Banks are going through a dubious moment on the stock market: on the one hand they delivered good results, on the other hand they rose little (Image: Freepik)
Banks are going through a dubious moment on the stock market: on the one hand they delivered good results, on the other hand they rose little. Bradesco (BBDC4) e Santander (SANB11) even threatened to soar, but realized part of the gains last month. Bank of Brazil (BBAS3) walked sideways. Only the Itaú (ITUB4) managed to maintain some momentum, with an increase of 6% in the year.
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Opportunity or trap? For the HarvestBrazil is in the opposite direction of the global monetary cycle. While economists predict the country will go through a tightening cycle, most countries are expected to experience an easing cycle.
The Focus Bulletin's projection is that the Selic rate will end 2024 at 11.75% per year.
“As such, we continue to prefer banks within Brazil’s financial spectrum, as we note a solid environment based on controlled asset quality, solid GDP (Gross Domestic Product) growth and moderate inflation expectations for the coming years,” he says.
See the recommendations below:
| Banco | Recommendation | Previous price | Current price | Potential |
|---|---|---|---|---|
| Bank of Brazil | Neutral | R$ 31 | R$ 32 | 18% |
| Bradesco | Buy | R$ 16 | R$ 18 | 22% |
| Itaú | Buy | R$ 39 | R$ 45 | 26,7% |
| Santander | Neutral | R$ 33 | R$ 34 | 19% |
BB from a corner, Bradesco accurate
According to Safra, Bradesco's asymmetry is tilted upwards, with the bank trading at around 1 times the multiple PBV (price over book value).
“We recognize recent developments and the modernization efforts of the new management, which have boosted morale internally and helped throughout the ROE (return on equity) recovery process,” he says.
In the second quarter, the bank made a profit of R$4.7 billion, an increase of 4.4% compared to the same period last year.
The number was above what was expected by the Bloomberg consensus, which expected R$4.3 billion in the period. Furthermore, most houses expected a drop in profit.
In relation to the new forecasts, Safra increased profit estimates by 10% for 2024 to R$19,503 billion (12.2% ROE) and 10.2% for 2025 to R$24,013 billion (14.8% ROE).
“This already takes into account a worse-than-expected market NII (net margin), as we expect the recent steepening of the interest rate curve to have a negative impact on the spread of Bradesco’s pre-fixed portfolio,” he says.
In the case of Banco do Brasil, Safra still has some concerns, with the worsening of agribusiness.
“We observed that producers are complaining about lower commodity prices, having not yet sold their stocks from the previous harvest, delaying the new crop rotation and, therefore, frustrating the disbursement of working capital credit from the 24/25 harvest plan “, it says.
Estimates remain unchanged, at R$37.6 billion, 21.2% ROE, (from R$37.8 billion) in 2024 and R$39.8 billion, 21.0% ROE, (from R$39 .6 billion) in 2025, with no material difference from the consensus.
In Santander there is still no sun; at Itaú, resilience
According to Safra, Itaú is resilient and has a carry, based on its strong profitability above peers, which leaves room for a higher dividend yield compared to privately owned peers (almost 200 bps above) with 8.6% in 2024 and 9.5% in 2025.
The bank's projection is for net profit of R$40.7 billion, with an ROE of 21.9%. For 2025, it projects a profit of R$45 billion and an ROE of 22.7%.
For Santander, Safra explains that it still doesn't see the sun, despite the bank having presented a better ROE, as well as results.
“However, we believe that the promise of good times has been postponed again, given the fact that the bank has the same problem as Bradesco in relation to the mismatch between the pre-fixed portfolio and floating financing, which should impact the market's NII more once”.
Analysts also say that they prefer to maintain a neutral stance at least in the short term, as they do not think its current valuation is broadly attractive in relation to its peers, although they recognize the bank's recent advances in investments, vehicle financing, among others.
“We see Santander trading at 6.8x P/E (price over earnings) and 1.08x PBV (price over book value) for 2025.”