Brazil loan defaults hit highest level in nearly eight years

BRASILIA, Aug 27 (Reuters) - Default rates on outstanding loans in Brazil rose in July to their highest level in almost eight years, central bank data showed on Wednesday, while credit growth continued to lose momentum amid high borrowing costs.

Defaults on non-earmarked credit to households and businesses in the country climbed to 5.2% in July from 5.0% the month before, marking the highest since November 2017. So far this year, the indicator has jumped 1.1 percentage point.

The figures came as a recent regulatory change led banks in Latin America's largest economy to report higher delinquency rates than previously calculated, as they recorded fewer charge-offs.

But "even excluding the effects of the change in charge-off dynamics, there has been an increase in troubled assets in the most recent period," the central bank's financial stability committee (Comef) noted in the minutes from its latest meeting.

Outstanding loans in Brazil rose 0.4% in July from the prior month to 6.7 trillion reais ($1.24 trillion), with 12-month growth easing to 10.7% from 10.8% in June, according to the monetary authority.

The central bank said that signs of slowing credit have become more evident, though growth remains historically high.

"This deceleration was expected and is consistent with tighter financial conditions and more moderate economic activity," it said in the Comef minutes.

Policymakers at the bank interrupted an aggressive monetary tightening cycle in late July, after raising the benchmark Selic rate by a total 450 basis points since September to 15%, its highest in nearly two decades.

($1 = 5.4212 reais)