The American crisis further complicates the credit scenario

The moment is not the most favorable for companies and families to borrow money. Interest rates are high, defaults have increased and the economy is slowing down. To complicate the scenario, came the crisis of Lojas Americanas.

Although it is described by some banks as an “isolated case”, a “fraud” that is far from being the rule in retail, the episode lit a warning signal for companies in this and other sectors. The perception of risk in corporate finance has grown – and this perception is one of the most relevant components in determining the cost of credit and the decision to grant or not a loan.

On January 11, Americanas reported having detected accounting “inconsistencies” of R$ 20 billion. The company, which filed for bankruptcy eight days later, has debts of nearly R$48 billion, according to the court administrators.

“The crisis in Americanas put more fuel in the credit market and accentuated uncertainties”, says analyst Fabiano Vaz, from Nord Research. “It’s reducing credit for companies. The risk for banks has increased.”

Companies have also been experiencing difficulties issuing private credit, after a record year for fixed-income issues.

Antônio Sanches, from Rico Investimentos, sees the Americanas case as isolated and assesses that there are no structural problems with private credit issuances. But he says that the episode ended up infecting the environment: “The impact of the Americanas did not just happen in the company, it created a scenario of risk aversion”.

It’s not just Americana that is in trouble. At least three other companies – Oi, Light and Marisa – announced that they would seek to restructure their debt to avoid bankruptcy.

For José Eduardo Daronco, an analyst at Suno Research, there are points in common between Americanas, Light and Marisa: “They entered a scenario of monetary tightening with unbalanced financial leverage”.

In a year and a half, the Central Bank raised the basic interest rate from 2% to 13.75% per annum, to combat high inflation – and the market believes that it should remain at this level at least during the first semester. Daronco points out that this scenario took many companies by surprise.

“In addition to being more leveraged, Marisa and Americanas operate in a highly competitive sector, where they need to finance the customer to finalize the purchase. With high interest rates, credit becomes more expensive, making it difficult for retailers to finance customers. And the result of this is less sales, which further aggravate the already delicate situation”, says the analyst.

Corporate defaults have been growing for seven months

The revelation of financial difficulties in large companies comes at a delicate moment. Corporate defaults, including earmarked and earmarked resources, grew in January for the seventh consecutive month, reaching 1.63% of the portfolio, according to the BC.

Data from Serasa Experian show that in November there were 6.4 million companies in default, 8.2% more than at the end of the previous year. Negative debts reach R$ 108.9 billion, with each CNPJ owing R$ 17 thousand, on average. Most pending issues are non-financial.

At the same time that delinquency grows, the appetite for credit by companies has been decreasing, points out Serasa Experian. In the 12 months ended in November, it registered an expansion of 3.1% in relation to the previous period. It’s the lowest rate since April 2021. Medium and large have been pulling the slowdown.

On the other hand, more emergency lines of credit, such as prepaying bills, receivables and card bills, have been more used by companies. Concessions reached BRL 1.08 billion in the 12 months ended in January, 13.2% more than in the previous period.

The average term for granting these loans is shorter. Between January 2022 and January 2023, it dropped from 2.6 to 2.3 months. Prepayment of credit card bills remained stable at 2.4 months.

Number of Brazilians in default is a record

Delinquency is also on the rise among families. According to Serasa Experian, there are already 70.1 million individuals with some type of credit restriction. In absolute terms, a record. The number is equivalent to 43% of the adult population. There are BRL 323.3 billion in unpaid debts, which corresponds to the GDP of a state like Santa Catarina or a country like Serbia (Eastern Europe).

“One of the main factors responsible for this is inflation, which has been causing damage to consumers’ purchasing power and pockets”, says Serasa’s chief economist, Luiz Rabi.

The average debt of each defaulter is R$ 4,621.30, 27% more than five years ago. It became more difficult to get out of default, since the salary did not follow this expansion, highlights the economist.

The increase in the participation of people over 60 years of age in the list of defaulters is noteworthy. According to Serasa Experian, 9.2 million Brazilians in this age group were in arrears in January 2019, equivalent to 14.7% of the total defaulters at the time (62.2 million). Today there are 12.5 million people aged 60 or over who are in default, or 17.8% of the total.

The expansion is due, among other factors, to the loan of the name, a practice that, according to Serasa Experian, was common during the pandemic. It’s when a person uses the name of another to get credit, something that happens with the INSS payroll, for example.

This Monday (27), the BC informed that default already corresponds to 6.11% of the total credit portfolio of individuals, the highest percentage since October 2016. And the indebtedness of families with the national financial system corresponds to almost half of the accumulated income in the last 12 months.

The strong rise in interest rates, derived from the rise in the Selic rate, also explains the increase in defaults. According to the BC, the average interest rate on credit operations with free resources – those that financial institutions can freely allocate – reached 43.49% per year in January, the highest level since October 2017.

The situation would be worse if it weren’t for the relative deconcentration that the credit market has experienced in recent years, evaluates the Serasa economist. “Fintechs, digital banks and credit unions have increased competition. This increased the willingness of banks to renegotiate”, says Rabi.

The situation is more serious among families with an income of up to three minimum wages.

Research by the National Confederation of Trade in Goods, Services and Tourism (CNC), released in early February, shows that four out of ten families with incomes of up to three minimum wages delayed payments in January.

Of all Brazilian families, 11.6% arrived in the first month of the year without being able to pay overdue debts from previous months. The indicator increased in all income groups and more significantly among those earning up to three minimum wages. The share of consumers who delayed debts for more than 90 days reached 44.5% of defaulters, the highest proportion since April 2020.

Matheus Amaral, an analyst of banks and insurance companies at Inter, says that the expectation is that the peak of defaults will be reached in the second quarter.

One of the segments that most gained participation in defaults among consumers is precisely the financial sector. Before the pandemic, in January 2020, 37.9% of pending issues registered at Serasa Experian were there. Three years later, this percentage increased to 45.7%.

Americanas crisis reduces bank profits

The Americanas crisis has already affected the results of financial institutions in the fourth quarter. Provisions in relation to the loan portfolio reached 6.3%, a number that had not been reached since January 2021, points out the Central Bank.

Bradesco provisioned BRL 4.9 billion to cover 100% of its exposure to Americanas, which caused profit to fall in the fourth quarter of 2022 to BRL 1.595 billion, 75.9% less than the same period of the last year.

Itaú adopted a similar strategy. The provisions generated an impact of BRL 1.307 billion on the cost of credit and the financial institution lost another BRL 719 million in profit when it decided to provision 100% of the retailer’s debt.

Different strategies were adopted by Banco do Brasil (BB) and Santander. The first provisioned 50% of the retailer’s debt. The value is R$ 788 million. Santander made a provision of 30% of its exposure and presented a result below market expectations. Profit for the fourth quarter was BRL 1.7 billion, 38% lower than expected and a 56% drop compared to the same period in 2021.

It’s not just the big banks that are making allowances for Americanas exposure. It is a practice used by other institutions and which also had an impact on the results.

BTG Pactual provisioned 63% of the exposure of BRL 1.9 billion, with a profit of BRL 580 million. The amount at ABC Brasil was R$117 million, impacting the result by R$29 million.

Daycoval’s provision was 50% of the approximately R$500 million it has to receive. BV’s results were also affected, with a drop of 33.8% in the comparison between the fourth quarters of 2021 and 2022. The exposure is BRL 206 million.