Lending in Brazil increases in November despite deteriorating credit conditions

RIO DE JANEIRO, BRAZIL – Credit conditions in Brazil worsened in November due to higher interest rates, Central Bank figures showed Tuesday, although lending continued to grow for businesses and consumers.

Credit spreads, which reflect the gap between banks’ rates to grant a loan and their cost to raise money, rose to 23.4 percentage points in November from 22.9 percentage points in October, the Central Bank said. It was the highest level since January.

The amount of loans outstanding, however, increased by 1.8% in November to R$4.58 trillion (US$811.5 billion), which corresponds to 53.2% of Gross Domestic Product.

In general, the credit market is being hampered by the Central Bank’s aggressive monetary cycle to control inflation that is soaring into double digits.

Brazil’s benchmark Selic rate stood at 7.75% in November, up from 2% in March, when the monetary tightening cycle began. The Central Bank took the cost of credit to 9.25% in December and has already indicated that it will apply another 150 basis points increase in February.

Still, the volume of corporate loans increased by 0.7% in November to R$4.6 trillion, and personal loans rose by 1.9% to R$2.9 trillion.

Credit growth in the last 12 months reached 13.8%, the Central Bank said. In its quarterly inflation report, the agency revealed that it expects a 14.6% increase in credit this year.

A generalized measurement of default rates of Brazilian companies and consumers reached 3.1%, compared to 3% in the previous month.

With information from Reuters