Brazil’s biggest lenders are pulling back from unsecured consumer lending and refocusing on secured loans and higher-income segments as household indebtedness climbs close to historic highs, even while employment remains relatively strong and incomes have improved. Executives at the country’s major publicly traded banks conveyed similar risk-averse messages during the results season that concluded with Banco do Brasil’s disclosures on Wednesday.
Bank leaders say the shift represents a defensive posture designed to limit exposure to borrowers whose balance sheets appear strained. That stance could reflect preparations for a tougher portion of the credit cycle after several years in which rising household borrowing helped underpin economic momentum.
Analyst perspective
Katherine Hennings, an analyst at BRCG, described the move as an acknowledgement that underwriting standards may need to tighten further. She observed that lenders’ more cautious approach mirrors worries that Brazil could be nearing a slower growth phase following an expansion in part driven by household leverage. Hennings noted that historical episodes of rapid credit growth accompanied by fast increases in household debt have often been followed by deeper slowdowns in consumer spending, referring to prior cycles in Brazil.
What distinguishes the current cycle, she said, is that household financial metrics have worsened markedly even as unemployment has stayed low and average incomes have increased. Family debt levels are sitting at around 50% of disposable income - figures that Hennings and the banks view as elevated.
Structural and policy drivers
Hennings pointed to structural changes that broadened access to credit, including regulatory reforms, fintech expansion and the rapid uptake of digital payment methods, which brought more consumers into the credit system. On the policy side, she cited government measures intended to stimulate consumption and expand credit - including programs championed recently by President Luiz Inacio Lula da Silva - that helped lift household leverage, often via higher-cost unsecured instruments such as credit cards and personal loans.
Those are the precise categories of lending that the country’s largest banks say they are retreating from when offered to lower-income borrowers.
Banks favor payroll and collateral-backed credits
While the central bank’s weekly survey of more than 100 economists shows a median GDP growth forecast of 1.5% for next year, down from roughly 2% this year, executives at Banco do Brasil are more conservative. Banco do Brasil expects growth of about 1% in 2027, according to the bank’s management.
Geovanne Tobias, vice president for finance at Banco do Brasil, said reducing consumer delinquency next year will depend on concentrating growth in public- and private-sector payroll loans. That emphasis reflects a preference for credit tied to payroll deductions, which typically offer stronger repayment visibility.
Itau’s chief executive, Milton Maluhy Filho, issued perhaps the starkest assessment of overall market capacity to absorb recent credit volumes. "The volume of credit that has been distributed in the market is far above what the market has the capacity to absorb," he said, arguing that household commitments relative to income have grown too large. As a result, Itau has moved to favor secured lending and to reduce unsecured consumer credit in its origination mix.
Bradesco’s CEO Marcelo Noronha described his bank as having become considerably more selective. "Our appetite for lower-income clients today is much lower than it was in the past," he said, adding that Bradesco’s portfolio is now more substantially backed by collateral.
Santander Brasil has also curbed lending to higher-risk borrowers, explicitly cutting exposure to customers with monthly incomes below 4,000 reais - approximately 2.5 times the country’s minimum wage. The bank highlighted doubts about whether the current combination of strong employment and government household support would persist if expansion slows. CFO Carlos Muniz stated: "Below 4,000 reais, we cannot compete with other incumbents right now, and we won’t. Above that income level, we will always seek transactions with some form of collateral." The bank noted that roughly 70% of employed workers earn up to twice the minimum wage, underscoring the breadth of the affected segment of the workforce.
Banco do Brasil’s CEO Tarciana Medeiros said the bank has set a strategic objective to increase the number of "high-value clients" by 25% by 2030, signaling a longer-term pivot toward wealthier customers and more secured business.
Implications for digital and unsecured lenders
By contrast, Nubank - Brazil’s largest digital lender with a portfolio concentrated in credit cards and other unsecured products - reported a rise in loans more than 90 days past due to 6.9% in the second quarter, up from 6.5% in the prior quarter and the same period a year earlier. Despite that increase in non-performing loans, the U.S.-listed bank delivered profit gains that exceeded expectations, driven by higher revenue and an improved risk-adjusted net interest margin. Nubank’s management maintained that it does not see broad-based deterioration among consumers even as the macroeconomic backdrop becomes more cautious.
Executives and analysts alike emphasized that the current tightening by larger banks is selective - targeting specific borrower segments and unsecured product types - rather than a universal credit freeze. Still, the coordinated message from major lenders points to an industry-level reassessment of risk appetite in consumer credit.
Outlook
Bank executives framed their strategies around resisting higher-risk unsecured lending and boosting secured, payroll- or collateral-backed business as a means of containing future delinquencies. Whether that recalibration will meaningfully slow segment-level credit growth, or translate into broader economic effects if household spending decelerates, will hinge on how indebtedness and employment evolve in the coming quarters.
Investors and market participants will be watching delinquency trends, the pace of new secured loan originations, and any further guidance from banks on the composition of future credit flows.