Bank profit growth of 30% expected in Q4
The earnings season for large Brazilian banks starts next week with expectations that the numbers for the fourth quarter show an improvement compared to the previous period and a leap when compared to the last quarter of 2022, when lenders began to make provisions due to the Americanas default.Analysts also expect the consolidation of a stabilization scenario and even the start of a decline in default rates, which may include the segment of individuals. The segment of credit, in turn, has slowed down, as a result of a tight monetary policy, which usually has delayed effects. However, investors’ focus will be on the disclosure of banks’ guidance for 2024, given the scenario of falling interest rates and weaker activity. Santander will be the first to disclose its numbers, on Wednesday (31).A survey carried out by Valor with seven firms shows that Itaú Unibanco, Bradesco, Santander, and Banco do Brasil combined are expected to post earnings of R$26 billion for the period from October to December, an increase of 4.8% when compared to the third quarter and 30% in one year. The most significant increase is expected from Bradesco, which had the largest exposure to Americanas and made a provision of 100% of its credit with the retailer at the beginning of the crisis. Although the accounting scandal broke out in January 2023, banks recorded the impact on their financial statements for the fourth quarter of 2022, as a "subsequent event." Last year’s combined earnings is expected to reach R$98.915 billion, an increase of 2.8%.After the most challenging period following the pandemic, with inflation, interest rates and default rates rising in 2022 and 2023, a perception is beginning to form that 2024 could be more positive for banks. Inflation under control, falling interest rates, and positive activity indicators—although with some slowdown—suggest there is more room for the return of credit from the middle of this year.The Brazilian Federation of Banks (Febraban) projects an 8.5% expansion of the credit stock in 2024, after around 6.8% in 2023 (last year’s official data has not yet been released by the Central Bank). One factor expected to help boost fee income is the long-awaited recovery in capital markets. This week, the first bond issues abroad started, while share offerings are also expected to return, after the biggest drought of IPOs in 20 years.According to J.P. Morgan analysts, default concerns seem to have eased and the focus should now be on when credit...
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