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Itau Unibanco's CEO sees loan delinquency at record levels

Credit: REUTERS/PAULO WHITAKER

Itau Unibanco Holding SA's Chief Executive Candido Bracher said on Tuesday that next year he sees Brazil's 90-day default ratio reaching higher levels than in previous crisis.

By Carolina Mandl

SAO PAULO, Aug 4 (Reuters) - Itau Unibanco Holding SA's ITUB4.SA Chief Executive Candido Bracher said on Tuesday that next year he sees Brazil's 90-day default ratio reaching higher levels than in previous crisis.

"Brazil's GDP is poised to drop by unseen levels, so it is natural that there will be higher loan delinquency rates,", Bracher told journalists in a conference call. Itau's 90-day delinquency ratio reached a peak of 5.6% in 2009 and 4.8% amid a recession in 2016.

Its second-quarter loan default was at 2.7%, but Bracher said he sees it going up next year, as grace periods extended to clients end.

Itau reported on Monday a recurring net income of 4.205 billion reais ($785.82 million), down 40% from a year earlier, as it boosted loan-loss provisions for another quarter to account for the coronavirus crisis.

Preferred shares were down more than 3% in the morning trading, as analysts saw a weak performance in net interest income, fees and insurance.

"We believe investors were expecting a bit more from Itau," BTG Pactual's analysts said in a note to clients.

Chief Financial Officer Milton Maluhy said net interest margin is likely to continue a downward trend, as Brazil's interest rates are at record-low levels and Itau has decided to shift to corporate loans. It was at 8.4% in the second quarter, down from 9.2% in the previous quarter.

To weather the impact of the coronavirus crisis, the bank is seeking a nominal reduction in operating expenses this year and next, Maluhy added.

Among ongoing measures, the CFO said the bank is returning some rented buildings, as some working-from-home measures will be permanent. Maluhy also said the bank will further shrink its branch network, but did not disclose numbers.

($1 = 5.3511 reais)

(Reporting by Carolina Mandl, editing by Louise Heavens and Nick Zieminski)

((carolina.mandl@thomsonreuters.com; +55 11 5644 7703; +55 11 97116-3806;))

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

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