Analyst Note
| Michael Miller |No-moat rated Banco Bradesco reported strong third-quarter results, with net income of BRL 6.8 billion growing 7.1% quarter over quarter and 34.5% year over year. Bradesco enjoyed another quarter of strong loan growth with its loan portfolio growing 6.5% sequentially. While these results are impressive, they are overshadowed by increasing economic uncertainty for Brazil. Inflation has been an ongoing concern for Brazil during 2021, a consequence of fiscal stimulus and external supply shocks, and pressure has intensified in recent months. Inflation in Brazil is now running above 10%, rising from just 4.5% in January. As we incorporate a higher probability of economic fallout from inflationary pressure on the Brazilian economy, we are lowering our fair value estimate for Bradesco from $4.80 to $4.50. Roughly $0.10 of the decrease comes from lower loan growth estimates, $0.20 from higher credit loss assumptions, and $0.20 from a weaker Brazilian real since our last update. These adjustments were offset by higher projected net interest margins.