Fitch Ratings has affirmed Itau Unibanco Holding S.A.'s (IUH) Tier 1 perpetual capital securities at 'B'.

The notes were issued between 2018 and 2020 under IUH's USD100 billion global medium-term note program.

Key Rating Drivers

The ratings on the notes are four notches below IUH's Viability Rating (VR) of 'bb+' in accordance with Fitch's criteria for assessing and rating bank subordinated and hybrid securities. The notching reflects the notes' higher expected loss severity relative to senior unsecured creditors (two notches) and higher non-performance risk (two notches).

The notching for loss severity reflects the notes write-down feature if IUH's common equity Tier 1 (CET1) ratio falls below 5.125%

The notching for non-performance risk reflects Fitch's baseline notching for non-performance risk relative to the bank's VR. According to Fitch's Criteria, the baseline notching for non-performance risk can be reduced where there are very high constraints to non-performance or, conversely, wider notching can be applied where capital buffers over coupon omission triggers are low. Neither case applies with these notes.

IUH's notes will defer coupon payments on a non-cumulative basis when certain conditions are met (i.e. if regulatory capital ratios falls below minimum levels or due to insufficient funds from profits and profit reserves available for distribution). The notching of AT1 notes reflects Fitch's expectation that IUH will maintain adequate capital buffers above regulatory requirements. IUH had buffers of about 360bp above its minimum capital requirement (including buffer requirements) at end-June 2023, representing a buffer of about BRL46 billion above coupon restriction points.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

IUH's ratings of additional Tier 1 securities are sensitive to changes in IUH's VR. A downgrade of IUH's VR would cause a similar downgrade to IUH's ratings.

Although not Fitch's base case, the ratings of the additional Tier 1 securities are also sensitive to Fitch's assessment of their incremental non-performance risk relative to the risk captured in IUH's VR.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

IUH's ratings of additional Tier 1 securities are sensitive to changes in IUH's VR. An upgrade of IUH's VR would cause a similar upgrade to IUH's ratings.

Although not Fitch's base case, the ratings of the additional Tier 1 securities are also sensitive to Fitch's assessment of their incremental non-performance risk relative to the risk captured in IUH's VR.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

RATING ACTIONS

Entity / Debt

Rating

Prior

Itau Unibanco Holding S.A.

subordinated

LT

B

Affirmed

B

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Bank Rating Criteria (pub. 02 Sep 2023) (including rating assumption sensitivity)

ADDITIONAL DISCLOSURES

Dodd-Frank Rating Information Disclosure Form

Solicitation Status

Endorsement Policy

ENDORSEMENT STATUS

Itau Unibanco Holding S.A. 	EU Endorsed, UK Endorsed

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