Brazilian banks could be entering a new credit cycle

Macro-economic recovery and falling Selic paint positive outlook; credit growth frustrating the rosy outlook.

There are signs the banks are moving into a new and positive credit cycle as Brazil approaches the end of its monetary-easing cycle and expectations for the country’s GDP growth in 2018 improve.

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Philip Finch, UBS

“After four years of downturn, Brazilian banks are approaching a new lending cycle,” says Philip Finch, financial analyst at UBS.

The Selic interest rate is expected to fall to between 6.5% and 7.0% in early 2017 and, crucially, is expected to remain around that level for at least a year.