Brazil Consumer Default Rate Falls in January From December

Brazil’s consumer-loan default rate in January fell from the month before, even as interest rates rose in the world’s second-biggest emerging market.

The consumer default rate fell to 7.9 percent from a revised 8 percent in December, the central bank said in a report distributed today in Brasilia. The company loan default rate was unchanged from a revised 3.7 percent in December.

President Dilma Rousseff has pushed banks to boost lending and reduce borrowing costs to stimulate Brazil’s $2.5 trillion economy. Policy makers have also kept the benchmark interest rate at a record low since October, even as inflation has accelerated above 6 percent. Brazil’s consumer credit default rate is tending to fall and the share of income used by consumers to pay debts is declining, the central bank’s director for economic policy, Carlos Hamilton, told reporters on Feb. 21.

Banco do Brasil SA, Latin America’s largest lender by assets, is one bank that has boosted lending. Its shares climbed the most in two months on Feb. 21 after the company reported higher-than-expected fourth quarter profits driven by faster credit expansion. Banco do Brasil also said loans at least 90 days overdue dropped to 2.05 percent from 2.19 percent the previous quarter.

Average Rates

Brazil’s average rate on loans rose in January to 26.1 percent from a revised 25.3 percent in December. Average rates on consumer loans rose to 34.5 percent from a revised 33.9 percent the month prior. Rates on corporate loans rose to 18.8 percent from a revised 17.9 percent.

Outstanding credit was unchanged in January from December at 2.4 trillion reais ($1.2 trillion), the central bank said today. Credit expanded 16.4 percent from a year ago.

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, were unchanged at 7.80 percent at 10:50 a.m. local time. The real strengthened 0.1 percent to 1.9805 per U.S. dollar.

The central bank on Dec. 20 cut its 2012 growth forecast to 1 percent. That’s down from growth of 2.7 percent in 2011 and 7.5 percent in 2010.

In this report, the central bank changed the methodology used to measure total outstanding real estate loans to include both consumers and companies. The new numbers are not comparable to the previous figures, the bank said.

To contact the reporter on this story: Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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