Itaú resisting growing NIM pressures
Bracher admits “severe pressure” to reduce spreads; credit portfolios tilting to SME and consumer segments.
The surprise decision by the Brazilian central bank to call an end to its easing cycle in May, because of concerns about emerging market volatility, has offered some respite to the banks that have been facing a drastically lower interest rate environment.
Candido Bracher, chief executive of Itaú Unibanco, gives a glimpse into the ferocity of the authorities’ push to reduce credit spreads charged by the banks as the central bank has been slashing the country’s base rate from 14.25% to 6.5% (a final further 25 basis point cut was expected in May).
“The banking sector is under severe pressure to reduce spreads,” says Bracher in a candid admission that the central bank’s move to reduce rates and fees on credit and debits, as well as overdrafts, is part of a coherent drive to reduce the ‘spread bancario’.
Congress is also expected to pass a law that will create an ‘opt-out’ rather than the ‘opt-in’ rule for the country’s positive credit bureau in a bid to boost competition. The central bank is also fostering a friendly regulatory environment for fintechs.
“All these changes do affect our income… and we think we are dealing with them, trying to be as efficient as we can,” says Bracher.