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TRANSCRIPT
1
March 26, 2004
Banco Itaú Holding Financeira S.A.
Presentation to:
2
Brazilian Banking System
Macro Characteristics Micro Scenario
High Spreads Expected to decrease in function of reforms and drop in interest rates
Oriented to services Intensive use of technology
High Fixed Expenses Cost Reduction / Efficiency / Headcount reduction
All bills are paid in the Bank Emphasis in self-service
High Capitalization Plenty of room to grow in credit
Highly automated Heavy investments (focus: Internet)
Satisfactory Provisions Level Keep conservative approach
Many Points of Sale Likely to decrease
High Service Fees Tailor-made products for each segment
Huge volumes of transactions Technology
3
Tier One Capital / Assets (%)
Source: THE BANKER - Top 1000 – July, 2003
9.2%
14.2%
12.3%11.4% 11.7%
9.1%9.9%
9.1%10.2%
12.0% 11.9%11.1%
9.1%
4.3% 4.4% 4.5% 4.7% 4.7% 4.6% 4.6% 4.5% 4.7% 4.9% 4.7% 4.6% 4.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
90 91 92 93 94 95 96 97 98 99 00 01 02
Brazilian Financial System 1,000 Largest Banks in the World
4
1. Citigroup2. Bank of America Corp.3. HSBC Holdings4. JP Morgan Chase & Co.5. Crédit Agricole Group6. Mizuho Financial Group7. Royal Bank of Scotland8. Sumitomo Mitsui9. Mitsubishi Tokyo12. Deutsche Bank23. ABN AMRO Bank115. Hamburgische Landesbank118. Banco Itaú119. Woori Bank122. Banco Bradesco139. Banco do Brasil190. Unibanco
December, 2002
Ranking by Stockholder’ Equity
Assets
1,097660759759609
1,081649845781795583913175405821
US$Billion
1st
12nd
7th
8th
16th
2nd
13rd
4th
6th
5th
17th
90th
209th
104th
170th
125th
279th
Rank
BIS
11.2 %12.4 %13.3 %11.9 %11.7 %9.5 %
11.7 %10.1 %11.0 %12.6 %11.5 %
n.a.19.1 %11.6 %17.9 %12.2 %
n.a.
Index
5943393836292727262418333332
SE(1)
US$ Billion
ROA
%
156th
179th3
361st
725th
584th
966th
379th
930th
919th
654th
562nd
709th
25th
561st
219th
251st
301st
Rank (*)
Source: The Banker Top 1000 - July/03 (*) BIS ranking extracted from the largest 200 banks by SE(1).(1) Stockholder´ Equity
2.8 %2.0 %1.3 %0.3 %0.6 %
-1.7 %1.8 %
-0.6 %-0.4 %0.5 %0.7 %0.7 %3.8 %0.7 %1.8 %1.6 %1.5 %
5
Financial Statistics - Banking System December, 2002
US$ Million
124,390
160,464
108,629
17,88232,192
304,824
70,662
46,130
4,961
115,196
39,901
100,366
50
100
150
200
250
300
350
Total Assets Total Deposits Total Equity Total Loans
BrazilChileMexico
Source: Felaban – Latin America Banks Association
6
Agenda
Earnings per Share
2004 – Banco Itaú Holding Financeira
Banco Itaú Holding Financeira S.A.´s Results
Brazilian Banking System - The challenge of:
Growth of Credit Operations
Reduction of Expenses
7
Keep the High Primary Surplus
Net Debt/GDPNet Debt/GDP Total Credit/GDPTotal Credit/GDP
Source: Brazil Central BankElaborated by Banco Itaú
26
58
20
23
25
28
30
33
35
38
Jul-9
4
Jan-
95
Jul-9
5
Jan-
96
Jul-9
6
Jan-
97
Jul-9
7
Jan-
98
Jul-9
8
Jan-
99
Jul-9
9
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
20
28
35
43
50
58
65
% o
f G
DP
% o
f G
DP
Jan/
04
The Challenge of Growth of Credit Operations
8
Source: Brazil Central BankElaborated by Banco Itaú
Reserve Requirement on Demand Deposits – Country Comparison
53.0%
9.0%
2.0% 1.3%6.0%
10.0%
Brazil Chile Euro Area Japan Peru USA
Interest bearingNon-interest bearing
45.0%
8.0%
