Itaú Margin Growth Accelerated as Lending Rebounded
Managerial financial margin rose 3.6% from Q1 to R$33.49 billion as credit growth resumed.
Itaú Unibanco (ITUB), the Brazilian universal lender, reported a 3.6% quarter-over-quarter increase in managerial financial margin to R$33.49 billion in Q2, accelerating from essentially flat growth in Q1. The measure rose 5.2% from a year earlier.
Financial margin with clients increased 3.3% from Q1 to R$32.56 billion, reversing the prior quarter’s 0.7% decline. Higher average credit volumes, additional calendar days, wholesale structured-operation revenue and improved working-capital remuneration drove the increase. The annualized client-margin rate held at 9.1% quarter over quarter and narrowed 30 bps from a year earlier.
The total credit portfolio grew 2.7% from Q1 to R$1.522 trillion after contracting 0.5% in the prior quarter. Loans increased 9.6% year over year. In Brazil, corporate lending led the expansion with 4.4% quarterly growth, while small and middle-market loans increased 1.5%.
Consumer lending in Brazil rose 1.6% from Q1 and 7.8% from a year earlier, supported by quarterly growth of 3.9% in mortgages and 3.5% in payroll loans. Card balances were nearly unchanged after declining 2.1% in Q1, while vehicle loans fell 1.7%.
Funding grew slightly faster than lending. Deposits and other funding sources increased 3.1% from Q1 to R$1.718 trillion, lowering the loan-to-funding ratio by 70 bps to 80.3%. Itaú’s CET1 ratio strengthened 30 bps to 12.3%, though it remained 80 bps below the year-earlier level. Dividends and interest on capital net of taxes increased 3.2% from Q1 to R$3.79 billion.
Credit costs rose alongside the larger loan book. Cost of credit increased 1.9% from Q1 to R$10.14 billion, while the annualized ratio held at 2.7%. The expected-loss provision balance increased by R$1.0 billion to R$56.9 billion, and recoveries of written-off loans rose 20.2% from Q1.
Fee momentum remained modest as commissions and fees increased 0.3% from Q1 to R$11.03 billion, following a 7.1% decline in Q1. Non-interest expenses rose 3.3%, pushing the efficiency ratio 30 bps higher to 37.4%. Recurring managerial return on equity declined 50 bps from Q1 to 24.3%, though it improved 100 bps year over year.
The 90-day nonperforming-loan ratio remained at 1.9%, but the 15-to-90-day delinquency ratio increased 10 bps to 1.8% as small and middle-market credit normalized and Latin American delinquencies rose. NPL creation also increased 10 bps to 0.8%, leaving early-stage credit performance as the key counterweight to the renewed loan growth.