Nov. 13 (Bloomberg) -- Banco do Brasil SA, the country's largest federally controlled bank, is seeking to expand its share of Brazil's loan market as competitors face difficulties in expanding credit amid higher borrowing costs.

The bank, based in Brasilia, could win 17 percent of the country's total lending by the end of next year, compared with 16.5 percent currently, Finance Vice President Aldo Luiz Mendes said today.

``It's a challenging goal but it's not impossible,'' Mendes said in a Bloomberg Television interview in Sao Paulo. ``There're a smaller number of banks who're able to provide credit, so this crisis is an opportunity for us to grow. We're in a time of credit shortage but we have the wherewithal to lend.''

Smaller banks in Brazil have been the hardest hit by the global financial crisis as risk aversion increased, pushing funding costs higher. The central bank is encouraging the largest lenders to buy loans from the smaller institutions to make sure they have enough cash to keep issuing loans.

Banco do Brasil's loan portfolio increased 35 percent in the third quarter from a year earlier to 202.2 billion reais, while overall lending in the country in the 12 months ended September expanded 34 percent. The bank is also betting on acquisitions to gain market share and regain its position as Latin America's largest lender after being overtaken by the combination of Banco Itau Holding Financeira SA's and Uniao de Bancos Brasileiros SA.

Banco do Brasil acquired 8.2 billion reais ($3.6 billion) in loan portfolios from smaller institutions after the central bank eased reserve requirements. About 44 percent of the loans bought were payroll-deductible loans and 29 percent were car loans, Mendes said.

The bank forecast today that growth in lending would slow next year to 20 percent to 25 percent, from 34 percent to 36 percent for 2008.

Expansion Postponed

The lender is postponing plans to expand abroad while there are uncertainties about the global credit crunch and the effects of that on economic growth, Mendes said. The bank had plans to expand in South America and also in the U.S., mainly to serve Brazilians living abroad.

``There are very good opportunities but on the other hand at the moment there are too many uncertainties regarding the crisis,'' Mendes said. ``It's a technical stoppage. We will resume these plans possibly by the middle or end of next year.''

The bank's shares rose 21 centavos to 13.40 reais at 12:39 p.m. New York time in Sao Paulo trading.

To contact the reporter on this story: Telma Marotto in Sao Paulo at Tmarotto1@bloomberg.net

Last Updated: November 13, 2008 12:47 EST