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Bank Bradesco SA ADR BBD

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Banco Bradesco Reports Strong Third-Quarter Results but Economic Risks Loom

Michael Miller Equity Analyst

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.

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Company Profile

Business Description

Banco Bradesco is Brazil's second largest private bank, with about 15% of deposits, and the largest insurance provider in Brazil, with roughly 20%-25% market share. The bank is majority controlled by the Bradesco foundation--a private non-profit institution focused on education. Banking provides roughly 70% of profits, while the insurance segment contributes the remaining 30%. The bank is also a major asset manager with high-single-digit market share. In 2016, Bradesco acquired the Brazilian operations of HSBC.

Cidade de Deus S/N, Vila Yara
Osasco, SP, 06029‑900, Brazil
T +55 1136844011
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings Jun 30, 2008
Fiscal Year End Dec 31, 2021
Stock Type
Employees 89,575