UPDATE 2-Brazil bank lending rebounds in Dec, jumps 14 pct

Tue Jan 27, 2009 12:35pm EST
(Adds default rates, economist comments)
BRASILIA, Jan 27 (Reuters) - Bank lending in Brazil expanded 14 percent in December from November, rebounding from a two-month slump in which credit virtually dried up, the central bank said on Tuesday.
Bank lending had contracted 9.4 percent in November and 3 percent in October as the global credit crunch spilled over into Latin America's largest economy.
The recovery in lending in December may be of little consolation to banks in Brazil as default rates on personal loans rose to the highest level in more than six years, analysts said.
Defaults on personal or household credit rose to 8.1 percent in December from 7.8 percent the previous month and reached the highest since an 8.3 percent rate in September 2002. Defaults also edged higher for corporate credit, reaching 1.8 percent in December from 1.7 percent in November.
"It does not bode well for the return to a normal situation the increase observed in the delinquency ratios both at the corporate and the households segment," said Jankiel Santos, chief economist at BES Investimento, in a report.
"With the level of credit in arrears going up quite fast and the impression that economic situation should lead those ratios to even higher levels, the banks are prone to hoard their resources, which should lead to further drops in the credit concession."
In another sign of a recovery in the credit market, the average interest rate charged by banks in December dropped for the first time since April, edging lower to 43.4 percent a year from 44 percent in November.
In December 2007, banks charged an average interest rate of 33.8 percent a year.
For the whole of 2008, the number of new bank loans rose 8.4 percent, while the total volume of outstanding credit in the country increased 31.1 percent. In 2007, the total volume of credit expanded a revised 27.8 percent.
The total stock of outstanding loans in the country amounted to 1.227 trillion reais ($530.5 billion) at the end of December, equivalent to 41.3 percent of gross domestic product. At the end of 2007, the total stock of credit was equivalent to 34.2 percent of GDP.
Brazil's economy has boomed in the last few years, in large part thanks to an increase in the availability of credit that fueled a surge in domestic consumption.
The central bank said last month that lending growth is likely to slow sharply in 2009 because of the global financial crisis, which has severely restricted the availability of credit around the world.
The bank estimated that the total volume of credit would expand 16 percent this year, when Brazil's economy is expected to slow significantly after five years of robust growth. ($1=2.313 reais) (Reporting by Isabel Versiani and Elzio Barreto; Editing by Jan Paschal)