On January 1, Zacks Investment Research downgraded Itau Unibanco Holding S.A. ( ITUB - Analyst Report ) to a Zacks #5 Rank (Strong Sell).

Why the Downgrade?

The company has witnessed downward estimate revisions after reporting disappointing third-quarter 2012 results. Moreover, the shares of this Brazilian bank have been on a downtrend since the end of April 2012. Given the negative earnings surprise trend in the last three quarters, it has more downside left.

On October 23, 2012, Itau Unibanco reported its third-quarter earnings per share of 36 cents, missing the Zacks Consensus Estimate by two cents.

Earnings were primarily aided by a sequential dip in non-interest expenses (down 3.1% sequentially) as well as a slight decline in provisions for loan losses (decreased 0.8% sequentially). However, these positives were more than offset by a 3.7% sequential decline in operating revenues, 4.8% dip in managerial financial margin and 0.9% decline in Banking Service Fees and Income from Banking Charges.

The Zacks Consensus Estimate for 2012 decreased 5.4% to $1.58 per share over the last 60 days. For 2013, the Zacks Consensus Estimate reduced 8.7% to $1.68 per share over the same time frame.

Other Stocks to Consider

Not all banking stocks are performing as poorly as Itau Unibanco. The following banking stocks with favorable Zacks Rank are performing well and are worth considering:

1) The Blackstone Group LP ( BX - Analyst Report ) carries a Zacks #1 Rank (Strong Buy)
2) Banner Corporation ( BANR - Snapshot Report ) holds a Zacks #1 Rank (Strong Buy)