伊塔烏聯合銀行 (ITUB) 2013 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Itau Unibanco Holding conference call to discuss the 4Q13 earnings results. (Operator Instructions)

As a reminder, this conference is being recorded and broadcast live on the investor relation website, at www.itau-unibanco.com/ir. A slide presentation is also available on this site. The replay of the conference call will be available by phone, on (55 11) 4688-6312, access code 1576884#.

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 that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risk, and other factors.

With us today in this conference call in Sao Paulo are Mr. Roberto Egydio Setubal, Chief Executive Officer; Mr. Alfredo Egydio Setubal, Executive Vice President and Investor Relations Officer; Mr. Caio Ibrahim David, Chief Financial Officer; and Mr. Rogerio Calderon, Corporate Controller and Head of Investor Relations.

First, Mr. Roberto Setubal will comment on the fourth quarter 2013 earnings result. Afterwards, management will be available for question-and-answer. It is now my pleasure to turn the call over to Mr. Roberto Setubal.

Thank you. Good morning and good afternoon to all of you. It's a pleasure to be here with you and to show our results for the year and for the fourth quarter.

I'd like to start. I guess that all of you are following the presentation on internet. So, let me start at page 2, with the highlights of the quarter. We had a very strong quarter -- R$4.7 billion net income. I think it was strong in all the lines.

We have margins with clients growing. We have margins with market also very strong compared to previous quarters.

Our loan loss expenses were down. So, this was positive for the results.

Commissions and fees, we have major improvement in the fourth quarter. There is some seasonality there, but it was also very strong.

And efficiency ratio improved, although the non-interest expenses did not perform as well as previous quarter. But we still had a strong year, with expenses running in line with inflation where we compare on a comparable basis the situation of Redecard.

The loan portfolio also had important growth in the fourth quarter, and we'll see this throughout the presentation.

Moving ahead, our ROE, when we exclude market revenues, are improving. We are becoming operationally very strong. We presented an operational ROE of 24%, which is quite recurrent in my view. And we'll see some volatility in the market lines, but the operation of the Bank is quite strong, although we have to consider the seasonality which is positive in the fourth quarter.

ROA, it's also improving, as we can see in the fourth page. It's heading to a highest level since the merger of Itau with Unibanco. So, this shows how strong is our operating models.

The results were strong in the fourth quarter, as I mentioned, better than the third quarter and much better than last year's. For the full year, we had a net income growth of 15%.

And it's important to mention that although when we compare year to year the margins with clients have declined in the fourth quarter, it shows growth. So, we are already in the mood of growth, and we have fully adjusted our risk appetite in terms of the impact on the revenue side. So, from now on we expect growth, and we are having growth in the margins with clients since second quarter. And we'll have [some] growth for the next year.

Market line, revenues with market have been very volatile, and we expect it to keep in very high level of volatility of the markets. So, this brings some uncertainty to our results, although we had a strong quarter in the fourth of 2013.

The revenue from fees and commissions were also strong. This was a quarter of favorable seasonality, and we performed quite well.

Insurance revenue came in line with our expectations, and we are concentrating more our business in lower risk lines and I'll talk about that. So, the net of revenue after claims is improving. This is what counts in our mind.

Loan losses, it's still improving as you can see. Year to year, we had a 23% decline, which was positive. In the quarter, we had a 7% decline. And we still expect some additional decline going forward.

Expenses for the year were 7.4% in terms of growth, but [I assure you] that in a more recurrent basis we are pretty much in line with the 5.9% inflation that we had this year.

We had some non-recurring events. I won't talk about that, because they basically were neutral for the results of the quarter and for the year. So, if you have some questions, please ask us.

The loan portfolio had a strong growth the fourth quarter, even if you do not consider the acquisition of Credicard which we incorporated in our balance sheet in December. We had strong growth, which means that we are already coming back towards growth, although the vehicles portfolio are still declining.

