Time to Short Banco do Brasil (BBAS3)? After Dividend Slash and Weak Earnings, Analyst Reveals What to Do with the Stock

• Banco do Brasil’s Q2 Disaster: What Went Wrong?
• Why Did BBAS3 Rally After Such a Bad Report?
• The Better Bank Bet: Itaú (ITUB4) Shines Where BB Fails
• Beyond Itaú: 9 Other Stocks to Watch
• FAQ: Your Burning BBAS3 Questions, Answered

Banco do Brasil (BBAS3) just dropped a bombshell with its Q2 2025 earnings report, and the market isn’t happy. Plummeting profits, slashed dividends, and rising agribusiness defaults have left investors questioning whether it’s time to bail. But here’s the twist—despite the dismal numbers, BBAS3 shares actually gained over 1% last Friday. Confused? Let’s break it down.

Banco do Brasil’s Q2 Disaster: What Went Wrong?

The numbers speak for themselves: net profit nosedived 60% year-over-year to R$3.7 billion, while return on equity (ROE) collapsed to just 8%, down 13 percentage points. The bank also axed its dividend payout ratio from 40-45% to a meager 30%, with no new payments announced. The culprit? Agribusiness defaults, which make up 30% of BB’s loan portfolio. CEO Tarciana Medeiros openly warned that the pain could continue into Q3, leaving analysts like Larissa Quaresma from Empiricus Research advising caution. "We’re staying neutral on BBAS3 for now," she says. "There’s just too much uncertainty."

Why Did BBAS3 Rally After Such a Bad Report?

Oddly enough, BBAS3 climbed 1% post-earnings. Quaresma attributes this to hope for a late-2025 turnaround—if commodity prices stabilize. "By Q4, we could see improvement, but only if farm input prices stop falling," she notes. Still, she warns against buying in yet: "We’d need a steeper discount to get bullish. That said, shorting is risky too—this stock reacts wildly to election news."

The Better Bank Bet: Itaú (ITUB4) Shines Where BB Fails

While BB flounders, Itaú (ITUB4) is firing on all cylinders. Its Q2 profit hit R$11.5 billion (up 23.3% YoY), and it’s delivering a juicy 7% dividend yield. Quaresma highlights Itaú’s "stellar execution" and hints at special dividends in early 2026. "It’s still cheap, and the upside is clear," she argues. Notably, ITUB4 is part of a handpicked "top 10 stocks to buy now" portfolio—but more on that later.

Beyond Itaú: 9 Other Stocks to Watch

Diversification is key, and Quaresma’s recommended portfolio spans sectors from commodities to utilities. While details are behind a registration wall, the takeaway is clear: BBAS3 isn’t the only game in town. "These picks combine quality and profit potential," she says, urging investors to explore all options.

FAQ: Your Burning BBAS3 Questions, Answered

Should I sell BBAS3 now?

Not necessarily. While fundamentals are weak, political shifts could spark rallies. Neutral is the play for now.

Is Itaú really a safer bet?

Yes—stronger earnings, reliable dividends, and less agribusiness exposure make ITUB4 a lower-risk bank stock.

When might BB recover?

Earliest hope is late 2025, but only if farm commodity prices rebound.