There is no risk in Brazil of a credit bubble due to the fast-growing consumer finance segment, the country's second largest private sector bank, Bradesco (NYSE: BBD), said in a study.
Despite very strong credit expansion during the last several years - especially in consumer finance - Brazil still has a low credit-to-GDP ratio, and there is still room for further consumer loan growth, the study noted.
Credit in the Brazilian financial system rose to 1.71tn reais (US$1.06tn) at the end of January this year, from 418bn reais at end-January 2004. In the same comparison, the credit-to-GDP ratio increased to 46.5%, from 24.3%.
Chile has the highest credit-to-GDP ratio in Latin America, at close to 80%, and the US is the world leader with around 187%, according to the study.
Bradesco also noted in the study that "a striking fact of the development of consumer credit in Brazil is that the expansion has been made mainly within the so called 'healthy' credit lines, i.e. those linked to consumer goods or home loans at the expense of those linked to 'debt' (roll over)."