Exhibit 99.1

(A free translation of the original in Portuguese)

Report of independent auditors on the consolidated financial statements

To the Board of Directors and Stockholders

Itaú Unibanco Holding S.A.

Opinion

We have audited the accompanying consolidated financial statements of Itaú Unibanco Holding S.A. ("Bank") and its subsidiaries (together, the "Group"), which comprise the consolidated balance sheet as at June 30, 2017 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Itaú Unibanco Holding S.A. and its subsidiaries as at June 30, 2017, and the financial performance and cash flows for the six-month period then ended, in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for opinion

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

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

Why it is a Key Audit Matter	How the matter was addressed in the audit
Allowance for loan and lease losses (Note 2.3.1.a, 2.4.d.X and 12.b)
The calculation of the allowance for loan and lease losses is a sensitive matter to management's judgment. The identification of the situations that may compromise the recoverable value of receivables and the determination of the allowance for loan and lease losses involve a process with a number of assumptions and factors, including the counterparty's financial condition, the expected future cash flows, the estimated amounts of recovery and realization of guarantees. The utilization of different modeling techniques and assumptions could result in a materially different estimate of recoverable amounts. Furthermore, managing the credit risk is complex and depends on the completeness and integrity of the related database. Guarantees and renegotiations have represented important aspects on determining the allowance for loan and lease losses, during the management of the credit risks. Considering the matters mentioned above, this was an area of focus during the audit.	We tested the design and the effectiveness of the main controls used to calculate the allowance for loan and lease losses, including: i) totality and integrity of the database; ii) models and assumptions adopted by management to determine the recoverable value of the credit portfolio; iii) monitoring and valuation of guarantees; iv) identification, approval, and monitoring of renegotiated transactions; and v) processes established by management to guarantee application of these assumptions, as well as, the adequacy of the disclosures in the financial statements. For the individually calculated allowance for loan and lease losses, we tested the relevant assumptions adopted to identify the impairment and the resulting rating of the debtors, as well as the expected future cash flows, the underlying guarantees, and the estimates of recovery of overdue receivables. For the allowance for loan and lease losses calculated on a collective basis (retail banking segment), we tested the underlying models, including the models approval's process and the validation of the assumptions adopted to determine the estimated losses and recoveries. We tested the inputs for these models, including the recoveries, and, when available, compared the data and assumptions used with market data.

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Why it is a Key Audit Matter	How the matter was addressed in the audit
	The results of these procedures provided us with adequate and sufficient evidence in the context of our audit of financial statements.
Measurement of the fair value of financial instruments and derivatives - level 3 (Notes 2.3.1.c, 2.4.d.IV, V and VI, 7 to 10, and 31) The fair value measurement requires subjectivity, considering that it depends on valuation techniques based on internal models that involve management's assumptions for assessing financial instruments with little liquidity and without an active market. In addition, management of market risk management is complex, especially during periods of high volatility and when observable market prices or parameters are not available. These financial instruments are substantially comprised of investments in securities issued by companies and derivative contracts. This was an area of focus during our audit since the utilization of different valuation techniques and assumptions could lead to materially different fair value estimates. In addition, management of the market risk is complex, especially during periods of high volatility and when observable market prices or parameters are not available.	We tested the design and the effectiveness of the main controls established by management related to the fair valuation of these financial instruments, as well as the approval of models and related disclosures. We analyzed the methodology to fair value these financial instruments and the assumptions adopted by management by comparing them with independent methodologies and assumptions. We reperformed, on a sampling basis, the fair valuation of certain operations and compared the assumptions and methodologies used by management with our knowledge about fair valuation practices, which are commonly adopted and evaluated the consistency of these methodologies with the ones applied in prior years. We considered that the criteria and assumptions adopted by management to measure the fair value of these financial instruments and derivatives are appropriate and consistent with the information disclosed in the financial statements.

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Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter	How the matter was addressed in the audit
Information technology environment Itaú Unibanco Holding S.A. and its subsidiaries rely on their technology structure to process their operations and prepare their financial statements. Over the last years, significant short and long-term investments have been made in the information technology systems and processes. The technology structure, due to the history of acquisitions and size of the related operations, is comprised of more than one technology environment with different processes and segregated controls. The lack of adequacy of the general controls of the technology environment and of the controls that depend on technology systems may result in the incorrect processing of critical information used to prepare the financial statements. Accordingly, this was an area of focus during the audit.	As part of our audit procedures, with the support of our specialists, we assessed the information technology environment, including the automated controls of the application systems that are significant for the preparation of the financial statements. The procedures we performed comprised the combination of relevant control tests and, when necessary, the tests of compensating controls, as well as the performance of tests related to the information security, including the access management control and the segregation of duties. The information technology environment and controls established by management provided reasonable basis for the audit of the financial statements audit.
Deferred tax assets (Notes 2.3.1.b and 27.b.) The deferred tax assets arising from temporary differences and tax losses carryforward are recorded to the extent that management considers probable that Itaú Unibanco Holding S.A. and its subsidiaries will generate future taxable profits. The projection of the future taxable profits takes into account a number of subjective assumptions established by management. We consider that this area requires audit focus, taking into account that the utilization of different assumptions in the projection of the future taxable profits could materially modify the expected periods for realization of deferred tax assets, thus affecting the accounting records.	We tested the design and the effectiveness of the main controls established by management to calculate the deferred tax assests and the recording of such credits in accordance with the accounting standards, including the necessity of analysis of the perspectives for the realization of these assets, via projections of future taxable profits. We tested the design and the effectiveness of the controls over the respective disclosures, as well as, we compared the critical assumptions used to the projection of the future results with macroeconomic information disclosed by the market and with the historical data in order to support the consistency of these estimates. We considered that management's assumptions are appropriate and consistent with the information disclosed in the financial statements.

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Why it is a Key Audit Matter	How the matter was addressed in the audit
Realization of goodwill (Notes 2.3.2, 2.4.h and 3) The balances of intangible assets are annually tested for impairment. These tests involves estimates and significant judgment, including the identification of cash-generation units. The determination of expected cash flows and the risk-adjusted interest rate for each cash-generating unit or group of cash-generating units requires the application of judgment as well as the use of estimates by management. We consider that this area requires audit focus, taking into account that it involves the projection of future results for each cash-generating unit or group of cash-generating units, and that the utilization of different assumptions to project future results may materially modify the perspectives for realization of such assets and result in the accounting of an impairment to the recoverable value, thus affecting the financial statements.	We tested the design and the effectiveness of the main controls established by management, including the totality and integrity of the database and the underlying systems. In connection with the audit procedures over the projections of future results, which are base for the taxable profit projection study, we analyzed the projections for the determination of impairment of intangible assets as prepared to by management to corroborate the reasonableness of these estimates for realization. We considered that the assumptions adopted by management are appropriate and consistent with the information disclosed in the financial statements.
Provision for contingent liabilities (Notes 2.3.1.e, 2.4.q and 32) Itaú Unibanco Holding S.A. and its subsidiaries have contingent liabilities mainly arising from judicial and administrative proceedings, inherent to the normal course of their business, filed by third parties, former employees, and public agencies, involving civil, labor, tax, and social security matters. In general, the settlement of these proceedings takes a long time and involves not only discussions on the matter itself, but also complex process-related aspects, depending on the applicable legislation. In certain situations, the legislation allows taxpayers to settle certain tax proceedings in advance by decreasing or eliminating related interest rates and fines. Civil and labor legislation also permits that agreements be made to settle proceedings in advance. It should be noted that, among other things, the aspects used to establish the likelihood of a loss attributed to each proceeding are subjective, and the evolution of the jurisprudence is not always uniform.	We tested the design and the effectiveness of the main controls used to identify, assess, monitor, measure, record, and disclose the provision for contingent liabilities, including the totality and the integrity of the database. Civil and labor proceedings are divided on a group basis and on an individualized basis. Proceedings considered under a group basis are quantified based on internal models and are revalued considering the judicial decisions on the related matters. Regarding the individualized proceedings, the calculation is made periodically based on the determination of the amount of the request and on the likelihood of a loss, which is estimated according to the characteristics, in fact or in law, related to each sentence in particular. We tested the models used to quantify judicial proceedings of a civil and labor nature considered on a group basis. We counted on the support of our specialists in the labor, legal, and fiscal areas when assessing the risk

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Why it is a Key Audit Matter

How the matter was addressed in the audit

In this context, we consider that this is an area which requires audit focus.

of the individualized proceedings, according to the nature of each proceeding. Also, we performed external confirmation procedures with both internal and external lawyers responsible for the proceedings. We considered that the criteria and assumptions adopted by management for determining the provision for contingent liabilities, as well as the information disclosed in the financial statements, are appropriate.

Others matters

Statement of Value Added

The consolidated Statement of Value Added for the the six-month period ended on June 30, 2017, prepared under the responsibility of the Consolidated's management and presented as supplementary information for IFRS purposes, were submitted to audit procedures performed in conjunction with the audit of the Consolidated financial statements. For the purposes of forming our opinion, we evaluated whether this statement is reconciled with the financial statements and accounting records, as applicable, and if its form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09, "Statement of Value Added". In our opinion, this Statement of Value Added has been properly prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and is consistent with the consolidated financial statements taken as a whole.

Other information accompanying the financial statements and the auditor's report

The Bank´s management is responsible for the other information which comprise the Management Report.

Our opinion on the financial statements does not cover the Management Report, and we do not express any form of audit conclusion thereon.

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

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), as issued by

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Itaú Unibanco Holding S.A.

the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditor's responsibilities for the audit of the consolidated financial statements

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

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

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

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of Itaú Unibanco Holding S.A. and its subsidiaries.

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

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

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

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Itaú Unibanco Holding S.A.

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

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

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

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

São Paulo, July 31, 2017
PricewaterhouseCoopers	Washington Luiz Pereira Cavalcanti
Auditores Independentes	Contador CRC 1SP172940/O-6
CRC 2SP000160/O-5

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ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

Assets	Note	06/30/2017			12/31/2016
Cash and deposits on demand	4		22,700			18,542
Central Bank compulsory deposits	5		88,607			85,700
Interbank deposits	6		28,715			22,692
Securities purchased under agreements to resell	6		261,443			265,051
Financial assets held for trading	7a		223,211			204,648
Pledged as collateral			7,122			12,950
Other			216,089			191,698
Financial assets designated at fair value through profit or loss	7b		1,410			1,191
Derivatives	8 and 9		19,305			24,231
Available-for-sale financial assets	10		89,175			88,277
Pledged as collateral			17,774			17,435
Other			71,401			70,842
Held-to-maturity financial assets	11		39,092			40,495
Pledged as collateral			2,814			11,778
Other			36,278			28,717
Loan operations and lease operations portfolio, net	12		452,209			463,394
Loan operations and lease operations portfolio			479,870			490,366
(-) Allowance for loan and lease losses			(27,661	)		(26,972	)
Other financial assets	20a		52,666			53,917
Investments in associates and joint ventures	13		5,029			5,073
Goodwill	3		9,834			9,675
Fixed assets, net	15		7,624			8,042
Intangible assets, net	16		7,301			7,381
Tax assets			42,525			44,274
Income tax and social contribution - current			1,612			2,703
Income tax and social contribution - deferred	27b		35,488			37,395
Other			5,425			4,176
Assets held for sale	36.7		599			631
Other assets	20a		9,777			10,027
Total assets			1,361,222			1,353,241

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

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ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

Liabilities and stockholders' equity	Note	06/30/2017			12/31/2016
Deposits	17		352,327			329,414
Securities sold under repurchase agreements	19a		321,922			349,164
Financial liabilities held for trading	18		457			519
Derivatives	8 and 9		21,420			24,698
Interbank market debt	19a		136,872			135,483
Institutional market debt	19b		97,506			96,239
Other financial liabilities	20b		63,731			71,832
Reserves for insurance and private pension	30c II		166,869			154,076
Liabilities for capitalization plans			3,215			3,147
Provisions	32		21,471			20,909
Tax liabilities			4,917			5,836
Income tax and social contribution - current			1,519			1,741
Income tax and social contribution - deferred	27b II		514			643
Other			2,884			3,452
Other liabilities	20b		32,023			27,110
Total liabilities			1,222,730			1,218,427
Capital	21a		97,148			97,148
Treasury shares	21a		(2,571	)		(1,882	)
Additional paid-in capital	21c		1,550			1,785
Appropriated reserves	21d		5,891			3,443
Unappropriated reserves	21e		26,917			25,362
Cumulative other comprehensive income			(2,991	)		(3,274	)
Total stockholders’ equity attributed to the owners of the parent company			125,944			122,582
Non-controlling interests	21f		12,548			12,232
Total stockholders’ equity			138,492			134,814
Total liabilities and stockholders' equity			1,361,222			1,353,241

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

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ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Income Periods ended

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

		04/01 to			04/01 to			01/01 to			01/01 to
	Note	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Banking product			26,517			31,672			56,030			61,480
Interest and similar income	23a		36,516			39,207			76,786			77,914
Interest and similar expense	23b		(19,470	)		(22,707	)		(43,647	)		(45,393	)
Dividend income			170			106			175			116
Net gain (loss) on investment securities and derivatives	23c		(407	)		3,173			2,363			6,185
Foreign exchange results and exchange variations on transactions			(326	)		2,026			226			3,535
Banking service fees	24		8,439			8,047			16,711			15,487
Income related to insurance, private pension and capitalization operations before claim and selling expenses			1,287			1,446			2,696			3,010
Income related to insurance and private pension	30b III		6,392			6,412			13,260			11,858
Reinsurance Premiums	30b III		(12	)		(38	)		(26	)		(57	)
Change in reserves for insurance and private pension			(5,240	)		(5,080	)		(10,831	)		(9,092	)
Revenue from capitalization plans			147			152			293			301
Other income	25		308			374			720			626
Losses on loans and claims			(4,399	)		(4,587	)		(10,267	)		(10,443	)
Expenses for allowance for loan and lease losses	12b		(5,191	)		(5,207	)		(11,587	)		(11,500	)
Recovery of loans written-off as loss			1,053			973			1,902			1,804
Expenses for claims			(268	)		(388	)		(599	)		(787	)
Recovery of claims under reinsurance			7			35			17			40
Banking product net of losses on loans and claims			22,118			27,085			45,763			51,037
Other operating income (expenses)			(14,339	)		(14,796	)		(28,579	)		(28,073	)
General and administrative expenses	26		(12,914	)		(12,673	)		(25,413	)		(24,060	)
Tax expenses			(1,552	)		(2,256	)		(3,441	)		(4,272	)
Share of profit or (loss) in associates and joint ventures	13		127			133			275			259
Income before income tax and social contribution	27		7,779			12,289			17,184			22,964
Current income tax and social contribution			(1,845	)		(641	)		(2,975	)		(1,574	)
Deferred income tax and social contribution			858			(5,326	)		(1,539	)		(9,370	)
Net income			6,792			6,322			12,670			12,020
Net income attributable to owners of the parent company	28		6,369			5,999			12,370			11,710
Net income (loss) attributable to non-controlling interests	21f		423			323			300			310
Earnings per share - basic	28
Common			0.99			0.92			1.91			1.80
Preferred			0.99			0.92			1.91			1.80
Earnings per share - diluted	28
Common			0.99			0.91			1.90			1.79
Preferred			0.99			0.91			1.90			1.79
Weighted average number of shares outstanding - basic	28
Common			3,351,741,143			3,351,741,143			3,351,741,143			3,351,741,143
Preferred			3,155,404,279			3,170,650,946			3,158,922,612			3,167,060,932
Weighted average number of shares outstanding - diluted	28
Common			3,351,741,143			3,351,741,143			3,351,741,143			3,351,741,143
Preferred			3,209,326,813			3,211,878,406			3,195,332,639			3,201,328,525

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

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ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Comprehensive Income Periods ended

(In millions of Reais)

		04/01 to			04/01 to			01/01 to			01/01 to
	Note	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Net income			6,792			6,322			12,670			12,020
Available-for-sale financial assets			(409	)		817			441			2,022
Change in fair value			(691	)		1,262			938			2,766
Income tax effect			299			(492	)		(353	)		(1,125	)
(Gains) / losses transferred to income statement	23c		(28	)		79			(240	)		635
Income tax effect			11			(32	)		96			(254	)
Hedge			(310	)		349			(411	)		(260	)
Cash flow hedge	9		83			(785	)		(269	)		(2,415	)
Change in fair value			225			(1,311	)		(390	)		(4,316	)
Income tax effect			(142	)		526			121			1,901
Hedge of net investment in foreign operation	9		(393	)		1,134			(142	)		2,155
Change in fair value			(804	)		2,040			(390	)		3,824
Income tax effect			411			(906	)		248			(1,669	)
Remeasurements of liabilities for post-employment benefits (*)			5			6			(59	)		(3	)
Remeasurements	29		1			9			(24	)		5
Income tax effect			4			(3	)		(35	)		(8	)
Foreign exchange differences on foreign investments			517			(1,406	)		312			(2,743	)
Total comprehensive income			6,595			6,088			12,953			11,036
Comprehensive income attributable to non-controlling interests			424			323			300			310
Comprehensive income attributable to the owners of the parent company			6,171			5,765			12,653			10,726

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

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

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ITAÚ UNIBANCO HOLDING S.A.

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

Periods ended June 30, 2017 and 2016

(In millions of Reais)

	Attributed to owners of the parent company
																		Other comprehensive income
	Capital		Treasury shares			Additional paid-in capital			Appropriated reserves			Unappropriated reserves			Retained earnings			Available for sale (1)			Remeasurements of liabilities of post- employment benefits			Cumulative translation adjustments abroad			Gains and losses – hedge (2)			Total stockholders’ equity – owners of the parent company			Total stockholders’ equity – non- controlling interests			Total
Balance at 01/01/2016		85,148		(4,353	)		1,733			10,067			20,947			-			(2,771	)		(225	)		4,822			(3,116	)		112,252			1,807			114,059
Transactions with owners		-		2,906			(208	)		(2,174	)		-			(2,899	)		-			-			-			-			(2,375	)		11,420			9,045
Treasury shares - granting of stock options		-		2,906			(63	)		(2,670	)		-			-			-			-			-			-			173			-			173
Granting of stock options – exercised options		-		436			(34	)		-			-			-			-			-			-			-			402			-			402
Acquisition of treasury shares (Note 21a)		-		(200	)		-			-			-			-			-			-			-			-			(200	)		-			(200	)
Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		2,670			-			(2,670	)		-			-			-			-			-			-			-			-			-
Granted options recognized		-		-			(29	)		-			-			-			-			-			-			-			(29	)		-			(29	)
Share-based payment – variable compensation		-		-			(145	)		-			-			-			-			-			-			-			(145	)		-			(145	)
(Increase) / Reduction of interest of controlling stockholders (Note 2.4a I and 3)		-		-			-			-			-			-			-			-			-			-			-			11,501			11,501
Dividends and interest on capital - Statutory Reserve (Note 21b)		-		-			-			496			-			(2,899	)		-			-			-			-			(2,403	)		(81	)		(2,484	)
Dividends / Interest on capital paid in 2016 - Year 2015 - Special profit reserve		-		-			-			(2,697	)		-			-			-			-			-			-			(2,697	)		-			(2,697	)
Corporate reorganizations (Note 2.4 a III)		-		-			-			(314	)		-			-			-			-			-			-			(314	)		-			(314	)
Other		-		-			-			-			(9	)		-			-			-			-			-			(9	)		-			(9	)
Total comprehensive income		-		-			-			-			-			11,710			2,022			(3	)		(2,743	)		(260	)		10,726			310			11,036
Net income		-		-			-			-			-			11,710			-			-			-			-			11,710			310			12,020
Other comprehensive income for the period		-		-			-			-			-			-			2,022			(3	)		(2,743	)		(260	)		(984	)		-			(984	)
Appropriations:
Legal reserve		-		-			-			447			-			(447	)		-			-			-			-			-			-			-
Statutory reserve		-		-			-			5,592			2,772			(8,364	)		-			-			-			-			-			-			-
Balance at 06/30/2016		85,148		(1,447	)		1,525			10,921			23,710			-			(749	)		(228	)		2,079			(3,376	)		117,583			13,537			131,120
Change in the period		-		2,906			(208	)		854			2,763			-			2,022			(3	)		(2,743	)		(260	)		5,331			11,730			17,061
Balance at 01/01/2017		97,148		(1,882	)		1,785			3,443			25,362			-			(731	)		(815	)		2,085			(3,813	)		122,582			12,232			134,814
Transactions with owners		-		(689	)		(235	)		2,568			-			(5,467	)		-			-			-			-			(3,823	)		16			(3,807	)
Treasury shares - granting of stock options		-		(689	)		(69	)		-			-			-			-			-			-			-			(758	)		-			(758	)
Granting of stock options – exercised options		-		593			(23	)		-			-			-			-			-			-			-			570			-			570
Acquisition of treasury shares (Note 21a)		-		(1,282	)		-			-			-			-			-			-			-			-			(1,282	)		-			(1,282	)
Granted options recognized		-		-			(46	)		-			-			-			-			-			-			-			(46	)		-			(46	)
Share-based payment – variable compensation		-		-			(166	)		-			-			-			-			-			-			-			(166	)		-			(166	)
(Increase) / Reduction of interest of controlling stockholders (Note 2.4a I and 3)		-		-			-			-			-			-			-			-			-			-			-			167			167
Dividends / interest on capital  – Special profit reserve (Note 21b)		-		-			-			2,568			-			(5,467	)		-			-			-			-			(2,899	)		(151	)		(3,050	)
Dividends / Interest on capital paid in 2017 - Year 2016 - Special profit reserve		-		-			-			(5,048	)		-			-			-			-			-			-			(5,048	)		-			(5,048	)
Corporate reorganizations (Note 2.4 a III)		-		-			-			(443	)		-			-			-			-			-			-			(443	)		-			(443	)
Other		-		-			-			-			23			-			-			-			-			-			23			-			23
Total comprehensive income		-		-			-			-			-			12,370			441			(59	)		312			(411	)		12,653			300			12,953
Net income		-		-			-			-			-			12,370			-			-			-			-			12,370			300			12,670
Other comprehensive income for the period		-		-			-			-			-			-			441			(59	)		312			(411	)		283			-			283
Appropriations:
Legal reserve		-		-			-			537			-			(537	)		-			-			-			-			-			-			-
Statutory reserve		-		-			-			4,834			1,532			(6,366	)		-			-			-			-			-			-			-
Balance at 06/30/2017		97,148		(2,571	)		1,550			5,891			26,917			-			(290	)		(874	)		2,397			(4,224	)		125,944			12,548			138,492
Change in the period		-		(689	)		(235	)		2,448			1,555			-			441			(59	)		312			(411	)		3,362			316			3,678

(1) Includes Share of other comprehensive income in associates and joint ventures – Available-for-sale financial assets.

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 14

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In millions of Reais)

		04/01 to			04/01 to			01/01 to			01/01 to
	Note	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Adjusted net income			19,451			48,474			38,941			63,704
Net income			6,792			6,322			12,670			12,020
Adjustments to net income:			12,659			42,152			26,271			51,684
Granted options recognized and share-based payment – variable compensation			106			116			(212	)		(174	)
Effects of changes in exchange rates on cash and cash equivalents			1,264			20,793			866			17,617
Expenses for allowance for loan and lease losses	12b		5,191			5,207			11,587			11,500
Interest and foreign exchange expense from operations with subordinated debt			2,322			(1,585	)		2,698			(2,770	)
Change in reserves for insurance and private pension			5,240			5,080			10,831			9,092
Revenue from capitalization plans			(147	)		(152	)		(293	)		(301	)
Depreciation and amortization	15 and 16		771			847			1,591			1,575
Interest expense from provision for contingent and legal liabilities			326			410			761			843
Provision for contingent and legal liabilities			1,018			886			1,720			1,718
Interest income related to escrow deposits			(86	)		(97	)		(174	)		(188	)
Deferred taxes (excluding hedge tax effects)	27b		1,431			8,411			2,761			9,362
Share of profit or (loss) in associates and joint ventures			(127	)		(132	)		(275	)		(259	)
(Gain) loss on available-for-sale securities	23c		(28	)		78			(240	)		635
Interest and foreign exchange income related to available-for-sale financial assets			(3,374	)		1,500			(4,577	)		1,685
Interest and foreign exchange income related to held-to-maturity financial assets			(1,056	)		443			(717	)		925
(Gain) loss on sale of assets held for sale	25 and 26		182			50			236			52
(Gain) loss on sale of investments	25 and 26		(13	)		7			(18	)		8
(Gain) loss on sale of fixed assets	25 and 26		(10	)		8			(6	)		10
Other			(351	)		283			(268	)		353
Change in assets and liabilities (*)			(25,158	)		(49,550	)		(45,684	)		(31,207	)
(Increase) decrease in assets			(44,896	)		(60,341	)		(37,927	)		20,056
Interbank deposits			477			1,405			1,158			1,437
Securities purchased under agreements to resell			(23,308	)		(47,199	)		(19,375	)		23,410
Compulsory deposits with the Central Bank of Brazil			(3,799	)		(2,180	)		(2,771	)		(3,489	)
Financial assets held for trading			(12,996	)		(3,850	)		(18,535	)		(9,584	)
Derivatives (assets / liabilities)			2,178			(4,843	)		1,946			(8,460	)
Financial assets designated at fair value through profit or loss			583			(411	)		(219	)		(222	)
Loan operations			(3,335	)		5,139			2,096			23,206
Other financial assets			(2,641	)		1,619			1,490			320
Other tax assets			(2,346	)		(2,378	)		(956	)		231
Other assets			291			(7,643	)		(2,761	)		(6,793	)
(Decrease) increase in liabilities			19,738			10,791			(7,757	)		(51,263	)
Deposits			23,610			(7,051	)		22,710			(30,566	)
Deposits received under securities repurchase agreements			(8,081	)		29,814			(27,263	)		(864	)
Financial liabilities held for trading			(25	)		35			(62	)		71
Funds from interbank markets			3,790			(15,586	)		1,190			(24,019	)
Other financial liabilities			(305	)		(653	)		(8,350	)		(1,657	)
Technical reserve for insurance and private pension			(193	)		1,478			1,962			3,131
Liabilities for capitalization plans			159			122			361			253
Provisions			(1,000	)		(673	)		(1,498	)		(1,188	)
Tax liabilities			230			631			1,861			2,191
Other liabilities			2,455			3,557			4,310			5,502
Payment of income tax and social contribution			(902	)		(883	)		(2,978	)		(4,117	)
Net cash from (used in) operating activities			(5,707	)		(1,076	)		(6,743	)		32,497
Interest on capital / dividends received from investments in associates and joint ventures			172			7			331			144
Cash received on sale of available-for-sale financial assets			4,028			8,082			11,432			11,529
Cash received from redemption of held-to-maturity financial assets			892			910			2,216			1,797
Cash upon sale of assets held for sale			114			104			132			214
Cash upon sale of investments  in  associates and joint ventures			14			(7	)		25			(8	)
Cash and cash equivalents, net of assets and liabilities due from CorpBanca acquisition	3		-			5,869			-			5,869
Cash and cash equivalents, net of assets and liabilities from Recovery acquisition	3		-			-			-			(714	)
Cash upon sale of fixed assets	15		21			(1	)		29			7
Cash upon sale of intangible assets	16		(2	)		2			18			5
Purchase of available-for-sale financial assets			(1,980	)		(1,389	)		(6,958	)		(3,516	)
Purchase of held-to-maturity financial assets			(80	)		(697	)		(96	)		(985	)
Purchase of investments in associates and joint ventures	13		-			(319	)		-			(463	)
Purchase of fixed assets	15		(208	)		(77	)		(376	)		(223	)
(Cash upon sale) Purchase of intangible assets / Goodwill	16		(621	)		204			(714	)		33
Net cash from (used in) investing activities			2,350			12,688			6,039			13,689
Funding from institutional markets			2,357			4,864			5,859			4,864
Redemptions in institutional markets			(3,444	)		(6,192	)		(8,014	)		(13,919	)
(Acquisition) / Disposal of interest of non-controlling stockholders			265			(45	)		167			(45	)
Granting of stock options – exercised options			25			31			570			402
Purchase of treasury shares			(996	)		-			(1,282	)		(200	)
Dividends and interest on capital paid to non-controlling interests			(136	)		(51	)		(151	)		(81	)
Dividends and interest on capital paid			(293	)		(267	)		(7,567	)		(5,093	)
Net cash from (used in) financing activities			(2,222	)		(1,660	)		(10,418	)		(14,072	)
Net increase (decrease) in cash and cash equivalents	2.4c and 4		(5,579	)		9,951			(11,122	)		32,114
Cash and cash equivalents at the beginning of the period	4		90,974			116,987			96,119			91,649
Effects of changes in exchange rates on cash and cash equivalents			(1,264	)		(20,793	)		(866	)		(17,617	)
Cash and cash equivalents at the end of the period	4		84,131			106,146			84,131			106,146
Additional information on cash flow
Interest received			30,345			33,687			70,527			77,990
Interest paid			17,406			16,486			41,510			35,819
Non-cash transactions
Loans transferred to assets held for sale			-			-			-			-
Dividends and interest on capital declared and not yet paid			999			995			2,544			2,102

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 15

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Added Value

(In millions of Reais)

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Income		41,849			50,145			89,992			97,177
Interest, similar income and other		35,953			44,512			79,550			87,750
Banking services		8,439			8,047			16,711			15,487
Income related to insurance, private pension and capitalization operations before claim and selling expenses		1,287			1,446			2,696			3,010
Result of loan losses		(4,138	)		(4,234	)		(9,685	)		(9,696	)
Other		308			374			720			626
Expenses		(21,924	)		(25,221	)		(48,533	)		(50,249	)
Interest, similar income and other		(19,470	)		(22,707	)		(43,647	)		(45,393	)
Other		(2,454	)		(2,514	)		(4,886	)		(4,856	)
Inputs purchased from third parties		(3,887	)		(3,967	)		(7,651	)		(7,484	)
Materials, energy and others		(179	)		(195	)		(363	)		(378	)
Third party services		(1,045	)		(1,150	)		(2,036	)		(2,081	)
Other		(2,663	)		(2,622	)		(5,252	)		(5,025	)
Data processing and telecommunications		(1,031	)		(983	)		(2,012	)		(1,916	)
Advertising, promotions and publication		(291	)		(248	)		(514	)		(456	)
Installations		(309	)		(295	)		(577	)		(542	)
Transportation		(82	)		(99	)		(167	)		(198	)
Security		(179	)		(181	)		(364	)		(358	)
Travel expenses		(54	)		(49	)		(97	)		(89	)
Other		(717	)		(767	)		(1,521	)		(1,466	)
Gross added value		16,038			20,957			33,808			39,444
Depreciation and amortization		(742	)		(781	)		(1,488	)		(1,451	)
Net added value produced by the company		15,296			20,176			32,320			37,993
Added value received through transfer		127			133			275			259
Total added value to be distributed		15,423			20,309			32,595			38,252
Distribution of added value		15,423			20,309			32,595			38,252
Personnel		5,141			5,404			10,094			8,351
Compensation		3,997			4,353			7,867			6,421
Benefits		927			837			1,802			1,520
FGTS – government severance pay fund		217			214			425			410
Taxes, fees and contributions		3,118			8,223			9,086			17,180
Federal		2,814			7,932			8,489			16,586
State		1			9			1			9
Municipal		303			282			596			585
Return on third parties’ assets - Rent		372			360			745			701
Return on own assets		6,792			6,322			12,670			12,020
Dividends and interest on capital		1,471			1,310			3,050			2,484
Retained earnings (loss) for the period		4,898			4,689			9,320			9,226
Minority interest in retained earnings		423			323			300			310

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 16

ITAÚ UNIBANCO HOLDING S.A.

Notes to the Consolidated Financial Statements

At June 30, 2017 and December 31, 2016 for balance sheet accounts and

From April 1 to June 30, 2017 and 2016 and from January 1 to June 30, 2017 and 2016 for income statement accounts

(In millions of Reais, except information per share)

Note 1 - Overview

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

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

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

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

These consolidated financial statements were approved by the Executive Board on July 31, 2017.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 17

Note 2 – Significant accounting policies

2.1. Basis of preparation

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

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

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

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

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

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

a) Accounting standards applicable for period ended June 30, 2017

There were no new accounting pronouncements for the period ended June 30, 2017.

b) Accounting standards recently issued and applicable in future periods

The following pronouncements will become applicable for periods after the date of these consolidated financial statements and were not early adopted:

· IFRS 9 – Financial Instruments – This standard replaces IAS 39 – Financial Instruments: Recognition and Measurement. IFRS 9 applies to financial instruments and will be adopted retrospectively at its effective date, on January 1^st, 2018. This standard is structured to cover the pillars (I) classification and measurement of financial assets (II) impairment, and (III) hedge accounting. Among the amendments, the items below may have the most significant impacts:

(I) Classification and measurement of financial assets: the classification of financial assets should depend on two criteria: the entity’s business model for managing its financial assets and the characteristics of the contractual cash flow of financial assets;

(II) Impairment: The new standards introduced the expected loss approach and classification into three phases;

(III) Hedge accounting: The hedge accounting requirements are closed aligned with risk management and should be applied on a prospective basis.

IFRS 9 is in process of implementation by ITAÚ UNIBANCO HOLDING, and an evaluation of the possible impacts resulting from the adoption of this standard has been conducted and will be completed through its effective date. The adoption of the expected loss model in relation to the incurred loss approach is likely to require an increase in the allowance for loan and lease losses since the recognition of losses will occur earlier. The finance, risks, and technology departments as well as Management are involved in the implementation process.

· IFRS 15 – Revenue from Contracts with Customers – The pronouncement replaces IAS 18 – Revenues and IAS 11– Construction Contracts, as well as interpretations related thereto (IFRICs 13, 15 and 18). It requires that revenue is recognized in a way that shows the transfer of assets or services to the client for an amount that reflects the company’s expectation of having in consideration the rights to these assets or services. ITAU UNIBANCO HOLDING will adopt IFRS 15 retrospectively only for contracts with remaining obligations until the date this standard comes into

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 18

effect. Other effects should be adjusted with a counter-entry to Retained Earnings (Losses). This standard is effective for annual periods beginning on January 1^st, 2018. At the moment, no significant impacts from the adoption of this standard were identified.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 19

· Amendment to IFRS 10 – Consolidated Financial Statements and IAS 28 – Investments in Associates and Joint Ventures – The amendments refer to an inconsistency between IFRS 10 and IAS 28 requirements, when addressing the sale or contribution of assets between an investor and its associate or joint venture. The effective date has not been defined by IASB yet. No material impacts arising from this change on the consolidated financial statements of ITAÚ UNIBANCO HOLDING were identified.

2.3. Critical accounting estimates and judgments

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

2.3.1  Critical accounting estimates

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

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

a) Allowance for loan and lease losses

ITAÚ UNIBANCO HOLDING periodically reviews its portfolio of loans and receivables to evaluate the existence of impairment.

In order to determine the amount of the allowance for loan and lease losses in the Consolidated Statements of Income with respect to receivables or group of receivables, ITAÚ UNIBANCO HOLDING exercises its judgment to determine whether objective evidence indicates that an event of loss has occurred. This evidence may include observable data that indicates that an adverse change has occurred in the cash flows received in relation to those expected from the counterparty or the existence of a change in local or international economic conditions that correlates with impairment. The methodology and assumptions used for estimating future cash flows are regularly reviewed by Management, considering the adequacy of models and sufficiency of provision volumes in view of the experience of incurred loss.

ITAÚ UNIBANCO HOLDING uses statistical models to calculate the Allowance for Loan and Lease Losses in the homogeneous loan portfolio. ITAÚ UNIBANCO HOLDING periodically carries out procedures to improve these estimates by aligning the required provisions to the levels of losses observed by the historical behavior (as described in Note 2.4d X). This alignment aims at ensuring that the volume of allowances reflects the current economic conditions, the composition of the loan portfolios, the quality of guarantees obtained and the profile of our clients.

Methodology and assumptions used by Management are detailed in Note 2.4d X. Allowance for loan losses is detailed in Note 12b.

b) Deferred income tax and social contribution

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 20

c) Fair value of financial instruments, including derivatives

The fair value of Financial Instruments is measured recurrently, in conformity with the requirements of IAS 39 – Financial Instruments: Recognition and Measurement. The fair value of financial instruments, including derivatives that are not traded in active markets, is determined by using valuation techniques. This calculation is based on assumptions that take into consideration Management’s judgment based on market information and conditions in place at the balance sheet date.

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

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

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

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

d) Defined benefit pension plan

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

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

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

e) Provisions, contingencies and other commitments

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

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

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

f) Technical provisions for insurance and pension plan

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 21

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

Additional information is described in Note 30.

2.3.2 Critical judgments in accounting policies

a) Goodwill

The impairment test for goodwill involves estimates and significant judgments, including the identification of cash generation units and the allocation of goodwill to such units based on the expectations of which ones will benefit from the acquisition. Determining the expected cash flows and a risk-adjusted interest rate for each unit requires that management exercises judgment and estimates. Semi-annually submitted to the impairment test and, at June 30, 2017 and 2016, ITAÚ UNIBANCO HOLDING did not identify goodwill impairment losses.

2.4. Summary of main accounting practices

a) Consolidation

I. Subsidiaries

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 22

The following table shows the main consolidated companies, which together represent over 95% of total consolidated assets, as well as the interests of ITAÚ UNIBANCO HOLDING in their voting capital at 06/30/2017 and 12/31/2016.

		Functional	Incorporation		Interest in voting capital at						Interest in total capital at
		currency	country	Activity	06/30/2017			12/31/2016			06/30/2017			12/31/2016
Domestic
Banco Itaú BBA S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Consignado S.A (1)			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaucard S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itauleasing S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Cia. Itaú de Capitalização			Brazil	Capitalization		100.00	%		100.00	%		100.00	%		100.00	%
Dibens Leasing S.A. - Arrendamento Mercantil			Brazil	Leasing		100.00	%		100.00	%		100.00	%		100.00	%
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento			Brazil	Consumer finance credit		50.00	%		50.00	%		50.00	%		50.00	%
Hipercard Banco Múltiplo S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itauseg Seguradora S.A. (2)			Brazil	Insurance		99.99	%		99.99	%		99.99	%		99.99	%
Itaú Corretora de Valores S.A.			Brazil	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Seguros S.A.			Brazil	Insurance		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Unibanco S.A.			Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Vida e Previdência S.A.			Brazil	Pension plan		100.00	%		100.00	%		100.00	%		100.00	%
Luizacred S.A. Soc. Cred. Financiamento Investimento			Brazil	Consumer finance credit		50.00	%		50.00	%		50.00	%		50.00	%
Redecard S.A.			Brazil	Acquirer		100.00	%		100.00	%		100.00	%		100.00	%
Foreign
Itaú Corpbanca Colombia	(Note 3)	Colombian peso	Colombia	Financial institution		23.67	%		23.67	%		23.67	%		23.67	%
Banco Itaú (Suisse) S.A.		Swiss franc	Switzerland	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Argentina S.A.		Argentinian peso	Argentina	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Paraguay S.A.		Guarani	Paraguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Uruguay S.A.		Uruguayan peso	Uruguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau Bank, Ltd.		Real	Cayman Islands	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú BBA Colombia S.A. Corporacion Financiera		Colombian peso	Colombia	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA International plc		Dollar	United Kingdom	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itau BBA USA Securities Inc.		Real	United States	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú CorpBanca	(Note 3)	Chilean peso	Chile	Financial institution		35.71	%		35.71	%		35.71	%		35.71	%

(1) New company name of Banco Itaú BMG Consignado S.A..

(2) New company name of Itaú BMG Seguradora S.A.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 23

II. Business combinations

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

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

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

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

III. Transactions with non-controlling stockholders

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

b) Foreign currency translation

I. Functional and presentation currency

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

The assets and liabilities of subsidiaries with a functional currency other than the Brazilian Real are translated as follows:

· Assets and liabilities are translated at the closing rate at the balance sheet date.

· Income and expenses are translated at monthly average exchange rates.

· Exchange differences arising from currency translation are recorded in other comprehensive income.

II. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of income as part of foreign exchange results and exchange variations on transactions.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 24

c) Cash and cash equivalents

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

d) Financial Assets and Liabilities

In accordance with IAS 39 - Financial instruments: Recognition and Measurement, Financial Assets and Liabilities, including derivative financial instruments, should be recognized in the Balance Sheet, and measured in accordance with the category in which the instrument was classified.

Financial assets and liabilities may be classified as follows:

Categories	Recognition and Measurement
·     Financial assets and liabilities at fair value through profit or loss – held for trading ·     Financial assets and liabilities at fair value through profit or loss – designated at fair value	·     Initial and subsequently recognized at fair value; ·     Transaction costs are directly recognized in the Consolidated Statement of Income; ·     Gains and losses arising from changes in fair value are directly included in Net gain (loss) from investments in securities and derivatives.
·     Available-for-sale financial assets (*)	·     Initial and subsequently recognized at fair value plus transaction costs; ·     Unrealized gains and losses (except losses for impairment, foreign exchange differences, dividends and interest income) are recognized, net of applicable taxes, in Other comprehensive income.
·     Held-to-maturity financial assets (*) ·     Loans and receivables ·     Financial liabilities at amortized cost	·     Initially recognized at fair value plus transaction costs; ·     Subsequently measured at amortized cost, using the effective interest rate method.

(*) Interest, including the amortization of premiums and discounts, is recognized in the Consolidated Statement of income under Interest and similar income.

The classification of financial assets and liabilities depends on the purpose for which financial assets were acquired or financial liabilities were assumed. Management determines the classification of financial instruments at initial recognition.

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

Interest and similar income and expense are recognized in the Consolidated Statement of Income, in Interest and similar income and Interest and similar expense, respectively.

ITAÚ UNIBANCO HOLDING classifies as loans and receivables and financial liabilities at amortized cost the following Balance Sheet headings:

Loans and receivables	Financial liabilities at amortized cost
·     Central Banks compulsory deposits (Note 2.4dl and Note 5); ·     Interbank deposits (Note 6); ·     Securities purchased under agreements to resell (Note 2.4dll and Note 6); ·     Loan operations (Note 2.4dVIII and Note 12); and ·     Other financial assets (Note 20a).	·     Deposits (Note 17); ·     Securities sold under repurchase agreements (Note 2.4dll and Note 19a); ·     Funds from interbank markets (Note 19a); ·     Funds from institutional markets (Note 19b); ·     Liabilities for capitalization plans; and ·     Other financial liabilities (Note 20b).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 25

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

Financial assets are derecognized when rights to receive cash flows expire or when ITAÚ UNIBANCO HOLDING transfers substantially all risks and rewards of ownership, and such transfer qualifies for write-off in accordance with IAS 39 requirements.

Otherwise, control should be assessed to determine whether the continuous involvement related to any retained control does not prevent write-off. Financial liabilities are derecognized when settled or extinguished.

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

I –  Central Bank Compulsory deposits

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

II – Securities purchased under agreements to resell

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

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

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

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

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

III-  Financial assets and liabilities at fair value through profit or loss - held for trading

These are financial assets and liabilities acquired or incurred principally for the purpose of selling them in the short term or when they are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent history of trading transactions.

IV-  Financial assets and liabilities at fair value through profit or loss – designated at fair value

These are assets and liabilities designated at fair value through profit or loss upon initial recognition (fair value option). In accordance with IAS 39, the fair value option can only be applied if it reduces or eliminates accounting mismatches in income or when the financial instruments are part of a portfolio for which risk is managed and reported to Management based on its fair value or when these instruments consist of debt instruments and embedded derivatives that should otherwise be separated.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 26

V-   Derivatives

All derivatives are recorded as assets when the fair value is positive and as liabilities when the fair value is negative.

Certain derivatives embedded in other financial instruments are treated as separate derivatives, when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not recognized at fair value through profit or loss. These embedded derivatives are accounted for separately at fair value, with changes in fair value recognized in the Consolidated Statement of Income in Net gain (loss) on investment securities and derivatives.

Derivatives can be designated as hedging instruments under hedge accounting and in the event they qualify, depending upon the nature of the hedged item, the method for recognizing gains or losses from changes in fair value will be different. These derivatives, which are used to hedge exposures to risk or modify the characteristics of financial assets and liabilities, and that meet IAS 39 criteria, are recognized as hedge accounting.

In accordance with IAS 39, to qualify for hedge accounting, all of the following conditions are met:

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

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

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

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

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

IAS 39 presents three hedge accounting categories: fair value hedge, cash flow hedge, and hedge of net investments in a foreign operation.

ITAÚ UNIBANCO HOLDING uses derivatives as hedging instruments under cash flow hedge strategies, fair value hedge and hedge of net investments, as detailed in Note 9.

Fair value hedge

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

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

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

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

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Cash flow hedge

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

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

Hedge of net investments in foreign operations

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

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

b) The ineffective portion is recognized in income.

