Itaú Unibanco Hits 24.4% ROE Amid Election-Year Caution

Date of Call: Feb 5, 2026

Guidance:

• Total credit portfolio growth expected between 5.5% and 9.5% (Brazil 6.5% to 10.5%).
• Net interest income with clients to grow 5% to 9%; market NII between BRL 2.5B and 5.5B.
• Cost of credit expected between BRL 38.5B and 43.5B.
• Commissions, fees, and insurance to grow 5% to 9%.
• Noninterest expenses to grow 1.5% to 5.5% (midpoint below projected inflation).
• Effective tax rate between 29.5% and 32.5%.,

Business Commentary:

Strong Financial Performance and Value Creation:

• Itaú Unibanco reported net income of BRL 12.3 billion for Q4 2025, representing 3.7% growth over the previous quarter and 13.2% year-over-year increase.
• The bank's ROE reached 24.4% and in Brazil, 26.0%. Adjusted for capital, profitability was 25.4% and 27.3% in Brazil respectively.
• This performance demonstrates strong value creation, supported by disciplined cost management and significant revenue growth.

Loan Portfolio Expansion and Quality:

• The bank's loan portfolio grew by 6.3% compared to September 2025 and 6% compared to December 2024, reaching BRL 1,490.8 billion.
• The portfolio saw significant growth in segments such as payroll loans and mortgage lending, with private payroll loans growing by 27.5% in the quarter.
• The growth was supported by a strategic focus on derisking certain portfolios, leading to higher quality and better positioning for future growth.

Technological Advancements and Efficiency:

• Itaú Unibanco achieved a 99% reduction in incidents due to its modernization agenda and increased delivery speed by 2,600%.
• The bank reduced its unit transaction cost by 45%, enhancing scalability and operational efficiency.
• These improvements were driven by substantial investments in technology, digital transformation, and modernization of platforms and data architecture.

Retail Banking and Digital Transformation:

• In retail banking, the bank migrated 15 million clients to the Super App, achieving an NPS of 80 points.
• Transaction volumes on new digital features like Pix on WhatsApp powered by AI and Piggy bank saw substantial growth.
• The modernization of the platform enabled quick participation in new private sector payroll loan programs, regaining market leadership.

Capital Management and Distribution:

• The bank maintained a CET1 ratio of 12.3% and distributed BRL 33.7 billion in 2025, representing a payout ratio of 72%.
• This strong capital performance is due to high-quality capital generation, strategic hedging, and a disciplined approach to capital allocation and distribution.

Sentiment Analysis:

Overall Tone: Positive

• "I believe we delivered an outstanding year." "We are very optimistic about the potential of this agenda..." "I am very excited with the moment of the bank..." "We have everything to deliver a solid year of quality."

Q&A:

• Question from Thiago Bovolenta Batista (UBS Investment Bank, Research Division): Concerns about the sustainability of the high ROI (24-25%) and potential leverage changes given capital constraints and hedging.
  Response: Management sees no reason ROE shouldn't remain at current high levels, guided by spread over cost of capital. Leverage review is discussed with rating agencies but not expected in 2026 due to election volatility; capital strategy prioritizes predictability and a 50 bps buffer for dividend distribution.

• Question from Bernardo Guttmann (XP Investimentos Corretora de Câmbio, Títulos e Valores Mobiliários S.A., Research Division): Whether 2026 captures efficiency gains leading to operational leverage for 2027.
  Response: Yes, investments in technology and digitalization are yielding efficiency gains (efficiency ratio at 94% of 2024 base), with cost growth below IPCA, enabling a path of operational scalability and continued investment without sacrificing future returns.

• Question from Renato Meloni (Bernstein Autonomous LLP): Long-term value generation levers beyond efficiency, and clarification on 2026 financial margin growth sensitivity to interest rates.
  Response: Key levers are disciplined capital allocation, portfolio growth above cost of capital, and strategic cost/revenue management. Anticipated dividend timing impacts comparable margin growth, but core organic growth remains solid with adequate risk and mix.

• Question from Yuri Fernandes (JPMorgan Chase & Co, Research Division): Impact of SME profitability (historically high ROI) on overall ROE and potential competitive pricing effects.
  Response: SME profitability has already caught up significantly since 2022, with returns now above cost of capital. No expected further expansion in segment ROI; focus is on consistent value delivery and platform-driven efficiency, not aggressive pricing.

• Question from Daer Labarta (Goldman Sachs Group, Inc., Research Division): Main competitive concerns and opportunities given fintechs and peers adapting.
  Response: Competitive environment is strong across segments. Key advantages are human capital, culture, long-term capital allocation discipline, technological modernization, and AI capabilities, enabling agility and focus on client-centric innovation.

• Question from Gustavo Schroden (Citigroup Inc., Research Division): Specifics on appetite and profitability for massified and INSS (social security) segments.
  Response: Efficiency gains allow higher loss absorption. For INSS, recent volume decline due to regulatory blocks and interest rate cap; focus is on internal channel and potential reopening post-election, with returns above cost of capital when viable.

• Question from Mario Pierry (BofA Securities, Research Division): Future investment in technology as a percentage of revenue and expected portfolio growth per segment.
  Response: Technology investment continues at current high threshold (over 20% of employees). Portfolio growth for 2026 is well-distributed across segments, with uncertainty mainly in corporate/wholesale (dependent on capital markets) and SMEs/individuals growing consistently.

• Question from Jorge Kuri (Morgan Stanley, Research Division): Why 2026 credit growth guidance is conservative despite a more favorable macro backdrop.
  Response: Guidance reflects caution due to election-year volatility and uncertainties (economic plans, FX, inflation, investment). The bank maintains agility to react and accelerate if conditions permit, prioritizing long-term discipline over maximum growth targets.

