Brazilian Financial Institutions: Super El Niño could create more havoc for the sector

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Brazilian Financial Institutions: Super El Niño could create more havoc for the sector

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Brazilian Financial Institutions

Super El Niño could create more havoc for

the sector

Industry Overview

Climate risk increasing; potential Super El Niño in ’26/27 18 May 2026

Our Global Commodities Research team has highlighted a potentially stronger-than- Equity

expected El Niño in the ’26/27 cycle (see their report). Historically, such events bring Brazil

excessive rainfall to the South region of Brazil and drier, hotter conditions to the Center- Financial Institutions

West, disrupting grain production. Should a Super El Niño materialize, we expect further Mario Pierry

pressure on rural producers’ cash flows, delaying the sector’s recovery and increasing Research Analyst

provisioning needs for banks; in parallel, heavy rainfall could lead to higher loss ratios for BofAS+1 646 743 0047

insurers. BBAS, ABCB, BRSR, BBSE, PSSA and CXSE are the most exposed. Exhibits 1-2. mario.pierry@bofa.com

Antonio Ruette >>

Further disruption to rural producers’ cash flows ResearchMerrill LynchAnalyst(Brazil)

El Niño events typically lead to lower soybean and corn yields in Brazil’s Center-South, +55 11 2188 4225 antonio.ruette@bofa.com

weighing on farmers’ cash flows; both crops combined 85% of grain production. This

Augusto Uehara >>

pattern was evident during the last two Super El Niño events (‘15/16 and ’23/24), with Research Analyst

peak impacts between Nov/Jan. In addition, ongoing disruptions to global fertilizer Merrill Lynch (Brazil)

+55 11 2188 4651

supply chains—partly driven by geopolitical tensions in the Middle East—are likely to augusto.uehara@bofa.com

raise input costs for the ’26/27 crop season, further compressing margins. Exhibits 3-6. Ernesto Gabilondo >>