Bovespa Stock Index Drops as Banks Fall; Banco Bradesco Leads Declines
The Bovespa stock index dropped as state-controlled companies fell on presidential election speculation and Banco Bradesco SA reported profits that missed analysts’ estimates, sending financial stocks lower.
Bradesco, Brazil’s second-biggest bank by market value, led a drop on the Bovespa index after saying adjusted net income increased to 2.52 billion reais ($1.46 billion). Centrais Eletricas Brasileiras SA paced a decline for state-controlled companies after a poll showed presidential candidate Jose Serra falling further behind Dilma Rousseff to win the Oct. 31 election.
“The market thinks Serra would not tighten control of state companies as much, so there would be a better return on investment,” said Eduardo Rocha, who helps manage about 1.2 billion reais at Modal Asset Management in Rio de Janeiro. “The market anticipated a lot from Bradesco’s results.”
The Bovespa slipped 0.2 percent to 70,568.94. The BM&FBovespa Small Cap index fell 0.3 percent to 1,411.34. The real fell 1 percent to 1.7214 per dollar.
Rousseff increased her lead to 15.2 percentage points over opposition candidate and former Sao Paulo Governor Serra, a Sensus poll showed.
Eletrobras, as the federally controlled utility is known, slipped 1.1 percent to 28.22 reais. Support for Rousseff, President Luiz Inacio Lula da Silva’s former cabinet chief, rose to 51.9 percent from 46.8 percent in the previous Sensus poll taken Oct. 18-19. Support for Serra declined to 36.7 percent from 41.8 percent a week before.
The poll surveyed 2,000 people from Oct. 23-25 and has a margin of error of 2.2 percentage points. It was commissioned by the National Transport Confederation.
Itau Unibanco Holding SA, Brazil’s biggest bank by market value, sank 2 percent to 41.54 reais. Bradesco fell 4.5 percent to 35.25 reais. Adjusted net income, which excludes one-time events, increased from 1.8 billion reais a year earlier, the Osasco, Brazil-based bank said today in a regulatory filing. The result fell short of the mean estimate of 2.55 billion reais in a Bloomberg survey of four analysts.
“Administrative expenses came higher than expected, and will very likely continue to expand,” wrote BTG Pactual analyst Eduardo Nishio in a note to clients. “Bradesco has already been outperforming peers since the beginning of the year on the back of improving results, so most of the good news has already been priced in.”
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