Economic Information

PRESS RELEASE - August 24, 2017

Monetary Policy and Financial System Credit Operations
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I - Financial system credit operations

The balance of financial system credit operations reached R$3,062 billion in July, falling by 0.6% in the month and by 1.7% in twelve months (compared with respective variations of +0.4% and -1.6% in June). The balance of the corporate portfolio fell by 1.4% to R$1,463 billion in the month, while the household portfolio increased by 0.2% to R$1,598 billion. The credit/GDP ratio declined 0.4 p.p., closing at 47.8% (50.7% in July 2016).

Credit operations with nonearmarked resources totaled R$1,521 billion (-0.7% in the month and -2.1% in twelve months). The balance of household loans grew 0.5% in the month to R$822 billion, with emphasis on payroll-deducted loans and credit cards with immediate payment. The balance of the corporate portfolio totaled R$699 billion (-2.1% in the month), highlighting reductions under discount of trade bills and receivables and working capital.

Earmarked credit operations totaled R$1,541 billion (-0.4% in the month and -1.3% in twelve months). Household loans declined 0.1% in the month to R$776 billion, with a 2.8% decrease in rural financing opposed to a 0.7% growth in housing financing. The decline of 0.6% in the balance of the corporate segment, to R$765 billion, reflected the contraction of operations with BNDES funds.

Considering borrowers' economic activity segments, the main contractions occurred in trade (-3.1%, R$248 billion), manufacturing (-0.9%, R$381 billion) and construction (-1.8%, R$92 billion). Regionally, including operations above R$1,000, only the Northeast region portfolio remained stable (R$398 billion), with declines in the credit balance in the other regions, especially in the South (-0.8%, R$547 billion) and in the Southeast (-0.4%, R$1,615 billion).

Interest and default rates

The average cost of all active credit operations - the Cost of Credit Indicator (ICC) - did not change in July, remaining at 22.2% p.y. (-0.6 p.p. in twelve months). In operations with nonearmarked resources, the indicator remained stable compared with the previous month, at 37.1%. In operations with earmarked loans, the ICC reached 8.9% (-0.1 p.p. in the month).

The average interest rate of financial system credit operations, which reflects operations contracted over the month, with nonearmarked and earmarked resources, reached 29% p.y. in July (+0.2 p.p. in the month and -4.0 p.p. in 12 months). In the nonearmarked segment, the average cost increased 0.4 p.p. in the month to 46.6%, while, in the earmarked segment, it remained stable at 10.2% p.y.

As for the household credit segment, the average rate remained at 36.5% p.y. (-5.6 p.p. in twelve months). With regard to nonearmarked loans, a rise of 0.4 p.p. was observed in the month, to 63.8% p.y., especially non payroll-deducted loans (+7.2 p.p.) and not regular revolving credit card (+39.3 p.p.). As for earmarked loans, the average cost declined 0.2 p.p. to 9.0% p.y. (rural credit: -0.6 p.p.).

Regarding corporate credit operations, the average interest rate reached 19% p.y. (+0.3 p.p. in the month and -3.1 p.p. in twelve months). In the nonearmarked segment, the rate closed at 25.3% p.y. (+0.5 p.p. in the month), highlighting discount of trade bills and receivables (+2.3 p.p.) and working capital (+0.5 p.p.). In the earmarked segment, the rate increased 0.1 p.p. in the month to 11.8% p.y.

The average bank spread of operations with nonearmarked and earmarked resources reached 21.5 p.p. (+0.5 p.p. in the month and -1.6 p.p. in twelve months), with a monthly increase in both household (+0.2 p.p. to 29 p.p.) and corporate (+0.7 p.p. to 11.5 p.p.) segments. The indicator reached 37.6 p.p. in the nonearmarked segment (+1.0 p.p.) and 4.3 p.p. in the earmarked segment (-0.1 p.p.).

The default rate, corresponding to the participation of credit balances overdue for more than 90 days, remained stable at 3.8% in July (+0.2 p.p. in twelve months). The level of outstanding payments remained stable in both household (3.9%) and corporate (3.6%) segments. The default rate also remained stable in the nonearmarked segments (5.6%), but increased by 0.1 p.p. in the earmarked segment to 2.0% in July.

II - Evolution of monetary aggregates

The average daily balance of the monetary base reached R$251.4 billion in July, expanding 0.3% in the month and 5.8% in twelve months. The monthly variation reflected the increase of 1% in the balance of currency issued and the reduction of 3.2% in bank reserves.

Among the monthly flows of factors conditioning the monetary base, it should be highlighted operations with federal government securities, with a contractionary impact of R$32.5 billion (net sales of R$70.8 billion in the secondary market and net redemptions of R$38.3 billion in the primary market) and National Treasury operations, with an expansion of R$27.7 billion.

The average daily balance of the restricted means of payment (M1) reached R$319.6 billion in July, up 1.5% in the month, corresponding to growth of 1.8% in demand deposits and 1.3% in currency outside banks. In twelve months, M1 increased by 5.1%.

The balance of the means of payment in the M2 concept, which corresponds to M1 plus savings deposits and private securities issued by financial institutions, fell by 0.4% in July to R$2.4 trillion. This trajectory was consequent upon the 1% decline in private securities to R$1.4 trillion, despite the 0.8% growth in savings deposits to R$683.9 billion. Net inflows of R$9.6 billion in savings accounts and net redemptions of R$10.2 billion in time deposits were observed in the month.

The M3 concept, which comprises M2, fixed-income funds and government securities backing repurchase operations between the public and the financial sector, increased by 0.8% in the month to R$5.6 trillion. The balance of fund quotas reached R$3.1 trillion (+2.3% in the month), while the stock of repurchase operations with federal government securities fell by 12.2%. M4, a concept that comprises M3 and public securities held by the nonfinancial public, grew 0.6% in the month and 8.3% in 12 months, reaching R$6.4 trillion.