Analysts believe that the Brazilian banking sector has just moved to a new lending cycle.

Brazil’s central bank latest data (from November 2018) shows that origination for earmarked loans picked up sharply over the last year, reaching R$302 billion ($80.2 billion), the highest level since December 2015.

After two years of contraction in the loan book, 2018 was a year of inflection; with economic activity picking up in 2019, analysts expect this accelerating trend to continue.

UBS’s financial analyst Philip Finch believes the recent compression in NIMs will be alleviated during the year: «We expect the Selic rate to start increasing in mid 2019, reaching 8% by the end of the year, which together with better mix should offset competition pressure on NIMs. We currently forecast NIMs flat in 2019, on average, for the banks under our coverage.»

Consensus expectations are for system-wide credit growth of around 8% year on year, with volumes and a better mix (skewed towards SMEs and consumer growth) boosting profitability.

Better NPL ratios

Strong credit growth should also coincide with better asset quality – reductions in non-performing loans and lower provisions – which will drive the large Brazilian banks.

Marcelo Telles, analyst at Credit Suisse, says: «[90 day] delinquency ratios have declined substantially from its recent peak in mid-2016. Delinquency for individuals currently stands at the lowest level in 10 years, while corporate delinquency has declined to pre-crisis levels, though seemingly with plenty of room to improve, as it still stands substantially higher than historical levels».

Provision expenses should increase below loan growth, slightly lowering the cost of risk from 2.90% to 2.85%, below the previous annual low of 3.1% in 2014.

«We see upside risk to our [forecasts],» says Finch. «Most banks still have high levels of excess provisions, meaning that a better economic activity level can lead to clients’ ratings upgrades, translating into lower provisioning. Moreover, as sector loan mix has become considerably more defensive, with a greater portion of collateralized lending, we believe there is scope for [cost of risk] to fall to new lows, although how much lower could also depend on how quickly banks re-risk their loan books.»

Telles agrees: «We expect cost of risk to continue to improve in the next few quarters, driven mainly by Bradesco and Banco do Brasil. After gradually normalizing two years down the road, we assume the cost of risk will start to rise again, as credit growth, expected to pick up this year, should be led by high-yield segments.»

«In other words, we attribute the higher cost of risk to changes in the portfolio mix, not to any deterioration in delinquency levels on a product-by-product basis, thus not necessarily affecting risk-adjusted returns.»

Original story:Euromoney |  Rob Dwyer
Photo: FreeImages.com/Marcel Krings
Edition: Prime Yield

Multiple positive factors point to outperformance of Brazil’s banks in 2019, but pensions reform risks remain.

UBS’s financial analyst Philip Finch believes that a potent mix of stronger than-expected-loan growth, improving net interest margins (as the country’s base rate, Selic, rises), a falling cost of risk (if pensions reform is passed) and improved efficiency ratios from branch rationalization will improve the profitability of Brazil’s leading banks.

Floating all these specific boats is the cyclical recovery of the Brazilian economy that should come this year. These strong numbers are based on expected growth of 3% (rebounding from a small recovery of 1.5% in 2018 and 0.5% in 2017 and a deep recession between 2014 and 2016).

As Finch notes, pensions reform is the key variable. All of the projections of 3%-plus growth are based upon the new administration of president Jair Bolsonaro being able to pass meaningful reform – and there have been encouraging noises that the new administration is making this social security reform a priority.

However, William Jackson, Capital Economics’ chief emerging markets economist, highlights the downside risks to this assumption: «The latest noises don’t mean pension reform is guaranteed. For one thing, it’s not clear that Bolsonaro himself is as committed to the reform as his economic team – it seems he has yet to sign off on the higher retirement ages being suggested and the shorter transition phase».

The politics are also obtuse: the plan will be politically unpopular and Jackson points out that it isn’t clear if the appetite exists within congress to push through unpopular and painful changes to the pension system.

Pensions notwithstanding, other banks are more bullish on this year’s macro-economic scenario: Bank of America Merrill Lynch forecasts growth of 3.5% in 2019 – above the 2.6% consensus – driven by «higher confidence indices and lower market rates, in our view, which should lead to a decline in unemployment rate and an improvement in credit market conditions, favouring especially private consumption and investment.»

Finch expects an average of 17.6% earnings growth for the large Brazilian banks in 2019, with return on equity improving 147 basis points to 19.5%.

