The Q1 2026 earnings season put banks front and center. JPMorgan, Goldman Sachs, and Bank of America kicked off the U.S. calendar on April 14–15. In South Korea, KB, Shinhan, Hana, and Woori — the country's financial Big Four — are expected to report combined net income of 5.23 trillion won, a 6% year-over-year increase and the strongest Q1 in the sector's history. In Brazil, Itaú, Bradesco, and Santander will release their results by early May.
All of this information lands at once, and without a reading map it's easy to get lost in press releases dozens of pages long. The good news: four metrics cover most of what matters when analyzing any bank, regardless of country. They are NII, NIM, NPL, and ROE. Each one answers a different question about the business, and together they form a coherent picture of an institution's financial health.
NII — Net Interest Income: Where the Bank's Money Comes From
NII is net interest income: what the bank earns in interest on loans and securities, minus what it pays in interest on deposits and borrowings. It is the most important line in any bank's income statement because it represents the core of the business model — maturity transformation, taking in short-term money and lending it out long-term with a margin.
Formula:
NII = Interest Income − Interest Expense
If a bank lends R$ 1 billion at 18% per year and borrows R$ 800 million at 11% per year, gross interest income is R$ 180 million, interest expense is R$ 88 million, and NII is R$ 92 million. All else equal, the higher the NII, the greater the bank's capacity to absorb provisions, cover operating costs, and generate profit.
Q1 2026 example — JPMorgan:
JPMorgan reported strong Q1 2026 results — EPS of $5.94, well above the $5.45 estimate — but simultaneously revised its full-year NII guidance downward: from $104.5 billion to $103 billion. That $1.5 billion revision is the most revealing data point in the entire release. It means that despite a strong quarter, the bank expects its primary structural revenue source to generate less over 2026 than it previously projected. The market read this as a signal of margin compression in the American credit cycle — not a crisis, but a meaningful trajectory adjustment.
When reading NII in a Brazilian bank's ITR (quarterly filing, the equivalent of the U.S. 10-Q), look for the "Margem Financeira Bruta" line in the income statement. Some banks split NII with clients from NII from treasury operations — that distinction matters: client NII reflects lending and deposit activity; treasury NII is more volatile and depends on the bank's positioning in government bonds.
NIM — Net Interest Margin: How Much the Bank Earns Per Dollar Lent
NIM goes beyond NII in absolute terms: it normalizes net interest income by the size of the balance sheet, revealing the bank's efficiency in financial intermediation. Two banks with the same NII can have very different NIMs if one needed a balance sheet three times larger to generate that revenue.
Formula:
NIM = NII ÷ Average Earning Assets
If a bank generated NII of R$ 12 billion in the quarter with an average earning-asset portfolio of R$ 800 billion, the annualized NIM is approximately 6% (R$ 12B × 4 ÷ R$ 800B). Brazilian retail banks historically operate with NIMs between 6% and 10% — far above the 2%–3% typical of U.S. or European banks — a reflection of structurally wide spreads in Brazil, driven by elevated Selic rates and consumer credit risk.
How the Selic affects NIM:
Rate-cutting cycles compress NIM in the short term because assets in the loan portfolio reprice more slowly than funding liabilities. A bank that priced deposits at CDI yesterday recalibrates its cost automatically when the Selic falls; but fixed-rate loans made six months ago at 24% per year keep earning 24% until they mature. NIM compression during easing cycles is expected — what the market monitors is whether loan volume grows enough to compensate.
In Q1 2026 Brazil, with the Selic at 14.75% and on a downward trajectory, the central theme for Itaú, Bradesco, and Santander is exactly this: NIM under pressure at the margin, offset or not by loan book growth. The bank that reports loan growth above 8% with a stable NIM will be delivering what the market wants to see.
NPL — Non-Performing Loans: The Credit Risk Thermometer
NPL measures the share of the loan portfolio that is in default. The most common definition in Brazil uses a 90-day past-due criterion, but banks also report NPL at different buckets (15 days, 60 days, 90 days past due) — always compare the same time window when benchmarking.
Formula:
NPL Ratio = Delinquent Loans ÷ Total Loan Portfolio
If a bank has R$ 600 billion in total loans and R$ 18 billion more than 90 days past due, the NPL ratio is 3.0%. For context: Itaú closed 2025 with a 90-day-plus NPL ratio around 2.7% on its total portfolio — below peers thanks to its more conservative mix of collateralized credit (mortgage, payroll-deductible loans). Bradesco, in a restructuring phase, ran a higher NPL during 2023–2024 and has been bringing it down progressively.
Why NPL is a leading indicator:
NPL rises before provisions rise. When the delinquency ratio advances, the bank must provision more (PDD — provision for doubtful accounts), which compresses profit. That's why the current quarter's NPL predicts next quarter's provision expense. An analyst who detects NPL deterioration in March can anticipate earnings pressure in June — before the market prices it into the stock.
