Scale and Diversification

Itaú and Unibanco have complementary activities in various segments, which brings benefits to the new bank’s clients.

The merger of the operations of two of the largest privately-controlled banks in Brazil will bring benefits to customers of Itaú Unibanco, which will maintain the best practices, products and services of its founding institutions. The new bank will be better able to expand the supply of credit, provide extensive cooperation to the government and to its sister bank entities, value the work of its employees and help ensure the soundness of Brazil’s financial system.

The main priority of Itaú Unibanco is to consolidate the integration of its various businesses, in all segments of financial activity, reinforcing the presence of the new bank in the market and maintaining a positive view to expanding its business. The goals are to expand its activities in Brazil, compete in the international market, support the growth of credit operations and generate gains of scale in all customer segments.

Branches

Itaú Unibanco begins 2009 ideally suited to face the economic slowdown forecast this year. Several measures were taken during 2008 to make the coming months a period of opportunity for its customers. The merger of the two institutions provides a superior base for preserving the good customer service and best practices of Itaú and Unibanco: the first direct benefit of the merger will be greater interconnectivity of branches and ATMs of the Itaú and Unibanco networks.

By September 2008, when the Brazilian economy gave its first signs of slowing down, the expansion of the customer service network was at the top of the agendas of both banks. In recent years Itaú and Unibanco were focused on organic growth and the attraction and retention of customers, due to fierce competition between the market’s financial institutions. At the end of 2008 Itaú Unibanco was present in over 1,100 cities and towns throughout Brazil, offering 4,600 branches and Banking Services outlets (PABs) and over 30,000 ATMs.

Itaú and Unibanco’s retail approaches are very similar, as both are heavily focused on working to meet the personalized needs of their clients, and this similarity will further facilitate the integration of the two institutions.

The segmentation of customers, built up over many years by both banks, is a strategy adopted to offer differentiated products and services for each market niche. This work will also be benefited by the merger, as the joining of Itaú and Unibanco employees increases our capacity to develop innovative products and services for every customer segment.

Itaú customers are segmented by income between standard Itaú and Itaú Personnalité branches. At Unibanco the approach is very similar, with customers segmented between Exclusivo and Uniclass.

A key program developed by Unibanco in 2008 was “Passion for the Customer”, which involves employees of the branch network and operations areas working to win over those clients who are the main reason for the bank’s existence. The project seeks to stimulate the attitudes of internal teams so that customers see our concern for delivering everything we promise, based on uncomplicated and efficient processes that really make a difference.

One of the strategies to achieve Itaú Unibanco’s objective of retaining customers over the long term is to contribute to their financial education. “The Conscientious Use of the Bank” program, introduced by Itaú in 2005 and re-launched in 2009, is one way to fulfill this role (see Commitments and Practices).

Consumer Credit

The Itaú Unibanco consumer credit area seeks to offer credit and financial services to consumers through a broad portfolio of products, including Itaucard and Unicard credit cards, consumer loans, private label cards, insurance and extended warranties, among others.

Account and non-account holder customers have various service channels at their disposal, including 389 stores, over 2,000 points of sale, plus the entire branch network.

Cards

Itaú Unibanco is Brazil’s credit cards leader. Itaucard and Unicard offer a broad portfolio of products to 17 million account and non-account holder customers.

In 2008 this segment maintained the same rapid pace of growth seen in recent years, closing the year with a portfolio of R$15.8 billion and revenues of R$63.2 billion.

Orbitall, a group company, maintained its leadership in electronic payments processing, reaching 29.3 million cards processed in 2008. Orbitall is attractively positioned as a service provider for banks and retail chains, and this strategy is expected to bring more new customers in 2009 and beyond.

For 2009 Itaú Unibanco’s main challenges, in addition to merging its operations, will be growing its customer base and increasing the profitability of its credit cards portfolio. To achieve these goals we will focus on creating differentiated products and benefits and step up the search for new partnerships.

