Banco Bradesco BBD earned BRL 1.8 billion ($1.0 billion) during the third quarter. This figure is 21% lower than the second quarter's net income, which benefited from a one-time BRL 2.0 billion gain on the sale of VisaNet Brasil shares. The bank's recurring results are right where we expected them, and we are not modifying our fair value estimate. Similar to what peers Itau Unibanco ITUB and Santander Brasil BSBR reported, Bradesco's credit quality is showing signs of stabilization. Although nonperforming loans are still increasing, the rate of climb is slower than in recent quarters, especially in loans to individuals. In addition, we are optimistic that the worst of credit deterioration may be behind Bradesco, as early delinquencies are falling. That is not to say that we think loan losses will fall precipitously. Indeed, currently, total nonperforming loans past due 90-plus days stand at 5.0% of the portfolio, and we think there is still plenty of loss content in this balance. Hence, though we do not anticipate very high provisions (like the second quarter's BRL 4.4 billion), we do expect these to remain elevated (between BRL 2.0 billion and BRL 3.0 billion, similar to that of the third quarter) for some quarters, pressuring Bradesco's bottom line.We think Bradesco has a very adequate capital position. Tangible common equity makes up 7.3% of tangible assets, and the bank has a hefty 14.3% Tier 1 capital ratio. In our opinion, the firm is well situated to absorb its expected losses and deploy its capital in new lending operations once demand kicks in full steam next year.
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Analyst Notes
08-04-09 | 12:27PM Bradesco Benefits from VisaNet IPO
07-09-09 | 9:36AM Reducing Brazilian Banks' Uncertainty
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