Market roundup: What Brazilian banks’ Q3 results tell us

What Brazilian banks’ results say about what’s ahead

The Q3 earnings season brought some mixed results in Brazil’s banking sector. While Santander and Bradesco presented dreadful numbers — with net profits falling 28.1 and 22.1 percent, respectively — Itaú Unibanco and state-controlled Banco do Brasil emerged as benchmarks for navigating times of high-interest benchmark rates, inflation, and elevated delinquency.

State of play. High levels of delinquency, especially in credit lines destined for individuals, such as credit cards and personal loans, lead institutions to increase their provisions for doubtful debts, affecting their profits. After a solid second quarter for Brazil’s big four banks, the quarter ending in September showed a slowdown.

Yes, but … Let’s be honest, Brazil is a banking paradise … for banks. Even with the deceleration of some of their operations in Q3, concerns about asset quality deterioration, and political uncertainty, Brazilian institutions are on track for their most profitable year in recent history. 

• Aggregate net income for the leading banks in Latin America’s largest economy is projected to total BRL 106 billion in 2022, surpassing last year’s figure by nearly 20 percent, according to S&P Global Capital IQ analyst consensus.

Ready for 2023. “We believe we are in the most challenging part of the cycle,” Santander Brasil president Mario Leão...