Original story:Euromoney | Rob Dwyer
Photo:FreeImages.com/Bruno Neves
Edition:Prime Yield

Brazil’s newly appointed Finance Minister, Paulo Guedes, faces a daunting challenge: to bring Latin’s America’s biggest economy back to full health, following the worst recession in the country’s history.

Making matters more difficult, Guedes will have very limited time to implement urgent fiscal and structural reforms to avoid a new crisis.

For now, the country’s economy is evolving positively: GDP grew at an annualized rate of 1.4% in the third quarter if 2018, at the fastest pace in 18 months. Investment rose 1.6%, marking the first positive reading in four years. Although positive, it seems a fragile recovery as we look at the 13 million unemployed workers, a staggering fiscal deficit and a massive debt-to-GDP ratio.

Guedes, who will also be in charge of planning and development, has been dubbed by the Brazilian press a “super minister.” A former pupil of Milton Friedman at the University of Chicago, he argues for smaller government and privatization.

«As a ‘Chicago Boy,’ Guedes would like to privatize everything,» says Alfredo Saad-Filho, professor of political economy at SOAS University of London. «However, his ambitions have already fallen victim to the conflicts between the president and other players close to the administration, to the extent that Bolsonaro has already intervened repeatedly to contain Guedes.» It now appears that while utility companies Petrobras and Eletrobras will be privatized, lenders like Banco do Brasil and Caixa Economica Federal will remain state-owned, Saad-Filho notes.

Another challenge is restructuring the country’s pension system. «The sooner the better,» Guedes has stated to the press. The current structure—which disproportionately benefits public servants, who can retire in their mid-50s—costs 12% of GDP.

While Guedes economic views are fairly clear, it remains to be seen where Bolsonaro and a divided and unpredictable Congress land. As some observers have already pointed out, the country’s fate is in the hands of an economist who is getting his first taste of public service—and new lawmakers who don’t know much about the economy. «A very public conflict is mounting,» says Saad-Filho, «and it started when the administration was not even in power yet.»

Original story: Global Finance |  Luca Ventura 
Photo: Valter Campanato/Agência Brasil
Edition: Prime Yield

Brazil’s Outgoing central bank President told Swiss newspaper Le Temps that conditions remain in place for strong economic growth, while he warned against inflated expectations under the country’s new populist government.

In an interview quoted by Bloomberg, Ilan Goldfajn told that «the expectations are now very high in Brazil». The responsible, who is to be replaced as central bank president by Roberto Campos Neto, said the same source that to keep inflation in check Brazil must continue with economic reforms under the new government of Jair Bolsonaro.

«The idea is to continue the reforms and increase the flexibility of the economy», he said. «If the new government comes to put the accounts in order, the economy will gain in productivity».

Goldfajn also said Brazil’s inflation is under control and can remain so in coming years, with interest rates at a low level to stimulate the economy. He expects economic growth of 2.5% in March.

Original Story:Bloomberg |Andy Hoffman
Photo:  Arquivo/Marcelo Camargo/Agência Brasil
Edition: Prime Yield

Banco Santander grabbed 25% of the market for car loans in Latin America’s largest country, Brazil, in part by extending credit to borrowers shunned by other mainstream banks. As Reuters explained, that means financing working-class customers in need of cheap motorcycles and cars up to two decades old.

According to the same article, that business line helped power Madrid-based Santander through Brazil’s recent recession, even as domestic rivals Itau Unibanco Holding SA and Banco Bradesco SA hit the brakes, and other foreign banks such as London-based HSBC Plc and U.S. Citigroup sold their struggling Brazilian retail businesses.

Despite the risks of the high rates of default in this specific consumer credit niches, the fact is Santander is cruising in Brazil, where is the third-largest private sector bank. Its 90-day default ratio is the lowest among Brazil’s largest private banks, at 2.9% in September.

Year-over-year consumer loan growth in Brazil hit 22.6% in September, more than triple the industry average of 7%. Brazil unit profitability, which for years has lagged peers, jumped to 19.4% from 16.3% in the same period. That beat Bradesco, the country’s second largest private lender, and narrowed the gap with industry-leading Itau.

Santander’s increasing reliance on Brazil shows how emerging markets can still provide a jolt of growth. The Brazilian unit contributed 26% of group profits in the first nine months of 2018, up from 19% four years ago. Santander Brasil’s stock price has surged more than two thirds in the last 12 months, vastly outperforming the shares of its parent company, as well as those of Itau and Bradesco.

