Brazilian Economy outlook and its impacts on Real Estate sector. Joao Cesar Tourinho - CIO

Transcription

1 Brazilian Economy outlook and its impacts on Real Estate sector Joao Cesar Tourinho - CIO

2 Agenda I. Brazil s Fundamentals II. Challenges i. Fiscal Consolidation, ii. Investment and iii. Productivity III.Near-Term Outlook IV.Mortgage Market V. Conclusion

3 I - Brazil s Fundamentals & Buffers Against Shocks Very Large Liquidity Buffers in FX and RR : International Reserves and banking sector reserves at CB Strong Fiscal Position & Declining Public Debt-to-GDP Well-Capitalized & Supervised Financial System 3

4 Dez 06 Dez 07 Ago 08 Dez 08 Dez 09 Dez 10 Dez 11 May Ago-12 US$ billions Buffer (1): FX Reserves (USD Billion)

5 Dez 06 Dez 07 Set 08 Dez 08 Dez 09 Dez 10 Dez 11 May July-12 R$ Billions Buffer (2): Bank Reserves at CB (R$ Billion)

6 Fiscal Position & Declining Public Debt-to-GDP Fiscal Primary Surplus (% GDP) Net Public Debt (p.p. of GDP) 4 3,7 3,8 3,5 3 2,5 2 3,2 3,3 3,2 3,3 3,4 2 2,7 3,1 3,1 Cutting 24.7 % of GDP 1,5 1 0,5 0 6

7 International Comparisons of Fiscal Positions Fiscal Nominal Position (% GDP) Gross Public debt - % GDP(2011) Rússia 1,6 Rússia 10 Alemanha -1,0 China 26 China -1,2 México 44 Brasil -2,6 Brasil 54 México -3,4 Índia 68 Itália -3,9 Alemanha 82 Canadá -4,5 Reino Unido 83 França -5,3 Canadá 85 Índia -8,7 França 86 Reino Unido -8,7 Estados Unidos 103 Estados Unidos -9,6 Itália 120 Japão -10,1 Japão

8 Domestic credit to private sector (% of GDP) Brazil Euro area United States World 8

9 dez/01 jun/02 dez/02 jun/03 dez/03 jun/04 dez/04 jun/05 dez/05 jun/06 dez/06 jun/07 dez/07 jun/08 dez/08 jun/09 dez/09 jun/10 dez/10 jun/11 dez/11 Total Debt (Credit) by sector (% of GDP) Brazil Corporate Sector Debt as 35% of GDP Household Debt as 15% of GDP Net Consolidated Internal Public debt - 54% GDP Net Consolidated External Public debt - 18% of GDP

10 * Banks - Capital Adequacy Ratio ,8 14,8 16,6 19,0 18,5 17,4 17,8 17,3 17,7 18,9 16,9 16,3 16, Brazilian banks capital ratio regulatory minimum capital ratio Basel minimum capital ratio 10

11 Non-Performing Loans (% of total) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Brazil United States Euro area 11

12 Household Indebtedness Household Debt Service Ratio of 22% annual income LHS Household Debt as percentage of annual Income at 43% - LHS Household Debt participation on Banking Loans as 15% of GDP - RHS

13 II - Brazil s Challenges Fiscal consolidation: Public Sector Social Security Reform (FUNPRESP); Investment: tax reduction on payroll and investment (such as in Ports, Telecoms and Energy); Private Concessions and Infrastructure Investment: Airports (4 already granted and others under way); highways, ports and railways; Training and Human Capital Investment: National Scientific Program 100,000 scholarships; Pronatec Program for improvement of professional and technical education 13

14 Investment (percent of GDP) Brazil: Savings and Investment G-20: Saving, Investment, and Growth (1) China 35 India Turkey Brazil Indonesia Russia Mexico National saving (percent of GDP) 1/ Average since Size of bubbles reflects real per-capita GDP growth. 14

