Watch those profits tumble?

Sleepless nights are in store for bankers at Brazil’s leading private banks since the country’s powerful public banks promised to take an axe to lending rates last week. Rates could come down by as much as 88% in some cases, said one public bank.

The announcement grabbed headlines across Brazil at the end of last week. Some popular papers trumpeted the news on the cover, underlining its importance to middle class Brazilians who have been loading up with debt.

Over the last couple of years, high rates have become such a totemic issue in Brazil that the Central Bank regularly publishes comparative data on interest charges and consumer watchdogs, such as Instituto de Defesa do Consumidor (Idec) publish surveys and recommend consumers shop around.

The new government is raring to maintain growth and is not afraid to use all the levers in its power to try to reach the high target of 4% this year. Lula did the same in 2009 but it’s important to note that he was not so aggressive and forced the issue at a more precarious economic time.

The question is just how much the private banks dole out. They have improved service substantially but are still slow and lumbering compared to private banks. It also remains to be seen just how available, cheap and easy these lines will be for small companies and individuals as the government tends to smile on larger companies.

Private Brazilian banks are nevertheless rattled and share prices have been falling in recent days. For years, they have been doing very nicely, thank you very much, with rates that can comfortably exceed 100% for individuals. Now the cosy relationships have been challenged once again.

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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