Brazil’s largest private bank sets lower targets for 2019

Brazil’s largest private-sector lender Itau Unibanco Holding SA posted a higher first-quarter recurring profit, but set lower targets for gains with clients in 2019, indicating it sees fiercer competition for consumers.

Itau revised its 2019 guidance nearly three months after releasing its estimates, as competition sharply rose among credit card processors. The bank owns Rede, and has decided to stop charging interest rates to advance payments for merchants using its machines.

Itau reduced estimates for fee income growth to a range of 2% to 5% in 2019. Earlier this year, the bank had expected growth of 3% to 6%.

The bank also predicted slower growth in its financial margin with clients, of 9% to 12%, instead of 9.5% to 12.5%.

The bank’s recurring net income totalled 6.87 billion reais ($1.73 billion), up 7.1% from the year-ago period and roughly in line with a Refinitiv analysts’ consensus estimate.

Profit was boosted by higher financial margins with clients as Itau extended more loans to consumers and small companies.

The bank’s loan book reached 647.061 billion reais, up 1.6% from the previous quarter, boosted by car, payroll and personal loans. Corporate loans shrank during Brazil’s slow economic recovery.

Earlier this year, the bank had foreseen its loan book would grow between 8% and 11% this year, below competitors’ targets.

Itaú’s return on equity, a gauge of profitability, came in at 23.6%, up 1.8 percentage point in the quarter. For the year, the bank expects to reach 24% profitability.

Loans in arrears for more than 90 days were at 3% in March, up 0.1 percentage point from December.

Total loan-loss provisions remained stable year-over-year, but grew 11.4% in the quarter to 3.8 billion reais.

Original Story:Reuters | Carolina Mandl 
Photo: Itaú site
Edition:Prime Yield