This change in our risk appetite has made a big change in our financial margin with clients, as you can see in the page 8. We are reducing the risk. So, the revenues mix are changing in line with that.

And as we can see on page 9, this has brought a very important result for the Bank. The strategy has clearly paid out, because we can see that although the gross spread is declining -- we had a level of 13.4% and now it's 10.9% -- although we have reached some stable point [around].

And when we consider that the net spread after the loan loss provisions, we are already increasing it. So, we have 7.9% net spread compared to 6.9% in the fourth quarter of 2012. So, a major improvement. And this was reached although the gross spread has declined.

In terms of credit quality, we still are improving our NPLs. It has declined towards the lowest level since the merger of the Bank. We are at the 3.7% level in the fourth quarter, and this was impacted in 10 basis points by the incorporation of Credicard's portfolio.

Although we see some additional reduction in the delinquency, we believe that most of the improvement is already shown. So, although we expect some improvement, it will not be in the same amount as we had in these last 12 months.

Provisions are declining when we compare to absolute levels, or also compared to [a lower] loan portfolio. So, this shows the improvement that we are having.

When we look at the short-term NPLs, on page 12, we can see that it is already at a stable level. And again, it's the lowest level since the merger with Unibanco. And we can see clear improvements coming still on the consumer side, although on the company side we had some deterioration here at this quarter. We don't see this as a trend. We expect that companies will be in a stable level that we were. This does not represent a trend. This small deterioration that we had in this quarter was due to a few clients that went past due during the quarter.

When we go to see the revenues coming from market, we see that we had a good quarter, much better than previous quarters and more in line with the year of 2012. This is the line that we expect volatility going ahead. We are not sure about exactly how we will see this line perform. So, I will be very careful in terms of what can we expect about this line in the coming quarters.

When we look at the fees and commissions revenues, we can see that all the lines have been improving, especially the credit card lines which we have incorporated Redecard and that this coming year we are incorporating Credicard. So, it will keep on growing.

But all the lines are growing, and this was part of our strategy. When we announced the change in our risk appetite, we also mentioned that we would put more efforts to grow service revenue. And I think that we are in line with this strategy. We have acquired Redecard, 50% of Redecard, and also Credicard, which will keep our momentum on growth in service revenue.

On page 15, we can see the banking and insurance operation, each one of them, which shows the performance improving both in the bank and the insurance. Both businesses are performing quite well.

We are having an ROE of 25% when we analyze the banking operation, which is still very strong. So, the banking operations are in a very good momentum, with all the basics in line with a good performance. We believe that this is the leading franchise in terms of performance in Brazil [this day].

Insurance is performing well. We believe that we can grow that business in a more related basis with the Bank, in a more -- aligning more with the Bank, [the bank insurance] strategy that we believe that what we will do in the future.

On the page 16, we can see that our insurance net income breakdown shows that we have a low level of risk in our insurance portfolio. We work very hard in order to focus on the technical results. So, this means that our business, it's a low claim business. And we have a combined ratio of 71%, which is a very strong performance for our insurance operation.

And we will keep the business in that strategy. We will not move to higher risk type segments of insurance. And, by the way, we are moving out of the big claims, large business, of insurance which we believe is not in line with the bank insurance [strategy].

The non-interest expenses, as I mentioned, for the year was in line with our objectives of being below or in line with inflation. When we compare with last year, we had a 5.9% on comparable basis with Redecard. So, it was a good year, although the fourth quarter was not as good as we would like compared to the third quarter. But we will keep this objective of growing expenses on the inflation level for the coming years.

All this improvement in our risk appetite's reduction of loss have made our risk-adjusted efficiency ratio achieve 65%, which means that we have 35% pretax profit-to-revenue ratio, which is a very strong ratio. And we are very happy about the achievement that we have had more recently in that kind of ratio.

We [had in] the year an increase by 9% in our shareholders' equity, which [a chunk of that about the reach of the Bank such as to Basel III]. Our ratio today is 16.6%, as you can see on page 20. It's a strong number for the time being, and we believe that we will be totally adjusted to Basel III before 2019, although we have still some questions about domestic [sheets] and things like that which have not been defined so far.

