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Itaú Unibanco Asset Management Live on the Charles River FIX Network

Direct access to Brazilian brokers and international liquidity venues; automates trade execution.

January 5, 2011 – Charles River Development (Charles River), a front- and middle-office investment software solutions provider, today announced that Itaú Unibanco Asset Management (Itaú), the largest privately-owned asset manager in Brazil with more than US$ 128 billion of assets under management, is live on the broker-neutral Charles River Network for real-time, electronic trading via FIX (Financial Information eXchange). Itaú leverages Charles River’s low-cost, internet based Virtual Private Network solution for instant access to local sell-side brokers and global liquidity venues. Itaú is one of the first Brazilian buy-side firms to use the FIX protocol for accessing algorithmic trading strategies and handling block trades.

Itaú has been conducting a multi-phased roll-out of the Charles River Investment Management System (Charles River IMS) since 2008. This project, delivered on time, is part of Itaú’s initiative to eliminate manual trading processes and have a single, consolidated platform for order management and electronic trading. Itaú plans to connect its multi-market desks across Latin America to the Charles River Network, allowing traders in Santiago, for example, to execute trades in São Paulo via FIX.

Before Charles River IMS, Equity traders had to manually input trades in spreadsheets and send the orders to brokers, following-up with them over the telephone. Now, they can execute equity instruments in real-time directly from the Charles River Trader Blotter, sending a high volume of orders to local brokers and international liquidity providers, and automatically receiving execution details. The traders no longer rely on spreadsheets and instead of receiving a telephone call, all transaction details – prices, time stamps, fills and more – are instantly recorded in Charles River IMS.

Support for algorithmic trading was critical to the project. Itaú’s traders can directly access local and regional algorithmic strategies, assign algorithms to block trades, and route high-volume block orders to sell-side brokers. In addition, Itaú’s Quantitative traders can leverage proprietary algorithms and high frequency trading ideas for local executions directly from the Trader Blotter.

“Sell-side firms in Brazil are paying closer attention to domestic order flow – offering the buy-side more sophisticated algorithms and execution tools,” said Spiros Giannaros, Vice President-Americas, Charles River Development. “As electronic trading continues to evolve in Brazil, early adoption of the FIX protocol and implementation of Charles River’s integrated trading solution give Itaú a competitive edge. Charles River IMS allows Itaú to meet growing customer demands by increasing investment management capabilities, streamlining processes and reducing operational risk across the board.”

Charles River serves over 300 diverse investment management clients worldwide, including over a dozen firms across Brazil, Chile, Mexico and Panama. These include three of Brazil’s top 10 asset managers and the country’s leading fund administrator, as well as global investment firms establishing their footprint in the region.

Source: Charles River Development, 05.01.2011

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Filed under: Brazil, FIX Connectivity, Latin America, Trading Technology, , , , , , , ,

Brazil: Clouds still surround the US economy – October 2010- IXE BANIF – Monthly Analysis

Fear now is of deflation in the US

The US economy has shown signs of weakness since the beginning of 2H10 and now indications of a possible deflation have surfaced. This new fear is like a two edged sword. On one hand, the imminent risk of deflation is a deterioration from previous conditions but on the other, it might force the Central Bank to accelerate its actions to stimulate the economy. In our opinion, the market would see faster action as positive in the short term. In this respect, it is worth mentioning that the first set of economic indicators released in October displayed neutral results.

In the absence of strong market drivers worldwide in October, and with a weak local agenda (the most important factor is the Presidential elections), we believe the trend is likely to be neutral for the month, although with volatility. We foresaw the same scenario for September, but the 6.6% appreciation of the Ibovespa, caused by the easing of economic concerns, surprised us.

In Europe, we have clouds in Ireland after the Irish Central Bank announced that Allied Irish Bank would need around €30bn of extra capital by year-end. However, in our view, if problems in the region remain contained to Greece and Ireland, Europe should not be a concern and ought to continue its slow recovery. In Asia, we expect neutral events, with no problems arising in China.

