Banco do Brasil: Time to Buy BDORY?
B3: BBAS3, OTC US: BDORY
Today we are going to talk about the oldest bank in Brazil: Banco do Brasil S.A.
Controlled by the Federal Government of Brazil, this financial conglomerate, also known under the nickname "BB", extends its tentacles through banking services, non-financial services, asset management, payment methods, insurance, and capital market.
It divides opinions. Some people love it, some people hate it.
"Let's go by parts", as Jack the Ripper would say:
The Bright Side: Operational and Market Positioning
Highest profit in the industry, with ROE of 21% and low delinquency
Comprehensive physical presence, serving 97% of Brazilian municipalities
Main financier of agribusiness (the Brazil that works)
Cheap funding (court deposits, savings, …)
Management of public funds (high administration fees)
Access to Government deals in Investment Banking
Elected the Most Sustainable Bank in the World for the 4th time
The Dark Side: Politics
Controlled by the Government, so every 4 years the bank can have a new owner and thus change its strategy
The State-owned Law, sanctioned by President Michel Temer in 2016 to shield the Bank from political interference, is not 100% efficient
Left in Power, so we can see past issues happening again: tendency to rig State-owned companies, increased corruption and greater focus on social function than on results
Thanks, now I'm even more confused...
Let's try to unscramble.
My Point of View:
The Bank has a fantastic market position, and is very solid and profitable.
President Lula, in a few months of government, has already managed to make a series of messes, and Arthur Lira, President of the Chamber of Deputies, is becoming as powerful as a Prime Minister of a Parliamentary Regime
President Lula should not change the State Law, since the PT is still in people's memory as a corrupt party
Any slip regarding compliance with the State-owned Law, considering that the country is still quite polarized, would lead to a pubic inquiry
In state-owned companies, politics usually generate good buying opportunities
Is it cheap?
After all, is it to buy this stock or not?