4th Quarter, Executive Summary. Itaú Unibanco Holding S.A.

Transcription

1 4th Quarter, 2011 Executive Summary

2 Information and financial indicators of (Itaú Unibanco) are presented below. Highlights (except where indicated) Statement of Income Recurring Net Income 3,746 3,940 3,400 14,641 13,023 Net Income 3,681 3,807 3,890 14,621 13,323 Operating Revenues (1) 19,578 19,167 17,776 74,256 66,390 Managerial Financial Margin (2) 12,991 12,947 12,031 49,601 44,050 Shares (R$) Recurring Net Income per share (3) Net Income per share (3) Number of Outstanding Shares in thousands 4,513,640 4,512,243 4,544,368 4,513,640 4,544,368 Book Value per share Dividends/JCP net of taxes (4) 2, ,021 4,394 3,908 Dividends/JCP net of taxes (4) per share Market Capitalization (5) 152, , , , ,639 Market Capitalization (5) (US$ Million) 81,451 70, ,813 81, ,813 Performance Ratios (%) Recurring Return on Average Equity Annualized (6) 21.8% 23.5% 23.0% 22.3% 23.5% Return on Average Equity Annualized (6) 21.4% 22.7% 26.3% 22.3% 24.1% Recurring Return on Average Assets Annualized (7) 1.8% 1.9% 1.9% 1.8% 2.0% Return on Average Assets Annualized (7) 1.7% 1.9% 2.2% 1.8% 2.0% Solvency Ratio (BIS Ratio) (Economic Financial-Consolidated) 16.4% 15.5% 15.4% 16.4% 15.4% Annualized Spread-Sensitive Margin with Clients-Credit 13.0% 13.2% 13.8% 13.0% 14.1% Annualized Net Interest Margin with Clients (8) 11.0% 11.7% 12.2% 11.4% 12.2% Annualized Net Interest Margin with Credit after Provision for Credit Risk (8) 8.0% 8.3% 9.8% 8.1% 9.4% Nonperforming Loans Index (NPL over 90 days) 4.9% 4.7% 4.2% 4.9% 4.2% Coverage Ratio (Provision for Loan and Lease Losses/Nonperforming Loans over 90 days) 153% 156% 177% 153% 177% Efficiency Ratio (ER) (9) 47.3% 47.5% 51.9% 47.7% 49.1% Risk Adjusted Efficiency Ratio (RAER) (9) 69.9% 69.7% 69.9% 70.3% 70.1% Balance Sheet Dez 31,11 Sep 30,11 Dez 31,10 Total Assets 851, , ,443 Total Loan Portfolio, including Sureties, Endorsements and Guarantees 397, , ,427 Loan Operations (A) 345, , ,053 Sureties, Endorsements and Guarantees 51,530 46,957 38,374 Deposits + Debentures + Securities + Borrowings and Onlending (B) (10) 480, , ,688 Loan Operations/Funding (A/B) 71.9% 75.2% 75.5% Stockholders' Equity 71,347 68,206 60,879 Relevant Data Assets Under Administration 403, , ,818 Employees (Individuals) 104, , ,040 Employees in Brazil (Individuals) 98,258 99, ,316 Employees Abroad (Individuals) 6,284 6,149 5,724 Number of Points of Service 33,753 34,178 34,212 Branches (Units) 4,072 4,005 3,967 CSB Client Service Branches (Units) ATM Automated Teller Machines (Units) (11) 28,769 29,230 29,301 Macroeconomic Indicators Major Indicators EMBI Brazil Risk CDI In the Period (%) 2.7% 3.0% 2.6% 11.6% 9.8% Dollar Exchange Rate Quotation in R$ Dollar Exchange Rate in the Period (%) 1.2% 18.8% -1.7% 12.6% -4.3% Euro Exchange Rate Quotation in R$ Euro Exchange Rate in the Period (%) -2.4% 10.0% -3.6% 9.3% -11.1% IGP-M In the Period (%) 1.0% 1.0% 3.2% 5.1% 11.3% Savings Rate In the Period (%) 1.7% 1.9% 1.7% 7.5% 6.9% (1) Operating Revenues are the sum of Managerial Financial Margin, Banking Service Fees and Income from Banking Charges, Other Operating Income and Result from Insurance, Pension Plans and Capitalization Operations Before Retained Claims and Selling Expenses. (2) Described on page 12. (3) Calculated based on the weighted average of the number of outstanding shares. (4) JCP Interest on Own Capital. Amounts paid/provisioned and declared after 12/31/2011 (Note 16 b II to the Financial Statements ). (5) Total number of outstanding shares (common shares and non-voting shares) multiplied by the average price of non-voting share on the last trading day in the period. (6) Annualized Return was