Itau Nears Brokerage Sale in Mexico Investment Bank Retreat

  • Bank has reached agreement with local buyer: Mexico unit CEO
  • Itau plans to maintain research staff in Mexico, Mulas says

Less than two years after expanding its operations in Mexico, Banco Itau BBA SA reached an agreement to sell its brokerage and focus on Latin American countries where it has a bigger presence amid a slump in equity sales.

The investment-banking unit of the region’s biggest bank by market value is transferring its broker-dealer license, office space, hardware, software and the 23-person brokerage team to a local firm, according to Alberto Mulas, the Sao Paulo-based lender’s chief executive officer for the Mexican unit. He declined to disclose the name of the buyer as the deal is being reviewed by regulators, and said approval may happen within the next one to three months.

Mulas says the assets are being sold for about 400 million pesos ($21 million), or 1.2 times book value, in a deal that represents a significant departure from the lender’s earlier plans to grow its presence in Latin America’s second-biggest economy. Itau BBA is scaling back in Mexico to devote resources to countries such as Chile, Colombia and Argentina, where it has the necessary presence it needs to compete, it said in March. Equity issuance in Mexico has been almost dead in 2016, with homebuilder Servicios Corporativos Javer registering the only initial public offering.

Itau BBA expanded in Mexico last year as economists projected growth would outpace much of the rest of Latin America, and as reforms took hold that encouraged investments in infrastructure, energy and telecommunications. The economy expanded 2.6 percent in the first quarter from the year earlier amid a rebound in consumer demand. Still, the Finance Ministry cut its growth forecast for the year as the external environment deteriorated. The nation’s benchmark IPC stock index has dropped 4.2 percent in dollar terms this year, trailing the 1.8 percent gain in emerging-market shares.

Francisco Salas, whom Itau hired in August 2014 to head its investment-banking division in Mexico, left last month, as did five people working in corporate and investment banking, Mulas said. After the sale, Itau plans to maintain a research presence in Mexico with a staff of nine people, he added. Former JPMorgan Chase & Co. banker Enrique Camacho, who was hired by Itau to head the brokerage in March 2015 and was targeting a 10-fold increase in loans to Mexican companies by this year, remains in his role, Mulas said. Itau plans to still target global underwriting deals in Mexico, he said.

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