Brazil loan defaults fall to historic low, lending spreads narrowest in years

Credit: REUTERS/Adriano Machado

By Jamie McGeever

BRASILIA, Sept 28 (Reuters) - Bank lending spreads and loan defaults in Brazil fell to historic lows in August, figures showed on Monday, more evidence that central bank measures to loosen financial conditions and combat the coronavirus shock are working.

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

Lending spreads narrowed to 22.3 percentage points in August from 23.1 percentage points in July, the central bank said. That was the lowest since December 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 3.3% in August from 3.5% in July, the central bank said.

The default ratio for non-financial companies fell to a record low 1.6%.

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.

Central bank chief Roberto Campos Neto said last week that they have been a key factor behind the economy's "robust" recovery.

"We know that it is important to keep the credit channel on and always working. The pandemic credit measures have paid off," Campos Neto said.

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

The 90-day default ratio for personal credit held steady at 3.6% in August, the central bank said. Total household loan defaults, including borrowing such as auto loans and overdrafts, fell to 4.8% from 5.1%, the lowest since July last year.

The stock of outstanding loans in Brazil rose 1.9% in August to 3.74 trillion reais ($674 billion), the central bank said. Corporate loans rose 2.4% on the month to 1.6 trillion reais, and personal loans increased 1.5% to 2.1 trillion reais.

($1 = 5.50 reais)

(Reporting by Camila Moreira and Jamie McGeever; Editing by Catherine Evans)

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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