EX-99.1 2 v445728_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

CONTENTS

Management Discussion & Analysis	03

Executive Summary	06

Income Statement and Balance Sheet Analysis	15

Managerial Financial Margin	16

Credit Portfolio	18

Result from Loan Losses	22

Commissions and Fees & Result from Insurance, Pension Plan and Premium Bonds	27

Insurance, Pension Plan and Premium Bonds Operations	30

Non-interest Expenses	35

Tax Expenses for ISS, PIS, Cofins and Others	37

Income Tax and Social Contribution on Net Income	37

Other Balance Sheet Information	38

Balance Sheet by Currency	41

Capital Ratios	42

Risk Management	44

Business Analysis	45

Segment Analysis	47

Activities Abroad	52

Additional Information	57

Report of Independent Auditors	63

Complete Financial Statements	65

It should be noted that the managerial financial statements relating to prior periods may have been reclassified for comparison purposes.

The tables in this report show the figures in millions. Variations and totals, however, are calculated in units. Therefore, there may be differences due to rounding.

Future expectations arising from the reading of this analysis should take into consideration the risks and uncertainties that involve any activities and that are outside the control of the companies of the conglomerate (political and economic changes, volatility in interest and foreign exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products, prices and changes in tax legislation, among others).

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Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Itaú Unibanco Pro forma Information

As from the second quarter of 2016, Itaú CorpBanca, the company resulting from the merger between Banco Itaú Chile and CorpBanca, was consolidated in our financial statements, as we are the controlling shareholder, with a 33.58% ownership of the new bank’s total capital. In order to allow comparison with previous periods, historical pro forma data of the combined results of Itaú Unibanco and CorpBanca for the periods previous to the second quarter of 2016 will be presented in the Management Discussion & Analysis report.

The pro forma statements above mentioned were prepared considering all lines of the income statement, including 100% of Itaú CorpBanca’s result. The result related to the minority shareholders is shown in the “minority interests in subsidiaries” line, for both CorpBanca and Itaú Chile.

As the historical data was prepared to demonstrate, on a retroactively basis, the effect of a transaction occurred in a subsequent date, there are limits inherent to pro forma information. The historical data was provided for illustration purposes only and should not be taken as a demonstration of the result that would have been achieved if the merger had occurred on a previous date, nor do they indicate any future result of the combined company.

We present below pro forma information and indicators of Itaú Unibanco in order to allow analysis on the same basis of comparison.

Itaú Unibanco Pro forma Highlights

In R$ millions (except where indicated), end of period	2Q16			1Q16			2Q15			1H16			1H15
Results
Recurring Net Income		5,575			5,162			6,134			10,737			11,958
Operating Revenues ⁽¹⁾		26,478			26,884			26,532			53,362			52,491
Managerial Financial Margin ⁽²⁾		16,588			17,412			17,229			34,000			34,037
Performance
Recurring Return on Average Equity – Annualized ⁽³⁾		20.6	%		19.6	%		24.8	%		20.1	%		24.7	%
Recurring Return on Average Assets – Annualized ⁽⁴⁾		1.6	%		1.4	%		1.8	%		1.5	%		1.8	%
Nonperforming Loans Ratio (90 days overdue) – Total		3.6	%		3.5	%		3.0	%		3.6	%		3.0	%
Nonperforming Loans Ratio (90 days overdue) – Brazil		4.5	%		4.4	%		3.6	%		4.5	%		3.6	%
Nonperforming Loans Ratio (90 days overdue) - Latin America		1.1	%		1.1	%		1.1	%		1.1	%		1.1	%
Coverage Ratio (Provision for Loan Losses/NPL 90 days overdue)		215	%		210	%		187	%		215	%		187	%
Efficiency Ratio (ER) ⁽⁵⁾		46.7	%		44.0	%		43.2	%		45.3	%		43.5	%
Risk-Adjusted Efficiency Ratio (RAER) ⁽⁵⁾		68.6	%		72.2	%		62.1	%		70.4	%		62.6	%
Balance Sheet
Total Assets		1,395,856			1,397,631			1,332,655
Total Credit Portfolio, including Sureties and Endorsements		573,003			600,705			608,285
Deposits + Debentures + Securities + Borrowings and Onlending ⁽⁶⁾		653,528			703,052			645,390
Loan Portfolio/Funding ⁽⁶⁾		76.2	%		74.4	%		82.0	%
Stockholders’ Equity		110,587			106,647			100,711
Other
Assets Under Administration		835,194			807,267			709,111
Total Number of Employees		96,460			97,043			99,501
Brazil		82,213			82,871			85,028
Abroad		14,247			14,172			14,473
Branches and CSBs – Client Service Branches		5,154			5,215			5,298
ATM – Automated Teller Machines ⁽⁷⁾		26,588			26,751			27,303

Itaú Unibanco Holding S.A. Highlights - As disclosed (Does not consider historical CorpBanca’s information)

In R$ millions (except where indicated), end of period	2Q16			1Q16			2Q15			1H16			1H15
Highlights
Recurring Net Income per Share (R$) ⁽⁸⁾		0.94			0.88			1.02			1.82			1.99
Net Income per Share (R$) ⁽⁸⁾		0.93			0.88			1.00			1.81			1.95
Number of Outstanding Shares at the end of period – in thousands ⁽⁹⁾		5,929,726			5,928,684			5,994,053			5,929,726			5,994,053
Book Value per Share (R$)		18.65			17.99			16.80			18.65			16.80
Dividends and Interest Owns Capital net of Taxes ⁽¹⁰⁾		1,532			1,012			1,205			2,544			2,525
Dividends and Interest Owns Capital net of Taxes ⁽¹⁰⁾ per Share (R$) (*)		0.26			0.17			0.20			0.43			0.42
Market Capitalization (11)		179,256			185,390			186,742			179,256			186,742
Market Capitalization ⁽¹¹⁾ (US$ million)		55,846			52,092			60,181			55,846			60,181
Solvency Ratio - Prudential Conglomerate (BIS Ratio)		18.1	%		17.7	%		17.2	%		18.1	%		17.2	%
Common Equity Tier I		14.8	%		14.3	%		13.2	%		14.8	%		13.2	%
Estimated BIS III (Common Equity Tier I) - Full Implementation of BIS III (12)		14.1	%		12.6	%		12.7	%		14.1	%		12.7	%
Indicators
EMBI Brazil Risk		350			409			302			350			302
CDI rate – In the Period (%)		3.4	%		3.2	%		3.1	%		6.7	%		6.0	%
Dollar Exchange Rate – Quotation in R$		3.2098			3.5589			3.1026			3.2098			3.1026
Dollar Exchange Rate – Change in the Period (%)		-9.8	%		-8.9	%		-3.3	%		-17.8	%		16.8	%
EuroExchange Rate – Quotation in R$		3.5414			4.0539			3.4603			3.5414			3.4603
Euro Exchange Rate – Change in the Period (%)		-12.6	%		-4.6	%		0.4	%		-16.7	%		7.2	%
IGP-M – In the Period (%)		2.9	%		3.0	%		2.3	%		5.9	%		4.3	%

Note: (1) Operating Revenues are the sum of Managerial Financial Margin, Commissions and Fees, Other Operating Income and Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses; (2) Detailed on Managerial Financial Margin section; (3) Annualized Return was calculated by dividing Net Income by Average Stockholders’ Equity. The quotient was multiplied by the number of periods in the year to derive the annualized rate. The calculation bases of returns were adjusted by the amount of dividends that has not yet been approved at shareholders’ or Board meetings, proposed after the balance sheet closing date; (4) Return was calculated by dividing Recurring Net Income by Average Assets; (5) For further details on the calculation methodologies of both Efficiency and Risk-Adjusted Efficiency ratios, please refer to Non-Interest Expenses section; (6) As detailed on Other Balance Sheet Information section; (7) Includes ESBs (electronic service branches) and service points at third parties’ locations; (8) Calculated based on the weighted average number of outstanding shares for the period; (9) The number of outstanding shares was adjusted to reflect the share bonus of 10% granted on July 17, 2015; (10) IOC – Interest on capital. Declared amounts paid/accrued; (11) Total number of outstanding shares (common and non-voting shares) multiplied by the average price of the non-voting share on the last trading day in the period; (12) Takes into consideration the use of tax credit.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Net Income and Recurring Net Income

Our recurring net income totaled R$5,575 million in the second quarter of 2016 as a result of the elimination of non-recurring events, which are presented in the table below, from net income of R$5,518 million for the period.

Non-Recurring Events Net of Tax Effects

In R$ millions	2Q16			1Q16			2Q15			1H16			1H15
Recurring Net Income		5,575			5,162			6,134			10,737			11,958
Non-Recurring Events		(57	)		(51	)		(150	)		(108	)		(225	)
Contingencies Provision (a)		(31	)		(25	)		(86	)		(56	)		(128	)
Goodwill Amortization (b)		(156	)		(32	)		(35	)		(188	)		(96	)
Program for Settlement or Installment Payment of Taxes (c)		-			12			14			12			42
Impairment (d)		(9	)		-			(43	)		(9	)		(43	)
Liability Adequacy Test (e)		140			-			-			140			-
Other		-			(6	)		-			(6	)		-
Net Income		5,518			5,111			5,983			10,630			11,732
CorpBanca's Pro Forma Consolidation Effects		-			(72	)		(1	)		(72	)		15
Net Income as Reported		5,518			5,184			5,984			10,702			11,717

Note: The impacts of the non-recurring events, described above, are net of tax effects – further details are presented in Note 22-K of the Financial Statements.

Non-Recurring Events

(a) Contingencies Provision: Recognition of provisions for tax and social security lawsuits and losses arising from economic plans in effect in Brazil during the 1980's.

(b) Goodwill Amortization: Effect of the goodwill amortization generated by acquisitions made by the Conglomerate.

(c) Program for the Settlement or Installment Payment of Taxes: Effects of our adherence to the Program for the Settlement or Installment Payment of Federal and Municipal Taxes.

(d) Impairment: Adjustment in the carrying amount of assets in order to reflect its fair value.

(e) Liability Adequacy Test: Technical provisions adjustment resulting from the liability adequacy test.

Managerial Income Statement

We apply consolidation criteria for the managerial results that affect only the breakdown of accounts and, therefore, do not affect net income. These effects are shown in the table on the following page ("Accounting and Managerial Statements Reconciliation"). Additionally, we adjusted the tax effects of the hedges of investments abroad - originally accounted for as tax expenses (PIS and COFINS) and income tax and social contribution on net income and then reclassified to the financial margin - and non-recurring events.

Our strategy for the foreign exchange risk management of the capital invested abroad is aimed at mitigating, through financial instruments, the effects resulting from foreign exchange variations and takes into consideration the impact of all tax effects. In the second quarter of 2016, the Brazilian real appreciated 9.8% against the U.S. dollar and 12.6% against the Euro, compared with appreciations of 8.9% and 4.6%, respectively, in the previous quarter.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Accounting and Managerial Income Statements reconciliation for the past two quarters is presented below.

Accounting and Managerial Statements Reconciliation | 2^nd Quarter of 2016

In R$ millions	Accounting			Non-recurring Events			Tax Effect of Hedge			Managerial Reclassifications			Managerial
Operating Revenues		31,206			(230	)		(4,457	)		(41	)		26,478
Managerial Financial Margin		20,774			24			(4,457	)		247			16,588
Financial Margin with Clients		14,797			24			-			247			15,068
Financial Margin with the Market		5,977			-			(4,457	)		-			1,520
Commissions and Fees		8,397			-			-			(581	)		7,816
Result from Insurance, Pension Plan and Premium Bonds Operations Before Retained Claims and Selling Expenses		1,718			(254	)		-			610			2,074
Other Operating Income		183			-			-			(183	)		-
Equity in Earnings of Affiliates and Other Investments		138			-			-			(138	)		-
Non-operating Income		(5	)					-			5			-
Result from Loan Losses		(5,151	)		-			-			(214	)		(5,365	)
Provision for Loan Losses		(6,123	)		-			-			(214	)		(6,337	)
Recovery of Loans Written Off as Losses		972			-			-			0			972
Retained Claims		(352	)		-			-			-			(352	)
Other Operating Income/(Expenses)		(14,159	)		332			549			186			(13,093	)
Non-interest Expenses		(11,989	)		332			-			243			(11,415	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(2,008	)		-			549			(57	)		(1,516	)
Insurance Selling Expenses		(162	)		-			-			-			(162	)
Income before Tax and Profit Sharing		11,544			102			(3,908	)		(69	)		7,669
Income Tax and Social Contribution		(5,871	)		55			3,908			10			(1,899	)
Profit Sharing		(60	)		-			-			60			-
Minority Interests		(94	)		(101	)		-			-			(195	)
Net Income		5,518			57			-			-			5,575

Accounting and Managerial Statements Reconciliation | 1^st Quarter of 2016

In R$ millions	Accounting			Non- recurring Events			Tax Effect of Hedge			Managerial Reclassifications			CorpBanca's Consolidation Effects			Managerial
Operating Revenues		29,234			53			(3,093	)		(326	)		1,016			26,884
Managerial Financial Margin		19,573			64			(3,093	)		14			855			17,412
Financial Margin with Clients		14,743			64			-			14			855			15,675
Financial Margin with the Market		4,830			-			(3,093	)		-			-			1,737
Commissions and Fees		7,729			-			-			(560	)		161			7,331
Result from Insurance, Pension Plan and Premium Bonds Operations Before Retained Claims and Selling Expenses		1,584			-			-			557			-			2,141
Other Operating Income		200			(11	)		-			(189	)		-			-
Equity in Earnings of Affiliates and Other Investments		132			-			-			(132	)		-			-
Non-operating Income		16						-			(16	)		-			-
Result from Loan Losses		(6,364	)		-			-			(38	)		(571	)		(6,973	)
Provision for Loan Losses		(7,193	)		-			-			(38	)		(593	)		(7,824	)
Recovery of Loans Written Off as Losses		829			-			-			0			21			851
Retained Claims		(394	)		-			-			-			-			(394	)
Other Operating Income/(Expenses)		(12,660	)		52			370			312			(694	)		(12,620	)
Non-interest Expenses		(10,607	)		52			-			340			(694	)		(10,909	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,857	)		-			370			(28	)		-			(1,515	)
Insurance Selling Expenses		(196	)		-			-			-			-			(196	)
Income before Tax and Profit Sharing		9,816			105			(2,722	)		(53	)		(249	)		6,896
Income Tax and Social Contribution		(4,529	)		(53	)		2,722			14			107			(1,739	)
Profit Sharing		(39	)		-			-			39						-
Minority Interests		(64	)		-			-			-			70			6
Net Income		5,184			51			-			-			(72	)		5,162

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

We present below the income statement from a standpoint that highlights Operating Revenues, which is composed by the sum of the main accounts in which revenues from banking, insurance, pension plan and premium bonds operations are recorded.

Income Statement | Operating Revenues Perspective

In R$ millions	2Q16			1Q16			change					2Q15			change					1H16			1H15			change
Operating Revenues		26,478			26,884			(405	)	-1.5	%		26,532			(53	)	-0.2	%		53,362			52,491			871		1.7	%
Managerial Financial Margin		16,588			17,412			(824	)	-4.7	%		17,229			(641	)	-3.7	%		34,000			34,037			(36	)	-0.1	%
Financial Margin with Clients		15,068			15,675			(607	)	-3.9	%		15,668			(600	)	-3.8	%		30,743			30,604			138		0.5	%
Financial Margin with the Market		1,520			1,737			(217	)	-12.5	%		1,561			(41	)	-2.6	%		3,258			3,432			(175	)	-5.1	%
Commissions and Fees		7,816			7,331			486		6.6	%		7,105			711		10.0	%		15,147			14,141			1,006		7.1	%
Result from Insurance, Pension Plan and Premium Bonds Operations Before Retained Claims and Selling Expenses		2,074			2,141			(67	)	-3.1	%		2,198			(123	)	-5.6	%		4,215			4,314			(99	)	-2.3	%
Result from Loan Losses		(5,365	)		(6,973	)		1,608		-23.1	%		(4,605	)		(760	)	16.5	%		(12,338	)		(9,238	)		(3,101	)	33.6	%
Provision for Loan Losses		(6,337	)		(7,824	)		1,487		-19.0	%		(5,768	)		(569	)	9.9	%		(14,161	)		(11,482	)		(2,679	)	23.3	%
Recovery of Loans Written Off as Losses		972			851			121		14.3	%		1,163			(191	)	-16.4	%		1,823			2,244			(422	)	-18.8	%
Retained Claims		(352	)		(394	)		42		-10.7	%		(385	)		33		-8.5	%		(746	)		(753	)		7		-0.9	%
Operating Margin		20,761			19,516			1,245		6.4	%		21,541			(780	)	-3.6	%		40,277			42,500			(2,223	)	-5.2	%
Other Operating Income/(Expenses)		(13,093	)		(12,620	)		(472	)	3.7	%		(12,279	)		(813	)	6.6	%		(25,713	)		(24,431	)		(1,282	)	5.2	%
Non-interest Expenses		(11,415	)		(10,909	)		(505	)	4.6	%		(10,566	)		(848	)	8.0	%		(22,324	)		(20,997	)		(1,327	)	6.3	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,516	)		(1,515	)		(1	)	0.0	%		(1,445	)		(71	)	4.9	%		(3,031	)		(2,900	)		(131	)	4.5	%
Insurance Selling Expenses		(162	)		(196	)		34		-17.3	%		(268	)		106		-39.6	%		(358	)		(534	)		177		-33.1	%
Income before Tax and Minority Interests		7,669			6,896			773		11.2	%		9,262			(1,594	)	-17.2	%		14,564			18,069			(3,505	)	-19.4	%
Income Tax and Social Contribution		(1,899	)		(1,739	)		(159	)	9.2	%		(2,733	)		834		-30.5	%		(3,638	)		(5,408	)		1,770		-32.7	%
Minority Interests in Subsidiaries		(195	)		6			(201	)	-			(396	)		201		-50.7	%		(189	)		(703	)		514		-73.1	%
Recurring Net Income		5,575			5,162			413		8.0	%		6,134			(559	)	-9.1	%		10,737			11,958			(1,220	)	-10.2	%

We present below the income statement from the standpoint that highlights the Managerial Financial Margin.

Income Statement | Managerial Financial Margin Perspective

In R$ millions	2Q16			1Q16			change					2Q15			change					1H16			1H15			change
Managerial Financial Margin		16,588			17,412			(824	)	-4.7	%		17,229			(641	)	-3.7	%		34,000			34,037			(36	)	-0.1	%
Financial Margin with Clients		15,068			15,675			(607	)	-3.9	%		15,668			(600	)	-3.8	%		30,743			30,604			138		0.5	%
Financial Margin with the Market		1,520			1,737			(217	)	-12.5	%		1,561			(41	)	-2.6	%		3,258			3,432			(175	)	-5.1	%
Result from Loan Losses		(5,365	)		(6,973	)		1,608		-23.1	%		(4,605	)		(760	)	16.5	%		(12,338	)		(9,238	)		(3,101	)	33.6	%
Provision for Loan Losses		(6,337	)		(7,824	)		1,487		-19.0	%		(5,768	)		(569	)	9.9	%		(14,161	)		(11,482	)		(2,679	)	23.3	%
Recovery of Loans Written Off as Losses		972			851			121		14.3	%		1,163			(191	)	-16.4	%		1,823			2,244			(422	)	-18.8	%
Net Result from Financial Operations		11,223			10,439			784		7.5	%		12,624			(1,401	)	-11.1	%		21,662			24,799			(3,137	)	-12.7	%
Other Operating Income/(Expenses)		(3,554	)		(3,543	)		(11	)	0.3	%		(3,362	)		(193	)	5.7	%		(7,097	)		(6,730	)		(368	)	5.5	%
Commissions and Fees		7,816			7,331			486		6.6	%		7,105			711		10.0	%		15,147			14,141			1,006		7.1	%
Result from Insurance, Pension Plan and Premium Bonds Operations		1,560			1,551			9		0.6	%		1,544			16		1.0	%		3,111			3,026			85		2.8	%
Non-interest Expenses		(11,415	)		(10,909	)		(505	)	4.6	%		(10,566	)		(848	)	8.0	%		(22,324	)		(20,997	)		(1,327	)	6.3	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,516	)		(1,515	)		(1	)	0.0	%		(1,445	)		(71	)	4.9	%		(3,031	)		(2,900	)		(131	)	4.5	%
Income before Tax and Minority Interests		7,669			6,896			773		11.2	%		9,262			(1,594	)	-17.2	%		14,564			18,069			(3,505	)	-19.4	%
Income Tax and Social Contribution		(1,899	)		(1,739	)		(159	)	9.2	%		(2,733	)		834		-30.5	%		(3,638	)		(5,408	)		1,770		-32.7	%
Minority Interests in Subsidiaries		(195	)		6			(201	)	-			(396	)		201		-50.7	%		(189	)		(703	)		514		-73.1	%
Recurring Net Income		5,575			5,162			413		8.0	%		6,134			(559	)	-9.1	%		10,737			11,958			(1,220	)	-10.2	%

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Net Income

The recurring net income for the second quarter of 2016 amounted to R$5,575 million, representing an increase of 8.0% from the previous quarter and a 9.1% decrease from the same period of the previous year.

The main positive highlights in the quarter compared to the previous quarter were the 6.6% increase in our commissions and fees, the 19.0% decrease in the provision for loan losses and the 14.3% increase in recovery of loans written off as losses.

The positive highlights were partially offset by the 4.7% decrease in the managerial financial margin and the 4.6% increase in non-interest expenses.

In the first half of 2016, recurring net income was R$10,737 million, down 10.2% from the same period of the previous year, mainly driven by the increase of 23.3% in provision for loan losses.

Return on Average Equity

The annualized recurring return on average equity reached 20.6% in the second quarter of 2016. Stockholders’ equity totaled R$110.6 billion.

Annualized recurring return on average assets reached 1.6% in the second quarter of 2016, up 20 basis points from the previous quarter.

Operating Revenues

In the second quarter of 2016, operating revenues, representing revenues from banking, insurance, pension plan and premium bonds operations, totaled R$26,478 million, with decreases of 1.5% and 0.2% compared to the previous quarter and to the same period of the previous year, respectively. The main components of operating revenues and other items of the income statement are presented ahead.

Managerial Financial Margin

The managerial financial margin for the second quarter of 2016 totaled R$16,588 million, a decrease of R$824 million when compared to the previous quarter, mainly due to the decrease of R$607 million in our financial margin with clients. This margin was impacted by securities’ impairment in the amount of R$539 million. Our financial margin with the market decreased R$217 million in the quarter.

The managerial financial margin remained relatively stable when compared to the first half of 2015, with a decrease of R$36 million. This decrease was due to the R$175 million reduction in the financial margin with the market, which was partially offset by the R$138 million increase in the financial margin with clients.

Result from Loan Losses

The result from loan losses, net of recovery of credits, decreased 23.1% from the previous quarter, totaling R$5,365 million in the quarter. This decrease was mainly due to a 19.0% (R$1,487 million) reduction in our provision for loan losses. In the second quarter of 2016, there was a R$762 million reduction in the complementary allowance for loan losses. Additionally, the recovery of loans written off as losses increased 14.3% (R$121 million).

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

NPL Creation

¹ Includes Latin America

In the second quarter of 2016, the NPL Creation, which is the balance of loans that became over 90 days overdue in the quarter, reached R$5,329 million, down 11.4% compared to the previous period, mainly driven by the 27.9% reduction of the Wholesale segment NPL Creation, which totaled R$1,059 million in this quarter. There were also reductions in the Retail and Latin America segments.

Commissions and Fees

In the second quarter of 2016, commissions and fees increased 6.6% when compared to the previous period, mainly driven by higher revenues from credit card and current account services. Compared to the same period of the previous year, these commissions and fees recorded a 10.0% increase.

When compared to the first half of 2015, these revenues increased R$1,006 million (7.1%).

Result from Insurance, Pension Plan and Premium Bonds

In the second quarter of 2016, the result from insurance, pension plan and premium bonds from core activities, which consist of mass-market products related to life, property, credit, pension and premium bonds reached R$1,467 million, an increase of 1.4% from previous quarter and the same 1.4% from the second quarter of 2015. The loss ratio from core activities reached 26.6% this quarter.

Non-Interest Expenses

In the second quarter of 2016, non-interest expenses increased 4.6% from the first quarter of 2016. Personnel expenses were R$250 million higher, mainly driven by the lower number of employees on vacation in the second quarter of 2016, and administrative expenses were R$299 million higher when compared to the previous quarter.

Compared to the first half of 2015, non-interest expenses increased 6.3%. Excluding operations abroad, this increase would have been 4.6% in the period.

Efficiency Ratio and Risk-Adjusted Efficiency Ratio ^(*)

(*) Calculation criteria are detailed on Non-Interest Expenses section.

In the 12-month period, the efficiency ratio, according to the criteria that include all expenses except for the result from loan losses, reached 45.3%, an increase of 30 basis points from the same period of the previous year. In this period, our expenses grew 9.0%, in line with the accumulated inflation (8.8% - IPCA). On the other hand, our revenues increased 8.2%, mainly as a result of the challenging economic scenario.

In the second quarter of 2016, the efficiency ratio reached 46.7%, a 270 basis point increase from the previous quarter, mainly due to increases in non-interest expenses (4.6%).

In the 12-month period, the risk-adjusted efficiency ratio, which also considers the result from loan losses, reached 67.2%, an increase of 490 basis points compared to the previous year. In the second quarter of 2016, the risk-adjusted efficiency ratio reached 68.6%.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Balance Sheet | Assets

In R$ millions, end of period	2Q16			1Q16			change			2Q15			change
Current and Long-term Assets		1,368,692			1,371,979			-0.2	%		1,308,320			4.6	%
Cash and Cash Equivalents		21,852			26,910			-18.8	%		23,908			-8.6	%
Short-term Interbank Investments		270,899			237,828			13.9	%		192,785			40.5	%
Securities and Derivative Financial Instruments		358,267			357,230			0.3	%		349,670			2.5	%
Interbank and Interbranch Accounts		73,626			72,222			1.9	%		66,982			9.9	%
Loan, Lease and Other Loan Operations		497,959			523,226			-4.8	%		529,103			-5.9	%
(Allowance for Loan Losses)		(38,470	)		(38,241	)		0.6	%		(29,796	)		29.1	%
Other Assets		184,560			192,805			-4.3	%		175,667			5.1	%
Permanent Assets		27,165			25,652			5.9	%		24,335			11.6	%
Total Assets		1,395,856			1,397,631			-0.1	%		1,332,655			4.7	%

At the end of the second quarter of 2016, our assets totaled R$1.4 trillion, a decrease of 0.1% (R$ 1.8 billion) from the previous quarter. The main changes are presented below:

Compared to the previous year, our assets increased 4.7% (R$63.2 billion):

Balance Sheet | Liabilities and Equity

In R$ millions, end of period	2Q16		1Q16		change			2Q15		change
Current and Long-Term Liabilities		1,270,244		1,277,430		-0.6	%		1,220,719		4.1	%
Deposits		309,032		333,247		-7.3	%		340,554		-9.3	%
Deposits Received under Securities Repurchase Agreements		353,662		323,012		9.5	%		308,173		14.8	%
Fund from Acceptances and Issue of Securities		84,230		86,468		-2.6	%		63,014		33.7	%
Interbank and Interbranch Accounts		11,067		9,823		12.7	%		10,448		5.9	%
Borrowings and Onlendings		85,261		104,260		-18.2	%		99,371		-14.2	%
Derivative Financial Instruments		34,506		33,267		3.7	%		26,999		27.8	%
Technical Provisions for Insurance, Pension Plans and Premium Bonds		144,057		137,677		4.6	%		121,652		18.4	%
Other Liabilities		248,429		249,677		-0.5	%		250,507		-0.8	%
Deferred Income		1,724		1,847		-6.6	%		1,499		15.0	%
Minority Interest in Subsidiaries		13,301		11,707		13.6	%		9,727		36.7	%
Stockholders' Equity		110,587		106,647		3.7	%		100,711		9.8	%
Total Liabilities and Equity		1,395,856		1,397,631		-0.1	%		1,332,655		4.7	%

The main changes in liabilities at the end of the second quarter of 2016 compared to the previous quarter are presented in the chart below:

Compared to the previous year, the main changes are highlighted as follows:

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Credit Portfolio with Endorsements, Sureties and Private Securities

At the end of the second quarter of 2016, our total credit portfolio, including sureties, endorsements and private securities, reached R$608,606 million, reducing 4.5% from the previous quarter and 5.4% from the same period of the previous year.

Excluding the effect of the foreign exchange variation, our credit portfolio would have decreased 1.6% in the quarter and 5.2% in the 12-month period.

In R$ millions, end of period	2Q16		1Q16		change			2Q15		change
Individuals		182,626		184,226		-0.9	%		187,318		-2.5	%
Credit Card Loans		54,455		54,867		-0.8	%		56,247		-3.2	%
Personal Loans		28,703		29,159		-1.6	%		30,016		-4.4	%
Payroll Loans ⁽¹⁾		46,489		46,742		-0.5	%		45,517		2.1	%
Vehicle Loans		16,700		18,105		-7.8	%		23,786		-29.8	%
Mortgage Loans		36,280		35,353		2.6	%		31,753		14.3	%
Companies		251,136		264,896		-5.2	%		285,121		-11.9	%
Corporate Loans		188,897		199,273		-5.2	%		214,687		-12.0	%
Very Small, Small and Middle Market Loans ⁽²⁾		62,239		65,622		-5.2	%		70,434		-11.6	%
Latin America ⁽³⁾		139,241		151,583		-8.1	%		135,845		2.5	%
Total with Endorsements and Sureties		573,003		600,705		-4.6	%		608,285		-5.8	%
Corporate - Private Securities ⁽⁴⁾		35,603		36,768		-3.2	%		34,850		2.2	%
Total with Endorsements, Sureties and Private Securities		608,606		637,472		-4.5	%		643,134		-5.4	%
Total with Endorsements, Sureties and Private Securities ⁽⁴⁾ (ex-foreign exchange rate variation)		608,606		618,332		-1.6	%		642,008		-5.2	%
Endorsements and Sureties		75,044		77,479		-3.1	%		79,182		-5.2	%
Individuals		463		514		-9.9	%		465		-0.4	%
Corporate		64,127		65,095		-1.5	%		67,599		-5.1	%
Very Small, Small and Middle Market		2,494		3,210		-22.3	%		3,172		-21.4	%
Latin America ⁽³⁾		7,959		8,660		-8.1	%		7,946		0.2	%

(1) Includes operations originated by the institution and acquired operations. (2) Includes Rural Loans to Individuals. (3) Includes Argentina, Chile, Colombia, Panama, Paraguay and Uruguay. (4) Includes Debentures, CRI and Commercial Papers. (5) Calculated based on the conversion of the foreign currency portfolio (U.S. dollar and currencies of Latin America). Note: the Mortgage and Rural Loan portfolios from the companies segment are allocated according to the client’s size. For further details, please refer to page 18.

Credit Portfolio – Currency Breakdown

On June 30, 2016, R$194.9 billion of our total credit assets were denominated in, or indexed to foreign currencies. This portion decreased 9.8% in this quarter, mainly due to the appreciation of the Brazilian real against the U.S. dollar and to Latin American countries currencies.

NPL Ratio (90 days overdue)

Includes units abroad ex-Latin America

At the end of the second quarter of 2016, the NPL ratio for operations overdue 90 days reached 3.6%, an increase of 10 basis points from the previous quarter and of 60 basis points from the same period of 2015. In Brazil, the NPL ratio reached 4.5% in the quarter, a 10 basis point increase from the previous quarter. In Latin America, this ratio remained stable in the quarter and reached 1.1%.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

2016 Forecast

We present below our reviewed forecast that considers CorpBanca´s pro forma consolidation effects:

	Consolidated		Brazil ¹
	Previous	Reviewed	Previous	Reviewed

Total Credit Portfolio ²	From -0.5% to 4.5%	From -10.5% to -5.5%	From -1.0% to 3.0%	From -11.0% to -6.0%

Financial Margin with Clients	From 2.0% to 5.0%	From -2.5% to 0.5%	From 1.0% to 4.0%	From -1.0% to 2.0%

Provision for Loan Losses Net of Recovery of Loans	Between R$22.0 bn and R$25.0 bn	Between R$23.0 bn and R$26.0 bn	Between R$21.0 bn and R$24.0 bn	Between R$21.0 bn and R$24.0 bn

Commissions and Fees and Result from Insurance Operations³	From 6.0% to 9.0%	From 4.0% to 7.0%	From 4.5% to 7.5%	From 4.5% to 7.5%

Non-Interest Expenses	From 5.0% to 7.5%	From 2.0% to 5.0%	From 4.0% to 6.5%	From 2.5% to 5.5%

(1) Includes units abroad ex-Latin America.

(2) Includes endorsements, sureties and private securities;

(3) Commissions and Fees (+) Income from Insurance, Pension Plan and Premium Bonds Operations (-) Expenses for Claims (-) Insurance, Pension Plan and Premium Bonds Selling Expenses;

Although the growth plans and projections of results presented above are based on management assumptions and information available in the market to date, these expectations involve inaccuracies and risks that are difficult to anticipate and there may be, therefore, results or consequences that differ from those anticipated. This information is not a guarantee of future performance. The use of these expectations should take into consideration the risks and uncertainties that involve any activities and that are beyond our control. These risks and uncertainties include, but are not limited to, our ability to perceive the dimension of the synergies projected and their timing, political and economic changes, volatility in interest and foreign exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products, prices and changes in tax legislation, among others.

Itaú Unibanco Holding S.A.

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Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Managerial Financial Margin

In the second quarter of 2016, our managerial financial margin totaled R$16,588 million, a 4.7% decrease compared to the previous quarter.

Compared to the same period of the previous year, the managerial financial margin decreased 3.7%.

For comparison purposes, CorpBanca´s information were segregated from the consolidated information, as presented in the table below.

The main drivers of these variations are presented below:

In R$ millions	2Q16		1Q16		change					2Q15		change
Financial Margin with Clients		14,389		14,820		(431	)	-2.9	%		14,673		(284	)	-1.9	%
Spread-Sensitive Operations		12,710		13,198		(488	)	-3.7	%		13,066		(356	)	-2.7	%
Working Capital and Other		1,679		1,622		57		3.5	%		1,607		72		4.5	%
Financial Margin with the Market		1,520		1,737		(217	)	-12.5	%		1,561		(41	)	-2.6	%
CorpBanca		679		855		(176	)	-20.6	%		994		(316	)	-31.7	%
Total		16,588		17,412		(824	)	-4.7	%		17,229		(641	)	-3.7	%

Managerial Financial Margin with Clients

The managerial financial margin with clients consists of revenues generated by the use of financial products by clients, including both account and non-account holders.

For clarity purposes, we classify these operations into two different groups: i) financial margin of spread-sensitive operations and ii) working capital and other.

In the second quarter of 2016, the managerial financial margin with clients totaled R$14,389 million, a 2.9% decrease from the previous quarter and a 1.9% decrease compared to the same period of the previous year. This quarter’s financial margin with clients was impacted by securities impairment in the amount of R$539 million. Excluding this effect, the financial margin with clients would have increased 0.7% in the quarter and 1.7% in the annual comparison.

Spread-Sensitive Operations

The financial margin of spread-sensitive operations, which includes the results from credit assets, non-credit assets and liabilities, totaled R$12,710 million in the second quarter of 2016, a decrease of 3.7% and 2.7%, respectively, from the previous period and from the same period of the previous year. Excluding the above-mentioned effect of securities impairment, these revenues would have increased 0.4% compared to the previous quarter and 1.4% from the same period of the previous year, even considering the reduction of average balances of spread-sensitive operations in past quarters.

Annualized Rate of Spread-Sensitive Operations

In R$ millions	2Q16			1Q16			change
Average Balance		484,794			497,892			(13,098	)	-2.6	%
Financial Margin		12,710			13,198			(488	)	-3.7	%
Average Rate ( p.a. )		10.9	%		11.1	%				-20	bps

Working Capital and Other

In the second quarter of 2016, our financial margin of working capital and other totaled R$1,679 million, with a 3.5% increase from the first quarter of 2016, mainly explained by the 1.4% increase in average balance.

Annualized Rate of Working Capital and Other

In R$ millions	2Q16			1Q16			change
Average Balance		69,044			68,096			949	1.4	%
Financial Margin		1,679			1,622			57	3.5	%
Average Rate ( p.a. )		10.1	%		9.9	%			20	bps
CDI - Annualized Quarterly Rate		14.1	%		14.1	%			0	bps

Managerial Financial Margin with the Market

The financial margin with the market consists of treasury transactions that include Asset and Liability Management (ALM) and proprietary trading operations.

In this quarter, the financial margin with the market totaled R$1,520 million, mainly driven by the management of proprietary and structural positions in Brazil and abroad.

Financial Margin with the Market

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Managerial Financial Margin with Clients

In the second quarter of 2016, as a result of the previously mentioned changes, the annualized rate of managerial financial margin with clients, which excludes the financial margin with the market, reached 10.8%, a 10 basis point decrease compared to the previous quarter.

In this quarter, the annualized average rate of the risk-adjusted financial margin with clients reached 6.8%, up 70 basis points from the first quarter of 2016, mainly driven by lower provision for loan losses.

The annualized average rate of spread-sensitive operations reached 10.9% in this quarter, a decrease of 20 basis point compared to the previous quarter.

In the second quarter of 2016, the annualized average rate of the financial margin with spread-sensitive operations reached 6.3%, an increase of 80 basis points from the previous quarter, mainly driven by lower provisions for loan losses.

Table data does not consider CorpBanca	2Q16								1Q16
In R$ millions, end of period	Average Balance		Financial Margin			Average Rate (p.a.)			Average Balance		Financial Margin			Average Rate (p.a.)
Spread-Sensitive Operations		484,794		12,710			10.9	%		497,892		13,198			11.1	%
Working Capital and Other		69,044		1,679			10.1	%		68,096		1,622			9.9	%
Financial Margin with Clients		553,838		14,389			10.8	%		565,988		14,820			10.9	%
Provision for Loan Losses				(6,109	)							(7,231	)
Recovery of Loans Written Off as Losses				938								829
Financial Margin of Spread-Sensitive Operations after Provisions for Credit Risk		484,794		7,538			6.3	%		497,892		6,796			5.5	%
Financial Margin with Clients after Provisions for Credit Risk		553,838		9,218			6.8	%		565,988		8,418			6.1	%

The financial margin average rates with clients and with spread-sensitive operations without the impact of securities impairment are presented below.

Financial Margin with Clients and Spread-Sensitive Operations before and after Provisions for Credit Risk

Composition of the Change in the Financial Margin with Clients

For a better understanding of the changes in our financial margin with clients, we segregated effects from changes in the volume of spread-sensitive operations, in the mix of products, clients and spread, and in working capital and other effects.

In the second quarter of 2016, the 2.9% decrease in our financial margin with clients was mainly driven by the impact of the securities impairment and the lower volumes of spread-sensitive operations.

Financial Margin with Clients Change

^(*)Balances do not include the effects of foreign exchange rate variations.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Credit Portfolio

Credit Portfolio by Product

In the table below, the loan portfolio is split into three groups: individuals, companies and Latin America. For a better understanding of these portfolios performance, the main product groups of each segment are presented below.

In R$ millions, end of period	2Q16		1Q16		change			2Q15		change
Individuals - Brazil ⁽¹⁾		182,459		183,962		-0.8	%		187,109		-2.5	%
Credit Card		54,455		54,867		-0.8	%		56,247		-3.2	%
Personal Loans		28,240		28,645		-1.4	%		29,551		-4.4	%
Payroll Loans ⁽²⁾		46,489		46,742		-0.5	%		45,517		2.1	%
Vehicles		16,700		18,105		-7.8	%		23,786		-29.8	%
Mortgage Loans		36,280		35,353		2.6	%		31,753		14.3	%
Rural Loans		296		250		18.8	%		256		16.0	%
Companies - Brazil ⁽¹⁾		184,218		196,340		-6.2	%		214,094		-14.0	%
Working Capital ⁽³⁾		90,965		96,087		-5.3	%		108,926		-16.5	%
BNDES/Onlending		38,605		43,293		-10.8	%		50,986		-24.3	%
Export / Import Financing		31,339		33,241		-5.7	%		30,862		1.5	%
Vehicles		3,580		3,945		-9.2	%		5,194		-31.1	%
Mortgage Loans		10,812		10,980		-1.5	%		10,630		1.7	%
Rural Loans		8,917		8,796		1.4	%		7,496		19.0	%
Latin America ⁽⁴⁾		131,281		142,923		-8.1	%		127,900		2.6	%
Total without Endorsements and Sureties		497,959		523,226		-4.8	%		529,103		-5.9	%
Endorsements and Sureties		75,044		77,479		-3.1	%		79,182		-5.2	%
Total with Endorsements and Sureties		573,003		600,705		-4.6	%		608,285		-5.8	%
Corporate Private Securities ⁽⁵⁾		35,603		36,768		-3.2	%		34,850		2.2	%
Total Risk		608,606		637,472		-4.5	%		643,134		-5.4	%

(1) Includes units abroad ex-Latin America. (2) Includes operations originated by the institution and acquired operations. (3) Also includes Overdraft, Receivables, Hot Money, Leasing, and other; (4) Includes Argentina, Chile, Colombia, Panama, Paraguay and Uruguay. (5) Includes Debentures, CRI and Commercial Paper.

At the end of the second quarter of 2016, our total credit portfolio (including sureties, endorsements and private securities) reached R$608,606 million, a decrease of 4.5% from the previous quarter and of 5.4% from the second quarter of the previous year. Excluding the effect of the foreign exchange variation and corporate private securities, the decrease in the total loan portfolio, without endorsements and sureties, would have been 1.5% compared to the previous quarter and 5.7% in the 12-month period.

Individuals loan portfolio reached R$182,459 million at the end of the second quarter of 2016, relatively stable compared to the previous quarter. In the quarter, the highlight was the 2.6% mortgage loan portfolio growth. On the other hand, in the same period, the vehicle portfolio decreased 7.8% mainly due to a lower demand, and personal loans recorded a 1.4% reduction.

Companies loan portfolio reduced 6.2% in the second quarter of 2016, totaling R$184,218 million. Changes in this portfolio were mainly driven by the decreases of 5.3% in working capital, of 10.8% in BNDES/Onlending, and of 5.7% in export/import financing. These decreases were mainly due to lower demand from companies, as a result of a more challenging economic scenario and to the appreciation of the Brazilian real against the U.S. dollar.

The Latin American portfolio decreased 8.1%, and reached R$131,281 million, when compared to the previous quarter and increased 2.6% in the 12-month period. Excluding the effect of the foreign exchange variation, the Latin America portfolio, without sureties, endorsements and private securities would have increased 0.3% when compared to the previous quarter and 5.4% in the 12-month period.

Credit Portfolio by Business Sector (including endorsements and sureties)

The companies portfolio breakdown by business sector, including Latin America, is listed below:

In R$ millions, end of period	2Q16		%
Public Sector		4,460		1.3	%
Private Sector \| Companies		338,170		98.7	%
Real Estate		24,635		7.2	%
Vehicles and auto parts		19,701		5.7	%
Food and beverage		18,589		5.4	%
Agribusiness and fertilizers		15,952		4.7	%
Transportation		15,312		4.5	%
Energy and water treatment		14,220		4.2	%
Steel and metallurgy		11,069		3.2	%
Sugar and Alcohol		9,568		2.8	%
Telecommunications		9,842		2.9	%
Banks and other financial institutions		14,849		4.3	%
Petrochemical and chemical		11,220		3.3	%
Capital Assets		7,695		2.2	%
Mining		8,486		2.5	%
Construction Material		7,043		2.1	%
Infrastructure work		10,098		2.9	%
Pharmaceutical and cosmetics		6,498		1.9	%
Oil and gas		7,041		2.1	%
Electronic and IT		5,973		1.7	%
Clothing and footwear		4,934		1.4	%
Services - Other		39,657		11.6	%
Commerce - Other		18,547		5.4	%
Industry - Other		7,342		2.1	%
Other		49,900		14.6	%
Total		342,630		100.0	%

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Credit Concentration

Our loan, lease and other credit operations, including endorsements and sureties, are spread over our loan portfolio in a way that only 19.2% of the credit risk was concentrated on the 100 largest debtors at the end of the second quarter of 2016. The credit concentration of the 100 largest debtors (group consolidated) is as follows:

In R$ millions, end of period	Risk		% of total credits		% of total Assets
Largest Debtor		4,090		0.7		0.3
10 Largest Debtors		31,781		5.5		2.3
20 Largest Debtors		48,773		8.5		3.5
50 Largest Debtors		82,220		14.3		5.9
100 Largest Debtors		110,163		19.2		7.9

Renegotiated Loan Operations

According to the rules of CMN Resolution No. 2,682/99, balances of all contracts that have had changes to their original contractual terms should be reported as renegotiated loans. We segregate renegotiated loans, taking into account all types of renegotiation, either non overdue, overdue, or coming from the recovery of loans written off as losses, by overdue period measured at the moment of renegotiation, as shown below:

¹Includes units abroad ex-Latin America

Note: Periods prior to Jun-16 do not consider CorpBanca’s information.

The NPL 90 days of total renegotiated loans operations reached 20.7% at the end of the second quarter of 2016, and the coverage ratio of these loans that are overdue for more than 90 days reached 210%. We present below these ratios evolutions:

Note: Periods prior to Jun-16 do not consider CorpBanca’s information.

On June 30, 2016, total renegotiated credits reached R$24,093 million, a R$1,385 million increase from the previous quarter, mainly due to the consolidation of CorpBanca. In Brazil, the balance of renegotiated credit reached R$22,667 million, up R$332 million in the quarter.

In R$ millions, end of period	Portfolio		LLP			%
Total Renegotiated Loans Operations		24,093		(10,436	)		43.3	%
Loan Operations Renegotiated when up to 90 days overdue*		13,953		(4,571	)		32.8	%
Loan Operations Renegotiated when over 90 days overdue *		10,140		(5,865	)		57.8	%

* Measured at the moment of renegotiation.

Further information on Note 8-d to our financial statements.

Loan operations renegotiated when 90 days overdue reached R$10,140 million. The coverage of those credits reached 57.8% in the second quarter of 2016.

Loan Portfolio by Origination Period

The chart below shows the evolution of our loan portfolio, excluding endorsements and sureties, by origination period (vintages).

Note: Periods prior to Jun-16 do not consider CorpBanca’s information.

Sale and Transfer of Financial Assets

In the second quarter of 2016, there were sale or transfer of financial assets to third parties, with no risks and benefits retention. These operations, in the amount of R$193 million, which were 100% provisioned, and of which only R$23 million were 90 days overdue and had no significant impact on result and on credit quality ratios.

In this quarter, we sold portfolios that were already written off as losses, with no risk retention. Credits totaling R$380 million were assigned with a positive impact on revenues from recovery of loans in the amount of R$48 million, and with a positive impact of R$26 million on net income.

Additionally, we sold portfolios that had already been written off as losses, with retention of risk, to affiliated company. An amount of R$5.0 billion was assigned for the management of Recovery company. This operation did not impact the net income.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Loan Portfolio Mix Evolution in Brazil (excluding endorsements and sureties)

Our loan portfolio mix presented below highlights its major components and their share in past quarters.

Loan Portfolio Mix - Companies

In the second quarter of 2016, the proportion of credits to very small, small and middle-market companies increased compared to credits to large companies in our loan portfolio mix. This increase was mainly driven by the impact of the appreciation of the Real against the U.S. dollar on the corporate loan portfolio.

Loan Portfolio Mix – Individuals

The evolution of our individuals loan portfolio mix in past periods shows the growth of payroll loan and mortgage loan portfolios, which currently represent the second and third largest balances in our individuals portfolio. The decrease in the share of vehicle financing is a result of the nominal balance reduction of this portfolio.

We present below additional information about Payroll Loans, Mortgage Loans and Vehicle Financing.

Payroll Loans

We operate in the payroll loans market through two different distribution channels: directly through our own distribution network (branches, CSBs and electronic channels) and through Banco Itaú BMG Consignado S.A., a financial institution controlled by us aimed at offering, distributing and marketing payroll loans. This operation started in December 2012 and enables us to expand our business in this segment, based on our values and transparency principles, following our good management practices and policies

Evolution of the Payroll Loan Portfolio and NPL

At the end of June 2016, total payroll loans reached R$46,489 million, a 2.1% increase in twelve months. The highlight is the 13.3% increase in the portfolio of loans to retirees and pensioners of the INSS compared to the end of June 2015.

Payroll loans originated by the branch network totaled R$16,828 million on June 30, 2016, a 7.3% increase in twelve months, whereas payroll loans originated by other channels reached R$29.660 million, a 0.6% decrease from the same period of the previous year.

Evolution of Payroll Loan Portfolio

Our strategy of higher growth in the INSS Beneficiaries segment, combined with the credit policies adopted, allowed the portfolio growth to be followed by a low delinquency level over the last two years. A slower pace of the portfolio growth drove the recent increase in 90-day NPL ratio.

90-day NPL ratio (Mar -12 = 100) | Total Payroll Loan Portfolio

Note: Comparable to the National Financial System information disclosed by the Brazilian Central Bank.

Evolution of the Share of Payroll Loans in Personal Loans

The increase in the payroll loans balance allowed for a higher share in personal loans, which reached 61.8% in this period from 60.3% in June 2015, a 150 basis point increase in twelve months.

Mortgage Loans

Our mortgage portfolio reached R$47,092 million at the end of June 2016. Our portfolio increased 1.6% in the quarter and 11.1% in the past twelve months. The individuals portfolio, totaling R$36,280 million at the end of this quarter, increased 2.6% from the previous quarter and 14.3% in twelve months. At the end of June 2016, the companies portfolio totaled R$10,812 million, down 1.5% from the previous quarter and up 1.7% in the past twelve months.

Evolution of the Mortgage Portfolio

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

In the second quarter of 2016, the volume of new mortgage loan financing contracts for individuals was R$2,121 million.

Origination Volume

In R$ millions	2Q16		1Q16		change			2Q15		change
Individuals		2,121		1,892		12.1	%		2,725		-22.2	%
Companies		168		154		9.0	%		1,149		-85.4	%
Total		2,288		2,046		11.8	%		3,873		-40.9	%

Source: ABECIP.

At the end of the second quarter of 2016, our individual mortgage loan portfolio collaterals, under the legal framework of fiduciary lien (alienação fiduciária), accounted for 99.7% of the portfolio. Since 2007, we have been using this framework for 100% of our contracts.

Our new financing contracts use the Equal Amortization System, through which decreasing installments lead to faster balance amortization, reducing the loan-to-value ratio (ratio of the amount of the financing to the value of the real estate property) at a faster pace than other amortization systems.

The portfolio loan-to-value (LTV) reached 41.8% at the end of June 2016, stable when compared to the same period of the previous year.

The average quarterly LTV of originated vintages reached 54.9%, up 10 basis points from the first quarter of 2016 and down 370 basis points from the second quarter of 2015.

Loan–to-value | Vintage and Portfolio

In the current period, the 90-day NPL of the vintage originated in December 2015 reached 0.09%, remaining at levels that demonstrate the high quality of the portfolio.

NPL over 90 (%) | Six months after origination

Note: Loan portfolio to individuals.

Vehicle Financing

Our portfolio of vehicle financing to individuals amounted to R$16,700 million and to companies, R$3,580 million, totaling R$20,280 million on June 30, 2016.

This quarter, the average amount of vehicle financing to individuals originated by the branch network, dealerships and car retailers was R$25.9 thousand, with an average term of 40 months and average down payment of 41%. Both the average down payment and the financing term remained relatively stable in the past quarters, remaining at conservative levels.

Average Term and Down Payment - Individuals

New loans granted to individuals through our branches, dealerships and car retailers totaled R$1,808 million, whereas new loans granted to companies totaled R$334 million in the second quarter of 2016.

The loan-to-value of our vehicle portfolio reached 69.6% at the end of June 2016, continuing the declining trend of the past few quarters.

Loan–to-value | Portfolio ^(*)

(*) Loans originated by dealerships and car retailers to individuals and companies.

The 90-day NPL of vintages originated in February 2016 reached 0.31% in June 2016.

NPL over 90 (%) | Four months after origination

In this quarter, we received a monthly average of 14.0 million visits through iCarros, a classified ads website that facilitates the purchase and sale of new and used vehicles, a 0.1% decrease compared to the same monthly average of the previous year.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Result from Loan Losses

In R$ millions	2Q16			1Q16			change				2Q15			change					1H16			1H15			change
Provision for Loan Losses		(6,337	)		(7,824	)		1,487	-19.0	%		(5,768	)		(569	)	9.9	%		(14,161	)		(11,482	)		(2,679	)	23.3	%
Recovery of Loans Written Off as Losses		972			851			121	14.3	%		1,163			(191	)	-16.4	%		1,823			2,244			(422	)	-18.8	%
Result from Loan Losses		(5,365	)		(6,973	)		1,608	-23.1	%		(4,605	)		(760	)	16.5	%		(12,338	)		(9,238	)		(3,101	)	33.6	%

In the second quarter of 2016, result from loan losses (provision expenses, net of recovery of loans written off as losses) totaled R$5,365 million, a 23.1% decrease from the previous quarter, mainly due to the decrease in provision for loan losses.

Provision for loan losses decreased 19.0% compared to the previous quarter, partially driven by the decrease in the provision for specific economic groups. In the second quarter of 2016, there was a R$762 million reduction in the complementary allowance for loan losses. The recovery of loans written off as losses increased 14.3% from the first quarter of 2016.

The result from loan losses totaled R$12,338 million in the first half of 2016, an increase of 33.6% from the same period of 2015. This increase was mainly driven by higher provision for loan losses, which totaled R$14,161 million in the period, mainly related to higher provisions for specific economic groups due to the challenging economic scenario. Additionally, income from recovery of loans written off as losses decreased 18.8% compared to the same period of the previous year, and reached R$1,823 million in the first half of 2016.

Provision for Loan Losses by Segment

Note: Retail Banking includes loan loss provisions expenses of Corporation segment. In the business segments section, Latin America is part of the Wholesale business.

In the second quarter of 2016, Retail segment provision for loan losses totaled R$4,395 million, a 1.7% increase from the previous quarter. In the Wholesale segment, provision for loan losses totaled R$1,546 million, a decrease of R$1,182 million, or 43.3%, from the previous quarter, mainly due to the decrease in the provision for specific economic groups, in addition to the transfer of complementary allowance to the required by Resolution No. 2,682 allowance. In Latin America, provision for loan losses amounted to R$396 million.

Provision for Loan Losses and Loan Portfolio

In the second quarter of 2016, the ratio of provision for loan losses to loan portfolio reached 5.0%, a decrease of 80 basis points from the previous quarter. The ratio of result from loan losses to loan portfolio reached 4.2% in this quarter, a 100 basis point decrease compared to the previous quarter.

Result from Loan Losses and Loan Portfolio

(*) Loan portfolio average balance of the two previous quarters.

Allowance for Loan Losses and Loan Portfolio

¹ Includes units abroad ex-Latin America.

² Excludes Brazil.

At the end of June 2016, the loan portfolio decreased 4.8% from March 2016, reaching R$497,959 million, whereas the allowance for loan losses increased 0.6% in the quarter, totaling R$38,470 million.

The ratio of total allowance for loan losses to loan portfolio went from 7.3% at the end of March 2016 to 7.7% at the end of June 2016, an increase of 40 basis points in the period, mainly driven by the reduction of the loan portfolio.

The complementary allowance totaled R$10,224 million at the end of the second quarter of 2016, a 6.9% or R$762 million decrease from March 2016. This balance includes allowances in the amount of R$879 million recognized for endorsements and sureties.

The ratio of allowance for loan losses excluding complementary allowance to loan portfolio reached 5.7% on June 30, 2016, up 50 basis points from March 2016.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

We present below the allowance for loan losses allocation by type of risk:

Overdue Risk: Allowances for overdue loans, as required by the Brazilian Central Bank, related to the minimum provision required for overdue operations according to CMN Resolution No. 2,682/1999. We also present the amount for loans 100% provisioned and for loans that do not require 100% of provision.

Aggravated Risk: Allowances for overdue loans with aggravated risk ratings above the minimum required by the Brazilian Central Bank, and allowances for renegotiated loans. Regarding renegotiated loans, we segregate allowances over the minimum required by the Brazilian Central Bank for overdue operations and allowances for non-overdue operations.

Potential Risk: Allowances for expected losses related to Retail Segment operations and allowances for potential losses related to Wholesale segment operations.

¹ Includes units abroad ex-Latin America.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Delinquency Ratios

Nonperforming Loans

The portfolio of credits overdue for over 90 days decreased 1.8% from March 2016. Considering only Brazil¹ operations, this portfolio decreased 1.0% from March 2016, mainly driven by a reduction in the individuals segment.

The portfolio of credits overdue for over 90 days increased 12.5% from June 2015. Considering only Brazil¹ operations, the portfolio of credits overdue for over 90 days increased 13.5% from the same period of the previous year, mainly driven by the growth in individuals, and very small, small and middle-market companies segments.

NPL Ratio (%) | over 90 days

The NPL ratio of credits overdue for over 90 days increased 10 basis points compared to the previous quarter, and reached 3.6% in the end of June 2016. Compared to the same period of 2015, the ratio increased 60 basis points.

In Brazil¹, this ratio reached 4.5% in June 2016, with an increase of 10 basis points compared to the previous quarter, mainly due to the increased delinquency rates for very small, small and middle-market companies.

Regarding the Latin America portfolio, the ratio was 1.1%, remaining stable compared to the previous quarter.

¹ Includes units abroad ex-Latin America.

² Excludes Brazil.

NPL Ratio - Brazil¹ (%) | over 90 days

In June 2016, the NPL ratio over 90 days for individuals was 5.9%, down 10 basis points from the previous quarter, mainly driven by lower delinquency rates in credit cards and vehicles portfolios.

The increases in the NPL ratio of 10 basis points for large companies and of 40 basis points for very small, small and middle-market companies compared to March 2016 are mainly driven by the decreases in these portfolios by 7.1% and 4.4%, respectively.

NPL Ratio - Brazil¹ (%) | 15 to 90 days

In June 2016, short-term delinquency of individuals portfolios, measured based on the balance of operations overdue from 15 to 90 days (NPL 15-90), reached 4.2%, remaining stable when compared to the previous quarter. For large companies, this ratio reached 2.3%, an increase of 80 basis points compared to March 2016. This increase was concentrated in only one economic group of the segment, which is already fully provisioned. Excluding this particular case, the NPL 15-90 of large companies would have been 1.0% in June 2016 and would have decreased 50 basis points in the quarter. For very small, small and middle-market companies, the ratio was 4.3%, an increase of 10 basis points from March 2016.

NPL Ratio by Activity Sector

	NPL									NPL
	15-90 days									Over 90 days
	Total			Brazil¹						Total			Brazil¹
End of period	2Q16			2Q16			1Q16			2Q16			2Q16			1Q16
Public Sector		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Private Sector		3.2	%		3.6	%		3.3	%		3.6	%		4.5	%		4.4	%
Companies		2.4	%		3.0	%		2.4	%		2.3	%		3.1	%		2.9	%
Industry and Commerce		2.0	%		2.3	%		2.1	%		3.0	%		3.5	%		3.1	%
Services		2.9	%		4.2	%		3.1	%		1.7	%		2.7	%		2.9	%
Primary Sector		2.3	%		2.4	%		1.6	%		2.0	%		2.3	%		1.8	%
Other		0.3	%		0.3	%		0.4	%		0.3	%		0.2	%		0.2	%
Individuals		4.2	%		4.2	%		4.2	%		5.1	%		5.9	%		6.0	%
Total		3.2	%		3.6	%		3.3	%		3.6	%		4.5	%		4.4	%

For further information on NPL Ratios by Activity, please refer to the Risk Management Report required by Circular No. 3,678 of the Brazilian Central Bank, of October 31, 2013, which is available on our Investor Relations website.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Coverage Ratio | 90 days

Note: Coverage ratio is derived from the division of the allowance for loans losses balance by the balance of operations more than 90 days overdue.

At the end of June 2016, the 90-day coverage ratio reached 215%, an increase of 500 basis points from the previous quarter, mainly driven by the decrease in the portfolio of credits overdue for over 90 days. In the Wholesale segment, due to the challenging economic scenario that may continue to impact the segment’s performance, we´ve preemptively provisioned in the last quarters. Thus, the segment´s coverage reached 494%, an increase of 3,600 basis points from the prior quarter. In Latin America, this ratio reached 232%, an increase of 1,700 basis points from the previous quarter, mainly due to the decrease of the portfolio of credits overdue for over 90 days.

Compared to June 2015, the 90-day coverage ratio increased 2,800 basis points, mainly due to the increase in complementary allowance of the third quarter of 2015 and also to the increase in the provision for specific economic groups.

Loan Portfolio Risk Level

Our credit risk management is aimed at maintaining the quality of the loan portfolio at levels appropriate for each market segment in which we operate.

We have an improved guarantee control system to capture the updated market value for each of these individual operations. Therefore, operations with guarantees where the updated amount exceeds the debt balance are classified at better risk levels. On the other hand, operations with guarantees where the updated amount is insufficient to mitigate the entire risk are classified at worse risk levels.

At the end of June 2016, the portfolios rated “AA” and “A” accounted for 76.8% of the total loan portfolio and 78.7% of the total loan portfolio in Brazil¹.

Total loans rated from "D" to "H" accounted for 9.3% of total loans and 11.4% of total loans in Brazil¹.

Loan Portfolio Evolution by Risk Level

Note: Does not include endorsements and sureties.

¹ Includes units abroad ex-Latin America.

Loan Portfolio Write-Off

(*) Loan portfolio average balance for the previous two quarters.

In the second quarter of 2016, the loan portfolio write-off totaled R$5,647 million, a 6.9% increase compared to the previous quarter.

The ratio of written-off operations to loan portfolio average balance reached 1.1%, an increase of 10 basis points from the first quarter of 2016.

Recovery of Loans Written off as Losses

In this quarter, income from recovery of loans written off as losses increased R$121 million, or 14.3%, from the previous quarter.

In the second quarter of 2016, we sold portfolios that were already written off as losses, without risk retention. This operation had a positive impact on the recovery of loans in the amount of R$48 million and of R$26 million on net income.

In the first half of 2016, the income from recovery of loans written off as losses decreased R$422 million, or 18.8%, compared to the same period of the previous year, mainly driven by the challenging economic scenario.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

NPL Creation

NPL Creation Coverage

In the second quarter of 2016, the total NPL Creation coverage reached 119%, which means that the provision for loan losses in the quarter was higher than the NPL Creation.

In the Retail segment, provision for loan losses remained at a similar level than the segment NPL Creation. As a result, the Retail segment NPL Creation coverage ratio reached 105% in this quarter, similar to historical levels.

In the Wholesale segment, provision for loan losses reached 146% of the NPL Creation in the second quarter of 2016. This level reflects the preemptive approach of provision in the segment.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Commissions and Fees and Result from Insurance, Pension Plan and Premium Bonds

In R$ millions	2Q16		1Q16		change					2Q15		change					1H16		1H15		change
Asset Management		741		684		57		8.4	%		645		96		14.9	%		1,425		1,264		160		12.7	%
Current Account Services		1,596		1,545		51		3.3	%		1,311		285		21.7	%		3,141		2,662		478		18.0	%
Credit Operations and Guarantees Provided		793		758		35		4.6	%		789		4		0.5	%		1,551		1,575		(25	)	-1.6	%
Collection Services		404		364		40		11.0	%		379		26		6.8	%		769		738		31		4.2	%
Credit Cards		3,016		2,907		109		3.7	%		2,840		177		6.2	%		5,923		5,643		280		5.0	%
Other		544		484		60		12.5	%		518		27		5.2	%		1,028		1,028		0		0.0	%
Latin America (ex-Brazil)		722		588		134		22.8	%		625		97		15.6	%		1,309		1,230		79		6.4	%
Commissions and Fees		7,816		7,331		486		6.6	%		7,105		711		10.0	%		15,147		14,141		1,006		7.1	%
Result from Insurance, Pension Plan and Premium Bonds		1,560		1,551		9		0.6	%		1,544		16		1.0	%		3,111		3,026		85		2.8	%
Total		9,376		8,882		494		5.6	%		8,650		727		8.4	%		18,258		17,167		1,091		6.4	%
(-) Result from Other Insurance Activities(*)		94		105		(11	)	-10.7	%		99		(5	)	-5.1	%		198		183		15		8.3	%
Total excluding Other Insurance Activities(*)		9,283		8,777		506		5.8	%		8,551		732		8.6	%		18,060		16,984		1,076		6.3	%

In the second quarter of 2016, commissions and fees amounted to R$7,816 million, an increase of 6.6% from the previous quarter. Compared to the second quarter of 2015, these revenues increased 10.0%, mainly driven by higher revenues from current account services and credit cards.

In the year, these revenues reached R$15,147 million, a 7.1% increase from the same period of the previous year, mainly driven by higher revenues from current account services, credit cards and asset management.

In the second quarter of 2016, these revenues, combined with the result from insurance, pension plan and premium bonds, totaled R$9,376 million, an increase of 5.6% from the previous quarter and of 8.4% from the same period of the previous year.

Excluding the result from other insurance activities (*), our revenues reached R$9,283 million in the quarter, an increase of 5.8% compared to the first quarter of 2016 and of 8.6% from the same period of the previous year.

(*) Other insurance activities include extended warranty, health insurance, other products and our stake in IRB.

Asset Management

Asset management revenues totaled R$741 million in the second quarter of 2016, an increase of 8.4% from the previous quarter, mainly driven by the higher number of business days in the quarter. In the first half of 2016, these revenues reached R$1,425 million, a 12.7% increase compared to the same period of the previous year, mainly due to the higher volume of fund management operations.

Asset Administration

In the second quarter of 2016, fund management fees amounted to R$571 million, an 11.3% increase compared to the first quarter of 2016, mainly due to the higher number of business days in the quarter.

In June 2016, assets under administration¹ totaled R$822 billion, with increases of 3.6% from the previous quarter and of 18.3% from the same period of the previous year.

According to the ANBIMA ranking, in May 2016 we were second in the fund management and managed portfolio* ranking, with an 21.8% market share.

* Includes Itaú Unibanco and Intrag.

¹ Does not include Latin America ex-Brazil.

Consortia Administration Fees

Consortia administration fees totaled R$170 million in the second quarter of 2016, decreasing 0.3% from the first quarter of 2016. In the first half of 2016, these fees amounted to R$340 million, an increase of 5.3% compared to the same period of the previous year.

In June 2016, we reached approximately 402 thousand active contracts, a decrease of 2.2% from the same period of the previous year.

In June 2016, the balance of installments receivable reached R$11.1 billion, with decreases of 1.9% from March 2016 and of 3.9% from June 2015.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Current Account Services

In the second quarter of 2016, revenues from current account services totaled R$1,596 million, a 3.3% increase when compared to the first quarter of 2016.

