We issued an updated research report on Itaú Unibanco Holding S.A. ITUB on Apr 7, 2015. Strong top-line growth continued to be the strength while weak cost control remained the undermining factor.
Itau Unibanco’s diversified product mix, large deposit base and expanded credit portfolio continue to enhance revenue generation. Also, the company’s consistent focus on its strategy to internationalize the bank with expansion of operations in Brazil and abroad will further support top-line growth going forward.
Moreover, Itau Unibanco’s ongoing investments in technology will contribute to improve processes, reduce costs and increase productivity gains. We believe such moves support the company’s growth and profitability in the long run. Further, upon completion of the merger with CorpBanca, the company’s footprint in Chile will be strengthened.
On the flipside, in spite of taking initiatives to control expenses, Itau Unibanco’s escalating costs remain a hindrance for bottom-line growth. Also, increasing competition from other large Brazilian and international banks could take a toll on the company’s profitability.
Though impact of new regulations and stressed conditions in the Brazilian economy pose risks for Itau Unibanco, the company’s elevated managerial financial margin along with higher banking service fees and income from banking charges contributed to the impressive fourth-quarter 2014 earnings.
However, in spite of the earnings beat, the 3.7% fall in share price since the latest earnings release reflects the ambiguity prevalent in the market regarding the company’s future performance.
This can also be observed in the Zacks Consensus Estimate for 2015 and 2016, which declined 3.3% to $1.46 per share and 3.7% to $1.57 per share, respectively, over the last 30 days.
Currently, Itau Unibanco holds a Zacks Rank #4 (Sell). Some better-ranked foreign banks include BBVA Banco Francés S.A. BFR, CorpBanca BCA and Grupo Financiero Galicia S.A. GGAL. All these stocks sport a Zacks Rank #1 (Strong Buy).
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