Brazil’s Itau Unibanco (ITUB4.SA), the largest private lender in Latin America, posted an impressive 18% growth in its third-quarter net recurring profit, reaching 10.68 billion reais ($1.84 billion) for the quarter ending in September. This surpassed the 10.4 billion reais forecast by analysts in a recent LSEG poll.
The robust earnings prompted Itau to raise its estimated credit portfolio growth for the year to a range of 9.5% to 12.5%, up from a previous projection of 6.5% to 9.5%. According to Itau, this increase reflects the bank’s successful restructuring of its personal credit segment, where it strategically reduced risk by focusing on lower-risk loans. Analysts expect that this shift, once finalized, will continue to drive portfolio growth in the coming quarters.
Credit Card Growth and Lower Delinquency Rates
The bank highlighted a notable rebound in its credit card portfolio, which grew 1.7% quarter-over-quarter. This growth was achieved by adjusting client criteria to minimize potential risks, resulting in a slightly lower 90-day delinquency rate of 2.6%, down from 2.7% in the previous quarter and below the 3% rate recorded a year prior.
Citi analysts commended Itau’s performance, citing the bank’s “solid” results and a clear advantage from its “ample capital position,” allowing it to expand selectively and profitably. Itau’s return on equity reached 22.7% in the quarter, compared to 21.1% a year earlier and 22.4% in the prior quarter, underscoring the bank’s profitability and efficient capital use.
Interest Income Growth and Lower Credit Costs
Itau recorded an 8.5% increase in net interest income year-on-year, its primary revenue source. Additionally, its cost of credit fell by 11% due to reduced loan loss provisions, further bolstering the bank’s bottom line.
The quarter also saw a notable 500 million real gain attributed to payments from a large client, rumored to be Brazilian retailer Americanas (AMER3.SA), which recently resumed payments to creditors following its bankruptcy proceedings.
A Promising Outlook for Itau Unibanco
With strong Q3 results, enhanced credit growth guidance, and a targeted approach to client selection, Itau Unibanco appears well-positioned to capitalize on growth opportunities in Brazil and Latin America. The bank’s strategic focus on balancing growth with risk management could continue to drive profitability and market share in the highly competitive Brazilian banking sector.
