(Added CEO comments on provisions, analysts’ rating, stock reaction)
By Caroline Mandl
SAO PAULO, May 5 (Reuters) – Banco Bradesco defaults are under control despite the Brazilian lender’s decision to set aside an additional 1 billion reais ($ 185.31 million) in the first quarter to mitigate the impact of the coronavirus pandemic, Chief Executive Officer Octavio de Lazari said on Wednesday.
The CEO told analysts the bank is expected to end 2021 with between R $ 15 billion and R $ 16 billion in loan loss provisions, roughly in the middle of the annual outlook it unveiled in February.
“I am very positive about Brazil’s economic recovery in the coming months,” he said after being repeatedly asked about the quality of the bank’s assets amid a brutal second wave of the crisis. pandemic in Latin America’s largest economy.
Bradesco, the country’s second-largest private lender, on Tuesday announced a 73.6% increase in first-quarter profits, beating estimates, as its loan loss provisions fell 41.8% from the previous year. last year. With many lenders not repaying their debts with forbearance, the bank decided to increase its bad debt buffer by 1 billion reais.
Bradesco shares opened more than 2% lower on Wednesday, but were roughly flat by mid-morning, underperforming the Bovespa stock index and the company’s private sector peers.
Bradesco’s 90-day default ratio rose 0.3 percentage points to 2.5% in the first quarter compared to the previous three months, mainly thanks to small businesses and individuals.
The indicator is expected to increase by the end of 2021 but to pre-pandemic levels, Lazari added, as abstentions keep delinquency at abnormally low levels. He said the provisions set aside last year should be enough to cover the expected increase.
In a note to customers, analysts at XP Inc said bad debt performance at Bradesco had yet to be clarified.
With lower traffic at its branches due to the pandemic and competition with financial startups weighing on Bradesco’s fee income, Lazari said the bank will work to reduce operating costs at minus 5%.
Closing or resizing 300 to 400 branches this year are among the steps to achieve that goal, Lazari said. Bradesco ended March with 3,312 branches, or more than 1,000 units less than a year ago.
($ 1 = 5.3964 reais) (Report by Carolina Mandl edited by Paul Simao)