Itaú Unibanco Holding S.A. — Form 20-F Summary
Business context and reporting period
This annual report covers the fiscal year ended December 31, 2023, with balance-sheet information at December 31, 2023. Itaú Unibanco is a Brazil-based financial holding company operating primarily in Brazil and across Latin America through Retail Business, Wholesale Business, and Activities with the Market and Corporations. Consolidated financial statements are prepared under IFRS Accounting Standards issued by the IASB and are presented in Brazilian reais. The filing is annual rather than a standalone Form 20-F for the fourth quarter; the source text does not provide a separate Q4 income statement.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating revenues | R$154.971 billion | R$142.279 billion | +8.9% |
| Net interest income | R$97.712 billion | R$87.023 billion | +12.3% |
| Non-interest income | R$57.259 billion | R$55.256 billion | +3.6% |
| Expected loss from financial assets | R$(30.445) billion | R$(27.737) billion | Expense increased 9.8% |
| Net income attributable to parent | R$33.105 billion | R$29.207 billion | +13.3% |
| Recurring result | R$34.7 billion | Not clearly provided in the filing text | +16.4% year-on-year |
| Net interest margin | 4.2% | 3.3% | +0.9 percentage points |
| Net interest spread | 3.2% | 2.2% | +1.0 percentage point |
| Total assets | R$2.543 trillion | R$2.321 trillion | +9.6% |
| Stockholders’ equity attributable to parent | R$190.177 billion | R$167.717 billion | +13.4% |
| Loan and lease portfolio | R$910.590 billion | R$909.422 billion | +0.1% |
| Customer and other funding | R$1.3996 trillion | R$1.2954 trillion | +8.0% |
| Total deposits | R$951.352 billion | R$871.438 billion | +9.2% |
| Cash flow from operating activities | R$77.493 billion | R$129.633 billion | Decrease |
Reported net income was R$33.877 billion, including R$772 million attributable to non-controlling interests. Basic and diluted earnings per share were R$3.38 and R$3.36, respectively. The consolidated efficiency ratio was 39.9%, and management reported a recurring return on average equity of 19.4%, up 70 basis points year-on-year.
Capital, liquidity and debt
- Common Equity Tier 1 ratio was 13.7%, Tier 1 ratio was 15.2%, and total capital ratio was 17.0%, compared with 11.9%, 13.5% and 15.0%, respectively, in 2022.
- Risk-weighted assets were R$1.215 trillion, down from R$1.239 trillion. The reported leverage ratio was 7.4%.
- Average liquidity coverage ratio was 191.8%, versus 164.4% in 2022, above the 100% regulatory minimum. Net stable funding ratio was 126.9%, versus 124.9%, also above the 100% minimum.
- Operational liquidity reserve was R$238.576 billion at year-end, including cash, funded positions in securities purchased under resale agreements and unencumbered government securities.
- Total funding was R$1.762 trillion. Deposits represented 54.0% of total funding, repurchase agreements 20.6%, interbank market funds 18.6%, and institutional market funds 6.8%.
- The company issued R$1.5 billion of Level 2 subordinated financial bills maturing in January 2034 and R$700 million of perpetual subordinated financial bills during 2023.
- No debt acceleration event, default, or covenant non-compliance had occurred through December 31, 2023, according to management.
Material changes versus the prior comparable period
- Net income attributable to the parent increased 13.3%, supported by higher operating revenue and net interest income.
- Interest and similar income increased 17.6%, while interest and similar expense increased 35.5%, reflecting higher funding volumes and costs, especially time deposits, repurchase agreements and interbank funding.
- The loan portfolio was broadly stable overall, but individuals increased 4.1%, including mortgage loans up 7.1% and personal loans up 13.1%. Foreign loans in Latin America declined 8.2%, partly because Banco Itaú Argentina was consolidated only through July 31, 2023.
- The 90-day NPL ratio improved to 3.1% from 3.3%; the 15-to-90-day early delinquency ratio increased to 2.3% from 2.2%. The coverage ratio increased to 216% from 212%.
- Loan-loss write-offs increased to R$33.024 billion from R$20.142 billion. The allowance for loan losses declined to R$50.863 billion, or 5.6% of loans, from R$52.324 billion, or 5.8%.
- Operating expenses increased 9.0% to R$84.826 billion, reflecting personnel costs, wage agreements, profit sharing, depreciation and amortization, data processing and telecommunications.
- Assets at fair value through profit or loss increased 22.3%, largely due to higher holdings of Brazilian government securities and corporate securities.
- The company sold Banco Itaú Argentina in November 2023, recording a negative non-recurring impact of R$1.211 billion in third-quarter 2023 results. It also acquired 35% of Avenue, increased its ownership of Banco Itaú Chile to 67.42%, completed the initial acquisition of Ideal, and entered a 50% joint venture with TOTVS Techfin.
- IFRS 17 was applied for 2023 and comparative 2022 information using a modified retrospective approach. The 2021 information remains under IFRS 4 and is not directly comparable.
Guidance, outlook, commentary and unusual items
- Management expected Brazilian GDP growth of 2.3% and IPCA inflation of 3.7% in 2024. These are macroeconomic expectations, not company earnings guidance.
- Management emphasized improved efficiency, digital transformation, customer experience, selective credit origination, diversified funding and capital strength.
- Digital channels opened 2.9 million accounts in 2023, represented 52% of new accounts, and processed 98% of transfers and payments. The mobile application accounted for 29.3% of revenues, according to the filing.
- Net interest income benefited from higher asset yields and loan volumes, but funding costs rose materially. Future margins remain sensitive to Brazilian interest rates, inflation, deposit pricing and credit demand.
- Brazilian government securities represented approximately 20.5% of total assets and 57.8% of the securities portfolio. This creates sensitivity to Brazilian sovereign credit and interest-rate movements.
- The company committed to deploy R$400 billion in positive-impact sectors by 2025 and reported R$355.9 billion deployed by December 31, 2023.
- Principal risks include Brazilian macroeconomic and political conditions, interest and foreign-exchange volatility, credit deterioration, liquidity and funding costs, sovereign exposure, legal and tax proceedings, regulatory change, cybersecurity, data protection, competition, operational failures, climate risk and integration of acquisitions.
- Provisioned legal and administrative contingencies totaled R$19.744 billion, including R$7.821 billion for labor matters, R$6.579 billion for tax and social-security matters, and R$3.203 billion for civil matters. Possible-loss tax contingencies totaled R$45.080 billion and were not provisioned.
Important facts for investors to verify
- Reconcile the reported recurring result and recurring ROE with IFRS net income, including the treatment of the Banco Itaú Argentina disposal and other non-recurring items.
- Review credit-quality trends by segment, particularly consumer unsecured lending, Stage 2 and Stage 3 migrations, write-offs, renegotiated loans and allowance coverage.
- Assess the effect of declining Brazilian interest rates on net interest margin, deposit costs, securities income and loan demand.
- Evaluate concentration and mark-to-market sensitivity arising from Brazilian government securities, derivatives and interest-rate exposures.
- Confirm capital ratios after the R$11 billion extraordinary dividend and assess the effect of subordinated debt issuance, acquisitions and shareholder distributions.
- Review liquidity under stressed scenarios, including the maturity profile of time deposits, repurchase agreements and institutional funding.
- Examine the potential financial impact of savings-plan litigation, tax contingencies, labor claims and other unprovisioned possible losses.
- Verify the accounting and performance effects of IFRS 17 and the comparability limitations with 2021.
- Monitor regulatory changes affecting credit cards, payment systems, capital requirements, taxes, climate disclosures and expected-credit-loss accounting.