Brazilian banks face tough times

On Monday U.S. President Barack Obama has warned that more U.S. banks are likely to fail due to the economic crisis. Coincidentally, he could’ve said the same thing about Brazilian banks:

Banco Bradesco SA, Brazil’s second- largest non-government bank, posted a 27 percent decline in fourth-quarter profit, the biggest drop in two years, as the company increased provisions for bad loans.

Net income fell to 1.61 billion reais ($692 million) from 2.19 billion reais a year earlier, the Osasco-based company said today in a statement. It was the biggest decline in profit since an 85 percent drop in the third quarter 2006. Adjusted net income was 1.81 billion reais in the quarter, compared with 1.85 billion reais a year earlier. The adjusted result missed the 1.86 billion reais average estimate of four analysts surveyed by Bloomberg.

Over the past few years Brazilian banks have made most of their profits by expanding loan services. Yet the default rate has jumped and banks are less likely to make loans. "The crisis has spread in way that has never been seen before," Chief Executive Marcio Cypriano said in an article by Reuters.

Nevertheless, Bradesco execs said that they will open 170 new branches this year. The move is necessary in light of the soon-to-be completed merger between Banco Itau SA and Unibanco Holdings SA.

Image- O Globo
Online Sources- The Latin Americanist, Bloomberg, Reuters, IHT,