By Rogerio Jelmayer SAO PAULO- Brazil's state-run Banco do Brasil SA, Latin America's largest bank by assets, said it is considering selling its controlling stake in Argentina based bank Banco Patagonia. The bank, which controls a 59% stake in Banco Patagonia, is evaluating the sale of its stake via a public tender offer, but a final decision has not taken place, the bank said over the weekend. Banco do Brasil did not provide further details. "Banco do Brasil's 59% stake in Patagonia is valued at BRL4.4 billion ($1.39 billion). If it were to sell the entire stake, it would imply a one-time gain of BRL3.1 billion, given Patagonia's book value of BRL1.3 billion as of March 2016," said Tito Labarta, a banking analyst at Deutsche Bank. In 2010, the Brazilian bank bought the control of Banco Patagonia for $479 million, as part of the bank's strategy, then, to expand its activities. However, with Brazil's deep and prolonged economic recession and the deterioration of assets in the Brazilian banking industry, the state run bank is taking a more defensive approach. Now, state run banks, such as Banco do Brasil and Caixa Economica Federal are looking to alternatives to improve capital, such as the sale of non-core assets. "While the sale of Patagonia would not solve the bank's capital problem, it would help and highlights the bank's flexibility to sell non-core assets. We also think that controlled growth and improved profitability would make a bigger difference and that the bank should benefit the most from an improving outlook in Brazil," said Mr. Labarta. Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
Banco do Brasil has stated that it may sell its 59% stake in Banco Patagonia. Should the bank sell its stake, analysts estimate a one-time gain of Argentina ($988m) for Banco do Brasil. The possible sale is one of many efforts by Brazilian state-run banks to counteract the effects of the country’s prolonged economic recession and it’s banking industry’s deterioration of assets.