0 candido bracher executive vice-president august 25 th 2003
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Banco BBA Creditanstalt
Itaú Corporate Bank
Negociations to Create Banco
Itaú BBA • Basic Concepts• Structuring the Bank
Summary of Structure and Market Position
Challenges and Opportunities
Financial Highlights
Table of ContentsTable of Contents
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Banco BBA CreditanstaltBanco BBA Creditanstalt
- Founded in 1988:
Internationally respected foreign shareholder
Bank executives with wide experience in Brazilian markets
Net worth of US$20 million
50/50 share in total capital
Brazilian shareholders with 66% of voting capital
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Philosophy:
Wholesale Bank
Focus on a limited number of corporate clients
Objetive: quality relationships
Highly qualified professionals
Deep knowledge of corporate clients
Frank dialogue and consistent approach
Day-to-day products lead to structured transactions
Flat organization
Responsive and flexible attitude
Treasury and the International Area are the basis for growth
Banco BBA CreditanstaltBanco BBA Creditanstalt
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Banco BBA CreditanstaltBanco BBA CreditanstaltGrowth in Net WorthGrowth in Net Worth (U$ Mil (U$ Millionslions))
18 29 27 28 48 76
274325
413 429
538 508 514 552482
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
CAGR = 26.5%
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Banco BBA CreditanstaltBanco BBA Creditanstalt
2%
43%
35%
22%
36%
45%
54%
25%
35%
22% 21%
33%
21%16%
23%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Return on EquityReturn on Equity – ROE (%) – ROE (%)
AverageAverage = = 24.5%24.5%
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Publicly listed foreign shareholder
Full Disclosure
Starting 1994, Executives become shareholders in Bank –
Creation of BBA HE (Holding company owned by Executives)
Corporate Governance:
Declining Global appetite for Brazil risk (consequences for HVB)
Reason for exiting the country
Excellent Relations with Foreign Shareholder:
Availability of resources
Same philosophy as BBA
Continuation of growth
Search for a Replacement for HVB:
Banco BBA CreditanstaltBanco BBA Creditanstalt
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Excellent results with corporate clients
Capital base, reputation, cash mnagement products
Highly qualified professionals and management
Strong and active trading desks
Wholesale bank part of the Itaú Conglomerate
Demand for greater focus exclusively on corporate clients
CorporateBank
Itaú Corporate BankItaú Corporate Bank
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Confidentiality of information
Careful planning
Same cultural values
18 Months of steady progress:
NegociaNegociations to Create the Banktions to Create the Bank
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Focus on quality of relationship Client’s interests before all else :
Maximization of profitability over the medium and long term
Equity stake for principal executives
Suitable results-based compensation
Flat and informal organization
Excellent work environment (external, not internal competition
– teamwork)
Open space floors (new installations)
Highly motivated staff:
Itaú BBA – Itaú BBA – Basic ConceptsBasic Concepts
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Banco Itaú Holding Financeira S.A.
Banco Itaú S.A.
100.0%
Banco Itaú BBA S.A.
95.75%
BBA HE Participações S.A.
4.25%
BBA Executives
Shared ControlShared Control
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Shared control: 50% HE / 50% Itaú Holding
Shareholders agreement provides for autonomous operation
Operationally independent:
Independent risk control areas
Risk and control consolidated into a 2nd level within Itaú Holding
Itaú Holding nominates Vice-president Financial Controls
Operations within pre-set limits
Risk Control (Credit, Market and Operating):
Close integration between Itaú BBA and Itaú Holding executives
Itaú participates in decisions on credit limits over a given amount
Itaú BBA executives to sit on Itaú Holding Commissions
Joint Decision-taking:
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
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Complete autonomy and focus on a functionality that combines:
Responsive decision-taking
Flexible service
Processing capability
Broad choice of products and services
Design of the bank’s functional structure and specific areas:
Selecting Target Market:
Definition of client universe (1000 largest economic groups)
Itaucorp 920 clients, BBA 630 clients (350 overlap)
Definition of staff
Structuring of the areas
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
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Asset Management
Private Banking
Fináustria – Automobile finance
Brokerage
Areas transferred to Itaú :
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
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Operates independently but consolidates its risks into Itaú Holding
Rapid responses and structured products for clients
Treasury Maintained:
The Complete Bank
Handles correspondent banking for the whole Itaú Group
International Area:
Itaú BBA as distribution channel for the products of Itaú Holding to corporate clients,
independent of the operating model:
Banco Itaú Europa
Banco Itaú Buen Ayre
Broker Dealer – New York
Asset Management
Pension Funds and Insurance
Retail services for client employees
