Banco do Brasil Posts Weakest Profit Since 2020 on New Rules

(Bloomberg) -Banco Do Brasil SA published its smallest profit in almost five years and reduced the dividend payment rate after accounting changes, forcing the debt-controlled lending to increase the provisions for loan losses.

According to a statement on Thursday, the bank’s corrected earnings fell by 60% annually in the second quarter. In addition, it reduced the dividend payment rate to 30%in the range of 40%to 45%, which was cut for the first time in five years in metric.

The accounting rules, which entered into force in January, require lenders to adopt more strict policies and stop obtaining interest from low quality loans. The changes put pressure on Banco Do Brasil’s agricultural portfolio, which was already injured by Brazilian farmers applying for bankruptcy.

In the last few weeks, in addition to negative thoughts, it was the preliminary data on the financing of banks’ financing by the Central Bank, which led some analysts to estimate that the second quarter of the second quarter of Banco Do Brasil would be below low expectations.

The shares of the company, led by the Executive Board Chairman Tarciana Medeiros, fell 17% this year after falling 13% in 2024. However, they progressed 0.9% in the early hours of Friday, some analysts said that the stock had already taken into account the negatives of the second quarter of the second quarter of Thursday.

M Mora Capital’s partner and fund manager Murilo Arruda said, “The technical side of the stock seems to explain the price action after the release of 2Q earnings,” he said.

According to the average estimation of the analysts who participated in the survey by Bloomberg, the company’s $ 3.8 billion ($ 701 million) corrected profit compared to 5 billion Reais expectations. The provisions of credit loss increased by 104% and rose to 15.9 billion Reais, and the equity return was 8.4%, which has the lowest since 2016.

“2025 is a year of adjustment before accelerating growth, Mad Madeiros said.

In a conference meeting on Friday, CEO said the Bank expects the loan portfolio in the third quarter to be under stress. Uz We expect an improvement that started in the fourth quarter and supported by the growth of net interest income, ”he said.

Banco Do Brasil’s dividend payment ratio-the percentage of earnings paid to hissedars as dividends-the Bank has been the first decrease since 2020, when the Covid-19 pandemi was restricted. A little more than half of the company’s shares belong to the Brazilian government and the bank’s dividends help finance the country’s annual budget.

Banco Do Brasil also re -established his guidance for this year’s profit in May due to deterioration in the agricultural portfolio. The movement reduced the stock 13% that day, the biggest decline for more than five years. The bank is now waiting for the profit to decrease at least 34% per year.

-Leda help from Alvim.

(In the fifth paragraph, the share price adds.)

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