Brazil – Monthly Allocation – October 2010

In October, with no major operation scheduled, we believe the market will follow the economic and political news more closely. This month, we have made substantial changes in our portfolio, substituting companies having 35% of our previous total weight. The new names are PDG Realty (with a 10% weight), OGX, CSN and Itaú (with 5% each). We have also increased the weights of Telesp (from 5 to 10%) and Vale (from 15 to 20%).

Outlook for Brazil continues Bright

In Brazil, we expect the current strong economic demand to continue and believe in the likelihood of an upward revision for 2011 GDP growth forecasts, currently at 4.5% (Focus poll). For 2010, growth is relatively undisputed to be in the 7.5-8% range.

In our opinion, the political dispute in the presidential campaign can bring about one of three scenarios to affect the stock market: 1) Labor’s party, Dilma, wins in the first round; 2) a second round takes place, with a continuation of Dilma’s current advantage or 3) Dilma loses ground in a possible second round. We believe that the first and second scenarios are likely to have no effect on the market, as we have seen no response to Dilma’s advantage so far. If the third scenario takes place, it is likely to bring more volatility to the market. Investors may view this as positive but, as they note that the difference between the two candidates is in the details instead of being radical, the event should have limited positive impact. In overall terms, we think a second round would be beneficial, as it would force a greater balance between the country’s political forces.

Source: IXE-BANIF, 01.10.2010

Filed under: BM&FBOVESPA, Brazil, Exchanges, News, , , , , , , , , , ,

Brazil: BM&FBOVESPA Monthly News August 2010

BVMF NEWS – August 2010 Complete and Detailed Version

  • CVM authorizes BM&FBOVESPA to implement new DMA modalities in the Bovespa segment
  • New Fee Policy for High-Frequency Traders (HFT)
  • BM&FBOVESPA presents new financial education campaign
  • Itaú Unibanco S.A. is selected to manage the Financial ETF
  • Reduction in the round lot for ETFs to facilitate the access of individual investors
  • Deadline extended for approval of amendments to the listing rules for the special listing segments
  • On August 13th BM&FBOVESPA announced its 2010 second quarter earnings
  • MARKET RESULTS – BM&F Segment July 2010
  • MARKET RESULTS – BOVESPA Segment July 2010

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, , , , , , , , , , , , , , , ,

Brazil:Where one goes all follow December 2009 IXE-BANIF Market Analysis

We are now in the last month of the year and, after a doubtful start, in the midst of the crisis hurricane, it should end on a positive note, with a more than 70% appreciation. Therefore, December should not be a month of risk. Investors will attempt to guarantee the gains so far realized.

Brazil – Monthly Allocation – December 2009 Report

A new scare marked the end of November. However, this only gave investors a chance to take a breather. Dubai’s debts do not seem to cause much of a worry. The main creditor is the UK, with the exposure of other regions, including the USA, being less than 15%.

Economic data releases few and far between this month

Little economic data will come out this month, both in the USA and Brazil. In Brazil, investors look for a strong recovery in GDP for 3Q09, with release of figures expected for December 10 and with the Copom minutes being released on the 17. In the USA, investors expect the release of sales figures for “Black Friday”, that should indicate the strength (or weakness) of Christmas Sales. In addition, we will have one more FOMC meeting on the 16 and 3Q09 GDP on the 22.

The growth of the US economy still depends very much on the resources injected into it by the Federal Government. Inflation is not a problem, and should not be for some months. Therefore, the FED should maintain interest rates at their present level, at least for the next six months.

Things seem to be getting better. The Real Estate sector, although still weak, shows various signs of recovery. The truth is that the panic generated by Dubai is from this sector. On the other hand, as it is a concentrated crisis, it is hardly likely to spread to other regions.

