Brazil’s BMG tender unattractive for investors, JPMorgan says

Guillermo Parra-Bernal – Reuters, 9/8/2015

Banco BMG SA’s offer to repurchase global subordinated bonds due in 2019 and 2020 appears unattractive relative to current prices of the securities, JPMorgan Securities said on Tuesday, putting into question the feasibility of the plan under current terms.

In a client note, JPMorgan analyst Natalia Corfield said the buyback plan was long expected in the wake of BMG’s decision last year to transfer its payroll lending business to a joint venture with Itaú Unibanco Holding SA, Brazil’s largest bank by market value.

Under terms of the planned transaction, BMG is offering 94.5 cents on the U.S. dollar for the 9.95 percent bond due in Nov. 2019 at the Sept. 21 early bird date, and 91.5 cents for the 8.875 percent bond due in Aug. 2020 . Investors who do not tender by that date will get 91.5 cents for the 2019 bonds and 88.5 cents for 2020s.

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Brazil’s stock exchange is nearing a bear market

Paula Sambo and Ney Hayashi Cruz – Bloomberg Business, 8/19/2015

A plunge in the Ibovespa from this year’s peak put the equity gauge on the brink of a bear market amid forecasts Latin America’s largest economy is headed toward the longest recession since the 1930s.

The stock benchmark extended its slump since May 5 to almost 20 percent as lender Itau Unibanco Holding SA and oil producer Petroleo Brasileiro SA tumbled. Traders have been pulling money from Brazil on concern President Dilma Rousseff will struggle to revive the economy, curb inflation and narrow the budget deficit amid a political crisis. The real posted the second-biggest decline among 16 global major currencies.

Investors are turning bearish as the central bank has signaled it will hold interest rates at a nine-year high even in the face of a recession. Rising borrowing costs are slowing down consumer purchases, pushing Rousseff’s approval rating to record lows and dimming prospects for corporate earnings. To make matters worse, emerging markets have joined a selloff in commodities since China’s yuan devaluation last week.

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Brazil’s stocks lead world losses as real approaches 12-year low

Andressa Lelli, Filipe Pacheco, Paula Sambo – Bloomberg Business – 8/13/2015

Brazilian banks sent the Ibovespa to the biggest slide in the world after Banco do Brasil SA joined Itau Unibanco Holding SA in allocating more money for soured loans. The real approached the lowest level in 12 years.

Financial shares in the MSCI Brazil Index sank to a six-year low on speculation other lenders will be forced to bolster so-called provisions. The stock benchmark dropped for a third day, while the real extended this year’s plunge to 24 percent. Swap rates, a gauge of expectations for borrowing costs, rose.

Lenders have suffered from a slowdown in consumer purchases as financing gets more expensive with interest rates at a nine-year high. The selloff in banks has intensified since May on concern that President Dilma Rousseff’s decision to boost taxes on the industry’s profits will erode earnings.

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Itau Unibanco sees Brazil’s economy shrinking in 2016

Silvio Cascione – Reuters, 7/10/2015

Brazil’s recession will extend into next year, hurting President Dilma Rousseff’s efforts to shore up public finances and arrest a sharp increase in unemployment, Itau Unibanco’s chief economist said in a report on Wednesday.

Itau Unibanco is the largest financial institution yet to forecast Brazil’s gross domestic product will shrink for a second straight year in 2016, according to Reuters Polls data.

Ilan Goldfajn, the bank’s chief economist, forecasts a drop of 2.2 percent in 2015 and 0.2 percent in 2016, down from previous estimates for a decline of 1.7 percent in 2015 and an increase of 0.3 percent in 2016.

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Itaú, Bradesco, Santander seem likely to present bids for HSBC’s Brazil unit

Rogerio Jelmayer and Luciana Magalhaes – The Wall Street Journal, 7/03/2015

Brazil’s Itaú Unibanco Holding SA, Banco Bradesco SA and Banco Santander Brasil SA plan to present formal offers to buy the Brazilian unit of HSBC Holdings PLC by Monday, according to two people close to the talks.

HSBC will likely sign an agreement soon after to hold exclusive talks with the bank offering the best bid, said one of the people.

HSBC declined to comment Friday on the subject.

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Moody’s cuts Brazil bank ratings as part of global review

Matthew Cowley – The Wall Street Journal, 06/27/2012

SAO PAULO–Moody’s Investors Service on Wednesday said it downgraded credit ratings of eight Brazilian financial institutions by one to three notches, as part of its global review of all banks with ratings higher than their home country’s sovereign rating.

“Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis,” Moody’s said in a press release. “More particularly, we note their significant direct exposure to the Brazilian government securities, equivalent to 167% of tier 1 capital on average.”

Moody’s downgraded the following banks to the level of Brazil’s sovereign credit rating: Banco do Brasil SA (BBAS3.BR, BDORY), Banco Safra SA, Banco Santander (Brasil) SA (SANB3.BR, BSBR) and HSBC Bank Brasil–Banco Multiplo SA.

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Itau BBA to maintain pace of expansion in Latin America

Luciana Magalhaes – Dow Jones/WSJ, 02/09/2012

The chief executive of Itau BBA, the investment-banking unit of Brazil’s Itau Unibanco Holding SA (ITUB, ITUB4.BR), said the firm won’t change the pace of its Latin American expansion in the face of rival BTG Pactual’s growth in the region.

BTG this week concluded the acquisition of Celfin Capital, Chile’s leading financial and brokerage firm, which also has operations in Peru and Colombia.

Jean-Marc Etlin, Itau BBA’s CEO, said he is now evaluating the best strategy for entering the Mexican market, where Itau BBA plans to start wholesale and investment-banking operations in 2013. While the bank so far has opted for a strategy of organic growth, “we will always be open to look at opportunities,” he said, referring to the possibility of acquisitions.

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