By Antonio Guerrero
Banco Santander in September launched a much-awaited IPO of its Brazilian unit, in a deal expected to raise more than $5 billion—one of the world’s largest IPOs this year. Santander is Brazil’s third-largest private sector bank, with $154.2 billion in assets at end-June, and contributed one-fifth of the Spanish banking giant’s attributable profit in first-half 2009. Funds will be used to increase credit and to finance further expansion in Brazil, while boosting its tier-one capital ratio. The IPO will involve floating a 15% stake on the São Paulo exchange and ADRs in New York.
In a move to consolidate its position as Brazil’s largest bank by assets, state-owned Banco do Brasil will create new credit lines of some $19.5 billion to finance small companies and boost consumer lending. The bank is also increasing credit lines to farmers and municipal governments. Banco do Brasil temporarily lost its top rank after late last year’s merger of Banco Itaú and Unibanco but regained it this year. Banco do Brasil’s credit portfolio grew by 32.8% in the second quarter, to some $135 billion.
Funcef, Brazil’s third-largest pension fund, plans to increase its total stock holdings to 40%, from a current level of 35%, taking advantage of record-low interest rates and a recovering economy. Funcef, the pension fund of state-owned bank Caixa Econômica Federal, holds about $7 billion in Brazilian equity holdings out of some $20 billion in assets. The fund is particularly interested in shares of top-tier Brazilian companies, including Petrobras, the state-controlled oil company, which plans to float additional shares to finance its investment program.
President Luiz Inácio Lula da Silva unveiled a new development model for exploration and production of Brazil’s pre-salt oil fields. The offshore fields, discovered in 2007, are the largest oil find in the hemisphere in three decades. Under the new model, pending congressional approval, the government would establish a new production sharing system for contracts, a company to handle contract agreements and a social fund to invest in education and poverty reduction.