• Net Recurring Income: BRL 7.2 billion, a growth of 30% compared to the previous year.
• Return on Equity (ROI): 17.5%, a growth of 2.6 percentage points from the previous semester.
• Patrimony: Almost BRL 84 billion.
• Market Value of Assets: BRL 128 billion, a 12% year-on-year growth.
• Itau Unibanco Net Revenue: BRL 20 billion, a 25% growth year-on-year.
• Alpargatas Net Income: BRL 63 million.
• Dexco Net Revenue: BRL 153 million, a 23% drop year-on-year.
• CCR Net Revenue: BRL 859 million, a 65% growth year-on-year.
• IGI Net Revenue: BRL 130 million.
• Copper Energy Revenue: BRL 251 million, a 7% drop year-on-year.
• Recurring Net Revenue: BRL 7.220 billion, a 30% growth year-on-year.
• Financial Expenses Reduction: 65% improvement, with financial results closing at BRL 118 million.
• Net Debt: Less than BRL 1 billion.
• Dividend Yield: 8.6%.

• Warning! GuruFocus has detected 10 Warning Signs with BSP:ITSA3.

Release Date: August 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Itausa Investimentos ITAU SA (BSP:ITSA3) reported record results for the first semester of 2024, with a net recurring income of BRL7.2 billion, marking a 30% growth compared to the previous year.
• The company achieved a return on equity (ROI) of 17.5%, reflecting a 2.6-percentage-point increase from the previous semester.
• Itausa's shares outperformed the Ibovespa index, with a 70% increase over the past 12 months compared to the index's 5% growth.
• The company successfully reduced its financial expenses by 65% through strategic liability management, including debt prepayment and refinancing.
• Itausa's portfolio companies, such as Itau Unibanco and CCR, reported strong operational performances, contributing significantly to the holding's overall results.

Negative Points

• The high interest rate environment in Brazil, currently over 10.5%, poses challenges for growth and impacts leveraged companies within Itausa's portfolio.
• Despite strong results, Itausa's shares are still traded at a significant discount, which the management considers exaggerated.
• The fiscal deficit in Brazil continues to grow, necessitating high interest rates that hinder economic growth and investment opportunities.
• Itausa faces fiscal inefficiencies related to PIS/COFINS taxes, which result in an annual expense of over BRL500 million.
• The challenging geopolitical and economic environment, both domestically and internationally, adds uncertainty to Itausa's future growth prospects.

Q & A Highlights

Q: With the net debt close to BRL1 billion, is Itausa considering a new cycle of investment, or is it too early? A: Alfredo Setubal, CEO, explained that due to high interest rates, Itausa is cautious about new investments. The company continues to explore M&A opportunities but finds it challenging to identify assets offering a nominal return of around 16%. Therefore, a significant investment cycle is not anticipated unless conditions change.

Q: How will the tax reform impact Itausa, particularly regarding PIS/COFINS tax inefficiency? A: Priscila Toledo, CFO, stated that the tax reform could eliminate the PIS/COFINS inefficiency, which costs over BRL500 million annually. If the reform passes as expected, this inefficiency could end by 2026, positively impacting Itausa's financials.

Q: What strategies does Itausa have to address the market discount on its shares? A: Alfredo Setubal noted that while Itausa's discount is among the smallest compared to other holdings, it is still higher than it should be. Strategies to address this include improving fiscal efficiency, enhancing transparency, and potentially increasing dividends from non-financial investments as they mature.

Q: Is Itausa considering increasing its stake in Itau Unibanco given its strong performance? A: Alfredo Setubal clarified that while Itau Unibanco is a core asset, Itausa does not plan to increase its stake. The focus remains on diversifying investments in non-financial sectors to balance the portfolio and mitigate risks.

Q: What are the growth prospects for Itausa's non-financial investments? A: Alfredo Setubal highlighted Aegea as having significant growth potential due to regulatory opportunities in sanitation. CCR also has growth prospects in infrastructure, with potential investments in roadways, airports, and other mobility projects.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.