ANALYSIS-Brazil's Banespa bank still alluring despite delay
Reuters, 07/12/2000 15:09
By Andrei Khalip
SAO PAULO, July 12 (Reuters) - The long privatization saga of Brazil's state bank Banespa (SAO:BESP4) took a new twist with officials warning the sale may be put off for years as courts grapple with three injunctions blocking the auction.
But even with the bank stock tumbling to eight-month lows, financial analysts reject dire scenarios painted by the government, saying that despite delays, the heavyweight bank will still lure bidders seeking to expand or establish a presence in Latin America's biggest economy.
Banespa is the oldest and largest of Brazil's public banks. It serves Sao Paulo state, an economic powerhouse whose population accounts for than a fifth of the country's 160 milion people.
While Banespa's sale has been planned since the mid-1990s, its privatization has been entangled by scores of injunctions mainly filed by bank unions frightened by the prospects of layoffs.
The latest turn on the privatization path came with statements early this week by Eduardo de Freitas, a central bank director supervising the sale of Banespa.
He publicly warned lengthy postponements of the auction would sour investors, potentially reducing Banespa's value to "nothing but ashes."
His comments drove the bank's stock down more than 5 percent Tuesday and a further 2 percent early afternoon Wednesday.
But financial analysts looking at the benefits to eventual buyers of the bank saw the stock plunge as a blip eroding, rather than bashing, the value of Banespa.
The major focus should be on the institution's underlying attractiveness to major investors.
Banespa, valued at 5.6 billion reais ($3.3 billion), is a highly coveted asset for foreigners wanting to build up their presence in Brazil and for local banks in their race to expand.
Five foreign and four local banks have pre-qualified to bid in the sale. Foreign banks are BSCH (MADRID:SCH) and BBVA (MADRID:BBVA) of Spain, Britain's HSBC (ISEL:HSBA) and U.S. BankBoston (NYSE:FBF) and Citibank (NYSE:C). The domestic contenders are Brazil's three largest private banks -- Bradesco (SAO:BBDC4), Itau (SAO:ITAU4) and Unibanco (SAO:UBBR4) -- and Banco Safra.
WORST-CASE SCENARIO SEES BANESPA'S SALE DELAYED UNTIL 2002
De Freitas said the bank's sale could be delayed until 2002 if the injunctions were not overturned before September as a new evaluation of Banespa's accounts would be required.
The auction, which has been delayed twice and, according to local media, seen some 66 court challenges so far, is still officially slated for July 18. However, government officials acknowledge the sale will not take place as scheduled.
One senior analyst at a big foreign bank, who did not want to be named, criticized Central Bank's de Freitas for an "irresponsible action" that sent the stock into a tailspin.
"What de Freitas said was mostly an exaggeration, a rhetorical statement, an attempt to pressure the judiciary and the unions in a bid to move forward the sale. It shows the Central Bank is impatient with the difficulties in privatization," he said.
ABN AMRO equity director and strategist Antonio Klapka said he still viewed Banespa as one of the banks with the best book value in Brazil, although its market value could wither a bit with the delay and some bidders may find a better use for their cash in the interim.
Citibank's chief economist Carlos Kawall said any long delay would affect the bank's assets, but he the final value of the bank should still be high. "The delay is bad for the bank itself and prices may fall, but it won't really turn to ashes."
Analysts say Banespa administration appears to have lost its rhythm and become passive as it waits for a new owner to show up.
A TEST FOR PRIVATIZATION PROCESS
Some of the bidders have already cut down their crack teams and reduced the number of strategy meetings for what is still expected to be a very competitive auction.
On Tuesday, the Superior Justice Tribunal, which is the highest court in Brazil for nonconstitutional matters, referred one of the injunctions to Brazil's highest court -- the Supreme Federal Court -- saying the case had "constitutional issues".
Analysts warned that if the high court, which is generally more likely to back the government than lower courts, decides to rule on the case still this week, the government may suffer a defeat. They said the court's acting head until July 15, Marco Aurelio Mello, is known as an opponent of the government.
Many recalled the 1997 sell-off of the CVRD mining giant, which went on the block after a similar legal tug-of-war and despite a last-minute court order that nearly blocked the sale.
Analysts say the unions, which say privatization spells unemployment to many Banespa employees, are unlikely to back off in their anti-sale crusade. The government, which has so far carried out all its privatization plans despite any objections, is also also seen sticking to its guns.
"They may keep challenging each other till they drop dead. The privatization of Banespa is a difficult case, but it should happen sooner or later," Klapka said, adding though that the government now seems to have lost the momentum and influence it had in 1997.
Citibank's Kawall warned about the danger of an anti-privatization ruling in one of the top courts: "We have to see who the judiciary sides in with this time. If they turn against the privatization of Banespa, the whole schedule of remaining privatizations in Brazil from now on may be in danger."
Copyright 2000, Reuters News Service |
