BB, Bradesco to post solid Q2 results, Santander unit, Itaú could disappoint - DB

Thursday, July 14, 2011

Deutsche Bank (NYSE: DB) expects Brazilian banks to post mixed second quarter results, with the country's first and third largest bank - Banco do Brasil (BB) and Bradesco (NYSE: BBD) - to post solid results, while Itaú Unibanco (NYSE: ITUB) and Santander Brasil (NYSE: BSBR) could disappoint.

BB is expected to "surprise positively," on the back of higher gains from Previ, the pension fund for BB employees and the country's largest. "Similar to 2Q10, Previ gains could total some 900mn reais [US$572mn] (above our 600mn-real forecast) due to the semi-annual rebalancing of assets," DB said.

The federal banking giant should also continue to show better cost trends, with year-on-year single-digit growth, while asset quality should perform better than its peers on a quarterly comparison due to a better loan mix, the analysts wrote.

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In a note to investors, analysts Mario Pierry and Tito Labarta said Bradesco expects the operating trend to remain solid, with double digit year-on-year net income growth and ROE over 20%. Growth should be driven by higher net interest margin (NIM) and solid loan growth.


Regarding Spain's Santander (NYSE: STD) unit, Labarta and Pierry said that 2Q11 results could disappoint, as it fine tunes its business model following changes in management. They noted that the bank's NIM should continue to expand, while operating costs should grow at a slower pace than its peers.

As for Itaú, Deutsche Bank said the bottom line could come in below its estimates - but in line with first quarter figures - due to the lack of NIM expansion, a higher delinquency ratio and lower treasury income. On a positive note, DB expects expenses to grow by single digits, reflecting recent layoffs.

Deutsche bank has a buy rating on BB, Bradesco and Itaú, and a hold rating on Santander Brasil. Both Bradesco and Santander are expected to report 2Q11 results July 27, BB on August 1 and Itaú on August 2.