The strength of public banks

Banco do Brasil comes out on top with a bonanza year in 2009.

Banco do Brasil (BB) posted a net income of R$10.148 billion in 2009, up 15.2% on the R$8.803 billion registered in 2008. This is a record annual profit for the state-owned bank (or any other financial institution for that matter, as Itau-Unibanco reported a net profit of R$10.067 billion last year and Bradesco R$8.012 billion).

BB’s assets at the end of 2009 totaled R$708.549 billion, a y-o-y increase of 36% over the figure of R$521.273 billion reported at the end of 2008, making the bank the largest in the financial sector in Brazil. BB’s credit portfolio in December 2009 stood at R$300.829 billion, a value that indicates a growth of 33.8% compared with the loan volume in December 2008.

 Einar River of Economatrica attributes the bank’s record result to a dramatic increase in its credit operations and the booking of revenue from Previ (the bank’s employee pension fund with US$133 billion of assets), as well as lower costs. The actuarial gain at Previ represented R$3.3 billion in 2009, and extraordinary events added an additional R$2.336 billion.

Banco do Brasil’s record profit for a financial institution in Brazil shows the level of market gains made by public sector banks in the area of credit operation, as confirmed by the Central Bank report released on the evening of February 24, as these institutions accounted for 41.6% of total credit volume in the financial system in January 2010, compared with 34.2% in 2008. This strategy was encouraged by the Brazilian government during the scarcity of credit immediately after the international financial crisis in 2008, and the more conservative approach taken by private banks in this scenario. It is also worth remembering that Banco do Brasil’s 2009 results incorporate Banco Nossa Caixa and its 49.99% stake in Banco Vortorantim, both acquired at the beginning of 2009.