Banco Bradesco S.A. (BBD) Income Statement

The -22.4% NII growth recorded in 2026Q1, following a +23.8% print in 2025Q1, points to heavy dependence on the Selic rate path and floating-rate loan repricing rather than consistent volume-led expansion. Management's large retail and micro-SME exposure means rate cuts compress yields on assets faster than deposit costs adjust, which appears consistent with the sequential NII decline from 2026Q2 ($20.4B) to 2026Q3 ($18.9B) despite continued top-line revenue growth of 17.9% YoY in NII terms. Investors should monitor whether deposit betas remain favorable enough to defend spreads as the easing cycle progresses.

The NIM trough at 0.7% coincides with the highest readings of the Selic cycle, suggesting the bank has been unable to translate elevated benchmark rates into proportional spread expansion — a pattern that may reflect competitive deposit pricing and a high proportion of low-yielding liquid assets on the balance sheet. Compared with Itaú's more defensive NIM profile, BBD's margin structure appears more exposed to any further rate reductions. If deposit repricing lags asset repricing in an easing environment, NIM could stabilize modestly, but the persistent sub-1% level warrants investigation into the loan-book mix shift toward lower-risk, lower-yielding segments.

The efficiency ratio has trended from 55-60% levels through 2024-2025 into the low-50s in 2026, a meaningful structural improvement that should support operating leverage if sustained. However, 2025Q4's 111.6% efficiency ratio — driven by an anomalous $46.8B non-interest income line and -$19.1B operating income — indicates significant non-recurring items distort the series, so the trend should be read with caution. Excluding that outlier, the underlying trajectory appears consistent with management's stated restructuring objectives, and at current levels BBD is closing the efficiency gap versus Santander Brasil rather than Itaú, whose cost discipline remains the benchmark.

The provisions-to-revenue ratio has risen materially, with 2026Q3 provisions absorbing roughly 9.5% of total revenue versus approximately 5% in 2024Q3, pointing to sustained pressure from the high-rate environment on lower-income borrowers. The sequential uptick from $7.6B in 2026Q1 to $8.5B in 2026Q3 shows the cycle has not yet turned, even as headline revenue growth of 44.5% suggests the loan book is expanding. Given BBD's demographic concentration, further NPL deterioration would disproportionately impact earnings quality relative to Itaú, and the absence of updated guidance increases uncertainty around the provisioning trajectory.

This quarter's 73.4% fee-income share and 111.6% efficiency ratio stand far outside the normal 25-47% fee range and 51-65% efficiency band, implying a large one-off item — potentially an insurance-segment actuarial reserve adjustment, FX remeasurement, or tax credit recognition — inflated the revenue line while expenses absorbed the offset. Excluding 2025Q4, the core franchise appears to be generating net income in a $5-7B quarterly range with EPS growth averaging in the mid-teens, a more investable profile than the headline series suggests. Investors should await reconciliation of this quarter's items to IFRS disclosures before assigning valuation weight to the reported 15.2% net margin.