China Construction Bank on shaky ground in Brazil

Wednesday, April 6, 2016

China Construction Bank (CCB) is finding it increasingly difficult to stabilize its investments in Brazil, following two consecutive years with net losses that have brought its capital below the local central bank requirements.

CCB reported net losses for 492mn reais (US$133mn) in 2015, which took the capital ratio to fall below the minimum and prompted the bank to announce a US$200mn capital injection, according to Brazilian paper Valor Econômico.

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The 2015 loss was an improvement on the 735mn-real loss the previous year.

CCB entered the Brazilian market in 2013 with the acquisition of BicBanco from the Bezerra de Menezes family by paying just over US$2bn for 93.7% ownership.

Since the beginning of its Brazilian venture, CCB was forced to write down billions of reias in bad loans.

Last week, S&P downgraded the CCB Brazilian subsidiary to 'B+' from 'BB,' one notch below Brazil's sovereign rating, and announced the possibility of a new downgrade in three months time.

Despite the fact that bad loans provisions expenses decreased to 970mn reais in 2015 from 1.2bn the year before, the loans portfolio also fell to 6.2bn from 9.8bn.