EX-99.1 2 tv505802_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Risk Management – Pillar 3

OBJECTIVE		4

KEY INDICATORS		4

1	RISK MANAGEMENT	5
1.1	Risk Appetite	6
1.2	Risk Culture	7
1.3	Risk and Capital Governance	7
1.4	Risk- adjusted Compensation	8

2	CAPITAL	9
2.1	Capital Management	9
2.2	Capital Adequacy Assessment	9
2.3	Stress Testing	9
2.4	Recovery Plan	10
2.5	Capital Requirements in Place and in Progress	11
2.6	Capital Composition	13
2.7	Risk-Weighted Asset (RWA)	15
	Risk-Weighted Assets for Credit Risk (RWA_CPAD)	16
	Risk-Weighted Assets for Market Risk (RWA_MINT)	17
	Risk-Weighted Assets for Operational Risk (RWA_OPAD)	17
2.8	Additional Capital Buffers	18
2.9	Capital Adequacy	19
2.10	Leverage Ratio	21

3	BALANCE SHEET	22
	Balance Sheet	22
	Institutions that comprise the Financial Statements of Itaú Unibanco Holding	24
	Material entities	25

4	INVESTMENTS IN OTHER ENTITIES NOT CLASSIFIED IN THE TRADING BOOK	26

5	CREDIT RISK	27
5.1	Framework and Treatment	27
5.2	Credit Portfolio Analysis	28
	Operations with Credit Granting Characteristics by Countries and by Brazil Geographic Regions	28
	Operations with Credit Granting Characteristics by Economic Sector	29
	Remaining maturity of loan transactions	30
	Concentration on the Major Debtors	30
	Overdue Amounts	31
	Allowance for Loan Losses	31
	Mitigating Instruments	32
	Counterparty Credit Risk	33
	Acquisitions, Sale or Transfer of Financial Assets	35
	Operations of Securitization	36
	Credit Derivatives	37

6	MARKET RISK	38
6.1	Framework and Treatment	38
6.2	Portfolio Analysis	39
	Interest rate risk in the banking book	39
	Evolution of the Trading Book	40
	Evolution of the Derivatives Portfolio	40
	VaR - Consolidated Itaú Unibanco	41
	VaR and Stresses VaR Internal Model – Regulatory Portfolio	41
	Stress Testing	42
	Backtesting	42
	Pricing of Financial Instruments	42

Itaú Unibanco

Risk and Capital Management – Pillar 3

7	OPERATIONAL RISK	43
7.1	Framework and Treatment	43
7.2	Crisis Management and Business Continuity	44
7.3	Independent Validation of Risk Models	45

8	LIQUIDITY RISK	46
8.1	Framework and Treatment	46
8.2	Liquidity Coverage Ratio (LCR)	47

9	OTHER RISKS	48
	Insurance products, pension plans and premium bonds risks	48
	Social and Environmental Risk	48
	Regulatory Risk	48
	Model Risk	49
	Country Risk	49
	Business and Strategy Risk	49
	Reputational Risk	49

10	APPENDIX I	51

11	GLOSSARIES	54
11.1	Glossary of Acronyms	54
11.2	Glossary of Regulations	56

Itaú Unibanco

Risk Management – Pillar 3

Objective

This document presents Itaú Unibanco Holding S.A. (Itaú Unibanco) information required by the Central Bank of Brazil (BACEN) through Circular 3,678 and subsequent amendments, which address the disclosure of information on risks management, calculation of risk-weighted assets (RWA), and calculation of the Total Capital (“Patrimônio de Referência” - PR), in accordance with Itaú Unibanco’s institutional standards.

For further information than the contained on this document, please visit http://www.itau.com.br/investor-relations.

The information available in the website http://www.itau.com.br/investor-relations and referred to in this document is supplementary to this publication, and there were no important amendments between the dates of its disclosure and the base date of this report.

Key indicators

Itaú Unibanco’s risk and capital management focuses on maintaining the institution in line with the risk strategy approved by the Board of Directors. The key indicators based on the Prudential Consolidation, on September 30, 2018, are summarized below.

Common Equity Tier I Ratio	Tier I Ratio	Total Capital Ratio
13.9%	14.9%	16.9%
June 30, 2018: 14.1%	June 30, 2018: 15.1%	June 30, 2018: 17.2%

Common Equity Tier I	Tier I	Total Capital
R$ 113,313 million	R$ 121,386 million	R$ 137,252 million
June 30, 2018: R$ 110,457 million	June 30, 2018: R$ 118,203 million	June 30, 2018: R$ 134,072 million

RWA		Credit Risk Exposure
R$ 812,625 million		R$ 713,435 million
June 30, 2018: R$ 780,728 million		June 30, 2018: R$ 685,245 million

Itaú Unibanco

Risk Management – Pillar 3

Risk Management

To undertake and manage risks is one of the activities of Itaú Unibanco. For this reason, the institution must have clearly established risk management objectives. In this context, the risk appetite defines the nature and the level of risks acceptable for the institution, while the risk culture guides the attitudes required to manage them. Itaú Unibanco seeks to maintain robust and company-wide risk management processes to serve as a basis for its strategic decisions intended to ensure business sustainability.

These processes are in line with the guidelines of the Board of Directors and Executives who, through corporate bodies, define the institution’s global objectives, which are then translated into targets and thresholds for the business units that manage risks. Control and capital management units, in turn, support Itaú Unibanco’s management through the processes of analysis and monitoring capital and risk assessment processes.

The principles that provide risk management and risk appetite fundamentals, as well as guidelines regarding the actions taken by Itaú Unibanco’s employees in their daily routines are as follows:

Sustainability and customer satisfaction: the vision of Itaú Unibanco is to be a leading bank in sustainable performance and customer satisfaction. For this reason, the institution is concerned about creating shared values for employees, customers, shareholders and society to ensure the longevity of the business. Itaú Unibanco is concerned about doing business that is good for customers and for the institution;

Risk Culture: the institution’s risk culture goes beyond policies, procedures and processes, strengthening the employees’ individual and collective responsibility to do the right thing, at the right time and in the right way, with respect for ethical business. The Risk Culture is described in item 1.2 “Risk Culture”;

Price for Risk: Itaú Unibanco operates and assumes risks in business that it knows and understands, avoids unknown risks or risks that provide no competitive advantages, and carefully assesses risk-return ratios;

Diversification: the institution has low appetite for volatility in its results. Accordingly, it operates with a diversified base of customers, products and business, seeking risk diversification and giving priority to low-risk transactions;

Operational excellence: Itaú Unibanco intends to provide agility, as well as a robust and stable infrastructure, so as to offer high quality services;

Ethics and respect for regulations: at Itaú Unibanco, ethics is non-negotiable. For this reason, the institution promotes an institutional environment of integrity, educating its employees to cultivate ethical relationships and businesses, as well as respecting the norms, and therefore caring for the institution’s reputation.

On August 21, 2017, the Resolution CMN 4,557 put into force, which established the structure of risk and capital management. The resolution highlights are the implementation of a continuous and integrated risk management framework; the requirements for the definition of the Risk Appetite Statement (RAS) and the stress test program; the establishment of a Risk Committee; the indication, before BACEN, of the Chief Risk Officer (CRO); and the CRO’s roles, responsibilities and independence requirements.

Itaú Unibanco complies with the best risk and capital management practices set forth in CMN Resolution 4,557; accordingly, there is no significant impact arising from its adoption.

Itaú Unibanco

Risk Management – Pillar 3

1.1

Risk Appetite

In 2016, Itaú Unibanco reviewed its risk appetite policy, which was established and approved by the Board of Directors and guides the institution’s business strategy. The bank’s risk appetite is grounded on the following declaration of the Board of Directors:

“We are a universal bank, operating predominantly in Latin America. Supported by our risk culture, we operate based on rigorous ethical and regulatory compliance standards, seeking high and growing results, with low volatility, by means of the long-lasting relationship with clients, correctly pricing risks, well-distributed fund-raising and proper use of capital.”

Based on this declaration, the bank established five dimensions, each of which comprising a set of metrics associated with the key risks involved, combining complementary measurements and seeking a comprehensive view of its exposure:

Capitalization: establishes that Itaú Unibanco should have sufficient capital to protect against a serious recession or stress events without the need to adjust its capital structure under adverse circumstances. It is monitored by following up on the bank’s capital ratios in usual or stress situations, and debt issue ratings.

Liquidity: establishes that the institution’s liquidity should be able to support long stress periods. It is monitored by following up on liquidity ratios.

Composition of results: establishes that business will mainly focus on Latin America, where Itaú Unibanco will have a diversified range of customers and products, with low appetite for results volatility and high risk. This dimension includes business and profitability, as well as market and credit risks aspects. The metrics monitored by the bank seek to ensure, by means of exposure concentration limits such as, for example, industry sectors, quality of counterparties, countries and geographic regions and risk factors, a suitable composition of the bank’s portfolios, aiming at low volatility of results and business sustainability.

Operational risk: focuses on controlling operational risk events that may adversely impact the bank’s business strategy and operations. This control is carried out by monitoring key operational risk events and incurred losses.

Reputation: deals with risks that may impact brand value and the institution’s reputation before its customers, employees, regulators, investors and the general public. In this dimension, risks are monitored by following up on customers’ satisfaction or dissatisfaction, media exposure and observation of the institution’s conduct.

The Board of Directors is responsible for approving risk appetite guidelines and limits, performing its activities with the support of the Risk and Capital Management Committee (CGRC) and the CRO.

Metrics are regularly monitored and must comply with the limits defined. Monitoring is reported to the risk commissions and to the Board of Directors, guiding the use of preventive measures to ensure that exposures are within the limits provided and in line with the bank’s strategy.

Itaú Unibanco

Risk Management – Pillar 3

1.2

Risk Culture

Aiming at strengthening its values and aligning the behavior of its employees with risk management guidelines, the institution adopts several initiatives to disseminate and strengthen its Risk Culture, which is based on four principles: conscious risk taking, discussion about and actions on the institution’s risks, and each and everyone’s responsibility for risk management.

In addition to the bank’s policies, procedures and processes of risk management, the Risk Culture strengthens the employees’ individual and collective responsibility in understanding, identifying, measuring, managing and mitigating the risks connected to their activities, respecting business management with ethics.

The institution promotes its Risk Culture by emphasizing a behavior that helps people of all company levels to undertake and manage risks in a conscious way. By disseminating these principles, the institution fosters the understanding and an open discussion about the risks, so that they are kept within the risk appetite levels established, so that each employee individually, regardless of their position, area or duties, may also assume responsibility for managing the risks of the business.

Itaú Unibanco also makes some channels available for communication of operating failures, internal or external fraud, conflicts at the workplace, or cases that may result in inconveniences and/or losses for the institution or its customers. All employees or third parties are responsible for informing any problems immediately, as soon as they become aware of a situation.

1.3

Risk and Capital Governance

The Board of Directors is the main body responsible for establishing the guidelines, policies and authority levels regarding risk and capital management. In turn, the CGRC provides support to the Board of Directors in the performance of their duties relating to risk and capital management. At the executive level, corporate bodies headed by Itaú Unibanco’s Chief Executive Officer (CEO) are established to manage risks and capital. Their decisions are overseen by the CGRC.

Additionally, the institution has corporate bodies that perform delegated duties in the risk and capital management, and that are headed by the Vice-President of the Risk and Finance Area (ARF).

Furthermore, to support this structure, ARF is structured with specialized departments. The objective is provide independent and centralized management of the institution’s risks and capital, and ensuring the accordance with established rules and procedures.

A detailed description of the structure can be found on the Consolidated Annual Report, section “Our Risk Management”. The Consolidated Annual Report can be found in the website www.itau.com.br/investor-relations, section Itaú Unibanco.

Itaú Unibanco’s risk management organizational structure complies with Brazilian and international regulations in place and is aligned with the market’s best practices. Responsibilities for risk management at Itaú Unibanco are structured according to the concept of three lines of defense, namely:

in the first line of defense, the business and corporate support areas manage risks they give rise to, by identifying, assessing, controlling and reporting such risks;

in the second line of defense, an independent unit provides central control, so as to ensure that Itaú Unibanco’s risk is managed according to the risk appetite and established policies and procedures. This centralized control provides the Board and executives with a global overview of Itaú Unibanco’s exposure, to ensure correct and speedy corporate decisions;

in the third line of defense, internal audit provides an independent assessment of the institution’s activities, so that senior management can see that controls are adequate, risk management is effective and institutional standards and regulatory requirements are being complied with.

Itaú Unibanco uses robust automated systems for full compliance with capital regulations, as well as for measuring risks in accordance with the regulatory determinations and models in place. It also monitors adherence to the qualitative and quantitative regulators’ minimum capital and risk management requirements.

Itaú Unibanco

Risk Management – Pillar 3

1.4

Risk-adjusted Compensation

The Compensation guidelines are aimed at attracting, retaining and compensating on merit its employees, encouraging prudent risk exposure levels in short, medium and long-term strategies. The Compensation Committee, in accordance with the CMN Resolution No. 3,921, and the FEBRABAN’s normative SARB 017/2016 and with the reporting to the Board of Directors, is responsible for setting out the guidelines on models of compensation to employees and the policy on compensation of management members of the Itaú Unibanco companies.

The practices of compensation take into account the strategy of the institution, the general and specific legislation that should be adopted for each business or region of operation, and the adequate risk management over time. Variable compensation considers the current and potential risks, giving incentive to the achievement of sustainable results and discouraging decisions that involve excess risks and inadequacies.

For more information about remuneration in Itaú Unibanco, see section “Our Governance” in the Consolidated Annual Report, which is available on the website www.itau.com.br/investor-relations, section Itaú Unibanco.

Itaú Unibanco

Risk Management – Pillar 3

Capital

2.1

Capital Management

The Board of Directors is the main body in the Itaú Unibanco’s capital management and it is responsible for approving the capital management institutional policy and guidelines regarding the institution’s capitalization level. The Board is also responsible for the full approval of ICAAP (Internal Capital Adequacy Assessment Process) report, a process which is intended to assess the adequacy of Itaú Unibanco’s capital.

At the executive level, corporate bodies are responsible for approving risk assessment and capital calculation methodologies, as well as reviewing, monitoring and recommending capital related documents and topics to the Board of Directors.

In order to provide the Board with data required, management reports are prepared to inform the institution’s capital adequacy, as well as capital level forecasts under usual and stress conditions. There is a structure in place for coordination and consolidation of information and related processes, which are all subject to verification by the independent validation, internal controls and audit areas.

The guidelines of the institutional capital management policy can be accessed at www.itau.com.br/investor-relations, Itaú Unibanco, under Corporate Governance, Rules and Policies.

2.2

Capital Adequacy Assessment

For its capital adequacy assessment process, the annual Itaú Unibanco’s procedure is as follows:

Identification of the risks to which the institution is exposed and analysis of their materiality;

Assessment of the need for capital to cover the material risks;

Development of methods for quantifying additional capital;

Quantification of capital and internal capital adequacy assessment;

Capital and Contingency Plan;

Submission of report to BACEN.

By adopting a prospective stance regarding capital management, Itaú Unibanco implemented its capital management structure and its ICAAP in order to comply with National Monetary Council (CMN) Resolution 4,557, BACEN Circular 3,846 and BACEN Circular Letter 3,841.

The result of the last ICAAP – dated as of December 2017 – showed that, in addition to having enough capital to face all material risks, Itaú Unibanco has a significant cushion, thus ensuring the soundness of its equity position.

2.3

Stress Testing

The stress test is a process of simulating extreme economic and market conditions on the institution's results and capital. The institution has been carrying out this test in order to assess its solvency in plausible scenarios of systemic crisis, as well as to identify areas that are more susceptible to the impact of stress that may be the subject of risk mitigation.

For the purposes of the test, the economic research area estimates macroeconomic variables for each stress scenario. The scenarios are defined according to their importance for the institution results and the likelihood of their occurrence, and they are submitted annually to the Board of Directors for approval. Projections for the macroeconomic variables (such as GDP, the basic interest rate and inflation) and for variables in the credit market (such as raisings, lending, default rates, margins and charges) used are based on exogenous shocks or through use of models validated by an independent area.

Then, the stress scenarios adopted are used to influence the budgeted result and balance sheet, of which the risk-weighted assets and the capital and liquidity ratios are derived.

The stress test is also an integral part of the ICAAP (Internal Capital Adequacy Process), the main purpose of which is to assess whether, even in severely adverse situations, the institution would have adequate levels of capital, without any impact on the development of its activities.

This information enables potential risk factors in the business to be identified, and provides support for the strategic decisions of the Board of Directors, the budgeting and risk management process, as well as serving as an input for measuring risk appetite.

Itaú Unibanco

Risk Management – Pillar 3

2.4

Recovery Plan

In response to the latest international crises, the Central Bank of Brazil issued Resolution No. 4.502, dated June 30, 2016, requiring a recovery plan to be drawn up by systemically important financial institutions (financial institutions with a total exposure of more than 10% of GDP). The purpose of this plan is to reestablish adequate levels of capital and liquidity, in excess of the minimum regulatory levels, through appropriate strategies in the event of severe systemic or idiosyncratic shocks. Accordingly, an institution would be able to preserve its financial feasibility and continuity without jeopardizing the operation of the National Financial System, and minimizing the need to resort to bailout.

The first version of the Recovery Plan was delivered to the Central Bank of Brazil by Itaú Unibanco in December 2017, after approval by the Board of Directors. The plan covers the whole conglomerate and the overseas subsidiaries. The document will be reviewed annually, so as to ensure that the strategies remain up to date and feasible in the event of organizational, competitive or systemic changes.

To this end, Itaú Unibanco’s recovery plan describes the institution’s critical functions and essential services; and it provides for monthly monitoring, using a set of indicators, of potential risks to solvency and liquidity, and reporting by committees to senior management; and it defines the severe stress scenarios of a systemic and idiosyncratic nature that threaten the institution’s ability to simulate strategies for the recovery of capital and liquidity, their financial impact, the risks of putting it into effect, and potential mitigators. It also establishes a transparent communications plan for the use of all stakeholders.

This comprehensive exercise ensures that, even at times of severe stress, which are extremely unlikely to occur, Itaú Unibanco will have strategies for generating sufficient resources for the sustainable maintenance of its critical activities and essential services, without damaging its investors, the financial system or the other participants in the markets where it operates.

Itaú Unibanco

Risk Management – Pillar 3

2.5

Capital Requirements in Place and in Progress

Itaú Unibanco’s minimum capital requirements follow the set of resolutions⁽¹⁾ and circulars disclosed by BACEN that implemented, in Brazil, the global capital requirement standards known as Basel III. These are expressed as ratios of the capital available – stated by the Total Capital, composed by the Tier I Capital (which comprises the Common Equity and Additional Tier I Capital) and Tier II Capital – and the risk-weighted assets (RWA).

The Total Capital, Tier I Capital and Common Equity Tier I Capital ratios are calculated on a consolidated basis, applied to institutions included in Prudential Conglomerate⁽²⁾, which comprises not only financial institutions but also collective financing plans (“consórcios”), payment entities, factoring companies or companies that directly or indirectly assume credit risk, and investment funds in which the institution retains substantially all 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 uses standardized approaches to calculate credit and operational risk-weighted asset amounts.

From September 1st, 2016, BACEN has authorized Itaú Unibanco to use internal market risk models to determine the total amount of regulatory capital (RWAMINT), replacing the portion RWAMPAD, as set out in BACEN Circular 3,646.

The standardized approach continues to be used for external units. Accordingly, the use of the internal models does not apply to the following units: Argentina, Chile, Itaú BBA International, Colombia, Paraguay and Uruguay.

Credit, market and operational risks approaches are treated as described in section “2.7 Risk-Weighted Assets (RWA)”.

