October 26, 2016 / 1:32 PM / 2 years ago

UPDATE 1-Brazil defaults stay at record as refinancing gets tougher

(Recasts to add details on report, share performance)

SAO PAULO/BRASILIA, Oct 26 (Reuters) - The share of loans delinquent for at least 90 days in Brazil was unchanged at a record high in September, a signal that efforts by commercial banks to refinance looming debt maturities are yet to help ease the country’s worst credit crunch in two decades.

The so-called default ratio, a benchmark for delinquencies, came in at the equivalent of 5.9 percent of outstanding non-earmarked loans, unaltered from a revised figure in August, the central bank said in a report on Wednesday. The default ratio has climbed almost a full percentage point over the past year.

Likewise, early default ratios, or loans in arrears between 15 days and 90 days, rose slightly for consumers as some unsecured lending went through a significant deterioration last month. Banks have been refinancing potentially problematic loans earlier than usual to allow more borrowers to stay current.

The numbers provided new reason for concern over lingering risks amid the pickup in loan renegotiation and refinancing deals. Record defaults came as lending fell 0.2 percent in September, to 3.11 trillion reais ($998 billion), the report showed.

While some economists are becoming confident that Brazil’s credit crunch will ease with an expected central bank reduction in borrowing costs, commercial lenders see defaults falling in the first half of next year at the earliest.

“Going forward, we expect credit conditions to remain exigent but to start to gradually alleviate at the margin supported by the tentative signs of economic stabilization, and upcoming central bank rate easing cycle,” said Alberto Ramos, chief Latin America economist with Goldman Sachs Group Inc.

An index of banking and financial shares trading in the São Paulo Stock Exchange shed 0.6 percent on Wednesday.

$1 = 3.1166 reais Reporting by Guillermo Parra-Bernal and Marcela Ayres; Editing by Will Dunham

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