SAO PAULO (Brazil) - BRAZILIAN banks Itau and Unibanco announced on Monday that they plan to merge and create South America's largest private sector banking group.

Banco Itau SA and Unibanco Holdings SA did not immediately disclose the value of the deal, but said the new bank would be called Itau Unibanco Holdings SA and would have combined assets of 575.1 billion reals (S$385.23 billion).

That would make the new bank larger than Brazil's state-owned Banco Brasil SA and the private Banco Bradesco SA. Itau was the No. 2 private sector bank behind Bradesco before the merger was announced, and Unibanco held the No. 3 spot.

The merger is the result of 15 months of negotiations that began long before the world financial crisis that has shaken Latin America's largest economy, the banks said in a statement But Banco Itau said the deal is positive despite the uncertain global and regional economic outlook because it comes 'at a time of great changes and opportunities in the world, particularly in the financial sector.'

From Jan through Sept, the two banks had combined profit of US$3.7 billion. The merger announcement was made before Brazilian markets opened.

Unibanco chief executive Pedro Salles will head the bank's board of directors, and Itau chief executive Roberto Setubal will be its CEO.

The combined operation will have 4,800 branches, representing 18 per cent of Brazil's banking market, and 14.5 million clients. It will have 17 per cent of the nation's insurance market, and 24 per cent of its pension sector. -- AP