Banco do Brasil SA, Latin America’s biggest lender by assets, fell after Bank of America Corp. cuts its rating on the stock and said the outlook for further gains is limited after shares reached a one-year high.
Banco do Brasil declined 1.1 percent to 26.04 reais at 1:11 p.m. in Sao Paulo. The stock is up 19 percent since the end of November and reached 27.27 reais on March 8.
Bank of America cut its recommendation on the stock to the equivalent of hold given “fewer catalysts” for a rally because traders have already priced in a possible initial public offering of Banco do Brasil’s insurance unit and favorable capital rules, according to a research note today by analysts Jorg Friedemann, Marcus Fadul and Jose Barria.
The lender filed a request with Brazil’s securities and exchange regulator on Feb. 26 to sell shares of its pension and insurance unit BB Seguridade. Banco do Brasil could raise as much as 5 billion reais ($2.5 billion).
The Brazilian central bank announced on March 1 that implementation of Basel III rules in the country will allow lenders to count deferred tax credits as capital, reducing the need for fundraising before rules take effect in 2017.
Bank of America’s analysts also recommended today buying Banco do Estado do Rio Grande do Sul SA, saying profit growth would drive a 12 percent increase in the stock over the next 12 months.
“A better economic environment” in the southern state of Rio Grande do Sul, where the bank has most of its operations, favors the smaller lender over other Brazilian banks, according to the report.
Banco do Rio Grande do Sul, which is known as Banrisul, fell 1.6 percent to 17.47 reais. The stock is up 13 percent this year.