Conditions to Reduce Cost of CapitalDecrease of Reserve Requirements on bank deposits
The Challenge of Growth of Credit Operations
9(*) Source: Febraban - Brazilian Banks Association
Banking Sector (*)
Cost Efficiency...Quantity of Employees – Brazilian Financial System
Itaú Holding824
754700 682 672
638
559
483447
420 406 400402 401
433736
77
60
4942 43 45
47
3941
3631
0
100
200
300
400
500
600
700
800
900
Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
0
10
20
30
40
50
60
70
80
90
CAGR 1989-2002
Sector = -5.41%
In thousands
Itaú Holding = -4.41%
10
84.6
76.3
68.862.8 60.8 60.0 59.9
57.252.1
87.483.8
62.458.2
92.9
58.362.8
58.8 60.1
Japan Mexico Brasil USA Germany Chile UK Spain Netherlands
1998 2002
Source: The Banker – July 2003 and July 1999
Cost Efficiency...Cost / Income Ratio – 1000 largest banks in the world (%)
Brazil
11
Comparison between the medium and the largest banks of Brazil, Europe and U.S.(cost operation divided by assets)
Source: EFC (Financial Engineers and Consulters) and BankScopePublished on June 20, 2003
7.1%
2001
7.0% 6.2% 6.74%
2.01%
3.85%
2.93%
2000 2002Average of
the 3 years
10 biggest Brazilian Banks
Twenty biggest in Europe and United States
Twenty biggest in Europe
Twenty biggest in United States
Average of the biggest in Europe and Unites States
The Challenge of Reduction of Expenses
12
Growth in Perspectives
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Real Plan
(Jul)
Overheating
Asia Crisis
(Sep)
Russia Crisis
(Sep)
Devaluation
(Jan)
Energy Crisis
(May)
Elections (Oct)
Argentina Crisis
Projection of Banco ItaúReal GDP GrowthSource: IBGE
Elaborated by Banco Itaú
%
The Challenge of Growth
-0.2
53.25
23.9418.99
16.19 19.05 16.91
10
20
30
40
50
60
70
80
90
Selic annualized
16.25
%
13
Macroeconomic Stability
Reduction of interest rates
Growth in GDP
Growth in income per capita
Tax Reform (reduction, stimulation to the production)
Bankruptcy law
Primary surplus
Stable regulatory environment
Inflation targeting
Advances necessary to grow credit, GDP and promote stability:
14
Conclusion of the Brazilian Payment System;
Reduction in reserve requirements and flexibilization of mandatory credit
Reform of mortgages legislation
Central of Credit Risk
already implemented: information about risky customers
to be implemented: information about good customers
Regulatory Framework
Advances necessary to grow credit, GDP and promote stability:
15
Agenda
Earnings per Share
2004 – Banco Itaú Holding Financeira
Banco Itaú Holding Financeira S.A.´s Results
Brazilian Banking System - The challenge of:
Growth of Credit Operations
Reduction of Expenses
16
32,068
48,995
69,555
118,738
81,807
18,25924,445
51,91146,357
111,141
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03
R$ MillionAsset Evolution
Banco Itaú Holding Financeira S.A.
17
R$ Million (Except where indicated)
854
7.49
11,879
31.8%
2,754
30,453
19.8%
49.5%
4.1%
Net Income
Net Income per 1,000 shares
Stockholders’ Equity
ROE (%)
Net Interest Margin
Market Capitalization
BIS Ratio (%)
Efficiency Ratio (%)
NPL (%)
3rd Q./03
807
7.05
11,464
31.3%
2,765
25,691
21.5%
47.6%
4.7%
3,152
27.66
11,879
26.5%
10,998
30,453
19.8%
46.1%
4.1%
2,377
21.36
9,036
26.3%
9,511
17,743
18.4%
50.0%
4.2%
4th Q./03 2003 2002
Highlights
Banco Itaú Holding Financeira S.A.