In the year, these fees increased 18.0% and totaled R$3,141 million. This increase in revenues from current account services is mainly due to the offering of differentiated products and services aimed at adding more value to our clients’ experience with the bank. These products include differentiated current account service packages for individuals and the convenience and versatility of the “Conta Certa” products offered to companies.

Loan Operations and Guarantees Provided

In the second quarter of 2016, revenues from loan operations and guarantees provided totaled R$793 million, a 4.6% increase from the first quarter of 2016, mainly due to higher revenues from guarantees provided.

In the first half of 2016, these revenues decreased 1.6% compared to the first half of 2015, driven by lower loan operations volume.

In the second quarter of 2016, the ratio of annual revenues from loan operations to the loan portfolio, without endorsements and sureties, reached 0.5% p.a.

The ratio of annual revenues from guarantees provided to the endorsements and sureties portfolio reached 2.1% p.a.

¹ Includes units abroad ex-Latin America.

(*) Loan portfolio average balance from two previous quarters.

Collection Services

Revenues from collection services reached R$404 million in the second quarter of 2016, increasing 11.0% from the first quarter of 2016, which is marked by lower revenues due to the typical seasonality of the period. Compared to the same period of the previous year, these revenues increased 6.8%, mainly due to the higher volume of collection services.

Credit Cards

Credit card revenues totaled R$3,016 million in the second quarter of 2016, a 3.7% increase from the previous quarter, mainly due to higher annual fees.

Compared to the same period of the previous year, these revenues increased 6.2%, mainly driven by higher revenues from interchange, equipment rental and annual fees.

In the first half of 2016, credit card revenues reached R$5,923 million, an increase of 5.0% from the first half of 2015, mainly driven by higher revenues from interchange and revenues from equipment rental.

The share of credit card revenues related to card issuance is 52.0% of total revenues.

Transaction Volume and Card Accounts | Credit and Debit Cards

Through proprietary and partnership operations, we offer a wide range of credit and debit cards to approximately 58.1 million current account holders and non-account holders (in number of accounts). In the second quarter of 2016, the volume of transactions amounted to R$ 84.4 billion, a 3.5% increase from the same period of 2015.

We are the leading player in the Brazilian credit card market, through Itaucard, Hipercard, Hiper, Credicard, joint ventures and commercial agreements with leading companies in sectors such as telecom, vehicles, retail and aviation operating in the Brazilian market, totaling 32.1 million client accounts, including account and non-account holders.

In the second quarter of 2016, the volume of credit card transactions amounted to R$62.9 billion, a 1.7% increase from the same period of the previous year.

In the debit card segment, which only includes current account holders, we have 26.0 million accounts. The volume of debit card transactions amounted to R$21.5 billion in the second quarter of 2016, a 9.2% increase from the same period of the previous year.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Transaction Volume and Card Accounts | Credit and Debit Cards

Acquiring Services

Our merchant acquiring business comprises the process of capturing transactions through the affiliation, management and relationship with commercial establishments through company REDE.

In the second quarter of 2016, the transaction volume totaled R$93.4 billion, an increase of 0.5% from the previous quarter. Compared to the same period of the previous year, transaction volumes decreased 0.1%.

Transaction Volume | Credit and Debit Cards

In the second quarter of 2016, credit card transactions volume was R$61.3 billion, representing 65.7% of transactions total volume generated by acquiring services, with an increase of 2.2% from the first quarter of 2016 and a decrease of 0.8% from the same period of the previous year.

In addition to the transaction volume mentioned above, we captured and processed over R$1.2 billion in transactions within our retail partners and joint ventures in the second quarter of 2016.

In the second quarter of 2016, debit card transactions volume was R$32.1 billion, accounting for 34.3% of the total transaction volume, a 2.6% decrease from the first quarter of 2016 and a 1.1% increase from the same period of the previous year.

Equipment Base^(*)

At the end of the second quarter of 2016, our base of active installed equipment reached 1,680 thousand units, with decreases of 4.3% from the previous quarter and of 9.6% from the second quarter of 2015.

^(*)100% of REDE’s equipment base is able to capture Hiper brand transactions.

Other

In R$ millions	2Q16		1Q16		change
Foreign Exchange Services		22		22		0
Brokerage and Securities Placement		90		77		13
Custody Services and Portfolio Management		80		76		4
Economic and Financial Advisory Services		148		96		52
Other Services		204		213		(10	)
Total		544		484		60

Compared to the previous quarter, revenues from economic and financial advisory services increased mainly due to higher investment banking revenues.

Commissions and Fees and Result from Insurance, Pension Plan and Premium Bonds

In the second quarter of 2016, the ratio of total commissions and fees added to the result from insurance, pension plan and premium bonds, divided by these total revenues, added to the managerial financial margin, reached 36.1%.

In this quarter, the operational coverage ratio, which represents the extent to which non-interest expenses were covered by commissions and fees added to the result from insurance, pension plan and premium bonds, reached 82.1%, an increase of 70 basis points compared to the previous quarter, mainly driven by higher commissions and fees.

(*) Insurance Operations include insurance, pension plan and premium bonds.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Itaú Insurance, Pension Plan and Premium Bonds

Itaú Insurance, Pension Plan and Premium Bonds

The Pro Forma financial statements below were prepared based on Itaú Unibanco’s managerial information and are intended to explain the performance of the insurance-related business.

The disclosure of the results from Itaú Insurance, Pension Plan and Premium Bonds is broken down into Core Activities and Other Activities.

The capital allocation criteria for insurance, pension plan and premium bonds operations used in the managerial model is based on the BACEN regulatory model. As of the first quarter of 2016, we have started to allocate the effect of the Basel III rules schedule anticipation to the lines of business.

Sales Cost Model

Itaú Unibanco’s practice is to allocate the selling costs to all of our products and services based on the corresponding utilization of each channel (full allocation method). For that reason, the selling costs related to insurance, pension plan and premium bonds products in our branch network and other electronic or physical distribution channels are recorded in our income statement for the insurance segment. This practice has both accounting and managerial effects.

Pro Forma Recurring Income Statement of Insurance Operations

	2Q16									1Q16									change						2Q15									change
In R$ millions	Total			Core Activities			Other Activities			Total			Core Activities			Other Activities			Total			Core Activities			Total			Core Activities			Other Activities			Total			Core Activities
Earned Premiums		1,242			991			251			1,337			1,039			298			-7.1	%		-4.6	%		1,453			1,068			385			-14.5	%		-7.2	%
Revenues from Pension Plan and Premium Bonds		246			246			-			260			260			-			-5.2	%		-5.2	%		210			210			-			17.4	%		17.4	%
Retained Claims		(352	)		(269	)		(83	)		(394	)		(298	)		(97	)		-10.7	%		-9.4	%		(385	)		(284	)		(101	)		-8.5	%		-5.1	%
Selling Expenses		(162	)		(22	)		(140	)		(196	)		(25	)		(170	)		-17.3	%		-14.9	%		(268	)		(39	)		(229	)		-39.6	%		-45.3	%
Result from Insurance, Pension Plan and Premium Bonds		974			946			28			1,007			975			31			-3.2	%		-3.0	%		1,009			954			55			-3.5	%		-0.9	%
Managerial Financial Margin		258			205			53			251			195			56			2.7	%		5.1	%		196			166			30			31.9	%		23.9	%
Commissions and Fees		454			452			2			435			433			3			4.2	%		4.4	%		409			408			0			11.1	%		10.6	%
Earnings of Affiliates		81			59			21			90			62			27			-10.2	%		-4.8	%		102			83			19			-21.2	%		-28.3	%
Non-interest Expenses		(490	)		(454	)		(36	)		(430	)		(397	)		(33	)		13.9	%		14.2	%		(460	)		(425	)		(35	)		6.5	%		6.8	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(83	)		(73	)		(9	)		(83	)		(72	)		(11	)		-0.4	%		1.8	%		(83	)		(68	)		(16	)		-0.9	%		8.8	%
Income before Tax and Minority Interests		1,194			1,135			59			1,270			1,196			74			-6.0	%		-5.1	%		1,172			1,118			54			1.9	%		1.5	%
Income Tax/Social Contribution and Minority Interests		(466	)		(460	)		(7	)		(493	)		(482	)		(10	)		-5.3	%		-4.7	%		(418	)		(404	)		(14	)		11.5	%		13.8	%
Recurring Net Income		728			675			53			778			714			64			-6.4	%		-5.4	%		754			714			39			-3.5	%		-5.5	%

Allocated Capital		1,793			1,614			179			4,083			3,676			408			-56.1	%		-56.1	%		2,243			2,038			206			-20.1	%		-20.8	%
Recurring Return on Allocated Capital		99.1	%		102.1	%		71.9	%		103.7	%		105.6	%		86.6	%		-470	bps		-360	bps		138.6	%		145.5	%		74.5	%		-3,950	bps		-4,340	bps
Efficiency Ratio (ER)		29.1	%		28.6	%		37.8	%		25.3	%		24.9	%		30.6	%		380	bps		360	bps		28.2	%		27.5	%		39.5	%		90	bps		100	bps
Combined Ratio		66.6	%		56.4	%		106.8	%		66.1	%		55.3	%		104.0	%		50	bps		120	bps		66.4	%		54.6	%		99.0	%		20	bps		180	bps

Note: Combined Ratio for insurance activities. Non-interest Expenses comprise Personnel Expenses, Other Administrative Expenses and Other Operating Expenses.

Our core activities consist of mass-market products related to Life, Property, Credit Life, Pension Plan and Premium Bonds. Other insurance activities correspond to Extended Warranty, Health Insurance, our stake in IRB and other.

We continue to concentrate efforts on distribution through our own channels, giving priority to sales through the most efficient channels, which positively affects our profitability. Sales of insurance products and premium bonds through bankfone, bankline/internet, ATMs and teller terminals accounted for 47% of sales to account holders in the quarter. Sales of premium bonds through these channels accounted for 74% of total sales in the period. In the second quarter of 2016, the amount of sales of insurance products and premium bonds to Digital Branches clients accounted for 9% of total sales.

Recurring net income from Insurance Operations reached R$728 million in the second quarter of 2016, decreasing 6.4% from the previous quarter and 3.5% from the same period of the previous year.

Recurring net income from core activities was R$675 million in the second quarter of 2016, a 5.4% decrease from the first quarter of 2016, mainly due to the decrease in earned premiums and the increase in non-interest expenses. Compared to the same period the previous year, the decrease was 5.5%.

Recurring net income for other insurance activities reached R$53 million in the quarter, a decrease of 17.7% from the previous period, mainly driven by lower earned premiums, partially offset by the reduction in retained claims and selling expenses.

The annualized recurring return for insurance operations reached 99.1% in the period, a decrease of 470 basis points from the previous quarter. The insurance ratio, which represents the ratio of recurring net income from insurance, pension plan and premium bonds operations to Itaú Unibanco’s recurring net income, reached 13.1%, a 200 basis point decrease from March 2016.

Insurance Ratio⁽¹⁾ and ROE | Insurance Operations

Note: As of the first quarter of 2016, we have started to allocate the effect of the Basel III rules schedule anticipation to the lines of business.

(1) Insurance Ratio (%) = Recurring net income from Insurance, Pension Plan and Premium Bonds operations / Itaú Unibanco’s recurring net income.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Itaú Insurance, Pension Plan and Premium Bonds

Breakdown of Recurring Net Income | Insurance Operations

In the second quarter of 2016, the ratio of the result of core activities to the recurring net income from Itaú Insurance, Pension Plan and Premium Bonds reached 92.8%.

Combined Ratio | Insurance Activities

Note: The combined ratio of insurance activities is the sum of retained claims, selling expenses, administrative expenses, other operating income and expenses, tax expenses for ISS, PIS and Cofins and other taxes on earned premiums.

The combined ratio, which reflects the operating cost as a percentage of income from earned premiums, reached 66.6% in the period, a increase of 50 basis points from the previous quarter, mainly driven by higher non-interest expenses. Compared to the same period of the previous year, this ratio increased 20 basis points.

Extended Combined Ratio | Insurance Activities

Note: The extended combined ratio is the sum of retained claims, selling expenses, administrative expenses, other operating income and expenses, tax expenses for ISS, PIS and Cofins and other taxes on the sum of earned premiums, managerial financial margin and commissions and fees.

The extended combined ratio, which reflects the operating cost as a percentage of income from earned premiums, managerial financial margin and commissions and fees, reached 57.2% in the second quarter of 2016, a decrease of 230 basis points from the second quarter of 2015, mainly driven by the decrease in selling expenses and the increase in managerial financial margin.

Efficiency Ratio

The efficiency ratio was 29.1% in the second quarter of 2016, a 380 basis point increase from the previous quarter. Including only our core activities, the efficiency ratio reached 28.6% in the period.

Breakdown of Technical Provisions | Insurance Operations

Technical provisions, including insurance, pension plan and premium bonds, totaled R$144.1 billion in the period, representing increases of 4.6% from the previous quarter and of 18.4% from the second quarter of 2015.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Insurance Core Activities

Pro Forma Recurring Income Statement of the Insurance Segment | Core Activities

In R$ millions	2Q16			1Q16			change						2Q15			change
Earned Premiums	991			1,039			(48)			-4.6		%	1,068			(77)			-7.2		%
Retained Claims		(264	)		(293	)		29			-9.9	%		(277	)		13			-4.6	%
Selling Expenses		(21	)		(25	)		4			-15.4	%		(39	)		18			-45.7	%
Underwriting Margin		706			721			(15	)		-2.1	%		753			(47	)		-6.2	%
Managerial Financial Margin		58			57			1			2.2	%		36			23			63.6	%
Commissions and Fees		91			97			(7	)		-6.8	%		103			(12	)		-11.4	%
Earnings of Affiliates		59			62			(3	)		-4.8	%		83			(23	)		-28.3	%
Non-interest Expenses		(232	)		(215	)		(18	)		8.2	%		(227	)		(6	)		2.5	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(42	)		(42	)		(0	)		0.9	%		(42	)		(1	)		1.4	%
Income before Tax and Minority Interests		640			681			(41	)		-6.0	%		706			(65	)		-9.3	%
Income Tax/Social Contribution and Minority Interests		(249	)		(264	)		15			-5.7	%		(245	)		(4	)		1.6	%
Recurring Net Income		391			418			(26	)		-6.3	%		461			(69	)		-15.0	%
Efficiency Ratio (ER)		26.6	%		23.9	%					270	bps		24.3	%					230	bps

Our insurance core activities consist of mass-market products related to Life, Property and Credit Life. These products are offered in synergy through retail channels - branch network, partnership with retailers, credit card clients, mortgage loans, vehicle financing, personal and payroll loans - and in the wholesale channel. These products have characteristics such as low volatility in the result and less use of capital, making them strategic and increasingly relevant in the diversification of the conglomerate’s revenues.

Net Income | Insurance Core Activities

In the second quarter of 2016, recurring net income from core activities was R$391 million, a 6.3% decrease from the previous quarter, mainly driven by lower earned premiums, partially offset by the reduction in retained claims and selling expenses.

Earned Premiums Breakdown | Insurance Core Activities

In the second quarter of 2016, earned premiums from core insurance activities reached R$991 million, a 4.6% decrease from the previous quarter, mainly driven by the credit life product, related to credit volume decrease.

Considering only our core activities, which include our 30% stake Porto Seguro, the earned premiums market share of the total core insurance market reached 13.1% in the 2016 year-to-date(*). Regarding technical result of insurance core activities, our market share reached 17.1% in the 2016 year-to-date (*).

Retained Claims Breakdown | Insurance Core Activities

In the second quarter of 2016, retained claims from insurance core activities amounted to R$264 million, a 9.9% decrease from the previous quarter, mainly driven by life products.

Underwriting Margin | Insurance Core Activities

In the second quarter of 2016, the underwriting margin from our insurance core activities amounted to R$706 million, a 2.1% decrease from the previous quarter, mainly driven by a reduction in earned premiums. In the second quarter of 2016, the ratio of underwriting margin to earned premiums reached 71.3%, up 180 basis points from the first quarter of 2016 due to the decrease in retained claims and selling expenses.

(*) Most recent data available on May 31, 2016, based on information disclosed by SUSEP.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Insurance Core Activities and Pension Plan

Combined Ratio | Insurance Core Activities

Note: The combined ratio is the sum of retained claims, selling expenses, administrative expenses, other operating income and expenses, tax expenses for ISS, PIS and Cofins and other taxes on earned premiums.

The combined ratio, which reflects the operating cost as a percentage of income from earned premiums, reached 56.4% in the period, a increase of 120 basis points from the previous quarter, mainly driven by the increase in non-interest expenses.

The extended combined ratio, which reflects the operating cost as a percentage of income from earned premiums, managerial financial margin and commissions and fees, reached 49.0% in the second quarter of 2016, an increase of 90 basis points from the previous quarter.

Extended Combined Ratio | Insurance Core Activities

Efficiency Ratio | Insurance Core Activities

In the second quarter of 2016, the efficiency ratio reached 26.6%, an increase of 270 basis points from the previous quarter.

Pro Forma Recurring Income Statement of the Pension Plan Segment

In R$ millions	2Q16			1Q16			change					2Q15			change
Revenues from Pension Plan		95			110			(15	)	-13.3	%		69			27		38.8	%
Retained Claims		(6	)		(5	)		(1	)	16.0	%		(7	)		2		-24.1	%
Selling Expenses		(1	)		(1	)		(0	)	5.3	%		(1	)		0		-29.9	%
Result from Pension Plan		89			104			(15	)	-14.7	%		60			29		47.4	%
Managerial Financial Margin		74			78			(4	)	-4.8	%		67			7		10.0	%
Commissions and Fees		362			336			26		7.6	%		307			55		18.0	%
Non-interest Expenses		(137	)		(108	)		(29	)	26.6	%		(107	)		(30	)	27.6	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(24	)		(23	)		(1	)	3.5	%		(19	)		(5	)	26.1	%
Income before Tax and Minority Interests		365			388			(23	)	-5.9	%		308			56		18.2	%
Income Tax/Social Contribution and Minority Interests		(153	)		(162	)		9		-5.5	%		(118	)		(36	)	30.3	%
Recurring Net Income		211			225			(14	)	-6.2	%		191			21		10.8	%
Efficiency Ratio (ER)		27.3	%		21.8	%				550	bps		25.8	%				150	bps

Product and advisory service innovation has played a significant role in the sustainable growth of our pension plan operations for individuals. For companies, we offer specialized advisory services and develop customized solutions. We establish long-term partnerships with our corporate clients, keeping a close relationship with the human resources departments and adopting a communication strategy designed for the financial education of their employees.

In the second quarter of 2016, the Pension Plan segment’s recurring net income reached R$211 million, a decrease of 6.2% from the previous quarter, mainly driven by higher non-interest expenses.

Compared to the same period of the previous year, the increase was 10.8%, mainly driven by higher net pension plan contributions and revenues from administration fees.

Revenues from Administration Fees

In the second quarter of 2016, revenues from administration fees totaled R$362 million, which represented increases of 7.6% from the previous quarter and of 18.0% from the second quarter of 2015.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Pension Plan and Premium Bonds

Pension Plan Technical Provisions and Redemption Rate

On June 30, 2016, technical provisions for pension plan totaled R$136.7 billion, with increases of 5.1% from March 31, 2016 and of 20.7% compared to the same period of the previous year.

According to the National Federation of Pension and Life Insurance (FENAPREVI), in May 2016 our market share in total technical provisions was 23.3%, whereas our market share in plans for individuals was 23.5%, decreasing 60 and 70 basis points, respectively, from the same period of the previous year.

The redemption rate, which represents the ratio of redemptions to the balance of technical provisions for pension plans, reached 2.0%, a decrease of 10 basis points from the first quarter of 2016.

Total and Net Pension Plan Contributions⁽¹⁾

In the quarter, total pension plan contributions reached R$5,944 million, increasing 21.0% from the previous quarter, which is marked by lower contributions, due to the typically seasonal effects of the period. Compared to the same period of the previous year, there was an increase of 19.3%. In the second quarter of 2016, net pension plan contributions reached R$3,157 million, a 28.2% increase from the second quarter of 2015.

(1) Total pension plan contributions = Contributions (+) Portability requests accepted. Net pension plan contributions = Contributions (+) Portability requests accepted (-) Redemptions (-) Portability requests assigned.

Pro Forma Recurring Income Statement of the Premium Bonds Segment

In R$ millions	2Q16			1Q16			change					2Q15			change
Revenues from Premium Bonds		151			150			1		0.7	%		141			10		6.9	%
Managerial Financial Margin		73			60			12		20.4	%		62			10		16.3	%
Non-interest Expenses		(85	)		(74	)		(10	)	13.6	%		(91	)		6		-6.9	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(8	)		(8	)		(0	)	1.9	%		(7	)		(0	)	6.3	%
Income before Tax and Minority Interests		130			127			3		2.3	%		104			26		24.4	%
Income Tax/Social Contribution and Minority Interests		(58	)		(57	)		(1	)	2.5	%		(42	)		(16	)	39.4	%
Recurring Net Income		72			70			2		2.2	%		63			9		14.5	%
Efficiency Ratio (ER)		39.5	%		37.0	%				250	bps		46.6	%				-710	bps

The PIC Premium Bonds product is targeted at clients who are interested in competing for prizes. This product can be purchased through single payment or monthly payment modality, in accordance with the profile and segment of each client. The premium bonds business serves a large public demand and, at the end of the second quarter of 2016, had issued 13.6 million certificates.

In line with our sustainability principles, we have a partnership with Ayrton Senna Institute, a non-profit organization that works to improve the quality of education at public schools in Brazil. Part of the revenues from the monthly payments for premium bonds certificates is transferred to projects of this Institute.

In the second quarter of 2016, 570 clients received prizes in the aggregate amount of R$13.7 million. In the period, total sales of premium bonds under the traditional mode to account holders decreased 9.6% from the first quarter of 2016. Compared to the same period of the previous year, there was an increase of 13.2%. Total sales of premium bonds to Digital Branches clients accounted for 8.5% of total sales to account holders in the second quarter of 2016, with increases of 310 basis points from the first quarter of 2016 and of 760 basis points from the same period of the previous year.

In the second quarter of 2016, the Premium Bonds segment’s recurring net income reached R$72 million, a 2.2% increase from the previous quarter, mainly driven by higher managerial financial margin. Compared to the same period of the previous year, there was a 14.5% increase, mainly driven by higher revenues from premium bonds and managerial financial margin.

Premium Bonds Technical Provisions

On June 30, 2016, technical provisions for premium bonds reached R$2,996 million, with decreases of 1.0% from the previous quarter and of 2.5% from the second quarter of 2015.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Non-interest Expenses

In R$ millions	2Q16			1Q16			change					2Q15			change					1H16			1H15			change
Personnel Expenses		(4,609	)		(4,359	)		(250	)	5.7	%		(3,997	)		(612	)	15.3	%		(8,967	)		(8,183	)		(784	)	9.6	%
Administrative Expenses		(3,993	)		(3,694	)		(299	)	8.1	%		(3,982	)		(11	)	0.3	%		(7,687	)		(7,608	)		(79	)	1.0	%
Operating Expenses		(1,338	)		(1,239	)		(99	)	8.0	%		(1,256	)		(81	)	6.5	%		(2,577	)		(2,506	)		(71	)	2.8	%
Other Tax Expense (*)		(103	)		(87	)		(16	)	17.9	%		(45	)		(58	)	130.4	%		(190	)		(177	)		(14	)	7.7	%
Latin Amercia (ex-Brazil) (**)		(1,372	)		(1,531	)		158		-10.3	%		(1,286	)		(86	)	6.7	%		(2,903	)		(2,523	)		(379	)	15.0	%
Total		(11,415	)		(10,909	)		(505	)	4.6	%		(10,566	)		(848	)	8.0	%		(22,324	)		(20,996	)		(1,327	)	6.3	%
( - ) Operations Abroad		(1,774	)		(1,874	)		100		-5.3	%		(1,570	)		(205	)	13.0	%		(3,648	)		(3,135	)		(514	)	16.4	%
Total (ex-operations abroad)		(9,640	)		(9,035	)		(605	)	6.7	%		(8,996	)		(644	)	7.2	%		(18,675	)		(17,862	)		(814	)	4.6	%

(*) Does not include ISS, PIS and Cofins.

(**) Does not consider overhead allocation.

Non-interest expenses totaled R$11,415 million in the second quarter of 2016, up 4.6% from the first quarter of 2016. This increase was mainly driven by the increases of 8.1% in administrative expenses, of 5.7% in personnel expenses and of 8.0% in operating expenses. Our non-interest expenses in Latin America totaled R$1,372 million, down 10.3% compared to the previous quarter.

In the first half of 2016, non-interest expenses grew 6.3% compared to the same period of the previous year. Excluding operations abroad, these expenses would have increased 4.6%.

Personnel Expenses

In R$ millions	2Q16			1Q16			change
Compensation, Charges and Social		(3,040	)		(2,843	)		(198	)
Profit Sharing ^(*)		(866	)		(840	)		(26	)
Employee Terminations and Labor Claims		(667	)		(642	)		(25	)
Training		(35	)		(34	)		(1	)
Total		(4,609	)		(4,359	)		(250	)

(*) Includes variable compensation, stock option plans and shares.

Personnel expenses totaled R$4,609 million in the second quarter of 2016, a 5.7% increase compared to the previous quarter. This increase was mainly driven by higher expenses on compensation, charges and social benefits, as a result of a lower number of employees on vacation in the second quarter when compared to the first quarter. This increase was also caused by higher expenses on profit sharing and terminations and labor claims, which grew 3.1% and 3.9%, respectively, from the previous quarter.

Number of Employees

The total number of employees decreased to 96,460 at the end of the second quarter of 2016, from 97,043 in the previous quarter.

Note: For companies under our control, 100% of the total number of employees is considered. No employees are considered for companies not controlled by us.

Administrative Expenses

In R$ millions	2Q16			1Q16			change
Third-Party Services		(1,052	)		(886	)		(166	)
Data Processing and Telecommunications		(912	)		(859	)		(53	)
Facilities		(660	)		(659	)		(1	)
Depreciation and Amortization		(504	)		(485	)		(19	)
Advertising, Promotions and Publications		(212	)		(189	)		(24	)
Security		(169	)		(164	)		(4	)
Financial System Services		(137	)		(146	)		8
Transportation		(92	)		(87	)		(4	)
Materials		(65	)		(58	)		(6	)
Travel		(43	)		(36	)		(8	)
Other		(147	)		(124	)		(22	)
Total		(3,993	)		(3,694	)		(299	)

At the end of the second quarter of 2016, administrative expenses totaled R$3,993 million, an increase of 8.1% compared to the first quarter of 2016. This increase was mainly due to higher expenses on third-party services, concentrated on advisory and consulting services, and to data processing driven by higher expenses on rental and maintenance of equipment. This increase was also caused by higher expenses on advertising, promotions and publications, mainly related to campaigns on internet and television.

Operating Expenses

In R$ millions	2Q16			1Q16			change
Provision for Contingencies		(334	)		(336	)		1
Selling - Credit Cards		(493	)		(425	)		(67	)
Claims		(65	)		(64	)		(1	)
Other		(446	)		(414	)		(32	)
Total		(1,338	)		(1,239	)		(99	)

Operating expenses increased by R$99 million in the second quarter of 2016 compared to the previous quarter, basically due to higher credit cards selling expenses.

Other Tax Expenses (*)

Other tax expenses totaled R$103 million in the second quarter of 2016, up R$16 million compared to the first quarter of 2016.

(*) Does not include ISS, PIS or Cofins.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Efficiency Ratio and Risk-Adjusted Efficiency Ratio

We present below the efficiency ratio and the risk-adjusted efficiency ratio, which includes the risk portions associated with banking transactions (result from loan losses).

Efficiency Ratio

In the 12-month period, the efficiency ratio reached 45.3%, an increase of 30 basis points from the same period of the previous year. In this period, our non-interest expenses grew 9.0%, in line with the accumulated inflation (8.8% - IPCA). On the other hand, our revenues increased 8.2%, mainly as a result of the challenging economic scenario.

In the second quarter of 2016, the efficiency ratio reached 46.7%, up 270 basis points from the first quarter of the year. This increase is a result of the 4.6% growth in expenses in the quarter, mainly driven by the seasonal effect that reduces costs in the beginning of the year.

Risk-Adjusted Efficiency Ratio

In the 12-month period, the risk-adjusted efficiency ratio, in the criteria including all expenses and the result from loan losses, net of recoveries, reached 67.2%, an increase of 490 basis points compared to the same period of 2015. In the same period, the result from loan losses grew 36.7%.

The risk-adjusted efficiency ratio reached 68.6% in the second quarter of 2016, an improvement of 360 basis points compared to the previous quarter, mainly driven by a lower result from loan losses.

The chart below shows the portions of operating revenues used to cover non-interest expenses and result from loan losses.

(*) Net of Tax Expenses for ISS, PIS, Cofins and Other (taxes on revenues), Claims and Insurance Selling Expenses.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Points of Service

Automated Teller Machines (ATMs) | Brazil and Abroad

At the end of the second quarter of 2016, the number of ATMs totaled 26,588, a decrease of 715 units compared to the second quarter of 2015. This decrease in the number of ATMs in third-parties’ establishments noted in past quarters is a result of the shareholders’ agreement with Tecban and its shareholders, announced on July 18, 2014, which provides for the substitution of the external ATMs network for Banco24Horas ATMs.

Note: (i) Includes Banco Itaú Argentina and companies in Chile, Colombia, Paraguay and Uruguay.

(ii) Includes ESBs (Electronic Service Branches) and points of service in third-parties’ establishments.

(iii) Does not include points of sale and ATMs of Banco 24h.

Branches and Client Service Branches (CSB) | Brazil and Abroad We ended the second quarter of 2016 with 5,154 branches and client service branches (CSBs), including Brazil and Abroad.

In Brazil, the reduction in the number of brick and mortar branches and the increase in the number of digital branches is consistent with the profile of our customers, which has been increasingly demanding services through digital channels.

(i) Includes IBBA representative offices abroad.

Note: Includes Banco Itaú BBA, Banco Itaú Argentina and companies in Chile, Colombia, Panama, Paraguay and Uruguay.

Our service network covers the entire Brazilian territory and adopts a segmentation strategy including structures, products and services developed to meet the specific needs of our many different clients. Our segments are: Itaú, Itaú Uniclass, Itaú Personnalité and Itaú Private Bank.

Geographical Distribution of Service Network (*)

Number of Branches and Client Service Branches (CSBs)

(1) Does not include branches and client service branches abroad and Itaú BBA.

Tax Expenses for ISS, PIS, Cofins and Other

Tax expenses amounted to R$1,516 million in the second quarter of 2016, relatively stable compared to the previous quarter and up 4.9% from the same period of 2015.

Income Tax and Social Contribution on Net Income

In the second quarter of 2016, income tax and social contribution on net income (CSLL) expenses totaled R$1,899 million and the effective tax rate reached 24.8%.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Balance Sheet

Assets

On June 30, 2016, total assets amounted to R$1.4 trillion, relatively stable compared to the end of the previous quarter and with an increase of 4.7% in 12 months.

The breakdown of our assets and details on their main components are presented below:

Total Assets

Asset Breakdown | June 30, 2016

Short-term Interbank Investments and Securities Portfolio

On June 30, 2016, the balance of our short-term interbank investments and securities portfolio, including derivative financial instruments, totaled R$629.2 billion, a 5.8% increase when compared to the previous quarter. This increase was mainly due to the increase in short-term interbank investments, total public securities and derivative financial instruments.

In R$ millions, end of period	2Q16		%			1Q16		%			2Q15		%
Short-term Interbank Investments		270,899		43.1	%		237,642		39.9	%		192,433		35.5	%
Total Public Securities		124,813		19.8	%		109,671		18.4	%		135,411		25.0	%
Public Securities - Domestic		108,806		17.3	%		98,671		16.6	%		125,015		23.0	%
Public Securities - Foreign		16,007		2.5	%		11,000		1.8	%		10,397		1.9	%
Denmark		1,386		0.2	%		2,548		0.4	%		3,029		0.6	%
United States		1,656		0.3	%		1,880		0.3	%		1,209		0.2	%
Korea		1,672		0.3	%		2,172		0.4	%		1,625		0.3	%
Paraguay		1,150		0.2	%		780		0.1	%		1,444		0.3	%
Chile		4,172		0.7	%		1,766		0.3	%		1,014		0.2	%
Spain		753		0.1	%		753		0.1	%		307		0.1	%
Argentina		670		0.1	%		592		0.1	%		848		0.2	%
Uruguay		434		0.1	%		249		0.0	%		363		0.1	%
Colombia		4,004		0.6	%		11		0.0	%		68		0.0	%
Other		111		0.0	%		250		0.0	%		490		0.1	%
Corporate Securities		66,683		10.6	%		78,563		13.2	%		72,211		13.3	%
PGBL/VGBL - Fund Quotas		129,560		20.6	%		122,899		20.7	%		106,432		19.6	%
Derivative Financial Instruments		37,211		5.9	%		27,864		4.7	%		20,674		3.8	%
CorpBanca		-		-			18,419		3.1	%		15,295		2.8	%
Total		629,165		100.0	%		595,058		100.0	%		542,455		100.0	%

Evolution of Short-Term Interbank Investments and Securities Portfolio

The breakdown of short-term interbank investments and securities in the past few quarters is presented below:

Securities by Category

Our securities portfolio is classified into three categories: trading, available-for-sale and held-to-maturity. On June 30, 2016, the securities portfolio totaled R$321,056 million. The distribution of the securities portfolio remained relatively stable when compared to the previous quarter.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Balance Sheet

Funding

In R$ millions, end of period	2Q16		1Q15		change			2Q15		change
Demand Deposits		58,763		58,557		0.4	%		50,540		16.3	%
Savings Deposits		104,479		107,292		-2.6	%		113,974		-8.3	%
Time Deposits		139,422		91,916		51.7	%		88,914		56.8	%
Debentures (Linked to Repurchase Agreements and Third Parties’ Operations)		144,384		148,139		-2.5	%		134,932		7.0	%
Funds from Bills ⁽¹⁾ and Structured Operations Certificates		51,926		51,921		0.0	%		31,018		67.4	%
CorpBanca		-		79,045		-			70,950		-
(1) Total - Funding from Account Holders and Institutional Clients ^(*)		498,976		536,871		-7.1	%		490,330		1.8	%
Onlending		32,949		35,336		-6.8	%		42,621		-22.7	%
(2) Total – Funding from Clients		531,925		572,207		-7.0	%		532,951		-0.2	%
Assets Under Administration		835,194		807,267		3.5	%		709,111		17.8	%
Technical Provisions for Insurance, Pension Plan and Premium Bonds		144,057		137,677		4.6	%		121,652		18.4	%
(3) Total – Clients		1,511,176		1,517,151		-0.4	%		1,363,714		10.8	%
Interbank deposits		6,367		8,552		-25.5	%		27,014		-76.4	%
Funds from Acceptance and Issuance of Securities		32,304		22,431		44.0	%		21,156		52.7	%
Total Funds from Clients + Interbank Deposits		1,549,847		1,548,134		0.1	%		1,411,884		9.8	%

Repurchase Agreements ⁽²⁾		209,278		170,825		22.5	%		170,368		22.8	%
Borrowings		52,312		60,016		-12.8	%		49,517		5.6	%
Foreign Exchange Portfolio		58,145		64,240		-9.5	%		66,429		-12.5	%
Subordinated Debt		60,282		57,919		4.1	%		59,228		1.8	%
Collection and Payment of Taxes and Contributions		3,944		4,227		-6.7	%		4,440		-11.2	%
Working Capital ⁽³⁾		96,723		89,153		8.5	%		82,661		17.0	%
CorpBanca		-		21,372		-			17,978		-
Working Capital and Other		480,684		467,751		2.8	%		450,622		6.7	%
Total Funds (Working Capital, Raised and Managed Assets)		2,030,530		2,015,885		0.7	%		1,862,506		9.0	%

(*) Funds from Institutional Clients totaled R$36,338 million, which corresponds to 7.3% of total funds raised with Account Holders and Institutional Clients.

(1) Includes funds from Real Estate, Mortgage, Financial, Credit and Similar Notes. (2) Does not include own issued debentures classified as funding. (3) Equity + Non-Controlling Interest – Permanent Assets.

Total funds from clients, including interbank deposits, amounted to R$1.5 trillion at the end of the second quarter of 2016, an increase of R$137.962 million compared to the same period of the previous year.

Debentures issued by leasing companies of the conglomerate, after being purchased by the bank (the Conglomerate’s parent company), are negotiated with similar characteristics as those of CDs and other time deposits, although they are classified as deposits received under securities repurchase agreements. Therefore, these deposits are reclassified in the table above as deposits from account holders. At the end of the second quarter of 2016, this type of funding totaled R$144,384 million.

Total funds (working capital, raised and managed assets) amounted to R$2.0 trillion at the end of the second quarter of 2016, an increase of R$168,024 million compared to the same period of the previous year.

Funds from clients ⁽¹⁾

⁽¹⁾ Includes institutional clients in the proportion of each type of product invested in by them.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Balance Sheet

Loans to Funding Ratio

In R$ millions, end of period	2Q16			1Q15			change			2Q15			change
Funding from Clients		531,925			572,207			-7.0	%		532,951			-0.2	%
Funds from Acceptance and Issuance of Securities Abroad		32,304			22,431			44.0	%		21,156			52.7	%
Borrowings		52,312			60,016			-12.8	%		49,517			5.6	%
Other ⁽¹⁾		36,988			34,624			6.8	%		30,101			22.9	%
CorpBanca		-			13,774			-			11,666			-
Total (A)		653,528			703,052			-7.0	%		645,390			1.3	%
(-) Reserve Required by Brazilian Central Bank		(72,058	)		(71,312	)		1.0	%		(67,912	)		6.1	%
(-) Cash (Currency) ⁽²⁾		(21,852	)		(26,910	)		-18.8	%		(23,908	)		-8.6	%
Total (B)		559,619			604,831			-7.5	%		553,570			1.1	%
Loan Portfolio (C) ⁽³⁾		497,959			523,226			-4.8	%		529,103			-5.9	%
C/A		76.2	%		74.4	%		180	bps		82.0	%		-580	bps
C/B		89.0	%		86.5	%		250	bps		95.6	%		-660	bps

(1) Includes installments of subordinated debt that are not included in the Tier II Referential Equity.

(2) Includes cash, bank deposits of institutions without reserve requirements, foreign currency deposits in Brazil, foreign currency deposits abroad, and cash and cash equivalents in foreign currency.

(3) The loan portfolio balance does not include endorsements and sureties.

The loans to funding ratio before deduction of compulsory deposits and cash and cash equivalents reached 76.2% at the end of the second quarter of 2016, up 180 basis point when compared to the previous quarter.

Excluding reserve requirements and cash and cash equivalents, this ratio reached 89.0% at the end of the second quarter of 2016 compared to 86.5% at the end of the first quarter of 2016.

Loan to Funding Ratio

(*) Gross funding, ex-deductions of reserve requirements and cash and cash equivalents.

External Funding - Securities ⁽¹⁾

The table below highlights the main securities issued by Itaú Unibanco abroad in effect on June 30, 2016.

In US$ millions

Instrument	Issuer	Balance at Mar 31,16		Issuances		Amortization			Exchange Variation		Balance at Jun 30,16		Issue Date	Maturity Date	Coupon % p.a.
Fixed Rate Notes ⁽²⁾	Itaú Chile		97									97	7/24/2007	7/24/2017		UF⁽⁴⁾+3.79	%
Fixed Rate Notes ⁽³⁾	Itaú Chile		98									98	10/30/2007	10/30/2017		UF⁽⁴⁾+3.44	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,000									1,000	4/15/2010	4/15/2020		6.20	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,000									1,000	9/23/2010	1/22/2021		5.75	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		250									250	1/24/2011	1/22/2021		5.75	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		500									500	6/15/2011	12/21/2021		6.20	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		550									550	1/24/2012	12/21/2021		6.20	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,250									1,250	3/19/2012	3/19/2022		5.65	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,375									1,375	8/6/2012	8/6/2022		5.50	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,870									1,870	11/13/2012	5/13/2023		5.13	%
Medium Term Notes	Itaú Unibanco Holding S.A., Grand Cayman Branch		1,050									1,050	5/26/2015	5/26/2018		2.85	%
Structured Notes ⁽⁵⁾			2,123		142		(32	)				2,234
Total			11,163		142		(32	)		-		11,273

(1) The balances refer to principal amounts and does not consider external funding from CorpBanca; (2) and (3) Amounts in US$ equivalent on the issuance dates to CHP 46.9 billion and CHP 48.5 billion, respectively; (4) Development Financial Unit; (5) Structured Notes.

On June 30, 2016, funds obtained abroad totaled US$11,273 million, corresponding to an increase of US$110 million compared to the first quarter of 2016 (presented in the “Funding” table in the previous section as Foreign Borrowings through Securities and Subordinated Debt).

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Balance Sheet by Currency

We adopted a management policy for foreign exchange risk associated with our asset and liability positions, primarily intended to mitigate impacts from fluctuations in foreign exchange rates on consolidated results.

Brazilian tax legislation determines that gains and losses from exchange rate variation on permanent foreign investments must not be included in the tax basis. On the other hand, gains and losses arising from financial instruments used to hedge such asset positions are affected by tax effects. Therefore, in order not to expose net income to exchange rate variations, a liability position must be built at a higher volume than the hedged assets. The Balance Sheet by Currency shows our assets and liabilities denominated in local and foreign currencies. On June 30, 2016, the net exchange position was a liability of US$14,794 million.

Assets | June 30, 2016

In R$ millions, end of period	Consolidated			Business in Brazil			Local Currency			Foreign Currency		Business Abroad
Cash and Cash Equivalents		21,852			6,924			5,647			1,277		14,955
Short - Term Interbank Investments		270,899			250,741			250,741			0		20,320
Securities and Derivative Instruments		358,267			285,826			282,541			3,286		107,438
Loans, Leases and Other Loan Operations		459,489			295,060			282,199			12,860		221,831
Loans		497,959			329,354			316,494			12,860		226,006
(Allowance for Loan Losses)		(38,470	)		(34,295	)		(34,295	)		0		(4,175	)
Other Assets		258,185			208,382			192,407			15,975		71,283
Foreign Exchange Portfolio		56,527			26,019			10,225			15,794		51,730
Other		201,658			182,364			182,182			181		19,553
Permanent Assets		27,165			90,587			18,849			71,738		8,281
Total Assets		1,395,856			1,137,520			1,032,384			105,136		444,107
Derivatives - Purchased Positions											288,289
Total Assets After Adjustments (a)											393,425

Liabilities | June 30, 2016

In R$ millions, end of period	Consolidated		Business in Brazil		Local Currency		Foreign Currency			Business Abroad
Deposits		309,032		168,180		167,666		514			141,040
Funds Received under Securities Repurchase Agreements		353,662		334,648		334,648		0			19,014
Funds from Acceptances and Issue of Securities		84,230		85,375		53,040		32,334			31,517
Borrowings and Onlendings		85,261		92,819		33,662		59,157			49,842
Interbank and Interbranch Accounts		11,067		10,556		7,193		3,364			511
Derivative Financial Instruments		34,506		19,514		19,514		-			14,992
Other Liabilities		248,429		168,555		154,201		14,354			103,691
Foreign Exchange Portfolio		58,145		27,622		13,429		14,193			51,746
Other		190,283		140,933		140,772		161			51,945
Technical Provisions of Insurance, Pension Plan and Premium Bonds		144,057		143,981		143,979		2			76
Deferred Income		1,724		1,537		981		556			187
Minority Interest in Subsidiaries		13,301		1,793		1,793		-			11,508
Stockholders' Equity of Parent Company		110,587		110,561		110,561		-			71,729
Capital Stock and Reserves		99,885		100,441		100,441		-			71,000
Net Income		10,702		10,120		10,120		-			728
Total Liabilities and Equity		1,395,856		1,137,520		1,027,239		110,280			444,107
Derivatives - Sold Positions								330,632
Total Liabilities and Equity After Adjustments (b)								440,912
Net Foreign Exchange Sold Position Itaú Unibanco (c = a - b)								(47,487	)
Net Foreign Exchange Sold Position Itaú Unibanco (c) in US$								(14,794	)

Note: Does not include eliminations of operations between local and foreign units.

Assets and liabilities denominated in foreign currencies

We present below the net exchange position, a liability position at a higher volume than the balance of hedged assets, which, when including the tax effects on the net balance of other assets and liabilities denominated in foreign currency, reflects the mitigation of the exposure to foreign exchange variations.

In R$ millions, end of period	2Q16			1Q16			change
Investments Abroad		71,738			65,424			6,314		9.7	%
Net Foreign Exchange Position (Except Investments Abroad)		(119,224	)		(104,009	)		(15,216	)	14.6	%
Total		(47,487	)		(38,585	)		(8,902	)	23.1	%
Total in US$		(14,794	)		(10,842	)		(3,953	)	36.5	%

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Capital Ratios (BIS)

Solvency Ratios | Prudential Conglomerate¹

	With CorpBanca			Without CorpBanca
In R$ millions, end of period	2Q16			1Q16			2Q15
Stockholders' equity of the parent company		110,587			106,647			100,711
Consolidated stockholders’ equity (BACEN)		126,874			110,962			105,888
Deductions from core capital		(15,410	)		(11,742	)		(8,929	)
Core Capital		111,464			99,220			96,959
Additional Capital		685			70			49
Tier I		112,149			99,290			97,008
Tier II		23,686			23,582			29,416
Referential Equity (Tier I and Tier II)		135,835			122,872			126,424
Required Referential Equity		74,272			68,621			81,003
Risk-weighted Assets (RWA)		752,120			694,899			736,393
Excess Capital		61,563			54,250			45,421
Amount Required for Additional Common Equity Tier I Capital (ACP_Required)		4,701			4,343			-
Ratios (%)
Tier I (Core Capital + Additional Capital)		14.9			14.3			13.2
Tier II		3.2			3.4			4.0
BIS (Referential Equity / Total Risk-weighted Exposure)		18.1			17.7			17.2

¹ Includes financial institutions, consortium managers, payment institutions, companies that acquire operations or directly or indirectly assume credit risk and investment funds in which the conglomerate substantially retains risks and benefits.

Our minimum capital requirements follow the set of rules disclosed by the Brazilian Central Bank, which implement the Basel III global capital requirements standards in Brazil. These requirements are expressed as ratios of available capital - stated by the Referential Equity, or of Total Capital, composed of Tier I Capital and Tier II Capital - and the risk-weighted assets, or RWA.

Minimum Total Capital requirement corresponds to 9.875% from January to December 2016, decreasing gradually to 8% in January 2019. Additionally, the Brazilian Central Bank rules established the Additional Common Equity Tier I Capital (ACP), comprised of the sum of ACP_Conservation, ACP_{Countercyclical} and ACP_Sistemic, which, combined with minimum Total Capital, increase capital requirements over time. Any insufficiency in connection with these ACP requirements will result in restrictions detailed in CMN Resolution No. 4,193.

In conformity with CMN Resolution No. 4,193, the sum of the amounts ACP_Conservation and ACP_{Countercyclical} will gradually increase, from 0.625% as of January 2016 to 2.5% as of January 2019. In conformity with BACEN Circular No. 3,769, however, at present the amount calculated for the ACP_{Countercyclical}is equivalent to zero, and in the case of increases in this amount, the new percentage will become effective 12 months after it is disclosed. According to Circular No. 3,768 of the Brazilian Central Bank, the ACP_Sistemic currently applicable to Itaú Unibanco is 0%, and will gradually increase from 0.25% as of January 2017 to 1% as of January 2019.

On June 30, 2016, ACP amounted to R$4,701 million, and did not result in restrictions to Itaú Unibanco in connection with any insufficient Additional Common Equity Tier I Capital.

Referential Equity | Prudential Conglomerate

On June 30, 2016, our Referential Equity reached R$135,835 million, an increase of R$12,964 million compared to March 31, 2016, mainly driven by a higher Tier I Capital, which reached R$112,149 million at the end of the second quarter of 2016, an additional R$12,859 million amount from March 31, 2016, mainly driven by the result for the period and by the increase in minority interests (CorpBanca effect). Tier II Capital totaled R$23,686 million at the end of the second quarter of 2016, an increase of R$105 million from March 31, 2016.

Taking into consideration our current capital base, if we immediately fully applied the Basel III rules established by the Brazilian Central Bank, our core capital (Common Equity Tier I) would be 14.1% on June 30, 2016, including the use of tax credits. This scenario is presented in the following chart.

Estimated Core Capital Ratio according to Full Basel III Rules

(Common Equity Tier I)

¹ Includes deductions of Goodwill, Intangible Assets (generated before and after October 2013), Tax Credits from Temporary Differences and Tax Loss, Pension Fund Assets, Equity Investments in Financial Institutions, Insurance and similar companies.

²Includes the increase of the multiplier of the amounts of market risk, operational risk and certain credit risk accounts. This multiplier, which is at 10.1 nowadays, will be 12.5 in 2019.

³ Does not include any reversal of the complementary allowance for loan losses.

Solvency Ratios | Prudential Conglomerate

On June 30, 2016, the BIS ratio reached 18.1%, an increase of 40 basis points from March 31, 2016. This increase was mainly due to the quarter result and to the effect of foreign exchange variation in the period, which together were higher than the negative impact of CorpBanca consolidation.

Our BIS ratio exceeds by 760 basis points the sum of the minimum requirements of the Reference Equity and the Additional Common Equity Tier I Capital established by the Brazilian Central Bank for 2016 (equivalent to 10.5%).

In addition to these minimum capital requirements, Circular No. 3,748 of the Brazilian Central Bank added a Leverage Ratio to the Basel III framework, defined as the ratio of Tier I Capital to Total Exposure (calculated based on this Circular). On June 30, 2016, the Leverage Ratio reached 8.6%.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Capital Ratios (BIS)

Risk Exposure
	With CorpBanca		Without CorpBanca
In R$ millions, end of period	2Q16		1Q16		2Q15
Credit Risk-weighted Assets (RWA_CPAD)		690,963		637,179		681,622
FPR at 2%		161		149		101
FPR at 20%		7,121		6,484		6,085
FPR at 35%		11,396		11,888		9,050
FPR at 50%		47,095		46,622		42,723
FPR at 75%		141,482		129,244		142,557
FPR at 85%		116,582		117,929		142,034
FPR at 100%		314,034		267,515		275,611
FPR at 250%		28,267		36,973		36,339
FPR at 300%		7,968		9,066		13,362
FPR up to 1250% ¹		1,744		1,305		1,407
Derivatives – future potential gain and variation of the counterparty credit quality		15,112		10,005		12,353
Operational Risk-weighted Assets (RWA_OPAD)		43,448		37,364		35,509
Market Risk-weighted Assets (RWA_MPAD)		17,709		20,356		19,262
Gold, foreign currency and operations subject to exchange rate variation (RWA_CAM)		1,231		3,040		7,605
Operations subject to interest rate variation (RWA_JUR)		15,656		15,779		9,957
Operations subject to commodity price variations (RWA_COM)		510		624		573
Operations subject to stock price variation (RWA_ACS)		312		913		1,128
Total Risk-weighted Exposure (RWA) [RWA_CPAD+ RWA_OPAD+RWA_MPAD]		752,120		694,899		736,393

Note: FPR - Risk Weighting Factor.

¹ Includes the application of the “F” factor, as required by Article 29 of Circular No. 3,644/13.

On June 30, 2016, total risk-weighted exposure amounted to R$752,120 million, an increase of R$57,222 million compared to March 31, 2016, mainly driven by the increase in credit risk-weighted assets (RWA_CPAD), which reached R$690,963 million on June 30, 2016. The CorpBanca´s consolidation was the main factor for this variation.

In the second quarter of 2016, the operational risk-weighted assets (RWA_OPAD) reached R$43,448 million, an increase of R$6,084 million compared to March 31, 2016. The RWA_OPAD is calculated every six months, according to Circulars Nos. 3,640, 3,675, and 3,739 of the Brazilian Central Bank.

On June 30, 2016, market risk-weighted assets (RWA_MPAD) totaled R$17,709 million, a decrease of R$2,647 million compared to March 31, 2016, mainly due to the lower portion associated to the exposure to gold, foreign currency and operations subject to exchange rate variation (RWA_CAM).

Evolution of the Composition of the Risk-weighted Exposure

Credit Risk-weighted Exposure

Risk-weighted ROA

In the second quarter of 2016, annualized recurring return on average risk-weighted assets reached 3.1%, a 10 basis point increase compared to the previous quarter.

The risk-weighted leverage was 5.5 in the period, a 20 basis point decrease, mainly driven by the Referential Equity increase.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Risk Management

Corporate Principles of Risk and Capital Management

We regard risk and capital management as an essential instrument for optimizing the use of resources and selecting the best business opportunities in order to create value to our shareholders.

Risk management encompasses the entire institution and is in line with the guidelines of the Board of Directors and Senior Management, which, through Senior Committees, determine the overall goals, expressed as targets and limits for the risk management business units. Meanwhile, the control and capital management units support Itaú Unibanco’s management by means of monitoring processes and risk and capital analysis.

In order to strengthen our values and align our employee’s behavior to the guidelines established by our risk management, we have several initiatives aimed at encouraging compliance with our risk culture. In addition to policies, procedures and processes, the risk culture strengthens the individual and collective responsibility of our employees in connection with management of risks inherent in activities carried out on an individual basis, complying with our ethical business management.

We adopt a prospective approach regarding capital management, and, through the Internal Capital Adequacy Assessment Process (ICAAP), we assess the sufficiency of regulatory capital to cover our risks, represented by the regulatory capital for credit, market and operational risks, as well as the capital required to cover other risks. The ICAAP process comprises the following phases: identification of material risks, definition of additional capital requirement to material risks and of internal methodologies for capital quantification; preparation of the capital plan, for normal and stress situations, and structuring the capital contingency plan. The result of the last ICAAP – conducted as of December 2015 – indicated that, in addition to capital to face all material risks, we have significant capital surplus, thus assuring the institution’s equity soundness.

For further information on the risk and capital management structure, please refer to the Investor Relations website at www.itau.com.br/investor-relations >> Corporate Governance >> Risk and Capital Management – Pillar III.

Credit Risk

Our credit risk management is aimed at maintaining the loan portfolio quality at levels consistent with our risk appetite for each market segment in which we operate.

The credit risk control is centralized and carried out by a department independent from the business units and responsible for risk control. The main responsibilities include monitoring and controlling the performance of loan portfolios, and managing the process of development, review and approval of institutional credit risk policies.

Operational Risk

Our operational risk management structure is composed of operational risk management and control activities aimed at supporting the organization in decision-making processes, always aiming at the proper identification and evaluation of risks, the creation of value for shareholders, as well as the protection of our assets and image.

Liquidity Risk

The liquidity risk measurement comprises all financial operations of our companies, as well as possible contingent or unexpected exposures, such as those arising from settlement services, provision for endorsements and sureties and lines of credit raised but not used.

Liquidity risk management and control is carried out on a daily basis, through a governance approved in Senior Committees that establishes, among others, the adoption of minimum liquidity limits, sufficient to absorb possible cash losses in stress scenarios, measured by internal and also regulatory methodologies.

As from the second quarter of 2016, we started to inform liquidity coverage ratio (LCR), which is calculated based on the methodology defined by Circular No. 3,749, of the Brazilian Central Bank, which is in line with international guidelines. The average ratio for the quarter was 190.2%.

Market Risk

Our market risk is controlled by a department independent from the business units and responsible for carrying out, on a daily basis: (i) risk measurement and assessment, (ii) monitoring of stress scenarios, limits and alerts, (iii) applying, analyzing and testing stress scenarios, (iv) reporting risk results to those accountable for in the business units, in accordance with our governance, (v) monitoring the actions required to adjust positions and/or risk levels to make them feasible, and (vi) supporting the safe launch of new financial products. To this end, Itaú Unibanco has a structured communication and information process that provides feedback for the monitoring of Senior Committees and compliance with the requirements of Brazilian and foreign regulatory bodies.

VaR of Itaú Unibanco Holding

The Consolidated VaR of Itaú Unibanco is calculated based on the Historical Simulation methodology, which fully reprices all its positions based on historical series of asset prices. Since the first quarter of 2016, we choose to incorporate the exposures of each external unit to calculate our consolidated VaR, in order to also include the risk of these units, thereby improving the methodology used.

Maintaining our conservative management and portfolio diversification, we follow our policy of operating within low limits in connection with our capital in the period.

	With			Without
VaR by Risk Factor ⁽¹⁾	CorpBanca			CorpBanca
In R$ millions, end of period	2Q16⁽²⁾			1Q16⁽²⁾
Itaú Unibanco
Brazilian Interest rates		219.5			165.4
Other Foreign Interest rates		109.0			102.0
FX rates		16.3			20.7
Brazilian Inflation Indexes		149.7			140.2
Equities and Commodities		72.4			62.5
Diversification Effect		(335.7	)		(315.8	)
Total VaR		231.2			174.9
Maximum VaR in the Quarter		237.5			208.5
Average VaR in the Quarter		205.9			174.1
Minimum VaR in the Quarter		167.9			155.1

(1) The Values represented above consider 1 day as time horizon and 99% confidence.

(2) The VaR by risk factors includes foreign units.

Evolution of Itaú Unibanco’s VaR

Itaú Unibanco Holding S.A.

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Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Segment Analysis

Pro Forma Adjustments

Adjustments made to the balance sheet and income statement for the year are based on managerial information from the business units.

The financial statements were adjusted in order to replace the accounting stockholders’ equity with funding at market prices. Subsequently, the financial statements were adjusted to include revenues linked to allocated capital at each segment. The cost of subordinated debt and the respective remuneration at market prices were allocated to segments on a pro rata basis, in accordance with the economic allocated capital.

As of the first quarter of 2015, we changed the presentation of our segments in order to reflect the bank’s current organizational structure. We report on the following segments: (a) Retail Banking, (b) Wholesale Banking and (d) Activities with the Market + Corporation. Retail Banking include the previous Commercial Banking – Retail and Consumer Credit – Retail segments, with the transfer of the Private Bank and Latam operations to the Wholesale Banking.

The Activities with the Market + Corporation column presents the result from excess capital, excess subordinated debt and the net balance of tax assets and liabilities. It also shows the financial margin with the market, costs of Treasury operations, the equity pickup of companies not linked to each segment and our stake in Porto Seguro.

Allocated Capital

Impacts related to capital allocation are included in the Pro Forma financial statements. To this end, adjustments were made to the financial statements, using a proprietary model.

The economic allocated capital model (EAC) was adopted for the Pro Forma financial statements by segment and, as of 2015, we changed our calculation methodology. In addition to the Tier I allocated capital, the EAC model includes the effects of the calculated expected loan losses, complementary to that required by the Brazilian Central Bank through CMN Circular No. 2,682/99.

Accordingly, the allocated capital includes the following components: credit risk (including expected losses), operational risk, market risk, and insurance underwriting risk.

Based on Tier I capital measure we determined the Return on Allocated Capital, which corresponds to an operational performance ratio consistently adjusted to the required capital needed to support the risks of the financial positions assumed in accordance with our risk appetite.

As of the first quarter of 2016, we have adopted the Basel III rules in our managerial capital allocation model.

Income Tax Rate

We adopt the full income tax rate, net of the tax effect of payment of interest on capital, for the Retail Banking, Wholesale Banking and Activities with the Market + Corporation segments. The difference between the income tax amount determined for each segment and the effective income tax amount, as stated in the consolidated financial statements, is stated in the column Activities with the Market + Corporation.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Segment Analysis

The Pro Forma financial statements of Retail Banking, Wholesale Banking and Activities with the Market + Corporation presented below are based on managerial information derived from internal models to more accurately reflect the activities of the business units.

Pro Forma Balance Sheet by Segment | On June 30, 2016

In R$ millions	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			Itaú Unibanco
Assets
Current and Long-Term Assets		864,184			572,930			111,200			1,368,692
Cash and Cash Equivalents		15,575			6,282			-			21,852
Short-term Interbank Investments		320,157			100,903			-			270,899
Securities and Derivative Financial Instruments		193,016			154,080			33,277			358,267
Interbank and Interbranch Accounts		69,678			5,396			-			73,626
Loan, Lease and Other Credit Operations		215,432			282,527			-			497,959
(Allowance for Loan Losses)		(17,356	)		(10,890	)		-			(28,246	)
(Complementary Expected Loss Provisions)		-			-			(10,224	)		(10,224	)
Other Assets		67,683			34,633			88,146			184,560
Foreign Exchange Portfolio		7,171			15,469			38,952			56,527
Others		60,512			19,163			49,194			128,033
Permanent Assets		15,061			10,186			1,918			27,165
Total Assets		879,245			583,116			113,118			1,395,856
Liabilities and Equity
Current and Long-Term Liabilities		844,452			521,573			83,841			1,270,244
Deposits		205,632			203,440			-			309,032
Deposits Received under Securities Repurchase Agreements		331,863			56,001			-			353,662
Funds from Acceptances and Issue of Securities		69,960			51,756			-			84,230
Interbank and Interbranch Accounts		6,172			4,896			-			11,067
Borrowings and Onlendings		2,757			82,505			-			85,261
Derivative Financial Instruments		23			36,800			-			34,506
Other Liabilities		116,743			53,422			83,841			248,429
Foreign Exchange Portfolio		7,678			15,687			39,845			58,145
Others		109,065			37,735			43,996			190,283
Technical Provisions for Insurance, Pension Plans and Premium Bonds		111,303			32,754			-			144,057
Deferred Income		1,452			272			-			1,724
Minority Interest in Subsidiaries		1,739			11,491			70			13,301
Economic Allocated Capital - Tier I (*)		31,601			49,779			29,206			110,587
Total Liabilities and Equity		879,245			583,116			113,118			1,395,856

^(*) The Economic Capital allocated to the Activities with the Market + Corporation column contains all the excess capital of the institution in order to arrive at the accounting net equity.

Pro Forma Income Statement by Segment | 2^ndquarter of 2016

In R$ millions	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			Itaú Unibanco
Operating Revenues		17,402			7,236			1,840			26,478
Managerial Financial Margin		9,776			4,989			1,822			16,588
Financial Margin with Clients		9,776			4,989			302			15,068
Financial Margin with the Market		-			-			1,520			1,520
Commissions and Fees		5,653			2,151			12			7,816
Result from Insurance, Pension Plans and Premium Bonds Operations before Retained Claims and Selling Expenses		1,973			96			5			2,074
Result from Loan Losses		(3,556	)		(1,794	)		(15	)		(5,365	)
Provision for Loan Losses		(4,380	)		(1,942	)		(15	)		(6,337	)
Recovery of Loans Written Off as Losses		824			148			-			972
Retained Claims		(339	)		(13	)		-			(352	)
Operating Margin		13,507			5,429			1,825			20,761
Other Operating Income/(Expenses)		(9,133	)		(3,471	)		(489	)		(13,093	)
Non-interest Expenses		(7,895	)		(3,102	)		(417	)		(11,415	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,077	)		(368	)		(71	)		(1,516	)
Insurance Selling Expenses		(160	)		(0	)		(1	)		(162	)
Income before Tax and Minority Interests		4,374			1,958			1,336			7,669
Income Tax and Social Contribution		(1,540	)		(338	)		(22	)		(1,899	)
Minority Interests in Subsidiaries		(63	)		(126	)		(6	)		(195	)
Recurring Net Income		2,772			1,494			1,308			5,575
Recurring Return on Average Allocated Capital		34.2	%		12.6	%		18.4	%		20.6	%
Efficiency Ratio (ER)		49.9	%		45.3	%		23.6	%		46.7	%
Risk-Adjusted Efficiency Ratio (RAER)		72.4	%		71.4	%		24.4	%		68.6	%

Note: Non-interest Expenses includes Personnel Expenses, Administrative Expenses, Other Tax Expenses and Operating Expenses.

Consolidated figures do not represent the sum of the parts, because there are transactions between the companies that were eliminated only in the Consolidated figures.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Segment Analysis

Pro Forma Balance Sheet by Segment | On March 31, 2016

In R$ millions	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			Itaú Unibanco
Assets
Current and Long-Term Assets		827,012			611,344			112,892			1,371,979
Cash and Cash Equivalents		13,088			13,827			-			26,910
Short-term Interbank Investments		296,895			90,467			-			237,828
Securities and Derivative Financial Instruments		181,478			165,182			32,237			357,230
Interbank and Interbranch Accounts		67,058			6,557			-			72,222
Loan, Lease and Other Credit Operations		218,337			304,889			-			523,226
(Allowance for Loan Losses)		(17,303	)		(9,953	)		-			(27,256	)
(Complementary Expected Loss Provisions)		-			-			(10,985	)		(10,985	)
Other Assets		67,458			40,375			91,639			192,805
Foreign Exchange Portfolio		8,093			17,458			43,960			63,795
Others		59,366			22,917			47,679			129,011
Permanent Assets		15,116			8,673			1,863			25,652
Total Assets		842,128			620,017			114,755			1,397,631
Liabilities and Equity
Current and Long-Term Liabilities		805,621			564,540			86,538			1,277,430
Deposits		221,115			212,015			-			333,247
Deposits Received under Securities Repurchase Agreements		293,263			62,573			-			323,012
Funds from Acceptances and Issue of Securities		66,240			58,178			-			86,468
Interbank and Interbranch Accounts		5,000			4,825			-			9,823
Borrowings and Onlendings		4,512			99,748			-			104,260
Derivative Financial Instruments		20			35,667			-			33,267
Other Liabilities		108,648			60,679			86,538			249,677
Foreign Exchange Portfolio		8,483			17,332			44,142			64,240
Others		100,165			43,347			42,396			185,437
Technical Provisions for Insurance, Pension Plans and Premium Bonds		106,823			30,854			-			137,677
Deferred Income		1,519			328			-			1,847
Minority Interest in Subsidiaries		1,694			9,909			105			11,707
Economic Allocated Capital - Tier I (*)		33,294			45,241			28,112			106,647
Total Liabilities and Equity		842,128			620,017			114,755			1,397,631

^(*) The Economic Capital allocated to the Activities with the Market + Corporation column contains all the excess capital of the institution in order to arrive at the accounting net equity.

