UPDATE 3-Bradesco sees strong margins short-lived on sluggish economy

jueves 31 de julio de 2014 14:56 GYT

(Recasts with details on trends on interest margins, executive comments, share performance throughout)

By Guillermo Parra-Bernal

SAO PAULO, July 31 (Reuters) - The stronger return on some Banco Bradesco SA assets in the second quarter will weaken before year-end, executives said on Thursday, reflecting Brazil's sluggish economy.

Net interest margin (NIM), or the return on interest-bearing assets, widened more than expected to 7.7 percent as returns on government debt rose, funding costs stabilized and new loans were priced at higher levels.

Yet, some of the spread will ease through year-end, Chief Financial Officer Luiz Carlos Angelotti said on an earnings conference call. He expects NIM at about 7.3 percent by December.

The ease in margins "has to do with our loan mix and finding a balance between borrowing and funding costs," he noted. NIM was 7.1 percent in the first quarter.

Bradesco reported second-quarter profit that beat estimates, helped by more aggressive loan pricing coupled with growth in low-risk credit segments.

Saúl Martínez, an analyst with JPMorgan Securities, questioned whether second-quarter margins would be sustainable in the current economic environment.

Economists say Brazil's economy is flirting with recession as demand for goods and services falters.   Continuación...