Brazilian bank stocks bore the brunt of a violent sell-off on Monday, with Banco Bradesco’s preferred ADRs surrendering as much as 29% as investors scrambled to unwind positions built on the assumption of a change of government in Brasília. The stock last traded at 2.68 EUR, down roughly 26% on the session.
The trigger was unmistakably political. Luiz Inácio Lula da Silva’s victory in Sunday’s presidential runoff caught the market wrong-footed — Reuters reported that investors had positioned for a win by Flávio Bolsonaro. The result set off historic losses across Brazilian equities and the real, and Bradesco’s depositary receipts were swept up in the broader rout. No fresh corporate announcement lay behind the move.
Fiscal Fears Compound the Repricing
What worries investors most, according to media reports, is the fiscal direction of the incoming Lula administration. The distinction matters: Monday’s plunge reflects a wholesale reassessment of Brazilian assets rather than anything specific to Bradesco’s operations. The bank was simply one of many Brazilian financial names under pressure, and its ADRs ranked among the hardest-hit bank papers.
Earnings Beat Overshadowed by Credit Concerns
The political turbulence has drowned out what was, on the face of it, a solid operating update. Bradesco reported recurring net income of R$7.11 billion for the third quarter of 2026 on Thursday, a 14.6% year-on-year increase that landed broadly in line with analyst estimates, per Reuters.
Yet the quality of that growth drew scrutiny. Credit-related income expanded at a weaker pace, and delinquency metrics moved in the wrong direction. Loans overdue by more than 90 days rose to 4.6%, up from 4.3% in the prior quarter. The bank pointed to working-capital lending to micro-enterprises and to small and mid-sized companies backed by state guarantees, along with its agricultural portfolio, as the drivers behind the deterioration.
Should investors sell immediately? Or is it worth buying Banco Bradesco?
Management offered little comfort on the outlook. CEO Marcelo Noronha said Friday that defaults and credit costs are likely to remain under pressure, with SME delinquencies possibly climbing further in the fourth quarter. The net interest margin, meanwhile, is expected to finish the year near the bottom of the guided range. Full-year forecasts were left unchanged.
Buyback Authorization Is Prospective, Not Completed
Friday also brought the renewal of a share repurchase program covering up to 106,584,881 shares, running from November 8, 2026 through May 8, 2028. The authorization is an enabling resolution, not a executed purchase — and its start date falls after Monday’s rout, meaning it offered no counterweight to the selling.
Separately, Bradesco had already wrapped up a R$10 billion capital increase on October 8, following approval from Brazil’s central bank. That transaction is complete and does not represent pending financing.
Two Forces, One Stock
For investors, the picture splits cleanly in two. The election outcome explains the immediate selling pressure across the Brazilian market, while the credit trend remains the company-specific test of the bank’s trajectory. Higher profits and a renewed buyback sit on one side of the ledger; rising arrears, margin pressure and an unsettled fiscal backdrop sit on the other — and the latter carried far more weight on Monday.
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