Bradesco CEO Says Bank Set to Boost Lending at Least 10% in 2019

(Bloomberg) -- Banco Bradesco SA, the second-biggest bank in Latin America by market value, will increase lending at least 10 percent next year amid expectations that the new Brazilian government will promote market-friendly policies and speed up economic growth, Chief Executive Officer Octavio de Lazari said.

“Long-awaited projects are being brought back to life,” he said Tuesday in an interview at Bloomberg’s headquarters in New York. The incoming government may make changes amid an “uproar” from Brazilians and investors who have called for “social security reform, independence of the central bank and tax simplification.”

The victory of conservative lawmaker Jair Bolsonaro in October’s presidential election could lift Brazilian banks as reforms promise years of strong earnings growth, Morgan Stanley analysts said in a report last week. Bradesco is betting on growth, and sees lending to companies as “a mission,” Lazari said. It will also continue boosting credit to individuals, focusing on mortgage, vehicles and payroll loans.

Banks will present to the new government a proposal to reduce spread margins on loans, to cut borrowing costs in Latin America’s biggest economy, he said. Bradesco expects demand for credit to rise in 2019, when the economy is projected to grow 2.8 percent, more than the 1.03 percent in the 12 months ended June 30.

The Osasco-based bank’s total lending book to large corporations rose 6.7 percent in the 12 months through September, to 239 billion reais ($63 billion), according to its latest financial statement. That’s more than any other major lender in the country, while some competitors are still retreating after more than two years of recession and a corruption probe brought bankruptcy filings to a record high. Itau Unibanco Holding SA, the biggest Latin American bank by market value, posted a reduction of 2.2 percent in the same period, to 196.3 billion reais.

Bradesco has been eager to finance mergers and acquisitions on its own, rather than distributing credit to investors or being part of a syndicate. Among this year’s deals was a 4.68 billion-real local bond, fully underwritten by the bank, that was part of a financing package for pulp producer Suzano Papel e Celulose SA’s acquisition of Fibria Celulose SA.

Net income for the first three quarters rose 11 percent from a year earlier to 15.7 billion reais. Return on equity, a measure of profitability, reached 18.7 percent, below Itau’s 21.7 percent and Banco Santander Brasil SA’s 19.4 percent.

Bradesco’s total loan portfolio increased 7.5 percent in the third quarter from a year earlier. Provisions to cover loan losses dropped almost 24 percent from the third quarter of 2017, to 3.5 billion reais.

The Morgan Stanley analysts said that “Bradesco seems to be a step behind peers in tuning their business model to compete with fintech players.” Lazari said the bank is addressing that issue.

Next, Bradesco’s mobile bank, is opening about 5,000 accounts a day after launching a year and a half ago, and will pay for itself in June next year, he said. Integration of the bank’s brokerage firms with the private-banking and high-income Prime businesses, begun earlier this year, will help create a unique investment platform, Lazari said.

©2018 Bloomberg L.P.