At a time when private banks are under pressure to reduce interest rates, Bradesco shows that it continues to live with rising defaults. Because of rising delinquency rates in the January – March quarter, bank provisions against defaults amounted to R$3.09 billion, an increase of 30.1% compared to the same quarter of 2011. The loan portfolio was virtually unchanged from the fourth quarter of 2011.
The comparison of 1Q with the end of the year (4Q) is often imprecise to indicate trends. But from January to March of last year (1Q11), Bradesco’s loan portfolio had grown over 4% when compared to the 4Q of 2010. In 12 months, the growth of Bradesco’s loan portfolio was 12.4%. The modest growth resulted in a more modest growth in 1Q net income, which grew 3.4% over the same period in 2011, to $ 2.79 billion. For the fourth quarter of 2011, growth was 2.5%.
The worsening of the loan portfolio quality was due primarily to higher rates of payment delays of individuals and micro, small and medium enterprises. The total (90 days) delinquency rate stood at 4.1%, up 0.2 percentage points over the fourth quarter of 2011. Compared to the same quarter of 2011, the increase was 0.5 percentage points.
The bank predicts that it will end this year with a default rate of 3.9%, equal to that recorded last December. In a teleconference with reporters, the bank’s managing director Angelotti has not ruled out the possibility of further reduction in interest rates to defend themselves from the competition. “We are evaluating. New measures should be adopted.” Given the more aggressive strategy of public banks, the executive said the goal of Bradesco is at least to maintain its current market share of 12% in credit.
The slower pace of credit growth shown by Bradesco may be a warning of what is about to be a trend this week when other private banks (Itau and Santander) report their results.