3 rd quarter, Management Discussion & Analysis

Transcription

1 3 rd quarter, 2010 Management Discussion & Analysis

2 Contents Executive Summary 3 Analysis of Net Income 10 Managerial Financial Margin 11 Results from Loan and Lease Losses 13 Banking Service Fees and Banking Charge Revenues 14 Non-interest Expenses 15 Tax Expenses for ISS, PIS, Cofins and Others 18 Income Tax and Social Contribution 18 Balance Sheet 19 Balance Sheet by Currency 24 Value at Risk 25 Ownership Structure 26 Pro Forma Financial Statements by Segment 29 Commercial Bank 34 Itaú BBA 35 Consumer Credit 35 Insurance, Pension Plans and Capitalization 36 Activities Abroad 41 Report of Independent Accountants 47 Complete Financial Statements 49 The tables in this report show the figures in millions. Variations, however, are calculated in units. Future expectations arising from the reading of this analysis should take into consideration the risks and uncertainties that involve any activities and that are outside the control of the companies of the conglomerate (political and economic changes, volatility in interest and foreign exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products and prices, and changes in tax legislation). 2

3 Executive Summary Third Quarter of 2010 Information and financial indicators of (Itaú Unibanco) from the third quarter of 2010 are presented below. (except where indicated) Highlights Statements of Income 3 rd Q/10 2 nd Q/10 3 rd Q/09 jan-sep/10 jan-sep/09 Net Income Parent Company 3,034 3,165 2,268 9,433 6,854 Recurring Net Income 3,158 3,298 2,687 9,624 7,677 Managerial Financial Margin (1) 11,204 10,892 10,814 32,485 31,933 Shares (R$) Consolidated Net Income per share (2) (3) Consolidated Recurring Net Income per share (2) (3) Number of Outstanding Shares in thousands (2) 4,540,463 4,533,922 4,523,759 4,540,463 4,523,759 Book Value per share Dividends/JCP net of taxes (4) (R$ Million) ,887 2,303 Dividends/JCP net of taxes (4) per share Market Capitalization (5) (R$ Million) 182, , , , ,046 Market Capitalization (5) (US$ Million) 107,549 83,053 90, ,549 90,572 Performance Ratios (%) Return on Average Equity Annualized (6) 21.6% 23.4% 18.9% 23.3% 19.8% Recurring Return on Average Equity Annualized (6) 22.5% 24.4% 22.4% 23.8% 22.2% Return on Average Assets Annualized (7) 1.8% 2.0% 1.5% 1.9% 1.5% Recurring Return on Average Assets Annualized (7) 1.9% 2.1% 1.8% 2.0% 1.7% Solvency Ratio (BIS Ratio) 15.3% 15.7% 16.3% 15.3% 16.3% Annualized Net Interest Margin with clients (8) 12.2% 12.6% 12.6% 12.3% 11.8% Nonperforming Loans Index (NPL over 90 days) 4.3% 4.6% 5.9% 4.3% 5.9% Coverage Ratio (Provision for Loan Losses/Nonperforming Loans over 90 days) 196% 187% 172% 196% 172% Efficiency Ratio (ER) (9) 49.2% 47.3% 45.0% 46.9% 45.5% Risk Adjusted Efficiency Ratio (RAER) (10) 71.6% 70.8% 74.5% 70.4% 75.1% Balance Sheet Sep 30,10 Jun 30,10 Sep 30,09 Total Assets 686, , ,399 Total Credit Portfolio, including Sureties, Endorsements and Guarantees 313, , ,694 Credit Operations (A) 279, , ,099 Sureties, Endorsements and Guarantees 34,155 32,694 31,594 Deposits + Debentures + Borrowings and Onlending + Securities (B) (11) 366, , ,019 Credit Operations/Funding (A/B) 76.1% 77.4% 77.0% Stockholders' Equity of Parent Company 57,225 55,074 48,862 Relevant Data Assets Under Management (AUM) 357, , ,346 Employees (Individuals) 106, , ,754 Number of Points of Service 34,991 35,267 35,435 Branches (Units) 3,929 3,931 3,951 CSBs (Units) Automated Teller Machines (Units) (12) 30,120 30,398 30,524 (1) Described on page 11. (2) The number of shares outstanding was adjusted to reflect the 10% share bonus that occurred on August 28, (3) Calculated based on the weighted average of the number of outstanding shares. (4) JCP Interest on Own Capital. Amounts paid/provisioned (Note 16 b II to the Financial Statements). (5) Total number of shares outstanding (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 of the parent company by the Average Stockholders Equity of the parent company. The quotient of this division was multiplied by the number of periods of the year to derive the annualized index. (7) Annualized Return was computed by dividing Net Income of the parent company by Average Assets. The quotient of this division was multiplied by the number of periods of the year to arrive at the annual ratio. (8) Does not include Margin with Market. See details of criteria change on page 12. (9) ER = Non-interest Expenses/(Managerial Financial Margin + Banking Fees and Charge Revenues + Result from Operations of Insurance, Pension Plans and Capitalization before Retained Claims + Other Operating Income Tax Expenses for ISS/PIS/Cofins and Other). (10) RAER = (Non-interest Expenses + Results from Loan Losses + Retained Claims)/(Managerial Financial Margin + Banking Fees and Charge Revenues + Result from Operations of Insurance, Pension Plans and Capitalization before Retained Claims + Other Operating Income Tax Expenses for ISS/PIS/Cofins and Other). (11) As described on page 22. (12) Includes ESBs (electronic service branches) and service points in third-party establishments. 3

4 Executive Summary Third Quarter of 2010 Net Income and Recurring Net Income Itaú Unibanco s consolidated net income amounted to R$ 3,034 million in the third quarter of This figure incorporates the impact on income of the provision for contingencies economic plans, as shown in the table below, leading to the recurring net income for the period. 3 rd Q/10 2 nd Q/10 Jan-Sep/10 Jan-Sep/09 Recurring Net Income 3,158 3,298 9,624 7,677 Sale of investments Program for Settlement or Installment Payment of Federal Taxes- Law No.11,941/ Provision for contingencies economic plans (124) (133) (335) (166) Amortization of goodwill (*) (506) Itaú Unibanco Association with CBD (363) Total non-recurring effects (124) (133) (190) (823) Net Income 3,034 3,165 9,433 6,854 Note: The 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). (*) For first nine months of 2009, refers basically to the Redecard operation. Managerial Statement of Income The Management Discussion and Analysis Report presented is based on the Managerial Statement of Income, which arises from reclassifications made in the accounting statement of income. Basically, the tax effects of hedge 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 management of exchange risk of capital invested abroad is intended to prevent effects on income from Exchange variation. 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. In this third quarter, the Real appreciated 6.0% with respect to the U.S. dollar and depreciated 4.8% with respect to the euro. Macroeconomic Indices Sep 30,10 Jun 30,10 Sep 30,09 EMBI Brazil Risk CDI (In the Quarter) 2.6% 2.2% 2.2% Dollar Exchange Rate (Quotation in R$) Dollar Exchange Rate (Var. in the Quarter) -6.0% 1.2% -8.9% Euro Exchange Rate (Quotation in R$) Euro Exchange Rate (Var. in the Quarter) 4.8% -8.4% -5.1% IGP-M (In the Quarter) 2.1% 2.8% -0.4% Savings Rate (In The Quarter) 1.8% 1.6% 1.6% 4

5 Executive Summary Third Quarter of 2010 Reconciliation between Accounting and Managerial Statement of Income Itaú Unibanco 3 rd Quarter/10 Accounting Non-recurring Effects Tax Effect of Hedge Managerial Managerial Financial Margin 11,972 - (768) 11,204 Financial Margin with Clients 10, ,298 Financial Margin with Market 1,674 - (768) 906 Result of Loan Losses (2,935) - - (2,935) Expense for Allowance for Loan Losses (4,069) - - (4,069) Recovery of Credits Written Off as Losses 1, ,134 Net Result from Financial Operations 9,037 - (768) 8,269 Other Operating Income/(Expenses) (3,870) (3,593) Banking Fees and Charge Revenues 4, ,451 Result from Insurance, Pension Plans and Capitalization Operations Non-interest Expenses (8,162) (7,975) Tax Expenses for ISS, PIS, Cofins and Other Taxes (1,002) - 89 (913) Equity in earnings of affiliates and other investments Other Operating Income Operating Income 5, (679) 4,676 Non-operating Income Income before Tax and Profit Sharing 5, (679) 4,679 Income Tax and Social Contribution (1,868) (64) 679 (1,253) Profit Sharing (52) - - (52) Minority Interests (216) - - (216) Net Income 3, ,158 Itaú Unibanco 2 nd Quarter/10 Accounting Non-recurring Effects Tax Effect of Hedge Managerial Managerial Financial Margin 10, ,892 Financial Margin with Clients 10, ,001 Financial Margin with Market Result of Loan Losses (3,053) - - (3,053) Expense for Allowance for Loan Losses (4,019) - - (4,019) Recovery of Credits Written Off as Losses Net Result from Financial Operations 7, ,839 Other Operating Income/(Expenses) (3,325) (3,121) Banking Fees and Charge Revenues 4, ,300 Result from Insurance, Pension Plans and Capitalization Operations Non-interest Expenses (7,771) (7,570) Tax Expenses for ISS, PIS, Cofins and Other Taxes (974) - 4 (970) Equity in earnings of affiliates and other investments Other Operating Income Operating Income 4, ,719 Non-operating Income (1) - - (1) Income before Tax and Profit Sharing 4, ,717 Income Tax and Social Contribution (1,029) (68) (21) (1,119) Profit Sharing (54) - - (54) Minority Interests (247) - - (247) Net Income 3, ,298 5

6 Executive Summary Third Quarter of 2010 Recurring Net Income () and Annualized Recurring Return on Average Equity (%) 2,339 2,562 2,429 2,687 Recurring Net Income Annualized Recurring ROE without Migration Expenses Annualized Recurring ROE Loan Portfolio (*) Foreign Currency Local Currency (*) Includes endorsements and sureties. Managerial Financial Margin 3,207 3,453 3,426 3,168 3,298 3,158 2, th Q/08 Sep/10 Jun/10 Mar/10 Dec/09 Sep/09 Jun/09 Mar/09 Dec/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Recurring Net Income without Migration Expenses R$ billion Loan Portfolio with Endorsements and Sureties In the third quarter of 2010, the recurring net income added up to R$ 3,158 million and on a year-to-date basis, the recurring net income totaled R$ 9,624 million, corresponding to a 25.4% growth when compared to the prior period. On October 24, 2010, less than two years of the association, Itaú Unibanco completed the integration of its entire branch and sales network throughout Brazil. Unibanco branches and client service branches (CSBs) were fully renovated and integrated into Itaú s service points. If migration expenses incurred in 2010 had not been considered, the recurring net income for the third quarter would have been R$ 3,426 million. As of September 30, 2010, the parent company stockholders equity totaled R$ 57,225 million and the annualized recurring return on average equity reached 22.5% (without considering migration expenses, the recurring return would have been 24.4%). Variation (%) Sep 30,10 Jun 30,10 Dec 31,09 Sep 30,09 Sep/10 Sep/10 Sep/10 Jun/10 Dec/09 Sep/09 Individuals 118, , , , % 10.2% 15.9% Credit Card 30,481 29,835 29,313 25, % 4.0% 20.9% Personal Loans 23,686 22,538 20,627 21, % 14.8% 11.2% Vehicles 57,334 55,165 52,276 50, % 9.7% 13.2% Mortgage Loans 7,025 6,342 5,249 4, % 33.8% 41.4% Rural Loans % -13.3% -25.9% Companies 180, , , , % 13.8% 16.2% Corporate 104,411 98,643 95,832 96, % 9.0% 7.8% Very Small, Small and Middle Market 76,402 70,794 63,030 58, % 21.2% 30.0% Argentina/Chile/Uruguay/Paraguay 13,548 12,555 11,708 10, % 15.7% 28.5% Total 313, , , , % 12.5% 16.6% Total Retail (*) 195, , , , % 14.3% 21.0% Endorsements and Sureties 34,155 32,694 32,431 31, % 5.3% 8.1% Individuals % -0.8% 2.5% Corporate 30,238 29,135 29,150 28, % 3.7% 6.8% Very Small, Small and Middle Market 2,962 2,577 2,414 2, % 22.7% 19.2% Argentina/Chile/Uruguay/Paraguay % 13.2% 25.8% (*) Includes Credit Card, Personal Loans, Vehicles, Rural Loans (Individuals), Mortgage Loans (Individuals) and Very Small, Small and Middle Market. Note: The acquired payroll credit portfolio started to be considered as corporate risk, and to achieve comparability, the prior quarters were adjusted. Mortgage Loans and Rural Loans portfolios from the businesses segment are allocated according to the client s size. For more details see page 21. At September 30, 2010, our loan and financing portfolio, including sureties and endorsements, added up to R$ 313,189 million, growing by 5.7% quarter-onquarter. When compared to the previous year, the portfolio increased by 16.6%. In the individual segment, the vehicles portfolio stands out with a 3.9% growth, reaching R$ 57,334 million, despite the end of the IPI tax benefit in April For the 12-month period, our main highlights were the credit card, vehicles and mortgage loans portfolios, which increased by 20.9%, 13.2% and 41.4%, respectively. In the companies segment, our mains highlights in the period ended September 30, 2010 were the turnaround of the corporate subsegment with a 5.8% rise in the portfolio, which totaled R$ 104,411 million, as well as the maintenance of the good performance of the very small, small and middle market subsegment with a 7.9% increase, which reached R$ 76,402 million. Considering a 12-month period, the most significant increase was seen in the very small, small and middle market subsegment, with a 30.0% growth. 3rd Q/ ,298 11,204 2nd Q/10 1st Q/10 4th Q/09 3rd Q/09 2nd Q/09 1st Q/09 4th Q/ ,019 1,488 1,456 1,349 1, ,001 9,370 9,324 9,359 9,247 9,194 9,416 10,892 10,388 10,813 10,814 10,596 10,523 9,915 The managerial financial margin for the third quarter of 2010 totaled R$ 11,204 million, corresponding to a 2.9% rise quarter-on-quarter. The managerial financial margin with clients grew by 3.0%, reaching R$ 10,298 million, driven by the increase of the loan portfolio. With respect to the financial margin with the market, we observed a 1.7% increase from the prior period, totaling R$ 906 million. 6 Financial Margin with Clients Financial Margin with Market

