The big retail banks had, as usual, good results in the second quarter. Adding to the BRL 7.63 billion in profit of Banco do Brasil, disclosed on Wednesday night (10), the four giants listed on the stock exchange accounted for BRL 26.45 billion in profit, up 17.3% compared to BRL 22.55 billion in the second quarter of 2021. The relief of the pandemic and the return of economic activities to normality ensured this. However, the prospects are not bright. The default rates of individuals and small companies, which have less financial strength, grew throughout the financial system due to high interest rates and the slowdown in the economy. And in commenting on the outlook, bankers used their favorite word to anticipate tough times: challenging.
Without exception, financial institutions said they had raised their default provisions and pledged to take a cautious approach to lending during the second half of the year. “Looking ahead, the default scenario requires caution and the bank is on alert,” said Milton Maluhy Filho, president of Itaú Unibanco on Tuesday (9), when commenting on the results. The bank presented better numbers than expected by the market and raised the projection (‘guidance’) of several indicators for the coming quarters.
Net income of R$7.7 billion was above the market median for expectations, which was around R$7.3 billion. Inter Invest analyst Matheus Amaral said that the bank had a good result in services driven by asset management, credit card revenues and economic-financial advisory services. And according to XP analysts Renan Manda and Matheus Guimarães, default remains at a comfortable level of 2.7%.
“Looking ahead, the default scenario requires caution and the bank is alert” Milton Maluhy Filho, president of Itaú Unibanco.
Even Banco do Brasil, which presented a result well above the market’s expectations, had to increase the Provisions for Doubtful Accounts (PDD). The bank profited BRL 7.63 billion, up 14.5% from the first quarter and 38% from the same period in 2021. Equity profitability was in line with that of private competitors, reaching 20.6% in quarter, up 6.1 percentage points over the same period in 2021. Delinquency over 90 days closed the quarter at 2.0%, a slight increase of 0.1 percentage point compared to the first quarter of this year. As a result, the bank increased the allowance for loan losses by R$ 2.9 billion.
BRADESCO Bad debt was also mentioned in Bradesco’s earnings presentation, which released its second quarter numbers on Friday (5th). The bank recorded an 11% increase in profits compared to the same period in 2021. The result improved from R$6.3 billion to R$7.04 billion. However, in the second quarter, delinquency over 90 days rose to 3.5%. To compare, in the same period of 2021 this percentage was 2.5%. “The increase in provisions exceeded our expectations,” said analysts at Genial Investimentos Eduardo Nishio and Bruno Bandiera. However, XP Investimentos highlighted that not everything was bad in Bradesco’s results. The profit of R$ 7.04 billion was well above the expectations of the brokerage, which was R$ 6 billion. “The number was benefited by a stronger performance of the insurance segment”, said the analysts.
Santander, in the analysts’ view, presented a worsening of the financial margin, measured by the so-called Net Interest Income (NII). “NII was once again harmed by the result with treasury, still negatively affected by the high interest rate movement”, affirmed Amaral, from Inter Invest. The profit was R$ 4.08 billion, 2.2% below the one obtained in the second quarter of last year. Even so, the number for 2022 was above the R$ 3.9 billion expected by the market. And there was a positive point: among the big ones, Santander was the only one whose default for arrears of more than 90 days did not increase, remaining at 2.9%.
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