Itau Unibanco Holding S.a. · BMFBOVESPA:ITUB3
Itau Unibanco — Investor Day (September 2017)
148 slides from Itau Unibanco's investor day presentation, Sep 28, 2017
Slide 1: Business Model and Value Creation
Business Model and Value Creation Candido Bracher Executive President & CEO September 26, 2017 www.itau.com.br/investor-relations 1
Slide 2: Concept: Value Creation
Concept Recurring Net Income (Cost of Capital x Allocated Capital) VALUE CREATION 2
Slide 3: Value Creation
Value Creation Achieving profit ability higher than our cost of capital We have there fore created the business model that can be applicable to business with varying degrees of risk, thus different Regulatory Capital Cost of Capital capital requirements: Rules in effect issued by the Return Rate req
Slide 4: In 2012 – Revising the Business Model
In 2012 –Revising the Business Model Economic-financial scenario in 2011/2012... Slowdown in the economic activity in Brazil and abroad Increased volatility and uncertainties Going after higher quality gains The challenge to achieve better results Global Basel III Where were we? 4
Slide 5: Strategy disclosed in 2012 at APIMEC
In 2012 –Revising the Business Model Itaú Unibanco: Strategy disclosed in 2012 at APIMEC Economic-financial scenario in 2011/2012... Revising the mix of credit products Credit with returns atleast equal to cost of capital Slowdown in the economic Reducing the portfolio risk profile for lower volatil
Slide 6: Sustainable Performance
Sustainable Performance Stockholders’ Equity(R$ Billion) June/12 57% June/17 75.6 118.4 Recurring Net Recurring Income(R$ Billion) ROE (%) Dividends& Net Interest on Capital (R$ Billion) 1H12 1H17 1H12 1H17 1.4 242% 4.9 1H12 1H17 7.1 12.3 19.7 21.8 73% 2012 2016 2.1p.p. 4.5 121% 10.0 Value Creation(
Slide 7: Business Model
Business Model 1(st)Halfof2017 1(st)Halfof2012 Insurance Insurance Capital Capital Consolidated Credit Operations Trading Consolidated Credit Operations Trading In R$ billion Surplus Surplus and Services and Services Operating Revenues 54.5 28.3 23.7 1.0 1.4 39.4 22.8 15.5 0.6 0.4 Managerial Financi
Slide 8: Revising the mix of credit products
Revising the mix of credit products 7
Slide 9: Credit with returns at least equal to cost of capital
Credit with returns atleast equal to cost of capital Credit RWA Regulatory Capital Value Creation-Credit 63,9% 63.9% 17.4% 17.8% 57.9% 57,9% 58.4% 58,4% 141% 51,5% 51.5% 50.0% 15.7% 15.9% 0.7% 47,8% 47.8% 15.1% 135% 135% 0.6% 14.0% 16.0% 58.8 58,8 56.6 55,3 55.3 0.5% 48.4 48,4 49.8 49,8 11.1% 14.5%
Slide 10: Reducing the portfolio risk profile for lower volatility - Brazil
Reducing the portfolio risk profile(1)for lower volatility-Brazil Credit Portfolio(1)(June/12 to June/17) +7.8% R$ 414.6 R$ 384.7 billion billion Payroll and Mortgage Loans: 7% 20% Vehicles: 15% 3% Very Small, Small, and Middle- 15% Market Loans: 21% Corporate Loans: 40% 42% Credit Card and Personal
Slide 11: Reducing the NPL Ratio
Reducing the NPL Ratio 90-day NPL –Total -Brazil 5.6% 5.2% 5.1% 4.4% 4.6% 5.6% 4.2% + 70 bps 4.6% 4.5% 3.7% 3.9% 3.6% June/12 June/13 June/14 June/15 June/16 June/17 Total- Brasil Total –Brazil Total –Brazil –Simulated Mix - Brasil - Simulação Mix 90-day NPL –Individuals-Brazil 7.7% 7.5% 6.7% 6.8% 7
Slide 12: Robust Provisions with Lower Expenses
Robust Provisions with Lower Expenses Provision for Loan Losses/ Credit Portfolio(1)-Annualized 7.0% Without Corp Banca With Itaú Corp Banca 5.2% 5.0% 4.3% 4.1% 4.0% 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 (1) Average balance of credit portfolio without endorsements and sureties, including the last two quarte
Slide 13: Our Coverage Ratio: What It Means
Our Coverage Ratio: What It Means And How It Is Impacted Currently 3 types Overdue Credit operation sare rated in conformity with the Central Bank of Brazil requirements, Rating(1) AA A B C D E F G H including the minimum provision required according to the number of days overdue for Provision (%) 0
Slide 14: Total Allowance by Type of Risk
Total Allowance byType of Risk-Consolidated Allocation of Total Allowance(*)by Type of: Risk Segment Coverage Ratio(%) Consolidated June/17 (R$ billion) 37.4 37.4 166% Potential³ 17.2 Retail - Brazil¹ 19.7 715% 243% Wholesale - Brazil¹ Aggravated 9.9 13.8 Latin America² 245% Overdue 10.3 3.9 Operati
Slide 15: Focus on Services and Insurance Operations
Focus on Services and Insurance Operations 14
Slide 16: Focus on Services and Insurance Operations
Focus on Services andInsuranceOperations¹ OperatingRevenues² and Recurring Value Creation Regulatory Capital (R$ billion) Net Income(R$ billion) Insurance Operations& Services (R$ billion) 59% 26.9% 21.7 23.1 26.0% 26.3% 25.4% 21.2 25.1% 18.1 15.9 4.5 4.6 4.5 19.5% 29.1 29,1 30,0 30.0 14.5 6.5 27.1
Slide 17: Operating Revenues after Retained Claims
Focus on Services and Insurance Operations–Operating Revenues after Retained Claims 1(st) half of 2017 (R$ 23.1 billion) 1(st) half of 2012 (R$ 14.5 billion) Other Other 3% ALM Insurance Insurance Operations(1) 8% Operations(1)ALM 13% 15% 19% 12% Asset Management 10% 13% REDE Asset 8% REDE(2)Managem
Slide 18: Value Creation
Value Creation 17
Slide 19: Recurring Net Income
