NPL&REO News

Desenrola programme ends below potential

The Treasury says the result was ‘great’; in the market, however, the impression is that the programme has not reached its potential.

The Desenrola Brasil programme ended Monday with results below potential, although the figures are considered significant by the Ministry of Finance and analysts. Updated figures show that almost 15 million people benefited from the renegotiation of R$52.42 billion in debts in all phases of the programme.

The potential was to reach around 30 million just in the phase with a guarantee from the National Treasury, considered a priority by the government, in which around 5 million consumers took part.

Targeted by the initiative, the ‘negative’ public remained at around 70 million, but the economic team and experts believe that the programme has halted the worsening in general default. In terms of bank debts, the percentage of arrears of more than 90 days fell by 1 percentage point for those earning up to two minimum salaries – compared to a fall of 0.4 percentage points for the average individual, between July 2023 and February.

The Ministry of Finance argues that the programme had ‘great’ results, especially considering the low commitment of public money. In the market, however, the impression is that it didn’t reach its potential, especially the part aimed at the low-income population, with a Treasury guarantee, where debts had an average discount of 83 per cent.

Campaign promise

Among the reasons for the frustration, financial sector executives cite access difficulties and communication problems. But there is an understanding that, after the adjustments, only those who didn’t want to clear their name with Desenrola didn’t.

A campaign promise by President Luiz Inácio Lula da Silva, Desenrola was launched in July 2023 to settle debts contracted between 2019 and 2022 and impacted by the pandemic. Initially, it was due to end in December, but Track 1, for the low-income population, was extended twice.

At the start, participating banks cleared the names of customers who had debts of up to R$100 – benefiting 7 million people. At the same time, financial institutions began renegotiating bank debts with their own customers with monthly incomes of up to R$20,000. In this modality, 3 million people negotiated liabilities of R$26.5 billion – R$2.1 billion after discounts.

Finally, in October, the most eagerly awaited phase was launched, Track 1, aimed at the low-income population, with a Treasury guarantee in the event of default. In this stage, in addition to bank debts, debts such as electricity and water bills, educational fees or retail purchases were included.

This option was available until Monday for people who earn up to two minimum wages or are registered on the government’s Single Registry for social programmes, with debts of up to R$20,000. The instalment conditions are special: up to 60 months, with interest of up to 1.99% per month. R$8 billion was made available for the Operations Guarantee Fund (FGO), in order to guarantee any default.

On average, the discounts were 83% for a stock of R$151 billion in debts registered in the system, from 654 creditors. The potential was to reach 32 million people. Of these, 4.93 million took part in this phase of the programme, reducing liabilities from R$24.91 billion to R$3.6 billion so far. R$1.7 billion has been used up from the FGO.

«For the vast majority of people in debt, Desenrola was a great opportunity. It was a chance to rebuild their credit score for the market», summarises Rafael Baldi, director of Products at Febraban.

The most negotiated debt was related to credit cards, such as revolving credit cards, accounting for 44 per cent of agreements. The average discount for this segment was 96 per cent. The law that created Desenrola limited the amount of interest to 100 per cent of the original amount as of January this year.

«If we look at the programme as a whole, it’s a great result with minimal public resources, with great gains in regulation and cooperation between the players to enable this result» said Quênio França, Programme Director at the Ministry of Finance, highlighting the ‘innovative’ experience of bringing together banks, more than 600 creditors and a billion-dollar debt universe.

Impact of fake news

Part of the public preferred to pay cash. Of the R$14.2 billion in debts negotiated directly on the Desenrola website, R$3.1 billion were paid on the spot. In addition, the director explained that there were agreements reached through other channels. According to Serasa, negotiations on its own platform increased by almost 10 per cent during Desenrola compared to the same period last year, to 33 million.

«We do see it as a programme that worked. Of course it wasn’t going to get 72 million people out of default, but it did manage to help several families» said Aline Maciel, Serasa’s manager.

Original Story: O Globo | Author: Thais Barcelos
Edition and translation: Prime Yield

Delinquency rises in Q1, but falls for 8th consecutive month, says Boa Vista

The number of defaulters in Brazil ended the first quarter of the year up 4.5% compared to the same period in 2023, according to data from Boa Vista. However, on a monthly basis, the indicator fell by 0.46 per cent in March compared to February in the seasonally adjusted series, marking the eighth consecutive decline.

In the original data series, the indicator slowed from 3.0 per cent in February to 2.1 per cent in March 2024.

This was the eighth consecutive decline in the indicator, which was already expected given the improvement in the underlying factors from month to month, especially the employment figures,’ says Boa Vista economist Flávio Calife.

