Alfredo Setubal - EVP and IR Officer Rogerio Calderon - Corporate Controller and Head, IR Caio Ibrahim David - Chief Financial Officer

Daniel Abut - Citi Marcelo Telles - Credit Suisse Mario Pierry - Deutsche Bank Carlos Macedo - Goldman Sachs Saul Martinez - JPMorgan Boris Molina - Santander

Good morning everyone. It is a pleasure for us to be here again for the third quarter conference call.

I think is the best result that we released and since the merge with Itau and Unibanco. The best quarter since we are now [lying].

The trends are very good and we were able confirm that our strategy specially, the strategy that we took in the last two years reducing the risk of the company and controlling much better the costs than reducing costs and I think now with the third quarter numbers. For those who are following through their net we are starting on the slide number two, the highlights for the quarter.

Of course the first one is the recurrent net income of little bit over R$4 billion, growth of 11% when we compared to the second quarter of 2013, and the total net income for the year R$11.2 billion. This result implies in our recurrent ROE of 20.9 that is increase of our 160 basis points when we compared to the second quarter and 240 basis points when we compared to the third part.

Year-to-date the ROE is almost 24% and 19.8. Although highlights on the loan portfolio the growth of 2.9 and that was when we compared to the last year.

If we don’t consider the decrease in portfolio that reduce 20.9% in these 12 months and the increase of the total credit portfolio would have been 14.3%, much in line with the growth of the systems inventory. Financial margin with client, an increase of 1.10% the total of R$11.5 billion and the quarter that is R$3.7 million year-to-date is a good trend that the margin with clients for this quarter again increased and we expect that these lines to continue to increase after some quarters in the past that reduce due to the new strategy of reducing the cost and changing, the current portfolio.

Now we are in the strength, even though we have not very high the growth of this line, but as we see restarting to grow, what is important for the trend and for the future of our revenues. Financial margin with new markets.

This quarter is still below the average that we use to have in design, but better than the second quarter, the second quarter was our worst result in terms of financial margin market. And this quarter R$340 million the average when we consider R$2.5 billion a years is around R$500 million, in the past the average was close to R$800 million and we don't see these numbers going back to the same level, but we expect that we can have better numbers, more close to the average in the coming quarters.

Financial margin of credit, net of the loan loss provision expenses an increase of 5.5% and the fourth consecutive quarter that we show a better number in this line as and the total of R$6.6 billion. Good news continues to come from credit quality.

We grew the 90 days NPL ratio, below 4%. And we achieve 2.9 was a reduction of 30 basis points in the quarter and 120 basis points in (inaudible).

Another good news is that the delay between 15 and 90 days continuing also to improve to a better number. The ratio this quarter finishing 3%, so is the lower level that we ever have, i.e.

improvement of 40 basis points in this quarter when we compared to second quarter. So this is important because the delay that we have today is the reducing show us for the past experience that is a 90 days will continuing to reduce in the coming quarter.

Loan loss provision expenses also reduced again in this quarter when we compared to the second quarter. The total was R$4.5 billion and R$14.4 billion when we compared 12 month.

Commissions and fees also in the good trend, better than we expected at the beginning of the year. We’re in the trend of almost 34%, it is line including the results from the insurance special terms and capitalization business, but and considering hedge [comp] 100% in design, the growth was very strong and sustainable so it is also a very good news for our third quarter results.

Non-interest expenses continue to be a main objective and the main focus of the bank, it’s one of our strategy to reduce the cost, to increase the ROE. These pass through this better control expenses in this quarter, the growth was 0.9% also a good number.

And when we adjust the Redecard numbers through consolidation on an adjusted basis of last year to compare to the 2013 when we already had 100% of Redecard, the growth was 4.4 in line with the guidance that we showed at the beginning of this. Considering all these revenues and losses and expenses and everything components and risk adjusted efficiency ratios improved to 270 basis points in this quarter and 340 basis points when we compare nine months inline which we were expecting year-end risk adjusted considering the NPLs and the claims from issuance.

On slide number three, we see the result of the Bank for this third quarter. With much better numbers as I mentioned in terms of financial margin of clients and loan losses provision expenses.

