Disbursements of BNDES Giro, the working capital line of credit of the Brazilian Development Bank (BNDES), reached almost R$ 4.6 billion in loans in the year to August, a 315% increase compared with the same period of 2016. In the twelve-month period, BNDES Giro totaled almost R$ 6.2 billion in more than 14 thousand loan operations, up 230% compared with the immediately preceding twelve months.
In August alone BNDES Giro disbursed R$ 570 million in loans, a 147% increase over the same month last year. Created originally as BNDES Progeren with the aim of helping companies get through the recessive economic environment of recent years, preserving activities and jobs, the line was renamed as BNDES Giro in August, with the announcement of changes to facilitate access to short-term credit by micro, small and medium-sized enterprises (MSMEs).
Through BNDES Giro, BNDES contributes to economic recovery by meeting financing needs, especially of segments with most restricted access to credit. Almost 85% of all BNDES Progeren – now BNDES Giro – loans granted this year up to August went to MSMEs. This contributed to the increasing share of MSMEs in the Bank’s total disbursements. Between January and August, 41% of all BNDES loans went to this segment.
Last month, BNDES president Paulo Rabello de Castro announced a cut in the Bank’s spread, from 2.1% to 1.5%, in BNDES Giro operations with maturities of up to 60 months with a 24-month grace period. In its renewed version, the working capital credit line was included in the Bank’s new automatic operation approval system, BNDES On-line, exclusively for financial agents. The platform for machine-to-machine automated processes between on-lending banks and BNDES allows approval in a matter of seconds. In BNDES Giro, funds are transferred by financial agents, who assume the risk for the operation.
Recovery – Access to working capital is essential for businesses in times of economic recovery. Currently, several signs point to an improvement in the level of activity, such as the 0.2% growth of GDP in the second quarter of the year, calculated by IBGE. The result, above market projections, highlighted the increase in consumption. Even so, inflation continues at low levels, confirming projections of falling interest rates. This scenario points to a gradual recovery of demand for BNDES funds for investment in the coming months.
The operating performance of BNDES in the first eight months of the year reflects the resumption of investment in modernization. Approvals of Finame, a credit line for machines and equipment, exceeded R$ 14.6 billion in the year to August, an increase of 28% compared with the same period of the previous year. In the same comparison, disbursements increased 13%, totaling R$ 12.8 billion from January to August this year. In August alone, Finame loans for the acquisition of capital goods, such as trucks and agricultural machinery, totaled R$ 1.7 billion, 33% higher than the same month last year.
Aggregate data – BNDES operational statistics continue to reflect the country’s economic situation of low demand for investment loans, but in line with recovery indicators. Loan inquiries, which are the main thermometer of investment intention, being the first stage in the process of applying for BNDES loans, recorded a smaller decrease in the year to August than approvals and disbursements.
Between January and August, inquiries totaled R$ 68.7 billion, down 10% compared with the same period in 2016. Despite the maintenance of the negative result in the year to August, the sectors of trade and services and agriculture recorded significant increases in inquiries: 23% and 14%, respectively.
Several industrial sectors also recorded a rise in inquiries such as chemical and petrochemical (+55%), mechanics (+35%), food and beverages (+29%), pulp and paper (+16%) and textiles and clothing (+13%). In the infrastructure segment, there was a 36% increase in inquiries for public utilities, 25% for construction and 13% for electricity.
Increased infrastructure approval – In the next stage of loan applications, eligible operations totaled R$ 58.6 billion in the year to August, down 9% over the same period in 2016. In the same comparison, approvals decreased 15%, totaling R$ 45 billion between January and August. However, the infrastructure sector stood out with a 27% increase in approvals, which surpassed R$ 17.6 billion this year. In the electricity segment alone, approvals grew 154%. A total of R$ 10.6 billion was approved for energy generation, transmission and distribution projects, which accounted for almost a quarter of BNDES loan approvals this year.
Approvals are an indicator of funds ready to enter the economy in investment projects. Disbursements, in turn, reflect demand for credit for past investments, since the funds are only released to borrowers once the phases of eligibility, approval and agreement have been concluded.
