NPL&REO News

Brazil’s Caixa Económica Federal plans to sell real estate to repay public debt

Under new management, the biggest state-owned bank in Brazil, Caixa Economica Federal,plans to restructure itself by selling distressed real estate and equity stakes in subsidiaries.

Chief executive officer Pedro Guimaraes is overseeing this planned asset sales by the State-owned bank to repay perpetual bonds issued by the Brazilian government that total approximately $R 40 billion ($11 billion).

Caixa has assets valued at R$ 1.3 trillion, and all extraordinary gains from asset sales “will be used to repay that debt,” Guimaraes said in an interview with Bloomberg.

Guimaraes has approached investors focused in distressed real estate to gauge their interest in buying assets that Caixa has seized. The bank valued its portfolio of seized assets, mostly defaulted mortgages, at nearly R$ 8 billion as of September, more than any other Brazilian bank.

Caixa also may sell some non-distressed real estate assets, including all or part of 15 buildings in Brasilia, where the bank is based, and seven buildings on Paulista Avenue in Sao Paulo.

In recent years, the bank has struggled with low returns on assets and controversy, including allegations that Caixa officials have loaned money in exchange for bribes.

The new CEO of Caixa plans dual listings in Brazil and New York to sell minority stakes in bank subsidiaries in the insurance and bank-card businesses.  Guimaraes said the bank’s lottery and asset-management subsidiaries will go public in 2020. The bank could collect R$ 15 billion in proceeds from the four sales.

Among other plans, Caixa would auction the right to use its 26,000 offices – the largest branch network in the Brazilian banking industry – to sell insurance and card-processing products that generate fees for the bank.

Caixa has a loan portfolio valued at R$ 694 billion, which has grown nearly 10-fold over the past 10 years, largely because of efforts by previous administrations of the national government to provide low-cost credit through state-owned banks.

The Brazilian government supported that effort by lending Caixa $40 billion through a perpetual bond issue.

Original Story:  The Real Deal | Mike Seemuth / Bloomberg
Photo: Caixa Econômica Federal
Edition: Prime Yield

Caixa Económica Federal aims to raise R$3.9 billion through subsidiary listings

State-owned Brazilian bank Caixa Economica Federal is hoping to raise R$15 billion through the listing of four of its subsidiaries, chief executive Pedro Guimaraes told newspaper O Globo in an interview published on Saturday.

The bank aims to list its insurance, asset management, lottery and credit card subsidiaries in the second half of 2019 or first half of 2020, Guimaraes said. In January, he had said they could be listed within 12 months.

The company had previously disclosed that it plans to sell minority stakes in the subsidiaries through listings in Sao Paulo and New York.

Original Story:CNBC | Reuters
Photo: Caixa Econômica Federal
Edition:Prime Yield

 

Rental prices outpaced inflation for second consecutive month

Residential rental prices in Brazil continued to show positive movement in January rising 0.41%. After December’s rise of 0.38%, this was the second consecutive month rental prices outpaced the month’s inflation rate, which in January was 0.32%, as calculated by the IPCA/IBGE (National Consumer Price Index/Brazilian Institute of Geography and Statistics).

The latest rental figures were published in the FipeZap Rental Index, which tracks real estate rental listings across Brazil’s twenty-five largest cities.

Seventeen of the twenty-five cities in the survey registered increases in January with Brasília (2.15%), São José do Rio Preto (1.48%), São José (1.28%), and Joinville (0.96%) showing the biggest increases.

Notably, Rio de Janeiro showed a nominal increase in rental prices in January of 0.30% but still fell just short of the month’s inflation rate.

Meanwhile, rental prices in São Paulo registered an increase greater than inflation of 0.73%.

Of the eight cities in the survey that showed declines in January, the biggest declines were seen in Salvador and Fortaleza, where residential rental prices in the two cities declined 0.96% and 0.51% respectively.

Looking at the last twelve-month period, average rental prices in Brazil overall have increased 2.39%, but was still short of the period’s inflation rate of 3.72%.

São Bernardo de Campo had the biggest increase in that period, up 9.92%, with the city of Joinville in Santa Catarina not too far behind, up 9.48%.

Over the twelve-month period, Rio de Janeiro rental prices decreased 3.09%, while São Paulo prices increased 4.03%.

January’s survey also showed the average price per square meter of the twenty-five cities. São Paulo city held the distinction of having Brazil’s most expensive residential rental prices in January with an average price of R$37.02/sqm.

