Banco do Brasil Jumps as Brazil Cuts Banks’ Reserve Requirements

Banco do Brasil SA, Latin America’s biggest lender by assets, jumped to a three-month high as Brazilian banks rallied after the central bank reduced reserve requirements to spur flagging investments.

The lender’s shares rose 2.5 percent to 25.69 reais at 5 p.m. in Sao Paulo, the highest since Sept. 27. It was the best performance on the MSCI Brazil/Financials Index, which advanced 1.5 percent.

Large banks that provide loans for investment in machines, equipment and other capital goods can deduct as much as 20 percent of reserve requirements, the central bank said in a statement yesterday. The change applies to lenders with a minimum of 6 billion reais ($2.9 billion) in total equity, and the monetary authority said it expects the measure to create 15 billion reais in fresh credit.

“It’s very good news for banks,” Sandro Fernandes, a trader at brokerage Corval, said by phone from Belo Horizonte, Brazil. “The Brazilian government has been pressuring banks to lend more, and this measure has the same spirit.”

President Dilma Rousseff’s administration has demanded that banks reduce borrowing costs, ordered power utilities and phone companies to cut prices, capped car imports from Mexico and lowered taxes on consumer goods to boost domestic spending and spur growth in Latin America’s biggest economy.

Banco do Brasil rose 38 percent from this year’s low on July 17 through yesterday. The benchmark Bovespa index increased 12 percent during the same 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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