September 28, 2016 / 3:07 PM / 2 years ago

UPDATE 1-Brazil loan defaults, lending stabilize in August

(Adds data, background throughout)

By Guillermo Parra-Bernal and Marcela Ayres

SAO PAULO/BRASILIA, Sept 28 (Reuters) - The share of loans delinquent for at least 90 days in Brazil was unchanged in August, a signal that efforts by commercial banks to refinance looming debt maturities could be starting to 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 5.7 percent of outstanding non-earmarked loans, unaltered from July, the central bank said in a report on Wednesday. The default ratio has climbed almost a full percentage point over the past year.

Still, early default ratios, or loans in arrears between 15 days and 90 days, rose slightly for consumers and companies alike.

Banks have been refinancing potentially problematic credit earlier than usual in the loan’s time frame to allow more borrowers to stay current.

The unchanged 90-day default ratio came as lending stabilized in August. Outstanding loans totaled 3.115 trillion reais ($961 billion), unchanged from July, the report showed.

Some economists are increasingly confident that the credit crunch is showing signs of having hit bottom amid Brazil’s worst recession in eight decades.

Commercial lenders expect default to show an inflection in the first months of 2017, depending on whether the economy emerges from the downturn.

An index of banking and financial shares trading in the São Paulo Stock Exchange gained 0.2 percent on Wednesday.

Concern remains however over lingering risks amid the pickup in loan renegotiation and refinancing deals.

Banks have raised lending spreads to 40.7 percent in August for the eighth straight month. Spreads are the difference between the interest that banks charge on their loans and their cost of funding.

$1 = 3.2402 Brazilian reais Editing by Chizu Nomiyama and W Simon

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