1 acquisition of bankboston’s operations in latin america may 2, 2006
TRANSCRIPT
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ACQUISITION OF BANKBOSTON’S OPERATIONS IN LATIN AMERICA
May 2, 2006
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The Acquisition Agreement
Banco Itaú Holding Financeira S.A. (ITAÚ) and Itaúsa – Investimentos Itaú S.A. (ITAÚSA) announce today that they have entered into an agreement with Bank of America Corporation (BAC) dated 05-01-2006 which involves:
• The acquisition of BankBoston (BKB) in Brazil by ITAÚ pursuant to the issuance of 68,518 thousand new non-voting ITAÚ shares, equal to an approximate 5.8% share of ITAÚ’s total capital;• The exclusive right for ITAÚ to acquire BKB’s operations in Chile and Uruguay, as well as certain other financial assets owned by clients of Latin America.
The largest stock swap ever to be completed in the
Brazilian financial services industry
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Acquired Businesses
Bank of AmericaCorporation
BKB Chile
BKBBrazil
BKB Uruguay
CorporateMiddle
&Small
Premier
Option Option
OCA UruguayCredit Cards
Option
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Price and Transaction Structure
The acquisition of BKB Brazil will be effected in stock pursuant to the issuance of non-voting ITAÚ shares, equal to an approximate 5.8% share of ITAÚ’s total capital (68,518 thousand new shares of ITAÚ). Based on the non-voting shares average price on 04-28-06, these newly-issued shares would be valued at R$ 4.5 billion.
The same transaction structure is expected for the remaining acquisitions and the amounts involved will be generally in line with their respective asset bases vis-à-vis BKB Brazil.
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Recent Acquisitions in Shares in Brazil
DATE ACQUIRER TARGET
TOTAL
AMOUNT
R$ MM
% PAID
IN SHARES
SHARES ISSUED / TOTAL
CAPITAL
Apr-03 ABN Amro Real Sudameris 2,293 77.0% 12.9%
Jan-03 Bradesco BBV Brasil 2,480 25.4% 4.4%
Nov-02 Itaú BBA-Creditanstalt 3,119 16.7% 3.0%
Jul-00 Unibanco Bandeirantes 1,044 100.0% 12.3%
Apr-00 Bradesco Boavista 946 100.0% 6.5%
Source: Merrill Lynch
May-06 Itaú BKB Brazil 4,508 100.0% 5.8%
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Considerations Regarding BAC’s Investment in ITAÚ
BAC will appoint one member of ITAU’s Board of Directors; The acquisition will involve the issuance of new non-voting ITAÚ shares, will not give rise
to preemptive subscription rights on the part of ITAÚ’s current shareholders; BAC does not have a Right of First Refusal, but will have tag along rights, in the event of
a change of control at ITAÚ; BAC shall not increase its stake above 20% of the issued and outstanding capital of
ITAÚ in the future; Shares issued in connection with this acquisition are subject to a 3-year lock-up period
and, after this period, the sale of these shares in the market is limited to 15% of the average
daily volume or block trade; ITAÚ has a Right of First Offer should BAC decide to sell its stake.
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BKB Brazil
Present in Brazil since 1947
Assets (R$ MM) 22,603
Deposits (R$ MM) 5,911
Shareholders’ Equity (R$ MM) 2,124
# of Employees 4,800
Ranked 13th
by the CentralBank of Brazil
# of Clients (thousands) 203
Assets under Management (R$ MM) 26,014
Loans (includes sureties and endorsements) (R$ MM) 11,639
Source: BKB Publication, BAC, Central Bank of Brazil and Market Share taken from ANBID – Mar/05
# of Branches 66
1.4%
0.6%
3.3%
1.4%
MarketShare12-31-05
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BKB Brazil - Segmentation
Banking Revenues (BR) (*) Number of Clients
(*) Banking Revenues = Financial Margins + Service Fees
Position: Dec.05
Corporate31%
High Net Worth Individuals
38%Middle Market
31%SEGMENT
THOUSANDSOF
CLIENTS
INCREASE IN BR (%)
High Net Worth Individuals
178.3 118%
Middle Market 23.8 40%
Corporate 1.3 62%
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Client Overlap / Opportunities
SEGMENTESTIMATED OVERLAP
ESTIMATED LOSS IN
BANKING REVENUES
OPPORTUNITIES
HIGH NET WORTH
30% 5% Sale of Insurance and Private Pension Plans
MIDDLE MARKET
37% 11% Cash Management Services
CORPORATE 12% 3%Cash Management Services
Investment BankingCrossborder Transactions
Clients whose limits should be reduced according to information on the largest clients
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Relevant Aspects
Will become a shareholder of ITAÚ, thus maintaining an important presence in the region, through a significant investment in a leading bank; Will appoint one member of ITAÚ’s Board of Directors.
Leadership position among private banks in assets under management, custody, high net worth individual and corporate segments; Significant economies of scale in the large corporate and middle market segments; Acquisition of a premium credit card client base; Opportunity to expand into foreign markets in which ITAÚ does not currently have a presence.
