Brazil’s banking sector, the largest in Latin America, will sustain double-digit loan growth next year even if the global economic situation continues to deteriorate, according to Oxford Analytica.
However, Santander’s recent decision to sell a stake in its highly profitable Brazilian subsidiary there, together with other recent regional sales, points to continued turmoil in its Spanish and European markets.
Lending next year will be helped by the reduction from 3.0% to 2.5% of a consumer loan tax, part of a series of measures launched by the government in December to prevent the economy from slowing too sharply. This tax had been raised from 1.5% in April, when the government’s main aim was fighting inflation.
Brazilian banks are well capitalised, with most having capital adequacy ratios well above the minimum 11% that the Central Bank demands (already high compared with the current Basel committee recommendation of 8%).
The largest state banks, Banco do Brasil and Caixa Economica Federal, are expected to step in if the global situation deteriorates significantly next year and private sector banks become more cautious in their lending. These banks — together with the National Development Bank (BNDES) — played a critical role in ensuring credit availability during the 2008-09 downturn.
In a strong sign of the growing power of Brazil’s largest banks, Banco Safra recently announced the purchase of Swiss bank Sarasin. The acquisition fits well into Safra’s large and successful private banking business and will strengthen its geographical footprint in Asia, the Middle East and also in Europe.
For details, see BRAZIL: Credit growth to continue despite global woes