7 Executive Summary NPL Ratio over 90 days (%) 6.9% 3rd Q/10 2nd Q/10 1st Q/10 4th Q/09 3rd Q/09 2nd Q/09 1st Q/09 4th Q/08 7, % 8.1% 8.1% 7.6% 6.8% 6.4% 6,900 6,791 6,895 7,397 6,722 6,663 3,617 3,526 7,570 3,853 4,120 4, % 5.4% 5.9% 5.6% 4.9% 4.4% 4.6% 3.9% 4.1% 4.0% 4.3% 3.1% 3.3% 3.2% 2.9% 1.9% 1.3% Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Individuals Total Companies Banking fees and charge revenues Non-interest Expenses 4,451 4,300 4,231 7,975 7,335 7,569 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Non-interest Expenses Non-interest Expenses without Branch Migration Expenses Efficiency Ratio (E.R) and Risk Adjusted Efficiency Ratio (R.A.E.R.) (%) (*) In the third quarter of 2010, the expense from provisions for loan and lease losses amounted to R$ 4,069 million, increasing by R$ 49 million when compared to the prior quarter. The 5.9% growth in the credit portfolio was the main driver of this increase. Once again, the positive evolution of the credit risk performance indicators can be seen in this regard. The total nonperforming ratio, considering the balance of transactions more than 90 days overdue, stood at 4.3% in September 2010, or a 130 basis points decrease from December Delinquency in the individual customer portfolio was 6.0% in the quarter, versus 6.4% in the prior period. Similarly, delinquency in the company customer portfolio stood at 2.9% at the end of September 2010, compared to 3.2% in the second quarter of the year. Revenues from the recovery of credits previously written off as losses totaled R$ 1,134 million, representing a rise of R$ 167 million compared to the prior period. In the third quarter of 2010, revenues from banking service fees and charges totaled R$ 4,451 million, a R$ 152 million improvement quarter-on-quarter. During the period, the customer base grew and operating activities expanded, with impacts on revenues from current account services; revenues from credit transactions and sureties and endorsements provided also increased, driven by the higher volume of vehicle financing and leasing transactions; and finally, credit card revenues grew due to increased invoice discount services provided to merchants, as well as the expanded customer base. During the third quarter of 2010, non-interest expenses amounted to R$ 7,975 million, corresponding to a 5.3% growth quarter-on-quarter. The growth was due to the migration of branches and expansion of the service network, higher personnel expenses on account of the Collective Labor Agreement, and the increase in other administrative expenses, driven by higher expenses relating to cards and expanded operating activities. Disregarding the branch migration expenses, the change in non-interest expenses would have been R$ 7,569 million in the quarter. 71.7% 73.2% 74.8% 75.6% 74.7% 73.1% 71.9% 71.2% 48.2% 50.6% 48.1% 47.8% 46.8% 46.1% 45.5% 46.0% 47.1% 76.9% 75.5% 75.5% 74.5% 73.4% 46.2% 45.4% 45.0% 47.7% 68.9% 70.8% 71.6% 44.0% 47.3% 49.2% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Quarter E.R. E.R. Cumulative figure of the last 12 months Quarter R.A.E.R. R.A.E.R. Cumulative figure of the last 12 months (*) The criteria for calculating the efficiency ratio and the risk adjusted efficiency ratio are detailed on page 17. The efficiency ratio stood at 49.2% in the third quarter of 2010, as a result of higher non-interest expenses, as described above. Disregarding expenses relating to branch migration, the ratio would have been 46.7%. In the past 12 months, the efficiency ratio was 47.1%, compared to 46.8% in the same period ended September On the other hand, the risk-adjusted efficiency ratio declined by 440 basis points over the past 12 months, due to the improved quality of the credit portfolio. Unrealized Profits 11,279 11,676 11,241 10,427 10,417 8,792 9,141 9,225 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Unrealized profits in income totaled R$ 11,241 million in the third quarter of 2010, representing a R$ 2,016 million increase when compared to the prior period. Such increase is basically associated with the appreciation of Redecard shares in the capital markets. Also, during the quarter, the balance of the additional balance of provision for loan and lease losses remained stable at R$ 6,104 million. It should be noted that this allowance is not taken into consideration to determine unrealized profits. 7

8 Executive Summary Third Quarter of 2010 Balance Sheet ASSETS Sep 30,10 Jun 30,10 Sep 30,09 Sep/10 Jun/10 Variation (%) Sep/10 Sep/09 Current and Long-term Assets 675, , , % 12.2% Cash and Cash Equivalents 11,063 12,415 10, % 7.1% Short-term Interbank Investments 112, , , % -18.5% Securities and Derivative Financial Instruments 141, , , % 15.7% Interbank and Interbranch Accounts 66,243 62,204 17, % 278.9% Loans, Lease and Other Credits Operations 279, , , % 17.7% (Allowance for Loan Losses) (23,284) (22,900) (24,068) 1.7% -3.3% Other Assets 88,554 82, , % -12.4% Foreign Exchange Portfolio 20,571 18,238 35, % -42.4% Others 67,983 64,192 65, % 4.0% Permanent Assets 10,275 9,993 9, % 3.2% Investments 2,226 2,132 2, % -2.5% Fixed and Operating Lease Assets 4,702 4,483 4, % 15.0% Intangible Assets and Goodwill 3,347 3,378 3, % -6.7% TOTAL ASSETS 686, , , % 12.1% Balance Sheet LIABILITIES AND EQUITY Sep 30,10 Jun 30,10 Sep 30,09 Sep/10 Jun/10 Variation (%) Sep/10 Sep/09 Current and Long-term Liabilities 625, , , % 11.7% Deposits 194, , , % 3.1% Demand Deposits 29,052 26,398 23, % 22.4% Savings Deposits 54,874 51,852 44, % 24.3% Interbank Deposits 1,293 2,307 2, % -42.1% Time Deposits 109, , , % -7.8% Deposits Received under Securities Repurchase Agreements 155, , , % 22.9% Funds from Acceptances and Issue of Securities 23,379 18,904 18, % 26.1% Interbank and Interbranch Accounts 8,281 7,402 7, % 17.5% Borrowings and Onlendings 43,259 38,071 32, % 31.9% Derivative Financial Instruments 9,077 6,849 7, % 21.7% Technical Provisions for Insurance, Pension Plans and Capitalization 58,490 56,001 49, % 17.0% Other Liabilities 132, , , % 3.0% Foreign Exchange Portfolio 33,017 28,255 22, % 45.0% Subordinated Debt 21,399 18,793 36, % -41.7% Others 77,674 71,388 68, % 12.9% Deferred Income % 2.1% Minority Interest in Subsidiaries 3,658 3,740 3, % 6.3% Stockholders' Equity of Parent Company 57,225 55,074 48, % 17.1% TOTAL LIABILITIES AND EQUITY 686, , , % 12.1% 8

9 Executive Summary Third Quarter of 2010 Income Statement 3 rd Q/10 2 nd Q/10 jan-sep/10 jan-sep/09 3 rd Q/10 2 nd Q/10 % Variation jan-sep/10 jan-sep/09 % Managerial Financial Margin 11,204 10,892 32,485 31, % % Financial Margin with Clients 10,298 10,001 29,669 27, % 1, % Financial Margin with Market ,816 4, % (1,317) -31.9% Result of Loan Losses (2,935) (3,053) (9,008) (10,942) % 1, % Expenses for Allowance for Loan Losses (4,069) (4,019) (11,954) (12,383) (49) 1.2% % Income from Recovery of Credits Written Off as Loss 1, ,946 1, % 1, % Net Result from Financial Operations 8,269 7,839 23,476 20, % 2, % Other Operating Income/(Expenses) (3,593) (3,121) (9,259) (9,571) (473) 15.2% % Banking Service Fees and Income from Banking Charges 4,451 4,300 12,870 10, % 1, % Result from Insurance, Pension Plans and Capitalization Operations ,051 1,721 (34) -4.7% % Non-interest Expenses (7,975) (7,570) (22,266) (20,586) (405) 5.3% (1,680) 8.2% Tax Expenses for ISS, PIS, Cofins and Other Taxes (913) (970) (2,749) (2,378) % (371) 15.6% Equity in earnings of affiliates and Other investments % 0 0.1% Other Operating Income (262) -73.6% % Operating Income 4,676 4,719 14,217 11,419 (43) -0.9% 2, % Non-operating Income 3 (1) % (31) -59.4% Income before Tax and Profit Sharing 4,679 4,717 14,239 11,472 (38) -0.8% 2, % Income Tax and Social Contribution (1,253) (1,119) (3,733) (3,006) (134) 12.0% (728) 24.2% Profit Sharing (52) (54) (169) (166) 2-3.2% (2) 1.3% Minority Interests in Subsidiaries (216) (247) (713) (623) % (90) 14.5% Recurring Net Income 3,158 3,298 9,624 7,677 (140) -4.2% 1, % We present below another perspective on the income statement, highlighting the Managerial Financial Margin plus Banking Service Fees, which is primarily derived from the sum of the main items composing revenues from the banking and insurance, pension plans and capitalization operations. Income Statement 3 rd Q/10 2 nd Q/10 jan-sep/10 jan-sep/09 3 rd Q/10 2 nd Q/10 Recurring Net Income 3,158 3,298 9,624 7,677 (140) -4.2% 1, % Note: Other Results are composed of Equity in earnings of affiliates and other investments and Non-operating Income. % Variation jan-sep/10 jan-sep/09 Managerial Financial Margin Plus Banking Service Fees 17,124 16,959 50,241 47, % 2, % Financial Margin with Clients 10,298 10,001 29,669 27, % 1, % Financial Margin with Market ,816 4, % (1,317) -31.9% Banking Service Fees and Income from Banking Charges 4,451 4,300 12,870 10, % 1, % Result from Insurance, Pension Plans and Capitalization Operations Before Retained Claims 1,374 1,411 4,233 4,170 (36) -2.6% % Other Operating Income (262) -73.6% % Loan Losses and Retained Claims (3,624) (3,745) (11,190) (13,391) % 2, % Expenses for Allowance for Loan Losses (4,069) (4,019) (11,954) (14,070) (49) 1.2% 2, % Reversal (increase) of additional provision for loan losses , (1,687) % Income from Recovery of Credits Written Off as Loss 1, ,946 1, % 1, % Retained Claims (689) (692) (2,181) (2,448) 3-0.4% % Operating Margin 13,500 13,214 39,052 34, % 4, % Other Operating Income/(Expenses) (8,820) (8,497) (24,813) (22,732) (324) 3.8% (2,082) 9.2% Non-interest Expenses (7,975) (7,570) (22,266) (20,586) (405) 5.3% (1,680) 8.2% Tax Expenses for ISS, PIS, Cofins and Other Taxes (913) (970) (2,749) (2,378) % (371) 15.6% Other Results % (31) -13.4% Income before Tax and Profit Sharing 4,679 4,717 14,239 11,472 (38) -0.8% 2, % Income Tax and Social Contribution (1,253) (1,119) (3,733) (3,006) (134) 12.0% (728) 24.2% Profit Sharing (52) (54) (169) (166) 2-3.2% (2) 1.3% Minority Interests in Subsidiaries (216) (247) (713) (623) % (90) 14.5% The recurring net income for the first nine months of 2010 was R$ 9,624 million, up 25.4% from the same period of This result is primarily attributable to a 6.7% increase in the financial margin with clients, 17.0% growth in revenues from banking service fees and charges, and a 17.7% rise in the result of loan and lease losses. During the period, non-interest expenses increased by 8.2%, mainly due to the migration of Unibanco branches to the Itaú platform, completed in October % 9

