BB Q4 profits rise 21% but fail to please analysts

Brazil's largest bank, federally run Banco do Brasil (BB), reported fourth quarter profits of 771mn reais (US$300mn) on Monday, up 21% from a year ago but below analysts' expectations. A UBS Warburg analyst told BNamericas that profits were nearly 8% below his forecast and that operating income was "very weak". BB's profits also fell short of the 862mn reais expected by Deutsche Ixe's Mario Pierry. Full year profits rose 27% to 3bn reais. UBS Warburg has neutral recommendation on BB shares while Deutsche Ixe's has a hold recommendation. The UBS Warburg analyst blamed the bank's lacklustre performance on a 10% increase in administrative expenses during 2004. Operating income fell 32% on the higher expenses, reaching 903mn reais. The bank's loan book increased 14% to 88.6bn reais at year-end, giving it an 18% market share. BB said 92.1% of the loans it issued last year were classified in the central bank's AA, A, B and C categories, compared to the 89.6% average for the Brazil's financial system. On the liabilities side, BB saw time deposits and demand deposits increase last year to 49.7bn reais and 29bn reais, from 48.2bn reais and 27.1bn reais, respectively in 2003. In terms of customers BB showed strong growth last year as it closed 2004 with 22.2mn checking account clients, up 18.1% on 2003. The bank's checking account base is divided into 20.8mn individual clients and 1.4 company and institutional clients. The bank also counts 5.6mn savings account clients and 2.4mn clients receiving pension benefits through BB. Banco do Brasil is controlled by the federal government but it has a free float of 6.8%. The bank operates through a network of nearly 3,800 branches and has an international presence in 21 countries.