Brazil's federally controlled Banco do Brasil (BB) and São Paulo state bank Nossa Caixa are likely to negotiate a controlling stake sale rather than an outright sale, Nossa Caixa CEO Milton Luiz de Melo Santos told a conference call.
While initial plans called for a straightforward acquisition and incorporation of Nossa Caixa into BB, the discussions now appear likely to preserve the brand, branches and board of the state bank, the executive said.
"It would have its own executive board and employees would continue to be Nossa Caixa employees with the same commitments, obligations, duties and all rights maintained," Santos said.
However, this would not rule out eventual incorporation, he said.
"If later on BB decides to incorporate Nossa Caixa, then - and only then - the model will gradually be migrated to the BB system: personnel, technology, control, portfolios," he added.
Santos declined to speculate on a time table, but did support the stance of BB executives that any deal would wait for full congressional approval of MP 443, the presidential measure easing the restrictions on BB and federal savings bank Caixa Econômica Federal (CEF) buying assets from and stakes in other financial institutions.
The bill was passed by the lower house of congress last week, while a vote is expected in the senate as early as this week.
President Luiz Inácio Lula da Silva is expected to discuss the sale in a meeting with federal bank executives and economic officials scheduled for Tuesday (Nov 18), government news agency Agência Brasil reported.
NPL RATIOS, LOAN GROWTH
While the market focus is clearly on the possible sale of Nossa Caixa, Santos also tried to bring attention back to the bank's fundamentals.
The bank pulled its NPL ratio of loans overdue more than 60 days down to 4.8% in 3Q08, with improvements each quarter since the 7.1% reported in 3Q07. In individual loans, NPL was down to 4.3% from 5.9%.
"At Nossa Caixa, we see no increase in NPL," Santos told the call. "Our loan portfolio has a very important component, which is payroll-linked loans with government [employees] and we saw no reduction in the level of employment in the public sector."
As with nearly all banks this quarter, Nossa Caixa anticipates lower loan growth, Santos said.
Nossa Caixa ended September with a loan book of 11.5bn reais (US$4.99bn), rising 33.0% on the same time in 2007, while the bank enjoyed earnings of 69.8mn reais in the third quarter after a loss of 67.9mn reais during the same quarter in 2007.
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