伊塔烏聯合銀行 (ITUB) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. This is Itau Unibanco Banco Multiplo's conference call. (Operator Instructions)

At this time I would like to turn the conference over to Miss Daniela Ueda at FIRB, Financial Investor Relations Brasil. Please go ahead.

Good morning and welcome to Itau Unibanco Banco Multiplo's conference call to discuss 2008 earnings results. I would like to remind you that this conference call is being broadcast live on www.itauir.com. A slide presentation is also available on that site.

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

With us today in this conference call in San Paolo are Roberto Egydio Setubal, CEO, Alfredo Egydio Setubal, Investor Relations Officer, Silvio de Carvalho, Chief Financial Officer, Candido Bracher, Itau BBA's CEO, Geraldo Travaglia Filho, Executive Officer, and Marco Antunes, Accounting Director. First, Mr. Roberto Setubal will comment on the 2008 earnings. Afterwards, management will be available for a question and answer session. It is now my pleasure to turn the call over to Mr. Roberto Setubal.

Good morning for all of you in the US and good afternoon for all of you in Europe. It's a pleasure to be here with you to expose the numbers of Itau Unibanco.

I'd like to start with the highlights for the presentation in the page 2 for those of you who are in internet. We had earnings of BRL2.3 billion recurring earnings BRL2.3 billion for the quarter, BRL10.5 billion for the year. This represents an ROE of 24.8% for the year. We will explain further on this presentation the difference between recurrent and net earnings.

One thing that is very important is the provisions that we've made for this new, more difficult scenario that we are facing in 2009 and 2010. We have built up a lot of provisions as a result of extraordinary gains that we have for after the merger. We've built BRL4.6 billion of additional provision for credit losses. And we will talk more about that. But the idea is that we have [un-cycle] provisions, which we plan to use it in 2009 and 2010 as the scenario gets -- if the scenario gets much worse than it is at this moment. But the idea is that we will probably use some of this provisions in year of 2009.

Also, we had a very strong BIS ratio. We have now above 16%, so it's increasing base coming from the previous quarter. We'd also like to highlight the unrealized income that we have. We have almost BRL11 billion of earnings not realized, most of this regarding our investment in [Redicards].

On next slide we have the major and more important numbers of the year. I'd like to highlight that those numbers represent always the addition of Unibanco and Itau for 2007 and for the year of 2008. The numbers, the accounting numbers of our -- would be only numbers that would add Unibanco only November on. So we thought that these numbers adding the two banks for the full year of 2008 and 2007 and the third quarter would represent better the situation of the Company and the perspectives and potential of this new institution.

So I would like to show you those numbers, which are on page 3. Very strong numbers, as you can see. Our market capitalization now, it's above [USD40 billion]. We have been among the top 10 banks in the world in terms of market capitalization as a result of this very strong balance sheet, which has been improved even more after those new provisions that we have made in this new balance sheet.

Our earnings -- our ROE has been above 24% for the year of 2007 and 2008. And our efficiency ratio has been below 50%, which puts the Company as the most efficient company in Brazil, even before the synergies that we have been -- which we are looking forward.

Total assets of this Company have increased more than 40% in the year, more than 10% in the last quarter. Loans has been growing a lot, as you know, in Brazil. We ended the year with BRL272 billion in loans, 34% increase over 2007. Shareholders equity have been at the level of BRL43 billion , which is a very strong number for the balance sheet, giving us this BIS ratio of over 16%, as I had mentioned before.

Page 4 is a important page because we have the relation or the explanation for the differences between the net income and the recurring net income. We have effects of the merger, which have been positive, especially given the fiscal effects of BRL5 billion, which will be realized over the coming years. This we have made a lot of provisions for equitization of accounting criteria for the merger expenses.

And as I have mentioned before, we have made a big additional provision for loan losses. The number here is different from the previous page because here we are talking about after tax numbers and there I was mentioning a number before taxes. We have goodwill amortization, another smaller effect. So this total nonrecurring effect for the quarter represents BRL468 billion.

I would like to remember to remind you that in this quarter we have amortized all the effects of this merger and we have also amortized the goodwill that we had on AIG share of Unibanco's insurance company, which we have a quite solvent insurance company. The Unibanco insurance company is a fully owned subsidiary today.

