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Itau Unibanco (ITUB) Q4 Earnings and Revenues Decline Y/Y

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Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$5.4 billion ($1 billion) in fourth-quarter 2020, down 26.2% year over year. Including non-recurring items, net income came in at R$7.6 billion ($1.4 billion), up 1.5%.

Results display higher credit costs, and fall in revenues and managerial financial margin. Elevated expenses posed another concern. Nevertheless, solid capital position acted as a tailwind.

In 2020, Itau Unibanco reported net income of R$18.9 billion ($3.5 billion) compared with R$26.5 billion in the prior year.

Revenues Down, Costs Increase

Operating revenues came in at R$29.2 billion ($5.4 billion) in the reported quarter, down 8.3% on a year-over-year basis. In 2020, the company reported operating revenues of R$114.8 billion($21.4 billion), down 4.2%.

Managerial financial margin declined 9.5% year over year to R$17.6 billion ($3.3 billion). Also, commissions and fees were down 4.8% to R$9.9 billion ($1.8 billion).

Non-interest expenses totaled R$13.3 billion ($2.5 billion), up 2.4%.

Cost of credit charges climbed 3.8% on a year-over-year basis to R$6 billion ($1.1 billion).

In the fourth quarter, the efficiency ratio was 49.4%, up 140 basis points (bps) from the year-earlier quarter. An increase in this ratio indicates decreased profitability.

The non-performing loan ratio (loan transactions more than 90 days overdue) came in at 2.3% during the fourth quarter, down from the prior-year quarter’s 3%. Itau Unibanco’s credit portfolio, including financial guarantees provided and corporate securities, reached R$869.5 billion ($162 billion) as of Dec 31, 2020, up 20.3% year over year.

Balance Sheet Position

As of Dec 31, 2020, Itau Unibanco’s total assets amounted to R$2.11 trillion ($0.39 trillion), stable sequentially. Deposits totaled R$1.96 trillion ($0.37 trillion), down marginally on a sequential basis.

Capital & Profitability Ratios

As of Dec 31, 2020, Common Equity Tier 1 ratio was 11.5%, down from 13.2% on Dec 31, 2019.

Annualized recurring return on average equity slipped to 16.1% in the fourth quarter from the 23.7% recorded in the year-earlier quarter.

Our Viewpoint

Results of Itau Unibanco underline the company’s disappointing performance during the December quarter on lower revenues. Nevertheless, the bank’s prospects look encouraging as it is focused on building strategies to expand inorganically.

In addition, the merger with CorpBanca has fortified the bank’s footprint in Latin America, while acquiring Citibank’s operations has fueled its growth. Furthermore, controlled expenses are a tailwind.

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.

Performance & Upcoming Releases of Other Foreign Banks

UBS Group AG (UBS - Free Report) reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.

ICICI Bank’s (IBN - Free Report) third-quarter fiscal 2021 (ended Dec 31) net income was INR49.40 billion ($676 million), up 19% from INR41.46 billion ($567 million) in the prior-year quarter.

Barclays PLC (BCS - Free Report) will report results on Feb 11.

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