calculated by dividing Net Income by the Average Stockholders Equity. The quotient was multiplied by the number of periods of the year to derive the annualized index. Additionally, from this quarter, we changed the method for calculating the annualized recurring return to adapt to the new dividend s provisioning dynamic model. (7) Annualized Return was computed by dividing Net Income by Average Assets. The quotient of this division was multiplied by the number of periods of the year to derive the annualized index. (8) Does not include Margin with Market. See details on page 13. (9) For more details on the calculation methodology of both Efficiency and Risk Adjusted Efficiency ratios, please see page 19. (10) As described on page 26. (11) Includes ESBs (electronic service branches) and service points in third-party establishments. 3

3 Net Income and Recurring Net Income Our recurring net income totaled R$3,746 million in the fourth quarter of This amount was adjusted by the impact of non-recurring events, which are presented in the table below, leading to net income of R$3,681 million for the period. Non Recurring Events Net of Tax Effects Recurring Net Income 3,746 3,940 3,400 14,641 13,023 Non-recurring events (65) (133) 490 (20) 300 Partial Reversal of Additional Provision for Loan and Lease Losses (a) - - 1,038-1,038 Fiscal Contingencies (b) - - (380) - (380) Program for Settlement or Installment Payment of Federal Taxes- Law No.11,941/09 (c) Market Value Adjustment BPI (d) (11) (77) - (244) - Provision for Contingencies Economic Plans (e) (54) (55) (132) (285) (467) Benefits to Employees - Technical Pronouncements CPC 33 (f) - - (35) - (35) Net Income 3,681 3,807 3,890 14,621 13,323 Note: Impacts of the non-recurring events, described above, are net of tax effects further details are presented in Note 22-K of the Financial Statements. Non Recurring Events of 2011 and 2010 (a) Partial reversal of Additional Provision for Loan Losses In the fourth quarter of 2010, the additional provision for loan and lease losses started to reflect the model of expected loss adopted in the institution s loan risk management, based on the broad concept of BIS II, which considers the potential loss for revolving loan. This model replaces the former one, which contained, besides expected loss, the concept of countercyclical provision, which is treated as a capital cushion according to the BIS III precepts. The adoption of this model resulted in a R$ 1,573 million provision reversal gross of tax in the fourth quarter (b) Fiscal contingencies Provision for fiscal contingencies related to non-recurring events. (c) Program for Settlement or Installment Payment of Federal Taxes- Law No.11,941/09 Complementary effects from the enrollment by Itaú Unibanco Holding and its subsidiaries in the Program for Settlement or Installment Payment of Federal Taxes in This program included the debt administered by the Federal Revenue Service of Brazil and by the Attorney s General Office of the National Treasury. (d) Market Value Adjustment BPI The investment held in the Banco Português de Investimento was adjusted to recognize its market value based on the share price on the respective closing dates. (e) Provision for Contingencies - Economic Plans Provision for losses resulting from economic plans that were effective in the 1980's. (f) Benefits to Employees - Technical Pronouncement CPC 33 Post-employment benefits impact on the income statement of 2010 in the context of the technical pronouncement CPC 33. Managerial Statement of Income The following tables are based on the Managerial Statement of Income, which arises from reclassifications made in the audited accounting statement of income. Basically, the tax effects of hedges of investments abroad, originally included in tax expenses (PIS and Cofins), and income tax and social contribution on net income, were reclassified to financial margin. Our strategy for exchange risk management of capital invested abroad is intended to avoid impacts from exchange variation on net income. For this purpose, the exchange risk is neutralized and the investments are remunerated in Reais, through the use of derivative financial instruments. Our strategy to hedge investments abroad also considers the impacts of all related tax effects. It should be noted that, in the fourth quarter of 2011, the Real depreciated 1.2% against the U.S. Dollar and appreciated 2.4% against the Euro, as compared to depreciation of 18.8% and 10.0% in the previous quarter, respectively. 4

4 The reconciliations between the Accounting and Managerial Statements of Income of the last two quarters are presented below. Reconciliation between the Accounting and Managerial Statements 4 th quarter of 2011 Accounting Non-recurring Effects Itaú Unibanco Tax Effect of Hedge Managerial Operating Revenues 19, ,578 Managerial Financial Margin 12, ,991 Financial Margin with Clients 11, ,966 Financial Margin with Market ,025 Banking Service Fees and Income from Banking Charges 5, ,088 Results from Insurance, Pension Plans and Capitalization Operations Before Retained Claims and Selling Expenses 1, ,392 Other Operating Income Loan and Retained Claim Losses Net of Recovery (4,202) - - (4,202) Expenses for Allowance for Loan and Lease Losses (5,453) - - (5,453) Income from Recovery of Loans Written Off as Losses 1, ,574 Retained Claims (322) - - (322) Other Operating Income/(Expenses) (9,769) 99 (11) (9,681) Non-interest Expenses (8,629) 82 - (8,547) Tax Expenses for ISS, PIS, Cofins and Other Taxes (965) - (11) (976) Selling Expenses from Insurance (251) - - (251) Equity in Earnings of Affiliates and Other Investments Operating Income 5, ,696 Non-operating Income Income before Tax and Profit Sharing 5, ,698 Income Tax and Social Contribution (1,439) (34) (216) (1,689) Profit Sharing (29) - - (29) Minority Interests (234) - - (234) Net Income 3, ,746 Reconciliation between the Accounting and Managerial Statements 3 rd quarter of 2011 Accounting Non-recurring Effects Itaú Unibanco Tax Effect of Hedge Managerial Operating Revenues 16,399-2,768 19,167 Managerial Financial Margin 10,179-2,768 12,947 Financial Margin with Clients 11, ,812 Financial Margin with Market (1,632) - 2,768 1,136 Banking Service Fees and Income from Banking Charges 4, ,820 Results from Insurance, Pension Plans and Capitalization Operations Before Retained Claims and Selling Expenses 1, ,319 Other Operating Income Loan and Retained Claim Losses Net of Recovery (4,041) - - (4,041) Expenses for Allowance for Loan and Lease Losses (4,972) - - (4,972) Income from Recovery of Loans Written Off as Losses 1, ,315 Retained Claims (385) - - (385) Other Operating Income/(Expenses) (9,490) 201 (187) (9,477) Non-interest Expenses (8,484) 84 - (8,401) Tax Expenses for ISS, PIS, Cofins and Other Taxes (759) - (187) (946) Selling Expenses from Insurance (253) - - (253) Equity in Earnings of Affiliates and Other Investments Operating Income 2, ,580 5,649 Non-operating Income Income before Tax and Profit Sharing 2, ,580 5,711 Income Tax and Social Contribution 1,125 (68) (2,580) (1,523) Profit Sharing (57) - - (57) Minority Interests (190) - - (190) Net Income 3, ,940 5

