Annual Report 2005 - Itaúww13.itau.com.br/Portalri/html/ing/download/rao/ra311205.pdf · Operating Income 8,183 7,342 5,714 4,255 3,140 11.5 Consolidated Recurring Net Income 5,443

Annual Report2005

HighlightsRisk rating agencies Moody’s upgraded its Financial Strength rating for Itaú, while Fitch

Ratings followed suit for its Individual rating, reflecting the strong performance associated

with our consistent profitability and gains in operational efficiency. Under these

classifications, Itaú is rated as Brazil’s best bank.

Itaú was also selected as Brazil’s best bank by Euromoney and Global Finance magazines,

and as the most ethical and best managed of Latin America’s largest banks by Latin

Finance magazine.

For the fourth consecutive time, the Itaú brand was selected as the most valuable brand

name in Brazil, valued at US$1.342 billion by English consulting firm Interbrand.

For the sixth consecutive time, Itaú was chosen to be part of the select group of

companies which make up the Dow Jones Sustainability World Index (DJSWI). It is the only

Latin American bank on the index, which features 312 companies from 24 countries,

chosen from the 2,500 largest companies by market value on the Dow Jones Global Index,

which itself represents 60 industrial sectors. Our inclusion in the DJSWI takes into account

financial performance and, principally, the quality of company management –

transparency, corporate governance and socio-environmental responsibility.

Itaú also joined the São Paulo Stock Exchange (Bovespa) Corporate Sustainability Index

(ISE), which began in 2005 and is made up of 28 Bovespa-listed companies which

demonstrate best practices in keeping with sustainable development.

Itaú created an Executive Committee for Socio-Environmental Responsibility and a Socio-

Environmental Responsibility Commission, both of which are responsible for establishing

and implementing the Bank’s Socio-Environmental Responsibility Policy.

Through a public bidding process, Banco Itaú won the payroll contract for the City of São

Paulo’s 210,000 employees, and the management of its financial assets.

In November, Itaú BBA opened a representative office in China, broadening its capacity to

serve Brazilian companies seeking access to the Chinese market.

On December 29, we signed a Termination Agreement ending Itaú’s strategic alliance with

America Online Latin America, releasing the two parties from the obligations contained in

the June 12, 2000 Strategic Interactive Services and Marketing Agreement, and from any

respective amendments and other contracts (see details in Explanatory Note 20 in the

Financial Statements which accompany this Annual Report).

The Itaú Annual Report has been published since 1966, and represents an important

reference source for the Bank’s growth over the past four decades. Countless changes have

been systematically introduced to improve transparency and inform readers on our corporate

social responsibility and business sustainability.

In 1999, we published our first Social Report, which followed guidelines set up by the

Ethos Institute, and included a Social Statement recommended by the Brazilian Institute of

Social and Economic Analyses (Ibase). Previously, our Reports had contained a specific section on

our social and cultural activities.

In keeping with the latest international standards for presenting accounts, in 2004 Itaú began

publishing a cross-referenced index based on Global Reporting Initiative (GRI) guidelines, which

shows the location of economic, environmental and social information in the Annual Report,

Financial Statements and Social Report. Only a little over 700 companies worldwide follow the

GRI guidelines, which seek to standardize and promote comparisons with companies

everywhere.

The information in this Report refers to all the operations and results in 2005 for

Banco Itaú Holding Financeira S.A., which is generally referred to as Itaú or the Bank. However,

the Report also includes discussions of Banco Itaú S.A. and Banco Itaú BBA S.A. activities in

Brazil and abroad.

Our Annual and Quarterly Reports, in addition to providing the most updated information

about the Bank, are also available on the Itaú website at www.itauri.com.br.Throughout the

Report, readers can access the internet using the “Learn More” feature to get additional

information about the many topics we cover.

If you have any questions, comments or suggestions, or would like more copies of the Report,

please e-mail our Investor Relations area at [email protected].

Happy reading!

Introduction

Primary Indicators and Highlights

Change (%)

Earnings – in R$ millions 2005 2004 2003 2002 (1) 2001 (04/05)

Gross Income from Financial Operations 11,157 10,200 9,224 7,250 5,892 9.4

Income from Services, Insurance, Pensions and Annuities 14,417 12,398 10,129 7,777 6,275 16.3

Non-Interest Expenses (2) 10,428 9,015 8,770 8,425 7,056 15.7

Operating Income 8,183 7,342 5,714 4,255 3,140 11.5

Consolidated Recurring Net Income 5,443 4,870 3,717 3,080 2,354 11.8

Consolidated Net Income 5,251 3,776 3,152 2,377 2,389 39.1

Earnings per Share in 2004 and 2005 (in R$)

(other years: per 1,000 shares)

Consolidated Net Income 4.76 3.33 2.77 2.14 2.14 42.9

Book Value 14.09 12.33 10.43 8.12 6.79 14.3

Interest on Own Capital 1.68 1.21 0.97 0.74 0.72 38.8

Preferred Share (PN) Price (3) 57.05 38.93 26.73 15.95 17.47 46.5

Market Capitalization (in R$ millions) (4) 62,980 44,092 30,453 17,743 19,499 42.8

Balance Sheet (in R$ millions)

Total Assets 151,241 130,339 118,738 111,141 81,416 16.0

Total Loans (including endorsements and sureties) 67,756 53,275 44,581 45,414 34,282 27.2

Non-earmarked, Raised and Managed Own Resources 248,113 211,238 183,627 154,362 123,970 17.5

Subordinated Debt 4,584 4,765 4,814 5,707 1,433 (3.8)

Consolidated Stockholders’ Equity 15,560 13,971 11,879 9,036 7,578 11.4

Reference Equity (5) 20,644 19,806 17,185 16,573 10,585 4.2

Financial Ratios (%)

Average Return on Equity – Recurring 36.6 37.7 35.0 37.3 32.6

Average Return on Equity 35.3 29.2 29.7 28.8 33.1

Average Return on Assets 3.7 3.0 2.8 2.6 3.1

Efficiency Ratio (6) 50.3 53.9 54.5 58.2 62.1

Solvency (Basel) Ratio (7) 17.0 20.6 19.8 18.4 16.9

Fixed Assets Ratio (7) 26.1 27.4 25.0 33.1 36.7

Selected Measures

Assets under Administration (in R$ millions) 120,287 99,753 81,102 59,167 55,796 20.6

Number of Employees 51,036 45,316 42,450 43,215 45,409 12.6

Number of Branches 2,391 2,282 2,321 2,314 2,259 4.8

Number of PABs (banking services outlets) 783 791 851 878 925 (1.0)

Number of ATMs 22,023 21,150 20,021 17,926 13,777 4.1

(1) The consolidation of Banco Itaú BBA appears only on the Balance Sheet, and does not affect results.(2) Includes staff expenses, other administrative expenses, CPMF and other tax

expenses, and other operating expenses. (3) Based on the average price for December. (4) Calculated based on the average price of Itaú preferred shares in December. (5) Capital base,

calculated in compliance with Central Bank of Brazil Resolution 2.837, dated May 30, 2001, based on consolidated economic-financial data. (6) Since 2004, calculated in compliance

with international criteria as described in the Management Analysis of Operations. (7) As of December 31.

1

Annual Report 2005

Principal Indicators and

Highlights (inside front cover)

Chairman’s Message 2

The Economy in Review and 2005 Results

Message from the President 6

Outlook for 2006

Banco Itaú Holding

Financeira Profile 10

Financial Sector Analysis 12

Results 14

• Management’s Discussion

and Analysis of Financial

Condition and Results of

Operations 14

• Share Price and ADR

Performance 36

• Ratings and Recognition 38

Credit Portfolio 40

Management 44

Corporate Governance 46

Risk Management 52

Cost Management 54

Brand Management 56

Business Performance 58

Banco Itaú 60

Profile 62

Banking 63

Consumer Clients 63

• Retail

• Itaú Personnalité

• Itaú Private Bank

Commercial Clients 65

• Micro Companies

• Small Companies

• Middle Market Companies

• Institutional Clients

Public Sector 66

Home Loans 67

Credit Cards – Account Holders 68

Insurance, Pensions

and Annuities 70

Fund and Portfolio

Management 71

Itaú Corretora de Valores 72

Capital Markets Services 73

Itaucred Operations 74

Automobiles 74

Credit Cards –

Non-account holders 75

Taií – Consumer Finance 76

Banco Itaú BBA 78

Profile 80

Investment Banking 80

Corporate Banking 81

International Presence 84

Banco Itaú Europa 86

Banco Itaú Buen Ayre 88

Selected Highlights for 2005 89

Senior Management

and Directors 90

Corporate Information 94

Financial Statements 97

Glossary 182

| Banco Itaú Holding Financeira S.A. Annual Report 20052

Chairman’s MessageItaú has built up its sustainability over 60 years through a

corporate culture founded on ethics and quality service.

Today, these same attributes are shared by our 51,000

employees, who serve over 16 million clients.

The Economy in Review

After 60 years in the industry, Itaú is fully prepared to continue its uninterrupted,

sustained growth. Steady results throughout the institution’s history, seen yet again in

2005, reflect its unceasing efforts to ensure our practices maintain their capacity to

create value for everyone with whom we do business, independent of macroeconomic

conditions.

In 2005, for example, growth of the Brazilian economy was less robust than in 2004, with

GDP finishing lower.This slowdown was most evident in the third quarter of the year,

with a contraction of 1.2% against the previous quarter. As a result, this economic

situation impacted investments and the demand for durable consumer goods, which

also posted lower growth rates.

On the other hand, inflation remained close to the 5.1% ceiling established by the

Central Bank: the IPCA broad-based consumer price index hit a high of 5.7% for the year,

which represented a better control over prices in comparison to 7.6% in 2004.These

results augur well for consolidating the economic stability process and attaining the

4.5% goal set for 2006.

3

Despite higher interest rates in 2005, total credit with non-earmarked resources rose 18.8%

over 2004, due primarily to the 29.7% rise in consumer client credit, while commercial loans

grew 11.1%.

The Brazilian real also continued to strengthen against the US dollar in 2005. In spite of this,

domestic exports grew 22% year-on-year, thanks to higher prices of exported goods and a

stronger global economy.

Another reason for optimism comes from Brazil’s reduction of its foreign debt from US$220

billion in 2004 to approximately US$186 billion at year-end. Contributions came from the

private sector and the public sector, in addition to an early repayment of part of its debt with

the International Monetary Fund.

Apprehensive economic growth led to maintaining the Public Debt-GDP ratio at 51%,

halting the declining rates of previous years. In 2006, there will be room for economic

expansion, supported by fiscal adjustment and inflationary target policies.This should bring

about a positive impact on the performance of the financial sector, which has long displayed

a robust character and high level of competitiveness, as Brazil remains the only country in

Latin America whose leading financial institutions are locally controlled.

2005 Results – Unrivaled Performance

An invaluable gauge to ensure sustainability, Itaú’s consolidated earnings continued their

growth of previous years, rising to R$5,251 million in 2005 and generating an average

return of 35.3%.Total assets reached R$151,241 million, up 16.0% from 2004.This

performance was driven by growth in consumer loans and the acquisition of goods,

specifically in credit cards and automobile financing. As a result, the credit portfolio

climbed 27.2% to reach R$67,756 million at year-end.

Itaú’s preferred shares ended the period up 46.5%, while common shares finished 47.0%

higher.These increases extended to one of the Bank’s principal intangible assets: the Itaú

brand, which once again was considered the most valuable in Brazil. Clear evidence of the

value of our brand comes from the shared values and strength of Itaú’s performance

culture as demonstrated by our almost 51,000 employees, who constantly seek a better

relationship with the Bank’s 16 million-plus clients.

Chairman’s Message

Responsible management and operational excellence have

placed Itaú in the Dow Jones and São Paulo Stock Exchange

sustainability indices.We earned Moody’s highest rating for

financial strength in Brazil, and the highest individual

rating in Brazil from Fitch Ratings.


46.5%was how much Itaú preferred shares rose invalue in 2005

55

These results, which are due to our recognized operational excellence and responsible

conduct, have allowed the Bank to be part of the Dow Jones and São Paulo Stock

Exchange corporate sustainability indices, while our consistent performance over many

years allowed Moody's and Fitch Ratings to upgrade Itaú’s ratings. Based on these

evaluations, we are now known as Brazil’s best financial institution.

The segmentation strategy we adopted some years ago years has been accompanied by

a series of acquisitions and partnerships, and sticking with this business model has led to

growth in markets such as Consumer Credit, Insurance and Pensions. Our international

presence also expanded with the 2005 opening of a Banco Itaú BBA representative office

in China, which is designed to handle Brazilian corporations with commercial interests in

this increasingly important market.

Economic stability and increased investment capacity allow the Bank to create new

avenues for growth, but any actions we take will always be in keeping with the ethical

values that underline the 60 years of Itaú’s history.These are the foundations that ensure

the creation of value for our shareholders, help us overcome social challenges, let us

respect our natural resources, and give us the incentive for economic development.

Thank you to everyone who shares Itaú’s vision.

Cordially,

Olavo Egydio Setubal

Chairman of the Board of Directors


Message from the PresidentIn 2005, Itaú strengthened its position in the Consumer

Credit segment through strategic focus and an eye to the

future,which are fundamental characteristics of every Itaú

operation in Brazil and overseas.

Valuing a legacy and culture developed over 60 years. Staying connected with the

present and being alert to future trends, while always seeking superior results. This is

how Itaú has built on its performance each year and consolidated its leadership among

private sector banks in Latin America. In 2005, it was no different. Our credit portfolio

grew 27%, particularly in consumer finance, which led to greater overall earnings and

a larger client base.

The consumer finance segment has consolidated itself after the first wave of expansion,

begun in 2004, making Itaú a leading competitor in this market. Our Taií financing arm

increased its loans to lower income clients, adding 1.5 million new non-account holder

customers to the Bank’s portfolio, through strategically located points of sale in the

states of São Paulo and Rio de Janeiro. Part of this presence was via the Companhia

Brasileira de Distribuição (CBD – Paõ de Açucar) supermarket chain, which maintained

Financeira Itaú-CBD’s (FIC) expansion policy. In the same area, our partnership with Lojas

Americanas S.A. (LASA), through Financeira Americanas Itaú S.A. (FAI), allowed products

and financial services to be offered exclusively to LASA outlet customers in Brazil.

Among the larger growth segments was automobile financing, which rose 80.1% from

2004 and ended the year with a total portfolio of R$11.2 billion, thanks to the efficient

exploitation of expansion opportunities.

77

This same strategy was successfully adopted for credit cards, whereby Itaú became the

sector leader with a 21.7% market share in 2005, due to a new management agreement

with Credicard which helped segregate the 7.6 million cards managed between Itaú and its

partner, Citibank.This measure benefited all new clients through the Bank’s technology,

quality and wide range of products and services, in addition to leveraging the client base to

12.2 million card holders.

Itaú also won the right to manage the financial assets and employee payroll of the City of

São Paulo.This brings us a further 200,000 accounts, which should generate an additional 3%

to 4% in earnings from retail operations.

All our business activities arise from the ongoing effort to anticipate changing conditions,

plus having a clear strategic focus and solid ethical base, all of which guide Itaú’s initiatives.

This direction led to the reworking of our Vision in 2005, as well as the creation of the new

Code of Ethics, which relied on the participation of representatives from various areas and

levels of the Organization. Amongst the primary actions designed to ensure Sustainability

was the creation of our Executive Committee for Socio-environmental Responsibility and

the Socio-environmental Responsibility Commission, which will ensure that all our

businesses comply with the policies these two bodies establish and implement. One

example is Itaú’s analysis of socio-environmental impacts when granting credit, a result of

our adoption of the Equator Principles, which establish criteria for project financing in excess

of US$50 million. Using the same criteria, Itaú has developed a methodology to evaluate

investments of lesser value for middle market companies.

Increasing the number of areas and ways where we interact with the public is also an Itaú

hallmark. In 2005, we launched the Itaú Ombudsman's Office (Ouvidoria Corporativa Itaú)

which is an additional forum for dialogue within the Itaú customer support system, which

has been in operation since 1987. We also introduced the “Itaú Wants to Hear You”

campaign to encourage and publicize the use of our customer communication channels.

Such initiatives strengthen our commitment to ongoing improvement, and employ the

knowledge gained through customer opinions and suggestions to create valuable ways to

improve our products and services.

Outlook for 2006

The expansion of the credit portfolio and merging of the synergies arising from our

strategic alliances and partnerships will be an important challenge in 2006. The

consolidation of the market, combined with reduced chances of growth through

acquisitions, outline the conditions where by Itaú will employ the best methods to attain

suitable gains in scale in its operations.

Among the strategies to be implemented is increasing Itaú’s geographic coverage in

segments where the demand for credit tends to be greater, due to Brazil’s prevailing

economic conditions. We therefore expect an increased number of business units geared

to servicing small companies, and expanded automobile financing activities.

In the area of consumer finance, the Taií financing arm hopes to have 300 outlets open by

year-end through a nationwide expansion, particularly in Brazil’s northeast and south. We

will also seek to offer our clients an even wider variety of financial products through efforts

based on high sales productivity and a focus on earnings, the result of our cost and risk

Message from the President

Other areas of attention in 2006 will be the investment

banking and credit cards segments, in addition to

insurance,pensions and annuities,which have

considerable growth potential for the coming years.


99

management strategies. We also plan to introduce co-branded and private label credit cards through

Lojas Americanas S.A. and grow our client base through an increased presence of Financeira Itaú CBD

in the Companhia Brasileira de Distribuição supermarket chains.

In the credit cards market, the integration of Itaucard’s operations with those of Credicard should bring

about synergies in several areas, including the ability to generate credit card sales among non-account

holder customers, the management of partnerships, more focused activities in the Corporate Business

segment, and the diversity of Itaú’s distribution channels. On the other hand, the acquisition of Orbitall

– Brazil’s leader in the credit card processing market – added significant benefits and should provide

increased efficiency thanks to the possible synergies with Itaú’s existing infrastructure. These efforts are

all designed to maintain the Bank’s market leadership by optimizing its results.

Banco Itaú will also be dedicated to increasing its market share in Insurance, Pensions and Annuities,

which are sectors offering considerable growth potential in Brazil in the coming years.

Another key area of activity will be increasing our market share in the fast-growing Investment Banking

segment through Banco Itaú BBA. Earnings resulting from these activities have been taking up a

steadily growing portion of our corporate client financial margin, and we expect that in three to five

years Itaú BBA will be Brazil’s leading investment bank.

In light of the expected economic conditions for 2006, with continued stability, inflation control, lower

interest rates, a slight recovery in income and GDP growth of 3% to 4%, Itaú is well placed to maintain

the same efficient performance that has characterized the Organization for so many years. Our ability to

finance growth also allows us to adequately project our earnings and the creation of value for all our

shareholders, employees, clients and the general public.

By being active in all segments of the economy, Itaú expects to contribute even more to the

sustainable development of the country and consequently, be present in the lives of all Brazilians.

Sincerely,

Roberto Egydio Setubal

Chief Executive Officer

With a 22% market share incredit card sales, Itaucard is Brazil’s leaderin this segment

Banco Itaú Holding Financeira Profile


The new vision guides Banco Itaú Holding Financeira (Itaú), one of Brazil’s largest financial

institutions. With over 16 million clients, Itaú has developed the structure, products and services to satisfy

the needs of a wide variety of markets in Brazil and overseas. Through Banco Itaú and Banco Itaú BBA, it is

active in all areas of domestic economic activities.

At year-end, Itaú’s net shareholders’ equity was R$15.6 billion, it had R$151.2 billion in assets and a market

capitalization of R$63.0 billion. Its shares are traded on the São Paulo (Brazil), Buenos Aires (Argentina) and

New York stock exchanges.

A commitment to excellence has made Itaú part of sustainability indices such as the Dow Jones Sustainability

World Index (DJSWI) and the Bovespa Corporate Sustainability Index (ISE).

As Brazil’s largest wholesale bank, Itaú BBA serves the country’s 1,000 largest organizations, and is

also highly active in investment banking, where it combines specialized service for large corporations with

the high volume operations and service quality of Banco Itaú.

Banco Itaú operates in a wide variety of market segments: micro, small and middle market

companies, the public sector, institutional investors and consumer clients, plus high income (Personnalité)

and high net worth (Itaú Private) individuals, who receive specialized products and service designed to meet

their needs. It also handles underwriting, custodian services, securities brokerage, credit cards, consórcios,

insurance, bonus-enhanced annuities and private pension plans, automobile financing as well as sub-prime

lending for non-account holders.

Its extensive service network offers 4,558 facilities, including branches, banking services outlets, electronic

service units in companies and at Taií offices, and more than 22,000 Itaú ATMs. Consistent investments in

technology allow 2.6 billion operations to be conducted annually through self-service, ATMs, telephone, fax

and internet, plus direct debit card purchases.

Itaú is also internationally recognized as a leader among Brazilian private sector financial institutions operating

abroad. It serves consumer and commercial clients through its branches in Japan, the United States, the

Cayman Islands, Portugal, England, Argentina and China, while Banco Itaú BBA has branch offices in Uruguay

and the Bahamas, plus representative offices in Shanghai, Buenos Aires and New York. Itaú’s consolidated

overseas investments totaled R$6.5 billion (US$2.8 billion) at year-end, including non-financial activities.

11

Itaú’s VisionTo be the industry's best performing bank,long lasting, renowned for being soundand ethical, and distinguished by highlymotivated teams committed to customersatisfaction, to the community and togenerating competitive advantages.

The Economy

Economic growth in 2005 lagged that of 2004.The

slowdown in GDP, which began at the end of 2004,

bottomed out in the third quarter, dropping 1.2% from

the previous quarter.This contraction was due in part to a

considerable stockpiling of goods in the industrial sector.

With restrictive monetary policies and slow growth in

average real wages, investments backed off along with

demand for durable consumer goods. Only the

exceptional performance of exports prevented the

Brazilian economy from slowing further. On the other

hand, inflation only marginally exceeded the 5.1% ceiling

established by the Central Bank: the IPCA price index

measured inflation at 5.7% in 2005 against 7.6% in 2004,

pointing to a goal of 4.5% in 2006.

In 2005, the real strengthened about 16% in nominal

terms and over 20% in real terms in against the US dollar.

