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Pao de Acucar - CBD - Brazil - looking for credit partner to bolster consumer finance

|Includes:BBD, Companhia Brasileira de Distribuio (CBD), ITUB

Brazil's biggest store chain is negotiating with the country's leading banks to open a new consumer financing unit. This is traditionally a great retail business.

Pao de Acucar, better known as CBD, has opened up preliminary discussions with Itau Unibanco ITUB, Banco Bradesco BBD and Banco do Brasil BDORY to see which will be the best lending partner for its Nova Globex appliance chain. Opening up a private label consumer financing unit is a time-honored way for Brazilian (and global) retailers to drum up sales.

Customers buy more washing machines and TVs when they can put them on their store card, while the store and the underwriting bank split the interest and financing fees. Although BDORY and BBD have recently pooled their credit and debit card processing operations, neither is as well known for private label in-store lending as ITUB. In fact, ITUB already has a long-standing and very lucrative partnership with CBD to run the parent chain's consumer lending operations while selling insurance and other products out of the stores.

Through consolidation with Unibanco and other Brazilian lenders, ITUB has also absorbed one-time leading in-store lenders like Hipercard, Redecard and half of the Credicard franchise. Still, maybe BBD and/or BDORY will come up with a better deal for CBD than ITUB. If so, it will be a major upset and a significant win on either side. How big a win is this? CBD sells $11.6 billion in appliances every year.

Disclosure: no positions
Stocks: CBD, ITUB, BBD