A rise in defaults came along with a slower pace of disbursements last month, the report showed. Outstanding loans in Brazil's banking system BRLEND=ECI rose 1.1 percent in July from June, totaling 1.854 trillion reais ($1.16 trillion), the report said.
The numbers back recent evidence that delinquencies for the riskiest pool of loans -- those to small-sized companies and some types of consumer credit -- are poised to rise further this year as Brazil's economic growth loses momentum. Banks are tightening credit risk controls to prevent defaults from climbing further.
"There shouldn't be anything extravagant with defaults this year," Lazaro de Mello Brandao, chairman of Banco Bradesco (BBDC4.SA), Brazil's fourth-largest bank, said at a Tuesday event in Sao Paulo. "They will rise slightly at the margin."
Some investors fear that loans made amid a burst of government lending during the global financial crisis in 2008 could sour as the economy slows this year. Easy credit was the main engine behind Brazil's 7.5 percent expansion last year -- the fastest in a quarter century.
A spike in defaults and polls suggesting borrowers are nearing their limit for new credit have driven banking sector shares down 24 percent so far this year -- mainly on worries that a rapid expansion in lending in past years went too far.
Read full article