Cruzeiro Shares Post Record Drop After Takeover: Sao Paulo Mover

Banco Cruzeiro do Sul SA shares fell the most on record as trading resumed two days after Brazil’s central bank ordered the takeover of the lender, saying it found “serious” financial violations.

The shares dropped 42 percent to 4.40 reais at the close in Sao Paulo, the lowest level since December 2008. Trading began late after a two-day halt, then was suspended twice for about three hours today. The stock plunged 40 percent last week before the takeover was announced.

The press office of BM&FBovespa SA (BVMF3), the stock exchange operator, declined to comment on today’s suspension.

“Investors now feel lost, not knowing if the institution is still good enough to be sold or if it is going to be liquidated,” Eduardo Machado, an analyst at Amaril Franklin Corretora, said by phone from Belo Horizonte, Brazil. “Other small and medium banks may suffer from this distrust too, because fear can spread, making it difficult for them to gather funds.”

Banco Industrial e Comercial SA, the Sao Paulo-based lender known as BicBanco, closed 0.5 percent higher at 5.87 reais after reversing a decline of as much as 3.4 percent. Banco Daycoval SA (DAYC4) rose 0.1 percent to 9.65 reais after earlier plunging 5.6 percent.

The central bank said June 4 that Cruzeiro would be run by the privately owned deposit-insurance fund known as FGC for about 180 days, during which time the fund will be responsible for meeting financial obligations as they come due. Cruzeiro became at least the fifth mid-sized Brazilian bank to require intervention from regulators since 2010, underscoring strain in the industry as the lenders seek to refinance debt.

Cruzeiro dollar-denominated bonds that mature in September rallied on speculation FGC will pay them in full.

Bond Rally

The 8 percent notes due in 2012 jumped 11.8 cents to 71.6 cents on the dollar, according to data compiled by Bloomberg. The bonds touched a record low 59.8 cents yesterday.

Brazil’s federal police will investigate Cruzeiro for possible fraud, according to an e-mailed statement.

FGC plans to prepare the bank for sale while PricewaterhouseCoopers concludes an audit, Antonio Carlos Bueno, head of FGC, said on a conference call yesterday.

The bank’s shares fell 45 percent this year through June 1, the last trading day before the intervention was announced. The benchmark slipped 5.9 percent in that period.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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