Itau Unibanco Holding S.A.

Hello, good morning everyone, and thank you for joining this video conference to talk about our earnings for the second quarter of 2024. As usual, we are broadcasting directly from our office in Avenida Faria Lima in São Paulo. Today's event will be divided into two parts. First, Milton will take you through our performance and earnings for the second quarter of 2024. and then we will have a Q&A session during which investors and analysts can ask us questions and get into the details with us. Before we get started, I'd like to give you a few pointers to help you make the most of today's meeting. For those of you who access this via our website, there are three audio options on screen. The entire content in Portuguese, the entire content in English, or just the original audio. For the first two options, will have simultaneous translation to choose your preferred option just click on the flag on the top of your screen questions can be submitted via whatsapp just click on the button on the screen on the website or simply send a message to plus some fight 5 11 93959 1877 the presentation we will be making today is available for download on the website screen and as usual on our investor relations website. I will now hand over the floor to Milton, who will begin the earnings presentation, and then I'll be back to moderate the Q&A session. Milton, the floor is yours.

Good morning, everyone. Welcome to our meeting to talk about the 2024 second quarter earnings. In this presentation, we have primarily tried to provide executive information in order to make more time for a conversation during the Q&A session. Let me go straight into the figures to share our results. We reached the double-digit mark in quarterly managerial recurring results of 10.1 billion RIAs in the second quarter. and posted growth of 3.1% over the first quarter of 2024. Now, moving on to the bank's profitability, our consolidated return on equity was 22.4%, a quarter-on-quarter growth of 50 basis points, and in Brazil, our ROE was 23.6%, a quarter-on-quarter growth of 100 basis points. I'd like to draw your attention to the fact that we are running with the common equity TRI ratio of 13.1%. If we were to adjust the bank's profitability by the risk appetite level set by our board, which today is not permitted to operate with capital below 11.5%, we would have posted a consolidated ROE of 24%, taking into account all adjustments, and ROE of 25.7% in the operation in Brazil. So the profitability adjusted by Common Equity Tier 1 of 11.5% is 25.7% in Brazil, which is the profitability for the quarter. We have good news regarding the loan portfolio, with sound growth that I will comment on later. We've been finding opportunities to grow with quality and a long-term vision by looking at longer-term cycles. We reached the 1.3 trillion reais mark during this quarter. Delinquency ratios are within acceptable thresholds, and I think that the delinquency indicators level that we've been working on is just as important as the steep fall that we're posting. Delinquency indicators are lower than pre-pandemic levels, and I'll talk about that later. Commission fees and insurance recorded a good quarter and posted high-quality growth of 5%. We continued to organically grow our capital base and ended the quarter at common equity Tier 1 of 13.1%, a growth of 10 basis points in the quarter. I'll give you more details on capital in a little while. Going into a little more depth, let's talk about the loan portfolio. I'll focus on some key messages. The individual loan segment grew 1.2% in the quarter, and last quarter I'd commented to you that there would still be a de-risking effect going on in the portfolio in the coming quarters. The credit card portfolio was one of the portfolios in which we had to make the biggest credit adjustment. This portfolio remains stable, which is good news because it needs to stop dropping so it can start growing again. and we're already seeing an inflection point for this portfolio this quarter. The personal loans portfolio grew 2.3% in the quarter. We also grew 0.8% in payroll loans, in vehicle loans. Growth within the mortgage portfolio was 1.6%. The portfolio of individuals grew 3.2% in the year, with some more detracting effects, such as the card portfolio and the payroll loan portfolio, holding back this growth. But as I said last quarter, we are at the end of the de-risking process. So all the origination effects are already starting to be positive for the portfolio. We'll be able to notice that in the coming quarters. The SME portfolio also posted healthy growth in the quarter of 2.7% and has been growing above double digits year over year, posting growth of 12.5%. The large corporates portfolio posted very strong growth of 8.6% in the quarter and 16.3% year over year. I remind you that this includes the FX impact. I'd say that a third of this growth was due to exchange rate volatility, but two-thirds of the growth happened organically, which shows this portfolio's great momentum. And the results for Latin America, which posted growth of 13.3%, are basically explained by the FX effect. Thus, this does not necessarily represent a portfolio growth, but rather reflects FEX fluctuations. As a result, we can see the loan portfolio growth of 8.9% year-over-year, and excluding FEX, growth was 7.1% for the period. I had told you last quarter that we'd reaffirm the growth set in 2024 guidance, and that we'd be able to post high-quality growth in the quarters ahead. The market doubted it, but I believe that two Q24 figures prove this dynamic. By looking at the credit card portfolio, for example, we note that it was flat in the quarter but grew 2% year over year. In this context, I'd like to highlight two segments that are key for the bank in terms of both the quality and the number of customers, which are personality and uniclass segments. The credit card portfolio in both these two segments grew 3.5% quarter over quarter and 17.3% year over year. These are middle and high income segments where we've been focusing a good portion of our growth. We