Banco do Brasil annual 2020 adjusted profit R$13.8 billion, down 22% from 2019

RIO DE JANEIRO, BRAZIL – Banco do Brasil posted an adjusted net income of R$3.695 billion (US$684 million) in the fourth quarter 2020, down 20.1% compared to the same period in 2019. Compared to the third quarter, there was a 6.1% increase in profit.

Meanwhile, the state-owned bank’s annual adjusted profit shrank by 22.2%, from R$17.848 billion to R$13.884 billion.

Service revenues closed the quarter between October and December at R$7.389 billion, a slight 1.6% drop from R$7.508 billion the year before. In 2020, revenue fell 1.7% to R$28.702 billion.

Growth recorded against the third quarter is linked to the 6.3% reduction in expanded provisions, the 1.5% increase in service revenues, and the 1.1% increase in gross margin.

According to the bank, the worsening in the year-on-year comparison is mainly explained by the increase in provisions for loan losses, which grew 47.6% in the fourth quarter compared to the same period in 2019, influenced by the anticipation of provisions, which totaled R$8.1 billion.

The Extended Credit Portfolio, in turn, closed December at R$742.0 billion, up 1.5% compared to the result at the close of the third quarter, with a highlight for operations with retail and agribusiness, according to BB.

The Individual portfolio grew 3.0%, an improvement that was mainly driven by the positive performance in consigned credit (+4.0%) and credit card (+15.9%), according to the bank.

The return on equity, reflected in the ROE indicator, reached 12.1% in the last quarter last year against 12% in the 3 preceding months. For the year, it reached 12% against 17.3% in 2019. The pandemic further hindered bank’s struggle to close the existing return gap vis-à-vis its private peers. With the reinforcement of its loss buffer, profitability was impaired.

The last quarter in 2020 marks the first ‘full’ quarter under the management of André Brandão, who took over the BB presidency in late September, replacing economist Rubem Novaes. He joined the bank after leaving HSBC, with the challenge of unblocking a disinvestment agenda, which had been hindered by the pandemic, and preparing the institution for the digital arena, in a more digital and efficient world.

With no time to lose and with the DNA of an investment bank, he made his first ‘delivery’ late last year. At the time, he completed the dissolution of BB’s first wholly-owned subsidiary, Bescval, merged into the parent institution in 2008, along with the acquisition of Banco de Santa Catarina. This week, the bank announced the divestment of its stake in Kepler Weber, an agricultural storage solutions company.

In the short term, the market expects a boost in asset sales throughout 2021. In this semester, the plan is to list the Elo card brand and BV, formerly know as Votorantim Bank, on the stock exchange, and also to close an international partnership with its manager, BB DTVM. Another pledge is to launch a partnership with UBS in the investment banking area, a heated market despite the pandemic.

In parallel, BB went further in its plans to increase efficiency, in line with its private peers, who have been working on the subject in recent years faced with growing competition and the drop in interest rates in Brazil. In this direction, it announced a restructuring plan that entails closing 112 branches and cutting 5,000 employees through voluntary resignation programs. The measures displeased President Jair Bolsonaro, but Brandão nevertheless succeeded in holding on to his position and pursuing his efficiency plan, which was welcomed by the market.

The plan to close branches in 2021 will be implemented after the bank ran contrary to the market trend in 2020 and ended the year with 12 more branches than end-2019.

By the end of 2020, BB totaled R$1.725 trillion in total assets, a 16.5% increase over the preceding year. However, a 2.5% drop was observed in the 4th quarter. Its net worth reached R$126.971 billion at the end of December, 17% higher than a year earlier. Compared to the 3 preceding months, it grew by 3.8%.

BB will comment its first quarter results over a teleconference with the press on Friday, February 12th. After that, at 10 AM, Brandão will speak to analysts and investors.

Source: InfoMoney