| SAO PAULO, Sept 4
SAO PAULO, Sept 4 State-run Banco do Brasil SA
is negotiating a new partnership model for an investment bank
with subsidiary Banco Votorantim SA, with the focus on
strengthening equity research and advisory on mergers and
acquisitions and capital markets deals, a source with direct
knowledge of the talks said on Wednesday.
Both banks are revising aspects of a potential partnership,
which they discussed for months after suspending them on Aug.
22. Under new terms being discussed, Banco do Brasil would pay a
fee on each deal executed by Votorantim, with Banco
do Brasil also getting some sort of compensation for each deal
generated from its pool of clients, said the source, who
declined to be identified because the talks are in a preliminary
The source said the talks are still "very incipient" and
that a mechanism of remuneration has yet to be figured out.
The media offices of Banco do Brasil and Votorantim declined
to comment. Newspaper Valor Econômico said on Wednesday that
both banks had resumed talks.
For years, Banco do Brasil has failed to build a
specialized investment-banking unit, chiefly because of pay and
bonus restrictions facing state-run entities. In Brazil, state
companies have a cap on salaries and compensation, making it
harder for them to compete with their private-sector rivals.
Banco do Brasil needs of a bigger wholesale banking unit
with bigger research, sales and trading and financial advisory
capabilities to help support its bid to increase corporate
lending. Previously, Banco do Brasil's priority was to have 75
percent of Votorantim's capital in an eventual partnership, or
the equivalent to 49.9 percent of common stock and 100 percent
of preferred stock.
Paulo Roberto Caffarelli, Banco do Brasil's senior vice
president in charge of wholesale, international and private
banking, said growth in investment bank can only happen either
organically or through an association. A partnership with a
foreign firm cannot be ruled out, Caffarelli told Reuters in
May, adding that no talks on the matter were held by then.
Unlike counterparts in other emerging markets such as China,
Brazilian investment banks have consistently bested their
foreign rivals over the past three years at funding deals,
forging stronger client ties and setting up distribution
networks similar to those of global banks.
Itaú Unibanco Holding SA's purchase of Banco BBA
Creditanstalt in 2002 and Banco Bradesco SA's
creation of Bradesco BBI in 2006 allowed both private-sector
lenders to vie with foreign investment banks for lucrative
mergers and capital markets advisory deals in Brazil.