Brazil’s largest lender, Itau Unibanco Holding SA, sees its loan book growing near the low end of its forecast range in 2019, reflecting the cut in the country’s economic growth estimate, Chief Financial Officer Milton Maluhy told journalists.

At the beginning of the year, Itau said its loan book was likely to grow between 8% and 11% this year.

Itau’s prediction comes as Brazil’s economy has been struggling to rebound and demand for corporate loans has been weak.

The bank’s second-quarter loan book grew by 5.9% from the same period a year earlier, mainly driven by consumer demand for credit cards and auto loans.

Itau also faces a more competitive banking arena, executives said. Partly as a result, fee income growth this year is unlikely to exceed 3.5%, the midpoint of its outlook provided in January, Maluhy said.

On Monday, the bank reported recurring net income of 7.034 billion reais ($1.86 billion), up 10.2% from a year earlier, helped by loans to individuals and trading gains.

Original Story:Reuters |Carolina Mandl |
Photo: Site ITAÚ
Edition: Prime Yield

Brazil’s largest lender, Itaú Unibanco Holding SA,  announced it has closed nearly 200 brick-and-mortar branches and that was launching a voluntary severance program to slash costs amid rising competition.

The bank revealed the cost-cutting moves even as quarterly estimates met analysts’ forecasts. It reported recurring net income of 7.034 billion reais ($1.86 billion), up 10.2% from a year earlier, helped by loans for individuals and trading gains.

Itau said in a securities filing that it will offer buyouts to some employees aiming to «adjust the company’s structures to the reality of the market,» but did not disclose the number of reductions targeted.

Its workforce had already decreased by 1.2% in the quarter as the bank closed branches.

Still, Itau said it has hired new employees for its technology department as it seeks to speed up its digital transformation.

In May, Itaú said it would tighten its belt to compensate for fiercer competition, especially in the card-processing business.

Itau is not alone in its cost-cutting efforts. On Monday, state-controlled lender Banco do Brasil also announced a voluntary severance program, seeking to cut personnel.

Itau’s quarterly results showed that while its client revenues are under pressure, they are still on an upward trend. The bank’s fee income increased by 3.5% from the year-ago period, helped by its investment banking and asset management units.

The bank’s net financial income came in at 18.4 billion reais, up 6.7% from the same period a year earlier.

The bank’s loan book grew by 2%, reaching 659.7 billion reais in the quarter, mainly boosted by loans for individuals and small companies.

Loans in arrears for more than 90 days stood at 2.9% of its portfolio in June, down 0.1 percentage point from March. Loan-loss provisions grew by 12.3% from a year earlier, driven by higher provisions in loans for individuals.

Still, Itau’s return on equity came in nearly in line with the previous quarter, at 23.5%.

Original Story:Reuters | Carolina Mandl
Photo: ITAÚ
Edition: Prime Yield

In the first half of 2019, Brazil’s deficit stood at 186 billion reais (about USD $49.5 billion dollars), value at 14.05% lower than the deficit for the same period in 2018, the Central Bank reported.

The deficit is the difference between revenues and expenditures of the Brazilian public sector in the first six months of this year, and dropped by 22.71% in comparison with that of the same period in 2017, according to government data.

The sharp fall in the fiscal deficit reflects the success of the measures taken by the government of President Jair Bolsonaro to reduce public spending, one of his main objectives.

Since assuming office on January 1, Bolsonaro has promoted a liberal economic policy that seeks to reduce the size of the state, privatize non-strategic state companies, and cut costs to reduce deficits and Brazil’s crushing debt load.

The Ministry of Economy has already announced two cuts amounting to 31.2 billion reais (about USD $8.326 billion) in public expenditures provided for in the budget approved by Congress last year.

Bolsonaro also presented to Congress a project to reform Brazil’s troubled pension system, which is considered vital both to set in order Brazil’s public spending and to boost the economy; the legislation has already passed its first vote in the lower house.

The deficit in the Brazilian public sector accumulated so far this year is equivalent to 5.35% of Brazil’s Gross Domestic Product (GDP), a significant improvement upon the figure of 6.53% of GDP in the first half of 2018, and 7.53% in the same time period in 2017.

According to the report released by the Central Bank, the nominal public deficit of Brazil over the course of the last twelve months amounted to 456.8 billion reais (about USD $121.192 billion dollars), equivalent to 6.54% of GDP.

In 2018, Brazil registered a nominal deficit in its public accounts of 487.442 billion reais (about USD $124,985 billion), equivalent to 7.14% of GDP and the lowest in the last four years.

Brazil’s deficit amounted to 10.22% of GDP in 2015 and 8.98% of GDP in 2016, but was reduced by fiscal measures promoted by the then president, Michel Temer, who decreed the freezing of public expenses, a strategy now reinforced by Bolsonaro.

In June, the negative balance in the public accounts was 30 billion reais (about USD $7.9 billion), a value 48.05% lower than the same month last year.

The balance in public accounts measures the difference between the income and the expenses of the state in general, including those of the central government, state companies, and the regional and municipal administrations, as well as the resources destined for the payment of interest on debt.

The Central Bank also reported that the Brazilian national debt rose in March to 5,498 trillion reais (about USD $1.488 trillion dollars), equivalent to 78.7% of GDP, a slight increase from 77.2% of GDP, where it stood in December of 2018.

In April, however Brazil’s national debt stood at 79.1% of GDP, its highest level since the data began to be measured with the current criteria in December 2001.

This is one of the indicators that most worries the risk rating agencies, since, according to the data of the International Monetary Fund, the gross debt of other emerging countries such as Brazil is less than 50% of GDP.

Original Story:PANAM Post | EFE 
Photo: Site do Banco Central do Brasil
Edition:Prime Yield