10 Analysis of the Net Income

11 Analysis of the Net Income Managerial Financial Margin The managerial financial margin totaled R$ 11,204 million in the third quarter of 2010, or a R$ 312 million increase from the second quarter of the year. The main drivers of such change are described below. Variation 3 rd Q/10 2 nd Q/10 Jan-Sep/10 Jan-Sep/09 3 rd Q/10 Jan-Sep/10 % 2 nd Q/10 Jan-Sep/09 % Financial Margin with Clients 10,298 10,001 29,669 27, % 1, % Interest Rate Sensitive 1,543 1,241 3,951 3, % % Spread-Sensitive 8,756 8,761 25,718 24,352 (5) -0.1% 1, % Financial Margin with Market ,816 4, % (1,317) -31.9% Treasury ,816 4, % (1,317) -31.9% Total 11,204 10,892 32,485 31, % % Managerial Financial Margin with Clients The managerial financial margin comprises the use of financial products and services by our clients including account holders and non-account holders. In the third quarter of 2010, the managerial margin with clients totaled R$ 10,298 million, increasing by R$ 297 million when compared to the prior period. In order to allow for a better understanding of changes in the financial margin, in this discussion the margin is divided into two different components: financial margin that are sensitive to interest rate changes, and financial margin that are sensitive to spreads. Interest Rate Sensitive Margin with Clients The financial margin on interest rate-sensitive operations amounted to R$ 1,543 million in the quarter, a 24.3% growth, or R$ 302 million, from the prior quarter. The increased volume of operations, particularly associated with the growth in the average balance of working capital, coupled with the impact from the increase in the basic interest rate, were the factors behind this change. Annualized Rate of Interest Rate Sensitive Banking Operations Performed with Clients Spread-Sensitive Margin with Clients The financial margin on spread-sensitive operations added up to R$ 8,756 million in the period, virtually stable when compared to the prior quarter. The criteria for spread-sensitive net interest margin was revised in this quarter, in which we excluded from the interestearning assets the amount of compulsory deposits and assets guaranteeing PGBL/VGBL technical provisions, since both are funded assets that do not generate financial margin for the bank. Annualized Rate of Spread-Sensitive Margin with Clients 3 rd Q/10 2 nd Q/10 Variation Balance % Average Balance 278, ,121 16, % Financial Margin 8,756 8,761 (5) -0.1% Annualized Rate 12.6% 13.4% -80 bps 11.4% 11.3% 12.1% 13.3% 13.5% 13.2% 13.4% 12.6% 3 rd Q/10 2 nd Q/10 Variation Balance % Average Balance 59,045 55,984 3, % Financial Margin 1,543 1, % Annualized Rate 10.4% 8.9% 160 bps 13.3% 11.5% 9.5% 8.7% 8.3% 8.1% 8.9% 10.4% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Managerial Financial Margin with Market The financial margin with market basically comprises treasury operations. During the quarter, the financial margin with market totaled R$ 906 million, increasing by 1.7% when compared to the prior quarter. Such increase was driven by better results on exchange and fixed income positions. 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 11

12 Analysis of the Net Income Managerial Financial Margin As a result of the changes previously described, and in the revised criteria illustrated in the previous page, the net interest margin NIM (annualized rate of managerial financial margin, disregarding the financial margin with market) dropped to 12.2% in the third quarter of 2010, compared to 12.6% in the prior period. When the Financial Margin Analysis Average Balance Financial Margin CDI (p.y.) Average Balance Financial Margin expense from provisions for loan and lease losses, net of the recovery of credits previously written off as losses, is taken into account, the adjusted NIM rate reached at 8.7%, virtually stable when compared to the prior period, due to the significant improvement in our loan and recovery indexes. 3 rd Q/10 2 nd Q/10 Jan-Sep/10 CDI (p.y.) Average Balance Demand Deposits + Floatings 36,933 35,713 36,581 (-) Compulsory Deposits (11,922) (10,763) (11,410) Contingent Liabilities (-) Deposits in guarantee of Contingent Liabilities 900 1,357 1,066 Tax and Social Security obligations (-) Deposits in guarantee 16,827 15,726 16,275 (-) Tax Credits (27,659) (27,623) (27,390) Working Capital (Equity + Minority Interests - Permanent Assets - Capital Allocated to Treasury) 43,966 41,575 41,252 Interest Rate Sensitive Margin with Clients (A) 59,045 1, % 55,984 1, % 56,374 3, % Financial Margin CDI (p.y.) Average Balance Financial Margin Spread (p.y.) Average Balance Financial Margin Spread (p.y.) Average Balance Financial Margin Spread (p.y.) Cash and Cash Equivalents + Interbank Deposits + Securities (*) 71,187 67,344 71,063 Interbank and Interbranch Accounts 52,302 38,614 33,482 Loans, Leasing and Other Credits 271, , ,150 (Allowance for Loan Losses) (23,092) (23,035) (23,351) Spread-Sensitive Margin with Clients - Prior Criteria 371,664 8, % 340,731 8, % 341,344 25, % (-) Compulsory Deposits - Central Bank (51,086) (38,815) (35,653) (-) Assets Guaranteeing PGBL/VGBL Technical Provisions (42,529) (40,794) (40,959) Spread-Sensitive Margin with Clients (B) - Revised Criteria 278,049 8, % 261,121 8, % 264,732 25, % Net Interest Margin with Clients (C= A+B) 337,094 10, % 317,106 10, % 321,107 29, % Provision for Loan and Lease Losses (D) (4,069) (4,019) (11,954) Recovery of Credits Written Off as Losses (E) 1, ,946 Net Interest Margin after Provision for Credit Risk (F = C+D+E) 337,094 7, % 317,106 6, % 321,107 20, % Treasury Financial Margin (G) ,816 Net Result from Financial Operations (H= F+G) 8,269 7,839 23,476 (*) Cash and Cash Equivalents + Interbank Deposits + Securities (-) Interbank Deposits related to Repurchase Liability (-) Derivative financial instruments. (-) Operations Sensitive to Variations in Interest Rate. Note: spread is the annualized difference between the earnings of assets and their opportunity costs. Net Interest Margin with Clients and Net Interest Margin with Clients after Provision for Credit Risk vs CDI 13.3% 11.7% 10.3% 7.5% 11.5% 11.7% 11.1% 10.1% 9.8% 9.5% 7.0% 6.9% 12.6% 12.5% 12.3% 12.6% 12.2% 10.7% 10.6% 10.3% 10.1% 10.4% 8.7% 8.3% 8.1% 8.9% 9.6% 8.8% 8.7% 8.2% 8.3% 7.6% 4thQ/08 1stQ/09 2ndQ/09 3rdQ/09 4thQ/09 1stQ/10 2ndQ/10 3rdQ/10 12 NIM with Clients Revised Criteria NIM with Clients Prior Criteria CDI NIM with Clients after Provision for Credit Risk

13 Analysis of the Net Income Results from Loan and Lease Losses 8.3% 5.1% 3, % 6.0% 4, , % 7.0% 10.2% 7.6% 5,027 4, ,252 4, % 1.6% 1.8% 1.8% 9.8% 7.3% 4,016 3,866 4,019 4, % 9.2% 6.8% 8.7% 8.3% 6.4% 6.2% 1.6% 1.6% 1.5% 231% 204% 182% Expenses for Provision for Loan Losses and Recovery of Credits Written off as Losses Variation 3 rd Q/10 2 nd Q/10 Jan-Sep/10 Jan-Sep/09 3 rd Q/10 Jan-Sep/10 % 2 nd Q/10 Jan-Sep/09 % Provision for Loan and Lease Losses (4,069) (4,019) (11,954) (12,383) (49) 1.2% % Income from Recovery of Credits Written Off as Losses 1, ,946 1, % 1, % Result from Loan Losses (2,935) (3,053) (9,008) (10,942) % 1, % Nonperforming Ratios The result from loan losses reached R$ 2,935 million in the third quarter of 2010, improving by R$ 118 million in comparison with the second quarter, due to a R$ 167 million growth in income from the recovery of credits previously written off as losses. Expenses for the provision for loan and lease losses added up to R$ 4,069 million, a 1.2% increase from the prior quarter. Such increase is mainly attributable to the R$ 15,536 million growth in the credit portfolio balance, not including endorsements and sureties. The improvement trend observed in our loan and financing portfolio performance indicators since the third quarter of 2009 continued in the present quarter. Our non-performing loan ratio (credit transactions more than 90 days overdue) reached 4.3%, a 130 basis points improvement from December This ratio for credit transactions with both individuals and companies showed a positive variance of 40 and 30 basis points, respectively, quarter-on-quarter. The reduced delinquency levels are directly associated with the improvement of the Brazilian economic cycle, as well as the more conservative credit policies adopted since the end of The balance of the additional provision for loan and lease losses remained unaltered at R$ 6,104 million. Provision for Loan Losses and Credit Portfolio Sep 30, 10 Jun 30, 10 Sep 30, 09 Nonperforming Loans over 60 days (a) 14,231 14,778 16,639 Nonperforming Loans over 90 days (b) 11,902 12,224 14,018 Credit Portfolio (c) 279, , ,099 NPL Ratio [(a)/(c)] x 100 over % 5.6% 7.0% NPL Ratio [(b)/(c)] x 100 over % 4.6% 5.9% (a) Loans overdue for more than 60 days and that do not accrue revenues. (b) Loans overdue for more than 90 days. (c) Endorsements and sureties not included. NPL Ratio 90 days (%) 7.9% 8.1% 8.1% 6.9% 5.4% 5.9% 3.9% 4.4% 3.1% 4.1% 1.3% 1.9% 7.6% 5.6% 4.0% Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Individuals Total Companies Coverage Ratio 90 days The 90-day coverage ratio increased from 187% in June 2010 to 196% in September 2010, mainly driven by the 2.6% reduction in the nonperforming loans over 90 days portfolio, while the balance of provisions for loan and lease losses grew by 1.7%. 172% 174% 6.8% 4.9% 3.3% 188% 6.4% 187% 6.0% 4.6% 4.3% 3.2% 2.9% 196% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Result from Loan Losses 2,971 Reversal of additional provision for loan losses () Expenses for Provisions for Loan Losses (). Expenses for Provisions for Loan Losses/Credit Portfolio (1). Provisions for Loan Losses Specific + Generic/Credit Portfolio Provisions for loan Losses Specific + Generic + Additional/Credit Portfolio 3, ,437 4,553 4, ,778 3, % 1.4% 1.6% 1.6% 3,223 3,021 3,053 2, % 1.2% 1.2% 1.1% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Reversal of additional provision for loan losses () Result from Loan Losses () Result from Loan and Lease Losses/Loan Portfolio (1) (1) Average balance of the two previous quarters. Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Coverage ratio is derived from the division of the provisions for loans and lease losses balance by the balance of operations more than 90 days overdue. Overdue Loans During the quarter, the portfolio declined by 4.4% from the prior quarter. Also, the difference between the balance of provisions for loan and lease losses versus the overdue loans portfolio increased by R$ 1,390 million when compared to the previous quarter. Sep 30, 10 Jun 30, 10 Sep 30, 09 Overdue Loans 21,870 22,876 24,297 Balance of Provision for Loan and Lease Losses (23,284) (22,900) (24,068) Difference 1, (228) Overdue loans are credit operations having at least one installment more than 15 days overdue, irrespective of collateral provided. 13

14 Analysis of the Net Income Banking Fee Revenues and Banking Charge Revenues Banking fee revenues and Banking charge revenues 3 rd Q/10 2 nd Q/10 Jan-Sep/10 Jan-Sep/09 3 rd Q/10 2 nd Q/10 % Variation Jan-Sep/10 Jan-Sep/09 Asset Management ,869 1, % % Current Account Services ,829 1, % % Loan Operations and Guarantees Provided ,057 1, % % Collection Services % % Credit Cards 1,706 1,639 4,898 4, % % Other , (61) -13.6% % Total 4,451 4,300 12,870 10, % 1, % Banking service fees, including income from banking charges, grew by 3.5% quarter-on-quarter. The main drivers behind such increase were: Asset Management Increase in fund management revenues, as a result of a 3.7% growth in the balance of assets under management to R$ 357,495 million. Credit Cards Credit Cards revenue increased by 4.1% when compared to the prior quarter, due to the higher volume of invoice discount services to merchants, as well as the expanded customer base. Other % Current Account Services Change of 5.5% in the quarter, arising from higher revenues from fee packages due to the growth in the customer base and activities. Loan Operations and Guarantees Provided Increase of 8.1% in the quarter, driven by the higher volume of credit operations, in particular vehicle financing and leasing. 3 rd Q/10 2 nd Q/10 Variation Foreign Exchange Services (4) Income from Brokerage and Securities Placement (44) Income from Custody Services and Management of Portfolio (3) Income from Economic and Financial Advisory Services (18) Other Services Total (61) Revenues from economic and financial advisory services declined because of lower revenues from the investment bank area. Banking Fee Revenues and Banking Charge Revenues 4,063 3,526 3,617 3,853 4,231 4,120 4,300 4,451 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 14