The main investment for the cards area in 2009 will be in expanding the base of chip cards. This initiative is designed to increase the safety of card operations for customers.

Partnerships

To expand the supply of credit and financial services, Itaú Unibanco has over 2,200 points of sale through joint-venture and operating agreements with major retailers, in addition to 385 commercial partnerships. These partners currently serve more than 23.2 million customers throughout Brazil.

Own Stores

In the consumer credit segment, the Taíi and Fininvest brands provide service to more than 5.2 million customers through 389 dedicated outlets around the country, offering the finest in financial products and services through personal credit, payroll deduction credit, cards, insurance and capitalization (an annuity-like product unique to Brazil), plus the convenience of paying bills and receiving INSS social insurance service.

Payroll Advance Loans

Itaú and Unibanco each had a very strong presence in the payroll advance loan segment prior to the merger, and the new bank will continue to act strongly in this growing market. At the end of 2008 the segment accounted for R$79 billion, or 55% of total personal credit granted in the domestic financial system.

Both banks had previously created special areas just for this segment, but used different strategies to originate their operations. While Itaú conducted the loans through its branches and electronic channels, Unibanco focused on partnerships and correspondent banking.

In 2008 Itaú’s portfolio grew 59% to reach
R$1.4 billion, while Unibanco’s portfolio grew 16.6%, reaching R$1.9 billion.

While still operating separately in October, Itaú and Unibanco both made several acquisitions of portfolios of smaller banks to improve the liquidity of the financial system, under the rights established by Central Bank Circulars 3407, 3411 and 3414.

Microcredit

Itaú Unibanco operates in the microcredit segment to offer credit with special conditions to micro-entrepreneurs throughout the country. These customers typically face difficult access to traditional financing lines.

Itaú and Unibanco employed different strategies for this segment: Itaú established partnerships with civil society organizations of public interest (Oscips) to identify projects to be supported, in addition to providing loans to clients through the branch network, while Unibanco provided credit directly to non-account holders in low income communities. These three approaches are now part of the new bank, and form the basis of considerable growth potential for Itaú Unibanco’s operations in this segment.

Itaú began its activities in partnership with social organizations in disadvantaged communities in 2005, and since 2007 has maintained an area dedicated solely to the segment. The current strategy is to establish partnerships with Oscips that act as microcredit institutions in poorer communities within larger cities (see photo below). These partners are responsible for evaluating requests for credit and choosing the projects to be benefited. In 2008 alone micro-entrepreneurs received about R$8.3 million in financing.

At the end of the year Itaú had five Oscip partners. To increase that number and help promote the segment in Brazil, in September 2008 the bank launched the Guide for the Creation of Microcredit Institutions.

Microcredit for account holders is marketed in Itaú branches, eliminating the need for these customers to show how the loan will be used. This is a low interest personal loan provided in instalments of up to R$1,000 to customers with limited financial resources. In 2008, 53,000 loans were made, totalling R$48.6 million.

Unibanco was the first privately-controlled bank in Brazil to operate in the manufacturing microcredit segment, offering financing to low-income formal and informal entrepreneurs since 2003 through Microinvest. The IFC (International Finance Corporation), the World Bank’s arm that finances private projects, has a 19.9% equity stake in Microinvest. In 2008 Microinvest completed the first technical cooperation project for the development of a technological credit analysis platform and model. This project was undertaken in conjunction with CGAP, a world leader in promoting access to financial services for the base of the social pyramid. In December a new agreement was signed with the Inter-American Development Bank to strengthen the management structure and support the use of the sector’s best practices.

Microinvest began operating in the city of Rio de Janeiro, and its success allowed it to expand to the rest of the State, and then on to the metropolitan regions of São Paulo and Porto Alegre. It later extended its operations throughout all of São Paulo State, as well as into the States of Minas Gerais and Espírito Santo, and areas in Rio Grande do Sul State.

In December 2008 Microinvest had about 70 lending agents, twice that of the previous year, and was operating in over 150 locations, including the communities of Rocinha in Rio de Janeiro and Paraisópolis in São Paulo.

