Banco do Brasil (BBAS3/ BDORY) – Long-Term Investment Analysis

Banco do Brasil S.A. (BB) is one of Brazil’s largest banks and the oldest financial institution in the country (founded in 1808). It is a state-controlled, yet publicly traded bank – the Brazilian Federal Government is the controlling shareholder with roughly a 50% stake . Banco do Brasil’s stock trades on the B3 exchange in São Paulo under BBAS3, and foreign investors can access it via the BDORY ADR in the U.S. (one ADR represents one common share ). This analysis examines Banco do Brasil from a long-term foreign investor’s perspective, focusing on financial stability, dividends, growth prospects, governance, valuation, peer comparison, currency risk, and ADR considerations.

Financial Performance and Stability

Banco do Brasil has delivered robust financial performance in recent years, marked by solid profitability and a strong balance sheet:

• Profitability: The bank’s net income reached R$35.4 billion in 2024, a ~4.8% increase from 2023 . Return on Equity (ROE) has been impressively high – around 20% in 2024 (21% in Q4 2024) – indicating efficient profit generation on shareholder capital. This ROE is on par with or even exceeding many global peers and reflects healthy net interest margins in Brazil’s high-rate environment. Even after a challenging first quarter of 2025, BB’s ROE stood about 16.7% , which, while down from prior highs, remains solid.
• Efficiency: Banco do Brasil has worked to control costs and improve efficiency. Its large scale (over 86,000 employees ) and ongoing digitalization efforts help it achieve a competitive cost-to-income ratio (though slightly higher than leaner private peers). In Q1 2025, administrative expenses rose ~7% YoY , but the bank continues to invest in technology and branch optimization to enhance efficiency.
• Asset Quality: Credit quality has historically been sound, but non-performing loans (NPLs) have ticked up recently due to stresses in certain sectors. As of Q1 2025, NPLs over 90 days reached 3.86% (up from prior levels around 2–3%), driven largely by troubles in the agribusiness portfolio . Notably, agricultural loan defaults hit 3.04%. Banco do Brasil responded by boosting loan loss provisions – provisions jumped 64% in Q1 2025 to R$15.45 billion – ensuring the bank remains well-covered against potential losses. Despite the uptick, these NPL levels are manageable and the bank’s overall loan book is broadly diversified (over R$1.27 trillion in loans) . Capitalization is also solid (Basel ratio comfortably above requirements), supporting stability.

In summary, Banco do Brasil’s core profitability is strong and its financial footing is stable, with prudent risk management to weather asset quality pressures. Its large franchise (over 54 million clients ) and dominant market positions (for example, ~50% market share in agribusiness financing ) provide a resilient foundation, albeit with pockets of risk as discussed below.

Dividend Policy and Historical Yield

One of Banco do Brasil’s key attractions for long-term investors is its generous dividend policy. Unlike many state-owned firms, BB has consistently rewarded shareholders with substantial payouts, balancing income and retained earnings for growth:

• Policy: By law, Brazilian companies must pay out at least 25% of net profits as dividends. Banco do Brasil far exceeds this – its formal policy sets a minimum 35% payout of adjusted net income, and in practice it often pays out 40–50% of earnings . In 2023, for example, the bank distributed 47% of its net profit (about R$12.1 billion) as dividends and interest on capital . This high payout ratio underscores management’s shareholder-friendly approach and the government’s need for dividend income (as a major owner).
• Frequency and Form: Banco do Brasil typically pays quarterly dividends, unlike many Brazilian firms that pay semi-annually . More frequent payouts provide investors with regular income and compounding benefits. Distributions come in two forms – traditional cash dividends (which are tax-exempt for individuals in Brazil) and “Juros sobre Capital Próprio” (JCP), a special interest on equity that is taxed at 15% . In 2023 about 60% of the payout was regular dividend and 40% JCP . For ADR holders, the total dividends are converted to USD; Brazilian withholding tax is applied only on the JCP portion (15%).
• Historical Yields: Banco do Brasil’s dividend yield has been consistently high, often in the high single-digits, outpacing inflation and local fixed-income returns . Over the past five years (2019–2023), the yield averaged ~6.2%, with a sharp rise in recent years as earnings grew. The table below shows the steady growth in dividends:

