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Itaú's Q2 profit rises as credit costs sink 29%

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Itaú's Q2 profit rises as credit costs sink 29%

Itaú Unibanco Holding SA posted a 10.7% rise in second-quarter net profit as a sharp decline in credit costs offset slightly weaker operating revenues.

The Brazilian banking giant showed recurring net income of 6.17 billion Brazilian reais, or 95 centavos per share, for the three-months to June 30, up from 5.58 billion, or 85 centavos per share, earned a year earlier.

Operating revenues slipped 0.9% year over year to 27.21 billion reais as financial margin income ticked 1.0% lower to 17.39 billion reais. Commission and fee income, meanwhile, rose 2.8% to 8.04 billion reais.

Itaú's cost of credit, however, sank 29.4% year over year, driven by markedly lower loan loss provisions, which fell 21.9% to 4.95 billion reais, and impairments, which sank by more than 80% to 105 million reais.

Total nonperforming loans more than 90 days past due represented 1.7% of total loans at June 30, unchanged from the prior quarter but up from 1.6% a year ago. For Brazil alone, however, the NPL ratio improved to 3.9% from 4.2% three months earlier and 4.5% in June 2016.

In reporting its results, the bank noted that it adjusted its full-year guidance to reflect that it has moved the discounts granted line item to be a component of credit costs, rather than as part of financial margin with clients. The net effect of the move is 1.0 billion reais. As a result, Itaú now expects cost of credit for the whole of 2017 to hit between 15.5 billion reais and 18.0 billion reais, while the expected growth in financial margin with clients stands at between -0.8% and -4.2%.

The bank noted that its board on July 31 approved a complimentary interest on capital payment of 39.9 centavos per share, which will be paid on Aug. 25 to shareholders of record as of Aug. 14.

As of July 31, US$1 was equivalent to 3.13 Brazilian reais.