Key Takeaways
- Banco Bradesco shares fell 5% today after Itaú BBA downgraded the bank to Market Perform from Outperform, hours after Citi cut it to Neutral from Buy.
- Itaú Unibanco and Santander Brasil fell 4% each and Nu Holdings fell 3%, after Santander Brasil’s third-quarter results showed pressure on net interest income and higher credit risk.
- Consensus expects Bradesco’s normalized EPS to rise 13% in fiscal 2027 after a nearly flat 2026, and both downgrades call 2027 a tougher year.
- At about 0.9x tangible book value, Bradesco is below its five-year average of 1.1x, but until the 2027 estimates settle, the low price alone isn’t enough to buy.
Banco Bradesco (BBD) stock sank 5% today after Itaú BBA downgraded it to Market Perform from Outperform after Tuesday’s close. (Itaú BBA is the investment bank of rival Itaú Unibanco (ITUB), for what it’s worth.)
And Bradesco had company. Itaú Unibanco and Santander Brasil (BSBR) fell [4%] each, and Nu Holdings (NU) slid 3%, as Santander Brasil’s third-quarter results this morning showed pressure on net interest income and higher credit risk.
Two downgrades in 24 hours
Itaú BBA’s Pedro Leduc set a R$20 target and pointed to a more challenging 2027 earnings outlook.
That came hours after Citi’s Gustavo Schroden cut Bradesco to Neutral from Buy on Tuesday morning. He lowered his target to R$16 from R$21 as Citi reworked its ratings across Brazilian financials.
Both calls came after Bradesco’s third-quarter report on Oct. 22. Recurring net income rose 15% from a year earlier to R$7.1 billion, but provisions for bad loans rose 24% to R$10.6 billion.
So both firms doubt the year when analysts expect Bradesco’s earnings to pick back up.
Consensus has normalized EPS nearly flat in fiscal 2026, at $0.45 after $0.44 in fiscal 2025, then climbing 13% to $0.51 in fiscal 2027. After two downgrades on a tougher 2027, I’d expect that jump to shrink.
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The whole group has the same problem
Santander Brasil earned R$2.9 billion of recurring net income in the third quarter, an 11.9% return on equity. CEO Gilson Finkelsztain was blunt about why on its third-quarter call:
“The macro environment remains challenging, and what I mean by that is that we have high interest rates, increased household debt, putting pressure on revenues and the cost of risk.”
Bradesco’s rising provisions show the same squeeze. Santander Brasil’s management expects net interest income to improve in 2027, but investors didn’t wait: Itaú and Nu sold off right alongside Santander Brasil.
Cheap, but I’d wait
And Bradesco already trades below its usual price to tangible book.
At about 0.9x after today’s drop, it’s under its five-year average of 1.1x. It has been cheaper, though: 0.8x in February 2025.
My take: The stock is cheap for a reason, and two more analysts just backed that reason. Until the 2027 estimates come down and settle, I’d stay on the sidelines.
Of course, Bradesco’s fourth-quarter report early next year should bring its 2027 outlook. If credit costs level off, 0.9x will look like a bargain.
So what is Bradesco stock actually worth?
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Disclaimer:
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