Bradesco Profit Beats Estimates on Bad-Loan Provisions

Banco Bradesco SA’s profit rose 18 percent, beating analysts’ estimates, as it spent less to cover bad loans and late payments fell to the lowest rate in more than five years.

Adjusted net income, which excludes one-time items, climbed to 3.47 billion reais ($1.56 billion) from 2.94 billion reais a year earlier, the Osasco, Brazil-based lender said today in a statement. That surpassed the 3.36 billion-real estimate of eight analysts surveyed by Bloomberg. Net income was 3.44 billion reais, up from 2.92 billion reais a year earlier.

Chief Executive Officer Luiz Carlos Trabuco Cappi, 62, has been shifting from riskier auto lending to mortgage and payroll loans to keep default rates under control. Improving credit at Bradesco mirrors the trend nationwide, where the rate of borrowers more than 90 days late on payments fell to 3 percent in February, the lowest level since March 2011, when the central bank began calculating the figure using the current method.

The strategy to reduce risks in its loan book paid off in the first quarter, along with “rigorous” cost controls, Nataniel Cezimbra and Carlos Daltozo, analysts at Banco do Brasil SA, wrote in a report.

Bradesco advanced 1.8 percent to 33.60 reais in Sao Paulo at 2:20 p.m., compared with a 0.2 percent gain for the Ibovespa benchmark index.

Late Payments

The bank’s 90-day delinquency rate of 3.4 percent in the first quarter was the lowest since the fourth quarter of 2008. It dropped from 3.5 percent in the previous three months and 4 percent a year earlier, according to the statement. Bradesco’s delinquency rates and provisions are expected to remain stable this year, Executive Managing Officer Luiz Carlos Angelotti told reporters on a conference call today.

Provisions for soured loans decreased to 2.86 billion reais in the first quarter from 3.11 billion reais a year earlier, according to the statement.

Lending expanded 10 percent from a year earlier to 432.3 billion reais. Bradesco, the second-biggest Latin American bank by market value, expects its loan book to grow 10 percent to 14 percent this year, it said in January. The bank may raise that forecast because lending expanded at a faster pace in March, led by mortgages and payroll loans, Cappi said on April 7.

“Bradesco is on track to achieve its 2014 targets,” Angelotti said on today’s call.

Expenses Rise

Administrative and personnel expenses rose 3.9 percent in the first quarter from a year earlier, while Brazil’s consumer price index climbed 6.15 percent through the 12 months ending in March.

Return on equity, a measure of profitability, rose to 20.5 percent in the period, up one percentage point from a year earlier and the highest in seven quarters.

Net interest income, or revenue from interest earned on assets compared to payments to depositors, was 11 billion reais in the first quarter, down 0.3 percent from the fourth quarter and up 4.2 percent from the same period of last year.

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