(Adds CEO comments and details)
By Alonso Soto
BRASILIA Dec 27 The Brazilian government has
not pressured state-run banks to free up credit and reduce their
spread, but interest rates are likely to fall as the central
bank's benchmark Selic rate continues to drop, state-controlled
Banco do Brasil Chief Executive Officer Paulo Rogerio
Caffarelli said on Tuesday.
In a briefing with reporters in Brasilia, Caffarelli said
the bank will seek to increase their loan spread to be in line
with private competitors and boost profitability.
However, Caffarelli said an increase in spread can be done
without increasing interest rates on loans by reducing costs.
"There is no pressure to lead the drop in interest rates,"
Caffarelli said. "That wasn't correct in the past and we need to
look forward and be consistent. We can't improvise anymore."
In previous administrations, Banco do Brasil and other
state-run banks were used as a tool to bolster the economy by
increasing the offer of credit and cutting interest rates.
Caffarelli said he expects the economy to recover gradually,
but was confident that the bank will improve its profitability
by increasing its loan book. He said the bank expects the
economy grow 0.7 percent next year.
Banco do Brasil has launched a plan to cut costs by closing
hundreds of agencies and reducing their workforce by more than
Caffarelli said banks are willing to lower their rates to be
more in line with a Selic that analysts expect to drop
substantially next year as inflation slows.
"There is a predisposition in the financial sector to follow
the drop in the Selic," he said.
At 13.75 percent, the Selic is one of the highest reference
rates among major economies. Analysts in a weekly central bank
poll expect policymakers to slash the Selic to 10.50 percent by
the end of 2017.
Banco do Brasil has no plans to sell Banco Votorantim and
aims to make the bank more profitable, Caffarelli said.
(Reporting by Alonso Soto; Editing by Chizu Nomiyama and