Bank of America Corporation (BAC) has announced that it has received a multiple bank license from the Central Bank of Brazil to operate as a commercial bank in Brazil. This will enhance the company’s competitive strength in Latin America.
With the help of this commercial banking license, BofA will be able to provide cash management, investment banking, corporate banking and treasury services. Additionally, the company will also offer payments, deposit accounts, reporting and liquidity solutions to its corporate clients in Brazil.
BofA expects other services such as trade products, collections and local currency loans to be initiated in Brazil over the next few months. At present, the company offers corporate and investment banking, wealth management, institutional sales and trading and research services.
Currently, BofA’s corporate banking unit mainly focuses on international subsidiary banking clients and large Brazilian firms delivering a wide range of solutions including offshore trade products, offshore loans, onshore derivatives and international cash management. So, the extended capabilities will further improve the unit’s strength in meeting the client needs.
According to the International Monetary Fund (IMF), Brazil’s gross domestic product (GDP) grew to 7.5% in 2010 compared with 2.8% for U.S. and 1.3% for U.K. Furthermore, the country’s unemployment levels are at an all time low and credits are at an all time high. Hence, BofA will surely benefit from the new banking license in the fastest growing economy.
Apart from BofA, Bank of New York Mellon Corporation (BK) is also expected to receive a Presidential order to operate as a commercial bank in Brazil by the end of first half of 2011. Additionally, the company is also planning to hire about 100 people in the country as a part of its strategy to expand its operations in Brazil.
The banking license in Brazil will boost BofA’s international revenue base and also aid in improving financial results.
BofA retains a Zacks #4 Rank, which translates into a short-term Sell rating. Also, considering the fundamentals, we maintain a long-term Underperform recommendation on the stock.
BANK OF AMER CP (BAC): Free Stock Analysis Report
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