Itau Unibanco Holding SA (ADR)(NYSE:ITUB) reported a smaller profit decline compared to analysts’ projections as the bank revenue gained from services, while cautioning that in coming period its loan book will narrow.
The highlights
Itau Unibanco reported that recurring net income in 2Q2016, which do not cover one-time items, dropped 9% to 5.58 billion reais. The average estimate of analysts was for net income of 5.08 billion reais. As per the market experts, revenue from services came as one of the most promising factors of the quarter.
With Brazil dealing with its worst recession, banks have been enhancing service fees to make for the declining market for lending. Last week, Banco Bradesco SA (ADR)(NYSE:BBD) posted 2Q2016 results that missed projections after it made a provision for an energy firm.
The overall performance
Itau’s revenue from commissions and fees came at 7.82 billion reais in 2Q2016 compared to 7.1 billion reais in the same period, a year ago. The bank stated that it projects its loan portfolio to come in a range of 5.5% and 10.5% this year. It also revised its lending projection because economic contraction in Brazil is worse than the predicted at the start of the 2016, while the country’s currency will be stronger.
Itau reported that it expects provisions to come in between 23 billion reais and 26 billion reais in 2016, compared to the previous estimated range of 22 billion reais – 25 billion reais. It has kept aside amount of 6.34 billion reais for souring loans in current quarter, against the reserve of 5.77 billion reais, in the same period, a year ago.
Brazilian bank booked securities’ impairment worth 539-million-real in the reported quarter. This impairment charge can largely attributed to one specific case; however the bank didn’t disclose the name of that company.
Itau shares jumped 1.07% to close at $10.36 in yesterday’s trading session.
