Company Reports

No-moat-rated Itaú Unibanco reported solid first-quarter earnings that were largely in line with our expectations. The bank's operating revenue increased 7.8% from last year but fell 1.5% from last quarter to BRL 40.4 billion. Meanwhile, recurring managerial results increased 15.8% from last year to 9.8%, which translates to a return on equity of 21.9%. As we incorporate these results, we do plan to materially alter our $6.30 per ADR share fair value estimate, and we see the shares as roughly fairly valued.

The challenge for Itaú Unibanco will be to navigate a volatile Brazilian economy and uncertain political environment, which is still working through the impact of high inflation, which exceeded 12% in April 2022 and the high interest rates intended to fight it. That said, inflation has moderated, falling to 4.51% in January 2024, and the Brazilian central bank has begun to cut rates, reducing them to 11.25% in January 2024 from a high of 13.75%, creating prospects for a soft landing for the Brazilian economy. The bank will face margin headwinds from lower interest rates, but a healthier economy should lead to higher loan growth and reduced credit risk for the bank.

We are increasing our fair value estimate for Itau to $6.30 per ADR share from $5.90. Around $0.20 of the increase is from higher medium-term loan growth projections. Brazil will likely achieve a soft landing from the elevated inflation in 2022 and early 2023. Inflation has fallen into the medium to low-single digits, allowing the Brazilian central bank to begin cutting interest rates. Brazil's benchmark reduced to 11.25% from a high of 13.75% last year. With inflation remaining relatively tame in Brazil, further interest rate cuts are expected. The combination of falling interest rates and a surprisingly resilient labor market has raised prospects for better loan growth in Brazil, with Itau well-positioned to take advantage, particularly considering the poor performance of some of its peers.

The challenge for Itaú Unibanco will be to navigate a volatile Brazilian economy and uncertain political environment, which is still working through the impact of high inflation, which exceeded 12% in April 2022 and the high interest rates intended to fight it. That said, inflation has moderated, falling to 4.51% in January 2024, and the Brazilian central bank has begun to cut rates, reducing them to 11.25% in January 2024 from a high of 13.75%, creating prospects for a soft landing for the Brazilian economy. The bank will face margin headwinds from lower interest rates, but a healthier economy should lead to higher loan growth and reduced credit risk for the bank.

No-moat Itaú Unibanco reported solid third-quarter earnings that were largely in line with our expectations. The bank’s operating revenue increased 8.1% from last year and 1.8% from last quarter to BRL 39.5 billion. Meanwhile, recurring managerial results increased 11.9% year over year to BRL 9 million, which translates into a return on equity of 21.1%. As we incorporate these results, we do not plan to materially alter our $5.40 per-share fair value estimate and we see the shares as roughly fairly valued.

No-moat-rated Itaú Unibanco reported good second-quarter earnings despite a challenging economic climate in Brazil, though, as we had anticipated, loan growth has slowed. Itaú reported operating revenue of BRL 38.8 billion, 3.7% higher than last quarter and 10.1% higher than last year. Net income increased 13.9% from last year to BRL 8.7 billion, which translates to a return on equity of 20.9%.

The challenge for Itaú Unibanco will be to navigate a volatile Brazilian economy and uncertain political environment, which is still working through the impact of high inflation, which exceeded 12% in April 2022 and the high interest rates intended to fight it. While inflation has since moderated, falling to 3.2% in June, the Brazilian central bank has kept interest rates high at 13.75%. The bank benefits from the return of high rates, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and elevated credit losses for the bank. That said, with inflation now well below its peak and in the low single digits, the opportunity for the Brazilian Central bank to achieve a soft landing remains open.

No-moat-rated Itaú Unibanco reported solid first-quarter results. The bank continues to deliver strong loan growth and surprisingly resilient credit results, given high interest rates and rising unemployment in Brazil. Itaú reported operating revenue of BRL 37.4 billion, 13.4% higher than last year and 1.1% lower than last quarter. Net income increased 14.6% year over year and 10% from last quarter to BRL 8.4 billion, which translates to a return on equity of 20.7%. As we incorporate these results, we do not plan to materially alter our $4.90 per ADR share fair value estimate.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 12% in April 2022. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 13.75% by September 2022. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank. That said, inflation has shown significant improvement in recent months, falling back to the single digits, and the opportunity for the Brazilian Central bank to achieve a soft landing remains open.

