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Itau Unibanco Holding SA ADR ITUB

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Itau Unibanco Reports Middling Q2 Results as Inflation Remains a Major Concern

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

No-moat-rated Itau Unibanco posted middling second-quarter results, with recurring net income of BRL 6.5 billion up 2.3% quarter over quarter and 55.6% year over year. Second-quarter results equate to an annualized return on average equity of 18.9%. Inflationary pressures in the Brazilian economy continue to be a concern for our Brazilian bank coverage. Monthly inflation readings have risen sharply in the past few months from a 4.5% annualized level in January 2021 to 8.3% in June 2021. The current levels are worrying, especially given the fact that Brazil has not completely recovered from the pandemic. Brazil’s central bank has raised the benchmark Selic interest rate to 4.25% from 2.00% in July 2021 to curb the inflationary pressures in the economy. We expect that Brazil’s central bank will continue its contractionary monetary policy as the risk of inflation getting out of hand cannot be ignored. 

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Company Profile

Business Description

Itau Unibanco is the largest privately held bank in Brazil, the result of the 2008 merger between Banco Itau and Unibanco. In addition to Brazil, the bank has significant operations in Chile, Colombia, Argentina, Uruguay, and Paraguay. Its commercial and consumer loans account for 33% and 41% of the bank's total loans, respectively, while foreign loans now account for 26% of the bank's portfolio. In addition to banking, Itau operates the fourth- largest insurer in Brazil; it specializes in consumer-related insurance.

Praca Alfredo Egydio de Souza Aranha, 6th Floor, 100-Torre Conceicao
Sao Paulo, SP, 4344902, Brazil
T +55 1127943547
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 98,250