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Itau Gains on Expectation Cost Control to Offset Revenue Decline

Itau Unibanco Holding SA, Latin America’s largest lender, rose the most since June on optimism it will be able to sustain returns to investors even as Brazil’s government pressures banks to reduce consumer borrowing costs.

Shares gained 4.1 percent to 29.58 reais at the close of trading in Sao Paulo, snapping a five-day decline. The benchmark Bovespa index slid 0.9 percent.

Management “believes that lower provision charges and solid cost control should offset weak revenue generation” and “sounded confident that returns should rebound from current levels,” Mario Pierry, an analyst at Deutsche Bank AG, wrote in a note to clients today after a conference call with bank executives including Chief Financial Officer Caio Ibrahim David. Itau fell to a three-month low yesterday after saying service-fee revenue and net interest income fell in the third quarter.

Itau Unibanco’s earnings per share fell 11 percent to 76 centavos in the three months through September, according to a regulatory filing yesterday.

President Dilma Rousseff has demanded that state-controlled Banco do Brasil SA and Caixa Economica Federal lower rates and fees, prompting private banks to follow suit in order not to lose their stake in the market.

Itau Unibanco has fallen 13 percent this year as the Sao Paulo-based bank cut its average monthly interest rate on consumer loans to 3.38 percent earlier in October. On Oct. 17, the bank also announced it would reduce some service fees by as much as 33 percent.

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