Pro Forma Income Statement by Segment | 1^stquarter of 2016

In R$ millions	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			Itaú Unibanco
Operating Revenues		17,074			7,838			1,971			26,884
Managerial Financial Margin		9,646			5,802			1,964			17,412
Financial Margin with Clients		9,646			5,802			227			15,675
Financial Margin with the Market		-			-			1,737			1,737
Commissions and Fees		5,422			1,906			2			7,331
Result from Insurance, Pension Plans and Premium Bonds Operations before Retained Claims and Selling Expenses		2,006			130			5			2,141
Result from Loan Losses		(3,633	)		(3,430	)		90			(6,973	)
Provision for Loan Losses		(4,413	)		(3,501	)		90			(7,824	)
Recovery of Loans Written Off as Losses		780			71			-			851
Retained Claims		(379	)		(15	)		-			(394	)
Operating Margin		13,062			4,393			2,061			19,516
Other Operating Income/(Expenses)		(8,652	)		(3,457	)		(511	)		(12,620	)
Non-interest Expenses		(7,394	)		(3,153	)		(362	)		(10,909	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,065	)		(303	)		(147	)		(1,515	)
Insurance Selling Expenses		(193	)		(0	)		(2	)		(196	)
Income before Tax and Minority Interests		4,410			936			1,550			6,896
Income Tax and Social Contribution		(1,580	)		(37	)		(123	)		(1,739	)
Minority Interests in Subsidiaries		(58	)		70			(6	)		6
Recurring Net Income		2,772			969			1,421			5,162
Recurring Return on Average Allocated Capital		34.2	%		8.7	%		20.3	%		19.6	%
Efficiency Ratio (ER)		47.9	%		41.9	%		19.9	%		44.0	%
Risk-Adjusted Efficiency Ratio (RAER)		71.4	%		87.6	%		14.9	%		72.2	%

Note: Non-interest Expenses includes Personnel Expenses, Administrative Expenses, Other Tax Expenses and Operating Expenses.

Consolidated figures do not represent the sum of the parts, because there are transactions between the companies that were eliminated only in the Consolidated figures.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Segment Analysis

Retail Banking

The revenues from Retail Banking come from the offer of banking products and services to retail and high-income clients and very small and small companies, in addition to financial products and services offered to our non-account holder clients, including vehicle financing and credit cards offered outside the branch network, and Itaú BMG Consignado operations.

In the second quarter of 2016, recurring net income for the segment totaled R$2,772 million, remaining stable compared to the previous quarter.

The stability of net income for the quarter is due to the 1.9% increase in banking revenues, which, associated to a 2.1% decrease in the result from loan losses, was offset by a 6.8% increase in non-interest expenses.

The increase in operating revenues was mainly driven by the increases of 4.2% in commissions and fees and of 1.4% in financial margin with clients. The lower result from loan losses in the segment was driven by a 0.7% decrease in the provision for loan losses, whereas credit recovery increased 5.7%.

The Retail Banking annualized return on allocated capital reached 34.2% in the second quarter of 2016. The efficiency ratio was 49.9% and the risk-adjusted efficiency ratio reached 72.4%.

Loan Portfolio – Retail Banking

The loan portfolio totaled R$215,432 million at the end of June 2016, decreasing 1.3% compared to March 31, 2016.

Wholesale Banking

The revenues from the Wholesale Banking segment come from: i) activities of Itaú BBA, the unit responsible for commercial operations with large companies and for investment banking services, ii) the result from our units abroad, and iii) products and services offered to middle-market companies, high-net worth clients (Private Banking) and institutional clients.

In the second quarter of 2016, net income of the Wholesale Banking segment reached R$ 1,494 million, an increase of 54.2% from the previous quarter. This increase was mainly driven by the reduction of 47.7% in the result from loan losses, which was partially offset by the decrease of 7.7% in operating revenues, mainly due to the 14.0% decrease in the financial margin with clients. In the quarter, the margin was impacted by the impairment of securities in the amount of R$539 million.

The reduction in result from loan losses, totaling R$1,794 million in the second quarter of 2016, was mainly due to the decrease of 44.5%, or R$1,559 million, in the provision for loan losses, due to lower provision for loan losses for specific economic groups and to the transfer of complementary allowance to the provision required by Resolution No. 2,682.

Non-interest expenses decreased 1.6% from the first quarter of 2016 and totaled R$3,102million in the current period.

In the second quarter of 2016, the segment’s return on allocated capital reached 12.6%, the efficiency ratio was 45.3% and the risk-adjusted efficiency ratio was 71.4%.

Loan Portfolio – Wholesale Banking

The loan portfolio reached R$282,527 million on June 30, 2016, down 7.3% compared to March 31, 2016.

Middle Market

This sub-segment serves approximately 29 thousand clients (economic groups) with sales between R$30 million and R$200 million.

Our result is well balanced between earnings from loans and services. Our risk appetite continues to focus on high-rating clients, and 69% of loans are granted to B2 and higher ratings (internal rating).

Our credit portfolio (including sureties and endorsements) decreased 11% from the first quarter of 2016.

Large Companies

Our clients are approximately 5,800 large corporate groups and 190 financial institutions. We offer them a broad portfolio of banking products and services, from cash management to structured operations and transactions in capital markets.

The credit portfolio (including endorsements and sureties) decreased 12.0% from the end of June 2015, and the highlight is the decrease in foreign currency products. In our loan portfolio, 85% of credits are rated “AA”, “A” and “B”, according to criteria set forth in Resolution No. 2,682 of the National Monetary Council.

For derivatives, we maintained our outstanding position in CETIP (Clearing House for the Custody and Financial Settlement of Securities). We focused on operations that hedge our clients’ exposures to foreign currencies, interest rates and commodities.

Investment Banking

Fixed Income: we took part in local operations with debentures, promissory notes and securitization, which totaled R$3 billion up to June 2016.

Mergers and Acquisitions: in the period from January to June 2016, our Merger and Acquisition operation provided financial advisory on 16 transactions in Latin America, totaling US$4.8 billion, and reached the leadership in the Thomson Reuters ranking.

Project Finance: we ranked first in the ANBIMA¹ ranking for Financial Advisory on Long-Term Financing. This category includes long-term financing for the implementation of infrastructure projects in many different sectors, such as energy, roads, urban mobility, water treatment and airports.

We work as financial advisor and/or creditor to the implementation of three wind power generation projects, totaling approximately R$700 million in financing. These projects result in approximately 350 MW installed power and R$1.85 billion investments.

¹Brazilian Financial and Capital Markets Association, considering financed volume.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Segment Analysis

Additionally, we were financial advisors to the long-term financing from BNDES of R$882 million to the concession of the BR-101 road (476 km long, in the State of Espírito Santo), and to the structuring of debentures, in the amount of R$933 million to the Subway Line 4 project in the city of Rio de Janeiro.

Wealth Management and Services

Asset Management

In May 2016, we reached R$503.5 billion (*) in managed assets, which accounted for 15.9% of the market. In the last 12 months, the volume of managed assets grew 18.0% in the aggregate, and noteworthy were fixed income and pension plan funds. In addition to a strong local presence, we are present in the world’s major financial centers, with strategically allocated professionals, searching for opportunities and investment solutions appropriate for different customer profiles.

Kinea, the investments management company controlled by Itaú Unibanco, holds R$7.89 billion in managed assets.

(*) Source: ANBIMA (Brazilian Financial and Capital Markets Association) – May 2016. Considers Itaú Unibanco and Intrag.

Securities Services

With four lines of business, the Securities Services area serves both publicly and closely-held companies, pension funds, asset management and international investors, totaling 3,340 clients in 22 countries. We ended June 2016 with a custody market share of 23.8% and a total of R$1,151 billion in assets under custody, an increase of 11.3% from the same period of 2015. Our business lines are:

Local Custody and Fiduciary Administration: we offer custody and accounting services for portfolios, investment, mutual and pension funds, services of fund administration, rebalancing fund services and contracting of service providers. We ended June with a total of R$999 billion under custody, up 14.9% from the same period of 2015.

International Custody: we offer services of custody and representation to investors outside Brazil, custody of ADR programs and depositary services for Brazilian Depositary Receipts (BDR) programs. We ended June 2016 with R$152 billion under custody, a decrease of 7.7% from the volume under custody in the same period of 2015.

Corporate Solutions: we offer many solutions for capital markets, such as control of stock option programs, bookkeeping of shares, debentures, and settlement and custody of promissory notes and bank credit notes. We also work as guarantee agents in operations of Project Finance, Escrow Accounts, and loan and financing contracts. We are leaders in the bookkeeping of shares, providing services to 217 companies listed on the BM&F Bovespa, representing 61.1% of the total market, and in the bookkeeping of debentures, acting as the bookkeeper of 446 issues in June 2016.

Source: Itaú Unibanco, ANBIMA (Brazilian Financial and Capital Markets Association) and BM&F Bovespa – Junho 2016

Private Bank

With a full global wealth management platform, we are the market leaders in Brazil and one of the main players in Latin America. Our multidisciplinary team, which comprises private bankers, investment advisers and product experts, serves our clients from our eight offices in Brazil and other offices located in Zurich, Miami, New York, Santiago, Montevideo, Asuncion, and Nassau.

Activities Abroad

Our activities abroad include business with retail clients and large companies, and investment banking activities in nineteen countries outside Brazil.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Results - Brazil and Latin America

We present below the income statement segregated between our operations in Brazil, which include units abroad excluding Latin America, and our operations in Latin America excluding Brazil.

Additional information on our activities abroad is available on the next pages.

Income Statement | Quarterly Change

	2Q16									1Q16									change
							Latin									Latin									Latin
							America									America									America
In R$ millions	Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)
Operating Revenues		26,478			23,972			2,507			26,884			24,470			2,413			-1.5	%		-2.0	%		3.9	%
Managerial Financial Margin		16,588			14,835			1,753			17,412			15,624			1,788			-4.7	%		-5.1	%		-1.9	%
Financial Margin with Clients		15,068			13,607			1,461			15,675			14,010			1,665			-3.9	%		-2.9	%		-12.3	%
Financial Margin with the Market		1,520			1,228			293			1,737			1,615			122			-12.5	%		-24.0	%		139.4	%
Commissions and Fees		7,816			7,094			722			7,331			6,743			588			6.6	%		5.2	%		22.8	%
Result from Insurance ²		2,074			2,042			32			2,141			2,103			38			-3.1	%		-2.9	%		-16.7	%
Result from Loan Losses		(5,365	)		(5,015	)		(351	)		(6,973	)		(6,237	)		(736	)		-23.1	%		-19.6	%		-52.4	%
Provision for Loan Losses		(6,337	)		(5,941	)		(396	)		(7,824	)		(7,051	)		(772	)		-19.0	%		-15.7	%		-48.7	%
Recovery of Loans Written Off as Losses		972			927			45			851			814			37			14.3	%		13.8	%		24.0	%
Retained Claims		(352	)		(344	)		(8	)		(394	)		(384	)		(11	)		-10.7	%		-10.3	%		-25.7	%
Other Operating Expenses		(13,093	)		(11,464	)		(1,629	)		(12,620	)		(10,982	)		(1,639	)		3.7	%		4.4	%		-0.6	%
Non-interest Expenses		(11,415	)		(9,828	)		(1,587	)		(10,909	)		(9,294	)		(1,615	)		4.6	%		5.7	%		-1.8	%
Tax Expenses and Other ³		(1,678	)		(1,636	)		(42	)		(1,711	)		(1,688	)		(24	)		-1.9	%		-3.1	%		77.9	%
Income before Tax and Minority Interests		7,669			7,149			520			6,896			6,868			28			11.2	%		4.1	%		-
Income Tax and Social Contribution		(1,899	)		(1,857	)		(42	)		(1,739	)		(1,776	)		36			9.2	%		4.6	%		-216.1	%
Minority Interests in Subsidiaries		(195	)		(69	)		(126	)		6			(64	)		70			-			7.3	%		-280.1	%
Recurring Net Income		5,575			5,223			352			5,162			5,028			134			8.0	%		3.9	%		161.7	%

¹Includes units abroad ex-Latin America.

²Result from Insurance includes the Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses.

³ Include Tax Expenses (ISS, PIS, COFINS and other) and Insurance Selling Expenses.

Note: Latin America information is presented in nominal currency.

Income Statement | Year-to-date Change

	1H16									1H15									change
							Latin									Latin									Latin
							America									America									America
In R$ millions	Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)
Operating Revenues		53,362			48,442			4,920			52,491			47,759			4,732			1.7	%		1.4	%		4.0	%
Managerial Financial Margin		34,000			30,459			3,541			34,037			30,580			3,457			-0.1	%		-0.4	%		2.4	%
Financial Margin with Clients		30,743			27,617			3,126			30,604			27,307			3,297			0.5	%		1.1	%		-5.2	%
Financial Margin with the Market		3,258			2,843			415			3,432			3,272			160			-5.1	%		-13.1	%		159.5	%
Commissions and Fees		15,147			13,837			1,309			14,141			12,911			1,230			7.1	%		7.2	%		6.4	%
Result from Insurance ²		4,215			4,145			70			4,314			4,269			46			-2.3	%		-2.9	%		53.3	%
Result from Loan Losses		(12,338	)		(11,252	)		(1,086	)		(9,238	)		(8,566	)		(671	)		33.6	%		31.4	%		61.8	%
Provision for Loan Losses		(14,161	)		(12,993	)		(1,168	)		(11,482	)		(10,732	)		(750	)		23.3	%		21.1	%		55.8	%
Recovery of Loans Written Off as Losses		1,823			1,741			82			2,244			2,166			79			-18.8	%		-19.6	%		4.2	%
Retained Claims		(746	)		(728	)		(18	)		(753	)		(740	)		(13	)		-0.9	%		-1.7	%		39.3	%
Other Operating Expenses		(25,713	)		(22,446	)		(3,267	)		(24,431	)		(21,727	)		(2,704	)		5.2	%		3.3	%		20.8	%
Non-interest Expenses		(22,324	)		(19,122	)		(3,202	)		(20,997	)		(18,342	)		(2,655	)		6.3	%		4.3	%		20.6	%
Tax Expenses and Other ³		(3,389	)		(3,324	)		(66	)		(3,434	)		(3,385	)		(49	)		-1.3	%		-1.8	%		33.8	%
Income before Tax and Minority Interests		14,564			14,016			548			18,069			16,725			1,344			-19.4	%		-16.2	%		-59.2	%
Income Tax and Social Contribution		(3,638	)		(3,632	)		(6	)		(5,408	)		(5,066	)		(343	)		-32.7	%		-28.3	%		-98.3	%
Minority Interests in Subsidiaries		(189	)		(133	)		(56	)		(703	)		(185	)		(518	)		-73.1	%		-28.1	%		-89.2	%
Recurring Net Income		10,737			10,251			486			11,958			11,475			483			-10.2	%		-10.7	%		0.7	%

¹Includes units abroad ex-Latin America.

²Result from Insurance includes the Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses.

³ Include Tax Expenses (ISS, PIS, COFINS and other) and Insurance Selling Expenses.

Note: Latin America information is presented in nominal currency.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

In Argentina, Chile, Paraguay, Uruguay and Colombia we operate in retail, companies, corporate and treasury segments, with commercial banking as our main focus. In Peru, we have an Itaú BBA representation office.

As from April 1, 2016, after obtaining all shareholders and regulatory approvals required, the merger of operations between Banco Itaú Chile and CorpBanca was concluded. As consequence, we now hold the control of the resulting bank (Itaú CorpBanca) with a 33.58% stake in its capital. In the second quarter, Itaú CorpBanca’s financial statements were consolidated in our accounting numbers. The technological and operational integration of this process should be completed at the end of 2017, and merger synergies are expected to become more evident in 2018.

With this operation, we now rank 4^th, from a previous 7^th place, among the largest private banks in Chile in terms of loans and we have entered the financial retail market in Colombia through Banco CorpBanca Colombia S.A., the 5^th largest bank in terms of loans, which will also operate under the “Itaú” brand. Furthermore, we currently operate in Panama.

Additionally, we have operations in Europe (Portugal, United Kingdom, Spain, France, Germany and Switzerland), in the United States (Miami and New York), in the Caribbean (Cayman Islands and Bahamas), in the Middle East (Dubai), and in Asia (Hong Kong, Shanghai and Tokyo), mainly serving institutional, investment banking, corporate and private banking clients.

Information about the number of employees abroad and the international service network is presented below:

Employees Abroad

*Considers employees from Panama

International Service Network

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

Latin America

Latin America is a priority for our international expansion due to geographic and cultural proximity to Brazil. Our purpose is to be recognized as the “Latin American Bank”, becoming a reference in the region for all financial services provided to individuals or companies.

Over the past years, we consolidated our presence in Argentina, Chile, Paraguay and Uruguay, mainly focused in commercial bank and, with the recent merger between Banco Itaú Chile and CorpBanca, which assured our presence in Colombia and Panama, we expanded even more our operations in the region. In Peru, we operate in the corporate segment through a representative office.

We present consolidated results for Latin America as well as for its respective countries in constant currency⁽¹⁾ and, in managerial concept⁽²⁾ , which includes the allocation of Brazil’s cost structure and the impact of Brazilian income tax.

Income Statement | Latin America ⁽³⁾

	2Q16									1Q16
																			Change
	Nominal			Exchange			Constant			Nominal			Exchange			Constant			in Constant
In R$ millions	Currency			Rate Effect ⁽¹⁾			Currency			Currency			Rate Effect ⁽¹⁾			Currency			Currency
Operating Revenues		2,507			(200	)		2,307			2,413			(232	)		2,181			5.8	%
Managerial Financial Margin		1,753			(174	)		1,580			1,788			(178	)		1,610			-1.9	%
Financial Margin with Clients		1,461			(51	)		1,410			1,665			(150	)		1,515			-7.0	%
Financial Margin with the Market		293			(123	)		170			122			(28	)		95			79.5	%
Commissions and Fees		722			(26	)		696			588			(53	)		534			30.2	%
Insurance, Pension Plan and Premium Bonds		32			(1	)		31			38			(2	)		36			-14.5	%
Result from Loan Losses		(351	)		11			(339	)		(736	)		64			(672	)		-49.5	%
Provision for Loan Losses		(396	)		12			(383	)		(772	)		67			(706	)		-45.7	%
Recovery of Loans Written Off as Losses		45			(1	)		44			37			(3	)		34			31.5	%
Retained Claims		(8	)		0			(8	)		(11	)		0			(10	)		-24.1	%
Other Operating Expenses		(1,629	)		60			(1,568	)		(1,639	)		124			(1,514	)		3.6	%
Non-Interest Expenses		(1,587	)		46			(1,540	)		(1,615	)		127			(1,488	)		3.5	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(42	)		14			(28	)		(24	)		(3	)		(27	)		4.7	%
Insurance Selling Expenses		0			-			0			0			0			0			0.0	%
Income before Tax and Minority Interests		520			(129	)		391			28			(44	)		(16	)		-
Income Tax and Social Contribution		(42	)		53			11			36			17			53			-78.6	%
Minority Interests in Subsidiaries		(126	)		4			(122	)		70			(6	)		64			-
Recurring Net Income		352			(71	)		281			134			(34	)		101			178.4	%
Return on Average Equity - Annualized		15.3	%					12.7	%		6.6	%					5.3	%		740 bps
Efficiency Ratio		64.6	%					67.8	%		67.9	%					69.4	%		-160 bps

(1) Consists of the elimination of foreign exchange variation, which is obtained by the application of the average foreign exchange rate of June 2016 to all periods analyzed and hedge adjustments; (2) Considers CorpBanca Pro Forma figures on 1Q16; (3) Includes our operations in Argentina, Chile, Paraguay, Uruguay, Colombia, Peru, Panama and Mexico.

In the second quarter of 2016, net income for Latin America totaled R$281 million, an increase of R$180 million when compared to the first quarter of 2016. The financial margin decreased 1.9% in the period, practically stable compared to the previous quarter. Commissions and fees increased 30.2%, specially in Chile.

Provision for loan losses decreased 45.7% in the second quarter, mainly due to higher provisions in the corporate segment in Chile occurred in the first quarter. Non-interest expenses increased 3.5%, when compared to the previous quarter, specially in Chile.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

Argentina

In Argentina, we offer products and services for corporate, small and middle-market companies and retail segments, focused on large companies that have trade relations with Brazil. In the second quarter of 2016, the result in Argentina reached R$53 million, an 18.8% increase from the previous quarter. The financial margin decreased 5.2% mainly due to lower result from derivatives. On the other hand, commissions and fees were up 17.0% in the period, totaling R$102 million, driven by the increase in revenues from credit cards and insurance in the retail segment and in investment banking services and placement of fixed income securities in the corporate segment.

Provisions for loan losses were also drivers for the monthly result due to lower provisions in retail and small and middle companies segments. Non-interest expenses reached R$199 million, an increase of 2.8% from the previous quarter, mainly due to facilities and transportation of valuables expenses .

Income Statement | Argentina

In R$ millions	2Q16			1Q16			change
Operating Revenues		308			305			1.2	%
Managerial Financial Margin		206			217			-5.2	%
Financial Margin with Clients		175			183			-4.5	%
Financial Margin with the Market		31			34			-8.9	%
Commissions and Fees		102			88			17.0	%
Result from Loan Losses		2			(14	)		-
Provision for Loan Losses		1			(15	)		-
Recovery of Loans Written Off as Losses		1			1			-10.5	%
Other Operating Expenses		(225	)		(219	)		2.8	%
Non-Interest Expenses		(199	)		(194	)		2.8	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(26	)		(25	)		2.8	%
Income before Tax and Minority Interests		85			71			19.0	%
Income Tax and Social Contribution		(31	)		(26	)		19.4	%
Recurring Net Income		53			45			18.8	%
Return on Average Equity - Annualized		23.1	%		28.6	%		-550 bps
Efficiency Ratio		70.6	%		69.4	%		120 bps

Chile

The table below shows the results obtained in Chile in the second quarter of 2016. We highlight that, due to the association between Banco Itaú Chile and CorpBanca, concluded on April 1^stof 2016, we reported the results from the first quarter of 2016 considering the sum of results obtained by both companies in the period adjusted by minority interests. Additionally, the results obtained through the participation of Itaú CorpBanca in Colombia and Panama are considered in this income statement. Through Itaú CorpBanca, we operate in the retail (highlight for mortgage loans), companies and coporate segments.

Net income totaled R$68 million this quarter. The financial margin remained practically stable compared to the previous quarter. Commissions and fees increased 52.3% in the period, mainly due to higher income in the corporate segment. Provision for loan losses decreased 47.9%, mainly due to the increase that occurred in the first quarter of 2016 in the corporate segment (mainly in oil and gas and energy sectors, in Chile and Colombia). Non-Interest Expenses increased 3.6% mainly due to higher integration expenses.

Income Statement | Chile (Includes participation of subsidiaries from Chile in Colombia and Panama)

In R$ millions	2Q16			1Q16			change
Operating Revenues		1,489			1,342			10.9	%
Managerial Financial Margin		1,086			1,062			2.3	%
Financial Margin with Clients		983			1,065			-7.8	%
Financial Margin with the Market		103			(3	)		-
Commissions and Fees		372			244			52.3	%
Insurance, Pension Plan and Premium Bonds		31			36			-14.5	%
Result from Loan Losses		(301	)		(625	)		-51.9	%
Provision for Loan Losses		(341	)		(655	)		-47.9	%
Recovery of Loans Written Off as Losses		41			30			33.0	%
Retained Claims		(8	)		(10	)		-24.1	%
Other Operating Expenses		(995	)		(960	)		3.6	%
Non-Interest Expenses		(993	)		(959	)		3.6	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1	)		(0	)		68.4	%
Insurance Selling Expenses		(1	)		(1	)		46.2	%
Income before Tax and Minority Interests		186			(252	)		-
Income Tax and Social Contribution		4			138			-97.2	%
Minority Interests in Subsidiaries		(122	)		64			-
Recurring Net Income		68			(50	)		-
Return on Average Equity - Annualized		5.3	%		-4.2	%		950 bps
Efficiency Ratio		67.1	%		72.0	%		-490 bps

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

Paraguay

In Paraguay, we offer products and services for companies in the small and middle-market, agribusiness, and retail segments. The main sources of income in Paraguay are retail products, especially credit cards.

Net income in Paraguay reached R$39 million this quarter, a 9.9% decrease from the previous quarter. The financial margin was stable when compared the previous quarter, whereas the provisions for loan losses increased R$9 million in the quarter, mainly driven by higher expenses in the retail and agribusiness segments. Non-interest expenses reduced 1.6%, driven by lower promotional credit card expenses.

Income Statement | Paraguay

In R$ millions	2Q16			1Q16			change
Operating Revenues		179			179			0.2	%
Managerial Financial Margin		127			129			-1.1	%
Financial Margin with Clients		107			100			6.0	%
Financial Margin with the Market		21			28			-26.5	%
Commissions and Fees		52			50			3.5	%
Result from Loan Losses		(22	)		(13	)		67.1	%
Provision for Loan Losses		(23	)		(14	)		60.6	%
Recovery of Loans Written Off as Losses		1			1			-8.4	%
Other Operating Expenses		(94	)		(96	)		-1.6	%
Non-Interest Expenses		(94	)		(96	)		-1.6	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		0			0			37.5	%
Income before Tax and Minority Interests		63			70			-9.9	%
Income Tax and Social Contribution		(24	)		(26	)		-10.0	%
Recurring Net Income		39			43			-9.9	%
Return on Average Equity - Annualized		15.3	%		16.5	%		-120 bps
Efficiency Ratio		52.5	%		53.5	%		-100 bps

Uruguay

In Uruguay, we operate in the segments of small and middle-market companies and retail, targeting medium and high-income clients. Net income of our operations in Uruguay was R$42 million this quarter, a decrease of 25.1% compared to the previous quarter, mainly impacted by the 11.0% financial margin reduction, related to lower results with treasury operations. The provision for loan losses increased 34.5% in this quarter, due to higher provisions in companies segment.

Income Statement | Uruguay

In R$ millions	2Q16			1Q16			change
Operating Revenues		290			308			-5.9	%
Managerial Financial Margin		141			158			-11.0	%
Financial Margin with Clients		128			127			0.7	%
Financial Margin with the Market		13			31			-58.4	%
Commissions and Fees		148			149			-0.4	%
Result from Loan Losses		(19	)		(14	)		31.0	%
Provision for Loan Losses		(20	)		(15	)		34.5	%
Recovery of Loans Written Off as Losses		1			1			122.7	%
Other Operating Expenses		(205	)		(203	)		1.2	%
Non-Interest Expenses		(205	)		(202	)		1.2	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(0	)		(1	)		-14.7	%
Income before Tax and Minority Interests		66			90			-27.5	%
Income Tax and Social Contribution		(24	)		(34	)		-31.5	%
Recurring Net Income		42			56			-25.1	%
Return on Average Equity - Annualized		15.8	%		20.4	%		-460 bps
Efficiency Ratio		70.8	%		65.8	%		490 bps

Peru

In Peru, we have a representation office and we are considering to increase our activities in corporate and investment banking segments.

Mexico

As part of a restructuring process of our activities in Latin America, we sold this quarter our broker business in the country. This operation is pending regulatory approval.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Ownership Structure

Itaú Unibanco Holding’s capital stock is comprised of common shares (ITUB3) and non-voting shares (ITUB4), both traded on the BM&FBOVESPA. The non-voting shares are also traded as depositary receipts on the NYSE (New York) and BCBA (Argentina) as ADRs and CEDEARs, respectively.

Outstanding Shares | Itaú Unibanco Holding S.A.

In thousands	Common Shares		Non-voting Shares			Total
Number of Shares		3,047,040		2,936,876			5,983,916
Treasury Shares
On 12/31/2015		2.8		162,563			162,565
Purchases of treasury shares		-		7,990			7,990
Exercised - Granting of stock options		-		(8,740	)		(8,740	)
Disposals - Stock option plan		-		(7,625	)		(7,625	)
Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		(100,000	)		(100,000	)
On 06/30/2016 ⁽¹⁾		2.8		54,187			54,190
Total Shares (-) Treasury Shares		3,047,037		2,882,688			5,929,726

(1) The average cost of non-voting treasury shares was R$26.70 and of the common treasury shares was R$7.25. For further information, including information on the “Stock Option Plan”, see Note 16 to the financial statements.

Our ownership structure aims to optimize capital allocation among the many segments that compose the conglomerate. Itaú Unibanco Holding is controlled by IUPAR, which is jointly controlled by Itaúsa and Cia. E. Johnston. Itaúsa is controlled by the members of the Egydio de Souza Aranha family while Cia. E. Johnston is controlled by the members of the Moreira Salles family.

The organizational chart below summarizes the current ownership structure as at June 30, 2016:

Note: The percentages do not include treasury shares.

(1) Besides the treasury stocks, the percentages do not consider the participation of controlling stockholders.

Cancellation of Shares

On June 7, the Brazilian Central Bank approved the cancellation of 100 million non-voting treasury shares, without capital stock change, resolved on the Stockholders’ Meeting, resulting in a balance of 54.2 million shares after such cancellation.

The acquisition of own issued shares with their subsequent cancellation increases the shareholder’s interest percentage in the Company’s capital stock and, should the financial result and the distribution of earnings percentage be maintained, it will enable a higher return on dividends and interest on capital per share.

Free Float - Non-voting Shares | on 06/30/2016

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Stock Market Performance

Stock Market Performance | 2Q16

Our common and non-voting shares were traded on all BM&FBOVESPA’s sessions in the first half of 2016. Additionally, our non-voting shares are included in several Stock Exchange indexes on which financial institutions shares may be listed.

	(R$)			(R$)			(US$)
	Non-voting Shares			Common Shares			ADRs
	ITUB4			ITUB3			ITUB
Closing Price at 06/30/2016		30.30			26.02			9.44
Maximum price in the quarter		34.39			29.50			9.79
Average price in the quarter		30.69			26.60			8.74
Minimum price in the quarter		27.85			24.50			7.91
Closing Price at 03/31/2016		31.21			26.71			8.59
Maximum price in 12 months⁽¹⁾⁽²⁾		34.39			30.71			10.22
Average price in 12 months ⁽¹⁾		28.47			25.83			7.73
Minimum price in 12 months⁽¹⁾⁽³⁾		22.81			21.49			5.48
Closing Price at 06/30/2015		31.11			30.19			9.95
Change in 2Q16		-2.9	%		-2.6	%		9.9	%
Change in the last 12 months		-2.6	%		-13.8	%		-5.2	%
Average daily trading financial volume - in 12 months (million)⁽¹⁾		462.5			3.2			141.5
Average daily trading financial volume in 2Q16 (million)		406.4			3.4			144.7

(1) From 07/01/15 to 06/30/16;

(2) Prices on 04/13/16 for non-voting shares, on 07/13/15 for common shares and on 07/02/15 for ADRs;

(3) Prices on 01/20/16 for non-voting shares, on 01/26/16 for common shares and on 01/21/16 for ADRs.

Closing price at the end of each period ⁽¹⁾

(1) ITUB4, ITUB3 and ITUB historical information of 2014, 2013 and 2012 was adjusted by the July 2015, June 2014 and May 2013 bonuses.

Liquidity of our shares

	2Q16			1Q16			2Q15
BM&FBovespa (ITUB4)
Total Financial Volume Traded in the spot market (R$ million)		25,601			28,823			28,891
Volume of Transactions (thousand)		1,660.1			2,125.3			1,612.2
Average volume by transaction (R$ thousand)		15.4			13.6			17.9
Negotiability Index ⁽¹⁾		3.93	%		4.68	%		4.27	%
NYSE (ADR)
Total Financial Volume Traded (R$ million)		32,716			33,522			31,624
Volume of Transactions (thousand)		2,304.0			2,547.9			2,057.5
Average volume by transaction (R$ thousand)		14.2			13.2			15.4
Total outstanding ADRs (million)		846.6			856.4			895.5
Ratio of Total Outstanding ADRs to Total Outstanding Non-Voting Shares		29.4	%		29.7	%		30.4	%

(1) The negotiation index represents the percentage of share trading in relation to all shares traded in the spot market on BM&FBovespa. For calculation purposes, it considered the trading in the three last months of each period. Source: Economática.

Market Capitalization vs. Ibovespa Index

On June 30, 2016, our market capitalization was R$179.3 billion, and the compound annual growth rate (CAGR) was 5.1% since 2012. The Ibovespa index reached 51.5 thousand points in the same period. According to information provided by Bloomberg, on June 30, 2016 we were the 2^nd largest company by market capitalization in Brazil and the largest among financial institutions.

Market Indicators

(1): Closing price of non-voting share at the period end/Earnings per share. For calculation purposes, the retained earnings of the last 12 months were considered. (2): Closing price of non-voting share at the period-end/Book value per share.

Average Daily Trading Volume (BM&FBovespa + NYSE)

Financial trading profile by investor

Foreign investors accounted for 73.6% of the financial volume of our shares traded on stock exchanges in the first half of 2016.

(1) Cooperatives, public companies, limited-liability companies, municipal/state/federal governments, financial entities, churches and charities and/or non-profit organizations, among others.

(2) Includes foreign investors trading on the BM&FBOVESPA, as well those trading on the NYSE.

Dividends and Interest on Capital

We remunerate our stockholders by means of monthly and complementary payments of dividends and interest on capital. In the first half of 2016, we paid or recognized a provision of R$2.5 billion in dividends and interest on capital, net of taxes.

Dividend Yield (Dividends and Interest on Capital Distributed / Average Price⁽¹⁾) It is the ratio of total dividends/interest on capital distributed to the share price, which indicates the return on investment to the stockholder through profit sharing during each period.

Payout (Net Dividends and Interest on Capital Distributed / Net Income)

(1): Average price on the first day of each period.

(2): For calculation purposes, it was considered the total Dividends/Interest on capital distributed in the last 12 months of each period.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Stock Market Performance

Market Consensus

Major market analysts periodically issue recommendations on the shares that are the subject matter of their analysis. These recommendations help many investors choose the best option in which to invest their capital.

Based on information provided by Thomson Analytics and Bloomberg on August 01, 2016, we present in the table below a summary of the recommendations on Itaú Unibanco Holding’s non-voting shares.

	Thomson	Bloomberg
Buy	10	10
Hold	6	9
Sell	3	4
Number of Analysts	19	23

Based on the information provided by Thomson, the average estimated target price for 2016 was R$34.37. According to Bloomberg, the average estimated target price was R$34.21.

Main Market Index

The weights of our common and non-voting shares in the BM&FBOVESPA’s indexes of the current portfolios from May to August 2016 are shown in the chart below.

	ITUB3			ITUB4
	Weights			Weights and Ranking⁽¹⁾
Ibovespa (Bovespa Index)		-			10.46	%	1^st
IBrX - 50 (Brazil Index 50)		-			10.53	%	1^st
IBrX - 100 (Brazil Index 100)		-			9.49	%	1^st
IBrA (Brazil Broad-Based Index)		0.81	%		9.30	%	1^st
IFNC (Financial Index)⁽²⁾		1.60	%		18.40	%	1^st
IGCT (Corporate Governance Trade Index)		1.01	%		11.68	%	1^st
ITAG (Special Tag Along Stock Index)		-			12.57	%	1^st
IGCX (Special Corporate Governance Stock Index)		0.62	%		7.16	%	1^st
MLCX (Mid-Large Cap Index)		0.89	%		10.23	%	1^st
ICO2 (Carbon Efficient Index)		-			14.64	%	1^st
ISE (Corporate Sustainability Index)⁽³⁾		0.48	%		5.53	%	4^th

(1) Position of the ITUB4 share when the components of the index are ordered based on their weights.

(2) The weight of the companies’ shares in the index (including all types of shares) cannot exceed 20%.

(3) The weight of one economic sector in the Corporate Sustainability Index (ISE), including all types of shares, cannot exceed 15%.

Net Income per Share⁽¹⁾and Recurring Net Income per Share⁽¹⁾

(1) For calculation purposes, the retained earnings of the last 12 months were considered. ITUB4, ITUB3 and ITUB historical information of 2014, 2013 and 2012 was adjusted by the July 2015, June 2014 and May 2013 bonus.

Credit Risk Assessment by Rating Agencies

As a result of Fitch’s downgrade of Brazil’s sovereign credit rating in May 2016, this rating agency also reviewed the ratings of 22 financial institutions, including the downgrade of Itaú Unibanco S.A. and Itaú Unibanco Holding S.A.

In May 2016, Moody’s reviewed the ratings on national scale in Brazil. Therefore, the ratings of 28 financial institutions were changed, including Itaú Unibanco S.A. and Itaú Unibanco Holding S.A., the ratings on national scale of which were upgraded.

To learn more about these ratings, please visit (www.itau.com.br/ investor-relations) in Itaú Unibanco > Market Opinion > Ratings.

Non-voting Shares (ITUB4) Appreciation

The chart below shows the simulation of R$100 invested on June 30, 2006 through June 30, 2016, by comparing the amounts with and without the reinvestment of dividends to the performance of Ibovespa and the CDI (Interbank Deposit Certificate).

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Stock Market Performance

Market Relations

In the second quarter of 2016, we held five APIMEC (Association of Capital Market Analysts and Investment Professionals) meetings, with the attendance of 717 participants. We take this opportunity to invite you all for our 11 next meetings, including the one to be held on November 17 in São Paulo. For further details, please visit the Investors’ Relations website (www.itau.com.br/investor-relations).

IR Magazine Awards Brazil 2016 – Granted by IR Magazine and the Brazilian Institute of Investors Relations (IBRI), this award selects the Brazilian companies with the best Investor Relations practices, through an independent survey carried out by Fundação Getulio Vargas (FGV) with portfolio managers and investment analysts. This year we were recognized in two categories, as follows:

Best Corporative Governance;

Best Use of Technology.

2016 Agenda

August
02	2^nd Quarter Result

September
	APIMEC - Florianópolis / SC
01
	Venue: Majestic Palace Hotel	Time: 7:00 p.m.

	APIMEC - Curitiba / PR
05
	Venue: Pestana Curitiba Hotel	Time: 7:00 p.m.

	APIMEC - Recife / PE
13
	Venue: JCPM Trade Center	Time: 7:00 p.m.

	APIMEC - Salvador / BA
14
	Venue: Golden Tulip Salvador	Time: 7:00 p.m.

	APIMEC - Santos / SP
15
	Venue: Parque Balneário Hotel	Time: 7:00 p.m.

	APIMEC - Ribeirão Preto / SP
21
	Venue: Stream Palace Hotel	Time: 7:00 p.m.

	APIMEC - Uberlândia / MG
22
	Venue: Center Convention	Time: 7:00 p.m.

	APIMEC - Goiânia / GO
26
	Venue: Castro's Park Hotel	Time: 7:00 p.m.

	APIMEC - Campinas / SP
27
	Venue: Vitória Hotel Concept Campinas	Time: 7:00 p.m.

October
	APIMEC - Londrina / PR
04
	Venue: Hotel Boulevard	Time: 7:00 p.m.

31	3^rd Quarter Result

November
	APIMEC - São Paulo / SP
17
	Venue: Hotel Unique	Time: 2:00 p.m.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Stock Market Performance

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Itaú Unibanco Holding S.A.

(A free translation of the original in Portuguese)

Report of independent auditors on
supplementary information

To the Board of Directors and Stockholders

Itaú Unibanco Holding S.A.

Introduction

In connection with our audit of the financial statements of Itaú Unibanco Holding S.A. (Bank) and Itaú Unibanco Holding S.A. and its subsidiary companies (Consolidated) as of June 30, 2016, on which we issued an unqualified opinion dated August 1, 2016, we performed a review of the accounting information contained in the supplementary information included in the Management Discussion and Analysis Report of Itaú Unibanco Holding S.A. and its subsidiaries for the six month period ended June 30, 2016.

Scope of the Review

We conducted our review in accordance with NBC TA 720, “The auditor's responsibility relating to other information in documents containing audited financial statements”, which establishes the procedures to be performed in engagements of this nature. Those procedures primarily comprised: (a) inquiry of, and discussion with, management responsible for the accounting, financial and operational areas of the Bank and its subsidiaries with regard to the main criteria adopted for the preparation of the accounting information presented in the supplementary information and (b) review of the significant information and of the subsequent events which have, or could have, significant effects on the financial position and the operations of the Bank and its subsidiaries. The supplementary information included in the Management Discussion and Analysis Report is presented to permit additional analysis. Notwithstanding, this information should not be considered an integral part of the financial statements.

Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accounting information contained in this supplementary information, in order for it to be adequately presented, in all material respects, in relation to the financial statements at June 30, 2016, taken as a whole, prepared in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN).

São Paulo, August 1, 2016


PricewaterhouseCoopers		Washington Luiz Pereira Cavalcanti
Auditores Independentes		Contador CRC 1SP172940/O-6
CRC 2SP000160/O-5

Itaú Unibanco Holding S.A.

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Itaú Unibanco Holding S.A.

MANAGEMENT REPORT – June 30, 2016

To our Stockholders,

The Management Report and the Financial Statements of Itaú Unibanco Holding S.A. (Itaú Unibanco) and its subsidiaries for the period from January to June 2016 follow the regulations established by the Brazilian Corporate Law, the National Monetary Council (CMN), the Central Bank of Brazil (BACEN), the Brazilian Securities and Exchange Commission (CVM), the Superintendence of Private Insurance (SUSEP), the National Council of Private Insurance (CNSP), and the National Superintendence of Supplementary Pension (PREVIC). The information presented in this material is available on the Investor Relations’ website of Itaú Unibanco (www.itau.com.br/investor-relations > Financial Information) and on the CVM, Securities and Exchange Commission (SEC) and the Buenos Aires Stock Exchange (BCBA) websites. Our results may also be accessed on mobile devices and tablets, and through our application “Itaú RI” (APP), respectively.

1) OVERVIEW ⁽¹⁾

	June, 30 2016			June, 30 2015
Net income (R$ billion)		10.7			11.7
Recurring net income (R$ billion)		10.8			11.9
Recurring return on average equity - annualized		20.1	%		24.7	%
BIS of Prudential Conglomerate ⁽²⁾		18.1	%		17.2	%
Total Assets (R$ billion)		1,395.9			1,230.5
Total Loan Portfolio (including Sureties, Endorsements and Guarantees) (R$ billion)		573.0			531.7
Employees		96,460			91,968
Brazil		82,213			85,028
Abroad		14,247			6,940
Branches and CSB – Client Service Branches (units) ⁽³⁾		5,154			5,003
Digital Branches		115			56
Branches in Brazil ⁽⁴⁾		3,707			3,868
CSB in Brazil		794			834
Branches and CSB in Latin America		538			245
ATM – Automated Teller Machines (units)		26,588			26,709
Activities Abroad (countries) ⁽⁵⁾		19			18

⁽¹⁾ Itaú Corpbanca's data were consolidated on 2nd quarter 2016. Except Recurring return on average equity - annualized which considered proforma results of Itaú Corpbanca on the first semester of 2015 and first quarter of 2016.

⁽²⁾ On June 30, 2015 the criteria to calculate the BIS was the financial conglomerate and on June 30,2016 the criteria to calculate the BIS was the prudential conglomerate.

⁽³⁾ Client Service Branches consider only Bank's Client Service Branches.

⁽⁴⁾ Includes 5 representative offices of IBBA abroad.

⁽⁵⁾ Excludes Brazil.

2) ECONOMIC ENVIRONMENT

The U.S. economy grew 2.4% in 2015, but it slowed down in the first quarter of 2016 to 2.2% year-over-year. From April on, activity indicators improved, suggesting an increase of almost 3.0% in the second quarter, as compared to the previous quarter. The U.S. economy continued creating jobs and the unemployment rate posted a slight fall, to 4.9% in June 2016 from 5.0% in December 2015.

In the Eurozone, the economic activity continued showing a small recovery. The year-over-year growth in the first quarter of 2016 was 1.6%, the same pace of the end of 2015. The result of the United Kingdom’s referendum for the exit from the European Union shows political risks that should impact the economic activity, which is expected to decelerate over the second half and future years.

China continued slowing down in the first half of 2016, reaching a growth rate of 6.7% in the first quarter from the same period of the previous year.

In the Latin American context, in the twelve-month period ended March 2016, Colombia, Peru and Mexico grew 3.0%, 3.9% and 2.5% respectively. Argentina (2.5%), Paraguay (1.8%) and Chile (1.9%) grew less. In Brazil, however, there was a downturn of 4.7%, and in Uruguay of 0.1%.

In the Brazilian scenario, inflation measured by the IPCA accumulated for 12 months reached 8.8% in June. The basic interest rate has remained unchanged since the beginning of 2016, at 14.25% per year. Credit granting, based on BACEN data, fell 15.0% in actual terms year over year until June 2016. The actual credit inventory changed from a 0.8% growth in June 2015 to an annual fall of 7.2% in June 2016. In the same period, the credit inventory as a proportion of the GDP decreased from 53.4% in 2015 to 51.9% in 2016. The system default rate went up 0.6 percentage points over the last 12 months and is at 3.5%.

The quotation of real against the U.S. dollar ended at R$ 3.21 in the first half, as compared to R$ 3.96 at the end of 2015. Recently, BACEN repurchased a portion of its currency swaps, closing the six-month period with US$ 62 billion in short position. On the other hand, at the end of June, the volume of foreign exchange reserves was US$ 376.7 billion.

3) OUR HIGHLIGHTS

3.1) Corporate events

Cancellation of Treasury Shares – As resolved by the Extraordinary Stockholders’ Meeting of April 27 and approved by BACEN on June 7, we cancelled 100 million preferred, book entry shares of own issue and held in treasury, with no change in capital.

The balance of treasury shares in June 2016 was 54.2 million preferred shares, equivalent to 1.9% outstanding shares of the same class (free float)^(a).

(a)

For more information about volumes traded and prices practiced in such trading, access www.itau.com.br/investor-relations > Corporate Governance > Trading of Own Shares.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

3.2) Mergers, Acquisitions and Partnerships

Itaú CorpBanca – Through our subsidiary Banco Itaú Chile, in January 2014 we entered into a Transaction Agreement with CorpBanca* and its controlling stockholders. As set forth in the amendment to the Transaction Agreement entered into on June 2, 2015, the parties consummated the transaction on April 1, 2016, when they showed full conditions for corporate reorganization. As from the second quarter of 2016, Itaú CorpBanca started being consolidated in our financial statements, since we are their controlling stockholder, with a 33.58% interest in the capital of the new bank. This agreement represents an important step in our internationalization process. As a result of the merger, we went from the seventh to the forth position in the ranking of the largest banks in Chile.

Its quarterly and monthly financial information is disclosed on the Itaú Corpbanca’s Investor Relations website (www.itau.cl > Investor Relations), the latter by the eighth business day of the subsequent month.

*CorpBanca is a commercial bank headquartered in Chile that also operates in Colombia and Panama, focused on individuals and large and middle-market companies. In 2015, in accordance with the Chilean Superintendence of Banks, it was one of the largest private banks in Chile in terms of total volume of its loan portfolio, with a market share of 7.1%.

3.3) Digital Bank

Offering innovative products and services that meet the clients' new needs is part of our strategy to become an increasingly more digital bank. The number of digital branches increased 105% compared to the first half of 2015.

In April 2016, it was approved by the National Monetary Council the opening and closing of bank accounts on the internet. This movement provides more convenience, safety and efficiency in the processes of opening and closing our customers' accounts.

We were granted two important acknowledgments: the Cannes Lions, in the Mobile and Digital categories; and the Facebook Awards, in which we were the only Latin America company to win the “Best Use of Facebook Platforms” category.

In partnership with Facebook, we launched the “Books in the Timeline” platform. With this project, designed to upscale and improve the experience of the “Reading for a Child” initiative, we make available a series of child books written by great authors and specially designed for the mobile channel.

4) Our Performance

4.1) Result and Returns⁽¹⁾

In R$ billion	Jan to Jun/2016			Jan to Jun/2015			Change (%) ⁽²⁾
Income from financial operations before loan and losses		40.3			27.1			48.6
Expenses for allowance for loan losses		(13.3	)		(11.0	)		21.3
Income from recovery of credits written off as loss		1.8			2.2			(17.9	)
Banking service fees and income from bank charges		16.1			14.9			8.0
Result from insurance, pension plan and capitalization operations		2.2			2.0			10.6
Personnel, other administrative and operating expenses		(22.2	)		(20.5	)		8.0
Tax expenses		(4.3	)		(2.9	)		45.8
Equity in earnings of affiliates and Other operating revenues ⁽³⁾		0.7			0.8			(17.0	)
Income tax and social contribution, Minority interest in subsidiaries and Profit sharing – Management Members		(10.7	)		(0.9	)		-
Net income		(10.7	)		11.7			(8.7	)
Recurring net income ⁽⁴⁾		(10.8	)		11.9			(9.5	)
Dividends and interest on capital (net of taxes)		2.5			2.5			0.8
Recurring return on average equity - annualized		20.1	%		24.7	%		(4.6	)
Recurring return on average assets - annualized		1.5	%		1.8	%		(0.3	)

(1) Itaú Corpbanca's data were consolidated on 2nd quarter 2016. Except Recurring return on average equity - annualized which considered proforma results of Itaú Corpbanca on the first semester of 2015 and first quarter of 2016.

(2) Change is calculated based on actual figures in units.

(3) Equity in earnings of affiliates, jointly controlled entities and other investments, Other operating revenues and Non-operating income.

(4) Excludes the non-recurring effects of each period.

The following contributed to the net income from January to June 2016:

Income from financial operations before loan losses: the 48.6% increase in relation to the same period of the previous year in income from financial operations before loan losses is largely due to the tax effects of hedging foreign investments^(b). If we disregarded these effects, the increase would be 2.4%. The impact of the same reclassification to the Income Tax and Social Contribution on Net Income (CSLL) line would lead to a 28.7% reduction from the same period of the previous year.

(b) The Brazilian tax legislation sets forth that gains and losses from foreign exchange variation on foreign investments are not taxable for PIS/COFINS/IR/CSLL purposes. On the other hand, gains and losses from financial instruments used to hedge this asset position are impacted by tax effects.

The different tax treatment granted to these foreign exchange differences results in volatility in Gain (loss) from operations and tax expense accounts (PIS/COFINS) and income tax (income tax/social contribution on net income).

Banking service fees and income from bank charges: an 8.0% increase in relation to the same period of the previous year, due to the growth of income from credit cards, service packages and fund management.

Expenses for allowance for loan and lease losses: a 21.3% increase in relation to the same period of the previous year, partially due to the increase of the complementary allowance.

Personnel, and other administrative and operating expenses: an 8.0% increase in relation to the same period of the previous year, driven by higher personnel and installation expenses, and third-party services.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

4.2) Asset Data

In R $ billion	June 30, 2016		June 30, 2015		Change (%) ⁽¹⁾
Total assets		1,395.9		1,230.5		13.4
Loan Portfolio with endorsements, sureties and private securities		608.6		566.5		7.4
Loan portfolio with endorsements and sureties		573.0		531.7		7.8
Corporate – Private securities		35.6		34.8		2.2
Free, raised and managed own assets		2,030.5		1,773.6		14.5
Subordinated debt		60.3		59.2		1.8
Stockholders’ equity		110.6		100.7		9.8

(1) Change is calculated based on actual figures.

4.2.1) Assets

Total consolidated assets reached R$1.4 trillion at the end of June 2016, which represented a 13.4% increase compared to the same period of the previous year.

Of this total, R$ 114.7 billion resulted from Itaú Corpbanca, which started being consolidated in our financial statements as from the second quarter of 2016.

The diversification of our business is reflected in the changing composition of our loan portfolio in the last few years, focusing on origination of lower risk products and with more guarantees pledged.

Loan Portfolio

At June 30, 2016, the balance of the loan portfolio, including endorsements and sureties, reached R$573.0 billion, a 7.8% increase from June 30, 2015, particularly due to the effect of consolidation of Itaú Corpbanca in our financial statements as from the second quarter of 2016.

If we also consider the credit risks we have in the private securities modality, this increase would reach 7.4%. Excluding the effects of foreign exchange variation, our loan portfolio, including private securities, would have increased 7.3% from the previous year.

At June 30, 2016 and 2015, the breakdown of the portfolio, including endorsements and sureties, is as follows:

Brazil – Individuals

Credit Cards (Itaucard, Hipercard, Credicard and partnerships)

We are leaders in the credit card segment in Brazil in terms of transacted amount^(c).

At June 30, 2016, the balance of this portfolio reached R$54.5 billion, a 3.2% decrease from the same period of the previous year.

The transacted amount in purchases with credit cards reached R$123.2 billion from January to June 2016, which represented a 1.9% increase as compared to the same period of 2015.

In the debit card segment, which includes account holders only, we have a base of 26.0 million accounts. The transacted volume reached R$43.1 billion from January to June 2016, a 9.8% growth from the same period of the previous year.

c) Source: Itaú Unibanco and ABECS ((Brazilian Association of Credit Card Companies and Services) data from January to March 2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Payroll Loans

We are leaders in payroll loans among Brazilian private banks ^(d).

The balance of the loan portfolio reached R$46.5 billion (36% in our branch network and 64% in other trading channels), a 2.1% growth as compared to June 30, 2015.

Noteworthy were the portfolios of retirees and pensioners from the INSS, which grew 13.3% in relation to June 2015.

d) Source: BACEN and Financial Statements of Itaú Unibanco and Competitors – data from March 2016.

Personal Loans

In June 2016, the balance of the personal loan portfolio reached R$28.7 billion, down 4.4% from the same period of the previous year.

Mortgage Loans

We are leaders, among private banks, in mortgage loans to individuals with the use of savings funds (SBPE, the Brazilian savings and loans system)^(e).

Our offer is made by a network of branches, development companies, and real estate agencies. The balance of the mortgage loan portfolio reached R$36.3 billion, a 14.3% increase as compared to the same period of the previous year.

The ratio of the loan amount to the value of property was approximately 41.8% from January to June 2016.

In the same period, we provided about 13.2 thousand financing transactions to borrowers, totaling R$4.0 billion lent, with a 22.9% market share.

e) Source: Itaú Unibanco and ABECIP, the Brazilian Association of Mortgage and Savings Institutions - data from June 2016.

Vehicles

The balance of the loan portfolio reached R$16.7 billion. From January to June 2016, vehicle financing totaled R$3.6 billion, with an average term of 40 months, and half of the transactions were carried out with maximum terms of up to 36 months.

The portfolio average ratio of the loan amount to the vehicles value was 69.6% in June 2016, continuing a downward trend.

Brazil – Companies

Large Companies

At June 30, 2016, the balance of the loan portfolio reached R$188.9 billion, a 12.0% reduction from the same period of the previous year.

For derivatives, we are leaders at CETIP (Clearing House for the Custody and Financial Settlement of Securities) in financial volume and number of agreements^(f). The focus was on operations hedging exposures to foreign currencies, interest rates and commodities with clients.

f) Source: Itaú Unibanco and Cetip – data from May 2016.

Very small, Small and Middle-market Companies

At June 30, 2016, the balance of the loan portfolio reached R$62.2billion, an 11.6% decrease from the same period of the previous year.

In May, we launched a new functionality in Itaú Empresas on the Internet: the Credit Limit Change Simulator. In addition to transferring limits quickly, the client may easily visualize the products with the possibility of changing or increasing the limit.

Latin America

The balance of the Latin America loan portfolio reached R$139.2 billion, posting a 134.9% increase in relation to June 2015. Of this total, R$75.4 billion result from the consolidation of Itaú Corpbanca in our financial statements as from the second quarter of 2016. Excluding the foreign exchange effect, the variation of the portfolio was 142.0% in relation to the same period of the previous year.

We were awarded in four categories by Global Finance magazine, as follows: “Best Securities Lender in Latin America” and “Best Subcustodian Bank” in Brazil, Paraguay and Uruguay. Itaú Paraguay was the winner of the “Euromoney Awards for Excellence 2016" in the “Best Bank in Paraguay” category.

Default

Our policy for mitigating risk in credit granting, started in 2011, influenced the default rate, mainly due to the change to a more conservative profile for our portfolio. Due to the consolidation of Itaú Corpbanca in our financial statements as from the second quarter of 2016:

total delinquency rate (transactions overdue for over 90 days) reached 3.6% at June 30, 2016, posting an increase of 30 basis points as compared to June 30, 2015;

in the individuals portfolio, this rate reached 5.1% at the end of June 2016, increase of 50 basis points as compared to the same period of the previous year; and

in the companies portfolio, the default rate reached 2.3% at the end of June 2016, increase of 10 basis points as compared to June 30, 2015.

The balance of provisions additional to the minimum required by BACEN reached R$10.2 billion at June 30, 2016. The coverage ratio of the portfolio with operations overdue for over 90 days reached 215% in June 2016, a 2,780 basis point growth from the same period of the previous year.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

4.2.2) Funding

Free, raised and managed own assets amounted to R$2.0 trillion at June 30, 2016, up 14.5% from the same period of the previous year. If we consider the pro forma effects of adding Itaú Corpbanca on 30 June 2015, the growth would be 9.0%.

Demand deposits added to savings deposits posted a 0.8% reduction as compared to the same period of the previous year. The loan portfolio to funding ratio reached 76.2% at June 30, 2016.

In R $ billion	June 30, 2016		June 30, 2015		Change (%) ⁽¹⁾
Demand Deposits		58.8		50.5		16.3
Savings		104.5		114.0		(8.3	)
Time Deposits		139.4		88.9		56.8
Debentures ( (Linked to Repurchase Agreements and Third Parties’ Operations)		144.4		134.9		7.0
Funds from Bills ⁽²⁾and Structured Operations Certificates		51.9		31.0		67.4
Total - Funding from Account Holders and Institutional Clients (*)		499.0		419.4		19.0

(1) Change is calculated based on actual figures.

(2) Includes funds from Real Estate, Mortgage, Financial, Credit and Similar Notes.

(*) Funds from Institutional Clients totaled R$ 36,3 billion, which corresponds to 7,3% of the total raised with Account Holders and Institutional Clients.

4.2.3) Capital Strength

In order to ensure our strength and capital availability to support business growth, regulatory capital levels were kept above BACEN’s requirements (Prudential Consolidated*), as evidenced by the Basel Ratio and Principal Capital, Tier I (see the “Risk and Capital Management – Pillar 3” report on our website (www.itau.com.br/investor-relations > Corporate Governance).

At the end of June 2016, the Basel Ratio reached 18.1%, of which: (i) 14.9% related to Tier I Capital, composed by the sum of Principal Capital and Complementary Capital, and (ii) 3.2% related to Tier II Capital. These indicators evidence our effective capacity of absorbing possible losses

The amount of our subordinated debt, which is part of our Tier II regulatory capital, reached R$23.5 billion at June 30, 2016.

%					p.p.
*Capital^()**	Jun 30, 2016		Jun 30, 2015		Change
Nível I		14.9		13.2		1.7
Nível II		3.2		4.0		-0.8
Basel ratio		18.1		17.2		0.9

(*) Prudential Consolidated: Consolidated financial statements including financial companies and the like.

4.2.3.1) Credit Risk Ratings by Rating Agencies

Due to the sovereign credit rating downgrade announced by Fitch in May 2016, the agency also reviewed the ratings of 22 financial institutions, and downgraded the ratings of Itaú Unibanco S.A. and Itaú Unibanco Holding S.A

In May 2016, Moody’s recalibrated the national scale of ratings in Brazil. Thus, the ratings of 28 financial institutions were repositioned, including Itaú Unibanco S.A. and Itaú Unibanco Holding S.A., which ratings in national scale were upgraded. For further information on ratings, please access our Investor Relations’ website at (www.itau.com.br/investor-relations) Itaú Unibanco > Market Opinion > Ratings.

4.3) Services

We are constantly seeking to implement and focus on the offer of new products and services that add value to our clients and diversify our sources of income, allowing the growth of our non-financial income arising mainly from the provision of services and insurance (pension plan and capitalization operations).

Asset Management

In May 2016, we reached R$503.5 billion^(g) in assets under management, according to the ANBIMA management ranking, accounting for 15.9% of the market.

We posted an 18.0% growth in assets under management, compared to the same period of the previous year.

In addition to the strong performance in the domestic market, we are present in the main global financial centers, with strategically allocated professionals searching for investment opportunities and solutions adequate to different clients' profiles.

Kinea, the alternative investments management company of Itaú Unibanco conglomerate, holds R$7.9 billion in managed assets.

Itaú Asset Management was granted the “Best Bank to Invest” award in the Fixed Income category, organized by the Finance Studies Center of Fundação Getúlio Vargas in partnership with Fractal Consult. Itaú Asset Management was elected the Best Fund Manager of the Year for the seventh time, and make it for a third consecutive time, by the 2015 EXAME Investments Guide. This same publication also selected Itaú Asset Management as the Best Fixed Income Fund Manager and the Best Selective Retail Fund Manager. In June, Itaú Asset Management was acknowledged as the best manager in the Multimarkets category by Valor Econômico.

Fitch Ratings has reaffirmed the International Scale Asset Manager Rating for Itaú Asset Management at the “Highest Standard”.

g) Source: ANBIMA Management Ranking – data from May 2016. Includes Itaú Unibanco and Intrag.

Custody and Bookeeping Services

In the custody market, we hold R$1.2 trillion in assets, according to the ANBIMA management ranking in May 2016, which represents a 11.3% increase from the same period of the previous year ^(h).

We provide services to 217 companies listed on BM&F Bovespa, accounting for 61.1% of the share bookkeeping market. In debenture bookkeeping, we operated as the bookkeeper of 446 issues in June 2016, accounting for 49.0% of the market⁽ⁱ⁾.

h) Source: ANBIMA (June 2016),

i) Source: Itaú Unibanco and BM&FBovespa (June 2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Private Banking

With a full global wealth management platform, we are market leaders in Brazil and one of the main players in Latin America. Our multidisciplinary team, which comprises private bankers, investment advisers and product experts, serves our clients from offices in eight cities in Brazil and abroad, in our offices located in Zurich, Miami, New York, Santiago, Montevideo, Asuncion, and Nassau.

Consortium (Vehicles and properties)

In June 2016, the balance of installments receivable reached R$11.1 billion, with a 3.9% decrease when compared to June 2015. In the same period, we reached 401.9 thousand active quotas, a 2.2% decrease from June 2015. Consortia management fees reached R$340.1 million from January to June 2016.

Investment banking

We highlight that, from January to June 2016, our Merger and Acquisition operation provided financial advisory on 16 transactions in Latin America, totaling US$4.8 billion and topping the Thomson Reuters ranking. In local fixed income, we took part in debentures, promissory notes and securitization transactions, which totaled R$3.0 billion up to June 2016. To serve international clients, we rely on units in Argentina, Chile, Colombia, Arab Emirates, the United States, Hong Kong, Mexico, the United Kingdom and Peru, with a representation office in the latter. We were granted the “Global M&A Market Review” award, promoted by Bloomberg and “Deals of the Year”, promoted by The Banker.

Electronic means of payment

In the first half of 2016, we reached 1,951.0 million transactions in debit and credit cards, a 0.7% decrease when compared to the same period of the previous year.

The volume transacted on credit cards was R$121.3 billion from January to June 2016. This amount accounts for 65.1% of the total transactions arising from acquiring business, with a 0.5% increase from the same period of the previous year.

The volume captured in debit cards was R$65.0 billion and it accounted for 34.9% of the volume transacted from January to June 2016, up 1.6% when compared to the same period of the previous year. We closed the period with 1.7 million installed equipment items, a 9.6% drop from the same period of the previous year.

In March, we launched our new “Userede” website, customized for smartphones and tablets. In May and June we carried out a broad campaign with our clients, named “Promoção Use Rede Isso Muda o Seu Negócio” (Use Rede – this changes your business) to strengthen our partnership relationships.

In June, we relaunched our “Preço Único” (a single price) campaign, for a product that enables merchants to define a plan for monthly revenues from cards, choose the number and the type of equipment they want to use and whether they wish to receive the earnings from revolving credit sales within the usual term or within two business days.

4.4) Itaú insurance, pension plan and capitalization

Insurance^(j)

We continue concentrating efforts on our own channels, by giving priority to sales in the most efficient channels that generate positive impacts on our operation.

Net income posted a 0.4% decrease in the first half of 2016, when compared to the same period of the previous year, impacted by the reduction in earned premiums, partially offset by a reduction in costs and an increase in the financial result.

Net income from our core insurance activities ^(k) posted a 7.6% decrease in the first half of 2016 compared to the same period of the previous year, due to the reduction in earned premiums and to the increased social contribution tax on net income (CSLL) rate.

Premiums earned dropped 10.7% when compared to the first half of 2015, and reached R$2.6 billion in the period, mainly due to the accelerated termination of the Extended Warranty agreement between Itaú Seguros S.A. and Via Varejo, in the third quarter of 2014^(l). Retained claims reached R$0.7 billion in the first half of 2016, a 0.8% decrease from the first semester of 2015.

Loss ratio was 28.5% in the first half of 2016, a 2.9% increase from the same period of the previous year. The combined ratio in the period was 66.4%, a 0.4% decrease from the same period of the previous year. Technical provisions for insurance reached R$4.4 billion in June 30, 2016.

In the first half of 2016, the amount of total sales to account holders fell 21.1% from the same period of the previous year, impacted by the economic scenario and the new period for the marketing campaigns, for purposes of comparison between semesters.

Sales to clients of Digital Branches accounted for 8.5% of the total insurance products sales to account holders in the first half of 2016, a 6.5% increase in relation to the same period of 2015.

j) Not including our interest in Porto Seguro.

k) Our core activities consist of mass-market products related to Life, Property, Credit, Pension and Capitalization.

l) Premiums earned for extended warranty insurance products are only recognized after the manufacturer’s warranty runs out.

Pension Plan

We focus on mass-market products, operating based on the bancassurance model, on which products are offered in synergy through the bank’s diversified channels, such as the retail (branch network), and the wholesale channels. Product innovation has played a significant role in the sustainable growth of our pension plan operations for individuals. For companies, we offer specialized advisory services and develop customized solutions. We establish long-term partnerships with our corporate clients, keeping a close relationship with their Human Resources areas and adopting a communication strategy designed for the financial education of their employees.

In May 2016, according to the National Federation of Private Pension Funds and Life Insurance (FENAPREVI), our market share of total technical provisions was 23.3%, whereas individual plans accounted for 23.5%^(m).

Total gross funding from pension plans totaled R$10.9 billion in June 2016, up 12.7% when compared to the same period of the previous year.

m) Source: FENAPREVI data of May 2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Capitalization

In capitalization, we reached 13.6 million certificates in force at June 30, 2016. The technical provisions for capitalization reached R$3.0 billion at June 30, 2016 and collection with capitalization certificates reached R$1.4 billion in 2016, a 9.8% increase compared to the same period of the previous year.

Sales to Digital Branches clients accounted for 6.8% of total sales to account holders in the first six-month period of 2016, a 6.2% increase compared to the same period of the previous year.

4.5) Stock Market

Market value – at June 30, 2016, Itaú Unibanco was ranked the second largest company in Brazil in terms of market value (R$179.3 billion), and the first among financial institutions, according to the Bloomberg ranking.

In Ibovespa, the most widely followed index in Brazil, we are the most actively traded company, represented by our preferred share (ITUB4).

Presence in Market Indexes

In May 2016, BMF&FBOVESPA disclosed the composition of the stock portfolios that make up market indexes, effective for the period from May to August 2016. We highlight our presence in the market indexes in the following table:

Portfolios - May to August, 2016
	Itaú
	Unibanco's
Index	Weight ⁽¹⁾		Ranking
Ibovespa (Bovespa Index)		10.46	1st
IBrX 50 - Brazil Index 50		10.53	1st
IBrX 100 - Brazil Index 100		9.49	1st
IFNC - Financial Index ⁽²⁾		20.00	1st
IGCX - Special Corporate Governance Stock Index		7.78	1st
ITAG - Special Tag Along Stock Index		12.57	1st
ISE – Corporate Sustainability Index ⁽³⁾		6.01	4th

(1) It was considered the sum of all classes of shares of each company that participates in the indices.

