By Brazil Stock Guide – Itaú Unibanco (B3: ITUB4; NYSE: ITUB) said it will prioritize stable profits and balance-sheet protection in 2026, even if that means slower credit growth, as Brazil heads into a volatile election year. Executives said uncertainty around politics, inflation and interest rates justifies a cautious stance after a record year of earnings.
Itaú ended 2025 with net income of R$46.8 billion, about $9.4 billion at current exchange rates, and return on equity near 27% in Brazil. The bank also distributed R$33.7 billion, or roughly $6.8 billion, to shareholders, equal to a 72% payout.
The performance capped a multi-year turnaround. Profit nearly doubled from 2021, while value creation also doubled over the same period, according to management.
“We are being very realistic about the level of uncertainty we see in 2026,” chief executive Milton Maluhy Filho said. “If there is room to deliver more, we will do it. And if the environment worsens, we can react very fast.”
Profitability Before Expansion
Executives said Itaú is not managing the bank to reach a specific profit target. Instead, the goal is to keep returns above the cost of capital across cycles.
“We don’t manage the bank to hit a specific ROE number,” Maluhy said. “What matters is consistent value creation above the cost of capital.”
That discipline explains why Itaú does not plan to increase leverage next year. The bank ended 2025 with a core capital ratio of about 12.3% and keeps a buffer of roughly 50 basis points above its internal minimum.
“Having a strong, well-capitalized balance sheet is a competitive advantage,” Maluhy said. “It allows us to grow, distribute dividends and still preserve flexibility.”
Management said rating agencies remain a hard constraint on higher leverage, even as earnings volatility has fallen in recent years.
Efficiency as the Main Engine
Instead of leverage, Itaú is leaning on efficiency. The bank cut its efficiency ratio in Brazil to 36.9% in 2025, one of the lowest levels in its history.
That improvement reflects years of heavy investment in digital platforms, data systems and process simplification. Executives said those investments are now reducing unit costs across the bank.
“This is not about cutting costs for the sake of cutting,” Maluhy said. “It’s about changing how the bank operates.”
Retail and small-business banking now rely largely on digital channels. That allows growth without expanding branches or staff.
Itaú’s loan book reached R$1.4 trillion, about $280 billion, in 2025. Growth focused on secured products such as payroll-deducted loans and mortgages, rather than higher-risk credit.
Election Risk Shapes Guidance
Brazil’s economic backdrop looks more supportive than a year ago. Inflation eased, employment stayed strong and interest rates are expected to fall from recent peaks.
Yet executives warned that election risk does not show up fully in economic forecasts. Political uncertainty can affect investment decisions, market confidence and credit demand.
“This uncertainty doesn’t appear in macro models,” Maluhy said. “But it affects how investors and companies behave.”
That risk explains why Itaú guided for moderate credit growth in 2026, even with expectations of lower interest rates. Management said it prefers underpromising to chasing volume.
“We don’t want to grow fast and later regret it,” Maluhy said. “If conditions allow faster growth, we will move.”
Credit Quality and Transparency
Executives said credit quality remains controlled across portfolios. Delinquency levels in consumer and corporate lending showed no material deterioration from 2025.
Pressure in small businesses reflects the end of grace periods in government-backed programs, not a collapse in demand.
The bank also rejected accounting changes that would delay write-offs. Management said it chose transparency over short-term earnings support.
“We will not under-provision to deliver a better quarter,” Maluhy said. “Provisioning always comes before profitability.”
Technology and the Next Phase
Technology remains central to Itaú’s strategy. Investment levels stay high, but the mix has shifted away from maintaining legacy systems toward new products.
Artificial intelligence now supports payments, small-business platforms and wealth management tools. Executives said AI boosts engagement and productivity.
“That’s how you grow revenue without adding people or branches,” Maluhy said. “Efficiency and growth can coexist.”
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