5 We present below a perspective of the income statement highlighting the Operating Revenues, which is composed of the sum of revenues from banking, insurance, pension plans and capitalization operations. Statement of Income Operating Revenues Perspective We present below a perspective of the income statement highlighting the Managerial Financial Margin. 4 th Q/11 4 th Q/11 3 rd Q/11 4 th Q/ Operating Revenues 19,578 19,167 17,776 74,256 66, % 1, % 7, % Managerial Financial Margin 12,991 12,947 12,031 49,601 44, % % 5, % Financial Margin with Clients 11,966 11,812 10,817 45,816 40, % 1, % 5, % Financial Margin with Market 1,025 1,136 1,214 3,785 4,029 (111) -9.8% (189) -15.6% (244) -6.1% Banking Service Fees and Income from Banking Charges 5,088 4,820 4,493 19,048 17, % % 1, % Result from Insurance, Pension Plans and Capitalization Operations Before Retained Claims and Selling Expenses 1,392 1,319 1,107 5,215 4, % % % Other Operating Income % (37) -25.6% (136) -25.7% Loan and Retained Claim Losses Net of Recovery (4,202) (4,041) (2,986) (15,936) (13,092) (160) 4.0% (1,216) 40.7% (2,844) 21.7% Expenses for Allowance for Loan and Lease Losses (5,453) (4,972) (3,918) (19,912) (15,693) (482) 9.7% (1,535) 39.2% (4,219) 26.9% Income from Recovery of Loans Written Off as Loss 1,574 1,315 1,310 5,488 4, % % 1, % Retained Claims (322) (385) (378) (1,512) (1,608) % % % Operating Margin 15,377 15,125 14,790 58,320 53, % % 5, % Other Operating Income/(Expenses) (9,681) (9,477) (9,661) (37,005) (34,122) (204) 2.2% (19) 0.2% (2,882) 8.4% Non-interest Expenses (8,547) (8,401) (8,389) (32,587) (29,772) (146) 1.7% (158) 1.9% (2,815) 9.5% Tax Expenses for ISS, PIS, Cofins and Other Taxes (976) (946) (1,101) (3,839) (3,770) (30) 3.2% % (70) 1.9% Selling Expenses From Insurance (251) (253) (273) (989) (1,003) 2-0.8% % % Equity in Earnings of Affiliates and Other Investments (30) -24.5% (9) -8.5% (13) -3.0% Operating Income 5,696 5,649 5,129 21,316 19, % % 2, % Non-operating Income (60) -96.7% (57) Income before Tax and Profit Sharing 5,698 5,711 5,187 21,507 19,256 (13) -0.2% % 2, % Income Tax and Social Contribution (1,689) (1,523) (1,491) (5,861) (5,106) (166) 10.9% (198) 13.3% (754) 14.8% Profit Sharing (29) (57) (93) (192) (261) % % % Minority Interests in Subsidiaries (234) (190) (204) (814) (866) (44) 23.0% (31) 15.0% % Recurring Net Income 3,746 3,940 3,400 14,641 13,023 (194) -4.9% % 1, % Statement of Income Managerial Financial Margin Perspective 4 th Q/11 4 th Q/11 3 rd Q/11 4 th Q/ Managerial Financial Margin 12,991 12,947 12,031 49,601 44, % % 5, % Financial Margin with Clients 11,966 11,812 10,817 45,816 40, % 1, % 5, % Financial Margin with Market 1,025 1,136 1,214 3,785 4,029 (111) -9.8% (189) -15.6% (244) -6.1% Results from Loan and Lease Losses (3,880) (3,657) (2,608) (14,424) (11,484) (223) 6.1% (1,272) 48.8% (2,940) 25.6% Expenses for Allowance for Loan and Lease Losses (5,453) (4,972) (3,918) (19,912) (15,693) (482) 9.7% (1,535) 39.2% (4,219) 26.9% Income from Recovery of Loans Written Off as Loss 1,574 1,315 1,310 5,488 4, % % 1, % Net Result from Financial Operations 9,111 9,291 9,422 35,177 32,566 (179) -1.9% (311) -3.3% 2, % Other Operating Income/(Expenses) (3,415) (3,642) (4,294) (13,862) (13,390) % % (472) 3.5% Banking Service Fees and Income from Banking Charges 5,088 4,820 4,493 19,048 17, % % 1, % Result from Insurance, Pension Plans and Capitalization Operations ,714 2, % % % Non-interest Expenses (8,547) (8,401) (8,389) (32,587) (29,772) (146) 1.7% (158) 1.9% (2,815) 9.5% Tax Expenses for ISS, PIS, Cofins and Other Taxes (976) (946) (1,101) (3,839) (3,770) (30) 3.2% % (70) 1.9% Equity in Earnings of Affiliates and Other Investments (30) -24.5% (9) -8.5% (13) -3.0% Other Operating Income % (37) -25.6% (136) -25.7% Operating Income 5,696 5,649 5,129 21,316 19, % % 2, % Non-operating Income (60) -96.7% (57) Income before Tax and Profit Sharing 5,698 5,711 5,187 21,507 19,256 (13) -0.2% % 2, % Income Tax and Social Contribution (1,689) (1,523) (1,491) (5,861) (5,106) (166) 10.9% (198) 13.3% (754) 14.8% Profit Sharing (29) (57) (93) (192) (261) % % % Minority Interests in Subsidiaries (234) (190) (204) (814) (866) (44) 23.0% (31) 15.0% % Recurring Net Income 3,746 3,940 3,400 14,641 13,023 (194) -4.9% % 1, % 6

