Brazil economic recovery stalls in July

Economic activity in Brazil fell slightly in July, a central bank indicator showed, running counter to other data that had suggested the economy started the third quarter on a solid footing.

The central bank’s IBC-Br economic activity index, a leading indicator of gross domestic product (GDP), fell 0.16% in July from June, the first decline in three months.

Other economic data reports for the month of July released earlier this week showed bumper retail sales and strong activity in the dominant service sector, both rising at the fastest pace this year.

Friday’s figures might serve as a reminder that the economic recovery remains uneven and lacking sustained momentum. The index has risen only two months this year, in May and June.

So far this year, activity is up 0.78% on the same period in 2018, the IBC-Br index shows, largely in line with consensus market, government and central bank estimates that the economy will grow by around 0.8% this year.

Over the last 12 months, activity is up 1.07%, the central bank said.

Both these longer-term trends reflect the tepid recovery from the 2015-16 recession, a key reason why the central bank is widely expected to cut interest rates again next week.

The economy expanded by 0.4% in the second quarter, having contracted by 0.2% in the first. Economy Ministry officials reckon the worst is now behind it, although unemployment remains high and the global outlook is increasingly challenging.

Original Story: Reuters |  Jamie McGeever 
Photo: Photo by Bruno Neves from Free Images
Edition: Prime Yield

Brazil: outstanding loans go down, default go up in July

The amount of outstanding loans in Brazil fell 0.2% in July from the previous month to R$ 3.290 trillion, representing some 46.9% of gross domestic product, the central bank said.

Loan defaults edged up to 4.0% from 3.8% in June, while lending spreads widened to 31.6 percentage points from 31.5 percentage points the month before, the central bank said.

Original Story: Reuters | Auhtor: Marcela Ayres 
Photo: Photo by Cesar Fermino from Free Images
Edition: Prime Yield

BTG Pactual’s loan book expected to growth by 30% in 2019

Latin America’s largest independent investment bank, Banco BTG Pactual SA, expects its loan book to grow at least 30% this year, Chief Financial Officer João Dantas told Reuters.

«Companies started to ask for loans at a more regular pace and the potential approval of a pension reform is likely to increase demand for loans,» said Dantas, adding that the bank has appetite for a higher pace of growth in loans.

BTG’s expanded loan book stood at R$ 43.6 billion in June, up 33% from a year earlier and 8.5% from March.

Besides extending loans to large companies, BTG has been seeking small- and medium-sized corporate clients as a way to expand its loan book.

Dantas said the bank targets providers of services and products to its own big clients through a digital platform of receivables-backed credit.

In addition to loans, Dantas said the bank will offer checking accounts for small companies next year.

BTG’s move comes as an increasing number of digital platforms has been targeting smaller companies, such as C6 Bank and Nubank.

BTG posted a 50.2% jump in second-quarter recurring profit, as trading and proprietary investment gains increased, as well as management fees.

Recurring net income, which excludes onetime items, rose to R$ 1.029 from R$ 685 million a year earlier.

BTG’s total second-quarter revenues came in at R$ 2.181 billion, up 76% from the same period a year earlier, mainly helped by trading gains.

Original Story: Reuters | Author: Carolina Mandl 
Photo: BTG Pactual site
Edition: Prime Yield

ITAU Unibanco loan book to grow at end of forecast

Brazil’s largest lender, Itau Unibanco Holding SA, sees its loan book growing near the low end of its forecast range in 2019, reflecting the cut in the country’s economic growth estimate, Chief Financial Officer Milton Maluhy told journalists.

At the beginning of the year, Itau said its loan book was likely to grow between 8% and 11% this year.

Itau’s prediction comes as Brazil’s economy has been struggling to rebound and demand for corporate loans has been weak.

The bank’s second-quarter loan book grew by 5.9% from the same period a year earlier, mainly driven by consumer demand for credit cards and auto loans.

Itau also faces a more competitive banking arena, executives said. Partly as a result, fee income growth this year is unlikely to exceed 3.5%, the midpoint of its outlook provided in January, Maluhy said.

On Monday, the bank reported recurring net income of 7.034 billion reais ($1.86 billion), up 10.2% from a year earlier, helped by loans to individuals and trading gains.

Original Story:Reuters |Carolina Mandl |
Photo: Site ITAÚ
Edition: Prime Yield

Brazil’s largest lender launches voluntary severance program


Brazil’s largest lender, Itaú Unibanco Holding SA,  announced it has closed nearly 200 brick-and-mortar branches and that was launching a voluntary severance program to slash costs amid rising competition.

