Credit grows 16.5% in 2021, driven by record household indebtedness even with higher interest rates - ISTOÉ DINHEIRO

Central Bank in Brasilia

by Bernardo Caram

BRASILIA (Reuters) – The stock of credit in Brazil rose 16.5% in 2021 compared to the previous year, pulled by greater indebtedness of families even in the face of a significant increase in interest rates charged by banks, the Central Bank announced on Friday. -market.

The total credit balance rose 1.9% in December over November, closing the year at 4.684 trillion reais, which corresponds to 54.0% of the Gross Domestic Product (GDP).

The head of the Statistics Department of the Central Bank, Fernando Rocha, explained that there was a reversal in the factors that most boosted credit.

After growing 21.8% in 2020, the credit balance in the hands of legal entities rose 11.1% in 2021, a loss of strength explained by the large volume of credit programs to stimulate companies in the first year of the pandemic. The balance of individuals, in turn, went from an increase of 11.2% in 2020 to an increase of 20.8% last year.

The movement contributed to a record result of household indebtedness, which closed the year at 51.2%, the highest level in the historical series started in 2005. In the accumulated for the year, the increase was 9.2 percentage points in this index, which measures the relationship between the debt balance and the accumulated family income in 12 months.

The greater indebtedness is observed in a scenario of still high unemployment and high inflation that has eroded the purchasing power of families.

The average interest rate charged by financial institutions, which has been following the monetary tightening promoted by the Central Bank to control inflation, ended 2021 at 33.9% – at the end of 2020, it was at 25.5% per year. The level is the highest since the beginning of the pandemic, falling below the level observed in February 2020, of 34.1% per year.

The data refer to the segment of free resources, in which the cost of financing is established by financial institutions without government interference.

The Selic rate, which started the year at the historic low of 2% per year, rose 7.25 percentage points throughout 2021, reaching 9.25% at the last meeting of the Monetary Policy Committee, in December. The collegiate has already indicated that it should promote a new increase of 1.5 points in the rate at the February meeting.

“There was a general increase in interest rates,” Rocha said.

Despite the cost increase, the default level remains practically stable, ending December at 3.1%, the same level observed in November. Year-to-date, the total increase was 0.2 percentage point.

In 2021, there was also an increase in the banking spread, the difference between the cost of raising funds by financial institutions and what they charge customers when granting credit.

The spread level in operations with nonearmarked resources was 23.7 percentage points in December, against 23.0 points in November. In the year, the accumulated increase was 2.8 points.

INDIVIDUALS

Regarding credit offered to individuals, the BC said that the highlight in the rise in average interest in 2021 was for the credit card revolving, which stood at 349.6% per year in December, an increase of 21.8 points. percentages at 12 months. The level is the highest since August 2017, when it stood at 392.3% per year.

The credit card installment rate, in turn, rose 19.6 percentage points in 2021, to 168.5% per year.

There was also an increase of 12 percentage points in the overdraft fee, which closed 2021 at 127.6% per year.

Non-consigned personal credit is also among the highest in the year. The average rate rose 10.8 percentage points in 12 months, reaching 85.2% in December.