Bradesco’s share price is ‘absurd’ given the profitability of the operation, says bank president

Pressured by increased competition brought by fintechs in recent years, stocks in large banks have struggled to deliver positive returns to investors. Bradesco shares, for example, accumulated a drop of approximately 13% on the Stock Exchange in 2021, until the beginning of December.

In the evaluation of Octavio de Lazari, president of the bank, given the profitability of the Bradesco operation, the prices at which the papers are traded on the Stock Exchange are “absurd”. In particular, given the case of fintechs such as Nubank, which are still at a loss, and have managed to raise billions in investment rounds from investors.

“If we look deeply, it’s irrational [o preço em que negociam as ações do Bradesco]. Having a bank of this size, which makes BRL 25 billion in profit every year, which distributes dividends, is worth 1.2 [vezes] the equity value, what is the logic of that?”, asked the executive, during lunch with the press this Friday (3).

Lazari also said that he believes it is just a matter of time before the market recognizes the distortion he believes exists today in the share prices of big banks.

This, by the way, is a movement that has already started, added the executive, recalling the environment of greater pressure for fintechs in recent weeks, with increasing questions from investors regarding the lack of profitability and the expenses necessary to gain scale.

In the process of going public on the American stock exchange, Nubank was recently hit by the market’s pessimistic wave in relation to fintechs. The company has had to revise down its share price range for its IPO forecast for next week.

“We can’t afford not to make a profit like fintechs do,” Lazari said. According to him, in a scenario foreseen ahead of higher interest rates than those practiced in recent months, whether in Brazil or abroad, companies that benefited from the heated capital market, such as XP and BTG Pactual, must go through more difficult days to from now on.

“When you had a Selic of 2%, people were predisposed to take a little more risk to be able to have a better return on their capital. When you have interest of 10%, 12%, he will prefer conservatism,” he said the president of Bradesco.

“The trend is that there is, yes, greater difficulty in growth [por parte de empresas do setor financeiro que se beneficiaram dos juros baixos dos últimos anos]”, added Lazari.

He also said that today it is “much more” difficult to transfer the increase in the basic interest rate to late-end customers, compared to interest rates already in the double digits priced by economic agents in the future curve, in addition to fierce competition.

The president of Bradesco also stated that he sees as a “natural trend” the integration of the bank’s digital fronts, which today take place via Next, Digio and Bitz, which have a base of approximately 15.5 million customers. He stressed, however, that this is a process that will still take some time to materialize.

“Over time, this may even consolidate into a single digital bank, but now we believe the market is so competitive and multifaceted that working with more than one brand makes sense,” said Luiz Carlos Trabuco, chairman of the board of bank administration.

Trabuco also commented that the expansion of the credit portfolio of large banks goes hand in hand with the prospects for broader economic activity growth.

“If you have a long period of low GDP, the credit cycle starts to have a much greater risk. And then the credit cycle feeds back the low GDP”, said the chairman of the bank’s board.