(Recasts lead, adds data on spreads, annual lending growth)
By Guillermo Parra-Bernal and Luciana Otoni
SAO PAULO/BRASILIA, Sept 26 (Reuters) - Growth in bank lending in Brazil slowed for a seventh straight month in August, another sign that recent measures to unlock personal credit failed to offset the impact of high borrowing costs and weak economic activity.
Outstanding loans in Brazil’s banking system rose 11.1 percent in the 12 months through August, the central bank said in a report published on Friday. According to Thomson Reuters calculations, the annual growth of bank loan books is running at the slowest pace since at least late 2003.
For the 12 months through July, outstanding loans rose 11.5 percent.
Lending rose 1 percent in August from July, reaching 2.86 trillion reais ($1.18 trillion), the report said. Loans in arrears for 90 days or more, the industry’s benchmark gauge for credit delinquencies, remained stable at 5 percent of outstanding loans last month.
The central bank on Friday reiterated an estimate that lending will grow 12 percent this year. Last year, total credit grew 14.7 percent.
Increased worries about an economy flirting with recession and faltering credit flows motivated the central bank in July to ease bank capital and reserve requirements, even at the risk of spurring inflation. Disbursements for some of the credit segments targeted by the measures fell at a steeper pace than the prior month, the report showed.
Spreads, or the difference between the rate that banks charge on their loans and their cost of funding, fell 0.2 percentage point to 21.2 percent, the first decline since January. Lending rates slipped while funding costs rose. In the past year, spreads widened by 3.7 percentage points.
“Although August showed lower spreads, we don’t think this represents an inflection point as we expect the re-pricing of the back-book to underpin net interest margin in the coming quarters,” Philip Finch, a strategist with UBS Securities in London, wrote in a client note.
Disbursements of personal loans, measured by the number of approved financing deals, fell 3.7 percent in August. Earmarked loans for corporations rose 5.6 percent after state-run banks sped up disbursements of agribusiness and industrial loans, the report showed.
Analysts have warned that the two-speed nature of Brazil’s credit market is leading private-sector banks to turn even more cautious. Non-earmarked credit, or loans not subject to government mandates, is now contracting as a result, they said.
Earmarked loans now account for 46.8 percent of outstanding loans, up from 42 percent a year ago. Non-earmarked credit rose 0.5 percent last month while earmarked loans jumped 1.5 percent from July, the report showed.
Loans from state banks represented 53 percent of outstanding loans in Brazil in August, compared with 52.9 percent in July and 50.7 percent a year earlier. The share of local private-sector banks slumped to 32.3 percent from about 34 percent a year earlier.
$1 = 2.43 Brazilian reais Editing by W Simon, David Gregorio and Leslie Adler