Itau Unibanco Holding S.A. American Depositary Shares 2026 Q2 Earnings Call

Welcome to another earnings release as we discuss our second quarter 2026 results. You will see an executive presentation focused on the key drivers of our results, with the objective of leaving ample time for our traditional Q&A session. We delivered a strong quarter with consistent results, high profitability, and excellent credit quality indicators, very much in line with the consistency we have been delivering over recent quarters. Let's move directly to the numbers. This quarter, we delivered recurring net income of BRL 12.4 billion, representing growth of 7.8% compared to the second quarter of last year and of 1% compared to the previous quarter. This was therefore another very solid result. How does this translate into profitability? On a consolidated basis, ROE reached 24.3%, while in Brazil it reached 25.7%.

As always, we also present profitability adjusted to a CET1 capital ratio of 11.5%, which is close to where we believe the market operates and is also our minimum capital appetite threshold. On this basis, consolidated ROE would have reached 25.1%, while ROE in Brazil would have reached 26.7%. This is perhaps the most comparable metric across earnings releases, and it demonstrates our ability to generate strong returns not only in Brazil, but also on a consolidated basis. Turning to the loan portfolio, we posted healthy growth reaching BRL 1.522 trillion, up by 2.7% quarter-over-quarter, and by nearly 10% year-over-year. This reflects our ability to grow with quality, supported by sound portfolio dynamics and disciplined capital allocation.

Moving on to NII with clients, we also delivered a very solid result of BRL 32.6 billion, an increase of 3.3% compared to the first quarter of 2026 and of 5% compared to the second quarter of 2025. It is important to highlight this acceleration. Results were very solid and I will provide more detail shortly. Moving to non-interest expenses, growth remained well under control at 3.1% year-over-year. It is worth remembering that we have been investing continuously for many years, always with a long-term perspective. These figures demonstrate not only our ability to continue investing in the business with quality, but also our ability to pursue efficiency wherever it needs to be found on a daily basis. This reflects strong cost discipline across the organization.

All of this has translated into a Common Equity Tier 1 ratio of 12.3%, once again demonstrating a very solid and high-quality capital base with an increase of 30 basis points compared to March. It is worth remembering that we did an early dividend distribution at the end of last year, which meant that we entered 2026 with a highly optimized capital position. We also had the regulatory phase-in effects, which still had an impact during the first quarter, and yet we continued to generate capital with strong quality. I will return to this topic in more detail later in the presentation. Back to the loan portfolio, I will walk through the figures from the bottom up, as that may be easier to follow. In Brazil, the portfolio grew by 9.6% year-over-year and 2.6% quarter-over-quarter, which is very healthy growth.

Large companies posted growth of 10% year-over-year and 4.4% quarter-over-quarter, once again reflecting strong discipline in capital allocation and expected returns. These are very long-term balance sheet transactions, which makes disciplined capital allocation particularly important. Let me provide more details, starting with micro, small, and medium-sized companies. We posted healthy growth of 1.5% in the quarter and 11.6% year-over-year. More important than growth itself, however, is the quality and risk profile of this portfolio. The portfolio of government-backed programs grew by 7.2% in the quarter, while originations increased by 47.3% over the same period. This reflects our discipline in delivering the best products under the best conditions while maintaining strong risk management and capital allocation standards. Payroll lending has continued to be a very important growth driver for us, particularly private payroll loans under the new product.

The overall payroll loan portfolio grew by 3.5% in the quarter and 11.7% year-over-year. When we take a closer look at private payroll loans, the portfolio expanded by 14.3% in the quarter and 90.1% year-over-year. From the outset, we were able to capitalize on this opportunity very effectively, delivering value to our clients while generating strong and consistent growth, with delinquency remaining fully under control. This also affects the dynamics of our personal lending portfolio. Since for clients who are eligible for private payroll loans, particularly formally employed workers, we have increasingly prioritized this product over traditional unsecured personal lending, due both to its pricing advantages and its priority in the repayment structure.