have good news regarding credit origination in all products. We posted quarter on quarter growth of 6% in the individual segment, 7% in SMEs and 23% in large corporate segment. Year on year growth was of 19%, 11%, 21% and 17% respectively. This shows our ability to grow and originate credit very strongly with high quality and a long term vision. This is what we're managing to do. And deep diving at the personal loans portfolio, which includes products such as installment loans and overdrafts, 71% of the growth in 2Q24 came from the middle and high-income segments named uniclass and personality segments. Again, this shows the strength of E2 Unibanco's middle and high-income segment. It's very important to show our ability to grow in segments that still have a lot of room to continue growing, despite our very strong leadership position. With respect to the client's NII, I'd like to make an observation regarding the adjustment in Argentina, which I'll continue to make during the next two quarters. Our last year's earnings included seven months of Argentina's results, so we're trying to normalize this effect by excluding Argentina from the analysis. Taking this and the working capital effect into account, we posted a 7.4% growth in our client's NII year over year. As you can see, if we considered the core client's NII in the second quarter of 2024 over the first quarter of 2024 by firstly disregarding the working capital effect, this NII growth would have been even greater since we would also have a drop in working capital in these deltas. The core client's NII grew 2.7% in the quarter, or 600 million reais. The product mix was slightly negative for the NII because as I showed you in the loans portfolio slide, we grew more in the corporate segment than in the individual segment and within the corporate segment, we grew more in the large corporate segment than in SMEs. This is the slightly negative mix impact on the NII. On the other hand, volumes more than offset this effect. with a contribution of 400 million reais in the period. We also have the positive effect of spreads and liabilities margins, in which liabilities margins is the more representative of the two, as it continues to expand as a result of a very strong growth of the bank's liabilities. Finally, the structured wholesale operations are also having a positive contribution in the other and Latin America line. Even though we see a slight decrease in the consolidated annualized NIEM for the quarter, it is practically sidelined when adjusting for risk. The consolidated risk-adjusted annualized NIEM was 5.8% for the fourth quarter of 2023 and the first quarter of 2024, and 5.7% for 2Q24. The provision recognized in Latin America generated this 10 basis points impact on the consolidated NIEM. The annualized NIEM in Brazil dropped slightly, but as I always say, the most important indicator is the risk-adjusted NIEM. Therefore, increasing our NIEM and expanding our top line and our portfolio must be done with high quality. otherwise there will be a negative impact on risk-adjusted NIM. We continue to consistently improve the risk-adjusted NIM. Thus, I would say that this is yet another quarter of good news in terms of our NIM. I'd like to pause for a moment to bring back this chart and tell you the reason why I'm bringing it up again. In the second quarter of last year, we showed this data because some analysts asked us how sensitive our NIM was to interest rates. We've always said that we were less sensitive than some analysts were saying. But since this issue keeps coming back, we thought it would be important to show this data again. In this graph, we add the client's NII and the market NII, which is how we manage everything sensitive to interest rates on the balance sheet, whether it is the loan portfolio or market positions. So the first piece of information is that we set the 100 baseline in the fourth quarter of 2019, which was the last quarter before the COVID pandemic. The second piece of information is the interest rate, which is this black line. It shows how the interest rate has behaved over time. By doing this analysis, we note that the NIM is highly stable while interest rate behavior is very volatile. We note the interest rate rose from its lowest levels in history to the levels we have experienced recently, while both our gross margin and risk-adjusted NIM have been expanding and proving to be much less sensitive to interest rate fluctuation. I think this graph is very intuitive and it shows our ability to manage all the risk factors of the conglomerate and be able to navigate through greater interest rate volatility cycles with a much lower impact of CDI fluctuation than many imagine. This is why we think it's important to show you this information one more time. And what would this drop be? These are the first quarters of the pandemic. during which we recognize very high provisions in the balance sheet and that's why in fact we had a drop in NIM. But then we posted a very strong recovery over time. This is the message I'd like to share with you. I had a very positive quarter posting the best quarter in this historic series both on a consolidated basis and in Brazil. In Latin America we had a slightly weaker quarter as you can see and the capital hedging cost was flat compared with the previous quarters. This quarter's earnings therefore stand out because they were strong as a result of the operation and better risk management, seizing some market opportunities that we found, allowing us to post quality results. Moving on to commission fees and insurance revenue, I'll start with credit and debit cards, which grew 0.8% in the quarter. In current accounts, some might ask why there's a drop and what's happening. And I'd like to highlight that we disclosed to the market the support for Rio Grande do Sul and our clients impacted by the floods in the region. And now we can see how it affected some balance sheet lines. We exempted those clients from individual and business current account fees, which explains about two-thirds of this drop in the current account fees. We