Year	Total Payout (R$ billions)	Avg. Dividend Yield	Payout Ratio (Net Income)
2019	7.2	5.3%	40%
2020	4.1	3.8%	33%
2021	6.5	6.2%	42%
2022	9.8	7.5%	45%
2023	12.1	8.3%	47%
2024 (proj.)	14.5	8.7%	48%

• Source: Banco do Brasil reports (2019–2023) . The trend reflects remarkable growth in shareholder returns – total dividends doubled from 2019 to 2023 . Even during the 2020 pandemic slump, BB maintained a dividend (R$4.1B) when many banks cut payouts . For 2024, projections suggest a nearly 9% yield . This track record makes BB appealing for income-focused investors.
• Comparison: Banco do Brasil’s dividend yields actually surpass those of private peers, defying the notion that state-run firms pay less. In 2023, BB’s yield (~8%+) topped Itaú’s ~5.8% and Bradesco’s ~4.9% . The bank’s strong earnings and commitment to payouts support a reliable income stream for long-term holders.

In short, BB offers an attractive dividend profile – high yields, frequent payments, and a policy geared toward generous distributions while still reinvesting roughly half of earnings for growth. This makes it a compelling choice for investors seeking income.

Growth Potential and Risks

Banco do Brasil’s future prospects encompass significant growth opportunities as well as notable risks, often two sides of the same coin. A balanced view is essential:

Growth Drivers:

• Agribusiness Leadership: BB is the dominant lender to Brazil’s crucial agribusiness sector, with ~50% market share in agricultural financing . This positioning is a double-edged sword. On one hand, it gives BB a strong pipeline for growth as Brazil’s farm output expands. The government’s annual farm credit program (“Plano Safra”) relies heavily on Banco do Brasil to channel subsidized loans to farmers . The bank plans to grow its agribusiness loan portfolio by ~5–9% in 2025 , aligning with a forecasted strong harvest. In the long term, rising global demand for food and commodities could drive credit growth and fee income in this segment.
• Corporate and Retail Expansion: Outside of farming, BB is growing its corporate loan book and consumer lending. In Q1 2025, corporate loans surged 22.4% YoY as the bank capitalized on large companies’ credit needs. Its total loan portfolio grew 14% YoY despite the tougher climate . On the retail side, BB has a vast branch network and a popular digital app, positioning it to expand in consumer credit, mortgages, and credit cards as economic conditions improve. The bank’s scale and brand trust (especially in smaller cities) give it an edge in customer acquisition.
• Digital Transformation: Like peers, Banco do Brasil is investing in digital banking and fintech partnerships. The goal is to improve customer experience and lower costs. BB’s mobile and internet banking user base has been growing, which could boost efficiency and cross-selling. Embracing fintech innovation (for payments, lending, etc.) is key to staying competitive with newer digital-only banks in Brazil. Early indications show BB holding its own in digital offerings, which supports retention of younger customers and cost savings through automation.
• Fee-Based Services: As a full-service bank, BB has opportunities to grow fee income in insurance, asset management, and payments. It owns a stake in Brazil’s largest card payment network (Cielo) and has subsidiaries in insurance and pensions. As the middle class grows and invests, BB can earn more from managing investments, brokerage, and bancassurance. Diversifying revenue through fees will bolster growth beyond interest income.

Key Risks:

