Rising Financial Pressures: Banks Confront Elevated Credit Costs and High Non-Performing Loans

The Brazilian economy is currently navigating through a challenging financial landscape characterized by rising pressures on banks. Recent macroeconomic projections highlight persistent challenges, including high interest rates and persistently elevated non-performing loan (NPL) ratios. This has led to a deceleration in credit operations within the Sistema Financeiro Nacional (SFN). Since 2024, the expansion of these operations has shown decreasing growth rates each year. The benchmark Selic rate, which peaked at high levels over the past two years, continues to play a crucial role in inflation control and overall financial health. According to reports from major banks, this scenario disproportionately affects lower-income households and small and medium-sized enterprises (SMEs). As of June 2026, total credit balances within SFN reached R$7.4 trillion, up only 9.7% year-over-year. Experts note that the financial pressures impact different sectors differently. For instance, in agriculture, the situation is particularly complex, with high NPL rates and liquidity issues significantly impacting bank performance. The Brazilian Bank (BB) leads agricultural credit operations and has seen deteriorating loan portfolios, with a 5.61% NPL ratio increase to 6.27%. This financial strain has had direct impacts on banks' profitability; BB's net profit for the first half of 2026 was R$7.3 billion, down 34.2% from the same period in 2025. Although there was some improvement in the second quarter, with a net profit of R$3.9 billion (a 3.3% increase), NPL deterioration continued to significantly impact financial performance.