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Bovespa Falls as Santander Leads Banks Down on Earnings Outlook

Oct. 26 (Bloomberg) -- The Bovespa index posted a second consecutive weekly drop as Banco Santander Brasil SA led declines among banks amid concern Brazil’s economic recovery may falter after companies reported earnings that trailed estimates.

Santander Brasil, which reported lower-than-forecast third-quarter profit yesterday, fell to an 11-month low. MRV Engenharia e Participacoes SA led declines among homebuilders. The benchmark’s drop was limited as state-run oil producer Petroleo Brasileiro SA rose the most in two weeks.

The Bovespa slid 1 percent to 57,276.81 at the close of trading in Sao Paulo, pushing the weekly decline to 2.8 percent. The real was little changed at 2.0268 per U.S. dollar at 5:35 p.m. local time. Of 11 companies listed on the gauge that reported third-quarter earnings, six missed analysts’ estimates, according to data compiled by Bloomberg.

“It doesn’t matter that the economy is improving in the U.S., because it’s still stumbling in Brazil,” Ari Santos, a manager at Sao Paulo-based brokerage H.Commcor, said by phone. “The earnings are coming in weak.”

In the U.S., gross domestic product rose at a 2 percent annual rate in the third quarter, Commerce Department figures showed today. The median forecast of 86 economists surveyed by Bloomberg called for a 1.8 percent gain.

Santander Brasil

Santander Brasil, the local unit of Spain’s biggest bank, fell 2.8 percent to 13.85 reais, pushing the weekly decline to 5.3 percent. The bank’s net income attributable to shareholders was 1.46 billion reais ($720 million) in the third quarter, compared with a 1.52 billion-real average estimate of five analysts, according to data compiled by Bloomberg.

“The results were much better than in the second quarter but below peers in the third quarter with notable disappointments in asset quality and margins,” UBS AG strategist Philip Finch wrote in a research note dated today.

The MSCI Brazil/Financials index fell for the first time in three days, dropping 1.2 percent. MRV slid 3.8 percent to 10.60 reais as the BM&F Bovespa Real Estate Index fell to six-week low.

“Companies around the world are not meeting expectations, and if they do it’s not necessarily a good sign because analysts had set the bar so low,” Nastassia Romano, an economist at brokerage Omar Camargo CCV Ltda, said by phone from Curitiba, Brazil. “There’s still a lot of uncertainty, and that affects investment projections going forward.”

Gerdau, OGX

Dental-benefits company Odontoprev SA fell 3.2 percent to 10.15 reais. The company’s third-quarter adjusted net income was 35.4 million reais, compared with a 42.5 million-real estimate of 10 analysts, according to data compiled by Bloomberg.

Steelmaker Gerdau SA dropped 2.5 percent to 17.60 reais, the lowest level since July 26. Santander Brasil cut its recommendation on the stock to the equivalent of sell.

OGX Petroleo e Gas Participacoes SA tumbled 5.5 percent to 4.49 reais, the lowest since January 2009. The oil company’s credit quality may be affected by the put option announced by controller Eike Batista this week, Fitch Ratings said in a statement.

Petrobras surged 1.6 percent to 22.10 reais, the steepest one-day gain since Oct. 11. The company told partners at Logum Logistica it won’t invest in an ethanol duct project in 2013 in which it has a 20 percent stake, O Estado de S. Paulo reported, citing Logum CEO Alberto Guimaraes. Petrobras is scheduled to report third-quarter earnings after the market close today.

Relative Value

The Bovespa has climbed 9.1 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted demand for equities. The index trades at 15.1 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.5 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 5.95 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.3 billion reais this year through Oct. 25, according to data compiled by the exchange.

To contact the reporters on this story: Denyse Godoy in Sao Paulo at; Julia Leite in New York at

To contact the editor responsible for this story: David Papadopoulos at

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