Brazil Bank Lending Down For The First Time In a Year In January

• Outstanding loans in Brazil decreased by 0.3% in January, according to the Central Bank, marking the first decline in a year. The result suggests a slowdown that is likely to gain momentum in a scenario of high borrowing costs following the aggressive monetary tightening implemented by the central bank to curb inflation.
• Outstanding loans fell to 5.3 trillion reais ($1 trillion) in January, with loans to companies decreasing by 2.4%, while credit to families rose by 1.1%. Over the past 12 months, total credit expansion was 13.6%, down from 14.0% in the previous month.
• Fernando Rocha, head of the central bank Statistics Department, said that credit retraction to companies followed a seasonal behaviour, although the drop was "slightly greater" this time from the same month in 2022. After Brazilian retailer Americanas SA entered into bankruptcy protection in Brazil, Rocha stated that it is too soon to say whether the case has impacted the credit market.
• Bank loans in Latin America's largest economy have decelerated amid more expensive credit, as the country's benchmark interest rate stands at 13.75% from a record low of 2% in March 2021. This has prompted constant criticism from the new leftist President Luiz Inacio Lula da Silva and his political allies, who see the level of interest rates as unjustifiable given slowing inflation, which reached 5.63% in Mid-February.
• The central bank has left interest rates unchanged since September, but data from the central bank shows that average interest rates on non-earmarked loans have increased to 43.5% per year from 41.7% in December.
• Bank lending spreads also grew from 28.7 points the month before to 30.6 percentage points, while a broad measure of Brazilian consumer and business default ratios increased to 4.5% from 4.2% in December.

(Source: Reuters)