UPDATE 3-Potential Selic hikes could give Itaú further earnings power

martes 4 de noviembre de 2014 10:49 GYT

(Recasts to add analyst comments, share performance throughout)

By Guillermo Parra-Bernal and Aluísio Alves

SAO PAULO Nov 4 (Reuters) - Itaú Unibanco Holding SA could extend an impressive run of record profits into coming quarters as Brazil's largest bank by market value gets a boost from government policies.

Economists expect the central bank to raise the benchmark Selic overnight lending rate by about 1 percentage point over the next year to fight inflation, while officials are considering cutting funding costs for banks to fight Brazil's economic downturn.

Marcelo Kopel, Itaú's senior vice president for risk and compliance, suggested on a conference call on Tuesday that the positive earnings impact of Itaú's focus on the safest borrowers and declining defaults may be losing steam. A higher Selic may allow banks to charge more for their loans, he noted.

Itaú seems "to be approaching a peak impact of tailwinds in ... the non-performing loans cycle, though higher upcoming benchmark rate hikes could extend the effect," said Carlos Macedo, an analyst with Goldman Sachs Group Inc in New York.

The central bank unexpectedly lifted the Selic to 11.25 percent last Wednesday. Sources told Reuters recently that government measures to stimulate certain credit segments are in the offing, including efforts to alleviate banks' funding costs.

Itaú earned record profit in the third quarter, beating estimates by a large margin as revenue jumped and loan disbursements surprised on the upside. Recurring net income, which excludes one-time items, was 5.457 billion reais ($2.2 billion) in the quarter, beating a Reuters poll estimate of 5.029 billion reais.

Shares jumped as much as 3 percent at the open, and were 1.8 percent higher at 37.22 reais at noon on Tuesday.   Continuación...