Brazil Discusses Car-Loan Insurance With Banks, Itau Says

Itau Unibanco Holding SA (ITUB4) said Brazilian banks are in talks with the government about creating an insurance fund to guarantee car loans amid a drop in automobile sales.

“There is a great mobilization, because the car industry has a strong effect on the whole economy,” Marcelo Kopel, the Sao Paulo-based bank’s head of investor relations, said on a conference call with analysts today. The two sides share the goal of helping the industry grow faster, Kopel said, declining to give more details.

Banks including Itau and Banco Bradesco SA (BBDC4) are shifting from car loans to focus on safer mortgages and payroll loans to curb delinquency rates. Itau’s first-quarter automobile business dropped 24 percent from a year earlier and Bradesco’s fell 14 percent. Car sales declined 15 percent to 240,808 units in March from a year earlier, according to Anfavea, Brazil’s automaker association.

Kopel said banks and the government are also discussing policies on repossessing cars when loans default, to reduce costs and accelerate the process. Bradesco Chief Executive Officer Luiz Carlos Trabuco Cappi told reporters yesterday that lenders in Brazil are discussing ways to boost car loans, and declined to give more details.

An official at Brazil’s Finance Ministry declined to comment on the talks.

Folha de S.Paulo reported April 26 that the fund would be used to offset auto-lending delinquencies and would be financed by a portion of borrowers’ debt payments, without saying where it obtained the information. The newspaper said the measure will be announced next month.

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

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steve Dickson, Rick Green

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