NPL rate steady at 2.3% in July

With an increase of 6.1% compared to the same month last year, the stock of credit operations reached R$ 4.266 trillion in July. The value is also 1.2% higher than the one registered in June this year. The figures numbers are from the Credit Monetary Note, released this Friday (27) by the Central Bank (BC). The concession of credit was R$ 418.4 billion, 16.3% more than in July last year.

For individuals, the balance of credit operations grew 8.6% compared to July 2020 and 1.5% compared to June this year. For companies, the increase was 2.9% and 0.8%, in the yearly and monthly comparison, respectively.

At 2.3% of the total balance of operations, defaults remained stable in relation to the month immediately before, but advanced 0.2 percentage points in relation to July 2020.

In free resources, the credit stock reached R$ 2.495 trillion in July, a growth of 7.4% compared to July last year. Still in this segment, credit granting totaled R$ 356.2 billion in the period, up 15.2%.

Credit with directed resources, which is that subsidized by governments, totaled R$ 1.770 trillion in July. The value is 4.3% greater than the one registered in July of last year. The concession of credit totaled R$ 62.2 billion, an increase of 25.6%.

Original Story: CNN Brasil | Anna Russi
Photo: Photo by Bruno Neves from FreeImages
Edition & Translation: Prime Yield

Brazil interest rates to hit 7.00% this year

Expectations for 2021 Brazilian inflation and interest rates rose to new highs, a survey of over 100 economists showed, with the central bank’s benchmark Selic rate expected to hit 7.00% by the end of the year.

The central bank has raised borrowing costs to 4.25% this year, and is expected to raise it by at least another 75 basis points on Aug. 4.

Next year’s inflation outlook inched up to 3.8% from 3.75%, the survey showed, creeping further above the central bank’s goal of 3.50%.

The FOCUS survey showed that this year’s growth outlook held steady at 5.3%.

Original Story: Reuters | Staff 
Photo: Photo by Svilen Milev from FreeImages
Edition: Prime Yield

House financing funded by savings should reach new record in 2021

In Brazil, home financing funded by savings should reach a new record of R$195 billion (US$37.5 billion) in 2021, according to the latest forecasts form ABECIP (Brazilian Association of Real Estate Credit and Savings).

After breaking records last year, with a volume of R$124 billion (US$24 billion), and also in the first half of 2021, reaching R$97 billion, real estate financing with funds from savings should close the year totalling R$195 billion, up 57% from 2020. 

The projection and data were released by ABECIP and considers both the loans mobilized by end consumers for the purchase of real estate, and those taken out by construction companies for the execution of works.

Original Story: Rio Times| Staff
Photo: Photo by Afonso Lima from FreeImages
Edition: Prime Yield 

Bradesco aims to decarbonize its loan book by 2050

Brazil’s Banco Bradesco has just announced it aims to decarbonize its credit and investment portfolios by 2050, or possibly before, in accordance with scientific forecasts and Paris Agreement climate goals.

In a securities filing, the bank also said it is the first Brazilian bank to join the Net-Zero Banking Alliance, an industry body under the auspices of the United Nations committed to “aligning their lending and investment portfolios with net-zero emissions by 2050.”

Bradesco said this reinforces its commitment to ESG goals and transitioning to a “cleaner, more efficient and resilient economy.”

Original Story: Reuters |Staff 
Photo: Bradesco Linked In
Edition: Prime Yield

Brazilian banks’ profitability falls in 2020, but recovery is expected in 2021

Brazilian banks saw profitability fall last year for the first time since the 2015-2016 recession, according to the central bank annual report on the banking system, as the COVID-19 pandemic forced institutions to increase provisions.

In December 2020, the banking system’s aggregate return on equity was 11.5%, the lowest in the central bank’s series, although the 2021 outlook is improving despite ongoing uncertainty surrounding the pandemic, it said.

“The fall in profitability was widespread, affecting banks of different types of control, size and activity,” the central bank said in its annual report.

“Bolstering provisions in 2020 reduces the need for significant new provisions, and the rebound in economic activity will support growth, credit quality, and demand for banking services,” it added.

