Itaú Unibanco Holding S.A. (ITUB) on Q4 2024 Results - Earnings Call Transcript

Renato Lulia: Good morning, everyone. I'm delighted to welcome you to another Quarterly Earnings Conference. As always, this event will be divided into 2 parts. First, Milton will go through the performance for the quarter and the year and he'll also disclose our expectations for 2025. Then we'll have the Q&A section, during which investors and analysts will be able to interact with us directly. But before I hand over the floor to Milton, I'd like to provide some guidance to help you make the most of today's presentation. For those viewing this through our website, there are 3 audio options on the screen. You can choose to listen to the entire content in Portuguese, the entire content in English, or just the original audio. For the first 2 options, we will have simultaneous translation. To choose your preferred option, just click on the flag at the top of your screen. You can also send questions via WhatsApp. To do this, just click on the button on your screen, or simply send a message directly to the number +55-11-93959-1877. Today's presentation will be available for download on the website screen and, as always, on our Investor Relations website. That's it from me for now. Now I will hand over the floor to Milton, who will begin the earnings presentation. And then I will come back to you at the end to moderate the Q&A session. Milton, the floor is all yours. Milton Maluhy: Good morning. Welcome to another earnings presentation. Let's talk about our quarterly earnings, yearly earnings, dividends and guidance. This will be quite a dense conference call covering a lot of information. I'll try to be very objective to convey the main messages. And then we'll have our Q&A, in which we can talk more broadly about the different topics of interest to all analysts who might ask us questions. I'll start by summarizing what 2024 meant for us in a slightly more qualitative way by leaving aside most of the figures for the time being. And so let me put touch on several pillars of our operation. First in terms of both culture and ESG, this year, we were recognized for our work, both by an institutional investor, who ranked us first in all categories and in the Valor 1000 Yearbook as a value company. It's the first time in history that a bank has received the Value Company of the Year award. In addition to winning as a financial institution, we also won as a value company, an incredible mark of recognition by the entire Valor team. We are very honored by this, as well as by all the other awards that we list here. As regards our ESG agenda, we made important progress in 2024. We made the commitment to go from BRL400 billion to reach up to BRL1 trillion in loan transactions and financing transactions in the capital market by granting loans to businesses and industries with positive impacts on the economy. Our role is to be the transition bank and we continue to believe that we can be this bank while never losing focus on our pillars of sustainable finance, diversity and climate transition which are very important to us. In the last quarter, I talked a lot about what all our modernization, investment in technology and the migration to the cloud means. This is a summary, as I've already given you some data. We achieved an important reduction of 99% in higher impact incidents. We have more than 470 data scientists and more than 390 initiatives using generative artificial intelligence within the bank and we also have in place more than 1,300 artificial intelligence models currently in use, tested and growing within the organization. I made a commitment to you that our goal was to migrate 15 million clients as part of what we call One Itau, a very important project for us. For the end of the year, we had a goal that changed over time. We managed to close 2024 with 5.3 million clients migrated and should complete the migration of the remaining clients throughout 2025. We managed to do this without compromising quality with a post migration NPS of more than 80 points and a lot of account activation and pix [ph] key registrations. This shows that we have started to move from focusing on the experience of our clients' journeys towards a phase of hyper personalization and transactionality over time. So I believe the bank has a lot of opportunities and this is one of the most promising projects we have at the moment. And we have managed to do all this while delivering quality solutions. We reached an employee net promoter score of 83 points. This is the level of energy, engagement and internal strength that allows us to work, receive so much recognition and, above all, evolve within the client centricity agenda which is one of the key pillars of the entire management of our organization. Our global NPS increased by 4 points, with 75% business areas reaching their all-time highs and 69% of our business segments and products posting an NPS above 70 points. Considering global NPS, we overcame all the challenges and met all the goals we had set for ourselves and now we will set new challenges. It is very important when we look at the relative NPS to see how much we managed to narrow the gap in a very significant way for those items where we still had some kind of opportunity whether regarding the app or whatever. And today, we are able to compete in several segments with those segments leaders and narrow the gaps even further from an experience standpoint. While, on the other hand, in several other business segments, we are opening up major gaps. This is the bank's continuous agenda. Now let's talk about earnings. Managerial recurring results for the quarter totaled BRL10.9 billion, reminding that in the last quarter it totaled BRL10.7 billion. And we had that non-recurring impact, an important reversal of BRL500 million before taxes. Therefore, we managed to more than offset that effect and still grew our earnings by 2% for the quarter. For the year, we closed at BRL41.4 billion, very strong growth of 18.2% in light of the earnings and profitability levels at which the bank has been operating. This result leads us to a consolidated ROE of 22.1% and 23.4% in Brazil. And if we simulate adjusting by the minimum capital ratio approved by the Board of Directors, we would be running at 24.4% and 26.2% in Brazil. This shows how we have been able to perform in a very relevant way. We remind you that our capital ratio approved by the Board of Directors considers a minimum capital of 11.5% and we cannot operate below this level. So it is very important to adjust with regard to the average capital ratio of the industry. The loan portfolio grew with great quality and recorded major growth in this quarter. I'll give more details in a moment. We've already reached BRL1.359 trillion and we grew 15.5% over December 2023. This is very sound growth, although a good chunk of our growth is explained by FX rate effects which I'll soon give you more details about. All this growth has been achieved with increasingly better credit quality. We managed to improve our delinquency levels yet another quarter by reducing long-term NPL by 0.2 percentage point compared to last quarter and 0.5 percentage point compared to December 2023. We have also seen very positive growth in the financial margin with clients which has grown 3.7% in the quarter and 8.3% year-over-year, reaching BRL108 billion in 2024, very sound growth. Commission fees and results from insurance totaled BRL14.3 billion, important growth of 3.9% compared to the last quarter and 7.7% year-over-year. So I believe that the big picture shows a very sound quarter, very strong in terms of earnings, profitability, credit quality and growth. In addition, the figures year-over-year are also very strong, with growth of almost 20% in bottom line earnings. Going into more detail for credit portfolio. The individual loan segment grew 6.9% year-over-year. We remind you that this year we made an important adjustment to the portfolio. As I have mentioned in the past, we had been de-risking the individual loans portfolio since the beginning of 2024 and this process has now been completed. We grew 3.7% in the quarter, pushed by the growth in credit card loans. Naturally, this quarter has the highest card revenue seasonally. In addition, we also posted growth in vehicle and mortgage loans which are products that tend to have a slightly different credit performance from unsecured products