Banco do Brasil Sees Lower Credit Demand From Individuals

Banco do Brasil SA, Latin America’s largest lender by assets, expects the slowdown in credit to individuals to continue as demand from the nation’s middle class wanes, Chief Financial Officer Ivan Monteiro said.

Members of Brazil’s middle class “come to the market and acquire their first mobile, their first plasma TV,” Monteiro said yesterday in an interview at Bloomberg’s headquarters in New York. “But they don’t change this type of thing every single year. That’s why you see a slowdown in consumption.”

Economists are lowering 2014 growth estimates for Latin America’s largest economy, even after the government cut taxes by more than 13 billion reais ($5.6 billion) this year and offered 18.7 billion reais in subsidized credit for consumer goods. Analysts surveyed by the central bank have cut their 2014 growth forecast by more than a percentage point since President Dilma Rousseff five months ago announced below-market interest rates for purchases of everything from televisions to furniture by low-income Brazilians.

Federally controlled Banco do Brasil’s credit to individuals grew 14 percent in the 12 months ended in September compared with the same period a year earlier, it said on Nov. 12, down from a 16 percent expansion in the second quarter. The Brasilia-based bank’s overall lending expanded 22.5 percent, compared with a 25.7 percent advance in the previous quarter.

Caixa’s Outlook

Caixa Economica Federal, another state-controlled bank in Brazil, is expanding its loan book at a slower pace compared with the beginning of the year, CFO Marcio Percival said in a telephone interview today. The Brasilia-based lender expects its loan book to grow between 35 percent and 39 percent in 2013, he said.

Caixa’s portfolio of loans expanded at a 43 percent rate in both the first and second quarters compared with the same periods a year earlier, according to its earnings statement.

“Banco do Brasil will go through an adjustment phase,” Andre Riva Gargiulo, an analyst at brokerage GBM Grupo Bursatil Mexicano SA, said in a telephone interview from Sao Paulo. “Now you’ll have slower credit growth and increasing delinquency rates, and the lowest spreads in the industry. The question is, how does that add up.”

Banco do Brasil’s loan growth in mortgages and agriculture should remain strong enough to offset the slowdown in credit to individuals, Monteiro said.

“The banks will continue to pull in their credit offers, especially as we see some further slowing in emerging economies,” Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, said in a telephone interview. His firm oversees about $1.3 trillion.

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