Brazil’s biggest government-owned bank expects to make less money this year. Banco do Brasil said Wednesday that it is lowering how much profit it thinks it will earn in 2025. It said the main reason was that many farmers who borrowed from the bank couldn’t pay the money back. The bank also said it costs more to get the money it needs to run its business. Banco do Brasil now thinks it will make between $3.33 billion and $3.89 billion this year. That’s much lower than it predicted before – between $3.89 billion and $4.63 billion. This news makes investors who own shares of the bank nervous.
Why Farmers Can’t Afford to Pay
Banco do Brasil has always been the bank to which farmers in Brazil turn when they need money. Borrowers take out cash to buy seeds, equipment, and pay workers, paying back the bank after selling their crops. But lately, something has gone wrong: more farmers than ever before aren’t paying back what they owe. The bank calls this the default rate, meaning the percentage of borrowers who stop making payments.
The default rate of farm loans was 5.34% in the three months to September, compared with 3.49% for the preceding three months. That number also surpasses the bank’s total default rate of all its loans, at 4.93%. When farmers don’t pay back loans, the bank loses money. It also makes investors nervous because they fear this issue might get worse.
The Current Financial Picture of the Bank
Despite the bad news about farmers not paying loans, the Bank of Brazil still made a profit in the most recent quarter. Between July and September, the bank made a profit of $701.35 million. That’s 60.2% less than what was made during the same month in 2024. However, it was a little more than what financial experts expected the bank would make.
The bank measures how well it’s doing with something called return on equity. This basically means how good the bank is at making money from the money investors put into it. This number went down to 8.4% compared to last year, when it was much higher. But it stayed the same as the previous three months, which means things aren’t getting worse right now; they are just not as good as they used to be. The bank is trying to stabilise and stop things from getting any worse.
What This Means Going Forward
Bank of Brasil also informed about another important statistic in its projections. Now, the bank expects to spend between $10.92 billion and $11.48 billion dealing with bad loans in 2025. This number went up from the earlier forecast of $9.91 billion and $10.36 billion. This is a huge jump. The money covers the loans that people do not pay back and the preparation for future issues.
The bank said it is taking swift actions to manage these challenges, being transparent with investors about the problems, and making certain changes to improve matters. Farming plays a very important role in the economy of Brazil, meaning that when farmers struggle, the entire economy takes a hit. Being a government-owned bank, Banco do Brasil has an added responsibility towards farmers to keep the agricultural sector healthy.
There needs to be a balancing act between supporting farmers and ensuring it is taking care of its financial health. Banco do Brasil cuts 2025 net income outlook as farmer defaults surge, showing even big government banks face serious challenges when their main customers can’t pay their bills.
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