The pre-salt area becoming a reality

The pre-salt area still awaits the approval of Law 9541/09, but Petrobras is already taking steps to prepare for its implementation. One step is the creation of a Minorities Commission to follow the development of the “transfer of rights with compensation” process through which the Government capitalizes Petrobras using oil reserves. Another is the acceptance of Federal Public Debt bonds by minority shareholders’ for the proposed Petrobras capital increase.

Performing the same as the Ibovespa guarantees the year’s result

This month, we opted to have a portfolio that balances well with the Ibovespa as we believe that the result for the year is a given and thus expect the last month of 2009 to be flat. Therefore, we aimed at maintaining our portfolio gains in 2009 above 70%.

Outperforming the Ibovespa – Recommended Portfolio (Long)

Share – Catalysts/Fundamentals

BPNM4 – Rumors of the possible sale increase in personal credit during Christmas

BRTO4 – Most discounted share in the Oi Group

BTOW3 – Internet Christmas sales should grow strongly

CSNA3 – Sales to the domestic market continue to increase

ELPL6 – 1Q10 dividend should yield at least 8%

EQTL3 – A stock with low liquidity that should be less volatile

ITUB4 – Continued increase in credit to all sectors

KLBN4 – Cardboard price increases should result in a strong 4Q09

MMXM3 – Sale of a stake in the company should be above investor expectations

PCAR5 – Food and non-food Christmas sales

PETR4 – increase in daily volume

SUZB5 –Cardboard and pulp price increases

TLPP4 – Defensive stock that should announce dividend payout in December

VALE5 – Price negotiations start in December with expectations of a 10% increase

Short suggestion for December

NETC4 – incrase in competition with the sale of GVT to Vivendi

Source: IXE – BANIF, 01.12.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, , , , , , , , , , ,

Brazil: Catching its Breath – November 2009 IXE-Banif Market Analysis

Investors have at last decided to look around them. The strong rally of the markets in 2009 seems to have ended, or at least to have entered into a short-term profit-taking period, while waiting for data that justifies a new advance to 100 k points. The conclusion that the recent rally was stronger than the economic numbers justify seems to have given the tone to the last few trading days in October and should continue so into the first few days of November.  Download: Brazil – Monthly Allocation – November 2009

Fear for the future of the US economy is prevalent both there and here: and not without cause. The American economy remains the world’s motor and, if it reduces speed, the rest of the world’s economies will follow. The US recession ended with a GDP growth of 3.5% in 3Q09, above the most optimistic forecasts. The fear now is that the Government is removing the help that allowed this strong growth and that the economy does not have the strength to continue to expand without it and may even contract in the next quarters. Concerns about inflation also increase, which will certainly lead to interest rates going up, with a consequent reduction in the capital invested in emerging countries.

In Brazil, the elections begin to call the attention of investors. The movements intended to strengthen candidates do not always produce the results expected. Alliances begin forming but, for now, we do not even know who will be the candidates.


Waiting would have given better results
Worrying about the cost to Brazil of an expensive Real, the Government attempted to halt its appreciation. If it had waited a few more days, the market would have taken care of the problem itself. The strong sales of the last few days, and the return of these resources to their country of origin, led to the depreciation of the Real that the 2% tax on the entrance of capital did not manage to achieve. Some believe that the implementation of the IOF is an attempt to garner income and balance the Government’s accounts. If this is so, the new tax will remain in place for some time.

Shares from the domestic market should outperform
With the end of reduced IPI on the sale of vehicles, with it remaining only on the sale of white line products, we believe that the steel market has leveled and focus now shifts to the mining market. Therefore, this month we opt for a greater concentration of companies that focus on the mining sector, as well as continuing to prefer stocks in companies linked to the domestic economy.

Outperforming the Ibovespa – Recommended Portfolio (“LONG”)
Stock – Catalyst/fundamental
BRTP4 – greatest potential to appreciate
CTAX3 – good results in the 3Q09 lead to positive expectation in coming quarters
CSNA3 – increase in the sale of minerals from Namisa to China
EQTL3 – pure distributor that should have a dividend yield of at least 10%
ITUB4 – expected continuity of good results posted in the 3Q09
JHSF3 – one of the cheapest plays in the sector
LIGT3 – discounted in relation to its peers
LAME4 – increase in sales with the arrival of Christmas
MMXM3 – beginning of iron ore price negotiations
PCAR5 – of the retailers, it benefits the most from the maintenance of the IPI
PETR4 – pre-salt regulations
VALE5 – increase in fines and pellets sales


Short suggestion for November
BRML3 – price pressure due to sale of important stake
HYPE3 – price pressure due to sale of important stake

Source: IXE-BANIF, 03.11.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, , , , , , , , , , , ,

Brazil: Bank update-Loans to individuals improving – IXE/BANIF

The Central Bank published data on credit relating to September showing increases of 1.5% MoM and 16.9% YoY, a flat in relation to the August growth rate. Once again public banks showed the stronger growth rate increasing portfolio by 1.9%% MoM, while private banks’ loan portfolio increased by 1.5% MoM (an improvement to the 1.3% growth last month) and foreign banks showed a mere of 0.6% MoM expansion (also improving over Augusts’ 0.3% growth). Delinquency ratios, continued flat MoM at 4.4% of total loan portfolio with provisions down by 10 bps to 7.2% of total portfolio, from the adjusted 7.3% in the previous month. In September, delinquency ratios coming from individuals continued decreasing to 8.2% from 8.4% in August while the ones coming from corporate moved up to 4.0% from 3.9%. Private Banks decreased provisions, to 8.5% from 8.6% in August, while public banks decreased provisions from 6.1% to 5.9%.  The trend continues positive with individual delinquency ratios improving, but still causes some concern as delinquency ratios at corporate continued showing a small rise. The problem is that it is still unclear if corporate can renegotiate debts or if delinquencies will lead to shut downs and consequent layoffs, which would once again result in an increase in default levels coming from loans given to individuals. Brazil: Banks – Sector Update – 10282009

Breakdown

Loans to individuals increased 1.4% MoM and 17.1% YoY. Corporate loans showed a 1.2% increase MoM, with loans using domestic resources increasing by 2.8% MoM and those with external resources reducing by 8.0% MoM.

Amongst earmarked loans, the largest increase this month was in farming loans to coops (+11.1% MoM) followed by BNDES pass through (+3.8% MoM) and with BNDES direct loans dropping by 0.6%.

Loans for vehicle purchases increased 1.9% MoM, improvement to Augusts’ 1.3% growth. Leasing increased by 0.5% MoM in August, while direct financing was up 1.3% MoM.

Total credit increased its participation in GDP to 45.7% in September, from 45.2% in July, with GDP up by 0.65% MoM.

According to Central Bank data, the average spread charged by banks in September continued moving down, to 26.0% from 26.3% in August and is now lower than one year ago when it reached 26.4%. Loans to individuals had the largest decrease in spreads, down to 33.4% in August from 34.3% in August, while spreads on corporate loans were down another 10 bps to 17.7%, from 17.8% in August.

Default

Default levels were flat at end of September at 4.4%, still much higher than the 2.8% of the previous year. Public banks saw a decrease in default levels to 2.6% of loan portfolio reducing provisions flat to 5.9%. Private Banks decreased provisions for the first time in the last 12 months to 8.5% from 8.6% in August, even though default levels increased to 5.7%.

D-H classified loans decreased to 9.4% of total from 9.6% in August.

Conclusion

We believe that the larger banks are the bigger winners this month. This is because we saw most of the growth in vehicle financing and mortgages. Although some small banks operate in the vehicle segment, they do not operate in the mortgage market. However, in addition to not expect continued growth in vehicle financing, we believe that the share price of most banks capture the growths of September. Thus, our top pick remains Itau-Unibanco that will still show synergy gains.

