Banco Bradesco profit down, 2022 outlook positive

SAO PAULO (Reuters) – Brazilian lender Banco Bradesco on Tuesday posted fourth-quarter net income slightly below analysts’ estimates, but indicated a bright outlook for 2022 despite dim growth forecasts for Latin America’s biggest economy.

Bradesco’s recurring net income, which excludes one-off items, totaled 6.613 billion reais ($1.26 billion), below a Refinitiv analyst consensus of 6.916 billion reais and down 2.8% from a year earlier, as operating costs jumped.

Return on equity was at 17.5%, or 2.5 percentage points down from the previous quarter.

Despite Brazil’s more challenging economic environment in 2022, Bradesco said its loan book is likely to keep growing by double digits.

Amid expectations of flat economic growth this year, or even a recession, Bradesco’s credit portfolio should expand between 10% and 14% in 2022, below last year’s growth, it said. Net interest income with clients is seen growing between 8% and 12%.

As Brazil’s surging inflation has eaten in to consumers’ income, Bradesco said its loan-loss provisions are likely to total between 15 billion reais and 19 billion reais, up to 26.6% more than last year.

Despite fiercer competition with fintechs, the bank sees fee income rising between 2% and 6%.

Bradesco’s insurance unit is also likely to boost its 2022 profit, as the bank said insurance results will expand between 18% and 23%.

Inflation is likely to drive costs up between 3% and 7%, while in 2021 they stood at 1.1%.

Amid double-digit inflation in Brazil last year, which pushed up salaries, the bank’s operating costs rose 12.1% in the fourth quarter from a year earlier.

Q4 performance

Cash set aside for bad loans fell 6.2% to 4.283 billion reais. However, the bank’s 90-day default ratio rose 0.2 percentage points in the quarter to 2.8%.

Bradesco’s loan book grew by 5.1% in the quarter, mainly driven by consumer lending. In all of 2021, it rose by 18.3%

Net interest income, a measure of earnings on loans minus deposit costs, rose 1.8% from a year earlier, to 16.96 billion reais.

($1 = 5.2593 reais)

(Reporting by Carolina Mandl and Alberto Alerigi in Sao Paulo; Editing by Matthew Lewis)