By Marcela Ayres
BRASILIA (Reuters) -Brazilian banks' profitability improved in the first half of this year, led by digital banks, and net interest income and service income should continue to rise in the second half, the bank said on Thursday. central.
In its Financial Stability Report, the central bank noted that the annual return on equity (ROE) of the country's banking system increased to 15.11% as of June 30, up from 14.23% at the end of December 2023.
Digital banks stood out, whose ROE increased to 19.1% at the end of June – the highest among the segments – from 11.45% at the end of December.
The group includes institutions such as Nubank, Banco Inter and C6 Bank.
The central bank attributed the sharp increase to “the positive effects of operating leverage through monetization of customer bases by some institutions and reduced pressure from provision expenses.”
Between April 2020 and the end of last year, digital banks consistently reported single-digit or negative 12-month ROE.
In a press conference, central bank supervisory director Ailton de Aquino said digital banks have a “robust” lending model, attributing their lower provisioning levels compared to public and private banks to the level of maturity. of the sector.
He noted that the evolution of digital institutions in Brazil reflects the central bank's efforts to promote innovation and competition.
Following reports that Nubank, the country's largest digital bank with nearly 100 million customers, was considering moving its domicile to Britain, Aquino said the central bank is “aware” of the move.
REGULATORY CHANGES
Ahead of a major regulatory change coming into effect in January that will align the accounting of financial instruments with international standards, the central bank estimated that institutions would need to increase provisions by around 38 billion reais (6.5 billion). million dollars) due to the changes, equivalent to 10% of current provision levels.
The new provisions will be accounted for as “equity counterparts,” meaning the measure will not affect the institutions' results or their credit issuance, Aquino said.
He added that a smaller group of banks had expressed concerns about the upcoming impact, but noted that there had been enough time for the transition and that any issues would be addressed on a case-by-case basis by the central bank.
For the sector as a whole, the central bank said the risk realization cycle had weakened, easing the burden of provisioning expenses on overall results.
“The profitability outlook in the coming periods is one of continued gradual improvement, supported by revenue growth, relatively stable procurement costs and controlled operating expenses,” it said in the report.
Aquino also highlighted that the central bank is exploring new financing mechanisms for the real estate sector and that changes to banks' reserve requirements are on the table, although he emphasized that discussions are ongoing.
($1 = 5.8137 reais)
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