December 2024
The continuing progress of disinflation in the United States allowed a monetary easing cycle to begin in 2024, but the resilience of the American economy will make the pace of adjustments in 2025 slower. The global outlook remains uncertain and will depend on the economic direction taken by the new U.S. administration. If the changes implemented fall short of what is expected, with more moderate effects on global growth and the dynamics of geopolitics, the prospects for the emerging economies will become more favorable.
In Brazil, the easing cycle that began in 2023 was interrupted. The significant fiscal impulse and the resilience of the labor market outweighed the expected contractionary factors, resulting in a growth rate that for the fourth consecutive year surpassed the markets’ expectations at the start of the year. The deteriorating dynamics of inflation, which reaccelerated after considerable progress had been achieved, in conjunction with deanchored inflation expectations and local currency depreciation, led the Central Bank of Brazil to embark on a new monetary tightening cycle only a few months after the end of the easing cycle, so that interest rates rose to an even more restrictive level.
Although the outlook for Brazil is challenging and the tighter financial conditions are set to slow economic growth in 2025, we expect their effects to be more evident in the second half of the year and in 2026. Moreover, the slowdown is likely to be gradual, and less cyclical sectors such as agriculture should perform well, as should the labor market, which typically takes time to adjust.
With the economy’s basic interest rates at attractive levels and other asset classes underperforming, the credit market in Brazil stood out, attracting a continuous inflow into fixed-income products and funds, especially those exempt from taxation. Because of the abundant liquidity, BOCOM BBM had to lower the spread on new corporate credit transactions, but this kept default at a low level while also boosting revenue from fees on structured lending transactions provided by our debt capital market department (DCM).
In 2024, BOCOM BBM continued to expand its asset management operation, and launched its first agribusiness receivables investment fund (FIDC FIAGRO), raising BRL 150 million by September.
The first half of the year saw regulatory and tax changes in the investment market that shifted the flow of funds into the fixed-income segment and boosted our DCM results. The second half saw an increase in both global and local uncertainty, fueling market volatility and creating opportunities for our treasury and derivative sales operations, which proved to be the top performers in terms of earnings in 2024.
BOCOM BBM again obtained a high return on equity in the year. Treasury, sales of derivatives, and coordination and distribution of DCM deals performed especially well. The level of nonperforming loans was low, and new business areas such as asset management continued to grow.
In 2025, we expect a lower risk-return ratio in new credit transactions and therefore project a lower rate of portfolio growth than the annualized rate of 9% achieved in 2024. We remain confident in our successful strategy of diversification into new business areas, with expansion of DCM, treasury products for clients, and asset management. In 2024, these sources of income, which are not directly linked to the credit spread, reached 47.2% of total revenue, representing a significant growth compared to 22.3% in 2016, when the BOCOM BBM project began.
In 2024, we continued to strengthen our corporate commitment to the well-being of our employees, customers and suppliers, as well as the local communities where we operate. Through sponsorships and donations, we again supported several projects that provide training for people in vulnerable situations. The highlight was continuing support for Arte Tech, a project located near our Rio de Janeiro office, and run by the charity Gamboa Ação, that offers extracurricular classes for disadvantaged children. Via another charity, Viver Solidário, we also supported several philanthropic entities in Rio de Janeiro by donating food and hygiene products in the festive season. In addition, we supported universities and training courses in strategic areas for the Bank, such as the economics departments of the Pontifical Catholic University of Rio de Janeiro (PUC-Rio) and Getúlio Vargas Foundation (FGV), which are both centers of excellence in the area, and Global Hybrid Classroom, an online educational program developed by Tsinghua University to promote collaboration and knowledge exchanges between educational institutions worldwide. In Brazil, the program is run by the Federal University of Rio de Janeiro (UFRJ). Our Sustainability and Women’s Committees continued to promote important internal initiatives, such as the measurement, certification and offsetting of the Bank’s carbon emissions.
Banco BOCOM BBM took part in the celebration of 50 years of China-Brazil diplomatic relations by supporting projects that portrayed cultural exchanges between the two countries over the years, such as the restoration and maintenance of Casa Pacheco Leão in Rio’s Jardim Botânico district. In 2024, this cultural center held an exhibition entitled “The Tea Road”, which will remain there in 2025. We also supported the publication of a book entitled “Troposfera compartilhada: Artistas Brasil e China”, showcasing the work of Brazilian and Chinese artists that features elements of nature and technology shared by the two cultures. The synergies between China and Brazil are not confined to culture, and this is just a small sample of the opportunities that can bring about even more integration between our two countries.
