Brazil’s credit conditions improved in February ahead of Covid-19 spike

RIO DE JANEIRO, BRAZIL – Credit conditions in Brazil improved in February, Central Bank figures showed on Monday, March 29, as a broad measure of consumer and business default ratios held steady at a decade-low, bank lending spreads narrowed, and credit growth rose.

The figures tie in with other indicators that suggest the full force of the deadly second wave of the Covid-19 pandemic now battering the country had yet to be felt by corporations and households in the first two months of the year.

A broad 90-day default ratio covering households and businesses was 2.9% in February for a third straight month, Central Bank figures showed. That is the lowest since the data series began in March 2011.

The default ratio for households, including borrowing such as auto loans and overdrafts, was unchanged at a series low of 4.1%, while the default ratio for non-financial companies was also unchanged at 1.6%, just up from December’s low of 1.45%.

Lending spreads narrowed to 22.9 percentage points in February from 23.5 points in January, the central bank said.

The Central Bank made available more than R$1.2 trillion (US$208 billion) worth of credit and liquidity to businesses, banks and financial markets last year to cushion the economic shock of the pandemic.

Many of these measures expired on Dec. 31, but the monetary authority has said some will be extended.

The stock of outstanding loans in Brazil rose 0.7% in February to R$4 trillion, the bank said. Personal loans rose 0.8% to R$2.3 trillion, and business loans rose 0.6% to R$1.8 trillion.

The total stock of loans rose 16.1% in the 12 months through February, with personal loans rising 11.3% and business loans up 22.9%, the Central Bank said.