February 5, 2020 / 9:22 AM / 17 days ago

Shares in Brazil's Bradesco rise on outlook for 2020

SAO PAULO (Reuters) - Brazil’s second-largest private lender Banco Bradesco SA (BBDC4.SA) unveiled a cautious but better-than-expected outlook for 2020 on Wednesday, sending its preferred shares up by more than 4% in morning trading.

FILE PHOTO: The logo of Banco Bradesco is seen on a branch in Osasco financial centre, Brazil, August 3, 2015. REUTERS/Paulo Whitaker/File Photo

Bradesco’s 2020 forecast included lower loan-book growth than last year, but was still considered optimistic by analysts. The bank expects loan book growth of between 9% and 13% in 2020.

Amid higher taxes, a regulatory cap on overdraft charges, record-low interest rates and fiercer competition with financial technology startups, analysts said in notes to clients on Wednesday that Bradesco’s forecast was likely to yield a higher-than-expected profit.

“Guidance confirms our expectation Bradesco is set to post the highest earnings growth among private-sector banks,” Credit Suisse analysts said.

They see Bradesco’s 2020 profit coming in at 9% above the previous year.

In a call with journalists, Chief Executive Officer Octavio de Lazari said consumer lending and small companies were likely to drive loan book growth this year, although he does not expect a sharp rise in the credit market overall.

To compensate for this, Lazari said the bank would keep operating expenses under control, from flat to 4% growth at the most. Last year, expenses rose 7.2%.

“Operating expenses are likely to grow below inflation this year,” he said.

Lazari confirmed the previous target of shutting 300 branches in 2020.

Bradesco’s fourth-quarter recurring profit, which excludes one-time items, came in at 6.645 billion reais ($1.56 billion), slightly above analysts’ estimate of 6.508 billion reais in a Refinitiv poll and up 14% from a year earlier.

Profit was mainly driven by its insurance unit and loan book growth. Its loan book grew by 4.6% in the quarter and 13.8% in the year, boosted by consumer lending. Loans in arrears for more than 90 days came in at 3.3%, down 0.2 percentage point from the prior quarter.

Still, loan-loss provisions soared 19.3% in the quarter, amid higher disbursements for consumers and small companies.

Despite Brazil’s record low benchmark interest rates, Bradesco’s net interest income, a measure of gains on loans minus deposit costs, rose 4.4% from a year earlier.

The bank’s return on equity came in at 21.2%, up 1 percentage point from the previous quarter.

($1 = 4.2551 reais)

Reporting by Carolina Mandl, additional reporting by Paula Laier, editing by Louise Heavens and Bernadette Baum

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