Even though the markets got a scare on news that Brazil had to spend $1.5 billion to bail out a second-tier lender, bigger banks are experiencing no bearish effects.
Major Brazilian banks like Itau (NYSE:ITUB), Bradesco (NYSE:BBD) and Banco Santander (NYSE:BSBR) are actually up about 1% in mid-afternoon trading, indicating that global investors remain convinced that Brazil is the home of some of the best banks in the emerging world -- or anywhere else.
However, smaller banks, which do not have the ADR listings to become familiar names to U.S. traders, suffered in morning trading after news that car lender PanAmericano, which until recently was ranked No. 21 in the local financial sector by size, had confessed to significant "accounting inconsistencies."
As a result, the central bank had to float an emergency $1.5 billion to PanAmericano's controlling shareholders in order to avoid a run on either the company's shares or its deposits.
As it turns out, PanAmericano forgot to record the sale of some of its loans to rivals, which left its portfolio looking much larger than it actually now seems to be.
PanAmericano, founded by Brazilian game show mogul Silvio Santos, was probably an isolated event of bad accounting. If nothing else, Santos himself has volunteered to come forward to recapitalize the bank with some of his $3 billion personal fortune.
Disclosure: No positions