Another Microinvest initiative is the training of entrepreneurs. In April 2008 approximately 600 people received training in basic accounting, business management and the conscientious use of credit. The training is given in two modules: the first lasts three days while the second runs for six months.

Since beginning its operations in 2003, Microinvest has provided more than 20,000 loans, totalling R$58.5 million, at a minimum rate of 2.88% interest per month and a maximum of 4%.

Vehicles

Itaú Unibanco’s motor vehicle finance segment enjoyed considerable success in 2008, due to major growth in its portfolio, and cross-selling related products.

In 2008 Itaú’s vehicle finance and leasing credit rose 17% year-on-year to reach R$27.3 billion, while the market itself grew just 8%. The credit portfolio was R$41.2 billion at year-end, up 37% from 2007.

Unibanco’s vehicle loans totalled R$7.5 billion in 2008, 6% better than in 2007. Its credit portfolio at year-end was R$8.1 billion, up 35% year-on-year.

This performance maintained Itaú Unibanco as the vehicle financing market leader.

Itaú’s structure for heavy vehicles further established itself at the national level, and represented approximately 7.3% of Banco Itaú’s new financing and leasing contracts, while the corresponding figure for Unibanco in 2008 was 13.4%.

Banco Itaú also consolidated its nationwide motorcycle financing activities during the year, and reached a financing agreement with motorcycle manufacturer Dafra. Total loans in this segment reached R$1 billion in 2008.

Jointly, Itaú and Unibanco closed the year with 3.3 million clients with financing.
Of the 2.9 clients in the Itaú portfolio,
1.2 million already had Itaú insurance while about 700,000 had Itaucard or Fiat Itaucard credit cards.

Currently, Itaú Unibanco offers consumer loans through 15,200 light automobile, truck and motorcycle retailers and dealerships nationwide. All credit requests are submitted and processed via Internet, which offers greater security and faster approval times for dealers and customers.

The two banks’ operations will be integrated during the first quarter of 2009, resulting in a platform offering Itaú’s distribution innovations and Unibanco’s credit control structure.

Property Loans

The merger between Itaú and Unibanco strengthens the positioning of the new bank in property loans. The two institutions each had a different focus, but will now have complementary business operations. The new combined real estate financing portfolio totalled R$6.2 billion in 2008, a 41.2% year-on-year increase.

During the year Itaú Unibanco created socio-environmental risk identification tools for financing prospective real estate projects. The methodology is in the pilot phase and should be fully implemented in 2009.

This action is in keeping with the bank’s current sustainability policies, and is designed to encourage sustainable corporate credit practices.

Insurance, Pensions and Capitalization

The insurance, pensions and capitalization area has taken on an added dimension with the merger of Itaú and Unibanco, and is structured to meet the various market segments, focusing on customer satisfaction and risk management.

Itaú Seguros and Unibanco Seguros (the insurance arms of both institutions) are present in every region of Brazil through 16,000 active insurance brokers, 61 Broker Service outlets and 30 Quick Service Centres. They also operate via remote channels, direct distribution and through partnerships with retailers, credit cards and many of the financial areas of Itaú Unibanco.

In 2008 Itaú Unibanco insurance operations generated R$7.1 billion in premiums earned (excluding Health), making it the industry leader, with a 16% market share.

The two banks have invested heavily in recent years to improve their operations, products and services. Itaú Unibanco intends to maintain its insurance leadership in 2009 and consolidate its participation in pensions, employing a differentiated sales process that emphasizes the value proposition of its products, which are designed to prevent losses in asset value and ensure a more secure future for its customers. The bank’s portfolio of individual pension plans closed the year with R$3.9 billion in technical reserves, up 18% from 2007.

In November 2008 Unibanco paid US$805 million to purchase American International Group’s (AIG) 50% share of Unibanco Seguros, ending 11 years of one of the most successful partnership stories in the domestic insurance market.