We have also acquired 4% of Itau BBA, which was on the hands of the executives of Itau BBA, and we have also acquired the 70% of Itau Europa, which was holded by -- held by Itau [Europe]. So all these were amortized in this quarter together with the merger effects that we have been explaining. So we have a very clean balance sheet in terms of goodwill looking forward.

Next page is pro forma P&L for the quarter, previous quarter, year on previous year of the Bank. I'd like to mention to you that this bank all together for the year of 2008 has a BRL56.8 billion in terms of revenues. By revenues, I'm talking about net interest margin plus fees plus insurance revenues. So all this together brings the Company for almost BRL57 billion of income.

We have non-interest expenses of BRL24 billion additional provisions. Here we are talking about recurrent earnings, so we don't have the additional effect of the BRL4.6 billion provision that I mentioned before. So for the recurrent year the loan loss provisions we are BRL9.7 billion and the net income of BRL10.7 billion, which compares to the full year of 2007 by adding Itau and Unibanco we have increase of 8% compared to two years.

Going ahead for the next slide, we can see the evolution of the loan portfolio, which have increased more on the corporate side and small business, which have increased almost 42% combined compared to 24% on individuals. So this year was a year that we had a big increase in small and middle market and corporate as well, especially the case of corporate in the last quarter. So for the full year we had a 34% (inaudible - background noise) in the loan portfolio, combined again, two companies combined.

Going forward, we can see the level of nonperforming loans and the coverage ratios. The NPL have increased 4.6 to 4.8, showing the first signs of credit deterioration in the market, which we expect to worsen during this year. Coverage ratio have improved a lot, given the -- especially given the provisions that we have made, additional provisions. So we believe that we have a very strong provision for the new scenarios that we are facing for 2009 and probably for 2010.

Page 8 we can see that our provisions have been increasing. This is regular provisioning, not including the additional extraordinary provisions that I mentioned at the beginning of this presentation. So this BRL5.1 billion provisions for the credit portfolio does not include the BRL4.6 billion. By including it, this number will go higher than 8%, the level is 8% or more.

On slide 9, we show you our exposure in the derivatives, swap derivatives that we have on our balance sheet, when we show the numbers in October. And now you can see that we have a very positive evolution with huge reductions in the exposure for those derivatives.

Funding conditions, other types of funds, have been improving a lot, as you can see on page 10. Basically time deposits have been very strong and have had a very strong growth last year to support the credit portfolio evolution.

On page 11, you can see that the Bank is well funded by its clients. We do not depend on (inaudible) our position is a very strong one in terms of liquidity and (inaudible - background noise) evolution in terms of growth on our credit portfolio.

Fees revenues have had a quite stable year. We have different environment than the one we had the year before. So in terms of asset management, we lost some revenue because we lost volume, given the evolution that I mentioned in time deposits. Some money came out of money market funds and went to time deposits. Loan operations, we have some changes in the market regulation, as we had also in account services, which have [linked] the evolution on fees for that year. In terms of other revenues that we can see here, most of this revenues was related to investment bank and securities which, as we all know, have had a much weaker year when you compare to 2007.

Talking about expenses, we had, on page 13, we had an evolution of 12.5% for the year, more concentrated in the last quarter. And this is because we have, as you know, have a annual negotiation with the union and this was majorly in the last quarter. The effect of this negotiation was majorly in the last quarter of the year and this have increased our personal expenses in a special way.

Other expenses also had a big increase. Some of them, given the seasonality of the expenses, like marketing expenses for instance, we usually -- they have the higher level of marketing expenses is on the last quarter. And also we have some influence of the merger. We had a lot of expenses, some expenses at least related to marketing and communication of the merger, which [high thousands and internet] that have also affected the last quarter. So this explain most of the expenses, the expense increases we have had in the last quarter.

On the page 14 we can see that even considering this evolution, our efficiency ratio has been improving over the last 12 months. As I mentioned, we have a seasonality in this last quarter, the fourth quarter, and this is pretty much natural for when you analyze the figures in terms of efficiency. So all together, the evolution of the last 12 months have been improving.

Finally, I'd like to comment with you on the results that we have had in 2008 when we compare Itau and Unibanco with the guidance that we mentioned to you at the end of last year -- I meant the end of 2007. So in the page 16 you can see that we have the credit for individuals have increased less than we expected. Basically this was due to the fact that we had -- the last quarter was much weaker than the previous quarter and this explains why we did not reach the 30% target that we had before.