18
Financial Ratios (%)
2.6 2.9 2.1 2.7
31.5
26.3 26.5
14.416.9
19.8
27.7
18.4
0
5
10
15
20
25
30
35
Dec-00 Dec-01 Dec-02 Dec-03
Net Income / Assets (ROA) Net Income / Stockholders' Equity (ROE) BIS Ratio
Banco Itaú Holding Financeira S.A.
19
Banking Itaú-BBA
23%
Mutual Funds and Managed
Portfolio6%
Insurance, Capitalization and Pension
Plans15%
Credit Cards18%
Banking Banco Itaú
38%
Diversification of income sources Not only restricted to interest rates
Net Income by Segment 2003(*)
Banco Itaú Holding Financeira S.A.
Banco Itaú Banking
Itaú-BBA Banking
Credit Cards
Insur., Cap., Pension Plans
M. Funds and Managt. Portf.
Consolidated Net Income
1,201
732
582
458
179
3,152
R$ Million
(*) Pro Forma
20
Total Unrealized
Interbank DepositsSecurities and Derivatives Reclass. of Additional Provision Additional Provision Adjust. of Securities Available for Sale Adjust. of Securities Held to MaturityCredit OperationsInvestments (basically in BPI)Time and interbank dep. and funds from
accept. and Issuance of securities abroadSecuritization of payment orders abroadSubordinated Debt and Treasury shares
Unrealized Income / (Loss) (1) (2)Income Equity
December 2003
2,677 2,048
101,556
-545758253319627
337458
10688
-545
-143319627
3374
297
Income Equity
December 2002
1,765 1,794
3543
-760
(168)(49)(89)285
1673170682
3456
(255)760
-(49)(89)285
173170797
(1) Tax effects not considered.(2) Includes unrealized gains to minority interest amounting to R$ 307,036 (R$ 156,751 at 12/31/2002) on income and R$ 257,229
(R$ 116,966 at 12/31/2002) on stockholders' equity.
Financial Instruments - Market ValueR$ Million
Banco Itaú Holding Financeira S.A.
21
2,420
8,619
28.1%
22,113
100,516
Banco Itaú-BBA
732
3,260
22.5%
22,468
29,693
Net Income
Stockholders’ Equity
ROE (%)
Credit Operations (*)
Total Assets
2,214
7,986
27.7%
19,629
81,763
BancoItaú-BBA
591
2,903
20.4%
25,786
33,114
2003 2002
(*) Endorsements and Securities included.
Pro Forma R$ Million
Banco Itaú Holding Financeira S.A.
BancoItaú
BancoItaú
22
Credit Operations
16,890
19,596
27,253
34,282
44,594
14,058
23,674
29,615
38,65938,419
45,414
16,077
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1998 1999 2000 2001 2002 2003
Credit Operations Credit Operations+Guarantees
Banco Itaú Holding Financeira S.A.
R$ Million
23
Credit Operations (*)
Corporate
Small / Medium Sized Companies
Individuals
Mortgage Loans
Total
28,219
4,376
10,467
2,352
45,414
0.3%
22.1%
7.5%
-3.2%
4.4%
24,115
5,317
13,083
2,067
44,581
24,036
4,353
12,175
2,135
42,699
-14.5%
21.5%
25.0%
-12.1%
-1.8%
Var Dec/03x Sep/03
Dec 31, 03 Dec 31, 02Sep 30, 03 Var Dec/03
x Dec/02
(*) Endorsements and Securities included.
R$ Million
Banco Itaú Holding Financeira S.A.