Still, Santander Brazil’s outsized auto loan portfolio, and its willingness to bet on borrowers and vehicles avoided by competitors, could presage a bumpier road ahead in a country with a history of economic volatility.

«Certainly, Santander’s growth strategy is a success story so far,» said Andre Martins, an analyst at XP Investimentos, to Reuters. «But the bank will be the one most exposed to defaults if the Brazilian economy turns down.»

Around 80% of the Brazil unit’s auto loans are on cars aged four years or less, and down payments are hefty, averaging 36%. «If Santander’s loan book were problematic, it would already have popped after a 3-year historic recession,» said Angel Santodomingo, chief financial officer for Santander Brasil. «Our success in credit quality is related to our ability to analyze and price individuals’ risk.»

Big data at the service of consumer credit

The bank is harnessing big data to glean information beyond borrower income and savings. And Brazil risk officers are using company tools that have proven successful elsewhere, including the United States, where Santander is a major subprime auto lender.

The bank has also embraced the internet to grow its business, leveraging online sales generated through WebMotors, a top car-selling website that it owns. Two years ago it launched an app that allows dealers to arrange car loans within minutes for buyers who provide eight pieces of information, an innovation that is now being copied by other Brazilian banks. That process had previously taken at least a day and required car buyers to provide reams of documentation. If a loan is approved, clients sign the contract digitally.

Santander plans to use that model to grow its consumer finance business in Brazil with loans for vacations, building materials and solar panels, according to Andre Novaes, head of Santander’s consumer finance unit. Many Brazilian banks have avoided such lending because of the high default risk and shaky collateral.

To safeguard its portfolio, Santander said it has encouraged highly-indebted clients to refinance and consolidate different types of loans in arrears into a single loan with more amicable terms.

Some bankers, however, view the practice as a way to mask Santander’s default ratio. We must remember that severe losses in 2011 forced Itau and Bradesco to stop financing low-end motorcycles, and to ban cars aged ten years and older from their portfolios. They also increased down payments and shortened loan maturities, which had stretched as long as 70 months.

Original Story: Reuters | Carolina Mandl
Photo: Santander
Edition: Prime Yield

With its focus on SME’s, Brazilian Bradesco banc is well set to grow with the country’s economy, according to Euromoney.

Third-quarter 2018 results back up this optimism. The bank’s earnings grew 6% during the quarter and 14% year on year, which was the strongest bottom line expansion among the large banks.

Following the announcement of the results, Bradesco’s president, Octavio de Lazari, predicted further growth next year. «We have the appetite to continue to grow our credit portfolio and to grow a lot,» he said – though he declined to give any specific forecasts for either credit or earnings growth in 2019.

Perhaps more importantly, the bank also had the best net interest margin versus non-performing loan performance ratio in the market, with core net interest income increasing by 4% while NPLs (90 days) fell by 30 basis points. In the bank’s critical small and medium-sized enterprise segment (to which it has a larger exposure than its competitors), it managed to cut NPLs by an impressive 74bp in the quarter – with corporate NPLs stubborn due to three specific large defaults.

The performance in SMEs is encouraging for the bank. The loan portfolio to this sector increased by 3.6% in the quarter (corporates by just 0.4% and the individual’s segment by 1.8% quarter on quarter).

Bradesco’s overall loan portfolio is tilted more to the higher-returning segments than its competitors, which leads analysts to argue that it is best positioned to grow with the Brazilian economy.

BTG Pactual bank analyst, Eduardo Rosman, hailed the third quarter results as showing that the turnaround, “something investors have been waiting for some time”, has arrived.

«The big improvement in NPLs and particularly the better dynamics seen in the SME business line make us more positive on the prospects for the bank,» Rosman wrote in his third-quarter results report to clients. «In a scenario where Brazil’s GDP recovers, we tend to believe Bradesco’s ROE has room to expand and reduce the gap to its main competitor Itaú. It could also get back the number two ROE position recently lost to Santander.»

Bradesco’s ROE was 19.1% in the third quarter and Carlos Firetti, market relations director at Bradesco, thinks this level will more likely be a new floor rather than a peak. «We believe we have reached a new level of ROEs and we still focus for expanding,» he says. «We believe that the economy, the improvement in the economy, the opportunities that will arise from it, with more loan growth, and also the maturity of many of our initiatives, will allow us to actually look for higher profitability levels.»