had a very good quarter in the asset management business. It is important to mention that both the second and fourth quarters usually include a performance fee which generates some volatility, but we've been able to deliver performance fees both quarter over quarter and year over year. We remind you that last year was a very difficult year for performance fees, and although this year has not been easy, we have been able to deliver better results for some products. We posted major growth for advisory services and brokerage in the quarter, especially in DCM, which posted very strong results, in addition to continuing to expand our individual's brokerage business. Therefore, this business also helps to explain part of this growth in earnings. Year over year we grew 83.5% and I remind you that in the second quarter of last year we were facing a very difficult time with no capital market activities, which means that this is not the best comparison. In terms of results from insurance operations, we continued to expand the top line. We also had the effects of the floods in Rio Grande do Sul in the quarter for the insurance business since it affects the retained claims. But the quality of the operation and the insurance penetration continues to grow organically at the same pace that we had been growing over the past years. This gives us a very sound picture of commissions and fees and results from insurance operations. Funding through the asset management business was strong and posted an increase of 22% year over year and of 34% comparing the first half of 2024 against the first half of 2023. This is the advantage of having a portfolio with very diverse products and being able to understand what our clients' needs are. Client centricity, which has enabled our funding volumes to grow and net new money, has been higher and higher quarter after quarter. The pension funds operation reflects the same levers with revenue growth of 22.8% in the quarter and net inflows growing 61%. So we have more volume, good advisory service for our clients, and higher profitability as we can also deliver performance fees in pension products. And in investment banking, I already mentioned the strong DCM results. We indeed had a very sound quarter with 27% market share and once again delivering consistent results. I'll now present the credit quality indicator starting with short-term delinquency indicator, the NPL 1590. In Latin America, we had a slight increase in the short-term delinquency indicator explained by one or two corporate groups in the region, which is not worrying us. When we analyze the total delinquency ratio, and the delinquency ratio in Brazil, we see a slight drop in the quarter. 90 days NPL is running at 3% in Brazil, a slight drop compared to the last quarter and at 2.7% in total. Further down, we have the Latin America indicator at 1.4%. As important as it is to analyze the trend, we must also analyze these indicator levels. When comparing the current level with the pre-pandemic one, We can see that we now operate at lower levels. So I believe that this is the most important message to convey. We have been running for some time at levels lower than pre-pandemic. We can see this dynamic in the NPL 15 to 90 for Brazil, which fell 10 basis points quarter over quarter, while the NPL 15 to 90 for SMEs also fell 20 basis points in the period, which projects a very positive trend. For large corporates, the indicator is at historic lows. 90 days NPL in Brazil remained stable despite the typical rollover of short-term delinquency that happens in the first quarter. 90 days NPL for individuals was 4.2% in the quarter, remaining flat compared to 1Q24 and is lower than the pre-pandemic level, which was at 4.8% in 4Q19. As I've said earlier, these indicator levels are as important as their trend. We've shown that Quarter after quarter we are operating with high quality credit indicators and obviously this is where we always have to be careful with the type 1 and type 2 mistakes. The type 1 mistake is a credit mistake which is the kind we don't want to make and the type 2 mistake is a risk appetite mistake which is the kind that we have been careful not to make so that we can grow with quality. In terms of credit quality, the cost of credit was flat with a growing loan portfolio in the period as I showed earlier. This leads to another decrease in the cost of credit ratio over the loan portfolio, once again reinforcing the high quality of our portfolio. The renegotiated portfolio also fell, nominally and percentage-wise, with the loan portfolio growing. Its ratio to total credit portfolio is at 3%, which is good news. The coverage indexes are all very stable, with very little volatility within a very acceptable margin when compared to the time series. There are no points for our attention in these credit indicators. Non-interest expenses grew 4.7% quarter over quarter in Brazil, noting that the second quarter is typically stronger than the first quarter because of the accounting effect of vacations in the first quarter and some higher investments made in the second quarter. Excluding Argentina, growth was 7.1% year to date over year and consolidated OPEX grew 5.0% in the same period. The most important thing is that the efficiency ratio continues to fall consistently because managing the top line is as important as managing the cost. And it is this dynamic that has been translated into efficiency rates. This efficiency ratio that we are now disclosing is for the six month period. But it is important to highlight that the efficiency ratio for the second quarter is the best efficiency ratio of a second quarter in the historic time series. So this was another quarter in which we achieved the best efficiency ratio comparable to the second quarter. At the beginning of the year when we presented the 2024 guidance, I pointed out that core costs would grow below inflation. In effect, inflation for the last 12 months, measured by the IPCA, is at 4.2%, and core costs grew 3.8%. This shows that we have been able to keep core costs growth below inflation, but without ever