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Sometimes the market gets a call spectacularly wrong, and Monday was one of those mornings in Brazil.
Itaú Unibanco Holding S.A. (ITUB) stock is plunging after Brazilian President Luiz Inácio Lula da Silva secured another term, defeating Sen. Flávio Bolsonaro. Lula won the Sunday runoff with 51.8% of the vote, ahead of Bolsonaro's 48.2%. That surprise runoff victory reversed investor bets on a rightward political shift and tighter fiscal policy, and the unwind was not gentle.
Brazilian assets came under pressure following the election result. The Tokyo-listed Nomura NF Ibovespa Link ETF, which tracks Brazilian equities, plunged as much as 16% in Japan, marking its steepest intraday decline since 2020.
November futures for the Brazilian real fell roughly 10% during Asian trading hours, according to the Economic Times.
Here's the part that stings: the sell-off followed a strong rally in Brazilian markets as investors positioned for a potential rightward political shift. Three weeks ago, Brazilian stocks recorded their best session in more than six years.
Brazil's benchmark Ibovespa index climbed 12% over the past month, while the real strengthened nearly 5% against the U.S. dollar. Interest-rate futures also reflected expectations that tighter public finances under a Bolsonaro administration could create room for lower borrowing costs. In other words, a lot of money was leaning one way, and the voters leaned the other.
As if the political whiplash weren't enough, Itaú had its own news to deliver. The bank disclosed Monday that it is acquiring AI startup NeoSpace for 2.925 billion Brazilian reais, or approximately $580 million, in cash.
The transaction announcement states that the purchase price includes an installment payable at closing, with the remaining payments deferred over five years, subject to certain conditions.
The acquisition is expected to strengthen Itaú's in-house AI capabilities and expand the use of specialized models across its products and services. It will also support the development of ia.i, the bank's generative AI assistant, to enable more personalized customer experiences. NeoSpace will retain operational independence and keep its current team, which is probably the right call when you're paying up for talent and technology.
For context, Itaú Unibanco is the largest privately held bank in Brazil, created through the 2008 merger between Banco Itaú and Unibanco. Beyond Brazil, it also has meaningful operations across Chile, Colombia, Argentina, Uruguay, and Paraguay, giving it broad exposure to Latin American credit conditions.
Its loan book is tilted toward both commercial and consumer lending (35% and 43% of total loans, respectively), with foreign loans making up 22% of the portfolio as of the end of 2025. Itaú also runs the fifth-largest insurer in Brazil and is the country's second-largest asset manager, so the stock often trades as a proxy for the health of Brazil's financial system. Which explains why a presidential election result moves it like this.
Itaú Unibanco is scheduled to report earnings Nov. 3, 2026, with analysts expecting earnings per share of 22 cents, up from 18 cents a year earlier.
Revenue is projected to rise to $9.53 billion from $8.55 billion in the year-ago period. The stock trades at a price-to-earnings ratio of 11.6, potentially offering a valuation opportunity relative to peers.
Analysts maintain a consensus Buy rating on ITUB, with an average price target of $9.87.
Goldman Sachs maintained its Buy rating and raised its price forecast to $10.50 on Oct. 9, while HSBC downgraded the stock to Hold with a $9.10 price forecast on Oct. 8. JPMorgan maintained its Overweight rating and increased its price forecast to $10 on July 7.
ITUB Price Action: Itaú Unibanco Holding shares were down 23.78% at $7.37 at the time of publication on Monday, according to market data.
So the stock is now trading well below every one of those analyst targets, which is either a warning sign or an opportunity, depending on how much you think a Lula presidency changes the earnings power of Brazil's biggest private bank. The market, at least on Monday, had a strong opinion.
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