THE BANKER How will Brazil’s private banks see off multiple challenges?

Increased competition from public sector banks, criticism from the president, a weakening economy and aggressive interest rate cuts are combining to make life difficult for Brazil's private banks. Will an efficiency drive see them emerge leaner, smarter and stronger?

The Brazilian banking sector is no longer resembling an invincible, profit-making machine. The rate of growth in income among the country's private banks has slowed. The government has declared open season on private sector banks and spearheaded lending by public banks, accelerating a drop in spreads that was already happening thanks to lower interest rates. At the same time, the Brazilian economy is recovering worryingly slowly, meaning loan growth will not return to previous levels and low rates are here to stay. Is the share price rally a dead cat bounce or a more durable sign that the industry is poised to return to health?

Brazil’s largest private sector bank, Itaú Unibanco, reported mediocre if improving fourth-quarter 2012 results on February 5 with recurring profits up 2.6% over the previous quarter. The bank sought to emphasise that it was heading in the right direction. Bradesco, the country’s second largest private sector lender, which had reported results earlier than Itaú, posted a net income increase of 2.9% for 2012 on 2011's figures.

This is the start of an article on the outlook for banks in Brazil. To see the full article, please go to The Banker's website (www.thebanker.com).

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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One Response to THE BANKER How will Brazil’s private banks see off multiple challenges?

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