The bank revealed the cost-cutting moves even as quarterly estimates met analysts’ forecasts. It reported recurring net income of 7.034 billion reais ($1.86 billion), up 10.2% from a year earlier, helped by loans for individuals and trading gains.

Itau said in a securities filing that it will offer buyouts to some employees aiming to «adjust the company’s structures to the reality of the market,» but did not disclose the number of reductions targeted.

Its workforce had already decreased by 1.2% in the quarter as the bank closed branches.

Still, Itau said it has hired new employees for its technology department as it seeks to speed up its digital transformation.

In May, Itaú said it would tighten its belt to compensate for fiercer competition, especially in the card-processing business.

Itau is not alone in its cost-cutting efforts. On Monday, state-controlled lender Banco do Brasil also announced a voluntary severance program, seeking to cut personnel.

Itau’s quarterly results showed that while its client revenues are under pressure, they are still on an upward trend. The bank’s fee income increased by 3.5% from the year-ago period, helped by its investment banking and asset management units.

The bank’s net financial income came in at 18.4 billion reais, up 6.7% from the same period a year earlier.

The bank’s loan book grew by 2%, reaching 659.7 billion reais in the quarter, mainly boosted by loans for individuals and small companies.

Loans in arrears for more than 90 days stood at 2.9% of its portfolio in June, down 0.1 percentage point from March. Loan-loss provisions grew by 12.3% from a year earlier, driven by higher provisions in loans for individuals.

Still, Itau’s return on equity came in nearly in line with the previous quarter, at 23.5%.

Original Story:Reuters | Carolina Mandl
Photo: ITAÚ
Edition: Prime Yield

Brazil’s deficit falls 14% y-o-y in the first half of 2019

In the first half of 2019, Brazil’s deficit stood at 186 billion reais (about USD $49.5 billion dollars), value at 14.05% lower than the deficit for the same period in 2018, the Central Bank reported.

The deficit is the difference between revenues and expenditures of the Brazilian public sector in the first six months of this year, and dropped by 22.71% in comparison with that of the same period in 2017, according to government data.

The sharp fall in the fiscal deficit reflects the success of the measures taken by the government of President Jair Bolsonaro to reduce public spending, one of his main objectives.

Since assuming office on January 1, Bolsonaro has promoted a liberal economic policy that seeks to reduce the size of the state, privatize non-strategic state companies, and cut costs to reduce deficits and Brazil’s crushing debt load.

The Ministry of Economy has already announced two cuts amounting to 31.2 billion reais (about USD $8.326 billion) in public expenditures provided for in the budget approved by Congress last year.

Bolsonaro also presented to Congress a project to reform Brazil’s troubled pension system, which is considered vital both to set in order Brazil’s public spending and to boost the economy; the legislation has already passed its first vote in the lower house.

The deficit in the Brazilian public sector accumulated so far this year is equivalent to 5.35% of Brazil’s Gross Domestic Product (GDP), a significant improvement upon the figure of 6.53% of GDP in the first half of 2018, and 7.53% in the same time period in 2017.

According to the report released by the Central Bank, the nominal public deficit of Brazil over the course of the last twelve months amounted to 456.8 billion reais (about USD $121.192 billion dollars), equivalent to 6.54% of GDP.

In 2018, Brazil registered a nominal deficit in its public accounts of 487.442 billion reais (about USD $124,985 billion), equivalent to 7.14% of GDP and the lowest in the last four years.

Brazil’s deficit amounted to 10.22% of GDP in 2015 and 8.98% of GDP in 2016, but was reduced by fiscal measures promoted by the then president, Michel Temer, who decreed the freezing of public expenses, a strategy now reinforced by Bolsonaro.

In June, the negative balance in the public accounts was 30 billion reais (about USD $7.9 billion), a value 48.05% lower than the same month last year.

The balance in public accounts measures the difference between the income and the expenses of the state in general, including those of the central government, state companies, and the regional and municipal administrations, as well as the resources destined for the payment of interest on debt.

The Central Bank also reported that the Brazilian national debt rose in March to 5,498 trillion reais (about USD $1.488 trillion dollars), equivalent to 78.7% of GDP, a slight increase from 77.2% of GDP, where it stood in December of 2018.

In April, however Brazil’s national debt stood at 79.1% of GDP, its highest level since the data began to be measured with the current criteria in December 2001.

