UPDATE 1-Defaults, provisions at Brazil's Caixa soar in weak quarter

viernes 20 de noviembre de 2015 12:34 GYT
 

(Recasts to add details on defaults, quarterly results)

By Guillermo Parra-Bernal and Tatiana Bautzer

SAO PAULO Nov 20 (Reuters) - Profit at state-controlled Caixa Econômica Federal slumped 99 percent in the third quarter as soaring loan delinquencies forced Brazil's largest mortgage lender to slow loan book growth, ramp up loan-loss provisions and take on costly funding.

Recurring net income, or profit before one-time items, fell to 22 million reais ($5.9 million) last quarter, the lowest in almost eight years. Net income rose 60 percent to 3.037 billion reais, following a one-time gain in the value of deferred tax assets in the third quarter, according to a statement on Friday.

Loans in arrears for 90 days or more rose to 3.3 percent of outstanding loans last quarter, from 2.9 percent in the second quarter. The jump in defaults, the fastest since at least 2010, was triggered by deteriorating credit quality among consumer and small- and mid-sized companies, the statement added.

As a result, Chief Executive Officer Miriam Belchior was forced to raise loan-loss provisions to a record 6.123 billion reais last quarter, of which 1.054 billion reais came as the tax deferred asset gains were funneled into additional reserves. Belchior also stepped up sales of distressed loans last quarter.

The numbers underscore the rapidly deteriorating outlook for Caixa Econômica, which was used by successive Workers' Party administrations since 2008 to stimulate growth in Latin America's No. 1 economy. Belchior, a former close aide to President Dilma Rousseff, took the helm of Caixa in February.

With unemployment spiking and inflation eroding disposable income, households are defaulting on their loans at the fastest pace in three years. Chief Financial Officer Márcio Percival said in an interview on Friday that defaults at segments other than mortgages climbed more than a percentage point to 6.2 percent in the third quarter.

Mortgage lending represents 55 percent of Caixa Econômica's 666.1 billion-real loan book. Executives expect loan book growth at 12.5 percent this year, down from over 20 percent in 2014.

Loan-loss provisions remain at "comfortable" levels, even as the recession threatens to cloud the outlook for another two or three quarters, Percival said. Caixa's accumulated provisions stand at 32.7 billion reais.

Provision trends are the main issue for local banks because of the recession, which could turn out to be the longest since the 1930s. That, coupled with borrowing costs at a nine-year high, should stoke defaults until late next year, executives at rival lenders Itaú Unibanco Holding SA and Banco Bradesco SA said recently. ($1 = 3.7086 Brazilian reais) (Editing by Jeffrey Benkoe and Matthew Lewis)