UPDATE 3-Itaú posts record profit, sees solid year
(Recasts with comments from analysts and executives, share performance; adds details)
By Guillermo Parra-Bernal and Aluísio Alves
SAO PAULO Aug 5 (Reuters) - Itaú Unibanco Holding SA , which beat estimates to post record net income for the second quarter on Tuesday, sees solid profits through year-end despite a tepid economy, executives of Brazil's biggest private-sector bank said.
Return on equity, lending spreads, defaults and loan-loss provisions should stay stable, while steps to curb expenses may provide support for earnings in coming quarters, Marcelo Kopel, Itaú's senior vice president for risk and compliance, said on a conference call held to discuss quarterly results.
While a focus on low-risk lending segments and high interest rates in Brazil has given Itaú a strong profit push for the past two years, earnings after this year will hinge more on how quickly an economic recovery takes place, Kopel said. Banks in Brazil are grappling with a fourth year of weak economic growth, above-target inflation and eroding business and consumer confidence.
"The economy will be an important component of how sustainable earnings are going forward," Kopel said.
Shares rose to a record intraday high on Tuesday, validating Chief Executive Officer Roberto Setubal's choice to pick profits over market share. The results marked the second time in three quarters that Itaú has posted record profits.
Recurring net income, or profit excluding one-time items, was 4.973 billion reais ($2.2 billion) in the quarter, above the 4.634 billion reais estimate in a Reuters poll.
On a quarterly basis, interest income rose at its fastest pace in five years. Loan book expansion gained momentum after a hiccup in the previous quarter, defaults fell for an eighth straight quarter and income from trading of financial securities hit the highest level in two years. Continuación...