We continue to expect both lines to improve in the coming quarter, margin of clients increasing showing growth again and some more reduction in the loan losses expense. And also a better and continues to control the operational expenses to as I said, that’s part of our strategy to continue to grow the results of the Bank in the coming quarters.

On slide number four we can see banking and insurance operations, a split, we can see that from the ROEs recurrent net income of R$4.22 billion, R$3.27 billion came from when we considered the banking operations and [$618 million] came from our insurance operation. Insurance continue to be a very good business.

We continue to increase our Bank insurance business and products with a very good efficiency ratio in ROE, ROE of 36.5 from insurance business and efficiency ratio of 32.4 is a good business and we will continue to pay a lot of attention in these bank insurance products. On slide five we see the net interest margin that continued to reduce in this quarter achieving 10.9.

Good news came from the net credit spread, the green solid line that continue to improve. We achieved 6.9 one year ago now it’s 7.4.

So we are in a much better position and of course it’s helping us in terms of results. So on slide six we see how the margins increased in this quarter.

We finished second quarter 2013 which with R$11.3 billion, the loan volume improved revenue in R$280 million, but the impact of the SELIC rate is almost R$200 million in terms of financial margin. More calendar days, two days more in this quarter, also we are able to appropriate more revenues.

That is the positive line of this financial margin. Now the negative, we continue to have some impact in the product mix of R$108 million reducing the margin, R$220 related to client mix as we are changing the mix of the portfolio and product and other small numbers totalizing R$85 million.

So that explains how was the component of this R$11.5 billion in terms of net financial margin with the clients in this quarter. At the bottom of this slide you can see how the loan portfolios mix change.

That explains as I mentioned part of this impact in the financial margin with the client. So we continue to increase the large companies, we continue to increase payroll increase and market as part of the strategy of reducing the mix of good and the risk of the credit portfolio.

And of course this had some impact in terms of revenues, because we are operating with lower risk client and products. On slide seven, financial margin of credit and loan loss provision expenses.

We see that the split, the total was R$9.8 billion, R$3.2 billion was related to loan loss provision expenses net of the recoveries that we achieved in the second quarter. On slide eight, we see the financial margin of the market.

As I said, these numbers are reducing in the last quarter, much more difficult in terms of [playing] in the market. In terms of results, the average of this period through the fourth quarter of 2011 the average of this line was almost R$500 million, as I said was almost R$800 million some quarters ago.

And this quarter is better than second quarter, we achieved R$340 million, but below the average, the recent average and the mid-term average of --. So let's see how we will be able to play in the market both in terms of proprietary trading and structural positions of the Bank in terms of hedging, funding and lending.

On slide number nine, we see commissions and fees and results from our insurance business. We, as I said, we are very happy with this line.

The numbers are much better clients are using more purchase of the Bank. We are able to sell better and more product for clients and also the insurance business that continue to represent an important part of the Bank.

As we can see on page 10, the insurance operations remembering that we sold to Portu Seguro all the residential insurance. What we have here is mainly the life and the insurance that we sell-through our branches, but the results continue to be important and growing in terms of importance.

And we believe that this Bank insurance business will be important part of our strategy. Remembering also that we continue to be out of the health insurance due to the level of interference that we see in this business, last week the government showed new regulations in this health insurance obliging the companies to pay more [medical] and treatments related to cancer, so this will impact probably more of these products.

So we continue to be out of this and concentrating what we consider to be the Bank insurance business. But anyway, we have this business in recurrent of R$618 million including the 30% of participation that we have in the Porto Seguro total business first of the company that we’re shareholders into that [volumes].

Payroll loans on slide 11 continue to be important and continue to grow. We achieved R$20.5 billion in the portfolio for this product.

We continue to grow especially through the joint venture with partner BMG. We are growing through BMG into the public employees and retired people and we continue to be very active through our customer side branches with the corporate employees, private, corporate employees.

So we are growing faster and recovering market share that we should have in these product [tools], the size of the bank in Brazil. So payroll loans already represent 43% of the total personal loans of the bank.

We came from 31% last year. Mortgage, we achieved R$32 billion.

