Banco Bradesco's 16% Earnings Yield Is Not So Attractive Amid Its Challenges

2025-02-20 19:35:05 ET

Summary

• Bradesco's 4Q24 results show lagging loan growth, NII, and rising expenses, with key retail categories like credit cards and current accounts shrinking.
• Despite a 16% earnings yield, Bradesco's valuation is not attractive compared to peers like Santander Brasil and Banco do Brasil, which offer better growth and efficiency.
• Loan book grew 12% YoY, but the mix favored riskier segments; NII grew only 5.4% YoY, lagging behind loan growth.
• Operational expenses grew 9% YoY, outpacing revenue growth, continuing a negative trend and justifying a Hold rating on BBD stock.

Banco Bradesco ( BBD ) ( BBDO ) reported 4Q24 results with very little to like in comparison to peers. The bank continues to lag behind peers in loan growth, NII lags loans, and expenses grow above NII and fees. Key retail categories like credit cards and current accounts are shrinking on a relative basis. For FY25, the expectation is for NII to expand, but expenses to grow above loans and fees....

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