Quarterly Management Discussion & Analysis (MDA300905.pdf)

Risk ManagementCredit RiskCredit OperationsThe third quarter of 2005 was marked by specific actionstaken by Itaú, in particular in the consumer credit andvehicle segments, to meet the increasing credit demandfrom private individuals.During the period, the Bank proceeded with its actionsaimed at making available and granting credit, whileenhancing the quality or risk and seeking the best risk/return ratio in the transactions. As a result, the portfoliogrew by 5.1% in the quarter, totaling R$ 61,616 millionat September 30, 2005. Highlights in this period werethe growth of the vehicle finance (increase of R$ 1,256million, or 15.3%), personal loans (increase of R$ 935 , or10.1%) and micro, small and mid-size companies(increase of R$ 347 million, or 3.1%) portfolios.The share of customers with a risk rating between "AA"and "B" showed a slight decrease of 1.2 percentagepoint, corresponding to 86% of the total portfolio, whencompared to June 2005.Retail trade represented the largest concentration ofportfolio risk, accounting for 5.5% of the total. Theconcentration in the largest borrowers has shown adownward trend over recent periods. The share of the 100largest borrowers dropped from 26.9% in June 2005 to24.7% in September. The largest borrower represented 1.4%of the total portfolio in September 2005.Credit OperationsR$ Million (**)61,61653,27545,41444,58155,57334,28247,40738,65938,41927,25329,61519,59616,916 16,07723,67414,12711,79812,20616,8908,3629,0577,353 6,5356,52311,57212,325 14,414 14,0585,846 5,194 5,198 4,63410,8188,1437,0908,0226,0514,524 4,6105,6543,9585,53185 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 *Credit Operations and Guarantees (2)Credit Operations (1)(*) At September 30, 2005.(**) In constant currency from December 31, 1995 to that date; in nominal amounts thereafter.(1) Credit transactions: Loans, Leasing, Other Credits and Advances on Foreign Exchange Contracts. (2) Guarantees include collateral, surety and other guarantees.In the third quarter of 2005, after a thoroughreassessment of the profile and potential of customersof both Itaubanco (micro, small and mid-sizecompanies) and Itaú BBA (large companies), certainaccounts were transferred from one institution to theother, to provide for conformity between customersand the parameters set up for each segment. As a resultof this process, 245 economic groups migrated fromItaubanco to Itaú BBA, while 57 groups migrated fromItaú BBA to Itaubanco. The balance of the respectiveloan portfolios was impacted by the account transferprocess. Accordingly, to allow for a better comparisonbetween periods, the new customer categorization wasalso considered for prior periods.42 Management Discussion and AnalysisBanco Itaú Holding Financeira S.A.