From August 2021 to September, outflow reached R$131bn, while inflow totaled R$67bn
Fernando Honorato — Foto: Carol Carquejeiro/Valor
Brazilians have never withdrawn so much money from savings accounts as in recent months. The total withdrawals until September 19, 2022 reached a historical record of R$131 billion, counted since the balance of deposits reached the maximum point of R$1.05 trillion on August 6, 2021. Withdrawals are equivalent to 12.5% of the balance at the beginning of the period.
In the same period, the saving accounts inflow totaled R$67 billion, equivalent to 6.4% of the deposits balance at the beginning of the period. Even so, there was a record drop of 6.1% in the amount deposited, considering inflow and interests. The savings deposits balance never shrunk so much and in such a short time.
A set of factors contributed to the negative records. Fernando Honorato, Bradesco’s chief economist, believes that the historical level of withdrawals started during the pandemic. He says that the deposits in saving accounts skyrocketed during the Covid-19 crisis because a slice of the population was at home, consuming less and saving more. “Consumption fell more than income and there was money left over for families,” he said.
In fact, between mid-2016 and March 2020, before the pandemic, the balance of savings deposits, adding inflow and interests, grew at a steady rate of 8.1% per year. From April 2020 to early August 2021, the growth rate jumped to 14.7% per year.
Now, Mr. Honorato said, with the end of social distancing measures, a portion of the population is withdrawing funds from savings accounts to consume once again, which helps explain the record number. “Consumption is growing close to income or more,” he said.
According to Mr. Honorato, the fact that the government has distributed money through social programs such as the emergency aid has also contributed to the jump in savings deposits. According to data from the National Treasury, central government expenses related to the emergency aid reached R$237 billion between April and September 2020.
Caixa Econômica Federal was the lender that made the emergency aid payment in savings accounts through the Caixa Tem app. This led to an increase in the volume and quantity of low-value savings accounts.
The figures from the Credit Guarantee Fund (FGC) show that the balance of deposits in savings accounts up to R$5,000 grew 55% in this period. The number of accounts in this range increased 36%.
A part of the clients uses savings accounts as a current account, not to invest, said Leonardo Siqueira, head of investments at Santander. Almost half of Santander’s clients with savings accounts make more than four movements a month, which indicates that they use the savings account as a cash flow tool, taking advantage of the fact that it is exempt from income tax.
“Not everyone with savings accounts is an investor. Many put and withdraw money from there several times a month and use it only to set aside funds or to transfer it to other lenders,” he said. In general, these clients have accounts in more banks and transfer the money to themselves or to people close to them.
Among higher income people, with more than R$100,000 in the savings account, the balance of deposits and the number of accounts also grew consistently from April to September 2020.
In addition to the forced savings due to the closure of economic activities because of social distancing measures, the pandemic period was very turbulent for financial assets.
In a first moment, high-income investors scared with a falling market stimulated a migration of funds to savings accounts. “The savings account is an instrument that Brazilians know and trust,” said Mr. Siqueira.
However, over time, as the Central Bank increased interest rates to fight inflation, the difference in the profitability of other fixed-income investments in relation to savings grew. This was also one reason for the record withdrawals.
“Customers have started to question and seek better investments, and savings accounts are a bad alternative. Its risk is similar to that of certificates of bank deposit (CDBs), Real Estate Credit Bill (LCIs) or Agricultural Credit Bills (LCAs), which offer higher yields,” said Lucas Queiroz, a fixed-income strategist at Itaú BBA.
In addition, high inflation has compromised the population’s income and led people to withdraw money from savings accounts to cover part of the lost income.
“High prices, especially for food, and the population’s indebtedness match the hypothesis that the savings withdrawals are directed to recompose income. People are less able to take credit amid rising interest rates and are in need of money,” said Mr. Queiroz.
Mr. Queiroz evaluates that the scenario for savings is challenging and that the withdrawals are an incentive for the financial industry to seek alternatives for raising money for real estate credit. “The withdrawals are expected to drive the market to develop sources of real estate financing,” he said.
*By Marcelo D’Agosto, Júlia Lewgoy (Valor Investe) — São Paulo
Source: Valor International