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Investing.com - UBS downgraded Itau Unibanco (NYSE:ITUB) from Buy to Neutral on Thursday, while raising its price target to R$40.00 from R$37.00, citing limited upside potential after the stock’s significant year-to-date gains. According to InvestingPro data, the stock has surged 56.47% year-to-date, with shares currently trading at $6.65 and a market capitalization of $66.73 billion.
The Brazilian banking giant’s shares have risen 38% year-to-date, pushing its valuation to approximately 2.0 times reported book value, which UBS notes is among the highest historical levels for the stock. InvestingPro analysis indicates the stock is currently trading at 1.84 times book value with a P/E ratio of 9.7, suggesting it may be fairly valued based on InvestingPro’s Fair Value calculations.
Despite acknowledging Itau’s solid operating performance with a strong return on average equity (ROAE) of approximately 23% - the highest among incumbent banks - and high expected dividends of about R$55 billion over the next 18 months, UBS believes the current valuation limits further re-rating potential. InvestingPro data shows the bank maintains a dividend yield of 1.16% and receives a FAIR overall financial health score of 2.47 out of 5.
UBS highlighted that among nearly 100 emerging market banks in its coverage universe, only 10 incumbent banks trade above 2.0 times price-to-book value for 2025 estimates, with just four of those located in India.
The firm slightly increased its 2025-2027 earnings estimates for Itau by an average of 2% while simultaneously lowering its cost of equity assumption, resulting in the modest price target increase despite the rating downgrade.
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