Brazilian banks expected to withstand COVID-19 effects

Brazilian banks are in relatively better shape than their regional peers amid the challenges stemming from the negative economic impacts of the COVID-19 crisis.

"In general, the non-performing loan rate of Brazilian banks will increase in the coming quarters, but there's no reason for panic, as the increase is manageable for those banks," Luiz Miguel Santacreu, an analyst at local rating agency Austin Ratings specializing in banks and structured finance, told BNamericas.

Brazilian banking giants Itau Unibanco, Banco Bradesco, Banco do Brasil and Caixa Econômica Federal appear at the top of the list in terms of tier 1 capital in a regional ranking prepared by specialized publication The Banker.

Those Brazilian banks are followed in the ranking by Mexico's Grupo Financiero Banorte, Colombia's Bancolombia, and Chilean entities Banco de Credito e Inversiones and Banco de Chile.

Global investors have been closely watching what has been happening in Brazil in recent months, as the country is one of the epicenters of the pandemic in terms of confirmed cases and fatalities.

Although the country's economy is forecast by economists to shrink around 6% this year, the sharpest rate on record, there is a perception that the worst could now be over as most of the nation's states are now easing restrictions on the circulation of the public.

In recent presentations for investors, Roberto Campos Neto, head of the central bank, has insisted that the country's economy has been showing signs of recovery since April, considered the worst month of the pandemic so far in economic terms.

In addition, commercial banks in Brazil have assumed low risk during the crisis, with most of the bailouts in selected sectors being led by state-run development bank BNDES.