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Banks expected to report strong first quarter

The results of Brazil’s largest banks in the first quarter may help foresee the pace for the rest of the year, which is still a major unknown. On the one hand, the economy has been doing better than expected and credit growth has also surprised positively, which is likely to guarantee a good performance from January to March. On the other hand, high interest rates and inflation will lead to an expected increase in default rates throughout the year.

The projections of six banks collected by Valor indicate that Itaú Unibanco, Bradesco, Santander and Banco do Brasil (BB) are expected to have a combined profit of R$23.697 billion in the first quarter, up 0.5% from the fourth quarter – when there was a record – and an advance of 8.5% in comparison with the same period in 2021. The annual performance is expected to be the weakest since the fourth quarter of 2020, when numbers were still down due to the pandemic. The earnings season will begin next Tuesday, with Santander.

For UBS BB analysts, the default rate will be the most closely watched indicator in the financial statements. Still, they say that despite the expected deterioration in asset quality, banks are expected to show good operating trends, with year-over-year low-double-digit growth and improved margins for loans. There may be a small increase in provisions for bad debt, but some firms are likely to continue using some of the cushions built up in the pandemic, which would hold back that advance.

“We are positive about the dynamics of the results of Brazilian banks… Overall, we forecast earnings expansion for most of the banks we cover,” UBS BB said. Goldman Sachs takes a similar view, predicting resilient operating trends. “We expect Brazilian banks to sustain relatively stable ROEs as financial margins remain resilient and the cost of risk remains under control, with healthy loan growth, even if the default rate shows some deterioration.”

J.P. Morgan goes along the same lines, but with a slightly more cautious view. For the U.S. bank, the expected rise in defaults favors the large incumbent banks, which have a more diversified revenue base. “In Brazil, we see rising spreads, but asset quality worsening at the margin, in a potentially faster trend than initially anticipated.” According to the report, there could be sharper worsening in individual defaults, especially unsecured consumer loans and credit cards, which are under pressure as the year begins with high inflation and household debt also high.

“We believe that the deterioration in asset quality is likely to dominate the discussions and will probably prevail over strong net interest margin developments in the first quarter results. The first signs of how severe the scenario for Brazilian banks may be is expected to start to emerge in the first quarter,” Bradesco BBI analysts said.

Bank of America says that net interest income will probably benefit from a higher rate environment, although lower treasury earnings will limit total interest income growth to around 5%. They also warn about administrative expenses, which remain a point of concern, reflecting recent salary increases.

In a report in February, when the 2022 guidance was released, BofA said the discrepancies in projections made “Itaú came from Mars and Bradesco from Venus.” While Bradesco’s projections suggest 8% profit growth this year, Itaú’s forecasts indicate twice as much: 16%. “The 2022 guidances for Bradesco and Itaú include large disparities related to financial margin; bad debt provisions; revenues from tariffs and insurance; and effective tax rate. On the other hand, both indicated similar growth in loans and operating expenses,” the analysts said. Now, the first quarter results may give clues about who is right.

Itaú will probably have the highest year-over-year growth in profit, up 14.1% to R$7.3 billion. “We project total credit growth of 13.2% year over year. The retail portfolio is likely to remain robust, but with a different profile from previous quarters (growth in home loans may decelerate, while personal loans may expand faster),” UBS BB said. The analysts said that the recent appreciation of the Brazilian currency may have a negative impact on growth, since the bank’s portfolio in the rest of Latin America represents almost 25% of the total.

Bradesco will likely have a 3.7% expansion in profit, to R$6.754 billion. For Goldman Sachs, despite a solid 18% expansion in the portfolio, the financial margin is likely to fall in the transition from the fourth to the first quarter, and the default rate will rise. “Fee income and expenses are likely to be seasonally worse. We estimate expense growth to reach 10%, limiting profit expansion.”

