Bradesco Profit Tops Estimates as Lending Margins Widen

Banco Bradesco SA, Latin America’s second-biggest lender by market value, said quarterly profit rose 28 percent, beating analysts’ estimates, as lending margins widened.

Adjusted second-quarter net income, which excludes one-time items, advanced to 3.8 billion reais ($1.7 billion) from 2.98 billion reais a year earlier, the Osasco, Brazil-based lender said today in a statement. That was more than the 3.6 billion-real estimate of seven analysts surveyed by Bloomberg. Net income rose 28 percent to 3.78 billion reais.

Bradesco, led by Chief Executive Officer Luiz Carlos Trabuco Cappi, 62, is charging borrowers higher rates as state-owned banks become less aggressive in boosting their share of the loan market. Brazil’s average net interest margin climbed in June to a two-year high of 20.9 percent, the central bank said July 29.

“Results were above our estimates and consensus, mainly on the strong improvement in margins,” Itau BBA analysts including Thiago Bovolenta Batista wrote in a note to clients. “The positive margin trend should offset a potential asset-quality deterioration.”

Bradesco rose 0.3 percent to 35 reais at 11:18 a.m. in Sao Paulo, compared with the 1 percent decline of Brazil’s Ibovespa benchmark index.

‘Sustainable’ Rates

Net interest income, or revenue from interest earned on assets compared to payments to depositors, was 12 billion reais in the second quarter, up 14 percent from a year earlier, according to the statement. Return-on-equity, a measure of profitability, rose to 20.7 percent in the second quarter from 18.8 percent in the same period of last year.

Bradesco’s loan book expanded 8.1 percent in the second quarter to 435.2 billion reais from a year earlier, compared with a 10 percent expansion in the previous three months, according to the statement. Slowing credit prompted the central bank on July 25 to make an estimated 45 billion reais available to lenders, with measures including lower reserve requirements.

“Credit volume is growing at sustainable and risk-compatible rates,” the bank said in today’s statement.

Bradesco maintained its January forecast that lending will expand 10 percent to 14 percent this year. The bank has reduced the forecast in each of the past two years because of slower economic expansion.

In April, Cappi said the bank was considering boosting the figure as credit expanded at a faster pace in March.

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