This is one of the indicators that most worries the risk rating agencies, since, according to the data of the International Monetary Fund, the gross debt of other emerging countries such as Brazil is less than 50% of GDP.

Original Story:PANAM Post | EFE 
Photo: Site do Banco Central do Brasil
Edition:Prime Yield

Bank lending rises 0,4% and loan defaults down 0,1% in June

The amount of outstanding loans in Brazil rose 0.4% in June from the previous month at 3.296 trillion reais ($873 billion), representing some 47.2% of gross domestic product, the central bank said on Friday.

Loan defaults edged down to 3.8% from 3.9% in May, while lending spreads widened to 31.5 percentage points from 31.1 percentage points the month before.

In the first half of the year, the total stock of outstanding loans in Brazil rose 1.2%, the central bank said.

Original Story:Reuters | Marcela Ayres and Jamie McGeever
Photo: Bruno Leiva for FreeImages
Edition:Prime Yield

Mortgage granting soared 33% in the first semester

The volume of home-buying and building loans with funds from Brazil’s system of savings and loans (SBPE) increased sharply in the first half of the year.

Mortgage financing totalled 33.7bn reais (US$9.1bn), up 33.3% year-on-year, according to real estate credit and savings association Abecip.

In the period, 129,200 homes were financed compared to 98,840 units in the first semester of 2018.

Original Story: EXAME |Juliana Elias
Photo: Bruno Neves for FreeImages
Translation & Edition:Prime Yield



Reform progress paves way for Brazil rates to hit a new low

Expectations that Brazil’s central bank will soon embark on an aggressive interest rate-cutting cycle gathered momentum, after a measure of annual inflation fell to its lowest in over a year in mid July.

Economists at Bank of America Merrill Lynch slashed their end-year forecast for the benchmark Selic rate to 4.75%, Goldman Sachs said the easing cycle will start now, and Capital Economics said the mid-month inflation print for July «surely seals the deal» on a rate cut very soon.

The IPCA measure of mid-month inflation fell to 3.27% in July from 3.84% in June, lower than economists had expected and the lowest since May last year.

Economists at BAML, already among the most dovish on Brazil’s rate outlook, now expect the Selic rate to be cut to a new low of 4.75% this year compared with their previous call of 5.50%, starting with a 50 basis point reduction by the mid of July.

In a note to clients, they said a global shift towards a more dovish policy stance among central banks, concrete progress on Brazilian pension reform approval, structurally weak inflation and disappointing growth all point to substantially lower rates.

They also lowered their 2019 economic growth forecast to 0.7% from 1.2% and next year’s projection to 1.9% from 2.2%.

The Selic has been held at a record low of 6.50% for well over a year, but possibly not for much longer.

«We believe Copom will initiate a moderate easing cycle at the July 31 meeting. We expect 100 bps of rate cuts before the end of the year,» said Alberto Ramos, head of Latin American research at Goldman Sachs in New York.

Interest rate futures markets are pricing in around 100 basis points of easing over the next year.

On July 23rd, the International Monetary Fund slashed its outlook for Brazil’s gross domestic product growth this year to 0.8% from 2.1%, in line with the government, central bank and market consensus.

Original Story:Reuters | Jamie McGeever
Photo: São Paulo /Brazil
Edition: Prime Yield

BTG Pactual aims to become Brazil’s 6thlargest retail bank

Brazil’s largest independent investment bank Banco BTG Pactual SA aims to become the country’s sixth largest retail bank by client total, new senior partner Amos Genish announce4d.

Genish, Telecom Italia SpA’s former chief executive, will lead a full-service digital retail bank that BTG Pactual launched in the end of May.

The bank’s market capitalization has almost doubled so far this year to nearly R$51 billion.

Genish said high margins and growth prospects in Brazil’s heavily concentrated banking sector have prompted BTG to expand into the digital retail business.

«BTG does not have the legacy of branches that traditional banks have,» he said. «And BTG has a strong balance sheet that fintechs do not have

Genish said he would work to integrate BTG’s four retail units in the coming months: Banco Pan, insurance Too Seguros, loan for mid-sized companies, and its digital investment platform BTG Pactual Digital.

