Latest news with #Selic
Reuters
29-05-2025
- Business
- Reuters
Brazil's bank lending picks up in April despite tight borrowing costs
BRASILIA, May 29 (Reuters) - Brazilian bank lending accelerated in April despite tight borrowing costs, central bank data showed on Thursday, highlighting the resilience of economic activity even after aggressive monetary tightening. Outstanding credit rose 0.7% from the previous month to 6.6 trillion reais ($1.16 trillion). On a 12-month basis, credit growth picked up to 11.5% from 11.1% in March, driven by a 12.4% increase in household loans. Corporate lending rose 10.2%, faster than the previous month. The expansion came despite a sharp interest rate hiking cycle led by the central bank to cool economic activity and tame inflation. Since September, policymakers have raised the benchmark Selic rate by 425 basis points to 14.75%, its highest level in nearly two decades. On Thursday, the central bank said following its financial stability committee meeting that it had observed mild signs of a slowdown in credit between January and March, both in the banking system and capital markets. Still, it noted that credit growth remains historically high, reflecting economic resilience despite tighter financial conditions. In April, the default rate on non-earmarked loans to businesses and consumers rose to 4.8% from 4.5% in March, while the average spread in the segment jumped to 31.3 percentage points from 29.4 points the month before. ($1 = 5.6870 reais)
Reuters
28-05-2025
- Business
- Reuters
Brazil's debt issuance cost rises to highest level in more than eight years
BRASILIA, May 28 (Reuters) - The average cost of Brazil's domestic debt issuance rose to the highest level in more than eight years, Treasury data showed on Wednesday, as elevated interest rates and persistent inflation continue to weigh on the country's debt profile. The cost reached 13.05% in April, up from 12.61% the previous month and the highest since January 2017. Local currency debt accounts for 96% of the total public debt in Latin America's largest economy. Brazil's debt burden is under pressure from high interest rates - nearly half of the public debt is linked to the Selic rate - as well as persistent inflation, which has long remained above the 3% target, making inflation-linked bonds more expensive. The central bank has raised interest rates by a total 425 basis points to 14.75% since it began a tightening cycle in September to curb sticky inflation. Annual consumer prices reached 5.40% in mid-May. According to Treasury data, Brazil's total public debt stock, including external debt, rose 1.44% in April from the previous month to 7.617 trillion reais ($1.34 trillion). Gross debt issuance totaled 204.6 billion reais, while redemptions reached 164.6 billion reais, resulting in net issuance of 40 billion reais. The debt stock was also impacted by 68.3 billion reais in interest payments, the Treasury said. Year-to-date, Brazil's public debt has increased by 300.6 billion reais, driven by 259.4 billion reais in interest payments and net issuance of 41.2 billion reais. ($1 = 5.6894 reais)
Yahoo
14-05-2025
- Business
- Yahoo
Nu Holdings Ltd (NU) Q1 2025 Earnings Call Highlights: Record Customer Growth and Strategic ...
Customer Growth: Added 4.3 million customers in Q1 2025, reaching a total of 119 million. Revenue in Mexico: Nearly doubled on an FX neutral basis, reaching $245 million last quarter. Credit Portfolio: Reached $24.1 billion in Q1, growing 8% quarter over quarter and 40% year over year on an FX-neutral basis. Loan Originations: Total loan originations reached a record of BRL20.2 billion in Q1, up 64% year over year. Deposits: Total deposits reached $31.6 billion in Q1, up 48% year over year on an FX-neutral basis. Net Interest Income (NII): Grew 34% year over year and 5% quarter over quarter on an FX-neutral basis, reaching $1.8 billion. Net Interest Margin (NIM): Declined 20 basis points to 17.5%. Gross Profit: Totaled $1.3 billion in Q1, up 32% year over year on an FX-neutral basis. Efficiency Ratio: Improved to 24.7%, reflecting a 520-basis-points sequential improvement. Net Income: Reached $557 million in Q1, up 74% year over year on an FX-neutral basis. 15 to 90 Days NPLs: Rose by 60 basis points to 4.7%. 90-plus NPLs: Declined by 50 basis points to 6.5%. Credit Loss Allowance: Rose to $973.5 million in Q1. Warning! GuruFocus has detected 4 Warning Signs with SRFM. Release Date: May 13, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Nu Holdings Ltd (NYSE:NU) added 4.3 million customers in Q1 2025, reaching a total of 119 million across all markets. The company achieved a high customer engagement with nearly 100 million monthly active customers and an activity ratio above 83%. Nu Holdings Ltd (NYSE:NU) received approval for a banking license in Mexico, which is expected to accelerate growth and product offerings. The company's Average Revenue Per Active Customer (ARPAC) has the potential to grow significantly, with historical cohorts showing a fivefold increase over seven to eight years. Operating efficiency improved with an efficiency ratio of 24.7%, reflecting a 520-basis-point sequential improvement. Gross profit margins declined to 40.6% due to higher credit loss allowance and increased interest expenses in Brazil. Net interest margins (NIM) in Mexico and Colombia were temporarily impacted by strategic investments in building local deposit franchises. The company's consolidated net