An expected global monetary in some developed countries next year poses limited risks for Brazilian corporate borrowers, which may face higher borrowing costs and less available financing in international markets, the nation's central bank said on Thursday. The global economy is moving towards a moment of transition in which companies are slated to face tougher financing terms, according to the bank's latest semi-annual report on the local banking system.
Total corporate debt rose to 49 percent of gross domestic product in June from about 47 percent a year earlier and 40 percent two years ago, the report showed. Brazilian companies benefited in recent years from ample global liquidity to raise money at record-low costs and lengthen maturities beyond 10 years.
A stable share of revenue used for debt-servicing among companies and their increased demand for financial instruments to weather swings in currency and interest rates should mitigate the impact of tougher market conditions. "A potential transition scenario would point to limited risks because companies in the country ... present aggregated leverage ratios at comfortable levels, stable debt-to-income ratios and low foreign currency-denominated debt levels," the report said. Overall, solvency and liquidity metrics for Brazil's banking system remain at "elevated" levels, the report said.
In a news conference to explain the content of the report, central bank director Anthero Meirelles noted that loan-loss provisions are currently running at adequate levels and that rising profitability is making banks more resilient to a potential stress situation in credit markets. Loan delinquencies will stay almost unchanged through the year, Meirelles noted. In his opinion, lending growth in Brazil could end the year between 12 percent and 14 percent. The central bank has an official estimate of 12 percent.
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