From January 1st, 2018 to December 31st, 2018, the minimum Total Capital ratio required is 8.625%, and following the schedule for a gradual reduction, it will be 8% on January 1st, 2019.

Beyond the minimum requirement, the BACEN rules call for Additional Capital Buffers (ACP), corresponding to the sum of the components ACP_Conservation, ACP_{Countercyclical} and ACP_Systemic, which, along with the requirements mentioned, increase capital requirement over time. The amount of each component and the minimum regulatory requirements, as provided for in CMN Resolution 4,193, are described in the table below.

Basel III also redefined the requirements for qualifying the instruments eligible for Tier I and Tier II Capital, which in Brazil are regulated by CMN Resolution 4,192. This reform included a phase-out schedule for instruments currently included in capital, which were issued before the rule came into effect and which do not fully meet the new requirements.

The table below presents the schedule of implementation of Basel III rules in Brazil, as defined by BACEN. The information correspond to the percentages of Itaú Unibanco’s risk weighted assets.

Basel III - Implementation Schedule	From January 1^st
	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 Capital Buffers (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⁾

The countercyclical capital buffer is fixed by the Financial Stability Committee (Comef) based on discussions about the pace of credit expansion (BACEN Communication No. 32.516/18), and currently is set to zero. Should the requirement increase, the new percentage takes effect twelve months after the announcement.

⁽²⁾

Minimum requirements valid from 1 January, 2019 onwards.

⁽¹⁾ The standards that implemented the Basel III rules in Brazil were disclosed on March 1, 2013 through Resolutions No. 4,192 to No. 4,195 of the National Monetary Council (CMN) (Resolution No. 4,195 was revoked by Resolution No. 4,280), together with 15 Circulars published by BACEN on March 4, 2013, as amended.

⁽²⁾ Further details of Prudential Conglomerate can be found in BACEN Circular No. 3,701, CMN Resolution No. 4,280 or in the link: http://www.bcb.gov.br/?BRPRUDENTIALFINREG.

Itaú Unibanco

Risk Management – Pillar 3

In addition to the minimum capital requirements, BACEN Circular 3,748 has been in force since the fourth quarter of 2015. It incorporates the Leverage Ratio in the Basel III framework in Brazil. More details are given in section “2.10 Leverage Ratio” in this report.

Also, in March 2015, Circular BACEN 3,751 came into force. It provides for the calculation of relevant indicators to identify Global Systemically Important Banks (G-SIBs) among financial institutions in Brazil. Following the Basel methodology for identifying G-SIBs, Itaú Unibanco’s score was 39 at 2016. A institution is considered G-SIB whether its score reaches at least 130. Information on the values of the G-SIBs indicators can be found at www.itau.com.br/investor-relations, section Reports, Pillar 3 and Global Systemically Important Banks.

The compliance of BACEN with the standards recommended by the Basel Committee was assessed at the end of 2013, under the Regulatory Consistency Assessment Programme (RCAP)⁽³⁾. The rules effective in Brazil were considered compliant—pursuant to the Bank for International Settlements (BIS), Brazil is a compliant jurisdiction—i.e., the capital standards established in Brazil are also consistent with the internationally accepted minimum requirements. The pointed out discrepancies were considered immaterial.

Minimum capital requirement for Insurance

The National Council of Private Insurance (CNSP) issued CNSP Resolutions 321, 343 and 360, which, among other things, deals with the minimum capital requirements for underwriting, credit, operating and market risks for insurers, open private pension entities, premium bonds companies and reinsurers.

⁽³⁾ Regulatory Consistency Assessment Programme (RCAP). Assessment of Basel III regulations in Brazil, December 2013, updated in March 2017 with no additional material points.

Itaú Unibanco

Risk Management – Pillar 3

2.6

Capital Composition

The Total Capital, used to monitor compliance with the operational limits imposed by BACEN, is the sum of three items, namely:

Common Equity Tier I: sum of social capital, reserves and retained earnings, less deductions and prudential adjustment;

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, it makes up Total Capital.

The table below presents the composition of the referential equity and its components (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⁽¹⁾							R$ million
	09/30/2018			06/30/2018			09/30/2017
Stockholders’ equity Itaú Unibanco Holding S.A. (Consolidated)		125,035			121,758			123,631
Non-controlling interest in subsidiaries		13,580			13,166			11,445
Changes in ownership interest in a subsidiary in capital transactions		467			810			1,818
Consolidated Stockholders’ Equity (BACEN)		139,082			135,734			136,894
Common Equity Tier I prudential adjustments		(25,769	)		(25,277	)		(16,634	)
Common Equity Tier I		113,313			110,457			120,260
Instruments eligible to comprise Additional Tier I		7,985			7,664			-
Additional Tier I prudential adjustments		88			82			51
Additional Tier I Capital		8,073			7,746			51
Tier I (Common Equity Tier I + Additional Tier I Capital)		121,386			118,203			120,311
Instruments eligible to comprise Tier II		15,778			15,778			19,723
Tier II prudential adjustments		88			91			68
Tier II		15,866			15,869			19,791
Reference Equity (Tier I + Tier II)		137,252			134,072			140,102

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

The most significant prudential adjustments for Itaú Unibanco are shown in the following table. Together, they account for more than 90% of the prudential adjustments as of September 30, 2018.

Prudential Adjustments⁽¹⁾										R$ million
	09/30/2018			06/30/2018			09/30/2017			Ref. Appendix I
Goodwill paid upon the acquisition of investments		8,354			9,059			8,094		(e)
Intangible assets		7,895			7,937			4,899		(h) / (i)
Tax credits		6,093			5,841			4,620		(b)
Minority shareholders’ primary capital surplus		343			329			421
Adjustments related to the market value of derivative financial instruments used to hedge the cash flows of protected items whose mark-to-market adjustments are not recorded in the books		(1,309	)		(1,447	)		(1,722	)
Prudential Adjustments subject to exemption limits (deferred tax assets from temporary differences, investments in insurance companies and investments in financial institutions not consolidated).		4,348			3,374			-
Others		45			184			322
Total		25,769			25,277			16,634

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

During the year of 2018, Itaú Unibanco bought back R$ 510 million of its own shares. These shares are shown as “Treasury Shares”, which reached a balance of R$ (1,963) million as of September 30, 2018. Treasury shares reduce our shareholders’ equity, resulting in a decrease in the capital base.

In this period, the amount of dividends and Interest on capital paid / provided for, which affects Itaú Unibanco’s capital base, was R$ 19,396 million. Dividends are deducted from the institution’s shareholders’ equity, thus reducing its capital base. The interest on capital that is booked directly to income as an expense reduces the institution’s net income, reducing, consequently, the capital base.

More details about Total Capital are given in Appendix I (“Breakdown of the Total Capital and Information on its Adequacy) in this report.

Itaú Unibanco

Risk Management – Pillar 3

The table below presents subordinated debts and other instruments eligible for Additional Tier I and Tier II capital:

																	R$ million
Instruments Eligible for Additional Tier I Capital	Maturities												09/30/2018		06/30/2018		09/30/2017
Name of instrument	<1 year		1-2 years		2-3 years		3-4 years		4-5 years		> 5 years or Perpetual		Total		Total		Total
Subordinated Perpetual Debt		-		-		-		-		-		7,985		7,985		7,664		-
Instruments Eligible for Additional Tier I Capital (Sep/18)		-		-		-		-		-		7,985		7,985		7,664		-

Instruments Eligible for Tier II Capital	Maturities												09/30/2018		06/30/2018		09/30/2017
Name of instrument	<1 year		1-2 years		2-3 years		3-4 years		4-5 years		> 5 years		Total		Total		Total
Financial Bills		2,964		48		13		2,653		1,879		-		7,556		9,433		18,240
Euronotes		-		4,070		5,008		14,692		7,544		-		31,314		30,148		24,765
Subordinated Debt (Sep/18)		2,964		4,118		5,021		17,345		9,422		-		38,870		39,581		43,005
Subordinated Debt Not Elegible to Capital		321		217		214		312		360		13,427		14,851		14,345		5,401
Subordinated Debt - Total Sep/18)		3,285		4,335		5,235		17,657		9,783		13,427		53,721		53,926		48,406
Subordinated Debt after Reducer (Sep/18)		-		824		2,008		10,407		7,538		-		20,777		21,609		23,195
Subordinated Debt after Reducer (Dec/12)		-		990		290		4,235		7,093		26,514		39,122
Preferred Shares (Dec/12)		-		-		323		-		-		-		323
Threshold ⁽¹⁾ Instruments Eligible for Tier II Capital (Dec/12)		-		396		245		1,694		2,837		10,606		15,778
Instruments Eligible for Tier II Capital (Sep/18) ⁽²⁾		-		396		245		1,694		2,837		10,606		15,778
Total Instruments Eligible for Capital (Sep/18)		-		396		245		1,694		2,837		18,591		23,763

⁽¹⁾

Instruments Eligible for Tier II Capital with application of threshold in accordance with the current rules (Resolution 4,192 - Art 28).

⁽²⁾

According to current legislation, the accounting balance of instruments eligible for Tier II Capital as of December 2012 was used for the calculation of total capital as of September, 2018.

The perpetual subordinated notes / Additional Tier I (AT1), issued on December 12, 2017 and March 19, 2018, were approved by BACEN, increasing by 0.97 p.p. the Tier I Capital Ratio of the institution.

For further details of instruments that are part of the Total Capital, please visit the website www.itau.com.br/investor-relations, section Reports, under Pillar 3 and Global Systemically Important Banks – Spreadsheet Support, Appendix I and II – Pillar 3, Appendix II – Main Features of the Total Capital (PR) Instruments.

Itaú Unibanco

Risk Management – Pillar 3

2.7

Risk-Weighted Asset (RWA)

According to CMN Resolution 4,193 and subsequent amendments, for assessing the minimum capital requirements, the RWA must be calculated by adding the following portions:

RWA = RWA_CPAD+ RWA_MINT + RWA_OPAD

RWA_CPAD= portion related to exposures to credit risk, calculated using standardized approach;

RWA_MINT= portion related to the market risk capital requirement, made up of the maximum between the internal model and 80% of the standardized model, and regulated by BACEN Circulars 3,646 and 3,674;

RWA_OPAD= portion related to the operational risk capital requirement, calculated using standardized approach.

The table below presents the evolution of RWA composition of Itaú Unibanco.

Composition of Risk-Weighted Asset ⁽¹⁾											R$ million
Risk exposures	09/30/2018				06/30/2018				09/30/2017
Risk-Weighted Assets for Credit Risk (RWA_CPAD)		713,435	87.8	%		685,245	87.8	%		637,758		88.6	%
Risk-Weighted Assets for Market Risk (RWA_MINT)		26,356	3.2	%		25,015	3.2	%		18,864		2.6	%
Risk-Weighted Assets for Operational Risk (RWA_OPAD)		72,833	9.0	%		70,468	9.0	%		63,013		8.8	%
Risk-Weighted Assets (RWA)		812,625	100.0	%		780,728	100.0	%		719,635		100.0	%

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

Itaú Unibanco

Risk Management – Pillar 3

Risk-Weighted Assets for Credit Risk (RWA_CPAD)

The table below presents the credit risk-weighted assets (RWA_CPAD), regulated by BACEN Circular 3,644, segregated by risk weighting factor and by asset type:

Composition of Risk-Weighted Assets for Credit Risk (RWA_CPAD)⁽¹⁾					R$ million
	09/30/2018		06/30/2018		09/30/2017
Risk exposures
Exposure weighted by credit risk (RWA_CPAD)		713,435		685,245		637,758
a) Per Weighting Factor (FPR):
FPR at 2%		138		128		160
FPR at 4%		299		248		-
FPR at 10%		346		315		-
FPR at 20%		8,720		7,338		5,999
FPR at 35%		19,194		16,622		15,272
FPR at 50%		45,085		48,365		46,376
FPR at 75%		153,953		150,817		133,580
FPR at 85%		69,672		72,244		78,300
FPR at 100%		341,342		331,647		315,584
FPR at 250%		42,492		41,422		28,757
FPR at 300%⁽⁶⁾		15,610		-		3,465
FPR up to 1250%⁽²⁾		2,301		2,068		4,249
Derivatives – Variation of the counterparty credit quality		5,894		4,766		6,015
Default Funds⁽³⁾		4		3		-
Securitization⁽⁴⁾		8,385		9,262		-

Exposure weighted by credit risk (RWA_CPAD)		713,435		685,245		637,758
b) Per Type:
Securities		39,378		37,930		43,495
Loan operations - Retail		119,876		117,128		104,667
Loan operations - Non-retail		258,853		256,663		229,604
Joint liabilities - Retail		161		149		183
Joint liabilities - Non-retail		46,027		45,262		45,224
Loan commitments - Retail		33,875		33,499		28,726
Loan commitments - Non-retail		10,544		10,871		9,120
Derivatives - Future potential gain⁽⁵⁾		4,739		4,294		5,530
Intermediation Operations		3,292		2,912		-
Other exposures		196,690		176,537		171,209

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

⁽²⁾

Taking into consideration the application of the "F" factor required by Article 29 of BACEN Circular 3,644.

⁽³⁾

As from the first quarter of 2018, the balances relating to Default Funds are being weighted according to the calculation defined in Article 20-A of Circular 3,644 (amended by Circular 3,849), replacing the RPF of 1250%.

⁽⁴⁾

As from the first quarter of 2018, the balance relating to Securitization was segregated, according to the calculation defined in Circular 3,848.

⁽⁵⁾

The balances of Derivatives - Future Potential Gain are distributed in their respective FPRs.

⁽⁶⁾

As from the third quarter of 2018, considers the impact of CMN Resolution 4.680.

Itaú Unibanco

Risk Management – Pillar 3

Risk-Weighted Assets for Market Risk (RWA_MINT)

The market risk weighted assets (RWA_MINT) component is regulated by BACEN Circulars 3,646 and 3,674.

The table below includes the breakdown of the market risk component:

Composition of Risk-Weighted Assets for Market Risk (RWA_MINT)⁽¹⁾							R$ million
	09/30/2018			06/30/2018			09/30/2017
Risk-Weighted Assets for Market Risk - Standard Aproach (RWA_MPAD)		32,946			31,269			23,056
Operations subject to interest rate variation		28,860			28,040			21,655
Fixed income interest rate denominated in reais		3,519			3,469			4,971
Foreign exchange linked interest rate		19,130			18,614			11,623
Price index linked interest rate		6,211			5,957			5,062
Interest rate linked interest rate		0			0			0
Operations subject to commodity price variation		643			854			412
Operations subject to stock price variation		418			355			273
Operations subject to the risk of exposures in gold, foreign currency and foreign exchange variations		3,025			2,019			716
Minimum Market Risk Weighted Assets - Standard Aproach (RWAMPAD) ⁽¹⁾ (a)		26,356			25,015			18,445
Market Risk Weighted Assets calculated based on internal methodology (b)		23,378			18,593			18,864
Reduction of Market Risk Weighted Assets due to Internal Models Aproach (IMA)		(6,589	)		(6,254	)		(4,192	)
Market Risk Weighted Assets (RWAMINT) - maximum of (a) and (b)		26,356			25,015			18,864

⁽¹⁾

Market risk weighted-assets calculated based on internal models, with a maximum saving possibility of 20% of the standard model.

On September 30, 2018, RWA_MINT reached R$ 26,356 million, that corresponds to 80% of RWAMPAD, which in turn is higher than the capital requirement following intern models, which totalized R$ 23,378 million.

Risk-Weighted Assets for Operational Risk (RWA_OPAD)

BACEN Circulars 3,640, 3,316 and subsequent amendments established the criteria for determining the portion of risk-weighted assets related to the capital required for operational risk (RWA_OPAD). Itaú Unibanco uses the Alternative Standardised Approach. In accordance with current regulation, the exposure of RWA_OPAD is calculated on a semiannual basis, related to June 30 and December 31.

The RWA for operational risk is presented below:

Composition of Risk-Weighted Assets for Operational Risk (RWA_OPAD) ⁽¹⁾					R$ million
	09/30/2018		06/30/2018		09/30/2017
Risk-Weighted Assets for Operational Risk (RWA _OPAD)		72,833		70,468		63,013
Retail		12,822		12,790		11,607
Commercial		26,214		26,375		24,857
Corporate finance		2,697		2,799		2,663
Negotiation and sales		11,736		10,013		7,434
Payments and settlements		8,282		8,196		7,532
Financial agent services		4,343		4,280		3,892
Asset management		6,715		5,994		5,010
Retail brokerage		24		21		18

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

Itaú Unibanco

Risk Management – Pillar 3

2.8

Additional Capital Buffers

A requirement for Additional Capital Buffers (ACP) came into effect in the first quarter of 2016. Details of its portions are shown below:

Additional Capital Buffers (ACP)⁽¹⁾					R$ million
	09/30/2018		06/30/2018		09/30/2017
Additional Capital Buffers requirements (ACP_requirement)		19,300		18,543		10,794
conservation		15,237		14,639		8,995
countercyclical		-		-		-
systemically importance		4,063		3,904		1,799

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

BACEN Circular 3,769 describes the method for calculating the portion of ACP_{countercyclical}. Details of its portions are shown below for the relevant jurisdictions:

Additional Capital Buffers - countercyclical (ACP_{countercyclical})⁽⁴⁾

	09/30/2018		06/30/2018		09/30/2017						R$ million
	RWA_CPrNBi⁽¹⁾						ACCP⁽²⁾			date of announcement	date of effectiveness
Brazil		426,402		397,306		398,339		0	%	oct/15	jan/16
Chile ⁽³⁾		93,566		97,582		78,751		0	%	-	-
Total		519,968		494,888		477,090		-		-	-

⁽¹⁾

Portion of the RWA balance for credit risk exposure to the non-banking private sector in the relevant jurisdictions.

⁽²⁾

Percentage of countercyclical buffer for the principal jurisdictions.

⁽³⁾

Method of calculating countercyclical buffer not announced in this jurisdiction. According to Article 2 of BACEN Circular No. 3,769 the ACCP of Brazil value should be used.

⁽⁴⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

Itaú Unibanco

Risk Management – Pillar 3

2.9

Capital Adequacy

Itaú Unibanco, through ICAAP process, assesses the adequacy of its capital to face the incurred risks, composed by regulatory capital for credit, market and operational risks and by the necessary capital to face other risks.

In order to ensure the soundness of Itaú Unibanco and the availability of capital to support business growth, Itaú Unibanco maintains capital levels above the minimum requirements, according to the Common Equity Tier I, Additional Tier I Capital, and Tier II minimum ratios.

On September 30, 2018, the Total Capital (PR) reached R$ 137,252 million, R$ 121,386 million of Tier I and R$ 15,866 million of Tier II.

Composition of Referential Equity (PR)⁽¹⁾					R$ million
	09/30/2018		06/30/2018		09/30/2017
Tier I		121,386		118,203		120,311
Common Equity Tier I		113,313		110,457		120,260
Additional Tier I Capital		8,073		7,746		51
Tier II		15,866		15,869		19,791
Referential Equity (PR)		137,252		134,072		140,102
Required Referential Equity (PRE)		70,089		67,338		66,566
Excess capital in relation to Required Referential Equity		67,163		66,734		73,536
Additional Capital Buffers (ACP_requirement)		19,300		18,543		10,794
Referential equity calculated for covering the interest rate risk of trades of the banking book (RBAN)		1,949		2,388		2,462

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

The Total Capital Ratio reached 16.9% in September 30, 2018, decreasing 0.3 bps relatively to June 30, 2018, mainly due to the acquisition of the investment in XP Investimentos.

Besides, Itaú Unibanco has an R$ 67,163 million capital excess in relation to its required Total Capital, higher than the Additional Capital Buffers requirement of R$ 19,300 million, largely covered by total capital available.

