Banco do Brasil SA, Latin America’s largest lender by assets, reported a 7 percent decrease in first-quarter adjusted net income, matching analysts’ estimates as provisions mounted.
Adjusted net income, which excludes one-time charges, declined to 2.7 billion reais ($1.4 billion), or 89 centavos a share, from 2.92 billion reais, or 1.03 reais, the Brasilia-based lender said today in a regulatory filing. That compares with an average estimate of 2.69 billion reais in a Bloomberg survey of 11 analysts.
Chief Executive Officer Aldemir Bendine boosted provisions at the Banco Votorantim unit as Brazil’s rate of consumer-loan defaults rose in the first two months of this year to the highest level since December 2009. Higher inflation and a slowing economy eroded borrowers’ ability repay debts on time.
“Losses at Votorantim remained elevated given a continued pick-up in auto delinquencies,” Mario Pierry, an analyst at Deutsche Bank AG in Sao Paulo, wrote in a note today.
Banco do Brasil dropped 1.3 percent to 22.64 reais in Sao Paulo at 2:56 p.m., compared with a 0.8 decline for Brazil’s benchmark Bovespa. Itau, Latin America’s largest bank by market value, fell 0.3 percent to 29.14 reais.
Brazilian consumer-loan delinquencies reached 7.6 percent in January and February before falling to 7.4 percent in March, the central bank said April 25. Economic growth slowed to 2.7 percent last year after expanding 7.5 percent in 2010, while consumer prices rose 6.5 percent in 2011, the most since 2004.
Banco do Brasil increased provisions for bad loans to 3.58 billion reais from 2.89 billion reais in the previous quarter and 2.63 billion reais a year earlier, according to the statement today. Default rates for debt payments overdue more than 90 days climbed to 2.2 percent in the first quarter, up from 2.1 percent in December and in March of last year.
The lender expects provisions to be 3.6 billion reais to 3.8 billion reais in the second quarter and 3.5 billion reais to 3.7 billion reais in both the third quarter and fourth quarter, according to a regulatory filing.
Banco Votorantim, which mainly handles auto loans, posted a loss of 597 million reais after reporting a loss of 656 million reais in the fourth quarter and net income of 385 million reais in last year’s first quarter.
Banco do Brasil expects Votorantim to post second-quarter results better than it did in the first quarter, Chief Financial Officer Ivan Monteiro told reporters in Sao Paulo today. He said the unit’s third-quarter results will beat its second-quarter and improve further in the fourth.
Management expenses rose 16.4 percent to 6.63 billion reais from a year earlier. The loan portfolio expanded 19 percent in the first quarter to 473.1 billion reais. Total assets reached 1 trillion reais, a 16 percent increase from the previous year, according to the statement.
Banco do Brasil will announce further interest-rate cuts for individuals tomorrow as it increases credit lines, Alexandre Correa Abreu, vice-president of the retail business, told reporters in Sao Paulo today. He declined to say how large the rate reductions will be or by how much it will boost lending. The bank will also lower administration fees for funds next week, he said.
Last month, the federally controlled lender cut interest rates on loans as President Dilma Rousseff called for lower bank spreads to help support the economy.