WRAPUP 1-Brazil state banks assume bullish tone as recovery hopes take hold

viernes 12 de agosto de 2016 15:16 GYT

By Guillermo Parra-Bernal

SAO PAULO Aug 12 (Reuters) - Brazil's state-controlled banks, which have seen defaults and loan-loss provisions outpace those of rivals this year, are more confident than their private-sector competitors that Latin America's largest economy will soon emerge from a severe recession.

Executives at Banco do Brasil SA, the nation's largest bank by assets, said on Friday that provisions likely peaked in the second quarter, on hopes household and corporate budgets will recover after a two-year crisis. Top mortgage lender Caixa Econômica Federal sees defaults declining by year-end.

Their bullish tone contrasts with the view of Brazil's top-two private-sector banks, Itaú Unibanco Holding SA and Banco Bradesco SA, which do not expect defaults to fall until next June. Both lenders faced a deluge of requests to renegotiate existing loans last quarter as the economic crisis left many of their largest corporate borrowers short of cash.

The recession will force state and private-sector banks to keep reclassifying at least 90 billion reais ($28 billion) in troubled corporate loans, as bankruptcy filings doubled in the past year. More than half that amount, analysts say, remains on state lenders' balance sheets.

"I can assure you all that we have managed things more conservatively here than many private-sector banks did," Paulo Rogerio Caffarelli, who took over as chief executive officer of Banco do Brasil last month, told reporters at an event on Thursday.

Investors are giving Caffarelli, as well as CEO Gilberto Occhi of Caixa Econômica, the benefit of the doubt. Shares of Brasilia-based Banco do Brasil, have gained 8.3 percent since Thursday - the largest two-day gain for the stock in over a month.

Brazil's interim President Michel Temer, who replaced ousted Workers Party leader Dilma Rousseff as president in May, named Caffarelli, a former finance ministry official, and Occhi, a former cabinet minister, as part of a wider shake-up of leadership of state firms.

On Friday, Occhi said that faster loan renegotiations at Caixa helped bring down the default ratio last quarter. Caffarelli and his team at Banco do Brasil said future surprise cases of problematic lenders are unlikely, a prediction his peers at Itaú and Bradesco shied away from making when they released quarterly results earlier this month.   Continuación...