By Rogerio Jelmayer
SÃO PAULO--Brazil's state-run Banco do Brasil SA, Latin
America's largest bank by assets, cut its credit-growth outlook for
the year, as consumer demand wanes amid a faltering economy.
The bank cuts its credit-portfolio growth target to up to 16%
for the year, from up to 18%. Last year, the bank's credit
portfolio expanded 19.3%. The bank now expects individual credit to
rise by up to 12%, compared with a previous view of up to 16%, and
corporate lending to rise by up to 16% compared with an earlier
view of up to 18%.
After falling into recession in the first half, Brazil's economy
is struggling to regain traction amid low levels of consumer and
business confidence, inflationary pressures and high interest
rates. Economists expect growth of less than 0.5% this year,
compared with growth of 2.5% in 2013. The re-election of
left-leaning President Dilma Rousseff last month also has cast
doubt on Brazil's ability to overhaul the policies needed to
restore growth.
State banks have fueled Brazil's personal and commercial lending
in recent years, and low demand for borrowing is starting to cut
into banks' profits.
Rival Banco Bradesco SA also cut its credit-growth outlook to up
to 11% from up to 14%. On Tuesday, private sector giant Itau
Unibanco Holdings said that its credit portfolio would increase by
a lower-than-forecast 8%, compared with a previous projection of
10% to 13%.
Despite the reduction in credit-portfolio expansion, Brazilian
banks' profits have grown, mainly because of increased
financial-services revenues and the high interest rates charged to
clients. On Wednesday, Banco do Brasil posted recurring net profit
for the third quarter of 2.78 billion reais ($1.11 billion), up
from 2.7 billion reais in the year-earlier period.
Banco do Brasil's total outstanding loans rose to 732.7 billion
reais, up 12.3% from 652 billion reais in the third-quarter of
2013. Consumer loans rose 6.9% to 175 billion reais, while
corporate loans rose nearly 12.8% to 342 billion reais. Farm loans
rose 21.6% to 158 billion reais.
The bank also took on more provisions because of expanded
lending and default rates during the period. Provisions for bad
loans totaled 4.57 billion reais in the quarter, up from 3.91
billion reais a year earlier. The nonperforming loan rate was
2.09%, up from 1.97% a year earlier and up from 1.99% in the
previous quarter.
Return on equity was 16.1%, up from 15.7% a year earlier. Total
assets rose to 1.43 trillion reais from 1.26 trillion reais.
Financial-service revenue rose 9.4% in the period to 6.36 billion
reais.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com
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