Core Viewpoint - Investors in the Banks - Foreign sector should consider The Bank of East Asia Ltd. (BKEAY) as a more attractive option compared to Banco Itau (ITUB) due to its stronger valuation metrics and better earnings estimate revisions [1][3][7] Valuation Metrics - BKEAY has a forward P/E ratio of 6.34, while ITUB has a forward P/E of 8.10, indicating BKEAY is undervalued relative to ITUB [5] - The PEG ratio for BKEAY is 0.82, compared to ITUB's PEG ratio of 0.99, suggesting BKEAY offers better value considering its expected earnings growth [5] - BKEAY's P/B ratio is 0.26, significantly lower than ITUB's P/B of 1.45, further highlighting BKEAY's undervaluation [6] Analyst Outlook - BKEAY holds a Zacks Rank of 2 (Buy), indicating a positive analyst outlook, while ITUB has a Zacks Rank of 4 (Sell), reflecting a less favorable view [3] - The stronger estimate revision activity for BKEAY suggests a more optimistic future performance compared to ITUB [7]

Core Insights - The article compares The Bank of East Asia Ltd. (BKEAY) and Banco Itau (ITUB) to determine which stock offers better value for investors [1] Group 1: Zacks Rank and Earnings Outlook - BKEAY has a Zacks Rank of 2 (Buy), while ITUB has a Zacks Rank of 3 (Hold), indicating a stronger earnings outlook for BKEAY [3] - The Zacks Rank system emphasizes companies with positive earnings estimate revisions, suggesting that BKEAY is likely experiencing a more favorable earnings outlook [3] Group 2: Valuation Metrics - BKEAY has a forward P/E ratio of 6.63, compared to ITUB's forward P/E of 7.12, indicating that BKEAY may be undervalued relative to ITUB [5] - The PEG ratio for BKEAY is 0.85, while ITUB's PEG ratio is 0.88, suggesting that BKEAY has a better valuation considering its expected earnings growth [5] - BKEAY's P/B ratio is 0.26, significantly lower than ITUB's P/B of 1.35, further indicating that BKEAY may be undervalued [6] Group 3: Overall Value Assessment - Based on various valuation metrics, BKEAY holds a Value grade of A, while ITUB has a Value grade of D, reinforcing the conclusion that BKEAY is the superior value option [7]

Core Insights - Itaú Unibanco reported record net profits of R$10.9 billion, reflecting a 16% year-over-year growth, although it slightly missed EPS estimates [1] Financial Performance - The company achieved a net profit of R$10.9 billion for the quarter [1] - This represents a 16% increase compared to the same quarter last year [1] - EPS estimates were slightly missed, indicating potential areas for improvement in future earnings [1]

