The sector has seen an increase in the number of cedants, as well as a change in the profile of these companies, with an increase in the participation of cooperatives and retailers.
Recovery, an Itaú Group company and leader in the purchase and management of non-performing loans (NPL) in Brazil, has just published its balance sheet for 2024. According to the company’s research, the market for the sale of non-performing portfolios during this period will total 28 billion reais.
One of the main changes is the diversification of the profile of companies accessing the NPL market to negotiate their debt portfolios. In 2019, the volume of delinquent portfolios transacted in this market involved only 16 originators. At that time, the majority of the volume ceded (84%) was concentrated in transactions conducted by three large banks. However, by 2024, 45 companies were involved in the Brazilian NPL market, and the percentage of transactions carried out by large banks fell to 37%, in parallel with the entry of other segments, such as digital banks and cooperatives, as well as retailers, which increased their participation in the sale of debt portfolios.
Brazil has made significant progress in the NPL market over the past five years, and it is clear that companies’ understanding of the business of selling delinquent debt portfolios has changed significantly. It’s a sector that is raising funds that are being ploughed back into the lending industry, providing liquidity to companies and facilitating the process for debtors to clear their names and increase their chances of regaining credit. Negotiating delinquent portfolios is like oil in the machinery of credit, because the creditor who has a parked portfolio gets the opportunity to generate funds to invest in his own business,’ points out Plínio Ribeiro, head of commercial and portfolio acquisition at Recovery.
Change in the profile of lenders
In addition to the volume traded, the number of lenders has also increased. Five years ago, only four institutions, including financial institutions, cooperatives and digital banks, traded their credit assets in the sector. By 2024, that number had risen to 37.
‘We’d like to make a special mention of the cooperatives. Although it may seem modest when you look at the credit stock of co-operatives, this represents a very big leap. It’s a market with the potential to grow much more by 2025, because the wheels are starting to turn in this segment. Co-operatives are more inclined and open to this market, they have learnt to grant loans and have felt the benefits of these operations,’ says Plinio from Recovery.
In addition, the retail segment increased its share in 2024, reaching 26%, compared to 5% in 2019. In 2019, there were only nine retail companies in this sector; in 2024, there are 40. This wide diversification of the originators of delinquent portfolios is also reflected in a reconfiguration of the type of loans negotiated. This is the case, for example, of portfolios secured by vehicles, which reach almost 1 billion in 2020 and more than 4 billion in 2024.
Another change in the default portfolio sales sector relates to the average maturity of assigned portfolios. In 2019, they were on average 4 years old. In 2024, newer portfolios will be negotiated, with an average of 2.5 years.
For the executive, the macroeconomic scenario in 2025 and 2026 promises greater progress in the trading of credit assets in the country. With the increase in the Selic rate and the rise in inflation, companies and consumers are expected to be more indebted, creating a favourable scenario for the growth of the NPL market. In this more challenging environment, the willingness to sell defaulted portfolios tends to grow and mature. On the creditors’ side, it will be an opportunity to bring short-term funding to their respective operations and maintain their credit concession,” he concludes.
Original Story: Fusões e Aquisições | Author: Recovery PR
Edition and translation: Prime Yield