Defaults Drive Bradesco’s Worst Drop Since 1998

The stock closed 17% lower in Sao Paulo on Wednesday

A pedestrian walks past a Bradesco bank branch in Sao Paulo, Brazil.
By Vinícius Andrade
November 10, 2022 | 11:01 AM

Bloomberg — Brazil’s Banco Bradesco SA, (BBDC4) Latin America’s second-largest lender by market value, had its worst day since 1998, as much weaker-than-expected profits and souring loans sparked a spate of analyst downgrades.

Bradesco’s recurring net income totaled 5.2 billion reais ($1 billion) in the third quarter, a 23% drop from a year earlier and below the average analyst estimate of 6.7 billion reais, data compiled by Bloomberg show. The bank also increased its annual guidance for expenses for bad-loan provisions, with Chief Executive Officer Octavio de Lazari Junior saying he was bracing for more pain in the coming quarters.

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Higher provisions “should continue to weigh on profitability, leading Bradesco to report below potential ROE in the coming quarters,” Credit Suisse Group AG analyst Marcelo Telles wrote in a report. Telles downgraded the stock two levels, to underperform from outperform.

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The stock closed 17% lower in Sao Paulo on Wednesday, with Citigroup Inc. and Banco BTG Pactual SA also ditching bullish views. XP, Itau, and Bradesco’s own brokerage firm, Agora, accounted for most of the net buying of the bank’s shares at 4:56 p.m. local time, with a combined net volume of about 49 million shares, data compiled by Bloomberg showed.

“Some of the issues hurting Bradesco’s bottom line are likely cyclical, but it’s hard not to believe there might be something more structural explaining the performance gap,” said BTG Pactual analyst Eduardo Rosman. He added that Bradesco has more exposure than its peers to small companies and low-income individuals.

--With assistance from Patricia Xavier and Cristiane Lucchesi

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