BAC
ITAÚ and BAC will explore mutual cooperation opportunities to benefit their clients
ITAÚ
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Important Highlights
Maintenance of BKB’s branches, which are highly regarded for their superior facilities, and integration with the Itaú Personnalité segment (no intention to shut down branches);
The ITAÚ brand will be extended to the acquired businesses;
ITAÚ will add a set of highly qualified professionals to its current structure.
ITAÚ will continue to strengthen its tradition of providing differentiated
service to its customers in the various market segments
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BKB Chile (Exclusive Option)
Assets (R$ MM) 5,330
Deposits (R$ MM) 3,490
Shareholders’ Equity (R$ MM) 872
BankBoston Chile
Loans (R$ MM) 3,578
Source: BACParity CLP 514.21 / US$ 1.00 e R$ 2.2407 / US$ 1.00 as of 12-31-05
Investment Grade
Baa1 from Moody´s
# of Branches 44
# of Clients (thousands) 58
12-31-05
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BKB Uruguay (Exclusive Option)
Assets (R$ MM) 1,844
Deposits (R$ MM) 1,510
Shareholders’ Equity (R$ MM) 125
BankBoston Uruguay
Loans (R$ MM) 503
Source: BACParity UYU 24.17 / US$ 1.00 e R$ 2.2407 / US$ 1.00 as of 12-31-05
Assets (R$ MM) 239
Shareholders’ Equity (R$ MM) 55
Loans (R$ MM) 160
OCA
MarketShare 50%
# of Branches 15
12-31-05
372,000clients 12-31-05
# of Branches 23
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Pro Forma Analysis
Assets
Loans (*)
Deposits
151.2 22.6
67.8 11.6
52.0 5.9
19.8 %
23.4%
21.0%
Assets Under Management 120.3 26.0 40.3%
R$ BILLION
(*) Includes sureties and endorsements
Shareholders’ Equity 15.6 2.1 21.6%
7.4
4.2
5.0
22.4
1.1
181.2
83.6
62.9
168.7
18.9
%BKBBrazil
PRO FORMA
BKBForeign
CombinedITAÚ + BKB
ITAÚINFORMATION AS OF 12-31-05
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%
Pro Forma Analysis (Continued)
(*) Adjusted for BKB Brazil hedge transactions
# of Employees
# of Clients (thousands)
# of Branches
BKBBrazil
PRO FORMA
51,036 4,800
16,649 203
2,391 66
13.7%
3.9%
6.2%
Efficiency Ratio (*) 50.3% 77.3% 2.4 bps
Basle Ratio 17.0% 14.7% -0.3 bps
2,200
450
82
78.0%
15.8%
58,036
17,303
2,539
52.7%
16.7%
BKBForeign
CombinedITAÚ + BKBITAÚINFORMATION AS OF 12-31-05
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BKB earnings requirements to avoid dilution in 2005
ITAÚ + BKBITAÚ
Net Income (R$ MM)
ROE (%p.a.)
ROA (%p.a.)
Efficiency Ratio
5,5765,251
BKB Brazil
325
Fiscal Year 2005
EPS (R$/share) 4.744.74
Shares Outstanding (mm) 1,176.21,107.7
4.74
68.5
13.4%
1.4%
77.3%
33.7%
3.5%
50.3%
Required
In light of its scale, ITAÚ is in a position to make this acquisition EPS accretive in a short period of time.
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Accounting Effects
It is management’s intention to effect the write-off of the goodwill amount resulting from this transaction in the fiscal year of 2006. It is estimated that ITAÚ’s net income will be reduced by R$ 2.2 billion, net of taxes, as a result of the amortization of goodwill. The amount of dividends/interest on own capital to be distributed to the pro forma ITAÚ shareholder base for the fiscal year 2006 will not be impacted by this amortization of goodwill and should, therefore, be higher than those paid out in 2005;
The transaction is expected to be EPS accretive in the second half of 2007;
The Basle Ratio, pro forma for the acquisition, will equal approximately 16.7%.
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Impact of the Transaction on Itaúsa
Decline in stake in ITAÚ from 48.2% to 45.4% (R$ 0.4 billion);
Gain from the equity method due to capital increase at ITAÚ (R$ 2.0 billion);
Negative impact of goodwill amortization at ITAÚ (R$ 1.0 billion);
ESTIMATED POSITIVE NET EFFECT ON NET INCOME (R$ 0.6 BILLION).
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Disclaimer
This presentation contains forward-looking statements. These statements may include the plans and objectives of management for future operations and financial objectives, loan portfolio growth, and availability of funds. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results to differ materially include the uncertainties of economic, competitive, and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately, and many of which are beyond the control of the Bank. Although the Bank believes that the assumptions underlying the forward-looking statements included herein are reasonable, any of the assumptions could be inaccurate and therefore there can be no assurance that the forward-looking statements included herein will prove to be accurate. Therefore, the inclusion of such information should not be regarded as a representation by the Bank or any other person that the objectives and plans of the Bank will be achieved.