Recurring Net Income (R$ billion) 11.9 12.3 10.7 9.5 7.1 7.1 6.3 6.4 6.5 5.9 4.7 4.1 3.2 4.7 4.2 3.4 2.5 2.1 0.6 0.5 0.3 0.3 0.1 (0.1) 1H12 1H13 1H14 1H15 1H16 1H17 Consolidated(1) Insurance and Services Credit Trading ¹ In addition to Insurance and Services, Credit and Trading, it also includes Cap
Slide 20: Value Creation (R$ billion)
Value Creation(R$ billion) 4.5 4.6 4.5 3.7 3.6 3.2 4.6 4.1 3.3 1.8 2.2 1.7 0.5 0.3 0.3 (0.0) (0.2) (0.3) 0.0 (0.1) (0.4) (0.6) (1.7) (1.2) 1H12 1H13 1H14 1H15 1H16 1H17 Consolidated(1) Insurance and Services Credit Trading ¹ In addition to Insurance and Services, Credit and Trading, it also includes
Slide 21: Value Creation Compared to the Market
Value Creation Compared to the Market 20
Slide 22: Value Creation - Consolidated
Value Creation –Consolidated(1) R$ bilhões Criação de Valor Value Creation R$ billion Value Creation/ Average Stockholders’ Equity(%) 4.6 4.1 9.5% 3.0 3.4 8.1% 2.9 7.1% 1.2 1.8 5.9% 2.2 0.1 0.7 4.8% 1.7 3.4% 3.1% 2.9% 1.0% 0.1% 0.5% (7.0) -4,9% 1H12 1H13 1H14 1H15 1H16 1H17 1H12 1H13 1H14 1H15 1H16
Slide 23: What about the future?
What about the future? 22
Slide 24: 2017 Forecast
2017 Forecast We kept unchanged the ranges of our 2017 forecast Consolidated¹ Brazil(1,6) Total Credit Portfolio² From 0.0% to 4.0% From -2.0% to 2.0% Financial Margin with Clients(3) From-4.2% to -0.8% From-5.2% to -1.8% (Ex-Impairment and Discounts Granted) From R$ 15.5 billion From R$ 13.5 billio
Slide 25: Priority Strategic Topics
Priority Strategic Topics Risk Management Comply with the Risk Appetite guidelines Focus on Client of the Board of Directors; Increase even more the focus on client; Products+ Responsibility of all employees. Service Culture; Client Satisfaction. • Credit • Market • Client satisfaction in Retail bus
Slide 26: Changes in Preferred Share Price (ITUB4)
Changes in Preferred Share Price(ITUB4) 2012 –Aug/17 5 Years 12 Months Compound Annual 15.01% 18.26% 30.00% 221 Growth 10.25% 13.26% 23.81% Rate (CAGR) 10.92% 11.15% 12.05% 180 3.99% 4.42% 22.34% 174 125 100 Dec/11 June/12 Dec/12 June/13 Dec/13 June/14 Dec/14 June/15 Dec/15 June/16 Dec/16 Aug/17 Açõ
Slide 27: General Director's Office for Wholesale
DGA General Director´s Office for Wholesale Eduardo Vassimon General Wholesale Manager
Slide 28: Agenda
Agenda How can we achieve results in a challenging scenario 1. General Information a. General Director´s Office for Wholesale -DGA b. Client Satisfaction c. Segmentation 2. Bottom-line Drivers –Legal entities a. Service Revenue b. Sustainable Results from Loans and Leases 2
Slide 29: Agenda
Agenda How can we achieve results in a challenging scenario 1. General Information a. General Director´s Office for Wholesale -DGA b. Client Satisfaction c. Segmentation 2. Bottom-line Drivers –Legal entities a. Service Revenue b. Sustainable Results from Loans and Leases 3
Slide 30: General Director's Office for Wholesale
1.a. | General Director´s Office for Wholesale Base date June17 Legal Entities Individuals LatAm Revenue Income/ Investment COL Private CIB 5 Bank MM R$ 4Bn investments Large Personnalité PER 400MM 10k income Corporate 200 PAR MM Uniclass 4k 30 MiddleMarket income CHL URU MM Varejo Micro and Small C
Slide 31: Customer Satisfaction
1.b. | Customer Satisfaction – Service highly recognized by our clients 2016 7 .5 8 8.5 9 9.5 10 1(st) Highlights: CIB, Large, Coporate • Innovation/ Technology 1(ST) • Officer / Specialists Middle Market • Client Service Model • Product Offerings Market Average (ex-Itaú) Source: Officina Sophia | 2
Slide 32: Segmentation - Wholesale client service model
1.c. | Segmentation – Wholesale client service model –Legal Entities A thorough review of the client service model, tailoring the value proposition to the different client profiles Client Segmentation Niches Credit (Brazil) Granting Restructuring Financial Institutions Financial Sponsors CIB e CIB e
Slide 33: Agenda
Agenda How can we achieve results in a challenging scenario 1. General Information a. General Director´s Office for Wholesale -DGA b. Client Satisfaction c. Segmentation 2. Bottom-line Drivers –Legal entities a. Service Revenue b. Sustainable Results from Loans and Leases 7
Slide 34: Bottom-line Drivers - Legal Entities
2. | Bottom-lineDrivers –Legal Entities Services Loans and Leases Competitive advantages Management of the Management of the to grow service revenue Portfolio´s Risks Portfolio´s Profitability 8
Slide 35: Bottom-line Drivers - Banking Product
2. | Bottom-line Drivers –Legal Entities Base date June17 Banking Product Excluding return on capital Other Forex Investment Loans and Services Banking Leases 48% 52% Cash Management Fonte: Itaú Unibanco –Finanças e Planejamento DGA 9
Slide 36: Service Revenue - Distinguishing factors (1/2)
2.a. | Service Revenue – Distinguishing factors to grow the Service revenue (1/2) Base date June17 Banking Product* CIB + Large+ Corporate + Middle Market Base 100 Checking accounts 106 100 Receivables 21% Payables Other 48% (47%) Cash HR Solutions 7% Management 57% 51 50 Forex recognized as the Bes
Slide 37: Service Revenue - Distinguishing factors (2/2)
2.a. | Service Revenue – Distinguishing factors to grow the Service revenue (2/2) Base date June17 Banking Product* Banking Product 100 107 115 CIB + Large+ Corporate + Middle Market Base 100 64 Base 100 100 106 105 106 57% FixedIncome 57 100 Floating Income Cash Management 2014 2015 2016 1S17 NEC W
