October 26, 2010 / 6:29 PM / in 7 years

PREVIEW-Brazil banks Q3 profit to surge on economic growth

4 Min Read

 * Bank profits in Brazil seen surging in Q3 on economy
 * Brazil growth, low unemployment to cut default rates
 * Bradesco opens season, with net seen up 36.2 pct
 By Elzio Barreto
 SAO PAULO, Oct 26 (Reuters) - Profits at Brazil's largest banks likely surged in the third quarter from a year earlier as rapid growth of Latin America's largest economy stoked demand for new loans, while also helping reduce default rates, a Reuters survey showed on Tuesday.
 With the country's economy forecast to expand 7.5 percent in 2010 and unemployment falling to record lows, more and more Brazilians have taken up loans to buy houses, appliances and cars.
 Bank lending in the country jumped nearly 20 percent year-on-year in September, led by "intense demand" in segments like real estate and vehicle financing, the central bank said on Tuesday. [ID:nN26285578]
 "Despite seasonally higher operating expenses, Brazilian banks should maintain the profitability level in line with that of previous quarters, with lower provisions, resilient margins and loan growth acceleration driving the top line," Credit Suisse analysts Marcelo Telles and Victor Schabbel said in a report. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ StarMine comparative valuations: r.reuters.com/puw32q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 Banco Bradesco (BBDC4.SA)(BBD.N), Brazil's second-largest private sector bank, will open the earnings season for large Brazilian banks on Wednesday. The bank is forecast to report recurring net income of 2.47 billion reais ($1.45 billion), a 36.2 percent surge from a year earlier, according to the average forecast of 12 analysts in the survey.
 Santander Brasil (SANB11.SA)(BSBR.N), the Brazilian unit of Spain's largest bank, is expected to report the following day that third-quarter recurring profit rose 18.4 percent to 1.74 billion reais.
 Bradesco's larger rival, Itau Unibanco (ITUB4.SA)(ITUB.N), is expected to post third-quarter profit of 3.3 billion reais when it reports on Nov. 3, compared with 2.69 billion reais in the year-earlier period, according to the average of 11 forecasts.
 "Asset quality will likely remain under control and improve. We also expect fee income to remain solid, from the already strong 2Q," Barclays Capital analysts Roberto Attuch and Fabio Zagatti said in a report about Itau Unibanco's results.
 State-run Banco do Brasil (BBAS3.SA), Latin America's largest bank by assets, will be the last of the big banks to report earnings, on Nov. 16. A surge in the bank's loan portfolio should help boost profits 34.6 percent to 2.38 billion reais, according to the average of 11 estimates in the survey.
 Below are the forecasts for recurring net income for Bradesco, Itau Unibanco, Banco do Brasil and Santander Brasil in billions of reais: --------------------------------------------------------------- BANK             Q3/2010   Q3/2009  Yr/Yr      No of
              FORECAST   ACTUAL  CHANGE     FCASTS --------------------------------------------------------------- BRADESCO          2.466     1.811   36.2 pct     12 ITAU UNIBANCO     3.300     2.687   22.8 pct     11 BANCO DO BRASIL   2.375     1.764   34.6 pct     11 SANTANDER BRASIL  1.740     1.470   18.4 pct      9
($1=1.703 reais)  (Reporting by Elzio Barreto; Editing by Steve Orlofsky)   

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