in general. The SME portfolio grew 8.1% in the quarter. However, it's worth highlighting that this quarter our origination of governmental programs, as FGI and Pronampe, grew almost 300% compared to the last quarter as we originated more than BRL12 billion. When we make this adjustment to the SME portfolio, we see that of this quarterly growth delta, approximately BRL10 billion consists of these governmental programs that generate a pretty adequate NIM to our portfolio, especially by looking at the cycle and the challenges that lie ahead. We also have part of this growth explained by FX rate effects, especially with regard to the middle market portfolio which contains a more material foreign currency component. The large corporate segment is no different. We posted significant growth of 6.8% quarter-over-quarter and 21% year-over-year and this growth is also explained by FX rate effects. In the unsecured products portfolio, we grew 11% this quarter, pushed by credit transactions in the Personnalite and Uniclass segments which are mid and higher income segments that usually tend to perform better during more challenging cycles. Growth year-over-year was 17.5%. Mortgage loan origination totaled BRL10.8 billion and the segment's loan to value was 60%. So this is a collateralized higher quality portfolio. I've already highlighted about the impact of government programs and we also have the FX rate effects. Disregarding this, our growth in the SME segment would be 4.9% in the quarter. In large corporates, we are talking about growth of 4.3% and in Latin America, growth was 3.3%. This shows the impact of FX rate effects both in the quarter and year-over-year. That said, I can now move to render account of the 2024 guidance. Our guidance ranged from 9.5% to 12.5% and we are delivering growth of 15.5%. And if it weren't for the FX rate effects, our growth would be 10.2%, within the targeted range, because the FX rate effects were very strong. In other words, the devaluation of the real against several currencies ended up generating this effect on the portfolio as a whole and that is why we were above our guidance upper range. At the financial margin with clients, we isolated the impact of working capital which is these BRL3.1 billion which had a slightly positive effect, while the bank's equity kept growing. When we look at the core margin in product mix, by having an individual loans portfolio of better guaranteed products with credit cards this quarter tending to grow more in the non-interest portfolio and then moving on to the interest portfolio. And with the strong growth in government programs, this ends up resulting in a slight negative effect but with a small impact. We posted growth in average volume, with very significant volumes in the quarter and in spreads and liabilities margin. The biggest effect is on the liabilities margin and not on spreads which also helps to explain a good portion of the growth in NIM. In Latin America and others, we see some effects from structured operations allocated to the wholesale business. And that were a little weaker this quarter due to different seasonality impacts on this line as a result of our portfolio's dynamics. As regards the risk adjusted annualized margin which is the margin that we track -- as I always say, we cannot just look at the annualized margin and forget that we have a credit cost to offset. When we look at the series, we see a gradual evolution over the quarters. And last quarter, we had a one-off impact as a result of the mentioned extraordinary reversal that we made and which generated this impact on the indicator. In the fourth quarter, the indicator was 5.9%. So we have a margin that has been slightly expanding over the quarters. In Brazil, we have similar movement from 6.2% to 6.1%. By adjusting for the effect of BRL500 million from the reversal of provision for loan losses, last quarter, the ratio would be 6.3% and this quarter we also closed at 6.3%. Compared to the guidance, we closed 2024 at 8.3% of growth. And the given range, already adjusted for Argentina, was from 5.5% to 8.5%. Therefore, we grew close to the top of the guidance upper range which is good news for the financial margin with clients. In the financial margin with the market, we had a good quarter in terms of earnings generated in Brazil. The market NII reached BRL1 billion after removing the hedging effect from the capital ratio. And the earnings from Latin America were in line with the earnings posted in previous quarters. In annual terms, in 2023, we posted earnings of BRL3.3 billion and in 2024, this totaled BRL4.4 billion. So we recorded important growth year-over-year. Compared to our guidance, the range was between BRL3 billion and BRL5 billion and we closed at BRL4.4 billion. Therefore, closer to the guidance upper range and with another strong year of market NII performance. Focusing now on commissions, fees and result from insurance operations. I'd like to highlight some effects. In credit cards, at the issuer level, growth was 5.7% in the quarter and at the asset management level, growth was 6.8%, while year-on-year, growth was 12%, therefore quite material. In addition, in advisory services, revenue remains at BRL1.1 billion, while it grew 38% year-over-year. These are very strong results, especially in the capital market which I will highlight in a moment, since this is well reflected in all rankings. And when we look at the result of insurance operations, pension plan and premium bonds, growth was 14% year-over-year which shows that all our insurance earnings continue to grow consistently. With regards to the year's highlights, this year, Itaú Asset was the asset manager that raised the most funds and generated the most performance fees in a challenging year as we managed to have the best performance in the market. I never say much about our individual's broker. But this is a journey that started 4 years ago and we are focusing on it a great deal. As a result, we managed to increase the earnings of the individual's broker six-fold which is now much more in alignment with its value proposition, investments, products and UX. These are major results. And even though we did not break down the absolute amounts, they are already a quite material portion of our P&L. And as I mentioned earlier, we were once again in first place in fixed income, mergers and acquisitions and equities when it comes to investment banking. As you can see, our market share is quite significant, above our credit fair share, with a 26.5% market share in fixed income, 30% in mergers and acquisitions and 14% in equities. A very sound performance from our investment bank. ECM had a weaker year. But on the other hand, 2024 was an extraordinary year for fixed income. Compared to our guidance, we grew 7.7% over guidance ranging from 5.5% to 8.5%, also above the midpoint which also shows the quality of our guidance. In terms of credit quality, from any standpoint, we only have good news. Looking at NPL 15 to 90 days, we are consistently reducing the indicators both in Brazil and in Latin America and in total short-term NPLs. And our performance is measured by loan indicators which is not a denominator effect, was already very sound. In this case, we suffered a double impact, both from the numerator and the denominator. Total NPL over 90 days decreased from 2.6% to 2.4%, while in Brazil, NPL over 90 days decreased from 2.9% to 2.6%. So a very sound performance. We can also view this very sound performance in the breakdown of NPL 15 to 90 days. The short-term NPL ratio for individuals decreased from 3.0% to 2.8% and the ratio for SMEs decreased from 1.5% to 1.4%. Both long-term NPLs of individuals and SMEs improved by 20 basis points and 50 basis points, respectively which is a major development. Of these 50 basis points, 20 basis points are explained by the growth of the credit portfolio, while the other 30 basis points are explained by the actual improvement in loan performance. In terms of credit quality and cost of credit, last quarter, we separated this view. We posted BRL8.7 billion in cost of credit in the third quarter which disregards the extraordinary reversal effect that we had. Officially, the amount was BRL8.2 billion in the third quarter and the adjusted cost of credit ratio would have been 2.8% in the last quarter and went to 2.6% in the fourth quarter. These are the most comparable values. As a result, in this quarter, we posted