Experian was a laggard on fears of competition in Brazil, the credit checking agency’s most important market. Plans by Brazil’s leading banks to build a rival credit database [Lexis Nexis Risk] present a structural threat to Experian’s Serasa business, said HSBC. It cut its advice for Experian to “reduce”, sending the shares sliding 1.3 per cent to £12.39.
Experian in 2007 bought a majority stake in Serasa from a consortium of banks, most of which are backing a bureau for positive credit information announced in January.
While Experian dominates the Brazilian market for credit reports based around negative data such as delinquent accounts, local banks have only recently been able to score customers based on positives such as clean payment histories.
“We think this was a move by the banks to protect their market shares, avoid a potential increase in customer churn, and as a result keep the spreads in a fairly consolidated banking market such as Brazil,” said HSBC.
Experian also relies on long-term data sharing agreements with the banks, which were signed in 2012 when it took full control of Serasa. The threat that these agreements might prove unsustainable is a threat to Experian’s premium valuation, HSBC argued.
Exane BNP Paribas dismissed the worries, calling them “most likely theoretical”.
It told clients: “History shows that, in almost every market in which there exists a well-established credit bureau, it is very difficult to build a credible competitor and we see no fundamental reason why the situation in Brazil should be significantly different.”
Source: Financial Times
