financial crisis at Brazil’s embattled EBX Group will not have a major impact
on the country’s banking sector even in the “worst case” of a default,
Itaú-Unibano CEO Roberto Setúbal has said.
interview with LatinFinance, Setúbal
also confirmed speculation that regional expansion was on
the cards for Brazil’s largest private sector lender.
that there was “no need” for his bank to increase provisions in the event of
losses from exposure to the industrial conglomerate, as expectations grow that EBX
will have to restructure its debt.
the level of exposure of banks in Brazil to EBX group, it is not really a
problem at all in terms of systemic risk,” he said.
“In the worst
case scenario [of a default] we would not change our guidance in terms of
provisions or losses. Even in the worst case scenario, we would stay inside the
range we have given, so it’s not really a problem,” Setúbal said.
Itaú expects to post provisions between 19 billion reais ($9.2 billion) and 22 billion reais ($10.7 billion) for loan losses in 2013.
did not elaborate on his bank’s exposure to the group, although the sector as a
whole has lent some $6 billion to companies controlled by EBX, according to
S&P. Other analysts put that sum as high as $11 billion.
said he was nevertheless confident that the EBX, run by beleaguered businessman
Eike Batista, would meet its obligations to its lenders. “We believe that they
will over time sell their holdings and pay the banks. They are in the process
of doing it.”
that Brazilian banks had “little to no” exposure to EBX’s OGX, the oil company
at the center of group’s decline. “Basically that company has big debt that is
on the heads of bondholders,” he said. “We have no exposure to OGX and banks in
Brazil in general have very low or zero exposure to that company.”
acknowledged that the dramatic collapse of the EBX Group had taken its toll on
investor perceptions of Brazil. “Eike Batista was pretty much associated with
an image of a new Brazil as a very high growth country with a lot of potential
where things could happen quite fast. And the failure of Eike [Batista’s
company] definitely goes against this perception,” he said. “This is definitely
not good for Brazil.”
comments followed the release last week of Itaú’s second quarter earnings
report, in which the firm’s profits of 3.62 billon reais beat analysts’ expectations for the quarter.
veteran banker confirmed that his bank would make an acquisition of a “top
five” bank in a strategic market in Latin America as a key core part of its
order to keep on growing we need to go abroad because we cannot really acquire
many things in the Brazilian market and the banking sector in Brazil is pretty
much consolidated anyway,” he said. “We are still looking for opportunities to
acquire banks across the region and we believe this should be possible in the
ruled out buying investment banking franchises in the region, but said that
expansion into “Mercosur makes a lot of sense, given the Brazilian
relationships in those countries.” He acknowledged the bank was looking at
options in Chile, Uruguay, Paraguay and Argentina as well as Colombia and
Peru. “Mexico is also something that
interests us,” he said. “We would like something that is at least top five in
order for it to be interesting.”
He said his
bank was “not really looking at the US market at this point” although it
said that Itaú’s improved performance did not mean the lender was ready to take
on more risk. “We are not really considering at all changing our risk policy at
this point,” he said. “Two years ago we announced that we were changing our
risk appetite, that we would move out of higher risk segments and that the
benefits of this strategy would be down the road. In this quarter we delivered
slowdown in Latin America’s largest economy has taken its toll on the domestic
credit market, with a surge in loan delinquencies over the past two years. But
Setúbal said the banking sector had now turned the corner on bad debt. “The
worst of the problem is behind us, we are moving to a better and more
controlled level of delinquency in general, so this is not a problem any more,”
delinquency rate declined to 4.2% in the second quarter from 4.5% in the first
quarter and 5.2% a year earlier.LF
The full interview with Itaú-Unibanco CEO
Roberto Setúbal will be published this month in LatinFinance’s 25-Year issue. http://www.latinfinance.com/quartercentury