Brazil loan defaults hit 33-month high as recession deepens

SAO PAULO/BRASILIA: Bank loans overdue for at least 90 days in Brazil rose in November to their highest in almost three years, the central bank said on Tuesday, as the deepest recession in decades and rising credit costs strained borrowers’ capacity to stay current on their debts.

The so-called 90-day default ratio, a benchmark for delinquencies, rose to the equivalent of 5.2 percent of outstanding non-earmarked loans in November, the central bank said in a report. November’s number was the highest for the ratio since February 2013, according to central bank data.

In October, the default ratio was a revised 5 percent. The default ratio has grown from about a full percentage point over the past year, as rising unemployment and stubbornly high inflation also eroded the ability of companies and households to pay their debt. Latin America’s largest economy shrank by an annual 4.5 percent in the third quarter, the steepest drop since the current data series began in 1996.

Consumer defaults were stable last month after a costlier refinancing of revolving credit card and payroll loans offset early debt repayments.

Corporate defaults climbed, reflecting increased delinquencies in working capital, trade finance and guarantee letter-backed credits.

The data provides a glimpse into loan-book quality as the nation’s largest banks get set to report fourth-quarter results next month.

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