15 Analysis of the Net Income Non-interest Expenses Non-interest Expenses 3 rd Q/10 2 nd Q/10 3 rd Q/09 Jan-Sep/10 Jan-Sep/09 3rd Q/10 2 nd Q/10 Variation Jan-Sep/10 % Jan-Sep/09 Personnel Expenses (3,346) (3,186) (2,963) (9,414) (8,849) (160) 5.0% (566) 6.4% Other Administrative Expenses (3,738) (3,335) (2,774) (10,051) (8,431) (404) 12.1% (1,620) 19.2% Other Operating Expenses (804) (956) (1,051) (2,553) (3,047) % % Tax Expenses (86) (93) (106) (248) (260) 7-7.3% % Total (7,975) (7,570) (6,895) (22,266) (20,586) (405) 5.3% (1,680) 8.2% Non-interest expenses increased 5.3% in the third quarter of 2010 compared to the prior period. The main change relates to other administrative expenses, driven by a R$ 287 million increase associated with the branch migration and service network expansion processes. Personnel Expenses 3 rd Q/10 2 nd Q/10 Variation Compensation (2,196) (2,089) (107) Charges (546) (506) (40) Social Benefits (423) (413) (11) Training (57) (53) (4) Employee Terminations and Labor Claims (123) (126) 2 Total (3,346) (3,186) (160) Personnel expenses were 5.0% higher quarter-onquarter, as a result of the Collective Labor Agreement that adjusted salary levels, as well as the increase in the number of employees required by the expansion in operations. Overall, the impact of the Collective Labor Agreement on personnel expenses was R$ 93 million, of which R$ 44 million related to the adjustment of provisions for vacation and 13th salary. Other Administrative Expenses Other administrative expenses increased by 12.1% compared to the prior quarter, due to the growth in card expenses; increased operating activities; and branch migration processes, that resulted in the accelerated depreciation of assets from Unibanco, replacement of customer cards and renovation of facilities. Other Operating Expenses % 3 rd Q/10 2 nd Q/10 Variation Data Processing and Telecommunications (857) (762) (95) Depreciation and Amortization (393) (361) (32) Facilities (727) (588) (140) Third-Party Services (779) (695) (84) Financial System Services (90) (104) 14 Advertising, Promotions and Publications (287) (308) 21 Transportation (170) (147) (23) Materials (141) (109) (32) Security (115) (110) (5) Travel (45) (41) (4) Others (134) (109) (25) Total (3,738) (3,335) (404) Number of Employees (*) The number of employees in the third quarter increased as a result of organic growth, chiefly in connection with services to clients in the very small, small and mid-sized companies and consumer credit segments, in addition to units in Argentina, Uruguay, Paraguay and Chile. 108, , , , , , , ,879 3 rd Q/10 2 nd Q/10 Variation Provision for contingencies (88) (237) 149 Selling Credit Cards (403) (377) (26) Claims (129) (153) 24 Others (183) (189) 6 Total (804) (956) 153 Other operating expenses declined 16.0% from the prior quarter. Dec/08 Mar/08 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 (*) For companies under control of Itaú Unibanco, 100% of the number of employees are consolidated. For shared control companies, 50% of the employees are consolidated. No employee is considered for companies which are not under Itaú Unibanco s control. 15

16 Analysis of the Net Income Non-interest Expenses without Redecard, Porto Seguro, Migration and New Points of Sale Openings effects Excluding the effect of expenses associated with the migration of Unibanco branches to the Itaú platform, those associated with the opening of new points of sale, as well as expenses related to Redecard and Porto Seguro consolidated companies whose cost management is not directly under our responsibility non-interest expenses totaled R$ 20,108 million in the first nine months of 2010, growing by 1.1% from the same period of Non-interest Expenses without Redecard, Porto Seguro, New Points of Sale Openings and Branches Migration effects. Variation 3 rd Q/10 2 nd Q/10 3 rd Q/09 3 rd Q/10 Jan-Sep/10 Jan-Sep/10 Jan-Sep/09 2 nd % Q/10 Jan-Sep/09 % Non-interest Expenses (7,975) (7,570) (6,895) (22,266) (20,586) (405) 5.3% (1,680) 8.2% (+) Redecard Expenses % % (+) Porto Seguro Expenses % Non-interest Expenses without Redecard and Porto Seguro (7,540) (7,190) (6,652) (21,112) (19,893) (350) 4.9% (1,219) 6.1% (+) New Points of Sale Expenses % (+) Branches' Migration Expenses % Non-interest Expenses without Redecard, Porto Seguro, New Points of Sale Openings and Branches Migration effects. (6,951) (6,888) (6,652) (20,108) (19,893) (63) 0.9% (215) 1.1% Two years have not yet elapsed since the merger, and Itaú Unibanco completed on October 24, 2010 the integration of its base of points of service throughout Brazil. In total, 998 branches and 245 client service branches (CSB) of Unibanco were fully redesigned and integrated into Itaú points, thus creating a network of almost five thousand units in the whole country. Performance of Non-Interest Expenses and Ratio of Non-Interest Expenses to Assets (*) 4.9% 4.4% 4.4% 4.6% 4.8% 4.3% (7,446) (6,900) (6,791) (6,895) (7,397) (6,722) 4.7% 4.8% (7,570) (7,975) History of Numbers of Points of Service (**) 35,820 35,949 35,606 35,435 35,589 35,565 35,267 34,991 3,906 3,928 3,939 3,951 3,936 3,933 3,931 3, th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Non-Interest Expenses (R$ Million) Non-Interest Expenses/Assets (*) (*) Division of Non-Interest Expenses by the arithmetic average of total assets for the two previous quarters (annualized). 30,915 31,032 30,689 30,524 30,705 30,686 30,398 30,120 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 ATM (***) Client Service Branches (CSB) Branches (**) Includes Banco Itaú Argentina, Banco Itaú BBA and Chile, Uruguay and Paraguay companies information. Does not include points of sale and ATMs of Banco 24h. (***) Includes ESBs (electronic service branches) and service points in third-party establishments. 16

17 Analysis of the Net Income Efficiency Ratio and Risk-Adjusted Efficiency Ratio The efficiency ratio and the risk-adjusted efficiency ratio, which includes the risk portions associated with banking operations (results from the provisions for loan and lease losses) and insurance and private pension operations (claims) are presented below. Efficiency Ratio In the third quarter, the efficiency ratio stood at 49.2%, representing a 180 basis points increase from the prior quarter, primarily due to the intensification of the branch migration process concluded in advance in October Should migration expenses be disregarded, the ratio would have been 46.7%. During the past 12 months, the efficiency ratio was 47.1%, practically stable from period to period. Should migration expenses be disregarded, the ratio during the past 12 months would have been 46.0%. Efficiency Ratio (E.R.) and Risk-Adjusted Efficiency Ratio (R.A.E.R.) 71.7% 73.2% 74.8% 75.6% 74.7% 73.1% 71.9% 71.2% 48.2% 50.6% 48.1% 47.8% 46.8% 46.1% 45.5% 46.0% 47.1% 76.9% 75.5% 75.5% 74.5% 73.4% 46.2% 45.4% 45.0% 47.7% 68.9% 70.8% 71.6% 44.0% 47.3% 49.2% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Quarter E.R. Quarter R.A.E.R. Risk-Adjusted Efficiency Ratio The risk-adjusted efficiency ratio reached 71.6% in the third quarter, or an 80 basis points increase compared to the prior quarter, chiefly as a result of higher expenses, as described above. E.R. Cumulative figure of the last 12 months R.A.E.R. Cumulative figure of the last 12 months In the past 12 months, the risk-adjusted efficiency ratio stood at 71.2%, declining by 440 basis points in comparison with the same period of the previous year, due to the improved quality of the credit portfolio. Risk Adjusted Efficiency = Ratio Non-Interest Expenses (Personnel Expenses + Other Administrative Expenses + Other Operating Expenses + Tax Expenses with Other Taxes) + Result from Loan Losses + Retained Claims (Managerial Financial Margin + Banking Service Fees and Charge Revenues + Operating Result of Insurance, Capitalization and Pension Plans before Retained Claims + Other Operating Income - Tax Expenses for ISS, PIS, Cofins and Other Taxes) Usage of Managerial Financial Margin Plus Banking Service Fees The chart below shows the portions of the Managerial Financial Margin Plus Banking Service Fees that are utilized to cover Non-interest Expenses, Result from Loan Losses and Retained Claims. Managerial Financial Margin Plus Banking Service Fees (*) (-) Efficiency Ratio (-) Loan Losses and Retained Claims/ Managerial Financial Margin Plus Banking Service Fees (*) = Income before Tax and Profit Sharing (**) / Managerial Financial Margin Plus Banking Service Fees (*) (+) Risk Adjusted Efficiency Ratio Managerial Financial Margin Plus Banking Service Fees (*) 46.2% 45.4% 45.0% 47.7% 44.0% 50.6% 47.3% 49.2% 25.0% 29.2% 30.1% 29.5% 25.7% 23.4% 22.4% 26.3% E.R. R.A.E.R. 24.5% 25.5% 26.6% 31.1% 23.1% 24.5% 29.2% 28.4% 4th Q/08 1st Q/09 2nd Q/09 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 (*) Net of Tax Expenses for ISS, PIS and Cofins and Others. (**) Does not include Equity in Earnings of Affiliates and Other Investments and Non-operating Income. Income before Tax and Profit Sharing (**) 17

18 Analysis of the Net Income Income Tax and Social Contribution on Net Income In the third quarter of 2010, expenses from Income Tax and Social Contribution on Net Income reached R$ 1,253 million, or a 12.0% increase from the previous quarter. Social Contribution on Net Income expense payable in the short term continues without the effect of the rate increase to 15% from 9%, as tax credits recorded are sufficient to counter this effect, considering that management believes that the National Federation of the Financial System (CONSIF) will prevail in its direct unconstitutionality lawsuit in this regard. As of September 30, 2010, the remaining unrecorded tax credit balance amounted to R$ 2,023 million. Tax Expenses for ISS, PIS, Cofins and Others Tax expenses amounted to R$ 913 million in the third quarter of 2010, a 5.9% decline compared to the second quarter of the year. 18

19 Balance Sheet Balance Sheet by Currency Value at Risk Ownership Structure

20 Balance Sheet Securities Portfolio Securities Portfolio History Sep 30,10 % Jun 30,10 % Sep 30,09 % Variation (%) Sep/10 Jun/10 Sep/10 Sep/09 Total Public Securities 59, % 52, % 54, % 13.7% 8.7% Government Securities Domestic 51, % 45, % 45, % 12.7% 14.6% Government Securities Foreign 7, % 6, % 9, % 21.2% -19.6% Portugal - 0.0% - 0.0% % - - Austria - 0.0% - 0.0% % - - Argentina % % % 22.6% 39.8% Denmark 1, % % 1, % 94.6% -17.1% Spain % % 1, % 89.7% -55.4% Korea 2, % 2, % 1, % -2.2% 35.9% Chile 1, % 1, % 1, % 16.9% -5.5% Paraguay % % % -27.5% -5.3% Uruguay % % % 10.5% 87.0% United States % % 1, % -7.7% -66.7% Others % 6 0.0% % 550.8% -84.6% Corporate Securities 28, % 27, % 23, % 2.7% 21.3% PGBL/VGBL Fund Quotas 43, % 41, % 36, % 5.3% 19.8% Derivative Financial Instruments 10, % 7, % 8, % 38.0% 28.5% Total Securities 141, % 128, % 122, % 10.1% 15.7% At September 30, 2010, the securities portfolio added up to R$ 141,879 million, representing a 10.1% increase from the prior quarter. The securities portfolio mix was changed in the period, with an increase in the exposure to government securities. On the other hand, the relative share of corporate securities decreased. Evolution of Securities Portfolio 138, , ,248 10, , , , , ,825 10,901 17,605 8,048 7,901 8,485 5,939 8,162 30,024 32,334 43,621 34,476 41,436 36,404 38,626 40,153 25,774 27,998 24,117 28,180 23,230 23,414 13,888 23,968 27,432 12,035 9,440 7,592 9,447 8,319 7,993 6,264 52,907 51,958 48,664 45,011 43,889 41,097 45,791 51,585 Derivative Financial Instruments PGBL/VGBL Fund Quotas Private Securities Public Securities Foreign Public Securities Domestic Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Credit Portfolio by Risk Level At September 30, 2010, the share of credits rated "AA" to "C" grew by 30 basis points compared to the prior quarter, accounting for 90.4% of the portfolio. The increased share was a result of the overall improvement in the portfolio profile, attested by the growth in AA and A portfolios, by 8.7% and 7.2%, respectively. Such growth was basically driven by the reduced risks associated with the corporate segment. At the same time, the credit portfolio rated D-H continues to lose share since September of last year, as a result of the improved economic scenario and the introduction since the end of 2008 of more conservative credit policies. Evolution of Credit Portfolio by Risk Level 27.8% 26.1% 21.7% 21.2% 21.0% 21.4% 21.9% 22.6% 42.0% 41.2% 43.3% 44.2% 45.1% 44.3% 44.7% 45.3% Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 AA A B C D-H Δ Balance Sep10 x Jun/10 8.7% 7.2% 17.0% 17.0% 17.8% 17.9% 17.7% 18.4% 18.2% 17.3% 0.4% 5.2% 6.2% 6.4% 5.6% 5.8% 5.7% 5.3% 5.3% 5.5% 8.0% 9.5% 10.8% 11.1% 10.5% 10.2% 9.9% 9.6% 0.0% 20

