Annual and Transition Report (foreign Private Issuer) (20-f)

As filed with the Securities and Exchange Commission on April 20, 2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

OR

For the fiscal year ended December 31, 2016

OR

OR

Commission file number: 001-15276

ITAÚ UNIBANCO HOLDING S.A.

(Exact name of Registrant as specified in its charter)

Federative Republic of Brazil

(Jurisdiction of incorporation or organization)

Praça Alfredo Egydio de Souza Aranha, 100

04344-902 São Paulo, SP, Brazil

(Address of principal executive offices)

Marcelo Kopel

Investor Relations Officer

Itaú Unibanco Holding S.A.

Praça Alfredo Egydio de Souza Aranha, 100

04344-902 São Paulo, SP, Brazil

+55 11 2794 3547

drinvest@itau-unibanco.com.b r

(Name, Telephone, E-mail and/or Facsimilie number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

(*) Not for trading purposes, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

3,351,741,143 Common Shares, no par value

3,160,958,864 Preferred Shares, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes     ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨ Yes     x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

x Yes     ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨ Yes     ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17 ¨ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes     x No

INTRODUCTION

The information presented in this annual report on Form 20-F is accurate only as of the date of this annual report and information incorporated by reference in this annual report is accurate only as of the date of the document in which such incorporated information is contained. Our business, our financial condition and results of operations, our assets and our prospects may have changed since those dates.

Information contained in or accessible through the websites referred to in this annual report on Form 20-F is not part of this annual report unless we specifically state that it is incorporated by reference and is part of this report. All references in this annual report on Form 20-F to websites are inactive textual references only.

FORM 20-F CROSS-REFERENCE INDEX

(for the purpose of filing with the United States Securities and Exchange Commission)

GUIDE 3 CROSS-REFERENCE INDEX

(for the purpose of filing with the United States Securities and Exchange Commission)

Annex A – Annual Report

Context

Macroeconomic context

Global context

The world economy, as well as the credit and capital markets, show signs of improvement but continue to grow at a moderate pace. Political uncertainty, however, remains.

Global GDP is expanding at a moderate pace. As noted below, U.S. real GDP grew by 1.6% in 2016 and is expected to expand at a rate of 2.3% in 2017 (according to the Federal Reserve Bank of Philadelphia’s Fourth Quarter 2016 Survey of Professional Forecasters). The Eurozone and Japan have been recovering at modest economic growth rates. Meanwhile, growth in China is stable for now, and growth in other emerging markets has been increasing.

The new U.S. administration has started to implement major changes in U.S. economic policy. A moderate fiscal expansion with the U.S. economy close to full employment will likely lead to a faster tightening of monetary policy, putting pressure on emerging market currencies and local interest rates. In addition, any protectionist policies the U.S. might pursue could negatively impact global economic growth.

In the Eurozone, the economy has been recovering at a modest pace following fiscal reforms and implementation of expansionary monetary policies by the European Central Bank (ECB), which improved both confidence and financial conditions. As such, 2016 saw a 1.7% GDP growth, and early 2017 data show no sign of a slowdown. However, the recovery is clouded by political uncertainties surrounding the Eurozone. The UK triggered Article 50 at the end of March 2017, and “Brexit” will continue as a source of uncertainty in the years to come. Additionally, France will face general elections in 2017, and there are risks that Eurosceptic factions might emerge victorious. Thus far, the political events have seen little economic spillover. Nonetheless, risks are tilted to the downside as European politicians continue to struggle to find solutions to the growing Eurosceptic movements around the continent, which is aggravated by continued problems with migration and terrorism. Please refer to section Our Risk Management, item Risk Factors, The U.K. exit from the European Union could adversely impact our business, results of operations and financial condition for further details about Brexit Risk Factor.

Given the unprecedented monetary policy measures implemented by developed countries since 2008, liquidity has been available for investment in emerging markets, supporting asset prices in those markets. As the U.S. economy has continued its recovery and its outlook remains positive, the U.S. Federal Reserve has begun to raise interest rates, as announced at the Federal Open Market Committee of the Federal Reserve’s December 2015 meeting. The United States Federal Reserve increased interest rates again in December 2016 and in March 2017, and currently anticipates it may well be appropriate to continue on a gradual path of increases of the target range for the Federal Funds rates.

