Analysis of the possible credit crisis

After the bankruptcy of one of the largest banks, the Silicon Valley Bank (SVB), rumors began of a possible credit crisis in the banking sector in the short term. The rapid reduction in lending to families and individuals even impacts on economic activity.

The monthly survey for the month of March by BofA, Bank of America, with 212 fund managers, listed that the fear of the credit crisis is greater than that of inflation itself, for 31% of investors. But is there really any reason to be so afraid? In fact, what’s going on?

understand what’s going on

It is a moment as if the credit market were to brake, impacting everything around, such as families and companies that need resources to finance themselves. This can happen for a number of reasons, a liquidity crunch where lenders stop lending, for example.

Thus, no one can acquire credit in the market to meet their payments and objectives. Another consequence is that loan renewals also become more difficult, giving more strength to the failure of companies in more sensitive financial situations.

Analysis of the team’s expert on the credit crisis

Thinking about better understanding the scenario, we talked to Karina Afuso. With more than 10 years of experience in the Private Banking segment and almost 4 years as an investment advisor, she has a postgraduate degree in finance from Insper and is CFP® (Certified Financial Planner) certified.

In addition, Karina is a partner and investment advisor at Renova Invest. She even gave some tips for investing without losing money that are worth checking out here.

About what is happening in the credit market and this possible crisis, she explains that private credit funds have suffered many rescues with fearful investors after the financial collapse of the Americans.

That’s because back in mid-January, the company disclosed accounting inconsistencies and then there was a request for judicial recovery. Remembering that we are fanado of one of the largest retail companies in the country.

“Many investment funds, including the most conservative ones, held the company’s debt, because until then, they were considered low risk. With the event of the judicial recovery, these securities were marked to market, leading many conservative cash funds to have a negative quota”, he adds.

After the tragic event of the retailer in January, just a month later, in February, came the news that Light hired the company Laplace, specialized in debt restructuring. The investment adviser says that once again the private credit market suffered and the company’s debt papers were repriced due to fear of default.

According to Afuso, there were other companies presenting financial difficulties such as Oi, Marisa, Tok&Stok. As a result, this whole scenario of uncertainties led more shareholders to withdraw from private credit funds. “To raise the necessary liquidity to honor these redemptions, many managers had to ‘burn’ papers, as the number of redemptions was well above average”, he says.

In the first two months of the year, redemptions add up to R$ 12 billion. In the same period of 2022, funding was positive at R$ 164 million, just by way of comparison, according to data from Anbima.

But all is not lost, the partner at Renova Invest reveals that the good news is that in March this widespread opening of spreads that occurred in February is being regularized. For the investor who has the resilience to withstand this current challenging scenario, it may be that he will have good returns in the future.

“Because if, on the one hand, we had managers selling papers at prices below the market to honor redemptions, there were many fixed income and multimarket funds on the other hand buying these papers and very attractive rates”, he concludes.