Banco do Brasil (BBAS3): profit reaches R$9.3 billion in 1Q24 with “a little help” from Milei and is above expectations

With faster growth in credit and a “helping hand” from the Argentine operation, the Banco do Brasil (BBAS3) registered adjusted net profit of R$9.3 billion in the first quarter of 2024.

The result represents a increase of 8.8% compared to the same period last year. The number was above market expectations, which pointed to a profit of R$ 9.232 billion, according to projections that the Your money compiled.

After surpassing private competitors in the last balance sheet, profitability (ROEin its English acronym) from Banco do Brasil reached 21.7% in the first quarter of 2024.

Thus, it was slightly below the index of Itaú Unibanco (21.9%) this time, but it far surpassed the Santander (14.1%) and the Bradesco (10.2%).

Banco do Brasil (BBAS3) and the “Milei effect”

As happened in the fourth quarter, the so-called “Javier Milei effect” helped the results of BB, which controls the Argentine bank Patagonia.

The gain came from the exchange rate variation on the result of securities linked to the dollar that the bank maintains in its portfolio. Remembering that one of Milei’s first measures, who took office last December, was to promote a devaluation of the official peso exchange rate.

In Banco do Brasil’s balance sheet, the “Milei effect” appears in the financial margin. More specifically in the result of Treasurywhich grew 223.6% compared to the first quarter of last year, to R$5.457 billion.

Also including credit income minus funding costs, Banco do Brasil’s financial margin totaled R$25.734 billion, an increase of 21.6%.

BB accelerates in credit

Another highlight of Banco do Brasil’s result was the balance of credit portfolio, which reached the mark of R$ 1.138 trillion. It is a advance of 10.2% in 12 months, the highest among large banks, and 2.7% in the quarter.

The biggest growth came from agriculturewhose portfolio grew 15.5% compared to the balance in March last year.

Meanwhile, the default rate of Banco do Brasil remains well-behaved and stood at 2.9%, the same level as at the end of last year. In comparison with the first quarter of 2023, however, there was an increase of 0.3 percentage points.

Already the provisions for credit lossesone of the points that caused concern in the last balance sheet, continues to rise and could weigh on the market’s reaction to the balance sheet.

Expenses increased 45.9% compared to the first three months of last year and totaled R$8.541 billion. The good news is that there was a decline of 14.4% in the quarterly comparison.

Fees and expenses

The good performance of the financial margin ended up compensating for Banco do Brasil’s weaker result on the side of revenue from service provision.

BB’s earnings from charging fees increased by just 2.6% and totaled R$8.344 billion in the first quarter of 2024. Below, therefore, the projection (guidance) for the year, which is growth between 4% and 8 %.

On the other hand, Banco do Brasil did its homework in terms of operational expenseswhich grew 4.9% and, therefore, were below the guidance, which foresees an increase of 6% to 10%.