Itau Profit Beats Analysts’ Estimates as Provisions Fal

Itau Unibanco Holding SA (ITUB4), Latin America’s largest lender by market value, said fourth-quarter profit rose 34 percent, surpassing analysts’ estimates, as it reduced loan-loss provisions.

Recurring net income, which excludes one-time charges, climbed to 4.68 billion reais ($1.92 billion), or 94 centavos a share, from 3.5 billion reais, or 70 centavos, a year earlier, the Sao Paulo-based bank said in a statement today. That compares with the 4.18 billion-real estimate of 10 analysts surveyed by Bloomberg.

Itau, led by Chief Executive Officer Roberto Setubal, 59, has reduced auto lending to focus on less-risky credit such as payroll loans and mortgages. The strategy paid off in the quarter with a 27 percent drop in provisions, to 4.19 billion reais. In 2013, Itau had provisions of 18.6 billion, below its estimates ranging from 19 billion reais to 22 billion reais.

Itau declined 4.6 percent this year, compared with a loss of 10 percent for Brazil’s Ibovespa benchmark index.

The lender posted return on equity, a measure of profitability, of 23.9 percent in the fourth quarter, up from 19.3 percent a year earlier, according to the statement. Itau expects provisions will be 13 billion reais to 15 billion reais this year, while lending will expand 10 percent to 13 percent.

Last week, Banco Bradesco SA (BBDC4), Latin America’s second-largest bank by market value, said fourth-quarter adjusted net income rose 10 percent to 3.2 billion reais from a year earlier as it reduced provisions.

Itau said last week it agreed to buy a controlling stake in Corpbanca for at least $2.2 billion to expand in Chile.

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

To contact the editor responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net

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