Itaú Unibanco Holding S.A. Announcement to the Market - IFRS - Results for the 2nd Quarter of 2020

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Itaú Unibanco Holding has released a report detailing the differences in its financial statements under BRGAAP and IFRS for mid-2020. The transition to IFRS 9, effective January 2018, impacts the classification and measurement of financial assets. As of June 30, 2020, total assets were reported at R$ 1,954,009 million under IFRS, adjusted from R$ 2,075,122 million. Total stockholders' equity under IFRS stood at R$ 142,933 million, compared to R$ 137,818 million under BRGAAP. The report highlights key adjustments and the implications of the switch to IFRS for investors.

Positive

• Transition to IFRS 9 reflects compliance with international standards.
• Total assets were reported adjusted at R$ 1,954,009 million under IFRS.

Negative

• Total liabilities increased to R$ 1,811,076 million, indicating higher debt levels.
• Expected loss adjustments may indicate potential future credit issues.

SÃO PAULO, Aug. 3, 2020 /PRNewswire/ -- We present below the differences between our financial statements in BRGAAP and in International Financial Reporting Standards – IFRS.

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

The complete consolidated financial statements under IFRS for the first half of 2020 are available at our website: www.itau.com.br/investor-relations. 

Comparison between BRGAAP1 and IFRS
						R$ million
Balance Sheet	BRGAAP	Adjustments and Reclassifications2	IFRS	BRGAAP	Adjustments and Reclassifications2	IFRS
		Jun/30/2020			Dec/31/2019
Total Assets	2,075,122	(121,113)	1,954,009	1,738,713	(101,232)	1,637,481
Cash, Compulsory Deposits and Financial Assets At Amortized Cost 3 4 6	1,405,789	(29,562)	1,376,227	1,164,753	3,535	1,168,288
(-) Provision for Expected Loss at Amortized Cost5	(48,286)	3,755	(44,531)	(38,888)	2,859	(36,029)
Financial Assets at Fair Value Through Other Comprehensive Income 4	192,368	(85,975)	106,393	166,676	(89,930)	76,746
(-) Expected Loss at Fair Value Through Other Comprehensive Income 5	(3,056)	2,942	(114)	(3,162)	3,076	(86)
Financial Assets at Fair Value Through Profit or Loss 4	400,834	(9,684)	391,150	345,677	(22,748)	322,929
Tax Assets7	77,316	(7,063)	70,253	56,835	(7,875)	48,960
Investments in Associates and Joint Ventures, Goodwill, Fixed Assets, Intangible Assets, Assets Held for Sale and Other Assets	50,156	4,475	54,631	46,822	9,851	56,673
Total Liabilities	1,937,304	(126,228)	1,811,076	1,595,865	(107,849)	1,488,016
Financial Assets at Amortized Cost 3 6	1,559,442	(124,021)	1,435,421	1,265,471	(105,641)	1,159,830
Financial Assets at Fair Value Through Profit or Loss 4	89,310	645	89,955	48,008	21	48,029
Provision for Expected Loss (Loan Commitments and Financial Guarantees) 5	1,080	3,890	4,970	959	3,181	4,140
Provision for Insurance and Pension Plan	214,890	1,253	216,143	217,216	1,118	218,334
Provisions	19,897	-	19,897	21,454	-	21,454
Tax Liabilities 7	9,286	(4,098)	5,188	13,870	(5,979)	7,891
Other Liabilities	43,399	(3,897)	39,502	28,887	(549)	28,338
Total Stockholders' Equity	137,818	5,115	142,933	142,848	6,617	149,465
Non-controlling Interests	11,461	(209)	11,252	10,861	1,679	12,540
Total Controlling Stockholders' Equity 8	126,357	5,324	131,681	131,987	4,938	136,925