(2) The weight of the companies’ shares in the index (including all types of shares) cannot exceed 20%.

(3) The weight of one economic sector in the Corporate Sustainability Index(ISE), including all types of shares, cannot exceed 15%.

IR Magazine Awards Brazil 2016 – promoted by IR Magazine and by the Brazilian Institute of Investor Relations (IBRI), the award elects the Brazilian companies with the Investor Relations best practices. This year we were acknowledged in two categories: ‘Best Corporate Governance’ and ‘Best Use of Technology’.

Vigeo EIRIS - Emerging 70 – We were selected for the second time to make up the portfolio of the Vigeo EIRIS - Emerging 70 Sustainability Index.

Relations with the Market

In the second quarter of 2016, Itaú Unibanco we held five APIMEC (Association of Capital Market Analysts and Investment Professionals) meetings, with the attendance of 717 participants. We take this opportunity to invite you all for our 11 next meetings including the one to be held on November 17 in São Paulo. For further information please go to the Investor Relations (www.itau.com.br/investor-relations).

			R$		%
Shares	June 30, 2016		June 30, 2015		Change
Recurring net income per share⁽¹⁾		1.82		1.99		(8.5	)
Net income per share⁽¹⁾		1.81		1.95		(7.2	)
Book value per share⁽¹⁾		18.65		16.80		11.0
Number of outstanding shares (in millions)⁽²⁾⁽³⁾		5,929.7		5,994.1		(1.1	)
Dividends/Interest on capital, net per share⁽²⁾⁽³⁾		0.4291		0.4291		-
Price of preferred share (ITUB4)⁽²⁾⁽⁴⁾		30.23		31.15		(3.0	)
Price of common share (ITUB3)⁽²⁾⁽⁴⁾		25.87		29.72		(13.0	)
Price of preferred share (PN)⁽²⁾⁽⁴⁾/Net income per share (annualized)		8.35		7.99		4.5
Price of preferred share (PN)⁽²⁾⁽⁴⁾/Stockholders’ equity per share		1.62		1.85		(12.4	)
Market value (in billions) ⁽⁵⁾⁽⁶⁾		179.3		186.7		(4.0	)

(1) Calculated based on the weighted average of the number of shares;

(2) Adjusted by bonus carried out on July 17, 2015;

(3) For better comparability, outstanding shares in the period of June 30, 2015 were adjusted by the bonus shares;

(4) Based on the average quotation on the last day of the period;

(5) Calculated based on the average quotation of preferred shares on the last day of the period (quotation of average PN multiplied by the number of outstanding shares at the end of the period);

(6) Considering the closing quotation of common and preferred (ON and PN) shares multiplied by total outstanding shares of each type of shares, the market value reached R$166.6 billion on June 30, 2016 and R$183.7 billion on June 30, 2015, resulting a variation of -9.3%.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

5) PEOPLE

We had 96.5 thousand employees at the end of the first half of 2016, including about 14.2 thousand employees in foreign units, of whom 9.9 thousand are from Itaú Corpbanca. The employees’ fixed compensation plus charges and benefits totaled R$6.8 billion in this period, a 10.1% increase from the same period of the previous year.

6) AWARDS AND RECOGNITION

In the first six-month period of 2016, we received significant recognition that contributed to strengthen our reputation. Below is the list of awards received by the bank in the period:

*Deals of the Year* (The Banker – April 2016)		Itaú BBA was acknowledged in the 'Americas - Equities' category, with the follow-on for Telefônica company, a transaction that raised R$16.1 billion.

*17th Modern Consumer Excellence in Client Services Award* (Consumidor Moderno magazine and CIP – May 2016)		At the 17th Modern Consumer Excellence in Client Services Award, Itaú was the winner in the Banks category and Itaú Seguros won in the Insurance, pension plan and capitalization category.

*2016 'Valor' Executive* (Valor Econômico magazine – May 2016)		In the 16^th edition of this award, Roberto Setubal was the executive elected in the "Banks and Financial Services" sector.

*Efinance Award* (Financial Executives – May 2016)		Itaú BBA was acknowledged in the Process Management category. Itaú Unibanco was acknowledged in the FinTech category, with the 'Cubo' case. Rede was acknowledged in the B2B channels category.

*The Best of São Paulo - Services* (Folha de S. Paulo newspaper – May 2016)		For the second consecutive year, the Bank was the winner in the Internet Banking category.

*The Most Valuable Brands* (O Estado de S. Paulo – June 2016)		Itaú ranks first in the "Banks" category, second in the "Savings" category, and third in the "Insurance companies" category.

*Exame's Best and Largest Companies* (Exame magazine – June 2016)		in the 43rd edition of this award, Itaú Unibanco was the number one in the “200 largest groups" and “50 Largest Banks" rankings. At the “100 Largest Publicly-Held Companies" ranking, it ranked 2nd. At the "Mergers and Acquisitions" ranking, Itaú BBA/Itaú was ranked 2nd. At the “50 Largest Insurance Companies", Itaú Seguros ranks 10th; Itaú Auto e Residência ranks 17th; and Itaú Vida ranks 28th.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

7) REGULATION

7.1) INDEPENDENT AUDITORS – CVM Instruction No. 381

Procedures adopted by the Company

The policy adopted by us, including our subsidiaries and parent company, to engage non-audit related services from our independent auditors is based on the applicable regulations and internationally accepted principles that preserve the auditor’s independence. These principles include the following: (a) an auditor cannot audit his or her own work, (b) an auditor cannot function in the role of management in companies where he or she provides external audit services; and (c) an auditor cannot promote the interests of its client.

During the period from January to June 2016, the independent auditors and related parties did not provide non-audit related services in excess of 5% of total external audit fees.

According to CVM Instruction No. 381, we list below the engaged services and related dates:

January 22 - tax advisory procedures and transfer pricing;

February 15, March 7, March 23, May 23 and May 16 – acquisition of training, technical materials and research;

March 31 – review of tax-accounting bookkeeping.

Independent Auditors’ justification – PricewaterhouseCoopers

The provision of the above-described non-audit related professional services do not affect the independence or the objectivity of the external audit of Itaú Unibanco, parent and its subsidiary/affiliated companies. The policy adopted for providing non-audit related services to Itaú Unibanco is based on principles that preserve the independence of Independent Auditors, all of which were considered in the provision of the referred services, including the approval by the Audit Committee.

7.2) BACEN – Circular No. 3,068/01

We hereby represent to have the financial capacity and the intention to hold to maturity securities classified under the line “held-to-maturity securities” in the balance sheet, in the amount of R$40.7 billion, corresponding to 11.4% of total securities and derivative financial instruments held in June 2016.

7.3) International Financial Reporting Standards (IFRS)

We disclosed the consolidated financial statements in accordance with the international financial reporting standards (IFRS) at the same date of this publication, pursuant to CVM/SEP Circular Letter No. 01/13. The complete financial statements are available on the Investor Relations website of Itaú Unibanco (www.itau.com.br/investor-relations > Financial Information).

8) ACKNOWLEDGMENTS

We thank our employees for their determination and skills which have been essential to reaching consistent and differentiated results, and our stockholders and clients for their trust. (Approved at the Board of Directors' Meeting of August 1^st, 2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

BOARD OF DIRECTORS	BOARD OF EXECUTIVE OFFICERS
Chairman	Chief Executive Officer
Pedro Moreira Salles	Roberto Egydio Setubal

Vice-Chairmen	Director-Generals
Alfredo Egydio Arruda Villela Filho	Candido Botelho Bracher
Roberto Egydio Setubal	Márcio de Andrade Schettini
	Marco Ambrogio Crespi Bonomi
Members
Alfredo Egydio Setubal	Executive Vice-Presidents
Candido Botelho Bracher	Claudia Politanski
Demosthenes Madureira de Pinho Neto	Eduardo Mazzilli de Vassimon
Fábio Colletti Barbosa
Gustavo Jorge Laboissière Loyola	Executive Officers
José Galló	Alexsandro Broedel Lopes
Nildemar Secches	Fernando Barçante Tostes Malta
Pedro Luiz Bodin de Moraes	Leila Cristiane Barboza Braga de Melo
Ricardo Villela Marino	Paulo Sergio Miron

AUDIT COMMITTEE	Officers
Chairman	Adriano Cabral Volpini
Geraldo Travaglia Filho	Álvaro Felipe Rizzi Rodrigues
	Atilio Luiz Magila Albiero Junior
Members	Eduardo Hiroyuki Miyaki
Antonio Francisco de Lima Neto	Emerson Macedo Bortoloto
Diego Fresco Gutierrez	Gilberto Frussa
Maria Helena dos Santos Fernandes de Santana	José Virgilio Vita Neto
Sergio Darcy da Silva Alves	Marcelo Kopel (*)
	Matias Granata
FISCAL COUNCIL	Rodrigo Luis Rosa Couto
President	Sergio Mychkis Goldstein
Alkimar Ribeiro Moura	Wagner Bettini Sanches

Members
Carlos Roberto de Albuquerque Sá	() Investor Relations Officer.*
José Caruso Cruz Henriques

Accountant
Reginaldo José Camilo
CRC-1SP – 114.497/O-9

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO S.A.

Director-Generals

Candido Botelho Bracher

Márcio de Andrade Schettini

Marco Ambrogio Crespi Bonomi

Executive Vice-Presidents

Alberto Fernandes

Caio Ibrahim David

Claudia Politanski

Eduardo Mazzilli de Vassimon

Ricardo Villela Marino

Executive Officers

Alexsandro Broedel Lopes

Álvaro de Alvarenga Freire Pimentel

André Luis Texeira Rodrigues

André Sapoznik

Carlos Eduardo Monico

Christian George Egan

Fernando Barçante Tostes Malta

Fernando Marsella Chacon Ruiz

Flávio Augusto Aguiar de Souza

João Marcos Pequeno de Biase

Leila Cristiane Barboza Braga de Melo

Luís Fernando Staub

Luiz Eduardo Loureiro Veloso

Ricardo Ribeiro Mandacaru Guerra

Officers

Adriano Cabral Volpini

Adriano Maciel Pedroti

Álvaro Felipe Rizzi Rodrigues

André Carvalho Whyte Gailey

André Ferrari

André Henrique Caldeira Daré

Andréa Matteucci Pinotti Cordeiro

Antonio Carlos Barbosa Ortiz

Atilio Luiz Magila Albiero Junior

Badi Maani Shaikhzadeh

Carlos Eduardo de Castro

Carlos Henrique Donegá Aidar

Carlos Orestes Vanzo

Cesar Ming Pereira da Silva

Cesar Padovan

Cícero Marcus de Araújo

Cintia Carbonieri Fleury de Camargo

Claudio César Sanches

Cláudio José Coutinho Arromatte

Cristiane Magalhães Teixeira Portella

Cristiano Rogério Cagne

Cristina Cestari

Edilson Pereira Jardim

Eduardo Cardoso Armonia

Eduardo Corsetti

Elaine Cristina Zanatta Rodrigues Vasquinho

Emerson Savi Junqueira

Estevão Carcioffi Lazanha

Fabiana Pascon Bastos

Fabiano Meira Dourado Nunes

Felipe de Souza Wey

Fernando Della Torre Chagas

Officers (continued)

Fernando Julião de Souza Amaral

Fernando Mattar Beyruti

Flávio Delfino Júnior

Flavio Ribeiro Iglesias

Francisco Vieira Cordeiro Neto

Gabriela Rodrigues Ferreira

Gilberto Frussa

Gustavo Trovisco Lopes

Henrique Pinto Echenique

João Antonio Dantas Bezerra Leite

João Carlos de Gênova

Jorge Luiz Viegas Ramalho

José Virgilio Vita Neto

Laila Regina de Oliveira Pena de Antonio

Leon Gottlieb

Lineu Carlos Ferraz de Andrade

Livia Martines Chanes

Luís Eduardo Gross Siqueira Cunha

Luís Tadeu Mantovani Sassi

Luiz Felipe Monteiro Arcuri Trevisan

Luiz Fernando Butori Reis Santos

Luiz Severiano Ribeiro

Marcello Siniscalchi

Marcelo Kopel

Marcelo Luis Orticelli

Marcio Luis Domingues da Silva

Marco Antonio Sudano

Marcos Antônio Vaz de Magalhães

Mário Lúcio Gurgel Pires

Matias Granata

Messias dos Santos Esteves

Pedro Barros Barreto Fernandes

Renata Helena de Oliveira Tubini

Ricardo Lima Soares

Ricardo Nuno Delgado Gonçalves

Ricardo Urquijo Lazcano

Roberto Fernando Vicente

Rodnei Bernardino de Souza

Rodrigo Jorge Dantas de Oliveira

Rodrigo Luís Rosa Couto

Rodrigo Rodrigues Baia

Sergio Guillinet Fajerman

Sergio Mychkis Goldstein

Thales Ferreira Silva

Thiago Luiz Charnet Ellero

Vanessa Lopes Reisner

Wagner Bettini Sanches

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

BANCO ITAÚ BBA S.A.

BOARD OF EXECUTIVE OFFICERS

Chief Executive Officer

Candido Botelho Bracher

Executive Vice-Presidents

Alberto Fernandes

Executive Officers

Álvaro de Alvarenga Freire Pimentel

Christian George Egan

Officers

Adriano Cabral Volpini

Alexsandro Broedel Lopes

André Carvalho Whyte Gailey

Carlos Henrique Donegá Aidar

Cristiano Rogério Cagne

Fernando Barçante Tostes Malta

Flávio Delfino Júnior

João Carlos de Gênova

Marco Antônio Sudano

Roderick Sinclair Greenlees

Rodrigo Luís Rosa Couto

Sergio Mychkis Goldstein

Vanessa Lopes Reisner

ITAÚ SEGUROS S.A.

Chief Executive Officer

Luiz Eduardo Loureiro Veloso

Officers

Adriano Cabral Volpini

Alexsandro Broedel Lopes

Carlos Henrique Donegá Aidar

Fernando Barçante Tostes Malta

Henrique Pinto Echenique

Leon Gottlieb

Luís Eduardo Gross Siqueira Cunha

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet (Note 2a)

(In thousands of Reais)

Assets	Note	06/30/2016			06/30/2015
Current assets			965,355,062			853,789,580
Cash and cash equivalents			21,851,785			18,004,808
Interbank investments	4b and 6		269,770,534			191,421,112
Money market			242,121,454			159,166,188
Money market – Assets Guaranteeing Technical Provisions - SUSEP	11b		3,156,647			2,299,767
Interbank deposits			24,492,433			29,955,157
Securities and derivative financial instruments	4c, 4d and 7		248,736,178			228,258,593
Own portfolio			54,982,663			37,300,050
Subject to repurchase commitments			23,404,867			56,173,716
Pledged in guarantee			6,164,237			4,071,385
Securities under resale agreements with free movement			5,245,696			-
Deposited with the Central Bank			1,344,620			4,523,388
Derivative financial instruments			23,574,340			13,049,880
Assets guaranteeing technical provisions - PGBL / VGBL fund quotas	11b		129,559,984			106,431,575
Assets guaranteeing technical provisions – other securities	11b		4,459,771			6,708,599
Interbank accounts			72,940,944			64,008,457
Pending settlement			4,062,435			3,803,746
Central Bank deposits			68,698,374			60,156,620
National Housing System (SFH)			3,856			3,563
Correspondents			45,751			44,528
Interbank onlending			130,528			-
Interbranch accounts			104,458			147,653
Loan, lease and other credit operations	8		243,953,215			231,054,009
Operations with credit granting characteristics	4e		263,326,797			246,937,897
(Allowance for loan losses)	4f		(19,373,582	)		(15,883,888	)
Other receivables			105,341,736			118,394,759
Foreign exchange portfolio	9		36,724,869			64,820,551
Income receivable			2,412,411			2,274,980
Transactions with credit card issuers	4e		23,583,911			22,876,344
Receivables from insurance and reinsurance operations	4m I and 11b		1,334,206			1,448,913
Negotiation and intermediation of securities			9,946,086			4,798,136
Deferred tax assets	14b I		17,495,973			12,038,488
Escrow deposits - Civil, Labor, Tax and Social lawsuits	12b and 12d		2,163,426			2,143,600
Sundry	13a		11,680,854			7,993,747
Other assets	4g		2,656,212			2,500,189
Assets held for sale			724,147			446,440
(Valuation allowance)			(138,875	)		(75,261	)
Unearned reinsurance premiums	4m I		16,325			6,818
Prepaid expenses	4g and 13b		2,054,615			2,122,192

Long term receivables			403,336,478			356,901,236
Interbank investments	4b and 6		1,128,121			1,011,564
Money market			221,220			-
Money market – Assets Guaranteeing Technical Provisions - SUSEP	11b		40,691			-
Interbank deposits			866,210			1,011,564
Securities and derivative financial instruments	4c, 4d and 7		109,530,454			106,468,850
Own portfolio			65,997,031			74,181,725
Subject to repurchase commitments			1,886,127			15,418,759
Pledged in guarantee			5,006,425			813,035
Securities under resale agreements with free movement			14,482,948			-
Deposited with the Central Bank			2,014,588			3,231,750
Derivative financial instruments			13,636,372			7,623,749
Assets guaranteeing technical provisions – other securities	11b		6,506,963			5,199,832
Interbank accounts - National Housing System (SFH)			580,262			494,629
Loan, lease and other credit operations	8		215,535,862			198,277,800
Operations with credit granting characteristics	4e		234,631,798			210,525,343
(Allowance for loan losses)	4f		(19,095,936	)		(12,247,543	)
Other receivables			75,739,655			49,164,653
Foreign exchange portfolio	9		19,802,064			1,053,984
Receivables from insurance and reinsurance operations	4m I and 11b		15,231			-
Deferred tax assets	14b I		37,651,501			29,292,101
Escrow deposits - Civil, Labor, Tax and Social lawsuits	12b and 12d		10,854,093			11,669,390
Sundry	13a		7,416,766			7,149,178
Other assets			822,124			1,483,740
Unearned reinsurance premiums	4m I		-			2,707
Prepaid expenses	4g and 13b		822,124			1,481,033
Permanent assets			27,164,707			19,819,431
Investments	4h, 15a Il and III		4,725,245			3,610,014
Investments in affiliates and jointly controlled entities			4,227,708			3,180,454
Other investments			706,391			638,477
(Allowance for losses)			(208,854	)		(208,917	)
Real estate in use	4i and 15b l		6,789,767			7,378,907
Real estate in use			4,285,439			4,147,943
Other fixed assets			12,144,802			11,994,332
(Accumulated depreciation)			(9,640,474	)		(8,763,368	)
Goodwill	4j and 15b ll		1,479,068			212,738
Intangible assets	4k and 15b lll		14,170,627			8,617,772
Acquisition of rights to credit payroll			1,045,952			1,052,781
Other intangible assets			17,049,750			10,389,968
(Accumulated amortization)			(3,925,075	)		(2,824,977	)
Total assets			1,395,856,247			1,230,510,247

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet (Note 2a)

(In thousands of Reais)

Liabilities	Note	06/30/2016			06/30/2015
Current liabilities			712,394,393			666,149,420
Deposits	4b and 10b		248,040,166			222,893,397
Demand deposits			58,763,238			50,540,410
Savings deposits			104,479,486			113,974,326
Interbank deposits			6,138,776			26,424,029
Time deposits			78,658,666			31,954,632
Deposits received under securities repurchase agreements	4b and 10c		198,719,520			173,048,327
Own portfolio			56,910,444			96,357,426
Third-party portfolio			125,981,308			71,371,208
Free portfolio			15,827,768			5,319,693
Funds from acceptances and issuance of securities	4b and 10d		24,769,276			27,361,597
Real estate, mortgage, credit and similar notes			18,472,826			20,330,536
Foreign borrowing through securities			4,295,808			5,927,759
Structured operations certificates			2,000,642			1,103,302
Interbank accounts			5,206,237			5,184,750
Pending settlement			3,447,091			3,407,911
Correspondents			1,759,146			1,776,839
Interbranch accounts			5,861,167			5,263,111
Third-party funds in transit			5,838,147			5,224,756
Internal transfer of funds			23,020			38,355
Borrowing and onlending	4b and 10e		52,658,696			47,613,025
Borrowing			41,611,831			33,700,414
Onlending			11,046,865			13,912,611
Derivative financial instruments	4d and 7g		18,186,232			11,015,909
Technical provision for insurance, pension plan and capitalization	4m II and 11a		6,536,562			8,378,204
Other liabilities			152,416,537			165,391,100
Collection and payment of taxes and contributions			3,943,596			4,439,883
Foreign exchange portfolio	9		38,888,135			65,344,613
Social and statutory	16b II		3,778,894			4,423,701
Tax and social security contributions	4n, 4o and 14c		8,881,788			5,424,886
Negotiation and intermediation of securities			13,321,622			7,515,203
Credit card operations	4e		51,691,686			51,010,784
Subordinated debt	10f		10,723,205			7,064,769
Provisions for contingent liabilities	12b		4,010,294			3,341,691
Sundry	13c		17,177,317			16,825,570

Long term liabilities			557,849,932			460,380,616
Deposits	4b and 10b		60,992,145			57,549,925
Interbank deposits			228,369			590,136
Time deposits			60,763,776			56,959,789
Deposits received under securities repurchase agreements	4b and 10c		154,942,662			132,251,841
Own portfolio			111,565,587			107,452,613
Free portfolio			43,377,075			24,799,228
Funds from acceptances and issuance of securities	4b and 10d		59,460,372			24,812,940
Real estate, mortgage, credit and similar notes			28,929,838			7,280,080
Foreign borrowing through securities			28,007,803			15,228,519
Structured Operations Certificates			2,522,731			2,304,341
Borrowing and onlending	4b and 10e		32,602,408			44,525,046
Borrowing			10,700,078			15,816,787
Onlending			21,902,330			28,708,259
Derivative financial instruments	4d and 7g		16,319,864			12,896,232
Technical provision for insurance, pension plan and capitalization	4m II and 11a		137,520,420			113,274,278
Other liabilities			96,012,061			75,070,354
Foreign exchange portfolio	9		19,257,329			1,084,134
Tax and social security contributions	4n, 4o and 14c		12,079,946			7,259,013
Subordinated debt	10f		49,558,877			52,163,581
Provisions for contingent liabilities	12b		11,342,567			10,422,349
Sundry	13c		3,773,342			4,141,277
Deferred income	4p		1,724,293			1,499,368
Non-controlling interests	16f		13,300,944			1,770,261
Stockholders' equity	16		110,586,685			100,710,582
Capital			85,148,000			85,148,000
Capital reserves			1,329,803			1,331,243
Revenue reserves			27,967,269			16,639,773
Asset valuation adjustment	4c, 4d and 16e		(2,411,741	)		(66,308	)
(Treasury shares)			(1,446,646	)		(2,342,126	)
Total liabilities and stockholders' equity			1,395,856,247			1,230,510,247

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Income (Note 2a)

(In thousands of Reais)

		01/01 to			01/01 to
	Note	06/30/2016			06/30/2015
Income related to financial operations			74,364,059			76,867,046
Loan, lease and other credit operations			37,900,943			38,643,130
Securities and derivative financial instruments			23,191,269			29,754,009
Financial income related to insurance, pension plan and capitalization operations	11c		9,468,192			6,434,451
Foreign exchange operations			587,999			(631,517	)
Compulsory deposits			3,215,656			2,666,973
Expenses related to financial operations			(34,017,276	)		(49,721,716	)
Money market			(32,511,398	)		(32,694,789	)
Financial expenses on technical provisions for insurance, pension plan and capitalization	11c		(8,998,454	)		(5,968,736	)
Borrowing and onlending	10e		7,492,576			(11,058,191	)
Income related to financial operations before loan and losses			40,346,783			27,145,330
Result of allowance for loan losses	8d I		(11,515,316	)		(8,780,636	)
Expenses for allowance for loan losses			(13,316,456	)		(10,973,975	)
Income related to recovery of credits written off as loss			1,801,140			2,193,339
Gross income related to financial operations			28,831,467			18,364,694
Other operating revenues (expenses)			(7,483,090	)		(5,774,855	)
Banking service fees	13d		10,976,384			10,131,840
Income related to bank charges	13e		5,150,011			4,800,537
Result from insurance, pension plan and capitalization operations	11c		2,198,133			1,987,717
Personnel expenses	13f		(9,874,852	)		(8,702,157	)
Other administrative expenses	13g		(8,664,371	)		(8,192,734	)
Tax expenses	4o and 14a II		(4,282,481	)		(2,936,743	)
Equity in earnings of affiliates, jointly controlled entities and other investments	15a II and lll		270,226			298,668
Other operating revenues	13h		383,804			480,389
Other operating expenses	13i		(3,639,944	)		(3,642,372	)
Operating income			21,348,377			12,589,839
Non-operating income			10,806			21,879
Income before taxes on income and profit sharing			21,359,183			12,611,718
Income tax and social contribution	4o and 14a I		(10,400,363	)		(602,579	)
Due on operations for the period			(1,930,494	)		(4,474,535	)
Related to temporary differences			(8,469,869	)		3,871,956
Profit sharing – Management Members - Statutory - Law No. 6,404 of 12/15/1976			(98,500	)		(107,385	)
Non-controlling interests	16f		(158,218	)		(184,866	)
Net income			10,702,102			11,716,888
Weighted average of the number of outstanding shares	16a		5,926,183,705			6,012,124,077
Net income per share – R$			1.81			1.95
Book value per share - R$ (outstanding at 06/30)			18.65			16.80

Supplementary information

Exclusion of non recurring effects	2a and 22k		107,697			225,354
Net income without non recurring effects			10,809,799			11,942,242
Net income per share – R$			1.82			1.99

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In thousands of Reais)

		01/01 to			01/01 to
	Note	06/30/2016			06/30/2015
Adjusted net income			52,545,013			25,768,346
Net income			10,702,102			11,716,888
Adjustments to net income:			41,842,911			14,051,458
Granted options recognized and share-based payment – variable compensation			(173,808	)		(24,085	)
Adjustment to market value of securities and derivative financial instruments (assets / liabilities)	7h		(2,841,611	)		(241,076	)
Effects of changes in exchange rates on cash and cash equivalents			17,617,165			(3,229,128	)
Allowance for loan losses			13,316,456			10,973,975
Interest and foreign exchange expenses related to operations with subordinated debt			(2,769,773	)		6,483,262
Financial expenses on technical provisions for pension plan and capitalization			8,998,454			5,968,736
Depreciation and amortization	15b		1,053,464			1,383,947
Interest expenses related to provision for contingent and legal liabilities	12b		843,081			755,327
Provision for contingent and legal liabilities	12b		1,718,810			1,580,010
Interest income related to escrow deposits	12b		(188,134	)		(81,438	)
Deferred taxes (excluding hedge tax effects)			899,123			1,021,488
Equity in earnings of affiliates, jointly controlled entities and other investments	15a lll		(270,226	)		(298,668	)
Interest and foreign exchange income related to available-for-sale securities			1,685,433			(7,476,296	)
Interest and foreign exchange income related to held-to-maturity securities			924,564			(3,575,051	)
(Gain) loss on sale of available-for-sale financial assets	7i		403,850			675,728
(Gain) loss on sale of investments			(13,390	)		3,425
(Gain) loss on sale of foreclosed assets			52,077			20,243
(Gain) loss on sale of fixed assets			8,765			14,331
Non-controlling interests			158,218			184,866
Other			420,393			(88,138	)
Change in assets and liabilities			(24,166,259	)		(52,668,288	)
(Increase) decrease in assets			53,969,609			(23,189,394	)
Interbank investments			15,916,995			7,015,191
Securities and derivative financial instruments (assets / liabilities)			(2,174,872	)		(20,919,080	)
Compulsory deposits with the Central Bank of Brazil			(2,142,375	)		2,949,694
Interbank and interbranch accounts (assets / liabilities)			(75,023	)		1,396,856
Loan, lease and other credit operations			42,119,486			(15,737,123	)
Other receivables and other assets			(1,600,366	)		2,841,584
Foreign exchange portfolio and negotiation and intermediation of securities (assets / liabilities)			1,925,764			(736,516	)
(Decrease) increase in liabilities			(78,135,868	)		(29,478,894	)
Deposits			(51,925,209	)		(14,329,926	)
Deposits received under securities repurchase agreements			(1,344,148	)		(19,712,939	)
Funds for issuance of securities			(3,522,000	)		4,424,833
Borrowing and onlending			(25,738,745	)		3,361,603
Credit card operations (assets / liabilities)			(2,711,859	)		(6,182,065	)
Technical provision for insurance, pension plan and capitalization			3,039,238			2,946,360
Collection and payment of taxes and contributions			3,704,555			4,213,874
Other liabilities			4,753,447			(215,007	)
Deferred income			(274,431	)		76,651
Payment of income tax and social contribution			(4,116,716	)		(4,062,278	)
Net cash provided by (used in) operating activities			28,378,754			(26,899,942	)
Interest on capital / dividends received from affiliated companies			162,222			173,205
Funds received from sale of available-for-sale securities			11,880,901			7,958,499
Funds received from redemption of held-to-maturity securities			1,796,993			1,493,658
Disposal of assets not for own use			149,389			39,852
Disposal of investments			15,189			2,715
Cash and Cash equivalents, net of assets and liabilities arising from the merger with CorpBanca	2cI		5,869,160			-
Cash and cash equivalents, net assets and liabilities due from Recovery acquisition	2cI		(713,914	)		-
Sale of fixed assets			8,119			9,042
Termination of intangible asset agreements			5,267			37,516
Purchase of available-for-sale securities			(10,368,861	)		(3,881,687	)
Purchase of held-to-maturity securities			(1,221,020	)		(2,563,397	)
Purchase of investments - basicaly ConectCar	2cI		(508,576	)		(7,019	)
Disposal (Purchase) of fixed assets	15b		5,623			(619,088	)
Disposal (Purchase) of intangible assets	15b		44,270			(547,777	)
Net cash provided by (used in) investment activities			7,124,762			2,095,519
Decrease in subordinated debt			(7,596,476	)		(1,823,847	)
Change in non-controlling interests	16f		(41,438	)		(772,822	)
Granting of stock options			403,326			275,431
Purchase of treasury shares			(200,200	)		(1,247,150	)
Dividends and interest on capital paid to non-controlling interests			(90,761	)		(56,510	)
Dividends and interest on capital paid			(5,092,915	)		(4,702,721	)
Net cash provided by (used in) financing activities			(12,618,464	)		(8,327,619	)

Net increase (decrease) in cash and cash equivalents			22,885,052			(33,132,042	)

Cash and cash equivalents at the beginning of the period			87,191,559			87,831,981
Effects of changes in exchange rates on cash and cash equivalents			(17,617,165	)		3,229,128
Cash and cash equivalents at the end of the period	4a and 5		92,459,446			57,929,067

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Added Value

(In thousands of Reais)

		01/01 to				01/01 to
	Note	06/30/2016				06/30/2015
Income		81,567,881				85,508,772
Financial operations		74,364,059				76,867,046
Banking services		16,126,395				14,932,377
Result from insurance, pension plan and capitalization operations		2,198,133				1,987,717
Result from loan losses	8d	(11,515,316	)			(8,780,636	)
Other		394,610				502,268
Expenses		(37,657,220	)			(53,364,088	)
Financial operations		(34,017,276	)			(49,721,716	)
Other		(3,639,944	)			(3,642,372	)
Inputs purchased from third parties		(6,871,238	)			(6,467,799	)
Materials, energy and others	13g	(139,623	)			(201,785	)
Third-party services	13g	(2,097,964	)			(1,869,339	)
Other		(4,633,651	)			(4,396,675	)
Data processing and telecommunications	13g	(1,915,037	)			(1,925,069	)
Advertising, promotions and publication	13g	(435,969	)			(479,425	)
Installations		(779,945	)			(687,583	)
Transportation	13g	(198,304	)			(199,361	)
Security	13g	(358,167	)			(331,193	)
Travel expenses	13g	(88,389	)			(104,177	)
Other		(857,840	)			(669,867	)
Gross added value		37,039,423				25,676,885
Depreciation and amortization	13g	(1,093,000	)			(1,084,380	)
Net added value produced by the company		35,946,423				24,592,505
Added value received through transfer	15a lll	270,226				298,668
Total added value to be distributed		36,216,649				24,891,173
Distribution of added value		36,216,649				24,891,173
Personnel		8,992,176		24.8	%	7,879,903		31.7	%
Compensation		7,096,066		19.6	%	6,263,339		25.2	%
Benefits		1,485,885		4.1	%	1,235,575		5.0	%
FGTS – government severance pay fund		410,225		1.1	%	380,989		1.5	%
Taxes, fees and contributions		15,664,020		43.3	%	4,468,961		18.0	%
Federal		15,069,224		41.6	%	3,940,259		15.8	%
State		9,424		0.0	%	13,413		0.1	%
Municipal		585,372		1.6	%	515,289		2.1	%
Return on third parties’ assets - Rent		700,133		1.9	%	640,555		2.6	%
Return on own assets		10,860,320		30.0	%	11,901,754		47.8	%
Dividends and interest on capital		2,403,362		6.6	%	2,883,340		11.6	%
Retained earnings (loss) for the period		8,298,740		22.9	%	8,833,548		35.5	%
Minority interest in retained earnings		158,218		0.4	%	184,866		0.7	%

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Balance Sheet

(In thousands of Reais)

	Note	06/30/2016			06/30/2015
Assets

Current assets			5,330,179			7,168,852
Cash and cash equivalents			183,322			306,142
Interbank investments	4b and 6		1,466,037			1,747,755
Money market			1,466,037			31,478
Interbank deposits			-			1,716,277
Securities and derivative financial instruments	4c, 4d and 7		5,940			4,064
Own portfolio			1,426			-
Pledged in guarantee			4,514			4,064
Other receivables			3,665,757			5,102,447
Income receivable	15a I		2,189,619			4,147,876
Deferred tax assets	14b I		871,437			100,423
Escrow deposits - Civil, Labor, Tax and Social lawsuits			354			-
Sundry	13a		604,347			854,148
Other assets – prepaid expenses	4g		9,123			8,444
Long term receivables			65,339,884			57,862,410
Interbank investments – interbank deposits	4b and 6		64,081,769			57,458,849
Other receivables			1,258,115			403,561
Deferred tax assets	14b I		253,341			15,990
Escrow deposits - Civil, Labor, Tax and Social lawsuits			17,242			15,984
Sundry	13a		987,532			371,587
Permanent assets			90,364,359			72,135,387
Investments - Investments in subsidiaries	15a I		90,364,336			72,135,337
Real estate in use	4i		23			50
Total assets			161,034,422			137,166,649
Liabilities

Current liabilities			9,074,375			3,267,102
Deposits - interbank deposits	4b and 10b		6,532,205			-
Derivative Financial Instruments	4d and 7h		18,849			-
Other liabilities			2,523,321			3,267,102
Social and statutory	16b II		2,053,814			2,561,474
Tax and social security contributions	4n, 4o and 14c		58,748			301,404
Subordinated debt	10f		349,545			340,948
Provisions for contingent liabilities			3,243			2,812
Sundry			57,971			60,464
Long term liabilities			38,048,287			28,033,085
Deposits - Interbank deposits	4b and 10b		6,238,092			-
Funds from acceptance and issuance of securities	4b and 10d		3,379,009			3,771,384
Derivative Financial Instruments	4d		3,148,892			-
Other liabilities			25,282,294			24,261,701
Tax and social security contributions	4n, 4o and 14c		122,295			11,435
Subordinated debt	10f		24,957,148			24,105,588
Provisions for contingent liabilities			182,408			144,678
Sundry			20,443			-
Stockholders' equity	16		113,911,760			105,866,462
Capital			85,148,000			85,148,000
Capital reserves			1,329,803			1,331,243
Revenue reserves			30,892,688			21,890,585
Asset valuation adjustment	4c and 4d		(2,012,085	)		(161,240	)
(Treasury shares)			(1,446,646	)		(2,342,126	)
Total liabilities and stockholders' equity			161,034,422			137,166,649

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Statement of Income

(In thousands of Reais)

		01/01 to			01/01 to
	Note	06/30/2016			06/30/2015
Income related to financial operations			218,636			2,633,538
Securities and derivative financial instruments			218,636			2,633,538
Expenses related to financial operations			1,636,729			(783,133	)
Money market	10 d		1,636,729			(783,133	)
Gross income related to financial operations			1,855,365			1,850,405
Other operating revenues (expenses)			5,962,946			8,821,168
Personnel expenses			(74,636	)		(74,221	)
Other administrative expenses			(34,767	)		(23,447	)
Tax expenses	14a II		(92,995	)		(131,501	)
Equity in earnings of subsidiaries	15a I		6,209,983			9,096,803
Other operating revenues (expenses)			(44,639	)		(46,466	)
Operating income			7,818,311			10,671,573
Non-operating income			14,180			15,334
Income before taxes on income and profit sharing			7,832,491			10,686,907
Income tax and social contribution	4o		1,120,602			(65,377	)
Due on operations for the period			192,711			(170,354	)
Related to temporary differences			927,891			104,977
Profit sharing – Management Members - Statutory - Law No. 6,404 of 12/15/1976			(14,816	)		8,734
Net income			8,938,277			10,630,264
Weighted average of the number of outstanding shares	16a		5,926,183,705			6,012,124,077
Net income per share – R$			1.51			1.77
Book value per share - R$ (outstanding at 06/30)			19.21			17.66

Supplementary information

Exclusion of non recurring effects	2a and 22k		107,697			225,354
Net income without non recurring effects			9,045,974			10,855,618
Net income per share – R$			1.53			1.81

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Statement of Changes in Stockholders’ Equity (Note 16)

(In thousands of Reais)

			Capital			Revenue			Asset valuation			Retained			(Treasury
	Capital		reserves			reserves			adjustment			earnings			shares)			Total
Balance at 01/01/2015		75,000,000		1,315,744			27,224,331			(322,359	)		-			(1,327,880	)		101,889,836
Reserve Capitalization - ESM 04/29/2015		10,148,000		-			(10,148,000	)		-			-			-			-
Purchase of treasury shares		-		-			-			-			-			(1,247,150	)		(1,247,150	)
Granting of stock options		-		39,584			2,943			-			-			232,904			275,431
Granting of options recognized		-		21,465			-			-			-			-			21,465
Share-based payment – variable compensation		-		(45,550	)		-			-			-			-			(45,550	)
Payment of interest on capital on 02/26/2015 – declared after 12/31/2014 - R$ 0.5380 per share		-		-			(2,935,613	)		-			-			-			(2,935,613	)
Asset valuation adjustments:
Change in adjustment to market value		-		-			-			145,943			-			-			145,943
Remeasurements in liabilities of post-employment benefits		-		-			-			15,176			-			-			15,176
Net income		-		-			-			-			10,630,264			-			10,630,264
Appropriations:
Legal reserve		-		-			531,513			-			(531,513	)		-			-
Statutory reserves		-		-			7,215,411			-			(7,215,411	)		-			-
Dividends and interest on capital		-		-			-			-			(2,883,340	)		-			(2,883,340	)
Balance at 06/30/2015		85,148,000		1,331,243			21,890,585			(161,240	)		-			(2,342,126	)		105,866,462
Changes in the period		10,148,000		15,499			(5,333,746	)		161,119			-			(1,014,246	)		3,976,626
Balance at 01/01/2016		85,148,000		1,537,219			29,724,889			(1,375,886	)		-			(4,353,380	)		110,680,842
Purchase of treasury shares		-		-			-			-			-			(200,200	)		(200,200	)
Granting of stock options		-		(33,608	)		-			-			-			436,934			403,326
(-) Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		-			(2,670,000	)		-			-			2,670,000			-
Granting of options recognized		-		(29,345	)		-			-			-			-			(29,345	)
Share-based payment – variable compensation		-		(144,463	)		-			-			-			-			(144,463	)
Payment of interest on capital on 02/29/2016 – declared after 12/31/2015 - R$ 0.4564 per share		-		-			(2,697,116	)		-			-			-			(2,697,116	)
Asset valuation adjustments:
Change in adjustment to market value		-		-			-			(624,504	)		-			-			(624,504	)
Remeasurements in liabilities of post-employment benefits		-		-			-			(11,695	)		-			-			(11,695	)
Net income		-		-			-			-			8,938,277			-			8,938,277
Appropriations:
Legal reserve		-		-			446,914			-			(446,914	)		-			-
Statutory reserves		-		-			5,592,173			-			(5,592,173	)		-			-
Dividends and interest on capital		-		-			495,828			-			(2,899,190	)		-			(2,403,362	)
Balance at 06/30/2016		85,148,000		1,329,803			30,892,688			(2,012,085	)		-			(1,446,646	)		113,911,760
Changes in the period		-		(207,416	)		1,167,799			(636,199	)		-			2,906,734			3,230,918

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Statement of Cash Flows

(In thousands of Reais)

		01/01 to			01/01 to
	Note	06/30/2016			06/30/2015
Adjusted net income			(3,146,158	)		5,650,015
Net income			8,938,277			10,630,264
Adjustments to net income:			(12,084,435	)		(4,980,249	)
Granted options recognized and share-based payment – variable compensation			(173,808	)		(24,085	)
Interest and foreign exchange expense related to operations with subordinated debt			(4,762,653	)		4,200,005
Deferred taxes			(927,891	)		(104,977	)
Equity in earnings of subsidiaries	15a I		(6,209,983	)		(9,096,803	)
Amortization of goodwill			39,980			28,873
Effects of changes in exchange rates on cash and cash equivalents			(50,089	)		16,724
Other			9			14
Change in assets and liabilities			12,482,300			(4,606,982	)
(Increase) decrease in interbank investments			12,003,821			(17,932,207	)
(Increase) decrease in securities and derivative financial instruments (assets / liabilities)			3,482,003			13,540,463
(Increase) decrease in other receivables and other assets			110,342			(19,018	)
Increase (decrease) in deposits			(2,541,377	)		-
(Decrease) increase in other liabilities			(595,973	)		(153,110	)
Payment of income tax and social contribution			23,484			(43,110	)
Net cash provided by (used in) operating activities			9,336,142			1,043,033
Interest on capital / dividends received			4,160,604			1,835,182
(Purchase) sale of investments			(12,148,668	)		424,177
(Purchase) sale of fixed assets			-			(2	)
Net cash provided by (used in) investment activities			(7,988,064	)		2,259,357
Decrease in subordinated debt			(707,861	)		(684,220	)
(Increase) decrease in funds for issuance of securities			(731,439	)		3,265,842
Granting of stock options			403,326			275,431
Purchase of treasury shares			(200,200	)		(1,247,150	)
Dividends and interest on capital paid			(5,092,915	)		(4,702,721	)
Net cash provided by (used in) financing activities			(6,329,089	)		(3,092,818	)

Net increase (decrease) in cash and cash equivalents			(4,981,011	)		209,572

Cash and cash equivalents at the beginning of the period			6,580,281			144,772
Effects of changes in exchange rates on cash and cash equivalents			50,089			(16,724	)
Cash and cash equivalents at the end of the period	4a and 5		1,649,359			337,620

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Statement of Added Value

(In thousands of Reais)

		01/01 to			01/01 to
	Note	06/30/2016			06/30/2015
Income			1,405,355			2,727,033
Financial operations			218,636			2,633,538
Other			1,186,719			93,495
Expenses			1,590,593			(830,888	)
Financial operations			1,636,729			(783,133	)
Other			(46,136	)		(47,755	)
Inputs purchased from third parties			(34,500	)		(23,221	)
Third-party services			(24,504	)		(15,993	)
Advertising, promotions and publication			(875	)		(828	)
Expenses for financial system services			(3,037	)		(2,180	)
Other			(6,084	)		(4,220	)
Gross added value			2,961,448			1,872,924
Deprecitation and amortization			(39,989	)		(28,886	)
Net added value produced by the company			2,921,459			1,844,038
Added value received through transfer	15a I		6,209,983			9,096,803
Total added value to be distributed			9,131,442			10,940,841
Distribution of added value			9,131,442			10,940,841
Personnel			81,698			59,694
Compensation			80,188			58,901
Benefits			1,343			629
FGTS – government severance pay fund			167			164
Taxes, fees and contributions			111,200			250,657
Federal			111,182			250,636
Municipal			18			21
Return on third parties’ assets - rent			267			226
Return on own assets			8,938,277			10,630,264
Dividends and interest on capital			2,403,362			2,883,340
Retained earnings (loss) for the period			6,534,915			7,746,924

The accompanying notes are an integral part of these financial statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

ITAÚ UNIBANCO HOLDING S.A.

Notes to the Financial Statements

Period from January 1 to June 30, 2016 and 2015

(In thousands of Reais)

Note 1 - Operations

Itaú Unibanco Holding S.A. (ITAÚ UNIBANCO HOLDING) is a publicly-held company which, together with its subsidiaries and affiliated companies, operates in Brazil and abroad in all types of banking activities, through its commercial, investment, real estate loan, finance and investment credit, and lease portfolios, including foreign exchange operations, and other complementary activities, with an emphasis on Insurance, Private Pension Plans, Capitalization, Securities Brokerage and Administration of Credit Cards, Consortia, Investment Funds and Managed Portfolios.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Note 2 – Presentation of the financial statements

Presentation of the financial statements

The financial statements of ITAÚ UNIBANCO HOLDING and of its subsidiaries (ITAÚ UNIBANCO HOLDING CONSOLIDATED) have been prepared in accordance with the accounting principles established by the Brazilian Corporate Law, including the amendments introduced by Laws No. 11,638, of December 28, 2007, and No. 11,941, of May 27, 2009 and in conformity, when applicable, with instructions issued by the Central Bank of Brazil (BACEN), the National Monetary Council (CMN), the Brazilian Securities and Exchange Commission (CVM), the Superintendence of Private Insurance (SUSEP), the National Council of Private Insurance (CNSP) and the National Superintendence of Supplementary Pension – (PREVIC), which include the use of estimates deemed necessary to calculate the accounting provisions and the valuation of financial assets.

In order to enable the analysis of the net income, the heading Net income without non recurring effects is presented within the Consolidated Statement of Income, and this effect is shown under the heading Exclusion of non recurring effects (Note 22k).

As set forth in the sole paragraph of article 7 of BACEN Circular No. 3,068, of November 8, 2001, securities classified as trading securities (Note 4c) are presented in the Balance Sheet under Current Assets regardless of their maturity dates.

Lease Operations are presented at present value in the Balance Sheet, and the related income and expenses, which represent the financial results of these operations, are presented, grouped together, under Loan, lease and other loan operations in the Statement of Income. Advances on exchange contracts are reclassified from Other Liabilities – Foreign exchange portfolio to Loan operations. The foreign exchange result is presented on an adjusted basis, with reclassification of expenses and income, in order exclusively to represent the impact of variations and differences in rates on the balance sheet accounts denominated in foreign currencies.

As from June 30, 2106, ITAÚ UNIBANCO HOLDING CONSOLIDATED started to disclose a new concept for losses (Notes 8a II and 8c), segregating the Allowance for Loan and Lease Losses into 3 types of risks: Delay Risk: Provisions for delay, as required by BACEN, related to the minimum provision required for overdue operations, in accordance with CMN Resolution No. 2.682/1999; Aggravated Risk: Provisions for credits with aggravation of risk above the minimum required by BACEN for overdue operations and also provisions for credits that were renegotiated and Potential Risk (related to expected and potential loss).

Consolidation

As set forth in paragraph 1, article 2, of BACEN Circular No. 2,804, of February 11, 1998, the financial statements of ITAÚ UNIBANCO HOLDING CONSOLIDATED include the consolidation of its foreign branches and subsidiaries.

Intercompany transactions, intercompany balances and intercompany results have been eliminated on consolidation. The investment funds of which ITAÚ UNIBANCO HOLDING CONSOLIDATED companies are the main beneficiaries or holders of principal obligations are consolidated. The investments in these fund portfolios are classified by type of transaction and were distributed by type of security, based on the same categories to which these securities were originally allocated. The effects of foreign exchange variations on investments abroad are classified under the heading Securities and derivative financial instruments in the Statement of Income for subsidiaries with the same functional currency as the parent company, and in Asset valuation adjustment for subsidiaries with a functional currency different from that of the parent company (Note 4s).

The difference in Net Income and Stockholders’ Equity between ITAÚ UNIBANCO HOLDING and ITAÚ UNIBANCO HOLDING CONSOLIDATED (Note 16d) results from the adoption of different criteria for the amortization of goodwill originating from purchases of investments, from the recording of transactions with minority stockholders where there is no change of control (Note 4q), and in the record of exchange variations on investments abroad, and hedges of these investments where the functional currency is different from that of the parent company, net of the respective deferred tax assets.

In ITAÚ UNIBANCO HOLDING, the goodwill recorded in subsidiaries, mainly originated from the ITAÚ and UNIBANCO merger and acquisition by minority stockholders of REDE, is amortized based on the expected future profitability and appraisal reports, or upon realization of the investment, according to the rules and guidance of CMN and BACEN.

In ITAÚ UNIBANCO HOLDING CONSOLIDATED, from January 1, 2010, the goodwill originating from the purchase of investments is no longer fully amortized as part of the consolidated financial statements (Note 4j). By December 31, 2009, the goodwill generated had been fully amortized in the periods in which investments were made.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

The consolidated financial statements cover ITAÚ UNIBANCO HOLDING and its direct and indirect subsidiaries. We present below the main companies which together represent over 95% of total consolidated assets:

				Interest in voting						Interest in total
		Country of		capital at						capital at
		Incorporation	Activity	06/30/2016			06/30/2015			06/30/2016			06/30/2015
Banco CorpBanca Colômbia S.A.	(Note 2c)	Colombia	Financial institution		22.25	%		0.00	%		22.25	%		0.00	%
Banco Itaú Argentina S.A.		Argentina	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú BBA S.A.		Brazil	Financial institution		100.00	%		99.99	%		100.00	%		99.99	%
Banco Itaú Chile	(Note 2c)	Chile	Financial institution		0.00	%		99.99	%		0.00	%		99.99	%
Banco Itaú BMG Consignado S.A		Brazil	Financial institution		60.00	%		60.00	%		60.00	%		60.00	%
Banco Itaú Paraguay S.A.		Paraguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Suisse S.A.		Switzerland	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Uruguay S.A.		Uruguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaucard S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itauleasing S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Cia. Itaú de Capitalização		Brazil	Capitalization		100.00	%		100.00	%		100.00	%		100.00	%
Dibens Leasing S.A. - Arrendamento Mercantil		Brazil	Leasing		100.00	%		100.00	%		100.00	%		100.00	%
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		Brazil	Consumer Finance Credit		50.00	%		50.00	%		50.00	%		50.00	%
Hipercard Banco Múltiplo S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau Bank, Ltd.		Cayman Islands	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA Colombia S.A. Corporación Financiera		Colombia	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA International plc		United Kingdom	Insurance		100.00	%		100.00	%		100.00	%		100.00	%
Itaú BBA USA Securities Inc.		United States	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú BMG Seguradora S.A.		Brazil	Insurance		60.00	%		60.00	%		60.00	%		60.00	%
Itaú CorpBanca	(Note 2c)	Chile	Financial institution		33.58	%		0.00	%		33.58	%		0.00	%
Itaú Corretora de Valores S.A.		Brazil	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Seguros S.A.		Brazil	Insurance		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Unibanco S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Vida e Previdência S.A.		Brazil	Pension Plan		100.00	%		100.00	%		100.00	%		100.00	%
Luizacred S.A. Soc. Cred. Financiamento Investimento		Brazil	Consumer Finance Credit		50.00	%		50.00	%		50.00	%		50.00	%
Redecard S.A. - REDE		Brazil	Acquier		100.00	%		100.00	%		100.00	%		100.00	%

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

c) Business development

I. Acquisitions

Credit Intelligence Bureau (“CIB”)

In January 21, 2016, the ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary Itaú Unibanco S.A., signed a Memorandum of Understanding with Banco Bradesco S.A. Banco do Brasil S.A., Banco Santander S.A. and Caixa Econômica Federal in order to create a credit intelligence bureau (“CIB”) which will enable greater efficiency in the management and granting of credit lines at long and medium terms.

CIB will be structured as a corporation and the Parties, each of them holding a 20% equity ownership, will share its control.

CIB’s incorporation is subject to the execution of definitive documents among the Parties, as well as the satisfaction of certain conditions precedent, including the approval by applicable regulatory authorities.

Recovery do Brasil Consultoria S.A.

At December 31, 2015, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary Itaú Unibanco S.A., entered into an agreement for purchase and sale and other covenants with Banco BTG Pactual S.A. (BTG) for acquisition of a 81.94% interest in the capital of Recovery do Brasil Consultoria S.A. (Recovery), corresponding to BTG’s total interest in Recovery, for the amount of R$ 640 million.

In the same transaction, ITAÚ UNIBANCO HOLDING CONSOLIDATED agreed on the acquisition of approximately 70% of the portfolio of R$ 38 billion in credit rights related to the recovery of portfolios held by BTG, for the amount of R$ 570 million.

Established in 2000 in Argentina and present in Brazil since 2006, Recovery is the market leader in the management of overdue receivables portfolio. Recovery’s activities consist in prospecting and assessing portfolios, structuring and managing operations, acting in all segments, from individual to corporate loans, with financial and non-financial institutions, and offering a competitive advantage to its clients.

After the compliance with the conditions precedent and approval by regulatory authorities, the transaction was closed on March 31, 2016.

The transaction did not have significant accounting effects on the results of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

On July 7, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary Itaú Unibanco S.A., acquired from International Finance Corporation, a 6.92% additional interest, for the amount of R$ 59,186 and now holds 96% of Recovery´s capital.

ConectCar Soluções de Mobilidade Eletrônica S.A.

On October 21, 2015, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary Redecard S.A. (Rede), entered into a share purchase and sale commitment with Odebrecht Transport S.A. for the acquisition of 50% of capital stock of ConectCar Soluções de Mobilidade Eletrônica S.A. (ConectCar) for the amount of R$ 170 million.

ConectCar is an institution engaged in own payment arrangements and a provider of intermediation services for automatic payment of tolls, fuels and parking lots, ranked as the second largest company in the sector, currently operating in 12 States and in the Federal District. It was organized in 2012 as the result of a partnership between Odebrecht Transport S.A. and Ipiranga Produtos de Petróleo S.A., a company controlled by Ultrapar Participações S.A., which currently holds the remaining 50% of ConectCar’s capital stock.

After compliance with the conditions precedent and approval of proper regulatory authorities, the operation was closed on January 29, 2016.

The transaction did not have significant accounting effect on the results of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Itau CorpBanca

On January 29, 2014, ITAÚ UNIBANCO HOLDING, through its subsidiary Banco Itaú Chile S.A. (BIC), entered into a Transaction Agreement with CorpBanca and its controlling stockholders (Corp Group), establishing the terms and conditions of the merger of operations of BIC and CorpBanca in Chile and in the other jurisdictions in which CorpBanca operates.

CorpBanca is a commercial bank headquartered in Chile, which also operates in Colombia and Panama, focused on individuals and large and middle-market companies. In 2015, an accordance with the Chilean Superintendence of Banks, it was one of the largest private banks in Chile, in terms of overall size of loan portfolio, with a market share of 7.1%.

This agreement represents an important step in ITAÚ UNIBANCO HOLDING CONSOLIDATED’s internationalization process.

The merger was approved by the stockholders of CorpBanca and BIC and by all proper regulatory authorities in Chile, Brazil, Colombia and Panama. As set forth in the amendment to the Transaction Agreement, entered into on June 2, 2015, the parties closed the operation on April 1, 2016, when they had full conditions for the corporate reorganization process.

The operation was consummated by means of:

Increase in BIC’ capital in the amount of R$ 2,308,917 concluded on March 22, 2016;

ii.

Merger of BIC into CorpBanca, with the cancellation of BIC’s shares and issue of new shares by CorpBanca, at the rate of 80,240 shares of CorpBanca for one share of BIC, so that interests resulting from the merger, named Itaú CorpBanca, are 33.58% for ITAÚ UNIBANCO HOLDING CONSOLIDATED and 33.13% for Corp Group.

The following corporate structure resulted from the transaction:

Ownership interest
ITAÚ UNIBANCO HOLDING CONSOLIDATED	33.58	%
Corp Group	33.13	%
Other non-controlling stockholders	33.29	%

The Itaú CorpBanca was controlled from the April 1, 2016 fur ITAÚ UNIBANCO HOLDING CONSOLIDADO. On the same date, ITAU UNIBANCO HOLDING entered into a shareholders’ agreement with Corp Group, which sets forth, among others, the right of ITAÚ UNIBANCO HOLDING and Corp Group to appoint members for the Board of Directors of Itaú CorpBanca in accordance to their interests in capital stock, and this group of shareholders will have the right to appoint the majority of members of the Board of Directors of Itaú CorpBanca and ITAÚ UNIBANCO HOLDING will be entitled to appoint the majority of members elected by this block. Except for certain strategic matters of Itaú CorpBanca, on which Corp Group has the right of veto, the members of the board of directors appointed by Corp Group should vote as recommended by ITAÚ UNIBANCO HOLDING.

The fair value of the consideration transferred by ITAÚ UNIBANCO HOLDING CONSOLIDADO due to its interest in Itaú CorpBanca was R$ 10,517,487, based on the quotation of CorpBanca’s shares on the Santiago Stock Exchange.

The consideration transferred resulted in goodwill for future expected profitability of R$ 6,255,803. Additionally, a goodwill of R$ 690,388 was generated in Brazil due to the difference between the equity value of BIC and the equity value of Itaú CorpBanca resulting from the merger. This amount will not be deducted for tax purposes, except in case of disposal or merger of the investment.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

The table below summarizes the main assets acquired and liabilities assumed on the acquisition date.

CorpBanca

	04/01/2016
Current Assets and Long Term Receivables		110,630,546
Cash and cash equivalents		5,869,160
Interbank investments		3,897,540
Securities and derivative financial instruments		19,632,775
Interbank accounts and Interbranch accounts		154,230
Loan, lease and other credit operations		75,543,990
Other receivables and Other assets		5,532,851
Permanent assets		4,056,062
Investments		71,517
Fixed assets and operating lease		494,001
Goodwill and Intangible assets		3,490,544
Total assets		114,686,608
Current Liabilities and Long Term Liabilities		107,324,988
Deposits		68,387,102
Deposits received under securities repurchase agreements		4,052,218
Funds from acceptances and issuance of securities		12,161,294
Interbank accounts and Interbranch accounts		259,445
Borrowing and onlending		6,410,574
Derivative financial instruments		5,749,062
Other liabilities		10,305,293
Total liabilities		107,324,988
Plan net assets		7,361,620
Non-controlling interests		1,487,970
Net assets assumed		5,873,650
Adjustment to fair value of net assets assumed		(1,611,966	)
Net Assets Assumed at Fair Value		4,261,684

Contingent liabilities have not been recorded due to the acquisition.

The transaction did not have significant accounting effects on net income of ITAÚ UNIBANCO HOLDING CONSOLIDADO.

MaxiPago

On September 3, 2014, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary Redecard S.A. (Rede) entered into a share purchase agreement with the controlling shareholders of MaxiPago Serviços de Internet S.A., a gateway company – network interconnection for mobile electronic payments.

On the same date, subscription and payment of 19,336 shares (33.33%) and acquisition of 24,174 shares (41.67%) were carried out, so that Rede became the holder of 43,510 common shares, representing 75% of total voting capital of MaxiPago.

After the compliance with the conditions precedent and approval by proper regulatory authorities, the operation was closed on January 8, 2015.

The difference between the amount paid and net assets at fair value resulted in the recognition of goodwill due to expected future profitability.

Purchase price	14,500
(-) Fair value of identified assets and liabilities	(3,994	)
(=)Goodwill	10,506

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Note 3 – Requirements regarding capital and fixed asset limits

a) Basel and fixed asset ratios

Represented below are the main indicators at 06/30/2016, according to present regulation which defines the Consolidated Prudential as the calculation basis:

	Consolidated
	Prudential ⁽¹⁾
Reference equity ⁽²⁾		135,835,372
Basel ratio		18.1	%
Tier I		14.9	%
Common Equity		14.8	%
Additional Capital		0.1	%
Tier II		3.2	%
Fixed assets ratio		24.4	%
Excess capital in relation to fixed assets		34,834,406

(1)

Consolidated financial statements including financial companies and the like. As from the base date January 2015, in accordance with Circular 4,278, this is the basis for the consolidation calculation;

(2)

According to CMN Resolutions No. 4,192, of March 1, 2013, No. 4,278, of October 31, 2013, No. 4,311, of January 20, 2014 and No. 4,442, of October 29, 2015, CMN defines Regulatory Capital, for the purpose of operational limit calculation, as the sum of two tiers, Tiers I and II, in which Tier I is comprised of Common Equity Tier 1 and Additional Tier 1 Capital. The calculation is composed of items that are an integral part of the Stockholders’ Equity plus prudential adjustments and deductions, in addition to eligible instruments, particularly subordinated debt.

The management considers the current Basel ratio adequate (18.1% based on Prudential Consolidated, of which 14.9% is Principal Capital and Tier I and 3.2% is Tier II), taking into consideration that it exceeds by 7.6 percentage points the sum of minimum requirements for Regulatory Capital Additional to Principal Capital established by the Central Bank of Brazil for 2016 (equivalent to 10.5%).

CMN Resolution No. 4,192, of March 1, 2013, as amended, addresses the Reference Equity calculation methodology, and CMN Resolution No. 4,193, of March 1, 2013, as amended, addresses the minimum requirements for Reference Equity, Tier I, and Common Equity Tier I, and introduces the Additional Common Equity Tier 1. ITAÚ UNIBANCO HOLDING CONSOLIDATED opted to use a Standardized Approach to calculate credit and market risk-weighted assets, and the Alternative Standardized Approach to calculate operational risk-weighted assets, based on the regulations in force.

Considering current capital base at June 30, 2016, should the Basel III rules established by BACEN be immediately and fully applied, the principal capital ratio would be 14.1%, considering the use of tax credit.

For further information on capital requirements, please see to the company’s website www.itau.com.br/investor- relations, Corporate Governance section/ Risk and Capital Management – Pillar 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

The reference equity used for the calculation of ratios and the risk-weighted assets at 06/30/2016, are as follows:

	Consolidated
	Prudential
Stockholders' equity ITAÚ UNIBANCO HOLDING S.A. (consolidated)		110,586,685
Non-controlling interests		13,241,325
Changes in ownership interest in a subsidiary as a result of capital transaction		3,046,280
Consolidated stockholders’ equity (BACEN)		126,874,290
Common Equity deductions ⁽¹⁾		(15,410,251	)
Common Equity Tier I		111,464,039
Additional Tier I deductions		685,033
Additional Tier I Capital		685,033
Tier I (Common Equity + Additional Capital)		112,149,072
Instruments eligible for inclusion in Tier II		23,488,431
Tier II deductions		197,869
Tier II		23,686,300
Regulatory Capital (Tier I + Tier II)		135,835,372
Risk-weighted assets		752,120,368
Risk-weighted assets of credit risk (RWA_CPAD)		690,963,020		91.9	%
a) Per weighting factor (FPR):
FPR at 2%		160,533		0.0	%
FPR at 20%		7,121,222		0.9	%
FPR at 35%		11,396,184		1.5	%
FPR at 50%		47,094,990		6.3	%
FPR at 75%		141,481,929		18.8	%
FPR at 85%		116,582,126		15.5	%
FPR at 100%		314,034,393		41.8	%
FPR at 250%		28,267,445		3.8	%
FPR at 300%		7,967,899		1.1	%
FPR at 1250% ⁽²⁾		1,744,447		0.2	%
Derivatives – Future potential gain on and variation in the counterparty credit quality Minimum Required Regulatory Capital		15,111,852		2.0	%
b) Per type:
Securities		44,191,232		5.9	%
Loan operations - retail		113,499,965		15.1	%
Loan operations – non-retail		254,015,710		33.8	%
Joint obligations - retail		206,671		0.0	%
Joint obligations – non-retail		48,712,820		6.5	%
Loan commitments - retail		27,773,255		3.7	%
Loan commitments – non-retail		11,009,175		1.5	%
Other exposures		191,554,192		25.5	%
Risk-weighted assets of operational risk (RWA_OPAD)		43,447,870		5.8	%
Retail		7,989,605		1.1	%
Commercial		23,069,045		3.1	%
Corporate finance		2,946,218		0.4	%
Negotiation and sales		577,407		0.1	%
Payments and settlements		3,419,408		0.5	%
Financial agent services		3,070,052		0.4	%
Asset management		2,374,561		0.3	%
Retail brokerage		1,574		0.0	%
Business plans		-		0.0	%
Risk-weighted assets of market risk:		17,709,478		2.4	%
Gold, foreign currency and operations subject to foreign exchange variation (RWA_CAM)		1,231,210		0.2	%
Operations subject to interest rate variations		15,655,797		2.1	%
Fixed rate denominated in Real (RWA_JUR1)		3,507,483		0.5	%
Foreign currency coupon (RWA_JUR2)		7,033,063		0.9	%
Price index coupon (RWA_JUR3)		5,115,251		0.7	%
Interest rate coupon (RWA_JUR4)		-		0.0	%
Operations subject to commodity price variation (RWA_COM)		510,066		0.1	%
Operations subject to stock price variation (RWA_ACS)		312,405		0.0	%
RWA		752,120,368		100.0	%
Minimum Required Regulatory Capital		74,271,886
Excess capital in relation to Minimum Required Regulatory Capital		61,563,486		82.9	%
Ratio (%)		18.1	%
Regulatory Capital calculated for covering the interest rate risk of operations not classified into the trading portfolio (RBAN)		1,820,229

(1) As from Junec 30, 2015, Resolution No. 4,277/13 establishes the application of prudential adjustments related to pricing of financial instruments evaluated by market value, impacting deductions of capital by R$ 485 million.

(2) Considers the application of "F" factor required by article 29 of Circular No. 3,644/13.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

During this period, the effects of the changes in legislation and balances were as follows:

	Reference			Weighted
Changes in the Basel Ratio	*equity ^()**			*exposure ^()**		Effect
Ratio at 12/31/2015 - Prudential Conglomerate		128,465,152			722,467,645		17.8	%
Net income for the period		9,338,480			-		1.3	%
Interest on capital and dividends		(5,100,478	)		-		-0.7	%
Benefits to employees - CVM Resolution No. 4,424, June 25, 2015		(11,695	)		-		0.0	%
Granting of options recognized		(29,345	)		-		0.0	%
Granting of stock options – options exercised during the period		403,326			-		0.1	%
Asset valuation adjustment		225,425			-		0.0	%
Deductions in reference equity		(5,963,299	)		-		-0.8	%
Purchase of treasury shares		(200,200	)		-		0.0	%
Non-controlling interests		12,259,567			-		1.7	%
Subordinated debt and redeemable preferred shares		(3,914,740	)		-		-0.5	%
Other changes in reference equity		363,179			-		0.1	%
Changes in risk exposure		-			29,652,723		-0.7	%
Ratio at 06/30/2016 - Prudential Conglomerate		135,835,372			752,120,368		18.1	%

(*) Corpbanca merger impacted the Referential Equity in R$ 7,5 billion, particularly due to non-controlling interest (R$ 12.3 billion) and prudential deductions (R$ 4.8 billion) set forth in BACEN Resolution No. 4.192. This merger gave rise to an impact on Risk-weighted Assets of R$ 103.0 billion.

b) Global systemic importance

BACEN Circular No. 3,751 came into effect in March 2015, providing for the determination of indicators relevant to assess the global systemically important banks (G-SIB) for Brazilian financial institutions. For details on the indicators of the global systemic importance index see to our website www.itau.com.br/relacoes-com-investidores, at “Governança Corporativa”, “Annex I_IAISG”.