In terms of business portfolio, we grew by far the target that we had for us. We had record 69% growth in 2007. The fees, we were below the target. And I had already explained why this happened. Efficiency ratio was pretty much in the target. And delinquency ratio was pretty much in the target as well.

In the case of Unibanco, you can see on page 18 that the situation was very similar. Basically the explanations for the shortfall are the same and pretty much achieving the target [other than those, seeing as we did not]. So this is what I have for you, so we are open for questions

(Operator Instructions) Our first question comes from Mr. Saul Martinez with JPMorgan.

Hi. Good afternoon, gentlemen. I have two questions. First, on synergies from the transaction, obviously you guys feel it's too early to provide any sort of specific guidance on synergies. But in general, when should we start to see some of the operating efficiency gains from the merger start to show up in the results? Is that something that should occur in the second half of the year? Is that something that we start to see in the results in 2010?

Second question is on your expectations for loan loss provisioning levels next year. Obviously, Roberto, you gave a pretty cautious view in terms of the direction that --.

Hello?

Hello, Mr. Martinez if you'll please repeat your question please.

Hello?

Hello?

This is Carlos, but I think Saul Martinez was asking a question.

Okay, well, I think he lost his connection. So go ahead and we --.

Sure. My second -- my first question probably has something to do with Saul's question with provisioning and delinquency levels. Given that Itau Banco now has such a high level of excess provisions, we know that historically neither Itau or Unibanco has used these excess provisions to brace from asset quality issues. I was wondering if this year you might see some reversals. And Itau Unibanco being more active in the way they manage these excess provisions.

And the second question has to do with the fourth quarter. We saw very significant trading gains at Unibanco, significantly above the average for the past few quarters or even years, whereas Itau was a little bit lower. I was wondering if you could give me just the background behind these trading gains, given it was such a tough quarter otherwise.

Well, first of all, in terms of provisions, we do intend to use provisions in this year. We believe that we will have pressures from delinquencies that will be much above the normal levels. And the provisions were made exactly for this kind of situation, so we -- probably we will -- as we feel that the delinquency level is above the normal level, we will use some of this -- or the provision that we have made, this additional provision that we have made at the end of the year.

We don't have exact number for that, but the idea is that as delinquency level is much above the normal levels, assuming something as normal like last year or something like that, we will use this provision for this is un-cycle provision, which means that we differ from other situation. We will use this as the scenario [ask us for more] provision. In terms of last quarter --.

Trading gains.

Trading gains on last quarter, I don't have a clear view on that. I'm not sure if anybody here at the table has a clear view. I think [the result in] Unibanco is really above the target [and indicate that Itau], in my mind, [it were] pretty much in line with other quarters, probably above the average of last year, last quarter. So those are my comments.

Okay, thank you.

Our next question comes from Mr. Marcelo Telles, Banco Credit Suisse.

Hi. Hello, everyone. My question is regarding your expectation of your [restructuring target]. I understand also that you had a provision about (inaudible - microphone inaccessible). My question is [do you expect more] from restructuring expense should take place throughout the year and how you are meaning to record those expenses (inaudible - microphone inaccessible) be able to make separate amount of provisions in the future related to the integration of [Itau].

Well, this provision is made according to the regulation and it does not account for the full expenses of the integration. Is limited to what the regulation allow as provisions ahead of the expenses. We believe that this -- for we will have provisions that are basically not [provisioned], we would -- I mean expenses that are not provisioned during the process of integration in addition to the regular level.

I believe that although we will have provisions, we also will start to feel some synergy gains along the process. It's hard to say how much what will be there, the balance gain of those two different -- two different forces. But I think that along the process, which probably will take two to three years, we will end up with lower levels overall expenses that we had last year.

Great. Thank you.

Our next question comes from Mr. Daniel Abut with Citi.

Good morning, Roberto. If I look at your loan portfolio now that you reported a combined entity, and I see that in vehicle loans where Itau stand alone used to have over 20% of the entire portfolio in that category, now, by virtue of the growth of the [denominator] and also that this segment did not grow the last quarter, is represented 17%, 17.5%. Is there a level at which you would like to lower that number, given the currently more challenging environment, in order to feel more comfortable about your exposure going forward? Are you consciously trying to reduce that side? What should we expect that vehicle financing will eventually represent of the overall portfolio of Itau?