15 Brazil: Savings and Inflation 25% Gross national savings to GDP and yoy variation in consumer price index 20% 2011: 18.4% 15% 10% 2011: 6.5% 5% 0% Inflation Savings rate 15

16 Social Mobility: New Middle Class Consumption million (7%) Social Classes 23 million (12%) 29 million (15%) million (38%) 105 million (55%) 118 million (60%) 47 million (27%) million (28%) 39 million (20%) 32 million (16%) 25 million (13%) 17 million (9%) * E D C A/B *FGV forecast 16

17 jan 03 jul 03 jan 04 jul 04 jan 05 jul 05 jan 06 jul 06 jan 07 jul 07 jan 08 jul 08 jan 09 jul 09 jan 10 jul 10 jan 11 jul 11 jan 12 Financial Inclusion the rise in banks clients number of clients with credit operations over BRL 5, Accounts (banking sector) Customers (CCS data) Branches Banking sector All financial institutions Banking outposts ATM s Correspondents Municipalities Without financial services With financial services % Municipalities covered by the National Financial System 96% 100% 100%

18 US$ billions Foreigners leading Investment - FDI destination FDI in Latin America (2011) Brasil: US$ 67 bi. México: US$ 19 bi. 66,7 63, Chile: US$ 14 bi. Colômbia: US$ 13 bi. Argentina: US$ 7 bi. 32,8 45,1 34,6 48, ,9 28,6 25, ,0 22,5 16,6 18,1 15,1 18, ,5 3,1 1,3 1,5 1,4 0,3 1,2 2,8 1,1 1,0 1,1 2,1 1,3 2,1 4,4 10,8 10,1 18

19 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Competitiveness Brazil: ULC and CPI based Real Effective Exchange Rates, (Index, average 2008=100) CPI - based REER ULC - based REER 1/ Sources: INS; and IMF staff estimates 1/ Based on ULC in the manufacturing sector of Brazil's main trade partners, as provided by the OECD. 19

20 III - Outlook for Economic Recovery in 2013 Recovery drivers to sustain demand are in place: o Unemployment at very low historical levels o Formal employment and real wages growing o Credit maintains moderate but continuous growth o Although Inflation remains resilient Accumulated monetary policy action: improve conditions in credit markets together with other economic incentives; Forecast: economic recovery is gaining traction and will accelerate during the 2nd half of this year and 1st half of next year. 20

21 Unemployment & Real Income (% of total) 14% 12% 10% 8% 6% 4% 2% 0% 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Mar - 02 Dec - 02 Mar - 05 Dec - 05 Mar - 08 Dec - 08 Sep - 03 Jun - 04 Sep - 06 Jun - 07 Sep - 09 Jun - 10 Unemployment rate - seasonally adjusted (LHS) Average real income (R$), quarterly averaged (RHS) Mar - 11 Dec

22 Mar - 01 Dec - 01 Mar - 04 Dec - 04 Mar - 07 Dec - 07 Mar - 10 Dec - 10 Jun - 00 Sep - 02 Jun - 03 Sep - 05 Jun - 06 Sep - 08 Jun - 09 Sep - 11 Bank Lending Spreads (%) July 2012 > Average Spread: -3,9 %. Corporates: -1,9 p.p. Households: -5,3 p.p. Non earmarked funds (fixed rate) - Individuals Non earmarked funds (fixed, inflation linked and floating - rate) - General Non earmarked funds (fixed, inflation linked and floating - rate) - Corporate 22

23 % from GDP Total Credit YoY Average Growth: + 18 p.p. > Corporates: + 17 p.p. and Households: +19 p.p : 25.2% (average growth of nominal credit) : 18.3% (average growth of nominal credit) Imobiliário Real Estate Crédito Earmarked direcionado Crédito livre Non-earmarked 23

24 ago 11 set 11 out 11 nov 11 dez 11 jan 12 fev 12 mar 12 abr 12 mai 12 jun 12 % Long Term Interest Rate July 2021: 9,5% Average Interest Rate: -2,4 p.p. Corporates: -6,3 p.p. Households: -8,9 p.p

