Brazilian Banks Rise After High Court Invalidates Savings Refund Lawsuits

Most Brazilian bank stocks rose after a high court invalidated 99 percent of lawsuits demanding additional interest payments on savings deposits from 1987 to 1991 to compensate investors for inflation.

The Superior Court of Justice late yesterday narrowed the scope of a previous decision that ordered banks to refund depositors as much as 180 billion reais ($102 billion). Under the ruling, only those investors in class-action suits filed no more than five years after the alleged losses should be compensated. The decision isn’t final and can be appealed.

“The decision limited the scope of potential losses,” said Aloisio Lemos, a bank analyst with Agora Corretora in Rio de Janeiro. Lemos said the ruling, if confirmed, may have a positive impact on earnings because most banks had provisioned for bigger losses for this case.

Banco Bradesco SA gained 0.5 percent to 30.15 reais in Sao Paulo and Banco do Estado do Rio Grande do Sul SA rose 2.4 percent to 16.09 reais at 10:32 a.m. local time (9:32 a.m. New York). Itau Unibanco Holding SA was little changed at 36.62 reais.

The Brazilian Institute of Consumer Defense, known as Idec, said yesterday’s ruling means that 99 percent of the account holders included in the lawsuits will no longer be compensated, according to a statement. Most class-action suits were filed five years after the alleged loss, according to Idec.

The Brazilian Banking Association said in a statement it’s analyzing the impact of the court’s decision.

To contact the reporters on this story: Felipe Frisch in Sao Paulo at ffrisch1@bloomberg.net

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