Rising bad loans at Itau spark Brazil bank rout

Fast FT
Brazil’s ever deepening economic woes appear to be finally catching up with the country’s banks.
Shares Itaú Unibanco suffered their biggest one day loss in more than 15 months on Tuesday after Latin America’s biggest bank by market value reported a rise in bad loans and said it expected provisions to climb higher still this year.
Itau saw R$5.3bn wiped off its market cap after the stock fell fell 7.2 per cent to R$23.63.
Concerns that loan delinquencies will sharply rise over the next 12 months as more of the country’s consumers struggle to repay their bills, rattled other Brazilian financial stocks.
Shares in Banco Bradesco fell 3.1 per cent, Banco Santander Brasil and Banco do Brasil both lost more than 5 per cent while credit card processor Cielo dropped 7 per cent.
Delinquency rates hit 3.5 per cent at the end of last year, compared to 3.1 per cent a year ago, Itau revealed in its fourth quarter results on Tuesday.
With Brazil’s economy expected to shrink by another 3 per cent following an estimated 3.7 per cent contraction last year, Itau also said it expected provisions for 2016 to range between R$22bn ($5.5bn) and R$25bn. That’s up from the R$18.1bn it set aside in 2015.
It’s not just shareholders who are souring on Brazilian banks. Last October, both Moody’s and Fitch cut their outlook on the Brazil’s leading lenders, citing the country’s worsening growth prospects and its deteriorating fiscal accounts.
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