Moody’s Sees Shakeup in Chile Banking

The purchase by Citi of a piece of Banco de Chile could have wider repercussions, according to analysis by Moody’s. “This transaction has the potential to dramatically shift the balance of competition among banks in Chile, particularly for the largest players, in terms of pricing power, operating efficiency, and product offerings given the management and financial resources available within Citigroup,” says the agency. “We believe nevertheless that it may put even greater pressure on medium-sized or small banks which would spur further consolidation through other mergers or strategic associations.” It sees pressure in particular on domestically-controlled banks like Bci, “. . . the fourth largest bank, whose capital base is much smaller, but has an established and diverse retail franchise that makes it an attractive partner for domestic and international institutions alike.” Other potential targets in Chilean bank M&A include CorpBanca, Banco del Desarrollo and Banco Security. However, Moody’s still views the deal as a positive for the Chilean banking system, in light of financial and qualitative benefits.