BRBI — Q2 2026 Financial Report Analysis

BR Partners, a São Paulo investment bank whose units trade in Brazil as BRBI11 and whose ADSs trade in the US as BRBI, earned R$35.1 million in the second quarter of 2026, down 22.4% from R$45.2 million a year earlier, on total revenues of R$130.1 million (down 6.6%). The fall was not caused by a lack of client work: fees from deal advisory and debt underwriting rose almost 10%. Profit fell because the money the firm earns on its own capital and from client trading dropped sharply, while personnel and administrative costs rose about 40%.

At a glance

• Fee revenue rose 10.5% to R$85.9 million. Advisory and capital markets fees were R$81.1 million (+9.8%), so the client business grew even in a quarter the company calls volatile.
• Profit before tax fell 34.6% to R$41.8 million. Personnel expenses rose 43.9% and administrative expenses 39.8% while revenue shrank, which squeezed the pre-tax margin from 45.8% to 32.1%.
• Net income fell less than pre-tax profit (−22.4%) because the effective tax rate dropped from 29.2% to 16.0%. Without that lower tax bill, the decline in net income would have been much larger.

How BR Partners makes money

BR Partners is not a high-street bank. It makes almost no consumer loans: its loan book was only R$180.6 million at June 30, 2026, against R$18.5 billion of total assets. It earns money in four ways, which the company reports as separate lines of business (note 13 of the filing):

1. Investment Banking and Capital Markets. Fees for advising on mergers, acquisitions and restructurings, and for arranging bond issues such as debentures and real-estate receivables (CRIs).
2. Treasury Sales & Structuring. Selling derivatives and foreign-exchange hedges to corporate clients and earning a spread on them.
3. Investments and Wealth Management. Fees for managing money for wealthy families and funds.
4. Capital Remuneration. What the firm earns by investing its own equity, mostly in Brazilian government bonds. With Brazil's policy interest rate (the Selic) above 14%, this is a large line.

Most of the R$18.5 billion balance sheet is Brazilian government bonds (R$13.1 billion) financed with short-term repurchase agreements (R$11.8 billion). In a repurchase agreement, or "repo", the bank borrows money overnight and pledges the bonds as collateral. This is why the gross interest figures in the income statement are huge (R$2.1 billion of interest revenue in the quarter) even though the net amount the bank keeps is only R$44.2 million.

Second-quarter 2026 results

EPS falls by exactly the same 22.4% as net income because the share count did not change (314,987 thousand shares in both periods, with no dilutive instruments). The rounded figures in the table, R$0.11 and R$0.14, look like a bigger drop only because of rounding. Each US ADS represents 4 units, and each unit holds 3 shares, so one ADS carries 12 shares' worth of earnings. The return on equity (net income as a percentage of shareholders' money in the business) comes from management's comments in the filing; the filing does not give a figure for the year-earlier quarter.

For the first half of 2026, revenues were nearly flat at R$264.9 million (−0.7%), while net income fell 17.6% to R$72.8 million.

Revenue by business line

• Advisory and capital markets carried the quarter. Management says the advisory team announced 7 transactions (M&A and restructurings) and the capital markets team structured 15 debt operations totaling R$1.9 billion. It also says high interest rates "began to influence the dynamics of new debt issuances," which is a caution for the second half.
• Treasury Sales & Structuring fell 22.4%. Management cites slower corporate debt issuance in Brazil than a year ago and higher market volatility linked to the Middle East conflict, which "resulted in natural fluctuations in revenue generation." Client derivatives and FX volume was R$3.6 billion.
• Wealth management grew 23.9% from a small base. Client assets were R$6.2 billion at the end of June.
• Capital Remuneration fell R$12.0 million, or 31.9%. This was the single biggest reason total revenue declined. The filing does not explain the drop. Two facts in the filing fit with it, though neither is stated as the cause: the central bank cut the Selic rate to 14.25% by quarter-end, and the bank paid more on its own long-term funding (interest on subordinated bonds was R$55.8 million in the first half, up from R$48.7 million).

