BB sees 4.4mn client potential in INSS deal

Brazilian federal bank Banco do Brasil (BB) has said it sees a 4.4 million client potential in a loan agreement signed Thursday with the country's social security agency INSS. Under the agreement BB will offer so called payroll-linked loans to INSS beneficiaries with loan instalments deducted directly from the pension benefits paid out by the INSS. BB has 3bn reais (US$1.12bn) to lend INSS beneficiaries this year, local news agency Agencia Estado qouted the bank's president Rossano Maranhão Pinto as saying. By law, payroll linked loans to INSS beneficiaries can not exceed 30% of the monthly pension benefit. Last year many private banks entered into the payroll-linked segment because of the low-risk nature of those loans and also to broaden their customer bases by signing loan agreements with companies and public sector institutions. Payroll-linked lending through the INSS represents a "very large potential market" for Brazilian banks that is only beginning to the tapped because some 20 to 22 million people receive their pension benefits through the INSS, UBS Warburg banking analyst Bruno Pereira told BNamericas. Local press reported earlier this week that BB's agreement with INSS is likely to put downward pressure on the interest rates charged by private banks for their payroll-linked loans. Pereira however said he does not believe BB will be that aggressive in terms of pricing since the bank is most likely to target individuals who already get their INSS benefits paid at BB's branches. BB is the largest bank in Brazil in terms of overall market share.