Itau Unibanco and Banco do Brasil are actively looking at international expansion opportunities to parlay their thriving Brazilian businesses into global brands.
Banco do Brasil (BDORY, quote), which is Brazil's biggest financial institution but not widely traded by foreign investors, is dipping into the U.S. market by purchasing a few small lenders for around $100 million.
ITUB currently only does around 15% of its business outside Brazil. Setubal reportedly thinks that percentage is "small" for a bank of Itau's stature. Acquisitions are likely to be other Latin banks.
A combination of positive demographics, good capitalization, and stumbling Western competition has Brazil’s banks moving into a more prominent role around the world.
Who will get the bid?
The question, however, is which banks will get the nod (and the deal premiums) from ITUB.
With its $100 billion market cap, the Brazilian giant almost has an obligation to be choosy -- while there might be some small add-on acquisitions here and there, regional players with the scale to be a good strategic fit are relatively few in number.
In Argentina, BDORY already has a lock on Banco Patagonia (BPTGY, quote) and Spain's BBVA (BBV, quote) controls Banco Frances (BFR, quote). Banco Macro (BMA, quote), the country's second-biggest private bank, may be a tempting opportunity. But with a current market cap of $24 billion and Argentina's uncertain political environment to grapple with, it may be too big a bet to make.
In Colombia, either Bancolombia (CIB, quote) or Corficocolombiana (CRPFY, quote) would be a tempting prize. CIB in particular does business throughout the Caribbean, and ITUB could probably grab a controlling stake for well under $7 billion.
Banco de Chile (BCH, quote) may also be a great opportunity for ITUB. Foreign banks have been able to buy into the top tier of Chilean financial institutions before -- as the existence of BBVA Chile and Santander Chile (SAN, quote) demonstrates -- and with a $10 billion market cap and branches strewn along the hemisphere, both the scope and the price may be right.