We continue to use our branches, brokers and our partnerships (inaudible) to originate the business. The business we like, it is growing with very good loan to value collateral in average and in recent vintage.

For example, the market vintage June 71% so we are very comfortable with the collateral and delinquencies rate six months after the origination very, very low much low, much lower than the market rate. As you can see here in this slide our numbers is 0.17% and the market is 0.73%, so we are in a much better position in the mortgage business.

Credit quality, on the slide 13, we have finished with 3.9%, the lowest level that we always have here in the last years. Way for improvement both in new business that achieved 6%, the peak was in June of ‘09 8.1, a much lower than the peak level in the last years.

And the same for companies 2.3 and that this was 4.1% four years ago. They covers ratio for 90 days NPL, continue to improve and achieve 170% in this quarter.

Credit quality, we can see also in the slide 14, the trend continues to be very good in terms of ratios when we consider the loan loss with the loan portfolio. I think the level of provisions continues to be very good, very comfortable.

We continue to maintain complementary provision of R$5.1 billion in this quarter, of course this R$5.1 billion is losing in quarter as we go growing the portfolio that what is happened in the last quarters. A credit quality, when we look in release it came to 90 days.

The numbers also are improving. We finished with 3%, came from 3.4% last quarter.

So we can expect less provisions in the coming quarters when we look at this, the first sign for delinquency. We see that the numbers continue to improve and reduce.

So we continue to expect lower level of NPLs over 90 days in the coming quarters. On the slide 16, we can see using a 100 as a basis in March falls in 11 when we started to change the strategies of reducing the risk of the current portfolio.

We can see that no lines with the exception of people. We continue to improve the quality of the credit portfolio of the bank.

On slide 17, non-interest expenses continues to be very focused objective of the bank to control as much as possible below the inflation level and we will continue to target these in the coming years but in a way this quarter improve was 0.9% when we compare with last year considering the (inaudible) is a full consolidation 2012 and 2013 then improved the growth of expense was also below inflation at 4.4%. Efficiency ratio and risk adjusted efficiency ratio on slide 18.

We continue to improve the efficiency ratio adjusted, adjusted means that we include the claim for insurance and also the NPL over 90 days. We are in the trends of reducing these ratios at the level that we expected this year in terms of our guidance.

We have some work to do of course in the traditional efficiency ratio, both in terms of revenues and in terms of expenses that we see some room to cut more expenses in the coming quarters. On slide 19, the total assets of the bank (inaudible) R$1.82 trillion and then that the stockholders equity R$78.2 billion.

On slide 20, we see the composition of our loan portfolio. As I mentioned we continue to focus the growth of Basel loans in mortgage and corporate.

We do see reduction in the car financing products. We expect that this reduction to continue to until probably mid of next year and we still see some reductions in the very small portion that we are continuing to reduce.

And when we look at the middle market typical company, this portfolio is growing slowly but is growing. What is making the reduction in this line of 4.12% in 12 months too more related to very small amount.

We still have corporate credit security of R$24 billion and also endorsement (inaudible). So if we consider all these credits, the total credit portfolio, the total exposure for our credit in our numbers achieved R$481 billion.

What means the growth of 10% when we compared to last year. If we exclude the vehicle financing that we have been reducing and view lots of this portfolio, the growth is 14.3%, what is in line with the growth of the 12 portfolio financial system in Brazil numbers will release by the Central Bank.

Our funding and assets under management and capital of the bank totaled R$1.5 trillion, very comfortable position in terms of money from our clients in assets and funding. We can turn to page 22, that loan-to-funding ratio is 94%, so very comfortable.

We don’t see our funding as a issue if we decide to grow more the credit portfolio in the coming quarters. On slide 23, we see the changes in the quarter in our stockholders equity.

We started at R$75.8 billion, as the profit of the period is R$4 billion, interest and dividend that we pay for shareholders, R$800 million reducing the stockholders equity. Asset valuation of the long positions accumulative project [accused] impacted R$200 million in this quarter, very low compared to other quarters.

And we bought back shares and the period of R$400 million reducing also the portfolio of the things R$100 million. So that explain the growth of 3.3% of the stockholders equity in the quarter, when we finish with R$78.3 billion of stockholders’ equity.

