Lender Banco do Brasil places some 2025 projections under review after profit miss

SAO PAULO, May 15 (Reuters) - Lender Banco do Brasil BBAS3.SA said on Thursday it has placed its 2025 projections for net interest income, cost of credit and adjusted net income under review, citing factors such as the worsening in the delinquency of its agribusiness credit book.

The announcement came as the state-run bank reported an adjusted net profit of 7.37 billion reais ($1.30 billion) for the first quarter, down 20.7% year-on-year and below the 9.23 billion reais expected by analysts polled by LSEG.

Banco do Brasil, which kept its other yearly projections unchanged, said the delinquency of its agribusiness credit portfolio has worsened more than expected, which combined with the impact of regulatory accounting changes in Brazil increased uncertainties.

"We expect a very negative share reaction tomorrow as we believe consensus will likely need to materially adjust," JPMorgan analysts wrote in a note to clients.

Analysts at Citi in a note cited a weak first quarter for the bank. But Citi added, "Perhaps more worrisome is the bank's guidance revision," noting the three lines being placed under review, "which in our view talks of a still-challenging path ahead before a recovery."

The lender is the last among major listed Brazilian banks to report first-quarter earnings, with investors in general welcoming results of its main private peers, such as Itau Unibanco ITUB4.SA and Bradesco BBDC4.SA.

Banco do Brasil posted a return on equity of 16.7% in the quarter, down from 21.7% a year earlier and 20.8% in the previous three-month period.

While the lender's loan book, which is about 30% on the agribusiness sector, rose over 14% year-on-year to 1.28 trillion reais, the cost of credit increased near 19%, to 10.2 billion reais, on higher loan-loss provisions.

The bank said the cost of credit increase resulted mainly from a higher default ratio on the agribusiness book, which rose to about 3% from 1.2% a year earlier, driving an almost one percentage point increase in the bank's overall 90-day delinquency ratio.

"There is a stock of operations being handled from the 2023/2024 harvest, including due to judicial recoveries in the sector – which require greater provisioning under the new regulation," Banco do Brasil said in the earnings report.

In separate filings, the bank said it had approved 1.9 billion reais ($334.41 million) in interest on equity to shareholders, while announcing its board of directors tapped Anelize de Almeida as chairwoman.

($1 = 5.6817 reais)