This is Itaú Unibanco Holding Conference Call. (Operator Instructions). As a reminder this conference is being recorded. At this time, I would like turn the conference over to Ms. Daniela Ueda of Financial Investor Relations, Brazil. Please go ahead.

Good morning and welcome to Itaú Unibanco Holding Conference Call about the first quarter of 2010 earnings. This conference call is being broadcast live on www.itau-unibanco.com/ir. A slide presentation is also available on this site. Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from those anticipated in any forward-looking comments as a result of macro economic conditions, market risks and other factors. With us today in this conference call in Sao Paolo are Alfredo Egydio Setubal, Investor Relations Officer; Sérgio Ribeiro da Costa Werlang, Executive Vice President of Risk Control and Finance, Silvio de Carvalho, Chief Financial Officer; Jean Marc Etlin, Itaú BBAs Executive Vice President, Caio Ibrahim David, Executive Officer and Marco Antunes, Accounting Director. First, Mr. Alfredo Egydio Setubal will comment on the first quarter of 2010 earnings, afterwards management will be available for a question and answer session. It is now my pleasure to turn the call over to Mr. Alfredo Egydio Setubal.

Good morning. It is a pleasure to be with you again to talk about the results for the first quarter of 2010. In our view the quarter's results were that we released was very good, very strong showing already some synergies of the merger and also the number that we are taking advantage of the good environment that we have here in Brazil in terms of the growth of GDP in the quarter. For those who are following through the Internet, I will start on the highlight on slide number 2. The first one is the earnings, the recurring net income of R$ 3,168 million. That number means an increase when we compare to the previous quarter of 12.6%; and ROE of 24.4%. If we look at the number that we released considering the extraordinary items R$3.2 billion, means ROE of 25%. The second point is extraordinary items; we show R$66 million, that is mainly related because we use the program for installment payment of federal taxes that we could use and this gave us a gain of R$145 million. The third highlight is that we didn't use for the second quarter the additional provisions for loan losses that we made and we have at the end of the quarter the same amount as at the end of the year of R$6.1 billion, because the conditions of the economy as I said at the beginning is much better and we are seeing numbers for loan losses lower than in the previous quarter. Related to that is the fourth highlight is the NPL ratio over 90 days and the NPL ratio over 60 days that achieved 4.9% and 5.9%. That is in line with what we have been seeing in the last quarters that we expected these numbers to reduce when…

(Operator Instructions) Our first question comes from Mr. Daniel Abut from Citi.

I have a couple of questions. On the NPL ratio side, you indicated in your remark that you see room for further declines throughout the year. Do you venture to give us a guide on that how low can it go by the end of the year either on the 90-day basis or 60-day basis, whatever you feel more comfortable. Second question is on the expense side. You show this slide 13 that show that even considering the expansion cost and the Porto Seguro expenses that make the number not entirely comparable with the year ago, you are showing a decline in expenses compared to year ago. If I'm not mistaken, in the prior conference call, you indicated that you see expenses growing this year somewhere in the low single-digit 3% to 5%. Even what we see in the first quarter, do you see room for better performance in expenses that you were seeing a quarter ago given the cost synergies on the merger that, as you said are starting to begin?

Daniel, its Alfredo. We expect NPLs to remain along the year with some variations quarter-to-quarter, of course something between 4.5% and 5%. That’s the number that we expected this year for the whole year. This quarter to be more precise than that, but due to the conditions of the economy, we continue to give this guidance in terms of NPL. In terms of expenses, as I said we had a very good quarter. We show very good numbers. Some synergies [appears] but also first quarter is traditionally lower expenses. Lower expenses in terms of marketing, lower expenses in terms of personnel, many people in vacation and so on. So I prefer to be more conservative and remains with the guidance that we gave you to the market before. There is some increase, lower increase when we compare to the total expenses for the year and if we exclude expansion even lower, excluding expansion and all this Redecard and Porto Seguro and so on, something between 0% and 3%, in terms of growth of expenses and total expenses something between 3% and 5%. I prefer to be conservative. I don’t want to give you an increase expectation. I think it's better to be more conservative at this moment. Let's see quarter-by-quarter. Our next question comes from Mr. [Fabio] from Barclay’s Bank. Fabio - Barclay’s Bank: I wonder if you could provide us with some further color on the competitive environment in Brazil for loan growth throughout 2010. We have seen some from central bank data for March that for the first time domestic private banks surpassed public institutions and by wide margins foreign bank too. How do you see this trend for the rest of the year and looking at how you are positioned to compete in terms of your branch network, loan origination capabilities? Who are you seeing as the most active competitor in the field? Thanks.

