Itaú Unibanco Holding S.A. — Form 20-F Summary
Business context and reporting period
This annual report covers the fiscal year ended December 31, 2022, with comparative information for 2021 and 2020. Although the request references 2022 Q4, the filing is a full-year Form 20-F rather than a standalone quarterly filing. Financial statements are prepared under IFRS as issued by the IASB and presented in Brazilian reais, unless otherwise stated.
Itaú Unibanco is Brazil’s largest private-sector bank, operating primarily in Brazil and across Latin America through Retail Business, Wholesale Business, and Activities with the Market and Corporations. Its products include consumer and corporate lending, cards, payments, insurance, private pensions, asset management, investment banking and brokerage services.
Financial performance and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Operating revenues | R$144.9 billion | R$126.4 billion | +14.6% |
| Net interest income | R$87.2 billion | R$75.2 billion | +16.0% |
| Non-interest income | R$57.6 billion | R$51.2 billion | +12.7% |
| Expected losses from financial assets and claims | R$29.3 billion | R$14.4 billion | +103.7% |
| Income before tax | R$37.5 billion | R$42.2 billion | -11.1% |
| Net income | R$30.7 billion | R$28.4 billion | +8.3% |
| Net income attributable to parent | R$29.7 billion | R$26.8 billion | +11.0% |
| Basic earnings per share | R$3.03 | R$2.74 | +10.6% |
Net interest margin was 4.4% in 2022 versus 4.3% in 2021, while net interest spread decreased to 3.3% from 3.7%, reflecting higher funding costs. The consolidated efficiency ratio improved to 41.2%, compared with 42.9% in 2021 according to management’s measure; Brazil’s efficiency ratio was 39.1%.
Operating cash flow was R$130.0 billion, compared with R$54.3 billion in 2021. Investing activities used R$73.6 billion, financing activities used R$31.7 billion, and cash and cash equivalents ended at R$104.3 billion, compared with R$103.9 billion at year-end 2021.
Balance sheet, credit quality, capital and liquidity
- Total assets were R$2.323 trillion, up 12.3% from R$2.069 trillion.
- Customer loan and lease operations totaled R$909.4 billion, up 10.6%. Individual loans increased 20.3%, led by credit cards, personal loans and mortgages.
- Allowance for loan losses was R$52.3 billion, or 5.8% of the loan portfolio, compared with R$44.3 billion and 5.4% in 2021.
- The 90-day non-performing loan ratio increased 50 basis points to 3.3%, driven primarily by higher delinquency in Brazilian individual portfolios. The 15-to-90-day ratio also rose 50 basis points to 2.2%.
- Total deposits were R$871.4 billion, representing 54.8% of total funding, compared with R$850.4 billion and 59.8% in 2021. Interbank and institutional market funding increased materially.
- Total liabilities were R$2.146 trillion and equity attributable to the parent was R$168.0 billion.
- CET1, Tier 1 and total capital ratios were 11.9%, 13.5% and 15.0%, respectively, compared with 11.3%, 13.0% and 14.7% in 2021.
- The average liquidity coverage ratio was 164.4%, and the net stable funding ratio was 124.9%, both comfortably above the 100% regulatory minimum.
- The operational liquidity reserve was R$259.0 billion, consisting principally of cash, funded resale agreements and unencumbered Brazilian government securities.
Material changes versus the prior comparable period
- Revenue and net interest income benefited from loan growth, higher Brazilian interest rates and greater financial-asset yields. However, interest expense increased 99.9%, primarily due to more expensive deposits, repurchase agreements and insurance and pension technical provisions.
- Expected credit losses more than doubled, reflecting portfolio growth, higher consumer delinquencies and a R$1.3 billion provision covering 100% of a specific large-corporate exposure. The after-tax effect of this case was approximately R$719 million.
- Retail Business net income rose 15.4% to R$11.0 billion, while Wholesale Business net income rose 56.7% to R$17.4 billion. Activities with the Market and Corporations net income fell 62.3% to R$2.3 billion, partly because of hedge effects and the prior-year XP-related activity.
- The company increased its interest in Itaú CorpBanca to 65.62% following the restructuring of Corp Group companies and acquired an additional interest in XP Inc. in April 2022, while selling a portion of its XP stake in June.
- Capital expenditures were R$8.5 billion, down 6.5% from 2021, including R$4.7 billion for acquired and internally developed software.
Guidance, outlook, commentary, risks and unusual items
Management expected Brazilian GDP growth to slow to 1.1% in 2023, with inflation projected at 6.1%. The filing describes high interest rates, fiscal uncertainty, political developments following Brazil’s 2022 election, rising public debt and weaker global growth as important factors affecting credit demand, funding costs, asset quality and profitability. No formal earnings guidance is presented in the filing text.
- Key macroeconomic risks include Brazilian inflation, interest rates, exchange rates, fiscal policy, sovereign credit risk and political instability. The SELIC rate ended 2022 at 13.75%, while the Brazilian real appreciated 6.5% against the U.S. dollar.
- Credit risk is concentrated increasingly in individuals: individuals represented 54.7% of the loan portfolio, and consumer credit delinquencies rose in cards, personal loans and vehicle financing.
- Brazilian federal government securities represented approximately 17.0% of total assets and 54.6% of the securities portfolio, creating material sovereign concentration.
- Legal and tax contingencies include savings-plan litigation, labor claims and tax disputes. Total provisions were R$19.5 billion; possible-loss tax and social-security contingencies totaled approximately R$41.0 billion and were not provided for.
- The filing identifies cybersecurity, data protection, operational disruptions, regulatory change, competition from fintechs, climate and environmental risks, counterparty risk and the transition from IBOR benchmarks as material risks.
- On April 10, 2023, a subsidiary agreed to a settlement under which it would receive R$1.7 billion from the State of Paraná over 20 years, subject to ratification by Brazil’s Supreme Court.
- The filing reports effective disclosure controls and effective internal control over financial reporting as of December 31, 2022. PwC issued an unqualified audit opinion.
- The company’s 2023 acquisition of 50.1% of Ideal closed on March 31, 2023 for approximately R$650 million, after the reporting date.
Investor verification checklist
- Reconcile the reported R$29.7 billion parent-attributable net income to recurring or managerial earnings and identify the impact of the specific R$1.3 billion corporate credit provision.
- Review the trend in 90-day and early-stage NPLs, especially in credit cards, personal loans, vehicles and other unsecured retail products.
- Assess whether the R$52.3 billion allowance remains adequate under weaker GDP, higher unemployment or additional interest-rate stress.
- Evaluate the effect of funding mix changes, including the increase in time deposits, interbank funding and institutional market debt, on future margins and liquidity costs.
- Monitor exposure to Brazilian government securities, sovereign spreads, fiscal policy and potential mark-to-market volatility.
- Review the possible-loss tax contingencies and savings-plan litigation, including amounts exceeding recorded provisions.
- Confirm the financial and regulatory effects of the Ideal, Avenue, TOTVS Techfin, Itaú CorpBanca and XP transactions.
- Verify the transition impact of IFRS 17, which management estimated would reduce equity at January 1, 2022 by no more than 0.50%, net of tax, and assess subsequent implementation effects.