21 Balance Sheet Credit Portfolio by Product In this quarter, we introduced a new vision of the credit portfolio, that is now divided only into individuals and businesses. For a better understanding of the evolution of the two portfolios, the main product clusters for each one of them are presented in the next table. Variação (%) Sep 30,10 Jun 30,10 Dec 31,09 Sep 30,09 Sep/10 Sep/10 Sep/10 Jun/10 Dec/09 Sep/09 Individuals 123, , , , % 10.4% 16.0% Credit Card 30,481 29,835 29,313 25, % 4.0% 20.9% Personal Loans 17,363 16,618 15,468 16, % 12.2% 5.6% Vehicles 57,334 55,165 52,276 50, % 9.7% 13.2% Own Payroll Loan 6,137 5,731 4,972 4, % 23.4% 31.2% Mortgage Loans 7,025 6,342 5,249 4, % 33.8% 41.4% Rural Loans % -13.3% -25.9% Argentina/Chile/Uruguay/Paraguay 4,640 4,093 4,010 3, % 15.7% 19.8% Companies 155, , , , % 16.0% 19.0% Working Capital (*) 83,070 77,902 71,310 68, % 16.5% 21.0% BNDES/Onlending 31,799 27,170 25,379 24, % 25.3% 29.6% Export / Import Financing 12,479 13,615 14,252 16, % -12.4% -23.0% Vehicles 8,699 8,580 7,171 6, % 21.3% 28.6% Acquired Payroll Loan 1,662 1,604 1,127 1, % 47.5% 33.8% Mortgage Loans 4,938 4,159 3,261 2, % 51.4% 72.5% Rural Loans 4,967 4,694 4,796 4, % 3.6% 9.8% Argentina/Chile/Uruguay/Paraguay 8,138 7,669 7,019 6, % 16.0% 34.4% Total without Endorsements and Sureties 279, , , , % 13.5% 17.7% Endorsements and sureties 34,155 32,694 32,431 31, % 5.3% 8.1% Private Securities (**) 13,419 12,720 10,535 11, % 27.4% 17.0% Adjusted Total Risk 326, , , , % 13.0% 16.6% (*) It also includes Overdraft, Receivables, Hot Money, Leasing, among others. (**) Includes Debentures, CRI and Commercial Paper. The individuals portfolio grew by 4.4% at September 30, 2010 compared to the prior quarter, reaching R$ 123,282 million. The improvement was primarily driven by increases of 3.9% in the vehicles portfolio, totaling R$ 57,334 million, 4.5% in the personal loans portfolio, reaching R$ 17,363 million, 10.8% in the mortgage loans portfolio, amounting to R$ 7,025 million, as well as the 13.4% growth in our operations in Southern Cone countries, for a total of R$ 4,640 million, and 2.2% in the credit card business, which added up to R$ 30,481 million. Also noteworthy was the growth in the own payroll loans portfolio, that reached R$ 6,137 million, increasing by 7.1% from the prior period. The companies portfolio increased by 7.1% in the quarter and totaled R$ 155,753 million. Changes seen in this portfolio are mainly due to the expansion in the working capital portfolio by 6.6%, for a total of R$ 83,070 million, and the BNDES/ Onlending portfolio, which grew by 17.0% to reach R$ 31,799 million. Taking into consideration our private fixed-income securities portfolio, that is increasingly significant as a financing instrument for corporate companies, and the balance of sureties and endorsements, the total adjusted credit portfolio balance added up to R$ 326,608 million. Credit Portfolio by Industry The main increases in the portfolio during the quarter were seen in the following industries: Food and Beverage (up R$ 2,497 million, or 18.6%), Apparel (up R$ 834 million, or 12.9%), Pulp and Paper (up R$ 819 million, or 37.5%), Agribusiness (up R$ 795 million, or 6.7%), Transportation (up R$ 787 million, or 6.4%), Mining (up R$ 587 million, or 22.7%), Autoparts and Accessories (up R$ 545 million, or 15.2%), Electro-electronics (up R$ 506 million, or 6.6%), Metals and Steel (up R$ 353 million, or 4.7%), Construction Materials (up R$ 338 million, or 8.3%), as well as other less significant changes. The main reductions in the quarter were seen in the following portfolios: Tobacco (down R$ 73 million, or 12.8%), and Chemicals and Petrochemicals (down R$ 6 million, or 0.1%). 21

22 Balance Sheet Funding Funding from Clients Sep 30, 10 Jun 30, 10 Sep 30, 09 Sep/10 Jun/10 Sep/10 Sep/09 Demand Deposits 28,461 25,838 23, % 22.1% Savings Deposits 54,858 51,836 44, % 24.3% Time Deposits 106, , , % 0.1% Debentures (Repurchase Agreements) and Mortgage Backed Notes (*) 94,066 86,566 66, % 42.5% (1) Funding from Account Holders 283, , , % 18.4% Institutional Clients 14,104 13,583 20, % -29.5% Onlending 28,862 24,749 20, % 39.7% (2) Total Funding from Institutional & Account Holders 326, , , % 16.5% Assets Under Management 357, , , % 15.2% Technical Provisions for Insurance, Pension Plan and Capitalization 58,490 56,001 49, % 17.0% Deposits from Banks 1,293 2,307 2, % -42.1% Funds from Acceptance and Issuance of Securities Abroad 9,295 6,301 6, % 43.6% Total Funds from Clients 752, , , % 16.0% Ratio between Loan Portfolio and Funding (*) Includes funds from Real Estate, Mortgage, Credit and Similar Notes. (**) These are comprised of installments of subordinated debt that is not included in Tier II Reference Equity. (***) The credit portfolio balance does not include sureties and endorsements. Sep 30, 10 Jun 30, 10 Sep 30, 09 Sep/10 Jun/10 Sep/10 Sep/09 Funding from Clients + Account Holders 326, , , % 16.5% Funds from Acceptance and Issuance of Securities Abroad 9,295 6,301 6, % 43.6% Borrowings 14,397 13,321 12, % 18.5% Other (**) 16,779 13,614 9, % 79.2% Total (A) 366, , , % 19.1% (-) Compulsory Deposits (64,432) (61,585) (22,854) 4.6% 181.9% (-) Cash and Cash Equivalents (Currency) (11,063) (12,415) (10,325) -10.9% 7.1% Total (B) 291, , , % 6.0% Loan Portfolio (C) (***) 279, , , % 17.7% C/A 76.1% 77.4% 77.0% -131 bps -91 bps C/B 95.8% 98.9% 86.3% -308 bps 951 bps As of September 30, 2010, total funds from clients mounted R$ 752,935 million, or a 5.1% increase from the prior quarter. During the quarter, the funding mix was changed, as funds obtained through repurchase agreements and mortgage - backed notes grew by R$ 7,500 million, while savings deposits accounts increased by R$ 3,022 million. The ratio of credit portfolio to funding reached 95.8% in September 2010, versus 98.9% in June This 310 basis points improvement is primarily attributable to the rise in debentures, savings accounts and other liabilities along with the fall in cash and cash equivalents. Other liabilities were up due to the issue of Subordinated Notes of US$1 billion, pending approval by the Brazilian Central Bank to be included in the Tier II Reference Equity. When compulsory deposits and cash and cash equivalents are disregarded, the ratio reached 76.1% in September, remaining stable in comparison with the past 12 months. Ratio between Loan Portfolio and Funding 85.3% 85.4% 83.9% 86.3% 87.5% 92.3% 98.9% 95.8% 74.9% 75.7% 79.0% 77.0% 77.8% 78.3% 77.4% 76.1% dec/08 mar/09 jun/09 sep/09 dec/09 mar/10 jun/10 sep/10 Funding from Clients (R$ billion) Loan Portfolio (R$ billion) Loan / Funding Loan / Funding (*) (*) Gross funding, disregarding the deduction of compulsory deposits and cash and cash equivalents. 22

23 Balance Sheet Total Funds Sep 30, 10 Jun 30, 10 Sep 30, 09 Sep/10 Sep/10 Jun/10 Sep/09 Funding from Clients 752, , , % 16.0% Repurchase Agreements (1) 65,844 74,641 66, % -1.3% Borrowings 14,397 13,321 12, % 18.5% Foreign Exchange Portfolio 21,399 18,793 36, % -41.7% Subordinated Debt 33,017 28,255 22, % 45.0% Collection and Payment of Taxes and Contributions 3,707 3,738 3, % 9.8% Free Assets (2) 50,608 48,821 42, % 19.5% Free Assets and Other 188, , , % 2.7% Total Funds 941, , , % 13.1% (1) Does not include own issued Debentures. (2) Stockholders Equity + Minority Interests - Permanent Assets Total funds reached R$ 941,907 million at September 30, 2010, growing by R$ 37,716 million and R$ 108,766 million compared to June 2010 and September 2009, respectively. External Funding The table below highlights the main issues abroad of Itaú Unibanco outstanding as of September 30, (1) Balance refers to principal amounts. (2) Amount in US$ equivalent on the dates shown to JPY 30 billion. (3) Perpetual Bonds. (4) and (5) Amounts in US$ equivalent on the issue dates shown to CHP 46.9 billion, and CHP 48.5 billion, respectively. (6) and (7) Amounts in US$ equivalent on the dates shown to 200 million, 100 million The highest improvement period-on-period was observed in funds obtained from clients. Main Issues in Effect (1) Balance at Exchange Balance at Instrument Coordinator Issues Amortization Jun 30, 10 Variation Sep 30, 10 and 300 million, respectively. (8) Amounts in US$ equivalent on the date to R$ 387 million. (9) Unidade Financeira de Fomento (10) 180 day Libor. (11) 90 day Euribor. (12) Structured Notes. US$ millions Fixed Rate Notes (2) Merrill Lynch /13/2001 8/15/ % Fixed Rate Notes Merrill Lynch and Itaubank /13/2001 8/15/ % Fixed Rate Notes Merrill Lynch and Itaubank /9/2001 8/15/ % Fixed Rate Notes (3) UBS/Merrill Lynch /29/2005 Perpetual 8.700% Fixed Rate Notes (4) Itaú Chile /24/2007 7/24/2017 UF (9) % Fixed Rate Notes (5) Itaú Chile /30/ /30/2017 UF (9) % Floating Rate Notes Itaubank /31/2002 3/30/2015 Libor (10) % Floating Rate Notes (6) Itaú Europa, HypoVereinsbank and LB Baden Wuerttemberg /22/ /22/2015 Euribor (11) % Floating Rate Notes (7) Itaú Europa, UBS Inv. Bank/US and Natexis Banques Populaires 367 (67) 300 7/27/2006 7/27/2011 Euribor (11) % Floating Rate Notes (8) HSBC /30/2007 5/30/ % Medium Term Notes Banco Itaú Holding Cayman 1,000 1,000 4/15/2010 4/15/ % Medium Term Notes Banco Itaú Holding Cayman 0 1,000 1,000 9/23/2010 1/22/ % Other Notes (12) 2, ,831 Total 5,556 1,587 (67) 48 7,123 Issue Date Maturity Date Coupon % p.y. Equity At September 30, 2010, the stockholders equity totaled R$ 57,225 million, an increase of R$ 2,151 million compared to June. In the same period, the Basel Ratio was 15.3%. Tangible Capital A breakdown of the Basel ratio is presented below in order to show the Tangible Common Equity (TCE) ratio, internationally defined as Stockholders Equity less intangible assets, goodwill and redeemable preference shares. This is a conservative performance indicator, as it Sep 30,10 Jun 30,10 Stockholders Equity of Parent Company 57,225 55,074 (-) Intangible (3,273) (3,378) (=) Tangible Equity (A) 53,953 51,696 Risk-weighted Exposure 489, ,925 (-) Intangible asset not eliminated from weighting (2,851) (2,914) (=) Adjusted Risk-weighted Exposure (B) 486, ,011 Considering the issue of Subordinated Notes of U$1 billion, the ratio would be 15.6%. shows the amount of hard equity held by a company. In Brazil, non-voting shares basically have an equity function and, for this reason, have not been excluded from Tangible Equity. BIS Tier I (Core Capital) Tangible Equity Capital Ratios Ratios BIS 15.3% 15.7% Tier I (Core Capital) 11.9% 12.3% Tangible Equity (A/B) 11.1% 11.4% Jun/10 Sep/10 23

