Brazil Diversified Banks: Chart(s) of the Week: Unsecured lending – Fragile across cycles

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Brazil Diversified Banks: Chart(s) of the Week: Unsecured lending – Fragile across cycles

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18 Jun 2026 16:49:24 ET │ 14 pages

Brazil Diversified Banks

Chart(s) of the Week: Unsecured lending – Fragile across cycles

CITI'S TAKE

Gustavo Schroden AC

As we noted in Nu Holdings Ltd (NU.N) - The Hidden subordination risk – +55-11-4009-5858

Downgrade to Neutral, one of the key concerns in Brazil is asset quality and gustavo.schroden@citi.com

the potential subordination risk for unsecured credit lines. We expand our

analysis to include three additional periods of stress in Brazilian credit: Brian Flores, CFA

2011-12, 2015-16 and 2024-today. +55-11-4009-2842

luis.brian.flores@citi.com

Historical Credit Stress Analysis — We analyze four distinct credit stress periods to

Arnon Shirazi, CFAunderstand household default patterns. Credit card delinquencies consistently act

as the primary defense line, absorbing initial stress. Mortgages and private payroll +55-11-4009-7906

loans remain the most resilient credit lines across all cycles. We note a shift in arnon.shirazi@citi.com

delinquency drivers; consumer behavior was the main factor in 2011-16, while credit

volume has driven delinquency since 2021.

Early Cycle Default Drivers (2011-16) — We identify auto loans as the primary

source of defaults during the 2011-12 stress period. Auto loans accounted for 35.8%

of the change in delinquent balances. The subsequent 2015-16 cycle saw a shift,

with credit cards and personal loans leading defaults. In both periods, consumer

behavior, rather than loan volume, was the main explanation for rising

delinquencies.

Recent Cycle Stress (2021-23) — We find credit cards and auto loans drove the

largest defaults in the 2021-23 period. Credit cards were the most significant