Management Discussion & Analysis 1Q24
Earnings
Summary
Banco do Brasil recorded adjusted net income of R$9.3 billion in 1Q24, up 8.8% YoY, and a 21.7% ROE, reflecting the success of a strategy aimed at customer proximity and materialized, increasingly, in the Figital experience, sustainable credit concession, revenue diversification and cost control.
In the YoY comparison, financial revenue were influenced by the loan and treasury portfolios, which combined with lower financial expenses, resulted in an 21.6% growth in NII. The expanded ALLL expenses (+45.9%) is coherent with the loan portfolio size and reflects the companies and agribusiness segments NPL normalization, both above historical average.
Fee income was positively influenced by insurance, pension plans and premium bonds, asset management and consortium management fees, reflecting diversification and the performance of the conglomerate's companies. Meanwhile, administrative expenses remain under control (+4.9%).
Banco do Brasil S.A. | 1 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Statement of Income
Table 1. Summary Statement of Income - R$ million
1Q23 | 4Q23 | 1Q24 | Δ% Y/Y | Δ% Q/Q | |
Net Interest Income | 21,161 | 25,769 | 25,734 | 21.6 | (0.1) |
ALLL Expanded View | (5,855) | (9,983) | (8,541) | 45.9 | (14.4) |
ALLL - Recovery of Write-offs | 1,889 | 2,105 | 1,991 | 5.4 | (5.4) |
ALLL - Credit Risk | (4,148) | (10,413) | (10,000) | 141.1 | (4.0) |
ALLL - Impairment | (3,237) | (1,230) | (198) | (93.9) | (83.9) |
ALLL - Discount Granted | (359) | (445) | (334) | (6.9) | (25.1) |
Net Financial Margin | 15,306 | 15,785 | 17,193 | 12.3 | 8.9 |
Fee income | 8,132 | 8,744 | 8,344 | 2.6 | (4.6) |
Administrative Expenses | (8,466) | (9,253) | (8,878) | 4.9 | (4.0) |
Legal Risk ¹ | (1,464) | (1,404) | (1,523) | 4.0 | 8.5 |
Net Gains from Equity Method Investments | 1,657 | 1,952 | 1,842 | 11.2 | (5.6) |
PREVI - Plano de Benefícios I | 884 | 567 | 616 | (30.4) | 8.5 |
PREVI - Fundo Utilização Restatement | 345 | 224 | 319 | (7.6) | 42.7 |
Other Operating Income ² | (3,377) | (3,473) | (4,075) | 20.7 | 17.3 |
Profit Before Taxation and Profit Sharing | 13,017 | 13,143 | 13,837 | 6.3 | 5.3 |
Income and Social Contribution Taxes | (2,564) | (1,343) | (2,379) | (7.2) | 77.1 |
Employee and Directors Profit Sharing | (1,089) | (1,197) | (1,183) | 8.6 | (1.2) |
Non-Controlling Interests | (814) | (1,160) | (976) | 19.8 | (15.9) |
Adjusted Net Income | 8,550 | 9,442 | 9,300 | 8.8 | (1.5) |
One-Off Items | (343) | (580) | (518) | 51.1 | (10.7) |
Net Income | 8,207 | 8,862 | 8,782 | 7.0 | (0.9) |
ROE - % | 21.0 | 22.5 | 21.7 | 67 bps | (86) bps |
- Group containing the balance of the line 'Civil, Tax and Labor Claims'; (2) Group containing the result of the lines' Other Provisions', Tax Expenses, 'Other Income / Operating Expenses' and 'Non-Operating Result'.
Banco do Brasil S.A. | Investor Relations | 2 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Financial Margin
Net Interest Income (NII)
In 1Q24, NII was R$25.7 billion, practically stable compared to the previous quarter (-0.1%), and and growth of 21.6% compared to the same period last year.
In QoQ comparison, there was a 4.6% decrease in financial income (-2.4% in loan operations and -10.4% in treasury), offset by the 9.7% reduction in financial expenses, influenced by the 11.5% drop in commercial funding expenses.
In YoY comparison, the 9.1% increase in financial income (+6.2% in loan operations and +18.6% in treasury) contributed to the increase in NII, driven by growth of loan portfolio volumes and the drop in expenses with open market funding, reflecting the 19.4% drop in TMS in the period, while financial expenses decreased by 3.3%.
