Itau Unibanco : Announcement to the Market – IFRS – Results for the 2nd Quarter of 2019

Announcement to the Market

Disclosure of results for the second quarter and first half of 2019, according to

International Financial Reporting Standards - IFRS

We present below the differences between our financial statements in BRGAAP and in International Financial Reporting Standards - IFRS.

As from January 1st, 2018, IFRS 9 came into effect, the accounting standard that replaces IAS 39 in the treatment of Financial Instruments. The new standard is structured to encompass the pillars of classification, measurement of financial assets and impairment and was applied retrospectively by Itaú Unibanco Holding.

The complete consolidated financial statements under IFRS for the first half of 2019 are available at our website: www.itau.com.br/investor-relations.

Comparison between BRGAAP1 and IFRS

						R$ million
	BRGAAP	Adjustments and	IFRS	BRGAAP	Adjustments and	IFRS
Balance Sheet	Reclassifications 2	Reclassifications 2
		Jun/30/2019			Dec/31/2018
Total Assets	1,678,378	(112,067)	1,566,311	1,649,614	(96,817)	1,552,797
Cash and Cash Equivalents, Compulsory Deposits and Financial Assets At Amortized	1,178,480	(10,790)	1,167,690	1,172,276	(12,837)	1,159,439
Cost 3 4 6
(-) Provision for Expected Loss at Amortized Cost 5	(31,952)	261	(31,691)	(33,326)	(47)	(33,373)
Financial Assets at Fair Value Through Other Comprehensive Income 4	120,153	(66,286)	53,867	105,065	(55,657)	49,408
(-) Expected Loss at Fair Value Through Other Comprehensive Income 5	(3,224)	3,138	(86)	(3,441)	3,356	(85)
Financial Assets at Fair Value Through Profit or Loss 4	318,080	(36,592)	281,488	315,383	(28,737)	286,646
Tax Assets7	49,012	(8,633)	40,379	50,242	(7,412)	42,830
Investments in Associates and Joint Ventures, Goodwill, Fixed Assets, Intangible	47,829	6,835	54,664	43,415	4,517	47,932
Assets, Assets Held for Sale and Other Assets
Total Liabilities	1,540,126	(117,628)	1,422,498	1,505,490	(103,159)	1,402,331
Financial Assets at Amortized Cost 3 6	1,224,112	(110,254)	1,113,858	1,220,233	(100,499)	1,119,734
Financial Assets at Fair Value Through Profit or Loss 4	35,842	102	35,944	27,675	36	27,711
Expected Loss (Loan Commitments and Financial Guarantees) 5	1,253	2,830	4,083	1,265	2,527	3,792
Reserves for Insurance and Pension Plan	208,393	1,294	209,687	199,995	1,192	201,187
Provisions	18,164	-	18,164	18,613	-	18,613
Tax Liabilities 7	12,764	(7,693)	5,071	10,915	(5,631)	5,284
Other Liabilities	39,597	(3,906)	35,691	26,794	(784)	26,010
Total Stockholders' Equity	138,252	5,561	143,813	144,124	6,342	150,466
Non-controlling Interests	12,515	1,384	13,899	12,367	1,317	13,684
Total Controlling Stockholders' Equity 8	125,737	4,177	129,914	131,757	5,025	136,782

1. BRGAAP represents accounting practices in force in Brazil for financial institutions, according to regulation of the Central Bank of Brazil;
2. Resulted from reclassification of assets and liabilities and other effects from the adoption of IFRS;
3. Resulted from the elimination of transactions between parent company and exclusive funds (particularly PGBL and VGBL funds), which are consolidated under IFRS;
4. Refer to reclassification of financial assets between measurement categories at fair value and amortized cost;
5. Application of criterion for calculation of Expected Loss as set forth by IFRS;
6. Difference in accounting, particularly from Foreign Exchange Portfolio, which are now be presented as net effect between Assets and Liabilities;
7. Difference in accounting, particularly deffered taxes, which are now accounted for as net effect between Assets and Liabilities in each one of the consolidated companies;
8. Reconciliation of Controlling Stockholders' Equity is presented in the following table.