This partnership with the world’s largest insurer also brought the knowledge to allow Unibanco to operate in Brazil’s recently opened reinsurance market, which had been a monopoly for close to 70 years. This acquisition makes the new bank a market share leader in sales and expertise in insurance for large companies. It also further strengthens its leadership in extended warranty policies, which lengthens the guarantee given by manufacturers of white and brown goods such as refrigerators, freezers, stoves and other appliances. In 2008 Unibanco maintained its leadership in this area, garnering a 76% market share in Brazil’s extended warranty segment, through retail chains.

In the corporate private pension plan segment Itaú and Unibanco had revenues of $1.9 billion in 2008. To continue offering the finest products Itaú and Unibanco will be consolidating their efforts through pre-and post-sales consultations. This will allow customers to always have products which best suit their needs, plus a steady supply of new services.

In 2007 Unibanco became partners with AACD (Disabled Children’s Assistance Association), and since then part of the revenues coming from its capitalization plans has been given to AACD to help it treat children with disabilities. In 2008 the AACD received over R$4.7 million from Unibanco, which allowed over 106,000 children to be helped.

The combined capitalization operations of Itaú and Unibanco generated total revenues of R$1.7 billion in 2008, representing a market share of 16%. Technical provisions for insurance, pensions and capitalization reached R$42.7 billion at December 31, 2008, up 22.7% from 2007.

Differentiated Products

In 2009 Itaú and Unibanco will continue to develop innovative products in the insurance, pensions and capitalization areas. Following are some of the latest innovations in these products:

• Company pension plans, including Consumer Client Easy, and family plans like Flex Prev Itaú Business and Stages of Life;
• Itaú Vehicle Assistance, with monthly fees of R$19.90, designed for people who cannot buy car insurance but who need services like towing and electrical and mechanical help for breakdowns, plus a locksmith and life protection;
• Residential insurance policy costing less than R$68 per month, targeted to low-income people and providing home care services such as a locksmith, electrician, plumber and appliance repair; and
• Various Personal Accident, Home, Life and Credit Life insurance products at a lower price for customers with less purchasing power (Fininvest and Hipercard).

Corporate Insurance Solutions

The Itaú Unibanco structure is dedicated to serving major industrial and commercial customers in the construction, chemical and petrochemical, power generation and infrastructure industries, among others, and the bank is very active in this segment. Unibanco and Itaú’s insurance arms have been key players in recent years and together lead the sector in premiums earned and retained.

The high risk policies written by Unibanco Seguros are often done through domestic and foreign reinsurers. This allows Unibanco to offer differentiated conditions to each client, based on their operational and production needs.

Established in 2006, Itaú XL is a partnership between Itaú Holding and the XL Capital group. Thanks to its success at closing domestic clients, Itaú XL has consolidated a leading position in premiums retained in the high risk segment for companies with annual revenues over R$70 million, or insured values over R$30 million.

The implementation of a new management tool allows the commercial area to identify each client’s overall relationship with the bank. This allows us to offer the products and services best suited to their needs and aspirations, ensuring greater customer satisfaction while also helping us gain new clients.

Itaú also played an important role in the reconstruction of areas damaged by the floods in Santa Catarina State, covering the majority of client losses. Despite the large amount of money paid out, it had little effect on the results of Itaú Seguros, as the loss to the group was within expected calculations. Since 1987 it has been Itaú’s policy to purchase reinsurance to protect the assets of the company against disasters.

Small and Medium Enterprises

Small and middle market companies (SMEs) are a priority segment for Itaú Unibanco in 2009, offering the bank considerable room for expansion to provide loans and other services to this group.

In addition to the goal of better positioning itself to offer credit within this market, Itaú Unibanco estimates that in 2009 the segment will achieve superior financial results. Given the global economic slowdown, small and middle market companies in the domestic market have greater potential for taking up banking products and services. Accordingly, the new bank expects to maintain its investment in this area in 2009.

