Bank Bradesco ADRBBD

Morningstar Rating

Stock Research and Analysis

by Maclovio Pina

As Brazil's third-largest bank, Bradesco has enjoyed very fast and profitable growth in the last decade. However, we think deteriorating global conditions will take their toll even on Brazil, one of the most resilient emerging-market economies. As a Read more

Bulls Say

Despite short-term worries, Bradesco is poised to continue its profitable growth trajectory as it expands its business to underserved population segments.

Bradesco should be able to command high interest rates on its loans, which will result in wide interest margins and sizable revenue.

With around half of its revenue deriving from fee income, Bradesco is well-diversified, and interest rate movements will not affect its profitability as much as its smaller peers', which rely heavily on interest rate spreads. Read more

Bears Say

If inflation in Brazil shoots up, it will erode real purchasing power. Coupled with a rise in unemployment, this could really hamper short-term investment and consumption, hindering banks' growth prospects.

Very expensive bank loans will strain households during the recession, making them fall behind in payments and increasing banks' loan losses.

Any weakening of Brazil's currency will have a direct impact on Bradesco's U.S. dollar fair value. For instance, a 10% fall in the exchange rate would lead to a 10% decline in value, without any changes to the underlying bank operations.

Ten percent of Bradesco's loan portfolio is to government-targeted sectors of the economy at below-market interest rates. This may not only be an inefficient use of the bank's capital, but may also foreshadow increased government interference in Bradesco's operations when times get tough in Brazil. Read more

Strategy

Bradesco is focused on domestic expansion of its complete bank model. It wants to expand its banking and insurance segments both geographically and by having more penetration in low- and middle-income Read more

Management

Despite its handsome profitability and promising growth prospects, we think Bradesco is run with little regard for outside shareholders' interests. This comes as no surprise, given that Fundacao Bradesco, a charitable organization, owns nearly 50% of Read more

Profile

With about $250 billion in assets, Bradesco is Brazil's third-largest bank. It provides a wide array of banking services through its 4,600 branches. Its two main segments, Read more

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