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Itaú Unibanco Holding S.A.
1November 15th 2009
FELABAN
Itaú Unibanco Holding S.A.
CEO Round Table
Itaú Unibanco Holding S.A.
2
• Perspectives for Latin American EconomiesPerspectives for Latin American Economies
• Banking Markets in Latin America
• Itaú Unibanco's Merger Case
• Itaú Unibanco’s Highlights
Agenda
Itaú Unibanco Holding S.A.
3
Correlation(LatAm x World) 10% 89%
1980 to 1999 2000 - 2008
Source: IMF
Historical GDP Growth (%yoy)
CAGR LatAM 2,5% 3,8%
World Advanced Economies Latin America
In recent years, LatAm has been more integrated to the global economy and has shown higher GDP growth rate than world´s average
-4
-2
0
2
4
6
8
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
%
2nd oil crisis
Brazilian default
Subprime crisis
Argentinean default
Mexican crisis
Asian crisis
LatAm’s volatility mostly related to debt crises
Higher integration to global economy and elevated international reserves
*GDP Growth for 2009/2010 is an IMF estimative
Itaú Unibanco Holding S.A.
4
100
110
120
130
140
150
160
Q1-99 Q1-01 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11
China
Brazil
Latin America
WORLD
USA
Euro Area
Japan
World Growth Forecast - Selected Countries
GDP (with seasonal adjustment; 1Q/99=100)
200
260
320
Q1-99 Q1-01 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11
Itaú Unibanco Holding S.A.
5
Latin American countries have
shown important regulatory
advances during the last 20
years…
Latin American Capital Markets have presented good levels of transparency and disclosure
...providing more confidence in the local banking system
0
33
92
56
88
3115
100
62
27
91
64
25
94
63
Supervisory Agency Creation
Establishment of Insider
Trading Laws
Custody Arrangements
Trading Systems Clearing and
Settlement Processes
Percentage of LatAm Countries Implementing Reforms
before 1990 by 1995 by 2002
Itaú Unibanco Holding S.A.
6
• Perspectives for Latin American Economies
• Banking Markets in Latin AmericaBanking Markets in Latin America
• Itaú Unibanco's Merger Case
• Itaú Unibanco’s Highlights
Agenda
Itaú Unibanco Holding S.A.
7
Latin American Banks were well poised to navigate the storm
… and with low leverage ratios
6.2
5.7
4.8
21.1
0.4
0.6
0.7
2.9
23.52.5
7.50.3
25.72.7
3.06.017.0
2.5
Mortgage penetration
% of GDP, 2006
The system is well capitalized … … and enjoys high returns
… with low exposure to low quality mortgage securities
ROE1
ROA1
50.0
73.0
15.5 15.316.0
13.3 12.8 12.6 12.5
Source: Bloomberg - in red, selected Latin American banks
-100%
-80%
-60%
-40%
-20%
0%
- 10 20 30 40 50 60 70
Total Assets / Common Equity
Lo
ss
in
Ma
rke
t V
alu
e i
n
las
t 1
2 m
on
ths
Basel index: Regulatory capital to risk-weighted assets, %, 20081
1 As of 1T 2008, except Brazil (Nov 2008), UK (Dec 2007) and Germany (Dec 2006)Source: IMF – Financial Stability Report Oct. 2008; Bacen; McKinsey Global Banking Pools
MEX BRA RUS COL USA UK GER
MEX
BRA
RUS
COL
USA
UK
GER
BRA COLUSA INDCHISPA
Itaú Unibanco Holding S.A.
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Structural trend towards increasing household income
• in the last 10 years, almost 90 million people had overcome poverty line in Latin America, which means a greater potential market
Increase access to banking services in Latin America
• on average only 36% of the families have access to banking services
• main barrier: costs of banking services
Increase domestic credit to private sector (% of GDP)
• LatAm average = 38,4% vs Advanced Economies average = 175%
• Focus on loans with “real” collaterals linked to the nature of each productive chain
Latin America presents some structural opportunities for banking
Itaú Unibanco Holding S.A.
