The watershed is stunning and close to the industry standard, but with the stock at a much lower value. This is how market analysts highlighted the results of Banco do Brasil (BBAS3), released the night before. With that, BBAS3 stock made significant gains in Thursday’s session (11) to close up by 4.43% at BRL 41.74.
The federally controlled bank made recurring profits from April to June in the amount of Brazilian Real 7.8 billion high 54.8% compared to the same period in 2021 and well above the average forecast of R$ 6.48 billion by analysts consulted by Refinitiv.
TheAs with the main competitors from the private sector who have already published their results for this period, BB’s performance was based on the strong expansion of loans, as the expanded portfolio at the end of June reached R$919.5 billion, after growing by 19.9% in 12 months, driven by card lines. Credit (+51.7%), guarantees and receivables (+59%) and agribusiness (+27.3%).
One of the results of this development was an increase in BB credit returns by 45% year-on-year, to R$26.2 billion. But BB has been more successful in controlling portfolio quality, with its 90-day client arrears rate rising just 0.14 percentage points per year, to 2%.
As a result, expenses with the Bank’s provision for expected losses with default increased by 2.3% to R$2.94 billion. Notably, the growth in this item for Bradesco (BBDC4) was 52.5%, while Itaú Unibanco (ITUB4) was 60.6% and Santander Brasil (SANB11) was up 24.6%.
In doing so, BB raised its adjusted earnings forecast for 2022, from a range of R$23 billion to R$26 billion to between R$27 billion and R$30 billion. It also raised the loan portfolio estimate to 12% to 16%, compared to previous forecasts of +8% to +12%, with gross financial margin now also expected at R$13 billion to R$17 billion (compared to R$11 billion) to 15 billion).
The bank also changed its forecast to increase revenue from fees and services in 2022, from +4% to +8% to +6% to 9%, while the provision for losses with defaults in the year changed from R$13 billion to R from 16 billion dollars to 14 billion Brazilian reals to 17 billion Brazilian reals.
BB also announced that it had agreed to distribute dividends of R$571.26 million and interest of R$1.63 billion on equity.
XP highlighted that the state-owned bank did well in Q222 overall, mainly due to the strong performance in its total interest margin (NII), which has benefited from the strong growth of its loan portfolio in recent quarters.
Major contributions to the loan portfolio have been corporate and agribusiness loans. This financial margin (NII) helped reach R$17.1 billion in the quarter (+18.9% yoy), outstripping estimates by a whopping 16%.
“Despite strong loan portfolio growth in recent quarters and a marginal increase in delinquency to 2.00% (+11 basis points q/q, still the lowest among existing banks), provisions increased slightly in the period and led the coverage ratio. to drop to 271% (the highest in the industry).
“The combination of a stronger NII and lower cost of credit increased recurring net income to R$7.8 billion. This means a return on average equity (ROAE) of 20.6%, a significant increase of 2.5 percentage points qoq and 6.1 percentage points y/y XP repeats that BBAS3 is the top pick in the segment (buy recommendation, target price of R$57 per share).
For the Itaú BBA, BB delivered amazing results, with adjusted net income well above expectations and consensus.
Almost all lines were improved and were better than our estimates, with marked improvements in NII’s market and customer credit returns. Services revenue also grew (4% QoQ) while containing General Administration and Administrative Expenses (+1% QoQ).
“Credit quality was another notable feature, with only a 10 basis point deterioration in lag,” the BBA assessed, while guidance was revised upwards by 15%.
“Overall, BB has reported by far the best set of results within our banking coverage this season. The recovery, combined with upward revisions to earnings, is likely to continue to boost the share price. As it is being negotiated at many attractions, we are re- Emphasizing BB as our number one choice among the big banks,” notes BBA.
For Credit Suisse, the BB quarter was a watershed win, with a great performance. Analysts believe that the balance sheet is difficult to ignore even for those who do not want to risk the state-owned enterprises.
Analysts note that BB has demonstrated significant profit strength, with an environment of high interest rates boosting deposit margins, healthy loan growth fueling NII credit, well-disciplined asset quality, controlled costs and strong performance in BB Seguridade (BBSE3) and Cielo (CIEL3). . Banco do Brasil is Credit Suisse’s main choice in this sector, as is Itaú, but BB is the cheapest option from Credit’s point of view. Recommendation for outperform (performance above the market average), with a target price of R$46.
“By achieving profit and profitability at Itaú levels – which is the benchmark among banks – Banco do Brasil has certainly decided to prove that it will not be the presidential election that will disrupt the earnings improvement path and, accordingly, close the large valuation discount”, assesses Genial Investimentos.
With a recurring profit of R$7.8 billion and a return on equity of 20.2%, BB finally reached the top of the rankings after a long straight run with much lower profitability than its private peers, according to house analysts.
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