Banco Bradesco Earnings: Improved Credit Results Help Offset Falling Net Interest Income

No-moat-rated Banco Bradesco reported weak first-quarter earnings that were in line with our expectations, as better credit results were offset by lower net interest income. The bank’s net revenue declined 3.7% from last year to BRL 28 billion. Recurring net income fell 1.6% from last year but increased 46.3% from the previous quarter to BRL 4.2 billion. This translates to a return on equity of 10.2%, which is below both historical levels and our cost of equity for the firm. As we incorporate these results, we do not plan to materially alter our $3.50 per ADR share fair value estimate. We see the shares as undervalued but caution investors that 2024 will be a transition year for the bank as it seeks to reverse its recent underperformances relative to its peers.