(Recasts to add further details, share performance throughout)
By Guillermo Parra-Bernal and Marcela Ayres
SAO PAULO/BRASILIA, March 29 Brazilian banks set
aside a record amount of capital to cover bad loans in February,
the central bank said on Wednesday, signaling caution as Latin
America's largest economy struggles to emerge from its worst
recession on record.
Loan loss provisions averaged the equivalent of 6.9 percent
of Brazil's outstanding bank loans last month, above 6.8 percent
in January and 6 percent in February 2016, the central bank said
in a report.
State-controlled and private-sector banks remain reluctant
to reduce their loan loss provisions despite recent declines in
delinquencies, the data showed. Lenders surprisingly moved
borrowing costs slightly higher last month, on concerns that an
unexpectedly slow economic recovery could spur new defaults.
Loans in arrears for 90 days or more in Brazil fell to an
eight-month low, totaling 5.6 percent of outstanding
non-earmarked loans, in February from 5.7 percent in January.
The drop may have reflected recent reductions in Brazil's
benchmark Selic overnight lending rate as well as steps by banks
to refinance looming debt maturities, analysts said.
Delinquencies, however, rose at state banks, which account
for 56 percent of lending. Corporate loan delinquencies remained
under pressure in February, with 15-day to 90-day defaults
rising in the category, the central bank said.
Executives at Brazil's largest banks said in recent weeks
that loan-loss provisions will only fall later in the year, once
there are signs that Brazil has emerged from a deep three-year
"Going forward, we expect credit conditions to remain
somewhat exigent but to gradually ease at the margin, supported
by the tentative signs of economic stabilization and the central
bank's front-loaded rate-cutting cycle," said Alberto Ramos,
chief Latin America economist with Goldman Sachs Group Inc.
Outstanding bank loans in Brazil reached 3.070 trillion
reais ($982 billion) at the end of February, representing a 3.5
percent drop in the past 12 months. The central bank estimates 2
percent growth for outstanding bank loans this year.
($1 = 3.1251 reais)
(Editing by Chizu Nomiyama and Paul Simao)