January 31, 2019 / 8:44 AM / 18 days ago

UPDATE 2-Brazil's Banco Bradesco sets aggressive 2019 targets, including potential acquisitions

(Adds CEO comments and share price)

By Carolina Mandl

SAO PAULO, Jan 31 (Reuters) - Banco Bradesco SA on Thursday posted forecast-beating quarterly earnings and set more aggressive targets for 2019, including eyeing upcoming government asset sales, sending the Brazilian lender’s shares to a record high.

Brazil’s second-largest privately owned bank reported a 19.9 percent rise in fourth-quarter profit over a year earlier and beat analysts’ average estimate on lower loan-loss provisions.

Recurring net income at Banco Bradesco came in at 5.830 billion reais ($1.58 billion) in the fourth quarter, above the average Refinitiv estimate of 5.526 billion reais.

The bank’s loan book grew at a faster 1.6 percent pace in the quarter. Bradesco also set a 2019 loan book growth target of 9 percent to 13 percent, after a 7.8 percent expansion last year.

“With the faster-than-expected pick-up in loan growth, Bradesco appears to be moving further into a new lending cycle,” UBS analysts wrote in a note to clients.

Bradesco preferred shares jumped nearly 4 percent to 3.99 reais, an all-time high.

Chief Executive Octavio de Lazari Junior told journalists the bank aims to close up to 100 branches this year, a reduced pace from last year given expectations of more loan demand in a recovering economy.

Lazari also said the bank will analyze acquisition opportunities in state-owned financial companies that the Brazilian government intends to privatize. Brazil’s antitrust watchdog had barred it from making additional acquisitions after it bought HSBC’s Brazilian unit, but the ban expired in November 2018.

Also reflecting that rebound, loan-loss provision slid by 31.8 percent year-on-year, as clients’ creditworthiness has improved.

As a result, the bank’s return on equity, a barometer of profitability, also rose in the fourth quarter, reaching 19.7 percent, up 0.7 percentage point from the prior quarter.

“The bank is confident it can post higher profitability,” he said, without mentioning specific targets.

Bradesco has been trying to boost the profitability of retail clients acquired in its purchase of the local unit of HSBC Holdings Plc to raise the bank’s return on equity.

The default ratio over 90 days came in at 3.5 percent, down 0.1 percentage point from the third quarter.

Net interest income is also likely to rebound this year, growing between 4 percent and 8 percent, the bank said.

$1 = 3.6849 reais Reporting by Carolina Mandl; Editing by Keith Weir and Andrea Ricci

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