24
R$ 31.20 R$ 31.20 R$ 30.20 R$ 32.30
R$ 15.20 R$ 13.40 R$ 12.50R$ 12.20
R$ 29.10
R$ 16.30
R$ 0.00
R$ 5.00
R$ 10.00
R$ 15.00
R$ 20.00
R$ 25.00
R$ 30.00
R$ 35.00
R$ 40.00
R$ 45.00
R$ 50.00
Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
Local Currency Foreign Currency
R$ 45.4 R$ 46.4 R$ 44.6 R$ 42.7 R$ 44.4
(US$ 4,6)(US$ 4,5) (US$ 4,7) (US$ 4,3)
(US$ 4,2)
Credit Operations by Currency (*)
(*) Endorsements and Securities included.
In Billion
Banco Itaú Holding Financeira S.A.
25
1,406 1,5101,692
1,853 1,9532,196
2,5152,332 2,285 2,234
2,378 2,257
630680
680
715715
715
747841 843 848
913906
3,172 3,128 3,082
3,2903,163
2,911
3,262
2,6682,568
2,372
2,1902,036
Mar.01 Jun.01 Sep.01 Dec.01 Mar.02 Jun.02 Sep.02 Dec.02 Mar.03 Jun.03 Sep.03 Dec.03
Provision for Loan Losses
Total Provision Additional Provision Minimum Provision
R$ Million
Banco Itaú Holding Financeira S.A.
26
Nonperforming Loans Ratio (%)
4.144.714.65
4.164.17
10.66
8.46
7.34
8.94
8.25
1.461.99 2.35 2.53
2.15
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
Nonperforming Loans Ratio – TotalNonperforming Loans Ratio – IndividualsNonperforming Loans Ratio – Companies
Coverage Ratio (*)
198%189%
173%
189% 198%
0%
50%
100%
150%
200%
250%
Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
(*) Provision Balance / Total Nonperforming Loans
Nonperforming Loans and Coverage Ratio
Banco Itaú Holding Financeira S.A.
27
Credit Operations
Consumer Credit
Acquisition of FIAT and Fináustria
Dec.02 (before acquisitions): market share of 3.0%
Jan.04: market share of vehicles of 12.8% (9.7% Itaú and Finaustria + 3.1% Fiat)
New Financing company (start in May 2004)
Own platform
Own brand (related to Itaú)
Focus in low income customers (non-Itaú)Corporate segment - Banco Itaú-BBA: Synergic operation
New Credit and Behavior Scoring models
News Models of Profitability of Products
Small Companies - UPJ: specific market segment and structure
Increase in Credit Cards Financing
28
2003
1,269
52
327
1,002
159
213
546
933
107
565
5,121
2002
1,031
0
296
912
172
199
458
930
71
397
4,466
Mutual Fund Management Fees
Consortium Administration
Collection
Checking Account Services
Tax Collection
Interbank Fees
Credit Operation Fees
Credit Card
Income from Guarantees Provided
Other
Total
Variation
23.0%
10.3%
9.9%
-7.1%
6.7%
19.3%
0.3%
51.5%
42.3%
14.7%
Banking Service Fees R$ Million
Banco Itaú Holding Financeira S.A.
29
Personnel Expenses
Other Administrative Expenses
Reorganization
Total without BBA and Fiat
BBA and Fiat
Total
2003
2,577
4,316
430
7,322
478
7,800
2002
2,488
4,040
716
7,244
7,244
Variation
89
276
(286)
78
556
Administrative Expenses R$ Million
Banco Itaú Holding Financeira S.A.
30
58.456.6 56.3
59.7
55.7 56.3 55.0 54.456.1 55.7
50.4
41.5 40.8
46.7 47.649.5
59.5%
55.0%
47.9%
54.1%
Not considering the 4th Q./02 and 1st Q./03, since we consider this criteria indicates better the recurrent efficiency.
Efficiency Ratio (%)
Banco Itaú Holding Financeira S.A.
31
Nominal expenses in 2003 = Nominal expenses in 2004
Cost Reduction
Strong commitment of the senior management to achieve the target
Cost reduction internal campaign - strengthening of a cost culture in the organization
Reduction in pioneer branches plus cancellation of listed company registration - acquired banks (BEG, Banestado and BEMGE)
On-line system for monitoring expenses - decentralized and available in all areas of the bank allowing stricter control
Reduction of administrative expenses: water and energy consumption, travels, paper recycling: intelligent buildings, intelligent branches, reuse.