The report also highlighted reduced concentration of the banking system, as the market share of state-owned institutions such as Banco do Brasil, Caixa Economica Federal and the BNDES national development bank fell.

The five largest banks – Itau, Bradesco, Santander, Banco do Brasil and Caixa Economica Federal – accounted for 77.6% of total assets in December 2020, down from 81% a year earlier, the central bank said.

The concentration of total deposits in these institutions dropped to 79.1% from 83.4% in December 2019, it added.

Original Story: Reuters|  Reuters Staff 
Photo: Photo by LotusHead from FreeImages
Prime Yield

Santander Brasil is said to have bought R$4bn in bad debts from Bradesco

Return Capital, a company owned by Santander Brasil (SA:SANB11), is said to have bought over BRL 4 billion in overdue and unpaid loan portfolios from Bradesco (SA:BBDC4), the newspaper Estado de Sao Paulo said, citing sources.
According to the publication, the operation with the so-called bad loans was advised by consulting firm Deloitte.

Original Story:
Photo: Bradesco Linked In
Translation: Prime Yield

Brazil’s central bank to make bank liquidity measure permanent

Brazil’s central bank will make permanent one of its pandemic crisis-fighting measures from last year of offering banks liquidity in exchange for private sector credit as collateral, instead of public debt, as had been the case before.

In an online event broadcast by the International Monetary Fund as part of its spring meetings, central bank president Roberto Campos Neto said this will help banks and Brazil’s nascent corporate bond market.

“This changes the whole chain of issuing private debt and the way we see private debt. Banks can charge less premium when they hold private debt on the balance sheet because now they know they can get liquidity out of that,” Campos Neto said.

“This is a change that we are going to make permanent, and we are designing a system to make that permanent,” he said.

In response to the COVID-19 pandemic just over a year ago, the central bank unveiled measures providing the financial system with up to 1.3 trillion reais ($225 billion) of liquidity, worth around 18.5% of gross domestic product.

Central bank figures show that within that overall package, loans backed by private sector debentures totalled up to 91 billion reais.

On monetary policy and inflation, Campos Neto repeated his view that front-loading interest rate hikes means they will not need to be raised as much in the end.

Brazil’s central bank began a “partial normalization” of monetary policy last month, raising its benchmark Selic rate by 75 basis points to 2.75% and, barring a major change in outlook, pledging to do so again next month.

Inflation is running well above the bank’s year-end target of 3.75%, the exchange rate is weak, and the fiscal outlook is deteriorating. All that points to continued tightening, despite the pandemic and darkening growth picture.

Campos Neto also warned that the rise in borrowing costs in some advanced economies will result in “some level of distress” for emerging countries like Brazil.

Original Story: Reuters | Jamie McGeever 
Photo: Banco Central do Brasil website
Edition: Prime Yield

Brazil’s Caixa may raise up to $1.15 bln in insurance holding Caixa Seguridade IPO

Brazilian state-controlled lender Caixa Economica Federal may raise up to 6.5 billion reais ($1.15 billion) by selling part of its stake in insurance holding Caixa Seguridade Participacoes according to documents filed with CVM.

The calculation considers the maximum size of the offering and the top of the price range for the shares, which was set between 9.33 reais and 12.67 reais per share.

The offering size will initially be 450 million shares in the insurance holding owned by parent Caixa Federal, but, depending on demand, the number of shares may rise to 517.5 million.

The IPO will be priced on April 27, according to the documents, and Caixa Seguridade will be listed under the ticker symbol CXSE. The offering will be managed by investment banking units of Morgan Stanley, Caixa Economica Federal, Bank of America, Credit Suisse AG, Itau Unibanco Holding and UBS BB.

Original Story: Nasdaq |  Tatiana Bautzer
Photo: Rodrigo de Oliveira
Edition: Prime Yield

Brazil’s biggest banks battle for reinvention in digital era

Incumbents have enjoyed huge profits but low interest rates and fintech challengers are forcing change.

Brazil’s big banks had it good for years.

 A small club of institutions dominates the high street in Latin America’s largest economy, long notorious for its costly banking fees and borrowing rates, with their fat margins often the source of public anger. 

