Itaú (ITUB4) has a positive result and above its peers, but the stock closes down on a day of risk aversion

Itaú (ITUB4) released its figures this Monday morning (9) with a recurring profit of R$7.36 billion in the 1st quarter of 2022, up 15% on an annual basis.

Default measured by delays of more than 90 days reached 2.6% of Itaú Unibanco’s loan portfolio at the end of the first quarter of this year. The number represents an increase of 0.3 percentage point (pp) compared to the same period last year, and is 0.1 pp higher than that recorded in the fourth quarter of 2021.

Provisions for doubtful accounts (better known as PDD), in turn, increased by 2.5% compared to the fourth quarter of 2021 (4Q21), reaching R$7.0 billion, contributing to the increase in 12% of the cost of credit in the same period. Expenses with this type of credit were much higher than those seen in 1Q21, caused by the expansion of the credit portfolio and, consequently, greater origination in consumer credit products without guarantees, in addition to the macroeconomic deterioration in the country, which has a direct effect on rates of default and indebtedness of the population.

In general, market analysts highlighted that the bank’s numbers were positive, even though the session was of a fall for assets amidst the global risk aversion scenario, which made the Ibovespa fall by around 1.8% at the end. of the day. ITUB4 assets still closed lower than the Ibovespa, 1.43%, at 23.45.

For Morgan Stanley, the bank delivered solid results and exceeded expectations for credit growth. The bank’s analysis team also highlighted the increase in the bank’s margins in the period and greater cost control. And note that, like Santander (SANB11) and Bradesco (BBDC4), Itaú also benefited from the increase in the basic interest rate and a change in the mix of granting consumer credit.

Levante also mentioned that, once again, Itaú surpassed its two main competitors, Bradesco and Santander. “The bank has a healthy mix of products that guarantees a healthy and quality portfolio, delinquency at quiet levels, even lower than the numbers presented in the pre-pandemic period, and a good performance in controlling expenses, which once again allowed an increase of ROE in the period”, says Levante.

Morgan Stanley also notes that the bank was able to reduce its costs by 4% from one quarter to the next, well below inflation and its revenue growth.

Other highlights were the normalization of Allowance for Doubtful Accounts (PDD) and non-performing loans (NPL). “We believe that this normalization to pre-pandemic levels happened due to the large volumes of renegotiations carried out in 2020 and 2021. In addition, we believe that the increase in the volume of loans and the change in the profile of granting credit to higher risk consumers contributes with an increase in provisions and unpaid loans”, the bank pointed out.

Read also: With a high margin in the 1st quarter, Itaú (ITUB4) sees a volatile scenario and convergence to the guidance in 2022

Morgan Stanley reiterated rating overweight (exposure above the market average) to the ADR (receipt of shares of the company traded on the New York Stock Exchange) ITUB, “our bank large-cap favorite in Latin America,” says the analysis. The target price is $7.20, or a 55% upside potential from Friday’s close.

For Credit Suisse, net income was in line with its estimate. Analysts at the Swiss bank highlighted the better performance of Itaú’s asset quality in relation to peers, with a controlled worsening of delinquency.

For Bradesco BBI, Itaú reported a “decent quarter”, with expected results. According to analysts, although the bank’s margin with customers was weaker than BBI’s analysts had expected, it remained in line with the guidance for 2022, while provisions reflected a slight deterioration of the NPL (non-performing credit loan). .

“Meanwhile, strong insurance and operating results more than offset service fees [fees] seasonally weaker. We believe that the smaller deterioration of the NPL compared to its private sector peers can bring a positive reading of the market and a potentially positive performance”, said Bradesco BBI. BBI’s recommendation for Itaú is outperform (a performance above the market average), with a target price of R$32, or an upside potential of 35% compared to Friday’s closing.

Despite slightly outperforming Goldman Sachs’ expectations (by 1%) for recurring earnings, Goldman Sachs noted that Itaú’s risk-adjusted NII (net interest income) was 7% below estimates, with the company outperforming the estimates primarily on operating expenses, insurance and a lower tax rate. Profit before taxes was 2% lower than expected by the bank, with an effective tax rate of 29% (from 35% in 4Q21).

Goldman analysts, in turn, point out that Itaú’s client NII was solid, up 1%, with better volumes, mix and margin of liabilities partially offset by weaker spreads in Latin America. Goldman Sachs maintains a neutral recommendation for Itaú, with a target price of BRL 28.

XP also follows with a recommendation equivalent to neutral for the bank, although it has highlighted its result as slightly positive due to the strong growth of the loan portfolio and net interest income.

“At the same time, Itaú reported a good control of expenses, despite the marginal deterioration in its delinquency and coverage ratio”, assess the analysts. The coverage ratio (which represents the proportion that the provision for credit risk is able to cover non-performing loans) fell by 9 percentage points in the quarterly comparison, to 232%.

In terms of expenses, the bank reported a slight increase of 2.9% year-on-year in non-interest expenses, well below inflation for the period and close to the low of guidance for the year, which analysts considered positive. However, they reiterated an equivalent recommendation

Challenging scenario but resilience

In a press conference this morning, CEO Milton Maluhy Filho highlighted that, despite the challenging scenario at the beginning of the year, Itaú’s numbers were strong, with emphasis on good profitability and the company’s record efficiency index.

“The numbers were in line with what was planned and demonstrate the consistency of our performance, which is essential for us to continue performing in a sustainable manner”, highlighted Milton Maluhy Filho.

Milton Maluhy Filho, reinforced that the bank maintains the guidance released in February for the entire year of 2022. According to him, after the results of 1Q22, the positive expectation for the year continues and the bank has “all the conditions to go through 2022 with a pretty robust balance”.

“We continue to believe that it will continue to be valid for the next 9 months. All lines capture the geography where we imagine our results could be throughout the year”, highlights the CEO.

Regarding default, the CEO highlighted that it should gradually return to pre-pandemic levels, with a slight increase in the coming quarters.

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