Banco do Brasil Capital Ratio Said to Rise Even After Oi Losses

  • Gauge said to jump from first-quarter level of 8.26%
  • Oi provisions said to equal 30% of outstanding loans

Banco do Brasil SA, Latin America’s largest bank by assets, will report an increase in its core capital ratio for the second quarter even after it boosts provisions for Oi SA, the Brazilian phone carrier that filed for bankruptcy protection this week, according to a person close to the bank.

The person, who asked not to be identified because the results haven’t been made public yet, declined to give a precise figure. The gauge of capital adequacy was 8.26 percent in the first quarter, according to earnings statements from the Brasilia-based federally controlled bank.

Oi sought protection from creditors on 65 billion reais ($19 billion) in debt after failing to reach a restructuring agreement. Brazil’s fourth-biggest wireless company plans to continue serving customers, the company said in a filing Monday.

Banco do Brasil’s provisions related to Oi will be equal to 30 percent of the loans the firm made to the company, the person said, without being more specific. Oi said on June 17 that the bank’s exposure was 4.3 billion reais. The bank won’t have to set aside provisions of 30 percent of the total because a portion is related to local debentures and international bonds, which are marked-to-market on its balance sheet, the person said.

A Banco do Brasil press official declined to comment.

Avoiding Losses

Chief Executive Officer Paulo Rogerio Caffarelli said in an interview in Sao Paulo Thursday that the company will make every effort to avoid losses on Oi and doesn’t need to raise capital in the short-term.

“Banco do Brasil is always assessing ways to improve capital,” Caffarelli said.

Oi’s bankruptcy filing came less than two months after oil-rig supplier Sete Brasil Participacoes SA filed for bankruptcy protection with 18 billion reais in debt. Creditors including Banco do Brasil had to raise first-quarter provisions as a result, and missed analysts’ profit estimates.

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