By John Rumsey
BRAZILIAN BANKING: End of the golden age
The outlook for Brazilian banks and their shareholders has darkened. Crude government measures to stimulate credit look dangerous while the consumer story is starting to unravel
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%.
Private banks would like to draw in their horns on credit,
but are afraid of losing market share. The government has
already enacted a bold series of measures – which are
proving worrisome to bankers – to stimulate credit as
GDP numbers remain weak.
According to the central bank’s latest poll of
leading economists, Brazil’s economy will grow by
just 2.01% this year, a...
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