EX-99.1 2 tv484941_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Contents

Management Discussion & Analysis	03

Executive Summary	05

Income Statement and Balance Sheet Analysis	15

Managerial Financial Margin	16

Cost of Credit	17

Credit Quality	19

Commissions and Fees & Result from Insurance, Pension Plan and Premium Bonds	22

Insurance, Pension Plan and Premium Bonds Operations	25

Non-interest Expenses	28

Balance Sheet	30

Credit Portfolio	31

Funding	33

Balance Sheet by Currency	34

Risk and Capital Management	35

Results by Business Segments	37

Results by Region - Brazil and Latin America	40

Activities Abroad	41

Additional Information	45

Itaú Unibanco Shares	46

Disclosure Criteria	47

Report of Independent Auditors	48

Complete Financial Statements	49

(This page was intentionality left blank)

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Itaú Unibanco Pro forma Information

As from the second quarter of 2016, Itaú CorpBanca, the company resulting from the merger between Banco Itaú Chile and CorpBanca, was consolidated in our financial statements, as we are the controlling shareholder of the new bank. In order to allow comparison with previous periods, historical pro forma data of the combined results of Itaú Unibanco and CorpBanca for the periods previous to the second quarter of 2016 will be presented in the Management Discussion & Analysis report.

The pro forma statements above mentioned were prepared considering all lines of the income statement, including 100% of Itaú CorpBanca’s result. The result related to the minority shareholders is shown in the “minority interests in subsidiaries” line, for both CorpBanca and Itaú Chile.

As the historical data was prepared to demonstrate, on a retroactively basis, the effect of a transaction occurred in a subsequent date, there are limitations inherent to pro forma information. The historical data was provided for illustration purposes only and should not be taken as a demonstration of the result that would have been achieved if the merger had occurred on a previous date, nor do they indicate any future result of the combined company.

We present below selected pro forma information in order to allow analysis on the same basis of comparison.

In R$ millions (except where indicated), end of period	4Q17			3Q17			4Q16			2017			2016
Results
Recurring Net Income ^(*)		6,280			6,254			5,817			24,879			22,150
Operating Revenues ⁽¹⁾		27,514			26,981			28,903			108,967			111,422
Managerial Financial Margin ⁽²⁾		16,745			16,769			18,855			68,315			72,121
Performance
Recurring Return on Average Equity – Annualized ^(3)(*)		21.9	%		21.6	%		20.7	%		21.8	%		20.3	%
Recurring Return on Average Assets – Annualized ^(4)(*)		1.7	%		1.7	%		1.6	%		1.7	%		1.6	%
Nonperforming Loans Ratio (90 days overdue) - Total		3.0	%		3.2	%		3.4	%		3.0	%		3.4	%
Nonperforming Loans Ratio (90 days overdue) - Brazil		3.7	%		3.8	%		4.2	%		3.7	%		4.2	%
Nonperforming Loans Ratio (90 days overdue) - Latin America		1.5	%		1.4	%		1.2	%		1.5	%		1.2	%
Coverage Ratio (Total Allowance/NPL 90 days overdue) ⁽⁵⁾		247	%		246	%		222	%		247	%		222	%
Efficiency Ratio (ER) ⁽⁶⁾		48.6	%		47.3	%		44.8	%		46.3	%		45.3	%
Risk-Adjusted Efficiency Ratio (RAER) ⁽⁶⁾		65.0	%		63.3	%		68.6	%		64.0	%		70.1	%
Balance Sheet
Total Assets ^(*)		1,503,503			1,466,000			1,427,084
Total Credit Portfolio, including Financial Guarantees Provided and Corporate Securities		593,712			575,184			598,431
Deposits + Debentures + Securities + Borrowings and Onlending ⁽⁷⁾		658,055			633,145			661,257
Loan Portfolio/Funding ⁽⁷⁾		74.0	%		73.9	%		74.3	%
Stockholders' Equity		126,924			123,631			115,590
Other
Assets Under Administration		969,858			938,494			814,326
Total Number of Employees		96,435			96,326			94,779
Brazil		82,640			82,401			80,871
Abroad		13,795			13,925			13,908
Branches and CSBs – Client Service Branches		4,910			4,919			5,103
ATM – Automated Teller Machines ⁽⁸⁾		46,965			46,700			46,175

Highlights as disclosed (Data prior to 2Q16 do not include CorpBanca)

In R$ millions (except where indicated), end of period	4Q17			3Q17			4Q16			2017			2016
Highlights
Recurring Net Income per Share (R$) ^{(9) (*)}		0.97			0.96			0.89			3.83			3.40
Net Income per Share (R$) ^{(9) (*)}		0.90			0.93			0.85			3.68			3.32
Number of Outstanding Shares at the end of period – in thousands ⁽¹⁰⁾		6,464,631			6,504,352			6,512,700			6,464,631			6,512,700
Book Value per Share (R$)		19.63			19.01			17.75			19.63			17.75
Dividends and Interest on Own Capital net of Taxes ⁽¹¹⁾		6,119			6,501			6,699			17,557			10,000
Net Payout ⁽¹²⁾		-			-			-			70.6	%		45.0	%
Net Payout after shares bought back ⁽¹³⁾		-			-			-			83.0	%		49.3	%
Market Capitalization ⁽¹⁴⁾		275,523			281,964			219,348			275,523			219,348
Market Capitalization ⁽¹⁴⁾ (US$ million)		83,290			89,004			67,303			83,290			67,303
Solvency Ratio - Prudential Conglomerate (BIS Ratio) ^(*)		18.8	%		19.5	%		19.1	%		18.8	%		19.1	%
Common Equity Tier I ^(*)		16.2	%		16.7	%		15.8	%		16.2	%		15.8	%
Estimated BIS III (Common Equity Tier I) ^{(15) (*)}		15.5	%		15.8	%		14.3	%		15.5	%		14.3	%

(*) Includes the consolidation of Citibank in the 4Q17.

Note: (1) Operating Revenues are the sum of Managerial Financial Margin, Commissions and Fees, Other Operating Income and Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses; (2) Detailed on Managerial Financial Margin section; (3) Annualized Return was calculated by dividing Net Income by Average Stockholders’ Equity. The quotient was multiplied by the number of periods in the year to derive the annualized rate. The calculation bases of returns were adjusted by the amount of dividends that has not yet been approved at shareholders’ or Board meetings, proposed after the balance sheet closing date; (4) Return was calculated by dividing Recurring Net Income by Average Assets; (5) Includes the balance of allowance for financial guarantees provided; (6) For further details on the calculation methodologies of both Efficiency and Risk-Adjusted Efficiency ratios, please refer to Non-Interest Expenses section; (7) As detailed on the Balance section; (8) Includes ESBs (electronic service branches) and service points at third parties’ locations and Banco24Horas ATMs; (9) Calculated based on the weighted average number of outstanding shares for the period; (10) The number of outstanding shares was adjusted to reflect the share bonus of 10% granted on September 14, 2016; (11) Interest on own capital. Amounts paid/provisioned, declared and reserved in stockholders’ equity; (12) Calculated by dividing Recurring Net Income by the total dividends and interest on own capital net of taxes; (13) Considers outstanding shares (common and non-voting shares) bought back in each period; (14) Total number of outstanding shares (common and non-voting shares) multiplied by the average price of the non-voting share on the last trading day in the period; (15) Takes into consideration the schedule anticipation impacts.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Net Income and Recurring Net Income

Our recurring net income totaled R$6,280 million in the fourth quarter of 2017 as a result of the elimination of non-recurring events, which are presented in the table below, from net income of R$5,821 million for the period.

Non-Recurring Events Net of Tax Effects

In R$ millions	4Q17			3Q17			4Q16			2017			2016
Recurring Net Income		6,280			6,254			5,817			24,879			22,150
Non-Recurring Events		(459	)		(177	)		(275	)		(914	)		(583	)
IRB		-			155			-			155			-
∟ Disposal of IRB shares
Integration of Citibank		(277	)		-			-			(277	)		-
∟ Provisions Expenses for Citibank integration
Liability Adequacy Test		145			-			(31	)		164			109
∟ Adjustment of technical provisions as a result from the liability adequacy test
Impairment		(7	)		(137	)		(172	)		(152	)		(180	)
∟ Adjustment to reflect the realization value of certain assets, mainly related to technology
Goodwill Amortization		(135	)		(125	)		(133	)		(508	)		(442	)
∟ Effect from the amortization of goodwill generated by acquisitions made by the conglomerate
Tax Contingencies and Legal Liabilities		(184	)		-			1			(225	)		7
∟ Mainly effects of our adherence to the program for the settlement or installment payment of federal and municipal taxes
Contingencies Provision		0			(61	)		(88	)		(101	)		(224	)
∟ Recognition of provisions for tax and social security lawsuits and losses arising from economic plans in effect in Brazil during the 1980's and early 1990's
Pension Fund		-			-			130			-			130
∟ Destination of pension fund surplus
Other		-			(9	)		18			31			18
Net Income		5,821			6,077			5,543			23,965			21,567
CorpBanca's Pro Forma Consolidation Effects		-			-			-			-			(72	)
Net Income as Reported		5,821			6,077			5,543			23,965			21,639

Note: The impacts of the non-recurring events, described above, are net of tax effects – further details are presented in Note 22-K of the Financial Statements.

Managerial Income Statement

In this report, we apply the managerial results consolidation criteria, which only affects the breakdown of our income statement and not the bottom line. Additionally, we adjust the tax effects of the hedge of investments abroad - originally accounted for as tax expenses (PIS and COFINS) and income tax and social contribution on net income and then reclassified to the financial margin - and non-recurring events. These reclassifications enable us to carry out analyses from the management viewpoint of our businesses and are shown in "Accounting and Managerial Statements Reconciliation", on the next page of this report.

Our strategy for foreign exchange risk management of the capital invested abroad is aimed at mitigating, through financial instruments, the effects from foreign exchange variations and takes into consideration the impact of all tax effects. We present below the foreign exchange variation of the Brazilian real:

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Accounting and Managerial Statements Reconciliation

For comparison purposes, we deconsolidated the effects from Citibank’s retail operations in Brazil (Citibank) and we recorded its results in a specific line in our income statement. Therefore, the information presented in this report does not include Citibank’s balances and results, except where otherwise indicated.

The analysis of our performance in the fourth quarter of 2017 was carried out taking into consideration the managerial net income presented in the table below.

Accounting and Managerial Statements Reconciliation | 4^th quarter of 2017

													Citibank's
													Operations
				Non-recurring			Tax Effect			Managerial			Recurring
In R$ millions	Accounting			Events			of Hedge			Reclassifications			Results¹			Managerial
Operating Revenues		24,691			459			2,214			476			(325	)		27,514
Managerial Financial Margin		13,749			(157	)		2,214			1,134			(195	)		16,745
Financial Margin with Clients		14,526			(157	)		-			1,134			(189	)		15,314
Financial Margin with the Market		(776	)		-			2,214			0			(6	)		1,431
Commissions and Fees		9,463			-			-			(688	)		(129	)		8,645
Result from Insurance, Pension Plan and Premium Bonds		1,768			(276	)		-			631			-			2,123
Operations Before Retained Claims and Selling Expenses
Other Operating Income		(526	)		891			-			(365	)		-			-
Equity in Earnings of Affiliates and Other Investments		198			-			-			(198	)		-			-
Non-operating Income		38			-			-			(38	)		-			-
Cost of Credit		(3,250	)		-			-			(1,007	)		66			(4,192	)
Provision for Loan Losses		(4,205	)		-			-			(278	)		41			(4,442	)
Impairment		-			-			-			(282	)		-			(282	)
Discounts Granted		-			-			-			(336	)		59			(277	)
Recovery of Loans Written Off as Losses		955			-			-			(111	)		(34	)		810
Retained Claims		(291	)		-			-			(83	)		-			(373	)
Other Operating Expenses		(15,471	)		790			(225	)		553			320			(14,033	)
Non-interest Expenses		(14,004	)		777			-			552			300			(12,375	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,428	)		13			(225	)		1			20			(1,619	)
Insurance Selling Expenses		(39	)		-			-			-			-			(39	)
Income before Tax and Profit Sharing		5,679			1,248			1,989			(61	)		61			8,916
Income Tax and Social Contribution		39			(688	)		(1,989	)		(28	)		(40	)		(2,707	)
Profit Sharing Management Members - Statutory		(89	)		-			-			89			-			-
Minority Interests		193			(101	)		-			-			-			92
Result from Citibank's Operation		-			-			-			-			(21	)		(21	)
Net Income		5,821			459			-			-			-			6,280

¹The consolidation of Citibank began on October 31, 2017, with impact on our net income in November and December 2017.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

4^th quarter of 2017 Income Statement

Operating Revenues Perspective

The Operating Revenues is composed by the sum of the main accounts in which revenues from banking, insurance, pension plan and premium bonds operations are recorded.

In R$ millions	4Q17			3Q17			∆			4Q16			∆			2017			2016			∆
Operating Revenues		27,514			26,981			2.0	%		28,903			-4.8	%		108,967			111,422			-2.2	%
Managerial Financial Margin		16,745			16,769			-0.1	%		18,855			-11.2	%		68,315			72,121			-5.3	%
Financial Margin with Clients		15,314			15,410			-0.6	%		16,862			-9.2	%		62,034			65,122			-4.7	%
Financial Margin with the Market		1,431			1,359			5.3	%		1,993			-28.2	%		6,281			6,999			-10.3	%
Commissions and Fees		8,645			8,358			3.4	%		7,980			8.3	%		32,885			30,952			6.2	%
Result from Insurance, Pension Plan and Premium Bonds		2,123			1,853			14.6	%		2,068			2.7	%		7,767			8,350			-7.0	%
Operations Before Retained Claims and Selling Expenses
Cost of Credit		(4,192	)		(3,990	)		5.1	%		(6,352	)		-34.0	%		(17,936	)		(25,480	)		-29.6	%
Provision for Loan Losses		(4,442	)		(4,282	)		3.7	%		(5,823	)		-23.7	%		(19,064	)		(26,152	)		-27.1	%
Impairment		(282	)		(262	)		7.8	%		(1,255	)		-77.5	%		(1,094	)		(1,882	)		-41.9	%
Discounts Granted		(277	)		(223	)		24.5	%		(278	)		-0.4	%		(1,047	)		(1,211	)		-13.5	%
Recovery of Loans Written Off as Losses		810			777			4.3	%		1,004			-19.3	%		3,269			3,765			-13.2	%
Retained Claims		(373	)		(320	)		16.6	%		(364	)		2.6	%		(1,275	)		(1,485	)		-14.1	%
Other Operating Expenses		(14,033	)		(13,505	)		3.9	%		(13,821	)		1.5	%		(53,450	)		(53,693	)		-0.5	%
Non-interest Expenses		(12,375	)		(11,818	)		4.7	%		(11,927	)		3.8	%		(46,745	)		(46,625	)		0.3	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,619	)		(1,640	)		-1.3	%		(1,786	)		-9.4	%		(6,469	)		(6,466	)		0.0	%
Insurance Selling Expenses		(39	)		(47	)		-15.8	%		(108	)		-63.8	%		(236	)		(602	)		-60.8	%
Income before Tax and Minority Interests		8,916			9,167			-2.7	%		8,366			6.6	%		36,306			30,765			18.0	%
Income Tax and Social Contribution		(2,707	)		(2,969	)		-8.8	%		(2,711	)		-0.2	%		(11,335	)		(8,540	)		32.7	%
Minority Interests in Subsidiaries		92			56			64.5	%		162			-43.7	%		(71	)		(75	)		-5.2	%
Result from Citibank's operation		(21	)		-			-			-			-			(21	)		-			-
Recurring Net Income		6,280			6,254			0.4	%		5,817			8.0	%		24,879			22,150			12.3	%

Managerial Financial Margin Perspective

In R$ millions	4Q17			3Q17			∆			4Q16			∆			2017			2016			∆
Managerial Financial Margin		16,745			16,769			-0.1	%		18,855			-11.2	%		68,315			72,121			-5.3	%
Financial Margin with Clients		15,314			15,410			-0.6	%		16,862			-9.2	%		62,034			65,122			-4.7	%
Financial Margin with the Market		1,431			1,359			5.3	%		1,993			-28.2	%		6,281			6,999			-10.3	%
Cost of Credit		(4,192	)		(3,990	)		5.1	%		(6,352	)		-34.0	%		(17,936	)		(25,480	)		-29.6	%
Provision for Loan Losses		(4,442	)		(4,282	)		3.7	%		(5,823	)		-23.7	%		(19,064	)		(26,152	)		-27.1	%
Impairment		(282	)		(262	)		7.8	%		(1,255	)		-77.5	%		(1,094	)		(1,882	)		-41.9	%
Discounts Granted		(277	)		(223	)		24.5	%		(278	)		-0.4	%		(1,047	)		(1,211	)		-13.5	%
Recovery of Loans Written Off as Losses		810			777			4.3	%		1,004			-19.3	%		3,269			3,765			-13.2	%
Net Result from Financial Operations		12,554			12,780			-1.8	%		12,502			0.4	%		50,378			46,640			8.0	%
Other Operating Income/(Expenses)		(3,637	)		(3,613	)		0.7	%		(4,136	)		-12.1	%		(14,072	)		(15,876	)		-11.4	%
Commissions and Fees		8,645			8,358			3.4	%		7,980			8.3	%		32,885			30,952			6.2	%
Result from Insurance, Pension Plan and Premium Bonds Operations		1,711			1,487			15.1	%		1,596			7.2	%		6,256			6,263			-0.1	%
Non-interest Expenses		(12,375	)		(11,818	)		4.7	%		(11,927	)		3.8	%		(46,745	)		(46,625	)		0.3	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,619	)		(1,640	)		-1.3	%		(1,786	)		-9.4	%		(6,469	)		(6,466	)		0.0	%
Income before Tax and Minority Interests		8,916			9,167			-2.7	%		8,366			6.6	%		36,306			30,765			18.0	%
Income Tax and Social Contribution		(2,707	)		(2,969	)		-8.8	%		(2,711	)		-0.2	%		(11,335	)		(8,540	)		32.7	%
Minority Interests in Subsidiaries		92			56			64.5	%		162			-43.7	%		(71	)		(75	)		-5.2	%
Result from Citibank's operation		(21	)		-			-			-			-			(21	)		-			-
Recurring Net Income		6,280			6,254			0.4	%		5,817			8.0	%		24,879			22,150			12.3	%

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Medium and Long-Term Strategic Agenda

Corporate Governance and Sustainability

permeate all efforts on our key strategic objectives

Commitment to permanently improve corporate governance plays a vital role in protecting stakeholders’ interests.

We incorporate sustainability into our strategy through a consolidated governance structure that is integrated with our business, thus making environmental and social issues part of our everyday activities, by incorporating variables on these issues into diverse processes, such as credit granting, investments, insurance activities, contracting of suppliers, and wealth management. We aim at creating a virtuous cycle on the path towards sustainable performance, which can only be met by collaborative work involving our main stakeholders: employees; clients; shareholders and society.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Results

Recurring Net Income

Highlights in the quarter:

Managerial Financial Margin with Clients

0.6% mainly driven by the negative effect of the interbank deposit rate decrease, especially in our liabilities margin and working capital, which was partially offset by structured operations of the Wholesale segment.

Cost of Credit

5.1% mainly driven by higher provision for loan losses, which increased R$160 million in the quarter, mainly in Retail segment in Brazil and Latin America.

Commissions and Fees

3.4% mainly driven by (i) the increase in revenues from credit card fees, due to revenue increase in the period, and (ii) the increase in revenues from loan operations and guarantees provided, associated to the increase in credit origination.

Non-Interest Expenses

4.7% mainly driven by (i) higher personnel expenses, mainly due to higher expenses on compensation and variable compensation, (ii) higher administrative expenses mainly due to higher expenses on third-party services, with highlight to consulting services, data processing and media.

Events in the quarter

Perpetual Subordinated Notes

In accordance with the Announcement to the Market of December 5, 2017, we issued perpetual subordinated notes in the aggregate principal amount of US$1.25 billion, at a fixed rate of 6.125%, which will be applicable until the fifth anniversary of the date of issue. Thereafter, the coupon will be reset every five years, based on the prevailing rate for U.S. Treasury bonds for the same period. The Notes offer price was 100%, resulting in a yield to investors of 6.125% until the fifth anniversary of the date of issue.

The Notes may be repurchased on the fifth anniversary of the date of issue or on any subsequent interest payment date, subject to prior approval of Brazilian authorities, including the Central Bank of Brazil. The approval of the Central Bank of Brazil is still necessary for the Notes to be included in our Regulatory Capital as Additional Tier I Capital.

Economic Plans

In December 2017, an agreement between savers and FEBRABAN (Brazilian Federation of Banks) was entered into to settle litigations associated to economic plans, and Itaú Unibanco has adhered to its terms. The completion of this agreement is subject to approval from the Federal Supreme Court, and we expect it to be obtained in the first quarter of 2018. As from the approval, savers will have 24 months to adhere to the terms of the agreement.

Share Buyback

In 2017, we acquired 37,982,900 non-voting shares of own issue and 46,214,237 common shares of own issue, totaling R$3.1 billion.

Dividends and Interest on Own Capital

We remunerate our stockholders by means of monthly and complementary payments of dividends and interest on own capital. In 2017 we paid or provisioned R$5.0 billion and reserved R$12.5 billion in stockholder’s equity, of dividends and interest on own capital, net of tax, totaling R$17.6 billion.

Citibank’s Retail Business | Brazil The consolidation of Citibank began on October 31, 2017, with impact on our net income in November and December 2017.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Highlights in 4Q17

Managerial Financial Margin

The decrease in the managerial financial margin with clients was mainly driven by the negative effect of the interbank deposit rate decrease, especially in our liabilities margin and working capital, partially offset by structured operations of the Wholesale segment.

The increase in our financial margin with the market was mainly driven by the management of proprietary and structural positions in Brazil and abroad.

Further details on page 16

Cost of Credit

The increase in cost of credit for the quarter was mainly driven by higher provision for loan losses, up R$160 million, mainly in the Retail Banking segment, related to the increase of the individuals credit portfolio, and in Latin America, due to exposure to corporate segment in Chile.

Compared to 2016, provision for loan losses decreased R$7,089 million, in line with lower delinquency rates noted mainly in Brazil.

Further details on pages 17-18

Commissions and Fees and Result from Insurance ¹

The increase in commissions and fees in the quarter was mainly due to (i) the increase in revenues from credit card fees and (ii) the increase in revenues from loan operations and guarantees provided, associated to the increase in credit origination.

Compared to 2016, revenues from asset management, current account services and advisory services were the main drivers for the increase in commissions and fees.

Further details on pages 22-27

Non-Interest Expenses

The increase in non-interest expenses in the quarter is mainly driven by (i) higher personnel expenses, mainly due to higher expenses on compensation and variable compensation (ii) higher administrative expenses mainly due to higher expenses on third-party services, with highlight to consulting services, data processing and media.

In 2017, non-interest expenses increased 0.3%, below the inflation rate for the period (2.95% - IPCA).

Further details on pages 28-29

Return on Equity

Efficiency Ratio (E.R.) and Risk-Adjusted Efficiency Ratio (R.A.E.R.)

Further details on page 29

¹ Result from insurance operations includes the result from insurance, pension plan and premium bonds, net of retained claims and selling expenses.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

Highlights in 4Q17

Credit Portfolio with Financial Guarantees Provided and Corporate Securities

In R$ billions, end of period	4Q17		3Q17		∆			4Q16		∆
Individuals		185.3		179.9		3.0	%		183.4		1.0	%
Credit Card Loans		63.0		57.2		10.3	%		59.0		6.8	%
Personal Loans		25.3		26.0		-2.7	%		26.3		-3.8	%
Payroll Loans ¹		44.2		44.6		-0.8	%		44.6		-1.0	%
Vehicle Loans		14.1		13.9		1.4	%		15.4		-8.4	%
Mortgage Loans		38.7		38.3		0.9	%		38.1		1.4	%
Companies		226.8		223.7		1.4	%		243.1		-6.7	%
Corporate Loans		165.1		164.6		0.3	%		181.5		-9.1	%
Very Small, Small and Middle Market Loans ²		61.8		59.1		4.6	%		61.5		0.4	%
Corporate Securities ³		36.0		36.1		-0.3	%		36.4		-1.1	%
Total Brazil with Financial Guarantees Provided and Corporate Securities		448.1		439.6		1.9	%		462.9		-3.2	%
Latin America		145.6		135.5		7.4	%		135.5		7.5	%
Argentina		8.2		7.0		16.9	%		7.1		16.6	%
Chile		96.7		89.4		8.1	%		87.4		10.6	%
Colombia		25.8		25.8		0.0	%		26.9		-4.1	%
Paraguay		6.3		5.7		10.9	%		5.9		7.4	%
Panama		0.8		0.8		-4.7	%		0.9		-12.4	%
Uruguay		7.8		6.7		15.8	%		7.2		7.3	%
Total with Financial Guarantees Provided and Corporate Securities (A)		593.7		575.2		3.2	%		598.4		-0.8	%
Total with Financial Guarantees Provided and Corporate Securities (ex-foreign exchange rate variation) ⁴		593.7		586.0		1.3	%		608.6		-2.4	%
Citibank Operations (B)		6.4		-		-			-		-
Total with Financial Guarantees Provided, Corporate Securities and Citibank (A + B)		600.1		575.2		4.3	%		598.4		0.3	%

(1) Includes operations originated by the institution and acquired operations. (2) Includes Rural Loans to Individuals. (3) Includes Debentures, Certificates of Real Estate Receivables (CRI) and Commercial Paper. (4) Calculated based on the conversion of the foreign currency portfolio (U.S. dollar and currencies of Latin America). Note: the Mortgage and Rural Loan portfolios from the companies segment are allocated according to the client’s size.

Further details on pages 31-32

NPL Ratio (%) | 90 days

(i) Including Citibank’s operations, the total NPL ratio would have been 3.1%.

The decrease when compared to the previous quarter and to the same period of 2016 is mainly driven by lower delinquency rates in Brazil.

In Brazil, NPL decreased from the previous quarter and from December 2016 driven by lower delinquency rates in individuals and very small, small and middle-market companies.

In Latin America, the increase in the quarter was driven by the individuals segment in both Chile and Colombia.

Further details on pages 19-21

Coverage Ratio | 90 days

(i) Including Citibank’s operations, the Coverage ratio would have reached 245%.

The coverage ratio, which reached 247% in December 2017, remained relatively stable compared to the previous quarter.

The coverage ratio level is not only a result of overdue loans, but also of our provision model for potential loan losses.

The expanded coverage ratio³ remained at 100%, showing that provisions are enough to cover the balance of renegotiated operations and the loans overdue for over 90 days.

Further details on pages 19-21

NPL Creation

(i) Including Citibank’s operations, total estimated NPL Creation would have been R$4,375 million.

The NPL Creation, which is the volume of loans that became overdue for more than 90 days in the quarter, was lower compared to the previous quarter, mainly in the Retail segment in Brazil, which decreased in the quarter.

This resulted in the lowest level of NPL Creation since March 2014.

Further details on pages 19-21

¹ Includes units abroad ex-Latin America. ² Excludes Brazil. ³ Calculated by dividing the total allowance by the balance of operations more than 90 days overdue and renegotiated operations, excluding double counting of renegotiated operations more than 90 days overdue.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

2017 Forecast

The results for 2017, compared to our previously disclosed forecast for 2017, are presented below:

1) Considers USD-BRL rate at R$3.50 in Dec-17;

2) Includes units abroad ex-Latin America;

3) Includes financial guarantees provided and corporate securities;

4) Financial Margin with Clients evolution also considers the Discounts Granted reclassification in 2016;

5) Includes Result from Loan Losses, Impairment and Discounts Granted;

6) Commissions and Fees (+) Income from Insurance, Pension Plan and Premium Bonds Operations (-) Expenses for Claims (-) Insurance, Pension Plan and Premium Bonds Selling Expenses;

Although the growth plans and projections of results presented above are based on management assumptions and information available in the market to date, these expectations involve inaccuracies and risks that are difficult to anticipate and there may be, therefore, results or consequences that differ from those anticipated. This information is not a guarantee of future performance. The use of these expectations should take into consideration the risks and uncertainties that involve any activities and that are beyond our control. These risks and uncertainties include, but are not limited to, our ability to perceive the dimension of the synergies projected and their timing, political and economic changes, volatility in interest and foreign exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products, prices and changes in tax legislation, among others.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Executive Summary

2018 Forecast

Basis for 2018 Forecast

We present below the income statement that includes the result from Citibank’s operation in each of its accounts and its corresponding loan portfolio. This income statement is the basis for the 2018 forecast.

Managerial Income Statement - with Citibank				Credit Portfolio - with Citibank

In R$ millions	2017			In R$ billions, end of period	4Q17
Managerial Financial Margin		68,510		Individuals		191.5
Financial Margin with Clients		62,223		Credit Card Loans		66.9
Financial Margin with the Market		6,287		Personal Loans		26.4
Cost of Credit		(18,002	)	Payroll Loans		44.4
Provision for Loan Losses		(19,105	)	Vehicle Loans		14.1
Impairment		(1,094	)	Mortgage Loans		39.7
Discounts Granted		(1,106	)	Companies		226.9
Recovery of Loans Written Off as Losses		3,303		Corporate Loans		165.1
Net Result from Financial Operations		50,508		Very Small, Small and Middle Market Loans		61.9
Other Operating Income/(Expenses)		(14,263	)	Corporate Securities		36.0
Commissions and Fees		33,014		Total Brazil with Financial Guarantees Provided and Corporate Securities		454.5
Result from Insurance, Pension Plan and Premium Bonds Operations		6,256		Latin America		145.6
Non-interest Expenses		(47,045	)	Argentina		8.2
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(6,489	)	Chile		96.7
Income before Tax and Minority Interests		36,245		Colombia		25.8
Income Tax and Social Contribution		(11,294	)	Paraguay		6.3
Minority Interests in Subsidiaries		(71	)	Panama		0.8
Recurring Net Income		24,879		Uruguay		7.8
				Total with Financial Guarantees Provided and Corporate Securities		600.1

2018 Forecast

We present below our 2018 forecast including the effect of Citibank’s operations.

1) Includes units abroad ex-Latin America; 2) Includes financial guarantees provided and corporate securities;

3) Includes Result from Loan Losses, Impairment and Discounts Granted; 4) Commissions and Fees (+) Income from Insurance, Pension Plan and Premium Bonds Operations (-) Expenses for Claims (-) Insurance, Pension Plan and Premium Bonds Selling Expenses.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Managerial Financial Margin

Highlights

Decrease in financial margin with clients in the quarter, highlighting the negative impact of the interbank deposit rate reduction on the liabilities margin (partially offset by balance increase) and on the remuneration of our working capital, partially offset by structured operations of Wholesale segment and gains from the sale of students’ loans from our Chilean operation.

Risk-adjusted financial margin with clients decreased 30 bps in the quarter, due to the reduction in the financial margin with clients and the increase in cost of credit.

In R$ millions	4Q17		3Q17		D
Financial Margin with Clients		15,314		15,410		(96	)	-0.6	%
Spread-Sensitive Operations		13,274		13,168		106		0.8	%
Working Capital and Other		2,040		2,242		(202	)	-9.0	%
Financial Margin with the Market		1,431		1,359		72		5.3	%
Total		16,745		16,769		(24	)	-0.1	%

Spread-Sensitive Operations: consists of the results from credit assets, non-credit interest-bearing assets and liabilities.

Financial Margin with the market: consists basically of treasury transactions that include Asset and Liability Management (ALM) and proprietary trading operations.

Change in the Financial Margin with Clients Breakdown

⁽¹⁾Considers credit and private securities portfolio net of overdue balance over 60 days. Balances do not include the effects of foreign exchange rate variations.

Annualized average rate of financial margin with clients

	4Q17								3Q17
	Average		Financial			Average Rate			Average		Financial			Average Rate
In R$ millions, end of period	Balance		Margin			(p.a.)			Balance		Margin			(p.a.)
Financial Margin with Clients		635,714		15,314			9.9	%		624,503		15,410			10.1	%
Spread-Sensitive Operations		529,901		13,274			10.3	%		526,027		13,168			10.3	%
Working Capital and Other		105,813		2,040			7.8	%		98,476		2,242			9.3	%
Cost of Credit				(4,192	)							(3,990	)
Risk-Adjusted Financial Margin with Clients		635,714		11,123			7.1	%		624,503		11,421			7.4	%

Spread-Sensitive Operations:

— 0 bp

negative impact coming from interbank deposit rate reduction on the liabilities margin, offset by (i) increase in liabilities balance, (ii) structured operations of the Wholesale segment and (iii) gains from the sale of students’ loans from our Chilean operation.

Working Capital and Other:

▼- 150 bps

higher average balance in the period (mainly driven by the increase in stockholders' equity due to incorporation of the net income for the period), more than offset by the impact from lower interest rates.

Financial Margin with Clients:

▼- 20 bps

the reductions in the Selic rate throughout 2017, adversely impacted our liabilities margin and the remuneration of our working capital.

Risk-Adjusted Financial Margin with Clients:

▼ - 30 bps

In the quarter, the pressure caused by the interbank deposit rate reduction on our financial margin was intensified by the growth of cost of credit.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Cost of Credit

Highlights

Increase in the provision for loan losses in the quarter, concentrated in the Retail Banking in Brazil, driven by the increase in generic allowance, related to the growth in the portfolio, and in Latin America, due to the exposure to large companies in Chile and to the growth in the portfolio.

In 2017, cost of credit reduced by R$7,544 million compared to 2016, mainly due to lower provision for loan losses in both the Retail and Wholesale Banking in Brazil.

In R$ millions	4Q17			3Q17			D			4Q16			D			2017			2016			D
Provision for Loan Losses		(4,442	)		(4,282	)		3.7	%		(5,823	)		-23.7	%		(19,064	)		(26,152	)		-27.1	%
Recovery of Loans Written Off as Losses		810			777			4.3	%		1,004			-19.3	%		3,269			3,765			-13.2	%
Result from Loan Losses		(3,632	)		(3,505	)		3.6	%		(4,819	)		-24.6	%		(15,795	)		(22,387	)		-29.4	%
Impairment		(282	)		(262	)		7.8	%		(1,255	)		-77.5	%		(1,094	)		(1,882	)		-41.9	%
Discounts Granted		(277	)		(223	)		24.5	%		(278	)		-0.4	%		(1,047	)		(1,211	)		-13.5	%
Cost of Credit ⁽ⁱ⁾		(4,192	)		(3,990	)		5.1	%		(6,352	)		-34.0	%		(17,936	)		(25,480	)		-29.6	%

⁽ⁱ⁾Including Citibank’s operations acquired, the cost of credit would be R$4,257 million.

Compared to the previous quarter, the increase in cost of credit was mainly driven by the R$160 million increase in provision for loan losses, especially concentrated in the Retail Banking in Brazil, driven by the increase in generic allowance, related to the growth in the individuals portfolio, and in Latin America, due to exposure to corporate segment in Chile, in addition to the growth in the loan portfolio. Discounts granted also increased by R$55 million, concentrated in the Wholesale Banking in Brazil. These effects were partially offset by the increase in recovery of loans written off as losses in the Wholesale Banking in Brazil.

In 2017, cost of credit reduced mainly due to the R$6,996 million decrease in provision for loan losses in Brazil, both in Retail and Wholesale Banking, of R$2,635 million and R$4,361 million, respectively, in line with the lower delinquency rates. Additionally, impairment charges on corporate securities in the Wholesale Banking in Brazil decreased by R$788 million. These effects were partially offset by the reduction of R$496 million in recovery of loans written off as losses, mainly in the Retail Banking.

Cost of Credit

(*) Loan portfolio with financial guarantees provided and corporate securities. Average balance of the loan portfolio with financial guarantees provided and corporate securities, considering the last two quarters.

Provision for Loan Losses by Segment

(*) Average balance of the loan portfolio, considering the last two quarters.

⁽ⁱ⁾ Including Citibank’s operations acquired, the provision for loan losses would be R$4,483 million.

Note: Retail Banking includes loan loss provisions expenses of Corporation segment. In the business segments section, Latin America is part of the Wholesale Banking.

· Wholesale Banking - Brazil: a decrease of R$284 million in expenses in the quarter, related to the lower provisioning requirement in the segment, associated with the provisions for potential losses constituted in the last two years.

· Retail Banking - Brazil: these expenses increased R$257 million in the quarter, driven by the increase in generic allowance, in line with the increase in the loans to individuals, especially credit card and vehicles.

Recovery of Loan Written off as Losses

The R$33 million increase in recovery of loans written off as losses from the previous quarter was particularly driven by an increase in the Wholesale segment.

In the fourth quarter of 2017, we sold assets that had already been written off as losses, with no risk retention, to non-related companies. Credits totaling R$1.6 billion were assigned with positive impacts on revenues from recovery of loans, in the amount of R$29 million, and on net income, in the amount of R$16 million, in the fourth quarter of 2017.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Loan Portfolio by Risk Level

Our credit risk management is aimed at maintaining the quality of the loan portfolio at levels appropriate for each market segment in which we operate. At the end of December 2017, portfolios rated “AA” and “A” accounted for 78.3% of the total loan portfolio and 80.5% of the total loan portfolio in Brazil¹.

⁽ⁱ⁾ Including Citibank’s operations acquired, the total allowance for loan losses would be R$37,309 million and the total allowance for loan losses in Brazil would be R$32,919 million.

Allowance for Loan Losses and for Financial Guarantees Provided

We observed a reduction of 2.0% in the allowance for loan losses and for financial guarantees provided compared to the same period of the previous year.

This reduction was mainly driven by the specific allowance of the Retail segment in Brazil, as a consequence of decreasing delinquency rates in this segment, which was partially offset by the increased allowance for loan losses in Latin America.

We present below the total allowance^(*)allocation by type of risk:

Overdue Risk: Allowances for overdue loans, as required by the Brazilian Central Bank, related to the minimum provision required for overdue operations according to CMN Resolution No. 2,682/1999. We also present the amount for loans 100% provisioned and for loans that do not require 100% of provision.

Aggravated Risk: Allowances for overdue loans with aggravated risk ratings above the minimum required by the Brazilian Central Bank, and allowances for renegotiated loans. Regarding renegotiated loans, we segregate allowances over the minimum required by the Brazilian Central Bank for overdue operations and allowances for non-overdue operations.

Potential Risk: Allowances for expected losses related to Retail Banking operations and allowances for potential losses related to Wholesale Banking operations, which includes allowance for financial guarantees provided.

¹ Includes units abroad ex-Latin America. ² Excludes Brazil. ³ Allowance for potential losses includes the allowance for financial guarantees provided. (*) Total allowance includes the allowance for loan losses and the allowance for financial guarantees provided, which totaled R$ 1,950 million in December 2017 and is recorded in liabilities in accordance with CMN Resolution No. 4,512/16. ⁽ⁱ⁾ Including Citibank’s operations acquired, the total allowance for loan losses would be R$37,309 million.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Credit Quality

Highlights

The total loan portfolio more than 90 days overdue decreased 11.9% compared to December 2016, driven by decreases in both individuals and companies portfolios in Brazil.

The short-term delinquency ratio (NPL 15-90 days) decreased in the quarter, and the highlights were the decreases of 30 bps for individuals and 50 bps for very small, small and middle market companies, which were partially offset by the increase of 80 bps for corporate, mainly driven by the exposure for a client in that segment.

Nonperforming Loans

⁽ⁱ⁾ Including Citibank’s operations acquired, the Nonperforming Loans over 90 days in Brazil would be R$13.2 billion and the Total would be R$15.2 billion.

· Nonperforming loans - 90 days - Total: decreased 11.9% from the same period of the previous year, driven by lower delinquency rates for both individuals and companies in Brazil.

NPL Ratio (%) | over 90 days

⁽ⁱ⁾ Including Citibank’s operations acquired, the Total NPL Ratio would be 3.1%.

Analysis of the quarterly change in NPL 90 (%) | Credit Quality x Volume

· Consolidated: decreased compared to the previous quarter due to an increased portfolio. Compared to the same period of 2016, it recorded a decrease mainly due to lower delinquency rates in Brazil.

· Brazil¹: decreased from the previous quarter and from December 2016 due to lower delinquency rates for individuals, and very small, small, and middle-market companies.

· Latin America²: increased in the quarter mainly driven by the increase in the individuals segment in both Chile and Colombia.

NPL Ratio – Brazil¹ (%) | over 90 days

⁽ⁱ⁾ Including Citibank’s operations acquired, the NPL Ratio for Individuals would be 4.9% and the NPL Ratio for Very Small, Small and Middle Market Companies would be 4.5%.

Analysis of the quarterly change in NPL 90 (%) | Credit Quality x Volume

· Individuals: the ratio decreased for the seventh consecutive quarter, with highlight for lower delinquency rates in credit cards, personal loans and vehicles in the quarter.

· Very small, small and middle-market companies: the ratio decreased for the fifth consecutive quarter, reaching the lowest level in the last 2 years.

· Corporate: the ratio remained stable compared to the previous quarter.

NPL Ratio (%) | 15 to 90 days

* Note: Total and Latin America NPL Ratio (15-90 days) prior to June 2016 do not include CorpBanca.

Analysis of the quarterly change in NPL 15-90 (%) | Credit Quality x Volume

· Consolidated: the ratio decreased from the previous quarter due to an increased portfolio.

· Brazil¹: the ratio remained stable compared to the previous quarter, with reduction in individuals and very small, small and middle-market companies ratios, offset by the increase in corporate segment, mainly driven by the exposure for a corporate client.

· Latin America²: the ratio decreased in the quarter, mainly driven by lower delinquency rates in Chile and Colombia, due to the improvement in the collection operational process in the individuals portfolio.

¹ Includes units abroad ex-Latin America.² Excludes Brazil.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

NPL Ratio – Brazil¹ (%) | 15 to 90 days

⁽ⁱ⁾ Including Citibank’s operations acquired, the NPL Ratio for Individuals would be 3.3%.

Analysis of the quarterly change in NPL 15-90 (%) | Credit Quality x Volume

· Individuals: the ratio decreased compared to the previous quarter, with highlight for lower delinquency rates in credit cards, personal loans, payroll loans and vehicles loans.

· Very small, small and middle-market companies: the ratio decreased in the quarter, mainly driven by the lower portfolio of overdue loans in the middle-market segment.

· Corporate: the ratio increased from the previous quarter, mainly driven by the exposure for a corporate client.

Coverage Ratio | 90 days

Note: Coverage ratio is calculated by dividing the total allowance balance by the balance of operations more than 90 days overdue. The extended coverage ratio is calculated by dividing the total allowance balance by the balance of operations more than 90 days overdue and renegotiated operations, excluding double counting of renegotiated operations more than 90 days overdue. Total allowance includes the allowance for financial guarantees provided, which totaled R$1,950 million in December 2017 and is recorded in liabilities in accordance with CMN Resolution No. 4,512/16.

⁽ⁱ⁾ Including Citibank’s operations acquired, the Total Coverage Ratio would be 245% and the Total - Brazil would be 249%.

· Consolidated: the ratio increased in the quarter, mainly driven by the higher coverage of the Retail Banking in Brazil, impacted by a lower portfolio of overdue loans for the segment.

¹ Includes units abroad ex-Latin America.

Loan Portfolio Write-Off

(*) Loan portfolio average balance for the previous two quarters.

⁽ⁱ⁾ Including Citibank’s operations acquired, the write-off would be R$4,412 million.

Loan portfolio write-offs decreased 8.8% from the previous quarter. This is the lowest level since December 2014. The ratio of written-off operations to the average balance of the loan portfolio remains in line with the level in the last quarters.

NPL Creation

Note: The NPL Creation is the balance of loans that became overdue for more than 90 days in the quarter.

⁽ⁱ⁾ Including Citibank’s operations acquired, the estimated Total NPL Creation would be R$4,375 million and the estimated NPL Creation of Retail Banking - Brazil would be R$3,312 million.

· Consolidated: the NPL Creation decreased from the previous period and reached its lowest level since March 2014, mainly driven by a lower NPL Creation in Brazil that decreased for the fifth consecutive quarter.

NPL Creation Coverage

Note: NPL Creation coverage ratio is calculated from the division of provision for loan losses by NPL Creation in the quarter.

In the fourth quarter of 2017, total NPL Creation coverage reached 104%, due to the NPL Creation reduction and provision for loan losses increase in the quarter.

· Retail Segment - Brazil: the NPL Creation coverage increased due to the NPL Creation reduction.

· Wholesale segment - Brazil: the 48% of the NPL Creation coverage level reflects the provision for loan losses decrease in the segment.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Renegotiated Loans Operations

Renegotiated loans are all types of renegotiation, either non overdue, overdue, or coming from the recovery of loans written off as losses.

R$26.0 billion as of December 31, 2017

▼ - 1.4% (vs. Sep-17)

▲ + 7.0% (vs. Dec-16)

Obs.: Including Citibank’s operations acquired, the balance of Renegotiated loans operation would be R$26.4 billion.

Compared to the same period of the previous year, the increase in renegotiated loans operations is mainly related to Corporate segment operations.

By overdue period

measured at the moment of renegotiation

Brazil¹

¹Includes units abroad ex-Latin America.

NPL of Renegotiated Loans Operations

⁽ⁱ⁾ Including Citibank’s operations acquired, the NPL 90 would be R$4.4 billion and the NPL Ratio would be 16.5%.

Renegotiated Loans Coverage

as of December 31, 2017

R$ billions

Total renegotiated loans operations

⁽ⁱ⁾ Including Citibank’s operations acquired, the LLP would be R$10.8 billion and the Coverage Ratio would be 40.9%.

Loan Operations Renegotiated
when up to 90 days overdue*

⁽ⁱ⁾ Including Citibank’s operations acquired, the Portfolio would be R$15.5 billion, the LLP would be R$4.2 billion and the Coverage Ratio would be 26.9%.

Loan Operations Renegotiated
when over 90 days overdue *

⁽ⁱ⁾ Including Citibank’s operations acquired, the Portfolio would be R$10.9 billion and the LLP would be R$6.6 billion.

* Measured at the moment of renegotiation.

Sale of Financial Assets

In the fourth quarter of 2017, we recorded sales of assets with no risk retention to non-related companies in the amount of R$1.0 billion. This operation had a positive impact of R$81 million on financial margin with clients, of R$64 million on cost of credit, being R$91 million in provision for loan losses and a negative impact of R$27 million in discounts granted. The effect on net income for the fourth quarter of 2017 was R$80 million. There was no material impact on non-performing loans ratios.

Additionally, we recorded sales of assets that had already been written off as losses, with no risk retention, to non-related companies in the amount of R$1.6 billion, with impact of approximately R$16 million on net income, but with no impact on non-performing loans ratios.

	4Q17			4Q17
				(Ex Sale of
In R$ millions (except where indicated)				Assets)
Income Statement
Operating Revenues		27,432			27,351
Cost of Credit		(4,192	)		(4,285	)
Provision for Loan Losses		(4,442	)		(4,533	)
Impairment		(282	)		(282	)
Discounts Granted		(277	)		(250	)
Recovery of Loans Written Off as Losses		810			781
Other Operating Expense and Other ¹		(14,253	)		(14,253	)
Income Tax and Social Contribution		(2,707	)		(2,628	)
Recurring Net Income		6,280			6,184

¹includes Other Operating Expenses, retained claims and minority interests in subsidiaries

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Commissions and Fees and Result from Insurance Operations¹

Highlights

The R$287 million increase in commissions and fees from the previous quarter was mainly due to: (i) credit cards fees, due to the increase in revenues; and (ii) revenues from loan operations, associated to the increase in credit origination.

The increase of R$1,933 million in 2017 compared to the previous year was due to: (i) fund management, related to the increase in the balance of funds and managed portfolios; (ii) revenues from advisory and brokerage services, due to the higher volume of investment banking operations; and (iii) revenues from current account services, due to the increased number of current-account holders and to the offering of differentiated products and services.

This quarter the share of commissions and fees and result from insurance operations over operating revenues reached 38.2%.

In R$ millions	4Q17		3Q17		D			4Q16		D			2017		2016		D
Credit Cards		3,298		3,103		6.3	%		3,125		5.6	%		12,367		12,150		1.8	%
Current Account Services		1,733		1,699		2.0	%		1,665		4.1	%		6,761		6,395		5.7	%
Asset Management		929		940		-1.2	%		807		15.1	%		3,546		3,007		17.9	%
Fund Management Fees		772		780		-1.0	%		642		20.1	%		2,918		2,332		25.1	%
Consortia Administration Fees		157		161		-2.4	%		164		-4.5	%		628		675		-6.9	%
Credit Operations and Guarantees Provided		882		829		6.4	%		869		1.4	%		3,374		3,238		4.2	%
Credit Operations		508		457		11.1	%		500		1.5	%		1,895		1,817		4.3	%
Guarantees Provided		374		371		0.7	%		369		1.4	%		1,479		1,421		4.1	%
Collection Services		459		432		6.2	%		421		9.2	%		1,728		1,603		7.8	%
Advisory Services and Brokerage		400		410		-2.4	%		326		22.6	%		1,398		1,012		38.2	%
Other		262		306		-14.5	%		237		10.3	%		1,148		1,103		4.1	%
Foreign Exchange Services		28		30		-6.3	%		25		9.1	%		113		92		22.4	%
Custody Service and Portfolio Management		88		92		-3.5	%		79		11.5	%		345		318		8.7	%
Other Services		146		185		-21.2	%		133		9.9	%		690		694		-0.5	%
Latin America (ex-Brazil)		682		638		6.8	%		530		28.7	%		2,563		2,443		4.9	%
Commissions and Fees		8,645		8,358		3.4	%		7,980		8.3	%		32,885		30,952		6.2	%
Result from Insurance Operations¹		1,711		1,487		15.1	%		1,596		7.2	%		6,256		6,263		-0.1	%
Total		10,356		9,845		5.2	%		9,576		8.1	%		39,142		37,215		5.2	%

Note: Including Citibank’s operations, total commissions and fees and result from insurance operations would be R$10,485 million in 4Q17, reaching R$39,270 million in 2017.

Breakdown of Commissions and Fees and Result from Insurance Operations¹

Operational Coverage Ratio

The operational coverage ratio represents the extent to which non-interest expenses were covered by the commissions and fees added to the result from insurance¹.

¹ Result from Insurance, Pension Plan and Premium Bonds Operations net of retained claims and selling expenses; ² Operating Revenues including the Result from Insurance, Pension Plan and Premium Bonds Operations net of retained claims and selling expenses.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Credit Cards

Credit card revenues increased R$195 million from the previous quarter, mainly driven by the increased transaction volume that, in turn, increased revenues from interchange and MDR (Merchant Discount Rate) by R$84 million and R$41 million, respectively.

In 2017, credit card revenues reached R$12.4 billion, up 1.8% from 2016, mainly driven by higher revenues from annuity fees and interchange revenues.

Revenues | Acquiring and Issuance Services

REDE New Developments

REDE provides its clients with a number of products that are in line with the latest trends in the market.

With the e-REDE, we strengthen and improve the quality of our electronic payment platform, providing not only the acquiring service, but also an antifraud portal.

In November 2016, we made available to merchants the Control REDE, a reconciliation solution that facilitates the financial control of receivables.

In order to make banking as simple as possible for our clients, in 2016, we developed REDE Pay, our digital wallet solution, which brings to our online merchants the chance to increase their sales by accessing thousands of customers in a simple and safe way and Preço Único (One Price), a solution that simplifies billing for the merchants by charging a single fee that includes Merchant Discount Rate and equipment rental.

In an effort to increase the reach of the sales force and improve even more the quality or services, REDE recently reinforced its commercial team.

Card Issuance Activities

We are the leading player in the Brazilian credit card market, through Itaucard, Hipercard, Hiper, Credicard, joint ventures and commercial agreements with leading companies in sectors such as telecom, vehicles, retail and aviation operating in the Brazilian market, totaling approximately 29.2 million (in number of accounts) credit cards and 26.2 million (in number of accounts) debit cards.

Note: Debit cards include account holders only.

Acquiring Activities

Our merchant acquiring business comprises the process of capturing transactions through affiliation, management and relationship with merchants through REDE.

In the fourth quarter of 2017, the volume of credit and debit card transactions increased 12.9% from the previous quarter, driven by the typical seasonality of the period. Compared to the same period of the previous year, the 2.2% increase was due to the higher level of economic activity in 2017.

In addition to the transaction volume mentioned above, we captured and processed over R$2.2 billion in transactions within our retail partners and Joint Ventures in the fourth quarter of 2017.

Equipment Base

The reduction in the equipment base is a result of the migration to non-POS solutions and the competition increase in the segment.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Income Statement Analysis

Current Account Services

Revenues from current account services increased R$34 million from the previous quarter.

In 2017, these revenues grew 5.7% from 2016, mainly driven by the increased number of current-account holders and by offering of differentiated products and services.

Asset Management

Fund Management

Fund management fees decreased R$8 million in the quarter, due to the fewer number of business days and lower performance fees, partially offset by the increase in assets under administration.

In 2017, fund management fees grew R$586 million compared to 2016, mainly driven by an 18.1% increase in the balance of investment funds and managed portfolios.

According to ANBIMA, in December 2017 we ranked second in fund management and managed portfolio*, with a 21.9% market share.

* Includes Itaú Unibanco and Intrag.

Portfolio Managed and Investment Fund

Note: Does not include Latin America ex-Brazil. As from the third quarter of 2017, we deconsolidated managed portfolios from the Itaú group, and, for comparison purposes, the previous quarters were reprocessed.

Consortia Administration Fees

The consortia business is an alternative to clients for a planned acquisition of vehicles and real estate, contributing to revenue diversification and to a more complete product portfolio offering to our clients. In December 2017, we reached approximately 393 thousand active contracts, up 1.2% from the previous quarter. Installments receivable totaled R$11.1 billion at the end of the period, with increases of 0.5% from September 2017 and of 2.9% from December 2016.

Loan Operations and Financial Guarantees Provided

These revenues increased R$53 million from the previous quarter, mainly driven by the larger volume of origination of credit in the quarter.

In the chart below, we show the annualized ratio of revenues from loan operations to the loan portfolio and of revenues from guarantees provided to the financial guarantees provided portfolio.

¹ Includes units abroad ex-Latin America. (*) Loan portfolio and financial guarantees provided average balances for the previous two quarters.

Collection Services

In the fourth quarter of 2017, revenues from collection services grew R$27 million from the previous quarter, due to the seasonality of the period.

In 2017, these revenues grew R$124 million from 2016, mainly due to higher volume of collection services and change in pricing.

Advisory Services and Brokerage

Compared to the previous quarter, revenues from advisory and brokerage services decreased R$10 million due to a lower volume of operations.

In 2017, these revenues increased R$386 million, driven by a higher volume of investment banking operations, related to the increase in capital markets activities over the year.

Fixed Income: we took part in local operations with debentures, promissory notes and securitization, which totaled R$24.9 billion up to December 2017, reaching the leadership position in the ANBIMA ranking.

Equities: We carried out 27 offerings in South America over 2017, totaling US$2.5 billion, which led us to the first place in the Dealogic ranking.

Mergers and Acquisitions: in 2017, we provided financial advisory on 48 transactions in South America, totaling US$17.4 billion and reaching the leadership position in the Dealogic ranking.

Itaú Unibanco Holding S.A.

Management Discussion and Analysis

Itaú Insurance, Pension Plan and Premium Bonds

Itaú Insurance, Pension Plan and Premium Bonds

Highlights

The increase in net income of Itaú´s Insurance, Pension Plan and Premium Bonds businesses in the quarter was driven by higher premiums and less claims in life, personal accidents, credit card and credit-related insurance lines. There was also an increase in net income of R$136 million in Pension Plans due to the Liability Adequacy Test.

In Other Activities, the claims increase this quarter was due to a provision for contingency of R$83 million in health insurance.

Pro Forma Recurring Income Statement of Insurance Operations

	4Q17
				Core			Other			Core Activities
In R$ millions	Total			Activities			Activities			3Q17			D			4Q16			D
Earned Premiums		1,012			948			65			902			5.1	%		1,002			-5.4	%
Revenues from Pension Plan and Premium Bonds		491			491			-			242			103.3	%		259			89.4	%
Retained Claims		(373	)		(246	)		(127	)		(266	)		-7.4	%		(310	)		-20.5	%
Selling Expenses		(39	)		(7	)		(32	)		(6	)		19.1	%		(19	)		-64.3	%
Result from Insurance, Pension Plan and Premium Bonds		1,091			1,186			(95	)		872			36.0	%		933			27.2	%
Managerial Financial Margin		106			65			41			111			-41.7	%		174			-62.8	%
Commissions and Fees		497			499			(2	)		522			-4.4	%		448			11.4	%
Earnings of Affiliates		118			86			33			50			72.6	%		78			10.2	%
Non-interest Expenses		(463	)		(436	)		(27	)		(448	)		-2.8	%		(478	)		-8.9	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(83	)		(84	)		2			(72	)		17.4	%		(70	)		20.6	%
Income before Tax and Minority Interests		1,267			1,316			(48	)		1,035			27.2	%		1,085			21.3	%
Income Tax/Social Contribution and Minority Interests		(532	)		(580	)		47			(435	)		33.2	%		(493	)		17.6	%
Recurring Net Income		735			736			(1	)		599			22.8	%		591			24.4	%

Allocated Capital		1,408			1,262			146			1,234			2.2	%		1,634			-22.8	%
Average Allocated Capital		1,394			1,248			146			1,222			2.1	%		1,615			-22.7	%
Recurring Return on Average Allocated Capital		210.8	%		235.8	%		-2.6	%		196.1	%		3,970	bps		146.5	%		8,930	bps
Efficiency Ratio (ER)		26.8	%		24.9	%		-128.5	%		30.2	%		-540	bps		30.6	%		-570	bps
Combined Ratio		67.0	%		52.0	%		286.4	%		57.9	%		-590	bps		59.2	%		-720	bps

Note: Combined Ratio for insurance activities. Non-interest Expenses considers Personnel Expenses, Other Administrative Expenses and Other Operating Expenses.

Core Activities

Core activities consist of bancassurance products related to Life, Property, Credit, Pension Plan and Premium Bonds.

Other Activities

Other insurance activities correspond to Extended Warranty, Health Insurance, our stake in IRB, and other.

Our priority is to service our clients through the most efficient channels. Sales of insurance products and premium bonds through bankline/internet, mobile, ATMs, teller terminals and bankfone accounted for 68.1% of sales to current account holders in the quarter. In the fourth quarter of 2017, the amount of sales of insurance products and premium bonds to Digital Branches clients accounted for 14.5% of total sales.

We concentrate distribution efforts through our own channels and expanding the offer of insurance policies via an open platform, through which we provide products from partner insurance companies to our clients.

Insurance Ratio⁽¹⁾ and ROE

⁽¹⁾Insurance Ratio (%) = Recurring net income from Itaú Insurance, Pension Plan and Premium Bonds operations / Itaú Unibanco’s recurring net income.

⁽²⁾If the liability adequacy test were excluded, the Insurance Ratio would have been 9.5% and the ROE of Itaú Insurance, Pension Plan and Premium Bonds would have been 171.7%.

Technical Provisions in 4Q17

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Itaú Insurance, Pension Plan and Premium Bonds

Insurance (Core Activities)

Our insurance core activities consist of bancassurance products related to Life, Property and Credit. These products are offered in synergy with retail channels – our branch network, partnership with retailers, credit card clients, real estate and vehicle financing and personal loans - and the wholesale channel. They have characteristics such as low volatility in result and less use of capital, making them strategic and relevant to the diversification of the conglomerate’s revenues.

47% share in the recurring net income of Itaú Insurance, Pension Plan and Premium Bonds

Pro Forma Recurring Income Statement of the Insurance Segment (Core Activities)

In R$ millions	4Q17			3Q17			∆			4Q16			∆
Earned Premiums		948			902			5.1	%¹		1,002			-5.4	%⁴
Retained Claims		(233	)		(253	)		-8.2	%²		(285	)		-18.5	%
Selling Expenses		(6	)		(5	)		22.4	%		(18	)		-65.3	%
Underwriting Margin		709			644			10.2	%		699			1.4	%
Managerial Financial Margin		(6	)		18			-133.4	%³		37			-116.3	%
Commissions and Fees		77			95			-19.4	%		66			16.7	%
Earnings of Affiliates		86			50			72.6	%		78			10.2	%
Non-interest Expenses		(214	)		(226	)		-5.0	%		(252	)		-15.0	%⁴
Tax Expenses for ISS, PIS and Cofins and other taxes		(40	)		(39	)		4.1	%		(38	)		4.6	%
Income before Tax and Minority Interests		611			542			12.7	%		589			3.7	%
Income Tax/Social Contribution and Minority Interests		(266	)		(214	)		24.0	%		(276	)		-3.6	%
Recurring Net Income		346			328			5.4	%		314			10.2	%
Efficiency Ratio (ER)		25.9	%		29.4	%		-340	bps		29.9	%		-400	bps

Highlight:

1. increase due to higher sales in life, credit card and credit-related insurance;

2. decrease due to implementation of a digital claim-reporting process, with impact felt mostly in the third quarter of 2017;

3. decrease due to higher financial expenses;

4. change mainly driven by the sale of our group life insurance business, distributed by brokers, in April 2017.

Earned Premiums Breakdown

Underwriting Margin

Note: the underwriting margin is the sum of earned premiums, retained claims and selling expenses.

Retained Claims Breakdown

Combined Ratio

It reflects the operating cost as a percentage of income from earned premiums.

