UPDATE 1-Shares in Brazil's Itau tumble despite lower-than-expected defaults
(Updates with shares, CEO and analysts' comments)
By Carolina Mandl
SAO PAULO, May 4 (Reuters) - Preferred shares in Brazil's biggest lender, Itau Unibanco Holding SA, plunged more than 3% in morning trading, as investors ignored better-than-expected profit and asset quality performance.
Chief Executive Milton Maluhy said loan delinquency was lower than Itau had expected despite a brutal second wave of the coronavirus pandemic in Brazil. The 90-day default ratio is likely to rise by year-end, but at lower than previously expected levels.
He said the bank may even be able to post a cost of risk below the bottom of its 2021 guidance range, which was disclosed earlier this year.
Still, analysts said the bank was unlikely to repeat a strong performance in the coming quarters, considering provisions and trading gains. "Itau is setting the bar higher for future results," said Bradesco BBI analyst Victor Schabbel.
Preferred shares in Itau were down 3.5% in morning trading, at 29.93 reais ($5.49) a share.
Itau posted a net income of 6.398 billion reais on Tuesday, 11% above Refinitiv's consensus estimate, mainly driven by lower loan-loss provisions and higher trading gains.
"The bank didn't use in the first-quarter additional provisions made in 2020 for the pandemic. It shows Itau's loan book is very healthy," CEO Maluhy said. The lender's 90-day default ratio stood at 2.3%, stable from the previous quarter.
Itau ended March with 46 billion reais in loans in forbearance plans, and nearly 19% of it was overdue.
Given the lower-than-expected loan losses, Maluhy said the bank decided to increase loan disbursements in riskier credit lines, such as overdraft and credit cards. The move is likely to boost margins in coming quarters, he added.
Shares in the banking sector on the B3 stock exchange were underperforming the Bovespa stock index, but Itau's shares were falling more than its peers in morning trading. ($1 = 5.4510 reais) (Reporting by Carolina Mandl, additional reporting by Paula Laier; editing by Louise Heavens and Jonathan Oatis)
