Itaúsa and Unibanco Holdings, the second and third largest bank in Brazil respectively, have merged to form the largest private financial conglomerate in Latin America with 575. billion reais ($265 billion) of assets.

The new group will have the capacity to compete with the world’s biggest banks. The merger will mean corporate restructuring, causing the migration of the current shareholders of Unibanco Holdings and Unibanco – União de Bancos Brasilei.

In a joint statement, the banks said merger talks began 15 months ago, long before the financial crisis got underway.

The new company will be called Itaúsa Unibanco Holding. Its combined assets place it ahead of Banco de Brazil, currently the largest bank in Latin America in terms of assets, according to Reuters.

Itaúsa's holding company, Investimentos Itaúsa, will hold 66 per cent of Itaúsa Unibanco Participacoes, which will control Itaúsa Unibanco Holding. Itaúsa will also hold a direct 18 per cent stake in Itaúsa Unibanco.

Unibanco will have a 33 per cent stake in Itaúsa Unibanco Participacoes, which bought the private banking unit for Latin America of Dutch banking giant ABN Amro last year. Bank of America, which holds 7.3 per cent of Itaúsa, will own 5.4 per cent of the new combined firm.

Unibanco Chief Executive Pedro Moreira Salles is chairman of the new group. Itaúsa chief executive Roberto Setubal will have the same role at the new company. The group's board will have 14 members, eight of independents and six named by Itaúsa and Unibanco.

There will be no changes in the operations and transactions conducted with clients, creditors and suppliers. Itaú and Unibanco will continue to operate in Brazil and abroad in the same terms that such operations are currently conducted, the banks said.

Central bank and regulatory approval of the deal is pending.