By Brazil Stock Guide – Itaú Unibanco (BVMF: ITUB4) is launching an offensive in Brazil’s low-income segment — territory long dominated by fintechs — as part of a broader digital transformation aimed at expanding its retail footprint and cutting costs. During the bank’s third-quarter 2025 earnings Q&A, CEO Milton Maluhy Filho said Itaú “never abandoned” this audience, but now has the technology, scale, and efficiency to serve it profitably. “With a lower cost to serve, clients who weren’t targets before now become targets,” he said.
Maluhy explained that Itaú’s new model relies on a decade-long digital overhaul — from modular architecture to its Super App, which unifies credit, investment, and insurance services under one ecosystem. Full digitalization, he said, enables Itaú to offer products “with much lower operating costs,” making it competitive with fintechs while sustaining profitability. “Scale no longer depends on mainframe capacity — it’s about platform intelligence,” he added.
The CEO emphasized that digital transformation expands both credit capacity and resilience. Advanced data analytics and risk calibration models allow Itaú to lend responsibly to new segments while preserving asset quality. “Clients who weren’t economically viable before can now be served efficiently,” Maluhy said. This approach, he added, “broadens our addressable market while deepening existing relationships in a scalable and sustainable way.”
With this digital leap, Itaú aims to compete head-on with fintechs in personal loans and credit cards, leveraging a leaner variable cost base and stable risk-adjusted returns. “When service is fully digital, we no longer carry the cost of the physical branch network — and that changes the game,” Maluhy said.
Strategic Discipline and a Robust Balance Sheet
Responding to Bernardo Guttmann (XP) about 2026 prospects, Maluhy reaffirmed Itaú’s cautious yet optimistic stance. The bank, he said, will enter the new year “with an extremely robust balance sheet, strong provisions, and solid capital levels.” He avoided giving early guidance but underscored the bank’s predictability and consistency. “Guidance isn’t written in stone — it’s the best information available at the time,” he said.
Maluhy also highlighted Itaú’s real-time reaction capability, a direct outcome of its modernization. “Today, we react within a day. Decision-making is instantaneous, and execution follows immediately,” he said, noting that this agility gives Itaú a structural advantage in volatile markets.
SME Lending and Government Credit Programs
Maluhy said Itaú’s lending to small and medium-sized enterprises (SMEs) remains strong, particularly through government-backed programs like Pronampe and FGI, which provide first-loss guarantees. “They’re among the most efficient capital allocations available — they multiply reach across thousands of small businesses,” he said.
The CEO stressed that Itaú’s business model does not depend on such programs, as its SME franchise is self-sustaining. He also pointed to the E-NPS platform as a key growth pillar for serving companies “100% digitally, with seamless experience and lower costs.”
High Rates and Policy Pressure
Pressed on how high interest rates affect Itaú’s strategy, Maluhy offered what appeared to be a measured response to Finance Minister Fernando Haddad’s recent criticism that banks are slow to pass on Selic cuts to borrowers. While avoiding direct reference to the government, he defended Itaú’s risk-based pricing discipline and long-term approach.
“It’s hard to have absolute convictions in a scenario of uncertainty,” he said, noting that even with rates high for longer, Itaú maintains “enormous flexibility to react and grow with quality.”
Later, when discussing margins, Maluhy made a broader point that analysts viewed as a subtle answer to Haddad: “Even if we enter a structural decline in interest rates next year, our ability to balance the balance sheet and grow in lines that benefit from lower rates rebalances the equation.”
He also noted that regulatory rate caps on payroll loans and credit cards compress profitability and limit pricing flexibility. “These caps require careful portfolio management,” he said. “Generating NIM isn’t hard — doing it with quality and in the right segments is what matters.”
Margins, Risk, and Profitability
In response to Gustavo Schroden (Citi), Maluhy elaborated on the stabilization of net interest margins (NIM). He explained that the previous quarter’s spike was an “outlier” driven by timing effects in wholesale operations and seasonal credit card volumes. In the third quarter, funding costs and regulatory caps weighed on spreads, though returns remained high.
“What really matters is the risk-adjusted margin,” Maluhy said, adding that Itaú expects to end 2025 near the center of its guidance range — roughly 12.5% NII growth. He described the results as proof of “portfolio balance, pricing discipline, and consistent credit quality,” with consolidated ROI near 27% in Brazil.
Capital Strength and Dividend Outlook
Fielding questions from Marcelo Mizrahi (Bradesco BBI) and Daniel Vaz (Safra), Maluhy reaffirmed the bank’s target to keep CET1 above 12%, consistent with its board-approved risk appetite. He ruled out unnecessary capital retention but acknowledged the possibility of accelerating dividend declarations if Brazil’s proposed tax on dividends moves forward. “We’ll fulfill our fiduciary duty and communicate any board decision immediately,” he said.
Maluhy noted that Itaú continues to benefit from strong organic capital generation, driven by profitability and cost discipline. The bank’s efficiency ratio stands at 36.9% in Brazil — the lowest among universal banks in the country. “Itaú is well positioned to keep creating sustainable value, even in a tighter regulatory environment,” he said.
Efficiency and the “Attack Mode” in Retail
When Eduardo Rosman (BTG Pactual) asked about Itaú’s cost agenda, Maluhy said the bank is operating in “attack mode, not defense.” The goal, he explained, is to lower service costs, deepen digitalization, and enhance operating leverage — especially in retail. “Efficiency isn’t about brute force — it’s about intelligence, technology, and disciplined execution,” he said.
The transformation is being led by VP Gabriel Moura, who is coordinating a redesign of Itaú’s service model and processes. The plan includes remote servicing for mid- and high-income clients and the integration of analytics into every decision layer. “We’re already executing — and we’re seeing results in profitability and speed of response,” Maluhy said.
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