The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Brazil’s banks to pay for Bolsonaro’s unpopularity

The country’s president has responded to falling approval ratings and the threat of a trucker strike by raising bank taxes.

President Jair Bolsonaro and Health Minister Luiz Henrique Mandetta Hold a Press Conference about the Coronavirus (COVID-19)
Getty Images

Brazil’s banks have been drawn directly into the firing line of the country’s increasingly populist administration.

On March 1, president, Jair Bolsonaro, announced he would be raising the rate of the industry's social contributions (CSLL) to 25% from 20%, to offset the costs of his decision to lower taxes on diesel and domestic gas.

The change will be effective for the second half of 2021.

The increase in CSLL takes the consolidated corporate tax rate for banks in Brazil to 50%.

Shares in the country’s large banks fell by an average of 3% in the following day’s session.

However, analysts project that the impact of the tax change should be modest. Goldman Sachs estimates a range of between 0.2% and 2.7% lower net income in 2021, while JPMorgan estimates a 3% to 4% fall in earnings per share.

However, in a client note, JPMorgan warned that the measure – if extended – would lead to a 150-basis point fall in returns on equity.

Marcel Campos, financial institutions analyst at XP Investimentos, says that if the five-point increase becomes “permanent … it would impact banks’ profit and valuation by approximately 3.7%”,

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree