Exhibit 99.1

www.pwc.com.br

(A free translation of the original in Portuguese)

Itaú Unibanco

Holding S.A.

Parent company and consolidated
financial statements at
June 30, 2018
and independent auditor's report

 

 

(A free translation of the original in Portuguese)

Independent auditor's report

To the Board of Directors and Stockholders 

Itaú Unibanco Holding S.A.

Opinion

We have audited the accompanying parent company financial statements of Itaú Unibanco Holding S.A. ("Bank"), which comprise the balance sheet as at June 30, 2018 and the statements of income, changes in stockholders' equity and cash flows for the six-month period, 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, 2018 and the consolidated statements of income and cash flows for the six-month period, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the financial statements referred to above 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, 2018, and the individual 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).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Parent Company and Consolidated Financial Statements" section of our report. We are independent of the Bank and of its subsidiaries in accordance with the ethical requirements established in the Accountant's Code of Professional Ethics and Professional Standards issued by the Brazilian Federal Accounting Council, and we have fulfilled other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 61005,

T: +55 (11) 3674 2000, www.pwc.com.br

Itaú Unibanco Holding S.A.

Our audit for the six-month period ended on June 30, 2018 was planned and executed considering that the operations of the Bank and the Consolidated did not present significant modifications in relation to the previous year. In this context, the Key Audit Matters, as well as our audit approach, have remained substantially in line with those of the previous year.

Why it is a Key Audit Matter

How the matter was addressed in the audit

Allowance for loan and lease losses (Notes 4(f) and 8) The calculation of the allowance for loan and lease losses is subject to management's judgment. The identification of situations relating to the recoverable value of receivables and the determination of the allowance for loan and lease losses is a process that involves a number of assumptions and factors, including the counterparty's financial condition, the expected future cash flows, the estimated amounts of recovery and realization of guarantees. The utilization of different modeling techniques and assumptions could result in a materially different estimate of recoverable amounts. Furthermore, managing the credit risk is complex and depends on the completeness and integrity of the related database, as well as managing credit risk, including guarantees and renegotiations, are important aspects on determining the allowance for loan and lease losses. Considering the matters mentioned above, this area continued to be an area of focus during the audit.

Our audit procedures consider, among others: •   Tests of the design and effectiveness of the main controls used to calculate the allowance for loan and lease losses, including: (i) totality and integrity of the database; (ii) models and assumptions adopted by management to determine the recoverable value of the credit portfolio; (iii) monitoring and valuation of guarantees; (iv) identification, approval, and monitoring of renegotiated transactions; and (v) processes established by management to meet the assumptions and the standards of the Brazilian Central Bank (BACEN) and National Monetary Council (CMN) as well as the disclosures in notes to the financial statements. •   For the individually calculated allowance for loan and lease losses, we tested the relevant assumptions adopted to identify the impairment and the resulting rating of the debtors, as well as the expected future cash flows, underlying guarantees, and the estimates of recovery of overdue receivables. •   For the allowance for loan losses calculated on a collective basis (retail segment), we tested the underlying models, including the model approval process and the validation of the assumptions used to determine the loss and recovery estimates, as well as the consistency of the models with those applied in previous periods. •   We tested the adequacy of the inputs for these models, and, when available, compared the data and assumptions used with market information. We believe that the criteria and assumptions adopted by Management in determining and recording the allowance for loan losses are

 

Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter	How the matter was addressed in the audit
	appropriate and consistent, in all material respects, in the context of the financial statements.
Measurement of the fair value of financial instruments and derivatives with little liquidity and without active market-(Notes 4(c), 4(d) and 7)
The fair value measurement of financial instruments with little liquidity and without an active market requires subjectivity, considering that it depends on valuation techniques based on internal models that involve management's assumptions for their valuation. In addition, management of market risk is complex, especially during periods of high volatility and when observable market prices or parameters are not available. These financial instruments are substantially comprised of investments in securities issued by companies and derivative contracts. This continues as an area of focus of our audit since the utilization of different valuation techniques and assumptions could lead to materially different fair value estimates.	Our audit procedures consider, among others: •   Testes of the design and the effectiveness of the main controls established for the fair valuation of these financial instruments, as well as the approval of models and related disclosures. •   We analyzed the methodology used to fair value these financial instruments and the assumptions adopted by management by comparing them with independent methodologies and assumptions. We reperformed, on a sampling basis, the fair valuation of certain operations and compared the assumptions and methodologies used by management with our knowledge about fair valuation practices, which are commonly adopted as well as evaluated the consistency of these methodologies with the ones applied in prior periods. We considered that the criteria and assumptions adopted by Management to measure the fair value of these financial instruments and derivatives are appropriate and consistent with the information disclosed in the financial statements.
Information technology environment
Itaú Unibanco Holding S.A. and its subsidiaries rely on their technology structure to process their operations and prepare their financial statements. Technology represents a fundamental aspect on the Bank's business evolution and, over the last years, significant short and long-term investments have been made in the information technology systems and processes. The technology structure, due to the history of acquisitions and size of the related operations, is comprised of more than one technology	As part of our audit procedures, with the support of our specialists, we assessed the information technology environment, including the automated controls of the application systems that are significant for the preparation of the financial statements. The procedures we performed comprised the combination of relevant control tests and, when necessary, the tests of compensating controls, as well as the performance of tests related to the information security, including the access

 

Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter	How the matter was addressed in the audit
environment with different processes and segregated controls.	management control and the segregation of duties.
The lack of adequacy of the general controls of the technology environment and of the controls that depend on technology systems may result in the incorrect processing of critical information used to prepare the financial statements, as well as risks related to information security and cybersecurity. Accordingly, this continued as an area of focus in our audit.	The audit procedures applied resulted in appropriate evidence that was considered in determining the nature, timing and extent of other audit procedures, and we believe that the processes and controls of the information technology environment have provided a satisfactory basis to be used in the outcome of our audit of the financial statements.
Deferred tax assets (Note 14(b))
The deferred tax assets arising from temporary differences, tax losses carryforward and negative basis of social contribution are recorded to the extent management considers probable that Itaú Unibanco Holding S.A. and its subsidiaries will generate future taxable profits. The projection of the future taxable profits takes into account a number of subjective assumptions established by management. We continue to consider that this area requires audit focus, taking into account that using different assumptions in the projection of the future taxable profits could materially modify the expected periods for realization of deferred tax assets, thus affecting the accounting records.	We tested the design and the effectiveness of the main controls established by management to calculate the deferred tax assets and the recording of such credits in accordance with the accounting standards and specific requirements of BACEN and CMN, including the necessity of analysis of the perspectives for the realization of these assets, via projections of future taxable profits, for each of the institutions which comprise the Consolidated. We tested the design and the effectiveness of the main controls over the respective disclosures, as well as we compared the critical assumptions used to the projection of the future results with macroeconomic information disclosed by the market and with the historical data, in order to support the consistency of these estimates. With the support of our specialists in the tax area, we performed tests on the nature and amounts of the temporary differences, fiscal losses and negative bases of social contribution, subject to future tax deduction. We believe that the assumptions adopted by Management in the determination and recording of tax credits are appropriate and consistent with the disclosures in the notes to the financial statements.

 

Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter	How the matter was addressed in the audit
Realization of amounts recorded on intangible assets (Notes 4(k) and 15(b))
The balances of intangible assets are tested semiannually for impairment. These tests involve estimates and significant judgment, including the identification of cash-generation units. The determination of expected cash flows and the risk-adjusted interest rate for each cash-generating unit or group of cash-generating units requires the application of judgment as well as estimates by management. We continue to consider this as an area of audit focus due to: (i) projection of future results, in which the use of different assumptions can significantly modify the perspective of realization of these assets and the possible need to record impairment with consequent impact on the financial statements and (ii) the relevance of intangible assets arising from the acquisition of Itaú Corpbanca.	We have tested the design and effectiveness of the main controls established, including the analysis of the assumptions and critical judgments used by Management. With the support of our specialists, we tested the projections for the determination of impairment of intangible assets as prepared by management, focusing on the most representative cases, such as intangible assets arising from the acquisition of Itaú Corpbanca, in order to corroborate the reasonableness of these realization estimates. We believe that the assumptions adopted by Management to evaluate the realization of intangible assets are appropriate and the disclosures in the notes to the financial statements are consistent with the information obtained.
Provision for contingent liabilities (Notes 4(n) and 12)
Itaú Unibanco Holding S.A. and its subsidiaries have contingent liabilities mainly arising from judicial and administrative proceedings, inherent to the normal course of their business, filed by third parties, former employees, and public agencies, involving civil, labor, tax, and social security matters. In general, the settlement of these proceedings takes a long time and involve not only discussions on the matter itself, but also complex process-related aspects, depending on the applicable legislation. In certain situations, the legislation allows taxpayers to settle certain tax proceedings in advance by decreasing or eliminating related interest rates and fines. Civil and labor legislation also permits that agreements are made to settle proceedings in advance. In addition, in 2017, a labor reform was approved and an agreement instrument for the termination of civil legal proceedings related to economic plans was signed.	As part of our audit procedures, we tested the design and the effectiveness of the main controls used to identify, assess, monitor, measure, record, and disclose the provision for contingent liabilities, including the totality and the integrity of the database. Civil and labor proceedings are divided on a group basis and on an individualized basis. Proceedings considered under a group basis are quantified based on internal models and are revalued considering the judicial decisions on the related matters. Regarding the individualized proceedings, the calculation is made periodically based on the determination of the amount of the request and on the likelihood of a loss, which is estimated according to the characteristics, in fact or in law, related to each sentence in particular. We tested the models used to quantify judicial proceedings of civil and labor natures considered on a group basis. We were supported by our specialists in the labor, legal, and fiscal areas, according to the nature of each proceeding.

 

Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter	How the matter was addressed in the audit
Among other things, the aspects used to establish the likelihood of a loss attributed to each proceeding are subjective and the evolution of the jurisprudence is not always uniform. In this context, we consider that this subject requires audit focus.	Also, we performed external confirmation procedures with both internal and external lawyers responsible for the proceedings. We considered that the criteria and assumptions adopted by Management for determining the provision for contingent liabilities, as well as the information disclosed in the financial statements, are appropriate.

Others matters

Statements of value added

The parent company and consolidated statements of value added for the six-month period ended on June 30, 2018, prepared under the responsibility of the Bank's management, which presentation is required by the Brazilian Corporate Law for listed companies and treated as supplementary information for purposes of BACEN, were submitted to audit procedures performed in conjunction with the audit of the financial statements. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09, "Statement of Value Added". In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and are consistent with the parent company and consolidated financial statements taken as a whole.

Other information accompanying the parent company and consolidated financial statements and the auditor's report

The Bank's management is responsible for the other information which comprise the Management Report and the Management Discussion and Analysis Report.

Our opinion on the parent company and consolidated financial statements does not cover the Management Report or the Management Discussion and Analysis Report, and we do not express any form of audit conclusion thereon.

In connection with the audit of the parent company and consolidated financial statements, our responsibility is to read the Management Report and the Management Discussion and Analysis Report and, in doing so, consider whether these reports are materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appear to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management Report or in the Management Discussion and Analysis Report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the parent company and consolidated financial statements

Management is responsible for the preparation and fair presentation of the parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by BACEN, and for such internal control as management

 

Itaú Unibanco Holding S.A.

determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company and consolidated financial statements, management is responsible for assessing the Bank's ability to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance in the Bank and its subsidiaries are responsible for overseeing the financial reporting process.

Auditor's responsibilities for the audit of the parent company and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the parent company or the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that the audit conducted in accordance with the Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the parent company and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 of the Bank and its subsidiaries.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank's ability to continue as going concerns. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as going concerns.

• Evaluate the overall presentation, structure and content of the parent company and consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

Itaú Unibanco Holding S.A.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated to express an opinion on the parent company and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance (Audit Committee and Management) regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and that we communicated to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

São Paulo, July 30, 2018

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

Washington Luiz Pereira Cavalcanti

Contador CRC 1SP172940/O-6

MANAGEMENT REPORT – January to June 2018

The Management Report and the Financial Statements of Itaú Unibanco Holding S.A. (Itaú Unibanco or Company) and its subsidiaries for the period from January to June 2018 follow the regulations established by the National Monetary Council (CMN), in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

New accounting standard IFRS 9 on financial instruments became effective on January 1, 2018. This standard introduces significant amendments to classification and measurement, impairment and hedge accounting. The most significant change resulting from IFRS 9 is how banks account for loan losses. As from IFRS 9 these will be addressed as expected rather than incurred, as before.

1 Economic Environment

1.1) Domestic Scenario

The Central Bank of Brazil started a cycle of cuts in interest rates in October 2016 and, since then, the Selic rate was reduced to current 6.50% per year from 14.25%. Inflation for the 12-month period, measured by IPCA, reached 4.4% in June.

GDP increased 1.0% in 2017 and 1.3% in the twelve-month period up to March 2018. This result is an improvement from the perfomance recorded between 2015 and 2016, a period overshadowed by economic downturn.

According to data from BACEN, loans granted increased 4.9% in actual terms in the 12-month period up to May 2018. Inventory of actual loans fell 1.5% in May, considering the annual comparison, from a decrease of 6.0% in the same period of 2017. In the same comparison, the inventory of loans as a proportion of GDP fell to 46.6% in 2018 from 47.9% in 2017. The default rate reduced 80 bps over the last 12 months and is now at 3.3%.

At the end of the first half of 2018, the Brazilian real was priced at R$3.86 against the U.S. dollar, compared to R$3.31 at the end of 2017. The short position in BACEN foreign exchange swaps is US$67 billion. On the other hand, the volume of foreign exchange reserves closed June 2018 at US$379.5 billion.

1.2) Latin America Scenario (ex-Brazil)

The economic activity has been recovering in Chile, Colombia and Peru, driven by higher commodities prices and a more robust growth of the world economy. Economic expansion remains strong in Paraguay, supported by the growth of the agricultural production. On the other hand, in view of more adverse external financial conditions, Argentina has experienced a severe economic downturn, also impacted by the effects of the drought gripping that country. The activity in Uruguay has slowed down, in line with the slower growth in Argentina and Brazil.

Central banks are adopting a more conservative approach. Chile, Colombia and Peru are signaling that there is no more room for interest cuts, and Paraguay has kept interest rates stable considering that its inflation is under control. Argentina and Uruguay, in turn, have increased interest rates.

1.3) International Scenario

The U.S. economy grew 2.3% in 2017 and 2.5% in the twelve-month period up to March 2018. In this recent period, job creation has remained on a strong pace, higher than 200,000 by month, and unemployment rate fell to 4.0% in June 2018 from 4.1% in December 2017.

In the Euro zone, the growth of the economic activity has remained robust, boosted by domestic demand and a more accommodative policy adopted by the European Central Bank. After a 2.4% growth in 2017, the 12-month growth calculated for the first quarter of 2018 was 2.7%.

China grew 6.8% in the first quarter of 2018. However, China’s economy has shown signs of a gradual slowdown, as a result of slightly more restrictive policies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 11

2 Itaú Unibanco Highlights

2.1) Corporate Governance

Fiscal Council

A permanent council reinforces our corporate governance

The Extraordinary General Stockholders’ Meeting of July 27 approved the permanent operation of our Fiscal Council, which works independently from the Board of Directors, our external auditors and the Audit Committee. It is worth mentioning that the Fiscal Council has been established annually and continuously since 2000. Its main responsibilities are:

· inspecting the activities carried out by our Management; and

· reviewing and providing an opinion on our financial statements.

Reference Form

Available on our Investor Relations website, this document includes a number of significant information on the bank

 

In May, we filed with CVM the 2017 Reference Form, which addresses a number of significant information, such as the Company’s economic and financial position, risk factors, management structure, capital structure, and securities issued, among others. This is a regulatory document issued annually, which must be updated whenever significant changes occur over the year, in accordance with CVM Instruction No. 480.

In this edition, chapters on risks and compensation were restated, and we adopted the IFRS as the standard approach for this document. To access the Reference Form, visit website https://www.itau.com.br/investor-relations > Financial Information > CVM Filings.

Audit Committee

Election of a new member keeps its composition independence

At a meeting of the Board of Directors held in April, Antonio Carlos Barbosa de Oliveira was elected as a new member of the Audit Committee, replacing Geraldo Travaglia Filho, who has reached the maximum number of terms of office permitted (5 years).

Additionally, Committee’s Chairman Gustavo Jorge Laboissière Loyola and members Antonio Francisco de Lima Neto, Diego Fresco Gutierrez¹, Maria Helena dos Santos Fernandes de Santana, and Rogério Paulo Calderón Peres were reelected.

All members of the Audit Committee are deemed independent members, as defined by the Central Bank of Brazil.

¹ Financial expert: a member with proven knowledge in accounting and auditing areas.

2.2) Strategic Frontlines

Seeking excellence and the creation of differentiated value for our stockholders and stakeholders, we have defined six strategic priorities with medium and long-term prospects, which have guided our management, as follows: client centricity, digital transformation, people management, risk management, sustainable profitability, and internationalization. Corporate governance and sustainability pervade all these frontlines.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 12

We highlight some significant initiatives in connection with this strategic agenda:

Digital Transformation

Samsung Pay

A simple, safe and private way to make payments and shop at stores, by apps or the Internet

  We have continuously invested in new groundbreaking products and services. As of the first quarter of 2018, our clients were able to use Apple Pay (with a three-month exclusivity) and Samsung Pay as of June. Both tools are new ways for clients to make payments in the retail and e-commerce segments, enabling shopping with their iPhone, Apple Watch, iPad or Macbook (Apple Pay) or Samsung Smartphones and Smartwatch Gear (Samsung Pay), in a simple, safe and private way, without the need to use a plastic card.  

People Management

New Dress Code

A new way to dress was implemented for all employees

In June, we launched the “Vou como Sou” campaign, aimed at providing employees with more freedom and comfort to dress to work, in addition to encouraging a diversity of styles within the organization. Based on surveys with employees and clients, this campaign aims at providing flexibility to our dress code, highlighting the importance of using common sense and respecting the environment scenario and the schedule of appointments in the day-to-day when choosing what to wear.

Diversity

Significant progress towards equal opportunities

In order to build up an increasingly fair company free from prejudice, we announced that the performance of our employees in maternity leave will be evaluated based on the period they worked in, with their profit sharing, nevertheless, being fully paid.

Accordingly, we have adjusted some issues that impacted exclusively and directly our women employees, thus making headway towards equal opportunities for all employees.

2.3) Return to Stockholders

Dividends and Interest on Capital

Stockholders with shareholding position on August 17, 2018 will be entitled to receive R$0.73042 per share, net of income tax

On July 30, 2018, the Board of Directors approved the payment of R$4.7 billion in dividends and interest on capital, net of income tax, to be credited on August 30, 2018, based on the shareholding position on August 17, 2018.

Up to June 30, 2018, we paid, provided or identified in the Stockholders’ Equity R$5.3 billion in dividends and interest on capital, net of income tax.

Share Buyback

Amount bought back from January to June 2018 totaled R$509.5 million

In the period from January to June 2018, we acquired 13.1 million preferred shares of own issue in the total amount of R$509.5 million at the average price of R$38.89 per share. It is worth mentioning that, including buybacks already carried out, our current program allows the acquisition of up to 14,195,517 common shares and up to 36.9 million preferred shares of own issue, and operations may be carried out up to June 19, 2019.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 13

Accordingly, on June 30, 2018, our treasury stock totaled 60,584,295 preferred shares.

This share buyback program aims at: (i) maximizing the capital allocation through the efficient application of available funds, (ii) arranging for the delivery of shares to employees and management members of the Company and its subsidiaries under the scope of remuneration models and long-term incentive plans; (iii) using the shares acquired if business opportunities arise in the future, and (iv) cancel them, eventually, increasing the individual share of each stockholder.

50% Stock Split

With a resulting 50% increase in dividends paid monthly

The Extraordinary General Stockholders’ Meeting of July 27 approved the 50% split of our shares and American Depositary Receipts (ADRs). Therefore, our stockholders will receive one new share for each two shares of the same type they own.

We believe that trading our shares at a more accessible level combined with a larger number of outstanding shares will generate potentially more business and a higher financial volume, which may create value to our stockholders.

After obtaining approval from the Central Bank of Brazil, we will disclose to the market the dates and other operational procedures to be carried out within the split operational scope.

2.4) Sustainability

Vigeo Eiris Best Emerging Market Performers Ranking

Making up this index for the sixth consecutive time

We once again make up the Vigeo Eiris Best Emerging Market Performers Ranking, composed of 101 companies from 20 countries with the best scores in indicators such as human rights, decent work practices, environment protection, corporate governance, business ethics, and contribution for economic and social development in the areas where they operate.

2.5) Regulatory Environment

Banking regulation is essential for the soundness and efficiency of the financial system. When amended, it may have direct impact on the bank’s results. We highlight below the main changes in this quarter:

Credit Cards

In April 2018, the Central Bank of Brazil disclosed new credit cards rules, which came into force on June 1, 2018, according to which financial institutions are barred from charging different interest rates for revolving credit for clients who pay at least the minimum amount of the bill and for those clients who are in default. The only difference permitted is that the bank may charge the latter with additional fine and interest in arrears. Additionally, the minimum percentage for payment of the bill (previously set at 15%) may be established by each institution individually, based on its own credit policy and the clients’ profile.

Since September 2017, Itaú Unibanco has equalized the rate for both audiences in order to be in conformity with Resolution No. 4,558, which, in the institution’s viewpoint, already imposed that condition to the card market.

Overdrafts

New self-regulation guidelines on the use of overdraft protection, announced in April by Febraban, came into force on July 1, 2018. Among these guidelines, we highlight the offer to pay the debit balance in installments for consumers who use this product on a non-emergency situation, that is, whenever they compromise at least 15% of the overdraft limit available during 30 consecutive days.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 14

This initiative from Febraban is an important hallmark in the sector to make headway and encourage people to have a healthier financial management and make a more conscious use of this product. This is a measure designed inside the banking self-regulation environment, which should contribute to boost the credit activity in Brazil.

Accordingly, Itaú Unibanco has adopted the following practices:

· alerting the client whenever he or she uses the overdraft protection;

· providing the client, at any moment, with a credit line for making payments in installments, at lower interest rates;

· whenever the client uses the overdraft limit on a non-emergency situation, the bank will offer a cheaper credit line more adequate to his or her needs, such as consumer credit, payroll loans or customized credit;

· Information will be stated separately in the bank statement, making it easier for clients to monitor the balance and the overdraft limit available;

· agreements will be updated, emphasizing the emergency nature of this product.

The overdraft area on the website was redesigned, bringing, in addition to a simpler and more user-friendly language, videos to guide the use of this product and a calculator that enables the client to make simulations of the fees to be charged when using the overdraft protection.

Additionally, based on improved credit and default indicators and the successive reductions of the Selic rate, Itaú Unibanco has reduced interest rates in overdrafts in the last months.

For further information, please access: https://www.itau.com.br/creditos-financiamentos/cheque-especial/.

3 Awards, Recognition and Certifications

In the second quarter of 2018, we received recognition that contributed to strengthen our reputation. We list below the main awards received in the period:

Awards and Recognition

Segurador Brasil 2018 (Brazil Insurer 2018) Award (Segurador Brasil Magazine - April 2018)	Itaú Unibanco was the winner in “Sales Growth” and “Market Share Evolution” in the private pension plan category. The bank also won with the "Best Performance" in the extended warranty category.
Empresa Legal (Legally Cool Company) (Padrão Group / CIP – April 2018)	Itaú Unibanco was recognized as a Legally Cool Company, that is, it is a company recognized for engaging in settling conflicts through dialogue.
SP De Bike ao Trabalho 2018 (SP commuting by bike 2018) Award (Bike Anjo / Instituto Ethos / GCCA – Global Call for Climate Action – May 2018)	Itaú Unibanco was awarded in the Large Companies category for the impact and diversification of its actions.
Marcas Mais Amadas pelos Millennials (brands most beloved by millenials) award (Padrão Group / CIP  - May 2018)	Itaú Unibanco was deemed the most beloved brand in the Banks segment.
Excelência em Serviços ao Cliente (Excellence in Customer Service) Award (Consumidor Moderno – May 2018)	Itaú Unibanco was the winner in the Banks and Cards categories, with ITAUCARD.
Efinance Award (Executivos Financeiros magazine - May 2018)	Itaú Unibanco was the winner in the Mobile Banking category with the “Depositing cheques on mobile” and "Essence of Personnalité service on Mobile" cases, and in the Education & Training category with the “Virtual Reality in Personnalité Features” case.
Euromoney FX Survey 2018 (Euromoney magazine - May 2018)	Banco Itaú Paraguay was the winner in the Paraguay’s best bank category.
Marcas Mais (brands most) (Estado Group - June 2018)	Itaú Unibanco ranked first in the Banks category and Itaú Seguros/Sulamerica ranked third in the Insurance Companies category.
Euromoney for Excellence (Euromoney magazine - June 2018)	Itaú Unibanco won as the best bank in Latin America, the best bank in Paraguay, and the best bank in Brazil.

Certifications

ISO 14001	Itaú Unibanco Business Center (local acronym IUCE) located at the Conceição district was certified for the first time, and Tatuapé Administrative Center was certified for the fourth consecutive time. ISO 14001 certification recognizes the bank's commitment to reduce environmental impact and promote the conscious use of natural resources.
ISO 27001	Itaú Unibanco holds the ISO 27001 certification, an international information security benchmark.
LEED	The Faria Lima 3500 building was recognized by the LEED operation and maintenance certification. This body assesses buildings with the best performance in connection with natural resources.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 15

4 Selected Financial Information

We offer a comprehensive range of banking services to a wide variety of market segments, including individuals and companies. We segregate our operations into wholesale and retail and we are structured to meet all our clients’ needs, either credit, investment, insurance or financial services in general. We present below a summary of our financial information:

	jun/30/2018			jun/30/2017
Profitability
Net Income (R$ billion)		12.5			12.7
Recurring Net Income (R$ billion)		12.1			12.4
Recurring Return on Average Equity - Annualized		20.1	%		20.9	%
Net Banking Product of Expected Losses from Financial Assets and Claims		41.4			45.7
Capital and Liquidity
Solvency Ratio - Prudential Conglomerate (BIS Ratio)		17.2	%		18.4	%
Fixed Asset Ratio		21.4	%		24.0	%
Total High-Quality Liquid Assets(1)(2) (R$ billion)		172.2			185.3
Liquidity Coverage Ratio (LCR)(2)		169.5	%		201.7	%
Customer Service Network
Total Number of Employees (individuals)		99,914			95,065
Brazil		86,144			81,252
Abroad		13,770			13,813
Branches and Client Service Branches (CSBs)  – units		4,904			4,955
Digital Branches		160			154
Branches - Brazil(3)		3,531			3,523
CSBs - Brazil		697			736
Branches  + CSBs - Latin America		516			542
Automated Teller Machines (ATMs) – units(4)		47,650			46,572

	jun/30/2018			dec/31/2017
Assets
Total Assets (R$ billion)		1,469.1			1,436.2
Total Credit Portfolio, including Financial Guarantees Provided (R$ billion)		592.6			568.2
Loan Portfolio/Funding(5)		77.8	%		74.4	%
Stockholders' Equity (R$ billion)		126.3			131.4
Funding
Demand, Savings, and Time Deposits (R$ billion)		423.7			400.8
Debentures (Linked to Repurchase Agreemens and Third Parties' Operations) (R$ billion)		35.4			58.8
Funds from Bills and Structured Operations Certificates (R$ billion)		71.5			65.7

⁽¹⁾ Correspond to weighted inventories of assets that remain liquid in the market even in periods of stress, which can easily be converted into cash and are classified as low risk. Used for LCR calculation.

⁽²⁾ We monitor the Liquidity Coverage Ratio (LCR), as it refers to free and highly liquid assets and net cash outflows over a 30-day period and is calculated based on the methodology defined by Circular No. 3,749, of the Central Bank of Brazil, in line with international guidelines. BACEN minimum requirement is 90% for 2018.

⁽³⁾ Includes IBBA representative offices abroad.

⁽⁴⁾ Includes CSBs (Client Service Branches), points of services in third parties’ establishments and Banco24horas ATMs.

⁽⁵⁾ The loan portfolio was calculated in BRGAAP and does not include financial guarantees provided.

From January to June 2018, net income was R$12.5 billion, down 1.6% from the same period of the previous year.

Our general and administrative expenses increased 5.7% between the first 6 months of 2017 and 2018, mainly driven by increases in compensation and benefits and our risk-adjusted efficiency ratio was 60.9%, down 300 basis points from the same period of 2017.

Itaú Unibanco is present in 19 countries with a team totaling, at June 30, 2018, 99.9 thousand employees who work focused on customer satisfaction. Employees’ fixed compensation plus charges and benefits totaled R$8.2 billion in the first semester of 2018.

In this semester, we highlight the 7.6% increase in commissions and fees from the first semester of 2017, mainly those related to current account services, fund management and credit cards.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 16

Loan portfolio reached R$592.6 billion at the end of June 2018, up 4.3% from the end of 2017. In the first semester of 2018, we recorded increases in the portfolios of loans to individuals and to very small, small and middle-market companies.

We highlight below our loan portfolio with financial guarantees provided at the end of June 2018:

The strategic credit risk management supports the quality of our loan portfolio. Nonperforming loans over 90 days overdue closed the second quarter of 2018 at 2.8%, down 30 basis points compared to the previous quarter.

¹In BRGAAP.

4.1) Capital Management and Distribution of Profits

Aimed at ensuring soundness and capital availability to support our business growth, regulatory capital levels were kept above those required by the Central Bank of Brazil, as evidenced by the Common Equity Tier I, Tier I, and BIS ratios. We intend to maintain the minimum level, established by the Board of Directors, of 13.5% for Tier 1 Capital, which must be composed of at least 12% Common Equity Tier I. For further information, see to “Risk and Capital Management Report – Pillar 3” report on our website www.itau.com.br/investor-relations > Corporate Governance.

The minimum capital requirement, either regulatory levels and those established by the Board of Directors, is directly associated with the percentage of dividends and interest on capital to be distributed to stockholders. This amount is determined based on: profitability in the year, the prospective use of capital based on the expected business growth, share buyback programs, mergers and acquisitions and regulatory changes that may modify capital requirements, and changes in tax legislation. Therefore, the percentage to be distributed may change every year based on the company’s profitability and capital demands, and always takes into account the minimum distribution set forth in the Bylaws.

Itaú Unibanco remunerates its stockholders by means of monthly and complementary payments, and the latter have historically occurred twice a year and are equally distributed regardless of the type of share. The Stockholders Remuneration Policy is available on our Investor Relations website www.itau.com.br/investor-relations > Corporate Governance > Rules and Policies.

At the end of June 2018, the BIS ratio reached 17.2%, of which: (i) 15.1% related to Tier I Capital, which comprises Common Equity and Additional Tier I Capital, and (ii) 2.0% related to Tier II Capital. These indicators provide evidence of our effective capacity of absorbing unexpected losses. The amount of subordinated debt, which is part of our Tier II regulatory capital, reached R$15.8 billion on June 30, 2018.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 17

· Perpetual Subordinated Notes – In March 2018, we accessed the international debt market by issuing perpetual subordinated notes/AT1¹ in the amount of US$750 million. We had already issued US$1.25 billion in these notes in December 2017.

In May 2018, the Central Bank of Brazil approved the inclusion of this debt, as from the issue date, in the bank’s Reference Equity as Additional Tier I Capital, adding approximately 38 basis points² to the bank’s Tier I Capital ratio. It is worth mentioning that in April 2018, the Central Bank of Brazil had already approved the issue carried out in December 2017, which composed approximately 60 basis points of the ratio.

Therefore, the total impact of these two AT1 issues on our Tier 1 capital ratio was 98 basis points².

1 These notes have a fixed rate of 6.5%, applicable until the fifth anniversary of the date of issue. Thereafter, the coupon will be reset every five years, based on the prevailing interest rate for U.S. Treasury bonds for the same period. Itaú Unibanco may repurchase these notes on the fifth anniversary of the issue date or on any subsequent interest payment date, subject to prior approval from Brazilian authorities, including the Central Bank of Brazil.

2 Takes into account the foreign exchange rate on June 30 at R$3.86.

5 Capital Markets

Itaú Unibanco is the largest private bank in Latin America, with market value of R$260.6 billion. We are ranked by Bloomberg among the 20 largest financial institutions in the world. We are deemed Brazil’s most valued brand by publications such as Interbrand, among other relevant recognition.

			R$		%
Shares	June 30, 2018		June 30, 2017		Change
Net income per share - Basic(1)
Common Shares		1.87		1.90		(1.6	)
Preferred Shares		1.87		1.90		(1.6	)
Net income per share - Diluted(2)
Common Shares		1.86		1.89		(1.6	)
Preferred Shares		1.86		1.89		(1.6	)
Average Daily Trading Volume (in millions)		1,203.2		932.1		29.1
B3 Volume (in millions)		673.7		454.5		48.2
NYSE Volume (in millions)		529.4		477.6		10.9
Market value (in billions)(3)(4)		260.6		239.0		9.0

(1) Calculated by dividing the net profit attributable to shareholders by the average number of shares, excluding the number of shares purchased by the company.

(2) Calculated similarly to (1), including the denominator (adjusted weighted average shares) actions related to stock options granted to the Stock Option Plan, assuming the potential plan of stock option exercise (Note 21a).

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

(4) Taking into account the closing price of common and preferred shares multiplied by total outstanding shares of each type of shares, the market value reached R$246.5 billion on June 30, 2018 and R$ 224.7 billion on June 30, 2017, resulting in a variation of 9.7%.

21 Years’ Worth of History on NYSE

A historical hallmark in the U.S. stock market

We are celebrating the 21st anniversary of our listing on the New York Stock Exchange, the largest in terms of business volume. To celebrate this date, we were honored at the Closing Bell, a traditional ceremony that marks the end of the trading day in this U.S. stock exchange. This occasion counted on the presence of members of the Executive Committee and Board of Directors.

Our shares are traded in the U.S. as ADRs with the ticker ITUB, with one ADR equivalent to one preferred share. In the first half of 2018, Itaú Unibanco shares traded daily on the NYSE amounted to an average of R$529.4 million (US$152.3 million).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 18

APIMEC Cycle 2018

Commitment to transparency

Over 2018, we held 15 APIMEC meetings with the attendance of 1,770 participants. At these events we carried out presentations on the macroeconomic scenario and our results, strategies and outlooks. We responded to all the questions posted in these events, and the most recurring topics were the impact of interest rates on our results, capital and dividends, and competition in the digital market.

All presentations are available on our Investor Relations website and were submitted to capital markets regulators.

We invite you all to attend our Apimec meeting in the city of São Paulo on September 12. The event will be broadcast live and with simultaneous translation on our IR website.

Additionally, we took part in 12 conferences and two road shows in Brazil and abroad and held quarterly conference calls in English and Portuguese.

6 Regulation

6.1) INDEPENDENT AUDITORS – CVM Instruction No. 381

Procedures adopted by the Company

The policy adopted by us, including our subsidiaries and parent company, to contract 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.

In the period from January to June 2018, 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 non-audit services provided and related dates:

· January 11 - review of compliance with transfer pricing policies;

· February 1 and April 3 - review of tax-accounting bookkeeping; and

· February 15 and May 23 -acquisition of technical materials.

Independent Auditors’ justification – PricewaterhouseCoopers

The provision of the non-audit services described above does 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 observed in the provision of the referred services, including the approval from Itaú Unibanco’s Audit Committee.

6.2) Brazilian Accounting Practices (BRGAAP)

We disclosed the complete financial statements in accordance with Brazilian accounting practices (BRGAAP) 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).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 19

7 Information and Acknowledgments

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 websites of CVM and of the Securities and Exchange Commission (SEC). Our results may also be accessed on mobile devices and tablets, and through our “Itaú RI” (app), respectively.

We thank our employees for their dedication 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 July 30, 2018).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 20

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

Assets	Note	06/30/2018			12/31/2017			01/01/2017
Cash and deposits on demand	4		25,402			18,749			18,542
Financial Assets			1,354,005			1,330,251			1,246,833
Central Bank compulsory deposits	5		84,800			98,837			85,700
At Amortized Cost			936,306			905,729			902,289
Interbank deposits	6		23,737			29,048			22,688
Securities purchased under agreements to resell	6		254,697			244,707			265,050
Securities	11		108,554			111,424			102,568
Loan operations and lease operations portfolio	12		522,492			497,719			494,851
Other financial assets	20a		62,953			59,568			53,895
(-) Provision for Expected Loss			(36,127	)		(36,737	)		(36,763	)
At Fair Value Through Other Comprehensive Income			52,732			52,149			40,039
Securities	10		52,732			52,149			40,039
At Fair Value Through Profit or Loss			280,167			273,536			218,805
Securities	7		252,447			250,693			194,574
Derivatives	8		27,720			22,843			24,231
Investments in associates and joint ventures	13		5,038			5,055			5,073
Goodwill	3		11,412			10,716			9,675
Fixed assets, net	15		7,102			7,359			8,042
Intangible assets, net	16		8,656			8,667			7,381
Tax assets			46,975			44,249			45,081
Income tax and social contribution - current			2,261			2,336			2,703
Income tax and social contribution - deferred	27b		38,542			35,869			38,202
Other			6,172			6,044			4,176
Assets held for sale	36.9		732			736			631
Other assets	20a		9,773			10,457			10,056
Total assets			1,469,095			1,436,239			1,351,314

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 21

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

Liabilities and stockholders' equity	Note	06/30/2018			12/31/2017			01/01/2017
Financial Liabilities			1,082,070			1,056,717			1,012,075
At Amortized Cost			1,044,367			1,024,584			982,116
Deposits	17		426,595			402,938			329,414
Securities sold under repurchase agreements	19a		302,527			312,634			349,164
Interbank market debt	19a		133,637			129,616			135,483
Institutional market debt	19b		101,518			98,482			96,239
Liabilities for capitalization plans			3,336			3,301			3,147
Other financial liabilities	20b		76,754			77,613			68,669
At Fair Value Through Profit or Loss			32,676			27,211			25,217
Derivatives	8 and 9		32,436			26,746			24,698
Others	18		240			465			519
Provision for Expected Loss	12		5,027			4,922			4,742
Loan Commitments			3,160			3,015			2,761
Financial Guarantees			1,867			1,907			1,981
Reserves for insurance and private pension	30c ll		189,493			181,232			154,076
Provisions	32		19,192			19,736			20,909
Tax liabilities			4,983			7,836			4,950
Income tax and social contribution - current			2,426			3,175			1,741
Income tax and social contribution - deferred	27b II		384			391			(289	)
Other			2,173			4,270			3,498
Other liabilities	20b		32,582			26,362			26,920
Total liabilities			1,328,320			1,291,883			1,218,930
Capital	21a		97,148			97,148			97,148
Treasury shares	21a		(1,978	)		(2,743	)		(1,882	)
Additional paid-in capital	21c		1,782			1,930			1,785
Appropriated reserves	21d		4,624			11,681			6,466
Unappropriated reserves	21e		28,204			25,994			20,370
Cumulative other comprehensive income			(3,444	)		(2,632	)		(3,792	)
Total stockholders’ equity attributed to the owners of the parent company			126,336			131,378			120,095
Non-controlling interests	21f		14,439			12,978			12,289
Total stockholders’ equity			140,775			144,356			132,384
Total liabilities and stockholders' equity			1,469,095			1,436,239			1,351,314

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 22

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Income

Periods ended

(In millions of Reais, except for number of shares and earnings per share information)

	Note	04/01 to 06/30/2018			04/01 to 06/30/2017			01/01 to 06/30/2018			01/01 to 06/30/2017
Banking product			21,176			26,575			48,585			56,906
Interest and similar income	23a		32,971			36,535			65,196			76,811
Interest and similar expense	23b		(16,877	)		(19,473	)		(33,308	)		(43,651	)
Dividend income			163			170			197			175
Adjustments to Fair Value of Financial Assets and Liabilities	23c		(7,103	)		(364	)		(5,902	)		3,218
Foreign exchange results and exchange variations on transactions			1,591			(326	)		1,446			226
Banking service fees	24		9,083			8,439			17,980			16,711
Income  related  to  insurance,  private  pension  and  capitalization operations before claim and selling expenses			1,100			1,287			2,273			2,696
Income related to insurance and private pension	30b III		6,096			6,392			12,150			13,260
Reinsurance Premiums	30b III		(6	)		(12	)		(5	)		(26	)
Change in reserves for insurance and private pension			(5,113	)		(5,240	)		(10,116	)		(10,831	)
Revenue from capitalization plans			123			147			244			293
Other income	25		248			307			703			720
Expected Loss from Financial Assets and Claims			(3,764	)		(4,684	)		(7,141	)		(11,244	)
Expected Loss with Loan Operations and Lease Operations	12b		(3,341	)		(4,415	)		(6,226	)		(9,497	)
Expected Loss with Other Financial Assets			(88	)		(8	)		(301	)		(1,165	)
Expenses for claims			(339	)		(268	)		(636	)		(599	)
Recovery of claims under reinsurance			4			7			22			17
Net Banking Product of Expected Losses from Financial Assets and Claim			17,412			21,891			41,444			45,662
Other operating income (expenses)			(15,037	)		(14,324	)		(29,506	)		(28,586	)
General and administrative expenses	26		(14,060	)		(12,913	)		(26,864	)		(25,412	)
Tax expenses			(1,140	)		(1,538	)		(2,932	)		(3,449	)
Share of profit or (loss) in associates and joint ventures	13		163			127			290			275
Income before income tax and social contribution	27		2,375			7,567			11,938			17,076
Current income tax and social contribution			(2,688	)		(1,845	)		(4,267	)		(2,975	)
Deferred income tax and social contribution			6,207			927			4,780			(1,446	)
Net income			5,894			6,649			12,451			12,655
Net income attributable to owners of the parent company	28		5,740			6,331			12,129			12,394
Net income (loss) attributable to non-controlling interests	21f		154			318			322			261
Earnings per share - basic	28
Common			0.89			0.97			1.87			1.90
Preferred			0.89			0.97			1.87			1.90
Earnings per share - diluted	28
Common			0.88			0.96			1.86			1.89
Preferred			0.88			0.96			1.86			1.89
Weighted average number of shares outstanding - basic	28
Common			3,305,526,906			3,351,741,143			3,305,526,906			3,351,741,143
Preferred			3,178,429,935			3,155,404,279			3,174,578,488			3,158,922,612
Weighted average number of shares outstanding - diluted	28
Common			3,305,526,906			3,351,741,143			3,305,526,906			3,351,741,143
Preferred			3,225,868,666			3,209,326,813			3,206,342,528			3,195,332,639

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 23

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Comprehensive Income

Periods ended

(In millions of Reais)

	Note			04/01 to 06/30/2018			04/01 to 06/30/2017			01/01 to 06/30/2018			01/01 to 06/30/2017
Net income					5,894			6,649			12,451			12,655
Financial assets at fair value through other comprehensive income					(891	)		(241	)		(772	)		381
Change in fair value					(1,513	)		(401	)		(1,330	)		560
Income tax effect					599			150			587			(237	)
(Gains) / losses transferred to income statement		23	c		43			17			(52	)		105
Income tax effect					(20	)		(7	)		23			(47	)
Hedge					(1,451	)		(310	)		(1,802	)		(411	)
Cash flow hedge		9			(13	)		83			(69	)		(269	)
Change in fair value					11			225			(80	)		(390	)
Income tax effect					(24	)		(142	)		11			121
Hedge of net investment in foreign operation		9			(1,438	)		(393	)		(1,733	)		(142	)
Change in fair value					(2,474	)		(804	)		(2,965	)		(390	)
Income tax effect					1,036			411			1,232			248
Remeasurements of liabilities for post-employment benefits (*)					1			5			1			(59	)
Remeasurements		29			3			1			11			(24	)
Income tax effect					(2	)		4			(10	)		(35	)
Foreign exchange differences on foreign investments					1,477			520			1,761			316
Total comprehensive income					5,030			6,623			11,639			12,882
Comprehensive income attributable to non-controlling interests					154			318			322			261
Comprehensive income attributable to the owners of the parent company					4,876			6,305			11,317			12,621

(*) Amounts that will not be subsequently reclassified to income.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 24

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Changes in Stockholders’ Equity (Notes 21 and 22)

Periods ended June 30, 2018 and 2017

(In millions of Reais)

	Attributed to owners of the parent company
																		Other comprehensive income
																		Financial Assets												Total			Total
																		at Fair Value			Remeasurements			Cumulative						stockholders’			stockholders’
						Additional												Through Other			of liabilities of post-			translation			Gains and			equity – owners			equity – non-
			Treasury			paid-in			Appropriated			Unappropriated			Retained			Comprehensive			employment			adjustments			losses –			of the parent			controlling
	Capital		shares			capital			reserves			reserves			earnings			Income (1)			benefits			abroad			hedge(2)			company			interests			Total
Balance at 01/01/2017		97,148		(1,882	)		1,785			6,466			20,370			-			(1,249	)		(815	)		2,085			(3,813	)		120,095			12,289			132,384
Transactions with owners		-		(689	)		(236	)		2,568			-			(5,467	)		-			-			-			-			(3,824	)		65			(3,759	)
Treasury shares		-		(689	)		(70	)		-			-			-			-			-			-			-			(759	)		-			(759	)
Granting of stock options – exercised options		-		593			(24	)		-			-			-			-			-			-			-			569			-			569
Acquisition of treasury shares (Note 21a)		-		(1,282	)		-			-			-			-			-			-			-			-			(1,282	)		-			(1,282	)
Granted options recognized		-		-			(46	)		-			-			-			-			-			-			-			(46	)		-			(46	)
Share-based payment – variable compensation		-		-			(166	)		-			-			-			-			-			-			-			(166	)		-			(166	)
(Increase) / Reduction of interest of controlling stockholders (Note 2.4a I and 3)		-		-			-			-			-			-			-			-			-			-			-			216			216
Dividends / interest on capital  – Special profit reserve (Note 21b)		-		-			-			2,568			-			(5,467	)		-			-			-			-			(2,899	)		(151	)		(3,050	)
Dividends / Interest on capital paid in 2017 - Year 2016 - Special profit reserve		-		-			-			(5,048	)		-			-			-			-			-			-			(5,048	)		-			(5,048	)
Corporate reorganizations (Note 2.4 a III)		-		-			-			(442	)		-			-			-			-			-			-			(442	)		-			(442	)
Other		-		-			-			-			23			-			-			-			-			-			23			-			23
Total comprehensive income		-		-			-			-			-			12,394			381			(59	)		316			(411	)		12,621			261			12,882
Net income		-		-			-			-			-			12,394			-			-			-			-			12,394			261			12,655
Other comprehensive income for the period		-		-			-			-			-			-			381			(59	)		316			(411	)		227			-			227
Appropriations:
Legal reserve		-		-			-			537			-			(537	)		-			-			-			-			-			-			-
Statutory reserve		-		-			-			4,739			1,651			(6,390	)		-			-			-			-			-			-			-
Balance at 06/30/2017		97,148		(2,571	)		1,549			8,820			22,044			-			(868	)		(874	)		2,401			(4,224	)		123,425			12,615			136,040
Change in the period		-		(689	)		(236	)		2,354			1,674			-			381			(59	)		316			(411	)		3,330			326			3,656
Balance at 01/01/2018		97,148		(2,743	)		1,930			11,681			25,994			-			(239	)		(825	)		2,816			(4,384	)		131,378			12,978			144,356
Transactions with owners		-		765			(148	)		2,417			-			(5,435	)		-			-			-			-			(2,401	)		1,139			(1,262	)
Treasury shares		-		765			8			(534	)		-			-			-			-			-			-			239			-			239
Granting of stock options – exercised options		-		741			373			-			-			-			-			-			-			-			1,114			-			1,114
Acquisition of treasury shares (Note 21a)		-		(510	)		-			-			-			-			-			-			-			-			(510	)		-			(510	)
Cancellation of Shares – Meeting of the Board of Directors 02/22/2018		-		534			-			(534	)		-			-			-			-			-			-			-			-			-
Granted options recognized		-		-			(365	)		-			-			-			-			-			-			-			(365	)		-			(365	)
Share-based payment – variable compensation		-		-			(156	)		-			-			-			-			-			-			-			(156	)		-			(156	)
(Increase) / Reduction of interest of controlling stockholders (Note 2.4a I and 3)		-		-			-			-			-			-			-			-			-			-			-			1,235			1,235
Dividends / interest on capital		-		-			-			2,951			-			(5,435	)		-			-			-			-			(2,484	)		(96	)		(2,580	)
Dividends / Interest on capital paid in 2018 - Year 2017 - Special profit reserve		-		-			-			(13,673	)		-			-			-			-			-			-			(13,673	)		-			(13,673	)
Corporate reorganizations (Note 2.4 a III)		-		-			-			(314	)		-			-			-			-			-			-			(314	)		-			(314	)
Unclaimed dividends		-		-			-			-			-			2			-			-			-			-			2			-			2
Other		-		-			-			-			27			-			-			-			-			-			27			-			27
Total comprehensive income		-		-			-			-			-			12,129			(772	)		1			1,761			(1,802	)		11,317			322			11,639
Net income		-		-			-			-			-			12,129			-			-			-			-			12,129			322			12,451
Other comprehensive income for the period		-		-			-			-			-			-			(772	)		1			1,761			(1,802	)		(812	)		-			(812	)
Appropriations:
Legal reserve		-		-			-			497			-			(497	)		-			-			-			-			-			-			-
Statutory reserve		-		-			-			4,016			2,183			(6,199	)		-			-			-			-			-			-			-
Balance at 06/30/2018		97,148		(1,978	)		1,782			4,624			28,204			-			(1,011	)		(824	)		4,577			(6,186	)		126,336			14,439			140,775
Change in the period		-		(765	)		148			7,057			(2,210	)		-			772			(1	)		(1,761	)		1,802			5,042			(1,461	)		3,581

(1) Includes Share of Other Comprehensive Income of Investments in Associates and Joint Ventures related to Financial Assets at Fair Value Through Other Comprehensive Income.

(2) Includes Cash flow hedge and hedge of net investment in foreign operation.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 25

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In millions of Reais)

	Note	04/01 to 06/30/2018			04/01 to 06/30/2017			01/01 to 06/30/2018			01/01 to 06/30/2017
Adjusted net income			10,578			19,927			25,558			37,758
Net income			5,894			6,649			12,451			12,655
Adjustments to net income:			4,684			13,278			13,107			25,103
Granted options recognized and share-based payment – variable compensation			109			106			(521	)		(212	)
Effects of changes in exchange rates on cash and cash equivalents			(2,355	)		1,264			(2,284	)		866
Expected Loss with Loan Operations and Lease Operations	12b		3,341			4,415			6,226			9,497
Interest and foreign exchange expense from operations with subordinated debt			6,267			2,322			7,336			2,698
Change in reserves for insurance and private pension			5,113			5,240			10,116			10,831
Revenue from capitalization plans			(123	)		(147	)		(244	)		(293	)
Depreciation and amortization	15 and 16		877			771			1,736			1,591
Interest expense from provision for contingent and legal liabilities			196			554			505			989
Provision for contingent and legal liabilities			805			942			1,085			1,644
Interest income related to escrow deposits			(38	)		432			(84	)		344
Deferred taxes (excluding hedge tax effects)	27b		848			1,596			2,694			2,668
Share of profit or (loss) in associates and joint ventures			(163	)		(127	)		(290	)		(275	)
(Gain) loss on Financial assets - At fair value through other comprehensive income	23c		43			17			(52	)		105
Interest and foreign exchange income of financial assets at fair value through other comprehensive
income			(7,147	)		(2,858	)		(9,378	)		(4,577	)
Interest and foreign exchange of financial assets at amortized cost			(2,600	)		(1,057	)		(3,159	)		(717	)
(Gain) loss on sale of assets held for sale	25 and 26		73			180			144			238
(Gain) loss on sale of investments	25 and 26		(18	)		(10	)		(116	)		(19	)
(Gain) loss on sale of fixed assets	25 and 26		37			(11	)		16			(7	)
Other			(581	)		(351	)		(623	)		(268	)
Change in assets and liabilities (*)			32,302			(3,898	)		(79,075	)		(25,755	)
(Increase) decrease in assets			(20,097	)		(15,939	)		(140,259	)		(16,265	)
Interbank deposits			662			(347	)		(5,396	)		331
Securities purchased under agreements to resell			(7,952	)		4,087			(110,068	)		15
Compulsory deposits with the Central Bank of Brazil			11,191			(3,799	)		14,037			(2,771	)
Financial assets Through Profit or Loss			8,188			19,753			(1,754	)		(16,717	)
Derivatives (assets / liabilities)			1,189			2,177			2,558			1,945
Loan operations			(28,767	)		(40,986	)		(30,293	)		(2,170	)
Other financial assets			(146	)		(2,335	)		(3,302	)		1,629
Other tax assets			(6,887	)		(2,480	)		(5,176	)		(1,862	)
Other assets			2,425			7,991			(865	)		3,335
(Decrease) increase in liabilities			52,399			12,041			61,184			(9,490	)
Deposits			71,632			20,658			74,582			17,264
Deposits received under securities repurchase agreements			3,149			(8,064	)		(10,424	)		(27,246	)
Financial liabilities at fair value throught profit or loss			(219	)		(25	)		(225	)		(62	)
Funds from interbank markets			(4,823	)		3,790			2,588			1,190
Other financial liabilities			252			(2,389	)		(993	)		(5,123	)
Technical reserve for insurance and private pension			(1,912	)		(193	)		(1,855	)		1,962
Liabilities for capitalization plans			123			159			279			361
Provisions			(1,011	)		(1,228	)		(1,775	)		(1,726	)
Tax liabilities			(1,038	)		280			(1,695	)		2,797
Other liabilities			(13,268	)		(45	)		3,293			4,071
Payment of income tax and social contribution			(486	)		(902	)		(2,591	)		(2,978	)
Net cash from (used in) operating activities			42,880			16,029			(53,517	)		12,003
Interest on capital / dividends received from investments in associates and joint ventures			98			116			189			275
Cash received on financial assets - At fair value through other comprehensive income			511			(1,271	)		3,478			11,087
Cash received from redemption of financial assets at amortized cost			1,584			892			11,667			2,216
Cash upon sale of assets held for sale			74			117			115			130
Cash upon sale of investments  in  associates and joint ventures			18			15			116			24
Cash upon sale of fixed assets	15		(27	)		22			47			30
Cash upon sale of intangible assets	16		2			(2	)		2			18
Purchase of financial assets at fair value through other comprehensive income			(36,337	)		3,168			(45,112	)		(6,791	)
Purchase of financial assets at amortized cost			(1	)		4,914			(533	)		(96	)
Purchase of investments in associates and joint ventures	13		(8	)		-			(16	)		-
Purchase of fixed assets	15		(304	)		(208	)		(517	)		(376	)
(Cash upon sale) Purchase of intangible assets / goodwill	16		(901	)		(621	)		(1,338	)		(714	)
Net cash from (used in) investing activities			(35,291	)		7,142			(31,902	)		5,803
Funding from institutional markets			399			2,357			2,892			5,859
Redemptions in institutional markets			(6,059	)		(3,444	)		(11,366	)		(8,014	)
(Acquisition) / Disposal of interest of non-controlling stockholders			927			153			1,139			65
Granting of stock options – exercised options			45			24			1,114			569
Purchase of treasury shares			(510	)		(996	)		(510	)		(1,282	)
Dividends and interest on capital paid to non-controlling interests			-			15			-			-
Dividends and interest on capital paid			(291	)		(293	)		(14,851	)		(7,567	)
Net cash from (used in) financing activities			(5,489	)		(2,184	)		(21,582	)		(10,370	)
Net increase (decrease) in cash and cash equivalents	2.4c and 4		2,100			20,987			(107,001	)		7,436
Cash and cash equivalents at the beginning of the period	4		77,306			293,125			186,478			306,278
Effects of changes in exchange rates on cash and cash equivalents			2,355			(1,264	)		2,284			(866	)
Cash and cash equivalents at the end of the period	4		81,761			312,848			81,761			312,848
Additional information on cash flow
Interest received			33,605			23,352			57,683			58,937
Interest paid			23,483			4,002			45,663			31,171
Non-cash transactions
Loans transferred to assets held for sale			-			-			-			-
Dividends and interest on capital declared and not yet paid			736			999			2,203			2,544

(*) Includes the amounts of interest received and paid as shown above.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 26

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Added Value

(In millions of Reais)

	04/01 a			04/01 a			01/01 to			01/01 to
	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Income		34,624			41,625			75,366			89,895
Interest, similar income and other		27,622			36,015			60,937			80,430
Banking services		9,083			8,439			17,980			16,711
Income related to insurance, private pension and capitalization operations before claim and selling expenses		1,100			1,287			2,273			2,696
Result of expected credit loss		(3,429	)		(4,423	)		(6,527	)		(10,662	)
Other		248			307			703			720
Expenses		(19,168	)		(21,927	)		(37,573	)		(48,537	)
Interest, similar income and other		(16,877	)		(19,473	)		(33,308	)		(43,651	)
Other		(2,291	)		(2,454	)		(4,265	)		(4,886	)
Inputs purchased from third parties		(4,917	)		(3,886	)		(9,013	)		(7,650	)
Materials, energy and others		(184	)		(179	)		(379	)		(363	)
Third party services		(1,092	)		(1,045	)		(2,087	)		(2,036	)
Other		(3,641	)		(2,662	)		(6,547	)		(5,251	)
Data processing and telecommunications		(1,055	)		(1,031	)		(2,063	)		(2,012	)
Advertising, promotions and publication		(411	)		(291	)		(660	)		(514	)
Installations		(315	)		(309	)		(614	)		(577	)
Transportation		(83	)		(82	)		(167	)		(167	)
Security		(190	)		(179	)		(380	)		(364	)
Travel expenses		(61	)		(54	)		(107	)		(97	)
Other		(1,526	)		(716	)		(2,556	)		(1,520	)
Gross added value		10,539			15,812			28,780			33,708
Depreciation and amortization		(820	)		(742	)		(1,622	)		(1,488	)
Net added value produced by the company		9,719			15,070			27,158			32,220
Added value received through transfer		163			127			290			275
Total added value to be distributed		9,882			15,197			27,448			32,495
Distribution of added value		9,882			15,197			27,448			32,495
Personnel		5,348			5,141			10,489			10,094
Compensation		4,116			3,997			8,055			7,867
Benefits		989			927			1,969			1,802
FGTS – government severance pay fund		243			217			465			425
Taxes, fees and contributions		(1,768	)		3,035			3,716			9,001
Federal		(2,092	)		2,731			2,998			8,404
Municipal		324			304			718			597
Return on third parties’ assets - Rent		408			372			792			745
Return on own assets		5,894			6,649			12,451			12,655
Dividends and interest on capital		3,085			2,613			5,435			5,467
Retained earnings (loss) for the period		2,655			3,718			6,694			6,927
Minority interest in retained earnings		154			318			322			261

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 27

ITAÚ UNIBANCO HOLDING S.A.

Notes to the Consolidated Financial Statements

At June 30, 2018, December 31, 2017 e January 01, 2017 for balance sheet accounts and

From April 1 to June 30, 2018 and 2017 and from January 1 to June 30, 2018 and 2017 for income statement accounts

(In millions of Reais, except information per share)

Note 1 - Overview

Itaú Unibanco Holding S.A. (ITAÚ UNIBANCO HOLDING) is a publicly-held company, organized and existing under the Laws of Brazil. The head office of ITAÚ UNIBANCO HOLDING is located at Praça Alfredo Egydio de Souza Aranha, n° 100, in the city of São Paulo, state of São Paulo, Brazil.

ITAÚ UNIBANCO HOLDING provides a wide range of financial products and services to individual and corporate clients in Brazil and abroad, whether these clients have Brazilian links or not through its international branches, subsidiaries and affiliates.

ITAÚ UNIBANCO HOLDING is a holding company controlled by Itaú Unibanco Participações S.A. (“IUPAR”), a holding company which owns 51% of our common shares, and which is jointly controlled by (i) Itaúsa Investimentos Itaú S.A. (“Itaúsa”), a holding company controlled by members of the Egydio de Souza Aranha family, and (ii) Companhia E. Johnston de Participações (“E. Johnston”), a holding company controlled by the Moreira Salles family. Itaúsa also directly holds 38.7% of ITAÚ UNIBANCO HOLDING common shares.

As described in Note 34, the operations of ITAÚ UNIBANCO HOLDING are divided into three operating and reportable segments: (1) Retail Banking, which comprises the retail and high net worth clients (Itaú Uniclass and Personnalité) and the corporate segment (very small and small companies); (2) Wholesale Banking, which covers the wholesale products and services for middle-market and large companies, as well as the investment banking, in addition to the activities of the Latin America unit and (3) Activities with the Market + Corporation, which mainly manages the financial results associated with capital surplus, subordinated debt, and net debt of tax credits and debits of ITAÚ UNIBANCO HOLDING.

These consolidated financial statements were approved by the Executive Board on July 30, 2018.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 28

Note 2 – Significant accounting policies

2.1. Basis of preparation

The Consolidated Financial Statements of ITAÚ UNIBANCO HOLDING were prepared taking into account the requirements and guidelines set out by the National Monetary Council (CMN), which established that as from December 31, 2010 annual Consolidated Financial Statements are to be prepared in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

These interim financial statements were prepared in accordance with IAS 34 - Interim Financial Reporting using the option to present complete consolidated financial statements instead of condensed consolidated financial statements.

In the preparation of these Consolidated Financial Statements, ITAÚ UNIBANCO HOLDING adopted the criteria for recognition, measurement and disclosure established in the IFRS and in the interpretations of the International Financial Reporting Interpretation Committee (IFRIC).

The Consolidated Statement of Cash Flows shows the changes in cash and cash equivalents during the period, arising from operating, investing, and financing activities, and include highly-liquid investments (Note 2.4c).

The Cash flows of operating activities are calculated by the indirect method. Consolidated net income is adjusted for non-monetary items, such as measurement gains and losses, changes in provisions and in receivables and liabilities balances. All income and expense arising from non-monetary transactions, attributable to investing and financing activities, are eliminated. Interest received or paid are classified as operating cash flows.

Management believes that the information included in these Consolidated Financial Statements is relevant and a faithful representation of the information used in the management of the ITAÚ UNIBANCO HOLDING.

2.2. New accounting standards and new accounting standards changes and interpretations

a) Accounting standards applicable for period ended June 30, 2018

· IFRS 9 – Financial Instruments – The pronouncement replaces IAS 39 - Financial Instruments: Recognition and Measurement. IFRS 9 is applicable to all financial assets and liabilities and will be retrospectively adopted on the date the standard becomes effective, on January 1^st, 2018. The new rule is structured to contemplate the pillars (l) Classification and measurement of financial assets, (ll) Impairment and (lll) Hedge accounting.

Transition for IFRS 9

The main changes identified by ITAÚ UNIBANCO HOLDING due to the adoption of IFRS 9 are related to the classification, measurement and impairment of financial assets. ITAÚ UNIBANCO HOLDING will continue applying the hedge accounting requirements set forth in IAS 39 and retrospectively applied the other criteria of IFRS 9 as from December 31, 2015. The effects on the transition date will be presented in the annual financial statements, which comprise the complete periods affected by the adoption of IFRS 9, proving more comparability and transparence of information. Further information on new classification requirements and accounting policies adopted are included in Note 2.4.

(I) Classification and Measurement of Financial Assets and Liabilities

IFRS 9 introduces the concept of business model and assessment of characteristics of contractual cash flows (Solely Payment of Principal and Interest Test – SPPI Test) for classification of financial assets.

· Business Model: represents the way the entity manages its financial assets;

· SPPI Test: assessment of cash flows generated by the financial instrument aiming at checking whether they represent solely payments of principal and interest.

ITAÚ UNIBANCO HOLDING conducted a detailed analysis of its business models and characteristics of its cash flows of financial assets, and the main changes resulting from the adoption of IFRS 9 are:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 29

· The classification categories of financial assets Held to maturity, Available for sale, Held for trading and Loans and receivables have ceased to exist.

· Three measurement categories of financial assets were introduced:

- Amortized Cost: used when financial assets are managed to obtain contractual cash flows, constituted solely of payments of principal and interest. A significant portion of financial assets previously classified in Loans and Receivables, Held to Maturity and Available for Sale was accounted for in this category;

- Fair Value Through Other Comprehensive Income: used when financial assets are held both for obtaining contractual cash flows, constituted solely by payments of principal and interest, and for sale. The remaining portion of financial assets previously accounted for as Available for Sale was classified in this category; and

- Fair Value Through Profit or Loss: used for financial assets that do not meet the aforementioned criteria. Derivatives and financial assets Held for Trading were recorded in this category.

· In the initial adoption, there were designations of equity instruments at fair value through other comprehensive income.

· The existing designations of financial assets/liabilities at fair value through profit or loss were maintained and there were no new designations.

· Financial assets which cash flows were modified (without write-off) had their gross carrying amount recalculated, according to IFRS 9 requirements, and the effects of this change were recognized in profit or loss.

ITAÚ UNIBANCO HOLDING maintained the classification of financial liabilities unchanged, which continue being measured at amortized cost or fair value through profit or loss, in the event they had not been previously designated.

(II) Impairment

The requirements for assessment of impairment of financial assets are based on an expected credit loss model. The main changes in the accounting policy of ITAÚ UNIBANCO HOLDING for impairment are listed below.

The expected credit loss model includes the use of prospective information and classification of financial assets in three stages:

· Stage 1 – 12-month expected credit loss: represents default events possible within 12 months. Applicable to financial assets originated or purchased with credit recovery issues;

· Stage 2 – Lifetime expected credit loss of financial instrument: considers all possible default events. Applicable to financial assets originated or purchased without credit recovery issues and which credit risk has increased significantly; and

· Stage 3 – Credit loss expected for credit-impaired assets: considers all possible default events. Applicable to financial assets originated or purchased with credit recovery issues. The measurement of assets classified in this stage is different from Stage 2 due to the recognition of interest income by applying the effective interest rate at amortized cost (net of provision) rather than at the gross carrying amount.

An asset will migrate from a phase as its credit risk increases or decreases. Therefore, a financial asset that migrated to phases 2 and 3 may return to phase 1, unless it was originated or purchased with credit recovery issues.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 30

The change in the calculation model of expected credit loss gave rise to an increase in the provision recorded in the consolidated financial statements of ITAÚ UNIBANCO HOLDING due to the change in measurement of financial assets, and loss revaluation considering prospective criteria.

Further information on new classification requirements and accounting policies adopted are detailed in Note 2.4.

(III) Hedge accounting

The hedge accounting requirements are closed aligned with risk management and should be applied on a prospective basis. ITAÚ UNIBANCO HOLDING will continue applying all requirements for hedge accounting set forth in IAS 39, as permitted by IFRS 9.

Reconciliation of Stockholders' Equity and Net Income between IAS 39 and IFRS 9

		06/30/2017						01/01/2017
	Reference	Stockholders' Equity			Net Income			Stockholders' Equity
In accordance with IAS 39 (excluding non-controlling interests)			125,944			12,370			122,582
Adjustments arising from changes in the financial asset write-off policy, net of tax effects	a		2,372			(109	)		2,462
In accordance with IAS 39 (excluding non-controlling interests)			128,316			12,261			125,044
Expected loss	b		(8,204	)		(290	)		(7,853	)
Loan operations and lease operations portfolio			(6,997	)		386			(7,385	)
Other financial assets			(1,207	)		(676	)		(468	)
Change in financial assets	c		46			9			36
Adjustment to fair value of financial assets	d		(401	)		365			(787	)
Deferred taxes on the above adjustments			3,725			1			3,712
Interest of non-controlling stockholders			(57	)		48			(57	)
Total adjustments			(4,891	)		133			(4,949	)
In accordance with IFRS 9 - attributable to controlling stockholders			123,425			12,394			120,095
In accordance with IFRS 9 - attributable to non-controlling stockholders			12,615			261			12,289
In accordance with IFRS 9 - attributable to controlling and non-controlling stockholders			136,040			12,655			132,384

(a)	Change in the policy for partial write-off of financial assets, in accordance with IAS 8, which caused the proportional treatment as asset, aligning the recovery behavior of financial assets and their economic realization.
(b)	Change in the calculation model based on loss incurred (IAS 39) for expected loss, considering prospective information.
(c)	Adequacy of gross carrying amount of financial assets that had their cash flows modified (without write-off), and which balances were recalculated in accordance with IFRS 9.
(d)	Change in the measurement model of financial assets due to the new categories introduced by IFRS 9.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 31

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet at 01/01/2017

(In million Reais)

	IAS 39										IFRS 9
	01/01/2017										01/01/2017
Assets	Categories	Balance			Reclassifications (a)			Remeasurements (b)			Categories	Balance
Cash and deposits on demand			18,542			-			-				-
Central Bank compulsory deposits			85,700			(85,700	)		-				-
Interbank deposits			22,692			(22,692	)		-				-
Securities purchased under agreements to resell			265,051			(265,051	)		-				-
Financial assets held for trading	Held for trading		204,648			(204,648	)		-				-
Pledged as collateral			12,950			(12,950	)		-				-
Other Financial assets held for trading			191,698			(191,698	)		-				-
Financial assets designated at fair value through profit or loss	Available for sale		1,191			(1,191	)		-				-
Derivatives			24,231			(24,231	)		-				-
Available-for-sale financial assets	Available for sale		88,277			(88,277	)		-				-
Pledged as collateral			17,435			(17,435	)		-				-
Other Available-for-sale financial assets			70,842			(70,842	)		-				-
Held -to-maturity financial assets	Held to maturity		40,495			(40,495	)		-				-
Pledged as collateral			11,778			(11,778	)		-				-
Other Held-to-maturity financial assets			28,717			(28,717	)		-				-
Loan operations and lease operations portfolio, net	Loans and receivables		463,394			(463,394	)		-				-
Loan operations and lease operations portfolio			490,366			(490,366	)		-				-
(-) Allowance for loan and lease losses			(26,972	)		26,972			-				-
Other financial assets			53,917			(53,917	)		-				-
Cash and deposits on demand			18,542			-			-				18,542
Financial assets			-			1,252,330			(5,360	)			1,246,833
Central Bank compulsory deposits			-			85,700			-				85,700
At amortized cost			-			906,850			(4,561	)	Amortized cost		902,289
Interbank deposits			-			22,692			(4	)			22,688
Securities purchased under agreements to resell			-			265,051			(1	)			265,050
Securities			-			101,796			772				102,568
Loan operations and lease operations portfolio			-			490,366			4,485				494,851
Other financial assets			-			53,917			(22	)			53,895
(-) Provision for expected loss			-			(26,972	)		(9,791	)			(36,763	)
At fair value through other comprehensive income			-			39,750			426		Fair value through other comprhensive income		40,039
Securities			-			39,750			426				40,039
At fair value through profit or loss			-			220,030			(1,225	)	Fair value through profit or loss		218,805
Securities			-			195,799			(1,225	)			194,574
Derivatives			-			24,231			-				24,231
Investments in associates and joint ventures			5,073			-			-				5,073
Goodwill			9,675			-			-				9,675
Fixed assets, net			8,042			-			-				8,042
Intangible assets, net			7,381			-			-				7,381
Tax assets			44,274			-			807				45,081
Income tax and social contribution - current			2,703			-			-				2,703
Income tax and social contribution - deferred			37,395			-			807				38,202
Other			4,176			-			-				4,176
Assets held for sale			631			-			-				631
Other assets			10,027			-			29				10,056
Total assets			1,353,241			(330,686	)		(4,524	)			1,351,314

	IAS 39 01/01/2017										IFRS 9 01/01/2017
Liabilities and stockholders' equity	Categories	Balance			Reclassifications (a)			Remeasurements (b)			Categories	Balance
Deposits			329,414			(329,414	)		-				-
Securities sold under repurchase agreements			349,164			(349,164	)		-				-
Financial liabilities held for trading			519			(519	)		-				-
Derivatives			24,698			(24,698	)		-				-
Interbank market debt			135,483			(135,483	)		-				-
Institutional market debt			96,239			(96,239	)		-				-
Other financial liabilities			71,832			(71,832	)		-				-
Reserves for insurance and private pension			154,076			-			-				-
Liabilities for capitalization plans			3,147			(3,147	)		-				-
Provisions			20,909			-			-				-
Tax liabilities			5,836			-			-				-
Income tax and social contribution - current			1,741			-			-				-
Income tax and social contribution - deferred			643			-			-				-
Other			3,452			-			-				-
Other liabilities			27,110			-			-				-
Total liabilities			1,218,427			-			-				-
Financial liabilities						-			-				1,012,075
At amortized cost						985,279			(3,163	)			982,116
Deposits						329,414			-				329,414
Securities sold under repurchase agreements						349,164			-				349,164
Interbank market debt						135,483			-				135,483
Institutional market debt						96,239			-				96,239
Liabilities for capitalization plans						3,147			-				3,147
Other financial liabilities						71,832			(3,163	)			68,669
At fair value through profit or loss						25,217			-		Financial Liabilities Designated at Fair Value Through Profit or Loss		25,217
Derivatives						24,698			-				24,698
Others						519			-				519
Provision for expected loss						-			4,742				4,742
Loan commitments						-			2,761				2,761
Financial guarantees						-			1,981				1,981
Reserves for insurance and private pension			154,076			-			-				154,076
Provisions			20,909			-			-				20,909
Tax liabilities			5,836			-			(886	)			4,950
Income tax and social contribution - current			1,741			-			-				1,741
Income tax and social contribution - deferred			643			-			(932	)			(289	)
Other			3,452			-			46				3,498
Other liabilities			27,110			-			(190	)			26,920
Total liabilities			-			-			(1,076	)			1,218,930
Capital			97,148			-			-				97,148
Treasury shares			(1,882	)		-			-				(1,882	)
Additional paid-in capital			1,785			-			-				1,785
Appropriated reserves			3,443			-			3,023				6,466
Unappropriated reserves			25,362			-			(4,992	)			20,370
C			(3,274	)		-			(518	)			(3,792	)
T			122,582			-			(2,487	)			120,095
Non-controlling interests			12,232			-			57				12,289
T			134,814			-			(2,430	)			132,384
Total liabilities and stockholders' equity			1,353,241			-			(1,927	)			1,351,314

(a) Reclassifications: refer to reclassifications of financial assets between categories of measurement at fair value and amortized cost;

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 32

· IFRS 15 – Revenue from Contracts with Customers: The pronouncement replaces IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as respective interpretations (IFRICs 13, 15 and 18). It requires that the recognition of revenue reflect the transfer of goods or services to the client. This standard is effective for the years beginning January 1^st, 2018 and there are no impacts for the Consolidated Financial Statements of ITAÚ UNIBANCO HOLDING.

· Amendment to IFRS 4 – Insurance Contracts – Joint application of IFRS 9: The amendment enables entities that are issuers of insurance contracts to mitigate possible impacts of the adoption of IFRS 9 – Financial Instruments before the effectiveness of IFRS 17 – Insurance Contracts, through two options:

· Temporary exemption: adoption of IFRS 9 together with IFRS 17, i.e., as from January 2021. This option is applicable only to entities with significant insurance activities (over 80% of total liabilities) and that have not applied IFRS 9 in advance;

· Overlay approach: adoption of IFRS 9, however, for assets reclassified to the category Fair Value through Profit or Loss, transferring the effects of the adoption of IFRS 9 from Income for the Period to Other Comprehensive Income until the effectiveness of IFRS 17.

Liabilities related to insurance contracts are not representative as compared to total liabilities of ITAÚ UNIBANCO HOLDING.

In 2018, ITAÚ UNIBANCO HOLDING will adopt IFRS 9 for all financial assets of insurance entities, and, therefore, will not use the aforementioned options.

b) Accounting standards recently issued and applicable in future periods

· Change in Conceptual Framework – In March, 2018, o IASB issued a review of the Conceptual Framework and the main changes refer to: definitions of assets and liabilities, recognition criteria, write-off, measurement, presentation and disclosure for equity elements and result. These changes are effective for the years started on January 1^st, 2020 and possible impacts are being assessed and will be completed by the date they are in force.

· IFRS 16 – Leases – The pronouncement replaces IAS 17 - Leases, and related interpretations (IFRIC 4, SIC 15 and SIC 27). It eliminates the accounting for operating lease agreements for the lessee, presenting only one lease model, that consists of: (a) recognizing leases which terms exceeds 12 months and with substantial amounts; (b) initially recognizing lease in assets and liabilities at present value; and (c) recognizing depreciation and interest from lease separately in the result. For the lessor, accounting will continue to be segregated between operating and financial lease. This standard is effective for annual periods beginning on January 1^st, 2019. Possible impacts arising from the adoption of this standard are being assessed and will be completed by the date this standard is effective.

· IFRS 17 – Insurance Contracts: The pronouncement replaces IFRS 4 – Insurance Contracts and presents three approaches for assessment of insurance contracts:

· General Model: applicable to all contracts, particularly the long-term contracts;

· Premium Allocation Approach (PAA): applicable to contracts which term is up to 12 months and with modestly complex cash flows. It is simpler than the standard model; however, it can be used only when it produces results similar to those that would be obtained it the standard model was used;

· Variable Fee Approach: approach specific for contracts with participation in the result of investments.

Insurance contracts should be recognized based on the analysis of four components:

· Expected Future Cash Flows: estimate of all components of cash flow of the contract, considering inflows and outflows;

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 33

· Risk Adjustment: estimate of offset required by deviations that may occur between cash flows;

· Contractual Margin: difference between any amounts received before the beginning of the contract coverage and present value of cash flows estimated in the beginning of the contract;

· Discount: projected cash flows should be discounted at present value, to reflect the time value of money, at rates that reflect the characteristics of respective flows.

This standard is effective for annual periods beginning on January 1^st, 2021. Possible impacts arising from the adoption of this standard are being assessed and will be completed by the date this standard is effective.

2.3. Critical accounting estimates and judgments

The preparation of Consolidated Financial Statements in accordance with IFRS requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of revenue, expenses, gains and losses over the reporting and subsequent periods, because actual results may differ from those determined in accordance with such estimates and assumptions.

2.3.1 Critical accounting estimates

All estimates and assumptions made by Management are in accordance with IFRS and represent the current best estimates made in compliance with the applicable standards. Estimates are evaluated continuously, considering past experience and other factors.

The Consolidated Financial Statements reflect a variety of estimates and assumptions. The critical accounting estimates and assumptions that have the most significant impact on the carrying amounts of assets and liabilities are described below:

a) Expected Credit Loss

Significant judgments are required in the application of accounting requirements for measurement of expected credit loss, such as:

· Assessment term of expected credit loss: ITAÚ UNIBANCO HOLDING considers the maximum contractual period on which it will be exposed to financial instrument’s credit risk. However, the estimated useful life of assets that do not have a determined maturity is based on the period of exposure to credit risk. Additionally, all contractual terms are considered when determining the expected life, including prepayment and rollover options.

· Prospective information: IFRS 9 requires a balanced and impartial estimate of credit loss that comprises forecasts of future economic conditions. ITAÚ UNIBANCO HOLDING uses prospective macroeconomic information and public information with projections prepared internally to determine the impact of these estimates on the calculation of expected credit loss.

· Probability-weighted loss scenarios: ITAÚ UNIBANCO HOLDING uses weighted scenarios to determine credit loss expected in a proper observation horizon.

· Determining criteria for significant increase or decrease in credit risk: in each period of the consolidated financial statements, ITAÚ UNIBANCO HOLDING assesses whether the credit risk on a financial asset has increased significantly using relative and absolute triggers (indicators) by product and by country.

Brazilian and foreign government securities are considered with low credit risk, and therefore they remain in stage 1, in accordance with a study conducted by ITAÚ UNIBANCO HOLDING.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 34

b) Deferred income tax and social contribution

As explained in Note 2.4I, deferred tax assets are recognized only in relation to temporary differences and tax assets and loss for offset to the extent it is probable that ITAÚ UNIBANCO HOLDING will generate future taxable profit for its use. The expected realization of deferred tax assets is based on the projection of future taxable profits and technical studies, as disclosed in Note 27.

c) Fair value of financial instruments, including derivatives

The fair value of Financial Instruments is measured recurrently, in conformity with the requirements of IFRS 9 – Financial Instruments. The fair value of financial instruments, including derivatives that are not traded in active markets, is determined by using valuation techniques. This calculation is based on assumptions that take into consideration Management’s judgment based on market information and conditions in place at the balance sheet date.

ITAÚ UNIBANCO HOLDING ranks fair value measurements using a fair value hierarchy that reflects the significance of inputs used in the measurement process.

The fair value of Financial Instruments, including Derivatives, as well as the fair value hierarchy, are presented in Note 31.

The team in charge of the pricing of assets, in accordance with the governance defined by the committee and regulatory circulars, carries out critical analyses of the information extracted from the market and from time to time reassesses the long term of indexes. At the end of the monthly closings, the departments meet for a new round of analyses for the maintenance of the classification in connection with the fair value hierarchy. ITAÚ UNIBANCO HOLDING believes that all methodologies adopted are appropriate and consistent with market participants, however, the adoption of other methodologies or use of different assumptions to estimate fair values may result in different fair value estimates.

The methodologies used to estimate the fair value of certain financial instruments are described in Note 31.

d) Defined benefit pension plan

The current amount of pension plan obligations is obtained from actuarial calculations that use a set of assumptions. Among the assumptions used for estimating the net cost (income) of these plans is the discount rate. Any changes in these assumptions will affect the carrying amount of pension plan liabilities.

ITAÚ UNIBANCO HOLDING determines the appropriate discount rate at the end of each year, which is used for determining the present value of estimated future cash outflows necessary for settling the pension plan liabilities. In order to determine the appropriate discount rate, ITAÚ UNIBANCO HOLDING considers the interest rates of the Brazilian federal government bonds that are denominated in Brazilian Reais, the currency in which the benefits will be paid, and that have maturity terms approximating the terms of the related liabilities.

The main assumptions on Pension plan obligations are based on, in part, current market conditions. Additional information is disclosed in Note 29.

e) Provisions, contingencies and other commitments

ITAÚ UNIBANCO HOLDING periodically reviews its contingencies. These contingencies are evaluated based on Management´s best estimates, taking into account the opinion of legal counsel when there is a likelihood that financial resources will be required to settle the obligations and the amounts may be reasonably estimated.

Contingencies classified as probable losses are recognized in the Balance Sheet under Provisions.

Contingent amounts are measured using appropriate models and criteria, despite the uncertainty surrounding the ultimate timing and amounts. Provisions, contingencies and other commitments are detailed in Note 32.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 35

f) Technical provisions for insurance and pension plan

Technical provisions are liabilities arising from obligations of ITAÚ UNIBANCO HOLDING to its policyholders and participants. These obligations may be short term liabilities (property and casualty insurance) or medium and long term liabilities (life insurance and pension plans).

The determination of the actuarial liability is subject to several uncertainties inherent in the coverage of insurance and pension contracts, such as assumptions of persistence, mortality, disability, life expectancy, morbidity, expenses, frequency and severity of claims, conversion of benefits into annuities, redemptions and return on assets.

The estimates for these assumptions are based on the historical experience of ITAÚ UNIBANCO HOLDING, benchmarks and experience of the actuary, in order to comply with best market practices and the continuous review of the actuarial liability. The adjustments resulting from these continuous improvements, when necessary, are recognized in the statement of income for the corresponding period.

Additional information is described in Note 30.

2.3.2 Critical judgments in accounting policies

a) Goodwill

The impairment test for goodwill involves estimates and significant judgments, including the identification of cash generation units and the allocation of goodwill to such units based on the expectations of which ones will benefit from the acquisition. Determining the expected cash flows and a risk-adjusted interest rate for each unit requires that management exercises judgment and estimates. Semi-annually goodwill is submitted to the impairment test and, at June 30, 2018 and 2017, ITAÚ UNIBANCO HOLDING did not identify goodwill impairment losses.

2.4. Summary of main accounting practices

a) Consolidation

l. Subsidiaries

In accordance with IFRS 10 - Consolidated Financial Statements, subsidiaries are all entities in which ITAÚ UNIBANCO HOLDING holds control. ITAÚ UNIBANCO HOLDING controls an entity when it is exposed to, or is entitled to, its variable returns derived from its involvement with such entity, and has the capacity to impact such returns.

Subsidiaries are fully consolidated as from the date in which ITAÚ UNIBANCO HOLDING obtains control and are no longer consolidated as from the date such control is lost.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 36

The following table shows the main consolidated companies, which together represent over 95% of total consolidated assets, as well as the interests of ITAÚ UNIBANCO HOLDING in their voting capital at 06/30/2018 and 12/31/2017.

		Functional	Incorporation		Interest in voting						Interest in total
		currency	country	Activity	capital at						capital at
					06/30/2018			12/31/2017			06/30/2018			12/31/2017
Domestic
Banco Itaú BBA S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Consignado S.A.			Brazil	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	%
Itauseg Seguradora S.A.			Brazil	Insurance		99.99	%		99.99	%		99.99	%		99.99	%
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. Sociedade de Crédito, Financiamento e Investimento			Brazil	Consumer finance credit		50.00	%		50.00	%		50.00	%		50.00	%
Redecard S.A.			Brazil	Acquirer		100.00	%		100.00	%		100.00	%		100.00	%
Foreing
Itaú CorpBanca Colombia S.A.	(Note 3)	Colombian peso	Colombia	Financial institution		23.90	%		23.90	%		23.90	%		23.90	%
Banco Itaú Argentina S.A.		Argentinian peso	Argentina	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Paraguay S.A.		Guarani	Paraguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú (Suisse) SA		Swiss franc	Switzerland	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Uruguay S.A.		Uruguayan peso	Uruguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau Bank, Ltd.		Real	Cayman Islands	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú BBA Colombia S.A. Corporacion Financiera		Colombian peso	Colombia	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA International plc		Dollar	United Kingdom	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA USA Securities Inc.		Real	United States	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú CorpBanca	(Note 3)	Chilean peso	Chile	Financial institution		36.06	%		36.06	%		36.06	%		36.06	%

ITAÚ UNIBANCO HOLDING is committed to maintaining the minimum capital required by all these joint ventures, noteworthy is that for all Financeira Itaú CBD S.A Crédito, Financiamento e Investimento (FIC) the minimum capital percentage is 25% higher than that required by the Central Bank of Brazil (Note 33).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 37

II. Business combinations

In accordance with IFRS 3 – Business Combinations, a business is defined as an integrated set of activities and assets that is conducted and managed so to provide a return to investors, cost reduction or other economic benefits, and it should be recorded when a business is acquired. In general, a business consists of an integrated set of activities and assets that may be conducted and managed so as to provide a direct return, as dividends, lower costs or other economic benefits, to investors or other stockholders, members or participants. There is goodwill in a set of activities and transferred assets, it is presumed to be a business. For acquisitions that meet the definition of business, accounting under the purchase method is required.

The acquisition cost is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the exchange date, plus costs directly attributable to the acquisition. Acquired assets and assumed liabilities and contingent liabilities identifiable in a business combination are initially measured at fair value at the date of acquisition, regardless of the existence of non-controlling interests. The excess of the acquisition cost, plus non-controlling interests, if any, over the fair value of identifiable net assets acquired, is accounted for as goodwill.

The treatment of goodwill is described in Note 2.4i. If the cost of acquisition, plus non-controlling interests, if any, is lower than the fair value of identifiable net assets acquired, the difference is directly recognized in income.

For each business combination, the purchaser should measure any non-controlling interest in the acquired company at the fair value or amount proportional to its interest in net assets of the acquired company.

III. Transactions with non-controlling stockholders

IFRS 10 – Consolidated Financial Statements establishes that, changes in an ownership interest in a subsidiary, which do not result in a loss of control, are accounted for as capital transactions and any difference between the amount paid and the carrying amount of non-controlling stockholders is recognized directly in consolidated stockholders' equity.

b) Foreign currency translation

I. Functional and presentation currency

The Consolidated Financial Statements of ITAÚ UNIBANCO HOLDING are presented in Brazilian Reais, which is its functional and presentation currency. For each subsidiary and investment in associates and joint ventures, ITAÚ UNIBANCO HOLDING defined the functional currency, as set forth in IAS 21 – The Effects of Changes in Foreign Exchange Rates.

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 other comprehensive income.

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 foreign exchange results and exchange variations on transactions.

c) Cash and cash equivalents

ITAÚ UNIBANCO HOLDING defines cash and cash equivalents as cash and current accounts in banks (included in the heading cash and deposits on demand on the Consolidated Balance Sheet), interbank deposits and securities purchased under agreements to resell that have original maturities of up to 90 days or less, as shown in Note 4.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 38

d) Central Bank Compulsory Deposits

The Central Banks of the countries in which ITAÚ UNIBANCO HOLDING operates currently impose a number of compulsory deposit requirements on financial institutions. Such requirements are applied to a wide range of banking activities and operations, such as demand, savings, and time deposits.

e) Financial assets and liabilities

Financial assets and liabilities are initially recognized at fair value and subsequently measured at amortized cost or fair value.

I - Classification and Measurement of Financial Assets

As from January 1, 2018, ITAÚ UNIBANCO HOLDING applies IFRS 9 – Financial Instruments and classified its financial assets in the following measurement categories:

· Amortized Cost;

· Fair Value Through Other Comprehensive Income;

· Fair Value Through Profit or Loss.

The classification and subsequent measurement of financial assets depend on:

· The business model under which they are measured;

· The characteristics of its cash flows (Solely Payment of Principal and Interest Test – SPPI Test).

Business model: represents how financial assets are managed to generate cash flows and does not depend on the Management’s intention regarding an individual instrument. Financial assets may be managed with the purpose of: i) obtaining contractual cash flows; ii) obtaining contractual cash flows and sale; or iii) others. To assess business models, ITAÚ UNIBANCO HOLDING considers risks that affect the performance of business model; how business managers are compensated; and how the performance of business model is assessed and reported to Management. If cash flows are realized differently from ITAÚ UNIBANCO HOLDING’s expectations, the classification of remaining financial assets maintained in this business model is not changed.

When the financial asset is maintained in business models i) and ii) the application of the SPPI Test is required.

SPPI Test: assessment of cash flows generated by financial instrument with the purpose of checking whether they represent solely payments of principal and interest. To fit into this concept, cash flows should include only consideration for the time value of money and credit risk. If contractual terms introduce risk exposure or cash flow volatilities, such as exposure to changes in prices of equity instruments or prices of commodities, the financial asset is classified at fair value through profit or loss. Hybrid contracts should be assessed as a whole, including all embedded characteristics. The accounting of a hybrid contract that contains an embedded derivative is performed on a joint basis, i.e. the whole instrument is measured at fair value through profit or loss.

Amortized Cost

The amortized cost is the amount through which the financial asset or liability is measured at the initial recognition, plus updates performed using the effective interest method, less amortization of principal and interest, adjusted for any provision for expected credit loss.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 39

Effective Interest Rate

The effective interest rate is the rate that discounts estimated future receipts or payments over the expected life of the financial asset or liability.

To calculate the effective interest rate, ITAÚ UNIBANCO HOLDING estimates cash flows including all contractual terms of the financial instrument, but does not include future credit losses. The calculation includes all commissions paid or received between parties to the contract, transaction costs, and all other premiums or discounts.

The interest revenue is calculated by applying the effective interest rate to the gross carrying amount of a financial asset. In case of financial assets with recovery issues, the adjusted effective interest rate is applied (considers the expected credit loss) at the amortized cost of the financial asset.

Fair Value

Fair value is the price that would be received for the sale of an asset or that would be paid for the transfer of a liability in a normal transaction between market players on the measurement date.

Details of the fair value of financial instruments, including Derivatives, as well as about the hierarchy of fair value are detailed in Note 31.

Based on these factors, ITAÚ UNIBANCO HOLDING applies the following criteria to each classification category:

· Amortized Cost

– Assets managed to obtain cash flows constituted of solely payments of principal and interest (SPPI Test);

– Initially recognized at fair value plus transaction costs;

– Subsequently measured at amortized cost, using the effective interest rate;

– Interest, including amortization of premiums and discounts, are recognized in the Consolidated Statement of Income in the heading Interest and similar interest.

· Financial Assets at Fair Value through Other Comprehensive Income

– Assets managed both to obtain cash flows constituted of solely payments of principal and interest (SPPI Test), and for sale;

– Initially and subsequently recognized at fair value plus transaction costs;

– Unrealized gains and losses (except for expected credit loss, foreign exchange differences, dividends and interest income) are recognized, net of applicable taxes, in the heading Other comprehensive income.

· Financial Assets at Fair Value through Profit or Loss and Financial Assets Designated at Fair Value

– Assets that do not meet the classification criteria of previous categories; or assets designated in the initial recognition at fair value through profit or loss to reduce “accounting mismatches”;

– Initially and subsequently recognized at fair value;

– Transaction costs are recorded directly in the Consolidated Statement of Income;

– Gains and losses resulting from changes in the fair value are recognized in the heading Net gain (loss) on investment securities and derivatives.

The average cost is used to determine the gains and losses realized on disposal of financial assets at fair value through other comprehensive income, which are recorded in the Consolidated Statement of Income in the heading Net gain (loss) on investments in securities and derivatives. Dividends on assets at fair value through other comprehensive income are recognized in the Consolidated Statement of Income as Dividend income when it is probable that ITAÚ UNIBANCO HOLDING’s right to receive such dividends is established.

Regular purchases and sales of financial assets are recognized and derecognized, respectively, on the trade date.

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Financial assets are derecognized when rights to receive cash flows expire or when ITAÚ UNIBANCO HOLDING transfers substantially all risks and rewards of ownership, and such transfer qualifies for write-off in accordance with IFRS 9 requirements.

Otherwise, control should be assessed to determine whether the continuous involvement related to any retained control does not prevent write-off.

Financial assets and liabilities are offset against each other and the net amount is reported in the Balance Sheet solely when there is a legally enforceable right to offset the recognized amounts and intention to settle them on a net basis, or simultaneously realize the asset and settle the liability.

Financial Assets Designated at Fair Value

ITAÚ UNIBANCO HOLDING irrevocably designates financial assets at fair value through profit or loss in the initial recognition (fair value option), when the option significantly reduces or eliminates measurement or recognition inconsistencies that could otherwise arise from the measurement of assets or liabilities or recognition of gains and losses on these assets and liabilities in different bases.

Equity Instruments

An equity instrument is any contract that evidences a residual interest in an entity’s assets, after the deduction of all its liabilities, such as Shares and Units.

ITAÚ UNIBANCO HOLDING subsequently measures all its equity instruments at fair value through profit or loss, except when Management opts, in the initial recognition, for irrevocably designating an equity instrument at fair value through other comprehensive income if it is held with a purpose other than only generating returns. When this option is selected, gains and losses on the fair value of an instrument are recognized in Other comprehensive income and are not subsequently reclassified to the Consolidated Statement of Income, even in the sale. Dividends continue being recognized in the Consolidated Statement of Income when ITAÚ UNIBANCO HOLDING’s right is established.

Gains and losses on equity instruments measured at fair value through profit or loss are accounted for in the Consolidated Statement of Income.

Expected Credit Loss

ITAÚ UNIBANCO HOLDING assesses on a forward-looking basis the expected credit loss associated with financial assets measured at amortized cost or through other comprehensive income, loan commitments and financial guarantee contracts. The recognition of the provision for expected credit loss is carried out monthly with a contra-entry in the Consolidated Statement of Income.

In case of financial assets measured at fair value through other comprehensive income, ITAÚ UNIBANCO HOLDING recognizes the provision for losses in the Consolidated Statement of Income with a contra-entry to Stockholders’ equity in Other comprehensive income, without effect in the gross carrying amount of the financial asset.

Expected Credit Loss Measurement

· Financial assets: loss is measured at present value of the difference between contractual cash flows and cash flows that ITAÚ UNIBANCO HOLDING expects to receive discounted at the effectively charged rate;

· Loan commitments: loss is measured at present value of the difference between contractual cash flows that would be due if the commitment was contracted and the cash flows that ITAÚ UNIBANCO HOLDING expects to receive;

· Financial guarantees: the loss is measured at the difference between the payments expected for refunding the counterparty and the amounts that ITAÚ UNIBANCO HOLDING expects to recover.

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In each reported period, ITAÚ UNIBANCO HOLDING assesses if the credit risk of a financial asset increased significantly by analyzing reasonable and sustainable information that is relevant and available without cost or undue effort, including qualitative, quantitative and forward-looking information. Forward-looking information is based on macroeconomic scenarios that are reassessed on an annual basis or when market conditions so require.

ITAÚ UNIBANCO HOLDING applies the three-stage approach to measure the expected credit loss, in which financial assets migrate from one stage to the other in accordance with changes in credit risk.

An asset will migrate from a stage as its credit risk increases. If, in a subsequent period, the quality of the financial asset improves or if the significant increase in credit risk previously identified is reversed, the financial asset may return to stage 1, unless it is a financial asset originated or purchased with credit recovery issues.

Brazilian and international government securities are considered low credit risk financial assets, in accordance with a study conducted by ITAÚ UNIBANCO HOLDING, and therefore they remain in stage 1.

ITAÚ UNIBANCO HOLDING assesses if the credit risk significantly increases on an individual and collective basis. For collective assessment purposes, the financial assets are grouped on the basis of shared credit risk characteristics, considering the type of instrument, credit risk classifications, date of initial recognition, remaining term, industry, counterparty’s geographic location, among other relevant factors.

The effects of changes of cash flows of financial assets and other details of methodologies and assumptions used by Management to measure the provision for expected credit losses, including the use of forward-looking information, are detailed in Note 36.

Changes in Contractual Cash Flows

When contractual cash flows of a financial asset are renegotiated or otherwise modified and this does not substantially change its terms and conditions, ITAÚ UNIBANCO HOLDING does not write it off. However, the gross carrying amount of this financial asset is recalculated as the present value of contractual cash flows renegotiated or changed, discounted at the original effective interest rate. Any costs or fees incurred adjust the modified carrying amount and are amortized over the remaining term of the financial asset.

If, on the other hand, the renegotiation or change substantially modifies the terms and conditions of the financial asset, ITAÚ UNIBANCO HOLDING writes off the original asset and recognizes a new one. Accordingly, the renegotiation date is considered the initial recognition date of the new asset for expected credit loss calculation purposes, including to determine significant increases in credit risk.

Anyhow, ITAÚ UNIBANCO HOLDING also assesses if the new financial asset may be considered as originated or purchased with credit recovery issues, particularly when the renegotiation was motivated by the debtor’s financial constraints. Differences between the carrying amount of the original asset and fair value of the new asset are immediately recognized in the Consolidated Statement of Income.

Transfer of Financial Assets

Financial assets are written off when the rights to receive cash flow are extinguished or when ITAÚ UNIBANCO HOLDING substantially transfers all risks and benefits of the property and such transfer is eligible for write-off in accordance with IFRS 9 requirements. In the event it is not possible to identify the transfer of all risks and benefits, the control to determine if the continuous involvement related to the transaction does not prevent the write-off.

If the retention of risks and benefits is characterized in the assessment, the financial asset remains recorded and a liability is recognized for the consideration received.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 42

Write-off of Financial Assets

When there are no reasonable expectancies of recovery of a financial asset, considering recovery historical curves, its total or partial write-off is made concurrently with the reversal of the related provision for expected credit loss, without effects in the Consolidated Statement of Income of ITAÚ UNIBANCO HOLDING. Subsequent recoveries of amounts previously written off are accounted for as income in the Consolidated Statement of Income.

II – Classification and Measurement of Financial Liabilities

Financial liabilities are initially recognized at fair value and subsequently measures at amortized cost, except for:

· Financial Assets at Fair Value Through Profit or Loss: classification applied to derivatives and other financial liabilities designated at fair value through profit or loss to reduce “accounting mismatches”. ITAÚ UNIBANCO HOLDING irrevocably designates financial liabilities at fair value through profit or loss in the initial recognition (fair value option), when the option eliminates or significantly reduces measurement or recognition inconsistencies.

· Loan Commitments and Financial Guarantees, as detailed in Note 2.4e Vlll.

Write-off and Change of Financial Liabilities

ITAÚ UNIBANCO HOLDING excludes a financial liability from the Consolidated Balance Sheet when it is extinguished, i.e., when the obligation specified in the contract is discharged, cancelled or expires.

A change of debt instrument or substantial modification of terms of a financial liability is accounted for as extinction of the original financial liability and a new one is recognized.

III – Securities purchased under agreements to resell

ITAÚ UNIBANCO HOLDING has purchased securities with resale agreement (resale agreements), and sold securities with repurchase agreement (repurchase agreement) of financial assets. Resale and repurchase agreements are accounted for under Securities purchased under agreements to resell and Securities sold under repurchase agreements, respectively.

The difference between the sale and repurchase prices is treated as interest and recognized over the life of the agreements using the effective interest rate method.

The financial assets accepted as collateral in our resale agreements can be used by us, if provided for in the agreements, as collateral for our repurchase agreements or can be sold.

In Brazil, control over custody of financial assets is centralized and the ownership of investments under resale and repurchase agreements is temporarily transferred to the buyer. ITAÚ UNIBANCO HOLDING strictly monitors the fair value of financial assets received as collateral under our resale agreements and adjusts the collateral amount when appropriate.

Financial assets pledged as collateral to counterparties are also recognized in the Consolidated Financial Statements. When the counterparty has the right to sell or re-pledge such instruments, they are presented in the balance sheet under the appropriate class of financial assets.

IV - Derivatives

All derivatives are accounted for as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The assessment of active hybrid contracts that are in the scope of IFRS 9 is carried out as a whole, including all embedded characteristics, whereas the accounting of an asset hybrid contract is carried out on a joint basis, i.e. the whole instrument is measured at fair value through profit or loss.

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When a contract has a host component outside the scope of IFRS 9, such as a lease agreement receivable or an insurance contract, or even a financial liability, embedded derivatives are treated as separate financial instruments if their characteristics and economic risks are not closely related to those of the host component, and the latter is not accounted for at fair value through profit or loss. These embedded derivatives are accounted for separately at fair value, with variations recognized in the Consolidated Statement of Income in the heading Net gain (loss) from investment in securities and derivatives.

ITAÚ UNIBANCO HOLDING will continue applying all accounting hedge requirements set forth in IAS 39; however, it may adopt the requirements of IFRS 9, according to the Management’s decision. According to this standard, derivatives may be designated and qualified as hedge instruments for accounting purposes and, depending on the nature of the protected item, the method for recognizing gains or losses of fair value will be different.

To qualify for hedge accounting, all of the following conditions are met:

· At the inception of the hedge there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge;

· The hedge is expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk, consistent with the originally documented risk management strategy for that particular hedging relationship;

· For a cash flow hedge, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss;

· The effectiveness of the hedge can be reliably measured, i.e. the fair value or cash flows of the hedged item that are attributable to the hedged risk and the fair value of the hedging instrument can be reliably measured;

· The hedge is assessed on an ongoing basis and it is determined that the hedge has in fact been highly effective throughout the periods of Financial Statements for which the hedge was designated.

IAS 39 presents three hedge strategies: fair value hedge, cash flow hedge, and hedge of net investments in a foreign operation. ITAÚ UNIBANCO HOLDING uses derivatives as hedging instruments under cash three hedge strategies, as detailed in Note 9.

For derivatives that are designated and qualify as fair value hedges, the following practices are adopted:

a) The gain or loss arising from the new measurement of the hedge instrument at fair value should be recognized in income; and

b) The gain or loss arising from the hedged item, attributable to the effective portion of the hedged risk, should adjust the book value of the hedged item and also be recognized in income.

When the derivative expires or is sold or the hedge no longer meets the accounting hedge criteria or the entity revokes the designation, the entity should prospectively discontinue the accounting hedge. In addition, any adjustment in the book value of the hedged item should be amortized in income.

Cash flow hedge

For derivatives that are designated and qualify as a cash flow hedge, the effective portion of derivative gains or losses are recognized in Other comprehensive income – Cash flow hedge, and reclassified to Income in the same period or periods in which the hedged transaction affects income. The portion of gain or loss on derivatives that represents the ineffective portion or the hedge components excluded from the assessment of effectiveness is recognized immediately in income. Amounts originally recorded in Other comprehensive income and subsequently reclassified to Income are recorded in the corresponding income or expense lines in which the related hedged item is reported.

When the derivative expires or is sold or the hedge no longer meets the accounting hedge criteria or the entity revokes the designation, any cumulative gain or loss existing in Other comprehensive income is frozen and is recognized in income when the hedged item is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss recognized in Other Comprehensive Income is immediately transferred to the statement of income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 44

Hedge of net investments in foreign operations

The hedge of a net investment in a foreign operation, including hedge of a monetary item that is accounted for as part of the net investment, is accounted for in a manner similar to a cash flow hedge:

a) The portion of gain or loss on the hedge instrument determined as effective is recognized in other comprehensive income;

b) The ineffective portion is recognized in income.

Gains or losses on the hedging instrument related to the effective portion of the hedge which is recognized in comprehensive income are reclassified to the disposal of the investment in the foreign operation.

V - Loan operations

ITAÚ UNIBANCO HOLDING classifies a loan operation as on non-accrual status if the payment of the principal or interest has been in default for 60 days or more. In this case, accrual of interest is no longer recognized.

Both the credit risk and the finance areas are responsible for defining the methodologies used to measure the allowance for loan losses and for assessing changes in the provision amounts on a recurring basis.

These areas monitor the trends observed in expected credit loss by segment level, in addition to establishing an initial understanding of the variables that may trigger changes in the allowance for loan losses, the probability of default or the loss given default.

Once the trends have been identified and an initial assessment of the variables has been made at the corporate level, the business areas are responsible for further analyzing these observed trends at a detailed level and for each portfolio, in order to understand the underlying reasons for the trends observed and for deciding whether changes are required in our credit policies.

VI - Lease operations (as lessor)

When assets are subject to a finance lease, the present value of lease payments is recognized as a receivable in the consolidated balance sheet under Loan operations and Lease Operations.

Initial direct costs when incurred by ITAÚ UNIBANCO HOLDING are included in the initial measurement of the lease receivable, reducing the amount of income to be recognized over the lease period. Such initial costs usually include commissions and legal fees.

The recognition of interest income reflects a constant rate of return on the net investment of ITAÚ UNIBANCO HOLDING and is recognized in the Consolidated statement of income under Interest and similar income.

Vll - Capitalization plans

For regulatory purposes in Brazil they are regulated by the insurance regulator. These plans do not meet the definition of an insurance contract under IFRS 4, and therefore they are classified as a financial liability at amortized cost under IFRS 9.