24 Balance Sheet by Currency (*) Itaú Unibanco adopts an exchange rate risk management policy with respect to its assets and liabilities positions that is primarily intended to prevent impacts on consolidated results from fluctuations in exchange parities. The Brazilian tax legislation determines that exchange variation gains and losses on permanent foreign investments shall not be included in tax calculations. Gains and losses arising from financial instruments used to hedge such asset positions, however, are impacted by tax Balance Sheet Assets effects. Therefore, in order not to expose net income to exchange variations, a liability position should be built at a higher volume than the hedged assets. The Balance Sheet per Currencies shows assets and liabilities balances denominated in local and foreign currencies. As of September 30, 2010, the net exchange position, including investments abroad, was an liability of US$ 9,071 million. Consolidated Itaú Unibanco Total Sep 30,10 Business in Brazil Itaú Unibanco Local Currency Foreign Currency Business Abroad Itaú Unibanco Cash and Cash Equivalents 11,063 7,116 5,584 1,532 4,534 Short Term Interbank Deposits 112, , , ,244 Securities 141, , , ,740 Loans 279, , ,299 7,796 40,866 (Allowance for Loan Losses) (23,284) (22,575) (22,575) 0 (709) Other Assets 154, , ,220 12,154 26,479 Foreign Exchange Portfolio 20,571 19,274 7,714 11,560 21,306 Other 134, , , ,173 Permanent Assets 10,275 30,418 8,992 21,426 1,283 TOTAL ASSETS 686, , ,838 43, ,438 Derivatives Purchased Positions 47,913 Futures 20,451 Options 11,509 Swaps 6,436 Other TOTAL ASSETS AFTER ADJUSTMENTS (a) 9,517 91,277 Liabilities and Equity Consolidated Itaú Unibanco Sep 30,10 Business in Brazil Itaú Unibanco Total Local Currency Foreign Currency Deposits 194, , , ,165 Funds Received under Securities Repurchase Agreements 155, , , ,546 Funds from Acceptances and Issue of Securities 23,379 28,205 13,972 14,234 8,746 Borrowings and OnLendings 43,259 45,776 30,620 15,156 10,307 Interbank and Interbranch Accounts 8,281 8,115 5,989 2, Derivative Financial Instruments 9,077 7,388 7, ,905 Other Liabilities 132, , ,565 11,904 30,141 Foreign Exchange Portfolio 21,399 20,154 8,853 11,301 21,254 Other 110, , , ,887 Technical Provisions of Insurance, Pension Plans and Capitalization 58,490 58,481 57, Deferred Income Minority Interest in Subsidiaries 3,658 2,992 2, Stockholders' Equity of Parent Company 57,225 57,225 57, ,426 Capital Stock 47,792 47,792 47, ,194 Net Income 9,433 9,433 9, ,232 TOTAL LIABILITIES AND EQUITY 686, , ,872 44, ,438 Derivatives Sold Positions 62,315 Futures 23,990 Options 16,302 Swaps 12,412 Other TOTAL LIABILITIES AND EQUITY AFTER ADJUSTMENTS (b) 9, ,645 Net Foreign Exchange Position Itaú Unibanco (c = a - b) (15,368) Net Foreign Exchange Position Itaú Unibanco (c) in US$ (9,071) (*) Does not consider eliminations of operations between local and foreign businesses. Business Abroad Itaú Unibanco 24

25 Value at Risk (VaR) The table below shows the Consolidated Global VaR, comprising the portfolios of Itaú Unibanco, Itaú BBA, Banco Itaú Europa, Banco Itaú Argentina, Banco Itaú Chile, Banco Itaú Uruguay and Banco Itaú Paraguay. Itaú Unibanco s and Itaú BBA s portfolios are analyzed together and segregated by risk factor. On a consolidated basis, Itaú Unibanco continues to pursue its policy of operating within low limits in relation to its capital. Consolidated values at risk showed a slight fluctuation over the quarter, as evidenced by the Average Global VaR, essentially as a result of the conservative portfolio management. It may be seen that the diversification of risks from the business units is significant, enabling the conglomerate to maintain a reduced overall exposure to market risk when compared to its equity. VaR Itaú Unibanco VaR by Risk Factor Sep 30, 10 Jun 30, 10 Fixed Rate TR Inflation Indexes Dollar Linked Interest Rate Foreign Exchange Rate US$ Foreign Sovereign and Private Securities Equities Foreign Interest Rate Commodities Other Foreign Exchange Rate Others Itaú Europa Itaú Argentina Itaú Chile Itaú Uruguay Itaú Paraguay Diversification Effect (91.9) (100.4) Global VaR Maximum VaR Average VaR Minimum VaR Itaú Unibanco + Itaú BBA Adjusted for tax effects. VaR refers to the maximum potential loss in one day, with a 99% confidence level. Evolution of Itaú Unibanco's Value at Risk (VaR) sep/09 dec/09 mar/10 jun/10 sep/10 Global Maximum Average Minimum 62 Find out more on risk management in Note 21 to the Financial Statements and in our Investor Relations website, in the Corporate Governance/Risk Management section, and also in Form 20-F, available in the Financial Information/SEC Files section. 25

26 Ownership Structure Management of our ownership structure is mainly intended to optimize the capital allocation to the various segments comprising the conglomerate. The average acquisition cost of treasury shares, as well as the activity of options granted to conglomerate executives under the Option Plan, are set out in Note 16-f to the Complete Financial Statements. The table below shows the number of shares of capital stock and treasury shares as of September 30, 2010: In thousands ITAÚ UNIBANCO HOLDING S.A. Common Shares Non-voting Shares Total Balance of Shares 2,289,286 2,281,650 4,570,936 Treasury Shares 2 30,472 30,474 Total Shares (-) Treasury 2,289,284 2,251,178 4,540,462 The organization chart below summarizes the current ownership structure: Moreira Salles Family Egydio Souza Aranha Family Free Float* % Total 61.08% Common Shares 17.95% Non-voting Shares 34.52% Total 38.92% Common Shares 82.05% Non-voting Shares 65.48% Total Cia. E. Johnston de Participações 50.00% Common Shares 33.47% Total Itaúsa 50.00% Common Shares 66.53% Total 38.66% Common Shares 19.50% Total IUPAR Itaú Unibanco Participações S.A % Common Shares 25.71% Total Free Float* 9.51% Common Shares 99.25% Non-voting Shares 54.01% Total Itaú Unibanco Holding S.A. Non-voting Shares Mix Average Daily Trading Volume (BM&FBovespa+NYSE) CAGR: 31.12% 874 CAGR: 21.47% CAGR: 36.89% jan-sept/10 Foreign Investor (BM&FBovespa) 23% Foreign Investor in NYSE (ADR) 39% Brazilian Investor (BM&FBovespa) 38% NYSE BM&FBOVESPA (Non-voting+Common) *excluding Controlling stockholders and Treasury 26

27 Performance in the Stock Market 3 rd Q/10 Non-voting Common shares shares ADRs ITUB4 (R$) ITUB3 (R$) ITUB (US$) Closing quotation at 06/30/ High for the quarter * Average for the quarter Low for the quarter ** Closing quotation at 09/30/ Change in 3 rd Q/ % 19.6% 34.3% Average daily trading financial volume (million) * quotation at September 30 **quotation at July 1 st Evolution of R$ 100 invested on September 30, 2000 until September 30, CAGR: 25.27% 800 CAGR: 21.11% CAGR: 15.86% 600 Baseline 100 = 09/30/ Sep-00 Market Capitalization (*) x Bovespa Index At September 30, 2010, Itaú Unibanco s market capitalization reached R$ 182,209 million, a 21.8% increase from June 30, According to Bloomberg, the Bank held the 10 th place in the worldwide bank ranking at the end of September Mar-01 Sep-01 CAGR rdQ/10 : 30.04% CAGR rdQ/10 : 26.39% Mar Sep-02 Mar Sep-03 Mar st Q/10 Sep-04 Mar-05 Bovespa Index (thousands points) Sep nd Q/ rd Q/10 Market Capitalization(R$ billion) Oct 18, 2010 (*) Average price of non-voting shares (the most liquid) on the last trading day of the period x total shares outstanding. Dow Jones Sustainability Index 2010 For the 11 th consecutive year, was selected to constitute the Dow Jones Sustainability Index (DJSI) portfolio, 2010/2011 version -- the only Latin American bank to be part of DJSI since its inception in The new portfolio comprises 318 companies from 27 countries in the Americas, Asia and Africa, of which only seven are Brazilian, including Itaúsa and Redecard. The companies that make up DJSI are well known for their commitment to social, environmental and cultural development. Agreement with China Unionpay At the end of September, Itaú Unibanco joined into a commercial and cooperation agreement with China Unionpay Co. Ltd ( CUP ), whereby customers of the Chinese company may withdraw funds at Itaú s ATMs. Formed in 2002, CUP today has more than 400 member institutions and has issued 2.2 billion credit and debit cards. Brazil is already a destination in high demand by the Chinese and is expected to be even more so due to the 2014 World Soccer Cup and 2016 Olympic Games. Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Itaú Unibanco's non-voting shares WITH reinvestment of dividends Itaú Unibanco's non-voting shares WITHOUT reinvestment of dividends São Paulo Stock Exchange Index (Bovespa Index) Mar-09 Sep-09 Mar-10 Sep Apimec Cycle To complete the Apimec Cycle, 12 additional meetings were held in Brazil in the third quarter, for a total of 22 meetings in Total audiences in such meetings comprised approximately 2,400 participants. It should be noted that six meetings were broadcasted via internet: Porto Alegre, Belo Horizonte, Fortaleza, Rio de Janeiro, Brasília and São Paulo, with 1,391 participants through webcast. To acknowledge the Bank s commitment to continuing transparency with the capital markets, in 2010 Apimec awarded Itaú Unibanco with the Platinum frequency seal, following the holding of the 15 th consecutive meeting in São Paulo. The Bank was also awarded five Gold seals to acknowledge the holding of over 10 consecutive meetings in five different cities. To view the presentations and webcasts, please visit the Investor Relations website ( > Presentations > Meetings Apimec). Expo Money 2010 In August and September, Itaú Unibanco took part in Expo Money events in Brasília and São Paulo, with the presence of thousands of individuals who are interested in learning about finance and investments, or improving their understanding of the financial market. In October, the Bank took part in Expo Money events in Belo Horizonte and Vitória. You are invited to visit Itaú Unibanco s stands at the Rio de Janeiro (November 10 and 11) and Porto Alegre (December 1 st and 2 nd ) events. Attendance to Investors During the third quarter, Itaú Unibanco took part in conferences and non-deal roadshows abroad: San Francisco (USA), Bogota (Colombia), London (England), and New York (USA). Overall, 15 conferences and roadshows have been carried out since early Additionally, the Investor Relations team assisted 291 assistances to institutional investors via telephone, and personal meetings. Also, assistance was provided to 284 individual investors by . Recognitions Itaú Unibanco is Brazil s largest financial institution At the 2010 edition of Exame magazine s Melhores & Maiores (list of top companies), Itaú Unibanco ranked first among the fifty largest Brazilian Banks, in terms of net equity. According to the annual survey conducted by this magazine, that specializes in economy and business, Itaúsa also ranked first among the country s largest business groups in terms of revenues. Transparency Ranking For the 4 th consecutive year, Itaú Unibanco was considered the most transparent company among the institutions that comprise Ibovespa (the São Paulo Stock Exchange Index), in accordance with the 4 th edition of the Annual Study and Ranking disclosed in August by Management & Excellence (M&E), a reference in Latin America for the assessment of company sustainability levels. The Bank complied with 95.93% of the criteria involved, while Itaúsa, the runner up, met 95.12% of such criteria. 27

28 (This page was left in blank intentionally) 28

29 Pro Forma Financial Statements by Segment

30 (This page was left in blank intentionally) 30

31 Pro Forma Financial Statements by Segment Pro Forma Adjustments and Allocated Capital The pro forma financial information takes into account the impacts associated with the allocation of capital. To this end, adjustments were made to the financial statements, based on a proprietary model that considers the credit, market and operating risks, as well as the regulatory framework and the level of fixed asset formation. We determine the Risk Adjusted Return on Capital (RAROC), an operating performance indicator consistently adjusted to the capital required to support the risk of asset and liability positions taken. Adjustments made to the balance sheet and statement of income for the period are based on the business units managerial information. The Corporate+Treasury column shows the results associated with excess capital, excess subordinated debt and the carrying cost of the net balance of deferred taxes. It also shows the cost of the treasury operation, equity in the earnings of companies not yet linked to the different segments, as well as the adjustments for minority interests in subsidiaries and the market financial margin. Since the 4 th quarter of 2009, the Corporate+Treasury column also comprises the consolidation of 30% of Porto Seguro. Income Tax and Social Contribution on Net Income effects on the payment of Interest on Own Capital for each segment were reversed and subsequently reallocated to the individual segments in proportion to the amount of Tier I capital, while the financial statements were adjusted in order to replace net book value with market level funding. The financial statements were then adjusted to include revenues associated with the allocated capital. The cost of subordinated debt and the related remuneration at market prices were allocated to the segments on a pro rata basis, in accordance with the Tier I allocated capital. The diagram below shows the changes introduced in the financial statements to reflect the impacts of capital allocation in each segment. Return on Stockholders Equity Net Income Stockholders Equity Adjustments to the Financial Statements Adjustment in the Financial Statements to replace the net book value of Stockholders Equity and Subordinated Debt with funding at market prices. The financial statements were adjusted to include allocated capital based on proprietary models, as well as their respective revenues (CDI) and expenses (cost os subordinated debt). Return on Allocated Capital Pro Forma Net Income per segment Allocated Capital per segment 31

