Bloomberg News

Brazil Caixa Cut Rates on Rousseff Call for Lower Spreads

April 09, 2012

Caixa Economica Federal (CEFN3), Brazil’s fifth-biggest lender by assets, cut interest rates to clients to boost competition as President Dilma Rousseff pushes federally- controlled banks to support economy growth.

Caixa said the rates will fall as much as 88 percent and that the measure will affect loans for individuals and small- sized companies, according to a statement distributed today in Sao Paulo. Caixa is also boosting credit lines by more than 10 billion reais ($5.5 billion) to small-sized companies.

The decision isn’t “simply political” and it strengthens the bank, Jorge Hereda, president of the Brasilia-based lender, told reporters today at an event in Sao Paulo.

With the reductions, Caixa plans to lend 71 billion reais by December under its “main credit lines”, according to the statement. The bank’s loan portfolio may increase as much as 37 percent to 340 billion reais in 2012 from a year earlier, Jose Henrique Marques da Cruz, a vice president for the lender, said at the same event.

Banco do Brasil SA (BBAS3), also based in Brasilia, said on April 4 it would cut rates and increased lending to individual and small- and mid-sized companies.

Spread Cuts

Rousseff wants “lower rates and spreads in Brazil,” she said on April 3 after introducing incentives worth about 65 billion reais to stimulate manufacturing. Brazilian banks raised average consumers borrowing costs to 45.4 percent in February from 45.1 percent in January, the central bank said on March 27.

Since August, the monetary authority reduced interest by 275 basis points to 9.5 percent as it seeks to revive economic growth. As part of the stimulus measures, the nation’s development bank, known as BNDES, will receive a cash injection from the Treasury of 45 billion reais to expand subsidized lending.

“The government’s willingness to reduce lending costs to foster economic growth” and “higher inter-bank competition” can lead to a “decrease in lending spreads over 2012,” Rafael Ferraz and Francisco Kops, analysts at Banco J. Safra in Sao Paulo, wrote in a note to clients on April 4.

Brazil’s government is working to stimulate the economy after growth slowed to 2.7 percent in 2011 from 7.5 percent in 2010. Economists cut their estimate for Brazil’s growth this year to 3.2 percent from 3.23 percent, according to a weekly central bank survey published on April 2.

To contact the reporters on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net; Katerina Petroff in Sao Paulo at kpetroff@bloomberg.net

To contact the editors responsible for this story: Helder Marinho at hmarinho@bloomberg.net; David Scheer at dscheer@bloomberg.net


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