Boa Vista’s Credit Recovery Indicator increased by 11.83 per cent in the first quarter of 2024 compared to the first quarter of 2023. On a seasonally adjusted monthly basis, the indicator expanded by 0.46 per cent in March, and on a 12-month cumulative analysis, it fell from 20.6 per cent in February to 19.7 per cent in March.

Credit recovery has shown strong growth in recent months, driven by the improvement in consumers’ financial conditions, with an increase in real income and a reduction in debt, as well as the debt renegotiations provided by the Desenrola programme,’ adds Calife.

Original Story: Infomoney
Edition and translation: Prime Yield

Default affects 28.6 per cent of families, says CNC

Brazilians were both more indebted and more in arrears between February and March, according to the National Confederation of Trade in Goods, Services and Tourism (CNC).

The proportion of families with overdue bills rose from 77.9 per cent in February to 78.1 per cent in March, according to the Consumer Indebtedness and Default Survey (Peic). However, the result is still lower than a year earlier, in March 2023, when 78.3 per cent of households were in debt.

“This result shows an increased demand for credit by families, taking advantage of lower interest costs,” the CNC said in its release of the study.

For the purposes of the survey, debt is defined as accounts payable in the form of credit cards, overdrafts, store bills, payroll loans, personal loans, post-dated cheques and car and house payments.

Delinquency

After five consecutive months of decline, the proportion of consumers with overdue bills rose from 28.1 per cent in February to 28.6 per cent in March. In March, the proportion of households in arrears was higher at 29.4 per cent.

“This increase in arrears is also reflected in the increase in the proportion of families who will not be able to pay their debts, which is the most complex group of defaulters, but with a difference of only 0.1 percentage points and in this case already exceeds the indicator for the same month last year,” the CNC said.

The proportion of families who said they were unable to pay their debts and therefore remained in arrears rose from 11.9 per cent in February to 12.0 per cent in March. The result is still higher than in March 2023, when 11.5 per cent were in this situation.

“In order to increase their disposable income, families have been trying to extend the deadline for paying off their debts. So much so that the time spent in debt reached 7.1 months in March 2023, the highest level since April 2022,” said CNC economist Izis Ferreira in a statement.

Poorer people drive up debt and defaults

From February to March, the increase in debt and defaults was driven by lower income families. In the group with a monthly family income of up to three minimum wages, the proportion of people in debt rose from 79.2 per cent in February to 79.7 per cent in March.

In the lower middle class, with incomes between three and five minimum wages, the proportion of people in debt fell from 79.5 per cent in February to 79.3 per cent in March. In the group earning between five and ten minimum wages, there was a fall from 75.8 per cent to 75.0 per cent. In the group earning more than 10 minimum monthly wages, the share remained stable at 71.4 per cent.

In terms of arrears, the proportion of families in arrears in the group with a monthly family income of up to three minimum wages rose from 35.8 per cent in February to 36.4 per cent in March.

In the lower middle class, with incomes between three and five minimum wages, the proportion of defaulters remained at 26.0 per cent in March, the same as in February. In the group earning between five and ten minimum wages, there was an increase from 20.5 per cent in February to 20.7 per cent in March. In the group earning more than 10 minimum monthly wages, the proportion of defaulters fell from 14.6 per cent to 14.3 per cent.

Original Story: Isto é Dinheiro
Translation and Edition: Prime Yield

Axios Capital announces R$200 million fund to buy NPL from the rural sector

Axios Capital, a holding company that owns an investment bank, a securitisation company and a business consultancy based in Poços de Caldas (MG), has announced the creation of a fund aimed at negotiating debt in the rural sector based on NPLs (non-performing loans). The fund, called Axios Special Situations I, is starting with an investment of around R$70 million, but the aim is to build up an initial capital of R$200 million.

The assets, backed by rural property guarantees, will be accumulated through the interest of professional investors, individuals and companies, with average contributions of R$10 million per shareholder. Axios is counting on the financial partnership of Stark Investment Bank, based in São Paulo (SP), a digital bank with R$2.5 billion under negotiation and R$600 million in completed transactions, according to the institution.

“Our thesis is to invest in distressed debt with a high degree of asymmetry, with the possibility of buying the assets at a significant discount and with solid coverage,” says Hugo Lopes de Barros, co-founder and CEO of Axios Group. According to the Central Bank, NPLs across all sectors of the economy in Brazil currently exceed R$400 billion in overdue debt.

