Banco do Brasil said today that it expects its current level of profitability – which is well above the historical average – remain “sustainable” for years to come.
The statement, made by CEO Fausto Ribeiro during BB Day, is an attempt to reassure the market about a possible change in BB’s strategy and policies in a new government.
In recent quarters, Banco do Brasil has managed to operate with a ROE of 20%, equivalent to that of large private banks and well above its history, which is around 16%.
This has been possible thanks to the work of efficiency gains made by the new board in recent years, as well as a greater focus on a credit portfolio with better returns.
To ensure that there is no rupture in this strategy, BB said that it has approved a series of governance mechanisms that should protect it from possible political interference.
These measures include a five-year strategic plan and the election of a board with more than 50% independent members (not appointed by the controller). The bank also created a rule stipulating that all positions – from chief executive officer on down – can only be filled by career employees.
Bradesco BBI analysts said they were “positively impressed” with Banco do Brasil’s strategy and governance initiatives.
“Maintaining these elements will be crucial to being able to sustain an ROE at a level structurally above the bank’s historical average,” they wrote.
Citi also praised the initiatives and said the event reinforced its vision “that the valuation The current one seems to be penalizing the bank’s performance too much because of election concerns.”
“We believe that regardless of the outcome [eleitoral]the impact to the operation will be limited,” the analysts wrote.
Banco do Brasil also said it was prepared for the digital transformation.
The bank stressed that its employees must undergo an “extremely” rigorous selection process, and said that more than 20,000 of them have already been trained in data science. BB also said that it hired 480 technology employees in a recent selection process.
Banco do Brasil shares trade at 0.8x its book value, compared to 1.8x for Itaú Unibanco and 1.4x for Bradesco and Santander. BTG trades at 2.8x.