Original Story: Euromoney
Photo: Bradesco
Edition: Prime Yield

US data analytics firm FICO has acquired Brazilian credit risk management consultancy GoOn, gaining wider access to thousands of potential clients in the Brazilian financial market. The values involved in the deal were not disclosed.

Founded in 2002, GoOn provides risk consulting services for the entire consumer credit life cycle. It is reported to have many deep-pocketed clients in Brazil’s banking, retail, insurance, and real estate sectors. Moreover, it has trained more than 12,000 credit management professionals and most of whom work for its clients.

FICO’s technology assets, combined with Goon’s skilled human talent, will create a powerful company in Brazil’s credit market, say analysts.

Original Story: Nearshore Americas | Narayan Ammachchi
Photo: GoOn
Edition: Prime Yield

The new heads of two Brazilian state lenders, BNDES and Caixa Econômica Federal, said in during their swearing-in ceremony that they will depend less on Treasury funding in coming years, in a sign President Jair Bolsonaro government wants to redefine the role of public-sector banks.

According to the officials, the new administration also plans to make development bank BNDES and mortgage lender Caixa Econômica Federal speed up repayment of Treasury loans. The strategy marks a departure from an economic model championed by previous left-wing administrations that funneled public funds to BNDES and other state banks to create “national champions.”

Economy Minister Paulo Guedes said such policies are «regressive» in a speech where he pledged that public-sector lending by public banks should focus on credit for the unprivileged and let the private-sector handle most lending.

At a swearing-in ceremony for the bank executives, new BNDES head Joaquim Levy said its lending activity should be adjusted in line with the equity of its shareholder, the federal government.

Carlos Thadeu de Freitas, the financial director of BNDES, told two local newspapers that the bank aims to return up to 100 billion reais ($27 billion) in loans owed to the Treasury in 2019.

BNDES had planned to repay 26 billion reais to the Treasury this year, but raising that figure would allow the government to cut public debt faster as is the desire of Bolsonaro’s new economic team, Freitas said.

«The BNDES has to reinvent itself,» Freitas was quoted as saying in newspaper O Estado de S.Paulo. «It cannot compete with private banks, providing working capital to companies which have other means to access such lines.»

In the same vein, Caixa will sell stakes in four subsidiaries to repay loans to the Treasury, said Pedro Guimarães, its new chief executive. The plan will involve the insurance, cards, asset management and lottery units.

Original Story: Reuters |Marcela Ayres
Photo: Caixa Economica Federal
Edition:Prime Yield

Standard & Poor’s Global (S&P) expects Brazilian banks to significantly raise credit granting in 2019, given the greater economic growth prospects. The international rating agency forecasts a 10% expansion in the total credit portfolio next year. As for 2018, S&P anticipates a growth between 4% to 6%, after years of contraction.

If this scenario is confirmed, the total credit ratio to GDP will rise to 47% in 2018 and 49%. The NPL ratio (for non-performing loans over 90 days), for its hand, should continue to gradually fall over the next two years, receding from the 3% level recorded in September. The Banks’ asset quality is expected to continue to improve and there should be a further moderation within the loan renegotiation levels, states S&P.

The credit growth should continue be headed by private banking institutions.

Original Story: Valor Económico | Sérgio Tauhat
Translation & Edition:Prime Yield

Brazil’s main banking lobby is going to deliver proposals aimed at reducing loan interest rates to the newly President-elect Jair Bolsonaro once he is inaugurated in January.

The information was told to Reuters by Bradesco’s Chief Executive, Octavio de Lazari, who explained that the proposals from industry group Febraban will include revamping brazil’s bankruptcy law and reducing mandatory notary services that elevate credit costs.

According to Reuters, the move comes as Brazil’s central bank has been looking for ways to cut consumer interest rates that average around 260% annually for revolving credit lines (central bank data). That figure compares with 6.5% for the country’s benchamark Selic rate.

Lazari also said that Bradesco expects its loan book to grow at a faster pace in 2019 than this year, as the Brazilian economy accelerates. Its corporate loan book is expected to grow close to 10% in 2019, and credit to individuals may grow at even higher rates, he said.

Original Story: Reuters | Authors: Tatiana Bautzer, Carolina Mandl, Rodrigo Campos
Photo: Banco Central do Brasil
Edition:Prime Yield

Brazil’s state bank Caixa Económica Federal has suspended the issuance of some new home loans in the “Minha Casa, Minha Vida” housing subsidy program.