Decrease primarily driven by fewer retained claims in life, personal accidents, protected card and credit life insurance portfolios.

Note: The combined ratio is the sum of retained claims, selling expenses, administrative expenses, other operating income and expenses, tax expenses for ISS, PIS and Cofins and other taxes divided by earned premiums.

The extended combined ratio is the sum of these same expenses divided by the sum of earned premiums, managerial financial margin and commissions and fees.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Itaú Insurance, Pension Plan and Premium Bonds

Pension Plan

Product and advisory service innovation has played a significant role in the sustainable growth of pension plan operations for individuals. For companies, we offer specialized advisory services and develop customized solutions. We establish long-term partnerships with our corporate clients, adopting a communication strategy designed for the financial education of their employees.

46% share in the recurring net income of Itaú Insurance, Pension Plan and Premium Bonds

Pro Forma Recurring Income Statement of the Pension Plan Segment

In R$ millions	4Q17			3Q17			∆			4Q16			∆
Revenues from Pension Plan		373			108			246.5	%¹		109			242.4	%
Retained Claims		(13	)		(12	)		9.4	%		(24	)		-44.4	%
Selling Expenses		(1	)		(1	)		-3.2	%		(1	)		0.3	%
Result from Pension Plan		359			95			279.1	%		84			326.5	%
Managerial Financial Margin		33			49			-31.1	%²		69			-51.6	%
Commissions and Fees		423			427			-1.0	%³		383			10.4	%
Non-interest Expenses		(163	)		(166	)		-1.8	%		(150	)		8.6	%
Tax Expenses for ISS, PIS and Cofins and other taxes		(38	)		(26	)		43.4	%		(23	)		61.1	%
Income before Tax and Minority Interests		615			378			62.6	%		363			69.4	%
Income Tax/Social Contribution and Minority Interests		(274	)		(169	)		62.4	%⁴		(158	)		73.7	%
Recurring Net Income		341			209			62.8	%		205			66.2	%
Efficiency Ratio (ER)		21.0	%		30.5	%		-960	bps		29.3	%		-830	bps

Highlight:

1. increase of R$260 million due to the liability adequacy test carried out;

2. decrease due to a lower return on assets;

3. decrease due to fewer business days in the period;

4. increase of R$112 million due to the liability adequacy test carried out.

Pension Plan Contribution

Note: Total pension plan contributions = Contributions (+) Portability requests accepted. Net pension plan contributions = Contributions (+) Portability requests accepted (-) Redemptions (-) Portability requests assigned.

Technical Provisions

Note: Redemption Rate = Redemptions/Balance of Technical Provisions for Pension Plan

Market Share *

Technical Provisions

Total
23.4%		+ 30 bps
		(12 months)

Plans for Individuals
23.9%		+ 20 bps
		(12 months)

* according to the National Federation of Pension and Life Insurance (FENAPREVI), in October 2017.

Premium Bonds

The PIC Premium Bonds product is targeted to clients who are interested in competing for prizes. This product can be purchased through single payment or monthly payment modality, in accordance with the profile and segment of each client.

7% share in the recurring net income of Itaú Insurance, Pension Plan and Premium Bonds

Pro Forma Recurring Income Statement of the Premium Bonds Segment

In R$ millions	4Q17			3Q17			∆			4Q16			∆
Revenues from Premium Bonds		118			134			-11.9	%¹		150			-21.5	%
Managerial Financial Margin		37			45			-16.6	%²		69			-45.4	%
Non-interest Expenses		(58	)		(57	)		3.2	%		(76	)		-23.3	%³
Tax Expenses for ISS, PIS and Cofins and other taxes		(6	)		(7	)		-7.5	%		(8	)		-20.8	%
Income before Tax and Minority Interests		90			114			-21.5	%		133			-32.4	%
Income Tax/Social Contribution and Minority Interests		(40	)		(52	)		-22.8	%		(60	)		-32.6	%
Recurring Net Income		49			62			-20.4	%		73			-32.2	%
Efficiency Ratio (ER)		39.4	%		33.1	%		630	bps		36.5	%		300	bps

In the fourth quarter of 2017, we distributed prizes in the aggregate amount of R$11.5 million.

The amount of sales of premium bonds to Digital Branches clients accounted for 8.7% of total sales in the fourth quarter of 2017.

The revenues of premium bonds net of redemption totaled R$635 million from January to December of 2017, which represents an increase of 3.2% compared to the same period of 2016.

Highlight:

1. decrease driven by lower revenues;

2. decrease driven by the negative impact of the interbank deposit rate reduction on the remuneration of our assets;

3. decrease due to the lower number of sales in the fourth quarter of 2017.

13.2 million outstanding certificates

+ 1.3% (vs. 3Q17)

- 2.0% (vs. 4Q16)

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Income Statement Analysis

Non-interest Expenses

Highlights

In 2017, non-interest expenses increased 0.3%, below the accumulated inflation rate for the period (2.95% - IPCA). This low increase was due to the lower expenses on labor claims, caused by the improvement in the calculation methodology in the third quarter of 2016, more than compensated by the higher expenses on personnel expenses, impacted by the negotiation of the collective labor agreement, in addition to the higher number of employees.

In the quarter, the 4.7% increase in non-interest expenses was mainly driven by higher personnel expenses, especially in variable compensation, in addition to higher administrative expenses, especially by the increase in third-party services (notably consulting services to the Retail Banking segment) and data processing and telecommunications.

In R$ millions	4Q17			3Q17			∆			4Q16			∆			2017			2016			∆
Personnel Expenses		(5,389	)		(5,020	)		7.3	%		(4,886	)		10.3	%		(20,179	)		(19,721	)		2.3	%
Compensation, Charges and Social Benefits		(3,396	)		(3,267	)		3.9	%		(3,167	)		7.2	%		(13,165	)		(12,480	)		5.5	%
Management and Employees' Profit Sharing ^(*)		(1,208	)		(976	)		23.8	%		(1,049	)		15.2	%		(4,079	)		(3,730	)		9.4	%
Employee Terminations and Labor Claims		(712	)		(727	)		-2.0	%		(610	)		16.8	%		(2,724	)		(3,336	)		-18.4	%
Training		(72	)		(50	)		44.7	%		(60	)		20.4	%		(211	)		(174	)		21.2	%
Administrative Expenses		(4,208	)		(3,961	)		6.3	%		(4,287	)		-1.8	%		(15,925	)		(15,841	)		0.5	%
Third-Party Services		(1,035	)		(939	)		10.1	%		(1,104	)		-6.3	%		(3,878	)		(4,033	)		-3.8	%
Data Processing and Telecommunications		(989	)		(923	)		7.2	%		(968	)		2.2	%		(3,764	)		(3,642	)		3.3	%
Facilities		(678	)		(657	)		3.2	%		(759	)		-10.6	%		(2,590	)		(2,707	)		-4.3	%
Depreciation and Amortization		(519	)		(489	)		6.0	%		(485	)		7.0	%		(1,977	)		(1,971	)		0.3	%
Advertising, Promotions and Publications		(284	)		(244	)		16.2	%		(277	)		2.6	%		(995	)		(897	)		10.9	%
Security		(163	)		(161	)		1.3	%		(160	)		2.3	%		(652	)		(655	)		-0.4	%
Financial System Services		(186	)		(175	)		6.3	%		(123	)		51.5	%		(682	)		(532	)		28.1	%
Transportation		(76	)		(79	)		-3.8	%		(87	)		-12.8	%		(304	)		(357	)		-15.0	%
Materials		(83	)		(80	)		4.6	%		(72	)		15.7	%		(300	)		(270	)		10.8	%
Travel		(53	)		(50	)		4.6	%		(56	)		-6.4	%		(191	)		(180	)		6.3	%
Other		(142	)		(162	)		-12.6	%		(196	)		-27.6	%		(592	)		(596	)		-0.7	%
Operating Expenses		(1,156	)		(1,382	)		-16.4	%		(1,157	)		-0.1	%		(4,859	)		(4,995	)		-2.7	%
Provision for Contingencies		(291	)		(469	)		-37.9	%		(131	)		122.7	%		(1,373	)		(1,180	)		16.3	%
Selling - Credit Cards		(535	)		(480	)		11.3	%		(521	)		2.7	%		(1,872	)		(1,800	)		4.0	%
Claims		(74	)		(66	)		11.3	%		(81	)		-9.2	%		(283	)		(287	)		-1.5	%
Other		(256	)		(366	)		-30.0	%		(425	)		-39.6	%		(1,331	)		(1,727	)		-22.9	%
Other Tax Expenses ^(**)		(86	)		(94	)		-8.9	%		(89	)		-3.2	%		(344	)		(373	)		-7.6	%
Latin America (ex-Brazil) ^(***)		(1,537	)		(1,361	)		12.9	%		(1,508	)		1.9	%		(5,439	)		(5,696	)		-4.5	%
Total ⁽ⁱ⁾		(12,375	)		(11,818	)		4.7	%		(11,927	)		3.8	%		(46,745	)		(46,625	)		0.3	%

^(*)Includes variable compensation and stock option plans. ^(**)Does not include ISS, PIS and Cofins. ^(***)Does not consider overhead allocation.

⁽ⁱ⁾Including Citibank’s operations acquired, total non-interest expenses ratio would be R$12,675 million in the fourth quarter of 2017 and R$47,045 million in 2017.

The increase in non-interest expenses in the quarter is mainly driven by (i) higher personnel expenses, mainly driven by variable compensation, due to a better result in 2017 than the previous year, and in compensation, due to the higher number of employees and to the negotiation of collective labor agreement; (ii) increase in administrative expenses, with highlight to the growth in third-party services, due to higher expenditures on consulting services to the Retail Banking segment, increase in data processing and telecommunications, and increase in advertising, due to higher TV media and internet advertising costs; and (iii) higher expenses in Latin America, due to readjustment of number of employees, to the foreign exchange variation and to the higher advertising and publicity costs.

In 2017, non-interest expenses increased 0.3% from the previous year, below the inflation rate for the period (2.95% - IPCA). This increase was basically driven by higher expenses on compensation, charges and social benefits, and variable compensation, which were impacted by the negotiation of the collective labor agreement, in addition to the higher number of employees to operational structure adjustment, partially offset by lower expenses on labor claims caused by the improvement in the calculation methodology in the third quarter of 2016. The decrease in expenses in Latin America (ex-Brazil) was mainly driven by the refund of the fine paid to SBIF (Superintendencia de Bancos e Instituciones Financieras de Chile) in the second quarter of 2017.

Number of Employees - in thousands

⁽ⁱ⁾Including Citibank’s operations acquired, total number of employees would be 99.3 thousand.

96.4 thousand employees at the end of the 4Q17

▲ + 0.1% (4Q17/3Q17)

▲ + 1.7% (4Q17/4Q16)

The increase in the number of employees in the year was driven by the new employees hired for the Retail Banking operational structure related to the branch network. Additionally, we started a hiring process aimed at strengthening REDE’s sales force.

Note: For companies under our control, 100% of the total number of employees is considered. No employees are considered for companies not controlled by us.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Income Statement Analysis

Efficiency Ratio

We present the efficiency ratio and the risk-adjusted efficiency ratio, which includes the cost of credit (result from loan losses, impairment and discounts granted).

Risk-Adjusted	=	Non-Interest Expenses (Personnel Expenses + Administrative Expenses + Operating Expenses + Other Expenses) + Cost of Credit
Efficiency Ratio	=	(Managerial Financial Margin + Commissions and Fees + Result of Insurance, Pension Plan and Premium Bonds + Tax Expenses for ISS, PIS, Cofins and Other Taxes)

Efficiency Ratio:

· 12-month period: increase of 100 basis points from the same period of the previous year. In this period, non-interest expenses increased 0.3%, whereas accumulated inflation for the period was 2.95% (IPCA). On the other hand, in the same period, revenues decreased 2.2%, mainly impacted by lower economic activity.

Risk-Adjusted Efficiency Ratio:

· 12-month period: decrease of 600 basis points from the same period of the previous year. In this period, in addition to the effects that explain the Efficiency ratio, cost of credit decreased 29.6%, mainly driven by lower provision for loan losses.

Distribution Network

Points of Service | Brazil and Abroad

The shareholders’ agreement with Tecban and its shareholders, announced on July 18, 2014, which provides for the substitution of the external ATMs network for Banco24Horas ATMs, is enabling the increase in the total number of available ATMs.

Note: (i) Includes Banco Itaú Argentina and companies in Chile, Colombia, Paraguay and Uruguay; (ii) Includes ESBs (Electronic Service Branches) and points of service in third-parties’ establishments. (iii) Does not include points of sale.

Branches and Client Service Branches | Brazil and Abroad

In Brazil, the annual reduction in the number of brick and mortar branches and the increased number of digital branches are consistent with our clients’ profiles, who have been increasingly demanding services through digital channels.

(i) Includes IBBA representative offices abroad. Note: Includes Banco Itaú BBA, Banco Itaú Argentina and companies in Chile, Colombia, Panama, Paraguay and Uruguay. Including Citibank’s operations acquired, total Brick and Mortar Branches - Brazil would be 3,591.

Geographical Distribution of Service Network^{(*) -}

Number of Branches and Client Service Branches

(*) In December 2017. Does not include branches and CSBs in Latin America and Itaú BBA.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Balance Sheet

Balance Sheet | includes the consolidation of Citibank in the 4Q17

Highlights

Our total assets exceeded R$1.5 trillion at the end of December 2017.

Annual growth of 22.3% in deposits, especially time deposits, due to the partial allocation of funds from repurchase agreements backed by debentures (11.5% decrease in deposits received under securities repurchase agreements), and of approximately R$5 billion in deposits coming from the consolidation of Citibank’s operation.

Assets
In R$ millions, end of period	4Q17			3Q17			∆			4Q16			∆
Current and Long-term Assets		1,475,217			1,439,523			2.5	%		1,400,097			5.4	%
Cash and Cash Equivalents		18,749			19,089			-1.8	%		18,542			1.1	%
Interbank Investments		271,254			287,701			-5.7	%		286,038			-5.2	%
Securities and Derivative Financial Instruments		445,751			412,806			8.0	%		376,887			18.3	%
Interbank and Interbranch Accounts		132,752			126,804			4.7	%		113,568			16.9	%
Loan, Lease and Other Loan Operations		493,595			467,831			5.5	%		491,225			0.5	%
(Allowance for Loan Losses)		(35,360	)		(34,702	)		1.9	%		(35,986	)		-1.7	%
Other Assets		148,475			159,993			-7.2	%		149,822			-0.9	%
Permanent Assets		28,286			26,477			6.8	%		26,987			4.8	%
Total Assets		1,503,503			1,466,000			2.6	%		1,427,084			5.4	%

Liabilities
In R$ millions, end of period	4Q17		3Q17		∆			4Q16		∆
Current and Long-Term Liabilities		1,362,133		1,328,779		2.5	%		1,297,823		5.0	%
Deposits		402,938		359,904		12.0	%		329,414		22.3	%
Deposits Received under Securities Repurchase Agreements		323,910		336,951		-3.9	%		366,038		-11.5	%
Fund from Acceptances and Issue of Securities		107,581		106,638		0.9	%		93,711		14.8	%
Interbank and Interbranch Accounts		39,086		37,638		3.8	%		32,362		20.8	%
Borrowings and Onlendings		63,441		66,318		-4.3	%		75,614		-16.1	%
Derivative Financial Instruments		26,453		21,562		22.7	%		24,711		7.0	%
Technical Provisions for Insurance, Pension Plans and Premium		183,747		177,522		3.5	%		156,656		17.3	%
Other Liabilities		214,977		222,244		-3.3	%		219,317		-2.0	%
Deferred Income		2,433		2,082		16.9	%		2,046		18.9	%
Minority Interest in Subsidiaries		12,014		11,508		4.4	%		11,625		3.3	%
Stockholders' Equity		126,924		123,631		2.7	%		115,590		9.8	%
Total Liabilities and Equity		1,503,503		1,466,000		2.6	%		1,427,084		5.4	%

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Balance Sheet

Credit Portfolio

Highlights

In the quarter, the total credit portfolio resumed growth with a 3.2% increase in the period, with increases of 10.3% in credit cards and of 5.0% in very small and middle-market companies in Brazil.

In 2017, origination of credits increased approximately 12% for individuals and 14% for very small, small and middle-market companies in Brazil.

Credit Portfolio by Product

In R$ billions, end of period	4Q17		3Q17		∆			4Q16		∆
Individuals - Brazil ⁽¹⁾		184.4		179.0		3.0	%		183.2		0.6	%
Credit Card Loans		63.0		57.2		10.3	%		59.0		6.8	%
Personal Loans		24.3		25.0		-2.9	%		25.8		-6.1	%
Payroll Loans ⁽²⁾		44.2		44.6		-0.8	%		44.6		-1.0	%
Vehicle Loans		14.1		13.9		1.4	%		15.4		-8.4	%
Mortgage Loans		38.7		38.3		0.9	%		38.1		1.4	%
Rural Loans		0.1		0.1		-8.0	%		0.2		-42.5	%
Companies - Brazil ⁽¹⁾		166.7		162.1		2.8	%		180.3		-7.6	%
Working Capital ⁽³⁾		84.6		76.6		10.5	%		93.3		-9.3	%
BNDES/Onlending		22.9		26.6		-13.9	%		32.7		-30.0	%
Export / Import Financing		39.8		39.4		0.8	%		30.5		30.4	%
Vehicle Loans		2.6		2.3		14.6	%		2.9		-11.4	%
Mortgage Loans		8.2		8.9		-7.8	%		10.5		-21.3	%
Rural Loans		8.6		8.3		3.3	%		10.4		-17.7	%
Latin America ⁽⁴⁾		136.2		126.7		7.5	%		127.7		6.6	%
Total without Financial Guarantees Provided		487.2		467.8		4.1	%		491.2		-0.8	%
Financial Guarantees Provided		70.5		71.3		-1.1	%		70.8		-0.4	%
Total with Financial Guarantees Provided		557.7		539.1		3.5	%		562.0		-0.8	%
Corporate Securities ⁽⁵⁾		36.0		36.1		-0.3	%		36.4		-1.1	%
Total Risk		593.7		575.2		3.2	%		598.4		-0.8	%
Citibank´s Operation		6.4		-		-			-		-
Total Risk with Citibank		600.1		575.2		4.3	%		598.4		0.3	%

(1) Includes units abroad ex-Latin America. (2) Includes operations originated by the institution and acquired operations. (3) Also includes Overdraft, Receivables, Hot Money, Leasing, and other. (4) Includes Argentina, Chile, Colombia, Panama, Paraguay, Peru and Uruguay. (5) Includes Debentures, Certificates of Real Estate Receivables (CRI) and Commercial Paper.

Credit Concentration**

As of December 31, 2017

Only 17.9% of the credit risk is concentrated on the 100 largest debtors.

			% of total		% of total
In R$ billions, end of period	Risk *		credits		Assets
Largest Debtor		4.1		0.7		0.3
10 Largest Debtors		29.0		5.1		1.9
20 Largest Debtors		46.3		8.2		3.1
50 Largest Debtors		74.8		13.3		5.0
100 Largest Debtors		101.1		17.9		6.7

* Including financial guarantees provided

Credit Portfolio without Financial Guarantees Provided by Vintage**

** Includes the consolidation of Citibank in the 4Q17

Companies Credit Portfolio by Business Sector**

With Financial Guarantees Provided

In R$ billions, end of period	4Q17		3Q17		∆
Public Sector		4.9		3.9		26.0	%
Private Sector \| Companies		314.0		305.5		2.8	%
Real Estate		21.9		21.6		1.4	%
Food and beverage		17.3		16.4		5.5	%
Vehicles and auto parts		16.0		17.2		-6.6	%
Agribusiness and fertilizers		16.0		15.7		2.2	%
Energy and water treatment		15.8		15.9		-0.6	%
Transportation		13.7		13.6		0.6	%
Banks and other financial institutions		11.0		11.6		-5.3	%
Infrastructure work		10.4		10.7		-2.6	%
Mining		9.3		9.5		-2.6	%
Steel and metallurgy		9.2		9.3		-1.7	%
Telecommunications		9.0		9.0		-0.3	%
Petrochemical and chemical		8.6		8.8		-3.0	%
Sugar and Alcohol		7.6		8.0		-4.9	%
Pharmaceutical and cosmetics		7.2		7.1		2.5	%
Capital Assets		6.9		6.7		2.6	%
Electronic and IT		6.4		6.1		5.3	%
Oil and gas		6.3		5.6		11.8	%
Construction Material		6.3		6.0		4.1	%
Clothing and footwear		4.8		4.9		-1.1	%
Services - Other		39.9		36.0		10.7	%
Commerce - Other		17.6		15.8		11.8	%
Industry - Other		8.0		7.3		8.4	%
Other		45.0		42.7		5.3	%
Total		318.9		309.3		3.1	%

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Balance Sheet

Credit Portfolio¹ (Individuals and Companies) - Brazil

(1) Without financial guarantees provided. (2) Includes Individuals and Companies.

Note: For further information on products, please see to our Institutional Presentation, available on our Investor Relations website.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Balance Sheet

Funding

Highlights

Diversified funding base with our loan portfolio mainly financed by retail clients.

Time deposit growth is partially related to the migration of funds from debentures linked to repurchase agreements.

After being purchased by the bank (the Conglomerate’s leading company), the debentures issued by the Conglomerate’s leasing companies are traded with characteristics similar to those of CDs and other time deposits, although they are classified as deposits received under securities repurchase agreements.

In R$ millions, end of period	4Q17		3Q17		∆			4Q16		∆
Demand Deposits		68,589		58,609		17.0	%		61,133		12.2	%
Savings Deposits		119,075		112,249		6.1	%		108,250		10.0	%
Time Deposits		208,086		186,912		11.3	%		156,274		33.2	%
Debentures (Linked to Repurchase Agreements and Third Parties’ Operations)		58,837		73,573		-20.0	%		132,149		-55.5	%
Funds from Bills ⁽¹⁾ and Structured Operations Certificates		65,015		67,827		-4.1	%		59,424		9.4	%
(1) Total - Funding from Account Holders and Institutional Clients		519,602		499,170		4.1	%		517,231		0.5	%
Onlending		24,181		25,575		-5.5	%		29,828		-18.9	%
(2) Total – Funding from Clients		543,783		524,746		3.6	%		547,058		-0.6	%
Assets Under Administration		969,858		938,494		3.3	%		814,326		19.1	%
Technical Provisions for Insurance, Pension Plan and Premium Bonds		183,747		177,522		3.5	%		156,656		17.3	%
(3) Total – Clients		1,697,388		1,640,762		3.5	%		1,518,040		11.8	%
Interbank deposits		2,182		2,131		2.4	%		3,757		-41.9	%
Funds from Acceptance and Issuance of Securities		41,877		38,812		7.9	%		34,287		22.1	%
Total Funds from Clients + Interbank Deposits		1,741,447		1,681,704		3.6	%		1,556,084		11.9	%

Working Capital and Other		519,836		529,735		-1.9	%		489,862		6.1	%
Repurchase Agreements ⁽²⁾		265,073		263,378		0.6	%		233,889		13.3	%
Borrowings		39,260		40,743		-3.6	%		45,786		-14.3	%
Foreign Exchange Portfolio		51,851		63,353		-18.2	%		52,262		-0.8	%
Subordinated Debt ⁽³⁾		52,696		48,406		8.9	%		57,420		-8.2	%
Collection and Payment of Taxes and Contributions		306		5,192		-94.1	%		278		10.1	%
Working Capital ⁽⁴⁾		110,651		108,662		1.8	%		100,228		10.4	%
Total Funds (Working Capital, Raised and Managed Assets)		2,261,283		2,211,439		2.3	%		2,045,946		10.5	%

(1) Includes funds from Real Estate, Mortgage, Financial, Credit and Similar Notes. (2) Does not include own issued debentures classified as funding. (3) Considers in the 4Q17, perpetual subordinated notes in the amount of R$4 billion. The approval of the Central Bank of Brazil is still necessary for the notes to be included in our Regulatory Capital as Additional Tier 1 Capital. (4) Stockholders’ Equity + Non-Controlling Interest – Permanent Assets.

Loans to Funding Ratio

In R$ millions, end of period	4Q17			3Q17			∆			4Q16			∆
Funding from Clients		543,783			524,746			3.6	%		547,058			-0.6	%
Funds from Acceptance and Issuance of Securities Abroad		41,877			38,812			7.9	%		34,287			22.1	%
Borrowings		39,260			40,743			-3.6	%		45,786			-14.3	%
Other ⁽¹⁾		33,135			28,845			14.9	%		34,126			-2.9	%
Total (A)		658,055			633,145			3.9	%		661,257			-0.5	%
(-) Reserve Required by Brazilian Central Bank		(101,291	)		(98,792	)		2.5	%		(90,155	)		12.4	%
(-) Cash (Currency) ⁽²⁾		(18,749	)		(19,089	)		-1.8	%		(18,542	)		1.1	%
Total (B)		538,014			515,264			4.4	%		552,560			-2.6	%
Loan Portfolio (C) ⁽³⁾		487,219			467,831			4.1	%		491,225			-0.8	%
Loan Portfolio / Gross Funding (C/A)		74.0	%		73.9	%		10	bps		74.3	%		-20	bps
Loan Portfolio / Net Funding (C/B)		90.6	%		90.8	%		-20	bps		88.9	%		170	bps

(1) Includes installments of subordinated debt that are not included in the Tier II Referential Equity.

(2) Includes cash, bank deposits of institutions without reserve requirements, foreign currency deposits in Brazil, foreign currency deposits abroad, and cash and cash equivalents in foreign currency.

(3) The loan portfolio balance does not include financial guarantees provided.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Balance Sheet by Currency

Balance Sheet by Currency

We have a foreign exchange risk management policy associated with our asset and liability positions, primarily intended to mitigate impacts from fluctuations in foreign exchange rates on consolidated results.

Brazilian tax legislation determines that gains and losses from exchange rate variation on permanent foreign investments must not be included in the tax basis. On the other hand, gains and losses arising from financial instruments used to hedge such asset positions are affected by tax effects. Therefore, in order not to expose net income to exchange rate variations, a liability position must be built at a higher volume than the hedged assets.

Assets | December 31, 2017

				Business in			Local			Foreign		Business
In R$ millions, end of period	Consolidated			Brazil			Currency			Currency		Abroad
Cash and Cash Equivalents		18,749			8,306			6,869			1,437		10,489
Short - Term Interbank Investments		271,254			247,784			247,784			0		23,470
Securities and Derivative Instruments		445,751			376,195			375,304			891		121,198
Loans, Leases and Other Loan Operations		458,235			294,081			283,610			10,471		207,523
Loans		493,595			323,377			312,906			10,471		213,587
(Allowance for Loan Losses)		(35,360	)		(29,296	)		(29,296	)		0		(6,064	)
Other Assets		281,228			245,365			228,265			17,100		67,582
Foreign Exchange Portfolio		51,655			28,273			11,346			16,927		54,972
Other		229,573			217,092			216,919			173		12,610
Permanent Assets		28,286			97,289			19,225			78,064		9,021
Total Assets		1,503,503			1,269,019			1,161,058			107,961		439,283
Derivatives - Purchased Positions											256,638
Total Assets After Adjustments (a)											364,599

Liabilities | December 31, 2017

			Business in		Local		Foreign			Business
In R$ millions, end of period	Consolidated		Brazil		Currency		Currency			Abroad
Deposits		402,938		260,297		259,933		364			142,672
Funds Received under Securities Repurchase Agreements		323,910		306,888		306,888		0			17,022
Funds from Acceptances and Issue of Securities		107,581		120,028		66,412		53,616			38,738
Borrowings and Onlendings		63,441		70,213		26,232		43,981			36,588
Interbank and Interbranch Accounts		39,086		38,328		35,097		3,231			759
Derivative Financial Instruments		26,453		15,207		15,207		-			11,245
Other Liabilities		214,977		144,914		129,230		15,685			102,261
Foreign Exchange Portfolio		51,851		28,429		12,821		15,608			55,012
Other		163,126		116,485		116,408		77			47,248
Technical Provisions of Insurance, Pension Plan and Premium Bonds		183,747		183,550		183,550		-			197
Deferred Income		2,433		1,965		1,159		806			468
Minority Interest in Subsidiaries		12,014		726		726		-			11,287
Stockholders' Equity of Parent Company		126,924		126,902		126,902		-			78,045
Capital Stock and Reserves		102,959		103,721		103,721		-			74,473
Net Income		23,965		23,181		23,181		-			3,572
Total Liabilities and Equity		1,503,503		1,269,019		1,151,336		117,683			439,283
Derivatives - Sold Positions								305,379
Total Liabilities and Equity After Adjustments (b)								423,062
Net Foreign Exchange Sold Position Itaú Unibanco (c = a - b)								(58,463	)
Net Foreign Exchange Sold Position Itaú Unibanco (c) in US$								(17,673	)

Note: Does not include eliminations of operations between local and foreign units.

Assets and liabilities denominated in foreign currencies

In R$ millions, end of period	4Q17			3Q17			∆
Investments Abroad		78,064			73,973			5.5	%
Net Foreign Exchange Position (Except Investments Abroad)		(136,526	)		(128,742	)		6.0	%
Total		(58,463	)		(54,768	)		6.7	%
Total in US$		(17,673	)		(17,288	)		2.2	%

The net foreign exchange position, a liability position at a higher volume than the balance of hedged assets, reflects the mitigation of the exposure to foreign exchange variations.

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Risk and Capital Management

Risk and Capital Management

We believe risk management is an essential tool to optimize the use of resources and select the best business opportunities to maximize value creation for shareholders. In this context, the risk appetite defines the nature and the level of risks acceptable and the risk culture guides the attitudes required to manage them.

With the aim of strengthening our values and aligning our employees' behavior with the guidelines established in risk management, we have adopted a number of initiatives to disseminate the risk culture. Our risk culture goes beyond policies, procedures and processes. It strengthens the individual and collective responsibility of all employees in the management of the risks inherent to the performed activities, respecting our ethical way of doing business. We take a prospective stance in relation to capital management and, through our Internal Capital Adequacy Assessment Process (ICAAP), we assess the adequacy of our capital to face the incurred risks, composed by credit, market, operational risks and to face other material risks. The result of the last ICAAP – dated as of December 2016 – showed that, in addition to having enough capital to face all material risks, we have a significant cushion, thus ensuring the soundness of our equity position.

Our risk management process includes:

Identification and measurement of existing and potential risks in our operations;

Management of our portfolio seeking optimal risk-return ratios;

Alignment of institutional policies for risk management control, procedures and methodologies according to the guidelines of the Board of Directors and our corporate strategies.

Risks Inherent in Our Business

Credit risk is the risk of loss associated with failure by a borrower, issuer or counterparty to fulfill their respective financial obligations as defined in the contracts.

Operational risk is the possibility of losses arising from failure, deficiency or inadequacy of internal processes, people or systems, or from external events that affect the achievement of strategic, tactical or operational objectives.

Liquidity risk is the likelihood of not being able to effectively honor obligations, including those from guarantees commitment, without affecting daily operations or incurring significant losses.

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

For further information on the risk and capital management structure, please refer to the Investor Relations website at www.itau.com.br/investor-relations >> Corporate Governance >> Risk and Capital Management – Pillar 3.

Liquidity Coverage Ratio

(LCR)

In R$ millions	4Q17			3Q17
HQLA*		187,090			190,910
Potential Cash Outflows		98,356			95,146
LCR (%)		190	%		201	%

In 2017, the minimum required by the Brazilian Central Bank is 80%.

Values are calculated based on the methodology defined by Circular No. 3,749, of the Brazilian Central Bank, which is in line with the international guidelines.

*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.

Note: Potential Cash Outflows calculated in standardized stress, determined by Circular No. 3,749;

Value at Risk - VaR ^1,2

It is a statistical metric that quantifies the maximum potential economic loss expected in normal market conditions.

In R$ millions, end of period	4Q17⁽²⁾		3Q17⁽²⁾
VaR by Risk Factor
Brazilian Interest Rates		764.7		712.0
Currency		11.9		46.6
Shares of Stock Exchange		46.4		51.6
Commodities		0.8		1.8
Diversification Effect		-451.5		-375.8
Total VaR		372.3		436.2
Maximum VaR in the quarter		467.3		466.9
Average VaR in the quarter		400.4		374.5
Minimum VaR in the quarter		324.2		315.4

(1) Values represented above consider a 1-day time horizon and a 99% confidence level.

(2) The VaR by risk factors includes foreign units.

Evolution of Itaú Unibanco’s VaR

Itaú Unibanco Holdings S.A.

Management Discussion & Analysis

Risk and Capital Management

Capital

Highlights

On December 31, 2017, our CET1 fully loaded with Basel III rules reached 15.5%. Our Tier I capital ratio fully loaded is 13.5% considering the acquisition of minority interest of 49,9% in XP Investimentos, the approval of our additional capital Tier I and more importantly, the additional dividends and interest on own capital reserved in stockholder’s equity in the amount of R$13.7 billion.

Capital Requirements

Our minimum capital requirements follow the set of rules disclosed by the Brazilian Central Bank, which implement the Basel III global capital requirements standards in Brazil. These requirements are expressed as ratios of available capital - stated by the Referential Equity, or of Total Capital, composed of Tier I Capital and Tier II Capital - and the risk-weighted assets, or RWA.

The following table presents the schedule for phased-in implementation by the Central Bank of the capital adequacy and liquidity coverage ratio requirements under Basel III, as applicable to Itaú Unibanco Holding.

	From January 1,
Basel III Schedule (%)	2015		2016		2017		2018		2019
Common Equity Tier I		4.5		4.5		4.5		4.5		4.5
Tier I Capital		6.0		6.0		6.0		6.0		6.0
Total Regulatory Capital		11.0		9.875		9.25		8.625		8.0
Additional Common Equity Tier I (ACP)		-		0.625		1.5		2.375		3.5
conservation buffer		-		0.625		1.25		1.875		2.5
countercyclical buffer¹		-		-		-		-		-
systemic		-		-		0.25		0.5		1.0
Common Equity Tier I + ACP		4.5		5.1		6.0		6.9		8.0
Total Regulatory Capital + ACP		11.0		10.5		10.75		11.0		11.5
Liquidity Coverage Ratio		60		70		80		90		100
Prudential adjustments deductions		40		60		80		100		100

¹ According to circular No.3,769 of Central Bank, required ACP countercyclical is zero.

Solvency Ratios

In R$ millions, end of period	4Q17			3Q17
Consolidated stockholders’ equity (BACEN)		140,348			136,894
Deductions from Core Capital		(17,952	)		(16,634	)
Core Capital		122,396			120,260
Additional Capital		57			52
Tier I		122,453			120,311
Tier II		19,799			19,791
Referential Equity (Tier I and Tier II)		142,252			140,102
Required Referential Equity		69,995			66,566
ACPRequired		11,351			10,795
Total Risk-weighted Exposure (RWA)		756,708			719,634
Credit Risk-weighted Assets (RWA_CPAD)		660,516			637,758
Operational Risk-weighted Assets (RWA_OPAD)		63,277			63,013
Market Risk-weighted Assets (RWA_MINT)		32,915			18,864
Tier I (Core Capital + Additional Capital)		16.2	%		16.7	%
Tier II		2.6	%		2.8	%
BIS (Referential Equity / Total Risk-weighted Exposure)		18.8	%		19.5	%

Main changes in the quarter:

Referential Equity: An increase of 1.5%, with impact on Tier I capital, which increased R$2,142 million, mainly due to the effect of the stockholders’ equity growth in the quarter.

RWA: Increase of R$37,073 million, mainly due to the higher exposure of credit risk-weighted assets (RWA_CPAD), including the incorporation of Citibank’s retail business in Brazil, and market risk-weighted assets (RWA_MINT).

BIS ratio: Reduction of 70 basis points, mainly due to the effect of the increase in risk-weight assets (RWA) in the quarter.

Note: Includes financial institutions, consortium managers, payment institutions, companies that acquire operations or directly or indirectly assume credit risk and investment funds in which the conglomerate substantially retains risks and benefits.

Capital Ratio according to Full Basel III Rules

On December 31, 2017, our CET1 fully loaded with Basel III rules reached 15.5%. Our Tier I capital ratio fully loaded is 13.5% considering the minority interest of 49,9% in XP Investimentos, the approval of our additional capital Tier I and more importantly, the additional dividends and interest on own capital reserved in stockholder’s equity in the amount of R$13.7 billion.

¹Includes deductions of Goodwill, Intangible Assets (generated before and after October 2013), Tax Credits from Temporary Differences and Tax Loss Carryforwards, Pension Fund Assets, Equity Investments in Financial Institutions, Insurance and similar companies, the increase of the multiplier of the amounts of market risk, operational risk and certain credit risk accounts. This multiplier, which is at 10.8 nowadays, will be 12.5 in 2019 and the anticipation of deferred tax assets consumption expected for the first quarter of 2018. ²Estimated impacts based on preliminary information, pending regulatory approval. ³The impact of 0.6% represents AT1 issuance pro forma information, which is pending regulatory approval to be considered as Capital Tier I. ⁴The additional dividends and interest on own capital in the amount of R$13.7 billions reserved in stockholder’s equity will be paid on March 7^th, 2018. Therefore, the net payout over the recurring net income is 70.6%. Considering the shares bought back in 2017, the net payout over the recurring net income is 83.0%.

Itaú Unibanco Holding S.A.

Management Discussion and Analysis

Segment Analysis

Results by Business Segment

The Pro Forma financial statements of Retail Banking, Wholesale Banking and Activities with the Market + Corporation presented below are based on managerial information derived from internal models to more accurately reflect the activities of the business units.

4^thquarter of 2017

Pro Forma Balance Sheet by Segment

							Activities with the
	Retail			Wholesale			Market +
In R$ millions	Banking			Banking			Corporation			Itaú Unibanco
Current and Long-Term Assets		954,056			594,358			117,130			1,475,217
Cash and Cash Equivalents		13,615			5,134			-			18,749
Short-term Interbank Investments		317,118			99,674			-			271,254
Securities and Derivative Financial Instruments		241,967			190,022			50,872			445,751
Interbank and Interbranch Accounts		125,634			9,729			-			132,752
Loan, Lease and Other Credit Operations		220,815			272,781			-			493,595
(Allowance for Loan Losses)		(15,641	)		(11,558	)		-			(27,199	)
(Complementary Expected Loss Provisions)		-			-			(8,161	)		(8,161	)
Other Assets		50,549			28,576			74,419			148,475
Permanent Assets		16,080			10,026			2,180			28,286
Total Assets		970,137			604,384			119,309			1,503,503
Current and Long-Term Liabilities		933,084			547,503			71,873			1,362,133
Deposits		262,080			253,708			-			402,938
Deposits Received under Securities Repurchase Agreements		315,777			39,185			-			323,910
Funds from Acceptances and Issue of Securities		84,503			63,161			-			107,581
Interbank and Interbranch Accounts		23,748			15,338			-			39,086
Borrowings and Onlendings		677			62,764			-			63,441
Derivative Financial Instruments		23			28,179			-			26,453
Other Liabilities		106,399			41,298			71,873			214,977
Technical Provisions for Insurance, Pension Plans and Premium Bonds		139,877			43,870			-			183,747
Deferred Income		1,751			682			-			2,433
Minority Interest in Subsidiaries		660			11,286			67			12,014
Economic Allocated Capital - Tier I (*)		34,641			44,913			47,369			126,924
Total Liabilities and Equity		970,137			604,384			119,309			1,503,503

^(*) The Economic Capital allocated to the Activities with the Market + Corporation column contains all the excess capital of the institution in order to arrive at the accounting net equity.

Pro Forma Income Statement by Segment

							Activities with the
	Retail			Wholesale			Market +
In R$ millions	Banking			Banking			Corporation			Itaú Unibanco
Operating Revenues		17,707			7,150			2,658			27,514
Managerial Financial Margin		9,433			4,682			2,631			16,745
Financial Margin with Clients		9,433			4,682			1,200			15,314
Financial Margin with the Market		-			-			1,431			1,431
Commissions and Fees		6,298			2,339			9			8,645
Result from Insurance, Pension Plans and Premium Bonds Operations before Retained Claims and Selling Expenses		1,976			129			18			2,123
Cost of Credit		(3,052	)		(1,136	)		(4	)		(4,192	)
Provision for Loan Losses		(3,489	)		(949	)		(4	)		(4,442	)
Impairment		-			(282	)		-			(282	)
Discounts Granted		(192	)		(85	)		-			(277	)
Recovery of Loans Written Off as Losses		629			181			-			810
Retained Claims		(356	)		(17	)		-			(373	)
Other Operating Expenses		(9,699	)		(3,997	)		(337	)		(14,033	)
Non-interest Expenses		(8,523	)		(3,686	)		(166	)		(12,375	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,158	)		(308	)		(153	)		(1,619	)
Insurance Selling Expenses		(18	)		(3	)		(18	)		(39	)
Income before Tax and Minority Interests		4,599			2,001			2,317			8,916
Income Tax and Social Contribution		(1,767	)		(597	)		(343	)		(2,707	)
Minority Interests in Subsidiaries		(41	)		140			(8	)		92
Result from Citibank's Operation		(21	)		-			-			(21	)
Recurring Net Income		2,770			1,544			1,966			6,280
Recurring Return on Average Allocated Capital		32.8	%		13.4	%		22.6	%		21.9	%
Efficiency Ratio (ER)		52.7	%		54.0	%		6.7	%		48.6	%
Risk-Adjusted Efficiency Ratio (RAER)		71.6	%		70.7	%		6.9	%		65.0	%

Note: Non-interest Expenses includes Personnel Expenses, Administrative Expenses, Other Tax Expenses and Operating Expenses.

Consolidated figures do not represent the sum of the parts, because there are transactions between the companies that were eliminated only in the Consolidated figures.

Itaú Unibanco Holding S.A.

Management Discussion and Analysis

Segment Analysis

Results by Business Segment

3^rdquarter of 2017

Pro Forma Balance Sheet by Segment

							Activities with the
	Retail			Wholesale			Market +
In R$ millions	Banking			Banking			Corporation			Itaú Unibanco
Current and Long-Term Assets		938,125			575,368			120,267			1,439,523
Cash and Cash Equivalents		13,779			5,317			-			19,089
Short-term Interbank Investments		335,151			104,080			-			287,701
Securities and Derivative Financial Instruments		224,084			175,978			46,872			412,806
Interbank and Interbranch Accounts		120,042			9,242			-			126,804
Loan, Lease and Other Credit Operations		208,025			259,806			-			467,831
(Allowance for Loan Losses)		(15,146	)		(10,811	)		-			(25,957	)
(Complementary Expected Loss Provisions)		-			-			(8,745	)		(8,745	)
Other Assets		52,190			31,755			82,140			159,993
Permanent Assets		14,792			9,529			2,156			26,477
Total Assets		952,917			584,897			122,423			1,466,000
Current and Long-Term Liabilities		917,424			526,692			78,900			1,328,779
Deposits		236,949			226,889			-			359,904
Deposits Received under Securities Repurchase Agreements		331,228			49,251			-			336,951
Funds from Acceptances and Issue of Securities		83,697			62,621			-			106,638
Interbank and Interbranch Accounts		22,990			14,649			-			37,638
Borrowings and Onlendings		714			65,604			-			66,318
Derivative Financial Instruments		19			22,971			-			21,562
Other Liabilities		105,559			43,453			78,900			222,244
Technical Provisions for Insurance, Pension Plans and Premium Bonds		136,268			41,254			-			177,522
Deferred Income		1,669			412			-			2,082
Minority Interest in Subsidiaries		799			10,649			60			11,508
Economic Allocated Capital - Tier I (*)		33,024			47,143			43,463			123,631
Total Liabilities and Equity		952,917			584,897			122,423			1,466,000

^(*) The Economic Capital allocated to the Activities with the Market + Corporation column contains all the excess capital of the institution in order to arrive at the accounting net equity.

Pro Forma Income Statement by Segment

							Activities with the
	Retail			Wholesale			Market +
In R$ millions	Banking			Banking			Corporation			Itaú Unibanco
Operating Revenues		17,187			7,065			2,730			26,981
Managerial Financial Margin		9,418			4,635			2,716			16,769
Financial Margin with Clients		9,418			4,635			1,357			15,410
Financial Margin with the Market		-			-			1,359			1,359
Commissions and Fees		6,048			2,293			17			8,358
Result from Insurance, Pension Plans and Premium Bonds Operations before Retained Claims and Selling Expenses		1,720			137			(3	)		1,853
Cost of Credit		(2,754	)		(1,236	)		(0	)		(3,990	)
Provision for Loan Losses		(3,236	)		(1,046	)		(0	)		(4,282	)
Impairment		-			(262	)		-			(262	)
Discounts Granted		(184	)		(39	)		-			(223	)
Recovery of Loans Written Off as Losses		666			111			-			777
Retained Claims		(309	)		(11	)		-			(320	)
Other Operating Expenses		(9,437	)		(3,538	)		(530	)		(13,505	)
Non-interest Expenses		(8,320	)		(3,214	)		(283	)		(11,818	)
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1,075	)		(321	)		(244	)		(1,640	)
Insurance Selling Expenses		(42	)		(2	)		(2	)		(47	)
Income before Tax and Minority Interests		4,686			2,281			2,200			9,167
Income Tax and Social Contribution		(1,801	)		(741	)		(426	)		(2,969	)
Minority Interests in Subsidiaries		(30	)		91			(6	)		56
Result from Citibank's Operation		-			-			-			-
Recurring Net Income		2,855			1,631			1,768			6,254
Recurring Return on Average Allocated Capital		34.4	%		12.8	%		22.4	%		21.6	%
Efficiency Ratio (ER)		52.8	%		47.8	%		11.4	%		47.3	%
Risk-Adjusted Efficiency Ratio (RAER)		70.3	%		66.1	%		11.4	%		63.3	%

Note: Non-interest Expenses includes Personnel Expenses, Administrative Expenses, Other Tax Expenses and Operating Expenses.

Consolidated figures do not represent the sum of the parts, because there are transactions between the companies that were eliminated only in the Consolidated figures.

Itaú Unibanco Holding S.A.

Management Discussion and Analysis

Segment Analysis

Retail Banking

Highlights

In the fourth quarter of 2017, net income decreased R$85 million from the previous quarter. This decrease was mainly driven by higher cost of credit, due to the increase in the loan portfolio, and by the growth of non-interest expenses, related to variable compensation, third-party services, data processing and telecommunications.

On the other hand, commissions and fees were up R$249 million and income from insurance, pension plan and premium bonds operations before retained claims and selling expenses were up R$256 million.

Retail banking comprises banking products and services to both current account and non-current account holders. Offered products and services include: personal loans, credit cards, payroll loans, vehicle financing, mortgage loans, insurance, pension plan and premium bond products, and acquiring services, among others.

Profile of clients served:

The client´s profiles determines the segment, which enables us to be closer to them and understand their needs, in addition to offer the most proper products to meet their requirements:

Retail (income up to R$4,000)

Uniclass (income between R$4,000 to R$10,000)

Personnalité (income above R$10,000 or holding investments over R$100,000)

Itaú Empresas (very small and small companies, revenues up to R$30 million)

Segment´s highlight

Personnalité Investimento 360

Launched in 2017, this service takes into account the investor’s needs and profile. It offers:

more convenience and practicality;

a wide range of investments products offered by Itaú and other financial institutions through Itaú Corretora ;

specialized advisory service.

Wholesale Banking

Highlights

In the fourth quarter of 2017, recurring net income decreased R$87 million, mainly due to the increase of 14.7% in non-interest expenses, related to variable compensation.

The increase in these expenses was partially offset by the reduction of R$97 million in provision for loan losses and by increases of R$46 million in financial margin and of R$46 million in commissions and fees.

Wholesale Banking comprises: i) the activities of Itaú BBA, the unit responsible for commercial operations with large companies and for investment banking services, ii) the activities of our units abroad, and iii) the products and services offered to high-net worth clients (Private Banking) and to middle market companies and institutional clients.

Profile of clients served and areas of operation:

Middle-Market Companies 28,000 clients (economic groups) with revenues between R$30 million and R$200 million.

Corporate Approximately 5,900 large business groups and over 190 financial institutions with revenues over R$200 million.

Investment Banking Our activities help companies raise funds through fixed income instruments and equities in public and private capital markets, comprising mergers and acquisitions advisory services. We provide advisory services to companies, equities funds and investors willing to invest in variable income products and engage in mergers and acquisitions.

Private Banking With a full global wealth management platform, we are market leaders in Brazil and one of the main players in Latin America.

Asset Management Itaú Asset Management is specialized in managing clients’ assets. In December 2017, it held R$601.2* billion in managed assets, a market share of 15.9%.

Capital Market Solutions Our business units offer local custody, fiduciary, international custody services and corporate solutions.

Activities Abroad

Information on our activities abroad is presented on next pages.

^(*) Source: ANBIMA (Brazilian Financial and Capital Markets Association) Management Ranking – December 2017. Includes Itaú Unibanco and Intrag.

Activities with the Market + Corporation

The Activities with the Market + Corporation column presents the result from capital surplus, excess subordinated debt and the net balance of tax assets and liabilities. It also shows financial margin with the market, costs of Treasury operations, the equity pickup of companies not linked to each segment and our interest in Porto Seguro.

Itaú Unibanco Holding S.A.

Management Discussion and Analysis

Brazil and Latin America

Results by Region (Brazil and Latin America)

We present below the income statement segregated between our operations in Brazil, which include units abroad excluding Latin America, and our operations in Latin America excluding Brazil.

Additional information on our activities abroad is available on next pages.

Quarterly Income Statement

	4Q17									3Q17									D
							Latin									Latin									Latin
							America									America									America
In R$ millions	Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)
Operating Revenues		27,514			25,144			2,370			26,981			24,764			2,217			2.0	%		1.5	%		6.9	%
Managerial Financial Margin		16,745			15,104			1,642			16,769			15,229			1,540			-0.1	%		-0.8	%		6.6	%
Financial Margin with Clients		15,314			13,903			1,411			15,410			14,117			1,293			-0.6	%		-1.5	%		9.1	%
Financial Margin with the Market		1,431			1,200			231			1,359			1,113			247			5.3	%		7.9	%		-6.4	%
Commissions and Fees		8,645			7,964			682			8,358			7,720			638			3.4	%		3.2	%		6.8	%
Result from Insurance ²		2,123			2,077			47			1,853			1,815			39			14.6	%		14.4	%		20.8	%
Cost of Credit		(4,192	)		(3,521	)		(671	)		(3,990	)		(3,503	)		(486	)		5.1	%		0.5	%		38.0	%
Provision for Loan Losses		(4,442	)		(3,741	)		(701	)		(4,282	)		(3,768	)		(514	)		3.7	%		-0.7	%		36.4	%
Impairment		(282	)		(282	)		-			(262	)		(262	)		-			7.8	%		7.8	%		-
Discounts Granted		(277	)		(251	)		(26	)		(223	)		(208	)		(15	)		24.5	%		21.0	%		73.7	%
Recovery of Loans Written Off as Losses		810			755			55			777			734			42			4.3	%		2.7	%		31.1	%
Retained Claims		(373	)		(360	)		(13	)		(320	)		(310	)		(10	)		16.6	%		16.1	%		31.6	%
Other Operating Expenses		(14,033	)		(12,294	)		(1,739	)		(13,505	)		(11,976	)		(1,529	)		3.9	%		2.7	%		13.8	%
Non-interest Expenses		(12,375	)		(10,685	)		(1,690	)		(11,818	)		(10,337	)		(1,481	)		4.7	%		3.4	%		14.1	%
Tax Expenses and Other ³		(1,658	)		(1,609	)		(49	)		(1,687	)		(1,639	)		(48	)		-1.7	%		-1.8	%		2.7	%
Income before Tax and Minority Interests		8,916			8,970			(53	)		9,167			8,976			191			-2.7	%		-0.1	%		-127.9	%
Income Tax and Social Contribution		(2,707	)		(2,774	)		68			(2,969	)		(2,955	)		(13	)		-8.8	%		-6.1	%		-611.9	%
Minority Interests in Subsidiaries		92			(49	)		140			56			(35	)		91			64.5	%		38.0	%		54.2	%
Result from Citibank's operation		(21	)		(21	)		-			-			-			-			-			-			-
Recurring Net Income		6,280			6,126			155			6,254			5,985			269			0.4	%		2.4	%		-42.6	%

Year-to-date Income Statement

	2017									2016												D
							Latin									Latin									Latin
							America									America									America
In R$ millions	Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)			Consolidated			Brazil ¹			(ex-Brazil)
Operating Revenues		108,967			99,961			9,006			111,422			102,151			9,272			-2.2	%		-2.1	%		-2.9	%
Managerial Financial Margin		68,315			62,018			6,296			72,121			65,427			6,693			-5.3	%		-5.2	%		-5.9	%
Financial Margin with Clients		62,034			56,693			5,341			65,122			59,315			5,806			-4.7	%		-4.4	%		-8.0	%
Financial Margin with the Market		6,281			5,326			956			6,999			6,112			887			-10.3	%		-12.9	%		7.8	%
Commissions and Fees		32,885			30,323			2,563			30,952			28,509			2,443			6.2	%		6.4	%		4.9	%
Result from Insurance ²		7,767			7,620			147			8,350			8,214			136			-7.0	%		-7.2	%		8.2	%
Cost of Credit		(17,936	)		(15,812	)		(2,125	)		(25,480	)		(23,298	)		(2,182	)		-29.6	%		-32.1	%		-2.7	%
Provision for Loan Losses		(19,064	)		(16,819	)		(2,244	)		(26,152	)		(23,815	)		(2,337	)		-27.1	%		-29.4	%		-4.0	%
Impairment		(1,094	)		(1,094	)		-			(1,882	)		(1,882	)		-			-41.9	%		-41.9	%		-
Discounts Granted		(1,047	)		(984	)		(64	)		(1,211	)		(1,199	)		(12	)		-13.5	%		-18.0	%		452.1	%
Recovery of Loans Written Off as Losses		3,269			3,085			184			3,765			3,599			166			-13.2	%		-14.3	%		10.6	%
Retained Claims		(1,275	)		(1,233	)		(42	)		(1,485	)		(1,449	)		(36	)		-14.1	%		-14.9	%		16.8	%
Other Operating Expenses		(53,450	)		(47,320	)		(6,129	)		(53,693	)		(47,338	)		(6,355	)		-0.5	%		0.0	%		-3.5	%
Non-interest Expenses		(46,745	)		(40,780	)		(5,965	)		(46,625	)		(40,404	)		(6,221	)		0.3	%		0.9	%		-4.1	%
Tax Expenses and Other ³		(6,705	)		(6,540	)		(165	)		(7,068	)		(6,934	)		(134	)		-5.1	%		-5.7	%		22.9	%
Income before Tax and Minority Interests		36,306			35,596			710			30,765			30,066			699			18.0	%		18.4	%		1.6	%
Income Tax and Social Contribution		(11,335	)		(11,327	)		(8	)		(8,540	)		(8,641	)		101			32.7	%		31.1	%		-107.9	%
Minority Interests in Subsidiaries		(71	)		(189	)		118			(75	)		(225	)		149			-5.2	%		-15.8	%		-21.2	%
Result from Citibank's operation		(21	)		(21	)		-			-			-			-			-			-			-
Recurring Net Income		24,879			24,059			820			22,150			21,201			949			12.3	%		13.5	%		-13.6	%

Includes units abroad ex-Latin America.

Result from Insurance includes the Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses.

Include Tax Expenses (ISS, PIS, COFINS and other) and Insurance Selling Expenses.

Note: Latin America information is presented in nominal currency.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

Global Footprint

Latin America

Latin America is a priority for our international expansion due to geographic and cultural proximity to Brazil. Our purpose is to be recognized as the “Latin American Bank”, becoming a reference in the region for all financial services provided to individuals or companies.

Over the past years, we consolidated our presence in Argentina, Chile, Paraguay and Uruguay. In these countries, we operate in retail, companies, corporate and treasury segments, with commercial banking as our main focus. With the recent merger between Banco Itaú Chile and CorpBanca, which assured our presence in Colombia and Panama, we expanded even more our operations in the region. In Peru, we operate in the corporate segment through a representative office. In Mexico, we are present through an office dedicated to equity research activities.

Itaú CorpBanca

In Chile, Colombia and Panama we operate through Itaú CorpBanca, from which results have been consolidated since the second quarter of 2016.

This operation represents an important step in our strategy to expand our presence in Latin America, diversifying our operations in the region.

+ more information on the next page

Other Countries

Additionally, we have operations in Europe (Portugal, United Kingdom, Spain, France, Germany and Switzerland), in the United States (Miami and New York), in the Caribbean (Cayman Islands and Bahamas), in the Middle East (Dubai), and in Asia (Tokyo), mainly serving institutional clients, investment banking, corporate and private banking.

Itaú BBA International

In 2016, Moody’s assigned to, for the first time, Itau BBA International plc (domiciled in the United Kingdom) an investment grade, long-term deposit and issuer ratings of A3. In assigning the ratings, Moody’s recognized the strength of Itau BBA International plc’s strong macro profile and balance sheet.

Other operations

Our international units offer a variety of financial products through its branches. Fund raising can be conducted by our branches located in the Cayman Islands, Bahamas and New York. These offices also enhance our ability to manage our international liquidity.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

We present the results of Latin American countries in constant currency, thus eliminating the effect of exchange rate variation and hedge adjustments, and in managerial concept, which considers Brazilian accounting criteria, in addition to the allocation of Brazil’s cost structure, the impact of Brazilian income tax and social contribution and the allocation of the tax benefit of interest on own capital.

Itaú CorpBanca

The table below shows results obtained by Itaú CorpBanca in Chile, Colombia and Panama. Focused on medium companies, corporate and retail, Itaú CorpBanca offers a wide range of banking products.

In Chile, Itaú CorpBanca is the 4th largest private bank in terms of loans. Branches migration and client segmentation were completed in December, 2017. In Colombia, as of May 2017, we started operating under the “Itaú” brand, and, until June 2018, we plan to complete the systems integration.

In R$ millions (in constant currency)	4Q17			3Q17			Δ
Operating Revenues		1,410			1,300			8.5	%
Managerial Financial Margin		1,086			958			13.4	%¹
Financial Margin with Clients		967			882			9.6	%
Financial Margin with the Market		119			76			56.4	%
Commissions and Fees		277			301			-8.1	%
Insurance, Pension Plan and Premium Bonds Operations Before Retained Claims and Selling Expenses		47			41			16.2	%
Cost of Credit		(633	)		(470	)		34.7	%
Provision for Loan Losses		(668	)		(507	)		31.7	%²
Discounts Granted		(14	)		(2	)		725.1	%
Recovery of Loans Written Off as Losses		48			39			25.5	%
Retained Claims		(13	)		(11	)		26.5	%
Other Operating Expenses		(1,074	)		(985	)		9.0	%³
Non-Interest Expenses		(1,070	)		(983	)		8.9	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1	)		(1	)		-10.4	%
Insurance Selling Expenses		(3	)		(2	)		65.7	%
Income before Tax and Minority Interests		(310	)		(166	)		86.8	%
Income Tax and Social Contribution		150			117			28.7	%
Minority Interests in Subsidiaries		139			97			43.2	%⁴
Recurring Net Income		(21	)		48			-144.6	%
Return on Average Equity - Annualized		-0.5	%		1.1	%		-160	bps
Efficiency Ratio		76.8	%		76.4	%		50	bps

1. Increase mainly driven by the sale of students’ loans in Chile;

2. Increase in provisions in the corporate segment in Chile and Colombia;

3. Increase in legal expenses, operating losses and advertising expenses in Chile, in addition to personnel expenses in Colombia;

4. Minority interests are calculated based on the accounting figures of the operation in BRGAAP.

Banco Itaú Argentina

We offer products and services for corporate, small and middle-market companies and retail segments, focused on large companies that have trade relations with Brazil.

In R$ millions (in constant currency)	4Q17			3Q17			Δ
Operating Revenues		355			339			4.8	%
Managerial Financial Margin		192			216			-11.5	%¹
Financial Margin with Clients		178			177			0.4	%
Financial Margin with the Market		14			39			-64.9	%
Commissions and Fees		164			123			33.5	%²
Cost of Credit		(9	)		(18	)		-46.4	%
Provision for Loan Losses		1			(19	)		-	³
Discounts Granted		(12	)		0			-
Recovery of Loans Written Off as Losses		1			1			-
Other Operating Expenses		(286	)		(221	)		29.7	%
Non-Interest Expenses		(259	)		(198	)		30.8	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(27	)		(22	)		20.1	%
Income before Tax and Minority Interests		60			101			-41.0	%
Income Tax and Social Contribution		(17	)		(34	)		-49.2	%
Recurring Net Income		42			67			-36.7	%
Return on Average Equity - Annualized		13.3	%		22.5	%		-920	bps
Efficiency Ratio		79.0	%		62.6	%		1,640	bps

1. Decrease driven by lower margin with the market, partially offset by higher demand deposits in the retail and corporate segments;

2. Increase in financial advisory fees in the corporate segment and in credit cards fees in the Retail segment;

3. Decrease driven by sale of portfolio in the quarter, in addition to improved rating in the corporate segment.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

Banco Itaú Paraguay

In Paraguay, we offer products and services for small and medium companies, agribusiness and corporate segments, institutional clients and retail clients. The main sources of revenues in Paraguay are retail products, especially credit cards. In the corporate segment, we are a reference in agribusiness.