At the same time, Brazil reduced its total foreign debt

from US$220 billion in December of 2004 to about

US$188 billion at year-end.The private sector and public

sector both greatly reduced their debts in foreign

currency, highlighted by the Brazilian government’s early

repayment of US$15.8 billion to the International

Monetary Fund (IMF). Brazil’s exports rose from US$96.5

billion in 2004 to US$118.3 billion in 2005, benefiting from

higher prices of exported goods and a stronger global

economy.These positive conditions allowed the Central

Bank to embark on a purchasing policy which added

US$21.5 billion to foreign reserves during the year.

Public sector debt as a percentage of GDP was relatively

stable in 2005, finishing at about 51.7%, halting the slide

in the Debt-GDP ratio which highlighted 2004.The policy

to improve the debt profile, however, continued through

larger issues of pre-set securities, which reached 27.2% of

the federal securities debt, helping foreign currency-

denominated debt drop from 23% to 9% of net sector

public debt.These actions also helped reduce the impact

of exchange rate fluctuations on the fiscal accounts.

Financial Sector AnalysisHigher savings rates, easier access to capital markets and

increased banking services, available at 24,000 service points,

helped drive the banking sector in 2005.


13

The Banking Sector

The trend to grow assets continued in 2005, through

higher savings and substantial growth in sourcing funds

from capital markets, while the availability of banking

services grew to over 24,000 facilities (branches and

service outlets).

Despite high interest rates, total credit with non-

earmarked resources rose 18.8% from 2004.This increase

was driven primarily by consumer credit, which rose

29.7%, while commercial client credit climbed 11.1%.

Increased consumer loans led to a slight increase in

delinquencies, with the proportion of the portfolio over

90 days in arrears going from 6.2% in November 2004 to

6.8% by November 2005.

In tandem with substantial growth in the automobile

sector, whose domestic sales rose 6.3% against GDP

growth of 2%, consumer financing for automobile

purchasing rose 26.3%.

Credit cards were another product which performed

well in the consumer client segment.The number of

cards issued grew 27.4%, with transactions increasing

25.1%. Sales per card fell steadily during the period,

going from R$229 to R$207, or a 9.6% drop.This was

due to competition between the leading operators, who

have now begun marketing cards to increasingly lower

income groups.

Property loans to commercial clients grew 35.2% in 2005,

while working capital grew 21.2%.

Demand deposits posted real growth of 7.7% from

December 2004.Term deposits had real growth of 27%,

while savings remained unchanged from the previous year.

Capital markets were much more buoyant in 2005

than in previous years. Debenture issues rose fivefold

from R$10.5 billion to R$51.5 billion, while the value of

shares issued climbed 17% from R$3.9 billion in 2004

to R$4.6 billion by year-end.

The average yearly rate for pre-set certificates of deposit

rose from 16.2% in November 2004 to 16.7% by

November 2005, following an increase in the Selic

inflation rate, which was directly affected by the demand

of public sector funds.

Finally, the share of non-earmarked credit in bank

assets (1) grew from 21% in September 2004 to 24%

by September 2005.The share of government securities

in the portfolio also increased, though somewhat less,

moving from 20% in September 2004 to 21% in

September 2005.

18.8%growth in total credit with non-earmarkedresources in 2005

13

1 Central Bank of Brazil sample of 104 financial institutions, including the following types: Commercial Banks, Universal Banks having a Commercial Portfolio or Savings Banks that arenot part of a banking conglomerate; and Banking Conglomerates containing at least one institution which is a Commercial Bank or Universal Bank having a commercial portfolio.

ResultsManagement’s Discussion and Analysis ofFinancial Condition and Results of Operations

Positive macroeconomic conditions, combined with our

strategic decision to focus more on commercial activities in

segments where we have traditionally kept a low profile, such

as consumer credit and loans to micro, small and middle

market companies, resulted in steady growth of the credit

portfolio and altered the dynamic of our revenue sources

throughout the year.


We have modified the calculation for Return on Net Equity (ROE) and introduced the metric of Annualized Return on Average

Net Equity, where the closing balance of net equity has been replaced by its average balance. The average balance

accumulated for the year is obtained by the arithmetic average of the balances on the last day of the past five quarters

(Dec. + Mar. + Jun. + Sept. + Dec. / 5).

Figures in the tables in this Annual Report are expressed in millions,unless otherwise indicated.Calculations of yearly changes

and totals are expressed as percentages.

Future expectations arising from the reading of the Management Discussion and Analysis of Financial Condition and Results

of Operations should take into consideration the risks and uncertainties that involve any activities which are beyond the

control of the companies of the Itaú conglomerate, including political and economic changes,volatility in interest and foreign

exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products and prices,

and changes in tax legislation.

15

Managerial Income StatementOur strategy for managing the foreign exchange risk on capital

invested abroad is designed to prevent exchange rate

fluctuations from affecting results.To achieve this objective, we

use derivatives to neutralize foreign exchange risk and

remunerate investments in reais (R$). Our hedging strategy also

takes into account all the related tax effects associated with the

non-taxability/deductibility of exchange rate fluctuations when

the real is strengthening/weakening against foreign currencies,

as well as those arising from the types of derivatives used.

When there is considerable variation in parity between the real

and other foreign currencies, a significant impact is reflected in

various line-item entries in the financial statements, with

particular emphasis on financial revenues and expenses.

As a result, in Q205 the Management Discussion & Analysis

began including the Managerial Income Statement, which

highlights the impact of exchange rate fluctuations on capital

investments abroad and the effects arising from hedging these

positions.The Managerial Income Statement is derived from a

series of reclassifications made to the general Income Statement,

while the managerial financial margin includes two adjustments

in relation to the overall financial margin: (i) all the effects of

exchange rate fluctuations on investments abroad, which are

distributed over several line-item entries in the general income

statement; and (ii) the tax effects of hedging these investments,

which are reflected in the general income statement in the tax

expenses (PIS and COFINS) and income tax and social

contribution line entries.

Additionally, the managerial financial margin has been broken

down by Banking operations associated with customer business

activities;Treasury – in which an opportunity cost is attributed to

each transaction; and Management of the foreign exchange risk

on investments abroad, which is essentially the remuneration of

capital used for these investments, expressed at the CDI

(certificate of deposit) rate.The following table shows how the

managerial financial margin is determined for managing the

foreign exchange risk of investments abroad.

The real strengthened 11.8% against the US dollar during 2005,

finishing the year at 2.3407 reais to the dollar, down from

R$2.6544 the previous December. In 2004 the trend was similar,

as the real rose 8.1% against the dollar over the year, closing with

an exchange rate of 2.6544 reais to the dollar, while in 2003 the

final figure was R$2.8892.

in R$ Millions

Initial Balance Gross Value Tax Effects Net Value 2005Capital Investments Abroad (A) 5,637 Exchange Variation on Investments Abroad (B) (752) (752)Effect of exchange risk management of investments abroad (C) = (D) + (E) 2,237 (829) 1,408

Assets Position in DI (D) 5,637 1,042 (386) 656 Liabilities Position in Foreign Currency (E) (8,957) 1,195 (443) 752

Managerial Financial Margin of Exchange Risk of Investments Abroad (F) = (B) - (C) 1,485 (829) 656

Initial Balance Gross Value Tax Effects Net Value 2004Capital Investments Abroad (A) 5,687 Exchange Variation on Investments Abroad (B) (395) (395)Effect of exchange risk management of investments abroad (C) = (D) + (E) 1,517 (562) 955

Assets Position in DI (D) 5,687 889 (329) 559 Liabilities Position in Foreign Currency (E) (9,036) 628 (233) 395

Managerial Financial Margin of Exchange Risk of Investments Abroad (F) = (B) - (C) 1,122 (562) 559

Consolidated Statement of Income

in R$ Millions

Banco Itaú HoldingManagerial Adjusts

Accounting Exchange Tax Effects Managerial 2005 from Variation from Hedge of

on Investments InvestmentsAbroad Abroad

Managerial Financial Margin 13,984 117 (829) 13,272 • Banking Operations 12,017 - - 12,017 • Treasury 599 - - 599 • Management of Foreign Exchange Risk from Investments Abroad – net of tax effects 1,368 117 (829) 656

Result from Loan Losses (2,827) (12) - (2,840)Provision for Loan and Lease Losses (3,716) (12) - (3,729)Credits Recoveries and Renegotiated 889 - - 889

Net Income from Financial Operations 11,157 104 (829) 10,432 Other Operating Income / (Expenses) (2,974) 94 104 (2,776)

Banking Service Fees 7,737 1 - 7,738 Result from Operations of Insurance,Capitalization and Pension Plans 798 - - 798 Non-Interest Expenses (10,428) (31) - (10,459)Tax Expenses for ISS,PIS and COFINS (1,613) - 104 (1,509)Equity in the Earnings of Associated Companies 14 155 - 169 Other Operating Income 518 (31) - 487

Operating Income 8,183 198 (725) 7,656 Non-Operating Income 18 2 - 20 Income before Tax 8,201 200 (725) 7,676 Income Tax and Social Contribution (2,321) (17) 725 (1,613)Extraordinary Results (192) - - (192)Profit Sharing (481) - - (481)Minority Interests 45 (183) - (138)Net Income 5,251 - - 5,251 Reconciliation of the Managerial Financial Margin of Management of Foreign Exchange Risk on Investments Abroad (see table on previous page): R$1,368 million plus R$117 million = R$1,485 million.

in R$ Millions

Banco Itaú HoldingManagerial Adjusts

Accounting Exchange Tax Effects Managerial 2005 from Variation from Hedge of

on Investments InvestmentsAbroad Abroad

Managerial Financial Margin 11,127 69 (562) 10,634 • Banking Operations 9,231 - - 9,231 • Treasury 844 - - 844 • Management of Foreign Exchange Risk from Investments Abroad – net of tax effects 1,053 69 (562) 559

Result from Loan Losses (927) (8) - (935)Provision for Loan and Lease Losses (1,582) (8) - (1,589)Credits Recoveries and Renegotiated 654 - - 654

Net Income from Financial Operations 10,200 61 (562) 9,699 Other Operating Income / (Expenses) (2,858) (48) 71 (2,836)

Banking Service Fees 6,165 0 - 6,166 Result from Operations of Insurance,Capitalization and Pension Plans 781 - - 781 Non-Interest Expenses (9,015) (19) - (9,034)Tax Expenses for ISS,PIS and COFINS (1,183) - 71 (1,114)Equity in the Earnings of Associated Companies 79 6 - 85 Other Operating Income 315 (35) - 280

Operating Income 7,342 13 (492) 6,863 Non-Operating Income 29 (0) - 29 Income before Tax 7,371 12 (492) 6,892 Income Tax and Social Contribution (2,092) 0 492 (1,600)Extraordinary Results (1,094) - - (1,094)Profit Sharing (358) - - (358)Minority Interests (52) (13) - (64)Net Income 3,776 - - 3,776 Reconciliation of the Managerial Financial Margin of Management of Foreign Exchange Risk on Investments Abroad (see table on previous page): R$1,053 million plus R$69 million = R$1,122 million.


17

Consolidated Balance Sheet

in R$ Millions

ChangeASSETS 31-Dec-05 31-Dec-04 Dec05 – Dec04 %Current and Long Term Assets 148,367 127,220 21,147 16.6%

Cash And Cash Equivalents 2,085 1,930 154 8.0%Short-term Interbank Deposits 22,877 19,747 3,130 15.9%Securities and Derivative Financial Instruments 33,128 29,176 3,953 13.5%Interbank and Interbranch Accounts 13,707 10,878 2,829 26.0%Loans.Leasing Operations and Other Credits 60,636 47,407 13,229 27.9%(Allowance for Loan Losses) (4,107) (3,054) (1,054) 34.5%Other Assets 20,042 21,135 (1,094) -5.2%

Foreign Exchange Portfolio 6,514 9,159 (2,645) -28.9%Others 13,528 11,976 1,552 13.0%

Permanent Assets 2,875 3,119 (244) -7.8%Investments 749 920 (171) -18.6%Fixed Assets 1,854 1,965 (111) -5.7%Deferred Changes 272 234 38 16.2%

TOTAL ASSETS 151,241 130,339 20,903 16.0%

in R$ Millions

ChangeLIABILITIES 31-Dec-05 31-Dec-04 Dec05 – Dec04 %Current and Long Term Liabilities 134,487 115,127 19,360 16.8%

Deposits 50,520 42,030 8,490 20.2%Demand Deposits 12,689 11,156 1,533 13.7%Saving Account 19,783 19,197 585 3.0%Interbank Deposits 646 647 (2) -0.3%Time Deposits 17,402 11,029 6,373 57.8%

Deposits Received under Securities Repurchase Agreements 22,031 16,098 5,932 36.8%Funds from Acceptances and Issue of Securities 4,961 3,431 1,530 44.6%Interbank and Interbranch Accounts 1,043 1,078 (35) -3.3%Borrowings and On-lendings 9,156 10,518 (1,362) -12.9%Derivative Financial Instruments 2,436 1,173 1,263 107.7%Technical Provisions for Insurance,Pension Plans and Annuities 14,640 11,023 3,616 32.8%Other Liabilities 29,701 29,775 (74) -0.2%

Foreign Exchange Portfolio 6,634 9,405 (2,771) -29.5%Subordinated Debt 4,584 4,765 (181) -3.8%Others 18,482 15,605 2,878 18.4%

Deferred Income 71 47 24 50.3%Minority interest in subsidiaries 1,124 1,193 (70) -5.9%Stockholders’Equity 15,560 13,971 1,589 11.4%TOTAL LIABILITIES 151,241 130,339 20,903 16.0%

Loans in R$ Millions

Change31-Dec-05 31-Dec-04 Dec05 – Dec04 %

Loans 60,636 47,407 13,229 27.9%Endorsements and Sureties 7,121 5,868 1,252 21.3%TOTAL LOANS 67,756 53,275 14,481 27.2%

Loans and Securities in R$ Millions

Change31-Dec-05 31-Dec-04 Dec05 – Dec04 %

Consumer Clients 28,691 18,272 10,419 57.0%Business Loans 34,524 30,480 4,044 13.3%

Micro,Small and Mid-sized Companies 12,784 9,718 3,066 31.6%Large Corporations 21,740 20,763 977 4.7%

Special Purpose Loans 4,541 4,523 18 0.4%Total Loans 67,756 53,275 14,481 27.2%Public Securities 6,638 7,486 (848) -11.3%Private Securities 12,781 12,145 636 5.2%Total Securities 19,419 19,631 (212) -1.1%TOTAL 87,175 72,906 14,269 19.6%

Banco Itaú Holding Financeira S.A. is a publicly-traded company which is active in all aspects of the

banking industry in Brazil and overseas through its subsidiary and related firms. Its consolidated net

income in 2005 totaled R$5,251 million, a 39.1% year-on-year increase.

Consolidated shareholders’equity – net of minority shareholders – reached R$15,560 million at year-

end, up 11.4% y-o-y. During the reporting period we purchased a considerable amount of our own

shares for Treasury, coming primarily from the sale of Itaú stock by SPANISH INSTITUTION La Caixa.

Our average yearly return on equity (ROE) was 35.3% in 2005, a 6.1% improvement from the

previous year.Total assets reached R$151,241 million at year-end, a 16.0% y-o-y rise, while the

average yearly return on assets (ROA) was 3.7%, up 0.7% from 2004. Itaú’s Solvency (Basel) ratio

finished the year at 17.0%, which was 3.6% lower than a year earlier.

In 2005, the development of various economic activities in Brazil and abroad continued to benefit

from a positive business environment. In particular, the Brazilian banking industry saw an even

greater demand for credit than that of 2004, primarily in the consumer finance segment.The real

strengthened 11.8% against the US dollar during 2005, finishing the year at 2.3407 reais to the dollar.

Brazil’s country risk (EMBI) reached 305 basis points at the end of the period, a 20.4% improvement

over 2004.The yearly Selic interest rate finished at 18.0%, slightly higher than the 17.75% of the

previous year.

Positive macroeconomic conditions, combined with our strategic decision to focus more on

commercial activities in segments where we have traditionally kept a low profile, such as consumer

credit and loans to micro, small and middle market companies, resulted in steady growth of the

credit portfolio and altered the dynamic of our revenue sources throughout the year. At December

31, total loans and financings, including endorsements and sureties, reached R$67,756 million, a

27.2% y-o-y increase. Consumer client operations grew 57.0% in 2005, finishing at R$28,691 million.

The principal highlight was the 80.1% increase in automobile financing, which was due to the

consolidation of investments undertaken in recent years in this segment (the acquisitions of

Finaustria, Banco Fiat and Intercap), and the organic growth of our operations. Our other consumer

client products also underwent substantial development in 2005. Personal loans grew 49.0%, while

credit card operations rose 40.1%. Increased activity with commercial clients, specifically among

micro, small and middle market companies, helped this segment generate a 31.6% rise, totaling

R$12,784 million. Credit for large corporations remained essentially unchanged throughout the year,

as these clients have increasingly returned to tapping the capital markets to fund the expansion of

their operations.We have prioritized those products in our credit portfolio which can make a greater

contribution to the managerial financial margin, as opposed to products such as payroll-deductible

credit, for example, which generate lower spreads due to higher competition.


ROE (%) Net Earnings (in R$ Millions)

2,377

3,1523,776

5,251

28.8% 29.7% 29.2%35.3%

2002 2003 2004 2005

Net Earnings and Return onShareholder´s Equity

Selic Rate (%) Dollar exchange rate(in R$)

2.6544 2.6662 2.3504 2.2222 2.3407

17.75% 19.25% 19.75% 19.50% 18.00%

dec/04 mar/05 jun/05 sep/05 dec/05

Selic Rate and Dollar Exchange Rate

Credit Operations (*)in R$ billions

in foreign currency+ foreign currency-indexed

in local currency

67.8

10.6

11.6

12.2

16.3

57.1

41.8

32.3

29.1

53.3

44.545.4

dec/02 dec/03 dec/04 dec/05

(*) Includes endorsements and sureties

19

The organic growth process of our credit portfolio and an altered product mix had a significant impact

on our performance, helping increase our managerial financial margin 24.8% to reach R$13,272 million.

The managerial financial margin from banking activities grew 30.2% to R$12,017 million during the

year, and was one of the cornerstones of our increased earnings.The managerial financial margin from

Treasury fell R$246 million year-on-year, finishing at R$599 million.This decline was due in part to our

strategy of managing market risk and interest on our credit operations, as well as the impact of a lower

IGP-M inflation rate on our portfolios associated with this index.The increase in average CDI rates

during the year allowed our financial margin on the management of exchange risk on investments

abroad, net of fiscal effects, to rise R$96 million, closing at R$656 million.

At the end of 2003, we anticipated falling interest rates and a consequent drop in the financial margin

by adopting a series of strategies that have helped grow and sustain our earnings.We began focusing

on consumer finance and loans to micro, small and middle market companies, and started to work

more closely with non-account holder clients.

As a result of these strategies, there were increased expenses related to provisions for doubtful loan

losses, as those operations capable of generating higher earnings generally carry a higher degree of

risk.We also increased our provisions for doubtful loan losses by R$370 million to hit R$1,370 million by

year-end. However, our policies of assessing credit quality and seeking a better risk-return ratio helped

delinquency levels remain within the acceptability limits established when we adopted this strategy.

Earnings from financial services also benefited from the new business dynamic associated with our

consumer clients, account holders and non-account holders.

The increase in our equity stakes in Credicard and Orbitall, which occurred at the end of 2004, combined

with organic growth in Itaucard’s activities, contributed to a substantial increase in earnings from credit

cards throughout 2005.At the same time, the emphasis we placed on consumer finance, particularly in

leasing and financing of vehicles, increased our credit-related earnings during the year, while a larger

client base generated positive results from our checking account services.Finally, we experienced

growth in our asset management activities, due in part to increased investments in our funds.

In 2005, we kept a keen eye on cost management.We reconciled the need for increased non interest-

related expenses associated with the structuring and consolidation of strategic initiatives – represented

by our Itaucred and Orbitall operations – with the processes and goals implemented in recent years to

rationalize and control costs.Throughout the year, non-interest related expenses rose R$1,425 million

from their 2004 levels, with about 80.0% of this figure being directly associated with strategic initiatives.

Net of the impact of these costs, non-interest related expenses rose just 3.0% year-on-year.

We also worked on attaining and maintaining increased productivity levels, seen in our improved

Efficiency ratio, which reached 50.3% in 2005, down from 53.9% the previous year, even including the

costs associated with our recent strategic initiatives.The methodology we have adopted to calculate

the Efficiency ratio is based on best international practices and takes in a wide range of banking

activity income and expenses.

Banking Operations Treasury

Management of Exchange Risk on Investments Abroad

2004 2005

Managerial Financial Margin in R$ millions

NPL Ratio – Commercial Clients

NPL Ratio NPL Ratio – Consumer Clients

10.7

4.2

1.5

4.1

2.22.9

0.9

3.5

1.3

7.3

5.6 5.8


NPL Ratio (*)

Consumer/Commercial Clients (%)

9.2319,231 12,017

10,634

13,272

844

599

559

656

Non-Interest Expensesin R$ millions

5,1214,466

7,7386,166

2002 2003 2004 2005

Earnings from Services in R$ millions

2005 2004 %Non-Interest Expenses (A) (10,459) (9,034) 15.8%- Managerial Financial Margin 13,272 10,634 24.8%- Income from Services 7,738 6,166 25.5%- Income from Insurance,

Pensions & Annuities 798 781 2.2%- ISS,PIS and COFINS Tax Expenses (1,509) (1,114) 35.5%- Other Operating Income 487 280 73,9%Subtotal – Income (B) 20,785 16,747 24.1%Efficiency Ratio (A/B) 50.3% 53.9%

(*) Non-performing loans: exceeding 60 days in arrears

The termination of our partnership with America Online Latin America Inc. (AOLA) had a positive

effect on Other Operating Income during the year. Our financial statements showed an outstanding

balance, entered in Other Sundry Liabilities, associated with monies received in advance, pursuant to

the terms of our service contract with AOLA.These monies have been booked as income to the

extent that they were spent in connection with services contracted. After receiving legal

authorization from the United States to terminate the contract, we fully recognized the outstanding

amount with respect to these monies, which totals R$120 million.

