BBDC4 Bco Bradesco Sa

SÃ O PAULO—Banco Bradesco SA on Thursday posted a near 22% drop in third-quarter net profit, as the deterioration of its nonperforming-loan rate led the bank to assume more provision charges against the backdrop of the country's recession.

Brazil's fourth-largest bank by assets recorded a net profit of 3.24 billion Brazilian reais ($1.01 billion) in the quarter, down from 4.12 billion reais a year earlier.

The bank opted to assume more provisions for bad loans. It said provision charges totaled 5.74 billion reais in the latest period, up nearly 50% from 3.85 billion reais a year earlier.

Bradesco's third-quarter nonperforming loan ratio, or NPL ratio, increased to 5.4% from 3.8% in the year-earlier period, and was up from 4.6% in the second-quarter.

The bank's NPL ratio is likely to continue deteriorating, as the rate covering loans that were more than 60 days, also increased in the period, to 6.4% from 4.7% in the year ago period.

With the country's economic recession and unemployment worsening, Brazilians are facing challenges to pay their bills and loans. After contracting 3.8% last year, Brazil's economy is expected to shrink 3.2% in 2016, according to economists.

Bradesco's return on equity stood at 17.6% in the third quarter, down from 20.7% in the year-ago period.

The bank's total credit portfolio increased in the period to 521 billion reais from 474 billion reais, while its assets increased 20.9% to 1.27 trillion reais.

Bradesco saw less demand for new loans from companies. Its loan portfolio for companies increased 6.5% in the period, while loans to individuals picked up 17.8%.

The bank, which bought HSBC's Brazilian operations there, in a $5.2 billion deal in August 2015, said that HSBC Brazil operations posted a net profit of 90 million reais in the third quarter.

Bradesco reviewed downward its view for the performance of its credit portfolio this year and increased its forecasts regarding expenses with provisions.

It now anticipates a portfolio performance of a contraction of up to 7%, compared with a previous view for contraction of up to 4%.

The bank sees its provisions charges reaching up to 25 billion reais this year, up from 20 billion reais, expected earlier. Bradesco said that its new forecasts also assumes the integration of HSBC unit.

Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com<mailto:rogerio.jelmayer@wsj.com>

(END) Dow Jones Newswires

November 10, 2016 06:55 ET (11:55 GMT)

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