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Itau Beats Analysts’ Estimates on Rising Loan Margins

Itau Unibanco Holding SA (ITUB4), Latin America’s largest bank by market value, said earnings rose 37 percent, beating analysts’ estimates as profit margins on loans widened. The shares climbed as much as 3.6 percent.

Second-quarter recurring net income, which excludes one-time charges, increased to 4.97 billion reais ($2.2 billion) from 3.62 billion reais a year earlier, the Sao Paulo-based bank said today in a statement. That was more than the 4.62 billion-real estimate of 10 analysts surveyed by Bloomberg. Net income also advanced 37 percent, to 4.9 billion reais.

Itau, led by Chief Executive Officer Roberto Setubal, 59, is boosting profit margins by becoming more selective in making loans. Net interest income, or revenue from interest earned on assets compared to payments to depositors, climbed 23 percent to 7.7 billion reais in the second quarter from a year earlier, according to the statement.

“Itau’s earnings were very good and above all our expectations,” Pedro Galdi, chief analyst at brokerage SLW Corretora in Sao Paulo, said by phone today.

Itau advanced 2.3 percent to 36.27 reais at 1:39 p.m. in Sao Paulo, compared with a 0.2 percent decline for the Ibovespa benchmark index.

The bank delivered “extraordinary earnings growth” after it widened lending margins, boosted efficiency and kept delinquencies under control, XP Investimentos CCTVM SA said in a report to clients today.

Bad Loans

Provisions for bad loans dropped 9 percent to 4.47 billion reais in the second quarter from a year earlier, according to the statement. The delinquency rate for debt overdue more than 90 days declined to 3.4 percent from 4.2 percent.

Itau’s loan book expanded 9 percent to 543.8 billion reais in the second quarter from a year earlier. The expansion is slower than the bank’s February forecast for 2014 lending growth, which was a range of 10 percent to 13 percent.

The bank expects credit to expand faster in the second half of this year as the economy improves, said Marcelo Kopel, head of investor relations.

“Itau doesn’t plan to revise its 2014 guidance,” Kopel told reporters on a conference call today.

Banco Bradesco SA, Latin America’s second-biggest bank by market value, last week reported second-quarter earnings that beat analysts’ estimates. Adjusted net income rose 28 percent to 3.8 billion reais as lending margins widened, according to the bank’s earnings statement.

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

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

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