• Agribusiness Credit Risk: The flip side of BB’s agribusiness focus is concentrated risk. The sector is inherently cyclical and exposed to commodity price swings, weather events, and other volatilities. Recently, a drought and lower crop prices led to a spike in farm bankruptcies – 341 agribusiness companies filed for recovery in one year, up 38% . This contributed to BB’s profit miss in Q1 2025 and prompted it to suspend full-year guidance . Investors are increasingly concerned that BB’s rural loan book could produce higher defaults . Indeed, some asset managers have shorted BB’s stock, arguing the market underestimates these agri risks . If crop yields or prices disappoint, or if interest rates squeeze farmers, credit costs for BB may remain elevated in the short term. Mitigants include government support programs and BB’s own campaigns to restructure or assist struggling farmers , but this risk requires careful monitoring.
• Government Influence: As a state-controlled bank, Banco do Brasil can face political interference that may not align with minority shareholders’ interests. For instance, in the past the government has used BB to expand cheap credit or hold down banking fees to stimulate the economy or fulfill social objectives. Such interventions can dent profitability. Changes in administration can also lead to management shakeups – e.g. new CEOs appointed by incoming governments. Currently, CEO Tarciana Medeiros (appointed 2023) has emphasized balancing the bank’s commercial goals with public policy roles . The Lula administration has so far respected BB’s need to remain profitable, but the risk remains that government ownership could influence lending decisions (favoring strategic sectors or state companies) or dividend policy (for fiscal needs). On the positive side, government backing provides an implicit safety net – in a crisis, the state would likely support BB (as noted by credit rating agencies) , reducing the risk of insolvency.
• Competition: Brazil’s banking sector is competitive and evolving. Private giants like Itaú Unibanco and Bradesco aggressively compete in all segments and often enjoy higher efficiency and innovation pace. Moreover, fintech and digital banks (e.g., Nubank) are eroding incumbents’ market share in areas like payments, consumer loans, and deposits, often with lower fees. While BB’s extensive branch network is an advantage in reaching many customers, it can also be a cost burden if branch banking declines. The bank will need to continue modernizing and improving service quality to retain clients against tech-savvy newcomers. So far, BB’s large customer base and trust (especially in the public sector and rural areas) have provided some moat, but competition could pressure margins and require further innovation.
• Credit Cycle and Macroeconomic Risk: High domestic interest rates (the Central Bank’s Selic rate was around 13–14% in early 2025) have increased borrowing costs and default risks. If Brazil’s economy slows or enters recession, banks could see rising delinquencies beyond just agribusiness. Sectors like small businesses or lower-income consumers are sensitive to interest and inflation. The recent regulatory changes (e.g., Resolution 4,966) forced banks to recognize certain interest only on a cash basis, which already shaved R$1 billion off BB’s interest income in Q1 2025 . This highlights regulatory risk as well. On the macro upside, Brazil’s inflation has been moderating, and if interest rates start to fall later in 2025, it could spur loan growth and ease pressure on borrowers – a positive for BB. But in the near term, credit risk management is paramount to ensure the bank doesn’t overextend in volatile segments.

Overall, Banco do Brasil’s growth outlook is positive given its entrenched market position and multiple avenues for expansion. However, investors must weigh the risks of sector concentration and government ties. Prudent risk controls, diversification efforts, and supportive economic policies will be key to realizing the bank’s long-term growth potential without undermining its stability.

Corporate Governance and Government Ownership

Banco do Brasil’s governance structure is a blend of public sector control and private sector accountability. Understanding this dynamic is crucial:

• Ownership and Control: BB is a “mixed-capital” company – it’s publicly listed (traded on the Novo Mercado segment with 100% common voting shares) but government-controlled. The Federal Government directly (and via entities) owns a controlling stake (around 50–59% of shares) . This means the state can appoint a majority of board members and top executives. Historically, the government has installed its chosen executives as CEO or board chair, sometimes leading to leadership changes with each administration. For example, shifts in political leadership in Brasília have in past decades led BB to alternate between more market-friendly management and more politically-driven mandates.
• Governance Practices: Despite state control, Banco do Brasil adheres to high corporate governance standards for a Brazilian company. It is listed on the B3 Novo Mercado, which requires transparency, equal voting rights for all shares, and a minimum free float. The bank emphasizes principles of “Transparency, Accountability, Equity and Responsibility” in its governance code . It has independent board members and a fiscal council to oversee management. BB also publishes an Annual Public Policies and Corporate Governance Charter (as mandated for state enterprises by Law 13,303/16) to clarify its commitments to both commercial and public policy goals . Minority shareholders (including large Brazilian pension funds and foreign institutional investors) have rights under Brazilian law and can influence certain decisions.
• Government Impact – Pros and Cons: The Brazilian government’s ownership can have positive effects, such as stability and support. BB often benefits from implicit sovereign backing – for instance, its credit ratings are linked to the sovereign rating given the expectation of support in a crisis . It also can play a counter-cyclical role, expanding credit in recessions with government blessing, which can gain market share (as seen in past crises). Furthermore, the government as owner has been keen on BB maintaining dividends (as those feed federal coffers), which aligns with investors’ income interests. On the negative side, government influence can lead to conflicts of interest. There is a risk of loans made on non-commercial criteria (to support political allies or further policy initiatives) or pressure to cap fees and interest spreads for political popularity. A notable example was during 2012–2015 when state banks (BB and Caixa) were pushed to lower lending rates to stimulate the economy, squeezing their margins. Such interventions can hurt profitability and valuation. Additionally, frequent management turnover can disrupt long-term strategy – although BB’s professional staff and systems ensure continuity, a politically appointed CEO might prioritize short-term policy goals.
• Minority Shareholder Protections: As a listed company, BB must comply with CVM (Brazil’s SEC) rules and disclosure requirements. It has improved financial reporting and engages with investors via quarterly results calls and investor days. The presence of significant non-government shareholders (like Previ, the BB employees’ pension fund, and foreign asset managers) provides some check on egregious actions. In recent years, there’s been a trend of more market-aligned management at BB, balancing its dual role. For instance, current leadership emphasizes sustainable profitability and digital innovation, which indicates that corporate governance is taken seriously despite the state link.

