SAO PAULO, Nov 16 (Reuters) - Banco Bradesco SA, Brazil’s No. 2 private-sector lender, plans to seek shareholder approval to raise about 3 billion reais ($780 million) to bolster capital following a ramp-up in loan-loss provisions and the purchase of HSBC Holdings Plc’s local unit.
In a securities filing on Monday, the Osasco, Brazil-based bank plans to offer 82.57 million common shares at 19.20 reais each, and 82.19 million preferred shares at 17.21 reais each. After the transaction, shareholders’ equity at Bradesco will rise to 46.1 billion reais from 43.1 billion reais currently.
The bank convened a meeting on Dec. 17 to vote on the proposal, the filing added.
Analysts including Eduardo Rosman of Banco BTG Pactual expect shareholders to approve and fully subscribe the new shares because of the significant discount at which the offering is being priced. Common and preferred shares of Bradesco fell 0.7 percent and 0.8 percent, respectively, to 23.63 reais and 21.36 reais.
The plan comes as investors overlook Bradesco’s profit beat in the third quarter to focus on lingering loan book quality issues and deteriorating capital metrics. Shareholders’ equity fell by about 2 billion reais last quarter following sizeable losses in the value of available-for-sale securities and rising provisions.
The acquisition of HSBC Bank Brasil Banco Múltiplo in August has posed capital risks for Bradesco. Analysts and investors are concerned the $5.2 billion acquisition, the largest in Bradesco’s 74-year history, will test the bank’s ability to absorb large banking assets at a time of high inflation, waning credit demand and surging defaults in Latin America’s largest economy.
Following the acquisition, Bradesco’s capital regulatory ratio, a measure of solvency strength, should decline to 9.9 percent from 12.8 percent currently.
“This is a move in the right direction,” BTG Pactual’s Rosman said in a client note. Still, this is “a move that indicates, we believe, that the acquisition of HSBC is going to be earnings-per-share dilutive, at least in the short term” for Bradesco shareholders.
$1 = 3.8546 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Meredith Mazzilli