Ecuador's Pichincha May Sell $100 Million in Stock After Lloyds Purchase

Banco del Pichincha CA, Ecuador’s biggest bank by revenue, may sell $100 million in preferred shares to raise capital after it bought Lloyds Banking Group Plc’s Ecuador operations, Pichincha President Fidel Egas said.

Pichincha, which will take on $150 million in assets and $175 million in liabilities from Lloyds, will sell the shares next year if it sees enough demand from the market, said Egas, who is also the company’s majority shareholder. Ecuador’s banking superintendent will probably approve the sale by the end of September, he said.

“If we see that there is adequate demand, we would think about a preferred stock sale within the next year,” Egas said yesterday in an interview in Quito. “We will see how the political situation is, which will essentially guide this demand. If we sell shares it wouldn’t be less than $100 million.”

Ecuador’s Congress has changed 16 “fundamental laws” in the last year and is debating changes to 31 others, including new industrial, financial, labor, land, oil and tax laws, Fernando Cordero, president of the country’s Congress, said Aug. 24 in an e-mailed statement.

Legal wrangling has stunted growth in South America’s seventh-biggest economy and driven away foreign investment, Diego Lavalle, chief executive officer of Quito-based brokerage Probrokers SA, said yesterday in an interview.

‘Good Return’

“Ecuador lives all the time with total unrest, which is why the local stock market isn’t developed,” Lavalle said from his offices in Quito. “However, there would be demand in the local market for Pichincha shares because they are strong, transparent and also have a good return.”

Pichincha shares were unchanged yesterday at $1.55 in Guayaquil trading and have risen 15 percent this year, according to the Bolsa de Valores de Guayaquil, the nation’s biggest securities exchange.

Egas, who is also the executive president and majority shareholder of Diners Club del Ecuador SA, said the country’s biggest credit-card company by sales will probably buy Diners Club Peru SA next week.

Diners Ecuador, which has about 200,000 credit-card customers in Ecuador, will pay cash for the company and expects to double Diners Club Peru’s credit-card accounts in Peru to 80,000 by 2013, Egas said.

More Purchases

Egas, who declined to say how much Diners Ecuador will pay for the purchase, said the company is looking for additional acquisitions in Peru.

Pichincha’s Peruvian unit, Banco Financiero del Peru, the country’s seventh-biggest bank by revenue, will probably expand total lending by 25 percent this year, and credit-card sales will grow as much as 32 percent, said Egas, who is also the president of Quito’s Universidad Catolica soccer team and television station Teleamazonas. The bank has about $1 billion in loans, he said.

“The lending segment that is growing the fastest in Peru right now is credit cards,” Egas said.

The Peruvian bank, which targets people who earn between $600 and $1,500 a month, will probably earn about $12 million this year, he said.

Growth Forecasts

Peru’s economy will grow as much as 7 percent this year, Egas said, more than the 6.6 percent estimate by the central bank. The economy expanded 11.9 percent in June, the fastest pace in 21 months and more than a full percentage point above the median estimate of 10 analysts surveyed by Bloomberg.

The central bank will likely increase its growth forecast, central bank Governor Julio Velarde said in an Aug. 17 interview.

Policy makers have raised Peru’s benchmark interest rate four times since May, to 2.5 percent, in an attempt to slow inflation as the $127 billion economy posted a faster-than- expected rebound.

The central bank probably won’t raise rates at its next meeting and may intervene in the currency market to maintain price stability should the sol appreciate too much, Egas said.

Ecuadorean sovereign debt is the second-riskiest after Venezuela’s among 15 emerging markets tracked by JPMorgan Chase & Co., according to the bank’s EMBI+ indexes.

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net