Analyst Eduardo Rosman reiterated his buy recommendation for Banco do Brasil, saying his confidence in the bank is growing despite prevailing skepticism in the market.
“We expect BB to report the best fourth quarter among banks and give constructive guidance, which should come in above market estimates,” wrote the analyst, who has a ‘buy’ on paper for almost a year and a price target of BRL 53. The share is trading at BRL 40.
BB shares have risen 12.5% since the beginning of the year, against state-owned companies such as Petrobras, which plummeted in the last month. Today, the share is up 2.6%, one of the biggest highs on the Ibovespa.
For BTG, the rally is justified.
“The new CEO made a great first impression, the appointment of the VPs was positive, all with more than 20 years of career at BB, and the bank confirmed [ontem à noite] to policy of payout 40% by 2023.”
BTG said that it had already been working with this payout scenario and sees a minimal risk of this policy changing, given that the bank is delivering very good results.
“But when we’ve spoken to many investors over the last few weeks, we felt this was a key risk in their view, particularly with the low payout it’s tall capex signaled by Petrobras.”
BB will release its fourth quarter results on February 14th. The guidance, at its midpoint, is for a profit of BRL 8.7 billion (a ROE of 21.8%). That would be 4% above market consensus.
“If that is the case, BB will end 2022 with a profit of BRL 31.5 billion, similar to Itaú, but with a market cap of only 45% of the market cap of its private peer,” wrote Rosman.
The analyst also said he expects 2023 earnings per share to grow between 5% and 10%.
On BTG accounts, BB trades at just 3.4x the estimated profit for next year, with a dividend yield of 12%.
BTG said investors appear to be pricing in ROE deterioration “greater and faster than we estimate.”
“Even if things really deteriorate, the starting point is very good: BB’s balance sheet is strong, it has a more defensive credit portfolio and it is a very underrated stock with a very positive carryover to earnings in the short term. ”