cost of credit of BRL8.6 billion which is the best indicator in the series when compared to previous quarters. The cost of credit year-over-year decreased from BRL36.9 billion in 2023 to BRL34.5 billion in 2024. We have posted strong portfolio growth and a nominal drop in the cost of credit for 2024. The figures for the renegotiated portfolio show a major effect. This is falling nominally and falling percentage-wise, while it is the lowest ratio in the series. Before the pandemic, we operated at the ratio of 3.9% and we closed the year at 2.5%. And we also have a very sound coverage ratio. The decrease in NPL indicators makes our coverage ratio slightly higher which again shows a very well-collateralized portfolio and with very well provisioned and sound indicators. By comparing the 2024 guidance projections with the actual figures posted, we reached BRL34.5 billion, while our guidance ranged from BRL33.5 billion to BRL36.5 billion. In other words, slightly below the midpoint. This evidence is a very strong year from a credit risk management standpoint. With regards to non-interest expenses, we posted growth of 6.8% year-over-year. When we look at our efficiency ratio, we ended 2024 with an efficiency ratio of 37.7% in Brazil and a consolidated efficiency ratio of 39.5%. This shows that we are also managing to grow the core cost with discipline and below inflation which was the benchmark that we gave you in the past. As a result, we grew 4.4% in core costs compared to an IPCA of 4.8%. And all this without giving up, making important investments in business and technology while focusing on and ensuring earnings generation and always investing in the franchise and our business. Compared to our guidance which range from 5% to 8%, we closed the year at 8% in the upper range and within the range that was released to you. On the capital side, this quarter, we were able to finance major growth. Given what we generated in terms of earnings already adjusted by the dividends that we had provisioned, we were able to fully finance the portfolio growth which was important in the quarter and we were also able to finance the adjustments that were made to equity caused by volatility, rates and securities. As a result, we closed the quarter with the same level of capital as the previous quarter at 13.7%. Here, you are seeing 1.3%. But I would like to remind you that the maximum percentage we can use from this additional Tier 1 is 1.5% and we closed the year with 1.3%. However, with the Tier 1 capital level of 15% at which we're operating, we believe that it is not necessary to operate at 1.5% as we have the capacity to operate at slightly below this percentage by always relying on our financial management while keeping an eye on our capital ratio and looking for the best opportunities to manage our additional Tier 1. For this reason, in this quarter, it dropped slightly. As regards the extraordinary dividends which are actually additional dividends, last year we made an additional distribution of dividends to shareholders. And this year, we are making another announcement of additional distribution of dividends. This is how we do things here at the bank. Every year, we assess our ability to generate capital throughout the year. We make expected growth, business performance, consumption and regulatory impacts projections. And based on these projections, we distribute payouts to shareholders above a certain level. And these announcements have been made somewhat regularly since we did this last year and we are doing it again this year. And this entire assessment will be done again at the end of 2025. The news we are announcing regarding dividends is very good. We will make an additional distribution of BRL18 billion which will be done in 2 different ways. BRL15 billion will be distributed as both dividends and interest on capital and we will distribute BRL3 billion related to share buybacks that will be made throughout the year. And these shares, once bought back, will be canceled. This was the best way and the best combination we found to distribute dividends to shareholders this year. We had already disclosed, declared and paid BRL5.7 billion and we also have BRL5 billion already declared that will be paid in the future. When we add up all these effects, we have a total distribution of BRL28.7 billion, with BRL15 billion in dividends and interest on capital and BRL3 billion in buybacks regarding shares that will be bought back and later canceled throughout the year. This means a distribution of around 70% of our profit, including this new distribution that I've just mentioned. Last year, we made an additional distribution of BRL11 billion which represented a payout of approximately 60%. We have increased our distributions not only as a percentage but also nominally as a result of higher earnings. With that, our common equity Tier 1 ratio goes from 13.7%, as we saw earlier, to 12.3% adjusted on a pro forma basis for this distribution as if the share buyback had been done on the first day and the shares had been canceled also on the first day of the period so that you can get a sense of the results of these events. As a consequence, our adjusted ROE on a pro forma basis in the consolidated figures would be 23.5% and 25% in Brazil due to these events and these adjustments made in the fourth quarter of 2024. In addition, we are announcing bonus shares of 10%. This way, we trigger a capitalization. That is an increase in the bank's capital stock by BRL33.3 billion which will be transferred from the reserves to capital stock. Simply put, for every 10 shares held by each investor, they will earn an additional share of the same class at the attributed cost of BRL34 per share. As for the BRL0.015 dividend that we pay monthly per share, with this bonus, each shareholder will have an increase of 10% in the amount received monthly. These are the 3 pieces of news we are announcing: distribution, buyback and bonus shares. These were all the points regarding the release of the 2024 results. Now let's talk about 2025 and our outlook and guidance. Regarding the GDP, we expect lower growth this year due to the monetary tightening cycle, reaching 2.2% growth by the end of 2025. We expect a year-end SELIC of 15.75% in 2025 which is our best outlook. We expect inflation of 5.8%, resulting in greater inflationary pressure which naturally justifies this effect on monetary policy. We estimate an unemployment rate going from 6.5% to 6.8% and an exchange rate in the range of BRL5.90 which despite the volatility is necessary to assess the sensitivity of our guidance. Accordingly, the guidance I submit to you now takes into account these macroeconomic indicators for sensitivity analysis purposes. We might make some adjustments or updates to our guidance if needed as a result of any changes over time. We remind you that this guidance has already been adjusted by the criterion of Resolution 4966. As regards to the loan portfolio, we expect growth ranging from 4.5% to 8.5%. And this is what we are currently foreseeing considering all the challenges expected for 2025. In terms of the financial margin with clients, we expect growth substantially higher than portfolio growth, ranging from 7.5% to 11.5%. As for the financial margin with the market, we expect something between BRL1 billion and BRL3 billion due to volatility and the monetary cycle. We estimate a cost of credit nominally ranging from BRL34.5 billion to BRL38.5 billion. An important point that I would like to mention is that Resolution 4966 has virtually no impact on these lines. But if we were to follow the previous criterion, commissions, fees and results from insurance operations would grow from 4.9% to 7.9%. That is an increase of 1 percentage point. But as we have to defer some revenues due to Resolution 4966, this is the actual impact of 1 percentage point on growth. In terms of non-interest expenses, we expect growth ranging from 5.5% to 8.5%. As for the effective tax rate, we expect it to range from 27% to 29%. These are our best prospects. This has surely given rise to many questions. And next, I will join Renato to reply to all of them in our traditional Q&A session. I would like to take this opportunity to tell you that we are very happy with the quality of our earnings and our performance throughout 2024. All business lines have been performing at their best and we see a bank that is perfectly integrated from a culture, management