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Itau Unibanco (ITUB) Q4 Earnings and Revenues Climb Y/Y

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$7.16 billion ($1.28 billion) for fourth-quarter 2021, up 32.9% year over year. Including non-recurring items, net income came in at R$6.23 billion ($1.12 billion), down 17.9%.

Results benefited from higher revenues and a rise in the credit portfolio. However, increased non-interest expenses, cost of credit charges and non-performing loan ratio acted as headwinds.

In 2021, Itau Unibanco reported recurring earnings of R$26.88 billion ($4.82 billion) compared with R$18.54 billion in the prior year. 2021 net income came in at R$24.98 billion ($4.47 billion) compared with R$18.91 billion reported a year ago.

Revenues Rise, Costs Increase

Operating revenues came in at R$33.44 billion ($5.99 billion) in the reported quarter, up 14.6% on a year-over-year basis. In 2021, ITUB reported operating revenues of R$125.60 billion ($22.49 billion), up 9.4%.

Managerial financial margin increased 20.6% year over year to R$21.21 billion ($3.79 billion). Also, commissions and fees were up 4% to R$10.25 billion ($1.84 billion).

Non-interest expenses totaled R$13.36 billion ($2.39 billion), up marginally.

In the fourth quarter, the efficiency ratio was 43%, down 640 basis points (bps) from the year-earlier quarter’s level. A decrease in this ratio indicates increased profitability.

Credit Quality

Cost of credit charges climbed 2.8% on a year-over-year basis to R$6.20 billion ($1.11 billion).

The non-performing loan ratio (loan transactions more than 90 days overdue) came in at 2.5% during the fourth quarter, up from the prior-year quarter’s 2.3%.

Balance Sheet Position

As of Dec 31, 2021, Itau Unibanco’s total assets amounted to R$2.17 trillion ($0.39 trillion), up marginally, sequentially. Deposits totaled R$1.12 trillion ($0.20 trillion), up 3.7% on a sequential basis.

Itau Unibanco’s credit portfolio, including financial guarantees provided and corporate securities, reached R$1.03 trillion ($0.18 trillion) as of Dec 31, 2021, up 18.1% year over year.

Capital & Profitability Ratios

As of Dec 31, 2021, Common Equity Tier 1 ratio was 11.3%, down from 11.5% on Dec 31, 2020.

Annualized recurring return on average equity climbed to 20.2% in the fourth quarter from 16.1% recorded in the year-earlier quarter.

2022 Guidance

The company expects costs of credit to be R$25-R$29 billion.

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

Total credit portfolio is now projected to grow 9-12%.

Commissions and fees from insurance operations are likely to be up 3.5-6.5%.

Managerial financial margin with clients is estimated to increase 20.5-23.5%.

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

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

Our Viewpoint

Results of Itau Unibanco underline its decent performance during the December quarter on higher revenues. ITUB’s prospects look encouraging as it is focused on building strategies to expand inorganically. In addition, its business restructuring efforts will support the financials.

However, inflated expenses are a concern. Heightening competition and stressed conditions in Brazil’s economy pose significant risks.

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 Banks

First Republic Bank’s FRC fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. C delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp USB reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance, and a strong capital position were also encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.

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