Banco Bradesco SA (NYSE:BBD) not in too bad a position any longer
Fitch ratings has confirmed the ratings of Banco Bradesco SA (NYSE:BBD) and a few other Brazilian financial groups such as Itau Unibanco Holding S.A. (IUH), Banco Itau BBA S.A and Itau Unibanco S.A. These groups of banks have managed to carry on operating in an extremely volatile working environment and a constantly-changing economic landscape. They have continued to preserve their profitability at levels much above the similarly-rated banks’ median as well as groups of the largest banks across the world.
This performance is now going through the test of fire again since 2012. At that point of time, dismal economic-activity levels, a marked drop in average interest rates and the smattering of credit-expansion in the past decade have resulted in narrower margins and increased credit costs. Fitch is not expecting profitability to plateau at past levels and hopes that it will be able to match up to its peers across the world.
Both IUH and Banco Bradesco SA (NYSE:BBD) have a presence in a broad range of lending-segments spanning commercial lending to corporates and SME’s. They are also involved in the business of credit cards, personal loans, mortgages and consumer finance, amongst other things. In every one of these segments, both these banks are either in first or second place in terms of the market share. Equity securities of both these banks are listed in the U.S and Brazil.
On the mend
Halfway through 2011 and at the start of 2012 the asset quality of both these banks has seen a downslide, especially in the vehicle loan and personal loan segments. To a certain degree this has been attributed to the downtrend in the economy. Though both the banks had to increase their levels of loan-loss provisions, IUH had been impacted more badly. The recent quarters seem to have been more healthy for both the banks.