It is important to mention that we’ve bought back this year, 23.5 million shares, longholding shares and the average price for this acquisition was R$28.80. Now on page 24, the BIS ratios, 17.5, a very comfortable position.

We have geared to face the growth of the bank at the credit portfolio if year grows opportunity in terms of acquisition. And also to face the new adjustment that we will need to do in the coming years in terms of Basel III implementing.

So we continue this level very comfortable for the coming years. On slide 25, recurrent ROE.

If we take off the market numbers treasury, we see that the client business ROE to this way achieved 22.7%, is growing things in the second quarter of 2012. So I think it’s important to separate the client business from the market operations.

And we see a very solid business in terms of client oriented products and services and what is important in terms of capability of our returns of the coming years. Market capitalization achieve a R$171 billion, it’s important to notice that this year the level of transactions and liquidity of Itau shares is well balanced between the BOVESPA and the New York Stock Exchange, the AGRs our AGRs that are trade as this year different from our years went, the liquidity was more in the NYSE, that this year is very well balanced between BOVESPA and NYSE.

On page 27, we see the splits of our numbers between the four traditional segments that we are used to show in these conference calls. Of the R$4 billion in terms of net income, R$1.8 came from the commercial banking, R$428 million came from the consumer credit, retail consumer credit, wholesale banking Itau BBA R$1 billion and markets and excess of capital R$727 million.

On slide 29 some information about our credit card numbers and merchant service. We announced some changes in the Hipercard business and we reduced the brand to Hiper.

So these are new brands and we will start to little bit more active in these brands and we will continue to have the Hipercard brand for the customers of Wal-Mart that remained with the Hipercard brand to use their card. But we are expanding the business of this new brand business in the credit card business.

And the view is it is the brand that has almost 5% of market share and we want to increase this brand also through all the country, today it’s very concentrated in Northeast area and the South of Brazil. So we changed the name of Credicard as part of the new strategy of the company and to start to be more active and more aggressive in terms of the business that we have a 100% now.

We are also launching new products and we are really starting from now on could be more active as we mentioned. And it was our strategy when we announced our intention last year to buy the minority shareholders of Credicard.

So now we are in the trend of being more active in the company with new product, new technology, new brand. So it is important and use the synergies between Citi and Itau Holdings.

Itaucard is our brand in terms of credit cards. Just to give you some numbers.

We are totally focused on Itaucard to pursue. And there is the card that charge clients that use the credit from the date of the use of the credit card, not from the date of the statement and we have around 1.5 million cards.

And we consider this product a very good success and a very good acceptance from the clients, no claims and we are only selling these cards not the traditional one that other banks and companies to sale. So we’re very happy and we’re continuing these trends.

Now on the slide 30, the outlook for 2013. We’re not changing any of these guidance.

We continue to expect the loan portfolio to grow between 8% and 11%. The growth now is almost 10%, 9.9%.

Loan loss provision was R$19 to R$22 billion we continue to expect and now very close to the R$19 billion and be a little bit below that to the fourth quarter. At commission in fees that we are expecting in 15 to 18 is growing above these numbers, probably the level that we already have is the level that we will finish the year.

So this would be above our expectations through the more use from clients and also from Credicard. And non-interest expenses is a growth of 4% to 6%, when we adjust the Credicard numbers last year and this year they growth is 4.5%, so in-line with our expectations.

And also risk adjusted efficiency ratio, we were expecting an improvement of 200 to 400 basis points. We are 300 employees so we’re inline also with this risk adjustment efficiency ratio.

And to finish we have, on slide 31, we have a public presentation of the bank in Sao Paulo. For those who will be here onto November 12, at 2 PM for the whole volume.

We are having these public presentations in the presence of our Chairman, Pedro Moreira Salles and the CEO Roberto Setubal. So this finishes our presentation and we are here open to questions if you formally have.

Good morning Alfredo. A couple of questions, number one on the insurance business.

As you explained in one of the slides this business which is posting ROEs of 35%, 36% contributes above 15% of the bottom-line of the entire group. That’s about half of the contribution of your closest peer.

