Three large Brazilian banks have some of the largest loan portfolio allocations to small and medium-sized businesses, a segment widely considered to be one of the most vulnerable during the COVID-19 pandemic, according to data collected by S&P Global Market Intelligence.
Banco Bradesco SA is the most exposed to SMEs among a sample of regional heavyweights, with 24.0% of its loan portfolio allocated to this segment. At Itaú Unibanco Holding SA, The largest financial institution in Latin America, loans to SMEs represent around 16.3% of its total loan portfolio, while at Banco Santander Brasil SA they represent 12.2%.
On average, the group of large Latin American banks devotes 12.1% of its financing to SMEs.
Small businesses have been a top concern for lenders during the COVID-19 pandemic, as mobility restrictions forced many business owners to temporarily close. Few have the capacity to overcome the crisis for an extended period. Itaú’s investor relations manager called the SME sector “the weakest link in the chain.”
The coronavirus epidemic has particularly affected Latin America. Months later, many countries are still struggling to contain its spread. Flexibility programs and government assistance throughout the pandemic have so far kept small business owners from defaulting. About 50 million loans with a combined value of $ 330 billion have benefited from some form of credit relief in five of Latin America’s largest economies: Brazil, Mexico, Colombia, Chile and Chile. Peru. In some countries, the value of these loans represented as much as two-fifths of the total private credit loans in the system.
But as these measures start to run out of steam, deteriorating credit is likely to increase.
Outside of Brazil, Banco de Chile and Banco de Crédito del Perú SA also have significant credit exposures to the SME segment, at 15.2% and 13.7% of their loan portfolios, respectively. Likewise, Banco Santander Chile’s SME loans represent around 13.3% of its portfolio.
Conversely, the Peruvian company Intercorp Financial Services Inc. and the Mexican company Grupo Financiero Inbursa SAB de CV have relatively lower exposures, both below 5%.