“Profits are enormous at the banks. They are really excessive,” was the verdict in 2019 by one politician — not a leftist firebrand, but the country’s pro-market economy minister, Paulo Guedes. 

But as the oligopoly faces a trifecta of low interest rates, the economic impact of Covid-19 and digital upstarts snapping at their heels, lenders are under pressure like never before to accelerate reforms and provide better value for money to clients. 

The chief executive of the country’s biggest private sector bank, Itaú Unibanco, puts a positive gloss on what he describes as “a fierce scenario” when it comes to competition 

“The Brazilian banking sector has been changing rapidly, and this is very good for both consumers and the so-called traditional banks,” said Milton Maluhy. But he admitted: “We need to be quicker and better for our products and services to outdo competition.”

The five giants that tower over the country’s financial system — Itaú, Bradesco and Santander Brasil, along with state-controlled Banco do Brasil and Caixa Econômica Federal — have in recent years embarked on investments in technology in a bid to stop customers switching to challengers such as Nubank, Brazil’s internet banking unicorn. 

Since the start of the coronavirus crisis, many have also deepened cost-cutting measures, with branch closures and redundancies. The need for reform is more urgent than ever with the pandemic having hastened the pace of digital change.

 Regulators are attempting to boost customer choice too: the central bank is rolling out an “open banking” initiative, aimed at giving clients greater control over their data and boosting competition, and last November introduced an instant payment system that is free for individuals.

Christened “Pix”, it offers a way for ordinary Brazilians to avoid at least some of the range of charges that banks have typically attached to standard services, such as current accounts and money transfers. 

Moody’s has estimated over the next year the banks could lose R$16bn ($2.9bn) of those fees, almost 10% of the total earned, as free or cheaper alternatives become available. Fees account for about 30% of bank earnings, according to the rating agency. 

As with many Latin American countries, margins in Brazil’s banking sector are the envy of peers elsewhere. The average return on equity (ROE), an important industry metric for profitability, stood at 17.2% in 2019, according to S&P Global Market Intelligence. That compared with 10.6% in the US, 8.8 per cent in Asia-Pacific and 5.8% in Europe. 

“There’s a big debate going on in Brazil [on] what’s going to happen to the profitability of the big banks,” said Mario Pierry, an analyst at Bank of America. “Now interest rates have come down, they can’t just survive buying government securities — they need to start lending more.” 

But the big lenders are not standing still. Along with around 1,500 branches closed and 13,000 job cuts last year, according to annual reports, many are pursuing copycat strategies to ape the fintechs’ success.

This has ranged from launching their own digital banks and investment brokerages to tap into the wave of new retail investors in Brazil, through to acquiring stakes in promising start-ups.

Itaú now offers third-party products in its insurance and asset management businesses, while Santander Brasil has followed rivals by introducing a virtual assistant bot. 

Bradesco has announced plans to float or sell a stake in its separate digital bank, Next, which does not charge fees and has 4m users, within the next couple of years.

 “When you have lower margins, the only remedy for this is to gain scale,” said chief executive Octavio de Lazari Junior. 

For consumers and businesses a shake-up is well overdue. Credit has traditionally been very expensive and often hard to access, partly a reflection of the high interest rates that were a legacy of the country’s long-running battles with inflation. 

For a long time, the banks made easy returns by stuffing cash into high-yielding government debt. However, with the central bank’s benchmark Selic rate at 2.75%, recently raised from an alltime low of 2%, that model has come under strain. 

The pandemic delivered a serious dent to earnings in 2020. Although lenders remained in the black, considerable provisions to cover bad loans contributed to the biggest percentage terms drop in two decades with sector-wide profits down almost a quarter, according to data provider Economatica. 

But it is the confluence of competitive forces and regulatory changes that has raised questions about the longer-term trajectory.

 Despite a downward trend over the past few years, borrowing costs in Brazil rank among the highest in the world.

The average annual interest on a loan has crept up to 22% for households and 11.3% for businesses, according to central bank data. 

Ilan Goldfajn, chair of Credit Suisse in Brazil and central bank president between 2016 and 2019, believes that low rates are here to stay and will eventually feed through into credit.

 “Lending rates are still very high and they’re now going down over time — it’s a process.”

