When Banco do Brasil President Karlos Rischbieter summoned the press a few weeks ago to announce the institution's balance sheet for the first half of 1978, he kept his commments brief and impassive. The bank's first-quarter gross earnings of $916.4 million "have fulfilled our expectations," he said laconically.
At some other bank, officers perhaps would have made more ceremony of such spectacular figures gross pre made more ceremony of such spectacular figures gross profits up 31.4 percent over the previous quarter, and net worth in local currency terms up 89 percent in the last year. But at Banco do Brasil, S.A., a semiprivate bank known here by the nickname "BB," record-breaking performances are so routine that this latest one passed almost without comment.
Yet it is thanks to results such as those Rischbieter announced in Brasilla last month that Banco do Brasil, which despite its name is not Brazil's official central bank, now ranks as the world's seventh largest bank. As of the end of 1977, BB had assets totalling $46.7 billion and deposits amounting to more than $26.6 billion. And in terms of the bottom line, Banco do Brasil is without rival in the international banking community. Thegross earnings of more than $1 billion it reported in 1976 and again last year are the highest ever recorded anywhere.
Banco do Brasil owes this eye-popping performance to a number of factors, chiefly its privileged position in one of the fastest-growing economies in the world.With approximately 60 percent of its stock in the hands of the Brazilian government, BB has become the financial engine powering the 15-year economic surge that has made Brazil the eighth largest economy in the West.
And even as the growth of the Brazilian economy itself has slowed a bit - from $10.9 billion since 1973, while assets and loans nearly have tripled in the same period.
Much of the bank's current $39 billion in loan operations has been poured through CACEX, its foreign trade department, into official export and subsidy programs, or used to finance the scores of industrial projects that the government has deemed essential to Brazil's continued growth. But BB also showed an unorthodox side recently by underwriting a version of the Maxim Gorky play, "The Vacationers," for staging in Rio's theatre district.
Virtually no financial operation, in fact, takes place in Brazil without BB being involved in one way or another. Banco do Brasil is a major commercial bank, but it also functions as the world's biggest agricultural bank, a development bank, a holding company and, at times, even as a central bank.
To Brazilian private and state bankers who chafe at BB's dominant role in Brazil's highly centralized economy, the bank is simply "the monster" - a huge and often unwieldly beast that gobbles up scarce capital and has extended its tentacles into every corner of Brazilian life. "There's simply no way for any of us to complete with Banco do Brasil," complains one private banker here.
Particularly resented by the banking community are the regulations that for the past decade have required Brazilian government funds to be deposited in one of BB's 1,322 domestic branches, which employ 80,000 persons. Thanks to other rulings, Banco do Brasil pays no interest on its substantial government deposits.
But some foreign bankers her argue that BB would reap even higher profits were it not for the dual private-public role it has been forced to assume. Though it is a profit-seeking institution, BB also has the responsibility of laying down the ground rules by which all of Brazil's financial organizations must oprate - a task that frequently works against the bank's own interests.
Thus, BB is forced to operate with a government-imposed ceiling on its loan operations ($27.2 billion for 1978). And when the government decided last year to lower interest rates in an effort to contain Brazil's 40 percent annual inflation rate, it fell to Rischbieter, who had been named BB president by the government in February 1977, to break the news to the banking community.
The campaign that Rischbieter, a 50-year-old descendant of German immigrants, undertook met at first with stiff resistance. But when BB lowered its interest rates to force down the market rate, its sheer bulk forced other banks to swallow their misgivings and go along.
Actions such as these have led private bankers here - both Brazilian and foreign - to look upon BB more as the nation's de facto monetary authority than as an ordinary bank. "The Banco do Brasil is more of a central bank than even the Banco Central itself," claims Luiz Queiroz de Guimaraes, financial director at the rival Banco Itau.
As the oldest (founded in 1808) and largest bank in Brazil, BB for many years was forced to play that role by default. But even after the Banco Central was established in 1964, staffed largely by personnel lured from Banco do Brasil, BB's voice in monetary matters continued strong.
Today, much of Banco do Brasil's monetary muscle derives form its membership in the National Monetary Council. This organ controls the growth of the money supply, regulates credit and the securities exchanges, and oversees the lending operations of all financial institutions.
But despite its strong ties to the government, BB does most of its business with private sector. Ninety-five and seven-tenths percent of the 20.8 billion in loans BB granted last year went to private enterprises, accounting for nearly half of all the loans received in that sector and showing an increase in local currency terms of nearly 50 percent over 1976.
Traditionally, BB has been the main sources of credit for Brazilian agriculture, which has grown in recent years to a point where Brazil is now second only to the U.S. as an exporter of agricultural products. BB, whose $11.2 billion in loans to Brazilian farmers last year made it the largest agricultural lender in the world, accounts for fully three-quarters of all rural loans in Brazil.
In a widely publicized speech two monts ago, however, Rischbieter called for a thorough overhaul of BB's agricultural operations on the grounds that current policies are elitist and inefficient.
Only one in five Brazilian farmers has access to bank loans, and many of those who receive rural credit use it for nonagricultural purposes because interest on such loans can run as low as 7 percent a year - in contrast to the 60 percent rate found elsewhere on the money market.
To encourage agricultural and industrial development, BB sometimes has opened offices in remote and backward areas where profits are not to be found. In its 1977 annual report, BB explained that, "When deciding whether or not to open a new branch, the criteria adopted by the bank have been basically to benefit those areas which most require financial assistance. Thus, social aspects have been the main factor."
But increasingly, as Brazil's foreign trade and loan needs have expanded, Banco do Brasil also has become involved in financial operations outside Brazil. It now has 46 branches overeas, including five U.S. offices in Washington, New York, Chicago, Los Angeles and San Francisco.
At home, BB is also emerging, very much against its will, as an important holding company. In more than a dozen recent cases where loans went sour, BB has bowed to government pressure and agree to rescue the companies inquestion, includind a pulp mill and a aluminum manufacturer, by converting the loans it had made - estimated to total more than $250 million - into share capital.
Yet despite these officially decreed drains on Banco do Brasil's profitability, the institution's outlook continues bright, at least so long as it continues to occupy its position as a semiofficial arm of the Brazilian government.
Said Rischbieter, in what may be the understatement of the year, after announcing the balance sheet for the first half of 1978: "Everything indicates that the second semester will repeat the satisfactory of the first."