Banco do Brasil cut its profit forecast for this year after credit costs rose faster than expected in the third quarter. The bank’s adjusted net profit fell 60% from July to September compared to the same period last year. There was a sense of stability compared to the second quarter of this year.
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The state bank said in a statement this Wednesday that it expects adjusted net profit to be between 18 billion reais ($3.4 billion) and 21 billion reais in 2025. Previous expectations were for 21 billion reais to 25 billion reais.
Giovanne Tobias, Banco do Brasil’s head of finance, said in a video that the increase in the provision for credit losses was partly related to specific cases that were not expected.
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Provisions for credit losses increased by 78% year-on-year, reaching R$17.9 billion in the third quarter, mainly due to agribusiness and large corporate portfolios. The bank expects these provisions to total between 59 billion and 62 billion reais for the year, according to a statement.
Despite higher provisions, adjusted net income for the third quarter came in at 3.79 billion reais, beating analysts’ average expectations, according to data compiled by Bloomberg. This result was down 60% compared to the same period last year, but stable compared to the second quarter.
“We managed to achieve results with low profitability, but still profitability,” Tobias said in the video.
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Banco do Brasil was affected by a rise in bankruptcies in agribusinesses, which account for a third of the country’s credit portfolio. Changes in accounting rules for Brazilian banks forced the bank to increase loan loss provisions, further exacerbating the impact.
The 90-day delinquency rate increased by 1.6 percentage points in the 12 months, reaching 4.9% in the quarter ended September, the statement said. In the agribusiness portfolio, default rates rose to 5.3%.
Return on equity (ROE) for the period decreased by 13 percentage points to 8.4% and remained stable compared to the second quarter.
Before the results were announced, analysts had predicted that Banco do Brasil’s third quarter would be its weakest quarter in 2025.
“As the market had widely expected, we expect the third quarter to be Banco do Brasil’s lowest point in profitability,” Citigroup analyst Gustavo Schroden said in a note.
The bank’s shares have fallen 5.7% since the start of the year, lagging behind its major competitors, but have risen 8% since early September, when Brazil’s government announced interim measures with a new credit line aimed at renegotiating the debt of rural producers. Banco do Brasil began offering the program to customers at the end of October.
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