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March 2006 Silvio de Carvalho Executive Director Roadshow
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1 Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy Agenda
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2 Brazilian Macroeconomic Scenario Floating exchange rate and outstanding adjustment in external accounts Monetary policy: inflation expectation and growth Fiscal policy: accomplishment of fiscal targets, even without IMF surveillance Credit expansion: public sector crowding out Baseline scenario Brazil: towards investment grade
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Real exchange rate
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Trade surplus accumulated in 12-months (US$ billion) Source: Central Bank of Brazil
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5 Monetary policy and inflation Source: IBGE Headline and Core Inflation (% y-o-y)
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6 Fiscal policy Source: Central Bank of Brazil Net Public Debt Dec 51.6% Dec 3.2%
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7 Primary surplus since 1998 Source: Central Bank of Brazil
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8 Inflation expectations: 4.66% for 2006 and 4.5% for 2007 (Focus Survey on February 10, 2006) Interest rate path: compatible with limiting aggregate demand acceleration in order to bring inflation to the target Exchange rate: strengthens to BRL 2.10 / USD in 2006 and remains constant in real terms in 2007 Primary budget surplus: the target remains at 4.25% of GDP, however the effective primary surplus decreases from 4.8% of GDP in 2005 to 4.25% of GDP in 2006 GDP linear growth trend: 3.5% in 2006 and 2007 Baseline scenario
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9 Investment grade Total foreign debt/current-account receipts
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10 Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy Agenda
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11 Brazilian Banking System Macro CharacteristicsMicro Scenario Huge fixed costs Cost reduction / efficiency Strongly capitalized Room for growth in credit Satisfactory level of provisioning Conservative approach Advanced risk management Advanced banking supervision; preparation for Basel II Importance of banking service fees Specific for each segment Profitable Target: to keep profitability in lower margins scenario Oriented to services Intensive use of technology, focused on self-service and Internet All bills are paid in the banks Huge transaction volumes High spreads Falling due to decline in interest rates Dimension Differentiated needs High reserve requirements High impact over spreads
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12 Declining Interest Rates x Increasing Loan Demand: New Revenue Dynamics Growing Fee Earnings and Tighter Cost Control To Offset Lower Treasury Gains Focus on Higher-Yielding Consumer Finance and SME Lending Efforts of Client Acquisition and Gains of Scale Government Still Attracts Large Portions of the System ’ s Liquidity; Gradual Replacement of Bonds By Loans Public Sector Banks Still Dominant: 45% of Deposits More Aggressive Competition Current Scenario
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13 Reserve Requirements (%) 53% 30% 23% 45% 20% Additional 8% remunerated by the Selic rate 20% remunerated by reference rate + 6% p.a. Additional 10% remunerated by Selic Remunerated by Selic rate 45% without remuneration
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14 Capital (Tier One) / Assets (%) Source: THE BANKER - Top 1000 – July 2005
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15 Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy Agenda
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16 Ownership Structure - Dec/05 ESA Family: 33.67% Common Shares: 60.64% Preferred Shares: 17.15% Free Float: 66.33% Common Shares: 39.36% Preferred Shares: 82.85% Itaúsa Banco Itaú Holding Financeira S.A. Free Float: 51.59% Common Shares: 11.16% Preferred Shares: 99.99% Total: 48.41% Commom Shares: 88.84% Preferred Shares: 0.01%
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17 Highlights Assets (R$ Billion) Credit Operations (R$ Billion) Stockholders’ Equity (R$ Billion) Technical Provisions – Insurance, Pension and Capitalization (R$ Billion)
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18 Net Income (R$ Million) Non-interest Expenses (R$ Million) Banking Service Fees (R$ Million) Net Interest Margin (R$ Million) Highlights
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19 Obs: Annualized quarterly indexes. Average ROE (%) Average ROA (%) BIS Ratio (%) Efficiency Ratio (%) Highlights
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20 Branches+CSBs Internet Banking Clients (In million) ATMs Employees Highlights
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21 CAGR (90-04) = 13.8% CAGR (90-04) = 25.2% Real Plan Mexican Crisis Asian Crisis Russian Crisis Real Devaluation Argentina Crisis Collor Plan Attack to WTC Brazilian Election Period R$ Million Adaptability to Different Scenarios Evolution of Stockholders’ Equity and Net Income Highlights