interest margins declined by 20 basis points to 17.5%, reflecting different stages of geographic operations. Credit loss allowance increased due to seasonal effects and portfolio growth, impacting risk-adjusted NIM. The expansion of deposit bases in Mexico and Colombia placed short-term pressure on margins. Q: Can you explain the resilience of Brazil's Net Interest Margin (NIM) despite higher Selic rates and seasonal weaknesses? A: Guilherme Lago, Chief Financial Officer, explained that despite headwinds from higher Selic rates and a pullback from PIX financing, the resilience in Brazil's NIM is due to increased loan-to-deposit ratios (LDRs). This balance sheet re-leveraging is expected to drive NIM expansion in the medium term, although short-term fluctuations may occur. Q: How did the FGTS loan API disruption impact loan originations, and what was the magnitude of this impact? A: Guilherme Lago noted that the FGTS loan API disruption caused a 10% impact on the quarter's FGTS originations. This operational issue affected the market for about 10 days, impacting the overall origination volumes. Q: Is the focus on Brazil and Mexico a shift in strategy, and what is the status of international expansion beyond Latin America? A: David Osorno, CEO, confirmed that Brazil, Mexico, and Colombia remain the primary focus due to significant growth opportunities. While international expansion is considered a long-term strategy, the current emphasis is on strengthening operations in these key markets. Q: How do you plan to stabilize risk-adjusted NIMs given the higher cost of risk observed this quarter? A: Guilherme Lago explained that the drop in risk-adjusted NIMs was largely seasonal, with three-fourths of the decline due to typical first-quarter effects. The remaining impact was from investments in Mexico and Colombia. He emphasized that Brazil's NIMs are expected to remain stable or grow as the balance sheet re-leverages. Q: What is the long-term potential for secured lending, and how aggressive can Nu Holdings be in this area? A: Guilherme Lago highlighted the significant growth potential in secured lending, particularly in public and private payroll loans. The company is optimistic about leveraging its digital model to capture market share, with FGTS and private payroll loans expected to drive substantial growth. Q: How does the debt renegotiation plan, Recomeco, impact PIX financing and overall credit origination? A: Youssef Lahrech, President and COO, clarified that the Recomeco program is not directly related to PIX financing. It aims to provide customers with a fresh start by offering selective credit access and discounts, designed to promote healthy credit behaviors without creating a moral hazard. Q: What are the expectations for net interest margins in Mexico and Colombia compared to Brazil? A: Guilherme Lago stated that while Mexico and Colombia currently have tighter NIMs, the profitability in these markets is expected to converge towards Brazil's levels as the company optimizes funding and loan-to-deposit ratios. Mexico's unit economics are particularly promising. Q: Why did Nu Holdings increase coverage for Stage 2 loans, and what does this indicate about risk management? A: Youssef Lahrech explained that the increase in Stage 2 coverage was due to a recalibration of provision model triggers, reflecting a proactive approach to risk management. This adjustment is seen as a one-time effect, pulling forward loans that would have been classified as Stage 2 later. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
The Sun
08-05-2025
- Business
- The Sun
Brazil central bank hikes rate to highest level in 19 years
RIO DE JANEIRO: Brazil's central bank on Wednesday hiked its benchmark interest for the sixth consecutive time, citing persistent inflation worries and heightened trade uncertainty surrounding US President Donald Trump's sweeping tariffs. The increase by the bank -- which has ignored leftist President Luiz Inacio Lula da Silva's warnings that high rates stifle economic growth -- lifted the benchmark Selic rate to 14.75 percent. The half-point hike puts the rate at its highest level since July 2006. The bank's Monetary Policy Committee cited an 'adverse and particularly uncertain' global outlook, due to the economic situation and policy of the United States,' particularly its trade policy. At home, it noted that annual inflation, which it has forecast to reach 5.5 percent in 2025 and 4.5 percent in 2026, was well above the bank's target of 3.6 percent. A majority of the institutions and consulting firms surveyed by the financial daily Valor had expected the rate hike. Besides high inflation, economist Mauro Rochlin, of the Getulio Vargas Foundation (FGV), pointed to an 'overheated labor market.' In March, prices in Brazil rose 5.48 percent compared to the same month in 2024. Analysts say persistently fast-rising prices partly explains left-wing Lula's sinking popularity. His approval rating of just 24 percent is at his lowest point in his three terms in office, according to a survey published in February by the Datafolha institute. Rising food costs have fuelled the spike in inflation, leading the government eliminate tariffs on imported products such as meat, sugar, and coffee. On some other measures, the economy has posted progress. Unemployment fell to seven percent in the first quarter of 2025, the lowest for the period since 2014, and GDP grew 3.4 percent in 2024, its strongest increase since 2021.
