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The investor who owns Bank of Brazil A few years ago, it became accustomed to encountering annual increases of more than 50%. However, so far, the action has barely moved. In 2024, the stock accumulates an increase of just 0.51%, which makes part of the market question whether BBAS3 did not reach its peak.
Some obstacles, such as the recurrence of delivery of results from the Banco Patagoniaalready Argentinaand an increase in defaults, especially in agribusiness, raised the yellow flag. However, for the Morgan Stanley BB still has room for a return (and what a return).
The bank has a target price of R$45, a potential increase of 64% compared to the last closing. The recommendation is to buy.
Furthermore, the bank participated in the first investor day promoted by BB in Nova York and left with not one, but five good reasons to remain optimistic about the stock.
O BB provided some incremental information about its outlook for 2025, competition in payday loans and the delisting of Cieloamong other topics.
See below.
ROE the 20%
Morgan says management continues to believe that maintaining ROE (return on equity) 20% will be possible in 2025.
And despite the macroeconomic scenario, the bank expects to meet its 2024 guidance of 8-12% loan growth, 4-8% fee income growth and net profit of R$37 to R$40 billion.
Currently, Morgan expects net profit of R$38.3 billion for 2024.
For 2025, however, BB recognized that the environment will be more challenging, as GDP growth is expected to slow down (from 3.0% to 1.8% this year) and interest rates (Selic) will be higher for more time.
“That said, strong agribusiness activity and healthy demand for credit should sustain another year of
solid results, with ROE likely to remain in the 20% range”, highlights Morgan.
Competitive advantages in payroll loans
BB highlighted the advantages of payroll tracking, considered less risky, as it is deducted directly from the payroll.
Currently, the bank holds more than 20% of the market share in this product and accounts for 40% of its individual portfolio.
Its presence is greater in the public payroll loan market.
47% of all public servants in Brazil receive their salaries at the bank, which is an important advantage when it comes to having the customer relationship for this product.
“Overall, although management expects competition for payday loans to remain quite fierce, it is confident in its ability to remain a market leader and continue to grow, particularly in segments such as INSS and private payroll loans, where it doesn’t think it has reached its fair share of the market yet,” he says.
Cielo and small and medium-sized companies
According to BB, the delisting of Cielo should allow it to gain momentum in the small and medium-sized companies segment, something similar to what happened with the small machines in the Itaú (ITUB4), a Networkwhich was listed and went private.
Therefore, the standalone profitability of the acquisition will not be a priority for management. And BB emphasized that both he and the Bradesco (BBDC4) are on the same page when it comes to this vision.
“In our opinion, pressure on holder prices will come sooner or later as the payments sector in Brazil is rapidly approaching saturation.
Technology and digitalization at Banco do Brasil
BB also explained that in the last three years, it has increased IT investments by 125% and expanded its IT-related headcount by 50%, which it believes has translated into a stronger expansion of the customer base and channel adoption digital.
Today, BB has 84.3 million customers, of which 29.2 million are active on digital channels.
“Impressively, BB has 9 million average daily visits to its Super App, with many customers using BB as their main account to execute PIX transactions (the bank said that 25% of PIX volumes pass through its channels)”, he states .
Agency network
And while other banks close branches, BB says that the physical remains alive.
During the event, the bank said that it still has more than 700,000 customers visiting its branches daily, a significant number according to Morgan, which continues to drive business, as average ticket sizes are 4 times greater in branches than in channels digital.
“Therefore, it will continue to focus on further integrating digital and physical service channels, as illustrated by its new Ponto BB branch model.”