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Posts Tagged ‘Nossa Caixa’

As mentioned in this blog on November, 10th, Brazil’s banking system is bracing itself for a wave of consolidation. The last announcement came yesterday as Banco do Brasil, the country’s top state-controlled bank announced it will spend US$2.3 billion to buy a 71.3 percent share in Banco Nossa Caixa SA, owned by the Sao Paulo state government.

Banco do Brasil will have US$217.2 billion in assets with the acquisition of Nossa Caixa, for which it will make 18 monthly payments of US$124.7 million starting in March. Earlier this month, Brazil’s second-largest private sector bank, Itau, bought rival Unibanco, creating a Latin American financial giant with total assets surpassing Banco do Brasil.

Cyrus Sanati has posted some interesting comments on the New York Times blog about this acquisition.

“If you look at the Brazilian banking system, there are 10 large banks representing 87.1 percent of the financial system,” Felipe Asenjo Wilkins, head of research for FIT Research in Santiago, Chile, told DealBook. “This is too much if we compare it with other emerging markets like Chile, Peru and Colombia.”

So who might be next? Banco do Brasil will probably move to purchase a stake in Banco Votorantim, a family-owned bank in São Paulo, Lia da Graça, an analyst with Banif Securities in São Paulo, told Dealbook. That purchase, along with another smaller bank, would put Banco do Brasil in the top spot.

All this could be unsettling to Brazil’s third-largest bank, Bradesco. It is not shy to do a deal to maintain its market share. “From 1948, Bradesco bought like 48 financial institutions” including banks, Mr. Wilkins said.

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Still about the banking situation in Brazil, news come out everyday about new joint-ventures including heavy weights on the public sector – ie. Nossa Caixa and Banco do Brasil. The Financial Times gave a note about the consolidation process running at full throttle in the country.

Brazil’s banks are preparing for a wave of consolidation following this week’s merger of Itaú and Unibanco to create the biggest bank in South America. Brazil has about 150 banks, many of them small players concentrating on a single line of business such as car loans or payroll-linked loans, areas that have grown quickly in line with rising employment and wages.

“Smaller banks have been seeing growth of 30 or 40 per cent a year,” says Ceres Lisboa, banking sector analyst in São Paulo at Moody’s, the international credit rating agency. “That’s over. They’ll have to reinvent themselves.”

Dozens of these smaller banks will be snapped up or forced to retreat into niche markets. Banco do Brasil, the federally-owned bank that was Brazil’s biggest before the latest merger, and Bradesco, formerly the biggest private-sector bank, are expected to scurry for acquisitions as they try to regain their dominance.

Consolidation will be helped by recent government measures to inject liquidity into the banking system as the global financial crisis has unfolded. The process should also be orderly as Brazil’s banking system remains solid, thanks to relatively low levels of lending and the fact little credit is sourced overseas.

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