and workplace environment standpoint, in addition to being very open to innovation and change. And as you have seen on the first slide, all the investment we have been making for years in technology, business model development and client experience is bringing major recognition both in terms of client satisfaction and the satisfaction of our employees. All in all, this is a set of results which in our view are very solid and consistent. I would like to thank you once again for your time, support and feedback. I will now join Renato so we can start the Q&A session. Thank you very much and see you in a moment. Renato Lulia: [Operator Instructions] Whatever we cannot answer here with Milton, we can answer thereafter with the IR team. Okay. Let's go. First question. We have Daniel Vaz from Safra Bank. Daniel Vaz: Congratulations on the results. It's incredible to see a 25% ROI being distributed here by the bank when adjusted here in Brazil. I wanted to talk about your guidance on expenses. You've delivered improvements on the efficiency. And the guidance, it's implicit that in the midpoint, it worsens 20 basis points because of stability. If you can give us some more detail on what is -- you're growing above revenue. Does that come from more investments in technology or a core cost that is pressured by higher inflation? Since you gave the projection for 5.8% on specific expenses, the efficiency program getting to a more advanced stage. If you can give us some more color on those expenses, that would be very productive. Milton Maluhy: Talking about expenses, very relevant messages. If we look at the year-on-year evolution of this result that we just delivered, you're going to see that there are 3 big effects. One, the profit sharing has improved. It explains 30% of the delta. I believe that this is a very important number to keep in mind, because the result of the bank growth not only in the value creation but also in the bottom line. And that affects naturally all the pools of the bank. That affects -- that's the first effect. The second effect; we had a year that we improved the labor provisions that generates a year-on-year effect. Central message -- this is an exercise that you can look. You can see what we have for labor against the costs incurred during the year. This is a model that has labor expenses that anticipates what's up to come and with a very relevant coverage. We have 3 years of coverage at least of these provisions. And it shows discipline, discipline in management. Thirdly and most importantly, all investments that we do all throughout the years -- we've done delta investments since 2021, very strong. And when you see the growth of investments, part of what we could activate, we've expensed on the result of the year itself. Part is activated and the activated part will depreciate, will lose value throughout time because of all the intangibles that we have in the balance sheet of the bank. The most important thing to see is that we're growing the level of investments. And we've stabilized for some years. We're still in the curve of depreciation. We're going to get to a plateau over the next 2 years. Delta depreciation tends to decrease year-on-year over the next 2 to 3 years until stabilization and everything is more constant, the investment is constant. So we've managed to deliver the level of profitability and result and growing the top line above expenses due to this level of investment that we've done. But this is the same level of investment that we've done that will allow us to take leaps of efficiencies in the future. So we have a platform that is completely digital. We have all applications of the bank, ultra-modern platforms of tech migration to cloud. Once you go through this maturation of the investment cycle, you get to a capture value cycle, because either you're going to turn off mainframes, you're going to deactivate a lot of expenses that you have today, so you'll have the cost of operation lower and also you'll have a value proposition and a model of business that is more digital which allows you to take relevant leaps in the efficiency of the bank. We are in the cycle, therefore, of investment that is not complete. We've gone over the midpoint. And what's up ahead, we are going to get into a cycle of capture of value that is very important. This is a project with an efficiency level. Looking up ahead, it's natural that part goes to price and competition. That's why we are more efficient. And part of it is so you can absorb more risk, especially in the retail operations. We're still investing nonetheless. We have inflation -- a banking inflation which is higher than the current inflation and transactionality issues and volumes that are important. So our volume is growing. Therefore, we see that our unit cost is decreasing which makes a big increase in the transactional. The volume grows, therefore, we have a leverage -- operational leverage that is much higher but with the space to grow and evolve. I am still very hopeful for the expectations of what we can do up ahead. Renato Lulia: Second question, we have Bernardo Guttmann from XP. Bernardo Guttmann: Congratulations on the results. I have a question about the guidance of growth for NII clients. Taking into consideration the reduction of the risk on the portfolio and the perspective of an expansion that is lower on the portfolio, when you think about growth from now on taking into consideration some current market dynamics such as the Nubank's well position in the mass segment, high income, more competition -- so which segments can bring the best opportunities for the bank to increase its spreads? Where are the opportunities and where can we still see pressure of the competition? Milton Maluhy: Right, Bernardo. Well, let me do a general statement first about the guidance and the numbers. First, when we do the scenarios and we do the budgeting of the bank, it always has the -- it's not matched between the moment of the budget and the moment that we publish it. And we try to do the adjustments that are more relevant corrections. But this temporal -- this adjustment exists by design. Secondly, guidance, we have thresholds. They are not midpoints. So these are the best thresholds. We are conscientious of the guidance that we are publishing and the thresholds are there to capture some deviations of what we imagine with the available information. Third aspect, very important. The bank never has been so well prepared to face any scenario in the future as of now. Whether if it's a positive scenario or a challenging scenario, it doesn't matter. I am saying that because of the indicators of the cost of credit, also because of the indicators of bad debt or delinquency. We are talking about the position of the business as a whole, the capacity of growth, modernization of platforms, improvement of the journeys, evolution of NPS and the credit indicators with a robust balance, with adequate provisions for the cycle and then capital index that is post adjustment of the dividends, additional dividends, that we're probably going to talk shortly. When we look at the whole bank, the bank is well positioned for the challenges up ahead. We've done that investment in modernization of the platforms, not only the platforms that are conventional. But also we've modernized the credit and coverage. And these are relevant projects and we've concluded these projects. So our speed of reaction for any scenario that is up in the future has never been so fast. These are not decisions that you do with 30, 60 days lag. You do this every day. So we have tempestiveness in the management of the control of the bank, monitoring of the businesses, of the scenario. And we do it daily. And this is where we're going to do the fine-tuning, the adjustments so we can evolve as the scenario is showing favorability. We show -- we see the macro and micro indicators. We look at the customer profile that we want to grow. Portfolio management, it's very important through the cycle. I'm answering your question. So we implemented that management of the portfolio in wholesale. After the crisis in '15,'16, we've done -- we've seen that the crops are growing. And we've done this project over the last few years in retail as well. So we have the thermometer. And the speed of reaction is instantaneous. Remember in the first quarter of last year when I gave you the first result, the first question is, "You're going to be below the