Itau Profit Beats Analysts’ Estimates as Provisions Fall

Itau Unibanco Holding SA, Latin America’s largest lender by market value, said fourth-quarter profit rose 34 percent, surpassing analysts’ estimates, as it reduced loan-loss provisions. The shares jumped the most in almost a year.

Recurring net income, which excludes one-time charges, climbed to 4.68 billion reais ($1.93 billion), or 94 centavos a share, from 3.5 billion reais, or 70 centavos, a year earlier, the Sao Paulo-based bank said in a statement today. That beat the 4.18 billion-real estimate of 10 analysts surveyed by Bloomberg.

Itau, led by Chief Executive Officer Roberto Setubal, 59, has reduced auto lending to focus on less-risky credit such as payroll loans and mortgages. The strategy paid off in the quarter with a 27 percent drop in provisions, to 4.19 billion reais. In 2013, Itau had provisions of 18.6 billion reais, below its forecast range of 19 billion reais to 22 billion reais.

“Fourth-quarter numbers were solid from the top to the bottom,” Banco BTG Pactual SA said in a report to clients. BTG said it upgraded Itau to buy from neutral after the “stunning” fourth-quarter results.

Itau rose 3.7 percent to 31 reais at 10:22 a.m. in Sao Paulo after climbing as much as 4.7 percent, the biggest intraday gain since Feb. 15, 2013. Brazil’s Ibovespa benchmark index climbed 1 percent.

Provision Forecast

The lender posted return on equity, a measure of profitability, of 23.9 percent in the fourth quarter, up from 19.3 percent a year earlier, according to the statement. Itau expects provisions will be 13 billion reais to 15 billion reais this year, while lending will expand 10 percent to 13 percent.

Last week, Banco Bradesco SA, Latin America’s second-largest bank by market value, said fourth-quarter adjusted net income rose 10 percent to 3.2 billion reais from a year earlier as it reduced provisions.

Itau said last week it agreed to buy a controlling stake in Corpbanca for at least $2.2 billion to expand in Chile.

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