* Loan growth, defaults show signs of improving
* Lending growth seen at 16 percent for this year
* Decline in borrowing costs to lose momentum
By Guillermo Parra-Bernal and Tiago Pariz
SAO PAULO/BRASILIA, Dec 19 Lending growth and
defaults at Brazilian banks showed signs of recovery in
November, the central bank said on Wednesday, in a further
indication that an ongoing decline in borrowing costs is easing
the finances of companies and consumers.
Loans in arrears for more than 90 days, a benchmark for
defaults in Latin America's largest economy, fell in November
for the first time in five months, although remained near a
record. Banks increased the stock of credit by 1.5 percent in
November as private sector lenders sought to recoup some of the
ground lost in prior months.
The average cost of borrowing in the banking system fell for
a ninth month in a row in November, hitting 28.9 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 21.6 percentage points.
The results underscore the impact of government efforts to
bring down benchmark interest rates in Brazil to single-digits,
a goal that President Dilma Rousseff set out for a country
where, only a year ago, borrowers paid the world's highest
interest rates. Still, the cost of credit remains prohibitive
for millions of Brazilians while access to the market is still
"Credit conditions are easing at a gradual pace: credit is
increasing at a moderate pace and lending rates continue to
decline," said Alberto Ramos, chief Latin America economist with
Goldman Sachs Group Inc in New York.
Loans made by commercial banks in Brazil totaled 2.304
trillion reais ($979 billion) last month, the central bank said.
Twelve-month trailing growth in bank lending slowed to 16.1
percent in November from 19 percent at the start of the year.
The average default ratio for the banking system fell to 5.8
percent in November compared with 5.9 percent the prior month.
Corporate loans in arrears for 90 days or more remained
unchanged at 4.1 percent of the segment's stock of credit, while
those for consumer credit fell to the equivalent of 7.8 percent.
Tulio Maciel, the central bank's head of economic research,
said potential reductions in borrowing costs are likely to lose
momentum into 2013. He unveiled a 14 percent estimate for
lending growth in 2013, down from his 16 percent projection for
According tot Maciel, a higher base of comparison may offset
the impact of a recovery in demand for credit. Estimates from
private economists put economic growth in 2013 at below-trend
rates for a third year in a row - with estimates for the 2013
expansion already facing steep cuts.
In addition, he said that "the reductions in borrowing costs
that we witnessed over the past few months we won't see next
He added that defaults, especially those between 15 days and
90 days, will keep falling well into 2013 as borrowers take
advantage of the lower tax and debt burdens and stable wages to
get current on their obligations.
STATE BANKS LEAD GAINS
State-controlled banks stepped up disbursements to help the
government kick-start activity in Latin America's largest
Public banks, including development bank BNDES
and Banco do Brasil SA, ramped up their loan book by
2.2 percent in November to a record 1.08 trillion reais. Local
private-sector and foreign banks upped lending by 0.9 percent
and 1.1 percent each, respectively.
Maciel raised his forecast for growth in the loan book of
government banks to 26 percent from a previous 24 percent
estimate. Forecasts for growth in the loan book of local
private-sector banks were slashed to 7 percent from a prior 10
The new-found caution among private banks is pitting them
against the government, which has used state lenders Banco do
Brasil and Caixa Econômica Federal to bring down the
cost of credit to businesses and consumers and boost access to
The new forecasts signal growing caution among policymakers
as Brazil struggles to emerge from a downturn. Local
private-sector banks have drastically restricted loan
origination since the start of the year as deleveraging in risky
segments such as auto financing took longer than expected.
One in every six households are considered as overleveraged,
according to a recent report by Santander Investment Securities