Concentration of the 5 largest banks in the Brazilian credit market drops in 2021


The share of the country’s five largest banks in the credit market followed the trend of previous years and fell again in 2021. Despite the decline, Caixa Econômica Federal, Banco do Brasil, Itaú, Bradesco and Santander concentrated 67.9% of operations, according to the Central Bank in the banking economy report released this Thursday (6).

The document shows in one of its annexes that there was a drop of 0.6 percentage point compared to 2020, when the group held 68.5% of the credit market. In December 2018, this concentration index was 70.9%.

The data consider, in addition to the banking sector, the non-banking segment, which includes fintechs and credit unions.

“The fact that the concentration in the credit markets has been reduced significantly reflects the public policy pursued by the BC in recent years, which encourages greater digitalization of means of payment and innovative business models”, said director Renato Dias de Brito Gomes ( Organization of the Financial System and Resolution).

In the banking sector alone, the five main financial institutions accounted for 78.7% of credit operations, compared to 79.2% in 2020. In the segment of banks with commercial portfolios, concentration dropped marginally to 81.4% in 2021, against 81.8% in the previous year.

“The trend of reduced concentration in the SFN [Sistema Financeiro Nacional] between 2018 and 2020 it remained in 2021, despite the assessment of twelve mergers in the last year. The drop in concentration is observed in all accounting aggregates and, more intensely, in total deposits”, said the BC in the document.

Regarding deposits, the group concentrated 70% in the segment that includes the non-banking sector and 75.9% only in the banking sector in 2021.

New methodology now considers four largest banks in the country, without the presence of Santander

In the report, the monetary authority started to adopt a new methodology when measuring the concentration of the financial system, considering only the four largest institutions in the country. With that, Santander, which occupies the fifth position, was out.

According to the new metric, the reduction in the concentration of the credit market in the hands of the four largest banks was marginal, from 59.4% to 59.3% between 2020 and 2021, that is, a drop of 0.1 percentage point.

According to the BC, the last edition of the report adopted the concept “traditionally used in the literature and by a multilateral organization”.

According to Gomes, the new methodology is more common internationally and more informative about the concentration of the system.

“An index that takes a more qualified top of the market is more informative. In any case, there is no reason but to adapt to international practice”, he said. “The inclusion or not of the fifth largest institution does not change any of the conclusions of the report,” he added.

In the document, the monetary authority highlighted that there was a reduction in banking concentration in relevant credit markets, including rural and agricultural financing, housing financing, payroll loans and credit cards for individuals and companies.

“The reduction in the concentration of the credit card market reflects the increase in the participation of payment institutions”, he pointed out.

For Gomes, payment institutions play an important role in bringing new consumers to the financial system. “It is true that their share of total deposits remains small, precisely because the consumers included are typically those with a lower income profile,” he said.

The BC director said that the impact of fintechs is particularly relevant in the credit card segment and stressed that the entry of payment institutions into the financial system generates, above all, a “prospective impact” on concentration indices.

“Today, there are 300 financial institutions competing in this market, while two years ago there were just under 260. Therefore, there is a great impact of fintechs on competition,” he said.

“But I think this impact will be seen more intensely in the future, when the financial system develops more and the financial inclusion agenda advances more”, he continued.

Also according to the BC, the participation of public banks continues to be higher than that of private banks in highly concentrated markets, in which directed credit prevails. “Among the markets with moderate concentration, characterized by freely directed resources, the participation of private banks predominates”, he pointed out.

In housing financing, Caixa concentrated 66.25% of the market in 2021, while Itaú, Bradesco and Santander had 10.44%, 9.23% and 6.36%, respectively. Added together, the three private banks obtained 26.03% of the total.

Banco do Brasil dominated rural and agricultural financing last year, with the largest share of the market (52.73%). Bradesco, with 5.38%, appears in the sequence, followed by Caixa (3.07%). Sicredi, which is a credit cooperative, had a share of 2.98%, ahead of Santander (2.81%).

As shown in its financial stability report, banks had a net profit of R$132 billion in 2021, an amount 49% higher than that recorded in 2020 and 10% higher than that observed in 2019.

“The profitability of the banking system continues to recover from the fall that occurred in 2020 and has returned to levels close to those observed before the pandemic”, he said.

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