Quarterly Management Discussion & Analysis (MDA300905.pdf)

Risk ManagementSecurities PortfolioEvolution of Securities PortfolioR$ MillionPublic Securities - Domestic 6,794 22.0% 7,321 25.1% 7,486 25.7% -7.2% -9.2%Public Securities - Foreign 793 2.6% 759 2.6% 1,065 3.7% 4.4% -25.6%Total Public Securities 7,587 24.6% 8,080 27.7% 8,551 29.3% -6.1% -11.3%Private Securities 11,517 37.4% 10,668 36.6% 12,145 41.6% 8.0% -5.2%PGBL/VGBL Funds Quotas 9,182 29.8% 8,274 28.4% 6,918 23.7% 11.0% 32.7%Derivative Financial Instruments 2,944 9.5% 2,535 8.7% 1,962 6.7% 16.1% 50.1%Additional Provision (400) -1.3% (400) -1.4% (400) -1.4% 0.0% 0.0%At September 30, 2005, the balance of Itaú's securitiesportfolio reached R$ 30,830 million, corresponding to a5.7% increase in relation to the closing balance of the priorquarter. Once more, the highlight of the quarter was the11.0% growth seen in the balance of quotas of PGBL/VGBL funds, which totaled R$ 9,182 million at the end ofthe period. It should be kept in mind that the securitiesportfolio of the PGBL/VGBL plans belongs to thecustomers, with a contra entry in liabilities under theheading of Technical Pension Plan Provisions.The share of the government securities in the total of Itaú'ssecurities portfolio at September 30, 2005 was 24.6%,compared to 27.7% in the previous quarter.Private Securities Portfolio and Credit PortfolioTotal funds allocated to finance the activities of thedifferent economic agents who have relationships withItaú amounted to R$ 73,133 million, which represents aR$ 3,818 million growth on the closing balance for thesecond quarter of 2005. The increase in the balance ofcredit transactions rated as AA risk level is partly due tothe risk reassessment process carried out by Banco ItaúBBA in the quarter, as a result of the adjustment of itsmodels in accordance with the Basel II Accord criteria.Funds intended for the economic agentsR$ MillionEuro Bond’s and Similars 3,465 390 111 42 52 4,059Certificates of Deposits 3,016 123 81 11 - 3,230Debentures 1,033 552 79 63 10 1,736Shares 868 206 25 2 0 1,101Promissory Notes 53 32 76 15 - 176Other 504 342 338 28 3 1,215Credit Operations (*) 14,013 25,943 13,055 3,048 5,556 61,616Euro Bond’s and Similars 3,599 559 173 44 32 4,407Certificates of Deposits 2,594 168 1 10 1 2,774Debentures 388 655 114 29 - 1,186Shares 244 829 42 7 1 1,123Promissory Notes 57 28 195 85 - 365Other 184 140 462 26 - 812Credit Operations (*) 9,685 29,255 12,225 2,661 4,821 58,647(*) Endorsements and Sureties included.41 Management Discussion and AnalysisBanco Itaú Holding Financeira S.A.