Itaú Is A Safe Bet For Reliable Dividends In Brazil

Core Viewpoint - Itaú Unibanco Holding is recognized as a solid financial institution in Brazil, maintaining a strong net profit and customer base despite being overtaken by Nu Holdings in market capitalization [1][10]. Financial Performance - In Q2, Itaú reported a net income of R$10 billion, outperforming Banco do Brasil's R$9.72 billion, while competitors Nu Holdings and Banco Bradesco did not reach half of Itaú's net income [1][2]. - The net income compound annual growth rate (CAGR) over the last five years was 7.28%, with a 20-year average of 13.5% [2]. - The total credit portfolio increased by 5.9% to R$1.25 trillion, with corporate loans rising by 8.9% and Latin American loans growing by 13.3% [6]. Operational Indicators - The consolidated 90-day non-performing loan (NPL) ratio remained stable at 2.7%, while the 15-90 day NPL decreased from 2.4% to 2.3% [6]. - The financial margin with clients increased from R$22.8 billion to R$23.4 billion, supported by higher volume and spread [8]. - The efficiency ratio improved to 37% in the first half of 2024, indicating effective expense management [8]. Dividend and Valuation - Itaú has a dividend yield of 5.6% over the last 12 months, with expectations for extraordinary dividend distributions due to a solid capital base [9][10]. - The price-to-book ratio stands at 1.7x, justified by a consistent ROE above 20%, while competitors have lower ratios [10][11]. - A conservative dividend discount model suggests a fair price of $6.40 for ITUB stocks, slightly below the current trading price of ~$6.80, indicating a reasonable entry point [15][16]. Market Position - Itaú's focus on quality and security differentiates it from fintech competitors like Nu Holdings and PagSeguro, which prioritize growth [10]. - The current Selic interest rate is at 10.5%, making Itaú stocks attractive for investors seeking returns above this rate [10].