SÃO PAULO— Itau Unibanco Holding SA is expecting an increase in its nonperforming loan rate, mainly from the deterioration of the country’s labor market, the bank’s president said.

“Despite the expected increase in nonperforming loan rates, I don’t see this reaching a worrisome level since we have good risk controls,” Roberto Setubal said Thursday in a presentation to investors and analysts.

The proportion of Itau’s loans that were more than 90 days overdue was at 3.3% in the second quarter, up from 3% in the first.

Brazil’s unemployment rate is rising as the country’s economy weakens. After expanding just 0.1% last year, Brazil’s economy is expected to contract around 2% this year, according to economists.

Brazil’s unemployment rate surged to a five-year high last month and came in far higher than expected as the country’s troubled economy likely took an ugly turn. The jobless rate in six major metropolitan areas jumped to 7.5% in July, from 6.9% in June, the Brazilian statistics agency said Thursday.

Economists polled by the local Agência Estado newswire had forecast a median unemployment rate of 7%, with the highest estimate coming in at 7.3%.

The bank is adjusting to the challenging economic situation by focusing on cutting costs, Mr. Setubal said. The bank’s total expenses reached 17.8 billion reais ($5.1 billion) in the first half, an increase of 4.5% from a year earlier and slower than the inflation rate, which is currently above 9%.