leaving aside investments in our organization, in business expansion, in technology, in our digital channels, and in a better experience for our clients. This is what we've been trying to do quarter after quarter. So the main reasons for the increase in the expenses line are the investments we make. All this investment generates results and benefits over time. which is why it is important to analyze the efficiency ratio. The last slide of the presentation covers capital. Here, the most important thing to show is that we continue to grow organically and we expanded our capital base by 0.5%, already adjusted for the dividends. Prudential adjustments, which consider effects of the mark-to-market of securities booked in the shareholders' equity, have consumed 0.2% of capital with all the interest rate volatility in recent months. and the loan portfolio expansion that I was talking about just now consumes 0.2% as well. It's important to remember that the capital appetite of the board of directors for the business is 11.5% and the capital appetite for dividends is 12%. I'm sure that we'll cover this topic during the Q&A session. The most important message is that we are working with a very strong capital base which allows the bank to continue pursuing growth opportunities as long as capital is not a constraint. We manage capital allocation focusing on high quality and profitability to ensure value creation. We have a very sound capital base, which has been expanding and financing the bank's growth, so I understand that this is a very healthy dynamic for the balance sheet, which shows that we ended up with very robust CET1 and Tier 1 indicators. This is the end of our 2Q24 results presentation. I'd like to thank you all once again for participating in another earnings presentation. In this presentation, we did not bring up the guidance, which is naturally reaffirmed. The guidance is not quarterly, it is annual, and we want to be able to share any developments with you. And we are absolutely in line with everything we have committed to since the beginning of the year. You will certainly be the first to know if there's any change of scenario or vision. Now I'm going to join Renato for our Q&A so we can discuss our results further. Thank you very much once again for your participation. Cheers.

Thank you, Milton, for your presentation. It was very quick because we just had Itaú Day, three hours of initiatives and contents about our business, focused on results, and we have 13 questions waiting for you here on today's call. Well, let's start the second part of our meeting today, which is a Q&A session. Now, I remind you that we have two languages. Milton will answer the questions in the language that are asked, either English or Portuguese. If you need support for translation, you can choose the entirety of the content in Portuguese or English. Besides, you can submit your questions via WhatsApp. The number 11-93-959-1877. Let's start Milton with the first question. We have a long list of analysts. We have Renato Meloni from Autonomous. Thank you, Renato, for taking part in our call. Good morning, everyone. Thank you for the questions. Actually, I wanted to understand what is the perspective for acceleration of the portfolio of natural persons for this quarter. But if you can give us some context regarding the risking that you just mentioned, but also with the comfort that you have to accelerating the origination and all the segments of income. Thank you. Thank you for the question. Okay. To give you a bit more context, let me just find a camera right there. All right. So to give you a bit of context, de-risking, it's at the end of the process, as I mentioned on the previous quarter. The 0.35 year on year on that drop on the second quarter, I would like to just say that we're very close to that end. The end of this. Well, we're at the inflection point until the third quarter. We should be close to that. So, in the end, we have to clarify something very important. We didn't stop growing. We continue to grow in the portfolio of medium-high income several quarters in a row. But when you look at a few portfolios in the aggregate, for example, credit cards, you have inertia of the portfolios that continue to drop nominally. So you have a strength, a gravitational strength that pulls you down when you have your origination and a portfolio growing in other segments. We're going to lose that negative effect and we're going to see the positive effect. We should observe the year on year growth on the portfolios in regards growing in regards to what we observed in this quarter. This is the central message. We had the opportunity of growing in several businesses, several products and several segments of income. So you have to be very careful when we say high income, low income. Well, actually, we've seen opportunities in all segments in growing in a correct channel with the correct client. And we have less resilient clients in all segments, whether if it's low, medium, high income, we have to interpret well the data. That's the important thing, understanding the model. the depth of the relationship and engage the more and more these clients. So we're looking at the future and we can see in a positive way the capacity of growth, especially after the good, the risking in a portfolio, but always having well understanding that the level of leverage is still high the commitment of the income of the population is still high so you have to grow with uh care growing the portfolio and accelerating bringing more margin and then returning that it's not what we do we do a very disciplined net margin and that financial margin so it's the margin of the products minus the cost of credit the expenses and we've defended our net margin and we are going to continue to expand on the adjusted line for the risk within this discipline. So we see it in a very positive way. We can naturally continue with the appetite for growth, quality in the long cycles and removing the volatility of the portfolio so we can continue to deliver the consistent growing results. That's the main message.