Banco do Brasil Misses Estimates as Provisions Increase

Banco do Brasil SA, Latin America’s largest bank by assets, said profit fell 9 percent in the first quarter, missing analysts’ estimates as bad-loan provisions and administrative expenses increased.

Adjusted net income, which excludes one-time charges, declined to 2.44 billion reais ($1.1 billion) from 2.69 billion reais a year earlier, the Brasilia-based company said today in a regulatory filing. Eight analysts surveyed by Bloomberg estimated 2.58 billion reais. Net income rose to 2.68 billion reais from 2.56 billion reais.

Chief Executive Officer Aldemir Bendine, 50, is boosting provisions as competitors that aren’t owned by the state decrease the amount they’re setting aside for bad loans. Itau Unibanco Holding SA, Latin America’s biggest bank by market value, and Banco Bradesco SA last month reported profit that beat estimates as provisions dropped.

Banco do Brasil’s bad-loan reserve rose 28 percent to 4.19 billion reais in the first quarter from a year earlier, according to the filing. Provisions and delinquency rates will be unchanged or decline in coming quarters, Chief Financial Officer Ivan Monteiro said on a conference call after earnings were released.

Shares of the company rose 0.3 percent to 24.78 reais at 2:40 p.m. in Sao Paulo. They advanced 1.2 percent this year through yesterday, the worst performance among major Brazilian banks.

Expenses Rise

Administrative expenses climbed 9.7 percent to 7.75 billion reais, above the bank’s 2014 forecast for an increase of 5 percent to 8 percent. Monteiro said on the call that expense growth for the year will remain within that range.

Lending increased 18 percent to 699.3 billion reais during the first quarter. The bank maintained its February forecast that lending will increase 14 percent to 18 percent this year, while net interest income climbs 3 percent to 7 percent.

Banco Votorantim SA, the auto lender in which Banco do Brasil has a stake of about 50 percent, posted net income of 152 million reais in the first three months of 2014, marking the company’s second-consecutive quarterly profit after nine straight losses.

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

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steve Dickson, Steven Crabill

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