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Bradesco’s BES Investment Will Cut Profit by $158 Million

Banco Bradesco SA (BBDC4), Latin America’s second-biggest bank by market value, said third-quarter net income will be cut by 356 million reais ($157 million) because of its investment in Portugal’s Banco Espirito Santo SA.

Bradesco will make a non-recurring accounting adjustment representing its 3.9 percent stake in BES, the Osasco, Brazil-based lender said in a regulatory filing today. The adjustment is about 9 percent of Bradesco’s second-quarter adjusted net income of 3.8 billion reais.

Portugal’s central bank took control of BES with a 4.9 billion-euro ($6.6 billion) bailout this week. BES’s deposit operations and most of its assets will move to a new company, Novo Banco, while shareholders and junior bondholders will hold the most “problematic” assets, the central bank said. BES’s rescue came after the central bank ordered the lender to raise capital because of potential losses on loans to other companies of the Espirito Santo family.

Brazilian government finance officials don’t expect any fallout for BES’s local unit, which will continue to operate normally, an official familiar with the matter said. The assets of the unit will be transferred to a new bank created after the bailout, the person said, asking not to be named because the information hasn’t been made public. BES is the 42nd-largest bank in Brazil, with 7.7 billion reais in assets, central bank data show.

An official at central bank’s press office declined to comment, saying it doesn’t comment on specific cases.

Bradesco rose 0.7 percent to 35.17 reais in Sao Paulo at 4:06 p.m., matching the advance of Brazil’s Ibovespa benchmark index.

Bradesco had no plans to contribute to a BES capital raise ordered by the central bank, a person familiar with the matter said last week.

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

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net Steve Dickson, Steven Crabill

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