6 Net Income 3,234 3,168 3,298 3,158 3,165 3,034 3,890 3,400 3,638 3,530 3,603 3,317 3,940 3,807 3,746 3,681 Recurring Net Income Net Income The recurring net income for the fourth quarter of 2011 amounted to R$3,746 million, an increase of 10.2% from the same period of the previous year. When compared to the third quarter of 2011, our income before tax and profit sharing stood practically stable while our recurring net income decreased 4.9%, due to a higher effective income tax and social contribution. When we compare 2011 to 2010, recurring net income grew 12.4%, mainly due to improvements of 14.5% in financial margin with clients, 11.4% in banking service fees and from banking charges and 29.3% in results from insurance, pension plans and capitalization. In this period, result from loan lease losses grew 25.6%, while non-interest expenses increased 9.5%. Net income per share for the fourth quarter of 2011 decreased 2.0% when compared to the prior quarter, reaching R$0.82. With respect to the year to date amounts in 2011, the net income per share has evolved to R$3.23, up 9.9% over the previous year. Recurring earnings per share were R$0.83 and R$3.23 in the fourth quarter of 2011 and year to date, respectively. The increase in net income per share was driven by, in addition to the evolution of results in 2011, the repurchase of 40,970,900 own shares, which occurred until the end of the third quarter of 2011 at an average price of R$ Operating Revenues 15,700 16,278 16,636 17,776 17,533 17,979 19,167 19,578 Annualized Return on Average Equity % In the fourth quarter of 2011, operating revenues, which represent revenues from banking operations and insurance, pension plans and capitalization operations, totaled R$ 19,578 million. Main components of operating revenues and other items of the results are presented next. Managerial Financial Margin 4th Q/11 1,025 11,966 12, Recurring Return on Average Equity (quarterly) Recurring Return on Average Equity (year-to-date) The annualized recurring return on average equity reached 21.8% in the fourth quarter of 2011 and 22.3% in As from this quarter, the calculation method was changed to adapt to the new dynamics for dividend provision. On December 31, 2011, stockholders equity, which forms the calculation basis of our annualized return on average equity, was adjusted by R$1,847 million, the amount of the dividend proposed by the management bodies which exceeds the minimum mandatory dividend and which, as determined by Circular Letter Nº 3,516/11 of the Central Bank of Brazil, must be maintained in our stockholders equity while awaiting for the approval of the Shareholders Meeting. Net Income per Share and Recurring Net Income per Share R$ rd Q/11 2nd Q/11 1st Q/11 4th Q/10 3rd Q/10 2nd Q/10 1st Q/10 1, , ,019 Financial Margin with Clients Financial Margin with Market 11,812 11,249 10,789 10,817 10,143 9,857 9,204 10,222 12,947 11,939 11,724 12,031 11,049 10,748 The managerial financial margin for the fourth quarter of 2011 totaled R$12,991 million, representing an increase of R$44 million in relation to the third quarter of The managerial financial margin with clients totaled R$11,966 million, an increase of 1.3% from the prior period, whereas the financial margin with market amounted to R$1,025 million, a reduction of R$111 million as compared to the prior quarter. In 2011, our managerial financial margin reached R$ 49,601 million representing an evolution of 12.6% when compared to Recurring Net Income per share Net Income per share 7

