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Itau Unibanco (ITUB) Q1 Earnings And Revenues Rise Y/Y

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Itau Unibanco Holding S.A. (ITUB - Free Report) delivered recurring earnings of R$6.4 billion ($1.17billion) in first-quarter 2021, significantly up year over year. Including non-recurring items, net income came in at R$5.4 billion ($0.98 billion), up 59.2% year on year.

Results display higher revenues and a fall in non-performing loan ratio. Moreover, high managerial financial margin and a solid capital position were positives. However, elevated non-interest expenses acted as headwind.

Revenues Up, Provisions Fall, Costs Flare Up

Operating revenues came in at R$30 billion ($5.5 billion) in the reported quarter, up 2.8% on a year-over-year basis.

Managerial financial margin climbed marginally year on year to R$18.6 billion ($3.4 billion). Further, commissions and fees were up slightly to R$9.6 billion ($1.75 billion).

Non-interest expenses came in at R$12.4 billion ($2.3 billion), flaring up 3.2% from prior-year quarter. Notably, expenses for provision for loan and lease losses fell more than double on a year-over-year basis to R$4.1 billion ($0.75 billion).

In the first quarter, the efficiency ratio was 44.6%, expanding 20 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 January-March quarter, down from the prior-year quarter’s 3.1%. Itau Unibanco’s credit portfolio, including financial guarantees provided and corporate securities, reached R$906.4 billion ($158.4 billion) as of Mar 31, 2021, up 14.9% year over year.

Balance Sheet Position

As of Mar 31, 2021, Itau Unibanco’s total assets amounted to R$2.12 trillion ($0.37 trillion), up marginally on a sequential basis. Deposits totaled R$1.96 trillion ($0.34 trillion), up slightly.

Capital & Profitability Ratios

As of Mar 31, 2021, Common Equity Tier 1 ratio was 11.3%, up from 10.3% on Mar 31, 2020.

Annualized recurring return on average equity rose to 18.5% in the first quarter from the 12.8% recorded in the year-earlier quarter.

Our Viewpoint

Results of Itau Unibanco highlight an impressive performance during the March-end quarter on lower provisions and higher revenues. Moreover, the company’s future prospects look encouraging as it is focused on building strategies to expand inorganically.

In addition to these, the merger with CorpBanca has fortified the bank’s footprint in Latin America, while acquiring Citibank’s operations has fueled the company’s growth. However, inflated expenses are a concern.

Heightening competition and stressed conditions in the Brazilian economy pose significant risks.

Itau Unibanco Holding S.A. Price and EPS Surprise

Itau Unibanco Holding S.A. Price and EPS Surprise

Itau Unibanco Holding S.A. price-eps-surprise | Itau Unibanco Holding S.A. Quote

Itau Unibanco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Competitive Landscape

UBS Group AG (UBS - Free Report) reported first-quarter 2021 net profit attributable to shareholders of $1.82 billion, up 14% from the prior-year quarter’s $1.60 million.

ICICI Bank’s (IBN - Free Report) fourth-quarter fiscal 2021 (ended Mar 31) net income was INR44.03 billion ($602 million), up substantially from the INR12.21 billion ($167 million) recorded in the prior-year quarter.

HSBC Holdings (HSBC - Free Report) recorded first-quarter 2021 pre-tax profit of $5.8 billion, up 79% from the prior-year quarter.

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