Itaú Unibanco Holding S.A.

Below is the reconciliation of Results to Stockholders' Equity, with the conceptual description of major adjustments.

						R$ million
	Stockholders			Result *
Reconciliation	Equity
	Jun/30/2019	2nd Q/19	1st Q/19	2nd Q/18	1st H/19	1st H/18
BRGAAP - Values Attributable to Controlling Stockholders	125,737	6,815	6,710	6,244	13,525	12,524
(a) Expected Loss - Loan and Lease Operations and Other Financial Assets	443	(77)	(74)	(459)	(151)	(368)
(b) Adjustment to Fair Value of Financial Assets	(1,881)	(6)	125	(57)	119	(132)
(c) Acquisition of Interest in Porto Seguro Itaú Unibanco Participações S.A.	441	(1)	(1)	(2)	(2)	(4)
(d) Criteria for Write-Off of Financial Assets	2,153	(24)	(39)	(20)	(63)	25
(e) Financial Lease Operations	284	(45)	(36)	(40)	(81)	(80)
(f) Other adjustments	2,737	(135)	62	74	(73)	164
IFRS- Values Attributable to Controlling Stockholders	129,914	6,527	6,747	5,740	13,274	12,129
IFRS - Values Attributable to Minority Stockholders	13,899	163	156	154	319	322
IFRS- Values Attributable to Controlling Stockholders and Minority Stockholders	143,813	6,690	6,903	5,894	13,593	12,451
* Events net of tax effects

Differences between IFRSand BRGAAP Financial Statements

1. In the adoption of IFRS 9, there was a change in the calculation model of incurred loss (IAS 39) to expected loss, considering forward-looking information. On BRGAAP, the concept of

Expected Loss is used, pursuant to BACEN Resolution No. 2,682/99.9

1. Under IFRS, stocks and quotas classified as permanent investments were measured at fair value and its gains and losses were recorded directly in Result. Additionally, there was a change in the model of classification and measurement of financial assets due to the new categories introduced by IFRS 9.
2. Under IFRS, the effect of accounting at fair value of the acquisition of interest in Porto Seguro Itaú Unibanco Participações S.A. was recognized.
3. Criterion for write-off of financial assets on IFRS considers the recovery expectative.
4. Under IFRS (IAS 17) the financial lease operations are recorded as Fixed Assets, as a contra-entry of Other Financial Liabilities. Under BRGAAP, as from September 30th, 2015, the consideration of these transactions are now recorded in result, in accordance with CMN Resolution No. 3,617/08.
5. Other Adjustments is mainly composed of reversal of Amortizations of Goodwill under BRGAAP.

9 More details in the Complete Financial Statements for the first half of 2019.

For comparison purposes, we present on the table below the Result and Recurring Result in IFRS and BRGAAP.

						R$ million
Recurring Result		2nd Q/19			2nd Q/18
	BRGAAP	IFRS	Variation	BRGAAP	IFRS	Variation
Result - Attributale to Controlling Stockholders	6,815	6,527	(288)	6,244	5,740	(504)
Exclusion of the Non-Recurring Events	219	7	(212)	138	17	(121)
Goodwill Amortization	151	-	(151)	150	-	(150)
Civil Lawsuits - Economic Plans	-	-	-	7	7	-
Impairment	-	-	-	10	10	-
Liabilities Adequacy Test - LAT	68	7	(61)	(29)	-	29
Recurring Result - Attributable to Controlling Stockholders	7,034	6,534	(500)	6,382	5,757	(625)

The tables in this report show the figures in million. Variations and summations, however, were calculated in units.

São Paulo, July 29, 2019.

Alexsandro Broedel

Group Executive Finance Director and Head of Investor Relations

Itaú Unibanco Holding S.A.