Reuters: Bankruptcy News: UPDATE 1-Brazil loan defaults rise to record; lending rises

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UPDATE 1-Brazil loan defaults rise to record; lending rises Jun 26th 2012, 14:19 Tue Jun 26, 2012 10:19am EDT * Default ratio hits highest level since June 2000 * Annual lending growth accelerates to 18.3 percent * Consumer loan defaults hit highest since Nov. 2009 * Signals uneven nature of Brazil economic expansion By Guillermo Parra-Bernal and Tiago Pariz SAO PAULO/BRASILIA, June 26 (Reuters) - Loan delinquencies at Brazilian banks reached a record high, a sign that an abrupt economic slowdown is still offsetting the benefits of the nation's strongest job market in decades and a series of aggressive cuts in borrowing costs. Loans in arrears for 90 days or more, the most widely followed gauge of bank defaults, rose to the equivalent of 6 percent of outstanding loans in May, compared with a revised 5.9 percent the prior month, the central bank said on Tuesday. The so-called default The level is the highest for the indicator, known as the default ratio, since the central bank began keeping records of this gauge in June 2000. Despite efforts by consumers to refinance loans at lower interest rates, the pace at which delinquency rates are increasing has continued to grow since last year. The data underscore Brazil's uneven economic expansion, in which still-strong retail sales and robust job growth contrast with a steep recession in manufacturing and rising defaults. Analysts are at odds in interpreting the behavior of overdue credit, which is inconsistent with burgeoning job and household income indicators. Rising delinquencies came with a slump in borrowing costs -- the highest among the world's 20 biggest economies. Government pressure on commercial banks to slash interest rates triggered the steepest decline in spreads since December 2010. The average lending rate fell to the lowest since December 2006. Spreads measure the difference between the rate at which banks lend and the yield they pay depositors for their savings. Last month, the government reduced taxes on some consumer loans and relaxed reserve requirements on deposits used to fund vehicle loans, in order to make credit more affordable for consumers. Yet, analysts have voiced concerns that such plans could create some asset quality problems for banks. The driver behind the climb in overall defaults was a slight increase in consumer loan delinquencies, which reached 8 percent last month -- the highest since November 2009. Defaults on corporate loans remained at 4.1 percent of the segment's loan book for a fourth month. Outstanding loans in Brazil's banking system rose 1.7 percent in May from April, the report showed. The stock of credit rose to a record 2.136 trillion reais ($1.031 trillion), up 18.28 percent from the same period a year earlier. At that pace, credit is rising faster than the central bank's estimate of 15 percent growth for this year. Last year, credit rose 19 percent. Link this Share this Digg this Email Reprints

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