Itau Unibanco Holding S.A.

Good morning, everyone. I'm delighted to welcome you to another quarterly earnings conference. As always, this event will be divided into two parts. First, Milton will go through the performance for the quarter and the year, and he'll also disclose our expectations for 2025. Then we'll have the Q&A section, during which investors and analysts will be able to interact with us directly. But before I hand over the floor to Milton, I'd like to provide some guidance to help you make the most of today's presentation. For those viewing this through our website, there are three audio options on the screen. You can choose to listen to the entire content in Portuguese, the entire content in English, or just the original audio. For the first two options, we will have simultaneous translation. To choose your preferred option, just click on the flag at the top of your screen. you can also send questions via WhatsApp. To do this, just click on the button on your screen or simply send a message. directly to the number plus 5511939591877. Today's presentation will be available for download on the website screen and, as always, on our Investor Relations website. That's it from me for now. Now I will hand over the floor to Milton, who will begin the earnings presentation, and then I will come back to you at the end to moderate the Q&A session. Milton, the floor is all yours.

good morning welcome to another earnings presentation let's talk about our quarterly earnings yearly earnings dividends and guidance this will be quite a dense conference call covering a lot of information i'll try to be very objective to convey the main messages And then we'll have our Q&A, in which we can talk more broadly about the different topics of interest to all analysts who might ask us questions. I'll start by summarizing what 2024 meant for us in a slightly more qualitative way by leaving aside most of the figures for the time being. And so let me put touch on several pillars of our operation. First in terms of both culture and ESG, this year we were recognized for our work, both by institutional investor who ranked us first in all categories and in the Valor 1000 yearbook as a value company. It's the first time in history that a bank has received the Value Company of the Year award. In addition to winning as a financial institution, we also won as a value company, an incredible mark of recognition by the entire Valor team. We are very honored by this, as well as by all the other awards that we list here. As regards our ESG agenda, we made important progress in 2024. We made the commitment to go from 400 billion reais to reach up to 1 trillion reais in loan transactions and financing transactions in the capital market by granting loans to businesses and industries with positive impacts on the economy. Our role is to be the transition bank, and we continue to believe that we can be this bank, while never losing focus on our pillars of sustainable finance diversity and climate transition, which are very important to us. In the last quarter, I talked a lot about what all our modernization, investment in technology, and the migration to the cloud means. This is a summary, as I've already given you some data. We achieved an important reduction of 99% in higher impact incidents. We have more than 470 data scientists and more than 390 initiatives using generative artificial intelligence within the bank. And we also have in place more than 1,300 artificial intelligence models currently in use, tested, and growing within the organization. I made a commitment to you that our goal was to migrate 15 million clients as part of what we call One Itaú, a very important project for us. For the end of the year, we had a goal that changed over time. We managed to close 2024 with 5.3 million clients migrated and should complete the migration of the remaining clients throughout 2025. We managed to do this without compromising quality with a post-migration NPS of more than 80 points and a lot of account activation and PixKey registrations. This shows that we have started to move from focusing on the experience of our clients' journeys towards a phase of hyper-personalization and transactionality over time. I believe the bank has a lot of opportunities. And this is one of the most promising projects we have at the moment. And we have managed to do all this. while delivering quality solutions. We reached an employee net promoter score of 83 points. This is the level of energy, engagement, and internal strength that allows us to work, receive so much recognition, and above all, evolve within the client centricity agenda, which is one of the key pillars of the entire management of our organization. Our global NPS increased by four points, with 75% business areas reaching their all-time highs and 69% of our business segments and products posting an NPS above 70 points. Considering global NPS, we overcame all the challenges and met all the goals we had set for ourselves. And now we will set new challenges. It is very important when we look at the relative NPS to see how much we managed to narrow the gap in a very significant way for those items where we still had some kind of opportunity, whether regarding