Brazil Court Delays Ruling on Depositor Lawsuits

Brazil’s highest court postponed until February a ruling on lawsuits by depositors that could cost the nation’s banks a quarter of their capital.

STF, as the high court is known, began hearing cases today and announced its timetable after a request by Judge Marco Aurelio de Mello to delay ruling because of the “complexity” of the lawsuits. President Dilma Rousseff had mobilized her cabinet to persuade the court to postpone its verdict, according to two government officials briefed on the matter.

“It shows STF is giving more attention and is more sensitive to the banks’ explanations,” Andre Riva Gargiulo, an analyst at brokerage GBM Grupo Bursatil Mexicano SA in Sao Paulo, said in an e-mail. “There is a great alignment between the government, members of previous administrations and jurists in favor of the banks.”

Lenders including Itau Unibanco Holding SA and federally controlled Banco do Brasil SA are being targeted by depositors seeking reimbursement for losses stemming from government policies adopted to fight hyperinflation in the 1980s and 1990s. The central bank estimates lenders would have to pay 149 billion reais ($64.5 billion) to depositors and could reduce lending by as much as 1 trillion reais if the court rules against them.

Be ‘Sensible’

Banco do Brasil dropped 11 percent from Nov. 8, when the court set the date for a ruling, through yesterday. That compares with a 1.5 percent loss for the Ibovespa benchmark index. The Brasilia-based bank’s shares rose 2.6 percent to 25.40 reais at 5:07 p.m. in Sao Paulo and Itau’s climbed 2.7 percent to 32.85 reais.

Itau Executive Director Claudia Politanski told the court today that depositors didn’t lose money because of the policies, while Eros Grau, a lawyer for Banco do Brasil, said the rates for savings accounts were set by the government, not lenders.

Spokesmen for Sao Paulo-based Itau and Banco do Brasil declined to comment on the court’s action.

Gleisi Hoffmann, Brazil’s cabinet chief, said in an interview yesterday that the court should be “sensible” in its ruling, and that an unfavorable decision for the banks would be a loss for the country.

The Brazilian Institute of Consumer Defense, which submitted a brief in support of the claims against the banks, said lenders benefited from the government’s actions, according to a statement on its website.

Before it's here, it's on the Bloomberg Terminal.