Letter to My Fellow NPL Investors: Brazil, Your Next Great Opportunity

Dear friend,

Let me share a story. While flipping through some old notes (yes, I still jot things down by hand occasionally), I came across my scribbles from 2020 during the NPL Forum Week. The event, originally scheduled to take place in Europe, was broadcast online due to the pandemic — which made it easier for me to attend from home. One of the highlights was a panel titled NPL Brazil: The Key Role of Creditors in Creating Post-COVID Opportunities. At the time, Lauro Leite (then at Return Capital) and Ulisses Rodrigues (then at Intrum) were among the speakers. They shared valuable insights into the challenges and untapped potential of the Brazilian NPL market.

Fast forward to 2021, and I had my first hands-on experience in this sector. While working at ID Finance, a fintech headquartered in Spain and operating in Brazil under the name Money Man, I conducted a runoff process during the pandemic. As part of this, I facilitated the sale of an NPL portfolio to Recovery, with invaluable support from Maxiuel Tomacheski Cerizza ki Cerizza, founder of the newly launched Portal de Cess?o de Créditos , a platform specializing in portfolio brokerage, providing advisory support and security for both sellers and buyers. This experience solidified my interest in this market — it was like discovering a hidden gold mine.

Now, in 2025, this gold mine is no longer a secret. The Brazilian NPL market has matured, becoming more organized, transparent, and full of opportunities for those ready to seize them.

Why Brazil is the Next Big Move in NPLs

1. The Bigger the Problem, the Greater the Opportunity

Imagine this: 73.14 million Brazilians are currently behind on their payments. Yes, that represents 45.12% of the adult population. These debts amount to R$402.03 billion, with an average individual debt of R$5,504.33, according to data from Serasa. For investors, this is not a problem—it’s a feast of opportunities waiting to be explored.

To contextualize the opportunity in Brazil's non-performing loans market it is essential to analyze the data provided by the Central Bank of Brazil, particularly the time series 20570 and 21112:

• 20570 series: Represents the balance of non-earmarked credit portfolios for individuals, indicating the total amount of credit granted without a specific purpose.
• 21112 series: Reflects the percentage of non-earmarked credit operations for individuals that are over 90 days past due, providing insight into the delinquency level in this segment.

An analysis of these series reveals that, in recent years, there has been a significant increase in the volume of credit granted to Brazilian households, coupled with a rise in delinquency rates. This scenario highlights a growing demand for specialized services in credit recovery, presenting a promising opportunity for investors interested in the non-performing loans (NPL) market.

2. The Rules of the Game Are Finally Fair

Brazil has implemented significant regulatory changes that align its market with global standards:

• Resolution 4966 and the adoption of IFRS 9 now require banks to account for expected losses in advance, rather than waiting until their balance sheets are overloaded. This has not only accelerated NPL sales but also enabled more realistic pricing, eliminating distortions and asymmetries that previously plagued the market. This creates a more transparent environment for NPL buyers, facilitating negotiations.
• Resolution CVM 175 mandates the registration of most credit rights, fostering a safer and more transparent environment for buyers.

With these new regulations, sales are expected to occur in shorter cycles, possibly annual or even semi-annual, to avoid the accumulation of provisions and improve efficiency ratios. These rules may also encourage banks to sell NPLs at earlier stages of delinquency, where recovery potential is higher, increasing their appeal to investors.

3. Public Debt Auctions: A New Frontier

Thanks to Law 208/2024, Brazilian governments at all levels can now securitize and sell their unpaid public debts. This opens up a new class of assets for NPL investors, offering opportunities to acquire public sector debts with solid recovery potential.

The Veterans of the NPL Market in Brazil

Over the years, many players have shaped the Brazilian NPL market. Some have come and gone, while others remain at the forefront. Here is a quick overview, presented in chronological order of their establishment:

