Itau Earnings Fall Less Than 1% as Bank Cuts Provisions

Itau Unibanco Holding SA, Latin America’s biggest lender by market value, said profit fell less than 1 percent after it set aside less money for bad loans.

Recurring net income, which excludes one-time charges, declined to 3.51 billion reais ($1.75 billion), or 78 centavos a share, from 3.54 billion reais, or 78 centavos, a year earlier, the Sao Paulo-based bank said today in a regulatory filing. The results exceeded the 77-centavo average estimate of 11 analysts surveyed by Bloomberg.

Itau, led by Chief Executive Officer Roberto Setubal, 58, said provisions for bad loans dropped as Brazil’s consumer delinquency rates fell to the lowest since November 2011. Itau’s loans overdue more than 90 days reached 4.5 percent in the first quarter, down from 4.8 percent in December and 5.1 percent a year earlier.

“Improvements in asset quality and provisions for bad loans should partially offset” weak loan growth and margin pressures, Banco Santander SA analysts including Boris Molina wrote in a report to clients April 19.

Itau declined 1.8 percent this year through yesterday, while Banco Bradesco SA, Latin America’s second-biggest lender by market value, lost 0.2 percent.

Itau said bad-loan provisions were 4.94 billion reais in the first quarter, down from 5.74 billion reais in the three previous months and 6.21 billion reais a year earlier, according to the earnings statement. The company’s book of loans expanded 9.2 percent to 456.2 billion reais from a year earlier. That compares with Itau’s forecast that credit will expand 11 percent to 14 percent this year. Total assets climbed almost 15 percent to 1.03 trillion reais.

The bank increased its growth forecast for insurance and service revenue to 15 percent to 18 percent from 11 percent to 14 percent in February.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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