S&P Global Market Intelligence presents the week's latest news and trends in Latin American banking.
From the regulators
* Banco Central do Brasil's President Roberto Campos Neto said the bank could further reduce its benchmark interest rate due to the balance of economic risks and persistently low inflation.
* Banco Central del Paraguay cut its monetary policy interest rate by 25 basis points to 4.25%, citing slower economic growth and reduced inflationary pressures.
* Banco Central de la República Argentina's head Guido Sandleris said that August and September will see increased inflationary pressure for the country in the wake of recent volatility, but that the Argentine peso was still competitive, which gave the regulator "more confidence to make interventions."
* Brazil's government announced a new inflation-linked mortgage credit line of at least 30 billion reais to be offered by state-run Caixa Econômica Federal. Banco Bradesco SA is reportedly also prepared to offer inflation-linked mortgage loans if there is sufficient demand, the bank's Investor Relations Director Leandro Miranda said.
Legal matters
* Brazil's federal police raided Banco BTG Pactual SA's headquarters and the bank's founder Andre Esteves' home regarding the Lava Jato probe, Reuters reported, citing federal prosecutors. The raid resulted in a more than 11% decline in the investment bank's shares in early Friday trading.
* Former partners of bankrupt Brazilian lender Banco Gerador are caught up in a legal conflict over the parties' liabilities arising from the bank's closure in 2014. The Macêdo family, which said they had lost 180 million reais from the bankruptcy, is claiming a debt worth 40 million reais from former partner Antônio Lavareda. Meanwhile, Lavareda said he had absorbed losses of 90 million reais from the bank's collapse and plans to file legal action against his former partners for fraudulent management.
* Brazilian authorities seized several assets belonging to Claudio Oliveira, the owner of Bitcoin Banco Cryptocurrency, following a court order related to a lawsuit filed by a group of clients who are purportedly owed 13 million reais by Oliveira's company.
* Distressed Peruvian lender Banco Agropecuario, or Agrobanco, said it lost information related to the bank's institutional and financial management between 2011 and 2017 requested by Congress for an ongoing investigation into irregular credits granted by the bank.
In other news
* The Brazilian federal government is looking to sell off part of its stake, up to 20,785,200 shares, in Banco do Brasil SA without yielding its controlling ownership position.
* Grupo Aval Acciones y Valores SA's second quarter net income attributable to owners of the parent jumped 19.3% annually to reach 813.2 billion Colombian pesos from 681.5 billion pesos.
* Grupo Aval Acciones y Valores is preparing to provision 380 billion pesos due to ongoing litigations on the Ruta del Sol II highway project, according to CEO Luis Carlos Sarmiento Gutiérrez. The Colombian holding company expects its exposure to the scandal-laden Ruta del Sol project to be "quite impactful" on its figures for the remainder of the year.
* Banco BTG Pactual said it will redeem all its outstanding junior, noncumulative subordinated notes and 8.750% perpetual noncumulative junior subordinated notes that are listed on the Luxembourg Stock Exchange and are circulated on the bourse's Euro MTF market.
* Banco de Chile reportedly plans to close 33 branches in 2019 as the company ramps up its digital transformation efforts.
* The front-runner in Argentina's presidential election, Alberto Fernández, said the country is "virtually in default" and would struggle to repay its loan to the International Monetary Fund.
* Banco do Brasil expects to book some 260 million reais in extra payout expenses tied to its workforce reduction program which resulted in the dismissal of 2,367 employees.
Featured this week on S&P Global Market Intelligence
* As state lenders retreat, Brazil's private sector leans in: Brazil's credit market, which for years has been dominated by state-run banks offering subsidized rates and terms, is rapidly shifting to the private sector as President Jair Bolsonaro's administration works to narrow the government's role in finance. As of the end of the first quarter, private sector banking institutions had a 52.9% credit market share, up from 49.6% a year earlier, whereas government-owned institutions saw their market share shrink to 47.1% from 50.4% year over year.
* Lower expenses buoy aggregate Q2 profitability for Brazilian banking majors: The combined net income of the three largest listed banks in Brazil — Banco do Brasil, Banco Bradesco and Itaú Unibanco Holding SA — totaled 17.06 billion Brazilian reais in the most recently concluded quarter, up 22.7% from 13.91 billion reais a year earlier.
* Argentine banking majors see Q2 profit triple on higher operating revenue: Aggregate second quarter net income for Grupo Financiero Galicia SA, Banco Santander Río SA, BBVA Banco Francés SA and Banco Macro SA totaled 30.88 billion Argentine pesos, up 199.8% from 10.30 billion pesos in the year-ago period.
* Spanish, US banks most exposed to crisis-stricken Argentina: Spain's banking system had $9.87 billion of exposure to Argentina's official sector, whereas lenders in the U.S. had $4.29 billion, followed by the U.K., which held $3.76 billion, according to data from the Bank for International Settlements as of March 2019.
* 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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