Banco do Brasil Falls on Drop in Interest-Income Forecast

Banco do Brasil SA, Latin America’s largest lender by assets, fell the most on the benchmark Ibovespa index after the lender lowered its forecast for interest income.

The shares dropped 5.6 percent to 26.53 reais in Sao Paulo at 11:25 a.m., the most in more than four months and the biggest decline on the 72-company Ibovespa. Itau Unibanco Holding SA, Latin America’s biggest bank by market value, declined 0.6 percent.

Higher interest rates prompted Banco do Brasil to lower its forecast for 2013 net interest income, or the revenue from interest earned on assets compared with payments to depositors, Chief Financial Officer Ivan Monteiro told reporters in Sao Paulo. The Brasilia-based lender expects an expansion between 2 percent and 5 percent this year, down from a previous estimate of 4 percent to 7 percent, according to its earnings statement.

“Net interest margins were impacted by higher funding costs as the central bank has been raising the Selic rate,” Monteiro said, referring to policy makers’ benchmark rate. Brazil’s central bank raised the Selic in each of the past five monetary-policy meetings.

Net interest income increased 4.5 percent to 11.8 billion reais ($5.1 billion) in the third quarter from a year earlier, according to the statement. The company’s loan book expanded 23 percent to 652.3 billion reais at the end of the third quarter from a year earlier, compared with a forecast for lending growth of 17 percent to 21 percent.

“We consider the results weak,” Banco Bradesco SA analysts including Carlos Firetti wrote in a report to clients today, adding that net-interest-income growth was worse than expected.

Adjusted net income, which excludes one-time charges, dropped to 2.61 billion reais from 2.66 billion reais a year earlier, the company said today in a filing. The results topped the 2.51 billion-real estimate of nine analysts surveyed by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.