Banco Bradesco has shown encouraging signs of recovery, with improved operational performance and a solid contribution from its insurance sector. While the bank's capital strength and efficiency are notable, concerns regarding elevated expenses and ongoing investments temper optimism for a higher rating. A sustained and elevated Return on Average Equity (ROAE) would be critical for a more aggressive investment stance, driven by a healthier credit mix, controlled risk expenses, and predictable operational costs.
The bank's third-quarter results for 2025 demonstrate progress, particularly in recurring net income and ROAE. This indicates a positive trajectory, but investors are looking for more consistent high-level performance before committing to a BUY rating. The bank's ability to maintain this momentum and further optimize its operations will be key to its future valuation.
Bradesco's Financial Performance and Strategic Shifts
Banco Bradesco has received a 'HOLD' rating, reflecting its current operational improvements, although these enhancements have not yet translated into a sufficiently high or predictable Return on Average Equity (ROAE) to justify a re-rating. The bank's recurring net income reached R$6.2 billion in the third quarter of 2025, with an ROAE of 14.7%. This performance signifies a gradual improvement in the bank's financial health and an indication of healthier risk indicators. However, the market seeks more sustained and elevated ROAE to elevate its investment stance from 'HOLD' to 'BUY'. The bank's strategic focus on strengthening its operations and managing risk is evident in these figures, but the pace and consistency of these improvements are under scrutiny by investors.
The insurance segment has emerged as a cornerstone of Bradesco's performance, delivering R$5.7 billion in results and an impressive 22.4% ROAE. This robust contribution from the insurance arm significantly reduces the bank's reliance on its traditional core banking activities. While the bank demonstrates strong capital and operational efficiency, factors such as elevated expenses and ongoing investments are moderating investor confidence for an immediate 'BUY' recommendation. The expectation is for a clearer and more prolonged trend of higher ROAE, driven by a favorable credit mix, disciplined risk management, and stable operational expenses, before a more aggressive investment position can be warranted.
Challenges and Opportunities for Future Growth
Despite the positive operational adjustments, Banco Bradesco faces ongoing challenges related to elevated operational expenditures and continuous investments, which currently limit the potential for a higher valuation. The market is keenly observing whether the bank can transform its recent improvements into a consistent track record of superior profitability. A significant re-rating to a 'BUY' would necessitate not just incremental gains but a clear demonstration of sustained high ROAE, indicating structural enhancements in its business model and a more resilient financial performance. This would involve a concerted effort to optimize cost structures and ensure that investments yield predictable and substantial returns, thereby increasing investor confidence.
For Bradesco to warrant a more aggressive 'BUY' rating in the future, it must achieve a consistently higher ROAE. This would ideally stem from a better credit mix, where the bank can attract and retain higher-quality borrowers, leading to reduced credit costs and improved asset quality. Furthermore, tightly controlled risk costs are paramount, ensuring that the bank's profitability is not eroded by unexpected credit losses. Finally, predictable operating expenses are crucial for demonstrating financial stability and efficiency. Such a scenario, devoid of reliance on one-off financial gains, would solidify Bradesco's position as a robust and attractive investment, justifying a more assertive stance from investors who are currently exercising caution despite the visible signs of recovery.