Slide 38: Portfolio Management - Risk Dimension (1/4)
2.b. | Sustainable Results from Loans and Leases – Portfolio Management (1/4) Risk Dimension Lessons learned What we did Risk Clusters Term and Avoid large concentrations by Rating Collateral A simple and Volume individual clients, especially in the comprehensive view of Industry Economic highest ri
Slide 39: Portfolio Management - Risk Dimension (2/4)
2.b. | Sustainable Results from Loans and Leases – Portfolio Management (2/4) Risk Dimension Results Risk Concentration in DGA’s Loans and Leases Portfolio Bacen+ Anbima -Monthly Brazil RiskBase –Base Date: June2017 Changes in Changes in 12 months 12 months Lower Risks 82% 3p.p. 1p.p. 69% Lower Risk
Slide 40: Portfolio Management - Risk Dimension (3/4)
2.b. | Sustainable Results from Loans and Leases – Portfolio Management (3/4) Risk Dimension Results Balance Over 90 (CIB + Large+ Corporate) Volume (base 100) 511 362 391 314 280 179 226 100 122 83 136 136 Lowest historical level of overdue jan/12 jun/12 jan/13 jun/13 jan/14 jun/14 jan/15 jun/15 ja
Slide 41: Portfolio Management - Risk Dimension (4/4)
2.b. | Sustainable Results from Loans and Leases – Portfolio Management (4/4) Risk Dimension Backtest| DGA Portfolio Management Model 2013 to2017 Base 100 +24% If the Management -9% Model had been applied since 2013, significant losses might have been avoided, even 100 91 With 100 With though with a
Slide 42: Portfolio Management - Profitability Dimension
2.b. | Sustainable Results from Loans and Leases – Portfolio Management Profitability Dimension What we did to increase Profitability Prospective pricing • Pricing based on the portfolio risk throughout the life of the operations • Global view of the customer relationship Governance • Specific forum
Slide 43: Key Message
Key Message Adopt a specialized model to increase the clients’ satisfaction while reducing the volatility of the results by improved credit risk management and service revenue growth 17
Slide 44: DGA General Director's Office for Wholesale
DGA General Director’s Office for Wholesale
Slide 45: Retail Banking
Retail Banking Marcio Schettini General Retail Manager 1
Slide 46: Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 01
Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 01
Slide 47: Retail Banking
Retail Banking Large corporations 27.4 MM Account Holders and Savers Medium 26 MM Clients -Individuals businesses 1.4 MM Itaú Empresas 4,396 Branches + CSBs Small businesses 208 Bi Credit Portfolio 531 Bi Funds + Deposits Source: www.itau.com.br/relacoes-com-investidores Very small businesses BRANCH
Slide 48: Profitability | Evolution - Retail Banking
Profitability | Evolution -Retail Banking Retail Banking -1% 9% 34,9 34,7 Recurring Net Operating Income 5,5 6 Revenues (R$MM) (R$MM) 1H16 1H17 1H16 1H17 3% -17% Cost of Administrative 15,6 16 Credit 7,6 6,3 Costs (R$MM) (R$MM) 1H16 1H17 1H16 1H17 03
Slide 49: Profitability | Credit Granting
Profitability | Evolution -Retail Banking *Base 100 Credit Granting 12% 9% Individuals* 100 112 Companies* 100 109 1H16 1H17 1H16 1H17 04
Slide 50: Profitability | Retail Banking
Profitability | Evolution -Retail Banking *Base 100 Retail Banking 15% 14% 100 115 Net income 100 114 Net income per branch* per client* 1H16 1H17 1H16 1H17 10% 10% Net income per 110 Net income per 100 110 100 commercial employee* manager* 1H16 1H17 1H16 1H17 05
Slide 51: Profitability | Credit Card and Payroll Loans
Profitability | Evolution -Retail Banking *Base 100 Credit Card 8% 25% Recurring Net 125 100 108 100 Credit Income* Card Revenues* 1H16 1H17 1H16 1H17 Payroll Loans 13% 22% 122 Operating 100 113 100 Revenues* Recurring Net Income* 06 1H16 1H17 1H16 1H17
Slide 52: Profitability | Rede
Profitability | Evolution -Retail Banking *Base 100 Rede -11% -17% 100 Recurring Net 100 89 Active 83 Income* Accounts* 1H16 1H17 1H16 1H17 2016 1Q 2017 1Q 1Q17 x 1Q16 Operating Revenues 100 97 -3% Administrative Costs 100 110 10% Recurring Net Income 100 89 -11% 07
Slide 53: Profitability | Insurance and Premium Bonds
Profitability | Evolution-Retail Banking *Base 100 Insurance and Premium Bonds Insurance and Premium Bonds Insurance Run off¹ and Total Bancassurance Portfolio Sale² -15% -4% -46% 100 100 96 100 Operating 85 54 Revenues* 1H16 1H17 1H16 1H17 1H16 1H17 13% 3% • Focus on distribution • Expansion of the
Slide 54: Retail Banking | Strategic Competencies Matrix
Retail Banking| Strategic Competencies Matrix business Retail Retail Cards and Payroll Real Banking - Banking - Rede Insurance Vehicles Consortium Financing Loans Estate Individuals Companies Team Distribution Commercial effectiveness Products Data Analytics Service Score Card channels Credit and Co
Slide 55: Schedule 9:41 Profitability Manuten çãodasmargens Risk Management redução das perdasde crédito People permitem uma
Schedule 9:41 Profitability Manuten çãodasmargens Risk Management redução das perdasde crédito People permitem uma retomada do lucro líquido com custos sob controle. Client Digital Satisfaction Transformation
Slide 56: Risk Management - Credit - Individuals
