Banrisul (BRSR6) and IRB (IRBR3) are the most exposed by the climate tragedy in RS, says JP Morgan, which calculates the impact on results

The heavy rains that hit Rio Grande do Sul in recent days caused the death of almost a hundred people and left more than 200,000 homeless. Furthermore, dozens of people are still missing.

Most of the images come from Porto Alegre and medium-sized cities underwater, but the situation in the countryside and in smaller cities is just as serious.

Isolated, small farmers in the state lost their homes and also their crops. The losses are described as “unprecedented”.

Faced with the extent of the humanitarian disaster caused by the climate catastrophe, the JP Morgan bank decided to reassess the exposure of the Brazilian financial sector to the tragedy.

The institution made a preliminary assessment of which banks and insurance companies listed on the stock exchange would be most exposed to the catastrophe.

Among banks, the result was expected, in a way. For JP Morgan, the Banrisul (BRSR6) It is the most exposed bank, as its operations are largely concentrated in Rio Grande do Sul.

In the insurance sector, the most exposed company is a reinsurer: the IRB Re (IRBR3).

What JP Morgan says about Banrisul

Banrisul has the government of Rio Grande do Sul as its largest individual shareholder. As its operations are mainly concentrated in the State, the bank ends up being the most exposed to the economic and financial impacts of the floods in the South.

According to JP Morgan, 98% of Banrisul’s credit portfolio is made up of people and companies established in Rio Grande do Sul.

Of this total, 22% of the bank’s debtors are in cities declared in a state of emergency.

Secondly comes the Banco do Brasil (BBAS3). JP Morgan estimates that 6% of bank loans contracted with public banks are from customers in Rio Grande do Sul, with 4% in cities in a state of emergency.

In any case, JP Morgan says it is too early to estimate the real impact due to negotiation efforts and other relief measures.

Banks such as Bradesco, BB and Itaú, for example, have already announced the granting of a 180-day moratorium in favor of their customers in the most affected regions.

Returning to BRSR6, the North American bank maintained a neutral recommendation for the stock, but cut the target price for the end of the year from R$14 to R$13. Yesterday, the share closed at R$12.15.

IRB (IRBR3) is the most exposed insurer

IRB is the most exposed company in the insurance sector.

IRB is followed by Porto Seguro (PSSA3) and BB Seguridade (BBSE3).

According to JP Morgan, Rio Grande do Sul is responsible for approximately 5% of car premiums insured by Porto Seguro.

In relation to BB Seguridade, 14% of the agricultural premiums covered by the Banco Brasil subsidiary are from customers in Rio Grande do Sul.

IRB has a similar exposure to BB Seguridade in the State. However, according to JP Morgan, the potential impact on the reinsurer’s profit is much greater.

While the impact on BB Seguridade’s profit is less than 1%, the exposure of IRB’s earnings could reach 14%.