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UPDATE 3-State banks lead Brazil lending rise; defaults steady
September 26, 2012 / 2:36 PM / 5 years ago

UPDATE 3-State banks lead Brazil lending rise; defaults steady

* Annual lending growth is lowest since April 2010

* Loan default ratio stabilizes

* Govt. may cut new BNDES capital by a third -source

By Guillermo Parra-Bernal and Tiago Pariz

SAO PAULO/BRASILIA, Sept 26 (Reuters) - Bank lending in Brazil rose in August, recovering from a slight dip the previous month, as state-controlled banks stepped up disbursements to help the government kick-start activity in Latin America’s largest economy.

Outstanding loans in Brazil’s banking system rose 1.2 percent in August from July, the central bank said on Wednesday. State banks originated loans at a much faster pace than foreign and local private-sector rivals last month, even as defaults stayed near all-time highs for consumers and companies.

Loans made by commercial banks in Brazil totaled 2.211 trillion reais ($1.089 trillion) last month. In the 12 months through August, lending expanded by 17 percent, the slowest growth since April 2010, according to central bank data.

President Dilma Rousseff has moved to cut taxes and interest rates to bolster consumption and reignite investment projects as economic growth slowed last year. The central bank upped its estimate for credit growth this year to 16 percent, from a prior 15 percent, after state lenders sharply sped up disbursements since April.

“The better numbers reflect the more assertive posture of state-run banks amid the uncertainties surrounding the economic situation of the country,” Tulio Maciel, the central bank’s head of economic research, said at a news conference.

Maciel raised his forecast for growth in the loan book of government banks to 24 percent from a previous 21 percent estimate. Forecasts for local and foreign private-sector banks were kept at 10 percent and 13 percent, respectively.

The new-found caution at private banks is pitting them against the government, which has used state lenders Banco do Brasil and Caixa Econômica Federal to bring down the cost of credit to businesses and consumers and boost access to credit.

The new forecasts signal growing caution as Brazil faces a second year of below-trend growth. Local private-sector banks have drastically restricted loan origination since the start of the year as deleveraging in risky segments such as auto financing took longer than expected.

Even the government may not be able to expand credit as quickly as it wants. Earlier this year the government said the Treasury would inject $45 billion reais ($22.2 billion) of new capital into state-owned development bank BNDES in 2012.

That amount is expected to be cut by a third to about 30 billion reais, two finance ministry sources told Reuters on Wednesday.

The 15 billion reais not transferred to BNDES this year will likely be given to BNDES early in 2013, one of the sources said. BNDES is Brazil’s principal source of long-term bank loans.

DELINQUENCIES TO FALL

Defaults will likely fall through the end of the year as borrowers take advantage of the lower tax and debt burdens and stable wages to get current on their obligations.

Loans in arrears for 90 days or more accounted for 5.9 percent of outstanding loans last month, unchanged from July, according to the central bank report.

Delinquencies at companies rose slightly, to 4.1 percent of the segment’s loan book, the central bank said. Still, loans in arrears between 15 days and 90 days, a measure of prediction for future default trends, was unchanged at 2.3 percent from July.

Short-term consumer defaults fell to the lowest level this year, although the average 90-day default rate remained steady at 7.9 percent - the highest on record.

State banks, including development bank BNDES and Banco do Brasil, increased their loan book by 1.9 percent in August to a record 1.011 trillion reais. In contrast, local private-sector and foreign banks increased lending by 0.8 percent and 0.3 percent each, respectively.

Spreads, or the difference between the rate at which banks lend and raise funds from depositors, fell half a percentage point last month to 22.5 percent, in a sign Rousseff’s pressure on state and private banks to charge less for some loans is working.

In the month through Sept. 14, the spread was barely changed at 22.6 percent, Maciel added.

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