Brazilian banks Itau and Unibanco to merge

Brazilian banks Itau and Unibanco are merging to create the biggest bank in Latin America, with combined assets of more than $260 billion.

The new bank - to be called Itau Unibanco - will be the 17th biggest in the world, with capital of 50 billion reais ($23 billion), the two banks said. Itau is currently the second largest private-sector bank in Brazil, and Unibanco is ranked fourth.

The heads of the banks, Roberto Setubal of Itau and Pedro Moreira Salles of Unibanco, said that while their merger talks had gone on for the past 15 months, the current global financial crisis had precipitated their move.

'The crisis was an opportunity to accelerate this,' Setubal said. Moreira Salles added that the merged banks' aim was to be 'a global player within five years,' and said that the new entity would start off with a strong position in South America.

They both said they did not foresee any branch closures or staff cuts as a result of the merger.

Setubal is to be the new bank's chief executive under the deal, while Moreira Salles will be chairman.

If the all-share transaction is approved by central bank regulators, Itau Unibanco would overshadow state-owned Banco do Brasil, currently the biggest bank in Latin America, and Bradesco, the biggest private-sector bank in Brazil.

Itau will hold the majority stake in the new enterprise. The bank was founded 65 years ago, and was restructured in 2003 to bolster its presence in Europe, Asia and the Americas. Currently Itau has assets of 396 billion reais ($182 billion) and 69,000 employees.

Unibanco, founded 84 years ago, has assets of 179 billion reais ($83 billion) and 35,000 employees. Together, Itau and Unibanco will have assets of 575 billion reais ($265 billion) and account for around 20% of Brazil's savings accounts and credit.

Analysts said fierce competition from Spanish bank Santander in Brazil also likely prompted the merger.