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Itau Unibanco Expands Digitally to Increase Client Base

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In order to meet the growing digital banking trend, Itau Unibanco Holding SA (ITUB - Free Report) is undertaking necessary steps and launching online-only bank accounts in Argentina. Also, the bank has partnered with PayPal Holdings (PYPL - Free Report) to offer card-related services to its clients. The news was reported by Reuters.

Argentina’s Online-Only Bank

Though it is yet to decide the fees it would be charging, the Brazil-based bank’s digital expansion in Argentina might support its top line as most people do not have bank accounts in the country, per the World Bank. Further, the bank feels that it has potential of increase retail banking client base in the region.

Itau BBA SA’s executive told Reuters that the bank seeks to increase accounts with an aim to boost customer growth without making investments in building a large branch network or performing acquisitions.

Itau Unibanco would face competition from other online bank startups present in Argentina such as Uala and Wanap, which are planning to offer below market fees and interest rates to clients.

PayPal Partnership

Per the terms of agreement, card holders of Itau Unibanco will be offered PayPal’s online digital account. The services would also be offered to the bank’s merchants who use its card processing unit, known as Rede.

In April, PayPal had partnered with another bank, Barclays (BCS - Free Report) .

Our Take

Itau Unibanco remains focused on building its operations either through strategic acquisitions or with plans to strengthen operations by introducing new products. However, elevated expenses and stressed conditions in Brazil keep us apprehensive.

Shares of Itau Unibanco have lost 19% so far this year compared with 12.1% decline of the industry.

Currently, the stock carries a Zacks Rank #5 (Strong Sell). 

A better-ranked stock in the same space is Bank of N.T. Butterfield & Son (NTB - Free Report) . The company’s earnings estimates were revised upward by nearly 1% for the current year, in the last 30 days. Also, its share price has jumped 58.1% over the past year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

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