Pressured by new accounting rules and the increase in defaults, Banco do Brasil (BB)’s profit fell in the third quarter. From July to September, the financial institution had an adjusted net profit of R$3.785 billion, a drop of 60.2% compared to the same period last year, according to the balance sheet released on Wednesday night (12) by the institution.
In the first nine months of the year, BB made a profit of R$14.943 billion, a decrease of 47.2% compared to the same period in 2024. Throughout last year, the bank had record profit of R$37.9 billion.
Compared to the third quarter of this year, profit was stable. From April to June, the financial institution made a profit of R$3.784 billion.
In a note, BB highlighted that revenue generation is increasing, despite the pressure caused by default. According to the bank, the Worker’s Credit Program, which unifies taking out payroll loans of workers in private companies.
“The growth of margin [financeira bruta] in the quarter was mainly based on business with customers, with emphasis on revenues from credit operations, positively influenced by the performance in Workers’ Credit, which contributes to improving the mix and risk-adjusted return, in addition to good liquidity management”, informed BB.
In January, a resolution of the National Monetary Council (CMN) that changed the accounting of financial institutions interfered in the result. Approved in 2021, the new rules only came into force this year.
The resolution changes the model from provisions (financial reserves to cover possible defaults) to expected loss, based on estimates. This has affected the way some expenses and income are recognized.
Under the new rules, the recognition of interest income from operations considered stage 3 (with delays of more than 90 days) under the cash basis resulted in the bank failing to recognize R$1 billion in credit income.. The cash basis only allows revenue recognition when the money actually enters the financial institution’s cash flow.
Default
THE default ratewhich considers delays of more than 90 days, rose to 4.93% in the third quarter, against 4.21% in the third quarter of 2024 and 3.33% in the third quarter of last year. The result is mainly influenced by agribusiness, a segment where the bank leads in granting credit, and in the credit card line.
Review of projections
With the drop in profit, BB revised its projections for 2025. The new numbers are as follows:
- Adjusted net profit: R$18 billion to R$21 billion; against a previous estimate of R$21 billion to R$25 billion.
- Cost of credit (expected losses due to default and other risks): R$59 billion to R$62 billion; previous estimate of R$53 billion to R$56 billion;
Credit growth
With the increase in interest rates, BB lent less in the third quarter, mainly driven by the decline in credit to companies. The expanded credit portfolio ended September at R$1.279 trillion, a drop of 1.2% in the quarter, but an increase of 7.5% in 12 months.
In the distribution by credit segments, the results were as follows:
Individual: R$350.51 billion at the end of September, an increase of 2.3% in the quarter and 7.5% in one year, with emphasis on the new type of credit granted for CLT, aimed at workers in the private sector, with R$9.2 billion loaned.
Legal Entity: R$452.97 billion, down 3.2% in the quarter, but up 10.4% in one year. The portfolio for large companies totaled R$258.9 billion, a reduction of 4.6% in the quarter, while the portfolio for micro, small and medium-sized companies totaled R$118.5 billion, a decrease of 2.7% in the quarter.
Agribusiness: R$398.79 billion, a drop of 1.5% compared to the previous quarter, but an increase of 3.2% in one year.
Sustainable Credit Portfolio: R$399 billion, financing activities that generate positive social and environmental impacts, with an increase of 8% in 12 months. This portfolio corresponds to 32.9% of the bank’s total credit.
Income and expenses
Service revenues totaled R$8.863 billion in the third quarter. The value represents an increase of 1.3% compared to the previous quarter, but a drop of 2.6% compared to September of last year. According to BB, the highlights in the quarterly comparison are revenues from fund management lines (+7.1%); insurance, pension and capitalization (+5.8%) and consortiums (+6.3%).
Administrative expenses totaled R$9.812 billion in the third quarter, an increase of 1.4% compared to the first quarter and 4.7% compared to September 2024. BB justified the increase based on the 4.6% salary adjustment in September last year and investments in technology, artificial intelligence and cybersecurity.
Dividends
In July, Banco do Brasil had reduced the portion of profit distributed to shareholders from 40% to 30%. In July, the Bimonthly Revenue and Expense Report, a document that guides the execution of the Budget, reduced the projection of state-owned company dividends for 2025 from R$43.4 billion to R$41.9 billion.
