UPDATE 2-Banco do Brasil pledges prudence amid stock downgrades

viernes 14 de febrero de 2014 16:40 GYT

By Guillermo Parra-Bernal

SAO PAULO Feb 14 (Reuters) - State-run Banco do Brasil SA downplayed concerns over profitability trends this year by pledging loan pricing discipline, as a steep fourth-quarter profit miss led analysts to put their recommendations on the stock under review.

Executives led by Chief Financial Officer Ivan Monteiro told investors on Friday that the bank will keep defaults stable, adjust the pricing of loans accordingly with an environment of higher interest rates in the country and maintain a longstanding policy of strict risk assessment of borrowers.

Loan-book growth and return-on-equity estimates could be raised if the outlook for risk and demand for credit improves, Monteiro said.

Banco do Brasil unveiled on Thursday guidance for loan-book expansion between 14 percent and 18 percent this year, and returns between 12 percent to 15 percent this year - which analysts considered too low.

"We are assuming a conservative view," Leo Loyola, head of investor relations at Banco do Brasil, said on the call. "While the higher rates impact funding right away, our top line only benefits from this situation after a lag time."

Shares of the Brasilia-based lender, the nation's largest bank by assets, tumbled a day earlier because of the weak earnings and concerns about future operational performance. Recurring net income, or profit excluding one-off items, was 2.424 billion reais ($1 billion), well below the 2.606 billion reais expected by analysts surveyed by Reuters.

Shares rose 1.0 percent on Friday, on top of Thursday's 4.9 percent slump, which was the worst daily drop since Nov. 12.   Continuación...