For BB, estimates are for a 14.1% rise in profit, to R$5.604 billion. Analysts see a low level of provisions and the margin benefiting from the growth in lines with higher spreads. At the same time, Banco do Brasil’s pension fund Previ’s results are expected to make a significant positive contribution. “Given the higher risk quarter, we favor less risky operations, such as Banco do Brasil and Itaú, over Nubank and Santander,” J.P. Morgan said.

In the case of Santander, the forecasts indicate profit of R$4.039 billion, an improvement of 0.7% year over year. BTG foresees an increase of 41.3% in provision for doubtful debts. In addition, analysts point out that the result of treasury, which was very strong in an environment of low interest rates, is likely to lose strength with the increase in the Selic. “Santander ended the fourth quarter with a coverage ratio of 220% (the lowest among large Brazilian banks). We believe this will fall even more in the coming quarters,” UBS BB pointed out.

Source: Valor International

https://valorinternational.globo.com

Banks dive into video game universe

Qual a melhor TV para jogar video-game? | Dica Amiga

Brazilian banks are diving headfirst into the world of video games, already the largest entertainment industry in the world.

Being part of this community, which got a boost during the pandemic, means talking to a young audience that is very connected to technology, but which is not yet fully integrated into financial services – a lode that is increasingly in the sights of financial institutions.

A DataFolha survey commissioned by the yearly video game convention Brasil Game Show shows that 38% of those interviewed play electronic games. The average age of the players is 30 years old, 53% are men and the average monthly income is R$3,580. On another research, Pesquisa Game Brasil, conducted by Blend New Research, 61.6% of the responders identifying themselves as gamers.

BTG is the latest of the big banks to announce news in the gamer universe. Its digital banking unit, BTG+, will offer exclusive benefits to players and people interested in knowing Ubisoft’s game Tom Clancy’s Rainbow Six Siege, which has 80 million users worldwide and almost 4 million in Brazil. The bank will offer a free game, which currently is sold for R$59.99, or in-game items for current players.

“We want to create a dialogue with this community to understand and offer solutions connected to the lives of these people. It’s not a one-off thing, we’re here to stay in the games market,” said Jaqueline Machado, executive director of onboarding, growth and customer experience at BTG.

Bruna Soares, head of strategic partnerships and business diversification at Ubisoft, says that 80% of the game’s sales happen through digital channels and, therefore, the user needs a credit card. “We are showing our players that BTG+ offers several benefits.”

One of the first banks to enter the gaming universe was Banco do Brasil, in 2018, as part of its strategy of digital transformation and rejuvenation of its customer base. Last year, in partnership with Visa, it created an exclusive platform, #TamoJuntoNesseGame. The idea was to gather in a single space all information about the eSports events supported by BB, as well as products, partnerships, benefits and discounts for customers who buy with the Ourocard credit card. In May, the two expanded the partnership and launched the KaBuM! credit card. KaBuM! is the largest e-commerce site in the technology and games segment in Latin America.

“This market is very heated,” says Roberta Grunthal, design executive of BB’s payment methods experience, adding that the card makes users choose the bank.

When it announced the sponsorship of the Brazilian Free Fire league, Santander caused a stir in the gaming community with a prize of more than 1 million dimas, the currency used within the game, equivalent to something between R$40,000 and R$45,000. In addition, whoever opened a digital account or applied for a credit card would earn a monthly amount of dimas over the course of a year. The campaign attracted more than 100,000 people.

Santander’s Marketing Director Igor Puga says that the gaming universe links the bank to an audience that seeks innovation at all times. “We think not only about language, but also about offering financial solutions that make sense for this audience. We hired a consultancy that helped us in this process, carried out research to understand this community. We want to be the gamers’ bank.”

At Bradesco, interaction with the gamer universe is mainly done through its digital bank, Next. The institution sponsors the Fluxo team and has as one of its ambassadors is player NoBru, voted the best in the world in Free Fire in 2019. The other ambassador is Fallen, a celebrity player who has a store of accessories for games, in which Next offers exclusive discounts. A new ambassador, the first woman, will be announced shortly.