Revenue from capitalization plans is recognized during the period of the contract and measured as the difference between the amount deposited by the client and the amount that ITAÚ UNIBANCO HOLDING has to reimburse.

VIIl – Loan Commitments and Financial Guarantees

ITAÚ UNIBANCO HOLDING recognizes in the Consolidated Balance Sheet, as an obligation, on the issue date, the fair value of loan commitments and financial guarantees. The fair value is generally represented by the fee charged from the client. This amount is amortized for the instrument term and is recognized in the Consolidated Statement of Income in the heading Banking service fees.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 45

After the issue, based on the best estimate, if ITAÚ UNIBANCO HOLDING concludes that the credit loss expected in relation to the guarantee issued is higher that the fair value less accumulated amortization, this amount is replaced by a provision for loss.

f) Investments in associates and joint ventures

I – Associates

In conformity with IAS 28 - Investments in Associates and Joint Ventures, associates are companies in which the investor has a significant influence but does not hold control. Investments in these companies are initially recognized at cost of acquisition and subsequently accounted for using the equity method. Investments in associates and joint ventures include the goodwill identified upon acquisition, net of any cumulative impairment loss.

II – Joint arrangements

ITAÚ UNIBANCO HOLDING reviews the nature of its joint business to assess whether it has joint operations and joint ventures. Joint ventures are recognized by the equity method in conformity with the requirements of IFRS 11 – Joint Arrangements.

ITAÚ UNIBANCO HOLDING’s share in profits or losses of its associates and joint ventures after acquisition is recognized in the Consolidated statement of income. Its share of the changes in the reserves of corresponding stockholders’ equity of its associates and joint ventures is recognized in its own reserves of stockholders’ equity. The cumulative changes after acquisition are adjusted against the carrying amount of the investment. When the ITAÚ UNIBANCO HOLDING share of losses of an associates and joint ventures is equal or above its interest in the associates and joint ventures, including any other receivables, ITAÚ UNIBANCO HOLDING does not recognize additional losses, unless it has incurred any obligations or made payments on behalf of the associates and joint ventures.

Unrealized profits on transactions between ITAÚ UNIBANCO HOLDING and its associates and joint ventures are eliminated to the extent of the interest of ITAÚ UNIBANCO HOLDING. Unrealized losses are also eliminated, unless the transaction provides evidence of impairment of the transferred asset. The accounting policies on associates and joint ventures are consistent with the policies adopted by ITAÚ UNIBANCO HOLDING.

If the interest in the associates and joint ventures decreases, but ITAÚ UNIBANCO HOLDING retains significant influence or joint control, only the proportional amount of the previously recognized amounts in Other comprehensive income is reclassified in Income, when appropriate.

Gains and losses from dilution arising from investments in associates and joint ventures are recognized in the consolidated statement of income.

g) Lease commitments (as lessee)

As a lessee, ITAÚ UNIBANCO HOLDING has finance and operating lease agreements.

ITAÚ UNIBANCO HOLDING leases certain fixed assets, and those substantially holding the risks and benefits incidental to the ownership are classified as finance leases.

Each lease installment paid is allocated part to liabilities and part to financial charges, so that a constant rate is obtained for the outstanding debt balance. Corresponding obligations, net of future financial charges, are included in Other financial liabilities. Interest expenses are recognized in the Consolidated Statement of Income over the lease term, to produce a constant periodic interest rate on the remaining liabilities balance for each period.

Expenses related to operating leases are recognized in the Consolidated statement of income, on a straight-line basis, over the period of lease.

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When an operating lease is terminated before the end of the lease term, any payment to be made to the lessor as a penalty is recognized as an expense in the period the termination occurs.

h) Fixed assets

According to IAS 16 – Fixed assets are recognized at cost of acquisition less accumulated depreciation, and adjusted for impairment, if applicable. Depreciation is calculated using the straight-line method and rates based on the estimated useful lives of these assets. These rates and other information are presented in Note 15.

The residual values and useful lives of assets are reviewed and adjusted, if appropriate, at the end of each period.

ITAÚ UNIBANCO HOLDING reviews its assets in order to identify whether any indications of impairment exist. If such indications are identified, fixed assets are tested for impairment. In accordance with IAS 36 – Impairment of assets, impairment losses are recognized for the difference between the carrying and recoverable amount of an asset (or group of assets), in the Consolidated statement of income. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and its value in use. For purposes of assessing impairment, assets are grouped at the lowest level for which independent cash flows can be identified (cash-generating units). The assessment may be made at an individual asset level when the fair value less the cost to sell may be reliably determined.

Gains and losses on disposals of fixed assets are recognized in the Consolidated statement of income under Other income or General and administrative expenses.

i) Goodwill

In accordance with IFRS 3 – Business combinations, goodwill may arise on an acquisition and represents the excess of the consideration transferred plus non-controlling interest over the net fair value of the net identifiable assets and contingent liabilities of the acquiree. Goodwill is not amortized, but its recoverable amount is tested for impairment semi-annually or when there is any indication of impairment, using an approach that involves the identification of cash-generating units and estimates of fair value less cost to sell and/or value in use.

As defined in IAS 36 – Impairment of assets, a cash-generating unit is the lowest identifiable group of assets that generates cash inflows that are independent of the cash inflows from other assets or groups of assets. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination.

IAS 36 determines that an impairment loss shall be recognized for a cash-generating unit if the recoverable amount of the cash-generating unit is less than its carrying amount. The loss shall be allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit on a pro rata basis applied to the carrying amount of each asset. The loss cannot reduce the carrying amount of an asset below the higher of its fair value less costs to sell and its value in use. The impairment loss of goodwill cannot be reversed.

Goodwill arising from the acquisition of subsidiaries is presented in the Consolidated Balance Sheet under the line Goodwill.

Goodwill of associates and joint ventures is reported as part of investment in the Consolidated Balance Sheet under Investments in associates and joint ventures, and the impairment test is carried out in relation to the total balance of the investments (including goodwill).

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j) Intangible assets

Intangible assets are non-physical assets, including software and other assets, and are initially recognized at cost. Intangible assets are recognized when they arise from legal or contractual rights, their costs can be reliably measured, and in the case of intangible assets not arising from separate acquisitions or business combinations, it is probable that future economic benefits may arise from their use. The balance of intangible assets refers to acquired assets or those internally generated.

Intangible assets may have finite or indefinite useful lives. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. Intangible assets with indefinite useful lives are not amortized, but periodically tested in order to identify any impairment.

ITAÚ UNIBANCO HOLDING semi-annually assesses its intangible assets in order to identify whether any indications of impairment exist, as well as possible reversal of previous impairment losses. If such indications are found, intangible assets are tested for impairment. In accordance with IAS 36, impairment losses are recognized as the difference between the carrying and the recoverable amount of an asset (or group of assets), and recognized in the Consolidated statement of income. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and its value in use. For purposes of assessing impairment, assets are grouped at the lowest level for which independent cash flows can be identified (cash-generating units). The assessment may be made at an individual asset level when the fair value less the cost to sell may be reliably determined.

As set forth in IAS 38, ITAÚ UNIBANCO HOLDING elected the cost model to measure its intangible assets after its initial recognition.

The breakdown of intangible assets is described in Note 16.

k) Assets held for sale

Assets held for sale are recognized in the balance sheet when they are actually repossessed or there is intention to sell. These assets are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, or (ii) the carrying amount of the related asset held for sale.

l) Income tax and social contribution

There are two components of the provision for income tax and social contribution: current and deferred.

Current income tax expense approximates taxes to be paid or recovered for the applicable period. Current assets and liabilities are recorded in the balance sheet under Tax assets – income tax and social contribution - current and tax liabilities – income tax and Social contribution – current, respectively.

Deferred income tax and social contribution represented by deferred tax assets and liabilities are obtained based on the differences between the tax bases of assets and liabilities and the amounts reported in the financial statements at each year end. The tax benefit of tax loss carry forwards is recognized as an asset. Deferred tax assets are only recognized when it is probable that future taxable income will be available for offsetting. Deferred tax assets and liabilities are recognized in the balance sheet under Tax assets – Income tax and social contribution – Deferred and Tax liabilities – Income tax and social contribution - Deferred, respectively.

Income tax and social contribution expense is recognized in the Consolidated statement of income under Income tax and social contribution, except when it refers to items directly recognized in Other comprehensive income, such as: deferred tax on fair value measurement of available-for-sale financial assets, and tax on cash flow hedges. Deferred taxes of such items are initially recognized in Other comprehensive income and subsequently recognized in Income together with the recognition of the gain / loss originally deferred.

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Changes in tax legislation and rates are recognized in the Consolidated statement of income under Income tax and social contribution in the period in which they are enacted. Interest and fines are recognized in the Consolidated statement of income under General and administrative expenses. Income tax and social contribution are calculated at the rates shown below, considering the respective taxable bases, based on the current legislation related to each tax, which in the case of the operations in Brazil are for all the reporting periods as follows:

Income tax	15.00	%
Additional income tax	10.00	%
Social contribution (*)	20.00	%

(*) On october 06, 2015, Law No. 13,169, a conversion of Provisional Measure No. 675, which increased the Social Contribution tax rate from 15.00% to 20.00% 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 9.00%.

To determine the proper level of provisions for taxes to be maintained for uncertain tax positions, a two-phased approach was applied, according to which a tax benefit is recognized if it is more probable than not that a position can be sustained. The benefit amount is then measured to be the highest tax benefit which probability of realization is over 50%.

m) Insurance contracts and private pension

IFRS 4 – “Insurance contracts” defines insurance contracts as contracts under which the issuer accepts a significant insurance risk of the counterparty, by agreeing to compensate it if a specified uncertain future event adversely affects it. An insurance risk is significant only if the insurance event could cause an issuer to pay significant additional benefits in any scenario, except for those that do not have commercial substance. Additional benefits refer to amounts that exceed those that would be payable if no insured event occurred.

At the time of the first-time adoption of IFRS, ITAÚ UNIBANCO HOLDING decided not to change its accounting policies for insurance contracts, which follow the accounting practices generally accepted in

Brazil (“BRGAAP”).

Although investment agreements with discretionary participation characteristics are financial instruments, they are treated as insurance contracts, as established by IFRS 4, as well as those transferring a significant financial risk.

These agreements may be reclassified as insurance contracts after their initial classification should the insurance risk become significant.

Once the contract is classified as an insurance contract, it remains as such until the end of its life, even if the insurance risk is significantly reduced during such period, unless all rights and obligations are extinguished or expired.

Note 30 presents a detailed description of all products classified as insurance contracts.

Private pension plans

Contracts that contemplate retirement benefits after an accumulation period (known as PGBL, VGBL and FGB) assure, at the commencement date of the contract, the basis for calculating the retirement benefit (mortality table and minimum interest). The contracts specify the annuity fees and, therefore, the contract transfers the insurance risk to the issuer at the commencement date, and they are classified as insurance contracts.

Insurance premiums

Insurance premiums are recognized by issuing an insurance policy or over the period of the contracts in proportion to the amount of the insurance coverage. Insurance premiums are recognized as income in the Consolidated statement of income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 49

If there is evidence of impairment losses with respect to receivables for insurance premiums, ITAÚ UNIBANCO HOLDING recognizes a provision, sufficient to cover this loss, based on the risk analysis of realization of insurance premiums receivable with installments overdue for over 60 days.

Reinsurance

Reinsurance premiums are recognized over the same period in which the related insurance premiums are recognized in the consolidated statement of income.

In the ordinary course of business, ITAÚ UNIBANCO HOLDING reinsures a portion of the risks underwritten, particularly property and casualty risks that exceed the maximum limits of responsibility that we determine to be appropriate for each segment and product (after a study which considers size, experience, specificities, and the necessary capital to support these limits). These reinsurance agreements allow the recovery of a portion of the losses from the reinsurer, although they do not release the insurer from the main obligation as direct insurer of the risks contemplated in the reinsurance.

Acquisition costs

Acquisition costs include direct and indirect costs related to the origination of insurance. These costs, except for the commissions paid to brokers and others, are expensed directly in income as incurred. Commissions are deferred and expensed in proportion to the recognition of the premium revenue, i.e. over the period of the corresponding insurance contract.

Liabilities

Reserves for claims are established based on historical experience, claims in process of payment, estimated amounts of claims incurred but not yet reported, and other factors relevant to the required reserve levels. A liability for premium deficiencies is recognized if the estimated amount of premium deficiencies exceeds deferred acquisition costs. Expenses related to recognition of liabilities for insurance contracts are recognized in the Consolidated statement of income under Change in reserves for insurance and private pension.

Embedded derivatives

We have not identified any embedded derivatives in our insurance contracts, which may be separated or measured at fair value in accordance with IFRS 4 requirements.

Liability adequacy test

IFRS 4 requires that the insurance companies analyze the adequacy of their insurance liabilities in each reporting period through a minimum adequacy test. ITAÚ UNIBANCO HOLDING conducts the liability adequacy test under IFRS by adopting current actuarial assumptions for future cash flows of all insurance contracts in force at the balance sheet date.

Should the analysis show insufficiency, any deficiency identified will be immediately accounted for in income for the period.

The assumptions used to conduct the liability adequacy test are detailed in Note 30.

n) Post-employments benefits

ITAÚ UNIBANCO HOLDING is required to make contributions to government social security and labor indemnity plans, in Brazil and in other countries where it operates, which are expensed in the consolidated statement of income as an integral part of general and administrative expenses, when incurred.

Additionally, ITAÚ UNIBANCO HOLDING also sponsors Defined Benefit Plans and Defined Contribution Plans, accounted for in accordance with IAS 19 – “Employee benefits”.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 50

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 defined benefit obligations at the balance sheet date less the fair value of plan assets. Defined benefit obligations are calculated on a yearly basis by an independent actuarial advisor based on the projected unit credit method. The present value of defined benefit obligations is determined by discounting the estimated amount of future cash flows of benefit payments based on Brazilian government securities denominated in Reais and with maturity periods similar to the term of the pension plan liabilities. They are recognized in the Consolidated statement of income:

· current service cost – 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.

Actuarial gains and losses arising from the non-adoption of the assumptions established in the latest evaluation, as compared to those effectively carried out or changes in such assumptions, as well as the effects of changes in these assumptions. Gains and losses are fully recognized in Other comprehensive income.

Pension plans - defined contribution

For defined contribution plans, contributions to plans made by ITAÚ UNIBANCO HOLDING, through pension plan funds, are recognized as an expense when due.

Other post-employment benefit obligations

Certain companies that merged into ITAÚ UNIBANCO HOLDING over the past few years were sponsors of post-employment healthcare benefit plans and ITAÚ UNIBANCO HOLDING is contractual committed to maintain such benefits over specific periods, as well as in relation to the benefits granted due to a judicial ruling.

Likewise the defined benefit pension plans, these obligations are assessed annually by independent and qualified actuaries, and costs expected from these benefits are accumulated during the employment period and gains and losses arising from adjustments of practices and changes in actuarial assumptions are recognized in Stockholders’ equity, under Other comprehensive income, in the period they occurred.

o) Share-based payment

Share-based payment is accounted for in accordance with IFRS 2 - “Share-based payment” which requires the entity to measure the value of equity instruments granted, based on their fair value at the option grant date. This cost is recognized during the vesting period of the right to exercise the instruments.

The total amount to be expensed is determined by reference to the fair value of the options granted excluding the impact of any service and non-market performance vesting conditions (notably remaining an employee of the entity over a specified time period). The fulfillment of on-market vesting conditions is included in the assumptions about the number of options that are expected to be exercised. At the end of each period, ITAÚ UNIBANCO HOLDING revises its estimates of the number of options that are expected to be exercised based on non-market vesting conditions. It recognizes the impact of the revision of the original estimates, if any, in the consolidated statement of income, with a corresponding adjustment to stockholders’ equity.

When the options are exercised, the ITAÚ UNIBANCO HOLDING treasury shares are generally delivered to the beneficiaries.

The fair value of stock options is estimated by using option pricing models that take into account the exercise price of the option, the current stock price, the risk-free interest rate, the expected volatility of the stock price and the life of the option.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 51

All stock based compensation plans established by ITAÚ UNIBANCO HOLDING correspond to plans that can be settled exclusively through the delivery of shares.

p) Provisions, contingent assets and contingent liabilities

Provisions, contingent assets and contingent liabilities are assessed, recognized and disclosed in accordance with IAS 37 - Provisions, Contingent Liabilities and Contingent Assets. Contingent assets and liabilities are potential rights and obligations arising from past events for which materialization depends on uncertain future events.

Contingent assets are not recognized in the Consolidated Financial Statements, except when the Management of ITAÚ UNIBANCO HOLDING understands that realization is virtually certain, which generally corresponds to lawsuits with favorable rulings, in final and unappealable judgments, withdrawal from lawsuits as a result of a payment in settlement or as a result of an agreement to offset against an existing liability.

Contingent liabilities mainly arise from administrative proceedings and lawsuits, inherent in the ordinary course of business, filed by third parties, former employees and governmental bodies, in connection with civil, labor, and tax and social security claims.

These contingencies are evaluated based on Management’s best estimates, and are classified as:

· Probable: in which liabilities are recognized in the consolidated balance sheet under Provisions.

· Possible: which are disclosed in the Consolidated Financial Statements, but no provision is recorded.

· Remote: which require neither a provision nor disclosure.

Contingent liabilities recorded under Provisions and those disclosed as possible are measured using best estimates through the use of models and criteria which allow their appropriate measurement even if there is uncertainty as to their ultimate timing and amount, and the criteria are detailed in Note 32.

The amount of court escrow deposits is adjusted in accordance with current legislation.

Contingent liabilities guaranteed by indemnity clauses provided by third parties, such as in business combinations carried out before the transition date to IFRS, are recognized when a claim is asserted, and a receivable is recognized simultaneously subject to its collectability. For business combinations carried out after the transition date, indemnification assets are recognized at the same time and measured on the same basis as the indemnified item, subject to collectability or contractual limitations on the indemnified amount.

q) Capital

Common and preferred shares, which are equivalent to common shares but without voting rights are classified in Stockholders’ equity. The additional costs directly attributable to the issue of new shares are included in Stockholders’ equity as a deduction from the proceeds, net of taxes.

r) Treasury shares

Common and preferred shares repurchased are recorded in Stockholders’ equity under Treasury shares at their average purchase price.

Shares that are subsequently sold, such as those sold to grantees under our share-based payment, are recorded as a reduction in treasury shares, measured at the average price of treasury stock held at such date.

The difference between the sale price and the average price of the treasury shares is recorded as a reduction or increase in Additional paid-in capital. The cancellation of treasury shares is recorded as a reduction in Treasury shares against Appropriated reserves, at the average price of treasury shares at the cancellation date.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 52

s) Dividends and interest on capital

Minimum dividend amounts established in the bylaws are recorded as liabilities at the end of each year. Any other amount above the mandatory minimum dividend is accounted for as a liability when approved by stockholders at a Stockholders´ Meeting.

Interest on capital is treated for accounting purposes as a dividend, and it is presented as a reduction of stockholders' equity in the consolidated financial statements. The related tax benefit is recorded in the consolidated statement of income.

Dividends have been and continue to be calculated and paid based on the financial statements prepared under Brazilian accounting standards and regulations for financial institutions and not based on these Consolidated financial statements prepared under IFRS.

Dividends and interest on capital are presented in Note 21.

t) Earnings per share

Earnings per share are computed by dividing net income attributable to the owners of ITAÚ UNIBANCO HOLDING by the weighted average number of common and preferred shares outstanding for each reporting year. Weighted average shares are computed based on the periods for which the shares were outstanding.

ITAÚ UNIBANCO HOLDING grants stock-based compensation whose dilutive effect is reflected in diluted earnings per share, with the application of the “treasury stock method“. Under the treasury stock method, earnings per share are calculated as if shares under stock-based compensation plans had been issued and as if the assumed proceeds were used to purchase shares of ITAÚ UNIBANCO HOLDING.

Earnings per share are presented in Note 28.

u) Revenue from services

Services related to current account are offered to clients in packages and individually, and their income is recognized when these services are provided.

Revenue from certain services, such as fees from funds management, performance, collection for wholesale and custody clients is recognized when the services are provided over the life of the respective contracts. Incremental costs are recognized as expenses when incurred.

The breakdown of the Banking Service Fees is detailed in Note 24.

v) Segment information

Segment information is disclosed consistently with the internal report prepared for the Executive Committee, which makes the operational decisions of ITAÚ UNIBANCO HOLDING.

ITAÚ UNIBANCO HOLDING has three reportable segments: (i) Retail Banking (ii) Wholesale Banking and (iii) Activities with the Market + Corporation.

Segment information is presented in Note 34.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 53

Note 3 – Business development

Citibank’s Retail Operations

On October 08, 2016, ITAÚ UNIBANCO HOLDING entered, by means of its subsidiaries Itaú Unibanco S.A. (ITAÚ UNIBANCO) and Itaú Corretora de Valores S.A., into a share purchase and sale agreement with Banco Citibank S.A. and with other companies of its conglomerate (CITIBANK) for the acquisition of the retail banking activities carried out by Citibank in Brazil, including loans, deposits, credit cards, branches, assets under management and insurance brokerage, as well as the equity investments held by CITIBANK in TECBAN – Tecnologia Bancária S.A. (representing 5.64% of its capital) and in CIBRASEC – Companhia Brasileira de Securitização (representing 3.60% of its capital), for R$ 628.

The operation was structured in three phases:

i. Acquisition of retail operations, cards and insurance brokerage on October 31, 2017;

ii. Acquisition of securities brokerage on December 1^st, 2017;

iii. Acquisition of ownership interest in TECBAN and CIBRASEC on December 26, 2017.

The difference between the amount paid and net assets acquired resulted in the recognition of goodwill due to expected future profitability on the acquisition date of R$ 631.

Gestora de Inteligência de Crédito

On January 21, 2016, o ITAÚ UNIBANCO HOLDING, through its subsidiary ITAÚ UNIBANCO, executing a non-binding Memorandum of Understanding with Banco Bradesco S.A., Banco do Brasil S.A., Banco Santander S.A. and Caixa Econômica Federal, aiming at the creation of a credit intelligence bureau that will develop a databank with the purpose of aggregating, reconciling and addressing master file and credit data of individuals and legal entities.

Gestora de Inteligência de Crédito S.A., located in the city of São Paulo, was organized as a corporation, and each of its shareholders will have a 20% interest in its capital.

After compliance with conditions precedent and approval by proper regulatory authorities, the operation was closed on June 14, 2017. Ownership interest acquired will be assessed under the Equity Method.

Itaú CorpBanca

On January 29, 2014, ITAÚ UNIBANCO HOLDING, through its subsidiary Banco Itaú Chile S.A. (BIC), entered into a Transaction Agreement with CorpBanca (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.

The parties closed the operation on April 1^st, 2016, when they had full conditions for the corporate reorganization process.

The operation was consummated by means of:

i. Increase in BIC’s capital in the amount of R$ 2,309 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 and 33.13% for CORP GROUP.

The ITAÚ CORPBANCA is controlled as of April 1st, 2016 by ITAÚ UNIBANCO HOLDING. 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.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 54

ITAÚ UNIBANCO HOLDING, through its subsidiary ITB Holding Brasil Participações Ltda., indirectly acquired the following additional interests in the capital of ITAÚ CORPBANCA:

• On October 26, 2016 – 10,908,002,836 shares (2.13%) for the amount of R$ 288.1, then holding 35.71%; and

• On September 14, 2017 – 1,800,000,000 shares (0.35%) for the amount of R$ 55.6, then holding 36.06%.

Said acquisitions gave rise to a repurchase option to CORP GROUP with a 5-year term counted as from each exercised option, being the first one until June 13, 2021 and the second one until August 4, 2022, pursuant to the shareholders’ agreement entered into between ITAÚ UNIBANCO HOLDING and CORP GROUP and affiliates, on April 1st, 2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 55

Note 4 - Cash and cash equivalents

For purposes of consolidated statements of cash flows, Cash and cash equivalents in this note comprises the following items:

	06/30/2018		12/31/2017
Cash and deposits on demand		25,402		18,749
Interbank deposits		3,208		15,327
Securities purchased under agreements to resell		53,151		152,402
Total		81,761		186,478

Amounts related to interbank deposits and securities purchased under agreements to resell not included in cash equivalents are R$ 20,529 (R$ 13,721 at 12/31/2017) and R$ 201,545 (R$ 92,297 at 12/31/2017), respectively.

Note 5 - Central Bank compulsory deposits

Central Bank of Brazil	06/30/2018		12/31/2017
Non-interest bearing deposits		5,292		4,790
Interest-bearing deposits		79,508		94,047
Total		84,800		98,837

Note 6 - Interbank deposits and securities purchased under agreements to resell

	06/30/2018						12/31/2017
	Current		Non- current		Total		Current		Non-current		Total
Interbank deposits (1)		22,760		974		23,734		28,034		1,014		29,048
Securities purchased under agreements to resell (2)		254,408		288		254,696		244,503		196		244,699
Total (3)		277,168		1,262		278,430		272,537		1,210		273,747

(1) Includes R$ 11,983 (R$ 7,220 at 12/31/2017) related to Compulsory Deposits with Central Banks of other countries, of which R$ 9,760 (R$ 6,171 at 12/31/2017) interest-bearing deposits and R$ 2,223 (R$ 1,049 at 12/31/2017) non-interest-bearing deposits.

(2) The amounts of R$ 3,684 (R$ 3,664 at 12/31/2017) are pledged in guarantee of operations on B3 S.A. - Brasil, Bolsa, Balcão (B3) and Central Bank and the amounts of R$ 192,348 (R$ 185,296 at 12/31/2017) are pledged in guarantee of repurchase agreement transactions, in conformity with the policies described in Note 2.4d.

(3) Includes losses in amounts R$ 4 (R$ 8 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 56

Note 7 – Financial assets held for trading and designated at fair value through profit or loss - Securities

a) Financial assets held for trading recognized at their fair value are presented in the following table:

	06/30/2018							12/31/2017
	Cost		Adjustments to Fair Value (in Income)			Fair value		Cost		Adjustments to Fair Value (in Income)			Fair value
Investment funds		3,222		(740	)		2,482		4,135		(622	)		3,513
Brazilian government securities (1a)		213,311		(707	)		212,604		207,418		426			207,844
Government securities – abroad (1b)		1,236		17			1,253		3,917		32			3,949
Argentina		455		17			472		1,446		20			1,466
Chile		273		-			273		57		-			57
Colombia		234		-			234		2,080		12			2,092
United States		116		-			116		100		-			100
Mexico		33		-			33		5		-			5
Paraguay		1		-			1		3		-			3
Peru		12		-			12		-		-			-
Uruguay		112		-			112		193		-			193
Other		-		-			-		33		-			33
Corporate securities (1c)		34,512		(717	)		33,795		33,816		(175	)		33,641
Shares		7,439		(534	)		6,905		6,080		(121	)		5,959
Bank deposit certificates		1,132		-			1,132		335		-			335
Securitized real estate loans		1,547		(9	)		1,538		1,779		16			1,795
Debentures		3,080		(155	)		2,925		3,290		(74	)		3,216
Eurobonds and other		874		(18	)		856		684		4			688
Financial credit bills		20,112		(1	)		20,111		21,170		-			21,170
Promissory notes		233		-			233		391		-			391
Other		95		-			95		87		-			87
Total		252,281		(2,147	)		250,134		249,286		(339	)		248,947

1) Financial assets at fair value through profit or loss – Securities pledged as Guarantee of Funding of Financial Institutions and Clients were: a) R$ 24,340 (R$ 30,325 at 12/31/2017), b) R$ 170 (R$ 46 at 12/31/2017) and c) R$ 9 (R$ 28 at 12/31/2017), totaling R$ 24,519 (R$ 30,399 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 57

The cost and fair value of Financial Assets at Fair Value Through Profit or Loss are as follows:

	06/30/2018				12/31/2017
	Cost		Fair value		Cost		Fair value
Current		46,670		45,488		50,174		49,512
Non-stated maturity		10,661		9,386		10,214		9,469
Up to one year		36,009		36,102		39,960		40,043
Non-current		205,611		204,646		199,112		199,435
From one to five years		160,511		159,922		147,700		147,805
From five to ten years		34,068		33,716		41,279		41,499
After ten years		11,032		11,008		10,133		10,131
Total		252,281		250,134		249,286		248,947

Financial Assets at Fair Value Through Profit or Loss include assets with a fair value of R$ 176,995 (R$ 169,178 at 12/31/2017) that belong to investment funds wholly owned by Itaú Vida e Previdência S.A. The return of those assets (positive or negative) is fully transferred to customers of our PGBL and VGBL private pension plans whose premiums (less fees charged by us) are used by our subsidiary to purchase quotas of those investment funds.

b) Financial assets designated at fair value through profit or loss are presented in the following table:

	06/30/2018
	Cost		Adjustments to Fair Value (income)		Fair value
Brazilian external debt bonds		2,233		80		2,313
Total		2,233		80		2,313

	12/31/2017
	Cost		Adjustments to Fair Value (income)		Fair value
Brazilian external debt bonds		1,670		76		1,746
Total		1,670		76		1,746

The cost and fair value by maturity of financial assets designated as fair value through profit or loss were as follows:

	06/30/2018				12/31/2017
	Cost		Fair value		Cost		Fair value
Current		2,233		2,313		1,006		1,041
Up to one year		2,233		2,313		1,006		1,041
Non-current		-		-		664		705
From one to five years		-		-		664		705

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 58

Note 8 – Derivatives

ITAÚ UNIBANCO HOLDING enters into derivative financial instruments with various counterparties to manage its overall exposures and to assist its customers in managing their own exposures.

Futures – Interest rate and foreign currency futures contracts are commitments to buy or sell a financial instrument at a future date, at a contracted price or yield and may be settled in cash or through delivery. The notional amount represents the face value of the underlying instrument. Commodity futures contracts or financial instruments are commitments to buy or sell commodities (mainly gold, coffee and orange juice), at a future date, at a contracted price, which are settled in cash. The notional amount represents the quantity of such commodities multiplied by the future price at the contract date. Daily cash settlements of price movements are made for all instruments.

Forwards – Interest forward contracts are agreements to exchange payments on a specified future date, based on a market change in interest rates from trade date to contract settlement date. Foreign exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed price, at an agreed settlement date. Financial instrument forward contracts are commitments to buy or sell a financial instrument on a future date at a contracted price and are settled in cash.

Swaps – Interest rate and foreign exchange swap contracts are commitments to settle in cash at a future date or dates, based on differentials between specified financial indices (either two different interest rates in a single currency or two different rates each in a different currency), as applied to a notional principal amount. Swap contracts presented in Other in the table below correspond substantially to inflation rate swap contracts.

Options – Option contracts give the purchaser, for a fee, the right, but not the obligation, to buy or sell within a limited time a financial instrument including a flow of interest, foreign currencies, commodities, or financial instruments at a contracted price that may also be settled in cash, based on differentials between specific indices.

Credit Derivatives – Credit derivatives are financial instruments with value relating to the credit risk associated to the debt issued by a third party (the reference entity), which permits that one party (the purchaser of the hedge) transfers the risk to the counterparty (the seller of the hedge). The seller of the hedge should make payments as set forth in the contract when the reference entity undergoes a credit event, such as bankruptcy, default or debt restructuring. The seller of the hedge receives a premium for the hedge, but, on the other hand, assumes the risk that the underlying asset referenced in the contract undergoes a credit event, and the seller would have to make the payment to the purchaser of the hedge, which could be the notional amount of the credit derivative.

The total value of margins pledged in guarantee by ITAÚ UNIBANCO HOLDING was R$ 16,400 (R$ 18,284 at 12/31/2017) and was basically comprised of government securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 59

Derivative financial instruments

See below the composition of the Derivative financial instruments portfolio (assets and liabilities) by type of instrument, stated fair value, and by maturity.

	06/30/2018
	Fair value		%		0-30 days		31-90 days		91-180 days		181-365 days		366-720 days		Over 720 days
Assets
Swaps – difference receivable		10,768		38.9		103		336		186		1,174		1,536		7,433
Option premiums		5,379		19.4		737		744		823		1,681		1,094		300
Forwards (onshore)		6,020		21.7		5,311		405		142		161		1		-
Credit derivatives - financial Institutions		145		0.5		-		1		2		3		8		131
NDF - Non Deliverable Forward		4,682		16.9		1,317		1,121		676		1,179		322		67
Check of swap - Companies		68		0.2		1		-		-		11		-		56
Other		658		2.4		421		4		11		4		7		211
Total		27,720		100.0		7,890		2,611		1,840		4,213		2,968		8,198
% per maturity term						28.5		9.4		6.6		15.2		10.7		29.6

	06/30/2018
	Fair value			%		0-30 days			31-90 days			91-180 days			181-365 days			366-720 days			Over 720 days
Liabilities
Swaps –  difference payable		(16,493	)		50.8		(187	)		(817	)		(1,234	)		(2,701	)		(4,080	)		(7,474	)
Option premiums		(4,978	)		15.4		(883	)		(520	)		(762	)		(1,681	)		(817	)		(315	)
Forwards (onshore)		(5,633	)		17.4		(5,631	)		(1	)		(1	)		-			-			-
Credit derivatives - financial Institutions		(139	)		0.4		-			-			-			(1	)		(4	)		(134	)
NDF - Non Deliverable Forward		(5,046	)		15.6		(1,085	)		(1,214	)		(702	)		(1,287	)		(334	)		(424	)
Check of swap - Companies		(75	)		0.2		(2	)		-			-			(16	)		-			(57	)
Other		(72	)		0.2		-			(2	)		(3	)		(6	)		(5	)		(56	)
Total		(32,436	)		100.0		(7,788	)		(2,554	)		(2,702	)		(5,692	)		(5,240	)		(8,460	)
% per maturity term							24.0			7.9			8.3			17.5			16.2			26.1

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 60

Derivative financial instruments

See below the composition of the Derivative financial instruments portfolio (assets and liabilities) by type of instrument, stated fair value, and by maturity.

	12/31/2017
	Fair value		%		0-30 days		31-90 days		91-180 days			181-365 days			366-720 days		Over 720 days
Assets
Futures contracts		158		0.7		153		11		(2	)		(3	)		38		(39	)
Swaps – difference receivable		9,190		40.2		189		187		327			744			1,661		6,082
Option premiums		3,337		14.6		430		440		353			955			865		294
Forwards (onshore)		6,911		30.3		6,529		293		46			43			-		-
Credit derivatives - financial Institutions		137		0.6		-		-		1			8			21		107
NDF - Non Deliverable Forward		2,950		12.9		677		717		624			610			166		156
Check of swap - Companies		68		0.3		-		-		6			-			-		62
Other		92		0.4		-		-		-			3			5		84
Total		22,843		100.0		7,978		1,648		1,355			2,360			2,756		6,746
% per maturity term						34.9		7.2		5.9			10.3			12.1		29.6

	12/31/2017
	Fair value			%		0-30 days			31-90 days			91-180 days			181-365 days			366-720 days			Over 720 days
Liabilities
Swaps – difference receivable		(13,692	)		51.2		(65	)		(202	)		(451	)		(1,711	)		(3,747	)		(7,516	)
Option premiums		(2,793	)		10.4		(332	)		(174	)		(304	)		(821	)		(889	)		(273	)
Forwards (onshore)		(6,272	)		23.5		(6,272	)		-			-			-			-			-
Credit derivatives - financial Institutions		(58	)		0.2		-			-			(1	)		(2	)		(7	)		(48	)
NDF - Non Deliverable Forward		(3,745	)		14.0		(927	)		(735	)		(547	)		(785	)		(225	)		(526	)
Check of swap - Companies		(122	)		0.5		-			-			(73	)		-			-			(49	)
Other		(64	)		0.2		-			(2	)		(2	)		(6	)		(9	)		(45	)
Total		(26,746	)		100.0		(7,596	)		(1,113	)		(1,378	)		(3,325	)		(4,877	)		(8,457	)
% per maturity term							28.4			4.2			5.2			12.4			18.2			31.6

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 61

The following table shows the composition of derivatives by index:

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Fair value
	06/30/2018		06/30/2018			06/30/2018			06/30/2018
Futures contracts		671,074		-			-			-
Purchase commitments		372,324		-			-			-
Shares		13,466		-			-			-
Commodities		267		-			-			-
Interest		317,816		-			-			-
Foreign currency		40,775		-			-			-
Commitments to sell		298,750		-			-			-
Shares		16,446		-			-			-
Commodities		236		-			-			-
Interest		246,859		-			-			-
Foreign currency		35,209		-			-			-
Swap contracts		970,904		(6,754	)		1,029			(5,725	)
Asset position		970,904		4,050			6,718			10,768
Shares		404		-			-			-
Commodities		12		3			-			3
Interest		960,542		2,790			6,629			9,419
Foreign currency		9,946		1,257			89			1,346
Liability position		970,904		(10,804	)		(5,689	)		(16,493	)
Shares		476		(6	)		-			(6	)
Interest		944,262		(7,812	)		(5,904	)		(13,716	)
Foreign currency		26,166		(2,986	)		215			(2,771	)
Option contracts		2,220,655		364			37			401
Purchase commitments – long position		361,822		1,862			1,992			3,854
Shares		8,520		316			425			741
Commodities		867		22			(1	)		21
Interest		297,082		238			77			315
Foreign currency		55,353		1,286			1,491			2,777
Commitments to sell – long position		777,114		1,761			(236	)		1,525
Shares		11,742		381			229			610
Commodities		914		24			(5	)		19
Interest		728,820		444			178			622
Foreign currency		35,638		912			(638	)		274
Purchase commitments – short position		219,045		(1,528	)		(1,880	)		(3,408	)
Shares		9,048		(166	)		(477	)		(643	)
Commodities		1,125		(33	)		1			(32	)
Interest		157,778		(187	)		(35	)		(222	)
Foreign currency		51,094		(1,142	)		(1,369	)		(2,511	)
Commitments to sell – short position		862,674		(1,731	)		161			(1,570	)
Shares		10,622		(282	)		(205	)		(487	)
Commodities		517		(13	)		3			(10	)
Interest		817,430		(568	)		(206	)		(774	)
Foreign currency		34,105		(868	)		569			(299	)
Forward operations (onshore)		29,556		389			(2	)		387
Purchases receivable		1,343		1,499			1			1,500
Shares		27		26			-			26
Interest		1,316		1,473			1			1,474
Purchases payable - Interest		-		(1,327	)		(1	)		(1,328	)
Sales receivable		8,041		4,516			4			4,520
Shares		8,041		1,004			4			1,008
Interest		-		3,512			-			3,512
Sales deliverable		20,172		(4,299	)		(6	)		(4,305	)
Shares		16,730		(10	)		(2	)		(12	)
Interest		3,442		(4,289	)		(4	)		(4,293	)
Credit derivatives		8,251		(30	)		36			6
Asset position		4,363		82			63			145
Shares		1,834		28			72			100
Interest		2,317		48			(11	)		37
Foreign currency		212		6			2			8
Liability position		3,888		(112	)		(27	)		(139	)
Shares		1,207		(41	)		(30	)		(71	)
Interest		2,469		(64	)		4			(60	)
Foreign currency		212		(7	)		(1	)		(8	)
NDF - Non Deliverable Forward		239,274		(506	)		142			(364	)
Asset position		117,354		4,498			184			4,682
Commodities		197		14			2			16
Foreign currency		117,157		4,484			182			4,666
Liability position		121,920		(5,004	)		(42	)		(5,046	)
Commodities		125		(13	)		3			(10	)
Foreign currency		121,795		(4,991	)		(45	)		(5,036	)
Check of swap		955		(65	)		58			(7	)
Asset position		127		6			62			68
Interest		-		-			56			56
Foreign currency		127		6			6			12
Liability position		828		(71	)		(4	)		(75	)
Interest		442		(16	)		(2	)		(18	)
Foreign currency		386		(55	)		(2	)		(57	)
Other derivative financial instruments		4,664		125			461			586
Asset position		3,323		131			527			658
Shares		213		(15	)		12			(3	)
Interest		3,077		148			78			226
Foreign currency		33		(2	)		437			435
Liability position		1,341		(6	)		(66	)		(72	)
Shares		1,155		(4	)		(38	)		(42	)
Interest		86		(2	)		(6	)		(8	)
Foreign currency		100		-			(22	)		(22	)
		Asset		18,405			9,315			27,720
		Liability		(24,882	)		(7,554	)		(32,436	)
		Total		(6,477	)		1,761			(4,716	)

Derivative contracts mature as follows (in days):  

Off-balance sheet – notional amount	0 - 30		31 - 180		181 - 365		Over 365		06/30/2018
Futures contracts		152,810		301,401		101,499		115,364		671,074
Swaps contracts		25,069		121,878		177,466		646,491		970,904
Options		268,067		972,511		775,620		204,457		2,220,655
Forwards (onshore)		12,134		16,881		540		1		29,556
Credit derivatives		-		1,733		615		5,903		8,251
NDF - Non Deliverable Forward		78,003		92,983		52,360		15,928		239,274
Check of swap		23		-		215		717		955
Other derivative financial instruments		-		811		418		3,435		4,664

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 62

The following table shows the composition of derivatives by index:

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Fair value
	12/31/2017		12/31/2017			12/31/2017			12/31/2017
Futures contracts		607,980		8			150			158
Purchase commitments		323,102		8			150			158
Shares		18,149		-			-			-
Commodities		187		-			-			-
Interest		275,155		7			(3	)		4
Foreign currency		29,611		1			153			154
Commitments to sell		284,878		-			-			-
Shares		11,359		-			-			-
Commodities		168		-			-			-
Interest		245,230		-			-			-
Foreign currency		28,121		-			-			-
Swap contracts		837,299		(4,770	)		268			(4,502	)
Asset position		837,299		3,630			5,560			9,190
Shares		350		-			1			1
Interest		825,811		2,937			5,314			8,251
Foreign currency		11,138		693			245			938
Liability position		837,299		(8,400	)		(5,292	)		(13,692	)
Shares		1,088		(1	)		-			(1	)
Interest		814,141		(8,244	)		(5,275	)		(13,519	)
Foreign currency		22,070		(155	)		(17	)		(172	)
Option contracts		1,847,829		452			92			544
Purchase commitments – long position		245,514		1,256			392			1,648
Shares		8,655		396			618			1,014
Commodities		367		11			18			29
Interest		204,674		202			(44	)		158
Foreign currency		31,818		647			(200	)		447
Commitments to sell – long position		736,856		1,457			232			1,689
Shares		11,795		358			34			392
Commodities		269		4			-			4
Interest		700,658		416			348			764
Foreign currency		24,134		679			(150	)		529
Purchase commitments – short position		88,688		(1,008	)		(229	)		(1,237	)
Shares		9,159		(128	)		(527	)		(655	)
Commodities		278		(6	)		(14	)		(20	)
Interest		51,477		(155	)		65			(90	)
Foreign currency		27,774		(719	)		247			(472	)
Commitments to sell – short position		776,771		(1,253	)		(303	)		(1,556	)
Shares		10,241		(261	)		(33	)		(294	)
Commodities		222		(8	)		4			(4	)
Interest		742,475		(435	)		(378	)		(813	)
Foreign currency		23,833		(549	)		104			(445	)
Forward operations (onshore)		9,954		639			-			639
Purchases receivable		1,654		1,861			-			1,861
Shares		25		25			-			25
Interest		1,629		1,836			-			1,836
Purchases payable - Interest		-		(1,644	)		-			(1,644	)
Sales receivable		737		5,049			1			5,050
Shares		737		729			1			730
Interest		-		4,320			-			4,320
Sales deliverable		7,563		(4,627	)		(1	)		(4,628	)
Shares		3,261		1			-			1
Interest		4,302		(4,628	)		(1	)		(4,629	)
Credit derivatives		10,110		(30	)		109			79
Asset position		5,831		38			99			137
Shares		1,955		22			69			91
Interest		3,876		16			30			46
Liability position		4,279		(68	)		10			(58	)
Shares		769		(21	)		4			(17	)
Interest		3,510		(47	)		6			(41	)
NDF - Non Deliverable Forward		252,628		(948	)		153			(795	)
Asset position		119,312		2,781			169			2,950
Commodities		80		6			1			7
Foreign currency		119,232		2,775			168			2,943
Liability position		133,316		(3,729	)		(16	)		(3,745	)
Commodities		175		(14	)		-			(14	)
Foreign currency		133,141		(3,715	)		(16	)		(3,731	)
Check of swap		955		(73	)		19			(54	)
Asset position - Foreign currency		514		-			68			68
Liability position - Interest		441		(73	)		(49	)		(122	)
Other financial instruments		4,225		90			(62	)		28
Asset position		2,464		100			(8	)		92
Shares		191		(9	)		5			(4	)
Interest		2,147		109			(15	)		94
Foreign currency		126		-			2			2
Liability position		1,761		(10	)		(54	)		(64	)
Shares		1,404		(1	)		(57	)		(58	)
Interest		327		(2	)		(2	)		(4	)
Foreign currency		30		(7	)		5			(2	)
		Asset		16,180			6,663			22,843
		Liability		(20,812	)		(5,934	)		(26,746	)
		Total		(4,632	)		729			(3,903	)

Derivative contracts mature as follows (in days):

Off-balance sheet – notional amount	0 - 30		31 - 180		181 - 365		Over 365		12/31/2017
Futures contracts		187,771		152,660		87,819		179,730		607,980
Swaps contracts - difference payable		37,526		135,791		115,296		548,686		837,299
Options		418,679		290,491		457,164		681,495		1,847,829
Forwards (onshore)		6,997		1,933		1,024		-		9,954
Credit derivatives		-		510		1,230		8,370		10,110
NDF - Non Deliverable Forward		63,446		136,650		39,109		13,423		252,628
Check of swap		-		293		-		662		955
Other derivative financial instruments		-		474		851		2,900		4,225

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 63

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.

	06/30/2018
	Futures		Swaps		Options		Forwards (onshore)		Credit derivatives		NDF - Non Deliverable Forward		Target flow of swap		Other derivative financial instruments
B3		497,379		23,704		2,070,884		24,789		-		55,408		-		-
Over-the-counter market		173,695		947,200		149,771		4,767		8,251		183,866		955		4,664
Financial institutions		173,265		698,833		111,298		10		8,251		119,058		-		2,359
Companies		430		138,242		38,240		4,757		-		64,480		955		2,305
Individuals		-		110,125		233		-		-		328		-		-
Total		671,074		970,904		2,220,655		29,556		8,251		239,274		955		4,664

	12/31/2017
	Futures		Swaps		Options		Forwards (onshore)		Credit derivatives		NDF - Non Deliverable Forward		Target flow of swap		Other derivative financial instruments
B3		476,031		24,339		1,746,729		4,023		-		76,838		-		-
Over-the-counter market		131,949		812,960		101,100		5,931		10,110		175,790		955		4,225
Financial institutions		131,525		525,855		69,460		-		10,110		118,743		-		1,792
Companies		424		173,129		31,340		5,931		-		56,905		955		2,433
Individuals		-		113,976		300		-		-		142		-		-
Total		607,980		837,299		1,847,829		9,954		10,110		252,628		955		4,225

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 64

a) Information on credit derivatives

ITAÚ UNIBANCO HOLDING buys and sells credit protection mainly related to securities of Brazilian listed companies in order to meet the needs of its customers. When ITAÚ UNIBANCO HOLDING sells contracts for credit protection, the exposure for a given reference entity may be partially or totally offset by a credit protection purchase contract of another counterparty for the same reference entity or similar entity. The credit derivatives for which ITAÚ UNIBANCO HOLDING is protection seller are credit default swaps.

Credit Default Swaps – CDS

CDS are credit derivatives in which, upon a credit event related to the reference entity pursuant to the terms of the contract, the protection buyer is entitled to receive, from the protection seller, the amount equivalent to the difference between the face value of the CDS contract and the fair value of the liability on the date the contract was settled, also known as the recovered amount. The protection buyer does not need to hold the debt instrument of the reference entity for it to receive the amounts due pursuant to the CDS contract terms when a credit event occurs.

	06/30/2018
	Maximum potential of future payments, gross		Before 1 year		From 1 to 3 years		From 3 to 5 years		Over 5 years
By instrument
CDS		6,941		2,258		1,797		2,834		52
Total by instrument		6,941		2,258		1,797		2,834		52
By risk rating
Investment grade		1,295		287		263		733		12
Below investment grade		5,646		1,971		1,534		2,101		40
Total by risk		6,941		2,258		1,797		2,834		52
By reference entity
Brazilian government		3,463		1,544		1,134		785		-
Government – abroad		625		137		51		435		2
Private entities		2,853		577		612		1,614		50
Total by entity		6,941		2,258		1,797		2,834		52

	12/31/2017
	Maximum potential of future payments, gross		Before 1 year		From 1 to 3 years		From 3 to 5 years		Over 5 years
By instrument
CDS		6,416		1,200		2,412		2,804		-
Total by instrument		6,416		1,200		2,412		2,804		-
By risk rating
Investment grade		1,416		449		347		620		-
Below investment grade		5,000		751		2,065		2,184		-
Total by risk		6,416		1,200		2,412		2,804		-
By reference entity
Brazilian government		3,597		406		1,671		1,520		-
Government – abroad		329		144		90		95		-
Private entities		2,490		650		651		1,189		-
Total by entity		6,416		1,200		2,412		2,804		-

ITAÚ UNIBANCO HOLDING assesses the risk of a credit derivative based on the credit ratings attributed to the reference entity by independent credit rating agencies. Investment grade are those entities for which credit risk is rated as Baa3 or higher, as rated by Moody's, and BBB- or higher, according to the ratings of Standard & Poor’s and Fitch Ratings. The maximum potential loss that may be incurred with the credit derivative is based on the notional amount of the derivative. ITAÚ UNIBANCO HOLDING believes, based on its historical experience, that the amount of the maximum potential loss does not represent the actual level of loss. This is so because, should there be an event of loss, the amount of maximum potential loss should be reduced from the notional amount by the recoverable amount.

The credit derivatives sold are not covered by guarantees, and during this period, ITAÚ UNIBANCO HOLDING has not incurred any loss related to credit derivative contracts.

The following table presents the notional amount of purchased credit derivatives whose underlying amounts are identical to those for which ITAÚ UNIBANCO HOLDING operates as seller of the credit protection.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 65

	06/30/2018
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(6,941	)		1,310		(5,631	)
Total		(6,941	)		1,310		(5,631	)

	12/31/2017
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(6,416	)		3,694		(2,722	)
Total		(6,416	)		3,694		(2,722	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 66

b) Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements

The following tables set forth the financial assets and liabilities that are subject to offsetting, enforceable master netting arrangements, as well as how these financial assets and liabilities have been presented in ITAÚ UNIBANCO HOLDING's consolidated financial statements. These tables also reflect the amounts of collateral pledged or received in relation to financial assets and liabilities subject to enforceable arrangements that have not been presented on a net basis in accordance with IAS 32.

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements:

	06/30/2018
	Gross amount of				Net amount of financial assets		Related amounts not offset in the statement of financial
	recognized		Gross amount offset in the		presented in the statement of		position (2)
	financial assets (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral received		Net amount
Securities purchased under agreements to resell		254,693		-		254,693		(640	)		-		254,053
Derivatives		27,720		-		27,720		(6,720	)		-		21,000

	12/31/2017
	Gross amount of				Net amount of financial assets		Related amounts not offset in the statement of financial
	recognized		Gross amount offset in the		presented in the statement of		position (2)
	financial assets (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral received		Net amount
Securities purchased under agreements to resell		244,699		-		244,699		(575	)		-		244,124
Derivatives		22,843		-		22,843		(3,138	)		-		19,705

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements:

	06/30/2018
	Gross amount of				Net amount of financial liabilities		Related amounts not offset in the statement of financial
	recognized		Gross amount offset in the		presented in the statement of		position (2)
	financial liabilities (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral pledged			Net amount
Securities sold under repurchase agreements		302,527		-		302,527		(20,148	)		-			282,379
Derivatives		32,436		-		32,436		(6,720	)		(477	)		25,239

	12/31/2017
	Gross amount of				Net amount of financial liabilities		Related amounts not offset in the statement of financial
	recognized		Gross amount offset in the		presented in the statement of		position (2)
	financial liabilities (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral pledged			Net amount
Securities sold under repurchase agreements		312,634		-		312,634		(14,489	)		-			298,145
Derivatives		26,746		-		26,746		(3,138	)		(452	)		23,156

(1)	Includes amounts of master offset agreements and other such agreements, both enforceable and unenforceable;
(2)	Limited to amounts subject to enforceable master offset agreements and other such agreements;
(3)	Includes amounts subject to enforceable master offset agreements and other such agreements, and guarantees in financial instruments.

Financial assets and financial liabilities are offset in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Derivatives and repurchase agreements not set off in the balance sheet relate to transactions in which there are enforceable master netting agreements or similar agreements, but the offset criteria have not been met in accordance with paragraph 42 of IAS 32 mainly because ITAÚ UNIBANCO HOLDING has no intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 67

Note 9 – Hedge accounting

There are three types of hedge relations: Fair value hedge, Cash flow hedge, and Hedge of net investment in foreign operations.

In hedge accounting, the groups of risk factors measured by ITAÚ UNIBANCO HOLDING are:

· Interest Rate: Risk of loss in transactions subject to interest rate variations;

· Currency: Risk of loss in transactions subject to exchange variation.