The Fixed Assets Ratio (“Índice de Imobilização”) indicates the level of adjusted Total Capital committed to adjusted permanent assets. Itaú Unibanco is within the maximum limit of 50% of the adjusted Total Capital, as established by BACEN.

The Total Capital and Fixed Assets ratios are presented in the table below.

Basel and Fixed Asset Ratios⁽¹⁾							R$ million
	09/30/2018			06/30/2018			09/30/2017
Basel ratio		16.9	%		17.2	%		19.5	%
Tier I		14.9	%		15.1	%		16.7	%
Common Equity Tier I		13.9	%		14.1	%		16.7	%
Additional Tier I Capital		1.0	%		1.0	%		0.0	%
Tier II		2.0	%		2.0	%		2.8	%
Fixed assets ratio		26.1	%		21.4	%		23.5	%
Excess Capital in Relation to Fixed Assets		32,854			38,332			37,165

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

The perpetual subordinated notes / Complementary Capital (AT1), issued on December 12, 2017 and March 19, 2018, were approved by BACEN, increasing by 0.97 p.p. the institution’s Level I.

Itaú Unibanco

Risk Management – Pillar 3

On September 30, 2018, the CET1 fully loaded with Basel III rules and considering the 90 basis points impact of the investment in XP Investimentos reached 13,8% and the Tier I capital ratio fully loaded reached 14,8%.

Simulated Common Equity Tier I with Fully Loaded Basel III Rules

⁽¹⁾

Includes deductions of Goodwill, Intangible Assets, Tax Credits, Equity Investments in Financial Institutions, Insurance and similar companies, and the increase of the multiplier of the amounts of market risk, operational risk and certain credit risk accounts. This multiplier is at 11.6 nowadays and will be 12.5 in 2019.

⁽²⁾

Proforma impact in June 2018 based on preliminary information. In August 2018, the investment in XP Investimentos was acquired, in accordance with the authorization of the regulatory bodies.

Itaú Unibanco

Risk Management – Pillar 3

2.10

Leverage Ratio

The Leverage Ratio is defined as the ratio between Tier I Capital and Total Exposure, calculated according to BACEN Circular 3,748. The ratio is intended to be a simple measure of non-risk-sensitive leverage, and so it does not take into account risk weighs or risk mitigation. As required by BACEN Circular Letter 3,706, Itaú Unibanco has been reporting the Leverage Ratio to BACEN monthly since October 2015.

As from January 1, 2018, the Resolution 4,615 was put into force and established minimum requirement at 3% for the Leverage Ratio.

The following information is based on the methodology and standard format introduced by BACEN Circular 3,748. As of 30 September, 2018, Itaú Unibanco’s Leverage Ratio reached 8,4%.

	Comparative Summary of Published Financial Statements and Leverage Ratio
								R$ Thousand
		09/30/2018			06/30/2018			09/30/2017
1	Total assets according to published financial statements		1,613,161,633			1,542,684,090			1,465,999,788
2	Adjustment for differences in consolidation of accounts		(188,249,447	)		(183,693,249	)		(170,452,691	)
3	Adjustment for assets assigned or transferred with substantial transfer of risks and benefits and		(3,584,471	)		(3,967,011	)		(4,479,180	)
4	Adjustment for changes in reference values and potential future gains on derivative financial		12,606,573			12,858,968			11,395,595
5	Adjustment for repurchase transactions and securities lending		13,094,110			10,852,265			13,369,988
6	Adjustment for transactions not booked in prudential conglomerate's total assets		114,388,601			112,778,440			121,560,149
7	Other adjustments		(115,500,243	)		(101,106,214	)		(101,889,788	)
8	Total Exposure		1,445,916,756			1,390,407,289			1,335,503,861

	Disclosure of information on Leverage Ratio ⁽¹⁾
								R$ Thousand
		09/30/2018			06/30/2018			09/30/2017
	Items shown in the Balance Sheet
1	Balance sheet items other than derivative financial instruments, securities received on loan and resales for settlement under repurchase transactions		1,020,019,383			1,009,519,370			950,646,623
2	Adjustments for equity items deducted in calculating Level I Capital		(30,825,792	)		(31,369,738	)		(33,593,928	)
3	Total exposure shown in the Balance Sheet		989,193,592			978,149,632			917,052,694
	Transactions using Derivative Financial Instruments
4	Replacement value for derivatives transactions		25,215,809			24,268,194			18,168,004
5	Potential future gains from derivatives transactions		13,767,009			13,134,823			12,601,643
6	Adjustment for collateral in derivatives transactions		-			-			-
7	Adjustment for daily margin held as collateral		-			-			-
8	Derivatives in the name of customers where there is no contractual obligation to reimburse in the event of bankruptcy or default of the entities responsible for the settlement system		(7,445,495	)		(6,142,586	)		-
9	Reference value adjusted for credit derivatives		7,092,846			6,941,034			2,615,931
10	Adjustment of reference value calculated for credit derivatives		(807,787	)		(1,074,303	)		(3,821,980	)
11	Total exposure for derivative financial instruments		37,822,382			37,127,162			29,563,599
	Repurchase Transactions and Securities Lending (TVM)
12	Investments in repurchase transactions and securities lending		286,550,419			247,832,318			253,957,432
13	Adjustment for repurchases for settlement and creditors of securities lending		-			-			-
14	Amount of counterparty credit risk		13,094,110			10,852,265			13,369,988
15	Amount of counterparty credit risk in transactions as intermediary		4,867,651			3,667,472			-
16	Total exposure for repurchase transactions and securities lending		304,512,181			262,352,056			267,327,420
	Off-balance sheet items
17	Reference value of off-balance sheet transactions		341,329,404			340,084,276			299,381,136
18	Adjustment for application of FCC specific to off-balance sheet transactions		(226,940,803	)		(227,305,836	)		(177,820,987	)
19	Total off-balance sheet exposure		114,388,601			112,778,440			121,560,149
	Capital and Total Exposure
20	Level I		121,385,672			118,203,165			120,311,093
21	Total Exposure		1,445,916,756			1,390,407,289			1,335,503,861
	Leverage Ratio
22	Basel III Leverage Ratio		8.4	%		8.5	%		9.0	%

⁽¹⁾

As from the fourth quarter of 2017, CitiBank's brazilian retail business commenced to be consolidated in Itaú Unibanco's financial statements.

Itaú Unibanco

Risk Management – Pillar 3

Balance Sheet

The following table presents a comparison between the Balance Sheet of Itaú Unibanco Holding S.A. presented in the Financial Statements and of Prudential Consolidation.

Comparison of balance sheets – Assets										R$ million
	Consolidated Balanced Sheet			Diferences ⁽¹⁾			Prudential			Ref. Appedix I ⁽²⁾
Assets	09/30/2018
Current assets and Long-term receivables		1,578,127			(208,689	)		1,369,439
Cash and cash equivalents		29,467			(524	)		28,943
Interbank investments		320,965			(5,771	)		315,194
Securities and derivative financial instruments		428,260			(198,923	)		229,337
Interbank accounts		125,741			-			125,741
Interbranch accounts		246			-			246
Loan, lease and other credit operations		496,293			4			496,297
Other receivables		174,497			(3,403	)		171,095
Tax credit and Actuarial Assets		-			-			20,857
Tax credits arising from income tax losses and social contribution		-			-			6,093		(b)
Credits resulting from temporary differences		-			-			14,396		(c)
Actuarial assets related to defined benefit pension funds		-			-			369		(d)
Other		-			-			150,238
Other assets		2,658			(73	)		2,585
Permanent assets		35,034			20,439			55,474
Investments		12,653			21,364			34,016
Goodwill based on the expectation of future profitability		-			-			686		(e)
investments in the capital of companies that are similar to non-consolidated financial institutions and insurance companies		-			-			8,474		(f)
investments in the capital of financial institutions		-			-			7,770		(a)
Other		-			-			17,086
Real estate in use		6,301			(550	)		5,751
Deferred permanent assets		-			-			-		(a)
Other		-			-			5,751
Goodwill		1,283			(808	)		476
Goodwill based on the expectation of future profitability		-			-			476		(e)
Intangible assets		14,798			433			15,230
Acquisition of rights to credit payroll		1,186			-			1,186
Intangible assets acquired from October 1^st 2013		-			-			1,069		(h)
Intangible assets acquired before October 1^st 2013		-			-			117		(i)
Other intangible assets		23,008			11,061			34,069
Intangible assets acquired from October 1^st 2013		-			-			10,437		(h)
Intangible assets acquired before October 1^st 2013		-			-			2,134		(i)
Goodwill based on the expectation of future profitability		-			-			20,902		(e)
Deferred permanent assets		-			-			453		(g)
Other		-			-			143
(Accumulated amortization)		(9,397	)		(10,628	)		(20,025	)
Intangible assets acquired from October 1^st 2013		-			-			(4,205	)	(h)
Intangible assets acquired before October 1^st 2013		-			-			(1,657	)	(i)
Goodwill based on the expectation of future profitability		-			-			(13,709	)	(e)
Deferred permanent assets		-			-			(453	)	(g)
Total assets		1,613,162			(188,249	)		1,424,912

⁽¹⁾

Differences are mainly due to non-consolidation of non financial companies (highlighting the following companies: Insurance, Pension Plan and Premium Bonds) within the Prudential Conglomerate and also by the eliminations of transactions with related parties.

⁽²⁾

Prudential information that is presented in Annex I of this document.

Itaú Unibanco

Risk Management – Pillar 3

Comparison of balance sheets – Liabilities										R$ million
	Consolidated Balanced Sheet			Diferences⁽¹⁾			Prudential			Ref. Appedix ⁽²⁾
Liabilities	09/30/2018
Current and Long-term Liabilities		1,471,863			(188,629	)		1,283,234
Deposits		454,552			5,553			460,104
Deposits received under securities repurchase agreements		314,575			760			315,335
Funds from acceptances and issuance of securities		118,684			-			118,684
Interbank accounts		43,345			-			43,345
Interbranch accounts		5,783						5,786
Borrowings and onlending		67,258			(2	)		67,256
Derivative financial instruments		31,827			-			31,827
Technical provision for insurance, pension plan and capitalization		196,748			(196,748	)		-
Other liabilities		239,090			1,806			240,896
Social and statutory		15,263			(1,889	)		13,374
Tax credits arising from income tax losses and social contribution		-			-			4,091
Provision of Actuarial assets related to defined benefit pension funds		-			-			323		(b)/( c)
Other		-			-			8,960		(d)
Other		-			-			227,522
Deferred income		2,603			(6	)		2,596
Non-controlling interest in subsidiaries		13,661			(81	)		13,580
Non-controlling interest in subsidiaries that are part of the conglomerate		-			-			13,580		(l)
Other		-			-			(0	)
Stockholders' equity		125,035			467			125,503
Capital		97,148			-			97,148
Eligible Instruments		-			-			97,148		(k)
Capital reserves		1,732			-			1,732
Capital reserves		-			-			1,732		(m)
Revenue reserves		31,742			(732	)		31,010
Revenue reserves		-			-			31,010		(l)
Others		-			-
Asset valuation adjustment		(3,624	)		1,199			(2,425	)
Other revenue and other reserve		-			-			(2,425	)	(m)
Others		-			-			(0	)
(Treasury shares)		(1,963	)		-			(1,963	)	(n)
Shares or other instruments issued by the bank		-			-			(1,963	)
Total liabilities and stockholders' equity		1,613,162			(188,249	)		1,424,912

⁽¹⁾

Differences are mainly due to non-consolidation of non financial companies (highlighting the following companies: Insurance, Pension Plan and Premium Bonds) within the Prudencial Conglomerate and also by the eliminations of transactions with related parties.

⁽²⁾

Prudential information that is presented in Annex I of this document.

Itaú Unibanco

Risk Management – Pillar 3

Institutions that comprise the Financial Statements of Itaú Unibanco Holding

The lists below provides the institutions that comprise the financial statements and the Prudential Consolidation of Itaú Unibanco.

List of institutions that comprise the Financial Statements of Itaú Unibanco Holding

Institutions that comprise the financial statements and the Prudential Consolidation
AJ Títulos Públicos Fundo de Investimento Renda Fixa Referenciado DI		Itaú Distribuidora de Títulos e Valores Mobiliários S.A.
Banco Investcred Unibanco S.A.		Itaú EU Lux-Itaú Latin America Equity Fund
Banco Itaú (Suisse) SA		Itaú Global Absolute Return Exclusivo Fundo de Invest em Cotas de Fdos de Inv Multimercado Inv Ext
Banco Itaú Argentina S.A.		Itaú Global Absolute Return Fundo de Investimento Multimercado Investimento no Exterior
Banco Itaú BBA S.A.		Itaú International Securities Inc.
Banco Itaú Consignado S.A.		Itaú Kinea Private Equity Multimercado Fundo de Investimento em Cotas de Fundos de Investimento Crédito Privado
Banco Itaú International		Itaú Securities Services Colombia S.A. Sociedad Fiduciaria
Banco Itaú Paraguay S.A.		Itaú Unibanco Holding Cayman Branch
Banco Itaú Uruguay S.A.		Itaú Unibanco Holding S.A.
Banco Itaú Veículos S.A.		Itaú Unibanco S.A.
Banco ItauBank S.A.		Itaú Unibanco S.A. Grand Cayman Branch
Banco Itaucard S.A.		Itaú Unibanco S.A. Nassau Branch
Banco Itauleasing S.A.		Itaú Unibanco S.A. New York Branch
CorpBanca New York Branch		Itaú Unibanco S.A. Tokyo Branch
Dibens Leasing S.A. - Arrendamento Mercantil		Itaú Unibanco Veículos Administradora de Consórcios Ltda.
FIDC NP América Multicarteira		Itaú Valores S.A.
Fideicomisos Financiero Privados BHSA		Itauvest Distribuidora de Títulos e Val. Mobiliários S.A.
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		ITB Holding Ltd.
Fundo de Invest Dir Creditórios Não Padron NPL II		Kinea Ações Fundo de Investimento em Ações
Fundo de Investimento em Direitos Creditórios Não-Padronizados Barzel		Kinea Ações Fundo de Investimento em Cotas de Fundos de Investimento em Ações
Fundo Fortaleza de Investimento Imobiliário		Kinea I Pipe Fundo de Investimento em Ações
Hipercard Banco Múltiplo S.A.		Kinea I Private Equity FIP Multiestrategia
Intrag Distribuidora de Títulos e Valores Mobiliários Ltda.		Kinea I Total Return Equity - Fundo de Investimento em Cotas de Fundos de Investimento Multimercado
Iresolve Companhia Securitizadora de Créditos Financeiros S.A.		Kinea II Macro Fundo de Investimento Multimercado Crédito Privado
Itaú (Panamá) S.A.		Licania Fund Limited
Itaú Administradora de Consórcios Ltda.		Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria		MCC S.A. Corredores de Bolsa
Itaú Bank & Trust Bahamas Ltd.		MCC Securities Inc.
Itaú Bank & Trust Cayman Ltd.		Microinvest S.A. Soc. de Crédito a Microempreendedor
Itau Bank, Ltd.		OCA S.A.
Itau BBA International plc		Oiti Fundo de Investimento Multimercado Crédito Privado Investimento no Exterior
Itau BBA USA Securities Inc.		Olympus Fundo de Investimento Renda Fixa
Itaú Casa de Valores S.A.		RedeCard S.A.
Itaú Cia. Securitizadora de Créditos Financeiros		RT Enterprise Soberano Renda Fixa Fundo de Investimento
Itaú Comisionista de Bolsa Colombia S.A.		RT Itaú Dj Títulos Públicos Fundo de Investimento Renda Fixa Referenciado DI
Itaú Corpbanca		RT Scala Renda Fixa - Fundo de Investimento em Cotas de Fundos de Investimento
Itaú Corpbanca Colombia S.A.		RT Voyager Renda Fixa Crédito Privado - Fundo de Investimento
Itaú Corredores de Bolsa Limitada		Uni-Investment International Corp.
Itaú Corretora de Valores S.A.		Universo FIP Multiestratégia

Itaú Unibanco

Risk Management – Pillar 3

Institutions that comprise only the financial statements
ACCS Administradora e Corretora de Seguros Ltda.		Itaú Institucional Renda Fixa Curto Prazo Fundo de Investimento
Albarus S.A.		Itau International Holding Limited
Banco Del Paraná S.A.		Itau Middle East Limited
BICSA Holdings, Ltd.		Itaú Participação Ltda.
BIE Cayman Ltd.		Itaú Rent Administração e Participações Ltda.
Borsen Renda Fixa Crédito Privado - Fundo de Investimento		Itaú Seguros S.A.
CGB II SpA		Itau USA Asset Management Inc.
CGB III SpA		Itaú Vida e Previdência S.A.
Cia. Itaú de Capitalização		Itauprev Retirement Renda Fixa Crédito Privado - Fundo de Investimento
Corplegal S.A.		Itaúsa Europa - Investimentos, SGPS, Unipessoal, Lda
Estrel Serviços Administrativos S.A.		Itauseg Participações S.A.
FC Recovery S.A.U.		Itauseg Saúde S.A.
FIC Promotora de Vendas Ltda.		ITAUSEG SEGURADORA S.A.
iCarros Ltda.		ITB Holding Brasil Participações Ltda.
IGA PARTICIPAÇÕES S.A.		Itrust Servicios Inmobiliarios S.A.I.C.
Investimentos Bemge S.A.		IU Corretora de Seguros Ltda.
IPI - Itaúsa Portugal Investimentos, SGPS, Unipessoal, Lda		Karen International Limited
Itaú Administração Previdenciária Ltda.		Kinea Investimentos Ltda.
Itaú Administradora General de Fondos S.A.		Maxipago Serviços de Internet Ltda.
Itaú Asesorías Financieras S.A.		MCC Asesorías Limitada
Itau Asia Securities Limited		Mundostar S.A.
Itau Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión		Nevada Woods S.A.
Itaú Bahamas Directors Ltd.		Proserv - Promociones y Servicios, S.A. de C.V.
Itaú Bahamas Nominees Ltd.		Provar Negócios de Varejo Ltda.
Itaú BBA Colombia S.A. Corporacion Financiera		Recovery do Brasil Consultoria S.A.
Itau BBA International (Cayman) Ltd.		RT Alm 5 Fundo de Investimento Renda Fixa
Itaú BBA México, S.A. de C.V.		RT Alm Soberano 2 Fundo de Investimento Renda Fixa
Itaú BBA Participações S.A.		RT Columbia Renda Fixa Crédito Privado - Fundo de Investimento em Cotas de Fundos de Investimento
Itaú BBA Trading S.A.		RT Defiant Multimercado - Fundo de Investimento
Itaú Chile Compañía de Seguros de Vida S.A.		RT Endeavour Renda Fixa Crédito Privado - Fundo de Investimento
Itaú Chile Inversiones, Servicios y Administracion S.A.		RT Multigestor 4 Fundo de Investimento em Cotas De Fundos de Investimento Multimercado
Itaú Corpbanca Recaudaciones y Cobranzas S.A.		RT Nation Renda Fixa - Fundo de Investimento
Itaú Corredor de Seguros Colombia S.A.		RT Valiant Renda Fixa - Fundo de Investimento
Itaú Corredores de Seguros S.A.		Topaz Holding Ltd.
Itaú Corretora de Seguros S.A.		Tulipa S.A.
Itaú Europa Luxembourg S.A.		Unión Capital AFAP S.A.
Itaú Gestão de Vendas Ltda.