Higher tax expenses during the year were due primarily to increased operational activities, including

acquiring larger equity stakes in Credicard and Orbitall. Additionally, tax on Interest on Own Capital

from inter-company payments within the Itaú conglomerate helped raise our PIS and Cofins tax

expenditures.

Income Tax and Social Contribution tax payments on net income remained practically unchanged

from 2004, despite higher Operating Income.This was due in great part to the fiscal effect on the

increased expenses for Interest on Own Capital.

The Tax Credits – Net Equity ratio reached 31.9%, a 1.1 percentage point drop due to a higher

consumption of tax credits on tax losses and a higher tax deduction on loan losses, which were

partially offset by the reduction of net equity resulting from the repurchase of shares for Treasury.

In 2005, overall growth in deposits was helped by increased time deposits, which in turn were

related to the rise in credit we made available.

With the demand for credit heating up, financial institutions have been increasingly facing important

questions over the need for consistent funding sources to sustain their ability to offer credit

products. Here, Itaú has an important competitive advantage, as we employ our vast funding

network and solid base of deposits to support the rapid expansion of our credit portfolio. As well, we

finished 2005 with R$120,287 million in our investment funds and managed portfolios, making us

one of Brazil’s largest private sector asset managers.

Technical provisions for Insurance, Annuities and Pensions grew 32.8% in 2005, reaching R$14,640

million by year-end. Among our Pensions products, in general, technical provisions rose 39.4% to

R$11,940 million. Once again, the VGBL (Free Benefit Generator Plan) family of products performed

well throughout the year, while technical provisions for VGBLs climbed 58.7% y-o-y to finish the year

at R$7,046 million.


487

280

2004 2005

Other Operating Incomein R$ millions

Non-Interest Expenses in R$ millions

2005 2004 %- PIS/COFINS (1,230) (923) 33.3%- ISS (279) (191) 46.2%- IR/CSLL (1,613) (1,600) 0.8%Total (3,122) (2,713) 15.1%


Deposits and Assets under Managementin R$ billions

Funds and ManagedPortfolios

Deposits

50.5

120.

3

42.0

99.8

36.7

81.1

39.0

59.2

Technical Provisions – Insurance,Pensions and Annuitiesin R$ billions

Technical Provisions – Pensions

Technical Provisions – Annuities

Technical Provisions – Insurancedec/02 dec/03 dec/04 dec/05

14.6

11.0

4.4

8.6

2.5

11.9

1.11.6

1.01.4

7.7

5.5

1.01.2

0.91.0

21

Itaú’s Operational SegmentsThe segmentation structure of our operations appears below.

The Itaubanco segment represents Banking, Credit Cards –

account holders, Fund Management, Insurance, Pensions and

Annuities, and Managed Portfolios.The Itaú BBA segment covers

Large Corporations (sales exceeding R$100 million per year).

Itaucred includes the results of our investments, plus strategic

initiatives begun at the end of 2004 to provide credit to non-

account holders.

Strategies and Outlook

Itaubanco

• Cross-selling of products;• Focus on the credit cycle with a view to sustainable growth;• Growth in Insurance, Private Pensions and Annuities;• Rationalization of processes, leading to cost reductions and• Specialization, diversification and high quality of products and services offered.

Itaú BBA

• Cross-Selling: unlock synergies with Itaú, and increase the banking services on offer, such as administration of payroll and collections;• Investment Banking: maintain leadership in the domestic fixed income market, continue to play a key role in the primary market for

equities, expand our operations in Mergers & Acquisitions, and look to become the country’s leading investment bank; and• International Area: support the internationalization process of Brazilian companies by offering products and services through the Itaú

Group’s overseas structure.

Itaucred

• Focus on the credit cycle with a view to sustainable growth;• Reach new clients through new channels;• Cross-selling of products;• Automobiles: continue to increase our market share by developing new segments and by a presence in new markets; and• TAIÍ: focus on consumer credit products and consumer loans for low-income customers, and offering banking products to non-

account holders.

Itaú

Banco Itaú

Itaubanco

Banking

Cards – account holders

Insurance,Pensions and Annuities

Banco Itaú BBA

Itaucred Corporate Operations&

Investment Banking

Taií

Automobiles

Cards – non-account holders

Corporation

Managed Fundsand Portfolios

Allocated CapitalThrough the use of our own model for assessing credit, market

and operational risks, as well as taking into account the regulatory

model and amount of fixed assets, we adjusted the pro forma

figures to demonstrate the impacts associated with the allocation

of capital.

This has allowed has us to calculate the Risk-Adjusted Return On

Capital (RAROC), which is a performance metric consistently

adjusted to help determine if Itaú has the right balance between

capital needs, returns and risk.

The adjustments made in the Balance Sheet and in the Income

Statement were based on information provided by the

management teams of our various business units.

The Corporation column shows the results related to the excess

of capital and subordinated debt, as well as the equity accounting

result of the companies that are not associated with these

segments.Additionally, profit from our Minority Interest in

Subsidiaries and the Extraordinary Result was booked in the

Corporation column.


Pro Forma Financial Statement, by Segment

At December 31, 2005 in R$ Millions

Banco Itaú HoldingASSETS Itaubanco Itaú BBA Itaucred Corporation ItaúCurrent and Long-Term Assets 113,673 43,205 15,852 3,911 148,367Cash and Cash Equivalents 1,967 117 - 0 2,085Short-term Interbank Deposits 33,498 13,280 - 838 22,877Securities 22,716 10,124 - 2,317 33,128Interbank and Interbranch Accounts 13,696 75 - 0 13,707Loans 25,810 18,015 16,811 - 60,636(Allowance for Loan Losses) (2,657) (342) (1,109) - (4,107)Other Assets 18,643 1,936 150 756 20,042Permanent Assets 2,135 51 103 585 2,875TOTAL ASSETS 115,808 43,256 15,955 4,497 151,241

in R$ Millions

Banco Itaú HoldingLIABILITIES Itaubanco Itaú BBA Itaucred Corporation ItaúCurrent and Long-Term Liabilities 108,147 38,916 14,267 1,432 134,487Deposits 50,761 20,664 - - 50,520Securities Repurchase Agreements 10,415 3,992 11,569 - 22,031Funds from Acceptances and Issue of Securities 5,039 438 - - 4,961Interbank and Interbranch Accounts 846 261 - - 1,043Borrowings 2,147 6,959 51 - 9,156Derivative Financial Instruments 1,261 2,560 - 17 2,436Other Liabilities 23,038 4,043 2,648 1,415 29,701Technical Provisions for Insurance,Pension Plans and Annuities 14,640 - - - 14,640Deferred Income 59 12 - - 71Minority Interest in Subsidiaries - - - 1,124 1,124Allocated Capital Level I 7,603 4,328 1,688 1,941 15,560TOTAL LIABILITIES 115,808 43,256 15,955 4,497 151,241Note:The Consolidated figures do not represent the sum of the parts because certain intercompany transactions were eliminated in the Consolidated calculations.

Consolidated Pro Forma Income Statement, by Segment

in R$ Millions

Banco Itaú Holding2005 Itaubanco Itaú BBA Itaucred Corporation ItaúManagerial Financial Margin 8,327 1,740 2,338 867 13,272

• Banking Operations 7,793 1,004 2,338 883 12,017 • Treasury 66 549 - (16) 599 • Management of Foreign Exchange Risk from Investments Abroad - net of tax effects 468 188 - - 656

Result from Loan Losses (2,272) 298 (687) (179) (2,840)Provision for Loan and Lease Losses (2,797) (85) (847) - (3,729)Credits Recoveries and Renegotiated 526 383 160 (179) 889

Net Income from Financial Operations 6,055 2,038 1,651 688 10,432 Other Operating Income / (Expenses) (1,466) (384) (910) (17) (2,776)

Banking Service Fees 6,500 383 864 (8) 7,738 Partial Result of Insurance,Capitalization and Pension Plans 798 - 0 - 798 Non-Interest Expenses (8,073) (681) (1,628) (77) (10,459)Taxes Expenses for ISS,PIS and COFINS (1,066) (107) (224) (113) (1,509)Equity in the Earnings of Associated Companies - - - 169 169 Other Operating Income 375 20 78 13 487

Operating Income 4,590 1,654 741 671 7,656 Non-Operating Income 18 2 1 (1) 20 Income Before Tax 4,607 1,656 743 670 7,676 Income Tax and Social Contribution (1,072) (313) (200) (29) (1,613)Extraordinary Results - - - (192) (192)Profit Sharing (357) (101) (18) (6) (481)Minority Interests - - - (138) (138)Net Income 3,179 1,242 525 305 5,251 (RORAC) - Return over Level I Allocated Capital 43.1% 34.2% 39.8% 12.0% 35.3%Efficiency Ratio 54.1% 33.4% 53.3% 10.2% 50.3%Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

23



Banco Itaú HoldingASSETS Itaubanco Itaú BBA Itaucred Corporation ItaúCurrent and Long-Term Assets 98,902 34,412 8,809 5,826 127,220Cash and Cash Equivalents 1,809 115 - 0 1,930Short-term Interbank Deposits 28,022 8,409 - 150 19,747Securities 18,303 7,646 - 5,182 29,176Interbank and Interbranch Accounts 10,761 129 - 0 10,878Loans 20,582 17,671 9,154 - 47,407(Allowance for Loan Losses) (2,338) (252) (464) - (3,054)Other Assets 21,764 694 118 494 21,135Permanent Assets 2,218 76 54 771 3,119TOTAL ASSETS 101,120 34,488 8,863 6,597 130,339

in R$ Millions

Banco Itaú HoldingLIABILITIES Itaubanco Itaú BBA Itaucred Corporation ItaúCurrent and Long-Term Liabilities 94,215 31,283 7,888 2,470 115,127 Deposits 41,703 15,093 - - 42,030 Securities Repurchase Agreements 9,534 2,510 6,121 - 16,098 Funds from Acceptances and Issue of Securities 3,558 838 - - 3,431 Interbank and Interbranch Accounts 885 205 - - 1,078 Borrowings 2,328 8,190 - - 10,518 Derivative Financial Instruments 908 1,150 - 1 1,173 Other Liabilities 24,276 3,298 1,767 2,469 29,775 Technical Provisions for Insurance,Pension Plans and Annuities 11,023 - - - 11,023 Deferred Income 36 11 - - 47 Minority Interest in Subsidiaries - - - 1,193 1,193 Allocated Capital Level I 6,868 3,194 975 2,934 13,971 TOTAL LIABILITIES 101,120 34,488 8,863 6,597 130,339 Note:The Consolidated figures do not represent the sum of the parts because certain intercompany transactions were eliminated in the Consolidated calculations.


in R$ Millions

Banco Itaú Holding2004 Itaubanco Itaú BBA Itaucred Corporation ItaúManagerial Financial Margin 7,649 1,249 1,068 669 10,634

• Banking Operations 6,632 923 1,068 608 9,231 • Treasury 609 174 - 61 844 • Management of Foreign Exchange Risk from Investments Abroad - net of tax effects 407 152 - - 559

Result from Loan Losses (973) 210 (172) - (935)Provision for Loan and Lease Losses (1,437) 191 (344) - (1,589)Credits Recoveries and Renegotiated 463 19 172 - 654

Net Income from Financial Operations 6,675 1,459 896 669 9,699 Other Operating Income / (Expenses) (2,039) (308) (490) 1 (2,836)

Banking Service Fees 5,439 307 424 (4) 6,166 Partial Result of Insurance,Capitalization and Pension Plans 781 - - - 781 Non-Interest Expenses (7,587) (622) (806) (19) (9,034)Taxes Expenses for ISS,PIS and COFINS (840) (69) (117) (86) (1,113)Equity in the Earnings of Associated Companies - - - 85 85 Other Operating Income 169 78 9 24 280

Operating Income 4,637 1,151 406 669 6,863 Non-Operating Income 29 2 (4) 2 29 Income Before Tax 4,665 1,153 402 671 6,892 Income Tax and Social Contribution (1,164) (266) (105) (65) (1,600)Extraordinary Results - - - (1,094) (1,094)Profit Sharing (284) (59) (12) (3) (358)Minority Interests - - - (64) (64)Net Income 3,218 829 285 (555) 3,776 (RORAC) - Return over Level I Allocated Capital 46.9% 27.2% 35.2% -21.5% 28.7%Efficiency Ratio 57.5% 39.8% 58.3% 3.1% 53.9%Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.




ItaubancoASSETS Branch Credit Cards Insurance, Consolidated

Banking Accounting Pensions and Holders Annuities

Current and Long-Term Assets 90,308 6,266 17,100 113,673 Cash and Cash Equivalents 1,873 73 21 1,967Short-term Interbank Deposits 32,743 755 - 33,498 Securities 6,552 721 15,444 22,716 Interbank and Interbranch Accounts 13,696 - - 13,696 Loans 22,193 3,616 - 25,810 (Allowance for Loan Losses) (2,528) (128) - (2,657)Other Assets 15,778 1,230 1,635 18,643 Permanent Assets 1,771 157 207 2,135TOTAL ASSETS 92,079 6,422 17,307 115,808

in R$ Millions

ItaubancoLIABILITIES Branch Credit Cards Insurance, Consolidated


Current and Long-Term Liabilities 86,372 5,761 16,014 108,147Deposits 50,761 - - 50,761 Securities Repurchase Agreements 10,415 - - 10,415 Funds from Acceptances and Issue of Securities 5,039 - - 5,039 Interbank and Interbranch Accounts 846 - - 846 Borrowings 2,005 142 - 2,147Derivative Financial Instruments 1,261 - - 1,261Other Liabilities 16,044 5,619 1,374 23,038Technical Provisions for Insurance,Pension Plans and Annuities - - 14,640 14,640 Deferred Income 59 - 0 59 Allocated Capital Level I 5,648 661 1,293 7,603TOTAL LIABILITIES 92,079 6,422 17,307 115,808


in R$ Millions

Itaubanco2005 Branch Credit Cards Insurance, Portfolio under Consolidated

Banking Accounting Pensions and ManagementHolders Annuities and Mutual Funds

Managerial Financial Margin 6,821 969 536 - 8,327 • Banking Operations 6,288 969 536 - 7,793 • Treasury 66 - - - 66• Management of Foreign Exchange Risk from

Investments Abroad - net of tax effects 468 - - - 468Result from Loan Losses (2,036) (235) - - (2,272)

Provision for Loan and Lease Losses (2,488) (309) - - (2,797)Credits Recoveries and Renegotiated 452 74 - - 526

Net Income from Financial Operations 4,785 733 536 - 6,055 Other Operating Income / (Expenses) (2,067) 25 182 394 (1,466)

Banking Service Fees 3,184 1,486 167 1,662 6,500 Transfer for Banking 777 - - (777) - Result of Insurance,Capitalization and Pension Plans 75 - 723 - 798Non-Interest Expenses (5,704) (1,341) (617) (411) (8,073)Taxes Expenses for ISS,PIS and COFINS (680) (202) (103) (80) (1,066)Other Operating Income 281 82 12 - 375

Operating Income 2,719 758 719 394 4,590Non-Operating Income (2) 1 18 - 18Income Before Tax 2,717 759 737 394 4,607 Income Tax and Social Contribution (519) (221) (173) (158) (1,072)Profit Sharing (244) (49) (17) (47) (357)Net Income 1,954 489 547 189 3,179 (RORAC) – Return over Level I Allocated Capital 35.0% 94.0% 42.8% 43.1%Efficiency Ratio 54.5% 57.4% 46.2% 54.1%Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

25



ItaubancoASSETS Branch Credit Cards Insurance, Consolidated


Current and Long-Term Assets 83,589 4,738 13,265 98,901 Cash and Cash Equivalents 1,776 29 31 1,809 Short-term Interbank Deposits 28,926 433 625 28,022Securities 6,010 786 11,143 18,303 Interbank and Interbranch Accounts 10,761 - - 10,761 Loans 17,859 2,723 - 20,582 (Allowance for Loan Losses) (2,125) (212) - (2,338)Other Assets 19,889 980 1,466 21,177 Permanent Assets 1,756 180 223 2,218 TOTAL ASSETS 85,294 4,914 13,488 101,119

in R$ Millions

ItaubancoLIABILITIES Branch Credit Cards Insurance, Consolidated


Current and Long-Term Liabilities 79,222 4,490 12,299 94,214 Deposits 41,901 - - 41,703 Securities Repurchase Agreements 9,546 9 - 9,533 Funds from Acceptances and Issue of Securities 3,558 - - 3,558 Interbank and Interbranch Accounts 885 - - 885 Borrowings 2,183 161 - 2,328 Derivative Financial Instruments 894 - 3 908 Other Liabilities 20,254 4,320 1,273 24,276 Technical Provisions for Insurance,Pension Plans and Annuities - - 11,023 11,023 Deferred Income 71 - 0 36 Allocated Capital Level I 6,001 424 1,189 6,868TOTAL LIABILITIES 85,294 4,914 13,488 101,119


in R$ Millions

Itaubanco2004 Branch Credit Cards Insurance, Portfolio under Consolidated

Banking Accounting Pensions and ManagementHolders Annuities and Mutual Funds

Managerial Financial Margin 6,466 697 485 - 7,649 • Banking Operations 5,450 697 485 - 6,632 • Treasury 609 - - - 609 • Management of Foreign Exchange Risk from

Investments Abroad - net of tax effects 407 - - - 407Result from Loan Losses (886) (87) - - (973)

Provision for Loan and Lease Losses (1,261) (175) - - (1,437)Credits Recoveries and Renegotiated 375 88 - - 463

Net Income from Financial Operations 5,580 610 485 - 6,675Other Operating Income / (Expenses) (2,124) (251) 100 237 (2,039)

Banking Service Fees 3,176 790 116 1,357 5,439 Transfer for Banking 681 - - (681) - Partial Result of Insurance,Capitalization and Pension Plans 89 - 691 - 781 Non-Interest Expenses (5,660) (940) (616) (372) (7,587)Taxes Expenses for ISS,PIS and COFINS (575) (106) (92) (68) (840)Other Operating Income 164 6 - - 169

Operating Income 3,456 359 584 237 4,637Non-Operating Income 9 2 17 - 29 Income Before Tax 3,466 361 601 237 4,665 Income Tax and Social Contribution (820) (123) (141) (80) (1,164)Profit Sharing (218) (25) (9) (31) (284)Net Income 2,428 213 451 125 3,218 (RORAC) - Return over Level I Allocated Capital 45.6% 63.7% 37.8% 46.9%Efficiency Ratio 56.6% 67.8% 51.3% 57.5%Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

In 2005, the managerial financial margin totaled R$6,821

million, which improved 5.3% from a year earlier. This was

essentially due to our strategy to expand and alter the credit

portfolio mix and, in part, to the R$544 million reduction in

the managerial financial margin for Treasury. The drop in the

financial margin in Itaubanco’s Treasury came from a reduced

impact of the IGP-M inflation rate, given the drop in this price

index in 2005, and lesser contributions from our securities and

derivatives positions abroad.

Expenses related to provisions for doubtful loan losses

reflected the strategic option to focus on those operations

capable of generating higher financial margins. In 2005, credit

risk-related expenses totaled R$2,488 million, rising 97.3% from

2004. After assessing the historical performance of credit

portfolios in times of economic crises, we added R$154 million

to provisions, exceeding the minimum banking industry

regulatory requirement. On the other hand, income from

recovering written-off loans grew R$77 million in 2005, thanks

to redoubled efforts in our commercial and collection areas.

Income from Services reached R$3,962 million, growing R$104

million year-on-year, due primarily to growth in our credit

activities.

Non-interest related expenses rose just 0.8% over the year.This

was the result of our considerable focus on controlling and

reducing administrative costs, even in light of the 4.8%

increase in the size of our branch network.

On December 29, 2005, we terminated the contractual

partnership between Itaú Holding and America Online Latin

America Inc., which released both parties from any current and

future obligations related to this strategic alliance.

Consequently, we booked R$120 million in Other Operating

Income, which were monies received in advance, pursuant to

the terms of our service contract.


Itaubanco – Banking

in R$ Millions

Itaubanco – Banking 2005 2004 ChangeNet interest margin 6,821 6,466 355

• Banking Operations 6,288 5,450 838 • Treasury 66 609 (544)• Management of Foreign Exchange Risk from Investments Abroad – net of tax effects 468 407 61

Result from Loan Losses (2,036) (886) (1,150)Provision for Loan and Lease Losses (2,488) (1,261) (1,227)Credits Recoveries and Renegotiated 452 375 77

Net income from financial operations 4,785 5,580 (795)Other operating income (expenses) (2,067) (2,124) 57

Banking Service Fees 3,962 3,857 104 Income from Insurance,Annuities and Pension Plans 75 89 (15)Non-Interest Expenses (5,704) (5,660) (44)Taxes Expenses for ISS,PIS and COFINS (680) (575) (105)Other Operating Income 281 164 117

Operating Income 2,719 3,456 (738)Non-Operating Income (2) 9 (11)Income Before Tax 2,717 3,466 (749)Income Tax and Social Contribution (519) (820) 300 Profit Sharing (244) (218) (25)Net Income 1,954 2,428 (474)

Composition of Credit Portfolio

dec/04 mar/04 jun/03 sep/02 dec/05

Consumer Clients

Special Purpose Loans

Micro/Small and Mid-sized Companies

Large Corporations

34.3%

39.0%

18.2%8.5%

36.4%

37.6%

18.4%7.6%

38.9%

34.8%

19.0%

7.2%

41.5%

32.9%

18.7%

6.9%

42.3%

32.1%

18.9%6.7%

27

Net income from the Credit Cards – Account holders segment

reached R$489 million in 2005, a 128.8% y-o-y increase, due

primarily to a higher number of transactions and financings,

which is shown on the balance sheet for the segment: the

Credit Operations item grew 32.7% to R$3,616 million. We also

reversed a provision which had exceeded the minimum

regulatory requirement by R$28 million. This provision had

previously been constituted based on a simulated risk

assessment model of the historical behaviour of the portfolio

during downturns in the economic cycle.

The cards base grew 20.6% during the year, reaching

8,510,000 active cards, which also contributed to Itaú’s

considerable earnings for the period. Total cards transactions

were R$16.8 billion, up 30% y-o-y.

