* State-run bank wants unit to be market No. 1 - newspaper
* Plan may include listing or joint venture
SAO PAULO Jan 4 (Reuters) - State-controlled Banco do Brasil SA, the country's largest bank by assets, wants to expand its investment banking unit, either through a listing or merger with a private sector rival, Valor Econômico newspaper reported.
The newspaper quoted a senior executive as saying that while the plan is preliminary, Banco do Brasil aims to form Brazil's largest wholesale and investment bank. The move could also make it easier for the bank to create a brokerage unit, the report said.
A Brasilia-based spokesman for Banco do Brasil confirmed the content of the Valor interview with Paulo Roberto Caffarelli, its senior vice president for wholesale, private and international banking.
The spokesman declined to provide further details on the plan. Caffarelli told Valor that a decision will be made before the end of the year.
For years, Banco do Brasil could not build a credible, strong investment banking franchise because it was difficult to hire and retain senior bankers. In Brazil, state entities have a cap on salaries, making it harder for them to compete with their private sector rivals.
"Our only option is to form a team. We have a great team but we can't poach people from other banks," Caffarelli told the newspaper. "At the same time the more people we lose to rivals come from the wholesale banking and capital markets operations."
The creation of a listed company or a joint venture could "reverse" such situation, Caffarelli told the paper.
Banco do Brasil is mulling selling shares in a newly formed insurance, retirement and pension division as early as this year. The division, which was named BB Seguridade, will manage Banco do Brasil's insurance brokerage and insurance services units as well as assets it owns jointly with Spain's Mapfre SA and other partners.
Foreign and local banks are betting on financial and capital markets advisory as a stable source of revenue as lending growth in Brazil cools and the government pushes down borrowing costs.