Banco Bradesco SA's preferred shares (BBDC4) declined 2.31% on Monday, closing at 18.12 reais in São Paulo, as the bank's stronger first-quarter earnings were overshadowed by a sharp increase in loan-loss provisions and lingering credit quality worries. The drop mirrored a broader weakness among Brazilian lenders, with Itaú Unibanco (ITUB4) falling 2.23%, Santander Brasil down 2.21%, and Banco do Brasil slipping 0.32%.
Bradesco reported a 16.1% rise in recurring net income to 6.811 billion reais for the first quarter, with total revenue climbing 14.0% to 36.881 billion reais. However, loan-loss provisions surged 26.5% to 9.667 billion reais, reflecting the bank's cautious stance amid a challenging macroeconomic environment. Investor relations director André Carvalho pointed to certain wholesale exposures and aging rural credit portfolios as key drivers of the increase, while noting that short-term delinquencies were influenced by seasonal trends.
Credit Quality Under Scrutiny
Loans overdue by more than 90 days ticked up to 4.2% from 4.1% in the previous quarter, keeping investor focus on stress from small and mid-sized companies. CEO Marcelo Noronha described the bank's approach as not exactly 'pulling the handbrake' but acknowledged a tighter grip on risk. Net interest income rose 16.4% year-on-year to 20.051 billion reais, while insurance, pension plans, and capitalization bonds income grew 20.4% to 6.384 billion reais. The expanded loan portfolio reached 1.09 trillion reais.
Technology and AI Push
Bradesco's digital initiatives remained a highlight, with the bank's AI platform, Bridge, recognized at The Banker Technology Awards for both Global and Latin America categories. Bridge, a generative AI operating system, has slashed AI integration cycles tenfold and boosted customer service resolution rates to 87%. The bank's digital platform for small and medium-sized businesses achieved an 83% reduction in cost-to-serve, while open-finance data generated 8 billion reais in qualified credit proposals. Chief technology officer Cíntia Scovine Barcelos emphasized that 'technology is the business,' underscoring the bank's commitment to making digital capabilities central to profit and risk management.
Capital and Analyst Outlook
On the capital front, Bradesco completed the merger of Bradesco Gestão de Saúde shares into BradSaúde on April 30, boosting its ownership to 91.35% of total and voting capital. The bank's Common Equity Tier 1 ratio stood at 10.2% at quarter-end, but pro forma would reach 12.7% based on the deal's impact. Analysts at Genial reiterated their buy rating on BBDC4 with a 25 reais price target, citing a steady return to profitability, improvements in credit quality, and potential capital upside from the BradSaúde restructuring. However, the stock's story now hinges on execution rather than accolades, as the bank balances revenue growth and insurance strength against provisioning pressures, elevated rates, and potential cracks in corporate or consumer credit.