Banco do Brasil SA’s profit declined in Q3 from a year earlier as the Brazilian lender again increased provisions to prepare for an expected rise in bad loans related to the economic impact of the coronavirus pandemic.

The state-controlled bank reported net income of 3.1 billion reais, the equivalent of $547 million, in the period, a decline of 27.5% from the Q3 of 2019, while adjusted net income fell 23.3% to 3.5 billion reais.

Net interest income rose 3.4% from a year earlier to 14 billion reais. Earnings per share fell to 1.06 reais in the quarter, from 1.49 reais a year earlier.

Banco do Brasil and other Brazilian banks have been boosting provisions in the wake of the pandemic, which slammed economic activity in March and April. Growth in some areas, such as industrial production and retail sales, resumed in May and has continued, though only in recent months has there been improvement on a year-over-year basis.

Total provisions rose by 40.5% from a year earlier, to 5.5 billion reais, while provisions for credit risks rose 30.5% in the period to 6.6 billion reais, the bank said.

The recovery in activity has already begun to slow, with a deceleration in growth in the past few months, and that trend is expected to continue through at least the end of this year. But Banco do Brazil and other lenders are showing quarter-over-quarter improvement as the economy has heated up.

Government aid payments to Brazil’s poorest residents, along with other stimulus programs, helped the recovery by boosting spending on necessities, the bank said. The weak real and strong demand from China pushed the price of the country’s agricultural commodities higher in the local currency, helping the economy in farming regions of Brazil, it said.

Original Story: Down Jones News | Jeffrey T.Lewis
Photo: Banco do Brasil website
Edition: Prime Yield