Strong loan growth, stable asset quality bring Bradesco's Q1 earnings up 27.5%

Wednesday, April 27, 2011

Brazil's second largest private sector bank, Bradesco (NYSE: BBD), reported recurring earnings of 2.74bn reais (US$1.75bn) in 1Q11, up 27.5% from 1Q10, on strong loan growth and stable asset quality, the bank's latest financial statements show.

Loan-loss allowances increased to 2.36bn reais in the quarter, a 7.95% increase from 1Q10. Bradesco's net loan financial margin increased 11% to 3.82bn reais.

Bradesco's total loan portfolio came to 285bn reais at end-March 2011, a 21% increase from 12 months prior and up 3.8% from three months ago. Retail loans were 100bn reais, up 16.4% from end-1Q10, while corporate lending rose 23.7% to 185bn reais.

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Despite the good results, administrative and personnel expenses seem to be a concern, as this item rose by 17% year-on-year to 5.58bn reais. Deutsche Bank's (NYSE: DB) Mario Pierry and Tito Labarta said the increase reflects the hiring of 8,600 people and opening of 196 branches in the past year.

The 90-day non-performing loan (NPL) ratio improved to 3.6% from 4.4% in 1Q10, and remained stable from the previous quarter.

Overall, for Deutsche Bank the results "showed the resilience of the bank's earnings despite adverse market conditions (due to the introduction of macro prudential measures). Net income is growing at a double-digit pace and ROE has remained comfortably above the 20% level."

The so-called macroprudential measures implemented by the government in the last few weeks have been aimed at curbing rising inflation and the strengthening of the real.

Deutsche Bank maintained its buy rating on Bradesco's stock.

To access the 1Q11 results in English, go to this link

To access the 1Q11 results in Portuguese, go to this link