Banco Bradesco delivered its tenth consecutive quarter of expanding recurring net income, with 2Q26 recurring net income of R$7.05 billion climbing 16.2% year-over-year and 3.5% sequentially, the kind of measured, step-wise improvement that Brazilian retail banks have managed to grind out through one of the highest policy-rate regimes in two decades. The story this quarter is Selic at 14.25%, the Brazilian Central Bank's base interest rate that anchors the entire credit, funding, and treasury arithmetic for the country's financial system, holding the policy rate at this restrictive level for long enough to push Client NII to a fresh R$20.2 billion and gross NIM to 9.1%, even as Bradesco's transformation agenda continues to compress the operating efficiency ratio to 46.5%, a 340-basis-point improvement year-over-year. Consolidated recurring net income of R$7.05 billion in 2Q26, against R$6.81 billion in 1Q26 and R$6.07 billion in 2Q25, and total revenue of R$37.6 billion (+2.1% quarter-over-quarter, +10.3% year-over-year), tell the same underlying story: a large, diversified Brazilian universal bank converting the combination of a flat-to-falling curve, an expanded collateralized loan book of R$1.137 trillion, and a still-tight efficiency program into a third consecutive double-digit earnings expansion.
The numbers matter, but so does the cadence. Bradesco is no longer the laggard of Brazilian private banking. ROAE expanded to 16.2% in 2Q26 from 14.6% a year earlier, and the Basel total ratio reached 15.5% with Tier 1 at 12.8% and Common Equity Tier 1 (CET1) at 11.3% even after R$4 billion of interest on capital paid out during the quarter. The picture is of a bank that is generating enough recurring earnings to fund its capital position comfortably above the 11.1% management target, while still leaving room to lend into a Brazilian credit cycle that is finally growing again in real terms after years of negative or flat growth. The loan book, the fee book, and the insurance book are all contributing. Insurance Group recurring net income of R$2.9 billion in 2Q26 was up 28.3% year-over-year; fee and commission income held at R$10.5 billion, only modestly below 1Q26, with a 1.7% year-over-year gain. The investment-led segments are doing the heavy lifting while the interest-rate-sensitive consumer book stays disciplined. The mix of revenues is becoming structurally more durable.
The setup into 2H26 is unusual for a Brazilian bank. Selic at 14.25% today, with consensus year-end targets of 13.75% for 2026 and 11.00% for 2027, implies a slow, well-telegraphed rate-cutting cycle that historically allows Brazilian banks to defend NIM even as funding costs fall, because loan repricing typically lags deposit repricing in this market. Loan growth of 11.6% year-over-year, fee growth in mid-single digits, and an insurance book compounding at 14%-plus all year are the earnings pillars that have to absorb a slight uptick in 90-day NPL to 4.3% and a flat cost of risk. The market is paying R$2.96 per BBDO ADR for an enterprise that is now generating book net income of R$12.5 billion for 1H26 (up 1.8% year-over-year) on R$2.47 trillion of assets and R$181.3 billion of equity. The Brazil premium is real, but the margin trajectory and the cushion on capital argue that the franchise is earning its way out of it.