I would expect in this scenario that the loan portfolio -- the vehicle portfolio will reduce the share of our loan portfolio. This clearly due to the lower demand of loans for vehicle loans at this moment. And so we believe that the loan portfolio probably will reduce its presence in our overall portfolio -- the vehicle portfolio will reduce its presence in our overall portfolio.

But how much [vehicle] share?

Not sure, Daniel. Look, this year it's a difficult year to forecast, for given the economic environment and also given the merger. We are not really fully mergered. We don't have all the numbers on hand. We believe that the loan portfolio will grow something between 10% and 15%. And depending on how the economy goes, probably corporate loans will be one of the major demands that we will have, especially given the fact that corporations in Brazil that used to fund themselves out of Brazil [coming to fund themselves inside] the market. Also, the middle market will keep on growing. We believe that. So vehicles, we [do not] believe [portfolio have] a very, very weak year, so overall it will lose some share.

Thank you, Roberto. And if I could come in with a second question. Given that you said that although you are not giving any specific target for cost synergies, you would expect that by the end of the process in two to three years, the combined entity should end up with an expense base lower than [the combined as of] 2008. Did I understand that correctly?

Yes, that's what we expect. But you have -- I mean this clearly would depend -- will depend on also on the overall growth of the economy. If, as we do not expect today, we have in the future a much stronger growth in the next two, three years, this might change a little bit. But at the end, what we do really expect is that we will have a much more efficient ratio in two, three years.

Okay. Thank you, Roberto.

Our next question comes from Mr. Mario Pierry with Deutsche Bank.

Good morning, everybody. I have I guess two questions. The first one has to do with what you just said about the efficiency ratio should be better. If you could provide us with any guidance, what kind of levels do you expect your efficiency ratio to get to.

Also, when you guys first presented the merger of Itau and Unibanco, you had at the time talked about not having many branch closures. I wanted to know if that is still the case and when should we expect to see the Itau Unibanco branches are fully consolidated or integrated.

The other question that I have is related to asset quality. You clearly mentioned that you expect asset quality to deteriorate. Also wondering if you could provide some more color what areas concern you the most, is it automobiles, is it credit cards, is it [SMEs]? Thank you.

Okay, Mario. In terms of efficiency ratio, I think we don't have a clear number today. But, look, I'm not -- Itau alone in the past have reached the level of 45%. So I believe that this is something that in the future we should be there at least. So 45% should be a number that in the future we have to get back to this level of efficiency ratio.

In terms of branches, we declared that we don't plan to close down branches. This is still in our mind. We believe that we have a strong brand to attract clients to [full all] the branches that we have. And this probably is something that we will start [the merger itself on] the branches will start in the second half of this year and probably will take at least till the end of next year to be completed. Your last question was on --?

(inaudible - microphone inaccessible)

The credit portfolio. We believe that we will have overall the deterioration will take place in all the business lines. So this includes consumers, this includes big companies, and also this includes middle market companies. Probably we will see first consumers, but -- deteriorating, but we believe that the deterioration will be very across the board, especially because this is something that (inaudible - microphone inaccessible) we have any [mismanagement] in our portfolio. But is coming basically because of the economic deterioration which will take place in the economy overall. So this will be a more difficult scenario both for consumers but also for companies.

Great. Thank you very much.

Our next question comes from Mr. Victor Galliano with HSBC.

Hi. Yes, a couple of things. Most of my questions have been answered. But one I wanted to get a bit more of a feel for, especially in view of the fact that you've got all these excess provisions, can you give us at least some kind of guidance in terms of a range of what you expect the provisioning levels to be as a percentage of average loans in 2009? That's my first question.

The second one is on ROE. Industry-wide we're seeing the ROEs coming down. Even if you look at it on a recurring basis, your ROE combined was 21%. Again, can you give us some sort of a guidance or a range for what you can anticipate for 2009?

And the last question is about tax rate. What sort of effective tax rate should we be assuming for 2009 for the combined entity? That's it. Thank you.

Okay. We don't have a clear number for the provisions at the end of 2009. In our mind, what we have today, given especially the uncertainties that we have for 2009, we have this excess provisions that we believe that will be necessary to be used along the year. Given the fact that we expect that the provision needs for 2009 will be above the 2008 level (inaudible - background noise) to use some of the provisions. So probably what we will see at the end of the year is a lower level provisions compared to the portfolio -- to the numbers that we have shown right now.

