Ita Unibanco Holding S A FELABAN CEO Round
Itaú Unibanco Holding S. A. FELABAN CEO Round Table November 15 th 2009 1
Agenda Itaú Unibanco Holding S. A. • Perspectives for Latin American Economies • Banking Markets in Latin America • Itaú Unibanco's Merger Case • Itaú Unibanco’s Highlights 2
In recent years, Lat. Am has been more integrated to the global economy and has shown higher GDP growth rate than world´s average Historical GDP Growth (%yoy) Itaú Unibanco Holding S. A. Higher integration to global economy and elevated international reserves Lat. Am’s volatility mostly related to debt crises 2 nd oil crisis Brazilian default World Correlation (Lat. Am x World) CAGR Lat. AM Mexican crisis Asian crisis Advanced Economies 1980 to 1999 10% 2, 5% Source: IMF *GDP Growth for 2009/2010 is an IMF estimative Argentinean default Subprime crisis Latin America 2000 - 2008 89% 3, 8% 3
World Growth Forecast - Selected Countries Itaú Unibanco Holding S. A. GDP (with seasonal adjustment; 1 Q/99=100) 4
Latin American Capital Markets have presented good levels of transparency and disclosure Itaú Unibanco Holding S. A. Percentage of Lat. Am Countries Implementing Reforms Latin American countries have shown important regulatory advances during the last 20 years… 94 88 31 64 63 56 25 100 91 92 62 33 27 15 0 Supervisory Agency Creation Establishment Custody Trading Systems Clearing of Insider Arrangements and Trading Laws Settlement Processes before 1990 by 1995 by 2002 . . . providing more confidence in the local banking system 5
Agenda Itaú Unibanco Holding S. A. • Perspectives for Latin American Economies • Banking Markets in Latin America • Itaú Unibanco's Merger Case • Itaú Unibanco’s Highlights 6
Latin American Banks were well poised to navigate the storm The system is well capitalized … … and enjoys high returns Basel index: Regulatory capital to risk-weighted assets, %, 20081 16. 0 15. 5 15. 3 COL 12. 6 12. 5 GER USA COL UK GER … with low exposure to low quality mortgage securities % of GDP, 2006 73. 0 50. 0 17. 0 USA 1 As SPA CHI IND ROE 1 ROA 1 5. 7 0. 6 4. 8 0. 7 … and with low leverage ratios Mortgage penetration 6. 0 6. 2 0. 4 RUS 3. 0 2. 5 BRA COL of 1 T 2008, except Brazil (Nov 2008), UK (Dec 2007) and Germany (Dec 2006) Source: IMF – Financial Stability Report Oct. 2008; Bacen; Mc. Kinsey Global Banking Pools Loss in Market Value in last 12 months RUS 7. 5 0. 3 USA BRA 21. 1 2. 9 UK MEX 23. 5 2. 5 MEX 12. 8 25. 7 2. 7 BRA 13. 3 Itaú Unibanco Holding S. A. Total Assets / Common Equity 0% - 10 20 30 40 50 60 70 -20% -40% -60% -80% -100% Source: Bloomberg - in red, selected Latin American banks 7
Latin America presents some structural opportunities for banking Itaú Unibanco Holding S. A. 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) • Lat. Am average = 38, 4% vs Advanced Economies average = 175% • Focus on loans with “real” collaterals linked to the nature of each productive chain 8
Opportunities for Banking in Latin America Itaú Unibanco Holding S. A. 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) Total Venezuela Uruguay Peru Mexico Ecuador Colombia Chile Brazil Bolivia Argentina -5 5 15 25 35 45 Source: Wold Bank - Finance for All? Policies and Pitfalls in Expanding Access 55 65 75 85 95 9
Opportunities for Banking in Latin America Access to banking services families with a bank account Number of Branches per 100. 000 in habitants % of families Average Potential Chile Panama Brazil Uruguay Colombia Ecuador Bolívia Paraguay Costa Rica Argentina Venezuela Peru Mexico 60 46 43 42 41 35 30 30 29 28 28 26 25 Finland Germany France USA 99 97 96 91 36 60 96 Itaú Unibanco Holding S. A. Number Average Brazil 14, 59 Panama 12, 87 Argentina 10, 01 Costa Rica 9, 59 Chile 9, 39 Ecuador 9, 30 Colombia 8, 74 Mexico 7, 63 Uruguay 6, 39 Venezuela 4, 41 Peru 4, 17 Bolivia 1, 53 8, 22 Germany France USA Finland 35, 64 Source: Wold Bank - Finance for All? Policies and Pitfalls in Expanding Access 49, 41 43, 23 30, 86 19, 06 Potential 27, 42 10
