Profit of the main federal state-owned companies falls 24% in 2023 – 03/31/2024 – Market

The main federal state-owned companies —Petrobras, Banco do Brasil, BNDES, Caixa Econômica Federal and Correios— recorded a combined net profit of R$182 billion in 2023, which represents a drop of 24% compared to a year before.

The performance in the first year of the Lula (PT) government is mainly explained by the retraction in Petrobras’ results, which saw its profit fall 33% compared to 2022 (to R$124.6 billion). There was also a drop in BNDES, with a 5% lower result last year (to R$ 11.9 billion).

On the other hand, Banco do Brasil and Caixa recorded better results in 2023. In the first case, there was an expansion of 11.3% (to R$35.5 billion). In the second, 15.5% (to R$ 10.6 billion).

The explanation for the results of state-owned companies, which pass on part of their profits to the National Treasury through dividends, varies. In the case of Petrobras, the company’s management says that there was a devaluation of oil on the international market. The Brent barrel fell by 18% in 2023 compared to 2022.

The company says that its results were impacted by lower margins on the sale of derivatives and higher operating expenses. The decline in profits follows that of the world’s largest oil companies, which also recorded a decline in earnings.

At BNDES, management states that the basis for comparison with 2022 was harmed by the sale of shares that year — which was not repeated in 2023.

The BNDES sought to dispose of shares in different companies, such as Petrobras and Vale, during the administration of Jair Bolsonaro (PL) — an orientation contrary to that of the Lula government, which has already signaled that it wants to expand the bank’s presence as a partner in companies.

BNDES’s financial director, Alexandre Abreu, says that the current management preferred not to sell shares as they did not consider the time to be appropriate. According to him, this benefited the institution.

“The fact that we didn’t do [a venda] it made the shares appreciate in value, and we had advantages in holding them. If we had sold it, we would have lost it,” he states.

According to him, the bank’s current management also had to deal with a smaller cash flow due to the early returns of resources to the National Treasury — which, in 2022 alone, exceeded R$70 billion. “At the beginning of this administration there was a cash problem, which fell from R$90 billion at the beginning of 2022 to R$16 billion at the beginning of 2023, when we took over”, he states.

In previous administrations, the BNDES had committed to returning, by 2023, R$440 billion in resources transferred by the Treasury between 2008 and 2014. Last year, however, the institution signed an agreement with the TCU (Tribunal de Contas da União ) to postpone the rest of the payments and divide the remaining R$22.6 billion into installments until 2030.

Regarding the next years, the BNDES board stated that it is still early to forecast results. But it plans to increase the level of disbursements from the current 1.1% of GDP (Gross Domestic Product) to 2% in 2026, with security and up-to-date financial health indicators.

At Banco do Brasil, there was an improvement in results. Directors attribute performance to different factors, such as growth in revenue from service provision — for example, in consortiums, insurance and credit and guarantee operations.

The main financier of national agribusiness, the bank monitors the performance of the harvest amid the climate effects that have hit the country this year. The assessment, however, is that only specific crops in defined regions have been affected so far — which minimizes potential impacts on the portfolio.

The bank says that, in contracts for the current harvest, more than 50% of volumes are covered by risk mitigators. It also states that the portfolio linked to agribusiness is solid and has low numbers of defaults.

At Caixa, the vice-president of finance, Marcos Brasiliano Rosa, highlights among the main factors for 2023 performance the improvement in the financial margin, with more revenue from credit operations, and the control of default. According to him, the natural tendency is for the recovery of financial margin to continue this year.

The vice president also says that the Lula government and the new products from the current administration generate new business for the bank. One example is the “Pé De Meia” program, a type of savings account for low-income students attending high school.

“Caixa does this as the executor of the program and, obviously, receiving fees for this, and in all of them considering the issue of sustainability and profitability. Caixa ends up working a little more and earning a little more on this type of service. “

He also mentions Minha Casa, Minha Vida, which had some of its lines extinguished during the Bolsonaro government and which will now be operational again — such as track 1 of the housing program, aimed at low-income families.

Caixa says that 2024 should be even better due to different factors, such as the fall in interest rates. “This creates a slightly more auspicious environment and a market with a little more tranquility”, says Brasiliano.

At Correios, there was a 22% lower loss (to R$596 million). The result stems from a retraction in expenses and an improvement in the financial result, mainly due to fewer exchange rate variations

The results of state-owned companies are recorded while analysts closely observe the Lula government’s actions regarding companies. Among Petrobras investors, for example, there is concern that actions by the new management will affect the company’s performance.

A complicating factor is the fact that, since last year, state-owned companies have been more exposed to political appointments with the suspension of the section of the State-Owned Companies Law that made the selection process for director and director positions more rigorous.

Elena Landau, economist at PUC-Rio, sees risks of the federal government interfering more in state-owned companies, as in the case of Petrobras. “When you change the State Law, you can make non-technical appointments of allies and distribute positions,” she says.

“The sale of refineries has already started to have problems since the Bolsonaro government, which also wanted to intervene in the price of fuel, and this scares potential buyers”, she says.

“The political intervention in Petrobras also leads to the mistake of the government using the company again to build ships and support the shipping industry, which Brazil has already tried to do several times”, he states. “This sum of things hinders the entire operation of state-owned companies,” he says.

Economist Joelson Sampaio, from FGV (Fundação Getúlio Vargas), states that respect for the Law on State-Owned Companies guarantees the protection of the board in appointments and in other moments involving the company’s operation. He recalls that the financial health of public companies yields dividends for the Union (in 2024, the Treasury expects to receive R$43.6 billion from the total number of state-owned companies).

“When the state company is well managed, it has a surplus and generates positive results for the government and the population”, he says.