Our business model focuses on increasing profits, fostering a collaborative environment, continuing excellence in human resources, and reinforcing our focus on our Retail segment, consistent with our strategy of intensifying our participation in higher margin and higher profitability businesses.

 

Learn more about our strategy:

 

-Unibanco

-Retail

-Wholesale

-Insurance and Pension Plan

Unibanco Business Strategy

 

Our objective is to maintain and enhance our position as a leading Brazilian full service financial institution operating in all business segments. To achieve this objective, we have developed strategies tailored to each of our business areas based on the Balanced Scorecard Methodology, a strategic model which helps us to translate our strategy into operational terms. In 2003, we became the first Latin American institution to appear in the Balanced Scorecard Hall of Fame, which recognizes companies that excel in the implementation of the Balanced Scorecard model.

 

Continuous Pursuit of Scale and Profitability

 

We believe that to maintain competitiveness, we must increase our customer base, expand our product and service offerings in each of our business segments and identify additional sources of revenue. We seek to accomplish this through organic growth, acquisitions, strategic alliances and partnerships.

 

We have focused our growth strategy on expanding our retail customer base by offering new products (such as the SuperPoupe time deposit), and through acquisitions, alliances with retailers and organic expansion of our operations. More recently, we have also focused on growing our small and medium sized enterprises, or "SMEs", customer base by designating a separate SME division within the Retail segment and training the staff at our branches to better serve these customers. We believe this strategy will contribute to improvements in our profitability and will help to lower our cost of funding.

 

Our segmentation strategy also focused on the segments with higher margins and higher growth rates, speacially in the consumer finance and credit card segments. These businesses target different economic segments of the population than the ones that are generally targeted by banks and they are largely responsible for the growth and penetration of credit access in Brazil. As credit penetration grows in segments that have not been traditionally served by commercial banks, consumer finance companies are likely to continue to experience strong growth rates. Several of the large commercial banks have established consumer finance companies and secondary brands to target this growing market.

 

In our Wholesale division, where we have traditionally been a market leader, we continue to improve our profitability by providing additional services to our large corporate clients such as cash management, payroll and investment banking services.

 

Continuous Efficiency Maximization

 

-  We are focused on controlling our costs as well as managing all of our investments in order to maximize returns. For example:

 

-We have a multifunctional committee responsible for analyzing and approving our potential projects or strategic initiatives. As a result, project and strategy decisions are not just business decisions, but corporate ones;

 

-We have centralized all of our back office activities, from operations to accounting and we are now reaping benefits from this synergy. This centralization process has included Fininvest, Hipercard, Creditec, Dibens, Unicard and other smaller operations;

 

-We have reviewed and refined certain of our policies related to the reimbursement of out of pocket expenses of our employess (i.e. - travel, telephone and meal expenses). We believe these reviews and policy changes have reinforced our corporate commitment to efficiency;

 

-We have established a single credit concession and recovery unit for all retail linked units called Credit Factory (Fábrica de Crédito) which provides unified credit and collections operations, systems and platforms for all of our the retail customers;

 

-We are reviewing all of our logistics operations, including transportation routes and our suppliers evaluation and assessment in order to seek greater efficiencies;

 

-We have consolidated and restructured our overseas platforms; and

 

-We have reduced our costs by outsourcing our document processing needs.

 

Retail Strategy

 

Increased Scale

 

We believe that our ability to maintain our position as a leading full service financial institution depends in part on maintaining and increasing scale in our retail business. Our customer base grew from 7.7 million in 2000 to over 20 million in 2005. We have increased scale in our retail business through organic growth, strategic transactions initiatives and several new cross-selling opportunities through our subsidiaries and strategic partners. As of December 2005, our total retail portfolio was R$20,581 million, representing 52% of our total loans, compared to 50% as of December 2004 and 38% in December 2003.

 

We seek to increase our scale through carefully chosen acquisitions and strategic alliances. We believe the consumer finance sector is one of the most rapidly growing and profitable segments of the Brazilian retail financial services market. Achieving a strong presence in consumer finance is central to our strategy of gaining scale in our retail business and reaching the lower income segment of the market.

 

Enhance Sales to Existing Customer Base Through Innovative Products and Service Offerings

 

We view scale not only in terms of the size of our customer base, but also as a function of the number of products we are able to sell per customer. Improving our product-per-client ratio has a positive impact on profitability, since it is less expensive to sell an additional product to an existing customer than to acquire a new customer. We believe that continually developing and marketing tailored and innovative products to serve the needs of specifically identified customer segments increases our ability to sell multiple products per client.