Between 2013 and 2016, significant amounts of financial resources were withdrawn from investments in the emerging markets in response to weak growth in these economies and in anticipation of the gradual monetary tightening in the U.S. However, signs emerged during 2016 that these financial flows were returning to emerging markets as commodities prices stabilized and economic fundamentals improved in some emerging markets economies. Nonetheless, the global economic outlook remains uncertain with significant downside risks. These risks may still result in periods of increased volatility in asset prices in emerging markets and could also affect our operational results.

U.S. real GDP grew 1.6% in 2016, according to U.S. Bureau of Economic Analysis’ advanced estimates, compared to 2.6% in 2015. The economic expansion is expected to continue at a moderate pace in 2017 (according to the Survey of Professional Forecasters issued by the Federal Reserve Bank of Philadelphia), sustained by solid domestic demand. Domestic demand should be supported by: (i) accommodative monetary and financial conditions; (ii) consumers and business optimism, according to the January surveys data published by The Conference Board and the Institute for Supply Management, respectively; and (iii) a healthy labor market, with net job increases averaging 196,000 per month in the last twelve months until February 2017 and the U.S. unemployment rate of 4.7% in February 2017.

United States Job Creation - Nonfarm Payroll

(seasonally adjusted, thousands)

Source: Itaú Unibanco Holding and U.S. Bureau of Labor Statistics

China’s real GDP increased 6.8% year over-year in the fourth quarter of 2016, maintaining a steady growth in 2016. Chinese policymakers are trying to balance short-term growth with reforms designed to improve medium-term growth.

Latin American context

In Latin America, commodity-exporting economies continue to exhibit weak economic activity. According to recent data published by INDEC (National Institute of Statistics and Census of Argentina), Argentina, which was in a recession due to the impact of the necessary adjustment in relative prices, likely presented a positive quarter-over-quarter growth rate in the final quarter of 2016.

With exchange rates evolving more favorably than in 2013 through 2015, inflation is falling in Argentina, Colombia, Chile, Uruguay and Paraguay. In this context, central banks are reducing interest rates, which will likely support an economic recovery during 2017. On the other hand, fiscal revenues remain weak, so the fiscal consolidation process is on-going, as governments try to preserve sovereign ratings. Increases in fuel prices in Mexico and the tax reform recently approved in Colombia are examples of measures taken by Latin American sovereigns to reduce their fiscal deficit.

The following table shows the real GDP growth rates in seven Latin American countries as of and for the twelve-month period ended September 30, 2016, and as of and for the years ended December 31, 2015, 2014, 2013 and 2012, except as otherwise indicated.

(1) Source: Instituto Nacional de Estadística y Censos

(2) Source: Banco Central de Chile.

(3) Source: Banco de la República.

(4) Source: Instituto Nacional de Estadística y Geografía.

(5) Source: Banco Central del Paraguay.

(6) Source: Banco Central de Reserva del Perú.

(7) Source: Banco Central de Uruguay.

Brazilian context

As a Brazilian bank with most of our operations in Brazil, we are significantly affected by the economic, political and social conditions in the country. From 2004 to 2011, we benefited from Brazil’s generally stable economic environment, with average annual GDP growth of approximately 4.4%, during that period, which led to increased bank lending and deposits. However, Brazil’s GDP growth rate declined to 1.9% in 2012, 3.0% in 2013 and 0.5% in 2014. In 2015, GDP decreased by 3.8% with 2016 economic slowdown partly reflecting a deceleration in potential growth. In 2016, GDP decreased by 3.6%.

GDP growth (%)

Source: IBGE.

The widespread decline in inflation, due to the high level of idle capacity in the Brazilian economy and anchored inflation expectations, created an opportunity for the Central Bank to start a monetary easing cycle. After reaching 14.25% a.a. at the end of 2015, the Central Bank began to cut interest rates in October 2016. In April 2017, the Selic rate was at 11.25%. Bank lending as a proportion of GDP decreased to 49.3% in December 2016 from 53.7% in December 2015.

Selic (nominal interest rate)	Bank Lending (as % of GDP)

 

Source: Itaú Unibanco Holding and Central Bank

Inflation reached 6.3% in 2016, down from 10.7% in the calendar year 2015. Government-regulated prices (such as electric power prices, water and sewage tariffs and fuel prices) rose 5.5% in 2016 (down from 18.1% in 2015), while the market-set prices increased 6.6% in the same period (from 8.5% in 2015).

