Loans to Brazil small firms dry up as steep recession looms
By Aluísio Alves
SAO PAULO, July 24 (Reuters) - Brazilian banks are increasingly reluctant to lend to small- and mid-sized firms as manufacturing and retail trade shrink, which will likely feed through to what looks like the nation's worst recession in 25 years.
Large and mid-sized banks alike are shunning loan requests from small companies on concerns sluggish revenue could lead to defaults, bank executives say. Disbursements have ground to a halt at banks that traditionally work in the segment, like Banco Daycoval SA and Banco do Brasil SA.
Signs of a sharp erosion in the quality of loans have appeared in recent months. Bounced checks, as well as unpaid bills and loan delinquencies, hit their highest levels in six years, credit research company Serasa Experian said this month.
While the central bank does not produce small company loan data, lending in segments they often tap, such as discounted receivables and trade bills, expanded 4 percent in the 12 months ending in May, below the system's 10 percent loan book growth.
Daycoval is unlikely to funnel a recent $200 million credit facility into lending for smaller firms, said Ricardo Gelbaum, the bank's head of investor relations.
"We're not growing in that segment at all," Gelbaum said in an interview.
Itaú Unibanco Holding SA, the nation's largest bank by market value, grew its loan book in the segment by only 1.7 percent in the first quarter.
The situation underscores how banks in Brazil are preparing for a jump in non-performing loans and the shutdown of thousands of small firms. Private-sector lenders have put the brakes on loan disbursements and begun to build large capital buffers since the economy started to show signs of deterioration in 2012. Continuación...