Highlights R$ Million (except where indicated)

Transcription

1 Highlights (except where indicated) Short Term Deposit Local Currency - Short Term - br.a-1 (1) JCP ( Interests on Capital) (*) Including savings accountholders and other non-current accountholders. We highlight that the data presented in this report related to the second quarter of 2003 were reclassified for comparison purposes, without an impact on net income for the period. The effects of exchange variation on foreign investments are distributed in the Statement of Income according to the nature of the corresponding accounts. The tables of this report have the numbers expressed in millions. However, the variations and totals were calculated based on numbers expressed in whole units. Future expectations resulting from this analysis should take into consideration the risks and uncertainties surrounding any activity and which are beyond the control of the companies in the group (political and economic changes, volatility of interest and exchange rates, technological change, inflation, financial desintermediation, competitive pressures on products and prices, and changes in tax legislation). Management Discussion and Analysis 1

2 We present below the results of Banco Itau Holding considering the exchange rate variation effects on investments abroad over the statement accounts, in conformity with the nature of the related balance sheet account. Consolidated Statement of Income Note: In this Statement of Income the following reclassifications were made: the committed operation expenses were excluded from interest and charges on deposits and were included in marketable securities. Similarly, the financial result of Insurance, Pension Plans and Capitalization and the financial expenses with Technical Provisions of Insurance, Pension Plans and Capitalization were reclassified, compounding the result of securities and financial derivative instruments. Management Discussion and Analysis 2

3 Consolidated Balance Sheet 115, ,519 95,441 1,644 1,463 2,791 21,981 14,852 10,861 29,864 25,506 23,227 8,876 9,899 11, ,642 35,271 30,537 Other Credits 18,700 15,492 15,539 Other Assets 1,023 1, ,238 3,280 3, ,092 2,156 2, , ,799 98, ,461 94,994 89,273 34,414 34,826 32,498 18,294 11,747 12,447 5,349 5,085 4,287 1,224 1,866 3, ,455 12,570 10, ,263 Technical Provisions for Insurance, Pension Plans and Cap. 6,086 5,388 3,765 26,208 21,592 18, ,002 11,464 10,772 8, , ,799 98,875 Management Discussion and Analysis 3

4 Third Quarter of 2003 Net Income Banco Itaú Holding s results for the third quarter of 2003 amounted to R$ 807 million, that is, a 4.0% increase over the second quarter. During the third quarter of 2003, the Brazilian economic environment was characterized by the low volatility of the exchange rate and the reduction in the base interest rate (Selic) from 26% p.a. in June to 20% p.a. in September The reserve requirement basic rate for demand deposits decreased from 60% to 45%, contributing to improve the liquidity in the Brazilian financial system as a whole and leading to gains from the increased volume of transactions during the period. Net Income per thousand shares (R$) Net Income () Return on Equity ROE (%) Stockholder s equity () Efficiency Ratio (*) 3rdQ.03 2ndQ.03 1stQ.03 4thQ.02 3rdQ.02 2ndQ.02 1stQ.02 4thQ.01 At September 30, 2003, the institution s stockholder s equity totaled R$ 11,464 million, increasing by 6.4% from the June balance. Such rise relates primarily to the results recorded for the period and, to a lesser extent, to the positive effect of the mark-to-market adjustment of securities, the results of which are recorded directly in stockholder s equity, growing from R$ 338 million in June to R$ 434 million in September, net of tax effects and minority interests. During the period, annualized return on equity (ROE) was 31.3%, greater than 30% for the fifth consecutive quarter. The Basle Ratio reached 21.5% in September 2003, compared with 18.5% in June. The growth in this ratio arose chiefly from the reduced exchange exposure of the Bank, as well as the effect of the change from 1 to 0.50 of the F factor (applicable to transactions indexed to the exchange variation) in the computation formula of the Required Stockholder s Equity (PLE) prescribed by Circular 3194 of the Brazilian Central Bank on July 2, As a result of Banco Itaú Holding s efforts to improve both the operating efficiency and the productivity of its employees, the efficiency ratio reached 46.8% in the quarter, in line with management targets. It should be pointed out that the employees collective bargaining agreement became effective in the third quarter, leading to a 12.6% rise in salaries and benefits, except for the Food Staples Assistance, the amount of which was set up at R$ , and a R$ 1, one-time bonus. The total effect on Personnel Expenses reached R$ 108 million, fully accounted for in September (*) The Efficiency Ratio calculation is presented on page 19. Unrealized Result Unrealized results from the operations of Banco Itaú Holding (see Note 19), without taking into account the tax effects and minority interests, but arising only from the effect of the mark-to-market adjustment of financial instruments, reached R$ 2,070 million, a 11,1% increase from the prior quarter. It is worthwhile stressing that these amounts will be recorded as income when the underlying assets are traded. Furthermore, the excess allowance for loan losses, totaling R$ 913 million, is not included in such unrealized results. Management Discussion and Analysis 4

