Banco de Brasilia SA’s chief executive officer said the lender is poised to resolve its monthslong crisis set off by dealings with failed Banco Master SA, which triggered 6 billion reais ($1.2 billion) of customer withdrawals.
The firm, awaiting a recapitalization led by Brazil’s capital city, expects Brasilia to conclude negotiations by the end of this month for a loan that could total 6.6 billion reais, Nelson Antonio de Souza said. BRB, as the company is known, has yet to resolve its capital situation, but Souza said it has fended off the worst of a liquidity crisis.
“We’ve lost around 6 billion reais from clients covered by the insurance fund, but we are recovering it,” the CEO said in an interview Wednesday, referring to outflows since Banco Master’s liquidation in November.
If completed, the capitalization would provide breathing room for one of the last regional banks still standing in Brazil, after it got entangled in fallout from the Banco Master scandal. Master collapsed last year in what officials have said was the largest case of bank fraud in the nation’s history. BRB estimates it got 21.9 billion reais in assets from Banco Master, some of which Brazilian authorities have said were fabricated.
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The capitalization of as much as 8.8 billion reais will be led by the city of Brasilia, which controls BRB through a majority of its shares. It would cover a provision for the expected credit loss on Master assets of the same amount. The capital city is seeking the loan from the country’s deposit insurance fund, known as FGC, backed by guarantees from Brazil’s biggest banks and funds the city is set to receive from the federal government.
The loan is expected to be completed by the end of June, Souza said. Terms are still being negotiated, but the proposal to the FGC and the banks included a 15-year maturity with payments starting in 2028, according to the CEO.
The deal was made possible after the federal government agreed in May to ease fiscal rules that had prevented the city from borrowing the needed amount. The city won’t be able to raise salaries or hire for new positions until the loan is fully repaid.
The slow pace at which the transaction is advancing has been raising concern in the market, given the bank’s strained finances.
“We assess that schedule misalignments or insufficient resources to absorb losses could increase the institution’s liquidation risk,” S&P Global Ratings said in late May, when it lowered BRB deeper into junk territory with a brCCC+/brC local rating.
Despite the drawn out negotiations, BRB is able to stay in business, the CEO said. The Brasilia government securitized credits it had the right to receive and used the proceeds to put 1 billion reais of the 8.8 billion-real total in the bank, he added.
BRB’s former CEO, Paulo Henrique Costa, was arrested after allegedly receiving luxury real estate properties from the Banco Master CEO, Daniel Vorcaro, in exchange for helping to get the deals done. BRB also tried to buy Master, but that transaction was nixed by the central bank in September, and Banco Master was liquidated in November.
Souza landed at the bank late that month to shore up its finances. A veteran in Brazil financial circles, he previously served as the CEO of federally owned Banco do Nordeste do Brasil SA and Caixa Economica Federal, where he spent most of his career.
A potential BRB liquidation was seen by many analysts as too big a risk for the financial system, with Finance Minister Dario Durigan telling Valor Economico it could cost the FGC 17 billion reais, adding to the 51.8 billion-real bill it shouldered with the Banco Master liquidation. In addition, BRB provides a range of services to local governments and courts, and has more exposure to consumers than Banco Master did.
Even with a solution still pending, BRB structured a business plan for 2026 to 2030 that it says would generate profit of more than 1 billion reais in 2028, Souza said. Last year’s results haven’t yet been published because the bank is waiting for an independent audit to conclude.