In 2022, credit continued to expand in the country, but with losing strength as the base interest rate (Selic) rise, which reached its recent peak of 13.75% per year in Aug'22, was passed on to interests on loans. Thus, the 8.4% growth registered in Q1'22 reversed the 1.0% decrease of Q4'22, always in relation to the previous quarter, after adjusting for seasonal effects.

Compared to the same period of 2021, the recent performance was far from negative, but still registered a slowdown when inflation, as measured by the IPCA, is discounted. Total credit granted by the banking system grew 21.4% in Q3'22 and 12.3% in Q4'22, in real terms. In 2022, the result was +20.8%. Both lending to households and to businesses showed loss of steam.

In the case of loans to individuals, the operations, which had registered +21.1% compared to Q3'21, grew 14.8% in real terms in the final quarter of last year in relation to the same period of 2021. Contributed to this, the decline of personal non payroll-deductible loans and a smaller increase in financing for the purchase of goods other than vehicles, and overdrafts.

Record levels of household debt, along with rising interest rates, are obstacles to continued credit expansion, especially in a context of low economic dynamism. In Nov'22 (last available data), debts except real estate financing represented 31.4% of the disposable income of individuals, that is 1/3 higher than the value of Aug'20, when a rapid and persistent trajectory of increase began. High indebtedness and rising interest rates have adverse effects that reinforce one another and end up leading to an increase in defaults. 

Average real interest rates on loans to households rose from 26.0% in Dec'21 to 33.7% in Dec'22. If we exclude some operations that dampen and pull the average down, such as real estate financing, and keep only the interests that are freely agreed between the parties, the increase was from 40.9% p.a. to 52.7% p.a., respectively. The rate of default in this operations reached 5.9% at the end of 2022. 

Despite this worrying scenario for households, especially because lower-income individuals tend to be the most indebted, it was loans to companies that lost most strength at the end of last year. The 21.1% increase in Q3'22 diminished to 9.3% in Q4'22, compared to the same periods of the previous year and adjusted for inflation. The main responsible for this was the share of operations with conditions freely agreed between the parties, whose rate fell from 23% to 6.4% in the period. 

It is worth remembering that it is this portion of bank credit, the so-called “free credit,” that reacts most intensely to the rise in interest rates. For companies, average interests rose from 17.9% p.a. in Dec'21 to 21.8% p.a. in Dec'22, discounting inflation. This increase was more pronounced than that of interest rates on earmarked credit granted by official financing channels, whose average interest rate went from 9.8% p.a. to 11.2% p.a. in the same period.

The loss of steam in the free segment of corporate credit was, in part, mitigated by the dynamism of official credit where interest rates are lower. Real loans to companies in the latter segment increased 66.5% in Q4'22, driven by operations granted by BNDES (+176%) and real estate financing (+36.1%).

Still, the slowdown in new corporate loans as a whole also caused the total stock of credit to companies to lose pace. From Q3'22 to Q4'22, the real balance of these operations registered +3.5%, below the result of the total stock of the financial system (+4.6%). Compared to the same period of the previous year, the same movement was seen: +13.7% versus +18.6%, respectively, in the last quarter of 2022. 

Other sources of funding for businesses besides bank credit also did not expand more intensely in the last quarter of the year: domestic bond issues grew at a similar pace (+3.6% versus Q4'21) and in the foreign market they were almost flat (+0.2%). Thus, the expanded credit stock, which includes bank loans and debt securities issued internally and externally, grew 2.4% in Q4'22 compared to Q4'21. In relation to the 2021 total, the increase was of 13.3%.

For the bank credit balance, the Central Bank presents data by sector. According to these numbers, although the evolution of operations contracted by industrial companies was in line with that of other sectors, in the year as a whole it grew the least: 17.1% for agriculture, 13.7% for services and 12.3% for industry. The fall in financing for the automotive industry (-13.9%) was an important setback.

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