I think competition is tough, we have not much, not a big number of banks competing in terms of retail in Brazil but all the banks have strong good brands and good technology and so on. So we are in a very good position. We are leaders among the private banks. We have very strong positions in most of the [areas] that we are. So we are very comfortable to face all these competition. We are also expanding our business in terms of opening new branches. As I have said a 150 new branches this year. We are hiring managers to serve better and increase our share in terms of SMEs and we are seeing in the numbers released by the central bank that the private sector are regaining part of the market share that they had lost to the public banks during the most, the worst part of the crisis, specifically in the beginning in the first semester of last year. So we continue to increase. We believe that we in all the private sector we will gain market share. This sector is more active and then as I said the numbers released by the central bank shows that the local banks, the private local banks are gaining market share and foreigners are stilling losing, and that the private banks also are losing this year. So we feel our position is very, very strong to continue to keep our leadership in most of the sectors and we see some room to increase share in some segments like SME for instance.

Our next question comes from Mr. Jason Mollin from Goldman Sachs.

My first question is digging more into the cost side, specifically on personnel expenses. You showed a substantial 11% decline quarter-on-quarter and you mentioned the impact on vacation, of making provisions previously for vacations, can you quantify that and give us a sense that this was a R$350 million decline quarter-on-quarter to see. This looks like this was much below our expectations, and if you can sustain that that would be quite positive. My second question is on fees. You disclosed that the 20% plus year-on-year growth in current account fees was distorted by a reversal in the first quarter of 2009, and if we adjust for that, the fees were basically seen to be flat. How should we think about banking fees going forward? I presume that the issue on pricing is done, so should it be in terms of number of accounts, and secondly if you can comment in terms of fees on the credit card segment, which were up 15% quarter-on-quarter, do you anticipate changes in the pricing environment given regulation and what's your expectation for the growth there?

Silvio de Carvalho speaking. Your first question actually was regarding expenses. Yes, the reduction during this quarter was mainly due to the seasonality and the consequences of the vacations during the first quarter in the country. There are some other movements. I don’t have the precise breakdown right now with me but it's mainly due to the seasonality on vacations. Regarding fees. Yes, again, you are right. If we renew, that impact is during the first quarter last year, it should be quite flat and looking forward what we see is some room for increasing fees mainly due to increase in volumes in our operations and also due to increase in operations regarding our CIBs and all the fixed income and equities distribution. Also, credit cards should be one of the boost for this increase in fees in near future.

Maybe just a follow up on cost. If you look at personnel expenses, maybe if we look year-over-year to get rid of the seasonal impact and they were down 3.5% year-over-year first quarter 2010 versus 2009. Is it this the kind of the run rate that we should expect throughout the rest of the year?

Well, as Fredo said, we are opening new branches and that’s why we don’t think that this saving that we booked during the first quarter is one thing that we could keep along the year, so that’s why we are not changing any guidance on expenses increased during the year, but you are right. The price was very positive during the first quarter, but we don’t think that we have reasons to believe right now that this could be kept throughout the year. I also think that you mentioned competitive scenario regarding credit cards, right.

I was just asking because as usual we hear some discussion of regulating credit card fees and we have seen some regulation come through and adjustment on other banking fees, so I was wondering if that would impact your view for credit cards?

I think we have lots of comments and typically negative agenda regarding credit cards, but we keep saying that this is a very, very good market even in immense expansion in the country where it is still under its standards right behind what is acceptable worldwide. We think that even under any regulatory difference environment, it's going to be a fair growth competition scenario and with lots of room for us to take our boom and take advantage of that. Just to give you one figure on that I think it's around 15% or 20% of the total expenses of a family in Brazil is paid using credit cards and they international standard comes from 40% to 50% in countries like France, UK and US, so there's room for growth and we will be keeping our standard.

Our next question comes from Mr. Saul Martinez from JPMorgan.

