Itaú BBA cuts Bradesco share target to 20 reais amid slowing 2027 earnings

Key Facts

Itaú BBA cut its rating on preferred shares in Brazil’s Bradesco bank, listed under ticker BBDC4, to “neutral” from “buy” and lowered its end-2027 price target to 20 Brazilian reais from 22, according to a report cited by UOL Economia on October 28. The decision reflects a weaker assessment of the earnings path and return on equity next year. The investment bank cut its 2027 net profit estimate by 12% to 28.5 billion reais. That represents growth of just 1% compared with the expected result for 2026. It also lowered its 2027 return on equity estimate to 14.4% from 16.3%.

Itaú BBA raised its estimate for loan-loss provision expenses in 2027 by 16% to 47.1 billion Brazilian reais. It also raised its forecast for the rate of defaults more than 90 days past due to 4.9%, from a previous estimate of 4.2%. The revisions come as the actual rate of defaults more than 90 days past due rose to 4.6% in the third quarter, from 4.1% a year earlier. Meanwhile, the loan book grew 11.1% year over year to 1.15 trillion reais. The figures reflect expanding lending alongside a rise in overdue loans, a factor in the bank’s assessment of the earnings and provisions outlook.

Bradesco said the increase in defaults more than 90 days past due was concentrated in the small and medium-sized business segment, particularly working-capital loans backed by federal government guarantees. The bank added that seasonal delays in John Deere Bank operations weighed on personal loans. On revenue, the bank posted 38.0 billion reais in the third quarter, up 8.4% year over year. It said in its filing that cost controls and diversified revenue sources supported performance during the period. Chief Executive Marcelo Noronha said slower growth in credit-related revenue was offset by non-credit revenue and strong cost controls.

Itaú BBA linked its weaker 2027 forecast to an expected economic slowdown and higher interest rates, saying both could limit loan demand and households’ and companies’ ability to repay. Bradesco said slower economic activity, higher rates and tighter financial conditions for individuals and companies make a slowdown in credit-related revenue expected. The bank said it had directed its sales teams toward a cautious credit mix and expanding non-credit revenue. Noronha described the bank’s stance as cautious, with a moderate risk appetite amid a difficult economic environment in Brazil. These factors put earnings and provisions forecasts at the center of the rating cut, according to the UOL report.

Itaú BBA’s downgrade came after Citi cut its rating earlier on Tuesday, according to TIKR, while the UOL report cited slower credit growth, higher coverage expenses and risks to the 2027 outlook among the reasons for Itaú’s revision. A TIKR report said Bradesco shares fell 5% during the October 28 session following the downgrade. Itaú and Santander Brasil shares also fell about 4% each, while Nu Holdings shares dropped 3% in the same session. EL7 data showed the U.S.-listed BBD share closed at $2.93 on October 26 and $2.91 on October 27; these closing prices do not in themselves represent a 5% daily move. Bradesco announced a renewed share buyback program starting in November, covering up to 106.6 million shares.