Itau Unibanco Upgraded to Outperform - Analyst Blog

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On Jan 6, 2014, we upgraded our long-term recommendation on Itau Unibanco Holding S.A. ( ITUB ) 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 sequentially.

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 ( BFR ) and China Merchants Bank Co., Ltd. ( CIHKY ) with a Zacks Rank #1 (Strong Buy), while Barclays PLC ( BCS ) carries a Zacks Rank #2 (Buy).



BARCLAY PLC-ADR (BCS): Free Stock Analysis Report

BANCO FRANC-ADR (BFR): Free Stock Analysis Report

CHINA MERCH BK (CIHKY): Get Free Report

BANCO ITAU -ADR (ITUB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BCS , BFR , CIHKY , ITUB

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