And the strong base of capital that we have today made us very confident that we will need not additional capital, especially given the very strong capital generation that we are going through at this moment.

[Here,] we see our trading volume of our shares. It has been kept very strong. Yesterday at BOVESPA, we had almost 18% of the volume, [Itau plus ITUB]. So, the liquidity of the shares are very strong, and this is good for investors.

When we look our numbers in IFRS, which are more comparable to international standards, we can check that our net revenue is even more bigger than the one we are showing in Brazil GAAP, which gives you a clear idea of the quality of operational [lift] that the Bank is going through at this moment. We runned in a 24.6% ROE in the fourth quarter in IFRS. So, it was a very strong results.

The year of 2013, I think we could achieve all the guidance that we mentioned to you at the beginning of last year. Some of them were above the previous outlook that we had.

And now, looking on page 24, we are looking at the year of 2014, and give those guidance for the year.

We expect the loan growth to be in the range of 10% to 13%. This basically is based on a range of growth of the Brazilian economy of 2% to 2.5%, and a currency more or less stable at the level that we have today.

Loan loss expenses net of recoveries -- so, this is a different guidance [than the gross one we gave you at last year], because here we are talking about provisions net of recoveries -- the range that we are looking is between R$13 billion and R$15 billion.

Revenues of service [plus] insurance, we believe a growth of 12% to 14%, and this already includes Credicard revenue that we are adding next year.

A non-interest expenses growth of 10% to 12.5%, but this includes the expenses that we would have next year of Credicard. So, if we [discount] that, we [will be] talking between 5.5% and 7.5%. But we would like to improve this number in order to keep it more below inflation. So, we believe that we will be able to do it. But the current guidance is this one.

Efficiency ratio in that conditions, we believe that we would keep on improving, and the range [of efficiency that we -- the range of the improvement] that we expect for the year of 2014 is between 50 and 175 bps.

So, those are the numbers that we are looking at in 2014.

Let me talk a little bit about the Itau CorpBanca deal. It was a merger, a merger with CorpBanca. That is a [Chilean-based] Colombian bank. With that merger, we are merging our Chilean operations with that bank, and we will be controlling that Itau CorpBanca, here as you can see on the chart.

And we'll become the fourth bank in the Chilean market. It's always interesting to remind you that the Chilean financial market is bigger than Mexican and Argentine markets. So, it's the second Latin American market. So, it's a really important market in terms of banking in Latin America.

And in Colombia, it will be the fifth Colombian bank in terms of size.

This deal was done in a way that we believe that will be accretive soon after we have the synergies done. So, it's a well priced deal for us [in addition].

After that deal, as we can see on the page 26, we'll have, [in consolidating our balance sheet,] an important amount of credit to loan outside of Brazil, in local markets in Latin America, that will represent 20% of our total credit portfolio. This shows [that we think] it's an interesting thing for our shareholders, because it give us some new diversity that we did not have in our balance sheet. You'd like to be more diverse in terms of not as much concentrated in one market.

And at the same time, we are moving into markets that are outgrowing Brazil. We have more growth prospective in those markets, because those economies are outgrowing Brazil and also because we had a lower level of market share which allow us to have a higher growth in those markets. So, we are moving into markets that we believe that will bring additional growth for the future.

Having said that, I open for questions. Thank you very much.

Ladies and gentlemen, we'll now begin the question-and-answer session. (Operator Instructions)

Carlos Macedo, Goldman Sachs.

Good afternoon, Roberto, gentlemen. Thanks for the opportunity to ask questions. Congratulations on the very strong results for the quarter.

I have two questions. The first one is related to margins. If you could give us some color on what your expectations are for 2014? Just doing the math on your guidance, it looks that if you're right at the middle of the guidance for all the different items, your managerial financial margin would have to be up 14% year on year, which seems a little bit high given the 10% to 13% guidance you have for loans. If you could give us a little bit of color on what you expect in terms of guidance and how to understand those numbers and put them together?

