Banco do Brasil reported a higher-than-expected quarterly profit on Thursday aslower taxes helped Brazil’s largest bank by assets overcome asurge in bad loan provisions and weak revenue. Even as profit rose, defaults increasedand revenue growth showed signs of slowing.
Despite strong credit growth and encouraging signsregarding loan delinquencies, Banco do Brasil’s quality ofearnings deteriorated from the prior quarter, underscoringtougher conditions in Latin America’s biggest economy. Itsprovisions jumped, it cut revenue estimates and itsprofitability suffered in the quarter.
The quality of results was “negatively impacted by almostflat interest income, higher provisions and operating expensesthat were partially offset by an abnormally lower tax rate,”Credit Suisse Group analyst Marcelo Telles said in a report.
Loans in arrears for more than 90 days, the domesticindustry’s most widely used gauge of defaults, fell to 2.1percent of the bank’s outstanding credit, compared with 2.7percent a year earlier. However, the so-called default ratiorose slightly from 2 percent in the second quarter.
Loans unpaid for more than 15 days slid to 3.9 percent oftotal credit from 4.4 percent a year earlier. They rose,however, from 3.8 percent in the second quarter.
As a result, the Brasilia-based lender increasedprovisions, or the money from profit used to cover potentialcredit-related losses, by 24 percent.
Full earnings report below.