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Itaú CorpBanca plans US$300mn share purchase

Bnamericas Published: Saturday, March 02, 2019
Itaú CorpBanca plans US$300mn share purchase

Chile's Itaú CorpBanca wants to purchase a 19.4% stake in its Colombian subsidiary after the International Court of Arbitration ordered Helm Bank to offload the shares for US$299mn.

The planned acquisition is the latest development in a legal tussle in which Helm Bank alleges Itaú CorpBanca breached the terms of two agreements.

Helm had called on Itaú CorpBanca to purchase the shares under the terms of one of the accords, which would have involved a larger sum, of around US$850mn, a regulatory filing said.

"Notwithstanding that Itaú CorpBanca is reviewing and analyzing the decision and its next steps, Itaú CorpBanca intends to purchase the shares from Helm," the filing said.

Any share transaction would require the authorization of regulatory authorities in Chile, Colombia and Brazil.

Itaú CorpBanca is the result of a merger between Itaú Chile - a unit of Brazilian giant Itaú - and Chile's Corpbanca in 2016. Corpbanca had acquired Colombia's Helm Bank in 2013.

During a conference call to discuss the bank's 2018 results, Itaú CorpBanca CFO Gabriel Moura said, "we have always believed that Helm's claim was without merit. And acquiring the shares was not our initial expectation when discussing this matter."

Moura said the bank was "pleased" with the court's decision and that it would lead to the expiry of a shareholder agreement with Helm and allow Itaú CorpBanca to "implement business decisions and strategies more efficiently."

EXPENSES

During the call, Moura and CEO Manuel Olivares said key focus areas of the bank were expenses and the value proposition.

In home market Chile, adjusted non-interest operating expenses for 2018 were 432bn pesos (US$655mn), up 2.2% but below the local financial system average of 8.1%, the bank said in a presentation.

In 4Q18, expenses grew 2.8% quarter-on-quarter in Chile to 112bn pesos but fell 4.6% in Colombia to 47.1bn pesos, in nominal terms.

Moura said, "the important message here, I think, is that cost discipline and the search for efficiency opportunities is a part of our DNA that we are creating for this bank."

CEO Manuel Olivares said the target was to keep cost increases in line with inflation. "We're putting a lot of pressure on continuously increasing the efficiency of our operations in Chile and as well as in Colombia."

On Chile, Olivares said the market was "very competitive" and that this is leading lenders to sharpen their focus on the likes of costs.

VALUE PROPOSITION

He added that banks are also looking carefully at their value proposition. "Because nowadays, here in Chile and in other markets around the world, clients are looking for experiences, are looking for more freedom, mobility, and many things. And this why - and it is something our competitors are doing as well - we have to update our value proposition, create client loyalty and compete in that environment. What I see in the future is that competition is going to be tough, the pressure on spreads is going to continue, in every single segment of our client base."

LOANS

The bank's consolidated loan portfolio grew 1.6% in the three months through December to 21.5tn pesos, while the consolidated NPL ratio fell 0.1 percentage point to 2.1%.

Loan growth was driven by the consumer segment.

BOTTOM LINE

For 4Q18, the bank posted consolidated attributable net income of 43.8bn pesos, down from 50.7bn pesos in 3Q18 but up from a loss of 17.6bn pesos in 4Q17.

Chile accounted for 37.1bn pesos in 4Q18 (down from 50.1bn pesos in 3Q18) and Colombia for 6.65bn pesos (up from 620mn pesos in 3Q18.)

Over the three-month period consolidated cost of credit rose 29.7% quarter-on-quarter to 64.3bn pesos. Over the full year consolidated cost of credit dropped 38.9% to 231bn pesos.

For the whole of 2018, the bank posted consolidated attributable net income of 172bn pesos, up from 57.4bn pesos in 2017.

Consolidated recurring net income was nearly 210bn pesos, up 241% and the strongest result since the creation of the bank in 2016. Moura cited improved loan growth and lower delinquencies, along with higher revenues and lower costs.

"A solid improvement and an important step towards the construction of competitive and sustainable results," he said.

OUTLOOK

The bank is expecting loan growth of 8-10% in Chile, in line with the system average, and for retail to account for a bigger share. In Colombia, it is expecting a "continued recovery in profitability."

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