 A jolt to the incumbents and their comfortable ways of operating has come from a band of homegrown fintechs with lower overheads and no branches. 

Leading the pack is Nubank, which boasts almost 35 million customers in Brazil out of a population of 213 million. Following a $400m fundraising this year, it has a valuation of about $25bn, according to two people familiar with the situation. Other rising brands include Neon and C6.

Rafael Schiozer, a professor at the Fundação Getúlio Vargas, said while traditional banks had adapted their investment products they were still behind fintechs on the lending side. “They need to go faster, because the fintechs have credit operations that are easier to use and with better prices.

However, there is some scepticism about how much of the lending pie the fintechs can grab. “At the end of the day, the new entrants in digital credit don’t have the balance sheet to keep all of the [loan] origination on their books,” said Jorg Friedemann, an analyst at Citi.

For the time being, incumbents still have the advantage of scale, brand power and physical presence. 

Although low interest rates tend to squeeze bank earnings, they provide the conditions to expand lending in a country with a weak level of credit penetration. 

“Brazil has never had a time like this in terms of [low] rates to stimulate mortgages,” said Ceres Lisboa, analyst at Moody’s.

 Publicly-owned Caixa Econômica Federal is seeking to boost financial inclusion for the poorest one-third of Brazilians.

 Already the biggest lender by customer numbers, Caixa created 35 million new accounts last year to pay government coronavirus benefits to people who were previously “unbanked” and is now opening new branches and promoting its digital arm. 

“We are going to launch micro-credit for 10 to 30 million people through mobile phones,” said chief executive Pedro Guimarães. “These clients of [our app] who are entering the financial market can get micro-insurance and a cheap credit card, step by step.”

Original Story: Financial Times | Michael Pooler 
Photo: Photo by Carlos Eduardo Livino from
Edition: Prime Yield

World Bank forecasts put Brazil among the Latin-American worst performing economies in 2021

The World Bank projects growth of 3% for the Brazilian economy in 2021, a figure close to government and private sector estimates and which places the country in the top ten with the weakest results expected for 29 Latin American and Caribbean economies, according to a report released on March 29th.

In 2020, the Brazilian economy shrank 4.1%, the sixth smallest drop and a result above the average of -6.7% in the region, which should expand by 4.4% in 2021, according to the World Bank. Due to emergency aid, Brazil spent the most to combat the pandemic.

Latin America and the Caribbean suffered more health and economic damage due to the Covid-19 pandemic than any other region, although there is the potential for significant transformation in key sectors as the region begins to recover, says the report of the Bank.

The number of deaths, for example, grew by almost 90% in the region, triple the increase seen in the world average, while the economic downturn was greater than in other country blocs. In 2021, there is no prospect of a vaccination rhythm that will grant immunity to the population of Latin America this year, according to the bank.

Original Story: Folha de São Paulo| Eduardo Cucolo 
Photo: Photo by Cesar Fermino from
Edition: Prime Yield

Brazil’s credit conditions improve in February ahead of COVID-19 spike

Credit conditions in Brazil improved in February, central bank figures showed, as a broad measure of consumer and business default ratios held steady at a decade-low, bank lending spreads narrowed, and credit growth rose.

The figures tie in with other indicators that suggest the full force of the deadly second wave of the COVID-19 pandemic now battering the country had yet to be felt by corporates and households in the first couple of months of the year.

A broad 90-day default ratio covering households and businesses was 2.9% in February for a third straight month, central bank figures showed. That is the lowest since the data series began in March 2011.

The default ratio for households, including borrowing such as auto loans and overdrafts, was unchanged at a series low of 4.1%, while the default ratio for non-financial companies was also unchanged at 1.6%, just up from December’s low of 1.45%.

Lending spreads narrowed to 22.9 percentage points in February from 23.5 points in January, the central bank said.

The central bank made available more than 1.2 trillion reais ($208 billion) worth of credit and liquidity to businesses, banks and financial markets last year to cushion the economic shock of the pandemic.

Many of these measures expired on Dec. 31, but the monetary authority has said some will be extended.