Itaubanco - Credit Cards – Account Holders

in R$ Millions

Itaubanco – Credit Cards – Account Holders 2005 2004 ChangeNet interest margin 969 697 272Result from Loan Losses (235) (87) (148)

Provision for Loan and Lease Losses (309) (175) (134)Credits Recoveries and Renegotiated 74 88 -15

Net income from financial operations 733 610 123Other operating income (expenses) 25 (251) 276

Banking Service Fees 1,486 790 696Non-Interest Expenses (1,341) (940) (401)Taxes Expenses for ISS,PIS and COFINS (202) (106) (96)Other Operating Income 82 6 77

Operating Income 758 359 399Non-Operating Income 1 2 (1)Income Before Tax 759 361 398Income Tax and Social Contribution (221) (123) (98)Profit Sharing (49) (25) (24)Net Income 489 213 276

Cards Basein thousands

dec/03 dec/04 dec/05

5,780

7,059

8,510

Cards Transactionsin R$ millions

2003 2004 2005

10,559

12,956

16,844

Combined RatioThe Combined ratio finished the year at 93.5%, which was down

0.8 percentage point from the previous year.This was due in

great part to lower automobile claims in the insurance segment.

Personal life and accident policies grew in 2005, reaching

1,174,000 policies at year-end.

Automobile insurance policies also registered an increase,

climbing to 848,000, while residential policies dropped by

15,000 during the year.

Note: Insurance tables include the Itaú Vida e Previdência S.A. life insurance line, but not ItausegSaúde and Gralha Azul Saúde.


Itaubanco – Insurance, Pension Plans and Annuities

Income Statement in R$ Millions

Itaubanco – Insurance, Pension Plans and Annuities 2005 2004 ChangeRevenues from Insurance, Pension Plans and Capitalization 6,733 6,255 478

Revenues from Insurance (a) 2,358 2,049 309Revenues from Pension Plans (b) 3,577 3,351 227Revenues from Annuities (c) 798 856 (58)

Changes in Technical Reserves (2,692) (2,957) 265Insurance (d) (138) (130) (8)Pension Plans (e) (1,929) (2,182) 253Annuities (f) (625) (645) 20

Expenses on Benefits and Withdrawals (g) (1,568) (1,154) (414)Earned Premiums (h = a + d) 2,219 1,919 300Result of Pensions and Annuities (i = b + c + e + f + g) 254 225 29Retained Claims (j) (1,260) (1,097) (163)Selling Expenses (k) (480) (395) (84)Other Operating Income/(Expenses) of Insurance Operations (l) (11) 39 (50)Result from Insurance, Annuities and Pensions (m = h + i + j + k + l) 723 691 32Financial Margin 536 485 52Service Fees 167 116 51Non-Interest Expenses (617) (616) (1)Tax Expenses of ISS,PIS and COFINS (103) (92) (12)Other Operating Income 12 - 12Operating Income 719 584 135Non-Operating Income 18 17 1Income Before Income Tax and Social Contribution 737 601 136Income Tax/Social Contribution (173) (141) (32)Profit Sharing (17) (9) (8)Net Income 547 451 96Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

Results, by Segment in R$ millions

Policies Sold – mass products in thousands

Composition of Premiums Earned

2005 Net Allocated Average Return EfficiencyIncome Capital on Allocated Index

Tier I CapitalInsurance 75 459 18.4% 79.4%Pensions 373 752 49.6% 25.5%Annuities 110 82 95.5% 42.2%Consolidated 547 1,293 42.8% 46.2%

Automobile Life and Personal Accident Property Risk

Transport Other

Automobile

Life and Personal Accident

Home

41.2%

30.4%

11.4%

4.2%12.8%

12.1%

5.2%10.4%

41.3%

31.1%

2005 2004

2004 2005

2,435

569

1,039

826

554

1,174

848

2,576

29

Private PensionsThe pro forma net income of Itaú’s Pensions companies reached R$373 million in 2005,

which was a 34.2% improvement over the year before.This performance was primarily

due to increased earnings from pension plans and services.

At the end of the year, technical provisions were approximately R$12 billion,up 34.9%

y-o-y.VGBL products represented 59.0% of the total technical provisions for Pensions,

while technical provisions for PGBL products took up 26.7% of the total.

On July 4,2005,the Diário Oficial da União (Brazil’s Federal Official Journal) published

Provisional Measure no.255/05,which extended the time limit for pension plan holders

to choose whether or not they wanted to use Definitive Regressive Taxation.Customers

who took out an Itaú Private Pension Plan or Itaú FAPI up to December 31,2004 were

given until December 30,2005 to make their choice.Customers getting new plans now

have until the last business day of the month subsequent to the signing date to choose

their taxation scheme.

Bonus-enhanced AnnuitiesPro forma net income from our companies offering bonus-enhanced annuities

(capitalização) reached R$110 million in 2005, down only slightly from R$112

million in 2004.

In 2005, we gave out R$30 million in cash prizes to 833 annuities clients whose

names were drawn.The table at right shows the growth in the portfolio of

Annuities bonds with monthly payments (PIC), and those with a single payment

(Super PIC).

Itaubanco – Insurance, Pensions and Annuities

Technical Provisions – Pension Plansin R$ millions

Traditional and Others

PGBL

VGBL2004 2005

8,565

4,438

2,480

1,647

7,046

3,186

1,708

11,940

Annuities Bonds Soldin thousands

Super Pic

PIC

2004 2005

3,596413

3,182

451

3,422

3,873

Assets Under Administrationin R$ billions

Managed Funds Portfolios Segment

dec/03 mar/04 jun/04 sep/04 dec/04 mar/05 jun/05 sep/05 dec/05

81.16.9

6.9 7.2 7.38.3

8.6 8.18.3

7.7

74.280.1 82.3 86.4

91.496.6 97.7

112.6

87.1 89.6 93.899.8

105.2 105.8112.3

120.313.9% 14.2% 14.1% 14.1% 14.2% 14.5% 14.2% 14.3%14.4%

Itaubanco – Investment Funds and Managed Portfoliosin R$ Millions

Itaubanco – Investment Funds and Managed Portfolios 2005 2004 ChangeBanking Service Fees 1,662 1,357 305

Mutual Fund Management Fees (*) 1,464 1,220 243 Brokerage Services 132 96 36 Custodian Services and Managed Portfolios 67 41 26

Transfer for Banking (777) (681) (96)Non-Interest Expenses (411) (372) (39)Taxes Expenses (ISS, PIS and COFINS) (80) (68) (12)Income Before Tax 394 237 157 Income Tax and Social Contribution (158) (80) (78)Profit Sharing (47) (31) (16)Net Income 189 125 64 (*) Not including income from Pension Plans Funds Management.Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses

Earnings from our Managed Funds and Portfolios segment

totaled R$189 million, a 51.4% increase from R$125 million

posted in 2004.

Total assets under administration rose from R$100 billion in

December 2004 to R$120 billion at the end of 2005.This growth

was the chief reason behind the 19.9% rise in earnings from

Fund Management, which totaled R$1,464 million for the year.

Earnings from Custodian Services grew 62.6% to reach R$67

million, while income from our Securities Brokerage hit R$132

million, up 37.5% from R$96 million in 2004.

104.0

Market share

Itaú BBA

Itaú BBA’s financial margin was R$1,740 million in 2005, a 39.4%

improvement from R$1,249 million a year earlier.

The financial margin from banking operations totaled R$1,004

million in 2005, climbing 8.8% y-o-y, thanks to a larger credit

portfolio, the maintenance of spreads, and gains from higher

value-added, structured credit transactions.

Treasury contributed R$549 million to overall earnings in 2005,

which reflected the strategies adopted by Itaú BBA in the

domestic and international markets, particularly regarding

Brazilian fixed income derivatives positions, operations involving

forex parity and positions in Brazilian sovereign debt

instruments, all of which were affected by the substantial

improvement in the country risk.

Underlining the high level of quality of our credit portfolio, 97%

of Itaú’s credit carried a risk rating of “AA”,“A”or “B”, based on the

criteria of Central Bank of Brazil Resolution 2.682. In this context,

the result from doubtful loans allowed for a R$298 million

reversal in provisions in 2005, due to a reclassification of risk

ratings, recovery of credit through renegotiated loans to the

energy and telecommunications sectors, and the effects of a

stronger real against the US dollar.

Earnings from Services totaled R$383 million in 2005, a 25.0%

yearly gain thanks to a greater number of cash management

services provided to clients, plus income from investment

banking operations.


31

Itaú BBA

in R$ Millions

Itaú BBA 2005 2004 ChangeManagerial Financial Margin 1,740 1,249 491

• Banking Operations 1,004 923 81 • Treasury 549 174 375 • Management of Foreign Exchange Risk from Investments Abroad – net of tax effects 188 152 36

Result from Loan Losses 298 210 88 Provision for Loan and Lease Losses (85) 191 (275)Credits Recoveries and Renegotiated 383 19 364

Net Income from Financial Operations 2,038 1,459 580 Other Operating Income/(Expenses) (384) (308) (76)

Banking Service Fees 383 307 77 Result from Operations of Insurance,Capitalization and Pension Plans - - -Non-Interest Expenses (681) (622) (58)Tax Expenses for ISS,PIS and COFINS (107) (69) (37)

Equity in the Earnings of Associated Companies - - -Other Operating Income 20 78 (57)Operating Income 1,654 1,151 503 Non-Operating Income 2 2 (1)Income Before Tax 1,656 1,153 503Income Tax and Social Contribution (313) (266) (47)Extraordinary Results - - - Profit Sharing (101) (59) (42)Net Income 1,242 829 414


Itaucred


ItaucredASSETS Vehicles Credit Cards Taií Consolidated

Non-account Holders

Current and Long-Term Assets 10,971 2,986 1,895 15,852 Loans 11,512 3,301 1,997 16,811 (Allowance for Loan Losses) (678) (319) (111) (1,109)Other Assets 137 4 9 150 Permanent Assets 55 5 44 103TOTAL ASSETS 11,026 2,991 1,939 15,955

in R$ Millions

ItaucredLIABILITIES Vehicles Credit Cards Taií Consolidated

Non-account Holders

Current and Long-Term Liabilities 9,950 2,569 1,748 14,267 Securities Repurchase Agreements 9,572 506 1,490 11,569 Borrowings 51 - - 51 Other Liabilities 328 2,063 257 2,648Allocated Capital Level I 1,076 422 191 1,688TOTAL LIABILITIES 11,026 2,991 1,939 15,955

Income Statementin R$ Millions

Itaucred2005 Vehicles Credit Cards Taií Consolidated

Non-account Holders

Managerial Financial Margin 1,209 936 193 2,338Result from Loan Losses (393) (192) (101) (687)

Provision for Loan and Lease Losses (505) (235) (107) (847)Credits Recoveries and Renegotiated 111 43 6 160

Net Income from Financial Operations 816 744 91 1,651 Other Operating Income / (Expenses) (249) (401) (260) (910)

Banking Service Fees 364 460 40 864Non-Interest Expenses (530) (828) (269) (1,628)Taxes Expenses for ISS,PIS and COFINS (105) (87) (32) (224)Other Operating Income 23 54 2 78

Operating Income 567 343 (169) 741 Non-Operating Income (0) 2 (0) 1 Income Before Tax 567 344 (169) 743 Income Tax and Social Contribution (159) (103) 63 (200)Profit Sharing (11) (7) (0) (18)Net Income 397 234 (106) 525 (RORAC) - Return over Level I Allocated Capital 47.0% 65.3% -91.6% 39.8%Efficiency Ratio 35.6% 60.7% 133.3% 53.3%Note: From 30-Sept-2005 company FIC is being consolidated integrally.Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

33

Itaucred


ItaucredASSETS Vehicles Credit Cards Taií Consolidated

Non-account Holders

Current and Long-Term Assets 6,127 2,243 439 8,809 Loans 6,272 2,439 443 9,154 (Allowance for Loan Losses) (262) (196) (6) (464)Other Assets 116 - 1 118 Permanent Assets 47 4 4 54 TOTAL ASSETS 6,174 2,246 443 8,863

in R$ Millions

ItaucredLIABILITIES Vehicles Credit Cards Taií Consolidated

Non-account Holders

Current and Long-Term Liabilities 5,573 1,903 412 7,888 Securities Repurchase Agreements 5,502 207 412 6,121 Borrowings - - - - Other Liabilities 71 1,696 - 1,767 Allocated Capital Level I 601 343 31 975TOTAL LIABILITIES 6,174 2,246 443 8,863

Income Statementin R$ Millions

Itaucred2004 Vehicles Credit Cards Taií Consolidated

Non-account Holders

Managerial Financial Margin 516 540 12 1,068Result from Loan Losses (86) (94) 8 (172)

Provision for Loan and Lease Losses (220) (131) 7 (344)Credits Recoveries and Renegotiated 134 37 1 172

Net Income from Financial Operations 430 446 20 896Other Operating Income / (Expenses) (161) (294) (35) (490)

Banking Service Fees 225 198 1 424 Non-Interest Expenses (344) (427) (35) (806)Taxes Expenses for ISS,PIS and COFINS (51) (65) (1) (117)Other Operating Income 9 0 0 9

Operating Income 268 152 (14) 406 Non-Operating Income (0) (4) (0) (4)Income Before Tax 268 148 (14) 402 Income Tax and Social Contribution (63) (48) 5 (105)Profit Sharing (8) (3) (2) (12)Net Income 198 97 (11) 285 (RORAC) - Return over Level I Allocated Capital 34.3% 45.4% -64.6% 35.2%Efficiency Ratio 49.3% 63.4% 279.6% 58.3%Note: From 30-Sept-2005 company FIC is being consolidated integrally.Note: Non-Interest Expenses is comprised of Personnel Expenses, Other Administrative Expenses, CPMF and other Tax Expenses, and Other Operating Expenses.

Itaucred

Automobiles2005 provided substantial growth in our automobile leasing

and financing operations, particularly those involving non-

account holder clients. Consequently, credit operations in

the Automobile sub-segment rose 83.5% to R$11,512 million

by December 31. This rapid growth was responsible for a

R$693 million improvement in the managerial financial

margin during the year, which represented a 134.5%

increase over 2004.

Due to the very nature of these operations – in which the

financed vehicle is considered a guarantee – the credit risk is

relatively low. However, due to rapid growth of the portfolio,

we made a R$267 million provision in excess of the amount

required by regulatory authorities, based on a simulated risk

assessment model of the historical behaviour of the portfolio

during downturns in the economic cycle. This contributed to

the 129.8% change in the provision for doubtful loan losses

between the periods, which totaled R$505 million in 2005.

Substantial growth in credit operations increased our

income from services related to the processing of approving

and providing financings and leasing, which reached

R$364 million, up 61.8% from 2004.

Non-interest related expenses were R$530 million in 2005, a

54.2% rise which was primarily associated with increased

business activities. Synergy gains resulting from completing

the process to integrate Finaustria and Banco Fiat were

reflected in the significant improvement in the Efficiency

ratio, which reached 35.6% in 2005, against 49.3% in 2004.


35

Taií – Consumer FinanceOur consumer finance operations are housed under the Taií

brand. In 2005, its credit portfolio reached R$1,997 million, up

350.6% year-on-year.The number of clients served hit 3.5 million

people, most of whom were low income earners. Our

development strategy was based on a single platform which is

integrated with the Bank, a medium and long-term focus on

non account-holder clients, a strong presence in the segments

in which Taií is active, and expectation to create value for

shareholders by the company’s fifth year of operation.

Itaucred

Credit cards – Non-Account holdersNet income from the Credit cards – Non-Account holders

segment finished the year at R$189 million, a figure 93.7%

higher than that of 2004.This was essentially due to the higher

number of financing transactions and our increased equity

stake in Credicard, which in November 2004 went from 33.3% to

50%.The items most strongly affected by the number of

financings and transactions were the managerial financial

margin, income from services, and non-interest related

expenses. In 2005, there was a R$68 million reversal related in

part to provisions in excess of the amount required by

regulatory authorities, based on a simulated risk assessment

model of the historical behaviour of the portfolio during

downturns in the economic cycle.With our equity share of

Credicard we continued to be Brazil’s credit card leader, enjoying

an 18.4% market share and a cards base that grew 17.7% from

10,655,000 in 2004 to 12,543,000 in 2005.The number of credit

cards transactions rose 18.7% to finish the year at R$27.8 billion.

Cards Basein thousands

Itaucard Credicard

dec/03 dec/04 dec/05

8,025

2,245

5,780

3,596

7,059

4,033

8,510

6,519

12,956

10,965

16,844

10,655

12,543

Cards Transactionsin R$ millions

Itaucard Credicard

2004 2005

19,475

27,809

Share Performance

In 2005, the price of our preferred shares (Bovespa: ITAU4) rose

41.1%, closing the year at R$56.30 per share. Our common

shares (Bovespa: ITAU3) matched this performance by climbing

34.3% to end at R$47.01 per share. Itaú Holding ADRs (ITU),

which trade on the New York Stock Exchange (NYSE), outpaced

their Bovespa counterparts by rising 59.8% to close at US$24.02

per ADR by year-end.

Itaú’s market capitalization increased 37.5%, reaching R$62.2

billion. By the end of the period the market value of preferred

shares (PN) was four times its book value. Itaú’s common and

preferred shares are traded on the São Paulo (Bovespa symbol:

ITAU3 and ITAU4, respectively), New York (ITU), and Buenos Aires

(BCBA – ITAU4) stock exchanges.

Average Daily Value of Trades

in R$ millionsBOVESPA NYSE TOTAL

2002 22 8 302003 23 12 352004 31 19 502005 59 42 101

In 2005, Itaú Holding:

a) had a 104.9% increase in average daily trading volume for

shares and ADRs;

b) made up 58.5% of the Bovespa’s average daily value of trades.

Share Price Performance – in R$

Preferred Common52-week high (a) 59.89 50.00Average 47.15 41.5252-week low (b) 37.55 33.00+/- % (a/b) 59.5% 51.5%Close (*) 56.30 47.01(*) as of Dec. 29, 2005

Market Indices

Being included in an index is an important factor for publicly

traded companies, as many fund and portfolio managers use

these indicators as guidelines when selecting stocks or

investing in portfolios consisting of securities within a

particular index. Itaú Holding shares are included in a

number of domestic and international indices, including the

IBOVESPA, IBX-100, IBX-50, IGC, ITAG, ISE, Dow Jones

Sustainability World Index and BNY Latin America 35 ADR.

In the past ten years we have paid out an average of 35% of

net income to our shareholders through Dividends/IOC

(interest on own capital). As well, in the past 15 years we have

not undertaken any capital increase while distributing over

R$8.6 billion in Dividends/IOC to our shareholders.

In 2005, the Board of Directors voted to raise the monthly

dividend payment from R$0.017 to R$0.021 per share – the

fourth consecutive yearly increase – resulting in a total

distribution of R$1,852 million (R$1.68 per share) in

Dividends/IOC.


Share Price and ADR Performance

Dividends/Interest on Own Capital (IOC)

Total Dividends/IOC – in R$ millions

Dividends/IOC per Share – in R$ per share

118

0.10 0.10 0.120.30 0.29

0.51 0.550.72 0.74

0.97

1.21

1.68

119

148 36

2

343

602

629 80

8

829 1,

108 1,

372

1,85

2

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

37

Share SplitOn October 3, 2005 we announced a share split whereby nine

new shares were issued for each common and preferred

share on the Bovespa, while on October 6 we issued four new

ADRs for each ADR on the NYSE. As a result, each ADR now

represents one preferred share. By year-end, our share capital

consisted of 1,132,941,290 book-entry shares with no par

value, comprising 605,963,420 common shares and

526,977,870 preferred shares.

Share Buyback and CancellationIn 2005, we repurchased 3.1% of our book-entry shares in

circulation. Of these, we cancelled 66.8%. In keeping with our

Operating Rules for Trading our own Treasury Shares, each

month we disclosed to applicable regulatory authorities, and

on our Investor Relations website, our monthly trades and the

minimum, maximum and average prices used in transactions

with our own shares.

Itaú’s policy of buying back shares for Treasury for subsequent

cancellation, combined with annualized earnings on

shareholders’ equity, has led to increased earnings per share

and dividends paid to our shareholders.

We also have previously repurchased shares in Treasury that

can be used for our “Stock Options Granting Plan” , with respect

to options not yet exercised by management. Explanatory Note

16 in the Financial Statements accompanying this Annual

Report provides information and details on this Plan, specifically

the average cost of acquiring the Treasury stock, as well as the

status of any options granted.

Performance CultureOur high market capitalization, combined with a substantial

increase in share liquidity and the introduction of unique

capital markets products and services, among other

achievements, reflected the strength of Itaú Holding’s

Performance Culture, which is geared to creating shareholder

value and focusing on sustainable earnings. As a result of our

long-term Performance Culture strategy, our return on equity

exceeded 30%.

Average Return on Net Equity (%) (*)(*) Annualized ROE

17.6

11.6

16.6 17

.7 19.8

34.5

29.0 33

.1

28.8 29

.7

29.2

35.3

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

31-DecAmounts 2005 2004 2003 2002 2001 2000Shareholders 51,624 48,706 54,436 57,893 52,212 62,018Outstanding Preferred Shares (in thousand) 502,434 526,468 531,471 492,837 490,179 496,434Outstanding Common Shares (in thousand) 601,575 606,243 607,967 619,633 626,015 654,764Outstanding Shares (in thousand) 1,104,009 1,132,711 1,139,438 1,112,470 1,116,194 1,151,198Preferred Shares in Treasury (in thousand) 24,544 22,510 17,507 21,691 23,416 17,160Common Shares in Treasury (in thousand) 4,388 633 5,551 350 535 11,143Total Shares in Treasury (in thousand) 28,932 23,143 23,058 22,041 23,951 28,303Total Shares (in thousand) 1,132,941 1,155,854 1,162,496 1,134,511 1,140,145 1,179,501(*) Due to the October 3, 2005 share split on the Bovespa, historical share structure figures have been adjusted for clearer comparisons.

In 2005, Itaú received important industry recognition

which reflected the efforts of our teams to build a bank of

lasting strength and trust.

Ratings

Highest rating in Brazil for financial strength –

Moody’s Investors Service

Highest individual rating in Brazil – Fitch Ratings

Recognition Received

Brand and Image

Brazil’s most valuable brand for the fourth

consective time – Interbrand

Brazil’s 10 most admired brands – 10th place overall,

and the only bank selected; 1st place in the bank

category and 2nd place for Itaucard – Carta Capital

magazine/TNT Interscience.