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

VI - Available-for-sale financial assets

In accordance with IAS 39, financial assets are classified as available-for-sale when in the Management’s judgment they can be sold in response to or in anticipation of changes in market conditions, and that were not classified into the categories of financial assets at fair value through profit or loss, loans and receivables or held to maturity.

The average cost is used to determine the realized Gains and losses on Disposal of available-for-sale financial assets, which are recorded in the consolidated statement of income under Net gain (loss) on Investments in Securities and Derivatives – Available-for-sale financial assets. Dividends on available-for-sale assets are recognized in the Consolidated Statement of Income as Dividend Income when it is probable that ITAÚ UNIBANCO HOLDING is entitled to receive such dividends and inflow of economic benefits.

VII- Held-to-maturity financial assets

In accordance with IAS 39, the financial assets classified into the held-to-maturity category are non-derivative financial assets for which ITAÚ UNIBANCO HOLDING has the positive intention and ability to hold to maturity.

Both impairment of held-to-maturity financial assets and reversal of this loss are recorded, when applicable, in the Consolidated statement of income.

VIII- Loan operations

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

When a financial asset or group of similar financial assets is impaired and its carrying amount is reduced through an allowance for loan losses, the subsequent interest income is recognized on

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 28

the reduced carrying amount using the interest rate used to discount the future cash flows for purposes of measuring the allowance for loan losses.

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

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

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

IX - Lease operations (as lessor)

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

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

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

X-   Allowance for loan and lease losses

General

ITAÚ UNIBANCO HOLDING periodically assesses whether there is any objective evidence that a receivable or group of receivables is impaired. A receivable or group of receivables is impaired and there is a need for recognizing an impairment loss if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows that can be reliably estimated.

The allowance for loan and lease losses is recognized as probable losses inherent in the portfolio at the balance sheet date. The determination of the level of the allowance rests upon various judgments and assumptions, including current economic conditions, loan portfolio composition, prior loan and lease loss experience and evaluation of credit risk related to individual loans. Our process for determining the allowance for loan and lease losses includes Management's judgment and the use of estimates. The adequacy of the allowance is regularly analyzed by Management.

The criteria adopted by ITAÚ UNIBANCO HOLDING for determining whether there is objective evidence of impairment include the following:

· Default in principal or interest payment.

· Financial difficulties of the debtor and other objective evidence that results in the deterioration of the financial position of the debtor (for example, debt-to-equity ratio, percentage of net sales or other indicators obtained through processes adopted to monitor credit, particularly for retail portfolios).

· Breach of loan clauses or terms.

· Entering into bankruptcy.

· Loss of competitive position of the debtor.

The estimated period between the loss event and its identification is defined by Management for each portfolio of similar receivables. Considering the representativeness of several homogeneous groups, management chose to use a twelve month period as being the most representative. For

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 29

portfolios of loans that are individually evaluated for impairment this period is at most 12 months, considering the review cycle for each loan operation.

Assessment

ITAÚ UNIBANCO HOLDING first assesses whether objective evidence of impairment exists for receivables that are individually significant, and individually or collectively for receivables that are not individually significant.

To determine the amount of the allowance for individually significant receivables with objective evidence of impairment, ITAÚ UNIBANCO HOLDING used methodologies are that consider both the quality of the client and the nature of the transaction, including its collateral, to estimate the cash flows expected from these loans.

If no objective evidence of impairment exists for an individually assessed receivable, whether significant or not, the asset is included in a group of receivables with similar credit risk characteristics and collectively assessed for impairment. Receivables that are individually assessed for impairment and for which an impairment loss is recognized are not included in the collective assessment. The amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

For collectively assessed loans, the calculation of the present value of the estimated future cash flows for which there is collateral reflects the historical performance of the foreclosure and recovery of fair value, considering the cash flows that may arise from foreclosure less costs for obtaining and selling that collateral.

For the purpose of a collective evaluation of impairment, receivables are grouped on the basis of similar credit risk characteristics. The characteristics are relevant to the estimation of future cash flows for such receivables by being indicative of the debtors’ ability to pay all amounts due, according to the contractual terms of the receivables being evaluated. Future cash flows in a group of receivables that are collectively evaluated for purposes of identifying the need for recognizing impairment are estimated on the basis of the contractual cash flows of the group of receivables and historical loss experience for receivables with similar credit risk characteristics. The historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

For individually significant receivables with no objective evidence of impairment, ITAÚ UNIBANCO HOLDING classifies these loans into certain rating categories based on several qualitative and quantitative factors applied through internally developed models. Considering the size and the different risk characteristics of each contract, the rating category determined according to internal models can be reviewed and modified by our Corporate Credit Committee, the members of which are executives and officers in corporate credit risk. ITAÚ UNIBANCO HOLDING estimates inherent losses for each rating category considering an internally developed approach for low-default portfolios, that uses our historical experience for building internal models, that are used both to estimate the PD (probability of default) and to estimate the LGD (loss given default).

To determine the amount of the allowance for individually insignificant items loans are segregated into classes considering the underlying risks and characteristics of each group. The allowance for loan and lease losses is determined for each of those classes through a process that considers historical delinquency and loan loss experience over the most recent years.

Measurement

The methodology used to measure the allowance for loan and lease losses was developed internally by the credit risk and finance areas at the corporate level. In those areas and considering the different characteristics of the portfolios, different areas are responsible for defining the methodology to measure the allowance for each: Corporate (including loan operations with objective evidence of impairment and individually significant loan operations but with no objective evidence of impairment), Individuals, Small and Medium Businesses, and Foreign Units Latin America. Each of the four portfolio areas responsible for defining the

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methodology to measure the allowance for loan and lease losses is further divided into groups, including groups that develop the methodology and groups that validate the methodology. A centralized group in the credit risk area is responsible for measuring the allowance on a recurring basis following the methodologies developed and approved for each of the four areas.

The methodology is based on two components to determine the amount of the allowance: The probability of default by the client or counterparty (PD), and the potential economic loss that may occur in the event of default, being the debt that cannot be recovered (LGD) which are applied to the outstanding balance of the loan. Measurement and assessment of these risk components is part of the process for granting credit and for managing the portfolio. The estimated amounts of PD and LGD are measured based on statistical models that consider a significant number of variables which are different for each class and include, among others, income, equity, past loan experiences, level of indebtedness, economic sectors that affect collectability and other attributes of each counterparty and of the economic environment. These models are regularly updated for changes in economic and business conditions.

A model updating process is started when the modeling area identifies that it is not capturing significant effects of the changes of economic conditions, in the performance of the portfolio or when a change is made in the methodology for calculating the allowance for loan and lease losses. When a change in the model is made, the model is validated through back-testing and statistical methods are used to measure its performance through detailed analysis of its documentation, by describing step-by-step how the process is carried out. The models are validated by an area independent from the one developing it, by issuing a technical report on the assumptions used (integrity, consistency, and replicability of the bases) and on the mathematical methodology used. The technical report is subsequently submitted to CTAM (Model assessment technical committee), which is the highest level of approval of model reviews.

Considering the different characteristics of the loans at each of the four portfolio areas (Corporate (with no objective evidence of impairment), Individuals, Small and Medium Businesses, and Foreign Units Latin America), different areas within the corporate credit risk area are responsible for developing and approving the methodologies for loans in each of those four portfolio areas. Management believes that the fact that different areas focus on each of the four portfolios results in increased knowledge, specialization and awareness of the teams as to the factors that are more relevant for each portfolio area in measuring the loan losses. Also considering such different characteristics and other factors, different inputs and information are used to estimate the PD and LGD as further detailed below:

· Corporate (with no evidence of impairment) - factors considered and inputs used are mainly the history of the customer relationship with us, the results of analysis of the customer’s accounting statements and the information obtained through frequent contacts with its officers, aiming at understanding the strategy and the quality of its management. Additionally, industry and macroeconomic factors are also included in the analysis. All those factors (which are quantitative and qualitative) are used as inputs to the internal model developed to determine the corresponding rating category. This approach is also applied to the corporate credit portfolio inside and outside Brazil;

· Individuals – factors considered and inputs used are mainly the history of the customer relationship with us, and information available through credit bureaus (negative information);

· Small / Medium Businesses – factors considered and inputs used include, in addition to the history of the customer relationship and credit bureau information about the customer’s revenues, industry expertise, and information about its shareholders and officers, among others;

· Foreign Units – Latin America – considering the relative smaller size of this portfolio and its more recent nature, the models are simpler and use the past due status and an internal rating of the customer as main factors.

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Reversal, write-off, and renegotiation

If, in a subsequent period, the amount of the impairment loss decreases and the decrease is objectively related to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment is reversed. The amount of reversal is recognized in the consolidated statement of Income under Expense for allowance for loan and lease losses.

When a loan is uncollectible, it is written-off in the balance sheet under allowance for loan and lease losses. Write-off as losses occur after 360 days of credits have matured or after 540 days for loans with maturities over 36 months.

In almost all cases for loan products, renegotiated loans require at least one payment to be made under the renegotiated terms in order for it to be removed from nonperforming and nonaccrual status. Renegotiated loans return to nonperforming and nonaccrual status when they reach 60 days past due under the renegotiated terms, which typically corresponds to the borrower missing two or more payments.

e) Investments in associates and joint ventures

I – Associates

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

II – Joint arrangements

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

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

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

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

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

f) Lease commitments (as lessee)

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

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

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

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

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

g) Fixed assets

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

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

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

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

h) Goodwill

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

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

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

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

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

i) Intangible assets

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

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

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

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

The breakdown of intangible assets is described in Note 16.

j) Assets held for sale

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

k) Income tax and social contribution

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

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

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

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

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

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

 (*) On october 06, 2015, Law No. 13,169, a conversion of Provisional Measure No. 675, which increased the Social Contribution tax rate from 15.00% to 20.00% until december 31, 2018, for financial institutions, insurance companies and credit card management companies, was introduced. For the other companies, the tax rate remains at 9.00%.

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

l) Insurance contracts and private pension

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

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

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

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

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

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

Private pension plans

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

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Insurance premiums

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

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

Reinsurance

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

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

Acquisition costs

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

Liabilities

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

Embedded derivatives

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

Liability adequacy test

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

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

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

m) Capitalization plans

For regulatory purposes in Brazil they are regulated by the insurance regulator. These plans do not meet the definition of an insurance contract under IFRS 4, and therefore they are classified as a financial liability at amortized cost under IAS 39.

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

n) Post-employments benefits

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

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

Pension plans - Defined benefit plans

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

· current service cost – defined as the increase in the present value of obligations resulting from employee service in the current period.

· interest on the net amount of assets (liabilities) of defined benefit plans is the change, during the period, in the net amount recognized in assets and liabilities, due to the time elapsed, which comprises the interest income on plan assets, interest expense on the obligations of the defined benefit plan and interest on the asset ceiling effects.

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

Pension plans - defined contribution

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

Other post-employment benefit obligations

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

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

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o) Share-based payment

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

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

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

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

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

p) Financial guarantees

ITAÚ UNIBANCO HOLDING recognizes the fair value of the guarantees issued in the Consolidated balance sheet under Other liabilities. Fair value is generally represented by the fee charged to client for issuing the guarantee. This amount at the issuance date is amortized over the life of the guarantee issued and recognized in the Consolidated statement of income under Banking service fees.

After issuance, based on the best estimate, if ITAÚ UNIBANCO HOLDING concludes that the occurrence of a loss regarding a guarantee issued is probable, and if the loss amount is higher than the initial fair value less cumulative amortization, a provision will be recognized for such amount.

q) Provisions, contingent assets and contingent liabilities

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

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

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

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

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

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

· Remote: which require neither a provision nor disclosure.

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

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

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

r) Capital

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

s) Treasury shares

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

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

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

t) Dividends and interest on capital

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

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

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

Dividends and interest on capital are presented in Note 21.

u) Earnings per share

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

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

Earnings per share are presented in Note 28.

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v) Revenue from services

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

Revenue from certain services, such as fees from funds management, performance, collection for retail clients and custody, is recognized over the life of the related contracts on a straight-line basis.

The breakdown of the banking service fees is detailed in Note 24.

w) Segment information

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

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

Segment information is presented in Note 34.

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Note 3 – Business development

Gestora de Inteligência de Crédito

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

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

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

Banco Itaú BMG Consignado S.A.

On September 29, 2016, ITAÚ UNIBANCO HOLDING, through its subsidiary Itaú Unibanco S.A. (Itaú Unibanco), entered into a purchase and sale agreement with Banco BMG S.A. (BMG) for acquisition of a 40% interest in the capital of Banco Itaú BMG Consignado S.A. (Itaú BMG Consignado), corresponding to BMG’s total interest in Itaú BMG Consignado, for the amount of R$ 1,460, and now holds 100% of Itaú BMG Consignado.

Itaú Unibanco and BMG will maintain an association by means of the execution of a new commercial agreement for the distribution of payroll loans of Itaú BMG Consignado and its affiliates, on an exclusive basis, through certain distribution channels linked to BMG and its affiliates.

After compliance with conditions precedent and approval by proper regulatory authorities, the transaction was completed on December 28, 2016.

Currently, Itaú Consignado S.A (current corporate name of Itaú BMG Consignado) is controlled by ITAÚ UNIBANCO HOLDING and, therefore, this acquisition did not have accounting effects on its results on initial recognition.

ConectCar Soluções de Mobilidade Eletrônica S.A.

On October 21, 2015, ITAÚ UNIBANCO HOLDING, through its subsidiary Redecard S.A. (Rede), entered into a share purchase and sale commitment with Odebrecht Transport S.A. for the acquisition of 50% of capital stock of ConectCar Soluções de Mobilidade Eletrônica S.A. (ConectCar) for the amount of R$ 170.

ConectCar, located in Barueri, São Paulo, is an institution engaged in own payment arrangements and a provider of intermediation services for automatic payment of tolls, fuels and parking lots. It was organized in 2012 as the result of a partnership between Odebrecht Transport S.A. and Ipiranga Produtos de Petróleo S.A., a company controlled by Ultrapar Participações S.A., which currently holds the remaining 50% of

ConectCar’s capital stock.

After compliance with the conditions precedent and approval of proper regulatory authorities, the operation was closed on January 29, 2016. The investment acquired is measured using the equity method (Note 2.4e II).

The acquisition had no initial accounting effects on the results of ITAÚ UNIBANCO HOLDING.

Recovery do Brasil Consultoria S.A.

At December 31, 2015, ITAÚ UNIBANCO HOLDING, through its subsidiary Itaú Unibanco S.A. (Itaú Unibanco), entered into an agreement for purchase and sale and other covenants with Banco BTG Pactual S.A. (BTG) and with Misben S.A. to acquire 89.08% of interest in the capital stock of Recovery do Brasil Consultoria S.A. (Recovery), corresponding to the total interest of the parties in Recovery, for R$ 735.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 41

In the same transaction, ITAÚ UNIBANCO HOLDING agreed on the acquisition of approximately 70% of the portfolio of R$ 38 billion in credit rights related to the recovery of portfolios held by BTG, for the amount of R$ 570.

Established in 2000 in Argentina and present in Brazil since 2006, Recovery is a market leader in the management of overdue receivables portfolio. Recovery’s activities consist in prospecting and assessing portfolios, structuring and managing operations, acting in all segments, from individual to corporate loans, with financial and non-financial institutions, and offering a competitive advantage to its clients.

After the compliance with the conditions precedent and approval by regulatory authorities, the transaction was closed on March 31, 2016.

The difference between the amount paid and the net assets at fair value has given rise to the recognition of goodwill from expected future profitability.

Purchase price	735
(-) Fair value of assets and liabilities identified	(74	)
(-) Intangible assets to be amortized	(20	)
(=) Goodwill	641

On July 7, 2016, ITAÚ UNIBANCO HOLDNG, through its subsidiary Itaú Unibanco S.A., acquired, from International Finance Corporation, a 6.92% additional interest, for the amount of R$ 59, and now holds 96% of Recovery’s capital.

Itaú CorpBanca

On January 29, 2014, ITAÚ UNIBANCO HOLDING, through its subsidiary Banco Itaú Chile S.A. (BIC), entered into a Transaction Agreement with CorpBanca and its controlling stockholders (Corp Group), establishing the terms and conditions of the merger of operations of BIC and CorpBanca in Chile and in the other jurisdictions in which CorpBanca operates.

CorpBanca is a commercial bank headquartered in Chile, which also operates in Colombia and Panama, focused on individuals and large and middle-market companies. In 2015, an accordance with the Chilean Superintendence of Banks, it was one of the largest private banks in Chile, in terms of overall size of loan portfolio, with a market share of 7.1%.

This agreement represents an important step in ITAÚ UNIBANCO HOLDING’s internationalization process.

The merger was approved by the stockholders of CorpBanca and BIC and by all proper regulatory authorities in Chile, Brazil, Colombia and Panama. As set forth in the amendment to the Transaction Agreement, entered into on June 2, 2015, the parties closed the operation on April 1^st, 2016, when they had full conditions for the corporate reorganization process.

The operation was consummated by means of:

i. Increase in BIC’s capital in the amount of R$ 2,309 concluded on March 22, 2016;

ii. Merger of BIC into CorpBanca, with the cancellation of BIC’s shares and issue of new shares by CorpBanca, at the rate of 80,240 shares of CorpBanca for one share of BIC, so that interests resulting from the merger, named Itaú CorpBanca, are 33.58% for ITAÚ UNIBANCO HOLDING and 33.13% for Corp Group.

The following corporate structure resulted from the transaction:

Ownership interest
ITAÚ UNIBANCO HOLDING	33.58	%
Corp Group	33.13	%
Other non-controlling stockholders	33.29	%

The Itaú CorpBanca was controlled from the April 1^st, 2016 by ITAÚ UNIBANCO HOLDING. On the same date, ITAU UNIBANCO HOLDING entered into a shareholders’ agreement with Corp Group, which sets

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 42

forth, among others, the right of ITAÚ UNIBANCO HOLDING and Corp Group to appoint members for the Board of Directors of Itaú CorpBanca in accordance to their interests in capital stock, and this group of shareholders will have the right to appoint the majority of members of the Board of Directors of Itaú CorpBanca and ITAÚ UNIBANCO HOLDING will be entitled to appoint the majority of members elected by this block. Except for certain strategic matters of Itaú CorpBanca, on which Corp Group has the right of veto, the members of the board of directors appointed by Corp Group should vote as recommended by ITAÚ UNIBANCO HOLDING.

The fair value of the consideration transferred by ITAÚ UNIBANCO HOLDING due to its interest in Itaú CorpBanca was R$ 10,517, based on the quotation of CorpBanca’s shares on the Santiago Stock Exchange.

The consideration transferred resulted in goodwill for future expected profitability of R$ 6,928. Additionally, a goodwill of R$ 692 was generated in Brazil due to the difference between the equity value of BIC and the equity value of Itaú CorpBanca resulting from the merger. This amount will not be deducted for tax purposes, except in case of disposal or merger of the investment.

The table below summarizes the main assets acquired and liabilities assumed on the acquisition date:

CORPBANCA

Assets	04/01/2016
Cash and deposits on demand		5,869
Interbank deposits		3,712
Securities purchased under agreements to resell		186
Financial assets held for trading		5,684
Derivatives		6,628
Available-for-sale financial assets		7,164
Held-to-maturity financial assets		236
Loan operations and lease operations portfolio, net		75,222
Other financial assets		3,018
Goodwill		888
Fixed assets, net		494
Intangible assets, net		2,603
Tax assets		1,413
Assets held for sale		2
Other assets		1,257
Total assets		114,376

Liabilities and stockholders' equity	04/01/2016
Deposits		68,387
Securities sold under repurchase agreements		4,052
Derivatives		5,749
Interbank market debt		6,429
Institucional market debt		17,025
Other financial liabilities		1,583
Provisions		140
Tax liabilities		1,341
Other liabilities		2,619
Total liabilities		107,325
Plan net assets		7,051
Non-controlling interests		1,515
Net assets assumed		5,536
Adjustment to fair value of net assets assumed		(1,946	)
Net assets assumed at fair value		3,590

In the year after the acquisition, adjustments are made to the amounts presented to reflect any new information obtained on existing facts upon the operation closing, in conformity with IFRS 3 – Business Combinations.

Contingent liabilities have not been recorded due to the acquisition.

Additionally, on October 26, 2016, ITAÚ UNIBANCO HOLDING, through its controlled subsidiary, ITB Holding Brasil Participações Ltda., indirectly acquired 10,908,002,836 shares of Itaú CorpBanca, for the equivalent of R$ 288.1.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 43

The right to acquire such shares was set forth in the April 1^st, 2016 shareholders’ agreement between ITAÚ UNIBANCO HOLDING and Corp Group and certain of its affiliates. As a consequence, ITAÚ UNIBANCO HOLDING’s ownership in Itaú CorpBanca increased from approximately 33.58% to 35.71%, without altering its current governance.

This transaction was effected upon the acquisition of 100% of the capital stock of CGB II SpA, the then holder of the shares. All the required regulatory approvals were obtained in October 2016.

The acquisitions had no initial accounting effects on the results of ITAÚ UNIBANCO HOLDING.

MaxiPago

On September 3, 2014, ITAÚ UNIBANCO HOLDING, through its subsidiary Redecard S.A. (Rede) entered into a share and purchase agreement with the controlling shareholders of MaxiPago Serviços de Internet S.A.(MaxiPago), a gateway company – network interconnection for mobile electronic payments.

On the same date, subscription and payment of 19,336 shares (33.33%) and acquisition of 24,174 shares (41.67%) were carried out, so that Rede became the holder of 43,510 common shares, representing 75% of total voting capital of MaxiPago.

After the compliance with the conditions precedent and approval by proper regulatory authorities, the operation was closed on January 8, 2015.

The difference between the amount paid and net assets at fair value resulted in the recognition of goodwill due to expected future profitability.

Purchase price	15
(-) Fair value of identified assets and liabilities	(4	)
(=) Goodwill	11

In the second semester of 2016, ITAÚ UNIBANCO HOLDING, through its subsidiary Rede, increased the capital of MaxiPago by 21.98% and acquired additional interest ownership of 3.02%, for R$ 2, and now holds 100% of MaxiPago’s capital stock.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 44

Note 4 - Cash and cash equivalents

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

	06/30/2017		12/31/2016
Cash and deposits on demand		22,700		18,542
Interbank deposits		20,208		13,358
Securities purchased under agreements to resell		41,223		64,219
Total		84,131		96,119

Amounts related to interbank deposits and securities purchased under agreements to resell not included in cash equivalents are R$ 8,507 (R$ 9,334 at 12/31/2016) and R$ 220,220 (R$ 200,832 at 12/31/2016), respectively.

Note 5 - Central Bank compulsory deposits

	06/30/2017		12/31/2016
Non-interest bearing deposits		4,243		3,002
Interest-bearing deposits		84,364		82,698
Total		88,607		85,700

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

	06/30/2017						12/31/2016
	Current		Non-current		Total		Current		Non-current		Total
Interbank deposits		27,267		1,448		28,715		21,503		1,189		22,692
Securities purchased under agreements to resell (*)		261,340		103		261,443		264,740		311		265,051
Total		288,607		1,551		290,158		286,243		1,500		287,743

(*) The amounts of R$ 3,575 (R$ 4,329 at 12/31/2016) are pledged in guarantee of operations on B3 S.A. - Brasil, Bolsa, Balcão (B3) and Central Bank and the amounts of R$ 212,355 (R$ 178,070 at 12/31/2016) are pledged in guarantee of repurchase agreement transactions, in conformity with the policies described in Note 2.4d.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 45

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

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

	06/30/2017							12/31/2016
			Accumulated gain /							Accumulated gain /
			(loss) reflected in							(loss) reflected in
	Cost		income			Fair value		Cost		income			Fair value
Investment funds		2,215		6			2,221		1,170		3			1,173
Brazilian government securities (1a)		182,989		288			183,277		159,602		422			160,024
Brazilian external debt bonds (1b)		5,273		91			5,364		5,275		50			5,325
Government securities – abroad (1c)		3,307		178			3,485		3,714		21			3,735
Argentina		1,429		87			1,516		634		17			651
Chile		185		1			186		126		1			127
Colombia		1,441		89			1,530		2,666		3			2,669
United States		80		-			80		78		-			78
Mexico		9		-			9		6		-			6
Paraguay		-		-			-		88		-			88
Uruguay		87		1			88		32		-			32
Other		76		-			76		84		-			84
Corporate securities (1d)		29,031		(167	)		28,864		34,425		(34	)		34,391
Shares		2,727		(236	)		2,491		2,598		(107	)		2,491
Bank deposit certificates		2,018		1			2,019		1,824		-			1,824
Securitized real estate loans		35		(1	)		34		-		-			-
Debentures		2,220		54			2,274		3,129		61			3,190
Eurobonds and other		750		8			758		654		8			662
Financial credit bills		21,170		-			21,170		25,893		-			25,893
Other		85		7			92		327		4			331
Total (2)		222,815		396			223,211		204,186		462			204,648

(1) Assets held for trading pledged as collateral of funding transactions of financial institutions and clients were: a) R$ 2,982 (R$ 7,696 at 12/31/2016), b) R$ 4,012 (R$ 4,045 at 12/31/2016), c) R$ 29 (R$ 1,183 at 12/31/2016) and d) R$ 99 (R$ 26 at 12/31/2016), totaling R$ 7,122 (R$ 12,950 at 12/31/2016).

(2) In the period, there was no reclassification of held for trading financial assets to other categories of financial assets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 46

The cost and fair value of financial assets held for trading by maturity are as follows:

	06/30/2017				12/31/2016
	Cost		Fair value		Cost		Fair value
Current		36,945		36,810		34,302		34,206
Non-stated maturity		3,432		3,205		3,356		3,206
Up to one year		33,513		33,605		30,946		31,000
Non-current		185,870		186,401		169,884		170,442
From one to five years		120,838		121,171		117,748		118,050
From five to ten years		56,767		56,976		42,135		42,284
After ten years		8,265		8,254		10,001		10,108
Total		222,815		223,211		204,186		204,648

Financial assets held for trading include assets with a fair value of R$ 141,471 (R$ 142,081 at 12/31/2016) that belong to investment funds wholly owned by Itaú Vida e Previdência S.A. The return of those assets (positive or negative) is fully transferred to customers of our PGBL and VGBL private pension plans whose premiums (less fees charged by us) are used by our subsidiary to purchase quotas of those investment funds.

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

	06/30/2017
	Cost		Accumulated gain / (loss) reflected in income		Fair value
Brazilian external debt bonds		1,396		14		1,410
Total		1,396		14		1,410

	12/31/2016
	Cost		Accumulated gain/(loss) reflected in income		Fair value
Brazilian external debt bonds		1,183		8		1,191
Total		1,183		8		1,191

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

	06/30/2017				12/31/2016
	Cost		Fair value		Cost		Fair value
Current		1,396		1,410		1,183		1,191
Up to one year		1,396		1,410		1,183		1,191

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 47

Note 8 – Derivatives

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

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

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

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

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

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

The total value of margins pledged in guarantee by ITAÚ UNIBANCO HOLDING was R$ 12,126 (R$ 12,246 at 12/31/2016) and was basically comprised of government securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 48

The following table shows the composition of derivatives by index:

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Fair value
	06/30/2017		06/30/2017			06/30/2017			06/30/2017
Futures contracts		548,052		(31	)		163			132
Purchase commitments		207,924		121			174			295
Commodities		104		-			-			-
Indices		57,131		11			(5	)		6
Interbank market		106,632		102			-			102
Foreign currency		32,937		6			179			185
Securities		11,120		2			-			2
Commitments to sell		340,128		(152	)		(11	)		(163	)
Commodities		213		-			-			-
Indices		82,453		(16	)		10			(6	)
Interbank market		192,875		(138	)		2			(136	)
Foreign currency		52,754		2			(24	)		(22	)
Fixed rate		816		-			1			1
Securities		10,980		-			-			-
Other		37		-			-			-
Swap contracts				(4,326	)		868			(3,458	)
Asset position		509,456		5,775			3,140			8,915
Indices		201,059		99			562			661
Interbank market		39,124		918			(54	)		864
Foreign currency		14,313		1,024			149			1,173
Floating rate		40,742		(12	)		679			667
Fixed rate		214,195		3,746			1,804			5,550
Securities		4		-			-			-
Other		19		-			-			-
Liability position		513,782		(10,101	)		(2,272	)		(12,373	)
Commodities		1		-			-			-
Indices		177,377		(1,732	)		(1,695	)		(3,427	)
Interbank market		28,711		(344	)		(24	)		(368	)
Foreign currency		20,426		(775	)		(13	)		(788	)
Floating rate		39,395		(120	)		(547	)		(667	)
Fixed rate		247,839		(7,129	)		7			(7,122	)
Securities		6		-			-			-
Other		27		(1	)		-			(1	)
Option contracts		751,090		279			508			787
Purchase commitments – long position		167,248		1,340			(362	)		978
Commodities		517		14			3			17
Indices		98,473		89			(41	)		48
Interbank market		11,129		28			32			60
Foreign currency		50,908		1,005			(607	)		398
Fixed rate		16		-			-			-
Securities		6,136		196			238			434
Other		69		8			13			21
Commitments to sell – long position		208,435		1,563			610			2,173
Commodities		293		5			3			8
Indices		155,591		144			56			200
Interbank market		13,159		16			29			45
Foreign currency		32,179		1,162			449			1,611
Fixed rate		148		7			(4	)		3
Securities		7,056		229			77			306
Other		9		-			-			-
Purchase commitments – short position		154,669		(1,324	)		429			(895	)
Commodities		364		(5	)		(5	)		(10	)
Indices		87,770		(76	)		35			(41	)
Interbank market		10,659		(27	)		10			(17	)
Foreign currency		50,741		(1,151	)		625			(526	)
Fixed rate		96		-			-			-
Securities		4,970		(57	)		(223	)		(280	)
Other		69		(8	)		(13	)		(21	)
Commitments to sell – short position		220,738		(1,300	)		(169	)		(1,469	)
Commodities		310		(17	)		(3	)		(20	)
Indices		176,223		(165	)		(34	)		(199	)
Interbank market		9,037		(18	)		(18	)		(36	)
Foreign currency		29,877		(918	)		(17	)		(935	)
Fixed rate		36		(1	)		-			(1	)
Securities		5,246		(181	)		(97	)		(278	)
Other		9		-			-			-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 49

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to  market value (in results / stockholders' equity)			Fair value
	06/30/2017		06/30/2017			06/30/2017			06/30/2017
Forward operations (onshore)		8,045		587			-			587
Purchases receivable		1,024		1,324			(1	)		1,323
Floating rate		572		572			-			572
Fixed rate		347		647			-			647
Securities		100		100			(1	)		99
Other		5		5			-			5
Purchases payable		-		(927	)		-			(927	)
Floating rate		-		(573	)		-			(573	)
Fixed rate		-		(349	)		-			(349	)
Other		-		(5	)		-			(5	)
Sales receivable		4,554		2,984			2			2,986
Interbank market		1,586		2			-			2
Floating rate		798		797			-			797
Fixed rate		1,269		1,296			-			1,296
Securities		901		884			2			886
Other		-		5			-			5
Sales deliverable		2,467		(2,794	)		(1	)		(2,795	)
Interbank market		2,462		-			-			-
Floating rate		-		(797	)		-			(797	)
Fixed rate		-		(1,992	)		(1	)		(1,993	)
Other		5		(5	)		-			(5	)
Credit derivatives		13,048		(6	)		76			70
Asset position		7,801		222			32			254
Foreign currency		6,024		222			(20	)		202
Fixed rate		149		(1	)		3			2
Securities		1,302		1			42			43
Other		326		-			7			7
Liability position		5,247		(228	)		44			(184	)
Foreign currency		4,642		(228	)		61			(167	)
Securities		442		-			(11	)		(11	)
Other		163		-			(6	)		(6	)
Forwards operations (offshore)		259,293		(204	)		159			(45	)
Asset position		126,982		2,166			233			2,399
Commodities		127		17			(1	)		16
Indices		285		5			-			5
Foreign currency		126,569		2,144			234			2,378
Securities		1		-			-			-
Liability position		132,311		(2,370	)		(74	)		(2,444	)
Commodities		184		(35	)		1			(34	)
Indices		582		(15	)		-			(15	)
Foreign currency		131,509		(2,319	)		(75	)		(2,394	)
Securities		36		(1	)		-			(1	)
Check of swap		1,215		(274	)		22			(252	)
Asset position - Foreign currency		755		16			13			29
Liability position - Interbank market		460		(290	)		9			(281	)
Other derivative financial instruments		4,122		79			(15	)		64
Asset position		2,307		92			24			116
Foreign currency		100		4			1			5
Fixed rate		1,573		86			8			94
Securities		480		2			9			11
Other		154		-			6			6
Liability position		1,815		(13	)		(39	)		(52	)
Foreign currency		49		(10	)		9			(1	)
Fixed rate		83		(1	)		(2	)		(3	)
Securities		1,347		(2	)		(40	)		(42	)
Other		336		-			(6	)		(6	)
		Asset		15,451			3,854			19,305
		Liability		(19,347	)		(2,073	)		(21,420	)
		Total		(3,896	)		1,781			(2,115	)

Derivative contracts mature as follows (in days):
Off-balance sheet – notional amount	0 - 30		31 - 180		181 - 365		Over 365		06/30/2017
Futures contracts		134,996		149,679		112,654		150,723		548,052
Swaps contracts - difference payable		18,808		69,211		73,187		342,475		503,681
Options		286,067		266,996		176,361		21,666		751,090
Forwards (onshore)		6,523		758		764		-		8,045
Credit derivatives		165		899		507		11,477		13,048
Forwards (offshore)		61,533		120,466		61,364		15,930		259,293
Check of swap		-		922		293		-		1,215
Other derivative financial instruments		-		368		512		3,242		4,122

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 50

The following table shows the composition of derivatives by index:

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Fair value
	12/31/2016		12/31/2016			12/31/2016			12/31/2016
Futures contracts		666,927		61			66			127
Purchase commitments		200,752		(237	)		86			(151	)
Commodities		147		-			-			-
Indices		47,295		(213	)		3			(210	)
Interbank market		109,649		1			-			1
Foreign currency		31,141		(25	)		83			58
Securities		12,520		-			-			-
Commitments to sell		466,175		298			(20	)		278
Commodities		284		-			-			-
Indices		169,930		306			(1	)		305
Interbank market		213,991		(11	)		1			(10	)
Foreign currency		70,719		3			(22	)		(19	)
Fixed rate		941		-			2			2
Securities		10,275		-			-			-
Other		35		-			-			-
Swap contracts				(4,446	)		1,767			(2,679	)
Asset position		471,221		6,602			3,940			10,542
Commodities		5		-			-			-
Indices		196,505		794			456			1,250
Interbank market		47,210		1,897			7			1,904
Foreign currency		13,582		1,136			(1	)		1,135
Floating rate		38,262		(21	)		1,471			1,450
Fixed rate		175,609		2,795			2,007			4,802
Securities		12		-			-			-
Other		36		1			-			1
Liability position		475,667		(11,048	)		(2,173	)		(13,221	)
Commodities		131		-			-			-
Indices		147,560		(2,729	)		(2,115	)		(4,844	)
Interbank market		36,554		(328	)		(68	)		(396	)
Foreign currency		21,156		(915	)		17			(898	)
Floating rate		36,438		(140	)		(1,204	)		(1,344	)
Fixed rate		233,780		(6,926	)		1,195			(5,731	)
Securities		20		(10	)		2			(8	)
Other		28		-			-			-
Option contracts		583,527		(2,108	)		2,348			240
Purchase commitments – long position		163,069		1,490			(625	)		865
Commodities		404		16			1			17
Indices		99,978		111			(8	)		103
Interbank market		1,247		1			20			21
Foreign currency		45,106		1,205			(835	)		370
Fixed rate		11		-			-			-
Securities		16,254		150			187			337
Other		69		7			10			17
Commitments to sell – long position		142,234		1,713			2,214			3,927
Commodities		162		4			5			9
Indices		92,088		106			(9	)		97
Interbank market		7,533		6			(2	)		4
Foreign currency		33,078		1,348			2,101			3,449
Fixed rate		145		6			(3	)		3
Securities		9,211		243			122			365
Other		17		-			-			-
Purchase commitments – short position		129,392		(2,674	)		1,721			(953	)
Commodities		239		(3	)		(8	)		(11	)
Indices		83,283		(161	)		29			(132	)
Interbank market		95		-			-			-
Foreign currency		39,900		(2,447	)		1,875			(572	)
Fixed rate		94		(1	)		-			(1	)
Securities		5,599		(54	)		(166	)		(220	)
Other		182		(8	)		(9	)		(17	)
Commitments to sell – short position		148,832		(2,637	)		(962	)		(3,599	)
Commodities		268		(17	)		(3	)		(20	)
Indices		104,268		(137	)		51			(86	)
Interbank market		3,438		(10	)		2			(8	)
Foreign currency		34,132		(2,258	)		(884	)		(3,142	)
Fixed rate		28		(1	)		-			(1	)
Securities		6,681		(214	)		(128	)		(342	)
Other		17		-			-			-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 51

	Off-balance sheet notional amount		Balance sheet account receivable / (received) (payable) paid			Adjustment to market value (in results / stockholders' equity)			Fair value
	12/31/2016		12/31/2016			12/31/2016			12/31/2016
Forwards operations (onshore)		13,429		1,446			(5	)		1,441
Purchases receivable		1,186		1,240			(5	)		1,235
Floating rate		546		545			1			546
Fixed rate		395		450			-			450
Securities		245		245			(6	)		239
Purchases payable		-		(971	)		-			(971	)
Floating rate		-		(545	)		-			(545	)
Fixed rate		-		(421	)		-			(421	)
Securities		-		(5	)		-			(5	)
Sales receivable		8,139		3,734			2			3,736
Interbank market		4,396		8			-			8
Floating rate		300		300			-			300
Fixed rate		2,250		2,257			-			2,257
Securities		1,193		1,169			2			1,171
Sales deliverable		4,104		(2,557	)		(2	)		(2,559	)
Interbank market		4,104		-			(2	)		(2	)
Floating rate		-		(300	)		-			(300	)
Fixed rate		-		(2,257	)		-			(2,257	)
Credit derivatives		12,100		-			34			34
Asset position		5,306		190			(9	)		181
Foreign currency		3,876		188			(56	)		132
Fixed rate		114		-			2			2
Securities		1,161		2			41			43
Other		155		-			4			4
Liability position		6,794		(190	)		43			(147	)
Foreign currency		5,487		(189	)		70			(119	)
Fixed rate		33		(1	)		-			(1	)
Securities		974		-			(21	)		(21	)
Other		300		-			(6	)		(6	)
Forwards operations (offshore)		250,775		472			162			634
Asset position		134,049		3,283			176			3,459
Commodities		206		18			1			19
Indices		148		9			-			9
Foreign currency		133,693		3,256			175			3,431
Securities		2		-			-			-
Liability position		116,726		(2,811	)		(14	)		(2,825	)
Commodities		244		(27	)		2			(25	)
Indices		27		-			-			-
Foreign currency		116,437		(2,784	)		(16	)		(2,800	)
Securities		18		-			-			-
Check of swap		1,493		(326	)		61			(265	)
Asset position - Foreign currency		923		18			70			88
Liability position - Interbank market		570		(344	)		(9	)		(353	)
Other derivative financial instruments		4,217		45			(44	)		1
Asset position		2,569		48			23			71
Foreign currency		148		(3	)		8			5
Fixed rate		1,174		48			(5	)		43
Securities		940		3			14			17
Other		307		-			6			6
Liability position		1,648		(3	)		(67	)		(70	)
Commodities		2		-			-			-
Foreign currency		84		-			(32	)		(32	)
Fixed rate		81		(1	)		(1	)		(2	)
Securities		1,317		(2	)		(30	)		(32	)
Other		164		-			(4	)		(4	)
		Asset		18,379			5,852			24,231
		Liability		(23,235	)		(1,463	)		(24,698	)
		Total		(4,856	)		4,389			(467	)

Derivative contracts mature as follows (in days):
Off-balance sheet - notional amount	0 - 30		31 - 180		181 - 365		Over 365		12/31/2016
Futures contracts		184,309		221,487		50,749		210,382		666,927
Swaps contracts - difference payable		17,588		67,405		50,000		329,626		464,619
Options		191,242		191,998		175,220		25,067		583,527
Forwards (onshore)		9,197		4,230		2		-		13,429
Credit derivatives		-		1,233		1,098		9,769		12,100
Forwards (offshore)		63,764		124,695		42,700		19,616		250,775
Check of swap		-		180		913		400		1,493
Other derivative financial instruments		32		579		418		3,188		4,217

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 52

Derivative financial instruments

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

	06/30/2017
	Fair value		%		0-30 days		31-90 days			91-180 days		181-365 days			366-720 days		Over 720 days
Assets
Futures contracts - B3		132		0.7		184		(13	)		3		(1	)		5		(46	)
Swaps – difference receivable		8,915		46.2		74		207			355		875			1,387		6,017
B3		986		5.1		27		8			12		122			159		658
Companies		3,628		18.8		29		138			224		357			433		2,447
Financial institutions		3,891		20.2		17		60			111		393			581		2,729
Individuals		410		2.1		1		1			8		3			214		183
Option premiums		3,151		16.3		1,357		284			352		574			408		176
B3		1,781		9.2		1,252		136			96		218			36		43
Companies		463		2.4		23		53			46		139			144		58
Financial institutions		905		4.7		82		94			210		216			228		75
Individuals		2		0.0		-		1			-		1			-		-
Forwards (onshore)		4,309		22.3		3,842		159			203		105			-		-
B3		987		5.1		535		151			196		105			-		-
Companies		2,158		11.2		2,143		8			7		-			-		-
Financial institutions		1,164		6.0		1,164		-			-		-			-		-
Credit derivatives - financial Institutions		254		1.3		1		-			1		3			15		234
Forwards (offshore)		2,399		12.4		326		388			589		594			309		193
B3		192		1.0		44		45			53		50			-		-
Companies		891		4.6		127		173			197		215			109		70
Financial institutions		1,316		6.8		155		170			339		329			200		123
Check of swap - Companies		29		0.2		-		29			-		-			-		-
Other		116		0.6		-		-			3		2			8		103
Companies		23		0.1		-		-			3		2			3		15
Financial institutions		93		0.5		-		-			-		-			5		88
Total (*)		19,305		100.0		5,784		1,054			1,506		2,152			2,132		6,677
% per maturity term						30.0		5.5			7.8		11.1			11.0		34.6

(*) Of the total asset portfolio of Derivative Financial Instruments, R$ 10,496 refers to current and R$ 8,809 to non-current.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 53

Derivative financial instruments

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

	12/31/2016
						0-30		31-90			91-180		181-365			366-720			Over 720
	Fair value			%		days		days			days		days			days			days
Assets
Futures		127			0.5		85		51			13		(18	)		(6	)		2
B3		128			0.5		85		52			13		(18	)		(6	)		2
Financial institutions		(1	)		0.0		-		(1	)		-		-			-			-
Swaps – difference receivable		10,542			43.5		828		723			585		659			1,497			6,250
B3		1,417			5.8		178		156			218		58			206			601
Companies		4,585			18.9		322		354			227		390			764			2,528
Financial institutions		4,256			17.6		319		197			122		196			447			2,975
Individuals		284			1.2		9		16			18		15			80			146
Option premiums		4,792			19.7		354		582			759		1,540			1,397			160
B3		1,679			6.9		144		209			182		1,075			41			28
Companies		507			2.1		23		19			88		134			188			55
Financial institutions		2,603			10.7		187		354			488		329			1,168			77
Individuals		3			0.0		-		-			1		2			-			-
Forwards (onshore)		4,971			20.6		3,947		735			287		2			-			-
B3		1,418			5.9		427		703			286		2			-			-
Companies		2,783			11.5		2,750		32			1		-			-			-
Financial institutions		770			3.2		770		-			-		-			-			-
Credit derivatives - financial institutions		181			0.7		-		-			3		5			13			160
Forwards (offshore)		3,459			14.3		601		1,252			444		579			245			338
B3		305			1.3		82		123			56		44			-			-
Companies		1,243			5.1		185		344			216		231			200			67
Financial institutions		1,908			7.9		333		783			172		304			45			271
Individuals		3			0.0		1		2			-		-			-			-
Check of swap - Companies		88			0.4		-		-			35		53			-			-
Other		71			0.3		-		-			1		6			13			51
Companies		29			0.1		-		-			-		5			8			16
Financial institutions		42			0.2		-		-			1		1			5			35
Total (*)		24,231			100.0		5,815		3,343			2,127		2,826			3,159			6,961
% per maturity term							24.0		13.8			8.8		11.7			13.0			28.7

(*) Of the total asset portfolio of Derivative Financial Instruments, R$ 14,111 refers to current and R$ 10,120 to non-current.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 54

	06/30/2017
									31 - 90			91 - 180			181 - 365			366 - 720			Over 720
	Fair value			%		0 - 30 days			days			days			days			days			days
Liabilities
Swaps – Difference payable		(12,373	)		57.7		(83	)		(179	)		(467	)		(774	)		(3,535	)		(7,335	)
B3		(1,291	)		6.0		(22	)		(8	)		(51	)		(47	)		(235	)		(928	)
Companies		(2,146	)		10.0		(26	)		(59	)		(213	)		(311	)		(410	)		(1,127	)
Financial institutions		(4,459	)		20.8		(29	)		(76	)		(165	)		(382	)		(771	)		(3,036	)
Individuals		(4,477	)		20.9		(6	)		(36	)		(38	)		(34	)		(2,119	)		(2,244	)
Option premiums		(2,364	)		11.1		(700	)		(267	)		(382	)		(478	)		(408	)		(129	)
B3		(913	)		4.3		(555	)		(53	)		(102	)		(142	)		(61	)		-
Companies		(578	)		2.7		(20	)		(68	)		(103	)		(153	)		(168	)		(66	)
Financial institutions		(853	)		4.0		(125	)		(141	)		(173	)		(180	)		(173	)		(61	)
Individuals		(20	)		0.1		-			(5	)		(4	)		(3	)		(6	)		(2	)
Forwards (onshore)		(3,722	)		17.4		(3,722	)		-			-			-			-			-
Companies		(2,558	)		12.0		(2,558	)		-			-			-			-			-
Financial institutions		(1,164	)		5.4		(1,164	)		-			-			-			-			-
Credit derivatives - Financial institutions		(184	)		0.9		-			-			(1	)		(1	)		(3	)		(179	)
Forwards (offshore)		(2,444	)		11.4		(387	)		(397	)		(501	)		(360	)		(237	)		(562	)
B3		(166	)		0.8		(35	)		(51	)		(43	)		(37	)		-			-
Companies		(585	)		2.7		(147	)		(133	)		(179	)		(77	)		(25	)		(24	)
Financial institutions		(1,692	)		7.9		(205	)		(212	)		(279	)		(246	)		(212	)		(538	)
Individuals		(1	)		0.0		-			(1	)		-			-			-			-
Check of swap - Companies		(281	)		1.3		-			(220	)		-			(61	)		-			-
Other - Companies		(52	)		0.2		-			-			-			(7	)		(9	)		(36	)
Total (*)		(21,420	)		100.0		(4,892	)		(1,063	)		(1,351	)		(1,681	)		(4,192	)		(8,241	)
% per maturity term							22.8			5.0			6.3			7.8			19.6			38.5

(*) Of the total liability portfolio of Derivative Financial Instruments, R$ (8,987) refers to current and R$ (12,433) to non-current.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 55

	12/31/2016
									31 - 90			91 - 180			181 - 365			366 - 720			Over 720
	Fair value			%		0 - 30 days			days			days			days			days			days
Liabilities
Swaps – difference payable		(13,221	)		53.4		(461	)		(228	)		(742	)		(732	)		(2,352	)		(8,706	)
B3		(1,614	)		6.5		(304	)		(75	)		(124	)		(97	)		(125	)		(889	)
Companies		(2,531	)		10.2		(67	)		(32	)		(90	)		(248	)		(573	)		(1,521	)
Financial institutions		(4,106	)		16.6		(79	)		(103	)		(128	)		(311	)		(554	)		(2,931	)
Individuals		(4,970	)		20.1		(11	)		(18	)		(400	)		(76	)		(1,100	)		(3,365	)
Option premiums		(4,552	)		18.5		(837	)		(659	)		(516	)		(713	)		(1,116	)		(711	)
B3		(1,437	)		5.8		(524	)		(216	)		(201	)		(455	)		(30	)		(11	)
Companies		(631	)		2.6		(48	)		(28	)		(103	)		(170	)		(200	)		(82	)
Financial institutions		(2,463	)		10.0		(265	)		(414	)		(208	)		(81	)		(882	)		(613	)
Individuals		(21	)		0.1		-			(1	)		(4	)		(7	)		(4	)		(5	)
Forwards (onshore)		(3,530	)		14.3		(3,530	)		-			-			-			-			-
B3		(6	)		0.0		(6	)		-			-			-			-			-
Companies		(2,754	)		11.2		(2,754	)		-			-			-			-			-
Financial institutions		(770	)		3.1		(770	)		-			-			-			-			-
Credit derivatives - Financial institutions		(147	)		0.6		-			-			-			(2	)		(10	)		(135	)
Forwards (offshore)		(2,825	)		11.5		(466	)		(881	)		(527	)		(299	)		(99	)		(553	)
B3		(259	)		1.0		(102	)		(76	)		(41	)		(40	)		-			-
Companies		(648	)		2.6		(166	)		(158	)		(124	)		(129	)		(37	)		(34	)
Financial institutions		(1,916	)		7.9		(198	)		(647	)		(360	)		(130	)		(62	)		(519	)
Individuals		(2	)		0.0		-			-			(2	)		-			-			-
Check of swap - Companies		(353	)		1.4		-			-			-			(214	)		(139	)		-
Other - Companies		(70	)		0.3		-			(1	)		(1	)		(1	)		(10	)		(57	)
Total (*)		(24,698	)		100.0		(5,294	)		(1,769	)		(1,786	)		(1,961	)		(3,726	)		(10,162	)
% per maturity term							21.4			7.2			7.2			7.9			15.1			41.2

(*) Of the total liability portfolio of Derivative Financial Instruments, R$ (10,810) refers to current and R$ (13,888) to non-current.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 56

a) Information on credit derivatives

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

Credit Default Swaps – CDS

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

Total Return Swap – TRS

TRS is a transaction in which a party swaps the total return of a reference entity 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 table below presents the portfolio of credit derivatives in which ITAÚ UNIBANCO HOLDING sells protection to third parties, by maturity, and the maximum potential of future payments, gross of any guarantees, as well as its classification by instrument, risk and reference entity.

