Banco do Brasil (BBAS3): Bradesco BBI raises its stock recommendation; see potential

The net income projected by Bradesco BBI in 2022 for Banco do Brasil is R$ 26.5 billion. (Image: Money Times/Renan Dantas)

THE Bradesco BBI raised the recommendation of shares of Bank of Brazil (BAAS3), from neutral to buy, and increased the target price from BRL 40 to BRL 45 – implying a 27% upside potential.

For Bradesco BII analysts, with the eventual rise, Banco do Brasil shares would be traded at a price on earnings (P/E) of 4.8x for 2022 (and a Price/Asset Value of 0.8x), “ which would still mean a 50% discount for private pairs”.

According to Gustavo Schroden and Maria Clara Negrão, who signed the report released this Tuesday (17), taking into account the improvement in earnings/ROE, the current valuation of BB’s shares are “unfairly discounted”.

Analysts say the stock trades at a multiple of 3.8x P/E for 2022, implying a 40% discount to its historical average and about a 60% discount to the private pair average.

What to Expect from BBAS3 in 2022

Bradesco BBI’s estimate for Banco do Brasil’s earnings per share increased by around 12% for 2022/23, driven by the perspective

According to analysts, the outlook reflects two points: a lower cost of risk, “since the bank benefits from a defensive portfolio” and the result with financial intermediation in continuous improvement, “reflecting higher spreads and funding gains”.

For executives, BB should deliver a ROE of 17.5% this year and 17.3% in 2023 (up from 15.8% in 2021), reducing the difference with private peers to around 2 percentage points (against 4 pp in 2021).

THE net profit projected by Bradesco BBI in 2022 for Banco do Brasil, of R$ 26.5 billion, implies a 26% growth in the annual variation – 10% above the Bloomberg consensus.


THE Money Times publishes informative articles of a journalistic nature. This publication does not constitute investment advice..

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Source: Moneytimes

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