By Guillermo Parra-Bernal and Aluísio Alves
SAO PAULO (Reuters) - State-controlled Banco do Brasil is conducting a thorough revision of supply contracts and operational processes to streamline expenses, an area that has kept management "very uneasy," Chief Executive Officer Paulo Rogêrio Caffarelli said on Thursday.
In an interview, Caffarelli said his team is "tidying up the house to cut redundancies wherever they are and readjust that cost structure downwards." Banco do Brasil has targeted general and administrative expense growth between 1.5 percent and 4.5 percent for this year.
Caffarelli said that he would like to bring down Banco do Brasil's expenses, regardless of the minimum 8 percent pay raise stemming from a collective bargaining agreement for this year. A list of steps that he announced in November, including a voluntary retirement plan for over 9,000 employees and the closure of hundreds of branches, could deliver 2.3 billion reais ($731 million) in cost savings this year, he added.
"I'm not comfortable at all with that guidance," Caffarelli said of the expense growth target, which executives vowed in February to keep at the lowest end of the range.
The cost-cutting initiative that Caffarelli has championed is part of efforts to bring Banco do Brasil's return on equity above fundraising costs. Such a tack, which includes focusing on domestic lending and stepping up digital banking, has spurred a 94 percent surge in shares of Brazil's No. 2 bank since May last year, when he took over.
