Brazilian regulator recommends conditional approval of Itaú-XP deal

People walk past an Itau branch office in Rio de Janeiro January 29, 2014. REUTERS/Sergio Moraes

SAO PAULO (Reuters) - A unit of Brazil's antitrust watchdog has recommended the conditional approval of Brazilian bank Itaú Unibanco Holding SA's ITUB4.SA purchase of a stake in financial services firm XP Investimentos SA, according to a statement issued on Wednesday.

According to the statement, the superintendent of competition regulator Cade has recommended that the watchdog approve the deal given that the parties comply with terms that they have negotiated with authorities.

As part of that accord, Itaú’s influence on XP’s commercial decisions will be limited and the parties are theoretically barred from abusing their market position with counterparties, among other measures.

“Thus, not only were accords negotiated that limit the influence of Itaú over XP’s commercial decisions, but the parties are committing to adopting practices in relation to their commercial partners ... that facilitate the access of competitors,” the superintendent said.

Itaú, Brazil’s largest bank by assets, agreed in May to pay 5.7 billion reais ($1.72 billion) for a 49.9 percent stake in XP to grow in the retail brokerage and money management segments, where competition for new clientele is growing.

However, in October, the Cade superintendent deemed the deal “complex” due to what it described as “horizontal overlapping” in securities brokerage, asset management, and product distribution markets.

In the Wednesday statement, the regulator also said the deal could be considered a situation in which a market incumbent tries to pacify a “disruptor,” which it described as a potential concern from a competition perspective.

Reporting by Gram Slattery; Editing by Sandra Maler