UPDATE 3-Banco do Brasil to lend less this year; shares fall on profit miss

jueves 13 de febrero de 2014 11:25 GYT

By Guillermo Parra-Bernal and Aluísio Alves

SAO PAULO Feb 13 (Reuters) - Banco do Brasil SA expects to lend less this year due to flagging demand for credit among households and companies, a further sign that a weak economy and rising loan loss provisions will likely cut profits at Brazil's largest lender by assets.

The state-run lender, which reported unexpectedly weak fourth-quarter results on Thursday, unveiled guidance for loan book expansion between 14 percent and 18 percent this year, down from a range of 17 percent to 21 percent last year.

More modest disbursements coupled with efforts to expand credit in the least risky segments will lead to low single-digit growth in interest income, it said in a securities filing.

The lender's cautious guidance comes as Brazil's economy enters what is expected to be a fourth straight year of anemic growth, and data points to tepid consumption and job creation trends, which could hamper Banco do Brasil and its peers.

Banco do Brasil's shares fell more than 5 percent in early trading on the weak earnings and concerns about its potential operational performance and asset quality trends for 2014. Based on guidance for recurring return on equity, profit at Banco do Brasil this year could fall up to 13 percent this year, Bradesco BBI analysts said in a client note.

Recurring net income, or profit excluding one-off items, reached 2.424 billion reais ($1 billion) in the quarter, down 7.1 percent from the third quarter and 23.8 percent from the year-earlier period. A Reuters poll of eight analysts expected recurring profit of 2.606 billion reais for the quarter.

Banco do Brasil said it missed analyst estimates because of higher funding costs and a spike in loan loss provisions. Higher interest rates failed to spur the revenue gains that bolstered private-sector rivals, while expenses rose way above expectations.   Continuación...