Banco do Brasil eyes US lender

Brazil’s biggest bank by assets and profits is poised to become the first in the country’s history to acquire a US retail bank, as surging profits and a strong local currency pave the way for international expansion, according to people close to the negotiations.

State-owned Banco do Brasil is in advanced talks to buy Eurobank, a regional lender based in Miami, for an undisclosed amount according to people close to the negotiations. Acquiring the bank, which has three branches in Florida, would give Banco do Brasil a vital foothold in the US market as well as access to lucrative money remittances from the state’s Latin American residents. Banco do Brasil later confirmed it had begun talks with the bank.

Brazil’s booming economy and the sharp appreciation of the Brazilian real against the dollar have given many companies the chance to finally break into the US. Government-backing, either through state ownership or loans from the national development bank BNDES, has also helped to catapult these groups on to the world stage.

“The government is trying to fatten up Banco do Brasil so it becomes one of the biggest banks in Latin America or even the world,” said Erivelto Rodrigues of Austin Asis, a banking sector consultancy in São Paulo. “The strategy is all about growth.”

In 2009, the Brazilian meat processor JBS bought a controlling stake in Texas chicken company Pilgrim’s Pride with the help of financing from BNDES. Steelmaker Gerdau also took over its US subsidiary last year, jet maker Embraer recently opened an assembly plant in Florida, and state-run oil company Petrobras recruits many engineers from top US universities.

Eurobank, which was founded in 1991 by a group of Americans and Europeans, is relatively small with one branch in Miami and two further north on the Florida coastline. However, the region is an important strategic hub for trade between the US and Latin America’s ever-richer consumers. Wealthy Brazilians have been snapping up properties in Florida over the past two years to take advantage of cheap prices in the wake of the financial crisis, making them a lucrative potential customer for Banco do Brasil in the region. Eurobank was unavailable for comment.

Banco do Brasil’s move also comes at a turning point for the sector. Brazil’s banks posted record profits last year thanks to a surge in consumer lending. Banco do Brasil made R$11.7bn ($7bn) in net income during the year. Yet the government has stepped up efforts to slow credit growth, which surged 21 per cent in the year to February, according to the most recent central bank data.

Aside from raising fears over a possible credit bubble, consumer lending has been blamed for fuelling inflation, which has come dangerously close to breaking the country’s official target range.

In the past two weeks alone, the government has introduced four separate tax measures to dissuade banks and companies from borrowing so much abroad and prevent consumers from buying so many goods on credit.