What the headline numbers hide

• The year-ago quarter included a one-off charge, so the underlying decline is worse than it looks. Q2 2025 included an R$10.9 million impairment charge (a write-down for expected credit losses). This quarter's charge was only R$1.4 million. Without impairments in both years, profit before tax fell 42.3% (R$43.2 million vs R$74.8 million), compared with the reported 34.6%.
• Costs are the real story. Leaving out impairments, operating expenses rose 34.8% to R$86.9 million while revenue fell. Personnel plus administrative costs took 59.9% of revenue, up from 39.3% a year ago. Outsourced services, a line inside administrative expenses, roughly doubled to R$12.1 million in the quarter (from R$5.9 million) and to R$38.2 million for the half (from R$19.8 million). The filing does not say what these outsourced services were.
• A lower tax rate softened the drop in net income. The effective tax rate was 16.0%, down from 29.2%. The filing's tax reconciliation credits most of the gap to "other" items: subsidiaries taxed on presumed profit and the financial institution's different tax rate. That adjustment rose to R$7.0 million in the quarter from R$2.3 million. Had the year-ago tax rate applied, net income would have been about R$29.6 million rather than R$35.1 million (our calculation).
• Cash flow says little here. For a bank, operating cash flow swings with the balance sheet, not with profit. First-half operating cash flow was R$99.8 million against net income of R$72.8 million, but it was driven by a R$1.84 billion increase in repo funding and a R$1.70 billion increase in bond holdings. It does not show earnings quality either way.
• Receivables grew faster than fees. Services receivable rose 26.6% since December to R$165.3 million, while first-half fee revenue grew 9.1% year on year. Neither figure is alarming in isolation. It is worth watching that the fees booked this half turn into cash.
• Credit and capital. One credit instrument of about R$18.2 million is classified as credit-impaired ("Stage 3"). A separate R$14.8 million asset was written off, but it had already been fully provisioned, so the write-off did not reduce profit. The bank subsidiary's Basel ratio, a measure of capital relative to risk, slipped to 21.6% from 22.6%, against a regulatory minimum of 10.5%. Client deposits fell 33.2% to R$1.09 billion. Repos, not deposits, are the main funding source.
• Mark-to-market losses outside the income statement. Unrealized fair-value losses on bonds held as "available for sale" (assets at fair value through other comprehensive income) cut first-half comprehensive income to R$64.3 million, below net income of R$72.8 million.

Takeaway: BR Partners' client franchise grew this quarter, with fee revenue up 10.5%. Profit fell because the firm's return on its own capital dropped by a third while its cost base rose about 40%. A lower tax rate hid part of that squeeze in the net income figure.

Compared with the first quarter

Working from the first-half and second-quarter figures, Q1 2026 revenue was R$134.8 million and net income R$37.7 million. That means Q2 revenue was 3.5% lower and net income 7.0% lower quarter on quarter. The pre-tax margin was steady at about 32%. The sharp year-on-year deterioration therefore looks like a new, lower cost-adjusted level of profitability that has held for two quarters, rather than a single bad quarter.

Dividends and capital

The board declared a Q2 interim dividend of R$18.9 million (R$0.06 per share, R$0.18 per unit), paid on August 28, 2026. That is about 54% of the quarter's profit, well above the 25% minimum in the company's bylaws. On September 9, 2026, the board approved a R$30 million capital injection into the bank subsidiary, subject to Central Bank of Brazil approval, "to strengthen Banco BR Partners' capital structure and support the development of its activities." Shareholders' equity was R$809.8 million at June 30.

Outlook

The filing gives no financial guidance. Management's own comments point to two things to watch in the second half:

• Debt issuance activity. Management says high interest rates have started to weigh on new corporate debt issuance. Capital markets fees are the biggest part of the advisory line, so a slowdown there would remove the one source of growth this quarter.
• Costs vs revenue. With the expense base around 40% higher than a year ago, BR Partners needs either more deals or a recovery in treasury and capital income to get its pre-tax margin back toward the mid-40s. Two quarters at about 32% suggest the higher cost base is not temporary.

Our view: the client business looks healthy, but earnings now depend more on deal volume than a year ago. Further Selic cuts would lower the return on the firm's own capital. The Q3 2026 interim report is due in early November, based on last year's 6-K timing. The September capital injection points to plans to grow the balance sheet, which would also mean more capital tied up in it.