Material entities

Total assets, stockholders’ equity, country and the industries of the material entities, including those subject to the risk weight for the purpose of capital requirements are as follows:

Major Institutions													R$ million
			09/30/2018				06/30/2018				09/30/2017
Institutions	Country	Activity	Total Assets		Equity		Total Assets		Equity		Total Assets		Equity
Itaú Corpbanca Colombia S.A. ⁽¹⁾	Colombia	Financial institution		40,085		4,516		40,089		4,364		34,244		3,624
Banco Itaú Argentina S.A. ⁽¹⁾	Argentina	Financial institution		5,658		516		6,226		649		6,095		724
Banco Itaú BBA S.A. ⁽¹⁾	Brazil	Financial institution		2,364		2,073		2,687		2,468		2,539		2,227
Banco Itaú Consignado S.A. ⁽¹⁾	Brazil	Financial institution		28,461		2,510		28,238		2,463		29,481		2,538
Banco Itaú Paraguay S.A. ⁽¹⁾	Paraguay	Financial institution		13,202		1,462		12,871		1,330		10,376		1,149
Banco Itaú (Suisse) SA ⁽¹⁾	Switzerland	Financial institution		6,770		777		6,029		720		5,299		640
Banco Itaú Uruguay S.A. ⁽¹⁾	Uruguay	Financial institution		18,165		1,823		17,083		1,667		13,861		1,287
Banco Itaucard S.A. ⁽¹⁾	Brazil	Financial institution		96,622		9,477		95,638		9,267		93,261		8,540
Banco Itauleasing S.A. ⁽¹⁾	Brazil	Financial institution		11,946		11,665		11,915		11,638		11,888		11,538
Cia. Itaú de Capitalização	Brazil	Premium Bonds		4,419		796		4,271		737		4,445		862
Dibens Leasing S.A. - Arrendamento Mercantil ⁽¹⁾	Brazil	Leasing		45,837		5,233		52,016		5,111		92,762		4,765
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento ⁽¹⁾	Brazil	Consumer Finance Credit		5,307		840		5,067		792		4,298		975
Hipercard Banco Múltiplo S.A. ⁽¹⁾	Brazil	Financial institution		16,683		4,522		16,058		4,456		14,984		4,406
Itau Bank, Ltd. ⁽¹⁾	Cayman Islands	Financial institution		10,206		4,385		10,172		4,166		13,824		3,498
Itaú BBA Colombia S.A. Corporacion Financiera	Colombia	Financial institution		465		453		450		441		367		354
Itau BBA International plc ⁽¹⁾	United Kingdom	Financial institution		29,024		4,741		25,998		4,487		20,689		3,480
Itau BBA USA Securities Inc. ⁽¹⁾	United States	Broker		2,110		1,908		2,003		1,841		1,676		1,414
Itauseg Seguradora S.A.	Brazil	Insurance		95		78		96		78		170		76
Itaú CorpBanca ⁽¹⁾	Chile	Financial institution		136,661		17,856		133,401		17,348		110,522		14,936
Itaú Corretora de Valores S.A. ⁽¹⁾	Brazil	Broker		4,536		1,161		3,609		1,331		4,058		1,248
Itaú Seguros S.A.	Brazil	Insurance		9,850		4,242		9,448		4,017		9,647		5,638
Itaú Unibanco S.A. ⁽¹⁾	Brazil	Financial institution		1,196,536		85,564		1,149,907		81,846		1,203,114		64,713
Itaú Vida e Previdência S.A.	Brazil	Pension Plan		194,599		2,607		189,923		2,563		175,620		4,109
Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento ⁽¹⁾	Brazil	Consumer Finance Credit		7,191		747		6,583		716		5,095		639
RedeCard S.A. ⁽¹⁾	Brazil	Acquirer		63,555		16,372		60,884		16,303		56,160		15,787

⁽¹⁾

Institutions included in the Prudential Conglomerate.

Itaú Unibanco

Risk Management – Pillar 3

4	Investments in other entities not classified in the trading book

The financial statements of Itaú Unibanco and its subsidiaries have been prepared in accordance with the Corporate Law (“Lei das Sociedades por Ações”), as amended, and with the rulings issued by BACEN, CMN, CVM, SUSEP, CNSP and PREVIC, as applicable, which include accounting practices and estimates for the establishment of provisions and the valuation of financial assets.

The interests held in other entities valued at acquisition price are classified in Permanent Assets, when there is the intention to hold them, and then are tested for impairment on a six-month basis. Investments in other companies which are not intended to be held for a long term are classified as Securities, and measured at market value.

Itaú Unibanco applies its policies on a systematic basis, ensuring the consistency and comparability of its information.

In the third quarter of 2018, there were no significant amendments to policies related to investments in other entities.

Itaú Unibanco holds corporate interests mainly for strategic reasons and to obtain capital gains.

For further information on Itaú Unibanco’s accounting policies, please see Note 4 – “Summary of the main accounting practices”, to the Complete Financial Statements, that can be found on the website www.itau.com.br/investor-relations.

The assessment of equity risk not included in the trading book, designated financial investment risk, is realized on ICAAP process. This assessment simulates asset losses in a stress scenario.

The table below shows the investments in other entities not classified in the trading book. On September 30, 2018, the capital required for these investments was R$ 121.3 million.

Investments in other entities							R$ million
	09/30/2018			06/30/2018			09/30/2017
Carrying Amount		629.9			599.6			811.6
Public		509.6			480.6			681.9
Private		120.3			119.0			129.7
Fair value		826.7			773.7			1,130.3
Public		687.1			633.7			936.2
Private		139.6			140.0			194.1
Gain or losses arising on investments in other entities		0.5			0.3			9.7
Recognized and unrealized gain or losses		(123.2	)		(117.2	)		97.5
Unrecognized and unrealized gain or losses		196.8			174.1			323.7

Itaú Unibanco

Risk Management – Pillar 3

5	Credit Risk

5.1

Framework and Treatment

Itaú Unibanco defines credit risk as the risk of loss associated with: failure by a borrower, issuer or counterparty to fulfill their respective financial obligations as defined in the contracts; value loss of credit agreements resulting from deterioration of the borrower’s, issuer’s or counterparty’s credit rating; reduction of profits or income; benefits granted upon subsequent renegotiations; or debt recovery costs.

The management of credit risk is intended to preserve the quality of the loan portfolio at levels compatible with the institution’s risk appetite for each market segment in which we operate. The governance of credit risk is managed through corporate bodies, which report to the Board of Directors or to the Itaú Unibanco executive structure. Such corporate bodies act primarily by assessing the competitive market conditions, setting the credit limits for the institution, reviewing control practices and policies, and approving these actions at the respective authority levels. The risk communication and reporting process, including disclosure of institutional and supplementary policies on credit risk management, are responsibility of this structure. Itaú Unibanco manages the credit risk to which it is exposed during the entire credit cycle, from before approval, during the monitoring process and up to the collection or recovery phase.

There is a credit risk management and control structure, centralized and independent of the business units and defines operational limits, risk mitigation mechanisms and processes, and instruments to measure, monitor and control the credit risk inherent to all products, portfolio concentrations and impacts to potential changes in the economic environment. The credit’s portfolio, policies and strategies are continuously monitored so as to ensure compliance with the rules and laws in effect in each country. The key assignments of the business units are (i) monitoring of the portfolios under their responsibility, (ii) granting of credit, taking into account current approval levels, market conditions, the macroeconomic prospects, and changes in markets and products, and (iii) credit risk management aimed at making the business sustainable.

Itaú Unibanco’s credit policy is based on internal factors, such as: client rating criteria, performance and evolution of the portfolio, default levels, return rates and allocated economic capital, among others; and also take into account external factors such as: interest rates, market default indicators, inflation and changes in consumption, among others.

With respect to individuals, small and medium companies, credit ratings are assigned based on statistical application (in the early stages of relationship with a customer) and behavior score (used for customers with whom Itaú Unibanco already has a relationship) models.

For large companies, classification is based on information such as the counterparty’s economic and financial situation, its cash-generating capacity, and the business group to which it belongs, the current and prospective situation of the economic sector in which it operates. Credit proposals are analyzed on a case-by-case basis through the approval governance. The concentrations are monitored continuously for economic sectors and largest debtors, allowing preventive measures to be taken to avoid the violation of the established limits.

Itaú Unibanco also strictly controls credit exposure to clients and counterparties, acting to reserve occasional limit breaches. In this sense, contractual covenants may be used, such as the right to demand early payment or require additional collateral.

To measure credit risk, Itaú Unibanco takes into account the probability of default by the borrower, issuer or counterparty, the estimated amount of exposure in the event of default, past losses from default and concentration of borrowers. Quantifying these risk components is part of the lending process, portfolio management and definition of limits.

The models used by Itaú Unibanco are independently validated, to ensure that the databases used in constructing the models are complete and accurate, and that the method of estimating parameters is adequate.

Itaú Unibanco counts on a specific structure and processes aimed at ensuring that the country risk is managed and controlled, described in item “9 Other Risks”.

In compliance with CMN Resolution 3,721, the document “Public Access Report - Credit Risk,” which describes the guidelines established in the institutional ruling on credit risk control, can be viewed on the website www.itau.com.br/investor-relations, section Itaú Unibanco, under Corporate Governance, Rules and Policies.

Itaú Unibanco

Risk Management – Pillar 3

5.2

Credit Portfolio Analysis

The information presented in the following tables allow the analysis of the credit portfolio, and its behavior, from different dimensions.

Operations with Credit Granting Characteristics by Countries and by Brazil Geographic Regions

Operations with Credit⁽¹⁾Granting Characteristics by Countries: Exposure																							R$ million
	09/30/2018																						06/30/2018
	Brazil		Argentina		Chile		Colombia		United States of America		Paraguay		United Kingdon		Switzerland		Uruguay		Other		Total		Total
Individuals		220,732		1,032		49,565		9,967		1		3,036		-		-		3,488		28		287,849		281,317
Rural Loans		65		-		-		-		-		-		-		-		-		-		65		75
Real State		40,954		98		25,910		1,662		-		387		-		-		363		-		69,374		67,501
Payroll		43,548		-		-		-		-		-		-		-		-		-		43,548		43,110
Vehicle and Leasing		14,590		-		-		153		-		144		-		-		-		-		14,887		14,323
Credit card		87,078		633		3,078		967		-		807		-		-		2,210		-		94,773		92,753
Financial Guarantees Provided		1,185		-		20		3		1		-		-		-		4		8		1,221		1,257
Personal Loans (Other)		33,312		301		20,557		7,182		-		1,698		-		-		911		20		63,981		62,298
Companies		192,268		2,978		59,685		19,569		8,111		5,303		16,179		3,656		6,902		1,267		315,918		309,520
Rural Loans		9,280		-		-		-		-		-		-		-		-		-		9,280		8,399
Investments		29,283		18		4,851		4,017		-		8		18		-		40		34		38,269		38,727
Import and Export		32,785		529		938		973		4,188		-		8,415		3,489		227		-		51,544		51,134
Working Capital, Discount Bonds and Secured Line of Credit		77,642		1,654		46,554		12,494		3,374		5,043		7,205		-		6,256		1,082		161,304		156,483
Financial Guarantees Provided		37,571		777		7,074		1,906		549		251		541		167		326		151		49,313		48,539
Other		5,707		-		268		179		-		1		-		-		53		-		6,208		6,238
Total		413,000		4,010		109,250		29,536		8,112		8,339		16,179		3,656		10,390		1,295		603,767		590,837

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

Operations with Credit⁽¹⁾Granting Characteristics by Countries: Quarterly Average Exposure																							R$ million
	09/30/2018																						06/30/2018
	Brazil		Argentina		Chile		Colombia		United States of America		Paraguay		United Kingdon		Switzerland		Uruguay		Other		Total		Total
Individuals		218,466		1,206		48,658		9,802		1		2,964		-		-		3,460		26		284,583		275,215
Rural Loans		71		-		-		-		-		-		-		-		-		-		71		80
Real State		40,565		107		25,422		1,615		-		371		-		-		357		-		68,437		66,078
Payroll		43,328		-		-		-		-		-		-		-		-		-		43,328		42,890
Vehicle and Leasing		14,299		-		-		161		-		146		-		-		-		-		14,606		14,177
Credit card		86,064		742		3,014		942		-		805		-		-		2,195		-		93,762		91,073
Financial Guarantees Provided		1,203		-		20		3		1		1		-		-		4		7		1,239		1,226
Personal Loans (Other)		32,936		357		20,202		7,081		-		1,641		-		-		904		19		63,140		59,691
Companies		192,938		3,198		57,975		19,456		7,920		5,110		14,665		3,408		6,728		1,321		312,719		303,077
Rural Loans		8,839		-		-		-		-		-		-		-		-		-		8,839		8,663
Investments		29,633		16		4,809		3,933		-		7		19		-		43		38		38,498		39,559
Import and Export		33,695		536		1,027		968		4,094		-		7,560		3,246		214		-		51,340		48,774
Working Capital, Discount Bonds and Secured Line of Credit		76,958		1,847		45,420		12,658		3,299		4,851		6,601		-		6,104		1,157		158,895		151,261
Financial Guarantees Provided		38,075		799		6,456		1,718		527		250		485		162		326		126		48,924		48,603
Other		5,738		-		263		179		-		2		-		-		41		-		6,223		6,217
Total		411,404		4,404		106,633		29,258		7,921		8,074		14,665		3,408		10,188		1,347		597,302		578,292

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

Operations with Credit⁽¹⁾Granting Characteristics in Brazil: Exposure													R$ million
	09/30/2018												06/30/2018
	Southeast		South		North		Northeast		Midwest		Brazil		Brazil
Individuals		142,523		25,010		7,607		32,094		13,498		220,732		216,201
Rural Loans		49		10		-		2		4		65		75
Real State		34,264		2,986		395		1,498		1,811		40,954		40,178
Payroll		24,000		5,301		3,365		7,864		3,018		43,548		43,110
Vehicle and Leasing		7,438		2,364		904		2,127		1,757		14,590		14,006
Credit card		50,707		10,668		2,340		18,507		4,856		87,078		85,051
Financial Guarantees Provided		1,116		20		1		6		42		1,185		1,222
Personal Loans (Other)		24,949		3,661		602		2,090		2,010		33,312		32,559
Companies		161,590		16,764		1,480		6,751		5,683		192,268		193,615
Rural Loans		4,884		3,311		24		217		844		9,280		8,399
Investments		22,196		3,567		355		1,669		1,496		29,283		29,988
Import and Export		30,569		1,421		133		398		264		32,785		34,605
Working Capital, Discount Bonds and Secured Line of Credit		62,528		7,531		839		3,935		2,809		77,642		76,273
Financial Guarantees Provided		37,036		288		37		142		68		37,571		38,582
Other		4,377		646		92		390		202		5,707		5,768
Total		304,113		41,774		9,087		38,845		19,181		413,000		409,816

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

Itaú Unibanco

Risk Management – Pillar 3

Operations with Credit⁽¹⁾Granting Characteristics in Brazil: Quarterly Average Exposure													R$ million
	09/30/2018												06/30/2018
	Southeast		South		North		Northeast		Midwest		Brazil		Brazil
Individuals		141,334		24,635		7,533		31,623		13,341		218,466		213,254
Rural Loans		47		17		-		2		5		71		80
Real State		33,985		2,918		392		1,475		1,795		40,565		39,976
Payroll		23,915		5,256		3,353		7,776		3,028		43,328		42,890
Vehicle and Leasing		7,311		2,317		878		2,077		1,716		14,299		13,865
Credit card		50,196		10,523		2,316		18,247		4,782		86,064		83,624
Financial Guarantees Provided		1,134		20		1		6		42		1,203		1,191
Personal Loans (Other)		24,746		3,584		593		2,040		1,973		32,936		31,628
Companies		162,735		16,565		1,500		6,707		5,431		192,938		192,926
Rural Loans		4,688		3,100		22		215		814		8,839		8,663
Investments		22,631		3,538		348		1,666		1,450		29,633		31,137
Import and Export		31,426		1,513		119		398		239		33,695		33,712
Working Capital, Discount Bonds and Secured Line of Credit		62,062		7,454		881		3,904		2,657		76,958		74,421
Financial Guarantees Provided		37,538		306		37		127		67		38,075		39,211
Other		4,390		654		93		397		204		5,738		5,782
Total		304,069		41,200		9,033		38,330		18,772		411,404		406,180

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

Operations with Credit Granting Characteristics by Economic Sector

Operations with Credit Granting Characteristics in Brazil⁽¹⁾: Exposure

R$ million

09/30/2018

06/30/2018

Individuals

Rural Loans

Real State

Payroll

Vehicle and
Leasing

Credit Card

Financial
Guarantees
Provided

Personal Loans
(Other)

