BANK BRADESCO Annual Report - How They Did This Year

I’ve put together this guide to help you understand how Bradesco performed this year. Think of this as a "cheat sheet" to help you decide if they are a company you want to watch or invest in.

1. What does this company do?

Bradesco is one of Brazil’s financial giants, serving over 70 million customers. They operate through three main areas:

• Banking: They manage R$ 890 billion in loans, including personal credit, credit cards, and corporate lending.
• Insurance & Pensions: Bradesco Seguros is a market leader, providing about 30% of the bank's total profit through life, health, and property insurance.
• Investments: They manage over R$ 1.2 trillion in assets through their brokerage and investment arms.

The bank makes money primarily from the difference between interest earned on loans and interest paid on deposits. They also earn R$ 38 billion annually in service fees and insurance premiums.

2. Financial performance: Are they making money?

Bradesco is currently in a "wait and see" mode, reporting an annual profit of R$ 16.3 billion. Brazil’s economy is growing at a modest 2.2%. Their biggest challenge is managing their loan book. High interest rates—which hit 15% in 2025 before cooling to 14.75%—make it harder for customers to pay back loans. Currently, 4.8% of loans are overdue by more than 90 days. Consequently, the bank set aside R$ 35 billion as a "rainy-day fund" to cover potential losses.

3. Major wins and challenges

Bradesco’s strength is its massive scale and digital shift. Over 90% of transactions now happen via mobile or internet banking, which lowers costs. However, they face a major hurdle with taxes. Brazil is rolling out a new consumption tax in 2027. While this aims to simplify the system, it will likely increase the bank's tax burden by 2-3 percentage points. Additionally, the government raised taxes on profits, which is expected to lower the bank's return on equity to 11.5%, down from its usual 18-20%.

4. Financial health: How do they handle risk?

Bradesco is highly sensitive to Brazil’s base interest rate.

• When rates are high: The bank earns more on its cash, but faces higher risks of customer defaults and lower demand for new loans.
• When rates fall: The bank’s profit margin can shrink because the cost of borrowing money stays high while the income from loans drops.

The bank also manages currency risk. The Brazilian real has been volatile against the U.S. dollar. Because the bank holds $12 billion in foreign debt, these swings create instability. They spend about R$ 1.2 billion annually on financial hedges to protect against these losses.

5. Key risks: What could hurt the stock price?

• Tax Uncertainty: The new tax system could reduce annual profit by R$ 1.5 billion to R$ 2 billion once fully active.
• Economic Slowdown: If Brazil’s economic growth drops below 1.5%, the bank typically sees a 5-7% increase in unpaid loans.
• Governance: A foundation holds most voting shares. This means the board may prioritize long-term stability over short-term payouts for smaller shareholders.

6. The Verdict

Bradesco is a stable, "one-stop-shop" bank, but it acts as a proxy for the Brazilian economy. You are betting on Brazil’s ability to manage inflation and tax changes. With a price-to-book ratio of 1.1x, the stock is priced for moderate growth. While the bank is resilient, high interest rates and economic uncertainty make this a "hold" for those who believe in Brazil’s long-term future.

Investor Tip: Before buying, check the latest central bank reports on Brazil's interest rates. Since Bradesco’s profitability is so closely tied to these rates, a shift in government policy is often the biggest signal for when to enter or exit this position.