Banco do Brasil (BB) is not currently in negotiations to buy any private sector banks, bank finance and IR VP Aldo Luiz Mendes told a conference call on the bank's third quarter results.
"Despite MP 443, which allows BB to buy private banks, we are not looking at opportunities," the executive said, referring to the presidential measure approved by Brazil's lower house of congress on Thursday (Nov 13). "We're not in discussions with anybody."
MP 443 was published as a provisional measure on October 22 and would allow federally controlled BB and Caixa Econômica Federal (CEF) to buy assets from and stakes in other financial institutions, make currency swaps with foreign central banks and, in the case of CEF, set up an investment bank.
Asked by analysts about consistent local press reports BB was in negotiations to buy 49% of Banco Votorantim, BB executives denied rumors, saying they were waiting for at least full approval from congress to move forward with any private sector purchases.
Brazil's senate could finish voting on the government's various economic measures related to the financial crisis, including MP 443, sometime the next week, congressional news agency Agência Senado reported.
BB did confirm previously disclosed negotiations with São Paulo state bank Nossa Caixa and federal district state bank Banco de Brasília (BRB), IR head Marco Geovanne Tobias da Silva told the call, noting BB was pleased congress had not added amendments forcing public auctions on such purchases of government-held banks.
Neither executive would give a timeframe on the negotiations with Nossa Caixa, but there's a high probability of at least part of the deal being done in cash with MP 443, Tobias said.
"If we pay cash, we won't be able to achieve the 25% minimum free float," he said, referring to the rules of stock exchange Bovespa's Novo Mercado, where BB's stock trades. The bank has been in contact with Bovespa about the issue and BB will likely receive an extension, he said.
DEFENSE AGAINST RUMORS OF GOVERNMENT PRESSURE
Many observers have interpreted MP 443 as a mandate for the federal banks to buy troubled assets or financial institutions, with BB's stock falling nearly 15% on the day of the announcement of the measure.
However, BB's executives sought again to calm such fears.
"We are not being forced to buy loan portfolios," IR director Tobias told the call, mentioning the bank had analyzed 17bn reais in loan portfolios before deciding to acquire only 40% of them.
"Until now, BB and CEF were at a competitive disadvantage," he said, referring to the recent merger announcement by Itaú (NYSE: ITU) and Unibanco (NYSE: UBB). "[Before the measure], we needed a specific authorization from congress [to make any private sector purchase]."
The measure also contains no language specifically calling on them to act on behalf of the government, the executive explained.
"If any bank needs any kind of help, that is an obligation for the central bank [BCB] not BB," Mendes added.
BB ended September with total assets of 459bn reais, short of the 575bn reais that a combined Itaú Unibanco would have.
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