Banco do Brasil will need govt help without spending cuts - CEO

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Monday, November 28, 2016

Banco do Brasil CEO Paulo Rogério Caffarelli has said that if the financial institution fails to cut back on its spending, it will have to seek help from the federal government in July 2017 in order to meet Basel III capital requirements.

"I can't expect that our costs will be like those of Bradesco or Itaú because we have much greater capillarity, but we will try to reduce [our spending] to the maximum," Caffarelli said in an interview with local daily Folha de S.Paulo.

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On November 20 the bank announced a restructuring plan that includes closing 402 of its branches and slashing up to 18,000 jobs through an early retirement plan. Caffarelli now expects 9,000-10,000 employees to participate in the program, up from the 5,000 in 2015. Last year's plan allowed early retirees to receive seven months' salary as an incentive, while this year's plan will offer 12 months' salary as compensation.

The downsizing and branch closures are expected to save the bank up to 3.1bn reais (US$912mn) in the coming years.

The Banco do Brasil CEO noted that if the expected 9,000 employees accept early retirement, the financial institution will save 2.13bn reais. Savings would reach 2.23bn reais if 10,000 were to participate, while 15,000 participants would mean 2.74bn reais in savings. Another 750mn reais are expected to be saved with the planned branch closures.

Caffarelli also told Folha that he does not plan to launch an IPO for the bank's credit card division or its real estate title distributor.