Banco do Brasil SA cut his forecasts de profits and said credit conditions had worsened across its large portfolio of loans to agricultural businesses, causing its share price to fall 13%.
“We are going through the most severe debt cycle in the agroindustrial sector in our history,” declared the executive director, Tarciana Medeirosin a teleconference. The financial director, Geovanne Tobiasstated that this quarter and the next will be “complicated.”
Medeiros He said the moral hazard associated with debates over debt relief measures was worse than expected, but that the bank will maintain its collection efforts and sell portfolios at a loss.
Loans to agricultural businesses, which make up a sizeable portion of the bank’s credit portfolio, have deteriorated since 2024. Debt relief programs have had little effect on the timeliness of payments as farmers face high interest rates and cost pressures from war-related spikes in the Middle East.
According to a statement issued Wednesday, the state bank now forecasts an adjusted net profit of between 9 billion and 11 billion reais this year, down from the previous forecast of between 18 billion and 22 billion reais. Likewise, it raised its forecast for credit costs to between 80,000 and 83,000 million reais, compared to the previous 65,000 and 70,000 million reais.
The bank’s shares fell to 14.79 reais in São Paulo.
According to a person familiar with the matter, who asked not to be identified because the information is private, a significant number of farmers in western Brazil who grew soybeans, corn or owned ranches chose not to pay their loans during that period. The situation was complicated by the presidential election, as prompt payments generally worsened during that time, while farmers weighed whether a government of Flavio Bolsonaro could bring them greater relief.
The bank also reported that adjusted net profit plummeted almost 67%, to 1.3 billion reais, during that period. This figure was considerably lower than analysts’ average estimate of 3.09 billion reais, according to data compiled by Bloomberg.
Earlier this year, shareholders of Bank of Brazil approved a plan to raise the entity’s capital limit to 150 billion reais, in order to give it greater room for maneuver in the face of the difficulties its loan portfolio is experiencing. At the time, the bank stated that it did not plan to raise new capital immediately.
The bank reduced its dividend from 30% to 25% this year, the minimum required of Brazilian companies. Next year it will maintain the same dividend as long as the bank’s projections justify it, he stated. Medeiros. Bank of Brazil It expects its CET1 capital ratio to remain around 10.5% at the end of next year, up from 10.8% in September, Tobias said.
The president’s victory Luiz Inácio Lula da Silva in October caused a 29% drop in the bank’s shares the next day, its biggest decline in at least 32 years, as investors weighed the prospects of interest rate cuts.
A little more than half of the shares of the Bank of Brazil They are in the hands of the Brazilian government, which makes the company’s shares a traditional electoral investment instrument. Medeiros, who was nominated for the position by Lulabe replaced, according to O Globo.
