Banco do Brasil takes wait-and-see approach to ongoing divestment plans

Banco do Brasil SA CEO Fausto Ribeiro said the bank maintains its divestment strategy, as it looks for buyers of its noncore businesses, including asset management subsidiary BB Gestão de Recursos-Distribuidora de Títulos e Valores Mobiliários SA, or BB DTVM; Banco BV SA; and Argentina's Banco Patagonia SA.

"Of course, we have to wait for the best opportunities in the markets," Ribeiro stressed on a conference call discussing the bank's second-quarter results, noting that the bank's comfortable capital levels allow the company to take a wait-and-see approach to its divestitures.

The CEO noted that the group has positive prospects for its investment banking unit due to increased activity in the local capital markets. Although still in its early stages, the company's investment banking partnership with Switzerland-based giant UBS "has opened up new markets for us," he said.

The bank also continues to evaluate further branch closures, Ribeiro said, although he did not detail specific numbers on the matter.

Loan growth strategies

Banco do Brasil plans to shore up its credit portfolio growth strategy through its agribusiness segment, a "quite relevant" sector for the bank, according to Investor Relations Head Daniel Maria. From an earlier guidance of between 7% and 11% growth, the bank now projects the rural segment to expand between 11% and 15% this year.

Although the bank has downgraded its growth estimates for its wholesale credit segment, Maria noted that this has to do with a strong base effect from last year, when companies flocked to the bank for liquidity support amid the pandemic. The executive affirmed that the bank maintains a close relationship with companies, supported by efforts of its investment banking subsidiary to originate deals and service their corporate clients.

The bank's payroll business is also growing, which helps to diversify the mix as the lender focuses on the retail segment, Maria said. The credit card business, in which the bank has "space to grow," is also an important consumer credit source.

Rate hikes and margins

Maria expects the bank's net interest income to start responding positively to the central bank's continued interest rate hikes by the end of the year and into 2022.

Banco Central do Brasil earlier raised the benchmark rate to 5.25%, but the market expects to further climb and end the year at 7%, Maria said.

The executive noted that the bank will continue to adjust its forecast funding costs and cull resources to counter a possible contraction in margins due to a faster increase in the benchmark rate.

Banco do Brasil has revised its guidance for net interest income growth to between 1.0% and 4.0% from the previous forecast of 2.5% to 6.5% growth range.