The government package that intends to inject up to R$165 billion in the Brazilian economy before the elections promises to be positive for banks and retailers, defend the analysts. Among the measures already announced are the anticipation of payment of the 13th salary for retirees and pensioners of Social Security and the possibility of drawing up to R$1,000  from Guarantee Fund of the Length of Service (FGTS), until December 15 this year.

For UBS, the Government stimulus should help reduce the volume of non-performing loans (NPL), improving the quality of the assets of financial institutions. “We see these measures as positive for the asset quality dynamics of Brazilian banks in the short term, as it helps postpone an expected increase in defaults,” wrote analysts Thiago Batista, Olavo Arthuzo and Kaio Prato.

These specialists point out that the deterioration in banks’ asset quality is currently the main issue raised by several investors and foresee that defaults tend to normalise during the year. UBS notes that the default rate had already ended Q4 2021 below the pre-Covid level of December 2019.

“The measures are particularly positive for banks with greater exposure to credit to households, especially consigned, and to low-income people,” the analysis says.

Original Story: Infomoney | Mitchel Diniz
Photo: Photo by Bruno Neves on FreeImages
Translation and edition: Prime-Yield