Brazil’s private banks go back to the future
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Brazil’s private banks go back to the future

Photo: Getty

The echoes of 2014 have been loud in Brazil’s private banking industry over the past 12 months. A precipitous fall in interest rates – followed by a meteoric rise – has left the market completely the same but also very different.

The problem with paradigm shifts is that they have to stick. For Brazil’s private banks, the once-in-a-generation transition away from high-yielding fixed income products didn’t last.

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  • The country’s base rate (Selic) is now back to 13.75% and all those allocations into risk assets that accompanied its precipitous fall from 14.25% at the end of 2016 to 2% in 2020 are now a distant memory – a cyclical aberration rather than a structural realignment.

    The fact that Brazil’s conversion to a low interest rate economy was a mirage is important. Private banking clients have suffered from their increased exposure to risk in the past few years and have suffered the worst year’s portfolio performance in a generation. The return to the domination of fixed income products – and specifically tax-free real estate and agricultural products – cements the advantage of the large banks: those that issue debentures, those that have large corporate and asset management business; and those that were seeing their private banking clients being aggressively courted by the numerous wealth management boutiques marketing specialist risk product expertise.



    Rob Dwyer head.jpg
    Latin America editor
    Rob Dwyer is Latin America editor. He has been a financial journalist since 1997 and has worked in London, New York and São Paulo, Brazil, where he is now based.
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