Source: Banif – IXE, 28.10.2009

Filed under: Banking, Brazil, Latin America, News, Services, , , , , , , , ,

Actinver Plans Mexican IPO in First Quarter, CEO Madero Says

Actinver SA, a Mexico City-based investment bank, plans to sell shares in an initial public offering in the first quarter, seeking to drum up underwriting business by setting a precedent for its clients to follow.

A sale would show companies needing capital that the equity market is a viable option in Mexico, where the last IPO was in June 2008, said Hector Madero, Actinver’s chief executive officer. He said Actinver is working with a “couple” companies that are considering share offerings.

“We want to provide access to mid-size companies, but the first statement has to be us,” Madero, 44, said in an interview in Mexico City. He said Actinver will sell shares to help open up the market even though it has no pressing need for the money.

A surge in kidnappings in Mexico is discouraging executives from taking their companies public, deepening an IPO drought sparked by the global credit crisis, Madero said. Mexico’s benchmark Bolsa stock index has climbed 32 percent this year, rebounding from a 24 percent slide in 2008.

Actinver, co-founded by Madero’s father in 1994, is “very close in a couple of deals” to underwrite IPOs, the CEO said. The firm co-led last month’s offering of 1.3 billion shares by Cemex SAB, the largest cement maker in the Americas.

The company is completing today the purchase of some of Prudential Financial Inc.’s Mexican assets. The Prudential units, which include a mutual fund business and a bank, bring Actinver’s assets to 109 billion pesos ($8.1 billion), according to Francisco Suarez, an equity strategist at the firm.

Banking License

Actinver acquired a banking license as part of the deal, allowing it to offer investment consulting services for individuals at a network of 70 offices around Mexico.

“We’re not going to be a bank that lends to institutions or corporations,” Madero said. “It’ll be a private bank with a retail business.”

The bank division will be headed by the CEO’s brother Alvaro Madero, currently the director of operations at Actinver.

In June Actinver launched a mutual fund with Brazil’s Itau Unibanco Holding SA in Mexico whose portfolio is mostly Brazilian stocks. Actinver is “very close” to a similar arrangement with a U.S. company, Madero said.

Mexico’s last initial share sale was Genomma Lab Internacional SAB’s $233.7 million offering in June 2008. There have been six IPOs in Mexico since the beginning of 2007, compared with 70 in Brazil, according to data compiled by Bloomberg.

Source: Bloomberg 06.10.2009

Filed under: Banking, BMV - Mexico, Brazil, Exchanges, Latin America, Mexico, News, Services, Wealth Management, , , , , , , , , , , , , , , , , ,

Brazil: The chicken and egg – June 2009 IXE-Banif Market Analysis

The Brazilian stock market brings back to mind the decoupling theory. Foreign investors continue to place their resources in Brazil, in particular in the stock market, which received approximately 40% of the total. The problem is that the good feeling from investors does not reflect in the economic scenario. The GDP being published on June 09 will show a -2,3% drop, with expectations that things will get better only in 4Q09. The data showing the fall in capital goods capex reflect the low expectations for growth. The 80% utilization rate of installed capacity is worrying. This should result in the Brazilian Central Bank cutting the basic rate by at least 75 bps this month. The savings problem seems to be resolved: not to the satisfaction of all, but enough so as not to create political contention in the pre-election year.
The Dollar and the Brazilian currency
The Real appreciated again, closing the month below R$ 2.00/US$. However, the question asked is whether it was the Real that appreciated, or the Dollar that devalued. The prices of many goods suggest that it was the Dollar that depreciated, which will result in a lower cash generation for companies, but better results (base for dividends).
Pension funds; the next buyers
Each time interest rates drop, discussion on pension funds increasing their participation in the stock market becomes prevalent. The reason is simple: low interest rates do not permit them to reach their targets. However, it is important to highlight that pension funds have already increased the participation of equity in their portfolios, from 10% some years ago, to around 30% this year.
Good winds continue to blow
To a lesser degree than in past months, we believe that, in June, the stock market should continue to perform positively, or at least flat MoM. We therefore reduce our exposure to defensive stock and concentrate our portfolio around the main representatives of the Ibovespa. Download: Brazil – Monthly allocation – June 2009 IXE Banif

