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Itau Unibanco Holding SA ADR ITUB

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Morningstar’s Analysis

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Economic Moat

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Capital Allocation

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Itau Unibanco Reports Decent Results Overshadowed by Growing Economic Risks

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

No-moat rated Itau Unibanco posted decent second-quarter results, with net income of BRL 6.8 billion growing 3.6% quarter over quarter and 34.8% year over year. Itau enjoyed another quarter of strong loan growth with its loan book growing 5.9% sequentially. The larger loan book was the primary force behind operating revenue increasing 11% from last year’s quarter. However, Itau’s good results are overshadowed by increasing economic uncertainty. Inflation has been an ongoing concern for Brazil during 2021, a consequence of fiscal stimulus and external supply shocks, and pressure has intensified in recent months. Inflation in Brazil is now running above 10%, rising from just 4.5% in January. As we incorporate a higher probability of economic fallout from inflationary pressure on the Brazilian economy, we are lowering our fair value estimate for Itau from $5.00 to $4.60. Roughly $.20 of the decrease comes from lower loan growth estimates, $.30 from higher credit loss assumptions, and $.20 from a weaker Brazilian real since our last update. These adjustments were offset by higher projected net interest margins.

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Company Profile

Business Description

Itaú Unibanco is the largest privately held bank in Brazil, the result of the 2008 merger between Banco Itaú and Unibanco. In addition to Brazil, the bank has significant operations in Chile, Colombia, Argentina, Uruguay, and Paraguay. Its commercial and consumer loans account for 36% of the bank’s total loans each, while foreign loans now account for 28% of the bank’s portfolio. Itaú also operates the fifth-largest insurer in Brazil and is the second-largest asset manager in the country, giving it broad reach over the Brazilian financial system.

Contact
Praca Alfredo Egydio de Souza Aranha, 6th Floor, 100-Torre Conceicao
Sao Paulo, SP, 4344902, Brazil
T +55 1127943547
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 98,764

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