In its current operations, Axios allocates 70 per cent of its investments to non-performing loans and single names, with guarantees and realisable assets guarantees and realisable equity valued at 150 per cent of the amount invested – which, in its new fund, will be backed by the value of forced sales of rural properties and other assets. The other 30 per cent of investments will normally be used to acquire judicial assets in special situations, distressed real estate assets, distressed real estate assets (i.e. overdue bank loans), credit rights (i.e. overdue bank loans), credit rights, precatórios, pre-precatórios and other lawsuits of this nature, all with final judgements.

Edition and translation: Prime Yield
Original Story: Forbes Brazil
Photo: Axios

Household delinquency in Brazil at 22-month low

Default rates are at their lowest level in 22 months. This is indicated by a monthly survey carried out by the National Confederation of Trade in Goods, Services and Tourism (CNC). The percentage of households in arrears closed January at 28.3%, the lowest level since March 2022.

And defaults fell more among lower-income families. The survey registered a drop of more than 3 percentage points year-on-year; 35% of families with an income of up to 3 minimum wages are in default. Despite finding it more difficult to pay, almost 30% of these consumers believe they are little in debt.

Felipe Tavares, CNC’s chief economist, believes that the figures show a positive scenario for lower-income families in 2024.

With regard to debt, 78% of families reported having debts due in January, an increase of 0.5 percentage points compared to December.

Original Story: Agência Brasil | Author: Fabiana Sampaio
Edition and translation: Prime Yield

The proportion of those indebted rose to 77.6% in December, while those failing to pay fell to 28.8%

Brazilians became more indebted between November and December 2023, while defaults improved slightly, according to the National Confederation of Trade in Goods, Services and Tourism (CNC). On an annual average, indebtedness fell in 2023 for the first time since 2019, while defaults peaked at almost a third of the population, the organisation said in its Consumer Indebtedness and Default Survey (Peic).

The proportion of households with overdue bills rose from 76.6% in November to 77.6% in December 2023. However, the result is still lower than a year earlier, in December 2022, when 78.0% of households were in debt.

“Indebtedness is fundamental to economic development, as credit is the springboard of the capitalist system,” CNC chief economist Felipe Tavares said in an official statement. “Default is a negative consequence of indebtedness, caused by the low income of Brazilians and the volatility of the country’s economy,” he added.

For the purposes of the survey, debt is defined as accounts due in the form of credit cards, overdrafts, store bills, payroll loans, personal loans, post-dated cheques, and car and house payments.

“The increase in indebtedness in the last month raises a point of attention in relation to the indebtedness of Brazilian families, given the high percentage of indebted families. Despite the high percentage of indebted families, family debt as a percentage of GDP is around 30%, which is not a high percentage compared to the US market, where family debt represents 73% of US GDP,” the CNC study added.

The proportion of consumers with overdue bills fell from 29.0% in November to 28.8% in December 2023. In December 2022, the share of delinquent households was higher at 30.0%.

The proportion of families who said they were unable to pay their arrears and therefore remained in arrears fell from 12.5% in November to 12.2% in December 2023. This is still higher than in December 2022, when 11.3% were in this situation.

Annual average

In 2023, the annual debt rate stood at 77.8% of the population, just 0.1 percentage points lower than in 2022.

“The decrease in the overall Peic indicator, although small, represents a victory in relation to the worrying evolution of household indebtedness,” says the CNC report, stressing, however, that eight out of ten Brazilians still have debt in their name.

The annual default rate will rise from 28.9% in 2022 to 29.5% in 2023. The average proportion of those who said they were unable to pay their outstanding debts also rose, from 10.7% to 12.1% over the period.

“This confirms the importance of well-structured debt renegotiation programmes, such as Desenrola, which is already showing results, with a fall in this indicator in the last quarter of the year, from 13% in October to 12.2% in December last year,” the CNC defended.

Original Story: UOL | Estadão Conteúdo
Translation: Prime Yield
Photo: Free Images /BrunoNeves

Brazil’s PIX a threat to credit cards, but a boon for banks

The market for credit cards and debit cards is going to get smaller in Brazil, as PIX, the country’s instant payment system, expands its reach and features. 

Launched in November 2020 by the Brazilian Central Bank (BCB) to foster competition in financial services, PIX became so popular that, by the end of last year, 77% of the Brazilian population had used it. 

The central bank is also studying new functionalities such as PIX International and PIX Automatico, with the latter to be launched next year to facilitate recurring payments.

While credit cards are growing alongside electronic payment systems in the country, they are losing ground to PIX. 