The structure of risk limits is extended to the risk factor level, with specific limits that aim at improving the monitoring and understanding process, as well as avoiding concentration of these risks.

The structures designed for categories of interest rate and exchange rate are realized considering aggregate risks when there are compatible hedge instruments. Due to a management’s decision, in certain cases risks are hedged for the term and limit of the hedge instrument risk factor.

The other risk factors hedged by the institution are presented in Note 36.

To protect cash flows and fair value of instruments designated as hedged items, ITAÚ UNIBANCO HOLDING uses derivative financial instruments and financial assets. Currently, Futures Contracts, Options, NDF (non-deliverable forward), Forward, Swap and Financial Assets are used.

ITAÚ UNIBANCO HOLDING manages risks through the economic relationship between hedge instruments and hedged items, where the expectation is that these instruments move in opposite directions and in the same proportion, with the purpose of neutralizing risk factors.

The designated coverage ratio is always 100% of the risk factor eligible for coverage. The sources of ineffectiveness are in general related to the counterparty’s credit risk and possible mismatches of terms between the hedge instrument and the hedged item.

a) Cash flow hedge

The cash flow hedge strategies of ITAÚ UNIBANCO HOLDING consist of a hedge of exposure to variations in cash flows, payment of interest and exposure to interest rate, which are attributable to changes in interest rates related to assets and liabilities recognized and changes in interest rates of unrecognized assets and liabilities.

ITAÚ UNIBANCO HOLDING has applied cash flow hedge strategies as follows:

Interest rate risks

· Hedge of time deposits and repurchase agreements: hedge of the variability in cash flows of interest payments resulting from changes in the DI interest rate, through futures contracts;

· Hedge of Syndicated Loan: hedge the variability in cash flow of interest payments resulting from changes in the LIBOR interest rate, through futures contracts;

· Hedge of asset transactions: to hedge the variations in cash flows of interest receipts resulting from changes in the DI rate, through futures contracts;

· Hedge of assets denominated in UF*: to hedge the variations in cash flows of interest receipts resulting from changes in the UF*, through swap contracts;

· Hedge of Funding: to hedge the variations in cash flows of interest payments resulting from changes in the TPM* rate and foreign exchange, through swap contracts;

· Hedge of loan operations: variations in cash flows of interest receipts resulting from changes in the TPM* rate, through swap contracts;

· Hedge of asset-backed securities under repurchase agreements: changes in cash flows from interest received on changes in Selic (benchmark interest rate), through futures contracts.

*UF – Chilean unit of account / TPM – Monetary policy rate

To evaluate the effectiveness and to measure the ineffectiveness of such strategies, ITAÚ UNIBANCO HOLDING uses the hypothetical derivative method. The hypothetical derivative method is based on a comparison of the change in the fair value of a hypothetical derivative with terms identical to the critical terms of the variable-rate liability, and this change in the fair value of a hypothetical derivative is considered a proxy of the present value of the cumulative change in the future cash flow expected for the hedged liability.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 68

a) Hedge Cash flow

		06/30/2018
		Carrying amount of the hedged item				Variation in the amounts used to calculate hedge			Cash flow hedge
Hedged item	Heading	Assets		Liabilities		ineffectiveness			reserve
Interest rate risk
Hedge of deposits and repurchase agreements	Securities purchased under agreements to resell				21,967		(1,002	)		(2,618	)
Hedge of assets transactions	Loan operations and lease operations and Securities		8,064				248			248
Hedge of Asset-backed securities under repurchase agreements	Securities purchased under agreements to resell		35,780				170			170
Hedge of loan operations (Cash flow)	Loan operations and lease operations		284				6			6
Hedge of funding (Cash flow)	Deposits				3,194		(10	)		(10	)
Hedge of assets denominated in UF	Securities		13,274				(48	)		(48	)
Foreign exchange risk
Hedge of highly probable forecast transactions			114				4			4
Total			57,516		25,161		(632	)		(2,248	)

		12/31/2017
		Carrying amount of the hedged item				Variation in the amounts used to calculate hedge			Cash flow hedge
Hedged item	Heading	Assets		Liabilities		ineffectiveness			reserve
Interest rate risk
Hedge of deposits and repurchase agreements	Securities purchased under agreements to resell		-		62,667		(3,227	)		(3,227	)
Hedge of assets transactions	Loan operations and lease operations and Securities		23,490		-		429			429
Hedge of Asset-backed securities under repurchase agreements	Securities purchased under agreements to resell		31,099		-		672			672
Hedge of loan operations (Cash flow)	Loan operations and lease operations		1,124		-		14			14
Hedge of funding (Cash flow)	Deposits		-		6,444		(16	)		(16	)
Hedge of assets denominated in UF	Securities		15,227		-		(28	)		(28	)
Foreign exchange risk
Hedge of highly probable forecast transactions			219		-		(5	)		(5	)
Total			71,159		69,111		(2,161	)		(2,161	)

For strategies of deposits and repurchase agreements to resell, asset transactions and asset-backed securities under repurchase agreements, the entity frequently reestablishes the coverage relationship, since both the hedged item and instruments change over time. This is so because they are portfolio strategies, reflecting guidelines for risk management strategy approved in the proper approval level.

The amount of R$ (1,626) in Reserve of Cash Flow Hedge will be recognized in result for the maturity term of the hedged item. In the period ended June 30, 2018, the amount of R$ (125) was recognized in Result related to this deferral.

	06/30/2018
	Notional		Carrying value(*)				Variations in fair value used to calculate hedge			Variation in hedge instrument value recognized in Other			Hedge ineffectiveness recognized		Amount reclassified from Cash flow hedge reserve
Hedge Instruments	amount		Assets		Liabilities		ineffectiveness			comprehensive income			in income		to income
Interest rate risk
Interest rate futures		66,733		17		12		(662	)		(585	)		77		-
Interest rate Swap		16,146		6		54		55			(48	)		7		-
Foreign currency risk
DDI futures		606		-		4		(4	)		(4	)		-		-
Option		114		4		-		4			4			-		-
Total		83,599		27		70		(607	)		(633	)		84		-

(*) Amounts recorded in the Derivatives.

			12/31/2017
	Notional		Carrying value(*)					Variations in fair value used to calculate hedge			Variatio in hedge instrument value recognized in Other			Hedge ineffectiveness recognized		Amount reclassified from Cash flow hedge reserve
Hedge Instruments	amount		Assets		Liabilities			ineffectiveness			comprehensive income			in income		to income
Interest rate risk
Interest rate futures		118,441		13		(32	)		(2,278	)		(2,126	)		152		-
Interest rate Swap		22,795		14		(44	)		(38	)		(31	)		7		-
Foreign currency risk
DDI futures		78		-		-			1			1			-		-
Option		154		9		-			(6	)		(6	)		-		-
Total		141,468		36		(76	)		(2,321	)		(2,162	)		159		-

(*) Amounts recorded in the Derivatives.

For strategies of deposits and repurchase agreements to resell, asset transactions and asset-backed securities under repurchase agreements, the entity frequently reestablishes the coverage relationship, since both the hedged item and instruments change over time. This is so because they are portfolio strategies, reflecting guidelines for risk management strategy approved in the proper approval level.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 69

b) Hedge of net investment in foreign operations

ITAÚ UNIBANCO HOLDING strategies of net investments in foreign operations consist of a hedge of the exposure in foreign currency arising from the functional currency of the foreign operation, with respect to the functional currency of the head office, by contracting futures, DDI, NDF and financial assets.

The risk hedged in this type of strategy is the foreign exchange risk.

ITAÚ UNIBANCO HOLDING does not use the qualitative method to assess the effectiveness and measure the ineffectiveness of these strategies.

To evaluate the effectiveness and to measure the ineffectiveness of such strategies, ITAÚ UNIBANCO HOLDING uses the Dollar Offset Method. The Dollar Offset Method is based on a comparison of the change in fair value (cash flow) of the hedge instrument, attributable to changes in exchange rate and gain (loss) arising from the variation in exchange rates, on the amount of investment abroad designated as a hedged item.

	06/30/2018
	Carrying amount of the				Variation in the amounts
	hedged item (2)				used to calculate hedge			Foreign currency
Hedged item	Assets		Liabilities		ineffectiveness			convertion
Foreign exchange risk
Hedge of net investment in foreign operations (1)		-		14,744		(8,472	)		(8,472	)
Total		-		14,744		(8,472	)		(8,472	)

(1) Hedge instruments include the overhedge rate of 44.65% regarding taxes.

(2) Amounts recorded in the Hedge of net investment in foreign operation.

	12/31/2017
	Carrying amount of the				Variation in the amounts
	hedged item (2)				used to calculate hedge			Foreign currency
Hedged item	Assets		Liabilities		ineffectiveness			convertion
Foreign exchange risk
Hedge of net investment in foreign operations (1)		-		13,074		(4,038	)		(4,038	)
Total		-		13,074		(4,038	)		(4,038	)

(1) Hedge instruments include the overhedge rate of 44.65% regarding taxes.

(2) Amounts recorded in the Hedge of net investment in foreign operation.

	06/30/2018
	Notional			Carrying value (*)				Variations in fair value used to calculate hedge			Variation in hedge instrument value recognized in Other			Hedge ineffectiveness recognized in			Amount reclassified from foreign currency convertion into
Hedge instruments	amount			Assets		Liabilities		ineffectiveness			comprehensive income			income			income
Foreign exchange risk
DDI futures		27,806					136		(11,527	)		(11,568	)		(41	)		-
Forward		(1,449	)		1,185				594			632			38			-
NDF		(13,056	)		365				2,415			2,424			9			-
Financial Assets		(697	)		697				42			40			(2	)		-
Total		12,604			2,247		136		(8,476	)		(8,472	)		4			-

(*) Amounts recorded in the Derivatives.

	12/31/2017
	Notional			Carrying value (*)				Variations in fair value used to calculate hedge			Variation in hedge instrument value recognized in Other			Hedge ineffectiveness recognized in			Amount reclassified from foreign currency convertion into
Hedge instruments	amount			Assets		Liabilities		ineffectiveness			comprehensive income			income			income
Foreign exchange risk
DDI futures		23,641			49		-		(7,564	)		(7,605	)		(41	)		-
Forward		(1,065	)		1,050		-		585			623			38			-
NDF		(11,474	)		-		357		1,507			1,516			9			-
Financial Assets		(541	)		541		-		(39	)		(41	)		(2	)		-
Total		10,561			1,640		357		(5,511	)		(5,507	)		4			-

(*) Amounts recorded in the Derivatives.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 70

c) Fair value hedge

The fair value hedge strategy of ITAÚ UNIBANCO HOLDING consists in hedging the exposure to variation in fair value, in the receipt and payment of interest related to recognized assets and liabilities.

ITAÚ UNIBANCO HOLDING has applied fair value hedge as follows:

Interest rate risk:

· To protect the risk of variation in the fair value of receipt and payment of interest resulting from variations in the fair value of variable rates involved, by contracting swaps.

ITAÚ UNIBANCO HOLDING does not use the qualitative method to assess effectiveness and to measure ineffectiveness of these strategies.

To evaluate the effectiveness and to measure the ineffectiveness of such strategy, ITAÚ UNIBANCO HOLDING uses the percentage approach and dollar offset method:

· The percentage approach is based on the calculation of change in the fair value of the reviewed estimate for the hedged position (hedge item) attributable to the protected risk versus the change in the fair value of the hedged derivative instrument.

· The dollar offset method is calculated based on the difference between the variation of the fair value of the hedging instrument and the variation in the fair value of the hedged item attributed to changes in the interest rate.

Following we present gains (or losses) of the effective and ineffective portions of the strategies of fair value hedge.

	06/30/2018
	Carryng amount of the				Adjustment to fair value of				Variation in the amounts used to
	hedged item (*)				the hedge item				calculate hedge
Hedged item	Assets		Liabilities		Assets		Liabilities		ineffectiveness
Interest rate risk
Hedge of loan operations		17,770		-		17,826		-		58
Hedge of funding		-		164,869				164,844		28
Hedge of available-for-sale securities		944		-		978		-		34
Total		18,714		164,869		18,804		164,844		120

(*) Amounts recorded in the heading Deposits, Securities, Funds from Interbank Markets and Loan and Lease Operation.

	12/31/2017
	Carryng amount of the				Adjustment to fair value of				Variation in the amounts used to
	hedged item (*)				the hedge item				calculate hedge
Hedged item	Assets		Liabilities		Assets		Liabilities		ineffectiveness
Interest rate risk
Hedge of loan operations		5,977		-		5,978		-		52
Hedge of funding		-		12,157		-		9,562		(114	)
Hedge of syndicated loan		-		794		-		779		-
Hedge of available-for-sale securities		482		-		450		-		34
Total		6,459		12,951		6,428		10,341		(28	)

(*) Amounts recorded in the heading Deposits, Securities, Funds from Interbank Markets and Loan and Lease Operation.

For loan operations strategies, the entity reestablishes the coverage ratio, since both the hedged item and the instruments change over time. This occurs because they are portfolio strategies that reflect the risk management strategy guidelines approved in the proper authority level.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 71

	06/30/2018
							Variation in the amount
	Notional		Carrying value (*)				used to calculate hedge			Hedge ineffectiveness
Hedge Instruments	amount		Assets		Liabilities		ineffectiveness			recognized in income
Interest rate risk
Interest rate Swap		184,011		21		158		(137	)		(8	)
Total		184,011		21		158		(137	)		(8	)

(*) Amounts recorded in the Derivatives.

	12/31/2017
							Variation in the amount
	Notional		Carrying value (*)				used to calculate hedge			Hedge ineffectiveness
Hedge Instruments	amount		Assets		Liabilities		ineffectiveness			recognized in income
Interest rate risk
Interest rate Swap		19,410		86		114		(27	)		(2	)
Total		19,410		86		114		(27	)		(2	)

(*) Amounts recorded in the Derivatives.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 72

The tables below present, for each strategy, the notional amount and the fair value adjustments of hedge instruments and the carrying amount of the hedged item:

	06/30/2018							12/31/2017
	Hedge instruments					Hedged item		Hedge instruments					Hedged item
			Fair value					Notional		Fair value
Strategies	Notional amount		adjustments			Carrying value		amount		adjustments			Carrying value
Hedge of deposits and repurchase agreements		21,967		(12	)		21,967		62,667		(32	)		62,667
Hedge of highly probable forecast transactions		114		4			114		232		9			219
Hedge of net investment in foreign operations (*)		12,604		2,111			14,744		10,561		1,283			13,074
Hedge of loan operations (Market risk)		17,770		(56	)		17,770		5,977		52			5,977
Hedge of loan operations (Cash flow)		284		6			284		1,124		14			1,124
Hedge of funding (Market risk)		165,297		(31	)		164,869		12,157		(114	)		12,157
Hedge of funding (Cash flow)		3,194		(10	)		3,194		6,444		(16	)		6,444
Hedge of syndicated loan (Market risk)		-		-			-		794		-			794
Hedge of assets transactions		8,312		1			8,064		23,919		2			23,490
Hedge of Asset-backed securities under repurchase agreements		36,454		15			35,780		31,855		11			31,099
Hedge of assets denominated in UF		13,274		(48	)		13,274		15,227		(28	)		15,227
Hedge of available-for-sale securities		944		(39	)		944		482		34			482
Total				1,941							1,215

(*) Hedge instruments include the overhedge rate of 44.65% regarding taxes.

The table below shows the breakdown by maturity of the hedging strategies:

	06/30/2018
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 repurchase agreements		12,968		2,544		4,636		110		1,706		3			-		21,967
Hedge of highly probable forecast transactions		98		16		-		-		-		-			-		114
Hedge of net investment in foreign operations (*)		12,604		-		-		-		-		-			-		12,604
Hedge of loan operations (Market risk)		166		286		799		1,978		1,211		12,089			1,241		17,770
Hedge of loan operations (Cash flow)		-		30		24		201		30		(1	)		-		284
Hedge of funding (Market risk)		140		13,431		1,691		964		4,131		75,907			69,033		165,297
Hedge of funding (Cash flow)		1,870		509		475		31		-		309			-		3,194
Hedge of assets transactions		7,012		-		1,300		-		-		-			-		8,312
Hedge of Asset-backed securities under repurchase agreements		25,164		6,513		1,527		-		3,250		-			-		36,454
Hedge of assets denominated in UF		11,227		1,989		-		58		-		-			-		13,274
Hedge of available-for-sale securities		-		370		265		-		-		309			-		944
Total		71,249		25,688		10,717		3,342		10,328		88,616			70,274		280,214

(*) Classified as current, since instruments are frequently renewed.

	12/31/2017
Strategies	0-1 year		1-2 years		2-3 years		3-4 years		4-5 years		5-10 years		over de 10 years		Total
Hedge of deposits and repurchase agreements		31,471		11,205		6,210		12,125		-		1,656		-		62,667
Hedge of highly probable forecast transactions		162		70		-		-		-		-		-		232
Hedge of net investment in foreign operations (*)		10,561		-		-		-		-		-		-		10,561
Hedge of syndicated loan (Market risk)		268		143		628		1,502		1,335		642		1,459		5,977
Hedge of loan operations (Cash flow)		-		-		27		157		75		865		-		1,124
Hedge of funding (Market risk)		2,399		3,669		799		218		348		2,099		2,625		12,157
Hedge of funding (Cash flow)		1,646		749		1,026		884		525		1,614		-		6,444
Hedge of syndicated loan (Market risk)		794		-		-		-		-		-		-		794
Hedge of assets transactions		16,726		5,940		-		1,253		-		-		-		23,919
Hedge of Asset-backed securities under repurchase agreements		251		25,209		3,956		1,349		-		1,090		-		31,855
Hedge of assets denominated in UF		12,352		2,822		-		53		-		-		-		15,227
Hedge of available-for-sale securities		-		-		223		-		-		259		-		482
Total		76,630		49,807		12,869		17,541		2,283		8,225		4,084		171,439

(*) Classified as current, since instruments are frequently renewed.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 73

Note 10 – Financial Assets at Fair Value Through Other Comprehensive Income - Securities

The fair value and corresponding cost of Financial Assets at Fair Value Through Other Comprehensive Income - Securities assets are as follows:

	06/30/2018										12/31/2017
			Fair value										Fair value
			adjustments (in										adjustments (in
			stockholders'			Expected							stockholders'			Expected
	Cost		equity)			loss			Fair value		Cost		equity)			loss			Fair value
Brazilian government securities (1a)		30,282		(619	)		-			29,663		31,933		993			-			32,926
Other		36		-			(36	)		-		36		-			(36	)		-
Government securities – abroad (1b)		21,079		(101	)		(2	)		20,976		16,583		(41	)		-			16,542
Colombia		7,198		11			(2	)		7,207		2,928		92			-			3,020
Chile		9,377		(12	)		-			9,365		9,554		(4	)		-			9,550
United States		2,013		(24	)		-			1,989		1,568		(18	)		-			1,550
Paraguay		1,656		(75	)		-			1,581		1,915		(115	)		-			1,800
Uruguay		835		(1	)		-			834		618		4			-			622
Corporate securities (1c)		2,110		31			(48	)		2,093		2,656		73			(48	)		2,681
Shares		83		88			-			171		73		75			-			148
Bank deposit certificates		232		-			-			232		685		-			-			685
Debentures		45		-			(43	)		2		44		-			(43	)		1
Eurobonds and others		1,747		(57	)		(2	)		1,688		1,851		(2	)		(2	)		1,847
Other		3		-			(3	)		-		3		-			(3	)		-
Total		53,507		(689	)		(86	)		52,732		51,208		1,025			(84	)		52,149

(1) Financial assets at fair value through other comprehensive income - Securities pledged in guarantee of funding transactions of financial institutions and clients were: a) R$ 25,210 (R$ 26,953 at 12/31/2017), b) R$ 7 (R$ 37 at 12/31/2017) and c) R$ 693 (R$ 479 at 12/31/2017), totaling R$ 25,910 (R$ 27,469 at 12/31/2017);

The cost and financial assets at fair value through other comprehensive income - securities by maturity are as follows:

	06/30/2018				12/31/2017
	Cost		Fair value		Cost		Fair value
Current		7,564		7,578		9,546		9,666
Non-stated maturity		83		171		73		148
Up to one year		7,481		7,407		9,473		9,518
Non-current		45,943		45,154		41,662		42,483
From one to five years		30,196		30,048		23,138		23,415
From five to ten years		11,084		10,551		11,368		11,680
After ten years		4,663		4,555		7,156		7,388
Total		53,507		52,732		51,208		52,149

Equity instruments at fair value through other comprehensive income - securities are presented in the table below:

	06/30/2018
			Adjustments to fair value
	Costs		(in Stockholders' equity)		Expected loss		Fair Value
Negotiable Shares		83		88		-		171
Total		83		88		-		171

	12/31/2017
			Adjustments to fair value
	Costs		(in Stockholders' equity)		Expected loss		Fair Value
Negotiable Shares		73		75		-		148
Total		73		75		-		148

In the period there was no receipt of dividends and there was no reclassification in Stockholder's Equity.

ITAÚ UNIBANCO HOLDING adopted the option of designating equity instruments at fair value through other comprehensive income due to the particularities of a certain market.

	06/30/2018				12/31/2017
	Costs		Fair Value		Costs		Fair Value
Circulante		83		171		73		148
Non-stated maturity		83		171		73		148

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 74

Reconciliation of expected loss for Financial assets at fair value through other comprehensive instrument - securities, segregated by stages:

	Expected												Expected
	loss			Gains /							Transfer to		loss
Stage 1	12/31/2017			(Losses)		Purchases			Settlements		stage 3		06/30/2018
Financial  assets  at  fair value through other comprehensive income		(84	)		1		(5	)		2		-		(86	)
Brazilian government securities		(36	)		-		-			-		-		(36	)
Other		(36	)		-		-			-		-		(36	)
Government securities - other countries - Chile		-			-		(2	)		-		-		(2	)
Corporate securities		(48	)		1		(3	)		2		-		(48	)
Debentures		(43	)		-		(2	)		2		-		(43	)
Eurobonds and others		(2	)		1		(1	)		-		-		(2	)
Other		(3	)		-		-			-		-		(3	)

	Expected												Expected
	loss			Gains /							Transfer to		loss
Stage 1	01/01/2017			(Losses)		Purchases			Settlements		stage 3		12/31/2017
Financial  assets  at  fair value through other comprehensive income		(93	)		-		(2	)		-		11		(84	)
Brazilian government securities		(36	)		-		-			-		-		(36	)
Other		(36	)		-		-			-		-		(36	)
Corporate securities		(57	)		-		(2	)		-		11		(48	)
Debentures		(43	)		-		-			-		-		(43	)
Eurobonds and others		(11	)		-		(2	)		-		11		(2	)
Other		(3	)		-		-			-		-		(3	)

Stage 3	Expected loss 01/01/2017		Settlements		Transfer to stage 1			Expected loss 12/31/2017
Financial assets at fair value through other comprehensive income		-		10		(10	)		-
Corporate securities		-		10		(10	)		-
Eurobonds and others		-		10		(10	)		-

Note 11 - Financial assets at amortized cost - Securities

The Financial assets at amortized cost - Securities is as follows:

	06/30/2018							12/31/2017
	Amortized		Expected					Amortized		Expected
	cost		loss			Fair Value		cost		loss			Fair Value
Brazilian government securities (1a)		51,666		(62	)		51,604		54,875		(66	)		54,809
Government securities – abroad (1c)		8,368		(3	)		8,365		8,414		(3	)		8,411
Argentina		29		-			29		-		-			-
Colombia		423		(3	)		420		836		(3	)		833
Chile		157		-			157		154		-			154
Korea		1,443		-			1,443		1,944		-			1,944
Denmark		492		-			492		1,951		-			1,951
Spain		3,082		-			3,082		2,937		-			2,937
United States		19		-			19		16		-			16
Mexico		2,703		-			2,703		559		-			559
Paraguay		5		-			5		4		-			4
Uruguay		15		-			15		13		-			13
Corporate securities (1b)		48,520		(5,511	)		43,009		48,135		(5,113	)		43,022
Rural product note		4,028		(201	)		3,827		2,899		(160	)		2,739
Bank deposit certificates		95		-			95		130		-			130
Securitized real estate loans		12,520		(1,419	)		11,101		13,839		(2,056	)		11,783
Debentures		24,744		(3,852	)		20,892		23,397		(2,857	)		20,540
Eurobonds and others		4,314		(7	)		4,307		3,660		(3	)		3,657
Financial bills		62		-			62		60		-			60
Promissory notes		1,042		(9	)		1,033		3,246		(23	)		3,223
Other		1,715		(23	)		1,692		904		(14	)		890
Total (2)		108,554		(5,576	)		102,978		111,424		(5,182	)		106,242

(1) Financial Assets at Amortized Cost – Securities Pledged as Collateral of Funding Transactions of Financial Institutions and Clients were: a) R$ 19,340 (R$ 26,953 at 12/31/2017), b) (R$ 37 at 12/31/2017) and c) R$ 7,447 (R$ 479 at 12/31/2017), totaling R$ 26,787 (R$ 27,469 at 12/31/2017).

(2) In order to reflect the risk management to the current strategy considered in business models, in the period ended 06/30/2018, ITAÚ UNIBANCO HOLDING changed the classification of Brazilian Debt Securities from Fair Value Through Profit or Loss, in the amount of R$ 3,707, and Fair Value Through Other Comprehensive Income, in the amount of R$ 8,678 to amortized cost. The fair value of these instruments at 06/30/2018 was R$ 11,880. In the event these financial assets had not been reclassified, the adjustment to fair value that would have been recognized in Other Comprehensive Income would be of R$ (282), net of tax effects.

The interest income related to Financial assets at amortized cost - Securities assets was R$ 1,125.

The fair value of Financial assets at amortized cost - Securities assets is disclosed in Note 31.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 75

The amortized cost of Financial assets at amortized cost - Securities by maturity is as follows:

	06/30/2018				12/31/2017
	Amortized cost		Fair Value		Amortized cost		Fair Value
Current		17,190		16,315		26,057		25,652
Up to one year		17,190		16,315		26,057		25,652
Non-current		91,364		86,663		85,367		80,590
From one to five years		53,174		51,240		53,303		50,650
From five to ten years		25,375		23,383		19,883		18,571
After ten years		12,815		12,040		12,181		11,369
Total		108,554		102,978		111,424		106,242

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 76

Reconciliation of expected loss to financial assets at amortized cost - securities, segregated by stages:

	Expected																Expected
	loss			Gains /								Transfer to		Transfer to			loss
Stage 1	12/31/2017			(Losses)			Purchases			Settlements		Stage 3		Stage 2			06/30/2018
Financial assets at amortized cost		(76	)		(407	)		(14	)		10		-		(1	)		(488	)
Government securities - other countries -		(3	)		-			-			-		-		-			(3	)
Colombia
Corporate securities		(73	)		(407	)		(14	)		10		-		(1	)		(485	)
Rural product note		(9	)		3			(5	)		4		-		-			(7	)
Securitized real estate loans		(9	)		4			-			1		-		-			(4	)
Debentures		(52	)		(414	)		(8	)		5		-		(1	)		(470	)
Eurobond and others		(2	)		-			-			-		-		-			(2	)
Promissory notes		(1	)		-			(1	)		-		-		-			(2	)

	Expected															Expected
	loss			Gains /								Transfer to		Transfer to		loss
Stage 1	01/01/2017			(Losses)			Purchases			Settlements		Stage 3		Stage 2		12/31/2017
Financial assets at amortized cost		(82	)		(24	)		(44	)		48		26		-		(76	)
Government securities - other countries -		(3	)		-			-			-		-		-		(3	)
Colombia
Corporate securities		(79	)		(24	)		(44	)		48		26		-		(73	)
Rural product note		(4	)		(2	)		(7	)		4		-		-		(9	)
Securitized real estate loans		(17	)		(3	)		-			-		11		-		(9	)
Debentures		(50	)		(20	)		(35	)		39		14		-		(52	)
Eurobond and others		(5	)		1			(1	)		3		-		-		(2	)
Promissory notes		(1	)		-			(1	)		1		-		-		(1	)
Other		(2	)		-			-			1		1		-		-

	Expected																		Expected
	loss			Gains /								Transfer to		Transfer to		Transfer of			loss
Stage 2	12/31/2017			(Losses)			Purchases			Settlements		Stage 1		Stage 3		Stage 1			06/30/2018
Financial assets at amortized cost		(368	)		(88	)		(439	)		1		10		15		(13	)		(882	)
Brazilian government securities		(65	)		5			-			-		-		-		-			(60	)
Corporate securities		(303	)		(93	)		(439	)		1		10		15		(13	)		(822	)
Rural product note		-			3			(10	)		-		7		-		-			-
Securitized real estate loans		(5	)		1			-			-		-		-		-			(4	)
Debentures		(284	)		(89	)		(429	)		1		3		15		(8	)		(791	)
Eurobond and others		-			-			-			-		-		-		(5	)		(5	)
Others		(14	)		(8	)		-			-		-							(22	)

	Expected																		Expected
	loss			Gains /								Transfer to		Transfer to		Transfer of			loss
Stage 2	01/01/2017			(Losses)			Purchases			Settlements		Stage 1		Stage 3		Stage 1			12/31/2017
Financial assets at amortized cost		(438	)		(73	)		(281	)		314		-		176		(66	)		(368	)
Brazilian government securities		(72	)		7			-			-		-		-		-			(65	)
Corporate securities		(366	)		(80	)		(281	)		314		-		176		(66	)		(303	)
Rural product note		(30	)		(3	)		-			33		-		-		-			-
Securitized real estate loans		(50	)		2			-			-		-		43		-			(5	)
Debentures		(286	)		(79	)		(267	)		281		-		133		(66	)		(284	)
Others		-			-			(14	)		-		-		-					(14	)

	Expected																Expected
	loss			Gains /								Transfer to		Transfer to			loss
Stage 3	12/31/2017			(Losses)			Purchases			Settlements		Stage 1		Stage 2			06/30/2018
Financial assets at amortized cost		(4,738	)		193			(466	)		833		-		(28	)		(4,206	)
Corporate securities		(4,738	)		193			(466	)		833		-		(28	)		(4,206	)
Rural product note		(148	)		(38	)		(19	)		11		-		-			(194	)
Securitized real estate loans		(2,046	)		71			-			562		-		-			(1,413	)
Debentures		(2,522	)		160			(447	)		245		-		(28	)		(2,592	)
Promissory notes		(22	)		-			-			15		-		-			(7	)

	Expected																	Expected
	loss			Gains /								Transfer to			Transfer to			loss
Stage 3	01/01/2017			(Losses)			Purchases			Settlements		Stage 1			Stage 2			12/31/2017
Financial assets at amortized cost		(3,298	)		(528	)		(1,276	)		1,221		(115	)		(742	)		(4,738	)
Corporate securities		(3,298	)		(528	)		(1,276	)		1,221		(115	)		(742	)		(4,738	)
Rural product note		(56	)		(37	)		(55	)		-		-			-			(148	)
Securitized real estate loans		(1,650	)		(200	)		-			125		(115	)		(206	)		(2,046	)
Debentures		(1,469	)		(294	)		(1,199	)		976		-			(536	)		(2,522	)
Eurobond and others		(101	)		3			-			98		-			-			-
Promissory notes		(22	)		-			(22	)		22		-			-			(22	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 77

Note 12 - Loan operations and lease operations portfolio

a) Composition of loan operations and lease operations

Below is the composition of the carrying amount of loan operations and lease operations by type, sector of debtor, maturity and concentration:

Loan operations and lease operations by type	06/30/2018			12/31/2017
Individuals		196,581			193,385
Credit card		66,979			67,413
Personal loan		28,783			27,295
Payroll loans		45,603			44,716
Vehicles		14,697			14,165
Mortgage loans		40,519			39,796
Corporate		107,133			107,647
Small and medium businesses		63,894			60,290
Foreign loans - Latin America		154,884			136,397
Total Loan Operations and Lease Operations (1)		522,492			497,719
Expected Credit Loss (2)		(35,574	)		(36,469	)
Total loan operations and lease operations, net of allowance for Expected Credit Loss		486,918			461,250

(1) In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 644 (R$ 102 at 12/31/2017).

(2) Comprises Expected Loan Losses for Financial Guarantees Pledged R$ 1,867 (R$ 1,907 at 12/31/2017) and Commitments to be Released R$ 3,160 (R$ 3,015 at 12/31/2017).

By maturity	06/30/2018		12/31/2017
Overdue as from 1 day		19,350		21,974
Falling due up to 3 months		134,332		127,402
Falling due more than 3 months but less than 1 year		120,131		116,089
Falling due after 1 year		248,679		232,254
Total loan operations and lease operations		522,492		497,719

By concentration (*)	06/30/2018		12/31/2017
Largest debtor		5,502		4,079
10 largest debtors		31,603		28,958
20 largest debtors		48,114		46,313
50 largest debtors		74,080		74,772
100 largest debtors		100,494		101,149

(*) The amounts include Financial Guarantees Pledged

The breakdown of the Loan and lease operations portfolio by debtor’s industry is evidenced in Note 36, item 8 - Maximum exposure of Financial Assets segregated by business sector.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 78

b) Gross Carrying Amount

Reconciliation of gross portfolio of Loan Operations and Lease Operations, segregated by stages:

	Closing balance		Transfer to			Transfer to			Transfer of		Transfer of				Acquisition /		Closing balance at
Stage 1	at 12/31/2017		Stage 2			Stage 3			the Stage 2		the Stage 3		Write Off		(Settlement)		06/30/2018
Individuals		161,364		(7,071	)		(914	)		3,031		-		-		8,728		165,138
Credit card		57,073		(2,690	)		(216	)		1,710		-		-		614		56,491
Personal loans		12,290		(2,025	)		(427	)		367		-		-		4,219		14,424
Payroll loans		42,115		(887	)		(224	)		309		-		-		1,753		43,066
Vehicles		12,550		(730	)		(44	)		164		-		-		1,204		13,144
Mortgage loans		37,336		(739	)		(3	)		481		-		-		938		38,013
Corporate		91,442		(419	)		(116	)		538		112		-		739		92,296
Small and medium businesses		47,132		(2,623	)		(384	)		1,307		6		-		5,668		51,106
Foreign loans - Latin America		117,448		(7,363	)		(627	)		3,018		45		-		18,615		131,136
Total		417,386		(17,476	)		(2,041	)		7,894		163		-		33,750		439,676

	Closing balance		Transfer to			Transfer to			Transfer of		Transfer of				Acquisition /			Closing balance at
Stage 2	at 12/31/2017		Stage 1			Stage 3			the Stage 1		the Stage 3		Write Off		(Settlement)			06/30/2018
Individuals		13,032		(3,031	)		(3,757	)		7,071		521		-		8			13,844
Credit card		6,027		(1,710	)		(1,395	)		2,690		34		-		590			6,236
Personal loans		3,108		(367	)		(1,385	)		2,025		297		-		(136	)		3,542
Payroll loans		733		(309	)		(528	)		887		81		-		(27	)		837
Vehicles		987		(164	)		(291	)		730		36		-		(280	)		1,018
Mortgage loans		2,177		(481	)		(158	)		739		73		-		(139	)		2,211
Corporate		3,833		(538	)		(321	)		419		673		-		(134	)		3,932
Small and medium businesses		6,001		(1,307	)		(785	)		2,623		259		-		(428	)		6,363
Foreign loans - Latin America		13,028		(3,018	)		(1,462	)		7,363		534		-		870			17,315
Total		35,894		(7,894	)		(6,325	)		17,476		1,987		-		316			41,454

	Closing balance		Transfer to			Transfer to			Transfer of		Transfer of					Acquisition /			Closing balance at
Stage 3	at 12/31/2017		Stage 1			Stage 2			the Stage 1		the Stage 2		Write Off			(Settlement)			06/30/2018
Individuals		18,989		-			(521	)		914		3,757		(6,106	)		566			17,599
Credit card		4,313		-			(34	)		216		1,395		(2,191	)		553			4,252
Personal loans		11,897		-			(297	)		427		1,385		(2,944	)		349			10,817
Payroll loans		1,868		-			(81	)		224		528		(734	)		(105	)		1,700
Vehicles		628		-			(36	)		44		291		(216	)		(176	)		535
Mortgage loans		283		-			(73	)		3		158		(21	)		(55	)		295
Corporate		12,372		(112	)		(673	)		116		321		(757	)		(362	)		10,905
Small and medium businesses		7,157		(6	)		(259	)		384		785		(1,690	)		54			6,425
Foreign loans - Latin America		5,921		(45	)		(534	)		627		1,462		(938	)		(60	)		6,433
Total		44,439		(163	)		(1,987	)		2,041		6,325		(9,491	)		198			41,362

	Closing
	balance at					Acquisition /		Closing balance at
Consolidated 3 Stages (*)	12/31/2017		Write Off			(Settlement)		06/30/2018
Individuals		193,385		(6,106	)		9,302		196,581
Credit card		67,413		(2,191	)		1,757		66,979
Personal loans		27,295		(2,944	)		4,432		28,783
Payroll loans		44,716		(734	)		1,621		45,603
Vehicles		14,165		(216	)		748		14,697
Mortgage loans		39,796		(21	)		744		40,519
Corporate		107,647		(757	)		243		107,133
Small and medium businesses		60,290		(1,690	)		5,294		63,894
Foreign loans - Latin America		136,397		(938	)		19,425		154,884
Total		497,719		(9,491	)		34,264		522,492

(*) In the composition of balance, there are operations designated at Fair Value Through Profit or Loss in the amount of R$ 644 (R$ 102 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 79

Reconciliation of gross portfolio of Loan Operations and Lease Operations, segregated by stages:

Stage 1	Beginning balance at 01/01/2017		Transfer to Stage 2			Transfer to Stage 3			Transfer of  the Stage 2		Transfer of the Stage 3		Acquisition / (Settlement)			Closing balance at 12/31/2017
Individuals		151,645		(3,925	)		(2,346	)		2,747		72		13,171			161,364
Credit card		48,772		(1,191	)		(176	)		1,513		10		8,145			57,073
Personal loans		11,068		(621	)		(907	)		313		6		2,431			12,290
Payroll loans		42,360		(412	)		(866	)		225		33		775			42,115
Vehicles		13,482		(733	)		(338	)		211		9		(81	)		12,550
Mortgage loans		35,963		(968	)		(59	)		485		14		1,901			37,336
Corporate		104,359		(884	)		(731	)		894		4		(12,200	)		91,442
Small and medium businesses		43,047		(1,599	)		(701	)		901		10		5,474			47,132
Foreign loans - Latin America		113,441		(5,913	)		(1,589	)		1,501		74		9,934			117,448
Total		412,492		(12,321	)		(5,367	)		6,043		160		16,379			417,386

Stage 2	Beginning balance at 01/01/2017		Transfer to Stage 1			Transfer to Stage 3			Transfer of the Stage 1		Transfer of the Stage 3		Acquisition / (Settlement)			Closing balance at 12/31/2017
Individuals		14,248		(2,747	)		(2,282	)		3,925		665		(777	)		13,032
Credit card		6,634		(1,513	)		(722	)		1,191		12		425			6,027
Personal loans		3,534		(313	)		(872	)		621		515		(377	)		3,108
Payroll loans		771		(225	)		(241	)		412		44		(28	)		733
Vehicles		1,269		(211	)		(297	)		733		39		(546	)		987
Mortgage loans		2,040		(485	)		(150	)		968		55		(251	)		2,177
Corporate		5,877		(894	)		(434	)		884		90		(1,690	)		3,833
Small and medium businesses		7,815		(901	)		(946	)		1,599		428		(1,994	)		6,001
Foreign loans - Latin America		8,964		(1,501	)		(1,246	)		5,913		134		764			13,028
Total		36,904		(6,043	)		(4,908	)		12,321		1,317		(3,697	)		35,894

Stage 3	Beginning balance at  01/01/2017		Transfer to Stage 1			Transfer to Stage 2			Transfer of  the Stage 1		Transfer of the Stage 2		Acquisition / (Settlement)			Closing balance at 12/31/2017
Individuals		20,574		(72	)		(665	)		2,346		2,282		(5,476	)		18,989
Credit card		4,457		(10	)		(12	)		176		722		(1,020	)		4,313
Personal loans		13,328		(6	)		(515	)		907		872		(2,689	)		11,897
Payroll loans		1,729		(33	)		(44	)		866		241		(891	)		1,868
Vehicles		815		(9	)		(39	)		338		297		(774	)		628
Mortgage loans		245		(14	)		(55	)		59		150		(102	)		283
Corporate		11,525		(4	)		(90	)		731		434		(224	)		12,372
Small and medium businesses		8,985		(10	)		(428	)		701		946		(3,037	)		7,157
Foreign loans - Latin America		4,371		(74	)		(134	)		1,589		1,246		(1,077	)		5,921
Total		45,455		(160	)		(1,317	)		5,367		4,908		(9,814	)		44,439

Consolidated 3 Stages (*)	Beginning balance at 01/01/2017		Acquisition / (Settlement)			Closing balance at 12/31/2017
Individuals		186,467		6,918			193,385
Credit card		59,863		7,550			67,413
Personal loans		27,930		(635	)		27,295
Payroll loans		44,860		(144	)		44,716
Vehicles		15,566		(1,401	)		14,165
Mortgage loans		38,248		1,548			39,796
Corporate		121,761		(14,114	)		107,647
Small and medium businesses		59,847		443			60,290
Foreign loans - Latin America		126,776		9,621			136,397
Total		494,851		2,868			497,719

(*) In the composition of balance, there are operations designated at Fair Value Through Profit or Loss in the amount of R$ 102 (R$ 143 at 01/01/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 80

c) Expected credit loss

Reconciliation of expected loan losses for Loan operations and lease operations, segregated by stages:

Stage 1	Beginning balance at 12/31/2017		Transfer to Stage 2			Transfer to Stage 3			Transfer of the Stage 2		Transfer of the Stage 3		Write off		Net increase / (Reversal)			Closing balance at 06/30/2018
Individuals		3,834		(334	)		(156	)		211		-		-		205			3,760
Credit card		2,135		(149	)		(35	)		131		-		-		(90	)		1,992
Personal loans		759		(112	)		(74	)		22		-		-		270			865
Payroll loans		805		(45	)		(43	)		45		-		-		2			764
Vehicles		123		(27	)		(4	)		9		-		-		30			131
Mortgage loans		12		(1	)		-			4		-		-		(7	)		8
Corporate		451		(4	)		(1	)		135		85		-		(116	)		550
Small and medium businesses		1,149		(108	)		(38	)		82		1		-		176			1,262
Foreign loans - Latin America		1,013		(77	)		(9	)		62		26		-		193			1,208
Total		6,447		(523	)		(204	)		490		112		-		458			6,780

Stage 2	Beginning balance at 12/31/2017		Transfer to Stage 1			Transfer to Stage 3			Transfer of the Stage 1		Transfer of the Stage 3		Write off		Net increase / (Reversal)			Closing balance at 06/30/2018
Individuals		2,209		(211	)		(1,574	)		334		75		-		1,613			2,446
Credit card		1,261		(131	)		(657	)		149		15		-		757			1,394
Personal loans		567		(22	)		(565	)		112		39		-		476			607
Payroll loans		262		(45	)		(291	)		45		8		-		320			299
Vehicles		108		(9	)		(54	)		27		9		-		36			117
Mortgage loans		11		(4	)		(7	)		1		4		-		24			29
Corporate		1,174		(135	)		(46	)		4		139		-		(24	)		1,112
Small and medium businesses		701		(82	)		(220	)		108		103		-		46			656
Foreign loans - Latin America		1,223		(62	)		(168	)		77		238		-		653			1,961
Total		5,307		(490	)		(2,008	)		523		555		-		2,288			6,175

Stage 3	Beginning balance at 12/31/2017		Transfer to Stage 1			Transfer to Stage 2			Transfer of the Stage 1		Transfer of the Stage 2		Write off			Net increase / (Reversal)			Closing balance at 06/30/2018
Individuals		8,787		-			(75	)		156		1,574		(4,591	)		2,090			7,941
Credit card		3,288		-			(15	)		35		657		(1,742	)		543			2,766
Personal loans		3,812		-			(39	)		74		565		(2,015	)		1,161			3,558
Payroll loans		1,301		-			(8	)		43		291		(664	)		311			1,274
Vehicles		316		-			(9	)		4		54		(158	)		67			274
Mortgage loans		70		-			(4	)		-		7		(12	)		8			69
Corporate		9,827		(85	)		(139	)		1		46		(436	)		(377	)		8,837
Small and medium businesses		3,554		(1	)		(103	)		38		220		(1,369	)		843			3,182
Foreign loans - Latin America		2,547		(26	)		(238	)		9		168		(725	)		924			2,659
Total		24,715		(112	)		(555	)		204		2,008		(7,121	)		3,480			22,619

Consolidated 3 Stages	Closing balance at 12/31/2017		Write off			Net increase / (Reversal) (1)			Closing balance at 06/30/2018 (2)
Individuals		14,830		(4,591	)		3,908			14,147
Credit card		6,684		(1,742	)		1,210			6,152
Personal loans		5,138		(2,015	)		1,907			5,030
Payroll loans		2,368		(664	)		633			2,337
Vehicles		547		(158	)		133			522
Mortgage loans		93		(12	)		25			106
Corporate		11,452		(436	)		(517	)		10,499
Small and medium businesses		5,404		(1,369	)		1,065			5,100
Foreign loans - Latin America		4,783		(725	)		1,770			5,828
Total		36,469		(7,121	)		6,226			35,574

(1) Change in macroeconomic scenarios used gave rise, in the second quarter, the recognition of a provision for Expected Loss in the amount of R$ 308.

(2) Comprises Expected Loan Losses for Financial Guarantees Pledged R$ 1,867 (R$ 1,907 at 12/31/2017) and Commitments to be Released R$ 3,160 (R$ 3,015 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 81

Reconciliation of expected loan losses for Loan operations and lease operations, segregated by stages:

Stage 1	Beginning balance at 01/01/2017		Transfer to Stage 2			Transfer to Stage 3			Transfer of the Stage 2		Transfer of the Stage 3		Net increase / (Reversal) / (Write off)			Closing  balance at 12/31/2017
Individuals		3,352		(107	)		(118	)		220		22		465			3,834
Credit card		1,685		(50	)		(21	)		135		6		380			2,135
Personal loans		733		(29	)		(56	)		24		9		78			759
Payroll loans		787		(12	)		(33	)		40		4		19			805
Vehicles		135		(15	)		(8	)		16		2		(7	)		123
Mortgage loans		12		(1	)		-			5		1		(5	)		12
Corporate		616		(7	)		(6	)		104		23		(279	)		451
Small and medium businesses		1,016		(51	)		(29	)		79		6		128			1,149
Foreign loans - Latin America		702		(97	)		(31	)		66		50		323			1,013
Total		5,686		(262	)		(184	)		469		101		637			6,447

Stage 2	Beginning balance at 01/01/2017		Transfer to  Stage 1			Transfer to  Stage 3			Transfer of the Stage 1		Transfer of the Stage 3		Net increase / (Reversal) / (Write off)			Closing balance at 12/31/2017
Individuals		2,232		(220	)		(721	)		107		112		699			2,209
Credit card		1,145		(135	)		(293	)		50		5		489			1,261
Personal loans		662		(24	)		(261	)		29		57		104			567
Payroll loans		251		(40	)		(121	)		12		27		133			262
Vehicles		147		(16	)		(43	)		15		14		(9	)		108
Mortgage loans		27		(5	)		(3	)		1		9		(18	)		11
Corporate		1,501		(104	)		(89	)		7		36		(177	)		1,174
Small and medium businesses		898		(79	)		(182	)		51		153		(140	)		701
Foreign loans - Latin America		471		(66	)		(124	)		97		55		790			1,223
Total		5,102		(469	)		(1,116	)		262		356		1,172			5,307

Stage 3	Beginning balance at 01/01/2017		Transfer to Stage 1			Transfer to Stage 2			Transfer of the Stage 1		Transfer of the Stage 2		Net increase / (Reversal) / (Write off)			Closing balance at 12/31/2017
Individuals		9,206		(22	)		(112	)		118		721		(1,124	)		8,787
Credit card		2,863		(6	)		(5	)		21		293		122			3,288
Personal loans		4,643		(9	)		(57	)		56		261		(1,082	)		3,812
Payroll loans		1,246		(4	)		(27	)		33		121		(68	)		1,301
Vehicles		393		(2	)		(14	)		8		43		(112	)		316
Mortgage loans		61		(1	)		(9	)		-		3		16			70
Corporate		8,972		(23	)		(36	)		6		89		819			9,827
Small and medium businesses		4,452		(6	)		(153	)		29		182		(950	)		3,554
Foreign loans - Latin America		1,107		(50	)		(55	)		31		124		1,390			2,547
Total		23,737		(101	)		(356	)		184		1,116		135			24,715

	Beginning		Net increase /			Closing
	balance at		(Reversal) /			balance at
Consolidated 3 Stages	01/01/2017		(Write off)			12/31/2017 (*)
Individuals		14,790		40			14,830
Credit card		5,693		991			6,684
Personal loans		6,038		(900	)		5,138
Payroll loans		2,284		84			2,368
Vehicles		675		(128	)		547
Mortgage loans		100		(7	)		93
Corporate		11,089		363			11,452
Small and medium businesses		6,366		(962	)		5,404
Foreign loans - Latin America		2,280		2,503			4,783
Total		34,525		1,944			36,469

(*) Comprises Expected Loan Losses for Financial Guarantees Pledged R$ 1,907 (R$ 1,580 at 01/01/2017) and Commitments to be Released R$ 3,015 (R$ 2,691 at 01/01/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 82

d) Present value of lease operations

Below is the analysis of the present value of the future minimum payments receivable from Finance Leases by maturity: The portfolio is composed of lease of vehicles, machines, equipment and real estate contracted in by individuals and legal entities in Brazil and abroad:

	06/30/2018
	Minimum future		Future financial			Present
	payments		income			value
Current		2,323		(1,025	)		1,298
Up to 1 year		2,323		(1,025	)		1,298
Non-current		9,316		(2,245	)		7,071
From 1 to 5 years		3,350		(544	)		2,806
Over 5 years		5,966		(1,701	)		4,265
Total		11,639		(3,270	)		8,369

	12/31/2017
	Minimum future		Future financial			Present
	payments		income			value
Current		3,292		(1,898	)		1,394
Up to 1 year		3,292		(1,898	)		1,394
Non-current		9,223		(2,859	)		6,364
From 1 to 5 years		5,334		(2,803	)		2,531
Over 5 years		3,889		(56	)		3,833
Total		12,515		(4,757	)		7,758

The allowance for loan and lease losses related to the lease portfolio amounts to: R$ 333 (R$ 322 at 12/31/2017).

e) Sale or transfer of financial assets

ITAÚ UNIBANCO HOLDING carried out operations related to the sale or transfer of financial assets in which there was the retention of credit risks of the financial assets transferred, through joint obligation clauses. Therefore, such operations remained recorded as loan operations and represent the following amounts:

	06/30/2018								12/31/2017
	Assets				Liabilities (1)				Assets				Liabilities (1)
	Book		Fair		Book		Fair		Book		Fair		Book		Fair
Nature of operation	value		value		value		value		value		value		value		value
Companies – working capital		2,505		2,505		2,437		2,437		2,651		2,651		2,570		2,570
Companies - loan (2)		-		-		3		3		-		-		4		4
Individuals - vehicles (2)		-		-		2		2		-		-		2		2
Individuals – mortgage loan		2,190		2,106		2,184		2,094		2,460		2,405		2,453		2,390
Total		4,695		4,611		4,626		4,536		5,111		5,056		5,029		4,966

(1) Under Interbank Market Debt.

(2) Assignment of operations that had already been written down to losses.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 83

Note 13 - Investments in associates and joint ventures

a) The following table shows the main investments of ITAÚ UNIBANCO HOLDING:

	Interest % at 06/30/2018				06/30/2018
	Total		Voting		Stockholders’ equity		Other Comprehensive Income			Net income		Investment		Equity in earnings			Market value (g)
Associates
Porto Seguro Itaú Unibanco Participações S.A. (a) (b)		42.93		42.93		4,602		(16	)		437		2,715		180			3,999
BSF Holding S.A. (c)		49.00		49.00		1,983		(1	)		210		1,554		103			-
IRB-Brasil Resseguros S.A. (a) (d)		11.20		11.20		3,342		(62	)		423		386		47			-
Other (e)		-		-		-		-			-		170		-			-
Joint Ventures - Other (f)		-		-		-		-			-		213		(40	)		-
Total		-		-		-		-			-		5,038		290			-

	Interest % at 12/31/2017				12/31/2017														06/30/2017
	Total		Voting		Stockholders’ equity		Other comprehensive income			Net income		Investment		Equity in earnings			Market value (g)		Equity in earnings
Associates
Porto Seguro Itaú Unibanco Participações S.A. (a) (b) (h)		42.93		42.93		4,715		10			795		2,771		327			3,571		156
BSF Holding S.A.(c) (h)		49.00		49.00		1,884		(212	)		233		1,506		109			-		52
IRB-Brasil Resseguros S.A. (a) (d)		11.20		11.20		3,550		(19	)		987		402		130			-		72
Other (e)		-		-		-		-			-		172		10			-		10
Joint Ventures - Other (f)		-		-		-		-			-		204		(28	)		-		(15	)
Total		-		-		-		-			-		5,055		548			3,571		275

(a) For purpose of recording the participation in earnings, at 06/30/2018 the position at 05/31/2018 and at 12/31/2017 the position at 11/30/2017, in accordance with IAS 27.