In R$ millions (in constant currency)	4Q17			3Q17			Δ
Operating Revenues		191			213			-10.2	%
Managerial Financial Margin		130			154			-15.8	%¹
Financial Margin with Clients		115			130			-11.3	%
Financial Margin with the Market		15			24			-39.8	%
Commissions and Fees		61			58			4.6	%
Cost of Credit		(9	)		(9	)		3.8	%
Provision for Loan Losses		(11	)		2			-	²
Discounts Granted		(0	)		(14	)		-
Recovery of Loans Written Off as Losses		2			3			-35.6	%
Other Operating Expenses		(107	)		(104	)		3.5	%
Non-Interest Expenses		(107	)		(104	)		3.4	%
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(0	)		0			-
Income before Tax and Minority Interests		74			100			-25.8	%
Income Tax and Social Contribution		(28	)		(39	)		-28.7	%
Recurring Net Income		46			60			-23.9	%
Return on Average Equity - Annualized		17.2	%		22.5	%		-530	bps
Efficiency Ratio		56.3	%		48.9	%		750	bps

1. Decrease mainly due to reduced spread in credit cards, demand deposits and loans in the retail segment;

2. Higher provisions mainly driven by reversal of provisions occurred in the previous quarter due to the sale of portfolio in the retail segment.

Banco Itaú Uruguay

We operate in the corporate, small and middle-market companies and retail segment, targeting medium and high-income clients. Through the OCA credit card company, more focused on the mass market, we complement our strategy of serving a wide range of clients through customized financial solutions.

In R$ millions (in constant currency)	4Q17			3Q17			Δ
Operating Revenues		368			345			6.6	%
Managerial Financial Margin		191			168			13.6	%
Financial Margin with Clients		170			149			13.7	%
Financial Margin with the Market		21			18			12.9	%
Commissions and Fees		177			177			0.0	%
Cost of Credit		(20	)		(14	)		43.2	%
Provision for Loan Losses		(25	)		(15	)		60.2	%¹
Recovery of Loans Written Off as Losses		4			1			-
Other Operating Expenses		(241	)		(235	)		2.5	%
Non-Interest Expenses		(240	)		(234	)		2.5	%²
Tax Expenses for ISS, PIS, Cofins and Other Taxes		(1	)		(1	)		2.2	%
Income before Tax and Minority Interests		107			96			11.3	%
Income Tax and Social Contribution		(43	)		(37	)		15.7	%
Recurring Net Income		65			60			8.6	%
Return on Average Equity - Annualized		20.9	%		19.5	%		140	bps
Efficiency Ratio		65.3	%		67.9	%		-260	bps

1. Increase mainly driven by downgrade of clients in the companies segment;

2. Increase mainly driven by credit card operation expenses.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Activities Abroad

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Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Our Shares

Our Shares

Our capital stock is comprised of common shares (ITUB3) and non-voting shares (ITUB4), both traded on B3 (São Paulo stock exchange). Non-voting shares are also traded as depositary receipts - ADRs - on the NYSE (New York Stock Exchange).

Market Capitalization

R$276 billion │ US$83 billion

Market capitalization is the total number of outstanding shares (common and non-voting shares) multiplied by the average price of the non-voting share on the last trading day in the period.

Market Consensus (ITUB4)

Corporate Structure Chart and Free Float Participation

Strengths of our structure

Family controlling ownership ensuring long-term view

Professional management team

Broad shareholder base (52.67% of our shares in free float)

Strong corporate governance

Performance in the Capital Market

	(R$)			(R$)			(US$)
	ITUB4			ITUB3			ITUB
Price and Volume	(PN Shares)			(ON Shares)			(ADR)
Closing Price at 12/28/2017 ⁽¹⁾		42.58			37.69			13.00
Maximum price in the quarter		45.79			40.18			14.59
Average price in the quarter		42.76			38.10			13.16
Minimum price in the quarter		40.67			36.08			12.20
Closing Price at 09/29/2017		43.35			38.40			13.70
Closing price at 12/29/2016		33.85			30.00			10.35
Change in the 4Q17		-1.8	%		-1.8	%		-5.1	%
Change in the last 12 months		25.8	%		25.6	%		25.6	%
Average daily trading financial volume in 12 months (milion) ⁽²⁾		426.5			16.0			135.2
Average Daily Trading Volume in 4Q17 (million)		441.5			52.1			116.2

Shareholder Base and Indicators	12/31/17			09/30/17			12/31/16
Number of Shares		6,550,514			6,582,308			6,582,308
Common Shares (ON)		3,319,951			3,351,744			3,351,744
Non-Voting Shares (PN)		3,230,563			3,230,563			3,230,563
Treasury Shares		85,884			77,955			69,608
Number of Outstanding Shares (thousands)		6,464,631			6,504,352			6,512,700
Recurring Net Income per Share in the Quarter (R$)		0.97			0.96			0.89
Net Income per Share in the Quarter (R$)		0.90			0.93			0.85
Book Value per Share (R$)		19.63			19.01			17.75
Price/Earnings (P/E) ⁽³⁾		11.57			11.92			10.23
Price/Book Value (P/B) ⁽⁴⁾		2.17			2.28			1.91

(1)

Closing price of 12/29/17 for ITUB;

(2)

From 01/02/17 to 12/28/17 for ITUB4 and ITUB3. From 01/03/17 to 12/29/17 for ITUB;

(3)

Closing price of non-voting share at the period end/earnings per share. For calculation purposes, the retained earnings of the last 12 months were included;

(4)

Closing price of non-voting share at the period-end/Book value per share at the period end.

Shareholders’ Remuneration

As disclosed by the Material Fact of September 26, 2017, we excluded the maximum limit of dividends paid and interest on capital previously determined at 45% excluding shares bought back. In 2017, the payout was 83% including shares bought back.

Dividends & Interest on Own Capital (IOC)

R$17.56 billion

paid, provisioned or reserved in Stockholders’ Equity in 2017

Payout - represents the percentage of the Recurring Net Income distributed to the shareholder in each period.

(1) Considers Common Shares and Non-voting shares bought back in each period.

Shares Buyback Program

37,982,900			R$36.19
non-voting shares of own issue bought back in 2017			average price

46,214,237			R$37.00
Common shares of own issue bought back in 2017			average price

For more information about our share buyback program, please refer to our Investor Relations website.

Itaú Unibanco Holding S.A.

Management Discussion & Analysis

Disclosure Criteria

Disclosure Criteria

General

Managerial financial statements relating to prior periods may have been reclassified for comparison purposes.

The tables in this report show the figures in millions or billions. Variations and totals, however, are calculated in units. Therefore, there may be differences due to rounding.

Future expectations arising from the reading of this analysis should take into consideration the risks and uncertainties that involve any activities and that are outside the control of the companies of the conglomerate (political and economic changes, volatility in interest and foreign exchange rates, technological changes, inflation, financial disintermediation, competitive pressures on products, prices and changes in tax legislation, among others).

Itaú Insurance, Pension Plan and Premium Bonds

The combined ratio is the sum of retained claims, selling expenses, administrative expenses, other operating income and expenses, tax expenses for ISS, PIS and Cofins and other taxes divided by earned premiums.

The extended combined ratio is the sum of these same expenses divided by the sum of earned premiums, managerial financial margin and commissions and fees.

VaR (Value at Risk)

The Consolidated VaR of Itaú Unibanco is calculated based on the Historical Simulation methodology, which fully reprices all its positions based on historical series of asset prices. In the third quarter of 2016, we started to calculate VaR of the regulatory portfolio based on internal models approved by the Brazilian Central Bank. Therefore, the breakdown of risk factors was standardized to comply with Circular No. 3,646 of the Brazilian Central Bank.

Business Analysis

Pro Forma Adjustments - Adjustments made to the balance sheet and income statement for the year are based on managerial information from the business units.

The financial statements were adjusted in order to replace the accounting stockholders’ equity with funding at market prices. Subsequently, the financial statements were adjusted to include revenues linked to allocated capital at each segment. The cost of subordinated debt and the respective remuneration at market prices were allocated to segments on a pro rata basis, in accordance with the economic allocated capital.

Impacts related to capital allocation are included in the Pro Forma financial statements. To this end, adjustments were made to the financial statements, using a proprietary model.

Allocated Capital - The economic allocated capital model (EAC) was adopted for the Pro Forma financial statements by segment and, as of 2015, we changed our calculation methodology. In addition to the Tier I allocated capital, the EAC model includes the effects of the calculated expected loan losses, complementary to that required by the Brazilian Central Bank through CMN Circular No. 2,682/99.

Accordingly, the allocated capital includes the following components: credit risk (including expected losses), operational risk, market risk, and insurance underwriting risk.

Based on Tier I capital measure we determined the Return on Allocated Capital, which corresponds to an operational performance ratio consistently adjusted to the required capital needed to support the risks of the financial positions assumed in accordance with our risk appetite.

As of the first quarter of 2016, we have adopted the Basel III rules in our managerial capital allocation model.

Income Tax Rate - We adopt the full income tax rate, net of the tax effect of payment of interest on capital, for the Retail Banking, Wholesale Banking and Activities with the Market + Corporation segments. The difference between the income tax amount determined for each segment and the effective income tax amount, as stated in the consolidated financial statements, is allocated in the column Activities with the Market + Corporation.

Itaú Unibanco Holding S.A.

(A free translation of the original in Portuguese)

Report of independent auditors on

supplementary information

To the Board of Directors and Stockholders

Itaú Unibanco Holding S.A.

Introduction

In connection with our audit of the financial statements of Itaú Unibanco Holding S.A. (Bank) and Itaú Unibanco Holding S.A. and its subsidiary companies (Consolidated) as of December 31, 2017, on which we issued an unqualified opinion dated February 5, 2018, we performed a review of the accounting information contained in the supplementary information included in the Management Discussion and Analysis Report of Itaú Unibanco Holding S.A. and its subsidiaries for year ended December 31, 2017.

Scope of the Review

We conducted our review in accordance with NBC TA 720, “The auditor's responsibility relating to other information in documents containing audited financial statements”, which establishes the procedures to be performed in engagements of this nature. Those procedures primarily comprised: (a) inquiry of, and discussion with, management responsible for the accounting, financial and operational areas of the Bank and its subsidiaries with regard to the main criteria adopted for the preparation of the accounting information presented in the supplementary information and (b) review of the significant information and of the subsequent events which have, or could have, significant effects on the financial position and the operations of the Bank and its subsidiaries. The supplementary information included in the Management Discussion and Analysis Report is presented to permit additional analysis. Notwithstanding, this information should not be considered an integral part of the financial statements.

Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accounting information contained in this supplementary information, in order for it to be adequately presented, in all material respects, in relation to the financial statements at December 31, 2017, taken as a whole, prepared in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN).

São Paulo, February 5, 2018


PricewaterhouseCoopers	Washington Luiz Pereira Cavalcanti
Auditores Independentes	Contador CRC 1SP172940/O-6
CRC 2SP000X60/O-5

PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil 05001-903, Caixa Postal 61005 T: (11) 3674-2000, www.pwc.com.br

Itaú Unibanco Holding S.A.

MANAGEMENT REPORT – January to December 2017

The Management Report and the Financial Statements of Itaú Unibanco Holding S.A. (Itaú Unibanco or Company) and its subsidiaries for the period from January to December 2017 follow the regulations established by the Brazilian Corporate Law, the National Monetary Council (CMN), the Central Bank of Brazil (BACEN), the Brazilian Securities and Exchange Commission (CVM), the Superintendence of Private Insurance (SUSEP), the National Council of Private Insurance (CNSP), the National Superintendence of Supplementary Pension (PREVIC), and the recommendations of the International Accounting Standards Board (IASB).

A bank with a purpose

In 2017, we unveiled Itaú Unibanco’s purpose to our employees and highlighted the values that are part of our essence and have brought us here.

In these 93 years of history, we have become the largest bank in Brazil, and are deemed Brazil’s most valued brand, among other relevant recognitions. These achievements are the result of the way we conduct business, by always placing ethics ahead of results and consistently seeking innovation and excellence.

We have grown by helping people and our country to grow, by encouraging the progress of those who are by our side. We work to make dreams come true, to boost development, and to wake the will to do increasingly more and better. This is what our journey means and this is our purpose: Empowering people to change.

There are people behind everything we do. People who have ideas, who become the solutions, who change the lives of other people. Unveiling Itaú Unibanco’s purpose is part of the reaffirmation of our reason to exist, by increasing the power every person has to invent and reinvent themselves. For this end, we need to have the engagement of all employees towards the same pathway.

In line with this purpose, the arrival of Itaú Unibanco’s new Executive President was marked by this purpose being integrated into the organization, which led to the definition of the six strategics priorities that will guide our actions in the coming years: customer centricity, digitization, people management, risk management, sustainable profitability, and internationalization.

These priorities were defined based on the perception shared by the Executive Committee of market trends and the challenges faced by the institution, as they organize initiatives that have been in progress throughout the bank already, reinforcing our commitment to employees, clients, stockholders and society.

Itaú Unibanco’s purpose was not born in 2017, but rather has always existed within all people who were part of this organization and within those who now keep this legacy alive. We are people who move people.

Medium and Long-Term Strategic Agenda

With medium to long-term prospects, these six strategic priorities have guided our management. Our Work was organized in frontlines, with responsibilities separated by working groups that involve many organizational levels, with clear purposes to be achieved and indicators selected for monitoring this process. We have already achieved some results and expect to add even more value to society and our stockholders in the coming years.

We segregated those priorities into two groups: Transformation and Continuous Improvement.

In the first group, we included the topics that we believe we need to truly transform within the organization: Customer Centricity, Digitization and People Management.

In the Continuous Improvement group, we include Risk Management, Internationalization and Sustainable Profitability. They are aspects broadly embraced by the organization, but require some effort for its continuous improvement.

Permeating all those challenges are our corporate governance and sustainability.

Corporate governance plays a vital role in ensuring stakeholders’ interests and is a key to achieve long-term sustainable growth. It is embedded not only in the challenges here described, but also in each part of our daily business activities, from remuneration practices to risk management.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Sustainability needs to be fully integrated with our business, from the operational to the commercial aspects, making environmental and social issues part of our everyday activities. Its variables need to be incorporated and measured into each of our diverse processes, such as credit granting, investments, insurance activities, contracting of suppliers and wealth management.

Our priority topics are detailed below:

1.1 Transformation

1.1.1 Customer Centricity: Our vision is to be the leading bank in sustainable performance and customer satisfaction. Today clients play a leading role and are therefore at the core of our organizational culture. In the current scenario business have stood out when it offers new and differentiated experiences to clients. Therefore, our actions, including digitalization and efforts aimed at people management, are directed towards client satisfaction, a key measure for the entire organization. We have established indicators to monitor client satisfaction on a timely and ongoing basis, which are directly related to incentives provided to our employees.

We will build a culture focused on client satisfaction and long-term relationships. Thus, our efforts will be directed to communicate, encourage and capacitate our employees around the pillars of this culture.

Client satisfaction opinion surveys and our monitoring of complaints figures evidence that we stand above the market average. We believe however that we can do more and, to this end, we are adopting the NPS (Net Promoter Score), which will be present in every stage of our processes.

Our goal is to build a bank with the client and for the client. We are even more dedicated to listening to what clients have to say so we may identify the attributes they value the most in their relationship and develop products and services that exceed their expectations. Accordingly, we work to improve the client’s experience, evolving and eliminating red tape in our processes.

Some of the initiatives to improve client satisfaction are as follows:

App Light, winner of the Financial World Innovation Awards. Launched in 2017, it was developed jointly with our clients. It takes up less memory in smartphones and is easier to navigate than the traditional app. App Light has reached over 500,000 users, with 90% of user loyalty.

In March 2017, we launched the Personnalité Investimento 360 platform, increasing convenience to our clients as it provides a thorough range of investment products offered by Itaú and other financial institutions through Itaú Corretora. This initiative also provides a specialized advisory service, which takes into account our clients’ needs in the short, medium and long term, offering more agility to investors by monitoring their financial transactions and returns as a whole in a single place.

Seeking to ensure the balance of multiple channels journey in the Internet, we have modernized the technology platform and reviewed the browsing and purchasing experiences, making it more friendly-user. We have also improved the payment and receipt services of the Companies segment, making Itaú the best internet banking experience for companies in Brazil for the third consecutive year.

We were elected, by vote of the clients to Euromoney magazine, the Best Bank in Cash Management in Brazil for the 10th consecutive year.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

1.1.2 Digitalization: Our challenge is to speed up our digital transformation process continually increasing the productivity of the IT department and spreading out a digital mindset throughout the bank, so as to gain efficiency and improve user experience and client satisfaction.

Technology today epitomizes the backbone of Itaú Unibanco’s evolution.

Developing over 1,000 APIs (application programming interface) that allow the creation of apps with reuse, being involved in 100% of blockchain applications in progress in Brazil to advance the financial market, consolidating a private cloud, which already runs dozens of the bank’s applications (internal systems); and using artificial intelligence and machine learning to gain operational efficiency, are some of the rewards of this digital transformation, which comes into being through a seamless integration of three essential elements.

The first element is people, that is, new digital profiles. These are professionals such as design, user experience, data sciences, digital media, web analytics and cyber security experts, who add up to professionals coming from traditional backgrounds (engineering, administration, economics and accounting). This evolution has taken place at an exponential rate in the organization. In the two last years alone, the presence of professionals with digital profiles in Itaú Unibanco increased 13 fold.

The second element is a technology-business symbiosis, with the Technology department becoming essential for the creation of transformation solutions. It is therefore possible to take advantage of this exponential evolution of technologies, accelerating the frequency of innovations and disruptions, and promoting shorter cycles of value deliveries (weeks, even days).

This integration of efforts is already a reality at our bank. At the end of 2017 we completed the second phase of strengthening technical expertise (technology architecture, distribution engineering, banking and data systems, system development, among others) and integrating teams (over 5,000 employees engaged in the process) by creating delivery communities and multidisciplinary teams that work collaboratively based on Lean¹ and Agile² principles to rise to business challenges. Notable for providing quick decisions shared among different expertise and with autonomy, this new working model is responsible for generating increasingly sustainable results, as follows:

Efficiency (more value delivery and synchronized planning): a 14% productivity gain in technology development;

Time to Market (shorter delivery cycles): down 22% in a project average delivery time;

Quality (quicker, streamlined and automatized testing and approval): down 20% in unavailability ratio and down 25% in number of incidents.

The last element is customer centricity, also construed as a new bank concept. Today we live in an era of experiences, where companies and clients create solutions together. Therefore, our bank performance has been driven to place the customer at the heart of our strategy. To this end, we seek to understand everything the client says, analyzing, for instance, hundreds of thousands of pieces of feedback received in social networks or provided by our beta testers (technologically engaged clients who test new versions of the bank apps). Additionally, we also make use of technology (such as big data, machine learning and cloud computing) to seek operational efficiency, such as an application of artificial intelligence in our credit models, and to understand the client's behavior in all points of contact with the bank. This is because these interactions are important inputs for creating products and services more connected to the clients’ actual needs.

We present below some of our 2017 highlights:

Itaú Light App: lighter and with low data consumption, this app offers intuitive and easy browsing.

Itaú abreconta app (opening accounts): over 190,000 accounts opened through the app, allowing a 100% online opening account experience via mobile, without the need to go to a branch.

Mobile evolution: apps with new design and easy browsing for Itaú and Itaú Empresas. In May 2017, Itaú App was elected the best app by Folha de São Paulo and the “must have” app at Apple Store.

Digital branches: we offer differentiated business hours service for Personnalité and Uniclass clients. At the end of 2017, we had 160 digital branches, of which 25 opened this year alone.

1 Lean: Process structure in which an attempt is made to minimize risks and waste while maximizing value to the client.

2 Agile: A philosophy focused on the time it takes to build a product step by step, delivering it through smaller parts.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

1.1.3 People Management: At Itaú Unibanco we have always had a strong belief: people have the greatest transformation power. People foster our progress, they ensure sustainable results and unveil our capacity of generating value to society and the country.

We are challenged to become even more attractive to all generations and engage and develop our talents. For this end, we consistently invest in spreading our purpose and the so called Our Way – a strong culture, based on collaboration, meritocracy, ethics and total and unrestricted respect to the individual.

Considering that the bank is basically human capital, providing the best experience to our employees so as to promote their development is essential. With this in mind, the priority people frontline is reviewing incentive models and encouraging people’s autonomy and mobility in order to make them increasingly feel they are owners of the business and their own career.

Accordingly, attentive to all the transformations happening in the world, the priority people frontline also seeks inspiration in the most innovative practices currently used and is focused on constructing an organization that increasingly promotes diversity and inclusion.

1.2 Continuous Improvement

1.2.1 Risk Management: Managing risks is the essence of our activity and a responsibility of all employees. In 2018, we will continue our efforts to fully comply with the Risk Appetite guidelines set out by the Board of Directors. Additionally, we will focus on addressing the priorities for 2018, that is, Business, Technology, People and Regulatory risks.

For Risk Appetite, our challenge is to monitor the progress of traditional risk areas (market risk, credit risk and operational risk), and seek, through risk culture tools, to engage all employees in the risk management day-to-day and, consequently, to comply with our Risk Appetite.

Regarding Business Risk, client centrality is a principle of ours, prioritizing the sustainability of our relationships. We monitor the evolving profile of our clients and competition creating new products and services focused on client satisfaction.

To address the challenges of the Technology Risk, we are committed to managing our digitalization process, preventing platforms or systems from becoming obsolete and fail to meet the business needs, in addition to increasing our IT department productivity.

Concerning People Risk, we are committed to improving mechanisms to attract, motivate and retain the best professionals, in addition to preventing teams with knowledge concentrated on key personnel. We should continuously improve our evaluation models to be increasingly perceived as fair and meritorious.

Concerning the Regulatory Risk, we understand that we should always be attentive to specific changes in laws and regulations that may affect our business and the offering of products or services. Therefore, we are committed to having a proactive attitude and monitor regulatory changes.

1.2.2 Sustainable Profitability: Our challenge is to continuously improve the efficiency of our operations, maintain our capacity of identifying opportunities to reduce costs and manage investments to gain agility, as well as to efficiently manage capital allocation and our cost of capital.

Adopted since 2012, our business model is based on a fundamental concept: Value Creation, which includes not only our operating or financial expenses, but also the cost of capital allocated to each activity, seeking to grant it a fair return.

This vision on results guides our operations towards business that effectively create value to stockholders, establishing a minimum return required for our operations.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Under this model, we have reviewed our mix of credit, which, in a scenario of economic crisis, has increased its share of lower-risk products, such as mortgage loans, whose operations are pledged by collaterals, and payroll loans, whose installments are discounted from payroll and concentrated on clients with stable income, such as retirees and federal public officers.

We detail below the change in the share of segments in our loan portfolio* in Brazil:

*Includes Financial Guarantees Provided

We also give priority to our Services and Insurance, Pension Plan and Premium Bonds, which require less capital allocation and whose results and value creation are less volatile in relation to economic cycles. In addition, our business strategy for this operation is to focus on mass-market products, traditionally sold through our network of branches and digital channels. Accordingly, operations such as life group, large risks and extended warranty insurance lines were either sold or discontinued over last years. Even in this scenario, we have increased the operating revenues¹ from insurance, pension plan and premium bonds and services.

1 Operating Revenues are the sum of Managerial Financial Margin, Commissions and Fees, Other Operating Income and Result from Insurance, Pension Plan and Premium Bonds Operations before Retained Claims and Selling Expenses

In view of the growth, even if moderate, of Brazil's GDP as of 2017, and together with the tools developed by our efforts towards risk management, our business model will enable us to identify granular opportunities to diversify and expand operations to meet both the need to create value for our stockholders and the limits established by our risk appetite.

Focus on efficiency is a very significant topic in our sustainable profitability strategy and is addressed as a top priority by the bank for some years already. We have developed some initiatives, from reducing the waste of resources and energy and reviewing department structures to designing projects to increasing productivity and digitization, and therefore we expect to increase gains of scale and ensure business synergy.

The digitalization process we are going through has given rise to a numbers of gains, since we are able to redesign processes and offer quality products at a reasonably less cost.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

1.2.3 Internationalization: We have operated in Brazil for over 90 years and, throughout this period, have achieved a high level of maturity in management, making our culture known and recording profitability levels that effectively create value to our stockholders.

Our strategy in other Latin America countries foresees that we will achieve, in this region, the same management standards Itaú Unibanco enjoys in Brazil, homogenizing practices and setting up conditions to take on even more leading positions. These objectives apply to our operations in the Southern Cone, and are particularly relevant in the Itaú CorpBanca integration process (a significant competitor in the banking markets in Chile and Colombia) a result from the merger between Itaú Chile and CorpBanca.

We also seek to strengthen our operations in the Northern hemisphere, where we have the primary objective of simplifying and optimize our operations. In Latin America, we always seek to improve client satisfaction, as well as develop products and services with digital solutions and bases. The main challenge is to accelerate the digitalization in all our external units.

Finally, Itaú Unibanco continuously monitors the international scenario, seeking to understand different markets, business, products and services, identifying opportunities to expand operations and integrating our units.

The Year of 2017

2.1) Highlights

New Executive President – In April 2017, Candido Botelho Bracher took over as the new Executive President of Itaú Unibanco, succeeding Roberto Egydio Setubal. After 23 years leading the Company, Mr. Setubal has reached the age limit and is now a co-chairman of the Board of Directors. We thank Mr. Setubal for all his dedication and contributions made to this organization, which experienced a period of significant growth, increasing, for instance, its annual recurring net income 69 fold.

Dividends and Interest on Capital – In 2017, we paid, recognized in a provision or identified in Stockholders’ Equity the amount of R$17.6 billion in dividends and net interest on capital, the highest in our history, corresponding to 70.6% of 2017 consolidated recurring net income, which represents an increase of 75.6% from 2016 fiscal year.

In March 7, 2018 we will pay dividends and interest on capital of R$2.0707 per share (shareholding position on February 15, 2018) and R$0.122825 per share (shareholding position on December 14, 2017).

Therefore, for the fiscal year of 2017 (competence) the Company’s stockholders will receive R$2.7127 net per share.

Additionally, considering the shares buyback in 2017, the payout accounts for 83.0% of the 2017 consolidated recurring net income.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

In 2017, we adopted a new practice to pay dividends and interest on capital at least 35% of annual recurring net income; the total amount to be paid each year will be set forth by the Board of Directors, taking into account, among others:

the Company’s capitalization level, in accordance with the rules defined by BACEN;

the minimum level, established by the Board of Directors, of 13.5% for tier 1 capital;

profitability for the year;

the prospective use of capital in view of the expected business growth, share buyback program, mergers and acquisitions, and market and regulatory changes that might modify capital requirements; and

tax changes.

Therefore, the percentage to be distributed may change every year based on the company’s profitability and capital demands, but always considering the minimum distribution set forth in the Bylaws.

Capital Management

We adopt a prospective approach to capital management, which comprises the following phases: (i) identifying material risks and determining the need of additional capital for these risks; (ii) preparing a capital plan, both in normal and stress scenarios; (iii) structuring a capital contingency plan; (iv) carrying out an internal capital adequacy assessment; and (v) preparing managerial and regulatory reports.

The result of the last ICAAP – dated as of December 2016 – showed that, in addition to having enough capital to face all material risks, Itaú Unibanco has a significant capital surplus, thus ensuring the soundness of Itaú Unibanco’s equity position.

To ensure our strength and capital availability to support business growth, regulatory capital levels were kept above the requirements of BACEN, as evidenced by the Common Equity Tier I, Tier I, and BIS ratios. For further information, see to the “Risk and Capital Management Report – Pillar 3” report on our website www.itau.com.br/investor-relations > Corporate Governance.

At the end of 2017, the BIS ratio was 18.8%, of which: (i) 16.2% related to Tier I Capital, which is composed of the sum of Core Capital and Additional Capital; and (ii) 2.6% related to Tier II Capital. These indicators provide evidence of our effective capacity of absorbing unexpected losses. The amount of our subordinated debt, which is part of Tier II regulatory capital, reached R$19.8 billion at December 31, 2017.

Capital management in 2017 highlights are as follows:

Share Buyback Program – From January to December 2017, we acquired shares of own issue:

Preferred shares: 37,982,900, in the total amount of R$1.4 billion at the average price of R$36.19 per share.

Common shares: 46,214,237, in the total amount of R$1.7 billion at the price of R$37.00 per share.

The total of 84.2 million shares bought back equal 1.3% of the bank’s capital stock as of December 31, 2016.

Approved by the Board of Directors in December 2017, our current buyback program authorizes the acquisition of up to 28,616,649 common shares and up to 50 million preferred shares of own issue, and it allows that operations are carried out from December 20, 2017 to June 19, 2019.

Cancellation of Treasury Shares – Of the shares bought back and held in treasury, 31,793,105 common shares were cancelled, as decided by the Board of Directors, with no capital decrease. Cancellation is pending regulatory approvals.

The main objectives of the acquisition of own issued shares with subsequent cancellation are as follows: (i) maximizing capital allocation through the efficient application of available funds; (ii) arranging for the delivery of shares to employees and management members of the Company and its subsidiaries under the scope of remuneration models and long-term incentive plans; and/or (iii) using the shares acquired if business opportunities arise in the future.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Perpetual Subordinated Notes – In December 2017, we issued for the first time perpetual subordinated notes/AT1, in the amount of US$1.25 billion. These notes were issued at a fixed rate of 6.125%, which will be applicable until the fifth anniversary of the date of issue. Thereafter, the coupon will be reset every five years, based on the prevailing rate for U.S. Treasury bonds for the same period. Itaú Unibanco may repurchase these notes on the fifth anniversary of the date of issue or on any subsequent interest payment date, subject to prior approval from Brazilian authorities, including BACEN.

These notes were offered in the international market to qualified institutional buyers only, as defined by Rule 144A of the Securities Act, and to non-U.S. persons outside the United States under Regulation S of the Securities Act.

Itaú Unibanco has requested the approval from BACEN, so that these perpetual subordinated notes be included in its Reference Equity as Additional Tier 1 Capital, adding 60 bps to the Company’s Tier 1 capital ratio.

Decision issued by the Administrative Board of Tax Appeals (CARF) - On April 10, 2017 CARF issued a favorable decision for the Company, recognizing that the intended collections of income tax and social contribution on net income were inapplicable and ratifying the regularity and legitimacy of Itaú and Unibanco merger as it had been fully approved by BACEN, CVM, and the Administrative Council for Economic Defense (CADE), which reaffirms the Company’s understanding that these operations were legitimate. Since it received the tax assessment notice from the Brazilian IRS, Itaú Unibanco has always believed that the risk of loss in the above mentioned tax proceeding was remote.

Economic Plans – Itaú Unibanco is a party to specific lawsuits in connection with the collection of understated inflation adjustments to savings accounts resulting from economic plans implemented in the 1980’s and 1990’s as a measure to combat inflation. Although we had 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 and, therefore, we have recognized provisions when we are served and when individuals file for the enforcement of rulings rendered by the Judicial Branch, by using the same criteria adopted to calculate provisions for individual lawsuits.

In December 2017, as mediated by the Office of the General Counsel to the Federal Government (AGU) and supervised by the Central Bank of Brazil, savings account holders (represented by two civil entities, FEBRAPO, and IDEC) and FEBRABAN, the Brazilian Federation of Banks, jointly executed an agreement to settle litigations in connection with the economic plans, and Itaú has already adhered to its terms accordingly. This agreement is pending ratification by the Federal Supreme Court (STF) to become valid and effective, which is expected to occur in the first quarter of 2018. After this ratification, savings account holders will be entitled 24 months to adhere to the terms of this agreement.

2.2) Acquisitions and Disposals

We present below the main operations carried out in 2017. All of them were timely announced to the market and the details are included in announcements to the market and material facts available on the Company’s Investor Relations website:

Group Life Insurance – In April 2017, after obtaining approvals from SUSEP and CADE, the Brazilian antitrust agency, we completed the sale of 100% of our group life insurance operations to Prudential do Brasil Seguros de Vida S.A.

Gestora de Inteligência de Crédito – In June 2017, together with other institutions, we entered into an agreement to incorporate Gestora de Inteligência de Crédito S.A., whose purpose will be the development of a data base aimed at aggregating, reconciling and handling master file and credit data of individuals and companies.

IRB-BRASIL RESSEGUROS S.A. (IRB) – Within the scope of the Public Offering of IRB’s shares, in August 2017 Itaú Seguros S.A reduced its interest to 11.1%, from 14.7%, in the total capital of IRB. Itaú Vida e Previdência S.A., which held 0.2% interest, is no longer a stockholder. We remain in the IRB controlling group, under the terms of the company's shareholders' agreement.

Itaú CorpBanca – In September 2017, we acquired 1.8 billion Itaú CorpBanca shares for the approximate amount of R$55.6 million. Therefore, Itaú Unibanco’s interest ownership reached 36.06%, without changing the governance of Itaú CorpBanca.

Citibank – In October 2017, after obtaining regulatory approvals, the first step of the incorporation process was carried out and we are now in charge of the retail business of Citibank in Brazil.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

XP Investimentos (XP) – In December 2017, the General Superintendence of CADE issued a favorable opinion on Itaú Unibanco’s acquisition of a minority interest of XP, accounting for 49.9% of total capital, of which 30.1% are common shares, conditioned on Itaú Unibanco’s commitment not to intervene in XP’s business management, as well as to reduce possible barriers to the entry and development in the segment of open platforms. The operation is still pending approval from BACEN.

2.3) Awards and Recognition

In 2017, we received recognitions that contributed to strengthening our reputation. The main awards received in the period are listed below:

*Bloomberg Financial Services Gender-Equality Index* (Bloomberg – January 2017)		Itaú Unibanco was one of 52 companies chosen to make up this Index.

*IF Design Award* (International Forum Design GmbH – January 2017)		Itaú Unibanco had "Miami Open" as the case awarded in the Communication category.

*World's Best Trade Finance Providers* (Global Finance – January 2017)		Itaú BBA was recognized as the “Best Trade Finance Provider 2017 in Brazil”.

*Empresas Legais (Legally Cool Companies)* (Centro de Inteligência Padrão – April 2017)		Itaú Unibanco was recognized as a Legally Cool Company in the Banks category, that is, as a company engaged in settling conflicts through dialogue.

*Annual ranking of the 50 largest banks of Latin America and the Caribbean* (S&P Global Market – April 2017)		Itaú Unibanco was number one in the 2017 edition of the annual ranking of the 50 largest banks of Latin America and the Caribbean.

*Melhores Empresas para a Mulher Trabalhar (Best Places for Women to Work)* (Great Place to Work – May 2017)		Itaú Unibanco ranked 4^th among the Largest Companies in the first edition of the ranking.

*XVIII Prêmio Consumidor Moderno de Excelência em Serviços ao Cliente (XVIII Modern Consumer Award in Excellence in Client Service)* (Grupo Padrão – May 2017)		Itaú Unibanco was the winner in the Banks category.

*Top 1000 World Banks 2017* (The Banker – July 2017)		Itaú Unibanco was number one in the Top 25 – Latin America and the Caribbean ranking.

*Anuário Época Negócios 360º (Época Negócios 360º Directory)* (Época Negócios magazine – August 2017)		Itaú Unibanco was the winner in the banking sector and in the Environmental and Social Responsibility dimension.

*As Melhores da Dinheiro 2017 (The Best of Dinheiro 2017)* (IstoÉ Dinheiro magazine – September 2017)		Itaú Unibanco was number one in the banking sector.

*Comarec Award* (Grupo Padrão – September 2017)		Itaucard was top in the Hirers category in the Cards segment.

*Prêmio MarCo - Marcas Corporativas de Maior Prestígio do Brasil (MarCo Award -The Most Prestigious Corporate Brands in Brazil)* (MarCo, Época Negócios magazine and Troiano Branding – October 2017)		Itaú Unibanco was number one in the Banks category.

*Guia Você S/A - As Melhores Empresas para Trabalhar (Você S/A Directory - The Best Companies to Work for)* (Você S/A magazine - Abril publisher - October 2017)		Itaú Unibanco was the winner in the Banks category.

*Valor CARREIRA (Valor CAREER)* (Valor Econômico magazine and AON - October 2017)		Itaú Unibanco was elected Company of the Year and was first in the "Companies with over 17,000 employees" category.

*Prêmio ÉPOCA Reclame Aqui (ÉPOCA Make a complaint here Award)* (ÉPOCA magazine - Globo publisher - October 2017)		Itaú Unibanco was top in the Bank and Consortium categories. Itaucard was the winner in the "Card Operators" category.

*World's Best Investment Banks 2017* (GLOBAL FINANCE - October 2017)		Itaú Unibanco won in the "Best Investment Bank in Latin America", "Best Equity Bank in Latin America" and "Best M&A Bank in Latin America" categories, and one of our executives was recognized as the "Best Leader in Private Bank".

*Global Private Banking Awards* (PWM / The Banker, Financial Times - October 2017)		Itaú Unibanco was awarded as "Best Private Bank in Latin America for Customer Service" and "Best Private Bank in Brazil".

*Startup Awards* (Brazilian Startup Association - October 2017)		Cubo won in the coworking category and Itaú Unibanco was first in the corporate category.

*As Marcas Brasileiras Mais Valiosas - Interbrand (Most Valuable Brazilian Brands - Interbrand)* (Interbrand - November 2017)		Itaú Unibanco was number one for the 14^thtime.

*Valor Grandes Grupos (Valor Large Groups)* (Valor Econômico newspaper - December 2017)		Itaú Unibanco ranked first among the "10 largest net income", "20 largest stockholders' equity" and "20 largest net income".

*Bank of the Year* (The Banker - December 2017)		Itaú Uruguay was announced as "Bank of the Year - Uruguay".

*Época Empresa Verde (Época Green Company)* (Época magazine - December 2017)		Itaú Unibanco was awarded as Highlight of the Year and was the winner in the Green Finance category.

*Empresa Pró-Ética 2017 (2017 Companies promoting ethics)* (Brazilian Ministry of Transparency, Inspection and General Controllership of the Federal Government - December 2017)		Itaú Unibanco was one of the 23 companies winning the 2017 Pro-Ethics Company Award.

*Financial Innovation Awards 2017* (IFS University College and BBA Association - December 2017)		Itaú Unibanco was number one in the Innovation in Product or Service Design category with the App Light case.

*Guia de Previdência Valor/FGV (Social Security Guide - Valor/ FGV)* (Valor Econômico newspaper and Center of Finance Studies of the School of Business Administration of São Paulo of Fundação Getúlio Vargas - December 2017)		Itaú Unibanco was awarded as the best manager in diversity of social security funds.

*The World's Best Foreign Exchange Providers 2018* (Global Finance magazine – December 2017)		Itaú Unibanco was recognized as the best foreign exchange bank in Brazil.

*Melhor Empresa para Trabalhar* (Great Place to Work – December 2017)		Itaú Paraguay was elected the best company to work for for the second consecutive year.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

2.4 Selected Financial Information

We present below a summary of our financial information:

	dec/31/2017			dec/31/2016
Profitability
Net Income (R$ billion)		24.0			21.6
Recurring Net Income (R$ billion)		24.9			22.2
Recurring Return on Average Equity - Annualized⁽¹⁾		21.8	%		20.3	%
Gross Income Related to Financial Operations (R$ billion)		49.9			52.8
Assets
Total Assets (R$ billion)		1,503.5			1,427.1
Total Credit Portfolio, including Financial Guarantees Provided (R$ billion)		564.1			562.0
Assets - Latin America		189.2			171.8
Loan Portfolio/Funding⁽²⁾		74.0	%		74.3	%
Stockholders' Equity		126.9			115.6
Funding
Demand, Savings, and Time Deposits		400.8			325.7
Debentures (Linked to Repurchase Agreemens and Third Parties' Operations)		58.8			132.1
Funds from Bills and Structured Operations Certificates		65.7			59.4
Free, Raised and Managed Assets⁽³⁾		2,261.3			2,045.9
Capital and Liquidity
Solvency Ratio - Prudential Conglomerate (BIS Ratio)		18.8	%		19.1	%
Fixed Asset Ratio		23.9	%		25.4	%
Total High-Quality Liquid Assets⁽⁴⁾⁽⁵⁾		187.1			181.0
Liquidity Coverage Ratio (LCR)⁽⁵⁾		190.2	%		212.8	%
Customer Service Network
Total Number of Employees (individuals)		99,332			94,779
Brazil		82,640			80,871
Abroad		13,795			13,908
Citibank		2,897			-
Branches and Client Service Branches (CSBs) – units		4,981			5,103
Digital Branches		160			135
Branches - Brazil⁽⁶⁾		3,520			3,653
Branches - Citibank		71			-
CSBs - Brazil		703			766
Branches + CSBs - Latin America		527			549
Automated Teller Machines (ATMs) – units⁽⁷⁾		46,965			46,175

⁽¹⁾

Itaú CorpBanca's data were consolidated since the second quarter 2016, except Recurring Return on Average Equity - Annualized which considered proforma results of Itaú CorpBanca of the first quarter of 2016.

⁽²⁾

The loan portfolio does not include sureties and endorsements.

⁽³⁾

Does not include balance originated from Citibank.

⁽⁴⁾

Correspond to weighted inventories of assets that remain liquid in the market even in periods of stress, which can easily be converted into cash and are classified as low risk. Used for LCR calculation.

⁽⁵⁾

We monitor the Liquidity Coverage Ratio (LCR), as it refers to free and highly liquid assets and net cash outflows over a 30-day period and is calculated based on the methodology defined by Circular No. 3,749, of the Central Bank of Brazil, in line with international guidelines. BACEN minimum requirement is 80% for 2017, and in the fourth quarter of 2017 the Company’s coverage ratio was 190.2%.

⁽⁶⁾

Includes IBBA representative offices abroad.

⁽⁷⁾

Includes CSBs (Client Service Branches), points of services in third parties’ establishments and Banco24horas ATMs.

In 2017, Itaú Unibanco's net income was R$24.0 billion, a 10.7% increase from the previous year. The reduction of our financial margin was offset by lower provisions for loan losses.

Our personnel, administrative and operating expenses increased 8.4% between 2017 and 2016, mainly driven by an increase in compensation and benefits and in the sale of credit cards expenses, and our risk-adjusted efficiency ratio was 64.0%, down 610 basis points from 2016.

Loan portfolio reached R$564.1 billion at the end of December 2017, up 0.4% from 2016. An increase has been recorded in origination demand and in some specific portfolios, such as vehicles, which recorded in the fourth quarter of 2017 the first ever increase since 2012, when we adopted the strategy of focusing on lower risk portfolios.

The strategic credit risk management supported the quality of our loan portfolio in 2017, and nonperforming loans over 90 days overdue closed the year at 3.1%, down 30 basis points from the previous year.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

NPL Over 90 days

2.5) Stock Market

Market Value – at December 31, 2017, we were ranked the second largest company in Brazil in terms of market value (R$275.5 billion) and the first among financial institutions, according to the Bloomberg ranking.

			R$		%
Shares	December 31, 2017		December 31, 2016		Change
Recurring net income per share⁽¹⁾		3.83		3.41		12.3
Net income per share⁽¹⁾		3.68		3.32		10.8
Book value per share⁽¹⁾		19.63		17.75		10.6
Number of outstanding shares (in millions)		6,464.6		6,512.7		(0.7	)
Price of preferred share (ITUB4)⁽²⁾		42.62		33.68		26.5
Price of common share (ITUB3)⁽²⁾		37.61		29.73		26.5
Price of preferred share (PN)⁽²⁾/Net income per share		11.13		9.88		12.7
Price of preferred share (PN)⁽²⁾/Book value per share		2.17		1.90		14.4
Average Daily Trading Volume (in millions)		877.0		941.3		(6.8	)
B3 Volume (in millions)		442.5		437.8		1.1
NYSE Volume (in millions)		434.6		503.5		(13.7	)
Market value (in billions)⁽³⁾⁽⁴⁾		275.5		219.3		25.6

(1)

Calculated based on the weighted average of the number of shares.

(2)

Based on the average quotation on the last day of the period;

(3)

Calculated based on the average quotation of preferred shares on the last day of the period (quotation of average PN multiplied by the number of outstanding shares at the end of the period);

(4)

Taking into account the closing price of common and preferred (ON and PN) shares multiplied by total outstanding shares of each type of shares, the market value reached R$ 259.1 billion on December 31, 2017 and R$ 207.6 billion on December 31, 2016, resulting in a variation of 25%.

Sustainability

Sustainability is incorporated into the corporate strategy through a consolidated governance framework integrated into business, providing for the internalization of social and environmental issues and trends into daily activities and processes, the identification of areas able to address them, and the follow-up of performance and indicators of these issues from time to time.

Our actions are based on three strategic focus points: financial education, dialogue and transparency, and social and environmental risks and opportunities. Our management of environmental and social risks is based on the identification, measurement, mitigation and monitoring of risks based on their characteristics, needs, exposure and specificities of each business front.

In 2017, as we concluded that our current position has reached its maturity, we started a process to review the sustainability strategy. This moment in time becomes even more convenient with the disclosure of Our Purpose, the emergence of new priority topics, the digitalization scenario, and the advancements in the sustainable development agendas.

Dow Jones Sustainability World Index (DJSI) – for the 18^th consecutive year, Itaú Unibanco was selected to compose the portfolio of the Dow Jones Sustainability World Index, the world’s main sustainability index. In this edition, we achieved the best rate in the banking sector in the “Anti-Crime Policies/Actions”, “Financial Stability and Systemic Risk”, “Materiality”, “Risks and Opportunities”, “Climate Strategy” “Philanthropy and Corporate Citizenship” and “Social Reporting” criteria. Additionally, Itaú Unibanco was also selected to make up the Dow Jones Sustainability Emerging Markets Index.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Participation in the B3 Corporate Sustainability Index (ISE) – for the 13^th consecutive year we were chosen to make up the portfolio of the B3 Corporate Sustainability Index. ISE reflects the return of a portfolio made up of shares of companies with the best performance in all aspects that measure corporate sustainability.

Participation in the Bloomberg Gender Equality Index – we were chosen to make up the portfolio of the 2017 Bloomberg Gender Equality Index for companies of the financial sector. In its second edition, this index was created to recognize companies for their commitment to gender equality and transparency in reporting such information.

Women’s Empowerment Principles – WEPs – in June 2017, we adhered to the Women’s Empowerment Principles (WEPs) proposed by the U.N. Women and the U.N. Global Compact. This adherence represents our commitment to working towards gender equality, one of the principles of the U.N. Global Compact. Further information on WEPs is available on http://www.weprinciples.org/.

In December, we were the winners in the “Sustainable Finance” category in the Época Empresa Verde awards, promoted by Época magazine, which recognized the bank’s main sustainability related actions.

3.1 Statement of Added Value

Our added value, which shows the wealth generated for the community, reached R$67.2 billion in 2017 (including recurring net income and the reclassification of hedge tax effects of investments abroad to financial margin), up 9.0% compared to 2016. This result refers to the direct economic value created and distributed by Itaú Unibanco, including income, operating costs, employee compensation, donations and other investments in the community, retained earnings and payments made to capital providers and governments.

3.2 Social Private Investment

Among the actions carried out by Itaú Unibanco Conglomerate in 2017 to support social change agendas, we highlight the social private investment model, in which we allocated funds to support initiatives and projects aligned with our institutional causes.

We recognize and value our share of responsibility for the development of Brazil and sustain the purpose of promoting positive changes in the lives of people and society. Accordingly, over 2017 we made contributions through social private investments on three fronts, as follows: I) direct allocation of financial funds; II) support to projects subject to incentive laws; III) our Institutions and Foundations.

These social investments were made to improve areas such as education, culture, sports, urban mobility, health, and aging. In 2017, we invested R$547.4 million in projects, of which 75.7% were via donations and sponsorships carried out by Itaú Unibanco and 24.3% through amounts incentivized by laws (Rouanet, Sports Incentive Law), making contributions to education, health, culture, sports, and mobility projects. We present below our activities in 2017:

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

	Amount					Number of
Sponsorship	(R$ million)		%			projects
Non-incentivized⁽¹⁾		414.3		75.7	%		668
Education		181.0					520
Culture		148.5					50
Sports		7.2					7
Urban Mobility		64.9					45
Elderly		2.3					3
Institutional Support and Other		10.4					43
Incentivized⁽²⁾		133.1		24.3	%		212
Culture		69.4					119
Education		15.8					38
Sports		16.9					18
Health and Elderly People		31.0					37
Total		547.4		100.0	%		880

⁽¹⁾

Own funds of the group companies and own budgets of foundations and institutions.

⁽²⁾

Tax incentivized funds through laws such as Rouanet and Sports Incentive laws, among others.

3.3) Education and Health

Fundação Itaú Social – The journey of Fundação Itaú Social dates back to 1993, when the Community Action Program – later named Itaú Social Program – was created. The purpose of the program was to implement the bank's social investment initiatives. In 2000, it was expanded with the foundation of Fundação Itaú Social through the creation of an endowment derived from funds donated by Itaú.

In 2017, the organization started to review its organizational structure, keeping a commitment to its mission to develop, implement and share social technologies to help improve Brazilian public education. Therefore, as from 2017, the actions of Fundação Itaú Social are focused on two axes: Education Management actions – training of education area professionals – and actions for Society – strengthening civil society organizations.

Instituto Unibanco (Unibanco Institute) – Founded 35 years ago, Instituto Unibanco is an organization working to raise the quality of Brazilian public education with focus on secondary schools. To this end, the Institute develops and implements public school system management solutions to improve learning results among young people.

The Institute has partnerships with education departments, academic institutions, education-focused philanthropic institutions, and the National Council of Secretaries of Education (Consed), among other institutions. It is supported by an endowment that guides the funding of activities. The highlights among its several programs are as follows: Jovem do Futuro (Promising Youth), Escola do Futuro (School of the Future) and Fomento (Promotion).

3.4) Culture

Itaú Cultural – Itaú Cultural completed 30 years in 2017 and prepared a number of actions to celebrate this date. One of them was Modos de Ver o Brasil: Itaú Cultural 30 Anos (Ways to See Brazil: Itaú Cultural 30 years) exhibition, which gathered 800 artworks of Itaú Unibanco’s collection. These were displayed between May and August at Oca, a space located in the Ibirapuera Park in São Paulo, which refitted by the institute and visited by approximately 100,000 people.

Regarding the virtual arena, Itaú Cultural redesigned its Internet portal. This new website, adaptable to the most different devices, shows the institute’s events schedule, the register of past activities carried out, videos, news and other contents, in addition to providing access to the Enciclopédia Itaú Cultural de Arte e Cultura Brasileiras (Itaú Cultural Encyclopedia of Brazilian Art and Culture) (unified early this year as the first action celebrating the 30 years), to the Ocupação Itaú Cultural program website and the O Mundo de Bartô (Bartô World) page, the latter dedicated to children. In the year, the portal received over 14 million single hits. In partnership with Biblioteca Nacional (National Library), Instituto Moreira Salles (Moreira Salles Institute) and Pinacoteca de São Paulo (Art Gallery of the State of São Paulo), in October 2017 the brasilianaiconografica.art.br website was designed to make available hundreds of art and other works related to the Brazilian history, culture, and fauna and flora. The website received 22,707,000 single hits.

Itaú Cultural carried out 875 activities over the year, impacting 765,093 people throughout Brazil. These actions include concerts and events at the Ibirapuera Auditorium, exhibitions at Espaço Memória (Heritage Hall), Alfredo Egydio room, and the events scheduled at our headquarters at Avenida Paulista, in the Olavo Setubal Hall, with 318,510 visitors, up 26% from the previous year.

Espaço Itaú de Cinema – Since opening in 1995, the purpose of Espaço Itaú de Cinema is to offer a diversified film programming, from art house to blockbuster movies.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

This structure has eight complexes with 57 screening rooms in six Brazilian cities (Brasília, Curitiba, Porto Alegre, Rio de Janeiro, São Paulo, and Salvador).

3.5) Sports

We believe, along with education and culture, sports helps develop critical-thinking citizens and leave a legacy to society at large. Therefore, we sponsor a number of projects in three sports (tennis, soccer and multidisciplinary sports) that aim to promote social inclusion through sports and to train people to spread sports training to transform people’s world.

3.6) Urban Mobility

As we are an essentially urban bank and recognize the importance of valuing an active transport mode for the sustainable development of cities, we define urban mobility as an investment pillar within our sustainability platform and have worked to foster the culture of integrating bikes into the urban transport model.

Bike-sharing system

In partnership with the municipality of Rio de Janeiro, we sponsor the Bike Rio program. This program success has led to its expansion to São Paulo and Porto Alegre in 2012, Pernambuco, Salvador, and Santiago (Chile) in 2013, and to Brasília and Belo Horizonte in 2014. We are the sole sponsors of bike-sharing systems in the world that count on nationwide programs. In 2017, we started to renew the project in Pernambuco, Porto Alegre, São Paulo, and Rio de Janeiro.

Employees and clients

In addition to efforts to promote public cycling mobility policies, we are committed to encouraging employees and clients to choose bikes as their mode of transport.

Regulation

4.1) INDEPENDENT AUDITORS – CVM Instruction No. 381

Procedures adopted by the Company

The policy adopted by us, including our subsidiaries and parent company, to contract non-audit related services from our independent auditors is based on the applicable regulations and internationally accepted principles that preserve the auditor’s independence. These principles include the following: (a) an auditor cannot audit his or her own work, (b) an auditor cannot function in the role of management in companies where he or she provides external audit services; and (c) an auditor cannot promote the interests of its client.

In the period from January to December 2017, the independent auditors and related parties did not provide non-audit related services in excess of 5% of total external audit fees.

According to CVM Instruction No. 381, we list below the non-audit services provided and related dates:

February 2 – review of tax-accounting bookkeeping;

February 6, March 15, May 2, May 16 and September 29 – research, technical material and training;

March 2 – review of compliance with transfer pricing policies.

August 1 – issue of income tax settlement report.

Independent Auditors’ justification – PricewaterhouseCoopers

The provision of the non-audit services described above does not affect the independence or the objectivity of the external audit of Itaú Unibanco, parent and its subsidiary/affiliated companies. The policy adopted for providing non-audit related services to Itaú Unibanco is based on principles that preserve the independence of Independent Auditors, all of which were observed in the provision of the referred services, including the approval by the Audit Committee.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

4.2) BACEN – Circular No. 3,068/01

We hereby represent to have the financial capacity and the intention to hold to maturity securities classified in the “held-to-maturity securities” category in the balance sheet, in the amount of R$36.6 billion, corresponding to 8.2% of total securities and derivative financial instruments held in December 2017.

4.3) International Financial Reporting Standards (IFRS)

We disclosed the complete financial statements in accordance with the International Financial Reporting Standards (IFRS) at the same date of this publication, pursuant to CVM/SEP Circular Letter No. 01/13. The complete financial statements are available on the Investor Relations website of Itaú Unibanco (www.itau.com.br/investor-relations > Financial Information).

Information and Acknowledgments

The information presented in this material is available on the Investor Relations website of Itaú Unibanco (www.itau.com.br/investor-relations > Financial Information) and on the websites of CVM and of the Securities and Exchange Commission (SEC). Our results may also be accessed on mobile devices and tablets, and through our application “Itaú RI” (app), respectively.

We thank our employees for their determination and skills, which have been essential to reaching consistent and differentiated results, and our stockholders and clients for their trust. (Approved at the Board of Directors' Meeting of February 5, 2018).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

BOARD OF DIRECTORS		BOARD OF EXECUTIVE OFFICERS
Co-Chairmen		Chief Executive Officer
Pedro Moreira Salles		Candido Botelho Bracher
Roberto Egydio Setubal

Members		Director-Generals
Alfredo Egydio Setubal		Eduardo Mazzilli de Vassimon
Amos Genish		Márcio de Andrade Schettini
Fábio Colletti Barbosa
Geraldo José Carbone
Gustavo Jorge Laboissière Loyola
João Moreira Salles
José Galló		Executive Vice-Presidents
Marco Ambrogio Crespi Bonomi		André Sapoznik
Pedro Luiz Bodin de Moraes		Caio Ibrahim David
Ricardo Villela Marino		Claudia Politanski


AUDIT COMMITTEE		Executive Officers
Chairman		Alexsandro Broedel Lopes (*)
Gustavo Jorge Laboissière Loyola		Fernando Barçante Tostes Malta
		Leila Cristiane Barboza Braga de Melo
		Paulo Sergio Miron
Members
Antonio Francisco de Lima Neto
Diego Fresco Gutierrez
Geraldo Travaglia Filho		Officers
Maria Helena dos Santos Fernandes de Santana		Adriano Cabral Volpini
Rogério Paulo Calderón Peres		Álvaro Felipe Rizzi Rodrigues
		Andre Balestrin Cestare
		Eduardo Hiroyuki Miyaki
FISCAL COUNCIL		Emerson Macedo Bortoloto
Chairman		Gilberto Frussa
José Caruso Cruz Henriques		José Virgilio Vita Neto
		Matias Granata
		Renato Barbosa do Nascimento
Members		Rodrigo Luis Rosa Couto
Alkimar Ribeiro Moura		Sergio Mychkis Goldstein
Carlos Roberto de Albuquerque Sá		Tatiana Grecco
		Tom Gouvêa Gerth



		() Group Executive Finance Director and Investor Relations Officer*


Accountant
Arnaldo Alves dos Santos
CRC - 1SP - 210.058/O-3

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO S.A.

Director-Generals		Officers (continued)
Eduardo Mazzilli de Vassimon		Fernando Julião de Souza Amaral
Márcio de Andrade Schettini		Fernando Mattar Beyruti
		Flávio Delfino Júnior
		Flavio Ribeiro Iglesias
		Francisco Vieira Cordeiro Neto
Executive Vice-Presidents		Gabriel Guedes Pinto Teixeira
Alberto Fernandes		Gabriela Rodrigues Ferreira
André Sapoznik		Gilberto Frussa
Caio Ibrahim David		Gustavo Trovisco Lopes
Claudia Politanski		João Antonio Dantas Bezerra Leite
Ricardo Villela Marino		Jorge Luiz Viegas Ramalho
		José de Castro Araújo Rudge Filho
		José Virgilio Vita Neto
		Laila Regina de Oliveira Pena de Antonio
		Leon Gottlieb
Executive Officers		Lineu Carlos Ferraz de Andrade
Alexsandro Broedel Lopes		Livia Martines Chanes
André Luis Texeira Rodrigues		Luís Fernando Staub
Carlos Eduardo Monico		Luís Tadeu Mantovani Sassi
Christian George Egan		Luiz Felipe Monteiro Arcuri Trevisan
Fernando Barçante Tostes Malta		Luiz Fernando Butori Reis Santos
Fernando Marsella Chacon Ruiz		Luiz Severiano Ribeiro
Flávio Augusto Aguiar de Souza		Manoela Varanda
João Marcos Pequeno de Biase		Marcello Siniscalchi
Leila Cristiane Barboza Braga de Melo		Marcio Luis Domingues da Silva
Luís Eduardo Gross Siqueira Cunha		Marco Antonio Sudano
Luiz Eduardo Loureiro Veloso		Mario Lucio Gurgel Pires
Marcelo Kopel		Mario Magalhães Carvalho Mesquita
Marcos Antônio Vaz de Magalhães		Matias Granata
Ricardo Ribeiro Mandacaru Guerra		Milena de Castilho Lefon Martins (*)
Sergio Guillinet Fajerman		Pedro Barros Barreto Fernandes
Wagner Bettini Sanches		Ricardo Nuno Delgado Gonçalves
		Ricardo Urquijo Lazcano
Officers		Roberto Fernando Vicente
		Roberto Teixeira de Camargo
Adriana Maria dos Santos		Rodnei Bernardino de Souza
Adriano Cabral Volpini		Rodrigo Jorge Dantas de Oliveira
Adriano Maciel Pedroti		Rodrigo Luis Rosa Couto
Alessandro Anastasi		Rodrigo Rodrigues Baia
Álvaro Felipe Rizzi Rodrigues		Rogerio Vasconcelos Costa (*)
Ana Lúcia Gomes De Sá Drumond Pardo		Sergio Mychkis Goldstein
André Balestrin Cestare		Tatiana Grecco
André Carvalho Whyte Gailey		Thales Ferreira Silva
André Henrique Caldeira Daré		Thiago Luiz Charnet Ellero
Andrea Carpes Blanco		Valéria Aparecida Marretto
Andréa Matteucci Pinotti		Vanessa Lopes Reisner
Atilio Luiz Magila Albiero Junior
Badi Maani Shaikhzadeh
Carlos Eduardo Mori Peyser
Carlos Henrique Donegá Aidar
Carlos Orestes Vanzo
Cesar Ming Pereira da Silva
Cesar Padovan
Cicero Marcus de Araújo
Cintia Carbonieri Fleury de Camargo
Claudio César Sanches
Cláudio José Coutinho Arromatte
Cristiane Magalhães Teixeira Portella
Cristiano Guimarães Duarte
Cristiano Rogério Cagne
Edilson Pereira Jardim
Eduardo Cardoso Armonia
Eduardo Corsetti
Eduardo Hiroyuki Miyaki
Emerson Savi Junqueira
Emilio Pedro Borsari Filho
Eric André Altafim
Estevão Carcioffi Lazanha
Fabiana Pascon Bastos
Fabiano Meira Dourado Nunes
Felipe de Souza Wey
Felipe Weil Wilberg
Fernando Della Torre Chagas

(*) Elected at the ESM of 12/07/2017, approved by BACEN on 01/04/2018.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

BANCO ITAÚ BBA S.A.

