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Itaú (ITUB4) posted a net profit of R$8.2 billion in the first quarter of 2023 – the second-highest in history among banks listed on the Brazilian Stock Exchange, according to data compiled by Einar Rivero, TradeMap’s Chief Commercial Officer.
The result of the financial institution was behind the profit made by the state-owned Bank of Brazil (BBAS3) in the fourth quarter of last year, amounting to 8.6 billion reais. Incidentally, of the top ten profits made by publicly traded banks, six belong to Itaú and four to Banco do Brasil.
For comparison purposes, Santander Bank (SANB11) had the worst result among private banks with net income of R$2 billion, which is a 47.7% decline in 12 months.
The figure reached by Itach at the beginning of this year, in addition to being a record, represents an increase of 14.6% compared to the same period in 2022.
The result comes within the complex context of the financial sector.
Higher interest rates, at 13.75% per annum, increase the cost of lines of credit. As a result, there is an increase in the number of indebted and defaulted Brazilians, that is, people who cannot afford the loans taken out. This scenario is detrimental to banks, which need to cover possible losses.
At the same time, the collapse of Americana (AMER3) also extended to financial institutions. The retailer filed for bankruptcy after reporting billions in debt in January. broke down reigns (The clauses) caused the expectation of the rest of the debt, which totals more than R$40 billion of debt – R$15.2 billion with banks, which started making provisions in the fourth quarter of last year.
This situation makes Itaú’s quarterly billionaire earnings even more impressive and has made the stock a top buy recommendation among private peers. says Guilherme Teglia, partner and equity analyst at Nord Research, which has a buy rating on the stock.
On the balance sheet for the first quarter of 2023, the first factor that drew attention was the “margin with the market,” that is, how much banks gain or lose from treasury operations.
In the first quarter of 2023, Itau was the only one among its private sector peers who managed to maintain such a positive margin, at R$645 million, despite a 36% decline in 12 months. This figure has been maintained by A hedge (protection strategy) in the interest rate, that is, the bank has protected against high Selic.
Santander and Bradesco provided this negative index, at R$1.17 billion and R$312 million, respectively. “The positive result from Treasury added to Ita’s revenue generation,” says Wagner Biondo, financial sector analyst at Genial Investimentos.
Another factor that made Itaú stand out this quarter was the quality of the loan portfolio. Rodrigo Azevedo, CFP®️ Financial Planner, Economist and Co-Founder of GT Capital, points out that the bank has historically been more careful in extending credit, which is reflected in fewer defaults.
“This quality is measured by analyzing the evolution of the 90-day default rate, where ETA is performing better than its peers,” says Azevedo. Overall, the 90-day default rate was 2.9%, with growth of 0.3 percentage points in the 12-month period. In Bradesco and Santander, the rate was 5.1% and 3.2%, respectively.
The overall profile of Itaú’s credit portfolio, less concentrated in individuals than others and with high-income clients, would make the institution more resilient to unfavorable macroeconomic scenarios.
In addition, Itao’s credit portfolio will be more diversified. The 100 largest debtors to a bank account for 11.7% of total credit. In Bradesco and Santander, the largest debtors correspond to a more relevant portion of the portfolio, 15.3% and 21.7%, respectively. “This means that when Itaú has a problem with a debtor, the impact ends up being less than that of other banks, because it is more diversified,” says Biondo, of Genial.
Santander, while disclosing its quarterly results, reported that it has been more selective in franchising since the end of 2021 and that it has begun to focus on products with warranties and customers with a better rating profile (a rating that indicates risk of default), “which is reflected in the quality of Better for the balance sheet.
According to a note from the bank’s press office, the percentage of high-income associated customers increased by 21% in 12 months, reaching 834 thousand, and this segment accounts for 24% of the total credit portfolio of individuals. Even with this selectivity, the bank has registered portfolio progress in strategic businesses, focusing on vehicles, payroll and real estate – today, 65% of an individual credit portfolio is collateralized (the type of operation in which a commodity is presented as collateral for debt repayment).
In terms of the largest debtors, Santander reported that the credit portfolio concentration fell from 22.1% at the end of 2022 to 21.7% in March of this year.
Finally, to justify the analysts’ preference for Itaú, there’s the foundation’s business structure, which is also considered more robust. The launch of Trends such as Íon, a financial investment platform, has led the brand to begin positioning itself in segments dominated by younger competitors, such as XP and Nubank.
“Both in banking and in investments, we see a sustainable and enduring structure,” says Ronaldo Cerqueira, Partner and Director of Eu Me Banco. “These moves were done before the pandemic, and now Itaú is reaping the benefits.”
What do you expect from stocks?
On Tuesday (9), ITUB4 shares closed up 0.99% at R$26.61. In the year, the stock is up 7.78%.
Biondo, from Genial, has a Buy recommendation for ITUB4, with a target price of R$33.60. The forecast represents a potential increase of 26.7% compared to the current price. “We believe Itaú will continue to deliver good results in the coming quarters and we estimate that the annual profit will be R$35 billion, a positive perspective,” he says. In addition to Itaú, Banco do Brasil (BBAS3) shares are also among the analysts’ pointers to buy in the financial sector. “Regarding Santander and Bradesco, we are more careful.”
Tiglia, from Nord Research, also has a buy rating for Itaú’s assets. “Itau has had good, strong results in recent quarters and continues to play a prominent role in the sector precisely because it does not suffer from an out-of-control holdup. In the latter case, the lagging index has been practically stable,” he says. “We have noticed a level of profitability that differs from others.”
The preference for Itaú shares among publicly listed private banks has been highlighted by analysts Eduardo Rosman, Thiago Paura, Ricardo Buchpiguel and Vitor Melo of BTG. “The main positive point in relation to peers was asset quality. Despite negative seasonality at the start of the year, defaults remained stable in the quarter, beating expectations,” he says.
The assets of Santander (SANB11) and Bradesco (BBDC4), in turn, rose 5.50% and 4.19% in 2023 at R$28.97 and R$15.17, respectively. For SANB11, BTG has a sell recommendation due to weak financial margins and low revenue growth, while for BBDC4, the index is neutral.
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