CNBC
07-05-2025
- Business
- CNBC
Brazil central bank hikes rates to near 20-year high, leaves next steps open
The Central Bank of Brazil headquarters in Brasilia, Brazil, on Thursday, Jan. 2, 2025. Brazil's central bank raised interest rates by 50 basis points Wednesday in a sixth straight hike that pushed borrowing costs to their highest in nearly 20 years, and left future steps open amid global uncertainties and sticky domestic inflation. The bank's monetary policy committee, known as Copom, raised the Selic to 14.75% in a unanimous decision, matching forecasts from 32 of 35 economists in a Reuters poll. Policymakers stressed that the current environment calls for a "significantly contractionary monetary policy for a prolonged period" to bring inflation to target, dropping previous language about the need for "a more contractionary" stance. "For the next meeting, the scenario of heightened uncertainty, combined with the advanced stage of the current monetary policy cycle and its cumulative impacts yet to be observed, requires additional caution in the monetary policy action and flexibility to incorporate data that impact the inflation outlook," they added in the decision's statement. Flavio Serrano, chief economist at BMG Bank, said the central bank left the door open for a smaller rate hike in June if needed, though he sees it as unlikely. "My base case is zero increase in June, holding at 14.75%. There may be room for a cut at the very end of the year, depending on how the outlook evolves," he said. In March, the central bank had already flagged the need for further tightening this month, though at a slower pace than the previous three 100 basis-point hikes. With Wednesday's move - announced just hours after the U.S. Federal Reserve held rates steady but cited the risk of rising inflation and unemployment - the Selic benchmark rate has now reached its highest level since August 2006. The sky-high rates come against a backdrop of a 5.49% annual inflation rate, well above the official 3% goal, with markets skeptical that inflation will return to target even by as far out as 2028. The aggressive tightening has added 425 basis points to the benchmark rate since September, but policymakers stressed on Wednesday they observe "an incipient moderation in growth," with indicators of domestic economic activity and the labor market still exhibiting strength. GLOBAL UNCERTAINTIES Now, however, the inflation risk balance is no longer described as tilted to the upside, but rather as featuring higher-than-usual risks on both sides - including a new disinflationary risk tied to falling commodity prices. "Indeed, the external scenario points to a greater disinflationary outlook than previously expected, which could support a pause in monetary tightening as early as June," said Rafaela Vitoria, chief economist at lender Inter. Global uncertainties, triggered by sweeping U.S. trade tariffs that have clouded the outlook for the world's largest economy, have led Copom members to emphasize the need for greater caution and flexibility in remarks ahead of the decision. The current environment, they previously argued, not only limits their ability to provide any guidance but also requires policymakers to consider a broader and diverse set of data to assess whether monetary policy is achieving its intended effects. Their concern about the trajectory of Latin America's largest economy came despite some favorable inflationary developments since the Brazilian central bank's latest policy meeting, including a stronger currency BRBY and lower commodity prices. On the other hand, the government of President Luiz Inacio Lula da Silva has unveiled new stimulus measures, such as changes to rules governing payroll-deductible loans, as it struggles to reverse a plunge in the leftist leader's approval ratings. Considering changes in macroeconomic conditions, Brazil's central bank on Wednesday lowered its 2025 inflation forecast to 4.8%, down from 5.1% projected in March. For the fourth quarter of 2026, the period most influenced by current monetary policy decisions, the bank now projects the 12-month inflation rate to reach 3.6%, down from 3.7% estimated in the quarterly monetary policy report released late March.
