January 29, 2020 / 2:29 PM / in 2 months

UPDATE 2-Brazil bank lending up 6.5% in 2019, default ratio falls to historic low

(Adds analyst comment)

By Jamie McGeever and Marcela Ayres

BRASILIA, Jan 29 (Reuters) - Bank lending and the financial health of borrowers in Brazil ended 2019 on a positive note, central bank figures on Wednesday showed, as default ratios and lending spreads fell against a backdrop of strong credit growth.

The amount of outstanding loans in Latin America’s largest economy rose to 3.47 trillion reais ($826.4 billion) in December, up 1.6% on the month and 6.5% from the year before, the second annual rise in a row.

The figures reflect growing demand for, and availability of, private-sector bank loans free of government influence, instead of credit provided by state-run entities.

Alberto Ramos, head of Latin American strategy at Goldman Sachs in New York, said continued and accelerating economic growth bodes well for the coming months.

“We expect credit conditions to improve ... as credit risk moderates with the forecasted gradual economic recovery, and credit demand picks up supported by the forecasted gradual improvement of the labor market backdrop and further decline in rates,” he wrote in a note to clients.

Credit to individuals rose 11.7% last year, and corporate borrowing rose 0.2%, the central bank said, while loans from national development bank BNDES fell 13.9% last year.

Lending spreads fell sharply on the month to 28.5 percentage points from 30.6 percentage points in November, the lowest level last year, although that was still up from 27.8 percentage points a year earlier.

The 90-day default ratio dipped to 3.7% in December from 3.8% the month before, the lowest since the central bank’s series began in 2011.

Figures from the Economy Ministry earlier this month showed that behind Brazil’s gradually accelerating economic growth, the private sector is growing at a 2.72% pace while the public sector is shrinking 2.25%.

The central bank has made it a priority to increase the availability of, and ease of access to, credit for consumers and businesses alike. (Reporting by Marcela Ayres and Jamie McGeever; Editing by Toby Chopra and Jonathan Oatis)

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