	06/30/2017
	Maximum potential
	of future payments,				From 1 to 3		From 3 to 5
	gross		Before 1 year		years		years		Over 5 years
By instrument
CDS		7,838		1,165		3,363		3,092		218
Total by instrument		7,838		1,165		3,363		3,092		218
By risk rating
Investment grade		1,920		425		874		621		-
Below investment grade		5,918		740		2,489		2,471		218
Total by risk		7,838		1,165		3,363		3,092		218
By reference entity
Brazilian government		4,782		451		1,995		2,118		218
Government – abroad		527		110		357		60		-
Private entities		2,529		604		1,011		914		-
Total by entity		7,838		1,165		3,363		3,092		218

	12/31/2016
	Maximum potential
	of future payments,				From 1 to 3		From 3 to 5
	gross		Before 1 year		years		years		Over 5 years
By instrument
CDS		8,094		1,989		3,487		2,585		33
Total by instrument		8,094		1,989		3,487		2,585		33
By risk rating
Investment grade		1,854		564		974		283		33
Below investment grade		6,240		1,425		2,513		2,302		-
Total by risk		8,094		1,989		3,487		2,585		33
By reference entity
Brazilian government		5,163		1,291		1,806		2,066		-
Government – abroad		529		81		413		35		-
Private entities		2,402		617		1,268		484		33
Total by entity		8,094		1,989		3,487		2,585		33

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 57

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

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

	06/30/2017
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(7,838	)		5,210		(2,628	)
Total		(7,838	)		5,210		(2,628	)

				12/31/2016
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(8,094	)		4,006		(4,088	)
Total		(8,094	)		4,006		(4,088	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 58

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

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

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

06/30/2017
	Gross amount of recognized financial		Gross amount offset in the		Net amount of financial assets presented in the statement of		Related amounts not offset in the statement of financial position (2)
	assets (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral received		Net amount
Securities purchased under agreements to resell		261,443		-		261,443		(535	)		-		260,908
Derivatives		19,305		-		19,305		(3,068	)		-		16,237

12/31/2016
	Gross amount of recognized financial		Gross amount offset in the		Net amount of financial assets presented in the statement of		Related amounts not offset in the statement of financial position (2)
	assets (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral received			Net amount
Securities purchased under agreements to resell		265,051		-		265,051		(334	)		-			264,717
Derivatives		24,231		-		24,231		(4,039	)		(540	)		19,652

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

06/30/2017
	Gross amount of recognized financial		Gross amount offset in the		Net amount of financial liabilities presented in the statement of		Related amounts not offset in the statement of financial position (2)
	liabilities (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral pledged			Net amount
Securities sold under repurchase agreements		321,922		-		321,922		(16,233	)		-			305,689
Derivatives		21,420		-		21,420		(3,068	)		(329	)		18,023

12/31/2016
	Gross amount of recognized financial		Gross amount offset in the		Net amount of financial liabilities presented in the statement of		Related amounts not offset in the statement of financial position (2)
	liabilities (1)		statement of financial position		financial position		Financial instruments (3)			Cash collateral pledged		Net amount
Securities sold under repurchase agreements		349,164		-		349,164		(17,829	)		-		331,335
Derivatives		24,698		-		24,698		(4,039	)		-		20,659

(1) Includes amounts of master offset agreements and other such agreements, both enforceable and unenforceable.

(2) Limited to amounts subject to enforceable master offset agreements and other such agreements.

(3) Includes amounts subject to enforceable master offset agreements and other such agreements, and guarantees in financial instruments.

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

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 59

Note 9 – Hedge accounting

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

a) Cash flow hedge

To hedge the variation of future cash flows of interest payment and receipts and exposure to futures interest rate, ITAÚ UNIBANCO HOLDING uses futures contracts traded at B3 and Chicago Stock Exchange, related to certain fixed assets and liabilities, denominated in Brazilian Reais and US Dollars, futures Euro-Dollar and interest rate swaps, related to redeemable preferred shares, denominated in US Dollars, issued by one of our subsidiaries, DDI Futures contracts, traded on B3, related to highly probable forecast transactions denominated in US Dollars and NDF (Non Deliverable Forward) and currency swap, contracts traded in the over-the-counter market, related to highly probable forecast transactions not accounted for.

Under a DI Futures contract, a net payment (receipt) is made for the difference between an amount multiplied by the CDI rate and an amount computed and multiplied by a fixed rate. Under an interest rate swap, currency and futures Euro-Dollar, a net payment (receipt) is made for the difference between an amount computed multiplied by the LIBOR rate and an amount computed and multiplied by a fixed rate. In DDI Future contracts, NDF and Forwards, the gain (loss) on exchange variation is computed as the difference between two periods of market quotation between the US Dollar and the contracted currency.

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

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

· Hedge of time deposits and repurchase agreements: hedge of the variability in cash flows of interest payments resulting from changes in the CDI interest rate.

· Hedge of redeemable preferred shares: hedge of the variability in cash flows of interest payments resulting from changes in the LIBOR interest rate.

· Hedge of Syndicated Loan: hedge the variability in cash flow of interest payments resulting from changes in the LIBOR interest rate.

· Hedge of asset transactions: to hedge the variations in cash flows of interest receipts resulting from changes in the CDI rate.

· Hedge of assets denominated in UF*: to hedge the variations in cash flows of interest receipts resulting from changes in the UF*.

· Hedge of Funding: to hedge the variations in cash flows of interest payments resulting from changes in the TPM* rate and foreign exchange.

· Hedge of loan operations: variations in cash flows of interest receipts resulting from changes in the TPM* rate.

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

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

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

All hedge relationships were designated between 2008 and 2017. Periods in which expected cash flows should be paid and affect the income statement are as follows:

· Hedge of time deposits and agreements to resell: interest paid/received daily.

· Hedge of redeemable preferred shares: interest paid/received every half year.

· Hedge of highly probable forecast transactions: foreign exchange amount paid / received on future dates.

· Hedge of Syndicated Loan: interest paid / received daily.

· Hedge of asset transactions: interest paid / received monthly.

· Hedge of assets denominated in UF*: interest received monthly.

· Hedge of funding: interest paid monthly.

· Hedge of loan operations: interest received monthly.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 60

Following we present gains (or losses) of the effective and ineffective of the strategies of cash flow hedge.

	06/30/2017					12/31/2016
	Accumulated					Accumulated
Hedge instruments	effective portion			Ineffective portion		effective portion			Ineffective portion
Interest rate futures		(2,475	)		61		(2,051	)		10
Interest rate swap		7			2		(27	)		(2	)
Total		(2,468	)		63		(2,078	)		8

The effective portion is recognized in the stockholders' equity, under other comprehensive income and the ineffective portion is recognized in the statement of income under net gain (loss) on investment securities and derivatives.

To hedge future cash flows of highly probable forecast transactions, arising from futures contracts in foreign currency, against the exposure to future interest rate, ITAÚ UNIBANCO HOLDING negotiated DDI Futures contracts on B3 and NDF (Non Deliverable Forward) contracts traded in the over-the-counter market. During the second quarter of 2015, part of the flow of these agreements was realized, and , accordingly, Asset Valuation Adjustment was reclassified and included in the deemed cost of assets related to Hedge of Highly Probable Forecast Transaction.

At 06/30/2017, the gain (loss) on cash flow hedge expected to be reclassified from Comprehensive Income to Income in the following 12 months is R$ (850) (R$ 338 at 06/30/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 61

b) Hedge of net investment in foreign operations

ITAÚ UNIBANCO HOLDING strategies of net investments in foreign operations consist of a hedge of the exposure in foreign currency arising from the functional currency of the foreign operation, with respect to the functional currency of the head office.

To hedge the changes of future cash flows of exchange variation of net investments in foreign operations, ITAÚ UNIBANCO HOLDING uses DDI Futures contracts traded at B3, Financial Assets and Forward contracts or NDF contracts entered into by our subsidiaries abroad.

In DDI Future contracts, the gain (loss) on exchange variation is computed as the difference between two periods of market quotation between the US Dollar and Brazilian Real. In the Forward or NDF contracts and Financial Assets, the gain (loss) on exchange variation is computed as the difference between two periods of market quotation between the functional currency and the US Dollar.

ITAÚ UNIBANCO HOLDING applies the hedge of net investment in foreign operations as follows:

To hedge the risk of variation in the investment amount, when measured in Brazilian Reais (the head office’s functional currency), arising from changes in exchange rates between the functional currency of the investment abroad and the Brazilian Real.

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

Hedge relationships were designated in 2011 and 2012 and the hedge instruments will mature on the sale of investments abroad, which will be in the period when the cash flows of exchange variation are expected to occur and affect the statement of income.

Following we present gains (or losses) of the effective and ineffective of the strategies of Hedge of net investment in foreign operations.

	06/30/2017						12/31/2016
	Accumulated						Accumulated
Hedge instrument	effective portion			Ineffective portion			effective portion			Ineffective portion
DDI futures		(7,681	)		(22	)		(7,490	)		(51	)
Forward		658			(41	)		683			(48	)
NDF		2,138			(15	)		2,312			(35	)
Financial assets		43			2			43			2
Total		(4,842	)		(76	)		(4,452	)		(132	)

The effective portion is recognized in the stockholders' equity, under other comprehensive income and the ineffective portion is recognized in the statement of income under net gain (loss) on investment securities and derivatives.

DDI Futures is a futures contract in which participants may trade a clean coupon for any period between the first maturity of the futures contract of foreign currency coupon (DDI) and a later maturity.

NDF (Non Deliverable Forward), or Forward Contract of Currency without Physical Delivery is a derivative traded on over-the-counter market, which has the foreign exchange rate of a given currency as its subject.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 62

c) Fair value hedge

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

To hedge the market risk variation in the receipt and payment of interest, ITAÚ UNIBANCO HOLDING uses interest rate swap contracts related to prefixed assets and liabilities expressed in UF (Chilean Unit of Accounts - CLF), and Euros and US Dollars, issued by subsidiaries in Chile, London and Colombia, respectively.

Under an interest rate swap contract, net receipt (payment) is made for the difference between the amount computed and multiplied by variable rate and an amount computed and multiplied by a fixed rate.

ITAÚ UNIBANCO HOLDING has applied fair value hedge as follows:

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

· To hedge the variations in cash flows of interest receipts resulting from changes in the CDI rate.

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

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

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

Hedge relationships were designated between 2012 and 2017, and maturities of related swaps will occur between 2017 and 2030. Receipts (payments) of interest flows are expected to occur on a monthly basis, and they will affect the statement of income.

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

	06/30/2017					12/31/2016
	Accumulated					Accumulated
Hedge instrument used	effective portion			Ineffective portion		effective portion			Ineffective portion
Interest rate swap		(102	)		15		(90	)		(6	)
Total		(102	)		15		(90	)		(6	)

The effective and ineffective portion are recognized in the statement of income under net gain (loss) on investment securities and derivatives.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 63

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

	06/30/2017							12/31/2016
	Hedge instruments					Hedged item		Hedge instruments					Hedged item
			Fair value					Notional		Fair value
Strategies	Notional amount		adjustments			Carrying value		amount		adjustments			Carrying value
Hedge of deposits and repurchase agreements		61,776		(85	)		61,776		83,068		(8	)		83,580
Hedge of syndicated loan (Cash flow)		2,647		(9	)		2,647		6,844		(46	)		6,844
Hedge of highly probable forecast transactions		261		1			261		-		-			-
Hedge of net investment in foreign operations (*)		21,624		(12	)		12,397		21,449		221			12,330
Hedge of loan operations (Market risk)		3,291		(95	)		3,291		2,692		(91	)		2,692
Hedge of loan operations (Cash flow)		1,037		20			1,037		1,121		15			1,121
Hedge of funding (Market risk)		11,082		(37	)		11,082		8,659		9			8,659
Hedge of funding (Cash flow)		4,883		(24	)		4,883		4,273		(22	)		4,273
Hedge of syndicated loan (Market risk)		795		(2	)		795		-		-			-
Hedge of assets transactions		22,776		13			22,159		24,168		312			26,495
Hedge of Asset-backed securities under repurchase agreements		16,248		23			16,035		2,546		24			2,524
Hedge of assets denominated in UF		13,338		10			13,338		13,147		(20	)		13,147
Hedge of available-for-sale securities		472		(32	)		472		472		(14	)		472
Total		160,230		(229	)		150,173		168,439		380			162,137

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

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

	06/30/2017
Strategies	0-1 year		1-2 years		2-3 years		3-4 years		4-5 years		5-10 years		Over 10 years		Total
Hedge of deposits and repurchase agreements		30,504		12,078		6,524		11,048		102		1,520		-		61,776
Hedge of syndicated loan (Cash flow)		2,647		-		-		-		-		-		-		2,647
Hedge of highly probable forecast transactions		149		98		14		-		-		-		-		261
Hedge of net investment in foreign operations (*)		21,624		-		-		-		-		-		-		21,624
Hedge of loan operations (Market risk)		433		200		146		26		633		294		1,559		3,291
Hedge of loan operations (Cash flow)		-		-		25		20		169		823		-		1,037
Hedge of funding (Market risk)		3,522		100		4,098		347		9		1,157		1,849		11,082
Hedge of funding (Cash flow)		1,421		799		396		879		556		832		-		4,883
Hedge of syndicated loan (Market risk)		-		795		-		-		-		-		-		795
Hedge of assets transactions		15,224		6,390		-		1,162		-		-		-		22,776
Hedge of Asset-backed securities under repurchase agreements		28		10,989		4,581		650		-		-		-		16,248
Hedge of assets denominated in UF		11,821		333		1,160		-		24		-		-		13,338
Hedge of available-for-sale securities		-		-		-		218		-		254		-		472
Total		87,373		31,782		16,944		14,350		1,493		4,880		3,408		160,230

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

	12/31/2016
Strategies	0-1 year		1-2 years		2-3 years		3-4 years		4-5 years		5-10 years		Over 10 years		Total
Hedge of deposits and repurchase agreements		32,132		28,616		10,188		5,646		6,070		416		-		83,068
Hedge of syndicated loan (Cash flow)		6,844		-		-		-		-		-		-		6,844
Hedge of net investment in foreign operations (*)		21,449		-		-		-		-		-		-		21,449
Hedge of loan operations (Cash flow)		123		-		-		24		141		833		-		1,121
Hedge of assets transactions		4,627		13,719		4,890		-		932		-		-		24,168
Hedge of assets denominated in UF		8,940		2,598		1,558		-		51		-		-		13,147
Hedge of funding (Cash flow)		121		1,485		73		536		774		1,284		-		4,273
Hedge of Asset-backed securities under repurchase agreements		-		-		1,465		918		163		-		-		2,546
Hedge of loan operations (Market risk)		189		422		63		29		93		335		1,561		2,692
Hedge of available-for-sale securities		-		-		-		218		-		254		-		472
Hedge of funding (Market risk)		1,266		2,460		3,433		701		72		488		239		8,659
Total		75,691		49,300		21,670		8,072		8,296		3,610		1,800		168,439

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 64

Note 10 – Available-for-sale financial assets

The fair value and corresponding cost of available-for-sale financial assets are as follows:

	06/30/2017							12/31/2016
			Accumulated gain /							Accumulated gain /
			(loss) reflected in other							(loss) reflected in other
	Cost		comprehensive income			Fair value		Cost		comprehensive income			Fair value
Investment funds		188		-			188		42		-			42
Brazilian external debt bonds (1b)		11,807		67			11,874		14,465		(400	)		14,065
Brazilian government securities (1a)		21,363		439			21,802		17,652		286			17,938
Government securities – abroad (1c)		19,498		(69	)		19,429		14,488		(16	)		14,472
Colombia		1,794		9			1,803		1,105		50			1,155
Chile		5,792		3			5,795		5,832		12			5,844
Korea		2,954		-			2,954		2,673		-			2,673
Denmark		2,282		-			2,282		819		-			819
Spain		2,941		-			2,941		923		-			923
United States		1,600		(15	)		1,585		1,446		(19	)		1,427
Netherlands		-		-			-		101		-			101
Paraguay		1,781		(72	)		1,709		1,167		(56	)		1,111
Uruguay		354		6			360		413		(2	)		411
Other		-		-			-		9		(1	)		8
Corporate securities (1d)		36,231		(349	)		35,882		42,176		(416	)		41,760
Shares		1,180		568			1,748		1,020		365			1,385
Rural product note		1,519		8			1,527		1,477		(52	)		1,425
Bank deposit certificates		590		-			590		2,639		2			2,641
Securitized real estate loans		2,013		(20	)		1,993		2,150		(55	)		2,095
Debentures		21,475		(970	)		20,505		21,863		(693	)		21,170
Eurobonds and others		6,386		57			6,443		7,671		44			7,715
Financial bills		641		-			641		2,822		(6	)		2,816
Promissory notes		2,156		10			2,166		2,191		(18	)		2,173
Other		271		(2	)		269		343		(3	)		340
Total (2)		89,087		88			89,175		88,823		(546	)		88,277

(1) Available-for-sale assets pledged as collateral of funding of financial institutions and Clients were: a) R$ 820 (R$ 9,120 at 12/31/2016), b) R$ 11,800 (R$ 3,240 at 12/31/2016), c) R$ 20 and d) R$ 5,134 (R$ 5,075 at 12/31/2016), totaling R$ 17,774 (R$ 17,435 at 12/31/2016);

(2) In the period, there was no reclassification of available-for-sale financial assets to other categories of financial assets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 65

The cost and fair value of available-for-sale financial assets by maturity are as follows:

	06/30/2017				12/31/2016
	Cost		Fair value		Cost		Fair value
Current		17,135		17,318		23,516		23,636
Non-stated maturity		1,369		1,938		1,010		1,375
Up to one year		15,766		15,380		22,506		22,261
Non-current		71,952		71,857		65,307		64,641
From one to five years		43,086		42,902		39,149		38,969
From five to ten years		17,620		17,647		12,521		12,329
After ten years		11,246		11,308		13,637		13,343
Total		89,087		89,175		88,823		88,277

Note 11 - Held-to maturity financial assets

The amortized cost of held-to-maturity financial assets is as follows:

	06/30/2017		12/31/2016
	Amortized cost		Amortized cost
Corporate securities		14,162		14,977
Brazilian external debt bonds (1)		11,238		12,042
Brazilian government securities		13,251		12,937
Government securities – abroad		441		539
Colombia		428		526
Uruguay		13		13
Total (2)		39,092		40,495

(1) Held-to-maturity financial assets pledged as collateral of funding transactions of financial institutions and clients were R$ 2,814 (R$ 11,778 at 12/31/2016).

(2) In the period, there was no reclassification of held-to maturity financial assets to other categories of financial assets.

The interest income related to held-to-maturity financial assets was R$ 1,458 (R$ 2,049 from 01/01 to 06/30/2016).

The fair value of held-to-maturity financial assets is disclosed in Note 31.

The amortized cost of Held-to-Maturity Financial assets by maturity is as follows:

	06/30/2017		12/31/2016
	Amortized cost		Amortized cost
Current		10,087		2,498
Up to one year		10,087		2,498
Non-current		29,005		37,997
From one to five years		10,803		19,376
From five to ten years		11,462		10,957
After ten years		6,740		7,664
Total		39,092		40,495

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 66

Note 12 - Loan operations and lease operations portfolio

a) Composition of loan operations and lease operations

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

Loan operations and lease operations by type	06/30/2017			12/31/2016
Individuals		179,027			183,147
Credit card		56,376			59,022
Personal loan		25,372			25,813
Payroll loans		44,783			44,636
Vehicles		14,134			15,434
Mortgage loans		38,362			38,242
Corporate		114,726			121,754
Small and medium businesses		57,224			58,935
Foreign loans - Latin America		128,893			126,530
Total loan operations and lease operations		479,870			490,366
Allowance for loan and lease losses		(27,661	)		(26,972	)
Total loan operations and lease operations, net of allowance for loan and lease losses		452,209			463,394

By maturity	06/30/2017		12/31/2016
Overdue as from 1 day		15,809		16,843
Falling due up to 3 months		122,524		130,313
Falling due more than 3 months but less than 1 year		110,624		112,923
Falling due after 1 year		230,913		230,287
Total loan operations and lease operations		479,870		490,366

By concentration	06/30/2017		12/31/2016
Largest debtor		3,997		3,543
10 largest debtors		20,768		21,609
20 largest debtors		31,798		32,720
50 largest debtors		51,467		52,992
100 largest debtors		69,941		72,441

The breakdown of the Loan and lease operations portfolio by debtor’s industry is evidenced in Note 36 item 5.1. Maximum exposure of Financial Assets segregated by business sector.

The accretion of the net present value of impaired loan operations and lease operations and the respective allowance for loan and lease losses are not presented using their gross amounts in the statement of income but on a net basis within interest and similar income. If they were presented at gross amounts, there would be an increase of R$ 836 and R$ 1,026 in interest and similar income as of 06/30/2017 and 06/30/2016 respectively, with the same impact on the allowance for loan and lease losses expenses.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 67

b) Allowance for loan and lease losses

The changes in the allowance for loan and lease losses are shown in the table below:

	Opening							Closing
Composition of the carrying amount by class of	balance					Net increase /		balance
assets	12/31/2016		Write-offs			(Reversal)		06/30/2017
Individuals		14,259		(6,688	)		5,694		13,265
Credit card		3,693		(2,284	)		1,952		3,361
Personal loans		7,756		(3,391	)		2,851		7,216
Payroll loans		2,108		(732	)		644		2,020
Vehicles		644		(256	)		218		606
Mortgage loans		58		(25	)		29		62
Corporate		5,862		(1,043	)		2,099		6,918
Small and medium businesses		4,743		(2,330	)		1,759		4,172
Foreign loans - Latin America		2,108		(837	)		2,035		3,306
Total		26,972		(10,898	)		11,587		27,661

	Opening							Closing
Composition of the carrying amount by class of	balance					Net increase /		balance
assets	12/31/2015		Write-offs			(Reversal)		12/31/2016
Individuals		14,717		(13,682	)		13,224		14,259
Credit card		4,141		(4,905	)		4,457		3,693
Personal loans		8,330		(6,745	)		6,171		7,756
Payroll loans		1,319		(1,273	)		2,062		2,108
Vehicles		874		(709	)		479		644
Mortgage loans		53		(50	)		55		58
Corporate		6,459		(4,985	)		4,388		5,862
Small and medium businesses		4,809		(4,267	)		4,201		4,743
Foreign loans - Latin America		859		(1,317	)		2,566		2,108
Total		26,844		(24,251	)		24,379		26,972

The composition of the allowance for loan and lease losses by customer sector is shown in the following table:

	06/30/2017		12/31/2016
Public sector		5		5
Industry and commerce		5,191		5,253
Services		6,038		5,237
Natural resources		993		872
Other sectors		402		19
Individuals		15,032		15,586
Total		27,661		26,972

ITAÚ UNIBANCO HOLDING assesses the objective evidence of impairment for loan operations and lease operations on an individual basis for financial assets that are individually significant or, in aggregate, for financial assets that are not individually significant (Note 2.4d X).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 68

The composition of the allowance for loan and lease losses by type of assessment for objective evidence of impairment is shown in the following table:

	06/30/2017												12/31/2016
	Impaired				Not impaired				Total				Impaired				Not impaired				Total
	Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance
I – Individually evaluated
Corporate (*)		16,103		6,522		98,623		396		114,726		6,918		14,138		5,351		107,616		511		121,754		5,862
II- Collectively evaluated
Individuals		9,810		6,081		169,217		7,184		179,027		13,265		10,763		6,756		172,384		7,503		183,147		14,259
Credit card		3,226		1,946		53,150		1,415		56,376		3,361		3,512		2,150		55,510		1,543		59,022		3,693
Personal loans		4,267		2,914		21,105		4,302		25,372		7,216		4,837		3,302		20,976		4,454		25,813		7,756
Payroll loans		1,344		888		43,439		1,132		44,783		2,020		1,431		954		43,205		1,154		44,636		2,108
Vehicles		537		307		13,597		299		14,134		606		591		326		14,843		318		15,434		644
Mortgage loans		436		26		37,926		36		38,362		62		392		24		37,850		34		38,242		58
Small and medium businesses		3,111		2,105		54,113		2,067		57,224		4,172		3,646		2,523		55,289		2,220		58,935		4,743
Foreign loans - Latin America		1,985		831		126,908		2,475		128,893		3,306		1,770		727		124,760		1,381		126,530		2,108
Total		31,009		15,539		448,861		12,122		479,870		27,661		30,317		15,357		460,049		11,615		490,366		26,972

(*) As detailed in Note 2.4.d X, corporate loans are first evaluated on an individual basis. In the event there is no objective indication of impairment, these are subsequently evaluated on an aggregate basis in accordance with the characteristics of the operation. As a result, an allowance for loan and lease losses for corporate loans is recognized, both in the individual and the aggregate evaluation.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 69

c) Present value of lease operations

Below is the analysis of the present value of minimum future payments receivable from finance leases by maturity basically composed of individual operations - vehicles:

	06/30/2017
	Minimum future		Future financial			Present
	payments		income			value
Current		3,327		(1,807	)		1,520
Up to 1 year		3,327		(1,807	)		1,520
Non-current		9,244		(2,796	)		6,448
From 1 to 5 years		5,378		(2,729	)		2,649
Over 5 years		3,866		(67	)		3,799
Total		12,571		(4,603	)		7,968

	12/31/2016
	Minimum future		Future financial			Present
	payments		income			value
Current		3,572		(1,636	)		1,936
Up to 1 year		3,572		(1,636	)		1,936
Non-current		9,726		(2,955	)		6,771
From 1 to 5 years		5,741		(2,778	)		2,963
Over 5 years		3,985		(177	)		3,808
Total		13,298		(4,591	)		8,707

The allowance for loan and lease losses related to the lease portfolio amounts to: R$ 253 (R$ 254 at 12/31/2016).

d) Sale or transfer of financial assets

ITAÚ UNIBANCO HOLDING carried out operations related to the sale or transfer of financial assets in which there was the retention of credit risks of the financial assets transferred, through joint obligation clauses. Therefore, such operations remained recorded as loan operations and represent the following amounts at June 30, 2017 and December 31, 2016:

	06/30/2017								12/31/2016
	Assets				Liabilities (1)				Assets				Liabilities (1)
	Book		Fair		Book		Fair		Book		Fair		Book		Fair
Nature of operation	value		value		value		value		value		value		value		value
Companies – working capital		2,709		2,709		2,709		2,709		2,768		2,768		2,768		2,768
Companies - loan (2)		-		-		6		6		-		-		8		8
Individuals - vehicles (2)		-		-		3		3		-		-		4		4
Individuals – mortgage loan		2,734		2,759		2,732		2,751		3,061		2,960		3,055		2,944
Total		5,443		5,468		5,450		5,469		5,829		5,728		5,835		5,724

(1) Under Interbank Market Debt.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 70

Note 13 - Investments in associates and joint ventures

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

	Interest %
	at 06/30/2017				06/30/2017
							Other
					Stockholders’		Comprehensive							Equity in
	Total		Voting		equity		Income			Net income		Investment		earnings			Market value (g)
Associates
Porto Seguro Itaú Unibanco Participações S.A. (a) (b)		42.93		42.93		4,481		20			381		2,678		156			3,009
BSF Holding S.A. (c)		49.00		49.00		1,979		1			116		1,552		52			-
IRB-Brasil Resseguros S.A. (a) (d)		15.01		15.01		3,171		(29	)		458		478		72			-
Other (e)		-		-		-		-			-		122		10			-
Joint Ventures - Other (f)		-		-		-		-			-		199		(15	)		-
Total		-		-		-		-			-		5,029		275			-

	Interest %
	at 12/31/2016				12/31/2016														06/30/2016
							Other
					Stockholders’		comprehensive							Equity in					Equity in
	Total		Voting		equity		income			Net income		Investment		earnings			Market value (g)		earnings
Associates
Porto Seguro Itaú Unibanco Participações S.A. (a) (b)		42.93		42.93		4,251		26			293		2,587		241			2,644		115
BSF Holding S.A.(c)		49.00		49.00		2,067		(1	)		396		1,687		194			-		101
IRB-Brasil Resseguros S.A.(a) (d)		15.01		15.01		3,230		(17	)		745		478		109			-		48
Other (e)		-		-		-		-			-		114		13			-		9
Joint Ventures - Other (f)						-		-			-		207		(29	)				(14	)
Total		-		-		-		-			-		5,073		528			-		259

(a) For purpose of recording the participation in earnings, at 06/30/2017 the position at 05/31/2017 was used and at 06/30/2016 the position at 05/31/2016 was used, in accordance with IAS 27.

(b) For purposes of market value, the quoted share price of Porto Seguro S.A. was taken into account. The investment included the amounts of R$ 754 at 06/30/2017 and R$ 762 at 12/31/2016 that correspond to the difference between the interest in the net assets at fair value of Porto Seguro Itaú Unibanco Participações S.A. and the investment book value.

(c) In May 2012 Itaú Unibanco S.A. acquired 137,004,000 common shares of BSF Holding S.A. (parent company of Banco Carrefour) for R$ 816 which corresponds to 49% of interest in its capital. The investment amount includes R$ 582 to goodwill on 06/30/2017.

(d) Previously accounted for as a financial instrument. As from the 4th quarter of 2013, after completing the privatization process, ITAÚ UNIBANCO HOLDING started to exercise a significant influence over IRB. Accordingly, as from this date, the investment has been accounted for under the equity method.

(e) At 06/30/2017, includes interest in total capital and voting capital of the following companies: Compañia Uruguaya de Medios de Procesamiento S.A. (38.78% total and voting capital and 39.58% on 12/31/2016), Rias Redbanc S.A. (25% total and voting capital and 25% on 12/31/2016), Kinea Private Equity Investimentos S.A. (80% total capital and 49% voting capital; 80% total capital and 49% voting capital on 12/31/2016) and Tecnologia Bancária S.A. (24.92% total capital and voting capital and 24.92% on 12/31/2016).

(f) At 06/30/2017, includes interest in total capital and voting capital of the following companies: Olimpia Promoção e Serviços S.A. (50% total and voting capital and 50% on 12/31/2016); Conectcar Soluções de Mobilidade Eletronica S.A.(50% capital total e votante; 50% on 12/31/2016) and includes income not arising from profit subsidiaries.

(g) Disclosed only for public companies.

At 06/30/2017, ITAÚ UNIBANCO HOLDING receives / recognizes dividends and interest on capital of the unconsolidated companies being the main IRB - Brasil Resseguros S.A. in the amount of R$ 67 (R$ 104 at 12/31/2016), BSF Holding S.A in the amount of R$ 188 (R$ 62 at 12/31/2016) and Porto Seguro Itaú Unibanco Participações S.A. in the amount of R$ 173 (R$ 222 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 71

b) Other information

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

	06/30/2017			12/31/2016			06/30/2016
Total Assets (*)		20,329			20,819			20,396
Total Liabilities (*)		10,698			11,272			11,206
Total Income (*)		2,956			14,868			12,387
Total Expenses (*)		(2,002	)		(13,401	)		(11,575	)

(*) Represented by IRB-Brasil Resseguros S.A., in the amount of R$ 13,686 (R$ 14,313 at 12/31/2016) related to assets, R$ 10,515 (R$ 11,083 at 12/31/2016) related to liabilities, R$ 2,447 (R$ 14,142 at 12/31/2016) related to income and of R$ (1,989) (R$ (13,397) at 12/31/2016) related to expenses.

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

Note 14 – Lease commitments as lessee

a) Finance lease

ITAÚ UNIBANCO HOLDING is the lessee in finance lease contracts of data processing equipment, with the option of purchase or extension, without contingent rental payments or imposed restrictions. The net carrying amount of these assets is R$ 7 (R$ 26 at 12/31/2016).

The table below shows the total future minimum payments:

	06/30/2017		12/31/2016
Current		7		26
Up to 1 year		7		26
Non-current		-		-
From 1 to 5 years		-		-
Total future minimum payments		7		26
(-) Future interest		-		-
Present value		7		26

b) Operating leases

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

The expenses related to operating lease agreements recognized under General and Administrative Expenses total R$ 665 from 01/01 to 06/30/2017 (R$ 580 from 01/01 to 06/30/2016).

ITAÚ UNIBANCO HOLDING has no relevant sublease contracts.

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

	06/30/2017		12/31/2016
Current		959		1,336
Up to 1 year		959		1,336
Non-current		3,476		5,402
From 1 to 5 years		3,148		4,689
Over 5 years		328		713
Total future minimum payments		4,435		6,738

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 72

Note 15 - Fixed assets

				Real estate in use (2)						Other fixed assets (2)
																						Other
	Fixed assets																					(communication,
	under															Furniture and						security and
Fixed Assets (1)	construction			Land			Buildings			Improvements			Installations			equipment			EDP systems (3)			transportation)			Total
Annual depreciation rates								4	%		10	%		10 to 20%			10 to 20%			20 to 50%			10 to 20%
Cost
Balance at 12/31/2016		387			1,047			3,099			1,857			1,901			1,205			8,543			1,075			19,114
Acquisitions		112			-			-			45			9			43			122			45			376
Disposal		-			(1	)		(8	)		(18	)		(1	)		(6	)		(187	)		(12	)		(233	)
Exchange variation		-			-			6			4			27			(18	)		-			2			21
Transfers		(294	)		-			195			70			-			-			29			-			-
Other		6			(5	)		(13	)		8			(6	)		(39	)		(10	)		(1	)		(60	)
Balance at 06/30/2017		211			1,041			3,279			1,966			1,930			1,185			8,497			1,109			19,218
Depreciation
Balance at 12/31/2016		-			-			(1,840	)		(1,114	)		(986	)		(674	)		(5,804	)		(654	)		(11,072	)
Accumulated depreciation		-			-			(40	)		(107	)		(77	)		(53	)		(454	)		(53	)		(784	)
Disposal		-			-			8			14			-			3			174			11			210
Exchange variation		-			-			(1	)		(4	)		(16	)		34			(16	)		(2	)		(5	)
Other		-			-			10			(5	)		2			12			35			3			57
Balance at 06/30/2017		-			-			(1,863	)		(1,216	)		(1,077	)		(678	)		(6,065	)		(695	)		(11,594	)
Impairment
Balance at 12/31/2016		-			-			-			-			-			-			-			-			-
Additions/ assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 06/30/2017		-			-			-			-			-			-			-			-			-
Book value
Balance at 06/30/2017		211			1,041			1,416			750			853			507			2,432			414			7,624

(1) The contractual commitments for purchase of the fixed assets totaled R$ 247, achievable by 2017 (Note 36 - Off balance sheet).

(2) Includes the amount of R$ 4 related to attached real estate.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 73

				Real estate in use (2)						Other fixed assets (2)
																						Other
	Fixed assets																					(communication,
	under															Furniture and						security and
Fixed assets (1)	construction			Land			Buildings			Improvements			Installations			equipment			EDP systems (3)			transportation)			Total
Annual depreciation rates								4	%		10	%		10 to 20%			10 to 20%			20 to 50%			10 to 20%
Cost
Balance at 12/31/2015		792			1,008			3,026			1,673			1,801			975			8,217			858			18,350
Acquisitions		341			57			70			137			47			309			246			223			1,430
Disposal		-			(4	)		(13	)		(56	)		(15	)		(8	)		(449	)		(6	)		(551	)
Exchange variation		(2	)		(15	)		(11	)		(22	)		(3	)		(67	)		151			3			34
Transfers		(738	)		-			27			125			-			1			515			4			(66	)
Other		(6	)		1			-			-			71			(5	)		(137	)		(7	)		(83	)
Balance at 12/31/2016		387			1,047			3,099			1,857			1,901			1,205			8,543			1,075			19,114
Depreciation
Balance at 12/31/2015		-			-			(1,764	)		(930	)		(841	)		(579	)		(5,138	)		(557	)		(9,809	)
Accumulated depreciation		-			-			(80	)		(245	)		(142	)		(102	)		(1,038	)		(95	)		(1,702	)
Disposal		-			-			11			53			6			5			377			4			456
Exchange variation		-			-			(8	)		8			9			(1	)		(101	)		(8	)		(101	)
Other		-			-			1			-			(18	)		3			96			2			84
Balance at 12/31/2016		-			-			(1,840	)		(1,114	)		(986	)		(674	)		(5,804	)		(654	)		(11,072	)
Impairment
Balance at 12/31/2015		-			-			-			-			-			-			-			-			-
Additions/ assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 12/31/2016		-			-			-			-			-			-			-			-			-
Book value
Balance at 12/31/2016		387			1,047			1,259			743			915			531			2,739			421			8,042

(1) The contractual commitments for purchase of the fixed assets totaled R$ 48 achievable by 2017 (Note 36 - Off balance sheet).

(2) Includes the amount of R$ 4 related to attached real estate.

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

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 74

Note 16 - Intangible assets

				Other intangible assets
				Association for the
	Acquisition of			promotion and offer
	rights to credit			of financial products			Acquisition of			Development of			Other intangible
Intangible assets (1)	payroll			and services			software			software			assets			Total
Amortization rates p.a.		20	%		8	%		20	%		20	%		10 to 20%
Cost
Balance at 12/31/2016		1,046			1,748			3,840			3,525			1,078			11,237
Acquisitions		148			-			342			65			-			555
Terminated agreements/ write off		(177	)		(8	)		-			-			-			(185	)
Exchange variation		-			3			(4	)		-			178			177
Other		(13	)		2			(6	)		-			(152	)		(169	)
Balance at 06/30/2017		1,004			1,745			4,172			3,590			1,104			11,615
Amortization (2)
Balance at 12/31/2016		(555	)		(376	)		(1,701	)		(532	)		(284	)		(3,448	)
Amortization expense		(112	)		(152	)		(222	)		(193	)		(128	)		(807	)
Terminated agreements/ write off		158			9			-			-			-			167
Exchange variation		-			106			(6	)		-			(43	)		57
Other		-			(12	)		(4	)		-			123			107
Balance at 06/30/2017		(509	)		(425	)		(1,933	)		(725	)		(332	)		(3,924	)
Impairment (3)
Balance at 12/31/2016		(19	)		-			(54	)		(335	)		-			(408	)
Additions / assumptions		-			-			-			(2	)		-			(2	)
Write off		19			-			1			-			-			20
Balance at 06/30/2017		-			-			(53	)		(337	)		-			(390	)
Book value
Balance at 06/30/2017		495			1,320			2,186			2,528			772			7,301

(1) The contractual commitments for the purchase of new intangible assets totaled R$ 124 achievable by 2017 (Note 36 - Off balance sheet).