BOARD OF EXECUTIVE OFFICERS
Chief Executive Officer
Eduardo Mazzilli de Vassimon

Executive Vice-President
Alberto Fernandes


Executive Officers
Christian George Egan
Luís Eduardo Gross Siqueira Cunha


Officers
Adriano Cabral Volpini
Carlos Eduardo Mori Peyser
Carlos Henrique Donegá Aidar
Cristiano Guimarães Duarte
Cristiano Rogério Cagne
Eduardo Hiroyuki Miyaki
Eric André Altafim
Felipe Weil Wilberg
Flávio Delfino Júnior
Gabriel Guedes Pinto Teixeira
Gilberto Frussa
Marco Antônio Sudano
Roderick Sinclair Greenlees
Rodrigo Luís Rosa Couto
Sergio Mychkis Goldstein
Vanessa Lopes Reisner



ITAÚ SEGUROS S.A.


Chief Executive Officer
Luiz Eduardo Loureiro Veloso

Officers
Adriano Cabral Volpini
Badi Maani Shaikhzadeh
Carlos Henrique Donegá Aidar
Eduardo Hiroyuki Miyaki
Leon Gottlieb

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet (Note 2a)

(In thousands of Reais)

Assets	Note	12/31/2017			12/31/2016
Current assets			1,089,698,982			1,003,649,930
Cash and cash equivalents			18,749,350			18,541,972
Interbank investments	4b and 6		270,045,399			284,538,189
Money market			238,752,482			259,589,926
Money market – Assets Guaranteeing Technical Provisions - SUSEP	11b		3,257,326			3,447,330
Interbank deposits			28,035,591			21,500,933
Securities and derivative financial instruments	4c, 4d and 7		333,777,929			264,095,295
Own portfolio			97,744,768			69,206,274
Subject to repurchase commitments			33,401,902			18,608,226
Pledged in guarantee			11,354,597			7,549,852
Securities under resale agreements with free movement			1,745,202			7,419,769
Deposited with the Central Bank			3,386,777			-
Derivative financial instruments			13,149,331			14,236,853
Assets guaranteeing technical provisions - PGBL / VGBL fund quotas	11b		169,177,514			142,080,715
Assets guaranteeing technical provisions – other securities	11b		3,817,838			4,993,606
Interbank accounts			132,523,704			113,326,416
Pending settlement			33,103,755			27,451,574
Central Bank deposits			98,836,941			85,700,462
National Housing System (SFH)			8,491			6,412
Correspondents			34,779			32,111
Interbank onlending			539,738			135,857
Interbranch accounts			123,946			7,497
Loan, lease and other credit operations	8		245,048,364			244,240,815
Operations with credit granting characteristics	4e		261,103,526			260,066,448
(Allowance for loan losses)	4f		(16,055,162	)		(15,825,633	)
Other receivables			86,969,324			76,455,618
Foreign exchange portfolio	9		35,086,221			29,899,299
Income receivable			2,866,925			2,530,307
Receivables from insurance and reinsurance operations	4m I and 11b		1,224,588			1,305,648
Negotiation and intermediation of securities			5,830,585			6,770,077
Deferred tax assets	14b I		28,722,584			23,848,435
Escrow deposits - Civil, Labor, Tax and Social lawsuits	12b and 12d		1,520,071			2,117,861
Sundry	13a		11,718,350			9,983,991
Other assets	4g		2,460,966			2,444,128
Assets held for sale			1,260,614			809,630
(Valuation allowance)			(524,477	)		(178,675	)
Unearned reinsurance premiums	4m I		4,848			16,937
Prepaid expenses	4g and 13b		1,719,981			1,796,236
Long term receivables			385,518,078			396,446,877
Interbank investments	4b and 6		1,208,747			1,500,187
Money market			195,861			260,910
Money market – Assets Guaranteeing Technical Provisions - SUSEP	11b		-			49,868
Interbank deposits			1,012,886			1,189,409
Securities and derivative financial instruments	4c, 4d and 7		111,972,591			112,791,428
Own portfolio			56,771,744			61,480,022
Subject to repurchase commitments			17,208,562			12,433,937
Pledged in guarantee			6,580,660			5,149,342
Securities under resale agreements with free movement			13,169,009			12,863,925
Deposited with the Central Bank			698,010			4,454,448
Derivative financial instruments			9,532,003			10,153,442
Assets guaranteeing technical provisions – other securities	11b		8,012,603			6,256,312
Interbank accounts - National Housing System (SFH)			104,723			234,295
Loan, lease and other credit operations	8		213,187,027			210,998,505
Operations with credit granting characteristics	4e		232,491,686			231,158,529
(Allowance for loan losses)	4f		(19,304,659	)		(20,160,024	)
Other receivables			58,398,347			70,235,022
Foreign exchange portfolio	9		16,568,458			21,742,524
Receivables from insurance and reinsurance operations	4m I and 11b		9,885			14,207
Deferred tax assets	14b I		22,248,795			30,209,189
Escrow deposits - Civil, Labor, Tax and Social lawsuits	12b and 12d		11,892,128			11,143,678
Sundry	13a		7,679,081			7,125,424
Other assets	4g and 13b		646,643			687,440
Unearned reinsurance premiums	4m I		3,975			-
Prepaid expenses	4g and 13b		642,668			687,440
Permanent assets			28,286,424			26,987,417
Investments	4h, 15a Il and III		5,458,802			4,943,071
Investments in affiliates and jointly controlled entities			5,153,969			4,430,622
Other investments			513,659			721,273
(Allowance for losses)			(208,826	)		(208,824	)
Real estate in use	4i and 15b l		6,394,948			6,811,509
Real estate in use			4,303,629			4,274,314
Other fixed assets			13,051,144			12,508,606
(Accumulated depreciation)			(10,959,825	)		(9,971,411	)
Goodwill	4j and 15b ll		1,451,809			1,397,867
Intangible assets	4k and 15b lll		14,980,865			13,834,970
Acquisition of rights to credit payroll			1,059,890			1,045,006
Other intangible assets			20,961,019			17,478,594
(Accumulated amortization)			(7,040,044	)		(4,688,630	)
Total assets			1,503,503,484			1,427,084,224

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet (Note 2a)

(In thousands of Reais)

Liabilities	Note	12/31/2017			12/31/2016

Current liabilities			793,758,946			750,149,557
Deposits	4b and 10b		273,339,101			249,014,691
Demand deposits			68,973,374			61,132,961
Savings deposits			119,980,208			108,250,051
Interbank deposits			1,664,631			3,718,435
Time deposits			82,718,297			75,913,244
Other deposits			2,591			-
Deposits received under securities repurchase agreements	4b and 10c		252,083,864			251,443,677
Own portfolio			82,203,557			89,378,644
Third-party portfolio			158,000,043			140,973,618
Free portfolio			11,880,264			21,091,415
Funds from acceptances and issuance of securities	4b and 10d		48,437,013			36,278,088
Real estate, mortgage, credit and similar notes			34,842,544			27,965,728
Foreign borrowing through securities			11,831,551			6,262,058
Structured operations certificates			1,762,918			2,050,302
Interbank accounts			34,116,644			26,469,416
Pending settlement			33,761,289			26,284,854
Correspondents			355,355			184,562
Interbranch accounts			4,969,504			5,893,044
Third-party funds in transit			4,947,961			5,425,032
Internal transfer of funds			21,543			468,012
Borrowing and onlending	4b and 10e		38,709,245			47,480,309
Borrowing			30,718,378			38,275,670
Onlending			7,990,867			9,204,639
Derivative financial instruments	4d and 7g		13,102,103			10,786,722
Technical provision for insurance, pension plan and capitalization	4m II and 11a		1,721,255			4,029,837
Other liabilities			127,280,217			118,753,773
Collection and payment of taxes and contributions			305,719			277,558
Foreign exchange portfolio	9		35,309,779			30,485,328
Social and statutory	16b II		5,068,079			5,575,671
Tax and social security contributions	4n, 4o and 14c		7,494,228			5,578,990
Negotiation and intermediation of securities			4,601,234			10,372,023
Subordinated debt	10f		12,498,741			11,055,748
Provisions for contingent liabilities	12b		4,794,420			4,412,647
Sundry	13c		57,208,017			50,995,808
Long term liabilities			568,373,734			547,673,346
Deposits	4b and 10b		129,598,806			80,399,303
Interbank deposits			517,143			38,271
Time deposits			129,081,663			80,361,032
Deposits received under securities repurchase agreements	4b and 10c		71,826,142			114,594,160
Own portfolio			27,178,185			73,393,596
Free portfolio			44,647,957			41,200,564
Funds from acceptances and issuance of securities	4b and 10d		59,144,011			57,432,754
Real estate, mortgage, credit and similar notes			26,474,085			26,221,530
Foreign borrowing through securities			30,045,568			28,024,772
Structured Operations Certificates			2,624,358			3,186,452
Borrowing and onlending	4b and 10e		24,731,795			28,133,622
Borrowing			8,541,383			7,510,440
Onlending			16,190,412			20,623,182
Derivative financial instruments	4d and 7g		13,350,513			13,924,604
Technical provision for insurance, pension plan and capitalization	4m II and 11a		182,025,607			152,625,822
Other liabilities			87,696,860			100,563,081
Foreign exchange portfolio	9		16,541,385			21,776,177
Tax and social security contributions	4n, 4o and 14c		17,682,257			16,716,929
Subordinated debt	10f		36,048,767			46,364,327
Provisions for contingent liabilities	12b		10,205,469			11,870,972
Debt instruments eligible as capital	10f		4,148,367			-
Sundry	13c		3,070,615			3,834,676
Deferred income	4p		2,433,470			2,045,943
Non-controlling interests	16f		12,013,734			11,624,952
Stockholders' equity	16		126,923,600			115,590,426
Capital			97,148,000			97,148,000
Capital reserves			1,733,611			1,589,343
Revenue reserves			33,371,254			22,126,215
Asset valuation adjustment	4c, 4d and 16e		(2,586,498	)		(3,390,779	)
(Treasury shares)			(2,742,767	)		(1,882,353	)
Total liabilities and stockholders' equity			1,503,503,484			1,427,084,224

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Income (Note 2a)

(In thousands of Reais)

		2nd Half of			01/01 to			01/01 to
	Note	2017			12/31/2017			12/31/2016
Income related to financial operations			68,465,950			147,494,988			160,212,631
Loan, lease and other credit operations			36,673,728			74,721,149			78,456,495
Securities and derivative financial instruments			21,259,779			49,700,617			53,487,387
Financial income related to insurance, pension plan and capitalization operations	11c		7,095,747			15,277,709			18,656,281
Foreign exchange operations			114,793			644,682			2,695,963
Compulsory deposits			3,321,903			7,150,831			6,916,505
Expenses related to financial operations			(36,629,753	)		(82,570,681	)		(85,878,777	)
Money market			(27,182,874	)		(62,340,486	)		(72,159,878	)
Financial expenses on technical provisions for insurance, pension plan and capitalization	11c		(7,073,052	)		(14,918,112	)		(17,789,954	)
Borrowing and onlending	10e		(2,373,827	)		(5,312,083	)		4,071,055
Income related to financial operations before loan and losses			31,836,197			64,924,307			74,333,854
Result of allowance for loan losses	8		(6,466,596	)		(15,048,252	)		(21,582,437	)
Expenses for allowance for loan losses			(8,263,909	)		(18,749,556	)		(25,325,119	)
Income related to recovery of credits written off as loss			1,797,313			3,701,304			3,742,682
Gross income related to financial operations			25,369,601			49,876,055			52,751,417
Other operating revenues (expenses)			(9,495,851	)		(16,970,081	)		(16,914,343	)
Banking service fees	13d		12,340,423			23,892,445			22,607,420
Income related to bank charges	13e		6,165,237			11,909,748			10,620,779
Result from insurance, pension plan and capitalization operations	11c		2,302,233			4,018,032			4,031,682
Personnel expenses	13f		(11,569,229	)		(22,350,923	)		(21,420,469	)
Other administrative expenses	13g		(9,551,123	)		(18,479,728	)		(18,073,695	)
Tax expenses	4p and 14a II		(3,603,590	)		(7,035,918	)		(7,977,872	)
Equity in earnings of affiliates, jointly controlled entities and other investments	15a II and lll		338,547			626,993			567,061
Other operating revenues	13h		630,668			1,177,256			804,738
Other operating expenses	13i		(6,549,017	)		(10,727,986	)		(8,073,987	)
Operating income			15,873,750			32,905,974			35,837,074
Non-operating income			163,508			(14,990	)		121,398
Income before taxes on income and profit sharing			16,037,258			32,890,984			35,958,472
Income tax and social contribution	4p and 14a I		(4,339,517	)		(8,868,899	)		(14,210,055	)
Due on operations for the period			(1,836,196	)		(5,157,616	)		(4,502,698	)
Related to temporary differences			(2,503,321	)		(3,711,283	)		(9,707,357	)
Profit sharing – Management Members - Statutory			(145,699	)		(243,584	)		(250,530	)
Non-controlling interests	16f		346,054			186,050			141,238
Net income			11,898,096			23,964,551			21,639,125
Weighted average of the number of outstanding shares	16a					6,503,910,030			6,522,956,804
Net income per share – R$						3.68			3.32
Book value per share - R$ (outstanding at 12/31)						19.63			17.75

Supplementary information

Exclusion of non recurring effects	2a and 22k					914,342			582,824
Net income without non recurring effects						24,878,893			22,221,949
Net income per share – R$						3.83			3.41

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In thousands of Reais)

		2nd Half of			01/01 to			01/01 to
	Note	2017			12/31/2017			12/31/2016
Adjusted net income			31,089,273			68,571,143			92,332,680
Net income			11,898,096			23,964,551			21,639,125
Adjustments to net income:			19,191,176			44,606,592			70,693,555
Granted options recognized and share-based payment – variable compensation			293,502			80,675			68,841
Adjustment to market value of securities and derivative financial instruments (assets / liabilities)	7h		(1,013,543	)		1,648,677			(1,751,589	)
Effects of changes in exchange rates on cash and cash equivalents			(178,681	)		687,494			17,940,515
Allowance for loan losses	8c		8,263,909			18,749,556			25,325,119
Interest and foreign exchange expenses related to operations with subordinated debt			2,015,927			4,713,628			942,033
Financial expenses on technical provisions for pension plan and capitalization			7,073,052			14,918,112			17,789,954
Depreciation and amortization	15b		1,927,380			3,790,045			2,979,033
Interest expenses related to provision for contingent and legal liabilities	12b		563,902			1,325,501			1,608,514
Provision for contingent and legal liabilities	12b		1,922,743			3,641,812			4,247,403
Interest income related to escrow deposits	12b		(170,461	)		(344,667	)		(383,120	)
Deferred taxes (excluding hedge tax effects)			2,979,101			5,408,702			3,166,928
Equity in earnings of affiliates, jointly controlled entities and other investments	15a ll and III		(338,547	)		(626,993	)		(567,061	)
Interest and foreign exchange income related to available-for-sale securities			(4,369,253	)		(8,946,157	)		(1,719,142	)
Interest and foreign exchange income related to held-to-maturity securities			1,033,906			316,433			(184,813	)
(Gain) loss on sale of available-for-sale financial assets	7i		(132,395	)		(389,584	)		218,452
(Gain) loss on sale of investments			(199,047	)		(197,750	)		(27,514	)
(Gain) loss on sale of foreclosed assets			170,162			407,755			122,704
(Gain) loss on sale of fixed assets			(87,479	)		(93,286	)		(16,307	)
Non-controlling interests			(346,054	)		(186,050	)		(141,238	)
Other			(216,948	)		(297,311	)		1,074,843
Change in assets and liabilities			(14,653,811	)		(69,533,320	)		(50,133,353	)
(Increase) decrease in assets			(39,964,461	)		(107,212,124	)		(5,073,114	)
Interbank investments			24,563,326			(10,191,970	)		7,676,128
Securities and derivative financial instruments (assets / liabilities)			(39,325,339	)		(59,424,918	)		(29,142,459	)
Compulsory deposits with the Central Bank of Brazil			(10,229,896	)		(13,136,479	)		(19,144,463	)
Interbank and interbranch accounts (assets / liabilities)			1,790,096			454,030			1,214,695
Loan, lease and other credit operations			(19,534,638	)		(20,895,805	)		35,565,638
Other receivables and other assets			4,219,092			1,237,512			(2,395,978	)
Foreign exchange portfolio and negotiation and intermediation of securities (assets / liabilities)			(1,447,102	)		(5,254,494	)		1,153,325
(Decrease) increase in liabilities			25,310,649			37,678,804			(45,060,238	)
Deposits			45,633,449			68,546,847			(31,543,526	)
Deposits received under securities repurchase agreements			(15,212,980	)		(42,127,831	)		11,031,507
Funds for issuance of securities			(1,345,826	)		13,019,459			5,959,194
Borrowing and onlending			(6,154,526	)		(12,238,198	)		(35,385,918	)
Technical provision for insurance, pension plan and capitalization			6,919,463			12,266,587			6,875,385
Collection and payment of taxes and contributions			(3,673,098	)		28,161			38,517
Other liabilities			432,570			2,315,066			4,340,746
Deferred income			251,509			386,482			47,219
Payment of income tax and social contribution			(1,539,912	)		(4,517,769	)		(6,423,362	)
Net cash provided by (used in) operating activities			16,435,462			(962,177	)		42,199,328
Interest on capital / dividends received from affiliated companies			151,634			489,119			323,996
Funds received from sale of available-for-sale securities			7,191,004			18,640,009			19,643,383
Funds received from redemption of held-to-maturity securities			1,809,045			4,025,144			3,472,970
Disposal of assets not for own use			(70,995	)		(139,800	)		235,305
Disposal of investments			416,779			415,556			28,952
Cash and Cash equivalents, net of assets and liabilities arising from the merger with CorpBanca	2c		-			-			5,869,160
Cash and cash equivalents, net assets and liabilities from Recovery acquisition	2c		-			-			(713,914	)
Cash and cash equivalents, net assets and liabilities from Citibank acquisition	2c		(244,557	)		(244,557	)		-
Sale of fixed assets			176,855			205,622			111,376
Termination of intangible asset agreements			7,389			25,718			11,328
Purchase of available-for-sale securities			(14,653,339	)		(21,369,048	)		(16,891,427	)
Purchase of held-to-maturity securities			(310,702	)		(406,282	)		(1,598,607	)
Purchase of investments	2c		(784,423	)		(785,725	)		(428,169	)
Disposal (Purchase) of fixed assets	15b		(500,542	)		(877,327	)		(801,895	)
Disposal (Purchase) of intangible assets	15b		(1,366,601	)		(1,922,073	)		(1,431,098	)
Net cash provided by (used in) investment activities			(8,178,453	)		(1,943,644	)		7,831,360
Increase in subordinated debt			4,135,000			4,135,000			-
Decrease in subordinated debt			(5,559,262	)		(13,572,828	)		(14,170,289	)
Change in non-controlling interests	16f		751,624			921,013			(1,081,282	)
Granting of stock options			544,646			1,114,391			731,719
Purchase of treasury shares			(1,807,372	)		(3,089,464	)		(947,409	)
Dividends and interest on capital paid to non-controlling interests			(195,387	)		(346,181	)		(93,453	)
Dividends and interest on capital paid			(2,814,584	)		(10,381,751	)		(7,672,530	)
Net cash provided by (used in) financing activities			(4,945,335	)		(21,219,820	)		(23,233,244	)

Net increase (decrease) in cash and cash equivalents			3,311,674			(24,125,641	)		26,797,444

Cash and cash equivalents at the beginning of the period			67,744,998			96,048,488			87,191,559
Effects of changes in exchange rates on cash and cash equivalents			178,681			(687,494	)		(17,940,515	)
Cash and cash equivalents at the end of the period	4a and 5		71,235,353			71,235,353			96,048,488

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Added Value

(In thousands of Reais)

		2nd Half of			01/01 to					01/01 to
	Note	2017			12/31/2017					12/31/2016
Income			83,601,423			173,429,227					176,816,211
Financial operations			68,465,950			147,494,988					160,212,631
Banking services			18,505,660			35,802,193					33,228,199
Result from insurance, pension plan and capitalization operations			2,302,233			4,018,032					4,031,682
Result from loan losses	8		(6,466,596	)		(15,048,252	)				(21,582,437	)
Other			794,176			1,162,266					926,136
Expenses			(43,178,770	)		(93,298,667	)				(93,952,764	)
Financial operations			(36,629,753	)		(82,570,681	)				(85,878,777	)
Other			(6,549,017	)		(10,727,986	)				(8,073,987	)
Inputs purchased from third parties			(7,643,097	)		(14,730,480	)				(14,393,527	)
Materials, energy and others	13g		(194,174	)		(349,974	)				(313,495	)
Third-party services	13g		(2,140,926	)		(4,197,480	)				(4,395,246	)
Other			(5,307,997	)		(10,183,026	)				(9,684,786	)
Data processing and telecommunications	13g		(2,139,752	)		(4,151,826	)				(3,966,513	)
Advertising, promotions and publication	13g		(587,581	)		(1,095,420	)				(973,199	)
Installations			(881,262	)		(1,665,070	)				(1,587,512	)
Transportation	13g		(172,053	)		(338,679	)				(391,338	)
Security	13g		(359,418	)		(723,148	)				(716,094	)
Travel expenses	13g		(116,476	)		(213,704	)				(197,998	)
Other			(1,051,455	)		(1,995,179	)				(1,852,132	)
Gross added value			32,779,556			65,400,080					68,469,920
Depreciation and amortization	13g		(1,185,833	)		(2,282,514	)				(2,202,318	)
Net added value produced by the company			31,593,723			63,117,566					66,267,602
Added value received through transfer	15a II and lll		338,547			626,993					567,061
Total added value to be distributed			31,932,270			63,744,559					66,834,663
Distribution of added value			31,932,270			63,744,559					66,834,663
Personnel			10,494,451			20,243,342		31.8	%		19,632,383		29.4	%
Compensation			8,194,307			15,751,809		24.7	%		15,973,503		23.9	%
Benefits			1,874,484			3,641,185		5.7	%		2,833,125		4.2	%
FGTS – government severance pay fund			425,660			850,348		1.3	%		825,755		1.2	%
Taxes, fees and contributions			9,163,584			18,255,982		28.6	%		24,226,543		36.2	%
Federal			8,247,443			16,742,580		26.3	%		23,016,649		34.4	%
State			1,076			2,155		0.0	%		34,622		0.1	%
Municipal			915,065			1,511,247		2.4	%		1,175,272		1.8	%
Return on third parties’ assets - Rent			722,193			1,466,734		2.3	%		1,477,850		2.2	%
Return on own assets			11,552,042			23,778,501		37.3	%		21,497,887		32.2	%
Dividends and interest on capital			13,725,510			19,200,473		8.7	%		11,573,623		9.8	%
Retained earnings (loss) for the period			(1,827,414	)		4,764,078		28.9	%		10,065,502		22.6	%
Minority interest in retained earnings			(346,054	)		(186,050	)	-0.3	%		(141,238	)	-0.2	%

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Balance Sheet

(In thousands of Reais)

Assets	Note	12/31/2017			12/31/2016
Current assets			28,621,142			12,443,774
Cash and cash equivalents			625,811			797,340
Interbank investments	4b and 6		3,590,114			3,687,924
Money market			117,255			3,687,924
Interbank deposits			3,472,859			-
Securities and derivative financial instruments	4c, 4d and 7		20,594,801			4,819
Own portfolio			20,594,801			-
Pledged in guarantee			-			4,819
Other receivables			3,788,901			7,947,307
Income receivable	15a I		2,056,122			4,455,125
Deferred tax assets	14b I		102,150			52,930
Escrow deposits - Civil, Labor, Tax and Social lawsuits			94			367
Sundry	13a		1,630,535			3,438,885
Other assets – prepaid expenses	4g		21,515			6,384
Long term receivables			81,033,743			66,033,575
Interbank investments – interbank deposits	4b and 6		79,093,407			64,722,877
Securities and derivative financial instruments	4c, 4d and 7		407,564			3,094
Own portfolio			2,297			1,443
Derivative Financial Instruments			405,267			1,651
Other receivables			1,532,772			1,307,604
Deferred tax assets	14b I		258,468			167,496
Escrow deposits - Civil, Labor, Tax and Social lawsuits			16,906			17,905
Sundry	13a		1,257,398			1,122,203
Permanent assets			82,733,174			89,544,381
Investments - Investments in subsidiaries	4h and 15a I		82,733,127			89,544,336
Real estate in use	4i		47			45
Total assets			192,388,059			168,021,730
Liabilities

Current liabilities			27,003,550			16,534,345
Deposits - interbank deposits	4b and 10b		16,575,549			13,111,244
Funds from acceptance and issuance of securities	4b and 10d		3,481,671			-
Derivative Financial Instruments	4d and 7g		4,915,168			-
Other liabilities			2,031,162			3,423,101
Social and statutory	16b II		1,882,767			2,842,047
Tax and social security contributions	4n, 4p and 14c		130,783			175,909
Subordinated debt	10f		-			354,914
Provisions for contingent liabilities			-			2,895
Sundry			17,612			47,336
Long term liabilities			36,876,569			32,920,900
Deposits - Interbank deposits	4b and 10b		6,343,296			-
Funds from acceptance and issuance of securities	4b and 10d		19,718			3,431,074
Derivative Financial Instruments	4d and 7g		169			3,775,838
Other liabilities			30,513,386			25,713,988
Tax and social security contributions	4n, 4p and 14c		44,496			156,684
Subordinated debt	10f		26,105,059			25,348,101
Provisions for contingent liabilities			195,479			188,623
Debt instruments eligible as capital	10f		4,148,367			-
Sundry			19,985			20,580
Stockholders' equity	16		128,507,940			118,566,485
Capital			97,148,000			97,148,000
Capital reserves			1,733,611			1,589,343
Revenue reserves			33,806,424			24,687,292
Asset valuation adjustment	4c and 4d		(1,437,328	)		(2,975,797	)
(Treasury shares)			(2,742,767	)		(1,882,353	)
Total liabilities and stockholders' equity			192,388,059			168,021,730

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Statement of Income

(In thousands of Reais)

		2nd Half of			01/01 to			01/01 to
	Note	2017			12/31/2017			12/31/2016
Income related to financial operations			3,024,272			5,465,130			2,722,510
Securities and derivative financial instruments			3,024,272			5,465,130			2,722,510
Expenses related to financial operations			(1,484,447	)		(2,676,948	)		493,656
Money market	10d		(1,484,447	)		(2,676,948	)		493,656
Gross income related to financial operations			1,539,825			2,788,182			3,216,166
Other operating revenues (expenses)			10,061,012			18,098,700			15,382,700
Personnel expenses			(78,796	)		(161,445	)		(132,549	)
Other administrative expenses			(77,137	)		(118,710	)		(56,118	)
Tax expenses	14a II		(187,959	)		(374,759	)		(386,819	)
Equity in earnings of subsidiaries	15a I		10,432,777			18,805,000			16,058,825
Other operating revenues (expenses)			(27,873	)		(51,386	)		(100,639	)
Operating income			11,600,837			20,886,882			18,598,866
Non-operating income			8,912			24,727			21,288
Income before taxes on income and profit sharing			11,609,749			20,911,609			18,620,154
Income tax and social contribution	4p		(1,228,031	)		231,124			252,555
Due on operations for the period			(36,869	)		29,322			212,776
Related to temporary differences			(1,191,162	)		201,802			39,779
Profit sharing – Management Members - Statutory			(16,368	)		(34,267	)		(19,514	)
Net income			10,365,350			21,108,466			18,853,195
Weighted average of the number of outstanding shares	16a					6,503,910,030			6,522,956,804
Net income per share – R$						3.25			2.89
Book value per share - R$ (outstanding at 12/31)						19.88			18.21

Supplementary information

Exclusion of non recurring effects	2a and 22k					914,342			582,824
Net income without non recurring effects						22,022,808			19,436,018
Net income per share – R$						3.39			2.98

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Statement of Changes in Stockholders’ Equity (Note 16)

(In thousands of Reais)

	Capital		Capital reserves			Revenue reserves			Asset valuation adjustment			Retained earnings			(Treasury shares)			Total
Balance at 07/01/2017		97,148,000		1,352,881			27,263,502			(2,514,060	)		-			(2,571,065	)		120,679,258
Purchase of treasury shares		-		-			-			-			-			(1,807,372	)		(1,807,372	)
Granting of stock options		-		87,228			-			-			-			457,418			544,646
Granting of options recognized		-		142,765			-			-			-			-			142,765
Share-based payment – variable compensation		-		150,737			-			-			-			-			150,737
Cancellation of Shares – Meeting of the Board of Directors at December 15, 2017		-		-			(1,178,252	)		-			-			1,178,252			-
Asset valuation adjustments:
Change in adjustment to market value		-		-			-			584,277			-			-			584,277
Remeasurements in liabilities of post-employment benefits		-		-			-			55,625			-			-			55,625
Foreign exchange variation on investments abroad / Hedge of net investment in foreign operations		-		-			-			436,830			-			-			436,830
Net income		-		-			-			-			10,365,350			-			10,365,350
Appropriations:
Legal reserve		-		-			518,267			-			(518,267	)		-			-
Statutory reserves		-		-			(3,886,750	)		-			3,886,750			-			-
Dividends and interest on capital		-		-			11,089,657			-			(13,733,833	)		-			(2,644,176	)
Balance at 12/31/2017		97,148,000		1,733,611			33,806,424			(1,437,328	)		-			(2,742,767	)		128,507,940
Changes in the period		-		380,730			6,542,922			1,076,732			-			(171,702	)		7,828,682
Balance at 01/01/2016		85,148,000		1,537,219			29,724,889			(1,375,886	)		-			(4,353,380	)		110,680,842
Reserve Capitalization - ESM 09/14/2016		12,000,000		-			(12,000,000	)		-			-			-			-
Purchase of treasury shares		-		-			-			-			-			(947,409	)		(947,409	)
Granting of stock options		-		(16,717	)		-			-			-			748,436			731,719
Cancellation of shares - ESM of April 27, 2016 – Approved on June 7, 2016		-		-			(2,670,000	)		-			-			2,670,000			-
Granting of options recognized		-		55,657			-			-			-			-			55,657
Share-based payment – variable compensation		-		13,184			-			-			-			-			13,184
Payment of interest on capital on 02/29/2016 – declared after 12/31/2015 - R$ 0.4564 per share		-		-			(2,697,116	)		-			-			-			(2,697,116	)
Asset valuation adjustments:
Change in adjustment to market value		-		-			-			(999,975	)		-			-			(999,975	)
Remeasurements in liabilities of post-employment benefits		-		-			-			(599,936	)		-			-			(599,936	)
Net income		-		-			-			-			18,853,195			-			18,853,195
Appropriations:
Legal reserve		-		-			942,660			-			(942,660	)		-			-
Statutory reserves		-		-			6,336,912			-			(6,336,912	)		-			-
Dividends and interest on capital		-		-			5,049,947			-			(11,573,623	)		-			(6,523,676	)
Balance at 12/31/2016		97,148,000		1,589,343			24,687,292			(2,975,797	)		-			(1,882,353	)		118,566,485
Changes in the period		12,000,000		52,124			(5,037,597	)		(1,599,911	)		-			2,471,027			7,885,643
Balance at 01/01/2017		97,148,000		1,589,343			24,687,292			(2,975,797	)		-			(1,882,353	)		118,566,485
Purchase of treasury shares		-		-			-			-			-			(3,089,464	)		(3,089,464	)
Granting of stock options		-		63,593			-			-			-			1,050,798			1,114,391
Cancellation of Shares – Meeting of the Board of Directors at December 15, 2017		-		-			(1,178,252	)		-			-			1,178,252			-
Granting of options recognized		-		96,509			-			-			-			-			96,509
Share-based payment – variable compensation		-		(15,834	)		-			-			-			-			(15,834	)
Payment of interest on capital on 03/03/2017 – declared after 12/31/2016 - R$ 0.6591 per share		-		-			(5,047,692	)		-			-			-			(5,047,692	)
Financial guarantees provided - CMN Resolution nº 4,512 (Note 8c)		-		-			-			-			(220,902	)		-			(220,902	)
Asset valuation adjustments:
Change in adjustment to market value		-		-			-			700,830			-			-			700,830
Remeasurements in liabilities of post-employment benefits		-		-			-			(11,231	)		-			-			(11,231	)
Foreign exchange variation on investments abroad / Hedge of net investment in foreign operations		-		-			-			848,870			-			-			848,870
Net income		-		-			-			-			21,108,466			-			21,108,466
Appropriations:
Legal reserve		-		-			1,055,423			-			(1,055,423	)		-			-
Statutory reserves		-		-			631,668			-			(631,668	)		-			-
Dividends and interest on capital		-		-			13,657,985			-			(19,200,473	)		-			(5,542,488	)
Balance at 12/31/2017		97,148,000		1,733,611			33,806,424			(1,437,328	)		-			(2,742,767	)		128,507,940
Changes in the period		-		144,268			9,119,132			1,538,469			-			(860,414	)		9,941,455

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Statement of Cash Flows

(In thousands of Reais)

		2nd Half of			01/01 to			01/01 to
	Note	2017			12/31/2017			12/31/2016
Adjusted net income			2,686,719			4,598,056			(733,035	)
Net income			10,365,350			21,108,466			18,853,195
Adjustments to net income:			(7,678,631	)		(16,510,410	)		(19,586,230	)

Granted options recognized and share-based payment – variable compensation			293,502			80,675			68,841
Interest and foreign exchange expense related to operations with subordinated debt			734,146			1,861,079			(3,636,725	)
Deferred taxes			1,191,164			(201,802	)		(39,779	)
Equity in earnings of subsidiaries	15a I		(10,432,777	)		(18,805,000	)		(16,058,825	)
Amortization of goodwill			25,747			51,494			91,613
Effects of changes in exchange rates on cash and cash equivalents			509,578			503,128			(11,371	)
Other			9			16			16
Change in assets and liabilities			(21,355,410	)		(23,116,782	)		9,335,610
(Increase) decrease in interbank investments			(13,550,272	)		(17,843,389	)		11,362,713
(Increase) decrease in securities and derivative financial instruments (assets / liabilities)			(16,088,324	)		(19,854,953	)		4,088,127
(Increase) decrease in other receivables and other assets			(4,887,994	)		2,378,613			(2,736,764	)
Increase (decrease) in deposits			9,651,696			9,807,601			(2,200,430	)
(Decrease) increase in other liabilities			3,519,484			2,356,252			(1,201,520	)
Payment of income tax and social contribution			-			39,094			23,484
Net cash provided by (used in) operating activities			(18,668,691	)		(18,518,726	)		8,602,575
Interest on capital / dividends received			23,382,983			28,608,438			9,112,869
(Purchase) sale of investments			(26	)		416,780			(9,816,742	)
(Purchase) sale of fixed assets			(18	)		(18	)		(29	)
Net cash provided by (used in) investment activities			23,382,939			29,025,200			(703,902	)
Decrease in subordinated debt			(729,474	)		(1,459,035	)		(1,437,467	)
(Decrease) increase in funds for issuance of securities			(29,607	)		70,315			(679,374	)
Granting of stock options			544,646			1,114,391			731,719
Purchase of treasury shares			(1,807,372	)		(3,089,464	)		(947,409	)
Dividends and interest on capital paid			(2,814,583	)		(10,381,751	)		(7,672,530	)
Net cash provided by (used in) financing activities			(4,836,390	)		(13,745,544	)		(10,005,061	)

Net increase (decrease) in cash and cash equivalents			(122,142	)		(3,239,070	)		(2,106,388	)

Cash and cash equivalents at the beginning of the period			1,374,786			4,485,264			6,580,281
Effects of changes in exchange rates on cash and cash equivalents			(509,578	)		(503,128	)		11,371
Cash and cash equivalents at the end of the period	4a and 5		743,066			743,066			4,485,264

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Statement of Added Value

(In thousands of Reais)

		2nd Half of			01/01 to			01/01 to
	Note	2017			12/31/2017			12/31/2016
Income			1,844,769			5,783,199			3,106,961
Financial operations			3,024,271			5,465,130			2,722,510
Other			(1,179,502	)		318,069			384,451
Expenses			(1,516,066	)		(2,734,485	)		391,576
Financial operations			(1,484,447	)		(2,676,948	)		493,656
Other			(31,619	)		(57,537	)		(102,080	)
Inputs purchased from third parties			(76,793	)		(117,990	)		(55,473	)
Third-party services			(22,544	)		(38,781	)		(36,677	)
Advertising, promotions and publication			(3,855	)		(19,077	)		(10,450	)
Expenses for financial system services			(39,588	)		(42,912	)		(5,816	)
Insurance			(21	)		(21	)		(8	)
Other			(10,785	)		(17,199	)		(2,522	)
Gross added value			251,910			2,930,724			3,443,064
Deprecitation and amortization			(25,756	)		(51,511	)		(91,629	)
Net added value produced by the company			226,154			2,879,213			3,351,435
Added value received through transfer	15a I		10,432,777			18,805,000			16,058,825
Equity income			10,432,777			18,805,000			16,058,825
Total added value to be distributed			10,658,931			21,684,213			19,410,260
Distribution of added value			10,658,931			21,684,213			19,410,260
Personnel			83,594			165,867			138,454
Compensation			82,245			163,068			135,632
Benefits			1,177			2,443			2,471
FGTS – government severance pay fund			172			356			351
Taxes, fees and contributions			209,642			409,160			417,966
Federal			209,538			409,013			417,924
Municipal			104			147			42
Return on third parties’ assets - rent			345			720			645
Return on own assets			10,365,350			21,108,466			18,853,195
Dividends and interest on capital			13,725,510			19,200,473			11,573,623
Retained earnings (loss) for the period			(3,360,160	)		1,907,993			7,279,572

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

ITAÚ UNIBANCO HOLDING S.A.

Notes to the Financial Statements

Period from January 1 to December 31, 2017 and 2016

(In thousands of Reais)

Note 1 - Operations

Itaú Unibanco Holding S.A. (ITAÚ UNIBANCO HOLDING) is a publicly-held company which, together with its affiliated and subsidiaries companies, operates in Brazil and abroad in all types of banking activities, through its commercial, investment, real estate loan, finance and investment credit, and lease portfolios, including foreign exchange operations. By means of its subsidiaries, it directly or indirectly carries out many other activities, with an emphasis on Insurance, Private Pension Plans, Capitalization, Securities Brokerage and Administration of Credit Cards, Consortia, Investment Funds and Managed Portfolios.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 2 – Presentation and consolidation of the financial statements

Presentation

The financial statements of ITAÚ UNIBANCO HOLDING and of its subsidiaries (ITAÚ UNIBANCO HOLDING CONSOLIDATED) have been prepared in accordance with the accounting principles established by the Brazilian Corporate Law, including the amendments introduced by Laws nº. 11,638, of December 28, 2007, and nº. 11,941, of May 27, 2009 and in conformity, when applicable, with instructions issued by the Central Bank of Brazil (BACEN), the National Monetary Council (CMN), the Brazilian Securities and Exchange Commission (CVM), the Superintendence of Private Insurance (SUSEP), the National Council of Private Insurance (CNSP) and the National Superintendence of Supplementary Pension – (PREVIC), which include the use of estimates deemed necessary to calculate the accounting provisions and the valuation of financial assets.

In order to enable the analysis of the net income, the heading “Net income without non recurring effects” is presented within the Consolidated Statement of Income, and this effect is shown under the heading “Exclusion of non recurring effects” (Note 22k).

As set forth in the sole paragraph of article 7 of BACEN Circular nº. 3,068, of November 8, 2001, securities classified as trading securities (Note 4c) are presented in the Consolidated Balance Sheet under Current Assets, regardless of their maturity dates.

Lease Operations are presented at present value in the Consolidated Balance Sheet, and the related income and expenses, which represent the financial results of these operations, are presented, grouped together, under Loan, Lease and Other Credit Operations in the Statement of Income. Advances on exchange contracts are reclassified from Other Liabilities – Foreign exchange portfolio to Loan operations. The foreign exchange result is presented on an adjusted basis, with reclassification of expenses and income, in order exclusively to represent the impact of variations and differences in rates on the balance sheet accounts denominated in foreign currencies.

As from June 30, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED began presenting a new concept for losses (Notes 8a II and 8c), segregating the Allowance for Loan and Lease Losses into 3 types of risks: Delay Risk: Provisions for delay, as required by BACEN, related to the minimum provision required for overdue operations, in accordance with CMN Resolution nº. 2,682, of December 21, 1999; Aggravated Risk: Provisions for credits with aggravation of risk above the minimum required by BACEN for overdue operations and also provisions for credits that were renegotiated and Potential Risk related to expected and potential loss.

Consolidation

As set forth in paragraph 1, article 2, of BACEN Circular nº. 2,804, of February 11, 1998, the financial statements of ITAÚ UNIBANCO HOLDING CONSOLIDATED include the consolidation of its foreign branches and subsidiaries.

Intercompany transactions, intercompany balances and intercompany results have been eliminated on consolidation. The investment funds of which ITAÚ UNIBANCO HOLDING CONSOLIDATED companies are the main beneficiaries or holders of principal obligations are consolidated. The investments in these fund portfolios are classified by type of transaction and were distributed by type of security, based on the same categories to which these securities were originally allocated. The effects of foreign exchange variations on investments abroad are classified under the heading Securities and derivative financial instruments in the Statement of Income for subsidiaries with the same functional currency as the parent company, and in Asset valuation adjustment for subsidiaries with a functional currency different from that of the parent company (Note 4t).

The difference in Net Income and Stockholders’ Equity between ITAÚ UNIBANCO HOLDING and ITAÚ UNIBANCO HOLDING CONSOLIDATED (Note 16d) results from the adoption of different criteria for the amortization of goodwill originating from purchases of investments, from the recording of transactions with minority stockholders where there is no change of control (Note 4r), and in the record of exchange variations on investments abroad, and hedges of these investments where the functional currency is different from that of the parent company, net of the respective deferred tax assets.

In ITAÚ UNIBANCO HOLDING, the goodwill recorded in subsidiaries, mainly originated from the ITAÚ and UNIBANCO merger and acquisition by minority stockholders of REDE, is amortized based on the expected future profitability and appraisal reports, or upon realization of the investment, according to the rules and guidance of CMN and BACEN.

In ITAÚ UNIBANCO HOLDING CONSOLIDATED, from January 1st, 2010, the goodwill originating from the purchase of investments is no longer fully amortized as part of the consolidated financial statements (Note 4j). By December 31, 2009, the goodwill generated had been fully amortized in the periods in which investments were made.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

The consolidated financial statements cover ITAÚ UNIBANCO HOLDING and its direct and indirect subsidiaries. We present below the main companies which together represent over 95% of total consolidated assets:

					Interest in voting					Interest in total
			Country of		capital at					capital at
		Functional currency	Incorporation	Activity		12/31/2017		12/31/2016			12/31/2017		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.			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.^(*)			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. Sociedade de Crédito, Financiamento e Investimento			Brazil	Consumer Finance Credit		50.00	%	50.00	%		50.00	%	50.00	%
Redecard S.A.			Brazil	Acquier		100.00	%	100.00	%		100.00	%	100.00	%
Foreign
Itaú Corpbanca Colombia S.A.	(Note 2c)	Colombian Peso	Colombia	Financial institution		23.90	%	23.67	%		23.90	%	23.67	%
Banco Itaú (Suisse) SA		Swiss Franc	Switzerland	Financial institution		100.00	%	100.00	%		100.00	%	100.00	%
Banco Itaú Argentina S.A.		Argentine 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 2c)	Chilean Peso	Chile	Financial institution		36.06	%	35.71	%		36.06	%	35.71	%

(*)

New company name of Itaú BMG Seguradora S.A.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Business development

Citibank’s Retail Operations

On October 08, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED entered, by means of its subsidiaries Itaú Unibanco S.A. (ITAÚ UNIBANCO) and Itaú Corretora de Valores S.A., 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 banking 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$ 627,795.

The operation was structured in three phases:

Acquisition of retail operations, cards and insurance brokerage on October 31, 2017;

ii.

Acquisition of securities brokerage on December 1st, 2017;

iii.

Acquisition of ownership interest in TECBAN and CIBRASEC on December 26, 2017.

The difference between the amount paid and net assets acquired resulted in the recognition of goodwill due to expected future profitability on the acquisition date of R$ 630,629.

Gestora de Inteligência de Crédito S.A.

On January 21, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary 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 S.A., 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 CONSOLIDATED, through its subsidiary 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$ 1,460,406, 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 CONSOLIDATED.

ConectCar Soluções de Mobilidade Eletrônica S.A.

On October 21, 2015, ITAÚ UNIBANCO HOLDING CONSOLIDATED, 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 million.

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.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Recovery do Brasil Consultoria S.A.

At December 31, 2015, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary 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$ 734,755.

In the same transaction, ITAÚ UNIBANCO HOLDING CONSOLIDATED 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 million.

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.

On July 7, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary ITAÚ UNIBANCO, acquired from International Finance Corporation, a 6.92% additional interest, for the amount of R$ 59,186 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 (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 CONSOLIDATED’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:

Increase in BIC’s capital in the amount of R$ 2,308,917 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 (ITAÚ CORPBANCA), are 33.58% for ITAÚ UNIBANCO HOLDING CONSOLIDATED and 33.13% for CORP GROUP.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

The following corporate structure resulted from the transaction:

Ownership interest
ITAÚ UNIBANCO HOLDING CONSOLIDATED	33.58	%
CORP GROUP	33.13	%
Other non-controlling stockholders	33.29	%

The ITAÚ CORPBANCA is controlled as of April 1st, 2016 by ITAÚ UNIBANCO HOLDING CONSOLIDATED. On the same date, ITAU UNIBANCO HOLDING entered into a shareholders’ agreement with CORP GROUP, which sets 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 CONSOLIDATED due to its interest in ITAÚ CORPBANCA was R$ 10,517,487, based on the quotation of CORPBANCA’s shares listed on the Santiago Stock Exchange.

The consideration transferred resulted in goodwill for future expected profitability of R$ 6,590,106 (Recorded in Intangible assets - Note 15b III). Additionally, a goodwill of R$ 675,362 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. The goodwill will be amortized over 10 years. 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

	04/01/2016

Current Assets and Long Term Receivables		110,630,546
Cash and cash equivalents		5,869,160
Interbank investments		3,897,540
Securities and derivative financial instruments		19,632,775
Interbank accounts and Interbranch accounts		154,230
Loan, lease and other credit operations		75,543,990
Other receivables and Other assets		5,532,851
Permanent assets		4,056,062
Investments		71,517
Fixed assets and operating lease		494,001
Goodwill and Intangible assets		3,490,544
Total assets		114,686,608
Current Liabilities and Long Term Liabilities		107,324,988
Deposits		68,387,102
Deposits received under securities repurchase agreements		4,052,218
Funds from acceptances and issuance of securities		12,161,294
Interbank accounts and Interbranch accounts		259,445
Borrowing and onlending		6,410,574
Derivative financial instruments		5,749,062
Other liabilities		10,305,293
Total liabilities		107,324,988
Plan net assets		7,361,620
Non-controlling interests		1,487,970
Net assets assumed		5,873,650
Adjustment to fair value of net assets assumed		(1,946,269	)
Net Assets Assumed at Fair Value		3,927,381

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Contingent liabilities have not been recorded due to the acquisition.

ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary ITB Holding Brasil Participações Ltda., indirectly acquired the following additional interests in the ITAU CORPBANCA’s capital:

•

On October 26, 2016 – 10,908,002,836 shares (2.13%) for the amount of R$ 288,108, then holding 35.71%; and

•

On September 15, 2017 – 1,800,000,000 shares (0.35%) for the amount of R$ 55,624, then holding 36.06%.

The possibility of these acquisitions were set forth in ITAÚ CORPBANCA shareholders agreement, entered into between ITAÚ UNIBANCO HOLDING CONSOLIDATED and CORP GROUP and affiliated companies on April 1st, 2016.

MaxiPago Serviços de Internet Ltda.

On September 3, 2014, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary REDE entered into a share and purchase agreement with the controlling shareholders of MaxiPago Serviços de Internet Ltda. (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 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	14,500
(-) Fair value of identified assets and liabilities	(3,994	)
(=) Goodwill	10,506

In the second semester of 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary REDE, increased the capital of MAXIPAGO by 21.98% and acquired additional interest ownership of 3.02%, for of R$ 2,000, and now holds 100% of MAXIPAGO’s capital stock.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 3 – Requirements regarding capital and fixed asset limits

ITAÚ UNIBANCO HOLDING CONSOLIDATED is subject to the requirements of the Central Bank of Brazil (BACEN), which determines minimum capital requirements, procedures to assess information on globally systemic important banks (G-SIB), fixed asset limits, loan limits, accounting practices and compulsory deposit requirements, thereby requiring banks to conform to the regulation based on the Basel Accord for capital adequacy purposes. Additionally, both the National Council of Private Insurance (CNSP) and the Superintendence of Private Insurance (SUSEP) issue regulations on capital requirements that impact our insurance operations, and private pension and capitalization plans.

Further details on the Capital Management of ITAÚ UNIBANCO HOLDING CONSOLIDATED, which are not an integral part of the financial statements, can be found on the website www.itau.com.br/investor-relations Corporate Governance / Risk and Capital Management – Pillar 3.

Capital Requirements in Place and in Progress

ITAÚ UNIBANCO HOLDING CONSOLIDATED’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).

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 CONSOLIDATED uses the standardized approaches to calculate credit and operational risk-weighted asset amounts.

As from September 1, 2016, BACEN authorized ITAÚ UNIBANCO HOLDING CONSOLIDATED 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.

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.

The table below shows Basel III implementation calendar for Brazil, as defined by BACEN, in which the figures refer to the percentage of ITAÚ UNIBANCO HOLDING CONSOLIDATED risk-weighted assets.

	As from January 1^st
Schedule for Basel III implementation	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	%
ACPconservation		0	%		0.625	%		1.25	%		1.875	%		2.5	%
ACPcountercyclical ^(*)		0	%		0	%		0	%		0	%		0	%
ACPsystemic		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 adjustment deductions		40	%		60	%		80	%		100	%		100	%

^(*) ACP _{Countercyclical}is triggered during the credit cycle expansion phase, and, currently, according to BACEN Circular 30,371, the amount required for the countercyclical capital is zero. Furthermore, in the event of increase in ACPCountercyclical, the new percentage will be effective only twelve months after it is announced.

Additionally, in March 2015, Circular 3,751, of March 19, 2015, of the BACEN 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).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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.

Capital management governance

The Board of Directors is the main body in the management of ITAÚ UNIBANCO HOLDING CONSOLIDATED’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 CONSOLIDATED’s capital.

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.

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.

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 Reference Equity	12/31/2017			12/31/2016
Stockholders’ equity of Itaú Unibanco Holding S.A. (Consolidated)		126,923,600			115,590,426
Non-controlling interests		11,942,502			11,568,390
Changes in Subsidiaries´ Interests in Capital Transactions		1,481,888			2,776,121
Consolidated stockholders’ equity (BACEN)		140,347,990			129,934,937
Common Equity Tier I prudential adjustments		(17,951,725	)		(14,526,992	)
Common Equity Tier I		122,396,265			115,407,945
Additional Tier I Prudential Adjustments		57,062			532,392
Additional Tier I Capital		57,062			532,392
Tier I (Common Equity Tier I + Additional Tier I Capital)		122,453,327			115,940,337
Instruments Eligible to Comprise Tier II		19,722,563			23,488,432
Tier II prudential adjustments		76,083			48,507
Tier II		19,798,646			23,536,939
Reference Equity (Tier I + Tier II)		142,251,973			139,477,276

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 80% 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 – December 31, 2017

The table below shows the amounts of risk weighted assets for Credit Risk (RWA_CPAD):

Risk exposures	12/31/2017		12/31/2016
Exposure Weighted by Credit Risk (RWA_CPAD)		660,516,354		669,284,247
a) Per Weighting Factor (FPR):
FPR at 2%		92,010		105,577
FPR at 20%		7,673,779		8,011,339
FPR at 35%		15,900,495		12,056,104
FPR at 50%		42,896,233		44,250,940
FPR at 75%		145,376,381		142,193,646
FPR at 85%		75,672,552		82,494,126
FPR at 100%		320,975,708		325,889,852
FPR at 250%		34,052,500		33,213,428
FPR at 300%		3,906,261		7,356,695
FPR up to 1250%^(*)		2,095,611		1,607,958
Derivatives - Changes in the Counterparty Credit Quality		6,417,363		6,167,814
Derivatives – Future potential gain		5,457,462		5,936,767
b) Per Type:		660,516,354		669,284,247
Securities		45,629,423		45,740,665
Loan operations – Retail		114,141,186		114,481,468
Loan operations – Non-retail		240,814,547		247,910,726
Joint Liabilities - Retail		172,251		205,149
Joint Liabilities - Non-Retail		45,405,251		47,107,743
Loan commitments – Retail		31,057,682		27,504,191
Loan commitments – Non-retail		9,017,086		10,234,492
Other exposures		174,278,929		176,099,813

(*) Taking into consideration the application of the “F” factor required by Article 29 of BACEN Circular 3,644.

The table below presents the market risk weighted assets (RWA_MINT)

Composition of Market Risk-Weighted Assets (RWA_MINT)

	12/31/2017⁽¹⁾	12/31/2016⁽²⁾
Market Risk Weighted Assets - Standard Aproach (RWAM_PAD)	32,892,766	26,811,072
Operations subject to interest rate variation	31,076,008	24,918,995
Fixed rate denominated in reais	6,118,736	4,952,015
Foreign exchange coupons	17,153,167	15,496,581
Price index coupon	7,804,105	4,470,396
Interest rate coupon	1	3
Operations subject to commodity price variation	361,109	353,313
Operations subject to stock price variation	239,091	400,755
Operations subject to risk exposures in gold, foreign currency and foreign	1,216,558	1,138,009
Minimum Market Risk Weighted Assets - Standard Aproach (RWAM_PAD) ^{(1) (2)} (a)	26,314,213	24,129,965
Market Risk Weighted Assets calculated based on internal methodology (b)	32,914,851	19,798,552
Reduction of Market Risk Weighted Assets due to Internal Models Aproach (IMA)	-	(2,681,107	)
Market Risk Weighted Assets (RWA_MINT) - maximum of (a) and (b)	32,914,851	24,129,965

(1)

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

(2)

Market risk weighted-assets calculated based on internal models, with maximum saving possibility of 10% of the standard model.

At December 31, 2017, RWA_MINTtotaled R$ 32,914,851, which corresponds to capital calculated at internal models, higher than the 80% of RWA_MPAD, which totaled R$ 26,314,213.

The table below presents the composition of the operational risk weighted assets (RWA_OPAD):

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

	12/31/2017		12/31/2016
Operational Risk-Weighted Assets (RWA_OPAD)		63,276,519		37,826,292
Retail		11,870,427		10,886,992
Commercial		24,857,050		24,166,481
Corporate finance		2,663,324		2,788,550
Negotiation and sales		7,433,500		(11,025,674	)
Payments and settlements		7,532,335		3,417,572
Financial agent services		3,892,102		3,471,283
Asset management		5,009,943		4,109,048
Retail brokerage		17,838		12,038

Capital Adequacy

ITAÚ UNIBANCO HOLDING CONSOLIDATED, through the ICAAP, assesses the adequacy of its capital to face the incurred risks, for ICAAP, capital is composed by regulatory capital for credit, market and operational risks and by the necessary capital to face other risks.

In order to ensure the soundness of ITAÚ UNIBANCO HOLDING CONSOLIDATED and the availability of capital to support business growth, 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)	12/31/2017		12/31/2016
Tier I		122,453,327		115,940,337
Common Equity Tier I		122,396,265		115,407,945
Additional Tier I Capital		57,062		532,392
Tier II		19,798,646		23,536,939
Deductions		-		-
Reference Equity		142,251,973		139,477,276
Minimum Referential Equity Required		69,995,465		72,210,000
Surplus Capital in relation to the Minimum Referential Equity Required		72,256,508		67,267,276
Additional Common Equity Tier I Required (ACP_Required)		11,350,616		4,570,253
Reference equity calculated for covering the interest rate risk of operations not classified in the trading portfolio (RBAN)		2,469,835		2,264,123

The table below shows the Basel and Fixed Asset Ratios:

	12/31/2017			12/31/2016
Basel Ratio		18.8	%		19.1	%
Tier I		16.2	%		15.9	%
Common Equity Tier I		16.2	%		15.8	%
Additional Tier I Capital		0.0	%		0.1	%
Tier II		2.6	%		3.2	%
Fixed Asset Ratio		23.9	%		25.4	%
Surplus Capital in Relation to Fixed Assets		37,101,323			34,297,512

Capital for insurance activity

In December 2017, the National Council of Private Insurance (CNSP) issued CNSP Resolution nº. 360, which, among other things, addresses the minimum capital requirements for underwriting, credit, operational and market risks for insurers, open private pension entities, capitalization companies and reinsurers.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 4 – Summary of the main accounting practices

Cash and cash equivalents - For the purposes of the Consolidated Statement of Cash Flows, this item includes cash and current accounts in banks (considered in the heading Cash and cash equivalents), interbank deposits and securities purchased under agreements to resell – funded positions that have original maturities of up to 90 days.

Interbank investments, remunerated restricted credits – Brazilian Central Bank, remunerated deposits, deposits received under securities repurchase agreements, funds from acceptance and issuance of securities, borrowing and onlending, subordinated debt and other receivables and payables – Operations with fixed remuneration and charges are accounted for at present value. Operations with post-fixed or floating remuneration and charges are accounted for at the adjusted principal amount. Operations subject to foreign exchange variation are accounted for at the corresponding amount in local currency. Liabilities are presented net of the transaction costs incurred, when relevant, calculated pro rate die.

Securities - Recorded at the cost of acquisition restated by the index and/or effective interest rate and presented in the Balance Sheet, according to BACEN Circular nº. 3,068, of November 8, 2001. Securities are classified into the following categories:

Trading securities – securities acquired to be actively and frequently traded, and adjusted to market value, with a counter-entry to the results for the period;

Available-for-sale securities – securities that can be negotiated but are not acquired for the purposes of active and frequent trading. They are adjusted to their market value, with a counter-entry to an account disclosed in stockholders’ equity;

Held-to-maturity securities – securities, except for non-redeemable shares, which the bank has the financial condition and intend, or is required to hold in the portfolio to maturity, are recorded at the cost of acquisition, or market value, whenever these are transferred from another category. The securities are adjusted using the accrual method through maturity, and are not adjusted to market value.

Gains and losses on available-for-sale securities, when realized, are recognized on the trade date in the statement of income, with a counter-entry to a specific stockholders’ equity account.

Decreases in the market value of available-for-sale and held-to-maturity securities below their related costs, resulting from non-temporary causes, are recorded in the results as realized losses.

Derivative financial instruments - these are classified on the date of their acquisition, according to whether or not management intends to use them either as a hedge, according to BACEN Circular nº. 3,082, of January 30, 2002. Transactions involving financial instruments, carried out at the client’s request, on their own account, or which do not comply with the hedging criteria (mainly derivatives used to manage the overall risk exposure), are stated at market value, including realized and unrealized gains and losses, which are recorded directly in the statement of income.

The derivatives that are used for protection against risk exposure or to modify the characteristics of financial assets and liabilities, which have changes in market value closely related with those of the items being protected at the beginning and throughout the duration of the contract, and which are found to be effective reducing the risk related to the exposure being protected against, are classified as hedges, in accordance with their nature:

Market Risk Hedge – financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value, plus realized and unrealized gains and losses, which are recorded directly in the statement of income.

Cash Flow Hedge - the effective amounts of the hedge of financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value plus realized and unrealized gains and losses, net of tax effects, when applicable, and recorded in a specific account in stockholders’ equity. The ineffective portion is recorded directly in the statement of income.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Net Investment Hedge of Foreign Operations - accounted for similarly to cash flow hedge, i.e. the portion of gains or losses on a hedging instrument that is determined to be an effective hedge is recognized in stockholders’ equity, and reclassified to income for the period in the event of the disposal of the foreign operation. The ineffective portion is recognized in income for the period.

Loan, lease and other credit operations (operations with credit granting characteristics) – These transactions are recorded at present value and calculated pro rata die based on the variation of the contracted index and interest rate, and are recorded on basis until the 60th day overdue in financial companies, according to the estimates of receipt. After the 60th day, income is recognized upon the effective receipt of installments. Credit card operations include receivables arising from the purchases made by cardholders. Funds corresponding to these amounts to be paid to the accrediting organization are in liabilities, in the heading Interbank Accounts – Receipts and Payments Pending Settlement.

Allowance for loan losses - the balance of the allowance for loan losses was recorded based on a credit risk analysis, at an amount considered sufficient to cover loan losses in accordance with the rules determined by CMN Resolution nº. 2,682 of December 21, 1999, which are as follows are:

Provisions are recorded from the date on which loans are granted, based on the client’s risk rating and on the periodic quality evaluation of clients and industries, and not only in the event of default;

Taking into account default exclusively, the write-off as losses occurs 360 days after the credits have matured or after 540 days for operations that mature after a period of 36 months.

The criterion adopted for recognition of a provision for Financial Guarantees pledged was based on the Expected Loss model.

Other assets - these assets are mainly comprised of assets held for sale relating to real estate available for sale, own real estate not in use and real estate received as payment in kind, which are adjusted to market value through a provision, according to current regulations, unearned reinsurance premiums (Note 4m I); and prepaid expenses, corresponding to disbursements, the benefits of which will be felt in future exercises.

From January 1st, 2015, ITAÚ UNIBANCO HOLDING CONSOLIDATED has adopted the option provided in BACEN Circular nº. 3,693, of December 20, 2013, which establishes accounting procedures for the compensation of local correspondents in connection with credit origination. These compensation amounts for local correspondents in connection with transactions originated after January 1st, 2017 will be fully recorded as expenses for the period.

