On Jan 6, 2014, we upgraded our long-term recommendation on
Itau Unibanco Holding S.A.
) to Outperform from Neutral based on its organic growth, aided
by a huge deposit base coupled with elevated loans level and
diversifying efforts in the recovering economy. Further, the
company's recurring earnings in third-quarter 2013 were up
Why the Upgrade?
The economy in Brazil, the domestic market of Itau Unibanco, is
recovering at a sluggish pace. Based on the economy improvement
to date in 2013, the Brazilian GDP is expected to be 2-2.5% in
the coming period, higher than 2012. Such progress will aid in
improving the company's business prospects.
Itau Unibanco enjoys a large deposit base, reflecting its strong
funding position. As of Sep 30, 2013, deposits and loans
increased 8.8% and 7.8% year over year, respectively. Notably, in
2012, deposits reflected a 2-year CAGR of 9.5%, while rapid loan
growth was recorded with a 2-year CAGR of 11.5%. Such a trend
represents continued organic growth of the company.
In Oct 2013, Itau Unibanco reported third-quarter 2013 recurring
earnings of R$4.0 billion ($1.75 billion), up 11.1% sequentially.
Including non-recurring items, Itau Unibanco's third-quarter 2013
net income came in at R$3.99 billion ($1.74 billion), up 11.5%
sequentially. The sequential increase was primarily attributed to
reduced expenses for allowance of loan and lease losses and
increased managerial financial margin along with higher banking
service fees and income from banking charges.
The Zacks Consensus Estimate for 2013 and 2014 remained stable at
$1.38 and $1.54 per share, respectively over the last 30 days.
Hence, the company carries a Zacks Rank #3 (Hold).
Some Foreign Banks to Consider
Some better-ranked foreign banks worth considering include
BBVA Banco Franc
China Merchants Bank Co., Ltd.
) with a Zacks Rank #1 (Strong Buy), while
) carries a Zacks Rank #2 (Buy).
BARCLAY PLC-ADR (BCS): Free Stock Analysis
BANCO FRANC-ADR (BFR): Free Stock Analysis
CHINA MERCH BK (CIHKY): Get Free Report
BANCO ITAU -ADR (ITUB): Free Stock Analysis
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