NPL’s sales from Brazil’s top banks gain momentum in 2019

The credit recovery market in Brazil is seen gaining momentum in 2019 with the country’s largest banks expected to put 40 billion Brazilian reais of non-performing loans (NPL) up for sale, Valor Econômico reported, citing forecasts from managers who specialize in bad loan trading

Banks put about 30 billion reais in face value of delinquent loans up for sale in 2017 and 2018 each, according to the report.

The projected uptick is based on Caixa Econômica Federal’s plans to revisit the market this year after a court ruling suspended such sales for the state-run bank in mid-2016. The company is reportedly in the final stages of securing approval to resume the sales.

The strategy of Brazilian banks has reportedly been to partner with managers who specialize in debt recovery and sell the oldest tranches of their nonperforming retail loan portfolios.

In October 2018, Banco Bradesco SA agreed to purchase 65% of asset manager RCB Investimentos SA’s NPL servicing platform in Brazil. In doing so, it joined fellow Brazilian lenders Itaú Unibanco Holding SA, Banco Santander (Brasil) SA and Banco do Brasil SA, all of which either own or have stakes in similar asset recovery firms.

«Selling portfolios is more a matter of efficiency and focus» as opposed to revenue, Valor quoted Eurico Fabri, Bradesco’s vice president of retail banking, as saying.

Although Brazil’s debt recovery market is expected to grow this year, current unemployment levels suggest improvement will only solidify in the years to follow as the country’s economic situation continues to improve.

Original Story: S&P Global Intelligence| David Feliba
Edition: Prime Yield