Banrisul: Time to Buy The Largest Bank of Southern Brazil?
B3: BRSR3, BRSR6
Today we are going to talk about the largest bank of Southern Brazil: Banrisul (B3: BRSR3, BRSR6).
If you don't have an account in Brazil, you can buy shares in B3 using Interactive Brokers or ask your brokerage house to open a custody account in Brazil for you.
Who will I be a partner with?
The company has common and preferred shares listed on B3. As usual, preferred shares have greater liquidity.
The Government of the State of Rio Grande do Sul controls the company with 98.13% of common shares (BRSR3) and 0.37% of preferred shares (BRSR6).
There are no relevant minority shareholders.
A little about the history of Banrisul:
1928: Established as a government-owned farm loan bank.
1931: Starts collecting taxes for the State of RS; carries out IPO.
Expansion process, with opening of branches and incorporation of other banks.
1990: Becomes a Multiple Bank.
1997: Incorporates Caixa Econômica Estadual do RS.
1998: Undergoes Restructuring, including capital injection.
2000: Launches the first chip card.
2001: Enters the acquiring market.
2007: Re-IPO (primary and secondary offering of shares).
2012: Acquires 49.9% of BEM Promotora de Vendas.
2013: Creation of Banrisul Cartões.
2014: Launched Vero, a multi-brand acquiring brand, and creates a Life and Pension Insurance Company with Icatu.
2016: Purchase of payroll for public servants.
2017: Launches Voluntary Retirement Plan and creates capitalization products with Icatu.
2019: Encourages the development of the State of RS by supporting agribusiness in the region.
2020: Launches Voluntary Dismissal Plan
2021: Banrisul Corretora de Seguros and Bond Issuance in USD begins operations.
2022: Launches Voluntary Dismissal Plan and Rebrands
What is Banrisul?
Banrisul's mission is to promote the economic and social development of the State of Rio Grande do Sul.
It is a medium-sized bank, with regional operations and more focused on retail, with the largest service network in the south of the country.
Summary of business lines:
70% financial margin
90% credit operations
50% individuals (79% collaterized)
17% companies (80% working capital)
19% rural
11% real estate
3% others
10% treasury
30% service provision
37% Banrisul Payments
13% insurance brokerage
26% current account fees
24% other
Quality of the credit portfolio: 90-day default rate at 2.0%, under control and close to historical lows.
Cost of credit: 2.33%, slight increase, but still controlled.
90-day coverage ratio: 257%, on a downward trend.
ROE: 9.3%
My Point of View:
I've sometimes heard Banrisul mentioned as being a mini Banco do Brasil because it's a state-owned bank with a lot of payroll loans and a relevant rural credit portfolio, but I think it's an exaggeration.
By limiting its operations to the State of RS, the bank has difficulty growing. This is evident when we look at the net profit and dividends distributed over the last 10 years. Shareholders’ Equity even grew, but with a compression in ROE.
The rural credit portfolio is the segment that has brought some growth to the bank.
Credit portfolio generally well maintained in recent years, analyzing defaults and interest coverage.
As it is a state-owned company, it trades at a structural discount, enabling a generous dividend yield, but without long-term growth.
From time to time, rumors circulate about a possible privatization, but I wouldn't buy a share because of that. If it comes, it's very welcome. Anyone from Rio Grande do Sul knows that Banrisul is a source of great pride for the people, so the pressure against privatization is considerable.
The ongoing drop in the Selic rate should bring an increase in profits in the coming quarters.
It is not a stock to carry for the long term, but, if you buy and sell at the right times, it can generate a very interesting return.
Is it cheap?
After all, is it to buy this stock or not?
What is the price to buy and sell BRSR6 after all?
I'll show you all the rationale, in detail.
Let's go.