• AMC do Brasil (2000): A pioneer in the national receivables securitization market, with solid experience in the financial and commercial sectors.
• Recovery (2002): Founded in 1998 in Argentina, Recovery expanded its operations to Brazil in 2002, becoming one of the leading companies in the sector. In 2011, Banco BTG Pactual acquired Recovery to strengthen its position in the NPL market. Later, in March 2016, Itaú Unibanco acquired 89% of the company's capital for R$699.2 million, increasing its stake to 96% in 2017, consolidating control over Recovery.
• Ativos S.A. (2002): Established in 2002, Ativos S.A. is a privately held company and part of the Banco do Brasil conglomerate, specializing in the acquisition of credit operations from financial institutions and debt collection management.
• Credigy (2003): A subsidiary of the National Bank of Canada, Credigy entered Brazil to operate in the acquisition and management of non-performing credit portfolios. In November 2020, MGC Holding acquired Credigy's Brazilian operations.
• Ipanema Credit Management (2004): In July 2017, Banco Santander Brasil acquired 70% of Ipanema Credit Management to boost its revenue and strengthen its position in the credit recovery market. Later, in November 2019, Santander acquired the remaining 30%, taking full control of the company. Ipanema continues to operate under its original brand.
• Itapeva Recupera??o de Créditos (2007): Part of the RCB Group, Itapeva specializes in the acquisition and management of credits from major financial institutions and companies in Brazil, offering transparent and agile solutions for financial debt regularization.
• Hoepers (2010): Hoepers was founded in 1994 and entered the NPL (non-performing loans) acquisition market in 2010, significantly expanding its portfolio of operations. Until then, the company was primarily recognized for its services in managing and recovering delinquent debts on behalf of third parties. In 2011, Hoepers sold 60% of its shares to the EOS Group, becoming part of one of the world’s leading financial services providers. In 2015, Manfredo Hoepers repurchased these shares, regaining control of the company and initiating a new phase, including the launch of a new brand identity.
• Return Capital (2012): In 2017, Banco Santander Brasil acquired a majority stake in Return Capital to strengthen its presence in the credit recovery market. Currently, Return Capital is part of the Santander Group, indirectly controlled by Banco Santander (Brasil) S.A., which holds 100% of the capital of Atual Servi?os de Recupera??o de Créditos e Meios Digitais S.A., the sole owner of Return Capital.
• Jive Investments (2010): A Brazilian manager specializing in the acquisition and management of non-performing loans and distressed financial assets. Founded in 2010, the company had a unique origin: acquiring the NPL portfolio of the American bank Lehman Brothers in Brazil. In 2018, Jive Investments launched its second investment fund, Jive Distressed FIM II CP, focused on acquiring corporate NPLs and distressed real estate assets.
• MGC Holding (2015): Established in 2015, MGC Holding is a leading independent player in the Brazilian market for consumer NPLs, focusing on restructuring the financial health of both businesses and consumers.
• Intrum Justitia (2020): Entered Brazil but sold its operations to TW Capital in 2023.
• MBA Consult (2021): Founded in Russia and now headquartered in Singapore, MBA Consult is a global company specializing in managing non-performing loans (NPLs) with a strong presence in various countries. In November 2021, the company expanded its operations to Brazil, establishing a branch in S?o Paulo with a solid local presence.
• TW Capital (2023): Took over Intrum’s operations and is now an important player in the local market.

This list reflects the evolution and diversity of key participants in Brazil’s NPL market, highlighting their contributions to its development and the opportunities they continue to provide.

What to Expect in 2025

In 2023, the NPL market in Brazil reached a record-breaking R$72 billion in transactions, as reported by Deloitte. Based on the projected 9.6% growth in credit balances by 2025, according to the Central Bank of Brazil, it is reasonable to estimate that the NPL transaction market will follow a similar growth trajectory. This could increase the total transaction volume to approximately R$79 billion, further consolidating the sector.

With the entry of new players and the maturation of trading platforms, the market is poised to become even more dynamic and competitive, offering unique opportunities for experienced investors and newcomers alike.

As for me, I am thrilled to continue being part of this evolution—facilitating new portfolio sales and showing the world that Brazil is not just about samba and beaches; it is a goldmine for those who understand the NPL game.

If you are considering entering this market, let’s talk. Brazil is ready, the opportunities are real, and those who act now will reap the rewards. See you at the table!

References

1. BANCO CENTRAL DO BRASIL. Resolu??o no 4966. Brasília: 2021.
2. BANCO CENTRAL DO BRASIL. Séries Temporais - 20570 e 21112. Disponível em: https://www3.bcb.gov.br/sgspub/localizarseries/localizarSeries.do?method=prepararTelaLocalizarSeries. Acesso em: 17 jan. 2025.
3. BRASIL. Lei Complementar no 208. Brasília: 2024.
4. CVM. Resolu??o CVM no 175. Rio de Janeiro: 2022.
5. DELOITTE. Perspectivas sobre o Mercado de NPL no Brasil. S?o Paulo: 2024.
6. G1. Itaú Unibanco finaliza compra da participa??o do BTG na Recovery. Disponível em: https://g1.globo.com. Acesso em: 10 jan. 2025.
7. SERASA EXPERIAN. Mapa da Inadimplência no Brasil e Renegocia??o de Dívidas – Outubro de 2024. S?o Paulo: 2024.
8. TW CAPITAL. Aquisi??o da Intrum Brasil. Disponível em: https://www.twcapital.com.br. Acesso em: 10 jan. 2025.
9. VALOR ECON?MICO. Jive Investments lidera o mercado de ativos inadimplentes. Disponível em: https://valor.globo.com. Acesso em: 10 jan. 2025.
10. ATIVOS S.A. Quem Somos. Disponível em: https://institucional.ativossa.com.br/ativos_institucional/opencms/Apresentacao/QUEM-SOMOS.html. Acesso em: 10 jan. 2025.
11. RETURN CAPITAL. Vis?o Corporativa. Disponível em: https://www.returncapital.com.br/sobre-return-capital. Acesso em: 10 jan. 2025.
12. MGC HOLDING. Quem Somos. Disponível em: https://www.mgcholding.com.br/quem-somos/. Acesso em: 10 jan. 2025.
13. AMC BRASIL. Sobre Nós. Disponível em: https://amc-brasil.com.br. Acesso em: 10 jan. 2025.
14. CREDIGY. Sobre Nós. Disponível em: https://www.credigy.com. Acesso em: 10 jan. 2025.
15. HOEPERS. Vis?o Corporativa. Disponível em: https://institucional.hoepers.com. Acesso em: 10 jan. 2025.
16. PORTAL CESS?O DE CRéDITOS. Homepage. Disponível em: https://www.portalcessaodecreditos.com.br Acesso em: 10 jan. 2025.

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