Performance and Efficiency

Best Brazilian Bank in Emerging Markets –

Global Finance magazine

Best Bank in Brazil – Euromoney magazine

Brazil’s Largest Financial Group – Latin Trade magazine

Brazil’s Best Financial Group – Retail Segment –

Conjuntura Econômica magazine – FGV

The Best of Dinheiro – 1st place in the banks category

– Istoé Dinheiro magazine

RISKbank – Major Retail Bank (Banco Itaú) - 3rd

consecutive time – Hors Concours – Lopes Filho &

Associados, Investment Consultants

DCI Award – Most Admired in 2005 – Insurance and

Finance sector – Diário Comércio Indústria & Serviços

2004 Public Company Award – Apimec Nacional

Public Company awards – Among the ten best listed

companies in 2004, and 1st place in the financial

sector – Agência Estado / Economática

Only Brazilian bank among world’s ten best private

sector banks, chosen by Euromoney magazine for the

second consecutive time. Itaú’s private bank went

from 4th to 3rd place and was selected the best

institution for business people.

Top Management 2005 – Best Equities Manager –

Standard & Poor’s

Best Fund Manager – Exame Guide – The Best

Investment Funds

Best Equity Fund Manager – Exame Guide – The Best

Investment Funds

Best CEO in Latin America – list of Latin America’s 50

most influential people – Roberto Setubal – Latin

Finance magazine

Insurance, Pensions and Annuities

Brazil’s Ten Most Admired Brands – 1st place in the

insurance and pensions category – Carta Capital

magazine/TNT Interscience.

ANSP Award 2005 – National Insurance and Pensions

Academy, for the Itauvida Mulher policy;

ABEMD Award, Telemarketing category: sales of

financial products and services by Ação Welcome

Itaucred (personal accident insurance).

Ratings and RecognitionItaú was selected as the best Brazilian bank by Euromoney and

Global Finance magazines. It was also recognized by Latin

Finance/Management & Excellence as the most ethical and best

managed of Latin America’s largest banks.


39

1st place in the Automobile category in the ranking

“Brazil’s best insurance companies”, Conjuntura

Econômica magazine.

Top of Marketing Seg News in Broker Expertise

Top of Mind – HR suppliers – Private Pensions – HR

Suppliers

Best Operating Margin and Highest Book Value Among

Pension Providers – Conjuntura Econômica magazine –

FGV

Coverage Award – Performance – Category

Economic/Financial Performance – Cobertura magazine

– Insurance Market

Itaú Corretora

Bovespa Award – Presented to Itaú Corretora in the

Most Shares Placed in the Retail Market category.

Human Resources

Cidadão HR Award – Itaú in the Family project

National Quality of Life Award – Momento Saúde

Program

Investor Relations

IR Magazine Brazil Awards – Best corporate governance;

Best IR Site; Best Annual Report; Best IR Executive among

IBOVESPA-listed firms – Alfredo E. Setubal and Geraldo

Soares

Institutional Investor – Best Investor Relations in Latin

America (buy-side and sell-side ranking); Best corporate

governance, Financial Institutions category; Best CEO

and Best CFO among Latin American Financial

Institutions (sell-side ranking) (Roberto Setubal and

Henri Penchas)

Top 5 in Latin America – Best IR Site – MZ Consult

Best On-line Annual Report (RAO 1) in Latin America –

MZ Consult

Animec Public Company Seal – 2004 – Animec

Social Responsibility

Most Ethical and Best Managed Bank among Latin

America’s largest banks – Latin Finance

magazine/Management & Excellence

Milennium Development Goals Award Brazil –

Organizations Category – awarded to the Itaú Social

Foundation – Federal Government, United Nations

Development Program, National Movement for

Citizenship and Solidarity

Eco Award 2005 – Consumers and Clients – AMCHAM –

American Chamber of Commerce

Top Social Award 2005 – Writing the Future Program –

ADVB (Brazilian Sales and Marketing Managers

Association)

Technology and the Internet

e-finance Award – Executivos Financeiros magazine/IT

and Banking Administration Congress (CIAB)/ Febraban

– Best Insurance Platform; Best IR Site; Overseas Branch;

Data Storage and Operation Desk

Ibest Award – Best Bank Site – Best Site in the Banks

category – Ibest – Academia

Top 3 Award – Banks Category – Ibest – Popular Vote

Ibest Award – Best Art and Culture Site and Grand Prize

– Art and Culture Category – Ibest – Academia

World Summit Award – e-culture Category – Itaú

Cultural Institute – Interactive Media Association (AMI)

and the Brazilian Chamber of e-Commerce.

Itaú was the first Brazilian company to receive the

GoodPriv@cy certificate from the Fundação Carlos

Alberto Vanzolini (FCAV). GoodPriv@cy means that the

information supplied by users, via the Web, is collected

and safeguarded in compliance with the strictest

standards for security and trust.

39

The consumer and automobile loans portfolio grew 27%

year-on-year to close at R$67,756 million. A major factor in

this increase was the demand for credit from consumer

clients, which climbed 57.0% to R$28.691 million, a

R$10,419 million y-o-y improvement. For micro, small and

middle market companies, loans grew 31.6% from

December 2004, ending the period with a R$12,784

million portfolio.

Our ongoing efforts to diversify the credit portfolio

throughout the year led to a lower percentage of the

largest debtors in relation to the overall portfolio. In

December 2004, the one hundred largest debtors

represented 28.9% of the total portfolio, against 24.0% in

December 2005.The largest debtor’s share of the total

portfolio total dropped from 1.1% to 0.8% during the year.

Consequently, loans classified from "AA" to "B" dropped

1.2 percentage points during the year, finishing at 85.8%

of the portfolio total.

Credit PortfolioSignificant portfolio growth in 2005 was the result of our

ongoing efforts in the consumer and automobile credit

segments, in addition to increased demand for personal loans.


4141

The growth in consumer client credit was also due in part

to our partnerships with the Companhia Brasileira de

Distribuição (CBD – Pão de Açúcar) and Lojas Americanas

S.A. retail chains. Earnings from the Taií consumer finance

outlets, when added to these figures, represented

approximately 8.7% of this segment’s overall growth.

Increased risk from non-account holder clients was offset

by higher returns.

In the automobile financing segment, volumes rose

80.1% year-on-year.

Credit cards grew 40.1% in 2005, thanks to Itaú’s

larger card base and our new management

agreement with Credicard.

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Credit Operations – in R$ millions

Credit Operations and Guarantees Credit Operations

8,362

8,413 11,5727,090 6,051 5,531 4,524 4,610 3,958 5,654

8,02210,818

12,325 14,414 14,05816,890

23,674

29,615

38,41938,659

47,407

60,636

11,7987,353 6,535 5,846 5,194 5,198 4,634

6,5239,057

12,20614,127

16,916 16,077

19,596

27,253

34,282

45,41444,581

53,275

67,756


Through constant attentionto ethics, respect and transparency,Itaú seeks to create value for everyonewith whom we interact.This has givenus widespread market recognitionthroughout our history.

43

16.7 millionclients areserved by Itaú

In its ongoing effort to deliver consistent, long-term

results, Banco Itaú seeks to adopt best management and

corporate governance practices which are adapted to suit

the various markets with which we interact.

Becoming a sustainable organization requires recognized

financial strength – increased earnings per share,

continuous growth without capital increases, and

reduced costs of capital – plus working with society in a

responsible way which adds value to all. Doing business

means striving for superior financial results, as well as

earning recognition from the market.

The Itaú Vision, introduced in 1992 and revised in 2005,

spells out Itaú’s long-term objectives and guides our

strategic decisions.

In 2000, the Bank formalized its commitment to ethics,

respect and transparency by introducing the Itaú Code of

Ethics.This initiative reaffirmed the values that guide our

activities. In 2005, the Code was revised and expanded.

ManagementFinancial strength and socio-environmental responsibility are

cornerstones of Itaú’s activities. In 2005, the Bank enhanced its

position by creating a new Vision and expanding the

commitments in its Code of Ethics.


45

Itaú’s principal strategies include:

Continuous, sustained growth;

Ethics in business;

Leadership in performance, emphasizing the qualitative aspects of our results;

Transparency in all our stakeholder relationships;

A highly professional corporate governance structure;

Brand management;

A strong, trustworthy image;

A strict focus on the banking industry;

The formation of strategic alliances with the market’s best partners;

Large-scale operations;

Aggressive marketing;

A trademark of quality in all our activities.

Rigorous control of image, operational and market risk;

Use of advanced technology in all operating sectors;

Building a strong capital base;

Widely diversified sources of income;

Accumulation of organizational knowledge and intellectual capital; and

Attracting, developing and retaining talent.

45

The involvement of the Board of Directors and related

committees in Itaú Holding’s amalgamated management

structure strengthens the administrative fundamentals of

an organization seeking long-term durability and

sustainability. It also ensures we keep a strict focus on the

performance of the businesses, and work to create value

for the Bank’s wide range of stakeholders through ethics,

transparency and adopting best corporate governance

practices.

The structure of the committees working under the

Board of Directors means that subjects of strategic

importance are comprehensively addressed, resulting in

directives to improve management controls. Board and

committee members always work together with every

group in the Organization to seek consensus through

dialogue and the planned vision that characterizes Itaú

management.These amalgamated groups have decision-

making authority, which lets us take quick action and

encourage inter-area communication and integration,

leading to contributions and viewpoints that add value to

the Organization.

General Shareholders Meetings

Final authority of the Organization rests with the Annual

and Extraordinary General Shareholders Meetings. Annual

meetings are legally convened in the first third of every

year, to examine and approve the financial statements

and elect of members of the Board of Directors and the

Audit Board. Extraordinary meetings are held to discuss

and legally vote on timely matters of material importance

to the Organization.

Board of Directors

The Board of Directors currently has 14 members. Since

2001, shareholders of Itaú Holding have elected Directors

who are independent of the controlling group, which

ensures a greater voice for minority shareholders in the

decisions, in addition to promoting discussion and the

exchange of ideas. Banco Itaú Holding Financeira has four

independent members on the Board of Directors: Pérsio

Arida (former Chairman of the Central Bank of Brazil),

Roberto Teixeira da Costa (first President of the CVM –

Brazil’s securities and exchange commission), Alcides

Lopes Tápias (former Minister of State for Development,

Industry and Commerce) and Tereza Cristina Grossi Togni

(former Director of the Central Bank of Brazil).

Corporate GovernanceBy adopting best practices of corporate governance, Itaú has

improved its management processes and consequently, its

business performance,ensuring that we will continue

contributing to society.


4747

Corporate Governance Structures

Shareholders’ Meetings

Board of Directors

Executive Board

TradingCommittee

InternationalAdvisory Board

Audit Board

Advisory BoardDisclosureCommittee

Internal CorporateAuditing External Auditing Internal Operations

Auditing

Senior AccountingPolicies Commission

Senior TaxationCommission

Senior Operational Risk Audit andManagementCommission

Senior EthicsCommission

Senior CreditCommission

Senior Financial Risk Management

Commission

RemunerationCommittee

AuditCommittee

Board of Directors – seated, l-r : Carlos da Camara Pestana,Tereza Cristina Grossi Togni, José Carlos Moraes Abreu, Olavo Egydio Setubal, Maria de Lourdes Egydio Villela, Fernão Carlos BotelhoBracher – standing, l-r : Roberto Teixeira da Costa, Alcides Lopes Tápias, Sergio Silva de Freitas, Henri Penchas, Alfredo Egydio Arruda Villela Filho, Roberto Egydio Setubal, José Vilarasau Salat,Persio Arida.

Audit Board

The Audit Board is elected annually at the AGM, and is

responsible for reviewing management actions,

examining the financial statements and commenting on

the Annual Report. It has been in place since 2000, and

features three independent members, one of whom is

elected by preferred shareholders.

The Regulations of the Audit Board appear on

the Investor Relations website (www.itauri.com.br),

in the Corporate Governance section >> Regulations

and Policies.

Advisory Boards

The Advisory Board and the International Advisory

Committee are comprised of Advisors and Directors of

Itaú, as well as other individuals with recognized skills in

the international financial and economic arena.They

work with senior management to evaluate the prospects

of the domestic and global economic picture, and apply

internationally accepted codes and standards, particularly

in the areas of financial and monetary policy, corporate

governance, capital markets, payment systems and

prevention of money laundering.

The Regulations of the International Advisory Committee

appear on the Investor Relations website in the

Corporate Governance section >> Regulations and

Policies.

Remuneration Committee

In 2005, shareholders at the Annual General Meeting

approved the creation of a Remuneration Committee,

featuring one independent member. It is responsible for

establishing policies for the remuneration of Directors,

based on the overall payment budget set at the AGM,

profit sharing, granting of share-purchase options and the

concession of all types of benefits and representative

monies, and must dedicate sufficient time to its functions,

responsibilities, professional reputation and value of its

services in the market. It is also responsible to guide the

remuneration policies for directors of Itaú subsidiaries.

The Regulations of the Remuneration Committee appear

on the Investor Relations website, in the Corporate

Governance section >> Regulations and Policies.

Corporate Governance


Audit Board (l-r): Iran Siqueira Lima, Gustavo Jorge Laboissiere Loyola and Fernando Alves de Almeida.

4949

Audit Committee

At the April 2004 AGM, shareholders approved the

creation of the Itaú Holding Audit Committee, in

compliance with the requirements set out in Resolution

3198 of the National Monetary Council, Resolution 118 of

the National Council of Private Insurers, and the Sarbanes-

Oxley Act (SOX) of the USA.The Committee has three

independent members: Carlos da Camara Pestana, who is

Chairman, and full-time members Alcides Lopes Tápias

and Tereza Cristina Grossi Togni, who is also the

Committee’s financial specialist. It is the Organization’s only

Audit Committee, and is one more instrument that Itaú

has created to protect the rights of its minority

shareholders.

The Committee is responsible for overseeing: (i) the quality

and integrity of the financial statements; (ii) our

compliance with legal and regulatory requirements; (iii)

the performance, independence and quality of the work

of our independent auditors; (iv) the performance and

quality of the work of the Internal Auditing Directorate;

and (v) the quality and effectiveness of our internal

controls and risk management systems.

Internal Auditing

Itaú Holding makes use of the services of its Internal

Auditing Directorate, which works independently to

conduct methodologically structured examinations,

analyses, surveys and fact finding to evaluate the integrity,

adequacy, effectiveness, efficiency and economy of the

information systems processes and internal controls

associated with our risk management.

Audit Committee (l-r): Alcides Lopes Tápias,Tereza Cristina Grossi Togni and Carlos da Camara Pestana.

The Directorate’s activities are directly supervised by the

Audit Committee, which acts under the Itaú Holding

Board of Directors, and is monitored by the Itaú Holding

Senior Operational Risk Audit and Management

Commission.

In carrying out its duties, the Internal Auditing Directorate

has access to all documents, records, systems, locations

and people involved with the activities under review.

Sarbanes-Oxley Act – Section 404 –

Internal Controls

To clearly meet the requirements in Section 404 of the

Sarbanes-Oxley Act (SOX), in the third quarter of 2004

Itaú began working on the analysis, testing and

documentation of the effectiveness of internal controls

for financial reporting and disclosure.

Our actions to implement the SOX requirements have

been meeting our goals to effect ongoing

improvements to Itaú’s Internal Controls and

Compliance System (SICIC).

Disclosure and Trading Committees

The primary function of these committees is to

administrate the Policies for Disclosing Material Acts or

Facts and for Trading of the company’s own stock. Its

scope of activities covers a range of internal actions

designed to improve information flows and to oversee

the ethical conduct of our management and staff. Among

Brazil’s listed companies, Itaú was a pioneer in the

creation and operation of corporate governance

committees. Brazilian Securities and Exchange

Commission (CVM) Instruction 358 requires public

companies to adopt a Disclosure Policy and a Trading

Policy. In addition to adopting both, Itaú took the

Instruction even further by creating a Disclosure

Committee and a Trading Committee, which were not

legally required.The constitution of these committees,

which both feature non-executive members, was

enshrined in the Articles of Association at the 2005

Annual General Meeting.

Related Internal Commissions

To coordinate its administrative role, the Executive Board

relies on the following related internal commissions:

Senior Itaú Holding Commission

Senior Ethics Commission

Senior Credit Commission

Senior Financial Risk Management Commission

Senior Accounting Policies Commission

Senior Taxation Commission

Senior Operational Risk Audit and Management

Commission

Depending on the nature of the items being reviewed by

these commissions, those managers with particular

knowledge of the subject can be invited to attend

meetings.

Corporate Governance


Learn MoreOur Disclosure and Trading Policies are available on theInvestor Relations website, in the Corporate Governancesection >> Regulations and Policies.

5151

Learn More

About the background of our senior executives in the section Corporate Governance > ManagementAbout the new Code of Ethics on the Investor Relations websiteAbout our Risk Management on the Investor Relations site, www.itauri.com.br, in the Corporate Governance section >> RiskManagement, in the Management Discussion and Analysis available in the Financial Information section and also in the 20-F Form, foundin the Financial Information section >> Filings CVM/SEC.About Investor Relations on the Investor Relations website.About our Articles of Association on the Investor Relations website in the section >> Corporate Governance > Regulations and Policies.

History of adopting best practices

Creation of the Board of Directors (1978)

Monthly Dividend Payment Policy (since 1980)

Creation of the Executive Banking Commission (1986)

First public meeting with Apimec (Association of Professional Investment and Capital Markets Analysts) (1996)

Chosen to form part of the first Dow Jones Sustainability Index (1999)

Introduction of the Corporate Code of Ethics (2000)

Creation of the Investor Relations website (2000)

Introduction of the Audit Board, which has served continuously until the present (2000)

Joins Bovespa’s Corporate Governance Level 1 (2001)

Lists its Level II ADRs (American Depositary Receipts) on the NYSE (2002)

Creation of the Disclosure and Trading Committees (2002)

Stock Options Granting Plan for CVM-registered shares, featuring detailed and transparent rules (2002)

Granting of Tag-Along rights to all preferred shareholders under the same conditions as minority common shareholders (2002)

Creation of the Audit Committee, made up of independent members (2004)

First company to adopt Operating Rules for Treasury (2004)

First company to adopt a Dividends Reinvestment Program for shareholders, subsequently approved by the CVM (2004)

Creation of the Remuneration Committee (2005)

Part of the Bovespa Corporate Sustainability Index (ISE) – in which it comprises the second largest portion of the portfolio (2005)

Introduction of the new Itaú Code of Ethics (2005)

Banco Itaú Holding considers Risk Management an

essential tool to optimize the use of capital and select

those opportunities which provide the best risk-return

ratio for shareholders.

Anticipating the requirements of the New Basel Capital

Accord, the Bank has developed a strong control

environment for risk monitoring and mitigation,

employing capital allocation models covering all risk

factors outlined by the Basel Committee.

The main risk categories

Market Risk stems from the variation in the value

of assets and liabilities caused by uncertainties

over changes in market prices and rates (interest rates,

stocks, foreign currency and commodity prices), as well

as the correlations between these variables and their

related volatility.

The main tools and measures used by Itaú to manage

risk are Value at Risk (VaR), which provides a statistical

prediction of the maximum loss in value of the Bank’s

portfolio under normal market conditions, and Stress

Test Scenarios, which determine the effects of extreme

market conditions on portfolio value, based on

optimistic and pessimistic stress scenarios as defined by

Itaú senior management.

Credit Risk can be defined as measuring the

uncertainty of collecting an amount to be repaid.

Itaú employs statistical models to determine the

economic capital to be allocated for a portfolio to

cover its credit risk, taking into account the portfolio’s

quality and concentration, as well as the credit

classification of its clients.

Risk ManagementSystematic control, combined with actions to lower our risks,

allow Itaú to identify suitable business opportunities which

can provide positive returns for its shareholders.


53

Liquidity Risk occurs when a mismatch in cash flow

causes a temporary inability to settle commitments.

Itaú’s structure is designed to monitor and analyze the

Organization’s liquidity, through statistical and financial-

economic projection modeling of the asset and liability

variables that affect our cash flow and reserve levels in

local or foreign currency, allowing us to maintain

adequate reserves and liquidity requirements in Brazil

and abroad.

Operational Risk represents the possibility of losses

resulting from internal processes, human or system

failure or inadequacies, or external events. Itaú employs

strict policies and control mechanisms that provide a

suitable environment to evaluate operational risk, which

is consistently monitored to ensure ongoing and

emergency mitigation.

Market Risk Indicators

A reduction in Banco Itaú Holding Financeira’s global

VaR in practically all risk factor areas was due to lower

volatility levels in the domestic economy, and that the

portfolios were better exposed to market conditions.

The table above consolidates the VaR of Banco Itaú

Holding Financeira, covering the portfolios of Banco Itaú,

Banco Itaú BBA, Banco Itaú Europa and Banco Itaú Buen

Ayre.The Banco Itaú and Banco Itaú BBA portfolios are

combined, broken down by risk factor.

53

Banco Itaú Holding Financeira VaR – in R$ millions31-Dec-05 31-Dec-04

Pre-set Interest 19.1 18.3TR Interest 6.3 15.6IGP-M – Inflation Rate 4.5 31.5Exchange Coupon 8.6 8.6Exchange Variation (*) 6.3 15.6Sovereign Abroad 15.7 15.5Equities 9.9 17.5Libor 1.1 0.2Banco Itaú Europa 1.6 0.6Banco Itaú Buen Ayre 0.2 0.2Effect of Diversification (56.2) (83.0)Total Global VaR (*) 17.0 40.7(*) Includes effect of fiscal adjustments.

Itaú+

Itaú

BBA

Learn More

About our Risk Management on the Investor Relations site,www.itauri.com.br, in the Corporate Governance section>> Risk Management, in the Management Discussion and Analysis available in the Financial Information section and also in the 20-F Form inthe Financial Information Section >> Filings CVM/SEC

Our Efficiency ratio rose almost four percentage points,

from 53.9% in 2004 to 50.3% in 2005.This validated our

policy of creating productivity gains and synergies, in

addition to encouraging the rationalization of resources.

Staff Expenses

Staff expenses totaled R$4,034 million during the period,

a year-on-year increase of approximately 22%. Part of

this growth was due to the effect of recent strategic

initiatives, which contributed R$293 million to this figure.

