Caixa Econômica Federal is set to post a record profit for full-year 2017, according to CEO Gilberto Occhi, and an agreement with the Brazilian government allowing the state-run bank to retain the full amount should help it boost capital levels and lending.
The full-year results for Caixa are the best in its history and will be published in the coming days, Reuters reported, citing the CEO. According to a report in O Estado de S.Paulo, the bank is expected to book a profit of more than 10.00 billion Brazilian reais for the full year.
The company is coming off a strong first half of 2017, a period in which it generated a record profit of 4.1 billion reais as net interest income ticked higher and provision expenses fell. However, the lender has been struggling to ensure compliance with Basel III capital requirements.
Caixa has historically transferred 25% of its annual profits to Brazil's Treasury in the form of dividends. But the government has signaled that it will forego that amount this year and will instead use it to capitalize the bank, O Estado reported.
Brazilian President Michel Temer signed a bill in January allowing Caixa to draw resources from state workers' fund FGTS in order to meet Basel III standards, but the bank subsequently announced an alternate capitalization plan after the FGTS proposal was met with criticism.
Separately, Occhi said the bank has a budget of 82.1 billion reais for real estate loans in 2018, slightly higher than last year's 80.9 billion reais but still well below the 2016 budget of 93.7 billion reais.
To help boost its mortgage lending portfolio — Caixa was once the leader in real estate financing in Brazil — the bank also plans to reduce interest rates on housing loans by the end of March, Reuters reported.
"We are going to bring more competitiveness and we want to compete more with the market since we have not made any interest reduction in the year," CEO Occhi was quoted as saying.
As of March 19, US$1 was equivalent to 3.29 Brazilian reais.