Brazil's Itau Unibanco Looks To Grow As European Banks Scale Back

| About: Itau Unibanco (ITUB)

By Jonathan Yates

While European banks such as Royal Bank of Scotland (NYSE:RBS), Societe Generale (OTCPK:SCGLY) and Commerzbank AG (OTCPK:CRZBY) are contracting operations, Itau Unibanco (NYSE:ITUB) is looking to expand from its base in Brazil.

In a recent article in The New York Times by Rob Cox and Jeffrey Goldfarb, “Tempting Targets for Itau in 2012,” the expansion plans of Itau Unibanco were detailed.

Known as the “Global Latin American Bank,” according to The New York Times piece by Cox and Goldfarb, 2012 will be a year on the offensive due to “Itau’s solid financials, robust market valuation, searing ambitions and a wealth of opportunities from the misfortunes of global rivals make it the bank to watch.”

The “misfortunes of global rivals” are certainly reflected in the share prices of Royal Bank of Scotland, Commerzbank AG and Societe Generale.

As detailed in many articles on, the future does not hold much promise for these institutions beyond solvency without a taxpayer bailout.

For Itau Unibanco, up more than 20% for the quarter, 2012 will present many opportunities due to its strong income statement and balance sheet.

On a quarter-by-quarter basis, earnings are up more than 25%. The price-to-earnings ratio is around 10 and expected to fall about 9 as the bank expands.

Now around $18.67 a share, the mean analyst target price for Itau Unibanco over the next year is $24.24.

And what really sets Itau Unibanco apart from Societe Generale, Royal Bank of Scotland and Commerzbank AG is its dividend income.

The Brazilian lender has the cash to reward its shareholders. Its European peers do not.