Brazilian banks’ profitability falls in 2020, however restoration anticipated this yr

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© Reuters. FILE PHOTO: The central bank headquarters building can be seen in Brasilia, Brazil May 16, 2017. REUTERS / Ueslei Marcelino / File Photo

BRASILIA (Reuters) – According to a central bank report on the banking system on Monday, Brazilian banks saw profitability decline for the first time since the 2015-2016 recession as the COVID-19 pandemic forced institutions to increase their provisions .

In December 2020, the banking system’s aggregate return on equity was 11.5%, the lowest in the central bank’s ranks, although the outlook for 2021 is improving despite ongoing uncertainty surrounding the pandemic, it said.

“The decline in profitability was widespread, affecting banks of different types of control, size and activity,” the central bank said in its annual report.

“The increase in provisions in 2020 will reduce the need for significant new provisions, and the recovery in economic activity will support growth, credit quality and demand for banking services,” she added.

The report also highlighted the banking system’s decreased concentration as the market share of state-owned institutions such as Banco do Brasil, Caixa Economica Federal and the national development bank BNDES declined.

The five largest banks – Itau, Bradesco, Santander (MC :), Banco do Brasil and Caixa Economica Federal – accounted for 77.6% of total assets in December 2020, up from 81% in the previous year, the central bank said.

The concentration of total deposits at these institutions fell from 83.4% in December 2019 to 79.1%, she added.

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