Two questions as well. First, I wanted to ask about your net interest income and your net interest margin outlook. If you look at your net interest income, two customers that grew only 0.5% quarter-on-quarter, year-on-year which normalizes for the fewer trading days, or for the fewer business days, it only grew 2%. I suspect much of that had to do with the fact that we've had a low interest rate environment up until the Central Bank began to raise rates this month. Can you talk a little bit about what your outlook is for not only your net interest margin this year to customers, but also how quickly do you think that your net interest income will start to grow? If you can share what your thoughts are for net interest income growth customers this year that would be helpful? Secondly, on asset quality, I think Alfredo you mentioned, and correct me if I'm wrong in response to Daniel's question that the NPL 90 days, you guys are expecting something like 4.5% to 5%. I believe you are at 4.9% already, and if I look at the asset quality indicators, the formation of new non-performing loans before charge-offs that are declining very quickly, it seems like that's a very conservative estimate, and there's room for that to even perhaps fall further than that. If you can just comment on if that number is conservative and whether there is the potential for asset quality to continue to improve a little bit more than what your guidance implies, that would be helpful as well? Rogério Paulo Calderón Peres: Hi Saul, this is [Rogério]. Regarding margin, what we are seeing so far during the year has slightly changed in the spread scenario. Actually, spreads went a little bit up during the first…

Okay. Just a follow up to make sure I understood the answer to the question on net interest income. You expect margins to contract during the course of the year but volumes would overwhelm that and that net interest income will show some growth during the course of the year. Is that correct?

Looking at the figure we think that should be seen less to last year, maybe with some strong change on spreads to volumes but closer to a flat figure. I am referring to margin as a whole because we should be compensating some of this [lack] in the margin with the markets with some more margin with the clients mostly because of volumes. That’s what I said.

Okay. So your total net interest margin you think would be flat but your net interest margin with clients might actually increase?

Absolutely.

Our next question comes from Marcelo Telles from Credit Suisse.

My first question, I would like to go back to the discretional on credit cards, sorry for insisting on that point. I just want to segregate the discussion on two fronts and focus more on the issuers perspective not the acquirers perspective. From what I have seen as that part of the regulation of the regulatory changes in this provision of the central bank would also encompass you to supervise the credit cards from the issuer's standpoint. So my question is if you anticipate any (approbation) changes in the fee structure on the issuer side. My second question, and going back to the expense side, clearly you had a very good quarter although beyond the seasonal factors, which were favorable would explain, but if you take little more like a medium-term view and think of 2011, do you think you would be able to extract more synergies next year as well or do you think that by the end of this year you would already be running at a sustainable rate in terms of what we would expect in terms of expense? Thank you.

Regarding your first quarter, we don't see much changes into fee structure of the credit card business. It continues, of course there's many talks, many discussion inside the government and so on, but at the end we believe this do not affect much the total business, because also the business is growing. I think it is important to remember that the use of credit cards are growing. The number of people that are having access these instruments is growing. So I think even if we have some reduction, we'll be compensated by more volumes of card and more transactions. On the second question in terms of synergies, we still have synergies next year? Yes, because we are just going to finish the integration of the branch network of Unibanco by the end of November. So until then we have to keep all the systems and people and everything related to the working. So we just do this work and most of this work will be done only next year, in terms of systems and operation of systems and so on. Also, the cost and all the gains of this integration partly will be captured during the year and partly next year, we are going to have the whole year under the integration of the branches. So a part of the gains will remain to 2011.

Excellent. Then just one follow up question on my last one. If you virtually estimate how much, what was the rate of achievement of your total expected synergies, what do you think that rate would be this year? Do you think you achieved 60% of your synergies, 70% and you have 30% more next year? Just to give us a sense of where you are?

We are not giving numbers in terms of synergies because all these numbers are mixed with the expansion of the bank in terms of network, in terms of the needs. It is very complex to really separate totally the gains of synergies. What I can give you is that we expect that by the fourth quarter, the efficiency ratio to be around 42%. I think it is a better way to see the gains and costs and revenues to see the bank as a whole not only looking at the synergies.

Our next question comes from Tito Labarta from Deutsche Bank.