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

(3) Note 2.4i.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 75

				Other intangible assets
				Association for the
	Acquisition of			promotion and offer
	rights to credit			of financial products			Acquisition of			Development of			Other intangible
Intangible assets (1)	payroll			and services			software			software			assets			Total
Amortization rates p.a.		20	%		8	%		20	%		20	%		10 to 20%
Cost
Balance at 12/31/2015		1,005			1,409			2,362			3,311			960			9,047
Acquisitions		342			719			1,293			215			277			2,846
Terminated agreements / write off		(308	)		(73	)		(3	)		(1	)		-			(385	)
Exchange variation		-			(12	)		120			-			(130	)		(22	)
Other		7			(295	)		68			-			(29	)		(249	)
Balance at 12/31/2016		1,046			1,748			3,840			3,525			1,078			11,237
Amortization (2)
Balance at 12/31/2015		(600	)		(330	)		(1,190	)		(252	)		(342	)		(2,714	)
Amortization expense		(261	)		(263	)		(429	)		(280	)		(298	)		(1,531	)
Terminated agreements / write off		306			67			1			-			-			374
Exchange variation		-			84			(107	)		-			110			87
Other		-			66			24			-			246			336
Balance at 12/31/2016		(555	)		(376	)		(1,701	)		(532	)		(284	)		(3,448	)
Impairment (3)
Balance at 12/31/2015		(18	)		(2	)		-			(18	)		-			(38	)
Additions / assumptions		(1	)		-			(57	)		(317	)		-			(375	)
Reversals		-			2			3			-			-			5
Balance at 12/31/2016		(19	)		-			(54	)		(335	)		-			(408	)
Book value
Balance at 12/31/2016		472			1,372			2,085			2,658			794			7,381

(1) The contractual commitments for the purchase of new intangible assets totaled R$ 262 achievable by 2017 (Note 36 - Off balance sheet).

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

(3) Note 2.4i.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 76

Note 17 - Deposits

The table below shows the breakdown of deposits:

	06/30/2017						12/31/2016
	Current		Non-current		Total		Current		Non-current		Total
Interest-bearing deposits		186,737		101,599		288,336		187,882		80,399		268,281
Time deposits		74,767		101,366		176,133		75,913		80,361		156,274
Interbank deposits		2,453		233		2,686		3,719		38		3,757
Savings deposits		109,517		-		109,517		108,250		-		108,250
Non-interest bearing deposits		63,991		-		63,991		61,133		-		61,133
Demand deposits		63,989		-		63,989		61,133		-		61,133
Others Deposits		2		-		2		-		-		-
Total		250,728		101,599		352,327		249,015		80,399		329,414

Note 18 – Financial liabilities held for trading

Financial liabilities held for trading are presented in the following table:

	06/30/2017		12/31/2016
Structured notes
Shares		45		49
Debt securities		412		470
Total		457		519

The effect of the changes in credit risk of these instruments is not significant at 06/30/2017 and 12/31/2016.

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

The fair value of financial liabilities held for trading by maturity is as follows:

	06/30/2017		12/31/2016
	Cost / Fair value		Cost / Fair value
Current - up to one year		74		134
Non-current		383		385
From one to five years		282		295
From five to ten years		61		52
After ten years		40		38
Total		457		519

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 77

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

a) Securities sold under repurchase agreements and interbank market debt

The table below shows the breakdown of funds:

	06/30/2017						12/31/2016
			Non-						Non-
	Current		current		Total		Current		current		Total
Securities sold under repurchase agreements		233,231		88,691		321,922		234,569		114,595		349,164
Transactions backed by own financial assets (*)		66,366		88,691		155,057		101,400		114,595		215,995
Transactions backed by third party financial assets		166,865		-		166,865		133,169		-		133,169
Interbank market debt		73,115		63,757		136,872		75,352		60,131		135,483
Real estate credit bills		13,043		5,828		18,871		12,830		6,349		19,179
Agribusiness credit bills		9,048		7,092		16,140		9,158		6,284		15,442
Financial credit bills		9,558		17,599		27,157		5,976		13,590		19,566
Import and export financing		32,498		9,563		42,061		38,123		7,510		45,633
On-lending - domestic		8,959		18,234		27,193		9,205		20,623		29,828
Liabilities from transactions related to credit assignments (Note 12d)		9		5,441		5,450		60		5,775		5,835

(*) It includes R$ 89,814 (R$ 132,149 at 12/31/2016) related to Debentures of own issue.

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

	Brazil	Foreign
Securities sold under repurchase agreements(*)	40% of CDI  to 17.36%	1.3% to 6.2%
Mortgage notes	-	2.5% to 8%
Real estate credit bills	83% to 100% of CDI	-
Financial credit bills	IGPM to 113%	-
Agribusiness credit bills	83% to 98% of CDI	-
Import and export financing	1.4% to 6.0%	1.1% to 11%
On-lending - domestic	2.5% to 14.5%	-
Liabilities from transactions related to credit assignments	6.78% to 13.17%	-

(*) Note 2.4d presents the operations comprising Deposits received under securities repurchased agreements.Final repurchase dates are set until December 2032.

b) Institutional market debt

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

	06/30/2017						12/31/2016
			Non-						Non-
	Current		current		Total		Current		current		Total
Subordinated debt (1)		11,849		40,256		52,105		11,056		46,364		57,420
Foreign borrowing through securities		15,309		25,874		41,183		5,947		27,636		33,583
Structured Operations Certificates (2)		616		3,602		4,218		2,050		3,186		5,236
Total		27,774		69,732		97,506		19,053		77,186		96,239

(1) At 06/30/2017, the amount of R$ 46,434 (R$ 51,875 at 12/31/2016) is included in the Reference Equity, under the proportion defined by CMN Resolution No. 3,444, of February 28, 2007, as amended by CMN Resolution No. 3,532, of January 31, 2008.

(2) As at June 30, 2017, the market value of the funding from Structured Operations Certificates issued is R$ 4,418.

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

	Brazil	Foreign
Subordinated debt	CDI+ 1.3% to IGPM + 7.6%	2.8% to 10.8%
Foreign borrowing through securities	0.89% to 12.73%	0.97% to 23.94%
Structured Operations Certificates	IPA + 3.30% to 16.54%	-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 78

Note 20 - Other assets and liabilities

a) Other assets

	06/30/2017						12/31/2016
	Current		Non- current		Total		Current		Non- current		Total
Financial (1)		39,656		13,010		52,666		41,648		12,269		53,917
Receivables from credit card issuers		24,299		-		24,299		26,124		-		26,124
Insurance and reinsurance operations		1,211		10		1,221		1,306		14		1,320
Deposits in guarantee for contingent liabilities (Note 32)		1,444		12,059		13,503		2,118		11,144		13,262
Deposits in guarantee for foreign borrowing program		563		-		563		893		-		893
Negotiation and intermediation of securities		6,730		6		6,736		6,770		-		6,770
Receivables from reimbursement of contingent liabilities (Note 32c)		237		915		1,152		258		870		1,128
Receivables from services provided		2,677		1		2,678		2,510		-		2,510
Amounts receivable from FCVS – Salary Variations Compensation Fund (2)		-		5		5		7		234		241
Operations without credit granting characteristics		2,495		14		2,509		1,662		7		1,669
Non-financial		7,899		1,878		9,777		7,804		2,223		10,027
Prepaid expenses		2,235		519		2,754		2,101		687		2,788
Retirement plan assets (Notes 29c and d)		-		1,090		1,090		-		1,113		1,113
Sundry domestic		1,690		37		1,727		1,634		32		1,666
Premiums from loan operations		416		152		568		531		319		850
Sundry foreign		2,303		74		2,377		1,776		65		1,841
Other		1,255		6		1,261		1,762		7		1,769

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

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

b) Other liabilities

	06/30/2017						12/31/2016
	Current		Non- current		Total		Current		Non- current		Total
Financial		63,731		-		63,731		71,798		34		71,832
Credit card operations		54,476		-		54,476		58,920		-		58,920
Foreign exchange portfolio		600		-		600		620		-		620
Negotiation and intermediation of securities		6,668		-		6,668		10,538		-		10,538
Finance leases (Note 14a)		7		-		7		26		-		26
Funds from consortia participants		111		-		111		84		-		84
Other		1,869		-		1,869		1,610		34		1,644
Non-financial		30,250		1,773		32,023		25,968		1,142		27,110
Collection and payment of taxes and contributions		3,991		-		3,991		297		-		297
Sundry creditors - domestic		2,530		156		2,686		2,488		117		2,605
Funds in transit		11,362		723		12,085		10,214		190		10,404
Provision for sundry payments		2,329		248		2,577		2,007		203		2,210
Social and statutory		4,354		23		4,377		5,541		35		5,576
Related to insurance operations		167		-		167		224		-		224
Liabilities for official agreements and rendering of payment services		817		-		817		864		-		864
Provision for retirement plan benefits (Note 29c and e)		203		577		780		201		548		749
Personnel provision		1,674		46		1,720		1,352		49		1,401
Provision for health insurance		752		-		752		742		-		742
Deferred income		2,011		-		2,011		1,975		-		1,975
Other		60		-		60		63		-		63

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 79

Note 21 – Stockholders’ equity

a) Capital

The Extraordinary Stockholders’ Meeting held on September 14, 2016 approved the increase of subscribed and paid-up capital by R$ 12,000, by capitalizing of the amounts recorded in Revenue Reserve – Statutory Reserve, with a 10% bonus shares. Bonus shares started being traded on October 21,2016 and the process was approved by the Central Bank on September 23,2016. Accordingly, capital stock was increased by 598,391,594 shares.

The Extraordinary Stockholders` Meeting of April 27, 2016 approved the cancellation of 100,000,000 preferred shares of own issue held in treasury, without change to the capital stock by capitalizing amounts recorded in Revenue Reserves – Statutory Reserve. This process was approved by the Central Bank of Brazil on June 7, 2016.

Capital comprises 6,582,307,543 book-entry shares with no par value, of which 3,351,744,217 are common and 3,230,563,326 are preferred shares without voting rights, but with tag-along rights, in the event of the public offer of common shares, at a price equal to 80% of the amount paid per share with voting rights in the controlling stake, as well as a dividend at least equal to that of the common shares. Capital stock amounts to R$ 97,148 (97,148 at 12/31/2016), of which R$ 66,258 (65,534 at 12/31/2016) refers to stockholders domiciled in the country and R$ 30,890 (R$ 31,614 at 12/31/2016) refers to stockholders domiciled abroad.

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

	06/30/2017
	Number
	Common		Preferred			Total			Amount
Residents in Brazil at 12/31/2016		3,335,350,311		1,104,963,731			4,440,314,042
Residents abroad at 12/31/2016		16,393,906		2,125,599,595			2,141,993,501
Shares of capital stock at 12/31/2016		3,351,744,217		3,230,563,326			6,582,307,543
Shares of capital stock at 06/30/2017		3,351,744,217		3,230,563,326			6,582,307,543
Residents in Brazil at 06/30/2017		3,332,400,080		1,156,937,300			4,489,337,380
Residents abroad at 06/30/2017		19,344,137		2,073,626,026			2,092,970,163
Treasury shares at 12/31/2016 (1)		3,074		69,604,462			69,607,536			(1,882	)
Purchase of shares		-		35,382,900			35,382,900			(1,282	)
Exercised options – granting of stock options		-		(13,207,357	)		(13,207,357	)		174
Disposals – stock option plan		-		(8,118,685	)		(8,118,685	)		419
Treasury shares at 06/30/2017 (1)		3,074		83,661,320			83,664,394			(2,571	)
Outstanding shares at 06/30/2017		3,351,741,143		3,146,902,006			6,498,643,149
Outstanding shares at 12/31/2016		3,351,741,143		3,160,958,864			6,512,700,007
	12/31/2016
	Number
	Common		Preferred			Total			Amount
Residents in Brazil at 12/31/2015		3,033,657,386		1,130,776,196			4,164,433,582
Residents abroad at 12/31/2015		13,382,812		1,906,099,555			1,919,482,367
Shares of capital stock at 12/31/2015		3,047,040,198		3,036,875,751			6,083,915,949
(-) Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		(100,000,000	)		(100,000,000	)
Bonus Shares - ESM of 09/14/2016 - Carried out at 09/23/2016		304,704,019		293,687,575			598,391,594
Shares of capital stock at 12/31/2016		3,351,744,217		3,230,563,326			6,582,307,543
Residents in Brazil at 12/31/2016		3,335,350,311		1,104,963,731			4,440,314,042
Residents abroad at 12/31/2016		16,393,906		2,125,599,595			2,141,993,501
Treasury shares at 12/31/2015 (1)		2,795		162,562,650			162,565,445			(4,353	)
Purchase of shares		-		30,640,000			30,640,000			(947	)
Exercised options - granting of stock options		-		(19,931,626	)		(19,931,626	)		315
Disposals – stock option plan		-		(8,293,957	)		(8,293,957	)		433
(-) Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		(100,000,000	)		(100,000,000	)		2,670
Bonus Shares - ESM of 09/14/2016 - Carried out at 09/23/2016		279		4,627,395			4,627,674			-
Treasury shares at 12/31/2016 (1)		3,074		69,604,462			69,607,536			(1,882	)
Outstanding shares at 12/31/2016		3,351,741,143		3,160,958,864			6,512,700,007
Outstanding shares at 12/31/2015 (2)		3,351,741,143		3,161,744,411			6,513,485,554

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

(2) For better comparability, outstanding shares were adjusted to reflect the bonuses of 09/23/2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 80

We detail below of the cost of shares purchased in the period, as well the average cost of treasury shares and their market price (in Brazilian Reais per share):

	01/01 to 06/30/2017
Cost / market value	Common		Preferred
Minimum		-		33.48
Weighted average		-		36.23
Maximum		-		38.56
Treasury shares
Average cost		6.59		30.73
Market value at 06/30/2017		32.54		36.75
	01/01 to 12/31/2016
Cost / market value	Common		Preferred
Minimum		-		23.79
Weighted average		-		30.13
Maximum		-		36.05
Treasury shares
Average cost		6.59		27.04
Market value at 12/31/2016		30.00		33.85

b) Dividends

Stockholders are entitled to an annual mandatory dividend of not less than 25% of adjusted profit, pursuant to the provisions of the Brazilian Corporate Law. Both common and preferred shares participate equally, after common shares have received dividends equal to the annual minimum priority dividend of R$ 0.022 per share non-cumulative to be paid to preferred shares.

The calculation of the monthly advance of the mandatory minimum dividend is based on the share position on the last day of the prior month, with payment being made on the first business day of the subsequent month, amounting to R$ 0.015 per share.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 81

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

Calculation of dividends and interest on capital

	06/30/2017			06/30/2016
Statutory net income		10,743			8,938
Adjustments:
(-)  Legal reserve		(537	)		(447	)
Dividend calculation basis		10,206			8,491
Mandatory dividend - 25%		2,551			2,123
Dividends and interest on capital – paid / provisioned for		4,938			2,544

Payments / provision for interest on capital and dividends

	06/30/2017
	Gross		WHT			Net
Paid / prepaid		489		-			489
Dividends - 5 monthly installments of R$ 0.015 per share paid from February to June 2017		489		-			489
Declared until 06/30/2017 (recorded in other liabilities)		2,410		(347	)		2,063
Dividends - 1 monthly installment of R$ 0.015 per share paid on 07/03/2017		98		-			98
Interest on capital - R$ 0.3558 per share, to be paid on 08/25/2017		2,312		(347	)		1,965
Recorded in Revenue Reserves in Stockholders' Equity		2,568		(182	)		2,386
Interest on capital - R$ 0.0432 per share, to be paid on 08/25/2017		281		(42	)		239
Interest on capital - R$ 0.1438 per share, to be declared		934		(140	)		794
Dividends - R$ 0.2083 per share, to be declared		1,353		-			1,353
Total from 01/01 to 06/30/2017 - R$ 0.7596 net per share		5,467		(529	)		4,938
	06/30/2016
	Gross		WHT			Net
Paid / prepaid		444		-			444
Dividends - 5 monthly installments of R$ 0.015 per share paid from February to June 2016		444		-			444
Declared until 06/30/2016 (recorded in other liabilities)		1,959		(281	)		1,679
Dividends - 1 monthly installment of R$ 0.015 per share paid on 07/01/2016		89		-			89
Interest on capital - R$ 0.3154 per share		1,870		(281	)		1,590
Recorded in Revenue Reserves in Stockholders' Equity		496		(74	)		422
Interest on capital - R$ 0.0836 per share		496		(74	)		422
Total from 01/01 to 06/30/2016 - R$ 0.4291 net per share		2,899		(355	)		2,544

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 82

c) Additional paid-in capital

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

d) Appropriated reserves

	06/30/2017			12/31/2016
Capital reserves (1)		285			285
Premium on subscription of shares		284			284
Reserves from tax incentives, restatement of equity securities and other		1			1
Revenue reserves		5,606			3,158
Legal (2)		8,375			7,838
Statutory		5,966			1,132
Dividends equalization (3)		2,755			337
Working capital increase (4)		967			-
Increase in capital of investees (5)		2,244			795
Corporate reorganizations (Note 2.4 a III)		(11,306	)		(10,862	)
Unrealized profits (6)		2,571			5,050
Total reserves at parent company		5,891			3,443

(1) Refers to amounts received by Itaú Unibanco Holding that were not included in the statement of income, since they do not refer to compensation for the provision of goods or services.

(2) Legal reserve - may be used to increase capital or to absorb losses, but it cannot be distributed as dividends.

(3) Reserve for dividends equalization - its purpose is to reserve funds for the payment or advances on dividends, including interest on capital, to maintain the flow of the stockholders' compensation.

(4) Reserve for working capital - its purpose is to guarantee funds for operations.

(5) Reserve for increase in capital of investees - its purpose is to guarantee the preemptive right in the capital increases of investees.

(6) Refers to Interest on Capital provided for up to June 30 for each period, in compliance with BACEN Circular Letter nº 3,516, of july 21, 2011.

e) Unappropriated reserves

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

f) Non-controlling interests

	Stockholders’ equity				Net Income
	06/30/2017		12/31/2016		01/01 to 06/30/2017			01/01 to 06/30/2016
Itaú CorpBanca (Note 3)		10,542		10,117		214			236
Itaú Corpbanca Colombia (Note 3)		1,190		1,231		(9	)		83
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		444		519		52			56
Banco Itaú Consignado S.A.		-		-		-			(109	)
Luizacred S.A. Soc. Cred. Financiamento Investimento		294		275		33			26
Others		78		90		10			18
Total		12,548		12,232		300			310

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 83

Note 22 – Share-based payment

ITAÚ UNIBANCO HOLDING and its subsidiaries have share-based payment programs aimed at involving its management members and employees in the medium and long term corporate development process.

These payments are only made in years where there are sufficient profits to enable the distribution of mandatory dividends, in order to limit the maximum dilutive effect to which stockholders are subject, and at a quantity that does not exceed the limit of 0.5% of the total shares held by the controlling and minority stockholders at the balance sheet date.

These programs are settled through the delivery of ITUB4 treasury shares to stockholders.

From 01/01 to 06/30/2017, the accounting effect of the share-based payment in income was R$ (254) (R$ (313) from 01/01 to 06/30/2016.

I – Stock Option Plan (Simple Options)

ITAÚ UNIBANCO HOLDING has a Stock Option Plan (“Simple Options”) aimed at involving management members and employees in the medium and long term corporate development program of ITAÚ UNIBANCO HOLDING and its subsidiaries, offering them the opportunity benefit from the appreciation that their work and dedication bring to the shares.

In addition to the awards provided under the Plan, ITAÚ UNIBANCO HOLDING also maintains control over the rights and obligations in connection with the options granted under the plans approved at the Extraordinary Stockholders’ Meetings held on April 24, 2009 and April 19, 2013 related to the Unibanco – União de Bancos Brasileiros S.A. and to Unibanco Holdings S.A., and to Redecard S.A. (“Rede”) stock option plans, respectively. Accordingly, the exchange of shares for ITUB4 did not have a relevant financial impact.

Simple options have the following characteristics:

a) Exercise price: calculated based on the average prices of shares in the three months of the year prior to the grant date. The prices determined will be inflation-adjusted to the last business day of the month prior to the option exercise date based on IGP-M or, in its absence, on an index to be determined internally, and should be paid within the period in force for the settlement of operations on B3.

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

c) Fair value and economic assumptions for cost recognition: the fair value of Simple Options is calculated on the grant date based on the Binominal model. Economic assumptions used are as follows:

(i) Exercise price: exercise price previously agreed upon the option issue, adjusted by the IGP-M variation;

(ii) Price of the underlying asset (ITUB4 shares): closing price on B3 on the calculation base date.

(iii) Expected dividends: the average annual return rate for the last three years of dividends paid plus interest on capital of the ITUB4 share;

(iv) Risk-free interest rate: IGP-M coupon rate at the expiration date of the Simple Option;

(v) Expected volatility: calculated based on the standard deviation from the history of the last 84 monthly returns of the ITUB4 share closing prices, disclosed by B3, adjusted by the IGP-M variation.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 84

Summary of changes in the plan

	Simple options
	Quantity			Weighted average exercise price		Weighted average market value
Opening balance 12/31/2016		38,033,506			36.94
Options exercisable at the end of the period		23,440,177			40.98
Options outstanding but not exercisable		14,593,329			30.45
Options:
Granted		-
Canceled / Forfeited (*)		(19,667	)		38.90
Exercised		(5,684,306	)		30.58		40.03
Balance at 06/30/2017		32,329,533			37.56
Options exercisable at the end of the period		32,329,533			37.56
Options outstanding but not exercisable
Range of exercise prices
Granting 2010-2011					21,71 - 41,09
Granting 2012					30.01
Weighted average of the remaining contractual life (in years)		1.48

(*) Refers to non-exercise based on the beneficiary’s decision.

	Simple options
	Quantity			Weighted average exercise price		Weighted average market value
Opening balance 12/31/2015		50,543,148			31.89
Options exercisable at the end of the period		35,647,958			33.40
Options outstanding but not exercisable		14,895,190			28.29
Options:
Granted		-			-
Canceled / Forfeited (*)		(63,680	)		31.10
Exercised		(732,273	)		23.79		29.24
Opening balance 06/30/2016		49,747,195			34.07
Options exercisable at the end of the period		35,149,321			35.66
Options outstanding but not exercisable		14,597,874			30.25
Range of exercise prices
Granting 2009-2010					25,49 - 41,41
Granting 2011-2012					21,71 - 40,45
Weighted average of the remaining contractual life (in years)		2.13

(*) Refers to non-exercise based on the beneficiary’s decision.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 85

ll – Partner Plan

The employees and management members of ITAÚ UNIBANCO HOLDING and its subsidiaries may be selected to participate in the program investing a percentage of their bonus to acquire ITUB4 shares and share-based instruments. Accordingly, the ownership of these shares should be held by the beneficiaries for a period from three to five years, counted from the initial investment, and are thus subject to market price variations. After complying with the suspensive conditions set forth in the program, beneficiaries will be entitled to receive ITUB4 as consideration, in accordance with the numbers of shares provided for in the program regulations.

The acquisition prices of own shares and Share-Based Instruments are established every six months and is equivalent to the average of the ITUB4 quotation in the 30 days prior to the determination of the acquisition price.

The fair value of the ITUB4 as consideration is the market price at the grant date, less expected dividends.

The weighted average of the fair value of the ITUB4 shares as consideration was estimated at R$ 32.33 per share at 06/30/2017 (R$ 19.45 per share at 06/30/2016).

Law No. 12,973/14, which adjusted the tax legislation to the international accounting standards and terminated the Transitional Tax Regime (RTT), set up a new legal framework for payments made in shares. We made changes to the Partner Plan, and adjusted its tax effects, with conform with this new legislation.

Changes in the Partner Program

	Quantity
Balance at 12/31/2016		35,462,379
New granted		7,041,957
Cancelled		(439,424	)
Exercised		(7,523,051	)
Balance at 06/30/2017		34,541,861
Weighted average of remaining contractual life (years)		2.86
	Quantity
Balance at 12/31/2015		33,666,355
New granted		12,389,821
Cancelled		(228,456	)
Exercised		(8,881,995	)
Balance at 06/30/2016		36,945,725
Weighted average of remaining contractual life (years)		3.04

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 86

III- Variable compensation

The policy established in compliance with CMN Resolution No. 3,921/10 sets forth that fifty percent (50%) of the management’s variable compensation should be paid in cash and fifty percent (50%) should be paid in shares for a period of three years. Shares are delivered on a deferred basis, of which one-third (1/3) per year, will be contingent upon the executive’s remaining with the institution. The deferred unpaid portions may be reversed proportionally to the significant reduction of the recurring income realized or the negative income for the period.

The fair value of the ITUB4 share is the market price at its grant date.

The weighted average of the fair value of ITUB4 shares was estimated at R$ 38.25 per share at 06/30/2017 (R$ 21.96 per share at 06/30/2016).

Change in variable compensation in shares	2017
	Quantity
Opening balance 12/31/2016		24,539,406
New		8,501,063
Delivered		(12,048,631	)
Cancelled		(139,157	)
Balance at 06/30/2017		20,852,681

Change in variable compensation in shares	2016
	Quantity
Opening balance 12/31/2015		22,325,573
New		13,422,462
Delivered		(11,135,737	)
Cancelled		(66,180	)
Balance at 06/30/2016		24,546,118

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 87

Note 23 - Interest and similar income and expense and net gain (loss) on investment securities and derivatives

a) Interest and similar income

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Central Bank compulsory deposits		1,950		1,634		3,825		3,217
Interbank deposits		159		30		357		345
Securities purchased under agreements to resell		6,777		8,547		14,677		16,731
Financial assets held for trading		4,735		5,476		12,187		11,289
Available-for-sale financial assets		2,396		2,715		4,815		5,728
Held-to-maturity financial assets		622		1,011		1,458		2,049
Loan and lease operations		19,681		19,536		39,037		38,083
Other financial assets		196		258		430		472
Total		36,516		39,207		76,786		77,914

b) Interest and similar expense

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Deposits		(3,590	)		(3,181	)		(6,710	)		(6,886	)
Securities sold under repurchase agreements		(7,823	)		(11,413	)		(19,578	)		(23,314	)
Interbank market debt		(3,283	)		(691	)		(5,730	)		(1,254	)
Institutional market debt		(1,849	)		(3,044	)		(3,736	)		(4,881	)
Financial expense from technical reserves for insurance and private pension		(2,910	)		(4,345	)		(7,845	)		(8,998	)
Other		(15	)		(33	)		(48	)		(60	)
Total		(19,470	)		(22,707	)		(43,647	)		(45,393	)

c) Net gain (loss) on investment securities and derivatives

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Financial assets held for trading		(567	)		(246	)		495			2,128
Derivatives (*)		51			3,489			1,851			4,733
Financial assets designated at fair value through profit or loss		49			21			76			62
Available-for-sale financial assets		28			(79	)		240			(635	)
Held-to-Maturity Financial Assets (Permanent Loss)		-			-			(300	)		-
Financial liabilities held for trading		32			(12	)		1			(103	)
Total		(407	)		3,173			2,363			6,185

(*) Includes the ineffective derivatives portion related to hedge accounting.

During the period ended 06/30/2017, ITAÚ UNIBANCO HOLDING recognized impairment expenses of R$ 579, with on Available-for-sale securities in the amount R$ 279 and Held-to-Maturity Financial Assets in the amount of R$ 300. Total loss, net of reversals, amounted to R$ 366 (R$ 224 of loss at 06/30/2016) and was recorded in the statement of income in line item Securities and derivative financial instruments.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 88

Note 24 - Banking service fees

	04/01 a		04/01 a		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Current account services		2,535		2,397		5,025		4,635
Asset management fees		987		871		1,966		1,638
Collection commissions		337		327		671		636
Fees from credit card services		3,463		3,309		6,847		6,535
Fees for guarantees issued and credit lines		443		443		887		845
Brokerage commission		125		61		224		108
Other		549		639		1,091		1,090
Total		8,439		8,047		16,711		15,487

Note 25 - Other income

	04/01 a		04/01 a		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Gains on sale of assets held for sale, fixed assets and investments in associates and joint ventures		46		71		76		95
Recovery of expenses		52		82		102		146
Reversal of provisions		7		11		88		58
Program for Cash or Installment Payment of Federal Taxes		-		-		-		11
Other		203		210		454		316
Total		308		374		720		626

Note 26 - General and administrative expenses

	04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Personnel expenses		(5,720	)		(5,404	)		(11,225	)		(10,315	)
Compensation		(2,297	)		(2,157	)		(4,568	)		(4,059	)
Payroll taxes		(697	)		(646	)		(1,398	)		(1,256	)
Welfare benefits		(845	)		(804	)		(1,654	)		(1,463	)
Retirement plans and post-employment benefits (Note 29)		(23	)		5			(48	)		17
Defined benefit		(21	)		(23	)		(44	)		(39	)
Defined contribution		(2	)		28			(4	)		56
Stock option plan (Note 22d)		(38	)		(69	)		(100	)		(176	)
Training		(59	)		(38	)		(100	)		(74	)
Employee profit sharing		(889	)		(843	)		(1,732	)		(1,654	)
Dismissals		(115	)		(137	)		(236	)		(236	)
Provision for labor claims (Note 32)		(757	)		(715	)		(1,389	)		(1,414	)
Administrative expenses		(4,035	)		(4,085	)		(7,847	)		(7,618	)
Data processing and telecommunications		(1,031	)		(983	)		(2,012	)		(1,916	)
Third party services		(1,045	)		(1,150	)		(2,036	)		(2,081	)
Installations		(309	)		(295	)		(577	)		(542	)
Advertising, promotions and publications		(291	)		(248	)		(514	)		(456	)
Rent		(372	)		(360	)		(745	)		(701	)
Transportation		(82	)		(99	)		(167	)		(198	)
Materials		(79	)		(77	)		(156	)		(140	)
Financial services		(194	)		(203	)		(397	)		(376	)
Security		(179	)		(181	)		(364	)		(358	)
Utilities		(100	)		(118	)		(207	)		(238	)
Travel		(54	)		(49	)		(97	)		(89	)
Other		(299	)		(322	)		(575	)		(523	)
Depreciation		(394	)		(462	)		(784	)		(889	)
Amortization		(348	)		(319	)		(704	)		(562	)
Insurance acquisition expenses		(74	)		(203	)		(178	)		(413	)
Other expenses		(2,343	)		(2,200	)		(4,675	)		(4,263	)
Expenses related to credit cards		(961	)		(775	)		(1,907	)		(1,580	)
Losses with third party frauds		(110	)		(122	)		(285	)		(229	)
Loss on sale of assets held for sale, fixed assets and investments in associates and joint ventures		(205	)		(136	)		(288	)		(165	)
Provision for civil lawsuits (Note 32)		(348	)		(389	)		(671	)		(734	)
Provision for tax and social security lawsuits		(231	)		(263	)		(434	)		(478	)
Refund of interbank costs		(70	)		(70	)		(144	)		(134	)
Other		(418	)		(445	)		(946	)		(943	)
Total		(12,914	)		(12,673	)		(25,413	)		(24,060	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 89

Note 27 – Income tax and social contribution

ITAÚ UNIBANCO HOLDING and each of its subsidiaries file separate, for each fiscal year, corporate income tax returns and social contribution on net income.

a) Composition of income tax and social contribution expenses

Demonstration of Income tax and social contribution expense calculation:

	04/01 to			04/01 to			01/01 to			01/01 to
Due on operations for the period	06/30/2017			06/30/2016			06/30/2017			06/30/2016
Income before income tax and social contribution		7,779			12,289			17,184			22,964
Charges (income tax and social contribution) at the rates in effect (Note 2.4 k)		(3,501	)		(5,530	)		(7,733	)		(10,334	)
Increase / decrease in income tax and social contribution charges arising from:
Share of profit or (loss) of associates and joint ventures net		(57	)		51			(121	)		107
Foreign exchange variation on investiments abroad		1,132			(2,790	)		399			(4,707	)
Interest on capital		938			324			1,905			1,215
Corporate reorganizations (Note 2.4 a III)		157			157			314			314
Dividends and interest on external debt bonds		151			116			220			177
Other nondeductible expenses net of non taxable income (*)		(665	)		7,031			2,041			11,654
Income tax and social contribution expenses		(1,845	)		(641	)		(2,975	)		(1,574	)
Related to temporary differences
Increase (reversal) for the period		873			(5,330	)		(1,524	)		(9,372	)
Increase (reversal) of prior periods		(15	)		4			(15	)		2
(Expenses)/Income related to deferred taxes		858			(5,326	)		(1,539	)		(9,370	)
Total income tax and social contribution expenses		(987	)		(5,967	)		(4,514	)		(10,944	)

(*) Includes temporary (additions) and exclusions.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 90

b) Deferred taxes

I - The deferred tax asset balance and respective changes are as follows:

			Realization /
	12/31/2016		reversal			Increase			06/30/2017
Reflected in income		47,883		(8,068	)		7,484			47,299
Allowance for loan and lease losses		26,975		(5,992	)		3,667			24,650
Related to income tax and social contribution tax carryforwards		6,928		(152	)		1,450			8,226
Provision for contingent liabilities		5,707		288			(41	)		5,954
Civil lawsuits		1,955		(6	)		19			1,968
Labor claims		2,168		511			(428	)		2,251
Tax and social security		1,582		(217	)		368			1,733
Other		2		-			-			2
Goodwill on purchase of investments		165		(124	)		-			41
Legal liabilities – tax and social security		387		(86	)		92			393
Adjustments of operations carried out on the futures settlement market		485		(13	)		22			494
Adjustment to market value of financial assets held for trading and derivatives		145		(145	)		337			337
Provision related to health insurance operations		300		-			-			300
Other		6,791		(1,844	)		1,957			6,904
Reflected in stockholders’ equity		2,994		(653	)		280			2,621
Corporate reorganizations (Note 2.4 a III)		1,256		(314	)		-			942
Adjustment to market value of available-for-sale securities		642		(339	)		44			347
Cash flow hedge		843		-			228			1,071
Other		253		-			8			261
Total (1)(2)		50,877		(8,721	)		7,764			49,920

(1) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 35,488 and R$ 514.

(2) The accounting records of deferred tax assets on income tax losses and/or social contribution loss carryforwards, as well as those arising from temporary differences, are based on technical feasibility studies which consider the expected generation of future taxable income, considering the history of profitability for each subsidiary individually, and for the consolidated taken as a whole. For the subsidiaries, Itaú Unibanco S.A. and Banco Itaucard S.A., a petition has been sent to Central Bank of Brazil, in compliance with paragraph 7 of article 1 of Resolution No. 4,441/15 and pursuant to Circular 3,776/15.

			Realization /
	12/31/2015		reversal			Increase		12/31/2016
Reflected in income		48,911		(16,508	)		15,480		47,883
Allowance for loan and lease losses		25,572		(6,337	)		7,740		26,975
Related to income tax and social contribution tax carryforwards		6,655		(288	)		561		6,928
Provision for contingent liabilities		5,385		(1,784	)		2,106		5,707
Civil lawsuits		2,149		(701	)		507		1,955
Labor claims		1,812		(1,010	)		1,366		2,168
Tax and social security		1,420		(71	)		233		1,582
Other		4		(2	)		-		2
Goodwill on purchase of investments		511		(346	)		-		165
Legal liabilities – tax and social security		508		(200	)		79		387
Adjustments of operations carried out in futures settlement market		1,253		(797	)		29		485
Adjustment to market value of financial assets held for trading and derivatives		4,951		(4,951	)		145		145
Provision related to health insurance operations		322		(22	)		-		300
Other		3,754		(1,783	)		4,820		6,791
Reflected in stockholders’ equity		4,253		(1,970	)		711		2,994
Corporate reorganizations (Note 2.4 a III)		1,883		(627	)		-		1,256
Adjustment to market value of available-for-sale securities		1,980		(1,338	)		-		642
Cash flow hedge		137		-			706		843
Other		253		(5	)		5		253
Total (*)		53,164		(18,478	)		16,191		50,877

(*) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 37,395 and R$ 643.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 91

II- The provision for deferred tax and contributions and respective changes are as follows:

			Realization /
	12/31/2016		reversal			Increase		06/30/2017
Reflected in income		13,507		(8,675	)		9,630		14,462
Depreciation in excess – finance lease		936		(510	)		419		845
Adjustment of escrow deposits and contingent liabilities		1,193		(52	)		84		1,225
Pension plans		233		-			72		305
Adjustments of operations carried out on the futures settlement market		1,095		-			337		1,432
Adjustment to market value of financial assets held for trading and derivatives		7,293		(7,293	)		7,382		7,382
Taxation of results abroad – capital gains		1,502		-			289		1,791
Other		1,255		(820	)		1,047		1,482
Reflected in stockholders’ equity accounts		618		(207	)		73		484
Adjustment to market value of available-for-sale securities		486		(159	)		-		327
Cash flow hedge		63		-			73		136
Provision for pension plan benefits		35		(25	)		-		10
Other		34		(23	)		-		11
Total (*)		14,125		(8,882	)		9,703		14,946

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 35,488 and R$ 514.

			Realization /
	12/31/2015		reversal			Increase		12/31/2016
Reflected in income		4,277		(2,283	)		11,513		13,507
Depreciation in excess – finance lease		1,487		(551	)		-		936
Adjustment of escrow deposits and contingent liabilities		1,130		(168	)		231		1,193
Pension plans		336		(143	)		40		233
Adjustments of operations carried out on the futures settlement market		51		(100	)		1,144		1,095
Adjustment to market value of financial assets held for trading and derivatives		198		(198	)		7,293		7,293
Taxation of results abroad – capital gains		286		-			1,216		1,502
Other		789		(1,123	)		1,589		1,255
Reflected in stockholders’ equity accounts		1,804		(1,639	)		453		618
Adjustment to market value of available-for-sale securities		53		-			433		486
Cash flow hedge		1,313		(1,250	)		-		63
Provision for pension plan benefits		424		(389	)		-		35
Other		14		-			20		34
Total (*)		6,081		(3,922	)		11,966		14,125

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 37,395 and R$ 643.

III - The estimate of realization and present value of tax credits and from the Provision for Deferred Income Tax and Social Contribution existing at 06/30/2017, are:

	Deferred tax assets
						Tax loss / social																Net
	Temporary					contribution loss										Deferred tax						deferred
	differences		%			carryforwards		%			Total		%			liabilities			%			taxes			%
2017		16,350		39	%		304		4	%		16,654		33	%		(3,199	)		21	%		13,455			38	%
2018		11,624		28	%		1,710		21	%		13,334		27	%		(451	)		3	%		12,883			37	%
2019		4,494		11	%		528		6	%		5,022		10	%		(1,770	)		12	%		3,252			9	%
2020		1,708		4	%		741		9	%		2,449		5	%		(3,154	)		21	%		(705	)		-2	%
2021		992		2	%		1,297		16	%		2,289		5	%		(802	)		5	%		1,487			4	%
After 2021		6,526		16	%		3,646		44	%		10,172		20	%		(5,570	)		38	%		4,602			14	%
Total		41,694		100	%		8,226		100	%		49,920		100	%		(14,946	)		100	%		34,974			100	%
Present value (*)		38,582					6,977					45,559					(13,030	)					32,529

(*) The average funding rate, net of tax effects, was used to determine the present value.

The projections of future taxable income include estimates related to macroeconomic variables, exchange rates, interest rates, volume of financial operations and services fees and others, which can vary in relation to actual data and amounts.

Net income in the financial statements is not directly related to the taxable income, due to differences between the accounting criteria and tax legislation, in addition to corporate aspects. Accordingly, it is recommended that the trends for the realization of deferred tax assets arising from temporary differences, and tax loss carry forwards should not be used as an indication of future net income.

Considering the temporary effects of Law 13,169/15, which increases the Social Contribution tax rate to 20% until December 31, 2018, tax credits were accounted for based on their expected realization. There are no unrecorded deferred tax assets at 06/30/2017 and 12/31/2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 92

Note 28 – Earnings per share

Basic and diluted earnings per share were computed as shown in the table below for the periods indicated. Basic earnings per share are computed by dividing the net income attributable to the stockholder of ITAÚ UNIBANCO HOLDING by the average number of shares for the period, and by excluding the number of shares purchased and held as treasury shares by the company. Diluted earnings per share are computed on a similar way, but with the adjustment made in the denominator when assuming the conversion of all shares that may be diluted.

Net income attributable to owners of the parent company – basic earnings per Share	04/01 to 06/30/2017			04/01 to 06/30/2016			01/01 to 06/30/2017			01/01 to 06/30/2016
Net income		6,369			5,999			12,370			11,710
Minimum non-cumulative dividend on preferred shares in accordance with our bylaws		(69	)		(70	)		(69	)		(70	)
Subtotal		6,300			5,929			12,301			11,640
Retained earnings to be distributed to common equity owners in an amount per share equal to the minimum dividend payable to preferred equity owners		(74	)		(74	)		(74	)		(74	)
Subtotal		6,226			5,855			12,227			11,566
Retained earnings to be distributed to common and preferred equity owners on a pro-rata basis
To common equity owners		3,207			3,009			6,295			5,947
To preferred equity owners		3,019			2,846			5,932			5,619
Total net income available to common equity owners		3,281			3,083			6,369			6,021
Total net income available to preferred equity owners		3,088			2,916			6,001			5,689
Weighted average number of shares outstanding (Note 21a)
Common shares		3,351,741,143			3,351,741,143			3,351,741,143			3,351,741,143
Preferred shares		3,155,404,279			3,170,650,946			3,158,922,612			3,167,060,932
Earnings per share - basic – R$
Common shares		0.99			0.92			1.91			1.80
Preferred shares		0.99			0.92			1.91			1.80
Net income attributable to owners of the parent company – diluted earnings per Share	04/01 to 06/30/2017			04/01 to 06/30/2016			01/01 to 06/30/2017			01/01 to 06/30/2016
Total net income available to preferred equity owners		3,088			2,916			6,001			5,689
Dividend on preferred shares after dilution effects		27			19			35			31
Net income available to preferred equity owners considering preferred shares after the dilution effect		3,115			2,935			6,036			5,720
Total net income available to ordinary equity owners		3,281			3,083			6,369			6,021
Dividend on preferred shares after dilution effects		(27	)		(19	)		(35	)		(31	)
Net income available to ordinary equity owners considering preferred shares after the dilution effect		3,254			3,064			6,334			5,990
Adjusted weighted average of shares (Note 21a)
Common shares		3,351,741,143			3,351,741,143			3,351,741,143			3,351,741,143
Preferred shares		3,209,326,813			3,211,878,406			3,195,332,639			3,201,328,525
Preferred shares		3,155,404,279			3,170,650,946			3,158,922,612			3,167,060,932
Incremental shares from stock options granted under our share-based payment		53,922,534			41,227,460			36,410,027			34,267,593
Earnings per share - diluted – R$
Common shares		0.99			0.91			1.90			1.79
Preferred shares		0.99			0.91			1.90			1.79

Potential anti-dilution effects of shares under our share-based payment, which were excluded from the calculation of diluted earnings per share, totaled 1,681,699 preferred shares at 06/30/2017 and 11,480,721 preferred shares at 06/30/2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 93

Note 29 – Post-employment benefits

The accounting policies and procedures adopted by ITAÚ UNIBANCO HOLDING CONSOLIDATED for employee benefits are summarized below:

The total amounts recognized in Income for the Period and Stockholders’ Equity – Other comprehensive income were as follows:

Total amounts recognized in Income for the period

	Defined benefit												Defined contribution (*)												Other benefits												Total
	04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to			04/01 to			04/01 to			01/01 to			01/01 to
	06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016
Cost of current service		(17	)		(18	)		(34	)		(31	)		-			-			-			-			-			-			-			-			(17	)		(18	)		(34	)		(31	)
Net interest		(4	)		(4	)		(7	)		(5	)		19			60			38			120			(5	)		(5	)		(11	)		(10	)		10			51			20			105
Contribution		-			-			-			-			(21	)		(32	)		(42	)		(64	)		-			-			-			-			(21	)		(32	)		(42	)		(64	)
Benefits paid		-			-			-			-			-			-			-			-			5			4			8			7			5			4			8			7
Total Amounts Recognized		(21	)		(22	)		(41	)		(36	)		(2	)		28			(4	)		56			-			(1	)		(3	)		(3	)		(23	)		5			(48	)		17

(*) In the period, contributions to the defined contributions plan, including PGBL, totaled R$ 158 (R$ 163 from 01/01 to 06/30/2016), of which R$ 42 (R$ 64 from 01/01 to 06/30/2016) arising from social security funds.

Total amounts recognized in Stockholders’ Equity – Other comprehensive income

	Defined benefit						Defined contribution						Other benefits						Total
	06/30/2017			12/31/2016			06/30/2017			12/31/2016			06/30/2017			12/31/2016			06/30/2017			12/31/2016
At the beginning of the period		(70	)		(45	)		(1,322	)		(314	)		(49	)		(13	)		(1,441	)		(372	)
Effects on asset ceiling		4			(633	)		(3	)		(1,244	)		-			-			1			(1,877	)
Remeasurements		(15	)		608			(18	)		236			-			(36	)		(33	)		808
Total Amounts Recognized		(81	)		(70	)		(1,343	)		(1,322	)		(49	)		(49	)		(1,473	)		(1,441	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 94

a) Retirement plans

ITAÚ UNIBANCO HOLDING and certain subsidiaries sponsor defined benefit plans, including variable contribution plans, whose basic purpose of which is to provide benefits that, in general, represent a life annuity benefit, and may be converted into survivorship annuities, according to the plan's regulations. They also sponsor defined contribution plans, the benefit of which is calculated based on the accumulated balance of individual accounts at the eligibility date, according to the plan’s regulations, which does not require actuarial calculation, except as described in Note 29c.

