BBAS3 "Precificam errado". Por que bolsa cai com Baixo Desemprego e 'boa' Inflação? Banco do Brasil

Summary

Brazil’s economy is facing several challenges despite declining inflation. The IPCA inflation rate is slowing, but food prices and services remain a concern. The unemployment rate is at historical lows, but this figure is misleading due to informal work and the rise in social benefits like Bolsa Família. The high dollar and fiscal risks continue to put pressure on inflation. Meanwhile, Banco do Brasil is being undervalued in the market, with its strong agricultural exposure offering a promising outlook, especially as the agricultural sector recovers. Despite fiscal issues, the bank’s prospects for 2025 are positive, driven by a favorable agricultural cycle.

Takeaways

• 😀 Inflation (IPCA) slowed down from 0.62% to 0.34% in November, and year-on-year inflation decreased slightly from 4.77% to 4.71%.
• 😀 Food and drink prices remain a key concern in the inflationary breakdown, with certain services also showing negative trends.
• 😀 Electricity prices decreased due to improved climatic conditions, but this is not attributed to government policy changes.
• 😀 Economists are worried about inflation pressures from food, services, and the persistent strength of the dollar, which is expected to further fuel inflation.
• 😀 Unemployment in Brazil is at historical lows, but the official rate is misleading due to high informality in the labor market and the growing number of people dependent on social welfare programs.
• 😀 Many Brazilians are supported by social benefits like Bolsa Família, which distorts the true employment picture, as it includes people not actively seeking work.
• 😀 A stronger dollar (around R$6.20) is increasing inflation pressures, with capital outflows due to rising perceptions of risk in Brazil's fiscal stability.
• 😀 The stock market has reacted negatively, with major outflows from real estate and equities, while cryptocurrencies and international investments have gained traction.
• 😀 Despite challenges in the agribusiness sector, Banco do Brasil remains well-positioned due to its strong exposure to agriculture, which could lead to better financial performance in the future.
• 😀 Banco do Brasil's stock has fallen by 10% this year, but the bank's strong ties to the agricultural sector could help it recover, especially with the potential for a good harvest in 2025.
• 😀 Analysts from major firms like Goldman Sachs and Citi have downgraded Banco do Brasil, citing risks from the agribusiness sector, but some investors remain optimistic about its future growth.
• 😀 The SELIC rate's high level is expected to benefit banks like Banco do Brasil, as it will drive up interest earnings despite the challenges of rising delinquency.

Q & A

What is the main concern regarding Brazil's inflation despite a decrease in the IPCA rate?

The main concern is that the decrease in the IPCA rate is mainly due to the reduction in energy prices, which is not directly controlled by the government. Core inflation, particularly in food and beverage prices, remains high, which continues to worry economists.

How does the high value of the Brazilian real impact inflation?

The high value of the dollar, staying above R$6, puts pressure on inflation. As the value of the dollar rises, it increases the cost of imports, which contributes to inflationary pressures in the domestic economy.

What is the relationship between the unemployment rate and Brazil’s fiscal challenges?

Although the unemployment rate is at historical lows, the unemployment index is misleading due to the high levels of informal employment and the large number of people receiving social benefits. This distorts the true picture of labor market health and poses challenges to sustainable economic growth.

Why is there skepticism about the sustainability of Brazil's social benefits programs like Bolsa Família?

There is concern that the expansion of Bolsa Família and other social benefit programs is fostering a dependency culture, where people may not be incentivized to seek formal employment. This could exacerbate inflationary pressures and lead to long-term fiscal instability.

What factors are contributing to the decline in the Brazilian stock market?

The decline in the stock market is driven by concerns over fiscal risks, especially regarding government debt, and the exit of foreign investors from the country due to increased perceptions of risk. These factors are prompting investors to move their money to other assets like cryptocurrencies and international investments.

How is the agribusiness sector influencing the outlook for Banco do Brasil?

Banco do Brasil has strong exposure to the agribusiness sector, which is expected to recover due to favorable crop conditions. This positions the bank well for future growth, especially since it has already accounted for previous sector challenges.

What is the concern regarding the past performance of Banco do Brasil and how is it affecting its valuation?

The market is currently pricing Banco do Brasil based on past difficulties in the agribusiness sector. This does not reflect the bank's present and future prospects, especially given the expected recovery in agriculture and the bank’s strong position in the sector.

How do interest rates (Selic) affect the profitability of banks like Banco do Brasil?

The higher Selic rate is expected to boost bank profits by increasing the revenue from loans and credit products. However, this may also lead to higher default rates, which banks will need to manage, but it can still result in overall higher profits due to the increased interest margins.

What is Werner's outlook on the future performance of Banco do Brasil in the next year?

Werner believes that Banco do Brasil is well-positioned for the coming year, as it is benefiting from a recovering agribusiness sector and should perform better than other larger banks that face more challenges with smaller companies and rising default rates.

Why is the focus on the past performance of Banco do Brasil considered a potential mistake by Werner?

Werner argues that focusing too much on past performance, particularly the difficulties in the agribusiness sector, is short-sighted. The market should be looking ahead to the expected recovery in agriculture, which will likely improve Banco do Brasil's performance moving forward.