In a statement to Reuteurs, the bank said it was not extending new loans in the so-called “bracket 1.5” of the subsidy program until the end of this year due do budgetary restrictios. Loans in that segment, which offer favourable terms to families earning up to 2,600 reais ($690) per month, will be restarted next year, the bank explained.

The announcement of this move knocked the shares of homebuilders and dealing a blow to low income consumers who rely on the program.

Original Story: Reuteurs
Photo: wikimedia commons /Gaf.arq
Edition:Prime Yield

Even as all major candidates in Brazil’s presidential election have expressed support for housing subsidy programs, the country’s October vote still brings risks for major homebuilders, a Moody’s executive said on Tuesday.

Airline profits could also take a hit if the election results hurt the value of Brazil’s real currency, Moody’s added.

Marianna Waltz, head of the ratings agency’s Latin America corporate finance team, said in an interview that no candidate was planning structural changes to Brazil’s popular “Minha Casa, Minha Vida,” housing program, which is key for homebuilders’ bottom lines.

But she said any deterioration in public finances following the election or a decrease in consumer confidence would leave the sector significantly exposed.

«It doesn’t seem that we are going to have material changes in the current regulatory framework, which is positive. That said – if the economy isn’t doing well, if there is a reversal in market sentiment, demand isn’t going to be there», she said. «In addition to that, if government fiscal accounts are not in good shape, maybe the policy framework is there, but in practice the money will not be there to be lent».

Waltz’s comments highlight risks to some of Latin America’s largest homebuilders. Real estate executives have sought to assure investors in recent months that any housing subsidy changes will be minor, though some analysts have flagged possible cuts post-election when politicians may have fewer qualms about cutting popular programs.

Brazilian go to the polls on Oct. 7 to vote for president, governors, and state and federal lawmakers. In the presidential race, right-wing Congressman Jair Bolsonaro is likely to face off against leftist former Sao Paulo Mayor Fernando Haddad in a tight runoff.

Original story: Reuters | Gram Slattery 
Photo: Governo do Brasil (www.brasil.gov.br)
Edition: Prime Yield

Brazilian companies will need to look to capital markets instead of traditional bank loans for a substantial portion of their funding by early next year, as stricter international capital rules pressure lenders to cut balance sheets, a study found.
Brazilian banks must comply by January 2019 with the new Basel III capital requirements, conceived after the 2008 financial crash to force banks worldwide to hold more capital.
The research paper, by the asset management unit of Brazil’s largest private lender Itaú Unibanco Holding SA, found that corporate borrowing through bonds and other debt securities will need to grow by between 2 and 4.8 times the current level by 2022 to meet companies’ financing needs as banks are compelled to cut outstanding loans.
As a result, Brazil’s corporate debt stock is likely to soar to between R$ 343 billion ($87.67 billion) and R$ 799 billion by 2022 from R$ 165 billion in 2018, the study found.
«Under Basel III, banks will turn to loans that require less capital expenditure, such as mortgages and payroll-backed credit, leaving companies to seek more financing in the capital markets», said Gerson Konishi, the Itaú Asset Management portfolio specialist who was responsible for the study.
In addition to requiring banks to boost their core capital ratio to 7% from 4.5%, Brazil’s central bank is also obliying them to set aside more capital for corporate loans. A loan to a large company is almost 2.5 times costlier to banks in terms of capital than mortgages, for instance, according to the central bank rules.
The situation will challenge Brazilian companies to get financing as the country’s capital markets lag not just developed countries but many other emerging markets. International bond markets are often expensive for Brazilian companies, which generally need to hedge foreign currency debts.
Bonds and equities sold by private companies comprised just 2% of Brazil’s gross domestic product between 2013 and 2015, a McKinsey study found, lagging countries such as Chile (6%), China (8%) and the Philippines (4%).
If companies cannot borrow through the capital markets, the economy could slow, the Itaú study found. The Basel III requirements are also likely to drive corporate borrowing rates higher if demand exceeds supply, according to the study.
Exacerbating the challenges, government financing sources like state development bank BNDES have also scaled back lending due to tight budgets.