7 Banking Service Fees and Income from Banking Charges 4,024 4,204 4,379 4,493 4,467 4,672 4,820 5,088 related to facilities and remodeling for the new Itaú Unibanco branch model, explained later in this report. Personnel expenses decreased 5.1% (R$ 177 million) in the quarter. Efficiency Ratio (E.R.) and Risk Adjusted Efficiency Ratio (R.A.E.R) (1) Banking service fees, including income from banking charges, recorded an increase of 5.5% in the fourth quarter of 2011 as compared to the prior period, totaling R$ 5,088 million, mainly driven by revenues from credit cards and current account services resulting from the higher volume of transactions in the period arising from the increase in year-end sales st Q/10 2nd Q/10 3rd Q/10 4th Q/10 1st Q/11 2nd Q/11 3nd Q/11 4th Q/11 Quarter E.R. (%) Quarter R.A.E.R. (%) E.R. Cumulative figure of the last 12 months (%) R.A.E.R. Cumulative figure of the last 12 months (%) Result from Loan Losses, Net of Recovery 3,715 3,657 2,976 3,004 2,896 3,173 2,608 5,107 4,972 4,380 3,809 3,955 4,010 3,918 3,880 5,453 (1) The criteria for calculating the ratios are detailed on page 19. During the fourth quarter, the efficiency ratio reached 47.3%, a decrease of 20 basis points when compared to the third quarter of This change was a result of the 2.1% increase in operating revenues, partially offset by the 1.7% increase in expenses from the prior quarter. The efficiency ratio decreased 460 basis points compared to the same period of the prior year ,114 1,310 1,207 1,393 1,315 1,574 Expenses for Provision for Loan and Lease Losses Income from Recovery of Loans Written Off as Losses Result from Loan Losses The result from loan losses, net of recovery, totaled R$ 3,880 million in the fourth quarter, an increase of 6.1%, due to an increase of R$ 482 million in the expenses for allowance for loan losses, which reached R$ 5,453 million in the fourth quarter of This behavior is attributed to the residual impact of the post office and bank workers strikes, increase in default levels, growth in the loan portfolio and the increased amount of loan renegotiation of loans already written off as losses, partially offset by the increase in loan recovery due to the receipt of the 13th month pay (bonus salary) in Brazil. Non-Interest Expenses In 2011, the efficiency ratio reached 47.7%, a 140 basis point decreased compared to The dissemination of practices related to the efficiency project was responsible for the strong performance in the control of expenses and played a key role in this improvement. The risk-adjusted efficiency ratio for the fourth quarter was 69.9%, an increase of 20 basis points from the third quarter of 2011, mainly due to the increase in the expenses for loan and lease losses, partially offset by the factors that impacted the efficiency ratio. In 2011, the risk-adjusted efficiency ratio reached 70.3%. Unrealized Gains 3,030 2,852 3,797 3,990 3,716 3,477 2,934 3, % 4.5% 4.7% 4.7% 4.0% 4.0% 4.1% 4.0% 6,506 7,138 7,739 8,389 7,674 7,965 8,401 8,547 Non Interest Expenses () Non Interest Expenses / Average Assets Notwithstanding the higher level of operating activities in the fourth quarter and the opening of 82 fully equipped branches in Brazil (123 for the full year), our non-interest expenses grew only 1.7% in relation to the prior quarter, amounting to R$ 8,547 million in the fourth quarter of Administrative expenses grew 7.0% (R$ 249 million), especially because of expenses Unrealized gains totaled R$3,529 million in the fourth quarter of 2011, a 20.3% increase from the previous period. The increase is mainly to the appreciation of Porto Seguro shares on stock exchanges. From this quarter we changed the criteria for calculating the unrealized gains: we disconsidered our share on Redecard and included our 30% share in Porto Seguro. For comparability purposes, we restated the past on the chart above. 8

