Government of Brazil Injects New Capital into CAIXA

Date Published 9/17/2012
Author Marja Hoek-Smit
Country Brazil

The Government of Brazil is to inject BRL1.5 billion (approximately $735 million) into state-owned bank Caixa Economica Federal. The capital contribution will be in the form of shares of two other government-owned companies --government-controlled Petroleo Brasileiro S.A. - Petrobras and Telecomunicacoes Brasileiras S.A. – Telebras, rather than cash. A similar capital injection occurred in 2011. The new capital will raise Caixa’s capital ratio to 13.06%, from 12.91% as of June 2012 (not accounting for its upcoming minimum dividend payment of approximately BRL600 million on income from first-half 2012), and will allow CAIXA to expand its loan book by approximately 5 percent.   Caixa’s loan book increased by 45 percent over the past 12 months, which stretched its capitalization ratio. Caixa is the main lender for the government subsidized Minha Casa Minha Vida housing program.Caixa accounted for 33 percent of all of Brazil’s new lending in the first half of 2012 and close to 75 percent of mortgage lending.   Caixa’s loan expansion occurred against the backdrop of government attempts to lower credit spreads and to create more competition within the banking system.

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