Nov. 6 (Bloomberg) -- Banco Nossa Caixa SA, the lender owned by the state of Sao Paulo, rose the most in Brazil's Bovespa index after a report that Banco do Brasil SA may pay about 6.4 billion reais ($3 billion) to buy it.

Jose Serra, the governor of Sao Paulo state, which controls Nossa Caixa, met Finance Minister Guido Mantega yesterday in Brasilia to set the price, Folha de S. Paulo reported without saying where it obtained the information. The deal, which started being discussed in April, may be announced in coming days, Folha said. The price is about 2 times Nossa Caixa's book value at the end of June, according to the report.

``Investors now feel that the deal is imminent as Banco do Brasil must be under pressure to make an acquisition to try and regain its position as the country's largest bank after the merger of Itau and Unibanco,'' said Debora Morsch, who helps manage about $305 million at Solidus Brokerage in Porto Alegre, Brazil.

Federally controlled Banco do Brasil lost its top ranking among Latin American financial companies by assets after Banco Itau Holding Financeira SA agreed to buy Uniao de Bancos Brasileiros SA, or Unibanco. The deal spurred speculation that consolidation in the industry will accelerate as medium-sized banks face a credit squeeze amid a rout in global financial markets.

Nossa Caixa surged 13 percent to 45 reais in Sao Paulo trading, the highest price since February 2007. The stock has gained 91 percent in 2008, compared with a 43 percent loss in the Bovespa index. Banco do Brasil sank 6.5 percent to 15 reais. The stock has lost 51 percent this year.

Carmakers' Rescue

Raquel Rosa, a spokeswoman for Banco do Brasil in Brasilia, declined to comment the Folha report when contacted by Bloomberg News. She said ``negotiations with Nossa Caixa are still under way.'' Nossa Caixa won't comment, according to its press office in Sao Paulo. Sao Paulo state and federal government officials weren't available for comment, according to their press offices in Sao Paulo and Brasilia.

Finance Minister Guido Mantega said today government- controlled Banco do Brasil SA will provide 4 billion reais ($1.9 billion) of loans to carmakers' financial arms to help sustain auto sales this month and in December. The automotive industry, growing at a record pace this year, lost steam as the global credit crisis prompted banks to toughen lending terms and raise interest rates.

Brazil vehicle registrations declined for the first time in two years, dropping to 239,200 units in October from 244,500 units a year earlier, the country's Automakers Association, known as Anfavea, said today in Sao Paulo.

Mantega also said Banco do Brasil would receive 5 billion reais from a workers' assistance fund, known locally as FAT, to help small companies hurt by the credit squeeze.

To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net

Last Updated: November 6, 2008 16:02 EST