Itaú Unibanco Holding S.A. — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. The filing was dated April 28, 2022 and presents audited consolidated financial statements under IFRS as issued by the IASB. Itaú is a Brazil-based financial holding company with operations in Brazil and 18 countries and territories, reporting Retail Banking, Wholesale Banking, and Activities with the Market and Corporation.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenues | R$126.4 billion | R$100.2 billion | +26.1% |
| Net interest income | R$75.2 billion | R$50.1 billion | +50.3% |
| Non-interest income | R$51.2 billion | R$50.1 billion | +2.0% |
| Expected loss from financial assets and claims | R$(14.4) billion | R$(26.0) billion | Expense down 44.7% |
| Income before tax | R$42.2 billion | R$5.2 billion | +707.5% |
| Net income | R$28.4 billion | R$15.1 billion | +88.4% |
| Net income attributable to parent | R$26.8 billion | R$18.9 billion | +41.6% |
| Basic earnings per share | R$2.74 | R$1.94 | +41.2% |
| Total assets | R$2.07 trillion | R$2.02 trillion | +2.5% |
| Loan and lease portfolio | R$822.6 billion | R$714.1 billion | +15.2% |
The attributable net-income margin based on operating revenues was approximately 21.2%, compared with approximately 18.9% in 2020. Net interest margin increased to 4.3% from 2.8%, while net interest spread increased to 3.7% from 2.3%. The filing attributes the improvement primarily to loan growth, higher rates, stronger financial-asset results and materially lower credit-loss expense.
Balance sheet, funding and liquidity
- Deposits totaled R$850.4 billion, representing 59.9% of total funding, compared with R$809.0 billion and 58.8% in 2020.
- Financial liabilities totaled R$1.62 trillion, including R$1.55 trillion at amortized cost and R$63.5 billion at fair value through profit or loss.
- Stockholders’ equity totaled R$164.5 billion, including R$152.9 billion attributable to the parent company.
- Operating cash flow was R$60.1 billion; investing cash flow was R$(4.8) billion; financing cash flow was R$(31.5) billion; and cash and cash equivalents ended at R$109.7 billion.
- The average liquidity coverage ratio was 159.1%, above the 100% regulatory minimum. The net stable funding ratio was 121.1%, also above the 100% minimum.
- Common Equity Tier 1, Tier 1 and total capital ratios were 11.3%, 13.0% and 14.7%, respectively, compared with 11.5%, 13.2% and 14.5% in 2020.
- Brazilian government securities had a book value of R$366.0 billion and represented approximately 17.5% of total assets, creating material sovereign concentration.
Credit quality and portfolio changes
- The loan portfolio grew 15.2%, led by individuals, which increased 30.2%; mortgage loans increased 55.6%, credit cards 29.6%, and micro, small and medium-business loans 23.0%.
- The 90-day non-performing loan ratio was 2.8%, up 10 basis points year over year. The 15-to-90-day early delinquency ratio was 1.7%, down 10 basis points.
- Allowance for loan losses declined to R$44.3 billion from R$48.3 billion, and allowance coverage of total loans declined to 5.4% from 6.8%.
- Write-offs increased to R$18.0 billion from R$13.6 billion. Renegotiated loans declined to R$22.8 billion from R$24.2 billion, while redefaulted renegotiated loans increased to R$6.1 billion from R$5.9 billion.
Material changes and unusual items
- The company completed the spin-off of its investment in XP Inc. into XPart during 2021. Following the subsequent merger of XPart into XP Inc., Itaú no longer held an equity interest in XP Inc. The transaction reduced parent-company equity by approximately R$10.0 billion and reduced investments in associates and joint ventures by approximately R$9.4 billion.
- The 2021 result benefited from the sharp reduction in COVID-19-related provisioning established in 2020. The filing also identifies the 2020 XP-related gain and 2020 Itaú CorpBanca impairment as important comparability items.
- Operating expenses declined modestly overall, but tax expenses increased. The fiscal benefit from hedges of foreign investments was R$2.8 billion in 2021, compared with R$17.7 billion in 2020, creating a significant year-over-year tax comparison effect.
- Itaú issued US$500 million of 3.875% Tier 2 subordinated notes due 2031 in January 2021 and R$5.5 billion of Level 2 subordinated financial notes in September 2021.
- Capital expenditures totaled R$9.1 billion, including R$7.7 billion in intangible assets, principally software and other technology-related investments.
Guidance, outlook, commentary and risks
The filing does not provide formal company-specific earnings guidance. Management’s macroeconomic outlook anticipated Brazilian GDP growth of approximately 1.0% in 2022 and inflation of approximately 7.5%, with restrictive interest rates. The filing also discusses geopolitical uncertainty, the Russia-Ukraine conflict, rising global inflation, tighter monetary policy, Brazil’s 2022 elections and fiscal risks.
- Primary risks include higher borrower defaults, weaker credit demand, funding-cost increases, interest-rate and foreign-exchange volatility, and losses on Brazilian government securities.
- COVID-19 effects remained uncertain, including possible new variants, renewed restrictions, customer defaults and operational disruption.
- Competition from digital banks, fintechs, payment institutions and open-finance initiatives may pressure fees, margins and market share.
- Cybersecurity, data protection, operational resilience, misconduct, anti-money-laundering compliance and reputational risks remain material.
- Potential tax increases, interest-rate caps, consumer over-indebtedness rules and other regulatory changes could reduce profitability or restrict lending practices.
- Legal contingencies included R$19.6 billion of provisions at December 31, 2021. Possible-loss tax and social-security contingencies totaled R$35.9 billion, while civil and labor possible-loss contingencies totaled approximately R$5.4 billion.
- Subsequent events included proposed acquisitions of Ideal, an additional 11.36% interest in XP Inc. for an estimated R$7.9 billion, an additional interest in Itaú CorpBanca Colombia, and a 50% joint venture with TOTVS Techfin. These transactions were subject to regulatory approvals or had not yet closed as of the relevant disclosures.
Investor verification priorities
- Reconcile IFRS net income, recurring or managerial earnings and segment results, because management reporting differs from IFRS.
- Assess whether the lower 2021 credit-loss expense and lower allowance ratio are sustainable as interest rates rise and loan growth continues.
- Review exposure to Brazilian sovereign securities, including fair-value sensitivity to rates, inflation and fiscal deterioration.
- Verify the status, purchase price, funding and regulatory approvals for the Ideal, XP Inc., Itaú CorpBanca Colombia and TOTVS Techfin transactions.
- Review the potential cash and capital impact of tax disputes, savings-plan litigation and other possible-loss contingencies.
- Confirm dividend and interest-on-capital capacity under Brazilian regulatory capital requirements and the company’s stated policy.
- Investigate filing inconsistencies: the narrative cites different December 2021 SELIC rates in separate sections, and credit-coverage measures vary between reported IFRS and Brazilian-GAAP presentations.