Brazil's Bradesco beats quarterly profit expectations

Brazilian lender Banco Bradesco SA on Thursday reported a better-than-expected 11.4% growth in quarterly profit, helped by an increase in personal loans and cost controls. The lender posted recurring net profit, which excludes one-off items, of 7.04 billion reais ($1.35 billion), compared with a Refinitiv consensus of 6.73 billion reais.

The profit growth was driven by the "performance of net interest income from clients, fee and commission income, operations from insurance and operating expenses control," the bank said in a statement. Bradesco's cash set aside for bad loans jumped 52.4% in the period to 5.31 billion reais, reflecting a more challenging economic environment in Brazil in light of repeated interest rate hikes and surging inflation.

On the other hand, higher interest rates also boosted Bradesco's net interest income (NII) from clients, which came in at 16.95 billion reais, up 25.8% from the year-ago quarter. Relatively slow growth in the lender's operating costs were another highlight, reaching 11.53 billion reais, or 4.9% above the previous year, but well below Brazil's June 12-month inflation rate of 11.89%.

The bank's consolidated loan book expanded 17.7% to 855.38 billion reais, while personal loans grew 19.6%. Its 90-day default ratio grew just one percentage point to 3.5%. The growth in the default ratio was an expected trend, it said, given the product mix of its loan portfolio, which, in the quarter, focused more on credit card products and personal credit, according to the bank.

"The quality of the portfolio continues at normal and profitable levels, maintaining good coverage ratios," said Bradesco. Return on equity reached 18.1%, or 0.5 percentage points above the previous three months. ($1 = 5.2119 reais)

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