So do you have a target of where do you see that evolving and what type contribution to the group the insurance business should have over the next few years? And second and somewhat related to this, and the question is on your ROE as you correctly explained your ROE has been 20% for the first nine months of the year, 21% in this quarter alone excluding no recurrent items, where do you see the ROE being sustained?

Because if I consider some of the things as you said that your contribution from the market related business is still below par and would probably trend towards the R$500 million contribution that is the average historical, then insurance probably is higher ROE business and we continue to grow its participation. Then the lending business in terms of volume growth is still below par should probably trend up.

And finally you have excess capital at the bank level and that is a driver on the ROE and that should probably improve, as you improve the allocation of capital. Where do you imagine your ROE being sustainable once you can see that all these factors if the floor now seems to be 20%, 21%?

Hello Daniel. We see the trends when we analyze this trend of the last quarters and what we see in the coming quarters and then the strategy that we have is showing in terms of expenses and credit portfolio and so on.

We are very confident that the level of around 20% is sustainable in terms of ROE for the bank. Of course we have closed of the numbers and as we think the environment look the local economy, international trends, but the trend seems to us very positive and I think we are showing that our strategy both in terms of banking and insurance was correct.

So the [Portugal] also showed good results in this quarter and bank insurance continues to grow in our numbers, the strategy of reducing the risk of the portfolio was correct. So we are not seeing anything in the short term that at least that we will move the kind of returns that we are showing in the next quarter and especially this quarter we think that is quite sustainable this level that we show this quarter.

But we do believe that this proportion is going to increase as time goes by and when you consider the insurance business itself is actually very similar in size, when you compare the industries that we operate, remember that we don’t like and we don’t operate one of the most important products of insurances, insurance when you consider only revenues. And I am returning health insurance of course, but the size of insurance business is going to outgrow the other portion and probably this percentage that you mentioned is going to increase, but not to reach the same 30% level whatever, because the other businesses are actually also growing.

No, Rogerio I appreciate that. I was not suggesting that the growth should be to trend to about 30% just to have an idea, if you have a number or a target.

If you look at Banco do Brasil for example as part of the civilized location they are currently above 15% contribution like you and they can clearly targeted to grow that towards a 20%, 25% levels. Do you have a target and a timing for that target?

No, we don’t have any targets on this.

Okay. And just a follow up on the first Alfredo.

I see what you say and it seems to me that the 20% should be lower given all the trends that you indicated, we are already at 20% , 21% and it more seems that only get better more likely that 20%, 21% should be more a floor or have room to be above that. So when you think, you’re thinking about 20%, it seems like you are pulling the bar too low?

I think it’s difficult to say today that is a floor. I think it’s sustainable around these numbers, we are confident about that.

But I think we have to follow the environment, Daniel. It’s difficult to really be very assertive that this level, it will be up, do we expect the yield, yes, but...

On the environment that was potentially be a drag, what are the things that still worry you, spreads for example or what are the things that still you want to monitor before you go mid to a higher number?

Daniel, could you repeat these last words?

I understand that I feel okay that there are still too many moving pieces that need to be watch before you are willing to go like higher number. So what are the things that still worry you in that environment?

Is it spreads, what are the things that are still too early to say?

I think the international environment is a issue. Probably as I said some points, the fed in the U.S.

really start to increase in first grade, so this we saw some months ago, the impact that this can have on the economy of our emerging market like Brazil for example. You said it was [roughly] spread, no I think that you've seen at least that they are worse in terms of reduction, our spreads are gone.

We are not seeing today that Bank is fighting for gaining market share through prices through reduction of spreads. So we can even see some rising in the mix, some improvement in terms of this spread in the coming quarters.

But we have to follow closely the economy and unemployment in Brazil, inflation we have electoral, (inaudible) next year. So I think we have had some things that can impact the environment.

Even though we consider all these not very high probability, but we have to consider all these in the scenario that we are working.

Thank you, Alfredo.

Hello, everyone. Thanks for the opportunity.

I have two questions, the first one I mean we are of course we are seeing that it seems to be a change in the way in that resonance of public banks I would say in several segments rise up their credit portfolio. But my question to you is, I think that your delinquency numbers were very good and are very bullish for the improvement down the road.

