Sao Paulo - Banco Itau Holding Financeira SA agreed to acquire Uniao de Bancos Brasileiros SA, creating Brazil's biggest bank.

According to a statement from the banks made public Monday in Sao Paulo, the merger is set to create "the largest private financial group in the southern hemisphere" and among the 20 largest in the world.

"It is a financial institution with the capacity to compete in the international stage with the world's great banks," said the statement issued by Itausa and Unibanco Holdings, which control both banks.

Based on the two institutions' most recent reports, the new Itau Unibanco will have total assets worth 255.2 billion dollars.

The state-owned Banco do Brasil was so far the largest financial institution in the country, with assets worth 186.8 billion dollars.

The banks' statement acknowledged that the merger comes "at a time of great changes and opportunities in the world, particularly in the financial sector.

"The new bank gets consolidated in a setting that finds Brazil and its financial system in a privileged position, with huge possibilities for improving even further their relative position in the global setting."

Although negotiations started 15 months back, Monday's announcement of the deal caught the financial markets by surprise.

Analyst Carlos Alberto Sardenberg, of TV channel GloboNews, said the operation makes the Brazilian financial system stronger in the light of the current global financial crisis.

Finance specialist Miriam Leitao said the country's financial system, "which is already solid, becomes even more solid" with the merger.

Unibanco president Pedro Moreira Salles will head the board of the new bank, while Itau owner Roberto Egydio Setubal will be its CEO. (dpa)