Two Brazil banks merge to be among world's top 20

Rio de Janeiro, Nov 4 (IANS) Two of Brazil's top three banks have announced their merger to create Latin America's biggest financial institution - and one of the world's top 20, EFE reported Tuesday.

Itau and the Unibanco, the country's second and third largest banks, Monday said in a communique that they have signed a merger agreement 'establishing the largest private financial conglomerate in the southern hemisphere, with a market capitalization among the top 20 in the world.' Only five US banks have more assets than the new entity.

The communique to the Sao Paulo stock exchange said that the merger 'comes at a time of great changes and opportunities in the world, particularly in the financial sector'.

Brazilian officials praised the merger for providing a buttress for the country's financial system, which has been convulsed by steep currency declines, the outflow of investment dollars and shrinking access to trans-border financing.

Brazil's central bank recently announced a $50 billion programme of currency swaps to keep financial institutions operating amid the credit squeeze.

Brazil's finance minister, Guido Mantega, hailed the announced merger, saying that it could help to increase liquidity amid global financial crisis.

The new entity will be named Itau Unibanco Holding S.A. The merger is to be approved by the country's central bank and stock market regulators.

In September, Itau's assets totalled 393.6 billion reais ($206 billion), while Unibanco's assets at the close of the first quarter were estimated at 156.2 billion reais ($78.1 billion).

With stockholders equity of 51.7 billion reais ($23.7 billion) and net earnings of 8.1 billion reais ($3.7 billion) between March and September, Itau Unibanco Holding will be prepared to expand in Brazil and compete in the international market, the partners said.

Shares of both banks surged Monday on the Sao Paulo market, where Itau climbed more than 17 percent and Unibanco was up 12.3 percent.

The two banks' share price rises helped to sustain the rising trend of the benchmark Bovespa index, which climbed past two percent.

Brazil's finance minister, Guido Mantega, hailed the announced merger, saying that it could help to increase liquidity amid the global financial crisis.