Itau interested in buying small banks in Brazil

By Vivianne Rodrigues and Walter Brandimarte

NEW YORK (Reuters) - Itau Unibanco, Latin America's largest bank by assets, said on Tuesday it is considering expanding in Brazil by acquiring small and mid-sized financial institutions to complement its line of products.

"Yes, we are going to talk about boutique banks or niche banks," Alfredo Setubal, Itau's executive vice president and chief of investor relations, told Reuters Television in New York. "If it makes sense, we are open to complement our banking activity."

Setubal added that any acquisition would be subjected to high scrutiny by antitrust bodies given the bank's already large market share. The bank was formed last year when Itau and Unibanco combined.

"Probably the antitrust authorities will not permit Itau Unibanco, which already has a 20 percent market share, to make big acquisitions in local markets," he said.

Itau Unibanco (ITAU4.SA)ITU.N told Reuters earlier this month that delinquencies at the bank had risen in the first quarter and could reach a peak later in the year.

But now, Setubal sees a recovery both in the bad loans rate and in the Brazilian economy starting in the fourth quarter.

The bad loans rate "will stabilize because we believe (the Brazilian) economy will start to have positive GDP growth in the last quarter," he said.

Setubal said one indicator of Brazilian markets' resiliency to the global financial crisis has been the good performance of the local stock market, which has attracted a steady flow of dollars and boosted the local currency.