UPDATE 2-Brazil's Ita+¦ tops estimates, sees weaker loan growth
SAO PAULO, July 30 (Reuters) - Itaú Unibanco Holding SA , Brazil's largest bank by market value, beat second-quarter profit estimates on Tuesday as better-than-expected revenue and expense controls offset a slump in trading-related income.
Excluding one-time items, earnings totaled 3.622 billion reais ($1.59 billion), above the 3.616 billion reais estimate in a Thomson Reuters poll of eight analysts. Recurring profit rose 3 percent from the previous quarter and 0.9 percent from a year earlier, the bank said in a securities filing on Tuesday.
Itaú lowered its forecast for loan book growth this year to between 8 percent and 11 percent from a prior range of 11 percent to 14 percent.
"Clear signs of asset quality improvements, net interest margin stabilization and strong fees bode well for the second half, despite weak loan growth," said Philip Finch, a strategist for UBS Securities in London.
Net interest income rose for the first quarter in five, led by an unexpected 3.4 percent increase in lending-related revenue. Risk-weighted net interest margin, or the average interest rate charged on loans, rose for the first quarter in eight to 6.4 percent.
But trading-related income, or gains from the purchase and sale of financial securities, fell by 55 percent to 268 million reais, a four-year low. The decline came after a series of central bank interest-rate increases in the quarter weighed down the value of fixed-rate government debt holdings.
Smaller peer Banco Bradesco SA missed profit estimates because of a hefty decline in the value of bond holdings.
Shareholders' equity at Itaú rose 2 percent despite lower trading income, and unrealized gains, or the impact of marking to market the value of the securities in the balance sheet, led to a charge of 2.4 billion reais, about one-third of Bradesco's.
RETURN ON EQUITY RISES
Return on equity, a gauge of profitability among banks, rose for the third straight quarter to 19.3 percent, while analysts expected 19.4 percent.
Itaú's management will discuss results on a conference call later Tuesday.
Loans in arrears for more than 90 days, a benchmark for delinquencies, fell to 4.2 percent of the total. Analysts looked for the default ratio to reach 4.4 percent.
Itaú's loan book rose 7.7 percent over the 12 months through June to 445.1 billion reais, a tad off the expected growth for the indicator this year. The healthy 2.5 percent gain quarter to quarter was in line with estimates.
Provisions for bad loans fell 0.6 percent to 4.91 billion reais, above expectations of 4.77 billion reais.
Fee income rose 5.4 percent from the prior quarter to 5.399 billion reais, above expectations of 5.347 billion reais. Operating expenses rose 4.2 percent on a sequential basis to 8.626 billion reais, still above estimates of 8.5 billion reais.