After announcing the distribution of R$11 billion in extraordinary dividends next March and closing 2023 with payout (percentage of results distributed as earnings) of 60%, Itaú (ITUB4) believes that it will be possible to continue remunerating shareholders with the 2024 results.
“In the year 2024, if we feel that we have generated capital and there has been no consumption, we will distribute excess amounts, as far as possible. We will always look at the perspective of portfolio growth and opportunity”, said Milton Maluhy Filho, CEO of Itaú, at a press conference on the financial institution’s results for the fourth quarter of 2023 and the full year.
“It is quite possible that, with this level of profitability that we imagine in guidance, have extraordinary dividends again next year.” However, the executive explains that distribution depends on a series of factors.
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“We never look at the vision of photography. We take into account uncertainties, events that may arise,” she added, citing a Basel review that could have positive or negative impacts.
“If there is a tax reform, any downward change in the corporate tax rate, we will have to increase the value of our tax credits at the new rate”, explains the CEO. “You have to make an impairment and it has an impact on capital.”
Portfolio growth
In projections for 2024, released together with the results, the bank predicts portfolio growth between 6.5% and 9.5%.
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“If you look at the midpoint of our guidance we are talking about growth of 8%, which we believe we are capable of achieving. […] Our view is that there is room to continue growing the portfolio”, he said. The executive states that the bank will be able to grow with more emphasis on individuals, if it sees less impairment of customer income, recovery of employment and economic activity.
In a scenario of falling interest rates, which as a rule reduces the profitability of portfolios, Maluhy says that the bank’s “risk appetite is alive”. Itaú predicts growth above double digits in the segment that has the main focus and greater engagement – in other segments, it could grow less.
“The bank will take the appropriate risk, always with a long-term vision. It may even generate results in the short term, but that is not relevant. Our nominal credit cost is falling compared to 2023, which shows that we will grow our portfolio, the margin and the cost of credit will fall. So the net financial margin continues to expand and this is super positive.”
The interest rate issue, notes Maluhy, has two aspects: on the one hand, it allows companies that had restricted investments to resume pipeline of projects, and on the other, it promotes a reopening of the capital market.
“An important part of companies tends to access the capital market. In more difficult times, the bank’s balance sheet will be used to support our clients in these projects, those who are unable to access the market”.
Default trajectory
According to Maluhy, Itaú expects a slight reduction in default rates in 2024, but still very close to current levels. “We expect a slight reduction throughout the year, perhaps 20 basis points throughout the cycle.” The executive notes that the bank’s portfolio growth, the denominator for calculating the default rate, is lower than in the pre-pandemic period.
“We have been carrying out active and disciplined risk management,” he stated. “We see a clearer normalization cycle in individual credit. It shows that this is a trend, this level of risk that we are at today.”
Maluhy also highlighted the quality of the new credit harvests and the reduction in the renegotiation portfolio. “We carried out the necessary and appropriate renegotiations. We do not use the instrument to manage the indicator”.