UPDATE 1-Brazil woes may lead Caixa to cut loan book growth estimate

miércoles 3 de junio de 2015 16:01 GYT
 

(Recasts to add CFO comments)

By Guillermo Parra-Bernal and Aluísio Alves

SAO PAULO, June 3 (Reuters) - Caixa Econômica Federal , Brazil's largest mortgage lender, could cut loan book growth estimates for this year as rising unemployment and sinking confidence in Latin America's largest economy hamper demand for credit and spark a jump in defaults.

Management at the Brasilia-based state lender could opt to cut so-called guidance as "economic conditions don't seem any supportive," Chief Financial Officer Marcio Percival said in a Wednesday interview, following the release of first-quarter results.

Currently, the bank expects lending to expand 14.5 percent and 18.5 percent for this year, down from 22.4 percent in 2014. Percival said that demand for credit is waning across the board and that the bank is recalculating its models to mitigate the impact of Brazil's worst downturn on the bank's activity.

"Credit markets are feeling the pinch of the economic weakness, so it might filter down on our guidance," Percival said, adding that any changes may be announced within 15 days to 20 days.

Caixa, which in recent years grew aggressively into corporate and infrastructure lending, was forced to raise loan-loss provisions in the first quarter after more corporate and individual borrowers fell behind on their loans. As a result, first-quarter profit dropped 14 percent on a quarterly basis.

Net income totaled 1.5 billion reais ($479 million) last quarter, down from 1.8 billion reais in the prior three months. Annualized return on equity slipped to 13.7 percent from 15.2 percent in the fourth quarter of last year.

Return on equity is a widely followed gauge of profitability for banks.

Loan-loss provisions soared 46 percent in a quarter-on-quarter basis to 5.027 billion reais - the highest in at least six years. The 90-day default ratio climbed to 2.9 percent, the highest since at least 2009, from 2.6 percent in the fourth quarter.

($1 = 3.1323 reais) (Editing by Bernard Orr)