07/15/2024 | Press release | Distributed by Public on 07/15/2024 05:16
This month, FICO Risk Trends has received the updates released by the Central Bank of Brazil on Wednesday, June 26, regarding the closing of May 2024. To facilitate understanding, we have condensed our main observations into the following sections:
The macroeconomic analysis of the Brazilian market presents a positive national scenario, based in official data. Retail sales volume reached its highest year-opening rate recorded, with March hitting 105.86%. The Open Unemployment Rate also stands out for its ten-year low record, reaching 7.5% in April, second only to the historical minimum (2014). The Average Real Income of Employed Persons also reached its historical maximum in April, at R$ 3,056. Additionally, we noted a reversal of the progressive downward trend in IPCA (National Consumer Price Index) since October 2023, reaching 3.93% in May.
Regarding indebtedness, there has been an increase in the percentage of indebted families since February, reaching 71.68% in May. The percentage of families with overdue bills has shown an opposite trend since March, reaching 21.85% this month. Meanwhile, the percentage of families unable to pay has been decreasing since October 2023, with a brief interruption between February and April this year, reaching 9.40%. For high-income families earning more than ten minimum wages, an interesting trend has been observed since February: the upward trend continues, reaching 4.46%.
Credit cards remain the leading type of debt with the highest percentage of indebted families. This type of debt has seen an increase since August 2023, reaching 88.13% this month (May). This value is only slightly below the historical maximum (2022).
The analysis of the Brazilian credit market also indicates growth opportunities. The Credit-to-GDP ratio stands at 53.66%, just 0.20 percentage points below the historical maximum recorded in December 2015, marking a return to this level after more than eight years. Of this value, 22.47% represents Directed Resources, 18.09% represents Free Resources for Natural Persons, and 13.10% represents Free Resources for Legal Persons.
Regarding credit operations in the financial system, the historical maximum of the total of these operations were recorded in April, at R$ 5.89 trillion, growing since March 2018. Credit markets for Natural Persons and Legal Persons also recorded their historical highs, reaching R$ 3.68 trillion and R$ 2.28 trillion, respectively.
The credit portfolio continues to show steady growth, reaching its historical maximum of R$ 5.96 trillion once again. On the other hand, concessions reached R$ 570.02 billion, a value stable since its historical maximum in March this year. Additionally, the average term of new operations also reached its historical maximum of 128.67 months. Conversely, the average interest rate has been trending downward since May 2023, reaching 27.79%, with an exception in April, which saw a slight increase outside of the trend.
Source: FICO Risk TrendsWe highlight the following credit products:
The Over 90-day delinquency rate reached 3.29% and appears to be rising again after the declines registered since December 2023. This scenario is confirmed by the rise in the 15 to 90-day delinquency and Over 15-day delinquency rates from the same period, reaching 4.08% and 7.37%, respectively.
Source: FICO Risk TrendsWe highlight the following credit products:
In this comparative chart between the credit portfolio and delinquency, we can observe a sharp decline in delinquency between April and December 2020, followed by a progressive increase until May 2023. This phenomenon is related to debt renegotiation, which saw an increase of over 50% between February and November 2020, contributing to this sharp drop in the overall delinquency rate. However, after September 2020, delinquency in personal loans linked to debt renegotiation rose significantly until May 2021, indicating that the agreements made were not paid on time, resulting in the observed increase in overall delinquency from December 2020 onwards.
The evolution of the credit portfolio and delinquency rates of unsecured personal loans linked to debt renegotiation can be tracked in the following graph:
Source: FICO Risk TrendsCurrent Scenario: This type of credit has the highest household debt (88.13%) and high delinquency rates (Over 15 days at 10.69% and Over 90 days at 7.60%).
Advice:
Current Scenario: Historical maximum portfolio value (R$ 38.23 billion), high-interest rate (128.44%), and delinquency rate (Over 90 days at 11.27%).
Recommendations:
Current Scenario: Portfolio value of R$ 293.01 billion, average term of 40.41 months, interest rate of 93.95%, and delinquency rate (Over 90 days at 5.98%).
Recommendations:
Integrated Risk Management Strategy:
Notice
These recommendations are based on data analysis and our consulting team's experience. They represent the team's specific view and do not necessarily reflect FICO's stance, nor do they assume responsibility for any practical application outcomes.
We note a predominantly positive scenario in the Brazilian macroeconomy, based in official data. This situation is supported by the historical maximum in Average Real Income of Employed Persons and the year-opening Volume of Sales in Commerce, by the lowest Open Unemployment Rate in the last ten years, and by the decrease in the percentage of families with overdue bills and the percentage of families unable to pay their bills. However, the reversal of the declining trend in IPCA and the increase in the percentage of indebted families deserve attention.
Regarding the credit market, the Credit-to-GDP ratio returns to its historical maximum after more than eight years, demonstrating the growth of credit portfolios. Moreover, the Total Credit Operations of the Financial System also recorded their historical maximum, growing since early 2018.
Regarding the credit portfolio, we observe steady growth, reaching its historical maximum of nearly R$ 6 trillion again this month. Credit granting remains stable at R$ 570 billion. The average interest rate recorded 27.79%, continuing its downward trend.
However, delinquency reached 3.29% (Over 90-day delinquency rate) and appears to be rising again after the declines observed from December 2023 onwards. This is evident when analyzing the 15 to 90-day delinquency and Over 15-day delinquency rate, which also increased during this period, with the latter reaching 7.37%.
Credit cards continue to be a significant credit product in the market, representing the highest percentage of indebted families at 88.13% this month, just below the historical peak. Additionally, the credit card reached a portfolio of over R$ 545 billion, with granting around R$ 229 billion. Its average interest rate continues to follow the national trend downward, reaching 84.76%. Its delinquency rates, in general, deviated from the national trend of decline, reaching 10.69% (Over 15-day delinquency rate). Nevertheless, the 15 to 90-day delinquency rate showed the opposite behavior, declining to 3.09%, suggesting a potential continuation of delinquency rate reduction in the future.
Overall, the results indicate growth opportunities. However, factors such as the rise in the IPCA, increasing household debt, particularly in high-interest products like credit cards, and uncertainty regarding the direction of delinquency evolution, call for caution in risk-related decisions.
For more details and other indicators, please refer to FICO Risk Trends, and stay tuned for future editions to track the evolution of the Brazilian credit and risk landscape.