{"id":92878,"date":"2025-02-03T11:36:11","date_gmt":"2025-02-03T14:36:11","guid":{"rendered":"https:\/\/murray.adv.br\/?p=92878"},"modified":"2025-02-03T11:36:14","modified_gmt":"2025-02-03T14:36:14","slug":"big-banks-profits-to-improve-in-q4-outlook-for-2025-concerns","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/big-banks-profits-to-improve-in-q4-outlook-for-2025-concerns\/","title":{"rendered":"Big banks profits to improve in Q4; outlook for 2025 concerns"},"content":{"rendered":"\n

Macroeconomic outlook for 2025 signals slowdown in loans and rising default rates<\/strong><\/em><\/p>\n\n\n\n

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02\/03\/2025 <\/p>\n\n\n\n

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The earnings season for Brazil\u2019s major banks in the fourth quarter of 2024 is expected to reflect what analysts are calling \u201cthe last rays of sunset.\u201d In other words, the numbers from October to December are likely to be positive, with rising profits and loan portfolios, while default rates remain stable. However, the forecasts presented by financial institutions and what their top executives say about 2025 in earnings calls are more important than the results themselves. With the Selic policy interest rate remaining high, credit is expected to lose momentum in 2025, and concerns over the country\u2019s fiscal outlook loom large.<\/p>\n\n\n\n

Together, Ita\u00fa Unibanco, Bradesco, Banco do Brasil, and Santander are expected to report combined profits of R$29.363 billion in the fourth quarter, up 1% from the previous quarter and 22.7% higher than the same period in 2023, according to the average projections of ten financial firms surveyed by Valor. For the year 2024, total profit is projected at R$112.4 billion, an increase of 16%.<\/p>\n\n\n\n

In a report titled The Last Rays of Sunset, Ita\u00fa BBA noted that despite strong fourth-quarter results, a key factor will be the banks\u2019 outlook for the year ahead. According to analysts, the combined profit of the four largest banks is still expected to rise around 10% in 2025 but growth will likely be concentrated in the first half of the year, making full-year guidance a challenge.<\/p>\n\n\n\n

\u201cProviding guidance is a tough task given the increasingly volatile and deteriorating scenario. Worsening macroeconomic indicators, such as interest rates and inflation, are raising barriers to credit, which tends to curb demand for new loans. We expect these concerns to be reflected in executives\u2019 statements and guidance, with a forecast of moderate loan portfolio growth (below 10%) and stable financial margins,\u201d Ita\u00fa BBA stated.<\/p>\n\n\n\n

Bradesco BBI also highlighted that investor focus will be on 2025 guidance and pointed to the adoption of the new IFRS 9 accounting standard, which could impact banks\u2019 bad debt provision levels. \u201cNotably, we believe banks will factor in a more challenging macroeconomic scenario for 2025, which may result in slower loan portfolio growth. Additionally, as banks deal with the expected impact of IFRS 9, some may face higher provisioning requirements in 2025.\u201d<\/p>\n\n\n\n

Bank of America projects that the major banks\u2019 loan portfolios will grow by 9% this year but net interest income should expand at a faster pace, driven by client margins\u2014supported by higher interest rates\u2014though partially offset by lower market margins. \u201cWe also expect asset quality to deteriorate and risk costs to increase. Finally, we believe fee revenue will rise in line with operational expense growth,\u201d BofA analysts stated in a report.<\/p>\n\n\n\n

Bernardo Guttmann, head of financial sector analysis at XP, pointed out that a snapshot of credit data published by the Central Bank for December does not indicate any slowdown in lending. However, he noted that recent conversations with bank executives suggest a more cautious stance. \u201cIt has become clear that banks\u2019 sentiment regarding the economy is aligning more with that of financial markets, which have a more pessimistic outlook,\u201d he said.<\/p>\n\n\n\n

Mr. Guttmann added that no specific sector stands out as the most likely to increase default rates, except for agribusiness, where court-supervised reorganization cases are expected to peak between February and March.<\/p>\n\n\n\n

XP also noted that IFRS 9 will lead to a raft of reclassifications beyond provisioning adjustments. Items previously recorded as fee income\u2014such as real estate appraisal fees for mortgage applications\u2014will now be accounted for as part of financial margins. Conversely, some expenses that were previously recorded as administrative costs, such as debt collection fees, will now be entered into bad debt provisions. Additionally, commissions paid to correspondent banking networks, which were previously paid upfront, will now be amortized over the contract term. \u201cThis will alter some balance sheet line items and complicate comparisons with previous periods,\u201d said analyst Matheus Guimar\u00e3es.<\/p>\n\n\n\n

