Update Itau Unibanco (ITUB)
On February 9 Itau Unibanco (ITUB) reported a 72% jump in fourth quarter net income from the fourth quarter of 2008. Just as important in banking these days, credit quality improved. The percentage of loans more than 90 days behind in payment fell to 5.6% as of the end of December from 5.9% at the end of the third quarter. That was the first improvement in the delinquency ratio since the third quarter of 2008.
The company managed to grow its loan portfolio in the quarter by 4% from the end of the third quarter and still increased its Tier One capital ratio to 13.7%.
Itau Unibanco remains the most profitable bank in Brazil with a return on average equity of 22.6% in the quarter. That was up from 20.1% in the third quarter and above the 18.2% return on average equity at top competitor Banco Bradesco (BBD).
2010 looks like a good year for Itau Unibanco.
The bank should see loan volume and fee income climb as the Brazilian economy continues to recover from the global economic slowdown. Loans will grow 25% in 2010, for example, according to projections by Deutsche Bank.
As of February 11 shares of Itau Unibanco were trading about 15% below their high for 2010. I think this price is a good entry point for long-term investors following my Jubak Picks 50 portfolio.
Full disclosure: I own shares if Itau Unibanco in my personal portfolio.
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Jim,
Great post. I really like when you indicate a good long term entry point for Jubak’s 50 picks. I bought some shares at 16 and more at the recent pullback to 20.
I have been shopping for some great long term stocks but figuring out the entry point is harder (example I think 30 is great to buy more CEDC)…
Thanks agin for these great posts. All of us appreciate all the hard work you do
> Jobless Suffer With Corporate Cash Climbing to $1.19 Trillion
http://www.bloomberg.com/apps/news?pid=20601087&sid=aE6W8c9z9Bms&pos=6
Only if that cash were put to good use…
(Corporate tax cuts as incentives any one?)
-bloodsuckingdogoodervampire
bsdgv,
With banks not lending, large companies are forced to hoarde cash for any contingencies, whether it’s future growth or an economic downturn. With banks not lending, small companies can’t expand (or even start in some cases).
As long as there are banks that are failing, other healthier banks will continue to sit on large reserves so they can buy the failing bank assets (via FDIC).
Finally, as long as the government continues to fund real estate mortgages for people who can’t afford them, and then has to turn around and dump those properties onto an already depressed real estate market, thereby hurting the value of smaller bank loan portfolios which are already in trouble, we will continue to have bank failures.
Get the government out of the real estate finance business. THEN after the real estate market levels off, we should see banks return to normal, and companies will be a lot more free with their money.
Jim
GLF is down 3% today (at 3:30pm est) on no news while the market is up 100 points. A couple of days ago, I received a notice of a special meeting on 2/23 to vote on 4 proposals. Prop 1 is to adopt an agreement and reorg changing the name of the company to New Gulfmark Offshore. Props 2 and 3 deal with increasing the authorized number of shares of stock from 30 to 60 million, thereby diluting the stock. I think this is the reason for the decline today and the general decline for the past 7-10 days. I will vote no on all 4 proposals, but I think the damage has already begun regarding share price. Your thoughts?
Jim posted on GLF a few weeks ago. Drill down and you’ll find his updated on this. My understanding is the proposals are part of a reorganization announced some time back (and Jim wrote about this in his last post on this topic) and does not change the basic story underlying the stock (which I don’t own).
EdMcGon,
So what you are saying is the large companies (banks or otherwise) will continue to look at each other’s face trying to figure out who will do what next while the small business and the jobless will starve to death. All in the name of good old capitalism…
According to this article, people making more that $250K/yr are rich:
“You’re Rich. Get Over It.”
http://www.slate.com/id/2243529/
The noose is tightening…
-bloodsuckingdogoodervampire
bsdgv,
Exactly, although it isn’t capitalism’s fault. As long as government insists on doing things in areas where it has no business messing around, you’ll find a whole lot of people standing around scratching their heads at the car wreck the government has created. But hey, let’s get government to fix it! And the wheels on the bus go round and round…
All,
I seek your input on HDB v. ITUB. Unlike uncle Sugar, I can’t have it all, and in this case, not even both. I have little exposure to financials, and relatively good exposure to Brazil (BRF, VALE and MELI) but none to India. But I’ve been to India (though 15 years ago) and am not struck by the protestant ethic and spirit of capitalism of that country. Do I plunge with HDB or stick to ITUB, which I’ve been following for some time. Please and thank you for any opinions one way or the other on the relative merits of one v. the other. Customary disclaimers of course.
southof8
I’m well aware of jim’s recent update on GLF and read it again today. Nowhere in his post was it mentioned that the stock would be diluted 100%. I also searched their company website and the internet and could find no reference to a stock dilution. Just another case of the shareholder getting screwed.
southof8-
According to the prospectus, the stock dilution only takes place if the reorganization isn’t approved. Otherwise, it’s a non-event. But if the reorganization proposal fails, apparently they think they can dilute the stock and sell enough of it to Americans to maintain the Jones requirement for citizenship.
Jim,
What are your thoughts on a stock like STD that has been hit hard by the worries on Spain debt default. It has large global exposure including Latin America.
Thanks
The next great crises default worries:
“China Milk Defaults on Bond Redemption, Seeks Talks ”
http://www.bloomberg.com/apps/news?pid=20601087&sid=adAwr8fdnJvE&pos=5
Where the hell are we gonna get our milk from if China milk defaults?? This is unthinkable… First the Greeks, then Italy, spain, and now the cows are going to default??
I’m mad as hell, and I’m not going to take it anymore.
Southof8 you said
“I can’t have it all, and in this case, not even both. ”
Call me crazy, but arent “having it all” and “having both” close enough to the same thing ?
I would settle for either one, “all” or “both.”
Oh,wait a minute, were not talking about stocks anymore are we ???
Well, anyway, I’d still rather have them both….
And the wheels on the bus go hmmmmm and hmmm, hmmmmm and hmmm, Hmmm and Hmmmmmm . . .La la la, la, a la la, la la la, . . .
-java12jack
re: STD
I would use protection, if I were you ….
“Tighter policy to keep leash on China stocks, dog Asia”
http://www.reuters.com/article/idUSTRE61A40020100211