The Bradesco bank announced its strategic plan until 2028 on Wednesday, aiming to increase profitability in the next five years, but with the bank’s CEO, Marcelo Noronha, warning that 2024 will be a transition year and that the results will come gradually, quarter by quarter.

The bank’s shares extended earlier losses in early afternoon trading, plunging more than 14%, while the Ibovespa showed a decline of 0.3%.

“We have a five-year plan, we will implement it quickly. But we will reap the benefits over five years,” said the executive in an interview with journalists, on the same day that the country’s second-largest private bank reported quarterly results below market expectations, according to LSEG data.

JPMorgan and Citi analysts evaluated that the bank presented a weak result for the fourth quarter and a disappointing guidance.

“We understand that Bradesco is on a path to recovery, but the guidance provided implies a profit of only about 18 billion reais (midpoint),” said Yuri Fernandes and JPMorgan’s team in a report to clients, an estimate similar to Citi’s estimate of around 17 billion reais.

For last year overall, Bradesco had a recurring net profit of 16.3 billion reais, a 21.2% decrease compared to 2022.

According to Citi analysts led by Rafael Frade, the profit indicated in Bradesco’s guidance “shows some recovery, but on a very depressed basis, and with still very high levels of provision expenses” and indicates that Bradesco’s improvement in profitability still has a long way to go.

Bradesco’s estimates for the current year include a 7% to 11% growth in the loan portfolio, a 3% to 7% expansion in net interest income, and a 2% to 6% increase in service revenues and a 5% to 9% increase in operating expenses.

AMBITIOUS

The strategic plan, which Noronha described as “dense and ambitious”, foresees a reduction in Bradesco’s hierarchical levels and greater autonomy for executives, as well as changes aimed at reducing complexity and increasing agility in decision-making.

The new management of the country’s second-largest private bank also seeks to increase its market share in expanded credit from the current level of about 14% to between 15% and 19%.

Bradesco’s strategic agenda also includes actions such as creating a new high-income segment, separating the digital retail business unit from the physical retail business, accelerating the migration of the bank’s infrastructure to cloud computing systems, and increasing the use of artificial intelligence in credit.

The bank’s structure will now include six business units – wholesale, wealth, retail, digital business, credit and treasury, and economic research – with Noronha stating that an external high-level executive will be hired for the digital business division.

Noronha did not provide specific deadlines, but stated that Bradesco “will execute all initiatives at the same time. We will not choose one or another initiative to pursue, that is the great mission we have.”

BALANCE SHEET

In 2023, the annualized return on average equity (ROAE) was 10%, down from 13.1% in 2022.

From October to December, Bradesco had a recurring net profit of 2.88 billion reais, below analysts’ expectations, with projections compiled by LSEG pointing to a profit of 4.57 billion reais for the period.

According to Noronha, the result was affected by a 1.4 billion reais provision reinforcement. The executive said the increase was caused by two cases in wholesale banking. The executive did not identify the cases but indicated that they do not involve Americanas.

The president of Bradesco highlighted the improvement in the delinquency trajectory, which decreased in all segments on a quarterly basis. “Now, we can state with all confidence that we have finally controlled delinquency.”

In the fourth quarter, the delinquency index considering delays of more than 90 days was 5.1%, down from 5.6% in the previous three months.

For 2024, Bradesco estimated provisions for doubtful receivables of between 35 billion and 39 billion reais, an improvement compared to 2023, when it recorded 39.5 billion reais, at the top of the bank’s own projection for the period – from 36.5 billion to 39.5 billion reais.

CIELO

Noronha also stated that the decision of Cielo’s controllers – Bradesco and Banco do Brasil – to make a public tender offer for the company’s outstanding shares (OPA) to delist the company is a strategic move.

“We are doing this… to have acquisition closest to the two banks,” said the executive, adding that there is no debate involving a possible split of the Cateno unit, nor plans to buy from BB or sell its stake in Cielo to the bank.

“We are not discussing any purchase or sale with Banco do Brasil… for now, it is closing the capital and going to fight for this market,” said the Bradesco CEO.

Noronha estimated the closing of the OPA in “about 150 days,” believing that most minority shareholders will accept the proposal at a price of 5.35 reais per share. “It is natural that minority shareholders may question (the price), that is part of the game… But I believe that most minority shareholders will accept our proposal.”