32 Pro Forma Financial Statements by Segment The pro forma financial statements of the Commercial Bank, Itaú BBA, Consumer Credit and Corporation+Treasury, presented below, are based on managerial information derived from internal models, so as to more accurately reflect the activities of the business units. On September 30, 2010 Pro Forma Balance Sheet by Segment ASSETS Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Itaú Unibanco Current and Long-Term Assets 480, ,205 84,493 58, ,973 Cash and Cash Equivalents 9,468 1, ,063 Short-term Interbank Investments 173,485 48,435-3, ,483 Short-term Interbank Deposits in the Market 124, , ,483 Short-term Interbank Deposits in Intercompany* 49,207 48, Securities and Derivative Financial Instruments 82,276 61, , ,879 Interbank and Interbranch Accounts 64,843 1, ,243 Loans, Lease and Other Credits Operations 114,805 73,956 86,191 4, ,035 (Allowance for Loan Losses) (11,388) (2,198) (7,243) (2,455) (23,284) Other Assets 47,433 11,217 5,468 29,567 88,554 Foreign Exchange Portfolio 15,124 9, ,571 Others 32,308 1,628 5,468 29,567 67,983 Permanent Assets 6, ,279 1,182 10,275 TOTAL ASSETS 487, ,127 85,772 59, ,248 LIABILITIES AND EQUITY Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Itaú Unibanco Current and Long-Term Liabilities 467, ,816 78,428 38, ,129 Deposits 198,405 76, , ,917 Deposits from Clients 170,511 26, , ,917 Deposits with Intercompany* 27,894 49, Deposits Received under Securities Repurchase Agreements 68,481 48,210 65,201 6, ,636 Securities Repurchase Agreements in the Market 47,979 36,234 65,201 6, ,636 Securities Repurchase Agreements with Intercompany* 20,502 11, Funds from Acceptances and Issue of Securities 40,193 5, ,379 Interbank and Interbranch Accounts 6,114 2, ,281 Borrowings and Onlendings 16,838 26, ,259 Derivative Financial Instruments 5,437 6, ,077 Other Liabilities 75,392 19,452 12,698 28, ,090 Foreign Exchange Portfolio 15,535 10, ,399 Others 59,856 9,445 12,698 28, ,691 Technical Provisions for Insurance, Pension Plans and Capitalization 56, ,827 58,490 Deferred Income Minority Interest in Subsidiaries (0) - - 3,658 3,658 Allocated Tier I Capital 20,120 12,253 7,344 17,508 57,225 TOTAL LIABILITIES AND EQUITY 487, ,127 85,772 59, ,248 *The Intercompany were eliminated in the Consolidated. Pro Forma Income Statement by Segment 3 rd Quarter/10 Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Note: Non-interest Expenses item is made up of Personnel Expenses, Other Administrative Expenses, Tax Expenses and Other Operating Expenses. The Consolidated figures do not represent the sum of the parts, because there are operations between the companies that were eliminated only in the Consolidated figures. Itaú Unibanco Managerial Financial Margin 7,066 1,164 2, ,204 Financial Margin with Clients 6,874 1,164 2,280-10,298 Financial Margin with the Market Financial Margin of the Corporation (192) - Result of Loan Losses (2,119) 143 (955) (4) (2,935) Expenses for Allowance for Loan Losses (2,947) 110 (1,227) (4) (4,069) Income from Recovery of Credits Written Off as Loss ,134 Net Result from Financial Operations 4,946 1,307 1, ,269 Other Operating Income/(Expenses) (2,888) (208) (423) (71) (3,593) Banking Service Fees and Income from Banking Charges 2, , ,451 Result from Insurance, Pension Plans and Capitalization Operations 474 (0) Non-interest Expenses (5,200) (533) (1,804) (437) (7,975) Tax Expenses for ISS, PIS and Cofins and Other Taxes (603) (107) (251) 48 (913) Equity in Earnings of Affiliates and Other Investments (0) (3) Other Operating Income 97 (33) Operating Income 2,058 1, ,676 Non-operating Income 12 (10) (0) 2 3 Income Before Tax and Profit Sharing 2,070 1, ,679 Income Tax and Social Contribution (566) (281) (264) (142) (1,253) Profit Sharing (21) (18) (6) (7) (52) Minority Interests in Subsidiaries (238) (216) Recurring Net Income 1, ,158 (RAROC) Return on Average Tier I Allocated Capital 31.7% 26.1% 33.7% 5.7% 22.5% Efficiency Ratio 53.3% 35.7% 49.3% 33.0% 49.2% 32

33 Pro Forma Financial Statements by Segment The pro forma financial statements of the Commercial Bank, Itaú BBA, Consumer Credit and Corporation+Treasury, presented below, are based on managerial information derived from internal models, so as to more accurately reflect the activities of the business units. On June 30, 2010 Pro Forma Balance Sheet by Segment ASSETS Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Itaú Unibanco Current and Long-Term Assets 462, ,422 79,324 54, ,590 Cash and Cash Equivalents 11,042 1, ,415 Short-term Interbank Investments 173,320 46,592-3, ,117 Short-term Interbank Deposits in the Market 125, , ,117 Short-term Interbank Deposits in Intercompany* 47,821 46, Securities and Derivative Financial Instruments 79,066 54, , ,825 Interbank and Interbranch Accounts 61,158 1, ,204 Loans, Lease and Other Credits Operations 109,122 69,064 80,978 4, ,498 (Allowance for Loan Losses) (11,254) (2,142) (7,046) (2,458) (22,900) Other Assets 40,269 10,532 5,315 29,372 82,430 Foreign Exchange Portfolio 11,343 9, ,238 Others 28, ,315 29,372 64,192 Permanent Assets 6, ,380 1,182 9,993 TOTAL ASSETS 469, ,947 80,704 56, ,583 LIABILITIES AND EQUITY Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Itaú Unibanco Current and Long-Term Liabilities 452, ,009 73,055 34, ,582 Deposits 193,771 72, , ,657 Deposits from Clients 168,985 24, , ,657 Deposits with Intercompany* 24,785 47, Deposits Received under Securities Repurchase Agreements 76,160 47,327 58,078 6, ,261 Securities Repurchase Agreements in the Market 54,386 38,184 58,078 6, ,261 Securities Repurchase Agreements with Intercompany* 21,774 9, Funds from Acceptances and Issue of Securities 36,546 3, ,904 Interbank and Interbranch Accounts 5,491 2, ,402 Borrowings and Onlendings 14,215 23, ,071 Derivative Financial Instruments 4,948 4, ,849 Other Liabilities 66,814 15,934 14,383 24, ,437 Foreign Exchange Portfolio 11,611 10, ,793 Others 55,204 5,864 14,383 24,460 99,644 Technical Provisions for Insurance, Pension Plans and Capitalization 54, ,748 56,001 Deferred Income Minority Interest in Subsidiaries (0) - - 3,741 3,740 Allocated Tier I Capital 17,301 11,887 7,649 18,238 55,074 TOTAL LIABILITIES AND EQUITY 469, ,947 80,704 56, ,583 *The Intercompany were eliminated in the Consolidated. Pro Forma Income Statement by Segment 2 nd Quarter/10 Commercial Bank Itaú BBA Consumer Credit Corporation + Treasury Itaú Unibanco Managerial Financial Margin 6,441 1,108 2, ,892 Financial Margin with Clients 6,450 1,108 2,442-10,001 Financial Margin with the Market Financial Margin of the Corporation (8) Result of Loan Losses (1,822) (156) (1,066) (8) (3,053) Expenses for Allowance for Loan Losses (2,482) (278) (1,251) (8) (4,019) Income from Recovery of Credits Written Off as Loss Net Result from Financial Operations 4, , ,839 Other Operating Income/(Expenses) (2,460) (180) (408) (61) (3,121) Banking Service Fees and Income from Banking Charges 2, , ,300 Result from Insurance, Pension Plans and Capitalization Operations 534 (0) Non-interest Expenses (4,932) (542) (1,720) (377) (7,570) Tax Expenses for ISS, PIS and Cofins and Other Taxes (572) (90) (238) (71) (970) Equity in Earnings of Affiliates and Other Investments (0) Other Operating Income 246 (36) Operating Income 2, ,719 Non-operating Income (12) 11 0 (0) (1) Income Before Tax and Profit Sharing 2, ,717 Income Tax and Social Contribution (633) (168) (284) (34) (1,119) Profit Sharing (20) (23) (4) (7) (54) Minority Interests in Subsidiaries (257) (247) Recurring Net Income 1, ,298 (RAROC) Return on Average Tier I Allocated Capital 36.5% 19.9% 35.3% 11.8% 24.4% Efficiency Ratio 53.0% 36.9% 45.8% 25.6% 47.3% Note: Non-interest Expenses item is made up of Personnel Expenses, Other Administrative Expenses, Tax Expenses and Other Operating Expenses. The Consolidated figures do not represent the sum of the parts, because there are operations between the companies that were eliminated only in the Consolidated figures. 33

34 Pro Forma Financial Statements by Segment Commercial Bank The Commercial Bank result is derived in the offering of financial products and banking services to a diversified client base, including individuals and companies. The segment includes retail clients (individuals and very small companies), high-income clients, wealthy clients (private bank) and small and mid-size companies. In the third quarter of 2010, recurring net income of the Commercial Bank totaled R$ 1,483 million, remaining practically stable. In this quarter there was the 6.6% growth in financial margin with clients, mainly driven by growth in the loan portfolio. The non-interest expenses grew 5.4% over the previous quarter, mainly caused by the intensification of the migration process of Unibanco's branch platform to Itaú. The credit portfolio totaled R$ 114,805 million, or a 5% increase compared with the prior period. The commercial Bank return on allocated capital reached 31.7% per annum while the efficiency ratio stood at 53.3% in the period. Some Commercial Bank Highlights: Assets Under Management (AUM) R$ billion Quantity of Credit Card Accounts* in thousands 25,707 24,676 23,520 23,280 23,800 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 *Does not include additional and partnership cards Amount of Transactions 26,303 25,420 24,154 24,719 21, % 20.0% 20.1% 21.3% 20.8% 20.5% 20.2% 19.8% 19.4% rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/ Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Investment Funds Managed Portfolios Market Share * *Source: ANBIMA (Brazilian Association of Financial and Capital Market Entities) At the end of the third quarter of 2010, assets under management totaled R $ 357,495 million, a 3.7% growth from the previous quarter. Credit Cards Itaú Unibanco is the leader in the Brazilian credit card market. Itaucard, Unicard and Hipercard offer a wide range of products to 25.7 million clients, both account holders and non-account holders. In the third quarter of 2010, the volume of transactions on credit cards added up to R$26,303 million, equal to a 24.1% increase when compared to the same period of the prior year. 272 Mortgage Loans In the third quarter of 2010, the mortgage loans portfolio amounted to R$ 11,963 million, growing by 13.9% compared to the prior quarter, and maintaining the accelerated expansion rate that has characterized the real estate market in the most recent quarters. Between July and September 2010, the volume of new mortgage loans financing contracts to individuals amounted to R$ 1,099 million, while financing to companies added up to R$ 2,265 million, for a total of R$ 3,364 million. Volume of contracts Variation 3 rd Q/10 2 nd Q/10 3 rd Q/10 2 nd Q/10 % Individuals 1,099 1, % Companies 2,265 1, % Total 3,364 2, % 34

35 Pro Forma Financial Statements by Segment Itaú BBA Itaú BBA segment is responsible for banking operations with large companies and investment bank services. Itaú BBA s net income added up to R$ 789 million in the third quarter of 2010, increasing by 33.2% compared to the prior quarter. Return on allocated capital stood at 26.1% per year, while the efficiency ratio reached 35.7% in the period. The financial margin with clients totaled R$ 1,164 million, or a 5.0% rise from the prior quarter. The outstanding quality level of the credit portfolio must be highlighted, with 94.0% of the credits ascribed risk ratings AA, A and B, in accordance with the criteria set forth in the Brazilian Monetary Council Resolution 2,682. In this context, the result of loan losses ended the third quarter as R$ 143 million, mainly due to reversal of provisions amounting to R $ 110 million. In the third quarter, banking service fees totaled R$ 468 million, declining by 3.9% when compared to the prior quarter, mostly as a result of the high volume of investment bank operations carried out in the second quarter of Non-interest expenses amounted R$ 533 million, or a 1.7% decrease from the prior quarter. Consumer Credit The Consumer Credit segment result includes financial products and services offered to customers who are nonaccount holders. In the third quarter of 2010, net income of the segment was R$ 631 million, or a 7.0% decline in comparison with the second quarter of the year. Such variation is mainly related to the reduction in the financial margin with clients, since the willingness to make financed purchases on credit cards reduction on the this time of the year for seasonal reasons, and the increase in costs due to the expansion in the clients base and the replacement of cards under the migration from Unibanco to Itaú. Return on allocated capital was 33.7% per year, while the efficiency ratio reached 49.3% in the period. The credit portfolio totaled R$ 86,191 million, corresponding to a 6.4% rise from the prior quarter balance. On September 30, 2010, the financing of new vehicles accounted for 56.8% of the total vehicle portfolio balance, versus 56.1% at the end of the prior quarter. As result of changes introduced in the collection policy during the second quarter, we continued good performance in the recovery of credits previously written off as losses in this quarter. Partnerships Our partnerships, in the form of joint ventures and operating agreements with major retailers present in the Brazilian market, are responsible for the offering of consumer credit to non-account holders. Our client base reached 15.8 million customers in the third quarter of 2010, for total revenues of R$ 5,931 million, equal to a 26% rise compared to revenues in the same period of the prior year. Amount of Transactions 4,709 4,763 5,363 5,776 5,931 3rd Q/09 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Vehicle Financing During the third quarter of 2010, new operations for vehicle financing and leasing added up to R$ 8,298 million, or a 23.5% growth when compared to the prior quarter. Despite the end of the IPI tax benefit in April, financing continued at an accelerated pace and our market share reached 24.2%, representing a 70 basis points increase from the second quarter of As result of this growth, the vehicle portfolio reached R$ 57,334 million. 35

