UPDATE 1-Banco do Brasil wins initial approval for first China branch

Wed Dec 12, 2012 8:12am EST

* Lender would finance Brazilian companies in China

* State-run bank ready to issue mortgage-backed securities

SAO PAULO Dec 12 (Reuters) - State-controlled Banco do Brasil SA, Brazil's largest bank by assets, has received approval from a Chinese regulator to open a branch there, a senior executive said on Wednesday, a first step toward operating as a commercial bank in Brazil's top trading partner.

The bank still requires two more regulatory approvals, which it may receive during 2013, before it starts Chinese operations, according to Paulo Rogerio Caffarelli, the lender's senior vice president for wholesale banking and international operations.

"Initially, the bank should hire about 20 employees to support financial operations for Brazilian companies with business in China," Caffarelli told journalists at an event hosted by financial exchange operator BM&FBovespa.

Banco do Brasil also expects to soon issue about 8 billion reais ($3.9 billion) in mortgage-backed securities in Brazil, Chief Financial Officer Ivan Monteiro said at the same event.

"We are ready. We're just awaiting final adjustments by BM&FBovespa," Monteiro said.