The first quarter of this year was the first where the number of PIX transactions surpassed those made with credit and debit cards combined. PIX transactions for the first quarter of 2023 totalled 8.1 billion, versus 4.2 billion credit card and 3.8 billion debit card transactions, according to BCB data. 

Challenges for card networks

PIX Garantido, also known as PIX Credit, another modality in the making, could represent the coup de grâce for credit cards as it will enable payments by instalment without the use of one.

This makes the solution especially attractive for the segments of the population that cannot afford credit cards. 

“Brazil is on the verge of a potential revolution in payments as people will no longer need credit cards to do instalment purchases,” says Carlos Scharfstein, partner at Stocche Forbes Advogados.

“When you use a credit card, you are paying fees to at least three service providers. PIX is a system created by the government that is free and that can do the same thing. It means that credit card companies and related businesses, such as credit card machine readers [so-called ‘POS machines’] may suffer and will have to reinvent their business model. And if you take a look at the stock market, you’ll see how the companies that rely very heavily on the use of credit cards are suffering,” says Mr Scharfstein.

Therefore, “MasterCard and Visa are presenting themselves more and more as technology companies instead of credit card networks”, Mr Scharfstein remarks.

Despite this, it seems card schemes do not realise what is happening, “because they’re increasing fees and coming up with new ones”,  says Ralf Germer, CEO and co-founder of payments platform PagBrasil.

PIX makes banks stronger

Banks have proved to be more resilient to PIX’s success despite initial woes. 

When PIX was launched, Brazil’s banks worried about losing all of their revenues from transfers. “But now, most payments go through banks,” says Mr Germer. 

For instalment purchases, the banks where the PIX key for the transaction is registered will guarantee the payout to the merchant in advance. As a result, lenders charge fees to merchants in exchange, to cover the risk. This means PIX Credit will bring additional revenue streams from payments to banks, says Mr Germer.

The larger revenue stream of banks doesn’t come from the use of credit cards, but rather credit itself, explains Mr Scharfstein.

A lot of challenger banks and neobanks in Brazil — such as BS2, Neon, Original, Next and Nubank — among others, started with the belief that they could build a sustainable business model by only offering credit and debit cards to low-income customers. 

After four or five years, they came to the conclusion that such a proposition was not feasible, Mr Scharfstein adds, and they either changed their business model or broadened their services to rely more heavily on credit and other services not related to payments. 

Meanwhile, some banks have already leveraged the open-source technology of PIX to release their own versions of PIX credit, which are often referred to as PIX Parcelado: literally “PIX in instalments”.

Original Story: The Banker | Barbara Pianese 
Photo:Deposit Photos
Edition: Prime Yield

Caixa’s default rate is the lowest among large banks thanks to Desenrola programme

Caixa’s default rate fell to 2.59% in October, from 2.67% in September. According to the institution, it reached the lowest level among the country’s big banks. The drop was greater, of 0.24 percentage points, compared to August, when the index reached 2.83%.

According to the bank’s vice-president of risk, Henriete Bernabé, one of the factors behind the drop is Desenrola Brasil. She said in a statement that the programme encouraged customers to seek out Caixa to renegotiate debts, regardless of whether they fit the Desenrola criteria or not.

She also says that the bank’s own renegotiation programmes, such as Tudo em Dia, and the evolution of collection processes have also influenced the movement. “Caixa has very attractive conditions for renegotiating defaulted loans in general. Discounts can reach 95 per cent,” he adds.

According to the bank, the total credit portfolio closed October at R$1.1 trillion, with more than R$700 billion in property loans.

According to Caixa, the reduction in the delinquency rate is despite the fact that credit has continued to be granted, which is different to the market trend. The institution said that it “endeavours to offer credit with conditions suited to the client’s profile and with the best market rates. This favours default,” according to Henriete.

Caixa’s expectation is that the default rate will continue to fall. For the vice-president, the trend for 2024 is positive.

“Considering the expectation of a reduction in the Selic rate, added to the control of the inflation index, the reduction in the unemployment rate and also a possible increase in jobs with the direct and indirect generation of jobs, through the Minha Casa Minha Vida and Novo PAC programmes, an improvement in families’ financial conditions is expected,” she said in the note.

Original Story: Valor Investe | Staff
Photo: Caixa building
Edition and translation: Prime Yield

Survey shows that 13% of Brazilian can’t pay basic bills

Research carried out by Serasa and Flexpag on the profile of profile of Brazilian indebtedness in 2023 shows that 13 per cent of people in debt in Brazil are unable to pay basic bills such as bills such as electricity, water or gas. Eight out of ten have reduced their consumption of these services, which appear among the three biggest expenses for another year, accounting for 24 per cent of the household budget, behind supermarkets (34 per cent in recent years and 33 per cent in the last 12 months) and credit cards (with 26 per cent and 29 per cent respectively), respectively).

