Brazil defaults drop to all-time low, credit spreads tightest in years
Band Jamie McGeever
BRASILIA, September 28 (Reuters) – Bank loan spreads and defaults in Brazil fell to all-time lows in August, figures showed on Monday, further evidence that central bank measures to ease financial conditions and tackle the shock of the coronavirus work.
A broad measure of bank credit spreads fell to its lowest since December 2013, while a broad measure of household and business loan defaults fell to its lowest since the start of the data series. the central bank in 2011.
Credit spreads narrowed to 22.3 percentage points in August from 23.1 percentage points in July, the central bank said. It was the lowest since December 2013, and sharply down from 29 percentage points in February just before the start of the COVID-19 pandemic.
A broad 90-day default rate covering households and businesses fell to 3.3% in August from 3.5% in July, the central bank said.
The default rate for non-financial corporations fell to a record low of 1.6%.
Brazil’s 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 chief Roberto Campos Neto said last week that they had been a key factor in the economy’s “robust” recovery.
“We know it is important to keep the credit channel activated and always functional. The pandemic credit measures have paid off,” Campos Neto said.
The government, meanwhile, has provided direct cash transfers to tens of millions of Brazil’s poorest people. These budget and credit support measures appear to have helped revive lending and economic activity and prevent defaults.
The 90-day default rate for personal credit stood at 3.6% in August, the central bank said. Total household defaults, including loans such as auto loans and overdrafts, fell to 4.8% from 5.1%, the lowest since July of last year.
Brazil’s outstanding loans rose 1.9 percent in August to reach 3.74 trillion reais ($ 674 billion), the central bank said. Business loans increased 2.4% on the month to R $ 1.6 trillion, and personal loans increased 1.5% to R $ 2.1 trillion.
($ 1 = 5.50 reais)
(Reporting by Camila Moreira and Jamie McGeever; editing by Catherine Evans)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.