Investments – investments in subsidiary and affiliated companies are accounted for based on the equity method. The consolidated financial statements of foreign branches and subsidiaries are adapted to comply with Brazilian accounting practices and converted into Reais. Other investments are recorded at cost and adjusted to market value by making a provision in accordance with current standards.

Fixed assets - As provided for in CMN Resolution nº. 4,535, of November 24, 2016, these correspond to proprietary tangible assets and leasehold improvements, provided that they were used to carry out the company`s activities for a period of time longer than one year, and they should be recorded at fair value and adjusted for impairment, if applicable. Fair value comprises the purchase or construction price on demand, plus any import taxes and taxes not recoverable upon purchase, directly attributable costs required for the operation, and the initial estimate of costs of disassembling and removal of the asset and restoration of the place it is located, if the institution agrees to bear such costs at the asset purchase date. Monthly recognized depreciation takes into account the systematic allocation of the depreciated amount over the useful life of the asset.

Goodwill – corresponds to the amount paid in excess for the purchase of investments and is amortized based on expected future profitability or as realized. It is tested semiannually for impairment.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Intangible assets – Corresponds to non-monetary assets identified as intangible, purchased or developed by ITAÚ UNIBANCO HOLDING CONSOLIDATED, intended to be held by the company or exercised with that purpose, as provided for by CMN Resolution nº. 4,534, of November 24, 2016. It is composed of:

(i)

The goodwill amount paid on the acquisition of the company, transferred to intangible assets in view of the transfer of the acquirer’s equity by the acquired, as set forth by Law nº. 9,532, of December 10, 1997, to be amortized based on the period defined in the appraisal reports;

(ii)

Usage rights and rights acquired to credit payrolls and partnership agreements, amortized over the terms of the contracts or to the extent that the economic benefits flow to the company; and

(iii)

Software and customer portfolios, amortized over terms varying from five to ten years.

Impairment of assets – a loss is recognized when there is clear evidence that assets are stated at a non-recoverable value. This procedure is adopted semiannually.

Insurance, pension plan and capitalization operations - insurance premiums, accepted coinsurances and selling expenses are accounted for by issuing an insurance policy or in accordance with the insurance effectiveness term, through the recognition and reversal of the provision for unearned premiums and deferred selling expenses. Interest arising from insurance premiums installments is accounted for as incurred. Revenues from social security contributions, gross revenue from premium bonds and respective technical provisions are recognized upon receipt.

I -

Credits from operations and other assets related to insurance and reinsurance operations:

Insurance premiums receivable - Refer to installments of insurance premiums receivable, current and past due, in accordance with insurance policies issued;

Reinsurance recoverable amounts – Refer to claims paid to the insured party while recovery of these paid amounts is pending from the Reinsurer, installments of unsettled claims and incurred but not reported claims - Reinsurance, classified in assets in accordance with the criteria established by CNSP and SUSEP legislation in force;

Unearned reinsurance premiums – Recognized to determine the portion of unearned reinsurance premiums, calculated pro rata die, and for risks of policies not issued computed based on estimates, based on the actuarial technical study and in compliance with the criteria established by CNSP and SUSEP legislation in force.

II -

The technical provisions for insurance, pension plan and capitalization are recognized in accordance with the technical notes approved by SUSEP and the criteria established by the current legislation.

II.I-

Insurance and pension plan:

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 to 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;

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;

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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 – recognized to ensure the amounts intended for the distribution of a financial surplus, in accordance with the regulations in force, in the event that it is stated in the agreement. Corresponds to the financial income exceeding the minimum return guaranteed in the product;

Supplemental Coverage Reserve - Recognized when technical reserves are found to be insufficient, as shown by the Liability Adequacy Test, which follows specific provisions in the prevailing regulation. ITAÚ UNIBANCO HOLDING CONSOLIDATED deducts the portion corresponding to the difference between the fair value and the carrying amount, at the base date, from securities pledged as collateral of technical reserves, classified in “Held-to-maturity securities”, up to the limit of the amount determined;

Provision for redemptions and other amounts to be regularize – includes amounts related to redemptions to regularize, returns on premiums or funds, transfers requested but, for any reason, not yet transferred to the insurance company or open private pension entity beneficiary, and where premiums have been received but not quoted;

Provision for related expenses - recognized for the coverage of expected amounts related to expenses on benefits and indemnities, due to events which have occurred and will occur.

II.II - Capitalization:

Mathematical provision for capitalization – recognized until the event triggering the benefit occurs, and comprised of the portion of the amounts collected for capitalization. It includes monetary restatement and interest, from the beginning of the validity date;

Provision for redemption – recognized from the date of the event triggering the redemption of the certificate and/or the event triggering the distribution of the bonus until the date of financial settlement, or the date on which the evidence of payment of the obligation is received;

Provision for raffles unrealized – comprises the portion of the amounts collected for raffles for each tickets, which have been funded but, at the recognition date, have not yet been realized;

Provision for raffles payable – recognized from the date when the raffle is drawn until the date of financial settlement, or the date when the evidence of payment of the obligation is received, or in conformity with other cases provided by law;

Supplementary provision for raffles – recognized to supplement the provision for raffles unrealized, and is used for coverage of possible shortfall related to the expected amount of raffles to be drawn;

Provision for administrative expenses - recognized for the coverage of the expected amounts of administrative expenses for the capitalization plans.

Contingent assets and liabilities and legal liabilities – tax and social security - assessed, recognized and disclosed according to the provisions set forth in CMN Resolution nº. 3,823 of December 16, 2009, and BACEN Circular Letter nº. 3,429 of February 11, 2010.

I -

Contingent assets and liabilities

Refer to potential rights and obligations arising from past events for which materialization depends on uncertain future events:

Contingent assets - not recognized, except where there is evidence of a high likelihood level of realization, usually represented by claims awarded a final and unappealable judgment and confirmation of the recoverability of the claim through receipt of amounts or through offsetting against another liability;

Contingent liabilities - basically arise from administrative proceedings and lawsuits inherent in the normal course of business filed by third parties, former employees and governmental bodies, in connection with civil, labor, tax and social security lawsuits and other risks. These contingencies are calculated on a conservative basis, usually recorded based on the opinion of legal advisors and considering the probability that financial resources shall be required to settle the obligation, the amount of which may be estimated with sufficient certainty. Contingencies are classified either as probable, for which provisions are recognized; possible, which are disclosed but not recognized; and remote, for which recognition or disclosure are not required. Any contingent amounts are measured through the use of models and criteria which allow adequate measurement, in spite of the uncertainty of their terms and amounts.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Escrow deposits are restated in accordance with the current legislation.

Contingencies guaranteed by indemnity clauses in privatization processes and with liquidity are only recognized upon judicial notification with the simultaneous recognition of receivables, without any effect on results.

II -

Legal liabilities – tax and social security

Represented by amounts payable related to tax liabilities, the legality or constitutionality of which are subject to judicial challenge, recognized at the full amount under discussion.

Liabilities and related escrow deposits are adjusted in accordance with the current legislation.

Provision for Financial Guarantees Provided – Recognized based on the expected loss model, in an amount sufficient to cover any probable losses over the whole guarantee period. As of January 1st, 2017, it is recorded in liabilities with a counter-entry to income for the period, in accordance with CMN Resolution nº. 4,512 of July 28, 2016. Any adjustments arising from the initial application of said resolution were recorded with a counter-entry to Stockholders’ Equity.

Taxes - these provisions are calculated in accordance with current legislation at the rates shown below, using the respective calculation bases.

Income tax	15.00	%
Additional income tax	10.00	%
Social contribution ⁽¹⁾	20.00	%
PIS ⁽²⁾	0.65	%
COFINS ⁽²⁾	4.00	%
ISS up to	5.00	%

(1)

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%;

(2)

For non-financial subsidiaries that fall into the non-cumulative calculation system, the PIS rate is 1.65% and COFINS rate is 7.60%.

Deferred income – this refers to: (i) unexpired interest received in advance that is recognized in income as earned, and (ii) the negative goodwill on acquisition of investments arising from expected future losses, which has not been absorbed in the consolidation process.

Transactions with Non-Controlling Stockholders – Changes in ownership interest in subsidiaries, which do not result in loss of ownership control, are recorded as capital transactions, and any difference between the amount paid and the amount corresponding to the non-controlling stockholders is directly recorded in the Consolidated Stockholders` Equity.

Post-employments 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 the defined benefit obligations on the balance sheet date less the fair value of the plan assets. The defined benefit obligation is annually calculated by an independent actuarial consulting company using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated amount of future cash flows of benefit payments based on the Brazilian treasury long term securities denominated in Reais and with maturity periods similar to the term of the pension plan liabilities.

The following amounts are recognized in the consolidated statement of income:

current service cost is 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.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Actuarial gains and losses arise from the non-realization of the actuarial assumptions established in the latest actuarial evaluation as compared to those effectively carried out, as well as the effects of changes in these assumptions. Gains and losses are fully recognized in Equity Valuation adjustments.

Pension plans - defined contribution

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

Other post-employment benefit obligations

Certain companies that merged into ITAÚ UNIBANCO HOLDING CONSOLIDATED over the past few years were sponsors of post-employment healthcare benefit plans. ITAÚ UNIBANCO HOLDING CONSOLIDATED is contractually committed to maintaining these benefits over specific periods, as well as the benefits granted based on judicial rulings.

Similarly to the defined benefit pension plans, these obligations are assessed annually by independent and qualified actuaries, and the costs expected from these benefits are accrued during the length of service. Gains and losses arising from adjustments and changes in actuarial assumptions are debited from or credited to stockholders’ equity in Equity asset valuation adjustment in the period in which they occur.

Foreign currency translation

I -

Functional and presentation currency

The Consolidated financial statements of ITAÚ UNIBANCO HOLDING CONSOLIDATED are presented in Reais, which is its functional and presentation currency. For each subsidiary and investment in associates and joint ventures, ITAÚ UNIBANCO HOLDING CONSOLIDATED defined the functional currency, as provided for in CMN Resolution Nº 4,524, of September 29, 2016.

The assets and liabilities of subsidiaries 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.

Equity in the earnings of subsidiaries abroad is recognized as follows:

For those with functional currency equal to Real: Income for the period;

For those with functional currency different to Real:

Income for the period; Portion related to the subsidiary’s effective income; and

Stockholders’ equity: Portion related to foreign exchange adjustments arising from the translation process, net of tax effects.

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 securities and derivative financial instruments.

For subsidiaries abroad with functional currency equal to Real, any operations carried out in a currency other than their respective functional currencies will be translated at the foreign currency rates of the respective trial balance or balance sheet of ITAÚ UNIBANCO HOLDING CONSOLIDATED for monetary items, assets and liabilities recognized at fair or market value and for items not classified as monetary, provided that the subsidiary’s functional currency is equal to the Real. For other cases, operations are translated at the foreign exchange rate at the transaction date.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 5 - Cash and cash equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents of ITAÚ UNIBANCO HOLDING CONSOLIDATED are composed of the following:

	12/31/2017		12/31/2016
Cash and cash equivalents		18,749,350		18,541,972
Interbank deposits		15,325,989		13,358,010
Securities purchased under agreements to resell – Funded position		37,160,014		64,148,506
Total		71,235,353		96,048,488

In ITAÚ UNIBANCO HOLDING it is composed of the following:

	12/31/2017		12/31/2016
Cash and cash equivalents		625,811		797,340
Securities purchased under agreements to resell – Funded position		117,255		3,687,924
Total		743,066		4,485,264

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 6 - Interbank investments

	12/31/2017												12/31/2016
	0 - 30		31 - 180		181 - 365		Over 365		Total		%		Total		%
Money market		38,222,056		200,528,208		2,218		195,861		238,948,343		88.0		259,850,836		90.9
Funded position ⁽¹⁾		7,050,474		35,248,271		2,218		195,861		42,496,824		15.7		81,780,868		28.6
Financed position		29,050,600		129,853,208		-		-		158,903,808		58.5		140,302,847		49.1
With free movement		28,024,796		29,150,330		-		-		57,175,126		21.1		24,710,346		8.6
Without free movement		1,025,804		100,702,878		-		-		101,728,682		37.4		115,592,501		40.5
Short position		2,120,982		35,426,729		-		-		37,547,711		13.8		37,767,121		13.2
Money market – Assets Guaranteeing Technical Provisions - SUSEP (Note 11b)		2,961,533		295,793		-		-		3,257,326		1.2		3,497,198		1.2
Interbank deposits (2)		21,643,847		3,509,303		2,882,441		1,012,886		29,048,477		10.8		22,690,342		7.9
Total		62,827,436		204,333,304		2,884,659		1,208,747		271,254,146		100.0		286,038,376		100.0
% per maturity term		23.2		75.3		1.1		0.4		100.0
Total – 12/31/2016		213,106,859		67,855,488		3,575,842		1,500,187		286,038,376
% per maturity term		74.5		23.7		1.3		0.5		100.0

(1)

Includes R$ 3,663,907 (R$ 4,328,865 at 12/31/2016) related to money market with free movement, in which securities are restricted to guarantee transactions at the B3 S.A. - Brasil, Bolsa, Balcão (B3) and the Central Bank of Brazil (BACEN);

(2)

Includes R$ 6,689,341 related to Compulsory Deposits with Central Banks of other countries.

In ITAÚ UNIBANCO HOLDING the portfolio is composed of Money market – Funded position falling due in up to 30 days amounting to R$ 117,255 (R$ 3,687,924 at 12/31/2016), Interbank deposits with maturity of 31 to 180 days amounting to R$ 3,472,859 and over 365 days amounting to R$ 79,093,407 (R$ 64,722,877 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Note 7 – Securities and derivative financial instruments (assets and liabilities)

See below the composition by Securities and Derivatives type, maturity and portfolio already adjusted to their respective market values.

a) Summary per maturity

	12/31/2017																																12/31/2016
				Adjustment to market value
				reflected in:
	Cost			Results			Stockholders’ equity			Market value			%		0 - 30			31 - 90			91 - 180			181 - 365			366 - 720			Over 720 days			Market value

Government securities - domestic		161,850,455			516,522			1,175,863			163,542,840			36.7		13,578,052			2,979,060			3,430,271			15,260,335			14,122,446			114,172,676			127,212,235
Financial treasury bills		42,219,084			6,696			(113	)		42,225,667			9.5		-			2,956,622			-			1,170,468			962,433			37,136,144			31,799,929
National treasury bills		45,478,719			59,346			262,001			45,800,066			10.3		10,920,710			-			2,207,817			6,304,532			7,739,852			18,627,155			18,159,198
National treasury notes		47,584,909			312,430			581,794			48,479,133			10.9		2,644,870			16,910			19,273			7,768,209			2,488,205			35,541,666			44,399,872
National treasury/securitization		197,416			(220	)		22,457			219,653			0.0		-			89			13			161			227			219,163			229,284
Brazilian external debt bonds		26,370,327			138,270			309,724			26,818,321			6.0		12,472			5,439			1,203,168			16,965			2,931,729			22,648,548			32,623,952
Government securities - abroad		28,882,488			33,197			(117,440	)		28,798,245			6.4		2,966,727			1,610,683			2,611,354			6,795,147			4,132,756			10,681,578			18,664,428
Argentina		1,445,600			20,188			-			1,465,788			0.3		1,119,420			106,750			41,574			137,607			4,639			55,798			653,038
Chile		9,765,360			873			(3,936	)		9,762,297			2.2		148,429			427,992			-			1,153,481			114,741			7,917,654			5,971,132
Colombia		5,844,198			12,285			30,355			5,886,838			1.3		99,434			-			528,156			1,270,852			2,009,584			1,978,812			4,351,179
Korea		1,943,924			-			-			1,943,924			0.4		-			-			500,191			1,443,733			-			-			2,672,676
Denmark		1,950,784			-			-			1,950,784			0.4		955,547			-			502,719			492,518			-			-			818,891
Spain		2,937,143			-			1			2,937,144			0.7		245,489			162,418			-			1,534,944			994,293			-			922,918
United States		1,684,046			(5	)		(17,960	)		1,666,081			0.4		-			296,461			257,001			263,958			462,892			385,769			1,505,429
Netherlands		-			-			-			-			0.0		-			-			-			-			-			-			101,402
Mexico		564,375			(31	)		(15,108	)		549,236			0.1		-			163,396			380,564			-			-			5,276			5,257
Paraguay		1,921,430			-			(114,854	)		1,806,576			0.4		206,763			284,412			176,101			417,612			532,069			189,619			1,199,665
Uruguay		823,703			(136	)		4,070			827,637			0.2		191,645			169,254			225,048			80,442			14,509			146,739			455,098
Other		1,925			23			(8	)		1,940			0.0		-			-			-			-			29			1,911			7,743
Corporate securities		62,364,332			(127,767	)		(685,978	)		61,550,587			13.8		7,304,982			3,773,932			3,135,492			3,939,012			7,212,677			36,184,492			64,539,050
Shares		3,036,379			(205,775	)		286,582			3,117,186			0.7		3,117,186			-			-			-			-			-			2,399,724
Rural product note		2,858,205			-			(29,785	)		2,828,420			0.6		15,621			47,948			182,130			393,014			236,227			1,953,480			1,424,946
Bank deposit certificates		833,780			16			(42	)		833,754			0.3		305,370			184,319			231,628			82,227			13,536			16,674			3,122,820
Securitized real estate loans		14,650,806			(1,045	)		18,673			14,668,434			3.3		-			4,910			50,013			121,009			517,942			13,974,560			16,582,079
Fund quotas		3,149,225			831			10			3,150,066			0.7		3,150,066			-			-			-			-			-			864,129
Credit rights		196,944			-			-			196,944			0.0		196,944			-			-			-			-			-			88
Fixed income		1,231,399			2,476			10			1,233,885			0.3		1,233,885			-			-			-			-			-			704,418
Variable income		1,720,882			(1,645	)		-			1,719,237			0.4		1,719,237			-			-			-			-			-			159,623
Debentures		23,722,141			77,115			(990,628	)		22,808,628			5.1		101,024			303,180			604,942			605,165			3,971,413			17,222,904			22,592,014
Eurobonds and others		6,192,372			1,347			25,011			6,218,730			1.4		332,446			454,838			891,944			1,041,895			1,300,363			2,197,244			8,395,327
Financial bills		3,684,559			(117	)		222			3,684,664			0.8		83,137			625,626			667,393			1,333,598			622,084			352,826			5,853,824
Promissory notes		3,246,331			-			(2,398	)		3,243,933			0.7		-			2,088,965			398,601			162,780			549,579			44,008			2,173,593
Other		990,534			(139	)		6,377			996,772			0.2		200,132			64,146			108,841			199,324			1,533			422,796			1,130,594
PGBL / VGBL fund quotas ⁽¹⁾		169,177,514			-			-			169,177,514			38.0		169,177,514			-			-			-			-			-			142,080,715
Subtotal - securities		422,274,789			421,952			372,445			423,069,186			94.9		193,027,275			8,363,675			9,177,117			25,994,494			25,467,879			161,038,746			352,496,428
Trading securities		285,466,243			421,952			-			285,888,195			64.1		180,198,687			3,371,565			4,795,000			13,456,906			11,158,191			72,907,846			224,657,879
Available-for-sale securities		100,248,604			-			372,445			100,621,049			22.6		3,371,908			4,953,981			4,085,531			12,033,006			12,829,944			63,346,679			87,343,310
Held-to-maturity securities ⁽²⁾		36,559,942			-			-			36,559,942			8.2		9,456,680			38,129			296,586			504,582			1,479,744			24,784,221			40,495,239
Derivative financial instruments		16,017,042			6,664,292			-			22,681,334			5.1		7,799,974			1,635,998			1,354,234			2,359,125			2,770,116			6,761,887			24,390,295
Total securities and derivative financial instruments		438,291,831			7,086,244			372,445			445,750,520			100.0		200,827,249			9,999,673			10,531,351			28,353,619			28,237,995			167,800,633			376,886,723

Derivative financial instruments (liabilities)		(20,523,308	)		(5,929,308	)		-			(26,452,616	)		100.0		(7,286,502	)		(1,114,011	)		(1,374,000	)		(3,327,590	)		(4,889,109	)		(8,461,404	)		(24,711,326	)

(1)

The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a counter-entry to long term liabilities in Pension Plan Technical Provisions account (Note 11a);

(2)

Unrecorded adjustment to market value in the amount of R$ 1,231,971 (R$ 254,224 at 12/31/2016), according to Note 7e.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

b) Summary by portfolio

	12/31/2017
			Restricted to
											Derivative		Assets guaranteeing
			Repurchase				Pledged				financial		technical provisions
	Own portfolio		agreements		Free portfolio		guarantees (*)		Central Bank		instruments		(Note 11b)		Total
Government securities - domestic		83,185,988		44,008,854		14,373,903		9,033,216		4,084,787		-		8,856,092		163,542,840
Financial treasury bills		31,180,964		2,927,274		-		6,448,633		863,229		-		805,567		42,225,667
National treasury bills		25,246,388		20,553,678		-		-		-		-		-		45,800,066
National treasury notes		14,570,636		20,527,902		-		2,108,512		3,221,558		-		8,050,525		48,479,133
National treasury / Securitization		219,653		-		-		-		-		-		-		219,653
Brazilian external debt bonds		11,968,347		-		14,373,903		476,071		-		-		-		26,818,321
Government securities - abroad		23,494,675		214,974		33,928		5,054,668		-		-		-		28,798,245
Argentina		1,279,578		165,683		-		20,527		-		-		-		1,465,788
Chile		9,739,938		12,337		-		10,022		-		-		-		9,762,297
Colombia		3,754,621		-		33,928		2,098,289		-		-		-		5,886,838
Korea		939,083		-		-		1,004,841		-		-		-		1,943,924
Denmark		1,254,119		-		-		696,665		-		-		-		1,950,784
Spain		1,991,934		-		-		945,210		-		-		-		2,937,144
United States		1,392,804		-		-		273,277		-		-		-		1,666,081
Mexico		549,236		-		-		-		-		-		-		549,236
Paraguay		1,765,005		36,954		-		4,617		-		-		-		1,806,576
Uruguay		826,417		-		-		1,220		-		-		-		827,637
Other		1,940		-		-		-		-		-		-		1,940
Corporate securities		47,835,849		6,386,636		506,380		3,847,373		-		-		2,974,349		61,550,587
Shares		3,117,108		-		-		78		-		-		-		3,117,186
Rural product note		2,828,420		-		-		-		-		-		-		2,828,420
Bank deposit certificates		822,228		-		-		20		-		-		11,506		833,754
Securitized real estate loans		14,668,434		-		-		-		-		-		-		14,668,434
Fund quotas		2,931,431		-		-		103,857		-		-		114,778		3,150,066
Credit rights		196,944		-		-		-		-		-		-		196,944
Fixed income		1,015,250		-		-		103,857		-		-		114,778		1,233,885
Variable income		1,719,237		-		-		-		-		-		-		1,719,237
Debentures		12,152,880		6,386,636		-		3,736,448		-		-		532,664		22,808,628
Eurobonds and other		5,705,380		-		506,380		6,970		-		-		-		6,218,730
Financial bills		1,398,621		-		-		-		-		-		2,286,043		3,684,664
Promissory notes		3,243,933		-		-		-		-		-		-		3,243,933
Other		967,414		-		-		-		-		-		29,358		996,772
PGBL / VGBL fund quotas		-		-		-		-		-		-		169,177,514		169,177,514
Subtotal - securities		154,516,512		50,610,464		14,914,211		17,935,257		4,084,787		-		181,007,955		423,069,186
Trading securities		70,485,653		29,310,267		1,569,697		8,178,371		3,386,777		-		172,957,430		285,888,195
Available-for-sale securities		51,302,896		21,300,197		12,370,328		9,756,881		698,010		-		5,192,737		100,621,049
Held-to-maturity securities		32,727,963		-		974,186		5		-		-		2,857,788		36,559,942
Derivative financial instruments		-		-		-		-		-		22,681,334		-		22,681,334
Total securities and derivative financial instruments (assets)		154,516,512		50,610,464		14,914,211		17,935,257		4,084,787		22,681,334		181,007,955		445,750,520
Total securities and derivative financial instruments (assets) – 12/31/2016		130,686,296		31,042,163		20,283,694		12,699,194		4,454,448		24,390,295		153,330,633		376,886,723

(*) Represent securities deposited with Contingent Liabilities (Note 12d), Stock Exchanges and the Clearing House for the Custody and Financial Settlement of Securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Trading securities

See below the composition of the portfolio of trading securities by type, stated at cost and market value and by maturity term.

	12/31/2017																					12/31/2016
			Adjustment
			to market
			value (in																	Over 720
	Cost		results)			Market value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		days		Market value
Government securities - domestic		101,024,819		516,522			101,541,341		35.6		4,420,943		2,626,289		3,430,231		11,689,935		9,072,553		70,301,390		70,230,073
Financial treasury bills		41,644,718		6,696			41,651,414		14.7		-		2,603,851		-		1,170,468		962,433		36,914,662		30,723,755
National treasury bills		26,764,626		59,346			26,823,972		9.4		1,763,601		-		2,207,817		3,185,729		4,890,977		14,775,848		6,097,007
National treasury notes		27,796,443		312,430			28,108,873		9.8		2,644,870		16,910		19,233		7,316,612		2,174,378		15,936,870		26,891,643
National treasury / Securitization		872		(220	)		652		0.0		-		89		13		161		227		162		1,154
Brazilian external debt bonds		4,818,160		138,270			4,956,430		1.7		12,472		5,439		1,203,168		16,965		1,044,538		2,673,848		6,516,514
Government securities - abroad		3,912,008		33,197			3,945,205		1.3		1,210,574		150,470		446,845		721,317		1,065,055		350,944		3,653,169
Argentina		1,445,600		20,188			1,465,788		0.5		1,119,420		106,750		41,574		137,607		4,639		55,798		652,825
Chile		50,462		873			51,335		0.0		1,635		2,157		-		1,479		6,109		39,955		126,873
Colombia		2,080,408		12,285			2,092,693		0.7		-		-		353,509		544,242		954,755		240,187		2,669,494
United States		99,528		(5	)		99,523		0.0		-		-		-		-		99,523		-		78,409
Mexico		5,307		(31	)		5,276		0.0		-		-		-		-		-		5,276		5,257
Paraguay		6,497		-			6,497		0.0		-		-		-		-		-		6,497		87,910
Uruguay		222,492		(136	)		222,356		0.1		89,519		41,563		51,762		37,989		-		1,523		31,579
Other		1,714		23			1,737		0.0		-		-		-		-		29		1,708		822
Corporate securities		11,351,902		(127,767	)		11,224,135		3.9		5,389,656		594,806		917,924		1,045,654		1,020,583		2,255,512		8,693,922
Shares		2,643,354		(205,775	)		2,437,579		0.9		2,437,579		-		-		-		-		-		1,947,656
Bank deposit certificates		30,633		16			30,649		0.0		-		16		1,331		15,282		-		14,020		482,308
Securitized real estate loans		66,218		(1,045	)		65,173		0.0		-		-		-		-		-		65,173		-
Fund quotas		2,848,521		831			2,849,352		1.0		2,849,352		-		-		-		-		-		822,887
Credit rights		196,944		-			196,944		0.1		196,944		-		-		-		-		-		87
Fixed income		930,695		2,476			933,171		0.3		933,171		-		-		-		-		-		663,416
Variable income		1,720,882		(1,645	)		1,719,237		0.6		1,719,237		-		-		-		-		-		159,384
Debentures		1,978,318		77,115			2,055,433		0.7		1,038		-		218,592		114,724		428,153		1,292,926		1,409,782
Eurobonds and other		632,764		1,347			634,111		0.2		18,550		725		30,608		34,356		104,277		445,595		662,376
Financial bills		3,065,305		(117	)		3,065,188		1.1		83,137		594,065		667,393		881,147		486,620		352,826		3,037,906
Others		86,789		(139	)		86,650		0.0		-		-		-		145		1,533		84,972		331,007
PGBL / VGBL fund quotas		169,177,514		-			169,177,514		59.2		169,177,514		-		-		-		-		-		142,080,715
Total		285,466,243		421,952			285,888,195		100.0		180,198,687		3,371,565		4,795,000		13,456,906		11,158,191		72,907,846		224,657,879
% per maturity term											63.0		1.2		1.7		4.7		3.9		25.5
Total – 12/31/2016		224,188,838		469,041			224,657,879		100.0		146,322,645		1,902,368		4,600,436		4,810,970		8,698,169		58,323,291
% per maturity term											65.2		0.8		2.0		2.1		3.9		26.0

At 12/31/2017, ITAÚ UNIBANCO HOLDING’s portfolio is composed of Fund quotas fixed income R$ 5,463 without maturity (R$ 4,819 of 12/31/2016), Financial treasury bills income R$ 8,321,778 over 365 days and National treasury bills income R$ 12,267,560 over 365 days.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

Available-for-sale securities

See below the composition of the portfolio of available-for-sale securities by type, stated at cost and market value and by maturity term.

	12/31/2017																					12/31/2016
			Adjustments to
			market value (in
			stockholders'
	Cost		equity)			Market value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		Over 720 days		Market value
Government securities - domestic		38,101,454		1,175,863			39,277,317		39.1		-		352,771		40		3,570,400		4,088,091		31,266,015		32,002,911
Financial treasury bills		574,366		(113	)		574,253		0.6		-		352,771		-		-		-		221,482		1,076,174
National treasury bills		9,556,984		262,001			9,818,985		9.8		-		-		-		3,118,803		2,848,875		3,851,307		3,754,465
National treasury notes		15,294,263		581,794			15,876,057		15.8		-		-		40		451,597		313,827		15,110,593		12,878,969
National treasury / Securitization		196,544		22,457			219,001		0.2		-		-		-		-		-		219,001		228,130
Brazilian external debt bonds		12,479,297		309,724			12,789,021		12.7		-		-		-		-		925,389		11,863,632		14,065,173
Government securities - abroad		24,510,089		(117,440	)		24,392,649		24.2		1,656,719		1,460,213		2,000,734		5,889,436		3,067,701		10,317,846		14,472,607
Argentina		-		-			-		0.0		-		-		-		-		-		-		213
Chile		9,714,898		(3,936	)		9,710,962		9.7		146,794		425,835		-		1,152,002		108,632		7,877,699		5,844,259
Colombia		3,316,187		30,355			3,346,542		3.3		-		-		10,872		542,216		1,054,829		1,738,625		1,155,564
Korea		1,943,924		-			1,943,924		1.9		-		-		500,191		1,443,733		-		-		2,672,676
Denmark		1,950,784		-			1,950,784		1.9		955,547		-		502,719		492,518		-		-		818,891
Spain		2,937,143		1			2,937,144		2.9		245,489		162,418		-		1,534,944		994,293		-		922,918
United States		1,584,518		(17,960	)		1,566,558		1.6		-		296,461		257,001		263,958		363,369		385,769		1,427,020
Netherlands		-		-			-		0.0		-		-		-		-		-		-		101,402
Mexico		559,068		(15,108	)		543,960		0.5		-		163,396		380,564		-		-		-		-
Paraguay		1,914,933		(114,854	)		1,800,079		1.8		206,763		284,412		176,101		417,612		532,069		183,122		1,111,755
Uruguay		588,448		4,070			592,518		0.6		102,126		127,691		173,286		42,453		14,509		132,453		411,011
Other		186		(8	)		178		0.0		-		-		-		-		-		178		6,898
Corporate securities		37,637,061		(685,978	)		36,951,083		36.7		1,715,189		3,140,997		2,084,757		2,573,170		5,674,152		21,762,818		40,867,792
Shares		393,025		286,582			679,607		0.7		679,607		-		-		-		-		-		452,068
Rural product note		2,858,205		(29,785	)		2,828,420		2.8		15,621		47,948		182,130		393,014		236,227		1,953,480		1,424,946
Bank deposit certificate		803,142		(42	)		803,100		0.8		305,365		184,303		230,297		66,945		13,536		2,654		2,640,508
Securitized real estate loans		1,742,777		18,673			1,761,450		1.8		-		-		-		-		-		1,761,450		2,094,890
Fund quotas		300,704		10			300,714		0.3		300,714		-		-		-		-		-		41,242
Credit rights		-		-			-		0.0		-		-		-		-		-		-		1
Fixed income		300,704		10			300,714		0.3		300,714		-		-		-		-		-		41,002
Variable income		-		-			-		0.0		-		-		-		-		-		-		239
Debentures		21,735,778		(990,628	)		20,745,150		20.6		99,986		303,180		386,350		490,441		3,543,260		15,921,933		21,169,978
Eurobonds and other		5,550,630		25,011			5,575,641		5.5		313,896		454,113		861,336		1,007,539		1,196,086		1,742,671		7,714,880
Financial bills		619,254		222			619,476		0.6		-		31,561		-		452,451		135,464		-		2,815,918
Promissory notes		3,246,331		(2,398	)		3,243,933		3.2		-		2,088,965		398,601		162,780		549,579		44,008		2,173,593
Other		387,215		6,377			393,592		0.4		-		30,927		26,043		-		-		336,622		339,769
Total		100,248,604		372,445			100,621,049		100.0		3,371,908		4,953,981		4,085,531		12,033,006		12,829,944		63,346,679		87,343,310
% per maturity term											3.4		4.9		4.1		12.0		12.7		62.9
Total – 12/31/2016		88,177,290		(833,980	)		87,343,310		100.0		5,060,201		5,412,894		5,125,796		7,103,264		10,751,749		53,889,406
% per maturity term											5.8		6.2		5.9		8.1		12.3		61.7

At December 31, 2017, at ITAÚ UNIBANCO HOLDING the portfolio is composed of Eurobonds, in the amount of R$ 2,297 over 365 days (R$ 1,443 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

100

Held-to-maturity securities

See below the composition of the portfolio of held-to-maturity securities by type, stated at cost and by maturity term. Included in the carrying value at 12/31/2017, not considered in results, is an impairment loss of R$ 405,111 (R$ 493,127 at 12/31/2016).

	12/31/2017																		12/31/2016
																			Carrying
	Carrying value		%		0 - 30		31 - 90		91 - 180		181 - 365		366 - 720		Over 720 days		Market value		value		Market value
Government securities - domestic ^(*)		22,724,182		62.2		9,157,109		-		-		-		961,802		12,605,271		23,670,416		24,979,251		25,319,547
National treasury bills		9,157,109		25.1		9,157,109		-		-		-		-		-		9,157,562		8,307,726		8,368,521
National treasury notes		4,494,203		12.3		-		-		-		-		-		4,494,203		5,130,131		4,629,260		5,064,744
Brazilian external debt bonds		9,072,870		24.8		-		-		-		-		961,802		8,111,068		9,382,723		12,042,265		11,886,282
Government securities - abroad		460,391		1.2		99,434		-		163,775		184,394		-		12,788		459,242		538,652		538,524
Colombia		447,603		1.2		99,434		-		163,775		184,394		-		-		439,664		526,121		526,009
Uruguay		12,763		0.0		-		-		-		-		-		12,763		19,577		12,508		12,508
Other		25		0.0		-		-		-		-		-		25		1		23		7
Corporate securities		13,375,369		36.6		200,137		38,129		132,811		320,188		517,942		12,166,162		13,662,255		14,977,336		14,891,392
Bank deposit certificate		5		0.0		5		-		-		-		-		-		5		4		4
Securitized real estate loans		12,841,811		35.2		-		4,910		50,013		121,009		517,942		12,147,937		13,128,697		14,487,189		14,401,319
Debentures		8,045		0.0		-		-		-		-		-		8,045		8,045		12,254		12,254
Eurobonds and other		8,978		0.0		-		-		-		-		-		8,978		8,978		18,071		17,998
Other		516,530		1.4		200,132		33,219		82,798		199,179		-		1,202		516,530		459,818		459,817
Total		36,559,942		100.0		9,456,680		38,129		296,586		504,582		1,479,744		24,784,221		37,791,913		40,495,239		40,749,463
% per maturity term						25.9		0.1		0.8		1.4		4.0		67.8
Total – 12/31/2016		40,495,239		100.0		1,369,798		65,224		463,433		599,953		8,615,792		29,381,039
% per maturity term						3.4		0.2		1.1		1.5		21.3		72.5

(*)

Includes investments of Itaú Vida e Previdência S.A. in the amount of R$ 2,697,822 (R$ 2,774,118 at 12/31/2016).

Reclassification of securities

No reclassification was made in the period.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

101

g) Derivative financial instruments

The globalization of the markets in recent years has resulted in a high level of sophistication of financial products used. As a result of this process, there has been increasing demand for derivative financial instruments to manage market risks, mainly arising from fluctuations in interest and exchange rates, commodities and other asset prices. Accordingly, ITAÚ UNIBANCO HOLDING CONSOLIDATED operate in the derivatives markets for meeting the growing needs of their clients, as well as enacting their risk management policy. This policy is based on the use of derivative instruments to minimize the risks resulting from commercial and financial operations.

The derivative financial instrument business with clients is carried out after the approval of credit limits. The process of limit approval takes into consideration potential stress scenarios.

Knowing the client, the sector in which it operates and its risk appetite profile, in addition to providing information on the risks involved in the transaction and the negotiated conditions, ensures transparency in the relationship between the parties and the supply of a product that better meets the needs of the client.

The derivative transactions carried out by ITAÚ UNIBANCO HOLDING CONSOLIDATED with clients are neutralized in order to eliminate market risks.

The derivative contracts traded by the institution with clients in Brazil include swaps, forwards, options and futures contracts, which are registered at the B3 or at the CETIP S.A. OTC Clearing House (CETIP). Overseas transactions are carried out with futures, forwards (onshore), options and swaps mostly listed on the Chicago, New York and London Exchanges. It should be emphasized that there are over-the-counter operations, but their risks are low compared to the institutions’ total. Noteworthy is also the fact that there are no structured operations based on subprime assets and all operations are based on risk factors traded on stock exchanges.

The main risk factors of the derivatives, assumed at 12/31/2017, were related to the foreign exchange rate, interest rate, commodities, US Dollar coupon, Reference Rate coupon, LIBOR and variable income. The management of these and other market risk factors is supported by sophisticated statistical and deterministic models. Based on this management model, the institution, through the use of transactions involving derivatives, has been able to optimize the risk-return ratios, even in highly volatile situations.

Most derivatives included in the institution’s portfolio are traded on stock exchanges. The prices disclosed by stock exchanges are used for these derivatives, except in cases in which the low representativeness of price due to the liquidity of a specific contract is identified. Derivatives typically valued in this way are futures contracts. Likewise, there are other instruments whose quotations (fair prices) are directly disclosed by independent institutions and which are valued based on this direct information. A substantial portion of the Brazilian government securities, highly-liquid international (public and private) securities and shares are in this situation.

For derivatives the prices of which are not directly disclosed by stock exchanges, fair prices are obtained based on pricing models which use market information, deducted based on the prices disclosed for higher liquidity assets. Interest and market volatility curves which provide input for the models are extracted from those prices. Over- the-counter derivatives, forward contracts and securities with limited liquidity are in this situation.

The total value of margins pledged in guarantee was R$ 13,436,262 (R$ 8,182,959 at 12/31/2016) and was basically composed of government securities.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

102

I - Derivatives by index

					Balance sheet
					account receivable /			Adjustment to market
	Memorandum account /				(received) (payable) /			value (in results /
	Notional amount				Paid			stockholders' equity)			Market value
	12/31/2017		12/31/2016		12/31/2017			12/31/2017			12/31/2017			12/31/2016
Futures contracts ^(*)		607,980,857		666,925,865		8,631			149,083			157,714			127,321
Purchase commitments		323,102,637		200,751,008		(3,129	)		136,147			133,018			(150,191	)
Commodities		186,955		146,587		80			-			80			(76	)
Indexes		109,501,694		47,294,724		(33,557	)		(16,362	)		(49,919	)		(209,133	)
Interbank market		166,832,716		109,648,661		30,108			(5	)		30,103			598
Foreign currency		28,514,305		31,140,699		246			152,514			152,760			58,438
Securities		18,066,967		12,520,337		(6	)		-			(6	)		(18	)
Commitments to sell		284,878,220		466,174,857		11,760			12,936			24,696			277,512
Commodities		167,727		283,761		62			-			62			116
Indexes		128,147,232		169,929,542		66,741			10,579			77,320			304,980
Interbank market		118,185,736		213,990,955		(55,801	)		(55	)		(55,856	)		(10,346	)
Foreign currency		26,645,554		70,719,481		547			360			907			(18,916	)
Fixed rates		505,462		941,228		-			2,052			2,052			1,618
Securities		11,218,348		10,274,881		216			-			216			46
Other		8,161		35,009		(5	)		-			(5	)		14
Swap contracts						(4,770,070	)		267,588			(4,502,482	)		(2,682,041	)
Asset position		585,570,412		471,217,226		3,626,838			5,558,926			9,185,764			10,538,412
Commodities		-		4,876		-			-			-			-
Indexes		228,406,427		196,504,724		(1,131,827	)		2,594,448			1,462,621			1,249,598
Interbank market		48,748,551		47,207,693		666,845			(72,413	)		594,432			1,902,270
Foreign currency		10,144,646		13,582,212		692,650			244,730			937,380			1,134,349
Fixed rates		253,853,606		175,608,268		3,446,995			1,656,107			5,103,102			4,801,875
Floating rate		44,399,804		38,261,711		(47,887	)		1,135,187			1,087,300			1,449,630
Securities		3,907		11,692		(16	)		840			824			67
Other		13,471		36,050		78			27			105			623
Liability position		590,340,482		475,665,372		(8,396,908	)		(5,291,338	)		(13,688,246	)		(13,220,453	)
Commodities		-		130,997		-			-			-			(665	)
Indexes		197,593,422		147,559,241		(428,430	)		(4,140,548	)		(4,568,978	)		(4,843,674	)
Interbank market		38,398,031		36,553,953		(292,695	)		14,852			(277,843	)		(395,928	)
Foreign currency		19,289,089		21,156,496		(596,149	)		(11,508	)		(607,657	)		(897,289	)
Fixed rates		292,333,203		233,779,126		(7,042,989	)		54,222			(6,988,767	)		(5,730,430	)
Floating rate		42,689,590		36,436,802		(36,162	)		(1,208,414	)		(1,244,576	)		(1,343,520	)
Securities		-		20,439		-			-			-			(8,947	)
Other		37,147		28,318		(483	)		58			(425	)		-
Option contracts		1,847,811,311		583,508,084		449,009			97,662			546,671			233,930
Purchase commitments - long position		245,495,975		163,049,195		1,253,362			394,663			1,648,025			858,304
Commodities		366,995		403,770		11,124			18,174			29,298			17,478
Indexes		178,840,030		99,977,560		294,996			(25,963	)		269,033			102,657
Interbank market		26,483,535		1,247,053		37,293			11,403			48,696			21,266
Foreign currency		31,818,481		45,106,313		647,366			(200,509	)		446,857			369,495
Fixed rates		19,762		10,853		-			44			44			33
Securities		7,883,243		16,235,000		253,595			571,901			825,496			330,917
Other		83,929		68,646		8,988			19,613			28,601			16,458
Commitments to sell - long position		736,857,386		142,235,215		1,456,832			232,540			1,689,372			3,928,887
Commodities		269,075		162,059		4,154			(563	)		3,591			9,512
Indexes		691,934,493		92,088,848		495,191			241,268			736,459			97,628
Interbank market		11,622,576		7,532,801		20,543			95,887			116,430			4,347
Foreign currency		24,134,040		33,078,333		678,943			(150,422	)		528,521			3,449,330
Fixed rates		129,376		145,388		6,071			(4,597	)		1,474			3,388
Securities		8,753,337		9,210,578		251,621			51,223			302,844			364,344
Other		14,489		17,208		309			(256	)		53			338
Purchase commitments - short position		88,688,150		129,390,585		(1,007,058	)		(227,013	)		(1,234,071	)		(954,200	)
Commodities		278,051		238,865		(6,414	)		(13,683	)		(20,097	)		(11,131	)
Indexes		30,554,463		83,282,920		(167,956	)		21,647			(146,309	)		(132,156	)
Interbank market		23,573,956		94,534		(31,351	)		31,226			(125	)		(84	)
Foreign currency		27,773,537		39,899,641		(719,248	)		247,077			(472,171	)		(570,227	)
Fixed rates		77,441		94,221		-			(163	)		(163	)		(238	)
Securities		6,346,773		5,598,811		(73,101	)		(493,504	)		(566,605	)		(222,684	)
Other		83,929		181,593		(8,988	)		(19,613	)		(28,601	)		(17,680	)
Commitments to sell - short position		776,769,800		148,833,089		(1,254,127	)		(302,528	)		(1,556,655	)		(3,599,061	)
Commodities		222,029		268,426		(8,125	)		3,765			(4,360	)		(20,030	)
Indexes		737,941,726		104,268,293		(505,450	)		(248,794	)		(754,244	)		(85,866	)
Interbank market		8,721,647		3,437,552		(18,397	)		(85,672	)		(104,069	)		(7,702	)
Foreign currency		23,832,732		34,132,406		(548,914	)		103,907			(445,007	)		(3,141,940	)
Fixed rates		40,768		28,452		(1,022	)		585			(437	)		(649	)
Securities		5,997,732		6,680,752		(171,910	)		(76,575	)		(248,485	)		(342,536	)
Other		13,166		17,208		(309	)		256			(53	)		(338	)
Forward contracts		9,954,221		13,428,559		754,533			(183	)		754,350			1,411,877
Purchases receivable		1,654,069		1,185,973		1,669,399			(251	)		1,669,148			1,186,199
Fixed rates		1,129,691		395,052		1,145,225			(274	)		1,144,951			400,863
Floating rate		499,214		546,396		499,010			322			499,332			546,509
Securities		25,164		244,525		25,164			(299	)		24,865			238,827
Purchases payable		-		-		(1,644,259	)		-			(1,644,259	)		(951,669	)
Fixed rates		-		-		(1,145,225	)		-			(1,145,225	)		(401,092	)
Floating rate		-		-		(499,010	)		-			(499,010	)		(545,956	)
Securities		-		-		(24	)		-			(24	)		(4,621	)
Sales receivable		737,424		8,138,165		5,049,345			964			5,050,309			3,735,407
Indexes		30,770		85		30,633			17			30,650			82
Interbank market		53		4,394,743		54			(1	)		53			7,593
Fixed rates		403		2,250,232		2,447,365			1			2,447,366			2,256,573
Floating rate		-		300,362		1,872,932			-			1,872,932			300,055
Securities		706,198		1,192,743		698,361			947			699,308			1,171,104
Sales deliverable		7,562,728		4,104,421		(4,319,952	)		(896	)		(4,320,848	)		(2,558,060	)
Interbank market		3,260,813		4,104,421		-			(259	)		(259	)		(1,608	)
Fixed rates		2,428,014		-		(2,446,970	)		326			(2,446,644	)		(2,256,207	)
Floating rate		1,873,851		-		(1,872,932	)		(964	)		(1,873,896	)		(300,245	)
Securities		50		-		(50	)		1			(49	)		-

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

103

					Balance sheet
					account receivable /			Adjustments to market
	Memorandum account				(received) (payable) /			value (in results /
	Notional amount				paid			stockholders' equity)			Market value
	12/31/2017		12/31/2016		12/31/2017			12/31/2017			12/31/2017			12/31/2016
Credit derivatives		10,110,254		12,099,966		(30,386	)		109,926			79,540			33,394
Asset position		5,831,392		5,307,193		37,416			100,237			137,653			179,658
Indexes		6,616		-		801			(8	)		793			-
Foreign currency		3,587,691		3,876,374		14,948			28,358			43,306			131,542
Fixed rate		89,316		114,069		140			1,884			2,024			1,327
Securities		1,743,841		1,161,288		19,892			59,096			78,988			42,211
Other		403,928		155,462		1,635			10,907			12,542			4,578
Liability position		4,278,862		6,792,773		(67,802	)		9,689			(58,113	)		(146,264	)
Indexes		760,840		-		(7,148	)		(1,415	)		(8,563	)		-
Foreign currency		2,581,894		5,486,694		(39,555	)		8,815			(30,740	)		(119,341	)
Fixed rate		-		32,591		-			-			-			(107	)
Securities		765,320		973,745		(20,454	)		4,362			(16,092	)		(21,245	)
Other		170,808		299,743		(645	)		(2,073	)		(2,718	)		(5,571	)
NDF - Non Deliverable Forward		252,627,585		250,775,431		(947,904	)		152,816			(795,088	)		634,371
Asset position		119,312,353		134,049,497		2,781,079			168,592			2,949,671			3,458,155
Commodities		80,956		206,097		5,663			545			6,208			18,563
Indexes		922		148,006		23			-			23			9,129
Foreign currency		119,230,338		133,693,023		2,775,389			168,047			2,943,436			3,430,346
Securities		137		2,371		4			-			4			117
Liability position		133,315,232		116,725,934		(3,728,983	)		(15,776	)		(3,744,759	)		(2,823,784	)
Commodities		174,534		244,376		(13,634	)		(121	)		(13,755	)		(24,700	)
Indexes		248,926		26,594		(6,307	)		-			(6,307	)		(195	)
Foreign currency		132,879,817		116,437,293		(3,708,390	)		(15,655	)		(3,724,045	)		(2,798,566	)
Securities		11,955		17,671		(652	)		-			(652	)		(323	)
Target flow of swap		954,781		1,493,459		(72,182	)		18,435			(53,747	)		(264,606	)
Asset position - Foreign currency		513,781		923,459		448			67,683			68,131			88,246
Liability position - Interbank Market		441,000		570,000		(72,630	)		(49,248	)		(121,878	)		(352,852	)
Other derivative financial instruments		4,675,373		4,933,728		102,103			(60,343	)		41,760			184,723
Asset position		2,693,915		3,079,734		133,692			(8,145	)		125,547			289,706
Foreign currency		126,260		147,536		408			2,405			2,813			5,442
Fixed rate		1,792,066		1,174,500		99,143			(17,973	)		81,170			42,860
Securities		617,186		1,450,688		34,172			4,858			39,030			235,606
Other		158,403		307,010		(31	)		2,565			2,534			5,798
Liability position		1,981,458		1,853,994		(31,589	)		(52,198	)		(83,787	)		(104,983	)
Commodities		-		1,630		-			-			-			(18	)
Foreign currency		34,734		83,924		(7,230	)		5,517			(1,713	)		(31,719	)
Fixed rate		82,700		81,478		(1,411	)		(1,615	)		(3,026	)		(1,115	)
Securities		1,506,408		1,523,125		(22,599	)		(46,785	)		(69,384	)		(67,778	)
Other		357,616		163,837		(349	)		(9,315	)		(9,664	)		(4,353	)
				ASSETS		16,017,042			6,664,292			22,681,334			24,390,295
				LIABILITY		(20,523,308	)		(5,929,308	)		(26,452,616	)		(24,711,326	)
				TOTAL		(4,506,266	)		734,984			(3,771,282	)		(321,031	)

Derivative contracts mature as follows (in days):

Memorandum account / notional amount	0 - 30		31 - 180		181 - 365		Over 365		12/31/2017		12/31/2016
Futures		187,771,028		152,660,465		87,819,268		179,730,096		607,980,857		666,925,865
Swaps		29,733,759		96,849,196		86,921,535		368,439,084		581,943,574		464,618,873
Options		418,679,122		290,491,480		457,164,437		681,476,272		1,847,811,311		583,508,084
Forwards (onshore)		6,996,658		1,932,834		1,024,298		431		9,954,221		13,428,559
Credit derivatives		-		510,408		1,230,153		8,369,693		10,110,254		12,099,966
NDF - Non Deliverable Forward		63,445,881		136,650,433		39,108,715		13,422,556		252,627,585		250,775,431
Target flow of swap		-		292,781		-		662,000		954,781		1,493,459
Other derivative financial instruments		11,808		494,614		868,650		3,300,301		4,675,373		4,933,728

(*) The book value of futures considers only the amount payable or receivable related to the last day of the quarter.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

104

II - Derivatives by counterparty

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

	12/31/2017																										12/31/2016
			Adjustments to
			market value (in
			results /																					Over 720
	Cost		stockholders' equity)			Market value			%		0 - 30		31 - 90			91 - 180			181 - 365			366 - 720		days			Market value
Asset
Futures (*)		8,631		149,083			157,714			0.7		153,318		11,297			(2,404	)		(3,035	)		38,082		(39,544	)		127,321
B3		8,631		149,635			158,266			0.7		153,318		11,463			(2,262	)		(2,791	)		38,082		(39,544	)		128,344
Companies		-		(543	)		(543	)		0.0		-		(157	)		(142	)		(244	)		-		-			(173	)
Financial institutions		-		(9	)		(9	)		0.0		-		(9	)		-			-			-		-			(850	)
Swaps - adjustment receivable		3,626,838		5,558,926			9,185,764			40.6		188,829		186,631			324,312			743,377			1,660,319		6,082,296			10,538,412
B3		708,632		451,317			1,159,949			5.1		63,122		25,549			39,160			108,965			94,591		828,562			1,416,239
Companies		1,041,246		1,789,878			2,831,124			12.5		65,670		39,906			92,327			244,994			399,746		1,988,481			4,582,811
Financial institutions		1,677,734		2,968,425			4,646,159			20.6		59,054		120,772			191,865			236,722			1,009,943		3,027,803			4,255,876
Individuals		199,226		349,306			548,532			2.4		983		404			960			152,696			156,039		237,450			283,486
Option premiums		2,710,194		627,203			3,337,397			14.7		428,715		439,957			352,161			954,306			864,793		297,465			4,787,191
B3		1,465,181		250,654			1,715,835			7.6		374,312		274,318			95,705			515,398			395,660		60,442			1,678,892
Companies		431,365		141,426			572,791			2.5		25,511		44,912			62,914			116,587			210,365		112,502			501,621
Financial institutions		810,288		235,598			1,045,886			4.6		28,880		120,700			192,378			320,639			258,768		124,521			2,603,251
Individuals		3,360		(475	)		2,885			0.0		12		27			1,164			1,682			-		-			3,427
Forwards (onshore)		6,718,744		713			6,719,457			29.6		6,350,124		280,733			46,176			42,054			175		195			4,921,606
B3		754,533		665			755,198			3.3		385,865		280,733			46,176			42,054			175		195			1,417,606
Companies		5,964,211		48			5,964,259			26.3		5,964,259		-			-			-			-		-			2,734,270
Financial institutions		-		-			-			0.0		-		-			-			-			-		-			769,730
Credit derivatives - Financial institutions		37,416		100,237			137,653			0.6		-		395			1,526			7,970			20,989		106,773			179,658
NDF - Non Deliverable Forward		2,781,079		168,592			2,949,671			12.9		677,482		716,784			623,107			610,356			165,925		156,017			3,458,155
B3		644,526		-			644,526			2.8		195,430		166,311			194,021			88,764			-		-			304,398
Companies		736,478		82,003			818,481			3.6		183,605		237,526			164,520			120,493			67,868		44,469			1,243,812
Financial institutions		1,398,143		86,320			1,484,463			6.5		298,346		312,726			263,586			400,282			97,975		111,548			1,907,060
Individuals		1,932		269			2,201			0.0		101		221			980			817			82		-			2,885
Target flow of swap - Companies		448		67,683			68,131			0.3		-		-			6,100			-			-		62,031			88,246
Other derivative financial instruments		133,692		(8,145	)		125,547			0.6		1,506		201			3,256			4,097			19,833		96,654			289,706
Companies		34,548		9,827			44,375			0.2		1,506		201			3,181			3,237			18,115		18,135			246,846
Financial institutions		99,144		(17,974	)		81,170			0.4		-		-			75			858			1,718		78,519			42,860
Individuals		-		2			2			0.0		-		-			-			2			-		-			-
Total		16,017,042		6,664,292			22,681,334			100.0		7,799,974		1,635,998			1,354,234			2,359,125			2,770,116		6,761,887			24,390,295
% per maturity term												34.4		7.2			6.0			10.4			12.2		29.8
Total - 12/31/2016		19,488,281		4,902,014			24,390,295			100.0		5,816,530		3,388,792			2,189,166			2,842,365			3,166,225		6,987,217
% per maturity term												23.8		13.9			9.0			11.7			13.0		28.6

(*) The book value of futures considers only the amount payable or receivable related to the last day of the quarter.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

105

	12/31/2017																													12/31/2016
				Adjustments to market
				value (in results /																							Over 720
	Cost			stockholders' equity)			Market value			%		0 - 30			31 - 90			91 - 180			181 - 365			366 - 720			days			Market value
Liabilities
Swaps - difference payable		(8,396,908	)		(5,291,338	)		(13,688,246	)		51.7		(64,817	)		(202,114	)		(447,073	)		(1,711,000	)		(3,746,900	)		(7,516,342	)		(13,220,453	)
B3		(730,547	)		(785,413	)		(1,515,960	)		5.7		(3,451	)		(16,955	)		(29,393	)		(128,374	)		(211,011	)		(1,126,776	)		(1,614,280	)
Companies		(1,353,089	)		(894,597	)		(2,247,686	)		8.5		(23,885	)		(77,339	)		(220,635	)		(346,755	)		(496,801	)		(1,082,271	)		(2,530,200	)
Financial institutions		(2,098,098	)		(3,485,557	)		(5,583,655	)		21.1		(29,651	)		(97,105	)		(182,868	)		(203,347	)		(1,269,773	)		(3,800,911	)		(4,106,040	)
Individuals		(4,215,174	)		(125,771	)		(4,340,945	)		16.4		(7,830	)		(10,715	)		(14,177	)		(1,032,524	)		(1,769,315	)		(1,506,384	)		(4,969,933	)
Option premiums		(2,261,185	)		(529,541	)		(2,790,726	)		10.6		(329,974	)		(174,223	)		(303,913	)		(820,496	)		(889,123	)		(272,997	)		(4,553,261	)
B3		(1,091,033	)		(195,128	)		(1,286,161	)		4.9		(278,898	)		(48,567	)		(102,394	)		(412,167	)		(428,691	)		(15,444	)		(1,441,165	)
Companies		(309,209	)		(360,170	)		(669,379	)		2.6		(22,619	)		(44,328	)		(98,939	)		(139,893	)		(246,979	)		(116,621	)		(628,635	)
Financial institutions		(855,797	)		27,032			(828,765	)		3.1		(28,440	)		(81,010	)		(100,960	)		(267,469	)		(210,155	)		(140,731	)		(2,463,000	)
Individuals		(5,146	)		(1,275	)		(6,421	)		0.0		(17	)		(318	)		(1,620	)		(967	)		(3,298	)		(201	)		(20,461	)
Forwards (onshore)		(5,964,211	)		(896	)		(5,965,107	)		22.6		(5,964,874	)		-			(144	)		(89	)		-			-			(3,509,729	)
B3		-			(259	)		(259	)		0.0		(26	)		-			(144	)		(89	)		-			-			(6,229	)
Companies		(5,964,211	)		(637	)		(5,964,848	)		22.6		(5,964,848	)		-			-			-			-			-			(2,733,839	)
Financial institutions		-			-			-			0.0		-			-			-			-			-			-			(769,661	)
Credit derivatives - Financial institutions		(67,802	)		9,689			(58,113	)		0.2		-			(205	)		(900	)		(2,571	)		(6,754	)		(47,683	)		(146,264	)
NDF - Non Deliverable Forward		(3,728,983	)		(15,776	)		(3,744,759	)		14.1		(926,782	)		(735,313	)		(546,427	)		(785,574	)		(224,864	)		(525,799	)		(2,823,784	)
B3		(638,196	)		(1	)		(638,197	)		2.4		(289,082	)		(133,648	)		(155,442	)		(60,025	)		-			-			(259,677	)
Companies		(736,775	)		(12,600	)		(749,375	)		2.8		(144,749	)		(266,051	)		(127,846	)		(131,003	)		(49,598	)		(30,128	)		(647,626	)
Financial institutions		(2,353,251	)		(3,024	)		(2,356,275	)		8.9		(492,905	)		(335,514	)		(262,544	)		(594,380	)		(175,266	)		(495,666	)		(1,913,895	)
Individuals		(761	)		(151	)		(912	)		0.0		(46	)		(100	)		(595	)		(166	)		-			(5	)		(2,586	)
Target flow of swap - Companies		(72,630	)		(49,248	)		(121,878	)		0.5		-			-			(73,052	)		-			-			(48,826	)		(352,852	)
Other derivative financial instruments - Companies		(31,589	)		(52,198	)		(83,787	)		0.3		(55	)		(2,156	)		(2,491	)		(7,860	)		(21,468	)		(49,757	)		(104,983	)
Total		(20,523,308	)		(5,929,308	)		(26,452,616	)		100.0		(7,286,502	)		(1,114,011	)		(1,374,000	)		(3,327,590	)		(4,889,109	)		(8,461,404	)		(24,711,326	)
% per maturity term													27.5			4.2			5.2			12.6			18.5			32.0
Total - 12/31/2016		(22,145,884	)		(2,565,442	)		(24,711,326	)		100.0		(5,271,967	)		(1,769,516	)		(1,784,323	)		(1,960,916	)		(3,726,985	)		(10,197,619	)
% per maturity term													21.3			7.2			7.2			7.9			15.1			41.3

At ITAÚ UNIBANCO HOLDING, market values related to Swap contract asset position totaled R$ 398,068, involving Foreign Currency R$ 398,068 and are distributed over 365 days; in the liability position they totaled (R$ 4,915,337) ((R$ 3,775,838) at December 31, 2016) involving Interbank Market (R$ 4,915,168) ((R$ 3,775,838) at December 31, 2016), and are distributed (R$ 1,408,922) from 31 to 90 days and (R$ 3,506,246) from 181 to 365 days ((R$ 3,775,838) at December 31, 2016 over 365 days) and involving Foreign Currency (R$ 169) over 365 days, Option contracts involving Securities in asset position totaled R$ 7,199 distributed over 365 days.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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III - Derivatives by notional amount

See below the composition of the Derivative Financial Instruments portfolio by type of instrument, stated at their notional amounts, per trading location (organized or over-the-counter market) and counterparties.