Original Story:Nasdaq |Carolina Mandl 
Photo: Site BTG Pactual
Edition:Prime Yield


Brazilian banks’ results are positive despite worsening economy

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: / CesarFermino
Edition:Prime Yield



Bradesco’s NPL ratio hit all-time lows in Q1 2019

Brazil’s second largest private lender Banco Bradesco SA posted a 22% gain in quarterly recurring net income, meeting forecasts, as default ratios hit all-time lows.

Bradesco managed to grow its loan book at a fast pace while improving asset quality. It was the latest sign of strength for Brazil’s top banks even as the country’s economy struggles to recover.

CEO Octavio de Lazari said he also sees its Non-Performing Loans (NPL) ratio falling further this year after they declined in the quarter, adding that the bank expects full-year profitability to rise.

«There is still room for improvement in the delinquency ratio, although it is smaller now,» Lazari said. The default ratio over 90 days came in at 3.3%, down 0.2 percentage point from the fourth quarter of 2018.

Analysts highlighted in notes that the main negatives of Bradesco’s results were fee income and operating expenses, as both came in outside the bank’s guidance range.

Bradesco’s first quarter profit rose to 6.238 billion reais ($1.56 billion). Declining losses on bad loans also boosted Bradesco’s results. Loan-loss provision fell by 8.4 % from the same quarter a year earlier.

Itau BBA’s analysts said in a note to clients they were surprised by improvements in Bradesco’s asset quality in the first quarter.

Loan book growth

The bank’s loan book reached 548.3 billion reais, up 3.1% in the quarter, as lending to both individuals and companies increased. Bradesco expects its loan book to grow between 9% and 13% in 2019.

Lazari said the bank’s growth in lending outpaced what it was expected for Brazil’s still sluggish economic recovery, helped by new tools that allow Bradesco to infer clients’ income without requesting a paycheck.

Bradesco’s return on equity, a barometer of profitability, rose to 20.5%, in line with analysts’ expectations. It was up 0.8 percentage points from the previous quarter.

Original Story:Reuters | Carolina Mandl
Photo: Site Bradesco
Edition:Prime Yield


Caixa will offer discounts on delinquent loans to raise up to R$4 billion

Brazilian state-owned bank Caixa Econômica Federal will offer indebted retail clients discounts on their delinquent loans, in an attempt to raise up to 4 billion reais ($990.52 million) for the lender’s coffers, CEO Pedro Guimarães announced.

As explained by the responsible, these loans had already been written off, so if successful this initiative would raise extra revenue. The move will allow Caixa to offer new products and services to clients after they pay off their loans.

According to Reuteurs, the discounts will range between 40% to 90%.

Original Story: Reuters | Marcela Ayres and Carolina Mandl
Photo:Rodrigo de Oliveira
Edition:Prime Yield

Brazil’s Central Bank holds interest rates at 6.5%

Brazil’s central bank held fire on interest rates despite lackluster growth in Latin America’s biggest economy and uncertainty over President Jair Bolsonaro’s ability to push through a much-needed pension reform.

In a unanimous decision, last May 8th the bank kept the key Selic rate, its main instrument for controlling inflation, at the historic low of 6.5%. That is unchanged since March 2018.

The bank expects the rate to stay at that level for the rest of the year, but flagged a possible rise to 7.5% in 2020, according to a statement released after its meeting.

The government’s proposed overhaul of Brazil’s unsustainable pension system, which Bolsonaro has warned would bankrupt the country if the changes are not adopted, is seen as crucial to the president’s chances of making good on his other promised economic reforms.

A parliamentary committee is currently scrutinising the bill which analysts fear could be diluted after it sparked heated debate in the Congress.

Brazil’s commodities-driven economy, which is still struggling to recover from a record 2015-2016 recession, is expected to expand by 1.49% this year, according to a recent central bank survey of economists.

That would be only slightly faster than the 1.1% growth recorded in 2017 and 2018.

Original Story: The Business Times | AFP 
Photo: Site Banco Central do Brasil
Edition: Prime Yield

Brazil’s largest private bank sets lower targets for 2019

Brazil’s largest private-sector lender Itau Unibanco Holding SA posted a higher first-quarter recurring profit, but set lower targets for gains with clients in 2019, indicating it sees fiercer competition for consumers.

Itau revised its 2019 guidance nearly three months after releasing its estimates, as competition sharply rose among credit card processors. The bank owns Rede, and has decided to stop charging interest rates to advance payments for merchants using its machines.

Itau reduced estimates for fee income growth to a range of 2% to 5% in 2019. Earlier this year, the bank had expected growth of 3% to 6%.

