Brazilian banking maintains strength

Brazil’s banking system is strong despite a slowdown in the global economy.

Brazil’s banking system is strong despite a slowdown in the global economy, says a Latin America manager.

Urban Larson, the manager of the F&C Latin American Equity fund, says that though much of the world’s financial sector is in crisis, Banco Itaú and Unibanco, the Brazilian banking giants, are merging from a position of strength.

Last week Banco Itaú and Unibanco, which are the country’s second and third largest private sector banks respectively, announced their first pro-forma consolidated earnings after the Brazilian authorities approved a merger between the two.

The value of the combined entity will be 12.9 billion Reais (£3.96 billion).

Larson says that Brazilian banks have learned the importance of maintaining strong balance sheets during the country’s bouts of hyperinflation, devaluation and other financial turbulence.

The country could emerge among the winners in the troubled global financial sector, he says.

The banks may be able to take advantage of their international competitors’ weakness and buy attractive assets cheaply, should the likes of Citigroup or other global banks need to reduce their exposure to Latin America, Larson concludes.