Risk Management –Credit -Individuals Portfolio per Rating Quality of Granting Rating Crediário 4% 3% Rating - Installment Payment 26% 19% C 24% 25% 16% 19% B2 37% B1 E 35% 28% A 20% 39% 36% D jul/15 jul/17 July/15 July/17 C Payroll Loans Granted 8% 5% A-B 36% 14% SIAPE 33% 15% 1% 11% EP 79% OP 66% j
Slide 57: Risk Management - Credit - Individuals NPL
Risk Management –Credit -Individuals Base 100* 15-90-day NPL NPL over 90 days 125 100 120 108 92 98 85 93 80 80 82 100,0 88 87 81 76 69 69 74 71 67 60 jan/13 sep/13 set/13 sept/13 may/14 mai/14 jan/15 set/15 sep/15 mai/16 may/16 jan/17 jan/13 sep/13 set/13 mai/14 may/14 jan/15 sep/15 set/15 mai/16 m
Slide 58: Risk Management - Credit - Medium businesses
Risk Management –Credit –Medium businesses Portfolio per Rating Portfolio per Rating Working Capital Granted 12% 10% 10% 1% 18% 15% E - H 35% 22% D E-H 81% C 27% 55% A-B D 31% jul/15 jul/17 C July/15 July/17 A-B 30% 17% 49% 34% Without Guarantee 70% 83% With Guarantee july/15 jul/15 july/17 jul/17 j
Slide 59: Risk Management - Credit - Medium businesses NPL
Risk Management –Credit –Medium businesses Base 100* 15-90-day NPL NPL over 90 days 140 155 152 112 129 111 111 100 100 87 91 89 90 93 82 70 67 71 70 51 59 65 59 57 46 43 jan/13 set/13 mai/14 jan/15 set/15 mai/16 jan/17 jan/13 jan/13 set/13 set/13 may/14 mai/14 jan/15 jan/15 sep/15 set/15 may/16 mai
Slide 60: Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 15
Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 15
Slide 61: People | Who we are
People| Who we are The General Retail Office has 40,000 employees, 87% in business departments and 13% in administrative departments Distribution Women: 64% per Gender Men: 36% Distribution per Age 4 % 27% 68% 2% Baby Boomers X Generation Y Generation Millennials >=52 37-51 years 22-36 years <=21 ye
Slide 62: People | Evolution
People| Evolution The 90s TEAM The 2017 TEAM 17
Slide 63: Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 18
Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 18
Slide 64: Client Satisfaction - Indicators
Client Satisfaction -Indicators Accepted Complaints| Historical ranking Great evolution in Complaint Ratios 2 2 4 4 Average position in 5 5 the ranking per 1Q16 2Qi16 3Q16 4Q16 1Q17 2Q17 quarter Procon| Complaints (thousand) -10,6% -23,6% Itaú Highest +3,1% -2,9% Other banks (largest 5) reduction am
Slide 65: Client Satisfaction | Competitiveness Survey
Client Satisfaction | Competitiveness Survey 2nd 2015 2nd 2016 6.0 6.5 7.0 7.5 8.0 8.5 9.0 6.0 6.5 7.0 7.5 8.0 8.5 9.0 Itaú Branches Itaú Uniclass Itaú Personnalité Itaú Empresas Market average * Question modified in 2016. 20
Slide 66: Client Satisfaction
Client Satisfaction Operating in client experience dimensions Time and effort NPS Single measure for client Integrity satisfaction Management of expectations Client experience dimensions Empathy Customization Purposefulness 21
Slide 67: Client Satisfaction | Evolution in our branches
Client Satisfaction | Evolution in our branches The90s BRANCH The 2017 BRANCH 22
Slide 68: Client Satisfaction | the pillars
Client Satisfaction | 360 the pillars_ Experts in bringing Knowing and opportunities on a understanding timely basis you The best Itaú investments and a Always making selection of the best choices in recommendations with other institutions transparency and impartiality Meeting client needs in all Se
Slide 69: Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 24
Schedule 9:41 Profitability Risk Management People Client Digital Satisfaction Transformation 24
Slide 70: Digital Transformation | Highly-connected clients and business
Digital Transformation | Highly-connected clients and business A highly-connected client A highly connected bank Design UX IT 12:00pm 6:30pm CRM Risks 9:00am 7:30pm Bank 8:30am Franchises Legal 8:00pm Products Digital 7:30am MKT business 25
Slide 71: Digital Transformation | Evolution of digital clients
Digital Transformation | Evolution of digital clients Individuals Companies +40% +23% Total clients 6,2 MM 8,7 MM 840,000 1,036,000 5,2 7,5 803 915 3,2 4,4 561 227 (2,9) (2,3) (0,9) (1,0) (3,3) (4,2) (613) (190) (37) (475) (440) (121) 2014 2017 (YTD) 2014 +147% 2017 (YTD) Internet +134% Mobile Mobil
Slide 72: Digital transformation | profitability
Digital transformation | profitability 2015 2016 2017 Physical Digital 32% 66% 69% 25% 7% 39% 42% 26% Physical branch 27% Recurring Net Income – Digital channel Individuals + 68% 34% 31% Companies Digital branch Operating Revenues -Physical Net Income -Physical Operating Revenues -Digital Net Income
Slide 73: Digital Transformation | Evolution of Digital Branches
Digital Transformation | Evolution of Digital Branches #individuals #companies Personnalité Clients UniclassClients (in thousands) (in thousands) 100 % 506 432 managers with: 338 1,7 1,3 0,8 2015 2016 2017 2015 2016 2017 Personnalité Branches Uniclass Branches smartphone tablet (conference call) 77
Slide 74: Digital Transformation | Tools for Digital Branches
Digital Transformation | Tools for Digital Branches e-mail | telephone | sms| conference call | online messages Client always served Conference calls Remote business with experts formalization TOIP for Automatically 100% managers sensitized tools 29