Actions:
Employees: incentive to internal transfers (career opportunities) – possibility of reduction in layoffs and hiring in the market
Effort to reduce costs with labor suits - increase in extrajudicial agreements with the unions, reduction of the costs of the agreements, more causes won.
32
Pro Forma
The following slides show the pro forma information about Banco Itaú and
Banco Itaú BBA operations.
• In 2003, it was considered as if the integration process between Itaú
BBA and the corporate segment of Itaú occurred in the beginning of the
year.
• In the year of 2002, it was considered the sum of net income and other
accounts of Itaú BBA to the corporate segment of Banco Itaú, as well as
the required capital allocation.
• The balances and incomes of credit operations, private bank and asset
management of Itaú BBA in 2002 and 2003 were allocated to Banco
Itaú.
Banco Itaú Holding Financeira S.A.
33
2,420
8,619
28.1%
22,113
100,516
BancoItaú-BBA
732
3,260
22.5%
22,468
29,693
Net Income
Stockholders’ Equity
ROE (%)
Credit Operations (*)
Total Assets
2,214
7,986
27.7%
19,629
81,763
BancoItaú-BBA
591
2,903
20.4%
25,786
33,114
2003 2002
(*) Endorsements and Securities included.
Pro Forma
Banco Itaú Holding Financeira S.A.
R$ Million
BancoItaú
BancoItaú
34
2003
9,021
(1,115)
4,895
(7,438)
(1,232)
(1,711)
2,420
8,619
28.1%
2002
9,195
(2,091)
4,324
(7,108)
(476)
(1,630)
2,214
7,986
27.7%
Financial Margin
Result from Loan Losses
Banking Service Fees
Administrative Expenses
Income Tax and Social Contribution
Other
Net Income
Stockholders’ Equity
ROE (%)
4th Q./03
2,369
(269)
1,289
(2,015)
(259)
(400)
715
8,619
37.5%
3rd Q./03
2,279
(315)
1,261
(1,935)
(319)
(331)
640
8,243
34.9%
Banco Itaú S.A.
Pro Forma R$ Million
35
Number of Credit Cards (thousand)
Turnover
Itaucard Net Income
Participation in Net Income of
Credicard
2003
5,780
10,603
442
140
2002
5,579
8,795
103
176
Credit Cards R$ Million
Variation
201
1,808
339
(36)
3.6%
20.6%
329.1%
-20.5%
Banco Itaú S.A.
36
Net Income
5250
36
42
29
0
10
20
30
40
50
60
4th Q./02 1st Q./03 2nd Q./03 3rd Q./03 4th Q./03
78.8
71.867.1
62.959.2
0
10
20
30
40
50
60
70
80
90
Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
Growth of 33% in volume of Mutual Funds and Managed Portfolios in relation to 2002
Mutual Funds and Managed Portfolios
Mutual Funds and Managed Portfolios
R$ BillionR$ Million
Banco Itaú S.A.
37
2,8253,352
3,9914,907
923906
902
927
977
1,0211,077
1,134
1,168
1,236
2,459
569
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Dec-02 Mar-03 Jun-03 Sep-03 Dec-03
Technical Provisions - Pension Plans AGF
Technical Provisions - Capitalization Technical Provisions - Insurance
4,4034,808
5,388
6,086
7,689
Insurance, Capitalization and Pension Plans
Growth of 75% in 2003 2nd Largest in Pension Plans Market
R$ Million
Banco Itaú S.A.
38
2003 2002 3rd Q./03 4th Q./03
138Result of Ins., Cap. and Pension Plans 458 256102
97.6%Combined Ratio 97.2% 95.4%94.7%
54.6%Claim Ratio 54.5% 52.9%52.8%
5,008
(2,578)
(358)
(1,508)
80
• Insurance Premiums, Pension Plans
Contributions and Premium Bonds Revenues• Changes in Technical Provisions• Selling Expenses • Insurance Claims, Pension Plans Benefits
and Premium Bonds Redemption• Other Operating Income/(Expenses)
3,311
(1,385)
(306)
(1,121)
40
1,253
(638)
(92)
(395)
27
1,622
(968)
(93)
(412)
34
156Operating Margin 646 540184
691
(643)
(241)
5
Financial Income
Administrative Expenses
Income Tax and Social Contribution
Other
391
(534)
(136)
(5)
207
(157)
(71)
3
176
(201)
(56)
(1)
Banco Itaú S.A.
