Citi ups stake in Banco de Chile holding company

SANTIAGO (Reuters) - Citigroup (C.N) increased its stake in the holding company for Banco de Chile CHI.SN on Monday to achieve a 50-50 interest along its Chilean partners as they compete for the Chilean market with Spanish powerhouse Banco Santander STG.SN(SAN.MC).

Citi has now invested at least $1 billion in Banco de Chile's holding company over the last two months, increasing its stake from 32.96 percent to 50 percent in LQ Inversiones Financieras in two separate deals.

Monday's transaction was worth $520 million for 8.52 percent stake in LQ, a unit of Quinenco QNN.SN, which in turn is the financial arm of Chile's powerful Luksic family, owner of one of Chile's largest mining companies.

Citi acquired the option to increase its stake in the LQ under a 2007 deal in which it merged its local operations with Banco de Chile.

Citi now has an indirect stake of around 30 percent in Banco de Chile, giving it a stronger foothold in what remains one of Latin America's most stable economies despite the 8.8 magnitude earthquake that leveled part of the country and killed hundreds on February 27.

Banco de Chile and the Luksics in turn build deeper ties with an international partner who can strengthen their presence in Asia, the destination for much of the commodity exports from the world's largest copper producing nation.

The deal was announced after the local market closed.

Banco de Chile shares fell 0.16 percent on Monday but have climbed more 16 percent since the January 29 announcement that Citigroup had bought an earlier 8.52 percent stake in LQ for $513 million. The bank posted profits of $509 million in 2009 in a shrinking Chilean economy.

Quinenco shares were up more than 20 percent over that same time.

(Reporting by Antonio de la Jara; Editing by Daniel Trotta and Gunna Dickson)