Itau Retakes Credicard

Confirming what had previously been rumored, Itau has agreed to buy Citigroup’s Brazilian consumer finance units for BRL2.77bn ($1.37bn), it says, extending the bank’s leading position in the country’s growing credit card market. Itau beat out other contenders for the asset including Santander and Bradesco. At the time the transaction was rumored, analysts saw the price at roughly 16-17x price/2012 earnings, considering only the card business. This compared to Itau’s 11-12x. “Although the expected price paid seems not accretive on a short-term multiple basis, strategically we believe the acquisition is important,” Brasil Plural said in a note. The Brazilian bank gets BRL8bn in assets the Banco Citicard and Citifinancial Promotora units, as well as the Credicard credit card brand. The transaction does not include Corporate cards, the Citi and Diners branded portfolios, and the Credicard Platinum portfolio, or Credicard American Airlines cards, Citi says. For it’s part, Citi is able to fulfill a step in the plan to exit non-core businesses, and the bank expects a $300m after-tax gain. Itau was Citi’s partner in the company until 2006. The move follows Itau’s spending of BRL10.5bn last year to take Redecard completely in-house. After the deal, Itau is expected to have about 40% of the credit card market, according to Brasil Plural, leading the market. The transaction is subject to regulatory approval.