Brazil's state-run lender BRB drops pursuit of Banco Master, sources say

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By Luciana Magalhaes and Marcela Ayres Brazilian state-run lender BRB BMFBOVESPA:BSLI3 has given up on its pursuit of distressed peer Banco Master, two people familiar with the matter told Reuters.Brazil's central bank last month rejected BRB's bid to acquire a 58% stake in Banco Master. BRB, which is controlled by the government of the Federal District, said at the time it would evaluate the decision and explore alternatives.While some observers had expected a revised proposal for Banco Master's assets, both sources, speaking on condition of anonymity, said that BRB has abandoned the plan.One of the sources said the state-run bank concluded that a new offer would face the same regulatory obstacles. BRB chose not to make a formal announcement of its change of plans to avoid drawing further attention to Banco Master's struggles, the same person added. Banco Master's funding largely stemmed from high-yield debt, distributed via investment platforms. The securities were marketed as being covered by Brazil's deposit insurance fund, which guarantees up to 250,000 reais ($45,000) per investor in the event of a bank failure.BRB declined to comment. Banco Master did not immediately comment.Daniel Vorcaro, who is Banco Master's controlling shareholder, has been selling assets in an effort to shore up the bank's liquidity and prevent the need for intervention by Brazil's central bank. Earlier this year, Brazilian investment bank BTG Pactual BMFBOVESPA:BPAC3 said it had agreed to buy shares, real estate and credit rights from Banco Master in a deal estimated at 1.5 billion reais ($278 million). Brazilian media has reported that Vorcaro also was selling an insurance company owned by the group. Vorcaro and the central bank declined to comment on those reports or Banco Master's current situation.($1 = 5.40 reais)

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