• Question from Marcelo Mizrahi (Banco Bradesco BBI S.A., Research Division): Outlook for delinquency in 2026, considering government programs and payroll loan strength.
  Response: No material change in delinquency indicators expected for 2026. SME short-term delays may normalize post-government program grace periods. Provisions are adequate, and the bank will not under-provision to meet quarterly results.

• Question from Carlos Gomez-Lopez (HSBC Global Investment Research): Competitive advantage in real estate financing and pricing trends with IT/software providers.
  Response: Market share driven by large savings deposits, favorable funding structure, competitive pricing, and digital client experience. AI/cloud provider contracts are negotiated long-term with scale; no significant pricing pressure observed, with providers remaining competitive.

• Question from Daniel Vaz (J. Safra Corretora de Valores e Cambio Ltda, Research Division): Need for FGI recapitalization in 2026 and tangible revenue growth opportunities from Gen AI.
  Response: FGI resource availability depends on government allocation; additional funding may be needed to sustain prior production levels. AI presents clear opportunities for efficiency, client engagement, and top-line growth via scalable, cost-effective solutions like AI-powered platforms (e.g., Itaú Emps).

Contradiction Point 1

Strategic Focus on SME Segment Profitability

It represents a shift from a strategic focus on growing profitability to a focus on increasing the bottom line, indicating a change in business priorities within the SME segment.

How does strong SME performance (e.g., Rede growing above 20%) impact ROE, and should retail ROE growth outpace concerns about price competition? - Yuri Fernandes (JPMorgan Chase & Co)

2025Q4: The SME segment... aims to increment the bottom line in this segment rather than expand profitability, as current returns are already above cost of capital. - Milton Maluhy Filho(CEO)

What factors drove the retail ROI increase from 17% to 23%? How is wholesale ROI expected to perform with competitive pressures and lower venture spreads? - Bernardo Guttmann (XP Inc.)

2024Q1: SMEs are a strategic, high-performance segment... with profitability above the bank average. - Milton Filho(CEO)

Contradiction Point 2

Outlook for Leverage Review and Capital Management

It reflects a change from discussing an ongoing review process to stating no advancement is expected in the near term, indicating a shift in capital management priorities.

Is Itaú's current 24–25% ROI level sustainable long-term, and how will leverage adjustments impact maintaining this ROI threshold? - Thiago Bovolenta Batista (UBS Investment Bank)

2025Q4: A review of leverage is a constant discussion but is not expected to advance in 2026. - Milton Maluhy Filho(CEO)

What is the impact of regulatory factors such as operational risk, IFRS 9, and tax reform on capital and second-half extraordinary dividends? - Gustavo Schroden (Bradesco)

2024Q1: The bank expects to have the capacity to pay extraordinary dividends by year-end... The timing and size of any dividend will depend on the board's assessment of capital needs for organic growth. - Milton Filho(CEO)

Contradiction Point 3

Strategic Focus on Retail Network (Rede) and Market Share

It involves a shift from stating that market share is a consequence of relationship-driven value to acknowledging a competitive catch-up, indicating a change in strategic emphasis.

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2025Q4: The SME segment... has seen extraordinary growth due to strategic reviews and discipline... The overall retail business has seen a sustainable catch-up in profitability. - Milton Maluhy Filho(CEO)

What is Itaú's strategy for enhancing competitiveness and capturing specific client offerings through the Rede network? - Daniel Vaz (J. Safra Corretora de Valores e Cambio Ltda)

2025Q2: Market share is a consequence of focusing on the correct client with the right price and holistic relationship, not a primary objective. - Milton Maluhy Filho(CEO)

Contradiction Point 4

Outlook for Wholesale (Corporate) Portfolio Growth and Risk Appetite

It represents a shift from a broad-based, disciplined growth strategy to a more cautious, range-bound guidance, indicating a change in risk appetite and growth outlook.

With improved macro conditions (lower rates, lower unemployment) compared to last year, why is the 2026 credit growth guidance (5.5–9.5%) only marginally higher than 2025’s? Is it due to intensifying competition, share loss, caution around the political cycle, or something else? - Jorge Kuri (Morgan Stanley)

2025Q4: The guidance reflects realism given the uncertainties of an election year... The bank plans for a cautious scenario. - Milton Maluhy Filho(CEO)

What are the key drivers of corporate (Wholesale) portfolio growth amid challenges like IOF and FX, and what are the expectations? - Henrique Navarro (Santander Investment Securities Inc.)

2025Q2: Growth is broad-based across segments (agribusiness, SMEs, middle market) without changing risk appetite. Itaú maintains disciplined pricing and capital allocation... - Milton Maluhy Filho(CEO)

Contradiction Point 5

Guidance and Timeline for Leverage Review

It involves a direct contradiction on when a leverage review will advance, moving from an expectation of annual review to a statement of no advancement in 2026.

Is the current 24–25% ROI sustainable in the long term, and can leverage adjustments maintain this ROI level over time? - Thiago Bovolenta Batista (UBS Investment Bank)

2025Q4: A review of leverage is a constant discussion but is not expected to advance in 2026. - Milton Maluhy Filho(CEO)

With elevated capital levels and strong ROE, what is the optimal target capital ratio, and is there potential for additional capital returns in 2025? - Tito Labarta (Goldman Sachs)

2024Q4: The priority is business growth; if excess capital remains after financing growth, it will be returned to shareholders. This approach... is intended to be a new normal, with distributions reviewed annually based on profitability, RWA growth, and regulatory impacts. - Milton Maluhy(CEO)