	12/31/2017
											NDF - Non				Other derivative
							Forwards				Deliverable		Target flow of		financial
	Futures		Swaps		Options		(onshore)		Credit derivatives		Forward		swap		instruments
B3		476,031,073		31,176,874		1,746,728,722		4,023,377		-		76,837,568		-		-
Over-the-counter market		131,949,784		550,766,700		101,082,589		5,930,844		10,110,254		175,790,017		954,781		4,675,373
Financial institutions		131,525,855		333,481,698		69,460,402		-		10,110,254		118,742,849		-		1,792,066
Companies		423,929		152,893,351		31,321,748		5,930,844		-		56,904,895		954,781		2,883,307
Individuals		-		64,391,651		300,439		-		-		142,273		-		-
Total		607,980,857		581,943,574		1,847,811,311		9,954,221		10,110,254		252,627,585		954,781		4,675,373
Total – 12/31/2016		666,925,865		464,618,873		583,508,084		13,428,559		12,099,966		250,775,431		1,493,459		4,933,728

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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IV - Credit derivatives

See below the composition of the Credit Derivatives (assets and liabilities) portfolio stated at their notional amounts, and their effect on the calculation of Required Reference Equity.

	12/31/2017								12/31/2016
	Notional amount			Notional amount of credit					Notional amount of			Notional amount of credit
	of credit			protection purchased with					credit protection			protection purchased with
	protection sold			identical underlying amount		Net position			sold			identical underlying amount		Net position
Credit swaps		(6,416,313	)		3,693,941		(2,722,372	)		(8,094,075	)		4,005,891		(4,088,184	)
Total		(6,416,313	)		3,693,941		(2,722,372	)		(8,094,075	)		4,005,891		(4,088,184	)

The effect on the reference equity (Note 3) was R$ 46,396 (R$ 277,987 at 12/31/2016).

During the period, there was no occurrence of a credit event as defined in the agreements.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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V - Hedge accounting

The effectiveness computed for the hedge portfolio was in conformity with the provisions of BACEN Circular nº. 3,082 of January 30, 2002, and the following hedge accounting structures are established:

Cash flow - the purpose of this hedge of ITAÚ UNIBANCO HOLDING CONSOLIDATED is to hedge cash flows of interest receipt and payment (CDB / Syndicated Loans / Assets Transactions / Funding and agreements to resell) and exposures to future exchange rate (anticipated transactions and unrecognized firm commitments) related to its variable interest rate risk (CDI / LIBOR/UF*/TPM*/Selic), and foreign exchange rate risk, making the cash flow constant (fixed rate) and regardless of the variations of DI CETIP Over, LIBOR/ UF*/ TPM* / Selic and foreign exchange rate.

*UF (Chilean Unit of Account) / TPM (Monetary Policy Rate).

	12/31/2017							12/31/2016
	Hedge Instrument					Hedge assets		Hedge Instruments					Hedge assets
			Adjustment to market							Adjustment to
Strategies	Nominal value		value ^(*)			Book value		Nominal value		market value ^(*)			Book value
Hedge of deposits and securities purchased under agreements to resell		69,253,139		(3,595,979	)		70,663,298		93,804,279		(2,479,977	)		95,302,890
Hedge of syndicated loan		-		-			-		6,844,110		(45,592	)		6,844,110
Hedge of highly probable forecast transactions		232,167		(4,718	)		218,879		-		-			-
Hedge of assets transactions		23,919,178		429,349			23,489,527		24,167,833		311,932			26,495,381
Hedge of Asset-backed Securities under Repurchase Agreements		31,855,096		672,321			31,099,006		2,546,108		24,062			2,523,771
Hedge of UF - denominated assets		15,227,170		(28,191	)		15,227,170		13,146,704		(20,310	)		13,146,704
Hedge of funding		6,444,407		(16,344	)		6,444,407		4,272,794		(21,687	)		4,272,794
Hedge of loan operations		1,123,646		13,693			1,123,646		1,120,580		14,787			1,120,580
Total				(2,529,869	)						(2,216,785	)

(*) Recorded in Stockholders’ Equity under heading Asset Valuation Adjustments.

The gains or losses related to the accounting hedge of cash flows that we expect to recognize in results in the following 12 months amount to R$ (1,907,845) (R$ 184,943 at 12/31/2016).

To hedge future cash flows of highly probable forecast transactions, arising from futures contracts in foreign currency, against exposure to future exchange rate, ITAÚ UNIBANCO HOLDING CONSOLIDATED negotiated DDI Futures contracts and Dollar Purchase Options on B3; NDF (Non Deliverable Forward) contracts and currency swaps traded in the over-the-counter market.

To hedge future cash flows of futures receipts and payments against exposure to variable interest rate (CDI / LIBOR / TPM / UF / Selic), ITAÚ UNIBANCO HOLDING CONSOLIDATED negotiated DI futures contracts on B3, interest rate swap and Euro-Dollar Futures on Chicago Stock Exchange.

II)

Market risk – The hedging strategies against market risk of ITAÚ UNIBANCO HOLDING CONSOLIDATED consist of hedge of exposure to variation in market risk, in interest receipts, which are attributable to changes in interest rates related to recognized assets and liabilities.

	12/31/2017
	Hedge instrument					Hedge assets
Strategies	Nominal value		Adjustment to market value ^(*)			Book value		Adjustment to market value ^(*)
Hedge of loan operations		5,976,642		51,950			5,976,642		(49,695	)
Hedge of available-for-sale securities		482,415		34,418			482,415		(32,734	)
Hedge of syndicated loan		794,221		435			794,221		(336	)
Hedge of funding		12,156,582		(113,877	)		12,156,582		107,591
Total				(27,074	)				24,826

	12/31/2016
	Hedge instrument					Hedge assets
Strategies	Nominal value		Adjustment to market value ^(*)			Book value		Adjustment to market value ^(*)
Hedge of loan operations		2,691,782		(91,314	)		2,691,782		91,042
Hedge of available-for-sale securities		472,410		(14,450	)		472,410		19,121
Hedge of funding		8,659,014		9,075			8,659,014		(19,686	)
Total				(96,689	)				90,477

(*) Recorded under heading Results from Securities and Derivative Financial Instruments.

To protect against market risk variation upon receipt and payment of interest, ITAÚ UNIBANCO HOLDING CONSOLIDATED uses interest rate swap contracts. Hedge items refer to prefixed assets and liabilities denominated in Chilean Unit of Account – CLF, and denominated in Euros and dollars, issued by subsidiaries in Chile, London and Colombia, respectively, maturing between 2018 and 2035.

Receipts (payments) of interest flows are expected to occur and will affect the statement of income in monthly periods.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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III)

Hedge of net investment in foreign operations – ITAÚ UNIBANCO HOLDING CONSOLIDATED's strategy of net investments in foreign operations consist of a hedge of the exposure in foreign currency arising from the functional currency of foreign operations, compared to the functional currency of the head office.

	12/31/2017							12/31/2016
	Hedge instrument					Hedge assets		Hedge instrument					Hedge assets
Strategies	Nominal value		Adjustment to market value ^(*)			Book value		Nominal value		Adjustment to market value (*)			Book value
Hedge of net investment in foreign operations ^(*)		22,700,549		(3,260,773	)		13,074,449		21,448,638		(2,211,074	)		12,329,871
Total				(3,260,773	)						(2,211,074	)

(*) Recorded in Stockholders’ Equity under heading Asset Valuation Adjustments.

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

Receipts (payments) of interest flows are expected to occur and will affect the statement of income upon the total or partial disposal of investments.

IV)

We present below the maturity terms of cash flow hedge, market risk hedge strategies and Hedge of net investiment in foreign operations:

	12/31/2017
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 securities purchased under agreements to resell		35,973,635		12,229,910		6,985,466		12,403,273		-		1,660,855		-		69,253,139
Hedge of highly probable anticipated transactions		162,309		69,858		-		-		-		-		-		232,167
Hedge of loans		16,725,587		5,940,862		-		1,252,729		-		-		-		23,919,178
Hedge of assets denominated in UF		12,352,296		2,822,005		-		52,869		-		-		-		15,227,170
Hedge of funding (Cash flow)		1,645,816		748,636		1,026,886		884,262		525,283		1,613,524		-		6,444,407
Hedge of loan operations (Cash flow)		-		-		26,910		156,078		75,348		865,310		-		1,123,646
Hedge of loan operations (Market risk)		268,321		143,027		628,188		1,501,716		1,334,664		642,213		1,458,513		5,976,642
Hedge of syndicated loan (Market risk)		794,221		-		-		-		-		-		-		794,221
Hedge of funding (Market risk)		2,399,309		3,669,286		799,462		217,004		347,472		2,099,107		2,624,942		12,156,582
Hedge of available-for-sale securities		-		-		222,909		-		-		259,506		-		482,415
Asset-backed securities under repurchase agreements		250,600		25,208,848		3,956,763		1,349,092		-		1,089,793		-		31,855,096
Hedge of net investment in foreign operations ^(*)		22,700,549		-		-		-		-		-		-		22,700,549
Total		93,272,643		50,832,432		13,646,584		17,817,023		2,282,767		8,230,308		4,083,455		190,165,212

(*) 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 securities purchased under agreements to resell		34,975,681		32,329,613		11,701,155		6,961,916		7,400,399		435,515		-		93,804,279
Hedge of syndicated loan		6,844,110		-		-		-		-		-		-		6,844,110
Hedge of loans		4,627,346		13,718,433		4,889,852		-		932,202		-		-		24,167,833
Hedge of assets denominated in UF		8,939,633		2,597,842		1,558,290		-		50,939		-		-		13,146,704
Hedge of funding (Cash flow)		121,400		1,484,965		72,840		536,102		773,561		1,283,926		-		4,272,794
Hedge of loan operations (Cash flow)		123,421		-		-		24,280		140,824		832,055		-		1,120,580
Hedge of loan operations (Market risk)		189,091		421,513		62,845		28,655		92,827		335,341		1,561,510		2,691,782
Hedge of funding (Market risk)		1,265,828		2,459,701		3,434,397		700,826		71,700		487,587		238,975		8,659,014
Hedge of available-for-sale securities		-		-		-		218,286		-		254,124		-		472,410
Asset-backed securities under repurchase agreements		-		-		1,465,380		917,839		162,889		-		-		2,546,108
Hedge of net investment in foreign operations ^(*)		21,448,638		-		-		-		-		-		-		21,448,638
Total		78,535,148		53,012,067		23,184,759		9,387,904		9,625,341		3,628,548		1,800,485		179,174,252

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

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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h) Changes in adjustments to unrealized ^(*) market value for the period

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Opening balance		(2,456,226	)		(5,901,210	)
Adjustments with impact on:
Results		(1,648,677	)		1,751,589
Trading securities		(47,089	)		1,578,579
Derivative financial instruments ^(**)		(1,601,588	)		173,010
Stockholders’ equity		(156,358	)		1,693,395
Available-for-sale		1,206,425			3,439,010
Accounting hedge – derivative financial instruments - Futures		(1,362,783	)		(1,745,615	)

Closing balance		(4,261,261	)		(2,456,226	)
Adjustment to market value		(4,261,261	)		(2,456,226	)
Trading securities		421,952			469,041
Available-for-sale securities		372,445			(833,980	)
Derivative financial instruments		(5,055,658	)		(2,091,287	)
Trading securities ^(**)		734,984			2,336,572
Accounting hedge - Futures		(5,790,642	)		(4,427,859	)

(*) The term unrealized in the context of Circular nº. 3,068 of 11/08/2001, of the Central Bank means not converted into cash.

(**) Changes were made in balances at December 31, 2016 for comparison purposes.

Realized gain of securities portfolio and derivatives financial instruments and foreign exchange variation on investments abroad

	01/01 to		01/01 to
	12/31/2017		12/31/2016
Gain (loss) – trading securities		1,936,648		1,131,183
Gain (loss) – available-for-sale securities		389,584		(218,452	)
Gain (loss) – derivatives		8,550,600		7,580,572
Gain (loss) – foreign exchange variations on investments abroad ^(*)		1,018,667		(9,678,689	)
Total		11,895,499		(1,185,386	)

(*) The results of all financial instruments linked to the hedge of exchange variation of Investments are not included.

During the period ended 12/31/2017, ITAÚ UNIBANCO HOLDING recognized impairment expenses of R$ 1,063,411 with on Available-for-sale securities in the amount R$ 787,833 and Held-to-maturity financial assets in the amount of R$ 275,578. Total loss, net of reversals, amounted to R$ 982,287 (R$ 1,522,012 of loss at 12/31/2016) and was recorded in the statement of income in line item Securities and derivative financial instruments.

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Sensitivity analysis (trading and banking portfolios)

In compliance with CVM Instruction nº. 475, ITAÚ UNIBANCO HOLDING CONSOLIDATED carried out a sensitivity analysis by market risk factors considered relevant. The biggest losses arising, by risk factor, in each scenario, were stated together with their impact on the results, net of tax effects, by providing an overview of ITAÚ UNIBANCO HOLDING CONSOLIDATED’s exposure under exceptional scenarios.

The sensitivity analyses of the banking and the trading portfolio shown in this report are an evaluation of a static position of the portfolio exposure and, therefore, do not consider management’s quick response capacity (treasury and control areas), which triggers risk mitigating measures, whenever a situation of high loss or risk is identified by minimizing the sensitivity to significant losses. In addition, the study's sole purpose is to disclose the exposure to risk and the respective protective actions, taking into account the fair value of financial instruments, irrespective of the accounting practices adopted by ITAÚ UNIBANCO HOLDING CONSOLIDATED.

Trading portfolio	Exposures	12/31/2017 (*)
		Scenarios
Risk factors	Risk of variations in:	I			II			III
Interest Rate	Fixed Income Interest Rates in Reais		(677	)		(181,412	)		(293,515	)
Foreign Exchange Linked	Foreign Exchange Linked Interest Rates		(464	)		(38,269	)		(79,140	)
Foreign Exchange Rates	Prices of Foreign Currencies		1,720			126,269			392,106
Price Index Linked	Interest of Inflation coupon		(586	)		(44,720	)		(82,604	)
TR	TR Linked Interest Rates		-			(1	)		(1	)
Equities	Prices of Equities		168			(1,885	)		(30,632	)
Other	Exposures that do not fall under the definitions above		8			1,238			2,671
Total			169			(138,780	)		(91,115	)

(*) Amounts net of tax effects.

Trading and Banking portfolios	Exposures	12/31/2017 (*)
		Scenarios
Risk factors	Risk of variations in:	I			II			III
Interest Rate	Fixed Income Interest Rates in Reais		(8,313	)		(1,653,629	)		(3,179,360	)
Foreign Exchange Linked	Foreign Exchange Linked Interest Rates		(1,759	)		(264,749	)		(505,366	)
Foreign Exchange Rates	Prices of Foreign Currencies		1,832			123,518			387,645
Price Index Linked	Interest of Inflation coupon		(3,198	)		(251,703	)		(474,026	)
TR	TR Linked Interest Rates		479			(121,136	)		(307,836	)
Equities	Prices of Equities		4,569			(110,354	)		(244,940	)
Other	Exposures that do not fall under the definitions above		(4	)		7,521			16,726
Total			(6,394	)		(2,270,532	)		(4,307,157	)

(*) Amounts net of tax effects.

The following scenarios are used to measure the sensitivity:

Scenario I: Addition of 1 base point in interest fixed rates, currency coupon, inflation and interest rate index, and 1 percentage point in currency and share prices;

Scenario II: Shocks of 25 percent in interest fixed rates, currency coupon, inflation, interest rate indexes and currency and share prices, for both growth and decline, considering the highest possible resulting losses per risk factor;

Scenario III: Shocks of 50 percent in interest fixed rates, currency coupon, inflation, interest rate indexes and currency and share prices, for both growth and decline, considering the highest possible resulting losses per risk factor.

Derivative financial instruments engaged by ITAÚ UNIBANCO HOLDING CONSOLIDATED are shown in the item Derivative financial instruments in this note.

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Note 8 - Loan, lease and other credit operations

Composition of the portfolio with credit granting characteristics

I – By type of operations and risk level

	12/31/2017																				12/31/2016
Risk levels	AA		A		B		C		D		E		F		G		H		Total		Total
Loan operations		208,079,463		105,449,573		38,889,849		16,935,595		9,713,532		6,256,809		6,230,543		5,462,177		10,622,921		407,640,462		410,916,148
Loans and discounted trade receivables		81,210,454		87,837,660		29,682,843		13,815,256		7,775,680		4,748,529		4,703,723		3,626,485		9,583,599		242,984,229		240,119,720
Financing		55,466,540		11,278,205		6,868,531		1,994,479		1,357,100		965,825		742,851		1,527,670		654,244		80,855,445		88,914,657
Farming and agribusiness financing		6,970,690		1,016,584		477,298		53,551		74,587		92,559		204		1,975		22,768		8,710,216		10,642,618
Real estate financing		64,431,779		5,317,124		1,861,177		1,072,309		506,165		449,896		783,765		306,047		362,310		75,090,572		71,239,153

Lease operations		1,930,770		3,657,296		1,166,949		306,658		217,809		39,014		178,769		38,849		189,755		7,725,869		8,674,870

Credit card operations		-		62,479,389		2,444,813		2,284,728		828,103		517,185		644,341		490,258		3,162,277		72,851,094		64,459,617

Advance on exchange contracts ⁽¹⁾		2,056,651		1,472,854		347,126		97,081		38,486		60,010		108,967		638		-		4,181,813		4,929,847

Other sundry receivables ⁽²⁾		24,651		586,902		-		24,115		620		143,007		2,176		125,722		288,781		1,195,974		2,244,495

Total operations with credit granting characteristics		212,091,535		173,646,014		42,848,737		19,648,177		10,798,550		7,016,025		7,164,796		6,117,644		14,263,734		493,595,212		491,224,977
Financial Guarantees Provided ⁽³⁾																				70,489,275		70,793,389
Total with Financial Guarantees Provided		212,091,535		173,646,014		42,848,737		19,648,177		10,798,550		7,016,025		7,164,796		6,117,644		14,263,734		564,084,487		562,018,366
Total – 12/31/2016		227,489,987		154,011,919		43,418,130		21,046,447		11,446,751		7,105,160		6,787,748		4,777,044		15,141,791		491,224,977

(1)

Includes Advances on exchange contracts and Income receivable from advances granted, reclassified from Liabilities – Foreign exchange portfolio / Other receivables (Note 2a);

(2)

Includes Securities and credits receivable, Debtors for purchase of assets and Financial Guarantees Provided paid;

(3)

Recorded in Memorandum Accounts.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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II – By maturity and risk level

	12/31/2017																													12/31/2016
	AA		A			B			C			D			E			F			G			H			Total			Total
	Overdue Operations ^{(1) (2)}
Falling due installments		-		-			1,868,783			1,778,335			1,371,187			1,435,039			1,293,465			1,099,064			4,072,202			12,918,075			13,715,853
01 to 30		-		-			71,802			67,354			49,697			38,986			37,033			37,782			163,836			466,490			561,250
31 to 60		-		-			60,353			58,081			44,909			34,945			37,073			34,443			152,257			422,061			493,751
61 to 90		-		-			56,110			53,188			41,347			37,263			34,375			31,478			163,524			417,285			462,406
91 to 180		-		-			159,000			151,724			119,446			118,899			97,515			94,963			381,726			1,123,273			1,264,463
181 to 365		-		-			219,916			260,887			225,856			340,268			233,122			179,550			679,191			2,138,790			2,265,589
Over 365		-		-			1,301,602			1,187,101			889,932			864,678			854,347			720,848			2,531,668			8,350,176			8,668,394
Overdue installments		-		-			1,065,372			1,024,072			1,035,273			825,789			2,163,730			1,368,873			6,187,246			13,670,355			13,651,132
01 to 14		-		-			25,225			44,302			24,112			27,452			86,698			14,974			66,894			289,657			233,911
15 to 30		-		-			817,627			118,052			102,724			51,982			51,312			39,199			125,616			1,306,512			1,414,082
31 to 60		-		-			222,520			718,913			172,664			105,069			671,255			198,431			253,297			2,342,149			1,992,697
61 to 90		-		-			-			118,462			624,669			125,505			654,852			256,474			317,217			2,097,179			1,611,963
91 to 180		-		-			-			24,343			111,104			484,331			647,179			793,720			1,212,179			3,272,856			3,484,064
181 to 365		-		-			-			-			-			31,450			52,434			66,075			4,031,878			4,181,837			4,758,790
Over 365		-		-			-			-			-			-			-			-			180,165			180,165			155,625
Subtotal		-		-			2,934,155			2,802,407			2,406,460			2,260,828			3,457,195			2,467,937			10,259,448			26,588,430			27,366,985
Specific allowance		-		-			(29,342	)		(84,072	)		(240,646	)		(678,248	)		(1,728,598	)		(1,727,556	)		(10,259,448	)		(14,747,910	)		(15,948,756	)
Subtotal - 12/31/2016		-		-			2,869,490			2,863,282			2,766,776			1,935,812			2,332,538			2,628,713			11,970,374			27,366,985
		Non-Overdue Operations
Falling due installments		211,144,636		171,725,177			39,513,528			16,599,620			8,249,847			4,619,438			3,648,863			3,598,506			3,955,417			463,055,032			460,666,552
01 to 30		17,287,657		38,737,272			5,521,450			3,287,602			978,419			372,740			383,136			211,050			444,225			67,223,551			66,782,493
31 to 60		14,630,317		17,080,052			3,228,051			1,100,925			442,845			256,146			209,523			46,542			249,864			37,244,265			39,622,727
61 to 90		7,760,888		10,259,862			2,150,420			772,770			212,111			101,343			97,695			57,912			212,597			21,625,598			22,386,712
91 to 180		22,153,254		20,790,785			5,078,185			1,694,254			589,959			332,833			365,509			242,686			435,059			51,682,524			49,421,019
181 to 365		28,249,820		21,883,123			5,916,493			2,300,953			1,015,501			570,386			409,648			435,166			356,494			61,137,584			59,963,466
Over 365		121,062,700		62,974,083			17,618,929			7,443,116			5,011,012			2,985,990			2,183,352			2,605,150			2,257,178			224,141,510			222,490,135
Overdue up to 14 days		946,899		1,920,837			401,054			246,150			142,243			135,759			58,738			51,201			48,869			3,951,750			3,191,440
Subtotal		212,091,535		173,646,014			39,914,582			16,845,770			8,392,090			4,755,197			3,707,601			3,649,707			4,004,286			467,006,782			463,857,992
Generic allowance		-		(868,230	)		(399,146	)		(505,373	)		(839,209	)		(1,426,559	)		(1,853,801	)		(2,554,795	)		(4,004,286	)		(12,451,399	)		(11,042,697	)
Subtotal - 12/31/2016		227,489,987		154,011,919			40,548,640			18,183,165			8,679,975			5,169,348			4,455,210			2,148,331			3,171,417			463,857,992
Grand total		212,091,535		173,646,014			42,848,737			19,648,177			10,798,550			7,016,025			7,164,796			6,117,644			14,263,734			493,595,212			491,224,977
Existing allowance		-		(868,230	)		(428,488	)		(589,445	)		(1,079,855	)		(4,848,956	)		(7,164,080	)		(6,117,033	)		(14,263,734	)		(37,309,465	)		(37,431,102	)
Minimum allowance required		-		(868,230	)		(428,488	)		(589,445	)		(1,079,855	)		(2,104,808	)		(3,582,398	)		(4,282,351	)		(14,263,734	)		(27,199,309	)		(26,991,453	)
Additional allowance included
Financial Guarantees Provided		-		-			-			-			-			(2,744,148	)		(3,581,682	)		(1,834,682	)		-			(10,110,156	)		(10,439,649	)
Financial Guarantees Provided		-		-			-			-			-			-			-			-			-			(1,949,644	)		(1,445,445	)
Additional allowance ⁽³⁾		-		-			-			-			-			(2,744,148	)		(3,581,682	)		(1,834,682	)		-			(8,160,512	)		(8,994,204	)
Existing allowance		-		(868,230	)		(428,488	)		(589,445	)		(1,079,855	)		(6,798,600	)		(7,164,080	)		(6,117,033	)		(14,263,734	)		(37,309,465	)		(37,431,102	)
Provision - delay⁽⁴⁾		-		-			(29,342	)		(75,345	)		(174,699	)		(416,481	)		(756,650	)		(1,019,548	)		(7,959,203	)		(10,431,268	)		(11,798,735	)
Provision - aggravated⁽⁵⁾		-		(14,973	)		(14,658	)		(85,635	)		(368,516	)		(980,716	)		(2,040,958	)		(1,735,936	)		(4,784,032	)		(10,025,424	)		(8,756,989	)
Provision - potencial⁽³⁾		-		(853,257	)		(384,488	)		(428,465	)		(536,640	)		(5,401,403	)		(4,366,472	)		(3,361,549	)		(1,520,499	)		(16,852,773	)		(16,875,378	)
Grand total - 12/31/2016		227,489,987		154,011,919			43,418,130			21,046,447			11,446,751			7,105,160			6,787,748			4,777,044			15,141,791			491,224,977
Existing allowance		-		(770,060	)		(434,181	)		(631,393	)		(1,144,675	)		(6,299,922	)		(6,787,069	)		(4,776,566	)		(15,141,791	)		(37,431,102	)
Minimum allowance required		-		(770,060	)		(434,181	)		(631,393	)		(1,144,675	)		(2,131,548	)		(3,393,874	)		(3,343,931	)		(15,141,791	)		(26,991,453	)
Additional allowance included
Financial Guarantees Provided		-		-			-			-			-			(4,168,374	)		(3,393,195	)		(1,432,635	)		-			(10,439,649	)
Financial Guarantees Provided ⁽⁶⁾		-		-			-			-			-			-			-			-			-			(1,445,445	)
Additional allowance ⁽³⁾		-		-			-			-			-			(4,168,374	)		(3,393,195	)		(1,432,635	)		-			(8,994,204	)
Existing allowance		-		(770,060	)		(434,181	)		(631,393	)		(1,785,593	)		(7,104,449	)		(6,787,069	)		(4,776,566	)		(15,141,791	)		(37,431,102	)
Provision - delay⁽⁴⁾		-		-			(28,695	)		(76,930	)		(192,405	)		(373,090	)		(689,736	)		(1,200,930	)		(9,236,949	)		(11,798,735	)
Provision - aggravated⁽⁵⁾		-		(18,587	)		(11,664	)		(88,264	)		(292,195	)		(772,057	)		(1,396,808	)		(1,406,772	)		(4,770,642	)		(8,756,989	)
Provision - potencial⁽³⁾		-		(751,473	)		(393,822	)		(466,199	)		(1,300,993	)		(5,959,302	)		(4,700,525	)		(2,168,864	)		(1,134,200	)		(16,875,378	)

(1)

Operations with overdue installments for more than 14 days or under control of administrators or in companies in the process of declaring bankruptcy;

(2)

The balance of non-accrual operations amounts to R$ 19,104,845 (R$ 19,942,065 at 12/31/2016);

(3)

Related to expected and potential loss;

(4)

Provisions for delay, as required by BACEN, related to the minimum provision required for overdue operations, in accordance with CMN Resolution nº. 2,682/1999;

(5)

Provisions for credits with aggravation of risk above the minimum required by BACEN for overdue operations and also provisions for credits that were renegotiated;

(6)

Provision for financial guarantees provided, recorded in liabilities in accordance with Resolution nº. 4,512/2016 of the National Monetary Council (CMN) and Circular Letter nº. 3,782/2016. The amount on December 31, 2016 was reclassified for comparison purposes.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

114

III – By business sector

	12/31/2017		%			12/31/2016		%
Public Sector		2,366,262		0.5	%		3,050,723		0.6	%
Energy		584,366		0.1	%		63,998		0.0	%
Petrochemical and chemical		1,307,636		0.3	%		2,547,032		0.5	%
Sundry		474,260		0.1	%		439,693		0.1	%
Private sector		491,228,950		99.5	%		488,174,254		99.4	%
Companies		247,100,423		50.1	%		257,687,900		52.5	%
Sugar and alcohol		7,022,519		1.4	%		8,895,177		1.8	%
Agribusiness and fertilizers		14,807,720		3.0	%		15,251,212		3.1	%
Food and beverage		12,137,497		2.5	%		13,416,188		2.7	%
Banks and other financial institutions		7,435,739		1.5	%		8,726,988		1.8	%
Capital assets		4,599,758		0.9	%		4,988,957		1.0	%
Pulp and paper		2,923,171		0.6	%		2,897,773		0.6	%
Publishing and printing		920,711		0.2	%		989,491		0.2	%
Electronic and IT		3,921,877		0.8	%		3,591,697		0.7	%
Packaging		2,184,568		0.4	%		2,284,635		0.5	%
Energy and sewage		8,672,677		1.8	%		8,409,615		1.7	%
Education		1,868,340		0.4	%		2,005,686		0.4	%
Pharmaceuticals and cosmetics		4,904,842		1.0	%		4,279,591		0.9	%
Real estate agents		20,365,308		4.1	%		22,853,617		4.7	%
Entertainment and tourism		4,337,930		0.9	%		4,750,231		1.0	%
Wood and furniture		2,734,289		0.6	%		2,542,060		0.5	%
Construction materials		4,545,929		0.9	%		5,115,774		1.0	%
Steel and metallurgy		7,357,035		1.5	%		7,580,644		1.5	%
Media		604,752		0.1	%		699,687		0.1	%
Mining		5,275,635		1.1	%		4,697,272		1.0	%
Infrastructure work		8,783,980		1.8	%		8,218,601		1.7	%
Oil and gas ^(*)		4,956,065		1.0	%		5,025,467		1.0	%
Petrochemical and chemical		6,403,409		1.3	%		8,347,609		1.7	%
Health care		2,170,648		0.4	%		2,450,215		0.5	%
Insurance, reinsurance and pension plans		15,672		0.0	%		46,915		0.0	%
Telecommucations		1,780,437		0.4	%		1,453,164		0.3	%
Third sector		2,572,961		0.5	%		3,204,727		0.7	%
Trading		1,588,877		0.3	%		1,544,442		0.3	%
Transportation		12,344,275		2.5	%		11,781,818		2.4	%
Domestic appliances		1,998,971		0.4	%		1,760,999		0.4	%
Vehicles and autoparts		11,846,820		2.4	%		13,594,044		2.8	%
Clothing and shoes		4,271,525		0.9	%		4,471,001		0.9	%
Commerce - sundry		14,982,484		3.0	%		15,626,445		3.2	%
Industry - sundry		7,694,584		1.6	%		7,154,400		1.5	%
Sundry services		36,117,485		7.3	%		35,649,332		7.3	%
Sundry		12,951,933		2.6	%		13,382,426		2.7	%
Individuals		244,128,527		49.4	%		230,486,354		46.9	%
Credit cards		71,937,401		14.6	%		63,572,360		12.9	%
Real estate financing		63,743,685		12.9	%		58,346,486		11.9	%
Consumer loans / overdraft		93,466,624		18.9	%		91,393,567		18.6	%
Vehicles		14,980,817		3.0	%		17,173,941		3.5	%
Grand total		493,595,212		100.0	%		491,224,977		100.0	%

(*) Comprises trade of fuel.

IV - Financial guarantees provided by type

	12/31/2017					12/31/2016 ^(*)
Type of guarantees	Portfolio		Provision			Portfolio		Provision
Endorsements or sureties pledged in legal and administrative tax proceedings		36,157,228		(901,225	)		34,532,756		(310,133	)
Sundry bank guarantees		24,700,064		(855,078	)		27,123,867		(923,780	)
Other financial guarantees provided		4,647,823		(123,071	)		4,572,472		(113,851	)
Tied to the distribution of marketable securities via a Public Offering		291,600		(52	)		-		-
Restricted to bids, auctions, service provision or execution of works		3,931,528		(63,613	)		3,427,539		(68,782	)
Restricted to supply of goods		613,924		(5,773	)		811,736		(3,291	)
Restricted to international trade of goods		147,108		(832	)		325,019		(25,608	)
Total		70,489,275		(1,949,644	)		70,793,389		(1,445,445	)

(*) The breakdown of balances as at 12/31/2016 was adjusted to conform to the new classification requirement set out by the Regulator.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

115

Credit concentration

	12/31/2017				12/31/2016
Loan, lease and other credit operations ^(*)	Risk		% of total		Risk		% of total
Largest debtor		4,079,032		0.7		4,134,421		0.7
10 largest debtors		28,957,637		5.1		31,171,715		5.5
20 largest debtors		46,312,823		8.2		48,129,040		8.6
50 largest debtors		74,764,354		13.3		79,010,496		14.1
100 largest debtors		101,141,728		17.9		106,712,267		19.0

(*) Amounts include financial guarantees provided.

	12/31/2017				12/31/2016
Loan, lease and other credit operations and securities of companies and financial institutions ^(*)	Risk		% of total		Risk		% of total
Largest debtor		7,667,580		1.2		7,783,779		1.2
10 largest debtors		39,989,911		6.2		43,510,712		6.7
20 largest debtors		64,834,511		10.1		69,471,923		10.7
50 largest debtors		108,828,051		16.9		113,276,464		17.4
100 largest debtors		144,443,228		22.4		151,478,406		23.3

(*) Amounts include financial guarantees provided.

Changes in allowance for loan losses and Provision for Financial Guarantees Pledged

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Opening balance		(37,431,102	)		(34,078,208	)
Balance arising from the merger with Corpbanca (Note 2c)		-			(2,282,754	)
Adjustments arising from the first-time adoption of Resolution nº. 4,512/16.		(401,640	)		-
Balance arising from the acquisition of Citibank operations		(665,725	)		-
Net increase for the period		(18,749,556	)		(25,325,119	)
Required by Resolution nº. 2,682/99		(19,480,689	)		(25,870,654	)
Required by Resolution nº. 4,512/16		(102,559	)		-
Additional allowance ⁽¹⁾		833,692			545,535
Others		6,707			-
Write-Off		19,957,074			23,866,970
Exchange variation		(25,223	)		388,009
Closing balance ⁽²⁾		(37,309,465	)		(37,431,102	)
Required by Resolution nº. 2,682/99		(27,199,309	)		(26,991,453	)
Specific allowance ⁽³⁾		(14,747,910	)		(15,948,756	)
Generic allowance ⁽⁴⁾		(12,451,399	)		(11,042,697	)
Additional allowance included Provision for Financial Guarantees Provided		(10,110,156	)		(10,439,649	)
Provision for Financial Guarantees Provided ⁽⁵⁾		(1,949,644	)		(1,445,445	)
Additional allowance ⁽¹⁾		(8,160,512	)		(8,994,204	)
Existing allowance		(37,309,465	)		(37,431,102	)
Provision delay		(10,431,268	)		(11,798,735	)
Provision aggravated		(10,025,424	)		(8,756,989	)
Provision potential		(16,852,773	)		(16,875,378	)

(1)

Refers to the provision in excess of the minimum required percentage by CMN Resolution nº. 2,682 of December 21, 1999;

(2)

The allowance for loan losses related to the lease portfolio amounts to: R$ (378,974) (R$ (353,163) at 12/31/2016);

(3)

Operations with overdue installments for more than 14 days or under responsibility of administrators or companies in the process of declaring bankruptcy;

(4)

For operations not covered in the previous item due to the classification of the client or operation;

(5)

At 12/31/2017, the balance of the allowance in relation to the loan portfolio is equivalent to 7.6% (7.6% at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

116

Recovery and renegotiation of credits

	12/31/2017									12/31/2016
	Portfolio ⁽¹⁾			Allowance for Loan Losses			%			Portfolio ⁽¹⁾			Allowance for Loan Losses			%
Total renegotiated loans		26,401,485			(10,807,411	)		40.9	%		24,341,718			(9,927,667	)		40.8	%
(-) Renegotiated loans overdue up to 30 days⁽²⁾		(9,147,755	)		2,122,979			23.2	%		(7,944,027	)		1,804,918			22.7	%
Renegotiated loans overdue over 30 days⁽²⁾		17,253,730			(8,684,432	)		50.3	%		16,397,691			(8,122,749	)		49.5	%

(1)

The amounts related to renegotiated loans up to 30 days of the Lease Portfolio are: R$ 126,819 (R$ 183,228 at December 31, 2016);

(2)

Delays determined upon renegotiation.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

117

Restricted operations on assets

See below the information related to the restricted operations involving assets, in accordance with CMN Resolution nº. 2,921, of January 17, 2002.

	12/31/2017										01/01 to 12/31/2017			12/31/2016		01/01 to 12/31/2016
	0 - 30		31 - 180		181 - 365		Over 365 days		Total		Income (expenses)			Total		Income (expenses)
Restricted operations on assets
Loan operations		123		73,698		-		6,053,850		6,127,671		258,431			2,954		11,786
Liabilities - restricted operations on assets
Foreign borrowing through securities		123		73,698		-		6,001,525		6,075,346		(258,451	)		2,893		(4,701	)
Net revenue from restricted operations												(20	)				7,085

At 12/31/2017 and 12/31/2016 there were no balances in default.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

118

Operations of sale or transfers and acquisition of financial assets

I -

Credit assignments (transfers of receivables) carried out through December 2011 were recorded in accordance with the current regulations, together at that time with income recognition at the time of the assignment, regardless of the risks and benefits being retained or not, the amount of whereby the bank assumes joint obligations, at 12/31/2017 where the entity substantially retained the related risks and benefits, is R$ 106,503 (R$ 134,359 at 12/31/2016), composed of real estate financing of R$ 98,054 (R$ 124,205 at 12/31/2016) and farming financing of R$ 8,449 (R$ 10,154 at 12/31/2016).

ll -

Beginning in January 2012, as provided for by CMN Resolution nº. 3,533/08, of January 31, 2008 and supplementary regulation, accounting records take into consideration the retention or non-retention of risks and benefits on sales or transfers of financial assets.

The breakdown of financial assets sale or transfer transactions with risk and benefit retention is presented below.

	12/31/2017								12/31/2016
Nature of operation	Assets				Liabilities ⁽¹⁾				Assets				Liabilities ⁽¹⁾
	Book value		Fair value		Book value		Fair value		Book value		Fair value		Book value		Fair value
Mortgage Loan		2,362,540		2,303,414		2,354,221		2,295,095		2,936,924		2,834,625		2,930,747		2,828,448
Working capital		2,650,606		2,650,606		2,570,017		2,570,017		2,767,733		2,767,733		2,767,520		2,767,520
Vehicles ⁽²⁾		-		-		2,266		2,266		-		-		4,308		4,308
Companies - loan ⁽²⁾		-		-		4,211		4,211		-		-		8,004		8,004
Total		5,013,146		4,954,020		4,930,715		4,871,589		5,704,657		5,602,358		5,710,579		5,608,280

(1)

Under Other sundry liabilities;

(2)

Assignment of operations that had already been written down to losses.

The sale or transfer transactions involving financial assets that posted loss, with no retention of risk if benefits affected the result of the period by R$ 67,224 (R$ 69,463 from January 1 to December 31, 2016).

The sale or transfer transactions involving financial assets of the active portfolio, with no retention of risk and benefits totaled R$ 2,007,631 (R$ 5,019,360 at December 31, 2016) with effect on the result for the period of R$ 325,627 (R$ 161,465 from January 1 to December 31, 2016), of which R$ 252,829 (R$ 82,270 from January 1 to December 31, 2016) in result for the period and R$ 72,798 (R$ 79,195 from January 1 to December 31, 2016) to be deferred in result, according to transactions terms), net of the Allowance for Loan Losses.

As at December 31, 2017, financial assets were transferred without retention of risks and rewards between related companies in connection with those transactions whose likelihood of recovery was considered by Management as remote.

The portfolio transferred, in the amount of R$ 15,240,988 (R$ 7,950,620 at 12/31/2016) fully written down to losses, was realized for the amount of R$ 206,056 (R$ 22,442 at 12/31/2016) according to an external appraisal report. The transaction did not have impact on the consolidated results.

There were acquisitions of loan portfolios with the retention of assignor’s risks during of period of 2017 the amount R$ 165,353 (R$ 435,102 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

119

Note 9 - Foreign exchange portfolio

	12/31/2017			12/31/2016
Assets - other receivables		51,654,679			51,641,823
Exchange purchase pending settlement – foreign currency		25,106,790			27,010,983
Bills of exchange and term documents – foreign currency		2,504			30,689
Exchange sale rights – local currency		26,814,236			24,943,401
(Advances received) – local currency		(268,851	)		(343,250	)
Liabilities – other liabilities (Note 2a)		51,851,164			52,261,505
Exchange sales pending settlement – foreign currency		27,284,404			24,428,272
Liabilities from purchase of foreign currency – local currency		24,382,296			27,659,315
Other		184,464			173,918
Memorandum accounts		1,550,303			1,612,307
Outstanding import credits – foreign currency		829,753			974,191
Confirmed export credits – foreign currency		720,550			638,116

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

120

Note 10 – Funding, borrowing and onlending

Summary

	12/31/2017												12/31/2016
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Deposits		216,842,070		33,258,300		23,238,731		129,598,806		402,937,907		42.4		329,413,994		35.7
Deposits received under securities repurchase agreements		219,536,918		15,743,626		16,803,320		71,826,142		323,910,006		34.1		366,037,837		39.7
Funds from acceptance and issuance of securities		6,819,995		23,229,503		18,387,515		59,144,011		107,581,024		11.3		93,710,842		10.2
Borrowing and onlending		4,804,280		17,194,632		16,710,333		24,731,795		63,441,040		6.7		75,613,931		8.2
Subordinated debt		1,314,648		10,190,516		993,577		40,197,134		52,695,875		5.5		57,420,075		6.2
Total		449,317,911		99,616,577		76,133,476		325,497,888		950,565,852				922,196,679
% per maturity term		47.3		10.5		8.0		34.2
Total – 12/31/2016		398,128,457		94,870,777		102,273,279		326,924,166		922,196,679
% per maturity term		43.1		10.3		11.1		35.5

Deposits

	12/31/2017												12/31/2016
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Demand deposits		68,973,374		-		-		-		68,973,374		17.1		61,132,961		18.6
Savings accounts		119,980,208		-		-		-		119,980,208		29.8		108,250,051		32.9
Interbank		87,751		907,837		669,043		517,143		2,181,774		0.5		3,756,706		1.1
Time deposits		27,798,146		32,350,463		22,569,688		129,081,663		211,799,960		52.6		156,274,276		47.4
Other deposits		2,591		-		-		-		2,591		0.0		-		0.0
Total		216,842,070		33,258,300		23,238,731		129,598,806		402,937,907				329,413,994
% per maturity term		53.8		8.3		5.8		32.2
Total – 12/31/2016		201,112,996		30,166,324		17,735,371		80,399,303		329,413,994
% per maturity term		61.1		9.2		5.4		24.4

In ITAÚ UNIBANCO HOLDING, the portfolio is composed of Interbank Deposits with maturity within 0 to 30 days amouting to R$ 11,579,447, with maturity within 31 to 180 days amouting to R$ 3,310,391 (R$ 5,054,803 at 12/31/2016), 181 to 365 days amouting to R$ 1,685,711 (R$ 8,056,441 at 12/31/2016) and over 365 days amounting to R$ 6,343,296, totaling R$ 22,918,845 (R$ 13,111,244 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

121

Deposits received under securities repurchase agreements

	12/31/2017												12/31/2016
	0 - 30		31 - 180		181 - 365		Over 365 days		Total		%		Total		%
Own portfolio		53,105,442		13,359,276		15,738,839		27,178,185		109,381,742		33.7		162,772,240		44.5
Government securities		43,614,616		4,430		-		-		43,619,046		13.5		25,544,435		7.0
Corporate Securities		6,564,059		-		-		-		6,564,059		2.0		4,906,420		1.4
Own issue		2,568,840		13,351,614		15,738,839		27,178,185		58,837,478		18.1		132,149,242		36.1
Foreign		357,927		3,232		-		-		361,159		0.1		172,143		0.0
Third-party portfolio		158,000,043		-		-		-		158,000,043		48.8		140,973,618		38.5
Free portfolio		8,431,433		2,384,350		1,064,481		44,647,957		56,528,221		17.5		62,291,979		17.0
Total		219,536,918		15,743,626		16,803,320		71,826,142		323,910,006				366,037,837
% per maturity term		67.7		4.9		5.2		22.2
Total – 12/31/2016		189,285,419		14,473,296		47,684,962		114,594,160		366,037,837
% per maturity term		51.7		4.0		13.0		31.3

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

122

Funds from acceptance and issuance of securities

	12/31/2017												12/31/2016
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Funds from bills:		3,922,774		16,903,316		14,016,454		26,474,085		61,316,629		56.9		54,187,258		57.9
Financial		713,462		3,795,205		8,725,700		14,457,357		27,691,724		25.6		19,566,267		20.9
Real estate		1,822,948		9,469,374		2,754,008		4,478,460		18,524,790		17.2		19,178,742		20.5
Bills of credit related to agribusiness		1,386,364		3,638,737		2,536,746		7,538,268		15,100,115		14.0		15,442,249		16.5
Foreign securities		2,826,239		6,143,196		2,862,116		30,045,568		41,877,119		38.8		34,286,830		36.5
Non-trade related – issued abroad		2,826,239		6,143,196		2,862,116		30,045,568		41,877,119		38.8		34,286,830		36.5
Brazil risk note programme		6,358		3,750,272		574,852		1,625,031		5,956,513		5.4		5,753,154		6.1
Structure note issued		86,515		862,874		980,303		3,743,402		5,673,094		5.3		6,257,627		6.7
Bonds		2,582,781		354,934		906,213		20,737,904		24,581,832		22.8		19,094,072		20.4
Fixed rate notes		98,139		902,437		124,454		1,994,289		3,119,319		2.9		582,863		0.6
Eurobonds		-		-		86		9,733		9,819		0.0		1,721,164		1.8
Mortgage notes		15,615		17,088		29,773		283,737		346,213		0.3		395,930		0.4
Other		36,831		255,591		246,435		1,651,472		2,190,329		2.0		482,020		0.5
Structured Operations Certificates ^(*)		70,982		182,991		1,508,945		2,624,358		4,387,276		4.3		5,236,754		5.6
Total		6,819,995		23,229,503		18,387,515		59,144,011		107,581,024				93,710,842
% per maturity term		6.3		21.6		17.1		55.0
12/31/2016		3,090,420		15,728,706		17,458,962		57,432,754		93,710,842
% per maturity term		3.3		16.8		18.6		61.3

(*) As of 12/31/2017, the market value of the funding from Structured Operations Certificates issued is R$ 4,605,105 (R$ 5,816,233 of 12/31/2016) according to BACEN Circular Letter nº. 3,623.

ITAÚ UNIBANCO HOLDING’s portfolio is composed of Brazil Risk Note Programme with maturities of 91 days to 180 days R$ 3,481,671 and over 365 days amounting amount of R$ 19,718 (R$ 3,431,074 at 12/31/2016), totaling R$ 3,501,389 (R$ 3,431,074 at 12/31/2016). Due to the exchange variation from the period from January 1 to December 31, 2016, the expense on financial operations is presented with credit nature.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

123

Borrowing and onlending

	12/31/2017												12/31/2016
	0-30		31-180		181-365		Over 365 days		Total		%		Total		%
Borrowing		4,045,458		13,901,156		12,771,764		8,541,383		39,259,761		61.9		45,786,110		60.6
Domestic		2,265,004		-		-		1,664		2,266,668		3.6		1,491,521		2.0
Foreign ^(*)		1,780,454		13,901,156		12,771,764		8,539,719		36,993,093		58.3		44,294,589		58.6
Onlending		758,822		3,293,476		3,938,569		16,190,412		24,181,279		38.1		29,827,821		39.4
Domestic – official institutions		758,822		3,293,476		3,938,569		16,190,412		24,181,279		38.1		29,827,821		39.4
BNDES		313,022		1,302,809		1,869,273		7,961,414		11,446,518		18.0		12,776,607		16.9
FINAME		433,311		1,942,929		2,014,970		7,764,062		12,155,272		19.2		16,356,819		21.6
Other		12,489		47,738		54,326		464,936		579,489		0.9		694,395		0.9
Total		4,804,280		17,194,632		16,710,333		24,731,795		63,441,040				75,613,931
% per maturity term		7.6		27.1		26.3		39.0
Total – 12/31/2016		4,011,611		25,954,220		17,514,478		28,133,622		75,613,931
% per maturity term		5.3		34.3		23.2		37.2

(*) Foreign borrowing are basically represented by foreign exchange transactions related to export pre-financing and import financing.

Due to the exchange variation from the period from January 1 to December 31, 2016, the expense on financial operations – Borrowings and Onlending is presented with credit nature.

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Subordinated debt, including perpetual ones

	12/31/2017															12/31/2016
	0-30		31-180		181-365		Over 365 days			Total			%			Total			%
CDB		-		-		-		-			-			-			929,395			1.6
Financial treasury bills		1,283,273		10,145,385		917,572		4,482,428			16,828,658			31.9			25,485,743			44.4
Euronotes				-		-		26,119,121			26,119,121			49.6			25,759,211			44.9
Bonds		31,375		45,131		76,005		5,461,280			5,613,791			10.6			5,301,922			9.2
Debt instruments eligible as capital		-		-		-		4,148,367			4,148,367			7.9			-			-
(-) Transaction costs incurred (Note 4b)		-		-		-		(14,062	)		(14,062	)		(0.0	)		(56,196	)		(0.1	)
Grand total ^(*)		1,314,648		10,190,516		993,577		40,197,134			52,695,875						57,420,075
% per maturity term		2.5		19.3		1.9		76.3
Total – 12/31/2016		628,011		8,548,231		1,879,506		46,364,327			57,420,075
% per maturity term		1.1		14.9		3.3		80.7

(*) According to current legislation, the accounting balance of subordinated debt as of December 2017 was used for the calculation of reference equity as of December, 2012, totaling R$ 42,686,968.

On December 12, 2017, ITAÚ UNIBANCO HOLDING CONSOLIDATED issued perpetual subordinated notes/AT1, in the total amount of R$ 4,135,000. The Notes were issued at the fixed rate of 6.125% to be validated until the 5th anniversary of the issue date. As from this date, inclusive, the interest rate will be recalculated every 5 years based on the interest rate of securities issued by the Treasury of the United States of America for the same period. The offer price of the Notes was 100%, which will result to investors in a return of 6.125% until the 5th anniversary of the Issue date. The Issue is neither subject to registration rules with the Securities Exchange Commission - SEC, in compliance with the Federal North-American law “Securities Act of 1933”, as amended (Securities Act), nor to registration with CVM, in Brazil, in compliance with applicable law and regulations. Notes are subject to BACEN’s approval for composition of Supplementary Capital of its Referential Equity, thus increased by approximately 0.6 p.p. the Company’s Tier I capitalization ratio, in compliance with CMN Resolution 4,192/13.

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Description

Name of security / currency	Principal amount (original currency)		Issue	Maturity	Return p.a.	Account balance
Subordinated financial bills - BRL
		42,000	2011	2018	IGPM + 7%		64,115
		30,000			IPCA + 7.53% to 7.7%		50,499
		6,373,127	2012	2018	108% to 113% of CDI		7,346,546
		460,645			IPCA + 4.4% to 6.58%		804,432
		3,782,100			100% of CDI + 1.01% to 1.32%		3,888,194
		112,000			9.95% to 11.95%		192,443
		2,000	2011	2019	109% to 109.7% of CDI		3,982
		1,000	2012	2019	110% of CDI		1,957
		12,000			11.96%		23,385
		100,500			IPCA + 4.7% to 6.3%		173,364
		1,000	2012	2020	111% of CDI		1,969
		20,000			IPCA + 6% to 6.17%		40,303
		6,000	2011	2021	109.25% to 110.5% of CDI		12,283
		2,306,500	2012	2022	IPCA + 5.15% to 5.83%		4,198,804
		20,000			IGPM + 4.63%		26,382
					Total		16,828,658
Subordinated euronotes - USD
		1,000,000	2010	2020	6.2%		3,343,100
		1,000,000		2021	5.75%		3,428,645
		750,000	2011	2021	5.75% to 6.2%		2,463,150
		550,000	2012	2021	6.2%		1,819,400
		2,625,000		2022	5.5% to 5.65%		8,836,595
		1,870,000		2023	5.13%		6,214,169
					Total		26,105,059

Subordinated bonds - CLP		13,739,331	2008	2022	7.4% to 7.99%		120,031
		41,528,200		2033	3.5% to 4.5%		220,122
		110,390,929		2033	4.8%		858,315
		98,151,772	2009	2035	4.8%		781,329
		2,000,000		2019	10.7%		2,604
		94,500,000		2019	IPC + 2%		119,957
		11,311,860	2010	2032	4.4%		75,419
		24,928,312		2035	3.9%		173,464
		125,191,110		2036	4.4%		825,241
		87,087,720		2038	3.9%		601,000
		68,060,124		2040	4.1%		462,679
		33,935,580		2042	4.4%		225,595
		104,000,000	2013	2023	IPC + 2%		118,265
		146,000,000		2028	IPC + 2%		166,082
		510,107,100	2014	2024	LIB + 4%		569,911
		47,831,440		2034	3.8%		293,777
					Total		5,613,791
Debt instruments eligible as capital - USD
		1,250,000	2017		6.12%		4,148,367
					Total		4,148,367

Total							52,695,875

ITAÚ UNIBANCO HOLDING’s portfolio is composed of Subordinated Euronotes with maturities of 31 to 180 days (R$ 354,914 at 12/31/2016) and over 365 days amounting to R$ 26,105,059 (R$ 25,348,101 at 12/31/2016), totaling R$ 26,105,059 (R$ 25,703,015 at 12/31/2016) and Debt Instruments Eligible as Capital over 365 days amounting to R$ 4,148,367.

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Note 11 - Insurance, pension plan and capitalization operations

Composition of the technical provisions

	Insurance				Pension plan				Capitalization				Total
	12/31/2017		12/31/2016		12/31/2017		12/31/2016		12/31/2017		12/31/2016		12/31/2017		12/31/2016
Unearned premiums		1,882,683		2,203,749		14,988		16,636		-		-		1,897,671		2,220,385
Mathematical provision of benefits to be granted and benefits granted		174,259		23,909		175,991,545		148,341,498		-		-		176,165,804		148,365,407
Redemptions and other unsettled amounts		11,228		10,739		264,295		209,921		-		-		275,523		220,660
Financial surplus		1,837		1,714		603,616		581,302		-		-		605,453		583,016
Unsettled claims		559,924		768,957		34,324		22,788		-		-		594,248		791,745
Claims / events incurred but not reported		400,952		435,340		26,895		26,816		-		-		427,847		462,156
Administrative and related expenses		27,948		39,062		94,725		71,208		11,368		15,718		134,041		125,988
Mathematical provision for capitalization and redemptions		-		-		-		-		3,269,426		3,105,812		3,269,426		3,105,812
Raffles payable and to be held		-		-		-		-		20,204		24,842		20,204		24,842
Other provisions⁽¹⁾		125,554		599,214		230,838		156,174		253		260		356,645		755,648
Total ⁽²⁾		3,184,385		4,082,684		177,261,226		149,426,343		3,301,251		3,146,632		183,746,862		156,655,659

(1)

It considers mostly the Supplemental Coverage Provision, regulated by SUSEP Circular nº. 517, of July 30, 2015;

(2)

This table covers the amendments established by SUSEP Circular nº. 517, of July 30, 2015, also for comparison purposes.

The total of Technical Provisions represents the amount of obligations after the Liability Adequacy Test is carried out.

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Assets guaranteeing technical provisions - SUSEP

	Insurance				Pension plan						Capitalization				Total
	12/31/2017		12/31/2016		12/31/2017			12/31/2016			12/31/2017		12/31/2016		12/31/2017			12/31/2016
Interbank investments – money market		687,150		922,814		1,148,776			1,094,525			1,421,400		1,479,859		3,257,326			3,497,198
Securities and derivative financial instruments		1,686,169		1,975,385		177,270,545			149,474,438			2,051,241		1,880,810		181,007,955			153,330,633
PGBL / VGBL fund quotas ⁽¹⁾		-		-		169,177,514			142,080,715			-		-		169,177,514			142,080,715
Government securities - domestic		-		-		146,176,158			113,386,189			-		-		146,176,158			113,386,189
National treasury bills		-		-		58,172,663			37,657,447			-		-		58,172,663			37,657,447
National treasury notes		-		-		41,209,530			35,653,890			-		-		41,209,530			35,653,890
Financial treasury bills		-		-		34,598,820			22,997,954			-		-		34,598,820			22,997,954
Repurchase agreements		-		-		12,195,145			17,076,898			-		-		12,195,145			17,076,898
Financial Treasury Bills		-		-		50,211			1,013,230			-		-		50,211			1,013,230
National Treasury Bills		-		-		10,319,654			11,140,553			-		-		10,319,654			11,140,553
National Treasury Notes		-		-		1,825,280			4,923,115			-		-		1,825,280			4,923,115
Corporate securities		-		-		22,724,144			28,434,397			-		-		22,724,144			28,434,397
Bank deposit certificates		-		-		316,405			1,341,959			-		-		316,405			1,341,959
Debentures		-		-		1,202,552			1,780,285			-		-		1,202,552			1,780,285
Shares		-		-		1,654,336			873,158			-		-		1,654,336			873,158
Promissory notes		-		-		391,323			-			-		-		391,323			-
Financial treasury bills		-		-		17,545,555			22,855,410			-		-		17,545,555			22,855,410
Others		-		-		31,520			83,148			-		-		31,520			83,148
Bank Deposit Certificates		-		-		1,582,453			1,500,437			-		-		1,582,453			1,500,437
Debentures		-		-		1,582,453			1,500,437			-		-		1,582,453			1,500,437
PGBL / VGBL fund quotas		-		-		362,458			349,988			-		-		362,458			349,988
Derivative financial instruments		-		-		(115,798	)		30,316			-		-		(115,798	)		30,316
Loans for shares		-		-		55,098			23,835			-		-		55,098			23,835
Accounts receivable / (payable)		-		-		(24,546	)		(144,010	)		-		-		(24,546	)		(144,010	)
Other assets		1,686,169		1,975,385		8,093,031			7,393,723			2,051,241		1,880,810		11,830,441			11,249,918
Government		697,056		1,022,093		7,834,256			6,200,269			324,780		390,942		8,856,092			7,613,304
Private		989,113		953,292		258,775			1,193,454			1,726,461		1,489,868		2,974,349			3,636,614
Receivables from insurance and reinsurance operations ⁽²⁾		1,061,839		1,216,692		-			-			-		-		1,061,839			1,216,692
Credit rights		922,341		919,753		-			-			-		-		922,341			919,753
Commercial – extended guarantee		88,902		244,899		-			-			-		-		88,902			244,899
Reinsurance		50,596		52,040		-			-			-		-		50,596			52,040
Total		3,435,158		4,114,891		178,419,321			150,568,963			3,472,641		3,360,669		185,327,120			158,044,523

(1)

The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a counter-entry to lliabilities in Pension plan technical provision accounts (Note 11a);

(2)

Recorded under Other receivables and Other assets.

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Financial and operating income

	Insurance																		Pension plan																		Capitalization						Total
	01/01 to 12/31/2017									01/01 to 12/31/2016									01/01 to 12/31/2017									01/01 to 12/31/2016									01/01 to			01/01 to			01/01 to			01/01 to
	Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			Direct			Reinsurance			Withheld			12/31/2017			12/31/2016			12/31/2017			12/31/2016
Financial income related to insurance, pension plan and
capitalization operations		174,149			-			174,149			351,267			-			351,267			44,312			-			44,312			281,292			-			281,292			141,136			233,768			359,597			866,327
Financial income		199,810			-			199,810			384,630			-			384,630			14,751,102			-			14,751,102			17,832,550			-			17,832,550			326,797			439,101			15,277,709			18,656,281
Financial expenses		(25,661	)		-			(25,661	)		(33,363	)		-			(33,363	)		(14,706,790	)		-			(14,706,790	)		(17,551,258	)		-			(17,551,258	)		(185,661	)		(205,333	)		(14,918,112	)		(17,789,954	)
Operating income related to insurance, pension plan and
capitalization operations		3,184,550			(1,892	)		3,182,658			2,848,579			(21,298	)		2,827,281			273,058			(3,744	)		269,314			580,898			(1,137	)		579,761			566,060			624,640			4,018,032			4,031,682
Premiums and contributions		4,059,916			(34,735	)		4,025,181			4,302,015			(90,979	)		4,211,036			22,854,224			(3,744	)		22,850,480			20,547,454			(3,210	)		20,544,244			2,816,941			2,854,850			29,692,602			27,610,130
Changes in technical provisions		621,642			(4,291	)		617,351			748,452			(9,298	)		739,154			(22,495,675	)		-			(22,495,675	)		(19,904,546	)		-			(19,904,546	)		4,350			2,463			(21,873,974	)		(19,162,929	)
Expenses for claims, benefits, redemptions and raffles		(1,228,996	)		36,913			(1,192,083	)		(1,557,945	)		73,134			(1,484,811	)		(79,126	)		-			(79,126	)		(53,549	)		486			(53,063	)		(2,261,441	)		(2,236,250	)		(3,532,650	)		(3,774,124	)
Selling expenses		(226,791	)		221			(226,570	)		(599,653	)		5,845			(593,808	)		(4,029	)		-			(4,029	)		(3,949	)		-			(3,949	)		(5,631	)		(4,547	)		(236,230	)		(602,304	)
Other operating revenues and expenses		(41,221	)		-			(41,221	)		(44,290	)		-			(44,290	)		(2,336	)		-			(2,336	)		(4,512	)		1,587			(2,925	)		11,841			8,124			(31,716	)		(39,091	)
Total income related to insurance, pension plan and capitalization operations		3,358,699			(1,892	)		3,356,807			3,199,846			(21,298	)		3,178,548			317,370			(3,744	)		313,626			862,190			(1,137	)		861,053			707,196			858,408			4,377,629			4,898,009

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Note 12 – Contingent assets and liabilities and legal liabilities – tax and social security

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.

