BMG: Is it worth having the action of a bank “confused” and sued by customers?

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BMG
Credit Suisse analysts rated the balance sheet document as “difficult to understand”. (Image: Reproduction / Linkedln)

The results of the BMG (BMGB4), released on Thursday night (14), scared shareholders and investment analysts. The reaction was huge and the actions melted 16.97%, to R $ 7.63. In 2020, the devaluation is approximately 20%.

Analysts at Credit Suisse assessed the balance sheet document (see below) as “difficult to understand”.

Recurring profit was R $ 74 million in the quarter, an increase of 20% in comparison with the previous year, and R $ 344 million last year, an increase of 33.4%.

“The numbers were disappointing and expenses were much higher than expected, despite the fact that the provisions for civil claims actually fell in the quarterly passage – the negative surprise came from other administrative issues”, point out Marcelo Telles, Otavio Tanganelli and Alonso Garcia.

In total, operating expenses rose 54.5% in the last quarter of 2019 and stood at R $ 415 million, while Credit Suisse expected R $ 364 million.

The significant increase in the line “other operating expenses”, of 127.6% in the last quarter and 43.3% in the annual passage, also drew attention.

The net operating provision, which shot up 100.2% in the quarter and 115.4% in the year, was R $ 93 million in the fourth quarter. It was a value similar to the R $ 90 million in the previous three months, when in fact there was a jump to this new level.

For analysts, this stability even “helps to alleviate some market concerns about an even higher rise in this line”. This item is a reflection of lawsuits filed by customers against the bank.

BMG
BMG explained that the higher-than-expected increase in provisions is a reflection of less successful participation in the closing of actions brought by clients (Image: YouTube from BMG)

In a report signed by analyst Tatiana Brandt, the Eleven Research stressed that this item “should remain on the radar”.

“The negative surprise arising from the increase in the volume of civil provisions, and the way the bank dealt with the matter, weighed negatively on our vision for the bank”, highlights the document.

BMG explained that the higher than expected increase is a reflection of less successful participation in closing the shares, concomitant with higher ticket losses.

“The combination of these factors was responsible for the substantial increase in expenses presented, especially in the second half of 2019”, shows the report.

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Projections

BMG, together with the results, published its expectations of results for 2020.

For Credit Suisse, the estimate of the effective IR / CSLL rate was “abnormally” low and it was not clear whether this considers management or accounting data. The level between 25% and 35% is lower than the 36% expected by analysts.

“In our calculations, we assume that all lines refer to managerial numbers”, they evaluate. The midpoint of the BMG results orientation suggests a pre-tax profit of R $ 1.010 billion, which is 9% below that estimated by Credit Suisse.

Actions

While BMG continues to surprise the market, analysts seem to be starting to lose some of the belief in the papers.

Eleven maintained the purchase recommendation, but put its target price under review. Credit Suisse also maintained the purchase indication, while it understands that the shares will remain under pressure. The target price remains at R $ 12.50.

See the results document:

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