CS Credit Suisse Group

By Luciana Magalhaes 

SÃO PAULO -- Credit Suisse Group AG's Brazil unit, one of the largest investment banks in the country, expects the economy to pick up this year and spur a rapid increase in the number of initial public offerings, José Olympio Pereira, chief executive of the unit, said in an interview.

Brazil's economy could be growing at a year-on-year pace of 2% in the last quarter of 2017, while the number of IPOs this year is likely to go back to the level of 2013, with about 10 offerings, Mr. Pereira said. For the full year, the executive sees the economy growing up to 0.5%.

Brazil has seen a drought in IPOs in the last two years amid its deepest recession since the country started keeping records. In 2016, only one company, medical-diagnostic services provider Centro de Imagem Diagnósticos SA, known as Alliar, went through with plans to raise capital through a primary offering of shares on the Brazilian stock exchange. The sale, which took place at the end of October, broke a dry spell which had lasted from June 2015.

Currently there are at least three companies in the process of planning a primary offering of shares, including two car-rental companies and one in medical exams, according to a BM&FBovespa spokeswoman.

The record for IPOs in Brazil was set in 2007, when more than 60 companies went public. Brazil is among the 10 largest economies in the world, but fewer than 500 companies are listed on the local BM&FBovespa exchange.

Mr. Pereira declined to point to specific sectors but said his bank has a good pipeline of businesses for 2017 and noted that, despite a recent scarcity of IPOs, money was still flowing into the country, which saw big merger and acquisitions deals in 2016.

"If even during a difficult time money was still coming to Brazil, imagine how it will be with a more favorable environment?" he said.

Mr. Pereira listed some large cross-border deals that took place in Brazil in 2016, including China's State Grid acquisition of a majority stake in Brazil's electricity giant CPFL Energia for $4.5 billion. Brookfield Asset Management Inc., Canada's largest alternative asset manager, said in September that it and its partners would pay $5.2 billion for a 90% stake in a Brazilian natural gas distribution network, purchasing it from oil giant Petróleo Brasileiro SA, or Petrobras.

Credit Suisse is currently representing clients looking at other assets belonging to Petrobras, though Mr. Pereira noted that doing business in Brazil has changed since the start of a sprawling anticorruption investigation, known as Operation Car Wash, at the oil firm.

After selling $13.6 billion in assets over the last two years, Petrobras still seeks to unload an additional $21 billion in assets in the 2017-2018 period as it struggles to cut its huge debt load.

The Car Wash probe has already ensnared some of the most important business people in Brazil, along with high-ranking politicians, and a prosecutor working on the case said recently that he expects the investigation to continue for at least another two to three years.

"Car Wash has made us very careful in terms of the people we associate with.... We need to understand the behavior, or the level of compliance, of our clients," he said, noting that the anticorruption efforts will benefit Brazil in the long term, despite "pains."

About U.S. President Donald Trump, Mr. Pereira said the bank hasn't made any "strategic changes" ahead of the change in government in the country.

Write to Luciana Magalhaes at Luciana.Magalhaes@wsj.com

(END) Dow Jones Newswires

February 06, 2017 11:39 ET (16:39 GMT)

Credit Suisse (NYSE:CS)
Historical Stock Chart
From Mar 2024 to Apr 2024

Credit Suisse (NYSE:CS)
Historical Stock Chart
From Apr 2023 to Apr 2024