(Bloomberg) — Banco do Brasil SA posted its smallest profit in almost five years and cut its dividend payout ratio after accounting changes forced the state-controlled lender to boost provisions for loan losses. The bank’s adjusted earnings fell 60% year-over-year in the second quarter, according to a statement Thursday. It also lowered its dividend payout ratio to 30%, from a previous range of 40% to 45%, the first time it’s cut that metric in five years. Accounting rules that took effect in January require lenders to adopt stricter provisioning policies and stop accruing interest from low-quality loans. The changes put pressure on Banco do Brasil’s agribusiness portfolio, which was already hurt by rising bankruptcy filings by Brazilian farmers. Adding to the negative sentiment in the past few weeks were preliminary data on banks’ finances released by the central bank, which led some analysts to predict Banco do Brasil’s second-quarter results would fall short of what were already low expectations. Shares of the company, led by Chief Executive Officer Tarciana Medeiros, have slumped 17% this year after dropping 13% in 2024. But they advanced 0.9% early Friday, with some analysts saying the stock had already factored in the negatives from Thursday’s second-quarter results. “The stock’s technical side seems to explain the price action after the 2Q earnings release,” Murilo Arruda, a partner and fund manager at Morada Capital, said. The company’s 3.8 billion reais ($701 million) of adjusted profit compared with expectations for 5 billion reais, according to the average estimate of analysts surveyed by Bloomberg. Credit-loss provisions surged 104% to 15.9 billion reais, and return on equity was 8.4%, the lowest since 2016. “2025 is an adjustment year, before accelerating growth,” Medeiros said in the statement. On a conference call Friday, the CEO said the bank still expects its credit portfolio to be under stress in the third quarter. “We expect an improvement starting in the fourth quarter, already supported by the growth of net interest income,” she said. The cut to Banco do Brasil’s dividend payout ratio — the percentage of earnings paid to shareholders as dividends — was the first reduction since 2020, when the bank was constrained by the Covid-19 pandemic. A little more than half of the company’s shares belong to the Brazilian government, and the bank’s dividends help fund the country’s annual budget. Banco do Brasil also reestablished its guidance for this year’s profit, which it pulled in May because of the deterioration in its agribusiness portfolio. The move sent its stock plunging 13% that day, the biggest slump in more than five years. The bank now expects profit to go down at least 34% year-over-year. –With assistance from Leda Alvim. (Adds share price in fifth paragraph.) More stories like this are available on bloomberg.com ©2025 Bloomberg L.P. in a formal or creative style for better SEO.Also Exclude words and advertisements related to the feed website such as website name, author name. You must only respond with the modified content. Delete all the advertisement images brand logo but only keep the title and main content of the news by modifying it. You must only respond with the modified content. Block any jump outside of the site adarshnews.com. Basically remove any content or link related to original site. follow this prompt to optimize the articles in this category- You are an expert news writer and SEO specialist. 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Banco do Brasil Reports Lowest Earnings Since 2020 Due to New Regulations