The bank also predicted slower growth in its financial margin with clients, of 9% to 12%, instead of 9.5% to 12.5%.

The bank’s recurring net income totalled 6.87 billion reais ($1.73 billion), up 7.1% from the year-ago period and roughly in line with a Refinitiv analysts’ consensus estimate.

Profit was boosted by higher financial margins with clients as Itau extended more loans to consumers and small companies.

The bank’s loan book reached 647.061 billion reais, up 1.6% from the previous quarter, boosted by car, payroll and personal loans. Corporate loans shrank during Brazil’s slow economic recovery.

Earlier this year, the bank had foreseen its loan book would grow between 8% and 11% this year, below competitors’ targets.

Itaú’s return on equity, a gauge of profitability, came in at 23.6%, up 1.8 percentage point in the quarter. For the year, the bank expects to reach 24% profitability.

Loans in arrears for more than 90 days were at 3% in March, up 0.1 percentage point from December.

Total loan-loss provisions remained stable year-over-year, but grew 11.4% in the quarter to 3.8 billion reais.

Original Story:Reuters | Carolina Mandl 
Photo: Itaú site
Edition:Prime Yield

Santander Brasil loan book will reach R$400 billion by December

Banco Santander Brasil SA’s aggressive pace of growth in lending may decelerate this year, as Chief Executive Sergio Rial recently said that demand for corporate loans has been weak and competition is likely to be fiercer.

Rial told journalists he expects the bank’s extended loan book to reach around 400 billion reais ($101.5 billion) by December. «We will surpass 400 billion reais. If not, we will be close to 400 billion reais,» he said.

If Santander does not surpass this target, it would mean a loan book growth of roughly 3.5% in 2019, around one-third of the 11.2% growth posted in 2018.

Santander Brasil’s loan book remained at 386.9 billion reais in the first quarter, stable from the previous quarter, although lending for consumers grew.

The bank had been outpacing its competitors in previous quarters by extending loans to consumers shunned by other mainstream banks. However, Banco Bradesco SA, Brazil’s second largest lender, is closing the gap with Santander.

Still, the bank beat analysts’ first-quarter profit estimates.

Recurring net income at the Brazilian unit of Spain’s Banco Santander SA rose 21.9% to 3.485 billion reais and topped the 3.296 billion reais expected by analysts, according to Refinitiv data, helped by lower loan-loss provisions.

The bank’s return on equity remained stable at 21.1%.

Brazil made up 29% of the euro zone’s biggest bank by market value in the first quarter. Latin America’s importance has increased for Santander, as its businesses in the region have posted higher profitability growth, compensating for lower gains in Europe.

Its 90-day delinquency rate also remained stable at 3.1% from the previous quarter.

Chief Executive Sergio Rial, who also became the bank’s regional head for South America earlier this month, said he intends to boost the bank’s consumer finance business in the region at his new position. In Argentina, the bank will launch a consumer finance unit soon.

Spain’s Santander reported a net profit fall of 10 pct due to restructuring costs in Britain and Poland.

Original Story:Reuters | Carolina Mandl and Paula Laier
Photo: Santander site
Edition:Prime Yield


FinanZero secures $11 Million trough Series B Funding Round

FinanZero, a marketplace for consumer loans in Brazil, had recently announced it secured $11 million through its Series B funding round. Participants of the round were Atlant Fonder, Dunross & Co, and Vostok Emerging Finance.

The company describes itself as an independent broker for loans that negotiate with the customer’s loan application with several banks and credit institutions, to find the loan with the best interest rate and terms for the consumer. The lender also handles the lending process from start to finish. FinanZero has handled more than 600,000 loan applications and over the next 12 months, the expectation is to grow the volume of intermediated loans 10 times.

«FinanZero has simplified the way to apply for all type of consumer loan products in Brazil. We are a cost-free marketplace that allows you to compare loans online and choose the option that fits your needs with the lowest interest rate and best terms

Olle Widén, CEO of FinanZero, commented: «FinanZero will improve its technical platform and invest heavily in marketing to increase the visibility of the brand. We have already received more than 3 million loan applications in three years of operation in the Brazilian market. Today, the company has a growth of 50% per quarter, which adds up to more than 1 million visitors on our site per month»

Speaking about the investment, David Nangle, CEO of Vostok Emerging Finance, went onto add: «Brazil remains our favored fintech market globally, and through FinanZero we have one of the best ways to play its extremely attractive consumer finance market. With a strong team, partnerships and growing traction, we are more than happy to continue to support team FinanZero on this exciting journey».

