The outlook for Brazilian banks and their shareholders has darkened. Crude government measures to stimulate credit while delinquencies are high look dangerous and the consumer story that has supported Brazil so long looks shakier than ever as GDP expectations shrivel
The cosseted Brazilian banking sector is facing unprecedented challenges. A government push to lower interest rates and moves to encourage public sector banks to lend more as part of a drive to squeeze spreads is coming on top of much higher delinquency rates. Average 90-day non-payment levels across businesses and individuals hit 6% in May, the highest level since the series began in 2000, according to Central Bank data. Individual credit defaults reached 7.98%, the highest level since November 2009 when it reached 8%.
To read the rest of this article on weaker credit trends and how they are hurting bank profitability, please go to the Latin Finance website (www.latinfinance.com).