Financial Performance - Operating revenues for the year ended December 31, 2024, increased by 8.4% to R$168,050 million compared to R$154,971 million in 2023[25]. - Net income attributable to owners of the parent company rose by 24.1% to R$41,085 million in 2024 from R$33,105 million in 2023[25]. - Net interest income for 2024 was R$103,848 million, reflecting a 6.3% increase from R$97,712 million in 2023[25]. - Non-interest income grew by 12.1% to R$64,202 million in 2024, compared to R$57,259 million in 2023[25]. - Net income for the year ending December 31, 2024, reached R$42,128 million, an increase of 24% compared to R$33,877 million in 2023[199]. - Total comprehensive income for 2024 was R$46,864 million, up from R$37,881 million in 2023, reflecting a growth of 24%[199]. - Comprehensive income attributable to the owners of the parent company increased to R$45,821 million in 2024, compared to R$37,109 million in 2023, marking a rise of 23%[199]. - Earnings per share (basic) increased to R$4.20 in 2024, up from R$3.38 in 2023, marking a growth of 24.3%[197]. Asset and Liability Growth - Total assets grew by 12.2% to R$2,854,475 million as of December 31, 2024, up from R$2,543,100 million in 2023[29]. - Financial liabilities grew by R$238,288 million, or 11.9%, totaling R$2,239,979 million as of December 31, 2024[81]. - Total loans and lease operations increased by R$114,903 million, or 12.6%, reaching R$1,025,493 million as of December 31, 2024, compared to R$910,590 million in 2023[79]. - Total current liabilities reached R$1,395,888 million, while long-term liabilities were R$1,236,700 million, leading to total capitalization of R$2,854,475 million[115]. - The bank's total liabilities increased to R$2,633,191 million in 2024, up from R$2,344,050 million in 2023, representing a growth of 12.3%[196]. Income and Expense Analysis - Other operating expenses increased by 4.0% to R$88,183 million for the year ended December 31, 2024, from R$84,826 million in 2023[52]. - The increase in general and administrative expenses was R$3,657 million, or 4.8%, for the year ended December 31, 2024, primarily due to salary adjustments and higher profit-sharing expenses[52]. - The provision for expected loss increased slightly to R$47,758 million in 2024 from R$47,539 million in 2023, indicating a stable risk management approach[195]. Business Segment Performance - Net income from the Retail Business segment increased by 15.5% to R$15,124 million for the year ended December 31, 2024, compared to R$13,099 million in 2023[66]. - Operating revenues for the Wholesale Business segment increased by R$3,383 million, or 6.2%, for the year ended December 31, 2024, driven by a 3.2% increase in the interest margin[69]. - Net income from the Activities with the Market + Corporation segment increased by R$2,603 million, or 94.2%, for the year ended December 31, 2024, compared to R$2,763 million in 2023[72]. - Non-interest income in the Retail Business segment increased by 4.3% to R$39,101 million for the year ended December 31, 2024[64]. Regulatory and Market Environment - Brazil's sovereign credit rating was upgraded to Ba1 with a positive outlook on October 1, 2024, from Ba2, which may positively influence investor perceptions[151]. - The new consumer protection law effective August 30, 2024, allows for flexible monetary restatement and interest rates in contracts, impacting future financial agreements[122]. - The Central Bank's new regulations on credit derivatives and structured operations certificates are expected to enhance risk management practices in the Brazilian market[123]. - The Central Bank's upcoming regulations on banking as a service and credit card payment arrangements are anticipated to strengthen risk management frameworks in the payments market[124]. Capital and Equity - Total stockholders' equity attributed to the owners of the parent company increased by R$20,913 million, or 11.0%, reaching R$211,090 million[81]. - The company's total capital reached R$227,602 million, an increase of R$20,740 million, with a Basel Ratio of 16.5%[91]. - The BIS ratio stood at 16.5%, reflecting the company's capital adequacy in relation to risk-weighted assets[115]. Operational Efficiency - The total number of employees increased by 0.5% to 96,219 in 2024 from 95,702 in 2023[30]. - The total number of branches and client service branches decreased by 9.9% to 2,928 in 2024 from 3,250 in 2023[30]. - Significant investments have been made in the Bank's Information Technology systems to support operations and financial statement preparation[177]. Miscellaneous - The audit confirmed that the criteria and assumptions used by management for measuring the provision for expected loss are consistent with the information analyzed[173]. - Provisions and contingent liabilities are primarily related to judicial and administrative proceedings, which require careful assessment and management judgment[179].

Financial Data and Key Metrics Changes - Managerial recurring results for Q4 2024 totaled BRL10.9 billion, a 2% increase from BRL10.7 billion in the previous quarter [20] - For the year, earnings closed at BRL41.4 billion, reflecting strong growth of 18.2% [21] - The consolidated ROE was 22.1%, with a simulated adjustment showing 24.4% [22] Business Line Data and Key Metrics Changes - The individual loan segment grew 6.9% year-over-year, with credit card loans driving growth [27] - The SME portfolio grew 8.1% in the quarter, significantly influenced by governmental programs [29] - The large corporate segment saw growth of 6.8% quarter-over-quarter and 21% year-over-year, also impacted by FX rate effects [30] Market Data and Key Metrics Changes - The loan portfolio reached BRL1.359 trillion, growing 15.5% over December 2023 [24] - The financial margin with clients grew 3.7% in the quarter and 8.3% year-over-year, totaling BRL108 billion in 2024 [25] - Commissions, fees, and results from insurance totaled BRL14.3 billion, marking a 3.9% increase compared to the last quarter [25] Company Strategy and Development Direction - The company aims to transition to a "transition bank," focusing on sustainable finance and climate transition [13] - Significant investments in technology and modernization are ongoing, with a goal to migrate 15 million clients, achieving 5.3 million by year-end 2024 [15][16] - The bank is focused on enhancing client experience through hyper-personalization and transactionality [16] Management's Comments on Operating Environment and Future Outlook - The management expects lower GDP growth of 2.2% for 2025, with inflation projected at 5.8% [68] - The bank is well-prepared for future challenges, with strong credit indicators and a robust balance sheet [94] - Guidance for loan portfolio growth is set between 4.5% to 8.5% for 2025, with expectations for financial margin growth higher than portfolio growth [70][71] Other Important Information - The company announced an additional distribution of BRL18 billion, including BRL15 billion in dividends and BRL3 billion for share buybacks [62][63] - The common equity Tier 1 ratio is projected to adjust to 12.3% after the distribution [65] Q&A Session Summary Question: Guidance on expenses and efficiency improvements - Management highlighted three main effects on expenses: profit sharing improvements, labor provisions adjustments, and increased investments in technology [78][80][82] Question: Growth opportunities in the current market dynamics - Management emphasized the bank's preparedness for various scenarios and the importance of portfolio management to capture growth opportunities [94][96][100] Question: Appropriate level of capital and potential for additional capital returns - Management indicated a target capital index of 12%, with plans to distribute excess capital through dividends and buybacks if growth opportunities arise [112][114][116] Question: Clarification on margin guidance - Management explained that margin projections are influenced by various factors, including portfolio growth and market conditions, and emphasized the bank's ability to adapt to changing scenarios [123][125]

