Banco do Brasil loses around 28% in a trading session after the election and reopens the debate on agribusiness and political risk
According to Clube do Valor, the action was already weakened by default in agriculture and lower profits, and Lula's victory increased the discount charged by the market.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM CLUBE DO VALOR · 5 MIN
Shares of Banco do Brasil (BBAS3) fell by around 28% in a single trading session, on Monday, after Lula's victory in the second round. According to Ramiro Gomes Ferreira, founder of Clube do Valor, the stock closed on Friday, October 23, at R$24.94 and was at R$17.47 on Monday, the lowest level since May 2023. The largest agribusiness bank in the country lost almost a third of its market value in one morning.
The fall occurred on a day of strong stress. According to the presenter, the Ibovespa triggered the circuit breaker and closed down almost 14%, the worst day since 2020. Future interest rates rose more than 2.5% on the curve, and the expectation of a cut in the Selic rate, currently at 13.75%, gave way to pricing in a greater chance of an increase.
A bench that arrived already injured
In the assessment of Clube do Valor, the election was the latest blow to an action that had already been punished. In May 2025, the bank suspended its profit guidance of R$37 billion to R$41 billion and saw the stock fall around 13% the following day. The presenter attributes the deterioration to the agro portfolio, in which the bank held 50% of the sector's financing at the beginning of 2025, and to the new accounting rule of Resolution 4,966 of the Central Bank.
The profit in 2025 was around R$20 billion, a drop of 45%, and the return on equity fell from 21%, in 2023, to 11%. In the first quarter of 2026, profit was R$3.44 billion, a drop of 53%, with profitability of 7.3%, and the projection for the year was reduced to the range of R$18 billion to R$22 billion. The bank also cut the portion of profits distributed as dividends to 30% and asked to postpone the return of R$4.1 billion to the Treasury. In the second quarter, total default rose to 5.6%, and credit card delays reached almost 15%.
Two pointers: the farm and Brasília
The presenter maintains that the bank's price responds to two factors. The first is that of the farm, which brings together defaults, provisions and profit, and moves slowly, from balance sheet to balance sheet. The second is Brasília, which involves interest, fiscal risk and fear of state interference, and can change on a Sunday night. Between August and the beginning of October, without a new balance sheet, the share went from close to R$17 to close to R$26, an increase of almost 50%. For Clube do Valor, the movement reflected the bet on a new government, citing Morgan Stanley's calculation that each point of drop in long interest rates would yield around a 13% increase in the stock.
In the first post-election trading session, all the big banks fell, but Banco do Brasil was the hardest hit: Santander fell 4.5%, Itaú 13.6% and Bradesco 21.7%. According to the presenter, the state-owned company had more to return for having increased its bet on change and carries risk due to having the government as controller. Citi downgraded its recommendation to sell, citing greater exposure to political and regulatory risks.
What is risk and what is noise
Of the four fears that the presenter lists, he considers two real and two exaggerated. High interest rates for longer periods of time and the use of the bank as an instrument of public policy, as in 2012, during the Dilma government, would be concrete risks, even more so with the renegotiation of rural debts provided for in MP 1,314. The dividend cut, in his view, occurred before the election due to capital needs, and the change of management would have a less frightening history: in the first year of the current Lula government, the bank delivered record profits. He remembers that the credit portfolio is the same as on Friday, and that the next test is the balance sheet for the third quarter, on November 11, for which Bradesco BBI projects a profit of just R$1.8 billion.
Analysts remain divided. In a Reuters survey mentioned in the video, six houses recommend holding, three selling and two buying, with target prices between R$15 and R$22. The stock trades at 0.55 times equity and 8.3 times earnings, with a return on equity of 6.6% and a dividend yield of around 4% in 12 months. The presenter projects three scenarios: an optimistic one, with a credible fiscal anchor and shares close to R$22, an intermediate one, with shares between R$19 and R$21, and a pessimistic one, in which R$15 stops seeming exaggerated.
For Clube do Valor, history indicates that the outcome depends less on the day of the poll and more on the performance of agriculture in the following months. After Dilma's re-election, the stock fell around 5% in the trading session and 32% in the following year. In 2022, it fell 4.6% after Lula's victory and rose 74% in 2023. The presenter's conclusion is that the discount is real, but it exists for an agribusiness that has not yet recovered and for a political controller, and that the lower price is a fact, while being cheap is a thesis. The analysis is the opinion of the channel and does not constitute an investment recommendation.
Automatically translated from Portuguese.