The focus on growing the commercial client business at both Itaú and Unibanco generated excellent results in 2008, primarily in gaining new small and middle market clients. Itaú’s active client portfolio rose from 506,000 companies in 2007 to 743,000 in 2008, an 80% increase in assets representing R$29 billion. Coverage rose 33% to reach R$30 billion. At Unibanco, with a client portfolio of 660,000 companies, credit operations rose to over R$13 billion in assets.

A variety of efforts contributed to these good results. The main factors were segmenting companies by sales, which placed greater attention on customer needs, and increased points of service in companies around the country.

One of the goals for 2009 is to continue introducing products that prioritize ease of access, enabling companies to use the internet even more without having to go to a bank branch. The main challenge for the managers of our client companies is finding tools that facilitate the daily running of their operations, including services, pricing, customer service and access to financial information. The products for very small, small and middle market companies consist of transactions with guaranteed receivables, overdraft, guaranteed account, plus working capital and BNDES/Finame loans, among others. These products enable cross-selling actions such as payroll, store affiliations and credit card company partners.

Innovations

Several new features were added to the commercial client segment by Itaú Unibanco in 2008, including:

• A mobile service allowing transactions to be conducted via cellular phone, including transferring funds, authorizing payments and purchasing products;
• The Express Collection service allows the on-line issue of procurement and collection forms;
• Online Exchange helps cut bureaucratic red tape for foreign exchange and other international trade services.

Wholesale and Investment bank

The wholesale and investment bank segments, for companies with average annual revenues exceeding R$150 million, has become more competitive with the merger between Itaú and Unibanco. The major benefit for the bank’s 2,000 client companies is an increased ability to grant credit to each client and the complementary nature of products offered, which increases its ability to meet the specific needs of its customers.

Itaú and Unibanco’s wholesale and investment bank operations are directed through Itaú BBA, which has remained independent within the new structure of Itaú Unibanco. This investment bank has international coverage and industry sector expertise, focused on long-term client relationships and institutional investors. In 2008 the wholesale bank posted good results in its differentiated products and services such as cash management solutions and structured transactions while growing its asset portfolio.

During the year Itaú BBA maintained very steady growth with corporate, treasury, international and investment banking clients.

In 2008 Itaú Unibanco’s Corporate area participated in R$20.1 billion worth of debenture and promissory note issues and R$2 billion worth of securitization deals. In equities it was coordinator and bookrunner for initial and secondary public offerings totalling R$31.8 billion.

In July 2008 Itaú BBA was named Best Investment Bank in Brazil by Global Finance magazine, an American publication which covers financial institutions worldwide.

In 2008 Unibanco’s wholesale division offered differentiated services in credit, cash management and structured deals (using derivatives) through its commercial structure of six offices in five states.

The worsening global economic situation in the third quarter of the year slowed the rate of development of external operations, due to a lack of liquidity in the markets.

Faced with this economic slowdown, a key element of the bank’s performance in 2009 will be to step up its relationships with customers, offering them the finest specialists in the market to help companies meet their needs in managing the financial crisis.

In the capital markets in 2009 the main opportunities will be in mergers and acquisitions. During the second half we envision more companies electing to go public, though this number will fall short of the 76 share offerings in 2007, which was an atypical year.

Itaú BBA will be focused on the merger with Unibanco and the implementation of centralized treasury operations to serve the entire group. This will reduce operational and financial risks by bringing gains in efficiency and better control of treasury operations.

Itaú Corretora

Itaú Corretora (Itaú’s securities brokerage arm) traded R$124 billion worth of securities on the São Paulo Stock Exchange in 2008, up 14% year-on-year. It also traded 11 million contracts on the BM&F futures exchange.

In concert with Banco Itaú BBA, Itaú Corretora participated in placing six equity issues totalling R$8.5 billion, while home broker Itautrade ended the year with total trades worth R$13.1 billion, a 52% increase from 2007.

