Itau Unibanco Holding SA (NYSE:ITUB) is going the Uruguay way
By market value, Itau Unibanco Holding SA (NYSE:ITUB) is the largest bank in Brazil. It announced that its Uruguayan unit has signed a deal to acquire the retail banking operations of Citi Uruguay. With this acquisition, it will be assuming over 15,000 clients and in excess of $265M in deposits. The deal also includes the transfer of a $60M worth credit-card portfolio that has been developed by Citi, in Uruguay, which males up around 6% of last year’s market.
ITUB said that the operational costs of the acquisition were “not significant” for them and that it will not have any accounting impact in the financial results. In April, Citigroup has said that it is reviewing its Uruguay operations in order to “maximize efficiencies.” The bank has chalked out some plans of repositioning Citigroup, the bank will be exiting a few markets where it has not managed to reach the necessary scale for generation of adequate return on its invested capital.
Significance of credit-portfolio transfers
For numerous reasons, a credit-portfolio owner might consider converting accounts from a particular processing system to another. It may be either a merger or an acquisition that is the cause of the conversion. It may also be a prospective new system that offers flexibility and exciting new capabilities that the company does not currently possess. Irrespective of what the reason is, once it has been determined by the issuer that the new system offers sufficient value, the conversion may be considered.
What is retail banking?
Standard mass-market banking wherein individual customers use the local branches of bigger commercial banks is called retail banking. Services like checking as well as savings accounts, personal loans, mortgages, debit/credit cards as well as certificates of deposit are offered in retail banking.
Retail banking is sort of like a one-stop shop for different financial services on behalf of retail clients. Certain retail banks have also been moving into investment services like brokerage services, wealth management, retirement planning and private banking. Some ancillary services are generally outsourced to third-parties (possibly for regulatory reasons). These are intertwined with the core retail-banking accounts like savings and checking to allow for swifter transfers and maintenance.