In terms of ROE, we believe that at this kind of environment [of growth 20% ROE], it's a great number and we think it's a challenge to keep at this level, at least at this level at this kind of environment that we are facing today. Maybe in the future, as the crisis gets better in terms of -- the economic situation gets better, we can come back to higher levels of ROE. But at this kind of environment, we believe that this is a good number. In terms of tax rate, I don't have -- I'm not sure if -- Silvio, please comment on that. I don't have --

I think 25 is a figure that we are working on.

Okay. Thank you. And that includes social contribution or not?

Yes.

Yes, okay. Just one last question, which is a technical one, really. Will you continue to report during 2009 with the level of disclosure that you've given us in the yearend '08 numbers? In other words, Itau, Unibanco and then the pro forma, or will this change into just Itau Unibanco pro forma once you've merged the shares at the end of the quarter?

We won't be able, at least in the year of 2009, to give you the same level of disclosure because we don't have ways to do this at this moment in Unibanco to combine with the numbers on Itau. But as the integration goes on, we will tend to come back to a more higher level of disclosure. I'm not sure if we will get there -- get back to the same levels of disclosure that we used to have, especially given the fact that our peers, our competitors don't give the same level of disclosure.

Okay, understood. Thank you.

Our next question comes from Mr. Saul Martinez with JPMorgan.

Hi. Can you guys hear me this time? Hello? Hello?

Yes.

You can hear me okay. Great. Two -- a couple of questions. First of all, a lot of questions on operating efficiency gains and cost synergies. I want to follow up with that in terms of timing. When you guys mentioned that 2010 should be lower than '08 and you guys gave some guidance for efficiency ratios, but when should we start to see operating efficiency gains start to show up in the results and in improvements in the efficiency ratios? Is this something that should start to show up in the second half of the year? Is this more of a 2010-like event?

And then secondly, more of a question on how you're positioned versus interest rate declines. I think in the past, lower interest rates have generally been -- generally you've been more asset sensitive and lower rates have hit your net interest margins. But your balance sheet structure has changed a lot in the last few years with more fixed rate assets, longer duration assets, more wholesale funding. How -- lower rates, generally, is that a good thing or a bad thing in terms of your profitability?

Okay, first synergies. I think that the synergies that might take place this year will be minor and it will happen probably along the second semester of this year. But probably be minor and I'm not sure if it be perceived as something that you can read on the numbers, especially given the fact that at the same time we have, as we start building synergies, we also have additional expenses for the integration. In 2010, yes, we can probably see some of the impact of -- some impact of the synergies and probably the full level of synergies will be something more to 2012. On 2011, probably something like maybe 80% of the impact will be in place in 2011 and full impact in 2012. This would be a reasonable numbers.

In terms of interest rates impact on the balance sheet, in one hand, the lower rates are good, given that it tend to improve the credit conditions. In other words, when we have lower rates, we have a lower level of delinquency. So this would be a good impact of the lower interest rate.

On the other hand, some of the lower cost liabilities will not perform in terms of revenues as it does at the higher level of delinquency. So it's a mixed impact. I tend to believe that probably the overall impact probably will be more to negative on the long term, not necessarily the short term because you have treasury gains and you have other types of gains.

Okay. And just a very quick follow-up on one of Victor's questions. A clarification more. Did I understand you when you said that next year, because you're going to use some of your excess reserves, that your credit provisioning level to average loans will be lower than it currently is?

Come again?

Did I -- just a clarification. I thought in your answer to Victor Galliano's question about guidance for credit provisions to average loans that you mentioned that it's going to be lower by yearend next year than it current is. Is that -- is that accurate?

What was mentioned is the level of provisions on the balance sheet compared to the credit portfolio --.

Okay.

Will be lower, given the fact that we expect to use some of the excess provisions during the year.

Understood. What about through the income statement? I think in the fourth quarter your provisions were about 1.5%. Is that a reasonable run rate, do you think, in 2009?

The provisions on the P&L also be higher. Not much higher, as we plan to use some of the excess provisions to offset the delinquency ratio that we [were].

Okay, great. Thank you very much.

