Barclays Weekly Latam Financials Scanner: Takeaways from Our Conference

Barclays Weekly Latam Financials Scanner: Takeaways from Our Conference

Barclays analyst, Roberto Attuch, said, "Last week we hosted our 3rd Latin America Financials Conference and Field Trip in Brazil. Throughout the event we heard management's overall message that banks are conservatively thinking about the implications of the current global macro outlook, whilst they remain confident about the trends in the domestic economy (not only in Brazil) and do not anticipate overall profitability to falter. But, management does not seem to be concerned with asset quality despite some recent deterioration in 3Q and with margin sustainability in an environment of easing benchmark rates, which is especially true in Brazil."

"Itaú Unibanco (NYSE: ITUB)(OW, PT R$49): Senior management is targeting the bank's efficiency improvement plan and addressing up to R$35bn of total annual expenses. Management across all levels is very committed to deliver on its medium-term (yet challenging) guidance to improve costs and revenues. For instance, in consumer division, which makes almost 25% of the group's total costs, management reiterated its goal to reach 41% efficiency ratio by 2013, improving from as high as 55% in 2010. Management anticipates to complete initial steps for improving efficiency in the consumer division by 1Q12, when it expects efficiency should be running at a rate in the range of 45-50%."

"Bradesco (NYSE: BBD)(EW, PT R$38): On the contrary, the "expenses" theme seems to be the key investment concern at Bradesco, especially in the context of the necessary infrastructure investments to cope with the loss of the Banco Postal franchise. Meanwhile, Bradesco argues credit growth of 15% would not be a major challenge in Brazil even in a more challenging international scenario; management thinks that currently asset quality deterioration under a stress hypothetical scenario would not be of the same magnitude seen during the 2008-2009 crisis."

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