CorpBanca deal positive for Itau: Fitch

Itau Unibanco’s agreement to take a 33.58% stake in Chilean lender CorpBanca gives the Brazilian bank a strong hold in Andean markets, making it positive for the bank, Fitch Ratings analyst Franklin Santarelli said. “[Itau Unibanco] has longstanding operations in Chile, but it was difficult to grow that organically because the competition is fierce,” he told LatinFinance. In a deal announced late on Tuesday, Itau is poised to become the fourth largest Chilean retail bank — until now it ranked seventh — growing its market share there from 4% to 12%. It will also gain a foothold in the fast-growing Colombian market, through CorpBanca’s operations. The Brazilian lender will become controlling shareholder in the new Chilean bank, to be branded Itaú. CorpBanca’s existing shareholders will hold the remainder of the institution. Itau will inject $652m of equity into its Chilean subsidiary ahead of the merger to capitalize the new institution and prepare it for future growth. Its investment banking arm, Itau BBA, will also extend a $950m 7-year credit line to CorpGroup, which holds 45.26% of CorpBanca. “The structure is positive for Itau,” Santarelli said. “They’re not deploying capital, they’re only injecting $652m into the Chilean bank, to help the balance of ownership. It’s not a large amount for Itau to spend.” The deal is thought to address a desire at CorpBanca expand in Chile through acquisition. As well as giving Itau a more solid position in Chile and an entry into Colombia, it offers a platform to move into other markets like Peru and Central America, said Mark Rosen, head of investment banking for Latin America at Bank of America Merrill Lynch, which with Goldman Sachs was advisor to CorpBanca. Itau BBA advised Itau. “This is the most significant strategic alliance for Itau that they’ve made outside Brazil so far,” he said. “Nothing they’ve done in the past is of the scale of this transaction. It’s a transformational deal for the international business of Itau.”