the app or whatever. And today we are able to compete in several segments with those segments leaders. and narrow the gaps even further from an experience standpoint, while on the other hand, in several other business segments, we are opening up major gaps. This is the bank's continuous agenda. Now let's talk about earnings. Managerial recurring results for the quarter totaled 10.9 billion reais, reminding that in the last quarter it totaled 10.7 billion reais. And we had that non-recurring impact, an important reversal of 500 million reais before taxes. Therefore, we managed to more than offset that effect and still grew our earnings by 2% for the quarter. For the year, we closed at 41.4 billion riyals, very strong growth of 18.2% in light of the earnings and profitability levels at which the bank has been operating. This result leads us to a consolidated ROE of 22.1% and 23.4% in Brazil, and if we simulate adjusting by the minimum capital ratio approved by the Board of Directors, we would be running at 24.4% and 26.2% in Brazil. This shows how we have been able to perform in a very relevant way. We remind you that our capital ratio approved by the Board of Directors considers a minimum capital of 11.5% and we cannot operate below this level. So it is very important to adjust with regard to the average capital ratio of the industry. The loan portfolio grew with great quality and recorded major growth in this quarter. I'll give more details in a moment. We've already reached 1 trillion and 359 billion riyals, and we grew 15.5% over December 2023. This is very sound growth, although a good chunk of our growth is explained by FX rate effects, which I'll soon give you more details about. All this growth has been achieved with increasingly better credit quality. We managed to improve our delinquency levels yet another quarter, by reducing long-term MPL by 0.2 percentage point compared to last quarter and 0.5 percentage point compared to December 2023. We have also seen very positive growth in the financial margin with clients, which has grown 3.7% in the quarter and 8.3% year over year, reaching 108 billion Riyals in 2024, very sound growth. Commission fees and results from insurance totaled 14.3 billion reais, important growth of 3.9% compared to the last quarter, and 7.7% year over year. So I believe that the big picture shows a very sound quarter, very strong in terms of earnings, profitability, credit quality, and growth. In addition, the figures year over year are also very strong, with growth of almost 20% in bottom line earnings. Going into more detail for credit portfolio, The individual loan segment grew 6.9% year over year. We remind you that this year we made an important adjustment to the portfolio. As I have mentioned in the past, we had been de-risking the individual loans portfolio since the beginning of 2024, and this process has now been completed. We grew 3.7% in the quarter, pushed by the growth in credit card loans. Naturally, this quarter has the highest card revenue seasonally. In addition, we also posted growth in vehicle and mortgage loans. which are products that tend to have a slightly different credit performance from unsecured products in general. The SME portfolio grew 8.1% in the quarter. However, it's worth highlighting that this quarter, our origination of governmental programs as FGI and PRONAMPE grew almost 300% compared to the last quarter as we originated more than 12 billion Riyals. When we make this adjustment to the SME portfolio, we see that of this quarterly growth delta, approximately 10 billion reais consists of these governmental programs that generate a pretty adequate NIEM4 to our portfolio, especially by looking at the cycle and the challenges that lie ahead. We also have part of this growth explained by FX rate effects, especially with regard to the middle market portfolio, which contains a more material foreign currency component. The large corporate segment is no different. We posted significant growth of 6.8%, quarter over quarter and 21% year over year, and this growth is also explained by FX rate effects. In the unsecured products portfolio, we grew 11% this quarter pushed by credit transactions in the personality and uniclass segments, which are mid and higher income segments that usually tend to perform better during more challenging cycles. Growth year over year was 17.5%. Mortgage loan origination totaled 10.8 billion reais, and the segment's loan-to-value was 60%. So this is a collateralized higher-quality portfolio. I've already highlighted above the impact of government programs, and we also have the FX rate effects. Disregarding this, our growth in the SMEs segment would be 4.9% in the quarter. In large corporates, we are talking about growth of 4.3%, and in Latin America, growth was 3.3%. This shows the impact of FX rate effects both in the quarter and year over year. That said, I can now move to render a count of the 2024 guidance. Our guidance ranged from 9.5% to 12.5%, and we are delivering growth of 15.5%. And if it weren't for the FX rate effects, our growth would be 10.2% within the targeted range, because the FX rate effects were very strong. In other words, the devaluation of the real against several currencies