Outperforming the Ibovespa – Recommended BUY Portfolio (“LONG”)
Stock – Catalysts/Fundamentals
BRTO – The best potential upside in the sector
CCRO – A lower than expected fall in traffic
CSNA – Better performance than its peers, due to having iron ore
ITUB – Multiples lower than its peers
MMXM – MOU with Chinese and the M&A in Corumbá not priced in
PCAR – Lagging, despite good supermarket sales in April
PETR – Should perform in accordance with the Ibovespa
PRGA – With the merger, it presents lower risks than the risks for Sadia
SUZB5 – lagging in relation to its main peers
TCSL – Sale of control brings tag along gains
VALE – Price negotiations should result in a lower than expected price decrease

Source:IXE & Banif, 01.06.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, , , , , , , , , , , , ,

ITAU denies Citi’s Banamex talks, Banamex prefering Mexican Investor group

Banco Itau, Latin America’s largest lender, denied it’s in talks to buy Citi’s Banamex. Itau “is not negotiating any stake in Banamex’s capital,” Itau said in a statement sent to the Brazilian securities regulator.

Meanwhile, according to the local newspaper EXCELSIOR, Roberto Hernandeza and Manuel Medina Mora have been lobbying with PRI lawmakers and the Calderon administration in an effort to persuade the US government to sell BANAMEX to a group of Mexican investors.

According to the article, the group of Mexican investors could buy up to 30% of the bank, list in the Mexican Stock Exchange between 30-40% of the company and get a credit line from either the government or another bank for the remaining stake.

Source: IXE Casa de Bolsa, 05.03.2009

Filed under: Banking, Mexico, News, , , , , , , , , ,

ITAU Securities Selects NYSE Technologies To Create New Direct Market Access Platform – First Global Electronic Trading Platform To Offer Access To Brazilian Markets

NYSE Euronext (NYX) and Itau Securities today announced that NYSE Technologies, the commercial technology division of NYSE Euronext, has been selected to develop a next-generation electronic trading platform that will allow Itau Securities’ customers around the world to send orders directly to Brazil’s BM&F Bovespa market center.

Making them the first to offer Direct Market Access (DMA) connectivity to BM&F Bovespa. Itau Securities and NYSE Technologies will work together to implement a best-in-class technology solution that combines comprehensive hosting software with an integrated back office platform utilizing the super-fast, resilient SFTI network.

“We are excited to work with Brazil ’s leading capital markets firm on a truly ground-breaking project that further opens the Latin American marketplaces to the global investors – and puts the global markets within reach of the Brazilian investors” said Stanley Young, CEO, NYSE Technologies and Co-Global CIO, NYSE Euronext.

“With our industry-leading technology and Itau’s extensive customer relationships in the Americas , Europe, the Middle East and Asia, we will be implementing a new breed of direct market access solutions unlike anything currently available in Latin America .”

“As we continue our global expansion to London, Dubai, Hong Kong and Tokyo, Itau Securities is working with NYSE Euronext to build this new platform giving us the ability to offer our customers outside Latin America a robust, innovative trading solution for trading in our markets,” said Roberto Nishikawa, CEO of Itau Securities.

“Moreover, Itau’s clients will have access to the most complete provider of investment services for the Brazilian market – from custody to asset management, foreign exchange, research for equities, derivatives and fixed income products.”

Source: MondoVisione, 04.02.2009

Filed under: Brazil, FIX Connectivity, News, Trading Technology, , , , , , , , , , , , , ,

FiNETIK and the latest on ITAU / Banamex / Citi

Via the Finetik blog linked here, your info-hungry Otto finds out that Banco Itau (ITU) sent an official communication to the Brazilian regulators last night stating that Itau “..is not negotiating any stake in Banamex’s capital..”.