Core Insights - Itau Unibanco Holding S.A. reported a recurring managerial result of R$10.8 billion ($1.87 billion) for Q4 2024, reflecting a year-over-year increase of 14.9% [1] - For the full year 2024, the recurring managerial results reached R$41.4 billion ($7.15 billion), marking an 18.2% increase year-over-year [2] Financial Performance - Operating revenues for Q4 2024 were R$44.1 billion ($7.6 billion), up 7.6% year-over-year, while total operating revenues for the year were R$169 billion ($29.2 billion), increasing by 7.8% [3] - The managerial financial margin rose by 8.3% year-over-year to R$29.4 billion ($5.13 billion), and commissions and fees increased by 4.5% to R$11.7 billion ($2 billion) [3] - Non-interest expenses totaled R$16.7 billion ($2.9 billion), reflecting an 8.9% year-over-year increase [3] Efficiency and Profitability - The efficiency ratio improved to 39.5% in Q4 2024, down from 39.9% in the same quarter of the previous year, indicating enhanced profitability [4] - The annualized recurring managerial return on average equity was 22.2%, up from 21.2% in the prior year [8] Credit Quality - The cost of credit charges decreased by 5.5% year-over-year to R$8.6 billion ($1.5 billion) [5] - The non-performing loan ratio improved to 2.4% in Q4 2024, down from 2.8% in the prior-year quarter [5] Balance Sheet Overview - As of December 31, 2024, total assets decreased by 6.6% to R$2.85 trillion ($492.8 billion) [6] - Liabilities, including deposits and borrowings, increased significantly by 82.6% on a sequential basis to R$2.63 trillion ($454.7 billion) [6] - The credit portfolio rose by 6.3% to R$1.35 trillion ($233.4 billion) from the previous quarter [7] Capital Ratios - The Common Equity Tier 1 ratio improved to 15% as of December 31, 2024, up from 13.7% a year earlier [8]

Core Insights - Itaú Unibanco (NYSE: ITUB) reported a quarterly performance that fell slightly below market expectations, missing both top and bottom line estimates, yet demonstrated solid profit growth and expansion overall [1] Financial Performance - The company experienced accelerating profit growth during the quarter, indicating a positive trend despite the slight miss in estimates [1] Market Position - Itaú Unibanco continues to be a significant player in the financial sector, particularly in emerging markets, as highlighted by the focus of analysts on foreign equities [1]

Group 1 - The Value Lab focuses on long-only value investment ideas, aiming for a portfolio yield of about 4% and has performed well over the last five years by engaging in international markets [1][2] - Itau Unibanco is highlighted as an interesting investment opportunity from the Brazilian market, with recent rate cuts being reversed due to rising inflation and a robust labor market, which should support net interest margins (NIMs) [2] - The Valkyrie Trading Society consists of analysts sharing high conviction investment ideas that are expected to generate non-correlated and outsized returns in the current economic environment, emphasizing a long-only investment strategy [3]

