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NEWS - Banco Do Brasil Grew At Expense Of Profits In First Quarter

Banco Do Brasil Grew At Expense Of Profits In First Quarter

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State-run Banco do Brasil SA likely saw profit tumble in the first quarter as provisions rose after the nation's largest bank stepped up loan disbursements at the fastest annual pace in three years, a poll of analysts said on Tuesday.

State-run Banco do Brasil SA likely saw profit tumble in the first quarter as provisions rose after the nation's largest bank stepped up loan disbursements at the fastest annual pace in three years, a poll of analysts said on Tuesday. The Brasilia-based bank, which releases quarterly earnings early on Wednesday, is braced for a quarter of weak earnings as interest income fell in the face of lower domestic interest rates. Waning trading gains as well as a decline in income from pension fund operations may also hurt the bank's bottom-line, the poll found. Brazilian President Dilma Rousseff has used Banco do Brasil and Caixa Econömica Federal to cut credit costs in Brazil - which remain among the world's highest - and to foster competition with private banks. Such efforts fueled rapid loan book growth at state-run lenders, which now control 48 percent of Brazil's outstanding loans, without a significant deterioration in delinquencies. Recurring profit, a measure of net income excluding one-off items, is forecast to drop 13 percent to 2.77 billion reais ($1.38 billion) compared with the fourth quarter, a Thomson Reuters poll of five analysts showed. On an annual basis, profit likely rose 2.3 percent. Lenders have suffered in the face of Rousseff's drive, a reluctance among indebted consumers to borrow and two years of flagging activity. Last year, industry profit fell for the first time in 15 years. Among the largest listed banks, Banco do Brasil had the biggest decline in return on equity, a gauge of how well banks invest shareholder money, during the quarter, according to the poll. Net interest margin, the average rate earned on loans, fell too, the poll found. Return on equity likely tumbled to 16.4 percent in the first three months, compared with 27 percent in the fourth quarter and 18.1 percent in the year-earlier period, the poll showed. Growth in Banco do Brasil's loan book probably accelerated to 26 percent at the end of March, the fastest annual pace since the second quarter of 2010, the poll showed. On a quarter-on-quarter basis, credit rose 3.7 percent, totaling 545.1 billion reais. Expenses probably fell 2 percent on a quarterly basis, but rose 11 percent from the first quarter of last year pressured by rising payroll costs, the poll said. This year's first quarter will probably see stable default ratios at Banco do Brasil, which were made possible after management increased the provision to cover souring credit. Loans in arrears for 90 days or more stood at 2.1 percent in the first three months. The provision for loan losses likely rose 6.4 percent from the fourth quarter to 3.87 billion reais, according to analysts in the poll. Following is a table with analysts' first-quarter earnings expectations. Comparisons are made with the prior three months. ---------------------------------------------------------------- BANCO DO BRASIL Q1 2013 Q4 2012 Q1 2012 ---------------------------------------------------------------- Recurring profit 2.77 bln reais 3.18 bln reais 2.70 bln reais Percent change - 13.0 pct + 2.3 pct ---------------------------------------------------------------- Return on equity 16.4 pct 27.0 pct 18.1 pct ---------------------------------------------------------------- Default ratio 2.1 pct 2.1 pct 2.2 pct Percent change unchanged - 0.1 pps ---------------------------------------------------------------- Provisions 3.87 bln reais 3.64 bln reais 3.58 bln reais Percent change + 6.4 pct + 8.2 pct ---------------------------------------------------------------- ($1 = 2.01 Brazilian reais) (Reporting by Guillermo Parra-Bernal)


 

 

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