UPDATE 3-Banco do Brasil stock sinks after worst results in seven years
(Adds share performance, executive and analyst comments)
By Guillermo Parra-Bernal
SAO PAULO May 12 (Reuters) - Shares in state-controlled Banco do Brasil SA sank on Thursday as soaring defaults and loan-loss provisions led Brazil's largest bank by assets to miss first-quarter profit estimates and post the worst set of results in at least seven years.
Chief Executive Officer Alexandre Abreu cut an annual goal for profitability and raised another for loan-loss provisions, as the worst recession in decades sparked a slew of defaults and loan renegotiations. Interest and fee income fared worse than expected last quarter, forcing management to trim expenses to bolster earnings.
The stock fell as much as 5.6 percent in midmorning trading in São Paulo, the steepest intraday decline in five weeks. Investors warned that quarterly results reignited worries about Banco do Brasil's balance sheet as escalating political turmoil hampers the outlook for Latin America's largest economy.
Recurring net income came in at 1.286 billion reais ($373 million) last quarter, the lowest for any quarter in more than seven years. The result for the indicator, a measure of profit excluding one-time items, missed the average consensus estimate of 2.433 billion reais compiled by Thomson Reuters.
Loan-loss provisions jumped 31 percent last quarter to a record 9.145 billion reais, way above consensus and those of private-sector peers. Loans in arrears for 90 days or more, a benchmark for defaults, rose to 2.6 percent in the first three months of the year - the highest in for any quarter in over five years.
"We are concerned with the limited protection the bank now appears to have going into what should be the most difficult 18 months of" the ongoing credit cycle, said Carlos Macedo, an analyst with Goldman Sachs Group Inc in New York.
Speaking at an event to discuss results, Chief Executive Officer José Mauricio Coelho said the bank is comfortable with current bad-loan reserves, noting that the pace of provisioning should lose steam in coming quarters. Continuación...