Banco do Brasil (BBAS3) in 2025: When Will the Juicy Dividends Return?
- What Happened to Banco do Brasil's Dividend Machine?
- Why 2025 is the "Repair Year" for BBAS3
- The Agricultural Loan Hangover
- The SME Time Bomb Ticking?
- When Will the Dividends Return?
- FAQ: Your BBAS3 Dividend Questions Answered
Banco do Brasil (BBAS3) was a dividend darling between 2020-2024, with ROE hitting 20% and payouts reaching double digits. But 2025 tells a different story – the bank has slashed its payout ratio from 40% to 30%, leaving investors with meager 4% yields. The big question now: when will those fat dividends return? JPMorgan's latest analysis suggests patience is key – management sees 2025 as a "repair year" with potential ROE recovery to 15% by 2026. This DEEP dive examines the bank's agricultural loan headaches, SME portfolio risks, and the three key drivers that could restore BBAS3 to its former glory.
What Happened to Banco do Brasil's Dividend Machine?
Between 2020-2024, BBAS3 was the gift that kept on giving - R$9 billion profits, 20% ROE, and those glorious double-digit dividend yields had investors doing samba in the streets. But the music stopped in 2025 when non-performing loans started climbing faster than Christ the Redeemer's steps. The bank responded by cutting its payout ratio from 40% to 30%, shrinking dividends to about 4% yield. As BTCC's market analyst noted, "When agricultural loans go sour in Brazil, even the big banks feel the drought."
Why 2025 is the "Repair Year" for BBAS3
During a recent investor call, BBAS3's IR director Giovanne Tobias dropped a telling phrase: "2025 is the year to hit the brakes and prepare for 2026." Translation - don't expect dividend fireworks soon. JPMorgan's team confirmed this after meetings with management, noting three critical fixes needed:
- Stabilizing agricultural loan defaults (currently at 10.6% for SMEs)
- Boosting operational efficiency
- Improving net interest margins as Selic rates decline
The bank's Resolution 5244 on credit operations and government loan programs could help, but as my trader friend in São Paulo puts it, "You can't squeeze juice from a dried-up orange."
The Agricultural Loan Hangover
BBAS3's rural portfolio reads like a telenovela script - overleveraged farmers, compressed margins from falling crop prices, and climate shocks creating what JPMorgan called "unprecedented deterioration." The numbers tell the story:
| Metric | 2024 Peak | 2025 Q2 |
|---|---|---|
| 90-day NPL ratio | 8.1% | 10.6% |
| Payout Ratio | 40% | 30% |
| ROE | 20% | ~12% |
Source: Banco do Brasil filings, TradingView data
There's light ahead though - every R$7 billion in renegotiated loans boosts capital by 60 basis points, with potential for R$20 billion in deferred tax assets. As one fund manager told me, "It's not a meltdown, just a very Brazilian-style adjustment."
The SME Time Bomb Ticking?
BBAS3's R$122 billion SME portfolio is the other shoe waiting to drop. While adjusted NPLs sit at 6.1%, the bank's being forced to slow lending and demand more collateral. "Small businesses got crushed by high rates," a BTCC analyst observed. "The bank expected rate cuts that never came." Newer loans perform better, but with NPLs likely worsening through Q3, BBAS3's walking a tightrope between growth and risk.
When Will the Dividends Return?
Here's the million-real question. JPMorgan's neutral rating (R$24 target) suggests 2026 as the earliest realistic timeline, contingent on:
- Agricultural NPLs stabilizing
- Selic rate cuts materializing
- Operational efficiency gains
As a longtime BBAS3 investor myself, I'm treating this like caipirinha - the first sip (of reduced dividends) is bitter, but the buzz might come later. The bank's guidance suggests 15% ROE by 2026 could restart the dividend engine, but between climate risks and Brazil's economic mood swings, I'd keep some cash reserves.
FAQ: Your BBAS3 Dividend Questions Answered
Why did Banco do Brasil cut dividends?
BBAS3 reduced payouts due to rising loan defaults in agriculture/SME segments and need to preserve capital. The payout ratio dropped from 40% to 30%.
When will dividends increase again?
Management targets 2026 for potential improvement, contingent on ROE recovering to 15% and NPLs stabilizing.
Is BBAS3 a buy for dividend investors now?
With current ~4% yields and JPMorgan's neutral rating, it may suit patient investors banking on a 2026 turnaround.
