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BNDES may quadruple Treasury returns in 2019

Banco Nacional de Desenvolvimento Econômico e Social may nearly quadruple the amount of its debt repayments to Brazil's National Treasury in 2019 to roughly 100 billion reais from 26 billion reais previously envisaged, the development bank's CFO Carlos Thadeu de Freitas said according to Valor Econômico.

The suggested pace of returns would be tied to loan disbursements growth, the executive reportedly said. Such a figure could be met if loan growth was limited to 16% in 2019, with a market-estimated inflation rate of 4%.

"Returns (to Treasury) in 2019 can reach 100 billion reais if disbursements do not grow above 80 billion reais, which is quite realistic since in 2018 they should have reached 69 billion reais," the executive was quoted as saying.

As of September, 2018, the bank had repaid about 280 billion reais to the Treasury since 2015, and was aiming to repay the remaining amount — an estimated 260 billion to 270 billion reais — by 2040.

The potential accelerated payments come as new BNDES chief executive Joaquim Levy argued that BNDES had to alter its balance sheet, which still relied too heavily on Brazil's national treasury.

"[We need] to adjust our balance sheet, which today depends to an exaggerated proportion — although less than four years ago — on Treasury resources," Levy reportedly said at a Jan. 7 event.

However, anonymous sources cited by Valor expressed concern that such an aggressive pace of Treasury returns could compromise the development bank's ability to expand its loan book in 2019.

Another reported alternative to manage 100 billion reais in returns would be to increase the pace of divestment in the bank's large equity positions, held by BNDES Participações S.A. - BNDESPAR

As of Jan 4, US$ 1 was equivalent to 3.73 Brazilian reais.