Employees hired prior to July 31, 2002, for those who came from Itaú, and prior to February 27, 2009 for those who came from Unibanco, are beneficiaries of the above-mentioned plans. As regards the new employees hired after these dates, they have the option to voluntarily participate in a variable contribution plan (PGBL), managed by Itaú Vida e Previdência S.A.

Retirement plans are managed by closed-end private pension entities (EFPC), with independent legal structures, as detailed below:

Entity	Benefit plan
Fundação Itau Unibanco - Previdência Complementar	Supplementary retirement plan – PAC (1)
	Franprev benefit plan - PBF (1)
	002 benefit plan - PB002 (1)
	Itaulam basic plan - PBI (1)
	Itaulam Supplementary Plan - PSI (2)
	Itaubanco Defined Contribution Plan (3)
	Itaubank Retirement Plan (3)
	Itaú Defined Benefit Plan (1)
	Itaú Defined Contribution Plan (2)
	Unibanco Pension Plan (3)
	Prebeg benefit plan (1)
	UBB PREV defined benefit plan (1)
	Benefit plan II  (1)
	Supplementary Retirement Plan – Flexible Premium Annuity (ACMV) (1)
	REDECARD Basic Retirement Plan (1)
	REDECARD Supplementary Retirement Plan (2)
	REDECARD Pension Plan (3)
	ITAUCARD Defined Benefit  Retirement Plan (1)
	ITAUCARD Supplementary Retirement Plan (2)
Funbep Fundo de Pensão Multipatrocinado	Funbep I Benefit Plan (1)
	Funbep II Benefit Plan (2)

(1) Defined benefit plan;

(2) Variable contribution plan;

(3) Defined contribution plan.

b) Governance

The closed-end private pension entities (EFPC) and the benefit plans they manage are regulated in conformity with the related specific legislation. The EFPC are managed by the Executive Board, Advisory Council and Fiscal Council, with some members appointed by the sponsors and others appointed as representatives of active and other participants, pursuant to the respective Entity’s by laws. The main purpose of the EFPC is to pay benefits to eligible participants, pursuant to the Plan Regulations, maintaining the plans assets invested separately and independently from ITAÚ UNIBANCO HOLDING.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 95

c) Defined benefit plans

I - Main assumptions used in actuarial valuation of retirement plans

	06/30/2017	06/30/2016
Discount rate (1)	10.24% p.a.	11.28% p.a.
Mortality table (2)	AT-2000	AT-2000
Turnover (3)	Exp.Itaú 2008/2010	Exp.Itaú 2008/2010
Future salary growth	5.04% to 7.12% p.a.	5.04 to 7.12% p.a.
Growth of the pension fund and social security benefits	4.00% p.a.	4.00% p.a.
Inflation	4.00% p.a.	4.00% p.a.
Actuarial method (4)	Projected Unit Credit	Projected Unit Credit

(1) The adoption of this assumption is based on interest rates obtained from the actual interest curve in IPCA, for medium term liabilities of retirement plans sponsored by ITAÚ UNIBANCO HOLDING. At 12/31/2016 assumptions were adopted consistently with the economic scenario at the balance sheet date rate, considering the volatility of the interest markets and the models adopted.

(2) The mortality tables adopted correspond to those disclosed by Society of Actuaries (SOA), the North-American entity which corresponds to Brazilian Institute of Actuarial Science (IBA), which reflects a 10% increase in the probabilities of survival compared to the respective basic tables.The life expectancy in years per the AT-2000 mortality table for participants aged 55 years is 27 and 31 years for men and women, respectively.

(3) The turnover assumption is based on the effective experience of active participants linked to ITAÚ UNIBANCO HOLDING, resulting in the average of 2.4 % p.a. based on the 2008/2010 experience.

(4) Using the Projected Unit Credit method, the mathematical reserve is determined based on the current projected benefit amount multiplied by the ratio between the length of service at the assessment date and the length of service that will be reached at the date when the benefit is granted. The cost is determined taking into account the current projected benefit amount distributed over the years that each participant is employed.

In case of benefits sponsored by foreign subsidiaries, actuarial assumptions adequate to the group of participants and the country's economic scenario are adopted.

Biometric/demographic assumptions adopted are consistent with the group of participants of each benefit plan, pursuant to the studies carried out by an independent external actuarial consulting company.

II- Risk Exposure - Through its defined benefit plans, ITAÚ UNIBANCO HOLDING is exposed to a number of risks, the most significant ones are:

- Volatility of Assets - The actuarial liability is calculated by adopting a discount rate defined on the income related to securities issued by the Brazilian treasury (government securities). If the actual income related to plan assets is lower than expected, this may give rise to a deficit. The plans have a significant percentage of fixed-income securities pegged to the plan commitments, aimed at minimizing volatility and short and medium term risk.

- Changes in Investment Income - A decrease in income related to public securities will imply a decrease in the discount rate and, therefore, will increase the plan's actuarial liability. The effect will be partially offset by the recognition of these securities at market value.

- Inflation Risk - Most of the employee benefit plans are pegged to the inflation rates, and a higher inflation will lead to higher obligations. The effect will also be partially offset because a significant portion of the plan assets is pegged to government securities restated at the inflation rate.

- Life Expectancy - Most of the plan obligations are to provide life benefits, and therefore an increase in life expectancy will result in increased plan liabilities.

III - Management of defined benefit plan assets

The general purpose of managing EFPCs funds is to search for a long term balance between assets and obligations to pay retirement benefits, by exceeding the actuarial targets (discount rate plus benefit adjustment index, established in the plan regulations).

Regarding the assets guaranteeing the actuarial liability reserves, management should ensure the payment capacity of retirement benefits in the long term by avoiding the risk of mismatching assets and liabilities in each pension plan.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 96

The allocation of plan assets and the allocation target by type of asset are as follows:

	Fair Value				% Allocation
Types	06/30/2017		12/31/2016		06/30/2017			12/31/2016			Target 2017
Fixed income securities		15,960		15,134		94.64	%		91.61	%	53% to 100%
Variable income securities		200		685		1.19	%		4.15	%	0% to 20%
Structured investments		16		9		0.09	%		0.05	%	0% to 10%
Real estate		618		623		3.66	%		3.77	%	0% to 7%
Loans to participants		71		69		0.42	%		0.42	%	0% to 5%
Total		16,865		16,520		100.00	%		100.00	%

The defined benefit plan assets include shares of ITAÚ UNIBANCO HOLDING, its main parent company (ITAÚSA) and of subsidiaries of the latter, with a fair value of R$ 193 (R$ 575 at 12/31/2016), and real estate rented to Group companies, with a fair value of R$ 592 (R$ 597 at 12/31/2016).

Fair Value

The fair value of the plan assets is adjusted up to the Balance Sheet date, as follows:

Fixed-Income Securities and Structured Investments – accounted for at market value, considering the average trading price on the calculation date, net realizable value obtained upon the technical addition of pricing, considering, at least, the payment terms and maturity, credit risk and the indexing unit.

Variable income securities – accounted for at market value, taken to be the share average quotation at the last day of the month or at the closest date on the stock exchange on which the share has posted the highest liquidity rate.

Real Estate – stated at acquisition or construction cost, adjusted to market value based on reappraisals made in 2016, supported by technical appraisal reports. Depreciation is calculated under the straight line method, considering the useful life of the real estate.

Loans to participants – adjusted up to the report date, in compliance with the respective agreements.

Fund Allocation Target

The fund allocation target is based on Investment Policies that are currently revised and approved by the Advisory Council of each EFPC, considering a five-year period, which establishes guidelines for investing funds guaranteeing Actuarial Liability and for classifying securities.

IV- Net amount recognized in the balance sheet

Following is the calculation of the net amount recognized in the balance sheet, corresponding to the defined benefit plan:

	06/30/2017			12/31/2016
1 - Net assets of the plans		16,865			16,520
2- Actuarial liabilities		(13,932	)		(13,723	)
3- Surplus (1-2)		2,933			2,797
4- Asset ceiling (*)		(3,157	)		(3,008	)
5- Net amount recognized in the balance sheet (3-4)		(224	)		(211	)
Amount recognized in assets (Note 20a)		332			317
Amount recognized in liabilities (Note 20b)		(556	)		(528	)

(*) Corresponds to the excess of the present value of the available economic benefit, in conformity with paragraph 58 of IAS 19.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 97

V- Changes in the net amount recognized in the balance sheet:

	06/30/2017
	Plan net			Actuarial						Asset			Recognized
	assets			liabilities			Surplus			ceiling			amount
Value at the beginning of the period		16,520			(13,723	)		2,797			(3,008	)		(211	)
Cost of current service		-			(34	)		(34	)		-			(34	)
Net interest (1)		819			(672	)		147			(154	)		(7	)
Benefits paid		(516	)		516			-			-			-
Contributions of sponsors		35			-			35			-			35
Contributions of participants		7			-			7			-			7
Effects on asset ceiling		-			-			-			4			4
Exchange Variation		1			3			4			-			4
Remeasurements (2) (3)		(1	)		(22	)		(23	)		1			(22	)
Value end of the period		16,865			(13,932	)		2,933			(3,157	)		(224	)

	12/31/2016
	Plan net			Actuarial						Asset			Recognized
	assets			liabilities			Surplus			ceiling			amount
Value at the beginning of the period		13,633			(11,587	)		2,046			(2,134	)		(88	)
Cost of current service		-			(62	)		(62	)		-			(62	)
Net interest (1)		1,483			(1,255	)		228			(241	)		(13	)
Benefits paid		(1,060	)		1,060			-			-			-
Contributions of sponsors		149			-			149			-			149
Contributions of participants		15			-			15			-			15
Effects on asset ceiling		-			-			-			(633	)		(633	)
Balance arising from the Corpbanca
acquisition (Note 3)		-			(207	)		(207	)		-			(207	)
Exchange Variation		(8	)		43			35			-			35
Remeasurements (2) (3)		2,308			(1,715	)		593			-			593
Value end of the period		16,520			(13,723	)		2,797			(3,008	)		(211	)

(1) Corresponds to the amount calculated on 01/01/2017 based on the beginning amount (Net Assets, Actuarial Liabilities and Asset ceiling), taking into account the estimated amount of payments/ receipts of benefits / contributions, multiplied by the discount rate of 10.24% p.a. (At 01/01/2016 used by the discount rate of 11.28% p.a.)

(2) Remeasurements recorded in net assets and asset ceiling correspond to the income earned above/below the expected return rate.

(3) The actual return on assets amounted to R$ 819 (R$ 3,791 at 12/31/2016).

During the period, the contributions made totaled R$ 35 (R$ 32 from 01/01 to 06/30/2016). The contribution rate increases based on the beneficiary’s salary.

In 2017, contribution to the retirement plans sponsored by ITAÚ UNIBANCO HOLDING is expected to amount to R$ 71.

The estimate for payment of benefits for the next 10 years is as follows:

	Payment
Period	estimate
2017		1,071
2018		1,112
2019		1,160
2020		1,212
2021		1,266
2022 to 2026		7,098

VI- Sensitivity of defined benefit obligation

The impact, due to the change in the assumption – discount rate by 0.5%, which would be recognized in Actuarial liabilities of the plans, as well as in Stockholders’ Equity – Other Comprehensive Income of the sponsor (before taxes) would amount to:

							Effect which would be
	Effects on actuarial						recognized in
	liabilities of the plan						Stockholders’ Equity (*)
				Percentage of
				actuarial
Change in Assumption	Value			liabilities			Value
- Decrease by 0.5%		703			5.13	%	(271)
- Increase by 0.5%		(644	)		(4.70	%)	235

(*) Net of effects of asset ceiling

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 98

d) Defined contribution plans

The defined contribution plans have assets relating to sponsors’ contributions not yet included in the participant’s account balance due to loss of eligibility to a plan benefit, as well as resources from the migration from the defined benefit plans. The fund will be used for future contributions to the individual participants' accounts, according to the rules of the respective benefit plan regulation.

I - Change in the net amount recognized in the Balance sheet:

	06/30/2017									12/31/2016
	Pension plan						Recognized			Pension plan						Recognized
	fund			Asset ceiling			amount			fund			Asset ceiling			amount
Value beginning of the period		1,287			(491	)		796			2,229			(270	)		1,959
Net interest		63			(25	)		38			269			(30	)		239
Contribution (Note 29)		(42	)		-			(42	)		121			-			121
Receivables – allocation of funds (*)		(13	)		-			(13	)		(515	)		-			(515	)
Effects on asset ceiling (Note 29)		(15	)		12			(3	)		(1,053	)		(191	)		(1,244	)
Remeasurements		(18	)		-			(18	)		236			-			236
Value end of the period (Note 20a)		1,262			(504	)		758			1,287			(491	)		796

(*) Refers to the allocation of the surplus of Plano Itaubanco CD’s social security fund.

e) Other post-employment benefits

ITAÚ UNIBANCO HOLDING and its subsidiaries do not offer other post-employment benefits, except in those cases arising from obligations under acquisition agreements signed by ITAÚ UNIBANCO HOLDING, as well as in relation to the benefits granted due to a judicial sentence, in accordance with the terms and conditions established, in which health plans are totally or partially sponsored for specific groups of former workers and beneficiaries.

Based on the report prepared by an independent actuary, the changes in obligations for these other projected benefits and the amounts recognized in the balance sheet, under liabilities, of ITAÚ UNIBANCO HOLDING are as follows:

I- Change in the net amount recognized in the balance sheet:

	06/30/2017			12/31/2016
At the beginning of the period		(221	)		(179	)
Interest cost		(11	)		(19	)
Benefits paid		8			13
Remeasurements		-			(36	)
At the end of the period (Note 20b)		(224	)		(221	)

The estimate for payment of benefits for the next 10 years is as follows:

	Payment
Period	estimate
2017		13
2018		14
2019		15
2020		16
2021		17
2022 to 2026		103

II- Assumptions and sensitivity - medical care cost

For calculation of projected benefits obligations in addition to the assumptions used for the defined benefit plans (Note 29c I), an 8.16% p.a. increase in medical costs assumption is assumed.

Assumptions about medical care cost trends have a significant impact on the amounts recognized in income. A change of one percentage point in the medical care cost rates would have the following effects:

	Recognition	1% increase		1% decrease
Service cost and interest cost	Income		3		(2	)
Present value of obligation	Other comprehensive income		26		(22	)

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 99

Note 30 – Insurance contracts

a) Insurance contracts

ITAÚ UNIBANCO HOLDING, through its subsidiaries, offers to the market insurance and private pension products, with the purpose of assuming risks and restoring the economic balance of the assets of the policyholder if damaged. Products are offered through insurance brokers (third parties operating in the market and its own brokers), Itaú Unibanco branches and electronic channels, according to their characteristics and regulatory requirements.

b) Main products

I - Insurance

The contract entered into between the parties aims at guaranteeing the protection of the client's assets. Upon payment of a premium, the policyholder is protected through previously-agreed replacement or indemnification clauses for damages. ITAÚ UNIBANCO HOLDING insurance companies then recognize technical reserves administered by themselves, through specialized areas within the conglomerate, with the objective of indemnifying the policyholder's loss in the event of claims of insured risks.

The insurance risks sold by insurance companies of ITAÚ UNIBANCO HOLDING are divided into property and casualty, that covers losses, damages or liabilities for assets or persons, and life insurance that includes coverage for death and personal accidents.

	Loss ratio				Sales ratio
	%				%
	01/01 to		01/01 to		01/01 to		01/01 to
Main insurance lines	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Group accident insurance		6.0		5.4		39.5		42.8
Individual accident		22.6		19.0		10.6		12.5
Commercial multiple peril		35.7		43.7		21.1		20.9
Internal credit		136.4		193.4		1.0		6.3
Mandatory insurance for personal injury caused by motor vehicles
(DPVAT)		85.7		86.4		1.2		1.4
Serious or terminal diseases		17.5		13.5		10.7		10.7
Extended warranty - assets		16.9		18.1		62.1		64.0
Credit Life		15.4		18.7		18.9		19.5
Income from Uncertain Events		18.5		16.6		14.7		14.3
Multiple risks		13.7		9.9		61.1		61.5
Home insurance in market policies – Credit Life		7.5		11.2		20.3		(2.5	)
Group life		32.7		46.4		12.0		13.8

II - Private pension

Developed as a solution to ensure the maintenance of the quality of life of participants, as a supplement to the government plans, through long term investments, private pension products are divided into three major groups:

· PGBL - Plan Generator of Benefits: The main objective of this plan is the accumulation of financial resources, but it can be purchased with additional risk coverage. Recommended for clients that file the full version of income tax return, because they can deduct contributions paid for tax purposes up to 12% of the annual taxable gross income.

· VGBL - Redeemable Life Insurance: This is an insurance structured as a pension plan. Its taxation differs from the PGBL; in this case, the tax basis is the earned income.

· FGB - Fund Generator of Benefits: This is a pension plan with minimum income guarantee, and possibility of receiving earnings from asset performance. Once recognized the distribution of earnings at a certain percentage, as established by the FGB policy, it is not at management's discretion, but instead represents an obligation to ITAÚ UNIBANCO HOLDING. Although there are plans still in existence, they are no longer sold.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 100

III – Income related to insurance and private pension

The revenue from the main insurance and private pension products is as follows:

	Premiums and contributions issued								Reinsurance												Retained premiums and contributions
	04/01 to		04/01 to		01/01 to		01/01 to		04/01 to			04/01 to			01/01 to			01/01 to			04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016		06/30/2017			06/30/2016			06/30/2017			06/30/2016			06/30/2017		06/30/2016		06/30/2017		06/30/2016
Group accident insurance		170		205		336		402		(1	)		(2	)		(1	)		(3	)		169		203		335		399
Individual accident		69		69		128		120		(1	)		(6	)		(1	)		(11	)		68		63		127		109
Commercial multiple peril		14		14		26		29		-			-			-			-			14		14		26		29
Internal Credit		15		14		29		39		-			-			-			-			15		14		29		39
Mandatory insurance for personal injury caused by motor vehicles (DPVAT)		6		9		16		24		-			-			-			-			6		9		16		24
Serious or terminal diseases		48		50		88		87		-			-			-			(1	)		48		50		88		86
Warranty extension - assets		-		31		-		72		-			-			-						-		31		-		72
Disability Savings Pension		81		74		162		144		(1	)		(1	)		(2	)		(2	)		80		73		160		142
PGBL		429		431		875		816		-			-			-			-			429		431		875		816
Credit Life		144		132		285		275		(2	)		-			(2	)		-			142		132		283		275
Income from Uncertain Events		44		41		77		73		-			-						-			44		41		77		73
Multiple risks		37		40		81		82		-			-			-			-			37		40		81		82
Home Insurance in Market Policies – Credit Life		69		64		138		126		-			(4	)		(4	)		(8	)		69		60		134		118
Traditional		28		29		57		57		-			-			-			-			28		29		57		57
VGBL		4,877		4,754		10,180		8,642		-			-			-			-			4,877		4,754		10,180		8,642
Group life		248		346		561		655		(6	)		(22	)		(9	)		(26	)		242		324		552		629
Other lines		113		109		221		215		(1	)		(3	)		(7	)		(6	)		112		106		214		209
Total		6,392		6,412		13,260		11,858		(12	)		(38	)		(26	)		(57	)		6,380		6,374		13,234		11,801

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 101

c) Technical reserves for insurance and private pension

The technical provisions of insurance and pension plan are recognized according to the technical notes approved by SUSEP and criteria established by current legislation.

I - Insurance and private pension:

· Provision for unearned premiums – this provision is recognized, based on insurance premiums, for the coverage of amounts payable related to claims and expenses to be incurred, throughout their terms maturity, in connection with the risks assumed at the calculation base date. The calculation is performed on the level of policies or endorsement of agreements in force, on a pro rata-die basis.The provision includes an estimate for effective and not issued risks (PPNG-RVNE).

· Provision for unsettled claims – this provision is recognized for the coverage of amounts payable related to lump-sum payments and income overdue from claims reported up to the calculation base date, but not yet paid. The provision covers administrative and legal claims, gross of accepted coinsurance operations and reinsurance operations and net of ceded coinsurance operations. The provision should include, whenever required, IBNER (claims incurred but not sufficiently reported) for the aggregate development of claims reported but not paid, which amounts may be changed throughout the process up to final settlement.

· Provision for claims incurred and not reported – this provision is recognized for the coverage of expected unsettled amounts related to claims incurred but not reported up to the calculation base date, gross of accepted coinsurance operations and reinsurance operations, and net of ceded coinsurance operations.

· Mathematical provisions for benefits to be granted - recognized for the coverage of commitments assumed to participants or policyholders, based on the assumptions set forth in the contract, while the event that gave rise to the benefit and/or indemnity has not occurred. The provision is calculated in accordance with the methodology approved in the actuarial technical note to the product.

· Mathematical provisions for granted benefits - recognized after the event triggering the benefit occurs, for the coverage of the commitments assumed to the participants or insured parties, based on the assumptions established in the agreement. The provision is calculated in accordance with the methodologies approved in the technical actuarial note on the product.

· Provision for financial surplus – it is recognized to ensure the amounts intended for distribution of financial surplus, if the event is stated in the agreement. Corresponds to the financial income exceeding the minimum return guaranteed in the product.

· Other technical provisions – it is recognized when insufficiency of premiums or contributions are identified related to payments of benefits and indemnities.

· Provision for redemptions and other amounts to regularize – it comprises the amounts related to redemptions to regularize, returns of premiums or funds, portability requested but, for any reason, not yet transferred to the insurance company or open private pension entity beneficiary, and premiums received but not quoted.

· Provision for related expenses - It is recognized for the coverage of expected amounts related to expenses with benefits and indemnities, due to events incurred and to be incurred.

II - Change in reserves for insurance and private pension

The details about the changes in balances of reserves for insurance and private pension operations are as follows:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 102

II.I - Change in technical provisions

	06/30/2017												12/31/2016
	Property,												Property,
	individuals						Life with						Individuals						Life with
	and life			Private			survivor						and life			Private			survivor
	insurance			pension			benefits			Total			insurance			pension			benefits			Total
Opening balance		3,926			37,679			112,471			154,076			4,755			32,688			91,862			129,305
(+) Additions arising from premiums / contribution		1,980			1,094			10,180			13,254			4,302			2,395			18,153			24,850
(-) Deferral of risk		(2,176	)		(162	)		-			(2,338	)		(5,124	)		(297	)		-			(5,421	)
(-) Payment of claims / benefits		(644	)		(211	)		(54	)		(909	)		(1,623	)		(370	)		(39	)		(2,032	)
(+) Reported claims		662			-			-			662			1,620			-			-			1,620
(-) Redemptions		(1	)		(891	)		(5,347	)		(6,239	)		(1	)		(1,939	)		(13,277	)		(15,217	)
(+/-) Net portability		-			328			666			994			-			380			709			1,089
(+) Adjustment of reserves and financial surplus		10			1,717			6,022			7,749			20			4,371			13,171			17,562
(+) Corporate Reorganization		(282	)		-			-			(282	)											-
(+/-) Other (recognition / reversal)		(149	)		132			(81	)		(98	)		(23	)		451			1,892			2,320
Reserves for insurance and private pension		3,326			39,686			123,857			166,869			3,926			37,679			112,471			154,076

II.II - Technical provisions balances

	Insurance				Private pension				Total
	06/30/2017		12/31/2016		06/30/2017		12/31/2016		06/30/2017		12/31/2016
Unearned premiums		1,951		2,204		16		17		1,967		2,221
Mathematical reserve for benefits to be granted and benefits granted		75		24		161,679		148,341		161,754		148,365
Redemptions and Other Unsettled Amounts		11		11		231		210		242		221
Financial surplus		2		2		611		581		613		583
Unsettled claims (1)		543		769		28		23		571		792
IBNR		359		435		28		27		387		462
Administrative and Related Expenses		29		39		78		71		107		110
Other		356		442		872		880		1,228		1,322
Total (2)		3,326		3,926		163,543		150,150		166,869		154,076

(1) The provision for unsettled claims is detailed in Note 30e.

(2) This table covers the amendments established by Susep Circular No. 517, de 07/30/2015, also for comparison purposes.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 103

d) Deferred selling expenses

Deferred acquisition costs of insurance are direct and indirect costs incurred to sell, underwrite and originate a new insurance contract.

Direct costs are basically commissions paid for brokerage services, agency and prospecting efforts and are deferred for amortization in proportion to the recognition of revenue from earned premiums, that is, over the coverage period, for the term of effectiveness of contracts, according to the calculation rules in force.

Balances are recorded under gross reinsurance assets and changes are shown in the table below:

Balance at 01/01/2017	429
Increase	398
Amortization	(519	)
Balance at 06/30/2017	308
Balance to be amortized in up to 12 months	248
Balance to be amortized after 12 months	60
Balance at 01/01/2016	901
Increase	902
Amortization	(1,374	)
Balance at 12/31/2016	429
Balance to be amortized in up to 12 months	335
Balance to be amortized after 12 months	94

The amounts of deferred selling expenses from reinsurance are stated in Note 30I.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 104

e) Table of loss development

Changes in the amount of obligations of the ITAÚ UNIBANCO HOLDING may occur at the end of each annual reporting period. The table below shows the development by the claims incurred method. The first part of the table shows how the final loss estimate changes through time. The second part of the table reconciles the amounts pending payment and the liability disclosed in the balance sheet.

I – Gross of reinsurance

Reserve for unsettled claims (*)	571
(-) DPVAT operations	12
(-) IBNER (claims incurred but not sufficiently reported)	183
(-) Retrocession and other estimates	4
Liability claims presented in the development table (Ia + Ib)	372

(*) Provision for unsettled claims stated in Note 30c II.II of 06/30/2017, gross of reinsurance

Ia - Administratives claims - gross of reinsurance

Occurrence date	06/30/2013		06/30/2014		06/30/2015		06/30/2016		06/30/2017		Total
At the end of reporting period		1,059		913		997		1,061		861
After 1 year		1,068		922		1,028		1,075
After 2 years		1,069		931		1,036
After 3 years		1,071		934
After 4 years		1,071
Current estimate		1,071		934		1,036		1,075		861
Accumulated payments through base date		1,068		929		1,026		1,048		718		4,789
Liabilities recognized in the balance sheet		3		5		10		27		143		188
Liabilities in relation to prior years												16
Total administratives claims included in balance sheet												204

Ib - Judicial claims - gross of reinsurance

Occurrence date	06/30/2013		06/30/2014		06/30/2015		06/30/2016		06/30/2017		Total
At the end of reporting period		42		36		32		38		38
After 1 year		52		46		42		42
After 2 years		56		54		45
After 3 years		62		57
After 4 years		64
Current estimate		64		57		45		42		38
Accumulated payments through base date		55		43		32		31		30		191
Liabilities recognized in the balance sheet		8		14		13		11		9		55
Liabilities in relation to prior years												113
Total judicial claims included in balance sheet												168

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 105

II - Net of reinsurance

Reserve for unsettled claims (1)	571
(-) DPVAT operations	12
(-) IBNER	183
(-) Reinsurance (2)	19
(-) Retrocession and other estimates	4
Liability claims presented in the development table (IIa + IIb)	353

(1) Provision refers to provision for unsettled claims stated in Note 30c II.II of 06/30/2017.

(2) Reinsurance operations stated in Note 30I III of 06/30/2017.

IIa - Administratives claims - net of reinsurance

Occurrence date	06/30/2013		06/30/2014		06/30/2015		06/30/2016		06/30/2017		Total
At the end of reporting period		1,022		896		972		1,054		848
After 1 year		1,031		905		993		1,068
After 2 years		1,032		911		1,001
After 3 years		1,033		913
After 4 years		1,034
Current estimate		1,034		913		1,001		1,068		848
Accumulated payments through base date		1,031		908		991		1,040		706		4,676
Liabilities recognized in the balance sheet		3		5		10		27		142		187
Liabilities in relation to prior years												9
Total administratives claims included in balance sheet												196

IIb - Judicial claims - net of reinsurance

Occurrence date	06/30/2013		06/30/2014		06/30/2015		06/30/2016		06/30/2017		Total
At the end of reporting period		42		36		32		38		35
After 1 year		52		46		41		42
After 2 years		56		54		45
After 3 years		62		57
After 4 years		64
Current estimate		64		57		45		42		35
Accumulated payments through base date		55		43		32		31		27		188
Liabilities recognized in the balance sheet		8		14		12		11		9		54
Liabilities in relation to prior years												103
Total judicial claims included in balance sheet												157

The breakdown of the table development of claims between administrative and legal evidences the reallocation of claims up to a certain base date and that become legal ones afterwards, which may give the wrong impression of need for adjusting the provisions in each breakdown.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 106

f) Liability adequacy test

As established in IFRS 4 – “Insurance contracts”, an insurance company must carry out the Liability Adequacy Test, comparing the amount recognized for its technical reserves with the current estimate of cash flow of its future obligations. The estimate should consider all cash flows related to the business, which is the minimum requirement for carrying out the adequacy test.

The Liability adequacy test did not show any deficiency for periods ended 2016, 2015 and 2014.

The assumptions used in the test are periodically reviewed and are based on the best practices and the analysis of subsidiaries’ experience, therefore representing the best estimates for cash flow projections.

Methodology and Test Grouping

The methodology for testing all products is based on the projection of cash flows. Specifically for insurance products, cash flows were projected using the method known as run-off triangle of quarterly frequency. Cash flows for the deferral and the assignment phases are tested on a separate basis for social security products.

The risk grouping criterion considers groups subject to similar risks that are jointly managed as a single portfolio.

Biometric Tables

Biometric tables are instruments to measure the biometric risk represented by the probability of death, survival or disability of a participant.

For death and survival estimates, the Brazilian Market Insurer Experience (BR-EMS) tables in effect are used, adjusted according to life expectancy development of Scale G, and the Álvaro Vindas table is adopted to estimate benefit requests for disability.

Risk-free Interest Rate

The relevant risk-free forward interest-rate structure is an indicator of the pure time value of money used to price the set of projected cash flows.

The relevant structure of risk-free interest rate was obtained from the curve of securities deemed to be credit risk free, available in the Brazilian financial market and determined pursuant to an internal policy of ITAÚ UNIBANCO HOLDING, considering the addition of spread, which took into account the impact of the market result of held-to-maturity securities of the guarantee assets portfolio.

Income conversion rate

The income conversion rate represents the expected conversion of balances accumulated by participants in retirement benefits. The decision of conversion into income by participants is influenced by behavioral, economic and tax factors.

Other Assumptions

Related expenses, cancellations and partial redemptions, future increases and contributions, among others, are assumptions that affect the estimate of projected cash flows since they represent expenses and income arising from insurance agreements assumed.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 107

g) Insurance risk – effect of changes on actuarial assumptions

Property insurance is a short-lived insurance, and the main actuarial assumptions involved in the management and pricing of the associated risks are claims frequency and severity. Volatility above the expected number of claims and/or amount of claim indemnities may result in unexpected losses.

Life insurance and pension plans are, in general, medium or long-lived products and the main risks involved in the business may be classified as biometric risk, financial risk and behavioral risk.

Biometric risk relates to: i) more than expected increase in life expectancies for products with survivorship coverage (mostly pension plans); ii) more than expected decrease in mortality rates for products with survivorship coverage (mostly life insurance).

Products offering financial guarantee predetermined under contract involve financial risk inherent in the underwriting risk, with such risk being considered insurance risk.

Behavioral risk relates to a more than expected increase in the rates of conversion into annuity income, resulting in increased payments of retirement benefits.

The estimated actuarial assumptions are based on the historical evaluation of ITAÚ UNIBANCO HOLDING, on benchmarks and the experience of the actuaries.

To measure the effects of changes in the key actuarial assumptions, sensitivity tests were conducted in the amounts of current estimates of future liability cash flows. The sensitivity analysis considers a vision of the impacts caused by changes in assumptions, which could affect the income for the period and stockholders’ equity at the balance sheet date. This type of analysis is usually conducted under the ceteris paribus condition, in which the sensitivity of a system is measured when one variable of interest is changed and all the others remain unchanged. The results obtained are shown in the table below:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 108

The sensitivity analysis considers a vision of the impacts caused by changes in assumptions, which could affect the income for the period and stockholders’ equity at the balance sheet date. Results were as follows:

	Impact in Results and Stockholders’ Equity (*)
	06/30/2017									12/31/2016
	Supplementary			Insurance						Supplementary			Insurance
	Retirement Plans and			Gross of			Net of			Retirement Plans and			Gross of			Net of
Sensitivity analysis	Life with Living Benefits			reinsurance			reinsurance			Life with Living Benefits			reinsurance			reinsurance
5% increase in mortality rates		23			-			(1	)		21			(3	)		(3	)
5% decrease in mortality rates		(24	)		1			-			(23	)		3			3
0.1% increase in risk-free interest rates		51			4			4			49			6			6
0.1% decrease in risk-free interest rates		(52	)		(4	)		(4	)		(50	)		(6	)		(6	)
5% increase in conversion in income rates		(6	)		-			-			(6	)		-			-
5% decrease in conversion in income rates		6			-			-			6			-			-
5% increase in claims		-			(37	)		(35	)		0			(50	)		(48	)
5% decrease in claims		-			37			35			0			50			48

(*) Amounts net of tax effects.

h) Risks of insurance and private pension

ITAÚ UNIBANCO HOLDING has specific committees to define the management of funds from the technical reserves for insurance and private pension, issue guidelines for managing these funds with the objective of achieving long term return, and define evaluation models, risk limits and strategies on allocation of funds to defined financial assets. Such committees are comprised not only of executives and those directly responsible for the business management process, but also for an equal number of professionals that head up or coordinate the commercial and financial areas.

The extended warranty product, this is marketed by the retail company that sells to consumer. The DPVAT production results from the participation that the insurance companies of ITAÚ UNIBANCO HOLDING have in the Leading Insurance Company of the DPVAT consortium.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 109

There is no product concentration in relation to insurance premiums, reducing the concentration risk of products and distribution channels.

	04/01 to 06/30/2017						04/01 to 06/30/2016						01/01 to 06/30/2017						01/01 to 06/30/2016
	Insurance		Retained		Retention		Insurance		Retained		Retention		Insurance		Retained		Retention		Insurance		Retained		Retention
	premiums		premium		(%)		premiums		premium		(%)		premiums		premium		(%)		premiums		premium		(%)
Property and casualty
Mandatory personal injury caused by
motor vehicle (DPVAT)		6		6		100.0		9		9		100.0		16		16		100.0		24		24		100.0
Extended warranty		-		-		0.0		31		31		100.0		-		-		0.0		72		72		100.0
Individuals
Group accident insurance		170		169		99.4		205		203		99.0		336		335		99.8		402		399		99.2
Individual accident		69		68		98.6		69		63		91.3		128		127		99.5		120		109		90.8
Credit life		144		142		98.6		132		132		100.0		285		283		99.4		275		275		100.0
Group life		248		242		97.6		346		324		93.6		561		552		98.4		655		629		96.0

i) Insurance, pension plan and capitalization management structure

The products that make up the portfolios of ITAÚ UNIBANCO HOLDING’s insurance companies are related to the life insurance and elementary, pension plan and capitalization lines. Therefore, ITAÚ UNIBANCO HOLDING understand that the major risks inherent in these products are as follows:

· Underwriting risk: possibility of losses arising from insurance, pension plan and capitalization operations contrary to the institution’s expectations, directly or indirectly associated with technical and actuarial bases adopted to calculate premiums, contributions and provisions;

· Market risk;

· Credit risk;

· Operational risk;

· Liquidity risk in insurance operations.

j) Duties and responsibilities

In line with good national and international practices and to ensure that the risks arising from insurance, pension plan and capitalization products are properly identified, measured, assesses, reported and approved in proper bodies, the ITAÚ UNIBANCO HOLDING has a risk management structure which guidelines are established in an internal policy, approved by its Board of Directors, applicable to the companies and subsidiaries exposed to insurance, pension plan and capitalization risks in Brazil and abroad.

The management process of insurance, pension plan and capitalization risks is based on responsibilities established and distributed between the control and business areas, assuring independence among them and focusing on the specificities of each risk, in accordance with the guidelines established by ITAÚ UNIBANCO HOLDING.

Also, as part of the risk management process, there is a governance structure where decisions may be escalated to panels, ensuring compliance with a number of internal and regulatory requirements, as well as balanced decisions regarding risks.

The purpose of ITAÚ UNIBANCO HOLDING is to ensure that assets backing long-term products, with guaranteed minimum returns, are managed according to the characteristics of the liabilities aiming at actuarial balance and long-term solvency.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 110

Considering actuarial assumptions, a detailed mapping of the liabilities of long-term products that result in payment flows of projected future benefits is performed annually. Based on this mapping, Asset Liability Management models are used to find the best asset portfolio composition that enables the neutralize the risks entailed in this type of product, considering its long-term economic and financial feasibility. The portfolios of backing assets are periodically rebalanced based on the fluctuations in market prices of assets, the company’s liquidity needs, and changes in characteristics of liabilities.

k) Market, credit and liquidity risk

I) Market risk

Market risk is analyzed, in relation to insurance operations, based on the following metrics and sensitivity and loss control measures: Value at Risk (VaR), Losses in Stress Scenarios (Stress Test), Sensitivity (DV01- Delta Variation) and Concentration. For a detailed description of metrics, see Note 36 – Market risk. In the table, the sensitivity analysis (DV01 – Delta Variation) is presented in relation to insurance operations that demonstrate the impact on the cash flows market value when submitted to a 1 annual basis point increase in the current interest rates or index rate and 1 percentage point in the share price and currency.

	06/30/2017					12/31/2016
	Account					Account
Class	balance		DV01			balance		DV01
Government securities
NTN-C		5,089		(2.94	)		5,141		(3.03	)
NTN-B		4,844		(6.37	)		2,969		(3.53	)
LTN		-		-			-		-
DI Future		-		-			-		-
Private securities
Indexed to IPCA		370		(0.14	)		307		(0.14	)
Indexed to PRE		105		(0.00	)		240		(0.00	)
Shares		0		0.00			0		0.00
Floating assets		5,032		-			5,852		-
Under agreements to resell		4,657		-			6,266		-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 111

II) Liquidity Risk

Liquidity risk is the risk that ITAÚ UNIBANCO HOLDING may have insufficient net funds available to honor its current obligations at a given moment. The liquidity risk is managed, for insurance operation, continuously based on the monitoring of payment flows related to its liabilities vis a vis the inflows generated by its operations and financial assets portfolio.

Financial assets are managed in order to optimize the risk-return ratio of investments, considering, on a careful basis, the characteristics of their liabilities. The risk integrated control considers the concentration limits by issuer and credit risk, sensitivities and market risk limits and control over asset liquidity risk. Thus, investments are concentrated in government and private securities with good credit quality in active and liquid markets, keeping a considerable amount invested in short-term assets, available on demand, to cover regular needs and any liquidity contingencies. Additionally, ITAÚ UNIBANCO HOLDING constantly monitors the solvency conditions of its insurance operations.

Liabilities	Assets	06/30/2017						12/31/2016
		Liabilities		Liabilities		Assets		Liabilities		Liabilities		Assets
		amounts (1)		DU (2)		DU (2)		amounts (1)		DU (2)		DU (2)
Insurance operations	Backing asset
Unearned premiums	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		1,950		25.3		10.1		2,202		13.5		12.7
IBNR, PDR e PSL	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		928		21.4		18.6		1,242		13.8		18.9
Other provisions	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		414		88.5		33.9		446		119.0		33.3
Subtotal	Subtotal		3,292						3,890
Pension plan, VGBL and individual life operations
Related expenses	LFT, repurchase agreements, NTN-B, CDB, LF and debentures		78		114.0		82.1		71		107.4		80.9
Unearned premiums	LFT, repurchase agreements, NTN-B, CDB and debentures		18		-		11.1		19		-		14.1
Unsettled claims	LFT, repurchase agreements, NTN-B, CDB and debentures		31		-		11.0		25		-		13.9
IBNR	LFT, repurchase agreements, NTN-B, CDB and debentures		28		18.8		11.1		27		11.4		14.1
Redemptions and Other Unsettled Amounts	LFT, repurchase agreements, NTN-B, CDB and debentures		242		-		11.1		221		-		14.0
Mathematical reserve for benefits granted	LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures		1,703		114.0		82.3		1,737		107.4		81.1
Mathematical reserve for benefits to be granted – PGBL/ VGBL	LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures (3)		155,500		178.4		38.8		142,039		169.9		39.4
Mathematical reserve for benefits to be granted – traditional	LFT, repurchase agreements, NTN-B, NTN-C, Debentures		4,493		217.3		98.0		4,584		210.9		92.0
Other provisions	LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures		871		217.3		98.0		880		210.9		92.0
Financial surplus	LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures		613		216.9		97.8		583		210.6		91.8
Subtotal	Subtotal		163,577						150,186
Total technical reserves	Total backing assets		166,869						154,076

(1) Gross amounts of Credit Rights, Escrow Deposits and Reinsurance.

(2) DU = Duration in months

(3) Excluding PGBL / VGBL reserves allocated in variable income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 112

III) Credit Risk

Reinsurers – Breakdown

We present below the division of risks granted by the ITAÚ UNIBANCO HOLDING’s insurance companies to reinsurance companies:

- Insurance Operations: reinsurance premiums operations are basically represented by: IRB Brasil Resseguros with 58.01% (56.14% at 12/31/2016) and Munich Re do Brasil with 40.13% (43.33% at 12/31/2016).

- Social Security Operations: social security operations related to reinsurance premiums are entirely represented by Munich Re do Brasil with 70% (70% at 12/31/2016) and General Reinsurance AG with 30% (30% at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 113

IV) Risk level of financial assets

The table below shows insurance financial assets, individually evaluated, classified by rating:

	06/30/2017
	Interbank deposits and						Available-for-		Held-to-
	securities purchased under		Held-for-trading		Derivatives		sale financial		Maturity
Internal rating (*)	agreements to resell		financial assets		assets		assets		financial assets		Total
Lower risk		7,621		134,860		297		5,425		3,479		151,682
Satisfactory				1		-		-		-		1
Higher Risk		-		-		-		-		-		-
Total		7,621		134,861		297		5,425		3,479		151,683
%		5.0		88.9		0.2		3.6		2.3		100.0

(*) Internal risk level ratings, with due associated probability of default, are detailed in Note 36.

	12/31/2016
	Interbank deposits and						Available-for-		Held-to-
	securities purchased under		Held-for-trading		Derivatives		sale financial		Maturity
Internal rating (*)	agreements to resell		financial assets		assets		assets		financial assets		Total
Lower risk		7,859		125,944		284		3,558		4,629		142,274
Satisfactory		-		13		-		-		-		13
Higher Risk		-		-		-		-		-		-
Total		7,859		125,957		284		3,558		4,629		142,287
%		5.5		88.5		0.2		2.5		3.3		100.0

(*) Internal risk level ratings, with due associated probability of default, are detailed in Note 36.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 114

l) Reinsurance

Expenses and revenues from reinsurance premiums ceded are recognized in the period when they occur, according to the accrual basis, with no offset of assets and liabilities related to reinsurance except in the event there is a contractual provision for the offset of accounts between the parties. Analyses of reinsurance required are made to meet the current needs of ITAÚ UNIBANCO HOLDING, maintaining the necessary flexibility to comply with changes in management strategy in response to the various scenarios to which it may exposed.

Reinsurance assets

Reinsurance assets are valued according to consistent basis of risk assignment contracts, and in the event of losses effectively paid, as from December 2015, they are revalued after 180 days have elapsed in relation to the possibility of non-recovery. For previous periods, revaluation term is 365 days. This amendment was for compliance with the SUSEP Circular in force. In case of doubt, these assets are reduced based on the provision recognized for credit risk associated to reinsurance.

Reinsurance transferred

ITAÚ UNIBANCO HOLDING transfers, in the normal course of its businesses, reinsurance premiums to cover losses on underwriting risks to its policy holders and is in compliance with the operational limits established by the regulating authority. In addition to proportional contracts, non-proportional contracts are also entered into in order to transfer a portion of the responsibility to the reinsurance company for losses that exceed a certain level of losses in the portfolio. Non-proportional reinsurance premiums are included in Other assets - prepaid expenses and amortized to Other operating expenses over the effectiveness period of the contract on a daily accrual basis.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 115

I- Changes in balances of transactions with reinsurance companies

	Credits						Debits
	06/30/2017			12/31/2016			06/30/2017			12/31/2016
Opening balance		46			18			74			103
Issued contracts		-			-			19			79
Recoverable claims		5			32			-			-
Prepayments / payments to reinsurer		(5	)		(3	)		(28	)		(108	)
Other increase / reversal		(5	)		(1	)		-			-
Closing balance		41			46			65			74

II – Balances of technical reserves with reinsurance assets

	06/30/2017		12/31/2016
Reinsurance claims		51		52
Reinsurance premiums		17		15
Closing balance		68		67

III – Changes in balances of technical reserves for reinsurance claims

	06/30/2017			12/31/2016
Opening balance		52			52
Reported claims		13			70
Paid claims		(17	)		(99	)
Other increase / reversal		2			2
Monetary adjustment and interest of claims		1			27
Closing balance (*)		51			52

(*) Includes Reserve for unsettled claims, IBNER (Reserve for claims not sufficiently warned), IBNR (Reserve for claims incurred but not reported), not covered by the table of loss development net of reinsurance Note 30 eII.

