1
March 23, 2004
Banco Itaú Holding Financeira S.A.
Alfredo SetubalExecutive Vice PresidentInvestor Relations Director
Presentation to:Citigroup Conference
2
Brazilian Banking System
Macro Characteristics Micro Scenario
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 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
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
5
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
6
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
7(*) 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%
8
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
9
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
10
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
11
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 (rule of law)
Inflation targeting
Advances necessary to grow credit, GDP and promote stability:
12
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:
13
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
14
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.
15
Banking Itaú-BBA
23%
Mutual Funds and Managed
Portfolio6%
Insurance, Capitalization and Pension
Plans15%
Credit Cards18%
Banco Itaú Banking
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
16
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.
17
Banco
Itaú
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
Banco
Itaú
2,214
7,986
27.7%
19,629
81,763
Banco Itaú-BBA
591
2,903
20.4%
25,786
33,114
2003 2002
(*) Endorsements and Sureties included.
Pro Forma R$ Million
Banco Itaú Holding Financeira S.A.
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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
19
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 Sureties included.
R$ Million
Banco Itaú Holding Financeira S.A.
20
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 Sureties included.
In Billion
Banco Itaú Holding Financeira S.A.
21
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.
22
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.
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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
24
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.
25
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.
26
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.
27
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.
28
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
29
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
30
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
31
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
32
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
33
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
34
March 23, 2004
Banco Itaú Holding Financeira S.A.
Alfredo SetubalExecutive Vice PresidentInvestor Relations Director
Presentation to:Citigroup Conference