Q1 results spell a tough year for Brazilian banks

The pressure on the Central Bank for interest cuts, currently at 13.75 percent, is coming from all sides — from the government, to the Senate, to business leaders. Counterintuitively, Brazilian banks may be an ally for these groups in their demand for lower borrowing costs.

While expensive credit may benefit banks, it can also lead to higher default rates. The latest survey by Serana Experian, a credit protection agency, shows that 70.7 million Brazilians are in default as of March 2023 — a 7.8 percent increase from a year prior.

Most defaulters are behind on their credit card bills, followed by utilities payments, and retail purchases.

Brazilians’ inability to make ends meet is showing in banks’ earnings reports. Financial institutions have seen their rate of non-performing loans (90 days or more past due) going up quarter after quarter, as...