(b) For purposes of market value, the quoted share price of Porto Seguro S.A. was taken into account. The investment included the amounts of R$ 739 at 06/30/2018 and R$ 746 at 12/31/2017 that correspond to the difference between the interest in the net assets at fair value of Porto Seguro Itaú Unibanco Participações S.A. and the investment book value.

(c) In May 2012 Itaú Unibanco S.A. acquired 137,004,000 common shares of BSF Holding S.A. (parent company of Banco Carrefour) for R$ 816 which corresponds to 49% of interest in its capital. The investment amount includes R$ 582 to goodwill on 06/30/2018.

(d) Investments partially sold on 07/28/2017 and 08/28/2017.

(e) At 06/30/2018, includes interest in total capital and voting capital of the following companies: Gestora de Inteligência de Crédito S.A (20% total and voting capital and 20% on 12/31/2017), Compañia Uruguaya de Medios de Procesamiento S.A. (35.83% total and voting capital and 35.83% on 12/31/2017); Rias Redbanc S.A. (25% total and voting capital and 25% on 12/31/2017); Kinea Private Equity Investimentos S.A. (80% total capital and 49% voting capital; 80% total capital and 49% voting capital on 12/31/2017) and Tecnologia Bancária S.A. (28.95% total capital and voting capital and 28.95% on 12/31/2017).

(f) At 06/30/2018, includes interest in total capital and voting capital of the following companies: Olimpia Promoção e Serviços S.A. (50% total and voting capital and 50% on 12/31/2017); Conectcar Soluções de Mobilidade Eletrônica S.A.(50% capital total and e voting and 50% on 12/31/2017) and includes income not arising from profit subsidiaries.

(g) Disclosed only for public companies.

(h) Only at 12/31/2017, the companies Porto Seguro Itaú Unibanco Participações S.A. and BSF Holding S.A. include in Comprehensive Income adjustments for the adoption of IFRS 9 in the amount of R$ (29) e R$ (213), respectively.

At 06/30/2018, ITAÚ UNIBANCO HOLDING receives / recognizes dividends and interest on capital of the unconsolidated companies being the main IRB-Brasil Resseguros S.A. in the amount of R$ 64 (R$ 87 at 12/31/2017), BSF Holding S.A. in the amount of R$ 54 (R$ 281 at 12/31/2017) and Porto Seguro Itaú Unibanco Participações S.A. in the amount of R$ 359 (R$ 246 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 84

b) Other information

The table below shows the summary of the aggregate financial information of the investees under the equity method of accounting.

	06/30/2018			12/31/2017			06/30/2017
Total Assets (*)		20,856			21,472			20,329
Total Liabilities (*)		10,928			11,081			10,698
Total Income (*)		14,220			12,388			2,956
Total Expenses (*)		(13,149	)		(10,374	)		(2,002	)

(*) Represented by IRB-Brasil Resseguros S.A., in the amount of R$ 14,261 (R$ 14,631 at 12/31/2017) related to assets, R$ 10,919 (R$ 11,080 at 12/31/2017) related to liabilities, R$ 13,563 (R$ 11,340 at 12/31/2017) related to income and of R$ (13,139) (R$ (10,353) at 12/31/2017) related to expenses.

The investees do not have contingent liabilities to which ITAÚ UNIBANCO HOLDING is significantly exposed.

Note 14 – Lease commitments as lessee

a) Finance lease

ITAÚ UNIBANCO HOLDING is the lessee in finance lease contracts of data processing equipment, with the option of purchase or extension, without contingent rental payments or imposed restrictions. The net carrying amount of these assets is R$ 20 (R$ 4 at 12/31/2017).

The table below shows the total future minimum payments:

	06/30/2018		12/31/2017
Current		9		4
Up to 1 year		9		4
Non-current		11		-
From 1 to 5 years		11		-
Total future minimum payments		20		4
(-) Future interest		-		-
Present value		20		4

b) Operating leases

ITAÚ UNIBANCO HOLDING leases many properties, for use in its operations, under standard real estate leases that normally can be cancelled at its option and include renewal options and escalations clauses. No lease agreement imposes any restriction on our ability to pay dividends, enter into further lease agreements or engage in debt or equity financing transactions, and there is no contingent payments related to the agreements.

The expenses related to operating lease agreements recognized under General and administrative expenses total R$ 686 from 01/01 to 06/30/2018 (R$ 665 from 01/01 to 06/30/2017).

ITAÚ UNIBANCO HOLDING has no relevant sublease contracts.

Minimum payments of initiated and remaining lease agreements with non-cancelable clauses are as follows:

	06/30/2018		12/31/2017
Current		1,233		1,113
Up to 1 year		1,233		1,113
Non-current		4,438		4,310
From 1 to 5 years		4,003		3,927
Over 5 years		435		383
Total future minimum payments		5,671		5,423

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 85

Note 15 - Fixed assets

				Real estate in use (2)						Other fixed assets (2)
Fixed Assets (1)	Fixed assets under construction			Land			Buildings			Improvements			Installations			Furniture and equipment			EDP systems (3)			Other (communication, security and transportation)			Total
Annual depreciation rates								4	%		10	%		10 to 20%			10 to 20%			20 to 50%			10 to 20%
Cost
Balance at 12/31/2017		367			1,044			3,107			2,204			1,955			1,152			8,679			1,148			19,656
Acquisitions		169			-			-			16			1			30			247			54			517
Disposal		-			(3	)		(47	)		(33	)		(3	)		(14	)		(87	)		(7	)		(194	)
Exchange variation		7			10			-			84			14			27			39			5			186
Transfers		(96	)		-			50			32			14			-			-			-			-
Other		8			-			(1	)		91			(6	)		3			(10	)		1			86
Balance at 06/30/2018		455			1,051			3,109			2,394			1,975			1,198			8,868			1,201			20,251
Depreciation
Balance at 12/31/2017		-			-			(1,893	)		(1,375	)		(1,151	)		(715	)		(6,411	)		(752	)		(12,297	)
Accumulated depreciation		-			-			(40	)		(96	)		(77	)		(48	)		(454	)		(58	)		(773	)
Disposal		-			-			13			22			2			10			79			5			131
Exchange variation		-			-			(1	)		(48	)		2			(15	)		(47	)		(5	)		(114	)
Other		-			-			1			(84	)		-			(7	)		8			(14	)		(96	)
Balance at 06/30/2018		-			-			(1,920	)		(1,581	)		(1,224	)		(775	)		(6,825	)		(824	)		(13,149	)
Impairment
Balance at 12/31/2017		-			-			-			-			-			-			-			-			-
Additions/ assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 06/30/2018		-			-			-			-			-			-			-			-			-
Book value
Balance at 06/30/2018		455			1,051			1,189			813			751			423			2,043			377			7,102

(1) The contractual commitments for purchase of the fixed assets totaled R$ 139 achievable by 2019 (Note 36 - Off balance sheet).

(2) Includes the amount of R$ 3 related to attached real estate.

(3) Includes lease contracts, mainly related to data processing equipment, which are accounted for as lease operations. The asset and the liability are recognized in the Financial Statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 86

				Real estate in use (2)						Other fixed assets (2)
Fixed assets (1)	Fixed assets under construction			Land			Buildings			Improvements			Installations			Furniture and equipment			EDP systems (3)			Other (communication, security and transportation)			Total
Annual depreciation rates								4	%		10	%		10 to 20%			10 to 20%			20 to 50%			10 to 20%
Cost
Balance at 01/01/2017		387			1,047			3,099			1,857			1,901			1,205			8,543			1,075			19,114
Acquisitions		302			-			-			147			7			111			294			82			943
Disposal		-			(1	)		(69	)		(46	)		(1	)		(14	)		(313	)		(20	)		(464	)
Exchange variation		-			4			5			37			15			(12	)		5			1			55
Transfers		(320	)		-			86			122			26			-			86			-			-
Other		(2	)		(6	)		(14	)		87			7			(138	)		64			10			8
Balance at 12/31/2017		367			1,044			3,107			2,204			1,955			1,152			8,679			1,148			19,656
Depreciation
Balance at 01/01/2017		-			-			(1,840	)		(1,114	)		(986	)		(674	)		(5,804	)		(654	)		(11,072	)
Accumulated depreciation		-			-			(80	)		(211	)		(154	)		(104	)		(910	)		(105	)		(1,564	)
Disposal		-			-			16			29			-			6			283			19			353
Exchange variation		-			-			-			(12	)		10			28			(16	)		(4	)		6
Other		-			-			11			(67	)		(21	)		29			36			(8	)		(20	)
Balance at 12/31/2017		-			-			(1,893	)		(1,375	)		(1,151	)		(715	)		(6,411	)		(752	)		(12,297	)
Impairment
Balance at 01/01/2017		-			-			-			-			-			-			-			-			-
Additions/ assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 12/31/2017		-			-			-			-			-			-			-			-			-
Book value
Balance at 12/31/2017		367			1,044			1,214			829			804			437			2,268			396			7,359

(1) The contractual commitments for purchase of the fixed assets totaled R$ 181 achievable by 2019 (Note 36 - Off balance sheet).

(2) Includes the amount of R$ 3 related to attached real estate.

(3) Includes lease contracts, mainly related to data processing equipment, which are accounted for as lease operations. The asset and the liability are recognized in the Financial Statements.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 87

Note 16 - Intangible assets

				Other intangible assets
Intangible assets (1)	Acquisition of rights to credit payroll			Association for the promotion and offer of financial products and services			Acquisition of software			Development of software			Other intangible assets			Total
Amortization rates p.a.		20	%		8	%		20	%		20	%		10 to 20%
Cost
Balance at 12/31/2017		1,060			2,452			4,571			4,353			1,525			13,961
Acquisitions		153			1			341			147			-			642
Terminated agreements/ write off		(91	)		(20	)		(310	)		(2	)		-			(423	)
Exchange variation		-			125			344			-			675			1,144
Other		10			74			42			47			(657	)		(484	)
Balance at 06/30/2018		1,132			2,632			4,988			4,545			1,543			14,840
Amortization (2)
Balance at 12/31/2017		(471	)		(647	)		(1,998	)		(1,267	)		(514	)		(4,897	)
Amortization expense		(109	)		(110	)		(289	)		(320	)		(135	)		(963	)
Terminated agreements/ write off		91			20			310			-			-			421
Exchange variation		-			(111	)		(218	)		-			(123	)		(452	)
Other		(1	)		74			6			(47	)		249			281
Balance at 06/30/2018		(490	)		(774	)		(2,189	)		(1,634	)		(523	)		(5,610	)
Impairment (3)
Balance at 12/31/2017		-			-			(54	)		(343	)		-			(397	)
Additions / assumptions		-			-			(167	)		-			-			(167	)
Write off		-			-			(10	)		-			-			(10	)
Balance at 06/30/2018		-			-			(231	)		(343	)		-			(574	)
Book value
Balance at 06/30/2018		642			1,858			2,568			2,568			1,020			8,656

(1) The contractual commitments for the purchase of new intangible assets totaled R$ 813 achievable by 2020 (Note 36 - Off balance sheet).

(2) All intangible assets have a defined useful life.

(3) Note 2.4j.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 88

				Other intangible assets
Intangible assets (1)	Acquisition of rights to credit payroll			Association for the promotion and offer of financial products and services (4)			Acquisition of software			Development of software			Other intangible assets			Total
Amortization rates p.a.		20	%		8	%		20	%		20	%		10 to 20%
Cost
Balance at 01/01/2017		1,046			1,748			3,840			3,525			1,078			11,237
Acquisitions		345			18			1,206			350			388			2,307
Terminated agreements / write off		(329	)		(16	)		-			(1	)		(22	)		(368	)
Exchange variation		-			25			(77	)		-			685			633
Other (4)		(2	)		677			(398	)		479			(604	)		152
Balance at 12/31/2017		1,060			2,452			4,571			4,353			1,525			13,961
Amortization (2)
Balance at 01/01/2017		(555	)		(376	)		(1,701	)		(532	)		(284	)		(3,448	)
Amortization expense		(215	)		(273	)		(495	)		(446	)		(176	)		(1,605	)
Terminated agreements / write off		310			16			-			(6	)		22			342
Exchange variation		-			(17	)		79			-			(134	)		(72	)
Other (4)		(11	)		3			119			(283	)		58			(114	)
Balance at 12/31/2017		(471	)		(647	)		(1,998	)		(1,267	)		(514	)		(4,897	)
Impairment (3)
Balance at 01/01/2017		(19	)		-			(54	)		(335	)		-			(408	)
Additions / assumptions		-			-			-			(14	)		-			(14	)
Reversals		19			-			-			6			-			25
Balance at 12/31/2017		-			-			(54	)		(343	)		-			(397	)
Book value
Balance at 12/31/2017		589			1,805			2,519			2,743			1,011			8,667

(1) The contractual commitments for the purchase of new intangible assets totaled R$ 984 achievable by 2020 (Note 36 - Off balance sheet).

(2) All intangible assets have a defined useful life.

(3) Note 2.4j.

(4) Reclassifications were made in the balances at December 31, 2017 aiming at permitting the proper presentation of operation balances, in accordance with their respective accounting natures.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 89

Note 17 - Deposits

The table below shows the breakdown of deposits:

	06/30/2018						12/31/2017
	Current		Non-current		Total		Current		Non-current		Total
Interest-bearing deposits		213,178		142,768		355,946		204,363		129,599		333,962
Time deposits		83,045		142,716		225,761		82,718		129,082		211,800
Interbank deposits		2,791		52		2,843		1,665		517		2,182
Savings deposits		127,342		-		127,342		119,980		-		119,980
Non-interest bearing deposits		70,649		-		70,649		68,976		-		68,976
Demand deposits		70,646		-		70,646		68,973		-		68,973
Others Deposits		3		-		3		3		-		3
Total		283,827		142,768		426,595		273,339		129,599		402,938

Note 18 – Financial liabilities designated at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss are presented in the following table:

	06/30/2018		12/31/2017
Structured notes
Shares		44		58
Debt securities		196		407
Total		240		465

The effect of the changes in credit risk of these instruments is not significant at 06/30/2018 and 12/31/2017.

For shares, in view of the characteristics of the instrument, there is no definite value to be paid at the maturity date. For debt securities, the amount to be paid at maturity comprises several exchange rates and indices, and there is no contractual amount for settlement.

The fair value of financial liabilities designated at fair value through profit or loss by maturity is as follows:

	06/30/2018		12/31/2017
	Cost / Fair value		Cost / Fair value
Current - up to one year		30		55
Non-current		210		410
From one to five years		148		319
From five to ten years		28		50
After ten years		34		41
Total		240		465

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 90

Note 19 – Securities sold under repurchase agreements and interbank and institutional market debts

a) Securities sold under repurchase agreements and interbank market debt

The table below shows the breakdown of funds:

	06/30/2018						12/31/2017
	Current		Non- current		Total		Current		Non- current		Total
Securities sold under repurchase agreements		228,446		74,081		302,527		240,808		71,826		312,634
Transactions backed by own financial assets (*)		81,963		74,081		156,044		93,955		71,826		165,781
Transactions backed by third party financial assets		146,483		-		146,483		146,853		-		146,853
Interbank market debt		74,495		59,142		133,637		73,414		56,202		129,616
Real estate credit bills		11,393		3,437		14,830		14,046		4,479		18,525
Agribusiness credit bills		8,966		8,495		17,461		7,562		7,539		15,101
Financial credit bills		14,153		20,702		34,855		13,234		14,457		27,691
Import and export financing		33,004		8,640		41,644		30,548		8,541		39,089
On-lending - domestic		6,727		13,494		20,221		7,991		16,190		24,181
Liabilities from transactions related to credit assignments (Note 12d)		252		4,374		4,626		33		4,996		5,029

(*) It includes R$ 35,392 (R$ 58,837 at 12/31/2017) related to Debentures of own issue.

Funding for import and export financing represents credit facilities available for financing of imports and exports of Brazilian companies, in general denominated in foreign currency. The interest rate for each one of the operations (p.a.) is presented in the table below:

	Brazil	Foreign
Securities sold under repurchase agreements(*)	35% of CDI to 16.93%	1.40% to 5.15%
Real estate credit bills	83% to 93% of CDI	-
Financial credit bills	IGPM to 102% of CDI	-
Agribusiness credit bills	78% to 100% of CDI	-
Import and export financing	1.4% to 6.0%	0.79% to 11.1%
On-lending - domestic	2.5% to 14.5%	-
Liabilities from transactions related to credit assignments	6.78% to 13.17%	-

(*) Note 2.4d presents the operations comprising Deposits received under securities repurchased agreements. Final repurchase dates are set until December 2055.

b) Institutional market debt

The table below presents the breakdown of funds obtained in Institutional markets:

	06/30/2018						12/31/2017
	Current		Non- current		Total		Current		Non- current		Total
Subordinated debt (1)		5,073		48,853		53,926		12,500		40,196		52,696
Foreign borrowing through securities		6,403		36,795		43,198		11,764		29,636		41,400
Structured Operations Certificates (2)		3,437		957		4,394		1,762		2,624		4,386
Total		14,913		86,605		101,518		26,026		72,456		98,482

(1) At 06/30/2018, the amount of R$ 39,581 (R$ 42,687 at 12/31/2017) is included in the Reference Equity, under the proportion defined by CMN Resolution No. 3,444, of February 28, 2007, as amended by CMN Resolution No. 3,532, of January 31, 2008.

(2) As at June 30, 2018, the market value of the funding from Structured Operations Certificates issued is R$ 4,546.

The interest rate for each one of the operations (p.a.) is presented in the table below.

	Brazil	Foreign
Subordinated debt	CDI + 1.1% to IGPM + 7.60%	3.5% to 10.79%
Foreign borrowing through securities	0.89% to 12.73%	1.25% to 30.35%
Structured Operations Certificates	IPCA to 15.82%	-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 91

Note 20 - Other assets and liabilities

a) Other assets

	06/30/2018						12/31/2017
	Current		Non- current		Total		Current		Non- current		Total
Financial (1) (3)		49,929		13,024		62,953		46,718		12,850		59,568
Receivables from credit card issuers		30,234		-		30,234		32,073		-		32,073
Insurance and reinsurance operations		923		338		1,261		1,224		10		1,234
Deposits in guarantee for contingent liabilities (Note 32)		1,539		11,933		13,472		1,520		11,892		13,412
Deposits in guarantee for foreign borrowing program		885		-		885		639		-		639
Negotiation and intermediation of securities		10,529		1		10,530		6,202		18		6,220
Receivables from reimbursement of contingent liabilities (Note 32c)		299		739		1,038		244		821		1,065
Receivables from services provided		3,027		2		3,029		2,842		1		2,843
Amounts receivable from FCVS – Salary Variations Compensation Fund (2)		1		4		5		1		105		106
Foreign exchange portfolio		346		-		346		-		-		-
Operations without credit granting characteristics		2,146		7		2,153		1,973		3		1,976
Non-financial		8,142		1,631		9,773		8,637		1,820		10,457
Prepaid expenses		2,397		510		2,907		2,432		643		3,075
Retirement plan assets (Notes 29c and d)		-		1,073		1,073		-		1,067		1,067
Sundry domestic		2,911		3		2,914		2,642		-		2,642
Premiums from loan operations		121		35		156		240		77		317
Sundry foreign		997		10		1,007		1,847		29		1,876
Other		1,716		-		1,716		1,476		4		1,480

(1) There were no impairment losses for other financial assets in these periods.

(2) The Salary Variation Compensation Fund – FCVS was established through Resolution No. 25, of June 16, 1967, of the Board of the former BNH (National Housing Bank), and its purpose is to settle balances remaining after the end of real estate financing contracted up to March 1990, relating to agreements financed under the SFH (National Housing System), and provided that they are covered by FCVS.

(3) Loan and lease operations written off as loss until 06/30/2017; all collection procedures to recover these assets are ongoing.

b) Other liabilities

	06/30/2018						12/31/2017
	Current		Non- current		Total		Current		Non- current		Total
Financial		76,754		-		76,754		77,598		15		77,613
Credit card operations		67,593		-		67,593		71,892		-		71,892
Foreign exchange portfolio		-		-		-		197		-		197
Negotiation and intermediation of securities		7,950		-		7,950		4,606		15		4,621
Finance leases (Note 14a)		20		-		20		4		-		4
Funds from consortia participants		140		-		140		102		-		102
Other		1,051		-		1,051		797		-		797
Non-financial		31,467		1,115		32,582		24,382		1,980		26,362
Collection and payment of taxes and contributions		4,568		-		4,568		325		-		325
Sundry creditors - domestic		2,247		193		2,440		2,009		143		2,152
Funds in transit		11,427		27		11,454		8,800		989		9,789
Provision for sundry payments		1,934		84		2,018		1,721		135		1,856
Social and statutory		4,166		216		4,382		4,931		137		5,068
Related to insurance operations		148		-		148		167		-		167
Liabilities for official agreements and rendering of payment services		899		-		899		985		-		985
Provision for retirement plan benefits (Note 29c and e)		234		535		769		197		525		722
Personnel provision		1,833		60		1,893		1,496		51		1,547
Provision for health insurance		849		-		849		842		-		842
Provision for Citibank integration expenditures		504		-		504		504		-		504
Deferred income		2,575		-		2,575		2,326		-		2,326
Other		83		-		83		79		-		79

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 92

Note 21 – Stockholders’ equity

a) Capital

At the Meeting of the Board of Directors held on December 15, 2017 and February 22, 2018, the cancellation of 31,793,105 and 14,424,206, respectively, common shares of own issue and held in treasury was approved, with no change in capital, upon capitalization of the amounts recorded in Revenue Reserves – Statutory Reserve.

As a result of this last cancellation, capital is represented by 6,536,090,232 book-entry shares with no par value, of which 3,305,526,906 are common and 3,230,563,326 are preferred shares with no voting rights, but with tag-along rights, in the event of disposal of control, to be included in a public offering of shares, so as to ensure the price equal to eighty per cent (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 amounts to R$ 97,148 (R$ 97,148 at December 31, 2017), of which R$ 65,427 (R$ 65,482 at December 31, 2017) refers to stockholders domiciled in the country and R$ 31,721 (R$ 31,666 at December 31, 2017) refers to stockholders domiciled abroad. The consequent statutory change in the number of shares will be resolved in the next Annual Stockholders’ Meeting.

The table below shows the breakdown of and change in shares of paid-in capital and the reconciliation of balances at the beginning and end of the period:

	06/30/2018
	Number
	Common			Preferred			Total			Amount
Residents in Brazil at 12/31/2017		3,299,073,506			1,116,291,341			4,415,364,847
Residents abroad at 12/31/2017		20,877,606			2,114,271,985			2,135,149,591
Shares of capital stock at 12/31/2017		3,319,951,112			3,230,563,326			6,550,514,438
(-) Cancellation of Shares – Meeting of the Board of Directors February 22, 2018		(14,424,206	)		-			(14,424,206	)
Shares of capital stock at 06/30/2018		3,305,526,906			3,230,563,326			6,536,090,232
Residents in Brazil at 06/30/2018		3,282,781,277			1,119,115,278			4,401,896,555
Residents abroad at 06/30/2018		22,745,629			2,111,448,048			2,134,193,677
Treasury shares at 12/31/2017 (1)		14,424,206			71,459,714			85,883,920			(2,743	)
Purchase of shares		-			13,100,000			13,100,000			(510	)
Exercised options – granting of stock options		-			(22,988,198	)		(22,988,198	)		690
Disposals – stock option plan		-			(987,221	)		(987,221	)		51
(-) Cancellation of Shares – Meeting of the Board of Directors February 22, 2018		(14,424,206	)		-			(14,424,206	)		534
Treasury shares at 06/30/2018 (1)		-			60,584,295			60,584,295			(1,978	)
Outstanding shares at 06/30/2018		3,305,526,906			3,169,979,031			6,475,505,937
Outstanding shares at 12/31/2017		3,305,526,906			3,159,103,612			6,464,630,518

	12/31/2017
	Number
	Common			Preferred			Total			Amount
Residents in Brazil at 01/01/2017		3,335,350,311			1,104,963,731			4,440,314,042
Residents abroad at 01/01/2017		16,393,906			2,125,599,595			2,141,993,501
Shares of capital stock at 01/01/2017		3,351,744,217			3,230,563,326			6,582,307,543
(-) Cancellation of shares - Meeting of the Board of Directors December 15, 2017		(31,793,105	)		-			(31,793,105	)
Shares of capital stock at 12/31/2017		3,319,951,112			3,230,563,326			6,550,514,438
Residents in Brazil at 12/31/2017		3,299,073,506			1,116,291,341			4,415,364,847
Residents abroad at 12/31/2017		20,877,606			2,114,271,985			2,135,149,591
Treasury shares at 01/01/2017 (1)		3,074			69,604,462			69,607,536			(1,882	)
Purchase of shares		46,214,237			37,982,900			84,197,137			(3,089	)
Exercised options - granting of stock options		-			(28,008,923	)		(28,008,923	)		728
Disposals – stock option plan		-			(8,118,725	)		(8,118,725	)		322
(-) Cancellation of shares - Meeting of the Board of Directors December 15, 2017		(31,793,105	)		-			(31,793,105	)		1,178
Treasury shares at 12/31/2017 (1)		14,424,206			71,459,714			85,883,920			(2,743	)
Outstanding shares at 12/31/2017		3,305,526,906			3,159,103,612			6,464,630,518
Outstanding shares at 01/01/2017		3,351,741,143			3,160,958,864			6,512,700,007

(1) Own shares, purchased based on authorization of the Board of Directors, to be held in Treasury for subsequent cancellation of replacement in the market.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 93

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):

	01/01 to 06/30/2018
Cost / market value	Common		Preferred
Minimum				37.45
Weighted average		-		38.95
Maximum		-		40.06
Treasury shares
Average cost		-		32.64
Market value at 06/30/2018		35.90		40.34

	01/01 to 12/31/2017
Cost / market value	Common		Preferred
Minimum		37.06		33.48
Weighted average		37.06		36.25
Maximum		37.06		38.56
Treasury shares
Average cost		37.05		30.90
Market value at 12/31/2017		37.69		42.58

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 94

b) Dividends

Stockholders are entitled to an annual mandatory dividend of not less than 25% of adjusted profit, pursuant to the provisions of the Brazilian Corporate Law. Both common and preferred 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 the mandatory minimum dividend is based on the share position on the last day of the prior month, with payment being made on the first business day of the subsequent month, amounting to R$ 0.015 per share.

Below is a statement from dividends and interest on equity and the calculation of the minimum mandatory dividend:

Calculation of dividends and interest on capital

	06/30/2018			06/30/2017
Statutory net income		9,946			10,743
Adjustments:
(-) Legal reserve		(497	)		(537	)
Dividend calculation basis		9,449			10,206
Mandatory dividend - 25%		2,362			2,551
Dividends and Interest on Capital Paid / Provided for / Identified		5,313			4,938

Stockholders' compensation

	06/30/2018
	Gross		WHT			Net
Paid / prepaid		486		-			486
Dividends - 5 monthly installments of R$ 0.015 per share paid from February to June 2018		486		-			486
Declared until 06/30/2018 (Recorded in Other Liabilities)		1,998		(122	)		1,876
Dividends - 1 monthly installment of R$ 0.015 per share paid on 07/02/2018		97		-			97
Dividends provision - R$ 0.1683 per share		1,090					1,090
Interest on capital - R$ 0.1252 per share		811		(122	)		689
Identified in Revenue Reserve In Stockholders’ Equity - R$ 0.4557 per share		2,951		-			2,951
Total from 01/01 to 06/30/2018		5,435		(122	)		5,313

	06/30/2017
	Gross		WHT			Net
Paid / prepaid		489		-			489
Dividends - 5 monthly installments of R$ 0.015 per share paid from February to June 2017		489		-			489
Declared until 06/30/2017 (Recorded in Other Liabilities)		2,410		(347	)		2,063
Dividends - 1 monthly installment of R$ 0.015 per share paid on 07/03/2017		98		-			98
Interest on capital - R$ 0.3558 per share to be paid on 08/25/2017		2,312		(347	)		1,965
Identified in Revenue Reserve In Stockholders’ Equity - R$ 0.3953 per share		2,568		(182	)		2,386
Total from 01/01 to 06/30/2017		5,467		(529	)		4,938

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 95

c) Additional paid-in capital

Additional paid-in capital corresponds to: (i) the difference between the proceeds from the sale of treasury shares and the average cost of such shares, and (ii) the compensation expenses recognized in accordance with the stock option plan and variable compensation.

d) Appropriated reserves

	06/30/2018			12/31/2017
Capital reserves		285			285
Premium on subscription of shares		284			284
Reserves from tax incentives, restatement of equity securities and other		1			1
Revenue reserves		4,339			11,396
Legal		9,390			8,893
Statutory		4,056			586
Corporate reorganizations (Note 2.4 a III)		(12,058	)		(11,741	)
Unrealized profits (*)		2,951			13,658
Total reserves at parent company		4,624			11,681

(*) Refers to Interest on capital provided for up to June 30, 2018 and December 31, 2017 for each period, in compliance with BACEN Circular Letter nº 3,516, of July 21, 2011.

e) Unappropriated reserves

Refers to balance of profit remaining after the distribution of dividends and appropriations to statutory reserves in the statutory accounts of ITAÚ UNIBANCO HOLDING.

f) Non-controlling interests

	Stockholders’ equity				Net Income
					01/01 to			01/01 to
	06/30/2018		12/31/2017		06/30/2018			06/30/2017
Itaú CorpBanca (Note 3)		12,364		11,144		251			256
Banco CorpBanca Colômbia S.A. (Note 3)		1,372		1,203		(18	)		(36	)
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		341		297		44			36
Luizacred S.A. Soc. Cred. Financiamento Investimento		269		241		27			(7	)
Other		93		93		18			12
Total		14,439		12,978		322			261

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 96

Note 22 – 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 06/30/2018, the accounting effect of the share-based payment in income was R$ (314) (R$ (254) from 01/01 to 06/30/2017).

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 benefit from the appreciation that their work and dedication bring to the shares.

In addition to the awards 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. and to Unibanco Holdings S.A., and to Redecard S.A. (“Rede”) stock option plans, respectively. Accordingly, the exchange of shares for ITUB4 did not have a relevant financial impact.

Simple options have the following characteristics:

a) 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 inflation-adjusted 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 B3.

b) Vesting period: determined upon issue, from one to seven years, counted from the grant date. The vesting period is normally determined at five years.

c) 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 B3 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 B3, adjusted by the IGP-M variation.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 97

Summary of changes in the plan

	Simple options
	Quantity			Weighted average exercise price		Weighted average market value
Balance at 12/31/2017		16,342,906			37.81
Options exercisable at the end of the period		16,342,906			37.81
Options outstanding but not exercisable		-			-
Options:
Granted		-			-
Canceled / Forfeited (*)		(7,020	)		32.10
Exercised		(9,289,940	)		38.79		50.09
Balance at 06/30/2018		7,045,946			38.79
Options exercisable at the end of the period		7,045,946			38.79
Options outstanding but not exercisable
Range of exercise prices
Granting 2010-2011					21.71 - 42.92
Granting 2012					32.10
Weighted average of the remaining contractual life (in years)		0.89

(*) Refers to non-exercise based on the beneficiary’s decision.

	Simple options
	Quantity			Weighted average exercise price		Weighted average market value
Balance at 01/01/2017		38,033,506			36.94
Options exercisable at the end of the period		23,440,177			40.98
Options outstanding but not exercisable		14,593,329			30.45
Options:
Granted		-			-
Canceled / Forfeited (*)		(19,667	)		38.90
Exercised		(5,684,306	)		30.58		40.03
Balance at 06/30/2017		32,329,533			37.56
Options exercisable at the end of the period		32,329,533			37.56
Options outstanding but not exercisable
Range of exercise prices
Granting 2010-2011					21.71 - 41.09
Granting 2012					30.01
Weighted average of the remaining contractual life (in years)		1.48

(*) Refers to non-exercise based on the beneficiary’s decision.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 98

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 variations. 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 regulations.

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$ 39.33 per share at 06/30/2018 (R$ 32.33 per share at 06/30/2017).

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
Balance at 12/31/2017		34,049,627
New granted		6,608,237
Cancelled		(310,243	)
Exercised		(7,731,613	)
Balance at 06/30/2018		32,616,008
Weighted average of remaining contractual life (years)		2.74

	Quantity
Balance at 01/01/2017		35,462,379
New granted		7,041,957
Cancelled		(439,424	)
Exercised		(7,523,051	)
Balance at 06/30/2017		34,541,861
Weighted average of remaining contractual life (years)		2.86

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 99

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$ 51.07 per share at 06/30/2018 (R$ 38.25 per share at 06/30/2017).

Change in variable compensation in shares	2018
	Quantity
Opening balance 12/31/2017		20,819,982
New		6,827,114
Delivered		(11,074,347	)
Cancelled		(83,373	)
Balance at 06/30/2018		16,489,376

Change in variable compensation in shares	2017
	Quantity
Opening balance 01/01/2017		24,539,406
New		8,501,063
Delivered		(12,048,631	)
Cancelled		(139,157	)
Balance at 06/30/2017		20,852,681

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 100

Note 23 - Interest and similar income and expense and net gain (loss) on investment securities and derivatives

a) Interest and similar income

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Central Bank compulsory deposits		1,236		1,950		2,591		3,825
Interbank deposits		367		159		665		360
Securities purchased under agreements to resell		4,036		6,777		8,154		14,677
Financial assets at fair value through profit or loss		4,370		4,734		10,343		12,186
Financial assets at fair value through other comprehensive income		2,849		2,396		4,897		4,815
Financial assets at amortized cost		624		632		1,125		1,469
Loan and lease operations		19,410		19,692		37,168		39,050
Other financial assets		79		195		253		429
Total		32,971		36,535		65,196		76,811

b) Interest and similar expense

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Deposits		(5,142	)		(3,590	)		(8,421	)		(6,710	)
Securities sold under repurchase agreements		(2,836	)		(7,828	)		(8,413	)		(19,583	)
Interbank market debt		(6,529	)		(3,283	)		(8,894	)		(5,730	)
Institutional market debt		(1,900	)		(1,849	)		(3,480	)		(3,736	)
Financial expense from technical reserves for insurance and private pension		(461	)		(2,910	)		(4,074	)		(7,845	)
Other		(9	)		(13	)		(26	)		(47	)
Total		(16,877	)		(19,473	)		(33,308	)		(43,651	)

c) Adjustments to Fair Value of Financial Assets and Liabilities

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Financial assets at fair value through profit or loss		(4,584	)		(480	)		(3,925	)		1,394
Derivatives (*)		(2,157	)		52			(1,725	)		1,852
Financial assets designated at fair value through profit or loss		(385	)		49			(340	)		76
Financial assets at fair value through other comprehensive income		(43	)		(17	)		52			(105	)
Finacial liabilities designated at fair value		66			32			36			1
Total		(7,103	)		(364	)		(5,902	)		3,218

(*) Includes the ineffective derivatives portion related to hedge accounting.

During the period ended 06/30/2018, ITAÚ UNIBANCO HOLDING recognized R$ 396 as expenses for Expected Losses, with reversal of R$ 2 for Financial Assets – Fair Value through Other Comprehensive Income and loss of R$ 394 for Financial Assets – Amortized Cost.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 101

Note 24 - Banking service fees

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Current account services		2,720		2,535		5,391		5,025
Asset management fees		1,226		987		2,386		1,966
Collection commissions		392		337		749		671
Fees from credit card services		3,534		3,463		7,039		6,847
Fees for guarantees issued and credit lines		460		443		903		887
Brokerage commission		122		125		280		224
Other		629		549		1,232		1,091
Total		9,083		8,439		17,980		16,711

Note 25 - Other income

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Gains on sale of assets held for sale, fixed assets and investments in associates
and joint ventures		40		46		181		76
Recovery of expenses		44		52		129		102
Reversal of provisions		17		7		115		88
Other		147		202		278		454
Total		248		307		703		720

Note 26 - General and administrative expenses

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Personnel expenses		(5,959	)		(5,720	)		(11,786	)		(11,225	)
Compensation		(2,497	)		(2,297	)		(4,931	)		(4,568	)
Payroll taxes		(735	)		(697	)		(1,490	)		(1,398	)
Welfare benefits		(906	)		(845	)		(1,813	)		(1,654	)
Retirement plans and post-employment benefits (Note 29)		(23	)		(23	)		(49	)		(48	)
Defined benefit		(20	)		(21	)		(43	)		(44	)
Defined contribution		(3	)		(2	)		(6	)		(4	)
Stock option plan (Note 22d)		(73	)		(38	)		(108	)		(100	)
Training		(60	)		(59	)		(107	)		(100	)
Employee profit sharing		(1,035	)		(889	)		(2,079	)		(1,732	)
Dismissals		(130	)		(115	)		(214	)		(236	)
Provision for labor claims (Note 32)		(500	)		(757	)		(995	)		(1,389	)
Administrative expenses		(4,370	)		(4,035	)		(8,304	)		(7,847	)
Data processing and telecommunications		(1,055	)		(1,031	)		(2,063	)		(2,012	)
Third party services		(1,092	)		(1,045	)		(2,087	)		(2,036	)
Installations		(315	)		(309	)		(614	)		(577	)
Advertising, promotions and publications		(411	)		(291	)		(660	)		(514	)
Rent		(408	)		(372	)		(792	)		(745	)
Transportation		(83	)		(82	)		(167	)		(167	)
Materials		(78	)		(79	)		(167	)		(156	)
Financial services		(193	)		(194	)		(385	)		(397	)
Security		(190	)		(179	)		(380	)		(364	)
Utilities		(106	)		(100	)		(212	)		(207	)
Travel		(61	)		(54	)		(107	)		(97	)
Other		(378	)		(299	)		(670	)		(575	)
Depreciation		(387	)		(394	)		(773	)		(784	)
Amortization		(433	)		(348	)		(849	)		(704	)
Insurance acquisition expenses		(46	)		(74	)		(95	)		(178	)
Other expenses		(2,865	)		(2,342	)		(5,057	)		(4,674	)
Expenses related to credit cards		(961	)		(961	)		(1,942	)		(1,907	)
Losses with third party frauds		(153	)		(110	)		(301	)		(285	)
Loss on sale of assets held for sale, fixed assets and investments in
associates and joint ventures		(132	)		(205	)		(225	)		(288	)
Provision for civil lawsuits (Note 32)		(182	)		(348	)		(197	)		(671	)
Provision for tax and social security lawsuits		(221	)		(231	)		(374	)		(434	)
Refund of interbank costs		(68	)		(70	)		(132	)		(144	)
Impairment - intangible asset		-			-			(167	)		-
Other		(1,148	)		(417	)		(1,719	)		(945	)
Total		(14,060	)		(12,913	)		(26,864	)		(25,412	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 102

Note 27 – Income tax and social contribution

ITAÚ UNIBANCO HOLDING and each of its subsidiaries file separate, for each fiscal year, corporate income tax returns and social contribution on net income.

a) Composition of income tax and social contribution expenses

Demonstration of Income tax and social contribution expense calculation:

Due on operations for the period	04/01 to 06/30/2018			04/01 to 06/30/2017			01/01 to 06/30/2018			01/01 to 06/30/2017
Income before income tax and social contribution		2,375			7,567			11,938			17,076
Charges (income tax and social contribution) at the rates in effect (Note 2.4 k)		(1,069	)		(3,405	)		(5,372	)		(7,684	)
Increase / decrease in income tax and social contribution charges arising from:
Share of profit or (loss) of associates and joint ventures net		(28	)		24			29			88
Foreign exchange variation on investiments abroad		4,089			1,132			4,225			399
Interest on capital		886			938			1,818			1,905
Corporate reorganizations (Note 2.4 a III)		157			157			314			314
Dividends and interest on external debt bonds		194			151			262			220
Other nondeductible expenses net of non taxable income (*)		(6,917	)		(842	)		(5,543	)		1,783
Income tax and social contribution expenses		(2,688	)		(1,845	)		(4,267	)		(2,975	)
Related to temporary differences
Increase (reversal) for the period		5,448			920			3,787			(1,434	)
Increase (reversal) of prior periods		759			7			993			(12	)
(Expenses)/Income related to deferred taxes		6,207			927			4,780			(1,446	)
Total income tax and social contribution expenses		3,519			(918	)		513			(4,421	)

(*) Includes temporary (additions) and exclusions.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 103

b) Deferred taxes

I - The deferred tax asset balance and respective changes are as follows:

	12/31/2017		Realization / (Reversal)			Increase		06/30/2018
Reflected in income		48,810		(15,799	)		9,704		42,715
Provision for expected loss		24,686		(4,983	)		1,848		21,551
Related to income tax and social contribution tax carryforwards		7,595		(3,522	)		1,787		5,860
Provision for profit sharing		1,829		(1,829	)		1,283		1,283
Provision for devaluation of securities with permanent impairment		2,228		(523	)		1,006		2,711
Provision for contingent liabilities		5,194		(892	)		652		4,954
Civil lawsuits		1,974		(263	)		88		1,799
Labor claims		2,200		(544	)		438		2,094
Tax and social security		1,020		(85	)		126		1,061
Goodwill on purchase of investments		141		(42	)		50		149
Legal liabilities – tax and social security		488		(42	)		78		524
Adjustments of operations carried out on the futures settlement market		277		(277	)		213		213
Adjustment to fair value of financial assets designated at fair value through profit or loss  and derivatives		429		(429	)		799		799
Provision related to health insurance operations		341		-			2		343
Other		5,602		(3,260	)		1,986		4,328
Reflected in stockholders’ equity		2,192		(318	)		619		2,493
Corporate reorganizations (Note 2.4 a III)		628		(314	)		-		314
Adjustment to fair value of financial assets at fair value through other comprehensive income		327		(4	)		617		940
Cash flow hedge		983		-			2		985
Other		254		-			-		254
Total (1)(2)		51,002		(16,117	)		10,323		45,208

(1) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 38,542 and R$ 384.

(2) 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., a petition has been sent to Central Bank of Brazil, in compliance with paragraph 7 of article 1st of Resolution No. 4,441/15 and pursuant to Circular 3,776/15.

	01/01/2017		Realization / (Reversal)			Increase		12/31/2017
Reflected in income		49,841		(16,347	)		15,316		48,810
Provision for expected loss		27,510		(9,453	)		6,629		24,686
Related to income tax and social contribution tax carryforwards		6,981		(197	)		811		7,595
Provision for profit sharing		1,541		(1,541	)		1,829		1,829
Provision for devaluation of securities with permanent impairment		1,727		-			501		2,228
Provision for contingent liabilities		5,704		(2,733	)		2,223		5,194
Civil lawsuits		1,955		(576	)		595		1,974
Labor claims		2,167		(1,233	)		1,266		2,200
Tax and social security		1,582		(924	)		362		1,020
Goodwill on purchase of investments		165		(758	)		734		141
Legal liabilities – tax and social security		387		(557	)		658		488
Adjustments of operations carried out in futures settlement market		485		(239	)		31		277
Adjustment to fair value of financial assets designated at fair value through profit or loss  and derivatives		243		(243	)		429		429
Provision related to health insurance operations		300		-			41		341
Other		4,798		(626	)		1,430		5,602
Reflected in stockholders’ equity		3,123		(1,072	)		141		2,192
Corporate reorganizations (Note 2.4 a III)		1,256		(628	)		-		628
Adjustment to fair value of financial assets at fair value through other comprehensive income		771		(444	)		-		327
Cash flow hedge		843		-			140		983
Other		253		-			1		254
Total (*)		52,964		(17,419	)		15,457		51,002

(*) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 35,869 and R$ 391.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 104

II- The provision for deferred tax and contributions and respective changes are as follows:

			Realization /
	12/31/2017		reversal			Increase			06/30/2018
Reflected in income		14,569		(10,992	)		2,537			6,114
Depreciation in excess – finance lease		613		(78	)		-			535
Adjustment of escrow deposits and contingent liabilities		1,280		(10	)		65			1,335
Pension plans		304		(13	)		10			301
Adjustments of operations carried out on the futures settlement market		1,421		(1,421	)		1,412			1,412
Adjustment to fair value of financial assets designated at fair value through profit or loss  and derivatives		7,592		(7,592	)		1,065			1,065
Taxation of results abroad – capital gains		1,973		(1,201	)		1			773
Other		1,386		(677	)		(16	)		693
Reflected in stockholders’ equity accounts		955		(259	)		240			936
Adjustment to fair value of financial assets at fair value through other comprehensive income		767		(252	)		228			743
Cash flow hedge		166		(7	)		-			159
Provision for pension plan benefits		9		-			11			20
Other		13		-			1			14
Total (*)		15,524		(11,251	)		2,777			7,050

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 38,542 and R$ 384.

	01/01/2017		Realization / reversal			Increase		12/31/2017
Reflected in income		13,507		(8,716	)		9,778		14,569
Depreciation in excess – finance lease		936		(323	)		-		613
Adjustment of escrow deposits and contingent liabilities		1,193		(179	)		266		1,280
Pension plans		233		-			71		304
Adjustments of operations carried out on the futures settlement market		1,095		-			326		1,421
Adjustment to fair value of financial assets designated at fair value through profit or loss  and derivatives		7,293		(7,293	)		7,592		7,592
Taxation of results abroad – capital gains		1,502		-			471		1,973
Other		1,255		(921	)		1,052		1,386
Reflected in stockholders’ equity accounts		968		(129	)		116		955
Adjustment to fair value of financial assets at fair value through other comprehensive income		836		(82	)		13		767
Cash flow hedge		63		-			103		166
Provision for pension plan benefits		35		(26	)		-		9
Other		34		(21	)		-		13
Total (*)		14,475		(8,845	)		9,894		15,524

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 35,869 and R$ 391.

III - The estimate of realization and present value of tax credits and from the Provision for Deferred Income Tax and Social Contribution existing at 06/30/2018, are:

	Deferred tax assets
	Temporary differences		%			Tax loss / social contribution loss carryforwards		%			Total		%			Deferred tax liabilities			%			Net deferred taxes		%
2018		12,899		33	%		69		1	%		12,968		29	%		(1,167	)		17	%		11,801		31	%
2019		11,325		29	%		157		3	%		11,482		25	%		(1,155	)		16	%		10,327		27	%
2020		3,503		9	%		1,737		30	%		5,240		12	%		(219	)		3	%		5,021		13	%
2021		3,501		9	%		2,110		36	%		5,611		12	%		(1,699	)		24	%		3,912		11	%
2022		1,715		4	%		1,759		30	%		3,474		8	%		(711	)		10	%		2,763		7	%
After 2022		6,405		16	%		28		0	%		6,433		14	%		(2,099	)		30	%		4,334		11	%
Total		39,348		100	%		5,860		100	%		45,208		100	%		(7,050	)		100	%		38,158		100	%
Present value (*)		35,781					5,059					40,840					(6,056	)					34,784

(*) 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 services 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, due to differences between the accounting criteria and tax legislation, in addition to corporate aspects. Accordingly, it is recommended that the trends for the realization of deferred tax assets arising from temporary differences, and tax loss carry forwards should not be used as an indication of future net income.

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 06/30/2018 and 12/31/2017.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 105

Note 28 – Earnings per share

Basic and diluted earnings per share were computed as shown in the table below for the periods indicated. Basic earnings per share are computed by dividing the net income attributable to the stockholder of ITAÚ UNIBANCO HOLDING by the average number of shares for the period, and by excluding the number of shares purchased and held as treasury shares by the company. Diluted earnings per share are computed on a similar way, but with the adjustment made in the denominator when assuming the conversion of all shares that may be diluted.

Net income attributable to owners of the parent company – basic earnings per	04/01 to			04/01 to			01/01 to			01/01 to
share (*)	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Net income		5,740			6,331			12,129			12,394
Minimum non-cumulative dividend on preferred shares in accordance with our by laws		(70	)		(69	)		(70	)		(69	)
Subtotal		5,670			6,262			12,059			12,325
Retained earnings to be distributed to common equity owners in an amount per share equal to the minimum dividend payable to preferred equity owners		(73	)		(74	)		(73	)		(74	)
Subtotal		5,597			6,188			11,986			12,251
Retained earnings to be distributed to common and preferred equity owners on a pro-rata basis
To common equity owners		2,853			3,188			6,114			6,307
To preferred equity owners		2,744			3,000			5,872			5,944
Total net income available to common equity owners		2,926			3,262			6,187			6,381
Total net income available to preferred equity owners		2,814			3,069			5,942			6,013
Weighted average number of shares outstanding (Note 21a)
Common shares		3,305,526,906			3,351,741,143			3,305,526,906			3,351,741,143
Preferred shares		3,178,429,935			3,155,404,279			3,174,578,488			3,158,922,612
Earnings per share - basic – R$
Common shares		0.89			0.97			1.87			1.90
Preferred shares		0.89			0.97			1.87			1.90

Net income attributable to owners of the parent company – diluted earnings per	04/01 to			04/01 to			01/01 to			01/01 to
share (*)	06/30/2018			06/30/2017			06/30/2018			06/30/2017
Total net income available to preferred equity owners		2,814			3,069			5,942			6,013
Dividend on preferred shares after dilution effects		21			27			30			35
Net income available to preferred equity owners considering preferred shares after the dilution effect		2,835			3,096			5,972			6,048
Total net income available to ordinary equity owners		2,926			3,262			6,187			6,381
Dividend on preferred shares after dilution effects		(21	)		(27	)		(30	)		(35	)
Net income available to ordinary equity owners considering preferred shares after the dilution effect		2,905			3,235			6,157			6,346
Adjusted weighted average of shares (Note 21a)
Common shares		3,305,526,906			3,351,741,143			3,305,526,906			3,351,741,143
Preferred shares		3,225,868,666			3,209,326,813			3,206,342,528			3,195,332,639
Preferred shares		3,178,429,935			3,155,404,279			3,174,578,488			3,158,922,612
Incremental shares from stock options granted under our share-based payment		47,438,731			53,922,534			31,764,040			36,410,027
Earnings per share - diluted – R$
Common shares		0.88			0.96			1.86			1.89
Preferred shares		0.88			0.96			1.86			1.89

(*) Earnings per Share are calculated based on results determined according to the rules in force of the Central Bank of Brazil.

Potential anti-dilution effects of shares under our share-based payment, which were excluded from the calculation of diluted earnings per share, totaled 1,681,699 preferred shares at 06/30/2017. In 2018 doesn't have this effect.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 106

Note 29 – Post-employment benefits

The accounting policies and procedures adopted by ITAÚ UNIBANCO HOLDING for employee benefits are summarized below:

The total amounts recognized in Income for the Period and Stockholders’ Equity – Other comprehensive income were as follows:

Total amounts recognized in Income for the period

	Defined benefit												Defined contribution (*)												Other benefits												Total
	04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017
Cost of current service		(17	)		(17	)		(34	)		(34	)		-			-			-			-			-			-			-			-			(17	)		(17	)		(34	)		(34	)
Net interest		(3	)		(4	)		(5	)		(7	)		17			19			34			38			(6	)		(5	)		(12	)		(11	)		8			10			17			20
Contribution		-			-			-			-			(20	)		(21	)		(40	)		(42	)		-			-			-			-			(20	)		(21	)		(40	)		(42	)
Benefits paid		-			-			-			-			-			-			-			-			6			5			8			8			6			5			8			8
Total Amounts Recognized		(20	)		(21	)		(39	)		(41	)		(3	)		(2	)		(6	)		(4	)		-			-			(4	)		(3	)		(23	)		(23	)		(49	)		(48	)

(*) In the period, contributions to the defined contributions plan, including PGBL, totaled R$ 157 (R$ 158 from 01/01 to 06/30/2017), of which R$ 40 (R$ 42 from 01/01 to 06/30/2017) arising from social security funds.

Total amounts recognized in Stockholders’ Equity – Other comprehensive income

	Defined benefit						Defined contribution						Other benefits						Total
	06/30/2018			12/31/2017			06/30/2018			12/31/2017			06/30/2018			12/31/2017			06/30/2018			12/31/2017
At the beginning of the period		40			(70	)		(1,370	)		(1,322	)		(77	)		(48	)		(1,407	)		(1,440	)
Effects on asset ceiling		11			97			8			(386	)		-			-			19			(289	)
Remeasurements		(31	)		11			(11	)		339			-			(28	)		(42	)		322
Acquisition Citibank portfolio		(1	)		(1	)		-			-			-			-			(1	)		(1	)
Total Amounts Recognized		19			37			(1,373	)		(1,369	)		(77	)		(76	)		(1,431	)		(1,408	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 107

a) Retirement plans

ITAÚ UNIBANCO HOLDING and certain subsidiaries sponsor defined benefit plans, including variable contribution plans, whose basic purpose of which is to provide benefits that, in general, represent 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 of individual accounts at the eligibility date, according to the plan’s regulations, which does not require actuarial calculation, except as described in Note 29c.

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 new 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.

Retirement plans are managed by closed-end private pension entities (EFPC), with independent legal structures, as detailed below:

Entity	Benefit plan
Fundação Itau Unibanco - 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 Defined Benefit  Retirement 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.

b) Governance

The closed-end private pension entities (EFPC) and the 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 by laws. 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.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 108

c) Defined benefit plans

I - Main assumptions used in actuarial valuation of retirement plans

	06/30/2018	06/30/2017
Discount rate (1)	9.98% p.a.	10.24% p.a.
Mortality table (2)	AT-2000	AT-2000
Turnover (3)	Exp.Itaú 2008/2010	Exp.Itaú 2008/2010
Future salary growth	5.04% to 7.12% p.a.	5.04% to 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. At 12/31/2017 assumptions 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 active participants linked to ITAÚ UNIBANCO HOLDING, resulting in the average of 2.4 % p.a. based on the 2008/2010 experience.

