Update Itau Unibanco (ITUB)

02/11/2010 2:05 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

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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