Itaú BBA Revises Bank Ratings: Key Upgrades and Downgrades

Itaú BBA revised its bank ratings, notably upgrading Santander Brasil (SANB11) and Banrisul (BRSR6) to buy.

Santander Brasil emerged as BBA’s top pick among large Brazilian banks, with a year-end 2024 target price of R$ 33 per share.

The report notes valuations at 1.1 times Price/Book Value, with fast earnings growth and an expected 17% ROE by 2025.

BBA identifies consumer credit as the best sector due to job creation, higher wages, and lower inflation.

Since 2022, Santander has cleaned up its credit channels in terms of provisions and clientele, positioning it to accelerate in this cycle.

Analysts noted that a new market strategy and customer service led to first-quarter market share gains in credit cards, payroll, vehicles, and SMEs.

Itaú BBA upgraded Banrisul from neutral to buy, setting a target price of R$ 17. Banrisul’s 85% commercial exposure to Rio Grande do Sul caused its shares to drop to 0.4 times Price/Book Value.

Analysts believe concerns are exaggerated as regional activity quickly returned, and credit relief measures may dilute potential risks.

BBA expects upcoming results to alleviate concerns, triggering a revaluation back to 0.6 times Price/Book Value, in line with 10% to 12% ROE levels.

Conversely, BBA downgraded BTG (BPAC11) from outperform to market perform and reduced the target price to R$ 35.

The higher interest rates in Brazil and market uncertainty will impact capital markets and investment more than consumer credit.

Despite 10-15% EPS growth potential from market share and efficiency, BBA sees limited upside due to reduced momentum and likely downward revisions.

Itaú BBA Revises Bank Ratings: Key Upgrades and Downgrades

BBA also downgraded Banco do Brasil (BBAS3) to neutral with a target price of R$ 31.

Though it acknowledges long-term potential and a discount of 0.8 times Price/Book Value, BBA foresees fewer catalysts for reclassification.

It expects a significant slowdown in earnings momentum by 2025, with modest EPS growth of 4%.

Persisting provision issues, likely due to a growing renegotiated portfolio, may exceed guidance, while political risks could hinder multiple expansions.

These changes highlight shifting dynamics in Brazil’s banking sector, underscoring the importance of adapting to evolving market conditions.

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