Banco do Brasil chose profitability over market share and nearly doubled profit by 2018

Brazil's recession and a wave of corporate defaults hit Banco do Brasil, the country's largest state-controlled lender, harder than its private rivals. Net income fell 44.2% in 2016 to R$8.034 billion from R$14.4 billion in 2015, loan-loss provisions reached R$27 billion, and adjusted return on equity dropped to 7.2% — less than half Itaú Unibanco's. Investors dumped the shares.

In May 2016 the government appointed Paulo Caffarelli as CEO. His diagnosis was blunt: the bank had chased market share and taken risk it could not price. He reversed the priority — profitability ahead of market share — cut costs, closed branches and deliberately shrank the loan book, guiding 2017 provisions down to R$20.5–23.5 billion. Investors rewarded the shift with a share rally, and Reuters reported the Caffarelli-led turnaround was winning them over.

The results validated the choice. Adjusted profit rose from R$7.17 billion in 2016 to R$11.1 billion in 2017, up 54%, and to R$13.5 billion in 2018, with reported profit of R$12.8 billion. The bank's ROE moved toward private-sector levels, and the stock that had been punished through 2015–16 became a market favorite.

Adjusted profit recovered from R$7.2B in 2016 to R$11.1B in 2017 (+54%) and R$13.5B in 2018; the bank's shares rallied as return on equity closed in on private peers.

Chasing market share had loaded the book with unprofitable credit risk.

R$27 billion of annual provisions made the loan book the biggest profit lever.

Cost cuts and branch consolidation flowed straight to the bottom line.

A shrinking book reduced future provisions faster than any other move.

For a bank under credit stress, deliberately shrinking the loan book, cutting costs and making profitability — not market share — the metric the market watches restores trust faster than growth.

Caffarelli left in early 2019 with profitability near private-sector levels. The strategy persisted: Banco do Brasil continued to prioritize returns over volume, posted double-digit-billion reais profits in the following years and expanded digital banking, cementing its place among Brazil's most profitable banks.