State controlled banking behemoth Banco de Brasil has been involved in a three way battle with its private peers Itau-Unibanco (NYSE:ITUB) and Banco de Bradesco (NYSE:BBD) for some time for dominance in the growing domestic banking sector. Having surpassed ITUB in the second quarter, mainly due to lower interest rates attracting borrowers, Banco de Brasil has now announced that it is looking to change its stance regarding international stockholders.
Yesterday, a spokeswoman for the company revealed that the bank is now looking to double the potential foreign ownership in Bovespa traded shares from the current 11% by raising its free float of shares to 25%.
On the same call, she also advised that the bank has appointed an advisory bank regards launching an ADR offering on the NYSE, similar to its two biggest rivals, and the programme could be launched by the end of this year.
“We are talking about two movements that aim to improve the attractiveness of the shares,” Marco Geovanne Tobias da Silva, said in a telephone interview with Bloomberg. “We are increasing the number of potential investors to our shares.”
Banco de Brasil has performed well this year, having outperformed the Bovespa average by some margin. As we have discussed in previous articles, the banking sector in Brazil has been going through a wave of consolidation & the state bank has just added to its growing portfolio via the acquisition of a 49.99% stake in Banco Votorantim for 4.2 billion reals ($2.3Bn) earlier this month.
Meanwhile, Spain's Santander (STD) is now looking at a local IPO that should see an initial raising of $200 million (equivalent to 15% of current valuation) that will be used to expand its reach across the country. At the same time, Santander also said that it will launch an ADR programme for the local listing.
With only a single IPO so far this year with Visa affiliate VisaNet, Brazil now has 12 companies that have registered since the end of July for potential listings. The VisaNet launch was hugely oversubscribed & raised a Brazilian record of $4.5Bn in its sale, much to the benefit of Bradesco.
Much of this is fuelled by local retail interest, as the Brazilian middle classes are growing, however, there are also signs that foreign investors are looking at Brazil as the next BRIC economy to really get going, with Credit Suisse coming out with a bullish statement yesterday.
“Brazil is in style for foreigners,” said Ilan Ryfer at Credit Suisse Hedging Griffo, Brazil’s biggest hedge fund. “Everyone thinks it’s a bull market again and the party’s back. Investors have short memories.”
Much of the excitement around Brazilian stocks is fuelled by its BRIC partner China, as the Chinese economy starts to lift again, commodities are very much back in vogue. South Africa's Investec Asset Management is looking at Brazil and neighbours Chile and Peru to lead the way in South America, as Chinese demand for raw materials is set to grow.
So Viva Brasilia !! Being a bull on emerging markets and Brazil in particular, I am looking forward to the Banco de Brasil and Santander IPOs with great interest.
Disclosure : Author holds long positions in Santander & Itau-Unibanco