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Banco Indusval to rejig business model as insiders take bigger ownership stake

Banco Indusval SA is set to revamp its ownership structure and business model as the Brazilian bank works to address persistent capital issues.

In a March 22 statement, the agricultural lender said that major shareholder Roberto de Rezende Barbosa will buy up about 80% of the company's planned 245.0 million-real capital hike. Rezende's investment, equal to about 195 million reais, will increase his total voting capital stake to between 55% and 70%, according to a Valor Econômico report. Some company executives, including Chairman Manoel Felix Cintra Neto and co-CEOs Jair Ribeiro and Luiz Masagão, reportedly have committed to put up the remaining 50.0 million reais.

Banco Indusval could raise as much as 325 million reais if minority shareholders also join the cash call. According to Valor, however, the bank's largest minority shareholder, Warburg Pincus-affiliated Wp X Brasil Fundo de Investimentos E Participações, already has decided not to participate.

Additionally, Banco Indusval said it plans to create a new executive board during a March 29 board meeting, including Fernando Fegyveres as its new general director and Alexandre Teixeira as executive director and head of product and services. The two executives will join current executive board members Andre Jacintho Mesquita, Jair da Costa Balma and Claudio Roberto Cusin.

The changes come as shareholders led by Rezende Barbosa plan to shift Banco Indusval's business model to that of a niche bank focused on medium-sized companies, according to Valor. Pércio de Souza from investment firm Estáter reportedly is leading the transformation as a consultant.

According to Valor, the bank is hoping to emulate the business model of investment lender Banco Itaú BBA SA, the company from which both Fegyveres and Teixeira are joining.

In revamping its strategy, the company hopes to resolve years of issues that have plagued its capital ratios and stock price. Banco Indusval's Tier 1 capital ratio slipped into negative territory in early 2018 and stood at negative 16.8% as of September of that year. It was also forced to launch a 1-for-10 reverse stock split after a sharp drop in its share price.

As co-CEO Jair Ribeiro told S&P Global Market Intelligence in 2018, much of the bank's trouble stems from Ceagro, an agribusiness trader that defaulted on its loans in 2015, leaving several banks exposed to an estimated 800 million reais of debt.

Following the capital raise, however, the bank should meet minimum Basel capital levels, hitting between 10% and 14%.

Rezende Barbosa, who is an agricultural investor, also may inject another 55 million reais through Tier 2 convertible subordinated debt instruments, subject to central bank approval, Valor said.

As of March 22, US$1 was equivalent to 3.90 Brazilian reais.