Corrected: BREAKINGVIEWS-Latam bank exodus risks entrenching local heavies

Banco Bradesco

11/10/2016 03:11

(Corrects third paragraph to remove incorrect suggestion that 
Santander had listed a single Latin American business. Corrects 
sixth paragraph to specify that Cade is Brazil's antitrust 
regulator. Removes superfluous reference in seventh paragraph to 
consumer benefits.)(The author is a Reuters Breakingviews 
columnist. The opinions expressed are her own.) 
    By Sara Silver 
    NEW YORK, Oct 10 (Reuters Breakingviews) - Latin America's 
foreign bank exodus risks entrenching the local heavyweights. 
Global firms Citi  C.N  and HSBC  HSBA.L  are protecting their 
shareholders and dividends by selling second-tier units in 
Brazil and Argentina. But that's too bad for the markets they're 
leaving as it leaves incumbents more dominant, meaning 
competition suffers. 
    Citi, for example, on Sunday sold its retail division in 
Argentina to Banco Santander Rio  RIO.BA  - the day after Itaú 
Unibanco  ITUB4.SA  snapped up the U.S. bank's Brazilian 
operations. 
    Citi's retreat marks the tail end of a big retreat by 
once-ambitious global banks. Just six years ago, for example, 
they accounted for half of Brazil's top 10 lenders. Now 
Santander  SAN.MC  is the only one left. And even that could be 
regarded as a stretch, as the Spanish parent listed a slug of 
its Brazil business on the local stock exchange in 2009 - a 
tactic it uses for many of its overseas operations. 
    That leaves the country's five main banks holding 85 percent 
of loans, with state-controlled Banco do Brasil  BBAS3.SA  and 
Caixa Economica Federal  CEF.UL  accounting for 45 percent of 
the total. Similarly, Argentina's two biggest lenders are owned 
by the state. 
    It's easy to understand why the likes of Citi and HSBC, 
which finalized the $5.2 billion sale of its Brazilian unit to 
Bradesco  BBDC4.SA  in August, are getting out of the region. 
Both Brazil's and Argentina's economies have been struggling. 
And in 2012, Brasilia instructed state banks to aggressively cut 
borrowing costs, hurting the industry's overall profitability. 
    Cade, Brazil's antitrust regulator, is at least taking a 
hard look at deals in the financial-services sector. Earlier 
this year, for example, it imposed some restrictions on Itaú's 
payments-processing joint venture with MasterCard  MA.N  after a 
more than seven-month review determined it would reduce 
competition. 
    A stronger economy may, of course, lure foreign lenders back 
at some point. But that looks a long way off. 
     
    On Twitter https://twitter.com/SilverSara7 
          
    CONTEXT NEWS  
    - Citigroup on Oct. 8 announced it would sell its 
retail-banking and credit-card business in Brazil to Itaú 
Unibanco for 710 million reais ($220 million), transferring its 
71 branches as well as about 35 billion reais in deposits and 
assets under management in Brazil. Banco Santander agreed on 
Oct. 9 to buy Citi's Argentina unit for an undisclosed amount. 
    - Citi, which derives most of its revenue its home U.S. 
market, announced on Oct. 4 that it would expand its retail 
operations in Mexico, investing $1 billion to update its 
branches, technology, products, services and risk management, to 
serve Mexico's growing middle class. 
    - The New York-based bank has been exiting consumer banking 
across Latin America and other regions as it seeks to simplify 
its operations and cut costs and risk. It has announced its 
departure from other Latin American markets including Peru, 
Costa Rica, and Colombia. 
    - For previous columns by the author, Reuters customers can 
click on  SILVER/  
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe 
           
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
Itaú to pay $220 mln for Citigroup's Brazil assets    
 urn:newsml:reuters.com:*:nL2N1CE09H 
Bradesco wins Brazil approval for $5.2 bln purchase of HSBC unit 
    urn:newsml:reuters.com:*:nL1N1901AF 
BREAKINGVIEWS-U.S. companies pick Mexico's reality over Trump's  
   urn:newsml:reuters.com:*:nL2N1CB1NO 
BREAKINGVIEWS-Santander sprawl contains more ladders than snakes 
    urn:newsml:reuters.com:*:nL4N1AD3GD 
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 (Editing by Antony Currie and Martin Langfield) 
 ((sara.silver@thomsonreuters.com;)(Reuters 
Messaging:)(sara.silver.thomsonreuters.com@reuters.net)) 
 
Keywords: CITIBANK BRASIL M&A/BREAKINGVIEWS