25 jan-04 jun-04 nov-04 abr-05 set-05 fev-06 jul-06 dez-06 mai-07 out-07 mar-08 ago-08 jan-09 jun-09 nov-09 abr-10 set-10 fev-11 jul-11 dez-11 mai-12 Resilient Inflation 7,0 1-Year Forward IPCA Inflation - Market Expectations 6,5 6,0 5,5 5,65 5,0 4,5 4,0 3,5 3,0 25

26 12-Month Rolling Inflation (%) Consumer Price Inflation (observed) 16 Regulated Prices Food Away from Home Apparel Services (ex - food away from home) Food at Home Durables & Semi (ex - apparel) Non Durables (ex - food) abr-12 jan-12 out-11 jul-11 abr-11 jan-11 out-10 jul-10 abr-10 jan-10 out-09 jul-09 abr-09 jan-09 out-08 jul-08 abr-08 jan-08 out-07 jul-07 abr-07 jan-07 out-06 jul-06 abr-06 jan

27 Real GDP Chained Index Recovery Granted by Investments onto Brazil: GDP Growth Recoveries Since Q Q Q Q Quarters following trough in QoQ growth 27

28 IV. Mortgage Market: Is there a Housing bubble? New Home Sales : More than 80% of homes are sold to first time buyers avoiding speculation; Absence of Leverage : Less than 5% of households have a home equity, meaning no borrowing being used into consumption; Banks Credit Policy : Most loans come from banks and existing credit standards are highly restricted, as an example, buyers should prove that mortgage payments cannot represent more than 30% of a family s income; Guarantees : In general Developers and Banks have strict lending policies, with no more than 70% loan-to-value; Mortgage Financing : Still represents less than 5% of GDP, although it will keep growing to reach 15% over the next 10 years.

29 Credit to Mortgage Market Total Credit Related to the Sector Increased 31% in 2011 R$ in billions mortgages for individuals construction financing loans Total mortgage and const. loan Portfolio Net increase from FGTS from SBPE Total New Mortgage Origination Source: Central Bank. 29

30 Strong growth path over last 6 years Mortgage Growth vs. Total Loan Growth 51% 45% 45% 38% 29% 22% 23% 28% 31% 21% 20% 19% 13% 15% Total Mortgages Total Loans 30

31 Mortgage Financing to Households Total Amount of Mortgages to Individuals (Ex-construction financing) R$160 bi

32 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Mortgage Financing gaining market share Mortgages as % of GDP %

33 Market Share : more to grow 106 Mortgages as % of GDP

34 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Savings Accounts growth rate Interest Rate Impact on Saving Accounts Growth 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% (RHS) 5% 0% -5% 34

35 Brazilian Real Rates Brazil 2yr Gov. Bond IPCA-Linked Curve % Yield ,7% 2 35

36 Securitization growing CRI s Securitization Issuance backed by Real Estate Credits (in R$ millions) 36

37 Securitization growing CRI s CRI - Real Estate Receivables Inventories

38 Banks Securities backed by Mortgage loans Yearly Change on LCI plus LH Outstanding Balance (in R$ millions) 38

39 Banks Securities backed by Mortgage loans Inventories of Real Estate Credit Bills (LCI) issued

40 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-10 Apr-10 Jul-10 Oct-10 NAV (R$ millions) Number of Funds (Units) Real Estate Investment Funds History of FII NAV and Number of funds 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Source: Uqbar 40

41 V - Conclusion Macroeconomic Stability : low inflation + low debt + sustainable GDP growth & external CA position; Financial Stability: well capitalized banks + sustainable credit growth + strong supervision & regulation; Very Large Buffers: sufficient conditions to accommodate external and domestic liquidity shocks; Sustainable credit expansion: with declining interest rates and spread margins; expected fall of delinquency rates and NPLs ratios; Economic recovery is underway: and will accelerate during 2nd half of 2012, as a result of favorable monetary and financial conditions. 41

42 Thank you All