Bradesco preferred shares (BBDC4) ended Friday at R$17.69, down 0.84% on the day and 4.84% for the week, as Brazil's benchmark Ibovespa index also slid 0.61% to 177,283.83 points, marking a 3.71% weekly decline. The drop comes despite the bank reporting a 16.1% rise in first-quarter recurring net income to R$6.8 billion, highlighting persistent headwinds from credit costs and political instability.
Earnings Strength Overshadowed by Credit Risks
Bradesco's first-quarter results showed solid operational progress. Total revenue increased 14% to R$36.9 billion, while return on average equity reached 15.8%. The bank's cost-to-income ratio improved to 46.9%. However, credit quality metrics deteriorated: loans overdue by more than 90 days hit 4.2%, and credit costs rose, particularly in large corporate and rural credit segments. CEO Marcelo Noronha emphasized on the May 7 earnings call that the bank maintains a moderate appetite for loan growth, potentially passing on certain deals based on risk profiles.
Market Context and Political Overhang
The Ibovespa's weekly decline was fueled by a combination of domestic political uncertainty and global inflation concerns. Brazilian markets dropped midweek after Reuters reported alleged links between Senator Flávio Bolsonaro and former Banco Master owner Daniel Vorcaro, adding fresh uncertainty to the tight presidential race. Additionally, Brazil's central bank cut the Selic rate to 14.50% on April 29, but Banco Inter chief economist Rafaela Vitoria described policy as still quite restrictive, keeping funding costs elevated for banks.
Analyst Caution and Sector Comparison
XP Investimentos analysts Bernardo Guttmann, Matheus Guimarães, and Guilherme Meneghetti maintained a neutral rating on Bradesco with a year-end target of R$24, noting the bank has executed better than expected but faces tougher macro conditions, increased competition, and higher technology spending that limit upside. Among Brazil's major banks, Bradesco was the only one to beat earnings estimates in the first quarter, according to Reuters. In contrast, Banco do Brasil's adjusted net profit plunged 54% and credit costs surged 86% year-over-year.
Outlook and Key Risks
Bradesco's loan book expanded 8.4% year-over-year to approximately R$1.09 trillion, but the bank's performance remains sensitive to credit cost management and secured lending in pressured rural and small-business segments. Any depreciation of the Brazilian real, rising oil prices, or further political turmoil could increase funding costs and pressure borrowers. With the market in a cautious but not panicked state, Bradesco's share price movement on Monday will likely hinge more on broader market sentiment than on the bank's own quarterly results.
