Banco do Brasil SA on Wednesday raised its limits on loan exposure to the nation's largest firms, a sign that President Dilma Rousseff is again using state-controlled lenders to help stem the fallout from a deep recession. Brazil's No 1 bank by assets upped the maximum threshold for loan book exposure to conglomerates by 15 billion reais, Chief Risk Officer Walter Malieni said at a news conference in S?o Paulo. The bank will extend 9 billion reais ($2.6 billion) in fresh credit to a "wide array of productive sectors" hurt by the country's broad economic downturn.
Part of those efforts include freeing up to 3.1 billion reais in loans to auto and auto parts producers, which need to pay mounting debts with suppliers. Automakers will act as guarantors for some of the loans, which should help diminish default risks, Malieni noted. Banco do Brasil shares fell almost 5 percent in S?o Paulo, their biggest drop since mid-December, amid investor concerns that the government's political goals were a more important priority than profitability. The stock traded at 18.54 reais as of 4 pm local time (2100 GMT), the lowest level in almost 1 1/2 years.
The size of Banco do Brasil's loan book was 708.5 billion reais as of the end of June. The decision came a day after state lender Caixa Econ?mica Federal offered carmakers and auto parts producers lower borrowing costs for some types of loans as long as they hold off on dismissing staff.
"By protecting jobs, we are protecting the country's banking system," Banco do Brasil Chief Executive Officer Alexandre Abreu said at the news conference. The measures revived concerns about a fresh round of state intervention in the banking industry, something Rousseff tried during her first term in office, analysts said. Economists expect Brazil's gross domestic product to shrink in 2015 and next year, which would be the first consecutive annual contractions since the 1930s. The move does not run counter to government efforts to narrow its budget deficit, Finance Minister Joaquim Levy told reporters in Rio de Janeiro on Wednesday.
When Levy announced those efforts early this year, he wanted state banks to look for funding outside National Treasury funds or grow their loan books at a more moderate pace. Exporters will have an additional $7 billion worth of trade financing lines from Banco do Brasil, after the lender raised maximum loan book exposure limits on the segment, its executives said.