ended up generating this effect on the portfolio as a whole, and that is why we were above our guidance upper range. At the financial margin with clients, we isolated the impact of working capital which is these 3.1 billion riyals which had a slightly positive effect while the bank's equity kept growing when we look at the core margin in product mix by having an individual loans portfolio of better guaranteed products with credit cards this quarter tending to grow more in the non-interest portfolio and then moving on to the interest portfolio and with the strong growth in government programs This ends up resulting in a slight negative effect, but with a small impact. We posted growth in average volume, with very significant volumes in the quarter, and in spreads and liabilities margin. The biggest effect is on the liabilities margin, and not on spreads, which also helps to explain a good portion of the growth in Niem. In Latin America and others, we see some effects from structured operations allocated to the wholesale business, and that we're a little weaker this quarter due to different seasonality impacts on this line as a result of our portfolio's dynamics. As regards the risk-adjusted annualized margin, which is the margin that we track, as I always say, we cannot just look at the annualized margin and forget that we have a credit cost to offset. When we look at the series, we see a gradual evolution over the quarters. And last quarter, we had a one-off impact as a result of the mentioned extraordinary reversal that we made and which generated this impact on the indicator. In the fourth quarter, the indicator was 5.9%. So we have a margin that has been slightly expanding over the quarters. In Brazil, we have similar movement from 6.2% to 6.1%. By adjusting for the effect of 500 million reais from the reversal of provision for loan losses, last quarter, the ratio would be 6.3%, and this quarter, we also closed at 6.3%. Compared to the guidance, we closed 2,024 at 8.3% of growth, and the given range, already adjusted for Argentina, was from 5.5% to 8.5%. Therefore, we grew close to the top of the guidance upper range, which is good news for the financial margin with clients. In the financial margin with the market, we had a good quarter in terms of earnings generated in Brazil. The market NII reached 1 billion reais after removing the hedging effect from the capital ratio. and the earnings from Latin America were in line with the earnings posted in previous quarters. In annual terms, in 2023, we posted earnings of 3.3 billion reais, and in 2024, this totaled 4.4 billion reais, so we recorded important growth year over year. Compared to our guidance, the range was between 3 billion reais and 5 billion reais, and we closed at 4.4 billion reais, therefore closer to the guidance upper range and with another strong year of market-nigh performance. Focusing now on commissions, fees, and result from insurance operations, I'd like to highlight some effects. In credit cards, at the issuer level, growth was 5.7% in the quarter, and at the asset management level, growth was 6.8%, while year-on-year, Growth was 12%, therefore quite material. In addition, in advisory services, revenue remains at 1.1 billion reais. while it grew 38% year over year. These are very strong results, especially in the capital market, which I will highlight in a moment, since this is well reflected in all rankings. And when we look at the result of insurance operations, pension plan and premium bonds, growth was 14% year over year, which shows that all our insurance earnings continue to grow consistently. With regards to the year's highlights, this year Itaú Asset was the asset manager that raised the most funds and generated the most performance fees in a challenging year as we managed to have the best performance in the market. I never say much about our individual's broker, but this is a journey that started four years ago and we are focusing on it a great deal. As a result, we managed to increase the earnings of the individual's broker sixfold, which is now much more in alignment with its value proposition, investments, products, and UX. These are major results, and even though we did not break down the absolute amounts, they are already a quite material portion, our P&L. And as I mentioned earlier, We were once again in first place in fixed income, mergers and acquisitions, and equities when it comes to investment banking. As you can see, our market share is quite significant, above our credit fair share, with a 26.5% market share in fixed income, 30% in mergers and acquisitions, and 14% in equities. A very sound performance from our investment bank. ECM had a weaker year, but on the other hand, 2024 was an extraordinary year for fixed income. Compared to our guidance, we grew 7.7% over guidance ranging from 5.5% to 8.5%, also above the midpoint, which also shows the quality of our guidance. In terms of credit quality, from any standpoint, we only have good news. Looking at NPL 15 to 90 days, We are consistently reducing the indicators, both in Brazil and in Latin America, and in total short-term NPLs. And our performance as measured by loan indicators, which is not a denominator effect, was already