Brazil banks reduce risky loans amid rising household deductions

The largest banks in Brazil are moving toward adopting more cautious credit policies in order to mitigate the fallout from the household debt accumulation crisis, despite positive economic performance and low unemployment rates. Economic data shows that debt service obligations have risen to about 50% of household income, driven by the expansion of digital financing and the effects of consumption-supportive policies, which have increased borrowing costs through credit cards and personal loans. In response, banks such as Santander, Itau, and Bradesco have reduced financing aimed at low-income clients and tightened requirements for collateral on loans, focusing on secured lending to maintain asset quality. They aim to increase their high-net-worth client base by 25% by 2030. Meanwhile, Nubank has reported a slight rise in non-performing loans, but continues to generate strong profits and remain confident in their risk management capabilities.

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