Itaú raises R$3 billion in AT1 capital
What's the deal? Itaú Unibanco, Brazil's largest private-sector bank, announced it raised R$3 billion ($3B) through perpetual subordinated financial bills aimed at professional investors. The instruments will count as Additional Tier 1 capital and are expected to boost the bank's Tier 1 capital ratio by roughly 19 basis points.
The securities are perpetual but can be repurchased starting in 2031, subject to approval from Brazil's central bank. Markets responded positively: Itaú's NYSE ADR rose 3.7% to $7.905, while its preferred shares (ITUB4) in São Paulo climbed 2.97% to R$40.53.
Why now? The capital raise follows a strong first quarter. Itaú posted a recurring managerial result of R$12.3 billion in Q1 2026, with an annualised return on equity of 24.8%.
Its total credit portfolio stood at R$1.48 trillion, and its non-performing loan ratio held steady at 1.9%. Chief executive Milton Maluhy Filho struck a cautious tone, saying the bank entered 2026 in "a scenario that demands caution and discipline in credit."
The board also approved R$3.99 billion in interest-on-capital payments for fiscal 2026, with a record date of June 18 and shares going ex-rights on June 19.
What could go wrong? Perpetual subordinated instruments sit low in the capital structure — they absorb losses before senior debt. If Brazil's economy deteriorates, these securities could face pressure, and the bank's ability to repurchase them in 2031 would depend on regulatory approval.
Itaú's board maintains a minimum Tier 1 capital target of 13.5%, meaning future shareholder payouts could be constrained if capital buffers tighten. The bank itself flagged that growth, buybacks, and acquisitions all compete for capital alongside dividends.
The signal: Itaú's R$3 billion AT1 issuance underscores how Latin America's largest private lender is leaning on hybrid capital instruments to fortify its balance sheet while preserving shareholder returns — a playbook that becomes especially relevant with a 24.8% annualised ROE and a credit portfolio nearing R$1.5 trillion in an environment its own chief executive describes as demanding "caution and discipline." The market's enthusiastic response, with both the ADR and ITUB4 outpacing the Ibovespa's 1.3% gain, suggests investors see the move as a sign of strength rather than stress.
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