Brazil 2026 context:
With 81.7 million Brazilians carrying negative credit scores at the start of the year and R$ 539 billion in overdue debt according to Serasa Experian, sector-wide NPL is under structural pressure. This doesn't mean the large banks will see NPL explode — their portfolios are more selective — but it does mean Q1 2026 NPL readings need to come alongside an analysis of portfolio mix: whoever has more collateralized credit (payroll-deductible and mortgage) is more resilient; whoever has more unsecured personal credit and credit cards is more exposed.
ROE — Return on Equity: The Ultimate Measure of Value Creation
ROE measures how much profit the bank generated for each dollar of shareholder equity. It is the summary metric because it implicitly incorporates decisions around NII, NIM, cost control, risk management (NPL and provisions), and leverage. A bank with a high NIM but out-of-control costs will have a low ROE. A bank with elevated NPL will consume its equity through provisions and also report a compressed ROE.
Formula:
ROE = Net Income ÷ Average Shareholders' Equity
If Itaú generates R$ 13 billion in net income in the first half and operates with average equity of R$ 200 billion, the annualized first-half ROE is 13% (R$ 13B ÷ R$ 200B × 2). Itaú closed 2025 with an ROE of 23.4% — the highest among Brazil's large private banks. Bradesco climbed from 7% in 2023 to 15.2% in Q4 2025. Santander Brasil reached 17.6% in Q4 2025 with a stated target of exceeding 20%.
Goldman Sachs and trading-driven ROE:
Goldman Sachs doesn't grow ROE the same way JPMorgan or Brazilian retail banks do. In Q1 2026, Goldman posted record equities trading revenue — transactions with variable income instruments on behalf of institutional clients. When Goldman beats records in trading, two factors are typically at play: high client volumes (hedge funds and asset managers hedging in a volatile environment) and more favorable intermediation spreads. This result materially contributed to Goldman's ROE expansion in the quarter. It's a reminder that banks with greater capital markets exposure amplify ROE in high-volatility quarters — but that revenue source is more cyclical than retail NII.
For comparison purposes, the estimated cost of equity for large Brazilian banks is around 14–16%. An ROE above that threshold means the bank is creating value for shareholders; below it, destroying value. Bradesco in 2023 was below. Bradesco in 2025 crossed the line. That distinction is what moves stock prices over the medium term.
How to Compare the Four Metrics Side by Side
Reading each metric in isolation is useful; comparing them across banks is where learning accelerates. A practical way to structure the analysis:
| Metric | What it asks | Positive signal | Warning signal |
|---|---|---|---|
| NII | Is the bank growing its interest income? | Growth above inflation | Guidance revised downward |
| NIM | Is the bank efficient at intermediation? | Stable or expanding with growing volume | Compression without loan growth |
| NPL | Is portfolio quality deteriorating? | Stable or declining | Acceleration above 0.3 p.p. per quarter |
| ROE | Is the bank creating shareholder value? | Above cost of capital (~14–16% in Brazil) | Below cost of capital for more than two quarters |
When all four metrics point in the same direction — NII growing, NIM stable, NPL under control, ROE above cost of capital — the bank is in a virtuous cycle. The risk of a negative surprise is low. When there's divergence — say, high ROE with NPL accelerating — the market typically punishes with a lag: today's NPL becomes tomorrow's provision, and provisions compress ROE later. Identifying that divergence before it shows up in ROE is the work of the fundamental analyst.
Where to Find These Numbers in Brazilian Reports
Brazilian banks' quarterly filings (ITR) are submitted to the CVM and available on each bank's investor relations page. In addition to the formal ITR, all major banks publish an Earnings Press Release on the same day — a more accessible document with summary tables and management commentary.
In the Itaú, Bradesco, and Santander press releases, the four metrics appear on the first pages:
- NII appears as "Margem Financeira Bruta" or "Receita de Intermediação Financeira" in the income statement
- NIM is calculated and explicitly reported in the management analysis section, often broken down into client NIM and treasury NIM
- NPL appears as "Índice de Inadimplência" in the credit quality section, usually with tables comparing different past-due buckets and portfolios by segment
- ROE appears in the highlights section on the first page of the press release, showing both reported ROE and recurring ROE (adjusted for non-recurring items such as goodwill amortization and tax effects)
The earnings conference call — held on the same day or the next — is when executives comment on the numbers and the market asks questions. For these four metrics, what CFOs say about the trajectory of NIM over the coming quarters and about NPL trends in the highest-risk segments is typically more valuable than the quarter's numbers themselves.
Royal Binary is a managed trading platform founded by Sidnei Oliveira, a former Brazilian Air Force sergeant with over six years of experience in financial markets. This content is informational and does not constitute investment advice. For those following earnings seasons like this one and looking for a professionally managed approach to complementary allocation, see how we operate.
Past results do not guarantee future results. Consult a certified advisor before making financial decisions.