In essence, Banco do Brasil’s governance is a hybrid – the bank enjoys institutional heft and backing from being state-linked, but it must also answer to public shareholders and regulators. Long-term investors should watch how the government uses its influence (either as a benevolent backer or an overreaching owner). So far, BB has managed to operate with a reasonable degree of autonomy and efficiency, though this remains an ongoing consideration.

Valuation and Peer Comparison

Banco do Brasil’s stock is currently trading at undemanding valuations, especially compared to its major Brazilian peers. This reflects both the bank’s strong recent earnings and, arguably, a discount for perceived risks. Below is a comparison of BB with two key rivals, Itaú Unibanco and Bradesco, on select metrics:

Metric (latest)	Banco do Brasil (BBAS3/BDORY)	Itaú Unibanco (ITUB4/ITUB)	Bradesco (BBDC4/BBD)
Market Position (assets)	Top 1–2 in Brazil	Largest private bank in Brazil	2nd largest private bank
Return on Equity (ROE)	~20% (21% in Q4’24; ~17% Q1’25)	~22% (Q1’25)	~14% (Q1’25) (recovering)
Price-to-Earnings (P/E)	~4.0x trailing	~9–10x trailing	~9x trailing (lower forward)
Price-to-Book (P/B)	~0.7x (below book value)	~1.3x (premium to book)	~0.8–0.9x (near book)
Dividend Yield	~8–12% (trailing ~11–13%)	~5–6%	~4–5%
Credit Focus	High agribusiness exposure (50%+ share)	Diversified retail & corporate, strong in consumer lending	Broad mix, with emphasis on retail and insurance
Government Ownership	Yes – ~50% (state-controlled)	No (fully private)	No (fully private)

Sources: Company reports and market data .

Valuation Takeaways: Banco do Brasil appears significantly undervalued relative to peers. Its P/E of ~4–5x and P/B ~0.7x are roughly half or less of Itaú’s multiples . In other words, despite similar (even higher, in 2024) ROE, BB’s market price implies a heavy discount. Bradesco’s valuation is also low after a tough 2023 (trading under book), but BB is even cheaper. This discount can be attributed to the market’s assessment of BB’s risk profile – i.e., concerns over government influence and agribusiness loan quality – as well as historically lower growth multiples for state entities.

However, if Banco do Brasil can navigate its challenges, there is potential for a valuation re-rating. An ROE near 18–20% is typically associated with higher P/B multiples (Itaú’s ~20% ROE is valued at ~1.3x book) – the gap suggests upside if confidence in BB improves. In fact, some analysts see BB as deeply undervalued: after strong 2024 results, analysts maintained “Buy” ratings noting the “compelling valuation below 1x book” for a bank with 21% ROE . Even with the Q1 2025 setback, the stock’s dividend-adjusted drop might be overdone, and long-term investors may find an attractive entry point.