guidance with this projection?" I said, "No, we are very comfortable to get here," and we overcome the guidance. We did the adjustment in the quarter. And a great deal of the effect is exchange rate related but the portfolio has grow -- grew a lot. This is an opportunity to -- well, we have a decision today about the increase of growth. We're going to do it if that's the case. And the guidance is the best information that we have available. If we have to do any adjustments for the guidance, we are always going to do it looking up ahead. We are not saying that this is set in stone. We have to fulfill the guidance. No. About the delta portfolio and margin, it's -- well, we have a portfolio at the end. It has a mix that is very distributed amongst the businesses and in a year that the portfolios grew a lot, 15%. So it's natural that when you have a base effect, your expectation for growth at a cycle of uncertainty, monetary uncertainty, inflation and interest rates, you have the trend of not being more conservative but you allocate the capital in the most efficient way taking into consideration the scenario, the scenario that is. We cannot ignore what's up ahead, positive or negative. So we discuss the indicators as if the scenario is not a relevant point. It's very relevant for the decision-making. Second aspect is that the average portfolio which is what generates margin, will grow strongly than the other portfolio. It depends on the capital markets. It depends on exchange rate. It depends on our capacity to grow in the business, where the opportunities may arise. Interest rates also play a part. The terminal interest rate, 15%, this is a macro projection based on the best information available. The change in that threshold that is lower than what we've observed can give you maybe an even lower rate depending on how the inflation will behave. That might or might not have an effect whether -- at the growth of the margin because there's a lot of products that are capped by regulatory rates or whether by our capacity of growth. This is a central message. We see spaces of growing in all the businesses but always with that strategy of having the resilient target clients through the cycle. And in the middle to high income which is a part of your question as well, this is where we managed to grow the most. So we get share. We are still growing, because this is a segment that was always available. It's not new. The mid, high income, it's not a new segment. Competition was always there for this segment. Of course, when you see a performance that is much more stable of the bank -- through the cycles, you see the strength of our balance sheet. Whether if it's the mid to high income on the retail or our wholesale Itaú BBA asset management, treasury which together let us work with a profitability level that is much higher than the average of the industry, not adjusted by the capital index of the average of the industry. We have a higher index. So we have an opportunity of continuing to grow in the mid to high income. And the last point. In One Itau, our platform, our super app that we migrated 5,300,000, to give you an updated number. What we're discussing here, we migrated 6 million clients. We've increased right at the beginning of the year and we're going to conclude the 15 million. Our capacity of growing in this public which is not a low-income public, it's very heterogeneous. We have clients all throughout the spectrum. And then we have nothing implicit in the numbers that you can see here because our main challenge was migrating and taking care of the transition. Once we've done the transition and the migration in the best way possible, NPS above 80, then you have the opportunity of cross-sell in all the products that we can service and offer within the journey and the context of these clients. None of this is contained in growth of margin, growth of portfolio. What we want to do is first test and see the potential results before we do any estimation. We are still on track. We doubled the speed of what was expected. And this is a great opportunity for growing in all segments, low, mid, high income. This is the watershed moment for the retail operation of the bank. Sorry for the long response but this is important to pinpoint some points on the guidance. Renato Lulia: Thank you for the complete response. And a lot of things about guidance. Now switch back to English. We have Tito Labarta from Goldman Sachs with us. Tito Labarta: My question is on capital, right? Core Tier 1 is still at 13.7%. I mean you did pay additional dividends. You have the buyback, the stock bonus, I think all well received by the market and to somewhat expected, I would say. I mean just given the high level of capital that you have, your ROE is running above 20%, the loan growth guidance mid-single digits roughly, it seems you will still be generating capital. So just kind of want to think, what is the appropriate level of capital that you would like to be at? Is there room to return more capital? Just to think about what kind of payout we could see in 2025. Milton Maluhy: That's a great question because we are seeing here a few times additional dividend, not extraordinary dividend. And this is meaningful. There is a reason why we are using this word. Basically because after the recovery that we made in the capital index of the bank since the pandemic, we reached a very good level of capital generation, growth and dividend distribution and buybacks. So our view is that everything constant. So if we are able to deliver the profitability that we believe we can do that. Of course, risk-weighted assets depend on the capability to grow. And this will be always the main goal, grow the business, grow the bank. And if we are not able to grow more for businesses reasons, we will be distributing the excess capital. In this year, 2025, in the first quarter, we are paying 2 relevant increments that we have in the capital index. One is operational risk that we have a hit in the first quarter and the second one risk on credit for wholesale portfolio in some specific operations. Both of them are being funded by this excess that we're going to have of 12.3. Of course, by the moment we are paying the dividend, we will be having capital generation as well. So 12 is what we look today as the target of running the bank in terms of capital index. It's 50 basis above what we have as a minimum dividend decided by the Board of Directors of the bank. So we try to operate with a buffer of 50 basis points for many reasons, for uncertainty. And let's agree that we have more uncertainty today than we had last year. This is the first topic, the capability to grow. So if we decide if there is an opportunity, we're going to grow. This will be our priority. And other businesses that we decide to do organic or inorganic. This is part of the business. So by the year-end, everything ceteris paribus, if we get by the year-end, we'll be having the same discussions that we are having now. We're going to be calculating the excess and we're going to be distributing to our shareholders in either way, paying dividends and/or buyback of the shares. And this will be what we believe the new normal. So, it's an additional. It's not extraordinary. And this is the way we're going to be approaching the market every single fiscal year. If there is any change on that, of course, you will know. But I think we have a very solid history to grow capital, to finance the business and to distribute, increasing our dividend yield for the investors. So this is what we're going to be pursuing looking forward. Tito Labarta: Can I do a quick follow-up on it or no? Renato Lulia: So the next question is from Thiago Batista, UBS. Thiago Batista: Congratulations on the results. The bank seems to navigate very well this cycle. I have a question and maybe a follow-up on the question of Tito. But again, regarding the guidance -- sorry to focus on this point. I think you answered 2 of these questions already. There's a lot of questions about the 2 guidance of margin, margin with the client and margin with the market. In the margin with client, the main point is why is it so much higher than the portfolio index? And the margin index, why is it below of what we were running? And what would be the indicator for '24? Those are the 2 doubts of the guidance. And then, the follow-up to confirm. Doing the midpoint work for '25, can you imagine that the payout is 