2023-11-10 19:17:21
According to analysts, the numbers for the period indicate that the sector’s credit crisis, derailed by the rise in the Selic rate and the Americanas accounting scandal, is behind us.
Julia Moura
Sao Paulo-SP
The four large Brazilian banks listed on the Stock Exchange reported profits totaling R$25 billion in the third quarter of 2023. The number is slightly higher than the second quarter’s result, of R$24.3 billion, and similar to the same period 2022.
Between them, however, the moments are different. While Banco do Brasil, Itaú Unibanco and Santander granted more credit, Bradesco pulled the handbrake on loans to improve the quality of the portfolio.
According to analysts, the numbers for the period indicate that the sector’s credit crisis, derailed by the rise in the Selic in 2021 and 2022 and exacerbated by the Americanas accounting scandal, is behind us.
“BB and Itaú continue to have very high margins and should continue to do so. Santander and Bradesco, which have a portfolio more focused on consumption, with a lot of unsecured loans, have not yet recovered profitability”, says José Eduardo Daronco, analyst at Suno Research.
The banks’ efforts that began in the second quarter to recover profitability appear to be working. Credit portfolios increased, even if slightly, while PDD (Provision for Doubtful Debts) and default rates fell in most cases.
Furthermore, the effects of Americanas were concentrated in the first half of the year, when banks recorded most of the retailer’s debts as accounting losses.
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In this third quarter, the biggest impact of the company’s judicial recovery was on Banco do Brasil, which increased coverage against Americanas’ default from 70% of what the retailer owed in the second quarter to 100%, which increased its debt rate. default over 90 days. Without this effect, the index would have fallen from 2.65% in June to 2.63% in September.
SANTANDER
Santander Brasil’s profit was R$2.729 billion in the third quarter of this year, a drop of 12.60% compared to the same period in 2022. In relation to the second quarter, the value represents an improvement of 18.20%.
The ROE (return on equity, which measures the profitability of the operation) was 13.10% from July to September, the best of the year so far, but lower than the 15.6% of the last third quarter.
The bank’s president, Mario Leão, said that the worst part of the credit cycle would be behind us and that the institution is moving towards increasing ROE to the range between 15% and 20%.
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From July to September, Santander’s credit portfolio grew 7.9% year-on-year, to R$625.5 billion.
Default rates fell to the best level since the first quarter of 2022, reaching 3%. Last quarter, it was 3.3%.
According to analysts at Genial Investimentos, this is the first significant improvement in default rates since the third quarter of 2020.
As a result, the bank reduced PDD by 6%, to R$5.618 billion.
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For BB Investimentos, this result marks a “turning point in terms of credit quality, which should be a trigger for sequential improvements, despite several lines still showing challenging times.”
ITAÚ UNIBANCO
Even with the loss of R$1.2 billion from the end of the operation in Argentina, Itaú Unibanco had a profit above expectations, of R$9.04 billion in the third quarter of 2023. The number represents a growth of 11.9 % compared to the same period of the previous year. Compared to the second quarter of 2023, the result is 3.4% higher.
ROE maintained the pace of improvement seen in previous quarters and went from 21% to 21.1%. According to Daronco, from Suno, Itaú’s result was driven by the bank’s exposure to high-income customers, who have lower defaults.
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The total credit portfolio grew 4.7% compared to the third quarter of 2022, reaching R$1.16 trillion, in line with inflation for the period. In relation to the second quarter of 2023, which saw an increase of 6.2%, there was a slowdown. “This decline can be seen as a warning sign, since the current pace is slightly below the lower limit of the bank’s guidance”, say XP analysts.
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PDD totaled R$9.212 billion in the third quarter of 2023, a quarterly increase of 11.3%. But, in the annual comparison, the number is 4.1% lower. “The cost of credit showed the first improvement since the escalation of worsening in mid-2021”, says Genial.
The bank’s default rate in Brazil remained at 3.5%.
BANK OF BRAZIL
Banco do Brasil had a profit of R$8.785 billion in the third quarter. The result is 4.5% higher than the same period last year and exactly the same as recorded in the second quarter of 2023.
ROE also remained stable, at 21.3% – the highest among peers.
The expanded credit portfolio totaled R$1.07 trillion in September, an annual increase of 10%, driven by the 17% growth in lines for agribusiness.
PDD, in turn, totaled R$7.516 billion, an increase of 4.5% compared to the second quarter and a jump of 66.4% compared to 2023.
Santander’s equity research area assesses that the balance sheet is solid and expects double-digit growth for BB in 2024. “We reiterate BB as our main choice [de investimento no setor]”, say analysts.
In the same vein, Goldman Sachs expects 10% growth in the portfolio next year, above what the American bank predicts for BB’s private competitors.
BRADESCO
Bradesco made a profit of R$4.6 billion in the third quarter of this year, 11.5% less than in the same period in 2022. Compared to the second quarter of 2023, the result is 2.3% higher.
More than half of the performance is the result of insurance operations, which generated R$2.35 billion.
ROE fell from 13% in 2022 to 11.3%. Compared to the last quarter, the drop was smaller, 0.2 percentage points.
“Bradesco has a lower income audience than Itaú, which leads to more credit card defaults. As expected, it had the worst result in the sector, and I don’t see a quick recovery in profitability”, says Daronco, from Suno.
The bank’s executive president, Octavio de Lazari Junior, said this Friday (10) that the current ROE is below what he considers adequate.
The expanded credit portfolio was stable in relation to the third quarter of 2022, at R$877.5 billion, without keeping up with inflation. The majority of new loans went to agribusiness, representing an annual increase of 34%.
“We still see the bank taking a cautious approach to lending (particularly to small and medium-sized businesses), which should improve asset quality but reduce top-line expansion,” wrote analysts at Goldman Sachs, who see a slow recovery ahead.
PDD fell from R$10.3 billion in the second quarter to R$9.2 billion. However, in relation to the third quarter of 2022, the provision grew 26.4%.
The delinquency indicator over 90 days, in turn, had a slight improvement compared to the last quarter: it fell 1.1 percentage points, to 5.6%. In relation to September 2022, however, it increased by 1.7 percentage points.
According to Lazari, the peak of the default rate has passed. “Now, what we have to work on is improving margins with customers,” he said in an interview with journalists.
The executive also stated that October has already seen an improvement in outstanding accounts and that he expects a reduction in the cost of credit in the fourth quarter of 2023.
“Despite the full and complete recovery of Bradesco to its old form hovering in the minds of investors, including an ROE of around 20%, at the moment we see little evidence not only of the speed but also of the possibility of this scenario, even if defaults begin to appear. signs of improvement”, says Rafael Reis, analyst at BB Investimentos.
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