Brazil’s near-term economic forecast is disappointing, with gross domestic product growth that, at best, may just exceed 1% in 2015. This has had a dramatic impact on its banks' expansion plans. Private sector lenders, such as Itaú Unibanco and Bradesco, have tightened their lending policy, while state-run institutions Caixa Economica Federal and Banco do Brasil, which are tasked with supporting the economy through the extension of credit lines, are expected to relax their previously aggressive margins on loans and are braced for rising non-performing loans (NPLs).
Upcoming presidential elections have added a further layer of difficulty to the market in recent months, with most in the finance community adopting a wait-and-see policy. Banks have put the brakes on lending, but this may open up opportunities to less conventional financiers, such as private equity funds.
