Banco Itaú Holding Financeira S.A.
December 2004
Silvio de Carvalho
Executive Director
2
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
3
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
4
•Results
2. Growth of credit portfolio in the quarter: Small and Medium Sized Companies 9.6% and Individuals 10.7%;
6. Technical Provisions of Pension Plans: R$ 7.7 billion – Growth of 307.7% in the last 24 months against 123.5% of market growth in the same period;
7. Full Amortization of Goodwill related to the association with Companhia Brasileira de Distribuição in the amount of R$ 349 million after tax effects;
3. Net interest margin maintained: small growth to 13.0% in the 3rd Quarter/04 from 12.5% in the 2nd Quarter/04;
4. Provisions maintained: Additional provision for Securities of R$ 600 million; Exceeding provision for loan losses of R$ 1,000 million;
1. Results: Net Income of R$ 920 million with a decrease of 3.1% in relation to previous quarter; ROE 30.3%; Net income per thousand shares of R$ 8.13; Recurring net income of R$1,226 million; Recurring ROE 41.7%;
5. Insolvency: Nonperforming Loans Ratio presented a positive evolution , reaching 3.2%, against 3.5% on June 30, 2004;
Highlights – 3rd Quarter of 2004Results
5
2º Tri/043º Tri/04 Jan-Set/03Var % Var %
2.673Net Interest Margin 2.457 7.503 8.1638,8% -8,1%
Highlights
Jan-Set/04
13,0%Net Interest Margin (%) 12,5% 12,2% 14,3%- -
(402)Loan Loss Expenses (383) (1.148) (1.592)5,0% -27,9%
1.508Banking Service Fees 1.454 4.366 3.7783,7% 15,6%
(1.886)Personnel+Adm Expenses (1.826) (5.481) (5.334)3,3% 2,8%
(305)Extraordinary Result - (301) (563)- -46,5%
920Net Income 949 2.745 2.298-3,0% 19,5%
1.226Recurrent Net Income 949 3.046 2.86129,2% 6,4%
8,13Net Income / 1,000 shares 8,38 24,24 20,06-3,1% 20,9%
13.471Stockholders’ Equity 12.787 13.471 11.4645,3% 17,5%
30,3%ROE (%) 33,1% 28,1% 27,6%- -
2,7%ROA (%) 3,1% 2,7% 2,6%- -
34.959Market Capitalization 30.485 34.959 25.69114,7% 36,1%
R$ Million (Except where indicated)
Highlights – 3rd Quarter of 2004Results
6
Evolution of Remunerated Assets (Risk Brazil)
15,279
31,114
9,609
21,505
4,666
51,059
9,369
11,216
20,585
71,644
Individuals
Loans to Companies
Small and Medium Sized
Corporate
Compulsory Loans (*)
Total - Loans
Public Securities
Private Securities
Total - Securities
Total
Jun 30, 04
13,789
30,855
8,768
22,088
4,068
48,713
10,738
10,745
21,484
70,197
12,777
27,768
6,787
20,982
4,036
44,581
14,784
8,564
23,348
67,929
Sep 30,04
10.7%
0.8%
9.6%
-2.6%
14.7%
4.8%
-12.8%
4.4%
-4.2%
2.1%
Var Sep04/Jun04
Dec 31, 04
R$ Million
19.6%
12.0%
41.6%
2.5%
15.6%
14.5%
-36.6%
31.0%
-11.8%
5.5%
Var Sep04/Dec03
(*) Rural Loans and Mortgage – Loans linked to the availability of Demand deposits and Savings deposits.
Obs.: If the exchange rate had remained at the level it had on June 30, 2004, the portfolio of the Corporate segment would reach R$ 22.4 billion on September 30, 2004.
Highlights – 3rd Quarter of 2004Results
7
R$ Million
Banking Service Fees
3rd Q/04
358
303
282
234
180
151
1,508
2nd Q/04
333
312
266
219
182
142
1,454
Jan-Sep/04
1,036
904
791
649
565
422
4,366
Jan-Sep/03
966
743
715
485
515
355
3,778
Var 3Q4-2Q04
7.5%
-2.9%
6.0%
6.7%
-1.1%
6.4%
3.7%
Var9 months
7.3%
21.7%
10.6%
33.8%
9.7%
18.9%
15.6%
Asset Management (*)
Current Account Services
Credit Cards
Sureties and Credits Granted
Collection Services
Other
Total
(*) Mutual Funds and Consortium.
Highlights – 3rd Quarter of 2004Results
8
Personnel Expenses
Other Administrative Expenses
Reorganization
Total
770
1,041
75
1,886
725
1,034
66
1,826
R$ Million
Administrative Expenses
Strong Cost Control
2,191
3,071
219
5,481
2,009
2,990
335
5,334
6.2%
0.7%
13.6%
3.3%
9.1%
2.7%
-34.6%
2.8%
3rd Q/04 2nd Q/04 Jan-Sep/04 Jan-Sep/03Var 3Q4-2Q04
Var9 months
Campaign “Quanto Custa”: Over 20 thousand suggestions from employees.
Highlights – 3rd Quarter of 2004Results
9
Total Unrealized
Interbank Deposits
Securities and Derivatives
Additional provision
Adjustment – Securities Held to Maturity
Credit Operations
Investment on BPI
Time and Interbank Deposits and Funds from acceptance and issuance of securities abroad
Securitization of Payment Orders Abroad
Subordinated Debt and Treasury Shares
Unrealized Income/(Loss) (1) (2) Stockholders’ Equity
09/30/04
2,366
10
782
600
182
309
691
87
133
354
06/30/04
2,265
3
663
600
63
276
672
80
129
441
R$ Million
1,486
8
594
545
49
193
414
1
56
221
09/30/03
Stockholders’ Equity
Stockholders’ Equity
Financial Instruments – Market Value
(1) Tax effects not considered.(2) Includes unrealized minority interest gains in Equity of R$ 284 million in Sep/04, R$ 276 million in Jun/04 and R$ 170 million in
Sep/03.
Highlights – 3rd Quarter of 2004Results
10
Banco
Itaú
814
8,182
46.2%
27,559
115,882
213
3,814
24.2%
23,500
38,464
Net income
Tier I Allocated Capital
ROE (%)
Credit Portfolio (*)
Total Assets
778
7,499
48.4%
25,116
97,866
198
3,539
24.3%
23,597
36,161
3rd Q/04 2nd Q/04
(*) Endorsements and sureties included.
R$ Million
Pro Forma
Corpo-
ration
(27)
1,749
-6.1%
-
5,690
Corpo-
ration
(107)
1,474
-25.9%
-
4,986
Note.: The Consolidated figures do not represent the sum of the parts because certain intercompany transactions were eliminated only at the Consolidated level.
Conso-
lidated
920
13,471
30.3%
51,059
138,520
Conso-
lidated
949
12,787
33.1%
48,713
122,760
Banco
Itaú BBA
Banco
Itaú
Banco
Itaú BBA
Highlights – 3rd Quarter of 2004Results
11
3rd Quarter of 2004
66%
5%
14%
15%
Banco Itaú - BankingCredit CardsInsurance, Capitalization and Pension PlansMutual Funds and Managed Portfolios
Diversification of income sourcesNot dependent only on interest rates
R$ Million
531
122
117
44
814Total
3rd Q/04Banco Itaú S.A.
Banking
Credit Cards
Ins., Pension, and Cap.
Funds and Managed Port.
Consolidated Net Income – Banco Itaú S.A.
Highlights – 3rd Quarter of 2004Results
12
R$ Milhões
Consolidated Net Income – Banco Itaú S.A.
Var %
531
122
117
44
814
471
136
131
41
778Total
12.7%
-10.3%
-10.7%
7.3%
4.6%
3º Tri/04 2º Tri/04Banco Itaú S.A. Var %Jan-
Set/04Jan-
Set/03
1,353
368
365
117
2,204
1,211
342
332
114
1,999
11.7%
7.6%
9.9%
2.6%
10.2%
Var %
Banking
Credit Cards
Ins., Pension, and Cap.
Funds and Managed Port.
Diversification of income sourcesNot dependent only on interest rates
Highlights – 3rd Quarter of 2004Results
13
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
14
7,9 7,8 8,411,2
14,317,2
19,322,0 23,6
28,0
35,3
41,5
47,551,1
106210
319437
517641
770
1.0281.119
1.2851.447
1.000
200152
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004(*)0
500
1.000
1.500
2.000
2.500
3.000
Number of Credit Cards (Million)
Transaction Volume (million)
Attractiveness of the businessBrazilian Credit Card Market
Source: ABECS – Brazilian Association of Credit Card and Related Service Companies
(*) As of September 2004. Transaction data on an annualized basis.
CAGR = 15.8%
CAGR = 22.3%
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
15
5,0%
7,5%
10,0%
12,5%
15,0%
17,5%
20,0%
jan/01
mar/01
mai/01
jul/01
set/0
1
nov/01
jan/02
mar/02
mai/02
jul/02
set/0
2
nov/02
jan/03
mar/03
mai/03
jul/03
set/0
3
nov/03
jan/04
mar/04
mai/04
jul/04
set/0
4
Credicard
OurocardItaú
Bradesco
Unibanco
17.2%
13.9%
12.7%
10.8%
7.6%
Principal Sector PlayersEvolution of Monthly Market Share by Revenue (%)
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
16
The Credicard Conglomerate
The Credicard Conglomerate
Credit Card issuer
Relationship with Commercial
Establishments
Transaction processor
• Largest credit card issuer in Brazil, with an 18.8% market share by transaction volume;
• Number of cards: 7.6 million in September 2004.
• Exclusive capture and transmission of the credit and debit card transactions of issuers like Mastercard, Redeshop and Diners;
• Deals directly with sales points.
• Leader in the credit card processing industry in Brazil, serving approx. 16.1 million cards;
• Diversification of its product range to include any clients accepting cards as a means of payment.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
17
Credicard Banco S.A.New Shareholder Structure
Before After
Itaú
33.33%
Unibanco
33.33%
Citigroup
33.33%
Itaú
50%
Citigroup
50%
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
18
ITAÚ and Citigroup will enter into a new shareholders’ agreement for sharing management of Credicard Banco S.A., in such a way as to capture the synergies of the Credicard customers with the partners.
Credicard Banco S.A.Main Effects
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
19
Credicard Banco S.A.Evolution of Net Income (*)
214,1199,5
222,2
176,5
2001 2002 2003 2004
235.3
Net Income from Jan. to Sep.
Annualized Net Income
(*) Net Income from Credicard’s proprietary cards only.
R$ Million
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
20
(50%) (*)
Credicard Banco S.A.Contribution to Itaú
+As of September 30 2004
(50%) (*)
Number of Cards
Revenues(1)
Receivables
Number of Accounts
Market Share - Nr. of cards(2)
Market Share – Revenues(2)
6.6 million
R$ 8.9 billion
R$ 2.1 billion
4.3 million
12.9%
12.2%
7.6 million
R$ 13.7 billion
R$ 3.8 billion
5.2 million
14.9%
18.8%
10.3 million
R$ 15.1 billion
R$ 3.8 billion
6.9 million
20.1%
20.7%
(1) Revenues year-to-date September 2004 (2) Source: ABECS – Brazilian Association of Credit Card and Related Service Companies(*) Credicard’s proprietary cards only
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
21
OrbitallHighlights
Total Assets
Net Income
Number of Cards Processed
Number of Accounts Processed
Number of Credit Transactions Processed
Vouchers (*)
Numbers of Accounts Processed
Number of Transactions Processed
As of September 30 2004
R$ 419.5 million
R$ 33 million
16.1 million
12.0 million
354.3 million
2.9 million
95.4 million
Source: Orbitall
(*) Includes food, meal, fuel and pharmaceutical drug vouchers under brand names such as Ticket Alimentação, Ticket Restaurante, Ticket Car, Vale Alimentação, Vale Combustível, Sodexho Pass Alimentação and others.
Itaú has acquired a 66% share of Orbitall, totaling 100% of the company's equity.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
22
Orbitall will continue to be an independent card processor,
providing services to all its existing clients as well as actively
seeking new ones;
We expect to achieve operating synergies at Orbitall, resulting
in productivity and efficiency gains of about R$ 50 million p.a.,
signifying opportunities to be more price competitive.
OrbitallMain Effects
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
23
OrbitallEvolution of Net Income (*)
(*) Net Income on an MIS basis.
R$ Million
44,041,5
53,4
32,9
2001 2002 2003 2004
43.9
Net Income from Jan. to Sep.
Annualized Net Income
Operating Synergy
Expected: R$ 50 million p.a.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
24
Credicard and OrbitallValue of the Transaction
The investment was paid for in cash.
Investment (R$ Million)
• Goodwill (R$ Million)
Internal Rate of Return (%)
768
720
19% p.a.
281
235
19% p.a.
1,049
955
Total
Itaú Holding is used to fully amortize the goodwill derived from the acquisitions in the same quarter.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
25
Redecard S.A.
Itaú
31.94%
Citigroup
31.94%
Unibanco
31.94%
Mastercard
4.17%
Current structure (no change)
No change in Redecard’s current shareholder structure
Redecard will continue as an independent company, dedicated to capturing and transmitting card transactions for its existing as well as
prospective clients.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
26
Additional Investment in Credicard and Acquisition of Orbitall
Reinforces Itaú’s strategy for the credit card market (expected to surpass the growth of current account customers);
Increases synergies from larger-scale card issuance and transaction processing;
Diversifies range of processing services related to the use of cards as a means of payment;
Expressive increase in market share: by number of credit cards climbed from 12.9% para 20.1% on a 51.1 million cards market.
Highlights – 3rd Quarter of 2004Increase in Participation: Credicard and Orbitall
27
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
28
Scen
ario
s
Consolidation
of democracy
• Low growth• Controlled Inflation• Market volatility• High interest rates• Globalization
• Foreigners / Privatization• Specialization• Growth of electronic banking
• Stiffer competition• Consolidation of the system
Period : 1995 to 2003
Polítical Economic Banking
1995 2003
Itaú´s Management
1995 – Acquisition of BFB
1997 – Acquisition of Banerj
1998 – Aquisition of Bemge
2000 – Acquisition of Banestado
2001 – Acquisition of BEG
2002 – Acquisition of BBA and FIAT
Anticipating Scenarios
29
1990 20031994
Objective Planned Growth Shareholder Value
Operations Do it well! Do it efficiently!
Market Grow Focus
Personnel Undifferentiated Specialized
Remuneration Fixed Variable
Risk Avoid Manage
Corp.Gov. Formal Active
Business Banking Financial Services
Changes of Approach
Anticipating ScenariosBefore and after the Real Plan
Intangíbles Not managed Managed
Anticipating Scenarios
30
44.838.723.7
14.613.5
38.415.9 17.311.58.3
29.6
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
Asset growth trendsLoans
Anticipating Scenarios
CAGRLoans: 18.9%R$ Billion
31
14.2 13.919.9 19.3
25.2 29.4 28.3
7.32.3 4.0
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
Asset Growth TrendsSecurities
Anticipating Scenarios
CAGRSecurities: 37.2%
CAGRLoans: 18.9%R$ Billion
32
9.68.210.0
4.74.43.2
3.21.4
4.1
2.12.8
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
Asset Growth TrendsReserve Requirements
Anticipating Scenarios
CAGRRes. Requirements: 13.5%
CAGRSecurities: 37.2%
CAGRLoans: 18.9%R$ Billion
33
5.8 8.5 13.219.9 17.0 16.4
21.927.7
37.6 42.555.8
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
Asset Growth TrendsOther Assets
Anticipating Scenarios
CAGROther Assets: 26.1%
CAGRRes.Requirements: 13.5%
CAGRSecurities: 37.2%
CAGRLoans: 18.9%R$ Billion
34
6.2
5.97.0
4.73.6
2.72.92.51.81.41.0
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
Asset Growth TrendsGuarantees and Co-obligations
Anticipating Scenarios
CAGRGtees & Co-oblig.: 20.6%
CAGROther Assets: 26.1%
CAGRRes.Requirements: 13.5%
CAGRSecurities: 37.2%
CAGRLoans: 18.9%R$ Billion
35
14,217,9 21,4
32,7
42,9
57,3
62,0
10,5
84,3
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
..
Asset Growth TrendsMutual Funds and Portfolios under Management (*)
R$ Billion
Anticipating Scenarios
(*) Includes assets under management at Banco Itaú Europa Luxembourg.
CAGRFunds&Portfolios: 31.4%
CAGR.Gtees & Co-oblig: 20.6%
CAGROther Assets: 26.1%
CAGRRes.Requirements: 13.5%
CAGRSecurities: 37.2%
CAGRLoans: 18.9%
36
18,3 24,4 32,146,4 49,0 51,9
69,6 81,8111,1 118,7
7,911,9
16,020,4 24,3
35,4
46,5
62,0
69,0
90,2
105,1
138,5
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/04
R$ Billion
Asset Growth TrendsAssets + Off-Balance sheet
26.236.3
48.1
66.873.3
87.3
116.1
143.8
180.1
208.9
243.6
Anticipating Scenarios
CAGROff-Balance Sheet: 30.4%
CAGRAssets: 23.1%
CAGRTotal: 25.7%
37
1.7982.145
3.465
5.121
3.778
4.366
3.699
574 856
3.159
2.202
4.466
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
R$ Million
Banking Service Fees
CAGR: 27.5%
15.6%
Anticipating Scenarios
38
2.4102.345
3.1743.2042.750
1.186 1.0771.426 1.596 1.727
2.129 2.311
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
Evolution of ExpensesR$ Million
CAGRPersonnel: 11.6%
Anticipating Scenarios
2.8%
39
3.0712.990
4.1204.040
3.679
2.8722.481
2.1431.791
1.494
1.0131.091
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
CAGRAdministrative: 15.9%
Anticipating Scenarios
2.7%
R$ Million
Evolution of Expenses
CAGRPersonnel: 11.6%
40
572 199752
494647
617645
409
9431.272
907 888
dec/94 decc/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
CAGROperating: 9.3%
CAGRAdministrative: 15.9%
Anticipating Scenarios
-2.1%
R$ Million
Evolution of Expenses
CAGRPersonnel: 11.6%
41
302260
356355
302
238
89
162
134
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
CAGRTax (97 to 03): 17.7%
CAGROperating: 9.3%
CAGRAdministrative: 15.9%
Anticipating Scenarios
16.2%
(*) Non-interest-related Tax Expenses
R$ Million
Evolution of Expenses (*)
CAGRPersonnel: 11.6%
42
2.8492.289
3.672
6.6716.502
8.9228.542
6.701
6.066
5.316
4.679
4.015
dec/94 dec/95 dec/96 dec/97 dec/98 dec/99 dec/00 dec/01 dec/02 dec/03 sep/03 sep/04
CAGRTax (97 to 03): 17.7%
CAGROperating: 9.3%
CAGRAdministrative: 15.9%
Anticipating Scenarios
2.6%
(*) Non-interest-related Tax Expenses
R$ Million
CAGRTotal Expenses: 13,5%
Evolution of Expenses (*)
CAGRPersonnel: 11.6%
43
Efficiency Ratio
69,5%56,7% 58,2%
64,2% 59,5% 55,0% 50,0% 46,1%53,1%
44,7%58,3% 58,0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 9m/03 9m/04
Efficiency Ratio(Current Model) Efficiency Ratio(New Model)
(Non-interest expenses) (1)
(Net interest margin + Banking Service Fee + Partial results of Insurance, Capitalization and Pension businesses + Other operating results - PIS/COFINS taxes)
Efficiency Ratio(new model) =
Anticipating Scenarios
(1) Personnel expenses + Other Administrative Expenses + Other Operating Expenses + Non-interest-related Tax Expenses
75.6%
58.2%
65.3%
71.6%67.1% 66.8% 65.3%
62.0% 58.6%54.9%
62.1%
55.9%
44
392 347610
939 1.1281.518
1.9182.353
3.080
3.717
2.861 3.046
-218 -248-703 -565 -563
-301-18
36
351
-77
-1.000
-500
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 9m2003 9m2004
Extraordinary Net Income
Recurrent Net Income
Evolution of Net Income R$ Million
CAGR Recurring (94 to 03) = 28,4%6.5%
Anticipating Scenarios
CAGR Total (94 to 03) = 26,1%
19.5%
RealPlan
Mexican
Crisis
Asian Crisis
Russian Crisis
Real devaluation
Power shortage / Argentina
Elections
45
3,3 2,95,1
7,9 9,612,9
16,721,1
27,7
32,6
25,026,9
-2,1-6,3 -5,0 -4,9
-2,7-0,7
3,0
0,3
-1,8-0,2
-10
-5
0
5
10
15
20
25
30
35
40
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 9m/03 9m04
Extraordinary Net Income
Recurrent Net Income
CAGR Recurring (94 to 03) = 29.0%
Decrease Nr.Shares (%) = -6.0%
R$
7.6%
Anticipating Scenarios
CAGR Total (94 to 03) = 26.6% 20.4%
RealPlan
Mexican Crisis
Asian Crisis
Russian Crisis
Real devaluation
Power Shortage / Argentina
Elections
Evolution of Earnings per Share
46
2,0 3,24,7
6,8 7,6
11,0
17,919,8
17,8
23,3
32,5
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004(2)
Consistently the Largest Market Cap in the Brazilian Banking Sector
R$ Billion
CAGR p.a. = 32.5%
Largest Market Cap of all Largest Market Cap of all Latin American Banks Latin American Banks
R$39 bilhões 11/12/2004R$39 bilhões 11/12/2004
Anticipating Scenarios
(1) Average of closing prices during the year(2) From January to November 12 2004
Average Market Cap (1) per period
47
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
48
Total R$ 3.2 billion
• Additional Provision for Doubtful Loans R$ 1.0 billion
• Financial Instruments: Market x Recorded Value (Net of Additional Provision) R$ 1.6 billion
• SecuritiesR$ 678 millionMarket Adjustment
Additional Provision R$ 600 million
Unrealized Results September 30, 2004
Ready to GrowConservative Accounting Practices
SustainabilityEconomic Dimension
49
Ready to GrowStrong Capitalization – Basel Index (*)
14,2 14,311,6
14,0 14,0 14,4
0,22,6 6,8
5,8 5,5 5,0
dez/00 dez/01 dez/02 dez/03 jun/04 set/04
Tier I Tier II
14.4%16.9%
18.4%19.8% 19.5% 19.4%
(*) Calculated according to the Economic-Financial Consolidated.
SustainabilityEconomic Dimension
50
The Most Valuable Brands In BrazilDinheiro Magazine – June 2004
US$ MillionUS$ MillionStudy conducted by British consulting firm Interbrand
Company
BradescoNaturaBanco do BrasilSkolPetrobrasBrahmaUnibancoAntarcticaRealEmbraerSadia
Value in 2001
697-
308---
303--
196128
Value in 2003
809-
427421286294208184133193106
Itaú 970 1,093Value in 2004
828536520512485352223192171159156
1,204
SustainabilityEconomic Dimension
51
Corporate Governance Means Action2000 2001 2002 2003 2004
Investor Relations Website in 3 languages
Corporate Code of Ethics
Totally independent Fiscal Council
Member of the Dow Jones Sustainability World Index
Election of independent members to the Board of Directors (currently 4 independent directors)
Adheres to Bovespa’s Corporate Governance Level 1
Included in the Dow Jones Sustainability World Index for the 2nd year
Tag along rights given to ALL shareholders
Level II ADRs on NYSE
Financial Holding Company status
Disclosure Committee, with independent Board members and executives
Securities Trading Committee, with independent Board members and executives
Included in the Dow Jones Sustainability World Index for the 3rd year
Audit Committee (International Standards) with 3 members, of which 2 totally independent
New shareholder communication channel:”Ações Itaú em Foco”
Elected the most valuable Brazilian brandname by Interbrand for the 3rd year running: US$1.2 billion
Adheres to the Equator Principles (August)
Included in the Dow Jones Sustainability World Index for the 5th year running
Best Emerging Market Corporate Governance (Euromoney)
1 year Share Buy-back Program
Internal Fiscal Council regulations issued
Included in the Dow Jones Sustainability World Index for the 4th year
SustainabilityEconomic Dimension
52
Audit Committee founded in April 2004;
CMN Resolução 3.081 and the Sarbanes-Oxley Bill;
2 independent Committee members and one external;
Independent functioning of the Board of Directors;
Independent Councilor named Committee specialist.
Audit Committee
SustainabilityEconomic Dimension
53
The Itaú Social Foundation
Net Worth: R$ 315 million
(Aug/04)
Proprietary Programs:
• Itaú-Unicef Award• Regional Training Conventions• Learning Managers
Urban Youth Program
• Direct support of the Public Schooling System• Cooperation with Non-Governmental Organizations
Focus on improving basic public education
Principal Partnerships:Canal Futura, Programa
Capacitação Solidária, Prêmio Escola Voluntária, Programa
Alfabetização Solidária, UNICEF, CENPEC, CONSED, UNDIME,
UNESCO
SustainabilitySocial Dimension
54
The Itaú Cultural Institute
2003 - 427 thousand visitors + 1,653 groups from 495 institutions totaling 30 thousand people
2003: over 220 events in Brazil and 9 outside the country:
• Theater, music and dance• Art exhibitions• Movie films and videos• Digital data base• CD and CD ROM collection• And many others
1987 – Foundation of the Itaú Cultural Institute
Popularization of access to Brazilian culture
Center for promoting, researching and divulging culture
Use of Hi Tec to reach an ever wider audience (Internet, radio and TV)
Partnerships and reciprocal arrangements with other organs/entities
Focus on representing and promoting Brazilian culture
SustainabilitySocial Dimension
55
The Itaú Social Excellence Mutual Fund Available for all customer categories
Portfolio chosen according to principles of corporate social responsibility Social activities Environmental protection activities Good corporate governance practice
Advisory Board composed of specialists Sign-off on what shares elegible for the Fund’s Portolio Representatives of private sector institutions
One half of the management fee reserved for projects and entities engaged in social activities
SustainabilitySocial Dimension
56
Responsible use of Credit
Relationship
Financial Education
Rational use Increases demand
and reduces payment delinquency
Credit product segmentation to match
individual customer profile
Credit. Use with moderation
Itaú’s responsibility for the
financial education of its
customers
Objetives:
Customers, Employees,
Companies, Government, public
schooling system attendees, the
press, the Public in general......
Target public:
Domestic market
Scope:
Premises:
SustainabilitySocial Dimension
57
Project financing in amounts of over US$50 million;
Commitment to Environmental Responsibility;
The principles are divided by category, according to the risks posed by each project:
Category A (high risk) Category B (medium risk) Category C (low risk)
For Categories A and B an Environmental Impact Report has to be prepared on the potential damage and the meaures to be taken when implementing the project as well as, in some cases, an Environmental Management Plan.
Drawn up in 2002 in London, with the aim of promoting the principles of social responsibility and environmental management in the execution of a wide range of industrial projects;
IFC (International Finance Corporation)
forecast
In 10 years over US$100 billion of investments
will have to conform to these rules
SustainabilityEnvironmental Dimension
58
Banco Itaú has been part of the Dow Jones Sustainability World Index (DJSI World) since 1999, together with 318 other companies. The composition of the index is reviewed annually.
Corporate Sustainability
The Ability to Create Long-term Shareholder Value
Social/Cultural/Environmental Conscience
Quality of Management
Since its launching in January 1999, the DJSI World has become an important reference for international investors and asset managers, who use its
performance as a benchmark for their investment decisions.
Itaú has been included in the index since its creation in 1999 and in 2004 was the only Latin American bank in the DJSI. In 2004, Itaúsa was chosen to be part of the index for the second year running.
The Dow Jones Sustainability World Index
Sustainability Sustainable Growth
59
• Strengthens the Image/Brand Name
• Reinforces Corporate Responsibility of Stakeholders
• Broadens the universe of potential stakeholders
• Provides a measurable view of the company’s sustainability strategy
Seal of Quality
The Dow Jones Sustainability World IndexImpact on sustainability strategy
Sustainability Sustainable Growth
60
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Taií
CBD
Credicard
61Three different store models: Independent, Annex and Corner.
Taií Store
SustainabilityNew Initiatives
62
New Brand Name (Itaú-based).
Focus on lower income consumers.
Proprietary platform.
Operation launched in June/04 with 3 branches in São Paulo.
Forecast to be operating with 30 branches by end-2004.
Uses the Itaú ATM network.
Diversifies credit-related revenues.
Responsive and efficient.
SustainabilityNew Initiatives
63
Initial Results
Number of Customers : 13,136
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
3.500.000
4.000.000
4.500.000
5.000.000
8/6 30/6 30/7 31/8 30/9 4/11
R$ thousand
2.963
(*) Usage / Limits granted = 96%
Total Limits granted
Usage
3,139
2,070
1,340
386 1.9261.236
310
4.401
4,588
SustainabilityNew Initiatives
(*)
64
SustainabilityNew Initiatives
The Structure of Financeira Itaú CBD S.A.
“Financeira Itaú CBD”
A better and broader financial service and product range for CBD customers
Initial equity: R$ 150 million
50% 50%
Itaú-CBD Joint Venture
65
SustainabilityNew Initiatives
Growth forecasts for Financeira Itaú CBD S.A.
Consumer Credit Contracts
Private Label cards
Credit Cards3
Personal loans
580 thou
3.3 million
480 thou
-
(1) On March 31 2004.(2) Compound Average Annual Growth Rate (3) Widely accepted credit cards
Number of CAGR2
Year 10
Number of
Current1
3,519 thou
9.3 million
2,646 thou
1,600 thou
22.2%
12.2%
20.9%
Internal Rate of Return = 20%
The joint venture is expected to start contributing to Itaú’s
results after the third year
Itaú-CBD Joint Venture
66
SustainabilityNew Initiatives
Operating synergy gains
A better and broader financial product and service range for CBD cutomers
Private Label Credit Cards
Other widely accepted credit cards Consumer credit Personal loans
Financial service desks to be installed at all 555 existing stores plus any subsequently opened by CBD.
Itaú-CBD Joint Venture: Characteristics
67
SustainabilityNew Initiatives
Strategy Greater focus on consumer credit
Long-term partnership: 20 years, extendable
Itaú responsible for operations
Exclusivity as regards financial products and services for CBD customers
Powerful partnership = Stronger commercial relations
Goodwill of R$ 380 million totally amortized in
the 3Q04 income statement
Itaú-CBD Joint Venture
68
4,55,3 5,7
6,7 6,37,3
8,8
14,5
10,2
12,411,4
10,2
0
5
10
15
20
2000 2001 2002 2003 set/03 set/04
0
5
10
15
20
CAGR = 14.2%
CAGR = 18.1%
Credicard Banco S.A.Evolution of Volumes (*)
(*) Credicard’s proprietary cards only.
Number of Cards (million)
Revenues (R$ million)
Period: 2000-2003
21.6%
+15.9%
Net Income: R$ 176.5 million
SustainabilityNew Initiatives
69
10,012,2
13,214,6
13,4
16,1
337,2
535,8
305,0
354,3
463,5
409,0
0
5
10
15
20
25
30
35
2000 2001 2002 2003 set/03 set/04
0
100
200
300
400
500
600
OrbitallEvolution of Volume
CAGR = 13.4%
CAGR = 16.7%
Number of Cards (million)
Transaction Volume (million)
Period: 2000-2003
16.2%
+20.2%
Net Income: R$ 33 million
SustainabilityNew Initiatives
70
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
71
Brazilian Macroeconomic Scene
High volatility Lower volatility
High interest rates Declining interest rates
Brazil risk Stable risk
Low growthModerate and sustained
growth
Economic Instability Political Stability
A Change of Perspective
Pre- 2002 Post- 2003
Scenario pre-2002 and post-2003
72
Implications for the Banking Industry
Negative Implications
Loss of liability-side gains
Loss of Treasury profits
Downward pressure on spreads
-
Scenario pre-2002 and post-2003
73
Implications for Itaú
Lower interest income – 3.5% decrease in the net financial margin (1);
Lower Treasury profits (1);
A 10% reduction in spreads (2) (3).
(1) Comparison between 9M03 and 9M04.(2) Comparison between 9M02 and 9M04.(3) Sample: the ten Itaú products with the highest spread.
Scenario pre-2002 and post-2003
74
Implications for Itaú
Lower interest income – 3.5% decrease in the net financial margin (1);
Lower Treasury profits (1);
A 10% reduction in spreads (2) (3).
(1) Comparison between 9M03 and 9M04.(2) Comparison between 9M02 and 9M04.(3) Sample: the ten Itaú products with the highest spread.
Scenario pre-2002 and post-2003
Approximately
R$ 450 million
75
Implications for the Banking Sector
Positive Implications
Increase in financial asset volume
Opportunity for growth of loan portfolio
Decrease in payment delinquency
Need for greater efficiency
+
Scenario pre-2002 and post-2003
76
Individuals
2002 2004
Loan and Security Portfolio by Segment
Scenario pre-2002 and post-2003
R$ Million
59.0%
11.384
September 30
9,608 15,279
9.609
9.369
September 30
3,417
9,609181.2%
Micro, Small and Medium Cos.
22,565
21,505-4.7%
Large corporates
Public sector securities
13.9%
Govt.mandated/ funded credit
21.1%
9,259
11,216
4,097
4,666
Private sector securities
-17.7%
11,384
9,369
18.8%
60,330
71,644
77
Delinquency rate (*)
11,62%
12,67% 12,90%
1,55% 1,73% 1,66%
5,66% 5,90% 5,60%
1º Trim 02 2º Trim 02 3º Trim 02
Corporate customers Global Individuals
7,30%6,50%
6,00%
1,90% 1,80% 1,50%
4,00%3,50% 3,20%
1º Trim 04 2º Trim 04 3º Trim 04
(*) – Delinquency rate = Credits over 60 days past due / Total Credit Portfolio.
2002 2004
Scenario pre-2002 and post 2003
78
Service Fee Revenue
Asset Management Checking Account Services Credit-related
Collections Credit Cards Others
Scenario pre-2002 and post 2003
R$ Million2002 2004
11.1%
63.4%
18.7%
99.7%
44.2%
36.7%
4,367
3,050
43.2%
January to September
758 1,036
627904325
649476
565484
791
380
422
January to September
79
Other Sources of RevenueInsurance, Pensions and Capitalization – Net Income(*)
Scenario pre-2002 and post-2003
Insurance Life Insurance and Pensions Capitalization
Credit Cards (*) – Pro Forma.
R$ Million2002 2004
119.0%
84.4%
1,421.4%
-26.5%
124.6%739
329
January to September
102 75
14
21345
83
168
368
January to September
80
Non-interest expenses
Personnel expenses
Other Operating Expenses Non-interest-related Tax Expenses
Scenario pre-2002 and post-2003
R$ Million2002 2004
36.0%
9.9%
8.1%
0.2%
6,6716,276
6.3%
Other Administrative Expenses
January to September
2,404 2,410
2,842 3,071
808888
222302
January to September
81
Positive Aspects
Increase in financial assets
Opportunity for loan growth
Decline in payment delinquency
Need for greater efficiency
+
Scenario pre-2002 and post-2003
Negative Aspects
Loss of liability-side gains
Loss of Treasury profits
Downward pressure on spreads
-
Impact on the Banking Sector
82
Impact on the Banking Sector
Positive Aspects
Increase in financial assets
Opportunity for loan growth
Decline in payment delinquency
Need for greater efficiency
+ Negative Aspects
Loss of liability-side gains
Loss of Treasury profits
Downward pressure on spreads
-
Scenario pre-2002 and post-2003
Increase in Itaú Holding Net Income: R$ 1,067
million (Jan. to Sep. 2002 vs. 2004)
83
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
84
Sensitivity Analysis – Retail (*)
Assumptions
Inflation
Interest rates (Selic)
Res. requirements - demand deposits
Res. requirements – savings (TR+ 6%
p.a.)
Reduction in Spreads
Increase in Volume
Costs under Control
Scenario post-2005(APIMEC 2003)
9.2% p.a.
26.2% p.a.
45.0%
20.0%
Actual 2003
5.0% p.a.
12.0% p.a.
25.0%
20.0%
(*) Expectations from reading this sensitivity analysis should take into account the risks and uncertainties inherent in any form of economic activity and which are beyond the Itaú Conglomerate’s control (political and economic changes, interest and exchange rate volatility, technological change, inflation, financial disintermediation, competitive pressures on products and pricing and changes in the tax regime).
Sustainability
Actual Sep/04
7.1% p.a.
16.0% p.a.
45,0%
20,0%
85
(*) Expectations from reading this sensitivity analysis should take into account the risks and uncertainties inherent in any form of economic activity and which are beyond the Itaú Conglomerate’s control (political and economic changes, interest and exchange rate volatility, technological change, inflation, financial disintermediation, competitive pressures on products and pricing and changes in the tax regime)
Financial Resources
Retail loans
Corporate loans
Real Estate Finance
Service Fee Revenue
Banking Revenues
Securities-related
Loan Loss Allowance
Costs
Pre-tax net income
Actual 2003
100
Av. balance
100
100
100
100
Fin. Margin
100
100
100
100
100
100
100
100
100
100
Spread
100
100
100
Scenario post-2005 (APIMEC 2003)
130
Av. balance
154
149
152
91
Fin. Margin.
96
98
130
123
101
166
94
120
87
70
Spread
58
62
85
Actual Sep/04
121
Av. balance
122
177
87
74
Fin. Margin.
115
150
39
106
100
118
52
110
102
60
Spread
93
82
45
Sustainability
Sensitivity Analysis - Retail (*)
86
3rd Quarter 2004 Highlights
Quarterly results
Increase in equity participation: Credicard and Orbitall
Anticipating Scenarios
Sustainability
Economic, Social and Environmental Dimensions
New Initiatives
Scenarios pre-2002 and post-2003
Sensitivity analysis
Competition
87
134.2Retail Loans 143.3 129.,8
111.9Loans to micro/small/med co’s. 276.5 161.4
109.0Loans to large corporates 98.2 80.0
152.7Mutual Funds/Assets under mgt. 170.8 169.1
123.2Personnel and Admin. Expenses 104.5 118.3
109.5Loan Loss Provision (Assets) 92.8 75.3
152.5Service Fee Income 143.1 125.6
151.1Net Income 162.7 122.0
108.1Annualized ROE 103.7 95.1
150.0Net Income per Employee 166.7 118.5
101.7Efficiency Ratio (*) 90.0 111.0
137.9Earnings per share 159.8 120.4
128.2Total Assets 140.1 114.5
Jan 04 to Sep/04
Itaú Holding x Bradesco xUnibanco
Base date Sep/02 = 100
Jan 04 to Sep/04
Jan.04 to Sep/04
(*) According to
the new model.
Sustainability
88
On-going focus on credit for retail customers and micro/small/ medium-sized companies.
Steady growth in Earnings per Share
Sustainability
On-going improvements in efficiency.
New opportunities?
New lines of busines (CBD, Taií, Credicard and Orbitall)
89
11.879
13.471
2.229
9.0367.578
6.642
5.9074.198
3.3372.857
880
3.152
181
2.3772.389
1.841
1.869
721592
3433923820
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
12.000
13.000
14.000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04(*)
0
250
500
750
1.000
1.250
1.500
1.750
2.000
2.250
2.500
2.750
3.000
3.250
3.500
3.750
4.000
Net Worth
Net Income
R$ Million
CAGR(90-04) = 14.0%
Steady Growth in ResultsNet Worth and Net Income Trends
3Q04Net Income:
R$ 2,745 Million
(*) September 30 2004
CAGR(90-03) = 24.6%
Sustainability
90
Steady Growth in ResultsNet Worth and Net Income Trends
11.879
13.471
2.229
9.0367.578
6.642
5.9074.198
3.3372.857
880
3.152
181
2.3772.389
1.841
1.869
721592
3433923820
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
12.000
13.000
14.000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04(*)
0
250
500
750
1.000
1.250
1.500
1.750
2.000
2.250
2.500
2.750
3.000
3.250
3.500
3.750
4.000
Net Worth
Net Income
R$ Million
CAGR)(90-04) = 14.0%
CAGR(90-03) = 24.6%
Real Plan
Mexican crisis
Asian crisis
Russian Crisis
Real
DevaluationArgentine
Crisis
Collor Plan
3Q04 Net Income: R$ 2,745 Million
Jan/90 to Sep/04Dividends:
R$ 6.0 BillionIncrease i n Equity:
R$ 0,1 Bilion
Adaptability to Different
Scenarios
Sustainability
(*) September 30 2004
91
0
100
200
300
400
500
600
700
800
900
1.000
94 95 96 97 98 99 00 01 02 03 04
Itaú (1)
Itaú (2)
Bovespa
Itaú(1) Itaú(2) Ibov.
10 years 23.66% 19.24% 3.79%
5 years 19.86% 15.97% -1.14%
2004 33.12% 30.59% 15.01%
Average Annual Price Gain in Dollars
Russian Crisis
Real Devaluation
Mexican Crisis
Asian Crisis
Argentine crisis
WTC Attack
Elections
US$
581
145
836
Sustainability
(1) Dividends reinvested (2) Dividends not reinvested
Appreciation of the Preferred SharesEvolution of US$ 100 invested from 12-Nov-1994 to 12-Nov-2004
92
0
100
200
300
400
500
600
700
800
900
1.000
94 95 96 97 98 99 00 01 02 03 04
Itaú (1)
Itaú (2)
Bovespa
Itaú(1) Itaú(2) Ibov.
10 years 23.66% 19.24% 3.79%
5 years 19.86% 15.97% -1.14%
2004 33.12% 30.59% 15.01%
Average Annual Price Gain in Dollars
Russian Crisis
Real Devaluation
Mexican Crisis
Asian Crisis
Argentine crisis
WTC Attack
Elections
US$
581
145
836
Sustainability
(1) Dividends reinvested (2) Dividends not reinvested
Appreciation of the Preferred SharesEvolution of US$ 100 invested from 12-Nov-1994 to 12-Nov-2004
Itaú Holding: best Brazilian banking
sector performer and highest market
cap of all Latin American banks.
Banco Itaú Holding Financeira S.A.
December 2004
Silvio de Carvalho
Executive Director
Operating Rules for Trading Shares for Treasury
December 2004
Silvio de CarvalhoExecutive Director
95Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
Operating Rules for TreasuryApplicable Legislation
Brazil: • CVM Instruction 10 (1980) – acquisition of own shares for treasury
or canceling;
• CVM Instruction 268 (1997) – change from 5% to 10% in the limit of shares (over the total outstanding, per class of share) that can be kept in Treasury;
• CVM Instruction 390 (2003) – acquisition of own shares through options instruments and establishment of one-year as maximum term for buyback.
United States: SEC Rule 10b-18 (October 2003) – applicable only to north-american companies trading in US Stock Exchanges;
Other rules in Europe.
96Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
Active for over 20 years;
Acquisition of shares for treasury for:• Canceling with no capital reduction;• Reserve for stock option plan.
2003 – new share buyback period authorized by the Board of Directors: 1 year.
