Pending trouble for Brazil's banking sector

Brazil's household debt/income ratio was 45.8% in June 2015, and it has risen further since then, as the pace of growth of household income has fallen in conjunction with rising unemployment, while credit growth has continued at a rate of nearly 10% yoy.

The debt service ratio has risen, mostly on higher interest payments (average principal payments remained unchanged at 12-13% of disposable income). 

With interest rates rising and labour market deterioration looking to be only in its early stages, bad loans are set to rise and are bound to put pressure on consumer finances and balance sheets in the banking sector. 

"The labor market detoriation's effects on consumer finances and balance sheets is expected to add further stress to the banking sector, particularly in the context of rising external liabilities", says Societe Generale.