February 4, 2019 / 9:59 PM / a year ago

UPDATE 1-Brazil's Itaú Unibanco increases payout ratio to 89.2 pct

(Adds payout ratio, loan book and guidance)

By Carolina Mandl

SAO PAULO, Feb 4 (Reuters) - Brazil’s Itaú Unibanco Holding SA increased its payout ratio to shareholders for the second year in a row as the country´s largest private lender reported earnings that hit analysts’ estimates.

The bank said in a securities filing on Monday that dividends to shareholders will reach 22.4 billion reais, equivalent to 87.2 percent of Itaú’s net income in 2018. The company’s total payout ratio, which combines dividends and share buybacks, totaled 89.2 percent of the bank’s profit, up from 83 percent in 2017.

Chief Executive Candido Bracher set a new policy a year ago calling for the bank to return capital to shareholders whenever its tier 1 capital ratio exceeds 13.5 percent. The ratio was 15.9 percent in 2018. The bank, however, may keep some capital on hand for potential acquisitions.

Itaú posted fourth-quarter net income of 6.478 billion reais, up 3.1 percent year-over-year and hitting analysts’ average estimate calculated by Refinitiv. Profit grew mainly because the bank reduced provisions for loan losses offsetting higher-than-expected non-interest expenses.

Amid Brazil’s gradual economic recovery, the bank’s loan book reached 636.6 billion reais, up 6.1 percent in 2018, pushed by fast growing portfolios of car loans and credit cards. In the quarter, however, the loan book remained stable.

As Itaú expects an acceleration of growth this year, the bank set more optimistic 2019 targets, forecasting loan book growth of 8 to 11 percent.

Loan-loss provisions diminished 15.3 percent year-over-year, to 3.796 billion reais. The portion of loans in arrears for more than 90 days was stable at 2.9 percent in the quarter.

Still, the bank said that total cost of credit should be between 14.5 billion reais and 17.5 billion reais. In 2018, it reached 14.1 billion reais.

Bracher is slated to discuss the results on Tuesday morning with journalists and analysts. ($1 = 3.6707 reais) (Reporting by Carolina Mandl Editing by Sonya Hepinstall)

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