Brazil's BNDES, a government development bank, has reached 50% in size of the World Bank!
Total Assets of BNDES are 272 Billion, whilst the World Bank's are 233 billion, the latter in dollars the former in reais, but at an 1,95 exchange rate, this comes out to be 60%, all devoted to a single country: Brazil.
There is no safer banking system than that of Brazil. It beats even conservative Swiss Banks. Whilst 10 out 19 American banks need extra capital, none of the Brazilian Banks need anything of the kind. Repeat it : zero!
1. Firstly, Brazilian Banks have excellent financial systems, Just In Time IT, thanks to the years of double digit inflation, when that was a must.
2. Brazilian Banks use Real Accounting, not Nominal or Historical Accounting, where 1954 retained earnings, for example, are reported in 1954 US$ dollars, making US financial statements useless and misleading.
3. Brazilian Banks report Real Profits, not Inflated and Unreal Profits, which CEO's love because it gives the bonuses on inflation profits which they obviously do not deserve.
4. Brazilian Banks are extremely conservative, make extra cautionary provisions, which means that they effectively have HIDDEN reserves, whilst most US Banks, up to today, still have HIDDEN TOXIC DEBTS. Talk to your Brazilian correspondent and open an account in a Bank where their executives sleep at night just as you will, who believe in HONEST accounting, no bonuses tied to stock options, and where reputation is still a moral value.
Think about it: there are not many financial platforms you can trust anymore. Brazil is one of them.
The Economist, the world's leading magazine in the field, agrees to what
we have been saying all the long. Brazilian banks are the safest, the
least leveraged, the more conservative and lucrative in the world.
You can be lucrative the old fashioned way, lending to known and
trusted clients, using the 5 C's of credit rather than mathematical
models using Bells curves as hypothesis.
In January Brazilian Banks extended US$ 40 billion worth of additional credit to Brazilian companies, whilst all over the world credit has come to a halt. The other good news is that this is only a 24% reduction compared to last year's January figure of 52 billion, when Brazil's expected growth has fallen from 7% to 2% a year -- a 70% downfall.
So perhaps Brazil is growing much more than expected. Check this out here in the next following months!
Banks intend to increase consumer credit by 18% in 2009, which is below the 32% increase in 2008, which by all accounts could be considered excessive.
Credit terms are expected to be shorter, which means more than 18% of Brazilians will have access to more credit, but for a shorter term. The net effect may result in 25% more consumers in 2009. For growth, what is important is how many products are bought rather than the credit extended.
Which is safer? Buying 4 year treasury bills at minus 2% interest rate, no upside and a 8% downside, or buying Brazilian stocks at 2012 forward P/E of 2, with an upside of 500%, and dividends yield of 5% a year?
Let me repeat this. Which is safer? Buying 4 year treasury bills at minus 2% interest rate,
no upside and a 8% downside, or buying Brazilian stocks at 2012
forward P/E of 2, with an upside of 500%, and dividends yields of 5% a
Bradesco, one of Brazil's biggest banks, published its 2008 results, profits are up 5% compared to 2007.
Whilst most Banks in US and Europe are showing colossal losses, Brazilians banks are showing profits, and growing.
More important is the speed with which Brazilian Banks report their earnings in Brazil. Due to infflation in the past, financial statements and management reports are available in hours, not months.
In the 1998 Crisis, Lopes the President of the Brazilian Central Bank, knew the exact net equity of two failed banks in a question of hours.
How long will it take to find the same number for Lehman brothers?
Real time accounting is a must in a modern financial world. The lack of if in the US and Europe is one of the causes of thi Crisis, which till today no one knows exactly how big it is due to snail pace accounting standards.
Consultant Marcos Gouvea, leading retail expert of Brazil, said there was little risk of a Credit Card Crisis in Brazil, contrary to what is expect to occur in America.
Brazilians use credit cards as a means of payment, not as another source of long term financing. First because lower incomes treasure their credit rating, and second because interest rates are rather prohibitive, so most use credit sparingly.
Same is true of retail stores, no of which are leveraged, and there is no chance of a retail bankrupcy in Brazil.
Brazil's main Banks like Itau (ITAU), Bradesco (BBD) and Bank of Brazil (BBAS) are leveraged between 4 to 6 times viz a viz 25 for American banks. That was the level of risk American banks worked with 50 years ago, according to a study by Saunders and Wilson.
Brazilian Banks are much less leveraged than US Banks, because many are family owned or government owned.
Preserving capital is more important than making additional capital. Controlling families have a stake to loose. Compare this to LCM, where making money and bonuses was the main thrust of the managers at the time.
Brazilian Banks Capital Ratios are similar to 1909 ratios in the US, when Banks were family owned, and responsible.
Petrobrás notes were 5 times over subscribed, which suggests that the BBB rating is in fact a bit conservative, it does not reflect the true appetite of the market.
It also says something about commodity based countries. Perhaps they are not that risky as some contend. How many times a consumer based company as GM or Ford would be oversubscribed if they were to need capital.