Banco do Brasil Sinks on Up to $2.6 Billion in Carmaker Lending

Banco do Brasil SA slumped to a three-year low after signing a financing agreement to help support Brazil’s carmakers as the country heads for its longest recession since the 1930s.

Shares of the state-run bank declined 4.9 percent to the lowest level since July 2012. The benchmark Ibovespa equity index lost 3 percent, approaching a bear market as it extended its drop since May 5 to 20 percent.

Banco do Brasil will lend about 3.1 billion reais to strategic suppliers by the end of 2015, according to a statement distributed in Sao Paulo on Wednesday. The financing could climb to 9 billion reais ($2.6 billion) as deals are expanded for as many as 500 companies, according to the statement.

The deal follows a similar announcement by state-run lender Caixa Economica Federal, which said Tuesday that it signed an accord with Brazil’s automakers’ association to offer special conditions on credit lines. Caixa expects the amount to reach 5 billion reais by year-end, bank President Miriam Belchior told reporters.

Vehicle sales decreased 23 percent in July from a year earlier, the National Vehicle Manufacturers Association reported Aug. 6.

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