* Sees loans growing between 10 pct and 14 pct in 2014
* Recurring net income 3.2 bln reais, up 9.6 pct on year
* Poll had predicted recurring profit of 3.18 billion
* Loan defaults for 90 days or more fall to 3.5 pct
By Guillermo Parra-Bernal
SAO PAULO, Jan 30 Banco Bradesco SA
, Brazil's No. 2 private-sector lender, is expecting
year-ahead lending growth in a lower range compared with its
outlook this time a year ago, noting economic challenges facing
Brazil in the short term.
In a securities filing on Thursday, Bradesco said loans this
year could grow between 10 percent and 14 percent, compared with
an expansion of 10.8 percent in 2013. The lender had initially
predicted growth of 13 percent to 17 percent for 2013, before
adjusting its forecast down to between 11 percent and 15
The forecast underscores growing caution among
private-sector lenders, who in recent years have struggled with
tough competition from state-run banks, a steep drop in
borrowing costs and soaring defaults. Last year, Brazil's banks
extended credit to companies and individuals at the slowest pace
since at least 2007, the central bank said this week.
"In spite of the underlying risks to the outlook and the
current challenges to sustained growth expansion that the
Brazilian economy is faced with in the short run, Bradesco has a
positive view on the country," the filing said.
Some economists are predicting Brazil's economy will post a
fourth consecutive year of anemic growth and persistently high
inflation this year, with the October presidential election
potentially fanning market turmoil.
Still, Bradesco beat fourth-quarter earnings estimates on
the back of a prudent stance on credit, interest rates hikes in
the second half of last year and efforts to limit loan loss
Recurring net income, or profit excluding one-off items,
came in at 3.2 billion reais ($1.3 billion), up 9.6 percent on a
year-on-year basis, the filing said. A Thomson Reuters poll of
eight analysts had predicted recurring profit of 3.18 billion
"We expect a neutral market reaction" to the results, Philip
Finch, a strategist with UBS Securities in London, wrote in a
While banking results for Bradesco's peers could rise on a
sequential basis, structural trends in the sector may continue
to hamper revenue. Shares of Bradesco are down 10 percent over
the past month, reflecting worries that recent turmoil across
emerging markets, a deteriorating economic outlook and political
tensions ahead of the election may hamper its performance.
As expected by the poll, defaults fell again, more as a
result of the private-sector banks' risk-off credit approach
than to an improving economy.
Loan defaults for 90 days or more fell to 3.5 percent of
Bradesco's loan book in the fourth quarter, the fourth quarterly
decline in a row. Disbursements rose 3.6 percent on a sequential
basis, the fastest pace of lending expansion in five quarters,
the filing said.
Bradesco's loan book ended the year at 427.27 billion reais,
up 10.8 percent on an annual basis and slightly below guidance
of 11 percent to 15 percent for 2013.
On a quarterly basis, loan book growth outpaced that of
provision expenses, which climbed 2.8 percent. The poll had
expected provisions to rise 3.2 percent.
Return on equity, a gauge of profitability that measures how
well a bank is using shareholders' money, fell to 18 percent at
the end of the fourth quarter, missing the poll's estimate of
Bradesco's net interest margin (NIM), the average rate
earned on loans, edged higher in the quarter thanks to gains in
insurance underwriting and efforts to limit an increase in
funding costs, reaching 7.1 percent against 7 percent in the
Compared with the fourth quarter of 2012, NIM slipped from
7.3 percent, the filing said.
Management plans to discuss fourth-quarter results at a
conference call later on Thursday.