Now that doesn’t mean there’s no interest, of course. The ITU honchos have already said they’d be interested purchasers if and when Banamex went up for sale. It does mean, however, that ITU isn’t doing anything proactive right now. This fits with the official Citigroup (C) line that Banamex is not up for sale, of course. This won’t quell the rumours, but it will put a dampener on short-term speculation for sure. However it should be clearly pointed out that none of this addresses the core issue here: As explained previously if the US gov’t takes its 36% interest in Citigroup as planned, C will be breaking the Mexican law and cannot hold onto Banamex as things stand. That’s as plain as day.

Finally, a word of kudos for the people at Finetik; I’ve only recently discovered the blog (which is part of a wider capital markets company that specializes in Latin America as well as Asia) and put it on my RSS, but I’ve been very impressed with the quality of information passed over there. I can thoroughly recommend it and say it would be a good addition to your own RSS feed (or regular bookmarked visit). Here’s the link to the blog’s main page.

Disclosure: I have no affiliation whatsoever with Finetik and have never even spoken to the people in my time. I just think it’s a good blog that covers LatAm finance well.

Source: Inca Kola, 05.03.2009

Filed under: Banking, Mexico, News, , , , , , , , , , ,

Rumor: ITAU to buy Banamex from Citigroup

Marcia Peltier Column at Jornal do Commercio (Rio de Janeiro) says that Itau-Unibanco will announce next week the purchase of Banamex. It also says that executives from brazilian bank are already in Mexico City.

Itau-Unibanco opportunities in US crisis

There are two immediate analyses that Itaú has to do. The first is the sale of Citibank’s’ stake in the credit card processor Redecard. The stake is worth R$ 2.9 bn, at market value. Itáu declared that it is only interested in buying 24 mn shares, which will allow it to be the largest shareholder, with a 26.7% stake. At market value, Itaú will have to pay R$ 573 mn. As Redecard trades at 24x BV, it will mean that, net of tax, Itaú will pay less than R$ 400 mn. Itaú also stated that it would like to find a strategic partner for the rest of the stake. The only bank Itau would feel  fit the bill is HSBC, but we are uncertain if it desires to hold such a stake.

The second immediate opportunity that arises, also due to Citibank’s financial problems, is the sale of Citi’s Mexican bank. According to Mexican law, no foreign government can own a bank in that country. As Citi will have as a major shareholder the government of the United States, the situation forces them to sell their Mexican stake. This would be a very attractive asset for Itaú, as it would assure the bank’s international expansion. However, we expect it to let it pass due to the current process of digesting the merger with Unibanco.

Itau Unibanco are in merging process

Itaú and Unibanco have effectively begun the merger of the two banks. There are no expectations of major lay-offs, as
management expects natural turnover and retirements to decrease the total number of employees. There have been
some reductions in specific areas, but nothing significant enough to affect personnel expenses. By 1H10 the merger
should nearly be over, with only some back office mergers in 2011. According to management, there will be no
significant reduction in the number of branches.

IXE Casa de Bolsa conference call: ITAU

Source: IXE Casa de bolsa, 27.02.2009, 03.03.2009

Filed under: Banking, Mexico, News, , , , , , , , , , , , ,

Citigroup-Banamex: Failed US Banks vs. Soild Mexican Institutions

Does the US government’s 36 per cent stake in Citi violate Mexican ownership laws? Have we got our countries confused? No. Citi owns Banamex, a Mexican bank with circa 1,200 branches and 2.6m checking accounts. And Latin American finance blog Inca Kola sees a fight brewing over the Southern subsidiary:

The nub of the issue revolves around Mexican law, which states in crystalline manner that foreign governments cannot own more than 10% of any bank that operates inside Mexico. It’s as clear as a bell and on the statute. So as Banamex is a wholly owned subsidiary of Citigroup (C paid $12.1Bn or so back in 2001 for the bank) if the US Gov’t takes its 36% stake in Citigroup then it will be a larger-than-10% shareholder of Banamex, something against Mexican law. Won’t it?

