While the market waits anxiously for the pension reform to provide relief to the Brazilian economy, local investors are keeping one eye on the imminent earnings season to get some idea about how well the country’s companies are performing. This week, financial firms will draw all the attention, with two of the most important banks in the country reporting their first-quarter results.
According to analysts polled by newspaper Valor, Brazilian banks are set to show stronger earnings—despite the sluggish economy—reflecting a better credit performance and focusing on higher spread operations. As we explained in our April 24 newsletter, the banks’ driving force is the credit market for individual clients and small companies. As these markets are more concentrated, banks can keep their tariffs high—compensating for the reduction in the Selic benchmark interest rate to 6.5 percent per year.