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The positive results experienced in the past few years offer great opportunities: More than 90 million people had overcome poverty line in Latin America
Number of people that had overcome the poverty line in Latin America from 1999 to 2007 (million)
-5 5 15 25 35 45 55 65 75 85 95
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Uruguay
Venezuela
Total
Opportunities for Banking in Latin America
Source: Wold Bank - Finance for All? Policies and Pitfalls in Expanding Access
Itaú Unibanco Holding S.A.
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Opportunities for Banking in Latin America
Source: Wold Bank - Finance for All? Policies and Pitfalls in Expanding Access
Access to banking services - families with a bank account
% of families
Average Potential
Chile 60Panama 46Brazil 43Uruguay 42Colombia 41Ecuador 35Bolívia 30 36Paraguay 30Costa Rica 29Argentina 28Venezuela 28Peru 26Mexico 25
Germany 97France 96
96
USA 91
Finland 99
60
Number Average Potential
Brazil 14,59Panama 12,87Argentina 10,01Costa Rica 9,59Chile 9,39Ecuador 9,30Colombia 8,74
8,22
Mexico 7,63Uruguay 6,39Venezuela 4,41Peru 4,17Bolivia 1,53
Germany 49,41France 43,23USA 30,86
35,64
Finland 19,06
Number of Branches per 100.000 in habitants
27,42
Itaú Unibanco Holding S.A.
11
Domestic credit to private sector (% of GDP)
Source: Domestic credit to private sector (% of GDP). World Development Indicators 2008, World Bank, except Brasil* - source: Brazilian Central Bank aug/08.
Despite the high growth in recent years, LatAm countries still have a low credit GDP ratio.%
LatAm Countries
Opportunities for Banking in Latin America
0
50
100
150
200
USA Ireland Japan Netherlands UK Spain South Africa
China Australia SouthKorea
France Belgium Chile Brazil* Colombia Turkey Russia Indonesia Mexico Peru
Itaú Unibanco Holding S.A.
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Banking MarketsMarket Consolidation in Latin America
Top 5 Banks - % of Financial System Assets Top 5 Banks - % of Financial System Assets (jun/09)(jun/09)
Source: Total Assets: Monthly Financial Report – Felaban (jun/09); Top 5 Banks: Américaeconomía Intelligence
50,4%
77,40%73,0%
63,7%
78,0%
90,8%
50,7%
ARG BRA CHI COL MEX PER VEN
Itaú Unibanco Holding S.A.
13
• Perspectives for Latin American Economies
• Banking Markets in Latin America
• Itaú Unibanco's Merger CaseItaú Unibanco's Merger Case
• Itaú Unibanco’s Highlights
Agenda
Itaú Unibanco Holding S.A.
14
Itaú Unibanco's Merger Case
The most important issue on the integration of two big The most important issue on the integration of two big banks is not operational, it is cultural.banks is not operational, it is cultural.
A good cultural fit is crucial for success ,not only A good cultural fit is crucial for success ,not only among the business leaders of the two companies, but among the business leaders of the two companies, but also among employees.also among employees.
Itaú Unibanco Holding S.A.
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Employees: Optimism and commitment to the merger
Source: OHI 2009 Survey, (n = 3.854), interview, focus groups; team’s analysis
Employees believe that the merger will be positive and are committed to the process
% which agree entirely/ agree
87%
The merger will create opportunities for my professional development 92%
86%
76%
Employees are committed to implement the merger
88%Employees are receptive in accepting the best ideas of the two banks
89%
92%
93%
84%
People are receptive in building a new culture94%
Employees feel they are part of the same team
Itaú Unibanco Holding S.A.
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Employees: A better bank for all
Will the merger result in a better bank for all?
Employees believe that the integration will be positive for them and for the bank...
% which agrees entirely / agrees
Will the merger create better opportunities for my development?
... and show their confidence in this future merger
% which agrees entirely / agrees
Do I believe that management will only cut staff as a last resort?
Do I intend to work here for a long time to come?