IV – Changes in balances of technical reserves for reinsurance premiums

	06/30/2017			12/31/2016
Opening balance		15			24
Receipts		13			65
Payments		(11	)		(74	)
Other increase / reversal		-			-
Closing balance		17			15

V – Changes in balances of technical reserves for reinsurance commission

	06/30/2017		12/31/2016
Opening balance		-		-
Receipts		-		6
Payments		-		(6	)
Other increase / reversal				-
Closing balance		-		-

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 116

m) Regulatory authorities

Insurance and private pension operations are regulated by the National Council of Private Insurance (CNSP) and the Superintendence of Private Insurance (SUSEP). These authorities are responsible for regulating the market and consequently for assisting in the mitigation of risks inherent in the business.

The CNSP is the regulatory authority of insurance activities in Brazil, created by Decree-Law N° 73, of November 21, 1966. The main attribution of CNSP, at the time of its creation, was to set out the guidelines and rules of government policy on private insurance segments, and with the enactment of Law N° 6,435, of July 15, 1977, its attributions included private pension of public companies.

The Superintendence of Private Insurance (SUSEP) is the authority responsible for controlling and overseeing the insurance, and reinsurance markets. An agency of the Ministry of Finance, it was created by the Decree-Law N° 73, of November 21, 1966, which also created the National System of Private Insurance, comprising the National Council of Private Insurance (CNSP), IRB Brasil Resseguros S.A. – IRB Brasil Re, the companies authorized to have plans and the open-ended private pension companies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 117

Note 31 – Fair value of financial instruments

In cases where market prices are not available, fair values are based on estimates using discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions adopted, including the discount rate and estimate of future cash flows. The estimated fair value achieved through these techniques cannot be substantiated by comparison with independent markets and, in many cases, it cannot be realized in the immediate settlement of the instrument.

The following table summarizes the carrying and estimated fair values for financial instruments:

	06/30/2017				12/31/2016
			Estimated				Estimated
	Carrying value		fair value		Carrying value		fair value
Financial assets
Cash and deposits on demand and Central Bank compulsory deposits		111,307		111,307		104,242		104,242
Interbank deposits		28,715		28,778		22,692		22,731
Securities purchased under agreements to resell		261,443		261,443		265,051		265,051
Financial assets held for trading (*)		223,211		223,211		204,648		204,648
Financial assets designated at fair value through profit or loss (*)		1,410		1,410		1,191		1,191
Derivatives (*)		19,305		19,305		24,231		24,231
Available-for-sale financial assets (*)		89,175		89,175		88,277		88,277
Held-to-maturity financial assets		39,092		40,360		40,495		40,749
Loan operations and lease operations		452,209		459,201		463,394		472,704
Other financial assets		52,666		52,666		53,917		53,917
Financial liabilities
Deposits		352,327		352,262		329,414		329,371
Securities sold under repurchase agreements		321,922		321,922		349,164		349,164
Financial liabilities held for trading (*)		457		457		519		519
Derivatives (*)		21,420		21,420		24,698		24,698
Interbank market debt		136,872		136,452		135,483		134,730
Institutional market debt		97,506		96,247		96,239		95,012
Liabilities for capitalization plans		3,215		3,215		3,147		3,147
Other financial liabilities		63,731		63,731		71,832		71,832

(*) These assets and liabilities are recorded in the balance sheet at their fair value.

Financial instruments not included in the Balance Sheet (Note 36) are represented by Standby letters of credit and financial guarantees provided, which amount to R$ 79,772 (R$ 77,453 at 12/31/2016) with an estimated fair value of R$ 1,015 (R$ 1,066 at 12/31/2016).

The methods and assumptions adopted to estimate the fair value are defined below:

a) Cash and deposits on demand, Central Bank compulsory deposits, Securities purchased under agreements to resell, Securities sold under repurchase agreements and liabilities for capitalization plans – The carrying amounts for these instruments approximate their fair values.

b) Interbank deposits, deposits, Interbank market debt and Institutional market debt – ITAÚ UNIBANCO HOLDING estimates the fair values by discounting the estimated cash flows and adopting the market interest rates.

c) Financial assets held for trading, including Derivatives (assets and liabilities), Financial assets designated at fair value through profit or loss, Available-for-sale financial assets, Held-to-maturity financial assets and Financial liabilities held for trading – Under normal conditions, market prices are the best indicators of the fair values of financial instruments. However, not all instruments have liquidity or quoted market prices and, in such cases, the adoption of present value estimates and other pricing techniques are required. In the absence of quoted prices from National Association of Financial Market Institutions (ANBIMA), the fair values of bonds are calculated based on the interest rates provided by others on the market (brokers). The fair values of corporate debt securities are computed by adopting criteria similar to those applied to interbank deposits, as described above. The fair values of shares are computed based on their prices quoted in the market. The fair values of derivative financial instruments were determined as follows:

· Swaps: The cash flows are discounted to present value based on yield curves that reflect the appropriate risk factors. These yield curves may be drawn mainly based on the exchange price of derivatives at B3, of Brazilian government securities in the secondary market or derivatives and securities traded abroad. These yield curves may be used to obtain the fair value of currency swaps, interest rate swaps and swaps based on other risk factors (commodities, stock exchange indices, etc.).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 118

· Futures and forwards: Quotations on exchanges or criteria identical to those applied to swaps.

· Options: The fair values are determined based on mathematical models (such as Black&Scholes) that are fed with implicit volatility data, interest rate yield curve and fair value of the underlying asset. Current market prices of options are used to compute the implicit volatilities. All these data are obtained from different sources (usually Bloomberg).

· Credit: Inversely related to the probability of default (PD) in a financial instrument subject to credit risk. The process of adjusting the market price of these spreads is based on the differences between the yield curves with no risk and the yield curves adjusted for credit risk.

d) Loan operations and lease operations – Fair value is estimated based on groups of loans with similar financial and risk characteristics, using valuation models. The fair value of fixed-rate loans was determined by discounting estimated cash flows, applying current interest rates for similar loans. For the majority of loans at floating rate, the carrying amount was considered close to their fair value. The fair value of loan and lease operations not overdue was calculated by discounting the expected payments of principal and interest through maturity, at the aforementioned rates. The fair value of overdue loan and lease transactions was based on the discount of estimated cash flows, using a rate proportional to the risk associated with the estimated cash flows, or on the underlying collateral. The assumptions related to cash flows and discount rates are determined using information available in the market and the borrower’s specific information of the debtor.

e) Deposits – The fair value of fixed-rate loans with maturity dates was determined by discounting estimated cash flows, applying current interest rates for similar funding operations. Cash deposits are not considered in the fair value estimate. The assumptions related to cash flows and discount rates are determined based on information available in the market and information specific for each operation.

f) Other financial assets / liabilities – primarily composed of receivables from credit card issuers, deposits in guarantee for contingent liabilities and trading and intermediation of securities. The carrying amounts for these assets/liabilities substantially approximate their fair values, since they principally represent amounts to be received in the short term from credit card holders and to be paid to credit card acquirers, judicially required deposits (indexed to market rates) made by ITAÚ UNIBANCO HOLDING as guarantees for lawsuits or very short-term receivables (generally with a maturity of approximately 5 (five) business days). All of these items represent assets / liabilities without significant associated market, credit and liquidity risks.

In accordance with IFRS, ITAÚ UNIBANCO HOLDING classifies fair value measurements in a fair value hierarchy that reflects the significance of inputs adopted in the measurement process.

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is a market in which transactions for the asset or liability being measured occur often enough and with sufficient volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 generally includes: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or quoted prices vary substantially either over time or among market makers, or in which little information is released publicly; (iii) inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, etc.); (iv) inputs that are mainly derived from or corroborated by observable market data through correlation or by other means.

Level 3: Inputs are unobservable for the asset or liability. Unobservable information shall be used to measure fair value to the extent that observable information is not available, thus allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 119

Financial assets for trading, Available for sale, and Designated at fair value through profit or loss:

Level 1: Highly-liquid securities with prices available in an active market are classified in Level 1 of the fair value hierarchy. This classification level includes most of the Brazilian Government Securities, securities of foreign governments, shares and debentures traded on stock exchanges and other securities traded in an active market.

Level 2: When the pricing information is not available for a specific security, the assessment is usually based on prices quoted in the market for similar instruments, pricing information obtained for pricing services, such as Bloomberg, Reuters and brokers (only when the prices represent actual transactions) or discounted cash flows, which use information for assets actively traded in an active market. These securities are classified into Level 2 of the fair value hierarchy and are comprised of certain Brazilian government securities, debentures, some government securities quoted in a less-liquid market in relation to those classified into Level 1, and some share prices in investment funds. ITAÚ UNIBANCO HOLDING does not hold positions in alternative investment funds or private equity funds.

Level 3: When no pricing information in an active market, ITAÚ UNIBANCO HOLDING uses internally developed models, from curves generated according to the proprietary model. The Level 3 classification includes some Brazilian government and private securities falling due after 2025 and securities that are not usually traded in an active market.

Derivatives:

Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.

Level 2: For derivatives not traded on stock exchanges, ITAÚ UNIBANCO HOLDING estimates the fair value by adopting a variety of techniques, such as Black&Scholes, Garman & Kohlhagen, Monte Carlo or even the discounted cash flow models usually adopted in the financial market. Derivatives included in Level 2 are credit default swaps, cross currency swaps, interest rate swaps, plain vanilla options, certain forwards and generally all swaps. All models adopted by ITAÚ UNIBANCO HOLDING are widely accepted in the financial services industry and reflect all derivative contractual terms. Considering that many of these models do not require a high level of subjectivity, since the methodologies adopted in the models do not require major decisions and information for the model are readily observed in the actively quotation markets, these products were classified in Level 2 of the measurement hierarchy.

Level 3: The derivatives with fair values based on non-observable information in an active market were classified into Level 3 of the fair value hierarchy, and are comprised of non-standard options, certain swaps indexed to non-observable information, and swaps with other products, such as swap with option and USD Check, credit derivatives and futures of certain commodities. These operations have their pricing derived from a range of volatility using the basis of historical volatility.

All aforementioned valuation methodologies may result in a fair value that may not be indicative of the net realizable value or future fair values. However, ITAÚ UNIBANCO HOLDING believes that all methodologies used are appropriate and consistent with the other market participants. However, the adoption of other methodologies or assumptions different than those used to estimate fair value may result in different fair value estimates at the balance sheet date.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 120

Distribution by level

The following table presents the breakdown of risk levels at 06/30/2017 and 12/31/2016 for financial assets held for trading and available-for-sale financial assets.

	06/30/2017								12/31/2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets held for trading		190,244		31,997		970		223,211		165,883		37,760		1,005		204,648
Investment funds		5		2,216		-		2,221		14		1,159		-		1,173
Brazilian government securities		180,540		2,736		1		183,277		157,369		2,654		1		160,024
Brazilian external debt bonds		5,364		-		-		5,364		5,325		-		-		5,325
Government securities – other countries		1,765		1,720		-		3,485		819		2,916		-		3,735
Argentina		1,516		-		-		1,516		651		-		-		651
Chile		84		102		-		186		-		127		-		127
Colombia		-		1,530		-		1,530		-		2,669		-		2,669
United States		80		-		-		80		78		-		-		78
Mexico		9		-		-		9		6		-		-		6
Paraguay		-		-		-		-		-		88		-		88
Uruguay		-		88		-		88		-		32		-		32
Other		76		-		-		76		84		-		-		84
Corporate securities		2,570		25,325		969		28,864		2,356		31,031		1,004		34,391
Shares		1,635		-		856		2,491		1,533		-		958		2,491
Bank deposit certificates		13		2,006		-		2,019		12		1,812		-		1,824
Securitized real estate loans		-		-		34		34		-		-		-		-
Debentures		198		2,015		61		2,274		216		2,949		25		3,190
Eurobonds and others		724		17		17		758		595		49		18		662
Financial credit bills		-		21,170		-		21,170		-		25,893		-		25,893
Promissory notes		-		26		-		26		-		-		-		-
Other		-		91		1		92		-		328		3		331
Available-for-sale financial assets		36,952		44,341		7,882		89,175		34,840		43,903		9,534		88,277
Investment funds		-		188		-		188		-		42		-		42
Brazilian government securities		20,884		693		225		21,802		17,039		671		228		17,938
Brazilian external debt bonds		11,874		-		-		11,874		14,065		-		-		14,065
Government securities – other countries		1,585		17,750		94		19,429		1,536		12,850		86		14,472
Chile		-		5,701		94		5,795		-		5,758		86		5,844
Colombia		-		1,803		-		1,803		-		1,155		-		1,155
Korea		-		2,954		-		2,954		-		2,673		-		2,673
Denmark		-		2,282		-		2,282		-		819		-		819
Spain		-		2,941		-		2,941		-		923		-		923
United States		1,585		-		-		1,585		1,427		-		-		1,427
Netherlands		-		-		-		-		101		-		-		101
Paraguay		-		1,709		-		1,709		-		1,111		-		1,111
Uruguay		-		360		-		360		-		411		-		411
Other		-		-		-		-		8		-		-		8
Corporate securities		2,609		25,710		7,563		35,882		2,200		30,340		9,220		41,760
Shares		1,141		-		607		1,748		817		-		568		1,385
Rural Product Note		-		1,111		416		1,527		-		876		549		1,425
Bank deposit certificates		-		489		101		590		-		2,527		114		2,641
Securitized real estate loans		-		-		1,993		1,993		-		-		2,095		2,095
Debentures		280		16,122		4,103		20,505		277		16,007		4,886		21,170
Eurobonds and others		1,188		4,920		335		6,443		1,105		5,615		995		7,715
Financial credit bills		-		641		-		641		-		2,816		-		2,816
Promissory notes		-		2,166		-		2,166		1		2,172		-		2,173
Other		-		261		8		269		-		327		13		340
Financial assets designated at fair value through profit or loss		1,410		-		-		1,410		1,191		-		-		1,191
Brazilian government securities		1,410		-		-		1,410		1,191		-		-		1,191
Financial liabilities held for trading		-		457		-		457		-		519		-		519
Structured notes		-		457		-		457		-		519		-		519

The following table presents the breakdown of risk levels at 06/30/2017 and 12/31/2016 for our derivative assets and liabilities.

	06/30/2017											12/31/2016
	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
Derivatives - assets		132		18,755			418			19,305			127		23,583			521			24,231
Futures		132		-			-			132			127		-			-			127
Swap – differential receivable		-		8,514			401			8,915			-		10,074			468			10,542
Options		-		3,135			16			3,151			-		4,745			47			4,792
Forwards (onshore)		-		4,309			-			4,309			-		4,971			-			4,971
Credit derivatives		-		254			-			254			-		181			-			181
Forwards (offshore)		-		2,399			-			2,399			-		3,459			-			3,459
Check of swap		-		29			-			29			-		88			-			88
Other derivatives		-		115			1			116			-		65			6			71
Derivatives - liabilities		-		(21,350	)		(70	)		(21,420	)		-		(24,638	)		(60	)		(24,698	)
Swap – differential payable		-		(12,304	)		(69	)		(12,373	)		-		(13,165	)		(56	)		(13,221	)
Options		-		(2,363	)		(1	)		(2,364	)		-		(4,548	)		(4	)		(4,552	)
Forwards (onshore)		-		(3,722	)		-			(3,722	)		-		(3,530	)		-			(3,530	)
Credit derivatives		-		(184	)		-			(184	)		-		(147	)		-			(147	)
Forwards (offshore)		-		(2,444	)		-			(2,444	)		-		(2,825	)		-			(2,825	)
Check of swap		-		(281	)		-			(281	)		-		(353	)		-			(353	)
Other derivatives		-		(52	)		-			(52	)		-		(70	)		-			(70	)

There were no significant transfer between Level 1 and Level 2 during the period from June 30, 2017 and December 31, 2016. Transfers to and from Level 3 are presented in movements of Level 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 121

Measurement of fair value Level 2 based on pricing services and brokers

When pricing information is not available for securities classified as Level 2, pricing services, such as Bloomberg or brokers, are used to value such instruments.

In all cases, to assure that the fair value of these instruments is properly classified as Level 2, internal analysis of the information received are conducted, so as to understand the nature of the input used in the establishment of such values by the service provider.

Prices provided by pricing services that meet the following requirements are considered Level 2: input is immediately available, regularly distributed, provided by sources actively involved in significant markets and it is not proprietary.

Of the total of R$ 76,338 in financial instruments classified as Level 2, at June 30, 2017, pricing service or brokers were used to evaluate securities at the fair value of R$ 42,544, substantially represented by:

· Debentures: When available, we use price information for transactions recorded in the Brazilian Debenture System (SND), an electronic platform operated by CETIP, which provides multiple services for transactions involving debentures in the secondary market. Alternatively, prices of debentures provided by ANBIMA are used. Its methodology includes obtaining, on a daily basis, illustration and non-binding prices from a group of market players deemed to be significant. Such information is subject to statistical filters established in the methodology, with the purpose of eliminating outliers.

· Global and corporate securities: The pricing process for these securities consists in capturing from 2 to 8 quotes from Bloomberg, depending on the asset. The methodology consists in comparing the highest purchase prices and the lowest sale prices of trades provided by Bloomberg for the last day of the month. Such prices are compared with information from purchase orders that the Institutional Treasury of ITAÚ UNIBANCO HOLDING provides for Bloomberg. Should the difference between them be lower than 0.5%, the average price of Bloomberg is used. Should it be higher than 0.5% or if the Institutional Treasury does not provide information on this specific security, the average price gathered directly from other banks is used. The price of the Institutional Treasury is used as a reference only and never in the computation of the final price.

Level 3 recurring fair value measurements

The departments in charge of defining and applying the pricing models are segregated from the business areas. The models are documented, submitted to validation by an independent area and approved by a specific committee. The daily process of price capture, calculation and disclosure are periodically checked according to formally defined testing and criteria and the information is stored in a single and corporate history data base.

The most recurring cases of assets classified as Level 3 are justified by the discount factors used. Factors such as the fixed interest curve in Brazilian Reais and the TR coupon curve – and, as a result, its related factors – have inputs with terms shorter than the maturities of these fixed-income assets. For swaps, the analysis is carried out by index for both parties. There are some cases in which the inputs periods are shorter than the maturity of the derivative.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 122

Level 3 recurring fair value changes

The tables below show the changes in balance sheet for financial instruments classified by ITAÚ UNIBANCO HOLDING in Level 3 of the fair value hierarchy. Derivative financial instruments classified in Level 3 mainly correspond to other derivatives linked to shares.

																Total gains (losses)
			Total gains or								Transfers in			Fair value		related to assets and
	Fair value at		losses (realized /								and / or out of			at		liabilities still held at
	12/31/2016		unrealized)			Purchases		Settlements			Level 3			06/30/2017		06/30/2017
Financial assets held for trading		1,005		(130	)		44		(265	)		316			970		(254	)
Brazilian government securities		1		-			-		-			-			1		-
Corporate securities		1,004		(130	)		44		(265	)		316			969		(254	)
Shares		958		(102	)		-		-			-			856		(253	)
Securitized real estate loans		-		(1	)		35		-			-			34		(1	)
Debentures		25		(8	)		-		(212	)		256			61		-
Eurobonds and others		18		(17	)		9		(17	)		24			17		-
Financial credit bills				-			-		(36	)		36			-		-
Other		3		(2	)		-		-			-			1		-
Available-for-sale financial assets		9,534		(1,001	)		1,809		(1,996	)		(464	)		7,882		(1,051	)
Brazilian government securities		228		(3	)		-		-			-			225		18
Government securities – abroad - Chile		86		1			187		(180	)		-			94		-
Corporate securities		9,220		(999	)		1,622		(1,816	)		(464	)		7,563		(1,069	)
Shares		568		117			98		-			(176	)		607		114
Rural Product Note		549		(8	)		107		(154	)		(78	)		416		(21	)
Bank deposit certificates		114		3			214		(230	)		-			101		-
Securitized real estate loans		2,095		(171	)		69		-			-			1,993		(20	)
Debentures		4,886		(834	)		749		(601	)		(97	)		4,103		(1,144	)
Eurobonds and others		995		(101	)		385		(831	)		(113	)		335		2
Other		13		(5	)		-		-			-			8		-

																			Total gains (losses)
				Total gains or									Transfers in			Fair value			related to assets and
	Fair value at			losses (realized /									and / or out of			at			liabilities still held at
	12/31/2016			unrealized)			Purchases			Settlements			Level 3			06/30/2017			06/30/2017
Derivatives - assets		521			(27	)		32			(150	)		42			418			6
Swap – differential receivable		468			(17	)		-			(92	)		42			401			20
Options		47			(6	)		32			(57	)		-			16			(13	)
Other derivatives		6			(4	)		-			(1	)		-			1			(1	)
Derivatives - liabilities		(60	)		(45	)		(4	)		60			(21	)		(70	)		(25	)
Swap – differential payable		(56	)		(44	)		-			52			(21	)		(69	)		(27	)
Options		(4	)		(1	)		(4	)		8			-			(1	)		2

																Total gains (losses)
			Total gains or								Transfers in			Fair value		related to assets and
	Fair value at		losses (realized /								and / or out of			at		liabilities still held at
	12/31/2015		unrealized)			Purchases		Settlements			Level 3			12/31/2016		12/31/2016
Financial assets held for trading		60		(151	)		87		(344	)		1,353			1,005		(154	)
Brazilian government securities		3		-			-		(2	)		-			1		-
Corporate securities		57		(151	)		87		(342	)		1,353			1,004		(154	)
Shares		-		(114	)		-		-			1,072			958		(152	)
Debentures		48		(37	)		33		(306	)		287			25		(2	)
Eurobonds and others		6		-			54		(36	)		(6	)		18		-
Other		3		-			-		-			-			3		-
Available-for-sale financial assets		4,259		(677	)		4,626		(4,380	)		5,706			9,534		(685	)
Investment funds		114		313			-		(427	)		-			-		-
Brazilian government securities		212		(208	)		-		220			4			228		11
Government securities – abroad - Chile		29		(44	)		321		(220	)		-			86		-
Corporate securities		3,904		(738	)		4,305		(3,953	)		5,702			9,220		(696	)
Shares		267		119			-		(227	)		409			568		76
Rural Product Note		52		(54	)		1,205		(851	)		197			549		(57	)
Bank deposit certificates		130		2			483		(501	)		-			114		-
Securitized real estate loans		2,037		58			11		(10	)		(1	)		2,095		(55	)
Debentures		844		(739	)		2,111		(994	)		3,664			4,886		(653	)
Eurobonds and others		26		(130	)		446		(837	)		1,490			995		(7	)
Financial credit bills		367		14			-		(301	)		(80	)		-		-
Promissory notes		54		-			-		(54	)		-			-		-
Other		127		(8	)		49		(178	)		23			13		-

																			Total gains (losses)
				Total gains or									Transfers in			Fair value			related to assets and
	Fair value at			losses (realized /									and / or out of			at			liabilities still held at
	12/31/2015			unrealized)			Purchases			Settlements			Level 3			12/31/2016			12/31/2016
Derivatives - Assets		1,251			(713	)		254			(728	)		457			521			(7	)
Swaps - differential receivable		1,189			(731	)		8			(455	)		457			468			21
Options		33			36			246			(268	)		-			47			(28	)
Other derivatives		29			(18	)		-			(5	)		-			6			-
Derivatives - Liabilities		(33	)		18			(35	)		96			(106	)		(60	)		(2	)
Swaps - differential payable		(21	)		9			(5	)		67			(106	)		(56	)		(8	)
Options		(12	)		9			(30	)		29			-			(4	)		6

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 123

Sensitivity analyses operations of Level 3

The fair value of financial instruments classified in Level 3 (in which prices negotiated are not easily noticeable in active markets) is measured through assessment techniques based on correlations and associated products traded in active markets, internal estimates and internal models.

Significant unverifiable inputs used for measurement of the fair value of instruments classified in Level 3 are: interest rates, underlying asset prices and volatility. Significant variations in any of these inputs separately may give rise to significant changes in the fair value.

The table below shows the sensitivity of these fair values in scenarios of changes of interest rates, asset prices, or in scenarios vary in prices with shocks and the volatility for non-linear assets:

Sensitivity – Level 3 Operations		06/30/2017
		Impact
					Stockholders'
Risk factor groups	Scenarios	Result			equity
	I		(2.1	)		(2.0	)
Interest rates	II		(51.6	)		(50.3	)
	III		(103.1	)		(99.7	)
Currency, commodities, and ratios	I		(73.2	)		-
	II		(146.3	)		-
Nonlinear	I		(5.6	)		-
	II		(8.2	)		-

The following scenarios are used to measure the sensitivity:

Interest rate

Shocks at 1, 25 and 50 basis points (scenarios I, II and III respectively) in the interest curves, both for increase and decrease, considering the largest losses resulting in each scenario.

Currencies, commodities and ratios

Shocks at 5 and 10 percentage points (scenarios I and II respectively) in prices of currencies, commodities and ratios, both for increase and decrease, considering the largest losses resulting in each scenario.

Non linear

Scenario I: Shocks at 5 percentage points in prices and 25 percentage points the level in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

Scenario II: Shocks at 10 percentage points in prices and 25 percentage points the level in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 124

Note 32 – Provisions, contingencies and other commitments

Provision	06/30/2017		12/31/2016
Civil		5,225		5,172
Labor		7,331		7,232
Tax and social security		8,669		8,246
Other		246		259
Total		21,471		20,909
Current		4,461		4,434
Non-current		17,010		16,475

ITAÚ UNIBANCO HOLDING, as a result of the ordinary course of its business, may be a party to legal lawsuits of labor, civil and tax nature. The contingencies related to these lawsuits are classified as follows:

a) Contingent assets: there are no contingent assets recorded.

b) Provisions and contingencies: The criteria to quantify contingencies are adequate in relation to the specific characteristics of civil, labor and tax lawsuits portfolios, as well as other risks, taking into consideration the opinion of its legal advisors, the nature of the lawsuits, the similarity with previous lawsuits and the prevailing previous court decisions.

- Civil lawsuits

In general, contingencies arise from claims related to the revision of contracts and compensation for damages and pain and suffering and the lawsuits are classified as follows:

Collective lawsuits (related to claims of a similar nature and with individual amounts that are not considered significant): contingencies are determined on a monthly basis and the expected amount of losses is accrued according to statistical references that take into account the nature of the lawsuit and the characteristics of the court (Small Claims Court or Regular Court). Contingencies and provisions are adjusted to reflect the amounts deposited as guarantee for their execution when realized.

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): These are periodically calculated based on the calculation of the amount claimed. Probability of loss, which is estimated based on the characteristics of the lawsuit. The amounts considered as probable losses are recorded as provisions.

It should be mentioned that ITAÚ UNIBANCO HOLDING is a party to specific lawsuits related to the collection of understated inflation adjustments to savings accounts resulting from economic plans implemented in the 80’s and 90’s as a measure to combat inflation.

Although ITAÚ UNIBANCO HOLDING complied with the rules in effect at the time, the company is a defendant in lawsuits filed by individuals that address this topic, as well as in class actions filed by: (i) consumer protection associations; and (ii) the Public Prosecution Office on behalf of savings account holders. With respect to these lawsuits, ITAÚ UNIBANCO HOLDING records provisions when it is served and when the individuals apply to enforce the decision rendered by the Judicial Branch, using the same criteria adopted to determine provisions for individual lawsuits.

The Federal Supreme Court (STF) has issued some decisions favorable to savings account holders, but it has not established its understanding with respect to the constitutionality of the economic plans and their applicability to savings accounts. Currently, the appeals involving these matters are suspended, as determined by the STF, until it pronounces a final decision.

No amount is recorded as a provision in relation to Civil lawsuits which likelihood of loss is considered possible, which total estimated risk is R$ 3,731 (R$ 3,388 at 12/31/2016), in this amount there are no values resulting from interests in joint ventures.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 125

- Labor claims

Contingencies arise from lawsuits in which labor rights provided for in labor legislation specific to the related profession are discussed, such as: overtime, salary equalization, reinstatement, transfer allowance, pension plan supplement, among others, are discussed. These lawsuits are classified as follows:

Collective lawsuits (related to claims considered similar and with individual amounts that are not considered relevant): The expected amount of loss is determined and accrued on a monthly basis in accordance with a statistical share pricing model and is reassessed taking into account the court rulings. These contingencies are adjusted to the amounts deposited as guarantee for their execution when realized.

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): These are periodically calculated based on the calculation of the amount claimed. Probability of loss which, in turn, is estimated in accordance with the actual and legal characteristics related to that lawsuit.

No amount is recorded as a provision for labor claims for which the likelihood of loss is considered possible, and for which the total estimated risk is R$ 54 (R$ 79 of 12/31/2016).

- Other risks

These are quantified and recorded as provisions mainly based on the evaluation of agribusiness credit transactions with joint obligation and FCVS (Salary Variations Compensation Fund) credits transferred to Banco Nacional.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 126

The table below shows the changes in the balances of provisions for civil, labor and other provision and the respective escrow deposit balances:

	01/01 to 06/30/2017
	Civil			Labor			Other			Total
Opening balance		5,172			7,232			259			12,663
Balance arising from Corpbanca acquisition (Note 3)		(1	)		-			-			(1	)
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(256	)		(1,066	)		-			(1,322	)
Subtotal		4,915			6,166			259			11,340
Interest (Note 26)		64			312			-			376
Changes in the period reflected in results (Note 26)		607			1,077			(13	)		1,671
Increase (*)		839			1,183			-			2,022
Reversal		(232	)		(106	)		(13	)		(351	)
Payment		(636	)		(1,264	)		-			(1,900	)
Subtotal		4,950			6,291			246			11,487
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		275			1,040			-			1,315
Closing balance		5,225			7,331			246			12,802
Escrow deposits at 06/30/2017 (Note 20a)		1,529			2,289			-			3,818

(*) Civil provisions include the provision for economic plans amounting to R$ 73.

	01/01 to 06/30/2016
	Civil			Labor			Other			Total
Opening balance		5,227			6,132			135			11,494
Balance arising from the merger with Corpbanca (Note 3)		2			5			133			140
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(236	)		(1,089	)		-			(1,325	)
Subtotal		4,993			5,048			268			10,309
Interest (Note 26)		175			311			-			486
Changes in the period reflected in results (Note 26)		559			1,103			(15	)		1,647
Increase (*)		880			1,196			(14	)		2,062
Reversal		(321	)		(93	)		(1	)		(415	)
Payment		(805	)		(1,003	)		-			(1,808	)
Subtotal		4,922			5,459			253			10,634
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		250			1,056			-			1,306
Closing balance		5,172			6,515			253			11,940
Escrow deposits at 06/30/2016 (Note 20a)		1,653			2,294			-			3,947

(*) Civil provisions include the provision for economic plans amounting to R$ 102.

- Tax and social security lawsuits

ITAÚ UNIBANCO HOLDING classify as legal liability the lawsuits filed to discuss the legality and unconstitutionality of the legislation in force, which are the subject matter of a provision, regardless of the probability of loss.

Tax contingencies correspond to the principal amount of taxes involved in tax, administrative or judicial challenges, subject to tax assessment notices, plus interest and, when applicable, fines and charges. A provision is recognized whenever the likelihood of loss is probable.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 127

The table below shows the changes in the balances of provisions and respective balance of escrow deposits for tax and social security lawsuits:

	01/01 to			01/01 to
Provision	06/30/2017			06/30/2016
Opening balance		8,246			7,500
(-) Contingencies guaranteed by indemnity clause		(69	)		(64	)
Subtotal		8,177			7,436
Interest (*)		385			357
Changes in the period reflected in results		49			71
Increase (*)		254			142
Reversal (*)		(205	)		(71	)
Payment		(12	)		(69	)
Subtotal		8,599			7,795
(+) Contingencies guaranteed by indemnity clause		70			67
Closing balance		8,669			7,862

(*) The amounts are included in the headings Tax Expenses, General and Administrative Expenses and Current Income Tax and Social Contribution.

	01/01 to			01/01 to
Escrow deposits	06/30/2017			06/30/2016
Opening balance		4,847			4,339
Appropriation of interest		174			188
Changes in the period		18			106
Deposits made		136			164
Withdrawals		(117	)		(33	)
Deposits released		(1	)		(25	)
Closing balance (Note 20a)		5,039			4,633
Closing balance after reclassification		5,039			4,633

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 128

Main discussions related to the provisions recognized for Tax and Social Securities Lawsuits are described as follows:

· CSLL – Isonomy – R$ 1,255: the company is discussing the lack of constitutional support for the increase, establishes by Law nº 11,727/08, of the CSLL rate for financial and insurance companies from 9% to 15%. The balance of the deposit in court totals R$ 1,237;

· INSS – Accident Prevention Factor (FAP) – R$ 1,049: the company is discussing the legality of FAP and inconsistent calculations made by the INSS. The balance of the deposit in court totals R$ 114;

· ISS– Banking Activities – R$ 924: it is being discussed that certain revenues do not constitute a taxable event of the local tax or it is not included in the list of services of Supplementary Law 116/03 and/or Decree Law 406/68. The total balance of escrow deposit is R$ 347;

· PIS and COFINS – Calculation basis – R$ 666: the company is challenging the levy of PIS and COFINS on revenue, which should be understood as revenue from the sales of assets and services. The balance of the deposit in court totals R$ 578;

· IRPJ and CSLL – Profits abroad – R$ 613: the company is discussing the calculation bases with respect to profits earned abroad and the inapplicability of the SRF Regulatory Instruction No. 213/02, which exceeds the corresponding legal provision. The balance of the deposit in court totals R$ 206.

Off-balance sheet contingencies

The amounts involved in tax and social security lawsuits for which the likelihood of loss is possible are not recognized as a provision. The estimated amounts at risk in the main tax and social security lawsuits with a likelihood of loss deemed possible, which total R$ 20,098, are described below:

· INSS – Non-compensatory amounts – R$ 4,928: the company defends the non-levy of this contribution on these amounts, among which are profit sharing, stock options, transportation vouchers and sole bonuses;

· IRPJ and CSLL – Goodwill – Deduction – R$ 3,470: the deductibility of goodwill with future expected profitability on the acquisition of investments, and R$ 689 of this amount is guaranteed in purchase agreements;

· IRPJ, CSLL, PIS and COFINS – Requests for offsetting dismissed - R$ 1,590: cases in which the liquidity and the ability of offset credits are discussed;

· PIS and COFINS - Reversal of Revenues from Depreciation in Excess – R$ 1,454: the company is discussing the accounting and tax treatment granted to PIS and COFINS upon settlement of leasing operations;

· IRPJ and CSLL – Interest on capital – R$ 1,453: the company is defending the deductibility of interest on capital declared to stockholders based on the Brazilian long term interest rate (TJLP) on the stockholders’ equity for the year and for prior years;

· ISS – Banking Institutions – R$ 1,058: these are banking operations, revenue from which may not be interpreted as prices for services rendered, and/or which arises from activities not listed under Supplementary Law No. 116/03 or Decree Law No. 406/68.

· IRPJ and CSLL – Deductibility of Losses in Credit Operations – R$ 607 – Assessments drawn up to require the payment of IRPJ and CSLL due to the alleged non-observance of the legal criteria for the deduction of losses upon the receipt of credits.

· IRPJ and CSLL – Disallowance of Tax Losses – R$ 584: Discussion on the amount of tax loss carryforwards, which may reduce the calculation basis of such taxes;

c) Receivables - Reimbursement of contingencies

The Receivables balance arising from reimbursements of contingencies totals R$ 1,152 (R$ 1,128 at 12/31/2016) (Note 20a). This value is derived basically from the guarantee in the privatization process of the Banco Banerj S.A. which occurred 1997, where the State of Rio de Janeiro created a fund to guarantee civil, labor and tax contingencies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 129

d) Assets pledged as collateral for contingencies

Assets pledged as collateral for lawsuits involving contingent liabilities are restricted or deposited as shown below:

	06/30/2017		06/30/2016
Financial  assets  held  for  trading  and  Available-for-sale  financial  assets (basically financial treasury bills)		940		948
Escrow deposits (Note 20a)		4,646		4,438

Deposits related to lawsuits must be made in court and can be withdrawn by the winning party in the lawsuit, with the respective additions provided for by law, according to the court decision.

In general, the provisions related to the lawsuits of ITAÚ UNIBANCO HOLDING are long term, considering the time required for the termination of these lawsuits in the Brazilian judicial system. For this reason, no estimate of the specific year in which these lawsuits will be terminated has been disclosed.

Pursuant to the position of its legal advisors, ITAÚ UNIBANCO HOLDING is not involved in any other administrative or judicial proceedings that may significantly impact the results of their operations.

e) Programs for Cash or Installment Payment of Municipal Taxes

ITAÚ UNIBANCO HOLDING adhere to PPIs – Installment Payment Incentive Programs substantially related to the local level, established the following by laws: Law No. 5,854, of April 27, 2015 - Rio de Janeiro; Law No. 8,927, of October 22, 2015 and Decree-Law No. 26,624, of October 26, 2015 - Salvador; Law No. 18,181, of November 30, 2015 and Decree Law No. 29,275, of November 30, 2015 - Recife; Supplementary Law No. 95, of October 19, 2015 - Curitiba; Law No. 3,546, of December 18, 2015 – Salto; Law No. 12,457, of October 03,2016 – Londrina.

The PPIs promote the regularization of debts mentioned in these laws, arising from tax and non-tax credits, either recognized or not, including those that are part of the Enforceable Debt, either filed or to be filed in court.

The net effect of the PPIs on results at 01/01 to 06/30/2016 was R$ 12, and it is recorded in Other Operating Income.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 130

Note 33 – Regulatory capital

ITAÚ UNIBANCO HOLDING is subject to regulation by the Central Bank of Brazil (BACEN), which issues rules and instructions regarding currency and credit policies for financial institutions operating in Brazil. BACEN also determines minimum capital requirements, procedures for verification of information for assessment of the global systemic importance of financial institutions, limits for fixed assets, limits for loans, accounting practices and requirements of compulsory deposits, requiring banks to comply with the regulation based on the Basel Accord on capital adequacy. Additionally, the National Council of Private Insurance (CNSP) and SUSEP issue regulations on capital requirement, which affect our insurance, pension plan and capitalization operations.

a) Capital Requirements in Place and In Progress

ITAÚ UNIBANCO HOLDING’s minimum capital requirements comply with the set of BACEN resolutions and circulars, which established in Brazil the global capital requirement standards known as Basel III. They are expressed as indices obtained from the ratio between available capital - represented by Referential Equity (PR), or Total Capital, composed of Tier I Capital (which comprises Common Equity and Additional Tier I Capital) and Tier II Capital, and the Risk-Weighted Assets (RWA).

The Total Capital, Tier 1 Capital and Common Equity Tier I Capital ratios are calculated on a consolidated basis, applied to entities that are part of Prudential Conglomerate, which comprises not only financial institutions but also collective financing plans (“consórcios”), payment entities, factoring companies or companies that directly or indirectly assume credit risk, and investment funds in which ITAÚ UNIBANCO HOLDING 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 HOLDING uses the standardized approaches to calculate credit and operational risk-weighted asset amounts.

As from September 1, 2016, BACEN authorized ITAÚ UNIBANCO HOLDING to use market risk internal models to determine the total amount of regulatory capital (RWA_MINT), replacing the RWA_MPAD portion, as set forth in BACEN Circular 3,646.

For foreign units, the standardized approach is adopted. Therefore, the internal models are not used for Argentina, Chile, Itaú BBA International, Itaú BBA Colombia, Paraguay, and Uruguay units.

From January 1, 2017 to December 31, 2017, the minimum capital ratio required is 9.25%, and, following the gradual decrease schedule, it will be 8% on January 1, 2019.

In addition to minimum regulatory capital requirements, BACEN rules established the Additional Common Equity (ACP), corresponding to the sum of the portions of ACP_{Conservation,} ACP_{Countercyclical} and ACP_Systemic, which, in conjunction with the above-mentioned requirements, increase the need for capital over time. The amounts of each one of the portions, as established by CMN Resolution 4,193, are shown in the table below.

Basel III also reformulated the requirements for qualification of instruments eligible for Tier I and Tier II Capital, as regulated in Brazil by CMN Resolution 4,192. This reform includes a phase-out schedule for instruments already considered in capital, issued prior to the effectiveness of the rule, and that do not fully meet the new requirements.

The table below shows the schedule for implementation of Basel III rules in Brazil, as established by BACEN, and the figures refer to the percentage of ITAÚ UNIBANCO HOLDING’s risk-weighted assets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 131

	From January 1,
Basel III Implentation Calendar	2015			2016			2017			2018			2019
Common Equity Tier I		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%
Tier I		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%
Total Capital		11	%		9.875	%		9.25	%		8.625	%		8.0	%
Additional Common Equity Tier I (ACP)		0.0	%		0.625	%		1.50	%		2.375	%		3.5	%
Conservation		0	%		0.625	%		1.25	%		1.875	%		2.5	%
Countercyclical(1)		0	%		0	%		0	%		0	%		0	%
Systemic		0	%		0	%		0.25	%		0.5	%		1.0	%
Common Equity Tier I + ACP		4.5	%		5.125	%		6.0	%		6.875	%		8.0	%
Total Capital + ACP		11.0	%		10.5	%		10.75	%		11.0	%		11.5	%
Prudential Adjustments Deductions		40	%		60	%		80	%		100	%		100	%

(1) ACP _{Countercyclical} is triggered during the credit cycle expansion phase, and, currently, according to BACEN Circular 3.769, the amount required for the countercyclical capital is zero. Furthermore, in the event of increase in ACP _{Countercyclical ,} the new percentage will be effective only twelve months after it is announced.

Additionally, in March 2015, Circular BACEN 3,751, of March 19, 2015 came into force, It provides for the calculation of the relevant indicators for assessing the Global Systemically Important Banks (G-SIBs) of financial institutions in Brazil. Information on the values of the G-SIBs indicators, which are not part of its financial statements, can be found at www.itau.com.br/investor-relations, “Corporate Governance” section, “Global Systemically Important Banks”.

In March 2017, Additional Common Equity Tier I Capital of systemic importance (ACP_Systemic) went into effect, regulated by BACEN Circular 3.768, of October 29, 2015. The purpose of ACP_Systemic is to reduce the probability of insolvency of an institution systemically important in the domestic level (D-SIB: Domestic Systemically Important Bank) and the impact on the stability of the financial system and economy. The calculation of ACP_Systemic associates the system importance, represented by the institution’s total exposure, with the Gross Domestic Product (GDP).

Further details on ACP_Systemic, which are not part of the financial statements, can be viewed on the website www.itau.com.br/investor-relations, “Corporate Governance” / Risk and Capital Management – Pillar 3.

The Leverage Ratio is defined as the ratio between the Tier I Capital and Total Exposure, calculated as prescribed by BACEN Circular 3,748. The objective of this ratio is to be a simple, risk-insensitive leverage measure. Therefore, it does not take into consideration risk-weighting or mitigation factors. In line with the instructions set out in BACEN Circular 3,706, since October 2015, ITAÚ UNIBANCO HOLDING has reported its Leverage Ratio to BACEN on a monthly basis. However, according to recommendations in Basel III Accord, a minimum Leverage Ratio should be required in 2018, which will be defined based on the period over which the ratio’s behavior was monitored, since its implementation in 2011 up to 2017.

More information on the composition of the Leverage Ratio, which are not part of its financial statements, is available at www.itau.com.br/investors-relations, “Corporate Governance section/Risk and Capital Management – Pillar 3.

b) Capital Management

The Board of Directors is the main body in the management of ITAÚ UNIBANCO HOLDING’s capital and it is responsible for approving the institutional capital management policy and guidelines for the institution’s capitalization level. The Board is also responsible for fully approving the ICAAP report (Internal Capital Adequacy Assessment Process), which is intended to assess the adequacy of ITAÚ UNIBANCO HOLDING’s capital.

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

In order to provide the Board of Directors with necessary information, management reports are prepared to inform on the institution’s capital adequacy, and the projections of capital levels under normal and stress situations. There is a structure that coordinates and consolidates related information and processes, all of them subject to verification by the independent validation, internal controls and audit areas.

The “Public Access Report – Capital Management”, which are not part of its financial statements, which provides the guidelines established in the institutional capital management policy can be accessed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 132

c) Risk appetite

In 2016 ITAÚ UNIBANCO HOLDING revisited its risk appetite policy, established and approved by the Board of Directors, which guides its business strategy. The institute’s risk appetite is based on the following statement issued by the Board of Directors:

“We are a universal bank, operating mostly in Latin America. Supported by our risk culture, we operate within the highest ethical standards and regulatory compliance, seeking increasingly improved results, with low volatility, through an ongoing client relationship, accurate risk pricing, diversified funding and proper use of capital.”