The stock of outstanding loans in Brazil rose 0.7% in February to 4 trillion reais, the central bank said. Personal loans rose 0.8% to 2.3 trillion reais, and business loans rose 0.6% to 1.8 trillion reais.

The total stock of loans rose 16.1% in the 12 months through February, with personal loans rising 11.3% and business loans up 22.9%, the central bank said.

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

Family indebtedness grows in January and reaches 66.5%

The percentage of indebted families (with debts in arrears or not) in Brazil reached 66.5% in January this year, staying above the rates of December 2020 (66.3%) and January last year (65.3%). The data is from the National Survey of Consumer Indebtedness and Delinquency, released today (18), in Rio de Janeiro, by the National Confederation of Trade of Goods, Services and Tourism (CNC).

The percentage of defaulters, i.e. families with debts or overdue bills, reached 24.8%, down from 25.2% in December, but up from 23.8% in January last year.

Families who will not be able to pay their bills added up to 10.9% of the total, down from 11.2% in December, but up from 9.6% in January 2020.

“With the end of the [emergency] aid and the delay in the vaccination calendar, lower-income families will need to adopt greater rigour in organising their budgets. This situation makes credit play an even more important role in income recomposition. We must continue to expand access to resources with lower costs, but also extend the payment terms of debts to keep delinquency under control,” said economist responsible for the survey, Izis Ferreira.

Credit cards
According to the CNC, the percentage of credit card debt among the total number of people with debts reached 80.5%, a record high.In January last year, the rate was 79.8%. Other main reasons for debt in January this year were: installment plans (16.8%), car loans (9.9%) and personal loans (8.4%).The average time with overdue payments reached 63.3 days and the average time committed to debt stood at 6.9 months, the CNC said.

Original Story: Agência Brasil | Vitor Abdala
Photo: Photo by Bruno Neves in
Translation: Prime Yield

Itau profits go 26% down on Q4 2020

Itau Unibanco Holding SA , Brazil’s largest bank, reported a 26% drop in fourth-quarter recurring net income from a year earlier, roughly in line with analysts’ estimates.

In a statement, Itau’s incoming CEO Milton Maluhy said the bank will seek to cut costs and accelerate growth to weather a challenging 2021, but it did not disclose a formal outlook for this year.

Itau’s recurring net income totaled 5.388 billion reais ($991.9 million), roughly in line with a consensus estimate of 5.440 billion reais compiled by Refinitiv.

The bank’s net interest income and provisions for bad loans remained under pressure, while fee income declined amid the pandemic.

Net interest income fell 9.5% year-over-year, mainly on a shift in its loan book towards less risky lines.

The bank’s cost of credit rose 3.8% from the same period a year earlier, to 6 billion reais, but the bank said it was due to a provision for one company.

Itau’s loan book grew by 2.7% in the quarter, mainly driven by consumers and small companies. Its 90-day default ratio remained roughly stable at 2.3%, but the bank saw more defaults among small and medium companies as forbearance ended.

On the cost side, Itau saw operating expenses up 5.1% in the quarter, on new hires and variable salaries.

Return on equity, a gauge of profitability, rose 0.4 percentage points from the third quarter to 16.1%. 

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

Bradesco sees recovery in 2021

Brazil’s second largest private-sector lender Banco Bradesco SA forecasts a “year of recovery” after posting a forecast-beating quarterly profit, helped by higher net interest income and cost-cutting measures.

Bradesco reported fourth-quarter net income of 6.801 billion reais ($1.27 billion), above the 5.546 billion reais consensus estimate of analysts polled by Refinitiv, and up 2.3% from a year earlier.

Operating expenses fell 9.3% as the bank tightened its belt to weather the COVID-19 related slump, closing 1,083 branches.

“2021 will be another year of overcoming challenges, but it will be a year of recovery more than adversity,” CEO Octavio de Lazari said in a statement, forecasting growth in loans and declines in provisions.

In 2020, net interest income, a measure of earnings on loans minus deposit costs, jumped 8% year-over-year, mostly on trading gains.

The bank’s return on equity was a better-than-forecast 20%, maintaining a recent upward trend.

Loan-loss provisions rose 14.7% from a year earlier, to 4.568 billion reais. Still, the bank’s loan default ratio came in at 2.2%, down slightly from the third quarter.

