June 26, 2020 / 1:52 PM / 10 days ago

UPDATE 1-Brazil personal loan defaults rise to highest in three years

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By Jamie McGeever

BRASILIA, June 26 (Reuters) - Personal loan defaults in Brazil rose to a three-year high in May as the economy continued to suffer from the coronavirus-fueled shock, official figures showed on Friday, even as lending spreads shrank to the narrowest in 5-1/2 years.

The data suggest that the central bank’s emergency measures to increase the availability of credit are working, but at the same time pressure on household finances from the economic downturn and deteriorating labor market is intensifying.

According to the central bank, the 90-day default ratio for personal credit rose to 3.9% in May from 3.8% the month before, the highest since May 2017, just as Brazil was emerging from a brutal recession in 2015-16.

That ratio has risen for three months in a row, and is approaching the 4% threshold above which defaults registered every month throughout 2016.

Total household loan defaults, including borrowing such as auto loans and overdrafts, held steady at 5.5%. But a more detailed look at the figures show that it inched up to 5.53% from 5.47%, which would also put it at its highest since 2017.

This came despite a narrowing in household lending spreads to 37.2 percentage points from 38.8 percentage points, the narrowest since December 2014, central bank data showed.

Overall lending spreads in Brazil, including lending to businesses, narrowed to 24.6 percentage points in May, also the lowest since December, 2014, the central bank said.

The broadest 90-day default ratio, also including corporations, held steady at 4.0% in May, while lending to businesses helped raise the amount of outstanding credit in Brazil to 3.6 trillion reais ($557 billion), the central bank said. (Reporting by Jamie McGeever Editing by Chizu Nomiyama and Jonathan Oatis)

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