(4) Using the Projected Unit Credit method, the mathematical reserve is determined based on the current projected benefit amount multiplied by the ratio between the length of service 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.

II- Risk Exposure - Through its defined benefit plans, ITAÚ UNIBANCO HOLDING 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 on the income related to securities issued by the Brazilian treasury (government securities). If the actual income related to plan assets 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 employee benefit plans 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.

- 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 EFPCs funds is to search for a long term balance between assets and obligations to pay 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.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 109

The allocation of plan assets and the allocation target by type of asset are as follows:

	Fair Value				% Allocation
Types	06/30/2018		12/31/2017		06/30/2018			12/31/2017			Target 2018
Fixed income securities		17,212		16,851		95.96	%		95.81	%	53% to 100%
Variable income securities		19		19		0.11	%		0.11	%	0% to 20%
Structured investments		43		24		0.24	%		0.14	%	0% to 10%
Real estate		581		615		3.24	%		3.49	%	0% to 7%
Loans to participants		81		79		0.45	%		0.45	%	0% to 5%
Total		17,936		17,588		100.00	%		100.00	%

The defined benefit plan assets include shares of ITAÚ UNIBANCO HOLDING, its main parent company (ITAÚSA) and of subsidiaries of the latter, with a fair value of R$ 11 (R$ 12 at 12/31/2017), and real estate rented to Group companies, with a fair value of R$ 499 (R$ 531 at 12/31/2017).

Fair Value

The plan's assets is adjusted up to the base 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 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 2017, 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:

	06/30/2018			12/31/2017
1 - Net assets of the plans		17,936			17,588
2- Actuarial liabilities		(14,717	)		(14,491	)
3- Surplus (1-2)		3,219			3,097
4- Asset ceiling (*)		(3,367	)		(3,217	)
5- Net amount recognized in the balance sheet (3-4)		(148	)		(120	)
Amount recognized in assets (Note 20a)		360			345
Amount recognized in liabilities (Note 20b)		(508	)		(465	)

(*) Corresponds to the excess of the present value of the available economic benefit, in conformity with paragraph 58 of IAS 19.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 110

V- Changes in the net amount recognized in the balance sheet:

	06/30/2018
	Plan net			Actuarial						Asset			Recognized
	assets			liabilities			Surplus			ceiling			amount
Value at the beginning of the period		17,588			(14,491	)		3,097			(3,217	)		(120	)
Cost of current service		-			(34	)		(34	)		-			(34	)
Net interest (1)		850			(694	)		156			(161	)		(5	)
Benefits paid		(546	)		546			-			-			-
Contributions of sponsors		35			-			35			-			35
Contributions of participants		5			-			5			-			5
Effects on asset ceiling		-			-			-			11			11
Exchange Variation		4			(8	)		(4	)		-			(4	)
Remeasurements (2) (3)		-			(36	)		(36	)		-			(36	)
Value end of the period		17,936			(14,717	)		3,219			(3,367	)		(148	)

	12/31/2017
	Plan net			Actuarial						Asset			Recognized
	assets			liabilities			Surplus			ceiling			amount
Value at the beginning of the period		16,520			(13,723	)		2,797			(3,008	)		(211	)
Cost of current service		-			(69	)		(69	)		-			(69	)
Net interest (1)		1,639			(1,347	)		292			(307	)		(15	)
Benefits paid		(1,141	)		1,141			-			-			-
Contributions of sponsors		71			-			71			-			71
Contributions of participants		12			-			12			-			12
Effects on asset ceiling		-			-			-			97			97
Exchange Variation		2			(6	)		(4	)		-			(4	)
Remeasurements (2) (3)		485			(487	)		(2	)		1			(1	)
Value end of the period		17,588			(14,491	)		3,097			(3,217	)		(120	)

(1) Corresponds to the amount calculated on 01/01/2018 based on the beginning amount (Net Assets, Actuarial Liabilities and Asset ceiling), taking into account the estimated amount of payments/ receipts of benefits / contributions, multiplied by the discount rate of 9.98% p.a. (At 01/01/2017 used by the discount rate of 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$ 850 (R$ 2,124 at 12/31/2017).

During the period, the contributions made totaled R$ 35 (R$ 35 from 01/01 to 06/30/2017). The contribution rate increases based on the beneficiary’s salary.

In 2018, contribution to the retirement plans sponsored by ITAÚ UNIBANCO HOLDING is expected to amount to R$ 56.

The estimate for payment of benefits for the next 10 years is as follows:

Period	Payment estimate
2018		1,103
2019		1,126
2020		1,157
2021		1,190
2022		1,220
2023 to 2027		6,563

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 – Other Comprehensive Income of the sponsor (before taxes) would amount to:

	Effects on actuarial liabilities of the plan						Effect which would be recognized in Stockholders’ Equity (*)
Change in Assumption	Value			Percentage of actuarial liabilities			Value
- Decrease by 0.5%		740			5.11	%		(269	)
- Increase by 0.5%		(677	)		(4.67	%)		153

(*) Net of effects of asset ceiling

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 111

d) Defined contribution plans

The defined contribution plans have assets relating to sponsors’ contributions not yet included in the participant’s account balance due to loss of eligibility to a plan benefit, as well as 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:

	06/30/2018									12/31/2017
	Pension plan						Recognized			Pension plan						Recognized
	fund			Asset ceiling			amount			fund			Asset ceiling			amount
Value beginning of the period		1,634			(912	)		722			1,287			(491	)		796
Net interest		79			(45	)		34			126			(50	)		76
Contribution		(40	)		-			(40	)		(91	)		-			(91	)
Receivables – allocation of funds (*)		-			-			-			(12	)		-			(12	)
Effects on asset ceiling		-			8			8			(15	)		(371	)		(386	)
Remeasurements		(11	)		-			(11	)		339			-			339
Value end of the period (Note 20a)		1,662			(949	)		713			1,634			(912	)		722

(*) Refers to the allocation of the surplus of Plano Itaubanco CD’s social security fund.

e) Other post-employment benefits

ITAÚ UNIBANCO HOLDING 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, 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:

	06/30/2018			12/31/2017
At the beginning of the period		(257	)		(221	)
Interest cost		(12	)		(22	)
Benefits paid		8			14
Remeasurements		-			(28	)
At the end of the period (Note 20b)		(261	)		(257	)

The estimate for payment of benefits for the next 10 years is as follows:

Period	Payment estimate
2018		15
2019		16
2020		17
2021		18
2022		19
2023 to 2027		115

II- Assumptions and sensitivity - medical care cost

For calculation of projected benefits obligations in addition to the assumptions used for the defined benefit plans (Note 29c I), an 8.16% p.a. increase in medical costs assumption is assumed.

Assumptions about medical care cost trends have a significant impact on the amounts recognized in income. A change of one percentage point in the medical care cost rates would have the following effects:

	Recognition	1% increase		1% decrease
Service cost and interest cost	Income		3		(3	)
Present value of obligation	Other comprehensive income		32		(26	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 112

Note 30 – Insurance contracts

a) Insurance contracts

ITAÚ UNIBANCO HOLDING, through its subsidiaries, offers to the market insurance and private pension products, with the purpose of assuming risks and restoring the economic balance of the assets of the policyholder if damaged. Products are offered through insurance brokers (third parties operating in the market and its own brokers), Itaú Unibanco branches and electronic channels, according to their characteristics and regulatory requirements.

b) Main products

I - Insurance

The contract entered into between the parties aims at guaranteeing the protection of the client's assets. Upon payment of a premium, the policyholder is protected through previously-agreed replacement or indemnification clauses for damages. ITAÚ UNIBANCO HOLDING insurance companies then recognize technical reserves administered by themselves, through specialized areas within the conglomerate, with the objective of indemnifying the policyholder's loss in the event of claims of insured risks.

The insurance risks sold by insurance companies of ITAÚ UNIBANCO HOLDING are divided into property and casualty, that covers losses, damages or liabilities for assets or persons, and life insurance that includes coverage for death and personal accidents.

	Loss ratio				Sales ratio
	%				%
	01/01 to		01/01 to		01/01 to		01/01 to
Main insurance lines	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Group accident insurance		8.0		6.0		34.0		39.5
Individual accident		17.7		22.6		13.2		10.6
Commercial multiple peril		43.0		35.7		21.1		21.1
Internal credit		159.9		136.4		0.7		1.0
Mandatory insurance for personal injury caused by motor vehicles (DPVAT)		-		85.7		-		1.2
Serious or terminal diseases		21.4		17.5		12.1		10.7
Extended warranty - assets		13.2		16.9		62.1		62.1
Credit Life		18.4		15.4		18.9		18.9
Income from Uncertain Events		20.3		18.5		18.5		14.7
Multiple risks		52.6		13.7		49.1		61.1
Home insurance in market policies – Credit Life		16.3		7.5		20.4		20.3
Group life		32.3		32.7		12.3		12.0

II - Private pension

Developed as a solution to ensure the maintenance of the quality of life of participants, as a supplement to the government plans, through long term investments, private pension products are divided into three major groups:

· PGBL - Plan Generator of Benefits: The main objective of this plan is the accumulation of financial resources, but it can be purchased with additional risk coverage. Recommended for clients that file the full version of income tax return, because they can deduct contributions paid for tax purposes up to 12% of the annual taxable gross income.

· VGBL - Redeemable Life Insurance: This is an insurance structured as a pension plan. Its taxation differs from the PGBL; in this case, the tax basis is the earned income.

· FGB - Fund Generator of Benefits: This is a pension plan with minimum income guarantee, and possibility of receiving earnings from asset performance. Once recognized the distribution of earnings at a certain percentage, as established by the FGB policy, it is not at management's discretion, but instead represents an obligation to ITAÚ UNIBANCO HOLDING. Although there are plans still in existence, they are no longer sold.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 113

III – Income related to insurance and private pension

The revenue from the main insurance and private pension products is as follows:

	Premiums and contributions issued								Reinsurance												Retained premiums and contributions
	04/01 to		04/01 to		01/01 to		01/01 to		04/01 to			04/01 to			01/01 to			01/01 to			04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017		06/30/2018			06/30/2017			06/30/2018			06/30/2017			06/30/2018		06/30/2017		06/30/2018		06/30/2017
Group accident insurance		158		170		309		336		-			(1	)		(1	)		(1	)		158		169		308		335
Individual accident		90		69		162		128		-			(1	)		6			(1	)		90		68		168		127
Commercial multiple peril		13		14		26		26		-			-			-			-			13		14		26		26
Internal Credit		22		15		35		29		-			-			-			-			22		15		35		29
Mandatory insurance for personal injury caused by motor vehicles (DPVAT)		-		6		-		16		-			-			-			-			-		6		-		16
Serious or terminal diseases		53		48		94		88		-			-			-			-			53		48		94		88
Disability Savings Pension		75		81		152		162		(1	)		(1	)		(2	)		(2	)		74		80		150		160
PGBL		428		429		922		875		-			-			-			-			428		429		922		875
Credit Life		220		144		430		285		(2	)		(2	)		(2	)		(2	)		218		142		428		283
Income from Uncertain Events		-		44		-		77		-			-			-			-			-		44		-		77
Multiple risks		50		37		91		81		-			-			-			-			50		37		91		81
Home Insurance in Market Policies – Credit Life		71		69		142		138		(1	)		-			(6	)		(4	)		70		69		136		134
Traditional		25		28		51		57		-			-			-			-			25		28		51		57
VGBL		4,458		4,877		8,902		10,180		-			-			-			-			4,458		4,877		8,902		10,180
Group life		246		248		471		561		(1	)		(6	)		5			(9	)		245		242		476		552
Other lines		187		113		363		221		(2	)		(1	)		(5	)		(7	)		185		112		358		214
Total		6,096		6,392		12,150		13,260		(7	)		(12	)		(5	)		(26	)		6,089		6,380		12,145		13,234

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 114

c) Technical reserves for insurance and private pension

The technical provisions of insurance and pension plan are recognized according to the technical notes approved by SUSEP and criteria established by current legislation.

I - Insurance and private pension:

· 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 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 (PPNG-RVNE).

· 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.

· Provision for financial surplus – it is recognized to ensure the amounts intended for distribution of financial surplus, if the event is stated in the agreement. Corresponds to the financial income exceeding the minimum return guaranteed in the product.

· Other technical provisions – it is recognized when insufficiency of premiums or contributions are identified related to payments of benefits and indemnities.

· Provision for redemptions and other amounts to regularize – it comprises the amounts related to redemptions to regularize, returns of premiums or funds, portability requested but, for any reason, not yet transferred to the insurance company or open private pension entity beneficiary, and premiums received but not quoted.

· Provision for related expenses - It is recognized for the coverage of expected amounts related to expenses with benefits and indemnities, due to events incurred and to be incurred.

II - Change in reserves for insurance and private pension

The details about the changes in balances of reserves for insurance and private pension operations are as follows:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 115

II.I - Change in technical provisions

	06/30/2018												12/31/2017
	Property, individuals and life insurance			Private pension			Life with survivor benefits			Total			Property, individuals and life insurance			Private pension			Life with survivor benefits			Total
Opening balance		3,464			43,888			133,880			181,232			3,926			37,679			112,471			154,076
(+) Additions arising from premiums / contribution		2,119			1,125			8,902			12,146			4,059			2,536			20,318			26,913
(-) Deferral of risk		(1,838	)		(153	)		-			(1,991	)		(4,225	)		(323	)		-			(4,548	)
(-) Payment of claims / benefits		(565	)		(258	)		(17	)		(840	)		(1,228	)		(402	)		(70	)		(1,700	)
(+) Reported claims		687			-			-			687			1,291			-			-			1,291
(-) Redemptions		-			(1,012	)		(6,716	)		(7,728	)		(2	)		(1,687	)		(10,847	)		(12,536	)
(+/-) Net portability		-			641			1,497			2,138			-			2,683			753			3,436
(+) Adjustment of reserves and financial surplus		6			1,148			2,825			3,979			16			1,717			6,037			7,770
(+) Corporate Reorganization		-			-			-			-			(282	)		-			-			(282	)
(+/-) Other (recognition / reversal)		(263	)		120			13			(130	)		(91	)		1,685			5,218			6,812
Reserves for insurance and private pension		3,610			45,499			140,384			189,493			3,464			43,888			133,880			181,232

II.II - Technical provisions balances

	Insurance				Private pension				Total
	06/30/2018		12/31/2017		06/30/2018		12/31/2017		06/30/2018		12/31/2017
Unearned premiums		1,993		1,883		14		15		2,007		1,898
Mathematical reserve for benefits to be granted and benefits granted		188		173		184,036		175,992		184,224		176,165
Redemptions and Other Unsettled Amounts		12		11		300		264		312		275
Financial surplus		2		2		589		604		591		606
Unsettled claims (1)		546		560		44		34		590		594
IBNR		352		401		26		27		378		428
Administrative and Related Expenses		28		28		99		95		127		123
Other		489		406		775		737		1,264		1,143
Total (2)		3,610		3,464		185,883		177,768		189,493		181,232

(1) The provision for unsettled claims is detailed in Note 30e.

(2) This table covers the amendments established by Susep Circular No. 517, de 07/30/2015, also for comparison purposes.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 116

d) Deferred selling expenses

Deferred acquisition costs of insurance are direct and indirect costs incurred to sell, underwrite and originate a new insurance contract.

Direct costs are basically commissions paid for brokerage services, agency and prospecting efforts and are deferred for amortization in proportion to the recognition of revenue from earned premiums, that is, over the coverage period, for the term of effectiveness of contracts, according to the calculation rules in force.

Balances are recorded under gross reinsurance assets and changes are shown in the table below:

Balance at 01/01/2018	253
Increase	455
Amortization	(391	)
Balance at 06/30/2018	317
Balance to be amortized in up to 12 months	262
Balance to be amortized after 12 months	55
Balance at 01/01/2017	429
Increase	772
Amortization	(948	)
Balance at 12/31/2017	253
Balance to be amortized in up to 12 months	209
Balance to be amortized after 12 months	44

The amounts of deferred selling expenses from reinsurance are stated in Note 30I.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 117

e) Table of loss development

Changes in the amount of obligations of the ITAÚ UNIBANCO HOLDING may occur at the end of each annual reporting period. The table below shows the development by the claims incurred method. The first part of the table shows how the final loss estimate changes through time. The second part of the table reconciles the amounts pending payment and the liability disclosed in the balance sheet.

I – Gross of reinsurance

Reserve for unsettled claims (*)	583
(-) DPVAT operations	-
(-) IBNER (claims incurred but not sufficiently reported)	177
(-) Retrocession and other estimates	(28	)
Liability claims presented in the development table (la + lb)	434

(*) Provision for unsettled claims stated in Note 30c II.II of 12/31/2017, gross of reinsurance.

Ia - Administratives claims - gross of reinsurance

Occurrence date	06/30/2014		06/30/2015		06/30/2016		06/30/2017		06/30/2018		Total
At the end of reporting period		913		997		1,061		861		917
After 1 year		922		1,028		1,075
After 2 years		931		1,036
After 3 years		934
After 4 years
Current estimate		934		1,036		1,075		861		917
Accumulated payments through base date		929		1,026		1,048		718		738		4,633
Liabilities recognized in the balance sheet		5		10		27		143		180		240
Liabilities in relation to prior years												19
Total administratives claims included in balance sheet												259

Ib - Judicial claims - gross of reinsurance

Occurrence date	06/30/2014		06/30/2015		06/30/2016		06/30/2017		06/30/2018		Total
At the end of reporting period		36		32		38		38		14
After 1 year		46		42		42
After 2 years		54		45
After 3 years		57
After 4 years
Current estimate		57		45		42		38		14
Accumulated payments through base date		43		32		31		30		7		163
Liabilities recognized in the balance sheet		14		13		11		9		7		57
Liabilities in relation to prior years												118
Total judicial claims included in balance sheet												175

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 118

II - Net of reinsurance

Reserve for unsettled claims (1)	583
(-) DPVAT operations	-
(-) IBNER	177
(-) Reinsurance (2)	22
(-) Retrocession and other estimates	(28	)
Liability claims presented in the development table (IIa + IIb)	412

(1) Provision refers to provision for unsettled claims stated in Note 30c II.II of 12/31/2017.

(2) Reinsurance operations stated in Note 30l III of 12/31/2017.

IIa - Administratives claims - net of reinsurance

Occurrence date	06/30/2014		06/30/2015		06/30/2016		06/30/2017		06/30/2018		Total
At the end of reporting period		896		972		1,054		848		906
After 1 year		905		993		1,068
After 2 years		911		1,001
After 3 years		913
After 4 years
Current estimate		913		1,001		1,068		848		906
Accumulated payments through base date		908		991		1,040		706		727		4,536
Liabilities recognized in the balance sheet		5		10		27		142		179		239
Liabilities in relation to prior years												10
Total administratives claims included in balance sheet												249

IIb - Judicial claims - net of reinsurance

Occurrence date	06/30/2014		06/30/2015		06/30/2016		06/30/2017		06/30/2018		Total
At the end of reporting period		36		32		38		35		14
After 1 year		46		41		42
After 2 years		54		45
After 3 years		57
After 4 years
Current estimate		57		45		42		35		14
Accumulated payments through base date		43		32		31		27		7		159
Liabilities recognized in the balance sheet		14		12		11		9		7		57
Liabilities in relation to prior years												106
Total judicial claims included in balance sheet												163

The breakdown of the table development of claims between administrative and legal evidences the reallocation of claims up to a certain base date and that become legal ones afterwards, which may give the wrong impression of need for adjusting the provisions in each breakdown.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 119

f) Liability adequacy test

As established in IFRS 4 – “Insurance contracts”, an insurance company must carry out the Liability Adequacy Test, comparing the amount recognized for its technical reserves with the current estimate of cash flow of its future obligations. The estimate should consider all cash flows related to the business, which is the minimum requirement for carrying out the adequacy test.

The Liability Adequacy Test did not indicate insufficiency in the first half of 2018 nor in the periods ended 2017 and 2016.

The assumptions used in the test are periodically reviewed and are based on the best practices and the analysis of subsidiaries’ experience, therefore representing the best estimates for cash flow projections.

Methodology and test grouping

The methodology for testing all products is based on the projection of cash flows. Specifically for insurance products, cash flows were projected using the method known as run-off triangle of quarterly frequency. For social security products, cash flows for the deferral and assignment phases are tested on a separate basis.

The risk grouping criterion considers groups subject to similar risks that are jointly managed as a single portfolio.

Biometric tables

Biometric tables are instruments to measure the biometric risk represented by the probability of death, survival or disability of a participant.

For death and survival estimates, the Brazilian Market Insurer Experience (BR-EMS) tables in effect are used, adjusted according to life expectancy development of Scale G, and the Álvaro Vindas table is adopted to estimate benefit requests for disability.

Risk-free interest rate

The relevant risk-free forward interest-rate structure is an indicator of the pure time value of money used to price the set of projected cash flows.

The relevant structure of risk-free interest rate was obtained from the curve of securities deemed to be credit risk free, available in the Brazilian financial market and determined pursuant to an internal policy of ITAÚ UNIBANCO HOLDING, considering the addition of spread, which took into account the impact of the market result of Financial assets at amortized cost of the guarantee assets portfolio.

Income conversion rate

The income conversion rate represents the expected conversion of balances accumulated by participants in retirement benefits. The decision of conversion into income by participants is influenced by behavioral, economic and tax factors.

Other assumptions

Related expenses, cancellations and partial redemptions, future increases and contributions, among others, are assumptions that affect the estimate of projected cash flows since they represent expenses and income arising from insurance agreements assumed.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 120

g) Insurance risk – effect of changes on actuarial assumptions

Property insurance is a short-lived insurance, and the main actuarial assumptions involved in the management and pricing of the associated risks are claims frequency and severity. Volatility above the expected number of claims and/or amount of claim indemnities may result in unexpected losses.

Life insurance and pension plans are, in general, medium or long-lived products and the main risks involved in the business may be classified as biometric risk, financial risk and behavioral risk.

Biometric risk relates to: i) more than expected increase in life expectancies for products with survivorship coverage (mostly pension plans); ii) more than expected decrease in mortality rates for products with survivorship coverage (mostly life insurance).

Products offering financial guarantee predetermined under contract involve financial risk inherent in the underwriting risk, with such risk being considered insurance risk.

Behavioral risk relates to a more than expected increase in the rates of conversion into annuity income, resulting in increased payments of retirement benefits.

The estimated actuarial assumptions are based on the historical evaluation of ITAÚ UNIBANCO HOLDING, on benchmarks and the experience of the actuaries.

To measure the effects of changes in the key actuarial assumptions, sensitivity tests were conducted in the amounts of current estimates of future liability cash flows. The sensitivity analysis considers a vision of the impacts caused by changes in assumptions, which could affect the income for the period and stockholders’ equity at the balance sheet date. This type of analysis is usually conducted under the ceteris paribus condition, in which the sensitivity of a system is measured when one variable of interest is changed and all the others remain unchanged. The results obtained are shown in the table below:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 121

The sensitivity analysis considers a vision of the impacts caused by changes in assumptions, which could affect the income for the period and stockholders’ equity at the balance sheet date.

Results were as follows:

	Impact in Results and Stockholders’ Equity (1)
	06/30/2018									12/31/2017
	Supplementary			Insurance						Supplementary			Insurance
	Retirement Plans and			Gross of			Net of			Retirement Plans and			Gross of			Net of
Sensitivity analysis	Life with Living Benefits			reinsurance			reinsurance			Life with Living Benefits			reinsurance			reinsurance
5% increase in mortality rates		21			2			2			24			-			-
5% decrease in mortality rates		(22	)		(2	)		(2	)		(25	)		(1	)		(1	)
0.1% increase in risk-free interest rates		29			7			7			26			5			5
0.1% decrease in risk-free interest rates		(29	)		(7	)		(7	)		(27	)		(5	)		(5	)
5% increase in conversion in income rates		(11	)		-			-			(13	)		-			-
5% decrease in conversion in income rates		11			-			-			13			-			-
5% increase in claims		-			(37	)		(38	)		-			(37	)		(36	)
5% decrease in  claims		-			38			39			-			37			36

(1) Amounts net of tax effects.

h) Risks of insurance and private pension

ITAÚ UNIBANCO HOLDING has specific committees to define the management of funds from the technical reserves for insurance and private pension, issue guidelines for managing these funds with the objective of achieving long term return, and define evaluation models, risk limits and strategies on allocation of funds to defined financial assets. Such committees are comprised not only of executives and those directly responsible for the business management process, but also for an equal number of professionals that head up or coordinate the commercial and financial areas.

At June 30, 2017, the DPVAT production results from the participation that the insurance companies of ITAÚ UNIBANCO HOLDING have in the Seguradora Líder dos Consórcios de DPVAT.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 122

There is no product concentration in relation to insurance premiums, reducing the concentration risk of products and distribution channels.

	04/01 to 06/30/2018						04/01 to 06/30/2017						01/01 to 06/30/2018						01/01 to 06/30/2017
	Insurance		Retained		Retention		Insurance		Retained		Retention		Insurance		Retained		Retention		Insurance		Retained		Retention
	premiums		premium		(%)		premiums		premium		(%)		premiums		premium		(%)		premiums		premium		(%)
Property and casualty
Mandatory personal injury caused by motor vehicle (DPVAT)		-		-		0.0		6		6		100.0		-		-		0.0		16		16		100.0
Extended warranty		-		-		0.0		-		-		0.0		-		-		0.0		-		-		0.0
Individuals
Group accident insurance		158		158		100.0		170		169		99.4		309		308		99.7		336		335		99.8
Individual accident		90		90		100.0		69		68		98.6		162		168		103.7		128		127		99.5
Credit life		220		218		99.1		144		142		98.6		430		428		99.5		285		283		99.4
Group life		246		245		99.6		248		242		97.6		471		476		101.1		561		552		98.4

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 123

i) Insurance, pension plan and capitalization management structure

The products that make up the portfolios of ITAÚ UNIBANCO HOLDING’s insurance companies are related to the life insurance and elementary, pension plan and capitalization lines. The main risks inherent in these products are described below and their definitions are presented in their respective chapters.

· Underwriting risk: possibility of losses arising from insurance, pension plan and capitalization operations contrary to the institution’s expectations, directly or indirectly associated with technical and actuarial bases adopted to calculate premiums, contributions and provisions;

· Market risk;

· Credit risk;

· Operational risk;

· Liquidity risk in insurance operations.

j) Duties and responsibilities

In line with good national and international practices, ITAÚ UNIBANCO HOLDING has a risk management structure that ensures that the risks arising from insurance, pension plan and capitalization products are properly reported to the proper bodies.

The management process of insurance, pension plan and capitalization risks is independent and focused on the specifics of each risk.

Finally, ITAÚ UNIBANCO HOLDING is to ensure that assets backing long-term products, with guaranteed minimum returns, are managed according to the characteristics of the liabilities aiming at actuarial balance and long-term solvency.

k) Market, credit and liquidity risk

I) Market risk

Market risk is analyzed, in relation to insurance operations, based on the following metrics and sensitivity and loss control measures: Value at Risk (VaR), Losses in Stress Scenarios (Stress Test), Sensitivity (DV01- Delta Variation) and Concentration. For a detailed description of metrics, see Note 36 – Market risk. In the table, the sensitivity analysis (DV01 – Delta Variation) is presented in relation to insurance operations that demonstrate the impact on the cash flows market value when submitted to a 1 annual basis point increase in the current interest rates or index rate and 1 percentage point in the share price and currency.

	06/30/2018					12/31/2017
	Account					Account
Class	balance		DV01			balance		DV01
Government securities
NTN-C		5,229		(2.87	)		4,936		(2.87	)
NTN-B		5,562		(6.92	)		5,343		(6.78	)
LTN		-		-			279		(0.09	)
DI Future		-		-			-		-
Private securities
Indexed to IPCA		364		(0.09	)		336		(0.10	)
Indexed to PRE		26		-			31		-
Shares		-					-		-
Floating assets		4,587					5,132
Under agreements to resell		6,082					6,856

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 124

II) Liquidity Risk

Liquidity risk is the risk that ITAÚ UNIBANCO HOLDING may have insufficient net funds available to honor its current obligations at a given moment. The liquidity risk is managed, for insurance operation, continuously based on the monitoring of payment flows related to its liabilities vis a vis the inflows generated by its operations and financial assets portfolio.

Financial assets are managed in order to optimize the risk-return ratio of investments, considering, on a careful basis, the characteristics of their liabilities. The risk integrated control considers the concentration limits by issuer and credit risk, sensitivities and market risk limits and control over asset liquidity risk. Thus, investments are concentrated in government and private securities with good credit quality in active and liquid markets, keeping a considerable amount invested in short-term assets, available on demand, to cover regular needs and any liquidity contingencies. Additionally, ITAÚ UNIBANCO HOLDING constantly monitors the solvency conditions of its insurance operations.

		06/30/2018						12/31/2017
		Liabilities		Liabilities		Assets		Liabilities		Liabilities		Assets
Liabilities	Assets	amounts (1)		DU (2)		DU (2)		amounts (1)		DU (2)		DU (2)
Insurance operations	Backing asset
Unearned premiums	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		1,993		55.6		13.0		1,882		24.7		12.0
IBNR, PDR e PSL	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		922		48.0		18.0		985		20.4		18.3
Other provisions	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		661		84.4		22.6		565		70.6		26.2
Subtotal	Subtotal		3,576						3,432
Pension plan, VGBL and individual life operations
Related expenses	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		99		119.7		74.9		95		116.8		78.9
Unearned premiums	LFT, repurchase agreements, NTN-B, CDB and debentures		14		-		9.1		16		-		9.7
Unsettled claims	LFT, repurchase agreements, NTN-B, CDB and debentures		47		-		9.3		37		-		9.8
IBNR	LFT, repurchase agreements, NTN-B, CDB and debentures		26		15.8		9.1		28		17.0		9.7
Redemptions and Other Unsettled Amounts	LFT, repurchase agreements, NTN-B, CDB and debentures		312		-		9.2		275		-		9.8
Mathematical reserve for benefits granted	LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures		2,557		119.7		75.0		2,404		116.8		79.1
Mathematical reserve for benefits to be granted – PGBL/ VGBL	LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures (3)		176,822		191.0		35.1		169,149		197.2		38.9
Mathematical reserve for benefits to be granted – traditional	LFT, repurchase agreements, NTN-B, NTN-C, debentures		4,674		199.5		86.5		4,454		-		95.1
Other provisions	LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures		775		199.5		86.5		737		116.8		95.1
Financial surplus	LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures		591		199.2		86.3		605		116.8		95.0
Subtotal	Subtotal		185,917						177,800
Total technical reserves	Total backing assets		189,493						181,232

(1) Gross amounts of Credit Rights, Escrow Deposits and Reinsurance.

(2) DU = Duration in months.

(3) Excluding PGBL / VGBL reserves allocated in variable income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 125

III) Credit Risk

Reinsurers – Breakdown

We present below the division of risks granted by the ITAÚ UNIBANCO HOLDING’s insurance companies to reinsurance companies:

- Insurance Operations: reinsurance premiums operations are basically represented by: IRB Brasil Resseguros with 24.35% (45.07% at 12/31/2017) and Munich Re do Brasil with 93.78% (53.80% at 12/31/2017).

- Social Security Operations: social security operations related to reinsurance premiums are entirely represented by Munich Re do Brasil with 70% (70% at 12/31/2017) and General Reinsurance AG with 30% (30% at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 126

IV) Risk level of financial assets

The table below shows insurance financial assets, individually evaluated, classified by rating:

	06/30/2018
			Financial assets
			held for trading
	Financial instruments		and designated at
	designated at fair value through		fair value through		Derivatives		Financial Assets at
Internal rating (*)	profit or loss		profit or loss		assets		Amortized Cost		Total
Lower risk		6,412		168,316		153		27,901		202,782
Satisfactory		-		1		-		-		1
Higher Risk		-		62		-		-		62
Total		6,412		168,379		153		27,901		202,845
%		3.2		83.0		0.1		13.7		100.0

(*) Internal risk level ratings, with due associated probability of default, are detailed in Note 36.

	12/31/2017
			Financial assets
	Financial instruments designated at fair value through		held for trading and designated at fair value through		Derivatives		Financial Assets at
Internal rating (*)	profit or loss		profit or loss		assets		Amortized Cost		Total
Lower risk		7,558		167,812		194		27,719		203,283
Satisfactory		-		4		-		-		4
Higher Risk		-		25		-		-		25
Total		7,558		167,841		194		27,719		203,312
%		3.7		82.6		0.1		13.6		100.0

(*) Internal risk level ratings, with due associated probability of default, are detailed in Note 36.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 127

l) Reinsurance

Expenses and revenues from reinsurance premiums ceded are recognized in the period when they occur, according to the accrual basis, with no offset of assets and liabilities related to reinsurance except in the event there is a contractual provision for the offset of accounts between the parties. Analyses of reinsurance required are made to meet the current needs of ITAÚ UNIBANCO HOLDING, maintaining the necessary flexibility to comply with changes in management strategy in response to the various scenarios to which it may exposed.

Reinsurance assets

Reinsurance assets are valued according to consistent basis of risk assignment contracts, and in the event of losses effectively paid, as from December 2015, they are revalued after 180 days have elapsed in relation to the possibility of non-recovery. For previous periods, revaluation term is 365 days. This amendment was for compliance with the SUSEP Circular in force. In case of doubt, these assets are reduced based on the provision recognized for credit risk associated to reinsurance.

Reinsurance transferred

ITAÚ UNIBANCO HOLDING transfers, in the normal course of its businesses, reinsurance premiums to cover losses on underwriting risks to its policy holders and is in compliance with the operational limits established by the regulating authority. In addition to proportional contracts, non-proportional contracts are also entered into in order to transfer a portion of the responsibility to the reinsurance company for losses that exceed a certain level of losses in the portfolio.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 128

I- Changes in balances of transactions with reinsurance companies

	Credits						Debits
	06/30/2018			12/31/2017			06/30/2018			12/31/2017
Opening balance		27			46			49			74
Issued contracts		-			-			2			30
Recoverable claims		11			-			-			-
Prepayments / payments to reinsurer		(2	)		(10	)		(18	)		(55	)
Other increase / reversal		(22	)		(9	)		(19	)		-
Closing balance		14			27			14			49

II – Balances of technical reserves with reinsurance assets

	06/30/2018		12/31/2017
Reinsurance claims		43		57
Reinsurance premiums		8		10
Closing balance		51		67

III – Changes in balances of technical reserves for reinsurance claims

	06/30/2018			12/31/2017
Opening balance		57			52
Reported claims		11			21
Paid claims		(20	)		(22	)
Other increase / reversal		(6	)		2
Monetary adjustment and interest of claims		1			4
Closing balance (*)		43			57

(*) Includes Reserve for unsettled claims, IBNER (Reserve for claims not sufficiently warned), IBNR (Reserve for claims incurred but not reported), not covered by the table of loss development net of reinsurance Note 30 eII.

IV – Changes in balances of technical reserves for reinsurance premiums

	06/30/2018			12/31/2017
Opening balance		10			15
Receipts		14			8
Payments		(16	)		(13	)
Closing balance		8			10

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 129

m) Regulatory authorities

Insurance and private pension operations are regulated by the National Council of Private Insurance (CNSP) and the Superintendence of Private Insurance (SUSEP). These authorities are responsible for regulating the market and consequently for assisting in the mitigation of risks inherent in the business.

The CNSP is the regulatory authority of insurance activities in Brazil, created by Decree-Law N° 73, of November 21, 1966. The main attribution of CNSP, at the time of its creation, was to set out the guidelines and rules of government policy on private insurance segments, and with the enactment of Law N° 6,435, of July 15, 1977, its attributions included private pension of public companies.

The Superintendence of Private Insurance (SUSEP) is the authority responsible for controlling and overseeing the insurance, and reinsurance markets. An agency of the Ministry of Finance, it was created by the Decree-Law N° 73, of November 21, 1966, which also created the National System of Private Insurance, comprising the National Council of Private Insurance (CNSP), IRB Brasil Resseguros S.A. – IRB Brasil Re, the companies authorized to have plans and the open-ended private pension companies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 130

Note 31 – Fair value of financial instruments

In cases where market prices are not available, fair values are based on estimates using discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions adopted, including the discount rate and estimate of future cash flows. The estimated fair value achieved through these techniques cannot be substantiated by comparison with independent markets and, in many cases, it cannot be realized in the immediate settlement of the instrument.

The following table summarizes the carrying and estimated fair values for financial instruments:

	06/30/2018						12/31/2017
	Carrying value			Estimated fair value			Carrying value			Estimated fair value
Cash deposits on demand		25,402			25,402			18,749			18,749
Financial assets		1,354,005			1,359,772			1,330,251			1,337,921
Central Bank compulsory deposits		84,800			84,800			98,837			98,837
At Amortized Cost		936,306			942,073			905,729			913,399
Interbank deposits		23,737			23,792			29,048			29,112
Securities purchased under agreements to resell		254,697			254,697			244,707			244,707
Securities (*)		108,554			109,372			111,424			112,656
Loan operations and lease operations portfolio (**)		522,492			527,386			497,719			504,093
(-) Provision for Expected Loss		62,953			62,953			59,568			59,568
Other financial assets		(36,127	)		(36,127	)		(36,737	)		(36,737	)
At Fair Value Through Other Comprehensive Income		52,732			52,732			52,149			52,149
Securities		52,732			52,732			52,149			52,149
At Fair Value Through Profit or Loss (*)		280,167			280,167			273,536			273,536
Securities		252,447			252,447			250,693			250,693
Derivatives (*)		27,720			27,720			22,843			22,843
Financial liabilities		1,082,070			1,081,632			1,056,717			1,054,981
At Amortized Cost		1,044,367			1,043,929			1,024,584			1,022,848
Deposits		426,595			426,563			402,938			402,911
Securities sold under repurchase agreements		302,527			302,527			312,634			312,634
Interbank market debt		133,637			133,347			129,616			129,286
Institutional market debt		101,518			101,402			98,482			97,103
Liabilities for capitalization plans		3,336			3,336			3,301			3,301
Other financial liabilities		76,754			76,754			77,613			77,613
At Fair Value Through Profit or Loss		32,676			32,676			27,211			27,211
Derivatives (*)		32,436			32,436			26,746			26,746
Others (*)		240			240			465			465
Provision for Expected Loss		5,027			5,027			4,922			4,922
Loan Commitments		3,160			3,160			3,015			3,015
Financial Guarantees		1,867			1,867			1,907			1,907

(*) These assets and liabilities are recorded in the balance sheet at their fair value.

(**) In the composition of balance there are operations designated at fair value through profit or loss, in the amount of R$ 644 (R$ 102 at 12/31/2017).

Financial instruments not included in the Balance Sheet (Note 36) are represented by Standby letters of credit and financial guarantees provided, which amount to R$ 80,425 (R$ 79,703 at 12/31/2017) with an estimated fair value of R$ 1,174 (R$ 935 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 131

The methods and assumptions adopted to estimate the fair value are defined below:

a) Cash and deposits on demand, Central Bank compulsory deposits, Securities purchased under agreements to resell, Securities sold under repurchase agreements and liabilities for capitalization plans – The carrying amounts for these instruments approximate their fair values.

b) Interbank deposits, deposits, Interbank market debt and Institutional market debt – ITAÚ UNIBANCO HOLDING estimates the fair values by discounting the estimated cash flows and adopting the market interest rates.

c) Financial assets held for trading, including Derivatives (assets and liabilities), Fair value through other comprehensive income, Financial Assets at Amortized Cost and Financial liabilities held for trading – Under normal conditions, market prices are the best indicators of the fair values of financial instruments. However, not all instruments have liquidity or quoted market prices and, in such cases, the adoption of present value estimates and other pricing techniques are required. In the absence of quoted prices from National Association of Financial Market Institutions (ANBIMA), the fair values of bonds are calculated based on the interest rates provided by others on the market (brokers). The fair values of corporate debt securities are computed by adopting criteria similar to those applied to interbank deposits, as described above. The fair values of shares are computed based on their prices quoted in the market. The fair values of derivative financial instruments were determined as follows:

· Swaps: The cash flows are discounted to present value based on yield curves that reflect the appropriate risk factors. These yield curves may be drawn mainly based on the exchange price of derivatives at B3, of Brazilian government securities in the secondary market or derivatives and securities traded abroad. These yield curves may be used to obtain the fair value of currency swaps, interest rate swaps and swaps based on other risk factors (commodities, stock exchange indices, etc.).

· Futures and forwards: Quotations on exchanges or criteria identical to those applied to swaps.

· Options: The fair values are determined based on mathematical models (such as Black&Scholes) that are fed with implicit volatility data, interest rate yield curve and fair value of the underlying asset. Current market prices of options are used to compute the implicit volatilities. All these data are obtained from different sources (usually Bloomberg).

· Credit: Inversely related to the probability of default (PD) in a financial instrument subject to credit risk. The process of adjusting the market price of these spreads is based on the differences between the yield curves with no risk and the yield curves adjusted for credit risk.

d) Loan operations and lease operations – Fair value is estimated based on groups of loans with similar financial and risk characteristics, using valuation models. The fair value of fixed-rate loans was determined by discounting estimated cash flows, applying current interest rates for similar loans. For the majority of loans at floating rate, the carrying amount was considered close to their fair value. The fair value of loan and lease operations not overdue was calculated by discounting the expected payments of principal and interest through maturity, at the aforementioned rates. The fair value of overdue loan and lease transactions was based on the discount of estimated cash flows, using a rate proportional to the risk associated with the estimated cash flows, or on the underlying collateral. The assumptions related to cash flows and discount rates are determined using information available in the market and the borrower’s specific information of the debtor.

e) Deposits – The fair value of fixed-rate loans with maturity dates was determined by discounting estimated cash flows, applying current interest rates for similar funding operations. Cash deposits are not considered in the fair value estimate. The assumptions related to cash flows and discount rates are determined based on information available in the market and information specific for each operation.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 132

f) Other financial assets / liabilities – primarily composed of receivables from credit card issuers, deposits in guarantee for contingent liabilities and trading and intermediation of securities. The carrying amounts for these assets/liabilities substantially approximate their fair values, since they principally represent amounts to be received in the short term from credit card holders and to be paid to credit card acquirers, judicially required deposits (indexed to market rates) made by ITAÚ UNIBANCO HOLDING as guarantees for lawsuits or very short-term receivables (generally with a maturity of approximately 5 (five) business days). All of these items represent assets / liabilities without significant associated market, credit and liquidity risks.

In accordance with IFRS, ITAÚ UNIBANCO HOLDING classifies fair value measurements in a fair value hierarchy that reflects the significance of inputs adopted in the measurement process.

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is a market in which transactions for the asset or liability being measured occur often enough and with sufficient volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 generally includes: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or quoted prices vary substantially either over time or among market makers, or in which little information is released publicly; (iii) inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, etc.); (iv) inputs that are mainly derived from or corroborated by observable market data through correlation or by other means.

Level 3: Inputs are unobservable for the asset or liability. Unobservable information shall be used to measure fair value to the extent that observable information is not available, thus allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Financial assets at fair value through profit or loss and at fair value through other comprehensive income:

Level 1: Highly-liquid securities with prices available in an active market are classified in Level 1 of the fair value hierarchy. This classification level includes most of the Brazilian Government Securities, securities of foreign governments, shares and debentures traded on stock exchanges and other securities traded in an active market.

Level 2: When the pricing information is not available for a specific security, the assessment is usually based on prices quoted in the market for similar instruments, pricing information obtained for pricing services, such as Bloomberg, Reuters and brokers (only when the prices represent actual transactions) or discounted cash flows, which use information for assets actively traded in an active market. These securities are classified into Level 2 of the fair value hierarchy and are comprised of certain Brazilian government securities, debentures, some government securities quoted in a less-liquid market in relation to those classified into Level 1, and some share prices in investment funds. ITAÚ UNIBANCO HOLDING does not hold positions in alternative investment funds or private equity funds.

Level 3: When no pricing information in an active market, ITAÚ UNIBANCO HOLDING uses internally developed models, from curves generated according to the proprietary model. The Level 3 classification includes some Brazilian government and private securities falling due after 2025 and securities that are not usually traded in an active market.

Derivatives:

Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 133

Level 2: For derivatives not traded on stock exchanges, ITAÚ UNIBANCO HOLDING estimates the fair value by adopting a variety of techniques, such as Black&Scholes, Garman & Kohlhagen, Monte Carlo or even the discounted cash flow models usually adopted in the financial market. Derivatives included in Level 2 are credit default swaps, cross currency swaps, interest rate swaps, plain vanilla options, certain forwards and generally all swaps. All models adopted by ITAÚ UNIBANCO HOLDING are widely accepted in the financial services industry and reflect all derivative contractual terms. Considering that many of these models do not require a high level of subjectivity, since the methodologies adopted in the models do not require major decisions and information for the model are readily observed in the actively quotation markets, these products were classified in Level 2 of the measurement hierarchy.

Level 3: The derivatives with fair values based on non-observable information in an active market were classified into Level 3 of the fair value hierarchy, and are comprised of non-standard options, certain swaps indexed to non-observable information, and swaps with other products, such as swap with option and USD Check, credit derivatives and futures of certain commodities. These operations have their pricing derived from a range of volatility using the basis of historical volatility.

All aforementioned valuation methodologies may result in a fair value that may not be indicative of the net realizable value or future fair values. However, ITAÚ UNIBANCO HOLDING believes that all methodologies used are appropriate and consistent with the other market participants. However, the adoption of other methodologies or assumptions different than those used to estimate fair value may result in different fair value estimates at the balance sheet date.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 134

Distribution by level

The following table presents the breakdown of risk levels at 06/30/2018.

	06/30/2018								12/31/2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss		217,143		30,226		2,765		250,134		213,421		31,579		3,947		248,947
Investment funds		685		1,797		-		2,482		1,738		1,775		-		3,513
Brazilian government securities		209,524		3,079		1		212,604		205,027		2,816		1		207,844
Government securities – other countries		836		417		-		1,253		1,643		2,306		-		3,949
Argentina		472		-		-		472		1,466		-		-		1,466
Chile		203		70		-		273		39		18		-		57
Colombia		-		234		-		234		-		2,092		-		2,092
United States		116		-		-		116		100		-		-		100
Mexico		33		-		-		33		5		-		-		5
Paraguay		-		1		-		1		-		3		-		3
Peru		12		-		-		12		-		-		-		-
Uruguay		-		112		-		112		-		193		-		193
Other		-		-		-		-		33		-		-		33
Corporate securities		6,098		24,933		2,764		33,795		5,013		24,682		3,946		33,641
Shares		4,842		941		1,122		6,905		3,875		65		2,019		5,959
Bank deposit certificates		1		1,131		-		1,132		1		334		-		335
Securitized real estate loans		-		-		1,538		1,538		-		-		1,795		1,795
Debentures		422		2,434		69		2,925		486		2,608		122		3,216
Eurobonds and others		833		23		-		856		651		37		-		688
Financial credit bills		-		20,111		-		20,111		-		21,170		-		21,170
Promissory notes		-		233		-		233		-		391		-		391
Other		-		60		35		95		-		77		10		87
Financial assets at fair value through other comprehensive income		32,193		20,539		-		52,732		35,234		16,915		-		52,149
Brazilian government securities		28,898		765		-		29,663		32,218		708		-		32,926
Government securities – other countries		1,989		18,987		-		20,976		1,550		14,992		-		16,542
Chile		-		9,365		-		9,365		-		9,550		-		9,550
Colombia		-		7,207		-		7,207		-		3,020		-		3,020
United States		1,989		-		-		1,989		1,550		-		-		1,550
Paraguay		-		1,581		-		1,581		-		1,800		-		1,800
Uruguay		-		834		-		834		-		622		-		622
Corporate securities		1,306		787		-		2,093		1,466		1,215		-		2,681
Shares		171		-		-		171		148		-		-		148
Bank deposit certificates		-		232		-		232		-		685		-		685
Debentures		-		2		-		2		-		1		-		1
Eurobonds and others		1,135		553		-		1,688		1,318		529		-		1,847
Financial assets at fair value through profit or loss		2,313		-		-		2,313		1,746		-		-		1,746
Brazilian government securities		2,313		-		-		2,313		1,746		-		-		1,746
Financial liabilities designated at fair value through profit or loss		-		240		-		240		-		465		-		465
Structured notes		-		240		-		240		-		465		-		465

The following table presents the breakdown of risk levels at 06/30/2018 for our derivative assets and liabilities.

	06/30/2018												12/31/2017
	Level 1			Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
Derivatives - assets		429			27,162			129			27,720			158		22,249			436			22,843
Futures		-			-			-			-			158		-			-			158
Swap – differential receivable		-			10,725			43			10,768			-		8,821			369			9,190
Options		-			5,293			86			5,379			-		3,271			66			3,337
Forwards (onshore)		-			6,020			-			6,020			-		6,911			-			6,911
Credit derivatives		-			145			-			145			-		137			-			137
Forwards (offshore)		-			4,682			-			4,682			-		2,950			-			2,950
Check of swap		-			68			-			68			-		68			-			68
Other derivatives		429			229			-			658			-		91			1			92
Derivatives - liabilities		(7	)		(32,362	)		(67	)		(32,436	)		-		(26,643	)		(103	)		(26,746	)
Swap – differential payable		-			(16,449	)		(44	)		(16,493	)		-		(13,590	)		(102	)		(13,692	)
Options		-			(4,955	)		(23	)		(4,978	)		-		(2,792	)		(1	)		(2,793	)
Forwards (onshore)		-			(5,633	)		-			(5,633	)		-		(6,272	)		-			(6,272	)
Credit derivatives		-			(139	)		-			(139	)		-		(58	)		-			(58	)
Forwards (offshore)		-			(5,046	)		-			(5,046	)		-		(3,745	)		-			(3,745	)
Check of swap		-			(75	)		-			(75	)		-		(122	)		-			(122	)
Other derivatives		(7	)		(65	)		-			(72	)		-		(64	)		-			(64	)

There were no significant transfer between Level 1 and Level 2 during the period from June 30, 2018. Transfers to and from Level 3 are presented in movements of Level 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 135

Measurement of fair value Level 2 based on pricing services and brokers

When pricing information is not available for securities classified as Level 2, pricing services, such as Bloomberg or brokers, are used to value such instruments.

In all cases, to assure that the fair value of these instruments is properly classified as Level 2, internal analysis of the information received are conducted, so as to understand the nature of the input used in the establishment of such values by the service provider.

Prices provided by pricing services that meet the following requirements are considered Level 2: input is immediately available, regularly distributed, provided by sources actively involved in significant markets and it is not proprietary.

Of the total of R$ 50,765 in financial instruments classified as Level 2, at June 30, 2018, pricing service or brokers were used to evaluate securities at the fair value of R$ 22,413, substantially represented by:

· Debentures: When available, we use price information for transactions recorded in the Brazilian Debenture System (SND), an electronic platform operated by CETIP, which provides multiple services for transactions involving debentures in the secondary market. Alternatively, prices of debentures provided by ANBIMA are used. Its methodology includes obtaining, on a daily basis, illustration and non-binding prices from a group of market players deemed to be significant. Such information is subject to statistical filters established in the methodology, with the purpose of eliminating outliers.

· Global and corporate securities: The pricing process for these securities consists in capturing from 2 to 8 quotes from Bloomberg, depending on the asset. The methodology consists in comparing the highest purchase prices and the lowest sale prices of trades provided by Bloomberg for the last day of the month. Such prices are compared with information from purchase orders that the Institutional Treasury of ITAÚ UNIBANCO HOLDING provides for Bloomberg. Should the difference between them be lower than 0.5%, the average price of Bloomberg is used. Should it be higher than 0.5% or if the Institutional Treasury does not provide information on this specific security, the average price gathered directly from other banks is used. The price of the Institutional Treasury is used as a reference only and never in the computation of the final price.

Level 3 recurring fair value measurements

The departments in charge of defining and applying the pricing models are segregated from the business areas. The models are documented, submitted to validation by an independent area and approved by a specific committee. The daily process of price capture, calculation and disclosure are periodically checked according to formally defined testing and criteria and the information is stored in a single and corporate history data base.

The most recurring cases of assets classified as Level 3 are justified by the discount factors used. Factors such as the fixed interest curve in Brazilian Reais and the TR coupon curve – and, as a result, its related factors – have inputs with terms shorter than the maturities of these fixed-income assets. For swaps, the analysis is carried out by index for both parties. There are some cases in which the inputs periods are shorter than the maturity of the derivative.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 136

Level 3 recurring fair value changes

The tables below show the changes in balance sheet for financial instruments classified by ITAÚ UNIBANCO HOLDING in Level 3 of the fair value hierarchy. Derivative financial instruments classified in Level 3 correspond to other derivatives indexed to shares.