SAVING CAPITAL
Brazilian banks, including state-controlled lenders like Banco do Brasil SA, have already started cutting corporate loan exposure in favor of retail. Banco do Brasil’s corporate loan book shrank 3% over the latest year to R$ 133.8 billion.
In a glimmer of hope for Brazil’s capital markets, which have suffered mainly from competition with sovereign bonds with high interest rates, investment funds have boosted holdings in real-dominated corporate bonds, said capital markets industry association Anbima director José Eduardo Laloni.
Corporate bonds held by investment funds surged 18% to R$ 137.5 billion. That is still just a fraction of the roughly R$ 4 trillion in assets under domestic funds’ management, most of which remains in government bonds.
Laloni said growth in capital markets will depend on Brazil’s ability to keep benchmark interest rates and inflation low. ($1 = 3.9122 reais)

Original story: Reuters | Carolina Mandl
Photo: ITAÚ
Edition:Prime Yield

With high defaults in real estate financing caused by the economic crisis, the number of real estate repossessed by Banks has skyrocketed in recent years in Brazil. Since the beginning of 2014, the five major banking institutions of the country recovered R $ 11.5 billion in real estate due to lack of payment. A figure that corresponds to about 70 thousand houses and apartments, estimates the industry.

Nowadays, the five biggest banks in Brazil have a record volume of R$ 13,7 billion in real estate waiting in line for potential interested – including amongst them those units that were already in stock – a figure that grew 745% in four and a half years.

Banco do Brasil, Bradesco, Caixa Económica Federal, Itaú Unibanco and Santander balance sheets show that, together, these institutions had an average annual growth of almost R$ 2 billion in the volume of real estate repossessed between 2014 and 2017. The growth pace continues strong in 2018, and in just six months, banks took more than R$ 1.48 billion in homes and apartments from delinquents.

Leader in the real estate sector, Caixa, heads up this movement concentrating 70% of the total of repossessed units. In June there were about 47 thousand real estate assets from clients that, altogether, had a value of R$ 9.1 billion. In 2016, the total stock was less than half: 23 thousand units.

Same phenomenon is observed among its competitors, although with less intense pace. Since the beginning of 2014, Bradesco, Santander and Itaú totaled, each, about R$ 1 billion to this portfolio, while BB recorded the less expressive growth, with R $ 116 million in the period.

Original Story: Economia.uol /Fernando Nakagawa
Photo: Shutterstock
Edition and translation: Prime Yield

In the first half of the year, commercial real estate prices were stable in four of the most important Brazilian markets: Rio de Janeiro, São Paulo, Belo Horizonte and Porto Alegre, according to the latest FipeZap Commercial Index.
Rio was the city with the highest sales prices: R$ 10,427/sqm, while São Paulo led the way with the highest rents: R$ 43,18/sqm.
Looking into June, the top five Brazilian neighbourhoods for commercial sale prices were all in the Cidade Maravilhosa, with Leblon topping the list at R$34,478/sqm. In a distant second was Ipanema, where listings averaged R$24,115/sqm, followed closely by Jardim Botânico at R$23,524/sqm Rounding out the top five were Catete at R$16,041 and Flamengo at R$15,929/sqm.
Similarly, for commercial rental prices, Rio dominated with four of the top five highest average listings among Brazilian neighbourhoods in June. Again, Leblon easily sat atop the list at R$126.51/ sqm. Ipanema was next at R$82.83, followed by Botafogo at R$69.43 and Jardim Botânico at R$ 66.59/sqm. Closing out the top five for commercial rental prices  was Itaim Bibi in São Paulo, where prices averaged R$64.97/sqm in June.
Taking into account the last twelve months, commercial sale and rental prices fell slightly, -2.07 % and -3.06 %   respectively across Brazil.
However, both figures fell far below the accumulated inflation rate during the twelve-month period of 4.39 %, as calculated by the IPCA/IBGE (National Consumer Price Index/Brazilian Institute of Geography and Statistics).
The latest FipeZap Commercial Index also compared Brazil commercial real estate as an investment vehicle compared to lower risk alternatives, such as the CDI (Certificado de Deposito Interbancário, in English, Interbank Certificate of Deposit).
When compared to the CDI, a daily average rate of overnight interbank loans, those who have invested in Brazil commercial real estate have taken losses.
Over the last twelve months, the CDI has yielded a return of 6.8 %. However, according to FipeZap, owners of commercial real estate who leased their property were only able to gain an average return of 2.2 % during that period.
The FipeZap Index is prepared by the Economic Research Institute Foundation (Fipe) using data from the Brazilian Institute of Geography and Statistics (IBGE), in partnership with the Brazilian real estate website, Zap Properties.

