C6 Bank, the Brazilian digital bank backed by JPMorgan Chase & Co., saw losses narrow in this year’s first half as fewer borrowers fell behind and costs declined — trends it expects to continue.
(Bloomberg) — C6 Bank, the Brazilian digital bank backed by JPMorgan Chase & Co., saw losses narrow in this year’s first half as fewer borrowers fell behind and costs declined — trends it expects to continue.
The loss through June shrank to 473 million reais ($95.5 million) — down 15% from a year earlier and 74% from last year’s second half, founder and Chief Executive Officer Marcelo Kalim said in an interview Thursday. The percentage of loans to people at least 90 days behind on payments fell to 4.6% in June from 5.2% at the end of last year.
“From now on, bad-loans provisions and other costs are expected to fall further — and revenue will keep growing,” said Kalim, who forecast that the firm will become profitable by year-end.
C6 posted a string of losses as rising interest rates made it harder for heavily indebted Brazilians to keep up with payments — leaving delinquency rates “bigger than expected,” Kalim said. At Itau Unibanco Holding SA — Latin America’s most valuable bank — the rate was 4.9% for individuals at midyear as lenders across the country took provisions to cover bad loans.
The plan now is to keep expanding, Kalim said, with the goal of turning C6 into a bank rivaling Itau. That may require more capital in coming months, he said, in which case fundraising would be through the issuance of subordinated debt.
The firm’s loss last year swelled to 2.2 billion reais, up from 692 million reais in 2021. Part of the 2022 losses stemmed from an 850 million-real derecognition of fiscal credits that still can be used in the future, Kalim said.
The company reduced its workforce to 3,750 from 4,029 in January, and it has started to charge clients for some services.
Payroll Loans
C6’s credit portfolio grew 33% in the year’s first half to 38.4 billion reais, of which 44% is payroll loans to individuals. Provisions for loan losses reached 1.2 billion reais, up modestly from 1.1 billion reais in last year’s second half.
Revenue in the first half of this year reached 4 billion reais, compared with 2.9 billion reais for the second half of 2022.
Earlier this week, JPMorgan said it plans to boost its holdings in C6 to 46% from 40%. Terms of the transaction, which requires regulatory approval, weren’t disclosed. The Wall Street giant revealed its investment in the online lender two years ago.
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C6’s client base has ballooned to 25 million, up from 8 million around the time New York-based JPMorgan first invested in the firm.
“It’s only a matter of time before C6 is as big as Itau,” Kalim said, adding that JPMorgan wouldn’t settle for anything less.
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