Just a follow up in terms of asset quality and I know you mentioned you are kind of what you expect for NPLs but just wanted to get a sense on terms of provisioning levels which also fell in the quarter. Do you expect that to remain pretty stable throughout the year, do you think that could decline further, as we saw your coverage ratio also increased which you feel comfortable lowering your coverage ratio? Just wanted to get some more color on that, and then another follow-up on the credit card business is that your oldest competitors announced the creation of a new brand. I just wanted to get your thoughts on how that new brand could impact your strategy in terms of credit cards, in terms of pricing, growth etcetera; I wanted to get your thoughts on the impact on the credit card industry because of that. Rogério Paulo Calderón Peres: Regarding bad debt provisions and NPL movement, it was actually a good surprise if I may say. Actually the improvements with NPL was a little bit faster than we expected and this reduces I think 60 or 70 [bits] during the first quarter and our guidance was from 50 to a 100 bits during the year. Although it is a little bit early to get any conclusion on that whether we see is that environment is getting much better and maybe we will see a better scenario, even better than we included in our guidance. So far we do think that is too early to change any strategy on this. The Bank is showing a conservative approach on this and we are keeping our provisions. The additional provision was not possible in the quarter and what we are doing as time goes by models are getting better…

Our next question comes from Victor Galliano from HSBC.

Just a couple of follow ups here, focusing again on operating expenses, you have given us a very useful breakup there of the non-interest expense cost on slide 13. If we focus on the expansion cost, which is the number R$347 million for 1Q, what do you expect as a run rate for this going forward or in the quarters to come? Do you think it should stay at this sort of level or increase? You are talking about adding 150 branches this year. So far this year, you don’t seem to have added any new branches at least at the end of Q1. Can we expect this number to increase going forward on a quarterly basis? Then the second question I have for you is on funding. We have seen the first phase of the increase of the [Porto Seguro]. Can we expect those reserve requirements to increase quite a bit further in the second Q? Or is others reserve requirements now at the new level?

Victor, on your first question, we expected a number in terms of expansion to be around the same level for the other quarters along the year because we are opening and expanding the business through the year, not easy to open all these branches and hire all the people. So, I think it is better to consider this kind of level for the coming quarters, and as your model and your projections. Sérgio Werlang will answer you the second part. Sérgio Ribeiro da Costa Werlang: The increasing rate reserve requirements that happened right now. Basically it's almost put us back almost previously to where we were previously to the September 2008 events. So, there is still room a little bit of room for the central banks in reserve requirement. So it won't have a huge impact on demand. So we don’t expect because it is very close to that level anyway and what we expect is that the central bank will just use all instruments which is the interest rate as it's much more effective right now. It doesn’t mean that they wont increased a bit the reserve requirement if they feel assured but it's a very small number and not very important.

Okay. Sot that $R37 billion number now reflects the new level because I felt that there was some more of this to come through in April. Sérgio Ribeiro da Costa Werlang: You are right, we made the deposit if $R13 billion in the quarter. I think if I am not wrong we have to go up to $R35 billion.

Okay. Sérgio Ribeiro da Costa Werlang: I can't give you a ore precise number, but I think the number is around R$35 billion, the total that we have to deposit.

Our next question comes from Mr. Paul Tucker from Egerton.

Most of my questions have been touched up on, but I just wonder whether you could just give us a little more clarity on your exposure to some of the peripheral European economies. Now you get some disclosure the Note 7 about your government securities abroad and you detailed less [Spain], and you gave a helpful breakdown of maturities and then over the page, the amount of which relates to pledges and to your own portfolio, but can you just kind of take us through what are those guarantees, what are you doing if anything to change your approach to risk, so in terms of haircuts on your repo book or things like that? Whether you still own those bonds as a principal and more generally then how do we think about your total aggregate exposure to Portugal, Spain, Greece, including what maybe buried in the corporate securities piece as well. Thank you. Sérgio Ribeiro da Costa Werlang: I don't have relevant exposure in these countries. I mean the major parts of our portfolio is all Brazil or Brazil-linked, and just not the relevant parts.

Can I just follow-up on that? You say it's not relevant, but if I look at Spain, you've got what R$3.7 billion out of total R$136 billion. So if that were to go to zero, it kind of become somewhat relevant for your equity, right? It's not going to take your tire I ration to 3% but I think it’s a little easy to say it's not relevant. Sérgio Ribeiro da Costa Werlang: The major part of it is short term. So it's in Spain, specifically. Okay. So, it's actually not of a relevant impact.