8 Balance Sheet Assets Dec 31,11 Sep 30,11 Dec 31,10 Dec/11 Sep/11 Dec/11 Dec/10 Current and Long-term Assets 839, , , % 13.4% Cash and Cash Equivalents 10,633 11,509 10, % 5.3% Short-term Interbank Investments 116,082 99,519 86, % 34.4% Securities and Derivative Financial Instruments 187, , , % 0.7% Interbank and Interbranch Accounts 98, ,876 86, % 14.3% Loan, Lease and Other Loan Operations 345, , , % 17.1% (Allowance for Loan Losses) (25,772) (24,719) (22,018) 4.3% 17.0% Other Assets 106, ,746 97, % 8.5% Foreign Exchange Portfolio 26,450 40,274 21, % 22.5% Other 79,743 76,472 76, % 4.5% Permanent Assets 11,909 11,200 10, % 8.5% Investments 2,717 2,898 3, % -16.4% Fixed and Operating Lease Assets 5,287 4,921 4, % 11.8% Intangible Assets and Goodwill 3,906 3,381 3, % 30.1% TOTAL ASSETS 851, , , % 13.3% On December 31, 2011, total assets amounted to R$851.3 billion, corresponding to increases of 1.7% and 13.3% when compared to September 30, 2011 and to December 31, 2010, respectively. The growth in loan portfolio (excluding endorsements and sureties) is to be highlighted, with a 3.0% increase quarter on quarter and 17.1% compared to December 31, 2010, reaching R$345.5 billion, and the growth in short-term interbank investments, with a 16.6% increase quarter on quarter and 34.4% compared to December 31, 2010, reaching R$116.1 billion. In summary, this increase of R$14.3 billion in the total bank assets in the quarter is a result of the growth in (a) the loan portfolio of R$10.2 billion and (b) short term interbank investments and securities and derivative financial instruments. Balance Sheet Liabilities and Equity Dec 31,11 Sep 30,11 Dec 31,10 Dec/11 Sep/11 Dec/11 Dec/10 Current and Long-term Liabilities 777, , , % 13.2% Deposits 242, , , % 19.7% Demand Deposits 28,933 26,069 26, % 9.4% Savings Deposits 67,170 63,334 57, % 16.0% Interbank Deposits 2,066 2,157 1, % 7.1% Time Deposits 144, , , % 24.1% Deposits Received under Securities Repurchase Agreements 188, , , % -5.4% Fund from Acceptances and Issue of Securities 51,557 40,965 25, % 101.5% Interbank and Interbranch Accounts 4,048 8,624 3, % 10.4% Borrowings and Onlendings 56,602 57,872 47, % 19.6% Derivative Financial Instruments 6,807 11,211 5, % 19.3% Technical Provisions for Insurance, Pension Plans and Capitalization 73,754 70,170 60, % 21.8% Other Liabilities 152, , , % 8.3% Subordinated Debt 38,974 37,638 33, % 15.2% Foreign Exchange Portfolio 26,182 39,759 22, % 18.8% Other 87,629 83,440 85, % 2.8% Deferred Income % 9.2% Minority Interest in Subsidiaries 2,139 2,004 3, % -39.1% Stockholders' Equity 71,347 68,206 60, % 17.2% TOTAL LIABILITIES AND EQUITY 851, , , % 13.3% In Liabilities and Equity, the following significant increases were observed: 4.6% and 17.2% in stockholders equity in the quarter and in the year, respectively, reaching R$71.3 billion; 25.9% and 101.5% in funds from acceptances and issue of securities in the quarter and in the year, respectively; 3.6% and 15.2% in subordinated debt in the quarter and in the year, respectively; 11.9% and 24.1% in time deposits in the quarter and in the year, respectively; and 19.6% in borrowings and onlendings in the year. In summary, the liabilities and equity increase in the fourth quarter is a result of the growth of (a) the deposits of R$22.0 billion and (b) funds from acceptances and issue of securities of R$10.6 billion, primarily. Both movement are a consequence of increasing funding initiatives taken by the management during the quarter. 9

