12 foro latibex
TRANSCRIPT
12º FORO LATIBEX
17th November 2010
Macro and Social Dynamics
Brazil Financial System: Key Features
2
• Table of Contents
For the first time in a long period, we are living in a truly DUAL WORLD
Need for PUBLIC SECTOR
to adjust large fiscal
deficits
HIGH
HIGH
LOW
LOW
Need for
PRIVATE
SECTOR to
deleverage
Leverage
MATURE
MARKETS
Balanced
EMERGING
MARKETS
MATURE MARKETS
have started to
behave like
mature markets…
i.e., not growing…
…and EMERGING
MARKETS have started to
behave like emerging
markets… i.e., delivering
DIFFERENTIAL GROWTH…
2005
Interest Rates Reduction
2004 2006 2007 2008 2009 2010E
5.5
10.75
5
9
6
14
7
1112
1313
18
8
18
Selic Taxa Nominal (%)
Selic Taxa Real (%)
Lula 1 Lula 2FHC 2
Inflation under control
FHC 1Investiment Grade
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
916.4%
22.5%
9.6%5.2%
1.7%
8.9%6.0%
7.7%12.5%
9.3% 7.6%5.7% 3.1% 4.5% 5.9% 4.3% 5.3%
6.15.1
-0.2
7.6
4.5
GDP (Annual Real Growth %)
2007 2008 2009 2010E 2011E
2011E
5.0%
6.75
11.75
2011E
4
Brazil took its macro fundamentals to a new level…
Source: IPCA-IBGE, The Brazilian Central BankProjections: FOCUS- The Brazilian Central Bank
Dec94Aug95
Feb83Jan87
Feb99Nov00
Oct88May89
Sep95Sep97
Most brief
contraction
Jan09Oct10
Sep01Sep02
Oct80Jan83
Jun89Nov91
Dec00Aug01
Oct02Mai03
Jul08Dec08
Feb87Sep88
Oct97Jan99
Dec91Nov94
28
48
20
8
30
36
9
25
16
22
9
13
8
61
6
21
Duration in months of the Brazilian economic expansion and contraction periods
Jun03Jun08
Largest
expansion period
… with less macroeconomic volatility and showing resilience to the
international crisis…
Source: The Brazilian Central Bank
11.5
9.8 10.09.3
7.9 8.16.7
2004 2007 2010E
Annual Average Unemployment Rate(%)
Unemployment at historic lows….
Source: FGV-CPS; IBGE PNAD 2008Projection: Santander Economic Research
7
4929
16
47
44
40
6695
113
1320
31
0
50
100
150
200
2003 2009 2014*
E D C A/B
+44.0%+19.0%
Mill
ion
s o
f P
eo
ple
Social Mobility Trends2
40%
50%
60%
70%
80%
90%
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Population in Active Ages= 15-64 years
Dependence Ratio
Favorable Demographic Transiction1
Demographic
Bonus
∆abc= 36 ∆abc= 29
Social dynamics leverages growth…
Sources: 1 - IBGE2 - Ministry of Finance; * estimated
“Cadastro Positivo”
(Positive credit list)
An information system that
allows banks to know about the
creditworthiness of a person
and the likelihood that this
person will pay his or her debts.
It’s possible that over
26 million Brazilians
will be included in
the banking
sector, according to Serasa
research.
84.0
108.8
0
20
40
60
80
100
120
Jul.05 Sep.09
30%
Milion
Leading to more access to banking services…
More 24 million people
had access to bank
Source: The Brazilian Central Bank, SERASA
Macro and Social Dynamics
Brazil Financial System: Key Features
9
• Table of Contents
18.5%17.4% 17.8% 17.3%
16.4%17.2%
0%
4%
8%
12%
16%
20%
2004 2005 2006 2007 2008 jul/09
Banking Sector Consolidation – % on Assets of the 5 largest Banks
Well Capitalized – BIS Ratio High Profitability - ROE
Balance of Reserve Requirements
Legal Requirement = 11%
Basel Committee = 8%
0
50
100
150
200
250
300
350
Securities Cash
R$ Billons
57.3% 59.1% 59.0%
73.6%77.8%
75.5%
Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
21.8% 21.7%23.7%
18.8%15.5% 16.2%
2005 2006 2007 2008 2009 Jun 10
Jun 10
Brazilian Financial System
----
