Itau climbed 3.4 percent to 34.52 reais, the highest level since March 2012, at 11:14 a.m. in Sao Paulo. The 73-company Ibovespa index dropped 0.8 percent.
“The bank’s earnings momentum continued to improve,” Deutsche Bank AG analysts including Mario Pierry wrote in a report to clients today. “Overall results look solid.”
Recurring net income, which excludes one-time items, increased to 4.02 billion reais ($1.85 billion), or 81 centavos a share, from 3.41 billion reais, or 69 centavos, a year earlier, the Sao Paulo-based lender said in a statement today. That compares with the 3.9 billion-real estimate of nine analysts surveyed by Bloomberg.
Chief Executive Officer Roberto Setubal, 59, shifted toward less risky mortgage and payroll loans and away from auto finance after default rates on consumer loans in Brazil reached a record 8.18 percent in May 2012. Provisions dropped 26 percent in the third quarter from a year earlier.
“Privately owned banks in Brazil such as Itau and Bradesco are more selective in giving credit,” Pedro Galdi, head strategist at Sao Paulo-based brokerage SLW Corretora, said in a telephone interview last week. Banco Bradesco SA (BBDC4), the nation’s second-biggest bank by market value, reported record earnings on Oct. 21.
Itau posted provisions of 4.54 billion reais in the third quarter, down from 4.91 billion reais in the second quarter, and 6.12 billion reais a year earlier, according to the statement. The lender estimated provisions will range from 19 billion reais to 22 billion reais in 2013.
Loans overdue more than 90 days declined for a fifth straight quarter to 3.9 percent, compared with 4.2 percent in the previous three months and 5.1 percent a year earlier. The portfolio of loans rose 10 percent to 481 billion reais from a year earlier.