Capital for insurance activity

In July 2015, the National Council of Private Insurance (CNSP) issued CNSP Resolution No. 321, which, among other things, deals with the minimum capital requirements for underwriting, credit, operating and market risks for insurers, open private pension entities, capitalization companies and reinsurers. Upon publication of this resolution, CNSP Resolutions No. 228, 280, 283, 284, 316 and 317 are cancelled.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Note 4 – Summary of the main accounting practices

Cash and cash equivalents - For the purposes of the Consolidated Statement of Cash Flows, this item includes cash and current accounts in banks (considered in the heading Cash and cash equivalents), interbank deposits and securities purchased under agreements to resell – funded positions that have original maturities of up to 90 days.

Interbank investments, remunerated restricted credits – Brazilian Central Bank, remunerated deposits, deposits received under securities repurchase agreements, funds from acceptance and issuance of securities, borrowing and onlending, subordinated debt and other receivables and payables – Transactions subject to monetary correction and foreign exchange variations, and transactions with fixed charges, are recorded at their present value, net of the transaction costs incurred, calculated “pro rata die” based on the effective rates of transactions, according to CVM Resolution No. 649 of December 16, 2010.

Securities - Recorded at the cost of acquisition restated by the index and/or effective interest rate and presented in the Balance Sheet, according to BACEN Circular No. 3,068, of November 8, 2001. Securities are classified into the following categories:

Trading securities – securities acquired to be actively and frequently traded, and adjusted to market value, with a counter-entry to the results for the period;

Available-for-sale securities – securities that can be negotiated but are not acquired for the purposes of active and frequent trading. They are adjusted to their market value, with a counter-entry to an account disclosed in stockholders’ equity;

Held-to-maturity securities – securities, except for non-redeemable shares, which the bank has the financial condition and intend, or is required to hold in the portfolio to maturity, are recorded at the cost of acquisition, or market value, whenever these are transferred from another category. The securities are adjusted using the accrual method through maturity, and are not adjusted to market value.

Gains and losses on available-for-sale securities, when realized, are recognized on the trade date in the statement of income, with a counter-entry to a specific stockholders’ equity account.

Decreases in the market value of available-for-sale and held-to-maturity securities below their related costs, resulting from non-temporary causes, are recorded in the results as realized losses.

Derivative financial instruments - these are classified on the date of their acquisition, according to whether or not management intends to use them either as a hedge, according to BACEN Circular No. 3,082, of January 30, 2002. Transactions involving financial instruments, carried out at the client’s request, on their own account, or which do not comply with the hedging criteria (mainly derivatives used to manage the overall risk exposure), are stated at market value, including realized and unrealized gains and losses, which are recorded directly in the statement of income.

The derivatives that are used for protection against risk exposure or to modify the characteristics of financial assets and liabilities, which have changes in market value closely related with those of the items being protected at the beginning and throughout the duration of the contract, and which are found to be effective reducing the risk related to the exposure being protected against, are classified as hedges, in accordance with their nature:

Market Risk Hedge – financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value, plus realized and unrealized gains and losses, which are recorded directly in the statement of income.

Cash Flow Hedge - the effective amounts of the hedge of financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value plus realized and unrealized gains and losses, net of tax effects, when applicable, and recorded in a specific account in stockholders’ equity. The ineffective portion of the hedge is recorded directly in the statement of income.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Net Investment Hedge of Foreign Operations - accounted for similarly to cash flow hedge, i.e. the portion of gains or losses on a hedging instrument that is determined to be an effective hedge is recognized in stockholders’ equity, and reclassified to income for the period in the event of the disposal of the foreign operation. The ineffective portion is recognized in income for the period.

Loan, lease and other credit operations (operations with credit granting characteristics) – These transactions are recorded at present value and calculated “pro rata die” based on the variation of the contracted index and interest rate, and are recorded on an accrual basis until the 60th day overdue in financial companies, according to the estimates of receipt. After the 60th day, income is recognized upon the effective receipt of installments. Credit card operations include receivables arising from the purchases made by cardholders. The funds related to these amounts are recorded in Other Liabilities – Credit Card Operations, which also include funds arising from other credits related to transactions with credit card issuers.

Allowance for loan losses - the balance of the allowance for loan losses was recorded based on a credit risk analysis, at an amount considered sufficient to cover loan losses in accordance with the rules determined by CMN Resolution No. 2,682 of December 21, 1999, which are as follows are:

Provisions are recorded from the date on which loans are granted, based on the client’s risk rating and on the periodic quality evaluation of clients and industries, and not only in the event of default;

Taking into account default exclusively, the write-off as losses occurs 360 days after the credits have matured or after 540 days for operations that mature after a period of 36 months.

Other assets - these assets are mainly comprised of assets held for sale relating to real estate available for sale, own real estate not in use and real estate received as payment in kind, which are adjusted to market value through a provision, according to current regulations, unearned reinsurance premiums (Note 4m I); and prepaid expenses, corresponding to disbursements, the benefits of which will be felt in future periods.

From January 1, 2015, Itaú Unibanco has adopted the option provided in Circular No. 3,693/13, which establishes accounting procedures for the compensation of local correspondents in connection with credit origination.These compensation amounts for local correspondents in connection with transactions originated after January 1, 2017 will be fully recorded as expenses for the period.

Investments – investments in subsidiary and affiliated companies are accounted for based on the equity method. The consolidated financial statements of foreign branches and subsidiaries are adapted to comply with Brazilian accounting practices and converted into Reais. Other investments are recorded at cost and adjusted to market value by making a provision in accordance with current standards.

Fixed assets - these assets are stated at the cost of acquisition or construction, less accumulated depreciation, and were adjusted to market value up to December 31, 2007, when applicable, for insurance, pension plan and capitalization operations, and these adjustments to market value are supported by appraisal reports. They correspond to rights related to tangible assets intended for the maintenance of the company’s operations or exercised for this purpose, including assets arising from transactions that transfer to the company their benefits, risks and controls. The consideration received under lease contracts started to be recorded in income in accordance with CMN Resolution No. 3,617/08, as of September 30, 2015, as determined by the Central Bank.

Goodwill – corresponds to the amount paid in excess for the purchase of investments and is amortized based on expected future profitability or as realized. It is tested semi-annually for impairment.

Intangible assets – correspond to rights acquired related to intangible assets intended to be held by the company, or which are exercised for this purpose, according to CMN Resolution No. 3,642, of November 26, 2008. They are composed of: (i) the goodwill amount paid on the acquisition of the company, transferred to intangible assets in view of the transfer of the acquirer’s equity by the acquired, as set forth by Law No. 9,532/97, to be amortized based on the period defined in the appraisal reports; (ii) usage rights and rights acquired to credit payrolls and partnership agreements, amortized over the terms of the contracts or to the extent that the economic benefits flow to the company and (iii) software and customer portfolios, amortized over terms varying from five to ten years.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Impairment of assets – a loss is recognized when there is clear evidence that assets are stated at a non-recoverable value. This procedure is adopted semiannually.

Insurance, pension plan and capitalization operations - insurance premiums, accepted coinsurances and selling expenses are accounted for by issuing an insurance policy or in accordance with the insurance effectiveness term, through the recognition and reversal of the provision for unearned premiums and deferred selling expenses. Interest arising from insurance premiums installments is accounted for as incurred. Revenues from social security contributions, gross revenue from premium bonds and respective technical provisions are recognized upon receipt.

I - Credits from operations and other assets related to insurance and reinsurance operations:

Insurance premiums receivable - Refer to installments of insurance premiums receivable, current and past due, in accordance with insurance policies issued;

Reinsurance recoverable amounts – Refer to claims paid to the insured party while recovery of these paid amounts is pending from the Reinsurer, installments of unsettled claims and incurred but not reported claims - Reinsurance, classified in assets in accordance with the criteria established by CNSP Resolution No. 321, of July 15, 2015, as amended by CNSP Resolution No. 319, of December 12, 2014, and SUSEP Circular No. 517, of July 30, 2015;

Unearned reinsurance premiums – Recognized to determine the portion of unearned reinsurance premiums, calculated “pro rata die”, and for risks of policies not issued computed based on estimates, based on the actuarial technical study and in compliance with the criteria established by CNSP current legislation as amended by CNSP Resolution No. 319, of December 12, 2014, and SUSEP Circular No. 517, of July 30, 2015.

II -

The technical provisions for insurance, pension plan and capitalization are recognized in accordance with the technical notes approved by SUSEP and the criteria established by the current legislation.

II.I- Insurance and pension plan:

Provision for unearned premiums – this provision is recognized, based on insurance premiums, for the coverage of amounts payable related to claims and expenses to be incurred, throughout their terms to maturity, in connection with the risks assumed at the calculation base date. The calculation is performed on the level of policies or endorsement of agreements in force, on a pro rata die basis. The provision includes an estimate for effective and not issued risks.

Provision for unsettled claims – this provision is recognized for the coverage of amounts payable related to lump-sum payments and income overdue from claims reported up to the calculation base date, but not yet paid. The provision covers administrative and legal claims, gross of accepted coinsurance operations and reinsurance operations and net of ceded coinsurance operations. The provision should include, whenever required, IBNER (claims incurred but not sufficiently reported) for the aggregate development of claims reported but not paid, which amounts may be changed throughout the process up to final settlement.

Provision for claims incurred and not reported – this provision is recognized for the coverage of expected unsettled amounts related to claims incurred but not reported up to the calculation base date, gross of accepted coinsurance operations and reinsurance operations, and net of ceded coinsurance operations.

Mathematical provisions for benefits to be granted - recognized for the coverage of commitments assumed to participants or policyholders, based on the assumptions set forth in the contract, while the event that gave rise to the benefit and/or indemnity has not occurred. The provision is calculated in accordance with the methodology approved in the actuarial technical note to the product.

Mathematical provisions for granted benefits - recognized after the event triggering the benefit occurs, for the coverage of the commitments assumed to the participants or insured parties, based on the assumptions established in the agreement. The provision is calculated in accordance with the methodologies approved in the technical actuarial note on the product.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

Provision for financial surplus – recognized to ensure the amounts intended for the distribution of a financial surplus, in accordance with the regulations in force, in the event that it is stated in the agreement. Corresponds to the financial income exceeding the minimum return guaranteed in the product.

Supplemental Coverage Provision – recognized whenever technical provisions are found to be insufficient, determined based on the Liability Adequacy Test, in accordance with the provisions specified in the regulations in force. In June 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED used the option provided for in SUSEP Circular No. 517/15 to make use of the difference between the market value and book value l ("value added") of securities pledged as guarantees of technical provisions recognized in assets as held to maturity;

Provision for redemptions and other amounts to be regularize – includes amounts related to redemptions to regularize, returns on premiums or funds, transfers requested but, for any reason, not yet transferred to the insurance company or open private pension entity beneficiary, and where premiums have been received but not quoted.

Provision for related expenses - recognized for the coverage of expected amounts related to expenses on benefits and indemnities, due to events which have occurred and will occur.

II.II - Capitalization:

Mathematical provision for capitalization – recognized until the event triggering the benefit occurs, and comprised of the portion of the amounts collected for capitalization. It includes monetary restatement and interest, from the beginning of the validity date.

Provision for redemption – recognized from the date of the event triggering the redemption of the certificate and/or the event triggering the distribution of the bonus until the date of financial settlement, or the date on which the evidence of payment of the obligation is received.

Provision for raffles unrealized – comprises the portion of the amounts collected for raffles for each tickets, which have been funded but, at the recognition date, have not yet been realized.

Provision for raffles payable – recognized from the date when the raffle is drawn until the date of financial settlement, or the date when the evidence of payment of the obligation is received, or in conformity with other cases provided by law.

Supplementary provision for raffles – recognized to supplement the provision for raffles unrealized, and is used for coverage of possible shortfall related to the expected amount of raffles to be drawn.

Provision for administrative expenses - recognized for the coverage of the expected amounts of administrative expenses for the capitalization plans.

Contingent assets and liabilities and legal liabilities – tax and social security - assessed, recognized and disclosed according to the provisions set forth in CMN Resolution No. 3,823 of December 16, 2009, and BACEN Circular Letter No. 3,429 of February 11, 2010.

I - Contingent assets and liabilities

Refer to potential rights and obligations arising from past events, the occurrence of which is dependent upon future events.

Contingent assets - not recognized, except where there is evidence of a high likelihood level of realization, usually represented by claims awarded a final and unappealable judgment and confirmation of the recoverability of the claim through receipt of amounts or through offsetting against another liability.

Contingent liabilities - basically arise from administrative proceedings and lawsuits inherent in the normal course of business filed by third parties, former employees and governmental bodies, in connection with civil, labor, tax and social security lawsuits and other risks. These contingencies are calculated on a conservative basis, usually recorded based on the opinion of legal advisors and considering the probability that financial resources shall be required to settle the obligation, the amount of which may be estimated with sufficient certainty. Contingencies are classified either as probable, for which provisions are recognized; possible, which are disclosed but not recognized; and remote, for which recognition or disclosure are not required. Any contingent amounts are measured through the use of models and criteria which allow adequate measurement, in spite of the uncertainty of their terms and amounts.

Escrow deposits are restated in accordance with the current legislation.

Contingencies guaranteed by indemnity clauses in privatization processes and with liquidity are only recognized upon judicial notification with the simultaneous recognition of receivables, without any effect on results.

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II - Legal liabilities – tax and social security

Represented by amounts payable related to tax liabilities, the legality or constitutionality of which are subject to judicial challenge, recognized at the full amount under discussion.

Liabilities and related escrow deposits are adjusted in accordance with the current legislation.

Taxes - these provisions are calculated in accordance with current legislation at the rates shown below, using the respective calculation bases.

Income tax	15.00	%
Additional income tax	10.00	%
Social contribution ⁽¹⁾	20.00	%
PIS ⁽²⁾	0.65	%
COFINS ⁽²⁾	4.00	%
ISS up to	5.00	%

(1)

On October 06, 2015, Law No. 13,169, a conversion of Provisional Measure No. 675, which increased the Social Contribution tax rate from 15% to 20% until December 31, 2018, for financial institutions, insurance companies and credit card management companies, was introduced. For the other companies, the tax rate remains at 9%.

(2)

For non-financial subsidiaries that fall into the non-cumulative calculation system, the PIS rate is 1.65% and COFINS rate is 7.60%.

Deferred income – this refers to: (i) unexpired interest received in advance that is recognized in income as earned, and (ii) the negative goodwill on acquisition of investments arising from expected future losses, which has not been absorbed in the consolidation process.

Transactions with non-controlling interests - Changes in ownership interest in a subsidiary, which do not result in loss of control, are accounted for as capital transactions and any difference between the amount paid and the amount corresponding to non-controlling is recognized directly in consolidated stockholders' equity.

Post-employments benefits

Pension plans - defined benefit plans

The liability (or asset, as the case may be) recognized in the consolidated balance sheet with respect to the defined benefit plan corresponds to the present value of the defined benefit obligations on the balance sheet date less the fair value of the plan assets. The defined benefit obligation is annually calculated by an independent actuarial consulting company using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated amount of future cash flows of benefit payments based on the Brazilian treasury long term securities denominated in Reais and with maturity periods similar to the term of the pension plan liabilities.

The following amounts are recognized in the consolidated statement of income:

current service cost is defined as the increase in the present value of obligations resulting from employee service in the current period;

interest on the net amount of assets (liabilities) of defined benefit plans is the change, during the period, in the net amount recognized in assets and liabilities, due to the time elapsed, which comprises the interest income on plan assets, interest expense on the obligations of the defined benefit plan and interest on the asset ceiling effects.

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Actuarial gains and losses arise from the non-realization of the actuarial assumptions established in the latest actuarial evaluation as compared to those effectively carried out, as well as the effects of changes in these assumptions. Gains and losses are fully recognized in equity valuation adjustments.

Pension plans - defined contribution

For defined contribution plans, contributions to plans made by ITAÚ UNIBANCO HOLDING CONSOLIDATED, through pension plan funds, are recognized as expenses when due.

Other post-employment benefit obligations

Certain companies that merged into ITAÚ UNIBANCO HOLDING CONSOLIDATED over the past few years were sponsors of post-employment healthcare benefit plans. ITAÚ UNIBANCO HOLDING CONSOLIDATED is contractually committed to maintaining these benefits over specific periods, as well as the benefits granted based on judicial rulings.

Similarly to the defined benefit pension plans, these obligations are assessed annually by independent and qualified actuaries, and the costs expected from these benefits are accrued during the length of service. Gains and losses arising from adjustments and changes in actuarial assumptions are debited from or credited to stockholders’ equity in Equity asset valuation adjustment in the period in which they occur.

Foreign currency translation

I- Functional and presentation currency

The financial statements of ITAÚ UNIBANCO HOLDING CONSOLIDATED are presented in Reais, which is its functional and presentation currency. For each subsidiary and investment in associates and joint ventures, ITAÚ UNIBANCO HOLDING CONSOLIDATED defined the functional currency, as provided for in CVM deliberation Nº 640/10.

The assets and liabilities of subsidiaries with a functional currency other than the Brazilian Real are translated as follows:

Assets and liabilities are translated at the closing rate at the balance sheet date;

Income and expenses are translated at monthly average exchange rates;

Exchange differences arising from currency translation are recorded in Cumulative Translation Adjustments (CTA).

II - Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of income as part of securities and derivative financial instruments.

In the case of monetary assets classified as available-for-sale, the exchange differences resulting from a change in the amortized cost of the instrument are recognized in the income statement, while those resulting from other changes in the carrying amount, except impairment losses, are recognized in cumulative translation adjustments until derecognition or impairment.

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Note 5 - Cash and cash equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents of ITAÚ UNIBANCO HOLDING CONSOLIDATED are composed of the following:

	06/30/2016		06/30/2015
Cash and cash equivalents		21,851,785		18,004,808
Interbank deposits		17,436,990		20,368,036
Securities purchased under agreements to resell – Funded position		53,170,671		19,556,223
Total		92,459,446		57,929,067

In ITAÚ UNIBANCO HOLDING it is composed of the following:

	06/30/2016		06/30/2015
Cash and cash equivalents		183,322		306,142
Securities purchased under agreements to resell – Funded position		1,466,037		31,478
Total		1,649,359		337,620

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Note 6 - Interbank investments

	06/30/2016												06/30/2015
	0 - 30		31 - 180		181 - 365		Over 365		Total		%		Total		%
Money market		183,483,934		56,563,046		2,074,474		221,220		242,342,674		89.4		159,166,188		82.7
Funded position ^(*)		58,422,214		18,911,457		1,377,841		221,220		78,932,732		29.1		59,025,341		30.7
Financed position		118,102,975		7,921,707		110,161		-		126,134,843		46.5		72,014,506		37.4
With free movement		5,005,658		7,921,707		110,161		-		13,037,526		4.8		39,036,741		20.3
Without free movement		113,097,317		-		-		-		113,097,317		41.7		32,977,765		17.1
Short position		6,958,745		29,729,882		586,472		-		37,275,099		13.8		28,126,341		14.6
Money market – Assets Guaranteeing Technical Provisions - SUSEP (Note 11b)		3,156,647		-		-		40,691		3,197,338		1.2		2,299,767		1.2
Interbank deposits		18,937,886		4,021,556		1,532,991		866,210		25,358,643		9.4		30,966,721		16.1
Total		205,578,467		60,584,602		3,607,465		1,128,121		270,898,655		100.0		192,432,676		100.0
% per maturity term		75.9		22.4		1.3		0.4		100.0
Total – 06/30/2015		96,293,816		88,459,703		6,667,593		1,011,564		192,432,676
% per maturity term		50.0		46.0		3.5		0.5		100.0


	()*	Includes R$ 8,586,241 (R$ 7,588,701 at 06/30/2015) related to money market with free movement, in which securities are restricted to guarantee transactions at the BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (Securities, Commodities and Futures Exchange) and the Central Bank of Brazil (BACEN).

In ITAÚ UNIBANCO HOLDING the portfolio is composed of Money market – Funded position falling due in up to 30 days amounting to R$ 1,466,037 (R$ 31,478 at 06/30/2015), Interbank deposits with maturity of 31 to 180 days (R$ 505,674 at 06/30/2015), with maturity of 181 to 365 days to (R$ 1,210,603 at 06/30/2015) and over 365 days amounting to R$ 64,081,769 (R$ 57,458,849 at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Note 7 – Securities and derivative financial instruments (assets and liabilities)

See below the composition by Securities and Derivatives type, maturity and portfolio already adjusted to their respective market values.

Summary per maturity

	06/30/2016																																06/30/2015
				Adjustment to market value reflected in:
	Cost			Results			Stockholders’ equity			Market value			%		0 - 30			31 - 90			91 - 180			181 - 365			366 - 720			Over 720 days			Market value
Government securities - domestic		108,266,250			366,774			173,117			108,806,141			30.4		636,200			9,239,375			2,252,565			6,102,974			11,399,846			79,175,181			125,014,636
Financial treasury bills		15,049,044			(2,060	)		(201	)		15,046,783			4.2		-			2,181,232			-			1,696,406			626,762			10,542,383			21,515,465
National treasury bills		19,948,939			39,854			-			19,988,793			5.6		626,073			-			1,397,073			160,481			9,299,485			8,505,681			33,092,853
National treasury notes		40,459,511			149,560			45,641			40,654,712			11.3		5,379			7,053,867			13,932			1,073,763			1,410,318			31,097,453			40,890,960
National treasury/securitization		228,453			(248	)		4,581			232,786			0.1		124			1,473			87			136			491			230,475			244,238
Brazilian external debt bonds		32,580,303			179,668			123,096			32,883,067			9.2		4,624			2,803			841,473			3,172,188			62,790			28,799,189			29,271,120
Government securities - abroad		15,984,845			36,719			(14,730	)		16,006,834			4.5		1,454,879			1,578,735			1,977,017			3,650,769			2,630,312			4,715,122			10,396,795
Argentina		649,216			20,531			-			669,747			0.2		202,178			162,875			179,324			107,875			5,783			11,712			848,465
Belgium		-			-			-			-			0.0		-			-			-			-			-			-			111,287
Chile		4,169,360			399			2,595			4,172,354			1.2		153,053			499,523			-			696,785			1,811,158			1,011,835			1,014,017
Colombia		3,948,869			15,584			39,050			4,003,503			1.1		53,504			3,217			439,799			469,317			-			3,037,666			67,684
Korea		1,672,171			-			-			1,672,171			0.5		-			-			390,655			1,281,516			-			-			1,624,664
Denmark		1,385,813			-			-			1,385,813			0.4		417,537			-			481,194			487,082			-			-			3,029,184
Spain		753,220			-			1			753,221			0.2		326,558			426,663			-			-			-			-			306,530
United States		1,647,720			81			8,130			1,655,931			0.5		216,272			241,692			177,069			80,759			432,041			508,098			1,209,419
France		-			-			-			-			0.0		-			-			-			-			-			-			192,867
Netherlands		100,000			-			90			100,090			0.0		-			-			-			100,090			-			-			170,000
Mexico		2,472			93			-			2,565			0.0		-			711			-			54			-			1,800			7,936
Paraguay		1,211,206			-			(61,519	)		1,149,687			0.3		85,688			244,054			223,559			268,597			327,789			-			1,443,575
Peru		-			-			-			-			0.0		-			-			-			-			-			-			815
Uruguay		435,759			(70	)		(2,045	)		433,644			0.1		84			-			85,417			151,790			53,541			142,812			362,842
Other		9,039			101			(1,032	)		8,108			0.0		5			-			-			6,904			-			1,199			7,510
Corporate securities		68,014,296			3,999			(1,335,334	)		66,682,961			18.6		7,248,714			2,136,336			5,266,138			6,562,039			7,780,214			37,689,520			72,210,808
Shares		1,822,995			(53,475	)		6,161			1,775,681			0.5		1,775,681			-			-			-			-			-			2,994,420
Rural product note		1,480,573			-			(114,233	)		1,366,340			0.4		301,104			186,841			86,594			226,461			10,955			554,385			1,315,682
Bank deposit certificates		1,199,283			199			1,172			1,200,654			0.3		444,265			100,523			117,540			234,986			102,686			200,654			1,588,361
Securitized real estate loans		17,506,772			-			(70,192	)		17,436,580			4.9		331,712			293,215			-			54,767			314,270			16,442,616			18,447,785
Fund quotas		1,448,655			5,773			(225	)		1,454,203			0.4		1,454,203			-			-			-			-			-			1,814,311
Credit rights		-			-			-			-			0.0		-			-			-			-			-			-			46,942
Fixed income		1,315,433			2,862			(25	)		1,318,270			0.4		1,318,270			-			-			-			-			-			1,565,044
Variable income		133,222			2,911			(200	)		135,933			0.0		135,933			-			-			-			-			-			202,325
Debentures		22,821,328			44,687			(1,084,473	)		21,781,542			6.1		143,328			199,968			678,728			1,221,401			2,571,505			16,966,612			22,179,432
Eurobonds and others		9,210,908			4,343			(21,108	)		9,194,143			2.5		323,712			431,318			750,513			1,915,743			2,718,689			3,054,168			9,355,598
Financial bills		10,663,423			-			(36,953	)		10,626,470			3.0		2,040,992			567,665			3,598,702			2,671,318			1,578,868			168,925			12,957,368
Promissory notes		1,086,669			-			(3,566	)		1,083,103			0.3		337,066			99,776			23,783			157,178			465,300			-			1,087,759
Other		773,690			2,472			(11,917	)		764,245			0.2		96,651			257,030			10,278			80,185			17,941			302,160			470,092
PGBL / VGBL fund quotas ⁽¹⁾		129,559,984			-			-			129,559,984			36.2		129,559,984			-			-			-			-			-			106,431,575
Subtotal - securities		321,825,375			407,492			(1,176,947	)		321,055,920			89.6		138,899,777			12,954,446			9,495,720			16,315,782			21,810,372			121,579,823			314,053,814
Trading securities		195,347,176			407,492			-			195,754,668			54.6		133,311,611			8,141,451			3,539,437			3,266,056			5,263,198			42,232,915			195,051,425
Available-for-sale securities		85,793,950			-			(1,176,947	)		84,617,003			23.6		5,106,861			4,262,750			5,824,152			11,698,528			8,340,132			49,384,580			79,924,505
Held-to-maturity securities ⁽²⁾		40,684,249			-			-			40,684,249			11.4		481,305			550,245			132,131			1,351,198			8,207,042			29,962,328			39,077,884
Derivative financial instruments		30,509,182			6,701,530			-			37,210,712			10.4		8,469,103			3,921,302			3,910,389			7,273,546			4,865,605			8,770,767			20,673,629
Total securities and derivative financial instruments (assets)		352,334,557			7,109,022			(1,176,947	)		358,266,632			100.0		147,368,880			16,875,748			13,406,109			23,589,328			26,675,977			130,350,590			334,727,443
																																		-
Derivative financial instruments (liabilities)		(31,292,709	)		(3,213,387	)		-			(34,506,096	)		100.0		(7,075,708	)		(2,522,423	)		(2,479,700	)		(6,108,401	)		(3,370,890	)		(12,948,974	)		(23,912,141	)

(1)

The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a counter-entry to long term liabilities in Pension Plan Technical Provisions account, as determined by SUSEP.

(2)

Unrecorded negative adjustment to market value in the amount of R$ 129,190 ( (R$ 160,504 at 06/30/2015), according to Note 7e.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Summary by portfolio

	06/30/2016
			Restricted to								Derivative		Assets guaranteeing
	Own portfolio		Repurchase agreements		Free portfolio		Pledged *guarantees ()**		Central Bank		financial instruments		technical provisions (Note 11b)		Total
Government securities - domestic		49,507,153		23,552,396		19,546,507		5,282,803		3,359,208		-		7,558,074		108,806,141
Financial treasury bills		3,592,119		5,610,048		-		4,849,705		-		-		994,911		15,046,783
National treasury bills		11,527,075		8,461,718		-		-		-		-		-		19,988,793
National treasury notes		21,012,774		9,480,630		-		238,937		3,359,208		-		6,563,163		40,654,712
National treasury / Securitization		232,786		-		-		-		-		-		-		232,786
Brazilian external debt bonds		13,142,399		-		19,546,507		194,161		-		-		-		32,883,067
Government securities - abroad		13,631,034		112,808		29,766		2,220,420		-		-		12,806		16,006,834
Argentina		605,994		38,641		-		25,112		-		-		-		669,747
Chile		4,097,233		22,794		-		39,521		-		-		12,806		4,172,354
Colombia		3,194,195		-		29,766		779,542		-		-		-		4,003,503
Korea		1,219,026		-		-		453,145		-		-		-		1,672,171
Denmark		708,020		-		-		677,793		-		-		-		1,385,813
Spain		753,221		-		-		-		-		-		-		753,221
United States		1,439,659		-		-		216,272		-		-		-		1,655,931
Netherlands		100,090		-		-		-		-		-		-		100,090
Mexico		2,565		-		-		-		-		-		-		2,565
Paraguay		1,092,463		51,373		-		5,851		-		-		-		1,149,687
Uruguay		417,364		-		-		16,280		-		-		-		433,644
Other		1,204		-		-		6,904		-		-		-		8,108
Corporate securities		57,841,507		1,625,790		152,371		3,667,439		-		-		3,395,854		66,682,961
Shares		1,772,430		-		-		3,251		-		-		-		1,775,681
Rural product note		1,366,340		-		-		-		-		-		-		1,366,340
Bank deposit certificates		1,191,178		1,139		-		8,337		-		-		-		1,200,654
Securitized real estate loans		17,436,580		-		-		-		-		-		-		17,436,580
Fund quotas		1,388,215		-		-		381		-		-		65,607		1,454,203
Fixed income		1,252,282		-		-		381		-		-		65,607		1,318,270
Variable income		135,933		-		-		-		-		-		-		135,933
Debentures		15,998,478		1,624,651		-		3,655,470		-		-		502,943		21,781,542
Eurobonds and other		9,041,772		-		152,371		-		-		-		-		9,194,143
Financial bills		7,799,166		-		-		-		-		-		2,827,304		10,626,470
Promissory notes		1,083,103		-		-		-		-		-		-		1,083,103
Other		764,245		-		-		-		-		-		-		764,245
PGBL / VGBL fund quotas		-		-		-		-		-		-		129,559,984		129,559,984
Subtotal - securities		120,979,694		25,290,994		19,728,644		11,170,662		3,359,208		-		140,526,718		321,055,920
Trading securities		30,434,689		21,302,029		3,943,623		4,830,039		1,344,620		-		133,899,668		195,754,668
Available-for-sale securities		65,079,595		3,988,965		4,040,075		6,340,619		2,014,588		-		3,153,161		84,617,003
Held-to-maturity securities		25,465,410		-		11,744,946		4		-		-		3,473,889		40,684,249
Derivative financial instruments		-		-		-		-		-		37,210,712		-		37,210,712
Total securities and derivative financial instruments (assets)		120,979,694		25,290,994		19,728,644		11,170,662		3,359,208		37,210,712		140,526,718		358,266,632
Total securities and derivative financial instruments (assets) – 06/30/2015		111,481,775		71,592,475		-		4,884,420		7,755,138		20,673,629		118,340,006		334,727,443

(*) Represent securities deposited with Contingent Liabilities (Note 12b), Stock Exchanges and the Clearing House for the Custody and Financial Settlement of Securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

106

Trading securities

See below the composition of the portfolio of trading securities by type, stated at cost and market value and by maturity term.

	06/30/2016																					06/30/2015
	Cost		Adjustment to market value (in results)			Market value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		Over 720 days		Market value
Government securities - domestic		55,833,947		366,774			56,200,721		29		636,175		7,513,525		2,252,485		2,578,774		3,012,073		40,207,689		76,958,552
Financial treasury bills		12,527,206		(2,060	)		12,525,146		6		-		717,720		-		1,164,780		303,966		10,338,680		19,158,262
National treasury bills		12,109,885		39,854			12,149,739		6		626,073		-		1,397,073		66,034		1,554,878		8,505,681		25,291,979
National treasury notes		25,983,765		149,560			26,133,325		13		5,354		6,791,529		13,852		863,336		1,089,948		17,369,306		27,930,953
National treasury / Securitization		3,037		(248	)		2,789		-		124		1,473		87		136		491		478		5,465
Brazilian external debt bonds		5,210,054		179,668			5,389,722		3		4,624		2,803		841,473		484,488		62,790		3,993,544		4,571,893
Government securities - abroad		2,037,361		36,719			2,074,080		1		253,577		180,772		502,641		130,833		108,854		897,403		1,297,062
Argentina		648,953		20,531			669,484		0		202,178		162,875		179,324		107,612		5,783		11,712		847,655
Belgium		-		-			-		-		-		-		-		-		-		-		111,287
Chile		99,023		399			99,422		0		-		15,019		-		5,500		25,918		52,985		1,103
Colombia		1,112,281		15,584			1,127,865		1		21		2,167		296,556		254		-		828,867		67,684
United States		77,072		81			77,153		-		-		-		-		-		77,153		-		68,263
Mexico		2,472		93			2,565		-		-		711		-		54		-		1,800		7,936
Paraguay		51,373		-			51,373		-		51,373		-		-		-		-		-		133,380
Peru		-		-			-		-		-		-		-		-		-		-		815
Uruguay		45,289		(70	)		45,219		-		-		-		26,761		17,413		-		1,045		58,929
Other		898		101			999		-		5		-		-		-		-		994		10
Corporate securities		7,915,884		3,999			7,919,883		4		2,861,875		447,154		784,311		556,449		2,142,271		1,127,823		10,364,236
Shares		1,673,514		(53,475	)		1,620,039		1		1,620,039		-		-		-		-		-		1,906,957
Bank deposit certificates		25,298		199			25,497		-		7,362		4,211		2,748		5,279		4,244		1,653		111,778
Fund quotas		762,568		5,773			768,341		-		768,341		-		-		-		-		-		479,753
Credit rights		-		-			-		-		-		-		-		-		-		-		37,600
Fixed income		629,929		2,862			632,791		-		632,791		-		-		-		-		-		295,768
Variable income		132,639		2,911			135,550		-		135,550		-		-		-		-		-		146,385
Debentures		1,173,517		44,687			1,218,204		1		17,864		5		-		10,425		417,211		772,699		1,499,921
Eurobonds and other		586,084		4,343			590,427		-		999		856		27,962		192,799		232,476		135,335		903,597
Financial bills		3,648,164		-			3,648,164		2		447,270		442,082		753,601		347,946		1,488,340		168,925		5,461,169
Others		46,739		2,472			49,211		-		-		-		-		-		-		49,211		1,061
PGBL / VGBL fund quotas		129,559,984		-			129,559,984		66		129,559,984		-		-		-		-		-		106,431,575
Total		195,347,176		407,492			195,754,668		100		133,311,611		8,141,451		3,539,437		3,266,056		5,263,198		42,232,915		195,051,425
% per maturity term											68.1		4.2		1.8		1.7		2.7		21.6
Total – 06/30/2015		195,177,591		(126,166	)		195,051,425		100		113,854,840		11,334,112		5,100,157		7,948,518		11,043,553		45,770,245
% per maturity term											58.3		5.8		2.6		4.1		5.7		23.5

At 06/30/2016, ITAÚ UNIBANCO HOLDING’s portfolio is composed of Fund quotas fixed income R$ 4,514 without maturity (4,064 of 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

107

Available-for-sale securities

See below the composition of the portfolio of available-for-sale securities by type, stated at cost and market value and by maturity term.

	06/30/2016																					06/30/2015
	Cost		Adjustments to market value (in stockholders' equity)			Market value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		Over 720 days		Market value
Government securities - domestic		28,019,498		173,117			28,192,615		33.4		25		1,725,850		80		2,587,604		517,516		23,361,540		25,097,313
Financial treasury bills		2,521,838		(201	)		2,521,637		3.0		-		1,463,512		-		531,626		322,796		203,703		2,357,223
National treasury bills		-		-			-		0.0		-		-		-		-		-		-		816,911
National treasury notes		9,910,427		45,641			9,956,068		11.8		25		262,338		80		210,427		194,720		9,288,478		8,877,705
National treasury / Securitization		225,416		4,581			229,997		0.3		-		-		-		-		-		229,997		238,773
Brazilian external debt bonds		15,361,817		123,096			15,484,913		18.3		-		-		-		1,845,551		-		13,639,362		12,806,701
Government securities - abroad		13,390,273		(14,730	)		13,375,543		15.8		1,148,364		1,397,963		1,342,245		3,160,101		2,521,458		3,805,412		9,087,904
Argentina		263		-			263		0.0		-		-		-		263		-		-		810
Chile		4,070,337		2,595			4,072,932		4.8		153,053		484,504		-		691,285		1,785,240		958,850		1,012,914
Colombia		2,291,684		39,050			2,330,734		2.8		545		1,050		11,112		109,228		-		2,208,799		-
Korea		1,672,171		-			1,672,171		2.0		-		-		390,655		1,281,516		-		-		1,624,664
Denmark		1,385,813		-			1,385,813		1.6		417,537		-		481,194		487,082		-		-		3,029,184
Spain		753,220		1			753,221		0.9		326,558		426,663		-		-		-		-		306,530
United States		1,570,648		8,130			1,578,778		1.9		216,272		241,692		177,069		80,759		354,888		508,098		1,141,156
Netherlands		100,000		90			100,090		0.1		-		-		-		100,090		-		-		170,000
Paraguay		1,159,833		(61,519	)		1,098,314		1.3		34,315		244,054		223,559		268,597		327,789		-		1,310,195
Uruguay		378,184		(2,045	)		376,139		0.4		84		-		58,656		134,377		53,541		129,481		292,100
Other		8,120		(1,032	)		7,088		0.0		-		-		-		6,904		-		184		7,484
Corporate securities		44,384,179		(1,335,334	)		43,048,845		50.8		3,958,472		1,138,937		4,481,827		5,950,823		5,301,158		22,217,628		45,739,288
Shares		149,481		6,161			155,642		0.2		155,642		-		-		-		-		-		1,087,463
Rural product note		1,480,573		(114,233	)		1,366,340		1.6		301,104		186,841		86,594		226,461		10,955		554,385		1,315,682
Bank deposit certificate		1,173,981		1,172			1,175,153		1.4		436,899		96,312		114,792		229,707		98,442		199,001		1,476,579
Securitized real estate loans		2,203,748		(70,192	)		2,133,556		2.5		-		-		-		-		-		2,133,556		2,353,319
Fund quotas		686,087		(225	)		685,862		0.8		685,862		-		-		-		-		-		1,334,558
Credit rights		-		-			-		0.0		-		-		-		-		-		-		9,342
Fixed income		685,504		(25	)		685,479		0.8		685,479		-		-		-		-		-		1,269,276
Variable income		583		(200	)		383		0.0		383		-		-		-		-		-		55,940
Debentures		21,631,312		(1,084,473	)		20,546,839		24.3		125,464		199,963		678,728		1,210,976		2,154,294		16,177,414		20,679,511
Eurobonds and other		8,583,799		(21,108	)		8,562,691		10.1		322,713		430,462		722,551		1,722,944		2,463,698		2,900,323		8,439,187
Financial bills		7,015,259		(36,953	)		6,978,306		8.2		1,593,722		125,583		2,845,101		2,323,372		90,528		-		7,496,199
Promissory notes		1,086,669		(3,566	)		1,083,103		1.3		337,066		99,776		23,783		157,178		465,300		-		1,087,759
Other		373,270		(11,917	)		361,353		0.4		-		-		10,278		80,185		17,941		252,949		469,031
Total		85,793,950		(1,176,947	)		84,617,003		100.0		5,106,861		4,262,750		5,824,152		11,698,528		8,340,132		49,384,580		79,924,505
% per maturity term											6.0		5.0		6.9		13.8		9.9		58.4
Total – 06/30/2015		80,396,552		(472,047	)		79,924,505		100.0		4,578,658		3,489,626		4,811,752		6,344,356		16,773,373		43,926,740
% per maturity term											5.7		4.4		6.0		7.9		21.0		55.0

At June 30, 2016, at ITAÚ UNIBANCO HOLDING the portfolio is composed of Eurobonds, in the amount of R$ 1,426 maturing 31 to 90 days.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

108

Held-to-maturity securities

See below the composition of the portfolio of held-to-maturity securities by type, stated at cost and by maturity term. Included in the carrying value at 06/30/2016, not considered in results, is an impairment loss of R$ 532,219 (R$ 674,771 at 06/30/2015).

	06/30/2016																		06/30/2015
	Carrying value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		Over 720 days		Market value		Carrying value		Market value
*Government securities - domestic ^()**		24,412,805		60.0		-		-		-		936,596		7,870,257		15,605,952		24,937,898		22,958,771		23,197,832.00
National treasury bills		7,839,054		19.3		-		-		-		94,447		7,744,607		-		7,778,039		6,983,943		6,830,912
National treasury notes		4,565,319		11.2		-		-		-		-		125,650		4,439,669		5,154,586		4,082,302		4,515,805
Brazilian external debt bonds		12,008,432		29.5		-		-		-		842,149		-		11,166,283		12,005,273		11,892,526		11,851,115
Government securities - abroad		557,211		1.4		52,938		-		132,131		359,835		-		12,307		557,261		11,829		17,487.00
Colombia		544,904		1.3		52,938		-		132,131		359,835		-		-		544,969		-		-
Uruguay		12,286		0.1		-		-		-		-		-		12,286		12,286		11,813		17,312
Other		21		-		-		-		-		-		-		21		6		16		175
Corporate securities		15,714,233		38.6		428,367		550,245		-		54,767		336,785		14,344,069		15,318,281		16,107,284		15,702,061
Bank deposit certificate		4		-		4		-		-		-		-		-		4		4		4
Securitized real estate loans		15,303,024		37.6		331,712		293,215		-		54,767		314,270		14,309,060		14,907,106		16,094,466		15,689,245
Debentures		16,499		0.0		-		-		-		-		-		16,499		16,499		-		-
Eurobonds and other		41,025		0.1		-		-		-		-		22,515		18,510		40,991		12,814		12,812
Other		353,681		0.9		96,651		257,030		-		-		-		-		353,681		-		-
Total		40,684,249		100.0		481,305		550,245		132,131		1,351,198		8,207,042		29,962,328		40,813,440		39,077,884		38,917,380
% per maturity term						1.2		1.4		0.3		3.3		20.2		73.6
Total – 06/30/2015		39,077,884		100.0		66,998		532,586		118,894		214,418		2,080,059		36,064,929
% per maturity term						0.2		1.4		0.3		0.5		5.3		92.3

(*)

Includes investments of Itaú Vida e Previdência S.A. in the amount of R$ 2,732,507 (R$ 2,435,424 at 06/30/2015).

Reclassification of securities

No reclassification was made in the period.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

109

Derivative financial instruments

The globalization of the markets in recent years has resulted in a high level of sophistication of financial products used. As a result of this process, there has been increasing demand for derivative financial instruments to manage market risks, mainly arising from fluctuations in interest and exchange rates, commodities and other asset prices. Accordingly, ITAÚ UNIBANCO HOLDING and its subsidiaries operate in the derivatives markets for meeting the growing needs of their clients, as well as enacting their risk management policy. This policy is based on the use of derivative instruments to minimize the risks resulting from commercial and financial operations.

The derivative financial instrument business with clients is carried out after the approval of credit limits. The process of limit approval takes into consideration potential stress scenarios.

Knowing the client, the sector in which it operates and its risk appetite profile, in addition to providing information on the risks involved in the transaction and the negotiated conditions, ensures transparency in the relationship between the parties and the supply of a product that better meets the needs of the client.

The derivative transactions carried out by ITAÚ UNIBANCO HOLDING and its subsidiaries with clients are neutralized in order to eliminate market risks.

The derivative contracts traded by the institution with clients in Brazil include swaps, forwards, options and futures contracts, which are registered at the BM&FBOVESPA or at the CETIP S.A. OTC Clearing House (CETIP). Overseas transactions are carried out with futures, forwards (onshore), options and swaps mostly listed on the Chicago, New York and London Exchanges. It should be emphasized that there are over-the-counter operations, but their risks are low compared to the institutions’ total. Noteworthy is also the fact that there are no structured operations based on subprime assets and all operations are based on risk factors traded on stock exchanges.

The main risk factors of the derivatives, assumed at 06/30/2016, were related to the foreign exchange rate, interest rate, commodities, US Dollar coupon, Reference Rate coupon, LIBOR and variable income. The management of these and other market risk factors is supported by sophisticated statistical and deterministic models. Based on this management model, the institution, through the use of transactions involving derivatives, has been able to optimize the risk-return ratios, even in highly volatile situations.

Most derivatives included in the institution’s portfolio are traded on stock exchanges. The prices disclosed by stock exchanges are used for these derivatives, except in cases in which the low representativeness of price due to the liquidity of a specific contract is identified. Derivatives typically valued in this way are futures contracts. Likewise, there are other instruments whose quotations (fair prices) are directly disclosed by independent institutions and which are valued based on this direct information. A substantial portion of the Brazilian government securities, highly-liquid international (public and private) securities and shares are in this situation.

For derivatives the prices of which are not directly disclosed by stock exchanges, fair prices are obtained based on pricing models which use market information, deducted based on the prices disclosed for higher liquidity assets. Interest and market volatility curves which provide input for the models are extracted from those prices. Over- the-counter derivatives, forward contracts and securities with limited liquidity are in this situation.

The total value of margins pledged in guarantee was R$ 6,969,638 (R$ 3,108,354 at 06/30/2015) and was basically composed of government securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

110

I - Derivatives by index

	Memorandum account / Notional amount				Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Market value
	06/30/2016		06/30/2015		06/30/2016			06/30/2016			06/30/2016			06/30/2015
Futures contracts		518,491,376		442,187,006		5,437			232,854			238,291			17,560
Purchase commitments		163,427,487		124,735,676		(302,993	)		258,525			(44,468	)		(39,583	)
Commodities		237,987		252,128		(705	)		-			(705	)		(2,403	)
Indexes		55,740,474		49,088,816		(286,951	)		(6,818	)		(293,769	)		(163,941	)
Interbank market		85,474,320		28,709,619		(2,789	)		169			(2,620	)		34,760
Foreign currency		11,763,994		43,733,127		(13,548	)		264,879			251,331			91,121
Fixed rates		320,980		-		-			295			295			-
Securities		9,803,500		2,951,986		352			-			352			880
Other		86,232		-		648			-			648			-
Commitments to sell		355,063,889		317,451,330		308,430			(25,671	)		282,759			57,143
Commodities		285,142		318,671		1,200			-			1,200			25
Indexes		67,226,646		69,453,145		244,879			6,546			251,425			181,064
Interbank market		200,073,545		137,279,023		3,493			(3,931	)		(438	)		(103,867	)
Foreign currency		76,285,487		106,807,872		59,790			(28,286	)		31,504			(19,990	)
Securities		11,182,670		3,589,424		(932	)		-			(932	)		(86	)
Other		10,399		3,195		-			-			-			(3	)
Swap contracts						(2,681,450	)		779,588			(1,901,862	)		(6,555,292	)
Asset position		429,731,049		265,447,700		8,759,727			3,241,298			12,001,025			5,397,737
Commodities		227,877		-		206			72			278			-
Indexes		171,803,121		114,851,425		1,151,287			434,041			1,585,328			716,710
Interbank market		58,411,499		54,390,319		3,296,940			98,253			3,395,193			751,816
Foreign currency		15,518,547		12,152,983		1,707,103			(75,509	)		1,631,594			2,036,802
Fixed rates		151,469,943		79,231,982		2,391,004			2,672,944			5,063,948			1,563,772
Floating rate		32,286,276		4,792,048		212,863			111,618			324,481			327,936
Securities		11,514		19,872		-			-			-			-
Other		2,272		9,071		324			(121	)		203			701
Liability position		432,412,499		272,468,522		(11,441,177	)		(2,461,710	)		(13,902,887	)		(11,953,029	)
Commodities		178,202		23,647		(159	)		46			(113	)		-
Indexes		139,329,738		76,920,098		(3,699,186	)		(1,116,858	)		(4,816,044	)		(2,969,075	)
Interbank market		39,463,888		35,854,568		(559,192	)		236,993			(322,199	)		(531,996	)
Foreign currency		27,124,677		26,452,439		(1,410,665	)		28,946			(1,381,719	)		(3,579,767	)
Fixed rates		192,908,429		124,466,793		(5,561,835	)		(605,470	)		(6,167,305	)		(4,532,761	)
Floating rate		33,365,325		8,513,237		(190,077	)		(1,008,362	)		(1,198,439	)		(298,754	)
Securities		33,184		96,990		(19,789	)		3,035			(16,754	)		(40,587	)
Other		9,056		140,750		(274	)		(40	)		(314	)		(89	)
Option contracts		396,537,799		494,985,545		(1,788,200	)		1,752,301			(35,899	)		965,981
Purchase commitments - long position		90,991,384		115,778,425		2,282,239			(1,186,789	)		1,095,450			2,400,636
Commodities		549,301		611,890		28,540			(3,170	)		25,370			21,930
Indexes		23,299,928		54,370,224		131,320			3,882			135,202			75,986
Interbank market		611,554		7,360,842		2,142			11,610			13,752			11,422
Foreign currency		60,794,165		48,542,840		1,957,904			(1,319,871	)		638,033			1,809,242
Fixed rates		5,970		3,413		-			5			5			22
Floating rate		-		9,618		-			-			-			-
Securities		5,661,414		4,800,690		156,530			110,610			267,140			472,122
Other		69,052		78,908		5,803			10,145			15,948			9,912
Commitments to sell - long position		108,353,551		140,370,240		1,940,060			3,380,179			5,320,239			2,660,054
Commodities		290,275		393,025		7,780			1,126			8,906			21,678
Indexes		64,770,544		67,191,451		118,499			(14,331	)		104,168			41,076
Interbank market		2,193,697		13,656,857		2,712			(2,236	)		476			291
Foreign currency		34,119,401		50,357,727		1,556,209			2,978,704			4,534,913			766,282
Fixed rates		142,547		139,306		6,359			(534	)		5,825			5,207
Securities		6,810,342		8,593,154		247,996			416,792			664,788			1,824,692
Other		26,745		38,720		505			658			1,163			828
Purchase commitments - short position		82,320,599		103,798,939		(3,482,700	)		1,947,153			(1,535,547	)		(2,464,754	)
Commodities		363,329		433,268		(7,241	)		(514	)		(7,755	)		(18,162	)
Indexes		23,351,185		53,308,117		(166,485	)		(47,737	)		(214,222	)		(164,735	)
Interbank market		281,452		4,651,144		(1,248	)		721			(527	)		(14,940	)
Foreign currency		53,591,361		41,320,573		(3,240,454	)		2,095,938			(1,144,516	)		(1,901,890	)
Fixed rates		92,153		89,076		-			(70	)		(70	)		(476	)
Securities		4,572,067		3,917,853		(61,469	)		(91,027	)		(152,496	)		(354,638	)
Other		69,052		78,908		(5,803	)		(10,158	)		(15,961	)		(9,913	)
Commitments to sell - short position		114,872,265		135,037,941		(2,527,799	)		(2,388,242	)		(4,916,041	)		(1,629,955	)
Commodities		394,555		409,092		(24,769	)		(2,765	)		(27,534	)		(39,132	)
Indexes		69,728,132		75,367,397		(330,376	)		26,604			(303,772	)		(225,359	)
Interbank market		1,086,433		7,013,469		(2,622	)		278			(2,344	)		(813	)
Foreign currency		37,480,304		45,942,566		(1,916,869	)		(2,005,901	)		(3,922,770	)		(716,893	)
Fixed rates		19,612		14,117		(720	)		(104	)		(824	)		(525	)
Securities		6,136,652		6,252,580		(251,978	)		(405,682	)		(657,660	)		(646,405	)
Other		26,577		38,720		(465	)		(672	)		(1,137	)		(828	)
Forward contracts		27,883,199		20,239,799		1,232,092			4,868			1,236,960			1,696,049
Purchases receivable		4,048,655		1,298,197		3,393,612			7,830			3,401,442			1,287,051
Interbank market		732,920		-		-			135			135			-
Fixed rates		2,116,199		65,602		2,178,968			6,327			2,185,295			65,546
Floating rate		1,186,516		1,232,595		1,187,785			1,436			1,189,221			1,221,471
Securities		13,020		-		26,859			(68	)		26,791			34
Purchases payable		4,908,415		-		(3,380,747	)		18			(3,380,729	)		(1,289,307	)
Interbank market		4,908,415		-		-			(1	)		(1	)		-
Fixed rates		-		-		(2,178,968	)		-			(2,178,968	)		(65,514	)
Floating rate		-		-		(1,187,785	)		-			(1,187,785	)		(1,223,759	)
Securities		-		-		(13,994	)		19			(13,975	)		(34	)
Sales receivable		3,123,230		2,997,248		3,098,949			1,288			3,100,237			2,677,774
Commodities		17		20		17			-			17			20
Indexes		182		421		178			-			178			413
Interbank market		258		287,009		257			-			257			1,470
Fixed rates		991,833		385,573		994,939			-			994,939			392,041
Floating rate		883,436		575,080		884,609			-			884,609			584,484
Securities		1,247,504		1,749,145		1,218,949			1,288			1,220,237			1,699,346
Sales deliverable		15,802,899		15,944,354		(1,879,722	)		(4,268	)		(1,883,990	)		(979,469	)
Interbank market		15,802,725		15,944,354		-			(2,851	)		(2,851	)		(2,606	)
Fixed rates		-		-		(994,939	)		(858	)		(995,797	)		(392,979	)
Floating rate		-		-		(884,609	)		(559	)		(885,168	)		(583,643	)
Securities		174		-		(174	)		-			(174	)		(241	)

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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	Memorandum account / Notional amount				Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Market value
	06/30/2016		06/30/2015		06/30/2016			06/30/2016			06/30/2016			06/30/2015
Credit derivatives		12,160,490		10,717,728		96,783			(84,812	)		11,971			(37,570	)
Asset position		4,972,867		3,945,233		248,262			(4,178	)		244,084			353,252
Foreign currency		3,965,708		2,472,243		247,460			(34,340	)		213,120			257,450
Fixed rate		32,098		440,569		-			802			802			54,273
Securities		791,980		854,625		595			24,648			25,243			34,391
Other		183,081		177,796		207			4,712			4,919			7,138
Liability position		7,187,623		6,772,495		(151,479	)		(80,634	)		(232,113	)		(390,822	)
Foreign currency		4,801,057		2,556,542		(148,482	)		8,458			(140,024	)		(245,190	)
Fixed rate		337,029		1,994,972		(3,559	)		290			(3,269	)		(53,754	)
Securities		1,675,447		2,095,561		483			(76,594	)		(76,111	)		(88,001	)
Other		374,090		125,420		79			(12,788	)		(12,709	)		(3,877	)
Forwards operations		227,421,067		124,808,551		2,276,573			203,159			2,479,732			698,583
Asset position		122,709,002		69,712,134		6,457,488			252,199			6,709,687			2,615,677
Commodities		259,565		183,445		36,624			(4,081	)		32,543			22,924
Indexes		331,463		108,412		38,252			-			38,252			494
Foreign currency		122,092,949		69,351,654		6,381,361			256,280			6,637,641			2,587,548
Securities		25,025		68,623		1,251			-			1,251			4,711
Liability position		104,712,065		55,096,417		(4,180,915	)		(49,040	)		(4,229,955	)		(1,917,094	)
Commodities		104,726		336,225		(5,274	)		(223	)		(5,497	)		(39,898	)
Indexes		198,974		6,989		(19,342	)		-			(19,342	)		(8	)
Foreign currency		104,408,365		54,748,777		(4,156,299	)		(48,817	)		(4,205,116	)		(1,877,138	)
Securities		-		4,426		-			-			-			(50	)
Target flow of swap		1,479,490		1,748,024		(314,383	)		92,993			(221,390	)		(209,621	)
Asset position - Foreign currency		909,490		1,060,027		14,895			107,015			121,910			183,074
Liability position - Interbank Market		570,000		687,997		(329,278	)		(14,022	)		(343,300	)		(392,695	)
Other derivative financial instruments		17,595,613		13,482,450		389,621			507,192			896,813			185,798
Asset position		13,078,471		12,093,558		4,308,513			669,834			4,978,347			3,080,814
Foreign currency		8,999,022		7,350,384		4,017,462			572,477			4,589,939			2,686,284
Fixed rate		1,306,618		776,705		55,916			8,665			64,581			38,487
Securities		2,415,432		3,817,646		235,185			76,307			311,492			352,739
Other		357,399		148,823		(50	)		12,385			12,335			3,304
Liability position		4,517,142		1,388,892		(3,918,892	)		(162,642	)		(4,081,534	)		(2,895,016	)
Indexes		11,220		-		(470	)		-			(470	)		-
Foreign currency		3,444,698		252,618		(3,894,515	)		(142,886	)		(4,037,401	)		(2,815,230	)
Securities		866,909		984,984		(23,751	)		(15,771	)		(39,522	)		(74,984	)
Other		194,315		151,290		(156	)		(3,985	)		(4,141	)		(4,802	)
				Asset		30,509,182			6,701,530			37,210,712			20,673,629
				Liability		(31,292,709	)		(3,213,387	)		(34,506,096	)		(23,912,141	)
				Total		(783,527	)		3,488,143			2,704,616			(3,238,512	)

Derivative contracts mature as follows (in days):

Memorandum account / notional amount	0 - 30		31 - 180		181 - 365		Over 365		06/30/2016		06/30/2015
Futures		84,371,279		191,452,964		77,104,039		165,563,094		518,491,376		442,187,006
Swaps		8,668,716		54,499,975		59,014,638		298,787,993		420,971,322		261,339,533
Options		98,977,106		164,495,016		92,213,175		40,852,502		396,537,799		494,985,545
Forwards (onshore)		10,437,809		11,548,922		5,896,413		55		27,883,199		20,239,799
Credit derivatives		-		536,375		1,284,716		10,339,399		12,160,490		10,717,728
Forwards (offshore)		74,340,644		98,452,151		41,758,399		12,869,873		227,421,067		124,808,551
Target flow of swap		-		-		177,355		1,302,135		1,479,490		1,748,024
Other derivative financial instruments		31,359		597,151		3,807,605		13,159,498		17,595,613		13,482,450

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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II - Derivatives by counterparty

See below the composition of the Derivative Financial Instruments portfolio (assets and liabilities) by type of instrument, stated at cost, market value, and maturity term.

	06/30/2016																								06/30/2015
	Cost		Adjustments to market value (in results / stockholders' equity)			Market value		%		0 - 30		31 - 90		91 - 180			181 - 365		366 - 720			Over 720 days			Market value
Asset
Futures - BM&FBOVESPA		5,437		232,854			238,291		0.6		231,818		62,319		(11,770	)		21,959		(25,300	)		(40,735	)		17,560
Swaps - adjustment receivable		8,759,727		3,241,298			12,001,025		32.2		285,555		583,863		1,070,599			1,944,885		1,852,089			6,264,034			5,397,737
BM&FBOVESPA		2,161,015		(173,358	)		1,987,657		5.3		106,937		122,218		42,835			487,858		649,257			578,552			401,027
Companies		4,201,075		2,166,180			6,367,255		17.1		140,235		392,543		948,279			683,120		717,220			3,485,858			3,526,593
Financial institutions		1,977,210		1,387,265			3,364,475		9.0		29,542		26,275		52,198			726,322		467,488			2,062,650			1,278,943
Individuals		420,427		(138,789	)		281,638		0.8		8,841		42,827		27,287			47,585		18,124			136,974			191,174
Option premiums		4,222,299		2,193,390			6,415,689		17.2		513,312		1,245,138		878,359			1,189,089		2,363,318			226,473			5,060,690
BM&FBOVESPA		2,495,993		2,310			2,498,303		6.7		181,111		627,678		379,498			336,786		960,308			12,922			2,459,981
Companies		414,798		283,146			697,944		1.9		24,863		39,450		55,382			150,638		325,387			102,224			862,073
Financial institutions		1,304,824		1,910,152			3,214,976		8.6		307,338		578,010		442,669			698,066		1,077,566			111,327			1,738,140
Individuals		6,684		(2,218	)		4,466		0.0		-		-		810			3,599		57			-			496
Forwards (onshore)		6,492,561		9,118			6,501,679		17.5		5,616,705		720,990		139,406			24,531		47			-			3,964,825
BM&FBOVESPA		1,245,303		1,354			1,246,657		3.4		361,683		720,990		139,406			24,531		47			-			1,701,003
Companies		2,933,921		2,223			2,936,144		7.9		2,936,144		-		-			-		-			-			1,486,197
Financial institutions		2,313,337		5,541			2,318,878		6.2		2,318,878		-		-			-		-			-			777,625
Credit derivatives - Financial institutions		248,262		(4,178	)		244,084		0.8		-		237		1,979			1,754		7,178			232,936			353,252
Forwards (offshore)		6,457,488		252,199			6,709,687		18.0		1,818,751		1,172,144		1,804,103			1,164,068		399,696			350,925			2,615,677
BM&FBOVESPA		267,520		-			267,520		0.7		107,037		53,331		67,093			39,975		84			-			-
Companies		2,970,857		129,060			3,099,917		8.3		753,785		693,185		973,915			314,778		231,354			132,900			1,189,900
Financial institutions		3,204,522		123,376			3,327,898		8.9		956,252		420,202		758,317			806,844		168,258			218,025			1,423,805
Individuals		14,589		(237	)		14,352		0.1		1,677		5,426		4,778			2,471		-			-			1,972
Target flow of swap - Companies		14,895		107,015			121,910		0.3		-		-		-			48,289		73,621			-			183,074
Other derivative financial instruments		4,308,513		669,834			4,978,347		13.4		2,962		136,611		27,713			2,878,971		194,956			1,737,134			3,080,814
Companies		1,046,995		205,851			1,252,846		3.4		2,962		42,666		26,960			248,588		188,939			742,731			452,486
Financial institutions		3,258,928		462,422			3,721,350		10.0		-		93,945		753			2,630,383		3,799			992,470			2,628,328
Individuals		2,590		1,561			4,151		0.0		-		-		-			-		2,218			1,933			-
Total		30,509,182		6,701,530			37,210,712		100.0		8,469,103		3,921,302		3,910,389			7,273,546		4,865,605			8,770,767			20,673,629
% per maturity term											22.8		10.5		10.5			19.5		13.1			23.6
Total - 06/30/2015		17,835,804		2,837,825			20,673,629		100.0		5,788,007		2,163,118		2,956,039			2,142,716		2,345,640			5,278,109
% per maturity term											28.0		10.5		14.3			10.4		11.3			25.5

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

113

	06/30/2016																													06/30/2015
	Cost			Adjustments to market value (in results / stockholders' equity)			Market value			%		0 - 30			31 - 90			91 - 180			181 - 365			366 - 720			Over 720 days			Market value
Liabilities
Swaps - difference payable		(11,441,177	)		(2,461,710	)		(13,902,887	)		40.4		(162,525	)		(594,614	)		(317,855	)		(1,226,543	)		(1,536,065	)		(10,065,285	)		(11,953,029	)
BM&FBOVESPA		(1,405,615	)		(269,222	)		(1,674,837	)		4.9		(3,370	)		(256,516	)		(49,957	)		(377,662	)		(112,364	)		(874,968	)		(1,088,535	)
Companies		(2,190,905	)		(518,710	)		(2,709,615	)		7.9		(120,913	)		(111,272	)		(135,861	)		(197,368	)		(506,084	)		(1,638,117	)		(3,896,186	)
Financial institutions		(2,140,617	)		(2,164,848	)		(4,305,465	)		12.5		(31,542	)		(138,389	)		(99,743	)		(203,175	)		(846,913	)		(2,985,703	)		(1,923,459	)
Individuals		(5,704,040	)		491,070			(5,212,970	)		15.1		(6,700	)		(88,437	)		(32,294	)		(448,338	)		(70,704	)		(4,566,497	)		(5,044,849	)
Option premiums		(6,010,499	)		(441,089	)		(6,451,588	)		18.7		(569,303	)		(956,726	)		(1,298,956	)		(1,280,742	)		(1,268,204	)		(1,077,657	)		(4,094,709	)
BM&FBOVESPA		(2,301,339	)		(153,338	)		(2,454,677	)		7.1		(267,546	)		(321,293	)		(715,142	)		(721,111	)		(421,384	)		(8,201	)		(1,299,567	)
Companies		(411,112	)		(356,011	)		(767,123	)		2.2		(65,259	)		(82,978	)		(153,502	)		(150,757	)		(230,131	)		(84,496	)		(530,290	)
Financial institutions		(3,285,054	)		82,013			(3,203,041	)		9.3		(236,031	)		(549,086	)		(421,993	)		(404,064	)		(613,674	)		(978,193	)		(2,262,041	)
Individuals		(12,994	)		(13,753	)		(26,747	)		0.1		(467	)		(3,369	)		(8,319	)		(4,810	)		(3,015	)		(6,767	)		(2,811	)
Forwards (onshore)		(5,260,469	)		(4,250	)		(5,264,719	)		15.2		(5,261,868	)		(479	)		(1,310	)		(1,062	)		-			-			(2,268,776	)
BM&FBOVESPA		(13,212	)		(2,849	)		(16,061	)		-		(13,210	)		(479	)		(1,310	)		(1,062	)		-			-			(2,605	)
Companies		(2,933,921	)		(881	)		(2,934,802	)		8.5		(2,934,802	)		-			-			-			-			-			(1,487,077	)
Financial institutions		(2,313,336	)		(520	)		(2,313,856	)		6.7		(2,313,856	)		-			-			-			-			-			(779,094	)
Credit derivatives		(151,479	)		(80,634	)		(232,113	)		0.7		-			(1,096	)		(737	)		(4,378	)		(22,086	)		(203,816	)		(390,822	)
Companies		-			-			-			-		-			-			-			-			-			-			(14,981	)
Financial institutions		(151,479	)		(80,634	)		(232,113	)		0.7		-			(1,096	)		(737	)		(4,378	)		(22,086	)		(203,816	)		(375,841	)
Forwards (offshore)		(4,180,915	)		(49,040	)		(4,229,955	)		12.2		(1,080,698	)		(847,371	)		(850,480	)		(806,893	)		(140,199	)		(504,314	)		(1,917,094	)
BM&FBOVESPA		(319,548	)		(1	)		(319,549	)		0.9		(132,142	)		(69,553	)		(79,989	)		(37,713	)		(152	)		-			-
Companies		(1,262,760	)		8,707			(1,254,053	)		3.6		(268,287	)		(384,009	)		(239,305	)		(205,076	)		(99,498	)		(57,878	)		(1,194,584	)
Financial institutions		(2,596,600	)		(56,224	)		(2,652,824	)		7.7		(680,171	)		(392,581	)		(530,706	)		(562,398	)		(40,532	)		(446,436	)		(718,452	)
Individuals		(2,007	)		(1,522	)		(3,529	)		-		(98	)		(1,228	)		(480	)		(1,706	)		(17	)		-			(4,058	)
Target flow of swap - Companies		(329,278	)		(14,022	)		(343,300	)		1.0		-			-			-			-			(343,300	)		-			(392,695	)
Other derivative financial instruments		(3,918,892	)		(162,642	)		(4,081,534	)		11.8		(1,314	)		(122,137	)		(10,362	)		(2,788,783	)		(61,036	)		(1,097,902	)		(2,895,016	)
Companies		(532,314	)		(154,438	)		(686,752	)		2.0		(1,314	)		(33,143	)		(10,362	)		(43,421	)		(15,442	)		(583,070	)		(643,316	)
Financial institutions		(3,386,537	)		(6,742	)		(3,393,279	)		9.8		-			(88,994	)		-			(2,745,362	)		(45,555	)		(513,368	)		(2,251,700	)
Individuals		(41	)		(1,462	)		(1,503	)		-		-			-			-			-			(39	)		(1,464	)		-
Total		(31,292,709	)		(3,213,387	)		(34,506,096	)		100.0		(7,075,708	)		(2,522,423	)		(2,479,700	)		(6,108,401	)		(3,370,890	)		(12,948,974	)		(23,912,141	)
% per maturity term													20.5			7.3			7.2			17.7			9.8			37.5
Total - 06/30/2015		(21,504,956	)		(2,407,185	)		(23,912,141	)		100.0		(4,084,268	)		(1,823,661	)		(3,159,321	)		(1,948,659	)		(2,287,422	)		(10,608,810	)
% per maturity term													17.1			7.6			13.2			8.1			9.6			44.4

At ITAÚ UNIBANCO HOLDING, the market values related to swap contract positions involving the interbank market totaled (R$ 3,167,741), at liabilities position, and were distributed between 31 to 180 days (R$ 18,849) and over 365 days (R$ 3,148,892) .

