Citi Upgraded Banco Bradesco (BBD) From Neutral to Buy, Also Raised the PT

Bank Performance: Bank Bradesco SA reported a 28.6% increase in recurring net income year-on-year, driven by a 15.1% rise in total revenue and significant growth in fee income and insurance segments, despite facing challenges in maintaining growth in large corporate loans and pressure on net interest margins.

Strategic Focus: The bank is adapting to economic slowdowns by enhancing its digital services for the low-income segment and managing risks in the SME sector through new credit models, while also aiming to improve profitability and maintain cautious guidance on provisions.

Banco Bradesco Upgrade: Citi analyst Gustavo Schroden upgraded Banco Bradesco S.A. from Neutral to Buy, raising the price target from R$13.60 to R$19.50 due to improved return on investment and expected growth in net interest income by 2025.

Future Projections: The bank's sustainable return on equity (ROE) is projected to reach 16.5% by late 2026, driven by cost discipline and operating leverage, although some analysts suggest other AI stocks may offer better investment potential.

Earnings Performance: Bank Bradesco SA reported a recurring net income of nearly $5.9 billion, reflecting over 39% year-on-year growth and 8.6% quarter-on-quarter growth, with total revenue reaching $32 billion driven by increases in net interest income and insurance revenue.

Growth Challenges: The bank faces challenges in maintaining profitability due to high costs in the mass retail segment and macroeconomic risks such as inflation and interest rates, while it aims to improve returns on equity through digital transformation and optimizing service costs.

Goldman Sachs Downgrade: Goldman Sachs has downgraded Banco Bradesco from Buy to Sell, lowering the price target to $2 due to concerns over the bank's profitability and return on equity remaining below its cost until at least 2027.

Capital Generation Concerns: The bank's muted profitability is expected to limit its organic capital generation, with shareholders' equity showing stability over the past year.

Financial Performance: Banco Bradesco reported a 37% increase in Q4 net income to BRL5.4 billion, with total revenue for the quarter reaching BRL32.3 billion, driven by growth across all revenue lines and a significant expansion in its loan portfolio.

Outlook and Strategy: The bank's 2025 guidance reflects a cautious approach due to macroeconomic uncertainties, emphasizing disciplined growth and ongoing investments in digital transformation while maintaining a focus on risk-adjusted returns.