Banco do Brasil (BBAS3): profit falls, but stock rises; what to do after 2Q?

The post-earnings session of Banco do Brasil (BBAS3) was marked by strong stock volatility, with shares opening lower, then turning positive, closing with a gain of about 4%, fluctuating throughout the Friday (15). The much-anticipated result, with a 60% profit decline to R$ 3.8 billion, came with negative signals and disappointing numbers. The majority of market analysts still have a neutral recommendation for BBAS3 shares, with 3 buy ratings, 7 hold ratings, and 1 sell rating from the 11 covering firms. Ativa Research downgraded its recommendation from buy to neutral after earnings, with the price target under revision. The analysts pointed out the weak results and the main concern being the agribusiness credit portfolio performance. Monte Bravo maintained a neutral recommendation for the assets, with a price target of R$ 22.50 for BBAS3, a 13% upside from the last close. The firm believes the bank can recover its results in the future. In a conference call, BB’s CEO mentioned a likely pressured result in the third quarter due to agribusiness credit operations, improving by year-end. XP, BTG Pactual, Morgan Stanley, JPMorgan, Goldman Sachs, Itau BBA, and Genial Investimentos also hold neutral ratings for BBAS3 shares, emphasizing the continued credit quality deterioration. On the other hand, analyst Malek Zein recommends a buy for BB’s long term prospects.