| SAO PAULO
SAO PAULO Aug 18 Banco do Brasil SA, long a
powerhouse in lending and insurance in Latin America's largest
economy, is betting big on a segment that has traditionally been
dominated by global rivals to bolster its profit outlook.
Bank executives expect fiduciary services, including trust,
depositary and custody services, to become a key profit engine
in coming years. Banks are growing their loan books at the
slowest pace in a decade this year, forcing Banco do Brasil and
rivals to look for sources of profit in areas other than simple
The segment accounts for less than 5 percent of the 12
billion reais ($5.3 billion) in fee income, or revenue from
financial services, that Banco do Brasil has earned so far this
year. But that could soon change as Banco do Brasil, which has
the nation's largest loan book, put a new focus on fiduciary
services as an alternative engine to speed up loan origination.
Beyond clearing and settling payments for clients and
investment funds, fiduciary management can also help the
state-run bank team up with rivals to sell client solutions it
would otherwise have to develop from scratch, executives say.
Currently, the bank controls a fifth of the fund trustee
services market and is the No. 3 asset custodian in Brazil.
Banco do Brasil expects the growing use of project finance to
fund infrastructure to bolster its trustee business in coming
"We see this unit fully capturing future growth in capital
markets activity," Chief Financial Officer Ivan Monteiro said at
an event to discuss second-quarter results last week. "Loan
origination will hinge more on market activity, thus the
excitement we have with the potential for fiduciary services."
The growth and development of transaction banking in Brazil
is heavily dependent on a recovery in local capital markets.
HSBC Holdings Plc, Citigroup Inc and Bank of New
York Mellon Corp are among the largest players in the
Banco do Brasil is up 24 percent this year, compared with an
average 30 percent gain in shares of Brazil's top three private
sector banks. Had it not been for a recent government decision
to recalculate compensation that Banco do Brasil might have to
pay depositors in a landmark savings case, the discount would be
By touting fiduciary services as a promising business, Banco
do Brasil is implicitly seeking to improve investor perception
about the value of its core assets, analysts said.
Following the successful $5.1 billion initial public
offering of the insurance unit of Banco do Brasil, BB Seguridade
Participações SA, in April last year, investors are
pondering what other unit IPO may be in the offing.
Sources told Reuters that Banco do Brasil could list its
asset management unit, known as BB DTVM, or its card unit BB
Cartões. Analysts estimate the combined value of BB DTVM, which
oversees 535 billion reais ($237 billion) in assets, and BB
Cartões to be about 60 billion reais.
"Should the fiduciary unit becomes a large player, the
impact could be transformational for the bank," said a São
Paulo-based fund manager who owns Banco do Brasil shares but is
not authorized to speak publicly about a specific stock.
($1 = 2.2560 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Editing by Tom Brown)