Itau Unibanco Holding S.A.
) reported second-quarter 2014 recurring earnings of R$5.0 billion
($2.24 billion), up 38.9% year over year. Including non-recurring
items, net income came in at R$4.9 billion ($2.19 billion), up
36.1% year over year.
The year-over-year increase was primarily attributed to reduced
expenses for provision of loan and lease losses and increased
managerial financial margin along with higher banking service fees
and income from banking charges. However, elevated non-interest
expenses were the headwind.
Performance in Detail
Operating revenues of R$22.1 billion ($9.89 billion) at Itau
Unibanco in the reported quarter climbed 15.1% on a year-over-year
basis. Managerial financial margin increased 17.2% year over year
to R$13.6 billion ($6.09 billion). Annualized net interest margin
with clients remained in line with the prior-year quarter and came
in at 8.9%.
Banking Service Fees and Income from Banking Charges moved up 16.7%
year over year to R$6.3 billion ($2.82 billion) in the second
quarter. Revenues from insurance, pension plans and capitalization
operations declined slightly from the prior-year quarter to R$2.2
billion ($0.98 billion).
Itau Unibanco's non-interest expenses came in at R$9.6 billion
($4.30 billion), up 11.6% year over year. However, expenses for
provision for loan and lease losses at Itau Unibanco decreased 8.2%
on a year-over-year basis to R$4.5 billion ($2.01 billion).
In the quarter under review, the efficiency ratio reached 47.1%,
reflecting a decrease of 200 basis points from the prior-year
quarter. A decrease in the efficiency ratio reflects an upswing in
The nonperforming loan ratio (loan transactions more than 90 days
overdue) was 3.4% in the reported quarter, decreasing 80 basis
points year over year. Itau Unibanco's credit portfolio, including
endorsements and sureties, reached R$487.6 billion ($221.17
billion) as of Jun 30, 2014, up 9.5% year over year.
As of Jun 30, 2014, Itau Unibanco's total assets amounted to R$1.11
trillion ($0.50 trillion), up 5.1% from the end of the prior-year
quarter. Assets under administration stood at R$634.6 billion
($287.84 billion), up 4.3% year over year.
Moreover, annualized recurring return on average equity increased
to 23.7% in the reported quarter from 19.3% in the prior-year
quarter. As of Jun 30, 2014, BIS ratio reached 16.0%, down 230
basis points year over year.
For the year 2014, the company expects loan loss provision net of
recovery to range from R$13 billion ($5.69 billion) - R$15 billion
($6.56 billion). Moreover, non-interest expenses are expected to
increase in the range of 10.5% - 12.5%, while excluding the impact
of Credicard, the range stands at 5.5% - 7.5%.
Moreover, total credit portfolio is expected to increase in the
range of 10% - 13%, while banking service fees and revenue of
insurance, pension plan and capitalization are expected to rise in
the range of 12% - 14%. Efficiency ratio is expected to improve 50
to 175 basis points.
Though increasing competition, elevated expenses and the stressed
conditions in the Brazilian economy pose risks, Itau Unibanco's
diversified product mix, increasing operating revenues and expanded
credit portfolio are encouraging. Additionally, we believe that the
improving asset quality remains a positive catalyst for Itau
Moreover, the recent merger with Chile-based bank CorpBanca (BCA)
in a stock-plus-cash offer will help enhance Itau Unibanco's
footprint in Chile as it penetrated the market back in 2007 through
the acquisition of the operations of BankBoston. Later in 2011, it
acquired HSBC's premium banking operations. Further, this will aid
the company to gain a greater market share in Latin America with
its entry into Peru and Central America, apart from its presence in
Chile, Columbia, Argentina, Paraguay and Uruguay.
Itau Unibanco currently carries a Zacks Rank #1 (Strong Buy).
The Royal Bank of Scotland Group plc's (
) first-half 2014 profit from continuing operations came in at
£1.92 billion ($3.20 billion), highlighting an over twofold rise
from £696 million ($1,074.9 million) in the prior-year comparable
period. Results were driven by lower loan impairment losses and
reduced operating expenses. Additionally, the results reflected
higher net interest income. However, reduced non-interest income
hampered the results to a certain extent.
HDFC Bank Ltd.'s (
) first-quarter fiscal 2015 (ended Jun 30) results recorded a net
profit of INR22.33 billion ($0.37 billion), up 21.1% year over
year. The results benefited from a rise in net interest income.
Moreover, deposit and loan balances continued to show improvement.
However, higher operating expenses and fall in non-interest
revenues were causes of concern. Again, credit quality was a mixed
Impacted by a disappointing top-line performance, Deutsche Bank AG
) reported net income of €238 million ($326.4 million) in the
second quarter of 2014, down from €335 million ($437.4 million) in
the prior-year quarter. However, decreased expenses, lower
provision for credit losses and a strong capital position were the
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