Banco do Brasil, Bradesco Create New Credit Card Firm
27 Abril 2010 - 3:33PM
Noticias Dow Jones
Two of Brazil largest banks, state-run Banco do Brasil SA
(BBAS3.BR) and Banco Bradesco (BBD, BBDC4.BR), Tuesday agreed to
create a new credit card company to compete with Visa and
Mastercard locally.
Each bank will contribute existing credit card assets to the new
firm, to be called Elo, which will start off being worth 15 billion
Brazilian reals ($8.5 billion).
The banks hope to wrestle 15% of the credit card market away
from Visa, Mastercard and other competitors over the next five
years, said Marcelo Noronha, Bradesco's card's department director.
He sees the local card market growing around 60% over the next five
years to 800 million cards.
Bradesco, Brazil's No. 3 bank, will have a 50.01% stake in the
joint venture, while Banco do Brasil, Brazil's No. 2 bank, will
have a 49.99% share.
Over the weekend, two banks agreed to assume joint control of
Cielo SA (CIEL3.BR), Brazil's No. 2 credit card networking company.
As a result, the banks will have few problems getting its cards
accepted by stores and companies, said Link Investimentos in a
report.
Visa International also has a stake in Cielo.
Elo will construct a new platform and the partial merger of card
operations will generate synergies of BRL1 billion, forecast
Bradesco's Noronha.
The central bank has been pushing for the creation of a new
locally owned credit card company.
Between them, Banco do Brasil and Bradesco have a debit and
credit card portfolio of approximately 220 million cards.
-By Rogerio Jelmayer, Dow Jones Newswires; 55-11-3544-7071;
rogerio.jelmayer@dowjones.com
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