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Consolidating a Growth, Segmented and Comprehensive Strategy

Consolidating a Growth, Segmented and Comprehensive Strategy. Mr. Israel Vainboim - December 20, 2000. 1. Contents. The Transaction Banco Fininvest Valuation Strategic Rationale Continuous Focus on Growth. The Transaction. Unibanco acquired, from Grupo Icatu, 50% of the

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Consolidating a Growth, Segmented and Comprehensive Strategy

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  1. Consolidating a Growth, Segmented and Comprehensive Strategy Mr. Israel Vainboim - December 20, 2000 1

  2. Contents The Transaction Banco Fininvest Valuation Strategic Rationale Continuous Focus on Growth

  3. The Transaction Unibanco acquired, from Grupo Icatu, 50% of the total capital of Banco Fininvest S.A. Unibanco which held 50% of Fininvest´s capital is now the latter´s sole owner, in a transaction valued at R$ 480 million

  4. Banco Fininvest Organizational Structure Unibanco Icatu 50% 50% Banco Fininvest Equity R$ 159 MM Loans R$ 800 MM Total Credit R$ 1,260 MM 99.9% 99.9% 99.9% 99.9% 99.9% Corretora de Seguros Equity R$ 0.3 MM Administradora Equity R$ 80 MM Loans R$ 460 MM Financeira Matrix Equity R$ 9 MM Leasing Equity R$ 7 MM DTVM Equity R$ 5 MM

  5. Banco Fininvest • Market leadership (top of mind) • - 3.0 million active customers • - 7.3 million customer database (75 % with bank accounts) - 3.3 million consumer credit operations - 1.3 million Private Label cards - 900 thousand loan cards - 600 thousand credit cards - 3,300 employees TOTAL: 6.1 million current operations 2.03 Product per Customer

  6. Banco Fininvest Top of Mind - Brand Awareness 35% 32% 30% 25% 20% 20% 14% 15% 10% 10% 4% 5% 2% 0% Fininvest Losango Panamericano Cacique Don´t know/ None Don´t remember Source: Research International November/2000 RJ, SP, Brasília, Curitiba, Porto Alegre, Belo Horizonte

  7. Valuation Methodology • Stand alone business case - Developed by Morgan Stanley Dean Witter hired jointly by Unibanco and Icatu - Discounted cash flow • Impact of synergies - based on study by Speer & Associates • Tax impact of goodwill - to be amortized by Fininvest itself • Impact of strategic opportunities identified by Fininvest with the support of McKinsey & Co. - Not valued

  8. Valuation Basic Premisses • Spreads net of losses will be 30% lower in 2004 • Loan annual growth rate of 15% until 2004 • Discount rate of 18% p.a. in US$ • Perpetuity growth rate of 2.0% p.a. • Equity equivalent to 12% of credit portfolio

  9. Valuation Potential Synergies • 11.5% cost reduction on total expenses of R$760 million incurred by Fininvest, Cartão Unibanco and Unibanco Financeira • Fundamentals underlying the cost reductions: • management and brands to remain independent • back office integration • Full cost reduction to be achieved within 3 years

  10. Valuation Synergy Potential - Integration Targets • Credit Processing • Billing • Customer Service • Centralized Management • Credit Department • Processing Center • Collections • Credit Card Issuance Department • Financial Settlement Department • Fraud Control

  11. Valuation Synergy Potential Net savings (in R$ MM) Year 1 Year 2 Year 3 ---> time table Net savings 1155 86 Nature of estimated savings Data processing 23% Collection 18% Management 15% Customer service 12% Others 32% Total 100% Savings PrioritiesScheduleIntegration of management areas 15% Back office (includes credit cards) 33% Unibanco finance 14% Other staff (HR, Legal, etc) 15% Data processing 23% Total 100%

  12. Valuation Recent Financials In R$ million 1998 1999 E2000 Credit Portfolio 963 919 1,260 Total Revenue 732 712 741 Losses (387) (425) (413) Expenses (333) (274) (293) Taxes 2 3 (14) Net Income 14 17 21

  13. Valuation Fininvest´s 2001 Growth Plan • Increase customer base 18% p.a. • Open 52 new branches in 2001 • Increase cross selling • New products introduction

  14. Valuation 2001 Budget In R$ million Not valued Business as Usual Financeira Matrix New Projects Total Total Revenue 902 44 35 981 Losses (434) (14) 18 (430) Expenses (353) (18) (47) (418) Provisions (9) (1) (1) (11) Taxes (38) (4) (2) (44) Net Income 68 7 3 78

  15. Valuation Summary In R$ million More favorable scenario Conservative scenario Business Stand Alone 560 700 Synergies (after tax) 338 338 Tax shield (goodwill) 62 62 New Strategies 0 0 TOTAL 960 1,100 Internal Rate of Return 18%22%

  16. Valuation Value at Unibanco 1996: acquisition of 50% US$ 10 MM 2000: proportional equity value R$ 80 MM acquisition of 50% R$ 480 MM 100% => R$ 560 MM Implied Economic Value: R$ 960 MM (*) (*) Morgan Stanley: Stand Alone Valuation Speers & Associates: Synergies Studies McKinsey: Strategic Planning of Fininvest