Itaú Corretora is consolidating its strategic position as the leading specialist on Brazil, with highly trained research teams and a presence in key global markets such as New York (Itaú USA Securities) and Hong Kong (Itaú Asia Securities). Brokerage offices were also opened in Dubai (Middle East Itaú Securities) and Tokyo (Itaú Asia Securities - Tokyo Branch), increasing its placement and sourcing capabilities.

Innovations introduced to clients in 2008 include Itaú Mobile Broker and 3G content, a pioneering entrant in the Brazilian market which allows customers to buy and sell shares and get reports via their celular phone.

Through the support of the foreign customer channel, Itaú secured various partnerships in 2008. Japanese investors now have access to various fixed income funds and securities through partnerships with Nikko Asset Management and Daiwa Securities, while other funds were launched in Scandinavia (Nordea Bank) and Canada (Excel Funds).

Investshop

In 2008 Unibanco’s brokerage arm Investshop traded a total of R$40.4 billion in equities.

Investshop’s equity research is recognized as one of the best in the market, covering a large number of industries and companies. Continual investments in people and technological infrastructure help Unibanco Investshop to provide consistent quality to its customers.

In addition to the main sectors traditionally found on the stock market, whose companies are followed by numerous analysts, Investshop professionals cover new sectors such as logistics, agribusiness, healthcare and financial services, and provide comprehensive reports of each to clients.

Asset management

Funds and portfolios managed by Itaú Unibanco in this segment totalled R$290 billion at the end of 2008. An international presence is part of Itaú Unibanco’s strategy to position itself overseas as the largest specialist Latin American asset manager.

In 2008 Itaú and Unibanco also maintained the socio-environmental funds in its combined portfolio (see table), which allocated monies for social and environmental projects or invested in companies with good corporate governance and corporate social responsibility practices.

Banco Itaú is now responsible for selecting the assets of the Latin America fund managed by Nordea Investment Funds, Scandinavia’s largest fund manager, with more than 10 million customers. The asset management division will determine the securities that will be in the fund’s portfolio, which were worth approximately R$62.5 million in November 2008. This is the fourth such fund managed or advised by Itaú, which has set up an analysis team in Mexico.

In addition to the partnership with Nordea, which will distribute the fund in 16 European countries, Itaú Unibanco will be the adviser for Brazilian and Latin American fixed income and equity funds in Japan, South Korea, Portugal, Argentina and Chile.

Unibanco Asset Management (UAM) was the first institution in Brazil to specialize in third-party asset management. UAM finished 2008 with a 3.2% increase in assets under management and administration, reaching R$56.7 billion.

Since July 2001 Standard & Poor’s has classified UAM as “AMP-1” (very strong). This classification is the rating agency’s opinion on UAM’s quality of its practices and procedures for managing third-party assets, which range from AMP-1 to AMP-5 (very weak).

The funds managed by UAM have won numerous awards from industry publications including Exame Guide to Personal Investments, Valor Invest (Top Management of Fixed Income and Equities), Gazeta Investe and Investidor Institucional.

In September 2008 three UAM Funds (two multi-market and one equity) received the seal of excellence in a ranking conducted by PPS Consulting for Investidor Institucional magazine.

During the year UAM was also the first large Brazilian manager to adopt the United Nations Principles for Responsible Investment (PRI). This initiative is designed to incorporate social, environmental and corporate governance in investment decision making. As a representative of investment funds under its management and by signing the PRI, UAM employs criteria for assessing the sustainability of the companies in which it invests, and shares experiences with other PRI participants worldwide with respect to these three pillars of sustainability.

In June 2008 UAM disclosed its voting policy, which establishes the principles, rules and procedures that govern the company when voting at shareholders’ meetings as a representative of the investment funds under its management.

The fund managers believe that the sustainability of a business is built on three pillars: environmental preservation, social development and good corporate governance. Accordingly, they must view their investments from this perspective when exercising their right to vote on behalf of others, approving motions which in their view add value to the assets in their portfolios, and against those motions that destroy the value of these assets. The managers must also act in defence of issues related to the sustainability of a business when deciding to exercise their right to vote.

