trending Market Intelligence /marketintelligence/en/news-insights/trending/sNU_EKpM92t0B07SNMKTyg2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

In This List

Fitch: FGTS withdrawals may have adverse impact on Brazil mortgage lending

Street Talk Episode 56 - Latest bank MOE shows even the strong need scale to thrive

South State CenterState MOE Shows Even The Strong Need Scale To Thrive

Talking Bank Stocks, Playing The M&A Trade With Longtime Investor

Report: Kashkari Says Fed In Holding Pattern But Rate Cut Still Possible


Fitch: FGTS withdrawals may have adverse impact on Brazil mortgage lending

The recently announced measures that will let individuals take out a portion of their balances from the FGTS workers' severance fund could negatively impact mortgage lending in the long term if Brazil's economic growth does not accelerate, Fitch Ratings said.

The rating agency noted that Caixa Econômica Federal holds the lead in mortgage loans in the country and "could also be affected by an increase in the maturity mismatch between assets and liabilities due to a decrease in funding from FGTS if economic growth does not accelerate."

According to Caixa, it will incur a negative impact of about 300 million Brazilian reais in annual revenues due to withdrawals from the FGTS fund, though it noted that the amount is only a small part of total income.

Fitch highlighted that FGTS inflows depend on Brazil's economic activity, as it is funded by payroll contributions. Due to the recent economic crisis, the fund's annual net inflows dropped to 4.9 billion reais in 2017 from 18.4 billion reais in 2014. The rating agency believes that net flows will continue declining if economic growth does not improve.

Some 30 billion reais will be withdrawn in 2019 and 12 billion reais in 2020 because of the recent measures. Fitch expects neutral medium-term impacts for mortgage lending as some withdrawal rules are aimed to protect the fund.

Moreover, the fund's growth could also be pressured by withdrawals, limiting its ability to fund the country's mortgage-lending segment. The rating agency also noted that Brazil has no solid alternative source for FGTS and/or savings as a source for mortgage lending.

However, "approval of the pension reform and discussions of other necessary reforms (tax, for example) could generate additional positive market sentiment and create a positive effect on confidence levels in the country, which would generate new hires and consequently boost the FGTS."

As of Aug. 5, US$1 was equivalent to 3.94 Brazilian reais.