Financial Data and Key Metrics Changes - The company reported quarterly managerial recurring results of BRL10.7 billion, representing a 6% increase quarter over quarter and nearly 20% year over year on a comparable basis [7] - The consolidated return on equity (ROE) was 22.7%, with a ROE in Brazil of 23.8% [7] - The Common Equity Tier I ratio increased to 13.7%, up 60 basis points from the previous period, significantly above the board-approved minimum of 11.5% [8] - The adjusted ROE, considering the minimum capital ratio, would be 24.6% consolidated and 26.4% in Brazil [8] Business Line Data and Key Metrics Changes - The loan portfolio grew by 1.9% quarter over quarter and nearly 10% year over year [9] - The individual loans segment saw a growth of 2.5% quarter over quarter [11] - The SME portfolio grew by 4.1% quarter over quarter, while the Large Corporates segment grew by only 0.7% due to a significant asset leaving the balance sheet [12] - The Latin America portfolio grew by 1.2% quarter over quarter, with an average balance growth of 8.2% [14] - The Financial Margin with Clients increased by BRL1.2 billion quarter over quarter, representing a 4.5% growth [16] Market Data and Key Metrics Changes - The company reported improvements in non-performing loans (NPL) indicators, with a drop of 20 basis points in both Individuals and SMEs for NPL 15-90 [23] - The NPL 90 indicator showed a significant drop of 20 basis points in Individuals and 10 basis points in SMEs [23] Company Strategy and Development Direction - The company aims to maintain a focus on sustainable finance, with a new goal to reach BRL1 trillion in structuring capital markets operations and individual loans by the end of 2030 [48] - Investments in technology and modernization are prioritized, with a focus on improving client experience and operational efficiency [36][38] - The company is transitioning to a unified banking experience for clients, reducing the number of applications and improving service delivery [40][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the bank's ability to navigate challenging cycles while maintaining quality growth [24] - The company is focused on sustainable growth with quality, emphasizing the importance of risk-adjusted returns [70][79] - The management highlighted that the appetite for risk is dynamic and closely monitored, ensuring decisions are made with long-term sustainability in mind [84] Other Important Information - Non-interest expenses grew by 6.1% year over year, primarily due to collective wage agreements [34] - The company has been actively managing its capital structure, with expectations for higher dividends compared to the previous year [64] Q&A Session Summary Question: Inquiry about capital and dividends - Management confirmed that the extraordinary dividend is expected to be larger than last year, with a focus on maintaining a well-capitalized bank [64][62] Question: Impact of AT1 on dividend decisions - Management clarified that there would be no impact on the dividend distribution policy due to AT1 levels [66] Question: Focus on portfolio growth and risk-adjusted returns - Management emphasized that growth is focused on quality and risk-adjusted returns, with consistent expansion across all segments [70][79] Question: Guidance on exchange rate influence - Management indicated that the exchange rate has influenced guidance adjustments, but the focus remains on sustainable growth [82][84] Question: Competitive advantages and industry outlook - Management discussed the importance of expected loss provisioning and proactive management as competitive advantages, positioning the bank favorably in the industry [92][98]

Core Insights - Itau Unibanco Holding S.A. (ITUB) reported a recurring managerial result of R$10.7 billion ($1.93 billion) for Q3 2024, reflecting an 18.1% year-over-year increase, supported by higher revenues and an increase in managerial financial margin, despite rising non-interest expenses acting as a negative factor [1] Financial Performance - Operating revenues for Q3 2024 were R$42.7 billion ($7.7 billion), an 8% increase year-over-year [2] - The managerial financial margin rose 6.4% year-over-year to R$28.5 billion ($5.13 billion) [2] - Commissions and fees increased by 5% to R$11.2 billion ($2 billion) [2] - Non-interest expenses totaled R$15.9 billion ($2.9 billion), up 8.2% year-over-year [2] Efficiency and Profitability - The efficiency ratio improved to 40.2%, down from 40% in the previous year, indicating increased profitability [3] - The annualized recurring managerial return on average equity was 22.7%, up from 21.1% in the prior year [7] Credit Quality - The cost of credit charges decreased by 11% year-over-year to R$8.2 billion ($1.5 billion) [4] - The non-performing loan ratio was 2.6%, down from 3% in the prior year [4] Balance Sheet Strength - Total assets as of September 30, 2024, rose 2.6% to R$3 trillion ($551.2 billion) [5] - Liabilities, including deposits and borrowings, totaled R$1.44 trillion ($264.6 billion), showing a marginal increase [5] - The credit portfolio increased by 1.9% to R$1.28 trillion ($235.2 billion) from the previous quarter [6] Capital Ratios - The Common Equity Tier 1 ratio improved to 13.7%, up from 13.1% a year earlier [7]