Table 2. Net Interest Income (NII) and Net Interest Margin (NIM) - R$ million
1Q23 | 4Q23 | 1Q24 | Δ% Y/Y Δ% Q/Q | ||
Net Interest Income | 21,161 | 25,769 | 25,734 | 21.6 | (0.1) |
Financial Income | 42,390 | 48,499 | 46,260 | 9.1 | (4.6) |
Loan Operations | 32,304 | 35,146 | 34,299 | 6.2 | (2.4) |
Treasury¹ | 10,086 | 13,353 | 11,962 | 18.6 | (10.4) |
Financial Expenses | (21,229) | (22,730) | (20,527) | (3.3) | (9.7) |
Commercial Funding | (18,073) | (19,532) | (17,285) | (4.4) | (11.5) |
Institutional Funding² | (3,156) | (3,198) | (3,241) | 2.7 | 1.4 |
NIM - %³ | 4.6 | 5.3 | 5.1 | 10.5 | (3.8) |
Risk Adjusted NIM - % | 3.3 | 3.2 | 3.4 | 1.9 | 5.1 |
CDI / TMS | 3.3 | 2.8 | 2.6 | (19.4) | (7.5) |
- It includes the result from interest, tax hedging, derivatives, and other financial instruments that offset the effects of the exchange rate variation on result; (2) It includes senior bonds, subordinated debt, and domestic and abroad hybrid capital and debt instruments; (3) Net Interest Income/Earning Assets Average, annualized.
Banco do Brasil S.A. | Investor Relations | 3 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Managerial NII
Margin with Clients and with the Market
In 1Q24, Margin with Clients, up 0.6% QoQ, was influenced by the positive performance of the credit margin. In the same comparison, the Margin with the Market decreased by 2.7%, mainly due to the performance of Banco Patagonia's NII, influenced by the macroeconomic scenario in Argentina and the maximum devaluation that occurred in December/23.
Figure 1. Margin with Clients¹ and with the Market² - R$ million
18,920 | 19,359 | 19,475 | 20,049 | 20,574 | 20,160 | 20,277 | |
17,159 | |||||||
5,608 | 5,457 | ||||||
639 | 2,092 | 1,686 | 2,838 | 3,106 | |||
(103) | |||||||
2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
Margin with Clients | Margin with the Market |
- Comparing with the accounting NII presented at the beginning of this chapter, the Margin with Clients is essentially formed by the loan operations income plus private securities, net of opportunity expenses for each type of operation, and by the commercial funding expenses and compulsory deposits, plus opportunity income for each type of operation; (2) Similarly, the Margin with the Market essentially consists of treasury result (excluding private securities), institutional funding expenses, Banco Patagonia's NII and net income from opportunities (income/expenses) plus income of compulsory applications..
In YoY comparison, the growth in Margin with Clients (+4.1%) was influenced by: (i) growth in the credit margin, sustained by the increase of the average balance and the repricing of the portfolio; and (ii) retraction in the margin with commercial funding, influenced by the drop in TMS in the period. In the same comparison, the positive performance of Margin with the Market was influenced by the treasury result and by the Banco Patagonia's NI.
Table 3. Margin with Clients and with the Market - R$ million
1Q23 | 4Q23 | 1Q24 | Δ% Y/Y Δ% Q/Q | ||
Net Interest Income | 21,161 | 25,769 | 25,734 | 21.6 | (0.1) |
Margin with Clients | 19,475 | 20,160 | 20,277 | 4.1 | 0.6 |
Average Balance | 913,999 | 979,865 | 1,021,535 | 11.8 | 4.3 |
Clients Spread | 8.80 | 8.49 | 8.18 | (7.0) | (3.6) |
Margin with the Market | 1,686 | 5,608 | 5,457 | 223.6 | (2.7) |
Banco do Brasil S.A. | Investor Relations | 4 |
Management Discussion & Analysis 1Q24 | Earnings Summary
ALLL Expanded View
Expanded ALLL expenses, which correspond to credit risk expenses (in accordance with CMN Resolution No. 2,682/99), added to the amounts recovered from losses, in addition to discounts granted and impairment losses, totaled R$8.5 billion in 1Q24 (-14.4% QoQ and +45.9% YoY).
