Brazil bank lending resilient in May despite high rates

BRASILIA, June 27 (Reuters) - Bank lending in Brazil remained robust in May, central bank data showed on Friday, reinforcing policymakers' recent upward revision to full-year credit growth forecasts despite aggressive monetary tightening.

Outstanding credit rose 0.6% from April to 6.65 trillion reais ($1.21 trillion). On a 12-month basis, loan growth held steady at 11.8%, matching the revised April figure after an initial reading of 11.5%.

On Thursday, the central bank raised its 2025 credit growth forecast to 8.5% from 7.7%, citing stronger-than-expected economic activity and rising household income.

In its quarterly monetary policy report, the bank noted that, with the exception of corporate loans using non-earmarked resources, lending balances across all segments exceeded expectations.

Still, policymakers stressed that the revised forecast represents a slowdown from the 11.5% credit expansion recorded in 2024.

The resilience in Brazilian bank lending has persisted despite a sharp rise in borrowing costs. The central bank has lifted its benchmark interest rate by 450 basis points since September, to 15%, in a bid to tame inflation, which remains above its 3% target.

Central bank data also showed that payroll-deductible loans to private sector workers rose 4.1% in May from April, to 46.56 billion reais, following new rules introduced earlier this year by President Luiz Inacio Lula da Silva's government aimed at boosting the segment.

Default rates on non-earmarked consumer and business loans edged up to 4.9% in May from 4.8% in April. Lending spreads widened to 31.6 percentage points, up 0.8 point from the previous month.

($1 = 5.4900 reais)