Competition between banks, fintechs and cooperatives
There is an ongoing discussion within banks posed to become heated in the coming months. It concerns the regulatory asymmetry to which they would be submitted in relation to other financial companies that are not banks.
The motto of the debate is "same product, same service, same regulation." Banks complain mainly about large fintechs like Stone and XP Investimentos, which have grown too much and compete in the market with regulatory, labor and tax advantages. Credit cooperatives, which have already set up shop in São Paulo's financial hub, known as Faria Lima, also bother. The debate takes place all over the world.
Brazil is home to 168 banks with 18,900 branches, besides thousands of smaller service offices. They directly employ 503,000 and generate 900,000 indirect jobs. The average remuneration in banks is R$7,000, 144% higher than the national average of R$2,900. Last year, in the face of the pandemic, it was the industry that laid off the least. And they are proud of being a segment where turnover is low.
Banks also invested R$24.6 billion in technology recently, plus R$9 billion in the security of branches and offices. With a higher tax burden than other companies, they paid R$239 billion in federal taxes in 2019, or 22.4% of Brazil's tax revenue. And reported credit balance of R$4 trillion in December 2020, equivalent to 54.2% of the GDP. The pandemic accelerated the system's digitalization. Currently, Brazilians execute 74% of transactions digitally.
Several perceptions that are part of the local culture are changing. One is that banks are highly concentrated and have nonsense profitability, out of step with the rest of the economy. There is, in fact, concentration, since the five largest banks (Itaú, Bradesco, Santander, Caixa Econômica Federal and Banco do Brasil) account for 71% of the total credit in the system. This chunk drops to 62% if we exclude real estate and farm loans (provided mainly by state-owned banks). It is important to note, however, that the level of concentration here is in line with the industry's performance in emerging countries, they argue. In addition, banks are profitable, but they are not the economy's most profitable industry. Also, the market capitalization of the major banks is no longer something so exceptional. The system is going through deep transformations.
The country's 100 largest banks made a profit of R$133.8 billion in 2019. This meant a 17.6% return on equity for all banks and 19.1% for the...
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