  17. Corporate Banking (Annual Sales > R$ 80 MM) Special Client R$ 350 < Monthly Income > R$1,300 Strategic Rationale Year 2000: Unibanco Furthers its Segmentation Private Banking (Financial Investment > R$ 1,000,000) Uni Class Upper Middle Market (Monthly Income > R$ 4,000 ) (R$ 25 MM < Annual Sales < R$ 80 MM) Banco 1 (Virtual Bank) (Monthly Income > R$ 1,000 ) Lower Middle Market Exclusive Client (R$ 1,300 < Monthly income < R$ 4,000) (R$ 10 MM < Annual Sales <R$ 25 MM) Exclusive Client Small Businesses (Annual Sales < R$ 10 MM) CORPORATE INDIVIDUALS Wholesale Banking Group Retail Banking Group Note: For visual representation.

  18. 18 30 35 37 40 45 55 65 60 65 Strategic Rationale Customer Base Distribution - Unibanco Income Young Affluent Affluent Clients: 93,588 Clients: 287,636 10,000 7,500 4,450 19.9% Successful Beginner Upper Middle Family Older Up-scale Clients: 88,098 3,600 Clients: 120,140 Middle Core Clients: 170,246 Middle Family 2,500 Clients: 447,502 Clients: 131,665 1,500 Young Mass Market Mass Market Clients: 481,478 Clients: 626,354 700 2.1% Older Lower Younger Lower Clients: 1,412,663 Clients: 330,355 0 25 50 70 Age Source: Brazil IBGE (PNAD/1996) - All sources

  19. Income Young Affluent Affluent 10,000 7,500 4,450 19.9% Successful Beginner Upper Middle Family Older Up-scale 3,600 Middle Core Middle Family 2,500 1,500 Young Mass Market Mass Market 700 10.8% Older Lower Younger Lower 18 30 35 37 40 45 55 65 60 65 0 25 50 70 Age Source: Brazil IBGE (PNAD/1996) - All sources Strategic Rationale Customer Base Distribution - Unibanco + Fininvest

  20. Transaction Rationale - Summary • Strategic • Increase scale by adding 3 million active clients • Increase Market Share in Low income segment • High Potential Growth segment • Powerful Brand Name ( top of mind) • Cross Sell Opportunities (Capitalization, Insurance etc.) • Financial • IRR of 18% + • Premium for control • Low Client Acquisition Cost • Synergies • Cost savings of 11.5 % incurred on similar activities • Full cost reduction to be achieved in 3 years

  21. 5.57 CAGR = 16.31% 2.99 2.22 1.43 90 93 96 99 Continuous Focus on Growth Total Funding (R$ million) Total Assets (R$ million) 44,437 52,654 35,997 CAGR = 25.55% CAGR = 22.36% 41,057 26,268 29,703 11,546 12,075 5,906 5,410 90 93 96 99 Sep/00 Pro Forma 90 93 96 99 Sep/00 Pro Forma Earnings per Share (R$)

  22. Continuous Focus on Growth Highest Relative Growth in the Decade Total Assets - Relative Positioning 1990 2000 Banco do Brasil vs. UNIBANCO 13,0 3,2 Bradesco vs. UNIBANCO 2,9 1,9 Itaú vs. UNIBANCO 2,3 1,3 Banespa vs. UNIBANCO 2,2 0,6 Source: Austin Asis, Central Bank of Brazil

  23. Continuous Focus on Growth Next 3-year Strategy Growth Objectives - New clients - Increased distribution - Increase cross selling Strategy Maintain segmentation focus while maximizing one-to-one sales approach • Focus • - Organic Growth Plan • Acquisitions

  24. Continuous Focus on Growth Organic Growth Plan - 3-year Objectives 66 new branches 135 Corporate-site branches 58 In-store Acquire : 1,857,000 customers Investments : R$ 181 million Expense Growth : R$ 199 million Incremental Income : R$ 513 million

  25. Continuous Focus on Growth Year 2000 - Strategic Initiatives In R$ million Acquisitions Divestitures/Associations Quatro/A 109 Zip.net 68 Banco1.net 114 BUS 215 TOTAL 506 Credibanco 108 Bandeirantes 1,044 Fininvest 480 TOTAL 1,632

  26. The following presentation contains forward looking statements regarding Banco Fininvest, anticipated synergies, Banco Fininvest’s growth plan, Unibanco and its projected results and future strategy. Although these forward looking statements reflect management’s good faith beliefs, they involve known and unknown risks and uncertainties that may cause Unibanco’s actual results or outcomes to be materially different from those anticipated and discussed herein. These risks and uncertainties, include but are not limited to our ability to realize the amount of the projected synergies and on the timetable projected, as well as economic, competitive, governmental and technological factors affecting Fininvest’s and Unibanco’s operations, markets, products and prices, and other factors detailed in Unibanco’s filings with the Securities and Exchange Commission which readers are urged to read carefully in assessing the forward-looking statements contained herein. Unibanco undertakes no duty to update any of the projections contained herein. For more information contact ourInvestor Relations Area atphone : 55-11-3097-1626 / 1313fax: 55-11-3813-6182email: investor.relations@unibanco.com.br

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