Brazil’s worsening corporate credit crisis is forcing the nation’s biggest banks to book losses they had been able to avoid until now, Bloomberg reported today. Banco Bradesco SA, the country’s second-biggest bank by market value, set aside 836 million reais ($240 million) in the first quarter to cover bad loans tied to oil-rig venture Sete Brasil Participacoes SA. Earnings fell 3.7 percent. Itau Unibanco Holding SA, the biggest Brazilian bank by market value, and Banco do Brasil SA, No. 1 by assets, may be next. Brazilian corporations are struggling to pay back their loans as a two-year economic downturn, high interest rates, falling commodity prices and a weaker currency combine to savage profit and revenue. A worsening political crisis in which President Dilma Rousseff is fighting off an impeachment effort has paralyzed reforms intended to jump-start the economy. Rather than setting aside provisions, many Brazilian banks have been restructuring loans, which could mask rising asset risks. Such restructurings rose 37 percent at the end of 2015 from a year earlier, which may be understating loan delinquencies and overstating reserve coverage. One of the nation’s highest-level bankers called the corporate credit crisis the worst in the nation’s history as bankruptcy filings almost doubled to a record this year. Companies seeking protection from their creditors surged to 155 in February after rising 55 percent last year.
