ITAÚ UNIBANCO - MATERIAL FACT - Stock Buyback Program

Rhea-AI Summary

Itaú Unibanco Holding S.A. announces the termination of the buyback program of own stock approved in 2022 and the approval of a new stock buyback program, authorizing the buyback of up to 75,000,000 preferred shares. The potential purposes of this stock acquisition process include maximizing capital allocation, providing shares to employees and management, and using the purchased shares in future business opportunities. The buybacks will be carried out through stock exchanges from 2024 to 2025.

Positive

• The buyback program demonstrates the company's commitment to maximizing capital allocation and providing long-term incentives to employees.
• The buyback will result in a greater return in the form of dividends for stockholders and an increase in the percentage of interest of the stockholder if the shares are cancelled.
• The buyback program will optimize the use of resources available for investment and may lead to a change in the capital ratio of the company.

Negative

• The buyback may not have significant accounting effects on the company's results if the totality of the shares within the program are bought back.
• The buyback may result in the withdrawal of shares from the market, which could impact liquidity and trading volume.

Financial Analyst

The announcement of Itaú Unibanco's new stock buyback program signals a strategic use of the bank's capital reserves to optimize shareholder value. By repurchasing up to 75 million preferred shares, the bank is utilizing R$2,617,406,396.82 in Capital Reserves and R$93,728,781,179.43 in Revenue Reserves to potentially enhance earnings per share (EPS) and return on equity (ROE) metrics. This move can be interpreted as a signal of confidence from the company's management in its financial health and future prospects.

For investors, the reduction of shares in circulation may lead to a higher dividend yield and an increased stake in the company due to share cancellation. However, the actual market impact will depend on the execution pace and market conditions during the buyback period, which extends until August 4, 2025. It is also noteworthy that the buyback represents approximately 1.56% of the preferred shares in free float, a relatively modest proportion that suggests a balanced approach to capital allocation.

Market Research Analyst

Itaú Unibanco's decision to initiate a stock buyback program is a strategic move often seen in the banking industry to manage capital structure and signal to the market. The bank's choice not to use derivative instruments for this program is a conservative approach, focusing on direct market transactions. This could be seen as a method to avoid additional financial risk and complexity.

Investors and market observers should note that the buyback is intermediated by Itaú Corretora de Valores S.A., a subsidiary of the bank, which may raise questions about conflict of interest. However, since the transactions will occur on the stock exchange at market value, this concern is mitigated. The absence of an impact on the management structure or shareholding composition indicates stability, which might be positively perceived by the market.

Corporate Governance Expert

The communication from Itaú Unibanco's Board of Directors regarding the share buyback program reflects a transparent approach to corporate governance. The detailed disclosure of the program's purpose, economic effects and compliance with CVM regulations demonstrates the bank's commitment to adhering to best practices in corporate governance. The Board's confidence that the buyback will not adversely affect creditor obligations or mandatory dividend payments further reinforces the bank's solid financial standing.

However, the bank must balance the immediate benefits of a buyback with the potential need for capital for future growth opportunities or economic downturns. The earmarking of funds for potential employee compensation and long-term incentive plans also aligns with modern governance practices, potentially enhancing employee retention and aligning interests with shareholders.

SÃO PAULO, Feb. 5, 2024 /PRNewswire/ -- ITAÚ UNIBANCO HOLDING S.A. informs its stockholders that the Board of Directors, meeting on February 5, 2024, has resolved to:

(i)  terminate early, as of this date, the buyback program of own stock approved at the Board meeting held on August 25, 2022, which would terminate on February 24, 2024; and

(ii)  approve the new stock buyback program, to be effective as of this date, authorizing the buyback of up to 75,000,000 preferred shares issued by the Company, with no reduction in capital, to be held in treasury, cancelled or replaced in the market, in accordance with Article 30, §§ 1 and 2, of the Brazilian Corporate Law (Law No. 6,404/76) and CVM Resolution No. 77/22.

The potential purposes of the stock acquisition process are: (i) maximize the allocation of capital through the efficient application of available funds; (ii) provide for the delivery of shares to employees and management members of the Company and its controlled companies within the scope of compensation models and long-term incentive plans; (iii) provide for the delivery of shares to employees within the scope of institutional projects, such as incentives to innovation and efficiency; and/or (iv) use these purchased shares in any business opportunities that may arise in the future.

These buybacks, if any, will be carried out through stock exchanges in the period from February 5, 2024 to August 4, 2025, at market value and intermediated by Itaú Corretora de Valores S.A., headquartered at Brigadeiro Faria Lima, 3500, 3º andar (parte) in the city and state of São Paulo.

The information contained in Attachment G to CVM Resolution No. 80/22, on the new stock buyback program, is included in Attachment I.

RENATO LULIA JACOB
Group Head of Investor Relations and Market Intelligence

ATTACHMENT I
Itaú Unibanco Holding S.A.     

ATTACHMENT G TO CVM RESOLUTION No. 80/22
(Trading of Own Shares)

1.  Justify in detail the purpose and the economic effects expected from the transaction.

Purpose

The potential purposes of the stock acquisition process are to: (i) maximize the allocation of capital through the efficient investment of the available resources; (ii) provide for the delivery of shares to employees and management members of the Company and its subsidiaries within the scope of the compensation models and long-term incentive plans; (iii) provide for the delivery of shares to employees within the scope of institutional projects, such as, incentive to innovation and efficiency projects; and/or (iv) use the shares bought back should there be business opportunities in the future.