Peer Performance: Itaú is considered the gold standard among Brazilian banks – it consistently delivers high ROE, stable asset quality, and has a premium valuation. Bradesco, on the other hand, struggled recently with higher defaults and restructuring, leading to a lower ROE (~10-15%) and a discounted valuation. By comparison, Banco do Brasil’s fundamentals (ex-agri) have been quite competitive – for example, BB’s cost of risk and efficiency were in line with peers before the agribusiness issue surfaced. Moreover, BB’s sheer size (often #1 or #2 by assets) means it benefits from economies of scale similar to Itaú. One peer difference: Itaú and Bradesco have larger fee income from areas like asset management and investment banking, whereas BB has more of its income from lending and government-related services. BB is expanding in those fee areas but is catching up.

In summary, Banco do Brasil offers value: a low valuation multiple, a high dividend yield, and solid core profitability. The key for investors is whether the bank can prove that its risk profile deserves a narrower gap relative to peers. If the agribusiness loan issue is a cyclical bump and not a structural flaw, BB’s earnings and dividends could make its current pricing look quite attractive in hindsight.

Currency and Macroeconomic Considerations

Investing in Banco do Brasil as a foreign investor entails exposure to Brazil’s currency and economic conditions, which can significantly impact returns:

• Currency Risk (BRL/USD): Although BDORY ADRs trade in U.S. dollars, they fully reflect the Brazilian real (BRL) exchange rate. If the real depreciates against the dollar, the ADR price will fall (all else equal), and dividends paid in BRL will convert to fewer USD. Conversely, a strengthening real boosts ADR value. It’s a common misconception that U.S.-traded ADRs avoid FX risk – in reality, ADRs carry the same currency risk as the underlying stock . Historically, the BRL has been volatile. In the last five years, it ranged roughly from ~R$3.8 per USD to over R$5.7 per USD. Political instability, commodity prices (Brazil is a commodity-exporting economy), and interest rate differentials all influence the real. For example, during 2020–2021, the real weakened significantly amid global uncertainty, which would have dampened USD returns for Brazilian stocks. More recently, high interest rates and improved trade balances saw the real stabilize in the ~R$5 range per USD. Investors in BDORY should be prepared for currency fluctuations, which can either erode or amplify local stock gains. One mitigant is that Banco do Brasil’s high dividend yield provides a cushion – even if the real softens, the yield in USD may remain competitive.
• Brazilian Interest Rates: Brazil’s interest rate cycle has direct and indirect effects on banks. Currently, Brazil’s benchmark Selic rate is elevated (in 2023 it peaked around 13.75%, and in early 2025 it was raised further to ~14% to combat inflation). High rates boost banks’ net interest income on float and certain loans, but they also curb credit demand and increase default risk. Banco do Brasil benefited from wider lending spreads in 2022–2023 when rates spiked, contributing to record profits . However, prolonged high rates started to bite into asset quality by 2024–25 as discussed. Looking forward, Brazil’s central bank signaled that inflation should fall toward target in 2025, potentially allowing rate cuts. Lower rates would likely reduce BB’s lending margins somewhat, but greatly improve credit growth and lower default rates – a net positive for long-term health. Additionally, lower domestic rates could weaken the real (as carry-trade appeal falls), so there is an interplay between the rate outlook and currency risk.
• Economic Exposure: Banco do Brasil’s fortunes are tied to Brazil’s economy. As a major bank, BB’s loan growth and default levels track overall GDP trends. Brazil’s economy in 2023–2024 showed moderate growth (around 2–3% GDP growth) with cooling inflation. Commodity exports (soy, oil, iron ore) bring in revenue that boosts corporate banking, while a growing middle class drives retail banking. That said, Brazil faces structural challenges – fiscal constraints, reforms, and global economic swings. Investors should monitor Brazilian macro indicators: e.g., if commodity prices fall sharply, rural loan demand and repayment could suffer; if unemployment rises, consumer credit quality might slip. On the positive side, Brazil’s large population and underpenetrated financial services in some areas offer a long runway for banking growth. Rising inclusion (bringing more people into the banking system) and credit expansion in a developing economy mean banks like BB have a tailwind if the economy stays on track.
• Political Environment: Policy decisions (tax reforms, banking regulations, etc.) and political stability affect investor confidence, the currency, and banks directly. For instance, any imposition of caps on interest spreads or higher taxes on banks would be risks to monitor. Conversely, pro-market reforms or infrastructure spending could benefit banks. Currently, President Lula’s administration is viewed as more interventionist than the previous one, but so far it has not drastically altered banking sector rules. Still, foreign investors should be mindful that election outcomes (the next presidential election is in 2026) could influence the regulatory and economic environment in which Banco do Brasil operates.

