Bradesco (BBD) Q3 2025: SME Lending Jumps 25% as Collateralized Credit Drives Margin Stability

2025-10-31 | By EarningsIQ Research

Bradesco’s Q3 results highlight a decisive pivot to collateralized lending, with SME credit up 25% and risk tightly contained. Management’s disciplined approach to credit origination and portfolio quality is fueling steady margin gains, while digital transformation and operational streamlining are driving cost controls and efficiency. With growth levers now focused on high-quality segments and technology-enabled productivity, the bank signals confidence in sustaining profitability improvements into 2026.

Summary

• SME Lending Acceleration: Bradesco’s focus on collateralized credit lines drove double-digit SME portfolio growth.
• Risk Management Discipline: Provisioning and delinquency rates remained tightly controlled despite selective portfolio expansion.
• Efficiency and Digital Push: Technology investments and footprint optimization underpin ongoing margin and productivity gains.

Performance Analysis

Bradesco delivered a quarter marked by robust revenue growth across core banking and insurance lines, with total revenue up 13.1% year-over-year, supported by a 9.6% increase in the total credit portfolio and nearly 7% growth in service revenue. The standout was SME (small and medium enterprise) lending, which surged almost 25%—a direct result of the bank’s deliberate pivot toward more collateralized, lower-risk credit lines. This shift, combined with disciplined risk management, helped keep delinquency and restructured loan ratios on a downward trend, with Stage 3 loans falling to 7.7% of the portfolio and restructured assets down nearly R$10 billion year-over-year.

Expense control remained a central theme, with operational expenses growing 9.6% but underlying staff and administrative costs rising only 5.5%, and even less when adjusted for variable compensation and the impact of consolidated affiliates. Technology spending and digital transformation continued to drive both cost efficiencies and improved customer experiences, as evidenced by a 109% increase in development productivity. Meanwhile, the insurance group once again delivered outsized returns, with operating profit up over 10% and return on equity above 21%.

• SME and Collateralized Credit Outperformance: SME lending rose nearly 25%, outpacing other segments and reinforcing portfolio quality.
• Margin Expansion in Customer Lending: Net interest margin with clients reached 9%, with management targeting further stability or upside.
• Insurance Group Momentum: Insurance operating results grew 10.2%, with technical provisions up 10.5% and health insurance earnings doubling year-over-year.

Despite a one-off corporate provision impacting credit costs, underlying trends in asset quality and profitability remain positive, positioning Bradesco for further improvement as macro headwinds abate and digital initiatives mature.

Executive Commentary

Strategic Positioning

1. Collateralized Credit and SME Leadership

Bradesco’s portfolio strategy is increasingly centered on collateralized lending, with SME and rural credit lines prioritized for growth. By targeting segments with robust guarantees and leveraging government-backed programs (FGI, FGO), the bank has both outpaced market growth and kept risk metrics in check. Management explicitly reaffirmed its intent to maintain SME leadership, with market share gains and continued expansion targeted in 2026 and beyond.

2. Digital Transformation and Productivity Levers

Technology and process innovation are now core to Bradesco’s operating model. The bank reported a 109% increase in development productivity and highlighted the use of machine learning and advanced analytics in credit modeling. The expansion of digital channels, especially for mass-market and SME clients, is enabling scalable growth, enhanced customer acquisition, and improved risk segmentation. Initiatives like the Bradesco Expresso network and the integration of Cielo solutions into SME apps further support omnichannel engagement.

3. Operational Efficiency and Footprint Optimization

Cost discipline is being achieved through both headcount and branch rationalization, with more than 1,600 points closed in the last 12 months. Management signaled that the pace of physical footprint reduction will moderate in 2026, shifting focus to capturing operational efficiency gains from recent investments. Expense growth was largely contained, with technology and affiliate costs the main outliers, but these are seen as necessary for long-term competitiveness.

4. Insurance Group as a Profit Engine

The insurance group continues to deliver consistent, high-margin growth, with diversified contributions from health, life, and pension products. The group’s operational and financial results are both up double digits, and management expects this momentum to persist, driven by product innovation, disciplined underwriting, and expanded distribution channels.

