90-day default ratio dipped to 3.7% in 2019

Bank lending and the financial health of borrowers in Brazil ended 2019 on a positive note, as default ratios and lending spreads fell against a backdrop of strong credit growth.

Central bank figures showed the amount of outstanding loans in Latin America’s largest economy rose to R$3.47 trillion in December, up 1.6% on the month and 6.5% from the year before, the second annual rise in a row.

The figures reflect growing demand for, and availability of, private-sector bank loans free of government influence, instead of credit provided by state-run entities.

Alberto Ramos, head of Latin American strategy at Goldman Sachs in New York, said continued and accelerating economic growth bodes well for the coming months.

«We expect credit conditions to improve … as credit risk moderates with the forecasted gradual economic recovery, and credit demand picks up supported by the forecasted gradual improvement of the labor market backdrop and further decline in rates,» he wrote in a note to clients.

Credit to individuals rose 11.7% last year, and corporate borrowing rose 0.2%, the central bank said, while loans from national development bank BNDES fell 13.9% last year.

Lending spreads fell sharply on the month to 28.5% from 30.6% in November, the lowest level last year, although that was still up from 27.8% a year earlier.

The 90-day default ratio dipped to 3.7% in December from 3.8% the month before, the lowest since the central bank’s series began in 2011.

Original Story: Reuters |Jamie McGeever and Marcela Ayres 
Photo:Photo by Bruno Neves for
Edition: Prime Yield