Mario Mesquita, chief economist at Itaú Unibanco: “The main headwind for bank earnings has been rising delinquency, that is, nonperforming loan (NPL) levels. NPLs in the national credit system moved from 2.7 percent in last year’s second quarter to 3.6 percent in this year’s second quarter. Credit volume growth has also been sluggish, rising by high-single digits in this year’s second quarter as compared to the mid-teens in the same period last year. The slowdown has been driven by both less appetite from clients to borrow at higher rates, and less appetite from banks to lend, given higher funding costs and NPL risk. It is important to flag a large earnings divergence between the big Brazilian banks. Santander Brasil has had more pressures on net interest income, on top of provision expenses. Bradesco is in a similar camp. Bradesco’s current 10-12 percent return on equity compares to 18-20 percent pre-pandemic. However, two other large banks in Brazil (Itaú and Banco do Brasil) are boasting 20 percent returns on equity and are consistently…”