(Image: iStock/Rmcarvalho)
O agribusiness is not experiencing its best moment, amid falling grain prices. The weak moment of the sector, considered the flagship of Brazilian exports, was evidenced by the increase in the number of judicial recoveriesincluding the AgroGalaxy (AGXY3) e Agro Portal.
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And in addition to the companies, two other companies depend heavily on the sector: BB Security (BBSE3) e Bank of Brazil (BBAS3). The state-owned company is the main supplier of credit for agriculture and should have impacts, sees the BTG Pactual in a report sent to clients.
In its monthly recommended portfolio, the bank chose to withdraw BBSA3 arguing that the risk of a weaker-than-expected third quarter has increased, with the main reason being higher NPLs (representing bank loans that have not been repaid by its customers) and provisions coming from its portfolio of agribusiness.
The bank has already felt the impact of weaker agriculture in the second quarter's numbers, when profits totaled R$9.5 billion.
According to BTG, data from Banco Central corroborate the greatest pessimism. In August, there was a 30 bps (basis points) jump in the system's NPLs for individual rural loans, where BB holds the largest market share.
For July, the BB was the only incumbent bank to show deterioration in its EH-rated loans (+18 bps m/m), a proxy for asset quality.
“Indeed, although it is challenging to draw important conclusions from just one month of data, BB is also below our estimates for the third quarter, underperforming its peers,” he says.
Also according to BTG, although the Safra Plan was positive, feedback suggests that the plan faced delays, with a weaker/slower start than expected.
This harvest, the Federal Government destined R$400.59 billion allocated for financing10% increase in relation to the previous harvest.
“Given the reduction in commodity prices, farmers have been operating on tighter margins and are carefully waiting for the right time to sell their crops, pay off existing debts and take out new loans under the Crop Plan,” it says.
Furthermore, BTG says that climate effects delayed the planting of new crops, further impacting the decision to take out new loans.
In analysts' calculations, this should translate into Q3 results of weaker loan growth, higher defaults and provisions for the rural segment, although some acceleration of loan growth could still be seen in Q4 (September has already shown improvement) .
The bank projects liquid profit of R$9.5 billion for BB (ROE of 21%), stable in relation to the previous quarter.
“However, based on the issues outlined above, we do not rule out a contraction in profits. For 2025, a higher Selic rate should provide some margin improvement, which could offset the more negative readings from the third quarter results alone.”
Could BB Seguridade suffer too?
In the view of BTGwith the BB having more difficulty originating rural loans this quarter, this should also lead to lower growth in rural premiums written for its insurance arm, BBSE.
“Rural insurance products are often cross-sold during the loan process as farmers are often looking to plant new crops.”
However, they say, as third-quarter results are driven by earned premiums (accumulated over time and with positive carryover strong growth in credit life premiums in the first half), the impact on EPS (earnings per share) for the quarter should be limited.
“But if rural premiums issued do not accelerate in the coming months, the impact on profits will naturally grow in relevance”, he explains.
Overall, BTG expects BBSE to have net profit for the third quarter in line, around R$2 billion to R$2.1 billion (10% in the quarter and stable for the year), similar to what SUSEP data from July indicated .
“There is a risk of a decline in the growth guidance for premiums written this year (8-12%) due to the dynamics of the rural segment, but the growth guidance for non-interest operating results (ex-holding) (5-10%) it should end the year at the midpoint (or even a little higher)”, he says.