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Itau Unibanco of Brazil to Shut Down 400 Branches

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As a large number of financial transactions shift to digital platforms, Brazil-based Itau Unibanco Holding S.A. (ITUB - Free Report) plans to close 400 branches in the country over the next two years, reported Reuters.

According to the source, the transition is likely to take place in two phases. In the first phase, the bank may close 200 branches over the next 12 months. In the second phase the remaining branches will be closed in the following year. Though the bank has not commented on the target number, it stated "the reduction of brick-and-mortar branches is a trend to adapt to the needs of clients and demand for digital services."

Some employees of these branches could be absorbed by 195 existing digital branches of the bank as of Mar 31, 2019.

Notably, Itau Unibanco recently announced that it will launch a digital wallet with no fee called Iti and all banking transactions will be made online.

Our Viewpoint

The digital-based financial services platforms, supported by the Central Bank, have developed in recent years, providing growth opportunities to large banks in areas such as consumer loans and payment facilities. Therefore, Itau Unibanco’s restructuring efforts will likely support its long-term growth. Nevertheless, heightening competition, flaring up expenses and stressed conditions in the Brazilian economy pose significant risks.

Shares of Itau Unibanco have lost 18.7% over the past three months compared with 1.9% decline registered by the industry.

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.

Key Picks

Banco Bradesco SA’s (BBD - Free Report) shares have rallied 11.5%, over the past three months. Also, the company’s earnings estimate for the current year has been revised 1.3% upward over the past 30 days. The stock sports a Zacks Rank of 1, at present.

DBS Group Holdings Ltd’s (DBSDY - Free Report) shares have increased 3.9%, in three months’ time. Further, the company’s earnings estimate for the ongoing year moved 5.2% north in the past 30 days. The stock flaunts a Zacks Rank of 1, currently.

Lloyds Banking Group, PLC’s (LYG - Free Report) shares have gained 9.9%, in the past three months. In addition, this Zacks #1 Ranked company’s earnings estimate for 2019 moved up 12.5%, in 30 days’ time.

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