May 3, 2019 / 1:16 PM / a year ago

UPDATE 1-Itaú Unibanco sees competition among card processors unlikely to cool down

(Adds more CEO comments and context)

SAO PAULO, May 3 (Reuters) - The CEO of Brazil’s largest private-sector lender Itaú Unibanco Holding SA said on Friday there is no sign that the fierce competition among card processors in the country will cool down.

Chief Executive Candido Bracher said the bank reduced its 2019 targets for fee income and financial margins with clients after its card processor Rede decided to stop charging interest rates to advance payments for merchants who use its machines and pay them in two days instead of the usual 30-day period.

Still, Bracher said new targets are unlikely to change the bank’s profit, as Itaú also reduced its estimate for operating expenses growth to a range between 3 percent and 6 percent, from between 5 percent and 8 percent.

Bracher said, however, the cut in operating expenses is related to Brazil’s slower-than-expected economic recovery and will affect all Itaú’s areas.

Upstart card processors such as PagSeguro Digital Ltd and StoneCo Ltd in recent years have challenged mainstream banks’s card businesses.

All Brazilian card processors have fought back Rede’s move and announced new offers for small and mid-sized merchants, in a price war rarely seen in the concentrated Brazilian financial system.

“We maintain our call that the aggressive pricing strategy adopted by Rede will have a negative effect on banking fees in the short term, while in the medium-to-long term it should increase the banking franchise’s cross-sell opportunities,” analysts at Banco Santander SA said in a note to clients.

Itaú posted a recurring net income of 6.87 billion reais ($1.74 billion) on Thursday, up 7.1% from the year-ago period and roughly in line with a Refinitiv analysts’ consensus estimate. ($1 = 3.9444 reais) (Reporting by Carolina Mandl; Additional reporting by Paula Laier; Editing by Chizu Nomiyama and David Gregorio)

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