Brazil's largest private-sector bank in terms of assets, Itau Unibanco (ITUB, ITUB4.BR), sees no need to tap capital markets in the next few years in order to meet strict new liquidity requirements under Basel III rules, one of the firm's top executives said Thursday.
"If the rules took effect now, we'd have no need to raise capital. Our own cash generation will help us to meet the requirements with no need to tap capital markets," said the bank's vice president and director of investor relations, Alfredo Setubal, in a conference call with analysts.
Earlier this year, Brazil's National Monetary Council authorized the country's central bank to begin implementing Basel III international banking recommendations during the period 2014 to 2019. More broadly, Mr. Setubal predicted improvements in the bank's performance.
He said a combination of accelerated lending, cost controls and lower interest spreads will help the bank improve its Net Interest Margin, or NIM, starting in the second quarter of this year.
The bank's NIM ended the first quarter at 9.1%, down from 9.8% in the fourth quarter and down from 11.4% in the first quarter of 2012.
"The worst is behind us; I believe that we reached bottom in the first quarter and we now expect an improvement in our margins," said Mr. Setubal.
Earlier this week, Itau Unibanco posted a first-quarter net profit of 3.47 billion Brazilian reais ($1.7 billion), up only slightly from BRL3.43 billion a year earlier. Growth in earnings did not match 12-month inflation during the period, which was 6.4%.
The bank's comparatively weak earnings were attributed to a slow rise in total lending because of Brazil's weak economic activity.
Brazil's economy expanded by only 0.9% in 2012. The bank's credit portfolio ended the first-quarter at BRL434 billion, up 8.4% from BRL400 billion in the year-earlier period.
That was considerably less than the expansion in lending by Brazil's overall financial system, which was more than 15%.
Itau decided to reduce the pace of expansion in its loans, especially those linked to vehicle purchases and small- and mid-cap companies, in order to reduce default rates and expenses from provisioning.
Asked by analysts if the bank was studying a possible spinoff of its insurance and pension unit, the Itau executive answered with a flat denial.
The question arose because of a successful initial public offering of shares in April by Brazilian state-run banking giant Banco do Brasil (BBAS3.BR).
Banco do Brasil held the world's largest IPO so far this year, selling off its pension and insurance arm, called BB Seguridade, in an operation totaling BRL11.5 billion.
"We have no ongoing studies about any changes in our pension and insurance division," said Mr. Setubal.
"The unit is expanding in line with the expansion of incomes among Brazilians. I do not foresee any changes in this area." In early trading Thursday, Itau's shares were up 0.76% at BRL33.88, while the main Brazilian stocks index, the Ibovespa, was down 0.34%.
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"If the rules took effect now, we'd have no need to raise capital. Our own cash generation will help us to meet the requirements with no need to tap capital markets," said the bank's vice president and director of investor relations, Alfredo Setubal, in a conference call with analysts.
Earlier this year, Brazil's National Monetary Council authorized the country's central bank to begin implementing Basel III international banking recommendations during the period 2014 to 2019. More broadly, Mr. Setubal predicted improvements in the bank's performance.
He said a combination of accelerated lending, cost controls and lower interest spreads will help the bank improve its Net Interest Margin, or NIM, starting in the second quarter of this year.
The bank's NIM ended the first quarter at 9.1%, down from 9.8% in the fourth quarter and down from 11.4% in the first quarter of 2012.
"The worst is behind us; I believe that we reached bottom in the first quarter and we now expect an improvement in our margins," said Mr. Setubal.
Earlier this week, Itau Unibanco posted a first-quarter net profit of 3.47 billion Brazilian reais ($1.7 billion), up only slightly from BRL3.43 billion a year earlier. Growth in earnings did not match 12-month inflation during the period, which was 6.4%.
The bank's comparatively weak earnings were attributed to a slow rise in total lending because of Brazil's weak economic activity.
Brazil's economy expanded by only 0.9% in 2012. The bank's credit portfolio ended the first-quarter at BRL434 billion, up 8.4% from BRL400 billion in the year-earlier period.
That was considerably less than the expansion in lending by Brazil's overall financial system, which was more than 15%.
Itau decided to reduce the pace of expansion in its loans, especially those linked to vehicle purchases and small- and mid-cap companies, in order to reduce default rates and expenses from provisioning.
Asked by analysts if the bank was studying a possible spinoff of its insurance and pension unit, the Itau executive answered with a flat denial.
The question arose because of a successful initial public offering of shares in April by Brazilian state-run banking giant Banco do Brasil (BBAS3.BR).
Banco do Brasil held the world's largest IPO so far this year, selling off its pension and insurance arm, called BB Seguridade, in an operation totaling BRL11.5 billion.
"We have no ongoing studies about any changes in our pension and insurance division," said Mr. Setubal.
"The unit is expanding in line with the expansion of incomes among Brazilians. I do not foresee any changes in this area." In early trading Thursday, Itau's shares were up 0.76% at BRL33.88, while the main Brazilian stocks index, the Ibovespa, was down 0.34%.
foxbusiness.com
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