Larger loans help Brazilian bank Itau’s earnings outperform peers

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SAO PAULO (Reuters) – Latin America’s biggest bank, Itau Unibanco SA, posted a recurring rise in net profit of 19% on Thursday, outperforming other Brazilian private lenders as a larger loan book boosted it. helped offset the growing risk of non-payment.

Latin America’s biggest bank reported recurring net profit of 8.08 billion reais ($1.51 billion) in the third quarter, just below analysts’ estimate of 8.11 billion reais by Refinitiv.

Analysts at XP Inc nevertheless hailed the positive results in a note to clients, pointing to a larger loan book and balanced risk management, which helped Itau control its defaults.

Aggressive monetary tightening from Brazil’s central bank left the benchmark interest rate at its highest level in six years, prompting peers Bradesco SA and Santander Brasil SA to increase provisions for defaulting customers. Both posted earnings down about 20%.

Itau raised its provisions for bad debts by almost 50% to 8.27 billion reais, although unlike its peers, it did not raise its 2022 forecast for provisions for loan losses.

“The reason for this divergence remains unclear,” Citi analysts said, pointing to potential differences in underwriting and customer profiles, “but Itau’s results offer much more confidence in its sustainability.” .

Itau also reported a 90-day default rate of 2.8% at the end of September, up from 2.7% in the previous quarter, but at a much slower pace than its peers.

The size of its loan portfolio jumped 15.5% year-on-year to R$1.11 trillion, fueled by more personal loans.

The company also reported higher revenue from interest it earned on customer debt. The net interest income (NII) of its customers jumped 33% compared to the previous year to reach 23.38 billion reais.

Chief Financial Officer Alexsandro Broedel said in a statement that the quarterly results reflect “the strength and consistency of our performance over time, across different business lines.”

Return on equity, an indicator of profitability, edged up 0.2 percentage points from the previous quarter to 21%.

($1 = 5.3665 reais)

(Reporting by Peter Frontini; Editing by Sarah Morland and Chris Reese)

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