The coronavirus lockdown has been an efficiency crash course for heavyweight banks in Brazil.
Itaú Unibanco Holding SA, which shifted 95% of its headquarters, customer service and digital agency personnel to work from home, is set to pursue cost-cutting opportunities exposed by the coronavirus pandemic, CEO Candido Bracher said May 5 on a call to discuss first-quarter results.
“The crisis is bringing in daily lessons on how we can operate more efficiently,” Bracher said, adding that the bank was “positive” that those benefits will turn into permanent savings after the crisis is left behind.
The executive signaled that the “new normal” for Itaú would bring in lower expenses from reduced travel budgets and real estate expenditures.
“We will be using fewer premises,” Bracher said. “A banker can now make more virtual meetings with clients in a day instead of visiting physically.”
On top of that, a faster adoption in digital services will prompt Itaú to drive its multiyear plan to reduce an outsized branch network more aggressively. The bank, which culled 10% of its physical footprint in 2019, sees opportunities for picking up speed once the coronavirus crisis subsides.
“Branches may become less necessary because there has been an acceleration in the [customer’s] digitization,” the CEO said. “We may close more branches than we had anticipated.”
Bracher noted that Itaú’s digital channels were now operating at their highest historical availability level due to investments in technological capacity. Account openings through mobile channels doubled “in the last weeks.” This would encourage Latin America’s largest lender to scale back its vast footprint at a faster pace.
The top four lenders in Brazil had 16,353 brick and mortar branches in late 2019, of which 8,789, or 53.75%, are in the highly populated Southeast region. Many banks in the country have as many as two or three branches per block in dense metropolitan areas.
The bank was already executing cost-cutting efforts, with noninterest expenses falling 0.8% in the first quarter to 12.1 billion Brazilian reais. Yet the executives said the COVID-19 lessons will lead the bank to drive those efforts further.
Milton Filho, the lender’s CFO, said Itaú is working to “guarantee that after this strong lockdown (the bank) can take the opportunity to adapt our way of working in the way we are doing now.”
Itaú’s first-quarter recurring profit plummeted 43.1% year over year on the back of a spike in credit loss provisions and a subdued performance from its core income sources.
The Brazilian banking major posted recurring net income, which excludes one-off items, of 3.91 billion reais for the first three months of 2020, down from 6.88 billion reais a year ago. Recurring EPS dropped to 40 centavos, from 71 centavos a year earlier.
As of May 4, US$1 was equivalent to 5.57 Brazilian reais.
