UPDATE 1-Itáu, CorpBanca close to announcing venture -sources

Tue Jan 28, 2014 2:36pm EST

By Guillermo Parra-Bernal, Felipe Iturrieta and Aluísio Alves

SAO PAULO/SANTIAGO Jan 28 (Reuters) - Itaú Unibanco Holding SA, Latin American's largest bank by market value, and Chilean lender CorpBanca SA could announce a partnership as early as Wednesday, sources with direct knowledge of the situation told Reuters.

São Paulo-based Itaú and CorpBanca, controlled by billionaire Alvaro Saieh, would create a new company and merge assets in Chile and Colombia, according to two of the sources, who declined to be identified because the deal has not been finalized.

Under the terms of the deal, Itaú would control 50.5 percent of the new company, said one source. In recent years Itaú has resorted to partnerships, such as the payroll lending venture with Banco BMG SA and an insurance joint operation with Porto Seguro SA, to avoid the difficulties that might crop up from a full combination.

For Itaú, an association with CorpBanca would not only open a significant window of opportunity into retail banking in Chile, but also provide a platform to grow in Colombia, South America's fastest-growing economy last year.

Both banks declined to comment.

For years Setubal sought to buy regional rivals, but backed off due to high valuations. Itaú began operations in Chile with the purchase of Fleet Boston Corp's local unit in 2006 and later HSBC Holdings Plc's operations in 2011.

Itaú and Santiago-based CorpBanca, Chile's fifth-largest bank and which also operates in Colombia, recently confirmed they were in acquisitions talks. As part of the deal, Itaú could inject cash and equity into the new company, one source said, with CorpBanca basically entering the deal with its assets.

The new company could become the Andean nation's No. 3 lender by assets, leap-frogging Banco del Estado de Chile SA and Banco de Credito & Inversiones SA. Itaú has a fast-growing wholesale banking operation in Colombia.

HISTORY OF BUYING, SELLING

None of the sources gave details, such as the value of the transaction. Shares of CorpBanca shed 1.3 percent to 7.1 pesos on Tuesday, valuing the company at about $4.4 billion. Itaú rose for a second day, adding 0.8 percent to 30.08 reais.

Saieh, CorpBanca's controlling shareholder, began talks in November with Itaú and other lenders to pursue a merger, an outright sale, or creation of a structure allowing him to remain a relevant shareholder in CorpBanca, sources told Reuters in December.

Investors expected CorpBanca to finish integrating two banks it bought in Colombia before attempting a combination.

Apart from Itaú, Spain's Banco Bilbao Vizcaya Argentaria SA and Canada's Bank of Nova Scotia were also interested in the Chilean bank, sources said at the time.

Colombia-born Saieh, who holds a doctorate in economics from the University of Chicago, has a history of buying and selling financial assets. He sold a small bank to Banco Santander SA in 1996 and pension and retail banking assets in Argentina to BBVA three years later.

He has struggled in recent times with his SMU retail unit, which runs Unimarc, one of Chile's largest supermarket chains.

Last August, SMU uncovered accounting errors in a review of first-quarter earnings, raising its liabilities and leading it to breach debt covenants.