5. Prudent Risk Appetite and Capital Management

Bradesco’s risk appetite remains moderate, with selective expansion in higher-yielding, lower-risk segments. The bank’s capital ratios improved to 11.4% (main capital) and 13.4% (level 1), with further optimization expected as tax credit realization and portfolio quality trends continue. Management is committed to balancing growth with risk-adjusted returns and maintaining capital adequacy in the face of evolving regulatory requirements.

Key Considerations

This quarter’s results reflect a deliberate shift toward quality growth and operational discipline, with the following strategic considerations for investors:

Key Considerations:

• SME and Collateralized Lending as Growth Anchors: Bradesco’s market share gains in SME and rural credit are likely to continue, given its focus on risk-adjusted returns and government-backed lines.
• Digital and Productivity Investments Yielding Results: Technology-driven efficiency gains are evident in both cost control and customer engagement metrics, supporting scalable growth.
• Insurance Group Provides Earnings Stability: The insurance business is a reliable profit engine, with strong growth across health, life, and pension segments.
• Expense Discipline with Strategic Flexibility: While costs are tightly managed, management remains willing to invest opportunistically for long-term competitive advantage.
• Asset Quality Remains a Key Watchpoint: Isolated credit events were provisioned, but continued vigilance is required as the macro environment evolves.

Risks

Bradesco’s forward trajectory is exposed to several risks, including macroeconomic deceleration, potential increases in delinquency rates if credit mix shifts toward riskier segments, and regulatory changes affecting capital and funding structures. While management’s risk discipline is evident, isolated corporate credit events and the normalization of labor provisions highlight ongoing sensitivity to portfolio quality and operational costs. Investors should also monitor the pace of digital adoption and the ability to sustain efficiency gains as competitive pressures intensify.

Forward Outlook

For Q4 2025, Bradesco guided to:

• Continued growth in credit portfolio, with particular strength in SME, rural, and public sector lines
• Stable or improving net interest margin with clients, supported by funding optimization and digital initiatives

For full-year 2025, management maintained guidance:

• All core performance metrics expected at the upper end of guidance ranges, including credit growth, financial margin, and expense control

Management highlighted several factors that will shape performance:

• Footprint rationalization to slow, with focus shifting to operational efficiency capture
• Insurance and digital banking expected to remain key growth drivers into 2026

Takeaways

Bradesco’s Q3 results underscore a business model increasingly anchored in collateralized lending, digital productivity, and insurance diversification. The bank’s ability to grow high-quality credit segments while maintaining cost and risk discipline positions it well for further margin and profitability gains as macro conditions stabilize.

• SME and Collateralized Credit Expansion: Growth in these segments is driving both revenue and portfolio quality improvements, with risk tightly managed through advanced modeling and government programs.
• Efficiency and Digital Execution: Technology investments are translating into real productivity gains and cost control, supporting long-term scalability.
• Future Watchpoints: Monitor for sustained improvement in ROE, continued insurance outperformance, and the impact of further digital adoption on customer acquisition and retention.

Conclusion

Bradesco’s Q3 performance highlights a well-executed pivot toward quality growth, underpinned by disciplined risk management and digital transformation. The bank’s strategic choices are delivering tangible results, and while macro and competitive risks persist, the foundation is set for continued profitability and market share gains in core segments.

Industry Read-Through

Bradesco’s results provide a clear read-through for the broader Brazilian banking sector: risk-adjusted growth, digital transformation, and insurance diversification are now table stakes for sustainable profitability. The focus on collateralized and government-backed credit lines, combined with operational streamlining, is likely to be echoed by peers facing similar macro and regulatory headwinds. Investors should expect continued divergence between banks that execute on digital and risk discipline and those that lag in these areas, as the competitive landscape increasingly rewards quality over sheer scale.

BBD Financials Banking Digital transformation SME lending Collateralized credit Insurance Efficiency