Banco do Brasil Requests Debt Delay After Tough 2025

Banco do Brasil, the country’s oldest and largest state-controlled lender, disclosed on Wednesday that it has asked the government to delay repayment of R$4.1 billion ($800 million) in hybrid capital debt owed to the National Treasury. The request is part of a broader effort to shore up the bank’s capital base after the worst earnings year in its recent history.

This is part of The Rio Times’ daily coverage of Latin American markets and finance and Latin American financial news.

What the Bank Is Asking For

The debt in question is a Hybrid Capital and Debt Instrument (IHCD) contracted with the Treasury in 2012 to strengthen the bank’s capital structure. Of the original R$8.1 billion, R$4.1 billion remains outstanding under a schedule set in 2021. Banco do Brasil is now proposing to push back the bulk of those payments: two small installments of R$100 million each in July 2026 and July 2027, followed by R$1 billion in July 2028 and a final R$2.9 billion in July 2029.

If approved, the restructuring would preserve eight basis points of capital in both 2026 and 2027, before consuming eight and 22 basis points in 2028 and 2029 respectively. The current repayment schedule remains in force until the request is formally approved.

Why Now

The timing reflects the damage inflicted by 2025. Full-year adjusted net income fell 45% to R$20.7 billion ($4 billion) from a record R$37.9 billion in 2024, and return on equity collapsed from 21.4% to 11.4%. The agribusiness portfolio — roughly a third of the bank’s total credit book — was the epicenter of the crisis. Rural delinquency climbed to 6.09%, driven by an unprecedented wave of judicial recovery filings across the soy belt. The headline 90-day NPL ratio hit 5.17%, pushed higher by a single R$3.6 billion ($690 million) wholesale exposure that the market identified as debt owed by Novonor, the former Odebrecht conglomerate, secured by shares of petrochemical company Braskem.

The Novonor Episode

Banco do Brasil initially refused to name the client, citing banking secrecy laws, and later denied media reports attributing the default to Novonor. But the bank’s own executives acknowledged the debt had been classified as delinquent during negotiations that ultimately succeeded, with the exposure regularized in January 2026 and transferred to IG4 Capital, a private equity firm specializing in distressed credit. The deal was part of a broader R$20 billion ($3.8 billion) transaction involving Braskem-collateralized debt held by Itaú, Santander and Bradesco as well. Without the Novonor impact, the bank’s coverage ratio would have stood at 164.7% instead of 155.4%.

The Recovery Bet

The IHCD rescheduling is one piece of a medium-term capital plan that also includes cutting the dividend payout ratio to 30% in 2025 and 2026 — a significant reduction for a bank whose shareholders, including the federal government, have historically counted on generous distributions. For 2026, Banco do Brasil is guiding for net income of R$22–26 billion, implying a 6% to 26% recovery, with loan portfolio growth of up to 4.5% and a more selective approach to agribusiness lending. The bank’s fourth-quarter results showed early signs of stabilization: Q4 profit of R$5.7 billion beat consensus by 28%, though it was still 40% below the same quarter a year earlier. The question for investors and for the Treasury alike is whether the worst is behind the bank — or whether the agro crisis and concentrated corporate exposures have exposed structural vulnerabilities that capital management alone cannot fix.

For more context, read Brazil’s Morning Call and the Ibovespa market report.