Bloomberg/Sao Paulo/Rio de Janeiro

There’s a new face at the top of Petrobras, but little else has changed. Aldemir Bendine, the former Banco do Brasil head, is a ruling party collaborator like his predecessor and has some ethics questions of his own.
While Bendine, 51, helped build Banco do Brasil into Latin America’s biggest lender by assets, Petrobras’s plunging share price when his new job was announced suggests he’s seen by investors as more government loyalist than champion for needed change. Under Bendine, Banco do Brasil - like Petrobras, controlled by the government - responded quickly to pressure from the country’s president, Dilma Rousseff, to boost lending to stimulate the economy, and profits suffered.
The choice “was a disaster,” Adriano Pires, head of Rio-based energy consulting firm CBIE, said. “The market expected a name that represented change and independence, instead Bendine is more of the same.”
Rousseff “apparently didn’t realise how serious the Petrobras situation is,” Pires said by telephone.
Bendine, who joined state-run Banco do Brasil at age 15 and worked his way up to chief executive officer, quit on Friday to replace Maria das Gracas Foster at Petroleo Brasileiro, the oil company embroiled in the nation’s largest-ever graft scandal. What was supposed to be a chance for Petrobras to start distancing itself from scandals, turned into a market rout with a new round of unwelcome headlines. Shares fell as much as 9.5%.
Roughly 82% of Brazilians say corruption is damaging Petrobras, according to a Datafolha poll published on February 7 on the website of Folha de S. Paulo. Seventy-seven percent of respondents said Rousseff was aware of corruption at the company, according to the poll, which surveyed 4,000 people on February 3-5 and has a margin of error of plus or minus two percentage points.
As Petrobras’s government-controlled board was approving Bendine’s appointment, federal prosecutors requested police to investigate an “irregular loan” that Banco do Brasil allegedly made during his tenure.
Prosecutors in Sao Paulo allege the 2.79mn-real ($1mn) loan was granted to an unnamed businesswoman with terms to which she should not have had access given her record at the bank. The woman is a friend of Bendine’s who participated in a reality television show called “Rich Women” and accompanied him on two official bank trips, newspaper Folha de S. Paulo reported on Friday.
The loan is normal, payments have been made on time and the bank will cooperate with authorities when requests are made, Banco do Brasil said in an e-mailed statement.
Petrobras shares fell the most among major drillers on Friday on concern Bendine lacks the independence needed to lead a turnaround. Mauro Cunha, who represents international funds on the company’s board, issued a statement after the board meeting criticising the appointment.
The government “once again imposes its will on the company’s interest and ignores the appeals from long-term investors,” said Cunha, who has long been critical of the government’s intervention in the company.
Bendine is a name recognised for experience in banking and in the public sector, which satisfies both the politicians of Rousseff’s party and some demand for market experience, said Joao Paulo Peixoto, a political science professor at the University of Brasilia. It will be harder for Bendine to make the sweeping changes that might be implemented by someone more neutral, he said.
“We’re more likely to see a continuation of the policies the government demands from Petrobras that aren’t necessarily in the company’s best interest,” Peixoto said. “He won’t have the same independence as someone who was chosen specifically for professional qualifications.”One of the first tasks awaiting Bendine and his team is gaining approval of the board and independent auditors for writedowns from the contractor kickback scheme. A lack of consensus has delayed the release of earnings and shut out Petrobras from international debt markets at a time of slumping oil prices, threatening the company’s spending plans.
“The main problem now will be to get enough credibility to resume negotiations with the auditors,” said Joao Augusto de Castro Neves, Latin America analyst at Eurasia Group. “He’s far from bringing this kind of credibility punch right from the start to his tenure at Petrobras.”
The government didn’t help with an appearance of independence in having one of its spokesmen announce the appointment before it was disclosed in a regulatory filing.
On January 28, the company announced at least 4.1bn reais in graft losses - as part of a total potential writedown of 89bn reais - related to the scheme, in which company executives allegedly took bribes from a cartel of construction companies and shared the proceeds with politicians.
“Bendine has the right experience and qualities to lead the company in this moment,” said Rui Falcao, the president of Rousseff’s Workers’ Party. “He’s a good manager who was a good leader of Banco do Brasil for many years.”
The former banker, who doesn’t hold a position in the party, “without a doubt” will continue policy initiatives Rousseff supports such as requiring national content for projects and having Petrobras control operations at fields in the so-called pre-salt region, Falcao said. Local press reported last month that Bendine had been invited to head Brazil’s state development bank BNDES.
With a master’s degree in finance from Rio de Janeiro’s Pontificia Universidade Catolica, Bendine helped build Banco do Brasil into Latin America’s biggest bank by assets during his 36 years at the institution. He requested employees call him by his nickname “Dida” when he became chief executive in 2009.
As CEO he responded to pressure from President Dilma Rousseff to boost lending as a way to stimulate the economy. Profits suffered. While Banco do Brasil’s loan book rose 2.7 times through the third quarter of last year, Itau’s lending doubled. Return on equity for Banco do Brasil declined to 15.2% from 19.1% in the period, compared to an unchanged 23.1% rate for Itau.
Foster, like Bendine, rose through the ranks to claim the top job of a state-run company. She announced her resignation on February 4 after failing to get a consensus on writedowns of assets under corruption allegations investigation by federal police and prosecutors. As the probe escalated and oil prices tumbled, Petrobras’ market value shrank by $100bn since September. The driller also named Banco do Brasil chief financial officer Ivan Monteiro to the same position on Friday.
Then-finance minister Guido Mantega named Bendine CEO when Luiz Inacio Lula da Silva was Brazil’s president, saying the executive had a mission to increase banking clients, boost credit and compete with other lenders.
As part of the plan to boost lending, Bendine led the acquisition of a 50% stake in Banco Votorantim in September 2009. It posted nine straight quarterly losses after the deal. Despite the declining profitability, Banco do Brasil held the world’s largest initial public offering in 2013. The sale of insurance unit BB Seguridade Participacoes SA raised 10.2bn reais ($3.7bn).
Apart from the loan under investigation, Bendine paid a 122,000-real fine to Brazil’s tax agency in 2012, according to two people with direct knowledge of the matter. He wasn’t investigated after paying the fine, the people said in August, asking not to be identified discussing a personal financial matter. Banco do Brasil said at that time the matter was dismissed and Bendine had no outstanding tax issues. The statement didn’t give details about what the case involved.