Amid coronavirus-related quarantines, fee income dropped 1.3% year-over-year due to fewer card transactions and less visits to bank branches.

For 2021, Bradesco predicted its loan book will expand between 9% and 13%, compared with an increase of 10.3% last year.

It sees loan-loss provisions declining to between 14 billion reais and 17 billion reais, from 25 billion reais in 2020.

Fee income is also seen higher, growing at between 1% and 5%.

Even so, Bradesco will keep its cost cutting program in place and operating expenses are expected to fall by between 1 and 5% this year.

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

Caixa studies further sales of NPL portfolios and five new IPOs

Brazil’s Caixa Econômica Federal (Caixa) President, Pedro Guimarães, said the bank is planning to resume operations aimed at the market and to completely focus in the sales of participations on its subsidiaries. 

The plans are to sell a share in five of its businesses: insurances, credit cards, asset management, lotteries, and digital banking. This last one is an asset that Caixa is still establishing, putting together the net assets created from the services delivered by the Caixa Tem app together with those from the millions of accounts created to the payment of the emergency state help. According to the executive, these public listings will be one of his legacy in the institution, stating that the presence of minority shareholders tends to strength governance. 

Part of the sales will be made throughout an IPO. “We want to resume operation in the capital markets. One of Caixa’s total focus is tocary out these IPO’s, including  that for the digital bank”, he said during an event from Credit Suisse.

Original Story: BNL Data | Editor’s Blog
Photo: Caixa Econômica Federal site
Edition and Translation: Prime Yield 

BNDES launches public notice for sale of part of non-performing loans

The National Bank for Economic and Social Development (BNDES) will sell part of the defaulted credits that make up its portfolio. The announcement for the auction, which is scheduled for March 31, was launched on December 21. The list of credits for sale includes 323 operations involving 251 different debtors, with a total accounting balance of R$160 million.

The securities will be sold for the highest bid value. Interested parties must apply by January 15 and information about the portfolio will be available to qualified investors between February and March. Bids will be presented between March 25 and 30.

According to BNDES, the bonds for sale have been in the bank’s portfolio for more than 13 years, and in that period there have been several unsuccessful attempts to recover debts, either through renegotiation or legal actions.

All the credits come from indirect operations originated in banks that were interrupted in their activities by intervention or extrajudicial liquidation. By law, they have been subrogated to the BNDES, i.e., their ownership has been transferred to the development bank.

For the period of default, the credits were entered in the balance sheet of the BNDES at a loss. The bank’s objective with the assignment is to optimize the high cost of maintaining these assets that are difficult to recover and with limited returns.

The public notice states that the minimum amount estimated for the assignment of the portfolio will be confidential and that payment will have to be made in cash. BNDES is betting on the interest of companies specialized in increasing the recovery capacity of the securities.

In the last decade, according to the bank, the number of new securities of this type in its portfolio has fallen drastically, to only 15, as a result of measures that have reduced exposure to problematic transfer agents.

Original Story: Seu Dinheiro | Estadão Conteúdo
Photo: Photo by Doll91939 in Wikimedia Commons
Translation/Edition/Summary:Prime Yield

Bradesco sets aside €462 million for COVID-19 loan losses

Brazilian lender Banco Bradesco reported higher-than-expected third-quarter recurring net income, despite a spike in loan-loss provisions amid the coronavirus pandemic.

Brazil’s second largest private-sector lender posted net income of 5.031 billion reais ($894.56 million), roughly 15% above analysts’ consensus estimate according to Refinitiv, but down 23.1% from a year earlier.

Bradesco set aside 5.588 billion reais for bad loans, up 67.5% from a year earlier, but down 37.1% from the previous quarter. That includes 2.6 billion reais in extraordinary provisions related to potential losses stemming from the coronavirus crisis.

“The results shows the first signs of a return to normality,” Bradesco Chief Executive Octavio de Lazari said in a statement.

As the bank gave grace periods of up to 180 days to help clients weather the economic crisis stemming from the coronavirus pandemic, its 90-day default ratio went down 0.7 of a percentage point to 2.3%.

