Brazil bank lending slows, sign of uneven economy

Growth in Brazil's bank lending slowed in April, the latest sign that an expansion in Latin America's largest economy remains uneven in the face of faster inflation and a robust job market. Outstanding bank loans in Brazil totalled a record 2.45 trillion reais ($1.2 trillion) at the end of April, while growth in bank lending slightly slowed to 16.4 percent in the 12 months through March, the central bank said in a report on Friday.
The banking system's loan book rose 1.1 percent in April, slowing from 1.8 percent in March, as disbursements to small-, mid-, and large-sized companies lost momentum. On an annual basis, state-run banks disbursed loans at a pace six times faster than their private-sector counterparts, which are growing slowly as Brazil's economy enters a third year of sub-par growth. "Corporate credit took a hit, especially disbursements of working capital loans ... which put the brakes on growth," Tulio Maciel, the central bank's head of economic research, said in a news conference in Brasilia.
The fastest inflation rate in years, flagging industrial activity and lower-than-expected corporate earnings are weighing on demand for credit, analysts said. Requests for new loans are unlikely to respond to Brazil's nascent economic recovery - which is taking longer than expected to bear fruit.
First-quarter results at Brazil's largest banks confirmed the view among investors that profitability trends in the sector remain fragile as a government campaign to cut borrowing costs hampered revenue and led lenders to pare back disbursements. First-quarter results showed Brazil's largest listed banks struggling with high provisions for bad loans, weak demand for loans and narrowing spreads. Loans in arrears for 90 days or more, an industry benchmark for delinquencies, remained unchanged at 5.5 percent of outstanding loans last month, the central bank said.
The so-called default ratio fell in April for consumers and rose for companies, especially in segments where non-state banks like Itaú Unibanco Holding SA pulled out, such asauto and small-sized corporate loans. Yet forward-looking indicators for delinquencies remained stable, the bank said.