By Brazil Stock Guide – Banco do Brasil SA (BBAS3) shares swung between losses and gains on Friday after the state-controlled lender posted second-quarter earnings that tumbled 60% to 3.8 billion reais, according to InfoMoney. The results disappointed even after recent downward revisions to profit and dividend forecasts, extending the stock’s 2025 losses to about 15%.
Market reaction remains split. Data compiled by LSEG show that among the 11 brokerages covering BBAS3, three rate the stock a buy, seven recommend holding and one advises selling. While some analysts argue current multiples are compelling, others question the bank’s ability — and pace — to recover.
Downgrades and forecast cuts
Ativa Research downgraded its recommendation to neutral from buy, citing weaker-than-expected performance, especially in its agribusiness loan portfolio. Since Brazil’s CMN Resolution 4,966/21 took effect, the segment has required higher provisions for expected losses, weighing on earnings.
Monte Bravo maintained a neutral rating with a 22.50 reais price target, implying a 13% upside from the previous close. The firm highlighted that Banco do Brasil cut its 2025 net income guidance to between 21 billion and 25 billion reais from 37 billion to 41 billion reais previously, while raising its loan-loss provision outlook to as much as 56 billion reais. The lender also reduced its payout ratio to 30% of net income, which would translate into a dividend yield of 5.5% to 6.5% based on mid-range earnings estimates.
Management and peer views
Chief Executive Officer Tarciana Medeiros said during a conference call that results are likely to remain pressured by delinquencies in the agribusiness credit portfolio through the third quarter, with improvement expected only by year-end.
Other firms maintaining neutral ratings on BBAS3 include XP Investimentos, BTG Pactual (BPAC11), Morgan Stanley (MS), JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Itaú BBA (ITUB4) and Genial Investimentos. XP noted that delinquency remained a significant drag in the second quarter, while BTG likened the deterioration in results to “coming down by elevator” and the recovery to “going up by stairs.” JPMorgan cited longer credit cycles, and Goldman said the new earnings outlook could anchor projections but warned of execution risks. Itaú BBA maintained a cautious stance, citing ongoing deterioration in credit quality.
A contrarian call
Malek Zein, an analyst at Eleven Financial, reiterated a buy rating for BBAS3 but framed it as a medium-term call rather than a short-term trade. He said the 2025 profit guidance is “extremely optimistic” and difficult to achieve, noting that second-quarter earnings were boosted by deferred tax effects. Zein expects 2025 to be among the bank’s weakest years in two decades in terms of return on equity, but argued that the current valuation — below 0.7 times book value — historically offers an attractive entry point. Eleven projects the bank will restore its return on invested capital above its cost of capital by mid-2027.
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