12-month IPCA inflation rate

Source: Itaú Unibanco Holding and IBGE

The Brazilian primary public budget result has been on a downward trend since 2014. Cuts in discretionary spending and tax hikes proved insufficient to offset the drop in tax revenues and growth in mandatory expenditures. Over 12 months, the Brazilian primary public budget balance closed December 2016 with a deficit of 2.5% of GDP, after a deficit of 1.9% of GDP in 2015 and 0.6% in 2014. To tackle the structural fiscal imbalance, the Brazilian Congress approved a spending ceiling that will limit primary public expenditure growth to the prior years inflation for at least 10 years, representing a structural reform for the Brazilian economy. The next step is the social security reform that will be discussed in the Brazilian Congress during 2017 and is primordial to ensure that the ceiling remains feasible in the years ahead. These structural reforms are an important step toward returning to primary surpluses and stabilizing public debt in the medium-term.

In addition, Brazil has implemented a large number of regulatory changes in recent years, such as changes in reserve and capital requirements for financial institutions, as well as other macro-prudential policies. Please refer to the section Our risk management, item Regulatory environment, Implementation of Basel III in Brazil and to the section Performance, item Required Reserve Deposits with the Central Bank, for further information.

Outstanding loans provided by Brazilian financial institutions continued its decreasing trend in the fourth quarter of 2016 adjusted for inflation. Year-to-year total bank loans fell by 9.2% as of December 2016 in real terms, compared with a contraction of 3.6% as of December 2015. Total new loans decreased by 15.7% as of December 2016 compared with a decrease of 11.3% in December 2015, both on an annualized basis. Non-performing household loans decreased 0.2 p.p. to 4.0% as of December 2016 when compared with the same month in 2015. Non-performing loans to non-financial corporations reached 3.5% in December 2016, compared with 2.6% in December 2015.

The Brazilian real has appreciated against the U.S. dollar, with the exchange rate reaching R$3.26 per US$1.00 as of December 30, 2016, compared with R$3.96 per US$1.00 as of December 31, 2015. This reflects the adjustments and reforms taking place in Brazil resulting in a lower risk premium.

Nominal exchange rate
(Real/US dollar)

Source: Itaú Unibanco Holding and Central Bank

Brazil’s current account deficit (the net balance from the trade of goods and services and international transfers) was 3.3% of GDP for December 2015. By December 2016, the deficit decreased to 1.3% of GDP. Brazil has maintained its external solvency, with US$372 billion in international reserves and US$ 324 billion in external debt as of December 2016.

The following table shows real GDP growth, the inflation rate, exchange rate variation and interest rates in Brazil as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012.

(1) Source: Instituto Brasileiro de Geografia e Estatística , or IBGE.

(2) Source: General Price Index – Internal Supply ( Índice Geral de Preços – Disponibilidade Interna , or IGP-DI) published by the Fundação Getulio Vargas .

(3) Source: Extended National Consumer Price Index ( Índice de Preços ao Consumidor Amplo , or IPCA) published by IBGE.

(4) Source: Bloomberg (cumulative rates for the period); positive numbers mean depreciation of the Brazilian real .

(5) Source: Mortgage reference rate ( Taxa Referencial , or TR) published by the Central Bank. Data presented in percentage per year. 2016 data is for November.

(6) Source: Central Bank. Data presented in percentage per year.

(7) Source: Bloomberg (period-end). Sovereign credit default swaps or CDS is a measure of country risk (and is measured using basis points).

Context of Itaú Unibanco Holding

Message from the Chairman of the Board of Directors

Dear Reader,

In 2016, Brazil faced up huge economic and political challenges that have led to uncertainties and ultimately impacted our Gross Domestic Product (GDP) for the second consecutive year. Despite this scenario, we have been able to tackle a number of hurdles and managed to generate recurring net income of R$23.3 billion ¹ and return on equity (ROE) of 20.1%, which means adding value to our stockholders. When it comes to our capital strength, our solidity can be seen from the 19.1% Basel ratio we reached, which is higher than the minimum of 10.5% required by the Central Bank.

