Opinion – Marcos de Vasconcellos: With record profit, banks give crumbs to investors and layoffs to employees

The four largest Brazilian banks had record profits in 2021. Accounts on the table were R$ 81.63 billion in net profit, adding only Banco do Brasil, Bradesco, Itaú Unibanco and Santander. It was the highest amount since 2006.

For purposes of comparison, what the banks made in profit is practically double the amount allocated to federal investments in the 2022 Budget.

Whoever had bank shares in their portfolio won, then. Right? It seems not. At least until now.

While the profits of the four institutions jumped 32% from 2020 to 2021, the distribution of dividends and interest on equity (JCP) to shareholders rose by only 12%, according to a study by Economatica, which sells market data.

In the previous period, from 2019 to 2020, profit had fallen by 24%. And the distribution of dividends and interest on equity was dropped by 48%.

In other words: when earnings fell, dividend payouts doubled. When profit recovered, the payout to shareholders went up by half.

But profits and dividends should only be a fraction of what the investor actually earns as a “partner” in the companies. The growth of companies, theoretically, would lead to the appreciation of their shares, making everyone gain the success of the companies in which they invest. I repeat: theoretically.

In this case, the path was different. The market value of Itaú, Bradesco, BB and Santander, together, dropped 16% from 2019 to 2020, and plummeted 29% from 2020 to 2021.

In short, again: when earnings fell, so did the value of stocks. When profit rose, shares continued to fall.

There are a myriad of reasons to list for falling stocks, the main one being market estimates, as I mentioned last week. If investors are too optimistic, even great results can bring the stock price down, as long as it comes in below expectations.

In the case of Itaú — the largest bank in Brazil, with R$ 2.16 trillion in assets — the last balance sheet, released on the 10th, exceeded estimates. The shares rose sharply shortly after the release and, today, ITUB4 shares are worth 4% more than on that date.

A week after impressing the market with its good results, the bank announced a program of voluntary redundancies, stating that this “will not affect the quality and availability of its services to its customers”.

In times of record profits: crumbs for investors and cuts for employees. Banks are preparing for a difficult period for the Brazilian economy in the coming months.