February 27, 2019 / 12:59 PM / 7 months ago

Brazil's Caixa prepares $1.9 bln provision for possible defaults -sources

SAO PAULO, Feb 27 (Reuters) - Brazilian state bank Caixa Economica Federal is preparing an extraordinary provision of 7 billion reais ($1.87 billion) due to expected defaults on home loans and a loss of value in the real estate held by the bank, two sources told Reuters.

The move is being done at the behest of newly appoint Chief Executive Pedro Guimaraes, said the sources, who requested anonymity to discuss private matters.

If the proposal goes into effect, it will reduce profit to 10 billion reais in 2018, against the bank’s expectations for 16 billion reais, the sources said.

The bank posted 9.8 billion reais in loan-loss provisions in the first nine months of 2018.

Caixa Economica Federal declined to comment on the matter.

The extraordinary provision is part of a push by Guimaraes to adopt more conservative accounting methods at the state bank, the country’s largest provider of home loans.

Its real estate loan book came to some 440 billion reais in September.

Caixa has been hit hard in recent years by Brazil’s sluggish macroeconomic climate, which has put the real estate sector under considerable pressure.

Last year, Caixa’s attempt to sell real estate to institutional investors that it had repossessed from debtors failed at auction.

($1 = 3.75 reais)

Reporting by Aluisio Alves; Writing by Gram Slattery; Editing by Bernadette Baum

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