Banco do Brasil SA : Banco do Brasil Approves BRL2 Billion Capitalization of Votorantim
06/25/2012| 02:00am US/Eastern
SAO PAULO--Banco do Brasil (BBAS3.BR) said Monday that its board approved plans to inject an additional 2 billion Brazilian reais ($968 million) into Banco Votorantim, the midsized Brazilian bank in which it holds a 49.99% stake.
Banco do Brasil agreed to contribute BRL1 billion to reinforce the capital structure of Banco Votorantim, the lender controlled by local billionaire family Ermirio de Moraes, which controls the Votorantim industrial holding company. Votorantim Financas, the finance holding arm of the Ermirio de Moraes family, will contribute the other BRL1 billion, Banco do Brasil said in a regulatory filing.
Banco Votorantim is the eighth largest bank in Brazil in terms of assets, with BRL115 billion in total assets. The bank specializes in auto loans. However, a slowdown in economic activity and an increase in nonperforming loans in this area have influenced recent quarters' earning performance.
A capital infusion is needed in the short term as Banco Votorantim's capital ratios are running low, analysts at Deutsche Bank said earlier this month.
Votorantim is expected to continue to post losses, and is likely to need a capital infusion as it has capital reserves equivalent to 13% of total assets at the end of the first quarter, Deutsche Bank said in a June 5 report published after a meeting with Banco do Brasil's management.
The equal injection from Banco do Brasil and Votorantim is meant to keep the size of each holder's equity stake in the bank constant.
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