Bradesco reduces credit for individuals and small companies after ‘lesson learned’ in the pandemic

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Loans granted to individuals, especially low-income individuals, and micro and small companies seem to be a greater concern for Bradesco than the Americanas case. This is what the numbers and statements given by the bank’s president, Octavio de Lazari Júnior, show.

The results for the fourth quarter of 2022 were greatly impacted by the R$4.8 billion provision made by Bradesco to protect itself from Americanas’ debts, which resulted in the lowest quarterly net profit since the period between July and September 2006, according to a survey by the TradeMap.

However, in a conference call with the press held this Friday (10th), Lazari showed that, at the end of last year, lending to individuals and smaller companies fell by 16% and 18% in relation to the fourth quarter. quarter of 2022, respectively. For medium and large companies, the concession increased by 22%, on the same basis of comparison.

“The bank granted more credit than it should have during the pandemic, and it was a lesson learned by us. We always have to be one point ahead of the curve, and that is why we will continue, in 2023, to be more restrictive in credit to individuals, especially low income, and for micro and small companies”, reveals Lazari.

Bradesco’s loans overdue for more than 90 days rose 1.5 percentage points in 2022, from 2.8% of the total portfolio at the end of 2021 to 4.3%.

Among smaller companies, the increase was 2.2 points, to 5.3% of the portfolio. Default by individuals reached 5.5%.

Thus, even when excluding the effect of the provision made for the Americanas case, there was a growth of 23% in one year in the volume destined to protect capital against defaults over 90 days, known by the acronym PDD.

Greater selectivity in granting should reduce the pace of growth of Bradesco’s credit portfolio in 2023, as the bank projects a range between 6.5% and 9.5% for this item, compared to an increase of 9.8% in 2022 The number was lower than initially forecast, which was to grow between 10% and 14%.

Even with the slowdown, the projection for provisions against bad debts is for growth, reaching close to BRL 40 billion in 2023, compared to BRL 32.3 billion in 2022, already including the volume destined for Americanas.

“We believe that the projected value for the provisions is adequate, because we will have the effects of the renegotiated credits, and also of the new operations, since we will not stop granting loans”, explains Lazari.

Bradesco’s president claims that the provision for large companies was at low levels, but tends to normalize between 2023 and 2024. “Even so, we are well provisioned, we have R$ 58 billion for this purpose.”

Regarding credit operations for large companies, especially in the line of drawn risk, in which the bank finances the purchase of items from suppliers, Lazari denies that the bank intends to increase interest rates because of Americanas.

“It’s a line that’s been offered for a long time, which has virtually no defaults. This case makes us even more careful in the analyses, in the risk assessment processes. But it won’t result in increased rates for customers. It was an isolated case. “

Branch closures and pressured revenues

Lazari announced that the bank will close or restructure between 200 and 250 Bradesco branches during the year 2023.

“Many of them will stop being traditional branches and start to act as business units, which results in lower operating costs”, he explains. In this new model, the service stations continue to serve customers, but in a different way, more focused on products.

Revenues from service provision should also slow down in 2023. Bradesco projects growth between 2% and 6%, compared to an increase of 4.7% in 2022.

“This forecast has to do with increased competition, with more agents offering to open accounts. In addition, this item will also be impacted by lower credit growth”, says the executive.

Weak results, but 2023 could be better

It is practically a consensus among analysts that the results presented by Bradesco were weak, but there are positive points, especially when 2023 is projected.

Flavio Conde, an analyst at Levante Investimentos, says that default is affecting Bradesco’s result more quickly compared to Itaú Unibanco, for example, even without the participation of Americanas.

“The positive point is that, with everything provisioned for Americanas, this effect will no longer weigh on the 2023 numbers”, says Conde.

Milton Rabelo, an analyst at VG Research, points out that if it weren’t for the provisions referring to Americanas, the institution’s profit would have been approximately R$6.4 billion in the fourth quarter, with a return of 10.3%.

“We believe that Bradesco’s efforts in improving the analysis of credit granting will yield more positive results from mid-2023”, says Rabelo.

Around 11:45 am (Brasília time), Bradesco’s preferred shares fell more than 7%, while common shares fell by 6%.

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