very sound. In this case, we suffered a double impact, both from the numerator and the denominator. Total NPL over 90 days decreased from 2.6% to 2.4%, while in Brazil, NPL over 90 days decreased from 2.9% to 2.6%. So very sound performance. We can also view this very sound performance in the breakdown of NPL 15 to 90 days. The short-term NPL ratio for individuals decreased from 3.0% to 2.8%, and the ratio for SMEs decreased from 1.5% to 1.4%. Both long-term NPLs of individuals and SMEs improved by 20 basis points and 50 basis points respectively, which is a major development. Of these 50 basis points, 20 basis points are explained by the growth of the credit portfolio, while the other 30 basis points are explained by the actual improvement in loan performance. In terms of credit quality and cost of credit, last quarter we separated this view. We posted 8.7 billion reais in cost of credit in the third quarter, which disregards the extraordinary reversal effect that we had. Officially, the amount was 8.2 billion reais in the third quarter, and the adjusted cost of credit ratio would have been 2.8% in the last quarter. and went to 2.6% in the fourth quarter. These are the most comparable values. As a result, in this quarter, we posted cost of credit of 8.6 billion reais, which is the best indicator in the series when compared to previous quarters. The cost of credit year over year decreased from 36.9 billion reais in 2023 to 34.5 billion reais in 2024. we have posted strong portfolio growth and a nominal drop in the cost of credit for 2024. The figures for the renegotiated portfolio show a major effect. This is falling nominally and falling percentage-wise, while it is the lowest ratio in the series. Before the pandemic, we operated at the ratio of 3.9% and we closed the year at 2.5%. And we also have a very sound coverage ratio. The decrease in NPL indicators makes our coverage ratio slightly higher, which again shows a very well collateralized portfolio and with very well provisioned and sound indicators. By comparing the 2024 guidance projections with the actual figures posted, we reach 34.5 billion Riyals, while our guidance range from 33.5 billion to 36.5 billion Riyals. In other words, slightly below the midpoint. This evidence is a very strong year from a credit risk management standpoint. With regards to non-interest expenses, we posted growth of 6.8% year over year. When we look at our efficiency ratio, we ended 2024 with an efficiency ratio of 37.7% in Brazil and a consolidated efficiency ratio of 39.5%. This shows that we are also managing to grow the core cost with discipline and below inflation, which was the benchmark that we gave you in the past. As a result, we grew 4.4% in core costs compared to an IPCA of 4.8%. And all this without giving up making important investments in business and technology while focusing on and ensuring earnings generation and always investing in the franchise and our business. Compared to our guidance, which ranged from 5% to 8%, we closed the year at 8% in the upper range and within the range that was released to you. On the capital side, this quarter we were able to finance major growth. Given what we generated in terms of earnings already adjusted by the dividends that we had provisioned, We were able to fully finance the portfolio growth, which was important in the quarter, and we were also able to finance the adjustments that were made to equity caused by volatility, rates, and securities. As a result, we closed the quarter with the same level of capital as the previous quarter. at 13.7%. Here you are seeing 1.3%, but I would like to remind you that the maximum percentage we can use from this additional Tier 1 is 1.5%, and we close the year with 1.3%. However, with the Tier 1 capital level of 15%, at which we're operating, we believe that it is not necessary to operate at 1.5%, as we have the capacity to operate at slightly below this percentage, by always relying on our financial management. while keeping an eye on our capital ratio and looking for the best opportunities to manage our additional Tier 1. For this reason, in this quarter, it dropped slightly. As regards the extraordinary dividends, which are actually additional dividends, last year we made an additional distribution of dividends to shareholders, and this year we are making another announcement of additional distribution of dividends. This is how we do things here at the bank. Every year we assess our ability to generate capital throughout the year. We make expected growth, business performance, consumption and regulatory impacts projections and, based on these projections, we distribute payouts to shareholders above a certain level. And these announcements have been made somewhat regularly since we did this last year and we are doing it again this year. And this entire assessment will be done again at the end of 2025. the news we are announcing regarding dividends is very good we will make an additional distribution of 18 billion reais which will be done in two different ways 15 billion reais will be distributed as both dividends and interest on capital and we will distribute 3 billion reais related to share buybacks that will be made throughout the year and these