May 17, 2018 / 5:52 PM / a year ago

Brazil companies will stick to deleveraging in 2018, says Itaú BBA

SAO PAULO, May 17 (Reuters) - Brazilian companies will focus on reducing debt and refrain from large new capital expenditures until a new president is elected later this year, an executive at Itaú Unibanco Holding SA’s investment bank said in an interview on Thursday.

Alberto Fernandes, vice-president at Itaú BBA SA, said that the lack of new corporate investments will curb growth in its lending portfolio this year even as record low Brazilian interest rates make it easy for companies to get loans.

“Current low interest rates are already reducing debt ratios to a great extent,” he said. Itau BBA is Latin America’s largest wholesale and investment bank.

Brazil’s Central Bank made a surprise decision late on Wednesday to keep interest rates unchanged, confounding expectations of a rate cut, but that will have a very small impact on economic activity, Fernandes said.

This week, Reuters reported that Brazilian banks were seeing weak corporate demand. Its top four listed banks - Itaú, Banco do Brasil SA, Santander Brasil SA e Banco Bradesco SA - reported a 6.6 percent overall first-quarter year-over-year drop in large corporate lending to 602.8 billion reais ($163.29 billion).

Fernandes, speaking by phone from New York after a two-day Itaú BBA conference there with investors in Latin American stocks and bonds, said concern about Brazil’s presidential election - where market-friendly candidates have been lagging in recent polls - is making investors more selective when picking Brazilian assets. ($1 = 3.6915 Brazilian reais) (Reporting by Carolina Mandl Editing by James Dalgleish)

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