Investors eye Brazil’s growth story as Lula retakes power
The new administration is expected to be less receptive to bank privatization as the result boosts ‘Lula portfolio’ stocks.
State-controlled Banco do Brasil saw its stock fall by more than 10% in the week running up to Brazil’s presidential election on Sunday, as polls pointed to the victory for former president Luiz Inácio Lula de Silva.
The now president-elect is thought to be much less receptive to fully privatizing Banco do Brasil compared with outgoing Jair Bolsonaro’s administration, which had made sporadic aspirational statements to that effect during the past four years.
Banco do Brasil is due to release third-quarter earnings on November 9. A recent improvement in profitability – the bank reported recurring 2Q return on equity (ROE) of 20.2% – is based on many positive drivers, not least its strong agricultural loan portfolio and other financial investments.
“Banco do Brasil has lost market share, but given the nominal growth of Brazilian agribusiness, the business is still a powerhouse,” says one private-sector banker.
Data from the central bank shows that Banco do Brasil has a 49.26% of the total financing for the agribusiness sector’s 2021/22 harvest in Brazil. While that market share is down 475 basis points from the previous year, it still dwarfs the next largest bank, Caixa Econômica Federal, which accounts for 13.15%.