BTG Pactual keeps performance crown, while Itaú gains ground in Brazil

Brazil witnessed a strong rebound in economic activity in 2021 as restrictions were lifted, with gross domestic product (GDP) growing by 4.6% on an annual basis after the economy shrank 3.9% in 2020 due to the pandemic.

As a result of improved macroeconomic conditions, the banking sector was able to build up its strength in the year to December 2021. Large Brazilian banks’ post-pandemic performance exceeded expectations, thanks to their diversified business model and sound pre-impairment profit, according to Fitch Ratings.

Pre-tax profits increased by least double-digit figures for all Brazil’s top banks, with Itaú Unibanco and Banco Bradesco reporting more than 650% increases in profits. Tier 1 capital improved as well, aside from Banco do Brasil, which saw a slight decrease of 0.39%.

But in terms of performance, it is fifth-largest Banco BTG Pactual that comes out on top for the third year running. The investment bank has come out on top in five out of the eight categories included in the best-performing methodology, which considers metrics from assets and loan portfolio growth to operational efficiency and soundness. BTG Pactual stands out by far in terms of growth, scoring 9.04 out of 10, with gross loans growing 89.5% in 2021 compared to the previous year. The bank had the third-highest return on capital in Latin America and the Caribbean at 25.03%.

Itaú Unibanco has jumped from fourth to second position in the overall performance table, and is best placed in terms of return on risk. In 2021, the bank’s return on equity increased from 14.5% to 19.5%, with a 18.1% growth in credit portfolio compared to 2020. Itaú Unibanco is also the country’s largest lender and the biggest in Latin America and the Caribbean by Tier 1 capital.

Banco do Brasil, the country’s second-largest lender, comes fourth with regards overall performance but first in liquidity, a metric that takes into account loans-to-assets and loans-to-deposits ratio. Loans-to-assets ratio improved from 43.79% in 2020 to 43.19% in 2021.

Caixa Econômica Federal is fifth in terms of overall performance, despite having improved in several metrics, notably return on risk, soundness and leverage, where it places second. Its capital asset ratio went from 5% in 2020 to 6.5% the following year.

Banco Bradesco is third again in 2022, despite coming first for operational efficiency and second for growth, a metric encompassing annual percentage growth in assets, loans, deposits and operating income. Gross total loans increased 11.8% and operating income was up 15.3% in 2021 compared to 2020.

For the rest of the year, Brazil’s largest private banks are likely to be challenged by decelerating economic activity and inflation, which could have an effect on asset quality and costs and profitability, according to Fitch Ratings. GDP growth is expected to slow to 0.6% this year, before rising to 1.2% in 2023, according to the Organisation for Economic Co-operation and Development.