Deposit market highly regulated: High reserve requirements
and mandatory lending
Reserve
requirements
Earmarked
LoansFree Funding
Demand
Deposits
Pricing
regulated51% 31% 18%
SavingsPricing
regulated30% 65% 5%
Time DepositsFree
Competition23% 77%
Source: The Brazilian Central Bank
Total Loans to GDP
10%
15%
20%
25%
30%
35%
40%
45%
50%
Se
p-9
3
Ma
r-9
4
Se
p-9
4
Ma
r-9
5
Se
p-9
5
Ma
r-9
6
Se
p-9
6
Ma
r-9
7
Se
p-9
7
Ma
r-9
8
Se
p-9
8
Ma
r-9
9
Se
p-9
9
Ma
r-0
0
Se
p-0
0
Ma
r-0
1
Se
p-0
1
Ma
r-0
2
Se
p-0
2
Ma
r-0
3
Se
p-0
3
Ma
r-0
4
Se
p-0
4
Ma
r-0
5
Se
p-0
5
Ma
r-0
6
Se
p-0
6
Ma
r-0
7
Se
p-0
7
Ma
r-0
8
Se
p-0
8
Ma
r-0
9
Se
p-0
9
Ma
r-1
0
Se
p-1
0
Although credit growth has been robust in the last years, credit
penetration is still relatively low
Real Free
Float
Argentina
Crisis
México
CrisisAsian
Crisis
9/11 &
Energy Crisis
Presidential
Elections
Subprime
Crisis
Russian
Crisis
Source: The Brazilian Central Bank
Public vs. Private Banks (YoY) Loans per Type of Ownership
Public
Banks
42%Private
Banks
40%
Foreign
Banks
18%
26.1%
18.3%
Se
p-0
7
De
c-0
7
Ma
r-0
8
Ju
n-0
8
Se
p-0
8
De
c-0
8
Ma
r-0
9
Ju
n-0
9
Se
p-0
9
De
c-0
9
Ma
r-1
0
Ju
n-1
0
Se
p-1
0
Public Banks Private and Foreign Banks
Total Loans – Banking System
Source: The Brazilian Central Bank
14
18.4
28.0
24.1
0
10
20
30
40
50
60
Se
p-0
4
Jan
-05
Ma
y-0
5
Se
p-0
5
Jan
-06
Ma
y-0
6
Se
p-0
6
Jan
-07
Ma
y-0
7
Se
p-0
7
Jan
-08
Ma
y-0
8
Se
p-0
8
Jan
-09
Ma
y-0
9
Se
p-0
9
Jan
-10
Ma
y-1
0
Se
p-1
0
Corporate Individuals Total
Source: The Brazilian Central Bank
Resilient Spreads – Corporate x Individuals
46
%
47
%
48
%
48
%
50
%
51
%
52
%
52%
54
%
54
%
57
%
57
%
59
%
59
%
60
%
61
%
61
%
61%
60
%
60
%
60
%
60
%
62
%
63
%
64
%
65
%
66
%
67
%
67
%
54
%
53
%
52
%
52
%
50
%
49
%
48
%
48%
46
%
46
%
43
%
43
%
41
%
41
%
40
%
39
%
39
%
39%
40
%
40
%
40
%
40
%
38
%
37
%
36
%
35
%
34
%
33
%
33
%
jan
/04
ab
r/04
jul/
04
ou
t/04
jan
/05
ab
r/05
jul/
05
ou
t/05
jan
/06
ab
r/06
jul/
06
ou
t/06
jan
/07
ab
r/07
jul/
07
ou
t/07
jan
/08
ab
r/08
jul/
08
ou
t/08
jan
/09
ab
r/0
9
jul/
09
ou
t/09
jan
/10
ab
r/10
jul/
10
ag
o/1
0
set/
10
Secured Lending* Unsecured Lending
*Payroll Loan + Mortgage + Auto Loans divided by total loans to individuals. Interest Rate Reference CreditOperations.
Source: The Brazilian Central Bank
Loans to Individuals – Secured* x Unsecured Lending
15,0
20,0
25,0
30,0
35,0
40,0 39.1
23.8
%
Household Debt Ratio*
Household Debt Service Ratio*
Source: The Brazilian Central Bank* MSA (Massa Salarial Ampliada)
Household Debt Ratio with healthy leverage and longer durations
20,0
22,5
25,0
27,5
30,0
32,5
3,0
3,5
4,0
4,5
5,0
5,5
6,0
6,5
Ja
n-0
4
Ma
y-0
4
Se
p-0
4
Ja
n-0
5
Ma
y-0
5
Se
p-0
5
Ja
n-0
6
Ma
y-0
6
Se
p-0
6
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
De
linq
ue
nc
y (
%)
Sp
rea
ds
(p.p
)
Spreads Delinquency
Banking Spreads and Delinquency Rates normalazing
Source: The Brazilian Central Bank
The banking sector has a big opportunity
Differential GDP growth (not involved in the excesses
of the past cycle)
Increased bancarisation(development of middle classes)
Sound Financial System(Low leverage, conservative,
good profitability, supervision)
Cashing in on the unique environment in Brazil
The triple Multiplier
X
X
X
Investor Relations (Brazil)
2,235 Juscelino Kubitschek Avenue - 10º floor
São Paulo | SP | Brazil | 04543-011
Phone. 55 11 3553-3300
Fax. 55 11 3553-7797
e-mail: [email protected]