Banco Bradesco SA

This is our first report on one of the largest financial service providers, Banco Bradesco. The company had a strong quarter, with an increase in delinquency in the retail segment. In the first quarter, Banco Bradesco reported a net profit of BRL 4.3 billion and a 10.6% return on equity, meeting the expectations communicated in its previous earnings release. Credit provisions remain elevated but are within the bank’s projected limits, and progress was observed in key areas such as insurance operations and market net interest income. Despite volatility due to interest and tax concerns, the quarter concluded positively owing to the introduction of a new tax and fiscal framework. The management anticipates pressure on the bank’s performance in the second quarter, primarily due to credit provisions, but expects superior results in the second half of 2023. In terms of strategy, the bank is simultaneously pursuing multiple initiatives across retail banking, high income, digital assets, IT, among others. Notable developments include the expansion into the high-income segment, the acquisition of Bradesco Bank, a partnership with BlackRock for the management of foreign investment funds, and a capital increase in Bradesco Bank exceeding BRL 2 billion. The bank aims to augment its footprint in the high-income segment by expanding its team of investment specialists by 40% this year, marking a broad and ongoing commitment to improving customer experiences domestically and abroad. We initiate coverage on the stock of Banco Bradesco SA with a ‘Hold’ rating.