2023-11-10 01:26:14
RIO DE JANEIRO, Nov. 9 (Xinhua) — The profitability of Brazilian banks fell 6 percent in the first half of this year compared to the same period in 2022, while bank credit slowed down, reported Thursday the Central Bank.
According to a report from the issuing entity, the net profit of the Brazilian banking system, the largest in Latin America, in the last 12 months until June was 134,400 million reais (about 27,424 million dollars), despite which the banking system continues being profitable and with positive prospects in the coming months.
“The drop in profitability reflected the increase in expenses with provisions (reserve for credit risks), financing expenses (how much is paid to offer credit) and administrative expenses,” the authority explained.
The outlook for the coming quarters is for a more positive scenario for the profitability of financial institutions.
“The improvement in the quality of new concessions and the reduction in loss estimates in credit portfolios indicate less pressure through provisions,” he noted.
The gradual cycle of monetary easing (lower base interest rates) is also favorable as it will reduce banks’ funding costs, while the credit “stock” will maintain a significant proportion of recent loans at higher rates.
“In addition, the new cycle tends to increase the demand for credit and other banking services, as well as reduce pressure on the payment capacity of families and companies,” explained the Central Bank.
In September, for the fourth consecutive month, the average interest rate on loans fell, slowing in 12 months, as did the base interest rate, which was lowered to 12.25 percent annually.
By the end of the year, analysts expect the Selic to fall to 11.75 percent. As a consequence, bank financing rates have been falling.
According to the Central Bank report, the capital market continued to expand in the first half, despite the slowdown, especially in the first three months of the year.
In the case of companies, the banking portfolio is growing at increasingly lower rates in all segments, with a particular reduction in credit to large companies, for which the capital market continues to be a relevant source of financing.
In the case of micro, small and medium-sized companies, there is pressure on their payment capacity and “high debt continues to manifest itself in the materialization of credit risk,” explained the issuing entity.
In the case of families, the criteria for granting credit have become more restrictive and the payment capacity has worsened slightly, since, “compared to the second half of 2022, income is more committed to riskier methods and higher interest rates, especially credit cards.”
“The worsening ability to pay appears to be coming to an end, especially among lower-income families,” the report noted.
Finally, the entity considered that there are no relevant risks for the financial stability of Brazil.
“The National Financial System remains comfortably maintained with capitalization and liquidity and provisions adequate to the level of expected losses. In addition, capital and liquidity stress tests demonstrate the solidity of the banking system,” the document concluded.
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