Bradesco posts lower profit, credit still strong

By Todd Benson and Aluisio Alves

SAO PAULO (Reuters) - Brazilian financial group Banco Bradesco (BBD.N) (BBDC4.SA) said on Monday its net profit fell 13 percent in the second quarter from a year before, when its earnings were inflated by the sale of stakes in steelmaker Arcelor Brasil and local credit bureau Serasa.

Net income slipped to 2.002 billion reais ($1.283 billion) from 2.302 billion reais a year earlier and 2.103 billion reais in the first quarter of 2008. The bank was expected to report net income of 2.093 billion reais, according to the average forecast of three analysts surveyed by Reuters.

Excluding one-time gains in the year-earlier quarter and the first quarter of this year, Bradesco's earnings rose, helped by steady growth in its credit portfolio.

The bank made a net profit of 1.801 billion reais in the second quarter of 2007 when excluding gains from the sale of stakes in Arcelor Brasil and Serasa. In the first quarter of 2008, its earnings totaled 1.907 billion reais after adjusting for the sale of part of its stake in credit card company Visa Internacional.

"The results are in line with expectations. Their shares are falling, but that's because the market is down today. It has nothing to do with the results, which were good," said Marco Aurelio Barbosa, a banking analyst at Coinvalores, a Sao Paulo brokerage.

Bradesco's shares fell 4.5 percent to 30.87 reais in afternoon in Sao Paulo, while the benchmark Bovespa index was down 2.66 percent.

Bradesco, Brazil's largest private-sector bank, reported net income of 4.105 billion reais ($2.63 billion) for the first half of the year, up 2.4 percent from a year earlier.

Return on equity, a key gauge of profitability, averaged 27.6 percent in the second quarter, down from 28.7 percent in the first quarter and 29.5 percent in the 2007 second quarter.

CREDIT EXPANSION

Like other banks in Brazil, Bradesco is benefiting from growing demand for consumer credit as the country's economy expands at a healthy clip. The increase in lending has helped Brazilian banks consistently chalk up hefty profits at a time when banks in the United States and Europe are bleeding losses because of the credit crisis there.

Bradesco's credit portfolio expanded 38.8 percent in the first six months of 2008 and 7.2 percent in the second quarter, reaching 181.6 billion reais. Loans for individual borrowers rose 32.2 percent in the first half, while lending to businesses jumped 42.9 percent.

Some analysts caution that bank lending may start to slow in the second half of the year now that Brazil's central bank has begun raising its benchmark lending rate, known as the Selic, to curb resurgent inflation. Bradesco, however, sees no signs of a slowdown in lending.

"The increase in the Selic hasn't had an impact," Chief Executive Marcio Cypriano said on a conference call.

Bradesco now expects its credit portfolio to expand by 24 percent to 29 percent this year, up from a previous forecast of 21 percent to 25 percent. Cypriano said the bank raised the forecast because of surging demand for credit, mainly from large companies seeking financing for expansion plans.

"They're dusting off projects and are moving ahead with investment plans," he said.

Bradesco finished June with 403.27 billion reais in total assets, up from 355.52 billion reais at the end of the first quarter.

($1=1.56 reais)

(Writing by Todd Benson, editing by Gerald E. McCormick)