In December 2017, through mediation of the Federal Attorney’s Office (AGU) and supervision of the Central Bank of Brazil (BCB), savers (represented by two civil associations, FEBRAPO and IDEC) and FEBRABAN entered into an instrument of agreement aiming at resolving lawsuits related to economic plans, and Itaú has already adhered to its terms. For effectiveness and validity of the agreement, it needs to be approved by the STF, which is expected to occur in the first half of 2018. As from that approval, the savers will have 24 months to adhere to the terms of the agreement.

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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$ 3,493,532 (R$ 3,388,219 at 12/31/2016), in this amount there are no values resulting from interests in joint ventures.

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$ 122,120 (R$ 78,507 at 12/31/2016).

Other Risks

These are quantified and accrued mainly based on the evaluation of rural credit transactions with joint liability and FCVS (salary variations compensation fund) credits assigned to Banco Nacional.

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The table below shows the changes in the respective provisions for contingent liabilities and the respective escrow deposit balances:

	01/01 to 12/31/2017												01/01 to 12/31/2016
	Civil			Labor			Other			Total			Total
Opening balance		5,172,432			7,232,098			259,138			12,663,668			11,493,615
Effect of change in consolidation criteria		(1,392	)		-			-			(1,392	)		-
Balance arising from the merger with Corpbanca (Note 2c)		-			-			-			-			140,132
Balance arising from the acquisition of Citibank operations		38,702			283,525			-			322,227			-
(-) Contingencies guaranteed by indemnity clauses (Note 4n I)		(256,104	)		(1,065,666	)		-			(1,321,770	)		(1,325,461	)
Subtotal		4,953,638			6,449,957			259,138			11,662,733			10,308,286
Monetary restatement/charges		98,890			612,811			-			711,701			872,400
Changes in the period reflected in results (Notes 13f and 13i)		1,419,731			2,357,434			(108,453	)		3,668,712			4,179,785
Increase ^(*)		1,961,939			2,592,298			4,125			4,558,362			5,044,103
Reversal		(542,208	)		(234,864	)		(112,578	)		(889,650	)		(864,318	)
Payment		(1,415,830	)		(3,135,138	)		-			(4,550,968	)		(4,018,573	)
Subtotal		5,056,429			6,285,064			150,685			11,492,178			11,341,898
(+) Contingencies guaranteed by indemnity clauses (Note 4n I)		243,221			997,546			-			1,240,767			1,321,770
Closing balance		5,299,650			7,282,610			150,685			12,732,945			12,663,668
Closing balance at 12/31/2016		5,172,432			7,232,098			259,138			12,663,668
Escrow deposits at 12/31/2017		1,456,521			2,200,012			-			3,656,533
Escrow deposits at 12/31/2016		1,541,137			2,336,935			-			3,878,072

(*) Civil provisions include the provision for economic plans amounting to R$ 184,448 (R$ 408,129 from 01/01 to 12/31/2016) (Note 22k).

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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.

The table below shows the changes in the provisions and respective balances of escrow deposits for Tax and Social Security lawsuits:

	01/01 to 12/31/2017									01/01 to 12/31/2016
Provisions	Legal obligation			Contingencies			Total			Total
Opening balance		4,625,198			3,619,951			8,245,149			7,500,534
(-) Contingencies guaranteed by indemnity clauses (Note 4n I)		-			(68,734	)		(68,734	)		(64,548	)
Subtotal		4,625,198			3,551,217			8,176,415			7,435,986
Monetary restatement / charges		235,546			378,254			613,800			736,114
Changes in the period reflected in results		(123,529	)		96,629			(26,900	)		67,618
Increase		128,397			323,609			452,006			286,413
Reversal		(251,926	)		(226,980	)		(478,906	)		(218,795	)
Payment ^(*)		(1,000	)		(1,825,346	)		(1,826,346	)		(63,303	)
Subtotal		4,736,215			2,200,754			6,936,969			8,176,415
(+) Contingencies guaranteed by indemnity clauses (Note 4n I)		-			66,190			66,190			68,734
Closing balance (Note 14c)		4,736,215			2,266,944			7,003,159			8,245,149
Closing balance at 12/31/2016 (Note 14c)		4,625,198			3,619,951			8,245,149

(*) Includes the adhesion to PERT (Special Tax Regularization Program) which allowed the use of deferred tax assets.

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	01/01 to 12/31/2017									01/01 to 12/31/2016
Escrow deposits	Legal obligation			Contingencies			Total			Total
Opening balance		4,311,027			535,499			4,846,526			4,338,744
Appropriation of income		256,739			87,928			344,667			383,120
Changes in the period		(18,615	)		15,637			(2,978	)		124,662
Deposited		81,027			159,037			240,064			216,856
Withdrawals		(93,681	)		(108,613	)		(202,294	)		(65,938	)
Reversals to income		(5,961	)		(34,787	)		(40,748	)		(26,256	)
Closing balance		4,549,151			639,064			5,188,215			4,846,526
Relocated to assets pledged in guarantee of contingencies (Note 12d)		-			(18,006	)		(18,006	)		-
Closing balance after relocated		4,549,151			621,058			5,170,209			4,846,526
Closing balance at 12/31/2016		4,311,027			535,499			4,846,526

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The main discussions related to the provisions recognized for Tax and Social Security Lawsuits are as follows:

CSLL – Isonomy – R$ 1,289,324: discussing the lack of constitutional support for the increase, established 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$ 1,272,798;

PIS and COFINS – Calculation basis – R$ 687,149: defending the levy of PIS and COFINS on revenue, a tax on revenue from the sales of assets and services. The balance of the deposit in court totals R$ 601,137.

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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 principal tax and social security lawsuits with a likelihood of loss deemed possible, which total R$ 19,595,293 are described below:

INSS – Non-compensatory amounts – R$ 5,219,802: 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$ 2,579,958: the deductibility of goodwill with future expected profitability on the acquisition of investments;

PIS and COFINS - Reversal of Revenues from Depreciation in Excess – R$ 1,657,882: discussing the accounting and tax treatment granted to PIS and COFINS upon settlement of leasing operations;

IRPJ, CSLL, PIS and COFINS – Requests for offsetting dismissed - R$ 1,649,520: cases in which the liquidity and the ability of offset credits are discussed;

IRPJ and CSLL – Interest on capital – R$ 1,486,739: 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$ 1,122,965: 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$ 704,589 – Assessments 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.

Receivables - reimbursement of contingencies

The receivables balance arising from reimbursements of contingencies totals R$ 1,065,095 (R$ 1,127,821 at 12/31/2016) (Note 13a). This value is derived basically from the guarantee in the privatization process of the Banco Banerj S.A., which occurred in 1997, when the State of Rio de Janeiro created a fund to guarantee civil, labor and tax contingencies.

Assets pledged as contingencies

Assets pledged as collateral for contingencies refer to lawsuits involving contingent liabilities and are restricted or in escrow deposits, as shown in the table below:

	12/31/2017		12/31/2016
Securities (basically financial treasury bills – Note 7b)		961,548		950,173
Deposits in guarantee		4,585,457		4,536,941

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ITAÚ UNIBANCO HOLDING’s litigation provisions are long-term, considering the time required to conclude legal cases through the court system in Brazil, which prevents the disclosure of a deadline for their conclusion.

The legal advisors believe that ITAÚ UNIBANCO HOLDING is not a party to this or any other administrative proceedings or lawsuits that could significantly affect the results of its operations.

Programs for Settlement or Installment Payment of Municipal Taxes

ITAÚ UNIBANCO conglomerate companies adhered to the Installment Payment Incentive Program – PPI, established by a number of Municipality Authorities, among which are São Paulo and Rio de Janeiro (Laws No. 16,680/17 and No. 6,156/17, respectively).

The programs permitted to regularize tax or other debts, with discounts on interest and fine amounts.

Special Tax Regularization Program - PERT

In the federal levels, ITAÚ UNIBANCO conglomerate companies adhered to the Special Tax Regularization Program - PERT, established by Law No. 13,496, of October 24, 2017, related to tax and social security debts management by the Federal Revenue Service and by the General Attorney’s Office of the National Treasury.

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Note 13 - Breakdown of accounts

Other sundry receivables

	12/31/2017			12/31/2016
Social contribution for offsetting (Note 14b I)		611,694			637,865
Taxes and contributions for offsetting		8,245,479			6,739,537
Escrow deposits for foreign fundraising program		606,054			854,828
Receivables from reimbursement of contingent liabilities (Note 12c)		1,065,095			1,127,821
Receivables from reimbursement of contingent liabilities		2,246,519			2,249,534
(Allowance for loan losses)		(1,181,423	)		(1,121,713	)
Sundry domestic debtors		2,546,801			1,616,453
Premiums from loan operations		316,097			849,655
Sundry foreign debtors		1,876,312			1,839,599
Retirement plan assets (Note 19)		1,066,667			1,113,473
Recoverable payments		46,984			32,355
Salary advances		117,631			55,529
Operations without credit granting characteristics		1,976,438			1,669,784
Securities and credits receivable		2,883,183			2,078,932
(Allowance for loan losses)		(906,745	)		(409,148	)
Other		922,179			572,516
Total		19,397,431			17,109,415

In ITAÚ UNIBANCO HOLDING, Other Sundry Receivables is mainly composed of Taxes and Contributions for Offset R$ 1,764,132 (R$ 1,465,928 at 12/31/2016) (Note 14b I) and Advance for future capital increase of (R$ 2,160,724 at 12/31/2016).

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Prepaid expenses

	12/31/2017		12/31/2016
Commissions ^(*)		561,852		1,175,287
Related to vehicle financing		44,835		92,627
Related to insurance and pension plan		71,513		238,015
Restricted to commissions / partnership agreements		6,905		30,598
Related to Payroll Loans		268,833		641,102
Other		169,766		172,945
Advertising		678,586		456,838
Other		1,122,211		851,551
Total		2,362,649		2,483,676

(*)

In the third quarter of 2017, the impact on income related to commission from local correspondents, as described in Note 4g, was R$ 331,904 (R$ 226,949 at 12/31/2016).

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Other sundry liabilities

	12/31/2017		12/31/2016
Liabilities from Payment Transactions (Note 4e)		37,101,553		29,998,035
Liabilities from transactions related to credit assignments (Note 8f)		4,930,715		5,710,579
Provisions for sundry payments		3,662,060		5,984,451
Sundry creditors - foreign		3,374,971		2,779,708
Sundry creditors - local		2,153,365		2,604,844
Provision financial guarantees provided (Note 8c)		1,949,644		1,445,445
Personnel provision		1,547,944		1,403,531
Creditors of funds to be released		1,134,248		935,865
Liabilities for official agreements and rendering of payment services		984,626		864,244
Provision for health insurance ^(*)		842,204		742,046
Provision for retirement plan benefits (Note 19)		721,285		749,735
Provision for Citibank integration expenditures		504,300		-
Liabilities for purchase of assets and rights		174,550		178,661
Related to insurance operations		167,192		224,180
Funds from consortia participants		101,676		84,171
Liabilities from sales operations or transfer of financial assets		36,463		38,162
Other		891,836		1,086,827
Total		60,278,632		54,830,484

(*) Provision set up to cover possible future deficits up to the total discontinuation of the portfolio, arising from the difference between monthly installments adjustments, authorized annually by the regulatory body, and the actual variation of hospital costs that affect the compensation of claims (Note 13i).

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Banking service fees

	01/01 to		01/01 to
	12/31/2017		12/31/2016
Asset management		5,510,663		4,811,462
Funds management fees		4,882,429		4,136,416
Consortia management fees		628,234		675,046
Current account services		748,894		818,147
Credit cards		10,560,346		10,192,456
Relationship with stores		10,560,290		10,175,778
Credit card processing		56		16,678
Sureties and credits granted		2,608,768		2,508,386
Loan operations		1,091,230		1,046,548
Guarantees provided		1,517,538		1,461,838
Receipt services		1,628,574		1,557,700
Collection fees		1,376,757		1,314,114
Collection services		251,817		243,586
Other		2,835,200		2,719,269
Custody services and management of portfolio		407,299		365,044
Economic and financial advisory		676,120		606,987
Foreign exchange services		118,896		93,440
Other services		1,632,885		1,653,798
Total		23,892,445		22,607,420

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Income related to bank charges

	01/01 to		01/01 to
	12/31/2017		12/31/2016
Loan operations / registration		875,827		830,778
Credit cards – annual fees and other services		3,566,610		3,203,539
Deposit account		196,094		176,539
Transfer of funds		302,363		249,142
Income related to securities brokerage		767,792		454,641
Service package fees		6,201,062		5,706,140
Total		11,909,748		10,620,779

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Personnel expenses

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Compensation		(9,294,958	)		(8,890,492	)
Charges		(2,831,954	)		(2,566,433	)
Welfare benefits (Note 19)		(3,409,481	)		(2,640,029	)
Training		(231,704	)		(193,096	)
Labor claims and termination of employees (Note 12b)		(2,814,643	)		(3,518,026	)
Stock Option Plan		(234,119	)		(306,172	)
Total		(18,816,859	)		(18,114,248	)
Employees’ profit sharing		(3,534,064	)		(3,306,221	)
Total including employees’ profit sharing		(22,350,923	)		(21,420,469	)

Other administrative expenses

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Data processing and telecommunications		(4,151,826	)		(3,966,513	)
Depreciation and amortization		(2,282,514	)		(2,202,318	)
Installations		(3,131,804	)		(3,065,362	)
Third-party services		(4,197,480	)		(4,395,246	)
Financial system services		(794,460	)		(693,036	)
Advertising, promotions and publication		(1,095,420	)		(973,199	)
Transportation		(338,679	)		(391,338	)
Materials		(349,974	)		(313,495	)
Security		(723,148	)		(716,094	)
Travel expenses		(213,704	)		(197,998	)
Other		(1,200,719	)		(1,159,096	)
Total		(18,479,728	)		(18,073,695	)

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Other operating revenue

	01/01 to		01/01 to
	12/31/2017		12/31/2016
Reversal of operating provisions		54,364		44,351
Recovery of charges and expenses		119,041		170,806
Program for Settlement or Installment Payment of Federal (Note 12e)		-		13,344
Other		1,003,851		576,237
Total		1,177,256		804,738

Other operating expenses

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Provision for contingencies (Note 12b)		(1,443,944	)		(1,528,312	)
Civil lawsuits		(1,419,731	)		(1,241,138	)
Tax and social security contributions		(132,666	)		(295,800	)
Other		108,453			8,626
Selling - credit cards		(3,351,237	)		(2,802,668	)
Claims		(310,401	)		(295,549	)
Impairment – Operations with no Credit Granting Characteristics		(553,552	)		-
Impairment – Other receivables Sundry		(249,284	)		-
Provision for health insurance (Note 13c)		(100,157	)		(25,704	)
Refund of interbank costs		(305,909	)		(307,931	)
Provision for Citibank integration expenditures		(504,300	)		-
Program for Cash or Installment Payment of Federal Taxes		(1,110,776	)		(927,301	)
Other		(2,798,426	)		(2,186,522	)
Total		(10,727,986	)		(8,073,987	)

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Note 14 - Taxes

Composition of expenses for taxes and contributions

I - Statement of calculation of income tax and social contribution:

Due on operations for the period	01/01 to 12/31/2017			01/01 to 12/31/2016
Income before income tax and social contribution		32,890,984			35,958,472
Charges (income tax and social contribution) at the rates in effect (Note 4p)		(14,800,943	)		(16,181,312	)
Increase / decrease in income tax and social contribution charges arising from:
Investments in affiliates and jointly controlled entities		176,337			171,992
Foreign exchange variations on investments abroad		397,306			(4,312,739	)
Interest on capital		3,873,196			3,616,794
Corporate reorganizations (Note 4r)		627,849			627,847
Dividends and interest on external debt bonds		420,235			364,615
Other nondeductible expenses net of non taxable income (*)		4,148,404			11,210,105
Income tax and social contribution expenses		(5,157,616	)		(4,502,698	)
Related to temporary differences
Increase (reversal) for the period		(3,779,316	)		(9,769,464	)
Increase (reversal) of prior periods		68,033			62,107
(Expenses)/Income related to deferred taxes		(3,711,283	)		(9,707,357	)
Total income tax and social contribution expenses		(8,868,899	)		(14,210,055	)

(*)

Includes temporary (additions) and exclusions.

II - Composition of tax expenses:

	01/01 to			01/01 to
	12/31/2017			12/31/2016
PIS and COFINS		(5,297,536	)		(6,208,791	)
ISS		(1,117,878	)		(1,040,383	)
Other		(620,504	)		(728,698	)
Total (Note 4p)		(7,035,918	)		(7,977,872	)

The tax expenses of ITAÚ UNIBANCO HOLDING amount to R$ 374,759 (R$ 386,819 at 12/31/2016) and are mainly composed of PIS and COFINS.

III- Tax effects on foreign exchange management of investments abroad

In order to minimize the effects on income in connection with the foreign exchange variations on investments abroad, net of the respective tax effects, ITAÚ UNIBANCO HOLDING CONSOLIDATED carries out derivative transactions in foreign currency (hedges), as mentioned in Note 22b.

The results of these transactions are considered in the calculation base of income tax and social contribution, in accordance with their nature, while the foreign exchange variations on investments abroad are not included therein, pursuant to the tax legislation in force:

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Deferred taxes

I -

The Deferred Tax Asset balance and its changes, segregated based on its origin and disbursements incurred, are represented as follows:

	Provisions				Deferred Tax Assets
	12/31/2016		12/31/2017		12/31/2016		Realization / Reversal			Increase ⁽³⁾		12/31/2017
Reflected in income and expense accounts						51,173,199		(16,409,757	)		14,312,765		49,076,207
Related to income tax and social contribution loss carryforwards						5,867,580		(202,268	)		619,239		6,284,551
Related to disbursed provisions						29,639,070		(9,251,812	)		6,994,323		27,381,581
Allowance for loan losses						26,713,660		(8,902,690	)		6,118,428		23,929,398
Adjustment to market value of securities and derivative financial instruments (assets/liabilities)						104,665		(104,665	)		210,561		210,561
Allowance for real estate						188,993		(113,921	)		102,239		177,311
Goodwill on purchase of investments						541,445		(108,431	)		219,883		652,897
Other						2,090,307		(22,105	)		343,212		2,411,414
Related to non-disbursed provisions ⁽¹⁾		41,556,545		37,739,945		15,666,549		(6,955,677	)		6,699,203		15,410,075
Related to the operation		31,116,896		27,629,789		11,490,689		(6,955,677	)		6,357,539		10,892,551
Provision for contingent liabilities		15,930,507		12,950,235		5,706,449		(2,732,869	)		2,221,708		5,195,288
Civil lawsuits		5,172,432		4,940,640		1,954,623		(575,944	)		595,413		1,974,092
Labor claims		7,232,098		5,627,873		2,167,564		(1,232,591	)		1,263,353		2,198,326
Tax and social security contributions		3,515,822		2,372,871		1,580,729		(923,546	)		362,942		1,020,125
Other		10,155		8,851		3,533		(788	)		-		2,745
Adjustments of operations carried out on the futures settlement market		1,289,343		930,178		537,938		(269,729	)		31,545		299,754
Legal obligation - tax and social security contributions		2,371,055		2,374,018		389,059		(557,946	)		657,677		488,790
Provision related to health insurance operations		742,046		842,204		296,604		-			43,987		340,591
Other non-deductible provisions		10,783,945		10,533,154		4,560,639		(3,395,133	)		3,402,622		4,568,128
Related to Additional Provisions in Relation to the Minimum Required Not Disbursed - Loan Losses, including Financial Guarantees Provided.		10,439,649		10,110,156		4,175,860		-			341,664		4,517,524
Provision for Financial Guarantees Provided (Note 8c)⁽²⁾		1,445,445		1,949,644		650,450		-			226,890		877,340
Additional allowance		8,994,204		8,160,512		3,525,410		-			114,774		3,640,184
Reflected in stockholders' equity accounts						2,884,425		(1,146,106	)		156,853		1,895,172
Corporate reorganizations (Note 4r)		3,692,905		1,846,293		1,255,588		(627,849	)		-		627,739
Adjustment to market value of available-for-sale securities		1,523,673		371,991		685,654		(518,257	)		-		167,397
Provision for retirement plan benefits		-		1,625		-		-			731		731
Cash flow hedge and hedge of net investment in foreign operation		2,505,143		2,748,262		943,183		-			156,122		1,099,305
Total ⁽⁴⁾		49,278,266		42,708,116		54,057,624		(17,555,863	)		14,469,618		50,971,379
Social contribution for offsetting arising from Option established in article 8° of Provisional Measure n°. 2,158-35 of August 24, 2001						637,865		(26,171	)		-		611,694

(1) From a financial point of view, rather than recording the provision of R$ 37, 739, 945 (R$ 41,556,545 at 12/31/2016) and deferred tax assets of R$ 15,410,075 (R$ 15,666,549 at 12/31/2016), only net provisions of the corresponding tax effects should be considered, which would reduce the total deferred tax assets from R$ 50,971,379 (R$ 54,057,624 at 12/31/2016) to R$ 35,561,304 (R$ 38,391,075 at 12/31/2016);

(2) Comprises the recognition of deferred tax assets of R$ 180,738 arising from the initial application of CMN Resolution no. 4,512/16 recorded in Retained Earnings / Accumulated Losses in Stockholders’ Equity;

(3) Includes balances arising from the acquisition of Citibank operations R$ 726,694.

(4) 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 subsidiaries, Itaú Unibanco S.A e Banco Itaucard S.A, a requirement has been sent to Central Bank of Brazil, in compliance with paragraph 7 of article 1 of Resolution no. 4,441/15 and Circular no. 3,776/15.

For ITAÚ UNIBANCO HOLDING, Tax Credits totaled R$ 360,618 (R$ 220,426 at 12/31/2016) and are mainly represented by Tax Loss Carryforwards of R$ 56,569 (R$ 37,801 at 12/31/2016), Provisions for Escrow Accounts of R$ 117,082 (R$ 117,126 at 12/31/2016), Administrative Provisions of R$ 96,736 (R$ 45,233 at 12/31/2016), Provisions for Legal, Tax and Social Security Risks of R$ 16,856 (R$ 10,338 at 12/31/2016), the realization of which is contingent upon the outcome of the respective lawsuits. Provision for Pension Plan Benefits of R$ 48,284, Allowance for Loan Losses of R$ 21,259, and Adjustment to Market Value of Trading Securities and Derivative Financial Instruments of (R$ 7,520 at December 31, 2016).

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II -

Provision for Deferred Income Tax and Social Contribution balance and the changes therein changes are shown as follows:

			Realization /
	12/31/2016		Reversal			Increase		12/31/2017

Reflected in income and expense accounts		12,561,946		(8,700,382	)		9,502,611		13,364,175
Depreciation in excess – leasing		935,600		(332,042	)		9,790		613,348
Restatement of escrow deposits and contingent liabilities		1,193,238		(181,124	)		267,605		1,279,719
Provision for pension plan benefits		233,114		-			70,918		304,032
Adjustments to market value of securities and derivative financial instruments		8,178,341		(8,178,342	)		8,498,726		8,498,725
Adjustments of operations carried out on the future settlement market		1,210,342		-			365,374		1,575,716
Taxation of results abroad – capital gains		1,787		-			529		2,316
Other		809,524		(8,874	)		289,669		1,090,319
Reflected in stockholders’ equity accounts		393,574		(177,198	)		17,227		233,603
Adjustments to market value of available-for-sale securities		358,924		(151,809	)		17,227		224,342
Provision for pension plan benefits ^(*)		34,650		(25,389	)		-		9,261
Total		12,955,520		(8,877,580	)		9,519,838		13,597,778

(*) Reflected in stockholders' equity, pursuant to CVM Resolution n° 4,424/15 (Note 19).

At ITAÚ UNIBANCO HOLDING, the Provisions for Deferred Taxes and Contributions total R$ 78,627 (R$ 148,273 at 12/31/2016) and are basically comprised of Adjustments to Market Value of Trading Securities and Financial Derivative Instruments of R$ 73,383 (R$ 137,742 at 12/31/2016) and Monetary Restatement of Escrow Deposits for Legal Obligations and Contingent Liabilities of R$ 5,243 (R$ 5,223 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

147

III -

The estimate of realization and present value of tax credits and social contribution to offset, arising from Provisional Measure 2,158-35 of 08/24/2001 and from the Provision for Deferred Income Tax and Social Contribution existing at December 31, 2017, are:

	Deferred tax assets																				Provision for
Year of realization	Temporary differences		%			Tax loss/social contribution loss carryforwards		%			Total		%			Social contribution for offsetting		%			deferred income tax and social contribution			%			Net deferred taxes		%

2018		25,982,820		58	%		2,739,764		44	%		28,722,584		56	%		7,060		1	%		(1,362,831	)		10	%		27,366,813		72	%
2019		10,833,130		24	%		134,384		2	%		10,967,514		21	%		10,480		2	%		(5,178,219	)		38	%		5,799,775		15	%
2020		1,759,367		4	%		634,883		10	%		2,394,250		5	%		422,717		69	%		(2,226,919	)		17	%		590,048		2	%
2021		1,333,809		3	%		594,408		9	%		1,928,217		4	%		171,437		28	%		(1,932,889	)		14	%		166,765		0	%
2022		766,272		2	%		757,059		12	%		1,523,331		3	%		-		0	%		(812,936	)		6	%		710,395		2	%
after 2022		4,011,429		9	%		1,424,054		23	%		5,435,483		11	%		-		0	%		(2,083,984	)		15	%		3,351,499		9	%
Total		44,686,827		100	%		6,284,552		100	%		50,971,379		100	%		611,694		100	%		(13,597,778	)		100	%		37,985,295		100	%
Present value ^(*)		41,692,126					5,573,010					47,265,136					544,439					(12,099,013	)					35,710,562

(*) 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 service 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 for income tax and social contribution, due to differences between the accounting criteria and tax legislation, in addition to corporate aspects. Accordingly, we recommend that the trends for the realization of deferred tax assets arising from temporary differences, income tax and social contribution loss carry forwards are not used as an indication of future net income.

IV-

Considering the temporary effects introduced by Law nº. 13,169/15, which increased the social contribution rate to 20% through December 31, 2018, tax credits were recognized based on their likelihood of realization. As at 12/31/2017 and 12/31/2016, there are no unrecognized tax credits.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

148

Tax and social security contributions

	12/31/2017		12/31/2016
Taxes and contributions on income payable		3,652,003		2,239,654
Taxes and contributions payable		3,190,489		2,475,547
Provision for deferred income tax and social contribution (Note 14b II)		13,597,778		12,955,520
Legal liabilities – tax and social security (Note 12b)		4,736,215		4,625,198
Total		25,176,485		22,295,919

At ITAÚ UNIBANCO HOLDING, the balance of tax and social security contributions totals R$ 175,279 (R$ 332,593 at 12/31/2016) and is mainly comprised of taxes and contributions on income payable of R$ 82,009 (R$ 170,601 at 12/31/2016) and provision for deferred income tax and social contribution R$ 78,627 (R$ 148,273 at 12/31/2016).

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

149

Taxes paid or provided for and withheld from third parties

The amount of taxes paid or provided for mainly arises from those levied on income, revenue and payroll. In relation to the amounts withheld and collected from third parties, the company takes into consideration the interest on capital and on the provision of service, in addition to that levied on financial operation.

	12/31/2017		12/31/2016
Taxes paid or provided for		16,856,898		16,136,908
Taxes withheld and collected from third parties		17,581,848		16,694,904
Total		34,438,746		32,831,812

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

150

Note 15 – Permanent Assets

a) Investment

I - Change of investments - ITAÚ UNIBANCO HOLDING

		Balance at 12/31/2016											Changes 12/31/2017
		Book value																	Equity in earnings of subisidiaries
Companies	Functional currency	Stockholders' equity		Adjustments under investor criteria ⁽¹⁾		Unrealized results			Goodwill		Balance at 12/31/2016		Amortization of goodwill			Dividends / interest on capital paid/provided for ⁽²⁾			Earnings / (Losses)			Adjustments under investor criteria ⁽¹⁾		Unrealized results			Total			Exchange Variation - Functional currency other than the Real			Adjustments in marketable securities of subsidiaries and other			Corporate Events ⁽³⁾			Balance at 12/31/2017		Equity in earnings of subsidiaries from 01/01 to 12/31/2016
Domestic			82,756,794		180,128		(265,314	)		11,615		82,683,223		(6,336	)		(26,055,320	)		18,443,144			256,360		33,685			18,733,189			287,331			209,864			(416,806	)		75,435,145		16,912,939
Itau Unibanco S.A.			69,303,215		163,163		(226,977	)		11,615		69,251,016		(6,336	)		(23,811,920	)		15,269,825			221,103		71,047			15,561,975			288,493			206,008			-			61,489,236		13,429,729
Banco Itaucard S.A. ⁽⁴⁾			7,516,728		1,522		(5,287	)		-		7,512,963		-			(1,038,405	)		2,033,669			1,512		(48,211	)		1,986,970			(287	)		34,644			-			8,495,885		2,037,173
Banco Itau BBA S.A.			2,776,358		13,399		(33,050	)		-		2,756,707		-			(754,662	)		594,374			28,157		10,849			633,380			(1,047	)		(25,277	)		(416,806	)		2,192,295		904,587
Itau BBA Participagoes S.A.			1,798,400				-			-		1,798,400		-			(2,793	)		274,007			-		-			274,007			172			(2	)		-			2,069,784		262,282
Itau Corretora de Valores S.A. ⁽⁴⁾			1,362,080		2,044		-			-		1,364,124		-			(447,537	)		271,265			5,588		-			276,853			-			(5,509	)		-			1,187,931		279,164
Itau Seguros S.A.			13		-		-			-		13		-			(3	)		4			-		-			4			-			-			-			14		4
Foreign			6,443,364		-		39			417,710		6,861,113		(45,158	)		(154,115	)		83,355			-		(11,544	)		71,811			562,208			2,097			26			7,297,982		(854,114	)
Itau Corpbanca ⁽⁵⁾	Chilean peso		3,352,180		-		23			417,710		3,769,913		(45,158	)		(653	)		(125,231	)		-		(14	)		(125,245	)		351,329			(8,924	)		-			3,941,262		(432,351	)
BICSA Holdings, LTD.	Chilean peso		1,700,890		-		16			-		1,700,906		-			-			(94,479	)		-		(11,534	)		(106,013	)		169,140			(12	)		-			1,764,021		(319,130	)
Banco Itau Uruguay S.A.	Uruguayan peso		1,156,119		-		-			-		1,156,119		-			(83,051	)		204,562			-		-			204,562			35,140			11,080			-			1,323,850		(65,986	)
OCA S.A.	Uruguayan peso		230,073		-		-			-		230,073		-			(69,387	)		98,266			-		4			98,270			6,622			(47	)		3,318			268,849		45,962
ACO Ltda. ⁽⁶⁾	Uruguayan peso		4,102		-		-			-		4,102		-			(1,024	)		237			-		-			237			(23	)		-			(3,292	)		-		(432	)
Itau Chile Holdings, INC. ⁽⁷⁾	Chilean peso		-		-		-			-		-		-			-			-			-		-			-			-			-			-			-		3,471
Banco Itau Chile ⁽⁸⁾	Chilean peso		-		-		-			-		-		-			-			-			-		-			-			-			-			-			-		(85,648	)
Grand total			89,200,158		180,128		(265,275	)		429,325		89,544,336		(51,494	)		(26,209,435	)		18,526,499			256,360		22,141			18,805,000			849,539			211,961			(416,780	)		82,733,127		16,058,825

(1)

Adjustment arising from the standardization of the investee’s financial statements according to the investor’s accounting policies;

(2)

Dividends approved and not paid are recorded as Dividends receivable;

(3)

Corporate events arising from acquisitions, spin-offs, merges, takeovers, and increases or decreases of capital;

(4)

In 2016 the equity in earnings reflect the different interest in preferred shares, profit sharing and dividends;

(5)

Inflow of investments on April 01, 2016 in the Corpbanca’s acquisition process;

(6)

Company incorporated on December 01, 2017;

(7)

Company liquidated on February 29, 2016;

(8)

Write-off of investment on April 01, 2016 in the Corpbanca’s acquisition process.

			Stockholders'		Net income			Number of shares/quotas owned by ITAU UNIBANCO HOLDING						Equity share in voting capital		Equity share in
Companies	Capital		equity		for the period			Common		Preferred		Quotas		(%)		capital (%)
Domestic
Itau Unibanco S.A.		47,425,425		61,639,515		15,269,825			2,396,347,872		2,320,862,580		-		100.00		100.00
Banco Itaucard S.A.		3,754,600		8,549,382		2,033,669			237,962,639,781		1,277,933,118		-		99.99		99.99
Banco Itau BBA S.A.		1,405,739		2,214,497		594,374			4,474,435		4,474,436		-		99.99		99.99
Itau BBA Participações S.A.		1,328,562		2,069,784		274,007			548,954		1,097,907		-		100.00		100.00
Itau Corretora de Valores S.A.		802,482		1,187,931		271,265			27,482,523		811,503		-		99.99		99.99
Itau Seguros S.A.		3,652,139		5,481,458		1,652,860			450		1		-		0.01		0.01
Foreign
Itau CorpBanca		10,025,731		15,895,671		(557,799	)		115,039,610,411		-		-		22.45		22.45
BICSA Holdings, LTD.		1,094,487		1,775,555		(94,479	)		-		-		330,860,746		99.99		99.99
Banco Itau Uruguay S.A.		513,044		1,323,850		204,562			4,465,133,954		-		-		100.00		100.00
OCA S.A.		17,275		268,849		98,266			1,503,496,740		-		-		100.00		100.00

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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II - Composition of investments

a) The table below shows the major investments of ITAÚ UNIBANCO HOLDING CONSOLIDATED:

	% participation
	at 12/31/2017						12/31/2017
	Total			Voting			Stockholders’ equity		Net income			Investment		Equity in earnings

Domestic													5,151,503		563,898
BSF Holding S.A ^(1a)		49.00	%		49.00	%		2,096,749		232,649			1,167,892		109,475
Conectcar Soluções de Mobilidade Eletrônica S.A. ^(1b)		50.00	%		50.00	%		122,451		(41,979	)		170,950		(20,989	)
IRB-Brasil Resseguros S.A. ^{(2) (3)}		11.20	%		11.20	%		3,550,438		987,429			402,132		129,645
Porto Seguro Itaú Unibanco Participações S.A.^{(2) (4)}		42.93	%		42.93	%		4,750,355		796,590			2,039,489		342,995
Others ^{(5a) (6)}													1,371,040		2,772
Foreign - Other ⁽⁷⁾													2,466		810
Total													5,153,969		564,708

	% participation at 12/31/2016						12/31/2016
	Total			Voting			Stockholders’ equity		Net income			Investment		Equity in earnings

Domestic													4,428,854		544,048
BSF Holding S.A ^(1a)		49.00	%		49.00	%		2,066,569		396,345			1,324,624		194,209
Conectcar Soluções de Mobilidade Eletrônica S.A. ^(1b)		50.00	%		50.00	%		132,429		(48,768	)		188,131		(24,384	)
IRB-Brasil Resseguros S.A. ^{(2) (4)}		15.01	%		15.01	%		3,229,829		744,392			477,641		109,459
Porto Seguro Itaú Unibanco Participações S.A_. ^{(2) (4)}		42.93	%		42.93	%		4,255,649		599,276			1,827,094		257,260
Others ^{(5b) (6)}													611,364		7,504
Foreign - Other ⁽⁷⁾													1,768		248
Total													4,430,622		544,296

(1)

Includes goodwill in the amount of a) R$ 140,485 (R$ 219,756 at 12/31/2016) and b) R$ 109,724 (R$ 121,916 at 12/31/2016);

(2)

For the purpose of accounting for participation in earnings, the position at 11/30/2017 and 11/30/2016, as provided for in Circular Letter nº 1,963 of August 23, 1991, from BACEN;

(3)

Investments partially sold on 07/28/2017 and 08/28/2017;

(4)

Includes adjustments resulting from standardization of the financial statements of the investee to the financial policies to the investor’s;

(5)

a) Includes companies Gestora de Inteligência de Crédito S.A, Kinea Private Equity, Olimpia Promoção e Serviços S.A., Tecnologia Bancária S.A which are started under the equity accounting and companies Gipar S.A, Intercement Brasil S.A. and Companhia Brasileira de Securitização, which are not started under the equity accounting. b) Includes companies Kinea Private Equity, Olimpia Promoção e Serviços S.A., Tecnologia Bancária S.A. which are started under the equity accounting and Intercement Brasil S.A., which are not started under the equity accounting;

(6)

Includes equity in earnings not arising from net income;

(7)

Includes Compãnia Uruguaya de Medios de Processamiento and Rias Redbanc S.A.

III)

Other investments

	12/31/2017			12/31/2016
Other investments		513,659			721,273
Shares and quotas		23,776			53,285
Investments through tax incentives		201,676			201,625
Equity securities		12,369			12,369
Other		275,838			453,994
(Allowance for loan losses)		(208,826	)		(208,824	)
Total		304,833			512,449
Equity - Other investments		62,285			22,765

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

152

b) Fixed assets, goodwill and intangible assets

I) Fixed assets

				Real estate in use ^{(2) (3)}						Other fixed assets ^{(2) (3)}
Real estate in use ⁽¹⁾	Fixed assets under construction			Land			Buildings			Improvements			Installations			Furniture and equipment			EDP Systems			Other (communication, security and 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		384,244			978,199			3,098,098			1,858,065			1,902,452			1,203,918			6,282,873			1,075,071			16,782,920
Acquisitions		301,837			350			304			146,705			7,167			111,285			293,465			82,224			943,337
Disposals		-			(1,404	)		(69,398	)		(46,162	)		(1,325	)		(14,353	)		(285,119	)		(20,280	)		(438,041	)
Exchange variation		38			3,469			5,475			36,046			14,192			(11,331	)		5,020			2,248			55,157
Transfers		(320,372	)		-			86,035			122,199			26,127			-			85,995			-			(16	)
Other		(43	)		(5,281	)		(13,932	)		86,590			7,058			(138,241	)		65,313			9,952			11,416
Balance at 12/31/2017		365,704			975,333			3,106,582			2,203,443			1,955,671			1,151,278			6,447,547			1,149,215			17,354,773

Depreciation
Balance at 12/31/2016		-			-			(1,840,685	)		(1,113,157	)		(987,264	)		(674,566	)		(4,701,497	)		(654,242	)		(9,971,411	)
Depreciation expenses		-			-			(79,786	)		(210,965	)		(154,413	)		(103,666	)		(646,607	)		(105,484	)		(1,300,921	)
Disposals		-			-			15,989			28,581			492			6,478			255,338			18,827			325,705
Exchange variation		-			-			669			(12,524	)		11,457			28,932			(16,986	)		(4,159	)		7,389
Other		-			-			10,778			(66,515	)		(21,284	)		29,140			35,620			(8,326	)		(20,587	)
Balance at 12/31/2017		-			-			(1,893,035	)		(1,374,580	)		(1,151,012	)		(713,682	)		(5,074,132	)		(753,384	)		(10,959,825	)

Impairment
Balance at 12/31/2016		-			-			-			-			-			-			-			-			-
Additions / assumptions		-			-			-			-			-			-			-			-			-
Reversals		-			-			-			-			-			-			-			-			-
Balance at 12/31/2017		-			-			-			-			-			-			-			-			-

Book value
Balance at 12/31/2017		365,704			975,333			1,213,547			828,863			804,659			437,596			1,373,415			395,831			6,394,948
Balance at 12/31/2016		384,244			978,199			1,257,413			744,908			915,188			529,352			1,581,376			420,829			6,811,509

(1)

The contractual commitments for the purchase of the fixed assets totaled R$ 180,935 achievable by 2019;

(2)

Includes amounts pledged in guarantee of voluntary deposits (Note 12d);

(3)

Includes the amount of R$ 3,292 (R$ 3,808 at 12/31/2016) related to attached real estate.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

153

II)

Goodwill

				Changes
	Amortization period	Balance at 12/31/2016		Acquisitions		Amortization expenses			Exchange variation		*Other ^()**			Balance at 12/31/2017
Goodwill (Notes 2b and 4j)	10 years		1,397,867		245,500		(176,370	)		1,102		(16,290	)		1,451,809

(*) Amount allocated to intangible assets, based on the appraisal report for the goodwill on Recovery.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

154

III)

Intangible assets

				Other intangible assets
Intangible ⁽¹⁾	Rights for acquisition of payroll ⁽²⁾			Association for the promotion and offer of financial products and services ⁽⁵⁾			Acquisition of software			Development of software			Goodwill on acquisition (Note 4k)			Other intangible assets			Total
Annual amortization rates		20	%		8	%		20	%		20	%		20	%		10% to 20%

Cost
Balance at 12/31/2016		1,045,323			1,746,405			3,777,945			3,525,383			7,790,077			1,012,930			18,898,063
Acquisitions		345,296			18,000			1,205,733			350,170			388,004			-			2,307,203
Disposals		(328,582	)		(16,416	)		-			(760	)		(21,612	)		-			(367,370	)
Exchange variation		-			26,297			(76,534	)		-			650,931			33,506			634,200
Other ⁽⁵⁾		(2,147	)		677,821			(404,834	)		477,783			177,296			1,432			927,351
Balance at 12/31/2017		1,059,890			2,452,107			4,502,310			4,352,576			8,984,696			1,047,868			22,399,447

Amortization
Balance at 12/31/2016		(554,770	)		(374,492	)		(1,698,940	)		(532,796	)		(1,045,762	)		(450,057	)		(4,656,817	)
Amortization expenses ⁽³⁾		(214,778	)		(272,508	)		(494,977	)		(446,323	)		(857,002	)		(27,166	)		(2,312,754	)
Disposals		309,682			16,416			-			(6,350	)		21,612			-			341,360
Exchange variation		-			(18,070	)		80,094			-			(105,950	)		(27,095	)		(71,021	)
Other ⁽⁵⁾		(11,506	)		1,752			118,648			(281,770	)		(149,713	)		-			(322,589	)
Balance at 12/31/2017		(471,372	)		(646,902	)		(1,995,175	)		(1,267,239	)		(2,136,815	)		(504,318	)		(7,021,821	)

Impairment ⁽⁴⁾
Balance at 12/31/2016		(18,528	)		-			(53,179	)		(334,569	)		-			-			(406,276	)
Additions / assumptions		-			-			-			(14,266	)		-			-			(14,266	)
Disposals		18,528			-			(1,107	)		6,360			-			-			23,781
Balance at 12/31/2017		-			-			(54,286	)		(342,475	)		-			-			(396,761	)

Book value
Balance at 12/31/2017		588,518			1,805,205			2,452,849			2,742,862			6,847,881			543,550			14,980,865
Balance at 12/31/2016		472,025			1,371,913			2,025,826			2,658,018			6,744,315			562,873			13,834,970

(1)

The contractual commitments for the purchase of the new intangible assets totaled R$ 984,169 achievable by 2020;

(2)

Represents the recording of amounts paid for acquisition of rights to provide services of payment of salaries, proceeds, retirement and pension benefits and similar benefits;

(3)

Amortization expenses related to the rights for acquisition of payrolls and associations are disclosed in the expenses on financial operations;

(4)

Pursuant to BACEN Resolution nº. 3,566, of May 29, 2001 (Note 13i);

(5)

Reclassifications were made in the balances at December 31, 2017 (related to the acquired deposits portfolio) aiming at permitting the proper presentation of operation balances, in accordance with their respective accounting nature.

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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Note 16 – Stockholders' equity

Shares

The Extraordinary Stockholders’ Meeting held on September 14, 2016 approved the increase of subscribed and paid-up capital by R$ 12,000,000, 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 held in treasury, without change to the capital stock, by capitalization amounts recorded in Revenue Reserves – Statutory Reserve. This process was approved by the Central Bank of Brazil on June 7, 2016.

At the Meeting of the Board of Directors held on December 15, 2017, the cancellation of 31,793,105 common shares of own issue and held in treasury was approved, with no change in capital, upon capitation of the amounts recorded in Revenue Reserves – Statutory Reserve.

As a result of this last cancellation, capital is represented by 6,550,514,438 book-entry shares with no par value, of which 3,319,951,112 are common and 3,230,563,326 are preferred shares with no voting rights, but with tag-along rights, in the event of disposal of control, to be included in a public offering of shares, so as to ensure the price equal to eight per cent (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 amounts to R$ 97,148,000 (R$ 97,148,000 at December 31, 2016), of which R$ 65,482,470 (R$ 65,534,408 at December 31, 2016) refers to stockholders domiciled in the country and R$ 31,665,530 (R$ 31,613,592 at December 31, 2016) refers to stockholders domiciled abroad. The consequent statutory change in the number of shares will be resolved in the next Annual Stockholders’ Meeting.

The table below shows the change in shares of capital stock and treasury shares during the period:

	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
(-) Cancellation of Shares – Meeting of the Board of Directors at December 15, 2017		(31,793,105	)		-			(31,793,105	)
Shares of capital stock at 12/31/2017		3,319,951,112			3,230,563,326			6,550,514,438
Residents in Brazil at 12/31/2017		3,299,073,506			1,116,291,341			4,415,364,847
Residents abroad at 12/31/2017		20,877,606			2,114,271,985			2,135,149,591
Treasury shares at 12/31/2016 ⁽¹⁾		3,074			69,604,462			69,607,536			(1,882,353	)
Purchase of treasury shares		46,214,237			37,982,900			84,197,137			(3,089,464	)
Exercised – granting of stock options		-			(28,008,923	)		(28,008,923	)		728,873
Disposals – stock option plan		-			(8,118,725	)		(8,118,725	)		321,925
(-) Cancellation of Shares – Meeting of the Board of Directors at December 15, 2017		(31,793,105	)		-			(31,793,105	)		1,178,252
Treasury shares at 12/31/2017 ⁽¹⁾		14,424,206			71,459,714			85,883,920			(2,742,767	)
Outstanding shares at 12/31/2017		3,305,526,906			3,159,103,612			6,464,630,518
Outstanding shares at 12/31/2016		3,351,741,143			3,160,958,864			6,512,700,007

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

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) at 12/31/2017:

Cost / Market value	Common		Preferred
Minimum		37.06		33.48
Weighted average		37.06		36.25
Maximum		37.06		38.56
Treasury shares
Average cost		37.05		30.90
Market value		37.69		42.58

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Dividends

Stockholders are entitled to a mandatory dividend of not less than 25% of annual net income, which is adjusted according to the rules set forth in the Brazilian Corporate Law. Both types of 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 mandatory minimum dividend is based on the share position on the last day of the prior month, taking into consideration that the payment is made on the first business day of the subsequent month, amounting to R$ 0.015 per share.

I - Calculation

Net income - ITAÚ UNIBANCO HOLDING	21,108,466
Adjustments:
(-) Legal reserve	(1,055,423	)
Dividend calculation basis	20,053,043
Mandatory dividend	5,013,262
Dividends and Interest on Capital Paid/Provided for/Identified	17,557,262

II – Stockholders' compensation

	Gross		WTS			Net
Paid / Prepaid		3,665,940		(388,823	)		3,277,117
Dividends - 11 monthly installments of R$ 0.015 per share paid in February to December 2017		1,073,786		-			1,073,786
Interest on capital - R$ 0.3990 per share, paid on 08/25/2017		2,592,154		(388,823	)		2,203,331
Provided for (recorded in Other liabilities - Social and statutory)		1,876,548		(140,403	)		1,736,145
Dividends - 1 monthly installment of R$ 0.015 per share paid on 01/02/2018		97,637		-			97,637
Dividends declared - R$ 0.1304 per share		842,907		-			842,907
Interest on capital - R$ 0.1445 per share, credited on December 28, 2017 to be paid until April 30, 2018.		936,004		(140,403	)		795,601
Identified in Revenue Reserve In Stockholders' Equity - R$ 2.1126 per share		13,657,985		(1,113,985	)		12,544,000

Total from 01/01 to 12/31/2017		19,200,473		(1,643,211	)		17,557,262
Total from 01/01 to 12/31/2016		11,573,623		(1,573,260	)		10,000,363

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Capital and revenue reserves - ITAÚ UNIBANCO HOLDING

	12/31/2017		12/31/2016
Capital reserves		1,733,611		1,589,343
Premium on subscription of shares		283,512		283,512
Granted options recognized – law nº. 11,638, Share-based instruments and Share-based payment		1,448,994		1,304,726
Reserves from tax incentives and restatement of equity securities and other		1,105		1,105
Revenue reserves		33,806,424		24,687,292
Legal		8,892,923		7,837,500
Statutory:		11,255,516		11,799,845
Dividends equalization ⁽¹⁾		5,847,852		5,213,928
Working capital increase ⁽²⁾		2,667,327		3,138,569
Increase in capital of investees ⁽³⁾		2,740,337		3,447,348
Unrealized profits ⁽⁴⁾		13,657,985		5,049,947

(1)

Reserve for dividends equalization – its purpose is to guarantee funds for the payment of advances on dividends, including interest on capital, to maintain the flow of the stockholders’ compensation;

(2)

Reserve for working capital increase – its purpose is to guarantee funds for the company’s operations;

(3)

Reserve for increase in capital of investees – its purpose is to guarantee the preferred subscription right in the capital increases of investees.

(4)

Refers to Interest on capital and dividends provided for up to December 31 for each period, in compliance with BACEN Circular Letter nº 3,516, of July 21, 2011.

Reconciliation of net income and stockholders’ equity (Note 2b)

	Net income						Stockholders’ equity
	01/01 to			01/01 to
	12/31/2017			12/31/2016			12/31/2017			12/31/2016
ITAÚ UNIBANCO HOLDING		21,108,466			18,853,195			128,507,940			118,566,485
Amortization of goodwill		223,139			341,513			(365,787	)		(538,741	)
Corporate reorganizations (Note 4r)		1,846,612			1,846,612			(1,218,553	)		(2,437,318	)
Conversion adjustments of foreign investments (Note 4t)		786,334			597,805			-			-
Foreign exchange variations of investments		(5,775	)		2,707,773			-			-
Hedge of net investments in foreign operations		1,381,995			(3,703,504	)		-			-
Tax effects – hedge of net investments in foreign operations		(589,886	)		1,593,536			-			-
ITAÚ UNIBANCO HOLDING CONSOLIDATED		23,964,551			21,639,125			126,923,600			115,590,426

Asset valuation adjustments - ITAÚ UNIBANCO HOLDING CONSOLIDATED

	12/31/2017			12/31/2016
Available-for-sale securities		(46,604	)		(897,888	)
Hedge cash flow		(1,407,664	)		(1,253,776	)
Remeasurements in liabilities of post-employment benefits		(835,364	)		(824,133	)
Foreign exchange variation on investments / Net Investment Hedge in Foreign Operations		(296,866	)		(414,982	)
Asset valuation adjustments ^(*)		(2,586,498	)		(3,390,779	)

(*) net of tax effects.

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Non-controlling interests

	Stockholders’ equity				Net Income
					01/01 to			01/01 to
	12/31/2017		12/31/2016		12/31/2017			12/31/2016
Itaú CorpBanca (Note 2c)		10,164,232		9,599,970		357,339			329,101
Itaú CorpBanca Colombia S.A. (Note 2c)		1,122,133		1,127,734		17,749			52,737
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		333,328		524,235		(93,465	)		(119,128	)
Banco Itaú Consignado S.A. (Note 2c)		-		-		-			(47,296	)
Luizacred S.A. Soc. de Crédito, Financiamento e Investimento		302,079		283,711		(69,033	)		(48,327	)
Other		91,962		89,302		(26,540	)		(25,849	)
Total		12,013,734		11,624,952		186,050			141,238

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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 12/31/2017, the accounting effect of the share-based payment in income was R$ (536,461) (R$ (590,925) from 01/01 to 12/31/2016).

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 to 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., Unibanco Holdings S.A. and Redecard S.A. stock option plans, respectively. Accordingly, the exchange of shares for ITUB4 did not have a relevant financial impact.

Simple options have the following characteristics:

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.

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

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.

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	Simple options
				Weighted		Weighted
				average		average
	Quantity			exercise price		market value

Opening balance at 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 ^(*)		(1,204,728	)		41.11
Exercised		(20,485,872	)		35.58		42.06
Closing balance at 12/31/2017		16,342,906			37.81
Options exercisable at the end of the period		16,342,906			37.81
Options outstanding but not exercisable		-			-
Range of exercise prices
Granting 2010-2011					21.71 - 41.31
Granting 2012					30.45
Weighted average of the remaining contractual life (in years)		1.28

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

	Simple options
				Weighted		Weighted
				average		average
	Quantity			exercise price		market value

Opening balance at 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 ^(*)		(127,798	)		35.91
Exercised		(12,381,844	)		26.92		35.15
Closing balance at 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
Range of exercise prices
Granting 2009-2010					25.66 - 41.69
Granting 2011-2012					30.45 - 40.72
Weighted average of the remaining contractual life (in years)		2.63

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

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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 variation. 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 regulation.

The acquisition prices of own shares and Share-Based Instruments are established every six months and are 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 12/31/2017 (R$ 19.45 per share at 12/31/2016).

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
Closing balance at 12/31/2016		35,462,379
New granted		7,041,957
Cancelled		(931,658	)
Exercised		(7,523,051	)
Balance at 12/31/2017		34,049,627
Weighted average of remaining contractual life (years)		2.46

	Quantity
Balance at 12/31/2015		33,666,355
New granted		12,392,845
Cancelled		(370,039	)
Exercised		(10,226,782	)
Balance at 12/31/2016		35,462,379
Weighted average of remaining contractual life (years)		2.73

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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$ 38.23 per share at 12/31/2017 (R$ 21.96 per share at 12/31/2016).

Change in variable compensation in shares	2017
	Quantity
Balance at 12/31/2016		24,539,406
New		8,556,882
Delivered		(12,048,631	)
Cancelled		(227,675	)
Balance at 12/31/2017		20,819,982

Change in variable compensation in shares	2016
	Quantity
Balance at 12/31/2015		22,325,573
New		13,422,462
Delivered		(11,136,079	)
Cancelled		(72,550	)
Balance at 12/31/2016		24,539,406

Itaú Unibanco Holding S.A. – Complete Financial Statements – December 31, 2017

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Note 17 – Related parties

Transactions between related parties are disclosed in compliance with CVM Deliberation n° 642, of October 7, 2010, and CMN Resolution n° 3,750 of June 30, 2009. These transactions 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 were eliminated from the consolidated financial statements and the lack of risk is taken into consideration.

The unconsolidated related parties are as follows:

Itaú Unibanco Participações S.A. (IUPAR), the 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, specially: Itautec S.A., Duratex S.A., Elekeiroz S.A., ITH Zux Cayman Company Ltd, Itaúsa Empreendimentos S.A. and Alpargatas 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 CONSOLIDATED;

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 and subsidiaries to act in their respective areas of interest, as described in Notes 22e and 22j; and

Investments in Porto Seguro Itaú Unibanco Participações S.A. and BSF Holding S.A.

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The transactions with these related parties are basically characterized by:

	ITAÚ UNIBANCO HOLDING													ITAÚ UNIBANCO HOLDING CONSOLIDATED
		Assets / (liabilities)						Revenue / (expense)							Assets / (liabilities)						Revenue / (expense)
								01/01 to			01/01 to										01/01 to			01/01 to
	Annual rate	12/31/2017			12/31/2016			12/31/2017			12/31/2016			Annual rate	12/31/2017			12/31/2016			12/31/2017			12/31/2016
Interbank investments			82,680,699			68,408,020			5,577,467			6,898,946				-			-			-		-
Itaú Unibanco S.A.	100% Selic / 8.92% to		48,999,041			39,309,405			4,048,874			5,242,456				-			-			-		-
	8.97%
Agência Grand Cayman	5.83% to 6.3633%		9,162,033			9,028,492			534,761			584,706				-			-			-		-
Itaú Unibanco S.A. Nassau Branch	2.96% to 6.202%		24,519,625			20,070,123			993,832			1,071,784				-			-			-		-
Loan operations			-			-			-			-				96,381			-			5,738		-
Alpargatas S.A.			-			-			-			-				96,381			-			5,738		-
Derivative financial instruments - assets			404,291			4,785			480			585				-			-			-		-
Fundo de Investimento Multimercado			404,291			4,785			480			585				-			-			-		-
Deposits			(22,917,703	)		(13,110,202	)		(378,507	)		(404,048	)			-			-			-		-
Itaú Unibanco S.A. Nassau Branch	3.01% to 4.16%		(22,917,703	)		(13,110,202	)		(378,507	)		(404,048	)			-			-			-		-
Derivative financial instruments - liabilities			(5,041,896	)		(4,078,726	)		-			(4,110,190	)			-			-			-		-
Fundo de Investimento Multimercado			(5,041,896	)		(4,078,726	)		-			(4,110,190	)			-			-			-		-
Securities sold under repurchase agreements			-			-			-			-				(46,542	)		(89,216	)		(5,319	)	(18,626	)
Itaúsa Investimentos Itaú S.A.			-			-			-			-				-			(12,547	)		-		-
Duratex S.A.			-			-			-			-		97.5% to 100% of CDI		(21,881	)		(17,576	)		(2,067	)	(3,653	)
Elekeiroz S.A.			-			-			-			-		97.5% of CDI		(4,738	)		(3,459	)		(265	)	(661	)
Itautec S.A.			-			-			-			-		100.1% of CDI		(1,629	)		(1,092	)		(91	)	(3,336	)
Itaúsa Empreendimentos S.A.			-			-			-			-				-			-			-		(7,432	)
Olimpia Promoção e Serviços S.A.			-			-			-			-		100% Selic		(6,766	)		(13,509	)		(1,336	)	(1,588	)
Conectcar Soluções de Mobilidade Eletrônica S.A.			-			-			-			-				-			(24,425	)		-		-
Other			-			-			-			-		60% to 100.1% of CDI		(11,528	)		(16,608	)		(1,560	)	(1,956	)
Debentures			(56,929	)		(38,520	)		-			-				-			-			-		-
Itaú Unibanco S.A. Nassau Branch			(56,929	)		(38,520	)		-			-				-			-			-		-
Amounts receivable from (payable to) related companies / Banking service fees (expenses)			(389	)		(427	)		(4,503	)		(5,324	)			(108,304	)		(129,061	)		40,288		28,497
Itaú Unibanco S.A.			-			(43	)		(1	)		(1	)			-			-			-		-
Itaú Corretora de Valores S. A.			(388	)		(384	)		(4,502	)		(4,373	)			-			-			-		-
Itaúsa Investimentos Itaú S.A.			-			-			-			-				-			-			6,208		2,794
Itaúsa Empreendimentos S.A.			-			-			-			-				-			-			202		248
Olimpia Promoção e Serviços S.A.			-			-			-			-				(2,246	)		(1,852	)		(22,551	)	(24,549	)
Fundação Itaú Unibanco - Previdência Complementar			-			-			-			-				(106,134	)		(127,301	)		47,265		44,315
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			-			-				299			323			5,892		5,689
Other			(1	)		-			-			(950	)			(223	)		(231	)		3,272		-
Rent revenues (expenses)			-			-			(385	)		(346	)			-			-			(62,665	)	(64,181	)
Itaúsa Investimentos Itaú S.A.			-			-			(27	)		(25	)			-			-			(2,434	)	(2,201	)
Itaú Seguros S.A.			-			-			(274	)		(245	)			-			-			-		-
Fundação Itaú Unibanco - Previdência Complementar			-			-			-			-				-			-			(48,601	)	(44,078	)
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			-			-				-			-			(11,266	)	(12,573	)
Other			-			-			(84	)		(76	)			-			-			(364	)	(5,329	)
Donation expenses			-			-			-			-				-			-			(103,477	)	(93,846	)
Instituto Itaú Cultural			-			-			-			-				-			-			(93,057	)	(86,926	)
Associação Itaú Viver Mais			-			-			-			-				-			-			(920	)	(920	)
Associação Cubo Coworking Itaú						-			-			-				-			-			(9,500	)	(6,000	)

In addition to the aforementioned operations, ITAÚ UNIBANCO HOLDING and non-consolidated related parties, as an integral part of the Agreement for apportionment of common costs of Itaú Unibanco, recorded in Other Administrative Expenses in the amount of R$ (7,149) (R$ (5,310) from 01/01 to 12/31/2016) in view of the use of the common structure.

In accordance with the rules in effect, the financial institutions cannot grant loans or advances to the following:

any individual or company that control the Institution or any entity under common control with the institution, or any officer, director, fiscal council member or direct relative of such individuals;

any entity controlled by the Institution; or

any entity of which the bank directly or indirectly holds at least 10% of the capital stock.