70, rounding up? Is it down this line that we should expect? Of course, you have the 12.3 that was left out. But is it this magnitude of payout that we should expect thinking about the midpoint of the guidance? Milton Maluhy: Well, great to see you, Thiago. Congratulations on the new job. Okay. Let me go back. The growth, you managed to talk about 2 relevant points. The margin projection has a double effect. First, the mix, where -- what are the products that we're going to grow, in which way, first effect. Remember that the financial margin with the clients, we have all the effects of the running capital, the way that we -- working capital, the way that we have the effect of the working capital with the margin with the clients. When we see the average of the portfolios and the mix that we are growing, especially there is the liabilities that also grow importantly, we can see the margin with the clients growing above what we see in the portfolio because we remember that with the clients, when we get it, we don't see just credit. Of course, credit is important but there is other effects on the balance that remain with the client. When we see all these effects, our capacity to grow with the liabilities the profitability, all the effect of the working capital and the portfolio and the average balance of the portfolio gives us a lot of surety in the growth of the margin. That's why it's above the portfolio effect. And remember that the portfolio is at the end. First answer. So thereafter, the margin with the market, a relevant point. I think that this is going to be a recurring question because of what I've heard from the sell side, the buy side and the reports. I want to give you an important statement. The truth is this is the most difficult line to project. When we sit down see VAR, the past results, the capacity to generate value -- well, margin with the market is the one that you don't have a result that is neutral in the great deal of this margin. The other part depends on the liability management, how you work with your hedges all throughout the year, that we have a clear vision which is the result to realize of the banking book. What we don't have effectively is the capacity to project the result of the trading. Truthfully, we have strong results and we expect to have very strong results in the trading for as much volatility as we might have. But uncertainty increased. And in the banking book, with an increase in the interest rates, you have a challenge that is natural for the generation in the accounting results all throughout the year. Besides that, within the margin of the market, there is a double effect. There is an effect that we consider which is the hedge of the capital index. So let's remember. Now when we made the decision of doing the hedge of the index as an opportunity cost that is with the margin of the market and with the differential of interest rate between Brazil and the United States, the interest rates going up here and abroad, maintenance in other countries where we already have operations. In a mix we see a delta differential of interest rates that is higher which implicates in a cost of hedge that is much higher. But I wanted to give you a data that is very important and relevant. We did a back test that went back since this decision, because remember that a part of our assets are in foreign exchange, a part in reals, a part in foreign currency. That foreign currency, you have a cost of the index hedge. And the final results of the currencies are in the patrimony of the assets. So we did a back test to see how is the cost of hedge plus the movement of the patrimony all throughout the years and we see that the effect was 0. So we managed to do the hedge of the capital index. And economically, we deducted the cost of opportunity of the hedge of the index and we are at 00. I would like to say that this is an insurance that didn't cost anything at the end of the cycle which shows that our capacity for economic management has worked very well. More detecting volatilities in the index gives you more surety to give -- to growth or having more dividends, because your sensitivity to exchange rate decreases because of the effect of the hedge of the index and the overhead that has a volatility of the index because of the credit taxes that were generated. This is the response. If you ask me, our capacity with the execution with the margin with the market could be better. But it depends on the scenario. And this is a constant discussion that we have here. So we understood that in this line having more prudence to project because of the uncertainties would be more reasonable. But again, as any year, I don't expect that we can -- regardless of the cost, we can work firmly here to have a performance that the threshold can absorb. And if eventually over the next first quarter -- first or second quarter, we can understand we can perform better due to the uncertainties and all this interest rate effect that has naturally appeared in the banking books, we're going to review the guidance if necessary. So to say that the guidance is not static. With time, we do adjustments if need so. But the degree of uncertainty is very high in this line. And the payout, it's an answer that -- I don't know if it's going to help you but we don't want to guide the market with an expectation of payout. Because when you create the expectation, any change, you frustrate the expectation. And we know how the market reacts to -- expectation is equal to reality, the happiness is expectation less than reality. So in practice not having a model of -- seeing first how much we're going to generate of result, how much are we going to grow of RWA, risk of credit, risk of market, operational risk. And having as a reference 12 of capital, it's something that we will observe all throughout the year. And the idea is financing what we have in regulatory changes. Remember that these changes are in phase in. They go to 2028, operational risk, credit risk. So these are changes that come all throughout the years and all of this is taken into consideration. I believe that we will continue to distribute dividends that are relevant more constantly. Any changes in the scenario for any reason, we're going to change what we don't want to compromise ourselves with the payout. And the sensitivity to exchange rate that in the past we had because of the foreign exchange assets or because of the overhead are hedged. So we can even be more leveraged all throughout the time, if you think that this is the moment. Given the uncertainties, this is something that we're not discussing but can be discussed if the bank decides to work with a leverage degree that is higher which might mean significantly higher payouts all throughout time. But this is a decision that will be taken if it makes sense. Renato Lulia: Let's continue with the questions, Mario Pierry from Bank of America. Mario Pierry: Congratulations on the result, very predictable as usual. We thought that the guidance was very in line with the projection. We really appreciate this visibility of the results. Milton, I wanted to focus on your growth of guidance. When we see you're expecting a nominal GDP of growing 8% and the growth of the portfolio in the middle is 6.5% -- so I wanted to understand better. Can you tell us more on the growth of line per product? And the growth of Brazil against the Latin American portfolio which usually you have this effect? Your total credit reflects your operations outside of Brazil. So is this growth valid just for Brazil? Or is it really the total and Brazil should be growing higher and Latin America is bringing it down? And also complementing -- when I see the guidance of the cost of credit, it doesn't seem so negative. I think that the low guidance -- you were saying that the cost of credit -- well, it seems that there is a big concern for the appetite of credit. At the same time, you don't see a worsening of the cost of credit. So I just wanted to understand your train of thought. Milton Maluhy: First, growth in Brazil tends to be higher than Latin America. But for those of you to do an exercise, I think that in Brazil we're going to grow in the midpoint, 7. There is 50 points between the consolidated and the Brazilian portfolio, distributed on the several businesses and with some businesses that depend on the market dynamics, exchange rate variation which has an effect but especially the capital markets. So