Another factor that could impact fourth-quarter results, particularly for some mid-sized banks, is payroll-deductible loans for Social Security (INSS) beneficiaries. Banks such as Banco do Brasil, Ita\u00fa, Santander, Pan, BMG, Mercantil, and Banrisul suspended these loans through correspondent banking networks late last year due to high operational costs relative to the 1.66% monthly interest rate cap.<\/p>\n\n\n\n

In January, the National Social Security Council (CNPS) raised the cap to 1.80%, a level banks argue is still insufficient. The Brazilian Association of Banks (ABBC) has taken the matter to the Federal Supreme Court (STF), questioning whether the CNPS and the National Institute of Social Security (INSS), which are linked to the Ministry of Social Security, have the authority to set interest rate caps.<\/p>\n\n\n\n

Analysts project that Ita\u00fa will post a record quarterly profit of R$10.831 billion. The bank is also expected to announce an extraordinary dividend payout of nearly R$20 billion.<\/p>\n\n\n\n

According to analysts at Genial, Ita\u00fa\u2019s highlights for the period should include loan portfolio expansion\u2014continuing the pace of previous quarters and closing with 12.5% growth, at the top of its guidance range\u2014higher financial margins, albeit at a slower rate than loan growth, and controlled provisioning expenses, reflecting stable asset quality and default rates. \u201cIt is the leader of the pack, with a return on equity (ROE) of 23% in 2025,\u201d Genial analysts said.<\/p>\n\n\n\n

Banco do Brasil is the only major bank expected to report a slight quarterly profit decline (-0.2%). Citi analysts believe its financial margin should remain resilient but do not foresee a turnaround in the agribusiness segment\u2019s difficulties. \u201cWe expect loan portfolio growth of 11% in 2024, with persistent provisioning pressures slightly offset by strong treasury results. Agribusiness loan defaults should remain high compared to historical levels, although client margins should continue to rise steadily.\u201d<\/p>\n\n\n\n

Bradesco is expected to continue its turnaround trajectory, with profit surging 84.5% from the fourth quarter of 2023 when higher provisions and a leadership transition impacted the bank\u2019s earnings (Marcelo Noronha replaced Octavio de Lazari Jr. as CEO). According to Santander analysts, client margins should improve and asset quality should remain stable, while market margins could be a downside risk. They estimate this line will total R$312 million in the fourth quarter \u201cdue to high volatility in the yield curve and a lack of hedging instruments to mitigate this impact.\u201d Given the Selic outlook for 2025, some analysts are already forecasting a zero result for Bradesco\u2019s market margin this year.<\/p>\n\n\n\n

Santander is expected to report a R$3.702 billion profit, with financial margins growing in line with loan portfolio expansion and fee revenue standing out amid the bank\u2019s efforts to engage customers and boost cross-selling. \u201cMeanwhile, we expect operating expenses to grow at a similar pace to the third quarter but below inflation on an annual basis. We also anticipate the effective tax rate will continue rising to 16%, though likely still below sustainable levels,\u201d Goldman Sachs stated.<\/p>\n\n\n\n

Nubank, which is not included in Valor\u2019s aggregate results, is expected to report a profit of approximately $565 million (around R$3.2 billion based on Friday\u2019s exchange rate). Analysts believe the bank may be affected by currency fluctuations, and fourth-quarter figures will be a key indicator of the fintech\u2019s risk appetite amid a tougher macroeconomic scenario. \u201cWe see 2025 as a challenging year for Nubank. Unsecured loans in Brazil may slow if credit conditions worsen due to inflation and higher interest rates, along with rising default rates. Although Nubank is gaining market share in secured lending, we believe returns on these products remain unattractive,\u201d Citi analysts stated.<\/p>\n\n\n\n

*By\u00a0\u00c1lvaro Campos \u00a0\u2014 S\u00e3o Paulo<\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/b\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Macroeconomic outlook for 2025 signals slowdown in loans and rising default rates 02\/03\/2025 The earnings season for Brazil\u2019s major banks in the fourth quarter of 2024 is expected to reflect what analysts are calling \u201cthe last rays of sunset.\u201d In other words, the numbers from October to December are likely to be positive, with rising […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8106],"tags":[25847,25848],"class_list":["post-92878","post","type-post","status-publish","format-standard","hentry","category-murray-news","tag-big-banks-profits","tag-outlook-for-2025"],"yoast_head":"\nBig banks profits to improve in Q4; outlook for 2025 concerns - Murray Advogados<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/murray.adv.br\/en\/big-banks-profits-to-improve-in-q4-outlook-for-2025-concerns\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Big banks profits to improve in Q4; 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