Bradesco Sticks to ‘Step by Step’ Strategy as CEO Sets 15% ROE as New Floor

By André Vieira

Brazil Stock Guide – Bradesco (BBDC4) has chosen to face mounting market pressure for a more aggressive acceleration by sticking to the same strategy laid out two years ago: gradual growth, strict risk discipline and heavy investment in technology. “Our ROE has exceeded our cost of capital. That is an important milestone. And our expectation is that profits will continue to grow, in each of the next quarters, in a gradual and safe manner, step by step,” CEO Marcelo Noronha said, defending the continuity of the bank’s transformation plan through 2028.

The bank closed the fourth quarter with net income of R$ 6.51 billion and a return on equity of 15.2%, above an estimated cost of capital of 15%, marking its eighth consecutive quarter of profit growth. For Noronha, that level is not a ceiling but a new floor. “We will not deliver an ROE below this level. From here on, it goes up,” he said, even while acknowledging that a decline in Brazil’s benchmark Selic rate over 2026 is likely to change the dynamics of financial margins. Bradesco estimates interest rates will end the year at around 12%.

According to the CEO, the temptation to accelerate more forcefully exists, but it will not be met at the expense of future competitiveness. “We will not give up investments to increase competitiveness for anything,” he said, responding to analysts who described the bank’s guidance as conservative. Noronha stressed that the plan was designed through 2028 and that part of the expected gains will only materialize later. “There are things we will deliver in 2028 that will have consequences in 2029 and 2030.”

Profit growth in 2026 is expected to be driven primarily by revenues. According to investor relations director André Carvalho, the guidance implies revenue growth close to 10% at the midpoint of the range, supported by credit expansion, fees and insurance. “Consistency is absolutely fundamental for us,” he said.

Asset quality remains non-negotiable. Noronha was unequivocal: “asset quality is a stone-carved clause.” Despite rising delinquency indicators in aggregate financial system data, Bradesco kept loans overdue by more than 90 days stable at 4.1% for four consecutive quarters. Stage 3 assets declined throughout 2025. The official outlook for 2026 is stability, even with stronger commercial momentum.

For CFO Cassiano Scarpelli, that balance between growth and risk is what underpins returns. “Our belief is to reach and remain above the cost of capital,” he said, pointing to insurance, credit and fee income as the main structural levers. According to Scarpelli, the combination of commercial traction and strict cost control provides comfort that ROE can remain elevated even in a lower interest-rate environment.

In credit, the bank surprised positively toward the end of 2025. The loan book expanded 11% over the year, above expectations, led by small and mid-sized companies. Within the Central Bank’s SME definition, Bradesco’s market share in assets rose from 14.3% to 16.6% by September. Noronha dismissed the idea that the gain was circumstantial. “This is not divine intervention. We worked for it,” he told reporters at Cidade de Deus (City of God), the bank’s headquarters, citing commercial reorganization, new tools, training and revamped risk models.

The expansion rests on a rebuilt credit structure, including the hiring of roughly 250 professionals, the creation of a portfolio-management unit and a dedicated pricing function focused on risk-adjusted returns. “Without this, we would not have grown the way we did,” the CEO said, highlighting intensive use of machine learning and predictive models, especially in private payroll-deducted lending.

Technological transformation is the second explicit pillar of the strategy. Noronha described Bradesco as “AI first,” going beyond generative AI to widespread use of machine learning, multi-agent systems and proprietary models across risk, customer service and operational efficiency. The bank said it has tripled its technology delivery capacity since 2023, even within a more complex and highly regulated structure.

That choice explains the decision to maintain elevated investment levels despite temporary pressure on expenses. In 2025, technology investments rose about 22% year on year. Even so, management maintains that cost control remains tight, with recurring expenses growing below average inflation when profit-sharing is excluded.

The insurance operation closed the fourth quarter with profit of R$ 2.8 billion and an ROE of 24.3%. For the full year, profit reached R$ 10.1 billion, accounting for more than 40% of the group’s results. According to Ivan Gontijo, head of Bradesco Seguros, the performance reflects consistent long-term decisions. “Growth has come predominantly from the operational side, with an expansion in the number of customers, contracts and insured items,” he said.

Gontijo added that the business’s sustainability is anchored in scale and discipline. “Technical provisions are approaching half a trillion reais, which reflects the insurer’s long-term vision,” he said, adding that loss ratios remain under control and show a trend of modest decline in 2026, supported by better underwriting, improved pricing and deeper integration across the healthcare value chain.

In retail and affluent banking, Bradesco expects a meaningful acceleration in its customer base in 2026 as the new segmentation model is consolidated. Noronha said the Principal segment should end the year with more than 800,000 clients, up from roughly 320,000 at the end of 2025, driven by base upgrades and a clearer value proposition. In Prime, the target is around 4.7 million clients, compared with about 3.7 million a year earlier. The overall retail customer base is expected to exceed 40 million, supported by expansion of the fully digital model.

In wholesale banking, Noronha reiterated that recent performance reflects deliberate strategic choices, with reinforcements in investment banking, agribusiness and project finance. The aim is to capture opportunities in issuance, M&A and structured financing as the interest-rate environment normalizes, without compromising risk-adjusted returns.

Asked about a 12% Selic rate and the political backdrop, the CEO said he sees more positives than negatives. “We root for interest-rate cuts,” he said, citing benefits for households, companies and delinquency. Fiscal and electoral risks may increase volatility, particularly in the second half, but do not change execution of the plan.

In closing, Noronha made clear that Bradesco will not react to short-term market anxiety. “The market pressures me more than my board does,” he said. Still, he left room for opportunistic upside. “If we can do another one billion, two billion, we will — but with our feet on the ground.”