The second one is also on top of the guidance. Looking at the numbers that you have on your results [of Credicard], it appears that the expenses for the company are around maybe 3% of Itau's expenses. And yet, we have 5% higher for -- the guidance including Credicard is 5% higher than that of Itau. Is there room for improvement there in that specific one? Are there any synergies that you'll be able to get so that maybe that 5% does not include --? Is that 5% including also some of the amortization of the goodwill in the Credicard acquisition? Some color there also would be welcomed.

Thank you.

In terms of Credicard expense -- in terms of expenses, you are absolutely correct. These numbers includes the goodwill amortization for Credicard.

And remember, Credicard has an operational expense month to month about R$130 million. So, if you multiply this by 12, you reach R$1.5 billion, plus some amortization that we plan to do next year of the goodwill. You reach a number that will be very close to those factors that you are mentioning.

So, you are absolutely right. Those are the numbers.

In terms of margins, you made up the numbers. I have not seen your numbers. But, as I mentioned during the presentation, we expect that margins with clients will be growing. I do not expect them to be outgrowing the level of growth that we will have in the [fourth] quarter.

We are running the portfolio. It's running to a direction of lower risk, because we are growing more the mortgages business and the Consignado business, which are lower margins business compared to -- and also the big corporations. Those are businesses that has lower margins, although lower losses as well.

So, we are running in terms of revenue, in terms of margins, in terms of running into the direction of a lower level of margins before losses, and we believe at a higher level of margins after losses.

So, we from the numbers that we made up -- I'm not sure why -- are showing higher the growth on margin that we would expect for clients.

We also have an additional number that is the revenues with markets, which are more uncertainty. We are more uncertain, although we expect growth coming from this year of 2013, which we had very low -- a much lower level of market revenue if you compare to previous years. So, we do expect some improvement in that line.

OK. Thank you, Roberto. Just one final follow-up. Would it be fair to say that there will be synergies in Credicard then, and that maybe that 5% won't actually end up being 5%?

Yes, we expect synergies, although depending on how fast that we implement them. There, because when we integrate two companies, before you have the benefit, you have some additional costs. So, this might impact negatively, although not in a meaningful way, in the short term. But down the road, yes, we do expect synergies coming from Credicard.

OK. Thank you, Roberto.

Mario Pierry, Deutsche Bank.

Good afternoon, everybody. Let me ask you two questions, as well, Roberto.

First question is related to loan growth. As you mentioned, the margins of clients are rising. Asset quality is completely under control. You mentioned also that the risk appetite is improving. But you're only guiding for loan growth of 10% to 13% in 2014, which is roughly in line with what you reported in 2013.

So, I was wondering why not guide for higher loan growth? What really concerns you about the Brazilian economy? We're seeing all this volatility of rising interest rates, weaker currency. If you could give us your perception of the Brazilian economy and why you shouldn't be growing faster, given that we're seeing better spreads and asset quality under control?

The second question is related to your expansion. We think that this was a great transaction with CorpBanca. You now have a very nice footprint in Latin America. But I was wondering if there's any appetite for the Bank to expand outside of Latin America? Would you consider any expansions in developed markets?

Thank you.

Talking about the loan growth, we have in 2013 an important impact of the exchange rate, which in that range that we are giving you in terms of guidance we do not expect -- we don't have any important impact in that range. If we have a devaluation, this might impact positively the growth. If you had an appreciation of the real, this might impact negatively that line. This is one thing that's important.

In 2013, we had also the growth that was impacted by Credicard incorporation in our balance sheet.

So, these two things, if you take out those two things, we will -- talking about the number, that will be closer to 10% for 2013, which compares to 11.5%, the middle of the range that we are giving you.