Source: Valor international

https://valorinternational.globo.com/

Banks likely to see higher profits in second quarter

Cartoon Retro Bank Building Or Courthouse With Columns Illustration  Isolated On White | Bank building, Bank building architecture, Building  cartoon

With a fairly low base of comparison in the second quarter of last year, when they were still making provisions to deal with the pandemic, Brazil’s largest banks are expected to report an almost 60% jump in profit for the April-June period. The expectation is that credit portfolios will continue to grow at a healthy pace and there will be a slight deterioration in nonperforming loans, which is more than normal given it was at historical lows due to the pauses in payments offered to customers. Financial margins, however, should remain under pressure amid increased competition, but the expansion of lines with larger spreads could ease this factor.

Itaú, Bradesco, Santander and Banco do Brasil should have a combined profit of R$21.5 billion in the second half, up 59.9% year over year, but a quarterly drop of 1.6%, a survey by Valor with eight analysts shows.

For J.P. Morgan analysts, the banks’ appetite to offer loans is growing as activity improves with the reopening of the economy and the advance of vaccination. They point out that data from the Central Bank indicate acceleration of loans, to 16% in May from an annual high of 14.5% in March, and among private-sector domestic banks this expansion is even stronger, of 24%. “Riskier products with higher spreads are growing faster, which can boost margins.”

The Itaú BBA points out that investors will be looking for signs of recovery in the financial margin, but that there should still be no substantial improvement in the second quarter. According to analysts, the period was still marked by mobility restrictions due to the pandemic and a stronger recovery in margins should come more in the second half of the year. “Increased confidence and normalization of household savings should drive demand for higher-return credit products. This will also be a better environment for banks to adjust prices upwards and compensate for the gradual increase in financing costs due to the Selic policy interest rate hike.”

Analysts point out, however, that a failure to improve the financial margin in the second half would undermine the profit forecasts for banks. Itaú BBA says this would fuel pessimists who argue that margin compression is more related to competition and regulation, and not so much to a lower Selic. “Brazil will enter phase two of open banking, probably increasing competition in the credit segment and casting long-term doubts if the recovery of spreads does not materialize. That is, if bank spreads do not improve with the growth of almost 6% of the GDP and a rate increase cycle of 4 percentage points, it will be more difficult to argue for a brighter future.”

“We have seen loans grow, but revenues, not so much,” Bruno D’Avilla, an analyst with Mauá Capital, said. “To be more optimistic about banks [stocks], revenue will need to grow more.” He expects a new round of portfolio expansion, with nonperforming loans still under control, below the pre-pandemic level, and that the level of provisions will fall. There will be great attention, therefore, on how the guidances will be for 2021 – whether there will be adjustment in these guidances or, at least, a change in the message about the prospect of meeting them.

XP analysts agree that higher stock prices of big banks in a “disruption” scenario caused by both regulatory interventions and increased competition are worrying. This assessment, coupled with the risks with open banking and more aggressive competition in the wholesale sector, led to a shift from optimistic to cautious. “While our recommendation for banks in June 2020 paid off, our hedging prices grew by an average of 26%, justifying a less optimistic view of the sector.”

For UBS, the financial margin should be almost stable in the comparison of the second with the third quarter, but with a better quality, that is, with a greater part formed by the margin with clients and a smaller portion of the financial results.

With portfolios growing strongly and margins relatively stable, the other focus is nonperforming loans. However, analysts point out that banks’ asset quality metrics should stay at low levels. UBS says Central Bank data showed a 0.2 percentage point increase in nonperforming loans in April and May. “Loans with more than 90 days in arrears should continue at a very low level, but with an uptrend, after ending the first quarter at 2.2%, only 0.05 percentage point above the historical low.”

Unlike what happened in the United States, where banks began to reverse provisions already in the first quarter, analysts do not believe in this possibility here. The expectation is that they will provision volumes below what goes into default, thus gradually consuming excess reserves. “Hedging began to fall in the first quarter of this year and this trend is expected to continue in the second,” says UBS.

