May 2, 2019 / 11:40 PM / 9 months ago

UPDATE 1-Brazil's Itau Unibanco cuts estimates as competition grows

(Adds new 2019 targets, profitability, loan book growth)

SAO PAULO, May 2 (Reuters) - Brazil’s largest private-sector lender Itau Unibanco Holding SA posted a higher first-quarter recurring profit on Thursday, but set lower targets for gains with clients in 2019, indicating it sees fiercer competition for consumers.

Itau revised its 2019 guidance nearly three months after releasing its estimates, as competition sharply rose among credit card processors.

Itau owns Rede, and has decided to stop charging interest rates to advance payments for merchants using its machines.

Itau reduced estimates for fee income growth to a range of 2% to 5% in 2019. Earlier this year, the bank had expected growth of 3% to 6%.

The bank also predicted slower growth in its financial margin with clients, of 9% to 12%, instead of 9.5% to 12.5%.

Itau, however, also estimated that 2019 operating expenses would also rise at a slower pace, of 3% to 6%, instead of 5% to 8%.

The bank did not provide reasons for the changes.

CEO Candido Bracher will discuss Itaú’s first-quarter results with analysts on Friday morning.

Itau’s recurring net income totaled 6.87 billion reais ($1.73 billion) on Thursday, up 7.1% from the year-ago period and roughly in line with a Refinitiv analysts’ consensus estimate.

Profit was boosted by higher financial margins with clients as Itau extended more loans to consumers and small companies.

The bank’s loan book reached 647.061 billion reais, up 1.6% from the previous quarter, boosted by car, payroll and personal loans. Corporate loans shrank during Brazil’s slow economic recovery.

Earlier this year, the bank had foreseen its loan book would grow between 8% and 11% this year, below competitors’ targets.

Itaú’s return on equity, a gauge of profitability, came in at 23.6%, up 1.8 percentage point in the quarter. For the year, the bank expects to reach 24% profitability.

Loans in arrears for more than 90 days were at 3% in March, up 0.1 percentage point from December.

Total loan-loss provisions remained stable year-over-year, but grew 11.4% in the quarter to 3.8 billion reais. ($1=3.9665 reais) (Reporting by Carolina Mandl, editing by G Crosse and Richard Chang)

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