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

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

R$ million
Reconciliation	Stockholders Equity *	Result *
	Jun/30/2020	2nd Q/20	1st Q/20	2nd Q/19	1st H/20	1st H/19
BRGAAP - Values Attributable to Controlling Stockholders	126,357	3,424	3,401	6,815	6,825	13,525
(a) Expected Loss - Loan and Lease Operations and Other Financial Assets	1,829	249	(136)	(77)	113	(151)
(b) Adjustment to Fair Value of Financial Assets	(696)	(257)	(126)	(6)	(383)	119
(c) Acquisition of Interest in Porto Seguro Itaú Unibanco Participações S.A.	437	(1)	(1)	(1)	(2)	(2)
(d) Criteria  for Write-Off of Financial Assets	1,971	65	(21)	(24)	44	(63)
(e) Financial Lease Operations	124	(32)	(37)	(45)	(69)	(81)
(f) Other adjustments	1,659	(1,725)	379	(135)	(1,346)	(73)
IFRS - Values Attributable to Controlling Stockholders	131,681	1,723	3,459	6,527	5,182	13,274
IFRS - Values Attributable to Minority Stockholders	11,252	(3,626)	219	163	(3,407)	319
IFRS - Values Attributable to Controlling Stockholders and Minority Stockholders	142,933	(1,903)	3,678	6,690	1,775	13,593
* Events net of tax effects

 

Differences between IFRS and BRGAAP Financial Statements
(a) In the adoption of IFRS 9, there was a change in the calculation model of incurred loss (IAS 39) to expected loss, considering forward-looking information. On BRGAAP, the concept of Expected Loss is used, pursuant to BACEN Resolution No. 2,682/99.9
(b) Under IFRS, stocks and quotas classified as permanent investments were measured at fair value and its gains and losses were recorded directly in Result. Additionally, there was a change in the model of classification and measurement of financial assets due to the new categories introduced by IFRS 9.
(c) Under IFRS, the effect of accounting at fair value of the acquisition of interest in Porto Seguro Itaú Unibanco Participações S.A. was recognized.
(d) Criterion for write-off of financial assets on IFRS considers the recovery expectative.
(e) Under IFRS (IAS 17) the financial lease operations are recorded as Fixed Assets, as a contra-entry of Other Financial Liabilities. Under BRGAAP, as from September 30th, 2015, the consideration of these transactions are now recorded in result, in accordance with CMN Resolution No. 3,617/08.
(f) Other Adjustments is mainly due to the impairment of goodwill and intangible assets of Itaú Corpbanca and reversal of the Amortization of Goodwill under BRGAAP.
9More details in the Complete Financial Statements for the first half of 2020.

 

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

						R$ million
Recurring Result	2nd Q/20			2nd Q/19
	BRGAAP	IFRS	Variation	BRGAAP	IFRS	Variation
Result - Attributable to Controlling Stockholders	3,424	1,723	(1,701)	6,815	6,527	(288)
Exclusion of the Non-Recurring Events	(782)	(2,085)	(1,303)	(219)	(7)	212
Donation to 'Todos pela Saúde'	(834)	(834)	-	-	-	-
Reclassification of investment in IRB	379	379	-	-	-	-
Impairment of goodwill and intangible assets - Itaú Corpbanca	(19)	(1,452)	(1,433)	-	-	-
Goodwill amortization	(206)	-	206	(151)	-	151
Liability Adequacy Test	-	(76)	(76)	(68)	(7)	61
Other	(102)	(102)	-	-	-	-
Recurring Result - Attributable to Controlling Stockholders	4,205	3,808	(398)	7,034	6,534	(500)

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

São Paulo, August 3^rd, 2020.

Alexsandro Broedel
Group Executive Finance Director and Head of Investor Relations

Itaú Unibanco – Corporate Communication
(11) 5019-8880 / 8881 – imprensa@itau-unibanco.com.br

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SOURCE Itaú Unibanco Holding S.A.

FAQ

What were the total assets of Itaú Unibanco under IFRS as of June 2020?

The total assets were reported at R$ 1,954,009 million under IFRS.

How did Itaú Unibanco's total stockholders' equity change after adopting IFRS?

Total stockholders' equity under IFRS was R$ 142,933 million, compared to R$ 137,818 million under BRGAAP.

What accounting standards did Itaú Unibanco switch from and to?

Itaú Unibanco switched from BRGAAP to International Financial Reporting Standards (IFRS) with the adoption of IFRS 9.

What does IFRS 9 change in financial reporting?

IFRS 9 changes the treatment of financial instruments, impacting classification, measurement, and impairment.

How do the financial metrics of Itaú Unibanco affect its stock performance?

The adjustment in total liabilities and stockholders' equity could influence investor confidence and stock performance.