Bank of the Year – Uruguay: Itaú Uruguay

After a difficult 2022, profits at Banco Itaú Uruguay started to recover momentum in the second half of last year. And in 2023, they got significantly better.  

The Uruguay subsidiary of Itaú Unibanco closed the six months to June with net profits of 3.76 billion pesos, a number that contrasts sharply with the 578 million peso loss it posted just a year earlier, according to numbers filed to the Uruguay’s central bank. 

Itaú Uruguay’s ROE reached 24.6% in June, compared to a dismal 4.1% twelve months prior. The number of clients grew 15% to 453,673, and the volume of credit went up by 14.5% in the period. At the same time, the bank managed to maintain a loan delinquency ratio of 0.77%, only a touch higher than the 0.56% posted in June 2022. 

Itaú Uruguay CEO André Gailey attributes the positive performance of the past 12 months in part to the efforts made by the bank to digitalize its operations. 

“Itaú’s greatest virtue is to lead this digital transformation.” 

In order to compete with fintech companies and other banks, Itaú Uruguay has introduced new services such as instant payments as well as payments by QR code and Whatsapp. It added a degree of dynamism to operations that, according to Gailey, have been embraced by clients. 

“Money transfers that previously took a full day to be completed, now they take place immediately, and clients can use their mobile phone contacts to perform the operation,” he says. 

The bank’s results came against the backdrop of an especially challenging economic environment. In the past year Uruguay’s economy was hit hard by a protracted drought as well as by economic instability in neighboring Argentina. Currency volatility in the wake of rising interest rates also impacted business activity. 

But Itaú takes a sanguine view on the economy’s outlook. While it forecasts growth of just 0.6% in 2023, it says output is trending in the right direction; economy should expand by 3.6% next year, it projects. 

“Uruguay is seen today as the safest Latin American market and is attracting much interest from foreign investors,” Gailey says. “It has helped to boost economic activity.” 

The brightening expectations have already given a boost to corporate banking, with companies dusting off their investment plans. Gailey believes that it will help to reduce NPL ratios even further as well. But he said that the banking market could post faster growth rates and provide better services if some measures were taken to contain rising labour costs. 

“To compete with fintechs and the foreign market, we need to have comparable costs,” he says. “For that, it is necessary a more flexible labor market that generates jobs and make it easier to grow and invest in the country.”