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(Corrects in second paragraph of June 8 item to clarify thatCade board has six members and they voted unanimously to passdeal)
By Guillermo Parra-Bernal and Leonardo Goy
SAO PAULO/BRASILIA, June 8 (Reuters) - Brazil's antitrustwatchdog on Wednesday approved Banco Bradesco SA's purchase ofHSBC Holdings Plc's local unit with some conditions,marking the latest departure of a foreign lender from one of theworld's most concentrated banking markets.
Six board members on the watchdog known as Cade voted topass the deal unanimously as long as Bradesco, thecountry's No. 3 listed commercial lender, agrees to refrain frommaking any rival acquisitions for at least 30 months.
After sitting on the sidelines for years while local rivalsbulked up through takeovers, Bradesco made a grab for HSBC BankBrasil Banco Múltiplo SA last August. The $5.2 billion purchaseallowed Bradesco to increase assets by 16 percent and add 5million clients.
The transaction will help Bradesco cut the gap withstate-controlled Banco do Brasil SA and Caixa Econômica Federaland private-sector rival Itaú Unibanco Holding SA - Brazil's topthree banks by assets. Consumer groups have warned, though, thatthe deal could hurt competition where the top 10 banks controlalmost 90 percent of the industry's assets.
Domestic firms acquired 84 of 104 for-sale Brazilian banksand financial targets since 2008, Thomson Reuters data showed.The purchase will give Bradesco control of 13 percent ofBrazil's banking assets, 12 percent of total deposits and thenation's third-largest loan book.
Analysts have said the deal, the largest in Bradesco's75-year history, will test Chief Executive Officer Luiz CarlosTrabuco's ability to absorb large asset management, banking andinsurance assets at a time when the economy is headed for theharshest recession in eight decades.
"We are up to the task, we have done our homework,"Alexandre Gluher, a senior Bradesco vice president, toldreporters at a conference call to discuss the deal on Wednesday.
Gluher expects Bradesco to finalize the integration ofHSBC's 851 branches, 5 million clients and over 19,000 employeesby October.
Non-voting shares in Bradesco, the bank's most widely tradedclass of stock, accelerated gains on the news. The shares rose3.3 percent to 25.03 reais, the highest level in three weeks.
TOO TOUGH
The HSBC exit highlights the impact of state intervention inthe sector since 2012, when Brazil's government instructed statebanks to aggressively cut borrowing costs. While localprivate-sector lenders reacted by retreating to protect profits,HSBC Bank Brasil was "caught in the middle," a source involvedin the sale said last year.
HSBC Chief Executive Officer Stuart Gulliver plans to useproceeds from the sale to boost capital metrics and ensure thebank remains the biggest dividend payer among European banks.
Growing asset concentration in the hands of local lendersproved too tough for "the World's Local Bank," as HSBC is knownglobally. According to International Monetary Fund data, bankingindustry concentration in Brazil is the highest among theso-called BRICs group of the world's largest emerging marketeconomies.
In addition, former executives at HSBC put corporate clientrelationships before profitability, kept branches overstaffedand failed to foresee weaker loan book quality when growth inBrazil began to wane around 2012, analysts said.
In recent years, Citigroup Inc and Societe Generale SA soldtheir consumer-finance operations, following the steps of IntesaSanpaolo SA, Bank of America Corp., Credit Lyonnais SA and BancoBilbao Vizcaya Argentaria SA since the start of the century.
Citigroup this year announced plans to sell retailbanking operations in Brazil, leaving Spain's Banco Santander SAas the only major foreign retail lender in Brazil. (Additional reporting by Lawrence White in London; Editing byMatthew Lewis and Chizu Nomiyama)
