Banking concentration fell last year, according to the 2021 Banking Economy Report, released today (6th) by the Central Bank (BC). Last year, the five largest banks in the country – Caixa Econômica Federal, Banco do Brasil, Bradesco, Itaú and Santander – held 76.6% of total assets in the commercial banking segment. At the end of 2020, this percentage was 77.6%.
“The report shows continuity in the reduction of concentration in the SFN [Sistema Financeiro Nacional] in 2021, a process that has been taking place in recent years, and an increase in the degree of competition, not only in the banking segment, but also in the cooperative and non-banking segment”, says the BC. “The drop in concentration is observed in all accounting aggregates and, more intensely, in total deposits”, he added.
The five largest banks were responsible for 77.4% of deposits at the end of last year, against 79.1% in 2020. In the case of credit, this group accounted for 81.4% of total operations in 2021, against 81 .8% from the previous year.
In this edition, the Banking Economy Report adopts the concentration ratio of the four largest banks instead of the five largest. Still, data on the top five were released for comparability with previous editions of the report.
The presence of the four largest banks – Caixa Econômica Federal, Banco do Brasil, Bradesco and Itaú – also decreased in all accounting aggregates, from 2020 to 2021, from 57.3% to 56% in total assets, from 62.7% to 60.1% in total deposits and from 59.4% to 59.3% in credit operations.
In terms of market shares, the banking segment increased from 88.1% to 87% of total assets; from 94.3% to 93.5% in total deposits; and from 86.4% to 86.2% in credit operations. “The increase in the market share of the non-banking segment in all accounting aggregates is mainly due to the increase in the share of the credit unions segment in the period”, explained the BC.
Credit unions were responsible for 5.3% of total assets last year, against 3.8% in 2020. In deposits, they went from 5.3% in 2020 to 6% in 2021, and in the case of credit, this group accounted for 6.1% of total operations in 2021, against 5.1% in the previous year.
Credit
The total balance of loans and financing granted by banks grew 16.3% last year, reaching a volume of R$ 4.7 trillion, which represents 53.9% of the Gross Domestic Product (GDP, sum of goods and services produced in the country), showing stability at the end of 2021. Credit grants grew 18.2% in 2021, the highest annual growth rate in the series started in 2011.
According to the BC, the strong growth was driven by the segment of individuals, both in non-earmarked credit lines and in earmarked credit. Free credit is one in which banks have the autonomy to lend money raised in the market and set the interest rates charged to customers. Directed credit, on the other hand, has rules defined by the government, and is basically intended for the housing, rural, infrastructure and microcredit sectors.
Thus, the stock of credit to individuals increased by 21% in 2021 (11.1% in 2020), with variations of 23% in the free credit modalities (emphasis on cash credit cards) and 18.5% in earmarked credit (emphasizing both rural credit and real estate financing).
In the corporate segment, there was a 10.5% increase in the balance (21.8% in 2020), reflecting the 17.3% growth in free credit, with emphasis on discounting trade notes and receivables, vehicle financing and advances on foreign exchange contracts. Credit directed to companies decreased by 0.3%, with a 3.9% drop in the balance of operations of the National Bank for Economic and Social Development (BNDES), being offset by increases of 17.8% in the balances of rural credit and 2.2% of the other earmarked credit modality, in which emergency programs are classified.
The BC’s projections for the evolution of bank credit this year are for growth of 14.2% in the total balance, with an increase of 17.2% in the credit balance with free resources and of 9.7% in the credit balance with directed.
The average interest rate on new credit contracts increased by 6 percentage points throughout 2021, reaching 24.3% per year in December, in line with the upward trajectory of the basic interest rate, the Selic.
Profitability
THE profitability of the banking system in 2021 recovered from the previous year’s decline, returning to levels close to those seen before the Covid-19 pandemic. “However, the recovery in profitability was not homogeneous, with institutions with more diversified business models benefiting the most”, explained the BC.
The net income of BRL 132 billion in 2021 was 49% higher than that recorded by the system in 2020 and 10% higher than that observed in 2019. The results are explained by the growth in the interest margin, the reduction in expenses with provisions (reserve on risks credit) and efficiency gains.
Regarding delinquency, the expectation is for a moderate increase towards pre-pandemic levels, given the less favorable economic scenario expected for this year. “This movement in delinquency and the migration of portfolios to a higher risk mix may increase the level of problem assets throughout the year. This eventual increase should not, however, bring greater difficulties to the system, given that the current level of coverage of provisions could be used to absorb it totally or partially”, says the report.
Published annually, the Banking Economy Report deals with a broad spectrum of issues related to the National Financial System and the relationships between institutions and their customers.
The document released this Thursday also includes a set of boxes covering various themes, such as changes in the competitive landscape of the financial sector, resulting mainly from the digitalization; the effect of change in credit card bill layout; at sustainability-related bond issues by Brazilian companies; O bond market in Brazil; among other topics.
