Lending interest rates maintain downward trend in Nov, commercial sees biggest drop

Thursday, December 3, 2009

Interest rates on credit lent by Peru's commercial banking system as of end-November were continuing their strong recent downward trend, banking association Asbanc said in a report.

The decrease should continue into the next few months due to lower risk in the face of the reactivation of the country's economy and the significant competition currently seen in the financial system to meet credit demand with better lending conditions, the association's head of economic studies, Alberto Morisaki, told BNamericas.

Interest rates for commercial credit dropped across the board in November, with rates for sol-denominated credit at 6.77% at the end of the month, down 1.01% from end-October, while US dollar-denominated credit dropped by 0.14% to 6.68%. These rates were down from 11.1% and 9.92%, respectively, at end-November 2008.

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The continued drop in commercial interest rates is due to a decrease in the perception of risk due to the international crisis, a surge in local production and comfortable liquidity levels at private banks, Asbanc said.

Consumer rates showed mixed results, as sol-denominated rates increased 1% to 42.7% at the end of November, while dollar-denominated credit dropped 1.2% to 21.4%. These rates were 35.7% and 21.4%, respectively, a year before.

The increase in local currency-denominated rates in the month was due to increase in credit card and short-term non-revolving credit costs, the association said.

Interest rates on loans to microenterprises also had mixed results, as sol-denominated rates dropped 0.3% to 32.4%, while foreign currency-denominated rates rose 0.17% to 22.4%. These rates were down from 34.8% and 24.2%, respectively, as of November 30 of last year.

The reduction in sol-denominated rates was due to increased competition between lenders in this segment, Asbanc said.

Finally, mortgage loan rates decreased in the month, with sol-denominated rates down 0.08% to 9.78% at the end of November, and dollar-denominated credit dropping 0.19% to 9.17%. These rates were down from 10.5% and 10.4%, respectively, a year prior.

Among the reasons cited by Asbanc for this decrease is financial entities' increased resources thanks to abundant liquidity, and the lower cost of long-term overseas funding.