(Recasts to add context, earnings data, comments throughout)
By Aluísio Alves and Guillermo Parra-Bernal
SAO PAULO May 21 Loan defaults at Caixa
Econômica Federal SA, Brazil's largest mortgage lender, will
decline this quarter after the indicator measuring defaults
jumped to a four year-high in the first three months of the
year, Chief Financial Officer Marcio Percival said on Wednesday.
In an earnings statement released on Wednesday, Caixa
said loans in arrears for 90 days or more rose to the
equivalent of 2.6 percent of outstanding loans in the
January-through-March quarter from 2.3 percent a year earlier.
The so-called default ratio is the industry's most widely
followed gauge to measure loan delinquencies.
Percival said the surge was lower than bank management had
expected for the quarter, a time of year when household debt
generally climbs due to year-end holidays and the start of the
school year. Caixa's shift from credit to large firms toward
infrastructure also might have also boosted the default ratio,
"We are not especially worried about the spike, which was
seasonally-triggered. We don't see an upward trend for
short-term default gauges. Loan recoveries are behaving
normally," he said.
Analysts expect delinquencies at Caixa to rise in coming
quarters as it slows the pace of disbursements to protect
capital. Percival noted that Caixa's loan book is expected to
grow between 20 percent and 22 percent this year. In March,
executives had set guidance of 22 percent to 25 percent for
Last year, Caixa's loan book, the third largest among
Brazil's banks, rose about 40 percent, Percival said.
Outstanding loans at Caixa totaled 519.8 billion reais ($236
billion) at the end of March, up 33 percent on a 12-month basis.
The revised guidance underpins government efforts to slow
the pace of disbursements from state-owned banks and, with it,
curtail federal financing for them. Standard & Poor's remains
skeptical of Brazilian President Dilma Rousseff's willingness to
phase out her five-year-long strategy of using state banks to
ramp up credit.
Caixa Chief Executive Officer Jorge Hereda is focusing on
mortgages, credit for infrastructure projects and
payroll-deductible lending, areas where the federal government -
Caixa's sole owner - wants more resources being funneled into.
Net income climbed 15.3 percent to 1.5 billion reais in the
first quarter on an annual basis. According to Percival, profit
was bolstered by a 46 percent surge in interest income and a 13
percent increase in fee income.
Return on equity, a gauge of how well a bank spends
shareholder money, ended the quarter at 23.5 percent, below
guidance of 26 percent to 28 percent this year.
Percival said net interest margin, or the average interest
charged on loan, is unlikely to rise in coming months despite a
year-long jump in borrowing costs in Latin America's largest
economy. "Pricing of credit will stay where it is - we want to
remain competitive," he added.
($1 = 2.20 Brazilian reais)
(Reporting by Guillermo Parra-Bernal and Aluísio Alves, Editing
by Franklin Paul and David Gregorio)