The bank said it conceded grace periods to 73 billion reais in loans.

Its loan books rose only 0.5% in the quarter, mainly on consumer lending, although Brazil is set for a recession and unemployment is at the highest in eight years.

The bank also showed it has put into action some cost-cutting measures as they went down 5.7% from a year earlier, but were up in the quarter.

Return on equity was at 15.2%, recovering from the second quarter, when the bank decided to set aside extraordinary provisions to face the coronavirus pandemic.

Original Story: Reuters | Staff 
Photo: Bradesco Linked In
Edition: Prime Yield

Mortgages skyrocket 70% in September, breaking Brazil’s records

Mortgage loans with resources from the Brazilian Savings and Loan System (SBPE) reached 12.9 billion reais ($2.29 billion) in September, up 70.1% over the same period in 2019, reaching a record, mortgage lender association Abecip reported.

From January to September, loans from the system to finance the purchase and construction of real estate advanced 44% versus the same period a year earlier, to 78.8 billion reais, already exceeding the result of all of last year. 

Original Story: Reuters | Aluisio Alves 
Photo: Photo by Bruno Neves in
Edition: Prime Yield

Banco do Brasil expects a rise in bad loans due to pandemic

Banco do Brasil SA’s profit declined in Q3 from a year earlier as the Brazilian lender again increased provisions to prepare for an expected rise in bad loans related to the economic impact of the coronavirus pandemic.

The state-controlled bank reported net income of 3.1 billion reais, the equivalent of $547 million, in the period, a decline of 27.5% from the Q3 of 2019, while adjusted net income fell 23.3% to 3.5 billion reais.

Net interest income rose 3.4% from a year earlier to 14 billion reais. Earnings per share fell to 1.06 reais in the quarter, from 1.49 reais a year earlier.

Banco do Brasil and other Brazilian banks have been boosting provisions in the wake of the pandemic, which slammed economic activity in March and April. Growth in some areas, such as industrial production and retail sales, resumed in May and has continued, though only in recent months has there been improvement on a year-over-year basis.

Total provisions rose by 40.5% from a year earlier, to 5.5 billion reais, while provisions for credit risks rose 30.5% in the period to 6.6 billion reais, the bank said.

The recovery in activity has already begun to slow, with a deceleration in growth in the past few months, and that trend is expected to continue through at least the end of this year. But Banco do Brazil and other lenders are showing quarter-over-quarter improvement as the economy has heated up.

Government aid payments to Brazil’s poorest residents, along with other stimulus programs, helped the recovery by boosting spending on necessities, the bank said. The weak real and strong demand from China pushed the price of the country’s agricultural commodities higher in the local currency, helping the economy in farming regions of Brazil, it said.

Original Story: Down Jones News | Jeffrey T.Lewis
Photo: Banco do Brasil website
Prime Yield 

Brazil default ratio highest since last July

Loan defaults in Brazil rose in April for a fourth month in a row, official figures showed, something not seen since the 2015-16 recession and a sign of what could lie in store as the economy heads for another steep downturn this year.

The rise in the 90-day default ratio to 4% from 3.8% the month before marked the highest level since July last year, according to central bank figures, as the coronavirus crisis tightened its grip on Latin America’s largest economy.

It has risen every month this year since hitting 3.7% in December, the lowest since the central bank’s data series began in 2011.

An even more forensic look at the figures show that the actual 3.99% default ratio in April was the highest since October 2018, when it was 4.08%.

Fernando Rocha, head of statistics at the central bank, said the rise in defaults is correlated with the economic cycle. He declined to give figures but said defaults for individuals will likely continue to rise in the coming months, pointing out that companies have better credit guarantee protections.

The government has created a Treasury program guaranteeing billions of reais of credit to micro and small companies, known as ‘Pronampe’, but the initiative is having teething troubles and has still to properly take effect.

Productivity and Competition Secretary Carlos da Costa said this week that credit will be made available “soon”.

The central bank figures also showed that lending spreads shrank to 26.2 percentage points in April from 27.6 percentage points the month before, the narrowest spread since December 2014.

The amount of outstanding loans in Brazil held steady at 3.59 trillion reais ($670 billion) in April, the central bank said.

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