Banco do Brasil’s Profit Plunges 20.7% in Q1 2025 Amid Agricultural Woes

Banco do Brasil’s Q1 2025 financial results reveal a sharp profit decline, driven by agricultural loan defaults and new regulations.

The figures, reported in the bank’s May 15, 2025, investor filing, expose vulnerabilities in its core agribusiness segment. Analysts now question the bank’s risk management as it navigates a turbulent economic landscape.

Banco do Brasil, Brazil’s largest bank by assets with a 50.2% share of agricultural financing, posted an adjusted net profit of R$7.37 billion ($1.29 billion), down 20.7% from Q1 2024.

This missed market expectations of R$9.1 billion ($1.6 billion). The drop ended 16 quarters of profit growth, setting the bank apart from peers like Itaú and Santander.

Rising defaults in agribusiness, where 341 companies filed for judicial recovery, up 38% year-on-year, battered the bank’s balance sheet. Non-performing loans over 90 days hit 3.86%, with agricultural defaults at 3.04%.

Consequently, loan loss provisions soared 64.2% to R$15.45 billion ($2.71 billion), reflecting heightened credit risks. New regulations under CMN Resolution 4,966/2021 exacerbated the strain.

These rules delayed interest recognition and shifted high-risk loans to cash-basis accounting, slashing interest income by R$1 billion ($175 million).

As a result, the gross financial margin fell 7.2% to R$23.9 billion ($4.19 billion), and net financial margin dropped 20.1% to R$13.73 billion ($2.41 billion).

Despite these challenges, the bank expanded its credit portfolio by 14.4% to R$1.27 trillion ($222.81 billion). Corporate lending surged 22.4% to R$459.9 billion ($80.68 billion), while agribusiness loans grew 9% to R$406.2 billion ($71.26 billion).

However, the bank paused guidance for profit and credit costs, citing uncertainty in the agricultural sector. Return on equity plummeted to 16.7%, down 498 basis points, trailing Itaú’s 23% and Santander’s 17%.

Meanwhile, service fee revenues stagnated at R$8.36 billion ($1.47 billion), and administrative expenses rose 7% to R$9.49 billion ($1.66 billion). The bank approved R$1.9 billion ($333 million) in interest on equity, payable June 12, 2025.

Behind the numbers lies a bank grappling with its dominant role in a struggling sector. Brazil’s agribusiness faces declining commodity prices and extreme weather, pushing farmers into distress.

The bank’s heavy exposure, while strategic, now tests its resilience. CEO Tarciana Medeiros calls this a “transitional period,” but analysts demand stricter credit controls.

Looking ahead, the bank bets on sustainable credit and digital banking to offset risks. Yet, with a projected 2025 harvest offering hope, legacy defaults linger.

Banco do Brasil’s low valuation and 12% dividend yield attract investors, but restoring confidence hinges on managing agricultural risks and regulatory pressures effectively.