Banco Bradesco (BBD)
Bancos — Brasil
One of Brazil's largest private banks —17.7% of loans among private institutions— and the country's largest insurer, coming out of a credit cycle that cut earnings in half in 2023: attributable income recovered to R$23.67 billion in 2025, up 37% over 2024 and above the pre-deterioration level. It trades near one times book value with a return on equity of 13.3% and pays out more than half of earnings as interest on equity. There is a margin of safety: the market's perception is meaningfully worse than reality. The estimated return is +23% annually and the status is Very undervalued.
- Price
- $3.19
- Intrinsic value (5y, base)
- $6
- Total annual return (5y)
- 23.4%
- Status (nominal)
- Very undervalued
- Margin of safety
- +52%
The essentials
- Attributable income went from R$14.25 billion in 2023 to R$23.67 billion in 2025: the banking segment's expected credit loss charge was R$37.11 billion in 2023, fell to R$33.12 billion in 2024, and rose again to R$36.37 billion in 2025 (+9.8%), meaning the recovery did not come from a structurally smaller charge.
- The insurance business contributes R$10.07 billion in earnings —41% of segment results— with a segment return on equity of 22.9% on closing balance in 2025 (25.5% on average equity); management reports a recurring return of 22.8% in the second quarter of 2026, well above the consolidated figure.
- It trades at 8× earnings and near one times book value of R$16.87 per share, with a dividend yield of 9.2% paid as interest on equity.
- Core capital stands at 11.3% against a required 8.0%, but coverage of loans overdue more than 90 days fell from 177.8% to 152.3% over four quarters: the provisioning cushion is being consumed.
Intrinsic value — two valuation methods
Total return at 5 years: 89.4%/year = 59.2% appreciation + 30.2% dividend. The target price ($33) is ex-dividend; the $9 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $65 · Multiples $34) exceeds the market price ($3).
Pillars of the analysis
The verdict — today vs 5 years
Today — with margin of safety: at $3 trades ~90.7% below its value discounted to today (~$34) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.
At 5 years — Muy infravalorado: the target price ($33) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.
Thesis
The business
A scale bank in a concentrated market, with a leading insurance arm that contributes 41% of segment earnings and returns 25.5% on average equity in 2025 (22.8% is the segment's market share, not the return). The quality lies in distribution and cross-selling, not in a network effect, and the moat is narrowing under digital competition. Return on tangible capital, 15.5%, clears the 10% bar but falls short of the roughly 20% it earned before the 2023 deterioration.
The valuation
Equity is valued, because at a bank debt is funding, not capital structure: terminal-year earnings per share times an exit multiple of 11.5x, within the 10-to-15x band of the bank archetype. Income to common goes from R$23.67 billion to R$31.68 billion over five years, on a share count that rises from 10,577 to approximately 11,175.6 million from the up-to-R$10-billion private capital issuance approved in July 2026, leaving a value of $33 per share against a price of $3.
The margin of safety
There is a margin of safety: the market's perception is meaningfully worse than reality. Against the 15% annual hurdle the discount is +86%, and the estimated five-year return is +89% annually, a meaningful part of which arrives as interest on equity: the current dividend yield is 47.4%. The adverse scenario returns +89% and the favorable one +89%, a range that reflects the credit cycle rather than the multiple.
What to watch
Three numbers. Coverage of loans overdue more than 90 days, which fell from 177.8% to 152.3% over four quarters while delinquency rose to 4.3%. Net financial margin, which fell 3.0% year over year in the first half of 2026. And the exchange rate: value is generated in reais and the certificate is paid in dollars, so a large devaluation of the real cuts the investor's return without the bank having done anything different.
Educational / informational. Does not constitute investment advice.