In essence, macroeconomic and FX factors are an integral part of investing in BB. The bank’s strong fundamentals can be overshadowed in the short term by a depreciating currency or recession, but conversely, an improving macro picture can significantly enhance returns. Long-term investors often accept this volatility as the price for higher yields and growth; one approach to mitigate risk is to hold a diversified portfolio or even hedge currency when appropriate. But for many, the high local yield and low valuation of BB already price in a degree of macro risk, making it a potentially rewarding bet if Brazil’s economy stays on a reasonably stable path.

Investing via the BDORY ADR

For international investors, BDORY (Banco do Brasil’s ADR) provides a convenient way to invest without direct access to Brazilian markets. Here are key points about the ADR and how to handle practical aspects:

• ADR Structure: BDORY is a Level I sponsored ADR that trades over-the-counter (OTC) in the U.S. One BDORY represents 1 common share of Banco do Brasil . The depositary bank (Bank of New York Mellon) holds the underlying shares and issues ADRs. Being 1:1 means the ADR price in USD should closely mirror BBAS3’s price in BRL, adjusted for the BRL/USD exchange rate. For example, if BBAS3 is trading at R$25 in São Paulo and the exchange rate is 5.0 BRL/USD, the ADR should trade around $5.00 (ignoring minor fees or arbitrage gaps).
• Liquidity and Trading: As an OTC security, BDORY doesn’t have the same liquidity as an NYSE/Nasdaq listing, but it is still reasonably liquid for individual investors. Recent data show daily volumes in the few hundred-thousand shares , which at ~$4 per share is around $1–2 million traded per day – usually sufficient for most retail trades, though large institutions might prefer buying the local shares directly. The ADR can be purchased through major brokerages; however, investors should use limit orders to account for potentially wider bid-ask spreads than very actively traded U.S. stocks.
• Dividends in USD: ADR holders are entitled to the same dividends as local shareholders, with the ADR bank handling currency conversion. When Banco do Brasil declares a dividend in BRL, the depositary receives the funds, converts them to USD (net of any taxes/fees), and distributes to ADR investors. One consideration: the depositary may charge a small fee (a few cents per share) for dividend processing. Also, due to the mix of regular dividends and JCP, ADR investors will see Brazilian withholding tax (15%) applied on the JCP portion. In practice, if BB pays, say, R$1.00 total (R$0.60 dividend + R$0.40 JCP), an ADR holder would get the USD equivalent of the full R$0.60 plus R$0.34 from JCP (after 15% tax), minus ADR fees. It’s a bit technical, but the bottom line is ADR investors typically receive around 85% of the gross declared amount in USD. Even after these taxes, BB’s dividend yield remains very high in global terms (e.g., ~10% yield gross might net ~8.5% after tax, still attractive). Dividends are usually paid quarterly and the ADR will have corresponding ex-dividend dates just like the local stock (these can be found via BDORY dividend announcements).
• Currency and Price Tracking: As discussed, the ADR price will fluctuate with the underlying stock price and FX rate. Investors can track BBAS3’s performance via financial news or the Banco do Brasil investor relations site, but note the time zone difference – the B3 exchange trades during Brazilian business hours (often overlapping with early U.S. hours). The ADR will trade in U.S. hours, potentially reflecting any overnight news or global market sentiment before São Paulo opens. Significant price gaps can sometimes occur if, for example, the real moves sharply after Brazilian markets close; arbitrage by market makers usually keeps ADR and local prices aligned.
• Corporate Actions: Banco do Brasil occasionally issues dividends in the form of “interest on capital” or may engage in share buybacks. As an ADR holder, these are handled for you by the depositary. Voting rights for ADR holders exist but are limited – the ADR bank will typically send voting materials if you wish to vote at shareholder meetings (rarely exercised by most retail ADR holders). There was a stock split in the past (the stock split 2:1 in 2019 , for instance). ADR holders got equivalent split shares. Overall, ADR holders should read any communications from the depositary (BNY Mellon) to stay informed on corporate actions.
• Alternative Investment Routes: For foreign investors with the capability, investing directly in BBAS3 on the Brazilian exchange is an option (requires a Brazilian brokerage account and registering with the Brazilian Central Bank/receita federal as a foreign investor). However, this is cumbersome for most. The ADR is the simpler route. Another alternative is buying Brazilian-focused ETFs or funds that include Banco do Brasil as part of a basket, though that dilutes the direct exposure. BDORY is straightforward and gives direct exposure with the convenience of U.S. dollar transactions.

