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SAO PAULO, Feb 11 (Reuters) - State-run Banco do Brasil SA will target loan book growth for this year roughly in line with rivals, indicating Brazil’s largest bank by assets will aim to protect profits as the economy flirts with recession.
The bank said on Wednesday that lending may grow between 7 percent and 11 percent this year, a little faster than that of private-sector rivals Itaú Unibanco Holding SA and Banco Bradesco SA. Excluding agribusiness loans, Banco do Brasil’s guidance would be in line with Itaú’s and Bradesco’s predictions.
Last year, Banco do Brasil’s loan book grew about 10 percent, the slowest pace since at least 2008, according to Thomson Reuters data. Banks are putting the brakes on loan disbursements on concern Brazil’s stagnant economy could spur defaults in the months ahead.
Interest income could rise at a faster pace this year as the central bank’s ongoing cycle of interest-rate increases gives Banco do Brasil additional power to reprice loans. That, alongside robust fee income growth forecast for this year could help the Brasilia-based lender keep return on equity - a key gauge of profitability for banks - at current levels.
Protecting profitability in an increasingly tougher environment ranks as No. 1 challenge for Alexandre Abreu, a three-decade Banco do Brasil veteran who last week was tapped as its new chief executive officer. Abreu was the architect of an aggressive sales program that allowed the bank to ramp up sales of financial products and the implementation of stricter risk assessment standards.
Guidance for this year was unveiled alongside fourth-quarter earnings that beat analyst estimates, largely the result of a surge in interest, fee and insurance income.
Recurring net income, or profit excluding one-time items, totaled 3.020 billion reais ($1.07 billion) in the quarter, above the average estimate of 2.908 billion reais in a Reuters poll. Recurring return on equity reached 16.2 percent, well above the 14.6 percent forecast in the poll.
Banco do Brasil targets recurring return on equity between 14 percent and 17 percent this year, compared with 15.1 percent last year.
Net interest income, or revenue from loan-related transactions, could rise between 9 percent and 13 percent, compared with 8.8 percent last year.
Fee income, or revenue from the sale of financial services, may expand between 7 percent and 10 percent this year, compared with 7.6 percent last year.
Management plans to discuss fourth-quarter results at an event later in the day.
$1 = 2.833 Brazilian reais Reporting by Guillermo Parra-Bernal