Brazil’s Government Prods Top Banks to Help Ignite Economy

Rogerio Jelmayer – Fox Business/Dow Jones Newswires, 06/02/2013

An increase in lending is seen as essential if Brazil is to jump-start economic growth. While lending has more than doubled over the past 10 years, the pace of growth fell in 2012 and has been blamed, in part, for disappointing growth in 2012.

In 2012, lending by all banks increased 16.2% to a record of nearly 2.4 trillion Brazilian reais ($1.2 trillion). But that was the lowest expansion in years. By comparison, lending rose 19% in 2011 and 21% in 2010.

Brazilian gross domestic product expanded by only 2.7% in 2011 and by an estimated 1.0% last year. The consensus forecast for 2013 is better at 3.1% but still lags behind developing-country rivals China and India.

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Brazil central bank mulls aid to mid-size banks

Reuters, 7/16/2012

SAO PAULO, July 16 (Reuters) – The Brazilian central bank, concerned by a deepening scarcity of funding for small- and mid-sized lenders, is considering creating a fund to invest in sales of loan-backed receivables, O Estado de S. Paulo newspaper reported on Monday.

So-called mid-cap banks are responsible for about 220 billion reais ($108 billion) in loans, or about 10 percent of Brazil’s total outstanding lending, the report said. Banks in that segment are facing a dearth of funding in the wake of the central bank’s seizure of Banco Cruzeiro do Sul for alleged accounting irregularities.

Among some of the measures to untie funding in the mid-cap segment is the creation of an investment vehicle that would buy debt from those banks backed by their own loans, Estado reported, citing one source familiar with the situation. The central bank declined to immediately comment on the report.

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Pace of credit surge fuels Brazil worries

Jonathan Wheatley – Financial Times, 11/30/2010

When Banco PanAmericano, a middle-market Brazilian bank, came close to collapse last month, it looked like a sure sign of more widespread trouble.

Like many small and medium-sized banks, Pan-Americano had flourished by lending to some of the tens of millions of people who have emerged from poverty to join Brazil’s rising consumer classes over the past decade. However, the bank ran into difficulties when default rates hit as much as 20 per cent.

The central bank insists PanAmericano was an isolated case but, if other banks use the same business model, surely some of them must be in similar difficulties?

However, Brazil is going through a credit boom and the pace of this growth has left many wondering when more trouble will emerge.

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Santander homes in on Latin America

Mark Mulligan – Financial Times, 07/11/2010

Spain’s Santander, the eurozone’s largest bank by assets, is on the lookout for acquisitions across Latin America as the region’s banking system becomes “the best in the world”, according to the head of its Latin American operations.

Francisco Luzón, managing director of the Americas division, said Peru and Colombia were a weak spot in the group’s regional footprint, which also covers Argentina, Brazil, Mexico, Chile and Uruguay. With market shares of between 10 per cent and 20 per cent, the focus in those countries is to consolidate and bring new customers into the banking system, a process known in Spanish as bancarización.

Santander raised €7bn ($8.8bn) last year with the stock market flotation of its Brazilian business in what was the world’s largest initial public offering in 2009.

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Santander Brazil raises $8bn in IPO

Justine Lau-Financial Times, 10/07/09

Santander of Spain, the eurozone’s biggest bank by market capitalisation, has raised just over $8bn from the listing of its Brazilian subsidiary in the world’s largest initial public offering this year.

The lender announced on Tuesday that it had sold 600m shares at R$23.5 per unit, in the middle of an indicative price range of R$22 to R$25, according to agencies. The bank, which filed to sell 525m units, said the dual São Paulo and American Depositary Receipts offering raised $8.05bn and included an over-allotment of 75m units.

According to Reuters, the bank said it would book €1.43bn ($2.10bn) in capital gains from the offering.

Banco Santander in Brazil: Push the float out

The Economist, 09/10/09

The filing by Spain’s Banco Santander on September 3rd to carry out an initial public offering (IPO) of shares in its Brazilian unit may seem plucky given rising default rates on bank loans. But an offering looks certain to succeed. The Brazilian economy is in decent shape: GDP growth should reach a healthy 4% in 2010, according to the latest survey of economists by the central bank. Appetite for Brazilian assets has been strong this year, VisaNet’s 8.4 billion reais ($4.3 billion) offering in June being the most eye-catching example. And Santander’s successful navigation of the financial crisis should also ensure hefty demand. The IPO, which is expected to take place this year, could raise as much as ten billion reais for a 15% stake, based on estimates of the unit’s current market value.

Santander will spend the bulk of the money on an aggressive expansion of branches and ATMs in the richer south and south-east of the country, which accounts for some 75% of national output. That should help the bank consolidate its position in Brazil, where a judicious blend of acquisition and organic growth has given it a more Brazilian face than other foreign-owned banks. Santander bought Banespa, a São Paulo state bank, in 2000 and last year completed its acquisition of ABN AMRO’s Brazilian business, making it the fourth-largest bank in the country. It has sensibly kept the services of Fabio Barbosa, who used to head ABN’s Brazilian operations and is widely admired.

In the process Brazil has become more and more important for Santander, accounting for some 18% of global profits in the first half of this year. Mr Barbosa will focus his attention on Brazil’s consumer-credit markets, which have historically been held back by swingeing interest rates and wide bank spreads but are now expanding rapidly. There’s room for more growth: credit amounted to just 50% of GDP in Brazil in 2007, compared with 169% in America, according to the World Bank.

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