Profits of large banks grow 20.5% and total R$ 26.6 billion in the 2nd quarter

The four big Brazilian banks —Itaú Unibanco, Bradesco, Santander and BB (Banco do Brasil) — reported a combined net income of R$26.6 billion in the second quarter of 2022.

The value corresponds to a growth of 20.5% compared to the same period last year.

The movement was mainly sustained by the advance of the credit portfolios. In particular, in lines of higher risk and return among the individual public, such as credit cards, personal loans and payroll-deductible loans.

With the process of increasing the Selic rate by the BC (Central Bank), which went from the historic low of 2% per year in March 2021 to the current 13.75%, the financial margin with customers, which measures the difference between the The cost of money raised by the bank and what is charged to consumers also made an important contribution to the results presented over the last quarter.

“Upward interest scenarios tend to favor bank results,” says Enrico Cozzolino, head of analysis and partner at Levante Investimentos.

“We are going through another challenging quarter in which we were able to achieve sustainable results, with a consistent increase in the profitability of our businesses”, said Milton Maluhy Filho, president of Itaú Unibanco, when commenting on the bank’s results in the second quarter.

The greater gains presented by financial institutions in a scenario of higher interest rates and still pressured inflation, however, also resulted in a general increase in delinquency rates.

And the expectation passed by banks is that late payment rates will continue on the recent upward trend throughout the second half of the year, with interest rates remaining at high levels, inflationary persistence and low economic growth.

“Non-payment increased with the normalization of credit conditions, growth in higher margin lines and some worsening in retail lines. We have made adjustments to our models over the last few quarters, so we should grow at a more moderate pace, while maintaining the profitability of our portfolio”, said Octávio de Lazari Junior, president of Bradesco, when commenting on the bank’s results in the second quarter.

In addition, given an increase in delinquency and a macroeconomic scenario that still inspires caution, the expansion of credit portfolios should slow down during the second half of the year, says João Frota Salles, an analyst at Senso Investimentos.

BB once again stands out against private banks

Among the four major banks in the country, BB once again stood out with numbers considered quite positive by market agents, with an annual profit growth well above that observed among private institutions.

In the first quarter results, the public bank had already emerged with above-average results compared to competitors.

“A good part of the profit growth of banks in the second quarter was pulled by BB, which saw the result jump 54.8%”, says Cozzolino, from Levante. The bank’s strong performance in the agribusiness sector, which remained one of the most vigorous during the last months of pressured inflation, favored the figures presented from April to June.

The analysts also highlighted that BB managed to match the same level of profitability of the operation as presented by Itaú Unibanco, Bradesco and Santander, when considering the ROE indicator (return on equity), and with a level of delinquency that is better in relation to the market average.

“BB has the lowest delinquency rate over 90 days among large banks and maintains a robust coverage level, enabling the gradual transition of the portfolio mix in search of the best risk-return ratio”, said Fausto Ribeiro, president of BB.

“With the delivery of robust results over the last six quarters, we have reached the level of profitability of private peers”, said the bank’s president.

Santander, which had a slight decrease in second-quarter profit, was again considered the worst performing bank among its peers in the sector.

The Spanish bank was the only one that delivered a single-digit growth in its loan portfolio, of 6.5% on an annual basis, but with a delinquency that was only below that of Bradesco, which had a much higher growth in the portfolio, of 17 .7%, says Salles, from Senso.

“Due to all the adjustments we have made to portfolios and models since the end of last year and especially in the first quarter of this year, when we look at these new vintages, they behaved exactly as we imagined, and we do not expect further deterioration [da inadimplência]”, said Mário Leão, president of Santander Brasil.

Itaú shares should stand out on the stock exchange in the coming months

In the case of Itaú and Bradesco, the analyst says that the two balance sheets can be considered positive in general, with robust numbers of growth in profit and in the loan portfolio.

The exception made by the specialist is due to the fact that, while Itaú still continues with a more controlled delinquency, ending the second quarter at 2.7%, at Bradesco, the rate of delays has already “entered a dangerous range”, of 3 .5% at the end of June.

Because of this, the trend is for Itaú to maintain a slightly more aggressive strategy in the expansion of the loan portfolio in the coming months, while Bradesco tends to opt for greater caution, in order to contain an advance in the delinquency rate. , says Salles.

Cozzolino, from Levante, believes that, based on the results presented and on the prospects for the evolution of the business, Itaú’s shares are the ones with the greatest potential for appreciation in the coming months.

“BB traditionally trades at a discount against its peers, but due to the risk of political interference”, says the Levante partner, noting that public bank shares have already registered a strong rise after the release of the balance sheet, taking away part of the delay in compared to private banks.