So, there's some more growth. Yes, it's true. But not that much growth. We expect a lower growth in the Brazilian economy in 2014, when compared to 2013. So, this is also one of the reasons why the growth is not that much stronger.

The other question was about --?

About expansion outside of Latin America.

Well, we are very happy that we could do this deal in an accretive situation, which is always very difficult to be able to achieve a controlling position in an accretive transaction. I think this was really something very, very special.

We will have a lot of work to do in the next two years in Chile and in Colombia in order to integrate those banks that we acquired. In Colombia, now we have three banks -- two that were subsidiaries of CorpBanca plus our bank. So, we are talking about the three-bank situation.

In Chile, we'll be integrating a bank to our bank which is bigger than ours.

So, we have a lot of work to do in the coming two or three years in those markets. So, we do not plan to have anything new for those two markets at least.

Then, we are still looking to be in other countries in Latin America to we are not at this point in time, which is Peru and Mexico. And maybe, if we have the opportunity to acquire something in those markets, we will do it.

We do not have anything in view in terms of [developed] economies at this point in time. We believe that we should pursue our strategy of becoming a regional bank. So, we would like to have presence in more markets and having a stronger position in Latin America before we think about going to other markets.

Very clear. Just a quick question, a follow-up then. When we look at your franchise today and your earnings contribution coming from Brazil, what would you expect this mix to look like five years down the road, or even 10 years down the road? What is the ideal mix that you would like to get in terms of revenue contribution out of Brazil and outside of Brazil?

Well, I think that we would like to have a more diversified balance sheet than the one we have today. When we look 10 years from now, maybe 5, 10, 20 years from now, we believe that we will have a more diversified balance sheet, because in Brazil the growth that we have in terms of the potential growth that we have is more limited given our market share that we have today and also the potential growth of the Brazilian economy.

But if we look into Latin America, we see more potential growth in the local economies that we are in, and there's also some market gain potential that we might achieve through acquisitions and transactions.

So, we see more growth out of Brazil than in Brazil for the next few years at least.

And we believe that we will always be mainly a Brazilian bank. Probably, it will be very difficult to achieve more than 30% of revenues coming from other Latin American countries.

Perfect. Thank you very much.

Saul Martinez, J.P. Morgan.

Good morning, or actually, good afternoon to you guys. Two questions, as well.

First, on loan growth and risk appetite. And Roberto, you talked a little bit in your answer to the previous question about your expectations for credit growth. But obviously, one of the major drags has been -- or, the principal drag, really, on your credit growth has been the auto book and the SME portfolio, both of which have been contracting.

Can you give us an outlook of how you see these two businesses, going forward -- what you think what needs to happen for risk appetite in these segments to start to come back, and when do you envision the balances for these segments to start to grow again?

My second question is very specific. It's on your NPL formation. I think on page 12 of your presentation, you give an evolution of NPL formation. Just wanted to understand, just clarify first, that that seems to not include the additional NPLs that came on board with Credicard. And if you could just give us the specific number? I know you gave us the NPL ratio excluding Credicard. But if you can share the specific number of what Credicard added to our 90-day past-due loan ratio, that would be helpful.

In terms of NPL creation, I don't have a number here of Credicard to give you, and those numbers does not include Credicard. We might work out some numbers for you if you wish. Please, Rogerio is here with me and he will be able to provide you those numbers.

In terms of impact in the NPLs, we showed you a 3.7% number in page 10 of our presentation. Credicard represents 10 bps on that. So, if we had not had Credicard incorporated in those numbers, we would be running a 3.6% ratio at this point in time.

In terms of credit growth of the auto book, we still expect some decline in that book, especially in the first semester, with some recovery in the second semester, probably going to a level still below December 2013. So, still some decline, although we will be in a growth mood in the second semester.

In terms of SMEs, we have already started to grow the SME portfolio, although slowly. But we will see this portfolio improving along the year. We believe that we have --. We have made some changes not only in terms of risk appetite, but more recently in the way we organize the business. We moved some of the business into different segments. So, we are still adjusting that. But we believe that this year we will have market growth in that segment.