90
84
80
89
Source: OHI 2009 Survey, (n = 4,985), GPTW survey, interviews, mini-sessions, focus groups team’s analysis
Itaú Unibanco Holding S.A.
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Benefits
Compensation
Structure
Evaluation
We have reviewed all HR’s macro processes
▪ Minimize signs of
hierarchy
▪ Strengthen
meritocracy
▪ Simplify
processes
▪ Provide an
environment for
performance
▪ Focus on
development of
people
▪ Minimize signs of
hierarchy
▪ Strengthen
meritocracy
▪ Simplify
processes
▪ Provide an
environment for
performance
▪ Focus on
development of
people
Principles
2▪ Evaluation of the officers for the 2008 cycle and
for 2009, ensuring homogeneous treatment
3▪ Adjustments made to the organizational
structure, adapting the reality the of the two banks and making the structure a more responsive one
4▪ Definition of compensation models focused on
meritocracy, performance and transparency of the process
5▪ Equalization of the benefits, minimizing
exaggerated signs of hierarchy and unifying policy
▪ Process of establishing bold goals for 2009 aligned to the entire organizationGoals
1
Concepts
Itaú Unibanco Holding S.A.
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Our Culture has focus on…
Reward linked to performance, not to hierarchy
Ethics and transparency
People with attention to the development of the leaderships
Performance (results and growth)
Meritocracy
Itaú Unibanco Holding S.A.
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Highlights: Merger of Itaú Unibanco
Focus on increased penetration in most profitable products and channels
Enhancing the importance and integration of the teams
Risk Control and Governance
Cost Reduction / Efficiencies
Simplicity: rationalization of processes and products
Since the beginning of the integration process, the bank has
always been aware of the importance of organizational
environment and the talent retention issues.
Itaú Unibanco Holding S.A.
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• Definition of organizational structure up to middle management ;
• Integration of Corporate, Investment Bank, Broker, Asset Management,
Vehicles, Private Bank and Treasury segments;
• New contracts of Insurance, Pension Plans, Vehicle Financing and Mortgage
– in an unique Itaú Unibanco platform;
• ATMs integration after only 3 months;
• Employees’ external e-mails addresses: @itau-unibanco.com.br;
• Convergence of communication and visual identity for both banks customers;
• Physical change to the final site location (average of 500 employees per week);
• Pilot project of branches integration – started in August 2009;
Integration – Concluded Steps
Expectation of 90% integrated by Dec/10
Itaú Unibanco Holding S.A.
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• Perspectives for Latin American Economies
• Banking Markets in Latin America
• Itaú Unibanco's Merger Case
• Itaú Unibanco’s HighlightsItaú Unibanco’s Highlights
Agenda
Itaú Unibanco Holding S.A.
22
Highlights
Total Assets
Individual Loans
344,4
55,3
3rd Q/09
Businesses Loans
Directed Loans
Total Deposits
Asset Under Management
Credit Card Revenue (accumulated)
Stockholders Equity
Market Share*
RankingBrazil
Net Income (accumulated)
ROE – annualized (%)
Efficiency Ratio (%)
Solvency Ratio (BIS Ratio %)
Values in US$ Billion
82,7
7,2
157,2
174,5
27,5
3,9
18,9%
41,1%
16,3%
33,4
27,0%
21,4%
36,3%
335,4
54,3
2nd Q/09
82,1
6,6
155,1
171,3
26,6
2,6
22,3%
42,7%
16,5%
18,2
23,2%
*Refers to the 2nd Q/09 because some banks had not presented their 3rdQ/09 balance sheet and income statement at the moment this report was finished. BRL/USD: 1,7781 (Sep/09)
22,1% # 1
# 1
# 1
# 1
# 1
Itaú Unibanco Holding S.A.
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Employees (individuals)
Branches* (units)
102,754
4,911
3rd Q/09
* Including CBSs (Customer Site Branches)
** June 2009
*** August 2009
ATMs (units) 30,374
Daily served clients and non-clients (million) 2.5**
Credit cards: daily approved transactions (million) 2.9***
Highlights
Itaú Unibanco Holding S.A.
