Brazilian banks announce merger

Itau and Unibanco are two of Brazil's biggest banks

Two of Brazil's biggest banks, Itau and Unibanco, have announced a merger that will create the biggest financial group in South America.

The new company, to be named Itau Unibanco Holding, will have assets of 575.1bn reais ($265bn).

The two banks said in a joint statement that their merger would allow them "to compete on the international stage with the biggest global banks".

Itau is Brazil's second-biggest bank and Unibanco is the third-largest.

Consolidation

Under the terms of the deal, Itau's holding company, Investimentos Itau SA, will own two-thirds of Itau Unibanco Participacoes, which will control Itau Unibanco Holding.

The remaining one-third of Itau Unibanco Participacoes will be owned by Unibanco.

Unibanco's chief executive, Pedro Moreira Salles, will be the new group's chairman, while his counterpart at Itau, Roberto Setubal, will be its chief executive.

The merger comes at a time when banks worldwide are consolidating in an effort to counter the effects of the global financial crisis.

Both Itau and Unibanco have seen big falls in the value of their shares, quoted on Sao Paulo's Bovespa exchange, since the start of this year.

However, both banks saw their share prices rise after the deal was announced. Itau's went up by 15% and Unibanco's by more than 8%.