Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banco do Brasil SA BB Brasil (BDORY, Financial) reported a robust net income of BRL18.8 billion, marking an 8.5% growth on a half-year basis.
- The bank successfully increased its fee income to BRL17.2 billion, a 4.7% growth, despite competitive pressures from digital banks.
- The bank's cost-to-issue rate and cost-to-income ratio were reported as the best, indicating efficient cost management.
- Banco do Brasil SA BB Brasil (BDORY) has been proactive in leveraging macroeconomic opportunities, resulting in positive outcomes from treasury interactions and hedging strategies.
- The bank's strategy to focus on payroll loans is expected to drive growth in the individual segment, with delinquency rates remaining under control at 3%.
Negative Points
- There is a noted increase in provisions for loan losses, particularly in the agribusiness sector, due to farmers delaying payments amid volatile commodity prices.
- The bank's capital consumption has increased due to growth in the loan portfolio and treasury activities, which may demand more capital.
- Concerns were raised about the sustainability of the current high return on equity (ROE) of 21.7%, given potential changes in interest rates.
- The legal risk expenses have increased significantly, with a 35% rise in the quarter, impacting overall expenses.
- The bank's exposure to economic plans continues to be a recurring issue, with provisions amounting to BRL1 billion in the quarter.
Q & A Highlights
Q: Could you elaborate on your strategy for the corporate portfolio and capital management for the second half of the year and beyond?
A: Marco Geovanne Tobias da Silva, CFO, explained that despite a restricted market in the first half, Banco do Brasil capitalized on opportunities, particularly in capital market transactions. The bank ranks between second and third in CM transactions and aims to continue leveraging its strong corporate and individual client base. The strategy involves maintaining adequate capital management to support growth, with a focus on working capital and investment portfolios, which have shown significant growth.
Q: What is your outlook on the Allowance for Loan Losses (ALLL) and the impact on different segments, particularly agribusiness?
A: Geovanne noted that the ALLL increase is partly due to agribusiness, where farmers delayed payments amid volatile commodity prices. The bank is negotiating to regularize delinquencies and expects to stabilize NPL rates. The ALLL from the individual portfolio is seen as "good cholesterol," stemming from credit expansion, especially payroll loans.
Q: How do you view the impact of the Selic rate on your funding margin and client NII?
A: Geovanne stated that a lower Selic rate puts pressure on the funding spread but also reduces the cost of time deposits. The bank expects an improvement in client NII due to better spreads in agribusiness funding and a focus on higher-return lines. The Selic rate is projected to be around 10.5% for the year.
Q: What is your approach to capital management and dividend payout in light of CET1 reductions?
A: Geovanne emphasized that the bank's strategy is to grow organically with sustainable results, incorporating profits into the capital base. The CET1 reduction is within predictions, and the bank aims to maintain a healthy level around 11%, which is above regulatory requirements. The payout increase to 45% aligns with a more benign economic outlook.
Q: Can you provide insights into the potential impact of IFRS 9 on your capital?
A: Felipe Geissler Prince, CRO, mentioned that while there will be an impact, it is not expected to significantly alter the bank's prudential level or growth strategies. The bank is in discussions with regulatory bodies regarding the deferral of provisioning rule changes, and the impact will be managed within the bank's capital projections.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
