Brazilian banks get tougher on credit.

Brazilian banks are getting sharply more cautious on credit and drawing in their horns. Surprisingly, they seem to have even turned more cautious on the safest segments such as payroll deducted loans, which has been such a driver for specialist and large banks.  Loans in this area dropped by 19.2% in January compared to December and many banks are slashing the length of loans too. Other banks are using the exit of their rivals to charge their clients more, leading to higher spreads. Worryingly, consumers seem to be responding by taking much more expensive credit, such as the notorious cheque especial for which rates are typically above 100% per annum, rather than stopping their credit binge.  We're not looking at a credit crisis in Brazil but there are clear signs of a cooling down.

Banks say that the new caution is a response to government reserve requirement measures and the drop off in Jaunary is only to be expected as December numbers are clearly distorted by Christmas shopping. It does suggest, however, a new nervousness on their part and uncertainty over the direction of the economy. The govenrment is clearly trying to get control of inflation through higher interest rates and reserve requirements and is contemplating taxes on international capital raising.

This all begs the question: Is Brazil heading for a soft landing where credit merely gently moderates and picks back up again as the year goes on? Or could this spell  a more fundamental and longer-term shift by banks. And does that undermine the Brazilian consumer growth story?

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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