Caixa Econômica Federal will sell a R$1 billion portfolio of foreclosed properties to a private-sector fund. The transaction is expected to close in a month at the most. Caixa has foreclosed on 39,000 properties worth R$6 billion this year alone and had been considering options to clean up its balance sheet. “We’ll sell R$1 billion to a fund, no later than next month. A private-sector fund wants to make a deal,” a Caixa executive told.
The bank has earned R$700 million so far this year selling foreclosed properties directly. Aside from shedding part of its property portfolio, the state-owned lender also is considering setting up a real-estate fund with the remaining repossessed properties and with housing units owned by the federal government. “We are working on creating a real-estate fund. I can put those [foreclosed] properties in the fund and may even add government-owned homes. But everything is still being studied,” the executive said.
The bank also has not ruled out selling the properties as it did in the past to Emgea, or Asset Management Company, a government entity created to absorb toxic assets. But the option is challenging because Emgea needs Treasury funds and other sources of taxpayer money, practically impossible amid the current budget crunch.
The executive said officials are concerned with the property market as a whole, hurt badly by the economic crisis and higher unemployment, and not with the potential losses from a R$6 billion portfolio of foreclosed properties, or with compliance with Basel III capital ratio rules. A higher ratio allows the bank to lend more.
Under Basel III rules, every bank needs to hold at least R$11 for every R$100 lent, or an 11% capital ratio index. Caixa’s ratio has been rising and reached 14.4% in late June, from 13.59% in March and 13.54% in December.
According to a source, the R$6 billion in foreclosed properties under discussion represent less than 1% of the bank’s mortgage portfolio, which rose 7% in the 12-month period ended in August to reach R$421.4 billion. The bank’s loan delinquency rate also remains low. Credit defaults increased by 0.7 percentage point in the 12 months ended July, to 2.5%, while the market average is 3.7%.
In addition to reduce its portfolio of foreclosed properties, Caixa also is trying to move forward on creating a “credit-card company.” The bank already started developing the model to be presented to the Central Bank. The state-owned lender has been consulting regulators to make the process more transparent. It wants to offer new services to its 80 million clients.
Amid the fiscal crisis, Caixa doesn’t expect to receive Treasury transfers this year and the next. “We need to make the company more efficient. Since Caixa will have to shrink, we already started cutting payroll and making branches leaner,” the executive said. “We are working to earn more respect for this company, especially abroad, by making it more efficient and free from meddling,” the executive said.
Source: Valor Econômico