9 Loan Portfolio with Endorsements and Sureties The loan portfolio, including sureties and endorsements, amounted to R$ million on December 31, 2011, growing 3.9% quarter-on-quarter, and 19.1% from the same period of the prior year. In the individuals segment, the highlights were the mortgage loan, credit card and personal loans portfolios, which increased 6.8%, 9.5% and 5.4% in the quarter, respectively. In the 12 months of 2011, the same products stood out, with increases of 66.7%, 18.0%, and 47.0%, respectively. The companies segment grew 3.2% in the quarter and 17.9% in the last 12 months. The corporate portfolio increased 3.8% in the quarter and 21.3% in the last 12 months, while the very small, small and middle market companies portfolio increased 2.2% and 13.0% in the same periods, respectively, driven by the growth of the mid sized companies portfolio, with a nominal decrease of the very small and small companies portfolio. The balance of sureties and endorsements added up to R$51,530 million on December 31, 2011, representing an increase of 9.7% in the quarter and of 34.3% in the last 12 months, mainly on account of the higher volume of transactions with large companies, which grew 10.3% quarter-on-quarter and 34.5% when compared to December 31, Dec 31,11 Sep 30,11 Dec 31,10 Dec/11 Sep/ Individuals 147, , , % 18.0% Credit Card 38,961 35,586 33, % 18.0% Personal Loans 35,069 33,282 23, % 47.0% Vehicles 60,093 60,008 60, % 0.0% Mortgage Loans (*) 13,450 12,599 8, % 66.7% Companies 228, , , % 17.9% Corporate 139, , , % 21.3% Very Small, Small and Middle Market (**) 88,854 86,908 78, % 13.0% Argentina/Chile/Uruguay/Paraguay 20,678 19,102 14, % 43.6% Total with Endorsements and Sureties 397, , , % 19.1% Total Retail - Brazil (***) 236, , , % 16.1% Endorsements and Sureties 51,530 46,957 38, % 34.3% Individuals % 5.7% Corporate 46,670 42,303 34, % 34.5% Very Small, Small and Middle Market 3,174 3,099 2, % 24.9% Argentina/Chile/Uruguay/Paraguay 1,419 1, % 59.8% Growth adjusted for the effects of exchange rate changes 3.7% 17.2% (*) The table does not include co-obligation in mortgage loan assignment in the amount of R$534.2 million. If it was considered, the grown recorded for this portfolio would have been 73.4%; (**) Includes Rural Loans to Individuals. (***) Includes Individuals and Very Small, Small and Middle Market companies. Note: the acquired payroll loans portfolio is considered as corporate risk. Mortgage and Rural Loans portfolios from the businesses segment are allocated according to the client s size. For more details, see page 23. Disregarding the effect of the exchange variation on the corporate portfolio, the grown recorded for this portfolio would have been 3.5% in the fourth quarter and 18.1% in the last 12 months. Loan Portfolio Currency Disclosure R$ billion NPL Ratio (90 days) Dec/ Sep/ % 8.1% 8.0% 7.4% Jun/11 Mar/11 Dec/ % 5.4% 3.1% 5.9% 5.6% 4.1% 4.0% 6.7% 6.6% 6.3% 6.3% 6.0% 5.8% 5.7% 5.8% 4.8% 4.6% 4.5% 4.7% 4.9% 4.2% 4.2% 4.2% 3.3% 3.5% 3.5% 3.5% 3.2% 2.8% 2.9% 3.1% Sep/ % Jun/ Mar/ Local Currency Foreign Currency On December 31, 2011, R$64.2 billion of our total loan assets was denominated in, or indexed to, foreign currencies. The slight depreciation of the Real against these currencies, namely the U.S. dollar, contributed to the change in the total balance quarter on quarter. Mar, 09 Jun, 09 Sep, 09 Dec, 09 Mar, 10 Jun, 10 Sep, 10 Dec, 10 Mar, 11 Jun, 11 Sep, 11 Dec, 11 Companies Total Individuals The overall NPL ratio (loans operations more than 90 days overdue) was 4.9% in December 2011, representing a 20 basis point growth compared to September 2011, and a 70 basis point increase compared to December