Liquidity of BDORY is adequate and improving given increased foreign interest in Brazilian equities post-pandemic. It’s worth noting that Itaú and Bradesco have NYSE-listed ADRs (ITUB and BBD) with higher trading volumes. Banco do Brasil’s decision to maintain only an OTC ADR might limit some U.S. institutional ownership, but many global emerging market funds still buy BBAS3 or BDORY. For a long-term retail investor, BDORY provides a handy mechanism to reap BB’s dividends and potential appreciation, with the main extra risk factor being that currency conversion.

Conclusion: The BDORY ADR allows you to invest in Banco do Brasil conveniently from abroad, enjoying the same economic benefits (and risks) as holding the local stock. Just remain aware of the currency exposure and the minor nuances of ADR fees/taxes. If one believes in Banco do Brasil’s investment case, the ADR is an accessible vehicle to participate in its performance.

Conclusion: Balancing Income and Growth Potential

Banco do Brasil presents a compelling but nuanced case for long-term foreign investors. On one hand, it offers a rare combination of high dividend income and potential for capital appreciation. The bank is fundamentally profitable, with a huge franchise in a major emerging market. Its dividend yields north of 8% and low valuation multiples suggest significant upside if risks are managed. Long-term trends like Brazil’s financial deepening and economic growth could provide tailwinds, and the backing of the Brazilian state lends a measure of stability that pure private-sector banks lack.

On the other hand, investors must be comfortable with the idiosyncratic risks: chiefly, heavy exposure to agribusiness cycles, and the influence of a government shareholder which introduces policy risk. Recent events – a spike in farm loan defaults and new regulations denting earnings – highlight these risk factors . It underscores that investing in Banco do Brasil is not without volatility. The stock’s 25% drop after Q1 2025 results exemplifies market sensitivity to such surprises.

For an international investor seeking income and willing to endure some emerging-market volatility, Banco do Brasil could be a rewarding addition to a portfolio. The current low valuation and ~12% dividend yield (in USD terms) provide a margin of safety – investors are essentially paid generously to wait for a potential recovery in sentiment. Analysts and Brazilian market experts continue to see value in BB; many maintain that the bank’s fundamentals remain intact and that the sell-off was overdone .

Diversification is key – one should size the position considering currency risk and Brazil’s weight in their portfolio. Monitoring quarterly results, especially credit quality trends and any signs of political meddling, will be important. Positive developments to watch for would be a stabilization of rural defaults (a good harvest year in 2025 could help) , and any indication that the government will allow the bank to operate on a purely commercial basis. Additionally, if Brazil’s interest rates ease and economy grows, Banco do Brasil could see both earnings growth and a valuation uplift, a powerful combination for total returns.

In conclusion, Banco do Brasil offers a mix of high dividends and long-term growth potential, tempered by unique risks. It stands out among Brazilian banks for its yield and state-linked resilience, while trading at a significant discount. For investors who can look past short-term noise and are optimistic about Brazil’s trajectory, Banco do Brasil (via the BDORY ADR) can be an “easy Brazil investing” opportunity – delivering solid income and the possibility of substantial capital gains over the long run, as the bank continues to modernize and navigate its dual role as a profit-maker and policy vehicle. As always, thorough due diligence and a long-term outlook are advised, but the bank’s track record and market position make it a noteworthy candidate for those seeking exposure to Brazil’s banking sector.

Sources: Banco do Brasil Investor Relations; Company filings and presentations; Reuters and Rio Times news reports; Seeking Alpha analysis; PocketOption dividend study ; Bloomberg and market data on valuations.

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