Maximization of synergies with the Itaú Group:
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
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5
2
553
22
6
-
25
1
3
300
-
4
12
50
3
2
620
34*
11
-
43
Vice-Presidents
Management levelsto Client
# of Employees
Executive Share-holders
Regional Directors
Commercial Superintendents
Officers
(73% of the total)
CorporateBank
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
(*) 12 executiv(*) 12 executives invited to become shareholderses invited to become shareholders
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CHAIRMAN
Fernão Bracher
VICE- CHAIRMEN
Antonio Carlos Barbosa de Oliveira
Back Office, Financial Controls, Risk and Systems
Candido Bracher
Commercial, Capital Markets and HR Policy
Eduardo Vassimon
International, Products, Client dealing and Treasury
Executive Committee
Itaú BBA – Itaú BBA – Structuring the BankStructuring the Bank
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Name / Reputation
Solid Capital Base
Ability to Attract and Retain the Best Talents
Being independent enables differentiated HR policies to generate
motivation
Streamlined and informal structure makes for versatility and
responsiveness
Broad range of products
Focus on creating value for shareholders
Summary of Structure and Market Summary of Structure and Market PositionPosition
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Moody’s – AAA (local)
Fitch – AA (local)
S&P – brAA (local)
Close integration and harmony make Itaú BBA an integral part of the Itaú Group
Summary of Structure and Market PositionSummary of Structure and Market Position
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Challenge overcome
Minimal loss of staff
Readily accepted by clients
Principal Challenge: Integration
Lacks the inertia of retail results
Builds its results anew each quarter
Ability to adapt to circumstances
Competitive in all market segments
Wholesale Bank
Challenges and OpportunitiesChallenges and Opportunities
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Improvement in credit quality
Lower losses and provisions
Higher volumes
Increase in Capital Markets operations
Compensating Factors
Falling spreads
Lower volatility reduces Treasury gains
Falling interest rates
Adverse Factors
Challenges and OpportunitiesChallenges and Opportunities
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Maintain the high return on equity
Responsibilities
To fully exploit the potential for cross-selling
To multiply volumes and processing capacity
To apply creativity to undifferentiated products
Capital Market and M&A
Well positioned to grow with the market
Well developed structure for origination and distribution of
securities
Opportunities
Challenges and OpportunitiesChallenges and Opportunities
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The operations of Itaucorp were incorporated on a preliminary basis in order to demonstrate approximately what Banco Itaú-BBA will be after all the migrations between segments have terminated. There are still adjustments to be made.Forecasts based on this exercise should therefore bear in mind the already mentioned risks and uncertainties as well as those that are beyond the control of the companies comprising the Itaú conglomerate (political and economic change, volatility in interest and exchange rates, technological change, inflation, financial disintermediation, competitive pressures on products and prices and changes in tax law).
R$ MillionPro-Forma Balance SheetPro-Forma Balance Sheet
LIABILITIESBanco Itaú-BBA
Pro FormaDeposits
Open market liabilities
Loan liabilities
Pass-through loan liabilities
Other liabilities
Deferred income
Capital
Balance Sheet at June 30 2003 ASSETS Banco Itaú-BBA
Pro Forma
Cash, Interbank placements and securities
Loans
Bad Debt Provision
Other Assets
Fixed Assets
TOTAL ASSETS
9,290
17,637
(574)
1,428
95
27,876
15,565
2,368
2,848
1,204
2,248
13
3,630 TOTAL LIABILITIES 27,876
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The operations of Itaucorp were incorporated on a preliminary basis in order to demonstrate approximately what Banco Itaú-BB A will be after all the migrations between segments have terminated. There are still adjustments to be made.Forecasts based on this exercise should therefore bear in mind the already mentioned risks and uncertainties as well as those that are beyond the control of the companies comprising the Itaú conglomerate (political and economic change, volatility in interest and exchange rates, technological change, inflation, financial disintermediation, competitive pressure on products and prices and changes in tax law).
R$ Million
INCOME STATEMENT 1st Half of 2003Banco Itaú-BBA
Pro Forma
1,252
(174)
1,078
120
(276)
922
(415)
507
3,630
29.9%
Financial margin
Bad debt provision
Gross income from Financial Intermediation
Fee income
Administrative Expenses
Income before tax and participations
Income Tax and Social Contribution
Net Income
Net Worth
ROE (%)
Pro-Forma Income StatementPro-Forma Income Statement
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Highlights – Environmental Highlights – Environmental ManagementManagement
Environmental Policy
Drawn up and approved by the Board of the Bank since 2001
Officially approved by the IFC
Control of environmental risk in projects
Environmental preservation
Access to special credit lines (BNDES and others)
Large potential market (US$ 600 billion)
Improved risk-return ratio
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