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Itau Unibanco (ITUB) Q2 Earnings & Revenues Increase Y/Y

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$7.68 billion ($1.56 billion) in second-quarter 2022, up 17.3% year over year. Including non-recurring items, net income came in at R$7.44 billion ($1.52 billion), which declined 1.6% from the prior-year quarter.

The results were supported by a significant increase in operating revenues. In addition, the rise in total deposits and credit portfolios reflects a strong balance sheet position. However, a rise in non-interest expenses was an offsetting factor.

Revenues Rise, Costs Increase

Operating revenues came in at R$35.2 billion ($7.17 billion) in the reported quarter, up 16.2% on a year-over-year basis.

Managerial financial margin increased 20.5% year over year to R$22.64 billion ($4.61 billion). Also, commissions and fees were up 8.3% to R$10.5 billion ($2.14 billion).

Non-interest expenses totaled R$13.31 billion ($2.71 billion), up 5.9%.

In the second quarter, the efficiency ratio was 40.8%, down 37 basis points (bps) from the year-earlier quarter’s level. A decrease in this ratio indicates increased profitability.

Weak Credit Quality

Cost of credit charges climbed 60.6% on a year-over-year basis to R$7.54 billion ($1.54 billion).

The non-performing loan ratio (loan transactions overdue more than 90 days) (NPL) came in at 2.7% during the second quarter, up from the prior-year quarter’s 2.3%.

Strong Balance Sheet Position

As of Jun 30, 2022, Itau Unibanco’s total assets increased 5% to R$2.29 trillion ($0.49 trillion) from the last reported quarter. Deposits totaled R$1.17 trillion ($0.25 trillion), increasing 6% on a sequential basis.

Itau Unibanco’s credit portfolio, including corporate securities and financial guarantees provided, reached R$1.08 trillion ($0.23 trillion) as of Jun 30, 2022, up 5% from the last reported quarter.

Capital Ratio Down & Profitability Ratio Up

As of Jun 30, 2022, Common Equity Tier 1 ratio was 11.1%, down from 11.9% on Jun 30, 2021.

Annualized recurring managerial return on average equity climbed to 20.8% in the second quarter from 18.9% in the year-earlier quarter.

2022 Guidance

The company expects costs of credit to be R$28-R$31 billion.

Non-interest expenses are expected to grow between 3% and 7%.

Total credit portfolio is now projected to grow 15.5-17.5%.

Commissions and fees from insurance operations are likely to be up 7-9%.

Managerial financial margin with clients is estimated to increase 25-27%.

Financial margin with the market is projected in the range of R$1-R$3 billion.

The effective tax rate is estimated to be 30-33%.

Our Viewpoint

Itau Unibanco second-quarter results were driven by the rise in managerial financial margin and commission and fees. The declining efficiency ratio indicates a rise in profitability, which is one positive factor. However, the weak credit quality was a matter of concern.

Itau Unibanco Holding S.A. Price, Consensus and EPS Surprise

Itau Unibanco Holding S.A. Price, Consensus and EPS Surprise
Itau Unibanco Holding S.A. Price, Consensus and EPS Surprise

Itau Unibanco Holding S.A. price-consensus-eps-surprise-chart | Itau Unibanco Holding S.A. Quote


Itau Unibanco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

Deutsche Bank DB reported second-quarter 2022 net income of €1.21 billion ($1.14 billion) compared with the year-ago quarter’s €828 million. Also, the Germany-based lender reported a profit before taxes of €1.55 billion ($1.45 billion), up 33% from the year-ago quarter.

The results of the second quarter were supported by higher net revenues and lower expenses. However, declining capital position was an offsetting factor for DB.

Mitsubishi UFJ Financial Group, Inc. MUFG reported profits, attributable to owners of the parent for first-quarter fiscal 2023 (ended Jun 30), of ¥113.7 billion ($0.877 billion), down 70.3% year over year.

MUFG’s lower net profit in the quarter was attributable to one-time losses related to the sale of MUFG Union Bank. Nonetheless, in the reported period, the demand for overseas loans accelerated.

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