Brazil’s Itaú exceeds projections and posts US$1.4 billion profit in Q4

RIO DE JANEIRO, BRAZIL – Itaú Unibanco (ITUB4) posted recurring net income of R$7.159 billion in the fourth quarter of 2021, a 32.9% jump from the same period in 2020, according to results released Thursday evening. There was 5.6% growth in relation to the third quarter.

Gains exceeded the consensus of market projections, which pointed to R$6.696 billion. Santander (SANB11) and Bradesco (BBDC4) in recent days announced profits that fell short of estimates, which led to a drop in their respective shares.

In the year-to-date, Itaú’s preferred shares have accumulated an appreciation of almost 20%.

In 2021, Brazil’s largest private bank posted a 45% increase in profits compared to the previous year, to R$26.879 billion.

The recurring return on average annualized equity (ROE) was 20.2% in the fourth quarter, compared to 16.1% a year earlier. In the third quarter it stood at 19.7%.

Itaú Unibanco’s CEO Milton Maluhy Filho said in a statement that the institution is ready to resume growth this year despite adverse economic conditions.

“We expect to expand our loan portfolio in a sustainable way and resume recurring results at levels higher than before the pandemic,” the executive said. “Our outlook for 2022 considers maintaining the recovery path and the good results we achieved last year.”

In Brazil, Itaú’s projection is to increase its loan portfolio between 11.5% and 14.5% in 2022.

Maluhy also said that the conglomerate began the year with “important advances” in its cultural and digital transformation, which were reflected in the fourth quarter results.

LOAN PORTFOLIO AND DEFAULTS

The bank experienced a strong boost from its banking product, rising from R$114.785 billion in 2020 to R$125.601 billion last year. The figure is the sum of the bank’s margins and revenues from other products and services.

Itaú’s credit portfolio reached R$1.027 trillion by the end of last year, an 18.1% increase compared to the same period in 2020. In relation to the third quarter, growth reached 6.7%.

With the increase in the bank’s credit operations, the financial margin with clients also rose: it totaled R$19.906 billion, up 24.3% in one year and 13.2% compared to the third quarter.

In total, Itaú’s net interest margin increased 20.6% between the fourth quarter of 2020 and the same period last year, to R$21.205 billion.

On the other hand, the cost of credit, which reflects Itaú’s expenses with provisions for defaults, among other factors, rose 2.8% in one year, to R$6.2 billion. Expenses with provisions alone totaled R$6.827 billion, up 21% in one year and 23.5% in one quarter.

Default over 90 days fell 0.1 percentage points (p.p.) between the third and the fourth quarter, to 2.5%, but rose 0.2 p.p. in one year. Considering the Brazilian operation alone, the default rate stood at 2.8%, stable in relation to September, but up 0.1 percentage points in one year. The default rate for individuals in Brazil rose from 3.6% to 3.8% in the quarterly comparison.

One of the highlights was the growth of Iti, Itaú’s free account digital bank, which reached 14.6 million clients, of which over 66% are under 35 years old. In the fourth quarter, Iti gained 4.7 million clients, 86% of whom had no previous relationship with Itaú Unibanco.

It is a segment in which Itaú clashes with new banks such as Nubank (NUBR33), Inter (BIDI11, BIDI4) and C6 Bank, and other more traditional players such as Pan Bank (BPAN4).

Itaú’s CFO Alexsandro Broedel said that the bank is succeeding in expanding customer satisfaction thanks to its investment in the digital model while also achieving financial results. “We emerge from this period strengthened and very well positioned to maintain our growth path in 2022.”