MD&A and Financial Statements (PDF) - Banco Itaú

Pro Forma Financial Statements by Segment
Itaú Unibanco Holding S.A.
Pro Forma Adjustments and Allocated Capital
The pro forma financial information takes into account the
impacts associated with the allocation of capital. To this
end, adjustments were made to the financial statements,
based on a proprietary model that considers the credit,
market and operating risks, as well as the regulatory
framework and the level of fixed asset formation.
We determine the Risk Adjusted Return on Capital
(RAROC), an operating performance indicator consistently
adjusted to the capital required to support the risk of asset
and liability positions taken.
Adjustments made to the balance sheet and statement of
income for the period are based on the business units’
managerial information.
The Corporate+Treasury column shows the results
associated with excess capital, excess subordinated debt
and the carrying cost of the net balance of deferred taxes.
It also shows the cost of the treasury operation, equity in
the earnings of companies not yet linked to the different
segments, as well as the adjustments for minority interests
in subsidiaries and the market financial margin.
Since the 4 th quarter of 2009, the Corporate+Treasury
column also comprises the consolidation of 30% of Porto
Seguro.
Income Tax and Social Contribution on Net Income effects
on the payment of Interest on Own Capital for each
segment were reversed and subsequently reallocated to
the individual segments in proportion to the amount of
Tier I capital, while the financial statements were adjusted
in order to replace net book value with market level
funding. The financial statements were then adjusted to
include revenues associated with the allocated capital. The
cost of subordinated debt and the related remuneration at
market prices were allocated to the segments on a pro rata
basis, in accordance with the Tier I allocated capital.
The diagram below shows the changes introduced in the
financial statements to reflect the impacts of capital
allocation in each segment.
Return on
Stockholders’
Equity
Net Income
Stockholders’ Equity
Adjustments to the Financial Statements
Adjustment in the
Financial Statements to
replace the net book
value of Stockholders’
Equity and
Subordinated Debt
with funding at market
prices.
The financial
statements were
adjusted to include
allocated capital based
on proprietary models,
as well as their
respective revenues
(CDI) and expenses
(cost os subordinated
debt).
Return on
Allocated
Capital
Pro Forma
Net Income
per segment
Allocated Capital
per segment
31
Management Discussion & Analysis 3 rd Quarter, 2010