Safra: It’s Too Early to Say Banco do Brasil (BBAS3) Has Hit Rock Bottom in 2025

• Why Safra Thinks BBAS3 Hasn’t Bottomed Yet
• The Rural Portfolio: A Ticking Time Bomb?
• Valuation: Not the Steal It Used to Be
• The Silver Lining Nobody’s Talking About
• FAQ: Your BBAS3 Questions Answered

Banco do Brasil (BBAS3) reported a 60% YoY drop in Q2 2025 net profit to R$3.8B, with Safra analysts warning that asset quality trends remain weak across sectors. While the bank’s NII outperformed expectations, rising rural delinquency and provisioning risks cloud its 2025 outlook. Trading at 5x forward P/E, BBAS3 isn’t the bargain it once was—but a 26% upside to Safra’s R$25 target suggests selective optimism.

Why Safra Thinks BBAS3 Hasn’t Bottomed Yet

Banco do Brasil’s Q2 2025 results confirmed what analysts feared: a perfect storm of shrinking profits (+60% YoY decline to R$3.8B) and deteriorating loan books. Safra’s team—Daniel Vaz, Maria Luisa Guedes, and Rafael Nobre—noted rural delinquencies spiked 140bps QoQ, with more pain likely as R$7B in loans mature through December. "The shift from ordinary to renegotiated rural portfolios screams ‘future provisions needed’," one analyst quipped. Even the bright spot—a 4% NII beat at R$25.1B—came with an asterisk: a R$700M accounting change dent.

The Rural Portfolio: A Ticking Time Bomb?

Here’s where it gets ugly. BB’s rural loan book saw R$7B migrate from ordinary to renegotiated status in Q2—a 1:1 swap that historically precedes credit losses. "This isn’t just sector-specific weakness; it’s systemic," noted a BTCC market strategist. With agribusiness representing 28% of BB’s total loans, Safra expects delinquencies to keep climbing through year-end. The bank’s revised 2025 NII guidance (R$103B-R$105B) now implies a 28% YoY risk-adjusted decline—hardly comforting for dividend hunters eyeing the new 30% payout ratio.

Valuation: Not the Steal It Used to Be

At 5x 2025 P/E (based on midpoint R$23B profit), BBAS3 trades at a 12% premium to its 3-year average. "That 5.4% gross dividend yield looks meh when you factor in Brazil’s 15% withholding tax," remarked a São Paulo-based trader. Safra’s R$25 target (26% upside) hinges on BB delivering its ambitious R$21B-R$25B 2025 profit—a feat requiring NII to keep outperforming while credit costs stabilize. Post-earnings volatility saw shares swing from -4% to +2%, reflecting market schizophrenia about the mixed results.

The Silver Lining Nobody’s Talking About

Buried in the gloom: BB’s retail repricing strategy is working. Personal loan yields ROSE 180bps QoQ, helping offset corporate margin compression. During the earnings call, management emphasized their "revenue engine"—code for more repricing ahead. TradingView data shows BB’s NII volatility has actually decreased 22% since 2023, suggesting some underlying stability. Still, as one analyst put it: "This is a ‘show me’ story—we need to see provisions peak before calling a bottom."

FAQ: Your BBAS3 Questions Answered

What caused Banco do Brasil’s 60% profit drop?

Primarily surging rural delinquencies (+140bps QoQ) and R$7B in loan renegotiations requiring future provisions. NII gains were offset by a R$700M accounting hit.

Is BBAS3 stock cheap now?

At 5x 2025 P/E, it’s pricier than historical levels. The 5.4% gross dividend yield (4.6% net) trails Brazilian peers averaging 6.2%.

Why did Safra set a R$25 price target?

Their model assumes BB hits midpoint 2025 guidance (R$23B profit), with NII sustaining Q2’s outperformance while credit costs stabilize by Q4.

How did the market react to earnings?

Shares whipsawed from -4% to +2% on August 14, 2025, as bulls focused on NII beats while bears noted worsening asset quality.