Time to join forces

Integrate to grow. With this vision Itaú and Unibanco formalized their alliance in November 2008, after 15 months of negotiations. This is the largest merger ever undertaken in the Brazilian banking industry, and has created the first globally-sized Brazilian bank.

This merger has opened the door to gain scale and the capacity to grant credit, and contribute to growing Brazil’s economy. The end goals are to offer customers the finest aspects of Itaú and Unibanco by incorporating the best practices of each institution, regardless of their origin.

The major challenge of the integration process is related to the size and nature of the project: preserving and adding value to our assets on a scale we’ve never attempted. Another big challenge, which should become an asset in the future, is the convergence of two cultures of success, with both banks contributing equally to the creation of a new culture that combines the best of both worlds. Itaú Unibanco brings together one of the finest groups of professionals in the Brazilian financial system, and we are sparing no effort to retain these talented individuals. Our people management policies and practices are based on respect for human beings, promotion of diversity, skills development and the alignment of employees to our corporate culture.

Strategy

In the beginning the process of integrating the two banks was headed by the Senior Integration Committee – made up of Roberto Setubal, Pedro Moreira Salles and executives from both banks – which set up guidelines for the integration. The committee oversaw the activities of 19 work fronts, which were created in November to map out processes and identify the best practices of each institution. The results of these working groups will form part of the construction of a new business model for each of Itaú Unibanco’s areas of expertise.

The groups working on the integration of operations (see diagram on previous page) made the first presentation of their findings to the Senior Integration Committee in December 2008. Each work front demonstrated the main characteristics of their areas in both banks, pointed out the differences and highlighted opportunities and challenges in the business models. The groups have the support of two outside consultants, who act as facilitators during this stage of the transition.

Senior Integration Committee

The Senior Integration Committee has already identified complementary business models and new marketing opportunities.

In the retail segment, for example, the combination of Unibanco’s differentiated service and Itaú’s technology vanguard can bring benefits to clients. The new bank’s activities in this segment will take on added value through their interactivity with Itaú and Unibanco’s service networks.

Itaú Unibanco seeks rapid integration, specifically in corporate areas or low complexity transactions. One example is the combining of the vehicles segments. Formerly Itaú focused on individual client loans, while Unibanco’s key area was commercial lending, particularly for large fleets. Given the level of complementarity between the two banks in this area, the integration was concluded rapidly. For small and middle market companies one of Itaú Unibanco’s priorities is to combine Itaú’s credit reach with Unibanco’s activities in these sectors to create a highly competitive credit structure.

The marketing teams of the two banks have also meshed quickly. Together they launched the television, newspaper and magazine publicity campaign that announced the merger and highlighted the benefits for customers and the country.

To expand its business, the marketing area of the new bank is now being structured to adopt the best practices of Itaú, Unibanco and the international financial sector. One of the most important tasks for the Itaú Unibanco marketing area will be to further incorporate the “voice of the customer” into the institution, conveying customer demands and market trends to the business areas, which will require increased activities such as research to monitor the competition. The integration of all operations and business is expected to occur in approximately two years. The Technology and Operations area will take on an active role in the integration of the two banks’ various systems and operational processes.

Transparent and timely communication

On the morning of November 3, 2008, when Itaú and Unibanco staff members arrived at their desks they were each greeted by an e-mail sent by their respective presidents stating that everyone was now part of a global company with the ability and ambition to participate at a competitive, international level. Later that same day a press conference was held.

On November 4, 2008 the President of Itaú, Roberto Setubal, and his counterpart at Unibanco, Pedro Moreira Salles, appeared in major newspapers, magazines and on websites in Brazil and around the world as a result of the announced merger between their companies.

The interests of Itaú Unibanco’s different stakeholders were on display once again when on December 9 a record number of over 640 people attended the introduction of the new bank by Roberto Setubal and Pedro Moreira Salles at the 2008 Ciclo Apimec meeting sponsored by the Association of Capital Markets Investment Analysts and Professionals.

The meeting was also attended by 15 reporters who traveled from Argentina, Chile, Paraguay and Uruguay, and was broadcast online with simultaneous translation in English and Spanish. In their comments the two presidents outlined the benefits of the merger between Itaú and Unibanco and their enthusiasm at leading the construction of a new, bigger and better bank that can put Brazil squarely on the world’s financial stage.

There was also a concern to keep customers well informed about the new institution and explain the merger between Itaú and Unibanco. Customers received letters about the new bank and will be kept updated on the steps of the integration process through direct mailings, e-mail, branch communications, Itaú and Unibanco websites and by their own managers.

Following the Central Bank’s approval of the merger and disclosure of the 2008 results, Itaú Unibanco took out an announcement in Brazil’s leading media publications which presented the main financial, social and environmental practices of both institutions.

Timely, transparent communication to employees is also a hallmark of the two banks. To ensure that employees are continually informed about the ongoing merger, Itaú Unibanco created an Internal Communications Management Group. It also launched a dedicated intranet site for the integration of the two organizations, through which teams can ask questions, get answers and give opinions through an interactive channel and monitor all internal and external information published about the merger. Senior executives also used Corporate video and TV to send messages to staff members.

Itaú Unibanco’s professionals also received the historic edition of Itaú News and Unibanco Magazine, which covered the history of both companies and the individuals who built them, as well as a profile of the new bank, the role of its employees in the success of the merger, plus the challenges and expectations. The bank’s commitment to communication led to the creation of the Integration Bulletin, which supplements the electronic channels and addresses issues such as the interaction between the teams and the new structures of the institution. The first edition profiled the members of Itaú Unibanco’s Executive Committee.

At the end of January over 100,000 Itaú Unibanco employees were introduced to the 11 members of the new bank’s Executive Committee. The presentation, structured in three blocks – strategy, challenges and final message – was presented at Unibanco via Corporate TV. At Itaú, DVDs were distributed to branches and presentation sessions were held in the auditoriums of Itaú’s Conceição Business Centre (Ceic), the Technical Operations Center (CTO) and the Tatuapé Administrative Center (CAT). The content of these materials also appeared in the Integration Bulletin and on the Integration website.

Since the merger the working environment between employees has been monitored to keep them motivated through every stage of the integration process. This monitoring is designed to identify the employees’ feelings in the face of the challenges of integration and their most pressing questions about the process. The tool also helps us communicate to staff about the changes caused by the merger.

The new bank regularly uses questionnaires to determine if employees are being kept well informed about the integration process.