Itaú Unibanco: Foot on the accelerator
Newly acquisitive Itaú's earnings have been remarkably resilient
The optimal way to drive through a sharp turn in the road is to slow down before you reach it, before accelerating out from the mid-point of the curve.
In much the same way, Itaú Unibanco has steered its way through the recent sharp recession in Brazil.
In 2012, the bank shifted into a defensive posture in terms of credit risk, shifting its retail portfolio more into secured lending (mortgages, payroll loans and car loans) and hitting the brakes on extending unsecured credit to riskier individuals.
The bank also pursued a strategy of increasing revenues from fees and commissions. That down-change of strategy before the economic downturn ensured the bank is well positioned to accelerate credit growth if and when the economic rebound occurs.
As well as increasing risk-adjusted lending behaviour before the crisis, Itaú also increased its provisions early and sharply in the early years of the slowdown. This means the bank is already lowering provisions and seeing a benefit in profitability that may be enhanced further if the loans against which the provisions have been made do not turn bad.