...Downward credit pressure in the corporate sector due to weak demand, higher corporate leverage and lower liquidity will make for a tougher 2015 for Brazilian banks. The Petrobras investigation and the energy giant's reduced capex are exerting additional pressures. Compared to one year ago, unemployment risk has risen and the potential for weaker-than- expected GDP growth threatens banks over short term. And while banks' revenues have risen due to 2014's interest rate hikes, borrower payment strain also increases. Lower public spending and a higher potential for electricity and water rationing in the main economic regions of Brazil are other sources of risk. Higher provisioning would stem from both corporate and retail portfolios. In general, asset quality deterioration in retail portfolios is a larger contributor of loan loss provisions at Brazilian banks, as around 47% of system loans at year-end 2014 were retail, whereas corporate loans comprise about 35% of the system's loans. The latter...
