SAO PAULO: Shares in the largest Brazilian listed banks fell on Thursday on concern the government might be preparing steps to raise taxation of commercial banking activities to help plug a swelling budget deficit.
According to weekly magazine Exame, Finance Minister Joaquim Levy told Febraban, the group representing the nation's banks, that the government is considering increasing a type of income taxes known as CSLL to 17 percent from 15 percent currently.
The magazine did not say how it obtained the information. Following the congressional scrapping of a tax on financial transactions in 2008, Brazilian banks have been subject to a higher tax burden than other sectors.
A tax hike could add to current industry headwinds ranging from a recession to fallout from a corruption scandal involving the largest state company and major engineering firms - all key bank clients.
Still, analysts at Ita? BBA and Banco Brasil Plural said the impact of that planned tax hike could bring down annual earnings by up to an average of 3 percent for the listed lenders. Finance Ministry and Febraban spokespeople did not have an immediate comment on the Exame report.
Traders also said that banking shares suffered after Credit Suisse Securities analysts said the sector faces downward pressure on earnings this year.
The analysts, led by Marcelo Telles, cut their recommendations and target prices on Ita Unibanco Holding SA, Banco Bradesco SA and state-controlled Banco do Brasil SA.
Preferred shares in Ita, Brazil's largest bank by market value, posted their steepest plunge in a month, shedding 2.9 percent to 36.46 reais. Banco do Brasil SA, the nation's No. 1 bank by assets, sank 3.7 percent to 23.45 reais.
Bradesco shed 2.7 percent to 31.04 reais.
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