(Adds details on consumer and corporate defaults, background on banks, analyst comments, paragraphs 3-10; adds bylines)
By Guillermo Parra-Bernal and Marcela Ayres
SAO PAULO/BRASILIA, Oct 27 (Reuters) - Bank loans delinquent for at least 90 days in Brazil remained in September at their highest in almost two years, as the deepest recession in a quarter century and rising interest rates strained borrowers’ capacity to stay current on their debts.
The so-called 90-day default ratio, a benchmark for delinquencies, came in at the equivalent of 4.9 percent of outstanding non-earmarked loans last month, the central bank said in a report on Tuesday. September’s number was the highest for the ratio since October 2013, when it reached 5 percent.
Consumer defaults rose in September, driven by a costlier refinancing of revolving credit card and renegotiated loans as urban unemployment jumped. Corporate defaults fell slightly, reflecting efforts by small and large firms to speed up debt repayments amid tighter credit standards.
The data provides a glimpse into loan book quality days before the nation’s largest banks report third-quarter results. Defaults and loan-loss provisions kept rising due to the recession and fallout from a corruption scandal at state firms , a Reuters poll showed earlier in the day.
“Given the deteriorating economic backdrop, it remains likely that credit quality will deteriorate going forward,” said Saúl Martínez, an analyst with JPMorgan Securities. The September data suggest “that at least some worsening in default ratios and loan losses are likely” in the third quarter.
Early default ratios, or loans in arrears between 15 days and 90 days, rose for both individual and corporate borrowers, indicating that future delinquencies are on the rise.
Last month, provisions as a share of capital fell for the first month in five, as state banks accelerated credit disbursements to help stem fallout from the recession, according to the report. Private-sector banks kept provisions at their highest levels in over two years.
While banks remain well capitalized, risks have been escalating as Latin America’s largest economy braces for the longest recession since the 1930s. That, coupled with high interest rates, has made it harder for factories, farmers and individuals to repay loans, driving up unpaid utility bills, loans and bounced checks.
Lending rose 9.1 percent in the 12 months ended in September, the slowest pace since at least 2011 and in line with the central bank’s 9 percent estimate for the year.
An index comprising banking shares traded in São Paulo shed 0.8 percent on Tuesday, extending losses to 6.5 percent for the year.
$1 = 3.9104 Brazilian reais Reporting by Guillermo Parra-Bernal and Marcela Ayres; Editing by W Simon and David Gregorio