April 6, 2020 / 3:57 PM / 2 months ago

UPDATE 1-Brazil small business credit lines to run out in two months -Itau CEO

(Adds exec comments on credit demand, capital ratio, bonds purchase, byline)

By Carolina Mandl

SAO PAULO, April 6 (Reuters) - Credit lines mainly funded by Brazil’s Treasury to finance small business payrolls during the coronavirus outbreak will run out in two months, Itau Unibanco Holding SA Chief Executive Candido Bracher said on Monday.

Brazil’s Treasury and top-three private lenders - Itau, Banco Bradesco SA and Banco Santander Brasil SA - last month launched a 40 billion reais ($7.6 billion) fund to help companies with annual sales of up to 10 million reais pay their workers.

The Treasury may have to reconsider that amount depending on the length of the crisis, said Bracher, whose bank will start offering the credit line this week.

Itau, Brazil’s top lender, has also seen a surge in loan demand from large companies, with disbursements quadrupling, said wholesale bank Itau BBA’s CEO, Caio Ibrahim David. Applications have begun to slow recently, he noted.

Itau said it has also bought roughly 2 billion reais in assets from fund managers, to boost their liquidity.

Brazil’s central bank last month launched credit lines to finance banks interested in acquiring funds’ corporate bonds to increase liquidity as many clients cash out from their investments.

Itau Chief Financial Officer Milton Maluhy said the bank’s liquidity is at a comfortable level but acknowledged that its capital ratio is likely to slip below this year’s 13.5% target, mainly due to the Brazilian currency’s devaluation.

Itau had said about two years ago that it would distribute all capital exceeding 13.5% to shareholders in the form of dividends. On Monday Brazil’s central bank forbade dividend payments above minimum legal or company bylaw requirements through Sept. 30.

“This is a wise decision,” Bracher told analysts and journalists on the call, referring to the central bank move.

$1 = 5.2593 reais Reporting by Carolina Mandl; Editing by Richard Chang

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