Global Finance sat down with Luiz Carlos Angelotti, MD and head of investor relations at Brazil’s Banco Bradesco, to discuss the bank’s bullish approach to investing despite the country’s economic downturn.
Global Finance: What are your expectations for Brazil’s GDP growth—and where does that leave the banking industry?
Luiz Carlos Angelotti: The economy is going through an adjustment year. The new government and the new Economy minister are implementing measures to correct debt and spending, while some private players are postponing their investments. This will have an impact on growth for this year but not the next, when the GDP will grow by around 1.5%.
Bradesco is investing because we are confident in the long-term outlook of the economy. We are adding 1 billion Brazil reais ($325 million) to open 180 new branches around the country on top of our 4 billion reais average yearly investment. Bradesco’s loans grew 7% in 2014, and we plan an increase between 5% and 9% for this year. This is the main impact we will have from the recession. Overall, loans can decline in the economy in general, but this will only marginally impact our business.
GF: Where do you expect the real will go this year?
Angelotti: We see the real ending 2015 at around 2.9 per US dollar—strengthening from current levels, as it will become clear that the outlook for the economy is improving.
GF: With lower government spending, the share of below-market-rate loans from Brazil’s National Bank for Economic and Social Development will also likely decline. Will banks such as Bradesco fill the gap with privately-priced loans?
Angelotti: BNDES could reduce its operations, and this gives banks more opportunities. The problem is to have competitive prices, as we do not have contributions for these loans.
GF: Earlier this year, you said that Bradesco’s delinquency ratio is expected to decline this year because of lower mortgage rates and growing payroll loans. But how will declines in other parts of the economy affect your loan portfolio?
Angelotti: We have fewer bad loans in our portfolio because of the extensive investment we have made in recent years on technology to assess credit quality. For the economy as a whole, a higher delinquency ratio [is possible], but the increase will not be large.