Slide 75: Digital Transformation | Digital Tools - Medium businesses
Digital Transformation | Digital Tools –Medium businesses conference calls | tablet smartphone | app for self-training Manager always available Tablet for business Conference calls with operations experts App for expeditious Smartphone for self-training 100% managers 30
Slide 76: Video Uniclass Digital / Video Emps Digital
Video Uniclass Digital Video Emps Digital
Slide 77: Digital Transformation | New service platforms
Digital Transformation | New service platforms Search Chat +900,000 chats/month + 4 MM searches/month 16% of clients • Payments • Transfers Virtual Assistant (Artificial intelligence) • Quick consultations (e.g.: balances, statements, Understands 97% of questions investments) Retains 74% Already ava
Slide 78: Digital Transformation | Mobile novelties
Ajustaranimação p/ automático Digital Transformation | Mobile novelties e trocar o iphone. Customized expenses Issuing and management consulting payment individuals slips companies 97% approved the pilot Issuing payment slips on a single screen Simple and online sharing Detailed consultation, with p
Slide 79: Digital Transformation | Analytics evolution
Centralidade Digital Transformation | Analytics evolution no cliente People Tecnologia Web Analytics Big Data Web Analytics + Big Data Monthly volumes Web analytics in data processing Results data from digital conversion in the branch Digital events for + 1 TB interactions 2-5x branches + 19 MM cook
Slide 80: Digital Transformation | Real-time monitoring of operations
Digital Transformation | Real-time monitoring of operations 34
Slide 81: Digital Transformation | Evolution of APPs
Digital Transformation| Evolution of APPs APP ITAÚ APP ABRECONTA Individuals 9:41 First Bank Ranked First proving the opening of in client accounts through mobile satisfaction 4.1 4.0 3.5 4.5 Elected the best App (Folha de SP newspaper -May/17) Must-have App (App store May/17) APP LIGHT APP Credit C
Slide 82: Digital Transformation | Digital Strategy
Digital Transformation| Digital Strategy ACHIEVEMENT TRANSACTION + CONSULTATION 1 year operation + 11 MM consultations and +180,000 accounts transactions opened in 2017 through digital channels SALES CLIENT SERVICE + 59% increase 80,000 chats per in sales in month 2017 (compared to 4 MM searches 201
Slide 83: Video Mobile
Video Mobile
Slide 84: DGV - General Retail Manager
DGV – General Retail Manager
Slide 85: Digital Transformation
Digital Transformation André Sapoznik Vice-President of Technology and Operations 1
Slide 86: Technology backbone of Itaú's evolution model
Technology backbone of Itaú’ sevolution model Technology benefiting customers @ Branch ATM CallCenter Internet Mobile Digital Voice Since Since Since banking banking Branch Assistant 1924 1983 1990 Since Since Since Since 1995 2008 2013 2017 3.199 3MM Branches 2,5BI 360 MM 300 MM 1,2 BI searches and
Slide 87: Digital technology transforming the banking experience
Digital technology transforming the banking experience Itaúcustomer’s transactions Digital Channels (internet and mobile) Traditional Channels (branches, ATM sand callcenter) In2017... + 1MM of digital customers 74% 80% 70% 73% 29% in mobile 62% 67% 60% 58% 57% 53% 11BI transactions in digital 43% 4
Slide 88: Digital Itaú business in a global scale
Digital Itaú businessin a global scale Traditional Itaú Digital Itaú 7MM mobile Bigger than 3.828 = 2 283 monthly accesses Denmark Branches and PABs (1,2)(MM)(m) Maracanãs population 46.000 100K The whole Rock ATMs 217 In Rio accessing simultane ous our appat the stacked is the Empire States access
Slide 89: Digital Transformation our cornerstones
Digital Transformation our cornerstones Customer Centricity anew bank concept philosophy People Technology efficiency new digital and ownership tribes in the for business finance market development 5
Slide 90: Digital Transformation: People
Digital Transformation our cornerstones Relationship evolution in the Entrepreneurship Age Itaú’s new human tissue: digital tribes and traditional professional side by side People new digital 1 tribes in the finance market 6
Slide 91: New values: Entrepreneurship Age
Novosvalores eradoempreendedorismo New values Entrepreneur ship Age People 10 years ago Today Hierarchy Autonomy Offices Company Close leadership Conservative Change and adapt Competition Collaboration Payback Values Purpose Stability Flexibility Acceptance Questioning Classic education backgroud Ne
Slide 92: Digital tribes: the growth of the new bank
Digitaltribes the growth of the new bank People Traditional Techies Professionals engineering design management ux +13X economy digital media professionals of law data science the neweconomy accounting web analytics cyber security 433 298 33 2015 2016 2017 #digital experts 8
Slide 93: Case: fraud and money laundering prevention challenge
Centralidade Case the fraud and money laundering prevention challenge no cliente How to verify if a company really exists? People Pessoas Tecnologia The traditional statistician (“HowcanI identifyriskier)analyzing mydatabase?”(companies by) 1. Account and 2. Linear 3. Face-to-face visits financial v
Slide 94: Case: fraud and money laundering prevention challenge
