Brazilian banks are dependent on whether the government can preserve businesses, as the country’s already weak economy has been hit hard by COVID-19, says GlobalData, a leading data and analytics company. The government has made guarantees to SMEs, but earnings challenges will still intensify for banks due to weaker business volumes and rising loan impairment charges.

Unlike most other countries, GlobalData still forecasts growth for Brazil in 2020. Mortgage loan balances will see the biggest drop off in growth, to just 2.8% in 2020, but many countries are seeing significant declines in this category. Credit card balance growth is expected to remain at 7.8% in 2020 in GlobalData’s post-COVID-19 forecasts, however, growth is expected to soar in 2021 and beyond, with significantly higher growth rates than in its original forecasts. GlobalData forecasts growth of 13.5%, compared to 5.8% previously in 2021, in this category.

GlobalData’s retail banking analyst, Resham Karira, commented: “Credit card transactions will rise at the expense of cash. This is because consumers want to avoid disease vectors and attractive credit offers from banks. Santander offered in would offer double rewards points on online purchases made via its cards in March 2020, for example.

“GlobalData expects declining consumer confidence will see a short-term drop in demand for loans and taking on any debt, while the safer retail deposits, will rise. Retail deposits are forecast to benefit from a flight to safety, which was also seen during the global financial crisis. By the end of 2020 we forecast deposit holdings to grow by 14.4%”.