Source: Valor international

https://valorinternational.globo.com/

Banks strengthen IT teams amid arms race

Technology has always been key to Brazilian banks, forged in the times of rampant inflation. In recent years, however, IT has been moving away from the back office and closer to the business teams, as a result of innovations and increased competition that are forcing financial firms to reinvent themselves. The most recent move is Santander’s, which is taking one step back in order to take two steps forward.

The bank told employees Thursday that it will concentrate technology assets in a new company named F1rst. It may seem contradictory to the integration trend in the industry, but the intention is to strengthen the team by giving it greater autonomy.

“The idea of classic banking has to change. For that, the technology team cannot be the classic IT unit of a traditional bank,” Ede Viani, executive vice-president of technology and operations at Santander in Brasil, told Valor.

F1rst will be under Santander and will provide services for the group’s more than two dozen affiliates, including foreign operations. The company will have almost 3,000 direct employees, besides 4,000 outsourced workers, and an annual budget of R$2 billion.

The revamp is a reflection of the increasingly heavy investments of banks in technology amid competition with fintechs and the digital revolution accelerated by the coronavirus pandemic. Some changes are internal, with efforts to take systems to the cloud, as already announced bu Itaú Unibanco. Others are visible for the external audience, like moves by next, iti and Caixa Tem, digital banks of Bradesco, Itaú and Caixa Econômica Federal, respectively.

One reason why Santander decided to create a separate company is to offer IT employees benefits that they already have in tech companies. F1rst plans to give incentives for further training and offer a flexible work arrangement and paid vacation before completing 12 months in the job. This is a response to the battle for these professionals – Itaú even run prime-time ads on TV highlighting that it is a great company for technology experts to work on.

Besides incentives, Santander also plans to hire instead of outsource. Mr. Viani said that almost 70% of the technology team was outsourced in the past. This percentage has fallen to 50% and the plan is to reach 30% to 40%. “We want to do things more and more internally. This reduces turnover, fosters greater adherence to our culture and favors the maintenance of knowledge here, but it will never be only internal,” he said.

Despite the concentration of technology activities in a different company, the TI and business teams will not be “separate.” Mr. Viani said that work will not be that different – with different teams working together in projects without necessarily being in the same physical space. “F1rst will be a provider of technological solutions for the Santander ecosystem. Just as the technology team has to be connected with the bank business, you cannot imagine someone in the business team not connected with technology.”

F1rst’s structure will include technology to process transactions, architecture and development. The company will control two digital generation centers, one in Interlagos and another in Jurubatuba, both in the city of São Paulo, as well as a data center in Campinas and innovation centers in São Carlos, São Paulo, and Belo Horizonte, Minas Gerais. Two more such units are expected to open soon in the South and Northeast regions. The bank also has partnerships with the University of Campinas (Unicamp), the Faculdade de Informática e Administração Paulista (FIAP, a higher education institute of technology and administration) and the network of technical schools of the São Paulo government.

“We have a decentralized vision, to reach talents throughout Brazil. In the last 12 months we have hired 1,500 people. In addition, we want to use technology as a tool to strengthen diversity, with programs that encourage the training of people of different genders and races,” Mr. Viani said.

F1rst will not be pressured to make profit, and its priority will be to serve the group’s companies. In the future, however, it could work for companies outside the Santander ecosystem. Banking as a service, data center as a service and data services are some possibilities to monetize the business. Mr. Viani also said that F1rst is open to mergers and acquisitions. “We don’t have to have only organic expansion by definition. In technology, in certain centers you gain speed if you make acquisitions,” he said, recalling that Toro, Santander’s investment platform, recently announced the purchase of fintechs Mobills and Monetus, while the bank itself bought Solution4Fleet and Car10, which operate in the automotive segment.

