Brazil State Bank Shares Fall 6% on JPMorgan Sell Call
BRAZIL · MARKETS
Key Facts
- —The country Brazil is Latin America’s largest economy, and Banco do Brasil, Bradesco and Itaú are among its biggest banks.
- —The background Brazilian stocks jumped 7.7% on Monday, 5 October, after a first-round election result that investors welcomed.
- —Why now JPMorgan, the largest US bank, reworked its Brazil bank calls after long-term Brazilian interest rates fell sharply.
- —What happened On Tuesday, 6 October, JPMorgan cut Banco do Brasil to sell and raised Bradesco to buy.
- —The numbers Banco do Brasil fell 6.42% to 24.64 reais (about US$4.91), while Bradesco rose 4.40%.
- —What it means for you Bradesco and Itaú trade in New York as ADRs, while Banco do Brasil has no NYSE listing.
- —Still open How deep farm-loan defaults go at Banco do Brasil, and how the 25 October runoff moves bank stocks.
One US bank’s research note split Brazil’s lenders into winners and losers a day after a sharp election rally.
Banco do Brasil shares fell 6.42% on Tuesday, 6 October, after JPMorgan cut the state-controlled lender to sell. On the same day, the US bank raised Bradesco, a large private rival, to buy, and Bradesco rose 4.40%.
The split matters to US investors because Bradesco and Itaú Unibanco, also in the note, trade in New York. Banco do Brasil, controlled by the federal government, is a major lender to Brazilian farmers and has no NYSE listing.
Banco do Brasil closed at 24.64 reais (about US$4.91) and Bradesco’s preferred shares at 22.80 reais (about US$4.54), InfoMoney reported. Conversions use about 5.02 reais per US dollar, the rate of 6 October.
Why JPMorgan Turned Against Brazil’s State Bank
JPMorgan moved Banco do Brasil from neutral to underweight, its sell-equivalent rating, according to InfoMoney and Money Times. It nudged its price target up by one real to 23 reais (about US$4.58), about 13% below Monday’s close.
The main reason is farm credit. The analysts said they had built in “a more challenging outlook” for bad loans in agriculture, Money Times reported.
They also cited a stronger real, El Niño weather risk, narrower interest margins as rates fall, and lower account fees. JPMorgan expects 2027 to remain a challenging year for the bank, with a recovery only in 2028, InfoMoney reported.
The note projects a return on equity of just 8.7% for Banco do Brasil in 2026. Return on equity measures profit against shareholders’ capital, and the analysts called the bank’s returns less attractive than other Brazilian opportunities.
Why Bradesco Won an Upgrade
JPMorgan raised Bradesco from neutral to overweight, citing lower credit costs and better margins in recent quarters. It projects Bradesco’s return on equity rising from 15.9% in 2026 to 16.8% in 2028, according to InfoMoney.
Much of the higher valuation comes from a lower cost of capital, not from higher profit forecasts. JPMorgan cut its cost-of-equity assumption by about 1.5 percentage points as Brazil’s 10-year rate fell from 14.4% to 13%.
Bradesco trades at about 1.1 times book value, and the analysts see room for 1.3 to 1.4 times, Money Times reported. Its shares had already gained 26% since 28 September, adding about 50 billion reais (about US$10 billion) in market value.
JPMorgan kept Itaú at overweight and lifted its target from 51 to 60 reais (about US$12), InfoMoney reported. Itaú’s shares rose 1.96% on Tuesday.
A Market Cooling After the Election Rally
The bank moves came on a down day for São Paulo stocks. The Ibovespa, the main index, slipped 0.52% to 205,835 points after Monday’s 7.70% surge, InfoMoney reported.
Analysts called the dip profit-taking after the first round on Sunday, 4 October, which put Flávio Bolsonaro ahead. Investors expect the conservative senator, son of former president Jair Bolsonaro, to spend less freely if elected.
What It Means for You
For holders of Bradesco or Itaú ADRs in New York, the upgrade rests on falling Brazilian interest rates. If long-term rates rise again after the runoff, that support weakens.
US investors cannot buy Banco do Brasil on a US exchange, but many emerging-market funds hold it. Its farm-loan problems also reflect stress in Brazilian agriculture, a direct competitor of US soy and corn growers.
The Banco do Brasil shares move is also a reminder that state-controlled companies react differently to Brazil’s election. Private banks with stronger capital have gained more from the rally.
What Is Not Known
JPMorgan’s full report is not public, and its details come from Brazilian financial media. Local reports differ on Bradesco’s new price target, so it is not given here.
Banco do Brasil’s response to the downgrade is not known. How much farm-loan defaults will rise, and when they peak, is also uncertain.
What Comes Next
The presidential runoff on Sunday, 25 October, is the next big test for Brazilian bank stocks. Third-quarter bank results, due in the coming weeks, will show whether farm-loan defaults are still rising.
A sell rating is an opinion on share returns, not a warning about the bank’s safety. Banco do Brasil remains a large, state-backed lender.
Frequently Asked Questions
What is Banco do Brasil?
Banco do Brasil is one of Brazil’s largest banks and is controlled by the federal government. It is a major lender to farmers, and its shares trade on the São Paulo exchange.
Why did JPMorgan downgrade Banco do Brasil?
JPMorgan expects more bad loans in agriculture and sees weak returns on equity until 2028. It also cited a stronger real, weather risk and narrower interest margins.
Can US investors buy Brazilian bank shares?
Bradesco and Itaú Unibanco trade on the New York Stock Exchange as American Depositary Receipts. Banco do Brasil has no NYSE listing, though emerging-market funds hold it.
Does a sell rating mean Banco do Brasil is in trouble?
No, it is a view that the shares will do worse than peers. The bank remains state-controlled and large, but its farm loans are under pressure.
Sources: InfoMoney, JPMorgan bank calls; InfoMoney, Ibovespa close; Money Times, Banco do Brasil; Money Times, Bradesco (all accessed 7 October 2026).
Editorial responsibility: Matthias Camenzind, Editor-in-Chief · Editorial standards · Report an error
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