Itaú expects an increase in defaults this year, says president of the institution – 05/04/2021 – Market

The pandemic may still have an impact on the family budget and cash flow of companies throughout this year. According to Itaú Unibanco’s president, Milton Maluhy Filho, this scenario reinforces the expectation that the bank’s default rates will increase in the coming months. This indicator would start to stabilize only in the fourth quarter.

According to the institution, at the beginning of the year, the environment was more benign. “Bad debt has been better than we imagined in the first quarter, reflecting activity, the important fiscal expansion we had last year with emergency aid and increased savings, as people reduced their spending,” said Maluhy Filho in conference call with journalists this Tuesday (4) to comment on Itaú’s results in the first quarter of this year.

The day before, when disclosing the result for the first quarter of this year, Itaú reported that its default rate over 90 days was 2.3%, stable in relation to the immediately previous quarter and a fall of 0.8 pp ( percentage point) compared to the first three months of 2020.

Specifically in the portfolio of micro, small and medium-sized companies, however, the default rate reached 2.5% in the first quarter of this year, an increase of 0.8 pp in relation to that seen in the immediately previous three months and an increase of 0.2 pp in the annual comparison.

The bank attributed the increase mainly to the end of the shortage of contracts that were relaxed in the previous quarters.

“Small and medium-sized companies, due to their own capital structure, channels and physical distribution points, is a sector that ends up suffering a lot in the pandemic, mainly with the lockdown and restrictions”, said Maluhy Filho.

In the case of arrears between 15 and 90 days, the index stood at 2% in the first quarter – a fall of 0.6 pp in relation to the same period in 2020 and an increase of 0.2 pp in comparison to the immediately previous three months.

Itaú’s president also stated that with the increase in defaults, the bank’s expectation is to consume part of the reserves made last year to cover possible defaults. In 2020, the bank set aside R $ 29.9 billion for this purpose.

“We still have a lot of uncertainty when looking forward, but the main message is that as the scenario normalizes, we should consume part of what we have provisioned last year. But it is important to say that we have a scenario with a positive bias for the future, despite the pandemic ”, said the executive.

“Even in the wake of the pandemic, the tendency is for the fourth quarter to be more normalized, with the effects of the vaccine and the stronger resumption of economic activity.”

In a conference call with journalists, Maluhy Filho also stated that he has already filed the request and now awaits the approval of the Central Bank to complete the acquisition of an additional 11.38% stake in XP. The purchase was announced in February this year and is expected to be completed in 2022.

Regarding IRB, a reinsurer in which the bank has a significant investment of 11% interest, the president of Itaú stated that he is comfortable with the changes in corporate governance that the company has been presenting.

“The IRB went through a complex and adverse scenario, of poor management and governance. […] But we are comfortable with the governance changes with the IRB and the cleanup that has been done. We are not controlling shareholders, but according to what we have seen in market reports, we have a positive expectation that these problems have already been solved, ”said Maluhy Filho.

The president of Itaú also stated that he does not rule out the possibility of being one of the partners of payments through WhatsApp. “We have analyzed all the alternatives available on the market and we are very pro-competitive. If that eventually means being part of the [pagamento por] WhatsApp is something that is being evaluated by the bank, ”he said.

In mid-April this year, the messaging app confirmed that it will launch the service soon and with more partners than initially announced.

WhatsApp announced the function of transfer and payments via app in June 2020, with a system initially developed with Visa and Mastercard, Cielo as operator and Banco do Brasil, Nubank and Sicredi as initial partners.

Days later, Cade’s General Superintendence (Administrative Council for Economic Defense) and the Central Bank suspended the agreement between WhatsApp and the financial institutions, stating that there would be doubts about the nature of the service and requesting clarifications about the business model.

At the time, there was speculation in the market that the BC would have complied with a complaint from the big private banks about the solution and, furthermore, barred the service to protect Pix, the instant payment system of the monetary authority that would be launched in November. The BC denied it.

The debate between BC, WhatsApp and the institutions involved lasted until March 30 this year, when the municipality authorized the service.

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