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Brazil bank lending spreads, default rates shrink to historic lows in Sept

Credit: REUTERS/PILAR OLIVARES

Bank lending spreads and loan defaults in Brazil fell to historic lows in September, figures showed on Monday, in further evidence that the central bank's steps to loosen financial conditions and combat the coronavirus shock were working.

By Jamie McGeever

BRASILIA, Oct 26 (Reuters) - Bank lending spreads and loan defaults in Brazil fell to historic lows in September, figures showed on Monday, in further evidence that the central bank's steps to loosen financial conditions and combat the coronavirus shock were working.

A broad measure of bank lending spreads fell to its narrowest since June 2013, while key measures of household and business loan defaults fell to their lowest since the central bank's data series began in 2011.

Lending spreads narrowed to 21.1 percentage points in September from 22.1 percentage points in August, the central bank said. That was the lowest since June 2013, and sharply down from 29 percentage points in February just before the onset of the COVID-19 pandemic.

A broad 90-day default ratio covering households and businesses fell to 3.1% in September from 3.3% in August, the central bank said, the lowest since the bank's data series began in 2011.

The default ratio for non-financial companies fell to a record low 1.55% while the broad measure of household defaults, including borrowing such as auto loans and overdrafts, also fell to a series low of 4.6% from 4.8% the month before.

Brazil's central bank has made available more than 1.2 trillion reais worth of credit and liquidity to businesses, banks and financial markets to cushion the economic shock of COVID-19.

The government has also provided direct cash transfers to tens of millions of Brazil's poorest people. These measures appear to have helped revive lending and economic activity, and stave off loan defaults.

The stock of outstanding loans in Brazil rose 1.9% in September to 3.8 trillion reais ($672.5 billion), the central bank said. Corporate loans rose 2.6% on the month to 1.7 trillion reais, and personal loans increased 1.4% to 2.1 trillion reais.

Loan growth over the last 12 months accelerated 13.1%, the central bank said.

($1 = 5.65 reais)

(Reporting by Jamie McGeever and Marcela Ayres; Editing by Catherine Evans and Bernadette Baum)

((jamie.mcgeever@thomsonreuters.com; +55 (0)11 97189 3169; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net))

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