Latin Finance - July/August 2012 - 20
Brazilian banking
End of the golden age
By John Rumsey
T
he cosseted Brazilian banking sector is facing unprecedented challenges. A government push to lower interest rates and moves to encourage public sector banks to lend more as part of a drive to squeeze spreads is coming on top of much higher delinquency rates. Average 90-day non-payment levels across businesses and individuals hit 6% in May, the highest level since the series began in 2000, according to central bank data. Individual credit defaults reached 7.98%, the highest level since November 2009 when it reached 8%. Private banks would like to draw in their horns on credit, but are afraid of losing market share. The government has already enacted a bold series of measures – which are proving worrisome to bankers – to stimulate credit as GDP numbers remain weak. According to the central bank’s latest poll of leading economists, Brazil’s economy will grow by just 2.01% this year, a figure that was revised down for the ninth consecutive time in the week starting July 9. The ever-bullish finance ministry continues to see recuperation in the second half leading to GDP growth of 4% in the final six months of the year, but its data are seen as significantly too optimistic by most private economists. To combat weak growth, the central bank, headed by Alexandre Tombini has sliced rates since last August with eight consecutive cuts bringing the rate down four and a half percentage points to 8%. It has signalled its intention to bring them down further and the consensus forecast of economists sees the Selic benchmark rate getting cut to 7.5% at the next monetary policy committee meeting.
The outlook for Brazilian banks and their shareholders has darkened. Crude government measures to stimulate credit look dangerous while the consumer story is starting to unravel
Dusk descends on São Paulo The government has been active in pushing growth. Ricardo Loureiro, president of Serasa Experian in Brazil, notes that the auto loan market has seen some recovery in the last two months thanks to the combination of lower taxes including industrial ones. Other measures to stimulate the economy have been taken and on July 11, the government brought forward refunds worth R$2.6 billion ($1.27billion) on 2011 income tax. There are further options for the government to stimulate the slowing economy including reducing the industrial products tax, a measure that has been used in the past and has functioned well, he says. According to a report put out by Moody’s at the end of May, the government stimulus measures mean banks “will focus on low-leveraged and new consumers by offering longer tenors, lower rates and lower installments that will attract consumers.” Lower taxes could have positive effects as
20 LatinFinance
July/August 2012
Latin Finance - July/August 2012
Table of Contents for the Digital Edition of Latin Finance - July/August 2012
Latin Finance - July/August 2012
Contents
Cover story: Mexico
Corporate bankruptcy
Brazilian banking
Panama
Corporate performance ranking
Healthcare
Retail
Structured finance
Latin Finance - July/August 2012 - Latin Finance - July/August 2012
Latin Finance - July/August 2012 - Cover2
Latin Finance - July/August 2012 - 1
Latin Finance - July/August 2012 - Contents
Latin Finance - July/August 2012 - 3
Latin Finance - July/August 2012 - 4
Latin Finance - July/August 2012 - 5
Latin Finance - July/August 2012 - 6
Latin Finance - July/August 2012 - 7
Latin Finance - July/August 2012 - 8
Latin Finance - July/August 2012 - 9
Latin Finance - July/August 2012 - Cover story: Mexico
Latin Finance - July/August 2012 - 11
Latin Finance - July/August 2012 - 12
Latin Finance - July/August 2012 - 13
Latin Finance - July/August 2012 - 14
Latin Finance - July/August 2012 - 15
Latin Finance - July/August 2012 - 16
Latin Finance - July/August 2012 - 17
Latin Finance - July/August 2012 - Corporate bankruptcy
Latin Finance - July/August 2012 - 19
Latin Finance - July/August 2012 - Brazilian banking
Latin Finance - July/August 2012 - 21
Latin Finance - July/August 2012 - 22
Latin Finance - July/August 2012 - 23
Latin Finance - July/August 2012 - 24
Latin Finance - July/August 2012 - 25
Latin Finance - July/August 2012 - Panama
Latin Finance - July/August 2012 - 27
Latin Finance - July/August 2012 - 28
Latin Finance - July/August 2012 - 29
Latin Finance - July/August 2012 - 30
Latin Finance - July/August 2012 - 31
Latin Finance - July/August 2012 - 32
Latin Finance - July/August 2012 - 33
Latin Finance - July/August 2012 - Corporate performance ranking
Latin Finance - July/August 2012 - 35
Latin Finance - July/August 2012 - 36
Latin Finance - July/August 2012 - 37
Latin Finance - July/August 2012 - 38
Latin Finance - July/August 2012 - 39
Latin Finance - July/August 2012 - Healthcare
Latin Finance - July/August 2012 - 41
Latin Finance - July/August 2012 - 42
Latin Finance - July/August 2012 - Retail
Latin Finance - July/August 2012 - 44
Latin Finance - July/August 2012 - 45
Latin Finance - July/August 2012 - 46
Latin Finance - July/August 2012 - Structured finance
Latin Finance - July/August 2012 - 48
Latin Finance - July/August 2012 - Cover3
Latin Finance - July/August 2012 - Cover4
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