Itaú sees challenging scenario in Chile, Colombia
Brazilian banking giant Itaú Unibanco said that the economic performance of Chile and Colombia was weaker than expected, but it remains committed to consolidating its operations in the region.
In 2014, Itaú's Chilean unit announced a deal to merge with local lender CorpBanca, creating Itaú CorpBanca. Then the Brazilian bank expanded its operations in Chile and Colombia, countries where CorpBanca has a strong presence,
"When we announced the merger deal, the economic growth expectations for Chile and Colombia were above 4% but this scenario failed to take place, with an expansion of half of this amount," said Itaú CEO Candido Bracher in a press conference in response to a BNamericas question.
"Despite this frustration with the economic performance our focus and commitment to establish our brand in those markets remains unchanged."
BRAZIL'S 2018 SCENARIO
With Brazil's presidential election taking place next October, Bracher said the country's economy is expected to be more sensitive to political turbulence.
"During most part of this year, we saw a certain detachment between the economy and politics, as economic agents believed in the permanency of the economic team," said Bracher, answering another BNamericas question.
"As next year is an election year, I see a different picture. Depending on the future government, the entire economic team along with its strategies will change, and economic agents will pay close attention to those candidates who appear better positioned [in the polls]," he added.
Questioned if he expects approval of the pension reform currently in congress, which is considered crucial to reducing government debt and spending in the long term, during Michel Temer's tenure Bracher said that he "desires" this, although he declined to specify the real chances of approval, saying: "I am not a good political analyst."
TEPID CORPORATE LOANS
Although Bracher declined to provide a forecast for loans next year, he said he expects a recovery in various segments, but companies are likely to remain absent from the loan market.
"Companies are seeing an opportunity to raise money from shares and debt issues and they will likely continue to use such instruments in the next year, instead of looking for loans from banks," the CEO said.
Itaú posted an 11.8% rise in recurring net earnings for the third quarter, as lower provision charges compensated for a contraction in new loans.
The bank ended Q3 with a loan portfolio of 575bn reais (US$175bn), down 4.9% from a year prior. Total assets were 1.46tn reais, up from 1.40tn reais.
"Itaú delivered a positive quarterly result, maintaining an above 20% ROE level," said banking analysts at BB Investimentos.
"In our view, Itaú has been delivering substantial drops in provision expense and keeping a strict control of non-interest expenses. Moreover, the current recovery trend in the domestic economy, the profitable insurance and fees revenues will continue to shine, maintaining the ROE at an above 20% level," it added, keeping its bullish view for Itaú, with an outperform recommendation.
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