Itaú Unibanco provisioned 100% of its credits with Americanas and still managed to report a return on equity of 19.3% in the fourth quarter – a balance that the market received with a collective sigh of relief tonight.
“The theme of the moment is the ‘credit crunch’” said one analyst. “If Itaú, which had been presenting excellent results and is conservative in its guidance, were to stumble, the market would have reason to fear 2023.”
By placing Americanas directly on the ‘H’ – the infamous BC letter for bad debts –, Itaú recognized a loss of R$ 1.3 billion before taxes and R$ 719 million after taxwhich shrank profit for the quarter by less than 10%.
Itaú’s total exposure to Americanas is around R$3 billion. In addition to the BRL 1.3 billion that passed through the result, the bank appropriated another BRL 1.7 billion in additional provisions made throughout the year.
Without the provision for Americanas, fourth quarter profit would have been R$8.4 billion, slightly higher than the average market projection according to Refinitiv. In the year, profit grew 14.5% to R$30.8 billion, and ROE was above 20%.
“Itaú decided to anticipate the full impact of Americanas in the fourth quarter, which it did not need to have done. This reflected in the result, but moderately, and with the advantage of clearing the way for 2023,” said Renan Manda, chief financial sector analyst at XP.
“There is no longer any doubt about what the loss will be with the company.”
The highlight of 2022 was the financial margin of customers, which grew 27.2% (above the bank’s projection) and reached R$ 89.6 billion. This was mainly due to the growth of more profitable lines of credit, from individuals and SMEs.
Unlike competitors such as Bradesco and Santander, Itaú has been able to expand these more profitable loans keeping defaults relatively under control – according to analysts, due to the use of technologies that allow a more assertive analysis of the credit profile of customers.
The question now is whether this will be sustained in 2023.
O guidance for this year generated mixed feelings. On the positive side, the bank continues to forecast loan portfolio growth of 6% to 9%, a level lower than the 11% expansion in 2022, but still relevant.
It also projects an increase in the margin with customers and in revenue from insurance and service provision.
Carlos Macedo, from Ohm Research, notes that around a third of Itaú’s loan portfolio was contracted in the fourth quarter, a period of high interest rates, which should generate strong revenues throughout this year.
What turned on the warning signal on the guidance was the estimated allowance for doubtful debts, from R$36.5 to R$40.5 billion. In 2022, that number had already been high: BRL 32.3 billion.
No call tomorrow with CEO Milton Maluhy and CFO Alexsandro Broedel, “the market will want to understand the assumptions that led to this guidance and know if some of these problematic debtors have already been identified or if the bank is just predicting a worsening,” said an analyst .
For Macedo, the points of attention for 2023 are default and revenue from services.
“Wholesale delinquency is quite low, at 0.2%. This is not sustainable. There should be a return to the mean, around 0.5% to 1%,” she says.
The behavior of individuals and smaller companies is also a concern.
On the services side, increased competition from digital banks and fintechs makes it harder to make money. “Checking account revenue, for example, which accounts for around 20% of total revenue from services, fell in 2022,” says Macedo.
At BTG, Eduardo Rosman estimates that Itaú will have a recurring profit of BRL 35.5 billion this year, the middle of the guidance range given by the bank and an increase of 15% compared to 2022.
If the bank stays at the guidance floor, analysts calculate, the 2023 profit should repeat last year’s.
Giuliana Napolitano