UPDATE 4-Bradesco shares sink as outlook for loan-loss provisions worsens

jueves 28 de julio de 2016 13:27 GYT

(Recasts with share performance, management actions throughout)

By Guillermo Parra-Bernal

SAO PAULO, July 28 (Reuters) - Shares in Banco Bradesco SA sank on Thursday as a grimmer outlook for loan-loss provisions this year reignited concerns that a harsh recession and a deluge of refinancing requests may hamper profits at Brazil's No. 3 listed lender.

Bradesco's preferred shares, its most widely traded class of stock, suffered their biggest drop since late May after the company said its provisions could end this year at between 18 billion reais and 20 billion reais ($5.52 billion and $6.14 billion). The prior range was 16.5 billion reais to 18.5 billion reais.

A 33 percent jump in provisions over the past year and signs of borrowers' reluctance to pay more for loans led Bradesco to miss the consensus second-quarter profit estimates. The Osasco, Brazil-based bank earned recurring net income of 4.161 billion reais last quarter, below the consensus estimate of 4.213 billion reais.

While the new provisions forecast underscores Chief Executive Officer Luiz Carlos Trabuco's steps to cushion Bradesco from soaring defaults, the market's reaction "suggests asset quality weakened beyond the story told by reported figures," said Carlos Macedo, an analyst with Goldman Sachs Group Inc.

The preferred shares tumbled 4.4 percent to 27.52 reais.

Adding to the bad news, a judge in Brasilia accepted charges against Trabuco and two other senior executives for allegedly plotting to avoid a 3 billion-real tax fine. The bank has repeatedly denied any wrongdoing by the executives.

Banks in Brazil are wrestling with slumping activity amid the country's worst recession in eight decades as well as fallout from a sweeping corruption probe into state companies and large corporate borrowers. Both situations have stoked a doubling in Brazilian bankruptcy filings over the past year.   Continuación...