Some of Brazil’s digital retail banks are leading a new credit cycle in the country. They are posting strong results on the back of an increase in consumer credit exposure, even before the banking system has registered a pick-up in credit demand.
Data from the Brazilian central bank appears to show that retail non-performing loans (NPLs), which peaked in the first half of 2023, have now started to fall. Delinquencies are trending lower in the third quarter (down 10 basis points), but consumer credit demand is also still trending lower as loans to individuals decelerated by 189bp to 5.1% year on year in September 2023.
However, that hasn’t prevented some banks increasing both risk appetite and loan portfolios – and profits. Banco Inter is a good example of this. The bank increased the size of its credit card portfolio by roughly R$5 billion ($1.03 billion) to R$25 billion in the third quarter, anticipating better credit risk dynamics in the economy. This helped it to boost profits – Inter reported R$100 million in net profit in the third quarter for the first time.
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