Total

69,374

43,548

14,887

94,773

1,221

63,981

287,849

281,317

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

Operations with Credit⁽¹⁾ Granting Characteristics in Brazil: Exposure

R$ million

	09/30/2018																																			06/30/2018
	Rural Loans					Investments					Import and Export					Working Capital, Discount Bonds and Guaranteed Account					Financial Guarantees Provided					Other					Total					Total
Companies	Total		%			Total		%			Total		%			Total		%			Total		%			Total		%			Total		%			Total		%
Public Sector		-		0.0	%		1,257		3.3	%		999		1.9	%		336		0.2	%		1,440		2.9	%		-		0.0	%		4,032		1.3	%		4,177		1.3	%
Energy		-		0.0	%		101		0.3	%		969		1.9	%		13		0.0	%		27		0.1	%		-		0.0	%		1,110		0.4	%		1,108		0.4	%
Petrochemical and Chemical		-		0.0	%		1,133		3.0	%		-		0.0	%		5		0.0	%		1,407		2.9	%		-		0.0	%		2,545		0.8	%		2,686		0.9	%
Sundry		-		0.0	%		23		0.1	%		30		0.1	%		318		0.2	%		6		0.0	%		-		0.0	%		377		0.1	%		383		0.1	%
Private Sector		9,280		100.0	%		37,012		96.7	%		50,545		98.1	%		160,968		99.8	%		47,873		97.1	%		6,208		100.0	%		311,886		98.7	%		305,343		98.7	%
Sugar and Alcohol		612		6.6	%		1,606		4.2	%		1,974		3.8	%		1,220		0.8	%		372		0.8	%		3		0.0	%		5,787		1.8	%		5,748		1.9	%
Agribusiness and Fertilizers		2,756		29.7	%		789		2.1	%		3,606		7.0	%		9,275		5.8	%		556		1.1	%		84		1.4	%		17,066		5.4	%		16,627		5.4	%
Food and Beverage		1,285		13.8	%		2,063		5.4	%		3,273		6.3	%		7,378		4.6	%		2,914		5.9	%		199		3.2	%		17,112		5.4	%		16,637		5.4	%
Banks and Other Financial Institutions		6		0.1	%		769		2.0	%		1,042		2.0	%		6,536		4.1	%		2,713		5.5	%		12		0.2	%		11,078		3.5	%		10,724		3.5	%
Capital Assets		84		0.9	%		490		1.3	%		1,200		2.3	%		2,749		1.7	%		1,526		3.1	%		177		2.9	%		6,226		2.0	%		6,058		2.0	%
Pulp and Paper		35		0.4	%		296		0.8	%		937		1.8	%		718		0.4	%		573		1.2	%		39		0.6	%		2,598		0.8	%		2,273		0.7	%
Electronic and IT		-		0.0	%		310		0.8	%		719		1.4	%		3,096		1.9	%		1,252		2.5	%		200		3.2	%		5,577		1.8	%		5,804		1.9	%
Packaging		1		0.0	%		150		0.4	%		565		1.1	%		1,410		0.9	%		267		0.5	%		148		2.4	%		2,541		0.8	%		2,610		0.8	%
Energy and Sewage		-		0.0	%		3,507		9.2	%		2,249		4.4	%		2,548		1.6	%		5,945		12.1	%		462		7.4	%		14,711		4.7	%		14,896		4.8	%
Education		-		0.0	%		288		0.8	%		63		0.1	%		1,836		1.1	%		1,103		2.2	%		61		1.0	%		3,351		1.1	%		3,986		1.3	%
Pharmaceuticals and Cosmetics		2		0.0	%		302		0.8	%		1,664		3.2	%		3,215		2.0	%		1,640		3.3	%		156		2.5	%		6,979		2.2	%		7,057		2.3	%
Real Estate Agents		33		0.4	%		9,495		24.8	%		223		0.4	%		9,472		5.9	%		1,416		2.9	%		214		3.4	%		20,853		6.6	%		21,583		7.0	%
Entertainment and Tourism		-		0.0	%		474		1.2	%		113		0.2	%		3,829		2.4	%		496		1.0	%		339		5.5	%		5,251		1.7	%		5,115		1.7	%
Wood and Furniture		38		0.4	%		244		0.6	%		560		1.1	%		1,954		1.2	%		79		0.2	%		113		1.8	%		2,988		0.9	%		2,858		0.9	%
Construction Material		1		0.0	%		681		1.8	%		1,403		2.7	%		2,317		1.4	%		1,018		2.1	%		178		2.9	%		5,598		1.8	%		5,816		1.9	%
Steel and Metallurgy		42		0.5	%		579		1.5	%		1,014		2.0	%		5,133		3.2	%		801		1.6	%		815		13.1	%		8,384		2.7	%		8,156		2.6	%
Media		-		0.0	%		124		0.3	%		113		0.2	%		433		0.3	%		92		0.2	%		10		0.2	%		772		0.2	%		722		0.2	%
Mining		-		0.0	%		341		0.9	%		253		0.5	%		5,636		3.5	%		3,196		6.5	%		39		0.6	%		9,465		3.0	%		8,449		2.7	%
Infrastructure Work		12		0.1	%		686		1.8	%		564		1.1	%		5,909		3.7	%		1,977		4.0	%		322		5.2	%		9,470		3.0	%		9,474		3.1	%
Oil and Gas ⁽²⁾		60		0.6	%		488		1.3	%		1,297		2.5	%		4,254		2.6	%		1,300		2.6	%		156		2.5	%		7,555		2.4	%		6,315		2.0	%
Petrochemical and Chemical		250		2.7	%		507		1.3	%		3,179		6.2	%		4,753		2.9	%		1,211		2.5	%		137		2.2	%		10,037		3.2	%		9,400		3.0	%
Health Care		6		0.1	%		415		1.1	%		247		0.5	%		1,964		1.2	%		451		0.9	%		50		0.8	%		3,133		1.0	%		3,011		1.0	%
Insurance and Reinsurance and Pension Plans		-		0.0	%		11		0.0	%		-		0.0	%		23		0.0	%		104		0.2	%		-		0.0	%		138		0.0	%		139		0.0	%
Telecommunications		-		0.0	%		491		1.3	%		181		0.4	%		1,698		1.1	%		3,567		7.2	%		10		0.2	%		5,947		1.9	%		4,988		1.6	%
Clothing and Footwear		65		0.7	%		387		1.0	%		1,287		2.5	%		2,613		1.6	%		356		0.7	%		293		4.7	%		5,001		1.6	%		4,864		1.6	%
Trading		32		0.3	%		94		0.2	%		809		1.6	%		1,154		0.7	%		157		0.3	%		18		0.3	%		2,264		0.7	%		2,252		0.7	%
Transportation		33		0.4	%		4,674		12.2	%		1,076		2.1	%		4,038		2.5	%		1,026		2.1	%		281		4.5	%		11,128		3.5	%		10,590		3.4	%
Domestic Appliances		3		0.0	%		63		0.2	%		542		1.1	%		1,374		0.9	%		369		0.7	%		21		0.3	%		2,372		0.8	%		2,376		0.8	%
Vehicles and Autoparts		14		0.2	%		1,000		2.6	%		2,733		5.3	%		7,254		4.5	%		2,421		4.9	%		257		4.1	%		13,679		4.3	%		14,901		4.8	%
Third Sector		-		0.0	%		30		0.1	%		-		0.0	%		1,964		1.2	%		19		0.0	%		4		0.1	%		2,017		0.6	%		2,169		0.7	%
Publishing and Printing		-		0.0	%		103		0.3	%		45		0.1	%		913		0.6	%		138		0.3	%		77		1.2	%		1,276		0.4	%		1,189		0.4	%
Commerce - Sundry		4		0.0	%		1,137		3.0	%		1,646		3.2	%		14,677		9.1	%		1,544		3.1	%		734		11.8	%		19,742		6.2	%		18,420		6.0	%
Industry - Sundry		4		0.0	%		74		0.2	%		6,307		12.2	%		3,322		2.1	%		280		0.6	%		27		0.4	%		10,014		3.2	%		9,476		3.1	%
Sundry Services		49		0.5	%		2,601		6.8	%		6,724		13.0	%		29,145		18.1	%		4,036		8.2	%		571		9.2	%		43,126		13.7	%		41,423		13.4	%
Sundry		3,853		41.5	%		1,743		4.6	%		2,937		5.7	%		7,158		4.4	%		2,958		6.0	%		1		0.0	%		18,650		5.9	%		19,237		6.2	%
Total		9,280		100.0	%		38,269		100.0	%		51,544		100.0	%		161,304		100.0	%		49,313		100.0	%		6,208		100.0	%		315,918		100.0	%		309,520		100.0	%

⁽¹⁾

The amount includes financial guarantees provided and committed loans, do not includes securities and is net of allowance for loan losses.

⁽²⁾

Comprises trade of fuel.

Itaú Unibanco

Risk Management – Pillar 3

Remaining maturity of loan transactions

Remaining maturities of loan transactions ⁽¹⁾																			R$ million
	09/30/2018										06/30/2018
	up to 6 months		6 to 12 months		1 to 5 years		above 5 years		Total		up to 6 months		6 to 12 months		1 to 5 years		above 5 years		Total
Individuals		77,044		5,179		60,081		98,447		240,751		75,357		4,455		58,569		95,963		234,344
Rural Loans		19		17		12		4		52		40		8		16		5		69
Real State		62		45		1,381		67,860		69,348		56		41		1,345		66,028		67,470
Payroll		351		980		21,953		20,343		43,627		340		997		22,135		19,727		43,199
Vehicle and Leasing		304		773		13,800		35		14,912		336		794		13,179		42		14,351
Credit card		68,363		-		-		-		68,363		65,954		-		-		-		65,954
Financial Guarantees Provided		91		765		50		299		1,205		712		182		42		305		1,241
Personal Loans (Other)		7,854		2,599		22,885		9,906		43,244		7,919		2,433		21,852		9,856		42,060
Companies		93,276		33,345		108,938		64,752		300,311		91,351		32,043		105,830		65,048		294,272
Rural Loans		3,808		3,675		957		559		8,999		4,067		2,013		1,627		522		8,229
Investments		2,402		2,273		19,391		11,778		35,844		2,857		2,238		19,334		12,404		36,833
Import and Export		20,539		5,645		21,399		3,954		51,537		21,242		6,582		19,658		3,656		51,138
Working Capital, Discount Bonds and Guaranteed Account		55,096		14,037		53,635		25,633		148,401		52,758		14,005		51,447		25,060		143,270
Financial Guarantees Provided		11,091		7,408		9,393		21,436		49,328		10,165		6,845		9,601		21,945		48,556
Other		340		307		4,163		1,392		6,202		262		360		4,163		1,461		6,246
Total		170,320		38,524		169,019		163,199		541,062		166,708		36,498		164,399		161,011		528,616

⁽¹⁾

Do not include loan commitments.

Concentration on the Major Debtors

Concentration of Largest Clients with Credit Granting Characteristics													R$ million
	Exposure		% of portfolio			Exposure		% of portfolio			Exposure		% of portfolio
Loan, Lease and Other Credit Operations ⁽¹⁾	09/30/2018					06/30/2018					09/30/2017
Largest debtor		5,267		0.9	%		5,502		0.9	%		4,671		0.9	%
10 largest debtors		30,406		5.1	%		31,603		5.4	%		28,460		5.3	%
20 largest debtors		46,822		7.8	%		48,118		8.2	%		44,739		8.3	%
50 largest debtors		73,867		12.3	%		74,084		12.6	%		72,179		13.4	%
100 largest debtors		100,330		16.7	%		100,498		17.1	%		97,438		18.1	%

⁽¹⁾

The amounts include financial guarantees provided. Do not include loan commitments.

Concentration of Major Clients with Credit Granting Characteristics													R$ million
	Exposure		% of portfolio			Exposure		% of portfolio			Exposure		% of portfolio
Loan, Lease and Other Credit Operations and Securities ⁽¹⁾	09/30/2018					06/30/2018					09/30/2017
Largest debtor		7,981		1.2	%		7,761		1.2	%		6,760		1.1	%
10 largest debtors		44,160		6.4	%		42,938		6.4	%		39,508		6.4	%
20 largest debtors		68,834		10.0	%		67,517		10.0	%		64,656		10.5	%
50 largest debtors		108,372		15.8	%		108,899		16.2	%		104,612		17.0	%
100 largest debtors		144,004		21.0	%		144,032		21.4	%		138,442		22.4	%

⁽¹⁾

The amounts include financial guarantees provided. Do not include loan commitments.

Itaú Unibanco

Risk Management – Pillar 3

Overdue Amounts

Overdue Amounts: by Brazil Regions and Countries																							R$ million
	09/30/2018												06/30/2018
	15 to 60 days		61 to 90 days		91 to 180 days		181 to 360 days		Above 360 days		Total		15 to 60 days		61 to 90 days		91 to 180 days		181 to 360 days		Above 360 days		Total
Southeast		4,118		2,059		4,121		3,975		568		14,841		5,097		1,989		3,386		3,904		545		14,921
South		641		252		557		681		109		2,240		737		283		561		663		107		2,351
North		209		67		147		184		42		649		224		75		156		195		40		690
Northeast		662		309		725		931		144		2,771		742		311		692		931		139		2,815
Midwest		410		136		331		412		63		1,352		510		157		350		361		59		1,437
Brazil		6,040		2,823		5,881		6,183		926		21,853		7,310		2,815		5,145		6,054		890		22,214
Foreign		4,054		830		892		1,048		196		7,020		3,283		580		1,073		1,215		202		6,353
Total		10,094		3,653		6,773		7,231		1,122		28,873		10,593		3,395		6,218		7,269		1,092		28,567

Overdue Amounts: by Economic Sector																							R$ million
	09/30/2018												06/30/2018
	15 to 60 days		61 to 90 days		91 to 180 days		181 to 360 days		Above 360 days		Total		15 to 60 days		61 to 90 days		91 to 180 days		181 to 360 days		Above 360 days		Total
Public Sector		2		-		-		-		-		2		-		-		-		-		-		-
Private Sector		10,092		3,653		6,773		7,231		1,122		28,871		10,593		3,395		6,218		7,269		1,092		28,567
Companies		2,724		1,363		2,163		2,057		413		8,720		3,283		1,101		1,669		2,208		413		8,674
Industry and Commerce		1,066		370		787		1,013		260		3,496		1,140		413		760		1,207		253		3,773
Services		1,474		921		785		967		143		4,290		1,370		632		842		876		133		3,853
Primary		182		72		589		76		10		929		771		55		67		124		27		1,044
Other		2		-		2		1		-		5		2		1		-		1		-		4
Individuals		7,368		2,290		4,610		5,174		709		20,151		7,310		2,294		4,549		5,061		679		19,893
Total		10,094		3,653		6,773		7,231		1,122		28,873		10,593		3,395		6,218		7,269		1,092		28,567

Allowance for Loan Losses

In order to be hedged against losses arising from loan operations, Itaú Unibanco takes into consideration all the aspects that determine the client’s credit risk to establish the provision level that is appropriate to the risk incurred in each operation. For each operation, the assessment and the client or economic group rating, the operation rating, and the possible existence of past due amounts are taken into account and the volume of the regulatory provision is determined.

Allowance for Loan Losses - Quarterly evolution																				R$ million
	09/30/2018											06/30/2018
	Opening Balance			Necessary accounting net provisions			Write-Off		Final Balance ⁽¹⁾			Opening Balance			Necessary accounting net provisions			Write-Off		Final Balance ⁽¹⁾
Public Sector		(4	)		-			-		(4	)		(5	)		1			-		(4	)
Private Sector		(36,114	)		(3,704	)		4,326		(35,492	)		(36,656	)		(3,636	)		4,178		(36,114	)
Companies		(18,779	)		(433	)		1,368		(17,844	)		(19,232	)		(870	)		1,323		(18,779	)
Industry and Commerce		(5,186	)		(386	)		565		(5,007	)		(5,370	)		(597	)		781		(5,186	)
Services		(10,802	)		479			711		(9,612	)		(11,181	)		(107	)		486		(10,802	)
Primary		(1,681	)		(206	)		82		(1,805	)		(1,737	)		5			51		(1,681	)
Other		(1,110	)		(320	)		10		(1,420	)		(944	)		(171	)		5		(1,110	)
Individuals		(17,335	)		(3,271	)		2,958		(17,648	)		(17,424	)		(2,766	)		2,855		(17,335	)
Total		(36,118	)		(3,704	)		4,326		(35,496	)		(36,661	)		(3,635	)		4,178		(36,118	)

⁽¹⁾

Comprises provisions for financial guarantees provided of R$ 1,269 in Sep/18 and R$ 1,810 in Jun/18, registered in the liabilities, according to CMN Resolution 4,512 and BACEN Circular Letter 3,782.

Itaú Unibanco

Risk Management – Pillar 3

Mitigating Instruments

Itaú Unibanco uses guarantees aiming at increasing resilience in operations with credit risk. The using guarantees can be personal guarantees, secured guarantees, legal structures with mitigating power and netting arrangements.

To be considered as credit risk mitigation instrument, the guarantees need to comply with requirements and determinations of the regulations that govern them whether internal or external and be legally valid (effective), enforceable and regularly evaluated. In the case of secured guarantees, legal structures with mitigating effects and netting arrangements, mitigation depends on established methods approved by the business units responsible for managing credit risk and the central credit risk control area. Such methods take into account factors relating to the legal enforcement of the security, the costs involved in the process and the expected execution value, considering market volatility and liquidity. Additionally, concentration of these instruments in the credit portfolio is monitored on a regular basis. Lastly, personal guarantees and the purchase of protection through credit derivatives mitigate credit risk by substituting the taker’s risk parameters with those of the guarantor.

Itaú Unibanco also uses credit derivatives to mitigate the credit risk of its portfolios of 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.

In order to use each type of mitigating instrument to calculate the regulatory capital, Itaú Unibanco compares the specifications of the instrument to the requirements provided for in the prudential regulations in force. In this process, the institution assesses the coverage level of mitigated exposures, the risk weights (FPR) of the mitigation instruments, maturity terms, and currencies of denomination or indexation, among other aspects.

In the case of credit transactions mitigated by fiduciary transfer or 1st-degree mortgage on residential property, mitigation is definite by the FPR applied to the exposure, as provided for in BACEN Circular 3,644. Therefore, these transactions are not subject to the provisions set forth in BACEN Circular 3,809.

The table below presents the total amount covered by mitigation instruments (collaterals and guarantees), calculated in accordance with BACEN Circular 3,809. As provided for in the Circular, at the beginning of each fiscal year, the institution must choose between the Simple or Comprehensive Approach for credit risk mitigation.

Currently, Itaú Unibanco uses the Simple Approach.

Total Mitigation					R$ million
	09/30/2018		06/30/2018		09/30/2017
Demand and time deposits, savings and own financial credit bills		285,513		278,622		299,029
FPR 0%		285,513		278,622		299,029
Securities		71,105		93,694		27,872
FPR 0%		15,753		28,879		27,872
FPR 10%		55,352		64,815		-
Personal Guarantee		50,692		51,311		41,845
FPR 0%		10,400		10,332		7,398
FPR 20%		3,494		5,079		-
FPR 50%		36,332		35,453		33,880
FPR 85%		467		447		566
Credit Linked Notes (CLN)		8,751		7,754		6,822
FPR 0%		8,751		7,754		6,697
FPR 20%		-		-		126
Netting		388,970		411,723		2,397
FPR 0%		388,970		411,723		2,397

Itaú Unibanco

Risk Management – Pillar 3

Counterparty Credit Risk

Counterparty credit risk is the possibility of noncompliance with obligations related to the settlement of transactions that involve the trading of financial assets with a bilateral risk. It encompass of derivative financial instruments, settlement pending transactions, securities lending and repurchase transactions.

Itaú Unibanco has well-defined rules for calculating its exposure, and the models designed are used both for controlling the use of counterparty limits and for allocating capital. For derivatives, Itaú Unibanco uses the potential credit risk (PCR) too, interpreted as the value of the potential financial exposure that a transaction can attain upon maturity. After the maturity of a derivatives contract, Itaú Unibanco’s practice is to set up a provision for the amounts receivable on these instruments.

Netting agreements are defined by CMN Resolution 3,263 and, as from January 2017, Itaú Unibanco has been considering this resolution in the calculation of its regulatory capital, in accordance with BACEN Circular 3,809.

According to BACEN Circular 3,644, for the calculation of the net global exposure to the counterparty credit risk arising from operations with derivative financial instruments, the application of the Future Potential Exposure Factor (FEPF) is considered. In the case of unsettled operations, the application of the Unsettled Operation Credit Conversion Factor (FCL) is considered.

Derivative Contracts Subject to Counterparty Credit Risk			R$ million
	09/30/2018		06/30/2018
Settled in a settlement system (Stock Exchange) ⁽¹⁾		6,811		6,365
Notional Value		1,500,394		1,596,467
Potential Future Exposures		1,538		1,912
Gross Positive Value		5,273		4,453
Not settled in a settlement system (Over-the-Counter) – with collateral		-		-
Notional Value		228,621		278,958
Potential Future Exposures		3,175		3,499
Gross Positive Value		7,668		8,402
Effects of netting agreements		7,137		7,864
Effect of collateral		3,706		4,037
Not settled in a settlement system (Over-the-Counter) – without collateral		20,968		18,968
Notional Value		1,229,158		1,235,595
Potential Future Exposures		9,054		7,835
Gross Positive Value		11,913		11,133
Net exposure to derivatives		27,779		25,333

⁽¹⁾

Amounts regarding contracts settled in a clearing and settlement system in which the clearinghouse operates as central counterparty.

Transactions carried out on behalf of Clients Subject to Counterparty Credit Risk			R$ million
	09/30/2018		06/30/2018
Derivatives Contracts		1,028		1,026
Notional Value		1,061,278		1,099,631
Potential Future Exposures		3,794		3,496
Gross Positive Value		3,651		2,647
Collaterals		6,417		5,117
Security lending and borrowing		2,009		1,637
Notional Value		4,868		3,667
Collaterals		2,859		2,030
Net exposure		3,037		2,663

Itaú Unibanco

Risk Management – Pillar 3

Itaú Unibanco considers that there is counterparty credit risk in reverse repo agreements (purchase with resale commitment) when the difference between the amount paid and the security received (when the latter is eligible as a mitigator) is positive; and in repo agreements (sale with repurchase commitment), when the difference between the security delivered and the amount received is positive.

Repurchase Agreements Subject to Counterparty Credit Risk			R$ million
	09/30/2018		06/30/2018
Settled in a settlement system ⁽¹⁾		2,487		1,488
Reverse repo agreements		2,408		1,095
Notional Value ⁽²⁾		287,393		245,572
Effect of collateral ⁽³⁾		284,985		244,477
Repo agreements		79		393
Notional Value ⁽²⁾		207,967		203,495
Effect of collateral ⁽³⁾		207,888		203,102
Not settled in a settlement system		5,404		5,994
Reverse repo agreements		776		641
Notional Value ⁽²⁾		1,088		641
Effect of collateral ⁽³⁾		311		-
Repo agreements		4,627		5,352
Notional Value ⁽²⁾		68,931		75,227
Effect of collateral ⁽³⁾		64,304		69,875
Net exposure to repurchase agreements		7,891		7,481

⁽¹⁾

Amounts regarding contracts settled in a clearing and settlement system (Stock Exchange, Selic or similar).

