(Updates closing share prices in last paragraph.)
Oct. 26 (Bloomberg) -- Banco Bradesco SA, Brazil’s second- largest bank by market value, posted the smallest profit increase in six quarters as wage expenses climbed and the company set aside more money to cover soured loans.
Third-quarter adjusted net income, which excludes one-time items, rose 14 percent to 2.86 billion reais ($1.6 billion), or 2.91 reais a share, from 2.52 billion reais, or 2.38 reais, a year earlier, the Osasco-based company said today in a statement. That missed the 2.9 billion-real average estimate of six analysts surveyed by Bloomberg.
Payroll and management expenses increased 19 percent on higher wages and provisions for loan losses surged 35 percent. Bradesco forecasts that operating expenses will climb 15 percent to 18 percent in 2011, compared with 11 percent to 15 percent previously, according to the statement. The firm maintained its outlook for credit growth of 15 percent to 19 percent this year.
“Costs are under pressure, but revenues are not slowing down,” Marcelo Henriques and Eduardo Rosman, analysts at Banco BTG Pactual SA in Sao Paulo, wrote in a note today. “Efficiency gains will most likely be seen only in 2013, 2014.”
Provisions for bad loans rose to 2.78 billion reais at the end of September as write-offs for loans at least 90 days overdue increased to 3.8 percent in the third quarter from 3.7 percent in the preceding three-month period.
A collective-bargaining agreement gave all Brazilian bank workers a 9 percent pay raise this month after a 21-day strike. The wage increase, retroactive to September, affected Bradesco’s third-quarter results, Domingos Figueiredo de Abreu, the bank’s director of investor relations, said in a conference call today.
Brazilian workers, including public postal employees, went on strike this month as the unemployment rate held at 6 percent in August, a record low for the month, and consumer prices rose 7.3 percent in September from a year ago, topping the country’s 4.5 percent inflation target, plus or minus 2 percentage points.
Bradesco’s loan portfolio increased 22 percent in the third quarter from a year earlier to 332.3 billion reais as total assets rose 18 percent to 722.3 billion reais, the company said. Brazil’s total loans expanded 20 percent in September from a year earlier, led by a 47 percent jump in mortgage credit, the central bank said in a report distributed today in Brasilia.
Bradesco increased its forecast for operating expenses as it plans to open branches to serve about 400,000 public employees of Rio de Janeiro state after buying state-controlled Banco do Estado do Rio de Janeiro in a May auction, Abreu said. The lender also must replace branches lost after Banco do Brasil SA won rights to offer banking services in the nation’s post offices, ending an exclusive 10-year deal for Bradesco, he said.
Bradesco rose 0.8 percent to 30.49 reais in São Paulo trading. Itau Unibanco Holding SA, Brazil’s biggest bank by market value, gained 1.8 percent to 32.59 reais.
--Editors: Peter Eichenbaum, Steve Dickson
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