Taxation and public banking are expected to gain attention in 2023, Citi predicts

Taxation and public banking are expected to gain attention in 2023, Citi predicts

Citi analysts said on Tuesday that they see changes in taxation and the behavior of public banks as topics that should attract the attention of the Brazilian banking sector in 2023.

In a report to clients, they said discussions about ending the equity interest mechanism should return to the table, but hoped there would be some offsets.

The PT plan calls for the income tax reform to include taxation on the distribution of profits and dividends, a measure proposed by the government of Jair Bolsonaro, but which has not been implemented by Congress.

As for government-controlled banks, the US banking team led by Rafael Frade does not expect a significant change in routes, but stressed that “this could be a risk for the sector”.

In his inaugural speeches, President Luiz Inácio Lula da Silva reaffirmed his intention to save the role of public banks and state-owned companies in the country’s development.

For the fourth-quarter earnings season in the industry, Citi analysts estimate the focus should be on 2023 projections.

“The findings themselves are likely to be less surprising, although they may provide some support for the guidance,” they wrote in the report.

They said they expect a solid run of results for Itaú Unibanco and Banco do Brasil, adding that multiples for both imply significant room for improvement.

Bradesco and Santander Brasil, as rated by Frade and team, are likely to continue to be impacted by negative market financial margin (NII) and higher provisioned expenses.

Citing the Central Bank’s forecast of 8% credit growth in the country for 2023, analysts expect a stronger performance for BB, given its exposure to agribusiness, and a weaker one for Santander Brasil, due to portfolio risk reduction. Itaú and Bradesco must stay on the line.

They also expect the financial intermediation income (NII) to grow above loan books in 2023, albeit with some NIM compression in Santander and Bradesco due to concentration on lower risks.

They also see the cost of risk as a percentage of the loan portfolio for 2023 at levels similar to Q4 2022, leading to higher fiscal year figures, with potential for improvement in the second half.

“The big doubt remains Bradesco, whose guidance for 2022 implies a wide variation for the fourth quarter, with the possibility of provisions still very high in the first half of 2023, easing thereafter”.

For the last quarter of 2022, they calculate a recurring net income of 8.55 billion reais for Itaú, with a NII of 25.3 billion reais. BB should present a positive result of 8.4 billion reais, with a NII of 19.9 billion reais.

As for Bradesco, they estimate a profit of 4.15 billion reais, with a financial margin of 17.3 billion reais, and for Santander Brasil they estimate a profit of 2.55 billion reais and an NII of 13.1 billion of reais.

At around 16:00, Itaú PN was down 1.63%, Bradesco PN was down 4.23%, BB was down 1.62% and Santander Brasil was down 0.43%, while the Ibovespa showed a decline of 1.05%.

+The best content in your email for free. Choose your favorite Terra newsletter. Click here!

Source: Terra

You may also like