Private Banking

The merger between the largest and second largest privately controlled banks in Brazil created the biggest administrative structure in the country, by assets. In addition to being the undisputed leader in Brazil, the new bank seeks to become the leader in Latin America and forge a prominent position among global competitors.

In Brazil the new Private Bank has extensive service coverage in São Paulo, Rio de Janeiro, Belo Horizonte, Recife, Porto Alegre, Curitiba and Goiânia. Worldwide it is present in Luxembourg, London, Miami, Grand Cayman and the Bahamas, and in 2009 will open a new bank in Zurich. In Latin America it operates in Chile, Argentina, Uruguay and Paraguay, and plans to enter Mexico.

To improve the service to its customers – individuals with assets of over R$2 million – the structures were separated into Brazilian and foreign clients, including the management of international subsidiaries.

As the products and services offered are highly complementary, the new Private Bank will provide customers with substantial support in determining investment policies, through a diverse portfolio of its own and third-party products and services consisting of fixed income and equity funds plus derivatives, as well as asset planning and management, international credit card operations and structured transactions.

Itaú Unibanco Private Bank is the sum of its talents. Its professionals are CFP (Certified Financial Planner) certified, which is the internationally recognized standard of excellence for personal financial planning.

Throughout 2009 the Private Bank will focus on offering more complete services to maintain its position as its clients’ preferred bank, and strengthen its efforts to secure new customers.

International Operations

Be a global bank. This is Itaú Unibanco’s long-term goal. As the largest privately-controlled bank in the Southern Hemisphere it is well-placed for international expansion in coming years. Prior to the creation of the new bank in November 2008, Itaú and Unibanco had operated independently abroad.

Itaú has built its international presence based on strategically positioned units in the Americas, Europe and Asia, allowing significant synergies in foreign trade finance, the placement of Eurobonds, offering more sophisticated financial operations (Structured Notes), and private banking operations through Banco Itaú Europa Luxembourg. Itaú operates in New York (Itaú branch, Broker Dealer and Itaú BBA representative office), Grand Cayman (branch and Itaubank Ltd., a subsidiary bank), Nassau (Itaú branch and Itaú BBA branch), Lisbon, Madeira, London, Luxembourg and Miami (Banco Itaú Europa), Argentina (Banco Itaú Argentina - 81 branches), Chile (Banco Itaú Chile - 67 branches), Uruguay (Banco Itaú Uruguay - 17 branches), Tokyo and Toyohashi (branches in Japan), Hong Kong (Broker Dealer) and Shanghai (representative office).

Unibanco owns one of the largest retail banks in Paraguay, Interbanco, which operates in the international market to serve foreign customers interested in Brazil and offer its customer base access to financial resources available in the international market. Its overseas structure includes securities brokerage, a representative office in New York and a banking subsidiary in Luxembourg.

Europe

Banco Itaú Europa (BIE), based in Lisbon, has branches in London and Madeira, permanent representative offices in Madrid, Paris and Frankfurt, plus subsidiaries in the Cayman Islands, Luxembourg, Miami and Nassau. It enjoyed superior results in 2008 due to its strategy of supporting European company investments in Brazil.

BIE’s strategic focus in this increasingly internationalized economy is to capitalize on the advantages of being a European bank with the knowledge of Latin American markets, especially Brazil. BIE has been successful in the key business segments where it operates: allocation and distribution of structured finance to corporate clients, capital markets, treasury and international private banking.

The provision of structured finance products to foreign trade and capital markets generated consolidated assets of €5 billion in 2008, up 11.7% from 2007. Corporate credit operations reached €2.4 billion, consisting of structured loans primarily associated with the financing of Brazilian exports.

BIE’s consolidated net income reached €19.6 million in 2008. The banking product generated €120.4 million, a 6.5% increase over 2007, demonstrating, apart from the stable contribution of the financial margin, increased performance from the capital markets, treasury and international private banking areas.

BIE’s international private banking activity, developed through the company’s subsidiaries, finished the year with US$6.1 billion in assets under management and about US$2.5 billion in deposits received from clients.