The number of employees grew by 5,720, of which 4,381

were new additions to our sales force and not directly

involved in the banking category, while 1,339 were in

the banking category and involved in the increased

number of branches and other activities of the Bank.

The expansion of the service network in excess of the

6% rate established in the September 2005 Collective

Bargaining Agreement, and the lump-sum bonus of

R$1,700 per employee granted to our bank staff, were

responsible for a R$715 million increase during the year.

Other Administrative Expenses

Other Administrative Expenses rose 15% to a total of

R$4,946 million. Expenses for data processing,

telecommunications and installations were affected by

an increase of 974 new service points, including

branches, PAB banking services outlets and ATMs.The

number of self-service transactions conducted by our

customers rose more than 14% to 2.57 billion in 2005.

Telemarketing expenses directly associated with the

increase in sales of products, as well as the development

of systems related to sales, grew R$201 million year-on-

year through expenses on outsourced services.

Other Operating and Tax Expenses

Other Operating Expenses dropped 2% year-on-year,

due primarily to lower levels of tax and pension

provisions. Increased tax expenses were due in great

part to CPMF financial transaction tax costs in

connection with the corporate restructurings that

occurred in 2005. Non-interest expenses were separated

from the effects related to our recent strategic initiatives,

and rose 3% to R$241 million.

Cost ManagementDuring 2005,we met the challenge of maintaining strict cost

controls while promoting the expansion of our business

activities in our branch network and self-service channels.


5555

Non-Interest ExpensesChange

2005 2004 2005 2004Personnel Expenses 4,034 3,320 715 22%Remuneration 2,226 1,881 346 18%

Charges 695 583 112 19%

Social Benefits 588 477 111 23%

Training 58 48 9 20%

Employee Resignation and Labor Claims 405 305 99 33%

Single Bonus 63 25 37 147%

Other Administrative Expenses 4,946 4,308 638 15%Data Processing and Telecommunication 1,181 1,077 104 10%

Depreciation and Amortization 613 604 9 1%

Premises 716 569 146 26%

Third-Party Services 832 660 173 26%

Financial System Service 372 323 49 15%

Advertising, Promotions and Publications 385 305 79 26%

Transportation 194 185 9 5%

Materials 165 143 22 15%

Security 138 128 11 8%

Legal and Judicial Suit 74 65 9 13%

Travel Expenses 49 46 4 9%

Others 227 203 24 12%

Other Operations Expenses 1,141 1,164 (24) -2%Provision for contingencies 415 534 (119) -22%

Tax and Social Securities 47 139 (92) -66%

Civil Lawsuits 333 335 (2) -1%

Others 35 60 (25) -42%

Sales - Credit Cards 250 211 40 19%

Claims 187 83 105 127%

Others 288 337 (49) -15%

Tax Expenses 337 241 95 39%CPMF 248 168 80 47%

Other taxes 89 73 16 21%

TOTAL NON-INTEREST EXPENSES 10,457 9,033 1,424 16%(-) Itaucred (1,628) (806) (822) 102%

(-) Vehicle (530) (344) (186) 54%

(-) Credit Cards - Non-Account Holders (*) (828) (427) (401) 94%

(-) Taií (269) (35) (234) 670%

(-) Orbitall (**) (632) (270) (362) 134%

Total Strategic Initiatives (2,260) (1,076) (1,184) 110%Total Non-Interest Expenses, less Total Strategic Initiatives 8,198 7,958 240 3%Efficiency Ratio 50.3% 53.9%

(*) Annual change affected by equity interest in Credicard increasing from 33% to 50%.(**) Annual change affected by equity interest in Orbitall increasing from 33% to 100%.

For the fourth consecutive time, the Itaú brand was

ranked as the most valuable in Brazil by English

consulting firm Interbrand, a world leader in brand

valuation.The analysis looked at the importance and

strength of the brand in generating future earnings,

taking into account our performance, relationships with

the market and capacity to operate in highly competitive

conditions.

The study found an 11% increase in the value of the Itaú

brand, climbing from US$1.204 billion in 2004 to

US$1.342 billion in 2005.

Among the main reasons for this rise were the

substantial expansion of consumer and commercial

credit through segmented structures that optimize the

value of each operation, more diversified sources of

income, the launching of our Taií consumer finance arm,

our partnerships with Companhia Brasileira de

Distribuição (CBD) and Lojas Americanas, and the growth

of our credit card business through an increased equity

stake in Credicard and the acquisition of Orbitall.

This recognition was also due to our ongoing efforts for

excellence in corporate management and the constant

commitment to the values that have made Itaú a

trustworthy, transparent and responsible company, one

which is geared to performance and pledged to

delivering solutions that help contribute to the

satisfaction of our clients.These attributes constitute the

basis of Itaú’s Sustainability.

In 2004, we began reformulating the exterior design and

interior layout of our bank branches, which also

strengthened the perception of the Itaú brand. In

addition to making the branches more modern,

transparent and personal, they now feature the most

advanced communication systems and bank branch

design. External signage has been carefully incorporated

into the branch architecture and the different client

service areas offer customers more comfort and

practicality.

At Itaú, brand management has been an ongoing

process for over 30 years. In 2003, it became further

refined and structured, leading to periodic assessments

of the value of the Itaú brand in our various operating

segments.We also implemented internal communication

procedures to publicize the brand’s values and practices

so they will be reflected in all our activities and ensure a

consistent image for Itaú.

Brand ManagementThe ongoing search for superior business management

and performance, in keeping with the Bank’s corporate culture

and principles of responsibility, makes the Itaú brand one of the

strongest in Brazil.


57

US$1.342 billionwas the estimated value of the Itaúbrand in 2005

57


Learn Moreabout Itaú’s segmentation in the 20-F Form,available in the Financial Information section >>Filings CVM/SEC, in the Investor Relations site,www.itauri.com.br.

The focus of Banco Itaú Holding Financeira’s activities

is designed to achieve excellence on two

complementary business fronts: the creation of products

and services to satisfy our 16.7 million clients, and the

development of technologies that bring agility, security

and convenience within an environment of over seven

billion operations a year.

Itaú’s segmentation strategy allows it to create and grow

companies, structures and systems to serve the many

areas of the financial market and our varied customer

base. Banco Itaú BBA, Brazil’s largest wholesale bank, and

Banco Itaú, which is active in all other segments, have

established key synergies and enjoy a unique

technological base which has been continuously refined

since the 1980s.

The following chart shows the business sectors where

Itaú is active:

Business PerformanceIn 2005, Itaú cleared various hurdles to maintain its strong

competitive position in the market: it expanded its service

network, improved its products and services and provided its

clients with access to more varied solutions.

59

Multiple Business Lines

Itaú Holding

Banco Itaú

Banking Products andServices

Credit Cards

Insurance, Pensionsand Annuities

Managed Funds andPortfolios

Corporate Operations &

Investment Banking

Taií

Automobiles

Credit Cards

Large Corporations

Insurance and Pensions

Cards and Financing

Institutional InvestorsPublic SectorMiddle Market Companies

Small CompaniesBranches

Branches

ConsumerFinance

Managed

Micro Companies

Annual Sales R$10 million – R$100 million

Investments R$2 million

Earnings R$5,000/mo

Earnings R$3,200/mo

Earnings R$3,200/mo

Annual Sales R$500,000 – R$10 million

Annual Sales less than R$500,000

Service Segmentation

Note:The Itaucred segment primarily reflects loans provided throughchannels for non-account holder clients.

Itaucred

Banco Itaú BBA


Itaú’s unparalleled performanceis the result of a consistent strategycovering the segmentation of itsbusinesses and quality and diversity ofits products and services, all supportedby a solid technological base.

61

2.6 billionself-servicetransactions wereconducted in 2005


Profile

Banco Itaú’s service network features 4,558 facilities,

including branches, banking services outlets, electronic

service outlets in companies and in Taií locations, plus

22,023 ATMs. With shareholders’ equity of R$15,560

million and R$151,241 million in assets, we are active in

domestic and international financial and capital

markets, and have a major presence in every aspect of

the local economy.

Over the past 20 years we have built up a segmentation

strategy which has allowed Itaú to develop structures,

products and services designed to meet the specific

needs of its different client profiles and sizes.

One of the main challenges for sustainable

development is adopting strategies that allow for

organic growth. On this basis, it is essential to have a

service network with a strong presence, as our branches

represent the principal relationship channel, primarily in

the retail banking segment.

In 2005, Itaú opened a record number of branches – 110

new units. It also maintained its market share, even as

competitors expanded their own operations. For 2006,

we will continue on the same path and plan to open

another 160 branches.

The efficiency of Banco Itaú’s service structure and the

ongoing refinement of its products and services are

backed by constant investments in technology. In 2005,

IT-related investments exceeded the R$1,225 million mark.

During the year, customers conducted 2.57 billion self-

service transactions.The ATM network handled over 40%

of the more than one billion convenience transactions

made directly by customers. Internet visits, available to

over four million registered clients, totaled 645.7 million. In

all, 1.46 billion transactions were conducted by telephone,

fax, internet, automatic debit and debit card purchases.

In 2005, the market share of Itaú’s loans portfolio rose 1.2

percentage points to 9.6%.To sustain this growth, the term

deposits portfolio reached a 7.5% market share, up two

percentage points y-o-y. Banco Itaú maintained its steady

share in the other deposits portfolios, even in a highly

competitive sector that sought to respond actively to the

Brazilian public’s demand for credit.

The following table shows Banco Itaú’s Pro Forma figures.

Banco Itaú S.A.By investing approximately R$1,225 million in technology,

Itaú now has one of the industry’s most efficient self-service

banking systems.

63

Banking

Consumer Clients

Retail

One of Banco Itaú’s primary business areas – and surely

its most visible – is the retail segment, particularly in the

consumer client and micro companies sectors. Its

operational base is founded on a substantial service

network, numerous access channels and a wide range

of products and services. Its 12 million clients (checking

and savings account holders) are handled through

3,165 service points.

This segment requires constant attention to the quality

of customer service, which is present in all forms of

relationships with the Bank, particularly through self-

service channels including Itaú ATMs, Itaú Bankfone and

Itaú Bankline (internet).

Itaú branches offer all the traditional retail banking

products such as checking and savings accounts,

overdraft protection, personal and consumer loans,

credit cards, home, life and accident insurance,

automobile financing, private pension plans, asset

management and bonus-enhanced annuity plans.

Itaú Personnalité

A pioneer in Brazil’s high income client banking sector,

Itaú Personnalité was created in 1995 as Banco Itaú’s

segment which specializes in serving consumer clients

earning over R$5,000 a month, or having investments in

excess of R$50,000.

To provide its unique services, Itaú Personnalité offers a

large, diversified portfolio that includes a range of

investment options – stock, financial products, funds and

pensions – in addition to loans, insurance and other

services. Personnalité clients requiring management of

their own assets receive financial advice from their

R$248 billionrepresents Itaú’s non-earmarked,raised and managed own resources

(1) Includes staff expenses, otheradministrative expenses, CPMF andother tax expenses, and otheroperating expenses.

(2) Reflects Banco Itaú’s pro formaeconomic capital, based onmanagement criteria for allocatingcapital from Itaú to its business units.

(3) Not including Endorsements andSureties

Pro Forma Figures (in R$ millions) 2005 2004 Change %IncomeGross Income from Financial Operations 6,055 6,675 (9.3)Income from Services 6.500 5,439 1.5 Non-interest expenses (1) 8,073 7,587 6.4 Operating Income 4,590 4,637 (1.0)Net Income 3,179 3,218 (1.2)Allocated Capital – Tier I (2) 7,603 6,868 10.7 Average Earnings on Allocated Capital (%) 43.1 46.9 (8.3)Assets and LoansTotal Loans (3) 25,810 20,582 25.4 - Banking 22,193 17,859 24.3 - Credit Cards – Account holders 3,616 2,723 32.8 Short-term investments 33,498 28,022 19.5 Marketable Securities 22,716 18,303 24.1 Deposits 50,761 41,703 21.7

The main highlight of 2005 came from a private banking

survey conducted by Euromoney magazine, which

appeared in its January 2006 issue, showing that for the

third consecutive time Itaú Private Bank was the only

Brazilian institution among the world’s five best private

banks which operate in Brazil. Itaú has improved steadily in

this annual ranking, which covers 100 institutions, finishing

fifth in 2003, fourth in 2004 and third in 2005. As a world

class private bank, Itaú was also chosen as the best Private

Bank in Brazil for business people and the best for clients

with one to ten million dollars in assets.

In the fourth quarter of the year, our second customer

satisfaction survey showed we have considerable brand

loyalty: 91% of our clients are satisfied with Itaú Private

Bank, who mentioned personalized service, strength and

good financial management as their principal criteria.

To ensure the continuous improvement of our team, and

consequently maintain our high levels of customer

satisfaction, we formed a partnership with business school

IBMEC-SP to develop a tailored extension course on

private banking operations.

Banco Itaú S.A.


Relationship Manager and by meeting with experts in

these markets.

Itaú Personnalité currently serves 200,000 clients through

85 stand-alone branches and service areas in six special

Itaú branches in major cities nationwide, all of which also

offer the convenience of Banco Itaú ATMs.

For 2006, we plan to continue expanding the Itaú

Personnalité branch network and developing practices

and processes designed to maintain the high levels of

satisfaction enjoyed by the clients served in this segment.

Itaú Private Bank

Operating in the segment dedicated to offering financial

and wealth management advice to high net worth

individuals, Itaú Private Bank maintained its leadership

position in the Brazilian market, closing the year with

R$14.9 billion in assets under administration. In the

international private banking segment, Itaú is the

commercial representative of Banco Itaú Europa

Luxembourg, which manages R$6.7 billion in assets.

6565

Commercial Clients

Banco Itaú is continuously refining its segmentation

strategy, which has allowed it to maintain its relationships

with micro, small and middle market companies through

specific service structures for each. It employs

independent areas and infrastructure, as well as managers

who are specially trained to offer solutions and detailed

advice on the products and services that best meet the

particular business demands of each segment.

At year-end, the process was given fresh impetus with the

establishment of a new business structure designed to

service micro retail companies.

Micro companies

In 2005, we created specialized units to service

companies with yearly sales of up to R$500,000. Clients in

this new segment now receive exclusive attention in the

branches where they are commercial account holders,

and typically, where they have a consumer client account

as well.The creation of these new business units allows us

to work much more closely with our smaller commercial

clients, in addition to better responding to their needs

and offering more suitable solutions to their companies.

We launched the project by opening 150 units in greater

São Paulo in 2005, and plan to open branches in the

interior of São Paulo state in 2006.

Small Companies

Our relationship with small companies is

conducted through 189 specialized units which serve

approximately 115,000 companies with yearly sales of

R$500,000 to R$10 million.

Small company credit at year-end totaled about

R$2.7 billion, or 4.0% of the overall loans portfolio.

Middle Market Companies

For middle market clients with yearly sales above R$10

million, we offer a full range of specialized financial

products and services including cash management,

investments, derivatives, insurance, private pension plans,

forex and trade finance.

To strengthen our presence in larger regional markets, we

opened 78 additional business platforms to provide

tailored service to over 32,000 clients.We also expanded

our commercial team by 28%, adding 380 highly qualified

managers to offer rapid decisions and competitive

solutions.

During 2005, approximately 250 large companies

migrated to Banco Itaú BBA, in keeping with Itaú’s

segmentation strategy. On an adjusted basis, the loan and

financing portfolios grew 22.4% to R$8.4 billion, thanks

primarily to medium and long-term vehicles such as

leasing and working capital. In turn, funds grew 31% to

R$7.7 billion (including demand/floating deposits),

particularly from repayments.

With respect to social responsibility, the "Know Your

Client" program strengthened our checking account

opening procedures to prevent accepting client

companies which have socially harmful activities such as

drug trafficking, illegal arms trading, dealing in stolen

goods and money laundering, among others.

In the environmental area, we continued to publicize

information, trends and best practices to help us analyze

environmental risk and assess environmental aspects to

classify the credit risk of clients with yearly sales

exceeding R$70 million.

For 2006, we plan to launch new products with special

benefits and conditions for environmentally responsible

companies, in a bid to encourage other clients to also

adopt sustainable practices.

Institutional Clients

The specialized structure we created in 2001 has

been responsible for the tailored service our

institutional clients receive, and for Banco Itaú

maintaining its leadership in providing services to this

segment in 2005, which exceeded R$178 billion, or

yearly growth of 18.7%.

In 2005, there was considerable growth in the banking

products and services offered to these clients, as well as

in investment funds and managed portfolios, which

reached R$2.1 billion.

Public Sector

With a structure dedicated exclusively to all areas of the

public sector, including federal, state and municipal

levels of the Executive, Legislative and Judicial branches,

Banco Itaú’s public sector business is substantial,

particularly in the states of Rio de Janeiro, Minas Gerais,

Paraná and Goiás, where we had purchased previously

state-owned banks. Our strategy for this segment

focuses on offering quality products and services

through our business structure and service network,

which has allowed Banco Itaú to expand its Public

Sector operations to Brazil’s north, northeast and

southern regions.

Banco Itaú S.A.


18.7%growth of the institutional client segment in 2005

67

Paraná

Through its acquisition of Banestado in October 2000,

Itaú received the right to provide financial services to

the state of Paraná until October 26, 2005. On June 17,

2002, the Paraná state government extended the term

of the contract – in compliance with State and

Privatization law – until October 26, 2010. This measure

was taken to obtain funds so that the State could meet

its repayment obligations to the federal government.

On September 27, 2005, through State Decree 5434, the

Paraná state government revoked the extension,

transferring the provision of services to other financial

institutions.To protect its rights, Itaú resorted to legal

action, convinced that it had acted legally, ethically and

in the best interests of the public. Confident that the

courts will find in its favour, Itaú continues to provide

civil servants, taxpayers and suppliers to the Paraná state

government with unbroken, disruption-free service.

67

The Bank uses platforms that act separately from the

retail branch environment, offering exclusive teams of

specially trained managers which offer customized

solutions in tax collection, exchange services,

administration of public agency assets, payments to

suppliers and payroll for about 1.7 million civil servants.

In 2005, Itaú implemented projects to support its

sustainable growth strategy, bringing civil servants a

complete package of financial products and services

and all the convenience of our service network.

São Paulo

Through a public bidding process which concluded on

September 5, Banco Itaú presented the best proposal and

won the financial asset management and payroll contract

for the City of São Paulo (PMSP), which has the country’s

fifth largest public sector budget.

This brought Banco Itaú 210,000 new clients in the city of

São Paulo, with no need for any substantial financial

outlay, given our extensive network and strong

technology base in the city. As a result, we expect about a

3% increase in the amount of business in the Bank’s retail

branch segment.

Home Loans

Throughout 2005, Banco Itaú sought to play an

active role in refining the Brazilian real estate financing

model by contributing to the creation of laws that can

provide legal protection in areas such as chattel

mortgages, uncontested financing payment amounts,

and electronic property registration, among others.

Better laws should lead to more credit becoming

available for home financing.

By working on reducing loan defaults by renegotiating

payments in arrears, the Bank sought to ensure the

borrowers’ capacity to pay, the preservation of their own

home and return of capital invested.This led to the

granting of credit to new customers, which was a

positive step in reducing the country’s housing shortage.

Thanks to lower interest rates and better laws covering

real estate financing, the amount of home loans granted

in 2005 was twice that of 2004. For 2006, we expect

continued growth in this area, leading to new business

opportunities.

Credit Cards – Account holders

Through Itaucard, Redecard and Orbitall, which handle

account holders, plus Credicard for non-account holders,

Itaú has strengthened its operating strategy in the credit

card segment, which is one of the fastest growing

consumer client products in the financial market place.

Itaucard

In 2005, Itaucard surpassed the 8.5 million mark in

cards issued, a 21% year-on-year increase, while sales

rose 30% to R$16.8 billion in the same period.

Average monthly purchases and withdrawals were

over R$1.4 billion.

In addition to opening new sales channels, another key

factor in Itaucard’s performance was better sales to

non-account holders, whose portfolio topped 1.4

million cards. Thanks to a new management

agreement with Credicard, Itaucard became the

country’s leading credit card brand, achieving a 22%

market share in sales.

Another highlight during the period was sales of

Itaucard Business cards to small and middle market

companies, which reached 57,000 MasterCard and Visa

brand cards issued.

Itaucard’s Installment Payment Plan, which allows card

holders to pay off their card in up to 12 payments at

reduced interest rates, helped grow the portfolio’s

financing portion by 11%.

Itaucard supported the consolidation of our

partnership with Companhia Brasileira de Distribuição

(CBD – Pão de Açúcar), which led to the creation of

Financeira Itaú CBD. The Extra Itaucard card, which

carries the MasterCard and Visa brands, began being

sold in the first half of the year and subsequently

gained more than 148,000 clients. In addition to CBD,

Itaucard also established a partnership with the Lojas

Americanas chain to issue credit cards in 2006.

Banco Itaú S.A.


69

21%growth in the number of credit cards from 2004

69

Redecard

In 2005, management of the relationship company for

Redecard retailers, which was previously undertaken by

Citigroup, began being handled by the three partners:

Itaú, Citigroup and Unibanco. This ownership structure

remained unchanged: each partner has a 32% equity

stake in the company, and MasterCard has 4%.

Redecard finished the year with 901,000 affiliated

establishments in Brazil, up 9% y-o-y, while sales rose

31% to R$67 billion.

Itaú’s concern for satisfying the needs of its customers

led to a joint effort with Procon (Brazil’s consumer

protection agency) to help resolve customer

complaints. An evaluation of every occurrence and

identification of the source of the problems allowed

Itaucard to reach 97% effectiveness with its customers,

demonstrating a high rate of satisfaction in how we

handle these situations.

For 2006, Itaucard will take on the challenge of

improving its credit cards results even further.

Learn More about Credit Cards by visiting www.itaucard.com.br

Orbitall

After acquiring 100% ownership of Orbitall, Itaú took

over exclusive management of the company in 2005.

Orbitall is Brazil’s leader in credit card processing,

and continues to independently provide processing

services to all its clients. In 2005, the company won

the contract to process credit cards from retailer

Casas Pernambucanas, helping it reach a total of

21 million credit, debit and private label cards, for a

28% y-o-y increase.

Insurance, Pensions and Annuities

Itaú Seguros and its subsidiaries finished 2005 with

R$2,420 million in premiums earned, a growth of 15.1%

for the year.

