Brazil: Bank lending improves with the economy - Rabobank

"According to the BCB’s credit market report for November, bank lending is gathering momentum, in line with the rest of the economy," Rabobank analysts note.

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Yet the data continue to show asymmetry between fast-rising consumer loans and still-struggling corporate credit. The latter follows a slower lending by federal institutions, amid a (necessary, healthy) removal of quasi-fiscal stimuli. Investment headwinds also play a role.

The incoming data continue to signal a declining trend in NPLs, which pave the way for lower spreads. Credit conditions are also improving on the back of lower interest rate.

All in all, considering aspects such as leverage and removal of quasi-fiscal stimuli, we see bank lending more accompanying the gradual pace of economic recovery than proving a big impulse to demand growth in coming years. Yet a lower Selic rate will lend some support.