Our next question comes from [Mr. Federico Rey] with Raymond James.

Hi. Good morning. I have two questions. The first one has been already answered, but I would like to -- if you can clarify. You had just said that further reduction in the [rates] could negatively impact net interest margins in the midterm but have maybe a neutral impact in the short term. My question there is if you can clarify this is after or before credit loss charges?

And the second question, if you can give us more color on potential acquisition targets in the region? Thank you.

Well, if I understood correctly your first question, the idea that I tried to convey is that when interest rates fall, you have gains in securities that you hold, you have gains in treasury overall. So this, it's a positive impact in the short term. In the long term, you lose some revenues coming from lower cost liabilities, but this also is offset by the fact that lower rates gives you a lower level of provisions in terms of [as an inconsistent]. Overall, it's a difficult balance to evaluate.

In terms of our international growth, we have, as we have mentioned before, we have declared that we plan in the future to be more international and that we would see -- and that we see Latin America as a natural way to -- for Itau Unibanco to go ahead and become an international player. So but right now our first priority is the integration and our second priority is also the integration. So we are fully concentrated on the integration.

Okay, thank you.

Our next question comes from [Mr. Jonathan Triggos] with Equinox Partners.

Hi. I just have -- I have a question that's motivated by the actual -- the audited financials. And so if you look there at the expenses on financial operations, there's a money market line which increased significantly from -- without Unibanco basis it looks like it's about three times as big as it was in 2007 and 2008. And that means that if you look at it on a cost of fund basis, your cost of funds actually doubled. So I'm wondering if that's just an accounting thing that I'm not understanding properly or if there was an actual material change in your cost of funds. And if there was a change, was that motivated by the mix moving to time deposits or market conditions or a little bit of both?

Well, I don't have the numbers you have mentioned. But the rational -- my intuitive answer, if I may, would be that the cost of funds has moved into a different mix. Clearly we have increased the amount of time deposit and this probably has changed the way you have described. But I don't have clearly the numbers that you have mentioned to make sure that my answer represents what is the reality. Maybe you can check this afterwards with Silvio to make clear -- a more positive and clear answer.

Okay. And just -- but just in general, do you guys have any numbers that you refer to? I know normally you talk about the financial margin. Do you have an idea of how much your cost of funds increased? Maybe not on an accounting basis, but just on whatever way you guys think about it?

Silvio? I'm passing on to Silvio.

What we are forecast that in this moment like we mentioned when you look the credit [inhalation] to our source of funding, you see that we have a high liquidity, which means that in this moment we are [practically] lower interest rates to get the deposits, time deposits. [To me is that you do] this year probably we will keep the net interest margin of the operations flat.

Okay. Thank you very much.

Our next question comes from [Miss Lola Wisner] with Barclays Capital.

Hi. Just one question. For the upcoming dividend that you have on or around March 17, I believe, I'm just wondering what is the breakdown between the different Itau and Unibanco share classes.

Would you please repeat the question, please?

Yes, sure. So the upcoming dividend that you have around mid March, I'm wondering what is the breakdown, like the ratio between the different Itau and Unibanco share classes.

Well, looking forward, we don't have any difference because the share will be the same. As a matter of fact, since November we have same dividend for Itau and the Unibanco shares. Geraldo will make some comments on that. Geraldo is CFO of Unibanco.

Hi. You only have to convert stocks from Unibanco to Itau by the swap ratio that has been released. And after this, on March 31, the stocks will be only one -- the same ticker and the same dividends. These are already provisioned for stockholders of Unibanco and will be paid now in March. We were only waiting the approval of Central Bank. Now is everything approved, [dividends] were paid, and you must only [attention to the] swap ratio.

Okay, thank you.

Our next question comes from [Mr. Ian Smith] with [Napsky Capital]. Mr. Smith, you line is open. Please proceed with your question.

Hi. Can you hear me?

Yes, we can hear you.

Great. Sorry about that. I have two questions. The first one is on the balance sheet progression during the quarter. It was quite different at Itau versus Unibanco. We saw large sort of asset growth and time deposit growth at Itau and much higher loan growth, while at Unibanco those numbers were much lower. Can you give us an idea of where those differences came from and whether going forward those differences are going to be more aligned?

