Itau Unibanco S.A.(ITUB) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank ended Q2 2020 with a recurring net income of BRL 4.2 billion, translating to a return on equity (ROE) of 13.5%, reflecting a 7.5% growth in net income [19] - The cost of credit decreased by 23%, contributing to the net income growth, although this was partially offset by a higher effective income tax rate due to a 5 percentage point increase in social contribution [20] - The loan portfolio grew by 2.9%, ending the period with a balance of BRL 811 billion [20] Business Line Data and Key Metrics Changes - The loan portfolio was stable when adjusted for foreign exchange valuation, with large corporates growing by 3.6% quarter-on-quarter, while individual loans contracted by 3.9% [21] - There was a significant contraction in credit cards and secured personal loans, reflecting a change in customer behavior and a proactive risk management approach [21] - Personalized credit with new payment conditions grew by 44%, partially compensating for the drop in other segments [21] Market Data and Key Metrics Changes - The economic activity in Brazil contracted by 45% at the end of March compared to pre-pandemic levels but showed recovery, reaching 90% of pre-COVID-19 activity levels by the end of June [8] - The bank's digital customer base increased by 17.1% over the last year, with nearly 1 million new bank accounts opened through the app in the first half of the year [29] Company Strategy and Development Direction - The bank focused on supporting customers during the crisis, participating in government programs to finance small retailers and extending emergency payroll financing for micro and small companies [11][12] - The integration of ESG teams into the bank's operations is a priority, with initiatives aimed at sustainable development, particularly in the Amazon region [18] - The bank aims to maintain appropriate capital and liquidity levels while adapting to changes in credit demand and market conditions [31][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented nature of the crisis and the uncertainty surrounding future economic conditions, opting to suspend guidance [31] - The bank expects a gradual recovery in economic activity and a potential reduction in the cost of credit, with provisions anchored in an expected loss model [32] - Management expressed confidence in delivering efficiency gains through continuous investment in technology and optimization of distribution channels [32] Other Important Information - The bank allocated over BRL 1 billion to fight the COVID-19 pandemic, including donations of medical supplies and support for vaccine production [16] - The non-performing loans (NPL) ratio decreased, but management cautioned that this does not fully reflect the ongoing crisis [25] Q&A Session Summary Question: Performance of loans that left the revised program - Management noted that many loans that matured after the initial 60-day grace period have performed better than expected, with a high level of payments [39] Question: Impact of instant payment platform on fees - Management expects the new instant payment platform to have a gradual impact on income, with potential competition effects in the midterm [41][42] Question: Provisions and cost of risk normalization - Management indicated that it may be too soon to see provisions return to normalized levels in Q3, as the most fragile quarter is still ahead [49] Question: Strategic view on Itau CorpBanca and IRB - Management confirmed normal operations for Itau CorpBanca and indicated a willingness to increase participation in IRB if conditions allow [50] Question: Credit card business recovery - Management reported that credit card expenditures are currently 10% to 15% below historical levels, with recovery expected to be gradual [56] Question: Competition from fintechs - Management observed strong competition in specific areas, particularly in acquiring and investment businesses, but noted that fintechs are still relatively small players in the overall lending market [57][62] Question: Position in XP and goodwill write-off - Management expressed satisfaction with the investment in XP and clarified that the goodwill write-off for CorpBanca had minimal impact on financial statements due to amortization practices [67][70]