S&P Global Market Intelligence presents the week's latest news and trends in Latin American banking.
Political peril in Peru
* Peruvian President Martin Vizcarra dissolved the country's opposition-run Congress on Sept. 30, accusing legislators of repeated attempts to choke his government's anti-corruption reforms. Vizcarra also announced new legislative elections for Jan. 26, 2020, in a bid to end his yearlong impasse with lawmakers who have failed to pass reforms and have recently rejected a bill for a snap general election.
* Meanwhile, opposition lawmakers blamed Vizcarra of violating constitutional limits, with a number of them declaring Vice President Mercedes Araoz as the country's interim leader and preparing a motion to impeach the president. However, Mercedes Araoz stepped down from both positions, saying that she hopes her resignation "leads to ... general elections as soon as possible for the good of the country."
* Maria Antonieta Alva, the general director of public budget at Peru's finance ministry, was named the country's new economy and finance minister after the resignation of Carlos Oliva.
* Moody's will likely cut its 2019 GDP growth forecast for Peru and could change its rating outlook on the country to negative from stable, depending on how Peru's ongoing political crisis plays out, Jaime Reusche, head of sovereign risk at the rating agency, said.
Legal disputes
* Banco do Brasil SA filed a legal complaint before a São Paulo court requesting the annulment of the judicial recovery proceedings of scandal-plagued construction and engineering conglomerate Odebrecht SA. The bank argues that Odebrecht's plan to convert its debt into profit-sharing securities lacks clarity about how much creditors will collect from the recovery scheme.
* Caixa Econômica Federal requested a Brazilian court to declare construction giant Odebrecht SA bankrupt, and therefore allow creditors to appoint directors to the conglomerate and its units, O Estado de S. Paulo reported.
* Shares of Banco BTG Pactual SA fell after federal police in Brazil said they raided the investment bank's São Paulo headquarters as part of an investigation into the alleged leaking of central bank monetary policy decisions between 2010 and 2012. A BTG Pactual investment fund reaped "extraordinary" profits using the leaked rate decisions, prosecutors said.
* Mexico's Federal Court of Administrative Justice ruled that the country's banking and securities commission CNBV must pay compensation for irregularly administering a case concerning Ficrea, a popular finance company accused of fraud by more than 6,800 people. The court ordered the CNBV to pay more than 1 million pesos to a Ficrea saver, who filed a claim for property damage.
Buy and sell
* Banco do Brasil announced a follow-on public offering of 132,506,737 common shares, to be priced Oct. 17. The offering will comprise 64 million shares held in the bank's treasury and 68,506,737 shares held by government severance indemnity fund FI-FGTS.
* Colombian financial regulator SFC approved Banco ProCredit Colombia SA's acquisition by financial services provider Créditos y Ahorro Credifinanciera SA Compañía de Financiamiento, or Credifinanciera. The companies have initiated procedures to close the deal.
* Banco BTG Pactual issued a CHF599 million equity-linked note as a means of transferring a roughly 25% stake in Switzerland-based EFG International AG to BTG Pactual Holding SA.
In other news
* Brazilian state-owned development bank Banco Nacional de Desenvolvimento Econômico e Social said it is facing losses of up to 14.6 billion reais from loans to Odebrecht between 2003 and 2018. This amount includes losses on export financing credits of 3.7 billion reais related to the federal government and loans amounting to 8.7 billion reais granted to companies under judicial recovery of the Odebrecht Group.
* Credifinanciera is working to secure regulatory approval to launch a digital bank before the end of 2019, President Carlos Iván Vargas said. The company plans to launch Banco Credifinanciera, maintaining the group's brand, once it completes its acquisition of Banco ProCredit Colombia.
* A decree that grants Brazil's central bank authority to allow entry of foreign capital into financial institutions is credit positive due to the efficiency gains it entails, Moody's said. The new rule simplifies the process of authorizing foreign investment in banks and the formation of foreign banks' branches in the country, the rating agency said.
* Shareholders at Grupo Security SA approved a capital increase of up to 100 billion Chilean pesos through the issuance of 415 million shares within three years. The resources will be used to capitalize the bank and its subsidiaries within the group's modernization process.
Featured this week on S&P Global Market Intelligence
* Argentine banks face uncertain future amid collapse in lending: While Argentine banks are unlikely to face catastrophe as a result of the country's latest crisis, analysts say broader existential problems remain a concern amid a collapse in traditional lending, vast macroeconomic imbalances and a strong decline in economic activity.
* LatAm CDS spreads pick up in Q3, with Argentina leading pack: Sovereign credit default swap prices for several Latin American countries ticked up in the third quarter with Argentina leading the charge, deviating from a general downward trend observed in the two previous three-month periods.
* Brazil closes Q3 with lowest bank index return in LatAm: As Latin America faced a downturn in economic growth amid increased political uncertainty, total returns for S&P Global Market Intelligence-tracked Latin American bank indexes delved into negative territory, with the Caribbean index as the sole exception.
* S&P: Political uncertainty dampening growth across LatAm: Latin American countries face an increasingly complex environment with regional political risk rising in the largest economies amid lingering negative external factors, analysts at S&P Global Ratings said.
* Hires and Fires: A weekly rundown of executive management, board and other personnel moves at Latin American financial institutions.
* Ratings Roundup: A summary of various ratings actions on Latin American financial institutions and economies.
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