The year 2021 was marked in the history of the country as the most deadly of the pandemic. More than 424,000 people died of covid-19, a disease that forced Brazilians into social isolation and deteriorated indicators of the country’s economy.
Last year, however, was also a period of record profits for banks. Only the four largest financial institutions with shares traded on the São Paulo Stock Exchange –Banco do Brasil, Bradesco, Itaú and Santander– together profited BRL 81.6 billion.
The amount is the highest ever recorded by the company Economatica, which has been monitoring the accounting results of these financial institutions for 15 years.
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Data tabulated by Ecomatica show that the combined profit of the four large banks grew 32.5% from 2020 to 2021. From November 2020 to November 2021, worker’s income fell by 11.4%according to the Brazilian Institute of Geography and Statistics (IBGE).
According to the Continuous National Household Sample Survey (Pnad Contínua), carried out by the institute, Brazilian workers received R$ 2,444 per month until November 2021. This is the lowest amount ever recorded by the IBGE, which has been collecting data since 2012. .
Of the four banks listed in the Economatica study, three of them –Banco do Brasil, Bradesco and Itaú– had record individual profits.
Itaú, the largest bank in the country, was also the one that profited the most in 2021: BRL 26.9 billion, after taxes have been deducted. The biggest profit in the company’s history is 45% higher than the one recorded by itself in 2020.
“The good performance is explained by lower expenses with loan provisions (-40.2%), growth in the loan portfolio, increase in service fees and gross financial margin”, declared Banco do Brasil, in the statement regarding its record profit for 2021.
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The professor at the Institute of Economics at the State University of Campinas (Unicamp), Simone Deos, explained that credit provisions are a kind of default loss forecast that banks account for in their balance sheets.
She said that, with the onset of the pandemic, in 2020, financial institutions increased these provisions, assessing that the risk of default had risen. In 2021, they understood that this risk had dropped. Loss forecasts were therefore reduced and bank profits grew from one to another.
According to Deos, however, that alone does not explain such a high profit for Brazilian banks – outside the international standards of the global banking system, she said. The professor said that the increase in the economy’s basic interest rate, the Selic, also collaborated a lot with the banks’ results in 2021.
Until March 2021, the Selic was 2% per year. In December, it was already at 9.75% per year. Today is 10.75% per year.
As this rate serves as the basis for interest rates in the real economy, banks have also increased interest rates on loans they made to individuals and companies. As a result, they began to earn more with each operation. That’s why they made more money.
“It is not by chance that the ‘market’, represented by bank economists, always indicates that the interest rate should be increased to account for inflation”, pointed out the professor. “It is a self-serving advocacy.”
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Simone recalled that, historically, Brazilian banks charge much higher interest rates than the Selic rate. While the Selic rate is 10.75% per year, the interest on a loan is about ten times that.
Survey carried out this month by Procon-SP, indicates that the average interest on a personal loan in commercial banks is 115.20% per year. The average interest on the credit card revolving reaches 150.59% per year.
Consequence for all
“Very high interest rates have a depressing effect on the economy,” added Deos, indicating that such high rates enrich banks but harm the country’s economic development as a whole.
“People might think that if the banks have extraordinary results, that’s good for the economy. But the truth is, no.”
The Brazilian Federation of Banks (Febraban) was asked to comment on the profits of its affiliates and their relationship with the country’s economic situation. The entity did not respond.
Editing: Vivian Virissimo