Case the fraud and money laundering prevention challenge How to verify if a company really exists? People The traditional statistician “How can I identify riskier companies by analyzing my database?” The datascientist "I betweare ableto extract information about establishments from images to prevent
Slide 95: People.com: career in the techie world
Centralidade People.com carrier in the techie world no cliente People Pessoas Tecnologia New language New development Linguagem e mídias and work model mais próximas ao público and attraction model Incentive to customized self- Language and media development +5k closer to the target public Cientista
Slide 96: Cubo: entrepreneurship reference
Centralidade Cubo 4x more entrepreneurship no cliente People Pessoas Tecnologia Entrepreneur ship reference Entrepreneur ship reference hub in Brazil hub in the world Total area +5K m2 Total area +20K m2 Startups 50 Startups +210 Entrepreneurs 4x Entrepreneurs and residents 250 and residents +1.000
Slide 97: Technology-business symbiosis
Digital Transformation our cornerstones Technology-business symbiosis as a fundamental axis Quick decisions, precise choices: keys for accelerating digital transformation Technology 2 efficiency and ownership for business development 13
Slide 98: New solutions: agent of transformation
Centralidade New solutions the agenda that seemst obeanagent of transformation no cliente Technology Pessoas Tecnologia Data Center +1000 APIs Appsbuiltwith 96% ofAPI R$3.4bi invested in buildings and reusage equipments Biggest green data center of Latin America, LEED Certification (Leadership in En
Slide 99: Mindset and working model
Centralidade Mind set and working model the real changeepi center no cliente Technology Pessoas Tecnologia Scenario Traditional Requirements Business command, technology evaluates the technical solution and executes them. Whydiditwork? Longcycles of technological change Restricted access to cutting-
Slide 100: Mindset and working model
Centralidade Mindset and working model the real change epicenter no cliente Technology Pessoas Tecnologia Scenario Digital Traditional Business and Joint conception of technology co-create Bussiness command, best solutions transformative solutions technology evaluates the technical solution and exec
Slide 101: Mindset and working model: Mobile example
Centralidade Mindset and working model the real change epicenter no cliente Technology Pessoas Tecnologia Mobile example Specialize to Integrate to Delegate to Home and Customer Payments and Bank statement Service Transfers strengthen accelerate exponentiate Reference Creation of Determining Leaders
Slide 102: Technology: increasing and sustainable results
Centralidade Technology increasing and sustainable results no cliente Technology Pessoas Tecnologia Efficiency Time to Market Quality More value Reduced cycles of Faster tests and homologation, delivery deliverables lean and automated Synchronized Lean e Agile Methods planning Ever other week new ap
Slide 103: Cyber security: fluid and safe experience
Centralidade Cyber security fluid and safe experience no cliente Technology Pessoas Tecnologia Attack sophistication increases every year 12/05/2017 Ciberataques em larga escala atingem empresas no mundo e afetam Brasil Balance Security is Ataques ocorreram em ao menos 74 países, com 'vírus de betwe
Slide 104: Customer Centricity: a new bank concept
Digital Transformation our cornerstones Customer Centricity a new bank concept 3 philosophy Customers in charge: the new digital hierarchy From research to big data: insights in scale for new business model solutions 20
Slide 105: Customer-centricity: the imperative
Customer centricity Centralidade Customer-centricity the imperative no cliente Pessoas Tecnologia Customers increasingly are PROTAGONISTS in the economic model Companies and Experiences customers co-creating Reputation Hoje solutions Companies listening Ethics and Services to customers in order 90-2
Slide 106: Case: the low income challenge
Customer centricity Centralidade Case the low income challenge no cliente Pessoas Tecnologia Bank as a protagonist 4 Final solution 1 Hypothesis generation 3 Co-creation with They don’t have smartphones customers and SMS familiarity testing 2 Learning synthesis Benchmark M-Pesa 2 Navigation needs to
Slide 107: Case: the SMS that turned into an app
Customer centricity Centralidade Case the SMS that turned into an app no cliente Pessoas Tecnologia “Featured Apps” 93% loyalty (Google Play – May/17) 400k “Best apps” 80% of the retail public (Exame – Jun/17) users in 3 months +20% in access with debit card password Lighter app and low data usage S
Slide 108: Centricity @scale: the challenge
Customer centricity Centralidade Centricity @scale the challenge no cliente Pessoas Tecnologia Qualitative Quantitative information information What do the How can we customers understand the explicitly say? customers without asking him/her? 24
Slide 109: Centricity @scale: the challenge
Customer centricity Centralidade Centricity @scale the challenge no cliente Pessoas Tecnologia Beta testers Qualitative Social Media Quantitative Qualitative Technological-engaged Spontaneous testimonials, customers that promoteinformation comments and conversation Information information feedback o
