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Itaú's Q1 profit falls 9.9% YOY amid sharp rise in loan-loss provisions

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Itaú's Q1 profit falls 9.9% YOY amid sharp rise in loan-loss provisions

Itaú UnibancoHolding SA posted a recurring net income of about 5.24 billionBrazilian reais for the first quarter, or 88 centavos per share, down 9.9%compared to the 5.81 billion reais, or 97 centavos per share, earned in theyear-ago period.

Operating revenues increased to 25.87 billion reais from24.95 billion reais a year earlier, while the bank's managerial financialmargin rose to 16.56 billion reais from 15.96 billion reais. Commissions andfees totaled 7.17 billion reais in the three-month period, up 4.4% from 6.87billion reais in the first quarter of 2015.

Results from the company's insurance, pension plan andpremium bonds operations, before retained claims and selling expenses, totaled2.14 billion reais, up 1.2% year over year.

Itaú said it recorded 7.23 billion reais in provisions forloan losses during the three-month period, an increase of 31.1% from 5.52billion reais a year ago.

"Recovery of loans written off as losses decreased44.0% from the fourth quarter of 2015. This decrease was mainly due to therecovery of loans written off as losses of a specific group of the corporatesegment in the amount of 488 million [reais] recognized in the fourth quarterof 2015," the bank said.

Other operating expenses, meanwhile, ticked 2.8% higher yearover year to 11.93 billion reais from 11.60 billion reais.

At the end of the first quarter, the company's total creditportfolio, including sureties, endorsements and private securities, reached554.25 billion reais, down 5.3% from the previous quarter and 4.2% lower than ayear earlier. Payroll loans increased 4.8% annually while auto loans fell31.2%. Mortgage loans, on the other hand, jumped 17.1% annually.

The bank's 90-day nonperforming loan ratio was 3.9% in the firstquarter, up from 3.0% in the year-ago period.

Itaú's annualized return on average equity dropped to 19.7%from 24.2% in the first quarter of 2015, while its annualized return on averageassets fell to 1.6% from 1.8%.

Excluding the impact of its recent with CorpBanca, Itaú expects itsfinancial margin with clients to grow between 2.0% and 5.0% in 2016. Provisionsfor loan losses, net of recovery of loans, are forecast to total between 22billion reais and 25 billion reais for the full year.

As of May 2, US$1 wasequivalent to 3.50 Brazilian reais.