July 28 (Bloomberg) -- Brazilian outstanding bank lending expanded at the fastest pace this year last month signaling economic growth is picking up, the central bank said.

Total outstanding loans rose 1.3 percent to a record 1.28 trillion reais ($679 billion) in June from 1.26 trillion reais in May, the fastest expansion since a 1.6 percent growth in December, the central bank said in a statement distributed today in Brasilia. Lending climbed 19.7 percent from the same month last year.

“Yesterday, I was saying Brazil would be the first out of this crisis, today I say we are out,” Planning and Budget Minister Paulo Bernardo said today at an event in Brasilia. “All economic data has improved.”

Latin America’s biggest economy is recovering from its first recession in five years after policy makers slashed the benchmark interest rate to a record 8.75 percent low last month in its fifth consecutive cut this year. Bernardo cited heated consumer demand and retail sales and the availability of credit as signs of economic recovery.

The average annual interest rate Brazilian banks charge customers fell to 36.7 percent from 37.9 percent in May, the report said. The June rate is the lowest since December 2007, according to the central bank. The default rate on personal loans was unchanged at 8.6 percent, while corporate defaults increased to 3.4 percent from 3.2 percent in May.

Credit ‘Normalizing’

Credit expanded 0.2 percent during the first half of July and the average rate charged by Brazilian banks fell to 36.2 percent in the same period, signaling credit is “normalizing”, Altamir Lopes, the head of the central bank’s economic department, told reporters in Brasilia.

“There’s still room for banks to cut lending rates,” Lopes said.

Public banks accounted for 38.6 percent of all lending in June, compared with 34.5 percent in June last year, Lopes said. The share held by Brazilian private banks fell to 41.6 percent last month from 44.1 percent a year ago, Lopes said. Foreign private lenders provided 19.8 percent of credit in June compared with 21.4 percent a year earlier, Lopes said.

To contact the reporter on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.netIuri Dantas in Brasilia at at idantas@bloomberg.net

Last Updated: July 28, 2009 15:00 EDT