Brazil loan defaults fall to record high in October

BRASILIA (Reuters) – Credit defaults in Brazil fell to all-time lows in October, figures released on Friday showed further evidence of the economy’s recovery and the fact that measures taken by the central bank to ease debt financial conditions were working.

FILE PHOTO: A man wearing a protective mask and face shield waits to change the 200-cent reais banknote after the Central Bank of Brazil issued the new banknote in Brasilia, Brazil on September 2, 2020. REUTERS / Adriano Machado / File Photo

Major measures of household and business loan defaults were at their lowest since the central bank’s data series began in 2011, although credit spreads widened slightly from record lows of the previous month.

A broad 90-day default rate covering households and businesses fell to 3.1% in October from 3.2% in September, the central bank said, the lowest since the start of the data series of the bank in 2011.

(Graphic: defaults in Brazil)

The default rate of non-financial corporations fell to an all-time high of 1.5% from 1.6%, while the general measure of household defaults, including loans such as auto loans and overdrafts, also fell to a low of 4.5% from 4.6% for the month. before.

Credit spreads, however, widened to 21.5 percentage points from a record 21.2 percentage points recorded in September, the central bank said. This was still significantly down from 29 percentage points in February before the start of the COVID-19 pandemic.

The central bank has made more than R $ 1.2 trillion in credit and liquidity available to businesses, banks and financial markets to cushion the economic shock of COVID-19.

Central Bank President Roberto Campos Neto said this week that the measures are “here to stay”, even if they will be changed. Their implementation marks a “structural change”, he said.

The government has also provided direct cash transfers to tens of millions of Brazil’s poorest people. These measures appear to have helped revive lending and economic activity and prevent defaults.

Brazil’s outstanding loans rose 1.4 percent in October to reach 3.9 trillion reais ($ 730.3 billion), the central bank said. Business loans increased 1% on the month to 1.7 trillion reais, and personal loans increased 1.7% to 2.2 billion reais.

Lending growth over the past 12 months has accelerated by 14.5%, the central bank said.

($ 1 = 5.34 reais)

Reporting by Jamie McGeever; edited by John Stonestreet and Chizu Nomiyama

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