In the online survey carried out in October, in partnership with the Opinion Box research institute, 11,541 people aged 18 and over were interviewed who are included in Serasa’s database of defaulters throughout Brazil. For 53 per cent of those interviewed, spending on basic bills takes up the biggest chunk of their monthly budget.

In 82% of cases, the value of the bills is up to R$750. Among those interviewed, 83% said they had already delayed other bills in order to prioritise paying for water, electricity or gas. A further 61 per cent have borrowed money from friends and family to pay a bill; 49 per cent have already taken out a loan and 45 per cent have had their supply cut off due to arrears.

Original Story: Canal Energia | Sueli Montenegro 
Photo:Photo by Cesar Fermino on FreeImages
Edition and translation: Prime Yield

Rio de Janeiro

Brazilian credit market slows down but it’s healthier

Confirming An expected scenario, the Central Bank’s financial stability report shows that the risk appetite of financial institutions fell in the first half of the year, as well as the supply of credit to families and companies, as a result of the restrictive monetary policy and the increase in default rates.

Banks also increased their provisions, which, while contributing to the resilience of the Brazilian system, led to a slowdown in their portfolio profitability by 6 percent in the 12 months through June. “The good news is that financial institutions are improving their credit analyses and, consequently, the quality of their portfolios”, said Central Bank’s oversight director, Aílton Aquino.

While the growth of real estate and payroll credit lines remained more or less stable for individuals, the active credit card portfolio has slowed sharply due to the bank’s more conservative approach, from around 30 percent per year in December 2022 to 15 percent in June. As a result, credit card stock also slowed, reaching BRL 505 billion – around 2 percent growth from December last year, compared to a 26 percent increase between the previous half-year periods.

Amid the heated debate over the need for congressionally mandated regulations on revolving credit by January 2024, data from the Central Bank’s report shows how much credit cards have weighed on family budgets, especially in the post-pandemic period. The burden of credit cards on personal income rose from 23.6 percent in 2019 to 30.7 percent last June. “We clearly see that credit cards have taken an important share of families’ income. It is not surprising that the current discussion on article 28 of the law that created Desenrola, the federal government’s debt renegotiation program, says that the market needs to find a solution to revolving credit interest rates,” Mr. Aquino commented.

In the case of companies, there was also a decline in new lending but an improvement in the share of “problem assets” — those overdue more than 90 days — except for micro and small enterprise, segments where problem assets accounted for 16 percent and 12 percent of the total in June, respectively. “This is a warning sign for the system as the high indebtedness of these firms continues to manifest itself in the materialization of credit risk and there is no sign of this changing in the short term,” Mr. Aquino warned. In the report, the Central Bank reiterated that it does not see any risks for the Brazilian financial system related to the increase in Fed interest rates in the U.S., or other external factors. Capitalization levels, liquidity, and provisions — well above the risk of individual and corporate loan portfolios — are adequate, “putting the Brazilian financial system in a comfortable position to face more extreme situations,” Mr. Aquino said. 

For Mr. Aquino, Brazil is prepared for any shock. “Stress tests have shown the robustness of our system.” According to him, because of the Brazilian market’s low exposure to external financing (15 percent), any adverse scenario in which institutions and companies find it more difficult to raise funds abroad would not have a significant impact on the system as a whole.

Original Story: The Brazilian Report | Fabiene Ziolla Menezes
Photo: Photo by Bruno Leiva in FreeImages.com
 Edition and translation: Prime Yield

Brazil’s bank lending up 0.8% in September but continues do decelerate over 12 months

Outstanding loans in Brazil rose 0.8% in September from the month before to 5.576 trillion reais, according to central bank data.

The 12-month growth rate of bank credit slowed down to 8%, down from 9% in August, marking a continued trend of deceleration amid elevated borrowing costs.

In the last week of October, central bank reduced interest rates by 50 basis points for the third consecutive time, bringing them to 12.25%. The bank kicked off an easing cycle in August, following nearly a year of maintaining rates unchanged at cycle-high levels in its battle against inflation.

In the minutes of its policy decision, the central bank said that the deceleration in credit extension aligns with the current monetary policy stance, with corporate credit granting experiencing a more pronounced slowdown.

“Household credit, in turn, shows lower deceleration and a recovery favoring low-cost modalities,” it said.

A broad default ratio for both Brazilian consumers and businesses in non-earmarked credit remained stable at 4.9% for the month.