 

We have increased our market penetration through cross-selling among our business units and offering new products and offers such as:

 

Plano Único - a letter of credit issued in connection with the purchase of real estate which permits clients to repay the credit over an extended period of time with guaranteed delivery on 36 months from the first installment and a remaining balance potentially paid in 100 monthly installments;

 

 Loans for which repayments are charged directly to payroll, offered to private or government employees with credit card usage and personal credit lines.

 Quality Concerns and the New Service Model

 

We have improved our quality control practices in order to ensure a high level of quality for our services and products. We have also enhanced our communications with our clients. We have undertaken several initiatives to maintain the high quality standard of our products and to satisfy our customers through the use of innovative communication channels with them. For example, we launched a small television program in 2005 that is broadcast daily on public television in order to market our products and services. As result, we have been able to achieve greater proximity to our customers.

 

Since the second quarter of 2005, we have been remodeling our branches and implementing a new service model to better suit our customers.

 

Wholesale Strategy

 

Enhance Our Market Position in the Brazilian Wholesale Sector and Deepening Our Client Relationship Base

 

Unibanco's Wholesale business aims to be the bank of choice for corporations and investors with interests in Brazil. Our strategy combines the strength of a commercial bank with the agility of a leading investment bank. Our in-depth knowledge of our clients and their businesses coupled with our financial capabilities allows us to establish credit limits and to structure transactions in an innovative way.

 

During the year ended December 31, 2005, we expanded our business, while maintaining a close relationship with our clients, and attending to their day-to-day financial needs. We offer our Wholesale business clients diversified products and services, including working capital credit lines, foreign exchange lending, banking services, corporate finance, advisory services and derivative products. In addition, we have a special focus on the delivery of structured solutions to meet our clients' needs.

 

We are one of the leading Brazilian banks participating in the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or BNDES, programs (see: The Brazilian Banking Industry section). As of December 31 2005, Unibanco ranked third among private-sector banks in terms of total BNDES disbursements, with a 10.3% market share, according to the official BNDES ranking list.

 

During the third quarter of 2005, our equity research department was recognized as one of the Top 10 Research Houses in the 2005 ranking of Institutional Investor's All-Brazil Research Team, and two of our analysts were recognized.

 

Insurance Strategy

 

Focus on Offering High Profitability Insurance Products and Strengthening our Leading Corporate Market Position

 

We believe that Brazilian economic growth will present opportunities for the country's insurance industry, as Brazilians' spending on insurance products currently lags behind that of many other countries.

 

We intend to take advantage of this growing market by using our sophisticated product development capability to focus our insurance offerings on value-added products. By maintaining high standards for our underwriting criteria, our products are more profitable than the relatively commoditized, market-standard products offered by many of our competitors.

 

We believe that our Insurance business has the most optimal mix of products among the five largest insurers in Brazil. In developing insurance products for corporate clients, we have achieved leading market positions in a variety of specialized areas such as segments of property risk, aviation, D&O (Directors and Officers) and energy distribution, in addition to extended warranty products. Our focus on developing and offering value-added insurance products is supported by our joint venture with AIG, which gives Unibanco access to AIG's expertise in product development and reinsurance, as well as a valuable brand name.

 

Enhance Profitability in Our Insurance Business through Cost Control and Underwriting Expertise

 

The profitability of our Insurance business depends in part on our ability to minimize expenses and losses. We have taken significant steps to reduce expenses in our Insurance operations, including the merger of several companies into Unibanco AIG Seguros S.A., and the introduction of an Internet portal to communicate with our insurance broker and the public.

  

Pension Plan Strategy

 

Our primary strategy is to improve sales of corporate pension plans by adding new companies to our pension plan portfolio and increasing the size of our portfolio of individual plans. We offer several innovative investment contract products including Vida Gerador de Benefícios Livres, or VGBL, which combines life insurance with investment, enabling the insured party to redeem the invested amount at any time, while still offering coverage in case of death, accident or disability; and Plano Gerador de Benefícios Livres, or PGBL, which enables customers to save for retirement with a tax-deductible feature and may include insurance coverage for death, accident or disability.

 

These pension products are mainly sold in Unibanco branches. Increasing sales and controlling expenses are the key drivers for the profitability of our pension plan business.

 

Wealth Management Strategy

 

Be the Leading Provider of Wealth Management Services in Brazil

 

The mission of our Wealth Management business is to provide proactive advice to help our clients to accumulate, preserve and transfer their wealth. We offer integrated financial solutions through our three main areas of expertise: asset management, private banking and advisory services.

 

Our tailored and value-added products are targeted towards middle to large-sized companies and pension funds and high net worth individuals, thus leveraging our unique position in those market segments.

 

To be able to provide these services we have developed a strong local and international network of wealth management specialists in the areas of estate planning, tax and real estate advice, among others. In the area of financial investments we developed an open architecture model that further distinguishes our offerings. Through this model, our clients have access to our best investment products and also to the best investment products of third party asset managers.