	Fair value at 12/31/2017		Total gains or losses (realized / unrealized)			Purchases		Settlements			Transfers in and / or out of Level 3			Fair value at 06/30/2018		Total gains (losses) related to assets and liabilities still held at  06/30/2018
Financial assets designated at fair value		3,947		(389	)		5		(242	)		(556	)		2,765		(553	)
Brazilian government securities		1		-			-		-			-			1		-
Corporate securities		3,946		(389	)		5		(242	)		(556	)		2,764		(553	)
Shares		2,019		(112	)		-		(203	)		(582	)		1,122		(388	)
Securitized real estate loans		1,795		(229	)		5		(39	)		6			1,538		(9	)
Debentures		122		(47	)		-		-			(6	)		69		(156	)
Other		10		(1	)		-		-			26			35		-

	Fair value at 12/31/2017			Total gains or losses (realized / unrealized)			Purchases			Settlements			Transfers in and / or out of Level 3			Fair value at 06/30/2018			Total gains (losses) related to assets and liabilities still held at  06/30/2018
Derivatives - assets		436			(14	)		98			(120	)		(270	)		129			2
Swap – differential receivable		369			(23	)		-			(31	)		(272	)		43			14
Options		66			9			98			(89	)		2			86			(12	)
Other derivatives		1			-			-			-			-			-			-
Derivatives - liabilities		(103	)		(18	)		(46	)		79			21			(67	)		(7	)
Swap – differential payable		(102	)		(36	)		-			73			21			(44	)		(6	)
Options		(1	)		18			(46	)		6			-			(23	)		(1	)

	Fair value at 01/01/2017		Total gains or losses (realized / unrealized)			Purchases		Settlements			Transfers in and / or out of Level 3			Fair value at 12/31/2017		Total gains (losses) related to assets and liabilities still held at 12/31/2017
Financial assets designated at fair value through profit or loss		3,808		(232	)		578		(146	)		(61	)		3,947		(412	)
Brazilian government securities		1		-			-		-			-			1		(1	)
Corporate securities		3,807		(232	)		578		(146	)		(61	)		3,946		(411	)
Shares		1,662		122			400		-			(165	)		2,019		(274	)
Securitized real estate loans		2,092		(355	)		58		-			-			1,795		16
Debentures		37		(1	)		106		(124	)		104			122		(153	)
Eurobonds and others		-		-			9		(9	)		-			-		-
Other		16		2			5		(13	)		-			10		-
Financial assets designated at fair value through other comprehensive income		227		-			200		(427	)		-			-		-
Corporate securities		227		-			200		(427	)		-			-		-
Securitized real estate loans		6		-			-		(6	)		-			-		-
Eurobonds and others		221		-			200		(421	)		-			-		-

	Fair value at 01/01/2017			Total gains or losses (realized / unrealized)			Purchases			Settlements			Transfers in and / or out of Level 3			Fair value at 12/31/2017			Total gains (losses) related to assets and liabilities still held at 12/31/2017
Derivatives - Assets		521			(33	)		101			(244	)		91			436			17
Swaps - differential receivable		468			(41	)		-			(100	)		42			369			32
Options		47			12			101			(143	)		49			66			(14	)
Other derivatives		6			(4	)		-			(1	)		-			1			(1	)
Derivatives - Liabilities		(60	)		(117	)		(15	)		111			(22	)		(103	)		(57	)
Swaps - differential payable		(56	)		(122	)		-			97			(21	)		(102	)		(60	)
Options		(4	)		5			(15	)		13			-			(1	)		3
Credit derivatives		-			-			-			1			(1	)		-			-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 137

Sensitivity analyses operations of Level 3

The fair value of financial instruments classified in Level 3 (in which prices negotiated are not easily noticeable in active markets) is measured through assessment techniques based on correlations and associated products traded in active markets, internal estimates and internal models.

Significant unverifiable inputs used for measurement of the fair value of instruments classified in Level 3 are: interest rates, underlying asset prices and volatility. Significant variations in any of these inputs separately may give rise to significant changes in the fair value.

The table below shows the sensitivity of these fair values in scenarios of changes of interest rates, asset prices, or in scenarios vary in prices with shocks and the volatility for non-linear assets:

Sensitivity – Level 3 Operations		06/30/2018
		Impact
					Stockholders'
Risk factor groups	Scenarios	Result			equity
	I		(0.9	)		(0.8	)
Interest rates	II		(23.1	)		(20.2	)
	III		(46.1	)		(40.0	)
Currency, commodities, and ratios	I		(56.1	)		0.0
	II		(112.2	)		0.0
Nonlinear	I		(49.1	)		0.0
	II		(89.0	)		0.0

The following scenarios are used to measure the sensitivity:

Interest rate

Shocks at 1, 25 and 50 basis points (scenarios I, II and III respectively) in the interest curves, both for increase and decrease, considering the largest losses resulting in each scenario.

Currencies, commodities and ratios

Shocks at 5 and 10 percentage points (scenarios I and II respectively) in prices of currencies, commodities and ratios, both for increase and decrease, considering the largest losses resulting in each scenario.

Non linear

Scenario I: Shocks at 5 percentage points in prices and 25 percentage points the level in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

Scenario II: Shocks at 10 percentage points in prices and 25 percentage points the level in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 138

Note 32 – Provisions, contingencies and other commitments

Provision	06/30/2018		12/31/2017
Civil		4,884		5,300
Labor		7,034		7,283
Tax and social security		6,863		7,003
Other		411		150
Total		19,192		19,736
Current		6,430		4,974
Non-current		12,762		14,762

ITAÚ UNIBANCO HOLDING, as a result of the ordinary course of its business, may be a party to legal lawsuits of labor, civil and tax nature. The contingencies related to these lawsuits are 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, taking into consideration the opinion of its legal advisors, the nature of the lawsuits, the similarity with previous lawsuits and the prevailing previous court decisions.

- Civil lawsuits

In general, contingencies arise from claims related to the revision of contracts and compensation for damages and pain and suffering and the lawsuits are classified as follows:

Collective lawsuits: related to claims of a similar nature and with individual amounts that are not considered significant. Contingencies are determined on a monthly basis and the expected amount of losses is accrued according to statistical references that take into account the nature of the lawsuit and the characteristics of the court (Small Claims Court or Regular Court). Contingencies and provisions 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. These are periodically calculated based on the calculation of the amount claimed. Probability of loss, which is estimated based on the characteristics of the lawsuit. The amounts considered as probable losses are recorded as provisions.

It should be mentioned that ITAÚ UNIBANCO HOLDING is a party to specific lawsuits related to the collection of understated inflation adjustments to savings accounts resulting from economic plans implemented in the 80’s and 90’s as a measure to combat inflation.

Although ITAÚ UNIBANCO HOLDING complied with the rules in effect at the time, the company is a defendant in lawsuits filed by individuals that address this topic, as well as in class actions filed by: (i) consumer protection associations; and (ii) the Public Prosecution Office on behalf of savings account holders. With respect to these lawsuits, ITAÚ UNIBANCO HOLDING records provisions when it is served and when the individuals apply to enforce the decision rendered by the Judicial Branch, 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 it has not established its understanding with respect to the constitutionality of the economic plans and their applicability to savings accounts. Currently, the appeals involving these matters are suspended, as determined by the STF, until it pronounces a final decision.

In December 2017, through mediation of the Federal Attorney’s Office (AGU) and supervision of the Central Bank of Brazil (BCB), savers (represented by two civil associations, FEBRAPO and IDEC) and FEBRABAN entered into an instrument of agreement aiming at resolving lawsuits related to economic plans, and Itaú has already adhered to its terms. Said agreement was approved on March 1, 2018, by the Plenary Session of the Federal Supreme Court (STF) and, savers may adhere to their terms for a 24-month period, counted as from May 22, 2018 with the subsequent conclusion of lawsuits.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 139

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$ 3,990 (R$ 3,494 at 12/31/2017), in this amount there are no values resulting from interests in joint ventures.

- Labor claims

Contingencies arise from lawsuits in which labor rights provided for in labor legislation specific to the related profession are discussed, such as: overtime, salary equalization, reinstatement, transfer allowance, pension plan supplement, among others, are discussed. These lawsuits are classified as follows:

Collective lawsuits: related to claims considered similar and with individual amounts that are not considered relevant. The expected amount of loss is determined and accrued on a monthly basis in accordance with a statistical share pricing model and is reassessed taking into account the court rulings. These contingencies are adjusted to the amounts deposited as guarantee for their execution when realized.

Individual lawsuits: related to claims with unusual characteristics or involving significant amounts. These are periodically calculated based on the calculation of the amount claimed. Probability of loss which, in turn, is estimated in accordance with the actual and legal characteristics related to that lawsuit.

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$ 116 (R$ 122 at 12/31/2017).

- Other risks

These are quantified and recorded as provisions mainly based on the evaluation of agribusiness credit transactions with joint obligation and FCVS (Salary Variations Compensation Fund) credits transferred to Banco Nacional.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 140

The table below shows the changes in the balances of provisions for civil, labor and other provision and the respective escrow deposit balances:

	01/01 to 06/30/2018
	Civil			Labor			Other		Total
Opening balance		5,300			7,283			150		12,733
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(243	)		(998	)		-		(1,241	)
Subtotal		5,057			6,285			150		11,492
Interest (Note 26)		60			253			-		313
Changes in the period reflected in results (Note 26)		137			742			261		1,140
Increase (*)		372			838			261		1,471
Reversal		(235	)		(96	)		-		(331	)
Payment		(578	)		(1,229	)		-		(1,807	)
Subtotal		4,676			6,051			411		11,138
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		208			983			-		1,191
Closing balance		4,884			7,034			411		12,329
Escrow deposits at 06/30/2018 (Note 20a)		1,539			2,250			-		3,789

(*) Civil provisions include the provision for economic plans amounting to R$ 176.

	01/01 to 06/30/2017
	Civil			Labor			Other			Total
Opening balance		5,172			7,232			259			12,663
Balance arising from the merger with Corpbanca (Note 3a)		(1	)								(1	)
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(256	)		(1,066	)		-			(1,322	)
Subtotal		4,915			6,166			259			11,340
Interest (Note 26)		64			312			-			376
Changes in the period reflected in results (Note 26)		607			1,077			(13	)		1,671
Increase (*)		839			1,183						2,022
Reversal		(232	)		(106	)		(13	)		(351	)
Payment		(636	)		(1,264	)		-			(1,900	)
Subtotal		4,950			6,291			246			11,487
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		275			1,040			-			1,315
Closing balance		5,225			7,331			246			12,802
Escrow deposits at 06/30/2017 (Note 20a)		1,529			2,289			-			3,818

(*) Civil provisions include the provision for economic plans amounting to R$ 73.

- Tax and social security lawsuits

ITAÚ UNIBANCO HOLDING classify as legal liability the lawsuits filed to discuss the legality and unconstitutionality of the legislation in force, which are the subject matter of 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.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 141

The table below shows the changes in the balances of provisions and respective balance of escrow deposits for tax and social security lawsuits:

	01/01 to			01/01 to
Provision	06/30/2018			06/30/2017
Opening balance		7,003			8,246
(-) Contingencies guaranteed by indemnity clause		(66	)		(69	)
Subtotal		6,937			8,177
Interest (*)		192			385
Changes in the period reflected in results		(55	)		49
Increase (*)		245			254
Reversal (*)		(300	)		(205	)
Payment		(278	)		(12	)
Subtotal		6,796			8,599
(+) Contingencies guaranteed by indemnity clause		67			70
Closing balance		6,863			8,669

(*) The amounts are included in the headings Tax Expenses, General and Administrative Expenses and Current Income Tax and Social Contribution.

	01/01 to			01/01 to
Escrow deposits	06/30/2018			06/30/2017
Opening balance		5,170			4,847
Appropriation of interest		84			174
Changes in the period		(153	)		18
Deposits made		83			136
Withdrawals		(41	)		(117	)
Deposits released		(195	)		(1	)
Closing balance (Note 20a)		5,101			5,039
Reclassification of assets pledged as collateral for contingencies (Note 32d)		(1	)		-
Closing balance after reclassification		5,100			5,039

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 142

Main discussions related to the provisions recognized for Tax and Social Securities Lawsuits are described as follows:

· CSLL – Isonomy – R$ 1,315: discussing the lack of constitutional support for the increase, establishes by Law nº 11,727/08, of the CSLL rate for financial and insurance companies from 9% to 15%. The balance of the deposit in court totals R$ 1,298;

· PIS and COFINS – Calculation basis – R$ 628: defending the levy of PIS and COFINS on revenue, a tax on revenue from the sales of assets and services. The balance of the deposit in court totals R$ 606;

· INSS – Non-compensatory amounts – R$ 652: the non-levy of social security contribution on amounts paid as profit sharing is defended.

Off-balance sheet contingencies

The amounts involved in tax and social security lawsuits for which the likelihood of loss is possible are not recognized as a provision. The estimated amounts at risk in the principal tax and social security lawsuits with a likelihood of loss deemed possible, which total R$ 21,606, are described below:

· INSS – Non-compensatory amounts – R$ 5,115: defends the non-levy of this contribution on these amounts, among which are profit sharing, stock options, transportation vouchers and sole bonuses;

· PIS and COFINS - Reversal of Revenues from Depreciation in Excess – R$ 3,570: discussing the accounting and tax treatment granted to PIS and COFINS upon settlement of leasing operations;

· IRPJ and CSLL – Goodwill – Deduction – R$ 2,630: the deductibility of goodwill with future expected profitability on the acquisition of investments;

· IRPJ, CSLL, PIS and COFINS – Requests for offsetting dismissed - R$ 1,671: cases in which the liquidity and the ability of offset credits are discussed;

· IRPJ and CSLL – Interest on capital – R$ 1,486: 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$ 1,122: 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 Decree Law No. 406/68;

· IRPJ and CSLL – Deductibility of Losses in Credit Operations – R$ 749 – Assessments to require the payment of IRPJ and CSLL due to the alleged non-observance of the legal criteria for the deduction of losses upon the receipt of credits.

c) Receivables - Reimbursement of contingencies

The Receivables balance arising from reimbursements of contingencies totals R$ 1,038 (R$ 1,065 at 12/31/2017) (Note 20a). This value is derived basically from the guarantee in the privatization process of the Banco Banerj S.A. which occurred 1997, where the State of Rio de Janeiro created a fund to guarantee civil, labor and tax contingencies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 143

d) Assets pledged as collateral for contingencies

Assets pledged as collateral for contingencies refer to lawsuits involving contingent liabilities and are restricted or in escrow deposits, as shown in the table below:

	06/30/2018		12/31/2017
Financial assets - at fair value through other comprehensive income (basically financial treasury bills)		769		962
Escrow deposits (Note 20a)		4,582		4,585

ITAÚ UNIBANCO HOLDING’s litigation provisions are long-term, considering the time required to conclude legal cases through the court system in Brazil, which prevents the disclosure of a deadline for their conclusion.

The legal advisors, believe that ITAÚ UNIBANCO HOLDING is not a party to this or any other administrative proceedings or lawsuits that could significantly affect the results of its operations.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 144

Note 33 – Regulatory capital

ITAÚ UNIBANCO HOLDING is subject to regulation by the Central Bank of Brazil (BACEN), which issues rules and instructions regarding currency and credit policies for financial institutions operating in Brazil. BACEN also determines minimum capital requirements, procedures for verification of information for assessment of the global systemic importance of financial institutions, limits for fixed assets, limits for loans, accounting practices and requirements of compulsory deposits, requiring banks to comply with the regulation based on the Basel Accord on capital adequacy. Additionally, the National Council of Private Insurance (CNSP) and SUSEP issue regulations on capital requirement, which affect our insurance, pension plan and capitalization operations.

a) Capital Requirements in Place and In Progress

ITAÚ UNIBANCO HOLDING’s minimum capital requirements comply with the set of BACEN resolutions and circulars, which established in Brazil the global capital requirement standards known as Basel III. They are expressed as indices obtained from the ratio between available capital - represented by Referential Equity (PR), or Total Capital, composed of Tier I Capital (which comprises Common Equity and Additional Tier I Capital) and Tier II Capital, and the Risk-Weighted Assets (RWA).

The Total Capital, Tier 1 Capital and Principal Capital ratios are calculated on a consolidated basis, applied to entities that are part of Prudential Conglomerate, which comprises not only financial institutions but also consortium administrators, payment institutions, companies that acquire operations or that directly or indirectly assume credit risk, and investment funds in which ITAÚ UNIBANCO HOLDING substantially retains risks and rewards.

For purposes of calculating these minimum capital requirements, the total RWA is determined as the sum of the risk weighted asset amounts for credit, market, and operational risks. ITAÚ UNIBANCO HOLDING uses the standardized approaches to calculate credit and operational risk-weighted asset amounts.

As from September 1, 2016, BACEN authorized ITAÚ UNIBANCO HOLDING to use market risk internal models to determine the total amount of regulatory capital (RWA_MINT), replacing the RWA_MPAD portion, as set forth in BACEN Circular 3,646.

For foreign units, the standardized approach is adopted. Therefore, the internal models are not used for Argentina, Chile, Itaú BBA International, Itaú BBA Colombia, Paraguay, and Uruguay units.

From January 1, 2018 to December 31, 2018, the minimum capital ratio required is 8.625%, and, following the gradual decrease schedule, it will be 8% on January 1, 2019.

In addition to minimum regulatory capital requirements, BACEN rules established the Additional Common Equity (ACP), corresponding to the sum of the portions of ACP_Conservation, ACP_{Countercyclical} and ACP_Systemic, which, in conjunction with the above-mentioned requirements, increase the need for capital over time. The amounts of each one of the portions, as established by CMN Resolution 4,193, are shown in the table below.

Basel III also reformulated the requirements for qualification of instruments eligible for Tier I and Tier II Capital, as regulated in Brazil by CMN Resolution 4,192. This reform includes a phase-out schedule for instruments already considered in capital, issued prior to the effectiveness of the rule, and that do not fully meet the new requirements.

The table below shows the schedule for implementation of Basel III rules in Brazil, as established by BACEN, and the figures refer to the percentage of ITAÚ UNIBANCO HOLDING’s risk-weighted assets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 145

	From January 1,
Basel III Implentation Calendar	2017			2018			2019 (2)
Common Equity Tier I		4.5	%		4.5	%		4.5	%
Tier I		6.0	%		6.0	%		6.0	%
Total Capital		9.25	%		8.625	%		8.0	%
Additional Common Equity Tier I (ACP)		1.50	%		2.375	%		3.5	%
Conservation		1.25	%		1.875	%		2.5	%
Countercyclical(1)		0	%		0	%		0	%
Systemic		0.25	%		0.5	%		1.0	%
Common Equity Tier I + ACP		6.0	%		6.875	%		8.0	%
Total Capital + ACP		10.75	%		11.0	%		11.5	%
Prudential Adjustments Deductions		80	%		100	%		100	%

⁽¹⁾ ACP _{Countercyclical} is triggered during the credit cycle expansion phase, and, currently, according to BACEN Circular 3,769, the amount required for the countercyclical capital is zero. Furthermore, in the event of increase in ACP_{Countercyclical} , the new percentage will be effective only twelve months after it is announced.

(2) Requirements in force as from January 1, 2019.

Additionally, in March 2015, Circular BACEN nº 3,751, of March 19, 2015 came into force, it provides for the calculation of the relevant indicators for assessing the Global Systemically Important Banks (G-SIBs) of financial institutions in Brazil. Information on the values of the G-SIBs indicators, which are not part of its financial statements, can be found at www.itau.com.br/investor-relations, “Corporate Governance” section, “Global Systemically Important Banks”.

In March 2017, Additional Common Equity Tier I Capital of systemic importance (ACP_Systemic) went into effect, regulated by BACEN Circular 3,768, of October 29, 2015. The purpose of ACP_Systemic is to reduce the probability of insolvency of an institution systemically important in the domestic level (D-SIB: Domestic Systemically Important Bank) and the impact on the stability of the financial system and economy. The calculation of ACP_Systemic associates the system importance, represented by the institution’s total exposure, with the Gross Domestic Product (GDP).

Further details on ACPSystemic, which are not part of the financial statements, can be viewed on the website www.itau.com.br/investor-relations, “Corporate Governance” / Risk and Capital Management – Pillar 3.

The Leverage Ratio is defined as the ratio between the Tier I Capital and Total Exposure, calculated as prescribed by BACEN Circular 3,748. The objective of this ratio is to be a simple, risk-insensitive leverage measure. Therefore, it does not take into consideration risk-weighting or mitigation factors. In line with the instructions set out in BACEN Circular 3,706, since October 2015, ITAÚ UNIBANCO HOLDING has reported its Leverage Ratio to BACEN on a monthly basis. However, according to recommendations in Basel III Accord, a minimum Leverage Ratio should be required in 2018, which will be defined based on the period over which the ratio’s behavior was monitored, since its implementation in 2011 up to 2017.

More information on the composition of the Leverage Ratio, which are not part of its financial statements, is available at www.itau.com.br/investors-relations, “Corporate Governance section/Risk and Capital Management – Pillar 3.

b) Capital Management

The Board of Directors is the main body in the management of ITAÚ UNIBANCO HOLDING’s capital and it is responsible for approving the institutional capital management policy and guidelines for the institution’s capitalization level. The Board is also responsible for fully approving the ICAAP report (Internal Capital Adequacy Assessment Process), which is intended to assess the adequacy of ITAÚ UNIBANCO HOLDING’s capital.

At the executive level, corporate bodies are responsible for approving risk assessment and capital calculation methodologies, as well as revising, monitoring and recommending capital-related documents and topics to the Board of Directors.

In order to provide the Board of Directors with necessary information, management reports are prepared to inform on the institution’s capital adequacy, and the projections of capital levels under normal and stress situations. There is a structure that coordinates and consolidates related information and processes, all of them subject to verification by the independent validation, internal controls and audit areas.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 146

The “Public Access Report – Capital Management“, which are not part of its financial statements, which provides the guidelines established in the institutional capital management policy can be accessed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies.

c) Risk appetite

In 2016 ITAÚ UNIBANCO HOLDING revisited its risk appetite policy, established and approved by the Board of Directors, which guides its business strategy. The institute’s risk appetite is based on the following statement issued by the Board of Directors:

“We are a universal bank, operating mostly in Latin America. Supported by our risk culture, we operate within the highest ethical standards and regulatory compliance, seeking increasingly improved results, with low volatility, through an ongoing client relationship, accurate risk pricing, diversified funding and proper use of capital.”

Based on this statement, defined five dimensions, each composed of a series of metrics associated with the main risks involved, by combining supplementary manners of measurement and seeking to reach a comprehensive vision of our exposures:

· Capitalization: establishes that ITAÚ UNIBANCO HOLDING must have capital sufficient to face any serious recession period or a stress event without the need to adjust its capital structure under unfavorable circumstances. It is monitored through the follow-up of ITAÚ UNIBANCO HOLDING’s capital ratios, both in normal and stress scenarios, and of the ratings of the institution's debt issues.

· Liquidity: establishes that the institution’s liquidity must withstand long stress periods. It is monitored through the follow-up of liquidity ratios.

· Composition of results: defines that business will be focused primarily in Latin America, where ITAÚ UNIBANCO HOLDING has a diversified base of clients and products, with low appetite for volatility of results and high risks. This dimension comprises aspects related to business and profitability, and market and credit risks. By adopting exposure concentration limits, such as industry sectors, counterparty quality, countries and geographical regions and risk factors, these monitored metrics seek to ensure the proper composition of our portfolios, aimed at the low volatility of results and business sustainability.

· Operational risk: focuses on the control of operational risk events that may adversely impact the operation and business strategy, and is carried out by monitoring the main operational risk events and incurred losses.

· Reputation: addresses risks that may impact the institution’s brand value and reputation with clients, employees, regulatory bodies, investors and the general public. The risk monitoring in this dimension is carried out by the follow-up of client satisfaction and dissatisfaction and media exposure, in addition to monitoring the institution’s conduct.

The Board of Directors is responsible for approving risk appetite limits and guidelines, performing its duties with the support of the Risk and Capital Management Committee (CGRC) and the Chief Risk Officer (CRO).

These metrics are monitored from time to time and must respect the defined limits. Monitoring is reported to the risk committees and the Board of Directors, and guides preventive measures to ensure that any exposures are within the limits established and in line with our strategy.

d) Composition of capital

The Referential Equity (PR) used to monitor compliance with the operational limits imposed by BACEN is the sum of three items, namely:

- Common Equity Tier I: the sum of capital, reserves and retained earnings, less deductions and prudential adjustments.

- Additional Tier I Capital: consists of instruments of a perpetual nature, which meet eligibility requirements. Together with Common Equity Tier I it makes up Tier I.

- Tier II: consists of subordinated debt instruments with defined maturity dates that meet eligibility requirements. Together with Common Equity Tier I and Additional Tier I Capital, makes up Total Capital.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 147

The table below presents the composition of the referential equity segregated into Common Equity Tier I, Additional Tier I Capital and Tier II Capital, taking into consideration their respective prudential adjustments, as required by current regulations.

Composition of Referential Equity	06/30/2018			12/31/2017
Stockholders’ equity Itaú Unibanco Holding S.A. (Consolidated)		121,758			126,924
Non-controlling Interests		13,166			11,942
Changes in Subsidiaries´ Interests in Capital Transactions		810			1,482
Consolidated Stockholders’ Equity (BACEN)		135,734			140,348
Common Equity Tier I Prudential Adjustments		(25,277	)		(17,952	)
Common Equity Tier I		110,457			122,396
Instruments Eligible to Comprise Additional Tier I		7,664			-
Additional Tier I Prudential Adjustments		82			57
Additional Tier I Capital		7,746			57
Tier I (Common Equity Tier I + Additional Tier I Capital)		118,203			122,453
Instruments Eligible to Comprise Tier II		15,778			19,723
Tier II Prudential Adjustments		91			76
Tier II		15,869			19,799
Referential Equity (Tier I + Tier II)		134,072			142,252

Composition of Prudential Adjustments	06/30/2018			12/31/2017
Goodwill paid on the acquisition of investments		9,059			8,123
Intangible assets		7,937			5,456
Tax credits		5,841			5,208
Added value of net interests in excess of 10% of the capital of financial institutions authorized to operate by BACEN		-			-
Surplus of Common Equity Tier I Capital - Noncontrolling interests		329			286
Adjustments relating to the fair value of derivatives used as cash flow hedge, for hedged
items that do not have their mark-to-market adjustments accounted for		(1,447	)		(1,399	)
Other		3,558			278
Total		25,277			17,952

During 2018, ITAÚ UNIBANCO HOLDING bought back shares in the amount of R$ 510 milion. These shares are recorded in line item “Treasury Shares”, which totaled R$ (1,978) milion as at June 30, 2018. Treasury shares reduce the institution´s Equity, causing its capital base to be decreased.

In this period, the amount of dividends and interest on capital paid / accrued that affected the base of the institution’s capital totaled R$ 16,155 milion. Dividends are deducted from the institution´s Equity, thus reducing the base of its capital. Whereas, interest on capital, which is accounted for as an expense directly in profit (loss), reduces the institution´s net income and, consequently, the base of its capital.

For details on capital requirements, which are not part of its financial statements, are available at www.itau.com.br/investors-relations, Corporate Governance section / Risk and Capital Management – Pillar 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 148

The funds obtained through the issuance of subordinated debt securities are considered Tier II capital for the purpose of capital to risk-weighted assets ratio, as follows. According to current legislation, the accounting balance of subordinated debt as of December 2012 was used for the calculation of reference equity as of June 2018, considering instruments approved after the closing date to compose Tier II, totaling R$ 51,134.

Name of security / currency	Principal amount (original currency)		Issue		Maturity		Return p.a.	Account balance 06/30/2018
Subordinated financial bills - BRL
		2,939		2012		2018	108% to 113% of CDI		3,401
		35					IPCA + 4.4% to 6.58%		64
		1,255					100% of CDI + 1.01% to 1.05%		1,272
		10					10.56%		18
		2		2011		2019	109% to 109.7% of CDI		4
		1		2012		2019	110% of CDI		2
		12					11.96%		25
		101					IPCA + 4.7% to 6.3%		178
		1		2012		2020	111% of CDI		2
		20					IPCA + 6% to 6.17%		42
		6		2011		2021	109.25% to 110.5% of CDI		13
		2,307		2012		2022	IPCA + 5.15% to 5.83%		4,384
		20					IGPM + 4.63%		28
		6,709					Total		9,433
Subordinated euronotes - USD
		990		2010		2020	6.20%		3,860
		1,000		2010		2021	5.75%		3,965
		730		2011		2021	5,75% to 6,20%		2,826
		550		2012		2021	6.20%		2,121
		2,600		2012		2022	5,50% to 5,65%		10,204
		1,851		2012		2023	5.13%		7,172
		7,721					Total		30,148
Total									39,581

Perpetual subordinate notes / Supplementary Capital (AT1), issued on December 12, 2017 and March 19, 2018, were approved by BACEN, increasing by 0.9 p.p. the Tier I Capital index of Itaú Unibanco.

e) Risk-Weighted Assets (RWA)

According to CMN Resolution 4,193, as amended, minimum capital requirements are calculated by the RWA amount, which is obtained by adding the terms listed below:

RWA = RWA_CPAD + RWA_MINT + RWA_OPAD

RWA_CPAD = portion related to exposures to credit risk, calculated using the standardized approach;

RWA_MINT = portion related to capital required for market risk, compose of the maximum between the internal model and 80% of the standardized model, regulated by BACEN Circulars nº 3,646 and 3,674;

RWA_OPAD = portion related to capital required for operational risk, calculated based on the standardized approach.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 149

The table below shows the amounts of risk weighted assets for Credit Risk (RWA_CPAD):

	06/30/2018 (1)		12/31/2017 (1)
Risk exposures
Exposure Weighted by Credit Risk (RWACPAD)		685,245		660,516
a) Per Weighting Factor (FPR):
FPR at 2%		128		180
FPR at 4%		248		-
FPR at 10%		315		-
FPR at 20%		7,338		7,717
FPR at 35%		16,622		15,900
FPR at 50%		48,365		44,741
FPR at 75%		150,817		145,376
FPR at 85%		72,244		76,033
FPR at 100%		331,647		324,097
FPR at 250%		41,422		34,053
FPR at 300%		-		3,906
FPR up to 1250%(2)		2,068		2,096
Derivatives - Changes in the Counterparty Credit Quality		4,766		6,417
Default funds (3)		3		-
Securitization (4)		9,262		-
b) Per Type:		685,245		660,516
Securities		37,930		45,629
Loan Operations - Retail		117,128		114,141
Loan Operations - Non-Retail		256,663		240,815
Joint Liabilities - Retail		149		172
Joint Liabilities - Non-Retail		45,262		45,405
Loan Commitments - Retail		33,499		31,058
Loan Commitments - Non-Retail		10,871		9,017
Derivatives – Future potential gain (5)		4,294		5,457
Agency Transition		2,912		-
Other exposures		176,537		168,821

(1) As from the 4th quarter of 2017, retail business in Brazil of Citibank started to be fully consolidated in the financial statement of Itaú Unibanco.

(2) Considers the application of “F” factor required by article 29th of BACEN Circular 3,644.

(3) As from the 1st quarter of 2018, balances related to Default Funds are being weighted in accordance with the calculation established in Art. 20-A of Circular 3,644 (amended by Circular 3,849), replacing FPR of 1250%.

(4) As from the 1st quarter of 2018, part of the balances related to Securitization are being weighted in accordance with the calculation established in Circular 3,848.

(5) Balances of Derivatives – Future Potential Gain are distributed into their respective FPRs.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 150

We present below the breakdown of Risk-weighted of market risk as follows:

	06/30/2018 (1)			12/31/2017 (1)
Market Risk Weighted Assets - Standard Aproach (RWAMPAD)		31,269			32,893
Operations subject to interest rate variations		28,040			31,076
Fixed rate denominated in Real		3,469			6,119
Foreign currency coupon		18,614			17,153
Price index coupon		5,957			7,804
Interest rate coupon		0.00			0.00
Operations subject to commodity price variation		854			361
Operations subject to stock price variation		355			239
Operations subject to risk exposures in gold, foreign currency and foreign exchange variation		2,019			1,217
Minimum Market Risk Weighted Assets - Standard Aproach		25,015			26,314
Market Risk Weighted Assets calculated based on internal methodology (b)		18,593			32,915
Reduction of Market Risk Weighted Assets due to Internal Models Aproach		(6,254	)		-
Market Risk Weighted Assets (RWAMINT) - maximum of (a) and (b)		25,015			32,915

(1) Market risk weighted-assets calculated based on internal models, with maximum saving possibility of 20% of the standard model.

At June 30, 2018, RWAMINT totaled R$ 25,015, which corresponds to 80% of RWAMPAD, higher than the capital calculated at internal models, which totaled R$ 18,593.

The table below presents the composition of the operational risk weighted assets (RWA^OPAD):

	06/30/2018		12/31/2017
Risk-weighted assets of operational risk (RWAOPAD)		70,467		63,277
Retail		12,789		11,870
Commercial		26,375		24,857
Corporate finance		2,799		2,663
Negotiation and sales		10,014		7,434
Payments and settlement		8,196		7,532
Financial agent services		4,279		3,892
Asset management		5,994		5,010
Retail brokerage		21		18

f) Capital Adequacy Assessment

Upon annually assessing its capital adequacy, ITAÚ UNIBANCO HOLDING adopts the following flow:

- Identification of risks to which the institution is exposed and analysis of their materiality;

- Evaluation of capital requirements for material risks;

- Development of methodologies for quantifying additional capital;

- Quantification and internal capital adequacy evaluation;

- Capital and Contingency Plan;

- Sending the capital adequacy report to BACEN.

Adopting a prospective attitude to manage its capital, ITAÚ UNIBANCO HOLDING implemented its capital management structure and ICAAP, thus complying with CMN Resolution 4,557, BACEN Circular 3,846 and BACEN Circular Letter 3,841.

The result of the last ICAAP – conducted as of December 2017 – indicated that, in addition to capital to face all material risks, ITAÚ UNIBANCO HOLDING has significant capital surplus, thus assuring the institution’s equity soundness.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 151

g) Capital Adequacy

ITAÚ UNIBANCO HOLDING, through the ICAAP, assesses the sufficiency of capital to face its risks, represented by regulatory capital for credit, market and operational risk and capital required to cover the other risks.

In order to ensure the soundness of ITAÚ UNIBANCO HOLDING and the availability of capital to support business growth, ITAÚ UNIBANCO HOLDING maintains PR levels above the minimum level required to face risks, as evidenced by the Common Equity, Tier I Capital and Basel ratios.

Composition of Referential Equity (PR)	06/30/2018		12/31/2017
Tier I		118,203		122,453
Common Equity Tier I		110,457		122,396
Additional Tier I Capital		7,746		57
Tier II		15,869		19,799
Deductions		-		-
Referential Equity		134,072		142,252
Minimum Referential Equity Required		67,338		69,995
Surplus Capital in relation to the Minimum Referential Equity Required		66,734		72,257
Additional Common Equity Tier I Required (ACPRequired)		18,543		11,351
Referential equity calculated for covering the interest rate risk on operations not classified in the trading portfolio (RBAN)		2,388		2,470

The table below shows the Basel and Fixed Asset Ratios:

	06/30/2018			12/31/2017
Basel Ratio		17.2	%		18.8	%
Tier I		15.1	%		16.2	%
Common Equity Tier I		14.1	%		16.2	%
Additional Tier I Capital		1.0	%		0.0	%
Tier II		2.0	%		2.6	%
Fixed Asset Ratio		21.4	%		23.9	%
Surplus Capital in Relation to Fixed Assets		38,332			37,101

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 152

h) Stress testing

The stress test is a process of simulation of extreme economic and market conditions in the institution’s results and capital. The institution has conducted this test since 2010 aiming at assessing its solvency in plausible scenarios of a systemic crisis, as well as at identifying areas that are more susceptible to the impact of stress, and that can be subject to risk mitigation.

To perform the test, macroeconomic variables for each stress scenario are estimated by the economic research department. The scenarios are established considering their relevance to the bank’s result, and the probability of occurrence, and they are submitted to the approval of the Board of Directors on an annual basis.

Projections of macroeconomic variables (GDP, benchmark interest rate and inflation) and of the credit market (fundraising, loans, default rate, spread and fees) for these scenarios are generated based on exogenous shocks or by using models validated by an independent area.

These projections affect the budgeted result and balance sheet that then change the risk-weighted assets and capital and liquidity ratios.

The stress test is also an integral part of ICAAP, with the main purpose of assessing whether, even in severe adverse conditions, the institution would have appropriate capital levels, not impacting the development of its activities.

This information allows to identify potential factors of risks on businesses, supporting the Board of Directors’ strategic decisions, the budgetary process and discussions on credit granting policies, in addition to being used as input for risk appetite metrics.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 153

Note 34 – Segment Information

ITAÚ UNIBANCO HOLDING is a banking institution that offers its customers a wide range of financial products and services.

The current operational and reporting segments of ITAÚ UNIBANCO HOLDING are described below:

· Retail Banking

The result of the Retail Banking segment arises from the offer of banking products and services to a diversified client base of account holders and non-account holders, individuals and companies. The segment includes retail clients, high net worth clients (Itaú Uniclass and Personnalité), and the corporate segment (very small and small companies). This segment comprises financing and lending activities carried out in units other than the branch network, and offering of credit cards, in addition to operations with Itaú Consignado.

· Wholesale Banking

The result of the Wholesale Banking segment arises from the products and services offered to middle-market companies, private banking clients, from the activities of Latin America units, and the activities of Itaú BBA, the unit in charge of commercial operations with large companies and performing as an investment banking unit.

· Activities with the Market + Corporation

This segment records the result arising from capital surplus, subordinated debt surplus and the net balance of tax credits and debits. It also shows the financial margin with the market, the Treasury operating cost, the equity in earnings of companies not associated to each segment and the interest in Porto Seguro.

Basis of presentation of segment information

Segment information is prepared based on the reports used by top management (Executive Committee) to assess the performance and to make decisions regarding the allocation of funds for investment and other purposes.

The top management (Executive Committee) of ITAÚ UNIBANCO HOLDING uses a variety of information for such purposes including financial and non-financial information that is measured on different bases as well as information prepared based on accounting practices adopted in Brazil. The main index used to monitor the business performance is the Recurring Net Income and the Economic Capital allocated to each segment.

The segment information has been prepared following accounting practices adopted in Brazil modified for the adjustments described below:

· Allocated capital and income tax rate

Based on the managerial income statement, the segment information considers the application of the following criteria:

Allocated capital: The impacts associated to capital allocation are included in the financial information. Accordingly, adjustments were made to the financial statements, based on a proprietary model. The Allocated Economic Capital (AEC) model was adopted for the financial statements by segments, and as from 2015, we changed the calculation methodology. The AEC considers, in addition to Tier l allocated capital, the effects of the calculation of expected loan losses, supplementary to the requirements of the Central Bank of Brazil, pursuant to CMN Circular No. 2,682/99. Accordingly, the Allocated Capital comprises the following components: Credit risk (including expected loss), operational risk, market risk and insurance underwriting risk. Based on the portion of allocated capital tier I, we calculated the Return on Allocated Economic Capital, which corresponds to an operational performance indicator consistently adjusted to the capital required to support the risk associated to asset and liability positions assumed, in conformity with our risk appetite.

Income tax rate: We consider the total income tax rate, net of the tax effect from the payment of interest on capital, for the Retail Banking, Wholesale Bank and Activities with the Market segments. The difference between the income tax amount calculated by segment and the effective income tax amount, as stated in the consolidated financial statements, is allocated to the Activities with the Market + Corporation column.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 154

· Reclassification and application of managerial criteria

The managerial statement of income was used to prepare information per segment. These statements were obtained based on the statement of income adjusted by the impact of non-recurring events and the managerial reclassifications in income.

We describe below the main reclassifications between the accounting and managerial results:

Banking product: The banking product considers the opportunity cost for each operation. The financial statements were adjusted so that the stockholders' equity was replaced by funding at market price. Subsequently, the financial statements were adjusted to include revenues related to capital allocated to each segment. The cost of subordinated debt and the respective remuneration at market price were proportionally allocated to the segments, based on the economic allocated capital.

Hedge tax effects: The tax effects of the hedge of investments abroad were adjusted – these were originally recorded in the tax expenses (PIS and COFINS) and Income Tax and Social Contribution on net income lines – and are now reclassified to the margin. The strategy to manage the foreign exchange risk associated to the capital invested abroad aims at preventing the effects of the exchange rates variation on income. In order to achieve this objective, we used derivative instruments to hedge against such foreign currency risk, with investments remunerated in Brazilian Reais. The hedge strategy for foreign investments also considers the impact of all tax effects levied.

Insurance: Insurance business revenues and expenses were concentrated in Income related to Insurance, pension plan and capitalization operations. The main reclassifications of revenues refer to the financial margins obtained with the technical provisions of insurance, pension plan and capitalization, in addition to revenue from management of pension plan funds.

Other reclassifications: Other Income, Share of Income of Associates, Non-Operating Income, Profit Sharing of Management Members and Expenses for Credit Card Reward Program were reclassified to those lines representing the way the institution manages its business, enabling greater understanding for performance analysis. Accordingly, equity in earnings of investment in Banco CSF S.A. (“Banco Carrefour”) was reclassified to the financial margin line.

The adjustments and reclassifications column shows the effects of the differences between the accounting principles followed for the presentation of segment information, which are substantially in line with the accounting practices adopted for financial institutions in Brazil, except as described above, and the policies used in the preparation of these consolidated financial statements according to IFRS. Main adjustments are as follows:

· Requirements of impairment assessment under IFRS 9 are based on an expected credit loss model, replacing the incurred loss model under IAS 39;

· Adjustment to fair value due to reclassifications of financial assets between the categories of measurement at fair value and amortized cost due to the new concept of business models adopted for reclassification of financial assets, as set forth by IFRS 9;

· Changes refer to financial assets modified and not written-off, which balances were recalculated in accordance with the requirements of IFRS 9;

· Effective interest rates, financial assets and liabilities stated at amortized cost, are recognized by the effective interest rate method, allocating revenues and costs directly attributable to acquisition, issue or disposal for the transaction period of the operation, according to Brazilian standards, fee expenses and income are recognized as these transactions are engaged;

· Business combinations are accounted for under the acquisition method in IFRS (IFRS 3), in which the purchase price is allocated among assets and liabilities of the acquired company, and the amount not subject to allocation, if any, is recognized as goodwill. Such amount is not amortized, but is subject to an impairment test.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 155

ITAÚ UNIBANCO HOLDING S.A.

From April 1 to June 30, 2018

(In millions of Reais, except per share information)

Consolidated Statement of Income	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			ITAÚ UNIBANCO			Adjustments			IFRS consolidated
Banking product		18,111			7,454			2,455			28,020			(6,844	)		21,176
Net interest (1)		10,072			4,821			2,402			17,295			(6,550	)		10,745
Revenue from services		6,236			2,470			20			8,726			357			9,083
Income related to insurance, private pension and capitalization operations before claim and selling expenses		1,803			163			33			1,999			(899	)		1,100
Other revenues		-			-			-			-			248			248
Cost of Credit and Claims		(3,428	)		(508	)		1			(3,935	)		171			(3,764	)
Expenses for allowance for loan and lease losses		(3,483	)		(789	)		1			(4,271	)		842			(3,429	)
Impairment		-			(1	)		-			(1	)		1			-
Discounts granted		(254	)		(19	)		-			(273	)		273			-
Recovery of credits written off as loss		626			319			-			945			(945	)		-
Expenses for claims / recovery of claims under reinsurance		(317	)		(18	)		-			(335	)		-			(335	)
Operating margin		14,683			6,946			2,456			24,085			(6,673	)		17,412
Other operating income (expenses)		(10,025	)		(3,754	)		(155	)		(13,934	)		(1,103	)		(15,037	)
Non-interest expenses (2)		(8,841	)		(3,407	)		(32	)		(12,280	)		(1,780	)		(14,060	)
Tax expenses for ISS, PIS and COFINS and other		(1,184	)		(347	)		(123	)		(1,654	)		514			(1,140	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			163			163
Net income before income tax and social contribution		4,658			3,192			2,301			10,151			(7,776	)		2,375
Income tax and social contribution		(1,747	)		(996	)		(753	)		(3,496	)		7,015			3,519
Non-controlling interest in subsidiaries		(43	)		(222	)		(8	)		(273	)		119			(154	)
Net income		2,868			1,974			1,540			6,382			(642	)		5,740

(1) Includes interest and similar income and expenses of R$ 16,094 dividend income of R$ 163, net gains (loss) on investment securities and derivatives of R$ (7,103) and results from foreign exchange operations and exchange variation of transactions abroad of R$ 1,591.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 387, amortization expenses of R$ 433 and insurance acquisition expenses of R$ 46.

Total assets (1) - 06/30/2018	976,868	633,344	113,140	1,542,683	(73,588	)	1,469,095
Total liabilities - 06/30/2018	940,161	570,262	77,932	1,407,686	(79,366	)	1,328,320
(1) Includes:
Investments in associates and joint ventures	1,171	-	3,886	5,057	(19	)	5,038
Goodwill	1,370	7,326	-	8,696	2,716		11,412
Fixed assets, net	5,419	861	-	6,280	822		7,102
Intangible assets, net	6,398	1,252	-	7,650	1,006		8,656

The Consolidated figures do not represent the sum of the parties because there are intercompany transactions that were eliminated only in the consolidated statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 156

ITAÚ UNIBANCO HOLDING S.A.

From April 1 to June 30, 2017

(In millions of Reais, except per share information)

Consolidated Statement of Income	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			ITAÚ UNIBANCO			Adjustments			IFRS consolidated
Banking product		17,217			7,309			2,679			27,205			(630	)		26,575
Interest margin (1)		9,684			5,065			2,636			17,385			(843	)		16,542
Revenue from services		5,870			2,159			8			8,037			402			8,439
Income related to insurance, private pension and capitalization operations before claim and selling expenses		1,663			85			35			1,783			(496	)		1,287
Other revenues		-			-			-			-			307			307
Cost of Credit and Claims		(3,478	)		(1,255	)		(1	)		(4,734	)		50			(4,684	)
Expenses for allowance for loan and lease losses		(3,732	)		(1,215	)		(1	)		(4,948	)		525			(4,423	)
Impairment		-			(105	)		-			(105	)		105			-
Discounts granted		(200	)		(54	)		-			(254	)		254			-
Recovery of credits written off as loss		703			131			-			834			(834	)		-
Expenses for claims / recovery of claims under reinsurance		(249	)		(12	)		-			(261	)		-			(261	)
Operating margin		13,739			6,054			2,678			22,471			(580	)		21,891
Other operating income (expenses)		(9,342	)		(3,516	)		(360	)		(13,218	)		(1,106	)		(14,324	)
Non-interest expenses (2)		(8,264	)		(3,206	)		(142	)		(11,612	)		(1,301	)		(12,913	)
Tax expenses for ISS, PIS and COFINS and Other		(1,078	)		(310	)		(218	)		(1,606	)		68			(1,538	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			127			127
Net income before income tax and social contribution		4,397			2,538			2,318			9,253			(1,686	)		7,567
Income tax and social contribution		(1,599	)		(729	)		(565	)		(2,893	)		1,975			(918	)
Non-controlling interest in subsidiaries		(44	)		(142	)		(5	)		(191	)		(127	)		(318	)
Net income		2,754			1,667			1,748			6,169			162			6,331

(1) Includes interest and similar income and expenses of R$ 17,062 dividend income of R$ 170, net gains (loss) on investment securities and derivatives of R$ (364) and results from foreign exchange operations and exchange variation of transactions abroad of R$ (326).

(2) Refers to general and administrative expenses including depreciation expenses of R$ 394, amortization expenses of R$ 348 and insurance acquisition expenses of R$ 74.

Total assets (1) - 01/01/2017	909,779	585,088	116,401	1,427,084	(75,770	)	1,351,314
Total liabilities - 01/01/2017	877,792	525,390	80,810	1,299,869	(80,939	)	1,218,930
(1) Includes:
Investments in associates and joint ventures	1,325	-	3,106	4,431	642		5,073
Goodwill	1,398	6,171	-	7,569	2,106		9,675
Fixed assets, net	5,635	1,177	-	6,812	1,230		8,042
Intangible assets, net	6,559	1,105	-	7,664	(283	)	7,381

The Consolidated figures do not represent the sum of all parties because there are intercompany transactions that were eliminated only in the consolidated statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 157

ITAÚ UNIBANCO HOLDING S.A.

From January 1, June 30, 2018

(In millions of Reais, except for share information)

Consolidated Statement of Income	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			ITAÚ UNIBANCO			Adjustments			IFRS consolidated
Banking product		35,804			14,275			5,367			55,446			(6,861	)		48,585
Interest margin (1)		19,788			9,252			5,253			34,293			(6,664	)		27,629
Banking service fees		12,471			4,743			41			17,255			725			17,980
Income related to insurance, private pension, and capitalization operations before claim and selling expenses		3,545			280			73			3,898			(1,625	)		2,273
Other income		-			-			-			-			703			703
Cost of Credit and Claims		(6,468	)		(1,534	)		-			(8,002	)		861			(7,141	)
Expected Loss with Loan Operations and Lease Operations		(6,647	)		(1,735	)		-			(8,382	)		1,855			(6,527	)
Impairment		-			(188	)		-			(188	)		188			-
Discounts granted		(529	)		(29	)		-			(558	)		558			-
Recovery of loans written off as loss		1,285			455			-			1,740			(1,740	)		-
Expenses for claims / recovery of claims under reinsurance		(577	)		(37	)		-			(614	)		-			(614	)
Operating margin		29,336			12,741			5,367			47,444			(6,000	)		41,444
Other operating income (expenses)		(19,539	)		(7,411	)		(367	)		(27,317	)		(2,189	)		(29,506	)
Non-interest expenses (2)		(17,164	)		(6,748	)		(63	)		(23,975	)		(2,889	)		(26,864	)
Tax expenses for ISS, PIS and COFINS and Other		(2,375	)		(663	)		(304	)		(3,342	)		410			(2,932	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			290			290
Net income before income tax and social contribution		9,797			5,330			5,000			20,127			(8,189	)		11,938
Income tax and social contribution		(3,669	)		(1,584	)		(1,704	)		(6,957	)		7,470			513
Non-controlling interest in subsidiaries		(87	)		(265	)		(17	)		(369	)		47			(322	)
Net income		6,041			3,481			3,279			12,801			(672	)		12,129

(1) Includes interest and similar income and expenses of R$ 31,888 dividend income of R$ 197, net gains (loss) on investment securities and derivatives of R$ (5,902) and results from foreign exchange operations and exchange variation of transactions abroad of R$ 1,446.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 773 amortization expenses of R$ 849 and insurance acquisition expenses of R$ 95.

Total assets (1) - 06/30/2018	976,868	633,344	113,140	1,542,683	(73,588	)	1,469,095
Total liabilities - 06/30/2018	940,161	570,262	77,932	1,407,686	(79,366	)	1,328,320
(1) Includes:
Investments in associates and joint ventures	1,171	-	3,886	5,057	(19	)	5,038
Goodwill	1,370	7,326	-	8,696	2,716		11,412
Fixed assets, net	5,419	861	-	6,280	822		7,102
Intangible assets, net	6,398	1,252	-	7,650	1,006		8,656

The consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 158

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to June 30, 2017

(In millions of Reais except per share information)

Consolidated Statement of Income	Retail Banking			Wholesale Banking			Activities with the Market + Corporation			ITAÚ UNIBANCO			Adjustments			IFRS consolidated
Banking product		34,705			14,534			5,232			54,471			2,435			56,906
Interest margin (1)		19,529			10,110			5,161			34,800			1,979			36,779
Banking service fees		11,616			4,245			20			15,881			830			16,711
Income related to insurance, private pension, and capitalization operations before claim and selling expenses		3,560			179			51			3,790			(1,094	)		2,696
Other income		-			-			-			-			720			720
Cost of Credit and Claims		(6,853	)		(3,483	)		(1	)		(10,337	)		(907	)		(11,244	)
Expected Loss with Loan Operations and Lease Operations		(7,281	)		(3,058	)		(1	)		(10,340	)		(322	)		(10,662	)
Impairment		-			(550	)		-			(550	)		550			-
Discounts granted		(409	)		(138	)		-			(547	)		547			-
Recovery of loans written off as loss		1,393			289			-			1,682			(1,682	)		-
Expenses for claims / recovery of claims under reinsurance		(556	)		(26	)		-			(582	)		-			(582	)
Operating margin		27,852			11,051			5,231			44,134			1,528			45,662
Other operating income (expenses)		(18,144	)		(6,988	)		(780	)		(25,912	)		(2,674	)		(28,586	)
Non-interest expenses (2)		(15,982	)		(6,359	)		(361	)		(22,702	)		(2,710	)		(25,412	)
Tax expenses for ISS, PIS and COFINS and Other		(2,162	)		(629	)		(419	)		(3,210	)		(239	)		(3,449	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			275			275
Net income before income tax and social contribution		9,708			4,063			4,451			18,222			(1,146	)		17,076
Income tax and social contribution		(3,577	)		(1,074	)		(1,008	)		(5,659	)		1,238			(4,421	)
Non-controlling interest in subsidiaries		(95	)		(114	)		(9	)		(218	)		(43	)		(261	)
Net income		6,036			2,875			3,434			12,345			49			12,394

(1) Includes interest and similar income and expenses of R$ 33,160 dividend income of R$ 175, net gains (loss) on investment securities and derivatives of R$ 3,218 and results from foreign exchange operations and exchange variation of transactions abroad of R$ 226.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 784 amortization expenses of R$ 704 and insurance acquisition expenses of R$ 178.