Lending spreads fell to 32.0 percentage points in September from 32.3 percentage in August.

Original Story: Yahoo Finance | Reuter
Photo:Photo by BrunoNeves in FreeImages
Edition: Prime Yield

Debts on basic utility bills hit record high

According to data from Serasa’s Default and Debt Renegotiation Map, Brazilian families are delaying payment of basic bills such as water, electricity, gas and telephone at unprecedented levels.

In August, these expenses accounted for 24.5% of the population’s debts, the highest level for this type of bill since the start of the historical series in 2019.

Also according to the report, basic water, electricity and gas bills represented significant growth among the debt segments, with an increase of 0.53 percentage points (p.p.) in August, and 2.97 p.p. since the beginning of this year.

Original story: Contec |News 
Photo: Photo by Marcel Krings in FreeImages
Edition and translation: Prime Yield

Desenrola: Banco do Brasil reaches unprecedented volume by renegotiating more than R$10 billion in debts

Banco do Brasil (BBAS3) has surpassed the R$10 billion mark in renegotiations for more than 1 million people under Desenrola Brasil, a project aimed at resolving bank debts in default.

The volume is unprecedented in the organisation’s history, considering previous actions, BB president Tarciana Medeiros told Estadão.

The Desenrola programme was launched around two months ago jointly by the federal government and Brazilian banks. The focus of the action is precisely to reintroduce people with credit restrictions into the economy. “Desenrola is a case of joint construction, of how public-private partnerships can work very well,” added BB’s president.

According to the bank, of the more than one million clients who have benefited, 40,000 have been micro and small companies and have already renegotiated approximately R$2.5 billion. The figures are equivalent to the Track 2 public, whose defaulted loans are being negotiated directly with the financial institutions under special conditions to be defined by each bank.

New phase of Desenrola

The banks are now preparing for the new phase of Desenrola, which is aimed at customers with debts of up to R$5,000. These loans will have more attractive conditions for renegotiation to be defined by the Programme’s rules and adopted by all the banks that have joined Desenrola.

In BB’s case, the conglomerate has offered discounts of up to 25% on renegotiation interest rates, up to 96% on debts and payment terms of up to 120 months for the publics selected for the Programme. It also made all its physical and virtual service channels available to customers interested in the initiative.

Original Story: Infomoney | Estadão Conteúdo 
Photo: Banco do Brasil website
Edition and translation: Prime Yield

Rio de Janeiro

Debt grows 7.2% to 66.8 million in August

The number of defaulters in Brazil rose by 7.17% in August compared to the same month in 2022. Compared to July, the increase was 1.14%. After two months of consecutive falls, the number of consumers with overdue accounts reached 66.80 million – 40.9% of the country’s adult population. The data comes from the CNDL (National Confederation of Shopkeepers) and SPC Brasil.

According to the survey, in August each consumer owed an average of R$4,108.89 when adding up all their debts. There were 31.11% of consumers with bills of up to R$500 and 45.25% with bills of up to R$1,000. Most of the debts are with banks.

In addition to the rise in defaulters, the number of overdue debts also rose by 14.75% compared to August 2022. The percentage exceeded the annual variation measured by the confederation in July 2023. The sectors with the biggest growth in consumers in debt were water and electricity (+31.97%) and banks (+19.79%).

On the other hand, the communication and commerce sectors registered a drop in total defaults in the period. in the period. Consumers in debt fell by 13.71% and 0.97% respectively, respectively.

The confederation attributes the increase in the indicator to the inclusion of defaulters with debts overdue of 1 to 3 years. Despite the increase, the president of the CNDL, José César da Costa, says that “the trend should be downwards for defaulters. should be a downward trend in the number of defaulters in the coming months, since the whole macroeconomic scenario favours this direction”

Original Story: Poder 360|Staff 
Photo: Photo by Bruno Leiva in FreeImages
Edition and translation: Prime Yield

Brazil’s domestic corporate debt market shows progressive recovery

Brazil’s central bank said it continues to observe a slowdown in credit growth in various lines, but stressed the country’s corporate debt market shows a progressive recovery.

After its Financial Stability Committee meeting of August 30th, the bank said in a statement it is important that banks continue to preserve the quality of credit concessions.

Policymakers are tracking international financial conditions, involving in particular greater volatility and higher U.S. longer-term interest rates and greater uncertainty surrounding growth in China, and remain prepared to act, minimizing any disproportionate contamination on local assets prices, they added.

