Brazil's federally controlled Banco do Brasil (BB) and South African bank FirstRand have decided to cancel their auto financing JV planned to begin operating in the first half of 2009, BB said in a statement.
BB said it had received a statement from FirstRand that it would be discontinuing its application for a banking license in Brazil to start the business. The banks were still waiting on regulatory approval in both Brazil and South Africa so major investments had not yet been made, the statement said.
Questions about the planned JV had arisen from the deteriorating auto market in Brazil and BB's announced deal to acquire the São Paulo state government's controlling stake in bank Nossa Caixa.
BB announced in November it would be providing 4bn reais (US$1.74bn) in wholesale credit to auto-financing banks in exchange for guarantees on the banks' loan books in a move that was praised by finance minister Guido Mantega given falling automotive sales.
The São Paulo state government quickly followed suit, saying that Nossa Caixa would also make 4bn reais available for auto lending.
Then on November 20, BB and the São Paulo state government announced their 5.39bn-real deal for the government's 71.2% stake in Nossa Caixa.
As of end-September, BB had a car loan portfolio of 5.61bn reais. Nossa Caixa, which began trying to ramp up its auto lending in May, does not break out its car portfolio in its financial statements. The bank, which specializes in loans to government employees, had 8.63bn reais in loans to individuals at end-September.
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