Total assets (1) - 01/01/2017	909,779	585,088	116,401	1,427,084	(75,770	)	1,351,314
Total liabilities - 01/01/2017	877,792	525,390	80,810	1,299,869	(80,939	)	1,218,930
(1) Includes:
Investments in associates and joint ventures	1,325	-	3,106	4,431	642		5,073
Goodwill	1,398	6,171	-	7,569	2,106		9,675
Fixed assets, net	5,635	1,177	-	6,812	1,230		8,042
Intangible assets, net	6,559	1,105	-	7,664	(283	)	7,381

The Consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 159

Information on the result of main services and products and noncurrent assets by geographic area are as follows:

	01/01 to 06/30/2018						01/01 to 06/30/2017
	Brazil		Abroad		Total		Brazil		Abroad		Total
Income related to financial operations (1) (2)		48,567		12,370		60,937		70,997		9,433		80,430
Income related to insurance, private pension and capitalization operations before claim and selling expenses		2,192		81		2,273		2,635		61		2,696
Banking service fees		16,249		1,731		17,980		15,217		1,494		16,711
Non-current assets (3)		12,060		3,698		15,758		13,299		2,124		15,423

(1) Includes interest and similar income, dividend income, net gain (loss) on investment securities and derivatives, foreign exchange results, and exchange variation on transactions.

(2) ITAÚ UNIBANCO HOLDING does not have clients representing 10% or higher of its revenues.

(3) The amounts for comparative purposes refer to the 01/01/2017.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 160

Note 35 – Related parties

a) Transactions between related parties 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 (Note 2.4a) were eliminated from the consolidated financial statements and the absence of risk is taken into consideration.

The unconsolidated related parties are as follows:

· Itaú Unibanco Participações S.A. (IUPAR), Companhia E. Johnston de Participações S.A. (shareholder of IUPAR) and ITAÚSA, direct and indirect shareholders of ITAÚ UNIBANCO HOLDING;

· The non-financial subsidiaries and joint-controlled entities of ITAÚSA, especially: Itautec S.A., Duratex S.A., Itaúsa Empreendimentos S.A. and Alpargatas 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;

· Fundação Itaú Social, Instituto Itaú Cultural, Instituto Unibanco, Instituto Unibanco de Cinema, Associação Itaú Viver Mais and Associação Cubo Coworking Itaú, entities sponsored by ITAÚ UNIBANCO HOLDING to act in their respective areas of interest; and

· Investments in Porto Seguro Itaú Unibanco Participações S.A. and BSF Holding S.A.

The transactions with these related parties are mainly as follows:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 161

	ITAÚ UNIBANCO HOLDING
		Assets / (liabilities)									Revenue / (expenses)
								04/01 to			04/01 to			01/01 to			01/01 to
	Annual rate	06/30/2018			12/31/2017			06/30/2018			06/30/2017			06/30/2018			06/30/2017
Loan operations			69			96			5			-			6			-
Alpargatas S.A.			69			96			5			-			6			-
Securities sold under repurchase agreements			(38	)		(48	)		(2	)		(1	)		(2	)		(3	)
Duratex S.A.	95.5% to 98% of CDI		(19	)		(22	)		(1	)		-			(1	)		(1	)
Elekeiroz S.A.			-			(5	)		-			-			-			-
Itautec S.A.			-			(2	)		-			-			-			-
Olimpia Promoção e Serviços S.A.	100% Selic		(2	)		(7	)		(1	)		(1	)		(1	)		(1	)
Conectcar Soluções de Mobilidade Eletrônica S.A.			-			-			-			(1	)		-			(1	)
Alpargatas S.A.	97.5% of CDI		(5	)		-			-			-			-			-
Other	60% to 100.15% of CDI		(12	)		(12	)		-			1			-			-
Amounts receivable from (payable to) related companies / Banking service fees (expenses)			(111	)		(108	)		(6	)		7			5			18
Itaúsa Investimentos Itaú S.A.			-			-			1			1			2			2
Itaúsa Empreendimentos S.A.			(3	)		-			(16	)		-			(16	)		-
Olimpia Promoção e Serviços S.A.			(2	)		(2	)		(7	)		(7	)		(12	)		(12	)
Fundação Itaú Unibanco - Previdência Complementar			(106	)		(106	)		13			11			25			23
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			1			1			3			3
Other			-			-			2			1			3			2
Rental revenues (expenses)			-			-			(14	)		(14	)		(26	)		(30	)
Itaúsa Investimentos Itaú S.A.			-			-			-			(1	)		(1	)		(2	)
Fundação Itaú Unibanco - Previdência Complementar			-			-			(12	)		(12	)		(21	)		(24	)
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			(2	)		(3	)		(4	)		(6	)
Other			-			-			-			2			-			2
Donation expenses			-			-			(39	)		(21	)		(83	)		(59	)
Instituto Itaú Cultural			-			-			(38	)		(20	)		(63	)		(48	)
Associação Cubo Coworking Itaú			-			-			-			-			(19	)		(10	)
Associação Itaú Viver Mais			-			-			(1	)		(1	)		(1	)		(1	)

Pursuant to the current rules, financial institutions cannot grant loans or advances to the following:

a) any individuals or companies that control the Institution or any entity under common control with the institution, or any executive officer, director, member of the fiscal council, or the immediate family members of these individuals;

b) any entity controlled by the institution; or

c) any entity in which the bank directly or indirectly holds more than 10% of the capital stock.

Therefore, no loans or advances were granted to any subsidiary, executive officer, director or family members.

b) Compensation of the key management personnel

Compensation for the period paid to Management Members and members of the Audit Committee of ITAÚ UNIBANCO HOLDING consist of:

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Compensation		118		97		258		210
Board of directors		9		15		21		20
Executives		109		82		237		190
Profit sharing		60		59		104		98
Board of directors		-		-		3		1
Executives		60		59		101		97
Contributions to pension plans - Executives		2		1		5		6
Stock option plan – Executives		71		36		103		91
Total		251		193		470		405

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 162

Note 36 – Management risks

Credit risk

1. Credit risk measurement

ITAÚ UNIBANCO HOLDING understands 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.

There is a credit risk control and management structure, centralized and independent from the business units, that provides for operational limits and risk mitigating mechanisms, in addition to establishing processes and tools to measure, monitor and control the credit risk inherent in all products, portfolio concentrations and impacts of potential changes in the economic environment.

ITAÚ UNIBANCO HOLDING establishes its credit policy based on internal factors, such as client rating criteria, performance of and changes in portfolio, default levels, return rates, and allocated economic capital, among others, also considering external factors, such as interest rates, market default indicators, inflation, changes in consumption, among others.

The continuous monitoring of ITAÚ UNIBANCO HOLDING’ portfolio concentration levels, assessing the economic industries and largest enables, allows to take preventive measures to avoid that the established limits are breached. 

For individual, small and middle-market companies, credit rating is attributed based on application statistical models (in the early phases of relationship with the client) and behavior score (used for clients with which ITAÚ UNIBANCO HOLDING already has a relationship).

For large companies, the rating is based on information such as economic and financial condition of the counterparty, their cash-generating capability, the economic group to which they belong, and the current and prospective situation of the economic sector in which they operate. The credit proposals are analyzed on a case by case basis, through an approval-level mechanism.

In compliance with CMN Resolution 3,721, the document “Public Access Report – Credit Risk“, which includes the guidelines established by the institutional credit risk control policy can be viewed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 163

2. Credit risk management

ITAÚ UNIBANCO HOLDING strictly controls the credit exposure of clients and counterparties, taking action to address situations in which the actual exposure exceeds the desired one. For this purpose, contractually provided actions can be taken, such as early settlement or requirement of additional collateral.

3. Collateral and policies for mitigating credit risk

ITAÚ UNIBANCO HOLDING uses collateral to increase its recovery capacity in transactions subject to credit risk. Collateral used may be personal security, secured guarantee, legal structures with mitigation power and offset agreements.

For collateral to be considered instruments that mitigate credit risk, they must comply with the requirements and standards that regulate them, be them internal or external ones, be legally valid (effective), enforceable, and assessed on a regular basis.

ITAÚ UNIBANCO HOLDING also uses credit derivatives, to mitigate credit risk of its portfolios of loans and securities. These instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates.

4. Policy on the provision

The provisioning policy adopted by ITAÚ UNIBANCO HOLDING is in line with the IFRS guidelines. Thus, all provisions for expected losses are recognized considering the expected risk linked to contracts with similar characteristics and in anticipation of impairment signs, considering a loss horizon adequate to the remaining period of the contract termination. For contracts of products with no determined termination date, average results of impairment and default are used to determine the loss horizon.

The classification between stages is considered to determine any limitation to the loss horizon to be assessed.

Write-offs to loss occur in accordance with the expected recovery of each contract.

5. Classification of Stages of Credit Impairment

ITAÚ UNIBANCO HOLDING considers internal classification of clients to determine the credit status of portfolio contracts. In addition, statistics models, days of default and qualitative analyses are used for the trading portfolio.

Credit impairment is determined using internal ratings resulting from the aforementioned information, and rules to change the stage consider lower and higher rating limits (quantitative criteria), in addition the relative variation of ratings since the initial recognition. Additionally, days of delay are important factors for classification and are used on an absolute basis.

After determining the contract credit status, its classification is established in one of three credit impairment stages. Based on this classification, measurement rules for expected credit loss established for each stage are used, as described in Note 2.4e.

For Retail and Middle business portfolio, contracts overdue for over 30 days are classified in stage 2, except for the payroll loans for government bodies, which are recognized after 45 days of delay. This happens due to the product dynamics. For the Wholesale business portfolio, information on delay is considered in the rating assessment.

Default parameters considered are: (i) 90 days with no payment record⁽¹⁾; (ii) debt restructuring; (iii) adjudication of bankruptcy; (iv) loss; and (v) court-ordered reorganization.

⁽¹⁾ For mortgage loan portfolio, 180 days without payment record are considered.

6. Economic scenarios

ITAÚ UNIBANCO HOLDING uses internal and external information that denotes the clients’ risk level to determine, through statistic models, the expected credit loss for the contract in a proper observation horizon, related to the number of months remaining to the contract termination and the state in which it is classified. Additionally, information on economic scenarios and public information with internally developed

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 164

information are used to determine and affect the expected credit loss, adjusting loss levels to expected macroeconomic realities.

7. Credit risk exposure

	06/30/2018									12/31/2017
	Brazil			Abroad			Total			Brazil			Abroad			Total
Financial Assets		967,900			301,305			1,269,205			967,703			263,711			1,231,414
At Amortized Cost		698,993			237,313			936,306			702,672			203,057			905,729
Interbank deposits		6,500			17,237			23,737			6,367			22,681			29,048
Securities purchased under agreements to resell		253,576			1,121			254,697			243,917			790			244,707
(-) Provision for Expected Securities purchased under agreements to resell		(4	)		-			(4	)		(8	)		-			(8	)
Securities		87,886			20,668			108,554			101,365			10,059			111,424
(-) Provision for Expected Securities		(5,566	)		(10	)		(5,576	)		(5,176	)		(6	)		(5,182	)
Loan operations and lease operations (*)		326,292			196,200			522,492			327,501			170,218			497,719
(-) Provision for Expected Loss		(22,580	)		(7,967	)		(30,547	)		(25,081	)		(6,466	)		(31,547	)
Other financial assets		52,889			10,064			62,953			53,787			5,781			59,568
At Fair Value Through Other Comprehensive Income		11,888			40,844			52,732			14,722			37,427			52,149
Securities		11,970			40,848			52,818			14,805			37,428			52,233
(-) Provision for Expected Loss		(82	)		(4	)		(86	)		(83	)		(1	)		(84	)
At Fair Value Through Profit or Loss		257,019			20,835			277,854			250,309			21,481			271,790
Securities		244,163			5,971			250,134			238,200			10,747			248,947
Derivatives		12,856			14,864			27,720			12,109			10,734			22,843
At Fair Value Designated at Fair Value Through Profit or Loss		-			2,313			2,313			-			1,746			1,746
Securities		-			2,313			2,313			-			1,746			1,746
Off balance sheet		299,887			49,309			349,196			280,032			43,797			323,829
Financial Guarantees Provided		58,213			11,907			70,120			60,062			10,427			70,489
Letters of credit to be released		10,305			-			10,305			9,214			-			9,214
Commitments to be released		231,369			37,402			268,771			210,756			33,370			244,126
Mortgage loans		2,567			-			2,567			3,218			-			3,218
Overdraft accounts		100,531			-			100,531			93,284			-			93,284
Credit cards		122,785			2,972			125,757			109,196			2,679			111,875
Other pre-approved limits		5,486			34,430			39,916			5,058			30,691			35,749
Provision for Expected Loss of Financial Liabilities		4,559			468			5,027			4,513			409			4,922
Loan Commitments		2,815			345			3,160			2,681			334			3,015
Financial Guarantees		1,744			123			1,867			1,832			75			1,907
Total		1,263,228			350,146			1,613,374			1,243,222			307,099			1,550,321

(*) In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 644 (R$ 102 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 165

The table above presents the maximum exposure at June 30, 2018 and December 31, 2017, without considering any collateral received or other additional credit improvements.

For assets recognized in the balance sheet, the exposures presented are based on net carrying amounts. This analysis includes only financial assets subject to credit risk and excludes non-financial assets.

The contractual amounts of Financial Guarantees Provided and letters of credit represent the maximum potential of credit risk in the event the counterparty does not meet the terms of the agreement. The vast majority of commitments (real estate loans, overdraft accounts and other pre-approved limits) mature without being drawn, since they are renewed monthly and we have the power to cancel them at any time. As a result, the total contractual amount does not represent our effective future exposure to credit risk or the liquidity needs arising from such commitments.

As shown in the table, the most significant exposures correspond to Loan Operations, Financial Assets Held for Trading, and Securities Purchased Under Agreements to Resell, in addition to Financial Guarantees Provided and Other Commitments.

8. Maximum exposure of financial assets segregated by business sector

a) Loan operations and lease operations portfolio

	06/30/2018		%		12/31/2017		%
Public sector		2,658		0.5		2,372		0.5
Industry and commerce		113,168		21.7		107,201		21.5
Services		119,976		23.0		114,332		23.0
Natural resources		24,298		4.6		23,032		4.6
Other sectors		3,993		0.8		3,643		0.7
Individuals		258,399		49.4		247,139		49.7
Total		522,492		100.0		497,719		100.0

b) The credit risks of Off Balance items (Financial Guarantees Pledged, Letters of Credit and Commitments to Be Released) are neither categorized nor managed by business sector.

c) Other financial assets ^(*)

	06/30/2018		%		12/31/2017		%
Natural resources		3,793		0.5		2,751		0.4
Public sector		328,409		45.9		327,932		46.5
Industry and commerce		11,828		1.7		11,212		1.6
Services		84,949		11.9		84,191		11.9
Other sectors		6,251		0.9		5,287		0.7
Individuals		647		0.1		554		0.1
Financial		278,430		39.0		273,747		38.8
Total		714,307		100.0		705,674		100.0

(*) Includes Financial Assets at Fair Value Through Profit or Loss, Derivatives, Assets Designated at Fair Value Through Profit or Loss, Financial Assets at Fair Value Through Other Comprehensive Income, Financial Assets at Amortized Cost, Interbank Deposits and Securities Purchased Under Agreements to Resell.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 166

8.1. Credit risk exposure

a) Maximum exposure of loan operations and lease operations

The table below presents the maximum exposure of financial assets segregated by type and classification of credit risk.

06/30/2018
	Stage 1												Stage 2												Stage 3												Total Consolidated of 3 stages
	Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations (*)			Commitments to be released			Financial Guarantees			Total
Individuals		165,138			175,941			1,039			342,118			13,844			4,791			-			18,635			17,599			747			-			18,346			196,581			181,479			1,039			379,099
Credit card		56,491			115,244			-			171,735			6,236			3,826			-			10,062			4,252			664			-			4,916			66,979			119,734			-			186,713
Personal loans		14,424			60,679			1,039			76,142			3,542			961			-			4,503			10,817			83			-			10,900			28,783			61,723			1,039			91,545
Payroll loans		43,066			-			-			43,066			837			-			-			837			1,700			-			-			1,700			45,603			-			-			45,603
Vehicles		13,144			-			-			13,144			1,018			-			-			1,018			535			-			-			535			14,697			-			-			14,697
Mortgage loans		38,013			18			-			38,031			2,211			4			-			2,215			295			-			-			295			40,519			22			-			40,541
Corporate		92,296			17,450			49,606			159,352			3,932			157			1,732			5,821			10,905			296			4,380			15,581			107,133			17,903			55,718			180,754
Small and medium businesses		51,106			34,511			2,369			87,986			6,363			1,693			66			8,122			6,425			213			60			6,698			63,894			36,417			2,495			102,806
Foreign loans - Latin America		131,136			28,894			10,479			170,509			17,315			3,991			365			21,671			6,433			87			24			6,544			154,884			32,972			10,868			198,724
Total		439,676			256,796			63,493			759,965			41,454			10,632			2,163			54,249			41,362			1,343			4,464			47,169			522,492			268,771			70,120			861,383
%		57.8	%		33.8	%		8.4	%		100.0	%		76.4	%		19.6	%		4.0	%		100.0	%		87.7	%		2.8	%		9.5	%		100.0	%		60.7	%		31.2	%		8.1	%		100.0	%

12/31/2017
	Stage 1												Stage 2												Stage 3												Total Consolidated of 3 stages
	Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations			Commitments to be released			Financial Guarantees			Total			Loan Operations (*)			Commitments to be released			Financial Guarantees			Total
Individuals		161,364			159,533			1,016			321,913			13,032			4,420			-			17,452			18,989			776			-			19,765			193,385			164,729			1,016			359,130
Credit card		57,073			102,180			-			159,253			6,027			3,353			-			9,380			4,313			697			-			5,010			67,413			106,230			-			173,643
Personal loans		12,290			57,339			1,016			70,645			3,108			1,065			-			4,173			11,897			79			-			11,976			27,295			58,483			1,016			86,794
Payroll loans		42,115			-			-			42,115			733			-			-			733			1,868			-			-			1,868			44,716			-			-			44,716
Vehicles		12,550			-			-			12,550			987			-			-			987			628			-			-			628			14,165			-			-			14,165
Mortgage loans		37,336			14			-			37,350			2,177			2			-			2,179			283			-			-			283			39,796			16			-			39,812
Corporate		91,442			14,100			50,811			156,353			3,833			278			1,299			5,410			12,372			390			5,538			18,300			107,647			14,768			57,648			180,063
Small and medium businesses		47,132			33,203			2,229			82,564			6,001			1,638			74			7,713			7,157			254			54			7,465			60,290			35,095			2,357			97,742
Foreign loans - Latin America		117,448			25,867			9,069			152,384			13,028			3,527			371			16,926			5,921			140			28			6,089			136,397			29,534			9,468			175,399
Total		417,386			232,703			63,125			713,214			35,894			9,863			1,744			47,501			44,439			1,560			5,620			51,619			497,719			244,126			70,489			812,334
%		58.5	%		32.6	%		8.9	%		100.0	%		75.6	%		20.8	%		3.7	%		100.0	%		86.1	%		3.0	%		10.9	%		100.0	%		61.3	%		30.1	%		8.7	%		100.0	%

(*) In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 644 (R$ 102 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 167

b) Maximum Exposure of other financial assets

	06/30/2018
			Stage 1				Stage 2				Stage 3
	Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Investment funds		2,482		2,308		2,286		-		-		914		196
Brazilian government securities		260,843		261,232		260,658		247		185		-		-
Brazilian external debt bonds		35,340		36,013		35,340		-		-		-		-
Others stakeholders		-		36		-		-		-		-		-
Government securities - other countries		30,594		30,683		30,594		-		-		-		-
Argentina		501		484		501		-		-		-		-
United States		2,124		2,148		2,124		-		-		-		-
Mexico		2,736		2,736		2,736		-		-		-		-
Denmark		492		492		492		-		-		-		-
Spain		3,082		3,082		3,082		-		-		-		-
Korea		1,443		1,443		1,443		-		-		-		-
Chile		9,795		9,807		9,795		-		-		-		-
Paraguay		1,587		1,662		1,587		-		-		-		-
Uruguay		961		962		961		-		-		-		-
Colombia		7,861		7,855		7,861		-		-		-		-
Peru		12		12		12		-		-		-		-
Corporate securities		78,897		74,712		74,130		3,423		2,374		7,007		2,393
Shares		7,076		6,810		6,843		239		11		473		222
Rural product note		3,827		3,616		3,609		-		-		412		218
Securitized real estate loans		12,639		11,571		11,559		113		109		2,383		971
Bank deposit certificate		1,459		1,459		1,459		-		-		-		-
Debentures		23,819		21,294		20,782		2,861		2,072		3,714		965
Eurobonds and other		6,851		6,818		6,739		117		112		-		-
Financial bills		20,173		20,174		20,173		-		-		-		-
Promissory notes		1,266		1,232		1,232		18		17		25		17
Others		1,787		1,738		1,734		75		53		-		-
Total		408,156		404,984		403,008		3,670		2,559		7,921		2,589

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 168

	12/31/2017
			Stage 1				Stage 2				Stage 3
	Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
Investment funds		3,513		3,351		3,345		-		-		784		168
Brazilian government securities		270,507		269,265		270,311		261		196		-		-
Brazilian external debt bonds		26,818		26,370		26,818		-		-		-		-
Others stakeholders		-		36		-		-		-		-		-
Government securities - other countries		28,902		28,914		28,902		-		-		-		-
Argentina		1,466		1,446		1,466		-		-		-		-
United States		1,666		1,684		1,666		-		-		-		-
Mexico		564		564		564		-		-		-		-
Denmark		1,951		1,951		1,951		-		-		-		-
Spain		2,937		2,937		2,937		-		-		-		-
Korea		1,944		1,944		1,944		-		-		-		-
Chile		9,761		9,765		9,761		-		-		-		-
Paraguay		1,807		1,922		1,807		-		-		-		-
Uruguay		828		824		828		-		-		-		-
Colombia		5,945		5,844		5,945		-		-		-		-
Other		33		33		33		-		-		-		-
Corporate securities		79,344		75,240		75,486		1,510		1,109		7,857		2,749
Shares		6,107		5,554		5,820		117		21		482		266
Rural product note		2,739		2,518		2,511		-		-		381		228
Securitized real estate loans		13,577		12,492		12,501		64		59		3,062		1,017
Bank deposit certificate		1,150		1,150		1,150		-		-		-		-
Debentures		23,758		21,584		21,569		1,255		969		3,892		1,220
Eurobonds and other		6,192		6,195		6,192		-		-		-		-
Financial bills		21,230		21,230		21,230		-		-		-		-
Promissory notes		3,614		3,597		3,596		-		-		40		18
Others		977		920		917		74		60		-		-
Total		409,084		403,176		404,862		1,771		1,305		8,641		2,917

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 169

8.2. The table below shows other financial assets, individually evaluated, classified by rating:

06/30/2018
Internal rating	Interbank deposits and securities purchased under agreements to resell		Financial assets at fair value through profit or loss		Financial assets at fair value through profit or loss designated at fair value		Derivatives assets		Financial Assets Fair Value Through Other Comprehensive Income		Financial assets at amortized cost		Total
Lower risk		278,430		250,054		2,313		25,759		52,732		99,753		709,041
Satisfactory		-		16		-		1,646		-		2,067		3,729
Higher risk		-		64		-		315		-		1,158		1,537
Total		278,430		250,134		2,313		27,720		52,732		102,978		714,307
%		39.0		35.0		0.3		3.9		7.4		14.4		100.0

12/31/2017
Internal rating	Interbank deposits and securities purchased under agreements to resell		Financial assets at fair value through profit or loss		Financial assets at fair value through profit or loss designated at fair value		Derivatives assets		Financial Assets Fair Value Through Other Comprehensive Income		Financial assets at amortized cost		Total
Lower risk		273,747		248,904		1,746		21,209		52,149		104,610		702,365
Satisfactory		-		15		-		1,263		-		338		1,616
Higher Risk		-		28		-		371		-		1,294		1,693
Total		273,747		248,947		1,746		22,843		52,149		106,242		705,674
%		38.8		35.3		0.2		3.2		7.4		15.1		100.0

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 170

8.3. Collateral held for loan and lease operations portfolio

	06/30/2018								12/31/2017
	(l) Over-collateralized assets				(II) Under-collateralized assets				(l) Over-collateralized assets				(II) Under-collateralized assets
Financial effect of collateral	Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral
Individuals		53,756		134,501		1,106		1,056		52,608		132,007		1,079		1,028
Personal		396		1,524		876		842		370		1,398		901		864
Vehicles		14,011		34,049		228		213		13,618		34,368		177		163
Mortgage loans		39,349		98,928		2		1		38,620		96,241		1		1
Small, medium businesses and corporate		115,244		314,475		9,914		7,321		115,731		339,892		11,032		8,537
Foreign loans - Latin America		118,183		198,978		11,313		3,800		105,425		175,476		10,262		3,598
Total		287,183		647,954		22,333		12,177		273,764		647,375		22,373		13,163

The difference between the total loan portfolio and collateralized loan portfolio is generated by non-collateralized loans amounting to R$ 212,976 (R$ 201,582 at 12/31/2017).

ITAÚ UNIBANCO HOLDING uses collateral to reduce the occurrence of losses in operations with credit risk and manages and regularly reviews its collateral with the objective that collateral held is sufficient, legally exercisable (effective) and feasible. Thus, collateral is used to maximize the recoverability potential of impaired loans and not to reduce the exposure value of customers and counterparties.

Individuals

Personal – This category of credit products usually requires collateral, focusing on financial guarantees provided.

Vehicles – For this type of operation, clients' assets serve as collateral, which are also the leased assets in leasing operations.

Mortgage loans – Regards buildings themselves given in guarantee.

Small, Medium Businesses and Corporate – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety / joint debtor, Mortgage and others).

Foreign loans – Latin America – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety/joint debtor, Mortgage and others).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 171

9. Repossessed assets

Repossessed assets are recognized as assets when possession is effectively obtained.

Assets received from the foreclosure of loans, including real estate, are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, or (ii) the carrying amount of the loan.

Further impairment of assets is recorded as a provision, with a corresponding charge to income. The maintenance costs of these assets are expensed as incurred.

The policy for sales of these assets (assets not for use) includes periodic auctions that are announced in advance and considers that the assets cannot be held for more than one year as stipulated by the BACEN. This period may be extended at the discretion of BACEN.

The amounts below represent total assets repossessed in the period:

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2018		06/30/2017		06/30/2018		06/30/2017
Real estate not for own use		30		20		47		93
Residential properties - mortgage loans		53		55		122		107
Vehicles - linked to loan operations		-		1		-		2
Other (vehicles / furniture / equipments) - dation		30		20		50		126
Total		113		96		219		328

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 172

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.

The institutional policy on market risk management is in line with CMN Resolution No. 3,464, as amended, comprising a set of principles that guide the strategy for control and management of market risks of the whole institution.

ITAÚ UNIBANCO HOLDING’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;

· Expertise within the group to support operations in specific markets.

The purpose of market risk control of ITAÚ UNIBANCO HOLDING structure is:

· Providing visibility and assurance to all executive levels that the assumption of market risks is in line with ITAÚ UNIBANCO HOLDING 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.

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, (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.

The CMN has regulations that establish the segregation of exposure to market risk in risk factors, such as interest rate, exchange rate, shares and commodities. Brazilian inflation indexes are also treated as a group of risk factors and follow the same governance structure of limits.

The limit and warning structure is aligned with the Board of Directors’ structure, and it is reviewed and approved on an annual basis. This structure has specific limits that aim at improvement the monitoring process and understanding of risks, as well as avoid their concentration. These limits are quantified by assessing the forecasted results of the balance sheet, size of stockholders’ equity, liquidity, market complexity and volatility, as well as the institution’s appetite for risk.

Aiming at adjusting risks to the established limits, ITAÚ UNIBANCO HOLDING hedges transactions with clients and proprietary positions, including foreign investments. Derivatives are the instruments most frequently used to carry out these hedge activities, and they may be characterized as accounting or economic hedge, both governed by the internal policies at ITAÚ UNIBANCO HOLDING.

For a detailed vision of the accounting hedge topic, see Note 9 – Accounting Hedge.

Market risk management follows the segregation of operations in Trading Portfolio and Banking Portfolio, pursuant to the general criteria set forth in CMN Resolution No. 3,464, and BACEN Circular No. 3,354.

The trading portfolio consists of all transactions involving financial instruments and commodities, including derivatives, which are carried out for trading purposes. The banking portfolio is mainly characterized by the operations arising from banking activities and related to the management of the institutions’ balance sheet, conducted with no intent of trading and with a horizon of time of medium and long terms.

Market risk management is conducted based on the following metrics:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 173

· 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

· Stressed VaR: statistical metric arising from VaR calculation, which purpose is to capture higher risk in simulations for the trading 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 uses proprietary systems to measure the consolidated market risk. The processing of these systems occur, 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.

The document that details the guidelines established by the internal policy on market risk management, that is not part of the financial statements, may be viewed on the website www.itau.com.br/investor-relations, in the section Corporate Governance/Rules and Policies / Public Access Report – Market Risk.

VaR - Consolidated ITAÚ UNIBANCO HOLDING

Consolidated VaR of ITAÚ UNIBANCO HOLDING is calculated by Historical Simulation, i.e., the expected distribution for profit and loss (P&L’s - Profit and loss statement) of a portfolio over a time horizon that can be estimated based on the historical behavior of returns of market risk factors of this portfolio. VaR is calculated at a confidence level of 99%, historical period of 4 years (1000 business days) and a holding period of one day. In addition, in a conservative approach, VaR is calculated daily, being or not volatility-weighted, and the final VaR is the most restrictive value between both methodologies.

From January 1 to June 30, 2018, the average total VaR in Historical Simulation was R$ 431.9 or 0.35% of total stockholders’ equity (throughout 2017 it was R$ 409.9 or 0.28% of total stockholders’ equity).

(Reais million)
	VaR Total - Historical Simulation
	06/30/2018 (1)									12/31/2017 (1)
	Average		Minimum		Maximum		Var Total			Average		Minimum		Maximum		Var Total
Risk factor group
Interest rates		874.6		744.1		1,042.9		912.4			721.0		583.6		1,311.9		764.7
Currencies		19.8		12.7		45.2		16.4			20.4		6.5		50.2		11.9
Shares		36.7		23.6		58.5		27.3			45.4		38.5		54.9		46.4
Commodities		1.7		0.7		3.1		1.0			1.5		0.7		4.0		0.8
Effect of diversification								(466.0	)								(451.5	)
Total risk		431.9		317.2		603.6		491.1			409.9		304.8		874.0		372.3

(1) VaR by Group of Risk Factors considers information from foreign units.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 174

Interest rate

The table on the position of accounts subject to interest rate risk group them by products, book value of accounts distributed by maturity. This table is not used directly to manage interest rate risks; it is mostly used to enable the assessment of mismatching between accounts and products associated thereto and to identify possible risk concentration.

The following table sets forth our interest-earning assets and interest-bearing liabilities and therefore does not reflect interest rate gap positions that may exist as of any given date. In addition, variations in interest rate sensitivity may exist within the repricing periods presented due to differing repricing dates within the period.

Position of accounts subject to interest rate risk ⁽¹⁾

	06/30/2018																	12/31/2017
	0-30 days			31-180 days			181-365 days			1-5 years			Over 5 years			Total		0-30 days			31-180 days			181-365 days			1-5 years			Over 5 years			Total
Interest-bearing assets		345,583			248,415			122,170			420,737			179,402			1,316,307		268,059			354,885			103,785			392,119			178,592			1,297,440
Interbank deposits		16,122			4,431			2,207			974			-			23,734		21,644			3,510			2,880			1,011			3			29,048
Securities purchased under agreements to resell		151,609			85,194			17,605			38			250			254,696		42,612			201,889			2			28			168			244,699
Central Bank compulsory deposits		79,508			-			-			-			-			79,508		94,047			-			-			-			-			94,047
Financial Assets at Fair Value Through Profit or Loss		11,931			17,199			16,358			159,922			44,724			250,134		16,554			15,855			17,103			147,805			51,630			248,947
Financial Assets Designated at Fair Value		-			-			2,313			-			-			2,313		-			-			1,041			705			-			1,746
Financial Assets at Fair Value Through Other Comprehensive		1,935			2,784			2,859			30,048			15,106			52,732		1,088			2,476			6,102			23,415			19,068			52,149
Financial Assets At Amortized Cost		2,130			8,039			6,146			51,240			35,423			102,978		10,897			7,921			6,834			50,650			29,940			106,242
Derivatives		7,890			4,451			4,213			7,824			3,342			27,720		7,978			3,003			2,360			6,681			2,821			22,843
Loan and lease operations portfolio (2)		74,458			126,317			70,469			170,691			80,557			522,492		73,239			120,231			67,463			161,824			74,962			497,719
Interest-bearing liabilities		377,916			100,389			71,493			312,296			67,546			929,640		376,492			93,736			87,850			290,677			56,451			905,206
Savings deposits		127,342			-			-			-			-			127,342		119,980			-			-			-			-			119,980
Time deposits		27,767			34,811			20,467			139,400			3,316			225,761		27,798			32,350			22,570			126,435			2,647			211,800
Interbank deposits		1,159			872			760			25			27			2,843		88			908			669			451			66			2,182
Deposits received under repurchase agreements		202,254			11,339			14,853			50,647			23,434			302,527		208,261			7,362			25,185			57,146			14,680			312,634
Interbank market		10,481			39,585			24,429			50,451			8,691			133,637		8,570			34,108			30,736			48,005			8,197			129,616
Institutional market		1,119			8,516			5,278			57,015			29,590			101,518		4,188			16,495			5,343			43,911			28,545			98,482
Derivatives		7,788			5,256			5,692			11,274			2,426			32,436		7,596			2,491			3,325			11,109			2,225			26,746
Financial liabilities held for trading		6			10			14			148			62			240		11			22			22			319			91			465
Liabilities for capitalization plans		-			-			-			3,336			-			3,336		-			-			-			3,301			-			3,301
Difference asset / liability (3)		(32,333	)		148,026			50,677			108,441			111,856			386,667		(108,433	)		261,149			15,935			101,442			122,141			392,234
Cumulative difference		(32,333	)		115,693			166,370			274,811			386,667					(108,433	)		152,716			168,651			270,093			392,234
Ratio of cumulative difference to total interest-bearing assets		(2.5	%)		8.8	%		12.6	%		20.9	%		29.4	%				(8.4	%)		11.8	%		13.0	%		20.8	%		30.2	%

(1) Remaining contractual terms.

(2) In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 644 (R$ 102 at 12/31/2017)

(3) The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end date, considering the contractually agreed terms.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 175

Position of accounts subject to currency risk

	06/30/2018
Assets	Dollar			Chilean Peso			Other			Total
Cash and deposits on demand		5,910			2,497			5,393			13,800
Financial Assets		111,263			108,614			71,364			291,241
At Amortized Cost		76,062			91,265			59,922			227,249
Interbank deposits		5,305			1,166			10,766			17,237
Securities purchased under agreements to resell		286			480			355			1,121
Securities		20,242			-			426			20,668
Loan operations and lease operations portfolio		53,681			92,045			50,474			196,200
(-) Provision for Expected Loss		(3,452	)		(2,426	)		(2,099	)		(7,977	)
At Fair Value Through Other Comprehensive Income		20,328			10,336			10,180			40,844
Securities		20,330			10,338			10,180			40,848
(-) Provision for Expected Loss		(2	)		(2	)		-			(4	)
At Fair Value Through Profit or Loss		12,560			7,013			1,262			20,835
Securities		4,927			282			762			5,971
Derivatives		7,633			6,731			500			14,864
Financial assets designated at fair value through profit or loss		2,313			-			-			2,313
Securities and Equity Instruments		2,313			-			-			2,313
Total assets		117,173			111,111			76,757			305,041

	06/30/2018
Liabilities	Dollar			Chilean Peso		Other		Total
Deposits		44,815			55,238		53,849		153,902
Securities sold under repurchase agreements		23,958			2,478		3,490		29,926
Financial liabilities designated at fair value through profit or loss		240			-		-		240
Derivatives		8,081			5,810		510		14,401
Interbank market debt		27,997			6,827		4,917		39,741
Institutional market debt		46,622			32,383		3,655		82,660
Total liabilities		151,713			102,736		66,421		320,870
Net position		(34,540	)		8,375		10,336		(15,829	)

Position of accounts subject to currency risk

	12/31/2017
Assets	Dollar			Chilean Peso			Other			Total
Cash and deposits on demand		4,958			2,527			2,990			10,475
Financial Assets		92,768			98,027			67,135			257,930
At Amortized Cost		60,143			80,785			56,348			197,276
Interbank deposits		8,473			469			13,739			22,681
Securities purchased under agreements to resell		196			-			594			790
Securities		9,605			-			454			10,059
Loan operations and lease operations portfolio		44,320			82,510			43,388			170,218
(-) Provision for Expected Loss		(2,451	)		(2,194	)		(1,827	)		(6,472	)
At Fair Value Through Other Comprehensive Income		19,963			10,881			6,583			37,427
Securities		19,963			10,881			6,583			37,427
At Fair Value Through Profit or Loss		10,916			6,361			4,204			21,481
Securities		6,869			158			3,720			10,747
Derivatives		4,047			6,203			484			10,734
Financial assets designated at fair value through profit or loss		1,746			-			-			1,746
Securities and Equity Instruments		1,746			-			-			1,746
Total assets		97,726			100,554			70,125			268,405

	12/31/2017
Liabilities	Dollar			Chilean Peso		Other		Total
Deposits		42,890			52,393		47,358		142,641
Securities sold under securities repurchase agreements		14,488			63		2,110		16,661
Financial liabilities designated at fair value through profit or loss		465			-		-		465
Derivatives		5,441			5,538		306		11,285
Interbank market debt		19,446			5,836		4,072		29,354
Institutional market debt		30,906			29,565		3,047		63,518
Total liabilities		113,636			93,395		56,893		263,924
Net position		(15,910	)		7,159		13,232		4,481

The exposure to share price risk is disclosed in Note 7 related to financial assets - At Amortized Cost and Note 10, related to Financial Assets at Fair Value Through Other Comprehensive Income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 176

Liquidity risk

Liquidity risk is defined as the possibility of the institution not being able to efficiently honor its expected and unexpected, current and future obligations, including those arising from guarantee binding, without affecting its daily operations and not incurring in significant losses.

Policies and procedures

Liquidity risk control is performed by an area independent of the business areas and is responsible for determining the composition of the reserve; proposing assumptions for the behavior of cash flow; identifying, assessing, monitoring, controlling and reporting, on a daily basis, the exposure to liquidity risk in different time horizons; proposing and monitoring liquidity risk limits consistent with the institution’s appetite for risk, reporting possible mismatches; considering the liquidity risk individually in the countries where ITAÚ UNIBANCO HOLDING operates; simulating the behavior of cash flow under stress conditions; assessing and reporting in advance the risks inherent in new products and transactions, and reporting the information required regulatory bodies. All activities are subject to checking by validation, internal control and audit independent areas.

The measurement of liquidity risk covers all financial transactions of ITAÚ UNIBANCO HOLDING companies, as well as possible contingent or unexpected exposures, such as those arising from settlement services, provision of collaterals and guarantees, and credit facilities contracted and not used. This process is conducted by means of corporate systems and proprietary applications developed and managed in-house.

The liquidity management policies and respective limits are established based on prospective scenarios and top management’s guidelines. These scenarios are reviewed on a periodic basis, by analyzing the need for cash due to atypical market conditions or resulting from strategic decisions of ITAÚ UNIBANCO HOLDING.

The document that details the guidelines established by the internal policy on liquidity risk management, that is not part of the financial statements, may be viewed on the website www.itau.com.br/investor-relations, in the section Corporate Governance/Rules and Policies / Public Access Report – Liquidity Risk.

Itaú Unibanco conducts the control over and management of liquidity risk on a daily basis, through a governance approved in superior committees, which sets forth, among other activities, the adoption of liquidity minimum limits, sufficient to absorb possible cash losses in stress scenarios, measured through internal and regulatory methodologies.

Additionally, and in compliance with the requirements of CMN Resolution No. 4,090 of May 24, 2012 and BACEN Circular N° 3,749 of March 5, 2015 , the Statement of Liquidity Risk (DRL) is sent to BACEN on a monthly basis, and the following items for monitoring and supporting decisions are periodically prepared and submitted to top management:

· Different scenarios projected for changes in liquidity;

· Contingency plans for crisis situations;

· Reports and charts that describe the risk positions;

· Assessment of funding costs and alternative sources of funding;

· Monitoring of changes in funding through a constant control over sources of funding, considering the type of investor and maturities, among other factors.

In compliance with BACEN Circular Letter 3.775, of July 14, 2016, 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, which is reported on a consolidated basis for institutions that are part of the Prudential Conglomerate. This ratio is calculated based on a methodology defined by the Central Bank of Brazil itself, and is in line with international guidelines of Basel.

The summarized index calculation is presented in the table below. In 2018, the index minimum requirement is 90%. Further details on the LCR for the period may be accessed at www.itau.com.br/investor-relations, section Corporate Governance/ Capital and Risk Management - Pillar 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 177

	2nd quarter 2018
Information on the Liquidity Coverage Ratio (LCR)	Total Adjusted Amount(1)
Total high-quality liquid assets (2)		172,178
Total potential cash outflows (3)		101,584
Liquidity Coverage Ratio (%)		169.5	%

(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, whichever is lower.

Primary sources of funding

ITAÚ UNIBANCO HOLDING has different sources of funding, of which a significant portion is from the retail segment. Total funding from clients reached R$ 630.9 billion (R$ 622.1 billion at 12/31/2017), particularly funding from time deposits. A considerable portion of these funds – 37.2% of total, or R$ 234.5 billion – is available on demand to the client. However, the historical behavior of the accumulated balance of the two largest items in this group – demand and savings deposits - is relatively consistent with the balances increasing over time and inflows exceeding outflows for monthly average amounts.

	06/30/2018						12/31/2017
Funding from clients	0-30 days		Total		%		0-30 days		Total		%
Deposits		226,915		426,595		-		216,842		402,938
Demand deposits		70,646		70,646		11.2		68,973		68,973		11.1
Savings deposits		127,342		127,342		20.2		119,980		119,980		19.3
Time deposits		27,766		225,761		35.8		27,798		211,800		34.0
Other		1,161		2,846		0.5		91		2,185		0.4
Funds from acceptances and  issuance of securities (1)		5,926		115,008		18.2		6,820		107,581		17.3
Funds from own issue (2)		1,408		35,392		5.6		2,570		58,837		9.5
Subordinated debt		217		53,926		8.5		1,315		52,696		8.5
Total		234,466		630,921		100.0		227,547		622,052		100.0

(1) Includes mortgage notes, real estate credit bills, agribusiness, financial and structured operations certificates recorded in interbank market and debts and liabilities for issuance of debentures and foreign borrowing and securities recorded in funds from institutional markets.

(2) Refer to deposits received under securities repurchase agreements with securities from own issue.

Control over liquidity

ITAÚ UNIBANCO HOLDING manages its liquidity reserves based on estimates of funds that will be available for investment, considering the continuity of business in normal conditions.

During the period of 2018, ITAÚ UNIBANCO HOLDING maintained appropriate levels of liquidity in Brazil and abroad. Liquid assets (cash and deposits on demand, securities purchased under agreements to resell - funded position and government securities – available, detailed in the table Undiscounted future flows – Financial assets) totaled R$ 151.6 billion and accounted for 64.7% of the short term redeemable obligations, 24.0% of total funding, and 15.9% of total assets.

The table below shows the indicators used by ITAÚ UNIBANCO HOLDING in the management of liquidity risk:

Liquidity indicators	06/30/2018 %		12/31/2017 %
Net assets (1) / funds within 30 days (2)		64.7		72.2
Net assets (1) / total funds (3)		24.0		26.4
Net assets (1) / total financial assets (4)		15.9		17.6

(1) Net assets: Cash and deposits on demand, Securities purchased under agreements to resell – Funded position and Government securities - available. Detailed in the table Undiscounted future flows – Financial assets.

(2) Table Funding from clients (Total Funding from clients 0-30 days).

(3) Table funding from clients (Total funding from clients).

(4) Detailed in the table Undiscounted future flows – Financial assets, total present value regards R$ 954,582 (R$ 933,686 at 12/31/2017).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 178

The following table presents assets and liabilities according to their remaining contractual maturities, considering their undiscounted flows.

Undiscounted future flows except for derivatives	06/30/2018										12/31/2017
Financial assets (1)	0 - 30 days		31 - 365 days		366 - 720 days		Over 720 days		Total		0 - 30 days		31 - 365 days		366 - 720 days		Over 720 days		Total
Cash and deposits on demand		25,402		-		-		-		25,402		18,749		-		-		-		18,749
Interbank investments		165,714		104,750		637		467		271,568		93,218		173,663		673		508		268,062
Securities purchased under agreements to resell – Funded position (2)		45,432		-		-		-		45,432		38,833		-		-		-		38,833
Securities purchased under agreements to resell – Financed position		104,216		97,883		-		-		202,099		31,238		167,061		-		-		198,299
Interbank deposits (4)		16,066		6,867		637		467		24,037		23,147		6,602		673		508		30,930
Securities		84,181		14,162		14,556		97,298		210,197		110,667		24,960		16,717		76,923		229,267
Government securities - available		76,941		290		291		5,829		83,351		103,447		152		232		5,052		108,883
Government securities – subject to repurchase commitments		422		4,437		7,460		33,376		45,695		203		15,677		9,107		19,270		44,257
Private securities - available		6,738		8,676		4,796		48,781		68,991		7,007		8,577		5,541		45,885		67,010
Private securities – subject to repurchase commitments		80		759		2,009		9,312		12,160		10		554		1,837		6,716		9,117
Derivative financial instruments		7,890		8,664		2,968		8,198		27,720		7,978		5,363		2,756		6,746		22,843
Net position		7,890		8,664		2,968		8,198		27,720		7,978		5,363		2,756		6,746		22,843
Swaps		103		1,696		1,536		7,433		10,768		189		1,258		1,661		6,082		9,190
Option		737		3,248		1,094		300		5,379		430		1,748		865		294		3,337
Forward (onshore)		5,311		708		1		-		6,020		6,529		382		-		-		6,911
Other derivative financial instruments		1,739		3,012		337		465		5,553		830		1,975		230		370		3,405
Loan and lease operations portfolio (3)		64,512		160,825		80,916		223,079		529,332		57,505		152,660		71,107		201,881		483,153
Total financial assets		347,699		288,401		99,077		329,042		1,064,219		288,117		356,646		91,253		286,058		1,022,074

(1) The assets portfolio does not take into consideration the balance of compulsory deposits in Central Bank, amounting to R$ 84,800 (R$ 98,837 at 12/31/2017), which release of funds is linked to the maturity of the liability portfolios. The amounts of PGBL and VGBL are not considered in the assets portfolio because they are covered in Note 30.

(2) Net of R$ 3,684 (R$ 3,664 at 12/31/2017) which securities are restricted to guarantee transactions at B3 S.A. and the Central Bank of Brazil.

(3) Net of payment to merchants of R$ 50,983 (R$ 53,687 at 12/31/2017) and the amount of liabilities from transactions related to credit assignments R$ 4,539 (R$ 4,931 at 12/31/2017).

(4) Includes R$ 11,983 (R$ 6,689 at 12/31/2017) related to Compulsory Deposits with Central Banks of other countries.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 179

Undiscounted future flows except for derivatives	06/30/2018															12/31/2017
Financial liabilities	0 – 30 days			31 – 365 days			366 – 720 days			Over 720 days			Total			0 – 30 days			31 – 365 days			366 – 720 days			Over 720 days			Total
Deposits		236,612			55,676			18,167			174,140			484,595			222,782			61,672			16,500			152,961			453,915
Demand deposits		70,646			-			-			-			70,646			68,973			-			-			-			68,973
Savings deposits		127,342			-			-			-			127,342			119,980			-			-			-			119,980
Time deposit		36,839			54,549			18,130			174,120			283,638			33,114			60,272			16,445			152,903			262,734
Interbank deposits		1,782			1,127			37			20			2,966			712			1,400			55			58			2,225
Other deposits		3			-			-			-			3			3			-			-			-			3
Compulsory deposits		(36,660	)		(12,896	)		(4,090	)		(31,154	)		(84,800	)		(40,538	)		(18,197	)		(4,644	)		(35,458	)		(98,837	)
Demand deposits		(5,292	)		-			-			-			(5,292	)		(4,790	)		-			-			-			(4,790	)
Savings deposits		(22,687	)		-			-			-			(22,687	)		(26,008	)		-			-			-			(26,008	)
Time deposit		(8,681	)		(12,896	)		(4,090	)		(31,154	)		(56,821	)		(9,740	)		(18,197	)		(4,644	)		(35,458	)		(68,039	)
Securities sold under repurchase agreements (1)		237,300			27,838			14,949			39,356			319,443			232,970			35,234			30,404			39,444			338,052
Government securities		199,978			3,945			6,575			33,272			243,770			202,545			3,197			8,260			27,680			241,682
Private securities		7,336			22,920			8,374			6,084			44,714			8,020			31,348			22,144			11,764			73,276
Foreign		29,986			973			-			-			30,959			22,405			689			-			-			23,094
Funds from acceptances and issuance of securities (2)		7,673			43,326			44,383			39,331			134,713			7,093			43,463			21,325			52,837			124,718
Borrowing and onlending (3)		3,868			36,999			10,425			15,652			66,944			3,975			37,132			9,839			19,807			70,753
Subordinated debt (4)		362			6,751			5,911			52,222			65,246			1,061			13,402			2,054			49,454			65,971
Derivative financial instruments		7,788			10,948			5,240			8,460			32,436			7,596			5,816			4,877			8,457			26,746
Net position		7,788			10,948			5,240			8,460			32,436			7,596			5,816			4,877			8,457			26,746
Swaps		187			4,752			4,080			7,474			16,493			65			2,364			3,747			7,516			13,692
Option		883			2,963			817			315			4,978			332			1,299			889			273			2,793
Forward (onshore)		5,631			2			-			-			5,633			6,272			-			-			-			6,272
Other derivative financial instruments		1,087			3,231			343			671			5,332			927			2,153			241			668			3,989
Total financial liabilities		456,943			168,642			94,985			298,007			1,018,577			434,939			178,522			80,355			287,502			981,318

(1) Includes own and third parties’ portfolios.

(2) Includes mortgage notes, real estate credit bills, agribusiness, financial bills and structured operations certificates recorded in interbank market funds and liabilities for issuance of debentures and foreign securities recorded in funds from institutional markets.

(3) Recorded in funds from interbank markets.

(4) Recorded in funds from institutional markets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 180

	06/30/2018										12/31/2017
Off balance sheet	0 – 30 days		31 – 365 days		366 – 720 days		Over 720 days		Total		0 – 30 days		31 – 365 days		366 – 720 days		Over 720 days		Total
Financial Guarantees Provided		1,656		17,692		6,297		44,475		70,120		1,749		17,563		5,451		45,726		70,489
Commitments to be released		103,260		30,627		6,429		128,455		268,771		98,310		27,857		7,307		110,652		244,126
Letters of credit to be released		10,305		-		-		-		10,305		9,214		-		-		-		9,214
Contractual commitments - Fixed assets and Intangible (Notes 15 and 16)		-		219		460		273		952		-		432		460		273		1,165
Total		115,221		48,538		13,186		173,203		350,148		109,273		45,852		13,218		156,651		324,994

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 181

Note 37 – Supplementary information

Acquisition of minority interest in XP Investimentos S.A.

On May 11, 2017, ITAÚ UNIBANCO HOLDING, through its subsidiary ITAÚ UNIBANCO, entered into an agreement for the purchase and sale of shares with XP Controle Participações S.A. (XP CONTROLE), G.A. Brasil IV Fundo de Investimento em Participações, Dyna III Fundo de Investimento em Participações, among other parties (SELLERS), for acquisition of 49.9% of total capital (30.1% of common shares) of XP Investimentos S.A. (XP HOLDING), by means of capital contribution of R$ 600 and acquisition of shares issued by XP HOLDING and held by the SELLERS in the amount of R$ 5,700. Such amounts are subject to contractual adjustments (FIRST ACQUISITION). A portion of this amount will be withheld as a guarantee for possible future obligations of XP CONTROLE, for a 10-year period, and possible remaining balance will be paid to XP CONTROLE at the end of this term.

In addition to the FIRST ACQUISITION, ITAÚ UNIBANCO undertook to acquire (i) in 2020, and additional percentage of 12.5%, that will ensure it 62.4% of total capital of XP HOLDING (40.0% of common shares), based on a multiple (19 times) applied to XP HOLDING’s earnings, and (ii) in 2022, the additional percentage of 12.5%, which will ensure it 74.9% of total capital of XP HOLDING (49.9% of common shares), based on the fair market value of XP HOLDING at that time, being clear that the control of Group XP will continue with the shareholders of XP CONTROLE, that will hold the majority of voting shares.

ITAÚ UNIBANCO will act as a minority partner and will not influence commercial and operating policies of XP HOLDING or of any other company belonging to Group XP.

Effective acquisitions and financial settlements will occur after compliance with certain contractual conditions and obtainment of required regulatory authorizations.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2018 182