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.
State lenders are following suit. Disbursements for risky segments like small- and mid-sized enterprise credit is shrinking at Banco do Brasil, the nation’s largest bank by assets, and Caixa Econômica Federal, Brazil’s largest mortgage lender.
The dearth of credit is putting many of those businesses near insolvency. Simpi, a group representing small enterprises in São Paulo state, Brazil’s most populous, forecast that as many as 40,000 small businesses could close within three months.
Many of them are falling behind on taxes in order to be able to service their debts, said Hiroyuki Sato, an executive at Abimaq, the group that represents Brazil’s machinery producers. (Editing by Guillermo Parra-Bernal and Dan Grebler)