Brazil's Itau Unibanco beats profit expectations, raises loan forecast

By Peter Frontini

SAO PAULO (Reuters) -Itau Unibanco on Monday beat profit expectations and substantially raised its loan growth forecast for this year even as it boosted provisioning for bad credits, reflecting higher Brazilian interest rates.

Brazil's largest lender said second-quarter recurring net profit rose 17.4% from the previous year to 7.67 billion reais ($1.50 billion), beating analyst expectations of 7.48 billion reais, as compiled by Refinitiv.

The bank also said its loan book is likely to grow between 15.5% and 17.5% this year, above a previous estimate of 9%-12%.

Its 2022 cost of credit, which is mainly composed of cash set aside for loans likely to default, is now seen in the range of 28 billion-31 billion reais, up from the previous forecast of between 25 billion and 29 billion reais.

In the three months ending June 30, Itau's loan-loss provisions reached 7.81 billion reais, up 61.7% from last year, while its loan book rose 19.3% on a year-on-year basis to 1.08 trillion reais.

The growth in cash set aside for bad loans comes in line with the trend seen in its peers, such as Bradesco SA and Santander Brasil SA, reflecting the economic environment of higher interest rates and inflation.

Credit volume expansion was the main driver of the growth in net interest income (NII) from clients, Itau said, which came in at 21.98 billion reais, or 30.9% above the previous year.

The solid performance prompted the lender to lift its 2022 growth projection for client NII to between 25% and 27%, from the range of 20.5%-23.5%.

At the end of June, its 90-day default ratio was 2.7%, slightly up from the previous quarter.

Itau's return on equity, a gauge of profitability, was at 20.8% in the quarter - above from the 20.4% seen in the previous three months.

($1 = 5.1110 reais)

(Reporting by Peter Frontini in Sao PauloEditing by David Alire Garcia, Christian Plumb and Matthew Lewis)