Barueri, also in São Paulo state, was a distant second with rental prices hovering at R$31.96/sqm. Rio de Janeiro rounded out the top three in January at R$30.21/sqm.

Within the city of São Paulo, the upscale neighborhood of Vila Olímpia, which is home to the Brazilian offices of several multinational companies including Google, Yahoo!, and Microsoft, had the most expensive rental prices in the entire country with listings averaging R$75.99/sqm.

Meanwhile in Rio, Leblon and Ipanema had the highest rental prices in the city at R$54.83/sqm and R$51.75/sqm respectively.

The FipeZap Index monitors real estate sale prices across fifteen Brazilian cities and is a monthly gauge of property prices. It is prepared jointly by the university research center, Fipe (Economic Research Institute Foundation) and the Brazilian online real estate platform, Zap Properties.

Original Story:The Rio Times | Nelson Bele
Photo: FreeImages.com/Carlos Eduardo Livino
Edition:Prime Yield

 

NPL’s sales from Brazil’s top banks gain momentum in 2019

The credit recovery market in Brazil is seen gaining momentum in 2019 with the country’s largest banks expected to put 40 billion Brazilian reais of non-performing loans (NPL) up for sale, Valor Econômico reported, citing forecasts from managers who specialize in bad loan trading

Banks put about 30 billion reais in face value of delinquent loans up for sale in 2017 and 2018 each, according to the report.

The projected uptick is based on Caixa Econômica Federal’s plans to revisit the market this year after a court ruling suspended such sales for the state-run bank in mid-2016. The company is reportedly in the final stages of securing approval to resume the sales.

The strategy of Brazilian banks has reportedly been to partner with managers who specialize in debt recovery and sell the oldest tranches of their nonperforming retail loan portfolios.

In October 2018, Banco Bradesco SA agreed to purchase 65% of asset manager RCB Investimentos SA’s NPL servicing platform in Brazil. In doing so, it joined fellow Brazilian lenders Itaú Unibanco Holding SA, Banco Santander (Brasil) SA and Banco do Brasil SA, all of which either own or have stakes in similar asset recovery firms.

«Selling portfolios is more a matter of efficiency and focus» as opposed to revenue, Valor quoted Eurico Fabri, Bradesco’s vice president of retail banking, as saying.

Although Brazil’s debt recovery market is expected to grow this year, current unemployment levels suggest improvement will only solidify in the years to follow as the country’s economic situation continues to improve.

Original Story: S&P Global Intelligence| David Feliba
Photo: FreeImages.com/CesarFermino
Edition: Prime Yield

Rio de Janeiro

Brazil’s Government claims the need of pension system reforms to avoid recession

Brazil’s Economy Ministry has just released a report on which warns that the economy will slip into recession next year and official interest rates could more than double unless Congress approves measures to reduce the deficit in the country’s pension system.

The warning comes days after President Jair Bolsonaro presented his ambitious social security reform plan to Congress, which aims to save over 1 trillion reais ($295 billion) in the next decade.

Overhauling the creaking social security system is seen as critical to shoring Brazil’s public finances, boosting investor confidence, fostering growth and keeping interest rates and inflation under control, most economists say.

In its first official forecast on the potential impact on the economy over the next five years of reform or no reform, the Economy Ministry laid out starkly contrasting scenarios.

«In the event of no pension reform, GDP growth in 2019 will be 1% lower and Brazil will enter recession in the second half of 2020, approaching the level of losses seen in the 2014-2016 period», the ministry’s economic policy division warned in the report.

It said growth this year would slump to 0.8% from 1.3% last year — far weaker than the market consensus of around 2.5% and much worse than the 2.9% «best case» scenario of reform being passed.

Recessionary forces would also deepen over coming years if the pension system stays unchanged, the ministry said. The economy would shrink by 0.5% in 2020, by 1.1% in 2022 and as much as 1.8% in 2023.

The document also adds that benchmark interest rates will soar past 11% by year end from the current record low of 6.50% , and as high as 18.5% by 2023. Most economists expect rates to be on hold for the rest of this year.

But if reform is passed, growth will accelerate, job creation will surge and interest rates will fall, the Economy Ministry predicted.

The benchmark Selic rate could be reduced to a new low of 6.0 % later this year while the economy could create as many as 8 million new jobs by 2023, it said.

Economists have already factored in pension reform into their forecasts and say the outlook is not that strong even if something is approved this year, most likely a diluted version of Bolsonaro’s bill.

Corporate and household balance sheets have not been fully repaired since the 2014-16 recession, the international picture is cloudy, and not everyone is convinced the new administration will deliver on its pledges.

