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Bank loans overdue for at least 90 days in Brazil rose in December to their highest in over three years, the central bank said on Wednesday, as the deepest recession in decades and rising credit costs strained borrowers' capacity to stay current on their debts. The so-called 90-day default ratio, a benchmark for delinquencies, rose to the equivalent of 5.3 percent of outstanding non-earmarked loans last month, the central bank said in a report. December's number was the highest for the ratio since November 2012, according to central bank data.
In November, the default ratio was 5.2 percent. The default ratio grew a full percentage point last year, as rising unemployment and stubbornly high inflation also eroded the ability of companies and households to pay their debt. Latin America's largest economy shrank by an annual 4.5 percent in the third quarter, the steepest drop since the current data series began in 1996.
The data provides a glimpse into loan-book quality as the nation's largest banks started to report fourth-quarter results on Wednesday. Early default ratios, or loans in arrears between 15 days and 90 days, went up for individual borrowers but remained stable for companies, indicating that future delinquencies may be slightly on the rise. Banco Santander Brasil SA, the largest foreign lender in the country, raised the coverage ratio, a gauge of reserves for bad loans, and downgraded some corporate borrowers into higher-risk categories - a sign defaults may be on the rise. The Sao Paulo-based bank released fourth-quarter results earlier in the day.
Banks in the country grew their loan books by 6.6 percent last year, the slowest growth rate for any year since at least 2008, the report said. The central bank targeted 9 percent growth in lending for last year. Disbursements rose 1.3 percent in December from November, up from an increase of 0.6 percent in the prior month.

Copyright Reuters, 2016

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