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III - Derivatives by notional amount

See below the composition of the Derivative Financial Instruments portfolio by type of instrument, stated at their notional amounts, per trading location (organized or over-the-counter market) and counterparties.

	06/30/2016
	Futures		Swaps		Options		Forwards (onshore)		Credit derivatives		Forwards (offshore)		Target flow of swap		Other derivative financial instruments
BM&FBOVESPA		422,538,601		48,236,127		283,889,542		22,704,894		-		78,489,180		-		-
Over-the-counter market		95,952,775		372,735,195		112,648,257		5,178,305		12,160,490		148,931,887		1,479,490		17,595,613
Financial institutions		95,874,257		237,011,989		87,486,941		2,258,849		12,160,490		93,996,394		-		7,926,891
Companies		78,518		52,612,150		24,573,257		2,919,456		-		54,766,787		1,479,490		9,660,898
Individuals		-		83,111,056		588,059		-		-		168,706		-		7,824
Total		518,491,376		420,971,322		396,537,799		27,883,199		12,160,490		227,421,067		1,479,490		17,595,613
Total – 06/30/2015		442,187,006		261,339,533		494,985,545		20,239,799		10,717,728		124,808,551		1,748,024		13,482,450

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IV - Credit derivatives

See below the composition of the Credit Derivatives (assets and liabilities) portfolio stated at their notional amounts, and their effect on the calculation of Required Reference Equity.

	06/30/2016								06/30/2015
	Notional amount			Notional amount of credit					Notional amount of			Notional amount of credit
	of credit			protection purchased with					credit protection			protection purchased with
	protection sold			identical underlying amount		Net position			sold			identical underlying amount		Net position
Credit swaps		(8,055,377	)		4,105,113		(3,950,264	)		(7,587,222	)		3,115,518		(4,471,704	)
Total return rate swaps		-			-		-			(14,988	)		-		(14,988	)
Total		(8,055,377	)		4,105,113		(3,950,264	)		(7,602,210	)		3,115,518		(4,486,692	)

The effect on the reference equity (Note 3) was R$ 336,215 (R$ 406,171 at 06/30/2015).

During the period, there was no occurrence of a credit event as defined in the agreements.

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V - Accounting hedge

The effectiveness computed for the hedge portfolio was in conformity with the provisions of BACEN Circular No. 3,082 of January 30, 2002, and the following accounting hedge structures are established:

Cash flow - the purpose of this hedge of ITAÚ UNIBANCO HOLDING CONSOLIDATED is to hedge cash flows of interest receipt and payment (CDB / Redeemable Preferred Shares / Syndicated Loans / Assets Transactions and Funding) and exposures to future exchange rate (anticipated transactions and unrecognized firm commitments) related to its variable interest rate risk (CDI / LIBOR/UF*/TPM*), and foreign exchange rate risk, making the cash flow constant (fixed rate) and regardless of the variations of DI CETIP Over and LIBOR/ UF*/ TPM* and foreign exchange rate.

*UF (Chilean Unit of Account) / *TPM (Monetary Policy Rate).

	06/30/2016							06/30/2015
	Hedge Instrument					Hedge assets		Hedge Instruments					Hedge assets
Strategies	Nominal value		Adjustment to market value ^(*)			Book value		Nominal value		Adjustment to *market value ^()**			Book value
Hedge of deposits and securities purchased under agreements to resell		86,503,505		(1,286,957	)		87,581,336		56,996,512		1,357,305			59,085,997
Hedge of syndicated loan		6,740,580		(95,196	)		6,740,580		6,515,460		(72,949	)		6,515,460
Hedge of assets transactions		11,199,531		20,844			12,223,651		-		-			-
Hedge of UF - denominated assets		8,162,552		5,615			8,162,552		-		-			-
Hedge of funding		2,984,360		(24,750	)		2,984,360		-		-			-
Hedge of loan operations		738,950		8,602			738,950		-		-			-
Total		116,329,478		(1,371,842	)		118,431,429		63,511,972		1,284,356			65,601,457

(*) Recorded in Stockholders’ Equity under heading Asset Valuation Adjustments.

The gains or losses related to the accounting hedge of cash flows that we expect to recognize in Results in the following 12 months amount to R$ 380,205 (R$ 510,805 at 06/30/2015).

To hedge future cash flows of highly probable forecast transactions, arising from futures contracts in foreign currency, against the exposure to future interest rate, ITAÚ UNIBANCO HOLDING CONSOLIDATED negotiated DDI Futures contracts on BM&FBOVESPA and NDF (Non Deliverable Forward) contracts traded in the over-the-counter market. During the second half of 2016, part of the flow of these agreements was realized, and, accordingly, Asset Valuation Adjustment was reclassified and included in the deemed cost of assets related to Hedge of Highly Probable Forecast Transaction.

To hedge future cash flows of futures receipts and payments against exposure to variable interest rate (CDI / LIBOR / TPM / UF), ITAÚ UNIBANCO HOLDING CONSOLIDATED negotiated DI futures contracts on BM&FBOVESPA, interest rate swap and Euro-Dollar Futures on Chicago Stock Exchange.

II)

Market risk – The hedging strategies against market risk of ITAÚ UNIBANCO HOLDING CONSOLIDATED consist of hedge of exposure to variation in market risk, in interest receipts, which are attributable to changes in interest rates related to recognized assets and liabilities.

	06/30/2016
	Hedge instrument					Hedge assets
Strategies	Nominal value		*Adjustment to market value ^()**			Nominal value		*Adjustment to market value ^()**
Hedge of loan operations		3,159,409		(89,437	)		3,159,409		84,387
Hedge of available-for-sale securities		10,980		46			10,980		(201	)
Hedge of funding		6,403,644		12,347			6,403,644		(12,851	)
Total		9,574,033		(77,044	)		9,574,033		71,335

	06/30/2015
	Hedge instrument					Hedge assets
Strategies	Nominal value		*Adjustment to market value ^()**			Nominal value		*Adjustment to market value ^()**
Hedge of loan operations		3,467,913		(66,209	)		3,467,913		65,953
Hedge of funding		620,520		390			620,520		(462	)
Total		4,088,433		(65,819	)		4,088,433		65,491

(*) Recorded under heading Results from Securities and Derivative Financial Instruments.

To protect against market risk variation upon receipt and payment of interest, ITAÚ UNIBANCO HOLDING CONSOLIDATED uses interest rate swap contracts. Hedge items refer to prefixed assets and liabilities denominated in Chilean Unit of Account – CLF, and denominated in Euros and dollars, issued by subsidiaries in Chile and London, respectively, maturing between 2016 and 2030.

Receipts (payments) of interest flows are expected to occur and will affect the statement of income in monthly periods.

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III)

Hedge of net investment in foreign operations – ITAÚ UNIBANCO HOLDING CONSOLIDATED's strategy of net investments in foreign operations consist of a hedge of the exposure in foreign currency arising from the functional currency of foreign operations, compared to the functional currency of the head office.

	06/30/2016							06/30/2015
	Hedge instrument					Hedge assets		Hedge instrument					Hedge assets
Strategies	Nominal value		Adjustment to market value ^(*)			Nominal value		Nominal value		Adjustment to market value (*)			Nominal value
Hedge of net investment in foreign operations ^(*)		20,353,244		(2,123,956	)		11,703,615		18,404,571		(2,551,585	)		10,529,255
Total		20,353,244		(2,123,956	)		11,703,615		18,404,571		(2,551,585	)		10,529,255

(*) Recorded in Stockholders’ Equity under heading Asset Valuation Adjustments.

To hedge the changes of future cash flows of exchange variation of net investments in foreign operations, ITAÚ UNIBANCO HOLDING CONSOLIDATED uses DDI Futures contracts traded on BM&FBOVESPA, Financial Assets and Forward contracts or NDF contracts entered into by our subsidiaries abroad.

Receipts (payments) of interest flows are expected to occur and will affect the statement of income upon the total or partial disposal of investments.

IV) We present below the maturity terms of cash flow hedge and market risk hedge strategies:

	06/30/2016
Strategies	0-1 year		1-2 years		2-3 years		3-4 years		4-5 years		5-10 years		Over 10 years		Total
Hedge of deposits and securities purchased under agreements to resell		31,189,985		29,163,887		12,480,638		6,233,224		7,316,765		119,006		-		86,503,505
Hedge of syndicated loan		6,740,580		-		-		-		-		-		-		6,740,580
Hedge of loans		4,627,346		5,308,970		728,884		-		534,331		-		-		11,199,531
Hedge of assets denominated in UF		6,595,556		-		-		1,566,996		-		-		-		8,162,552
Hedge of funding (Cash flow)		-		1,389,254		-		-		354,143		1,240,963		-		2,984,360
Hedge of loan operations (Cash flow)		123,560		-		-		24,390		19,512		571,488		-		738,950
Hedge of loan operations (Market risk)		188,861		726,749		159,869		78,972		32,432		360,302		1,612,224		3,159,409
Hedge of funding (Market risk)		483,817		2,930,138		97,603		2,563,048		329,038		-		-		6,403,644
Hedge of available-for-sale securities		10,980		-		-		-		-		-		-		10,980
Hedge of net investment in foreign operations ^(*)		20,353,244		-		-		-		-		-		-		20,353,244
Total		70,313,929		39,518,998		13,466,994		10,466,630		8,586,221		2,291,759		1,612,224		146,256,755

(*) Classified as current, since instruments are frequently renewed.

	06/30/2015
Strategies	0-1 year		1-2 years		2-3 years		3-4 years		4-5 years		5-10 years		Over 10 years		Total
Hedge of deposits and securities purchased under agreements to resell		11,474,234		18,301,467		21,352,049		5,380,321		173,975		314,466		-		56,996,512
Hedge of highly probable anticipated transactions		-		1,241,040		5,274,420		-		-		-		-		6,515,460
Hedge of loan operations (Market risk)		103,735		172,893		652,479		449,877		302,129		417,587		1,369,213		3,467,913
Hedge of funding (Market risk)		620,520		-		-		-		-		-		-		620,520
Hedge of net investment in foreign operations ^(*)		18,404,571		-		-		-		-		-		-		18,404,571
Total		30,603,060		19,715,400		27,278,948		5,830,198		476,104		732,053		1,369,213		86,004,976

(*) Classified as current, since instruments are frequently renewed.

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h) Changes in adjustments to unrealized ^(*) market value for the period

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Opening balance		(5,901,210	)		489,912
Adjustments with impact on:
Results		2,841,611			241,076
Trading securities		1,517,030			177,859
Derivative financial instruments		1,324,581			63,217
Stockholders’ equity		2,292,744			(2,165,790	)
Available-for-sale		3,096,043			56,440
Accounting hedge – derivative financial instruments		(803,299	)		(2,222,230	)
Futures		(803,299	)		(2,156,356	)
Swaps		-			(65,874	)

Closing balance		(777,110	)		(1,434,802	)
Adjustment to market value		(777,110	)		(1,434,802	)
Trading securities		407,492			(126,166	)
Available-for-sale securities		(1,176,947	)		(472,047	)
Derivative financial instruments		(7,655	)		(836,589	)
Trading securities		3,488,143			430,640
Accounting hedge - Futures		(3,495,798	)		(1,267,229	)
Futures		(3,495,798	)		(1,267,229	)

(*) The term unrealized in the context of Circular nº. 3,068 of 11/08/2001, of the Central Bank means not converted into cash.

Realized gain of securities portfolio and derivatives financial instruments and foreign exchange variation on investments abroad

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Gain (loss) – trading securities		965,486			(444,964	)
Gain (loss) – available-for-sale securities		(403,850	)		(675,728	)
Gain (loss) – derivatives		4,012,576			1,910,209
Gain (loss) – foreign exchange variations on investments abroad		(10,566,141	)		6,780,719
Total		(5,991,929	)		7,570,236

During the periods ended 06/30/2016 and 06/30/2015, ITAÚ UNIBANCO HOLDING did not recognize impairment losses for Held-to-Maturity Financial Assets.

During the period ended 06/30/2016, ITAÚ UNIBANCO HOLDING recognized R$ 223,914 as impairment losses for Available-for-Sale Financial Assets, recorded in the statement of income in the line "Net gain (loss) on investment securities and derivatives".

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Sensitivity analysis (trading and banking portfolios)

In compliance with CVM Instruction No. 475, ITAÚ UNIBANCO HOLDING CONSOLIDATED carried out a sensitivity analysis by market risk factors considered relevant. The biggest losses arising, by risk factor, in each scenario, were stated together with their impact on the results, net of tax effects, by providing an overview of ITAÚ UNIBANCO HOLDING CONSOLIDATED’s exposure under exceptional scenarios.

The sensitivity analyses of the banking and the trading portfolio shown in this report are an evaluation of a static position of the portfolio exposure and, therefore, do not consider management’s quick response capacity (treasury and control areas), which triggers risk mitigating measures, whenever a situation of high loss or risk is identified by minimizing the sensitivity to significant losses. In addition, the study's sole purpose is to disclose the exposure to risk and the respective protective actions, taking into account the fair value of financial instruments, irrespective of the accounting practices adopted by ITAÚ UNIBANCO HOLDING CONSOLIDATED.

Trading portfolio	Exposures	06/30/2016 (*)
		Scenarios
Risk factors	Risk of variations in:	I			II			III
Interest Rate	Fixed Income Interest Rates in Reais		(643	)		(205,037	)		(393,282	)
Foreign Exchange Linked	Foreign Exchange Linked Interest		158			(23,824	)		(51,346	)
Foreign Exchange Rates	Prices of Foreign Currencies		(2,682	)		215,138			493,926
Price Index Linked	Interest of Inflation coupon		(378	)		(22,840	)		(42,084	)
TR	TR Linked Interest Rates		-			(7	)		(13	)
Equities	Prices of Equities		(339	)		14,175			49,570
Total			(3,884	)		(22,395	)		56,771

(*) Amounts net of tax effects.

Trading and Banking portfolios	Exposures	06/30/2016 (*)
		Scenarios
Risk factors	Risk of variations in:	I			II			III
Interest Rate	Fixed Income Interest Rates in Reais		(4,810	)		(1,552,887	)		(3,009,727	)
Foreign Exchange Linked	Foreign Exchange Linked Interest		(3,192	)		(453,577	)		(856,136	)
Foreign Exchange Rates	Prices of Foreign Currencies		(3,180	)		212,518			498,028
Price Index Linked	Interest of Inflation coupon		(249	)		(121,119	)		(352,680	)
TR	TR Linked Interest Rates		755			(195,542	)		(453,822	)
Equities	Prices of Equities		3,845			(90,060	)		(158,851	)
Total			(6,831	)		(2,200,667	)		(4,333,188	)

(*) Amounts net of tax effects.

The following scenarios are used to measure the sensitivity:

Scenario I: Addition of 1 base point in interest fixed rates, currency coupon, inflation , and interest rate index, and 1 percentage point in currency and share prices;

Scenario II: Shocks of 25 percent in interest fixed rates, currency coupon, inflation, interest rate indexes and currency and share prices, for both growth and decline, considering the highest possible resulting losses per risk factor;

Scenario III: Shocks of 50 percent in interest fixed rates, currency coupon, inflation, interest rate indexes and currency and share prices, for both growth and decline, considering the highest possible resulting losses per risk factor.

Derivative financial instruments engaged by ITAÚ UNIBANCO HOLDING CONSOLIDATED are shown in the item Derivative financial instruments in this note.

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Note 8 - Loan, lease and other credit operations

a) Composition of the portfolio with credit granting characteristics

I – By type of operations and risk level

	06/30/2016																				06/30/2015
Risk levels	AA		A		B		C		D		E		F		G		H		Total		Total
Loan operations		220,011,798		98,397,743		43,417,788		19,677,250		9,394,800		7,998,356		5,145,472		3,896,732		11,289,478		419,229,417		382,692,806
Loans and discounted trade receivables		86,909,851		81,497,566		35,926,907		14,575,332		6,591,386		4,098,141		4,450,354		3,558,075		9,813,279		247,420,891		214,107,516
Financing		66,102,791		10,012,175		5,848,721		3,823,169		2,387,313		3,353,391		423,981		262,023		1,188,158		93,401,722		108,634,276
Farming and agribusiness financing		7,301,293		907,122		552,488		229,139		92,028		76,986		17,457		12,322		24,978		9,213,813		7,751,407
Real estate financing		59,697,863		5,980,880		1,089,672		1,049,610		324,073		469,838		253,680		64,312		263,063		69,192,991		52,199,607

Lease operations		3,290,015		3,693,021		1,328,689		434,537		186,786		58,254		167,137		52,724		156,911		9,368,074		5,409,622

Credit card operations		-		50,098,293		2,263,898		1,544,390		860,239		589,741		612,594		528,238		3,250,189		59,747,582		60,404,577

Advance on exchange contracts ⁽¹⁾		3,529,017		549,322		251,161		508,930		118,810		62,236		6,960		296		5,110		5,031,842		3,435,161

Other sundry receivables ⁽²⁾		742,001		1,957,839		3,613		6,562		877		38		12,365		3,610		1,854,775		4,581,680		5,521,074

Total operations with credit granting characteristics		227,572,831		154,696,218		47,265,149		22,171,669		10,561,512		8,708,625		5,944,528		4,481,600		16,556,463		497,958,595		457,463,240
Endorsements and sureties ⁽³⁾																				75,044,243		74,242,979
Total with endorsements and sureties		227,572,831		154,696,218		47,265,149		22,171,669		10,561,512		8,708,625		5,944,528		4,481,600		16,556,463		573,002,838		531,706,219
Total – 06/30/2015		233,066,372		133,821,248		37,645,387		15,920,418		12,350,933		3,974,987		3,264,466		4,004,184		13,415,245		457,463,240

(1)

Includes Advances on exchange contracts and Income receivable from advances granted, reclassified from Liabilities – Foreign exchange portfolio / Other receivables (Note 2a);

(2)

Includes Securities and credits receivable, Debtors for purchase of assets and Endorsements and sureties paid;

(3)

Recorded in Memorandum Accounts.

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II – By maturity and risk level

	06/30/2016																													06/30/2015
	AA		A			B			C			D			E			F			G			H			Total			Total
	Overdue Operations ^{(1) (2)}
Falling due installments		-		-			2,255,095			2,191,180			1,822,846			1,700,642			1,450,958			1,393,267			4,398,335			15,212,323			13,550,748
01 to 30		-		-			105,111			113,368			82,381			65,883			57,180			61,218			261,313			746,454			779,869
31 to 60		-		-			106,806			84,021			68,777			50,749			48,396			47,734			175,665			582,148			527,173
61 to 90		-		-			70,937			78,136			66,281			45,305			44,913			47,419			172,871			525,862			535,165
91 to 180		-		-			191,246			224,839			191,441			182,685			132,800			137,499			492,046			1,552,556			1,505,914
181 to 365		-		-			314,576			398,486			339,524			252,394			243,264			265,392			851,671			2,665,307			2,550,537
Over 365		-		-			1,466,419			1,292,330			1,074,442			1,103,626			924,405			834,005			2,444,769			9,139,996			7,652,090
Overdue installments		-		-			979,049			1,115,798			1,262,596			1,060,236			1,488,610			1,411,065			9,256,917			16,574,271			13,797,482
01 to 14		-		-			7,677			46,710			33,600			23,194			23,014			27,222			86,800			248,217			237,042
15 to 30		-		-			922,335			209,518			142,489			103,514			95,393			71,289			203,690			1,748,228			1,860,402
31 to 60		-		-			49,037			792,654			232,464			130,478			154,181			142,824			1,884,599			3,386,237			1,717,754
61 to 90		-		-			-			32,882			791,470			141,535			162,835			200,179			348,180			1,677,081			1,647,296
91 to 180		-		-			-			34,034			62,573			625,768			1,008,930			914,944			1,523,661			4,169,910			4,225,491
181 to 365		-		-			-			-			-			35,747			44,257			54,607			4,969,769			5,104,380			4,032,226
Over 365		-		-			-			-			-			-			-			-			240,218			240,218			77,271
Subtotal		-		-			3,234,144			3,306,978			3,085,442			2,760,878			2,939,568			2,804,332			13,655,252			31,786,594			27,348,230
Specific allowance		-		-			(32,341	)		(99,210	)		(308,545	)		(828,263	)		(1,469,784	)		(1,963,032	)		(13,655,252	)		(18,356,427	)		(14,470,674	)
Subtotal - 06/30/2015		-		-			3,214,767			3,181,966			3,448,844			2,335,728			2,272,354			2,444,279			10,450,292			27,348,230

		Non-Overdue Operations
Falling due installments		227,189,682		153,278,068			43,564,788			18,574,083			7,345,339			5,908,065			2,913,156			1,646,217			2,802,522			463,221,920			425,740,491
01 to 30		26,130,480		33,481,447			7,236,074			2,991,409			1,107,451			1,022,199			357,582			90,183			428,314			72,845,139			58,993,918
31 to 60		9,766,028		14,580,910			3,611,753			1,521,126			489,255			314,619			248,910			77,745			239,094			30,849,440			36,232,786
61 to 90		10,850,756		9,468,258			2,860,278			932,186			256,443			186,710			297,577			61,645			123,828			25,037,681			24,159,519
91 to 180		22,897,301		17,795,268			6,211,732			1,988,917			637,326			414,352			186,851			85,939			227,004			50,444,690			45,698,722
181 to 365		28,349,692		18,638,881			6,218,718			2,637,275			945,137			519,875			343,704			608,000			291,886			58,553,168			57,782,293
Over 365		129,195,425		59,313,304			17,426,233			8,503,170			3,909,727			3,450,310			1,478,532			722,705			1,492,396			225,491,802			202,873,253
Overdue up to 14 days		383,149		1,418,150			466,217			290,608			130,731			39,682			91,804			31,051			98,689			2,950,081			4,374,519
Subtotal		227,572,831		154,696,218			44,031,005			18,864,691			7,476,070			5,947,747			3,004,960			1,677,268			2,901,211			466,172,001			430,115,010
Generic allowance		-		(773,481	)		(440,310	)		(565,941	)		(747,607	)		(1,784,324	)		(1,502,480	)		(1,174,088	)		(2,901,211	)		(9,889,442	)		(7,330,496	)
Subtotal - 06/30/2015		233,066,372		133,821,248			34,430,620			12,738,452			8,902,089			1,639,259			992,112			1,559,905			2,964,953			430,115,010
Grand total		227,572,831		154,696,218			47,265,149			22,171,669			10,561,512			8,708,625			5,944,528			4,481,600			16,556,463			497,958,595			457,463,240
Existing allowance		-		(773,481	)		(472,651	)		(665,151	)		(1,056,152	)		(8,520,534	)		(5,943,934	)		(4,481,152	)		(16,556,463	)		(38,469,518	)		(28,131,431	)
Minimum allowance required		-		(773,481	)		(472,651	)		(665,151	)		(1,056,152	)		(2,612,587	)		(2,972,264	)		(3,137,120	)		(16,556,463	)		(28,245,869	)		(21,801,170	)
Additional allowance ⁽³⁾		-		-			-			-			-			(5,907,947	)		(2,971,670	)		(1,344,032	)		-			(10,223,649	)		(6,330,261	)
Existing allowance		-		(773,481	)		(472,651	)		(665,151	)		(1,056,152	)		(8,520,534	)		(5,943,934	)		(4,481,152	)		(16,556,463	)		(38,469,518	)		-
Provision - delay⁽⁴⁾		-		-			(32,341	)		(85,595	)		(218,308	)		(480,443	)		(876,905	)		(1,224,970	)		(9,608,354	)		(12,526,916	)		-
Provision - aggravated⁽⁵⁾		-		(20,208	)		(12,414	)		(76,536	)		(239,797	)		(718,211	)		(1,408,493	)		(1,378,666	)		(5,735,379	)		(9,589,704	)		-
Provision - potencial⁽⁶⁾		-		(753,273	)		(427,896	)		(503,020	)		(598,047	)		(7,321,880	)		(3,658,536	)		(1,877,516	)		(1,212,730	)		(16,352,898	)		-
Grand total - 06/30/2015		233,066,372		133,821,248			37,645,387			15,920,418			12,350,933			3,974,987			3,264,466			4,004,184			13,415,245			457,463,240			-
Existing allowance		-		(669,106	)		(476,905	)		(1,590,451	)		(3,704,044	)		(1,987,096	)		(2,284,800	)		(4,003,784	)		(13,415,245	)		(28,131,431	)		-
Minimum allowance required		-		(669,106	)		(376,454	)		(477,614	)		(1,235,093	)		(1,192,496	)		(1,632,233	)		(2,802,929	)		(13,415,245	)		(21,801,170	)		-
Additional allowance ⁽³⁾		-		-			(100,451	)		(1,112,837	)		(2,468,951	)		(794,600	)		(652,567	)		(1,200,855	)		-			(6,330,261	)		-
Existing allowance		-		(669,106	)		(476,905	)		(1,590,451	)		(3,704,044	)		(1,987,096	)		(2,284,800	)		(4,003,784	)		(13,415,245	)		(28,131,431	)		-
Provision - delay⁽⁴⁾		-		-			(32,144	)		(85,975	)		(208,766	)		(417,818	)		(745,926	)		(1,126,805	)		(8,072,420	)		(10,689,854	)		-
Provision - aggravated⁽⁵⁾		-		(21,673	)		(10,001	)		(44,848	)		(512,308	)		(520,458	)		(725,139	)		(980,045	)		(3,989,997	)		(6,804,469	)		-
Provision - potencial⁽⁶⁾		-		(647,433	)		(434,760	)		(1,459,628	)		(2,982,970	)		(1,048,820	)		(813,735	)		(1,896,934	)		(1,352,828	)		(10,637,108	)		-

(1)

Operations with overdue installments for more than 14 days or under control of administrators or in companies in the process of declaring bankruptcy.

(2)

The balance of non-accrual operations amounts to R$ 21,617,610 (R$ 18,358,822 at 06/30/2015).

(3)

Allocated to each level of risk in order to explain the additional volume.

(4)

Provisions for delay, as required by BACEN, related to the minimum provision required for overdue operations, in accordance with CMN Resolution No. 2.682/1999;

(5)

Provisions for credits with aggravation of risk above the minimum required by BACEN for overdue operations and also provisions for credits that were renegotiated;

(6)

Related to expected and potential loss.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

122

III – By business sector

	06/30/2016		%			06/30/2015		%
Public Sector		3,046,356		0.6	%		5,212,629		1.1	%
Energy		198,887		0.0	%		105,449		0.0	%
Petrochemical and chemical		2,655,106		0.5	%		4,820,879		1.1	%
Sundry		192,363		0.0	%		286,301		0.1	%
Private sector		494,912,239		99.4	%		452,250,611		98.9	%
Companies		265,057,388		53.2	%		242,860,241		53.1	%
Sugar and alcohol		8,748,778		1.8	%		10,116,148		2.2	%
Agribusiness and fertilizers		14,275,644		2.9	%		13,521,099		3.0	%
Food and beverage		11,594,726		2.3	%		11,426,809		2.5	%
Banks and other financial institutions		10,832,685		2.2	%		5,766,877		1.3	%
Capital assets		5,559,901		1.1	%		7,460,689		1.6	%
Pulp and paper		2,784,542		0.6	%		2,804,363		0.6	%
Publishing and printing		946,748		0.2	%		1,000,061		0.2	%
Electronic and IT		3,542,681		0.7	%		4,051,533		0.9	%
Packaging		2,497,307		0.5	%		2,476,395		0.5	%
Energy and sewage		8,007,705		1.6	%		7,267,715		1.6	%
Education		1,818,957		0.4	%		1,562,582		0.3	%
Pharmaceuticals and cosmetics		4,200,306		0.8	%		4,313,974		0.9	%
Real estate agents		22,917,423		4.6	%		18,502,103		4.0	%
Entertainment and tourism		4,683,609		0.9	%		3,836,448		0.8	%
Wood and furniture		2,794,949		0.6	%		2,877,432		0.6	%
Construction materials		5,323,886		1.1	%		5,638,044		1.2	%
Steel and metallurgy		8,928,816		1.8	%		10,862,558		2.4	%
Media		687,732		0.1	%		1,154,457		0.3	%
Mining		5,165,307		1.0	%		4,673,249		1.0	%
Infrastructure work		7,813,773		1.6	%		4,499,206		1.0	%
Oil and gas ^(*)		5,473,149		1.1	%		4,698,874		1.0	%
Petrochemical and chemical		8,819,942		1.8	%		6,557,377		1.4	%
Health care		2,555,110		0.5	%		2,072,674		0.5	%
Insurance, reinsurance and pension plans		52,612		0.0	%		1,340		0.0	%
Telecommucations		1,293,960		0.3	%		1,199,307		0.3	%
Third sector		3,532,179		0.7	%		3,678,721		0.8	%
Trading		1,621,379		0.3	%		1,839,596		0.4	%
Transportation		13,547,454		2.7	%		15,483,731		3.4	%
Domestic appliances		1,847,048		0.4	%		2,195,342		0.5	%
Vehicles and autoparts		14,143,427		2.8	%		16,115,417		3.5	%
Clothing and shoes		4,456,614		0.9	%		4,923,168		1.1	%
Commerce - sundry		15,762,854		3.2	%		14,020,509		3.1	%
Industry - sundry		6,962,625		1.4	%		7,824,525		1.7	%
Sundry services		36,208,143		7.3	%		25,043,431		5.5	%
Sundry		15,655,417		3.1	%		13,394,487		2.9	%
Individuals		229,854,851		46.2	%		209,390,370		45.8	%
Credit cards		58,834,120		11.8	%		59,547,173		13.0	%
Real estate financing		56,163,672		11.3	%		40,612,076		8.9	%
Consumer loans / overdraft		95,834,167		19.2	%		82,340,888		18.0	%
Vehicles		19,022,892		3.8	%		26,890,233		5.9	%
Grand total		497,958,595		100.0	%		457,463,240		100.0	%

(*) Comprises trade of fuel.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

123

Credit concentration

	06/30/2016				06/30/2015
			% of				% of
Loan, lease and other credit operations *^()**	Risk		total		Risk		total
Largest debtor		4,090,276		0.7		6,232,939		1.2
10 largest debtors		31,780,724		5.5		34,124,895		6.4
20 largest debtors		48,773,149		8.5		52,899,973		9.9
50 largest debtors		82,219,900		14.3		87,142,445		16.4
100 largest debtors		110,162,906		19.2		117,620,786		22.1

(*)

The amounts include endorsements and sureties.

	06/30/2016				06/30/2015
Loan, lease and other credit operations and securities of companies and financial institutions *^()**	Risk		% of total		Risk		% of total
Largest debtor		7,708,999		1.1		6,393,218		1.0
10 largest debtors		46,124,087		6.8		45,654,616		7.3
20 largest debtors		75,579,690		11.2		73,863,960		11.9
50 largest debtors		122,706,046		18.2		122,579,417		19.7
100 largest debtors		162,898,234		24.1		163,372,291		26.2

(*)

The amounts include endorsements and sureties.

Changes in allowance for loan losses

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Opening balance		(34,078,208	)		(26,947,986	)
Balance arising from the merger with Corpbanca (Note 2c)		(2,282,754	)		-
Net increase for the period		(13,316,456	)		(10,973,975	)
Required by Resolution No. 2,682/99		(14,077,991	)		(10,973,975	)
Additional allowance ⁽⁴⁾		761,535			-
Transfer of financial assets		-			1,027,897
Write-Off		10,752,623			9,059,052
Exchange variation		455,277			(296,419	)
Closing balance ⁽¹⁾		(38,469,518	)		(28,131,431	)
Required by Resolution No. 2,682/99		(28,245,869	)		(21,801,170	)
Specific allowance ⁽²⁾		(18,356,427	)		(14,470,674	)
Generic allowance ⁽³⁾		(9,889,442	)		(7,330,496	)
Additional allowance ⁽⁴⁾		(10,223,649	)		(6,330,261	)
Existing allowance		(38,469,518	)		(28,131,431	)
Provision delay		(12,526,916	)		(10,689,854	)
Provision aggravated		(9,589,704	)		(6,804,469	)
Provision potential		(16,352,898	)		(10,637,108	)


(1)	The allowance for loan losses related to the lease portfolio amounts to: R$ (358,198) (R$ (211,900) at June 30, 2015).
(2)	Operations with overdue installments for more than 14 days or under responsibility of administrators or companies in the process of declaring bankruptcy.
(3)	For operations not covered in the previous item due to the classification of the client or operation.
(4)	Refers to the provision in excess of the minimum required percentage by CMN Resolution No. 2,682 of December 21, 1999.

At 06/30/2016, the balance of the allowance in relation to the loan portfolio is equivalent to 7.7% (6.1% at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

124

Recovery and renegotiation of credits

I -

Composition of the result of allowance for loan losses

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Expenses for allowance for loan losses		(13,316,456	)		(10,973,975	)
Income related to recovery of credits written off as loss		1,801,140			2,193,339
*Result of allowance for loan losses ^()**		(11,515,316	)		(8,780,636	)

(*) The amounts related to the lease portfolio from 01/01 to 06/30/2016 are: Expenses related to the allowance for loan losses R$ 34,713 (R$ (72,214) from 01/01 to 06/30/2015) and Income related to recovery of credits written off as losses amounting to R$ 44,699 (R$ 73,283 from 01/01 to 06/30/2015).

II-

Renegotiated loan operations

	06/30/2016									06/30/2015
				Allowance for									Allowance for
	Portfolio ⁽¹⁾			Loan Losses			%			Portfolio ⁽¹⁾			Loan Losses			%
Total renegotiated loans		24,092,630			(10,436,166	)		43.3	%		20,011,472			(6,824,577	)		34.1	%
(-) Renegotiated loans overdue up to 30 days⁽²⁾		(7,811,328	)		2,181,373			27.9	%		(7,465,874	)		1,101,946			14.8	%
Renegotiated loans overdue over 30 days⁽²⁾		16,281,302			(8,254,793	)		50.7	%		12,545,598			(5,722,631	)		45.6	%

(1)

The amounts related to renegotiated loans up to 30 days of the Lease Portfolio are: R$ 206,391 (R$ 156,324 at June 30, 2015).

(2)

Delays determined upon renegotiation.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

125

Restricted operations on assets

See below the information related to the restricted operations involving assets, in accordance with CMN Resolution No. 2,921, of January 17, 2002.

	06/30/2016										01/01 to 06/30/2016			06/30/2015		01/01 to 06/30/2015
							Over 365				Income					Income
	0 - 30		31 - 180		181 - 365		days		Total		(expenses)			Total		(expenses)
Restricted operations on assets
Loan operations		-		2,207		225,537		192,202		419,946		(15,285	)		228,337		36,947
Liabilities - restricted operations on assets
Foreign borrowing through securities		-		2,207		227,959		192,069		422,235		19,057			227,962		(34,017	)
Net revenue from restricted operations												3,772					2,930

At 06/30/2016 and 06/30/2015 there were no balances in default.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

126

Operations of sale or transfers and acquisition of financial assets

I -

Credit assignments (transfers of receivables) carried out through December 2011 were recorded in accordance with the current regulations, together with income recognition at the time of the assignment, regardless of the risks and benefits being retained or not.

In compliance with CMN Resolution No. 3,809, of October 28, 2009, the amount of whereby the bank assumes joint obligations, at 06/30/2016 where the entity substantially retained the related risks and benefits, is R$ 152,215 (R$ 195,196 at 06/30/2015), composed of real estate financing of R$ 140,663 (R$ 181,772 at 06/30/2015) and farming financing of R$ 11,552 (R$ 13,424 at 06/30/2015).

II-

Beginning in January 2012, as provided for by CMN Resolution No. 3,533/08, of January 31, 2008 and supplementary regulation, accounting records take into consideration the retention or non-retention of risks and benefits on sales or transfers of financial assets.

ITAÚ UNIBANCO HOLDING CONSOLIDATED carried out sales operations or transfer of financial assets in which there was retention of credit risks of the financial assets then transferred. Accordingly, such credits continued being recognized, totaling R$ 5,563,320 at June 30, 2016. The operations are composed of: Mortgage Loans transactions with the amount recorded in assets of R$ 2,738,947, with fair value of R$ 2,678,466, and the amount recorded in liabilities under Other Liabilities – Sundry of R$ 2,737,712 with fair value of R$ 2,677,231; Working capital operations with the amount recorded in assets of R$ 2,824,373 with fair value of R$ 2,824,373 and the amount recorded in liabilities under Other Liabilities – Sundry of R$ 2,824,322 with fair value of R$ 2,824,322; Vehicle operations with the amount recorded in liabilities under Other Liabilities – Sundry of R$ 5,281 with fair value of R$ 5,281 and Loans to Individuals operations with the amount recorded in Other Liabilities – Sundry of R$ 9,809 with fair value of R$ 9,809.

Sales or transfers of financial assets without any risk and benefit retention totaling R$ 192,938 with an effect on results of R$ 52,837, net of the allowance for loan losses.

Acquisitions of loan portfolios with the retention of assignor’s risks the amount is R$ 207,037 during the first half of 2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

127

Note 9 - Foreign exchange portfolio

	06/30/2016			06/30/2015
Assets - other receivables		56,526,933			65,874,535
Exchange purchase pending settlement – foreign currency		31,984,183			36,287,611
Bills of exchange and term documents – foreign currency		2,075			-
Exchange sale rights – local currency		25,342,931			30,073,504
(Advances received) – local currency		(802,256	)		(486,580	)
Liabilities – other liabilities (Note 2a)		58,145,464			66,428,747
Exchange sales pending settlement – foreign currency		25,211,450			30,229,630
Liabilities from purchase of foreign currency – local currency		32,769,912			36,017,377
Other		164,102			181,740
Memorandum accounts		1,658,172			1,105,063
Outstanding import credits – foreign currency		903,131			1,038,652
Confirmed export credits – foreign currency		755,041			66,411

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Note 10 – Funding, borrowing and onlending

Summary

	06/30/2016												06/30/2015
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Deposits		196,849,172		33,596,849		17,594,145		60,992,145		309,032,311		34.6		280,443,322		35.5
Deposits received under securities repurchase agreements		159,810,925		16,650,250		22,258,345		154,942,662		353,662,182		39.6		305,300,168		38.7
Funds from acceptance and issuance of securities		3,957,679		11,777,678		9,033,919		59,460,372		84,229,648		9.4		52,174,537		6.6
Borrowing and onlending		5,656,149		23,084,469		23,918,078		32,602,408		85,261,104		9.6		92,138,071		11.7
Subordinated debt		96,497		9,426,863		1,199,845		49,558,877		60,282,082		6.8		59,228,350		7.5
Total		366,370,422		94,536,109		74,004,332		357,556,464		892,467,327				789,284,448
% per maturity term		41.3		9.9		8.8		40.0
Total – 06/30/2015		329,316,375		82,899,352		65,765,388		311,303,333		789,284,448
% per maturity term		41.7		10.5		8.3		39.5

Deposits

	06/30/2016												06/30/2015
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Demand deposits		58,763,238		-		-		-		58,763,238		19.0		50,540,410		18.0
Savings accounts		104,479,486		-		-		-		104,479,486		33.8		113,974,326		40.7
Interbank		3,429,753		1,727,724		981,299		228,369		6,367,145		2.1		27,014,165		9.6
Time deposits		30,176,695		31,869,125		16,612,846		60,763,776		139,422,442		45.1		88,914,421		31.7
Total		196,849,172		33,596,849		17,594,145		60,992,145		309,032,311				280,443,322
% per maturity term		63.7		10.9		5.7		19.7
Total – 06/30/2015		176,686,683		34,683,407		11,523,307		57,549,925		280,443,322
% per maturity term		63.0		12.4		4.1		20.5

In ITAÚ UNIBANCO HOLDING, the portfolio is composed of Interbank Deposits with maturity within 31 to 180 days amouting to R$ 1,629,085, 181 to 365 days amouting to R$ 4,903,120 and over 365 days amounting to R$ 6,238,092, totaling R$ 12,770,297.

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Deposits received under securities repurchase agreements

	06/30/2016												06/30/2015
							Over 365
	0 - 30		31 - 180		181 - 365		days		Total		%		Total		%
Own portfolio		26,459,341		13,452,910		16,998,193		111,565,587		168,476,031		47.7		203,810,039		66.8
Government securities		22,058,887		188,223		-		3,808		22,250,918		6.3		52,831,247		17.3
Corporate Securities		1,420,402		199,371		5,012		-		1,624,785		0.5		-		0.0
Own issue		2,773,039		13,063,654		16,985,829		111,561,779		144,384,301		40.8		134,932,225		44.2
Foreign		207,013		1,662		7,352		-		216,027		0.1		16,046,567		5.3
Third-party portfolio		125,981,308		-		-		-		125,981,308		35.6		71,371,208		23.3
Free portfolio		7,370,276		3,197,340		5,260,152		43,377,075		59,204,843		16.7		30,118,921		9.9
Total		159,810,925		16,650,250		22,258,345		154,942,662		353,662,182				305,300,168
% per maturity term		45.2		4.7		6.3		43.8
Total – 06/30/2015		144,090,685		12,075,847		16,881,795		132,251,841		305,300,168
% per maturity term		47.2		4.0		5.5		43.3

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Funds from acceptance and issuance of securities

	06/30/2016												06/30/2015
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Funds from bills:		2,422,192		10,399,863		5,650,771		28,929,838		47,402,664		56.3		27,610,616		53.0
Financial		36,095		828,462		935,465		16,902,772		18,702,794		22.2		7,383,339		14.2
Real estate		1,331,518		6,554,755		2,628,397		5,816,804		16,331,474		19.4		12,475,163		23.9
Bills of credit related to agribusiness		1,054,579		3,016,646		2,086,909		6,210,262		12,368,396		14.7		7,611,606		14.6
Mortgage notes		-		-		-		-		-		-		140,508		0.3
Foreign securities		1,443,852		926,669		1,925,287		28,007,803		32,303,611		38.3		21,156,278		40.5
Non-trade related – issued abroad		1,443,852		926,669		1,925,287		28,007,803		32,303,611		38.3		21,156,278		40.5
Brazil risk note programme		75,062		98,449		331,313		4,560,284		5,065,108		6.0		6,224,229		11.9
Structure note issued		33,731		513,140		1,191,997		4,944,108		6,682,976		7.9		6,948,897		13.3
Bonds		1,333,680		236,799		323,633		16,711,796		18,605,908		22.1		5,904,172		11.3
Fixed rate notes		-		-		-		786,443		786,443		0.9		1,656,888		3.2
Eurobonds		-		77,565		5,773		751,888		835,226		1.0		119,850		0.2
Other		1,379		716		72,571		253,284		327,950		0.4		302,242		0.6
*Structured Operations Certificates ^()**		91,635		451,146		1,457,861		2,522,731		4,523,373		5.4		3,407,643		6.5
Total		3,957,679		11,777,678		9,033,919		59,460,372		84,229,648				52,174,537
% per maturity term		4.7		14.0		10.7		70.6
Total – 06/30/2015		3,482,226		14,946,656		8,932,715		24,812,940		52,174,537
% per maturity term		6.7		28.6		17.1		47.6

(*) As of 06/30/2016, the market value of the funding from Structured Operations Certificates issued is R$ 5.111.190 (R$ 3,773,609 of 06/30/2015) according to BACEN Circular Letter No. 3,623.

ITAÚ UNIBANCO HOLDING’s portfolio is composed of Brazil Risk Note Programme with maturities over 365 days in the amount of R$ 3,379,009 (R$ 3,771,384 at 06/30/2015). Due to the exchange variation from the period from January 1 to June 30, 2016, the expense on financial operations is presented with credit nature.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Borrowing and onlending

	06/30/2016												06/30/2015
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Borrowing		3,778,511		18,537,797		19,295,523		10,700,078		52,311,909		61.4		49,517,201		53.7
Domestic		951,902		64,779		26,183		51,253		1,094,117		1.3		1,231,071		1.3
Foreign ^(*)		2,826,609		18,473,018		19,269,340		10,648,825		51,217,792		60.1		48,286,130		52.4
Onlending		1,877,638		4,546,672		4,622,555		21,902,330		32,949,195		38.6		42,620,870		46.3
Domestic – official institutions		1,877,638		4,546,027		4,622,555		21,902,330		32,948,550		38.6		42,619,002		46.3
BNDES		1,243,773		1,510,861		1,529,104		8,820,484		13,104,222		15.3		16,410,345		17.8
FINAME		616,612		2,845,975		3,056,701		12,668,907		19,188,195		22.5		25,607,363		27.8
Other		17,253		189,191		36,750		412,939		656,133		0.8		601,294		0.7
Foreign		-		645		-		-		645		0.0		1,868		0.0
Total		5,656,149		23,084,469		23,918,078		32,602,408		85,261,104				92,138,071
% per maturity term		6.6		27.1		28.1		38.2
Total – 06/30/2015		4,881,065		19,457,982		23,273,978		44,525,046		92,138,071
% per maturity term		5.3		21.1		25.3		48.3

(*) Foreign borrowing are basically represented by foreign exchange transactions related to export pre-financing and import financing.

Due to the exchange variation from the period from January 1 to June 30, 2016, the expense on financial operations – Borrowings and Onlending is presented with credit nature.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Subordinated debt

	06/30/2016															06/30/2015
	0-30		31-180		181-365		Over 365 days			Total			%			Total			%
CDB		-		1,322,965		878,755		-			2,201,720			3.7			7,987,268			13.5
Financial treasury bills		68,209		7,716,386		255,284		19,433,330			27,473,209			45.5			26,334,005			44.4
Euronotes		-		349,545		-		25,019,173			25,368,718			42.1			24,519,858			41.4
Bonds		28,288		37,967		65,806		5,168,400			5,300,461			8.8			460,541			0.8
(-) Transaction costs incurred (Note 4b)		-		-		-		(62,026	)		(62,026	)		(0.1	)		(73,322	)		(0.1	)
*Grand total ^()**		96,497		9,426,863		1,199,845		49,558,877			60,282,082						59,228,350
% per maturity term		0.2		15.6		2.0		82.2
Total – 06/30/2015		175,716		1,735,460		5,153,593		52,163,581			59,228,350
% per maturity term		0.3		2.9		8.7		88.1

(*) According to current legislation, the accounting balance of subordinated debt as of June 2016 was used for the calculation of reference equity as of December, 2012, totaling R$ 54.741.035.

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Description

Name of security / currency	Principal amount (original currency)		Issue		Maturity		Return p.a.	Account balance
Subordinated CDB - BRL
		465,835		2006		2016	100% do CDI + 0,7% (*)		1,322,965
		366,830		2010		2017	IPCA + 7,21% a 7,33%		878,755
							Total		2,201,720

Subordinated financial bills - BRL
		365,000		2010		2016	100% do CDI + 1,35% a 1,36%		384,673
		1,874,000					112% a 112,5% do CDI		1,972,552
		30,000					IPCA + 7%		64,324
		206,000		2010		2017	IPCA + 6,95% a 7,2%		338,939
		3,223,500		2011		2017	108% a 112% do CDI		3,530,354
		3,650,000					100% do CDI + 1,29% a 1,52%		3,797,266
		352,400					IPCA + 6,15% a 7,8%		613,116
		138,000					IGPM + 6,55% a 7,6%		261,758
		500,000		2012		2017	100% do CDI + 1,12%		506,549
		42,000		2011		2018	IGPM + 7%		61,377
		30,000					IPCA + 7,53% a 7,7%		45,689
		6,373,127		2012		2018	108% a 113% do CDI		7,133,602
		460,645					IPCA + 4,4% a 6,58%		723,104
		3,782,100					100% do CDI + 1,01% a 1,32%		3,903,252
		112,000					9,95% a 11,95%		165,900
		2,000		2011		2019	109% a 109,7% do CDI		3,339
		1,000		2012		2019	110% do CDI		1,639
		12,000					11.96%		19,684
		100,500					IPCA + 4,7% a 6,3%		156,002
		1,000		2012		2020	111% do CDI		1,647
		20,000					IPCA + 6% a 6,17%		35,227
		6,000		2011		2021	109,25% a 110,5% do CDI		10,284
		2,306,500		2012		2022	IPCA + 5,15% a 5,83%		3,716,281
		20,000					IGPM + 4,63%		26,651
							Total		27,473,209

Subordinated euronotes - USD
		1,000,000		2010		2020	6.2%		3,246,363
		1,000,000		2010		2021	5.75%		3,300,373
		750,000		2011		2021	5,75% a 6,2%		2,425,523
		550,000		2012		2021	6.2%		1,765,390
		2,625,000		2012		2022	5,5% a 5,65%		8,525,701
		1,870,000		2012		2023	5.13%		6,043,342
							Total		25,306,692

Subordinated bonds - CLP		13,739,331		2008		2022	7,4% a 7,99%		134,729
		41,528,200		2008		2033	3,5% a 4,5%		211,735
		110,390,929		2008		2033	4.8%		759,430
		98,151,772		2009		2035	4.8%		693,222
		2,000,000		2009		2019	10.7%		2,569
		94,500,000		2009		2019	IPC + 2%		116,578
		140,000,000		2010		2017	IPC + 2%		183,375
		11,311,860		2010		2032	4.4%		66,569
		24,928,312		2010		2035	3.9%		154,403
		125,191,110		2010		2036	4.4%		727,772
		87,087,720		2010		2038	3.9%		530,015
		68,060,124		2010		2040	4.1%		407,991
		33,935,580		2010		2042	4.4%		198,911
		104,000,000		2013		2023	IPC + 2%		114,891
		146,000,000		2013		2028	IPC + 2%		157,670
		510,107,100		2014		2024	LIB + 4%		581,784
		47,831,440		2014		2034	3.8%		258,817
							Total		5,300,461

Total									60,282,082

(*) Subordinated CDBs may be redeemed as from November 2011.

ITAÚ UNIBANCO HOLDING’s portfolio is composed of Subordinated Euronotes with (maturity of up to 30 days amounting to R$ 99,664 at 06/30/2015), with maturities of 31 to 180 days amounting to R$ 349,545 (R$ 241,284 06/30/2015) and over 365 days amounting to R$ 24,957,148 (R$ 24,105,588 at 06/30/2015), totaling R$ 25,306,693 (R$ 24,446,536 at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Note 11 - Insurance, pension plan and capitalization operations

Composition of the technical provisions

	Insurance				Pension plan				Capitalization				Total
	06/30/2016		06/30/2015		06/30/2016		06/30/2015		06/30/2016		06/30/2015		06/30/2016		06/30/2015
Unearned premiums		2,555,737		3,594,237		15,931		13,776		-		-		2,571,668		3,608,013
Mathematical provision of benefits to be granted and benefits granted		23,556		15,313		135,639,188		111,802,962		-		-		135,662,744		111,818,275
Redemptions and other unsettled amounts		12,556		21,851		212,511		181,680		-		-		225,067		203,531
Financial surplus		1,581		1,429		551,044		536,061		-		-		552,625		537,490
Unsettled claims		768,800		694,905		18,761		16,651		-		-		787,561		711,556
Claims / events incurred but not reported		439,699		475,026		24,841		19,590		-		-		464,540		494,616
Administrative and related expenses		40,758		39,480		60,855		74,592		20,657		11,772		122,270		125,844
Mathematical provision for capitalization and redemptions		-		-		-		-		2,948,316		3,035,135		2,948,316		3,035,135
Raffles payable and to be held		-		-		-		-		26,422		22,824		26,422		22,824
Complementary raffles		-		-		-		-		569		2,720		569		2,720
Other provisions⁽¹⁾		566,099		529,359		128,833		562,799		268		320		695,200		1,092,478
Total ⁽²⁾		4,408,786		5,371,600		136,651,964		113,208,111		2,996,232		3,072,771		144,056,982		121,652,482

(1)

It considers mostly the Supplemental Coverage Provision, regulated by SUSEP Circular No. 517, of July 30, 2015.

(2)

This table covers the amendments established by SUSEP Circular No. 517, of July 30, 2015, also for comparison purposes.

The total of Technical Provisions represents the amount of obligations after the Liability Adequacy Test is carried out.

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Assets guaranteeing technical provisions - SUSEP

	Insurance				Pension plan						Capitalization				Total
	06/30/2016		06/30/2015		06/30/2016			06/30/2015			06/30/2016		06/30/2015		06/30/2016			06/30/2015
Interbank investments – money market		1,141,023		779,950		834,487			664,363			1,221,828		855,454		3,197,338			2,299,767
Securities and derivative financial instruments		2,144,545		2,884,883		136,555,499			113,059,252			1,826,674		2,395,871		140,526,718			118,340,006
PGBL / VGBL fund quotas ⁽¹⁾		-		-		129,559,984			106,431,575			-		-		129,559,984			106,431,575
Government securities - domestic		-		-		98,488,290			72,646,801			-		-		98,488,290			72,646,801
National treasury bills		-		-		37,444,123			31,743,556			-		-		37,444,123			31,743,556
National treasury notes		-		-		27,663,868			27,174,649			-		-		27,663,868			27,174,649
Financial treasury bills		-		-		33,380,299			13,728,596			-		-		33,380,299			13,728,596
Corporate securities		-		-		30,139,751			33,071,843			-		-		30,139,751			33,071,843
Bank deposit certificates		-		-		957,957			2,635,532			-		-		957,957			2,635,532
Debentures		-		-		3,539,714			3,930,341			-		-		3,539,714			3,930,341
Shares		-		-		344,731			495,832			-		-		344,731			495,832
Financial treasury bills		-		-		25,171,976			25,948,001			-		-		25,171,976			25,948,001
Others		-		-		125,373			62,137			-		-		125,373			62,137
PGBL / VGBL fund quotas		-		-		635,544			396,109			-		-		635,544			396,109
Derivative financial instruments		-		-		101,274			109,648			-		-		101,274			109,648
Loans for shares		-		-		415,171			346,049			-		-		415,171			346,049
Accounts receivable / (payable)		-		-		(220,046	)		(138,875	)		-		-		(220,046	)		(138,875	)
Other assets		2,144,545		2,884,883		6,995,515			6,627,677			1,826,674		2,395,871		10,966,734			11,908,431
Government		1,002,289		1,017,805		6,167,117			4,658,074			401,473		170,562		7,570,879			5,846,441
Private		1,142,256		1,867,078		828,398			1,969,603			1,425,201		2,225,309		3,395,855			6,061,990
Receivables from insurance and reinsurance operations ⁽²⁾		1,355,080		1,939,113		-			-			-		-		1,355,080			1,939,113
Credit rights		890,666		845,895		-			-			-		-		890,666			845,895
Commercial – extended guarantee		406,782		1,039,900		-			-			-		-		406,782			1,039,900
Reinsurance		57,632		53,318		-			-			-		-		57,632			53,318
Total		4,640,648		5,603,946		137,389,986			113,723,615			3,048,502		3,251,325		145,079,136			122,578,886

(1)

The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a counter-entry to lliabilities in Pension plan technical provision accounts.

(2)

Recorded under Other receivables and Other assets.

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c) Financial and operating income

	Insurance																		Pension plan																		Capitalization						Total
	01/01 to 06/30/2016									01/01 to 06/30/2015									01/01 to 06/30/2016									01/01 to 06/30/2015									01/01 to			01/01 to			01/01 to			01/01 to
	Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			06/30/2016			06/30/2015			06/30/2016			06/30/2015
Financial income related to insurance, pension plan and capitalization operations		183,345			-			183,345			179,379			-			179,379			165,771			-			165,771			184,216			-			184,216			120,622			102,120			469,738			465,715
Financial income		204,476			-			204,476			203,047			-			203,047			9,048,735			-			9,048,735			6,030,535			-			6,030,535			214,981			200,869			9,468,192			6,434,451
Financial expenses		(21,131	)		-			(21,131	)		(23,668	)		-			(23,668	)		(8,882,964	)		-			(8,882,964	)		(5,846,319	)		-			(5,846,319	)		(94,359	)		(98,749	)		(8,998,454	)		(5,968,736	)
Operating income related to insurance, pension plan and capitalization operations		1,462,154			(19,868	)		1,442,286			1,597,098			(20,457	)		1,576,641			452,641			(33	)		452,608			132,878			(1,755	)		131,123			303,239			279,953			2,198,133			1,987,717
Premiums and contributions		2,199,205			(55,106	)		2,144,099			2,514,418			(33,102	)		2,481,316			9,658,888			(1,620	)		9,657,268			8,174,318			(3,505	)		8,170,813			1,409,172			1,276,907			13,210,539			11,929,036
Changes in technical provisions		431,477			(8,312	)		423,165			410,996			1,584			412,580			(9,188,717	)		-			(9,188,717	)		(8,025,179	)		-			(8,025,179	)		(3,045	)		2,606			(8,768,597	)		(7,609,993	)
Expenses for claims, benefits, redemptions and raffles		(786,983	)		40,601			(746,382	)		(760,903	)		7,412			(753,491	)		(13,980	)		-			(13,980	)		(12,589	)		1,750			(10,839	)		(1,102,374	)		(1,004,416	)		(1,862,736	)		(1,768,746	)
Selling expenses		(357,201	)		2,949			(354,252	)		(534,981	)		3,649			(531,332	)		(1,988	)		-			(1,988	)		(2,567	)		-			(2,567	)		(1,375	)		(257	)		(357,615	)		(534,156	)
Other operating revenues and expenses		(24,344	)		-			(24,344	)		(32,432	)		-			(32,432	)		(1,562	)		1,587			25			(1,105	)		-			(1,105	)		861			5,113			(23,458	)		(28,424	)
Total income related to insurance, pension plan and capitalization operations		1,645,499			(19,868	)		1,625,631			1,776,477			(20,457	)		1,756,020			618,412			(33	)		618,379			317,094			(1,755	)		315,339			423,861			382,073			2,667,871			2,453,432

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Note 12 – Contingent assets and liabilities and legal liabilities – tax and social security

In the ordinary course of its businesses, ITAÚ UNIBANCO HOLDING CONSOLIDATED is involved in contingencies that may be classified as follows:

a) Contingent Assets: there are no contingent assets recorded.

b) Provisions and contingencies: The criteria to quantify contingencies are adequate in relation to the specific characteristics of civil, labor and tax lawsuits portfolios, as well as other risks.

Civil lawsuits:

Collective lawsuits (related to claims of a similar nature and with individual amounts not considered significant): contingencies are determined on a monthly basis and the expected amount of losses is accrued based on statistical models that take into account the type of lawsuit and the characteristics of the court (Small Claims Court or Regular Court). These are adjusted to reflect the amounts deposited as guarantee for their execution when realized.

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): calculation is carried out on a periodic basis, from the calculation of the claimed amount which, in turn, is estimated based on the de jure or de facto characteristics related to that lawsuit. The amounts considered as representing probable losses are recorded as provisions.

In general, contingencies arise from revisions of contracts and compensation for damages and pain and suffering. ITAÚ UNIBANCO HOLDING CONSOLIDATED is also a party to specific lawsuits related to the collection of understated inflation adjustments to savings accounts resulting from economic plans.

From 1986 to 1994, the Brazilian federal government implemented several consecutive monetary stabilization plans (MSPs) to combat hyperinflation. In order to implement these plans, the Brazilian federal government enacted several laws based on its power to regulate the monetary and financial systems, as granted by the Brazilian Federal Constitution.

Savings account holders at the time when these MSPs were implemented challenged the constitutionality of the laws in connection with such plans, claiming, from the banks in which they held savings accounts, additional interest based on the inflation rates applied to the deposit accounts based on the MSPs.

ITAÚ UNIBANCO HOLDING CONSOLIDATED is a defendant in numerous standardized lawsuits filed by individuals in respect of the MSP, and records provisions for such claims upon service of a process for a claim. In addition, ITAÚ UNIBANCO HOLDING CONSOLIDATED is a defendant in class actions, similar to the lawsuits brought by individuals, filed by either: (i) consumer protection associations, or (ii) the Public Prosecution Office on behalf of savings account holders. Holders of savings accounts may claim any amount due based on such a decision. ITAÚ UNIBANCO HOLDING CONSOLIDATED records provisions when individual plaintiffs apply to enforce such decisions, using the same criteria adopted to determine provisions for individual lawsuits.

The Federal Supreme Court (STF) has issued some decisions favorable to savings account holders, but has not issued a final ruling with respect to the constitutionality of the MSPs as applicable to savings accounts. In relation to a similar dispute with respect to the constitutionality of the MSPs as applicable to time deposits and other private agreements, the STF has determined that the bills were constitutional. As a response to this discrepancy, the National Confederation of the Financial System (CONSIF) an association of Brazilian financial institutions, filed a special proceeding with the STF (Action against the violation of a constitutional fundamental right - “ADPF” No. 165), in which the Central Bank filed an amicus brief, arguing that savings account holders did not incur actual damages and that the MSPs as applicable to savings accounts were in accordance with the federal constitution. Accordingly, the STF suspended the rulings on all appeals involving this matter until it pronounces a final decision. However, there is no estimate when the judgment by STF will occur, since, due to the disqualification of certain ministers, there is no sufficient quorum at this time to resolve on the issue.

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The most important rulings will address the following issues: (i) the accrual of compensatory interest on the amount due to the plaintiff, on filings that carry no specific claim to such interest; (ii) the initial date of default interest, for class actions; and (iii) the possibility of compensating the negative difference arising in the month of the MSP implementation, between the interests actually paid on savings accounts and the inflation rate for the same period, with the positive difference arising in the months subsequent to the MSP implementation, between the interests actually paid on savings accounts and the inflation rate of the same period. In relevant sentences in 2015, the STJ decided that: (i) the inclusion of interest in the calculation of execution is not applicable if there is no express sentence for this; and (ii) there shall be no payment of interest to holders of savings accounts after the proven closing date of those accounts. The thesis that understated inflation of plans subsequent to those challenged in the lawsuit can be included as full monetary correction of the debt, even with no express claim by the holder of savings account, has been reaffirmed. Additionally, STJ reaffirmed that the term for filling collection lawsuits expired within five years counted from the implementation date of the monetary stabilization plan (MSP). Accordingly, various collective lawsuits continue being extinguished by the Judiciary Branch as a result of this decision.

No amount is recorded as a provision in relation to Civil lawsuits which likelihood of loss is considered possible, which total estimated risk is R$ 2,840,175 (R$ 2,350,344 at 06/30/2015) and the main nature of which refers to claims form compensation or collections, the individual amounts of which are not significant.

Labor claims

Collective lawsuits (related to claims considered similar and which each individual amount is not considered significant): the expected loss amount is determined and accrued monthly according to the statistical share pricing model and is reassessed taking into account court rulings. These are adjusted to reflect the amounts deposited as guarantee for their execution when realized.

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): determined from time to time, based on the amount claimed and the likelihood of loss, which, in turn, is estimated according to the de facto and de jure characteristics related to such lawsuit. The amounts of losses which likelihood of loss is considered probable are accrued.

Contingencies are related to lawsuits in which alleged labor rights based on labor legislation specific to the related profession, such as overtime, salary equalization, reinstatement, transfer allowances, pension plan supplements and other matters are discussed.

No amount is recorded as a provision for labor claims for which the likelihood of loss is considered possible, and for which the total estimated risk is R$ 477,979 (R$ 550,276 at 06/30/2015).

Other Risks

These are quantified and accrued mainly based on the evaluation of rural credit transactions with joint liability and FCVS (salary variations compensation fund) credits assigned to Banco Nacional.

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The table below shows the changes in the respective provisions for contingent liabilities and the respective escrow deposit balances:

	01/01 to 06/30/2016												01/01 to 06/30/2015
	Civil			Labor			Other			Total			Total
Opening balance		5,226,944			6,131,853			134,818			11,493,615			10,399,739
Balance arising from the merger with Corpbanca (Note 2c)		1,809			5,377			132,946			140,132			-
(-) Contingencies guaranteed by indemnity clauses (Note 4n I)		(236,018	)		(1,089,443	)		-			(1,325,461	)		(1,160,801	)
Subtotal		4,992,735			5,047,787			267,764			10,308,286			9,238,938
Monetary restatement/charges		175,392			310,601			-			485,993			482,774
Changes in the period reflected in results (Notes 13f and 13i)		558,950			1,103,307			(14,355	)		1,647,902			1,537,860
Increase ^(*)		880,335			1,197,335			(13,977	)		2,063,693			1,878,280
Reversal		(321,385	)		(94,028	)		(378	)		(415,791	)		(340,420	)
Payment		(804,699	)		(1,002,766	)		-			(1,807,465	)		(1,488,989	)
Subtotal		4,922,378			5,458,929			253,409			10,634,716			9,770,583
(+) Contingencies guaranteed by indemnity clauses (Note 4n I)		249,648			1,055,831			-			1,305,479			1,243,523
Closing balance		5,172,026			6,514,760			253,409			11,940,195			11,014,106
Closing balance at 06/30/2015		5,030,233			5,817,257			166,616			11,014,106
Escrow deposits at 06/30/2016		1,652,990			2,294,407			-			3,947,397
Escrow deposits at 06/30/2015		2,038,757			2,497,771			-			4,536,528

(*) Civil provisions include the provision for economic plans amounting to R$ 102,330 (R$ 137,698 from 01/01 to 06/30/2015) (Note 22k).

