BRASILIA--Growth in Brazilian lending volume slowed slightly in September, but the pace should pick up again in the coming months as declining credit costs and a recovering economy spur consumer and business borrowing.
The central bank Friday reported Brazil's total lending volume rose 1.1% in the month to BRL2.24 trillion Brazilian reais ($1.1 trillion), decelerating from a 1.2% increase posted in August.
The September figure equaled 51.5% of gross domestic product, representing an increase of 15.8% over the past 12 months.
Through August, 12-month credit volume had been up by 17.0%. Officials, however, said the pace of lending growth will likely accelerate again in the coming months as consumers and businesses take advantage of record-low interest rates.
"What we saw in September was a continued expansion of credit and a reduction in credit costs," said Central Bank Economics Department Coordinator Tulio Maciel.
"This reflected a lower base interest rate and lower bank lending spreads." The slight deceleration in the pace of credit growth in September was due, chiefly, to temporary factors, Maciel said.
These included fewer auto purchases caused by consumer uncertainties over government tax incentives. Furthermore, a bank-worker strike cut nearly a third of the average lending days during the period.
Still, average borrowing costs continued a long-running decline, dropping to 29.9% per annum from 30.1% in August.
That was 9.1 percentage points lower than September 2011. The sharp decline comes after Brazil lowered its benchmark Selic interest rate by more than five percentage points over the past 12 months to a record low of 7.25%.
But while interest rate reductions may soon end amid concerns over inflation, officials said credit growth will be reinforced over the long term by growth in mortgage lending, which is already up 40% so far this year, and an expected economic recovery.
Although overall credit flows in the economy currently remain "subdued," private analysts agree this should be only a temporary phenomenon.
"We see scope for firming credit growth during the second half of 2012," said Alberto Ramos, an economist at Goldman Sachs.
Still, an ongoing credit boom for Brazil has not come without side effects. In particular, the auto loan segment has been a source of difficulties, helping maintain loan delinquency rates for individual consumers at a record high of 7.9%.
Central bank officials, however, say they expect loan delinquencies to decline by year's end with lower interest rates and more cautious practices among lenders.
"Improved quality of recent credit concessions will assure lower delinquency rates," noted Mr. Maciel. "Credit has better guarantees and shorter terms than in the past."
Brazil's central bank, meanwhile, expects credit to grow at about 16% this year after a 19% expansion in 2011.
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The central bank Friday reported Brazil's total lending volume rose 1.1% in the month to BRL2.24 trillion Brazilian reais ($1.1 trillion), decelerating from a 1.2% increase posted in August.
The September figure equaled 51.5% of gross domestic product, representing an increase of 15.8% over the past 12 months.
Through August, 12-month credit volume had been up by 17.0%. Officials, however, said the pace of lending growth will likely accelerate again in the coming months as consumers and businesses take advantage of record-low interest rates.
"What we saw in September was a continued expansion of credit and a reduction in credit costs," said Central Bank Economics Department Coordinator Tulio Maciel.
"This reflected a lower base interest rate and lower bank lending spreads." The slight deceleration in the pace of credit growth in September was due, chiefly, to temporary factors, Maciel said.
These included fewer auto purchases caused by consumer uncertainties over government tax incentives. Furthermore, a bank-worker strike cut nearly a third of the average lending days during the period.
Still, average borrowing costs continued a long-running decline, dropping to 29.9% per annum from 30.1% in August.
That was 9.1 percentage points lower than September 2011. The sharp decline comes after Brazil lowered its benchmark Selic interest rate by more than five percentage points over the past 12 months to a record low of 7.25%.
But while interest rate reductions may soon end amid concerns over inflation, officials said credit growth will be reinforced over the long term by growth in mortgage lending, which is already up 40% so far this year, and an expected economic recovery.
Although overall credit flows in the economy currently remain "subdued," private analysts agree this should be only a temporary phenomenon.
"We see scope for firming credit growth during the second half of 2012," said Alberto Ramos, an economist at Goldman Sachs.
Still, an ongoing credit boom for Brazil has not come without side effects. In particular, the auto loan segment has been a source of difficulties, helping maintain loan delinquency rates for individual consumers at a record high of 7.9%.
Central bank officials, however, say they expect loan delinquencies to decline by year's end with lower interest rates and more cautious practices among lenders.
"Improved quality of recent credit concessions will assure lower delinquency rates," noted Mr. Maciel. "Credit has better guarantees and shorter terms than in the past."
Brazil's central bank, meanwhile, expects credit to grow at about 16% this year after a 19% expansion in 2011.
nasdaq.com
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