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Banco do Brasil’s new CEO will face a testing year

The bank’s new head must withstand political pressure to extend subsidized credit and lower underwriting standards.

Photo: Reuters

Shares in Banco do Brasil were sharply down (-4%) in the first trading session of 2023 as investors reacted negatively to the nomination of Tarciana Medeiros as its new chief executive. They were also hit by comments made by Brazil’s new president Luiz Inácio Lula da Silva in his inauguration speech.

On Sunday, Lula made it clear he sees a role for state-controlled companies to provide credit to help grow the economy. Such policies under the previous Workers' Party administration were partly blamed for the impeachment of then-president Dilma Rousseff, which came in the face of spiralling inflation, large interest-rate hikes and the deepest recession in the country’s history.

Investors may also be worrying that the promotion of Medeiros, who would be the bank’s first female president, from middle management could mean she lacks the experience to lead the bank and deal with a politically mandated strategy for aggressive credit expansion.

Solid inheritance

The challenge for Medeiros, who has been with Banco do Brasil for 22 years, will be to demonstrate that she can withstand that political pressure to extend subsidized credit and lower underwriting standards.