BIE’s investment grade status (Baa1 from Moody’s and BBB+ from Fitch Ratings) has been an important support factor for its diversified funding sources.

Americas

Argentina

Banco Itaú Argentina (BIA) ended the year with 81 branches, including two new branches in the interior (Neuquén and Salta), plus others located in Federal capital and the provinces of Buenos Aires, Santa Fé, Mendoza, Córdoba and Tucumán. It also opened 19 new commercial platforms in the corporate segment in 2008. During the year the customer base increased 17%, reaching a total of 236,000 individual customers and 5,800 commercial clients.

Total assets at the end of 2008 were $2.5 billion, representing 30% year-on-year growth. The loan portfolio grew 24% to R$1.6 billion, while deposits reached R$2 billion, up 22% from a year earlier. Net income from operations was R$13 million.

Chile

In 2008 Itaú continued to expand, opening seven new branches to bring its total to 67 branches in the country, and created Itaú Chile Compañía de Seguros de Vida.

During the year its organic growth was supported by a focus on quality customer service in the ABC1 segment, and the bank now has a 16% share of this market. The number of consumers individual rose 11% to reach 81,000 at year-end – putting the bank in 4th place in the accounts ranking among privately controlled banks – up from 66,000 accounts in 2006.

Consolidated assets increased by 45% and now total R$11.9 billion, thanks to growth in the foreign trade, leasing and mortgage portfolios. The loan portfolio increased 32%, finishing the year at R$8.4 billion, while deposits reached R$7.7 billion, up 48% year-on-year. During the period the bank issued US$64 million in subordinated bonds and undertook a capital increase of US$47 million.

Net income from operations was R$140 million, due in part to increased revenues from the credit portfolio and foreign exchange gains, though these were offset somewhat by increased provisions for doubtful loans and increased staffing costs. At December 31, 2008 the bank’s solvency ratio was 12.8%, one of the highest in the domestic system.

Paraguay

Unibanco is active in Paraguay through Interbanco, one of the country’s largest banks, which operates in all segments of the financial market. Interbanco was acquired by Unibanco in 1995, and now has 22 services points, including representative offices, branches and three banking services outlets. Interbanco is the domestic leader in offering products and services: it operates in a variety of segments and has the largest customer base in the country. It is also recognized as one of the 25 best banks in South America, and for two consecutive years was named Best Bank in Paraguay by Global Finance magazine.

Uruguay

In 2008 Banco Itaú Uruguay acquired 100% of Unión Capital AFAP, a Uruguayan private pension plan company with 175,000 customers and assets under management of R$483 million, which represents approximately 17% of all pension fund assets in Uruguay.

Banco Itaú Uruguay (see photo on facing page) grew its domestic assets by 64% in 2008, reaching R$3.3 billion. The credit portfolio rose 47% to R$1.6 billion, while its customer base increased 18%, totalling 107,000 clients in the ABC1 segment and 8,000 commercial clients. The bank now has 17 branches with the 2008 opening of a branch in Salto (one of the country’s largest cities), and has a strong presence in the agriculture and agribusiness sectors.

Net income from operations reached R$83 million in 2008, up 69% from 2007. This result was due principally to foreign exchange gains, increased revenue from credit cards and the merger with Unión Capital Afap.

Asia

Itaú is active in Japan and China through Itaú Corretora in Hong Kong and an Itaú BBA representative office in Shanghai. Its largest operation is in Japan, which is home to hundreds of thousands of Brazilians of Japanese descent.

The Tokyo branch team has 21 staff members. Customers can also perform transactions through JP Bank, which has 233 branches in Japan. In 2008 Itaú’s customers in Japan sent US$221 billion in remittances to Latin America.

In May 2008 Itaú opened a sub-branch in Aichi, in the city of Toyohashi, where some 35,000 Brazilians reside. It also expanded its activities in treasury and sourcing funds in the domestic Japanese market.

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