Bradesco‘s results in the first quarter were, in general terms, within what was expected from the bank at the beginning of its restructuring process.
The problem continues to be delivering the top line.
After two quarters of decline, the bank returned to growth in credit: the expansion was 1.4% compared to the fourth quarter and 1.2% compared to January to March 2023.
But it grew conservatively, on lines with lower spread. This led to a drop in customer margin, which was 5.9% in relation to the fourth quarter and 14.4% in the annual comparison.
“The bank has not yet reached an inflection point along these lines. It’s a weak number,” says an analyst at sell side.
In the call earlier today, CEO Marcelo Noronha admitted that this is the most challenging item in the result, but said that first the credit expansion is focused, and then the margin, lending more on higher risk lines.
“I can guarantee that we will go upwards with the growth of the credit portfolio”, said Noronha. “Our production is faster, with a solid risk appetite and better models.”
According to CFO Cassiano Scarpelli, the bank will reach guidance throughout the year: the projection is for a growth of 3% to 7% in total financial margin. In the first quarter, this margin fell 9%.
Profit reached R$4.2 billion, a significant increase of 46% compared to the previous quarter, but a drop of 1.6% in the annual comparison. As a result, it was above market expectations, which projected R$3.9 billion, according to Refinitiv. ROE increased slightly to 10.2%.
“But looking at profit in isolation matters little now. What matters is understanding Bradesco’s operational dynamics”, says this analyst. “Improvement is occurring, but slowly.”
Default rates continue to fall – falling from 5.1% in December to 4.8% in March – and provisions decreased significantly: 26% compared to the fourth quarter and 18% compared to the same period in 2023.
The bank also began delivering the expense cuts promised by Noronha as part of the strategic plan announced in February, two and a half months after he took office.
Administrative expenses fell 8.2% compared to the fourth quarter and grew just 1.2% year-on-year, below inflation. Personnel expenses decreased by 2.3% quarter on quarter, but increased by 5.6% compared to the first quarter of 2023 due to the salary adjustment made in a collective agreement.
The bank closed branches and reduced its workforce by 588 employees in the quarter, despite hiring investment and technology specialists.
Service revenues fell 1.8% compared to the fourth quarter and grew 1.3%, below inflation, compared to the same period in 2023.
In the annual comparison, the bank lost current account revenue, as a result of greater competition. In the quarter to quarter, it lost with cards (seasonal movement), fund management, capital markets and financial advisory. Revenues from consortiums increased in both comparisons.
For Noronha, this 1.3% increase in service revenue, despite being lower than inflation, was positive. “In cards, we will grow from now on, with Mother’s and Father’s Day. The first trimester is quieter. And the variable income capital market practically did not exist. If we have already managed to grow 1.3% with all of this, we should present more positive numbers in the future.”
The executive also said that the bank created “smarter” fee packages, and thus managed to increase current account revenues compared to the fourth quarter.
The insurer had an ROE of 19.8%, an increase of 1.6 percentage points compared to the first quarter. Net profit reached R$2 billion, an increase of 10% compared to the same period in 2023, but a drop of 21.6% quarter on quarter.
Giuliana Napolitano