I wasn't overly fond of Itau Unibanco (ITUB) back in the fall of 2019, and while COVID-19 wasn't on the radar then, Itau's performance since then has been lackluster - lagging the Brazilian exchange by more than 20% and Banco Santander (BSBR) by about 15%, while outperforming Bradesco (BBD) by about 10%. Competition from new non-traditional banking sources remains a significant issue, as does the government's handling of the economy, but I will say that Itau seems to be handling its credit exposures and costs more realistically and proactively than it has in the past.
I think Itau shares can likely produce a double-digit (mid-teens) return from here, but investors need to be aware of the well above-average volatility that will probably always go with investing in Brazil and the bank sector in particular. I like how Itau is handling this credit cycle, and my only real issue with a more forceful "buy" call is that I think there are American banks trading at even bigger discounts to fair value with lower risk profiles.
Follow this link to the full article:
Itau Unibanco Taking The Right Approach, But Needs A Healthier Underlying Economy
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