36 Insurance, Pension Plans and Capitalization The pro forma financial statements below were prepared based on Itaú Unibanco internal and managerial information and are intended to identify the performance of the insurance-related businesses. The numbers presented in this chapter are from the Commercial Bank segment and do not include results from the Porto Seguro association. On September 30, 2010 Pro Forma Insurance, Pension Plans and Capitalization Balance Sheet Life and Pension ASSETS Insurance Plans Capitalization Consolidated Current and Long-Term Assets 8,719 52,713 2,871 64,279 Cash and Cash Equivalents Securities 3,088 52,027 2,815 57,910 Other Assets (mainly receivables from insurance) 5, ,279 Permanent Assets TOTAL ASSETS 9,444 52,819 2,914 65,146 LIABILITIES AND EQUITY Insurance Life and Pension Plans Capitalization Consolidated Current and Long Term Liabilities 8,447 50,089 2,696 61,200 Technical Provisions Insurance 4, ,727 Technical Provisions Pension Plans and VGBL ,901-48,443 Technical Provisions Capitalization - - 2,500 2,484 Other Liabilities 3,099 1, ,546 Allocated Tier I Capital 997 2, ,945 TOTAL LIABILITIES AND EQUITY 9,444 52,819 2,914 65,146 Pro Forma Insurance, Pension Plans and Capitalization Income Statement 3 rd Quarter/10 Insurance Life and Pension Plans Capitalization Consolidated Earned Premiums (a) ,095 Result of Pension Plans and Capitalization (b) 1 (1) Retained Claims (c) (309) (67) - (376) Selling Expenses (d) (323) (21) (13) (357) Other Operating Income/(Expenses) of Insurance Operations (e) (49) (1) (0) (45) Underwriting Margin (f=a+c+d+e) Result from Insurance, Pension Plans and Capitalization (g=b+f) Managerial Financial Margin Banking fees and charge revenues Non-interest Expenses (147) (68) (13) (233) Tax Expenses for ISS, PIS and Cofins and other taxes (26) (20) (6) (52) Equity in Earnings of Affiliates and Other Investments 0 (0) (0) 0 Other Operating Income (15) (3) 2 3 Operating Income Non-operating Income 9 (1) 2 10 Income Before Income Tax and Social Contribution Income Tax/Social Contribution (33) (102) (39) (174) Profit Sharing Recurring Net Income (RAROC) Return on Average Tier I Allocated Capital 32.0% 35.5% 145.9% 40.4% Efficiency Ratio 55.7% 18.0% 18.1% 40.4% Note: The information on VGBL was classified together with the pension plan products. Non-interest Expenses comprise Personnel Expenses, Other Administrative Expenses, Tax Expenses, and Other Operating Expenses. The Underwriting Margin comprises insurance operations. The Consolidated figures do not represent the sum of the parts, because there are operations between the companies that were eliminated only in the Consolidated figures. 36

37 Insurance, Pension Plans and Capitalization The pro forma financial statements below were prepared based on Itaú Unibanco internal and managerial information and are intended to identify the performance of the insurance-related businesses. The numbers presented in this chapter are from the Commercial Bank segment and do not include results from the Porto Seguro association. On June 30, 2010 Pro Forma Insurance, Pension Plans and Capitalization Balance Sheet Life and Pension ASSETS Insurance Plans Capitalization Consolidated Current and Long-Term Assets 8,595 50,183 2,760 61,509 Cash and Cash Equivalents Securities 2,823 49,423 2,676 54,902 Other Assets (mainly receivables from insurance) 5, ,460 Permanent Assets TOTAL ASSETS 9,369 50,290 2,803 62,426 LIABILITIES AND EQUITY Insurance Life and Pension Plans Capitalization Consolidated Current and Long Term Liabilities 8,494 47,708 2,592 58,759 Technical Provisions Insurance 4, ,655 Technical Provisions Pension Plans and VGBL ,652-46,189 Technical Provisions Capitalization - - 2,420 2,402 Other Liabilities 3,168 1, ,512 Allocated Tier I Capital 875 2, ,668 TOTAL LIABILITIES AND EQUITY 9,369 50,290 2,803 62,426 Pro Forma Insurance, Pension Plans and Capitalization Income Statement 2 nd Quarter/10 Insurance Life and Pension Plans Capitalization Consolidated Earned Premiums (a) (0) 1,089 Result of Pension Plans and Capitalization (b) Retained Claims (c) (331) (56) 0 (387) Selling Expenses (d) (308) (20) (15) (342) Other Operating Income/(Expenses) of Insurance Operations (e) (54) (1) 1 (49) Underwriting Margin (f=a+c+d+e) Result from Insurance, Pension Plans and Capitalization (g=b+f) Managerial Financial Margin Banking fees and charge revenues Non-interest Expenses (123) (49) (50) (217) Tax Expenses for ISS, PIS and Cofins and other taxes (29) (13) (7) (48) Equity in Earnings of Affiliates and Other Investments (0) Other Operating Income (2) Operating Income Non-operating Income (6) (0) 3 (3) Income Before Income Tax and Social Contribution Income Tax/Social Contribution (23) (100) (29) (152) Profit Sharing Recurring Net Income (RAROC) Return on Average Tier I Allocated Capital 25.0% 37.1% 114.7% 38.4% Efficiency Ratio 53.6% 15.2% 42.3% 40.4% Note: The information on VGBL was classified together with the pension plan products. Non-interest Expenses comprise Personnel Expenses, Other Administrative Expenses, Tax Expenses, and Other Operating Expenses. The Underwriting Margin comprises insurance operations. The Consolidated figures do not represent the sum of the parts, because there are operations between the companies that were eliminated only in the Consolidated figures. 37

38 Insurance, Pension Plans and Capitalization Insurance Recurring net income of the Insurance segment added up to R$ 80 million, increasing by 32.3% when compared to the second quarter of The improvement is attributable to a 5.5% increase in the underwriting margin, driven by a 6.6% reduction in retained claims, particularly with respect to property risks. A further driver was a 7.6% decline in other operating expenses for insurance. On October 6, 2010, SUSEP (Brazilian Superintendent of Private Insurance) Ordinance 3771 approved the agreement for the acquisition, by Itaú Unibanco, of a shareholding in the subsidiary Itaú XL Seguros Corporativos S.A. Itaú Seguros will maintain its dedicated structure to meet the requirements of large industrial and commercial clients. Number of Contracts Mass products 4, , ,004 3,838 3,429 3, ,326 3,451 Dec/09 Mar/10 Jun/10 Sep/10 Life and Personal Accidents Companies In thousands The number of insurance policies increased by 3.5% compared to the prior quarter, mainly driven by life and personal accident lines, under the influence of commercial initiatives carried out in August and September Composition of Earned Premiums 23.7% 15.7% 5.5% 5.5% 3 rd Quarter/10 2 nd Quarter/ % Life and Personal Accidents Transportation Others 24.6% 16.0% 5.2% 6.2% Property Risk Extended Warranty 48.0% Note: Insurance charts do not include the Itauseg Saúde companies and include the Life line of Itaú Vida e Previdência S.A. Earned premiums added up to R$ 901 million in the Insurance subsegment, in line with the performance in the second quarter of 2010, and R$ 199 million in the Life and Pension Plan subsegment, with a 3.0% increase when compared to the prior quarter. Highlights include the Life and Personal Accidents, and Property Risks lines, essentially made up of products intended for large companies, and the Extended Guarantee portfolio, where Itaú Unibanco is the market leader. Combined Ratio The combined ratio, which reflects the operating cost efficiency in relation to income from earned premiums, grew 410 basis points quarter-on-quarter, mainly due to reversals of provisions in other operating expenses in the second quarter of 2010, but that did not occur in the current quarter. In addition, drivers of this scenario include the 110 basis points increase in selling expenses, in particular for life and personal accident products, as well as a 370 basis points rise in administrative and other expenses. The underwriting margin increased by 1.85% when compared to the prior quarter. Combined Ratio and Underwriting Margin 26.1% 89.7% 87.8% 86.0% 20.8% 30.3% 27.8% Underwriting Margin/ Earned Premiums 27.8% 31.2% 31.5% 20.7% 22.3% 26.0% 29.6% Combined Ratio 90.1% 30.7% 38.5% 39.3% 34.1% 33.4% 4th Q/09 1st Q/10 2nd Q/10 3rd Q/10 Insurance Claims/Earned Premiums Administrative Expenses and Others/Earned Premiums Selling Expenses/Earned Premiums Underwriting Margin / Earned Premiums (%) Note: The combined ratio is the sum of the following indices: retained claims/ earned premiums, selling expenses/earned premiums and administrative expenses + other operating income and expenses/ earned premiums. The underwriting margin is the sum of: earned premiums, retained claims, selling expenses and other operating income (expenses) of insurance operations. Note: the chart does not include the Itauseg Saúde company and includes the Life line of Itaú Vida e Previdência S.A. 38

39 Insurance, Pension Plans and Capitalization Insurance Technical Provisions As of September 30, 2010, insurance technical provisions amounted to R$ 5,727 million, growing by 1.3% when compared to the prior quarter. Pension Plan Technical Provisions Pension Plan technical provisions totaled R$ 48,443 million as of September 30, 2010, representing a 4.9% rise from the prior quarter, considering individual and company pension plans. 5,238 5,425 5,655 5,727 43,176 44,766 46,189 48,443 27,016 28,178 29,208 30,777 11,731 12,102 12,395 12,988 4,430 4,486 4,586 4,678 Dec/09 Mar/10 Jun/10 Sep/10 Dec/09 Mar/10 Jun/10 Sep/10 Traditional and other PGBL VGBL Life and Pension Plan In the third quarter of 2010, the recurring net income of the life and pension subsegment totaled R$ 242 million, increasing by 2.8% compared to the prior period. Drivers of this improvement include a 2.8% increase in operating income, influenced by a 48.7% growth in managerial financial margin, as well as a 7.8% increase in banking service fees and charges, mainly arising from private pension plan fund management. Underwriting margin decreased by 5.1% over the second quarter of The increase of 3% in earned premiums, especially for group life and personal accident lines, did not offset the 19.4% increase in retained claims. Contributions to pension plans amounted to R$ 2,048 million, a 9.6% growth from the prior quarter. The major components were voluntary investments from a number of corporate clients, significant funds obtained in the Premium portfolio, and the portability program. Capitalization Recurring net income of the Capitalization subsegment reached R$ 79 million, representing a 31.9% increase from the prior quarter, driven by managerial financial margin, which grew by 43.3%, and non-interest expenses, that declined by 74.8% as a result of the lower number of commercial campaigns run in the period. Capitalization results decreased by 16.9%, in the absence of the reversal of contingency technical provisions in the previous quarter. Overall, prizes for a total volume of R$ 13.5 million were distributed to 515 clients in the third quarter of 2010, representing a 40.7% increase when compared to the second quarter of the year. Itaú Unibanco takes part in social/environmental actions and social responsibility initiatives, by distributing funds from the Sales of various products, in particular capitalization bonds. Capitalization Technical Provisions At September 30, 2010, capitalization technical provisions added up to R$ 2,484 million, or a 3.4% growth quarteron-quarter. 2,261 2,351 2,402 2,484 Dec/09 Mar/10 Jun/10 Sep/10 39

40 (This page was left in blank intentionally) 40

41 Activities Abroad

42 Activities Abroad Activities Abroad Our operations are carried out mostly in Brazil. However, our footprint abroad includes strategically located units, in particular in Europe (Portugal, London, Luxembourg and Switzerland), and in Argentina, Chile, Uruguay and Paraguay. In these South American countries, our activities include retail banking. We present below information on our operations abroad (including net income, assets and liabilities of foreign branches): (except where indicated) Highlights Income Statement 3 rd Q/10 2 nd Q/10 Net Income Net Result from Financial Operations Balance Sheet Sep 30, 10 Jun 30, 10 Total Assets 114,282 99,089 Loans, Lease and Other Credit Operations 41,000 40,633 Deposits 34,165 33,093 Stockholders' Equity 21,426 21,507 Relevant Data Sep 30, 10 Jun 30, 10 Employees (Individuals) 5,651 5,508 Number of Points of Service Branches (Units) CSBs (Units) Automated Teller Machines (Units)