Itau Unibanco Stays Neutral - Analyst Blog
28 Fevereiro 2012 - 1:00PM
Zacks
We have reiterated our Neutral recommendation on Itau
Unibanco Holding S.A. (ITUB) following a detailed analysis
of the company’s fourth quarter and full year 2011 earnings results
in light of the current economic environment.
Itau Unibanco reported fourth quarter adjusted earnings of
R$3.75 billion ($2.1 billion), down 4.9% sequentially but up 10.2%
year over year. While Itau Unibanco experienced an increase in its
net interest and fee income, a rise in expenses offset that.
Additionally, credit quality also deteriorated in the quarter.
For full year 2011, Itau Unibanco reported earnings of R$14.6
billion ($8.8 billion), up 12.4% year over year. This was driven by
improvements of 14.5% in net interest income, 11.4% in fee income
and 29.3% in results from insurance, pension plans and
capitalization.
Itau Unibanco also announced that it will pay up to R$11.77
billion ($6.8 billion) for the outstanding 336.4 million common
shares, equivalent to 49.98% of Redecard's total share capital,
after the company acquires the latter. Redecard is a credit-card
networking services provider. The buyout is anticipated to have no
impact on the company’s cash flow.
Going forward, we believe that Itau Unibanco’s solid business
model, diversified product mix, growing service fees, cost controls
and expanded credit portfolio would support its earnings.
However, Itau Unibanco’s stressed asset quality, increasing
competition and the volatility of the Brazilian economy pose as
risks. Therefore, we have reiterated our Neutral recommendation on
the stock.
Itau Unibanco’s shares are maintaining a Zacks #2 Rank, which
translates into a short-term Buy recommendation. However, its
closest peer Banco De Chile (BCH) retains a Zacks
#4 Rank, implying a short-term Sell recommendation.
BANCO DE CHILE (BCH): Free Stock Analysis Report
BANCO ITAU -ADR (ITUB): Free Stock Analysis Report
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