Banco do Brasil (BBAS3) in 2025: BTG Pactual Warns of "Elevator-Like" Deterioration Amid Low Visibility

• Why Is BTG Pactual Skeptical About Banco do Brasil’s Recovery?
• The "Elevator vs. Staircase" Problem: Deterioration Outpaces Recovery
• 2025 Guidance: Hope or Hype?
• The Hidden Costs: How "Non-Recurring" Became Routine
• Credit Growth: The Lone Warrior
• BTG’s Verdict: Neutral With Side of Caution
• Market Whiplash: August 15 Trading Drama
• FAQs: Your BBAS3 Cheat Sheet

Banco do Brasil (BBAS3) faces mounting challenges as BTG Pactual highlights deteriorating financial metrics, including rising NPLs and stagnant equity. Despite a revised 2025 profit guidance of R$21-25B, analysts remain skeptical, citing recurring "non-recurring" costs and weak Q2 earnings (-60% YoY). Credit growth offers a silver lining, but with a neutral rating and 20.9% upside target (R$24), the stock’s volatility reflects market uncertainty. Here’s our DEEP dive into the numbers and what they mean for investors.

Why Is BTG Pactual Skeptical About Banco do Brasil’s Recovery?

BTG’s analysts minced no words: Banco do Brasil’s Q2 2025 results showed a 60% YoY profit plunge to R$3.8B, with ROE hitting a decades-low 8%. "Visibility remains poor," they noted, adding that Q3’s starting profit base looks weaker than Q2’s. The bank’s updated 2025 guidance (R$23B midpoint) suggests a second-half rebound, but BTG thinks even their own estimates may be "too optimistic." The kicker? Recurring "non-recurring" costs—R$750M in economic plan expenses—now eat up 20% of adjusted profits. Ouch.

The "Elevator vs. Staircase" Problem: Deterioration Outpaces Recovery

BTG’s metaphor hits hard: BB’s credit risks are falling like an elevator (fast), while recovery climbs like a staircase (slow). NPLs are rising not just in agribusiness but also corporate loans, and equity isn’t growing. Yet, there’s a bright spot—credit portfolios grew 6% YoY, driven by corporate (+5% QoQ) and payroll loans (+3% QoQ). The bank disbursed R$4.5B in private consignment loans, but as one trader quipped, "You can’t eat growth when margins are crumbling."

2025 Guidance: Hope or Hype?

Banco do Brasil’s R$21-25B 2025 profit range implies a 5.4x P/E and 5.5% dividend yield at the lower bound. But trading at 0.63x P/BV, BTG sees "no reason for optimism." Their R$24 target (+20.9% from August 14’s close) feels like a bet on patience. Meanwhile, BBAS3 swung wildly on August 15—down 4% at open, then up 2% post-auction. Volatility? More like a rollercoaster nobody ordered.

The Hidden Costs: How "Non-Recurring" Became Routine

Here’s the irony: BB has classified R$750M in economic plan costs as "non-recurring" every year since 2014. In 2025, these represent 20% of adjusted profits—a glaring red flag. "It’s like calling your daily coffee an ‘occasional expense,’" joked a market watcher. With ROE at 8% (vs. 15%+ in 2022), shareholders are left wondering: When do we stop giving passes for "exceptional" items?

Credit Growth: The Lone Warrior

Amid the gloom, BB’s loan book grew 1% QoQ and 6% YoY. Corporate loans (+5% QoQ) and payroll loans led the charge, with R$4.5B in private consignment deals. But here’s the rub: volume doesn’t equal quality. As NPLs creep up, the growth narrative feels like "polishing a turd," as one analyst bluntly put it. The market’s reaction? A collective shrug.

BTG’s Verdict: Neutral With Side of Caution

BTG maintains a "neutral" rating, citing BB’s "elevator down, stairs up" dynamic. Their R$24 target offers upside, but with caveats: "Assuming guidance’s floor (R$21B), P/E looks cheap, but catalysts are missing." Translation: Don’t expect a quick turnaround. For context, BBAS3 trades at a 35% discount to Itaú (ITUB4)—a gap that might widen further.

Market Whiplash: August 15 Trading Drama

On August 15, BBAS3 mirrored Brazil’s famed volatility: opened down 4%, reversed to +2% after auction triggers. Some blamed profit-taking; others pointed to BTG’s report. Either way, it’s a microcosm of BB’s 2025 story—unpredictable, messy, and not for the faint-hearted.

FAQs: Your BBAS3 Cheat Sheet

What caused Banco do Brasil’s 60% profit drop in Q2 2025?

Rising NPLs, stagnant equity, and R$750M in recurring "non-recurring" costs crushed earnings. ROE hit 8%, the lowest in decades.

Why does BTG Pactual use the "elevator vs. staircase" analogy?

They argue BB’s deterioration (elevator) is outpacing recovery (stairs), especially with NPLs worsening across segments.

Is Banco do Brasil’s 2025 guidance achievable?

BTG doubts it. Even the R$21B lower bound implies a H2 surge they find unrealistic given current trends.

What’s the bull case for BBAS3?

Credit growth (6% YoY) and a cheap 0.63x P/BV multiple. But bulls need patience—and strong stomachs.