Therefore, no loans or advances are made to any subsidiaries, executive officers, Board of Directors members or their relatives.

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Compensation of management key personnel

The fees attributed in the period to ITAÚ UNIBANCO HOLDING CONSOLIDATED management members are as follows:

	01/01 to		01/01 to
	12/31/2017		12/31/2016
Compensation		425,657		359,848
Board of Directors		59,438		31,565
Management members		366,219		328,283
Profit sharing		243,584		250,531
Board of Directors		3,107		1,904
Management members		240,477		248,627
Contributions to pension plans		9,133		12,065
Board of Directors		219		235
Management members		8,914		11,830
Stock option plan – Management members		219,983		262,526
Total		898,357		884,970

Information related to the granting of the share-based payment, benefits to employees and post-employment benefits is detailed in Notes 16g II and 19, respectively.

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Note 18 - Market value

The financial statements are prepared in accordance with accounting principles which assume the normal continuity of the operations of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

The book value of each financial instrument, whether included or not in the balance sheet (comprises investments in affiliates and other investments), when compared to the value that might be obtained in an active market, or in the absence of such a market, using the net present value of future cash flows adjusted based on the current market interest, is approximately equal to the market value, or does not have a market quotation available, except for the instruments in the table below:

									Effects ⁽¹⁾
	Book value				Market				Results						Stockholders’ equity
	12/31/2017		12/31/2016		12/31/2017		12/31/2016		12/31/2017			12/31/2016			12/31/2017			12/31/2016
Interbank deposits		29,048,477		22,690,342		29,112,205		22,729,229		63,728			38,887			63,728			38,887
Securities and derivative financial instruments		445,750,520		376,886,723		446,982,491		377,140,947		1,199,305			(1,072,883	)		1,231,971			254,224
Adjustment of available-for-sale securities										372,445			(833,980	)
Adjustment of held-to-maturity securities										826,860			(238,903	)		1,231,971			254,224
Loan, lease and other credit operations		456,285,747		453,793,875		462,659,408		463,104,861		6,373,661			9,310,986			6,373,661			9,310,986
Investments
B3		14,610		14,610		249,707		180,868		235,097			166,258			235,097			166,258
Porto Seguro Itaú Unibanco Participações S.A. ⁽²⁾		2,039,489		1,827,094		3,570,968		2,644,068		1,531,479			816,974			1,531,479			816,974
Funding and borrowing ⁽³⁾		360,822,519		299,527,934		361,397,994		300,910,829		(575,475	)		(1,382,895	)		(575,475	)		(1,382,895	)
Subordinated debt (Note 10f)		52,695,875		57,420,075		53,855,629		58,061,440		(1,159,754	)		(641,365	)		(1,159,754	)		(641,365	)
Treasury shares		2,742,767		1,882,353		3,586,403		2,356,203		-			-			843,636			473,850

(1)

This does not consider the corresponding tax effects;

(2)

Parent company of Porto Seguro S.A;

(3)

Funding is represented by interbank and time deposits, funds from acceptance and issuance of securities and borrowing.

Fair value is a measurement based, whenever possible, on information observable in the market. It is the price estimated at which a non-mandatory transaction to sell an asset or to transfer a liability would occur between market players, on the measurement date, under current market conditions. It does not represent unrealized results of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

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To obtain the market values for these financial instruments, the following criteria were adopted:

Interbank investments were determined based on their nominal amounts, monetarily restated as at their maturity dates and discounted to present value using future market interest rates and swap market rates for fixed-rate securities and using market interest rates for fixed-rate securities, achieved up to the closing of B3 at the balance sheet date, for floating-rate securities;

Securities and derivative financial instruments, according to the rules established by Circulars nº. 3,068 and 3,082 of November 8, 2001 and January 30, 2002, respectively, issued by BACEN, are recorded at their market values, except for those classified as Held to Maturity. Government securities allocated in this category have their market value calculated based on the rates obtained in the market, and validated through the comparison with information provided by the National Association of Financial Market Institutions (ANBIMA). Private securities included in this category have their market value calculated using a criterion similar to the one adopted for Investments in Interbank Deposits, as described above;

Loans with maturities over 90 days, when available, were calculated based on the net present value of future cash flows discounted at market interest rates effective on the balance sheet date;

Investments - in companies B3 and Porto Seguro at the share value quoted on stock exchanges.

Time and interbank deposits and funds from the acceptance and issuance of securities and foreign borrowing through securities, when available, were calculated based on their present value determined by future cash flows discounted at market rates obtained at the closing of B3 on the balance sheet date;

Subordinated debt, based on the net present value of future fixed or floating cash flows in foreign currency, net of the market interest rates effective on the balance sheet date and considering the credit risk of the issuer. The floating cash flows are estimated from the interest curves of the indexation market places;

Treasury shares are valued according to the average quotation available on the last trading day of the month or, if this is not available, according to the most recent quotation on prior trading days, published in the daily bulletin of each Stock Exchange.

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Note 19 – Post-Employments 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 – Asset valuation adjustment were as follows:

Total amounts recognized in Income for the period

	Defined benefit						Defined contribution ^(*)					Other benefits						Total
	01/01 to			01/01 to			01/01 to			01/01 to		01/01 to			01/01 to			01/01 to			01/01 to
	12/31/2017			12/31/2016			12/31/2017			12/31/2016		12/31/2017			12/31/2016			12/31/2017			12/31/2016
Cost of current service		(69,283	)		(61,605	)		-			-		-			-			(69,283	)		(61,605	)
Net interest		(15,296	)		(13,914	)		75,874			239,137		(21,953	)		(19,502	)		38,625			205,721
Contribution		-			-			(91,124	)		121,190		-			-			(91,124	)		121,190
Benefits paid		-			-			-			-		14,538			13,018			14,538			13,018
Total Amounts Recognized		(84,579	)		(75,519	)		(15,250	)		360,327		(7,415	)		(6,484	)		(107,244	)		278,324

(*) In the period, contributions to the defined contributions plan, including PGBL, totaled R$ 333,637 (R$ 339,310 from January 1 to December 31, 2016), of which R$ 91,124 (R$ 115,076 from January 1 to December 31, 2016) arising from social security funds.

Total amounts recognized in Stockholders’ Equity – Asset valuation adjustment

	Defined benefit						Defined contribution						Other benefits						Total
	12/31/2017			12/31/2016			12/31/2017			12/31/2016			12/31/2017			12/31/2016			12/31/2017			12/31/2016
At the beginning of the period		(69,512	)		(44,638	)		(1,323,234	)		(315,282	)		(48,400	)		(12,570	)		(1,441,146	)		(372,490	)
Effects on asset ceiling		97,837			(633,085	)		(385,859	)		(1,244,021	)		-			-			(288,022	)		(1,877,106	)
Remeasurements		11,521			608,211			339,414			236,069			(28,183	)		(35,830	)		322,752			808,450
Balance arising from the acquisition
of Citibank operations		(579	)		-			-			-			-			-			(579	)		-
Total Amounts Recognized		39,267			(69,512	)		(1,369,679	)		(1,323,234	)		(76,583	)		(48,400	)		(1,406,995	)		(1,441,146	)

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a) Retirement plans

ITAÚ UNIBANCO HOLDING CONSOLIDATED and certain subsidiaries sponsor defined benefit and variable contribution plans, whose basic purpose is to grant benefits that, in general, provide 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 at the eligibility date, according to the plan's regulations, which does not require actuarial calculation, except as described in Note 19c.

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 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.

Supplementary plans are managed by closed-end private pension entities with independent legal structures, as detailed below:

Entity		Benefit plan
Fundação Itaú 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 Retirement Defined Benefit 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.

Governance

The closed-end private pension entities (EFPC) and 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 bylaws. 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 CONSOLIDATED.

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Defined benefit plan

I - Main assumptions used in actuarial valuation of Retirement Plans

	12/31/2017	12/31/2016
Discount rate ⁽¹⁾	9.98% p.a.	10.24% p.a.
Mortality table ⁽²⁾	AT-2000	AT-2000
	Itaú Experience	Itaú Experience
Turnover ⁽³⁾	2008/2010	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 CONSOLIDATED. At 12/31/2017 assumption 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 ITAÚ UNIBANCO HOLDING CONSOLIDATED, resulting in the average of 2.4% p.a. based on the 2008/2010 experience;

(4) Using the Projected Unit Credit, the mathematical reserve is determined based on the current projected benefit amount multiplied by the ratio between the length of service in the company 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.

The main differences between the assumptions above and those adopted upon determination of the actuarial liability of defined benefit plans, for the purposes of recording in the balance sheet of the closed-end private pension entities (EFPCs) that manage them, are the discount rate and the actuarial method. Regarding the discount rate assumption, EFPCs adopt a rate consistent with the flow of receipts/payments, in accordance with the study conducted by an independent external consulting company. Regarding the actuarial method, the aggregate method is adopted, by which the mathematical reserve is defined based on the difference between the present value of the projected benefit and the present value of future contributions, subject to the methodology defined in the respective actuarial technical note.

II- Risk Exposure

Due to its defined benefit plans, ITAÚ UNIBANCO HOLDING CONSOLIDATED 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 based on the income related to securities issued by the Brazilian treasury (government securities). If the actual income related to plan investments 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 plan benefits 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.

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- 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 EFPC funds is to search for a long term balance between assets and obligations to pay of 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.

At 12/31/2017 and 12/31/2016 the allocation of plan assets and the allocation target for 2018, by type of asset, are as follows:

	Fair value				% Allocation
Types	12/31/2017		12/31/2016		12/31/2017			12/31/2016			2018 Target
Fixed income securities		16,851,242		15,134,389		95.81	%		91.61	%		53% to 100%
Variable income securities		18,986		684,786		0.11	%		4.15	%		0% to 20%
Structured investments		24,477		9,013		0.14	%		0.05	%		0% to 10%
Real estate		614,683		622,598		3.49	%		3.77	%		0% to 7%
Loans to participants		78,855		69,259		0.45	%		0.42	%		0% to 5%
Total		17,588,243		16,520,045		100.00	%		100.00	%

The defined benefit plan assets include shares of ITAÚ UNIBANCO HOLDING CONSOLIDATED, its main parent company (ITAÚSA) and of subsidiaries of the latter, with a fair value of R$ 11,614 (R$ 575,255 at 12/31/2016), and real estate rented to Group companies, with a fair value of R$ 530,998 (R$ 596,781 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 understood 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 2017, 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:

	12/31/2017			12/31/2016
1 - Net assets of the plans		17,588,243			16,520,045
2 - Actuarial liabilities		(14,490,671	)		(13,722,927	)
3- Surplus (1-2)		3,097,572			2,797,118
4- Asset restriction (*)		(3,217,227	)		(3,008,536	)
5 - Net amount recognized in the balance sheet (3-4)		(119,655	)		(211,418	)
Amount recognized in Assets (Note 13a)		344,907			317,192
Amount recognized in Liabilities (Note 13c)		(464,562	)		(528,610	)

(*) Corresponds to the excess of the present value of the available economic benefit, in conformity with Bacen Resolution nº 4,424/15.

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

	12/31/2017
				Actuarial									Recognized
	Plan net assets			Liabilities			Surplus			Asset Ceiling			amount
Value at the beginning of the period		16,520,045			(13,722,927	)		2,797,118			(3,008,536	)		(211,418	)
Cost of current service		-			(69,283	)		(69,283	)		-			(69,283	)
Net interest ⁽¹⁾		1,638,738			(1,346,602	)		292,136			(307,432	)		(15,296	)
Benefits paid		(1,141,459	)		1,141,459			-			-			-
Contributions of sponsor		71,453			-			71,453			-			71,453
Contributions of participants		12,294			-			12,294			-			12,294
Effects on asset ceiling		-			-			-			97,837			97,837
Exchange variation		1,838			(6,307	)		(4,469	)		-			(4,469	)
Remeasurements ^{(2) (3)}		485,334			(487,011	)		(1,677	)		904			(773	)
Value at end of the period		17,588,243			(14,490,671	)		3,097,572			(3,217,227	)		(119,655	)

	12/31/2016
				Actuarial									Recognized
	Plan net assets			liabilities			Surplus			Asset Ceiling			amount
Value at the beginning of the period		13,633,401			(11,587,180	)		2,046,221			(2,133,856	)		(87,635	)
Cost of current service		-			(61,605	)		(61,605	)		-			(61,605	)
Net interest ⁽¹⁾		1,483,119			(1,255,438	)		227,681			(241,595	)		(13,914	)
Benefits paid		(1,060,058	)		1,060,058			-			-			-
Contributions of sponsor		148,771			-			148,771			-			148,771
Contributions of participants		14,598			-			14,598			-			14,598
Effects on asset ceiling		-			-			-			(633,085	)		(633,085	)
Balance arising from the merger with Corpbanca
(Note 2c)		-			(206,561	)		(206,561	)		-			(206,561	)
Exchange variation		(8,540	)		42,940			34,400			-			34,400
Remeasurements ^{(2) (3)}		2,308,754			(1,715,141	)		593,613			-			593,613
Value at end of the period		16,520,045			(13,722,927	)		2,797,118			(3,008,536	)		(211,418	)

(1) Corresponds to the amount calculated on 01/01/2017 based on the beginning amount (Net Assets, Actuarial Liabilities and Restriction of Assets), taking into account the estimated amount of payments/ receipts of benefits/ contributions, multiplied by the discount rate of 10.24% p.a.(On 01/01/2016 the rate used was 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$ 2,124,072 (R$ 3,791,023 at 12/31/2016).

During the period, contributions made totaled R$ 71,453 (R$ 148,771 from 01/01 to 12/31/2016). The contribution rate increases based on the beneficiary’s salary.

In 2018, the expected contribution to retirement plans sponsored by ITAÚ UNIBANCO HOLDING CONSOLIDATED is R$ 55,682.

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

	Estimated
Period	payment
2018		1,103,020
2019		1,125,737
2020		1,156,848
2021		1,189,665
2022		1,220,291
2023 to 2027		6,562,643

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 – Asset valuation adjustment of the sponsor (before taxes) would amount to:

							Effect which would be
	Effects on actuarial liabilities						recognized in Stockholders’
Change in Assumption	of the plans						*Equity ^()**
				Percentage of
				actuarial
	Value			liabilities			Value
- Decrease by 0.5%		740,200			5.11	%		(268,981	)
- Increase by 0.5%		(677,029	)		(4.67	)%		153,064

(*) Net of effects of asset ceiling.

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Defined contribution plans

The defined contribution plans have pension funds set up using the portion of sponsors’ contributions not included in the participant’s accounts balance and by the loss of eligibility to a plan benefit, as well as by 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:

	12/31/2017									12/31/2016
	Pension Plan						Recognized			Pension Plan						Recognized
	Fund			Asset Ceiling			Amount			Fund			Asset Ceiling			Amount
Amount - beginning of the period		1,287,213			(490,932	)		796,281			2,228,597			(269,828	)		1,958,769
Net interest		125,992			(50,118	)		75,874			269,574			(30,437	)		239,137
Contribution		(91,124	)		-			(91,124	)		121,190			-			121,190
Receivables – allocation of funds (*)		(12,826	)		-			(12,826	)		(514,863	)		-			(514,863	)
Effects on asset ceiling		(14,980	)		(370,879	)		(385,859	)		(1,053,354	)		(190,667	)		(1,244,021	)
Remeasurements		339,414			-			339,414			236,069			-			236,069
Amount - end of the period (Note 13a)		1,633,689			(911,929	)		721,760			1,287,213			(490,932	)		796,281

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

Other post-employment benefits

ITAÚ UNIBANCO HOLDING CONSOLIDATED do not offer other post-employment benefits, except in those cases arising from obligations under acquisition agreements signed by ITAÚ UNIBANCO HOLDING CONSOLIDATED, 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 CONSOLIDATED are as follows:

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

	12/31/2017			12/31/2016
At the beginning of the period		(221,125	)		(178,811	)
Cost of interest		(21,953	)		(19,502	)
Benefits paid		14,538			13,018
Remeasurements		(28,183	)		(35,830	)
At the end of the period (Note 13c)		(256,723	)		(221,125	)

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

	Estimated
Period	payment

2018		14,986
2019		16,029
2020		17,060
2021		18,154
2022		19,271
2023 to 2027		114,593

II - Sensitivity Analyses - Cost of Healthcare

For calculation of benefits obligations projected beyond the assumptions used for the defined benefit plans (Note 19c l), the 8.16% p.a. increase in medical costs assumption is adopted.

Assumptions for rates related to medical assistance costs have a significant impact on the amounts recognized in income. A change of one percentage point in the medical assistance cost rates would have the following effects:

	Recognition	1% increase		1% decrease
Service cost and cost of interest	Income		3,162		(3,000	)
Present value of obligation	Asset valuation adjustment		31,686		(26,453	)

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Note 20 – Information on foreign subsidiaries

	Foreign branches ⁽¹⁾						Latin America consolidated ⁽²⁾						Other foreign companies ⁽³⁾						Foreign consolidated ⁽⁴⁾
	12/31/2017			12/31/2016			12/31/2017			12/31/2016			12/31/2017			12/31/2016			12/31/2017			12/31/2016
Assets
Current assets and long term receivables
Cash and cash equivalents		2,631,349			4,399,499			6,302,523			7,474,310			41,709,821			38,200,608			10,488,766			11,471,401
Interbank investments		17,355,256			17,513,126			10,191,904			7,820,617			6,744,262			7,485,453			23,470,479			17,617,666
Securities		86,878,777			73,812,470			30,136,133			22,448,723			10,012,331			15,079,970			121,197,538			110,232,708
Loan, lease and other credit operations		71,289,185			83,946,899			120,543,042			112,393,932			16,164,118			14,583,620			207,522,872			210,936,699
Foreign exchange portfolio		46,904,488			51,833,197			5,768,209			2,536,372			3,474,351			2,345,710			54,972,248			56,407,996
Other assets		5,050,933			6,685,640			6,843,825			10,415,888			694,138			422,090			12,610,248			16,894,471
Permanent assets		10,025			12,298			9,428,528			8,672,744			101,328			128,703			9,021,285			8,394,790
Total		230,120,013			238,203,129			189,214,164			171,762,586			78,900,349			78,246,154			439,283,436			431,955,731
Liabilities
Current and long term liabilities
Deposits		76,521,156			71,310,571			101,119,957			98,062,263			14,914,314			12,498,804			142,672,422			136,676,396
Deposits received under securities repurchase agreements		15,273,285			19,031,116			2,533,664			2,585,096			5,758,919			10,532,353			17,022,233			20,938,002
Funds from acceptance and issuance of securities		5,988,940			5,645,154			26,998,092			21,626,447			5,751,051			6,432,361			38,738,083			33,703,962
Borrowing		26,164,836			33,620,699			9,926,920			8,501,512			995,557			1,031,982			36,588,378			43,024,796
Derivative financial instruments		5,356,288			4,649,932			5,870,410			4,408,916			1,043,762			790,545			11,245,313			9,204,594
Foreign exchange portfolio		46,920,085			51,867,797			5,781,308			2,522,711			3,485,797			2,347,279			55,012,390			56,430,504
Other liabilities		32,817,537			33,838,143			13,947,060			12,327,444			884,804			766,648			48,203,718			48,440,673
Deferred income		50,440			74,650			372,173			253,688			45,714			48,313			468,326			390,987
Non-controlling interests		-			-			11,287,440			10,741,898			-			-			11,287,440			10,741,899
Stockholders’ equity		21,027,446			18,165,067			11,377,140			10,732,611			46,020,431			43,797,871			78,045,133			72,403,918
Total		230,120,013			238,203,129			189,214,164			171,762,586			78,900,349			78,246,156			439,283,436			431,955,731
Statement of Income
Income related to financial operations		6,555,732			6,942,122			11,730,247			12,351,362			1,444,372			1,396,895			17,511,267			21,279,575
Expenses related to financial operations		(4,041,084	)		(4,524,607	)		(6,076,040	)		(6,854,299	)		(618,684	)		(948,251	)		(8,256,553	)		(12,846,452	)
Result of loan losses		(236,355	)		(1,422,786	)		(1,795,768	)		(1,526,375	)		(13,193	)		(365,122	)		(2,045,316	)		(3,314,282	)
Gross income related to financial operations		2,278,293			994,729			3,858,439			3,970,688			812,495			83,522			7,209,398			5,118,841
Other operating revenues (expenses)		(409,329	)		(496,756	)		(3,801,269	)		(3,427,988	)		271,939			(135,503	)		(4,009,889	)		(4,118,640	)
Operating income		1,868,964			497,973			57,170			542,700			1,084,434			(51,981	)		3,199,509			1,000,201
Non-operating income		-			30,617			20,040			9,299			6,116			1,572			23,510			38,588
Income before taxes on income and profit sharing		1,868,964			528,590			77,210			551,999			1,090,550			(50,409	)		3,223,019			1,038,789
Income tax		13,539			31,385			94,358			(175,384	)		(96,886	)		(113,942	)		10,963			(257,939	)
Statutory participation in income		-			-			(12,492	)		(36,554	)		(23,895	)		(26,468	)		(36,387	)		(63,022	)
Non-controlling interests		-			-			374,873			379,080			-			-			374,873			379,079
Net income (loss)		1,882,503			559,975			533,949			719,141			969,769			(190,819	)		3,572,468			1,096,907

(1)

Itaú Unibanco S.A. - Agências Grand Cayman, New York, Tokyo, Nassau Branch, Itaú Unibanco Holding S.A - Agência Grand Cayman and CorpBanca New York Branch;

(2)

Basically composed of subsidiaries Banco Itaú Argentina S.A., Banco Itaú Uruguay S.A., Banco Itaú Paraguay S.A., Itaú CorpBanca and Itaú CorpBanca Colômbia S.A.; only at 12/31/2016, ACO Ltda; Corpbanca Administradora General de Fondos S.A. and Corpbanca Securities Inc;

(3)

Basically composed of subsidiaries Itau Bank, Ltd., ITB Holding Ltd. and Itaú BBA International plc; only at 12/31/2016, Itaú International Investment LLC and Itaú Japan Asset Management Limited;

(4)

Foreign consolidated information presents balances net of consolidation eliminations.

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Note 21 – Risk and capital management

Assuming and managing risks is one of the activities carried out by ITAÚ UNIBANCO HOLDING CONSOLIDATED and, accordingly, the institution should have established objectives for risk management. Accordingly, the risk appetite defines the nature and level of risks acceptable for the institution and the risk culture guides the attitudes required to manage them. ITAÚ UNIBANCO HOLDING CONSOLIDATED seeks robust process for risk management, which permeate the whole institution and that are the basis for strategic decisions to assure the sustainability of business

These processes are aligned with the guidelines of the Board of Directors and Executives that, through corporate bodies, define the global objectives that are measured as goals and limits to the risk management units. Control and capital management units, in turn, support the ITAÚ UNIBANCO HOLDING CONSOLIDATED’s management by monitoring and analyzing risk and capital.

The principles providing the foundations for management of risk, risk appetite and guidelines on how ITAÚ UNIBANCO HOLDING CONSOLIDATED’s employees should behave on the day-to-day for decision-making purposes are as follows:

Sustainability and Client Satisfaction: ITAÚ UNIBANCO HOLDING CONSOLIDATED’s vision is to be the leading bank in sustainable performance and client satisfaction and, therefore, it is committed to creating shared value to employees, clients, stockholders, and society, ensuring the continuity of business. ITAÚ UNIBANCO HOLDING CONSOLIDATED is committed to do business that is good both for the client and the institution itself.

Risk Culture: The institution’s risk culture goes beyond policies, procedures or processes, as it strengthens the individual and collective responsibility of all employees so they do the right thing at the right moment and on the proper way, by respecting the ethical way of doing business. The Risk Culture is described below.

Risk Pricing: ITAÚ UNIBANCO HOLDING CONSOLIDATED acts and assumes risks in business it knows and understands, avoiding risks that are unknown to the institution or that do not have a competitive edge, therefore carefully assessing the risk-return ratio.

Diversification: the institution’s appetite is low with respect to volatility in results and, therefore, it operates with a diversified base of clients, products and business, seeking to diversify risks and giving priority to lower risk business.

Operational Excellence: It is the wish of ITAÚ UNIBANCO HOLDING CONSOLIDATED to be an agile bank, with a robust and stable infrastructure to offer top services.

Ethics and Respect for Regulation: for ITAÚ UNIBANCO HOLDING CONSOLIDATED, ethics is non-negotiable; therefore, the institute promotes an institutional environment that has integrity, guiding employees to cultivate ethics in relationships and business, and the respect for rules, as it cultivates the care for the institution’s reputation.

Aiming to strengthen these values and align ITAÚ UNIBANCO HOLDING CONSOLIDATED’s employees’ behavior with its risk management guidelines, the institution adopts a number of initiatives to disseminate the risk culture. ITAÚ UNIBANCO HOLDING CONSOLIDATED’s risk culture is based on four basic principles: conscious risk-taking, discussion of the risks the institution faces, the corresponding action taken, and the responsibility of everyone to manage risks.

These principles lay down the basis for ITAÚ UNIBANCO HOLDING CONSOLIDATED’s guidelines by helping employees to consciously understand, identify, measure, manage and mitigate risks.

In addition to policies, procedures and processes, the risk culture strengthens the individual and collective responsibility of employees in the management of risks inherent in the activities performed individually, respecting the ethical way of managing business.

ITAÚ UNIBANCO HOLDING CONSOLIDATED promotes the risk culture, emphasizing the behavior that will help people in any level of the institution to assume and manage risk on a responsible way. With these principles disseminated by the institution, there is an incentive for the risk to be understood and discussed frankly, maintained within the limits established for risk appetite, and so that each employee, regardless of their position, area or function, also assumes responsibility for managing risks of their business.

ITAÚ UNIBANCO HOLDING CONSOLIDATED also provides channels for reporting operational failures, internal or external frauds, and conflicts in the work environment or situations that might cause disruptions and/or losses to the institution or adversely affect clients. Every employee and third party is responsible for reporting any issues on a promptly basis, as soon as they become aware of the fact.

Taking a prospective stance in relation to capital management, ITAÚ UNIBANCO HOLDING CONSOLIDATED implemented a capital risk structure and its ICAAP, therefore complying with National Monetary Council (CMN) Resolution nº. 3,988, BACEN Circular nº. 3,547, and BACEN Circular Letter nº. 3,774.

The risk management organizational structure of ITAÚ UNIBANCO HOLDING CONSOLIDATED is in compliance with the regulations in force in Brazil and abroad, and in line with the best practices of the market. The responsibilities for risk management at ITAÚ UNIBANCO HOLDING CONSOLIDATED are structured in accordance with three defense lines, to wit:

in the first defense line, business areas and back-office corporate areas manage risks originated by them, through their identification, assessment, control and report thereof;

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in the second defense line, an independent unit controls risks on a centralized basis, aiming at assuring that the risks of ITAÚ UNIBANCO HOLDING CONSOLIDATED are managed in accordance with the appetite for risk, and the policies and procedures established. Thus, the centralized control provides the Board of Directors and the executives with a global vision of exposures of ITAÚ UNIBANCO HOLDING CONSOLIDATED so as to optimize and expedite corporate decisions;

in the third defense line, internal audit performs the independent assessment of the activities carried out in the institution, enabling top management to measure the adequacy of controls, effectiveness of risk management and compliance with internal rules and regulatory requirements

ITAÚ UNIBANCO HOLDING CONSOLIDATED uses automated and robust systems to fully meet capital regulations and to measure risks following regulatory requirements and models in effect. It also coordinates actions to check for adherence to qualitative and quantitative requirements established by the regulatory bodies for compliance with the minimum mandatory capital requirement and risk monitoring.

Further details on risk management can be found on the website www.itau.com.br/investor-relations, under section Corporate Governance / Risk Management and Capital – Pillar 3.

I – 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.

Market Risk Management Policy is in line with the principles of Resolution nº. 3,464, issued by the National Monetary Council (CMN) and posterior amendments, being a set of principles that drive strategy towards control and management of market risk of all institution.

ITAÚ UNIBANCO HOLDING CONSOLIDATED’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other things:

Political, economic and market conditions;

Portfolio profile of ITAÚ UNIBANCO HOLDING CONSOLIDATED;

Expertise within the group to support operations in specific markets.

The purpose of market risk control of ITAÚ UNIBANCO HOLDING CONSOLIDATED structure is:

Providing visibility and assurance to all executive levels that the assumption of market risks is in line with ITAÚ UNIBANCO HOLDING CONSOLIDATED risk-return objective;

Promoting a disciplined and informed 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

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 CONSOLIDATED, (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.

The National Monetary Council (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. Brazilian inflation indexes are treated as a group of risk indicators and receive the same treatment given to other risk indicators.

The structure of limits and warnings is in line with the Board of Directors’ guidelines, and it is reviewed and approved on an annual basis. This structure has specific limits aiming at improving the risk monitoring and understanding process, and at avoiding concentration. These limits are quantified by assessing the forecasted results of the balance sheet, size of stockholders’ equity, liquidity, market complexity and volatility, as well as the institution’s appetite for risk.

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In order to set up operations within the defined limits, ITAÚ UNIBANCO HOLDING CONSOLIDATED hedges transactions with clients and proprietary positions, including its foreign investments. Derivatives are commonly used for these hedging activities, and can be characterized as accounting or economic hedge, both governed by the institutional polices of ITAÚ UNIBANCO HOLDING CONSOLIDATED.

For a detailed vision of the accounting hedge topic, see Note 7 – Securities and Derivative Financial Instruments.

The market risk structure categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with general criteria established by CMN Resolution nº. 3,464 and BACEN Circular nº. 3,354. 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.

Market risk management analyses is conducted based on the following metrics:

Value at risk (VaR): statistical measure that estimates the expected maximum potential economic loss under normal market conditions, considering a certain time horizon and confidence level;

Losses in stress scenarios: 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);

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 instrument or risk factor, calculated at market value (“MtM – Mark to Market”); and

Stressed VaR: statistical metric arising from VaR calculation, which purpose is to capture higher risk in simulations for the trading portfolio, considering returns that can be seen in historical scenarios of extreme volatility.

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In addition to the aforementioned risk measures, sensitivity and loss control measures are also analyzed. They comprise:

Mismatching analysis (GAPS): accumulated exposure by risk factor of cash flows expressed at market value, allocated at the maturity dates;

Sensitivity (DV01- Delta Variation): impact on the market value of cash flows, when submitted to an one annual basis point increase in the current interest rates or index rate;

Sensitivity to several risk factors (Greeks): partial derivatives of an option portfolio in relation to the prices of underlying assets, implied volatilities, interest rates and time.

ITAÚ UNIBANCO HOLDING CONSOLIDATED uses proprietary systems to measure the consolidated market risk. The processing of these systems occurs 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.

At December 31, 2017, ITAÚ UNIBANCO HOLDING CONSOLIDATED posted a Total VaR of R$ 372.3 million (R$ 329.8 million at December 31, 2016). The growth in Total VaR Total noted as compared to the prior year was mainly due to the increase of interest rate exposure.

The document “Public Access Report – Market Risk“, which includes the guidelines established by the institutional credit risk control policy, which is not an integral part of the financial statements, can be viewed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies.

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II – Credit risk

ITAÚ UNIBANCO HOLDING CONSOLIDATED understands credit risk as 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 provides for operational limits and risk mitigating mechanisms, in addition for establishing processes and tools to measure, monitor and control the credit risk inherent in all products, portfolio concentrations and the impacts from potential changes in the economic environment.

ITAÚ UNIBANCO HOLDING CONSOLIDATED 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.

To protect the institution against losses arising from loan operations, ITAÚ UNIBANCO HOLDING CONSOLIDATED considers all aspects that determine the client’s credit risk to define a provision level that is adequate with the risk incurred in each operation. For each operation, the assessment and rating of the client or economic group, the operation rating, and the possible existence of past-due amounts are taken into account and the volume of the regulatory provision is determined.

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.

III – Operational risk

Operational risk is defined as the possibility of losses from failure of, insufficient or inadequate internal processes, people and systems, or from external events impacting the realization of strategic, tactical or operational objectives. It includes the legal risk, associated with the inadequacy or deficiency in agreements signed by the institution, as well as sanctions for failing to meet legal provisions and compensation for damages to third parties arising from activities performed by the institution.

The managers of executive areas adopt corporate methodologies developed and made available by the internal controls, compliance and operational risk area.

As part of governance of risk management process, consolidated reports on risk monitoring, controls, action plans and operating losses are periodically presented to the business areas’ executives.

In line with the principles of CMN Resolution No. 4,557, the document “Public Access Report the document entitled “Public Access Report – Integrated Management of Operational Risk/ Internal Controls/ Compliance“, a summarized version of the institutional operational risk management policy, which is not an integral part of the financial statements, may be accessed on the website www.itau.com.br/investor-relations, section “Corporate Governance”, Rules and Policies.

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IV – Liquidity risk

Liquidity risk is defined as the institution’s possibility of not being able to efficiently meet its expected and unexpected obligations, both current and future, including those arising from the pledged guarantees, without affecting its daily operations and without incurring significant losses.

The control over liquidity risk is carried out by an area independent from the business area and responsible for establishing the reserve composition, estimating the cash flow and exposure to liquidity risk in different horizons of time, and monitoring the minimum limits to absorb losses in stress scenarios for each country where ITAÚ UNIBANCO HOLDING CONSOLIDATED operates. All activities are subject to verification by the independent validation, internal control and audit areas.

In compliance with Circular Letter n° 3,775 of BACEN, bank holding total assets over R$ 100 billion are required to report a standardized Liquidity Coverage Ratio (LCR) to the Central Bank of Brazil on a monthly basis as of October 2015. 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 index calculation is presented in the table below. In 2017, the index minimum requirement is 80%. Further details on the LCR for the period may be accessed at www.itau.com.br/investor-relations, section Corporate Governance/ Capital and Risk Management - Pillar 3.

Information on the Liquidity Coverage Ratio (LCR)	Forth quarter of 2017
	Total Adjusted Amount⁽¹⁾
Total high-quality liquid assets ⁽²⁾		187,090,072
Total potential cash outflows ⁽³⁾		98,356,111
Liquidity Coverage Ratio (%)		190.2	%

(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.

The document Public Access Report - Liquidity Risk, that expresses the guidelines set forth by the internal policy on liquidity risk, that is not part of the financial statements, may be viewed on the website www.itau.com.br/investor-relations, in the section Corporate Governance, Rules and Policies.

V - Insurance, Pension Plan and Capitalization Risks

The products that make up the portfolios of Insurance companies belonging to ITAÚ UNIBANCO HOLDING CONSOLIDATED are related to life and all risks insurances, private pension plans and capitalization. The main risks inherent in these products are described below and their definitions are presented in their respective chapters.

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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.

The management process of insurance, pension plan and capitalization risks is independent and focused on the specifics of each risk.

VI- Social and Environmental Risk

ITAÚ UNIBANCO HOLDING CONSOLIDATED understands 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 identification, the phases of prioritization, response, monitoring and reporting of assessed risks supplement this risk monitoring at ITAÚ UNIBANCO HOLDING CONSOLIDATED.

The social and environmental risk management is carried out by the first line of defense in its daily operations, with the technical support of the legal and risk control areas, which have a dedicated team. 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 institution.

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.

ITAÚ UNIBANCO HOLDING CONSOLIDATED 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 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 CONSOLIDATED’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 has been awarded.

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Note 22 –Supplementary information

Insurance policy - ITAÚ UNIBANCO HOLDING CONSOLIDATED despite the low risk exposure due to the physical non-concentration of their assets, it has a policy of guaranteeing their valuables and assets at amounts considered sufficient to cover possible claims.

Foreign currency – The balances in Reais linked to the foreign currencies were as follows:

	12/31/2017			12/31/2016
Permanent foreign investments		78,063,535			72,412,602
Net amount of other assets and liabilities indexed to foreign currency, including derivatives		(136,526,049	)		(124,851,838	)
Net foreign exchange position		(58,462,514	)		(52,439,236	)

The net foreign exchange position, considering the tax effects on the net balance of other assets and liabilities indexed to foreign currencies, reflects the low exposure to exchange variations.

Investment funds and managed portfolios - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, manages the following types of funds: privatization, fixed income, shares, open portfolio shares,investment clubs, customer portfolios and group portfolios, domestic and foreign, classified in memorandum accounts, distributed as follows:

	Amount				Amount ⁽¹⁾				Number of funds
	12/31/2017		12/31/2016		12/31/2017		12/31/2016		12/31/2017		12/31/2016
Investment funds		801,303,247		663,768,689		801,303,247		663,768,689		5,521		2,338
Fixed income		753,871,559		624,114,915		753,871,559		624,114,915		5,149		1,965
Shares		47,431,688		39,653,774		47,431,688		39,653,774		372		373
Managed portfolios		262,552,738		236,669,902		168,554,581		150,557,747		18,837		17,352
Customers		200,634,987		174,704,782		149,227,864		127,895,352		18,757		17,271
Itaú Group ⁽²⁾		61,917,751		61,965,120		19,326,717		22,662,395		80		81
Total		1,063,855,985		900,438,591		969,857,828		814,326,436		24,358		19,690

(1)

Refers to the total amounts after elimination of double counting related to investments in investment fund portfolios.

(2)

Changes were made in balances at December 31, 2016 for comparison purposes.

Consortia funds

	12/31/2017		12/31/2016
Monthly estimate of installments receivable from participants		174,045		165,800
Group liabilities by installments		11,054,378		10,741,858
Participants – assets to be delivered		9,264,395		9,102,228
Funds available for participants		1,758,861		1,642,539
(In units)
Number of managed groups		561		625
Number of current participants		392,813		395,474
Number of assets to be delivered to participants		131,131		147,238

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Fundação Itaú Social - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, is the main sponsor of Fundação Itaú Social, the objectives of which are managing the “Itaú Social Program”, which aims at coordinating the organization’s role in projects of interest to the community by supporting or developing social, scientific and cultural projects, mainly in the elementary education and health areas and supporting projects or initiatives in progress, supported or sponsored by entities qualified to work in the ”Programa Itaú Social” (Itaú Social Program).

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries did not make donations and the foundation´s net assets totaled R$ 4,000,429 (R$ 3,019,116 at 12/31/2016). The funds to finance the objectives of the foundation and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

Instituto Itaú Cultural – ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, is the main sponsor of Instituto Itaú Cultural, an entity set up to promote and disseminate Brazilian culture across the country and abroad.

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries made donations in the amount of R$ 93,057 (R$ 86,926 from 01/01 to 12/31/2016) and the institute’s net assets totaled R$ 30,195 (R$ 35,404 at 12/31/2016). The funds to finance the objectives of the institute and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

Instituto Unibanco - ITAÚ UNIBANCO HOLDING CONSOLIDATED sponsors Instituto Unibanco, an entity whose objective is to support projects on social assistance, particularly education, culture, promotion of integration to labor market, and environmental protection, directly and/or supplementary, through the civil society’s institutions.

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries did not make donations and the institute’s net assets totaled R$ 1,784,304 (R$ 1,549,017, at 12/31/2016). The funds to finance the objectives of the institute and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

Instituto Unibanco de Cinema - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, is the main sponsors Instituto Unibanco de Cinema, an entity whose objectives are the fostering of culture in general, and providing the low-income population with access to cinematography, videography and similar productions, for which it shall own and manage movie theaters, and theaters to screen films, videos, video-laser discs and other related activities, as well as to screen and divulge films of importance, especially those produced in Brazil.

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries did not make donations and the institute’s net assets totaled R$ 19,492 (R$ 18,668 at 12/31/2016). The funds to finance the objectives of the institute and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

Associação Itaú Viver Mais - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, is the main sponsor Associação Itaú Viver Mais, an entity whose objective is the provision of social services for the welfare of beneficiaries, in the way and conditions established by its Internal Rules, and according to the funds available. These services may include, among others, the promotion of cultural, educational, sports, entertainment and healthcare activities.

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries made donations in the amount of R$ 920 (R$ 920 at 12/31/2016) and the association’s net assets totaled R$ 538 (R$ 1,121 at 12/31/2016). The funds to finance the objectives of the association and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

Associação Cubo Coworking - ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiaries, is the main sponsor of Associação Cubo Coworking, an entity set up to encourage and promote: discussions, the development of alternative and innovative technologies, business models and solutions; the production and dissemination of the resulting technical and scientific knowledge; the attraction and gathering of new information technology talents that may be characterized as startups; research, development and establishment of ecosystems for entrepreneurship and startups.

During the period from 01/01 to 12/31/2017 and 01/01 to 12/31/2016, the subsidiaries made donations in the amount of R$ 9,500 (R$ 6,000 from 01/01 to 12/31/2016) and the association’s net assets totaled R$ 3,416 (R$ 3,545 at 12/31/2016). The funds to finance the objectives of the association and maintain its operating and administrative structure derive from donations and proceeds generated by its assets.

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Exclusions of non recurring effects net of tax effects – ITAÚ UNIBANCO HOLDING and ITAÚ UNIBANCO HOLDING CONSOLIDATED

	01/01 to			01/01 to
	12/31/2017			12/31/2016
Goodwill on acquisition (Note 15b ll)		(508,424	)		(441,798	)
Provision for Citibank integration expenditures		(277,365	)		-
Liability Adequacy Test (Note 4m II.I)		164,295			108,681
Contingencies tax and social security (Note 12e)		(225,462	)		7,381
Disposal of IRB shares		154,958			-
Realization of Assets and Impairment		(151,963	)		(180,438	)
Provision for contingencies - Civil Lawsuits - Economics Plans		(101,447	)		(224,471	)
Social security fund (Note 19)		-			129,946
Others		31,066			17,875
Total		(914,342	)		(582,824	)

Agreements for offsetting and settlement of liabilities within the scope of the National Financial System – Offset agreements were entered into within the scope of derivative contracts, as well as agreements for the offsetting and settlement of receivables and payables pursuant to CMN Resolution nº. 3,263, of February 24, 2005, the purpose of which is to enable the offsetting of credits and debits maintained with the same counterparty, and where the maturity dates of receivables and payables can be advanced to the date an event of default by one of the parties occurs or in the case of bankruptcy of the debtor.

Sale of Group Life Insurance Portfolio

On September 19, 2016, ITAÚ UNIBANCO HOLDING CONSOLIDATED 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 CONSOLIDATED, were sold.

To complete the transaction, ITAÚ SEGUROS was split and group life insurance operations were transferred to IU Seguros S.A., whose total capital was sold to PRUDENTIAL on April 1st, 2017, after conditions precedent, which included obtaining approval of relevant regulatory authorities, were met.

This transaction reiterates ITAÚ UNIBANCO HOLDING CONSOLIDATED´s strategy to focus on massive insurance products and services, typically associated with retail banking.

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Acquisition of minority interest in XP Investimentos S.A.

On May 11, 2017, ITAÚ UNIBANCO HOLDING CONSOLIDATED, through its subsidiary 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 million and acquisition of shares issued by XP HOLDING and held by the SELLERS in the amount of R$ 5,700 million. 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 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 HOLDING 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.

Reclassifications for comparison purposes – In compliance with the circular letter 3,828, of 06/19/2017, of BACEN, the Company carried out reclassifications in the balances of December 31, 2016, for financial statements comparison purposes, in view of the regrouping of the following headings.

	Prior disclosure		Reclassification			Adjusted balances

ASSETS

Current assets and Long term receivables		1,400,096,807		-			1,400,096,807
Interbank accounts		86,556,889		27,003,822			113,560,711
Pending settlement		447,752		27,003,822			27,451,574
Other receivables		173,694,462		(27,003,822	)		146,690,640
Transactions with credit card issuers		27,003,822		(27,003,822	)		-
Total assets		1,427,084,224		-			1,427,084,224

LIABILITIES

Current and Long term liabilities		1,297,822,903		-			1,297,822,903
Pending settlement		407,725		25,877,129			26,284,854
Other liabilities		243,748,538		(24,431,684	)		219,316,854
Credit card operations		59,631,880		(59,631,880	)		-
Sundry		21,075,733		33,754,751			54,830,484
Total liabilities		1,427,084,224		-			1,427,084,224

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ITAÚ UNIBANCO HOLDING S.A.

CNPJ. 60.872.504/0001-23

A Listed Company

NIRE. 35300010230

SUMMARY OF THE AUDIT COMMITTEE REPORT

SECOND SEMESTER OF 2017

The Audit Committee (Committee) is a statutory advisory body that reports directly to the Board of Directors (Board). It is currently composed of six members, one of whom is part of the Board, and all of them are effective and independent members, elected by the Board for a one-year term of office. The Committee serves as the sole vehicle for all companies of the Itaú Unibanco Conglomerate (Conglomerate) in Brazil, in which the appointment of an Audit Committee is required, including insurance, pension plan and capitalization companies.

In accordance with its Charter (available on website http://www.itau.com.br/investor-relations), the Committee is responsible for the oversight of the quality and integrity of the financial statements of the Conglomerate, for the compliance with legal and regulatory requirements, for the activity, independence and quality of the services rendered by the independent auditors and by the Internal Audit, and for the quality and effectiveness of the internal controls and risk management systems of the Conglomerate.

The assessments made by the Committee are based on information received from Management and on the presentations carried out by different officers of the business and support areas, as well as on the results of the work performed by the independent auditors, Internal Audit, and those responsible for risk management, capital management, internal controls and compliance, and on its own analysis resulting from direct observation.

Management is responsible for preparing the financial statements of Itaú Unibanco Holding S.A. and of its subsidiaries and affiliates and for establishing the procedures required to ensure the quality of the processes that generate the information used for preparation of financial statements and financial reports. Management is also responsible for risk control and monitoring, supervising the company’s internal controls and compliance activities, and for overseeing the compliance with legal and regulatory requirements.

The Conglomerate’s internal controls management and coordination are the responsibility of the Operational Risk and Compliance Executive Area (DEROC), which also works in the implementation and operation of the operational risk management framework.

The Internal Audit mission is to assess the quality and conformity of the internal control and risk management systems, as well as the compliance with defined policies and procedures, including those adopted for preparation of financial and accounting reports.

PricewaterhouseCoopers Auditores Independentes (PwC) is responsible for the independent audit of the individual and consolidated financial statements and for attesting whether those statements fairly represent, in all material respects, the individual and consolidated financial position of the Conglomerate, and the individual and consolidated performance of its operations, in accordance with Brazilian accounting practices and with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and it is also responsible for auditing the financial statements of the Prudential Conglomerate. The independent auditors should also annually issue an opinion on the quality and effectiveness of the internal controls related to financial reports, including risk management and compliance with legal and regulatory requirements.

Activities of the Committee

The Committee’s annual work plan is prepared at the beginning of each fiscal year, considering the main products and processes of businesses of the Conglomerate and their potential impact on the financial statements and the internal control and risk management system, and is revised from time to time as activities progress. Significant issues to be included in the planning are identified through this analysis, with the schedule of activities adjusted based on the approach given to these issues. Among the significant issues identified in the period and related actions adopted, we highlight:

Monitoring regulatory and normative changes – Reporting to the Committee significant activities in the discussion, implementation, and assessment of potential impacts arising from CMN Resolutions 4539/2016, 4557/2017, 4588/2017 and 4595/2017, and from IFRS 9 – Financial Instruments;

Information Technology – Holding meetings to discuss the procedures adopted to cover operational risk events;

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Information Security, Anti-Money Laundering and Fraud Prevention and Inspectorship activities - Holding meetings with the responsible areas;

Business Areas – Monitoring of risk management and the control environment;

Foreign Units – Focusing on the follow-up of Itaú CorpBanca integration process, in addition to holding meetings with the business and support areas and Audit Committees of foreign units;

Accounting Processing – Management and control of accounting back office processes;

Client Relations – Monitoring of the work developed by the Ombudsman and business areas to identify themes that impact clients, the root cause of complaints and respective corrective actions; and

Internal Audit Planning – Monitoring the proposed action, structure and relevante matters related to the future vision on Internal.

In compliance with its duties, the Committee carried out, among other, the following activities:

Risk Management, Internal Controls and Compliance - In meetings held with the responsible areas, the Committee monitored significant issues related to the risk management and capital management framework of the Conglomerate, with emphasis on credit, market, and operational risks. The Committee also monitored the compliance policy and the evolution of the Conglomerate’s internal control system at meetings with DEROC and through engagements carried out by Internal Audit. In this period the Committee performed the annual evaluation of DEROC.

Independent Audit – The Committee has a regular communication channel with the independent auditors to widely discuss their work and significant accounting matters, allowing members to support their opinion on the integrity of financial statements and financial reports.

Issues related to the assessment of the quality and adequacy of the internal controls system and of the compliance with legal and regulatory provisions by the entities of the Conglomerate were submitted to and discussed with the Committee at its meetings.

Engaging services from the independent auditors requires the prior approval from the Committee, which assesses the risks of loss of independence and conflicts of interest.

Internal Audit – The Committee met on a monthly basis with Internal Audit representatives to discuss the work performed, reports issued, conclusions and recommendations. In this period the Committee performed the annual evaluation of Internal Audit.

Financial Statements – The significant criteria involved in the preparation of individual and consolidated financial statements, notes to the financial statements and financial reports published together with the individual and consolidated financial statements were presented to the Committee by Management and the independent auditors. The Committee also monitored the preparation and disclosure of the consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

Insurance, Pension Plan and Capitalization Companies – As required by the Conselho Nacional de Seguros Privados (National Private Pension Council) regulations, the Committee monitored the companies supervised by the Superintendence of Private Insurance (Itaú Seguros S.A., Itauseg Seguradora S.A., Itaú Vida e Previdência S.A., and Cia Itaú de Capitalização), and the activities described in this Summary include the issues relevant to these companies.

Consumer matter– The Committee has a agenda of meetings with the business and support areas to monitor consumer-related topics. As part of these activities, the Committee was able to be informed about the client service activities carried out by the Ombudsman and discuss, in compliance with regulatory requirements, the half-yearly Ombudsman’s Report.

Regulators – The Committee took notice of the reports on inspections and of comments made by regulators, monitored the respective actions carried out by Management, and prepared, whenever required, reports to the Board of Directors, summarizing the actions taken, the level of attention required and its own comments on any actions adopted. In this period, the Committee held meetings with supervisors of the Central Bank of Brazil/Desup (Department of supervision of banks and banking conglomerates) and Central Bank of Brazil/Decon (Department of conduct supervision).

Meetings held in the period

For purposes of carrying out the aforementioned activities and procedures, the Committee held a total of 113 meetings, duly formalized in minutes, in 28 days from August 16, 2017 to January 31, 2018.

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The Committee held quarterly meetings with the Co-Chairmen of the Board of Directors and the CEO of Itaú Unibanco Holding S.A., when it submitted its own comments on a number of aspects related to the performance of its duties. It also reports its activities to the Board of Directors and holds regular meetings with the Fiscal Council.

Members of the Committee act as effective members or as observers in Audit Committees of foreign units, and they visited some of these units in the period. They also act as observers at meetings of the Accounting Standards and Policies Committee and the Superior Balance Sheet Closing Committee. The Committee carried out its annual self-assessment in the period.

Conclusions

Having duly considered its responsibilities and the natural limitations resulting from the scope of its activities, and based on the activities carried out in the period, the Committee concludes as follows:

The internal control systems, the compliance policy and the risk management and capital management frameworks are adequate to the Conglomerate’s size and complexity and the approved risk appetite;

The coverage and quality of the Internal Audit work are satisfactory;

The significant accounting practices adopted by the Conglomerate are in line with those adopted in Brazil, including those required by the Central Bank of Brazil, and with the International Financial Reporting Standards (IFRS); and

The volume and quality of information provided by PricewaterhouseCoopers Auditores Independentes (PwC), which supports the Committee’s recommendation on the financial statements, are satisfactory, and no situation was identified that could impair the objectivity and independence of the independent auditors.

Based on the work and assessments carried out and taking into account the context and limitation of its duties, the Committee recommends to the Board of Directors the approval of the consolidated financial statements of Itaú Unibanco Holding S.A. for the half year ended December 31, 2017.

São Paulo, February 5, 2018.

The Audit Committee

Gustavo Jorge Laboissière Loyola – Chairman

Antonio Francisco de Lima Neto

Diego Fresco Gutierrez

Geraldo Travaglia Filho

Maria Helena dos Santos Fernandes de Santana

Rogério Paulo Calderón Peres

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ITAÚ UNIBANCO HOLDING S.A.

CNPJ. 60.872.504/0001-23

Listed Company

NIRE. 35300010230

OPINION OF THE FISCAL COUNCIL

The effective members of the Fiscal Council of ITAÚ UNIBANCO HOLDING S.A., after having examined the financial statements for the fiscal year ended December 31, 2017 and verified the accuracy of all items examined, and in view of the unqualified opinion of PricewaterhouseCoopers Auditores Independentes, understand that these documents adequately reflect the company’s capital structure, financial position and the activities conducted during the period, and they have the conditions to be submitted to the appreciation and approval of the Stockholders.

São Paulo (SP), February 05, 2018.

JOSÉ CARUSO CRUZ HENRIQUES

President

	ALKIMAR RIBEIRO MOURA	CARLOS ROBERTO DE ALBUQUERQUE SÁ
	Member	Member

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ITAÚ UNIBANCO HOLDING S.A.

CNPJ 60.872.504/0001-23

A Publicly Listed Company

NIRE 35300010230

DECLARATION

The Officers responsible for the preparation of the financial statements, in compliance with the provisions in Article 29, paragraph 1, item II, and Article 25, paragraph 1, items V and VI, of Instruction No. 480/2009 of the Brazilian Securities and Exchange Commission (CVM), declare that they: a) read, discussed e agree with the opinions expressed in the independent auditor’s report on the Company’s financial statements for 2017; b) read, discussed and agree with the Company’s financial statements for 2017 and with the Management Discussion and Analysis (MD&A) Report.

São Paulo (SP), February 5, 2018.

CAIO IBRAHIM DAVID	ALEXSANDRO BROEDEL LOPES
Vice President	Executive Officer

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	(A free translation of the original in Portuguese)

	*Report of independent auditor on the parent company and consolidated financial statements*

	To the Board of Directors and Stockholders
	Itaú Unibanco Holding S.A.

	Opinion

	We have audited the accompanying parent company financial statements of Itaú Unibanco Holding S.A. ("Bank"), which comprise the balance sheet as at December 31, 2017 and the statements of income, changes in equity and cash flows for the six-month period and year then ended, as well as the accompanying consolidated financial statements of Itaú Unibanco Holding S.A. and its subsidiaries ("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2017 and the consolidated statements of income and cash flows for the six-month period and year then ended, and notes to the financial statements, including a summary of significant accounting policies.

	In our opinion, the parent company and consolidated financial statements referred to above present fairly, in all material respects, the financial position of Itaú Unibanco Holding S.A. and of Itaú Unibanco Holding S.A. and its subsidiaries as at December 31, 2017, and the individual financial performance and cash flows, as well as the consolidated financial performance and cash flows, for the six-month period and year then ended, in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN).

	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 Parent Company and Consolidated Financial Statements" section of our report. We are independent of the Bank and of its subsidiaries in accordance with the ethical requirements established in the Accountant’s 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.

PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 61005 T: (11) 3674-2000, www.pwc.com/br

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 parent company and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

	Our audit in 2017 was planned and executed considering that the operations of Bank and Consolidated did not present significant modifications in relation to the previous year. In this context, the Key Audit Matters, as well as our audit approach, have remained substantially in line with those of the previous year, except for the exclusion of the matter related to the acquisition of control of CorpBanca, since it refers to an event of the fiscal year ending on December 31, 2016.

Itaú Unibanco Holding S.A.

Why it is a Key Audit Matter

How the matter was addressed in the audit

Allowance for loan and lease losses (Notes 4f and 8)

Itaú Unibanco Holding S.A. and its subsidiaries has diversified its business with an impact on the change in the composition of the loan portfolio in recent years, focusing on the origination of products with lower credit risk. In 2017, the calculation of the allowance for loan and lease losses is still a sensitive matter subject to management's judgment. The identification of situations relating to 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 area continued to be a 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 meet the assumptions and the standards of the Brazilian Central Bank (BACEN) and National Monetary Council (CMN) as well as the disclosures in notes to 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, underlying guarantees, and the estimates of recovery of overdue receivables.

For the allowance for loan losses calculated on a collective basis (retail segment), we tested the underlying models, including the model approval process and the validation of the assumptions used to determine the loss and recovery estimates, as well as the consistency of the models with those applied in previous periods.

We tested the adequacy of the inputs for these models, including the recoveries, and, when available, compared the data and assumptions used with market data.

Itaú Unibanco Holding S.A.

	Why it is a Key Audit Matter		How the matter was addressed in the audit

			We believe that the criteria and assumptions adopted by Management in determining and recording the allowance for loan losses are appropriate and consistent in all material respects in the context of the financial statements.


	Measurement of the fair value of financial instruments and derivatives with little liquidity and without active market- (Notes 4c, 4d and 7) The fair value measurement of financial instruments with little liquidity and without an active market requires subjectivity, considering that it depends on valuation techniques based on internal models that involve management's assumptions for their valuation. In addition, management of market risk 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 continues as an area of focus our audit since the utilization of different valuation techniques and assumptions could lead to materially different fair value estimates.		We tested the design and the effectiveness of the main controls established for the fair valuation of these financial instruments, as well as the approval of models and related disclosures. We analyzed the methodology used 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 as well as evaluated the consistency of these methodologies with the ones applied in prior periods. 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.

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. Technology represents a fundamental aspect on Itaú Unibanco's business evolution and 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, as well as risks related to information security and cybersecurity. Accordingly, as in the fiscal year ended December 31, 2016, 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 audit procedures applied resulted in appropriate evidence that was considered in determining the nature, timing and extent of other audit procedures, and we believe that the processes and controls of the information technology environment have provided a satisfactory basis to be used in the outcome of our audit of the financial statements.


	Deferred tax assets (Note 14 b) The deferred tax assets arising from temporary differences, tax losses carryforward and negative basis of social contribution are recorded to the extent 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 continue to consider that this area requires audit focus, taking into account that using 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 assets and the recording of such credits in accordance with the accounting standards and specific requirements of BACEN and CMN, including the necessity of analysis of the perspectives for the realization of these assets, via projections of future taxable profits, for each of the institutions which comprise the Consolidated. We tested the design and the effectiveness of the main 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 believe that the assumptions adopted by Management in the determination and recording of tax credits are appropriate and consistent with the disclosures in the notes to the financial statements.

Itaú Unibanco Holding S.A.

	Why it is a Key Audit Matter		How the matter was addressed in the audit

	Realization of amounts recorded on intangible assets (Notes 4k and 15 b) The balances of intangible assets are tested semiannually for impairment. These tests involve 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 estimates by management. We continue to consider this as an area of audit focus due to: (i) projection of future results, in which the use of different assumptions can significantly modify the perspective of realization of these assets and the possible need to record impairment with consequent impact on the financial statements (ii) the relevance of intangible assets arising from the acquisition of Itaú Corpbanca.		We have tested the design and effectiveness of the main established controls, including the analysis of the assumptions and critical judgments used by Management We analyzed the projections for the determination of impairment of intangible assets as prepared by management, focusing on the most representative cases, such as intangible assets arising from the acquisition of Itaú Corpbanca, in order to corroborate the reasonableness of these realization estimates. We believe that the assumptions adopted by Management to evaluate the realization of intangible assets are appropriate and the disclosures in the notes to the financial statements are consistent with the information obtained.


	Provision for contingent liabilities (Notes 4n and 12) 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 involve 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 are made to settle proceedings in advance. In addition, in 2017, a labor reform was approved and an agreement instrument for the termination of civil legal proceedings related to economic plans was signed, which will be valid after homologation by the Federal Supreme Court.		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 civil and labor natures considered on a group basis. We were supported by our specialists in the labor, legal, and fiscal areas, according to the nature of each proceeding.

Itaú Unibanco Holding S.A.

	Why it is a Key Audit Matter		How the matter was addressed in the audit

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

	Statements of Value Added

	The parent company and consolidated Statements of Value Added for the six-month period and the year ended December 31, 2017, prepared under the responsibility of the Bank's management, which presentation is required by the Brazilian Corporate Law for listed companies and treated as supplementary information for purposes of BACEN, were submitted to audit procedures performed in conjunction with the audit of the financial statements. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09, "Statement of Value Added". In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and are consistent with the parent company and consolidated financial statements taken as a whole.

	Other information accompanying the parent company and consolidated financial statements and the auditor's report

	The Bank’s management is responsible for the other information which comprise the Management Report and the Operation Management Analysis Report.

	Our opinion on the parent company and consolidated financial statements does not cover the Management report or the Operation Management Analysis Report, and we do not express any form of audit conclusion thereon.

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

Itaú Unibanco Holding S.A.

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

	Management is responsible for the preparation and fair presentation of the parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by BACEN, 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 parent company and consolidated financial statements, management is responsible for assessing the Bank's and its subsidiaries ability to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank and its subsidiaries 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 parent company and consolidated financial statements

	Our objectives are to obtain reasonable assurance about whether the parent company or the consolidated 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 parent company and consolidated 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.

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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 the Bank and the Consolidated.

•

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 and it's subsidiaries ability to continue as going concerns. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained

Itaú Unibanco Holding S.A.

up to the date of our auditor's report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as going concerns.

•

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

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Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Consolidated to express an opinion on the parent company and consolidated 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 (Audit Committee and Management) 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 that we communicated to 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 parent company and consolidated 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, February 5, 2018

	PricewaterhouseCoopers		Washington Luiz Pereira Cavalcanti
	Auditores Independentes		Contador CRC 1SP172940/O-6
	CRC 2SP000160/O-5