No-moat-rated Itau Unibanco reported strong fourth-quarter results. The bank continues to see strong loan growth in its consumer lending products, and credit results remain resilient in the face of high interest rates in Brazil. The bank reported operating revenue of BRL 37.9 billion, 3.6% higher than last quarter and 13.2% higher than last year. Net income was up 7.1% from last year at BRL 7.7 billion, which translates to a return on equity of 19.3%, above the bank’s long-term average. As we incorporate these results, we do not plan to materially alter our $4.80 per ADR share fair value estimate for Itau Unibanco.

No-moat-rated Itau Unibanco reported solid third-quarter results as the bank saw good loan growth, particularly in its consumer lending products, and credit results that came in better than we had anticipated. The bank reported operating revenue of BRL 36.6 billion, 3.7% higher than last quarter and 16.1% higher than last year. Net income was 19.2% higher than last year at BRL 8.1 billion, which translates to a return on equity of 21%. As we incorporate these results, we are raising our fair value estimate for Itau Unibanco to $4.80 per ADR share from $4.60. Around $0.10 of the increase is from earnings and exchange rate movements since our last update while the other $0.10 is from higher loan growth projections.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 12% in April 2022. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 13.75% by September 2022. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank. That said, in the last remaining months of 2022 inflation has shown significant improvement, falling back into the single digits, and the opportunity for the Brazilian Central bank to achieve a soft landing remains open.

After a mildly disappointing first quarter, Itau Unibanco's second-quarter results surprised to the upside. Operating revenue rose 7% from last quarter (16% from last year) to BRL 35.2 billion, and net income rose 4% from last quarter (17% from last year) to BRL 7.7 billion. Commissions and fees also showed signs of life, growing 7% quarter over quarter (8% year over year). As we incorporate these results into our model, we expect to maintain our fair value estimate of $4.60 per ADR share.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 12% in April 2022. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 13.25% by June 2022. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 12% in April 2022. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 13.25% by June 2022. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank.

No-moat-rated Itau Unibanco's first-quarter results were a modest disappointment, as the bank showed a small sequential decline in operating revenue and a stagnant loan book, mostly due to weakness in its business outside Brazil. On the other hand, the bank showed strong cost management and is poised to benefit from rising interest rates in Brazil. Itau reported recurring net income of BRL 7.4 billion, 15% higher than the year-prior quarter, which translates to a return on equity of 20.4%. As we incorporate these results in our model, we are maintaining our fair value estimate of $5 per ADR share.

We are increasing our fair value estimate of no-moat Itaú to $5.00 from $4.30 per ADR share. The bulk of the increase comes from a stronger Brazilian real, with our model now using a 4.75 BRL/USD exchange rate as of April 7, 2022.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 10.5% in October 2021 and has remained in the double digits since. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 11.75% by March 2022. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank.

No-moat Itaú reported strong fourth-quarter results with the firm generating impressive loan and net interest income growth. This stood in notable contrast to its peer, Banco Bradesco, which had more difficulties in navigating Brazil’s rapidly changing economic environment during the fourth quarter. Recurring net income rose 32.9% year over year and 5.6% sequentially to BRL 7.16 billion. The bank’s revenue grew 14.6% year over year to BRL 33.44 billion. These results translated to a return on average equity of 20.2% for the fourth quarter. We expect to maintain our fair value estimate of $4.30 per ADR share.

The challenge for Itaú Unibanco will be to navigate an increasingly volatile Brazilian economy and uncertain political environment, which has been hit by the dual shocks of the pandemic and rapidly rising inflation, which exceeded 10.5% in October 2021. In response, the Brazilian central bank has rapidly increased interest rates, taking the SELIC rate from 2% at the start of 2021 to 7.75% by October. The bank benefits from rising interest rates, as Brazil's central bank attempts to fight inflation, but there is risk that economic fallout from rapidly increasing rates could lead to lower loan growth and higher credit losses for the bank.