Itaú buys 35 percent of U.S.-based brokerage for Brazilians

Photo: Avenue

Itaú Unibanco, Latin America’s largest bank, announced on Friday that it has entered into a share purchase agreement, by way of its subsidiaries, to buy 35 percent of brokerage Avenue.

Avenue is a SoftBank-backed brokerage firm based in Miami but targeted at Brazilian investors placing their money in Brazil and abroad.

By way of the agreement — which valued Avenue at BRL 1.25 billion (USD 236 million) — Itaú may end up controlling the digital brokerage firm within two years. The operation is pending regulatory approval.

According to a securities filing, Itaú will first buy a 35-percent share of Avenue through a capital contribution of BRL 160 million and a secondary acquisition of shares, totaling BRL 493 million.

After that, it can acquire an additional stake of 15.1 percent, for an amount to be determined based on a predefined multiple of adjusted revenues, achieving 50.1 percent of the company. And five years after the deal’s first tranche, Itaú will be able to exercise a call option for the remaining equity.

Itaú’s move is emblematic because it is the first transaction between a large retail bank and a digital brokerage aiming at expanding Brazilian individual investors’ horizons.

The latest data from Brazil’s stock exchange shows that the number of individual retail investors in the country jumped by more than 40 percent between April 2021 and March 2022.

There are more than 4.3 million Brazilians investing in the stock market. Experts believe that after such an increase in the last couple of years — although still far from its potential — it is now time to start bridging the gap between Brazilians and international opportunities.

XP, Brazil’s largest independent brokerage, launched its international brokerage three months ago. Two digital banks have also followed this path recently: Inter and C6 Bank.

Incorporated four years ago by Roberto Lee, former CEO and founding partner of the Brazilian brokers WinTrade and Clear, Avenue currently has over 229,000 active customers, 492,000 investment accounts enabled, and around BRL 6.4 billion under custody, offering options ranging from ETFs to REITs.

#banking

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.