R$ MillionInsurance, Capitalization and Pension Plans
39
Dec 31, 03
211
17,864
1.2%
Nonperforming Loans
Credit Operations
NPL Ratio (%)
Sep 30, 03
198
18,124
1.1%
Variation
13
(260)
0.1%
Itaú BBA has a high quality credit portfolio with 93.8% of volume
classified as “AA”, “A” and “B”.
Pro Forma Nonperforming Loans R$ Million
Banco Itaú BBA
40
4th Q./03
357
(172)
54
(92)
59
(67)
139
3,260
18.2%
3rd Q./03
486
(172)
62
(92)
(58)
(59)
167
3,221
22.4%
Financial Margin
Result from Loan Losses
Banking Service Fees
Administrative Expenses
Income Tax and Social Contribution
Other
Net Income
Stockholders’ Equity
ROE (%)
2003
1,977
(523)
226
(362)
(354)
(232)
732
3,260
22.5%
2002
1,353
(401)
248
(400)
(96)
(113)
591
2,903
20.4%
Banco Itaú BBA
Pro Forma R$ Million
41
Agenda
Earnings per Share
2004 – Banco Itaú Holding Financeira
Banco Itaú Holding Financeira S.A.´s Results
Brazilian Banking System - The challenge of:
Growth of Credit Operations
Reduction of Expenses
42
2.91 5.097.86 9.57
12.8716.66
21.08
27.6932.62
-1.83
2.98
-4.96-2.1
-6.32-0.67
0.32
-0.15
-10
-5
0
5
10
15
20
25
30
35
1995 1996 1997 1998 1999 2000 2001 2002 2003
Extraordinary EPS
Recurring EPS
CAGR Recurring = 35.3%
Decr. Number of Shares (%) = -3.8%
R$
Evolution of EPS
43
0
200
400
600
800
1,000
1,200
93 94 95 96 97 98 99 00 01 02 03
Itaú (1)Itaú (2)Bovespa
US$
100
494494
233233
721721
Itaú(1) Itaú(2) Ibov.
10 years 21.37% 16.95% 8.64%
5 years 18.14% 13.96% 5.93%
12 months 79.85% 71.28% 134.39%
Annual Average Appreciation in US$
Real Plan
Russian Crisis
Real Devaluation
Mexican Crisis
Asian Crisis
Argentine Crisis
Attack to WTC
(1) With reinvestment of dividends(2) Without reinvestment of dividends
Preferred Shares AppreciationEvolution of US$ 100 Invested from Dec. 1993 to March 12, 2003Evolution of US$ 100 Invested from Dec. 1993 to March 12, 2003
44
Agenda
Earnings per Share
2004 – Banco Itaú Holding Financeira
Banco Itaú Holding Financeira S.A.´s Results
Brazilian Banking System - The challenge of:
Growth of Credit Operations
Reduction of Expenses
45
Banco Itaú S.A. Banco Itaú S.A.
Growth in Small and Medium Sized Companies Credit Portfolio –
higher than the market average
Growth in Individuals Credit Portfolio – close to the market average
Expectation of lower default and lower margin
Emphasis on Insurance, Capitalization and Pension Plans segment –
growth higher than the market average
Strict cost control
Banco Itaú 2004
46
Maximization of synergies identified by the association, through the
use of businesses opportunities.
Increase of operations in Capital Markets.
Increase the offer of structured products/derivatives focused on the
needs of each corporate customer.
Banco Itaú BBA
Banco Itaú BBA 2004
47
March 26, 2004
Banco Itaú Holding Financeira S.A.
Presentation to: