* State banks grow loans faster than private peers
* Annual lending growth quickens to 16.6 percent
* Stable defaults pose question over debt levels
By Guillermo Parra-Bernal and Tiago Pariz
SAO PAULO/BRASILIA, Nov 29 Bank lending in
Brazil rose in October at the fastest pace in four months,
recovering from a dip the prior month, as state-controlled banks
stepped up disbursements to help kick-start activity in Latin
America's largest economy.
State lenders led by Banco do Brasil SA, state
development bank BNDES and Caixa Econômica Federal SA
increased credit to individuals, companies and home
buyers by an average 2.6 percent in October - the fastest pace
since July, the central bank said in a report on Thursday.
Outstanding loans in Brazil's banking system
rose 1.4 percent to 2.27 trillion reais ($1.08 trillion) in
October from the prior month, the report showed. On an annual
basis, credit expanded 16.6 percent - slightly gaining some
momentum after annual lending growth hit a three-year low in
Demand for credit has lagged behind, with one in six
families overleveraged, forcing the government to implement a
series of interest-rate and tax reductions and incentives to
revive borrowing. But banks, especially those in the private
sector, have turned more rigorous as defaults stubbornly remain
near record levels.
For a third consecutive month, public banks increased their
loan banks at rates close or above 2 percent, in stark contrast
with local private-sector and foreign banks, which boosted
credit by 0.2 percent and 0.7 percent in October, respectively.
President Dilma Rousseff has been pressuring private-sector
lenders to cut rates and boost access to credit, with relative
success. Since late April, Rousseff and other officials have
complained lenders charge some of the world's highest rates.
Rousseff has ordered state banks to step up lending, cut
rates and fees and create new products. The government has used
Banco do Brasil, the nation's largest bank by assets, and Caixa,
the country's largest mortgage lender, to reduce the cost of
credit and boost access for businesses and consumers.
Three of Brazil's largest banks are state-owned in terms of
assets, and 46 percent of lending is provided by state banks.
The average cost of borrowing in the banking system fell for
an eighth month in a row in September, hitting 29.3 percent. The
spread, or the difference between the rate at which banks lend
money and that at which it pays for deposits, fell to an
all-time-low of 22 percentage points.
"Credit conditions are easing at a gradual pace: credit is
increasing at a moderate pace and lending rates continue to
decline," said Alberto Ramos, senior Latin American economist
with Goldman Sachs Group in New York. "The public banks continue
to gain market share."
Total corporate credit grew 1.2 percent in October on a
monthly basis. Credit to individuals expanded 1.6 percent in
October, outpacing the 1 percent pace in September. On an annual
basis, however, consumer credit has slowed sharply to a 17.3
percent rate of expansion from 19.2 percent in June.
HOUSEHOLD DEBT RELIEF
Non-performing loans, defined as those overdue for 90 or
more days, remained stable at 5.9 percent in October for a
fourth month. Non-performing consumer loans were unchanged at
7.9 percent and those for the corporate segment rose to 4.1
percent from 4 percent in September.
A slight pick-up in defaults in some corporate segments such
as short-term loans and an increase in consumer lending
prevented non-performing loans from declining. Delinquencies
between 15 days and 90 days fell slightly for both groups - a
sign officials see as a prelude to lower defaults in the months
"We believe that before the end of the year, defaults will
take a break, though gradually," Tulio Maciel, head of economic
research at the central bank, told reporters in Brasilia on
Household debt ratios in Brazil fell in September from the
prior month, a further indication that record low borrowing
costs and a resilient job market are strengthening family
budgets across the country. Debt-servicing expenses dropped to
an average 22 percent of household income in September from 22.2
percent in August, the central bank added.
Since the start of November through Nov. 19, the average
spread was unchanged at 22.3 points, while the average cost of
borrowing climbed slightly to 29.5 percent. Average daily
disbursements are up 3.7 percent for November compared with
October in the latest evidence that demand for lending is likely
to pick up.