Original Story:Reuters |Jamie McGeever
Photo: FreeImages.com/Bruno Leiva
Edition:Prime Yield

Brazil holds interest rates at a record low

Brazil’s central bank held interest rates at a record low on last February 6thas expected, signalling it is in no rush to change them even though inflationary pressures have cooled, notices Reuters.

The bank’s monetary policy committee, known as Copom, voted unanimously to keep the benchmark Selic rate at 6.50% for the seventh straight meeting. According to Reuters, economists and investors are beginning to consider the possibility that rates could even be cut later this year. Although inflation risks have eased since its December meeting, Copom gave no indication it is moving in that direction too.

«The Committee judges that, since its previous meeting, notably related to the global outlook, inflationary risks have moderated,» Copom said in a statement accompanying the decision.

The central bank said the shifting global risks included greater odds of a global slowdown and easing short-term risks associated with normalizing interest rates in advanced economies.

Much will depend on how the economy performs in the coming months and the fate of the government’s economic reform agenda, which some see stimulating growth in the second half of 2019.

Based on market exchange rate and interest rate projections, Copom forecast inflation of 3.9% this year, unchanged from December but still below its 4.25% annual target.

The Brazilian real has strengthened around 5% since December’s policy meeting, largely on growing optimism that new right-wing President Jair Bolsonaro will deliver on his promise of ambitious economic reforms.

The central plank of that reform agenda is overhauling Brazil’s pension system, which could save the state up to 1.3 trillion reais ($350 billion) over the next decade and help the central bank to keep rates low — or even cut them further.

A stronger Brazilian currency will also help to cool price pressures. Interest rates futures markets are already pricing in around 20 basis points of easing by the end of the year.

Original story:Reuters |Jamie McGeever
Photo: FreeImage.com/ Svilen Milev
Edition: Prime Yield

 

 

Brazil Government supports foreign land purchases

Brazil’s land issues secretary within the Agriculture Ministry said that the government offers its support for foreign investors interested in buying land in Brazil, a practice which is currently prohibited.

A change to the law to allow foreigners to directly purchase land would require Congressional approval, Secretary Nabhan Garcia told reporters.

Original story: Reuters | Jack Spring and Anthony Boadle
Photo: FreeImages/ Marcel Krings
Edition: Prime Yield

Brazil current account deficit doubles, FDI inflows rise in 2018

Brazil’s current account deficit doubled in 2018 as economic growth fuelled demand for foreign goods and services, while foreign investment reached its highest share of GDP since 2001, reveals the country’s central bank.

The deficit remains narrow enough not to dim the generally positive outlook for Brazil that is taking shape among international investors for the year ahead.

Brazil’s current account deficit last year rose to $14.51 billion, or 0.77% of gross domestic product (GDP), almost exactly double the $7.235 billion shortfall registered the year before, equivalent to 0.35% of GDP.

Imports rose 21% on the year while exports rose 10%, which narrowed the trade surplus to $53.59 billion from $64 billion the year before.

But economists at Citi said the current account deficit, a broader measure of trade and capital flows, remains «comfortable» at less than 1% of GDP.

Investors are paying close attention to plans of the government to increase Brazil’s economic competitiveness via a mix of tax cuts, privatization and, most importantly, pension reform. The latter could save up to 1.3 trillion reais over the next decade, according to Economy Minister Paulo Guedes.

Some $88.3 billion of foreign direct investment (FDI) poured into Brazil last year, the central bank said, exceeding its earlier projections of $83 billion. Net FDI flows over the 12 months to December totaled 4.7% of GDP, the highest since June 2001, the central bank said.

Investors pulled funds out of Brazilian financial markets last year, however. Central bank figures showed that foreign investors withdrew $4.265 billion from Brazilian stocks in 2018, the most in a decade.

The pace of foreign inflows into Brazilian financial assets is expected to pick up this year, however, with investors attracted by Bolsonaro’s market-friendly policies and by relatively high interest rates.

Amundi, Europe’s largest fund manager with 1.45 trillion euros of assets under management, already said that Brazil is emerging as one of the most attractive destinations for long-term investment in local currency debt instruments.

Brazil’s benchmark Selic interest rate stands at 6.50%. That may not rise much if at all this year, thanks to the uncertain global economic outlook, but a growing consensus among international investors is that is an investment risk worth taking.

Original story:Reuters |Jamie McGeever and Marcela Ayres
Photo: FreeImages.com/Bruno Neves
Edition: Prime Yield

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