In 2024, new bank loans totaled R$7.2 trillion, representing an expansion of 15.3% compared to 2023, in real terms. As a result, the total bank credit stock in the country reached R$6.43 trillion in Dec'24, equivalent to 54.4% of GDP. 

Today's Letter IEDI analyzes the performance of credit with emphasis on the second half of 2024, thus updating the analysis in Letter n. 1283 "Selic reduction and credit improvement in the first half of 2024."

Credit market conditions are indeed not the same from one period to the next. In the first, we still reaped the positive effects of the downward phase of interest rates in the country. The second half-year, on the other hand, was marked by a new phase of monetary policy tightening, but this was only true from mid-Sep'24 onward. 

For this reason and due to the delay with which the Selic rise is passed on, the worsening of credit conditions is not yet fully perceived, although average interest rates on loans were already rising in the last quarter of 2024.

In Jan–Jun'24, new contracts had grown 14.3% in real terms, progressing to 16.2% in Jul–Dec'24, always in relation to the same period of the previous year. In the last quarter of the year, the increase in credit eased a little and registered 15.3%, remaining at a robust pace.

The acceleration from one half-year to the other was driven by operations with companies, whose total value went from an increase of 13.8% to 20.8% from Jan–Jun'24 to Jul–Dec'24. In Q4'24, the expansion was resilient, registering 20.1%.

It should be remembered, however, that 2023 was marked by creditors' risk aversion after Americanas' accounting problems and there was a slowdown in economic activity in its second half, as discussed in Letter IEDI n. 1256, generating more modest bases of comparison for credit in the 2nd half of 2024.

For families, operations went in the opposite direction, losing pace: from 14.7% in Jan–Jun'24 to 12.7% in Jul–Dec'24, with 11.4% in Q4'24. It is important to take into account that, unlike companies, the stock of credit to households has not stopped expanding since the pandemic.

In Dec'24, as a proportion of GDP, the total stock of credit to individuals was 6.1 percentage points above the level of Dec'19, while in the case of loans to companies this ratio was of only +1.7 percentage point.

Considering the source of resources, the impulse in the 2nd half'24 came from operations with "free resources" (those for which conditions are freely agreed between borrowers and creditors), which increased from 14.0% in Jan–Jun'24 to 18.0% in Jul–Dec'24, compared to the same period of the previous year. At the origin of this evolution is mainly the 22.0% rise in credit to companies. 

In the case of operations with earmarked resources, whose contracting conditions are regulated, the increase was of only 4.0% in Jul–Dec'24, with a slowdown in credit to companies and a contraction in rural credit to families (-13%), which led total loans to individuals to be almost stable in the second half of last year (+1.3%).

Although it is a strategic source of financing, since it has longer term lines and, in general, much lower costs than those of the “free” market segment, in 2024 earmarked credit operations accounted for only 10% of the country's total new bank credit and 8.0% of total loans to companies.

And much of this is related to investment financing. The sum of real estate credit —although it includes acquisition and not only construction— and the class "BNDES investment for legal entities and individuals" represented 42% of earmarked credit operations in 2024. Rural credit alone accounted for 38% of new official loans.

In 2025, credit is expected to decelerate, due to the rise in interest rates. Febraban, for example, estimates an expansion of 8.5% of total bank credit stock in 2025 compared to a nominal increase of 10.8% in 2024, according to the Central Bank.

In the final quarter of last year, the downward path of average loan rates was interrupted and a new increase occurred, especially in corporate credit, which, as we saw above, drove the expansion of loans in 2024.

From the end of 2023 to Q4'24, the average of interest rates on new bank loans had been slowly, but steadily, falling from 28.9% per year in Oct–Dec'23 to 27.7% per year in Q3'24, in nominal terms. Taking the average for Oct–Dec'24, they rose to 28.4% p.a.

This behavior was more influenced by "free” credit, not only because it weighs more on total concessions, but also because it reflects more closely the country's market interest conditions, since its terms are freely agreed between creditors and borrowers. 

The average interest rate on total "free" credit had fallen from 41.4% per year in Q4'23 to 39.8% per year in Q3'24, then rose to 40.6% per year in Q4'24, in nominal terms. 

The increase at the end of last year was more intense in the case of "free" credit to companies, which went from 20.9% p.a. in Q3 to 21.7% p.a. in Q4'24. Regarding transactions with households, the level of interest rates is already very high and, still, it also rose in the period, from 52.2% p.a. to 52.9% p.a.

In earmarked credit, average interest rates were more stable, but there was still a small increase in the last quarter of 2024. In addition, it should be noted that, in real terms— that is, after discounting inflation as measured by the IPCA — a similar behavior was observed in both categories (by type of borrower and type of resource). 

The increase in average interest rates in the last quarter of 2024 occurred despite the continuation of the downward trajectory of default in all categories presented by the Central Bank.

On a quarterly basis, for total credit operations, default decreased from 3.27% of the portfolio in Q1'24 to 3.10% in Q4'24. In operations with "free" resources, which usually have higher levels of nonpayment compared to earmarked operations, the rate changed from 4.57% to 4.23% of the total between Q1 and Q4'24. 

Considering the types of borrower, default in operations with companies fell from 2.57% to 2.20% from Q1'24 to Q4'24, due to the improvement in loans to large companies, and in operations with families it went from 3.67% to 3.63%.

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