Term deposits jumped again in 2023 as customers migrated from funds to lower-risk products

12/04/2024

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Luiz Masagão — Foto: Divulgação

The start of the fall in the Selic rate in August last year was not enough to increase investors’ appetite for risk. While investment funds withdrew R$127.9 billion in 2023, bank funding from CDBs rose again, consolidating its position as the largest source of funding for financial institutions. Meanwhile, savings continued to fall and were overtaken by bond issues, such as real estate credit bills (LCI), agribusiness credit bills (LCA), and financial bills (LF).

A Valor survey based on statements from Itaú, Caixa, Banco do Brasil, Santander, and Bradesco shows that the volume of term deposits—CDBs—rose 15.5% last year to R$2.2 trillion. Meanwhile, bills jumped 30% to R$960.6 billion, and savings fell 2.1% to R$929.1 billion. Bond issues made by the big banks abroad have been practically stable in recent years and have a much smaller share, at R$117.1 billion. Each instrument has its advantages and disadvantages. Savings accounts are cheaper than CDBs, but they must be directed towards the real estate sector. Bills, on the other hand, are more expensive than the former but are not subject to compulsory payments.

Ever since the yield on savings accounts was changed in 2012, CDBs have been gaining strength, a movement that has been reinforced since 2018 with the rise of investment platforms, which began distributing third-party securities, including those from medium-sized banks, which offer more attractive yields. During the pandemic, with the payment of emergency aid and the restriction on the movement of people, who were left without so many places to spend, there was initially a jump in bank deposits. Then, with the Selic rate at historic lows, the instrument remained competitive but had to compete for investors’ attention with multimarket funds and other asset classes with a greater chance of returns.

In 2022 and 2023, with the reversal of the scenario and rising interest rates, CDBs began to shine again. This pendulum is starting to swing again now, given that there are already signs of an influx into investment funds. Even so, deposit-taking remains strong and is fueling competition for customers’ pockets.

In addition to the big banks, medium-sized institutions—such as Inter, PagBank, ABC, and Daycoval—benefited from the demand and took the opportunity to diversify their funding. It’s common to see advertisements offering promotional rates or highlighting the yield of the securities. The coverage of the Credit Guarantee Fund (FGC)—a private entity in Brazil that protects depositors and investors in the event of a bank failure, offering R$250,000 coverage per individual—was a factor that gave investors the confidence to put money into financial institutions with which they have little familiarity.

The success of investment platforms and CDBs from medium-sized banks hasn’t affected the availability of funding for the big ones, but there are indications that it may have contributed to an increase in prices. A few years ago, it was common to see the biggest institutions paying returns well below the CDI rate. Today, the discount in relation to the spread is generally small, while medium-sized competitors often offer rates of 115% and even 130% of the CDI.

“In recent years, there has been this structural migration from savings accounts to other instruments, and now, even with the fall in the Selic rate, I don’t think this will be completely reversed,” said Luiz Masagão, Santander’s treasury director. “Some investors went into funds and then back into CDBs; they didn’t like having a more volatile portfolio. It’s a question of the investor’s profile.”

Santander has a slightly different funding mix from its private rivals, more concentrated on wholesale, but in the last two years, it has been trying to increase its share of retail. To this end, the bank strengthened its investment advisory services and reformulated the high-income segment. According to Mr. Masagão, this led to a very positive result in customer fundraising last year.

Eric Altafim, director of corporate products and sales at Itaú, says that with interest rates still high and problems in the corporate credit market in 2023, there has been a migration of funds to CDBs. “This has fattened the banks’ cash flow, providing a good supply of liquidity. But you have to remember that excess liquidity is different from excess capital. And that was in 2023. In recent months, we’ve started to see signs of a certain reversal of this trend of migration to CDBs, and there’s competition for these funds again.”

The executive also recalls that although liquidity increased during the pandemic, banks’ portfolios grew rapidly during those years, with the expansion only moderating in 2023.

At Bradesco, Roberto Paris, executive director in charge of the treasury, says that the development of the financial bills market has been so strong in recent years that today banks don’t need to issue international bonds as much. At the same time, after the 2008 global financial crisis, bank liquidity requirements became much more conservative. “Before 2008, the only protective barrier in times of volatility was compulsory deposits. Now, there are a series of rules and liquidity requirements. So I think we’re in a position to have lower compulsory deposits.”

An increase in deposits doesn’t necessarily mean that banks will have more money to lend and invest. If they take in more funds on one side and don’t see much chance of investing this money in the business, they adjust their funding mix, reducing the issuance of more expensive instruments, for example. In addition, in the case of deposits, the financial institution is obliged to leave compulsory deposits with the Central Bank.

A recent change that could affect the composition of bank funding is the restriction on incentivized securities, namely those that are exempt from income tax for individuals. These securities include Real Estate Credit Bills (LCI), Agribusiness Credit Bills (LCA), Real Estate Receivables Certificates (CRI), Agribusiness Receivables Certificates (CRA), and Real Estate Investment Funds (LIG). With new limitations on what can be used as collateral announced at the beginning of February, issuance of these securities has declined. Additionally, the increase in the minimum holding period to nine months for LCA and 12 months for LCI is expected to alter the buyer profile.

Alongside these changes are the challenges facing savings accounts. Savings accounts saw their third consecutive year of withdrawals in 2023. This scenario affects real estate financing, as savings accounts are the primary funding instrument for this industry. Last year, for the first time, savings accounts lost to the capital market as the leading source of funds for housing loans, with shares of 36% and 38% of the total, respectively.

In February, the CEO of Caixa, Carlos Vieira, said that the 2024 budget had been resolved but warned that if nothing was done about savings, there would be problems in 2025. The bank is the country’s leading mortgage lender. According to the executive, there are some alternatives to be discussed, such as releasing part of the compulsory deposit.

When asked, Caixa said in a statement that since 2021, it has repositioned its funding strategy with a focus on bills, especially LCI, in order to compensate for savings outflows from the point of view of funding for housing. Asked if it is discussing a possible reduction in the compulsory deposit with the Central Bank, the institution replied only that “it has been debating alternatives for expanding funding for real estate credit with all the actors involved.”

Banco do Brasil, meanwhile, said in a statement that its commercial funding has been growing in recent periods, reaching more than R$1 trillion in December. “Banco do Brasil, like the financial system, has been experiencing a gradual reduction in the volume raised through savings, which is natural in the context of the evolution of the funding products available to clients. The bank is constantly assessing the most suitable funding alternatives.”

*Por Álvaro Campos, Mariana Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/