The average nonperforming loans (NPL) rate within Brazil’s financial system rose to 4.4% in April, the highest level in the revised historical series maintained by the Central Bank of Brazil since 2011. The figure matches reinforces the trend of deteriorating credit quality across the country. The data were published on Thursday (28) in the Central Bank’s Monetary and Credit Statistics report.
The indicator covers loans and credit operations with payments overdue by more than 90 days, including both households and businesses.
The new peak comes just ahead of the implementation of Desenrola 2.0, the federal debt renegotiation programme aimed at indebted consumers, launched in May.
Among individuals, the default rate increased from 5.3% in March to 5.4% in April, the highest level since May 2012. The increase highlights mounting pressure on household budgets in an environment characterised by expensive credit and a high proportion of income committed to debt repayments.
Among businesses, the default rate remained unchanged at 2.8%, the same level recorded in March. Even so, this marks the highest rate since 2018, indicating that repayment difficulties are also spreading through the corporate sector, albeit at a more moderate pace.
High Indebtedness Maintains Pressure
Central Bank data also show that household indebtedness remains at historically elevated levels. In April, the ratio of household debt to cumulative income over the previous 12 months stood at 49.8%, virtually unchanged from March (49.9%), but significantly above the series average of 41.9%.
According to Serasa Experian, around 82.8 million Brazilians were in debt in March, equivalent to 49% of the population. Nearly half of these debts are concentrated within the financial sector, which is directly targeted by the new debt renegotiation programme.
Credit Expands, but Costs Remain High
Despite the rise in defaults, the volume of credit in Brazil continues to grow. The total credit stock of the National Financial System reached BRL 7.2 trillion in April, up 0.3% on the month and 9.3% year-on-year.
Credit extended to households totalled BRL 4.6 trillion, while lending to businesses stood at BRL 2.7 trillion.
New credit issuance also continued to increase, reaching BRL 691.5 billion during the month. However, borrowing costs remain elevated: the average lending rate on new credit operations reached 33.8% per annum, while unsecured lending to individuals climbed to 63% per annum.
Credit Expansion and Rising Risk
Despite continued growth in credit and broader monetary aggregates, the indicators suggest that the financial system is entering a phase of greater caution. Credit expansion has not been sufficient to offset the rising risk of default and the increasing cost of financial operations.
The overall picture points to a transitional period: on one hand, credit supply remains available; on the other, the repayment capacity of a significant share of borrowers—especially heavily indebted households—continues to deteriorate.
Original story: ICL Notícias
Edititon and translation: Prime Yield