*What: Second-quarter results for Brazil's big four banks.
*When: Starting on Aug. 4 at 7 a.m. (1000 GMT)
*Analysts see earnings rising at all four banks on strong
lending growth and a drop in default rates.
By Aluisio Alves
SAO PAULO, Aug 1 (Reuters) - The top four Brazilian banks
listed on the Sao Paulo stock exchange should post strong
quarterly earnings in the weeks ahead, helped by steady growth
in lending portfolios and a drop in default rates, as Brazil's
economy continues to expand at a healthy clip.
The big three private-sector banks -- Banco Bradesco
(BBD.N) (BBDC4.SA), Banco Itau ITU.N (ITAU4.SA) and Unibanco
UBB.N UBBR11.SA -- and state-run Banco do Brasil (BBAS3.SA)
have all steadily grown their loan portfolios in the last few
years by reaching out to low- and middle-class consumers that
have benefited from an economic boom and rising wages.
That strategy, coupled with increasingly discerning lending
practices to keep bad loans at a minimum, has allowed Brazilian
banks to consistently chalk up hefty profits at a time when
many banks in the United States and Europe are bleeding losses
because of the credit crisis there.
"Banks are increasing financing and becoming more efficient
as they do so, helping to push default rates lower," said Joao
Augusto Frota Salles, an analyst at Lopes Filho, a financial
consulting firm.
As more Brazilians take out loans, banks are also relying
less on income from trading government bonds, long one of the
most lucrative activities for financial firms in Brazil.
Brazil's central bank already gave a snapshot of what the
quarter was like for banks earlier this week, when it reported
that overall lending rose 14 percent in the first half of the
year and surged 33.4 percent in the 12 months through June.
At the same time, the overall default rate slipped to 4
percent in June, the lowest level since August 2005.
Analysts caution that the pace of lending may start to slow
in the second half of the year now that the central bank has
begun raising interest rates to curb resurgent inflation. But
the slowdown is unlikely to force banks to revise their lending
forecasts lower for the year.
"At these levels, loan growth for banks could still end up
surpassing our forecast of 25 percent in 2008," Maria Laura
Pessoa, an analyst at Unibanco, said in a research report.
Credit Suisse said in a report last week that it doesn't
expect the rise in interest rates to have a significant impact
on lending until 2009. As a result, it now expects retail loans
to increase 10 percent next year, down from a previous forecast
of 18 percent.
Bradesco, Brazil's largest private-sector bank, is due to
kick off the earnings season on Monday. Itau, its closest
rival, will report on Tuesday and Unibanco on Thursday.
Banco do Brasil, which unveiled plans this week to team up
with South African financial group FirstRand (FSRJ.J) in a
joint venture to provide lending for Brazil's fast-growing
automobile market, will report results on Aug. 14.
The following net profit average forecasts were provided by
analysts surveyed by Reuters. All figures are in Brazilian
reais:
=============================================================
2008 2007 CHANGE NUMBER OF
EST 2ND QTR 2ND QTR YR/YR PCT ANALYSTS
-------------------------------------------------------------
BRADESCO 2.093 bln 1.801 bln 16.2 3
ITAU 2.051 bln 1.920 bln 6.8 3
UNIBANCO 759 mln 638 mln 19.0 4
BB 1.491 bln 1.460 bln 2.1 2
=============================================================
($1=1.56 reais)
(Writing by Todd Benson, editing by Gerald E. McCormick)
