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Itau Earnings Matches Estimates as Banking Fees Increase

Itau Unibanco Holding SA, Latin America’s biggest bank by market value, said second-quarter profit rose 8.1 percent, matching analysts’ estimates as fee revenue increased.

Recurring net income, which excludes one-time charges, advanced to 3.56 billion reais ($1.74 billion), or 79 centavos a share, from 3.32 billion reais, or 73 centavos, a year earlier, the Sao Paulo-based bank said today in a regulatory filing. That compares with an average estimate of 79 centavos in a Bloomberg survey of seven analysts.

Itau, led by Chief Executive Officer Roberto Setubal, 57, increased banking fees 8.7 percent to 5.08 billion reais in the quarter, offsetting slower credit growth. The lender’s portfolio of loans reached 413.4 billion reais, up 15 percent from a year earlier. That compares with a 16 percent expansion in the first quarter and 19 percent in the fourth on an annual basis.

“The good news in the second quarter was that there was no bad news, and we do believe market participants may find some marginal positives in the quarter to revisit Itau’s investment case,” Fabio Zagatti, an analyst at Barclays Plc in Sao Paulo, wrote in a report today.

Itau climbed as much as 4 percent to 30.38 reais, its biggest intraday increase since June 6, before paring gains to 3.4 percent and closing at 30.19 reais in Sao Paulo. Banco Bradesco SA, Latin America’s second-biggest bank by market value, rose 0.9 percent to 29.33 reais.

Defaults Rise

Provisions rose 17 percent to 5.99 billion reais at the end of June from 5.11 billion reais a year earlier, while declining 0.7 percent from the previous three months, according to the statement.

Itau’s average default rate for payments at least 90 days overdue climbed to 5.2 percent at the end of June from 5.1 percent in March and 4.5 percent a year earlier, according to the statement.

The bank may post a “small” increase in delinquency rates in the second half of the year, Rogerio Calderon, the head of investor relations, told reporters on a conference call today.

The lender reduced its forecast for third-quarter provisions to a range of 6 billion reais to 6.5 billion reais from 6.5 billion reais to 7.1 billion reais in April, according to the regulatory filings. The bank expects provisions will range between 5.7 billion reais and 6.2 billion in the fourth quarter, according to the statement.

Loan Book

Total assets reached 888.8 billion reais in the second quarter, down 0.9 percent from the previous quarter and up 12 percent from a year earlier.

Itau said its portfolio of loans excluding car loans will expand 13 percent to 15 percent in 2012. Auto loans will fall to between 50 billion reais and 52 billion reais this year, according to the statement. In February, the lender said it expected credit growth including auto loans of 14 percent to 17 percent in 2012.

Total loan book, including vehicles, will expand about 10 percent this year, Calderon said.

The bank reduced its workforce to 99,017 employees in the second quarter from 107,546 a year earlier as it sold its credit-and debit-card processing unit Orbitall and restructured the consumer-loan business, according to the statement.

Itau is offering as much as 11.8 billion reais to buy out the minority shareholders of Redecard SA, Brazil’s second-biggest card-payment processor.

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