SAO PAULO, May 5 (Reuters) - Declining savings in Brazil are forcing banks to look out for alternative sources of funding to grow their residential mortgage loan book, analysts at Fitch Ratings said on Tuesday.
A net outflow of savings witnessed in the first quarter should slow the expansion of mortgage loans among banks operating in Brazil, analysts led by Esin Celasun said in a report. Average loan book growth for the segment was running at an annual 27 percent pace in March, compared with 31 percent in December.
The report comes as further evidence arises that Brazil's recession, stubborn inflation and swelling budget gap risk endangering a decade-long expansion in mortgage lending. The amount of mortgage loans funded with money from Brazil's Savings and Loans System, or SBPE, rose 3.4 percent last year, the lowest since 2003.
Under Brazilian banking regulations, a minimum of 65 percent of savings deposits must be directed towards mortgage- and other real estate-related credit. And while borrowing costs in Latin America's largest economy are rising, offered rates on savings accounts are lagging behind and leading to savings withdrawals.
The report is the latest early warning by industry specialists on the greater headwinds facing Brazil's still incipient mortgage loan industry, where some home buyers are pulling back and more borrowers are beginning to fall behind on their loan installments.
"Fitch believes that aggressive mortgage loan growth has limited increases in loan impairment ratios," the report said. "Mortgage lenders are likely to face a slight increase in impairment expenses due to a combination of the seasoning of the loan books and lower-than-expected loan growth."
The decline in the stock of savings deposits would affect most Caixa Econômica Federal, the state-controlled bank that is Brazil's largest mortgage lender. This month, volatility in savings rates led Caixa to put a limit on used homes at 40 percent to 50 percent of property value.
State-controlled Banco do Brasil SA and private-sector rivals Banco Bradesco SA and Itaú Unibanco Holding SA are expected to manage "a sharp slowdown in savings deposits relatively more easily," the reprot added. (Reporting by Guillermo Parra-Bernal; Editing by Bernard Orr)