trending Market Intelligence /marketintelligence/en/news-insights/trending/SuRZS9-0kipOlYHA5fN7dw2 content esgSubNav
In This List

Profitability of Brazilian banks hits 7-year high

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Profitability of Brazilian banks hits 7-year high

Profitability at Brazilian banks has risen to its highest level in seven years, Banco Central do Brasil said in its latest financial stability report Oct. 10.

The financial system's return on equity reached 15.8% in June, increasing from 14.8% at the end of 2018, and from 14.3% in June 2018. Banks saw a gradual recovery of the total mixed loan portfolio's profitability and more operational efficiency at Brazil's state-owned banks, the central bank noted.

This is the highest level of overall ROE since March 2012, according to data from the regulator. ROE at private banks reached 16.5% in June, up 2.2% year over year. However, at public banks the index decreased to 14.3% from 14.6% in the same period of 2018.

Despite the positive trend, the central bank warned that the pace of increase in profitability at banks could decelerate slightly, amid less cost-cutting and efficiency gains. However, the mild slowdown will come without risks to financial stability.

According to the central bank, the "still weak" economic picture in Brazil saw domestic financing to non-financial companies grow at a similar pace as in prior quarters. Meanwhile, a growing capital market reflects an appetite of borrowers to seek cheaper financing outside of banks, the regulator said. Further, an increase in loans to small and medium-sized enterprises has not offset less lending to large companies.

However, the solvency of the financial system improved, enhancing banks' ability to support the pace of credit growth. "Simulations continue to show that Brazilian banks are capable of coping with stress situations," Banco Central do Brasil said.