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Itau’s Profit Beats Estimates on Declining Bad-Loan Provisions

Oct. 29 (Bloomberg) -- Itau Unibanco Holding SA, Latin America’s largest lender by market value, said third-quarter profit rose 18 percent, beating analysts’ estimates, as it set aside less money to cover bad loans.

Recurring net income, which excludes one-time items, climbed to 4.02 billion reais ($1.85 billion), or 81 centavos a share, from 3.41 billion reais, or 69 centavos, a year earlier, the Sao Paulo-based lender said in a statement today. That compares with the 3.9 billion-real estimate of nine analysts surveyed by Bloomberg.

Chief Executive Officer Roberto Setubal, 59, shifted toward less risky mortgage and payroll loans and away from auto finance after default rates on consumer loans in Brazil reached a record 8.18 percent in May 2012. Provisions dropped 26 percent in the third quarter from a year earlier.

“Privately owned banks in Brazil such as Itau and Bradesco are more selective in giving credit,” Pedro Galdi, head strategist at Sao Paulo-based brokerage SLW Corretora, said in a telephone interview last week. Banco Bradesco SA, the nation’s second-biggest bank by market value, reported record earnings on Oct. 21.

Itau rose 10 percent this year through yesterday, compared with a 0.5 percent gain for Osasco, Brazil-based Bradesco.

Itau posted provisions of 4.54 billion reais in the third quarter, down from 4.91 billion reais in the second quarter, and down from 6.12 billion reais a year earlier, according to the statement. The lender estimates provisions will range from 19 billion reais to 22 billion reais in 2013.

Loans overdue more than 90 days declined for a fifth straight quarter to 3.9 percent, compared with 4.2 percent in the previous three months and 5.1 percent a year earlier.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at

To contact the editors responsible for this story: David Scheer at; Christine Harper at

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