May 2, 2018 / 6:31 PM / 3 months ago

UPDATE 1-Itaú Unibanco shares slump after credit demand seen weak

(Adds details, background)

By Carolina Mandl

SAO PAULO, May 2 (Reuters) - Shares in Itaú Unibanco Holding SA fell as much as 4.3 percent on Wednesday after the bank, Brazil’s largest private lender, said corporate credit demand is not expected to pick up in 2018.

Amid a sluggish recovery in the Brazilian economy, Itau Chief Executive Candido Bracher said during a call with analysts that the lack of corporate credit growth is a bit “frustrating.” On the other hand, first-quarter loan disbursements for individuals and small- and medium-sized companies increased by nearly 30 percent year-over-year.

“We continue to see subdued demand for credit in large companies,” said Bracher. “It continues to lag.” He said that large companies are also seeking bond issuance as a cheaper way to fund themselves, a trend that he said may be irreversible.

Overall, Itaú’s loan book grew 0.2 percent in the quarter, an increase led by the bank’s operations outside Brazil, in other Latin America countries.

On Tuesday, Itau reported a recurring net income of 6.419 billion reais ($1.81 billion) in the first quarter, 0.9 percent above the Reuters consensus estimate.

In notes to clients, analysts said Itaú’s results came in-line in the quarter, as the bank relied more on lower loan-loss provisions and other gains than on loan growth.

“We see these trends remaining through much of 2018, with a more marked improvement coming late in the year or early in 2019,” Goldman Sachs’ analysts said in a note to clients.

Itaú’s 90-day default ratio remained stable in the quarter at 3.1 percent, although the amount of non-performing loans increased. During the call, Bracher said this growth relates to a specific case of a company in the infrastructure sector, without naming it.

Shares in Itaú were down 3.8 percent at 49.04 reais, underperforming the São Paulo stock exchange index. ($1 = 3.5423 Brazilian reais) (Reporting by Carolina Mandl; editing by Christian Plumb and Lisa Shumaker)

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