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Document 33 of 68.

January 14, 1999, Thursday LONDON EDITION 1

SECTION: WORLD NEWS - THE BRAZILIAN DEVALUATION; Pg. 02

LENGTH: 498 words

HEADLINE: Spanish groups take heavy hit
BANKING SHARE PRICES OF BANKS WITH BIG BRAZIL EXPOSURE SUFFER
SHARP FALLS:

BYLINE: in Frankfurt

DATELINE: Frankfurt

BODY:
European banks quickly felt the effects of yesterday's Brazilian crisis, as the share prices of institutions with heavy Latin American exposure tumbled.

Spanish banks have led the charge into Latin America, and Banco Bilbao Vizcaya and Banco Santander, the two big banking groups which have acquired units in Brazil, suffered yesterday.

BBV's share price closed 13.54 per cent down at 11.69 ($ 13.5) on Madrid's Bolsa, and the value of Santander's shares dropped by 12.81 per cent to 14.28.

BBV paid $ 450m last year for control of Sao Paulo-based Banco Excel Economico, one of Brazil's largest financial institutions, and Santander has spent some $ 330m since 1997 building up its Brazilian presence. Brazilian banking investments represent 2 per cent of BBV's total assets and 3 per cent of Santander's.

But both banks prudently withdrew competing bids in September for Brazil's Banco Minas Gerais and adopted, instead, a wait and see attitude over future investments in the area.

Carlos Pertejo, a Spanish banking analyst at J.P. Morgan in London, said yesterday he was now revising 1999 earnings per share forecasts at BBV from an increase of 18 per cent to one of 15 per cent, and at Santander from 17.5 per cent to 14 per cent.

In London, Lloyds TSB and HSBC Holdings have both expanded in Brazil. Lloyds saw its shares drop 43p to 821 1/2 p ($ 13.79). However, recent loan volumes at Losango, its Brazilian consumer finance subsidiary, are thought to have been low, while the bank's other emerging market exposure is in Brady bonds.

HSBC, whose shares fell 125p to 1,628p yesterday, took over the troubled Bamerindus, but only after central bank intervention which resulted in most of the loan book being stripped off. Other European groups such as Credit Suisse and ABN Amro have also expanded in Brazil through acquisitions.

Wholesale lending to the region could also leave German banks heavily exposed. According to the Bank for International Settlements, German banks account for 12.3 per cent of foreign lending to Latin America, compared with 24.3 per cent for US banks and 9.6 per cent for Spanish banks.

Bundesbank data last year showed German banks had lent about DM70bn ($ 41.90bn) to Latin America, higher than the DM55bn they had lent to Russia before its effective debt default last August, but below their DM130bn of lending to Asian countries excluding Japan.

"The German banks get cover from state guarantees, but the risk that they'll have to make extra risk provisions has grown," one banker in Frankfurt said.

US banks have tended to be more exposed to securities and derivatives- trading portfolios, which are not reflected in the BIS lending statistics.

Within the US, Bank Boston and Citigroup, with established Brazilian banking affiliates, are the two groups thought to have the greatest exposure. Since Citigroup is larger than any European bank, its holdings in Brazil are more readily cushioned by its other earnings.

LANGUAGE: ENGLISH

LOAD-DATE: January 14, 1999