Opportunities for Banking in Latin America Itaú Unibanco Holding S. A. Domestic credit to private sector (% of GDP) Despite the high growth in recent years, Lat. Am countries still have a low credit GDP ratio. % 200 150 Lat. Am Countries 100 50 0 USA Ireland Japan Netherlands UK Spain South Africa China Australia South Korea France Belgium Chile Brazil* Colombia Turkey Russia Indonesia Mexico Peru Source: Domestic credit to private sector (% of GDP). World Development Indicators 2008, World Bank, except Brasil* - source: Brazilian Central Bank aug/08. 11
Banking Markets Market Consolidation in Latin America Itaú Unibanco Holding S. A. Top 5 Banks - % of Financial System Assets (jun/09) Source: Total Assets: Monthly Financial Report – Felaban (jun/09); Top 5 Banks: Américaeconomía Intelligence 12
Agenda Itaú Unibanco Holding S. A. • Perspectives for Latin American Economies • Banking Markets in Latin America • Itaú Unibanco's Merger Case • Itaú Unibanco’s Highlights 13
Itaú Unibanco's Merger Case Itaú Unibanco Holding S. A. The most important issue on the integration of two big banks is not operational, it is cultural. A good cultural fit is crucial for success , not only among the business leaders of the two companies, but also among employees. 14
Employees: Optimism and commitment to the merger Itaú Unibanco Holding S. A. Employees believe that the merger will be positive and are committed to the process % which agree entirely/ agree The merger will create opportunities for my professional development Employees are committed to implement the merger Employees feel they are part of the same team Employees are receptive in accepting the best ideas of the two banks People are receptive in building a new culture Source: OHI 2009 Survey, (n = 3. 854), interview, focus groups; team’s analysis 86% 92% 87% 89% 84% 76% 88% 92% 93% 94% 15
Employees: A better bank for all Itaú Unibanco Holding S. A. Employees believe that the integration will be positive for them and for the bank. . . % which agrees entirely / agrees Will the merger result in a better bank for all? Will the merger create better opportunities for my development? 90 84 . . . and show their confidence in this future merger % which agrees entirely / agrees Do I intend to work here for a long time to come? Do I believe that management will only cut staff as a last resort? 89 80 16 Source: OHI 2009 Survey, (n = 4, 985), GPTW survey, interviews, mini-sessions, focus groups team’s analysis
We have reviewed all HR’s macro processes Itaú Unibanco Holding S. A. Concepts 1 Principles ▪ Minimize signs of hierarchy ▪ ▪ Simplify processes ▪ Provide an environment for performance ▪ Process of establishing bold goals for 2009 aligned to the entire organization ▪ Evaluation of the officers for the 2008 cycle and for 2009, ensuring homogeneous treatment ▪ Adjustments made to the organizational structure, adapting the reality the of the two banks and making the structure a more responsive one ▪ Definition of compensation models focused on meritocracy, performance and transparency of the process ▪ Equalization of the benefits, minimizing exaggerated signs of hierarchy and unifying policy Goals 2 Evaluation Strengthen meritocracy ▪ 3 Structure 4 Compensation Focus on development of people 5 Benefits 17