Based on this statement, defined five dimensions, each composed of a series of metrics associated with the main risks involved, by combining supplementary manners of measurement and seeking to reach a comprehensive vision of our exposures:

· Capitalization: establishes that ITAÚ UNIBANCO HOLDING must have capital sufficient to face any serious recession period or a stress event without the need to adjust its capital structure under unfavorable circumstances. It is monitored through the follow-up of ITAÚ UNIBANCO HOLDING’s capital ratios, both in normal and stress scenarios, and of the ratings of the institution's debt issues.

· Liquidity: establishes that the institution’s liquidity must withstand long stress periods. It is monitored through the follow-up of liquidity ratios.

· Composition of results: defines that business will be focused primarily in Latin America, where ITAÚ UNIBANCO HOLDING has a diversified base of clients and products, with low appetite for volatility of results and high risks. This dimension comprises aspects related to business and profitability, and market and credit risks. By adopting exposure concentration limits, such as industry sectors, counterparty quality, countries and geographical regions and risk factors, these monitored metrics seek to ensure the proper composition of our portfolios, aimed at the low volatility of results and business sustainability.

· Operational risk: focuses on the control of operational risk events that may adversely impact the operation and business strategy, and is carried out by monitoring the main operational risk events and incurred losses.

· Reputation: addresses risks that may impact the institution’s brand value and reputation with clients, employees, regulatory bodies, investors and the general public. The risk monitoring in this dimension is carried out by the follow-up of client satisfaction and dissatisfaction and media exposure, in addition to monitoring the institution’s conduct.

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

These metrics are monitored from time to time and must respect the defined limits. Monitoring is reported to the risk committees and the Board of Directors, and guides preventive measures to ensure that any exposures are within the limits established and in line with our strategy.

d) Composition of capital

The Referential Equity (PR) used to monitor compliance with the operational limits imposed by BACEN is the sum of three items, namely:

- Common Equity Tier I: the sum of capital, reserves and retained earnings, less deductions and prudential adjustments.

- Additional Tier I Capital: consists of instruments of a perpetual nature, which meet eligibility requirements. Together with Common Equity Tier I it makes up Tier I.

- Tier II: consists of subordinated debt instruments with defined maturity dates that meet eligibility requirements. Together with Common Equity Tier I and Additional Tier I Capital, makes up Total Capital.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 133

The table below presents the composition of the referential equity segregated into Common Equity Tier I, Additional Tier I Capital and Tier II Capital, taking into consideration their respective prudential adjustments, as required by current regulations.

Composition of Referential Equity	06/30/2017			12/31/2016
Stockholders’ equity Itaú Unibanco Holding S.A. (Consolidated)		118,379			115,590
Non-controlling Interests		11,746			11,568
Changes in Subsidiaries´ Interests in Capital Transactions		2,150			2,777
Consolidated Stockholders’ Equity (BACEN)		132,275			129,935
Common Equity Tier I Prudential Adjustments		(18,459	)		(14,527	)
Common Equity Tier I		113,816			115,408
Additional Tier I Prudential Adjustments		49			532
Additional Tier I Capital		49			532
Tier I (Common Equity Tier I + Additional Tier I Capital)		113,865			115,940
Instruments Eligible to Comprise Tier II		19,723			23,488
Tier II Prudential Adjustments		66			49
Tier II		19,789			23,537
Referential Equity (Tier I + Tier II)		133,654			139,477

The table below shows the most significant Prudential Adjustments for ITAÚ UNIBANCO HOLDING. Together, they correspond to more than 90% of the prudential adjustments as at June 30, 2017.

Composition of Prudential Adjustments	06/30/2017			12/31/2016
Goodwill paid on the acquisition of investments		8,744			7,408
Intangible assets		4,458			3,254
Tax credits		5,877			3,678
Surplus of Common Equity Tier I Capital - Noncontrolling interests		418			909
Adjustments relating to the fair value of derivatives used as cash flow hedge, for hedged items that do not have their mark-to-market adjustments accounted for		(1,575	)		(1,254	)
Other		537			532
Total		18,459			14,527

During 2017, ITAÚ UNIBANCO HOLDING bought back shares in the amount of R$ 1,282. These shares are recorded in line item “Treasury Shares”, which totaled R$ (2,571) as at June 30, 2017. Treasury shares reduce the institution´s Equity, causing its capital base to be decreased.

In this period, the amount of dividends and interest on capital paid / accrued that affected the base of the institution’s capital totaled R$ 7,947. Dividends are deducted from the institution´s Equity, thus reducing the base of its capital. Whereas, interest on capital, which is accounted for as an expense directly in profit (loss), reduces the institution´s net income and, consequently, the base of its capital.

For details on capital requirements, which are not part of its financial statements, are available at www.itau.com.br/investors-relations, CorporateGovernance section / Risk and Capital Management– Pillar 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 134

The funds obtained through the issuance of subordinated debt securities are considered Tier II capital for the purpose of capital to risk-weighted assets ratio, as follows. According to current legislation, the accounting balance of subordinated debt as of December 2012 was used for the calculation of reference equity as of June 2017, considering instruments approved after the closing date to compose Tier II, totaling R$ 51,134.

								Account
	Principal amount							Balance
Name of security / currency	(original currency)		Issue		Maturity		Return p.a.	06/30/2017
Subordinated financial bills – BRL
		206		2010		2017	IPCA + 6.95% to 7.2%		354
		1,263		2011		2017	108% to 112% of CDI		1,576
		789					100% of CDI + 1.29% to 1.52%		866
		212					IPCA + 6.15% to 7.8%		455
		118					IGPM + 6.55% to 7.6%		239
		500		2012		2017	100% of CDI + 1.12%		505
		42		2011		2018	IGPM + 7%		62
		30					IPCA + 7.53% to 7.7%		48
		6,373		2012		2018	108% to 113% of CDI		7,312
		461					IPCA + 4.4% to 6.58%		772
		3,782					100% of CDI + 1.01% to 1.32%		3,886
		112					9.95% to 11.95%		183
		2		2011		2019	109% to 109.7% of CDI		4
		1		2012		2019	110% of CDI		2
		12					11.96%		22
		101					IPCA + 4.7% to 6.3%		167
		1		2012		2020	111% of CDI		2
		20					IPCA + 6% to 6.17%		39
		6		2011		2021	109.25% to 110.5% of CDI		12
		2,307		2012		2022	IPCA + 5.15% to 5.83%		4,047
		20					IGPM + 4.63%		27
		16,358					Total		20,580
Subordinated euronotes - USD
		990		2010		2020	6.20%		3,308
		1,000		2010		2021	5.75%		3,398
		730		2011		2021	5.75% to 6.20%		2,419
		550		2012		2021	6.20%		1,819
		2,600		2012		2022	5.50% to 5.65%		8,767
		1,851		2012		2023	5.13%		6,143
		7,721					Total		25,854
Total									46,434

e) Risk-Weighted Assets (RWA)

According to CMN Resolution No. 4,193, as amended, minimum capital requirements are calculated by the RWA amount, which is obtained by adding the terms listed below:

RWA = RWA_CPAD + RWA_MINT + RWA_OPAD

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

RWA_MINT = portion related to capital required for market risk, compose of the maximum between the internal model and 90% of the standardized model, regulated by BACEN Circulars 3,646 and 3,674;

RWA_OPAD = portion related to capital required for operational risk, calculated based on the standardized approach.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 135

The table below shows the amounts of risk weighted assets for Credit Risk (RWA_CPAD):

Risk exposures	06/30/2017		12/31/2016
Exposure Weighted by Credit Risk (RWACPAD)		642,616		669,284
a) Per Weighting Factor (FPR):
FPR at 2%		133		105
FPR at 20%		6,963		8,011
FPR at 35%		13,115		12,056
FPR at 50%		43,328		44,251
FPR at 75%		137,415		142,194
FPR at 85%		87,750		82,494
FPR at 100%		301,570		325,890
FPR at 150%		32,718
FPR at 250%		32,718		33,213
FPR at 300%		4,408		7,357
FPR up to 1250%(*)		3,547		1,608
Derivatives -  Changes in the Counterparty Credit Quality		6,000		6,168
Derivatives -  Future Potential Gain		5,669		5,937
b) Per Type:
Securities		43,524		45,741
Loan Operations - Retail		109,075		114,481
Loan Operations - Non-Retail		237,794		247,911
Joint Liabilities - Retail		186		205
Joint Liabilities - Non-Retail		44,902		47,108
Loan Commitments - Retail		28,147		27,504
Loan Commitments - Non-Retail		8,977		10,234
Other Exposures		170,011		176,100

(*) Taking into consideration the application of the “F” factor required by Article 29 of BACEN Circular 3,644.

We present below the breakdown of Risk-weighted assets of market risk (RWA_MINT), as follows:

	06/30/2017(1)			12/31/2016(1)
Market Risk Weighted Assets (RWAMPAD)		30,500			26,811
Operations subject to interest rate variations		28,682			24,919
Fixed rate denominated in Real		4,374			4,952
Foreign currency coupon		17,707			15,497
Price index coupon		6,602			4,470
Interest rate coupon		0.00			-
Operations subject to commodity price variation		331			353
Operations subject to stock price variation		273			401
Operations subject to risk exposures in gold, foreign currency and foreign		1,213			1,138
Capital benefit – Internal models		(3,050	)		(2,681	)
Market Risk Weighted Assets (RWAMINT)		27,450			24,130
Market Risk Weighted Assets calculated based on internal methodology		22,630			19,799

⁽¹⁾ Market risk-weighted assets calculated based on internal models.

At June 30, 2017, RWA_MINT totaled R$ 27,450, corresponding to 90% of RWA_MPAD, exceeding the need for capital calculated through internal models, which totaled R$ 22,630.

The table below shows the amounts of risk weighted assets for Operational Risk (RWA_OPAD):

	06/30/2017		12/31/2016
Risk-weighted assets of operational risk (RWAOPAD)		54,417		37,826
Retail		11,252		10,887
Commercial		24,549		24,166
Corporate finance		2,581		2,789
Negotiation and sales		4,135		(11,026	)
Payments and settlement		3,667		3,418
Financial agent services		3,729		3,471
Asset management		4,488		4,109
Retail brokerage		15		12

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 136

f) Capital Adequacy Assessment

Upon annually assessing its capital adequacy, ITAÚ UNIBANCO HOLDING adopts the following flow:

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

- Evaluation of capital requirements for material risks;

- Development of methodologies for quantifying additional capital;

- Quantification and internal capital adequacy evaluation;

- Capital and Contingency Plan;

- Sending the capital adequacy report to BACEN.

Adopting a prospective attitude to manage its capital, ITAÚ UNIBANCO HOLDING implemented its capital management structure and ICAAP, thus complying with CMN Resolution 3,988, BACEN Circular 3,547 and BACEN Circular Letter 3,774.

In the context of ICAAP, the stress test is noteworthy. This process permits to assess capital in adverse scenarios, annually approved by the Board of Directors. Its purpose is to measure and check whether the institution would have adequate capital levels even in severe stress conditions, not giving rise to restrictions in the development of its activities.

"The result of the last ICAAP – conducted as of December 2016 – indicated that, in addition to capital to face all material risks, ITAÚ UNIBANCO HOLDING has significant capital surplus, thus assuring the institution’s equity soundness."

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 137

g) Capital Adequacy

ITAÚ UNIBANCO HOLDING, through the ICAAP, assesses the sufficiency of capital to face its risks, represented by regulatory capital for credit, market and operational risk and capital required to cover the other risks.

In order to ensure the soundness of ITAÚ UNIBANCO HOLDING and the availability of capital to support business growth, ITAÚ UNIBANCO HOLDING maintains PR levels above the minimum level required to face risks, as evidenced by the Common Equity, Tier I Capital and Basel ratios.

Composition of Referential Equity (PR)	06/30/2017		12/31/2016
Tier I		113,865		115,940
Common Equity Tier I		113,816		115,408
Additional Tier I Capital		49		532
Tier II		19,789		23,537
Deductions		-		-
Referential Equity		133,654		139,477
Minimum Referential Equity Required		67,015		72,210
Surplus Capital in relation to the Minimum Referential Equity Required		66,639		67,267
Additional Common Equity Tier I Required (ACPRequired)		10,867		4,570
Referential equity calculated for covering the interest rate risk on		2,366		2,264

The table below shows the Basel and Fixed Asset Ratios:

	06/30/2017			12/31/2016
Basel Ratio		18.4	%		19.1	%
Tier I		15.7	%		15.9	%
Common Equity Tier I		15.7	%		15.8	%
Additional Tier I Capital		0.0	%		0.1	%
Tier II		2.7	%		3.2	%
Fixed Asset Ratio		24.0	%		25.4	%
Surplus Capital in Relation to Fixed Assets		34,773			34,298

Based on capital at June 30, 2017, should the Basel III rules established by the Central Bank of Brazil be applied immediately and fully, the core capital ratio would be 14.5% (14.0% on December 31, 2016, including the payment of additional interest on capital made in March 2017), including the merger of Citibank and XP Investimentos and the use of tax credits.

h) Stress testing

Stress testing is performed by Itaú Unibanco to evaluate the institution’s solvency in hypothetical, however, plausible, situations of systemic crisis and identify areas most susceptible to the impact of the stress that may require risk mitigation. Since 2010, ITAÚ UNIBANCO HOLDING has performed a process that simulates the impact of extreme economic and market conditions on the results and capital of the institution.

To perform the test, macroeconomic variables for each stress scenario are estimated by the economic research department. The scenarios are defined based on their relevance for the bank´s results and likelihood to occur and are submitted to the Board of Directors for approval.

Projections of macroeconomic variables (GDP, benchmark interest rate and inflation) and of the credit market (fundraising, loans, default rate, spread and fees) for these scenarios are generated based on exogenous shocks or by using models validated by an independent area.

The projections calculated sensitize the budgeted results and balance sheet and, consequently, affect the risk weighted assets and the capital and liquidity ratios.

This information allows to identify potential factors of risks on businesses, supporting the Board of Directors’ strategic decisions, the budgetary process and discussions on credit granting policies, in addition to being used as input for risk appetite metrics.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 138

Note 34 – Segment Information

ITAÚ UNIBANCO HOLDING is a banking institution that offers its customers a wide range of financial products and services.

The current operational and reporting segments of ITAÚ UNIBANCO HOLDING are described below:

· Retail Banking

The result of the Retail Banking segment arises from the offer of banking products and services to a diversified client base of account holders and non-account holders, individuals and companies. The segment includes retail clients, high net worth clients (Itaú Uniclass and Personnalité), and the corporate segment (very small and small companies). This segment comprises financing and lending activities carried out in units other than the branch network, and offering of credit cards, in addition to operations with Itaú Consignado.

· Wholesale Banking

The result of the Wholesale Banking segment arises from the products and services offered to middle-market companies, private banking clients, from the activities of Latin America units, and the activities of Itaú BBA, the unit in charge of commercial operations with large companies and performing as an investment banking unit.

· Activities with the Market + Corporation

This segment records the result arising from capital surplus, subordinated debt surplus and the net balance of tax credits and debits. It also shows the financial margin with the market, the Treasury operating cost, the equity in earnings of companies not associated to each segment and the interest in Porto Seguro.

Basis of presentation of segment information

Segment information is prepared based on the reports used by top management (Executive Committee) to assess the performance and to make decisions regarding the allocation of funds for investment and other purposes.

The top management (Executive Committee) of ITAÚ UNIBANCO HOLDING uses a variety of information for such purposes including financial and non-financial information that is measured on different bases as well as information prepared based on accounting practices adopted in Brazil. The main index used to monitor the business performance is the Recurring Net Income and the Economic Capital allocated to each segment.

The segment information has been prepared following accounting practices adopted in Brazil modified for the adjustments described below:

· Allocated capital and income tax rate

Based on the managerial income statement, the segment information considers the application of the following criteria:

Allocated capital: The impacts associated to capital allocation are included in the financial information. Accordingly, adjustments were made to the financial statements, based on a proprietary model. The Allocated Economic Capital (AEC) model was adopted for the financial statements by segments, and as from 2015, we changed the calculation methodology. The AEC considers, in addition to Tier l allocated capital, the effects of the calculation of expected loan losses, supplementary to the requirements of the Central Bank of Brazil, pursuant to CMN Circular No. 2.682/99. Accordingly, the Allocated Capital comprises the following components: Credit risk (including expected loss), operational risk, market risk and insurance underwriting risk. Based on the portion of allocated capital tier I, we calculated the Return on Allocated Economic Capital, which corresponds to an operational performance indicator consistently adjusted to the capital required to support the risk associated to asset and liability positions assumed, in conformity with our risk appetite.

Income tax rate: We consider the total income tax rate, net of the tax effect from the payment of interest on capital, for the Retail Banking, Wholesale Bank and Activities with the Market segments. The difference between the income tax amount calculated by segment and the effective income tax amount, as stated in the consolidated financial statements, is allocated to the Activities with the Market + Corporation column.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 139

· Reclassification and application of managerial criteria

The managerial statement of income was used to prepare information per segment. These statements were obtained based on the statement of income adjusted by the impact of non-recurring events and the managerial reclassifications in income.

We describe below the main reclassifications between the accounting and managerial results:

Banking product: The banking product considers the opportunity cost for each operation. The financial statements were adjusted so that the stockholders' equity was replaced by funding at market price. Subsequently, the financial statements were adjusted to include revenues related to capital allocated to each segment. The cost of subordinated debt and the respective remuneration at market price were proportionally allocated to the segments, based on the economic allocated capital.

Hedge tax effects: The tax effects of the hedge of investments abroad were adjusted – these were originally recorded in the tax expenses (PIS and COFINS) and Income Tax and Social Contribution on net income lines – and are now reclassified to the margin. The strategy to manage the foreign exchange risk associated to the capital invested abroad aims at preventing the effects of the exchange rates variation on income. In order to achieve this objective, we used derivative instruments to hedge against such foreign currency risk, with investments remunerated in Brazilian Reais. The hedge strategy for foreign investments also considers the impact of all tax effects levied.

Insurance: Insurance business revenues and expenses were concentrated in Income related to Insurance, pension plan and capitalization operations. The main reclassifications of revenues refer to the financial margins obtained with the technical provisions of insurance, pension plan and capitalization, in addition to revenue from management of pension plan funds.

Other reclassifications: Other Income, Share of Income of Associates, Non-Operating Income, Profit Sharing of Management Members and Expenses for Credit Card Reward Program were reclassified to those lines representing the way the institution manages its business, enabling greater understanding for performance analysis. Accordingly, equity in earnings of investment in Banco CSF S.A. (“Banco Carrefour”) was reclassified to the financial margin line.

The adjustments and reclassifications column shows the effects of the differences between the accounting principles followed for the presentation of segment information, which are substantially in line with the accounting practices adopted for financial institutions in Brazil, except as described above, and the policies used in the preparation of these consolidated financial statements according to IFRS. Main adjustments are as follows:

· Allowance for Loan Losses, which, under IFRS (IAS 39), should be recognized upon objective evidence that loan operations are impaired (incurred loss), and the Expected Loss concept is adopted according to Brazilian accounting standards;

· Shares and units classified as permanent investments were stated at fair value under IFRS (IAS 39 and 32), and their gains and losses were directly recorded to Stockholders’ Equity, not passing through income for the period;

· Effective interest rates, financial assets and liabilities stated at amortized cost, are recognized by the effective interest rate method, allocating revenues and costs directly attributable to acquisition, issue or disposal for the transaction period of the operation; according to Brazilian standards, fee expenses and income are recognized as these transactions are engaged;

· Business combinations are accounted for under the acquisition method in IFRS (IFRS 3), in which the purchase price is allocated among assets and liabilities of the acquired company, and the amount not subject to allocation, if any, is recognized as goodwill. Such amount is not amortized, but is subject to an impairment test.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 140

ITAÚ UNIBANCO HOLDING S.A.

From April 1 to June 30, 2017

(In millions of Reais, except per share information)

							Activities with
	Retail			Wholesale			the Market +			ITAÚ
Consolidated Statement of Income	Banking			Banking			Corporation			UNIBANCO			Adjustments			IFRS consolidated
Banking product		17,217			7,309			2,679			27,205			(688	)		26,517
Net interest (1)		9,684			5,065			2,636			17,385			(902	)		16,483
Revenue from services		5,870			2,159			8			8,037			402			8,439
Income related to insurance, private pension and capitalization operations
before claim and selling expenses		1,663			85			35			1,783			(496	)		1,287
Other revenues		-			-			-			-			308			308
Cost of Credit and Claims		(3,478	)		(1,255	)		(1	)		(4,734	)		335			(4,399	)
Expenses for allowance for loan and lease losses		(3,732	)		(1,215	)		(1	)		(4,948	)		(243	)		(5,191	)
Impairment		-			(105	)		-			(105	)		105			-
Discounts granted		(200	)		(54	)		-			(254	)		254			-
Recovery of credits written off as loss		703			131			-			834			219			1,053
Expenses for claims / recovery of claims under reinsurance		(249	)		(12	)		-			(261	)		-			(261	)
Operating margin		13,739			6,054			2,678			22,471			(353	)		22,118
Other operating income (expenses)		(9,342	)		(3,516	)		(360	)		(13,218	)		(1,121	)		(14,339	)
Non-interest expenses (2)		(8,264	)		(3,206	)		(142	)		(11,612	)		(1,302	)		(12,914	)
Tax expenses for ISS, PIS and COFINS and other		(1,078	)		(310	)		(218	)		(1,606	)		54			(1,552	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			127			127
Net income before income tax and social contribution		4,397			2,538			2,318			9,253			(1,474	)		7,779
Income tax and social contribution		(1,599	)		(729	)		(565	)		(2,893	)		1,906			(987	)
Non-controlling interest in subsidiaries		(44	)		(142	)		(5	)		(191	)		(232	)		(423	)
Net income		2,754			1,667			1,748			6,169			200			6,369

(1) Includes interest and similar income and expenses of R$ 17,046 dividend income of R$ 170, net gains (loss) on investment securities and derivatives of R$ (407) and results from foreign exchange operations and exchange variation of transactions abroad of R$ (326).

(2) Refers to general and administrative expenses including depreciation expenses of R$ 394, amortization expenses of R$ 348, and insurance acquisition expenses of R$ 74.

Total assets (1) - 06/30/2017	924,754	587,817	112,208	1,448,335	(87,113	)	1,361,222
Total liabilities - 06/30/2017	890,523	521,680	82,393	1,318,152	(95,422	)	1,222,730
(1) Includes:
Investments in associates and joint ventures	1,150	-	3,349	4,499	530		5,029
Goodwill	1,296	6,159	-	7,455	2,379		9,834
Fixed assets, net	5,326	1,187	-	6,513	1,111		7,624
Intangible assets, net	6,256	1,081	-	7,337	(36	)	7,301

The Consolidated figures do not represent the sum of the parties because there are intercompany transactions that were eliminated only in the consolidated statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 141

ITAÚ UNIBANCO HOLDING S.A.

From April 1 to June 30, 2016

(In millions of Reais, except per share information)

							Activities with
	Retail			Wholesale			the Market +			ITAÚ
Consolidated Statement of Income	Banking			Banking			Corporation			UNIBANCO			Adjustments			IFRS consolidated
Banking product		17,620			7,988			1,840			27,448			4,224			31,672
Net interest (1)		9,994			5,741			1,823			17,558			4,247			21,805
Revenue from services		5,653			2,151			12			7,816			231			8,047
Income related to insurance, private pension and capitalization
operations before claim and selling expenses		1,973			96			5			2,074			(628	)		1,446
Other revenues		-			-			-			-			374			374
Cost of Credit and Claims		(4,113	)		(2,559	)		(15	)		(6,687	)		2,100			(4,587	)
Expenses for allowance for loan and lease losses		(4,380	)		(1,942	)		(15	)		(6,337	)		1,130			(5,207	)
Impairment		-			(540	)		-			(540	)		540			-
Discounts granted		(218	)		(212	)					(430	)		430			-
Recovery of credits written off as loss		824			148			-			972			1			973
Expenses for claims / recovery of claims under reinsurance		(339	)		(13	)		-			(352	)		(1	)		(353	)
Operating margin		13,507			5,429			1,825			20,761			6,324			27,085
Other operating income (expenses)		(9,132	)		(3,471	)		(489	)		(13,092	)		(1,704	)		(14,796	)
Non-interest expenses (2)		(8,055	)		(3,103	)		(418	)		(11,576	)		(1,097	)		(12,673	)
Tax expenses for ISS, PIS and COFINS and Other		(1,077	)		(368	)		(71	)		(1,516	)		(740	)		(2,256	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			133			133
Net income before income tax and social contribution		4,375			1,958			1,336			7,669			4,620			12,289
Income tax and social contribution		(1,540	)		(338	)		(22	)		(1,899	)		(4,068	)		(5,967	)
Non-controlling interest in subsidiaries		(63	)		(126	)		(6	)		(195	)		(128	)		(323	)
Net income		2,772			1,494			1,308			5,575			424			5,999

(1) Includes interest and similar income and expenses of R$ 16,500 dividend income of R$ 106, net gains (loss) on investment securities and derivatives of R$ 3,173, and results from foreign exchange operations and exchange variation of transactions abroad of R$ 2,026.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 462, amortization expenses of R$ 319 and insurance acquisition expenses of R$ 203.

Total assets (1) - 12/31/2016	909,779	585,088	116,401	1,427,084	(73,843	)	1,353,241
Total liabilities - 12/31/2016	877,792	525,390	80,810	1,299,869	(81,442	)	1,218,427
(1) Includes:
Investments in associates and joint ventures	1,325	-	3,106	4,431	642		5,073
Goodwill	1,398	6,171	-	7,569	2,106		9,675
Fixed assets, net	5,635	1,177	-	6,812	1,230		8,042
Intangible assets, net	6,559	1,105	-	7,664	(283	)	7,381

The Consolidated figures do not represent the sum of all parties because there are intercompany transactions that were eliminated only in the consolidated statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 142

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to June 30, 2017

(In millions of Reais, except for share information)

							Activities with
	Retail			Wholesale			the Market +			ITAÚ
Consolidated Statement of Income	Banking			Banking			Corporation			UNIBANCO			Adjustments			IFRS consolidated
Banking product		34,705			14,534			5,232			54,471			1,559			56,030
Interest margin (1)		19,529			10,110			5,161			34,800			1,103			35,903
Banking service fees		11,616			4,245			20			15,881			830			16,711
Income related to insurance, private pension, and capitalization
operations before claim and selling expenses		3,560			179			51			3,790			(1,094	)		2,696
Other income		-			-			-			-			720			720
Cost of Credit and Claims		(6,853	)		(3,483	)		(1	)		(10,337	)		70			(10,267	)
Expenses for allowance for loan and lease losses		(7,281	)		(3,058	)		(1	)		(10,340	)		(1,247	)		(11,587	)
Impairment		-			(550	)		-			(550	)		550			-
Discounts granted		(409	)		(138	)		-			(547	)		547			-
Recovery of loans written off as loss		1,393			289			-			1,682			220			1,902
Expenses for claims / recovery of claims under reinsurance		(556	)		(26	)		-			(582	)		-			(582	)
Operating margin		27,852			11,051			5,231			44,134			1,629			45,763
Other operating income (expenses)		(18,144	)		(6,988	)		(780	)		(25,912	)		(2,667	)		(28,579	)
Non-interest expenses (2)		(15,982	)		(6,359	)		(361	)		(22,702	)		(2,711	)		(25,413	)
Tax expenses for ISS, PIS and COFINS and Other		(2,162	)		(629	)		(419	)		(3,210	)		(231	)		(3,441	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			275			275
Net income before income tax and social contribution		9,708			4,063			4,451			18,222			(1,038	)		17,184
Net income before income tax and social contribution		(3,577	)		(1,074	)		(1,008	)		(5,659	)		1,145			(4,514	)
Income tax and social contribution		(95	)		(114	)		(9	)		(218	)		(82	)		(300	)
Net income		6,036			2,875			3,434			12,345			25			12,370

(1) Includes net interest and similar income and expenses of R$ 33,139 dividend income of R$ 175, net gain (loss) on investment securities and derivatives of R$ 2,363 and results from foreign exchange results and exchange variation of transactions abroad of R$ 226.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 784, amortization expenses of R$ 704 and insurance acquisition expenses of R$ 178.

Total assets (1) - 06/30/2017	924,754	587,817	112,208	1,448,335	(87,113	)	1,361,222
Total liabilities - 06/30/2017	890,523	521,680	82,393	1,318,152	(95,422	)	1,222,730
(1) Includes:
Investments in associates and joint ventures	1,150	-	3,349	4,499	530		5,029
Goodwill	1,296	6,159	-	7,455	2,379		9,834
Fixed assets, net	5,326	1,187	-	6,513	1,111		7,624
Intangible assets, net	6,256	1,081	-	7,337	(36	)	7,301

The consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 143

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to June 30, 2016

(In millions of Reais except per share information)

							Activities with
	Retail			Wholesale			the Market +			ITAÚ
Consolidated Statement of Income	Banking			Banking			Corporation			UNIBANCO			Adjustments			IFRS consolidated
Banking product		34,918			14,825			3,811			53,554			7,926			61,480
Interest margin (1)		19,865			10,703			3,786			34,354			8,003			42,357
Banking service fees		11,075			3,895			15			14,985			502			15,487
Income related to insurance, private pension, and capitalization operations
before claim and selling expenses		3,978			227			10			4,215			(1,205	)		3,010
Other income		-			-			-			-			626			626
Cost of Credit and Claims		(8,349	)		(5,448	)		75			(13,722	)		3,279			(10,443	)
Expenses for allowance for loan and lease losses		(8,793	)		(4,851	)		75			(13,569	)		2,069			(11,500	)
Impairment		-			(540	)		-			(540	)		540			-
Discounts granted		(442	)		(226	)		-			(668	)		668			-
Recovery of loans written off as loss		1,604			197			-			1,801			3			1,804
Expenses for claims / recovery of claims under reinsurance		(718	)		(28	)		-			(746	)		(1	)		(747	)
Operating margin		26,569			9,377			3,886			39,832			11,205			51,037
Other operating income (expenses)		(17,785	)		(6,234	)		(1,001	)		(25,018	)		(3,055	)		(28,073	)
Non-interest expenses (2)		(15,643	)		(5,562	)		(783	)		(21,987	)		(2,073	)		(24,060	)
Tax expenses for ISS, PIS and COFINS and Other		(2,142	)		(672	)		(218	)		(3,031	)		(1,241	)		(4,272	)
Share of profit or (loss) in associates and joint ventures		-			-			-			-			259			259
Net income before income tax and social contribution		8,784			3,143			2,885			14,814			8,150			22,964
Income tax and social contribution		(3,119	)		(481	)		(144	)		(3,745	)		(7,199	)		(10,944	)
Non-controlling interest in subsidiaries		(120	)		(126	)		(12	)		(259	)		(51	)		(310	)
Net income		5,545			2,536			2,729			10,810			900			11,710

(1) Includes net interest and similar income and expenses of R$ 32,521, dividend income of R$ 116, net gain (loss) on investment securities and derivatives of R$ 6,185 and foreign exchange results and exchange variation on transactions of abroad R$ 3,535.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 889, amortization expenses of R$ 562 and insurance acquisition expenses of R$ 413.

Total assets (1) - 12/31/2016	909,779	585,088	116,401	1,427,084	(73,843	)	1,353,241
Total liabilities - 12/31/2016	877,792	525,390	80,810	1,299,869	(81,442	)	1,218,427
(1) Includes:
Investments in associates and joint ventures	1,325	-	3,106	4,431	642		5,073
Goodwill	1,398	6,171	-	7,569	2,106		9,675
Fixed assets, net	5,635	1,177	-	6,812	1,230		8,042
Intangible assets, net	6,559	1,105	-	7,664	(283	)	7,381

The Consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 144

Information on the result of main services and products and noncurrent assets by geographic area are as follows:

	01/01 to 06/30/2017						01/01 to 06/30/2016
	Brazil		Abroad		Total		Brazil		Abroad		Total
Income related to financial operations (1) (2)		69,905		9,645		79,550		77,791		9,959		87,750
Income  related  to  insurance,  private  pension  and  capitalization operations before claim and selling expenses		2,635		61		2,696		2,943		67		3,010
Banking service fees		15,217		1,494		16,711		14,067		1,420		15,487
Non-current assets (3)		12,214		2,711		14,925		13,299		2,124		15,423

(1) Includes interest and similar income, dividend income, net gain (loss) on investment securities and derivatives, foreign exchange results, and exchange variation on transactions.

(2) ITAÚ UNIBANCO HOLDING does not have clients representing 10% or higher of its revenues.

(3) The amounts for comparative purposes refer to the 12/31/2016.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 145

Note 35 – Related parties

a) Transactions between related parties are carried out at amounts, terms and average rates in accordance with normal market practices during the period, as well as under reciprocal conditions.

Transactions between companies included in consolidation (Note 2.4a) were eliminated from the consolidated financial statements and the absence of risk is taken into consideration.

The unconsolidated related parties are as follows:

· Itaú Unibanco Participações S.A. (IUPAR), Companhia E. Johnston de Participações S.A. (shareholder of IUPAR) and ITAÚSA, direct and indirect shareholders of ITAÚ UNIBANCO HOLDING;

· The non-financial subsidiaries and associated of ITAÚSA, especially: Itautec S.A., Duratex S.A., Elekeiroz S.A., ITH Zux Cayman Company Ltd, Itaúsa Empreendimentos S.A. and OKI Brasil Indústria e Comércio de Produtos de Tecnologia e Automação S.A.;

· Fundação Itaú Unibanco - Previdência Complementar and FUNBEP – Fundo de Pensão Multipatrocinado, closed-end supplementary pension entities, that administer retirement plans sponsored by ITAÚ UNIBANCO HOLDING and / or its subsidiaries;

· Fundação Itaú Social, Instituto Itaú Cultural, Instituto Unibanco, Instituto Assistencial Pedro Di Perna, Instituto Unibanco de Cinema, Associação Itaú Viver Mais and Associação Cubo Coworking Itaú, entities sponsored by ITAÚ UNIBANCO HOLDING and subsidiaries to act in their respective areas of interest; and

· Investments in Porto Seguro Itaú Unibanco Participações S.A. and BSF Holding S.A.

The transactions with these related parties are mainly as follows:

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 146

	ITAÚ UNIBANCO HOLDING CONSOLIDATED
		Assets / (liabilities)									Revenue / (expenses)
								04/01 to			04/01 to			01/01 to			01/01 to
	Annual rate	06/30/2017			12/31/2016			06/30/2017			06/30/2016			06/30/2017			06/30/2016
Securities sold under repurchase agreements			(62	)		(77	)		(1	)		(7	)		(3	)		(12	)
Itaúsa Investimentos Itaú S.A.			(12	)		-			-			-			-			-
Duratex S.A.	97.5% to 100% of CDI		(22	)		(18	)		-			(1	)		(1	)		(2	)
Elekeiroz S.A.	97.5% of CDI		(3	)		(3	)		-			(1	)		-			(1	)
Itautec S.A.			-			(1	)		-			(1	)		-			(3	)
Itaúsa Empreendimentos S.A.			-			-			-			(4	)		-			(4	)
Olimpia Promoção e Serviços S.A.	100% Selic		(11	)		(14	)		(1	)		(1	)		(1	)		(1	)
Conectcar Soluções de Mobilidade Eletrônica S.A.			-			(24	)		(1	)		-			(1	)		-
Other	50% of CDI / 100% Selic		(14	)		(17	)		1			1			-			(1	)
Amounts receivable from (payable to) related companies / Banking service fees (expenses)			(118	)		(129	)		(37	)		9			(67	)		14
Itaúsa Investimentos Itaú S.A.			-			-			1			-			2			-
Itaúsa Empreendimentos S.A.			-			-			-			1			-			1
Olimpia Promoção e Serviços S.A.			(2	)		(2	)		(7	)		(7	)		(12	)		(13	)
Fundação Itaú Unibanco - Previdência Complementar			(116	)		(127	)		11			11			23			21
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			1			3			3			3
OKI Brasil Indústria e Comércio de Produtos de Tecnologia e Automação S.A.			-			-			(44	)		-			(85	)		-
Other			-			-			1			1			2			2
Rental revenues (expenses)			-			-			(14	)		(15	)		(30	)		(29	)
Itaúsa Investimentos Itaú S.A.			-			-			(1	)		(1	)		(2	)		(1	)
Fundação Itaú Unibanco - Previdência Complementar			-			-			(12	)		(11	)		(24	)		(22	)
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			(3	)		(3	)		(6	)		(6	)
Other			-			-			2			-			2			-
Donation expenses			-			-			(21	)		(28	)		(59	)		(50	)
Instituto Itaú Cultural			-			-			(20	)		(23	)		(48	)		(45	)
Associação Cubo Coworking Itaú			-			-			-			(5	)		(10	)		(5	)
Associação Itaú Viver Mais			-			-			(1	)		-			(1	)		-

Pursuant to the current rules, financial institutions cannot grant loans or advances to the following:

a) any individuals or companies that control the Institution or any entity under common control with the institution, or any executive officer, director, member of the fiscal council, or the immediate family members of these individuals;

b) any entity controlled by the institution; or

c) any entity in which the bank directly or indirectly holds more than 10% of the capital stock.

Therefore, no loans or advances were granted to any subsidiary, executive officer, director or family members.

b) Compensation of the key management personnel

Compensation for the period paid to key management members of ITAÚ UNIBANCO HOLDING consisted of:

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Compensation		97		100		210		173
Board of directors		15		9		20		20
Executives		82		91		190		153
Profit sharing		59		59		98		99
Board of directors		-		-		1		1
Executives		59		59		97		98
Contributions to pension plans - executives		1		2		6		6
Stock option plan – executives		36		51		91		147
Total		193		212		405		425

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 147

Note 36 – Management risks

Credit risk

1. Credit risk measurement

ITAÚ UNIBANCO HOLDING understands credit risk is the possibility of losses arising from the breach by the borrower, issuer or counterparty of the respective agreed-upon financial obligations, the devaluation of loan agreement due to downgrading of the borrower’s, the issuer’s, the counterparty’s risk rating, the reduction in gains or compensation, the advantages given upon posterior renegotiation and the recovery costs.

There is a credit risk control and management structure, centralized and independent from the business units, that establishes limits and mechanisms to mitigate risks, in addition to determining processes and instruments to measure, monitor and control the credit risk inherent in all products, portfolio concentrations and impacts of potential changes in the economic environment.

ITAÚ UNIBANCO HOLDING establishes its credit policy based on internal factors, such as client rating criteria, performance of and changes in portfolio, default levels, return rates, and allocated economic capital, among others, also considering external factors, such as interest rates, market default indicators, inflation, changes in consumption, among others.

The continuous monitoring of ITAÚ UNIBANCO HOLDING’ portfolio concentration levels, assessing the economic industries and largest enables, allows to take preventive measures to avoid that the established limits are breached.

The table below shows the correspondence between risk levels attributed by all segments of ITAÚ UNIBANCO HOLDING internal models (lower risk, satisfactory, higher risk and impaired) and the probability of default associated with each of these levels, and the risk levels assigned by the respective market models.

		External rating
Internal rating	PD	Moody's	S&P	Fitch
Lower risk	Lower or equal than 4.44%	Aaa to B2	AAA to B	AAA to B-
Satisfactory	From 4.44% up to 25.95%	B3 to Caa3	B- to CCC-	CCC+ to CCC-
Higher risk	Higher than 25.95%	Ca1 to D	CC+ to D	CC+ to D
Impairment	Corporate operations with a PD higher than 31.84% Operations past due for over 90 days Renegotiated operations past due for over 60 days	Ca1 to D	CC+ to D	CC+ to D

For individual, small and middle-market companies, credit rating is attributed based on application statistical models (in the early phases of relationship with the client) and behavior score (used for clients with which ITAÚ UNIBANCO HOLDING already has a relationship).

For large companies, the rating is based on information such as economic and financial condition of the counterparty, their cash-generating capability, the economic group to which they belong, and the current and prospective situation of the economic sector in which they operate.

In compliance with CMN Resolution 3,721, the document “Public Access Report – Credit Risk“, which includes the guidelines established by the institutional credit risk control policy can be viewed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 148

2. Credit risk management

ITAÚ UNIBANCO HOLDING strictly controls the credit exposure of clients and counterparties, taking action to address situations in which the actual exposure exceeds the desired one. For this purpose, contractually provided actions can be taken, such as early settlement or requirement of additional collateral.

3. Collateral and policies for mitigating credit risk

ITAÚ UNIBANCO HOLDING uses collateral to increase its recovery capacity in transactions subject to credit risk. Collateral used may be personal security, secured guarantee, legal structures with mitigation power and offset agreements.

For collateral to be considered instruments that mitigate credit risk, they must comply with the requirements and standards that regulate them, be them internal or external ones, be legally valid (effective), enforceable, and assessed on a regular basis.

ITAÚ UNIBANCO HOLDING also uses credit derivatives, to mitigate credit risk of its portfolios of loans and securities. These instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates.

4. Policy on the provision

The policies on the provision adopted by ITAÚ UNIBANCO HOLDING are aligned with the guidelines of IFRS and the Basel Accord. As a result, an allowance for loan losses is recognized when there are indications of the impairment of the portfolio and takes into account a horizon of loss appropriate for each type of transaction. We consider as impaired loans overdue for more than 90 days, renegotiated loans overdue by more than 60 days and Corporate loans below a specific internal rating. Loans are written-down 360 days after such loans become past due or 540 days of being past due in the case of loans with original maturities over 36 months.

5. Credit risk exposure

	06/30/2017						12/31/2016
	Brazil		Abroad		Total		Brazil		Abroad		Total
Interbank deposits		6,511		22,204		28,715		6,044		16,648		22,692
Securities purchased under agreements to resell		260,225		1,218		261,443		264,080		971		265,051
Financial assets held for trading		212,784		10,427		223,211		193,903		10,745		204,648
Financial assets designated at fair value through profit or loss		-		1,410		1,410		-		1,191		1,191
Derivatives		9,889		9,416		19,305		13,593		10,638		24,231
Available-for-sale financial assets		58,543		30,632		89,175		53,529		34,748		88,277
Held-to-maturity financial assets		26,849		12,243		39,092		27,436		13,059		40,495
Loan operations and lease operations		294,999		157,210		452,209		305,394		158,000		463,394
Other financial assets		46,663		6,003		52,666		47,914		6,003		53,917
Off balance sheet		263,174		38,938		302,112		259,854		39,973		299,827
Financial Guarantees Provided		63,024		9,451		72,475		62,172		8,621		70,793
Letters of credit to be released		7,297		-		7,297		6,660		-		6,660
Commitments to be released		192,853		29,487		222,340		191,022		31,352		222,374
Mortgage loans		3,300		-		3,300		4,389		-		4,389
Overdraft accounts		87,000		-		87,000		87,239		-		87,239
Credit cards		99,674		1,274		100,948		96,497		1,273		97,770
Other pre-approved limits		2,879		28,213		31,092		2,897		30,079		32,976
Total		1,179,637		289,701		1,469,338		1,171,747		291,976		1,463,723

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 149

The table above presents the maximum exposure at June 30, 2017 and December 31, 2016, without considering any collateral received or other additional credit improvements.

For assets recognized in the balance sheet, the exposures presented are based on net carrying amounts. This analysis includes only financial assets subject to credit risk and excludes non-financial assets.

The contractual amounts of Financial Guarantees Provided and letters of credit represent the maximum potential of credit risk in the event the counterparty does not meet the terms of the agreement. The vast majority of commitments (real estate loans, overdraft accounts and other pre-approved limits) mature without being drawn, since they are renewed monthly and we have the power to cancel them at any time. As a result, the total contractual amount does not represent our effective future exposure to credit risk or the liquidity needs arising from such commitments.

As shown in the table, the most significant exposures correspond to Loan Operations, Financial Assets Held for Trading, and Securities Purchased Under Agreements to Resell, in addition to Financial Guarantees Provided and Other Commitments.

The maximum exposure to the quality of the financial assets presented highlights that:

· 88.9% of loan operations and other financial assets exposure (Table 6.1 and 6.1.2) are categorized as low probability of default in accordance with our internal rating;

· only 3.9% of the total loans exposure (Table 6.1) is represented by overdue credits not impaired;

· 6.5% of the total loans exposure (Table 6.1) corresponds to overdue loans impaired.

