By Rogerio Jelmayer
SAO PAULO--Latin America's largest bank in terms of assets,
Banco do Brasil SA, is among bidders for a small bank up for sale
in Florida, as it seeks to offer more services to the many
Brazilians living in the southeastern state.
"Banco do Brasil is in advanced talks to acquire City National,
and it may cost at least $750 million," a banker involved in the
negotiations said, speaking on condition of anonymity. City
National has 26 branches in the U.S., and a sale of the bank to
someone could be wrapped up by the end of May, the banker said.
Meantime, Banco do Brasil is also in advanced talks to increase
its stake in Banco Votorantim SA, a midsized local bank, as part of
a plan to speed up diversification within Brazil. Banco do Brasil
bought 49.99% of Banco Votorantim for 4.2 billion Brazilian reais
($2.1 billion) in 2009, and is now looking to increase that to 75%,
according to the same banker.
Spain's Bankia SA put City National Bank of Florida up for sale
last year, as part of a plan to shed assets to boost capital ratios
and restructure its business at home in the wake of the collapse of
a decade-long real-estate bubble. In February, Bankia Chairman Jose
Ignacio Goirigolzarri said more than a dozen potential bidders were
looking at the Miami-based bank, and his company aimed to close on
a sale in the second or third quarter of this year.
The press office at Banco do Brasil declined to comment for this
article.
For Banco do Brasil, a successful bid for City National would be
a new and more aggressive step in the Brazilian bank's
international expansion, following a $6 million purchase last year
of tiny Florida bank Eurobank, which has just three branches. Banco
do Brasil is keen to grow overseas, albeit at a conservative pace,
as part of a diversification strategy that's largely focused on
serving Brazilians and Brazilian banks overseas.
The move has been broadly welcomed by analysts, who believe the
bank's relatively cautious approach reduces risks related to
opening up in new markets. Banco do Brasil has also been analyzing
opportunities in other Latin American countries, particularly
Chile, Colombia and Peru.
City National isn't Banco do Brasil's only target in the U.S.,
though it is looking for assets mainly in Florida and New Jersey,
the banker said.
The first major step taken by Banco do Brasil outside Brazil was
in late 2010, when it bought control of Argentina's fourth-largest
bank, Banco Patagonia SA. The Brazilian bank has said it wants
international operations to increase to 15% of total revenues in
the next few years, up from around 8.4% at the moment. The figure
is up from 1% just four years ago.
A financial proposal Banco Votorantim hasn't yet been made, and
the two sides are discussing the size of the board of directors and
the number of votes, the person said. A deal is likely to be ready
in the next couple of months, the person said.
Banco do Brasil has publicly acknowledged the talks are under
way but hasn't provided any details. The press office also declined
comment.
The bank won't buy all of Banco Votorantim's shares, as that
would require changes in legislation because government-run banks
are barred from buying private-sector peers. The executive said
there are also practical reasons for wanting to maintain some
independent shareholders. "As a private-sector bank, Banco
Votorantim has less bureaucracy than Banco do Brasil, and the
intention would be to keep it that way," the banker said.
Banco Votorantim declined to comment for this article.
Banco do Brasil is believed to be interested in Banco Votorantim
to open up new business lines, including perhaps investment
banking, as it seeks to diversify revenue amid a historic decline
in Brazilian interest rates. Banco Votorantim acts as a retail bank
and also has a strong investment-banking unit, which also operates
as a brokerage.
While Banco do Brasil is a behemoth in lending to business and
consumers, with a loan portfolio equal to nearly $300 billion, or
more than 20% of Brazil's overall financial system, its
investment-banking area is small. The industry, which includes debt
and equity issues, private banking and mergers and acquisitions,
has long been dominated by private-sector heavyweights such as Itau
Unibanco Holding SA, Banco Bradesco SA, Banco BTG Pactual SA and
Credit Suisse Group AG.
Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com