As I had commented, BBAS3 charges proportionally less for loan losses than BBDC3 and ITUB3 does. Also, note that BBAS3 is paying more taxes than the other two.
So, given that taxes payments are too variable and that allowance for loan losses, besides being variable too, has some kind of subjectivity in it, I think it's more appropriated to compare Operating income + Allowance for loan losses. That way we can see how much each bank earns for each BRL loaned, not taking into account allowance for loan losses and tax payment.
From the table above it's easy to see that BBDC3 and ITUB3 earn 6.1% of each BRL loaned, while BBAS3 can earn just 5.1%. That is, BBDC3 and ITUB3 are able to earn 20% than BBAS3.
And why is that? Mainly because BBAS3 can't charge as much as BBDC3 and ITUB3 does, for each BRL loaned, as we can see in the ratio Income from financial intermediation / Portfolio. And that's my friend, is brand power, or moat, that Buffett talks about.
6 comments:
The credit portfolios are different from bank to bank. BBAS has more consigned, more agricultural credit than ITAU and BBDC. ITAU is the leader in auto loans, wich is riskier I think. The cause for the difference may be the composition.
Another cause may be the efficiency. Did you compare that measure for the three banks? Operational expenses / revenues?
Valor: Bancos Médios
Itaú aposta alto em eficiência e descarta disputa por Losango
Bradesco abre 1.003 agências para compensar Banco Postal
Bradesco has the financial discipline that BBAS hasn't. They didn't buy Banco Postal because the price was prohibitive.
R$ 154 bilhões em atraso
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