Mexico’s National Banking ans Securities Commission is therefore investigating, while Banamex is saying that the North American Free Trade Agreement will (somehow) protect it.

Selling Banamex would effectively mean an even worse deal for the US government. The unit’s been described by Citi as one of its “crown jewels”, managing to post an $896m net profit for 2008, making it one of the least toxic parts of the banking group. Banamex is accordingly part of Citicorp — the retail (read: non-toxic) part of the Citi empire. Full Article click here.

Source: FT Alphaville 02.03.2009, Inca Kola News 01.03.2009

Mexico Gov. Studying Effect on Banamex of U.S. Aid to Citi,

(Bloomberg) Mexico’s National Banking and Securities commission said it’s studying the legal impact of the U.S. government’s stake in Citigroup Inc., which owns Grupo Financiero Banamex SA.

The U.S. government announced today it plans to convert as much as $25 billion of preferred shares of Citigroup into common stock. The conversion would give the U.S. a 36 percent stake in the New York-based company. Mexico’s banking law prohibits foreign governments from owning or having a stake in banks that operate in Mexico, like Banamex. Citigroup purchased Banamex for $12.5 billion in 2001.

The commission has asked all banks operating in Mexico that have received help from governments to provide information on the aid, the statement said. The banking commission and other financial authorities will “soon” release information on the study, the body said in a statement.

“The Mexican financial authorities are analyzing the legal implications of the aid that foreign governments have granted foreign financial entities that have subsidiaries in Mexico,” the agency said.

Speculation has mounted in recent weeks that Citigroup may sell Banamex to raise cash and shore up capital amid the global financial crisis. Chief Executive Officer Vikram Pandit flew to Mexico Feb. 19 for two days of meetings with clients, Banamex officials and government officials, including Finance Minister Agustin Carstens and central bank Governor Guillermo Ortiz.

Citigroup fell 96 cents, or 39 percent, to $1.50 at 4 p.m. in New York Stock Exchange composite trading as a record 1.87 billion shares changed hands. The stock has plummeted 94 percent in the past year.

Source: Bloomberg 27.02.2009 Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Mexican Bank Asset Value

(IXE) According to local newspaper EL UNIVERSAL columnist Alberto Aguilar, ITAU is one of the government’s favorite candidates to acquire Citigroup’s BANAMEX if they have a minority stake in a group led by Mexican investors.Other candidates that have expressed interest are JP Morgan Chase and HSBC.

IXE understands that if Citibank sells Banamex, it will likely sell its BZ.Bradesco branch as well. Due to the fact that Banamex ranks in second in Mexico (assets) and first (equity), along with an important corporate loans book, while the BZ subsidiary present loans book smaller than the ones presented by mid-size banks, and with a lower ROE, which could be higher considering its BZ peers. Furthermore, Citibank BZ does not present important market share in any particular segment in Brazil.

Banamex instead, possess a significant Mexican banking market (see file attached). This would be a very important operation for Itau if it materializes. We believe foreign players could be potential acquirers of Banamex (including Itau) because local players could end up having problems to find funding to finance the operation in the future. If Itau buys Banamex, it will be coherent with Itau’s Roberto Setubal past speeches.

The following is a table of the size of Mexican Banks (Tot. Assets 2Q08 in billion US$)

US$ 53.4 bn BBVA Bancomer
US$ 38.9 bn Banamex
US$ 31.5 bn Santander
US$ 26.8 bn HSBC
US$ 21.0 bn Bannorte
US$ 12.7 bn Inbursa
US$ 10.0 bn Scotia

Source: IXE Casa de Bolsa, 28.01.2009

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