⁽²⁾

The notional value of repurchase agreements is similar to their positive gross value.

⁽³⁾

Cash and government securities with 0% FPR are used as collateral for counterparty credit risk exposure in repurchase agreements.

Other ⁽¹⁾ Agreements Subject to Counterparty Credit Risk			R$ million
	09/30/2018		06/30/2018
Notional Value ⁽²⁾		14,500		9,749
Collateral posted in favor of clearing houses		6,780		9,577
Effects of netting agreements		-		-
Effect of collateral		-		-
Net exposure to other agreements subject to counterparty credit risk ⁽³⁾		7,286		10,016

⁽¹⁾

Includes securities agreements to be settled, as well as forex agreements, and rights on securities lending.

⁽²⁾

The notional value of these agreements is similar to their positive gross value.

⁽³⁾

Exposure amount after the application of FCL, according to BACEN Circular 3,644.

Exposure to Counterparty Credit Risk			R$ million
	09/30/2018		06/30/2018
Net global exposure to counterparty credit risk		45,993		45,493
Net exposure to derivatives		27,779		25,333
Net exposure to repurchase agreements		7,891		7,481
Net exposure to other agreements subject to counterparty credit risk		7,286		10,016
Net exposure by transactions carried out on behalf of Clients		3,037		2,663

Itaú Unibanco

Risk Management – Pillar 3

Acquisitions, Sale or Transfer of Financial Assets

The acquisition of financial assets follows the same policies and the same credit governance established for the portfolios originated at Itaú Unibanco. Financial asset acquisitions aim at increasing loan portfolio diversification and meeting the clients’ demands for liquidity. The purpose of the sale and transfer of financial assets is to meet investor demand for credit assets or work as a portfolio credit risk management instrument.

Credit assignments (transfers of receivables) carried out through December 2011 were recorded in accordance with current regulation together with income recognition at the time of the assignment, regardless of the risks and benefits being retained or not.

Since January 2012, as determined by CMN Resolution 3,533 and supplementary regulation, accounting records take into consideration the retention or non-retention of risks and benefits on sale or transfers of financial assets.

Sale or Transfer of Financial Assets					R$ million
	09/30/2018		06/30/2018		09/30/2017
Balance of exposures assigned with significant withholding of risks and benefits		91		95		113
Balance of sale of exposure with substantial retention of risks and benefits		4,175		4,608		5,203
Securitization Companies		4,141		4,540		5,126
Financial institutions		34		68		77
Balance of sale of exposure without substantial transfer or retention of risks and benefits		-		-		-

Sale or Transfer of Financial Assets									R$ million
	3rd quarter		2nd quarter		1st quarter		4th quarter		3rd quarter
	2018		2018		2018		2017		2017
Flow of sale exposure in the quarter with substantial transfer of risks and rewards		979		730		-		1,011		775
Credit rights Investments Fund (FIDC)		637		596		-		92		252
Securitization Companies		43		31		-		-		16
Financial institutions		299		103		-		314		507
Other⁽¹⁾		-		-		-		605		-
⁽¹⁾ Transfer of college credits held with the public sector.

Sale or Transfer of Financial Assets									R$ million
	3rd quarter		2nd quarter		1st quarter		4th quarter		3rd quarter
	2018		2018		2018		2017		2017
Total exposures assigned over the last 12 months which have been honored, repurchased or written-off		110		116		123		118		120

Acquisition of Financial Assets					R$ million
	09/30/2018		06/30/2018		09/30/2017
Acquisitions of loan portfolios WITH the retention of assignor's risks and rewards
a) By type of exposure		453		450		684
Individuals - Vehicle and Leasing		385		446		579
Companies -Loans (CCB)		2		4		104
Companies - Other		67		-		1
b) By type of assignor		453		450		684
Financial institutions		453		450		684

Acquisition of Financial Assets

R$ million

09/30/2018

06/30/2018

09/30/2017

Acquisitions of loan portfolios with NO retention of assignor's risks and rewards

a) By type of exposure

1,658

1,863

2,710

Individuals - Payroll

1,658

1,863

2,710

b) By type of assignor

1,658

1,863

2,710

Financial institutions

1,658

1,863

2,710

Itaú Unibanco

Risk Management – Pillar 3

Operations of Securitization

Itaú Unibanco’s portfolio includes securities arising from securitization processes. The portfolio is made up of Securitized Real Estate Loans (CRI), quotas of Credit Rights Investment Funds (FIDC) and Agribusiness Receivables Certificate (CRA) and debentures with securitization characteristics (issues whose flow of receipts is dependent on the performance of the underlying receivables).

Exposure to securitization of FIDC, in the consolidated accounts, includes only fund units not consolidated in the Prudential Conglomerate. According to BACEN Circular 3,701, FIDC units when the institution has control or retains risks and benefits must be consolidated in the Prudential Conglomerate. Itaú Unibanco classifies securities arising from securitization processes based on the governance of products determined, and the credit is approved at the proper authority levels.

Itaú Unibanco follows risk retention guidelines of CMN Resolution 3,533.

The balances of these operations are presented below.

Securitization Exposures ⁽¹⁾					R$ million
	09/30/2018		06/30/2018		09/30/2017
CRI		11,967		13,348		15,327
Mortgage Loans		11,967		13,348		15,327
Single-Tranche		10,544		11,820		13,483
Subordinated		1,423		1,529		1,844
CRA		104		107		43
Credit Related to Agribusiness		104		107		43
Single-Tranche		104		107		43
FIDC		332		273		21
Credit Rights		332		273		21
Senior		332		273		21
Debenture		77		89		163
Loan portfolio		77		89		163
Single-Tranche		77		89		163
Total		12,480		13,818		15,554

⁽¹⁾

Traditional securitization.

Following is the summary of the securitization activity in the period:

Securitization Activities in the Period⁽¹⁾									R$ million
	3rd quarter 2018		2nd quarter 2018		1st quarter 2018		4th quarter 2017		3rd quarter 2017
CRI		253		-		362		184		36
Mortgage Loans		253		-		362		184		36
FIDC		-		839		5		766		16
Credit Rights		-		839		5		766		16
CRA		267		242		-		753		431
Credit Rights		267		242		-		753		431
Total		520		1,081		367		1,702		483

⁽¹⁾

Traditional securitization.

It should be noted that the portion of RWA_CPAD attributable to securitization exposure did not exceed 5% of the total on September 30, 2018.

Itaú Unibanco ascertains its gains and losses with the securitization process taking into account its different activities as originator or investor, in other words, the participant that assigns portfolios for securitization purposes, and the trader of securitized assets, respectively.

As originator, gains and losses are calculated as the difference between the sum received for assets transferred to the securitizing institutions and the book value of the portfolio. As investor, the calculation takes into account the difference between the sale amount and the book value of the securitized paper.

Gains and losses on securitization are disclosed when they are material.

Itaú Unibanco

Risk Management – Pillar 3

Credit Derivatives

Itaú Unibanco buys and sells credit protection mainly related to securities of the Brazilian government and securities of Brazilian listed companies in order to meet the needs of its customers. When Itaú Unibanco 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.

CDS (credit default swap) is credit derivative in which, upon a default related to the reference entity, 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.

TRS (total return swap) is a transaction in which a party swaps the total return of an asset or of a basket of assets for regular cash flows, usually interest and a guarantee against capital loss. In a TRS contract, the parties do not transfer the ownership of the assets.

The maximum potential loss that may be incurred with credit derivatives is the notional amount of the derivative. Itaú Unibanco believes that, based on its historical experience, the maximum potential loss does not represent the expected loss, because, when a loss event occurs, 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 the third quarter of 2018, Itaú Unibanco has not incurred any loss related to credit derivative contracts.

The table below shows the nominal value of purchased credit derivatives that are identical to those for which Itaú Unibanco acts as seller of protection underlying values.

Notional Amount of Credit Derivatives Held in Portfolio							R$ million
	09/30/2018			06/30/2018			09/30/2017
Risk Transferred		1,829			1,310			4,840
Credit Default Swap (CDS)		1,829			1,310			4,840
Risk Received		(7,093	)		(6,941	)		(7,174	)
Credit Default Swap (CDS)		(7,093	)		(6,941	)		(7,174	)
Total		(5,264	)		(5,631	)		(2,334	)
Required capital of Risk Received		46			108			46

Itaú Unibanco

Risk Management – Pillar 3

Market Risk

6.1

Framework and Treatment

Market risk is the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution, including the risk of operations subject to variations in foreign exchange rates, interest rates, price indexes, equity and commodity prices.

Itaú Unibanco’s institutional policies and general market risk management framework are in line with the principles of CMN Resolution 3,464, and subsequent amendments. These principles guide the approach to market risk control across the institution.

Itaú Unibanco’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other factors:

Political, economic and market conditions;

The profile of Itaú Unibanco´s portfolio; and

Capacity to act in specific markets.

The key principles underlying Itaú Unibanco’s market risk control structure are as follows:

Provide visibility and comfort for all senior management levels that market risks assumed must be in line with Itaú Unibanco risk-return objectives;

Provide disciplined and informed dialogue on the overall market risk profile and its evolution over time;

Increase transparency as to how the business works to optimize results;

Provide early warning mechanisms to facilitate effective risk management, without obstructing the business objectives; and

Monitor and avoid concentration of risks.

Market risk is controlled by an area independent of the business units, which is responsible for the daily activities: (i) measuring and assessing risk, (ii) monitoring stress scenarios, limits and alerts, (iii) applying, analyzing and stress testing scenarios, (iv) reporting risk to the individuals responsible in the business units, in compliance with Itaú Unibanco´s governance, (v) monitoring the measures needed to adjust positions and/or risk levels to make them viable, and (vi) supporting the secure launch of new financial products.

The CMN has regulations that establish the segregation of exposure to market risk into risk factors, such as: interest rates, exchange rates, stocks and commodities. Brazilian inflation indices are also treated as a group of risk factors and follow the same structure of limits governance.

The structure of limits and alerts is in alignment with the board of directors' guidelines, being reviewed and approved on an annual basis. This structure extends to specific limits and is aimed at improving the process of risk monitoring and understanding as well as preventing risk concentration. Limits and alerts are calibrated based on projections of future balance sheets, stockholders’ equity, liquidity, complexity and market volatility, as well as the Itaú Unibanco’s risk appetite.

In an attempt to fit the transactions into the defined limits, Itaú Unibanco hedges its client transactions and proprietary positions, including investments overseas. Derivatives are the most commonly used instruments for carrying out these hedging activities, and can be characterized as either accounting or economic hedge, both of which are governed by institutional regulations at Itaú Unibanco.

Hedge accounting considerations are presented in detail in Note 7g V – “Accounting hedge” to the Complete Financial Statements, that can be found on the website www.itau.com.br/investor-relations.

Market risk management framework categorizes transactions as part of either the Trading Book or the Baking Book, in accordance with general criteria established by CMN Resolution 3,464 and BACEN Circular 3,354. Trading Book is composed of all trades with financial and commodity instruments (including derivatives) undertaken with the intention of trading. Banking Book is predominantly characterized by portfolios originated from the banking business and operations related to balance sheet management, are intended to be either held to maturity, or sold in the medium and in the long term.

Market risk management is based on the following key metrics:

Value at Risk (VaR): a statistical metric that quantifies the maximum potential economic loss expected in normal market conditions, considering a defined holding period and confidence interval;

Itaú Unibanco

Risk Management – Pillar 3

Losses in Stress Scenarios (Stress Testing): a simulation technique to evaluate the impact, in the assets, liabilities and derivatives of the portfolio, of various risk factors in extreme market situations (based on prospective and historic scenarios);

Stop Loss: metrics that trigger a management review of positions, if the accumulated losses in a given period reach specified levels;

Concentration: cumulative exposure of certain financial instrument or risk factor calculated at market value ("MtM - Mark to Market"); and

Stressed VaR: statistical metric derived from VaR calculation, aimed at capturing the biggest risk in simulations of the current trading portfolio, taking into consideration the observable returns in historical scenarios of extreme volatility.

In addition to the risk metrics described above, sensitivity and loss control measures are also analyzed. They include:

Gap Analysis: accumulated exposure of the cash flows by risk factor, which are marked-to-market and positioned by settlement dates;

Sensitivity (DV01 – Delta Variation Risk): impact on the market value of cash flows when a 1 basis point change is applied to current interest rates or on the index rates; and

Sensitivities to Various Risk Factors (Greeks): partial derivatives of a portfolio of options on the prices of the underlying assets, implied volatilities, interest rates and time.

Itaú Unibanco uses proprietary systems to measure the consolidated market risk. The processing of these systems takes place 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 market risk control institutional policy is on the Investor Relations website www.itau.com.br/investor-relations, section Itaú Unibanco, under Corporate Governance, Rules and Policies.

6.2

Portfolio Analysis

Interest rate risk in the banking book

Interest rate risk is the potential loss associated with variations in these rates in the market in relation to indexer mismatches, maturities and between investments and funding. The methodology adopted involves marking-to-market of the various products, calculating the sensitivity to variations in interest rates, and the value at risk by historical simulation (VaR) as well as stress tests throughout the entire portfolio, as determined by Itaú Unibanco's institutional regulations.

In managing the interest rate risk of the loan portfolios that show material early settlements, Itaú Unibanco adjusts the original maturities of transactions, which speeds up the reduction in the originally contracted payment flows so as to better reflect clients' expected behavior.

Likewise, the balances of products with no definite expiry date, such as demand deposits and savings accounts, are included in the statistics on the basis of past and seasonal experience. The core portion is distributed over time, thus generating an exposure to changes in interest rates, pursuant to internally approved methodologies.

The table below shows the sensitivity of the amount of the banking book positions to changes in interest rate curves, using the methodology and stress scenarios adopted.

Sensibility of Banking Position ⁽¹⁾								R$ million
	Exposures	09/30/2018
Risk factors	Risk of variation in:	Scenario I			Scenario II			Scenario III
Interest Rate	Fixed Income Interest Rates in reais		(6	)		(1,170	)		(2,301	)
Foreign Exchange Linked	Foreign Exchange Linked Interest Rates		(2	)		(261	)		(495	)
Price Index Linked	Interest of Inflation coupon		(2	)		(228	)		(414	)
TR	TR Linked Interest Rates		-			(44	)		(92	)

⁽¹⁾

Amounts net of tax effects.

In order to measure these sensitivities, the following scenarios are used:

· Scenario I: Shocks of 1 base point in interest fixed rates, currency coupon, inflation, interest rate indexes, and 1 percentage point in the prices of currencies and shares;

· Scenario II: Shocks of 25% in interest fixed rates, currency coupon, inflation, interest rate indexes, and in the prices of currencies and shares, both for growth and fall, considering the largest resulting losses per risk factor;

Itaú Unibanco

Risk Management – Pillar 3

· Scenario III: Shocks of 50% in interest fixed rates, currency coupon, inflation, interest rate indexes, and in the prices of currencies and shares, both for growth and fall, considering the largest resulting losses per risk factor.

Evolution of the Trading Book

The evolution of the Trading Book, broken down by major risk factors, is tabulated below:

Total Value of Trading Position													R$ million
	09/30/2018					06/30/2018					09/30/2017
	Long		Short			Long		Short			Long		Short
Interest Rates		221,928		(214,914	)		182,464		(190,302	)		138,646		(196,152	)
Foreign Exchange		146,866		(145,623	)		133,333		(128,500	)		126,328		(122,725	)
Equities		3,067		(2,996	)		1,652		(1,615	)		2,448		(2,506	)
Commodities		4		(12	)		17		(0	)		0		(3	)

Evolution of the Derivatives Portfolio

The main purpose of the derivative positions in the Banking Book and Trading Book is to manage risks in these positions and in the corresponding risk factors.

Derivatives: Trades in Brazil - Trading + Banking - With Central Counterparty⁽¹⁾													R$ million
	09/30/2018					06/30/2018					09/30/2017
	Long		Short			Long		Short			Long		Short
Interest Rates		283,271		(243,242	)		262,897		(258,689	)		116,703		(189,008	)
Foreign Exchange		26,452		(32,032	)		20,263		(34,216	)		22,663		(44,450	)
Equities		775		(542	)		705		(147	)		1,160		(285	)
Commodities		163		(157	)		118		(141	)		159		(116	)

⁽¹⁾

As from the 1^st quarter of 2018, the consolidation of derivatives is no longer determined by the positions of individual companies, and is now consolidated in the view of Itaú Unibanco Holding S.A..

Derivatives: Trades in Brazil - Trading + Banking - Without Central Counterparty⁽¹⁾													R$ million
	09/30/2018					06/30/2018					09/30/2017
	Long		Short			Long		Short			Long		Short
Interest Rates		50,677		(41,779	)		53,750		(62,393	)		54,922		(68,863	)
Foreign Exchange		14,081		(40,554	)		14,270		(36,088	)		13,676		(27,181	)
Equities		-		(75	)		-		(57	)		28		(3	)
Commodities		34		(46	)		85		(44	)		53		(92	)

⁽¹⁾

Derivatives: Foreign Trades - Trading + Banking - With Central Counterparty⁽¹⁾													R$ million
	09/30/2018					06/30/2018					09/30/2017
	Long		Short			Long		Short			Long		Short
Interest Rates		2,476		(4,711	)		2,757		(5,538	)		2,117		(4,220	)
Foreign Exchange		68,200		(64,213	)		97,350		(92,443	)		74,761		(70,806	)
Equities		186		(1,623	)		406		(2,191	)		6		(216	)

⁽¹⁾

Derivatives: Foreign Trades - Trading + Banking - Without Central Counterparty⁽¹⁾													R$ million
	09/30/2018					06/30/2018					09/30/2017
	Long		Short			Long		Short			Long		Short
Interest Rates		50,044		(115,148	)		66,439		(84,504	)		68,902		(68,447	)
Foreign Exchange		238,363		(233,829	)		226,638		(220,488	)		208,218		(208,911	)
Equities		-		-			-		-			5		-

Itaú Unibanco

Risk Management – Pillar 3

VaR – Consolidated Itaú Unibanco

Consolidated VaR of Itaú Unibanco 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.

VaR - Itaú Unibanco Holding⁽¹⁾							R$ million
VaR per Risk Factor Group	09/30/2018			06/30/2018			09/30/2017
Brazilian Interest rates		720.0			912.4			712.0
Currencies		32.3			16.4			46.6
Equities		37.9			27.3			51.6
Commodities		1.4			1.0			1.8
Diversification effect		(496.9	)		(466.0	)		(375.8	)
Total VaR		294.7			491.1			436.2
Maximum Total VaR of the Quarter		476.3			603.6			466.9
Average Total VaR of the Quarter		376.4			431.0			374.5
Minimum Total VaR of the Quarter		294.7			317.2			315.4

⁽¹⁾

Considers one-day holding period and 99% confidence level. VaR per Risk Factor Group includes foreign units informations.

The decrease in the Total VaR noticed in relation to the last quarter was mainly due to the decrease in the volatility of the interest rates market.

VaR and Stressed VaR Internal Model – Regulatory Portfolio

For its Regulatory Portfolio, Itaú Unibanco uses historical simulation methodology for calculating the VaR and Stressed VaR, with a confidence interval of 99% and a holding period of at least 10-day, depending on the market liquidity of the portfolio.

