Brazil stocks close down on Itau; real rises

(Updates to close)

SAO PAULO, Aug 11 (Reuters) - Brazilian stocks posted their biggest fall in more than a month on Tuesday, dragged down by banking giant Itau Unibanco after it reported recurring net income plunged in the second quarter.

The benchmark Bovespa index .BVSP slid 1.88 percent to 55,761.16 points, a day after closing at a high for 2009. The index has been gaining fairly steadily in recent weeks, adding about 14 percent since July 14.

Itau Unibanco (ITUB4.SA), Latin America's biggest bank by assets, reported recurring net income fell 14 percent on increased provisions for bad debt. Still, the drop was less than analysts had expected. Shares tumbled 4.1 percent to 34.60 reais.

Comments by Itau Unibanco Chief Executive Roberto Setubal that lending rates charged by public banks are too low and unsustainable reinforced concern that profitability at the nation's banks will erode in coming months.

"It is a bit of warning sign," said Marcio Macedo, who manages about 20 million reais in stock at Humaita Investimentos. "This sparked some skepticism among investors about the outlook for profits."

Brazil's currency, the real (BRBY), strengthened 0.32 percent to 1.843 reais per dollar, reversing earlier weakening. The currency has hovered near its strongest level since September in recent sessions.

Other banks also fell. Banco Bradesco (BBDC4.SA) lost 2.94 percent to 29.99 reais and Banco Nossa Caixa (BNCA3.SA) dipped 0.09 percent to 74.98 reais.

Shares were also dragged down by profit-taking.

"It's a bit of profit-taking," said Hersz Ferman, an economist with Um Investimentos. "It's a bit of a breather. Things could start to gain again soon."

State-controlled energy giant Petrobras (PETR4.SA) shed 2.74 percent to 31.22 reais on the heels of a 1.63 percent tumble in crude oil CLc1. Oil prices fell as downbeat U.S. data and a lower revised forecast for global oil demand from that government prompted doubts over the pace of economic recovery.

Mining company Vale (VALE5.SA), the world's largest iron ore producer, lost 2.21 percent to 32.34 reais.

Petrobras and Vale have the heaviest weighting in the Bovespa index.

The 19-commodity Reuters-Jefferies index .CRB declined 0.79 percent. Mixed economic data, including a fall in U.S. wholesale inventories and in Chinese July imports, dragged copper HGc1 down 1.03 percent. The Bovespa index includes a number of stocks tied to commodities.

Yields on Brazilian interest rate futures contracts <0#DIJ:> largely continued to slide.

The yield on the contract due January 2011 DIJF1 slipped to 9.82 percent from 9.85 percent. The yield on the contract due January 2010 DIJF0 dipped to 8.65 percent from 8.66 percent. Both were among the most highly traded contracts of the day.

Investors also kept an eye on the U.S. Federal Reserve's policy-setting committee meeting on Tuesday and Wednesday this week. Analysts expect the U.S. central bank to keep the benchmark overnight rate in a range of zero to 0.25 percent.[ID:nN10470294] (Reporting by Luciana Lopez and Guillermo Parra-Bernal; Editing by Leslie Adler)