Itaú Unibanco’s technique of attempting to be all the things to each shopper and enterprise isn’t uncommon on this planet of banking. The key US banks have adopted the same technique over time, offering core banking providers like deposits and loans, but in addition insurance coverage merchandise, fairness investing, and a number of different merchandise to assist appeal to clients.
Nevertheless, what units Itaú Unibanco aside is its publicity to rising economies somewhat than established ones in Europe or the US.
Certainly, Brazil’s financial system has struggled for a few years, and most of the different international locations Itaú Unibanco operates in related, if not worse, conditions.
It is a major concern for us relating to the corporate’s skill to develop as a result of a financial institution’s enterprise mannequin requires broad financial progress for its personal enlargement. With out this progress, Itaú Unibanco could have a tough time producing revenue enlargement.
On February sixth, 2025, Itaú Unibanco reported its fourth-quarter and full-year outcomes for 2024. The corporate’s recurring managerial outcome reached R$10.9 billion, up 2.0% from the earlier quarter, with a 22.1% return on fairness.
The mortgage portfolio grew 6.3% general and 5.8% in Brazil, pushed by mortgage (+5.6%), automobile financing (+1.8%), and bank card loans (+6.8%). Small and medium-sized enterprise loans rose 8.1% as a consequence of overseas change results and government-backed financing. Company lending elevated 6.8%.
Increased lending and an improved liabilities margin led to a 3.7% rise within the monetary margin with purchasers, whereas credit score prices rose 4.8%. Nonperforming loans over 90 days (NPL 90) improved to 2.4%, with related positive aspects in short-term delinquency charges.
For 2024, the recurring managerial outcome grew 16.2% to R$41.4 billion, with a return on fairness of twenty-two.2%. Pre-tax revenue rose 19.7% to R$60.5 billion, whereas the mortgage portfolio expanded 15.5% general and 14.3% in Brazil. Development in lending, increased margins, and structured operations drove a 7.1% enhance in monetary margins with purchasers. The price of credit score fell 6.6%, saving R$2.4 billion. Commissions and costs grew 7.2%, whereas the insurance coverage and pension phase rose 13.8%.
Non-interest bills elevated 6.8%, however core prices rose simply 4.4%, beneath the 4.8% inflation price. The effectivity ratio hit report lows at 39.5% general and 37.7% in Brazil. Shareholder returns included R$18.0 billion in distributions—R$15.0 billion in dividends and R$3.0 billion in share buybacks—bringing the 2024 web payout ratio to 69.4%.
Supply: Investor Presentation
Dividend Evaluation
Itaú Unibanco takes a conservative strategy to dividend funds. The financial institution pays dividends to shareholders primarily based on its projected earnings and losses, with the objective of having the ability to proceed to pay the dividend beneath numerous financial situations.
On the plus aspect, the comparatively low yield affords the financial institution higher dividend protection because the payout ratio is within the teenagers. We, subsequently, don’t see any threat of a adverse change within the dividend coverage at this time, however we’re additionally cautious about future progress given the unsure outlook for Brazil’s financial system.
Supply: Investor Presentation
Thus, we don’t imagine revenue traders must be considering Itaú Unibanco inventory as a consequence of its pretty low yield and the elevated geopolitical and macroeconomic threat elements.
Closing Ideas
We see a tough highway forward for Itaú Unibanco. With low projected earnings progress beneath normalized situations and a diminutive dividend yield, we don’t view this inventory as enticing.
Moreover, shopping for worldwide shares carries a number of distinctive threat elements, together with geopolitical and foreign money dangers. Itaú inventory gives geographic diversification for traders notably considering investing exterior the USA.
Nevertheless, the dangers appear to outweigh the potential rewards for this inventory. Given the entire above elements, we advocate traders keep away from Itaú Unibanco, regardless of its month-to-month dividends.
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