Bradesco profit collapses with reserve to protect itself from Americanas default

Bradesco announced this Thursday (9) that it made an extraordinary provision of R$4.9 billion to cover its total exposure to Americanas, which filed for bankruptcy last month.

The measure, which is a way to protect against a possible default, had a strong impact on the bank’s results in the fourth quarter. The recurring profit, of BRL 1.595 billion, is well below the average projection of analysts consulted by Refinitiv, who expected BRL 4.4 billion. In comparison with the same period of 2021, profit fell by 75.9%.

Bradesco’s accounting profit, which takes into account extraordinary effects, was R$ 1.44 billion. The number is the lowest recorded by the bank since the third quarter of 2006, when Bradesco had gains of R$ 219 million, according to a survey carried out by TradeMap, without correction for inflation.

Bradesco’s total provision for bad debt was R$14.9 billion, more than double the amount set aside a year earlier.

Without the Americanas effect, the bank’s provisions would be BRL 10.562 billion, which would represent an increase of 23% compared to the third quarter of 2022, and 108% compared to the end of 2021.

In addition to Bradesco, Santander and Itaú also increased provisions due to Americanas. Known as PDD (Provision for Doubtful Accounts), the expense represents a cushion that the bank is obliged to make to protect its capital against possible delays in the loans it granted.

In the case of Itaú, the increase was BRL 1.7 billion in three months, from BRL 8.2 billion in the third quarter of 2022 to BRL 9.9 billion at the end of last year. In Santander’s case, provision expenses increased by 14% in three months.

As a result, Bradesco’s profitability, as measured by Return on Equity, fell from 13% between July and September to 3.9% in the fourth quarter of 2022.

Bradesco ended last year with an expanded credit portfolio of almost R$892 billion, growth of 1.5% in three months and 9.8% in one year.

The greatest growth was registered in loans to individuals, with an increase of 2.4% in the quarter and 12.6% in the year. For large companies, financing increased by 0.9% in three months and 7.9% in 12 months.

Bradesco’s default scenario worsened at the end of last year. Loans overdue by more than 90% increased from 3.9% to 4.3% of the total portfolio between September and December.

In individuals, default reached 5.5% at the end of 2022, compared to 5.1% in the third quarter. In micro, small and medium-sized companies, delays increased from 4.5% to 5.3% in three months.

The positive highlight of Bradesco’s balance sheet was the insurance area, which had recurring net income of 1.893 billion in the fourth quarter of 2022, growth of 26.6% compared to the third quarter, and of almost 25% in the annual comparison.

With Reuters