Slide 110: Centricity @scale: web analytics
Customer centricity Centralidade Centricity @scale the challenge no cliente Pessoas Tecnologia Qualitative information What do the Web Analytics customers explicitly say? 1,6BI page views 160MM 34MM 21MM 14MM 1,2MM visits Visitors Visitors on Visitors on Visitors on passing credit pages investment f
Slide 111: Analyzing the customer web analytics
Customer centricity Centralidade Analyzing the customer web analytics no cliente Pessoas Tecnologia One user Uniclass Detailed balance(27%) Statement (21%) Close (16%) 32% | New internet session 12% | Portals Investments (14%) Home (8%) 20% | Other bank 9% | E-commerce Home Checking account (13%) Ca
Slide 112: Digital Transformation: Talent and technology
Digital Transformation Cutting-edge technology with Customer no talent is a commodity. centricity Talent with no focus on customer generates irrelevant solutions. Focus on customer without technology is in the past. #this changes the world This transformation People Technology has already begun 28
Slide 113: Slide 113
Slide 114: Optimizing the Use of Capital
Optimizing the Use of Capital Roberto Setubal Co-Chairman of the Board of Directors September 26, 2017 www.itau.com.br/investor-relations
Slide 115: Regulatory Capital
Regulatory Capital Central Banks define the minimum capital requirement for banks. The purpose is to ensure the bank’s financial health. 2
Slide 116: Regulatory Capital
Regulatory Capital Central Banks define the minimum capital requirement for banks. The purpose is to ensure the bank’s financial health. This capital is a result of the risks assumed by the bank. 2
Slide 117: Regulatory Capital
Regulatory Capital Central Banks define the minimum capital requirement for banks. The purpose is to ensure the bank’s financial health. This capital is a result of the risks assumed by the bank. The Basel Committee is the body responsible for defining the global capital standards for G-20 countries
Slide 118: Risks Assumed by Banks
Risks Assumed by Banks Risks of Assets (loans, securities, and other) X Market Risks (interest, foreign exchange rates...) Y Operational Risks Z Risk-Weighted Assets (RWA) 3
Slide 119: Risks Assumed by Banks
Risks Assumed by Banks Risks of Assets (loans, securities, and other) X Market Risks (interest, foreign exchange rates...) Y Operational Risks Z The required capital will be a % of the risk-weighted Risk-Weighted Assets (RWA) assets (RWA). 3
Slide 120: Migration to Basel III
Migration to Basel III Phase-In of Basel I Basel II Basel III Basel III in Brazil Basel III Creation of Basel Ratio. Completed Before Basel 1988 2004 2011 2013 2019 80’s: Crisis in Latin America 2008: Subprime crisis (flight of capital and dollar-denominated debt) Before Basel Basel I Basel II Basel
Slide 121: Capital Requirement under Basel Committee, BACEN and ITUB Target
Capital Requirement under the Basel Committee, BACEN and ITUB Target ITUB Target Basel II 5
Slide 122: Capital Requirement under Basel Committee, BACEN and ITUB Target
Capital Requirement under the Basel Committee, BACEN and ITUB Target Basel II Basileia III 11.5% 11.0% 2.0% Subordinated Subordinated 8.0% debt (NII) 1.5% debt (NII) 5.5% Stockholders` equity Stockholders` 4.0% (CET1) equity (N1) 8.0% Perpetual Notes (AT1) 5.5% 4.0% N1= CET1 + AT1 2004 2004 2019 (Ba
Slide 123: Capital Requirement under Basel Committee, BACEN and ITUB Target
Capital Requirement under the Basel Committee, BACEN and ITUB Target Basel II Basel III 11.5% 11.0% 2.0% Subordinated 8.0% debt (NII) 1.5% 5.5% Stockholders` equity (CET1) 4.0% 8.0% N1= 9.5% Perpetual Bonds (AT1) 5.5% 4.0% N1= CET1 + AT1 2004 2004 2019 (Basel) (BACEN) Deductions 0% 0% 100% Notes: -
Slide 124: Capital Requirement under Basel Committee, BACEN and ITUB Target
Capital Requirement under the Basel Committee, BACEN and ITUB Target Basel II Basel III 11.5% 11.0% 2.0% Subordinated If total capital falls below 8.0% debt (NII) 1.5% 5.5% 11.5%, restrictions will Stockholders` equity start to be applied to the (CET1) 4.0% distribution of dividends 12,0% 8.0% N1= 9
Slide 125: Capital Requirement under Basel Committee, BACEN and ITUB Target
Capital Requirement under the Basel Committee, BACEN and ITUB Target ITUB Target Basel II Basel III 15.0% 1.5% 11.5% 1.5% 11.0% 2.0% Subordinated If total capital falls below 8.0% debt (NII) 1.5% 5.5% 11.5%, restrictions will Stockholders` equity start to be applied to the 12.0% N1= 13.5% (CET1) 4.0
Slide 126: Sources of Capital
Sources of Capital Changes in Stockholders’ Equity (SE) since 2008 Amounts in R$ billion 57 8 6 145 118 44 Stockholders’ Share Other Changes Stockholders’ Profits Dividends Equity in 2008 Buyback in Stockholders’ Equity Equity* in June, 2017 *Basically composed of asset valuation adjustments. 6
Slide 127: Uses of Capital
Uses of Capital Changes in Capital Requirements Intended Amounts in R$ Billion 118 9 12 15 45 25 16 13.5% 118 44 13.5% 12.0% 106 9.5% 29 Additional 20 Required 24 Stockholders’ BIS III Effects Increase in Investments* Capital Stockholders’ Equity Equity in RWA committed to of controlling party Dec/2
Slide 128: We do not intend to have capital surplus in excess