5 Third Quarter of 2003 Total Assets R$ Billion At September 30, 2003, total assets reached R$ 118,982 million, an 11.4% increase as compared to the prior quarter. Annualized return on total assets (ROA) stood at 2.7% in the period. To realize this analysis, was considered as if the process of transferring the operations with corporate clients, that are still registered in Itaú and will be transferred to the Itaú-BBA, had been concluded. Total assets of the Banking segment of Banco Itaú amounted to R$ 79,559 million, growing by 13.9% from the previous quarter. Total assets of the Banking segment of Banco Itaú-BBA stood at R$ 28,555 million, increasing by 2.4% compared to June Total assets of the Insurance, Capitalization and Pension Plan segment reached R$ 8,193 million, corresponding to a 12.7% growth compared to the previous period. Credit Operations (1) Sep-03 Jun-03 Mar-03 Dec-02 Sep-02 Jun-02 Mar-02 Dec-01 R$ Billion The performance of the Brazilian economy during the third quarter of 2003 was characterized by the low demand for credit, impacting the balance of the loan and financing portfolio of Banco Itaú Holding. In general, repayment of transactions improved significantly, thus contributing to reduce both individual and corporate portfolio balances. Accordingly, during the third quarter of 2003 the total balance of the credit portfolio, including guarantees, reached R$ 42,699 million, a 4.2% decrease from the prior quarter. Foreign Currency + Indexed to Foreign Currency Local Currency (1) Endorsements and Sureties included Non Performing Loans Ratio (2) - Individuals x Businesses (%) Non Performing Loans Ratio - Businesses Non Performing Loans Ratio Non Performing Loans Ratio - Individuals (2) Non Performing Loans: Loans for more than 60 days. The rate of non-performing loans was affected by the reduced demand for loans and financing during the third quarter of Non-performing loans decreased by 2.2% during the period to R$ 1,746 million, while the drop in the total balance of credit transactions was more severe 3.7% which explains the slight increase in the overall rate. The expense for allowances for loan losses amounted to R$ 659 million, increasing by 36.2% compared to the previous quarter. This rise stems primarily from the impact of the risk reassessment review of one single corporate client from the electric sector, with the related recording of a general allowance. During the quarter, the Bank aimed to diversify its credit offer, maintaining its conservative stance based on the selection of clients. Asset Under Management Sep Jun Mar Dec R$ Billion The balance of funds managed increased by 4.2% during the quarter to R$ 106,214 million. In this period, investment funds remained highly attractive, with growth in the participation of fixed rate income funds, driven by the expectation of falling interest rates in the future. Income from investment fund management totaled R$ 344 million in the third quarter of 2003, a R$ 37 million increase compared to the previous quarter. Sep Jun Mar Dec Deposits Mutual Funds + Portfolio Under Management Management Discussion and Analysis 5

6 Third Quarter of 2003 Net Income Composition by Segment Banking - Net Income Banking Itaú Banking Itaú-BBA Credit Cards - Net Income Segmentation Approximately twenty years ago, Banco Itaú Holding implemented a segmentation model for its operations which has since enabled the institution to meet the specific needs of its clients. This model is based on the enhancement of relationships with clients, allowing the Bank to understand better their different specific needs and therefore improve the effectiveness of its services by developing new products and fostering the specialization of its commercial managers. Growth by acquisitions and alliances is one of Banco Itaú Holding s key strategies. The Bank is always driven by the potential of value creation for its shareholders, looking for opportunities to expand its activities into segments that represent a potential diversification of income sources for the institution, not restricted only to interest rates. Over the past few years, the strength of the Brazilian economy benefited from the increased number of transactions via credit cards instead of post-dated checks, a not so good method of consumer financing. As a result of several campaigns designed to foster the use of credit cards, our profit from credit card transactions amounts to R$ 446 million year to date, corresponding to a 165% increase from the same period of the previous year. The volume of transactions grew by 24% period on period, to reach R$ 7,541 million for the nine-month period ending September 2003, compared to R$ 6,141 million for the same period of Insurance, Capitalization and Pension Plans - Net Income The good results obtained in this segment and the prospects of continuing development, in particular regarding the private pension plan area, are the reasons behind the Bank s efforts to expand these activities. In this connection, Itaú has recently announced the agreement with AGF Brasil Seguros and AGF do Brasil Participações Ltda., for the acquisition of AGF Vida e Previdência, Banco AGF and the portolio of group life insurance clients of AGF Seguros. Technical reserves of the Insurance, Premium Bond and Pension Plan segment increased by 13% in the third quarter of 2003, driven by the 40% growth in VGBL products during the same period, to reach R$ 1.6 billion. Portfolio Management and Mutual Funds - Net Income Income from investment fund management reached R$ 49 million in the third quarter of 2003, growing by 36.1% compared to the previous quarter. This rise stems primarily from the increased volume of resources in investment funds and managed portfolios, which amounted to R$ 71,801 million in September 2003, a 6.9% increase on June Management Discussion and Analysis 6