this year, we grew a lot in big companies because the capital markets were very active. And we found good opportunities for the operations. And we have a basic effect. Remember that the dynamics of Itaú BBA has an effect on the portfolio and we have the opportunities to generate the portfolio. It's not a buy and hold. It's only when the operation makes sense at the right price but with the vision of generating a portfolio and optimizing the relationship with the clients and the -- optimizing the capital of the bank. It depends on the scenario; the market of capitals can be in volume. Capital markets, local, can be 30%, 40% lower than the year of '24 which brings a few challenges naturally because you have more origination and distribution. On the other hand, you can have opportunities of getting more portfolio, more credit. In the natural person’s portfolio, well, we are well distributed in the several lines of business and we see the products more and more and we see the client. So I think that in this era of hyper personalization, customer-centric service, the product is necessarily not the chief bandwagon but it's how we service the client in that risk profile in that case in that segment. So we believe that the natural person can grow, can continue to grow. And then in the micro and mid, we can have a growth of 2 digits maybe in the companies in the right product and the right -- well, the performance of credit is very good. Let me separate your final question about prudence with the credit indicators and the guidance of the cost of credit. First, the bank was -- has -- it's at the best position to face the scenario whatever the scenario is, scenario of opportunities, more challenges, more delinquency, more pressured scenarios. Looking firstly at the quality of our portfolio, the profitability and the capital allocation and, most importantly, the distribution of the portfolio with the clients that are target that are resilient to longer cycles. We are ready for some volatility should it come to fruition and we are ready to grow should the opportunity appear. So we don't have anything that causes problems with the capital or delinquencies. We are at a unique moment for the future. So we have a reflection of a portfolio -- of our portfolio that we've grown over the last years. It's true. If you see the cost of credit adjusted by the effect of Americanas that we had the reversal in the third quarter of last fiscal year, the real year '24, what happens is that when we remove this effect, year-on-year portfolio is growing 4% at the cost of credit. This is going to grow 7%, 7.5% in the consolidated in the midpoint. And we want to use that threshold. If we want to use -- if we want to grow more, we're going to grow. And if we need to review the guidance in the regime, we're going to do it as well. Therefore, the central message is that we are very comfortable with this level of cost of credit. We don't expect any crisis in the market regardless of the higher interest rate for a longer time get us under pressure. We think that the portfolio is very well defended. And what we have of the growth of the cost of credit, we also had the perspective of expected loss. Since we grew well the portfolio and we continue to grow, we called the provisions up ahead. So the proof of that is the 4.99 [ph]. We did the equivalence of our model for 4.99 [ph] which is expected loss in IFRS and the tropicalized revision. And we have a zero effect, zero effect in the cost of credit, zero effect in the PL with the expected loss. So our capacity of provisioning up ahead is very precise and it gives you a lot of surety of what's up ahead. Again, we are comfortable with the cost of credit. We believe that the indicators got to the historic lows. It's difficult to imagine an improvement. The indicator is not improving regardless of the growth of the fourth quarter. It has that impact in the growth of the portfolio. But the great deal is the NPLs that are dropping. And the formation specifically of the retail is dropping as well. So we are comfortable with the guidance of the cost of credit. We will work strongly to have a lower cost of credit but not losing the opportunities. I told you the mistake of -- mistake 1 which is giving the credit. Mistake 2 is not making business because of the excess of being conservative. But we do the management of the bank looking at the future. I grow because the market wants me to grow and then I expect why the -- then I spend 2 years expecting -- explaining the indicators that are bad. No. Here, we create value and on the long term. We don't work on the short term. We are comfortable with what is being discussed. And if the opportunity should come to fruition, we will seize it. Renato Lulia: Next one, Yuri Fernandes from JPMorgan. Yuri Fernandes: Congratulations on the great result. I think that the expectations for you are high but it's part of your success. I'm going to ask about the wholesale bank. The SELIC rate is higher. So what is your expectation? And are you getting into the DCM market, opening spreads? How would it impact origination? Anything on asset quality that concerns? Thinking about the source of the wholesale, if you can explore on this part, I would expect -- I would thank you for giving us more details. Milton Maluhy: I think that the expectation is the expectation itself. And what we expect to do is to deliver or overcome the expectation whenever possible and having a good -- being aware -- good awareness of the scenario up ahead. This is how we've done the management of the bank. And talking about the wholesale bank, a few messages. The portfolio of the bank is well positioned. We managed to grow the portfolio in an important way. We have an effect of exchange rate. I'm talking exclusively about Itaú BBA. But still, the portfolio grew relevantly. Ratings that are very good. Rates and spreads that are very adequate, very important to this point, because growing portfolio with a low spread destroying the value is easy to do. You don't need any technology. And what we try to do is actually look at the cross-sell, client, ad hoc, return on allocated capital. This is -- the discipline of capital allocation is a differential of our bank today, competitive differential. And it makes a difference as we allocate and grow the relationships. What I believe that makes a lot of difference with Itaú BBA is the positioning of the franchise that goes beyond the credit portfolio that is well robust and strong with low concentration, well positioned, looking at longer cycles with the right price, with good profitability on the allocated capital and also our whole capacity for cross-sell. That makes a big difference, whether if it's cross-sell of the day-to-day operations, derivatives, exchange rate or the cross-sell of payments, flux, cash management, the investment which is not just cross-sell. We have aggregated value. We have alpha. When we have a relationship of trustworthiness with the client and we service them with all the needs as -- Flavia [ph] in Itaú BBA, they say from day-to-day to D-day, that makes a lot of difference in a holistic management of the portfolio. So we believe that this is a year for strong results. Capital markets, this was the biggest year of the history of the bank for the market. And in terms of volume and results, we are doing very well in this revenue pools and rankings. The bank once again is well positioned in this market with quality, profitability, with strategy, adequate structures, quality and execution. But the volume is lower for 2025. We expect 30% to 40% less this year with the interest rate. We don't imagine that the windows for the capital markets on equity, shares. We imagine that this is going to be a timid market with eventual opportunities or follow-ons. Some pinpoint cases and M&As, we're always going to have the most -- more active or less active depending on perspectives. The fact that we have a portfolio that is very complete allows us to do -- to have this balance within the bank itself and especially within Itaú BBA. Even though you might not have a very pungent year in some business lines, the other lines tend to perform very well. So the overall, we expect a solid bank -- a solid year for Itaú BBA, high profitability, doing the adjustments for our capital allocation which is necessary. The phase-in of operational risk impacts the profitability of the business. That phase-in of the credit