SAO PAULO, (Reuters) – The chief executive officer of Itaú Unibanco Holding SA said on Wednesday he does not think the central bank will block the bank from adding to its stake in financial services firm XP Investimentos if it does not seek to take a controlling position.
Itaú’s move with XP underscores competition challenges that banks are facing with financial start-ups, known as fintechs.
In a conference with investors in Sao Paulo, Bracher said due to competition with fintechs, banks’ profitability margins are likely to go down.
“Fintechs are choosing niches where banks are less efficient,” he said. “They are exposing banks’ weaknesses in terms of quality of services.”
Bracher said fintechs are exposing banks’ problems in areas such as credit cards by being able to charge lower rates and offer higher-quality services.
In the same presentation, Itau’s Co-Chairman Roberto Setubal told investors and analysts that the bank was taking some measures to keep its payout ratio above 25 percent in 2018.
He mentioned that even considering an exchange rate of 5 reais per dollar, the bank could still maintain its tier 1 capital ratio at 14.5 percent, above its minimum target of 13.5 percent, which it set last year.