Brazil's Itau sees profit plunge 40% as loan provisions soar


By Carolina Mandl

SAO PAULO, Aug 3 (Reuters) - Brazil's largest lender Itau Unibanco Holding SA ITUB4.SA decided to boost loan-loss provisions for another quarter to account for the coronavirus crisis, although the bank said it has seen some signs of recovery.

Itau Unibanco's recurring net income, which excludes one-off items, came in at 4.205 billion reais ($790.38 million), down 40% from a year earlier.

The bank set aside 7.770 billion reais in the second quarter to cover potential loan losses, nearly doubling from a year earlier, but down 23% from the previous quarter.

Its 90-day loan default ratio decreased 0.4 percentage point in the quarter, to 2.7%, in a downward trend already seen at Itau's biggest private rivals.

As banks give clients grace periods to repay loans or renegotiate them amid the coronavirus crisis, default ratios have shown improvement for the time being.

Itau has extended grace periods - giving clients up to six months to renegotiate their debt loads - for roughly 52 billion reais in loans, it said.

Fee income also felt the impact of coronavirus lockdown measures, falling 7.4% in the quarter, mainly on credit and debit cards as well from fund management.

On the credit side, corporate loans drove growth of 2.9% in its overall loan book, even as consumer lending shrunk.

Like its peers, Itau is leaning on cost-cutting measures to ease pressure on earnings from bad loans. Operating expenses remained stable in the quarter although the bank's headcount grew by 2.3% in the quarter.

The Sao Paulo-based bank's return on equity came in at 13.5%, down 10 percentage points from a year earlier, but up from the previous quarter.

Chief Executive Candido Bracher will discuss the bank's outlook on Tuesday morning in calls with analysts and journalists.

($1 = 5.3202 reais)

(Reporting by Carolina Mandl; Editing by Christian Plumb)

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