(Adds provisions, return on equity)
SAO PAULO, Feb 1 (Reuters) - Itau Unibanco Holding SA , Brazil’s largest bank, on Monday reported a 26% drop in fourth-quarter recurring net income from a year earlier, roughly in line with analysts’ estimates.
In a statement, Itau’s incoming CEO Milton Maluhy said the bank will seek to cut costs and accelerate growth to weather a challenging 2021, but it did not disclose a formal outlook for this year.
Itau’s recurring net income totaled 5.388 billion reais ($991.9 million), roughly in line with a consensus estimate of 5.440 billion reais compiled by Refinitiv.
The bank’s net interest income and provisions for bad loans remained under pressure, while fee income declined amid the pandemic.
Net interest income fell 9.5% year-over-year, mainly on a shift in its loan book towards less risky lines.
The bank’s cost of credit rose 3.8% from the same period a year earlier, to 6 billion reais, but the bank said it was due to a provision for one company.
Itau’s loan book grew by 2.7% in the quarter, mainly driven by consumers and small companies. Its 90-day default ratio remained roughly stable at 2.3%, but the bank saw more defaults among small and medium companies as forbearance ended.
On the cost side, Itau saw operating expenses up 5.1% in the quarter, on new hires and variable salaries.
Return on equity, a gauge of profitability, rose 0.4 percentage points from the third quarter to 16.1%. ($1 = 5.4322 reais) (Reporting by Carolina Mandl Editing by Brad Haynes and Richard Pullin)