(Recasts to add comments, details on lending focus, background
By Guillermo Parra-Bernal
SAO PAULO, March 26 Brazil's state-run Caixa
Economica Federal plans to slow lending growth
dramatically this year, in a sign the country's largest mortgage
lender is seeking to preserve capital after years of rapid
Brasilia-based Caixa, which on Wednesday reported a sharp
slump in fourth-quarter profit, plans to expand its loan book
between 22 percent and 25 percent this year, down from 36.8
percent in 2013. At such pace, the bank would need no capital
injection from the federal government, Caixa's sole owner, for
2014 and 2015, chief financial officer Marcio Percival said.
The bank will aim for Tier 1 and 2 capital ratios, or
average regulatory capital under Basel II rules, of between 13.5
percent and 16 percent this year. The ratio ended last year at
15.1 percent. Currently, Caixa and the government are
negotiating the dividend payout ratio that best helps bolster
the bank's coffers, Chief Executive Officer Jorge Hereda said.
The move underpins government efforts to slow the pace of
loan disbursements from state-owned banks and, with it, curtial
National Treasury financing for them. Standard and Poor's, which
on Monday cut Brazil's sovereign debt rating, remains skeptical
of President Dilma Rousseff's ability to phase out a
five-year-long strategy using state banks to ramp up credit
ahead of the October election. Rousseff is expected to run for a
"We believe we can grow and maintain the required balance in
our business plan with this arrangement," Percival said at an
event to discuss fourth-quarter earnings. With cash injections
not coming as frequently from the government as in recent years,
Caixa is considering other ways to replenish capital, he noted.
A potential offering of global bonds in international
markets, which could help beef up the bank's capital base, will
depend on whether market conditions are favorable, Percival
Caixa will focus primarily on mortgages and credit to
infrastructure projects, and less on loans to large- and
mid-sized companies and personal credit, executives said.
Caixa's loan book rose above an average annual rate of 30
percent for the past three years, mainly under Rousseff's
Return on equity, a gauge of how well a bank spends
shareholder money, is expected between 26 percent and 28 percent
this year, compared with 26 percent in 2013. Profits should
continue to grow at a faster pace than capital, the executives
Last year, the lender gave loan book growth guidance of
between 32 percent and 40 percent. Outstanding loans at Caixa
ended last year at 494.24 billion reais ($214 billion), the bank
said in a statement.
Caixa's net income rose 19.2 percent last year to 6.723
billion reais ($2.91 billion). Recurring net income, excluding
one-time items, rose 20 percent to 5.195 billion reais in 2013,
the statement said.
In the fourth-quarter, however, recurring net income tumbled
76 percent from the previous quarter to 399 million reais ($173
million). Compared with the year earlier, recurring profit fell
Recurring profit declined due to a surge in funding costs as
the central bank raised interest rates throughout the year, the
statement said. Caixa plans to compensate for the increase in
funding costs by raising lending rates to the extent it does not
drive customers to other banks, Hereda noted.
"We want to preserve our current market share, but we are
conscious that we have a limit of 20 percent market share that
we won't surpass," he said. Caixa's loans represented about 19
percent of the total banking system last year.
The bank's default ratio, or loans in arrears for 90 days or
more, slipped to 2.3 percent of its loan book in the fourth
quarter, from 2.4 percent in the previous three months.
($1 = 2.31 Brazilian reais)
(Editing by Sophie Hares and Meredith Mazzilli)