Instead of having its own digital bank, Santander has been betting on the digitization of its operations. “More than 75% of our services are already available on digital channels.”

A recent report by Credit Suisse drew attention to Santander’s digital transformation, pointing out that the bank should migrate 72% of its operations to the cloud by the end of this year. Itaú revealed the goal of reaching 50% of cloud operations by the end of 2022. Santander also intends to eliminate all paper of its transactions by 2022, which will allow the bank to become even more agile and significantly improve product launch time and customer experience and reduce environmental impact.

At CIAB Febraban, the country’s main banking technology event, held last month, bank executives spoke about the importance of investing in this segment, not only to improve processes in the backoffice, but mainly to offer an increasingly enjoyable experience to users. A survey commissioned by the Brazilian Federation of Banks (Febraban) to Delloite showed that banks in Brazil invested R$25.7 billion in technology in 2020, up 8% from 2019. Among the executives of 21 institutions consulted, 93% mentioned artificial intelligence as an investment priority, process automation being in second place (80% of the answers).

Fitch stated, in a report released this month, that digital transformation is not a new concept for traditional banks, but the acceleration of digital channels brought by the pandemic, coupled with the growing activity of fintechs will force them to maintain heavy investments in technology. “These investments will be fundamental to the defense of their franchises and business models.” The rating agency says that after the pandemic, market dynamics in the short term will lead to fiercer competition for digital products and promote joint ventures or acquisitions, given the reduced sources of funding and risk aversion of investors.

“Today, with the mobile phone, the customer opens an account wherever he wants,” Bradesco CEO Octávio de Lazari Jr. told Valor recently. “What I need is to specialize the teams, have adequate products and services and a user-friendly digital journey.”

Source: Valor international

https://valorinternational.globo.com/

Exporters want R$19bn compensation from banks involved in cartel

Banco de Horas: Regras, vantagens e compensação

The Brazilian Foreign Trade Association (AEB), which represents some of the country’s largest exporters, wants compensation of almost R$20 billion from 19 banks accused of involvement in an international cartel scheme in the foreign exchange sector. It is one of the first class actions in Brazil to seek compensation for competitive damages and one of the biggest ever filed in the country.

The case of the foreign exchange cartel itself is not new. The international scandal was revealed in 2015. At the time, chats of traders showed coordinated actions to influence reference indexes of the foreign exchange markets. The transactions aligned purchases and sales of currencies between January 2008 and December 2012. In Brazil, it involved the Ptax.

In Brazil, Swiss bank UBS signed a leniency agreement with the Administrative Council for Economic Defense (Cade) in July 2015, in which it detailed the scheme and implicated other banks. The case continues to this day. Last month, the Administrative Council for Economic Defense (Cade) approved a term of termination commitment with NatWest Markets (formerly the Royal Bank of Scotland) and thus reached nine agreements in the cartel lawsuit. Also last month, Petrobras filed suit for compensation against nine banks involved in the case. Valor has learned the company even considered participating in the class action of AEB, but then ended up deciding to do it alone.

In the United States, the case’s collective compensation already exceeds $2.3 billion, in addition to another $2.5 billion that banks have paid in the settlements with the Department of Justice (DoJ).

AEB, which represents mining giant Vale, pulp maker Suzano and Whirlpool, among others, claims R$19.154 billion based on a study by University of Campinas (Unicamp) researchers, coordinated by Pedro Rossi. The analysis estimates a counterfactual exchange rate and calculates how much exporters lost between January 2010 and December 2011, reaching R$107.4 billion. Exporting companies in the processing industry are the most affected, followed by companies in the extractive and agricultural industries. As AEB represents almost 20% of Brazilian exporters, it calculated this percentage on top of the estimated total loss.

AEB’s claim for compensation is partial — it only considers the period of 2010 and 2011, not the entire range from 2008 to 2012 — because to draw up a full report the entity needs detailed data from the Central Bank or from the banks, which it has not yet been able to obtain. Now, in the lawsuit it asks that the report of the full period be produced and, therefore, the judge will have to determine the release of the data necessary for the economist to be appointed as a judicial expert for the production of the full technical report. Thus, it is likely that the current value of almost R$20 billion will rise further.

