Itau Rises After Posting Fewer Provisions, Delinquencies

Itau Unibanco Holding SA, Latin America’s biggest lender by market value, rose the most in a month after reporting a decline in late payments and provisions for bad loans.

Itau climbed 2.5 percent to 34.19 reais in Sao Paulo, the biggest increase since Jan. 3. The benchmark Bovespa index dropped 0.2 percent.

Chief Executive Officer Roberto Setubal, 58, oversaw a reduction in the bank’s auto loans to lower delinquencies. Provisions were 5.69 billion reais ($2.86 billion) in the fourth quarter, down from 5.94 billion reais in the three previous months and up from 5.45 billion reais a year earlier, the Sao Paulo-based bank said today in a filing.

“Results showed encouraging trends with regards to asset quality, cost control and fee-income generation,” Deutsche Bank AG analysts including Mario Pierry wrote in a note to clients today.

Itau’s delinquency rate for debt overdue more than 90 days was 4.8 percent in the fourth quarter, down from 5.1 percent in the third quarter and 4.9 percent a year earlier, according to the filing.

The bank expects to set aside 19 billion reais to 22 billion reais to cover bad loans in 2013, compared with 23.6 billion reais in 2012, it said in the filing.

“Itau’s default rates start 2013 in a downward trend,” Setubal told reporters in Sao Paulo today. “We expect Itau’s default rates to fall more than the overall market in 2013.”

Analysts’ Estimates

Recurring net income, which excludes one-time charges, declined to 3.5 billion reais in the quarter, or 78 centavos a share, from 3.75 billion reais, or 83 centavos, a year earlier, according to the filing. That matched the average estimate of 14 analysts surveyed by Bloomberg.

The bank’s auto-loan portfolio declined to 51.2 billion reais in the fourth quarter from 60.1 billion reais in the same period of 2011, in-line with the bank’s forecast for 50 billion reais to 52 billion reais for last year. Car loans will expand this year after declining in 2012, Setubal said.

The total book of loans excluding auto lending rose 13 percent to 398 billion reais in the fourth quarter, at the low end of the bank’s forecast for an expansion between 13 percent to 15 percent in 2012. Total assets rose 19 percent to 1 trillion reais from a year earlier, according to the filing.

Itau said it expects the portfolio of loans to expand 11 percent to 14 percent in 2013.

The bank is studying possible acquisitions in Latin America, Setubal said, adding that there aren’t many banks available in the region and those that are are expensive.

Itau sees opportunities in Mexico, Colombia and Peru, Rogerio Calderon, head of investor relations, said.

“We are constantly looking into the Mexican market to establish a retail operation there,” Calderon said. “We need to start with reasonable size. Retail business requires scale.”

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