WE DO NOT INTEND TO HAVE CAPITAL SURPLUS IN EXCESS OF THE LEVELS ESTABLISHED WITHOUT THE PROSPECT OF USING IT. 8
Slide 129: We do not intend to have capital surplus in excess
WE DO NOT INTEND TO HAVE CAPITAL SURPLUS IN EXCESS OF THE LEVELS ESTABLISHED WITHOUT THE PROSPECT OF USING IT. THIS POSSIBLE SURPLUS WILL BE RETURNED TO STOCKHOLDERS. 8
Slide 130: Prospect for Capital Demand in Coming Years
Prospect for Capital Demand in Coming Years Regulatory 9
Slide 131: Regulatory
Regulatory Basel III – Fully met; Revising RWA regulatory models (BIS IV) – New demands Potential capital increase required due to risk of assets, and market and operational risks (we estimate a potential increase between 0 to 100 bps of impact on capital tier). 10
Slide 132: Prospect for Capital Demand: Investments
Prospect for Capital Demand in Coming Years Regulatory Investments 11
Slide 133: Investments
Investments Few opportunities in Brazil; Disadvantages abroad: Taxation Either partial adoption or BIS III not adopted in some countries. Mandatory value creation (Return > Cost of Capital). 12
Slide 134: Prospect for Capital Demand: Business Expansion
Prospect for Capital Demand in Coming Years Regulatory Investments Business Expansion 13
Slide 135: Business Model: Optimize return on capital
Business Model Optimize return on capital Consolidated 1H17 In R$ billion Operating Revenues 54.5 Cost of Credit (9.8) Retained Claims (0.6) Non-interest Expenses and Other Expenses(1) (26.1) Recurring Net Income 12.3 Regulatory Capital (CET1 = 12%) 118.4 Value Creation(2) 4.1 Recurring ROE 21.8% (1
Slide 136: Business Model: Optimize return on capital
Business Model Optimize return on capital Consolidated Credit 1H17 1H17 In R$ billion Operating Revenues 54.5 28.3 Cost of Credit (9.8) (9.8) Retained Claims (0.6) -Non-interest Expenses and Other Expenses(1) (26.1) (12.5) Recurring Net Income 12.3 4.2 Regulatory Capital (CET1 = 12%) 118.4 56.6 Valu
Slide 137: Business Model: Optimize return on capital
Business Model Optimize return on capital Consolidated Credit Trading 1H17 1H17 1H17 In R$ billion Operating Revenues 54.5 28.3 1.0 Cost of Credit (9.8) (9.8) -Retained Claims (0.6) - -Non-interest Expenses and Other Expenses(1) (26.1) (12.5) (0.2) Recurring Net Income 12.3 4.2 0.5 Regulatory Capita
Slide 138: Business Model: Optimize return on capital
Business Model Optimize return on capital Insurance Operations Consolidated Credit Trading & Services 1H17 1H17 1H17 1H17 In R$ billion Operating Revenues 54.5 28.3 1.0 23.7 Cost of Credit (9.8) (9.8) - -Retained Claims (0.6) - - (0.6) Non-interest Expenses and Other Expenses(1) (26.1) (12.5) (0.2)
Slide 139: Business Model: Optimize return on capital
Business Model Optimize return on capital Insurance Operations Consolidated Credit Trading Capital & Services 1H17 1H17 1H17 1H17 1H17 In R$ billion Operating Revenues 54.5 28.3 1.0 23.7 1.4 Cost of Credit (9.8) (9.8) - - - Retained Claims (0.6) - - (0.6) -Non-interest Expenses and Other Expenses(1)
Slide 140: Simulations - Payout
Simulations - Payout Total Payout(1)to keep CET1(2)full at 13.5% under different return and growth scenarios: ROE(4)Total Payout(1) 15.0% 17.5% 20.0% 22.5% 25.0% 5.0% 65 – 70% 70 – 75% 75 – 80% 80 – 85% 85 - 90% Increase in RWA 10.0% 40 – 45% 45 – 50% 50 – 55% 55 – 60% 60 – 65% 15.0% 25% 25 – 35% 35
Slide 141: Prospect for Capital Demand: Share Buyback
Prospect for Capital Demand in Coming Years Regulatory Investments Business Expansion Share Buyback 16
Slide 142: Share Buyback
Share Buyback Conditions: Capital Excess; Satisfactory Volume of Dividends (= 35% of Recurring Net Income); Return to stockholders above the cost of capital, based on a conservative projection. 17
Slide 143: Buy Back Timing
Buy Back Timing Closing Price of the Preferred Share (ITUB4)(1) Average Repurchase Price (R$) and total amount repurchased per year (R$ million) R$ 43.53 41 2017(2) 36 2014 R$ 36.19 R$ 1,375 MM R$ 34.75 R$ 35 MM 2011 31 R$ 31.79 2016 R$ 1,302 MM 2015 R$ 30.13 2012 2013 R$ 947 MM R$ 28.80 R$ 26.1 R$
Slide 144: When to Buy Back
When to Buy Back Closing Price of the Preferred Share (ITUB4)(1) Average Repurchase Price and total amount repurchased per year 43.53 41 2017(2) 36 “The remaining preferred 2014 R$ 36.19 R$ 1,375 MM stockholders increased their R$ 34.75 R$ 35 MM 2011 31 R$ ownership interest 31.79 in the capital of
Slide 145: Conclusion
Conclusion • A Business Model focused on optimizing capital requirements. 19
Slide 146: Conclusion
Conclusion • A Business Model focused on optimizing capital requirements. • Internal profit generation higher than capital demand for business growth. 19
Slide 147: Conclusion
Conclusion • A Business Model focused on optimizing capital requirements. • Internal profit generation higher than capital demand for business growth. • We do not intend to operate with capital in excess to the determined levels. 19
Slide 148: Conclusion
Conclusion • A Business Model focused on optimizing capital requirements. • Internal profit generation higher than capital demand for business growth. • We do not intend to operate with capital in excess to the determined levels. • Payout will be determined by the Board of Directors, considering the
Itau Unibanco Holding — Investor Day (September 2017) on 6ix