OK. The 30-basis point increase in early-stage delinquencies in commercials, were those concentrated more in your corporate portfolio? Or, were they more specific to small companies or middle-market companies?

The early delinquency NPLs for companies, it's more on the corporation side. We have a few names in that portfolio. It does not represent a trend in my view. We believe that this will be [stable in] the levels that we have seen since June. It's a normal oscillation, normal variation that we had in that number. It's not a trend.

And I still believe that the credit quality of the consumers will improve down the road.

So, companies, more or less stable, and some improvement in the consumer side.

Great. Thank you very much.

Amit Mehta, PIMCO.

Thank you for hosting the call. I just wanted to get more color on your expectations for your insurance business growth rates, just reflecting on the growth in 2013 and how you see the outlook for [2014]?

That's an interesting question. You should be --. Our strategy is to concentrate more in the [bank insurance] business. And we are moving out of some of the other businesses, other segments that we have business. We are considering to sell property business. And this will affect our top line, because those businesses have strong revenues.

But you should be looking at the combined ratio, and we are focusing more in our business in the combined ratio, as you can see on page 16, which means looking at the technical results, which means earned premiums less claims and commercial sales expenses.

But this is the line that we should be following, and we'll be showing you this, because since we are moving out of some of the businesses we believe that it does not have to do with our strategy because they are either too risky and needs more focus than we are able to put it.

But also, we are not going to [average of] insurance that has higher level of claims. We want to be in lower level, more bank insurance, and grow that line of technical results.

But can you elaborate on what combined ratio you would like to target? And then, maybe you can give us some color on what growth rates you expect earned premiums to grow at?

I do not have a number to give you.

(multiple speakers) combined ratio performance?

I do not have any number to give you, because we are changing the mix, and this change -- if we are successful, for instance, in selling the property business -- this will affect. And I don't have here a number to give you.

But in terms of technical results, we can always think in terms of growing that line. I don't have a number of the combined ratio to give you here at this point, in terms of focusing.

And what would be the priority segments that you would be focusing on?

Pension and life is the primary focus of our insurance strategy.

Are you able to elaborate on how much of your customer base is already [penetrated] for those products?

We have a market share on those products, but we believe we are below our potential. We can grow our market share. We have opportunity there, especially to penetrate in terms of cross-selling our Credicard portfolio that is much below what the potential for insurance sold through Credicard would be, the potential for the size of our Credicard portfolio.

Thank you.

Philip Finch, UBS.

Good afternoon, everyone. Thank you for taking my questions. They are two questions, really, I'd just like to ask. One is in terms of asset quality, where you reported really impressive NPL improvements coming through. So, I think on slide 10, you showed your 90-day NPL ratio at 3.7%, which looks like the lowest level for at least five years.

Now, I realize you're continuing to change your loan mix towards safer types of borrowers. So, my question is really whether there's much more scope for your NPL ratio to go much lower, given the current level which is already very low?

The second question is, again going back to Credicard, where you've given a guidance for 5% rise in costs in 2014. I guess the question here is, can you share any color in terms of the impact Credicard should have in terms of revenue growth in 2014, as well?

Thank you.

We still see some additional decline in our NPL over 90 days. I believe that most of the reduction, we have already seen given our current risk appetite position. In the last year, we had a major decline. We see additional decline for this year, but not the same level of last year, but some additional decline, especially coming from the consumer side.

In terms of the second question, I would like you to repeat it, because I really did not understand exactly what you have in mind.

The second question is really to try and understand the contribution Credicard could give to your revenues going forward. You talked about the additional costs, of 5%, that it could incur this year. But I guess, just trying to gauge what sort of revenue upside this could add to your overall Group revenues?

I don't have a number here to give you, but in our guidance when we -- Credicard is included in the number that we are giving in terms of guidance. So, whatever number you come up out of the math that you do on the guidance that we give you, it does include Credicard already.