To serve the automobile insurance market, Itaú Seguros

has 46 Rapid Service Centres (CARs) available to clients

with damage claims. CARs facilities provide policy holders

and brokers with high quality services which combine

speed with modern technology.The Automotive

Consultant, introduced in 2004, is available in 14 CARs

units, and offers a free evaluation to identify problems in

the car and give a cost estimate for repairs.

In 2005, automobile claims reached 68.0%, a 3.4

percentage points drop from 2004, due primarily to the

price adjustments and portfolio streamlining we

implemented at the start of the year.

In April 2005, Itaú Seguros began its “Look After it Well”

endomarketing program, which was designed to

consolidate the company’s new “Made to Look After You”

positioning and incorporate it into the daily activities of

its staff, partners and service providers.Throughout the

year we conducted various informative and involvement

actions to publicize the “Care”concept.

Life insurance, pensions and bonus-enhanced annuities

delivered exceptional results in 2005: R$12 billion in

pension reserves and one million insurance policies in the

portfolio. Itaú Vida (Life) and Previdência (Pensions)

reached R$3,173 million in earnings, through a 14.2%

increase in insurance and VGBL (Free Benefit Generator)

plans sold.Technical provisions for pensions and life

insurance totaled R$12,260 million. Annuities provisions

during the period reached R$1,111 million, while R$30

million in cash bonuses were distributed to annuity policy

holders who names were drawn.

The pensions portfolio grew 1.5%, giving Itaú a record

15.7% market share. Insurance premiums sold had a slight

0.3% rise, while the bonus-enhanced annuities portfolio

market share declined 0.8%, due to our focus on credit

products during the period.

Subsequent Event

On January 30, 2006, Banco Itaú Holding Financeira and

XL Capital Ltd. (XL), signed a Memorandum of

Understanding to create a new insurer in Brazil that will

operate in the market for high risk commercial and

industrial insurance.

Banco Itaú S.A.


71

In May 2005, Banco Itaú’s asset administration, which

manages our clients’ personal funds, retained its AM1 (bra)

rating, the highest level of asset management quality

issued by Fitch Ratings.

In the overall ANBID (Brazil’s National Investment Banks

Association) ranking for management of third-party

assets, Itaú Private Bank’s funds under management

placed first, thanks to approximately R$13 billion in the

portfolio and an 18.5% market share.

October 2005 saw the issue of the second tranche of

Brazil Index Fund stock (PIBB – an exchange-traded fund),

which reached almost R$2.3 billion.This allowed Banco

Itaú, as PIBB manager, to move to R$10 billion in shares

under management, consolidating its position as Brazil’s

largest private sector equities manager.The PIBB is traded

on the São Paulo Stock Exchange, and seeks returns

similar to those of the IBrX-50 Index.

23.1%growth in investment funds managed by Itaú in 2005

71

Pro Forma Figures (in R$ millions) Insurance Life and Annuities Consolidated (*)(non-Life) Pensions

2005 2004 2005 2004 2005 2004 2005 2004 Ch.(%)Net Income 75 69 373 278 110 112 547 451 21.2Paid-in Premiums and Earnings from Pension and Annuity Plans 1,833 1,583 465 353 177 204 2,473 2,144 15.4Technical Provisions 1,268 1,124 12,260 8,854 1,111 1,045 14,640 11,023 32.8

(*) Some Consolidated figures may not add up as they do not include all inter-company transactions.

Learn More

about investment funds by visiting www.itau.com.br in the sectionInvestments >> Fundsabout the fund market in Brazil by visiting www.anbid.com.brabout ratings by visiting www.fitchratings.com.br

XL is a leader in providing insurance, reinsurance and

financial products and services for commercial and

industrial corporate clients and insurance companies.

The synergy between Itaú and XL should bring

advantages to our clients and insurance brokers.

Fund and Portfolio Management

By year-end, Itaú had R$120,287 million in total assets

under administration, a 20.6% year-on-year increase, while

its managed investment funds climbed 23.1% to

R$112,573 million.

This achievement was due to the performance of our

team of investment consultants, whose financial market

advisory skills assisted our clients in their investment

decisions.This team worked with over 39,000 customers

in 2005, in the Retail, Personnalité and Small Company

segments. Our relationship with investors was also

conducted through Itaú Investfone, a telephone

investment advisory service which handled more than

300,000 calls from clients.

Concurrent with falling interest rates, investors have

begun to migrating to more sophisticated, higher value-

added products. In preparation, Banco Itaú has invested

in the development of equities and hedge fund teams,

and created more sophisticated funds such as those

introduced by the Personnalité segment during the year.

Itaú Corretora de Valores

Itaú Corretora (the Group’s securities brokerage arm)

solidified its highly competitive positioning in the capital

markets as one of the leaders in all investment products

rankings.To reach its goal of becoming Brazil’s top

specialist, offering high quality analysis and the market’s

strongest distribution, Itaú Corretora made major

investments in 2005, in addition to growing its presence

in the international market.

2005 Highlights:

Public Offers of Shares: Itaú Corretora strengthened

its analysis and distribution areas and was an active

participant in capital markets operations

coordinated by Banco Itaú BBA, such as Energias do

Brasil, PIBB and Tractebel.

Analysts Rankings: five analysts appeared in the

Institutional Investors Brazil international ranking, the

market’s most important such designation.The Itaú

Corretora team also placed first in the Institutional

Investor magazine rankings, based on a survey of

Brazilian institutional investors.These two rankings

represent the recognition of Itaú’s skilled professionals

by domestic and international investors.

Bovespa and BM&F: On the Bovespa (São Paulo Stock

Exchange), Itaú Corretora handled R$48.9 billion in

transactions, up 41.6% from 2004, finishing the year

ranked third, while having the highest volume of

trades among brokerages offering analysis.

On the BM&F (Brazilian Mercantile & Futures

Exchange), trades doubled over 2004, with more than

28 million contracts arranged, placing the firm fourth

in this market with a 7.9% market share. In the Home

Broker segment, Itautrade’s business rose 31.6% y-o-y,

while its 9.2% market share was third best in the

Brazilian rankings.

Banco Itaú S.A.


73

Domestic Fixed Income: Itaú Corretora handled the

distribution of 18 operations coordinated by Banco

Itaú BBA, remaining in first place in the November

ANBID rankings, thanks to R$8.1 billion in business and

a 20.9% market share during the period. Combining

the eight FIDC (credit receivables funds) operations

undertaken with debentures from related companies

(the latter are not included in the ANBID rankings), the

total value of its transactions was R$12.9 billion.

International Fixed Income: Itaú Corretora was

involved in US$28 billion worth of transactions, up

103% for the year. Highlights included its role as Co-

Manager of the international market’s first Brazilian

Treasury issue in reais.

Itaú Corretora grew substantially in all its business areas in

2005, and is well positioned to be highly active in the

capital markets in 2006 in tandem with Banco Itaú BBA

and Banco Itaú’s client investment channels.

Capital Markets Services

As a pioneer in the development of services for the capital

markets, Itaú has overcome considerable challenges in the

past 30 years to build up solid leadership as Brazil’s largest

custodian (as ranked by ANBID), and the largest back office

services processor for Brazilian capital markets products.

73

The support of advanced technology has been

fundamental in our achieving a number of ISO 9001

certifications, while maintaining the strength of the

operation is ensured through our use of sophisticated

compliance and contingency procedures involving

systemic, operational and physical processes.

The trust, quality and precision of our services allows us to

serve a large number of clients representing over 1,300

contracts in all capital markets segments, giving us a total

of R$1.1 trillion in assets being processed.

2005 Highlights:

Expansion of our Servicer and Custodian activities for

FDICs (credit receivables funds).

Growth of Representation and Custodian services for

non-resident investors (National Monetary Council

Resolution 2689/2000).

Growth in Bookkeeping services for shares, debentures

and promissory notes, through a recovery in taking

companies public through share offerings.

For 2006, our goal is to increase business volumes and

close new contracts, consistent with the development of

Brazil’s economy and capital markets.

With 28 million contracts arranged,Itaú Corretora doubled its trades on theBM&F in relation to 2004


Automobiles

By year-end, financing to purchase automobiles

represented 45% of Banco Itaú’s total loans to consumer

clients.The substantial increase in our market share put

this segment in second place among all of the Bank’s

consumer credit business activities.

In 2005, new financings and vehicle leasing totaled

R$9.7 billion, up 75% from 2004 and giving the Bank a

19% market share.The credit portfolio reached R$11.2

billion, whose 80% rise was well above the market

average due to combining Banco Itaú’s technology with

the use of all the business tools which were

incorporated into our systems in 2003 and 2004.

The combination of these factors led to 70% growth in

operational efficiency, increasing the share of total

financings contributed by our 11,000 registered retailers

and automobile dealers. Currently, 97% of these loans

are handled via the internet, bringing greater speed and

security to the loan approval process.

Banco Fiat’s efficiency gain was even greater, due in part

to its leasing activities, which also played a role in the

overall increase of financings in the Fiat network. At

year-end, Banco Fiat had financed 60% of all new car

sales in the Fiat network.

Consórcio Fiat is integrated into the Itaú system, and

closed the year with 60,000 active clients who enjoy

new facilities such as application approvals, bidding and

invoicing conducted through the internet, plus a range

of services provided through the service center.

Itaucred OperationsImportant advances characterized the Bank’s activities

in the automobile financing,credit cards and consumer

finance segments.Significant growth in these areas in

2005 also led to job creation.

75

A structure for heavy vehicles was implemented in

2005 in Brazil’s south, southeast and mid-west regions,

extending to the north and northeast in 2006.This

segment represents 6% of total financings.

Banco Intercap’s know how of operating in the sub-

prime segment was incorporated into the credit and

operations platforms, contributing to 10% of our

automobile-related business.

Cross-selling of insurance and credit card

products generated R$40 million in earnings during

the period, and our activities in these areas will be

increased in 2006. In this particular business area, our

Efficiency ratio was 40%, while ROE (Return on Equity)

reached 50% in 2005.

80.1%growth in the automobile finance segment

Credit Cards – Non-account holders

Credicard

In partnership with Citigroup, during 2005 Itaú began

to split up the branding of the cards issued by

Credicard, a process which should be finalized in the first

half of 2006. Almost all Credicard credit cards were

substituted for new ones the period July to December,

2005.The traditional card base, made up of six million

cards, already has the Credicard brand associated with

the Itaú or Citigroup brands.The rights to issue co-

branded Credicard cards were allocated among the

partners, resulting in Itaú receiving the TAM, CBD and

Fiat cards portfolios.

In October, Itaú and Citigroup presented Credicard

employees with the new operating structures and

staff allocation for their credit card areas, expected to

come into effect after the branding split up.The

procedure was conducted without affecting Credicard’s

normal business activities, which generated R$22 billion

in 2005, up 24% from 2004. Credicard closed the year

with 8.3 million credit cards in its portfolio, a 12% year-

on-year increase.


Credicard’s shared management will remain in place until

the date of the branding split up when its client base and

credit cards, as well as the assets and liabilities of the

company, will be transferred to the equity partners.

After the transfer, Itaú will have 12.3 million credit cards

and R$28 billion in sales, making it the market leader.

In 2006, Itaucard’s operations will be combined with

those of Credicard to help achieve a number of

synergies, such as offering Credicard cards to non-

account holders, generating new partnerships, greater

focus on the Corporate Business segment and more

diverse distribution channels for Itaú.

Taií – Consumer Finance

For Itaú, 2005 was an accomplishment-filled year in the

consumer finance segment.Throughout the period, the

Bank consolidated itself after the first wave of expansion,

begun in 2004, making us a leading competitor in this

market.

Consumer finance operations – housed under the Taií

brand – closed the year with 3.5 million clients served in

648 outlets, and receivables of R$718 million.

These results were due to several factors, including:

The expansion of the Taií outlet network, with

130 points strategically distributed in the states of

the Rio de Janeiro and São Paulo, high productivity

sales and a focus on earnings, based on strict risk

and cost management.The goals for 2006 are to

close the year with 300 Taií outlets nationwide, with

particularly strong growth in Brazil’s northeast and

south, and increase the range of financial products

offered to clients.

Itaucred

Taií outlets100% Itaú

50% CDB and 50% Itaú

FAI 50% LASA and 50% Itaú

24%growth in Credicard sales in relation to 2004

7777

Learn Moreabout our increased equity stake in Credicard and acquisition ofOrbitall by visiting our Investor Relations site: www.itauri.com.br inthe section Announcements >> Material Facts

Pro Forma Figures (in R$ millions) 2005 2004 Change %ResultsGross Income from Financial Operations 1,651 896 84.3 Income from Services 864 424 103.8 Non-interest expenses (1) 1,628 806 102.0 Operating Result 741 406 82.7 Net Income 525 285 84.5 Allocated Capital – Tier I (2) 1,688 975 73.2 Average Earnings on Allocated Capital (%) 39.8 35.2 13.0 Assets and LoansTotal Loans (3) 16,811 9,154 83.6 Automobiles 11,512 6,272 83.5 - Credit Cards – Non-account Holders 3,301 2,439 35.4 - Taií 1,997 443 350.6

(1) Includes staff expenses, otheradministrative expenses, CPMF andother tax expenses, and otheroperating expenses.

(2) Reflects Banco Itaú’s pro formaeconomic capital, based onmanagement criteria for allocatingcapital from Itaú to its business units.

(3) Not including Endorsements andSureties.

checking privileges in Lojas Americanas Taií outlets, in

addition to introducing private label and co-branded

credit cards.

Steady, sustainable growth of our consumer credit

operations strengthens Banco Itaú’s strategy to serve

new consumer segments.

As a result of our strategic decision to increase the

amount of credit offered to the lower-income market,

Taií has became an important employer for thousands

of young people with little or no previous work

experience and no access to formal employment.

An increased Taií presence in the network of stores

owned by Companhia Brasileira de Distribuição

(CBD), offering unique financial products and services

exclusively to Pão de Açúcar, Extra, Extra-Eletro,

CompreBem and Sendas customers. Playing a

continuing role in the expansion policy of FIC

(Financeira Itaú-CBD), which in 2005 focused on

converting the client base and setting up 308 points

of sale under the Taií brand. In 2006, we seek to

maximize our use of space inside CBD stores and

grow our customer portfolio.

The partnership with Lojas Americanas S.A., which

has allowed us to market financial products and

services exclusively to Lojas Americanas, American

Express and Americanas.com customers, using the

most advanced equipment and modern facilities. In

2006, we will be offering personal loans with


In 2005, various actions wereundertaken to consolidate Banco ItaúBBA’s leadership as the country’s largestwholesale bank, such as strengtheningits activities in investment banking andincreasing the number of bankingservices it offers.

79

1,100corporate clients areserved by Itaú BBA’sspecialized team


Profile

Itaú BBA operates in the large corporations segment,

offering a complete range of financial products and

services. With a highly qualified staff and supported by a

solid operational structure, Itaú BBA has established

close relationships with about 1,100 client companies,

allowing it to develop products and services customized

to their needs.

The products and services it provides include payroll

processing, advisory activities in mergers and

acquisitions, structured finance in Brazil and abroad, and

cash management products such as collection and

checking accounts.

Banco Itaú BBAAs part of its overseas expansion strategy, Itaú BBA

opened an office in Shanghai. It is Brazil’s only private

sector bank with a presence in the increasingly

important Chinese market.

The year was characterized by an ongoing series of

client relationship improvement initiatives to

consolidate Itaú BBA as a major Brazilian wholesale

bank. In particular, these included strengthening its

investment banking activities, growth in structured

finance and derivatives, increasing the supply of banking

services, and expanding its overseas operations.

Investment Banking

Itaú BBA has pinpointed growth in the investment

banking market as one of its priorities, with the

objective of becoming Brazil’s leading investment bank

in three to five years. The bank’s activities will be

focused on the fixed income market, where it has

traditionally been strong, as well as the equity markets

and mergers and acquisitions. In keeping with this

goal, 2005 was characterized by valuable hirings in the

investment banking team.

8181

R$16.9 billionin fixed income transactions werecoordinated by Itaú BBA

81

In 2005, Itaú BBA led fixed income operations totaling

R$16.9 billion, of which R$13.2 billion were in

debentures, R$3.1 billion in FIDCs (credit receivables

funds), R$570 million in Promissory Notes, and R$30.5

million in Real Estate Receivable Certificates (CRIs). As a

result, excluding transactions between financial

institutions, the Bank placed first in the Anbid (National

Association of Investment Banks) rankings for fixed

income origination and distribution, with a 21.0%

market share in origination and 20.9% in distribution.

In the equity markets, 2005 saw a number of major

operations in which Itaú BBA played a significant role.

Of particular note were the R$1,184 million initial

public offering (IPO) for Energias do Brasil S.A. (EDP),

and a new issue of Bovespa Brazil Index stock (PIBB –

an exchange-traded fund) totaling R$2,285 million,

which was the largest offering undertaken in Brazil in

the past two years. The Bank was also arranger and

bookrunner for the R$1,051 million secondary public

share offering for Tractebel Energia. In the Anbid

rankings, Itaú BBA placed second and third in equity

origination and distribution, respectively, with market

shares of 15.2% and 10.3%.

During 2005, Itaú BBA performed important financial

advisory services in mergers and acquisitions and

corporate restructuring. These included advising Cia.

Brasileira de Distribuição in its acquisition of the

Coopercitrus supermarket chain; Copersucar in the sale

of Açúcar União to Nova América; the Carlos Lyra

Group in the sale of Profertil S.A. to France’s Roullier

Group; the controlling shareholder of Panex in its sale

of Panex to SEB; and Suzano Petroquímica S.A. in its

US$315 million acquisition of Basell International

Holdings BV’s stake in Polibrasil S.A., which was one of

the year’s largest transactions.

Corporate Banking

In the domestic loans market, demand rose

throughout 2005, leading to a 22.1% year-on-year

increase in the local credit assets portfolio. This growth

was due to a migration from foreign currency-

denominated loans to vehicles such as forex advances

and import finance for loans in reais, and to a greater

demand for longer term funding.


With respect to derivatives, 2005 saw an increase in the

number of structured finance transactions geared to

the needs of each client, which consequently led to

greater numbers of clients using these more

sophisticated instruments. Despite this significant

growth and diversification of Itaú BBA’s portfolio, there

was an overall drop in the number of derivatives deals,

thanks to reduced client demand for hedges.

Itaú BBA has also developed and consolidated a broad

portfolio of electronic products and services,

combining Itaú’s strength and technological

innovation with creating tailored solutions for its

clients. In 2005, its portfolio of corporate client cash

management assets grew in relation to 2004.

Additionally, the financial value of electronic payments

increased 20% during the period.

Internationally, the Bank focused its activities on

financing the subsidiaries of Brazilian companies

abroad through transactions in various currencies in

more than 20 countries, in addition to providing over

US$13 billion in export finance and opening new

markets for its clients’ exports by performing

operations for countries in Africa, Eastern Europe and

the Middle East.

Itaú BBA continued to benefit by offering substantial

lines of credit for foreign trade, and keeping its funding

costs at their lowest ever levels. Banco Itaú BBA and

Banco Itaú closed the third quarter of 2005 with

approximately US$2 billion in lines drawn on

correspondent banks.

In view of China’s increasing importance to its clients, in

March 2005, Itaú BBA received authorization to open a

representative office in Shanghai. Itaú BBA is currently

the only private sector Brazilian bank with a

representative office in China, placing it in a unique

position to support clients wishing to set up or develop

business in that country.

Banco Itaú BBA

22.1%increase in the domestic credit assetsportfolio

838383

Learn More about Banco Itaú BBA by visiting www.itaubba.com.br

Finally, Banco Itaú BBA was active in BNDES on-lending

to finance large-scale projects for strengthening

domestic infrastructure and increasing the productive

capacity of various industrial sectors. The Itaú group

was one of the leading BNDES on-lending agents in

2005, disbursing over R$1.3 billion for a range of

different projects and financings.

Large-scale project financing complies with the Equator

Principles, a set of social and environmental policies

which Banco Itaú and Banco Itaú BBA adopted in 2004.

Pro Forma Figures

These are based on Banco Itaú BBA’s pro forma financial

statements, and seek to offer the clearest picture of its

activities during the period.

Pro Forma Figures 2005 2004 (3) Change (%)Earnings – (in R$ millions)Gross Earnings from Financial Operations 2,038 1,459 39.7Operating Income 1,654 1,151 43.7Consolidated Net Income 1,242 829 49.9Balance Sheet – (in R$ millions)Total Assets 43,256 33,902 27.6Total Loans (1) 24,067 22,553 6.7Allocated capital – Tier 1 (2) 4,328 3,194 35.5Financial Ratios (%) p.a.Average Earnings on Allocated Capital – Tier 1 34.2 25.9 -Return on Assets 2.9 2.4 -

(1) Including Endorsements and Sureties.(2) Reflects Banco Itaú BBA’s pro forma economic capital, based on management criteria for allocating capital from Itaú to its business units.(3) Figures for previous years have been readjusted to provide clearer comparisons consistent with current management criteria, particularly those

related to allocation of capital and interest on own capital.

Itaú broadened itsinternational standing through unitsin the Americas, Europe and Asia,which include branches, subsidiariesand representative offices.


85

R$6.5 bilionin consolidated overseasinvestments in 2005

Banco Itaú Buen AyreHeadquarters, Buenos Aires

Banco Itaú EuropaHead Office

location Lisbon

Banco ItaúTokyo Branch

Banco ItaúBranch Office locationNew York

Banco Itaú BBARepresentative Officelocation Shanghai


Itaú has a considerable overseas presence through

strategically located facilities in the Americas, Europe

and Asia, providing valuable synergies in trade finance,

placing eurobonds, offering sophisticated financial

transactions (Structured Notes) and in private banking

activities through Banco Itaú Europa Luxembourg.

The Bank operates out of New York (New York branch),

the Cayman Islands (Grand Cayman branch), Lisbon and

London (Banco Itaú Europa), Buenos Aires (Itaú Buen

Ayre), Tokyo and now in China (Itaú BBA).

Consolidated overseas investments – including

non-financial activities – totaled R$6.5 billion

(US$2.8 billion) in 2005.

Banco Itaú Europa is active in cross-border commerce

and investments between Europe and Brazil, and in

issuing eurobonds in international capital markets,

supported by Banco Itaú Europa Luxembourg’s

integrated treasury, capital markets and private

banking operations.

