Bradesco Profit Misses Analysts’ Estimates on Provisions

Banco Bradesco SA (BBDC4), Latin America’s second-largest bank, said profit rose 1 percent in the third quarter, missing analysts’ estimates as it increased provisions for bad loans and lending expanded at a slower pace.

Adjusted net income, which excludes one-time items, climbed to 2.89 billion reais ($1.43 billion), or 0.76 reais a share, from 2.86 billion reais, or 0.75 reais, a year earlier, the Osasco, Brazil-based lender said today in a statement. That was less than the 0.77-real per-share median estimate of six analysts surveyed by Bloomberg.

Bradesco, led by Chief Executive Officer Luiz Carlos Trabuco Cappi, 61, set aside 3.3 billion reais to cover loan losses in the third quarter, down from 3.41 billion reais in the previous three months and up from 2.78 billion reais a year earlier. The bank has been slowing credit growth this year as delinquencies for consumer loans in Brazil increase.

“Although operating trends were positive, net income was 5.7 percent below our estimate on lower trading gains and lower- than-expected reduction in loan-loss provisions,” Banco Itau BBA SA analysts including Regina Longo Sanchez wrote in a note to clients today. “Loan growth was weaker than expected, at 1.9 percent quarter over quarter, versus our estimate of 3.8 percent.”

Bradesco declined 1.9 percent to 31.75 reais at 5:07 p.m. in Sao Paulo, compared with a drop of 0.5 percent for Itau Unibanco Holding SA (ITUB4), Latin America’s largest bank. The Bovespa benchmark index fell 0.4 percent.

Late Payments

The delinquency rate for debt overdue more than 90 days was 4.1 percent at the end of September, after reaching 4.2 percent in the second quarter and 3.8 percent in the third quarter of last year. The bank expects the rate to continue improving as central bank reduces benchmark interest rates and the country’s economy recovers, Luiz Carlos Angelotti, an executive director at Bradesco, told reporters on a conference call today.

Brazil’s central bank cut the Selic rate by 525 basis points since August 2011 to a record 7.25 percent this year to revive the economy.

“The worst of the credit-delinquency cycle has passed for Bradesco,” Eduardo Nishio, an analyst at Brasil Plural Corretora de Cambio, Titulos e Valores Mobiliarios SA, wrote in a note to clients on Oct. 1. The Sao Paulo-based brokerage has an overweight rating on Bradesco.

Loan Growth

The loan book increased 12 percent to 371.7 billion reais in the third quarter from a year earlier, after expanding 14 percent in the previous quarter and 22 percent a year earlier. In June, the bank reduced its forecast for lending growth in 2012 to a range of 14 percent to 18 percent, down from 18 percent to 22 percent. Total assets reached 856.3 billion reais in the third quarter, up almost 19 percent from a year earlier.

“Bradesco’s loan book will probably grow at the lower range of the guidance,” Angelotti said today, adding lending will expand at a faster pace in the fourth quarter as Brazil’s economy recovers.

Bradesco and Itau slowed credit growth as delinquencies for consumer loans in Brazil rose to 7.9 percent in May, a 30-month high. The rate remained at the same level in July and August, according to the central bank.

Itau cut its guidance for lending growth in 2012 as it reduces its auto-loan portfolio. The total loan book, including vehicles, will expand about 10 percent this year, Rogerio Calderon, the head of investor relations, said in July. In February, the bank said it expected credit to grow 14 percent to 17 percent.

Federally controlled Banco do Brasil SA, based in Brasilia, expanded credit 20 percent in the second quarter from a year earlier as it cut borrowing costs under pressure from Brazil President Dilma Rousseff.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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