Bear Stearns upgrades key private banks

Bear Stearns has upgraded its recommendation on Brazilian banks Bradesco and Itau as well as on Itausa, Itau's parent company. In a research note Monday, Bear Stearns said the upgrade was based on expected returns of 17.8%, 18.6%, and 17.6% by the end of 2004 for Bradesco, Itau and Itausa, respectively, compared with a projected 15.2% total return for its Latin American bank universe. As a result, ratings for these Brazilian institutions were raised to peer perform from under perform. Bradesco and Itau are Brazil's first and second-largest private-sector banks, respectively. Unibanco, the third biggest private bank here, had its "peer perform" rating reiterated. In addition, expecting a total of return of 17.5% by end-2004 for the Brazilian banks on a market capitalization-weighted basis, Bear Stearns raised its sector rating to market weight from market underweight. According to Bear Stearns, Bradesco's and Itau's stock prices have under performed Brazil's overall market and Unibanco since the start of the year. As of Friday (Nov 14), local stock exchange Bovespa had accumulated gains of 102.7% in dollar terms since January, compared with 41.8% for Bradesco, 67.4% for Itau and 105.2% for Unibanco. by Sergio Caldas