UPDATE 2-Soaring fees help Brazilian lender Bradesco beat profit forecasts
By Guillermo Parra-Bernal
SAO PAULO, July 30 (Reuters) - Banco Bradesco SA, Brazil's second-largest private-sector bank, beat second-quarter profit estimates on Thursday after fee income came in stronger than expected and loan-loss provisions peaked despite an uptick in defaults.
Recurring net income, or earnings excluding one-time items, rose to a record 4.504 billion reais ($1.35 billion) for the quarter, topping the 4.339 billion reais estimate in a Reuters poll. Recurring profit rose 5.4 percent in the quarter and 18.4 percent on an annual basis.
The numbers underscore the resilience of Bradesco's business model, which increasingly relies on the sale of insurance and other financial services as much as on credit. While interest income fell slightly after loan-book growth stagnated, Bradesco expects to charge borrowers more for their loans in the face of mounting economic risks in Brazil.
The numbers also indicate that neither Brazil's steepest economic downturn in 25 years, nor fallout from the country's biggest corruption scandal, may prevent the largest listed banks from posting robust second-quarter results.
Rising borrowing costs in Brazil are helping banks counter the impact of higher loan-loss provisions and weak credit demand.
"Bradesco is still generating strong interest income growth as loan repricing continues, and is maintaining excellent cost control despite weak loan growth and high provisions," said Philip Finch, a strategist with UBS Securities in London.
The company kept its full-year loan book expansion forecast unchanged but raised its estimate for growth in interest income, or revenue from loan-related transactions, to between 10 percent to 14 percent this year. Prior guidance stood at between 6 percent and 10 percent. Continuación...