Banco Bradesco's High Cost of Funds Is Pressuring Results, but Falling Rates Will Provide Relief

As pandemic conditions eased, Bradesco was able to generate impressive loan growth during much of 2021 and 2022, with commercial loans and mortgages in particular leading the way. With a slew of government guarantee programs for small and midsize enterprises and fiscal stimulus spending, the bank's credit costs during the pandemic were surprisingly low. However, credit costs rose in 2023 and the bank is underperforming its peers, with the bank's more-than 90-day nonperforming loan ratio reaching 5.1% at the end of 2023. While Banco Bradesco had been enjoying a period of high profitability, deteriorating credit conditions have put an end to that as the bank's loan loss provisions have ballooned.