Original Story: The Rio Times | Nelson Belen
Photo: FreeImages.com/Carlos Koblischek
Translation & Edition: Prime Yield

Brazilian state bank Caixa Econômica Federal will use proceeds raised in a new joint venture with France’s CNP Assurances SA to boost its capital ratio. The news was advanced to Reuters by the bank’s Chief Executive Officer, Nelson Antonio de Souza.
Under this joint-venture, Caixa will sell CNP life insurance products in its branches, and the French company will pay R$ 4.65 billion ($1.13 billion) for a 40% stake in the new company.
As told by Souza, Caixa is exploring the sale of other assets, including lottery licensing unit Caixa Instantanea SA, part of its loan portfolio and real estate. After failing to sell Caixa Instantanea earlier this year, the bank intends to resume its sale effort by December.
The bank faced high delinquency rates after its aggressive loan book expansion unde the country’s former Workers Party government.
Souza also said that Caixa wants to grow its loan book in credit lines that require less capital, such as payroll-backed loans. ($1 = 4.1056 Brazilian reais)

Original Story: Reuters | Aluisio Alves
Photo: Caixa Econômica Federal/Rodrigo de Oliveira
Translation & Edition: Prime Yield

BVA Bank, which filed for bankruptcy in 2014, plans to sell further R$ 550 millions in NPL later this year.
According to Eduardo Seixas, partner from the business restructuring consultants Alvarez & Marsal, the auction will take place in October and has set an R$ 70 million as minimum bidding value.
Last year, BVA sold an R$ 2,3 billion NPL portfolio to Enforce, the credit recovery arm of BTG Group, for R$ 211 million. A sales price that was 14% below the minimum bidding value set up for that auction, which registered 80 bids.
«We believe that this time the completion between investors will be even stronger», Seixas said. «Its smaller dimension should attract an even higher number of potential buyers and there is also a higher percentage of property backed loans».
Most of these loans were granted to average sized companies, according to Seixas, that also revealed that the company built a data room were the potential buyers can access to further details.
According to Alvarez & Marsal, since 2014 the sales of NPL assets have already brought around R$ 450 million to the Bank’s creditors. The goal is to sell all the bank’s assets until the end of the year.

Original Story: Bloomberg | Felipe Marques
Photo: FreeImages.com/Jason Morrison
Translation and Edition: Prime Yield

Caixa Econômica Federal has opened the period for the presentation of proposals to the acquisition of two lots comprising loan-recovery properties, but that still have unsolved issues to address– the so–called BNDUs, or assets not for own use. The properties are gathered in only two lots, of about 3,000 properties each, accounting for apartments, townhouses, commercial business rooms and warehouses. The bidding process will be restricted and lots comprise both properties subject to or without legal action. Investors specializing in distressed assets had been paying close attention to this opportunity since February, when Caixa gave the first signs to the market on a possible sale. However, changes in the Bank’s board of directors and presidency have delayed this process. Proposals should be submitted by July 27th and will be opened on August 2nd.

Original Story: Estadão/Economia (Coluna do Broadcast)
Photograph: Caixa (divulgação)
Translation and Edition: Prime Yield

Recovery, Itaú Unibanco’s credit recovery company, acquired over R$ 4 billion (bn) in Non-Performing Loans (NPLs) portfolios – the so called bad debt – from Bradesco. This is the second time that the company acquires operations from the financial institution, underlining its independence, which was questioned after the company changed hands from BTG Pactual to Itaú. The operation, whose winner was selected last 9thJune, is to be completed during the current month (June), allowing Bradesco to account it in its balance sheet on the 2nd quarter. However, being overdue loans with an average two to ten-year term, this won’t ben producing effects in the Banks results.

Since Bradesco started to dispose bad debt – a strategy that was not an option for this institution previously to the country’s recent crisis and before purchasing HSBC –, the bank has already disposed about R$ 20 billion in NPLs. In the 1st half of 2018, alone, more than R$ 9 billion were transacted. As the bank seems to prefer this strategy and, unlike its competitors, still does not consider to have its own credit recovery company, the market is now expecting Bradesco to put on sale a similar NPL volume over the second half of the year, boosting the transaction of NPLs portfolios in Brazil. The bank is, however, reserving information about the volume to come into the market. Bradesco and Recovery prefer not to comment on this information.

Original Story: Estadão/Economia (Coluna do Broadcast)
Photograph: Itaú
Translation and Edition: Prime Yield