The Banco de Brasília (BRB) has announced a significant acquisition of a stake in Banco Master, a move that aims to alleviate the funding squeeze faced by the latter. On March 28, 2025, BRB confirmed it would acquire 49% of Banco Master's voting shares and 100% of its preferred shares, resulting in a total ownership of 58% of the bank's capital. This acquisition values Banco Master at approximately R$ 3.5 billion, while BRB itself is valued at R$ 3.6 billion on the B3 stock exchange.
According to Daniel Vorcaro, the CEO of Banco Master, this deal represents the best outcome for both parties involved. "The BRB has a very good funding, much cheaper than ours, but it hasn’t been able to generate such a high Return on Equity (ROE), while we have delivered an ROE above the market," he stated in an interview with Brazil Journal. BRB's funding cost stands at 89% of the CDI (Interbank Deposit Certificate) with an ROE of around 10%, compared to Banco Master's funding cost of 120% of the CDI and an impressive ROE of 28% last year.
Vorcaro elaborated that the BRB's funding structure is robust, largely derived from payroll deposits from state employees and judicial deposits, which do not rely on market platforms. He noted that this transaction effectively resolves Banco Master's funding challenges, with projections indicating the bank’s funding cost could drop to around 108% of the CDI, potentially falling below 100% within two years.
The acquisition, however, is subject to approval from the Central Bank of Brazil and the Administrative Council for Economic Defense (CADE). While both banks will continue to operate independently, the merger will unify their operations under a single prudential conglomerate, combining risks and cash flows in the eyes of the Central Bank.
With this transaction, the newly formed conglomerate will boast a capital base of R$ 10 billion and total assets amounting to R$ 140 billion. This positions the conglomerate to be classified as a ‘S2’ bank, with the potential to be upgraded to ‘S1’, the highest level of systemic importance, comparable to major players like Itaú and Bradesco.
Discussions between BRB and Banco Master began in July 2024, when Banco Master started transferring portfolios of its Credcesta program, a benefit card for public servants, retirees, and pensioners, to BRB. As part of the restructuring, Vorcaro will step down as CEO of Banco Master to become the chairman, while also taking a position on BRB's board.
In a related context, the acquisition has been met with optimism due to the rapid growth of Banco Master. The bank has been recognized for its aggressive lending strategies, particularly to companies in distress, and for attracting investments through Certificates of Deposit (CDBs) with competitive rates. Since rebranding from Máxima to Banco Master in 2021, the bank's assets have grown nearly tenfold, and its credit portfolio has increased fivefold. Last year, the volume of CDBs issued reached levels that accounted for one-third of the funds available from the Credit Guarantee Fund (FGC) to protect depositors.
However, the rapid expansion has not gone unnoticed by the Central Bank, prompting regulatory adjustments that require Banco Master to refine its balance sheet and operational strategies. The bank closed 2024 with ambitious plans to raise around R$ 500 million internationally and to broaden its offerings of financial instruments to institutional investors, thereby reducing its dependence on CDBs.
In terms of capital structure, last year BRB executed a private capital increase of R$ 750 million to strengthen its balance sheet and maintain its lending momentum. Although there were considerations for a subsequent public offering of shares, these plans were shelved due to unfavorable market conditions.
BRB has also been proactive in expanding its geographical footprint, opening branches outside the Federal District and leveraging sporting events to enhance brand visibility. A notable venture includes the establishment of a digital bank in partnership with the Flamengo football club, known as Nação BRB Fla, which had amassed 3.6 million accounts by September 2024.
Currently, 10.6% of BRB's shares are held by other shareholders, a significant increase from previous years when the majority was owned by an employee association. This shift is intended to enhance liquidity and encourage broader market participation in BRB's stock.
As the acquisition moves forward, both banks are poised to navigate the complexities of the financial landscape together, potentially reshaping their competitive positions in the market. The synergy created by this merger could lead to enhanced service offerings and improved financial stability for Banco Master, while BRB continues its mission to expand its influence within the Brazilian banking sector.
