Itaú BBA - Brazilian corporate loans jump in March

Latam Talking Points

< Voltar

Brazilian corporate loans jump in March

Abril 29, 2020

Overall delinquency increased by 0.2 p.p. to 3.2% in seasonally adjusted terms

Talk of the Day


The Brazilian Central Bank released yesterday the credit figures for March. New non-earmarked loans climbed 5.8% mom/sa in real terms, driven by a 26.3% jump in loans granted to non-financial corporations, reflecting increased demand by businesses to face the coronavirus crisis. Meanwhile, new non-earmarked loans to households declined 12.9%. New earmarked loans advanced 1.5% as loans to non-financial corporations rose 16.6% and loans to households dropped 4.3%. Overall delinquency increased by 0.2 p.p. to 3.2% in seasonally adjusted terms. The average interest rate and spread declined. ** Full story here.

The mid-month consumer price index IPCA-15 oscillated -0.01% in April, printing below our estimate (0.12%) and close to the median of market expectations (0.01%). The main highlights were the drop in fuel prices (-5.8%) and the increases in food costs (3.1%) and airfares (14.8%). Importantly, nearly all the data in yesterday’s report was collected remotely (websites, phone calls or email). Core inflation measures remain low and are slowing down at the margin. Underlying service inflation went up slightly by 0.18% in yesterday’s report, while underlying industrial items fell 0.62%. The average of year-over-year core inflation measures receded to 2.5% from 3.0%. The next readings for the headline IPCA index will likely stay low. We expect deflation of 0.22% in April and 0.38% in May. ** Full story here.

According to FGV’s monthly survey, industrial confidence (final release) declined 39.3 p.p. in April (to 58.2) – the lowest level since the beginning of the series – amid COVID-19 pandemic. This result comes in line with last week’s preview (-39.5 p.p.), and with the special report published earlier this month (-39.0 p.p.). The breakdown shows that the expectations component declined 46.6 p.p. (to 49.6), while the current conditions component dropped 31.4 p.p. (to 67.4). All confidence surveys fell sharply in April, pressured by the COVID-19 pandemic. Services confidence declined by 31.7 p.p., while retail confidence posted a 26.9 p.p. loss. Consumer, and Construction confidence indicators also fell in the month, by 22.0 p.p., and 25.8 p.p., respectively.

Coronavirus update: the latest official information from the Ministry of Health is that Brazil has 71,886 confirmed cases (up by 5,385 vs 4,613 yesterday), with 5,017 confirmed deaths (up by 474, vs 338 yesterday).

Day Ahead: March’s central government’s balance will be released, for which we expect a BRL 25.1 bn deficit. Also, local news indicate that the Lower House may vote the “War-budget” bill today.


Non-oil trade balance improved further in March. Monthly trade balance posted a surplus of USD 3.4 billion in March, above our forecast of USD 0.9 billion surplus and median market expectations (USD 2.7 billion surplus) – taking the 12-month rolling trade balance to a surplus of USD 11.5 billion in March (from a surplus of USD 9.6 billion in February). Looking at the breakdown, also using 12-month rolling figures, the energy trade deficit remained broadly stable at USD 21.7 billion in March (compared to a deficit of USD 21.4 billion in February), while non-energy balance improved to a surplus of USD 33.2 billion (from a surplus of USD 31.1 billion). At the margin, using 3-month annualized seasonally adjusted figures, trade balance posted a surplus of USD 21.3 billion in 1Q20 (from a surplus of USD 9.9 billion in 4Q19), with the energy trade balance posting a deficit of USD 21.5 billion (from a deficit of USD 20.5 billion), while the non-energy trade surplus improved to USD 42.9 billion (from a surplus of USD 30.4 billion). 

We now expect the trade balance for 2020 to remain broadly stable relative to 2019 (USD 5.8 billion).  We expect weak non-oil imports, associated to a soft internal demand and weak MXN, to offset the downward pressure in the trade balance from a deterioration in manufacturing exports due to the disruption in global supply chains amid the coronavirus. ** Full story here.


Activity continued to fall in February, even before the impact of the COVID-19 outbreak. The EMAE (official monthly GDP proxy) fell by 2.2% yoy, a lower contraction than expected by the market consensus (-4.0%) but higher than our call of -1.5%. On a sequential basis, the index decreased by 1.1% mom (from an upwardly revised +0.2% in January), taking the qoq contraction to an annualized figure of 2.2% (from -4.4% in the quarter ended in January). Coincident indicators point to a sharp contraction in March. GDP proxy estimates from OJF consulting contracted by a hefty 9.5% yoy, affected by the beginning of lockdowns. We expect a severe contraction in 1H20 due to the negative effects of measures to control the outbreak of COVID-19, followed by some output normalization in the second half of the year. As a result, we forecast a GDP contraction of 6.4% for 2020. ** Full story here.

< Voltar