Itaú Unibanco Holding SA Q3 FY2023 earnings call

Key points include: ROE details with Brazil's ROE at 22% and if within capital risk appetite, ROE would be ~24%. Commission and fees growth in credit/debit cards, advisory services, asset management, and insurance. Loan portfolio segments with growth in individuals, SMEs, etc. Credit quality with stable NPL rates. Non-interest expenses grew 8.4%. Data initiatives with cloud-based data mesh, over 350 data scientists, etc. Culture and diversity progress with black representation and women in leadership. Awards won including being best company to work for. Capital ratio changes and impact of Argentina sale.

The recurring managerial result was BRL9 billion, growing 3.4% quarter-over-quarter. Consolidated ROE was 21.1%, with Brazil's ROE at 22% (up half a percentage point). Commission and fees and result with insurance operations grew 3.6% quarter-over-quarter to BRL12.9 billion. Cost of credit was BRL9.3 billion, a 1.9% quarter-over-quarter nominal drop. Level one capital ratio reached 14.6%, an increase of one percentage point. The individuals loan portfolio grew 6% year-over-year. SMEs portfolio grew 3.2% year-over-year with a 3.3% quarter-over-quarter pickup.

Guidance is reaffirmed with adjustment to exclude the impact of Argentina from the last five months, restating projections without changes.

Risks include credit card regulatory discussions with potential impacts on rates and portfolio growth, macroeconomic uncertainties affecting credit demand and quality, and potential caps on interest rates and their effect on profitability.

Q: Comment on improvement in ROA with retail business and credit card meeting with Central Bank A: Profitability in retail improved due to capital allocation changes. Credit card meeting with Central Bank involves technical discussion on transforming credit card into a platform with more efficiency Q: Thoughts on retail portfolio derisking and expanding lower income segments A: Derisking was correct, focus on Itaú One platform to deliver full bank experience for clients, rebalancing portfolio for quality growth Q: Impact of Argentina sale on hedge costs and loan growth demand A: Argentina sale had positive impact on hedge costs. Loan growth demand seen with increase in corporate origination and positive GDP prospects Q: Valuation and M&A opportunities A: Bank's valuation is seen as cheap, M&A team looks for opportunities but no relevant big opportunities outside Brazil seen currently Q: Payroll loan strategy and ROE expectations A: Payroll loan strategy involves adjusting to market changes, ROE expected around 20% looking ahead Q: Credit card regulatory inquiry and impact A: Complex topic with need for technical discussion, cap on rates could have negative impacts on portfolio growth and consumer access to finance Q: Wholesale portfolio NPLs and insurance business sustainability A: Wholesale portfolio NPLs well covered by provisions. Insurance business seen as sustainable with cross-sell opportunities via Itaú One platform Q: Digital transformation and account openings A: Digital transformation sees slower growth in penetration due to high initial penetration, focus on quality of digital accounts and credit filter adjustments