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Global bank retreat from LatAm gains pace in recent years


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According to Market Intelligence, April 2023

Global bank retreat from LatAm gains pace in recent years

A number of large North American and European banks have sold off operations in Latin America and the Caribbean since 2009, with divestitures gaining pace during the last two years as many of the region's countries, most notably Brazil, struggled with recessions and political uncertainty.

According to data compiled by SNL Financial, there were 24 such sales in the last eight years, 10 of them being announced in 2015 and 2016.

New York-based Citigroup Inc. was the seller in one-third of the transactions, agreeing to sell its retail banking operations in Uruguay in 2013 before deciding to scale back its presence in Honduras and Peru the next year. The company went on to dispose of its Nicaraguan and El Salvadorian units, as well as its commercial banking and consumer credit card business in Guatemala, in 2015.

Most recently, in 2016, Citi announced agreements to sell its consumer banking operations in Brazil and Argentina. The bank wanted to offload its Colombian retail business too, but suspended those plans in November, saying that it could reconsider the sale in the future at a price that reflects the "significant value" of those assets.

Citi's pullback from Latin America is part of a wider plan by the U.S. bank to shrink its global footprint. As such, the company's retrenchment isn't exclusive to South America, as it has also sold or is looking to sell its retail business in a number of European, Middle Eastern and Asian countries.

"We allocate our resources where they can generate the best possible returns for our shareholders," Citi CEO Michael Corbat said in a February statement announcing the Colombian, Argentine and Brazilian sales process. "These actions will further simplify our global consumer bank, allowing us to more effectively deploy resources to where we have the ability to achieve scale … and see the greatest opportunity for growth."

Meanwhile, London-based HSBC Holdings Plc, which was the seller in five of the 24 deals, sold its Chilean retail banking business in 2011, followed by the disposal of its Central American banking operations in 2012. The company later sold its Panama subsidiary in 2013 and its corporate and retail banking business in the Cayman Islands in 2014. The next year, it reached an agreement to offload its Brazilian unit in a deal valued at about $4.82 billion.

At the time, HSBC executives said the Brazil sale would boost the company's common equity Tier 1 ratio by about 50 basis points and could also allow it to return more capital to shareholders. Analysts saw the Brazil exit as a way for the British bank to free itself from a loss-making retail business.

A fellow European lender, Germany-based Deutsche Bank AG, struck deals to sell both its Mexican and Argentine units in the second half of 2016.

Both transactions are part of the bank's Strategy 2020 plan, under which the firm is looking to close operations in a number of other countries including Chile, Peru, Uruguay, Denmark, Finland, Norway, Malta and New Zealand. Under the plan, the bank aims to become simpler and more efficient, lower its risk profile and improve its capital position, among other objectives.

While some of the Latin American operations that have been sold in the past several years were acquired by other global players, some of the deals provided an opportunity for local lenders to expand their footprint and market share.

Citi's consumer banking business in Brazil, for example, is being acquired by São Paulo-based Itaú Unibanco Holding SA in a deal that will help the buyer's assets reach the 1.404 trillion Brazilian reais mark.

Similarly, Mexico's Investa Bank SA Institución de Banca Múltiple is buying Deutsche Bank's Mexican subsidiaries, while the German bank's Argentine unit is being acquired by Banco Comafi SA, a small Buenos-Aires based lender. Brazil's Banco Bradesco SA, meanwhile, completed its acquisition of HSBC Bank Brasil SA - Banco Múltiplo in July.

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As of Dec. 28, US$1 was equivalent to 3.28 Brazilian reais.