Profits of large banks grow 13.6% and total R$ 24.8 billion in the 1st quarter

​The country’s four big banks —Itaú Unibanco, Bradesco, Santander and BB (Banco do Brasil)—reported a combined net income of R$24.76 billion in the first quarter of 2022, against a backdrop of rising interest rates to tame the inflation, which positively impacts the level of profitability of the financial sector.

The number is equivalent to a growth of 13.57% compared to the same period last year.

The result was mainly driven by the advance of banks’ credit portfolios in the period, especially lines of greater risk and return expectations aimed at individuals, such as credit cards, overdrafts and revolving credit, says João Frota Salles, analyst by Senso Investimentos.

However, as more profitable operations gained space in the portfolios, delinquency rates also increased, a movement already signaled by the banks themselves, in an environment of interest and inflation back to double digits that erodes the purchasing power of the population, he adds. Sale.

The growth in late fees, a trend that the banks themselves were unanimous in signaling that it should continue moderately in the coming quarters, is one of the main points on the radar of market analysts for the rest of the year, says Alexandre Masuda, partner, co -manager and head of analysis at SFA Investimentos.

President of Itaú, Milton Maluhy Filho, said in a press conference about the results of the first quarter that, in a scenario of high interest rates and inflation, the tendency is for delinquency rates to continue with moderate increases during the coming quarters — a similar perception was transmitted by the presidents of Bradesco, Octavio de Lazari Junior, and of BB, Fausto Ribeiro.

The president of Itaú said that the internal expectation is that default rates will gradually return to the levels observed in the pre-pandemic. In March 2020, the bank’s overdue rate of over 90 days was 3.1%, and 5.1% considering only the rate among individuals. In March 2022, the rates were at 2.6% and 4.1%, respectively.

Itaú best positioned among the private sector

“Among the large private banks, Itaú presented the smallest increase in delinquency from January to March, and the largest growth in net income in the annual comparison, emerging as the best positioned to face the adverse macroeconomic environment ahead in the country”, he says. Masuda, which has Itaú shares, and, to a lesser extent, BB, in the portfolio of funds under management.

Bradesco appears next in the ranking of preferences of market analysts, having reported numbers that, in general, came within expectations.

Without major surprises in the results for the first quarter, the biggest positive highlight in the case of the Cidade de Deus bank, in Osasco (SP), was due to the revision in the “guidance” [projeções] to 2022.

“The change was motivated by an above-expected advance in recent months in operations with a higher built-in spread, such as credit cards”, says Guilherme Tiglia, partner and analyst at Nord Research.

The results of Santander Brasil, the first to publish the figures for the first quarter, were the ones that ended up disappointing the market the most, says Tiglia, with only timid growth in the loan portfolio and net income, but also with an increase in the levels of default over 90 days.

“Santander’s operational trends have disappointed us due to the small contraction of loans [na comparação com o quarto trimestre]to the increase in the delinquency rate and the cost of credit, together with weak results from service income”, point out analysts at investment bank UBS BB, in a report.

BB numbers please analysts

In the case of BB, the figures presented by the public bank this Wednesday (11) – with a record profit of R$ 6.6 billion in the first quarter, up 35% on an annual basis, and a delinquency below the levels verified among the private peers – were well received by market analysts.

“Banco do Brasil’s result shows the refined management of its assets, the good control in the choice of its debtors and the resilience of its credit portfolio. The company swam against the tide of the deterioration of the macro environment, with a worsening of the credit scenario in the country and managed to control its delinquency without neglecting the growth of profit and credit portfolio”, say Guide Investimentos analysts.

They also claim that the bank was able to deliver an improvement above the optimistic expectations of market analysts and that they expect a positive reaction from investors regarding the results – BB’s shares operated up 2.1% this Thursday on the Stock Exchange. Values, while the Ibovespa rose 0.4%.

Genial’s analysts point out that the bank’s profit was mainly driven by lower expenses with provisions due to the more defensive profile of the credit portfolio, with a relevant participation of agribusiness, and by cost control.

“If BB manages to replicate the same performance of the first quarter in the next three quarters (which is quite feasible) the bank’s profit would be above the upper range of the 2022 guidance of R$ 26 billion”, point out Genial analysts.

“With regard to credit quality, the bank continues to report healthy indicators, giving us confidence for the continuity of robust results in the coming quarters”, assess analysts at Ativa.

Analysts at Eleven Financial Research say that it is common in election years to see state-owned shares “detaching from their fundamentals. Therefore, we maintain a more cautious view” in relation to BB’s shares.

Flow can determine direction of actions

Although with nuances between each of them, the results of the large banks generally met market expectations, with some growth in credit grants and profit, as well as in default.

The numbers alone, however, were not perceived by experts as sufficiently positive, or negative, to provoke any more intense downward or upward movement for shares on the Stock Exchange.

Even more than the economic fundamentals, the performance of the papers in the short term is much more dictated by the flow of capital directed to the markets, says the partner of Nord Research.

Therefore, if in May, and over the next few months, foreigners once again withdraw more funds than they invest in the Brazilian market, as was the case in April, the tendency is that the shares of banks, which are highly representative on the stock exchange , experience selling pressure despite first-quarter results, says Tiglia.