In recent weeks, Brazil’s largest private banks released their 2023 earnings reports, which show mixed signals regarding the lower-income clientele. Unlike their peers, Bradesco and Santander are finding it more difficult to reduce delinquencies among these customers after granting them a lot of credit during the Covid pandemic.
State of play. Despite the general decline in individual delinquency rates between May and December 2023, from 4.3 percent (the peak) to 3.7 percent, according to the Central Bank, the loans granted to low-income customers in 2021 and early 2022 still caused Bradesco and Santander to lower net income and return on equity (ROE).
Why it matters. Most of the neobanks in Brazil expanded their operations by catering to lower-income customers, forcing the incumbents to follow suit. Now that they are all suffering from low credit demand and high delinquency rates, digital banks are openly chasing higher-income customers as they also seek profitability.
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