Reuters: Bankruptcy News: UPDATE 1-Brazil banks put the brakes on lending as defaults rise

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UPDATE 1-Brazil banks put the brakes on lending as defaults rise Aug 30th 2012, 14:34 Thu Aug 30, 2012 10:34am EDT * Growth in Brazil bank lending slows sharply in July * Signals less favorable loan renegotiation dynamics * Loan delinquencies climb, frustrating expectations By Guillermo Parra-Bernal and Tiago Pariz SAO PAULO/BRASILIA, Aug 30 (Reuters) - Brazil's banks abruptly slowed the pace of loan disbursements in July as caution took center stage among private sector lenders seeking to protect earnings amid a spike in delinquencies and declining borrowing costs. Outstanding loans in the nation's banking system rose 0.7 percent to 2.183 trillion reais ($1.06 trillion) in July from June, the central bank said in a report on Thursday. In the 12 months ended in July, credit grew 17.7 percent, the slowest annual pace since April 2010. Loan delinquencies at Brazilian banks reached a record high for the second month in three, 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 interest rates. Loans in arrears for 90 days or more, the most widely followed gauge of defaults, rose to the equivalent of 5.9 percent of outstanding loans in July, compared with 5.8 percent in June, the central bank said. The rise in the so-called default ratio came as more consumers fell behind on their loan installment payments. The increase in defaults took place even as households stepped up efforts to refinance overdraft, auto and other expensive types of loans. Renegotiations of such loans rose 0.1 percent in July, bucking two straight months of drops, while borrowings of secured credit such as payroll loans went up for the sixth month in a row. 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 modest fall in borrowing costs, although Finance Minister Guido Mantega said on Thursday that such costs remain the highest among the world's 20 biggest economies. Government pressure on commercial banks to slash interest rates drove the fifth straight monthly decline in spreads. The average lending rate fell to the lowest level since at least December 2006. Spreads measure the difference between the rate at which banks lend and the yield they pay depositors for their savings. Link this Share this Digg this Email Reprints

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