And then just second question is just clearing up a few queries. The equalization of accounting criteria, I think it's net BRL1.4 billion in the quarter. Can you give us an idea of what that number is? And my sense is that that probably relates to Unibanco putting through extra loan loss provisions to align themselves with Itau. Is that the case?

And then just secondly, a second point to clear up, it looks like the shareholders equity level reduced in the quarter, if you just look at the pro rata balance sheet, I think from about BRL44.5 billion to BRL43.5 billion, while we saw positive net income. Can you give us an idea of what that change relates to?

Okay. In terms of growth, I think we have to look forward as Itau and Unibanco being one company. And I don't think that the growth that we had last quarter is something meaningful looking forward for the future. So we believe that the trend is at both companies, especially as we have integration going forward, the level of growth will be basically the same. So we don't have to see this as something -- we don't have to concentrate on those differences.

In terms of provisions for accounting that we -- accounting criteria, equalization of accounting criteria. We basically did the -- we used the most conservative criteria, if it came from Unibanco or it came from Itau. In both case, we have criteria that came from one or other. So this basically what -- was what was done.

Well, my -- your final question was about why the equity position reduced from the third to the fourth quarter. The merger had a lot of effect, a lot of (inaudible) effect. In addition to the merger effects, we had effects coming from dividends and we had effects coming from the amortization of AIG acquisition and other acquisitions that we've made in the quarter. So those basically are the explanation.

If you want more detail, please look for Silvio and he can give you more details. But basically, effects, accounting effects coming from those operations and the dividend that we declared in the quarter.

Great. Thank you very much.

Our next question comes from Mr. Mario Pierry with Deutsche Bank.

Let me ask you a question with regards to the equity stake the Bank of America has on Itau. As we know, the lockup period is set to expire this year. Bank of America, like other banks in the US, is having some financial troubles. Have you had any discussion with management of Bank of America if they plan on selling this stake? And if they do plan on selling this stake, we know that Itau has the right of first refusal. Would Itau then be willing to buy this stake from Bank of America? Thank you.

Up to this point, Bank of America has not shown any intention of selling the stake on Itau. So we have talked to them and they have mentioned that they are not planning to do it. So we -- this is what we have for now.

Thanks.

Our next question comes from Mr. Victor Galliano with HSBC.

Yes, a couple of follow-up questions here. One on personnel. I noticed in the quarter, if you look at Itau, the employee number came down. You actually seemed to reduce your personnel levels by over 1,000 people in the quarter. And Unibanco, it seemed like, increased by about 600. But generally speaking, would it be fair to say, and I know that you're not planning to cut branches, et cetera, but would it be fair to say that you will be looking to take advantage of those employees who retire or perhaps retire early and not replacing them going forward, thereby reducing the personnel levels in that way? That's the first question.

The second question, coming back to the excess provisions, so I'm just -- one thing I want to clarify here. Are all excess provisions currently included in the capital calculation in the BIS calculation? So if you're going to be drawing down on those, would that effectively reduce your capital position?

Okay. Regarding the level of provisions (inaudible) let me start with the personnel question. We, since the merger took place, we have decided not to hire new employees. We basically are not replacing those who are -- who are leaving the Company. And this was implemented basically in December. We had some -- still some people that was in the pipeline hiring process. But now on since January we are not replacing those who are leaving the Company. So the trend overall is that we have people -- the overall number of employees reducing along the --

Talking about the excess provision, it has been part of the capital calculation, given the new regulation of Central Bank. It represents more or less 1% of the total BIS ratio. So this -- if we do not account for the excess provisions in the calculation, we will have something above 15%, which is still a very strong number.

Okay, thank you.

This concludes today's question and answer session. Mr. Setubal, at this time you may proceed with your closing statement.

Okay. Thank you all for being with us today. It was a very special moment to announce the numbers of Itau and Unibanco. We are very positive about the future of the Company. We believe that this is extraordinary company that has been combined for one institution from now on. We believe that it's extraordinary moment for us, especially given the very difficult year that we (inaudible).

And probably we are one of the very, very few companies in the world that today has a very positive agenda for the year. And we believe that this will take place during -- this integration will take place in a very [soft way] and very optimistic about the future of this company, which will be very, very good. And thank you all for being with us and I hope to be with you again in the future.

The Itau Unibanco Banco Multiplo's 2008 earnings conference call is over for today. Thank you very much for your participation and have a good day.