Quarterly Management Discussion & Analysis (MDA300905.pdf)

Analysis of the Consolidated PerformanceResults for Loan and Lease LossesAnalysis of Results from Possible Loan LossesR$ Million(Increase)/Generic Reversal (103) (52) (155) (11) (7) (18) (92) (45) (137)(Increase)/Specific Reversal (722) (148) (870) (552) (111) (663) (170) (36) (206)Exceeding Provision (50) - (50)Credits Recoveries and Renegotiated 291 190 101The expense for the provision for loan and lease lossesreached R$ 1,074 million in the third quarter of 2005,which corresponds to a 57.8% increase in relation tothe expense of the previous quarter.The expense for general provisions grew R$ 137 million inthe period. The R$ 92 million increase in the expense fromthe setting up of a general provision for transactions withprivate individual customers reflects not only the growthof the credit portfolio but also the reversal of provisionsassociated with secured transactions in the previousquarter (for further details, please see the ManagerialAnalysis Report of the Operation of the second quarter of2005). The R$ 45 million increase in general provision fortransactions with business customers derives from anadjustment to the risk level of one transaction with acorporate customer in the electricity sector, previouslywritten off against the provision and renegotiated in theperiod. The expense for specific provisions increased R$206 million between the quarters and reflects the strategyadopted by Itaú of prioritizing transactions capable ofgenerating a greater contribution to results, even thoughthey represent higher risks. Also in the quarter, a provisionin excess of the minimum required by the bankingauthorities, totaling R$ 50 million.In the same period, the revenue from the recovery ofcredits written off as a loss reached R$ 291 million, whichcorresponds to a 53.1% increase, when compared withthe previous quarter. As previously mentioned, Itaú BBAconcluded in this quarter the process of renegotiatinga transaction carried out with a customer in theelectricity sector.To assist the analysis of the net effects of the strategyof granting credit, we show the adjusted banking profit- made up of the managerial financial margin of bankingtransactions, service fees generated by the credit andcredit card transactions, PIS and COFINS tax expenses,net of the results for loan and lease losses - whichreached R$ 2,961 million in the period, growing of R$ 71million when compared to the previous quarter.Contribution of the Change of Mix of the Credit PortfolioR$ MillionManagerial Financial Margin - Banking Operations (A) 3,104 2,956 2,605 8,665Banking Service Fees with Operations of Credit and Credit Cards (B) 770 732 684 2,187Taxes Expenses for PIS and COFINS (C) (180) (171) (153) (505)Adjustment 1 - Results from Loan and Lease Losses (E) (784) (491) (594) (1,868)Adjustment 2 - Revision of Classification - Operations with Real Estate Security(F) - (135) - (135)Adjustment 3 - Exceeding Provision (G) 50 - 150 200(734) (626) (444) (1,803)Managerial Financial Margin - Banking Operations (A) 2,309 2,098 2,040 6,447Banking Service Fees with Operations of Credit and Credit Cards (B) 490 458 415 1,363Taxes Expenses for PIS and COFINS (C) (130) (119) (114) (363)Adjustment 1 - Results from Loan and Lease Losses (E) (256) (206) (199) (661)Adjustment 2 - Revision of Classification - Operations with Real Estate Security(F) - - - -Adjustment 3 - Exceeding Provision (G) - - 94 94(256) (206) (105) (567)15 Management Discussion and AnalysisBanco Itaú Holding Financeira S.A.