VaR - Itaú Unibanco - Regulatory Portfolio ⁽¹⁾																R$ million
	09/30/2018						06/30/2018						09/30/2017
VaR per Risk Factor Group	VaR			Stressed VaR			VaR			Stressed VaR			VaR			Stressed VaR
Brazilian Interest rates		79.5			56.5			264.7			156.7			54.8			286.5
Currencies		77.9			89.2			25.3			37.1			36.1			78.4
Equities		42.2			40.1			24.7			26.8			16.0			46.7
Commodities		4.7			3.0			3.0			3.2			1.0			3.0
Diversification effect		(71.9	)		(85.6	)		(51.3	)		(65.0	)		(34.4	)		(196.3	)
Total VaR		132.4			103.2			266.4			158.8			73.5			218.3
Maximum Total VaR of the Quarter		262.2			245.7			266.4			229.8			86.0			281.7
Average Total VaR of the Quarter		140.5			140.0			118.8			107.0			59.3			194.7
Minimum Total VaR of the Quarter		81.8			85.5			27.6			20.2			37.7			122.1

⁽¹⁾

VaR Historical Simulation approach, holding period of at least 10 days. Amounts reported consider 99% confidence level. External Units are not cosidered.

Itaú Unibanco

Risk Management – Pillar 3

Stress Testing

In addition to using VaR, Itaú Unibanco analyzes the risk in extreme scenarios under a wide range of different stress testings, so as to identify significant losses that could occur in extreme market conditions. This scenarios are based on past crises or on predetermined shocks in the risk factors.

One factor that has a major bearing on the test results is the correlation between the assets and the respective risk factors, and this effect is simulated in various ways in the different scenarios tested.

In order to identify its greatest risks and to assist in decision-making by the treasury department and by the senior management, the results of the stress tests are assessed by means of risk factors as well as in a consolidated way.

Backtesting

The effectiveness of the VaR model is validated by the use of backtesting techniques, comparing daily hypothetical and effective results with the estimated daily VaR, according to BACEN Circular 3,646. The number of exceptions to the VaR pre-established limits should be consistent, within an acceptable margin, with the hypothesis of 99% confidence interval, considering a range of 250 business days. Confidence intervals of 97.5% and 95%, and periods of 500 and 750 business days, respectively are also considered. The backtesting analysis presented below considers the ranges suggested by the Basel Committee on Banking Supervision (BCBS). The ranges are divided into:

Green (0 to 4 exceptions): backtesting results that do not suggest any problem with the quality or accuracy of the adopted models;

Yellow (5 to 9 exceptions): intermediate range group, which indicates an early warning monitoring and may indicate the need to review the model; and

Red (10 or more exceptions): need for improvement actions.

The Backtesting presented one exception in relation to the effective and hypothetical results in the period.

Pricing of Financial Instruments

To price its portfolios, Itaú Unibanco uses, where possible, price quotes seen in financial markets and published by reliable external sources, or, if quotes are not available from specialized sources, estimates from pricing models representing the fair value of its positions.

The pricing parameters used by Itaú Unibanco include interest rates, foreign exchange rates, the prices of securities, equities, commodities, derivatives contracts, indices, and volatilities.

Prices are calculated by the pricing area, and are independently validated from price information, volatility curves and surfaces (IPV – Independent price validation), to ensure that the information is consistent and accurate.

Itaú Unibanco

Risk Management – Pillar 3

Operational Risk

7.1

Framework and Treatment

Operational risk is defined as the possibility of losses arising from failure, deficiency or inadequacy of internal process, people or systems or from external events that affect the achievement of strategic, tactical or operational objectives. It includes legal risk associated with inadequacy or deficiency in contracts signed by the institution, as well as penalties due to noncompliance with laws and punitive damages to third parties arising from the activities undertaken by the institution.

Itaú Unibanco internally classifies its risk events in:

Internal fraud;

External fraud;

Labor claims and deficient security in the workplace;

Inadequate practices related to clients, products and services;

Damages to own physical assets or assets in use by Itaú Unibanco;

Interruption of Itaú Unibanco’s activities;

Failures in information technology (IT) systems, processes or infrastructure;

Failures in the performance, compliance with deadlines and management of activities at Itaú Unibanco.

Operational risk management includes conduct risk, which is subject to mitigating procedures to assess product design (suitability) and incentive models. The inspection area is responsible for fraud prevention. Irrespective of their origin, specific cases may be handled by risk committees and integrity and ethics committees. Itaú Unibanco has a governance process that is structured through forums and corporate bodies composed of senior management, which report to the Board of Directors, with well-defined roles and responsibilities in order to segregate the business and management and control activities, ensuring independence between the areas and, consequently, well-balanced decisions with respect to risks. This is reflected in the risk management process carried out on a decentralized basis under the responsibility of the business areas and by a centralized control carried out by the internal control, compliance and operational risk department, by means of methodologies, training courses, certification and monitoring of the control environment in an independent way.

The managers of the executive areas use corporate methods constructed and made available by the internal control, compliance and operational risk area. Among the methodologies and tools used are the self-evaluation and the map of the institution’s prioritized risks, the approval of processes, products, and system development products and projects, the monitoring of key risk indicators that and the database of operational losses, guaranteeing a single conceptual basis for managing processes, systems, projects and new products and services.

Within the governance of the risk management process, regularly, the consolidated reports on risk monitoring, controls, action plans and operational losses are presented to the business area executives.

In line with CMN Resolution 4,557, the document “Public Report – Integrated Management of Operational Risk /Internal Controls/Compliance”, summarized version of the institutional operational risk management policy can be found on the website www.itau.com.br/investor-relations, section Itaú Unibanco, under Corporate Governance, Rules and Policies.

Itaú Unibanco

Risk Management – Pillar 3

7.2

Crisis Management and Business Continuity

Itaú Unibanco's Business Continuity Program is designed to anticipate and respond at an acceptable level to events that may interrupt its essential activities. It establishes the Business Continuity Plan (BCP), which consists of modular procedures that are available for use in the event of incidents. The descriptions/characteristics of the existing plans are:

Disaster Recovery: it aims to ensure the availability and integrity of Information Technology resources and communication in the event of a failure in the primary Data Center to maintain the processing of critical systems;

Workplace Contingency: alternative facilities to perform the activities in the event the administrative buildings become unavailable;

Operational Contingency: alternatives to carry out critical processes whether they are systemic, procedural or emergency responses.

In order to assess the efficiency of the contingency actions in the face of the interruption scenarios described in the plans and identify improvement points, tests are carried out at intervals that vary according to the plan, at least once a year.

In order to keep the continuity solutions aligned with the business requirements (processes, minimum resources, legal requirements, etc) the Program applies the following tools to assess the institution:

Business Impact Analysis (BIA): evaluates the criticality and resumption requirement of the processes that support the delivery of products and services.

Threats and Vulnerabilities Analysis (AVA): identification of threats near to Itaú Unibanco’s buildings.

In addition, the institution has a Crisis Management Program, which is aimed at managing business interruption events, natural disasters, impacts of an environmental, social, and infrastructure/operational (including information technology) or of any other nature that jeopardize the image and reputation and/or viability of Itaú Unibanco's processes with its employees, clients, strategic partners and regulators, with timely and integrated responses.

Itaú Unibanco

Risk Management – Pillar 3

7.3

Independent Validation of Risk Models

Itaú Unibanco validates the processes and risk models independently. This is done by a department which is separate from the business and risk control areas, to ensure that its assessments are independent.

The validation method, defined in an internal policy, meets regulatory requirements such as those of BACEN Circulars 3,646 and 3,674. The validation stages include:

Verification of mathematical and theoretical development of the models;

Qualitative and quantitative analysis of the models, including the variables, construction of an independent calculator and the use of appropriate technical;

When applicable, comparison with alternative models and international benchmarks;

Histhorical Backtesting of the model;

The correct implementation of the models in the systems used.

Additionally, the validation area assesses the stress testing program.

The performance of the independent validation area and the validation of the processes and models are assessed by Internal Audit and reported to the specific senior management committees. Action plans are prepared to address opportunities identified during the independent validation process, and are monitored by the 3 lines of defense and by senior management until the conclusion.

Itaú Unibanco

Risk Management – Pillar 3

Liquidity Risk

8.1

Framework and Treatment

Liquidity risk is defined as the likelihood of the institution not being able to effectively honor its expected and unexpected obligations, current and future, including those from guarantees commitment, without affecting its daily operations or incurring significant losses.

Liquidity risk control is carried out by an area that is independent of the business areas, and which is responsible for defining the composition of the reserve, estimating cash flow and exposure to liquidity risk over different time horizons, and monitoring the minimum limits for absorbing losses in stress scenarios in the countries where Itaú Unibanco operates. All activities are subject to assessment by the independent validation, internal controls and audit departments.

Additionally, and pursuant to the requirements of CMN Resolutions 4,090 and BACEN Circular 3,749, Itaú Unibanco makes monthly delivery of its Liquidity Risk Statements (DLR) to BACEN and the following items are regularly prepared and submitted to the senior management for monitoring and decision support:

Different scenarios for liquidity projections;

Contingency plans for crisis situations;

Reports and charts to enable monitoring risk positions;

Assessment of funding costs and alternatives;

Tracking the sort of funding sources through a continuous control of funding sources considering counterparty type, maturity and other aspects.

The document that details the liquidity risk control institutional policy is on the Investor Relations website https://www.itau.com.br/investor-relations, section Itaú Unibanco, under Corporate Governance, Rules and Policies.

Itaú Unibanco

Risk Management – Pillar 3

8.2

Liquidity Coverage Ratio (LCR)

The Liquidity Coverage Ratio (LCR), which is calculated as required by BACEN, in line with the Basel international standard, is defined as follows:

· HQLA – High Quality Liquid Assets = correspond to inventories, in some cases weighted by a discount factor, of assets that remain liquid in the market even in periods of stress, that can easily be converted into cash and that are classified as low risk;

· Outflowss = total potential cash outflows for a 30-day horizon, calculated for a standard stress scenario as defined by BACEN Circular 3,749;

· Inflowss = total potential cash inflows for a 30-day horizon, calculated for a standard stress scenario as defined by BACEN Circular 3,749.

According to the instructions in BACEN Circular 3,775, banks with total assets exceeding R$100 billion have been required to submit a monthly Prudential Conglomerate LCR to BACEN since October 2015. This indicator is subject to a progressive minimum regulatory requirement, as presented below.

Schedule for limits to be observed	From January 1st
	2017			2018			2019
Liquidity Coverage Ratio (LCR)		80	%		90	%		100	%

Information on the Liquidity Coverage Ratio (LCR)														R$ thousand
		3rd quarter 2018					2nd quarter 2018					3rd quarter 2017
		Total Unweighted Value		Total Weighted Value			Total Unweighted Value		Total Weighted Value			Total Unweighted Value		Total Weighted Value
		(average)⁽¹⁾		(average)⁽²⁾			(average)⁽¹⁾		(average)⁽²⁾			(average)⁽¹⁾		(average)⁽²⁾
	High Quality Liquid Assets (HQLA)
1	Total High Quality Liquid Assets (HQLA)				179,507,182					172,177,693					190,910,310
	Cash outflows⁽³⁾
2	Retail deposits and deposits from small business customers, of which:		271,310,918		24,337,896			267,422,033		24,633,245			256,569,365		22,325,666
3	Stable deposits		138,404,574		6,920,229			122,645,902		6,122,045			135,644,891		5,954,084
4	Less stable deposits		132,906,344		17,417,668			144,776,131		18,511,200			120,924,474		16,371,582
5	Unsecured wholesale funding, of which:		152,796,965		69,308,090			145,089,181		68,539,220			136,689,717		63,415,545
6	Operational deposits (all counterparties) and deposits in networks of cooperative banks		2,151,928		107,601			2,363,385		118,619			2,348,312		103,219
7	Non-operational deposits (all counterparties)		149,175,965		67,731,417			139,456,399		65,173,582			132,826,960		61,797,882
8	Unsecured debt		1,469,073		1,469,073			3,269,398		3,247,019			1,514,444		1,514,444
9	Secured wholesale funding				5,740,085					6,220,303					4,376,562
10	Additional requirements, of which:		222,339,528		29,595,362			227,716,430		28,493,666			192,572,015		24,135,378
11	Outflows related to derivative exposure and other collateral requirements		23,571,941		11,775,921			21,770,285		10,131,981			17,605,105		8,041,172
12	Outflows related to loss of funding on debt products		3,880,923		3,880,923			4,529,870		4,528,192			4,057,455		4,057,455
13	Credit and liquidity facilities		194,886,663		13,938,517			201,416,274		13,833,493			170,909,455		12,036,751
14	Other contractual funding obligations		58,243,800		58,243,800			56,705,043		56,797,286			47,297,669		47,297,669
15	Other contingent funding obligations		91,159,671		11,581,524			91,493,094		11,085,517			84,309,251		9,460,864
16	Total cash outflows				198,806,757					195,769,236					171,011,684
	Cash inflows⁽³⁾
17	Secured lending		179,692,316		368,834			130,239,839		190,669			163,384,746		91,337
18	Inflows from fully performing exposures		27,471,300		16,523,696			30,364,647		17,742,831			27,199,507		14,755,671
19	Other cash inflows		87,515,098		76,856,387			87,164,435		76,251,344			69,075,805		61,019,020
20	Total cash inflows		294,678,715		93,748,917			247,768,921		94,184,845			259,660,058		75,866,028

				Total Adjusted⁽⁴⁾					Total Adjusted⁽⁴⁾					Total Adjusted⁽⁴⁾
21	Total HQLA				179,507,182					172,177,693					190,910,310
22	Total net cash outflows				105,057,841					101,584,392					95,145,656
23	LCR (%)				170.9	%				169.5	%				200.7	%

(1)

Total balance of the cash inflows or outflows.

(2)

After application of weighting factors.

(3)

Potential cash outflows (Outflows _e ) and inflows (Inflows _e ).

(4)

Amount calculated after applying weighting factors and limits set by BACEN Circular 3,749.

The table shows that Itaú Unibanco has an average LCR of 170,9% in the quarter, leading to the conclusion that the institution comfortably has sufficient liquid assets to endure more than 30 days in a period of idiosyncratic or systemic liquidity stress, as set forth by the metrics.

Itaú Unibanco

Risk Management – Pillar 3

Other Risks

Insurance products, pension plans and premium bonds risks

Products that compose portfolios of insurance companies of Itaú Unibanco are related to life and elementary insurance, as well as pension plans and premium bonds. The main risks inherent in these products are described below and their definitions are given in their respective chapters.

Underwriting Risk: possibility of losses arising from insurance products, pension plans and premium bonds that go against institution’s expectations, directly or indirectly associated with technical and actuarial bases used for calculating premiums, contributions and technical provisions;

Market Risk;

Credit Risk;

Operational risk;

Liquidity risk in insurance operations.

In line with domestic and international best practices, Itaú Unibanco has a risk management structure which ensures that risks resulting from insurance, pension and special savings products are properly assessed and reported to the relevant forums.

The process of risk management for insurance, pensions and premium bond plans is independent and focus on the special nature of each risk.

The aim of Itaú Unibanco is to ensure that assets serving as collateral for long-term products, with guaranteed minimum returns, are managed according to the characteristics of the liabilities, so that they are actuarially balanced and solvent over the long term.

Social and Environmental Risk

Itaú Unibanco understands social and environmental risk as the risk of potential losses due to exposure to social and environmental events arising from the performance of its activities.

Mitigation actions of social and environmental risk are carried out through processes mappings, internal controls, monitoring new regulations on the subject, and recording occurrences in internal databases. In addition, risks identified, prioritized and actions taken complement the management of this risk in Itaú Unibanco. The social and environmental risk management is carried out by the first line of defense in its daily operations, supplemented by a specialized assessment of legal and risks control area. Business units also have their governance for approval of new products, including assessing the social and environmental risk, which ensures compliance in all new products and processes employed by the institution. Governance also includes the Social and Environmental Risk Committee, which is primarily responsible for guide institutional views of social and environmental risk exposure related to Itaú Unibanco activities.

Itaú Unibanco consistently seeks to evolve in the management of social and environmental risk, always attentive to the challenges so as to monitor the changes in and demands of society. Therefore, among other actions, Itaú Unibanco has assumed and incorporated into Itaú Unibanco’s internal processes a number of national and international voluntary commitments and pacts aimed at integrating social, environmental and governance aspects into Itaú Unibanco business. The main ones are the Principles for Responsible Investment (PRI), the Charter for Human Rights – Ethos, the Equator Principles (EP), the Global Impact, the Carbon Disclosure Project (CDP), the Brazilian GHG Protocol Program, the Pacto Nacional para Erradicação do Trabalho Escravo (National Pact for Eradicating Slave Labor), among others. Itaú Unibanco efforts to increase the knowledge of the assessment of the social and environmental criteria have been recognized as models in Brazil and abroad, as shown by the recurring presence of the institution in the major sustainability indexes abroad, such as the Dow Jones Sustainability Index, and recently, in Sustainability Index Euronext Vigeo – Emerging 70, and in Brazil, for example in the Corporate Sustainability Index, as well as the numerous prizes which Itaú Unibanco has been awarded.

Regulatory Risk

Regulatory risk is the risk arising from losses due to fines, sanctions and other penalties applied by regulatory agencies resulting from noncompliance with regulatory requirements. The regulatory risk is managed through a structured process aimed at identifying changes in the regulatory environment, analyzing their impacts on the departments of the institution and monitoring the implementation of actions directed at adherence to the regulatory requirements.

Itaú Unibanco

Risk Management – Pillar 3

Itaú Unibanco has a structured flow for addressing rules, covering the stages of recognition, distribution, monitoring and compliance, and all of these processes are established in internal policies.The flow for handling regulatory risk involves various areas of the institution, and consists of: (i) structure of lines of defense; (ii) monitoring of draft legislation, public notices and public hearings; (iii) monitoring of new rules and definition of action plans; (iv) relationship with regulators and professional organizations; (v) monitoring of action plans; (vi) control over compliance with legal decisions and TAC (conduct adjustment agreements), executed in public civil actions. In addition, the institution’s risks are classified and prioritized according to Itaú Unibanco’s internal control methodology.

Model Risk

The model risk arises from the incorrect development or maintenance of models, such as mistaken assumptions, and inappropriate use or application of the model.

The use of models can lead to decisions that are more accurate and therefore it is a major practice in the institution. The models have supported strategic decisions in several contexts, such as credit approval, pricing, volatility curve estimation, calculation of capital, among others.

Due to the increasing use of models, driven by the application of new technologies and the expansion of data use, Itaú Unibanco has improved its governance in relation to its development and monitoring, through the definition of guidelines, policies and procedures aimed at assuring the quality and mitigation of the associated risks.

Country Risk

The country risk is the risk of losses related to non-compliance with obligations in connection with borrowers, issuers, counterparties or guarantors, as a result of political-economic and social events or actions taken by the government of the country where the borrower, issuer, counterparty or guarantor is located.

Itaú Unibanco has a specific structure for the management and control of country risk, consisting of corporate bodies and dedicated teams, with responsibilities defined in policies. The institution has a structured and consistent procedure for managing and controlling country risk, including :(i) establishment of country ratings; (ii) determination of limits for countries; (iii) monitoring the use of limits.

Business and Strategy Risk

Business and strategy risk is the risk of a negative impact on the results or capital as a consequence of a faulty strategic planning, the making of adverse strategic decisions, the inability of Itaú Unibanco to implement the proper strategic plans and/or changes in its business environment.