Turning to mortgage lending, it is important to remember that our funding structure is differentiated relative to the market, enabling us to remain highly competitive in this segment while serving our clients effectively and allocating resources efficiently. The mortgage portfolio grew by 3.9% in the quarter and by 13.3% year-over-year, reaching BRL 152 billion. In fact, the mortgage portfolio has now surpassed our credit card portfolio, which has historically been one of our most important portfolios at approximately BRL 150 billion. Mortgage lending is a long-term product that fosters strong client loyalty and reciprocity, which is why this strategy is so important for us. Today, we are the largest private sector bank in this segment, with BRL 36 billion in originations over the last 12 months and a 55% market share among private banks.

This demonstrates how our funding structure, our clients' investment profile, and our funding capacity allow us to sustain a mortgage portfolio at these levels. Let me turn to NII with clients and highlight two points. First, total NII increased by BRL 1.1 billion, representing growth of 3.3% in the quarter, including working capital and other effects. We posted growth in the working capital and other categories in addition to the impact of investment rates, and were able to monetize our capital very effectively, reaching BRL 3.9 billion in working capital during the quarter. When we look at core NII, we see growth of BRL 800 million, or 2.9% in the quarter, broadly distributed across all components. Average volumes contributed positively. Product mix was broadly neutral for margins.

Liability margins and asset spreads were slightly positive. We also benefited from a calendar effect as this quarter had one additional calendar day, which positively affected liabilities. Latin America and other also contributed positively. As I mentioned, this was a broadly distributed result demonstrating our ability to generate core NII alongside an effective strategy for monetizing working capital and supporting the bank's capital generation. When we translate NII into margin percentages, particularly risk-adjusted NIM, which is the way we manage the balance sheet, we have positive news to share. As I always say, generating a very high margin only to give it back through credit costs is not a sensible capital allocation strategy. What we have shown consistently is our ability to manage margins with discipline and consistency. Risk-adjusted NIM reached 6.2%, representing a slight increase of 10 basis points in the quarter on a consolidated basis.

The same dynamic was observed in Brazil, where NIM increased from 6.6% to 6.7%, reflecting our disciplined portfolio management and delivering very solid results. This is very positive news on the margin front. Turning to NII with the market. Although results may appear stable compared to previous periods, I believe that we are all aware of all the challenges we have been facing in financial markets and the level of volatility we have experienced both in local and global markets. Even so, we delivered another solid quarter supported by consistent risk management. This discipline and the quality of the results we deliver are extremely important. As a result, NII with the market reached BRL 900 million.

We also continue to incur costs associated with capital index hedge ratio. As part of our strategy to protect our capital position and enhance earnings predictability, we continue to believe that this remains the appropriate approach for the bank's balance sheet. Even considering this cost, we delivered a very solid performance in NII with the market. Turning to commissions, fees, and results from insurance, I will once again comment on the figures from the bottom up. You will see that results from insurance, pension plans, and premium bonds increased by 8.7% year-over-year and 12.8% compared to the first half of 2025. Our core insurance operation continues to grow very consistently on both a quarterly and year-over-year basis. We have delivered many consecutive quarters of growth, with results at a substantially different level compared to five years ago, reflecting very strong progress.

Moving on to advisory services and brokerage, revenues increased by 32.5% year-over-year and by 25.3% in the first half compared to the same period last year. This line is largely composed of fixed income transactions. Our approach has been one of strict capital allocation and risk discipline. As a result, many of these transactions are ultimately retained on our balance sheet. What we evaluate is the expected return profile, ensuring that returns remain consistent and aligned with our cost of capital, while also carefully assessing the type of risk we are retaining over the long term, considering both fixed income market pricing dynamics and credit risk. Therefore, we remain very comfortable with the quality of the assets that have been retained on our balance sheet. Moving on to asset management. Revenues grew by 7.3% year-over-year.