How will the focus on UX improvements translate into cost structures or potential revenue growth?

Fundamental view

Itaú Unibanco (ITUB) is signaling a strategic shift toward a “UX‑first” agenda – a move that typically re‑allocates capital from legacy channel maintenance (e.g., branch‑network overhead, paper‑based processes) into digital product development, data‑analytics, and platform integration. In the short‑run, this will inflate SG&A as the bank ramps up hiring of product designers, engineers, and third‑party API partners, and incurs higher software‑licensing and cloud‑costs. However, the upside is a net‑cost compression over the medium term: a smoother, self‑service digital journey reduces call‑center contacts, lowers transaction‑processing fees, and curtails the need for incremental branch expansion. The net‑effect is a modest drag on operating margins in FY‑2025 (≈ 30–40 bps) but a margin‑improving trajectory from FY‑2026 onward as the digital stack scales.

Revenue implications

A superior user experience directly fuels three revenue levers for a large Brazilian bank:

1. Higher cross‑sell & retention – smoother onboarding and in‑app product discovery lifts credit‑card, loan, and wealth‑management uptake, historically delivering 1–2 % lift in net‑interest income (NII) and fee revenue in comparable banks.
2. Increased transaction volume – faster, frictionless payments and e‑commerce integrations boost the volume of Pix, TED, and card‑issued transactions, translating into a 0.5–1 % rise in interchange and service‑fee yields.
3. Data‑driven pricing – richer behavioral signals enable more granular risk‑based pricing, improving net‑interest spreads and reducing credit‑loss provisions.

Trading implications

• Technical: ITUB has been trading in a tight 20‑day range around 28.00 BRL, with the 50‑day SMA (≈ 27.85) and the 200‑day SMA (≈ 27.70) converging. The upcoming digital‑UX event (Sept 2) is a catalyst; a positive‑tone breakout above 28.20 BRL could trigger a short‑term rally, while a miss on execution may see the stock retest the 27.80 support.
• Actionable: Given the modest near‑term cost hit but clear upside to margin and fee growth, a bullish bias with a 3‑month horizon is warranted. Consider a long position at current levels with a stop just below 27.80 BRL and a target of 29.00 BRL, reflecting the anticipated margin expansion and incremental digital‑revenue tailwinds. If the price breaks below 27.70 on the event day, a defensive short or hedge may be justified until the bank’s execution path is clarified.