Brazil’s Second-Biggest Bank Says Lula Has Sought Its Help

Martha Beck and Rachel Gamarski
·3 min read
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(Bloomberg) -- Brazil’s president asked the country’s second-largest bank to join his government’s efforts to help boost credit and economic growth, Banco do Brasil SA Chief Executive Officer Tarciana Medeiros said.

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The request from President Luiz Inacio Lula da Silva doesn’t mean the bank will take excessive risks or endanger its guidance or governance protocols, she said in an interview Tuesday at a Bloomberg New Voices event in Sao Paulo.

“The president has asked us to make sure that credit reaches all Brazilians,” Medeiros, 45, told Bloomberg. But Lula also said “no public bank should carry out operations that would result in losses.”

Banco do Brasil, a state-controlled firm, will seek markets where it sees potential, such as home equity, payroll loans for retired workers and medium and small companies — while also focusing on its traditional clients in agribusiness, according to the CEO.

Banco do Brasil declined as much as 0.75% in Sao Paulo after Bloomberg reported on the comments. Ibovespa benchmark index rose 1.3%.

Lula is in a tight spot as the country’s economy slows.

Brazil’s economy stalled for two straight quarters this year, signaling the economy is losing momentum. That raises questions about whether the leftist leader will exert greater pressure on other state-linked companies, the central bank and the finance ministry.

Read More: Lula Irks Investors in Bid to Spur Brazil Growth, Boost Approval

For her part, Medeiros said the best way to respond to concerns about government intervention is to continue delivering “robust results.”

Still, the market places an unfair discount on Banco do Brasil’s shares because of investors’ fears of government intervention, she said.

Banco do Brasil’s shares were affected by a crisis involving Petrobras’ dividends on March 8, as investors grew wary of Lula’s interference. Besides Petrobras, BB is the only other federal state-controlled company in the Ibovespa benchmark index.

“After the case with Petrobras, the market is very sensitive”, said Wesley Okada, an analyst at hedge fund Ace Capital. “It is less likely the same will happen to the bank, since the government has other tools to promote credit, such as BNDES, Caixa and Banco do Nordeste.”

In response to a question about whether public banks like hers would be used to distribute cheaper credit, Medeiros mentioned the bank’s autonomy.

“We have a good banking practice,” she said. “We don’t grant credit that won’t be good for the bank. So, I don’t see that risk. At the bank we do not face this issue, we do have management autonomy.”

Banco do Brasil is also looking worldwide to raise funds on its ESG strategy. The bank issued $750 million of ESG notes earlier this month.

“We can expect more ESG issuances,” she said before the panel, adding that the bank had seen more demand for ESG notes than expected.

--With assistance from Barbara Nascimento, Leda Alvim and Raphael Almeida.

(Updates to add share move in third paragraph)

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