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Bradesco's Q1 profit slips 2.9% as credit quality, expenses weigh

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Bradesco's Q1 profit slips 2.9% as credit quality, expenses weigh

Banco BradescoSA posted a 2.9% drop in net profit for the first quarter of 2016,as the bank saw a 52.2% jump in loan loss provisions and higher administrativeand personnel expenses.

The Brazilian bank showed book net income of 4.12 billionBrazilian reais for the quarter, down from 4.24 billion reais a year earlier.Adjusted net income totaled 4.11 billion reais for the first quarter, 3.8%lower than 4.27 billion reais in the year-ago period. The adjusted figurescorrespond to 3.52 reais per share for the first quarter, up from 3.21 reais ayear earlier.

Total net interest income was 14.89 billion reais, up 9.5%year over year from 13.60 billion reais. Fee and commission income climbed11.5% annually to 6.41 billion reais from 5.74 billion reais.

However, the company showed a spike in loan loss provisionsduring the quarter, jumping to 5.45 billion reais from 4.20 billion reais inthe prior quarter and 3.58 billion reais a year earlier. The bank attributedthe increase to the provisioning for its corporate client operations, pointingto a specific case that resulted in an 836 million reais impact, as well as toa broader increase in delinquencies due to Brazil's economic slowdown.

Nonperforming loans represented 5.3% of the company's loanbook at the end of first quarter, up from 4.5% a year ago. The delinquencyratio, meanwhile, ticked to 4.2% from 4.1% in the linked-quarter period and3.6% a year earlier.

Administrative and personnel expenses also moved higher,rising 11.1% year over year to 7.87 billion reais.

Bradesco's annualized return on average equity was 17.5%,compared to 20.6% a year earlier, while its annualized return on average assetswas 1.5%, compared to 1.7% in the year-ago period.

In March 2016, Bradesco's expanded loan portfolio reached463.21 billion reais, little changed from a year earlier.

Looking ahead, the bank forecast a 1% to 5% growth in itsloan portfolio for 2016. The interest earning portion of the bank's netinterest income is expected to grow between 6% and 10%, while fees andcommission income should grow by between 7% and 11%. Meanwhile, operatingexpenses are forecast to grow between 4.5% and 8.5%.

In reporting its results, the bank noted that in January itsacquisition of HSBC Bank BrasilSA - Banco Múltiplo and HSBC Serviços e Participações Ltda. wasapproved. The bankalso in January signeda non-binding memorandum of understanding with , , andCaixa EconômicaFederal to create a holding company of credit intelligence thatwill develop a database with the goal of adding, reconciling and handlingdatabase and credit-related information, of individuals and legal entities.

As of April 27, US$1was equivalent to 3.54 Brazilian reais.