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  • 1. 25/11/13 Banco do Brasil Shares Retreat After 3Q Earnings Report - Update - WSJ.com U.S. EDITION Tuesday, November 12, 2013 As of 8:42 AM EST Subscribe Log In November 12, 2013, 8:42 a.m. ET Banco do Brasil Shares Retreat After 3Q Earnings Report - Update (Updates with comments from bank executive throughout) SAO PAULO--Shares in Brazilian state-run bank Banco do Brasil SA (BBAS3.BR) were down sharply in early trading Tuesday after release of a quarterly report showing a decline in profit from a year earlier. In early trading, shares in the bank were down 2.7% at 27.38 Brazilian reais ($12.13). The bank's shares were the biggest losers in early trading on the Brazilian Stock Exchange Tuesday. The main Ibovespa stocks index was down only 0.16%. Earlier Tuesday, the bank reported third quarter earnings of BRL2.7 billion, down 0.9% from the same quarter of 2012. But analysts found some worrisome trends in the earnings report, such as a rise in provisioning against nonperforming loans to BRL3.9 billion from BRL3.76 billion in the third quarter of 2012. Latin America's largest bank by assets maintained its guidance to expand all lending by up to 21% this year. Total outstanding loans by Banco do Brasil in the third quarter rose 22.5% to BRL652 billion from BRL532 billion in the third quarter of 2012. However, the bank altered its guidance on net interest income for this year to an expansion of between 2% and 5%. Previous guidance called for an expansion of between 4% and 7%. The bank's vice president for finance, Ivan Monteiro, said at a news conference, "The reduction in guidance reflects the increase in the Brazilian Central Bank's base interest rate. A higher base rate causes an immediate rise in our cost of funding but we can only pass that on to borrowers later." Brazil's central bank has been systematically raising its base rate since the middle of the year in an effort to fight down inflation, which is now running at 5.8% per year. The base rate now stands at 9.5%, up from 7.25% at the beginning of 2013. The bank's nonperforming loan rate in the third quarter was 1.97%, down from 2.19% a year ago, but up from 1.87% in the previous quarter. "We believe that further deterioration in non-performing loans is likely to be seen in the coming quarters along with a slowdown in credit expansion," said Andre Riva Gargiulo of the GBM brokerage in a research note. But Banco do Brasil Vice President Monteiro said the bank was learning to be more cautious and was shifting its attention somewhat from consumer loans to business customers. "There is less demand for consumer loans right now and more competition in handing them out," said Mr. Monteiro. Mr. Monteiro said the bank is expecting the level of nonperforming loans to remain broadly stable through the end of the year. Regarding the bank's fund-raising operations, Mr. Monteiro said Banco do Brasil was "always alert" to possible overseas bond issue opportunities. He added, "We would like to diversify these issues into currencies other than the U.S. dollar." Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com Order free Annual Report for Banco do Brasil SA Visit http://djnweurope.ar.wilink.com/?ticker=BRBBASACNOR3 or call +44 (0)208 391 6028 Order free Annual Report for Banco do Brasil SA Visit http://djnweurope.ar.wilink.com/?ticker=US0595781040 or call +44 (0)208 391 6028 online.wsj.com/article/BT-CO-20131112-706579.html#printMode 1/1