Lean, Mean Banking Machine

Mar 1, 2003

Banco do Brasil, the state-owned bank, is in top form and higly profitable. Now, under new management, Brazil's biggest bank needs to convince the markets that it still means business.

In all its 195-year history, Banco do Brasil has probably never been in such good health. In 2002, pretax income rose by 50% in dollar terms to $951.1 million. The government-owned bank is well-capitalized, tightly managed and ready to do battle with the country's aggressive private sector banks. Indeed, last year it posted a 22% return on equity, better than the country's largest private sector bank, Bradesco, which reported an 18.6% ROE and $438.4 million in pretax profit.

This is quite an achievement. Between 1995 and 1996, Banco do Brasil posted net losses of $11.61 billion. The government had to inject $6.39 billion in fresh equity in 1996 after Banco do Brasil's capital ratios collapsed under the weight of bad loans, foreign exchange losses and the cost of recognizing unfunded liabilities to its employee pension fund. Although the bank had nearly $80 billion in assets at the...

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