Banco do Brasil buys Nossa Caixa, sparks further consolidation

Banco do Brasil (SAO:BBAS3), Brazil's largest government-controlled lender, said it would buy Banco Nossa Caixa SA (SAO:BNCA3), a commercial bank owned by the state of Sao Paulo, for 5.39 billion reals (US$2.25 billion).

Banco do Brasil will own 71.3 percent share of Nossa Caixa, if the legislature approves the deal. The bank said it hopes to generate between 2 billion to 4 billion reals (US$1.7 billion) from this investment over the nest 5 years.

Brazilian President Luiz Inacio Lula da Silva said this week that he wants Banco do Brasil to re-establish its position as the country's top bank, hinting that it may soon buy other institutions.

Banco do Brasil will have 512.4 billion reals ($217.2 billion) in assets with the acquisition of Nossa Caixa, for which it will make 18 monthly payments of 299.3 million ($124.7 million) starting in March, the bank said.

"This acquisition is positive because private banks are growing in Brazil," Finance Minister Guido Mantega told reporters in Brasilia.

"The important thing is that Banco do Brazil be strong," he said.

Banco do Brasil will pay 18 cash installments from March 2009 and make a public offer to buy minority shares in the first half of 2009.

In Brazil, the Bovespa index was closed due to a public holiday, but on Wednesday, Banco do Brasil shares closed down 0.6 at 13.32 reals and Nossa Caixa fell 0.37 percent to 51.30 reals.