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Lower expenses buoy aggregate Q2 profitability for Brazilian banking majors

The three largest listed banks in Brazil saw their second-quarter profits increase from both the linked quarter and the year-ago period, driving aggregate profitability higher.

The combined net income of Banco do Brasil SA, Banco Bradesco SA and Itaú Unibanco Holding SA totaled 17.06 billion Brazilian reais in the most recently concluded quarter, up 22.7% from 13.91 billion reais a year earlier, according to data compiled by S&P Global Market Intelligence.

Although collective income from loans, leases, securities and derivatives fell 13.3% year over year to 85.76 billion reais, the decline was offset by higher income from other financial operations, which more than doubled to 17.06 billion reais, and lower expenses from other financial operations, which tumbled almost 30% to 52.10 billion reais.

Aggregate provisions for loan losses, meanwhile, inched slightly higher to 12.38 billion reais from 12.32 billion reais.

Itaú, the country's largest private-sector bank, posted the highest quarterly profit at 6.81 billion reais, followed by Bradesco and Banco do Brasil with 6.04 billion reais and 4.21 billion reais, respectively.

All three banks also registered improvement in their net interest margins compared to a year earlier, with Bradesco's ratio ending the second quarter at 3.04%, the highest NIM among the group.

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As of Aug. 16, US$1 was equivalent to 3.99 Brazilian reais.