Table 4. ALLL Expanded View - R$ million
1Q23 | 4Q23 | 1Q24 | Δ% Y/Y | Δ% Q/Q | |
ALLL Expanded View | (5,855) | (9,983) | (8,541) | 45.9 | (14.4) |
ALLL Expenses - Credit Risk | (4,148) | (10,413) | (10,000) | 141.1 | (4.0) |
ALLL Expenses - Recovery of Write-offs | 1,889 | 2,105 | 1,991 | 5.4 | (5.4) |
ALLL Expenses - Impairment | (3,237) | (1,230) | (198) | (93.9) | (83.9) |
ALLL Expenses - Discounts Granted | (359) | (445) | (334) | (6.9) | (25.1) |
Credit Risk - down 4.0% compared to the previous quarter and up 141.1% in relation to 1Q23.
Year-to-date results were impacted by the following events:.
- reprofiling of client debt in the large corporate segment, which occurred in 1Q23, with the deconstitution of a provision in the amount of R$2,546 million and concomitant recognition of loss due to impairment of debentures arising in the context of the change in the debt profile (from credit operations to securities);
- worsening credit risks in the Companies segment in the Agribusiness portfolio;
Recovery of Write-Offs - down 5.4% compared to 4Q23 and up 5.4% in relation to the same period last year.
Impairment - totaled R$198 million, an reduction of 83.9% QoQ and 93.9% YoY , mainly explained by the debt reprofiling (1Q23) (as described above) and risk increase in the Companies segment (4Q23).
Discounts Granted - down 25.1% QoQ and 6.9% YoY.
Banco do Brasil S.A. | Investor Relations | 5 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Fee Income
Fee income was R$8.3 billion in the 1Q24, down 4.6% QoQ, impacted by the quarter's seasonality.
Compared to the same period last year, there was growth of 2.6%, influenced mainly by the positive performance of the insurance, pension plans and premiuym bonds commission lines (+11.5%), asset management (+5.8%) and consortum (+20.3%).
Table 5. Fee Income - R$ million
1Q23 | 4Q23 | 1Q24 | Δ% Y/Y Δ% Q/Q | ||
Fee Income | 8,132 | 8,744 | 8,344 | 2.6 | (4.6) |
Asset Management | 2,056 | 2,062 | 2,175 | 5.8 | 5.5 |
Checking Account | 1,573 | 1,659 | 1,552 | (1.3) | (6.5) |
Insur., Pens. Plans & Premium Bonds | 1,306 | 1,377 | 1,457 | 11.5 | 5.8 |
Loans and Guarantees | 524 | 728 | 579 | 10.4 | (20.5) |
Credit/Debit Cards | 674 | 648 | 526 | (22.0) | (18.9) |
Consortium Management Fees | 573 | 676 | 690 | 20.3 | 2.0 |
Collections | 371 | 323 | 306 | (17.5) | (5.4) |
Billings | 254 | 248 | 252 | (0.9) | 1.5 |
Contract Processing | 234 | 250 | 250 | 6.8 | (0.1) |
Subsidiaries Abroad | 225 | 230 | 169 | (24.8) | (26.3) |
Capital Market | 93 | 257 | 132 | 41.4 | (48.7) |
Nat. Treasury & Manag. of Official Funds | 85 | 82 | 77 | (9.0) | (6.5) |
Foreign Exchange Services | 56 | 55 | 54 | (4.5) | (2.9) |
Other | 109 | 148 | 128 | 17.9 | (13.5) |
Business Days | 63 | 61 | 61 | (3.2) | 0.0 |
Banco do Brasil S.A. | Investor Relations | 6 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Administrative Expenses and
Cost-to-Income Ratio
In 1Q24, administrative expenses were R$8.9 billion, down 4.0% QoQ, mainly due to the 6.9% decrease in Other Administrative Expenses and the 2.5% decrease in Personnel Expenses.
In YTD comparison, administrative expenses grew 4.9%, influenced by the collective bargaining of the banking category. The cost-to-income ratio accumulated in 12 months was 25.9%, reflecting the good generation of revenues and the control of expenses.
This section also presents BB's service network.
