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Elections do not cloud the view of Banco do Brasil (BBAS3); why do analysts recommend the stock?

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Banco do Brasil: Prospects for 2022 and 2023 lean more towards the optimistic side (Image: Marcelo Camargo/Agência Brasil)

Years of elections often put pressure on state-owned companies, but 2022 has been an exception so far.

Petrobras (PETR4) It’s from Bank of Brazil (BAAS3) not only accumulated appreciation in the year, but the rise in their shares is strong – respectively, +56.28% and +43.65%.

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In case of BBanalysts remain constructive with the company’s investment thesis, which recently held its annual investor event.

Despite the uncertainties surrounding the Brazilian political scenario, the harvest highlights, in a report released this week, that the Bank it has collegiate decisions and minority shareholders, in addition to the obligation for statutory directors to be from within the institution.

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In Safra’s assessment, the outlook for 2022 and 2023 is more optimistic, with delinquency expected to remain under control in the short term, despite the possibility of a slight deterioration in the coming quarters.

“Structurally, delinquency is not our major concern when we look at Banco do Brasil, given its mix of credit with a very defensive positioning, despite the recent move towards riskier lines in the individual segment, due to the high share of agribusiness and corporate”, he says.

“In addition, BB has a comfortable coverage ratio (271% in the second quarter of 2022)”, completes Safra.

The institution’s analysis team also says that, in terms of controlling expenses, the bank continues “doing its homework”, with good prospects for improving efficiency.

digital initiatives

BB has been committed to revamping its operations, showing progress in its digital agenda, but without neglecting the physical model.

The bank’s “phygital” strategy reflects the delivery of digital products and services, whether in the application or through data analysis models in the assignment of credit, says the Inter Researchwhich also participated in Investor Day.

“In addition, we emphasize that BB, since the implementation of the pixhas guided all new cloud processes, prioritizing the efficiency of this model in systems and Open Finance. The bank has been leading the adoption and development in the country, using a model with 100% of the data architecture organized and available in a big data environment”, he adds.

Inter adds that, as a reflection of the Open BankingBB launched “Minhas Finanças Multibanco”, with around R$8 billion in consolidated balances with other banks, resulting in a fully customized offer for around 90% of customers who provided their data.

still discounted

Despite the appreciation in 2022, Banco do Brasil shares remain attractive, in Safra’s opinion.

Analysts point out that the bank is running at “a big discount” compared to its peers (3.8x P/E (price-to-earnings for 2023 vs. roughly 7x the average of major private peers) and at its historical average of 10 years (of 6.4 times).

Another positive aspect raised by Safra is the dividend yield (dividend yield).

“We hope that BB distributes a dividend yield of 9.7% and 12.7% for 2022 and 2023, respectively”, he says.

Inter says that Banco do Brasil has delivered “surprising” results in 2022, which has brought ROAE (return on equity) to a level similar to that of private peers.

Inter points out, however, that BB has sought to further leverage its results with a more profitable portfolio mix, which should increase delinquency.

“Therefore, we understand that for the long term, if the bank continues to grow in riskier lines of credit, we can see a reflection of higher net interest income, which is supported by the bank’s high coverage indicator and the good overall quality of the portfolio” , comments the institution.

Inter have a buy recommendation for the name, with a target price at the end of 2023 of BRL 54 at the end of 2022.

Safra’s recommendation is also to buy, with a target price of BRL 61 for 2023.


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O Money Times publishes informative articles of a journalistic nature. This publication does not constitute an investment recommendation.

Source: Moneytimes

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