Original Story: Reuters | Marcela Ayres 
Photo: Image by Bruno Neves in FreeImages
Edition: Prime Yield

Bank lending delinquency up again despite lending rate decline

Brazil’s non-earmarked credit default rate rose to 5% in July, reaching its highest level since January 2018 despite a minor decrease in bank lending rates as well as a government-initiated debt renegotiation incentive program.

A broad gauge of default rates, encompassing both individual borrowers and businesses, climbed from 4.9% in June and 3.8% in the same period last year, central bank data showed.

In mid-July, the government launched the first phase of a broad consumer debt renegotiation program called “Desenrola Brasil,” in which banks began providing consumers with the chance to directly renegotiate their debts.

In return, the government granted regulatory incentives to boost the banks’ credit availability.

The rise in the delinquency rate occurred despite the implementation of the program and a marginal dip in the average interest rate for non-earmarked credit, which reached 44.3% annually in July compared with 44.6% in the prior month.

Fernando Rocha, the head of the statistics department at the central bank, said the delinquency increase reflects the effects within a specific credit line that has been affected since April by the high-profile bankruptcy of retailer Americanas in January, which brought to light 20 billion reais in accounting fraud.

Rocha said the Desenrola program encompasses “a considerable number of operations with small individual values” in comparison to the Americanas event. He also added that the program might be helping to reduce delinquency rates in other credit lines.

The central bank kicked off a monetary easing cycle in August, slashing its benchmark rate by 50 basis points to 13.25%, following nearly a year of stable rates aimed at curbing inflation.

Bank lending spreads saw a minor contraction to 33.0 percentage points in July, down from 33.1 percentage points in June.

Reflecting the more challenging credit environment, total outstanding loans in Brazil experienced a 0.2% decline in June from the previous month, amounting to 5.405 trillion reais ($1.11 trillion).

This decline was primarily driven by reduced lending to businesses, the central bank said.

Over the past year, the expansion of loans continued to decelerate, reaching 8.2%, which was down from June’s 9.2% figure.

Original Story: Yahoo Finance | Reuters 
Photo: Photo by Cesar Fermino on FreeImages
Edition: Prime Yield

Lending for vehicles rises, but for property falls

Credit stock falls 0.2% in July to R$5.405 trillion, says Central Bank

The balance of the financial system’s credit operations fell 0.2 per cent in July, to R$5.405 trillion, according to the Central Bank (BC) latest release. In 12 months, there was an increase of 8.2%.

The total balance of free credit fell 0.8% in July to R$3.179 trillion, while directed credit advanced 0.7% to R$2.226 trillion.

The total credit balance for families increased by 0.4% in the month, reaching R$3.314 trillion. For companies, there was a 1.1% drop, to R$2.090 trillion.

The Central Bank’s most recent projections for credit growth in 2023 are: 7.7% for the total; 6.3% for free credit; 9.6% for directed credit; 9.9% for individuals; 4.4% for companies.

Vehicles

The balance of operations for the purchase of vehicles by individuals rose 0.7% in July, to R$270.829 billion.

Loans rose 4.4% in the month, to R$13.259 billion. The average interest rate stood at 26.1% per year, after 26.8% in June.

Real Estate

The total stock of real estate loans to individuals with directed resources rose 0.5% in July compared to June, totalling R$ 972.847 billion. In 12 months, the increase was 10.3%.

Loans in the same category, on the other hand, fell 2.2% to R$11.3 billion in the month, accumulating a 12.7% drop over 12 months.

The annual interest rate, meanwhile, rose from 11.5% to 11.9%.

BNDES

The National Bank for Economic and Social Development’s (BNDES) credit portfolio for companies ended July up 0.1% to R$392.570 billion. The comparison is with the previous month.

Looking at the BNDES’ concessions, there was a fall of 2.4% in the month, to R$5.796 billion.

Default

The average default rate on credit operations remained stable at 3.6% in July, compared to June.

Among companies, the average rate was 2.7%, compared to 2.6% in June. Among households, it was 4.2%, the same percentage as the previous month.

In credit with free resources, delinquency stood at 5.0% (against 4.9% in June).

In directed credit, it was 1.7%, against 1.6% previously.

Original Story: Valor Investe | Alex Ribeiro and Larissa Garcia
Photo: Big Stock Photo
Edition and translation: Prime Yield

Credit card revolving interest rates rise to 445% per year, says BC

A hot topic at the moment, the average total interest rate charged by banks on revolving credit card payments rose 8.7% from June to July.

The Central Bank (BC) also reported that the rate went from 437.0% to 445.7% per year.

The emergency credit modality is at the centre of the country’s economic and political discussions at the moment due to the more expensive rates on the market.

