The spike in loans to individuals over the past year has led some analysts to suggest there is a credit bubble in Brazil. Personal lending has gone from 462.5bn reais ($276.3bn) in December 2009 to 553.8bn reais in January 2011, an increase of 16.5%. The growth in mortgages over the same period is a staggering 35.7%.

Brazilian banks loans to individuals

The argument that banks may be taking on too much risk is supported by the high loan-to-deposit ratios at some Brazilian banks. For example, Itau Unibanco has a loan-to-deposit (LTD) ratio of 146%, while Banco Bradesco has an LTD ratio of 133%.

Loans to deposit ratio

Such figures have led several international investors to draw parallels with the US, saying that Brazil’s levels of personal debt can be compared to data from the US in the run up to the financial crisis.

To read the full story, look out for “Does Brazil have a credit bubble?” in the April issue of The Banker magazine and at thebanker.com from April 1.

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