New pension-backed loan segment worth US$19.2bn

A new type of loan which allows banks to offer pensioners loans and receive payment directly out of pensioners' pay checks could bring 55bn reais (US$19.2mn) to banks' coffers, Brazilian finance paper Valor Economico reported. Brazil is home to 17.6 million pensioners who collectively receive 7.6bn reais monthly. According the presidential decree signed this week, pensioners can receive loans of up to 30% of their pension payments, capping the new loan potential at 2.3bn reais monthly. The average life of a contract is 24 months, bringing the total potential of the new loan facility to 55bn reais. The country's largest private bank Bradesco (NYSE: BBD) leads the banking sector in terms of number of pensioner clients, with 3.6 million, followed by federal bank Banco do Brasil with 3.5 million. "The average age of pensioners [in Brazil] is 53 and many continue to work," HSBC consumer finance director Celso Fernandes said, referring to the attractiveness of the new loan segment. According to Brazil's current pension system workers begin to receive payment after number of years worked, rather than at an age cutoff.