February 14, 2019 / 10:01 AM / a month ago

UPDATE 3-Banco do Brasil to sell off units; full sale would be better-CEO

(Adds comments from news conference)

By Carolina Mandl

SAO PAULO, Feb 14 (Reuters) - Banco do Brasil SA’s chief executive said on Thursday that he plans to sell some of the bank’s units, but that he believes a full privatization would be better for the state-controlled lender.

“Employees and management would profit from a sale of the bank, but the country is not prepared for this idea”, Rubem Novaes said in a briefing on Thursday, adding that a privatization would likely increase the bank’s return on equity.

Novaes, installed as CEO last month by far-right President Jair Bolsonaro, is expected to focus on improving the bank’s profitability while selling off assets like its investment banking, asset management and debt collection units.

The bank’s quarterly results, reported earlier, showed its return on equity, a key gauge of profitability, gaining two percentage points to 16.3 percent. That is still behind its largest private peers, however.

The state lender beat fourth-quarter profit estimates, lifting its shares 0.4 percent in early afternoon trading.

The state-controlled lender reported recurring net income of 3.845 billion reais ($1.02 billion), 6.5 percent above the average analysts’ estimate compiled by Refinitiv, as loan-loss provisions fell and fee income rose.

Novaes said the bank is in talks with conglomerate Grupo Votorantim SA to explore an initial public offering or sale of Banco Votorantim SA, which specializes in payroll and used car loans. Grupo Votorantim and Banco do Brasil, which jointly own the bank, will hire an advisor in the coming days, he said.

Banco do Brasil said it sees a rosier performance in 2019, as net interest income and fees are likely grow at a faster pace while loan-loss provisions are likely to keep their downward trend.

The bank forecast recurring net income would grow up to 30 percent to 14.5 billion to 17.5 billion reais.

It estimated its domestic loan book would grow by 3 to 6 percent, helped mainly by loans to individuals. It grew 3 percent in 2018.

At the same time, non-interest expenses are expected to rise between 2 percent and 5 percent, accelerating from the 0.6 percent expansion in 2018.

The new targets underscore the challenges ahead for 73-year-old Novae, who worked most of his career as an academic and consultant.

Part of a team of hand-picked lieutenants to Economy Minister Paulo Guedes, he is a fellow alumni of the University of Chicago’s free market school of economics. ($1 = 3.7543 reais) (Reporting by Carolina Mandl editing by Keith Weir and Susan Thomas)

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