Banco do Brasil SA's second-quarter profit jumped almost 20% from a year earlier as loan-loss allowances fell sharply, partly offsetting a decline in net interest income.
The Brazilian banking giant booked quarterly net income of about 3.14 billion reais, or 1.12 reais per share, up 19.7% from 2.62 billion reais, or 94 centavos per share, in the second quarter of 2017. Taking into account a negative impact of 105 million reais from one-off items, the company's adjusted net income for the second quarter reached 3.24 billion reais, up 22.3% from 2.65 billion reais a year earlier.
According to mean estimates from S&P Global Market Intelligence, the bank was expected to post second-quarter net income of 3.15 billion reais.
Banco do Brasil's net interest income fell 4.7% from a year earlier to 12.60 billion reais in the second quarter. Fee income, meanwhile, ticked 5.7% higher annually to 6.80 billion reais. The lender's net interest margin improved to 4.0% from 3.8% in the linked quarter but fell from 4.2% a year ago.
The primary driven force behind the bank's quarterly result was a sharp drop in net allowance for loan losses, which fell 31.9% to 3.58 billion reais from 5.26 billion reais in the prior-year period. The company's net financial margin totaled 9.01 billion reais, up 13.4% from 7.95 billion reais a year earlier.
Commercial income surged 24.7% from a year ago to reach 6.43 billion reais in the second quarter, while other operating income soared to 227 million reais from just 30 million reais.
Administrative expenses, meanwhile, inched 2.6% higher year over year to 8.07 billion reais in the second quarter.
Banco do Brasil's expanded loan portfolio held 685.5 billion reais at the end of June, declining from 696.1 billion reais at the close of the second quarter of 2017. Its 90-day nonperforming loan ratio fell to 3.34% from 3.65% in the first quarter and 4.11% a year earlier. The bank said that excluding a specific case, the 90-day NPL ratio would have been 2.92%, bringing it closer to historical levels.
The bank's market return on equity rose to 13.8% from 12.8 a year ago, while its shareholders' ROE jumped to 15.1% from 14.1%.
The bank kept most of its guidance for 2018 unchanged, including its expectation for adjusted net income to reach between 11.5 billion reais and 14 billion reais this year. However, it now expects net loan loss provisions to total between 14.0 billion and 16.0 billion reais this year, down from a previous forecast of between 16.0 billion and 19.0 billion reais.
As of Aug. 8, US$1 was equivalent to 3.74 Brazilian reais.