Brazilian banks are showing their prowess in making money under any circumstance, with profits jumping even as the country’s economy fails to recover, and unemployment remains stuck in the double digits.
In the beginning of 2019, the country’s four biggest publicly-traded banks – Itau Unibanco Holding SA, Banco Santander Brasil SA, Banco do Brasil SA and Banco Bradesco SA – completed their best quarter since 2015, according to data analysis firm Economatica. Their profits increased 17% yearly between January and March, a period marked by political turbulence, fizzling confidence and plunging growth expectations.
On top of that, they padded profits even as policy makers held the benchmark rate at a record low and forged ahead with efforts to lower banking spreads and boost competition. While the sector’s reputation for making money is already known, its recent success amid such a tough backdrop has caught the eye of central bank officials who wrote in a report that profitability has returned to levels seen before Brazil’s two-year recession.
«Banks will continue with high levels of profitability, and there’s room to grow,» said Tatiana Brandt, a bank equity analyst at Eleven Financial Research. «We haven’t seen spreads fall, and banks are working with that. They are being successful with their portfolio mix and increase in services at a time of greater competition in Brazil.»
Their financial success shows that banks have become «detached» from a much weaker economy, said Andre Perfeito, chief economist at Necton. Brazil’s economy is expected to grow a mere 1.23% this year, little more than it did in 2018 and 2017. That disparity also raises chances of political pressures, particularly if popular discontent over a feeble recovery increases, he said.
Original Story:Bloomberg | Mário Sérgio Lima
Photo: FreeImages.com / CesarFermino