Itau Fourth-Quarter Profit Increases 10% as Bank Cuts Jobs

Itau Unibanco Holding SA, Brazil’s biggest lender, said fourth-quarter profit rose 10 percent as job cuts helped curtail expenses.

Adjusted net income, which excludes one-time charges, advanced to 3.75 billion reais ($2.17 billion), or 83 centavos a share, from 3.4 billion reais, or 75 centavos, a year earlier, the Sao Paulo-based bank said today in a regulatory filing. That matched the average estimate for adjusted profit in a Bloomberg survey of eight analysts.

Chief Executive Officer Roberto Setubal cut personnel expenses 4.7 percent in the fourth quarter from the previous three-month period as total employees declined by 1,427 to 104,542. Loans expanded 19 percent from the fourth quarter of 2010 to 397 billion reais, compared with 23 percent growth in the third quarter and 21 percent a year earlier.

“Itau’s efficiency-improvement initiatives are likely to provide it with greater capabilities to support return on equity,” Roberto Attuch and Fabio Zagatti, analysts at Barclays Plc in Sao Paulo, wrote in a research note today. “Itau did manage to tightly control expenses throughout 2011.”

Itau said it’s offering as much as 11.8 billion reais to buy out the minority shareholders of Redecard SA, Brazil’s second biggest card-payment processor, less than five years after Redecard and its shareholders, including Itau, raised 4.07 billion reais in an initial public offering.

Default rate

The average default rate for payments at least 90 days overdue climbed to 4.9 percent at the end of December from 4.7 percent in the third quarter and 4.2 percent a year earlier, Itau said. Total assets increased 13 percent to 851.3 billion reais, the company said.

Itau’s default rate may rise to 5 percent by mid-year before declining, Setubal told reporters today in Sao Paulo. Interest-rate cuts will accelerate Brazil’s economic growth this year, helping to reduce defaults, he said.

Brazil’s economy expanded at the fastest pace in 19 months in November. The central bank said this month its adjusted economic activity index, a proxy for gross domestic product, rose 1.15 percent in November from October, reversing a three-month contraction. The central bank reduced its benchmark rate to 10.5 percent from 12.5 percent in July.

Itau Unibanco rose almost 1 percent to 36.40 reais in Sao Paulo trading today, matching the gain for the benchmark Bovespa index.

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