In the United States, Itaú enjoys Financial Holding

Company status, allowing it to operate on an equal

footing with that country’s other financial institutions.

To-date only two Latin American banks share this

distinction. Granted by the Federal Reserve Board in

2002, this qualification was based on Itaú’s high level of

capitalization, the superior quality of its management,

the history of its activities in Brazil, its experience and

capability of establishing banking activities in the USA,

and by the existence of company-wide compliance

practices and controls which meet the standards

required by American law, both in its operations in

Brazil and in other countries where the Bank is active.

Banco Itaú Europa

Lisbon-based Banco Itaú Europa has branches in London

and Madeira, plus subsidiaries in the Cayman Islands and

Luxembourg. In 2005, it solidified its positioning in

international corporate activities by supporting

multinational firms operating in Brazil and creating

specialized international financing structures for Itaú

clients in Brazil in the large corporation and middle

market company segments.

International PresenceInternationally in 2005, Itaú provided support to multinationals

active in Brazil, and offered specialized international financing

to large and medium sized Brazilian companies.

8787

Consolidated assets reached €2,916.2 million, a 19.8%

improvement over 2004, while total assets under

administration, which included not only its own assets

but also guarantees, irrevocable commitments and

managed client assets, were almost €6 billion.

In asset composition, the Bank was active in commercial

credit, which finished the year at €1,062.7 million,

primarily in structured loans, most of which were for

Brazilian exports. Itaú Europa operates in keeping with

the dynamics of Itaú’s market segmentation

structures, growing its commercial client base, offering

structured products for trade finance and capital

markets, and supporting investments in Brazil made by

European companies.

Itaú Europa’s consolidated net income was €42.2

million, which rose 40.8% against the €30.0 million

posted in 2004, while the Banking Product reached

€70.7 million, up 47.4% y-o-y. This result indicates, in

addition to the stable contribution of the financial

margin, better performance in the areas of capital

markets, treasury, international private banking and the

role of Banco BPI.

Average return on equity (ROE) was 12.6%, the

Efficiency ratio hit 34.1%, while the Solvency (BIS) ratio

finished above 20%, well in excess of the minimum 8%

required by Portuguese and European Union regulatory

banking authorities.

40.8%growth in Itaú Europa’s net incomein relation to 2004

87

Itaú Securities (NY)

Itaú Bank (Cayman)

Itaú Cayman Branch

Banco Itaú Buen Ayre

Itaú EuropaItaú Tokyo Branch

Itaú BBA Nassau Branch

Itaú NY Branch

Itaú EuropaLondon Branch

Itaú Europa Luxembourg

Itaú BBA NY Rep. Office

Itaú BBA Uruguay Branch

Banco Itaú BBA

Banco Itaú

Itaú BBA Shanghai Rep. Office


The Bank’s investment grade status (Baa1 from Moody’s

and BBB+ from Fitch Ratings) has been an important

factor in supporting its diversification of funding

sources through issues of medium and long-term

eurobonds in the international capital markets. At year-

end, total securities and syndicated loans issued in the

international markets by Itaú Europa reached €966.1

million, while during the year it conducted a variety of

issues totaling over €550 million, including a €100

million ten-year subordinated debt issue. Much of its

success in these issues was due to the efforts of the

Bank’s capital markets desk in London.

The activities of Banco Itaú Europa Luxembourg

added 27.4% in the Banking Product and 21.5% in

terms of net income to the overall results of Itaú

Europa. Itaú Europa maintained its policy of increasing

the number of private banking clients, expanding and

strengthening its product line and family of funds, plus

investments and advisory services. At year-end, assets

under management reached US$2.5 billion, with over

1,500 active clients.

Banco Itaú Europa has a 51% share of Itaú’s equity stake

in Banco BPI, which rose from 16.1% to 16.4% at the

start of 2006. BPI is Portugal’s fourth largest financial

group, and ended the year with €30.1 billion in total

consolidated assets, shareholders’ equity of €1,492.8

million and net income of €251 million. Its key financial

indicators showed substantial improvement: ROE rose

to 23.5%, the Solvency ratio climbed from 9.8% in 2004

to 11.5% in 2005, while the Efficiency ratio dropped

from 61.7% to 57.8%.

Banco Itaú Buen Ayre

2005 marked the third consecutive year of economic

growth in Argentina. GDP rose 9.2% and there was a

fiscal surplus for the second year in a row. After the

successful renegotiation of the foreign debt led to the

cancelation of the IMF agreement in December, the

government’s chief worry for 2006 will be increased

inflation.

Under these conditions, Banco Itaú Buen Ayre

continued to grow in different areas, delivering good

performance within a financial system that shows signs

of recovery. In the Consumer Client segment, it posted

growth in personal loans, credit cards and services

receivables. It also opened new branches in the interior

cities of Córdoba and Mendoza during the year,

allowing it to evaluate other similar prospective

openings in 2006.

Small and middle market companies were the highest

growth segments in 2005, and offer the best potential

for 2006. Another key goal is to expand its trade finance

operations, primarily with Brazil, supported by the

potential of its branches in the interior.

International Presence

Learn Moreabout Banco Itaú Europa by visiting www.itaueuropa.ptabout Banco Itaú Buen Ayre by visiting www.itau.com.ar

898989

With respect to private deposits, the Bank maintained

its 1.3% market share in the financial system, while

private sector loans grew about 15% year-on-year,

providing a 2.3% market share.

Its new activities in investment funds, through Itaú

Asset Management, generated good results in their first

year of operation, exceeding planned goals and

delivering a 10.7% market share.

Selected Highlights for 2005:

In May, Itaú closed a US$400 million Liquidity Facility

featuring a clean credit line and a two-year

drawdown period. The transaction had the

participation of 18 international banks, with HSBC,

Calyon, Standard Chartered, Warchovia, and West LB

acting as Lead Arrangers.

In June, Itaú issued a new tranche of securitization

of foreign receivables (MTs), valued at US$345

million, with a three to seven-year term. With Calyon

as lead bank, the tranche was used partially for

on-lendings to clients and to repay the most costly

outstanding debts.

In July, the structure of the back office operations

of the Grand Cayman branch was transferred and

incorporated into other Itaú administrative

processing areas in Brazil, gaining efficiency and

synergy and considerably reducing the need for

operational contingencies now allocated in Brazil.

In August, a US$100 million A/B loan was closed in

partnership with the Inter-American Investment

Corporation, and was designed to provide financing

to small and middle market companies which

display socio-environmentally responsible practices,

underlining the Itaú Group’s concern for the

environment.

In September, Itaú participated as the only co-

manager of the first real-denominated Brazilian

National Treasury Notes issue in the international

market, raising R$3.4 billion and maturing in 2016.

The issue was structured by JP Morgan and

Goldman Sachs, while Itaú played a key role in

placing the Notes with investors worldwide.

To meet the more sophisticated needs of

international financial market transactions, Itaú

expanded its investment products portfolio by

offering Structured Notes, which can combine one

or more asset and/or market index categories thanks

to an optional principal-protection structure.

In December, Itaú closed a US$250 million liquidity

facility with Citibank, in connection with its payment

orders securitization program. The line can be drawn

down at any time over an eight-year term, at Libor +

0.25% p.a. The facility picked up AAA, Aaa and AAA

ratings from Standard & Poor’s, Moody’s and Fitch,

respectively.

BOARD OF DIRECTORS

ChairmanOlavo Egydio Setubal

Vice-ChairmenAlfredo Egydio Arruda Villela FilhoJosé Carlos Moraes AbreuRoberto Egydio Setubal

DirectorsAlcides Lopes TápiasCarlos da Camara PestanaFernão Carlos Botelho BracherHenri PenchasJosé Vilarasau SalatMaria de Lourdes Egydio VillelaPersio AridaRoberto Teixeira da CostaSergio Silva de FreitasTereza Cristina Grossi Togni

EXECUTIVE BOARD

Chairman and CEORoberto Egydio Setubal

Senior Vice-PresidentHenri Penchas

Executive Vice-PresidentsAlfredo Egydio SetubalCandido Botelho Bracher

Legal AdvisorLuciano da Silva Amaro

Executive DirectorsRodolfo Henrique FischerSilvio Aparecido de Carvalho

Managing DirectorsJackson Ricardo GomesMarco Antonio Antunes Vilson Gomes de Brito

Associate Managing DirectorWagner Roberto Pugliesi

AUDIT BOARD

ChairmanGustavo Jorge Laboissiere Loyola

DirectorsIran Siqueira LimaFernando Alves de Almeida

ADVISORY BOARD

Fernando de Almeida Nobre NetoLício Meirelles FerreiraLuiz Eduardo Campello

INTERNATIONAL ADVISORY BOARD

Roberto Egydio SetubalArtur Eduardo Brochado dos Santos SilvaCarlos da Camara PestanaFernão Carlos Botelho BracherHenri PenchasJosé Carlos Moraes AbreuJulio Lage GonzálezMaria de Lourdes Egydio VillelaRoberto Teixeira da CostaRubens Antonio BarbosaSergio Silva de Freitas

AUDIT COMMITTEE

ChairmanCarlos da Camara Pestana

MembersAlcides Lopes TápiasTereza Cristina Grossi Togni

TRADING COMMITTEE

ChairmanAlfredo Egydio Setubal

Members Alcides Lopes TápiasAlfredo Egydio Arruda Villela Filho Antonio Carlos Barbosa de OliveiraHenri PenchasMaria Elizabete Vilaça Lopes AmaroRoberto Teixeira da CostaSilvio Aparecido de Carvalho

DISCLOSURE COMMITTEE

ChairmanAlfredo Egydio Setubal

Members Alcides Lopes Tápias Alfredo Egydio Arruda Villela Filho Antonio Carlos Barbosa de OliveiraAntonio Jacinto MatiasHenri PenchasMaria Elizabete Vilaça Lopes AmaroRoberto Teixeira da CostaSilvio Aparecido de CarvalhoTereza Cristina Grossi Togni

REMUNERATION COMMITTEE

ChairmanOlavo Egydio Setubal

MembersCarlos da Camara PestanaFernão Carlos Botelho Bracher José Carlos Moraes AbreuRoberto Egydio SetubalRoberto Teixeira da Costa

Senior Management and Directors


Banco Itaú Holding Financeira S.A.

In-house AccountantJosé Manuel da Costa GomesCPF: 053.697.558-25CRC – 1SP219892/O-0

91

EXECUTIVE BOARD

Chairman and CEORoberto Egydio Setubal

Senior Vice-PresidentsAlfredo Egydio Setubal Antonio Jacinto Matias Henri PenchasRenato Roberto Cuoco

Executive Vice-PresidentsHelio de Mendonça Lima José Francisco Canepa Rodolfo Henrique FischerRonald Anton de Jongh Ruy Villela Moraes Abreu

Legal AdvisorLuciano da Silva Amaro

Executive DirectorsAlexandre de Barros Cláudio Rudge Ortenblad Fernando Tadeu PerezJoão Jacó HazarabedianMarco Ambrogio Crespi BonomiOsvaldo do NascimentoSérgio Ribeiro da Costa WerlangSilvio Aparecido de Carvalho

Senior Managing DirectorsAlexandre Zákia AlbertAntonio Carlos MorelliCarlos Henrique MussoliniJackson Ricardo GomesJosé Geraldo Borges FerreiraLuiz Antonio Fernandes Valente Lywal Salles FilhoMaria Elizabete Vilaça Lopes AmaroPaulo Roberto SoaresRicardo Villela Marino

Managing DirectorsAntonio Carlos Richecki RibeiroAlmir VignotoAndré de Moura MadarásAntonio Sivaldi Roberti FilhoArnaldo Pereira PintoAurélio José da Silva Portella Carlos Eduardo de Mori LuporiniCarlos Eduardo MônicoCesar Padovan Cícero Marcus de AraújoCristiane Magalhães TeixeiraEdelver CarnovaliEduardo Almeida Prado Erivelto Calderan Corrêa Fabio Whitaker VidigalHeli de AndradeJaime Augusto ChavesJoão Antonio Dantas Bezerra LeiteJoão CostaJoaquim Marcondes de Andrade Westin

José Antonio LopesJosé Carlos Quintela de CarvalhoJúlio Abel de Lima TabuaçoLuís Antonio RodriguesLuiz Antonio Nogueira de FrançaLuiz Antonio RibeiroLuiz Antonio RodriguesLuiz Eduardo ZagoLuiz Fernando de Assumpção FariaLuiz Marcelo Alves de Moraes Manoel Antonio GranadoMarcelo Habice da MottaMarcelo Santos RibeiroMarco Antonio AntunesMarcos Roberto CarnielliMáximo Hernández GonzálezMiguel Burgos Neto Moacyr Roberto Farto Castanho (*)Paschoal Pipolo BaptistaPatrick Pierre DelfosseRenata Helena Oliveira TubiniRicardo OrlandoRicardo Terenzi NeuenschwanderValma Aversi Prioli

91

Banco Itaú S.A.

(*) elected at the November 3, 2005 EGM and assumed office February 1, 2006

Senior Management and Directors


Banco Itaú BBA S.A.

BOARD OF DIRECTORS

ChairmanRoberto Egydio Setubal

Vice-ChairmenFernão Carlos Botelho BracherHenri Penchas

DirectorsAlfredo Egydio SetubalAntonio Beltran MartinezAntonio Carlos Barbosa de OliveiraCandido Botelho BracherEdmar Lisboa BachaEduardo Mazzilli de VassimonJean-Marc Robert Nogueira Baptista Etlin Rodolfo Henrique FischerSérgio Ribeiro da Costa Werlang

EXECUTIVE BOARD

ChairmanCandido Botelho Bracher

Executive Vice-PresidentsAntonio Carlos Barbosa de OliveiraEduardo Mazzilli de VassimonJean-Marc Robert Nogueira Baptista Etlin

Commercial Vice-PresidentsAlberto FernandesSérgio Ailton Saurin

DirectorsAlexandre Enrico Silva FigliolinoAndré Emilio Kok NetoAndré Luis Teixeira Rodrigues André Luiz HelmeisterCaio Ibrahim DavidElaine Cristina Zanatta Rodrigues VasquinhoEugenio José de Almeida e Silva (*)Ezequiel GrinFábio de Souza Queiroz Ferraz (**)Fernando Alcântara de Figueredo BedaFernando Fontes IunesFrancisco Paulo Cote GilGustavo Henrique Penha TavaresJoão Carlos de GênovaJoão Regis da Cruz NetoJosé Irineu Nunes BragaLuis Alberto Pimenta GarciaLuiz Augusto Nunes da SilvaLuiz Henrique CampígliaMarcelo MazieroMaria Cristina LassMario Luiz AmabileOdair Dias da Silva JuniorPaolo Sergio PellegriniPaulo de Paula Abreu

(*) elected at the November 1, 2005 Board of Directors Meeting, and assumed office February 1, 2006(**) elected at the December 15, 2005 Board of Directors Meeting, subject to Central Bank of Brazil approval

9393

Itaú Seguros S.A.

EXECUTIVE BOARD

ChairmanLuiz De Campos Salles

Supervising DirectorRuy Villela Moraes Abreu

Executive Vice-PresidentsMarcelo BlayOlavo Egydio Setubal Júnior

Executive DirectorsCarlos Eduardo de Mori LuporiniCláudio Cesar SanchesJosé Carlos Moraes Abreu Filho

Senior Managing DirectorJacques Bergman

Managing DirectorsAstério Sampaio MirandaIdacelmo Mendes VieiraItamar Borges ZiliottoManes Erlichman NetoOsmar Marchini

Banco Itaucred Financiamentos S.A.

EXECUTIVE BOARD

ChairmanRoberto Egydio Setubal

Vice-PresidentsJosé Francisco Canepa Marco Ambrogio Crespi Bonomi

DirectorsArnaldo Pereira PintoDilson Tadeu da Costa RibeiroErivelto Calderan CorrêaFernando José Costa TelesFlávio Kitahara SousaGeroncio Mota Menezes Filho Jackson Ricardo GomesLuís Fernando StaubLuís Otávio MatiasLuiz Tadeu Castro SanchesManoel de Oliveira FrancoMarco Antonio Antunes Marcos Vanderlei Belini Ferreira Mário Mendes Amadeu Mário Werneck BrittoRodolfo Henrique Fischer

Corporate Information


Head OfficePraça Alfredo Egydio de Souza Aranha, 100Torre ItaúsaCEP 04344 902 – São Paulo – SPwww.itau.com.br

Investor Relations Services

Geraldo SoaresInvestor Relations Superintendent

Praça Alfredo Egydio de Souza Aranha, 100Torre Conceição – 11º andar CEP 04344 902 – São Paulo – SPTel. (0xx11) 5019 1549Fax: (0xx11) 5019 1133e-mail: [email protected] www.itauri.com.br

Investfone Service CentreShareholders OnlyTel. (0xx11) 5029 7780Fax: (0xx11) 3274 3120Hours: Monday-Friday,9:00 am – 6:00 pm

Shareholder ServicesBelo Horizonte – MGAv. João Pinheiro, 195 – TérreoCEP 30130 180

Brasília – DFSCS Quadra 3 – Ed. Dona AngelaSobreloja – CEP 70300 500

Curitiba – PRRua João Negrão, 65 – SobrelojaCEP 80010 200

Porto Alegre – RSRua Sete de Setembro, 746 – TérreoCEP 90010 190

Rio de Janeiro – RJRua Sete de Setembro, 99 – SubsoloCEP 20050 005

Salvador – BAAv. Estados Unidos, 50 – 2º andarEd. SesquicentenárioCEP 40010 020

São Paulo – SPRua XV de Novembro, 318 – TérreoCEP 01013 001

For other locations,contact any branch of Banco Itaú S.A.

Customer Services

Itaú BankfoneInformation and banking transactionsMajor metropolitan areas:Tel. 4004-4828 (*)Other locations: (0800) 904-828

Customer Support Services

Bankfone Customer SupportMajor metropolitan areas:Tel. 4004-4828 (*)Other locations: (0800) 118-944

Consumer Protection ServicesItaú Responds ConsumerProtection ServicePraça Alfredo Egydio de Souza Aranha, 100Torre Conceição – 6º andarCEP 04344 902Tel. (0xx11) 5019 8006 Fax: (0xx11) 5019 8295e-mail: [email protected]

Central Bank of Brazil SupportServices GroupPraça Alfredo Egydiode Souza Aranha, 100Torre Conceição – 6º andarCEP 04344 902Tels. (0xx11) 5019 8380 / 8381 /8382 / 8383 / 8384Fax: (0xx11) 5019 8388

Talk to Us – Internet CustomerSupport Serviceswww.itau.com.br

(*) Direct dial – no area code required

9595

Bovespa TradesCommon Shares: ITAU3Preferred Shares: ITAU4

BCBA (Argentina) TradesCedear Itaú Holding: ITAU4

NYSE (USA) TradesADR Itaú Holding: ITUDepositary Bank (ADR):The Bank of New York101 Barclay Street – 22 WestNew York, NY USA 10286Tel. (212) 815-2293Tel. (212) 571-3050

Specialist (ADR):LaBranche & Co., Inc.One Exchange Plaza25th FloorNew York, NY 10006-3008Tel. (212) 425-1144e-mail: [email protected]

International OfficesBanco Itaú – New York Branch540 Madison AvenueNew York, NY 10022Tel. (1 212) 486-1280Fax: (1 212) 888-9342

Banco Itaú – Tokyo Branch – Japan1-6-1 Marunouchi, Chiyoda-kuTokyo 100-0005Tel. +81 (3) 5293-4828Fax: +81 (3) 5293-4830e-mail: [email protected]

Banco Itaú – Grand Cayman Branch20 Genesis CloseAnsbacher House – 3rd FloorP.O. Box 2582gtGrand Cayman, Cayman IslandsB.W.I.Tel. (1 345) 945 1271Fax: (1 345) 945 1275

Banco Itaú BBAWest Bay StreetNassau, Bahamas

Banco Itaú BBAMontevideo, UruguayPlaza Independencia, 831 Of. 706 C.P. 11.100 Tel. (59 82) 901-3965Fax: (59 82) 908-5613

Itau Bank, Ltd.20 Genesis CloseP.O. Box 2587gtAnsbacher House – 3rd FloorGrand Cayman, Cayman IslandsB.W.I.Tel. (345) 945-4175Fax: (345) 945-4185

Itaú Securities Inc. – New York540 Madison Avenue – 23rd FloorNew York, NY USA 10022Tel. (212) 207-9056Fax: (212 207-9076

Banco Itaú Europa – London Branch6th Floor, 17, Dominion StreetEC2M 2EFLondon, United KingdomTel. (44 207) 663-7830Fax: (44 207) 663-7831

Banco Itaú Europa – LisbonRua Tierno Galvan, Torre 3 – 11º andar– 1099-048Lisbon, PortugalTel. (351 21) 381-1093

Banco Itaú Buen Ayre – Head OfficeCerrito 740 – Código Postal: C1010AAPBuenos Aires, ArgentinaTel. (05411) 4378-8420www.itau.com.ar


Credits

Publication and Overall Coordination: Banco Itaú Holding Financeira

Editorial Project Coordination: Report Comunicação

Editorial and Graphic Design: Adroitt Bernard

Photos: João Musa

Printing: Laborprint

Print Run: Portuguese – 7,000; English – 2,000

Paper: Cover – Couche 230 gr; Pages – Couche 150 gr;Financial Statements: Recycled 75 gr

Banco Itaú Holding Financeira Address:Praça Alfredo Egydio de Souza Aranha, 100Torre Itaúsa – CEP 04344-902 – São Paulo, SP

Internet version available at: www.itauri.com.br

If you have any questions, comments or suggestions, or would like morecopies of the Report, please e-mail our Investor Relations area [email protected].

Our special thanks to everyone who authorized the use of their images in this Report.

Banco Itaú Holding Financeira S.A.

Praça Alfredo Egydio de

Souza Aranha, 100 – Torre Itaúsa

04344 902 – São Paulo, SP – Brazil

www.itau.com.br

Documents

Annual Report 2005 - Itaúww13.itau.com.br/Portalri/html/ing/download/rao/ra311205.pdf · Operating Income 8,183 7,342 5,714 4,255 3,140 11.5 Consolidated Recurring Net Income 5,443