Based on the banks’ market shares at the time, most of the compensation sought by AEB would fell on HSBC (R$4.691 billion), Itaú (R$4.305 billion), Santander (R$3.834 billion), Citi (R$2.923 billion) and BNP Paribas (R$1.163 billion).

AEB lawyer Bruno Maggi says the case can take 12 to 15 years, but does not rule out the possibility of banks opting for judicial or extrajudicial settlements. “Still, so far we have not been sought to negotiate any agreement,” he said. He claims that the banks’ agreements with the Cade are an important confession that confirms the existence of unlawful acts and thus believes that AEB has a great chance of victory in the case.

In the lawsuit, AEB claims that currency speculation, despite generating negative effects on the formation of the exchange rate, does not constitute a competitive unlawful act. “However, after the speculative cycle that appreciated the Brazilian currency [between 2010 and 2011] and hurt exporters, currency manipulation processes were discovered in Brazil and abroad. In this context, speculation becomes illegal when coordinated between banks that work as partners to the detriment of competitors in the foreign exchange market, in an effort to push the exchange rate in the direction that would gain their bets,” says the organization.

AEB also points out that, even if the exchange contracts of its associates have been concluded with other banks, other than the defendants in the case, still the damage will have been configured, since the cartel affected Ptax, which is used by all banks in the financial system.

In its separate lawsuit, Petrobras filed suit against Santander, HSBC, PNB Paribas, BTG, Citi, Fibra, Itaú BBA and Société Générale. The company says that its activity in the foreign exchange market is daily and that between 2008 and 2012 it bought $201 billion and sold $191 billion in dollars with the investigated banks. “It should be stressed, however, that this impact was not only on the dollar – as one might think – but also on other currencies directly influenced by the American currency,” the company points out.

The oil company made an analysis of the sensitivity of the manipulation in the exchange rate and points out that in the case of its transactions to sell dollars, if the cartel had reduced the exchange rate by R$ 0.01, the company’s loss would be R$1.911 billion. If the change had been RS 0.10, the loss would rise to R$19.112 billion. In the case of dollar purchases, the effects would be R$2.505 billion and R$25.051 billion in the two stipulated scenarios.

Still according to Mr. Rossi’s study, which is also mentioned in the Petrobras lawsuit, in some moments the manipulation may have brought distortions of up to R$0.49 per dollar. “That is, although the true impact of manipulation on foreign exchange operations is not yet known, it can be seen that the amount of damage caused to the plaintiff was undoubtedly significant,” states the company in the lawsuit.

The 20 banks cited in the case were sought by Valor to comment. Bocom BBM, BTG, Barclays, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS, Morgan Stanley, Société Générale and Bradesco declined to comment. Citi stated that it does not comment on ongoing issues in the judicial sphere, but reinforced “its conduct guided by full compliance with the legislation.” Santander stated that it has not yet been officially notified about the lawsuit, but says that “the case in question was already known, so much so that it was previously submitted to the competent authority, which is the Cade, to which the due information was presented.” Itaú stated that it has always acted in compliance with the legislation in force, “not having participated, under any circumstances, in illicit activities or activities that could cause losses to its clients. The bank will legally contest the accusation so that the truth prevails.”

BNP, Fibra, Inbursa, Standard Chartered, RBC and MFUG did not immediately reply to a request for comment. Royal Bank of Canada (RBC) and J.P. Morgan, despite being defendants in the case, do not appear in the table of indemnities because they did not have direct participation in the foreign exchange market in 2010 and 2011. Thus, the compensation they may be required to pay will be calculated in the final report prepared by the legal expert.

