It has been an up-and-down year for Brazil’s economy and investor sentiment, so it’s no great surprise that the shares of Itau Unibanco (ITUB)
have likewise bounced around. Although the ADRs haven’t really gone
anywhere fast when compared to the price twelve months ago, they are up
about 30% from my last update
on the company on renewed optimism over Brazil’s economy and perhaps
some recognition of Itau’s excellent capital and market position.
As
far as the potential returns from here, though, I’m not as bullish as I
was mid-year. I’m expecting double-digit earnings growth for each of
the next five years (and healthy growth beyond that), and that supports a
low-to-mid teens annualized return from here, which isn’t bad but not
as strong as the 20%+ returns I saw before this run. Where Brazil to
enter another “boom” cycle in the economy, there would certainly be
upside to my numbers, but then there is also potential downside if the
government’s efforts to improve the economy don’t pan out and/or if
up-and-coming fintech rivals successfully disintermediate the
traditional banks.
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Can A New Growth Cycle In Brazil Spark Growth For Itau Unibanco?
