Itau Unibanco (ITUB) Q3 Earnings Impress on Stellar Revenues

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$7.2 billion ($1.82 billion) in third-quarter 2019, up 10.8% year over year. Including non-recurring items, net income came in at R$5.6 billion ($1.41 billion), down 9.7% year over year.

Results display higher revenues, managerial financial margin and a solid balance-sheet position. However, elevated expenses and provisions were headwinds.

Revenues Improve, Provisions Rise, Costs Up

Operating revenues came in at R$30.3 billion ($7.6 billion) in the reported quarter, up 8.5% on a year-over-year basis.

Managerial financial margin advanced 9.6% year over year to R$19.1 billion ($4.8 billion). Further, commissions and fees were up 7.3% year over year to R$9.3 billion ($2.3 billion).

Non-interest expenses came in at R$12.8 billion ($3.2 billion), flaring up 1.2% on a year-over-year basis. In addition, expenses for provision for loan and lease losses were up 26.1% year over year to R$4.9 billion ($1.2 billion).

In the third quarter, the efficiency ratio was 45.5%, indicating a contraction of 330 basis points (bps) from the year-earlier quarter. A decrease in this ratio indicates increased profitability.

The non-performing loan ratio (loan transactions more than 90 days overdue) came in at 2.9% during the July-September quarter, in line with the prior-year quarter. Itau Unibanco’s credit portfolio, including endorsement, private securities and sureties, reached R$689 billion ($165.8 billion) as of Sep 30, 2019, up 8.3% year over year.

As of Sep 30, 2019, Itau Unibanco’s total assets amounted to R$1.74 trillion ($0.42 trillion), up 8.1% from the end of the year-ago quarter. Assets under administration were R$1.32 trillion ($0.32 trillion), up 21.1% year over year.

Annualized recurring return on average equity climbed to 23.5% in the reported quarter, from the 21.3% recorded in the year-earlier quarter. As of Sep 30, 2019, estimated BIS III ratio came in at 12.8% compared with the prior-year quarter’s 13.8%.


For 2019, the company expects costs of credit in the R$14.5-R$17.5 billion band. Also, non-interest expenses are expected to escalate in the 3-6% range.

In addition, the total credit portfolio is projected at 8-11%, while commissions and fees are likely to be up 2-5%. Managerial financial margin with clients is estimated between 9% and 12%. Financial marginal with the market is estimated between R$4.6 and R$5.6 billion. Effective tax rate is estimated in the 31-33% range.

Our Viewpoint

Results of Itau Unibanco suggest an encouraging quarter. Furthermore, the company’s future prospects look encouraging as it remains focused on building strategies to expand inorganically. In addition to these, the merger with CorpBanca has fortified the bank’s footprint in Latin America, while acquiring Citibank’s operations fueled the company’s growth.

Nevertheless, heightening competition, flaring up expenses and stressed conditions in the Brazilian economy pose significant risks.

Itau Unibanco Holding S.A. Price, Consensus and EPS Surprise

Itau Unibanco Holding S.A. Price, Consensus and EPS Surprise

Itau Unibanco Holding S.A. price-consensus-eps-surprise-chart | Itau Unibanco Holding S.A. Quote

Itau Unibanco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

UBS Group AG UBS reported third-quarter 2019 net profit attributable to shareholders of $1.05 billion, down nearly 16% from the prior-year quarter. The company’s performance was affected by slight rise in expenses. Also, results were negatively impacted by fall in net fee and commission income (down 1% year over year) and lower net interest income (down 8%).

Barclays BCS reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflected a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter. Results were affected by a substantial rise in credit impairment charges. Nonetheless, a decline in operating expenses along with higher revenues aided the company.

Marred by significant restructuring costs, Deutsche Bank DB reported third-quarter 2019 net loss of €832 million ($925.8 million) against net income of €229 million in the year-ago quarter. Also, the German lender incurred loss before taxes of €687 million ($764.4 million). Third-quarter results were affected by rise in expenses. Lower revenues and higher provisions were other undermining factors. However, strong capital position and net inflows were tailwinds.

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