Can the Caixa IPO repeat the euphoria of BB Seguridade?

SÃO PAULO – The possible capital increase of Caixa Seguridade, insurance subsidiary of Caixa Econômica Federal, has already become one of the most anticipated events of the Brazilian financial market. The question is whether there will be a repeat of the euphoria that marked a similar event: the initial offer of shares of BB Seguridade (BBSE3), insurer of Banco do Brasil, in 2013.

BB Seguridade's IPO was the largest on the Brazilian stock market until 2013: the company processed 11.47 billion reais of transactions. In addition, the stock has appreciated considerably: in the first two years, the company has doubled on the stock market, while so far it has increased by 61% (Ibovespa has increased by 65%) .

According to badysts, in favor of Caixa Securities, there are two main factors. One is the new leaders' desire to improve the bank's management. Another factor is the fact that there are business opportunities to explore: the insurer has 90 million customers, many of whom use only one product. It is expected that a better, more business-oriented service will increase sales of policies.

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The problem is the corporate governance of Caixa, considered a nebula. "Unlike BB, Caixa has no history of trading in the stock market," says Carlos Daltozo, variable income officer at Eleven Financial, who came to work on the company's IPO attempt in 2015.

"The market if you are not sure how the bank works in its direction, and we know that there has always been a lot of political interference in this country," he added. In 2015, according to Daltozo, the market wanted to pay the cash register a discounted value when compared to BB Seguridade's multiple P / E (share price relative to the company's profit).

Thanks to this and the fact that it is a fully state-controlled enterprise, investors, mainly foreigners, tend to take a step further in this first. "The company should address a few points, explain very well governance issues and possible changes in direction in the medium term," says Daltozo.

All this after the resolution of the problems of the contract with the French CNP Assurances and the broker Wiz. It should be remembered that an exclusive deal with the European partner has melted the estimated price for the company's debut in 2015 from 10 billion to 3 billion d. Pedro Guimarães, president of Caixa who was sworn in today, told Valor that he would badyze the renewal of the contract started in 2018.

Vote of confidence

Daltozo does not deny that the feeling general for IPOs to be positive, which could help the cashier's operation. There is also a confidence in the experience of Pedro Guimarães. As an badyst at the Brazilian bank Plural, he led the BB Seguridade IPO. At Pactual, he also structured medium-sized bank shares (it should be noted that some institutions had problems after the launch of the stock market).

André Martins, Financial Sector Analyst at XP Research, believes that the market is following Guimarães' speech with optimism and aware of the potential of a giant such as Caixa in the insurance sector.

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"We are in a very timely window for the IPO that is suspended since 2015," said the expert. "The new president [Pedro Guimarães] has taken a very constructive speech about the bank, and I think no one doubts the capillarity and size of the bank."

If the company's weight names follow a "sober vision" could help "dispel market fears about factors such as uncontrolled growth and high levels of failure", adds the badyst. "Of course, everything depends on variables such as the price [do ativo] and the investors' appetite for the moment [da oferta]." For the moment, I think the market would give the benefit of the doubt. "

example of the IRB

Daltozo, who also worked for the IRB's IPO (IRBR3), a state reinsurer two years ago, believes that Caixa is reflected in this case for the sale of its badets. Like La Caixa, the Brazilian Institute of Reinsurance failed to open capital in 2015. The company has granted a reduction in the price of the stock. The IPO was released in 2017 and the market value has doubled since then.

The badyst estimates that the security fund is currently worth between R17 billion and R21 billion. To make this calculation, it was taken into account a earnings growth in 2019 of 8.7% and the current price / earnings multiples of BB Seguridade. As a comparison, BB Seguridade currently accounts for $ 56.7 billion and the IRB, $ 3.5 billion.

However, at the time of the IPO, a portion between 25% and 50% of the capital of Caixa Seguridade should be listed. With this, the company should mobilize between 4.2 billion and 10.5 billion Australian dollars.