Banco do Brasil Climbs as Profit Tops Estimates on Lending

Banco do Brasil SA, Latin America’s largest lender by assets, climbed the most in two months after reporting a profit that beat analysts’ estimates as credit expanded faster than the company had forecast.

The lender’s shares advanced 4.1 percent to 25.29 reais in Sao Paulo, the biggest gain since Dec. 19.

Adjusted net income, which excludes one-time items, climbed to 3.18 billion reais ($1.61 billion) from 3.03 billion reais a year earlier, the Brasilia-based company said today in a filing. The average estimate of five analysts in a Bloomberg survey was for a profit of 2.63 billion reais.

“Overall results were encouraging, especially as NIM and asset quality remained stable,” Deutsche Bank AG analysts including Mario Pierry wrote in a note, referring to net interest margin, the difference between what banks pay depositors and what’s earned on loans. The fourth quarter “should allay market fears,” they wrote.

Banco do Brasil, led by Chief Executive Officer Aldemir Bendine, 49, said domestic lending increased 23 percent from a year earlier to 480.6 billion reais, exceeding its forecast of 17 percent to 21 percent. Total credit climbed 25 percent to

580.8 billion reais and that growth may slow to 16 percent to 20 percent this year, the bank said.

Economic Stimulus

Brazil President Dilma Rousseff pushed federally controlled Banco do Brasil and Caixa Economica Federal to boost lending and reduce borrowing costs to stimulate the economy. Non-government banks Itau Unibanco Holding SA and Banco Bradesco SA slowed credit expansion amid rising delinquency rates. Bradesco’s loan book expanded 12 percent last year as Itau reduced its auto-loan portfolio to 51.2 billion reais from 60.1 billion reais in 2011.

Banco do Brasil increased provisions for soured loans to

3.64 billion reais from 3.76 billion reais in the third quarter and 2.89 billion reais in the fourth quarter of 2011, according to the filing.

Loans at least 90 days overdue dropped to 2.05 percent in the fourth quarter, down from 2.19 percent the previous three months and 2.16 percent a year earlier, the bank said. Adjusted return on equity, a measure of profitability, fell to 21.2 percent from 22.9 percent in the last quarter of 2011. Total assets increased 17 percent to 1.15 trillion reais.

‘Early Talks’

The lender is in “early talks” to add to its 50 percent stake in Sao Paulo-based Banco Votorantim SA, Bendine said today at a news conference. Votorantim could increase business volume using Banco do Brasil’s distribution network, he said.

“Votorantim’s business platform is complementary to Banco do Brasil’s,” Bendine said.

Votorantim posted a fourth-quarter loss of 358 million reais, after losses of 497 million reais in the previous three-month period and 643 million reais a year earlier, according to today’s filing.

Investment banking is one of the areas Banco do Brasil could work with Votorantim, Paulo Rogerio Caffarelli, Banco do Brasil’s vice president of wholesale, international business and private banking, said at the news conference.

The lender is considering expanding into the U.S., targeting banks in Florida and New Jersey with at least 50 branches, Caffarelli said. The company also may seek to acquire assets in Colombia, Chile and Peru, he said.