Bradesco Fourth-Quarter Profit Rises on Lower Bad Loans

Banco Bradesco SA, Latin America’s second-biggest lender by market value, said fourth-quarter profit rose 10 percent, matching analysts’ estimates, as it set aside less money to cover loan losses.

Adjusted net income, which excludes one-time items, climbed to 3.2 billion reais ($1.3 billion) from 2.92 billion reais a year earlier, according to a statement today from the Osasco, Brazil-based bank. That compares with the 3.17 billion-real estimate of nine analysts surveyed by Bloomberg.

Bradesco, led by Chief Executive Officer Luiz Carlos Trabuco Cappi, 62, has been more selective in providing credit to clients as it seeks to keep losses under control. The bank forecast loans will expand 10 percent to 14 percent in 2014 while interest margins expand.

The forecasts are “more encouraging” than the fourth-quarter results, said Rodolfo Amstalden, an analyst at Empiricus Research in Sao Paulo. “Credit growth between 10 percent and 14 percent isn’t the bad scenario the market was expecting,” he said in an interview.

Provisions declined 8 percent to 2.96 billion reais in the fourth quarter from a year earlier, while the loan book expanded 11 percent to 427.3 billion reais.

The bank’s delinquency rates may stabilize or decline this year, while provisions tend to remain at the same level as 2013, Executive Director Luiz Carlos Angelotti told reporters on a conference call today.

‘Safer Portfolio’

“The change in the loan mix toward safer portfolios (mortgage and payroll loans) explains the big improvement in asset quality, and this trend is likely to continue but at a slower pace,” Banco Itau BBA SA analysts including Regina Sanchez wrote in a report to clients today.

Bradesco shares fell 0.1 percent to 25.86 reais at 1:44 p.m. in Sao Paulo, matching the decline for Brazil’s Ibovespa benchmark index. Before today, Bradesco shares had dropped 21 percent in the past 12 months, tracking the Ibovespa.

Net interest income will climb between 6 percent and 10 percent this year, accelerating from the 1.6 percent growth pace in 2013, Bradesco said.

Loans overdue more than 90 days dropped to 3.5 percent in the fourth quarter, down from 3.6 percent in the three previous months and from 4.1 percent a year earlier, according to the statement. Return on equity, which measures how well a company reinvests shareholders’ funds, fell to 18 percent in the fourth quarter from 19.2 percent a year earlier.

Loan Growth

“Bradesco expects lending to grow close to 12 percent, the mid-range of its guidance,” Angelotti said on the conference call, adding that ROE will be around 18 percent to 20 percent.

The bank reduced its staff by 2.8 percent in the fourth quarter from a year earlier, according to the statement. It expects administrative and personnel expenses to rise 3 percent to 6 percent this year.

Bradesco booked a one-time 6.1 billion reais loss on securities holdings that it may sell. The bank said that was offset by other one-time events including the reversal of some tax and insurance provisions.

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