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By Guillermo Parra-Bernal
SAO PAULO, March 8 (Reuters) - Itaú Unibanco Holding SA will cut the interest rate it charges on rollover credit card loans as Brazil's No. 1 lender seeks to comply with new rules to reduce the cost of borrowing for cash-strapped consumers and companies in Latin America's largest economy.
Under terms of the plan, Itaú will implement interest rates for card rollover loans similar to those applied to secured, parceled-out credit, said Marcos Magalhães, head of credit card lending. Rates for rollover credit card loans will decline 4 percentage points on average once changes take effect on April 3.
The move underscores how banks are responding to pressure from policymakers to ease the burden of domestic borrowers, who pay the highest rates among the world's top 20 economies. Itaú was the first to announce new monthly rollover card rates - between 1.90 percent and 9.90 percent - among peers.
With the new rules, President Michel Temer's government wants banks to speed up payment terms to businesses and cut the cost of revolving card loans as Brazil's longest and harshest recession on record rages. The banking and financial industry has for decades remained Brazil's most profitable, producing return on equity readings between 20 percent and 50 percent.
Itaú has already included the estimated impact of the new policy on this year's operational targets, executives said. They expect declining card loan-loss provisioning and migration to parceled-out credit to help offset the revenue losses stemming from the reduction in the cost of rollover card loans.
The average monthly rate on a credit card revolving loan is 16 percent, as much as three times the level in other Latin American countries. Banks blame such high rates on persistently high levels of revolving loan delinquencies that can hover above 35 percent of outstanding credit in the segment.
Goldman Sachs Group Inc analysts estimate that defaults in revolving credit card loans varies between 4 percent and 7 percent in most countries.
"The system we are proposing is giving clients the option to choose what risk adapts best to their payment behavior," said Magalhães.
Preferred shares fell 0.8 percent to 39.12 reais, paring back gains to 36 percent this year.
Itaú has outstanding credit card loans of about 60 billion reais ($19.08 billion), a little above 10 percent of its consolidated loan book.
Under new rules that the government announced late last year, revolving credit overdue by at least 30 days will change into parceled-out financing lines. According to estimates by analysts at Banco Bradesco BBI, up to 38 percent of current banking industry revenues from revolving credit could be impacted by the new rules.
At some point, banking industry players, regulators and the government will have to resume the discussion of themes other than credit cards to help reduce borrowing costs in Brazil, Magalhães said.
Currently, the government wants banks to slash the period by which it reimburses retailers for their card sales to less than a week from an average 28 days, the use of interest-free installments on card purchases, and a faster implementation of positive credit bureaus.
$1 = 3.1454 reais Additional reporting by Bruno Federowski in São Paulo; Editing by Chizu Nomiyama and Marguerita Choy