Economic Effects

The buyback of own shares may have the following impacts:

• For stockholders: (i) greater return in the form of dividends since the shares bought back by the Company are withdrawn from market and the payment of dividends is distributed over a lower number of shares; and (ii) increase in the percentage of interest of the stockholder if the shares are cancelled.
• For the Company: (i) optimization in the use of the resources available for investment; and (ii) change in the capital ratio. In the event of the buyback of the totality of the shares within this program, the financial amount spent will not have significant accounting effects on the Company's results.

2.  Inform the number of shares (i) comprising the free float and (ii) already held as treasury stock.

Shares comprising the free float: 402,586,896 common shares and 4,807,805,211 preferred shares listed as of December 31, 2023.

Shares held as treasury stock: 27,436,671 preferred shares as of January 31, 2024. There are no common shares held in treasury.

3.  Inform the number of shares that may be acquired or sold.

Up to 75,000,000 preferred shares may be bought back without the reduction of capital, equivalent to approximately 1.56% of the 4,807,805,211 preferred shares comprising the free float, as of December 31, 2023.

4.  Describe the main characteristics of the derivative instruments that the company may use in the future, if any.

The Company will not use derivative instruments.

5.  Describe agreements or existing voting instructions between the company and the counterparty to the transactions, if any.

The acquisitions of shares will be carried out through operations on the stock exchange and there are no voting instructions between the Company and the counterparties to the transaction.

6. In the event that operations are carried out outside the organized securities markets, please inform: (a) the maximum (minimum) price for which the shares will be bought back (sold); and (b) if applicable, the reasons justifying the transaction at prices of more than ten percent (10%) higher, in the case of buyback, or more than ten percent (10%) lower, in the case of sale, at the average price, weighted by volume, in the previous ten (10) trading days.

Not applicable since the buyback of shares issued by the Company will be carried out through transaction on a stock exchange at market value.

7.  Inform, if any, the impacts that trading will have on the shareholding composition or the management structure of the company.

There will be no impact on the management structure of the Company as a result of the buyback of shares issued by the Company nor will there be an impact on the shareholding composition since the Company has a defined controlling stake.

8.  Identify the counterparties, if known, and, in the event that the counterparty is a party related to the company, as set out in the accounting rules that cover this matter, also supply information required by Article 9^th of CVM Resolution No. 81, of March 29, 2022.

The buyback of shares issued by the Company will be carried out through transactions on a stock exchange and the counterparties are unknown.

9. Indicate the use of the funds accrued, if applicable.

Not applicable since, for the moment, the transactions will be limited to the buyback of shares and not the sale of shares.

10.  Indicate the final deadline for the settlement of the authorized operations. 

The final deadline for the settlement of the approved transactions is August 04, 2025.

11.  Identify institutions that will act as intermediaries, if any.

The buybacks will be intermediated by Itaú Corretora de Valores S.A., headquartered at Av. Brigadeiro Faria Lima, 3500, 3rd floor (parte), in the city of São Paulo (State of São Paulo).

12.  Specify the available funds to be used in accordance with Article 8, § 1^st, of CVM Resolution No. 77 of March 29, 2022.

On December 31, 2023, the funds available for the buyback of the shares issued by the Company reached:

R$ 2,617,406,396.82 in Capital Reserves; and
R$ 93,728,781,179.43 in Revenue Reserves.

13.  Specify the reasons for which members of the board of directors feel comfortable that the buyback of shares will not have an adverse impact on the ability to comply with obligations assumed with creditors or the payment of mandatory dividends, whether fixed or minimum.

The Board of Directors understands that the settlement of the buyback of own shares is compatible with the Company's financial position and it does not foresee any impact on compliance with the obligations assumed, considering that:

The Company manages its liquidity reserves based on estimates of the resources that will be available for investment, taking into consideration the continuity of business in usual conditions. Therefore, full payment ability is assured in relation to the financial commitments assumed. For further details, please see the Note "Cash and Cash Equivalents" in the Company's Financial Statements on the Investor Relations website (www.itau.com.br/relacoes-com-investidores/en/).

Itaú Unibanco Holding S.A.
A Publicly-Held Company 
CNPJ 60.872.504/0001-23    
NIRE 35300010230

CONTACT: 
Itaú Unibanco – Comunicação Corporativa
Phone: (11) 5019-8880 / 8881
E-mail: imprensa@itau-unibanco.com.br

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SOURCE Itaú Unibanco Holding S.A.

FAQ

What is the purpose of Itaú Unibanco's new stock buyback program?

The potential purposes of the stock acquisition process include maximizing capital allocation, providing shares to employees and management, and using the purchased shares in future business opportunities.

How many preferred shares are authorized to be bought back by Itaú Unibanco?

Up to 75,000,000 preferred shares may be bought back without the reduction of capital.

What are the economic effects of the buyback program?

The buyback will result in a greater return in the form of dividends for stockholders and an increase in the percentage of interest of the stockholder if the shares are cancelled.

Who will be intermediating the buybacks?

The buybacks will be intermediated by Itaú Corretora de Valores S.A.

What are the available funds for the buyback of shares?

On December 31, 2023, the funds available for the buyback of the shares reached R$ 2,617,406,396.82 in Capital Reserves and R$ 93,728,781,179.43 in Revenue Reserves.

What is the final deadline for the settlement of the approved transactions?

The final deadline for the settlement of the approved transactions is August 04, 2025.