Itau’s Provisions Seen Sufficient to Cover Batista LossesFrancisco Marcelino and Juan Pablo Spinetto
Itau Unibanco Holding SA and Banco Bradesco SA, Latin America’s largest banks by market value, have more than enough provisions to absorb losses from loans to Eike Batista’s companies, UBS AG said.
Itau has about 5 billion reais ($2.23 billion) in provisions beyond the minimum required by regulators, while the Sao Paulo-based bank’s loans to companies controlled by the former billionaire totaled 802 million reais as of the second quarter, UBS analysts including Philip Finch wrote in a note to clients. Bradesco has excess provision of about 4 billion reais and an exposure of 868 million reais, the analysts wrote.
Batista’s empire collapsed as his oil-production company, OGX Petroleo & Gas Participacoes SA, missed targets. The Rio de Janeiro-based firm filed for bankruptcy protection last week, putting $3.6 billion of dollar bonds into default. The failure is also affecting Batista shipbuilder OSX Brasil SA, whose main client is OGX. OSX said last week it may request bankruptcy protection as well.
Banks’ risks linked to Batista companies are receding after some were restructured and recapitalized, the analysts wrote, adding that mining companies MMX Mineracao & Metalicos SA and CCX Carvao da Colombia SA sold part of their assets to foreign investors.
Part of Itau’s and Bradesco’s exposure is to Eneva SA, formerly Batista’s MPX Energia SA. EON SE is the largest shareholder in the firm after participating in an 800 million-real capital increase by Eneva in July. Itau loaned 285 million reais to the utility, while Bradesco has 60 million reais in loans, UBS said.
Itau didn’t immediately respond to a request for comment, and officials at Bradesco declined to comment. EBX Group Co., the holding company for Batista’s firms, didn’t immediately reply an e-mail seeking comments about its outstanding loans from Brazilian banks.
Batista companies’ total debt isn’t clear because Brazilian regulations prohibit banks from disclosing their exposure to specific clients, according to UBS.