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Itau Unibanco (ITUB) Reports Decent Q1 Earnings, Shares Down
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Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$6.2 billion ($1.97 billion) in first-quarter 2017, up 19.2% year over year. Including non-recurring items, net income came in at R$6.1 billion ($1.94 billion), up 17.3% year over year.
Despite an increase in earnings, investors’ sentiments were down on concerns over escalating expenses which led to decline of around 1.82% on the NYSE following the earnings release.
Results reflected an increase in revenues and a solid balance-sheet position. However, higher expenses and lower managerial financial margin were headwinds.
Revenues Up, Costs Rise, Strong Capital Position
Operating revenues came in at R$27.0 billion ($8.6 billion) in the reported quarter, slightly up on a year-over-year basis.
Managerial financial margin edged down 1.7% year over year to R$17.1 billion ($5.4 billion). However, commissions and fees were up 7.0% year over year to R$7.8 billion ($2.5 billion).
Non-interest expenses came in at R$11.0 billion ($3.5 billion), slightly up on a year-over-year basis. However, expenses for provision for loan and lease losses plunged 31.1% on a year-over-year basis to R$5.4 billion ($1.7 billion).
In the quarter under review, the efficiency ratio was 44.1%, displaying an expansion of 10 basis points (bps) from the prior-year quarter. An increase in the efficiency ratio indicates decreased profitability.
The non-performing loan ratio (loan transactions more than 90 days overdue) was 3.4% in the reported quarter, contracting 10 bps year over year. Itau Unibanco’s credit portfolio, including endorsement, private securities and sureties, reached R$587.0 billion ($187.7 billion) as of Mar 31, 2017, down 7.9% year over year.
As of Mar 31, 2017, Itau Unibanco’s total assets amounted to R$1.41 trillion ($0.45 trillion), up 1.1% from the end of the year-ago quarter. Assets under administration were R$951.0 billion ($304.1 billion), up 19.7% year over year.
Annualized recurring return on average equity increased to 22.0% in the reported quarter from 19.6% in the year-earlier quarter. As of Mar 31, 2017, estimated BIS ratio was 18.1%, up 40 bps year over year.
Outlook
For 2017, the company expects loan losses and impairment in the range of R$14.5–R$17 billion. Moreover, non-interest expenses are anticipated to increase in the range of 1.5–4.5%.
In addition, the total credit portfolio is projected in the range of 0.0–4.0%, while commissions and fees are likely to climb 0.5%–4.5%. Managerial financial margin with clients is estimated in the range between -4.0% and -0.5%.
Our Viewpoint
Results of Itau Unibanco highlight a decent quarter. Furthermore, the company’s future prospects look encouraging as it remains focused on building strategies to expand inorganically. In addition, the merger with CorpBanca has fortified the company’s footprint in Latin America. Nevertheless, increasing competition, elevated expenses and stressed conditions in the Brazilian economy pose significant risks.
Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter. Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
Among other foreign banks Mitsubishi UFJ Financial Group, Inc. is scheduled to report March quarter-end earnings on May 15.
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Itau Unibanco (ITUB) Reports Decent Q1 Earnings, Shares Down
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$6.2 billion ($1.97 billion) in first-quarter 2017, up 19.2% year over year. Including non-recurring items, net income came in at R$6.1 billion ($1.94 billion), up 17.3% year over year.
Despite an increase in earnings, investors’ sentiments were down on concerns over escalating expenses which led to decline of around 1.82% on the NYSE following the earnings release.
Results reflected an increase in revenues and a solid balance-sheet position. However, higher expenses and lower managerial financial margin were headwinds.
Revenues Up, Costs Rise, Strong Capital Position
Operating revenues came in at R$27.0 billion ($8.6 billion) in the reported quarter, slightly up on a year-over-year basis.
Managerial financial margin edged down 1.7% year over year to R$17.1 billion ($5.4 billion). However, commissions and fees were up 7.0% year over year to R$7.8 billion ($2.5 billion).
Non-interest expenses came in at R$11.0 billion ($3.5 billion), slightly up on a year-over-year basis. However, expenses for provision for loan and lease losses plunged 31.1% on a year-over-year basis to R$5.4 billion ($1.7 billion).
In the quarter under review, the efficiency ratio was 44.1%, displaying an expansion of 10 basis points (bps) from the prior-year quarter. An increase in the efficiency ratio indicates decreased profitability.
The non-performing loan ratio (loan transactions more than 90 days overdue) was 3.4% in the reported quarter, contracting 10 bps year over year. Itau Unibanco’s credit portfolio, including endorsement, private securities and sureties, reached R$587.0 billion ($187.7 billion) as of Mar 31, 2017, down 7.9% year over year.
As of Mar 31, 2017, Itau Unibanco’s total assets amounted to R$1.41 trillion ($0.45 trillion), up 1.1% from the end of the year-ago quarter. Assets under administration were R$951.0 billion ($304.1 billion), up 19.7% year over year.
Annualized recurring return on average equity increased to 22.0% in the reported quarter from 19.6% in the year-earlier quarter. As of Mar 31, 2017, estimated BIS ratio was 18.1%, up 40 bps year over year.
Outlook
For 2017, the company expects loan losses and impairment in the range of R$14.5–R$17 billion. Moreover, non-interest expenses are anticipated to increase in the range of 1.5–4.5%.
In addition, the total credit portfolio is projected in the range of 0.0–4.0%, while commissions and fees are likely to climb 0.5%–4.5%. Managerial financial margin with clients is estimated in the range between -4.0% and -0.5%.
Our Viewpoint
Results of Itau Unibanco highlight a decent quarter. Furthermore, the company’s future prospects look encouraging as it remains focused on building strategies to expand inorganically. In addition, the merger with CorpBanca has fortified the company’s footprint in Latin America. Nevertheless, increasing competition, elevated expenses and stressed conditions in the Brazilian economy pose significant risks.
Itau Unibanco Banco Holding SA Price
Itau Unibanco Banco Holding SA Price | Itau Unibanco Banco Holding SA Quote
Itau Unibanco currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter. Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
Among other foreign banks Mitsubishi UFJ Financial Group, Inc. is scheduled to report March quarter-end earnings on May 15.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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