Figure 2. Administrative Expenses - R$ million
28.7 | 27.9 | 27.6 | 27.1 | |||
25.9 | ||||||
8,466 | 8,810 | 8,926 | 9,253 | 8,878 | ||
2,848 | 3,019 | 3,230 | 3,220 | 2,998 | ||
5,618 | 5,791 | 5,696 | 6,033 | 5,880 | ||
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | ||
Personnel Expenses | Other Administrative Expenses | Cost-to-Income Ratio 12m - % ¹ | ||||
(1) Cost-to-Income Ratio: Administrative Expenses / Operating Income. Data referring to the Income Statement with Reallocations.
Banco do Brasil S.A. | Investor Relations | 7 |
Management Discussion & Analysis 1Q24 | Earnings Summary
Capital Adequacy Ratio
The Basel Ratio was 15.13% in March, 2024. The Tier I capital ratio was 13.88%, of which 11.90% was CET 1. The Reference Equity, which takes into account the requirements for calculating Basel's regulatory capital, reached the amount of R$177.8 billion, a reduction of 0.8% in 12 months.
Figure 3. Capital Adequacy Ratio - %
12.01 | 12.21 | 12.49 | 12.12 | 11.90 |
16.19 | 15.72 | 16.24 | 15.47 | 15.13 |
1.59 | 1.59 | |||
1.59 | 1.56 | 1.25 | ||
14.60 | 14.13 | 14.64 | 13.91 | 13.88 |
Mar/23 | Jun/23 | Sep/23 | Dec/23 | Mar/24 |
Tier I | Tier II | CET1 | ||
Figure 4. Changes in Common Equity Tier 1 (CET1)- %
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Management Discussion & Analysis 1Q24 | Earnings Summary
Loan Portfolio
Credit Volume
The individuals expanded portfolio grew 1.4% QoQ and 5.8% YoY, mainly due to the performance of payroll loans (+3.5% QoQ and +10.3% YoY) and salary loan (+4.5% QoQ and 9.3% YoY).
The companies expanded portfolio grew 0.7% QoQ and 8.5% YoY, in comparison with the previous quarter highlighted by the performance of credit card operations (+18.9%) and investments (+2.6%). In comparison with the same period last year, the highlighed by the performance were working capital (+6.5%) and investments (+24.0%).
The agribusiness expanded portfolio grew 4.8% QoQ and 15.5% YoY and mainly reflects growth in working capital for input purchase (+8.2% QoQ and +19.7% YoY), agricultural investment (+3.9% QoQ and +19.2% YoY) and agro securities and guarantees (+7.4% QoQ and +48.4% YoY).
Figure 5. Expanded Loan Portfolio - R$ billion
16.9 | 13.6 | 10.0 | 10.3 | 10.2 | |
1,066 | 1,109 | 1,138 | |||
1,033 | 1,045 | 55 | |||
49 | |||||
47 | 49 | 51 | |||
323 | 322 | 340 | 355 | 373 | |
300 | 302 | 304 | 313 | 317 | |
363 | 372 | 371 | 391 | 393 | |
Mar/23 | Jun/23 | Sep/23 | Dec/23 | Mar/24 | |
Companies | Individuals | Agribusiness | Abroad | 12m Growth - % | |
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Management Discussion & Analysis 1Q24 | Earnings Summary
Credit Quality
The NPL+90d (ratio between operations overdue for more than 90 days and the balance of the classified loan portfolio) ended March/24 in 2.90%, below the Banking Industry in Brazil.
Figure 6. NPL +90d of Classified Loan Portfolio - %
3.50 | 3.40 | |||
3.30 | 3.30 | |||
3.20 | ||||
2.73 | 2.81 | 2.92 | 2.90 | |
2.62 | ||||
Mar/23 | Jun/23 | Sep/23 | Dec/23 | Mar/24 |
NPL +90d BB (%) | NPL +90d BI (%) |
Banco do Brasil's coverage ratio ended December at 196.0%.
Figure 7. Coverage Index of Classified Loan Portfolio - %
202.7 | 201.3 | 199.1 | 196.7 | 196.0 |
190.9 | 185.3 | 184.8 | 190.6 | |
182.9 | ||||
Mar/23 | Jun/23 | Sep/23 | Dec/23 | Mar/24 | ||
ALLL/NPL + 90d BB (%) | ALLL/NPL + 90d BI (%) | |||||
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Banco do Brasil SA published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 22:09:15 UTC.