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Brazil: Locals make hay from credit

Bullish outlook on the economy; Credit growth could reach 20%

Brazil’s two biggest privately owned banks came to London last month buoyed up by the prospects for Latin America’s biggest economy. Both Bradesco and Itaú Unibanco are confident that Brazil’s GDP will grow by at least 5% next year, providing opportunities for them to grow their loan portfolios.

Luiz Carlos Trabuco Cappi, chairman at Bradesco, reckons that if economic growth meets the bank’s forecast of 5.4% in 2010, total loans could increase by more than 20% next year. Brazil’s loan-to-GDP ratio is a low 46%, which although higher than that in Mexico and Argentina is well below the 100%-plus rates found in developed markets.

With real interest rates in Brazil at 4.75%, among the highest in the world, the local banks are making hay from their credit portfolios. Bradesco, for example, reported a 23.8% year-on-year increase in net interest income from its loans at the end of the third quarter to reach R$14.71 billion. The bank’s total net interest income for the year to the end of the quarter was R$16.99 billion on an adjusted basis.

The biggest opportunities, according to Cappi, will be in consumer lending and in providing credit to the lowest income earners, the C and D social classes, through Bradesco’s Banco Postal, a joint venture it has with the post office.

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