Banco Bradesco 3rd-Qtr net climbs to 1.43 bln reais
Banco Bradesco SA, Brazil's biggest non-state bank by assets, said third-quarter profit almost doubled on a surge in consumer lending. Shares fell as the bank boosted personnel expenses more than some analysts expected.
Net income at Bradesco rose to 1.43 billion reais ($647 million), or 2.92 reais a share, from 752 million reais in the same period last year, the bank, based in Osasco, near Sao Paulo, said in a statement on its Web site.
Bradesco increased personal loans 64 percent in the quarter, as higher wages and falling unemployment prompted more Brazilians to seek financing to buy appliances and electronics. The nation's growing economy, which is expanding at a 3.9 percent annual pace, is driving up profits for banks that are lending at some of the highest interest rates in the world.
"Banks are taking advantage of the bettering of the economy, especially in consumer loans and lending to small- and medium-sized companies, something that will continue in coming quarters,'' Daniel Araujo, a bank analyst at Standard & Poor's in Sao Paulo, said in an interview.
Banco Itau Holding Financeira SA, Brazil's biggest bank by market value, last week reported quarterly profit climbed 47 percent to 1.35 billion reais, also spurred by consumer lending.
Lending Rate
Brazil's benchmark lending rate started the third quarter at 19.75 percent, the highest level since October 2003, and ended the quarter at 19.50 percent. In the same period last year, the benchmark lending rate was more than 3 percentage points lower at 16 percent to 16.25 percent.
Brazil's interest rates discounted for inflation are the highest in the world, according to a survey of 40 countries by Curitiba, Brazil-based research company GRC Visao. Brazil's real interest rates in October stood at 11.9 percent, compared with 7.8 percent for Turkey, the second highest.
Bradesco's loan portfolio grew to 75.2 billion reais at the end of the quarter, up 26 percent from 60 billion reais a year earlier.
"We expect an expansion of gross domestic product and there is a recovery of job creation and salaries of workers and that's very important because it allows us to expand our loan portfolio,'' Jose Luiz Acar, Bradesco's executive director of investor relations, said in an interview.
Buy on Weakness
The gain was tempered in part by a 19 percent jump in personnel expenses to 1.48 billion reais from 1.25 billion reais in the previous quarter, reflecting a 6 percent salary increase in the quarter and a one-time bonus payment.
"The seasonal increase in personnel expenses was much higher than expected -- nonetheless, we would buy on any sign of weakness today, as earnings quality was very high,'' Credit Suisse First Boston bank analyst Roberto Attuch said in a report.
Bradesco's preferred shares closed the day unchanged at 121 reais in trading on the Sao Paulo stock exchange, leaving them up 88 percent this year.
Eleven of 16 analysts tracked by Bloomberg have a buy rating on Bradesco's shares, while three have a hold rating and two recommend selling.
Bradesco lowered the amount of money that it sets aside to cover bad loans by 22 million reais to 540 million reais from 562 million reais in the second quarter. It was the second straight quarter that the bank lowered provisions.
Acquisitions
Bradesco will boost its lending by between 25 percent and 28 percent this year, up from an earlier estimate of 22 percent to 25 percent, Bradesco's Acar said. The bank's lending will likely expand about 22 percent in 2006, he said.
Acar said the bank may also consider further acquisitions, after the planned sale of Banco do Estado de Ceara, a 70-branch bank in the northeastern state of Ceara that the government took over in 1999, was canceled. Bradesco, Banco Itau and Uniao de Bancos Brasileiros SA all placed bids for the bank.
"There are sales of state banks that are slated,'' Acar said.
"Bradesco is interested and will be attentive and if there are opportunities we are ready to make moves.''
Revenue from service fees climbed to 1.92 billion reais from 1.46 billion reais a year earlier and 1.76 billion reais the previous quarter, the bank said.
Bradesco posted an average annualized return on equity of 36.5 percent, a measure of the bank's profitability, in the third quarter, down from 38.1 percent in June and 23.3 percent at the end of September last year, the bank said.
(Published Bloomberg.com, November 7, 2005)
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