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Tax and social security lawsuits

Itaú Unibanco Holding S.A. and its subsidiaries classify as legal liability the lawsuits filed to discuss the legality and/or unconstitutionality of the legislation in force, to be included in a provision, regardless of the probability of loss.

Tax contingencies correspond to the principal amount of taxes involved in tax, administrative or judicial challenges, subject to tax assessment notices, plus interest and, when applicable, fines and charges. A provision is recognized whenever the likelihood of loss is probable.

The table below shows the changes in the provisions and respective balances of escrow deposits for Tax and Social Security lawsuits:

	01/01 to 06/30/2016									01/01 to 06/30/2015
	Legal
Provisions	obligation			Contingencies			Total			Total
Opening balance		4,261,241			3,239,293			7,500,534			6,626,932
(-) Contingencies guaranteed by indemnity clauses (Note 4n II)		-			(64,548	)		(64,548	)		(60,646	)
Subtotal		4,261,241			3,174,745			7,435,986			6,566,286
Monetary restatement / charges		162,514			194,574			357,088			272,553
Changes in the period reflected in results		50,516			20,392			70,908			42,150
Increase		97,566			44,432			141,998			95,447
Reversal		(47,050	)		(24,040	)		(71,090	)		(53,297	)
Payment		(25,555	)		(43,664	)		(69,219	)		(131,765	)
Subtotal		4,448,716			3,346,047			7,794,763			6,749,224
(+) Contingencies guaranteed by indemnity clauses (Note 4n II)		-			66,619			66,619			62,448
Closing balance (Note 14c)		4,448,716			3,412,666			7,861,382			6,811,672
Closing balance at 06/30/2015 (Note 14c)		4,061,738			2,749,934			6,811,672

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	01/01 to 06/30/2016									01/01 to 06/30/2015
Escrow deposits	Legal obligation			Contingencies			Total			Total
Opening balance		3,880,081			458,663			4,338,744			4,736,435
Appropriation of income		156,998			31,136			188,134			81,438
Changes in the period		95,948			9,758			105,706			171,323
Deposited		149,709			14,292			164,001			301,285
Withdrawals		(28,665	)		(4,534	)		(33,199	)		(37,571	)
Reversals to income		(25,096	)		-			(25,096	)		(92,391	)
Closing balance		4,133,027			499,557			4,632,584			4,989,196
Relocated to assets pledged in guarantee of contingencies (Note 12d)		-			(107	)		(107	)		-
Closing balance after relocated		4,133,027			499,450			4,632,477			4,989,196
Closing balance at 06/30/2015		4,598,746			390,450			4,989,196

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The main discussions related to the provisions recognized for Tax and Social Security Lawsuits are as follows:

CSLL – Isonomy – R$ 1,153,252: as the law increased the CSLL rate for financial and insurance companies to 15%, the company is discussing the lack of constitutional support for this measure and, due to the principle of isonomy, the company is defending the levying of CSLL at the regular rate of 9%. The corresponding escrow deposit balance totals R$ 1,136,524;

INSS – Accident Prevention Factor (FAP) – R$ 955,667: it challenges the legality of FAP and inconsistent calculation by the INSS. The corresponding escrow deposit balance totals R$ 104,618;

PIS and COFINS – Calculation basis – R$ 631,198: the company is defending the levying of contributions on revenue, understood as revenue from the sales of assets and services. The corresponding escrow deposit balance totals R$ 545,475;

IRPJ and CSLL – Taxation of profits earned abroad – R$ 581,652: the company is discussing the calculation basis for the levying of these taxes on profits earned abroad and the non-applicability of Regulatory Instruction SRF No. 213-02 in which it exceeds the parameters of the legal text. The corresponding escrow deposit balance totals R$ 221,997.

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Off-balance sheet contingencies – The estimated amounts at risk in the main tax and social security lawsuits with a likelihood of loss deemed possible, which total R$ 16,982,925, are described below:

INSS – Non-compensatory amounts – R$ 4,599,680: we defend the non-taxation of these amounts, mainly profit sharing, stock options, transportation vouchers and sole bonuses;

IRPJ and CSLL – Goodwill – Deduction – R$ 2,995,823: the deductibility of goodwill on acquisition of investments with future expected profitability, and R$ 637,208 of this amount is guaranteed in company purchase agreements;

IRPJ, CSLL, PIS and COFINS – Requests for offsetting dismissed – R$ 1,424,195: cases in which the liquidity and the ability to offset credit are discussed;

IRPJ and CSLL – Interest on capital – R$ 1,352,824: the company is defending the deductibility of interest on capital declared to stockholders based on the Brazilian long term interest rate (TJLP) on the stockholders’ equity for the year and for prior years;

ISS – Banking Institutions – R$ 954,625: these are banking operations, revenue from which may not be interpreted as prices for services rendered, and/or which arises from activities not listed under Supplementary Law No. 116/03 or Law No. 406/68;

IRPJ and CSLL – Disallowance of Losses – R$ 540,729: Discussion on the amount of tax loss (IRPJ) and/or social contribution loss carryforwards, which may reduce the calculation basis of said taxes.

Receivables - reimbursement of contingencies

The receivables balance arising from reimbursements of contingencies totals R$ 1,146,993 (R$ 757,646 at 06/30/2015) (Note 13a), basically represented by the guarantee for the Banco Banerj S.A. privatization process which occurred in 1997, where the State of Rio de Janeiro created a fund to guarantee civil, labor and tax contingencies.

Assets pledged as contingencies

Assets pledged in guarantee for contingencies are related to liability contingencies and restricted or deposited as presented below:

	06/30/2016		06/30/2015
Securities (basically financial treasury bills – Note 7b)		947,851		801,196
Deposits in guarantee		4,437,645		4,287,266

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Escrow deposits are generally required to be made with the court in connection with lawsuits in Brazil, and they are held by the respective court until a decision is made. In case of a decision against ITAÚ UNIBANCO HOLDING CONSOLIDATED, the deposited amount is released from escrow and transferred to the counterparty to the lawsuit. In the case of a decision in favor of ITAÚ UNIBANCO HOLDING CONSOLIDATED, the deposited amount is released at the full deposited and updated amount.

In general, provisions related to lawsuits of ITAÚ UNIBANCO HOLDING CONSOLIDATED are long term, considering the time required for the termination of these lawsuits in the Brazilian judicial system, which is the reason why no estimate of the specific year in which these lawsuits will be terminated has been disclosed.

According to the opinion of its legal advisors, ITAÚ UNIBANCO HOLDING CONSOLIDATED and its subsidiaries are not involved in any other administrative or judicial proceedings that may significantly impact the results of their operations. The combined evaluation of all existing provisions for all contingent liabilities and legal obligations, which are recognized based on statistical models for claims involving small amounts and on individual evaluations by internal and external legal advisors of other cases, showed that the accrued amounts are sufficient, in the terms of CMN Resolution No. 3,823, of December 16, 2009, and BACEN Circular Letter No. 3,429, of February 11, 2010.

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Programs for Cash or Installment Payment of Municipal Taxes

ITAÚ UNIBANCO HOLDING and its subsidiaries adhered to PPI – Installment Payment Incentive Programs substantially related to the local level, established by Laws: (Law No. 5,854, of April 27, 2015) Rio de Janeiro; (Law No. 8,927, o October 22, 2015 and Decree No. 26,624 of October 26, 2015) Salvador; (Law No. 18,181, of November 30, 2015 and Decree No. 29,275 of November 30, 2015) Recife; (Supplementary Law No. 95, of October 19, 2015) Curitiba. The programs promote the regularization of debts mentioned in these laws, arising from tax and non-tax credits, either recognized or not, including those that are part of the Enforceable Debt, either filed or to be filed in court.

The net effect of the programs in result was R$ 12,474, and it is recorded in Other Operating Income, Income Tax and Social Contribution.

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Note 13 - Breakdown of accounts

Other sundry receivables

	06/30/2016			06/30/2015
Social contribution for offsetting (Note 14b I)		638,789			645,254
Taxes and contributions for offsetting		5,509,389			3,395,587
Escrow deposits for foreign fundraising program		1,355,872			451,437
Receivables from reimbursement of contingent liabilities (Note 12c)		1,146,993			757,646
Receivables from reimbursement of contingent liabilities		2,239,140			1,600,234
(Allowance for loan losses)		(1,092,147	)		(842,588	)
Rights receivable from financial assets sold or transferred		6,958			784,077
Sundry domestic debtors		2,028,016			1,273,226
Premiums from loan operations		1,212,676			2,130,333
Sundry foreign debtors		2,469,809			1,706,811
Retirement plan assets (Note 19)		2,247,870			2,529,882
Recoverable payments		44,727			124,056
Salary advances		299,844			245,280
Amounts receivable from related companies		37,984			43,762
Operations without credit granting characteristics		1,570,613			536,513
Securities and credits receivable		1,937,403			1,137,342
(Allowance for loan losses)		(366,790	)		(600,829	)
Other		528,080			519,061
Total		19,097,620			15,142,925

In ITAÚ UNIBANCO HOLDING, Other Sundry Receivables is mainly composed of Taxes and Contributions for Offset R$ 996,547 (R$ 565,977 at 06/30/2015) (Note 14b I).

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Prepaid expenses

	06/30/2016		06/30/2015
Commissions ^(*)		1,565,631		2,469,921
Related to vehicle financing		106,283		194,096
Related to insurance and pension plan		399,475		968,220
Restricted to commissions / partnership agreements		54,884		134,640
Related to Payroll Loans		858,469		1,013,681
Other		146,520		159,284
Advertising		311,033		353,687
Other		1,000,075		779,617
Total		2,876,739		3,603,225

(*) In the first semester of 2016, the impact on income related to commission from local correspondents, as described in Note 4g, was R$ 158,462 (R$ 99,536 of 06/30/2015).

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Other sundry liabilities

	06/30/2016		06/30/2015
Provisions for sundry payments		2,771,087		2,192,234
Personnel provision		1,656,420		1,468,061
Sundry creditors - local		2,133,405		1,911,340
Sundry creditors - foreign		3,792,738		3,856,127
Liabilities for official agreements and rendering of payment services		1,154,760		1,065,151
Related to insurance operations		191,642		201,799
Liabilities for purchase of assets and rights		78,661		661
Creditors of funds to be released		1,009,696		1,346,118
Funds from consortia participants		66,426		40,787
Provision for retirement plan benefits (Note 19)		692,789		524,701
Provision for health insurance ⁽¹⁾		728,276		698,468
Expenses for lease interests ⁽²⁾		-		544,892
Liabilities from transactions related to credit assignments (Note 8f)		5,577,124		5,725,475
Liabilities from sales operations or transfer of financial assets		38,615		666,205
Other		1,059,020		724,828
Total		20,950,659		20,966,847

(1) Provision set up to cover possible future deficits up to the total discontinuation of the portfolio, arising from the difference between monthly installments adjustments, authorized annually by the regulatory body, and the actual variation of hospital costs that affect the compensation of claims (Note 13i).

(2) Change in the Accounting Treatment of Financial Lease (Note 4i).

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Banking service fees

	01/01 to		01/01 to
	06/30/2016		06/30/2015
Asset management		2,268,379		1,949,332
Funds management fees		1,928,308		1,626,401
Consortia management fees		340,071		322,931
Current account services		405,047		393,563
Credit cards		5,036,321		4,770,203
Relationship with stores		5,023,839		4,739,643
Credit card processing		12,482		30,560
Sureties and credits granted		1,191,459		1,083,224
Loan operations		491,897		477,846
Guarantees provided		699,562		605,378
Receipt services		755,472		750,940
Collection fees		635,861		599,273
Collection services		119,611		151,667
Other		1,319,706		1,184,578
Custody services and management of portfolio		177,261		140,436
Economic and financial advisory		250,836		343,607
Foreign exchange services		44,619		42,897
Other services		846,990		657,638
Total		10,976,384		10,131,840

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Income related to bank charges

	01/01 to		01/01 to
	06/30/2016		06/30/2015
Loan operations / registration		400,435		516,135
Credit cards – annual fees and other services		1,552,130		1,619,956
Deposit account		77,507		57,388
Transfer of funds		104,505		95,147
Income related to securities brokerage		183,061		181,113
Service package fees		2,832,373		2,330,798
Total		5,150,011		4,800,537

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Personnel expenses

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Compensation		(4,087,191	)		(3,750,472	)
Charges		(1,255,193	)		(1,234,425	)
Welfare benefits (Note 19)		(1,411,979	)		(1,148,364	)
Training		(73,906	)		(87,211	)
Labor claims and termination of employees (Note 12b)		(1,338,951	)		(827,621	)
Stock Option Plan		(175,809	)		(116,869	)
Total		(8,343,029	)		(7,164,962	)
Employees’ profit sharing		(1,531,823	)		(1,537,195	)
Total including employees’ profit sharing		(9,874,852	)		(8,702,157	)

Other administrative expenses

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Data processing and telecommunications		(1,915,037	)		(1,925,069	)
Depreciation and amortization		(1,093,000	)		(1,084,380	)
Installations		(1,480,078	)		(1,328,138	)
Third-party services		(2,097,964	)		(1,869,339	)
Financial system services		(356,733	)		(277,626	)
Advertising, promotions and publication		(435,969	)		(479,425	)
Transportation		(198,304	)		(199,361	)
Materials		(139,623	)		(201,785	)
Security		(358,167	)		(331,193	)
Travel expenses		(88,389	)		(104,177	)
Other		(501,107	)		(392,241	)
Total		(8,664,371	)		(8,192,734	)

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

152

Other operating revenue

	01/01 to		01/01 to
	06/30/2016		06/30/2015
Reversal of operating provisions		22,370		132,577
Recovery of charges and expenses		62,775		28,890
Program for Settlement or Installment Payment of Federal (Note 12e)		11,443		121,082
Other		287,216		197,840
Total		383,804		480,389

Other operating expenses

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Provision for contingencies (Note 12b)		(687,917	)		(1,017,511	)
Civil lawsuits		(558,950	)		(861,561	)
Tax and social security contributions		(143,322	)		(148,164	)
Other		14,355			(7,786	)
Selling - credit cards		(1,428,730	)		(1,502,491	)
Claims		(132,110	)		(153,547	)
Provision for health insurance (Note 13c)		(11,933	)		(13,878	)
Refund of interbank costs		(141,598	)		(133,462	)
Other		(1,237,656	)		(821,483	)
Total		(3,639,944	)		(3,642,372	)

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

153

Note 14 - Taxes

Composition of expenses for taxes and contributions

I -

Statement of calculation of income tax and social contribution:

	01/01 to			01/01 to
Due on operations for the period	06/30/2016			06/30/2015
Income before income tax and social contribution		21,359,183			12,611,718
Charges (income tax and social contribution) at the rates in effect (Note 4o)		(9,611,632	)		(5,044,687	)

Increase/decrease in income tax and social contribution charges arising from:

Investments in affiliates and jointly controlled entities		109,903			92,389
Foreign exchange variations on investments abroad		(4,707,182	)		2,709,853
Interest on capital		1,214,898			1,128,657
Corporate reorganizations (Note 4q)		313,923			316,625
Dividends and interest on external debt bonds		177,221			128,378
Other nondeductible expenses net of non taxable income (*)		10,572,375			(3,805,750	)
Income tax and social contribution expenses		(1,930,494	)		(4,474,535	)
Related to temporary differences
Increase (reversal) for the period		(8,471,156	)		3,857,056
Increase (reversal) of prior periods		1,287			14,900
(Expenses)/Income related to deferred taxes		(8,469,869	)		3,871,956
Total income tax and social contribution expenses		(10,400,363	)		(602,579	)

(*) Includes temporary (additions) and exclusions.

II -

Composition of tax expenses:

	01/01 to			01/01 to
	06/30/2016			06/30/2015
PIS and COFINS		(3,373,651	)		(2,159,593	)
ISS		(508,482	)		(469,003	)
Other		(400,348	)		(308,147	)
Total (Note 4o)		(4,282,481	)		(2,936,743	)

The tax expenses of ITAÚ UNIBANCO HOLDING amount to R$ 92,995 (R$ 131,501 at 06/30/2015) and are mainly composed of PIS and COFINS.

III-

Tax effects on foreign exchange management of investments abroad

In order to minimize the effects on income in connection with the foreign exchange variations on investments abroad, net of the respective tax effects, ITAÚ UNIBANCO HOLDING CONSOLIDATED carries out derivative transactions in foreign currency (hedges), as mentioned in Note 22b.

The results of these transactions are considered in the calculation base of income tax and social contribution, in accordance with their nature, while the foreign exchange variations on investments abroad are not included therein, pursuant to the tax legislation in force.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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Deferred taxes

I - The Deferred Tax Asset balance and its changes, segregated based on its origin and disbursements incurred, are represented as follows:

	Provisions						Deferred Tax Assets
							Realization /
	06/30/2015		06/30/2016		12/31/2015		Reversal			Increase ⁽¹⁾		06/30/2016		06/30/2015
Reflected in income and expense accounts						53,000,680		(12,842,852	)		11,998,042		52,155,870		38,632,813
Related to income tax and social contribution loss carryforwards						5,643,067		(165,055	)		879,864		6,357,876		7,167,528
Related to disbursed provisions						32,229,846		(8,863,798	)		7,632,920		30,998,968		20,461,163
Allowance for loan losses						25,432,877		(2,988,199	)		5,033,571		27,478,249		19,350,339
Adjustment to market value of securities and derivative financial instruments (assets/liabilities)						5,674,148		(5,674,148	)		1,232,358		1,232,358		95,332
Allowance for real estate						219,017		(27,005	)		6,825		198,837		188,717
Goodwill on purchase of investments						537,917		(173,054	)		-		364,863		712,896
Other						365,887		(1,392	)		1,360,166		1,724,661		113,879
Related to non-disbursed provisions⁽²⁾		28,240,435		36,636,454		15,127,767		(3,813,999	)		3,485,258		14,799,026		11,004,122
Related to the operation		21,910,174		26,412,805		10,733,693		(3,509,385	)		3,485,258		10,709,566		8,472,018
Provision for contingent liabilities		11,482,209		12,875,928		5,386,508		(731,841	)		917,583		5,572,250		4,572,795
Civil lawsuits		4,814,817		4,805,966		2,149,334		(314,925	)		248,886		2,083,295		1,973,261
Labor claims		4,003,796		4,712,363		1,811,927		(385,456	)		552,601		1,979,072		1,534,873
Tax and social security contributions		2,635,473		3,346,047		1,420,092		(30,467	)		116,096		1,505,721		1,054,189
Other		28,123		11,552		5,155		(993	)		-		4,162		10,472
Adjustments of operations carried out on the futures settlement market		1,236,986		1,321,127		1,391,101		(894,577	)		56,638		553,162		460,100
Legal obligation - tax and social security contributions		1,447,691		2,273,326		508,498		(3,064	)		38,222		543,656		427,018
Provision related to health insurance operations		698,468		728,276		322,354		(31,358	)		-		290,996		279,387
Other non-deductible provisions		7,044,820		9,214,148		3,125,232		(1,848,545	)		2,472,815		3,749,502		2,732,718
Related to provisions exceeding the minimum required not disbursed – allowance for loan losses		6,330,261		10,223,649		4,394,074		(304,614	)		-		4,089,460		2,532,104

Reflected in stockholders’ equity accounts						3,982,935		(1,575,755	)		584,424		2,991,604		2,697,776
Corporate reorganizations (Note 4q)		6,462,823		4,616,211		1,883,435		(313,923	)		-		1,569,512		2,197,359
Adjustment to market value of available-for-sale securities		1,251,043		1,768,970		2,099,500		(1,261,832	)		17,242		854,910		500,417
Cash flow hedge and hedge of net investment in foreign operation		-		1,565,141		-		-			567,182		567,182		-
Total ⁽³⁾		35,954,301		44,586,776		56,983,615		(14,418,607	)		12,582,466		55,147,474		41,330,589

Social contribution for offsetting arising from Option established in article 8 of Provisional Measure No. 2,158-35 of August 24, 2001						645,254		(6,465	)		-		638,789		645,254

(1) Includes balance arising from the merger with Corpbanca (R$ 1,220,814) and Recovery acquisition (R$ 44,830) (Note 2c).

(2) From a financial point of view, rather than recording the provision of R$ 36,636,454 (R$ 28,240,435 at 06/30/2015) and deferred tax assets of R$ 14,799,026 (R$ 11,004,122 at 06/30/2015), only the net provisions of the corresponding tax effects should be considered, which would reduce the total deferred tax assets from R$ 55,147,474(R$ 41,330,589 at 06/30/2015) to R$ 40,348,448 (R$ 30,326,467 at 06/30/2015).

(3) The accounting records of deferred tax assets on income tax losses and/or social contribution loss carryforwards, as well as those arising from temporary differences, are based on technical feasibility studies which consider the expected generation of future taxable income, considering the history of profitability for each subsidiary individually, and for the consolidated taken as a whole. For the subsidiaries, Itaú Unibanco S.A. and Banco Itaucard S.A., due to their specific tax status, a petition has been sent to Central Bank of Brazil, in compliance with paragraph 7 of article 1 of Resolution No. 4,441/15 and pursuant to Circular 3,776/15, to maintain the respective deferred tax assets.

At ITAÚ UNIBANCO HOLDING, the Deferred Tax Assets totaled R$ R$ 1,124,778 (R$ 116,413 at 06/30/2015) and are basically represented by Interest on capital of R$ 584,581, Income Tax Losses and Social Contribution Loss carryforwards of R$ 354,101 (R$ 99,678 at 06/30/2015), Provisions for Guarantee Accounts of R$ 117,069 and Administrative Provisions of R$ 28,737 (R$ 10,096 at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

155

II -

Provision for Deferred Income Tax and Social Contribution balance and the changes therein changes are shown as follows:

			Realization /
	12/31/2015		Reversal			Increase ⁽¹⁾		06/30/2016		06/30/2015
Reflected in income and expense accounts		3,500,301		(1,003,843	)		9,607,734		12,104,192		3,667,300
Depreciation in excess – leasing		1,487,279		(417,495	)		141,468		1,211,252		2,013,726
Restatement of escrow deposits and contingent liabilities		1,129,778		(80,851	)		156,916		1,205,843		954,731
Provision for pension plan benefits		380,099		-			33,552		413,651		382,090
Adjustments to market value of securities and derivative financial instruments		205,166		(205,166	)		7,944,420		7,944,420		21,228
Adjustments of operations carried out on the future settlement market		56,457		-			515,508		571,965		38,921
Taxation of results abroad – capital gains		167,162		(165,611	)		-		1,551		169,982
Other		74,360		(134,720	)		815,870		755,510		86,622
Reflected in stockholders’ equity accounts		1,848,221		(1,433,828	)		192,435		606,828		1,094,779
Adjustments to market value of available-for-sale securities		34,969		-			184,106		219,075		94,496
Cash flow hedge		1,433,828		(1,433,828	)		-		-		542,922
Provision for pension plan benefits ⁽²⁾		379,424		-			8,329		387,753		457,361
Total		5,348,522		(2,437,671	)		9,800,169		12,711,020		4,762,079

(1) Includes balance arising from the merger with Corpbanca (R$ 993,750) (Note 2c).

(2) Reflected in stockholders' equity, pursuant to CVM Resolution n° 4.424/15 (Note 19).

At ITAÚ UNIBANCO HOLDING, the Provisions for Deferred Taxes and Contributions total R$ 149,409 (R$ 4,242 at 06/30/2015), and are basically comprised of Adjustments to Market Value of Trading Securities and Financial Derivative Instruments of R$ 130,216, Adjustments to market value of available-for-sale securities of R$ 13,700 and Monetary Restatement of Escrow Deposits for Legal Obligations and Contingent Liabilities of R$ 5,493 (R$ 4,242 at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

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III -

The estimate of realization and present value of tax credits and social contribution to offset, arising from Provisional Measure 2,158-35 of 08/24/2001 and from the Provision for Deferred Income Tax and Social Contribution existing at June 30, 2016, are:

	Deferred tax assets																				Provision for deferred
Year of realization	Temporary differences		%			Tax loss/social contribution loss carryforwards		%			Total		%			Social contribution for offsetting		%			income tax and social contribution			%			Net deferred taxes		%

2016		11,908,298		25	%		21,582		0	%		11,929,880		22	%		3,053		0	%		(3,759,295	)		30	%		8,173,638		19	%
2017		12,201,296		25	%		66,148		1	%		12,267,444		22	%		23,559		4	%		(2,470,222	)		19	%		9,820,781		23	%
2018		13,173,802		27	%		238,034		4	%		13,411,836		24	%		56,115		9	%		(1,969,828	)		15	%		11,498,123		26	%
2019		4,047,256		8	%		1,325,129		21	%		5,372,385		10	%		290,524		45	%		(438,566	)		3	%		5,224,343		12	%
2020		468,629		1	%		2,478,529		39	%		2,947,158		5	%		265,538		42	%		(1,593,406	)		13	%		1,619,290		4	%
after 2020		6,990,317		14	%		2,228,454		35	%		9,218,771		17	%		-		0	%		(2,479,703	)		20	%		6,739,068		16	%
Total		48,789,598		100	%		6,357,876		100	%		55,147,474		100	%		638,789		100	%		(12,711,020	)		100	%		43,075,243		100	%
Present value ^(*)		44,431,615					5,282,492					49,714,107					558,609					(11,318,692	)					38,954,024

(*) The average funding rate, net of tax effects, was used to determine the present value.

The projections of future taxable income include estimates related to macroeconomic variables, exchange rates, interest rates, volume of financial operations and service fees and others, which can vary in relation to actual data and amounts.

Net income in the financial statements is not directly related to the taxable income for income tax and social contribution, due to differences between the accounting criteria and tax legislation, in addition to corporate aspects. Accordingly, we recommend that the trends for the realization of deferred tax assets arising from temporary differences, income tax and social contribution loss carry forwards are not used as an indication of future net income.

IV-

Considering the temporary effects of Law 13,169/15, which increases the Social Contribution tax rate to 20% until December 31, 2018, tax credits were accounted for based on their expected realization. There are no unrecorded deferred tax assets at 06/30/2016 and 06/30/2015.

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

157

Tax and social security contributions

	06/30/2016		06/30/2015

Taxes and contributions on income payable		2,114,565		2,224,906
Taxes and contributions payable		1,687,433		1,635,176
Provision for deferred income tax and social contribution (Note 14b II)		12,711,020		4,762,079
Legal liabilities – tax and social security (Note 12b)		4,448,716		4,061,738
Total		20,961,734		12,683,899

At ITAÚ UNIBANCO HOLDING, the balance of Tax and Social Security Contributions totals R$ 181,043 (R$ 312,839 at 06/30/2015) and is mainly comprised of Taxes and contributions on income payable of R$ 18,561 (R$ 297,161 at 06/30/2015) and Deferred Taxes and Social Contribution R$ 149,409 (R$ 4,242 at 06/30/2015).

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

158

Taxes paid or provided for and withheld from third parties

The amount of taxes paid or provided for mainly arises from those levied on income, revenue and payroll. In relation to the amounts withheld and collected from third parties, the company takes into consideration the interest on capital and on the provision of service, in addition to that levied on financial operation.

	06/30/2016		06/30/2015
Taxes paid or provided for		8,728,921		9,394,774
Taxes withheld and collected from third parties		7,756,386		7,178,353
Total		16,485,307		16,573,127

Itaú Unibanco Holding S.A. – Complete Financial Statements – June 30, 2016

159

Note 15 – Permanent Assets

a) Investment

I - Change of investments - ITAÚ UNIBANCO HOLDING

	Balance at 12/31/2015											Changes																														Equity in
	Book value																	Equity in earnings of subsidiaries																								earnings of
Companies	Stockholders' equity		Adjustments under investor criteria ⁽¹⁾		Unrealized results			Goodwill		Balance at 12/31/2015		Amortization of goodwill			Dividends / interest on capital paid/provided for ⁽²⁾			Earnings/ (loss)		Changes in exchange rates			Adjustments under investor criteria ⁽¹⁾			Unrealized results			Total			Adjustments in marketable securities of subsidiaries and other			Corporate Events ⁽³⁾			Balance at 06/30/2016		Balance at 06/30/2015		subsidiaries from 01/01 to 06/30/2015
Domestic		66,428,426		19,485		(373,322	)		17,951		66,092,540		(3,168	)		(1,397,366	)		6,987,328		-			42,066			60,704			7,090,098			(710,132	)		12,333,329			83,405,301		65,080,245		7,847,429
Itaú Unibanco S.A.		56,187,610		11,362		(327,902	)		17,951		55,889,021		(3,168	)		-			5,851,740		-			43,003			54,566			5,949,309			(725,907	)		12,333,329			73,442,584		54,955,453		5,505,428
Banco Itaú BBA S.A.		5,686,536		3,175		(45,420	)		-		5,644,291		-			(1,397,386	)		355,068		-			2,808			8,256			366,132			15,716			-			4,628,753		5,418,662		419,601
Banco Itaucard S.A. ⁽⁴⁾		2,595,045		4,425		-			-		2,599,470		-			24			548,294		-			(4,032	)		(2,118	)		542,144			340			-			3,141,978		1,892,805		1,554,572
Itaú -BBA Participações S.A.		1,538,767		-		-			-		1,538,767		-			-			120,622		-			-			-			120,622			-			-			1,659,389		1,428,974		68,554
Itaú Corretora de Valores S. A. ⁽⁴⁾		420,455		523		-			-		420,978		-			-			111,602		-			287			-			111,889			(282	)		-			532,585		1,384,337		299,271
Itau Seguros S.A.		13		-		-			-		13		-			(4	)		2		-			-			-			2			1			-			12		14		3

Foreign		8,159,423		-		-			51,409		8,210,832		(36,812	)		(169,136	)		249,764		(1,140,687	)		10,835			(27	)		(880,115	)		18,927			(184,661	)		6,959,035		7,055,092		1,249,374
Itaú Corpbanca⁽⁵⁾		-		-		-			-		-		(21,476	)		(15,945	)		5,065		(324,643	)		200			(25	)		(319,403	)		1,415			4,254,869			3,899,460		-		-
BICSA Holdings ⁽⁶⁾		2,019,984		-		-			3,769		2,023,753		(1,884	)		-			37,652		(365,281	)		-			(2	)		(327,631	)		26			-			1,694,264		-		-
Banco Itaú Uruguay S.A.		1,296,198		-		-			4,712		1,300,910		(2,356	)		-			129,335		(277,090	)		-			-			(147,755	)		12,018			-			1,162,817		1,114,883		211,862
OCA S.A.		342,288		-		-			1,434		343,722		(717	)		(141,907	)		54,165		(56,519	)		-			-			(2,354	)		1			-			198,745		289,508		72,834
ACO Ltda.		4,534		-		-			21		4,555		(11	)		-			99		(894	)		-			-			(795	)		-			-			3,749		3,804		268
Itaú Chile Holdings, INC. ⁽⁷⁾		181,190		-		-			-		181,190		-			-			-		3,471			-			-			3,471			-			(184,661	)		-		5,646,897		952,779
OCA Casa Financiera S.A. ⁽⁸⁾		-		-		-			-		-		-			-			-		-			-			-						-			-			-		-		11,631
Banco Itau Chile S.A. ⁽⁹⁾		4,315,229		-		-			41,473		4,356,702		(10,368	)		(11,284	)		23,448		(119,731	)		10,635			-			(85,648	)		5,467			(4,254,869	)		-		-		-
Grand total		74,587,849		19,485		(373,322	)		69,360		74,303,372		(39,980	)		(1,566,502	)		7,237,092		(1,140,687	)		52,901			60,677			6,209,983			(691,205	)		12,148,668			90,364,336		72,135,337		9,096,803

(1)

Adjustment arising from the standardization of the investee’s financial statements according to the investor’s accounting policies;

(2)

Dividends approved and not paid are recorded as Dividends receivable.

(3)

Corporate Events arising from acquisitions, spin-offs, merges, takeovers, and increases or decreases of capital.

(4)

The investment and the equity in earnings reflect the different interest in preferred shares, profit sharing and dividends.

(5)

Inflow of investments on 04/01/2016 in the Corpbanca’s acquisition process;

(6)

Company entrance on July 31, 2015.

(7)

Company liquidated on February 29, 2016.

(8)

Company liquidated on March 30, 2015.

(9)

Write-off of investment on 04/01/2016 in the Corpbanca’s acquisition process.

					Net income		Number of shares/quotas owned by								Equity share
			Stockholders’		for the		ITAÚ UNIBANCO HOLDING						Equity share in		in
Companies	Capital		equity		period		Common		Preferred		Quotas		voting capital (%)		capital (%)
Domestic
Itaú Unibanco S.A.		52,658,892		73,702,327		5,851,740		2,568,761,491		2,487,845,145		-		100.00		100.00
Banco Itaú BBA S.A.		3,574,844		4,665,917		355,068		4,474,435		4,474,436		-		100.00		100.00
Banco Itaucard S.A. ⁽⁴⁾		15,564,076		20,033,126		606,361		3,596,744,163		1,277,933,118		-		1.51		2.04
Itaú-BBA Participações S.A.		1,328,562		1,659,389		120,622		548,954		1,097,907		-		100.00		100.00
Itaú Corretora de Valores S. A. ⁽⁴⁾		802,482		1,488,387		123,462		-		811,503		-		-		2.87
Itau Seguros S.A.		3,767,415		4,883,278		905,089		450		1		-		0.00		0.00
Foreign
Itaú Corpbanca⁽⁵⁾		9,086,866		15,347,099		22,561		115,039,610,411		-		-		22.45		22.45
BICSA Holdings ⁽⁶⁾		1,061,997		1,692,382		37,650		-		-		330,860,746		100.00		100.00
Banco Itaú Uruguay S.A.		470,625		1,160,461		129,335		4,465,133,954		-		-		100.00		100.00
OCA S.A.		15,833		198,028		54,165		1,502,176,740		-		-		100.00		100.00
ACO Ltda.		14		3,767		99		-		-		131		99.24		99.24

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II - Composition of investments

a) The table below shows the major investments of ITAÚ UNIBANCO HOLDING CONSOLIDATED:

	% participation
	at 06/30/2016						06/30/2016
							Stockholders’							Equity in
	Total			Voting			equity		Net income			Investment		earnings
Domestic													4,225,431		264,843
BSF Holding S.A ^(1a)		49.00	%		49.00	%		2,064,098		205,107			1,270,800		100,503
Conectcar Soluções de Mobilidade Eletrônica S.A. ^(1b)		50.00	%		50.00	%		116,912		(21,286	)		185,113		(10,643	)
IRB-Brasil Resseguros S.A. ^{(2) (3)}		15.01	%		15.01	%		2,911,430		322,928			438,801		48,411
Porto Seguro Itaú Unibanco Participações S.A.⁽²⁾⁽³⁾		42.93	%		42.93	%		4,215,614		283,396			1,809,906		121,594
Others ^{(4a) (5)}													520,811		4,978
Foreign - Other ^(6a)													2,277		932
Total													4,227,708		265,775

	% participation
	at 06/30/2015						06/30/2015
							Stockholders’						Equity in
	Total			Voting			equity		Net income		Investment		earnings
Domestic												3,178,564		293,288
BSF Holding S.A.^(1c)		49.00	%		49.00	%		1,353,125		238,706		1,001,693		116,966
IRB-Brasil Resseguros S.A. ^{(2) (3)}		15.01	%		15.01	%		2,866,499		162,854		423,091		24,408
Porto Seguro Itaú Unibanco Participações S.A.^{(2) (3)}		42.93	%		42.93	%		3,831,260		334,489		1,644,932		143,608
Others ^{(4b) (5)}												108,848		8,306
Foreign - Others ^(6b)												1,890		640
Total												3,180,454		293,928

(1)

Includes goodwill in the amount of a) R$ 259,391 e b) R$ 126,657 at 06/30/2016. Includes goodwill in the amount of c) R$ 338,662 at 06/30/2015;

(2)

For the purpose of accounting for participation in earnings, the position at 05/31/2016 and 05/31/2015, as provided for in Circular Letter nº 1,963 of August 23, 1991, from BACEN;

(3)

Includes adjustments resulting from standardization of the financial statements of the investee to the financial policies to the investor’s;

(4)

a) At June 30, 2016, it includes companies Kinea Private Equity, Olímpia Promoção e Serviços S.A., Tecnologia Bancária S.A.. It also includes companies Eneva S.A. and Intercement Brasil S.A., which are not stated under the equity accounting. b) At June 30, 2015 it includes companies Kinea Private Equity, Olímpia Promoção e Serviços S.A. and Tecnologia Bancária S.A.

(5)

Includes equity in earnings not arising from net income.

(6)

a) At 06/30/2016, includes Compãnia Uruguaya de Medios de Processamiento and Rias Redbanc S.A. b) At 06/30/2015, includes Compãnia Uruguaya de Medios de Processamiento, Rias Redbanc S.A. and Rosefield Finance Ltda.

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III) Other investments

	06/30/2016			06/30/2015
Other investments		706,391			638,477
Shares and quotas		53,288			50,898
Investments through tax incentives		201,625			201,625
Equity securities		11,809			15,443
Other		439,669			370,511
(Allowance for loan losses)		(208,854	)		(208,917	)
Total		497,537			429,560
Equity - Other investments		4,451			4,740

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b) Fixed assets, goodwill and intangible assets

I) Fixed assets

				Real Estate in Use ^{(2) (3)}						Other Fixed Assets ^{(2) (3)}
																						Other
	Fixed assets																					(communication,
	under															Furniture and						security and
Real estate in use ⁽¹⁾	construction			Land			Buildings			Improvements			Installations			equipment			EDP Systems			transportation)			Total
Annual depreciation rates							4%			10%			10 a 20%			10 a 20%			20 a 50%			10 a 20%

Cost
Balance at 12/31/2015		790,756			939,157			3,025,558			1,673,074			1,801,698			973,937			5,940,644			858,567			16,003,391
Acquisitions		77,914			55,577			71,005			97,291			11,747			39,272			193,379			67,996			614,181
Disposals		-			(187	)		-			(41,772	)		(66	)		(6,704	)		(111,578	)		(1,129	)		(161,436	)
Exchange variation		(459	)		(2,405	)		(14,777	)		(44,525	)		11,792			51,222			54,883			14,185			69,916
Transfers		(489,433	)		-			11,337			37,942			-			1			397,270			-			(42,883	)
Other		(6,777	)		(142	)		(568	)		751			23,330			(1,433	)		(66,581	)		(1,508	)		(52,928	)
Balance at 06/30/2016		372,001			992,000			3,092,555			1,722,761			1,848,501			1,056,295			6,408,017			938,111			16,430,241

Depreciation
Balance at 12/31/2015		-			-			(1,764,172	)		(929,569	)		(841,462	)		(579,305	)		(4,276,197	)		(557,355	)		(8,948,060	)
Depreciation expenses		-			-			(39,781	)		(136,292	)		(72,630	)		(50,378	)		(403,825	)		(46,747	)		(749,653	)
Disposals		-			-			-			41,545			1			3,771			98,757			478			144,552
Exchange variation		-			-			(11,284	)		9,694			2,070			(16,411	)		(110,617	)		(5,874	)		(132,422	)
Other		-			-			409			(751	)		(12,868	)		1,526			55,293			1,500			45,109
Balance at 06/30/2016		-			-			(1,814,828	)		(1,015,373	)		(924,889	)		(640,797	)		(4,636,589	)		(607,998	)		(9,640,474	)

Impairment
Balance at 12/31/2015		-			-			-			-			-			-			-			-			-
Additions / assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 06/30/2016		-			-			-			-			-			-			-			-			-

Book value
Balance at 06/30/2016		372,001			992,000			1,277,727			707,388			923,612			415,498			1,771,428			330,113			6,789,767
Balance at 06/30/2015		922,544			943,488			1,284,272			753,482			1,004,488			400,978			1,784,269			285,386			7,378,907

(1)

The contractual commitments for the purchase of the fixed assets totaled R$ 51,700 achievable by 2016.

(2)

Includes amounts pledged in guarantee of voluntary deposits (Note 12d).

(3)

Includes the amount of R$ 4,068 (R$ 4,589 at 06/30/2015) related to attached real estate.

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II) Goodwill

Changes

Amortization

Balance at

Amortization

Exchange

Balance at

period

12/31/2015

Acquisitions

expenses

Disposals

variation

06/30/2016

06/30/2015

Goodwill (Notes 2b and 4j)

10 years

231,915

1,358,733

(47,387

)

(34,964

)

(29,229

)

1,479,068

212,738

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III) Intangible assets

				Other intangible assets
				Association for the
	Rights for			promotion and offer									Goodwill on
	acquisition of			of financial products			Acquisition of			Development of			Acquisition			Other Intangible
Intangible ⁽¹⁾	payroll ⁽²⁾			and services			software			software			(Note 4k)			Assets			Total
Annual amortization rates	20%			8%			20%			20%			20%			10% to 20%

Cost
Balance at 12/31/2015		1,004,449			1,408,589			2,298,862			3,310,640			1,812,300			887,580			10,722,420
Acquisitions		157,297			709,066			983,842			125,786			5,717,788			279,234			7,973,013
Disposals		(108,026	)		(15,914	)		(3,207	)		(832	)		-			(14	)		(127,993	)
Exchange variation		-			(5,528	)		(66,232	)		-			(10,311	)		(97,235	)		(179,306	)
Other		(5,996	)		(275,286	)		46,360			-			(11,254	)		(28,185	)		(274,361	)
Balance at 06/30/2016		1,047,724			1,820,927			3,259,625			3,435,594			7,508,523			1,041,380			18,113,773

Amortization
Balance at 12/31/2015		(599,634	)		(329,673	)		(1,187,484	)		(252,486	)		(356,144	)		(496,277	)		(3,221,698	)
Amortization expenses ⁽³⁾		(112,501	)		(105,071	)		(200,224	)		(113,178	)		(271,990	)		(25,639	)		(828,603	)
Disposals		105,694			15,914			153			-			-			14			121,775
Exchange variation		-			(62,441	)		(127,088	)		-			8,866			82,509			(98,154	)
Other		-			110,646			20,203			-			281			(1,929	)		129,201
Balance at 06/30/2016		(606,441	)		(370,625	)		(1,494,440	)		(365,664	)		(618,987	)		(441,322	)		(3,897,479	)

Impairment ⁽⁴⁾
Balance at 12/31/2015		(18,251	)		(1,792	)		-			(17,675	)		-			-			(37,718	)
Additions / assumptions		-			-			(3,084	)		(4,865	)		-			-			(7,949	)
Disposals		-			-			-			-			-			-			-
Balance at 06/30/2016		(18,251	)		(1,792	)		(3,084	)		(22,540	)		-			-			(45,667	)

Book value
Balance at 06/30/2016		423,032			1,448,510			1,762,101			3,047,390			6,889,536			600,058			14,170,627
Balance at 06/30/2015		409,172			1,129,175			1,109,888			2,887,097			1,569,850			1,512,590			8,617,772

(1)

The contractual commitments for the purchase of the new intangible assets totaled R$ 534,967 achievable by 2016.

(2)

Represents the recording of amounts paid for acquisition of rights to provide services of payment of salaries, proceeds, retirement and pension benefits and similar benefits.

(3)

Amortization expenses related to the rights for acquisition of payrolls and associations are disclosed in the expenses on financial operations.

(4)

Pursuant to BACEN Resolution No. 3,566, of May 29, 2001 (Note 13i).

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Note 16 – Stockholders' equity

Shares

The Extraordinary Stockholders` Meeting of April 27, 2016 approved the cancellation of 100,000,000 preferred shares of own issue held in treasury, without change to the capital stock, through the capitalization of amounts recorded in Revenue Reserves – Statutory Reserve. This process was approved by the Central Bank of Brazil on June 7, 2016.

Capital comprises 5,983,915,949 book-entry shares with no par value, of which 3,047,040,198 are common and 2,936,875,751 are preferred shares without voting rights, but with tag-along rights, in the event of the public offer of common shares, at a price equal to 80% of the amount paid per share with voting rights in the controlling stake, as well as a dividend at least equal to that of the common shares. Capital stock amounts to R$ 85,148,000 (R$ 85,148,000 at 06/30/2015), of which R$ 57,507,585 (R$ 58,151,513 at 06/30/2015) refers to stockholders domiciled in the country and R$ 27,640,415 (R$ 26,996,487 at 06/30/2015) refers to stockholders domiciled abroad.

The table below shows the change in shares of capital stock and treasury shares during the period:

	Number
	Common		Preferred			Total			Amount
Residents in Brazil at 12/31/2015		3,033,657,386		1,130,776,196			4,164,433,582
Residents abroad at 12/31/2015		13,382,812		1,906,099,555			1,919,482,367
Shares of capital stock at 12/31/2015		3,047,040,198		3,036,875,751			6,083,915,949
(-) Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		(100,000,000	)		(100,000,000	)
Shares of capital stock at 06/30/2016		3,047,040,198		2,936,875,751			5,983,915,949
Residents in Brazil at 06/30/2016		3,033,812,779		1,007,627,491			4,041,440,270
Residents abroad at 06/30/2016		13,227,419		1,929,248,260			1,942,475,679
Treasury shares at 12/31/2015		2,795		162,562,650			162,565,445			(4,353,380	)
Purchase of treasury shares		-		7,990,000			7,990,000			(200,200	)
Exercised – granting of stock options		-		(8,740,245	)		(8,740,245	)		151,353
Disposals – stock option plan		-		(7,624,995	)		(7,624,995	)		285,581
(-) Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		(100,000,000	)		(100,000,000	)		2,670,000
Treasury shares at 06/30/2016 ⁽¹⁾		2,795		54,187,410			54,190,205			(1,446,646	)
Outstanding shares at 06/30/2016		3,047,037,403		2,882,688,341			5,929,725,744
Outstanding shares at 06/30/2015		3,047,037,403		2,947,015,705			5,994,053,108

(1)

Own shares, purchased based on authorization of the Board of Directors, to be held in Treasury for subsequent cancellation or replacement in the market.

We detail below of the cost of shares purchased in the period, as well the average cost of treasury shares and their market price (in Brazilian reais per share) at 06/30/2016:

Cost / Market value	Common		Preferred
Minimum		-		23.79
Weighted average		-		25.06
Maximum		-		25.98
Treasury shares
Average cost		7.25		26.70
Market value		26.02		30.30

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166

Dividends

Stockholders are entitled to a mandatory dividend of not less than 25% of annual net income, which is adjusted according to the rules set forth in the Brazilian Corporate Law. Both types of shares participate equally, after common shares have received dividends equal to the annual minimum priority dividend of R$ 0.022 per share (non-cumulative) to be paid to preferred shares.

The calculation of the monthly advance of mandatory minimum dividend is based on the share position on the last day of the prior month, taking into consideration that the payment is made on the first business day of the subsequent month, amounting to R$ 0.015 per share.

I - Calculation

Net income - ITAÚ UNIBANCO HOLDING	8,938,277
Adjustments:
(-) Legal reserve	(446,914	)
Dividend calculation basis	8,491,363
Mandatory dividend	2,122,841
Dividend – paid / provided for	2,544,295		30.0	%

II – Payments / provision of interest on capital and dividends

	Gross		WTS			Net
Paid / Prepaid		444,283		-			444,283
Dividends - 05 monthly installments of R$ 0.015 per share paid in February to June 2016		444,283		-			444,283

Declared (recorded in other liabilities – Social and Statutory)		1,959,079		(280,521	)		1,678,558
Dividends - 1 monthly installment of R$ 0.015 per share paid on 07/01/2016		88,946		-			88,946
Interest on capital - R$ 0.3154 per share.		1,870,133		(280,521	)		1,589,612

Declared after June 30, 2016 (Recorded in Revenue Reserves – Unrealized profits)		495,828		(74,374	)		421,454
Interest on capital - R$ 0.0836 per share		495,828		(74,374	)		421,454

Total from 01/01 to 06/30/2016 - R$ 0.4291 net per share		2,899,190		(354,895	)		2,544,295
Total from 01/01 to 06/30/2015 - R$ 0.4291 net per share		2,883,340		(358,653	)		2,524,687

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Capital and revenue reserves - ITAÚ UNIBANCO HOLDING

	06/30/2016		06/30/2015
Capital reserves		1,329,803		1,331,243
Premium on subscription of shares		283,512		283,512
Granted options recognized – Law No. 11,638, Share-based instruments and Share-based payment		1,045,186		1,046,626
Reserves from tax incentives and restatement of equity securities and other		1,105		1,105
Revenue reserves		30,892,688		21,890,585
Legal		7,341,754		6,372,163
Statutory:		23,055,106		15,518,422
Dividends equalization ⁽¹⁾		9,849,181		5,927,334
Working capital increase ⁽²⁾		5,785,488		4,338,486
Increase in capital of investees ⁽³⁾		7,420,437		5,252,602
Unrealized profits ⁽⁴⁾		495,828		-

(1)

Reserve for Dividends Equalization – its purpose is to guarantee funds for the payment of advances on dividends, including interest on capital, to maintain the flow of the stockholders’ compensation.

(2)

Reserve for Working Capital Increase – its purpose is to guarantee funds for the company’s operations.

(3)

Reserve for Increase in Capital of Investees – its purpose is to guarantee the preferred subscription right in the capital increases of investees.

(4)

Refers to Interest on Capital declared after June 30 for each period, in compliance with BACEN Circular Letter nº 3,516, of July 21, 2011.

Reconciliation of net income and stockholders’ equity (Note 2b)

	Net income						Stockholders’ equity
	01/01 to			01/01 to
	06/30/2016			06/30/2015			06/30/2016			06/30/2015
ITAÚ UNIBANCO HOLDING		8,938,277			10,630,264			113,911,760			105,866,462
Amortization of goodwill		258,040			280,115			(278,376	)		(890,417	)
Corporate reorganizations (Note 4q)		923,306			931,248			(3,046,699	)		(4,265,463	)
Conversion adjustments of foreign investments (Note 4s)		582,479			(124,739	)		-			-
Foreign exchange variations of investments		2,731,376			(1,114,333	)		-			-
Hedge of net investments in foreign operations		(3,791,124	)		1,729,757			-			-
Tax effects – hedge of net investments in foreign operations		1,642,227			(740,163	)		-			-
ITAÚ UNIBANCO HOLDING CONSOLIDATED		10,702,102			11,716,888			110,586,685			100,710,582

Asset valuation adjustments - ITAÚ UNIBANCO HOLDING CONSOLIDADO

	06/30/2016			06/30/2015
Available-for-sale securities		(979,851	)		(707,635	)
Hedge cash flow		(796,342	)		707,499
Remeasurements in liabilities of post-employment benefits		(235,892	)		(161,104	)
Foreign exchange variation on investments / Net Investment Hedge in Foreign Operations		(399,656	)		94,932
Asset valuation adjustments		(2,411,741	)		(66,308	)

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Non-controlling interests

	Stockholders’ equity				Net Income
					01/01 to			01/01 to
	06/30/2016		06/30/2015		06/30/2016			06/30/2015
Itaú CorpBanca (Note 2c)		10,194,073		-		(3,853	)		-
Banco CorpBanca Colômbia S.A. (Note 2c)		1,297,006		-		(21,929	)		-
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		489,750		503,731		(56,485	)		(67,047	)
Banco Itaú BMG Consignado S.A.		952,677		885,097		(36,719	)		(70,764	)
Luizacred S.A. Soc. Cred. Financiamento Investimento		274,819		278,200		(22,184	)		(42,295	)
IGA Participações S.A.		14,056		54,926		(9,819	)		(1,690	)
Investimentos Bemge S.A.		25,008		22,991		(1,000	)		(844	)
Banco Investcred Unibanco S.A.		19,864		18,579		(659	)		1,279
Others		33,691		6,737		(5,570	)		(3,505	)
Total		13,300,944		1,770,261		(158,218	)		(184,866	)

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Share-based payment

ITAÚ UNIBANCO HOLDING and its subsidiaries have share-based payment programs aimed at involving its management members and employees in the medium and long term corporate development process.

These payments are only made in years where there are sufficient profits to enable the distribution of mandatory dividends, in order to limit the maximum dilutive effect to which stockholders are subject, and at a quantity that does not exceed the limit of 0.5% of the total shares held by the controlling and minority stockholders at the balance sheet date.

These programs are settled through the delivery of ITUB4 treasury shares to stockholders.

From 01/01 to 06/30/2016, the accounting effect of the share-based payment in income was R$ (312,916) (R$ (456,307) from 01/01 to 06/30/2015).

I –

Stock Option Plan (Simple Options)

ITAÚ UNIBANCO HOLDING has a Stock Option Plan (“Simple Options”) aimed at involving management members and employees in the medium and long term corporate development program of ITAÚ UNIBANCO HOLDING and its subsidiaries, offering them the opportunity to benefit from the appreciation that their work and dedication bring to the shares.

In addition to the grants provided under the Plan, ITAÚ UNIBANCO HOLDING also maintains control over the rights and obligations in connection with the options granted under the plans approved at the Extraordinary Stockholders’ Meetings held on April 24, 2009 and April 19, 2013 related to the Unibanco – União de Bancos Brasileiros S.A., Unibanco Holdings S.A. and Redecard S.A. stock option plans, respectively. Accordingly, the exchange of shares for ITUB4 did not have a relevant financial impact.

Simple options have the following characteristics:

Exercise price: calculated based on the average prices of shares in the three months of the year prior to the grant date. The prices determined will be restated to the last business day of the month prior to the option exercise date based on IGP-M or, in its absence, on an index to be determined internally, and should be paid within the period in force for the settlement of operations on BM&FBOVESPA.

Vesting period: determined upon issue, from one to seven years, counted from the grant date. The vesting period is normally determined at five years.

Fair value and economic assumptions for cost recognition: the fair value of Simple Options is calculated on the grant date based on the Binominal model. Economic assumptions used are as follows:

(i)

Exercise price: exercise price previously agreed upon the option issue, adjusted by the IGP-M variation;

(ii)

Price of the underlying asset (ITUB4 shares): closing price on BM&FBOVESPA on the calculation base date.

(iii)

Expected dividends: the average annual return rate for the last three years of dividends paid plus interest on capital of the ITUB4 share;

(iv)

Risk-free interest rate: IGP-M coupon rate at the expiration date of the Simple Option;

(v)

Expected volatility: calculated based on the standard deviation from the history of the last 84 monthly returns of the ITUB4 share closing prices, disclosed by BM&FBOVESPA, adjusted by the IGP-M variation.

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	Simple options
				Weighted		Weighted
				average		average
	Quantity			Exercise price		Market value
Opening balance at 12/31/2015		45,948,317			35.08
Options exercisable at the end of the period		32,407,235			36.74
Options outstanding but not exercisable		13,541,082			31.12
Options:
Granted		-			-
Canceled / Forfeited ^(*)		(57,891	)		34.21
Exercised		(665,703	)		26.17		32.16
Closing balance at 06/30/2016		45,224,723			37.48
Options exercisable at the end of the period		31,953,928			39.23
Options outstanding but not exercisable		13,270,795			33.27
Range of exercise prices
Granting 2009-2010					28,04 - 45,55
Granting 2011-2012					23,88 - 44,49
Weighted average of the remaining contractual life (in years)		2.13

(*) Refers to non-exercise based on the beneficiary’s decision.

	Simple options
				Weighted		Weighted
				average		average
	Quantity			Exercise price		Market value
Opening balance at 12/31/2014		55,162,112			32.43
Options exercisable at the end of the period		28,872,290			32.15
Options outstanding but not exercisable		26,289,822			32.73
Options:
Granted		-			-
Canceled / Forfeited ^(*)		(403,151	)		33.24
Exercised		(150,057	)		24.31		33.39
Closing balance at 06/30/2015		54,608,904			33.34
Options exercisable at the end of the period		28,673,987			33.25
Options outstanding but not exercisable		25,934,917			33.43
Range of exercise prices
Granting 2008-2009					24,82 - 37,95
Granting 2010-2012					23,88 - 39,30
Weighted average of the remaining contractual life (in years)		2.58

(*) Refers to non-exercise based on the beneficiary’s decision.

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ll – Partner Plan

The employees and management members of ITAÚ UNIBANCO HOLDING and its subsidiaries may be selected to participate in the program investing a percentage of their bonus to acquire ITUB4 shares and share-based instruments. Accordingly, the ownership of these shares should be held by the beneficiaries for a period from three to five years, counted from the initial investment, and are thus subject to market price variation. After complying with the suspensive conditions set forth in the program, beneficiaries will be entitled to receive ITUB4 as consideration, in accordance with the numbers of shares provided for in the program regulation.

The acquisition prices of own shares and Share-Based Instruments are established every six months and is equivalent to the average of the ITUB4 quotation in the 30 days prior to the determination of the acquisition price.

The fair value of the ITUB4 as consideration is the market price at the grant date, less expected dividends.

The weighted average of the fair value of the ITUB4 shares as consideration was estimated at R$ 21.40 per share at 06/30/2016 (R$ 33.33 per share at 06/30/2015).

Law No. 12,973/14, which adjusted the tax legislation to the international accounting standards and terminated the Transitional Tax Regime (RTT), set up a new legal framework for payments made in shares. We made changes to the Partner Plan, and adjusted its tax effects, with conform with this new legislation.

Changes in the Partner Program

	Quantity
Closing balance at 12/31/2015		30,605,777
New granted		11,263,474
Cancelled		(207,687	)
Exercised		(8,074,541	)
Balance at 06/30/2016		33,587,023
Weighted average of remaining contractual life (years)		3.04

	Quantity
Balance at 12/31/2014		26,734,428
New granted		10,402,580
Cancelled		(514,102	)
Exercised		(2,286,148	)
Balance at 06/30/2015		34,336,759
Weighted average of remaining contractual life (years)		2.30

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III- Variable Compensation

The policy established in compliance with CMN Resolution No. 3,921/10 sets forth that fifty percent (50%) of the management’s variable compensation should be paid in cash and fifty percent (50%) should be paid in shares for a period of three years. Shares are delivered on a deferred basis, of which one-third (1/3) per year, will be contingent upon the executive’s remaining with the institution. The deferred unpaid portions may be reversed proportionally to the significant reduction of the recurring income realized or the negative income for the period.

The fair value of the ITUB4 share is the market price at its grant date.

The weighted average of the fair value of ITUB4 shares was estimated at R$ 24.16 per share at 06/30/2016 (R$ 31.24 per share at 06/30/2015).

Change in variable compensation in shares	2016
	Quantity
Balance at 12/31/2015		20,295,976
New		12,202,238
Delivered		(10,123,397	)
Cancelled		(60,164	)
Balance at 06/30/2016		22,314,653

Change in variable compensation in shares	2015
	Quantity
Balance at 12/31/2014		16,366,009
New		11,837,297
Delivered		(7,551,017	)
Cancelled		(540,168	)
Balance at 06/30/2015		20,112,121

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Note 17 – Related parties

Transactions between related parties are disclosed in compliance with CVM Resolution n° 642, of October 7, 2010, and CMN Resolution n° 3,750 of June 30, 2009. These transactions are carried out at amounts, terms and average rates in accordance with normal market practices during the period, as well as under reciprocal conditions.

Transactions between companies included in consolidation were eliminated from the consolidated financial statements and the lack of risk is taken into consideration.

The unconsolidated related parties are as follows:

Itaú Unibanco Participações S.A. (IUPAR), the Companhia E.Johnston de Participações S.A. (shareholder of IUPAR) and ITAÚSA, direct and indirect shareholders of ITAÚ UNIBANCO HOLDING;

The non-financial subsidiaries of ITAÚSA, specially: Itautec S.A., Duratex S.A., Elekeiroz S.A., ITH Zux Cayman Company Ltd and Itaúsa Empreendimentos S.A.;

Fundação Itaú Unibanco - Previdência Complementar and FUNBEP – Fundo de Pensão Multipatrocinado, closed-end supplementary pension entities that administer retirement plans sponsored by ITAÚ UNIBANCO HOLDING and / or its subsidiaries;

Fundação Itaú Social, Instituto Itaú Cultural, Instituto Unibanco, Instituto Assistencial Pedro Di Perna, Instituto Unibanco de Cinema, Associação Itaú Viver Mais and Associação Cubo Coworking Itaú, entities sponsored by ITAÚ UNIBANCO and subsidiaries to act in their respective areas of interest, as described in Notes 22e and 22j; and

Investments in Porto Seguro Itaú Unibanco Participações S.A. and BSF Holding S.A.

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The transactions with these related parties are basically characterized by:

	ITAÚ UNIBANCO HOLDING												ITAÚ UNIBANCO HOLDING CONSOLIDATED
	Assets / (liabilities)						Revenue / (expense)						Assets / (liabilities)						Revenue / (expense)
							01/01 to			01/01 to									01/01 to			01/01 to
	06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015
Interbank investments		65,547,674			59,203,807			3,708,506			2,105,421			-			-			-			-
Itaú Unibanco S.A.		36,889,229			31,092,262			2,830,908			1,817,882			-			-			-			-
Agência Grand Cayman		8,891,920			8,696,448			310,767			248,833			-			-			-			-
Itaú Unibanco S.A. Nassau Branch		19,766,525			19,415,097			566,831			38,706			-			-			-			-
Securities and derivative financial instruments		-			-			-			409,774			-			-			-			-
Agência Grand Cayman		-			-			-			409,774			-			-			-			-
Deposits		(12,769,287	)		-			(214,060	)		-			-			-			-			-
Itaú Unibanco S.A. Nassau Branch		(12,769,287	)		-			(214,060	)		-			-			-			-			-
Securities sold under repurchase agreements		-			-			-			(87,362	)		(131,347	)		(199,175	)		(11,665	)		(12,869	)
Duratex S.A.		-			-			-			-			(17,892	)		(72,269	)		(2,310	)		(5,691	)
Elekeiroz S.A.		-			-			-			-			(7,659	)		(4,991	)		(504	)		(243	)
Itautec S.A.		-			-			-			-			(10,051	)		(1,629	)		(2,871	)		(91	)
Itaúsa Empreendimentos S.A.		-			-			-			-			(67,822	)		(96,399	)		(4,271	)		(5,553	)
Olimpia Promoção e Serviços S.A.		-			-			-			-			(12,638	)		(10,454	)		(733	)		(509	)
Others		-			-			-			(87,362	)		(15,285	)		(13,433	)		(976	)		(782	)
Amounts receivable from (payable to) related companies / Banking service fees (expenses)		(32,310	)		(324	)		(2,101	)		(1,767	)		(124,590	)		(118,023	)		14,505			5,055
Itaú Unibanco S.A.		-			(30	)		-			-			-			-			-			-
Itaú Corretora de Valores S. A.		(325	)		(294	)		(2,101	)		(1,765	)		-			-			-			-
Itaúsa Investimentos Itaú S.A.		-			-			-			-			(205	)		-			1,442			893
Itaúsa Empreendimentos S.A.		-			-			-			-			-			-			-			(3,296	)
Itaú Unibanco S.A. Nassau Branch		(31,985	)		-			-			-			-			-			-			-
Olimpia Promoção e Serviços S.A.		-			-			-			-			(1,827	)		(2,022	)		(12,501	)		(13,944	)
Fundação Itaú Unibanco - Previdência Complementar		-			-			-			-			(122,633	)		(116,114	)		21,022			17,993
FUNBEP - Fundo de Pensão Multipatrocinado		-			-			-			-			317			274			2,770			2,533
Others		-			-			-			(2	)		(242	)		(161	)		1,772			876
Rent revenues (expenses)		-			-			(140	)		(124	)		-			-			(29,188	)		(27,026	)
Itaúsa Investimentos Itaú S.A.		-			-			(11	)		-			-			-			(1,030	)		(850	)
Itaú Seguros S.A.		-			-			(94	)		(95	)		-			-			-			-
Fundação Itaú Unibanco - Previdência Complementar		-			-			-			-			-			-			(21,735	)		(19,665	)
FUNBEP - Fundo de Pensão Multipatrocinado		-			-			-			-			-			-			(6,352	)		(6,383	)
Others		-			-			(35	)		(29	)		-			-			(71	)		(128	)
Donation expenses		-			-			-			-			-			-			(49,621	)		(46,380	)
Instituto Itaú Cultural		-			-			-			-			-			-			(45,000	)		(45,500	)
Associação Itaú Viver Mais		-			-			-			-			-			-			-			(880	)
Others		-			-			-			-			-			-			(4,621	)		-

In addition to the aforementioned operations, ITAÚ UNIBANCO HOLDING and non-consolidated related parties, as an integral part of the Agreement for apportionment of common costs of Itaú Unibanco, recorded in Other Administrative Expenses in the amount of R$ (3,780) (R$ (1,971) from 01/01 to 06/30/2015) in view of the use of the common structure.

In accordance with the rules in effect, the financial institutions cannot grant loans or advances to the following:

any individual or company that control the Institution or any entity under common control with the institution, or any officer, director, fiscal council member or direct relative of such individuals;

any entity controlled by the Institution; or

any entity of which the bank directly or indirectly holds at least 10% of the capital stock.

Therefore, no loans or advances are made to any subsidiaries, executive officers, Board of Directors members or their relatives.

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Compensation of management key personnel

The fees attributed in the period to ITAÚ UNIBANCO HOLDING CONSOLIDATED management members are as follows:

	01/01 to		01/01 to
	06/30/2016		06/30/2015
Compensation		173,222		232,509
Board of Directors		20,430		11,881
Management members		152,792		220,628
Profit sharing		98,500		107,385
Board of Directors		1,166		195
Management members		97,334		107,190
Contributions to pension plans		6,476		5,441
Board of Directors		116		2
Management members		6,360		5,439
Stock option plan – Management members		146,816		105,119
Total		425,014		450,454

Information related to the granting of the share-based payment, benefits to employees and post-employment benefits is detailed in Notes 16g II and 19, respectively.

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Note 18 - Market value

The financial statements are prepared in accordance with accounting principles which assume the normal continuity of the operations of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

The book value of each financial instrument, whether included or not in the balance sheet (comprises investments in affiliates and other investments), when compared to the value that might be obtained in an active market, or in the absence of such a market, using the net present value of future cash flows adjusted based on the current market interest, is approximately equal to the market value, or does not have a market quotation available, except for the instruments in the table below:

									Effects ⁽¹⁾
	Book value				Market				Results						Stockholders’ equity
	06/30/2016		06/30/2015		06/30/2016		06/30/2015		06/30/2016			06/30/2015			06/30/2016			06/30/2015
Interbank deposits		25,358,643		30,966,721		25,367,473		30,967,040		8,830			319			8,830			319
Securities and derivative financial instruments		358,266,632		334,727,443		358,395,823		334,566,939		(1,579,975	)		(1,307,322	)		129,191			(160,504	)
Adjustment of available-for-sale securities										(1,176,947	)		(472,047	)		-			-
Adjustment of held-to-maturity securities										(403,028	)		(835,275	)		129,191			(160,504	)
Loan, lease and other credit operations		459,489,077		429,331,809		464,319,602		431,705,341		4,830,525			2,373,532			4,830,525			2,373,532
Investments
BM&FBOVESPA		14,610		14,610		197,310		128,471		182,700			113,861			182,700			113,861
Porto Seguro Itaú Unibanco Participações S.A. ⁽²⁾		1,809,906		1,644,932		2,629,325		4,069,310		819,419			2,424,378			819,419			2,424,378
Funding and borrowing ⁽³⁾		282,331,144		217,620,324		283,420,387		218,519,028		(1,089,243	)		(898,704	)		(1,089,243	)		(898,704	)
Subordinated debt (Note 10f)		60,282,082		59,228,350		60,966,964		59,816,966		(684,882	)		(588,616	)		(684,882	)		(588,616	)
Treasury shares		1,446,646		2,342,126		1,641,951		2,795,549		-			-			195,305			453,423

(1)

This does not consider the corresponding tax effects.

