Banco do Estado do Rio Grande do Sul (BRSR6) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 reached R$247.3 million, up 9.2% year-over-year and 31.9% quarter-over-quarter, while 1H2024 net income was R$434.9 million, down 1.1% year-over-year due to higher provisions and expenses.

• Operations remained fully functional despite severe flooding in Rio Grande do Sul, with rapid recovery, emergency measures, and credit support programs for affected clients.

• Over 549,000 clients were affected by the climate event, with 10.9% of the credit portfolio exposed, but losses were limited due to insurance and risk management.

• The bank launched major recovery initiatives, including new credit lines and products for companies and rural producers, and participated in federal recovery programs.

• Customer base, especially among companies, expanded, and digital initiatives like Conta Única and Vero saw significant uptake.

Financial highlights

• Net interest income was R$1,613.9 million in Q2 2024, up 15.9% year-over-year and 5.1% sequentially; financial margin for 1H2024 was R$3,150.1 million, up 19.2% year-over-year.

• Service fees totaled R$584.6 million in Q2 2024, up 9.7% year-over-year; service income for 1H2024 was R$1,163.6 million, up 10.4%.

• Loan portfolio reached R$54.7 billion, up 6.2% year-over-year, led by rural and real estate segments.

• Total funding rose 20% year-over-year and 8.4% quarter-over-quarter, reaching R$93.6 billion.

• Administrative expenses increased 5% year-over-year in Q2 2024, with 1H2024 expenses at R$2,133.6 million, up 5.2%.

Outlook and guidance

• 2024 guidance: loan portfolio growth of 3%-8%, cost of risk at 2%-3.5%, administrative expenses growth of 2%-9%, and net interest income/financial margin growth of 6%-23%.

• Credit expansion post-floods is not expected to increase risk levels, with portfolio quality preserved.

• Focus remains on expanding corporate and digital portfolios, leveraging strong funding and capital positions.