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Itau Unibanco (ITUB) Receives Approval for 50% Stock Split

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On Friday, Itau Unibanco Holding S.A. (ITUB) received the Central Bank of Brazil’s approval to move ahead with the 50% stock split of common stock that the company had announced on May 24. Also, it commits to maintain its dividend level and double payouts.

The company’s common stock is expected to begin trading on a split-adjusted basis from Nov 26. Shares of Itau Unibanco closed at $13.66 in last day’s trading session on the NYSE.

Stock split increases the number of outstanding shares of a company without changing its market capitalization. A higher number of shares outstanding translates into lower stock price, making it affordable for shareholders. In fact, shares of Itau Unibanco are currently trading at a discount to the industry.

The company’s price to book, the best multiple to value insurers because of large variations in their earnings results from one quarter to the next, is 2.27, below the S&P 500’s average of 3.14. Also, the stock has a Value Score of A. Strong fundamentals coupled with favorable industry trends make shares dearer as they trade at a premium. Following a stock split, value of the same shares falls, which in turn, increases a stock's liquidity.

In the recently reported quarter, the company displayed impressive performance on the back of higher revenues, lower provisions, improved managerial financial margin and a solid balance-sheet position. However, elevated expenses were headwinds.

Itau Unibanco remains focused on building its operations either through strategic acquisitions or with plans to strengthen operations by introducing new products. However, elevated expenses and stressed conditions in Brazil keep us apprehensive.

Shares of Itau Unibanco have gained 9.9% over the past three months against 5.4% decline of the industry.

Currently, the stock carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the financial space are JPMorgan Chase & Co. JPM,  Webster Financial Corporation WBS and Popular BPOP. All these stocks are carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

JPMorgan’s earnings estimates have been revised upward by nearly 1% for the current year, in the past 30 days. Also, its share price has jumped 7.6% over the past year.

Webster’s Zacks Consensus Estimate for current-year earnings has been revised 2.8% upward, over the past 30 days. Further, its shares have rallied 9.9% over the past 12 months.

Popular has witnessed 4.3% upward earnings estimates revision for the current year in the past 60 days. Moreover, its shares have gained 54.7% over the past year.

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