Itau Earnings Fall Less Than 1% as Bank Cuts Provisions

Itau Unibanco Holding SA, Latin America’s biggest lender by market value, said profit fell less than 1 percent after it set aside less money for bad loans.

Recurring net income, which excludes one-time items, declined to 3.51 billion reais ($1.75 billion), or 78 centavos a share, from 3.54 billion reais, or 78 centavos, a year earlier, the Sao Paulo-based bank said today in a regulatory filing. The results compare with the 77-centavo average estimate of 11 analysts surveyed by Bloomberg.

Itau, led by Chief Executive Officer Roberto Setubal, 58, said provisions for bad loans dropped as Brazil’s consumer delinquencies fell to the lowest since November 2011. Loans at least 90 days overdue dropped to 4.5 percent in the first quarter, from 4.8 percent in December and 5.1 percent a year earlier.

The bank is compensating for narrower profit margins on loans “with improved asset quality and operational efficiency gains,” Deutsche Bank AG analysts including Mario Pierry wrote in a note to clients today, referring to net interest margin, the difference between what banks pay depositors and what’s earned on loans. The worst appears to be behind the bank, the analysts wrote.

Itau advanced 2.6 percent to 33.64 reais in Sao Paulo, compared with a 1.9 percent gain for the benchmark Ibovespa index.

Narrowing NIM

Net interest margin dropped to 5.9 percent in the first quarter from 6 percent in the previous three months and 6.9 percent a year earlier, according to the statement. Itau said bad-loan provisions were 4.94 billion reais in the first quarter, down from 5.74 billion reais in the three previous months and 6.21 billion reais a year earlier.

“Itau’s delinquency peak is over,” Rogerio Calderon, head of investor relations, told reporters on a conference call today.

Itau submitted a bid to buy Citigroup Inc.’s Credicard unit in Brazil, Calderon said, adding that he doesn’t know when the New York-based bank will announce its decision on the proposals. Calderon declined to comment further on the bid.

Itau’s book of loans expanded 9.2 percent to 456.2 billion reais from a year earlier. That compares with the bank’s forecast that credit will expand 11 percent to 14 percent this year. Total assets climbed almost 15 percent to 1.03 trillion reais.

The bank increased its growth forecast for insurance and service revenue to 15 percent to 18 percent from 11 percent to 14 percent in February amid a reclassification of its earnings statements. Last week, Itau said it would reclassify 2011 and 2012 results as it consolidates its stake in Redecard SA after buying out the bank-card processor in September for 10.5 billion reais.

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