Post election Brazil’s Banks Take the Hi
Post election Brazil’s Banks Take the Hi
Brazil’s financials are the most exposed group after Sunday’s runoff. iShares MSCI Brazil Capped (EWZ) fell about 27% in pre-open trading on Oct 26, 2026 (05:34 EDT). President Lula won a fourth term with roughly 51.8% of the vote. Markets had positioned for a Bolsonaro win after he led the first round, so the move was a repricing of that bet.
Who is most exposed
Premarket moves as of 05:08–05:31 EDT on Oct 26, 2026, from :
| Name | Move | Why it’s at risk |
|---|---|---|
| Itau Unibanco ADR (ITUB) | -26.6% (about $7.10) | Largest bank. It had rallied 14.7% in a month and sat within 5% of its 52-week high, so it had the most to give back. |
| Banco Bradesco ADR (BBD) | -23% to -29% range | Domestic credit and rate sensitivity. |
| Nu Holdings (NU) | -23% to -29% range | Brazil consumer credit exposure. |
| Banco Santander Brasil ADR (BSBR) | -4.5% | Held up better, possibly because of its foreign parent. |
The article gives the 23–29% range for Itaú, Bradesco and Nu together, not individual moves.
Rate-sensitive names at risk
- Capital markets: Banco BTG Pactual (BPAC11) was up 22.1% in a month, yet is still 37.2% below its 52-week high. JPMorgan had named BTG and XP as favorites on Oct 6 because they depend on falling rates (). That thesis now looks fragile.
- Valuation: Itaú Unibanco Pref (ITUB4) traded at 11.6x trailing P/E. BTG traded at 16.1x. The richer multiple leaves BTG with less cushion if rate cuts stall.
The screener values are index snapshots and may lag live prices.
Why banks are hit
- Fiscal worries: Public debt is above 82% of GDP. The deficit is about 7–8% of GDP, and Lula’s team targets a primary surplus of only about 1.3% by 2030. Goldman expects only "modest measures" on spending ().
- Rate cuts in doubt: The Selic is 13.75% after five straight cuts. A weaker real and a higher risk premium could slow the easing cycle. That would hurt credit growth and asset quality, and it would hit rate-sensitive capital-markets names hardest ().
- Political noise: Bolsonaro is contesting the result. Lula also faces a Congress with many Bolsonaro allies. A quick concession, as in 2022, would calm markets.
- Currency: USD/BRL is expected to gap 5–7% higher toward 5.20/25 (Read more). That hurts dollar-based holders of the ADRs.
Bull counterpoint
The sell-off partly reverses a three-week rally. Brazilian local investors had only about 5% allocated to equities, versus an 8.5% average, according to Morgan Stanley. Lula has also promised a fiscal adjustment. A credible plan could cushion the drop, though it is unconfirmed.
What to watch
- Whether Bolsonaro concedes.
- The Copom meeting in early November.
- Lula’s fiscal announcements.