Brazil’s central bank said on Tuesday that bank profitability in the country had returned to pre-pandemic levels in 2021, but said profits could grow more slowly going forward, citing higher loan defaults and financing costs. .
The Central Bank’s Financial Stability Report said that the banking system’s return on equity (ROE) stood at 15.1% in 2021, up from 11.5% in 2020.
This was the second best result in the annual data series starting in 2014, with the highest ROE at 16.7% in 2019.
The net profit of the banking system in 2021 reached 132 billion reais (25.88 billion dollars), the highest in the series.
“The scenario for 2022 is one of weaker economic activity, lower credit growth, normalization of delinquencies and higher financing and operating costs. These elements represent obstacles for the evolution of profitability in the future,” the report said.
Defaults, which were lower during the pandemic, are expected to rise “moderately” this year, the central bank said.
He also stated that Brazil’s aggressive monetary tightening to fight inflation, which has raised interest rates to 13.75% from a record low of 2% in March 2021, increases funding costs for banks, but it also implies higher rates for new loans.