...Fundamental Role for Automakers According to the Central Bank of Brazil there were 14 independent banks linked to automakers of light and heavy vehicles and/or agricultural/construction machines in September 2015. Their operations are divided between financing to dealers and to retail. Their main strategy is to help the outflow of automaker's production. Delinquency Deterioration Should Pressure Profitability Automaker banks have relied on subsidized rates provided by their parents to supplement the lower appetite of commercial banks and the sharp decline in vehicle sales. Historically, operating and costs have been lower in this segment when compared with other traditional banks, thus explaining their higher profitability. However, provisions coverage has been reduced with the credit quality deterioration in the vehicle market, which should pressure these banks' profitability. Funding Concentrated in the Local Market These banks have had easy access to funding in the local market without...