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Itaú Unibanco´s Presence in Latin America
Uruguay (*)
Argentina
Chile
Paraguay
14,1% 3º
1,2%16º
3,1%9º
13,7% 2º
jun/09
mar/09
jun/09
jun/09
• Branches: 206
• Employees: 4.851
• Clients: 1,019 million
• Assets: US$ 9,7 billions
• Net Income: US$ 189 millions
Market ShareAssets
Ranking
June/09: ARP$/R$ 1.95 | CLP$/R$ 272 | PYG$/R$ 2.572 | UYP$/R$ 12.05 | R$/US$ 1.9516(*) Bank
Pro Forma Assets as of June 30,2009 and Net Income as of 1H09 multiplied by 2.
Itaú Unibanco Holding S.A.
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Evolution of Activities Abroad - Latin AmericaPro Forma
Total Assets (US$ million)
Total Revenue (US$ million)
*
June/2009: ARP$/R$ 1.95 | CLP$/R$ 272 | PYG$/R$ 2.572 | UYP$/R$ 12.05 | R$/US$ 1.9516
*
(*) For comparison purposes, the value of 1H09 was multiplied by 2.
8,515
6,592
5,663
3,619
9,7182009
2008
2007
2006
2005
615
443
367
301
680*2009
2008
2007
2006
2005
Stockholders’ Equity (US$ million)
Net Income (US$ million)
*
921
750
672
945
559
2009
2008
2007
2006
2005
152
117
83
189
45
2009
2008
2007
2006
2005
*
All historical values converted into US$ of June 2009. (1.0 US$ - R$ 1.9516)
Itaú Unibanco Holding S.A.
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Ranking - Market CapitalizationHighlights
Top 20 Banks – Market CapUS$ MillionUS$ Million
(*) Market Capitalization based on the total number of Itau Unibanco’s shares multiplied by the value of ITUB4
Source: Bloomberg
Ranking Company 11/09/2009 rk 11/02/2009 rk 12/31/2008 % Week % Year
1 IND & COMM BK -A 265.095 1 258.643 1 173.873 2,5% 52,5%
2 CHINA CONST BA-H 210.247 2 204.129 2 128.266 3,0% 63,9%
3 HSBC HLDGS PLC 201.429 3 196.528 4 116.799 2,5% 72,5%
4 JPMORGAN CHASE 174.410 4 167.449 3 117.681 4,2% 48,2%
5 BANK OF CHINA-H 155.170 5 152.155 6 98.190 2,0% 58,0%
6 BANCO SANTANDER 141.693 6 134.664 7 76.159 5,2% 86,0%
7 BANK OF AMERICA 136.436 8 126.573 8 70.648 7,8% 93,1%
8 WELLS FARGO & CO 132.674 7 128.983 5 111.840 2,9% 18,6%
9 ITAU UNIBANCO 102.343 12 89.453 10 48.036 14,4% 113,1%
10 BNP PARIBAS 100.769 9 92.934 17 38.482 8,4% 161,9%
11 CITIGROUP INC 95.800 10 91.227 18 36.566 5,0% 162,0%
12 GOLDMAN SACHS GP* 93.287 11 89.675 16 40.111 4,0% 132,6%
13 COMMONW BK AUSTR 78.571 14 70.321 27 29.960 11,7% 162,3%
14 ROYAL BANK OF CA 75.759 13 71.988 14 41.460 5,2% 82,7%
15 WESTPAC BANKING 71.868 15 67.758 20 34.442 6,1% 108,7%
16 BBVA 69.852 16 67.671 11 45.810 3,2% 52,5%
17 CREDIT SUISS-REG 68.921 17 64.668 24 30.592 6,6% 125,3%
18 BARCLAYS PLC 65.405 19 61.618 40 18.718 6,1% 249,4%
19 BRADESCO 65.388 21 60.814 26 30.177 7,5% 116,7%
20 MITSUBISHI UFJ F 63.413 18 63.058 9 70.308 0,6% -9,8%