5.1 Maximum exposure of financial assets segregated by business sector

a) Loan operations and lease operations portfolio

	06/30/2017		%		12/31/2016		%
Public sector		1,970		0.4		3,051		0.6
Industry and commerce		106,908		22.3		112,067		22.8
Services		115,606		24.1		118,102		24.1
Natural resources		24,454		5.1		24,362		5.0
Other sectors		2,176		0.5		2,839		0.6
Individuals		228,756		47.6		229,945		46.9
Total		479,870		100.0		490,366		100.0

b) Other financial assets ^(*)

	06/30/2017		%		12/31/2016		%
Natural resources		2,449		0.4		2,466		0.4
Public sector		272,216		41.1		249,745		38.7
Industry and commerce		8,757		1.3		10,435		1.6
Services		83,487		12.6		2,741		0.4
Other sectors		4,870		0.7		93,165		14.4
Individuals		414		0.1		290		0.0
Financial		290,158		43.8		287,743		44.5
Total		662,351		100.0		646,585		100.0

(*) Includes financial assets held for trading, derivatives, assets designated at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, interbank deposits and securities purchased under agreements to resell.

c) The credit risks of off balance sheet items (financial guarantees provided, letters of credit and commitments to be released) are not categorized or managed by business sector.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 150

6. Credit quality of financial assets

6.1 The following table shows the breakdown of loans operations and lease operations portfolio considering: loans not overdue and loans overdue either impaired or not impaired:

	06/30/2017												12/31/2016
Internal rating	Loans not overdue and not impaired			Loans overdue not impaired			Loans overdue and impaired			Total loans			Loans not overdue and not impaired			Loans overdue and not impaired			Loans overdue and impaired			Total loans
Lower risk		353,752			4,638			-			358,390			363,954			5,543			-			369,497
Satisfactory		63,539			7,088			-			70,627			62,883			6,904			-			69,787
Higher risk		12,762			7,082			-			19,844			13,767			6,998			-			20,765
Impairment		-			-			31,009			31,009			-			-			30,317			30,317
Total		430,053			18,808			31,009			479,870			440,604			19,445			30,317			490,366
%		89.6	%		3.9	%		6.5	%		100.0	%		89.8	%		4.0	%		6.2	%		100.0	%

The following table shows the breakdown of loans operations and lease operations by portfolios of areas and classes, based on indicators of credit quality:

	06/30/2017															12/31/2016
	Lower risk			Satisfactory			Higher risk			Impaired			Total			Lower risk			Satisfactory			Higher risk			Impaired			Total
Individuals		120,377			38,084			10,756			9,810			179,027			122,112			38,910			11,362			10,763			183,147
Credit cards		41,420			10,021			1,709			3,226			56,376			42,432			11,212			1,866			3,512			59,022
Personal		6,642			6,545			7,918			4,267			25,372			6,414			6,298			8,264			4,837			25,813
Payroll loans		26,718			16,183			538			1,344			44,783			26,624			15,972			609			1,431			44,636
Vehicles		10,405			2,665			527			537			14,134			11,378			2,911			554			591			15,434
Mortgage loans		35,192			2,670			64			436			38,362			35,264			2,517			69			392			38,242
Corporate		95,210			3,407			6			16,103			114,726			102,162			5,447			7			14,138			121,754
Small and medium businesses		39,946			9,865			4,302			3,111			57,224			40,534			10,084			4,671			3,646			58,935
Foreign loans - Latin America		102,857			19,271			4,780			1,985			128,893			104,689			15,346			4,725			1,770			126,530
Total		358,390			70,627			19,844			31,009			479,870			369,497			69,787			20,765			30,317			490,366
%		74.7	%		14.7	%		4.1	%		6.5	%		100.0	%		75.4	%		14.2	%		4.2	%		6.2	%		100.0	%

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 151

The table below shows the breakdown of loans operations and lease operations portfolio not overdue and not impaired, by portfolio of segments and classes, based on indicators of credit quality.

	06/30/2017								12/31/2016
	Lower risk		Satisfactory		Higher risk		Total		Lower risk		Satisfactory		Higher risk		Total
I – Individually evaluated
Corporate
Large companies		94,873		3,303		1		98,177		101,612		5,076		7		106,695
II- Collectively-evaluated
Individuals		118,864		33,967		6,771		159,602		120,221		34,851		7,155		162,227
Credit card		41,078		9,262		922		51,262		42,158		10,445		1,083		53,686
Personal		6,561		6,104		5,359		18,024		6,317		5,864		5,538		17,719
Payroll loans		26,438		15,771		410		42,619		26,383		15,606		447		42,436
Vehicles		10,023		1,804		61		11,888		10,821		1,947		68		12,836
Mortgage loans		34,764		1,026		19		35,809		34,542		989		19		35,550
Small and medium businesses		39,608		8,895		3,026		51,529		39,983		9,011		3,235		52,229
Foreign loans and Latin America		100,407		17,374		2,964		120,745		102,138		13,945		3,370		119,453
Total		353,752		63,539		12,762		430,053		363,954		62,883		13,767		440,604

6.1.1 Loan operations and lease operations by portfolios of areas and classes, are classified by maturity as follows (loans overdue not impaired):

	06/30/2017								12/31/2016
	Overdue by up to 30 days		Overdue from 31 to 60 days		Overdue from 61 to 90 days		Total		Overdue by up to 30 days		Overdue from 31 to 60 days		Overdue from 61 to 90 days		Total
Individuals		5,250		2,808		1,557		9,615		5,976		2,772		1,410		10,158
Credit card		896		466		525		1,887		937		442		446		1,825
Personal		1,713		987		380		3,080		1,850		993		414		3,257
Payroll loans		456		184		180		820		439		168		161		768
Vehicles		1,119		422		168		1,709		1,382		448		177		2,007
Mortgage loans		1,066		749		304		2,119		1,368		721		212		2,301
Corporate		265		71		111		447		790		72		58		920
Small and medium businesses		1,541		753		290		2,584		1,928		816		316		3,060
Foreign loans - Latin America		4,722		976		464		6,162		3,965		899		443		5,307
Total		11,778		4,608		2,422		18,808		12,659		4,559		2,227		19,445

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 152

6.1.2 The table below shows other financial assets, individually evaluated, classified by rating:

06/30/2017
Internal rating	Interbank deposits and securities purchased under agreements to resell		Held-for-trading financial assets		Financial assets designated at fair value through profit or loss		Derivatives assets		Available-for- sale financial assets		Held-to- maturity financial assets		Total
Lower risk		290,158		223,196		1,410		18,944		85,615		37,329		656,652
Satisfactory		-		5		-		79		254		-		338
Higher risk		-		10		-		282		1,203		-		1,495
Impairment		-		-		-		-		2,103		1,763		3,866
Total		290,158		223,211		1,410		19,305		89,175		39,092		662,351
%		43.8		33.7		0.2		2.9		13.5		5.9		100.0

12/31/2016
Internal rating	Interbank deposits and securities purchased under agreements to resell		Held-for-trading financial assets		Financial assets designated at fair value through profit or loss		Derivatives assets		Available-for- sale financial assets		Held-to- maturity financial assets		Total
Lower risk		287,743		204,621		1,191		23,943		83,974		39,008		640,480
Satisfactory		-		19		-		87		980		294		1,380
Higher Risk		-		8		-		201		1,227		-		1,436
Impairment		-		-		-		-		2,096		1,193		3,289
Total		287,743		204,648		1,191		24,231		88,277		40,495		646,585
%		44.4		31.7		0.2		3.7		13.7		6.3		100.0

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 153

6.1.3 Collateral held for loan and lease operations portfolio

	06/30/2017								12/31/2016
	(l) Over-collateralized assets				(II) Under-collateralized assets				(l) Over-collateralized assets				(II) Under-collateralized assets
	Carrying				Carrying				Carrying				Carrying
	value of the		Fair value of		value of the		Fair value of		value of the		Fair value of		value of the		Fair value of
Financial effect of collateral	assets		collateral		assets		collateral		assets		collateral		assets		collateral
Individuals		52,357		129,881		961		871		51,587		128,555		790		743
Personal		580		1,676		679		647		443		1,297		682		652
Vehicles		13,606		34,656		245		213		13,039		35,995		107		90
Mortgage loans		38,171		93,549		37		11		38,105		91,263		1		1
Small, medium businesses and corporate		120,410		350,028		9,107		5,412		122,353		368,937		12,324		6,729
Foreign loans - Latin America		98,153		161,077		10,251		3,773		97,374		155,923		9,420		4,803
Total		270,920		640,986		20,319		10,056		271,314		653,415		22,534		12,275

The difference between the total loan portfolio and collateralized loan portfolio is generated by non-collateralized loans amounting to R$ 188,631 (R$ 196,518 at 12/31/2016).

ITAÚ UNIBANCO HOLDING uses collateral to reduce the occurrence of losses in operations with credit risk and manages and regularly reviews its collateral with the objective that collateral held is sufficient, legally exercisable (effective) and feasible. Thus, collateral is used to maximize the recoverability potential of impaired loans and not to reduce the exposure value of customers and counterparties.

Individuals

Personal – This category of credit products usually requires collateral, focusing on financial guarantees provided.

Vehicles – For this type of operation, clients' assets serve as collateral, which are also the leased assets in leasing operations.

Mortgage loans – Regards buildings themselves given in guarantee.

Small, Medium Businesses and Corporate – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety / joint debtor, Mortgage and others).

Foreign loans – Latin America – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety/joint debtor, Mortgage and others).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 154

7. Repossessed assets

Repossessed assets are recognized as assets when possession is effectively obtained.

Assets received from the foreclosure of loans, including real estate, are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, or (ii) the carrying amount of the loan.

Further impairment of assets is recorded as a provision, with a corresponding charge to income. The maintenance costs of these assets are expensed as incurred.

The policy for sales of these assets (assets not for use) includes periodic auctions that are announced in advance and considers that the assets cannot be held for more than one year as stipulated by the BACEN. This period may be extended at the discretion of BACEN.

The amounts below represent total assets repossessed in the period:

	04/01 to		04/01 to		01/01 to		01/01 to
	06/30/2017		06/30/2016		06/30/2017		06/30/2016
Real estate not for own use		20		11		93		11
Residential properties - mortgage loans		54		112		107		250
Vehicles - linked to loan operations		1		4		2		8
Other (vehicles / furniture / equipments) - dation		19		95		126		99
Total		94		222		328		368

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 155

Market risk

Market risk is the possibility of incurring financial losses arising from the changes in the market value of positions held by a financial institution, including the risks of transactions subject to foreign exchange variation, interest rates, share prices, price indexes and commodity prices, among other indices related to risk factors.

Market risk management is the process through which the ITAÚ UNIBANCO HOLDING monitors and controls the risks of variations in financial instruments market values due market changes, aimed at optimizing the risk-return ratio, by using an appropriate structure of limits, alerts, models and adequate management tools.

The policy of risk management the ITAÚ UNIBANCO HOLDING is in line with the principles of CMN Resolution No. 3,464 of June 26, 2007, and posterior amendments, comprising a set of principles that drive the institution’s strategy of control and management of market risks in all business units and legal entities of ITAÚ UNIBANCO HOLDING.

The document set forth by the corporate guidelines on market risk management, that is not part of the financial statements, may be viewed on the website www.itau.com.br/relacoes-com-investidores, in the section Corporate Governance / Rules and Policies / Public Access Report - Market Risk.

The risk management strategy of ITAÚ UNIBANCO HOLDING tries to achieve a balance between business objectives, considering among others:

· Political, economic and market context;

· Portfolio profile of ITAÚ UNIBANCO HOLDING;

· Capacity to operate in specific markets.

The process for managing the market risk of ITAÚ UNIBANCO HOLDING is conducted within the governance and hierarchy of committees and a framework of limits and warnings approved specifically for this purpose, covering different levels and classes of market risk (such as interest rate, and exchange variation risk, among others). This framework of limits and warnings covers from the monitoring of risk aggregate indicators (portfolio level) to granular limits (individual desk level). The framework of market risk ranges from the risk factor level, with specific limits aiming at improving the risk monitoring and understanding process, and at avoiding risk concentration. These limits are quantified by assessing the forecasted results of the balance sheet, size of stockholders’ equity, liquidity, markets complexity and volatility and the institution’s appetite for risk. Limits are monitored daily and excesses and potential violations are reported and discussed for each established limit:

· Within one business day, for management of business units in charge and executives of the risk control area and business areas; and

· Within one month, for proper committees.

Daily risk reports, used by the business and control departments, are issued for senior management. Additionally, the risk control and management process is submitted to periodic reviews for the purpose of keeping it in line with the best market practices and adherent to the ongoing improvement processes at ITAÚ UNIBANCO HOLDING.

The structure of limits and alerts follows the Board of Directors' guidelines and is approved by panels. The process to definite limit levels and violation reports follow the governance to approve the internal policies of ITAÚ UNIBANCO HOLDING. The information flow established aims at disseminating information to the several levels of executives of the institution, including the members of the Executive Board, by means of the Committees in charge of risk management. This limit and warning framework increases effectiveness and the control coverage is reviewed at least on an annual basis.

The purpose of market risk of ITAÚ UNIBANCO HOLDING structure is:

· Providing visibility and assurance to all executive levels that the assumption of market risks is in line with ITAÚ UNIBANCO HOLDING and the risk-return objective;

· Promoting disciplined and educated discussion on the global risk profile and its evolution over time;

· Increasing transparency on the way the business seeks to optimize results;

· Providing early warning mechanisms in order to make the effective risk management easier, without jeopardizing the business purposes; and

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 156

· Monitoring and avoiding risk concentration.

The market risk is controlled by an area independent from the business areas, which is responsible for the daily activities of: (i) risk measurement and assessment, (ii) monitoring of stress scenarios, limits and warnings, (iii) application, analysis and tests of stress scenarios, (iv) risk reporting for individuals responsible within the business areas, in compliance with governance of ITAÚ UNIBANCO HOLDING, (v) monitoring of actions required for adjustment of positions and/or risk levels to make them feasible, and (vi) support to the launch of new financial products with security. For that purpose, ITAÚ UNIBANCO HOLDING has a structured reporting and information process and an information flow that provides input for the follow-up by committees and complies with the requirements of Brazilian and foreign regulatory agencies.

ITAÚ UNIBANCO HOLDING hedges transactions with clients and proprietary positions, including foreign investments, aiming at mitigating risks arising from fluctuations in market factors and maintaining the classification the transactions into the current exposure limits. Derivatives are the most frequently used instruments for these hedges. When these transactions are designed for as hedge accounting, specific supporting documentation is prepared, including continuous review of the hedge effectiveness (retrospective and prospective) and other changes in the accounting process. Accounting and managerial hedge are governed by corporate guidelines of ITAÚ UNIBANCO HOLDING.

For a detailed vision of the accounting hedge topic, see Note 9 – Hedge accounting.

The market risk structure categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with general criteria established by the National Monetary Council Resolution No. 3,464 and BACEN Circular No. 3,354 of June 27, 2007.

The trading portfolio consists of all transactions involving financial instruments and goods, including derivatives, which are carried out with the intention of trading.

The banking portfolio is basically characterized by transactions from the banking business and transactions related to the management of the balance sheet of the institution. It has the no-intention of resale and medium and long term time horizons as general guidelines.

Exposures to market risks inherent in the many different financial instruments, including derivatives, are broken down into a number of risk factors, primary market components for pricing. The main risk factors measured by ITAÚ UNIBANCO HOLDING are:

· Interest rates: the risk of losses from transactions subject to interest rate variations, foreign-currency coupons and price-index coupons;

· Currencies: the risk of losses from transactions subject to foreign exchange rate variation;

· Shares: the risk of losses from transactions subject to share price variations;

· Commodities: the risk of losses from transactions subject to commodity price variations.

The CMN has regulations that establish the segregation of exposure to market risk at least in the following categories: interest rate, exchange rate, shares and commodities. Inflation rates are addressed as a group of risk factors and received the same treatment as the other risk factors, such as interest rates, exchange rates, etc., and follow the structure of risk and limits governance adopted by ITAÚ UNIBANCO HOLDING to manage market risk.

Market risk is analyzed based on the following metrics:

· Value at risk (VaR): statistical metric that estimates the expected maximum potential economic loss under normal market conditions, taking into consideration a certain time horizon and confidence level;

· Losses in stress scenarios (Stress test): simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when several risk factors are taken to extreme market situations (based on prospective and historical scenarios) in the portfolio;

· Stop loss: metrics which purpose is to review positions, should losses accumulated in a certain period reach a certain amount;

· Concentration: cumulative exposure of a certain financial instruments or risk factor calculated at market value (“MtM – Mark to Market”); and

· Stressed VaR: statistical metric resulting from the VaR calculation, with the purpose of capturing the highest risk in simulations for the current portfolio, considering the returns that can be observed in historic scenarios of extreme volatility.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 157

In addition to the risk measures, sensitivity and loss control measures are also analyzed. They comprise:

· Gap analysis: accumulated exposure, by risk factor, of cash flows expressed at market value, allocated at the maturity dates;

· Sensitivity (DV01 – Delta Variation): the impact on the cash flows market value when submitted to an one annual basis point increase in the current interest rates or index rate;

· Sensitivity to the Several Risk Factors (Greeks): partial derivatives of an options portfolio in relation to the underlying assets price, implicit volatility, interest rate and timing.

ITAÚ UNIBANCO HOLDING uses proprietary systems to measure the consolidated market risk. The processing of these systems occur, in an access-controlled environment, being highly available, which has data safekeeping and recovery processes, and counts on such an infrastructure to ensure the continuity of business in contingency (disaster recovery) situations.

VaR - Consolidated ITAÚ UNIBANCO HOLDING

Consolidated VaR of ITAÚ UNIBANCO HOLDING is calculated through the Historical Simulation methodology, which fully reflects all its positions based on the historical series of asset prices. In the first quarter of 2016, o ITAÚ UNIBANCO HOLDING opted for including the exposures of each foreign unit in the calculation of ITAÚ UNIBANCO HOLDING’s Consolidated VaR, so as to take into account the risk factors of these units, thus improving the methodology used.

The Consolidated Total VaR table provides an analysis of the exposure to market risk of ITAÚ UNIBANCO HOLDING portfolios.

ITAÚ UNIBANCO HOLDING maintaining its conservative management and portfolio diversification, continued with its policy of operating within low limits in relation to its capital in the period. In this quarter, the Total Average VaR remained lower than 1% of ITAÚ UNIBANCO HOLDING`s stockholders` equity, in line with that recorded in the previous quarter.

From January 1 to June 30, 2017, the average total VaR in Historical Simulation was R$ 432.9, or 0.31% of total stockholders’ equity (throughout 2016 it was R$ 236.6 or 0.18% of total stockholders’ equity).

	VaR Total - Historical Simulation
	06/30/2017									12/31/2016
	Average		Minimum		Maximum		Var Total			Average		Minimum		Maximum		Var Total
Risk factor group
Interest rates		749.9		583.6		1,311.9		666.5			482.5		323.7		607.4		607.4
Currencies		17.1		6.5		29.7		6.5			18.4		6.8		33.2		17.0
Shares		43.9		38.5		49.3		41.4			45.2		34.0		63.3		44.3
Commodities		1.2		0.7		4.0		4.0			1.7		0.7		4.0		0.8
Effect of diversification								(257.6	)								(339.7	)
Total risk		432.9		304.8		874.0		460.8			236.6		155.1		341.5		329.8

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 158

Interest rate

The table on the position of accounts subject to interest rate risk group them by products, book value of accounts distributed by maturity. This table is not used directly to manage interest rate risks; it is mostly used to enable the assessment of mismatching between accounts and products associated thereto and to identify possible risk concentration.

The following table sets forth our interest-earning assets and interest-bearing liabilities and therefore does not reflect interest rate gap positions that may exist as of any given date. In addition, variations in interest rate sensitivity may exist within the repricing periods presented due to differing repricing dates within the period.

Position of accounts subject to interest rate risk ⁽¹⁾

	06/30/2017																	12/31/2016
	0-30			31-180			181-365			1-5			Over 5					0-30			31-180			181-365			1-5			Over 5
	days			days			days			years			years			Total		days			days			days			years			years			Total
Interest-bearing assets		398,404			201,139			98,415			341,264			187,363			1,226,585		389,843			219,332			95,331			347,743			167,400			1,219,649
Interbank deposits		20,657			5,613			997			1,445			3			28,715		13,286			4,676			3,541			1,189			-			22,692
Securities purchased under agreements to resell		204,259			56,458			623			2			101			261,443		201,525			63,180			35			281			30			265,051
Central Bank compulsory deposits		84,364			-			-			-			-			84,364		82,698			-			-			-			-			82,698
Held-for-trading financial assets		11,860			11,610			13,340			121,171			65,230			223,211		6,971			14,194			13,041			118,050			52,392			204,648
Financial assets held for trading and designated at fair value through profit or loss		-			-			1,410			-			-			1,410		-			-			1,191			-			-			1,191
Available-for-sale financial assets		3,806			6,462			7,050			42,902			28,955			89,175		5,994			10,539			7,103			38,969			25,672			88,277
Held-to-maturity financial assets		359			721			9,007			10,803			18,202			39,092		1,370			528			600			19,376			18,621			40,495
Derivatives		5,784			2,560			2,152			5,636			3,173			19,305		5,815			5,470			2,826			6,940			3,180			24,231
Loan and lease operations portfolio		67,315			117,715			63,836			159,305			71,699			479,870		72,184			120,745			66,994			162,938			67,505			490,366
Interest-bearing liabilities		335,399			92,915			101,604			268,040			71,770			869,728		325,240			90,653			111,907			287,433			62,298			877,531
Savings deposits		109,517			-			-			-			-			109,517		108,250			-			-			-			-			108,250
Time deposits		24,652			30,947			19,168			92,965			8,401			176,133		30,554			28,249			17,110			78,032			2,329			156,274
Interbank deposits		969			1,187			297			233			-			2,686		1,176			1,918			625			36			2			3,757
Deposits received under repurchase agreements		184,209			5,156			43,866			68,985			19,706			321,922		172,411			6,844			55,314			97,056			17,539			349,164
Interbank market		7,910			42,368			22,837			53,768			9,989			136,872		6,535			38,590			30,227			50,590			9,541			135,483
Institutional market		3,222			10,828			13,724			38,451			31,281			97,506		951			11,490			6,612			46,883			30,303			96,239
Derivatives		4,892			2,414			1,681			10,141			2,292			21,420		5,294			3,555			1,961			11,394			2,494			24,698
Financial liabilities held for trading		28			15			31			282			101			457		69			7			58			295			90			519
Liabilities for capitalization plans		-			-			-			3,215			-			3,215		-			-			-			3,147			-			3,147
Difference asset / liability (2)		63,005			108,224			(3,189	)		73,224			115,593			356,857		64,603			128,679			(16,576	)		60,310			105,102			342,118
Cumulative difference		63,005			171,229			168,040			241,264			356,857					64,603			193,282			176,706			237,016			342,118
Ratio of cumulative difference to total interest-bearing assets		5.1	%		14.0	%		13.7	%		19.7	%		29.1	%				5.3	%		15.8	%		14.5	%		19.4	%		28.1	%

(1) Remaining contractual terms.

(2) The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end date, considering the contractually agreed terms.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 159

Position of accounts subject to currency risk

	06/30/2017
Assets	Dollar		Chilean Peso		Other		Total
Cash and deposits on demand		7,895		1,919		4,169		13,983
Interbank deposits		7,690		2,379		12,135		22,204
Securities purchased under agreements to resell		570		475		173		1,218
Financial assets held for trading		7,174		264		2,989		10,427
Financial assets designated at fair value through profit or loss		1,410		-		-		1,410
Derivatives		3,508		5,350		558		9,416
Available-for-sale financial assets		19,423		6,625		4,584		30,632
Held-to-maturity financial assets		11,805		-		438		12,243
Loan operations and lease operations portfolio, net		41,236		74,784		41,190		157,210
Total assets		100,711		91,796		66,236		258,743

	06/30/2017
Liabilities	Dollar			Chilean Peso		Other		Total
Deposits		41,632			45,827		48,958		136,417
Securities sold under repurchase agreements		17,245			1,502		1,510		20,257
Financial liabilities held for trading		457			-		-		457
Derivatives		3,831			4,137		375		8,343
Interbank market debt		31,605			5,070		3,370		40,045
Institutional market debt		37,308			29,017		3,240		69,565
Total liabilities		132,078			85,553		57,453		275,084
Net position		(31,367	)		6,243		8,783		(16,341	)

	12/31/2016
Assets	Dollar		Chilean Peso		Other		Total
Cash and deposits on demand		6,719		1,581		3,164		11,464
Central Bank compulsory deposits		81		-		5,288		5,369
Interbank deposits		8,860		1,007		6,781		16,648
Securities purchased under agreements to resell		199		112		660		971
Financial assets held for trading		6,833		305		3,607		10,745
Financial assets designated at fair value through profit or loss		1,191		-		-		1,191
Derivatives		5,313		4,873		452		10,638
Available-for-sale financial assets		22,513		8,337		3,898		34,748
Held-to-maturity financial assets		12,519		-		540		13,059
Loan operations and lease operations portfolio, net		43,641		73,325		41,034		158,000
Total assets		107,869		89,540		65,424		262,833

	12/31/2016
Liabilities	Dollar			Chilean Peso		Other		Total
Deposits		37,824			51,330		47,331		136,485
Securities sold under securities repurchase agreements		18,353			27		2,558		20,938
Financial liabilities held for trading		519			-		-		519
Derivatives		4,783			4,105		282		9,170
Interbank market debt		34,659			5,932		2,451		43,042
Institutional market debt		37,077			23,643		3,284		64,004
Total liabilities		133,215			85,037		55,906		274,158
Net position		(25,346	)		4,503		9,518		(11,325	)

The exposure to share price risk is disclosed in Note 7 related to financial assets held for trading and Note 10, related to available-for-sale financial assets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 160

Liquidity risk

Liquidity risk is defined as the possibility of the institution not being able to efficiently honor its expected and unexpected, current and future obligations, including those arising from guarantee binding, without affecting its daily operations and not incurring in significant losses.

Policies and procedures

Liquidity risk control is performed by an area independent of the business areas and is responsible for determining the composition of the reserve; proposing assumptions for the behavior of cash flow; identifying, assessing, monitoring, controlling and reporting, on a daily basis, the exposure to liquidity risk in different time horizons; proposing and monitoring liquidity risk limits consistent with the institution’s appetite for risk, reporting possible mismatches; considering the liquidity risk individually in the countries where ITAÚ UNIBANCO HOLDING operates; simulating the behavior of cash flow under stress conditions; assessing and reporting in advance the risks inherent in new products and transactions, and reporting the information required regulatory bodies. All activities are subject to checking by validation, internal control and audit independent areas.

The measurement of liquidity risk covers all financial transactions of ITAÚ UNIBANCO HOLDING companies, as well as possible contingent or unexpected exposures, such as those arising from settlement services, provision of collaterals and guarantees, and credit facilities contracted and not used. This process is conducted by means of corporate systems and proprietary applications developed and managed in-house.

The liquidity management policies and respective limits are established based on prospective scenarios and top management’s guidelines. These scenarios are reviewed on a periodic basis, by analyzing the need for cash due to atypical market conditions or resulting from strategic decisions of ITAÚ UNIBANCO HOLDING.

The document that details the guidelines established by the internal policy on liquidity risk management, that is not part of the financial statements, may be viewed on the website www.itau.com.br/relacoes-com-investidores, in the section Corporate Governance/Rules and Policies / Public Access Report – Liquidity Risk.

ITAÚ UNIBANCO HOLDING conducts the control over and management of liquidity risk on a daily basis, through a governance approved in superior committees, which sets forth, among other activities, the adoption of liquidity minimum limits, sufficient to absorb possible cash losses in stress scenarios, measured through internal and regulatory methodologies.

Additionally, and in compliance with the requirements of CMN Resolution No. 4,090 of May 24, 2012 and BACEN Circular N° 3,749 of March 5, 2015 , the Statement of Liquidity Risk (DRL) is sent to BACEN on a monthly basis, and the following items for monitoring and supporting decisions are periodically prepared and submitted to top management:

· Different scenarios projected for changes in liquidity;

· Contingency plans for crisis situations;

· Reports and charts that describe the risk positions;

· Assessment of funding costs and alternative sources of funding;

· Monitoring of changes in funding through a constant control over sources of funding, considering the type of investor and maturities, among other factors;

In compliance with BACEN Circular Letter 3.775, of July 14, 2016, banks holding total assets over R$ 100 billion are required, since October 2015, to report a standardized Liquidity Coverage Ratio (LCR) ratio to the Central Bank of Brazil, which is reported on a consolidated basis for institutions that are part of the Prudential Conglomerate. This ratio is calculated based on a methodology defined by the Central Bank of Brazil itself, and is in line with international guidelines of Basel.

The summarized calculation of the indicator is as follows. In 2017, the minimum indicator requirement is 80%. For more detail on the short-term liquidity indicator, that is not part of the financial statements, visit investor-relations, section Corporate Governance / Risk and Capital Management – Pillar 3.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 161

	2nd quarter 2017
Information on the Liquidity Coverage Ratio (LCR)	Total Adjusted Amount(1)
Total high-quality liquid assets (2)		185,287
Total potential cash outflows (3)		91,879
Liquidity Coverage Ratio (%)		201.7	%

(1)    Corresponds to the amount calculated after the application of weighting factors and limits established by BACEN Circular No. 3,749.

(2)    HQLA - High quality liquid assets: balance in the stock, which in certain cases weighted by a discount factor, of assets that remain liquid in the markets during a stress period, which can be easily converted into cash and that pose low risk.

(3)    Potential cash outflows calculated in standardized stress, determined by Circular No. 3.749 (outflows), subtracted from (i) potential cash inflows calculated under standardized stress, set forth by Circular No. 3,749 and (ii) 75% x Outflows, whichever is lower.

Primary sources of funding

ITAÚ UNIBANCO HOLDING has different sources of funding, of which a significant portion is from the retail segment. Total funding from clients reached R$ 602.3 billion (R$ 612.7 billion at 12/31/2016), particularly funding from time deposits. A considerable portion of these funds – 34.4% of total, or R$ 207.1 billion – is available on demand to the client. However, the historical behavior of the accumulated balance of the two largest items in this group – demand and savings deposits - is relatively consistent with the balances increasing over time and inflows exceeding outflows for monthly average amounts.

	06/30/2017						12/31/2016
Funding from clients	0-30 days		Total		%		0-30 days		Total		%
Deposits		199,129		352,327		-		201,113		329,414
Demand deposits		63,989		63,989		10.6		61,133		61,133		10.0
Savings deposits		109,517		109,517		18.2		108,250		108,250		17.7
Time deposits		24,652		176,133		29.2		30,554		156,274		25.5
Other		971		2,688		0.4		1,176		3,757		0.6
Funds from acceptances and issuance of securities (1)		5,475		108,076		17.9		3,091		93,711		15.3
Funds from own issue (2)		1,532		89,814		14.9		2,561		132,149		21.6
Subordinated debt		1,004		52,105		8.7		628		57,420		9.4
Total		207,140		602,322		100.0		207,393		612,694		100.0

(1)  Includes mortgage notes, real estate credit bills, agribusiness, financial and structured operations certificates recorded in interbank market and debts and liabilities for issuance of debentures and foreign borrowing and securities recorded in funds from institutional markets.

(2)  Refer to deposits received under securities repurchase agreements with securities from own issue.

Control over liquidity

ITAÚ UNIBANCO HOLDING manages its liquidity reserves based on estimates of funds that will be available for investment, considering the continuity of business in normal conditions.

During the period of 2017, ITAÚ UNIBANCO HOLDING maintained appropriate levels of liquidity in Brazil and abroad. Liquid assets (cash and deposits on demand, securities purchased under agreements to resell - funded position and government securities – available, detailed in the table Undiscounted future flows – Financial assets) totaled R$ 177.6 billion and accounted for 85.7% of the short term redeemable obligations, 29.5% of total funding, and 19.5% of total assets.

The table below shows the indicators used by ITAÚ UNIBANCO HOLDING in the management of liquidity risk:

	06/30/2017		12/31/2016
Liquidity indicators	%		%
Net assets (1) / funds within 30 days (2)		85.7		84.2
Net assets (1) / total funds (3)		29.5		28.5
Net assets (1) / total assets (4)		19.5		19.0

(1) Net assets: Cash and deposits on demand, Securities purchased under agreements to resell – Funded position and Government securities - available. Detailed in the table Undiscounted future flows – Financial assets.

(2) Table Funding from clients (Total Funding from clients 0-30 days).

(3) Table funding from clients (Total funding from clients).

(4) Detailed in the table Undiscounted future flows – Financial assets, total present value regards R$ 910,790 (R$ 918,080 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 162

The following table presents assets and liabilities according to their remaining contractual maturities, considering their undiscounted flows.

Undiscounted future flows except for derivatives	06/30/2017										12/31/2016
Financial assets (1)	0 - 30 days		31 - 365 days		366 - 720 days		Over 720 days		Total		0 - 30 days		31 - 365 days		366 - 720 days		Over 720 days		Total
Cash and deposits on demand		22,700		-		-		-		22,700		18,542		-		-		-		18,542
Interbank investments		237,116		44,980		1,437		276		283,809		219,066		58,275		1,171		292		278,804
Securities purchased under agreements to resell – Funded position (2)		40,706		-		-		-		40,706		77,452		-		-		-		77,452
Securities purchased under agreements to resell – Financed position		175,734		38,201		-		53		213,988		128,303		49,749		-		-		178,052
Interbank deposits		20,676		6,779		1,437		223		29,115		13,311		8,526		1,171		292		23,300
Securities		113,660		9,717		10,035		56,507		189,919		82,163		16,757		12,415		74,479		185,814
Government securities - available		108,423		67		65		5,645		114,200		75,310		20		40		6,088		81,458
Government securities – subject to repurchase commitments		216		1,017		2,688		1,172		5,093		556		4,732		5,990		14,808		26,086
Private securities - available		5,019		8,207		6,535		44,255		64,016		6,297		11,728		5,424		47,866		71,315
Private securities – subject to repurchase commitments		2		426		747		5,435		6,610		-		277		961		5,717		6,955
Derivative financial instruments		5,784		4,712		2,132		6,677		19,305		5,815		8,296		3,159		6,961		24,231
Net position		5,784		4,712		2,132		6,677		19,305		5,815		8,296		3,159		6,961		24,231
Swaps		74		1,437		1,387		6,017		8,915		828		1,967		1,497		6,250		10,542
Option		1,357		1,210		408		176		3,151		354		2,881		1,397		160		4,792
Forward (onshore)		3,842		467		-		-		4,309		3,947		1,024		-		-		4,971
Other derivative financial instruments		511		1,598		337		484		2,930		686		2,424		265		551		3,926
Loan and lease operations portfolio (3)		55,499		156,005		80,736		212,550		504,790		61,602		176,002		81,224		211,908		530,736
Total financial assets		434,759		215,414		94,340		276,010		1,020,523		387,188		259,330		97,969		293,640		1,038,127

(1)  The assets portfolio does not take into consideration the balance of compulsory deposits in Central Bank, amounting to R$ 88,607 (R$ 85,700 at 12/31/2016), which release of funds is linked to the maturity of the liability portfolios. The amounts of PGBL and VGBL are not considered in the assets portfolio because they are covered in Note 30.

(2)  Net of R$ 3,575 (R$ 4,329 at 12/31/2016) which securities are restricted to guarantee transactions at B3 S.A. and the Central Bank of Brazil.

(3)  Net of payment to merchants of R$ 44,314 (R$ 43,837 at 12/31/2016) and the amount of liabilities from transactions related to credit assignments R$ 5,340 (R$ 5,711 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 163

Undiscounted future flows except for derivatives	06/30/2017															12/31/2016
	0 – 30			31 – 365			366 – 720			Over 720						0 – 30			31 – 365			366 – 720			Over 720
Financial liabilities	days			days			days			days			Total			days			days			days			days			Total
Deposits		202,350			53,559			11,449			126,450			393,808			201,167			44,545			13,106			107,055			365,873
Demand deposits		63,989			-			-			-			63,989			61,133			-			-			-			61,133
Savings deposits		109,517			-			-			-			109,517			108,250			-			-			-			108,250
Time deposit		27,569			52,339			11,240			126,418			217,566			30,295			41,971			13,088			107,033			192,387
Interbank deposits		1,273			1,220			209			32			2,734			1,489			2,574			18			22			4,103
Other deposits		2			-			-			-			2			-			-			-			-			-
Compulsory deposits		(38,333	)		(16,569	)		(3,339	)		(30,366	)		(88,607	)		(42,314	)		(13,885	)		(3,985	)		(25,516	)		(85,700	)
Demand deposits		(4,244	)		-			-			-			(4,244	)		(8,092	)		-			-			-			(8,092	)
Savings deposits		(25,114	)		-			-			-			(25,114	)		(24,791	)		-			-			-			(24,791	)
Time deposit		(8,975	)		(16,569	)		(3,339	)		(30,366	)		(59,249	)		(9,431	)		(13,885	)		(3,985	)		(25,516	)		(52,817	)
Securities sold under repurchase agreements (1)		225,909			50,945			40,879			42,978			360,711			209,521			59,771			42,410			87,069			398,771
Government securities		191,257			7,013			7,450			20,895			226,615			168,301			5,600			5,764			33,812			213,477
Private securities		5,859			43,931			33,429			22,083			105,302			13,753			54,171			36,646			53,257			157,827
Foreign		28,793			1			-			-			28,794			27,467			-			-			-			27,467
Funds from acceptances and issuance of securities (2)		5,511			40,531			25,382			46,736			118,160			3,003			35,659			28,974			36,858			104,494
Borrowing and onlending (3)		5,259			39,568			10,225			20,763			75,815			5,077			46,527			11,000			20,943			83,547
Subordinated debt (4)		801			13,612			6,919			44,333			65,665			271			13,501			16,621			41,043			71,436
Derivative financial instruments		4,892			4,095			4,192			8,241			21,420			5,294			5,516			3,726			10,162			24,698
Net position		4,892			4,095			4,192			8,241			21,420			5,294			5,516			3,726			10,162			24,698
Swaps		83			1,420			3,535			7,335			12,373			461			1,702			2,352			8,706			13,221
Option		700			1,127			408			129			2,364			837			1,888			1,116			711			4,552
Forward (onshore)		3,722			-			-			-			3,722			3,530			-			-			-			3,530
Other derivative financial instruments		387			1,548			249			777			2,961			466			1,926			258			745			3,395
Total financial liabilities		406,389			185,741			95,707			259,135			946,972			382,019			191,634			111,852			277,614			963,119

(1)  Includes own and third parties’ portfolios.

(2)  Includes mortgage notes, real estate credit bills, agribusiness, financial bills and structured operations certificates recorded in interbank market funds and liabilities for issuance of debentures and foreign securities recorded in funds from institutional markets.

(3)  Recorded in funds from interbank markets.

(4)  Recorded in funds from institutional markets.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 164

	06/30/2017										12/31/2016
Off balance sheet	0 – 30 days		31 – 365 days		366 – 720 days		Over 720 days		Total		0 – 30 days		31 – 365 days		366 – 720 days		Over 720 days		Total
Financial Guarantees Provided		1,095		18,160		4,915		48,305		72,475		1,645		16,203		5,603		47,342		70,793
Commitments to be released		90,530		33,874		7,103		90,833		222,340		90,279		42,522		11,657		77,916		222,374
Letters of credit to be released		7,297		-		-		-		7,297		6,660		-		-		-		6,660
Contractual commitments - Fixed assets and Intangible (Notes 15 and 16)		-		190		84		97		371		-		310		-		-		310
Total		98,922		52,224		12,102		139,235		302,483		98,584		59,035		17,260		125,258		300,137

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 165

Social and Environmental Risk

ITAÚ UNIBANCO HOLDING’s social and environmental risk as the risk of potential losses due to exposure to social and environmental damages arising from the performance of its activities.

Mitigation actions concerning the social and environmental risk are carried out by mapping processes, risks and controls, monitoring new regulations on the subject, and recording any occurrences in internal databases. In addition to risk identification, giving priority, responding to, monitoring and reporting assessed risks serve to supplement ITAÚ UNIBANCO HOLDING’s social and environmental risk management.

The social and environmental risk management is carried out by the first line of defense in its daily operations, supplemented by the technical support of the legal and risk control area, which has teams specialized in the social and environmental risk management. Business units also have governance for approval of new products, which includes the assessment of the social and environmental risk, therefore ensuring compliance with this requirement for all new products approved by the ITAÚ UNIBANCO HOLDING. Governance still has the Social and Environmental Risk Committee, which main duty is to guide the institutional understanding related to exposure to social and environmental risk for the institution’s activities and operations.

ITAÚ UNIBANCO HOLDING consistently seeks to evolve in the social and environmental risk governance, always attentive to any challenges to keep pace with the changes in and demands of society. Therefore, among other actions, ITAÚ UNIBANCO HOLDING has assumed and incorporated into its internal processes a number of national and international voluntary commitments and pacts aimed at integrating social, environmental and governance aspects into business. Highlights go to the Principles for Responsible Investment (PRI), the Charter for Human Rights – Ethos, the Equator Principles (EP), the Global Compact, the Carbon Disclosure Project (CDP), the Brazilian GHG Protocol Program, and the Brazilian Pact for Eradicating Slave Labor, among others. ITAÚ UNIBANCO HOLDING’s efforts to spread knowledge on the assessment of social and environmental criteria have been recognized in Brazil and overseas, as shown by our recurring presence in top sustainability indexes, both abroad, with the Dow Jones Sustainability Index, and more recently, with the Sustainability Index Euronext Vigeo – Emerging 70, and in Brazil, with the Corporate Sustainability Index, in addition to other numerous prizes with which ITAÚ UNIBANCO HOLDING has been awarded.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 166

Note 37 – Supplementary information

Citibank’s retail operations

On October 8, 2016, ITAÚ UNIBANCO HOLDING S.A. entered, by means of its subsidiaries, into a share purchase and sale agreement with Banco Citibank S.A. and with other companies of its conglomerate (Citibank) for the acquisition of the retail activities carried out by Citibank in Brazil, including loans, deposits, credit cards, branches, assets under management and insurance brokerage, as well as the equity investments held by Citibank in TECBAN – Tecnologia Bancária S.A. (representing 5.64% of its capital) and in Cibrasec – Companhia Brasileira de Securitização (representing 3.60% of its capital), for R$ 710.

This operation will involve the corporate restructuring of some companies of the Citibank conglomerate so that the retail business in Brazil is spun off and transferred to the companies that will be the subject matter of the acquisition.

The effective acquisitions and financial settlements will take place after compliance with some contractual conditions and the obtainments of the necessary regulatory authorizations.

The acquisition will not have accounting impacts on ITAÚ UNIBANCO HOLDING's results.

Sale of Group Life Insurance Portfolio

On September 19, 2016, ITAÚ UNIBANCO HOLDING entered into a purchase and sale share agreement with Prudential do Brasil Seguros de Vida S.A. (Prudential) whereby 100% of its group life insurance operations, which account for approximately 4% of the total assets belonging to Itaú Seguros S.A. (Itaú Seguros), controlled by ITAÚ UNIBANCO HOLDING, were sold.

To complete the transaction, Itaú Seguros was split and group life insurance operations were transferred to IU Seguros S.A. (IU Seguros), whose total capital was sold to Prudential on April 1^st, 2017, after conditions precedent, which included obtaining approval of relevant regulatory authorities, were met.

This transaction reiterates ITAÚ UNIBANCO HOLDING´s strategy to focus on massive insurance products and services, typically associated with retail banking, and it is not expected to have significant accounting effects on the results of its operations.

Acquisition of minority interest in XP Investimentos S.A.

On May 11, 2017, ITAÚ UNIBANCO HOLDING, through its subsidiary Itaú Unibanco S.A. (Itaú Unibanco), entered into an agreement for the purchase and sale of shares with XP Controle Participações S.A. (XP Controle), G.A. Brasil IV Fundo de Investimento em Participações, Dyna III Fundo de Investimento em Participações, among other parties (Sellers), for acquisition of 49.9% of total capital (30.1% of common shares) of XP Investimentos S.A. (XP Holding), by means of capital contribution of R$ 600 and acquisition of shares issued by XP Holding and held by the Sellers in the amount of R$ 5,700. Such amounts are subject to contractual adjustments (First Acquisition).

In addition to the First Acquisition, Itaú Unibanco undertook to acquire (i) in 2020, and additional percentage of 12.5%, that will ensure it 62.4% of total capital of XP Holding (40.0% of common shares), based on a multiple (19 times) applied to XP Holding’s earnings, and (ii) in 2022, the additional percentage of 12.5%, which will ensure it 74.9% of total capital of XP Holding (49.9% of common shares), based on the fair market value of XP Holding at that time, being clear that the control of XP Group, including XP Investimentos, will continue with the shareholders of XP Controle, that will hold the majority of voting shares.

Itaú Unibanco will act as a minority partner and will not influence commercial and operating policies of XP Investimentos or of any other company belonging to XP Group.

Effective acquisitions and financial settlements will occur after compliance with certain contractual conditions and obtainment of required regulatory authorizations.

The acquisition will not have accounting effects on the results of ITAÚ UNIBANCO HOLDING.

Itaú Unibanco Holding S.A. – Complete Financial Statements in IFRS – June 30, 2017 167