Brazil’s Itau Unibanco (ITUB) wasn’t among my preferred bank stocks back in August of 2020, and names I preferred like Credicorp (BAP), DBS Group (OTCPK:DBSDY), and ING (ING) have all done better, but I have to admit I’m surprised that Itau has only seen modest share price improvement in what has largely been a global bank stock rally.
I don’t think Itau will ever be my favorite international bank, or even my favorite South American bank, but the elevation of Milton Maluhy could drive some changes (though as the former CFO, I wouldn’t expect a big shift). In particular, Itau needs to figure out how to gain more traction with its digital efforts and offset increasingly fierce competition from non-bank fintech companies in Brazil.
A core long-term earnings growth rate of 7% marks a definite slowdown in the long-term earnings growth rate, but still supports a $6 fair value on the ADRs. I think there’s work that needs to be done here to maintain long-term competitiveness, but credit has held up better than I expected and I think Itau looks a little too cheap on its leverage to a recovery in Brazil’s economy and other economies in South America.
Read more here:
Itau Unibanco - Work To Do, But Undervalued On Recovery Prospects
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