Brazil's bank lending expands 11% in 2024, but slowdown expected

Recasts with further data, context

BRASILIA, Jan 27 (Reuters) - Brazil's outstanding loans grew slightly above the central bank's forecast in 2024, expanding 10.9% to 6.4 trillion reais ($1.08 trillion) in a year of robust economic activity, official data showed on Monday.

In its December quarterly inflation report, the central bank projected a 10.6% rise for the year, with higher borrowing costs seen slowing growth to 9.6% in 2025.

Brazil's benchmark Selic interest rate ended the year at 12.25%, having started it at 11.75%, as policymakers shifted to a monetary tightening stance in September following a brief easing cycle that lasted until May.

With resilient economic activity, a weakened exchange rate, and inflation expectations that have consistently moved further from a 3% target, policymakers have already signaled additional 100 basis-point hikes this week and at the next meeting in March.

Last year's credit expansion was primarily driven by lending to individuals, which grew 12.1%, while corporate credit rose by 9.1%.

Latin America's largest economy consistently outperformed growth expectations, with the government forecasting gross domestic product (GDP) expansion of 3.6% for 2024.

The default rate on non-earmarked credit, where financial institutions set interest rates freely, fell by 0.4 percentage points over the year to 4.1%. Lending spreads in the same segment narrowed by 2.8 percentage points to 27.2 percentage points.

However, the average interest rate charged to consumers increased by 0.2 percentage points to an annual 40.8%.

In December alone, Brazil's outstanding loans rose 1.4% compared to the previous month, central bank data showed.

($1 = 5.9359 reais)