Do you see any risk particularly in the SME segment of data pullback from public banks could actually trigger some deterioration in your portfolio and of course in the other portfolio that other like private sector banks I think this has been kind of a recurring theme that investors have been asking about? Do you think there is any significant overlap between your SME portfolio and let’s say the SME portfolio of Banco do Brasil or some of the other public banks?

And my second question is regarding NII, net interest income growth next year. I was wondering if you could share with us what you think would be kind of a worst case scenario for NII growth in 2014.

I understand there are many variables that would definitely have an influence on that. And of course part of that would be what your expectations are for your treasury results because we saw still relatively no number versus the number you used to say about R$800 million.

So I don’t know in which timeframe you would expect that number to convert at least to let’s say about R$500 million, R$600 million if it could convert to that number? Those would be my questions.

Thank you.

Marcelo, Rogerio speaking. So regarding your first question, when we look at our portfolio as a result of this much more selective approach that we have been applying, what we see in our portfolio for companies SMEs are now much stronger and as a consequence much more resilient than what we had in the past.

So it’s now based on operations fully collateralized or importantly partially collateralized. So we really don’t think that we would be affected by any eventual change in the system as a whole.

We don’t know, of course we are not sure about the quality of the portfolio of other banks. But we don’t think that it should be a matter of a systemic [breach] or anything like this and absolutely it’s not going to affect our credit portfolio.

Your second question is of course a bit more complex. When we look at net interest income, there are several different parts accounting for this resolution.

Talking specifically each one, on each one of them, we see volume is likely growing, so what should stimulate NII growth, we see it’s likely to be a little bit higher than today and eventually as a consequence higher in average next year than this year, so again contributing for a higher line. And we see a few present net interest margin compressions because of the change in our mix of portfolios and asset quality.

So all together, we see conditions of it is right, increasing mix into the income line when talking about price. When talking about this same line regarding what we say margin with the markets, that’s much more difficult to forecast.

And we think, I think it’s important to highlight that we don’t see savings conditions are being backed to our historical level. So we believe we can perform better than what we are posting this quarter and last quarter as well.

But not that to our usual level of R$800 this is far from what we have now because of the structural position that we have built up in the past on a lower interest rate level. So looking forward even performing better, we should not expect for a higher than let's say, R$500 million something like this in the coming quarters.

This is of course a big gap, but qualitatively saying, it's not difficult to make two different statements here. Yes, we can deliver better than today and it's very difficult to believe that we will back to our historical level.

Thank you so much, Rogerio.

Hi. Good morning.

Let me ask you two questions as well, the first one is related to your provisions. You had originally or you had recently guided for provision charges of R$19 billion to R$22 billion for this year.

The number for the first nine months is running at R$14 billion, so clearly you are running below your guidance. Just wondering, if you think, you did not, you chose not to change any of your guidance, but I was wondering if you see room for provisions to come a bit lower and/or even below your guidance from R$19 billion to R$22 billion?

Yeah. It's possible that it comes below R$19 billion.

If we just repeat the third quarter and the fourth quarter is going to be lower than R$19 billion and we believe that we can do even better than this, so at the end of day it’s possible if not likely that is going to be below R$19 billion. The reason we are not changing anything in terms of guidance is first of all because it’s not meaningful.

The second, because we don’t think that changing guidance as the year ended is so short is so close, we don’t think that it makes sense.

And what about 2014, should we expect provisions to be lower than 2013?

Could you repeat, Mario?

No, just your outlook for provision charges next year, 2014?

So we had, we still have our asset quality improving. So chances are that it comes in a lower level than today.

On the other hand, we have -- rules. So looking at the same figure with a lightly potential down, down is possible.

We don’t see under the current, this environment on our portfolio we don’t see provisions doing in only in our loans.

Okay. So my second question then is with regards to loan growth.

As you’re saying, it seems like asset quality is completely under control. Also, Alfredo’s remarks earlier that we're not seeing banks fighting for market share, seems like you have a rational pricing environment.