Share Buyback Program - Itaú Holding
97Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
YearCanceling of the treasury shares
Common (*) TotalPreferred (*)1987 77,426 6,196,7906,119,3641988 155,333 3,142,2022,986,8691989 - --1990 37,732 1,701,6061,663,8741991 499,996 5,347,0924,847,1261992 686,698 1,169,008482,3101993 175,024 1,199,9001,024,8761994 - --1995 292,441 870,602578,1611996 - --1997 27,939 454,209426,2701998 - - -1999 - - -2000 1,784,963 - 1,784,9632001 3,936,315 - 3,936,3152002 885,000 - 885,0002003 646,481 - 646,4812004(**) 664,281 - 664,281
(*) Quantities of shares adjusted by splits.(**) Until 10.31.2004.Total 9,869,599 18,128,850 27,998,449
From 1987 to 2004, 25% of
the total outstanding shares were bought back
and cancelled
Share Buyback Program - Itaú Holding
98Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
Operating Rules for TreasuryHighlights
Informal Operating Rules;
Synchronized with our Trading Policy, released on July 31, 2002;
Voluntary adoption of the Operating Rules for Treasury;
Itaú Holding: 1st company in Brazil to adopt a buyback policy;
Result of a broad research, both national and international, covering the best practices in the market.
99Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
Comparison – Buyback Legislations
United States Board None None None None None SEC
Countries Approval Time /
ScheduleRestrictions
Price Restrictions
Share Volume Restriction
Special Reporting
Insider Restric.
GoverningAuthority
Japan BoardLast 30 minutes
Closing price
25% o/ daily vol. Daily YesTokio
Exchange
United KingdomShareholder
MeetingValidity: 18
months5% of 5-day
closing15% o/ total Daily Yes FSA
FranceShareholder
MeetingValidity: 18
monthsMaximum
10% o/ total; 25% o/ daily vol.
Monthly Yes COB
GermanyShareholder
MeetingValidity: 18
monthsGeneral Meeting
10% o/ total Conditional None BaFin
Canada BoardValidity: 18
monthsLast quote
5% o/ total, 10% o/ free float
Monthly YesToronto
Exchange
ItalyShareholder
MeetingValidity: 18
monthsLast Quote
10% o/ total, 25% o/ monthly vol.
Yes (Public Offer)
n.d. CONSOB
NetherlandsShareholder
MeetingValidity: 18
monthsGeneral Meeting
10% o/ total Daily Yes Aut. FM
Switzerland Board None None 10% o/ total Conditional NoneCentral Bank
Hong KongShareholder
MeetingValidity: 12
monthsNone
10% o/ total, 25% o/ monthly vol.
Daily YesHK
Exchange
100Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
The daily volume of shares negotiated by Itaú Holding is not to exceed 25% (twenty five per cent) of the average daily trading volume of the shares on stock exchanges for the 20 (twenty) trading sessions preceding the date of the respective purchase/sell offer of shares or execution of the purchase/sell offer of shares by Itaú Holding.
The 25% limit maintains flexibility for buyback strategy and reduces possibility of trading
concentration.
Operating Rules for TreasuryMain Obligations
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The Rules do not apply to the trading of shares in BOVESPA – The São Paulo Stock Exchange in any high volume auction (as provided for by specific CVM rulings and in the "The São Paulo Stock Exchange Operating Procedures Manual", Chapter IV).
In the event that the broker agent hired is Itaú Corretora and Itaú Holding is the counterparty, the relevant notice of auction must have been divulged to the stock exchanges no longer than 24 (twenty four) or 48 (forty eight) hours (according to the volume of shares being offered) prior to the relevant trade execution.
High volume lots = Auctions according to Bovespa and CVM´s rules.
Operating Rules for TreasuryMain Obligations
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Itaú Holding shall trade the shares by means of Itaú Corretora de Valores S.A.
• In case it is necessary, Itaú Corretora de Valores S.A. shall hire services of broker agents in foreign countries in order to execute trading orders for settlement in overseas stock exchanges.
Transparency and Control
Operating Rules for TreasuryMain Obligations
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Itaú Holding shall not trade the shares (i) neither during the first 30 (thirty) minutes (ii) nor during the final 10 (ten) minutes of any trading session of BOVESPA – The São Paulo Stock Exchange, the market on which the shares are most heavily traded.
Avoid directioning and formation of prices
The price at which Itaú Holding negotiates the shares shall not exceed the highest price effectively paid by the market on the day Itaú Holding trades the shares.
Operating Rules for TreasuryMain Obligations
104Reunião APIMEC SP 2004 | Regras Operacionais para a Tesouraria
Simultaneous execution of opposite buy and/or sell orders received from any Itaú Holding´s administrator (or any of the administrators of any affiliated, controlled or controlling companies) and Itaú Holding itself shall not be permitted, and priority shall be given to trading orders from the above-mentioned administrators until such time as they are effectively executed.
Compliance to CVM Instruction 358; Itaú Holding will not act as counterpart to the adherents to
the Trading Policy; Priority of trading is given to the adherents to the Policy; Stock Option Plan.
The prohibitions established in these Rules do not apply to the acquisition of shares being held as treasury stock that have been privately acquired through the exercise of call options in the context of Itaú Holding's Stock Option Plan.
Operating Rules for TreasuryMain Obligations
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Itaú Holding shall monthly deliver to the CVM - Comissão de Valores Mobiliários, to the SEC – U.S. Securities and Exchange Commission, to BOVESPA – The São Paulo Stock Exchange, to the NYSE – The New York Stock Exchange, to the Buenos Aires Stock Exchange and to the entities of the over-the-counter market on which the shares may be traded a report giving the volumes traded and the minimum, average and maximum prices paid by Itaú Holding when trading its shares in the stock exchanges.
Transparency and Accountability
Operating Rules for TreasuryMain Obligations
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In the event of any crisis or economic conditions causing high volatility of share prices and/or lack of market liquidity, the daily trading volume may be as high as 100% (one hundred per cent) of the average daily trading volumes, provided that Itaú Holding complies with the limit of maintaining no more than 10% (ten per cent) of each class of the shares as Treasury stock.
Operating Rules vs. Strategy
The Rules are not limiting of Itaú Holding´s buyback strategy.
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Reduction of operational, financial and strategic risk;
Creation of an internal culture of operations;
Reduction of the possibility of occurrence of market concentration and/or formation of prices;
Reinforces buyback strategy, focused in preserving value to the shareholders and liquidity;
Best practices guaranteeing greater transparency.
Operating Rules for TreasuryBenefits
Operating Rules for Trading Shares for Treasury
December 2004
Silvio de CarvalhoExecutive Director