SAO PAULO: Banco Bradesco SA, Brazil’s No. 3 listed bank, on Wednesday beat net income forecasts as lower loan-loss provisions offset a contraction in its loan book. Provision expenses fell to the lowest levels in two years as the bank’s efforts to focus on less risky segments bore fruit. Loans in arrears for more than 90 days, the industry’s standard gauge of delinquencies, slipped to 4.8 percent from 4.9 percent in the prior three months. Improved credit quality, coupled with an increase in fee income, overshadowed a fourth-straight quarterly contraction in Bradesco’s loan book.
Brazil’s deepest recession on record has crippled demand for credit, while central bank efforts to slash interest rates curbed revenue from interest-bearing products. Bradesco’s interest income fell 6 percent to 14.604 billion reais ($4.46 billion), the lowest since the fourth quarter of 2015, also weighed down by substantial impairments on the value of financial assets. Still, loans to individuals rose 0.7 percent from the year before, hinting at a recovery in the credit market. Lower unemployment, slow inflation and delevaraging efforts among households have boosted consumer spending in Brazil, leading the economic pickup. Net income excluding one-off items totaled 4.810 billion reais ($1.5 billion), up 2.3 percent from the second quarter and above a consensus forecast of 4.544 billion reais compiled by Reuters. Return on equity (ROE), a gauge of profitability, slipped 0.1 percentage point to 18.1 percent but still outperformed analyst expectations. When including non-recurring events, net income fell to 2.884 billion reais, mostly due to expenses related to a voluntary employee buyout program. Executives will discuss quarterly results in a conference call at 11:00 a.m. local time.
