(Adds CEO, CFO comments)
By Carolina Mandl
SAO PAULO, May 5 (Reuters) - Brazil’s biggest bank Itau Unibanco Holding SA said on Tuesday that first-quarter cost cuts and higher provisions could be just the start of belt-tightening moves as it projected a slow economic recovery after the peak of the coronavirus pandemic.
“We cannot predict how long this crisis will last, but we do know that recovery for our clients will be a long way off,” CEO Candido Bracher told analysts in a conference call.
He added that political turmoil may slow any recovery in Latin America’s largest economy as mounting investigations of far right President Jair Bolsonaro and his family have eroded his popularity and fed talk of impeachment.
Itau Unibanco’s first-quarter recurring net income, which excludes one-off items, fell 43.1% from a year earlier to 3.912 billion reais ($706 million), as the bank’s loan-loss provisions skyrocketed.
The bank set aside 4.5 billion reais in the first quarter for potential future loan losses, and may further increase provisions in the coming quarters to adjust to the economic scenario, Chief Financial Officer Milton Maluhy said.
Even so, preferred shares in Itau Unibanco were up 5.6% in mid-morning trading, among the leading gainers on Brazil’s Bovespa benchmark stock index.
“We think the bank is well-prepared to face the crisis with the highest coverage and excess reserves among its peers and a still healthy capital ratio,” analysts at Goldman Sachs & Co said in a note to clients.
First-quarter operating expenses were down 0.6% year-on-year and CEO Bracher said the bank is committed to reducing nominal costs this year, to help weather higher provisions and fee income under pressure. (Reporting by Carolina Mandl Editing by Chizu Nomiyama and Alistair Bell)