Itau Unibanco Upped to Neutral - Analyst Blog
On Feb 13, 2013, we uplifted our long-term recommendation on Itau Unibanco Holding S.A. ( ITUB ) to 'Neutral' from 'Underperform' attributed to the completion of the acquisition of Redecard along with improved earnings performance.
Though its diversified product mix and cost control efforts
are encouraging, we believe that the low interest rate
environment and weak asset quality remains a major concern for
growth of its profitability.
Why the Upgrade?
On Feb 5, 2013, Itau Unibanco reported fourth-quarter 2012 recurring earnings of R$3.5 billion ($1.7 billion), up 2.9% sequentially. Operating revenues of R$19.9 billion ($9.7 billion) at Itau Unibanco were up 1.8% sequentially.
The sequential upsurge was driven by the increase in banking
service fees and income from banking charges and insurance
operations, which was offset by the decrease in financial margin
with clients, and the decrease of 6.5% in loan and retained claim
losses, net of recovery.
Following the earnings announcement, the Zacks Consensus Estimate for 2013 has gone up 0.6% to $1.70 per share. With the upswing in the Zacks Consensus Estimate for 2013, the company now has a Zacks Rank #3 (Hold).
During 2012, Itau Unibanco acquired 49.98% of Redecard through a tender offer completing the purchase of 100% shares. The total amount invested in the acquisition of Redecard's outstanding shares was R$11.75 billion. Therefore, the acquisition enables Itau Unibanco in offering products and services to the bank's clients and expanding business to a number of Brazilian municipalities.
Moreover, the company has made sufficient progress in controlling costs, with the efficiency ratio falling to 45.4% in 2012 from 51.2% in 2007. Such efforts to improve the bottom line augur well going forward.
Other Major Foreign Banks to Consider
Besides HSBC, other foreign banks that are currently performing well include Banco Bilbao Vizcaya Argentaria, S.A. ( BBVA ), Bank of Montreal ( BMO ) and Shinhan Financial Group Company Limited ( SHG ). All these companies carry a Zacks Rank #1 (Strong Buy).
BANCO BILBAO VZ (BBVA): Free Stock Analysis Report
BANK MONTREAL (BMO): Free Stock Analysis Report
BANCO ITAU -ADR (ITUB): Free Stock Analysis Report
SHINHAN FIN-ADR (SHG): Free Stock Analysis Report
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