Brazil's No. 2 Lender Sees Growth Where Itau Sees Higher Risk

  • First-quarter lending at Caixa expanded 9.2% while Itau's fell
  • Caixa expects loan growth in the low range of 2016 forecast

Caixa Economica Federal, the state-controlled bank poised to become Brazil’s biggest lender, is boosting its credit portfolio while competitors not owned by the government pull back in response to the worst recession in a century.

First-quarter lending at Caixa rose 9.2 percent to 684.2 billion reais ($194 billion) from a year earlier, the Brasilia-based bank said in an e-mailed statement Monday. Itau Unibanco Holding SA, the nation’s biggest bank by market value, said last week that its loan book declined 4.2 percent to 554.3 billion reais.

Many of Brazil’s biggest banks are reining in loans because of weak demand and to avoid taking on riskier loans. Itau and Banco Bradesco SA, the nation’s second-biggest bank by market value, reported first-quarter earnings that missed analysts’ estimates as provisions for bad debt soared.

Caixa expects lending to expand 7 percent to 7.5 percent in 2016, the low end of its March forecast of 7 percent to 11 percent, Chief Financial Officer Marcio Percival said in an interview Monday. The bank previously expected to boost its loan book by 9.6 percent this year, he said. Delinquency rates will be between 3.5 percent and 3.85 percent this year, according to Percival.

Challenging Environment

“This economic environment is challenging for all the banks,” Percival said, adding that the change to the loan-growth forecast was a result of the declining demand for credit.

First-quarter net income declined to 838 million reais from 1.54 billion reais a year earlier, according to the statement. Results were hurt by a credit provision of about 700 million reais related to a specific company in the oil and gas industry, Percival said, declining name the credit. Caixa has set aside provisions for the full amount it’s owed by the company, he said.

Oil-rig supplier Sete Brasil Participacoes SA filed for bankruptcy protection last month with liabilities of about 18 billion reais. Bradesco added an 836 million-real provision related to Sete Brasil last month, according to a person familiar with the matter. Caixa’s exposure to Sete Brasil was about 1.7 billion reais, people directly involved in the matter said in April.

Based on the growth forecast, Caixa’s loan book may catch up this year to Banco do Brasil SA’s, which has the nation’s biggest credit portfolio.

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