Bradesco results above expected; market monitors NPLs

Bradesco reported a better-than-expected result – and marked by mixed performances in its various business lines. 

The bank posted a R$ 7 billion profit in the second quarter, up 11.4%, with strong growth in the margin with clients, tariffs and insurance.  

These lines more than offset the drop in the margin of treasury operations – which was negative by R$ 587 million, pressured by the Selic rate – and the 10% increase in expenses with PDD, due to the return of default to historical levels and the growth of credit lines of higher return and, therefore, more risk.

The bank’s ROE was 18.1% in the quarter, compared with 18% in 1Q22. 

Service revenues grew 6.7% to R$9 billion, benefiting from the strong performance in cards, which recorded a 46% year-on-year growth in the base. In personal loans, the increase was 20.9%.  

The bank’s growth in riskier lines of credit drew attention. “‘Bradesco’ and ‘aggressiveness’ are rarely in the same sentence,” said one manager. 

The NPL ratio for 15-90 days remained stable at 3.6%; and NPL above 90 days came out from 3.2% to 3.5%.  

At Citi and JP Morgan, analysts highlighted that the 30 basis points rise in NPL over 90 days was ‘helped’ by the sale of a R$2 billion credit portfolio – without this sale, the rise would have been 60 points. 

“We believe the continued deterioration in asset quality is the main concern, and the second quarter brought no relief on this issue,” wrote Citi’s Rafael Frade.  

For BTG, given the market’s low expectations for Bradesco’s results, the poor performance of the stock in the year and the scenario of a possible end to the Selic hike cycle, the stock could react well to the result. 

 “There were things to like and others not so much, but overall, the quarter came in as expected,” wrote analysts Eduardo Rosman, Ricardo Buchpiguel and Thiago Paura. 

Original Story: Brazil Journal | Anna Paula Ragazzi 
Photo: Bradesco Linked IN
Edition & Translation: Prime Yield