[I see]. Fair enough. Thank you very much.

Jorge Kuri, Morgan Stanley.

Hi, Roberto. Good morning. Two questions, if I may.

On your guidance on provisions, just wanted to understand the change in expressing the guidance net of recoveries. I'm assuming that the amount of provisions you're going to do are not necessarily dependent on where the recoveries are this year. So, would you mind just helping us with understanding the provision in the same way as you did last year, just loan loss provision expense? And whatever recoveries, I guess, we'll net them out as they happen. So, what is your expectation for this?

And the second question, I guess, is a bit more long term, and it has to do with your loan growth outlook. I think you've made it perfectly clear that it is difficult to grow loans beyond the level that we've seen over the last year or two without the support of a stronger macroeconomic growth.

And I guess, what needs to happen in Brazil in order for the economy to grow much faster? Do you have the visibility that it is in the near future? You obviously don't see this happening in 2014. Is there an expectation that we're closer to that? Is 2015 hopefully a better year, or not? Or, are we in this funk for the next foreseeable future? And so, I just wanted to understand how do you see this playing out?

Thank you.

Let me start with this growth potential that we see over the years. I believe that probably we can grow between 10% and 15%, in the current levels of growth in the Brazilian economy of 2% to 3%. Something around that number, we could. Probably, if we have a higher growth, close to 3%, it will be more close to 15%. Lower growth, more to 2%, it will be something more closer to 10%.

So, this is for the next two, three years. This is the kind of growth that I would expect. Between 10% to 15% would be quite reasonable.

In terms of loan loss provisions net of the recoveries, I tell you that we do not expect a major change in recoveries. We believe that it would be around the same number that we had this year, more or less stable, maybe 5%, 10% above or below. Clear, not more than that. So, this is the number.

But it's also important to have in mind that we have Credicard included in that number. Credicard brings additional losses, given that big business we acquired. But on the same basis, we are talking about gross provisions below this year, the year of 2013. So, on the same business, on comparable basis, the loan loss provisions for 2014 should be below the level of 2013.

All right. And if I may, just a couple of clarifications. Is it fair to assume the same level of improvement as you saw in 2013 versus 2012? Or, a slower level of improvement? How much is -- better? I guess that's the question.

And then, on the first answer --. Thank you for your answer, but I was thinking more about your view on the macro. What needs --? I appreciate the ranges and if the economy grows 3%, you'll be closer to 15%. If the economy grows 2%, you'll be closer to 10%.

The economy has been closer to 2% for the last three years, I guess. And so, I wanted to understand your view on the macro, on what do you think needs to happen in order for Brazil to move out of this sluggish environment that we've seen? And how do you think that needs to play out?

Thank you.

In terms of macroeconomic conditions, I think that Brazil --. The bad thing is that growth probably will be between 2% and 3%. But the good thing, that probably it won't be below 2%. I think that Brazil has a low level of vulnerability in terms of [external accounts]. I think a 2% is a floor for Brazil economy growth.

I think there's some additional potential growth that you should take into consideration, which are the growth that would come from the reduction of the presence of the public banks, as has been announced by the government. This will open up space for the private sector to improve. And some recovery also on the margins of loans because of that reduction in presence.

So, those are things that you should also take into consideration, given the market conditions and the level of growth of Brazil.

And also, about your question on how much lower, we do not think that it will be too much lower. And given the numbers that we gave you, you can do the math and you'll find out that it will be a little bit below, not that much, but below the level of expenses of provisions that we had in 2013.

Thank you. Great. Thanks, Roberto.

This concludes today's question-and-answer session. Mr. Roberto Setubal, at this time you may proceed with your closer statements.

Thank you, all of you that has been with us during this call. It was very good to have you and the opportunity to present you the results that we had. And I look forward to see you again in another opportunity.

Thank you very much for your presence.

That does conclude our Itau Unibanco Holding earnings conference for today. Thank you very much for participation. You may now disconnect.