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Fitch: Truckers' strike in Brazil to dampen banks' loan portfolios

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Fitch: Truckers' strike in Brazil to dampen banks' loan portfolios

Fitch Ratings expects a slight deterioration in Brazilian banks' retail and corporate loan portfolios due to the truck drivers' strike in the country which began in May.

"While the strike seems to be ending, the temporary economic headwinds could result in weaker financial performance, which would be a credit negative for the banking sector, even though the level of portfolio impact may be still difficult to quantify," Fitch said. The rating agency expects the strike to negatively impact both credit quality and loan growth in May and June.

Although bank executives said that the strike's impact should not significantly impact earnings or capital amid the government's move to find a resolution, they acknowledged a likely erosion in asset quality and profitability if the strike continues longer than expected.

Smaller institutions with inadequate reserves for loan losses are especially at risk, which could weigh on ratings, Fitch said.

Thousands of Brazilian truck drivers went on strike May 21, protesting rising fuel prices.