Disbursements – Still reflecting a more critical economic scenario, BNDES disbursements totaled almost R$ 45 billion in the first eight months of 2017, down 19% compared with funds released between January and August 2016. However, there was an increase in disbursements in the year to August for the agriculture sector (+9%) and infrastructure segments such as telecommunications (+86%), electricity (+53%) and rail transport (+3%). In August alone, BNDES disbursed R$ 4.7 billion, down 32% over the same month last year.
The breakdown of BNDES disbursements by region shows that the retraction is more concentrated in the Southeast, where the volume of funds released fell 36% between January and August, compared with the same period last year. In the Center-West and Northeast regions there was a significant increase in BNDES disbursements for projects: 21% and 15%, respectively. Regarding approvals, there was an 107% increase for projects in the Northeast.
The Brazilian Development Bank (BNDES) registered a net income of R$ 1.34 billion in the first quarter of 2017. There was recovery in relation to the same period in 2016, when BNDES had calculated a net loss of R$ 2.17 billion. The gross result with shareholdings – which went from a loss of R$ 4.92 billion between January and June 2016, to a R$ 1.42 billion gain in the same period of 2017 – positively influenced the balance.
The 92.7% reduction of the spending on investment losses and the higher return provided by the variable income portfolio in the form of dividends, equity accounting and disposals, were the main contributions of the result of the shareholdings, originating mostly from the subsidiary of BNDESPAR holdings.
Regarding the roles of JBS, BNDESPAR decided to perform the calculations for verification of the recoverable value (impairment test) in the second half of 2017 only, due to the great volatility in the value of the company’s shares in the recent period.
Credit portfolio – In the net credit operations and transfers portfolio, there was a reduction of 4.6% in the first half of 2017, equivalent to R$ 27.83 billion, due to the fact that the settlements of the operations exceeded the disbursements carried out in the period and also because of the R$ 4.16 billion increase of the provision for credit risk. With that, financial availability grew 58.2% in the first half of 2017.
The financial intermediation product showed a reduction of R$ 3.9 billion in the comparison between the first half of 2016 and the first half of 2017 mainly due to the reduction in the average profitability of the treasury portfolio, in addition to the effect of the fall in the volume of the average credit portfolio.
Provision was made for a R$ 1.4 billion supplementary credit risk at the minimum required by Resolution CMN 2,682/99, aiming at covering additional risks due to the uncertainty of the current economic scenario. Thus, the provision for credit risk in the first half of 2017 reached R$ 17.11 billion, the equivalent to 2.85% of the total portfolio. Defaults for a period greater than 30 days retreated from 2.81% in December 2016 to 2.45% on June 30 this year. The credit operations and transfers portfolio maintained good quality, with 96.2% of its scheduled operations between levels AA and C. This level is higher than the average of 89.6% recorded by the Brazilian Financial System.
Assets and equity – The BNDES system’s assets totaled R$ 883.64 billion in June 30, 2017, with a R$ 7.5 billion (0.9%) growth in the first half of the year, impacted by the income from the treasury and credit portfolios; FAT’s funds raising and emission of U$ 1 billion in green bonds in May.
In the first half of 2017, the net equity suffered a R$ 5 billion reduction, reflecting the negative equity valuation adjustment of portfolios of holdings in non-affiliated companies and of securities, which reached R$ 4.22 billion, and the payment of complementary dividends relating to the R$ 2.12 billion net profit of 2016. Thus, the total dividends paid to the Brazilian Treasury relating to 2016’s profit amounted to R$ 3.64 billion, reaching the limit of 60% foreseen in the new dividend policy of BNDES approved earlier this year.
The effects above considered, BNDES’s Net Equity totaled R$ 50.17 billion at the end of the first semester of 2017. The Reference Equity, a basis for the calculation of prudential limits established by the Brazilian Central Bank (BACEN), was R$ 126.59 billion in June 2017. The prudential limits of BNDES remained above the minimum required by the BACEN. BNDES’s Basel index in June 2017 reached 22.75%, above the 10.5% required by the BACEN.
The consolidated financial statements of BNDES for the first quarter of 2017 are available here and on the Brazilian Securities and Exchange Commission’s website (CVM).