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22 CAGR (90-04) = 13.8% CAGR (90-04) = 25.2% Real Plan Mexican Crisis Asian Crisis Russian Crisis Real Devaluation Argentina Crisis Collor Plan Attack to WTC Brazilian Election Period R$ Million Adaptability to Different Scenarios Evolution of Stockholders’ Equity and Net Income Highlights Jan/90 to Dec/05 Dividends: R$ 8.8 Billion Increase of Capital: R$ 0.1 Billion
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23 Agenda Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy
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24 2005 Leaders Source: BusinessWeek – The BusinessWeek Global 1200 – 12/26/2005 RANK 1 2 3 4 5 9 11 56 114 193 207 239 2005 1 2 3 4 5 9 10 124 182 573 403 406 2004 COMPANY General Electric Exxon Mobil Microsoft Citigroup BP Bank of America HSBC Holdings Petrobras (Petróleo Brasileiro) Companhia Vale do Rio Doce Banco Bradesco Banco Itaú Holding Financeira AmBev (Cia. de Bebidas das Americas) 377.42 361.09 294.65 245.61 236.23 184.16 179.05 72.27 47.96 28.70 26.75 24.17 MARKET VALUE (Billions of USD) The BusinessWeek Global 1200
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25 Ranking Banks Source: Ranking BusinessWeek Global 1200 – 12/26/2005 Pos. Banks Mkt Cap. US$ billions Pos. Banks Mkt Cap. US$ billions 1ºCitigroup245.6121º Royal Bank of Canada48.67 2ºBank of America184.1622º Lloyds TSB Group46.17 3ºHSBC179.0523º Crédit Agricole43.75 4ºJP Morgan134.0124º ABN AMRO Holding42.07 5ºMitsubishi UFJ Financial Group126.3725º Fortis38.69 6ºWells Fargo 105.54 26º Bank of Nova Scotia38.54 7ºUBS 94.47 27º Toronto-Dominion Bank33.90 8ºRoyal Bank of Scotland Group 90.60 28º Banca Intesa32.90 9ºWachovia 82.93 29º Austrália & New Zealand Banking Group32.31 10ºBanco Santander Central Hispano 79.64 30º Westpac Banking31.03 11ºMizuho Financial Group 76.62 31º Banco Bradesco28.70 12ºING Groep 71.87 32º Bank of Montreal26.88 13ºSumitomo Mitsui Financial 68.99 33º Banco Itaú Holding Financeira26.75 14ºBNP Paribas 66.00 34º Sun Trust Banks26.28 15ºUnicredito Italiano 64.39 35º Hang Seng Bank25.29 16ºBBVA 60.05 36º Standard Chartered25.26 17ºU.S. Bancorp 55.04 37º Bank of New York24.95 18ºCredit Suisse Group 54.15 38º Dexia24.14 19ºDeutsche Bank 50.70 39º San Paolo-IMI22.42 20ºSociété Générale 49.44 40º Canadian Imperial Bank of Commerce22.36
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26 Presence in Brazil– Dec/2005 Including: Banco Itaú, Itaú BBA and Taií ATMs North Region Branches+CSBs1.4% GDP5.0% ATMs MidWest Region Branches+CSBs7.0% 5.6% GDP7.4% ATMs South Region Branches+CSBs17.7% 14.7% GDP18.6% ATMs Southeast Region Branches+CSBs70.2% 73.4% GDP55.2% ATMs Northeast Region Branches+CSBs3.7% 4.8% GDP13.8%
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27 Foreign Presence – Dec/2005 Itau Bank1,470568Banco Itaú Europa3,465469 Consolidated11,5982,784 Assets Stockholders’ Equity Foreign Branches3,561818Banco Itaú Buen Ayre54399Itaú BBA and subsidiaries5,153832 US$ Million
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28 Number of Clients (Thousands) Scale of Operations– Consolidated
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29 Agenda Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy
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30 Highlights 3. Additional Provisions: Increase of the Exceeding Provisions for Loan Losses of R$ 370 million (R$ 170 million in the quarter), totaling R$ 1,370 million; Reduction of R$ 30 million of Additional Provisions for Securities Portfolio totaling R$ 370 million (reduction in 4 th Q/05); 1.Results: 4 th Q./05: Net Income of R$ 1,425 million with increase of 5.4% q-o-q; ROE annualized 42.5%; 2005: Net Income of R$ 5,251 million with increase of 39.1% y-o-y; ROE annualized 35.3%; 4. Non-performing Loans Ratio: 3.5% ( Loans overdue for more than 60 days / Total Loans) 2. Growth of credit portfolio of 27.2% y-o-y and 10.0% q-o-q. Credit Cards: 40.1% y-o-y and 21.8% q-o-q. Vehicles: 80.1% y-o-y and 18.0% q-o-q. 5. Solvency Ratio (BIS Ratio): High level of BIS ratio - 17.0%. 2005 Results
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31 CAGR: 22.8% CAGR: 23.2% R$ Million Credit Portfolio 2005 Results
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32 (*) Rural Loans and Mortgage Loans – Loans linked to the availability of Demand and Savings deposits.. Credit Portfolio R$ Million 2005 Results
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33 Growth of 27.2% of the credit portfolio y-o-y. Individuals: 57.0% y-o-y Small Business and Middle Market: 31.6% y-o-y Breakdown of the Credit Portfolio 3 2005 Results
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34 Non-performing Loans Ratio and Coverage Ratio NPL Ratio (1) Coverage (2) (2) Provision for Loan Losses / Total Non-performing Loans (Loans overdue for more than 60 days) (1) Loans overdue for more than 60 days 2005 Results
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35 R$ Million Contribution of Credit Portfolio (1)Managerial Financial Margin + Banking Service Fees with operations of credit and credit cards – Taxes Expenses for PIS and COFINS. (2)Results from Loan and Lease Losses + Revision of classification (operations with real estate security) + Excess provision. (3)Average balance of credit portfolio net of non-performing operations. 2005 Results