So what is your appetite for taking on more credit risk especially as you’re able to better price the risk, it seems like the public sector banks being less present so you could proceed better spreads on your products. So I was just wondering, what kind of loan growth can we see next year given that asset quality is under control when state-owned banks seem to be less aggressive?

So we should be closer to the system growth, because the portion that is predicting us are following the market that is the overall [visit] due to shrink one or two quarters more and then only restarting to grow stronger in the second half of next year. So as this is going to be better than this year, marginally saying, which we should be closer to the market’s growth next year.

What means that it implies some marginal acceleration something like acceleration. And this acceleration I think is very important to highlight that we are not accelerating because we are changing the risk appetite.

We didn’t change; we are changing nothing regarding our risk appetite because the improvement that we see clearly now the portfolio is not so clear when we look at the market. So we don’t see conditions of being more, less selected than what we are doing right now.

Okay. Thank you very much.

Good morning, gentlemen. Congratulations on the strong set of results.

A couple of questions, somewhat follow-ups to the ones that already been asked both have to do with loan mix. So we've seen the loan mix change significantly with payroll loans increasing materially as a part of the overall loan mix and position of their less risky loans.

When you look at the progression of the 90 day NPLs, this is the lowest ratio since the merger, but also the portfolio you have is completely different than what you had in the merger. What is your expectation for and how low can this NPL ratio get given the mix of the portfolio.

In other words, if you adjust that NPL ratio to where it was during the merger and put in the current mix of the portfolio, is it reasonable that we go to 3% or is 3% completely out of the question assuming that the underlying economic conditions don’t change them materially going into next year? And then I have another question.

Okay, Carlos. Well, clearly it’s possible that it goes below the current level.

How far, is a very difficult question to answer. You know vintage are getting better every single new vintage.

We have better quality in collaterals et cetera. So it’s possible that we deliver 50, 60 basis points lower than today.

More than this, we should closer to this moment to reassess the question.

But I mean just for instance in your individuals portfolio in 2010 when you had 5.7% NPL ratio you probably had something like 40% of that portfolio in auto loans and now you have 40% in payroll loans plus mortgages going from 6 to below 5.8 which is what you had then. Is it reasonable expectation, would you agree with that statement?

Even if we use the equal portfolios in terms of products, we have today a better mix of times quality of times than what we had by that time. So we have today a better level of delinquency than any older moment in our history.

Okay. So you are saying that’s still part of the reason why the NPLs haven’t come down even further, it’s still cyclical?

Cyclical, whether it’s cyclicality I don’t know I will favor since we are adding better vintage level every new month.

Okay. Thank you, Caio.

And the second question is the flip side of that is margins and if you weren’t for the additional working days in the quarter your NII would have been essentially flat sequentially despite some loan growth. Next quarter you won’t have additional working days, I think in fact we go back.

And so there is, given what we saw there is other possibility that unless loan growth is very significant, the NII does remain flat or even comes back because of the change in mix. How strong is this change in mix and how should we look at it affecting your NII going forward.

I mean it’s a continuation of Marcelo’s question from before. But is that something that will continue to have this negative impact and will the provision expenses from the lower NPLs be able to offset most of the damage there?

You are right on the allowances, but proceeding as I think we see some room for increasing NII in the fourth quarter and beyond. It’s not going to be, I mean, an exciting growth, but it's going to be a positive evolution.

Okay, thank you.

I have two questions as well. The first question is really a follow-up to number of questions that deal with your financial margin and provisioning levels.

Turning to slide, the fifth slide, you gave your net interest margin evolution over time both before provisions and after provisions and what it shows obviously is as Alfredo highlighted was that your risk adjusted NII and NIMs have been expanding. It seems like you continue to think that that will continue.

Can you give us a more color though on how you see this evolving in the next few quarters? How much more room is there for your credit risk adjusted net interest margin to expand say over the next four or six quarter, because you're still relatively far below where you were in 2011 it seems?

Second question is on your capital strategy, seamlessly you have a very comfortable capital position even factoring in Basel III implementation, especially when you consider your ROEs, your current payout ratio and the fact that your growth is coming from products that have very low risk ratings. Can you just comment on how you are looking at capital deployment, because it seems between dividends non-organic growth, because it seems like you are generating more capitals than you need to sustain your organic growth?