shares once bought back will be cancelled this was the best way and the best combination we found to distribute dividends to shareholders this year We had already disclosed, declared and paid 5.7 billion reais and we also have 5 billion reais already declared that will be paid in the future. When we add up all these effects, we have a total distribution of 28.7 billion reais. with 15 billion reais in dividends and interest on capital, and 3 billion reais in buybacks regarding shares that will be bought back and later cancelled throughout the year. This means a distribution of around 70% of our profit, including this new distribution that I've just mentioned. Last year we made an additional distribution of 11 billion reais, which represented a payout of approximately 60%. we have increased our distributions, not only as a percentage, but also nominally as a result of higher earnings. With that, our common equity Tier 1 ratio goes from 13.7%, as we saw earlier, to 12.3%, adjusted on a pro forma basis for this distribution, as if the share buyback had been done on the first day and the shares had been cancelled also on the first day of the period, so that you can get a sense of the results of these events. As a consequence, our adjusted ROE, on a pro forma basis in the consolidated figures, would be 23.5% and 25% in Brazil, due to these events and these adjustments made in the fourth quarter of twenty twenty four in addition we are announcing a bonus shares of ten percent this way we trigger a capitalization that is an increase in the bank's capital stock by thirty three point three billion reais which will be transferred from the reserves to capital stock simply put for every ten shares held by each investor they will earn an additional share of the same class at the attributed cost of R$ 34 per share. As for the R$ 0.015 dividend that we pay monthly per share, with this bonus, each shareholder will have an increase of 10% in the amount received monthly. These are the three pieces of news we are announcing, distribution, buyback and bonus shares. These were all the points regarding the release of the 2024 results. Now let's talk about 2025 and our outlook and guidance. Regarding the GDP, we expect lower growth this year due to the monetary tightening cycle, reaching 2.2% growth by the end of 2025. We expect a year-end SILIC of 15.75% in 2025, which is our best outlook. We expect inflation of 5.8%, resulting in greater inflationary pressure, which naturally justifies this effect on monetary policy. We estimate an unemployment rate going from 6.5% to 6.8% and an exchange rate in the range of 5.90 reais, which, despite the volatility, is necessary to assess the sensitivity of our guidance. Accordingly, the guidance I submit to you now takes into account these macroeconomic indicators for sensitivity analysis purposes. We might make some adjustments or updates to our guidance if needed as a result of any changes over time. We remind you that this guidance has already been adjusted by the criterion of Resolution 4966. As regards the loan portfolio, we expect growth ranging from 4.5% to 8.5%. and this is what we are currently foreseeing considering all the challenges expected for 2025. In terms of the financial margin with clients, we expect growth substantially higher than portfolio growth, ranging from 7.5% to 11.5%. As for the financial margin with the market, we expect something between R$ 1 billion and R$ 3 billion due to volatility and the monetary cycle. We estimate a cost of credit nominally ranging from R$ 34.5 billion to R$ 38.5 billion. An important point that I would like to mention is that Resolution 4966 has virtually no impact on these lines, but if we were to follow the previous criterion, commissions, fees, and results from insurance operations would grow from 4.9% to 7.9%, that is, an increase of one percentage point. But as we have to defer some revenues due to Resolution 4966, this is the actual impact of one percentage point on growth. In terms of non-interest expenses, we expect growth ranging from 5.5% to 8.5%. As for the effective tax rate, we expect it to range from 27% to 29%. These are our best prospects. This has surely given rise to many questions, and next I will join Renato to reply to all of them in our traditional Q&A session. I would like to take this opportunity to tell you that we are very happy with the quality of our earnings and our performance throughout 2024. all business lines have been performing at their best and we see a bank that is perfectly integrated from a culture management and workplace environment standpoint in addition to being very open to innovation and change and as you have seen on the first slide all the investment we have been making for years in technology business model development and client experience is bringing major recognition both in terms of client satisfaction and the satisfaction of our employees All in all, this is a set of results which, in our view, are very solid and consistent. I would like to thank you once again for your time, support and feedback. I will now join Renato so we can start the Q&A session. Thank you very much and see you in a moment.

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