Brazil Banking Giant’s Share Sale Raises $1.4 Billion

(Bloomberg) -- Banco do Brasil SA, Latin America’s biggest lender by assets, and a government-managed fund raised 5.8 billion reais ($1.4 billion) by selling shares of the state-owned bank, another step in Brazil’s effort to shrink the size of the state.

Shares of the company rose to a three-week high after the deal, which priced 132.5 million shares at 44.05 reais apiece, according to a regulatory filing. A little over half of the shares were sold by a Brazilian workers’ investment fund known as FI-FGTS, managed by another state-controlled bank, Caixa Economica Federal. The rest was sold by Banco do Brasil itself, which held some of its own shares through its treasury desk.

The bank’s shares rose 2% to 45.79 reais at 11:23 a.m. in Sao Paulo, compared with a 0.3% increase for the benchmark Ibovespa index. They closed at 44.91 on Thursday.

Banco do Brasil’s sale is part of a broader effort by the government to shore up fiscal accounts through asset sales. Caixa has been leading the effort, having sold a roughly $1.9 billion stake it held in oil-and-gas giant Petroleo Brasileiro SA. Other funds managed by the bank sold a stake in IRB Brasil Re, and Banco do Brasil has also pitched in, selling its investment in Neoenergia SA in an initial public offering.

With over 1.5 trillion reais in assets, Banco do Brasil has been trying to catch up to its non-state owned peers in profitability by focusing on loans with better spreads, closing brick-and-mortar branches and announcing another voluntary dismissal program.

The company is also trying to improve its laggard investment bank through a partnership with UBS Group AG, which would see the Zurich-based firm taking a majority stake in a new joint venture operating in Brazil, Argentina, Chile, Paraguay, Peru and Uruguay.

Underwriters for the share sale were Banco do Brasil’s investment-banking unit, Credit Suisse Group AG, Caixa, Banco Itau BBA and JPMorgan Chase & Co.

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