(New throughout, adds CEO, CFO comments)
By Carolina Mandl
SAO PAULO, Nov 8 (Reuters) - State-controlled Banco do Brasil SA is likely to see stronger loan book growth, increase fee income above inflation and keep operating expenses in line with inflation in 2018, the bank’s executives said on Thursday.
It is unclear who will be at the helm of Banco do Brasil next year, as Brazil President-elect Jair Bolsonaro takes the reins on Jan. 1 and has not named yet the bank’s new chief executive.
Marcelo Labuto, who has only been CEO since last month, told journalists at a news conference that he has not been invited to continue at the bank. His predecessor Paulo Caffarelli left to run card processor Cielo SA.
Labuto’s plans include increasing the importance of fee income as a source of earnings, reducing the bank’s dependency on loans.
The CEO said Banco do Brasil was also studying partnerships in its brokerage and investment banking divisions, but did not name potential partners or specify when a deal could close.
Earlier on Thursday, Banco do Brasil posted third-quarter profit roughly in line with analysts’ expectations, helped by lower loan-loss provisions. Recurring net income, which excludes one-time items, came in at 3.402 billion reais ($911.65 million), up 25.6 percent from a year earlier.
“Overall operational trends surprised us positively: asset quality improved more than we were expecting, while operating expenses and banking fees dynamics came well above our already optimistic numbers,” Santander analysts said in a note.
Despite a generally positive reception of the results by analysts, shares in Banco do Brasil were trading down 1.52 percent in the early afternoon. The benchmark Bovespa was down 1.25 percent.
Labuto said Banco do Brasil should close the gap with its private peers in up to two years in terms of return on equity - in which the state-controlled lender still lags behind its biggest competitors.
The bank’s return on equity of 14.3 percent was up 0.5 percentage points from the previous quarter and topped an estimate compiled by Refinitiv of 13.1 percent, but it is still lower than its peers.
The bank’s expanded loan book, which includes domestic bonds, remained roughly stable in the quarter, at 686.3 billion reais.
With loan book growth sluggish, the bank forecast net interest income to contract by between 5 and 6.5 percent in 2018, a sharper drop than its previous estimate of up to 5 percent.
However, Banco do Brasil’s loan book is likely to grow in 2019, Labuto said. The bank in recent quarters has sought to alter its lending risk policy and bring more small and medium companies onto its books. (Reporting by Carolina Mandl; additional reporting by Paula Laier; editing by Jason Neely and Rosalba O’Brien)