By Natalia Gómez
SAO PAULO Nov 12 Banco do Brasil,
Latin America's largest bank, expects to disburse consumer loans
at a slower pace for the rest of the year because of weak demand
for credit among indebted households and increasing competition.
The state-run bank lowered its forecast for consumer loan
growth to between 14 percent and 18 percent from a prior
estimate of 16 percent to 20 percent, according to a securities
filing on Tuesday. On the same day, Banco do Brasil reported a
stronger-than-expected third-quarter profit, bolstered by robust
fee income and trading-related revenue.
Chief Financial Officer Ivan Monteiro said the revised
outlook resulted from "less demand and more competition," not
from the federal government's order to state banks to scale back
disbursements in an effort to maintain fiscal discipline.
However, the lender increased its estimate of 2013
agribusiness loan growth to a range of 24 percent to 28 percent.
As a result, it stood by its forecast of 17 percent and 21
percent growth for its consolidated loan book.
Third-quarter recurring profit, which excludes one-time
items, totaled 2.61 billion reais ($1.12 billion), down 0.9
percent from the second quarter and 1.8 percent from a year
earlier, according to a securities filing. Seven analysts in a
Thomson Reuters poll had forecast 2.53 billion reais.
President Dilma Rousseff has used Banco do Brasil and other
state-run lenders to cut credit costs in Brazil, which remain
among the world's highest, and to foster competition with
private-sector banks. But she has recently indicated that
lending growth should cool after the cost of pouring capital
into state banks grew considerably over the past year, fueling
concerns of a credit downgrade.
Monteiro said Banco do Brasil's board had yet to determine
forecasts for 2014.
Still, he said growth in mortgage and farming loans should
lose momentum next year. Mortgage credit is one of the
fastest-growing lending segments in Brazil's banking system
Shares of Banco do Brasil, which at Monday's close were up
19.2 percent this year, dropped 4.5 percent to 26.82 reais on
Tuesday. The benchmark Bovespa stock index was down 0.6
While the bank's third-quarter profit declined on both a
quarterly and annual basis, it beat analysts' forecasts, in
large part because of lower provisions for bad loans.
Provisions fell 7 percent from the second quarter,
offsetting a 2 percent drop in fee income, a jump in funding
costs and slightly higher sales, general and administrative
Banco do Brasil cut its estimate for gross interest income
growth this year to between 2 percent and 5 percent, down from a
previous range of 4 percent to 7 percent.
Net interest margin, or the average interest rate earned
from loans, declined 0.2 percentage points to 4.4 percent. Banco
do Brasil's cost of raising money increased as the central bank
hiked interest rates to head off inflation.
The bank's loan book, the largest in Brazil's financial
system, totaled 585.05 billion reais at the end of September, an
increase of 21.7 percent from a year earlier. Banco do Brasil's
90-day default ratio slightly rose to 1.97 percent in the third
quarter from 1.87 percent in the second quarter.
"With margins weakening and asset quality taking a negative
turn, the bank appears to be on an opposite cycle from private-
sector peers," Goldman Sachs analyst Carlos Macedo said in a
client note. "The size and magnitude of this cycle is still not
clear, but the trend is negative and could limit
earnings-per-share growth in the near term."
Banco do Brasil is betting on a recovery across the board
for an economy that is underperforming for the third year in a
row. The decision by Banco do Brasil to lower its forecast came
as private-sector peers have kept or cut their own outlooks due
to slowing demand for credit and flagging economic activity.
The bank is considering selling global bonds in currencies
other than the U.S. dollar before the end of the year, Monteiro
Banco do Brasil is not considering listing its card unit, he
added. Such a move has been the center of speculation.