Banco do Brasil SA, Latin America’s largest lender by assets, fell the most in almost six months in Sao Paulo trading after reporting a fifth-straight loss at its Banco Votorantim auto-loan unit.
The shares dropped 4.5 percent to 21.45 reais ($10.52) at 5:08 p.m. in Sao Paulo. Votorantim, the auto-leasing business in which it bought a 50 percent stake in January 2009, posted a loss of 497 million reais after reporting losses of 536 million reais in the previous quarter and 597 million reais in the three months ending in March.
“Time is showing the acquisition of Votorantim wasn’t any good for Banco do Brasil,” Joao Pedro Brugger, who helps oversee 220 million reais at Leme Investimentos in Florianopolis, Brazil, said in a telephone interview today.
Banco do Brasil, led by Chief Executive Officer Aldemir Bendine, 48, increased provisions for bad loans to 3.76 billion reais from 3.68 billion reais in the second quarter and 3.26 billion reais last year, according to a regulatory filing today. The bank had forecast its provisions would range between 3.5 billion reais and 3.7 billion reais in the third quarter.
The lender set aside more money to cover bad loans in the third quarter because of provisions at Banco Votorantim, Chief Financial Officer Ivan Monteiro told journalists in Sao Paulo.
“Results were weak and also below our estimates because Banco Votorantim continued to post material losses,” analysts at Banco Itau BBA, including Regina Longo Sanchez, wrote in a report today.
Banco do Brasil expects Votorantim to break even in the second quarter of next year as delinquency rates on its retail book of loans drop 18 percent to 20 percent in the fourth quarter compared with the third quarter, Monteiro said. Next year, Votorantim will reduce provisions for the portfolio by 45 percent to 48 percent, he said.
“At every quarter, delinquencies at Votorantim tend to fall dramatically” as we improve the quality of the portfolio of loans, Monteiro said.
Banco do Brasil’s adjusted net income, which excludes one-time charges, rose to 2.69 billion reais from 2.57 billion reais a year earlier, the company said. That was in line with the average estimate of 2.69 billion reais in a Bloomberg survey of nine analysts.
The bank increased its loan book to 532.3 billion reais in the third quarter, up 21 percent from a year earlier. It increased its share of Brazil’s credit market business to 19.6 percent at the end of September from 19.5 percent in June and 19.3 percent a year earlier, according to the statement. The bank maintained its 2012 forecast for lending growth of 17 percent to 21 percent.
Federally controlled banks Banco do Brasil and Caixa Economica Federal have been boosting lending and reducing borrowing costs after President Dilma Rousseff urged lenders to cut profits to “civilized” levels. Non-government banks’ outstanding loans grew 7 percent in the 12 months through September, compared with almost 26 percent for state-controlled lenders, according to the central bank.
The bank is increasing lending “well above private sector banks, but with stable asset quality,” Mario Pierry, an analyst at Deutsche Bank AG in Sao Paulo, wrote in a note to clients today. “Banco do Brasil’s asset quality ratios have remained stable.”
Delinquency rates for debt payments overdue more than 90 days climbed to 2.17 percent in the third quarter, up from 2.15 percent the three previous months and from 2.11 percent a year earlier, according to the statement.
Banco do Brasil’s adjusted return on equity, a measure of profitability, declined to 18.1 percent in the third quarter from 21.2 percent in the second quarter and 20 percent a year earlier, according to the statement.