The issue is the subject of a working group formed by the Ministry of Finance, the Central Bank and the banks.

Proposals

Recently, Roberto Campos Neto, the president of the Central Bank, said that the solution was “moving towards” the end of the revolving credit card, with the card debt being automatically transferred to the instalment plan with interest.

Since 2017, banks have been obliged to transfer revolving credit card debt to instalments after one month, at a lower interest rate.

Campos Neto also indicated that there could be a disincentive fee for “long” interest-free instalments, which is in the interest of the banks, while Finance Minister Fernando Haddad is against ending interest-free instalments.

In addition, last August 24th, deputy Alencar Santana (PT-SP) proposed limiting the rate on revolving and interest-free instalments to the principal amount of the debt, in his opinion on the Desenrola project.

The measure would apply if the banks do not propose self-regulation within 90 days of the law coming into force.

In the case of instalments, the interest went from 196.1% to 198.4% per year between June and July.

Considering the total credit card interest rate, which takes into account revolving and instalment operations, the rate went from 104.2% to 102.7%.

Original Story: CNN Brasil | Thais Barcellos and Eduardo Rodrigues
Photo: Banco Central do Brasil
Edition and translation: Prime Yield

Bad debt fell in July and lending slowed down

According to the latest data published by the Central Bank, the household default rate with free resources fell from 6.30% to 6.21% between June and July. Boa Vista’s Default Records indicator anticipated this movement, as it had fallen by 0.5% in the monthly comparison and in the long-term analysis the growth slowed even further.

“This was the second drop in the household default rate this year, the first was between February and March, but this time it seems to have been more consistent. The long-term trend of the Boa Vista indicator already indicated that, even disregarding the effect of ‘Desenrola’, the number of registrations and, consequently, the default rate had reached a turning point. Of course, the effect of the programme can’t be ruled out and it’s expected to be even greater in the coming months, but the fact that delinquency didn’t necessarily fall in the more expensive credit lines, such as revolving credit cards, instalments and overdrafts, also drew some attention, although it did fall in non-consigned personal loans. It’s still too early to make a diagnosis of the programme, which only started in the second half of July. It will have the effect of reducing defaults, but the efficiency of the renegotiations that are being made could be put to the test if the most expensive accounts remain open,” says Flávio Calife, an economist at Boa Vista.

The average interest rate charged to families when granting free resources fell in July from 47.44% to 47.07% due to a reduction in the cost of funding and the banking spread, as had happened in June. The granting of these loans rose 8.1% year-on-year, but remained on a path of decelerated growth in the 12-month accumulated variation.

“The start of the cycle of cuts in the Selic rate and the Copom’s signalling that the pace can be maintained in the next few meetings are arguments that favour the fall in the cost of funding, as happened in June and July, but it’s important to note that this has been going on since April, when inflation data was already starting to look better, indicating that the downward cycle was approaching. As defaults went sideways in June and fell in July, the spread has also fallen, but it’s important to emphasise that interest rates are still high and that’s why lending continues to slow down. Boa Vista’s Demand for Credit indicator is anticipating this trend very closely. It had risen by 9.7% compared to July last year, and over 12 months it shows growth of 12.4%, while lending is up 12.5% on the same basis of comparison,” concludes Calife.

Original Story: Monitor Mercantil | News room
Photo: BBVA website
Edition and translation: Prime Yield

Corporate defaults hits new record in Brazil

In April, defaults reached 6.5 million Brazilian companies. This was the highest number recorded by Serasa Experian’s indicator since 2016, when the historical series began. The value of debts also reached a record amount, totaling R$ 117.5 billion. On average, each CNPJ has about seven negative accounts.

According to the economist of Serasa Experian, Luiz Rabi, the economic framework of the country continues to impose challenges to entrepreneurs. “The analysis remains the same. Factors such as inflation and the Selic rate are affecting consumers’ purchasing power,” he says. “With expensive inputs and high interest rates, companies’ cash flow does not find room to grow, which makes it unfeasible for business owners to pay off debts.”

Last month, businesses in the service segment accounted for 54% of all defaulters. Next came commerce, with 37%, followed by the industrial (7.7%) and primary sectors (0.8%), and the category “others” (0.5%) – which includes financial companies and the Third Sector

The analysis by Federal Unit showed that São Paulo is the state with the highest number of defaulting companies. In second place was Minas Gerais, followed by Rio de Janeiro, Paraná, Rio Grande do Sul and Bahia.

Original Story:  Metropoles | Carlos Rydlewski
Photo: Photo by Svilen Milev in FreeImages
Translation & Edition:

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