November 4, 2019 / 11:09 PM / 4 months ago

UPDATE 1-Itau Unibanco meets profit estimates on loan growth, cost control

(Adds loan book, result of voluntary severance program)

By Carolina Mandl

SAO PAULO, Nov 4 (Reuters) - Brazil's biggest private-sector lender Itau Unibanco Holding SA posted on Monday a 10.9% gain in third quarter recurring net income, as loan growth and cost control offset higher provisions.

Recurring net income, which excludes one-time items, came in at 7.165 billion reais ($1.78 billion) in the third quarter, in line with a Refinitiv analysts' consensus estimate.

The bank's loan book picked up pace, rising 4.4% from the previous quarter to 689 billion reais, as corporate loans resumed growth.

Both lending and trading gains boosted Itaú's net interest income, which grew by 9.6% from the same period a year earlier. Return on equity came in stable at 23.5%, the highest among Brazilian banks.

Loans in arrears for more than 90 days stood stable at 2.9%. Still, loan loss provisions grew by 38% from a year earlier. Itaú said that the increase was caused by retail loan book growth in the period.

Itaú showed belt-tightening on the cost side, with a small increase of 1.2% in operating expenses from the same period a year earlier.

To fight back new competitors, mainly financial technology startups, Co-Chairman Roberto Setubal said in September that the bank would step up its emphasis on cost cutting.

Earlier this year, Itau launched a voluntary severance program. The bank said in a statement that 3,500 workers took part, triggering an estimated 2.4 billion reais in one-time costs.

Other Brazilian banks such as Banco Bradesco SA and Banco do Brasil SA have also announced measures to slash costs amid tougher competition from online startups.

Itau is trying to step up its own digital banking capabilities with acquisitions. Last week, the lender announced a deal to buy tech-consultant Zup IT, valuing it at 575 million reais.

Itaú's head of technology and operations Andre Sapoznik said the acquisition would allow Zup to provide Itaú with more customized services and accelerate the bank's digital transformation.

He added that he expects Zup's 900 employees to devote an increasing portion of their time to Itau-related projects, although they will also continue to work for other companies.

$1 = 4.0152 reais Reporting by Carolina Mandl; Editing by Sandra Maler and Rosalba O'Brien

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