August 9, 2012 / 3:50 PM / 5 years ago

UPDATE 1-Brazil's Caixa to grow loan book by 42 pct this year

* Caixa raises estimate for loan book growth this year

* Bank, Brazil government in talks for capital injection

By Aluísio Alves

SAO PAULO, Aug 9 (Reuters) - State-run bank Caixa Econômica Federal plans to increase its loan book by a whopping 42 percent this year, expanding mortgage and consumer lending as state and private- sector rivals retrench, Chief Executive Jorge Hereda said on Thursday.

Caixa, the nation’s largest mortgage lender, raised the estimate for growth of its outstanding loan portfolio from a prior 33 percent, Hereda told reporters in São Paulo.

The bank also reported a 45 percent surge in net income to 1.682 billion reais ($833 million) from the first quarter.

Demand for corporate and consumer loans is likely to drive overall growth in Caixa’s lending portfolio, Hereda said, adding the bank aims at an annual expansion of 60 percent in that segment.

Mortgage credit, the bank’s flagship product, is forecast to grow 25 percent this year.

Delinquencies slipped in the quarter, even as Caixa’s outstanding loan portfolio jumped 46 percent from a year earlier to about 297.8 billion reais, Hereda said. Loans in arrears for 90 days or more fell to 2.04 percent of total lending, from 2.1 percent in the prior quarter.

Hereda, who took the top job last year with the mandate of stepping up lending and cutting borrowing costs under President Dilma Rousseff’s instructions, said Caixa’s expansion strategy - which includes entering consumer and corporate credit - is “working perfectly and we will keep on with it.”

Caixa Econômica is wholly owned by Brazil’s federal government.

State banks are preventing credit in Latin America’s largest economy from tumbling as private-sector lenders put the brakes on credit disbursements in reaction to a surge in delinquencies. Chief Financial Officer Marcio Percival said Caixa originated one in every three reais of credit in Brazil during the first half of the year.

In June, government-led lenders disbursed 2.6 percent more credit on a monthly basis, compared with a 0.9 percent expansion for foreign lenders and 0.4 percent for local private sector banks, central bank data showed last month.

The bank is discussing a potential capital injection with the National Treasury and the finance ministry that might take place before year-end, Hereda said. He did not elaborate on potential terms of such transactions.

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