TD Cowen Holds Banco Bradesco at Neutral, Cites Persistent Profit Pressure
2h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
banco-bradescobradesco-bbd
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
TD Cowen affirmed its Hold rating on shares of Banco Bradesco S.A., Brazil's second-largest private bank by assets, on 20 June 2026. The research note signals a neutral stance amid a challenging operating environment for Brazilian financial institutions. The decision underscores a consensus view that Bradesco's profitability recovery faces significant headwinds from elevated credit costs and compressed margins. The bank's American Depositary Receipts trade under the ticker BBD on the New York Stock Exchange.
Brazilian banks are navigating a complex macroeconomic transition. The Central Bank of Brazil has pursued an aggressive monetary easing cycle, reducing the benchmark Selic rate from a post-pandemic peak of 13.75% in August 2022 to 9.25% as of mid-2026. While reducing funding costs, this rapid easing compresses the net interest margin, a core profitability metric for banks. Lower interest rates historically benefit loan demand but also reduce the spread banks earn between lending and deposit rates.
The catalyst for TD Cowen's review and subsequent Hold rating is Bradesco's upcoming second-quarter 2026 earnings report, scheduled for late July. Analysts are scrutinizing the bank's ability to manage credit provisioning as the economy adjusts. The last major rating agency action on Bradesco occurred in May 2025, when Fitch affirmed its Long-Term Issuer Default Rating at 'BB' with a Stable Outlook, citing the bank's resilient funding profile but also its high exposure to consumer credit.
Current sentiment towards Brazilian financials is cautious. The iShares MSCI Brazil ETF (EWZ) has declined 4.2% year-to-date through mid-June 2026, underperforming the S&P 500's gain of over 8%. Investor focus has shifted from top-line growth to asset quality and operational efficiency. Bradesco's own stock performance has mirrored this sector-wide pressure, trading sideways for much of the first half of 2026.
Concrete metrics anchor the neutral assessment. Banco Bradesco reported a return on equity (ROE) of 12.1% for the first quarter of 2026, a figure that remains below its five-year pre-pandemic average of approximately 18%. The bank's efficiency ratio, measuring operating expenses as a percentage of revenue, stood at 40.5% in Q1 2026, an improvement from 42.8% a year prior but still above management's target of sub-38%.
Credit quality remains a pivotal data point. The bank's 90-day default ratio for its total loan portfolio was 4.7% at the end of March 2026. While this represents a sequential decline from 4.9% in Q4 2025, it is nearly double the 2.5% level seen in late 2019. The provision for loan losses consumed 15.3% of the bank's net revenue in the latest quarter, a significant drag on bottom-line results.
Peer comparison highlights Bradesco's relative position. Its primary domestic rival, Itaú Unibanco, reported a Q1 2026 ROE of 18.5%, showcasing a stronger profitability profile. Bradesco's market capitalization of approximately $32 billion USD trails Itaú's $65 billion. The bank's net interest margin contracted by 30 basis points year-over-year to 7.1% in Q1, directly reflecting the impact of the falling Selic rate.
| Metric | Bradesco (Q1 2026) | Itaú (Q1 2026) |
|---|---|---|
| Return on Equity (ROE) | 12.1% | 18.5% |
| 90-Day Default Ratio | 4.7% | 3.9% |
| Efficiency Ratio | 40.5% | 37.1% |
The Hold rating signals that the current share price adequately reflects Bradesco's mixed fundamentals. This positioning is common among institutional investors waiting for a clearer inflection point in credit costs. Funds flowing out of direct Brazilian bank equities have found temporary havens in broader Brazilian ETFs or in higher-yielding local government debt, which now offers attractive real returns as inflation moderates.
Second-order effects are visible across related sectors. Brazilian fintechs and non-bank lenders, such as Nu Holdings (NU), may face less competitive pressure on margins if traditional banks like Bradesco remain focused on balance sheet repair rather than aggressive growth. Conversely, Brazilian consumer discretionary stocks could see a delayed benefit if banks maintain tighter lending standards, potentially capping near-term consumption growth.
A key counter-argument to the neutral stance is Bradesco's extensive branch network and leading insurance subsidiary, which provides a diversified revenue stream less sensitive to interest rate movements. Some analysts argue this embedded value is not fully priced, presenting a potential upside catalyst if insurance operations outperform. However, the dominant narrative remains one of patience, with the majority of sell-side analysts maintaining equivalent Hold or Neutral ratings.
The primary risk to the thesis is a sharper-than-expected deterioration in Brazil's labor market, which would trigger a new wave of credit defaults and force Bradesco to significantly increase provisions. This would pressure earnings and likely lead to downward revisions in price targets, currently clustered around the $5.00 USD per ADR level.
Markets will watch Banco Bradesco's Q2 2026 earnings release, expected on 29 July 2026. The key metrics will be the delinquency trend for its large consumer credit portfolio and any guidance on net interest income for the second half of the year. A sustained decline in the default ratio below 4.5% could shift sentiment.
The next Central Bank of Brazil Copom meeting on 6 August 2026 will provide critical data on the future path of the Selic rate. Consensus expects another 25 basis point cut to 9.00%. A pause or a signal that the easing cycle is nearing its end would provide clarity for net interest margin projections and could serve as a catalyst for bank stock re-rating.
Technically, Bradesco's ADR price faces immediate resistance at its 200-day moving average, near $4.85. A decisive break above this level on high volume could indicate institutional accumulation. Support is seen at the June low of $4.35. Investors should monitor trading volume in the iShares MSCI Brazil Financials ETF for signs of broader sector rotation.
A Hold rating suggests analysts believe the stock's current price is fair relative to its prospects and risks. For retail investors, it typically means there is no compelling immediate catalyst to buy or sell. The recommendation is to maintain any existing position but not to initiate a new one until fundamentals improve or the price dips to a more attractive entry point. It reflects a wait-and-see approach focused on upcoming earnings reports and macroeconomic data.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Trade 800+ global stocks & ETFs
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.