(2)

Parent company of Porto Seguro S.A.

(3)

Funding is represented by interbank and time deposits, funds from acceptance and issuance of securities and borrowing.

Fair value is a measurement based, whenever possible, on information observable in the market. It is the price estimated at which a non-mandatory transaction to sell an asset or to transfer a liability would occur between market players, on the measurement date, under current market conditions. It does not represent unrealized results of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

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To obtain the market values for these financial instruments, the following criteria were adopted:

Interbank investments were determined based on their nominal amounts, monetarily restated as at their maturity dates and discounted to present value using future market interest rates and swap market rates for fixed-rate securities and using market interest rates for fixed-rate securities, achieved up to the closing of BM&FBOVESPA at the balance sheet date, for floating-rate securities;

Securities and derivative financial instruments, according to the rules established by Circulars No. 3,068 and 3,082 of November 8, 2001 and January 30, 2002, respectively, issued by BACEN, are recorded at their market values, except for those classified as Held to Maturity. Government securities allocated in this category have their market value calculated based on the rates obtained in the market, and validated through the comparison with information provided by the National Association of Financial Market Institutions (ANBIMA). Private securities included in this category have their market value calculated using a criterion similar to the one adopted for Investments in Interbank Deposits, as described above;

Loans with maturities over 90 days, when available, were calculated based on the net present value of future cash flows discounted at market interest rates effective on the balance sheet date;

Investments - in companies BM&FBOVESPA and Porto Seguro at the share value quoted on stock exchanges.

Time and interbank deposits and funds from the acceptance and issuance of securities and foreign borrowing through securities, when available, were calculated based on their present value determined by future cash flows discounted at market rates obtained at the closing of BM&FBOVESPA on the balance sheet date;

Subordinated debt, based on the net present value of future fixed or floating cash flows in foreign currency, net of the market interest rates effective on the balance sheet date and considering the credit risk of the issuer. The floating cash flows are estimated from the interest curves of the indexation market places;

Treasury shares are valued according to the average quotation available on the last trading day of the month or, if this is not available, according to the most recent quotation on prior trading days, published in the daily bulletin of each Stock Exchange.

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Note 19 – Post-Employments Benefits

We present the policies adopted by ITAÚ UNIBANCO HOLDING CONSOLIDATED and its subsidiaries regarding benefits to employees, as well as the accounting procedures adopted.

The total amounts recognized in Income for the Period and Stockholders’ Equity – Asset valuation adjustment were as follows:

Total amounts recognized in Income for the period

	Defined benefit						Defined contribution						Other benefits						Total
	01/01 to			01/01 to			01/01 to			01/01 to			01/01 to			01/01 to			01/01 to			01/01 to
	06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015
Cost of current service		(30,766	)		(32,844	)		-			-			-			-			(30,766	)		(32,844	)
Net interest		(5,540	)		(2,997	)		119,569			109,401			(9,751	)		(8,495	)		104,278			97,909
Contribution		-			-			(63,526	)		(70,265	)		-			-			(63,526	)		(70,265	)
Benefits paid		-			-			-			-			6,514			7,153			6,514			7,153
Total Amounts Recognized		(36,306	)		(35,841	)		56,043			39,136			(3,237	)		(1,342	)		16,500			1,953

In the period, contributions to the defined contributions plan, including PGBL, totaled R$ 163,295 (R$ 110,869 from 01/01 to 06/302015), of which R$ 63,526 (R$ 70,265 from 01/01 to 06/30/2015) arising from social security funds.

Total amounts recognized in Stockholders’ Equity – Asset valuation adjustment

	Defined benefit						Defined contribution						Other benefits						Total
	06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015
At the beginning of the period		(44,638	)		(75,206	)		(315,282	)		(220,808	)		(12,570	)		(8,436	)		(372,490	)		(304,450	)
Effects on asset ceiling		(13,613	)		13,851			3,786			(9,888	)		-			-			(9,827	)		3,963
Remeasurements		14,125			5,821			(1,463	)		22,117			-			-			12,662			27,938
Total Amounts Recognized		(44,126	)		(55,534	)		(312,959	)		(208,579	)		(12,570	)		(8,436	)		(369,655	)		(272,549	)

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a) Retirement plans

ITAÚ UNIBANCO HOLDING CONSOLIDATED and some of its subsidiaries sponsor defined benefit and variable contribution plans, whose basic purpose is to grant benefits that, in general, provide a life annuity benefit, and may be converted into survivorship annuities, according to the plan's regulations. They also sponsor defined contribution plans, the benefit of which is calculated based on the accumulated balance at the eligibility date, according to the plan's regulations, which does not require actuarial calculation, except as described in Note 19c.

Employees hired prior to July 31, 2002, for those who came from Itaú, and prior to February 27, 2009 for those who came from Unibanco, are beneficiaries of the above-mentioned plans. As regards the employees hired after these dates, they have the option to voluntarily participate in a variable contribution plan (PGBL), managed by Itaú Vida e Previdência S.A.

Supplementary plans are managed by closed-end private pension entities with independent legal structures, as detailed below:

Entity		Benefit plan
Fundação Itaubanco - Previdência Complementar		Supplementary retirement plan – PAC ⁽¹⁾
		Franprev benefit plan - PBF ⁽¹⁾
		002 benefit plan - PB002 ⁽¹⁾
		Itaulam basic plan - PBI ⁽¹⁾
		Itaulam Supplementary Plan - PSI ⁽²⁾
		Itaubanco Defined Contribution Plan ⁽³⁾
		Itaubank Retirement Plan ⁽³⁾
		Itaú Defined Benefit Plan ⁽¹⁾
		Itaú Defined Contribution Plan ⁽²⁾
		Unibanco Pension Plan ⁽³⁾
		Prebeg benefit plan ⁽¹⁾
		UBB PREV defined benefit plan ⁽¹⁾
		Benefit Plan II ⁽¹⁾
		Supplementary Retirement Plan – Flexible Premium Annuity (ACMV) ⁽¹⁾
		REDECARD Basic Retirement Plan ⁽¹⁾
		REDECARD Supplementary Retirement Plan ⁽²⁾
		REDECARD Pension Plan ⁽³⁾
		ITAUCARD Retirement Defined Benefit Plan ⁽¹⁾
		ITAUCARD Supplementary Retirement Plan ⁽²⁾
Funbep Fundo de Pensão Multipatrocinado		Funbep I Benefit Plan ⁽¹⁾
		Funbep II Benefit Plan ⁽²⁾

(1) Defined benefit plan;

(2) Variable contribution plan;

(3) Defined contribution plan.

Governance

The closed-end private pension entities (EFPC) and benefit plans they manage are regulated in conformity with the related specific legislation. The EFPC are managed by the Executive Board, Advisory Council and Fiscal Council, with some members appointed by the sponsors and others appointed as representatives of active and other participants, pursuant to the respective Entity’s bylaws. The main purpose of the EFPC is to pay benefits to eligible participants, pursuant to the Plan Regulations, maintaining the plans assets invested separately and independently from ITAÚ UNIBANCO HOLDING CONSOLIDATED.

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c) Defined benefit plan

I - Main assumptions used in actuarial valuation of Retirement Plans

	06/30/2016	06/30/2015
Discount rate ⁽¹⁾	11.28% a.a.	10.24% p.a.
Mortality table ⁽²⁾	AT-2000	AT-2000
	Itaú Experience	Itaú Experience
Turnover ⁽³⁾	2008/2010	2008/2010
Future salary growth	5.04% a 7.12 % p.a.	5.04% a 7.12 % p.a.
Growth of the pension fund and social security benefits	4.00 % p.a.	4.00 % p.a.
Inflation	4.00 % p.a.	4.00 % p.a.
Actuarial method ⁽⁴⁾	Projected Unit Credit	Projected Unit Credit

(1) The adoption of this assumption is based on interest rates obtained from the actual interest curve in IPCA, for medium term liabilities of retirement plans sponsored by ITAÚ UNIBANCO HOLDING CONSOLIDATED. At 12/31/2015 assumption were adopted consistently with the economic scenario at the balance sheet date rate, considering the volatility of the interest markets and the models adopted.

(2) The mortality tables adopted correspond to those disclosed by Society of Actuaries (SOA), the North-American Entity which corresponds to Brazilian Institute of Actuarial Science (IBA), which reflects a 10% increase in the probabilities of survival compared to the respective basic tables.

The life expectancy in years per the AT-2000 mortality table for participants aged 55 years is 27 and 31 years for men and women, respectively.

(3) The turnover assumption is based on the effective experience of ITAÚ UNIBANCO HOLDING CONSOLIDATED, resulting in the average of 2.4% p.a. based on the 2008/2010 experience.

(4) Using the Projected Unit Credit, the mathematical reserve is determined based on the current projected benefit amount multiplied by the ratio between the length of service in the company at the assessment date and the length of service that will be reached at the date when the benefit is granted. The cost is determined taking into account the current projected benefit amount distributed over the years that each participant is employed.

In case of benefits sponsored by foreign subsidiaries, actuarial assumptions adequate to the group of participants and the country's economic scenario are adopted.

Biometric/demographic assumptions adopted are consistent with the group of participants of each benefit plan, pursuant to the studies carried out by an independent external actuarial consulting company.

The main differences between the assumptions above and those adopted upon determination of the actuarial liability of defined benefit plans, for the purposes of recording in the balance sheet of the closed-end private pension entities (EFPCs) that manage them, are the discount rate and the actuarial method. Regarding the discount rate assumption, EFPCs adopt a rate consistent with the flow of receipts/payments, in accordance with the study conducted by an independent external consulting company. Regarding the actuarial method, the aggregate method is adopted, by which the mathematical reserve is defined based on the difference between the present value of the projected benefit and the present value of future contributions, subject to the methodology defined in the respective actuarial technical note.

II- Risk Exposure

Due to its defined benefit plans, ITAÚ UNIBANCO HOLDING CONSOLIDATED is exposed to a number of risks, the most significant ones are:

- Volatility of assets

The actuarial liability is calculated by adopting a discount rate defined based on the income related to securities issued by the Brazilian treasury (government securities). If the actual income related to plan investments is lower than expected, this may give rise to a deficit. The plans have a significant percentage of fixed-income securities pegged to the plan commitments, aimed at minimizing volatility and short and medium term risk.

- Changes in investment income

A decrease in income related to public securities will imply a decrease in the discount rate and, therefore, will increase the plan’s actuarial liability. The effect will be partially offset by the recognition of these securities at market value.

- Inflation risk

Most of the plan benefits are pegged to the inflation rates, and a higher inflation will lead to higher obligations. The effect will also be partially offset because a significant portion of the plan assets is pegged to government securities restated at the inflation rate.

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- Life expectancy

Most of the plan obligations are to provide life benefits, and therefore an increase in life expectancy will result in increased plan liabilities.

III –Management of defined benefit plan assets

The general purpose of managing EFPC funds is to search for a long term balance between assets and obligations to pay of retirement benefits, by exceeding the actuarial targets (discount rate plus benefit adjustment index, established in the plan regulations).

Regarding the assets guaranteeing the actuarial liability reserves, management should ensure the payment capacity of retirement benefits in the long term by avoiding the risk of mismatching assets and liabilities in each pension plan.

At 06/30/2016 and 06/30/2015 the allocation of plan assets and the allocation target for 2016, by type of asset, are as follows:

	Fair value				% Allocation
Types	06/30/2016		06/30/2015		06/30/2016			06/30/2015			2016 Target
Fixed income securities		12,676,141		12,527,427		90.78	%		91.15	%	53% to 100%
Variable income securities		589,410		655,102		4.22	%		4.77	%	0% to 20%
Structured investments		756		24,083		0.01	%		0.18	%	0% to 10%
Real estate		627,775		475,199		4.50	%		3.46	%	0% to 7%
Loans to participants		70,128		61,861		0.50	%		0.45	%	0% to 5%
Total		13,964,210		13,743,672		100.00	%		100.00	%

The defined benefit plan assets include shares of ITAÚ UNIBANCO HOLDING CONSOLIDATED, its main parent company (ITAÚSA) and of subsidiaries of the latter, with a fair value of R$ 489,279 (R$ 566,748 at 06/30/2015), and real estate rented to Group companies, with a fair value of R$ 601,323 (R$ 444,899 at 06/30/2015).

Fair value - the fair value of the plan assets is adjusted up to the Balance Sheet date, as follows:

Fixed-Income Securities and Structured Investments – accounted for at market value, considering the average trading price on the calculation date, net realizable value obtained upon the technical addition of pricing, considering, at least, the payment terms and maturity, credit risk and the indexing unit.

Variable income securities – accounted for at market value, taken to be understood the share average quotation at the last day of the month or at the closest date on the stock exchange on which the share has posted the highest liquidity rate.

Real Estate – stated at acquisition or construction cost, adjusted to market value based on reappraisals made in 2015, supported by technical appraisal reports. Depreciation is calculated under the straight line method, considering the useful life of the real estate.

Loans to participants – adjusted up to the report date, in compliance with the respective agreements.

Fund Allocation Target - the fund allocation target is based on Investment Policies that are currently revised and approved by the Advisory Council of each EFPC, considering a five-year period, which establishes guidelines for investing funds guaranteeing Actuarial Liability and for classifying securities.

IV- Net amount recognized in the balance sheet

Following is the calculation of the net amount recognized in the balance sheet, corresponding to the defined benefit plan:

	06/30/2016			06/30/2015
1 - Net assets of the plans		13,964,210			13,743,672
2 - Actuarial liabilities		(11,975,949	)		(11,909,687	)
3 - Surplus (1-2)		1,988,261			1,833,985
4 - Asset restriction (*)		(2,268,267	)		(1,922,890	)
5 - Net amount recognized in the balance sheet (3-4)		(280,006	)		(88,905	)
Amount recognized in Assets (Note 13a)		230,735			263,861
Amount recognized in Liabilities (Note 13c)		(510,741	)		(352,766	)

(*) Corresponds to the excess of the present value of the available economic benefit, in conformity with Bacen Resolution nº 4,424/15.

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V- Changes in the net amount recognized in the balance sheet:

	06/30/2016
	Plan net assets			Actuarial liabilities			Surplus			Asset Ceiling			Recognized amount
Value at the beginning of the period		13,633,401			(11,587,180	)		2,046,221			(2,133,856	)		(87,635	)
Cost of current service		-			(30,766	)		(30,766	)		-			(30,766	)
Net interest ⁽¹⁾		741,575			(626,317	)		115,258			(120,798	)		(5,540	)
Benefits paid		(438,002	)		438,002			-			-			-
Contributions of sponsor		31,684			-			31,684			-			31,684
Contributions of participants		6,766			-			6,766			-			6,766
Effects on asset ceiling		-			-			-			(13,613	)		(13,613	)
Balance arising from the merger with		-			(206,561	)		(206,561	)		-			(206,561	)
Exchange variation		(11,214	)		29,514			18,300			-			18,300
Remeasurements ^{(2) (3)}		-			7,359			7,359			-			7,359
Value at end of the period		13,964,210			(11,975,949	)		1,988,261			(2,268,267	)		(280,006	)

	06/30/2015
	Plan net assets			Actuarial liabilities			Surplus			Asset Ceiling			Recognized amount
Value at the beginning of the period		13,437,757			(11,694,678	)		1,743,079			(1,847,316	)		(104,237	)
Cost of current service		-			(32,844	)		(32,844	)		-			(32,844	)
Net interest ⁽¹⁾		667,230			(575,871	)		91,359			(94,356	)		(2,997	)
Benefits paid		(404,467	)		404,467			-			-			-
Contributions of sponsor		31,501			-			31,501			-			31,501
Contributions of participants		6,448			-			6,448			-			6,448
Effects on asset ceiling		-			-			-			13,851			13,851
Remeasurements ^{(2) (3)}		5,203			(10,761	)		(5,558	)		4,931			(627	)
Value at end of the period		13,743,672			(11,909,687	)		1,833,985			(1,922,890	)		(88,905	)

(1) Corresponds to the amount calculated on 01/01/2016 based on the beginning amount (Net Assets, Actuarial Liabilities and Restriction of Assets), taking into account the estimated amount of payments/ receipts of benefits/ contributions, multiplied by the discount rate of 11.28% p.a.(On 01/01/2015 the rate used was 10.24% p.a.).

(2) Remeasurements recorded in net assets and asset ceiling correspond to the income earned above/below the expected return rate.

(3) The actual return on assets amounted to R$ 741,575 (R$ 672,433 at 06/30/2015).

During the period, contributions made totaled R$ 31,684 (R$ 31,501 from 01/01 to 06/30/2015). The contribution rate increases based on the beneficiary’s salary.

In 2016, the expected contribution to retirement plans sponsored by ITAÚ UNIBANCO HOLDING CONSOLIDATED is R$ 54,871.

The estimate for payment of benefits for the next 10 years is as follows:

	Estimated
Period	payment
2016		949,161
2017		976,687
2018		1,008,715
2019		1,041,954
2020		1,083,423
2021 to 2025		5,935,349

VI- Sensitivity of defined benefit obligation

The impact, due to the change in the assumption – discount rate by 0.5%, which would be recognized in Actuarial liabilities of the plans, as well as in Stockholders’ Equity – Asset valuation adjustment of the sponsor (before taxes) would amount to:

							Effect which would be
	Effects on actuarial liabilities						recognized in Stockholders’
Change in Assumption	of the plans						*Equity ^()**
				Percentage of
				actuarial
	Value			liabilities			Value
- Decrease by 0.5%		566,363			4.92	%		(280,500	)
- Increase by 0.5%		(519,825	)		(4.51	)%		201,040

(*) Net of effects of asset ceiling.

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Defined contribution plans

The defined contribution plans have pension funds set up using the portion of sponsors’ contributions not included in the participant’s accounts balance and by the loss of eligibility to a plan benefit, as well as by resources from the migration from the defined benefit plans. The fund will be used for future contributions to the individual participants' accounts, according to the rules of the respective benefit plan regulation.

I - Change in the net amount recognized in the balance sheet:

	06/30/2016									06/30/2015
	Pension Plan Fund			Asset Ceiling			Recognized Amount			Pension Plan Fund			Asset Ceiling			Recognized Amount
Amount - beginning of the period		2,228,597			(269,828	)		1,958,769			2,438,272			(223,616	)		2,214,656
Net interest		134,787			(15,218	)		119,569			119,625			(10,224	)		109,401
Contribution (Note 19)		(63,526	)		-			(63,526	)		(70,265	)		-			(70,265	)
Effects on asset ceiling		-			3,786			3,786			-			(9,888	)		(9,888	)
Remeasurements		(1,463	)		-			(1,463	)		9,964			12,153			22,117
Amount - end of the period (Note 13a)		2,298,395			(281,260	)		2,017,135			2,497,596			(231,575	)		2,266,021

Other post-employment benefits

ITAÚ UNIBANCO HOLDING CONSOLIDATED and its subsidiaries do not offer other post-employment benefits, except in those cases arising from obligations under acquisition agreements signed by ITAÚ UNIBANCO HOLDING CONSOLIDATED, as well as in relation to the benefits granted due to a judicial sentence, in accordance with the terms and conditions established, in which health plans are totally or partially sponsored for specific groups of former workers and beneficiaries.

Based on the report prepared by an independent actuary, the changes in obligations for these other projected benefits and the amounts recognized in the balance sheet, under liabilities, of ITAÚ UNIBANCO HOLDING are as follows:

I - Change in the net amount recognized in the balance sheet:

	06/30/2016			06/30/2015
At the beginning of the period		(178,811	)		(170,593	)
Cost of interest		(9,751	)		(8,495	)
Benefits paid		6,514			7,153
Remeasurements		-			-
At the end of the period (Note 13c)		(182,048	)		(171,935	)

The estimate for payment of benefits for the next 10 years is as follows:

	Estimated
Period	payment
2016		11,839
2017		12,724
2018		13,599
2019		14,500
2020		15,377
2021 to 2025		91,514

II - Sensitivity Analyses - Cost of Healthcare

For calculation of benefits obligations projected beyond the assumptions used for the defined benefit plans (Note 19c l), the 8.16% p.a. increase in medical costs assumption is adopted.

Assumptions for rates related to medical assistance costs have a significant impact on the amounts recognized in income. A change of one percentage point in the medical assistance cost rates would have the following effects:

	Recognition	1% increase		1% decrease
Service cost and cost of interest	Income		3,568		(3,034	)
Present value of obligation	Asset valuation adjustment		20,077		(16,977	)

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Note 20 – Information on foreign subsidiaries

	Foreign branches ⁽¹⁾						Latin America consolidated ⁽²⁾						Itaú Europe consolidated ⁽³⁾						Cayman consolidated ⁽⁴⁾						Other foreign companies ⁽⁵⁾						Foreign consolidated ⁽⁶⁾
	06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015			06/30/2016			06/30/2015
Assets
Current assets and long term receivables
Cash and cash equivalents		4,894,504			3,208,117			9,922,000			5,475,154			728,344			645,158			35,213,158			23,135,300			1,548,479			1,304,270			14,954,632			9,910,468
Interbank investments		32,610,612			29,353,775			9,691,635			4,256,180			7,931,874			3,516,117			17,995,996			4,397,089			58,861			902,037			20,319,601			23,654,553
Securities		73,359,599			53,313,150			19,965,950			6,930,085			3,923,725			4,150,749			11,776,401			15,811,503			264,031			34,006			107,437,898			79,551,134
Loan, lease and other credit operations		92,092,131			100,498,402			115,437,973			45,585,383			14,485,728			14,829,549			119,063			141,480			-			1,261			221,830,855			160,962,786
Foreign exchange portfolio		45,186,080			63,123,785			4,190,049			1,464,452			2,566,568			4,780,241			-			4			-			-			51,730,235			69,217,050
Other assets		8,623,457			5,630,208			10,280,700			6,640,301			723,455			418,869			157,116			577,302			107,563			903,975			19,552,622			13,936,864
Permanent assets
Investments		98			92			71,195			8,457			15,705			15,476			194,578			192,354			713,003			685,039			87,258			24,275
Fixed and intangible assets		13,375			17,138			8,113,897			873,534			99,465			144,239			-			80			17,564			19,594			8,194,175			1,054,585
Total		256,779,856			255,144,667			177,673,399			71,233,546			30,474,864			28,500,398			65,456,312			44,255,112			2,709,501			3,850,182			444,107,276			358,311,715
Liabilities
Current and long term liabilities
Deposits		84,261,079			75,175,342			101,489,811			43,934,586			15,072,501			10,347,113			15,870,908			1,182,083			-			-			141,040,046			101,696,631
Demand deposits		51,289,766			36,461,414			21,537,098			12,838,706			9,609,055			7,862,986			12,711			1,107,335			-			-			44,270,970			34,409,866
Savings deposits		-			-			9,448,670			9,138,156			-			-			-			-			-			-			9,434,998			9,138,156
Interbank deposits		23,335,004			27,706,386			124,764			150,499			2,344,858			1,577,614			15,858,197			74,748			-			-			5,068,969			25,113,305
Time deposits		9,636,309			11,007,542			70,379,279			21,807,225			3,118,588			906,513			-			-			-			-			82,265,109			33,035,304
Deposits received under securities repurchase agreements		17,455,817			15,528,011			1,936,819			677,347			-			308,697			10,996,934			13,035,984			-			511,995			19,014,048			16,249,408
Funds from acceptance and issuance of securities		4,910,781			4,981,511			19,684,160			6,346,923			6,704,825			6,964,375			217,403			1,316,463			-			-			31,517,168			19,571,945
Borrowing		39,574,638			42,821,567			9,454,823			2,915,938			1,070,107			732,825			-			29,516			-			-			49,842,406			46,499,846
Derivative financial instruments		9,846,295			6,111,550			5,576,013			1,339,847			1,186,635			1,492,355			3,829			284,798			-			-			14,991,789			8,699,074
Foreign exchange portfolio		45,272,324			63,449,550			4,141,911			1,469,338			2,544,045			4,762,034			-			-			-			-			51,745,819			69,529,491
Other liabilities		37,347,380			30,149,089			13,428,387			4,979,849			460,403			606,221			127,004			2,298,853			127,825			739,098			52,532,061			38,451,414
Deferred income		76,940			190,867			49,100			4,511			61,434			63,926			-			-			-			1,777			187,474			261,082
Non-controlling interests		-			-			11,507,613			335			-			-			-			-			-			-			11,507,613			336
Stockholders’ equity
Capital and reserves		17,344,472			17,361,141			9,888,849			8,868,112			3,429,417			2,945,032			38,616,178			25,626,371			2,645,137			2,664,464			71,000,358			56,644,518
Net income for the period		690,130			(623,961	)		515,913			696,760			(54,503	)		277,820			(375,944	)		481,044			(63,461	)		(67,152	)		728,494			707,970
Total		256,779,856			255,144,667			177,673,399			71,233,546			30,474,864			28,500,398			65,456,312			44,255,112			2,709,501			3,850,182			444,107,276			358,311,715
Statement of Income
Income related to financial operations		3,967,449			2,333,401			5,308,232			2,765,445			275,701			485,033			477,788			568,943			8,836			(2,623	)		10,804,888			5,937,172
Expenses related to financial operations		(2,501,290	)		(1,694,076	)		(2,737,726	)		(1,011,865	)		(106,913	)		(111,377	)		(568,909	)		42,268			(3,197	)		(4,188	)		(6,648,181	)		(2,611,076	)
Result of loan losses		(510,329	)		(1,052,032	)		(470,486	)		(232,107	)		(94,041	)		8,607			(284,874	)		(52,277	)		(1,668	)		(287	)		(1,361,399	)		(1,328,098	)
Gross income related to financial operations		955,830			(412,707	)		2,100,020			1,521,473			74,747			382,263			(375,995	)		558,934			3,971			(7,098	)		2,795,308			1,997,998
Other operating revenues (expenses)		(269,855	)		(211,134	)		(1,347,399	)		(626,257	)		(74,118	)		(59,300	)		51			(77,890	)		(34,966	)		(54,287	)		(1,744,181	)		(1,039,414	)
Operating income		685,975			(623,841	)		752,621			895,216			629			322,963			(375,944	)		481,044			(30,995	)		(61,385	)		1,051,127			958,584
Non-operating income		-			(120	)		1,603			12,570			114			-			-			-			2,331			1,529			1,553			12,851
Income before taxes on income and profit sharing		685,975			(623,961	)		754,224			907,786			743			322,963			(375,944	)		481,044			(28,664	)		(59,856	)		1,052,680			971,435
Income tax		4,155			-			(194,035	)		(202,486	)		(43,903	)		(35,937	)		-			-			(32,704	)		(5,287	)		(266,475	)		(243,710	)
Statutory participation in income		-			-			(14,684	)		(8,518	)		(11,343	)		(9,206	)		-			-			(2,093	)		(2,009	)		(28,119	)		(19,733	)
Non-controlling interests		-			-			(29,592	)		(22	)		-			-			-			-			-			-			(29,592	)		(22	)
Net income (loss)		690,130			(623,961	)		515,913			696,760			(54,503	)		277,820			(375,944	)		481,044			(63,461	)		(67,152	)		728,494			707,970

	(1)	Itaú Unibanco S.A. - Agências Grand Cayman, New York, Tokyo, Nassau Branch and Itaú Unibanco Holding S.A - Agência Grand Cayman; only at 06/30/2016, CorpBanca New York Branch.

	(2)	Banco Itaú Argentina S.A., Itaú Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión, Itrust Servicios Inmobiliarios S.A.C.I., Itaú Valores S.A., BICSA Holdings Ltd., Itaú Chile Inversiones, Servicios y Administracion S.A., Itaú BBA Corredor de Bolsa Ltda., Itaú Chile Corredora de Seguros Ltda., Itaú Chile Administradora General de Fondos S.A., Recuperadora de Creditos Ltda., Itaú Chile Compañía de Seguros de Vida S.A., ACO Ltda., Banco Itaú Uruguay S.A., OCA S.A., Unión Capital AFAP S.A., Banco Itaú Paraguay S.A., Itaú BBA México, S.A. de C.V., Proserv - Promociones y Servicios S.A. de Capital Variable, MCC Asesorías Limitada, MCC Securities INC., MCC S.A. Corredores de Bolsa, Itaú BBA Colombia S.A. Corporacion Financiera and Itaú BBA México Casa de Bolsa, S.A. de C.V.; only at 06/30/2015, Itaú BBA SAS, Itaú Chile Holdings, Inc. and Banco Itaú Chile; only at 06/30/2016, FC Recovery S.A, Banco CorpBanca Colombia S.A., Itaú CorpBanca, CorpBanca Administradora General de Fondos S.A., Itaú Asesorías Financeiras S.A., CorpBanca Corredora de Seguro S.A., CorpBanca Corredores de Bolsa S.A., CorpBanca Investment Trust Colombia S.A. Sociedad Fiduciaria, CorpBanca Securities INC., CorpLegal S.A., Helm Bank (Panamá) S.A., Recaudaciones y Cobranzas S.A., Helm Comisionista de Bolsa S.A., Helm Fiduciaria S.A., Helm Corredor de Seguros S.A., Helm Casa de Valores (Panamá) S.A. and SMU Corp S.A.

	(3)	IPI - Itaúsa Portugal Investimentos, SGPS, Lda (49%), Itaúsa Europa - Investimentos, SGPS, Lda, Itaúsa Portugal - Soc. Gestora de Partic. Sociais, S.A., Itaú BBA International (Cayman) Ltd., Itaú Europa Luxembourg S.A., Banco Itaú International, Itaú Bank & Trust Bahamas Ltd., Itaú International Securities Inc., Itaú Bahamas Directors Ltd., Itaú Bahamas Nominees Ltd., Banco Itaú (Suisse) S.A. and Itaú BBA International plc.

	(4)	Itaú Bank, Ltd., ITB Holding Ltd., Jasper International Investment LLC, Itaú Bank & Trust Cayman Ltd., Uni-Investment International Corp., Itaú Cayman Directors Ltd., Itaú Cayman Nominees Ltd., BIE Cayman Ltd.; only at 06/30/2015, UBT Finance S.A.

	(5)	Afinco Americas Madeira, SGPS, Sociedade Unipessoal, Lda, IPI - Itaúsa Portugal Investimentos, SGPS, Lda (51%), Banco Del Paraná S.A.,Topaz Holding Ltd., Itaú USA Inc., Itaú BBA USA Securities Inc., Itaú International Investment LLC, Mundostar S.A., Karen International Limited, Nevada Woods S.A., Albarus S.A., Garnet Corporation, Itaú Global Asset Management Limited, Itaú Asia Securities Ltd., Itaú Middle East Limited, Itaú USA Asset Management Inc., Itaú BBA UK Securities Limited, Itaú Japan Asset Management Limited, Itaú UK Asset Management Limited; only at 06/30/2015, Itaú Singapore Securities Pte. Ltd.

(6)

Foreign consolidated information presents balances net of consolidation eliminations.

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Note 21 – Risk and capital management

Risk and capital management is considered by ITAÚ UNIBANCO HOLDING CONSOLIDATED an essential instrument to optimize the use of funds and select the best business opportunities, aiming at maximizing the creation of value to the stockholders.

At ITAÚ UNIBANCO HOLDING CONSOLIDATED, risk and capital management is the process in which:

The existing and potential risks in ITAÚ UNIBANCO HOLDING CONSOLIDATED’s operations are identified and measured;

Norms, procedures and methodologies for risk management and control consistent with the Board of Directors’ guidelines and ITAÚ UNIBANCO HOLDING CONSOLIDATED’s strategies are approved;

The ITAÚ UNIBANCO HOLDING CONSOLIDATED’s risk portfolio is managed considering the best risk-return ratio.

The purpose of the identification of risks is to map the internal and external risks that may affect the strategies of the business and support units, with potential to impact results, capital, liquidity and reputation of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

Risk management processes are spread throughout the whole institution, aligned with the guidelines of the Board of Directors and Executives that, through corporate bodies, define the global objectives that are measured as goals and limits to the risk management units. Control and capital management units, in turn, support the ITAÚ UNIBANCO HOLDING CONSOLIDATED’s management by monitoring and analyzing risk and capital.

ITAÚ UNIBANCO HOLDING CONSOLIDATED, aiming at strengthening is values and aligning the behavior of its employees with the risk management established guidelines, took a number of initiatives to disseminate risk culture. In addition to policies, procedures and processes, the risk culture strengthens and individual and collective responsibility of employees in managing risks inherent in the activities performed individually, respecting the ethical way of running the business.

ITAÚ UNIBANCO HOLDING CONSOLIDATED promotes the risk culture, emphasizing behaviors that will help to assume and manage risks, on an informed basis, in all the organization’s levels. The principles of the risk culture of ITAÚ UNIBANCO HOLDING CONSOLIDATED are: aware risk taking, discussion and action on the institution's risks and risk management responsibility by all.

By disseminating these principles throughout the institution, risks can be known and openly discussed, and therefore kept within the levels established for the appetite for risk, so that they can be understood as a responsibility of each employee of ITAÚ UNIBANCO HOLDING CONSOLIDATED, regardless of any position, area or function.

In compliance with Resolution No. 3,988, of the National Monetary Council (CMN), and posterior amendments, regarding the implementation of the structure for capital management, BACEN Circular No. 3,547, which establishes procedures and parameters relative to the Internal Capital Adequacy Assessment Process (ICAAP) and BACEN Circular Letter No. 3,685, which discloses the ICAAP report model ITAÚ UNIBANCO HOLDING CONSOLIDATED implemented its capital management structure and its internal capital adequacy assessment process (ICAAP), adopting a prospective attitude in the management of its capital. The Board of Directors is responsible for full approval of the ICAAP report, a process that aims to assess the capital adequacy of ITAÚ UNIBANCO HOLDING CONSOLIDATED by identifying material risks establishing the need for additional capital for material risks and in-house methodologies to quantify capital to develop the capital plan, both in normal times and stress situations, and to structure the capital contingence plan.

The result of the last ICAAP – conducted with the base date December 2015 – indicated that ITAÚ UNIBANCO HOLDING CONSOLIDATED has, in addition to capital to face all material risks, a significant capital surplus, thus assuring the institution’s equity soundness.

The risk management organizational structure of ITAÚ UNIBANCO HOLDING CONSOLIDATED is in compliance with the regulations in force in Brazilin and abroad, and in line with the best practices of the market. The responsibilities for risk management at ITAÚ UNIBANCO HOLDING CONSOLIDATED are structured in accordance with three defense lines, to wit:

in the first defense line, business areas and back-office corporate areas are in charge of managing risks originated by them, through their identification, assessment, control and report;

in the second defense line, an independent unit controls risks on a centralized basis, aiming at assuring that the risks of ITAÚ UNIBANCO HOLDING CONSOLIDATED are managed in accordance with the appetite for risk, and the policies and procedures established. Thus, the centralized control provides the Board of Directors and the executives with a global vision of exposures of ITAÚ UNIBANCO HOLDING CONSOLIDATED so as to optimize and expedite corporate decisions;

in the third defense line, internal audit performs the role of promoting an independent assessment of the activities carried out in the institution, enabling top management to measure the adequacy of controls, effectiveness of risk management and compliance with internal rules and regulatory requirements.

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ITAÚ UNIBANCO HOLDING CONSOLIDATED uses proprietary IT systems to fully meet the applicable rules on capital reserve, and also for risk measurement, in compliance with the models issued by the regulatory models in force. It also coordinates actions to check for adherence to qualitative and quantitative requirements established by the regulatory bodies for compliance with the minimum mandatory capital requirement and risk monitoring.

Further details on risk management can be found on the website www.itau.com.br/relacoes-com-investidores, under section Corporate Governance / Risk Management and Capital – Pillar 3.

I – Market risk

Market risk is the possibility of incurring financial losses arising from the changes in the market value of positions held by a financial institution, including the risks of transactions subject to foreign exchange variation, interest rates, share prices, price indexes and commodity prices, among other indices related to risk factors.

Market risk management is the process through which the ITAÚ UNIBANCO HOLDING CONSOLIDATED monitors and controls the risks of variations in financial instruments market values due to market changes, aimed at optimizing the risk-return ratio, by using an appropriate structure, alerts, models and adequate tools for management limits.

ITAÚ UNIBANCO HOLDING CONSOLIDATED’s Market Risk Management Policy is in line with the principles of Resolution No. 3,464, issued by the National Monetary Council (CMN) and posterior amendments, being a set of principles that drive the ITAÚ UNIBANCO HOLDING CONSOLIDATED strategy towards control and management of market risk of all business units and legal entities.

The document Public Access Report – Market Risk, that details the guidelines set out by the corporate guidelines on market risk control, which is not part of the financial statements, can be read on the website www.itau.com.br/relacoes-com-investidores, in the section Corporate Governance, Rules and Policies.

ITAÚ UNIBANCO HOLDING CONSOLIDATED’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other things:

Political, economic and market conditions;

Portfolio profile of ITAÚ UNIBANCO HOLDING CONSOLIDATED;

Expertise within the group to support operations in specific markets.

The process for managing the market risk of ITAÚ UNIBANCO HOLDING CONSOLIDATED is conducted within the governance and hierarchy of corporate bodies and a framework of limits and warnings approved specifically for this purpose, covering different levels and classes of market risk (such as interest rate, and exchange variation risk, among others). This framework of limits and warnings ranges from the monitoring of risk aggregate indicators (portfolio level) to granular limits (individual desk level). The framework of market risk covers from the risk factor level, with specific limits aiming at improving the risk monitoring and understanding process, and at avoiding risk concentration. These limits are quantified by assessing the forecasted results of the balance sheet, size of stockholders’ equity, liquidity, markets complexity and volatility as well as the institution’s appetite for risk. Limits are monitored daily and excesses and potential violations are reported and discussed for each established limit:

Within one business day, for management of business units in charge and executives of the risk control area and business areas; and

Within one month, for proper corporate bodies.

Daily risk reports, used by the business and control areas, are issued to the top management. Additionally, risk control and management process is submitted to periodic reviews.

The structure of limits and alerts follows the Board of Directors' guidelines and is approved by corporate bodies. The process to definite limit levels and violation reports follow the governance to approve the internal policies of ITAÚ UNIBANCO HOLDING CONSOLIDATED. The information flow established aims at disseminating information to the several levels of executives of the institution, including the members of the Executive Board, by means of the Committees in charge of risk management. This limit and warning framework increases effectiveness and the control coverage is reviewed at least on an annual basis.

The purpose of market risk control of ITAÚ UNIBANCO HOLDING CONSOLIDATED structure is:

Providing visibility and assurance to all executive levels that the assumption of market risks is in line with ITAÚ UNIBANCO HOLDING CONSOLIDATED and the risk-return objective;

Promoting a disciplined and informed discussion on the global risk profile and its evolution over time;

Increasing transparency on the way the business seeks to optimize results;

Providing early warning mechanisms in order to make the effective risk management easier, without jeopardizing the business purposes; and

Monitoring and avoiding risk concentration.

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The market risk is controlled by an area independent from the business areas, which is responsible for the daily activities of: (i) risk measurement and assessment, (ii) monitoring of stress scenarios, limits and warnings, (iii) application, analysis and tests of stress scenarios, (iv) risk reporting for individuals responsible within the business areas, in compliance with governance of ITAÚ UNIBANCO HOLDING CONSOLIDATED, (v) monitoring of actions required for adjustment of positions and/or risk levels to make them feasible, and (vi) support to the launch of new financial products with security.

For that purpose, ITAÚ UNIBANCO HOLDING CONSOLIDATED has a structured reporting and information process and an information flow that provides input for the follow-up by corporate bodies and complies with the requirements of Brazilian and foreign regulatory agencies.

ITAÚ UNIBANCO HOLDING CONSOLIDATED hedges transactions with clients and proprietary positions, including its foreign investments, in order to mitigate risk arising from fluctuations in relevant market risk factors and maintaining the classification the transactions into the current exposure limits. Derivatives are commonly used for these hedging activities. When these transactions are classified as hedges for accounting purposes, specific supporting documentation is provided, including ongoing follow-up of hedge effectiveness (retrospective and prospective) and other changes in the accounting process. The accounting and managerial hedging procedures are governed by the institutional polices of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

For a detailed vision of the accounting hedge topic, see Note 7 – Securities and Derivative Financial Instruments.

The market risk structure categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with general criteria established by CMN Resolution No. 3,464 and BACEN Circular No. 3,354.

The trading portfolio consists of all transactions involving financial instruments and goods, including derivatives, which are carried out with the intention of trading.

The banking portfolio is basically characterized by transactions from the banking business, and transactions related to the management of the balance sheet of the institution. It has the no-intention of resale and medium and long term time horizons as general guidelines.

Exposures to market risks inherent in the many different financial instruments, including derivatives, are broken down into a number of risk factors, primary market components for pricing. The main risk factors measured by ITAÚ UNIBANCO HOLDING CONSOLIDATED are as follows:

Interest rates: the risk of losses from transactions subject to interest rates variations;

Foreign exchange-linked interest rate: the risk of losses arising from positions in transactions which are subject to a foreign exchange-linked interest rate;

Foreign exchange rates: the risk of losses from positions subject to foreign exchange rate variation;

Price index-linked: the risk of losses from transactions subject to the variations in the price of index-linked interest rates;

Variable income: risk of loss subject to variation in prices of shares and commodities;

The National Monetary Council (CMN) has regulations that establish the segregation of exposure to market risk at least in the following categories: interest rate, exchange rate, shares and commodities. Inflation rates are addressed as a group of risk factors and received the same treatment as the other risk factors, such as interest rates, exchange rates, etc., and follow the structure of risk and limits governance adopted by ITAÚ UNIBANCO HOLDING CONSOLIDATED to manage market risk.

The market risk analyses are conducted based on the following metrics:

Value at risk (VaR): statistical measure that estimates the expected maximum potential economic loss under normal market conditions, considering a certain time horizon and confidence level;

Losses in stress scenarios: simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when several risk factors are taken to extreme market situations (based on prospective and historical scenarios);

Stop loss: metrics which purpose is to review positions, should losses accumulated in a certain period reach a certain amount;

Concentration: cumulative exposure of a certain financial instrument or risk factor, calculated at market value (“MtM – Mark to Market”); and

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Stressed VaR: statistical metric arising from VaR calculation, which purpose is to capture higher risk in simulations for the current portfolio, considering returns that can be seen in historical scenarios of extreme volatility.

In addition to the aforementioned risk measures, sensitivity and loss control measures are also analyzed. They comprise:

Mismatching analysis (GAPS): accumulated exposure by risk factor of cash flows expressed at market value, allocated at the maturity dates;

Sensitivity (DV01- Delta Variation): impact on the market value of cash flows, when submitted to an one annual basis point increase in the current interest rates or index rate;

Sensitivity to several risk factors (Greeks): partial derivatives of an option portfolio in relation to the prices of underlying assets, implied volatilities, interest rates and time.

ITAÚ UNIBANCO HOLDING CONSOLIDATED uses proprietary systems to measure the consolidated market risk. The processing of these systems occurs in an access-controlled environment, being highly available, which has data safekeeping and recovery processes, and counts on such an infrastructure to ensure the continuity of business in contingency (disaster recovery) situations.

ITAÚ UNIBANCO HOLDING CONSOLIDATED, maintaining its conservative management and portfolio diversification, continued with its policy of operating within low limits in relation to its capital during the period.

At 06/30/2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED recorded total VaR of R$ 231.2 million (R$ 224.8 million at 06/30/2015).

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II – Credit risk

Credit risk is the possibility of losses arising from the breach by the borrower, issuer or counterparty of the respective agreed-upon financial obligations, the devaluation of loan agreement due to downgrading of the borrower’s, the issuer’s, the counterparty’s risk rating, the reduction in gains or compensation, the advantages given upon posterior renegotiation and the recovery costs.

The credit risk management of ITAÚ UNIBANCO HOLDING CONSOLIDATED’s is the primary responsibility of all business units and aims to keep the quality of loan portfolios in levels consistent with the institution’s risk appetite for each market segment in which it operates.

ITAÚ UNIBANCO HOLDING CONSOLIDATED establishes its credit policy based on internal factors, such as the client rating criteria and portfolio development analysis, the registered default levels, the incurred return rates, and the allocated economic capital, among others; and external factors, related to the economic environment, interest rates, market default indicators, inflation, and consumption increase / decrease, among others.

To protect the institution against losses arising from loan operations, ITAÚ UNIBANCO HOLDING CONSOLIDATED considers all aspects that determine the client’s credit risk to define a provision level that is adequate with the risk incurred in each operation. For each operation, the assessment and rating of the client or economic group, the operation rating, and the possible existence of past-due amounts are taken into account and the volume of the regulatory provision is determined.

In line with the principles of CMN Resolution No. 3,721 of April 30, 2009, ITAÚ UNIBANCO HOLDING CONSOLIDATED has a structure for and institutional norm on credit risk management, approved by its Board of Directors, applicable to the companies and subsidiaries in Brazil and abroad.

The document Public Access Report – Credit Risk, that outlines the guidelines set out by this internal policy on credit risk control, which is not part of the financial statements, can be read on the website www.itau.com.br/relacoes-com-investidores, in the section Corporate Governance, Rules and Policies.

III – Operational risk

For ITAÚ UNIBANCO HOLDING CONSOLIDATED operational risk is defined as the possibility of losses from failure of, insufficient or inadequate internal processes, people and systems, or from external events impacting the realization of strategic, tactical or operational objectives. It includes the legal risk, associated with the inadequacy or deficiency in agreements signed by the institution, as well as sanctions for failing to meet legal provisions and compensation for damages to third parties arising from activities performed by ITAÚ UNIBANCO HOLDING CONSOLIDATED.

The purpose of the management framework is to identify, prioritize, and manage possible operating risks, monitor and report management activities aiming at assuring the quality of the control environment, in compliance with internal guidelines and regulation in force.

The managers of executive areas use corporate methodologies that are built and made available by the internal control, compliance and operational risk area.

Within the governance of the risk management process where periodically there are consolidated reports on risk monitoring, controls, action plans and operational losses presented to the executives of the business areas.

A summarized version of such policy, which is not part of the financial statements, is available on the website www.itau.com.br/relacoes-com-investidores in the section Corporate Governance, Rules and Policies, Public Access Report – Operational risk.

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IV – Liquidity risk

Liquidity risk is defined as the institution’s possibility of not being able to efficiently meet its expected and unexpected obligations, both current and future, including those arising from the pledged guarantees, without affecting its daily operations and without incurring significant losses.

Liquidity risk control is carried out by an area independent from the business areas, and which is responsible for defining the constitution of a reserve, proposing assumptions for behavior of cash flow, identifying, assessing, monitoring, controlling and reporting, on a daily basis, the exposure to liquidity risks in different time horizons, proposing limits for liquidity risk and monitoring the established limits consistent with the risk appetite of the institution, informing on possible noncompliance, considering the liquidity risks individually in countries where ITAÚ UNIBANCO HOLDING CONSOLIDATED operates, simulating the behavior of cash flow under stress conditions, assessing and reporting risks inherent in new products and transactions and reporting information required by regulatory bodies. Every activity is subject to analysis by independent areas of validation, internal controls and audit.

The measurement of liquidity risk covers all financial transactions of ITAÚ UNIBANCO HOLDING CONSOLIDATED companies, as well as possible contingent or unexpected exposures, such as those arising from settlement services, pledge of endorsements and sureties and credit facilities contracted and not used.

Itaú Unibanco daily manages and controls liquidity risk through governance approved in superior committees, which establishes, among other activities, the adoption of minimum liquidity limits, sufficient to absorb possible cash losses in stress scenarios, measured by internal methodologies and regulatory methodology.

In compliance with Circular nº 3.724 of BACEN, banks holding total assets over R$ 100 billion are required, since October 2015, to report a standardized Liquidity Coverage Ratio (LCR) ratio to the Central Bank of Brazil. This ratio is calculated based on a methodology defined by the Central Bank of Brazil itself, and is in line with international of Basel guidelines.

In 2016, the minimum indicator requirement is 70%. For more detail on the short-term liquidity indicator, visit investor-relations, section Corporate Governance / Risk and Capital Management – Pillar 3.

Information on the Liquidity Coverage Ratio (LCR)	2^nd quarter
	Total Adjusted Amount⁽¹⁾
Total high-quality liquid assets (2)		177,534,502
Total potential cash outflows (3)		93,345,769
Liquidity Coverage Ratio (%)		190.2	%

(1) Corresponds to the amount calculated after the application of weighting factors and limits established by BACEN Circular No. 3,749.

(2) HQLA - High quality liquid assets: balance in the stock, which in certain cases weighted by a discount factor, of assets that remain liquid in the markets during a stress period, which can be easily converted into cash and that pose low risk.

(3) Potential cash outflows calculated in standardized stress, determined by Circular No. 3.749 (outflows), subtracted from (i) potential cash inflows calculated under standardized stress, set forth by Circular No. 3,749 and (ii) 75% x Outflows, whicheve

The document Public Access Report - Liquidity Risk, that expresses the guidelines set forth by the internal policy on liquidity risk, that is not part of the financial statements, may be viewed on the website www.itau.com.br/relacoes-com-investidores, in the section Corporate Governance, Rules and Policies.

V - Insurance, Pension Plan and Capitalization Risks

The products that make up the portfolios of ITAÚ UNIBANCO HOLDING CONSOLIDATED’s insurance companies are related to the life insurance and elementary, pension plan and premium bonds. Therefore, ITAÚ UNIBANCO HOLDING CONSOLIDATED understands that the major risks inherent in these products are as follows:

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Underwriting risk is the possibility of losses arising from operations of insurance, pension plan and capitalization that go against the organization’s expectations, directly or indirectly associated with the technical and actuarial bases adopted to calculate premiums, contributions and provisions;

Market risk is the possibility of incurring losses due to fluctuations in the market values of assets and liabilities comprising the actuarial technical reserves;

Credit risk is the possibility of a certain debtor failing to meet any obligations in connection with the settlement of operations involving the trade of financial assets or reinsurance;

Operational risk is the possibility of incurring losses arising from the failure, deficiency or inadequacy or internal processes, personnel and systems, or external events impacting the achievement of strategic, tactical or operational purposes of the insurance, pension plan and premium bonds operations;

Liquidity risk in insurance operations is the possibility of the institution’s failure to timely meet its obligations with insured and beneficiaries in view of lack of liquidity of the assets comprising the actuarial technical reserves.

The management process of insurance, pension plan and premium bonds risks is based on responsibilities defined and communicated between the control and business areas, assuring independence between them and focusing on the particularities of each risk, in accordance with the guidelines established by ITAÚ UNIBANCO HOLDING CONSOLIDATED.

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Note 22 –Supplementary information

Insurance policy - ITAÚ UNIBANCO HOLDING CONSOLIDATED and its subsidiaries, despite the low risk exposure due to the physical non-concentration of their assets, have a policy of guaranteeing their valuables and assets at amounts considered sufficient to cover possible claims.

Foreign currency – The balances in Reais linked to the foreign currencies were as follows:

	06/30/2016			06/30/2015
Permanent foreign investments		71,737,536			57,352,488
Net amount of other assets and liabilities indexed to foreign currency, including derivatives		(119,224,441	)		(89,343,945	)
Net foreign exchange position		(47,486,905	)		(31,991,457	)

The net foreign exchange position, considering the tax effects on the net balance of other assets and liabilities indexed to foreign currencies, reflects the low exposure to exchange variations.

Investment funds and managed portfolios - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, manages the following types of funds: privatization, fixed income, shares, open portfolio shares, investment clubs, customer portfolios and group portfolios, domestic and foreign, classified in memorandum accounts, distributed as follows:

	Amount				*Amount ^()**				Number of funds
	06/30/2016		06/30/2015		06/30/2016		06/30/2015		06/30/2016		06/30/2015
Investment funds		628,197,809		505,347,352		628,197,809		505,347,352		2,295		1,895
Fixed income		588,013,049		472,063,667		588,013,049		472,063,667		1,925		1,513
Shares		40,184,760		33,283,685		40,184,760		33,283,685		370		382
Managed portfolios		289,518,597		282,294,008		206,996,263		203,763,152		16,874		15,722
Customers		162,782,951		146,457,679		115,817,066		104,325,063		16,810		15,656
Itaú Group		126,735,646		135,836,329		91,179,197		99,438,089		64		66
Total		917,716,406		787,641,360		835,194,072		709,110,504		19,169		17,617

(*)

Refers to the total amounts after elimination of double counting related to investments in investment fund portfolios.

Consortia funds

	06/30/2016		06/30/2015
Monthly estimate of installments receivable from participants		161,155		156,304
Group liabilities by installments		11,111,381		11,561,632
Participants – assets to be delivered		9,587,002		10,295,146
Funds available for participants		1,587,614		1,457,687
(In units)
Number of managed groups		680		806
Number of current participants		401,934		411,098
Number of assets to be delivered to participants		162,846		194,530

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Fundação Itaú Social - ITAÚ UNIBANCO HOLDING CONSOLIDATED is the main sponsor of Fundação Itaú Social, the objectives of which are: 1) managing the “Itaú Social Program”, which aims at coordinating the organization’s role in projects of interest to the community by supporting or developing social, scientific and cultural projects, mainly in the elementary education and health areas; 2) supporting projects or initiatives in progress, supported or sponsored by entities qualified to work in the ”Programa Itaú Social” (Itaú Social Program).

During the period from 01/01 to 06/30/2016 and 06/30/2015 the consolidated companies made no donations, and the Foundation’s social net assets totaled R$ 2,675,977 (R$ 2,971,843 at 06/30/2015). The income arising from its investments will be used to achieve the Foundation’s social purposes.

Instituto Itaú Cultural – IIC - ITAÚ UNIBANCO HOLDING CONSOLIDATED is supporter of Instituto Itaú Cultural - IIC, an entity formed to grant incentives, promote and preserve Brazil’s cultural heritage. During the period, the consolidated companies donated an amount of R$ 45,000 (R$ 45,500 from 01/01 to 06/30/2015).

Instituto Unibanco - ITAÚ UNIBANCO HOLDING CONSOLIDATED is sponsor Instituto Unibanco, an entity whose objective is to support projects on social assistance, particularly education, culture, promotion of integration to labor market, and environmental protection, directly and/or supplementary, through the civil society’s institutions.

Instituto Unibanco de Cinema - ITAÚ UNIBANCO HOLDING CONSOLIDATED is sponsor Instituto Unibanco de Cinema, an entity whose objectives are (i) the fostering of culture in general; and (ii) providing the low-income population with access to cinematography, videography and similar productions, for which it shall own and manage movie theaters, and theaters to screen films, videos, video-laser discs and other related activities, as well as to screen and divulge films of importance, especially those produced in Brazil.

Associação Itaú Viver Mais - ITAÚ UNIBANCO HOLDING CONSOLIDATED is sponsor Associação Itaú Viver Mais, an entity whose objective is the provision of social services for the welfare of beneficiaries, in the way and conditions established by its Internal Rules, and according to the funds available. These services may include, among others, the promotion of cultural, educational, sports, entertainment and healthcare activities. In the period from January 1, to June 30, 2016, the consolidated companies did not make donations to Associação Itaú Viver Mais (R$ 880 from January 1 to June 30, 2015).

Instituto Assistencial Pedro di Perna - ITAÚ UNIBANCO HOLDING CONSOLIDATED is sponsor Instituto Assistencial Pedro di Perna, an entity whose objective is to provide social services, stimulate sporting activities, and promote recreation, aiming at the welfare of its members, in the manner and based on the conditions established by its Internal Rules, and using the funds available.

Exclusions of non recurring effects net of tax effects – ITAÚ UNIBANCO HOLDING and ITAÚ UNIBANCO

	01/01 to			01/01 to
	06/30/2016			06/30/2015
Liability Adequacy Test (Note 4m II.I)		139,521			-
Program for Cash or Installment Payment of Taxes (Note 12e)		12,474			41,658
Goodwill on acquisition (Note 15b ll)		(188,431	)		(95,665	)
Provision for contingencies		(62,591	)		(128,431	)
Civil Lawsuits - Economic Plans		(56,281	)		(82,622	)
Tax and social security (Notes 12b and 15a I)		(6,310	)		(45,809	)
Realization of assets and Impairment		(8,670	)		(42,916	)
Total		(107,697	)		(225,354	)

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Agreements for offsetting and settlement of liabilities within the scope of the National Financial System – Offset agreements were entered into within the scope of derivative contracts, as well as agreements for the offsetting and settlement of receivables and payables pursuant to CMN Resolution No. 3,263, of February 24, 2005, the purpose of which is to enable the offsetting of credits and debits maintained with the same counterparty, and where the maturity dates of receivables and payables can be advanced to the date an event of default by one of the parties occurs or in the case of bankruptcy of the debtor.

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Independent Auditor’s Report

To the Board of Directors and Stockholders

Itaú Unibanco Holding S.A.

We have audited the accompanying financial statements of Itaú Unibanco Holding S.A. (the “Bank”) stand alone, which comprise the balance sheet as at June 30, 2016 and the statements of income, changes in equity and cash flows for the six-month period then ended, as well as the accompanying consolidated financial statements of Itaú Unibanco Holding S.A. and its subsidiaries (“Consolidated”), which comprise the consolidated balance sheet as at June 30, 2016 and the consolidated statements of income and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Independent Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Itaú Unibanco Holding S.A. and of Itaú Unibanco Holding S.A. and its subsidiaries as at June 30, 2016, and the financial performance and cash flows, as well as the consolidated financial performance and cash flows, for the six-month period then ended, in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN).

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Other matters

Statement of value added

We also have audited the Bank’s and the Consolidated statements of value added for the six-month period ended June 30, 2016, the presentation of which is required by the Brazilian corporate legislation for listed companies. These statements were subject to the same audit procedures described above and, in our opinion, are fairly presented, in all material respects, in relation to the financial statements taken as a whole.

São Paulo, August 1, 2016

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

Washington Luiz Pereira Cavalcanti

Contador CRC 1SP172940/O-6

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ITAÚ UNIBANCO HOLDING S.A.

CNPJ. 60.872.504/0001-23

A Listed Company

NIRE. 35300010230

SUMMARY OF THE AUDIT COMMITTEE REPORT

FIRST HALF OF 2016

The Audit Committee of Itaú Unibanco S.A.

According to its Charter (available on the website www.itau.com.br/investor-relations), the Audit Committee (Committee) is responsible for the oversight of the quality and integrity of the financial statements of the Itaú Unibanco Financial Conglomerate, of compliance with legal and regulatory requirements, of the activities, independence and the quality of the services rendered by the independent auditor and by the Internal Audit, and of the quality and effectiveness of the internal controls and risk management systems of the Conglomerate. The Committee serves as the sole vehicle for all the institutions in the Conglomerate located in Brazil, including insurance, private pension and capitalization companies, where the appointment of an Audit Committee is required.

The assessments made by the Committee are based on information received from management, external auditors, internal auditors, those responsible for risk management and internal controls, and on its own analysis resulting from direct observation.

Management is responsible for preparing the financial statements of Itaú Unibanco Holding S.A. and of its subsidiaries and affiliated companies and for establishing the procedures necessary to ensure the quality of the processes that generate the information used to prepare the financial statements and financial reports. Management is also responsible for risk control and monitoring and for the supervision of the corporate activities of internal controls and compliance.

PricewaterhouseCoopers Auditores Independentes is responsible for auditing the financial statements and for certifying that they fairly represent, in all material respects, the financial position of the Conglomerate, in conformity with accounting practices adopted in Brazil arising from Brazilian corporate law and the requirements of the Conselho Monetário Nacional, Comissão de Valores Mobiliários, Banco Central do Brasil, Conselho Nacional de Seguros Privados and Superintendência de Seguros Privados, as well as in accordance with International Financial Reporting Standards (IFRS). The same independent auditor should also issue, annually, an opinion on the quality and effectiveness of internal controls related to financial reports (section 404 of the Sarbanes Oxley (SOX) Act.

Activities of the Committee

The Committee met 28 days in the period from February 1, 2016 to July 27, 2016, resulting in a total of 106 meetings. Additionally, the members of the Committee acted as effective members or observers in audit committees of foreign units and as observers in the meetings of the Senior Ethics Commission, the Accounting Standards and Policies Commission and Superior Balance Sheet Closing Committee.

In the period, the Committee devoted special focus to the CorpBanca (Chile) acquisition process through meetings with the executives in charge of the CorpBanca Integration Project, with the CorpBanca Chief Internal Audit Officer and partners of the independent auditor in Brazil and Chile, through monthly meetings held with the internal audit and independent audit teams and teams of the Internal Controls, Compliance and Operational Risk Executive Area (DECIC) involved in the process.

As part of its activities, the Committee became aware of the results of inspections and comments of the regulatory bodies and monitored the related management actions, developing reports to the Board of Directors summarizing the management action plans and its comments about them. In addition, the Committee held meetings with supervisors of the Central Bank of Brazil/Desup and Central Bank of Brazil/Decon.

Risk Management and Internal Control System

In the first half of 2016, in meetings held with officers of the Risk Management and Control and Finance Vice Presidency, the Committee assessed aspects related to risk management and control in the Conglomerate, with emphasis on credit, liquidity, market and operational risks. The Committee also monitored the evolution of the Conglomerate’s internal control system, through meetings with DECIC and through engagements carried out by the Internal Audit.

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As part of its responsibilities, the Committee monitores differentmatters through meetings with the respective officers, highlighting, in the period, the risks and related controls associated with: (i) information technology; (ii) cyber security; (iii) foreign units; (iv) conduct and ethics regarding money laundering and corruption prevention; (v) contingencies – mainly those involving higher risk and amount; (vi) allowance for loan losses; (vii) monitoring of portfolio risk; (viii) the credit card operation; (ix) the governance process for managing operational risk, and (x) debt restructuring transactions.

Based on the information brought to its attention, the Committee acknowledges the constant improvement of the existing internal controls and risk management systems.

Compliance with Legislation, Regulatory Requirements and Internal Policies and Procedures

The Committee considers that the duties and responsibilities, as well as the procedures for assessing and monitoring legal risks are established and continue to be followed in accordance with corporate guidelines. Based on the assessment conducted by the DECIC, on the work performed by Internal Audit and on the reports prepared by external auditors, the Audit Committee concludes that no deficiencies were identified about compliance with legislation, regulatory requirements and internal policies and procedures that might pose risks to the continuity of the Organization.

External Audit

The Committee has a regular channel of communication with the external auditors to widely discuss the results of their work and relevant accounting matters, thus allowing the members of the Committee to support an opinion as to the integrity of the financial accounting statements and financial reports. As in prior years the Audit Committee performed a formal assessment of the activities performed by PwC, assessing matters related to development of the audit engagements, preparation and delivery of reports, independence of the auditor and the relationship with the Organization and with the Committee. The Committee assesses as satisfactory the volume and quality of information provided by PricewaterhouseCoopers, which supports its opinion on the integrity of the financial statements.

Contracting of services to be provided by independent auditors require prior approval by the Committee which assesses the risks of loss of independence and conflicts of interest. The Committee did not identify situations that could affect the objectivity and independence of the external auditors. The Committee is monitoring compliance with independence requirements in the process of appointment of the new Chief Audit Executive.

Internal Audit

The Committee approves the annual work plan of Internal Audit and monitors its execution on a quarterly basis, making itself aware of work performed that was not originally planned and opines on the cancellation of originally planned work.

The Committee evaluates positively the coverage and quality of the work performed by internal audit. The results, presented monthly during the Committee’s meetings, did not bring to its attention the existence of residual risks that could affect the soundness and the continuity of the Organization.

Insurance, pensions and capitalization companies

As required by Conselho Nacional de Seguros Privados (National Private Pension Council) regulations, the Committee monitored companies supervised by the Superintendência de Seguros Privados (Itaú Seguros S.A., Itaú BMG Seguradora S.A., Itaú Vida e Previdência S.A. and Cia Itaú de Capitalização), and the activities described in this Summary include the matters relevant to these companies. During the period, the Committee monitored management actions with respect to regulatory matters, including the progress of the process to adapt the policies, processes and controls of Itaú BMG Seguradora S.A. to those of the Conglomerate.

Consolidated Financial Statements

The Committee analyzed the procedures involved in the preparation of individual and consolidated financial statements, explanatory footnotes and financial reports published with the consolidated financial statements. Those matters were discussed with PricewaterhouseCoopers and with executives of the organization. The Committee also examined the relevant accounting practices used by the Itaú Unibanco Financial Conglomerate for the preparation of the financial statements, which are in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Banco Central do Brasil and the entities under the supervision of the Superintendência de Seguros Privados. The Committee also monitored the preparation and disclosure of the consolidated financial statements prepared in accordance with the international accounting standards issued by the International Accounting Standards Board (IASB).

As part of such process, during the first half of the year, the Committee held meetings with Financial Control area officers, responsible for the preparation of the documents, and with PwC, responsible for their audit, addressing also the financial statements of the Prudential Conglomerate, prepared in accordance with the Central Bank of Brazil, and the Integrated Report, for the base date December 31, 2015.

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Recommendations

The Committee held quarterly meetings with the Chairman of the Board of Directors and the CEO of Itaú Unibanco Holding S.A., presenting recommendations on several aspects related to the performance of its duties, in addition to meetings with Itaú Unibanco Holding S.A. Board of Directors, at least, on a semi-annual basis, to report its activities and recommendations.

Conclusion

The Committee, having duly considered its responsibilities and the natural limitations resulting from the scope of its activities, recommends to the Board of Directors the approval of the consolidated financial statements of Itaú Unibanco Holding S.A., for the semester ended on June 30, 2016.

São Paulo, August 1, 2016.

The Audit Committee

Geraldo Travaglia Filho – President

Antônio Francisco de Lima Neto

Diego Fresco Gutierrez

Maria Helena dos Santos Fernandes de Santana

Sergio Darcy da Silva Alves

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ITAÚ UNIBANCO HOLDING S.A.

CNPJ. 60.872.504/0001-23

Listed Company

NIRE. 35300010230

OPINION OF THE FISCAL COUNCIL

The members of the Fiscal Council of ITAÚ UNIBANCO HOLDING S.A., after having examined the financial statements for the period from January to June 2016 and verified the accuracy of all items examined, and in view of the unqualified opinion of PricewaterhouseCoopers Auditores Independentes, understand that these documents adequately reflect the company’s capital structure, financial position and the activities conducted during the period.

São Paulo (SP), August 1, 2016.

ALKIMAR RIBEIRO MOURA

President

CARLOS ROBERTO DE ALBUQUERQUE SÁ	JOSÉ CARUSO CRUZ HENRIQUES
Member	Member

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