Itau Unibanco Holding SA, Latin America’s largest lender by market value, will become the biggest credit-card issuer in Chile after agreeing to manage the in-house cards of retailer Cencosud SA.
Itau will buy 51 percent of Santiago-based Cencosud’s credit-card operations in Chile and Argentina for $307 million, the companies said in a statement yesterday. Sao Paulo-based Itau will spend $1.3 billion to fund 100 percent of future credit-card loans in both countries, the firms said.
“This is a strategic growth opportunity,” Cencosud’s Chief Executive Officer, Daniel Rodriguez, told reporters in Santiago yesterday. “This partnership will help us build up and strengthen the credit-card business.”
Itau has been expanding its credit-card business through acquisitions. In October, it agreed to pay 11.8 billion reais ($5.4 billion) to buy the 50 percent of card processor Redecard SA it didn’t already own. Last month, Itau agreed to buy Citigroup Inc.’s Credicard unit for 2.77 billion reais to get an additional 10 percent share of Brazil’s card market.
Itau fell 1.4 percent to 29.13 reais in Sao Paulo at 11:25 a.m. Cencosud advanced 3.3 percent to 2,439 pesos in Santiago.
Itau will have about 2.3 million cards in Chile once the deal is completed, with an outstanding loan portfolio of $1.3 billion, according to the statement. The bank will pay $280 million for the Chilean operations and $27 million for the Argentine unit. Cencosud will use the payment to pay down debt and fund expansion plans, Rodriguez said.
Cencosud, Latin America’s third-largest retailer by sales, said in a filing to Chile’s regulator last week it was negotiating a deal with banks to handle its credit-card operations in Argentina and Chile, without specifying which banks. Santiago-based Diario Financiero had reported the day before that the retailer was in talks with Itau.
Cencosud signed a deal with Brazilian lender Banco Bradesco SA in August 2011 to operate branded credit cards for Cencosud’s supermarkets in Brazil.
In May, Cencosud said it would set aside provisions of 20 billion pesos ($40 million) after Chile’s Supreme Court ordered the retailer in April to compensate clients affected by “abusive” clauses on its credit-card contracts.
Rodriguez said yesterday that the deal with Itau wasn’t related to the fine and that the two companies had been negotiating for 10 months.