KBRA Affirms Ratings for Bradesco Bank

KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for Coral Gables, Florida based Bradesco Bank (“Bradesco”) (“the bank”). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by a differentiated, niche-focused business model driving strong growth and accelerating profitability, highlighted by its improved performance in 2025 with ROA nearing 1.0%, relatively inline with the rated peer average, though on a risk-adjusted basis, Bradesco outperformed rated peers, reporting a RoRWA of 1.5% for 2025. The increase in earnings was fueled by balance sheet expansion, improved operating efficiency, and NIM expansion (+20 bps). Furthermore, Bradesco remains highly focused on growing its private banking and wealth management customer base, reporting a ~30% increase in AUC in 2025 to $4.5 billion, driving strong fee income growth of 17% year-over-year.

Bradesco’s capital position is viewed favorably by KBRA, reflective of the bank’s comparatively high capital ratios as well as its relationship with its parent that has demonstrated capital support in prior years. As a subsidiary of a prominent financial group in Latin America, the bank ’s critical presence in the US affords it access to capital from its parent, which is regarded as a key strength. The recent decline in risk-based capital ratios is primarily a result of the bank’s strategic utilization of capital received from its parent, for organic growth. While growth is expected to remain rather robust in the near term, capital ratios are projected to remain above peer averages over long term.

While the loan portfolio exhibits concentration risk particularly from 1-4 family loans in Florida, which account for over 50% of total loans as well as country-specific risks within the C&IB portfolio related to sovereign exposure and single name concentrations, these risks are viewed as partially mitigated by the bank’s relatively strong capital levels and its disciplined and proactive risk management framework strengthened through cycles. This is evidenced by consistently strong and stable asset quality metrics over multiple years, limited credit costs and the realization of net recoveries in each of the past five years. The bank’s asset quality is further evidenced by low criticized loans at 1.0% of total loans and NPA ratio of 0.2% at year-end 2025.

Bradesco’s differentiated operating model centered on deposit generation via its private banking, wealth management, and C&IB segments results in a comparatively higher reliance on more expensive funding sources. While KBRA acknowledges certain sovereign-related risks within the bank’s funding profile, Bradesco has demonstrated limited funding volatility, including during the high-profile bank failures of 2023, when deposit runoff remained minimal. Looking ahead, Bradesco aims to improve funding stability and reduce costs through the launch of its digital platform, Bradesco Principal, which targets affluent clients. However, we expect funding costs to remain elevated relative to peers, reflecting the bank’s strategic focus on high-net-worth and C&IB deposit gathering. This approach leads to a less granular and higher-cost funding base, with a notable reliance on brokered deposits, which accounted for ~ 20% of total deposits as of 4Q25. Although brokered deposits represent a higher-than-peer portion of funding, the Bank has managed this exposure prudently, with stable balances and minimal runoff, including during periods of industry stress. Most importantly, these funds are used strategically to extend wholesale liability duration and reduce balance sheet liquidity risk.

Rating Sensitivities

A sustained focus on a more balanced revenue mix with fee income tracking more in-line with higher-rated peers (on an average asset basis), coupled with improved funding profile with less reliance on volatile sources of funding, stable asset quality and continued management of above-average capital ratios, could result in positive momentum over time. On the contrary, a material deterioration in asset quality driven by localized economic pressures particularly given the concentration in the South Florida real estate market combined with a weaker funding profile impacting profitability and a shift toward more aggressive capital management that brings risk-based capital levels closer to or below peers, could result in rating pressure over time.

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Methodologies