Itau Unibanco Holding S.A.
) fourth-quarter 2011 net income came in at R$3.7 billion
($2.0 billion), below the prior quarter earnings of R$ 3.81
billion ($2.3 billion) and year-ago earnings of R$ 3.90 billion
Excluding non-recurring items, Itaú Unibanco reported
fourth quarter earnings of R$ 3.75 billion ($2.1 billion), down
4.9% sequentially but up 10.2% year over year.
While Itaú Unibanco experienced an increase in its net interest
and fee income, a rise in expenses offset that. Additionally credit
quality also deteriorated in the quarter.
For full year 2011, Itaú Unibanco reported earnings of R$ 14.6
billion ($8.8 billion), up 12.4% year over year. This was driven by
improvements of 14.5% in net interest income, 11.4% in fee income
and 29.3% in results from insurance, pension plans and
Itau Unibanco's net interest income in the fourth quarter of
2011 increased 1.3% sequentially and 10.6% year over year to R$
11.966 billion. Fee income advanced 5.5% sequentially and 13.2%
year over year to R$5.088 billion.
Non-interest expenses were R$ 8.547 billion in the reported
quarter, up 1.7% sequentially and 1.9% year over year. Notably, the
company experienced an increased level of operating activities in
the fourth quarter and opened 82 fully equipped branches in Brazil
(123 for the full year). Administrative expenses increased in the
quarter primarily due to the costs associated with the facilities
and remodeling for the new Itaú Unibanco branch model. However,
personnel expenses reported a drop in the quarter.
During the fourth quarter, the efficiency ratio reached 47.3%,
reflecting a decrease of 20 basis points from the prior quarter, as
a result of the 2.1% increase in operating revenues, partially
offset by the 1.7% increase in expenses from the prior quarter. The
efficiency ratio, however, decreased 460 basis points from the
comparable quarter prior year.
Loan losses, net of recovery, totaled R$ 3,880 million in the
fourth quarter, up 6.1% sequentially, as a result of an increase of
R$ 482 million in expenses for allowance for loan losses, that
amounted to R$ 5,453 million. This was driven by the residual
impact of the post office and bank workers' strikes, rises in
default levels, increases in the loan portfolio and the increased
amount of loan renegotiation of loans already written off as
losses. It was partially offset by an uptick in loan recovery due
to the receipt of the 13th month pay (bonus salary) in Brazil.
The overall delinquency level (loan transactions more than 90
days overdue) reached 4.9% in December 2011, increasing 20 basis
points sequentially and 70 bps year over year.
Credit portfolio, including endorsements and sureties, reached
R$397.012 billion on December 31, 2011, increasing 3.9% and 19.1%
from the prior quarter and the same date of the prior year,
Itaú Unibanco's consolidated assets totaled R$851.3 billion, up
1.7% sequentially and 13.3% year over year. However, recurring
return on average equity decreased to 21.8% in the reported quarter
from 23.5% in the prior quarter and 23.0% in the year-ago quarter.
The Bank for International Settlements (
) capital ratio was 16.4%, up 90 bps sequentially and 100 bps year
Itaú Unibanco also announced that it will pay up to R$ 11.77
billion ($6.8 billion) for the outstanding 336.4 million common
shares, equivalent to 49.98% of Redecard's total share capital.
Redecard is a credit-card networking services provider. The buyout
is anticipated to have no impact on the company's cash flow.
Going forward, we believe that Itaú Unibanco'ssolid franchise
and diversified product mix would support its earnings. However,
the slowdown in the economy and credit quality concerns remains the
Itau Unibanco's shares are maintaining a Zacks #3 Rank, which
translates into a short-term Hold recommendation. However, its
Banco De Chile
) retains a Zacks #4 Rank, implying a short-term Sell
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