Okay, but its relevant if it's not paid back. So how are you thinking about just generally, could you just help us understand how those exposures come about and then how you are thinking about, if anything, any changes that you are making in terms of managing risk? Sérgio Ribeiro da Costa Werlang: I don’t quite your question. You want to know if Spain went to zero immediately, in terms of value. I think that then this is a much bigger problem than anything else but definitely our exposure is very short-term and that’s what it is.

I know those exposures come about because they are speculative bond positions that you own or they are collateral that you are taking, repo transactions? Just help us understand why they are there. Because I am sure, sitting in Brazil with GDP growth growing from 6% to 7%, this all feels somewhat distant, and I am glad it does, but in Europe, it condescends like a much more relevant question. Sérgio Ribeiro da Costa Werlang: Those are direct bonds linked to the government of Spain. The majority of them and as I said earlier a enormous portion of it will come due at the end of May.

Our next question comes from Mr. Jorg Friedemann from Merrill Lynch.

Just a instructive question if I may. I understand you consolidate credit card and also have credit card fees coming from interchange in individuals. Could you provide a rough approximation of which portion out of these R$1.5 billion reported as credit cards fees comes from individuals.

We don’t have here this information Jorg, but we can provide you later if you need.

Our next question comes from [Paul Hebero] from HSBC

I just want to drill down a little further on the Itaucard question that you talked about reaction to ALO that you already have Itaucard that target C and D classes. Would you consider opening it up to be an open-loop association with other issuers and other acquires, or could you also just give Redecard the acquiring portion and still keep just the issuing part with Itau? Can you tell me what you are seeing and what you think you could do given the regulatory framework?

We are analyzing all the movement that we have in the market. Of course this announcement of the JV between Bradesco and Banco do Brasiland make us think about what we can do and we should do in this business. So we are analyzing that Itaucard is strong brand. We have 13 million cards and we have a very good presence in these non-banking clients of us. We have a very good market share and so on. We already are in this position. We already are in this business, but we have to analyze all the movements and also the regulatory change that are in the discussions and any thing that is happening in the credit card market and we have a very good position and of course we want to keep our base and our market share. We have to analyze carefully all the movement that we can do or intend to do or plan to do. We have not decided anything yet, but of course all the transactions has to be very transparent and then we will announce if any. It's okay, but of course the market has many changes, competition, regulatory and so on. So we'll have to be careful in the movement that we have because of the share that we already have in all these segments.

Would the Redecard your vehicle for acquiring like from Banco do Brasil and Bradesco have defined Cielo as their acquiring vehicle?

Yeah, everything is under discussion. We have not yet decided what we are going to do. As I said, we'll have a new movement, a new competitor or potential new competitor JV between these two banks and we have summarized carefully the movement that we are going to do from now on considering the companies, the shareholders and so on. It's premature to say what we are going to do. We are in discussions inside. We were already before, not only because of this movement, because it's an important part of our business. So we are careful and we are not going to take a decision under the pressure. So we are confident we have a good position and we are going to keep it as a strategic business plan.

Thank you. This concludes today's question-and-answer session. Mr. Setubal, at this time you may proceed with your closing statement, sir.

Thank you for being with us. I would just like you to know that Silvio de Carvalho, who worked at Itau for almost 40 years, is leaving the company because he achieved, by law, the limit of age and Silvio has done a tremendous job here with us all this time, especially in this last 15 years. He gave us better relations, road shows and attending all the analyst and so on and I want to thank you Silvio for all this work and thank you all for the presence here with us during this conference call. I think we had a very good result. We are very confident about our position, our share and we expect it to continue to provide good numbers in the coming quarters and we believe the Brazilian economy will continue to be strong. Just to finalize this issue about Spain that Paul Tucker asked us, the number is R$1.5 billion, its not R$2.2 billion, the correct number is R$1.5 billion is our exposure in the short-term securities that maturities is north of May. Thank you all and we are here open to your questions in the coming days, if you want more details and so on. Thank you.

That does conclude our Itau Unibanco Holding Earnings Call for today. Thank you very much for your participation and have a good day. Thank you.