risk will always have the rebalancing effect all throughout the year and ceteris paribus, with the results that are with a high expectation. We are not foreseeing any crisis in the credit. We are not. Naturally, we know that we have events in wholesale. It's a relevant portfolio under management and it's very well diversified, distributed and the quality of it is very strong. We've never had a quality of the mix so strong as we have today. But we are working naturally with the lower indicators of 0.6, 0.5, 0.4 kLs [ph]. I mean, it is what it is. It might get worse, yes but we have the complete capacity for absorption. Last point to close this question is to tell you that we have a provisioning level in the cases that bring more attention to them -- this is a strong provisioning. I would say that it is almost completely provisioned any cases that have any cause for concern. We don't see any need to accelerate the provisions. On the contrary, if we can execute the transition of credits, we might even have reversals. And that has to be taken into consideration. The coverage index is not a good metric for this portfolio but the level of provisioning over the portfolio very adequate. And we see name by name. Statistically, we look at segments. We stress that we are very comfortable with the quality of our portfolio. Renato Lulia: Next question we have here. Hello, Nisher [ph]. Okay. Now we can hear you. Unidentified Analyst: I have 2 questions. First, the ROI. It's difficult to see how can you improve it. Maybe you had a tremendous result but looking at the verticals, different business views that you report -- the credit vertical, given the improvement, it still runs below the cost of capital of the bank. How do you see the evolution of this vertical all throughout time? Chile which still runs below the cost of capital, you had an improvement but still below the peers of Latin America that you can run with an ROI that is interesting. And my second question is in regards to the credit cycle, delinquency and the quality of portfolio that you've managed to improve even below the pre-pandemic. I wanted to know if you can somehow -- what do you see for this indicator? And can we keep the threshold structurally very low if you see a worsening in 2025 in the cycle? If you can tell us about the new crops, what's up ahead? Milton Maluhy: From the standpoint of profitability, I believe that we have naturally homework to do every single day. And capital allocation is, without a doubt, a mantra here. We discussed this thoroughly. It's a competitive differential of the bank. I believe this is true because the way that we do the capital management allocation, we make the decisions that are prospective. We do not do operations just looking at the short term and giving incentives down the line. This is a relevant differential that has shown itself strong from the standpoint of strategy and decision. When I look at the business, you have the -- while the cost of capital has done a catch-up that is important. And you don't reprice the portfolio in the same speed that the cost of equity grows. So this is an important message. So as you see an increase in the cost of capital, the ROI of the credit operations tends to not follow up in the first moment and then you reprice the portfolio as time goes by. There is some temporal mismatch. So the other side of the same coin, this credit portfolio allows us to have the level of revenue in the bank. So our capacity of cross-sell and not look at the ad hoc of credit stand-alone. Of course, it's important to look at the ad hoc of credit stand-alone but not ignoring the capacity of cross-sell that you have with the client and looking at the relationship. And at the end of the day, you have to look at the return of the capital, not of the relationship and not just the capital, even do -- we do both and with a lot of discipline. This is the differential in the way that we work with the bank. When I look at Chile, I believe that we are more conservative in the allocation of the business model than what we could be. There are 2 reasons for this. First, there is a tax issue. So when you look at the profitability of our bank locally for the size of the operation and for the level of cross-sell that you generate, I believe that we are managing to operate the bank with a competitive profitability. But what happens when you -- when you see the business model, there are 3 factors that affect the profitability for the allocation of calculation that we do in the bank. The first is the tax issue itself. The TBU-based -- taxing based universally, when you have the taxation of a country, you have to complement the taxes in Brazil. That's different than the OCDE. The government is conscientious of this. There's a discussion of pillar 2 of tax and there is a discussion of TBU, universal tax, happening. So we can standardize this in all dimensions. Of course, that depends on the approval of Congress. There's still a long ways ahead. But I have a high expectation that this tax issue can be resolved in a reasonable time frame. I expect short. And this is a discussion that we've done for many years, not just of Itaú Unibanco, it's of all the multinationals that have operations outside of Brazil. And it's a differential -- competitive differential on the opposite. You lose competitiveness as you do not dispute the markets with the same guns. The government is aware of that. We had talks at the higher level of the government. We have high expectations that this is a problem that will be solved and what unlocks the value for this operation in the future. Second aspect is the capital allocation. If we look at the operation of Chile, if you look at the minimum regulatory, there is no ad hoc in the way that the regulator looks at our minimum regulatory. In Chile, we have an adequate buffer for the operation. But for Brazil, for consolidation issues, we operate with a minimum of 11.5% with capital. If Ch
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Itaú Unibanco Holding S.A. (NYSE:ITUB) - A Comprehensive Analysis

  • The consensus price target for NYSE:ITUB has decreased from $7.4 to $6.8, indicating a cautious outlook from analysts.
  • Itaú Unibanco showcased a strong operational performance in the third quarter, with significant credit growth and a decrease in delinquency rates.
  • Despite challenges, Itaú Unibanco's financial stability is bolstered by substantial capital reserves and strategic dividend distributions, making it an attractive option for dividend investors.

Itaú Unibanco Holding S.A. (NYSE:ITUB) is a leading financial institution in Brazil, headquartered in São Paulo. It offers a wide array of financial services through its Retail Banking, Wholesale Banking, and Activities with the Market and Corporation segments. The bank serves a diverse range of clients, from individual customers to large corporations, both domestically and internationally.

The consensus price target for ITUB has seen a decline over the past year, dropping from $7.4 to $6.8. This shift suggests a more cautious outlook from analysts, possibly due to economic challenges or company-specific factors. Despite this, Itaú Unibanco's third-quarter results showed strong operational performance, with robust credit growth and a decline in delinquency rates, as highlighted by Zacks.

Itaú Unibanco's financial stability is further supported by its substantial capital reserves and strategic dividend distributions. These factors contribute to an attractive dividend yield and improved return on equity (ROE). However, Barclays analyst Gilberto Garcia has set a lower price target of $4.5 for ITUB, reflecting a more conservative view on the stock's future performance.

The bank's recent earnings reports indicate an increase in both earnings and revenues, driven by a rise in operating revenues and managerial financial margin. However, the company faces challenges due to rising expenses, which could impact its short-term financial outlook. Investors should monitor upcoming earnings releases and macroeconomic indicators in Brazil for further insights.

Itaú Unibanco's strong financial performance, including a net income of R$10 billion in the second quarter, positions it as a reliable choice for dividends. This performance surpasses competitors like Banco do Brasil and Nu Holdings, underscoring Itaú's solid track record and focus on security and predictability within the banking sector.