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UPDATE 1-Itaú loan write-offs seen stable, executives says
July 25, 2012 / 8:33 PM / 5 years ago

UPDATE 1-Itaú loan write-offs seen stable, executives says

* Credit write offs seen stable through year-end

* Trading-related gains seen at 800-900 mln reais

* Estimates follow view of gradual profit rebound (Adds comments, background throughout)

SAO PAULO, July 25 (Reuters) - Itaú Unibanco Holding expects loan write-offs to remain stable through the rest of the year, in line with a view of stabilizing loan delinquencies and slowing growth in bad credit provisions, executives said on Wednesday.

Delinquent borrowers will soon begin to catch up with their obligations, allowing the São Paulo-based lender to gradually scale down provisions for bad credit, the executives said, noting that a more pronounced decline in write offs may only happen next year.

“We definitely believe that the outlook is improving on that front,” Rogerio Calderón, the bank’s senior vice president for risk management and compliance, said in an earnings conference call.

Management on Tuesday vowed to strengthen cost and expense controls, rein in vehicle financing and set aside less money to cover mounting losses in the problematic segment. In the past eight quarters, Itaú has seen the stock of least-creditworthy loans, known as H-rated loans, surge 40 percent.

Itaú predicts quarterly gains related to trading of financial securities of about 800 million reais ($392 million) to 900 million reais, Chief Financial Officer Caio David said on the call.

The bank earned 1.129 billion reais in trading-related activities in the second quarter, after a drop in domestic interest rates to an all-time low boosted the value of fixed-income investments.

Their remarks underscore rising caution among banks as Brazil enters what could be a second year of below-trend economic growth. The central bank sees credit expanding 15 percent this year as consumers rein in debt and the economy cools not long after it had appeared to overheat.

Shares of the bank rose for a second day, adding 0.7 percent to 30.40 reais on Wednesday. The stock is down 13 percent this year.

Itaú Unibanco will slow auto loan disbursements to 50 billion reais ($24.5 billion), down 3.8 percent from its prior estimate. Mounting losses at the auto and corporate lending units led Itaú to raise bad-credit provisions by 53 percent over the past six quarters.

Itaú’s loan book may grow 10 percent this year, down from a prior range of 14 percent to 17 percent growth, Calderón said.

$1 = 2.04 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Gerald E. McCormick and Leslie Gevirtz

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