Our Culture has focus on… Itaú Unibanco Holding S. A. Meritocracy Performance (results and growth) Reward linked to performance, not to hierarchy People with attention to the development of the leaderships Ethics and transparency 18
Highlights: Merger of Itaú Unibanco Holding S. A. Enhancing the importance and integration of the teams Focus on increased penetration in most profitable products and channels Simplicity: rationalization of processes and products Cost Reduction / Efficiencies Risk Control and Governance Since the beginning of the integration process, the bank has always been aware of the importance of organizational environment and the talent retention issues. 19
Integration – Concluded Steps Itaú Unibanco Holding S. A. • 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; Expectation of 90% integrated by Dec/10 20
Agenda Itaú Unibanco Holding S. A. • Perspectives for Latin American Economies • Banking Markets in Latin America • Itaú Unibanco's Merger Case • Itaú Unibanco’s Highlights 21
Highlights Itaú Unibanco Holding S. A. Values in US$ Billion 3 rd Q/09 2 nd Q/09 Market Share* Ranking 344, 4 335, 4 22, 1% #1 Individual Loans 55, 3 54, 3 27, 0% #1 Businesses Loans 82, 7 82, 1 21, 4% #1 7, 2 6, 6 Total Deposits 157, 2 155, 1 23, 2% #1 Asset Under Management 174, 5 171, 3 Stockholders Equity 27, 5 26, 6 Credit Card Revenue (accumulated) 33, 4 18, 2 36, 3% #1 3, 9 2, 6 ROE – annualized (%) 18, 9% 22, 3% Efficiency Ratio (%) 41, 1% 42, 7% Solvency Ratio (BIS Ratio %) 16, 3% 16, 5% Total Assets Directed Loans Net Income (accumulated) Brazil *Refers to the 2 nd Q/09 because some banks had not presented their 3 rd. Q/09 balance sheet and income statement at the moment this report was finished. BRL/USD: 1, 7781 (Sep/09) 22
Highlights Itaú Unibanco Holding S. A. 3 rd Q/09 Employees (individuals) 102, 754 Branches* (units) 4, 911 ATMs (units) 30, 374 Daily served clients and non-clients (million) 2. 5** Credit cards: daily approved transactions (million) 2. 9*** * Including CBSs (Customer Site Branches) ** June 2009 *** August 2009 23
Itaú Unibanco´s Presence in Latin America Market Share Assets Itaú Unibanco Holding S. A. Ranking Paraguay jun/09 14, 1% Argentina mar/09 1, 2% Chile jun/09 3, 1% Uruguay (*) jun/09 13, 7% 3º 16º • Branches: 206 9º • Employees: 4. 851 • Clients: 1, 019 million • Assets: US$ 9, 7 billions 2º • Net Income: US$ 189 millions (*) Bank June/09: ARP$/R$ 1. 95 | CLP$/R$ 272 | PYG$/R$ 2. 572 | UYP$/R$ 12. 05 | R$/US$ 1. 9516 Pro Forma Assets as of June 30, 2009 and Net Income as of 1 H 09 multiplied by 2. 24
Evolution of Activities Abroad - Latin America Pro Forma Total Assets (US$ million) 2005 2006 2007 8, 515 9, 718 Total Revenue (US$ million) 2006 2007 2009 750 301 2008 921 2009 945 Net Income (US$ million) 2005 367 45 2006 443 83 117 2007 * 2008 672 2007 6, 592 2009 2005 559 2006 5, 663 2008 Stockholders’ Equity (US$ million) 2005 3, 619 615 680* Itaú Unibanco Holding S. A. 2008 2009 (*) For comparison purposes, the value of 1 H 09 was multiplied by 2. All historical values converted into US$ of June 2009. (1. 0 US$ - R$ 1. 9516) June/2009: ARP$/R$ 1. 95 | CLP$/R$ 272 | PYG$/R$ 2. 572 | UYP$/R$ 12. 05 | R$/US$ 1. 9516 * 152 * 189* 25
Highlights Itaú Unibanco Holding S. A. Ranking - Market Capitalization Top 20 Banks – Market Cap US$ Million Company Ranking 11/09/2009 rk 11/02/2009 rk 12/31/2008 D% Week D% 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% 100. 769 9 92. 934 17 38. 482 8, 4% 161, 9% 10 BNP PARIBAS 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% (*) Market Capitalization based on the total number of Itau Unibanco’s shares multiplied by the value of ITUB 4 Source: Bloomberg 26
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