Original Story: Crowdfunding insider |Samantha Hurst
Photo: FinanZero Site
Edition:Prime Yield






Banco Hyundai Brasil kicks off with R$ 300 million

Banco Hyundai Capital Brasil has been launched with initial capital of 300 million Brazilian reais ($76.8 million) to support customers and dealers of carmaker Hyundai Motor with financial services, Hyundai Capital said.

The consumer financing service provider unit stemmed from a joint effort by Hyundai Capital, the financial arm of Hyundai Motor Group, and Santander Brasil, a listed subsidiary of Spanish commercial banking group Santander.

Hyundai Capital and Santander Brasil equally hold 50%  stakes of the Sao Paulo-based joint venture, according to Hyundai Capital. The capital was raised in two rounds in May 2018 and February this year.

This marks the first time for a Seoul-based captive financing company dedicated to automotive financing and leasing to gain a license to operate an offshore lender in a South American market.

Hyundai Motor has about 9% market share, the fifth-largest in the Brazilian automotive market as of end-2018. Hyundai Capital said it sees great potential in the Brazilian automotive industry on the back of rising demand for new cars in Brazil.

«Hyundai Capital is supporting Hyundai Motor’s sales with a localization strategy based on the expertise that the company has accumulated in the market for many years.» Yoono Hwang, global president of Hyundai Capital, said in a statement.

The announcement came two months after Hyundai and Santander received authorization to operate a joint lender by the Brazil Central Bank in February.

Prior to the launch of the lender, Hyundai Motor’s Brazilian unit has been offering captive financial support by Hyundai Financiamentos, operated by Santander Brasil. Hyundai Capital said the contracts with Financiamentos customers will be gradually updated to Banco Hyundai Capital Brasil.

Original Story: The Investor | Son Ji-hyoung
Photo: Hyundai Motors Brasil site
Edition: Prime Yield


Brazil’s President proposes formal central bank autonomy

Brazil’s President Jair Bolsonaro issued a draft bill late on Thursday, April 11,  proposing to formalize the independence of the country’s central bank, a move that would align the country with other major economies where those who make monetary policy are legally protected from political interference.

Bolsonaro, who took office in January, campaigned on an orthodox economic platform and had promised to cut spending and ensure the central bank’s independence.

According to the document, the bank would be governed by a board of governors with fixed four-year mandates, with the possibility of being re-elected once. The four-year terms would not be simultaneous with the country’s presidential term, which is also four years.

Original Story: Reuters | Carolina Mandl
Photo: Site Banco Central do Brasil
Edition:Prime Yield

Households drive credit growth in Brazil

The household credit demand will pick up in Brazil over 2019, supported by a stronger labour market, low interest rates and broadly positive sentiment, Fitch says.

In a report released last April 8th, the rating agency maintains its view that credit growth in the Brazilian system will pick up over the coming quarters, in line with stronger economic activity. «Our core view remains that economic activity growth will rise modestly, driven by a cyclical rebound in consumption», says Fitch.

Latest figures show that Brazil’s total credit was up 5.5% y-o-y in February, led by a 9.0% rise in lending to individuals, well outpacing growth in the corporate sector.After a period of deleveraging, the household debt servicing ratio is at multi-year lows, at 19.8% overall in January and 17.4% when mortgages are excluded. While unemployment has risen in the first two months of 2019, the labour market is improving, adding a net 489,520 formal jobs in the year through February, of which 207,452 were added in January and February. Consumer sentiment is improving, in part reflecting optimism over the Bolsonaro administration’s ability to improve the economy, suggesting a stronger willingness to take on debt.

Regarding asset quality, «non-performing loans (NPL) in Brazil are likely to remain moderate over the coming quarters, benefiting from low interest rates and rebounding economic activity», Fitch forecasts. Until 2015, NPLs had steadily declined since 2012, when an economic slowdown – following a significant run-up in household debt levels – saw NPLs hit 4.0% of the total portfolio. This was largely due to an increase in non-performing credit from households. NPLs are beginning to fall, supported by improving economic growth and low interest rates. According to the rating agency, total NPLs came in at 2.9% in February.

Fitch forecasts real GDP growth will rise to 2.0% y-o-y in 2019, from 1.1% in 2018.

Original Story:Fitch Solutions | Fitch Solutions Press Release
Photo: Afonso Lima
Edition:Prime Yield