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November 4 th , 2009

Opportunities in Brazil Capital Market. Jack XU, Head of Itau Asia Securities. November 4 th , 2009. 2 º. About us: Itau Unibanco. Itau Unibanco : Largest bank in LatAm with over USD 77 billion market cap (Top 15 in the World) Total Assets: USD 306 billion

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November 4 th , 2009

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  1. Opportunities in Brazil Capital Market Jack XU, Head of Itau Asia Securities November 4th, 2009

  2. 2º About us: Itau Unibanco • Itau Unibanco : • Largest bank in LatAm with over USD 77 billion market cap (Top 15 in the World) • Total Assets: USD 306 billion • Employees (individuals): 106,210 • Branches: 4,895 and; ATMs: 30, 801 • Clients: 56 million • Equities • Largest research coverage in Brazil (35 analysts, over 120 companies) • #2 All-Brazil Research Team by Institutional Investor (2009) • Local Brazilian equities and ADRs • #2 in equity offerings (2008) • #1 in stock lending in Brazil (2008) • Futures • #1 in Clearing (2008) • Hedge Fund Desk • All-in-one desk • Client Facilitation (Risk Trades) • Fixed Income • Local and offshore bonds (Sovereign, Corp, Financial) • #1 in deal origination and distribution (2008) • FX • Best FX agent in Brazil by Global Finance (2009)

  3. Brazil– IBOVESPA (IBOV) • The IBOV index is comprised of 63 companies and weighted by traded volume • Mostly driven by the Basic Materials, Oil & Gas and Financials sectors, accounting for 72% of total • YTD performance of 68% in local currency, and up substantial 98% in USD • Daily average of financial trading volume of over USD 3.5 billion. • 35 ADRs traded in US, having Vale, Petro and Itau-Unibanco the most traded Highly Concentrated: Top 5 companies have approximately 50% of IBOV index Source: Bloomberg

  4. Relative attractive valuation

  5. IBOV x SHCOMP - Snapshot SHCOMP Sector Breakdown (%) IBOV Sector Breakdown (%) Source: Bloomberg

  6. IBOVESPA x SHCOMP – Main Sectors Basic Materials Source: Bloomberg

  7. Consumer Goods IBOV x SHCOMP EPS Growth Est (%) 76.2 SHCOMP 34.2 IBOV IBOVESPA x SHCOMP – Main Sectors Consumer Sector Source: Bloomberg

  8. IBOVESPA x SHCOMP – Main Sectors Financials Source: Bloomberg

  9. Oil & Gas IBOV x SHCOMP EPS Growth Est (%) 9.5 - 9.4 IBOVESPA x SHCOMP – Main Sectors Oil & Gas Source: Bloomberg

  10. Brazil At First Glance Data & Statistics • Capital: Brasília • Population (millions): 191.6 • GDP (US$ billions): 1573.3 (8th rank) • Structure of the Economy (% of GDP) • Agriculture: 4.9% • Industry: 30.6% • Services: 64.5% • Total Debt (% of GDP): 42.6% • Currency: Real (R$) • Exchange rate: R$1.72/US$ Emerging Medium Income segment in Brazil* 2005 2006 2007 Source: Secretaria do Estado da Fazenda and World Bank and Itaú Securities * Definition: High Income: Average Annual Income of USD 14,780; Medium: Average Annual Income of USD 7,080, and Low Income: Average Annual Income of USD 3,867

  11. …in the Debt Capital Market and … Source: BCB, Itaú Securities,

  12. …through Equity Capital Market IPO Bank & Financial Services BRL Billion Follow Ons 40% Toll Road Airline Real Estate IPO Follow On Source: BCB, Itaú Securities,

  13. Implications of a Single-Digit Interest Rates • Consumer sector • Increased leverage potential due to affordable credit • Lack of information and track-record of customers remains a short-term challenge • Deleveraging likely to precede sustainable credit expansion: prefer low-ticket stories • Infrastructure sector • Declining cost of capital and higher leverage availability • Pent-up demand (underinvestment story) • Locked IRRs offering attractive investment alternatives • Short-term cost of debt (due to bank spreads) and declining IRRs going forward • Dividend yield and Duration plays • Still high dividend yields, incompatible with low interest rates • Pension funds asset re-allocation • No reason to be bullish in the short-term… • - over-funded industry and YTD performance well ahead of performance targets • … but encouraging outlook for the coming years • - 50% of the Brazilian-inflation-linked debt matures by May 2013 (R$72 billion) Interest rate % (Selic)

  14. Suggested Stocks - Overweight Suggested Overweight Stocks Suggested Portfolio’s Sector Allocation

  15. Mining - Vale ( VALE5, VALE3) Vale is the world largest iron producer and sells: pellets, manganese, alloys, gold, nickel, copper, caolin, bauxite and so on. The company is based in Brazil, where it owns and operates railroads and maritime terminals. • Key Financial Figures: • Market Cap: USD 132 bn • YTD: 65.97% • P/E 10.95x, • Est P/E 19.59x • ROE: 27.76% • EV/12M EBITDA : 10.59x VALE5 performance ( BRL /share) Source: Bloomberg

  16. Oil & Gas - Petrobras (PETR4) Petrobras explores and produces oil and natural gas with operations concentrated in South America . The company refines markets, supplies oil products, operates: oil tankers, distribution pipelines, marine, river lake terminals, thermal power plants, fertilizer plants, and petrochemical units. • Key Financial Figures: • Market Cap: USD 198 bn • YTD: 57.40% • P/E: 9.93x • Est P/E :12.89x • ROE:28.31% • EV/12M EBITDA 7.12 x PETR4 performance ( BRL /share) Source: Bloomberg

  17. Banking - Itau Unibanco Holding S.A. ItauUnibanco Holding SA is one of top 15 banks in the world. It attracts deposits and off retail, commercial, corporate and providing banking services. The bank offers consumer loans, financial management, insurance, pension plans, treasury services, mortgage loans, lease financing, securities ties brokerage, and foreign exchange service. . • Key Financial Figures: • Market Cap: 84 bn • YTD: 49.03% • P/E 18.17x, • Est P/E 16.23x • ROE:28.11% • EV/market cap: 1.20 x ITUB4 performance ( BRL /share) Source: Bloomberg

  18. Brazil + China = Lots of Synergies to come • China is currently Brazil's largest trading partner since this Apr, accounting for 16 percent of all of Brazil's imports and exports, with a total value between $15 and $20 billion this year. The trade volume between two countries was 48.5 billion USD in 2008, YOY growth rate 63.2%. • Brazil will probably become the largest producer of petroleum in 2015 and 2016 and China is the second largest oil consuming country in the world. 50% of which must be imported from other countries. • China is the largest steel producer in the world and  has imported 469 million tons of iron ore until end of Sep this year, growing 35.7% compared to last year. Brazil is the largest iron ore producer and exporter in the world and second largest iron ore exporter to China. • China has more than 1.3 billion population and is largest rice and wheat consumer and second largest wheat consumer in the world.  Brazil is the largest soybean, sugar, coffee, beef and pork exporter in the world with more than 1 million square meters potential farming land. • Brazil has been awarded 2016 Olympics and 2014 World Cup. The development of local infrastructure will be key issue in the upcoming years. China has the third largest railway network and second largest high-speed way net, which can provide lots of experience in the infrastructure development in Brazil as well as the capital.

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