Five largest banks account for 78% of banking system profits in 2021

Of the BRL 132 billion in net income recorded in the banking system in 2021, 78% went to the five largest banks in the country – Itaú, Bradesco, Santander, Caixa Econômica Federal and Banco do Brasil.

According to data sent by the Central Bank at the request of the Sheet, the five institutions had, together, a net profit of R$ 103.5 billion last year. The total volume of the system is in the financial stability report released by the monetary authority on August 9.

The BC did not detail the separate numbers of each of the banks in 2021, but a survey carried out by the report based on the financial institutions’ financial statements shows that, among the main private banks, Itaú had the highest net accounting profit accumulated in the last year, with R$ 24.9 billion.

Bradesco, in turn, recorded BRL 21.9 billion in accounting net income in 2021, and Santander closed the last year with corporate net income of BRL 14.988 billion.

Banco do Brasil reported that, in the corporate view, net income for 2021 totaled BRL 19.7 billion; Caixa recorded R$ 17.2 billion in the last year.

The total amount according to the balance sheet data is equivalent to R$ 98.8 billion. BC data have adjustments made by the monetary authority to eliminate non-recurring events in the balance sheets of larger institutions.

Bank federation says profit is returning to pre-pandemic level

Sought after, Itaú, Bradesco, Banco do Brasil and Santander said that Febraban (Brazilian Federation of Banks) would speak on behalf of the institutions. Caixa replied that it would not comment.

According to Febraban, the current level of profit in the banking sector is returning to pre-pandemic levels. “The profitability of the banking sector, on average, is in line with the reality of other sectors of the Brazilian economy,” she said.

Regarding the concentration, the entity stated that, in Brazil, the banking sector is “extremely competitive and open to the entry of new competitors, both local and foreign” and that there are no regulatory barriers that prevent the entry of new participants.

“There is a lot of confusion between concentration and lack of competition. The banking activity, like others that require high volumes of capital, has a greater degree of concentration, especially in the so-called retail banking. But, in the case of the Brazilian market, the level of concentration is considered moderate, as the Central Bank itself recognizes,” he said.

According to the BC’s financial stability report, the Brazilian financial system currently has 136 banking institutions, not including payment institutions.

The banking concentration has already been the subject of criticism by Minister Paulo Guedes (Economy), who, in a videoconference held in May 2020, said that “200 million bundles” are exploited by six banks.

Dictatorship encouraged banking concentration, says economist

Economist Carla Beni, an MBA professor at FGV (Fundação Getulio Vargas), says that the concentration of the sector has historical roots in Brazil and began during the military dictatorship.

“There was an ideal that by concentrating, you could gain in scale and that could reduce the cost for the final borrower. This idea was carried even after democratization”, he said.

In the last decades, the Proer (Program to Stimulate the Restructuring and Strengthening of the National Financial System), in the Fernando Henrique Cardoso government (1995-2002), the liquidation of state banks and the merger of institutions contributed to the concentration. The high investment with the advancement of technology also contributed to the centralization.

“Banking concentration in other countries happens, but banking concentration in Brazil is a dysfunctional enrichment tool,” said Beni.

The specialist, however, sees an effort by the BC to change the scenario with the regulation of fintechs, the creation of open banking and the launch of open finance – a system that proposes to expand the sharing of personal, banking and financial data between institutions. , with the prior authorization of the citizen.

Looking at a broader universe in the financial market, the president of the BC, Roberto Campos Neto, said in May that, with the rise of fintechs in recent years, there was a reduction in the concentration index.

“We reduced banking concentration from 81.2% in 2018 to 77.6% in 2020. The 2022 figure should be close to 71%”, said Campos Neto at a public hearing at the Consumer Protection Commission, held in the Chamber of Deputies. deputies.

The BC’s financial stability report also showed that the amount of BRL 132 billion was 49% higher than the net income recorded by banks in 2020, in a period affected by the pandemic, and 10% higher than that observed in 2019.

The growth in the interest margin (the base rate jumped from 2% to 9.25% per year in 2021), the reduction in expenses with provisions and efficiency gains are the three factors that explain the result obtained by the institutions last year, according to the document.

For 2022, the BC points out that bank profits tend to grow at a slower pace, although the system’s profitability should remain resilient.

“The scenario for 2022 is of weaker economic activity, lower credit growth, normalization of defaults, and higher funding and operating costs. These elements represent obstacles to the evolution of profitability ahead”, he said.

The report also showed that, even with Pix gaining more relevance in the financial system over the last year, bank revenues from services grew by 10% in the comparison between 2021 and 2020, driven by the improvement in economic activity.