Itaú Unibanco has implemented many mechanisms that ensure that both the business and the strategic decision-making processes follow proper governance standards, have the active participation of executives and the Board of Directors, are based on market, macroeconomic and risk information and are aimed at optimizing the risk-return ratio. Decision-making and the definition of business and strategy guidelines, count on the full engagement of the Board of Directors, primarily through the Strategy Committee, and of the executives, through the Executive Committee. In order to handle risk adequately, Itaú Unibanco has governance and processes to involve the ARF in business and strategy decisions, so as to ensure that risk is managed and decisions are sustainable in the long term. They are: (i) qualifications and incentives of board members and executives; (ii) budgetary process; (iii) product assessment; (iv) evaluation and prospecting of proprietary mergers and acquisitions; and (v) a risk appetite framework which, for example, restricts the concentration of credit and exposure to specific and material risks.

Reputational Risk

Itaú Unibanco understand reputational risk as the risk arising from internal practices, risk events and external factors that may generate a negative perception of the institution among clients, counterparties, stockholders, investors, supervisors, commercial partners, among others, resulting in impacts on the value of the brand and financial losses, in addition to adversely affecting Itaú Unibanco’s capability to maintain existing commercial relations, start new businesses and continue to have access to financing sources.

The institution believes that its reputation is extremely important for achieving its long-term goals and this is why the institution tries to align its speech with ethical and transparent practice and work, which is essential to raise the confidence of Itaú Unibanco’s stakeholders. Itaú Unibanco’s reputation depends on its strategy (vision, culture and skills) and derives from direct or indirect experience of the relationship between Itaú Unibanco and its stakeholders.

Itaú Unibanco

Risk Management – Pillar 3

Since the reputational risk directly or indirectly permeates all operations and processes of the institution, Itaú Unibanco’s governance is structured in a way to ensure that potential reputational risks are identified, analyzed and managed still in the initial phases of its operations and analysis of new products.

The treatment given to reputational risk is structured by means of many processes and internal initiatives, which, in turn, are supported by internal policies, and their main purpose is to provide mechanisms for the monitoring, management, control and mitigation of the main reputational risks. Among them are (i) risk appetite statement; (ii) process for the prevention and fight against unlawful acts; (iii) crisis management process and business continuity; (iv) processes and guidelines of the governmental and institutional relations; (v) corporate communication process; (vi) brand management process; (vii) ombudsman offices initiatives and commitment to customer satisfaction; and (vii) ethics guidelines and prevention of corruption.

Financial institutions play a key role in preventing and fighting illegal acts, in particular money laundering, terrorist financing and fraud, for which the challenge is to identify and suppress increasingly sophisticated operations that seek to conceal the origin, ownership and movement of goods and money derived from illegal activities. Itaú Unibanco has introduced a corporate policy in order to prevent its involvement in illegal acts and to protect its reputation and image towards employees, clients, strategic partners, suppliers, service providers, regulators and society, through a governance structure based on transparency, strict compliance with rules and regulations and cooperation with police and judicial authorities. It is also continuously aligned It also seeks continuous alignment with local and international best practices for preventing and fighting against illegal acts, through investing and training employees.

In compliance with the guidelines of this corporate policy, Itaú Unibanco established a program to prevent and fight against illegal acts based on the following pillars:

Client Identification Process;

Know Your Client (KYC) Process;

Know Your Partner (KYP) Process;

Know Your Supplier (KYS) Process;

Know Your Employee (KYE) Process;

Assessment of New Products and Services;

Monitoring of Transactions;

Reporting Suspicious Transactions to the Regulatory Bodies; and

Training and Awareness Raising.

This program applies to the entire institution, including subsidiaries and affiliates in Brazil and abroad. Governance on preventing and combating unlawful acts is carried out by the Board of Directors, Audit Committee, Operational Risk Committee and Anti-Money Laundering Committees. The document that presents the guidelines established in the program to prevent and combat unlawful acts may be seen on the www.itau.com.br/investor-relations, section Itaú Unibanco, Corporate Governance, Rules and Policies.

In addition, Itaú Unibanco is committed to protecting corporate information and ensuring client privacy in any transactions. To this end, it has a Corporate Information Security Policy and has a monitoring process and a control structure that covers technology, business areas and international units, adhering to principal regulatory bodies and external audits, and best market practices and certifications. Additionally, a Security Operation Center (SOC) that works 24/7 contributes to the cyber security of Itaú Unibanco’s electronic channels and IT infrastructure, the monitoring of operations and thus minimization of the risk of a security incident.

Itaú Unibanco

Risk Management – Pillar 3

Appendix I

	Breakdown of the Referential Equity and Information on its adequacy	09/30/2018
		Value			Temporary Treatment		Balance
		(R$ Thousand)			(R$ Thousand)		Sheet Reference
	Core Capital: instruments and reserves
1	Instruments Eligible for the Core Capital		97,148,000			-	(k)
2	Revenue reserves		31,009,691			-	(l)
3	Other revenue and other reserve		(692,213	)		-	(m)
4	Instruments that are authorized to compose the Core Capital before Resolution No. 4,192 of 2013 comes into effect
5	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from the Core Capital¹		13,235,869			-	(j)
6	Core Capital before prudential adjustments		140,701,347			-
	Core Capital: prudential adjustments					-
7	Prudential adjustments related to the pricing of financial instruments		-			-
8	Goodwill paid upon the acquisition of investments based on the expectation of future profitability		8,354,088			-	(e)
9	Intangible assets		7,894,579			-	(h) / (i)
10	Tax credits arising from income tax losses and social contribution tax loss carryfowards and those originating from this contribution related to determination periods ended until December 31, 1998²		6,092,608			-	(b)
11	Adjustments related to the market value of derivative financial instruments used to hedge the cash flows of protected items whose mark-to-market adjustments are not recorded in the books.		(1,309,409	)		-
12	Downward difference between the amount recognized as a provision and the expected loss for institutions using the IRB		-			-
13	Gains arising from securitization operations
14	Gains or losses arising from the impact of changes on the credit risk of the institution on the fair value assessment of liability items
15	Actuarial assets related to defined benefit pension funds		45,121			-	(d)
16	Shares or other instruments issued by the bank authorized to compose the Core Capital, acquired directly, indirectly or synthetically		1,962,762			-	(n)
17	Investments crossed with instruments eligible for the Core Capital
18	Added value of investments lower than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities, that exceeds 10% of the amount of the Core Capital, disregarding specific deductions.		-			-
19	Investments higher than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		-			-
20	Mortgage servicing rights
21	Tax credits arising from temporary differences that depend on the generation of income or future taxable income for their realization, above the limit of 10% of the Core Capital, disregarding specific deductions		-			-
22	Amount that exceeds 15% of the Core Capital		4,348,879			-
23	of which: arising from investments in the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and open ended pension entities		3,309,448			-
24	of which: arising from mortgage servicing rights
25	of which: arising from tax credits resulting from temporary differences that depend on the generation of income or future taxable income for their realization²		1,039,431			-
26	National regulatory adjustments		-			-
26.a	Deferred permanent assets		-			-	(g)
26.b	Investment in dependence, financial institution abroad or non-financial entity that is part of the conglomerate, with respect to which the Central Bank of Brazil does not have access to information, data and documents		-			-
26.c	Funding instruments eligible for the Core Capital issued by an institution that is authorized to operate by the Central Bank of Brazil or by a financial institution abroad, and that is not part of the conglomerate		-			-
26.d	Increase of unauthorized capital		-			-
26.e	Excess of the amount adjusted of Core Capital		-			-
26.f	Deposit to cover capital deficiency		-			-
26.g	Amount of intangible assets established before Resolution No. 4,192 of 2013 comes into effect		-			-	(i)
26.h	Excess of resources invested on permanent assets		-			-
26.i	PR emphasis		-			-
26.j	Other residual differences concerning the Core Capital calculation methodology for regulatory purposes		-			-
27	Regulatory adjustments applied to the Core Capital due to the Insufficiency of Additional Capital and Tier II Capital to cover deductions		-			-
28	Total regulatory deductions from the Core Capital		27,388,628			-
29	Core Capital		113,312,719			-

1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.

2 - Considers the deduction of deferred tax liabilities.

3 - Calculated according to article 9 of Bacen Resolution No. 4,192.

4 - Calculated according to article 29 of Resolution No. 4,192.

Itaú Unibanco

Risk Management – Pillar 3

	Breakdown of the Referential Equity and Information on its adequacy	09/30/2018
		Value		Temporary Treatment		Balance
		(R$ Thousand)		(R$ Thousand)		Sheet Reference
	Additional Capital: instruments
30	Instruments eligible for the Additional Capital		7,985,434		-
31	of which: classified as core capital in accordance with the accounting rules				-
32	of which: classified as liabilities in accordance with the accounting rules				-
33	Instruments that are authorized to compose the Additional Capital before Resolution No. 4,192 of 2013 comes into effect				-
34	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from the Additional Capital ³		87,519		-
35	of which: instruments issued by subsidiaries before Resolution No. 4,192 of 2013 comes into effect				-
36	Additional capital before regulatory deductions		8,072,953		-
	Additional Capital: regulatory deductions
37	Shares or other instruments issued by the bank authorized to compose the Additional Capital, acquired directly, indirectly or synthetically		-		-
38	Investments crossed with instruments eligible for the Additional Capital
39	Added value of investments lower than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate and that exceeds 10% of the amount of the Additional Capital		-
40	Investments higher than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate		-
41	National regulatory adjustments		-		-
41.a	Added value of investments lower than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate and do not exceeds 10% of the amount of the Additional Capital		-		-
41.b	Non-controlling interest in Additional Capital		-		-
41.c	Other residual differences concerning the Additional Capital calculation methodology for regulatory purposes		-		-
42	Regulatory adjustments applied to the Additional Capital due to the insufficiency of Tier II Capital to cover deductions		-		-
43	Total regulatory deductions from the Additional Capital		-		-
44	Additional Capital		8,072,953		-
45	Tier I		121,385,672		-
	Tier II: instruments
46	Instruments eligible for Tier II Capital
47	Instruments that are authorized to compose Tier II Capital before Resolution No. 4,192 of 2013 comes into effect⁴		15,778,051		23,667,076
48	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from Tier II Capital³		88,166		-
49	of which: instruments issued by subsidiaries before Resolution No. 4,192 of 2013 comes into effect				-
50	Excess of provisions with respect to the loss expected in IRB		-		-
51	Tier II before regulatory deductions		15,866,217		-
	Tier II: regulatory deductions
52	Shares or other instruments issued by the bank authorized to compose Tier II Capital, acquired directly, indirectly or synthetically		-		-
53	Investments crossed with instruments eligible for Tier II Capital
54	Added value of investments lower than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate and that exceeds 10% of the amount of Tier II Capital		-
55	Investments higher than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate		-
56	National regulatory adjustments		-		-
56.a	Funding instruments issued by an institution that is authorized to operate by the Central Bank of Brazil or by a financial institution abroad, and that is not part of the conglomerate, limited to the instruments held by third parties and issued until December 31, 2012		-		-
56.b	Non-controlling interest in Tier II		-		-
56.c	Other residual differences concerning Tier II calculation methodology for regulatory purposes		-		-
57	Total regulatory deductions from Tier II Capital		-		-
58	Tier II		15,866,217		-
59	Referential Equity (Tier I + Tier II)		137,251,889		-
60	Total risk-weighted assets		812,625,018		-
	BIS Ratios and Additional Core Capital

1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.

2 - Considers the deduction of deferred tax liabilities.

3 - Calculated according to article 9 of Bacen Resolution No. 4,192.

4 - Calculated according to article 29 of Resolution No. 4,192.

Itaú Unibanco

Risk Management – Pillar 3

	Breakdown of the Referential Equity and Information on its adequacy	09/30/2018
		Value			Temporary Treatment		Balance
		(R$ Thousand)			(R$ Thousand)		Sheet Reference
	BIS Ratios and Additional Core Capital
61	Common Equity Tier ¹		13.9	%
62	Tier I Ratio		14.9	%
63	BIS Ratio		16.9	%
64	Core Capital minimum requirement, including capital additions (% of RWA)		6.875	%
65	of which: additional for preserving capital		1.875	%
66	of which: countercyclical additional		0.0	%
67	of which: additional for institutions that are systemically important at global level (G-SIB)
68	Core Capital available to meet the requirement for Additional Core Capital (% of RWA)		2.375	%
	National Minimum
69	Core Capital Ratio, if different from that established in Basel III
70	Tier I Ratio, if different from that established in Basel III		6.0	%
71	BIS Ratio, if different from that established in Basel III		8.625	%
	Amounts below the limit for deduction (non-weighted by risk)
72	Added value of investments lower than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		246,276
73	Investments higher than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		16,243,903				(f) / (a)
74	Mortgage servicing rights
75	Tax credits arising from temporary differences, not deducted from the Common Equity Tier I		9,265,675				(c)
	Limits to the inclusion of provisions in Tier II
76	Generic provisions eligible for the inclusion in Tier II Capital related to exposures subject to the calculation of the capital requirement by means of a standardized approach
77	Limit for the inclusion of generic provisions in Tier II Capital for exposures subject to the standardized approach
78	Provisions eligible for the inclusion in Tier II Capital related to exposures subject to the calculation of the capital requirement by means of the IRB approach (before the application of the limit)		-
79	Limit for the inclusion of provisions in Tier II Capital for exposures subject to the IRB approach		-
	Instruments authorized to compose the Referential Equity before Resolution No. 4,192 of 2013 comes into effect (applicable between October 1, 2013 and January 1, 2022)
80	Current limit for instruments that are authorized to compose the Core Capital before Resolution No. 4,192 of 2013 comes into effect
81	Amount excluded from the Core Capital due to the limit
82	Instruments that are authorized to compose the Additional Capital before Resolution No. 4,192 of 2013 comes into effect		-			-
83	Amount excluded from the Additional Capital due to the limit		-			-
84	Instruments that are authorized to compose Tier II Capital before Resolution No. 4,192 of 2013 comes into effect⁴		15,778,051			-
85	Amount excluded from Tier II Capital due to the limit⁴		23,667,076			-

1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.

2 - Considers the deduction of deferred tax liabilities.

3 - Calculated according to article 9 of Bacen Resolution No. 4,192.

4 - Calculated according to article 29 of Resolution No. 4,192.

Itaú Unibanco

Risk Management – Pillar 3

Glossaries

11.1

Glossary of Acronyms

ARF – Área de Riscos e Finanças (Risk and Finance Area)

AVA - Avaliação de Vulnerabilidades e Ameaças (Threats and Vulnerabilities Analysis)

ACP - Additional Capital Buffers

BACEN - Banco Central do Brasil (Central Bank of Brazil)

BIA - Business Impact Analysis

BIS - Bank for International Settlements

BRL - Brazilian Real

CCB – Cédula de Crédito Bancário

CDB - Certificado de Depósito Bancário (Bank Deposit Certificate)

CDI - Certificado de Depósito Interfinanceiro (Interbank Deposit Certificate)

CDS - Credit Default Swap

CEO - Chief Executive Officer

CET I - Common Equity Tier I

CGRC - Comitê de Gestão de Risco e Capital (Risk and Capital Management Committee)

CMN - Conselho Monetário Nacional (National Monetary Council)

CNSP - Conselho Nacional de Seguros Privados (National Council of Private Insurance)

CRA – Certificados de Recebíveis do Agronegócio (Agribusiness Receivables Certificate)

CRI - Certificados de Recebíveis Imobiliários (Securitized Real Estate Loans)

CRO - Chief Risk Officer

CVM - Securities and Exchange Commission

Comef - Financial Stability Committee (Comitê de Estabilidade Financeira)

DV01 - Delta Variation Risk

FCL - Fator de Conversão de Crédito de Operações a Liquidar (Unsettled Operation Credit Conversion Factor)

FEPF - Fator de Exposição Potencial Futura (Future Potential Exposure Factor)

FIDC - Fundo de Investimento em Direitos Creditórios (Credit Rights Investment Funds)

FII – Fundo de Investimento Imobiliário (Real Estate Investiment Fund)

FPRs - Fatores de Ponderação de Riscos (weighting factor)

GDP - Gross Domestic Product

G-SIBs - Global Systemically Important Banks

HQLA – High quality liquid assets

ICAAP - Internal capital adequacy assessment process

IGPM – Índice Geral de Preços do Mercado (Brazilian consumer index)

IPCA - Índice de Preço ao Consumidor Amplo (Brazilian consumer index)

IPV – Independent Price Validation

Itaú Unibanco

Risk Management – Pillar 3

IT - Information Technology

LCR – Liquidity Coverage Ratio

MEP - Equity Method

MtM - Mark to Market

PCN - Planos de Continuidade de Negócios (Business Continuity Plans)

PR - Patrimônio de Referência (Total Capital)

PREVIC - Superintendência Nacional de Previdência Complementar (National Superintendence of Supplementary Pension)

RA - Risk Assessment

RAS - Risk Appetite Statement

RBAN - Total Capital calculated for covering the interest rate risk of trades of the Banking Portfolio

RCAP - Regulatory Consistency Assessment Programme

RCP - Risco de Crédito Potencial (Potential Credit Risk)

RWA - Risk Weighted Asset

RWACPAD - Portion relating to exposures to credit risk

RWAMINT - Portion relating to exposures to market risk, using internal approach

RWAMPAD - Portion relating to exposures to market risk, calculated using standard approach

RWAOPAD - Portion relating to the calculation of operational risk capital requirements

SOC - Security Operation Center

SUSEP - Superintendência de Seguros Privados (Superintendence of Private Insurance)

TAC - Termo de Ajustamento de Conduta (Conduct Adjustment Agreements)

TRS - Total Return Swap

TR - Taxa Referencial (Referential Rate)

TVM - Títulos de valores mobiliários (Securities)

VaR - Value at Risk

Itaú Unibanco

Risk Management – Pillar 3

11.2

Glossary of Regulations

BACEN Circular No. 3,316, of April 30^th, 2008

BACEN Circular No. 3,354, of June 27^th, 2007

BACEN Circular No. 3,640, of March 04^th, 2013

BACEN Circular No. 3,644, of March 04^th, 2013

BACEN Circular No. 3,646, of March 04^th, 2013

BACEN Circular No. 3,674, of October 31^st, 2013

BACEN Circular No. 3,676, of October 31^st, 2013

BACEN Circular No. 3,678, of October 31^st, 2013

BACEN Circular No. 3,701, of March 13^th, 2014

BACEN Circular No. 3,748, of February 26^th, 2015

BACEN Circular No. 3,749, of March 05^th, 2015

BACEN Circular No. 3,751, of March 19^th, 2015

BACEN Circular No. 3,769, of October 29^th, 2015

BACEN Circular No. 3,809, of August 25^th, 2016

BACEN Circular No. 3,846, of September 13^th, 2017

BACEN Circular Letter No. 3,706 of May 05^th, 2015

BACEN Circular Letter No. 3,775 of December 16^th, 2015

BACEN Circular Letter No. 3,841 of July 27^th, 2017

CNSP Resolution No. 321, of July 15^th, 2015

CNSP Resolution No. 343, of December 26^th, 2016

CNSP Resolution No. 360, of Decemeber 20^th, 2017

CMN Resolution No. 3,464, of June 26^th, 2007

CMN Resolution No. 3,263, of February 24^th, 2005

CMN Resolution No. 3,533 of January 31^st, 2008

CMN Resolution No. 3,721 of April 30^th, 2009

CMN Resolution No. 3,921, of November 25^th, 2010

CMN Resolution No. 4,090, of May 24^th, 2012

CMN Resolution No. 4,192, of March 1^st, 2013

CMN Resolution No. 4,193, of March 1^st, 2013

CMN Resolution No. 4,195, of March 1^st, 2013

CMN Resolution No. 4,280, of October 31^st, 2013

CMN Resolution No. 4,502, of June 30^th, 2016

CMN Resolution No. 4,557, of February 23^rd, 2017

CMN Resolution No. 4,615, of November 30^th, 2017

CMN Resolution No. 4,680, of July 31^th, 2018

Normative SARB 017/2016, of August 25^th, 2016

Itaú Unibanco