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By Guillermo Parra-Bernal and Marcela Ayres
SAO PAULO/BRASILIA, Aug 26 (Reuters) - Bank loans delinquent for at least 90 days in Brazil rose in July to their highest in 19 months, the central bank said on Wednesday, as a widespread downturn and rising borrowing costs kept companies and consumers from staying current on their debt.
The 90-day default ratio, a benchmark for delinquencies, rose last month to the equivalent of 4.8 percent of outstanding non-earmarked loans from 4.6 percent in June, according to a report. The ratio last month was the highest since December 2013, according to Thomson Reuters data.
The uptick came despite efforts to stem increasing loan-related losses and indicates that local lenders, especially private-sector banks, are becoming increasingly prudent as Latin America’s largest economy slides into its steepest contraction in a quarter of a century. The share of public banks in total credit rose to a record 55 percent in July, the report showed.
Average borrowing costs for non-earmarked loans climbed 0.8 percentage point in July to 44.2 percent, the report said. Banks also raised loan-loss provisions to their highest in two years, as fallout from a corruption scandal at state firms and a plunging economy, weighed down creditworthiness.
Bank lending, including earmarked loans, which are credits aimed at investments and homebuilding in accordance with government mandates, rose 0.3 percent to 3.11 billion reais ($857 billion) in July from the previous month.
Lending rose 9.9 percent in the past 12 months, the slowest pace of expansion since at least 2011, yet above the central bank’s 9 percent estimate for this year.
“Finally, the already-high level of household debt, the accelerating labor market deterioration and rising interest rates are reducing credit demand by households for, among other things, the purchase of durable goods,” said Alberto Ramos, chief Latin America economist for Goldman Sachs Group Inc in New York.
The level of earmarked loans outstanding rose 0.8 percent last month, while non-earmarked loans remained stable.
Credit fell to the equivalent of 54.5 percent of gross domestic product in July, from 54.6 percent of GDP in June.
$1 = 3.6385 Brazilian reais Editing by James Dalgleish and Alan Crosby