Itau Unibanco Holding S.A.'s CEO Discusses Q2 2012 Results - Earnings Call Transcript

Itau Unibanco Holding S.A. (ITUB)

Q2 2012 Earnings Conference Call

July 25, 2012 10:00 ET

Executives

Alfredo Egydio Setubal – Executive Vice President and Investor Relations Officer

Sérgio Ribeiro da Costa Werlang – Executive Vice President, Risk Control and Finance

Caio Ibrahim David – Chief Financial Officer

Rogerio Calderon – Corporate Controller and Head of Investor Relations.

Analysts

Daniel Abut – Citi

Carlos Macedo – Goldman Sachs

Saul Martinez – JPMorgan

Mario Pierry – Deutsche Bank

Marcelo Telles – Credit Suisse

Marcelo Henriques – BTG Pactual

Victor Galliano – HSBC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. We inform you that this conference call aims exclusively to discuss the earnings results of Itau Unibanco Holding regarding the Second Quarter of 2012. Queries related to Redecard’s public offering shall be addressed to the Investor Relations division of Itau Unibanco Holding. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session and instructions to participate will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded and broadcast live on www.itau-unibanco.com/ir. A slide presentation is also available on this site.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from those anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks and other factors.

With us today in this conference call in Sao Paulo are Alfredo Egydio Setubal, Executive Vice President and Investor Relations Officer; Sérgio Ribeiro da Costa Werlang, Executive Vice President of Risk Control and Finance; Caio Ibrahim David, Chief Financial Officer; and Rogerio Calderon, Corporate Controller and Head of Investor Relations.

First, Mr. Alfredo Setubal will comment on the second quarter 2012 results. Afterwards, management will be available for a question-and-answer session. It is now my pleasure to turn the call over to Mr. Setubal.

Alfredo Egydio Setubal – Executive Vice President and Investor Relations Officer

So, good morning for those in U.S. and good afternoon for those who are in Europe. It’s a pleasure for us to be here again to speak about our second quarter results of 2012. For those who are following through the Internet, we are starting on page two, the slide number two, highlights. The first highlight is the result, the result – recurring result, recurring income, R$3.6 billion in the second quarter what means ROE annualizes of $19.4 million. This means an increase of 8.1% when we compare the second quarter of 2011. For the full year of 2012, the net income achieved R$7.1 billion with a ROE of $19.7 million. This result means a increase of 2.5% when we compare to 2011.

The second highlight is the loan portfolio that we are going to speak more deeply in the coming slides, but anyway, we achieved R$432 billion in credits here including endorsements, sureties and private securities that we held in treasury of large companies. This means growth, including all these – all these 3.6% growth when we compare to March 12, 2012 and 15.2% when we compare June 2011.

The third highlight is related to our financial margins with clients. The financial margin with clients achieved R$12.3 billion in this quarter. The net interest margin with the clients increased 30 basis point, achieving 10.9% especially because of the impact of the SELIC rates that the Central Bank is doing in the last coupon meetings during the year since last August when it is started to reduce the SELIC rates. The credit spreads remained almost flat with a small reduction of 10 basis points achieving 13.4%. And when we look at the risk adjusted credit spreads, then that spread also a decrease – a increase of 10 basis points achieving 7.5% in this quarter.

The fourth highlight is related to our banking fees and results from the insurance, pension plans and capitalization business. These operations grew 0.6% in the second quarter when we compare to the first quarter of 2012, achieving R$5.8 billion in the period. When we compare to last year we see a increase in these revenues and result of 11.5%.

Fifth highlight is related to our non-performing loan ratio and our loan losses. Our expenses net of credit recovery achieved R$4.9 billion in the second quarter. The 90-day – the total provisions created in this quarter achieved R$6.0 billion. The 90-day NPL achieved 5.2% in the second quarter with a 10 basis points growth quarter-on-quarter and 70 basis points when we compare to June 2011. And we are going to talk more about this and in the coming slides also.

This sixth highlight is related to our non-interest expenses. The growth in the quarter 3.2% and when we compare 12 months 5.8%, in line what we expected. That is a reduction in the pace of growth of expenses during the year. Seventh highlight is related to efficiency ratio. The efficiency ratio in this quarter increased 50 basis points. The ratio reached 44.8% meaning up to 180% increase compared to the first half of 2011. In the last 12 months our efficiency ratio reached 45.9% which means an improvement of 330 basis points also in line with the expectations that we’ve have for this year. And the last highlight is related to our unrealized gain. We have R$5.8 billion in unrealized gain and from this R$1.5 billion is related from our available for sale portfolio of securities.

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