| SAO PAULO, July 2
SAO PAULO, July 2 State-run Caixa Econômica
Federal, Brazil's largest mortgage lender, is considering
selling a pool of distressed consumer loans to investors, the
first step in a broader plan to get rid of bad loans and free up
capital, a source said on Wednesday.
About 3 billion reais ($1.35 billion) worth of defaulted
loans could be sold to funds that specialize in dealing with
distressed assets, the source said.
Other steps being considered include the issue of securities
backed by some of the bad loans, said the source, who declined
to be identified because the matter remains under study.
Such moves allow banks to take defaulted debt off their
books, creating room to fund more loans and comply with
regulators' capital requirements. Caixa consulted a number of
distressed debt funds about doing such a deal, the source said,
adding that no timetable for a deal has been set.
Brasilia-based Caixa wants to gain know-how on how to clear
defaulted loans from its balance sheet, a common practice among
lenders in Latin America's largest economy, the source said. For
lenders such as Caixa carrying distressed assets can increase
operational costs and be a distraction because of the time and
money needed to deal with them.
In May, state development bank BNDES unveiled a
plan to sell about 6 billion reais worth of loans in arrears.
Private-sector banks have far more experience. In December
2011, Banco Santander Brasil SA, the largest foreign
lender in Brazil, auctioned off 16 billion reais in bad loans,
so far, the largest transaction of its kind in the country.
The move comes a couple of years after Caixa aggressively
entered the consumer credit market under the instruction of the
federal government, the bank's only shareholder. Caixa's loan
book was 520 billion reais at the end of March, almost three
times the size of outstanding credit at the end of 2010.
At the end of the first quarter, the amount in problem loans
on Caixa's books, known in Brazil as E-H loans, totaled 25
billion reais, or the equivalent of 4.8 percent of outstanding
Caixa's loans 90 days or more in arrears rose to the
equivalent of 2.6 percent of outstanding loans in the first
quarter from 2.3 percent a year earlier. That so-called default
ratio is the industry's most widely followed gauge for measuring
($1=2.22 Brazilian reais)
(Reporting by Guillermo Parra-Bernal and Aluísio Alves; Editing
by Peter Galloway)