Brazil’s state bank, partners push into Africa

Brazil’s biggest state-run bank and two other partners announced an expansion in Africa on Monday in the latest sign of growing financial links between emerging markets.

Banco do Brasil, Latin America’s largest bank by assets, said in a regulatory filing it will team with local private-sector giant Banco Bradesco and Portugal’s Banco Espirito Santo (BES) to tap Africa’s growing appetite for consumer loans, credit cards and other products.

Brazilian President Luiz Inacio Lula da Silva has made commercial ties with Africa a major priority of his administration, visiting at least 25 African countries, setting up agricultural offices and doubling the number of embassies there. Lula’s finance minister stood alongside the CEOs from the three banks at a news conference in Sao Paulo on Monday.

“The African continent is the future,” Finance
Minister Guido Mantega said.

Lula has spoken of increasing Brazil’s role as a financial center for the developing world, and links with the rest of the so-called BRIC nations — India, China and Russia are the others — have expanded quickly in recent years. So-called “south-south” business often bypasses traditional financial centers such as New York and London entirely.

The three banks said they will form a holding company to consolidate all BES holdings in Africa and plan future investments. They were still sorting out other details such as who will hold what percentage of the new entity, and analysts said the short-term impact on the banks’ bottom lines will likely be minor.

The plan is to build on BES’ existing network of branches and use the financial strength of the new partners to fund potential acquisitions. The new entity will do business not only in African countries where Portuguese is spoken such as Angola, Mozambique and Cape Verde, but others including South Africa, Algeria and Morocco, Mantega said.

“Like Latin America, Africa is undergoing a boom in economic development, given its mineral wealth, its wealth in oil and gas and in the cement industry,” said Luiz Carlos Trabuco Cappi, chief executive for Bradesco, Brazil’s No. 2 private-sector bank.

Banco do Brasil shares rose 2.2 percent to 31.02 reais, while Bradesco was up 1.3 percent to 32.2 reais in mid-afternoon trading in Sao Paulo, compared with flat overall trade in the benchmark Bovespa index. BES shares gained 1 percent to 3.763 euros in Lisbon.

BRAZILIAN BANKS EXPAND ABROAD

The move dovetails with a broad push by Brazilian banks to expand their presence overseas as their domestic market booms in tandem with Brazil’s economy.

“Bradesco and Banco do Brasil have already consolidated themselves in the local market and now it’s time to expand abroad,” said Pedro Galdi, strategy chief at the SLW brokerage in Sao Paulo. He said the short-term impact on revenues for the three banks would likely be “tiny.”

Banco do Brasil raised $4.1 billion in a share offering in June, looking to bolster its capital base and help fund a foray in international markets.

The bank in April bought a controlling stake in Argentina’s Banco Patagonia and has eyed targets in retail banking in the United States, looking to offer services in Florida, Massachusetts, New Jersey and other states with large communities of Brazilians and Latinos.

“We have some possibilities already identified and are evaluating them now,” Banco do Brasil Chief Executive Aldemir Bendine said.

The bank expects to seal one takeover in the United States and another in Latin America by the end of the year, Allan Toledo, vice president of international operations, told Reuters on Monday. Banco do Brasil’s overseas business should account for 15 percent of profits in five years, up from 5 percent now, he said.

Portuguese lender BES has more than 30 branches in Angola and stakes in Libya’s Aman Bank and Moroccan bank BMCE . Two weeks ago it agreed to buy a 25 percent stake in Moza Banco of Mozambique, and it is looking for targets in South Africa.