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36 R$ Million Itaú Holding (pro forma) (*) Evolution considerably influenced by the acquisition of Orbitall and Credicard. Impact of R$ 30 million between the 3rd and the 4th quarters of 2005 and of R$ 545 million between the years of 2004 and 2005. 2005 Results
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37 Evolution of Managerial NIM (%) (*) (*) After non recurring items adjusts totaling R$ 612 million described in Management Discussion and Analysis of 4 th Q/04. 2005 Results
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38 R$ Million (1) Asset Management and Consortium. Service Fees 2005 Results
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39 R$ Million (*) Based in managerial data. (1) In 3 rd Q/05 includes R$ 93 million related to the collective convention of work. (2) Do not includes PIS, COFINS and ISS. (3) Includes non account holders credit cards holders and Taií. Non-Interest Expenses* Efficiency ratio improvement: at 50.3% in 2005 compared to 53.9% in 2004. 7 2005 Results
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40 Efficiency Ratio– International Efficiency Ratio The blue bars indicate the efficiency ratio calculated using the international methodology. The dashed red line indicates the efficiency ratio calculated by most of Brazilian banks. Efficiency Ratio– National 2005 Results
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41 (*) Values differ from the one published in note “Market Value” because they are net of the additional provision for securities. Conservative Accounting Practices Securities Adjust. market value Additional Provision Total Additional Provision for Loan Losses (PDD) Financial Instruments: Market vs. Recorded Value (*) R$ 435 million R$ 370 million R$ 3,6 billion 12/31/05 R$ 1,37 billion R$ 1,4 billion R$ 733 million R$ 400 million R$ 3,8 billion 12/31/04 R$ 1,0 billion R$ 1,67 billion R$ 758 million R$ 545 million R$ 3,7 billion 12/31/03 R$ 906 million R$ 1,5 billion 2005 Results
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42 Agenda Brazilian Economy Brazilian Banking System Highlights Itaú Itaú´s Positioning 2005 Results Strategy
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43 Segmentation Investment Banking
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44 Itaú ItaucredItaú BBAItaubanco Banking Credit Cards (Account Holders) Insurance, Pension Plans and Capitalization Mutual Funds and Managed Portfolio Corporation Corporate Operations & Investment Banking Vehicles Credit Cards (Non Account Holders) Taií Segmentation (pro forma)
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45 R$ Million Net Income per segment (pro forma) Net Income Breakdown in 2005: Segmentation (pro forma)
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46 Itaú CorporationItaucredItaú BBAItaubanco FIC 50% CBD 50% Itaú FAI 50% LASA 50% Itaú Own stores 100% Itaú Payroll Credit Fináustria Itaucred Vehicles Banco Fiat Intercap Vehicle Credit Cards non-account holders 50% Credicard Segmentation – Credit for Individuals
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47 Growth of 84.5% y-o-y of Net Income pro forma of Itaucred y-o-y, totaling R$ 525 million. Credit Portfolio (R$ Million) Own Stores 5 Itaucred
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48 Itaú Holding ItaucredItaú BBAItaubanco Organic growth of classic business lines; Expansion of Insurance, Capitalization and Pension Plan business areas; Maintenance of Efficiency Ratio; Growth of 25% in credit portfolio; Expectation of moderate growth of non-performing loans ratio. Focus on Investment Banking and banking services segments; Continuous improvement of market risk management; Growth of 5% in credit portfolio. Growth of vehicle financing; Consolidation and growth of partnerships with CBD (FIC) and Lojas Americanas (FAI); Growth of number of Taií´s Outlets (FIT); Growth of operations with non- account holders; Credicard / Orbitall integration on Itaú with operation gains; Growth of 30% in credit operations; Expectation of moderate growth of non-performing loans ratio. Disclosure of the impacts of operational risks, in compliance with Basel II Banco Itaú Holding Financeira S.A. in 2006
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49 R$ Net Income per share Net Income R$ million Note1: On October 3 was made a 900% split of the common and preferred shares traded at Bovespa and on October 6 was made a 400% split of the ADRs traded at NYSE. Note2: The values of the Net Income per share was adjusted for comparability purposes. Net Income and Net Income per Share 19.8% 39.1% 20.7% 42.9% 29.0% 32.6% Creation of Shareholder Value
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50 In US$ 100 Itaú (1) Itaú (2) Ibov. 10 years 28.95%24.38% 13.14% 5 years 36.74%32.28%20.87% 12 months 97.60%92.93%72.67% Annual Average Appreciation in US$ Preferred Shares Appreciation Evolution of US$ 100 invested from Mar/96 to Mar/06 Asian Crisis Russian Crisis Real Devaluation Argentine Crisis Attack to WTC Brazilian Election Period (1) With dividends reinvestment (2) Without dividends reinvestment Creation of Shareholder Value 886 344 1,271 (*) Until March 13.
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March 2006 Silvio de Carvalho Executive Director Roadshow
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