7 Banco Itaú Banking Profit from Banco Itaú Banking operations amounted to R$ 308 million in the third quarter of 2003, a 40.0% rise compared to the prior quarter. The financial margin on operations reached R$ 1,704 million, compared to R$ 1,521 million in the previous quarter, mainly as a result of the adequate posture for exchange risk, when the Bank aimed at eliminating the U.S. dollar gap. To this end, the Bank used derivatives with positions in Brazil linked to CDI, which made a positive contribution of R$ 268 million to the financial margin, compared with the prior quarter. During the period, expenses for the allowance for loan losses increased, chiefly as a result of the R$ 65 million increase in the allowance above the minimum required by the Brazilian Central Bank. Finally, the Administrative Expenses item was adversely impacted by a R$ 108 million in increase in expenses arising from the bank employees collective agreement for the period 2003/2004. Banco Itaú-BBA Banking Banco Itaú-BBA Banking segment results reached R$ 190 million in the third quarter of 2003, growing by 1.6% compared to the previous quarter. The financial margin was in line in relation to the previous quarter. The results for the period were adversely impacted by the recording of a general allowance for loan losses, arising from the risk assessment review of a single client in the electric sector, which was offset by the positive tax effects from different tax treatments for exchange variations on foreign investments and for the results of hedges of these investments. Credit Cards Profit from credit card operations amounted to R$ 148 million in the third quarter of 2003, a 10.8% drop from the second quarter. It should be noted that effective July 2003, the Credicard company no longer pays special dividends. This change gave rise to a one-time additional expense of R$ 16 million to be recovered through the future results of this segment, considering that the results of the credit card base will be recognized as profit sharing. Insurance, Capitalization and Pension Plans The net income of the insurance, premium bond and pension plan segment for the third quarter of 2003 increased by 38.7% compared with the prior quarter results. The significant performance of Technical Reserves over the last few quarters was a relevant factor for the growth in segment results. Technical Reserves increased by 13% from R$ 5,388 million in the second quarter to R$ 6,086 million in the third quarter. Net income also improved due to higher yields of securities indexed to IGP-M and the realization of a portion of the variable income portfolio, leading to an increase in the segment s financial income. Financial investments outperformed by R$ 8.4 million (after taxes) the CDI rates for the quarter. Portfolio Management and Mutual Funds Income from management of investment funds totaled R$ 49 million in the third quarter of 2003, increasing by 36.1% compared to the previous quarter. The volume of resources in investment funds and managed portfolios reached R$ 71,801 million in September 2003, a 6.9% increase compared to June, representing a 6.1% contribution to the net income of the group for the period, compared to a 4.6% contribution in the previous quarter. Corporate During the third quarter, corporate results were impacted by the full amortization of the goodwill paid on the acquisition of 100% of the outstanding shares issued by the Banestado, Bemge and Beg banks, when these institutions had their listed company registrations cancelled. This expense totaled R$ 15 million, after taxes, recorded in Extraordinary Loss. Management Discussion and Analysis 7

8 Third Quarter of 2003 The table below shows the relevant variation occurred in the cosolidated statement of income between the third and the second quarters of STATEMENT OF INCOME BY SEGMENT CONSOLIDATED NET INCOME (*) The above table shows the Pro-Forma Statement of Income of the Itaú Banking Segment, considered as if the corporate reorganization currently under way had been concluded. The allocation of the operations was done in a purely informative manner, with the objective of showing roughly how the operation of the Itaú Banking segment would look. Adjustments are still to be carried out. Taxes levied on income were calculated at the rate of 34% for each segment, while the tax increase or decrease as a result of temporary differences and other tax effects was allocated to Corporation.. Management Discussion and Analysis 8