In its Financial Stability Report, the Brazilian Central Bank noted that the return on equity (ROE) of the country's banking system rose to 15.11% as of June 30.

Brazilian banks' profitability improved in the first half of this year, led by digital banks, and net income from interest and services should continue to rise in the second half, the central bank said on Thursday.

In its Financial Stability Report, the central bank noted that the country's banking system's return on equity (ROE) rose to 15.11% as of June 30, up from 14.23% at the end of December 2023.

Digital banks stand out, with their ROE rising to 19.1% at the end of June - the highest among segments - from 11.45% at the end of December.

The group includes entities such as Nubank, Banco Inter, and C6 Bank.

The central bank attributed the sharp increase to "the positive effects of operating leverage through the monetization of customer bases by some institutions and the lower pressure from provisioning expenses."

Between April 2020 and the end of last year, digital banks consistently recorded single-digit or negative trailing 12-month ROEs.

For the sector as a whole, the central bank said the risk realisation cycle had weakened, easing the burden of provisioning expenses on overall results.

"The profitability outlook for the coming periods is one of continued gradual improvement, supported by revenue growth, relatively stable provision costs and controlled operating expenses," he said.