Bank said it will maintain presence in the country, denies political reasons for sale
08/26/2023
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2023/M/4/uUA8m9RWALmgHv2rp7BQ/25fin-100-itau-c3-img01.jpg)
Banco Itaú Argentina has been the 16th-largest bank in the country by total loans, with 67 branches — Foto: Divulgação
On the eve of the presidential elections in Argentina, Itaú announced the sale of its operations in the country to Banco Macro for R$250 million. The bank will now have only one representative office in the country. Itaú is the Brazilian bank with the largest presence in other Latin American countries, with a strong presence in Chile, Colombia, and Paraguay. In Argentina, Banco do Brasil (BB) also has an important presence through Banco Patagônia.
Itaú emphasizes that it will maintain a presence in the country, according to André Gailey, the bank’s regional CEO in Argentina, Paraguay, and Uruguay. “After more than 40 years, we are not only proud of our history in Argentina, but we are also aware that our journey in the country does not end here. Therefore, we will continue to be present in Argentina through a local representative office, and we will continue to serve our corporate, wealth, and private banking clients from our banking units in Brazil and other external units,” he explains.
With the acquisition, Banco Macro will consolidate its position as the largest private-sector bank with Argentine capital in the country, in addition to remaining as the private entity with the largest network of service points distributed throughout Argentina. With 565 branches and 9,400 employees, Banco Macro will serve 6 million customers daily.
“The decision to integrate the operations of Banco Itaú Argentina reaffirms our purpose, which is to think big,” adds Jorge Brito, CEO of Banco Macro. “We are an Argentine company that is growing every day, and with the purchase of Itaú Argentina, we are reaffirming our commitment to continue investing in the country. With more than $2 billion in assets, we are the Argentine bank with the broadest bases in the inland cities of Argentina. Now we will double our presence in the Greater Buenos Aires area,” Mr. Brito said.
Itaú will receive from Macro an amount of approximately R$250 million, adjusted by the net income of Banco Itaú Argentina generated between April 1, 2023, and the closing date, which will occur after the fulfillment of the conditions outlined in the agreement and the obtaining of the necessary regulatory authorizations in Argentina. The deal has been under consideration for several months and the bank has already made a public announcement on the subject.
According to a source familiar with the matter, Itaú’s decision has nothing to do with the presidential election in Argentina. When Itaú bought Banco del Buen Ayre in 1998 for $225 million, the bank’s CEO at the time, Roberto Setúbal, even said that the goal was to become one of the country’s five largest banks in a few years, but the plan never materialized. Now, with a small operation — much stronger in wholesale than in retail — the bank had to decide whether to invest more to gain scale or ultimately sell the asset.
“The bank was very small in retail, which made it difficult to monetize the operation. Either Itaú invested heavily and expanded the operation to gain scale, or it opted for a lighter structure to continue serving large wholesale clients more efficiently,” the source said. Because Argentina is experiencing very large macroeconomic turmoil, it is difficult to make projections and calculate the valuation of assets, so in these cases, the sale price is very much determined on a case-by-case basis. In any case, even with the promises of dollarization of the economy by candidate Javier Milei, executives reiterate that the sale has nothing to do with the election. “It’s a structural, long-term decision that has much more to do with Itaú’s ability to monetize the operation.”
According to the Central Bank of Argentina, since December 31, 2022, Banco Itaú Argentina has been the 16th-largest bank in the country by total loans in Argentine pesos and the 11th-largest considering only private-sector banks, with a market share of 2.1%. There are 67 branches and 145 ATMs.
Itaú’s operations in Argentina are small but profitable. In the second quarter, the local bank generated a recurring net income of R$186 million, up 40% from the same period last year. The return on average equity (ROE) was 52.5%. The data exclude the impact of exchange rate fluctuations.
The loan portfolio is small, totaling only R$9.1 billion at the end of the quarter, a decrease of 10.4% in one year. The bank had 1,468 employees in Argentina at the end of June, according to its financial statement.
In Latin America as a whole, which includes operations in Chile, Colombia, Paraguay, and Uruguay, Itaú ended the semester with a loan portfolio of R$216.6 billion and a recurring profit of R$769 million.
Itaú estimates that the sale of its operations in Argentina will have a non-recurring negative impact of approximately R$1.2 billion, which will be acknowledged upon closing of the transaction. The net impact on Tier 1 capital will be immaterial. The effect happens because the carrying value of the investment in Argentina is higher than the amount received from the sale.
*Por Álvaro Campos — São Paulo
Source: Valor International