Cruzeiro do Sul Soars Most Since IPO on Takeover Speculation

Banco Cruzeiro do Sul SA, the lender that was seized by Brazil’s central bank, surged the most since its initial public offering five years ago on speculation a bigger rival is close to purchasing it.

Shares jumped 57 percent, the most since June 2007, to 2.25 reais at the close of trading in Sao Paulo, rebounding from a one-month rout that erased 78 percent of the stock’s value following the government-ordered takeover. Today’s trading volume surged more than five-fold from the average over the past three months.

Mounting speculation that Banco Bradesco SA (BBDC4), Latin America’s second-biggest lender by market value, or billionaire Andre Esteves’s Banco BTG Pactual SA will buy Cruzeiro do Sul is sparking the rally, according to Sandro Fernandes, an analyst at Geraldo Correa Corretora.

“In the market, everybody is talking about BTG Pactual and Banco Bradesco as the best candidates to acquire Cruzeiro,” Fernandes said by phone from Belo Horizonte, Brazil. “The bank’s client portfolio seems very attractive to them.”

A press official for Bradesco declined to comment. Officials at BTG Pactual didn’t respond to a request for comment.

Midsized Brazilian banks are struggling to find funding since the privately owned deposit-insurance fund, or FGC, bailed out Banco Panamericano SA in January 2011 amid a fraud investigation. FGC has since financed buyers of Banco Schahin SA and Banco Matone SA, while the central bank liquidated Oboe Credito Financiamento e Investimento SA and Banco Morada SA.

‘Serious’ Violations

The central bank seized Cruzeiro on June 4, saying in a statement that it found “serious” financial violations. Policy makers put the lender under the administration of FGC for about 180 days. The fund requested an audit of the bank, which can take as long as 90 days, Antonio Carlos Bueno, the head of FGC, told reporters June 4. Bueno said the FGC would seek a buyer for the bank.

BTG held talks to acquire Cruzeiro before the takeover, and negotiations ended because the lender’s credit portfolio lacked proper documentation, Bueno said June 4. The central bank could not verify 1.3 billion of loans Cruzeiro claimed to have made, he said.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

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