Source: Valor international

https://valorinternational.globo.com/

Banks show signs of recovery

Large banks handled the coronavirus pandemic better than expected. A year after the first impacts on lenders’ results, profit rose sharply, driven by the drop in credit provisions. Financial margins are also beginning to show signs of improvement. Brazil’s ten largest banks in credit portfolio – Itaú Unibanco, Banco do Brasil, Caixa Econômica Federal, Bradesco, Santander, BNDES, Safra, BV, BTG and Banrisul – reported a combined net income of R$38.6 billion in the first quarter when compared to the same period in 2021. The credit portfolio expanded by 8.9%, reaching R$4.2 trillion, according to survey carried out by Valor. The biggest challenge will be to recover services revenue, which had already been pressured by increasing competition, including from fintechs, and recently was affected by social-distancing measures.

Source: Valor international

https://www.valor.com.br/international/briefs

Big five banks lend R$265.6bn in 30 days

The five largest banks in Brazil – Itaú Unibanco, Bradesco, Santander, Banco do Brasil and Caixa Econômica Federal – have lent R$265.6 billion between March 16 and April 17, the first month of the pandemic, according to the Brazilian Bank Federation (Febraban). The data includes new loans and financing, along with contract renewals and postponed installments. The total is nearly 22% higher than March 2019, but the trade group says the comparison is not possible. Febraban chief Isaac Sidney Ferreira says the numbers show liquidity is not pooling up in banks. However, there are still reports of smaller companies and some economic sectors finding it difficult to borrow. Central Bank President Roberto Campos Neto said on Monday that the government is working to make credit reach those companies.

Source: Valor Econômico

http://www.valor.com.br/international

Banks considering grace period for payroll loans

Brazilian banks study offering grace periods for payroll loans (also known as consigned loans, where the borrowers’ wages are pledged as collateral and payments are discounted from paychecks). Brazilian Bank Federation (Febraban) Chairman Isaac Sidney said lenders are trying to overcome operational problems before launching the measure. “Unlike other lines, consigned credit involves thousands of municipal governments, thousands of companies and states which process payrolls,” he said. Central Bank data puts the outstanding balance of such loans at R$393.4 billion in February, with civil servants making up R$227.6 billion.

Source: Valor Econômico

http://www.valor.com.br/international

Companies reinforce cash with R$5.5bn in new borrowing

Brazilian companies raised about R$3 billion in corporate bonds and R$2.5 billion in promissory notes over the last five days. The new funds are mostly reinforcing cash reserves, with the bonds and notes held by coordinating banks. Rates went up between 1 to 2 percentage points from recent issues while maturities are on the decline – most carry one-year maturities. Companies able to keep up the business during the crisis are borrowing below the CDI rate plus 2%, say analysts. The list includes Magazine Luiza (R$800 million), MRV Engenharia and subsidiaries (R$200 million), BR Properties (R$250 million) and Águas de Teresina Saneamento (R$102 million). Rodovias Integradas do Oeste, a highway concessionaire, raised R$430 million while ViaMobilidade, which operates two subway lines in São Paulo, borrowed R$700 million with tax-exempted infrastructure bonds. Ecorodovias led the way in promissory notes with a R$1.2 billion, two-year loan at the CDI plus 4%.

Source: Valor Econômico

http://www.valor.com.br/international

Banco Pan closes week of overly discounted share offerings

Banco Pan priced its share offering at R$8.25, 8% lower than Thursday’s closing price, raising R$1 billion in a week that saw investors pushing discounts on other offerings of midsize banks. Investors planning to join Banrisul’s offering, which was canceled, also started migrating to Banco Pan in the last two days. Sinqia, another share offering that took place this week, featured an 11% discount – secondary offerings usually feature an up to 5% discount. Banrisul would have faced a 23.2% discount if it had moved ahead. An investment banker says each stock had specificities that ended up depressing the price, with Pan having already risen significantly this year while state-owned Banrisul is under pressure from a cash-strapped state government and Sinqia had little liquidity after also increasing significantly.

Source: Valor Econômico

http://www.valor.com.br/international