• Non-performing loan sales seen at $7 billion, RCB Says
  • Banks under pressure to boost efficiency amid recession

Brazil’s market for distressed consumer and small-business debt will increase about 9 percent this year as the nation’s worst recession in a century drives banks to sell assets, according to estimates by one of the biggest investors in the securities.

Banks will unload portfolios of non-performing loans with a face value of about 25 billion reais ($7 billion) this year, up from 23 billion reais in 2015, said Alexandre Nobre, a founding partner of RCB Investimentos SA, the nation’s second-largest distressed-debt management firm. The forecast doesn’t include plans by Banco Bradesco SA, which doesn’t sell its non-performing loans, or Banco do Brasil SA, which doesn’t publicly market such sales, he said.

“All the banks are studying selling portfolios of non-performing loans,” Nobre said in an interview at RCB’s headquarters in Sao Paulo. “This is a conservative estimate.”

As Brazil heads into its second consecutive year of economic contraction, rising unemployment is forcing many consumers to repay their debt late. In the first quarter, Bradesco, Banco do Brasil and Itau Unibanco Holding SA missed profit estimates after setting aside more money to cover soured loans. State-owned Caixa Economica Federal cut provisions after it sold 2.6 billion reais of distressed credits in first quarter, including a total of 1.27 billion reais sold to RCB.

For a QuickTake explainer on Brazil’s recent highs and lows, click here.

Banco Santander Brasil SA, a unit of Spain’s largest bank, is in talks to sell 1.77 billion reais in similar loans, two people with knowledge of the matter said last week. Santander declined to comment on the sale talks, a company official said.

Banks under pressure to boost efficiency could help increase the annual distressed-debt market to 60 billion reais of non-performing loans, if large banks sell as much as 30 percent of their loans, Nobre said.

In another sign Brazil’s biggest banks are trying to come to grips with their bad-loan portfolios, Itau agreed to buy Grupo BTG Pactual’s stake in distressed-asset firm Recovery do Brasil Consultoria SA for 640 million reais in December, and said in February it plans to intensify the sale of non-performing loans to the firm.

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