Regarding the evolution of our spreads on net interest margin, we are still finishing our business plans for next year and we should be back to you guys. We know that you want to have anticipated everything that is going to happen next year.

But we think that we are in a better position to talk on this in the next conference call. But we do believe that there is some room for still increase our net interest margin.

Adjusted by this we believe that the compression we see in the net interest margin pre-provision is going to be lower in the coming quarters because of the change in the portfolio mix to be less impacted than today. And then although the improvements in the loan loss provision is going to be as well lower than today, this trade off should be still positive.

So this is what I can say qualitatively, then maybe we can go further invitation and figures in the next quarter. Regarding your question, so in relation to our capital deployment, I think it’s pretty clear our intention has been back to a normal level of growth when this restructuring of the auto loans portfolios finished probably we will be back to that around 15% growth in our credit portfolio.

If we consider that the 20% is a sustainable level by keeping the current dividend payout and growing 15%, we should be more or less with capital stabilization. In case however I know that you are question is a little bit different, so in case we've had (inaudible) so not possible to grow at the same level our credit portfolio and this still higher ROEs, then eventually we get into our position of excess of capital.

At this point in time we should have one, a couple of different measures. So take one, it’s of course increasing dividend payout, but we also look at the strategical opportunities of moving internationally as you know.

So at this point that we have business decision to take, then incidentally we would be dependent on the circumstance at that specific point in time.

Okay. Do you feel like you have excess capital today?

If you look at the full implementation of BIS, our total capital is 15%, but the core capital, the common equity tier 1 would be around 10%. The last figure we calculate precisely is in the state d 9.7%.

So if eventually it makes sense of capital but not a big one.

Okay. Great thanks a lot, Rogerio.

Your asset quantity indicators have done very especially in the consumer segment. Now the labor market in Brazil has shown some sign of deceleration this year, actually unemployment rate went up 10 bps in September.

Have you done any sensitivity about unemployment and your NPL ratio for consumer loans? Let’s say if unemployment goes by 100 basis points one year by how much the consumer NPL ratio should increase?

Thank you.

Okay, thank you very much.

I had a question regarding your investment plans on IT, regarding how the tangible assets related to software development and software application has been accelerating this growth. This obviously had impact on the capital ratio.

So what is the quarterly rate of additions to recent tangibles that you expect to see in the third quarter is around $R450 million. Is it going to go up to 550 and 600 on a quarterly basis?

How could we expect this revolution in terms of your quarterly outlays in IT? And what is the monetization calendar for this type of intangibles because these intangibles grow with some capital and then (inaudible) for reported earnings.

So I would like to get an idea of how this is going to absorb?

So we are trying to conclude them how to address the points, I think we have some comments to make here. This first and most important product that this is a investment that we are doing there IT.

This amounts to more than R$10 billion, R$10.4 billion. It's now at through as fast it's been implementation.

This is going to impact our capitalization in both 2014 and ’15 to increase of course and then depreciation to increase especially as from 2015. However, we have a very important efficiency to capture out of these investments here.

So we don't see think that this should imply any further pressure on our profitability. This should be matched.

In terms of capital, the portion on the intangible, I see could you develop a little bit more on this and this is the way we should address the points.

No I was just trying to get an idea, if quarterly additions to your software development acquisition intangible, which are right now, they are almost double in the third quarter, 450. So, is this a steady state level of investment on a quarterly basis or could you go up to 600?

No, no it's actually in a higher level today than our normal level, because of this, the part of this package, the full package of R$10.4 billion is related to the software.

Yeah, okay. You would expect it to go a little bit higher from current levels or is this level that you think is going to be recurred?

I should look at the figures in the budget to be more precise on this but essentially in short term, but then coming back to a lower level, we are now in a enough. I don’t know if we are at the top peak of the disbursement in this project, but we are in the higher level then to usual.

Okay, thank you.

Thank you all for the participation. We have very good results.

We expected to continue on this trend in the coming quarters. So thank you for your time here with us and we expect to be together again in the third quarter conference call.

Thank you.