Over the recent years, we have focused on enhancing credit management and have also placed an emphasis on growing insurance operations and service delivery. We pursued business expansion opportunities inside and outside Brazil, continued to invest in new technologies and disseminated the Risk Culture among our employees. As a result, in 2016, our service revenue grew 8.4% over 2015, we became holders of 100% of  Itaú BMG Consignado’s capital, acquired Citibank’s retail operations in Brazil and completed the merger between Itaú Chile and CorpBanca, with our new subsidiary Itaú CorpBanca being the resulting entity.

All of these achievements are the outcome of 90 years of dedication, the engagement of highly qualified teams, the adoption of well-defined strategies and, mainly, the establishment of a culture based on ethics and transparency. As part of this, we put a great value on meritocracy, invest in people training and implement clear anti-corruption and anti-money laundering policies across all areas of the bank.

We believe that disseminating behaviors that positively influence the management of risks inherent in our business is of paramount importance. Therefore, we have adopted a Risk Culture based on the following four principles:

Aligned with this, we understand, identify, measure, manage and mitigate risks, strengthening the individual and collective accountability of our employees so that they can make the right decision.

We recognize that our clients’ needs have changed in an increasingly fast pace. For this reason, we are always attentive to technologies having potential to transform us into a bank that is more and more digital. In 2015, we co-founded Cubo, a co-creation space now having more than 40 innovative projects being developed for Itaú. We continue to invest in data scientists who are capable of tailoring and developing new systems, as well as in information security to help ensure that the most secure products are provided to our clients. We take care of the details so that our clients do not need to worry about it.

Four years ago, we initiated a change in our structure to address the succession of Roberto Setubal. Today, we are ready to begin this new cycle, in which Candido Bracher, former Director-General of the Wholesale area of the bank, assumes as the new Executive President & CEO of the group. I am optimistic about the newly adopted structure and the new members of Itaú Unibanco’s Executive Committee, since they have all the ingredients that are necessary to continue to challenge barriers and add value to our investors, employees and clients.

I invite everyone to read the Consolidated Annual Report and learn more about the profile of our organization, businesses, strategies, and results. For us to become each day more transparent with our stockholders and the market, this annual report consolidates our 20-F form, Debt Prospectus (Medium Term Note - MTN Program) and GRI sustainability guidelines.

I wish you all a pleasant reading.

Cordially,

Pedro Moreira Salles.

Chairman of the Board of Directors.

¹ Net income attributable to owners of the parent company, in IFRS.

Message from the Chief Executive Officer

Dear reader,

As I noted in my message on the last Consolidated Annual Report, 2016 was expected to be challenging and we would proceed with our strategy of managing risks cautiously while keeping the capitalization level high and focusing on the efficiency of operations and client service quality. This Report describes how we executed this strategy, leading us to post positive results in 2016, even in a year marked by a severe recession in Brazil, with a contraction in GDP in excess of 7% in two years.

Despite the challenging scenario, we once again ended the year strong, with consistent results which are the outcome of a business model that balances loans and leases operations with insurance products and services. This model makes the bank less vulnerable to economic cycles, thus reducing the volatility of our income.

We closed 2016 with a net income of R$23.3 billion ¹ and an annualized recurring profitability to average equity of 20.1%, down 9.6% from the previous year. Under the accounting practices adopted in Brazil (BRGAAP), in 2016, 61% of Net Income ² arise from services and massive insurance products (insurance, pension plan and capitalization operations), 15% derive from treasury operations and capital surplus, and the remaining 24%, from loans and leases, the results of which have been affected by an increased default level, causing this activity to post a 9.4% return of regulatory capital, lower than the cost of capital.We believe that, with the efforts to decrease default, already initiated at the end of the year, we will be able to come back to return levels in line with the cost of capital for loans and lease operations. This expected improvement, if materialized, will be decisive to grow our results in the coming years.

Equity attributable to the owners of the company reached R$122.6 billion at the end of 2015, 9.2% up on 2016, while our Basel ratio at the end of the period was 19.1% and the average short-term liquidity ratio for 4Q16 was 212.8%, both higher than the minimum 10.5% and 70% required by the Central Bank, respectively.

The bank´s strong level of capitalization and prospects of generating results above the capital requirement in the following years allowed management to rise, for 2016, the total dividends and interest on capital to 45% of net income ² and announced that this distribution is expected to be maintained at 35% and 45% in the coming years.

The value added ³ to economy by Itaú Unibanco reached R$61.6 billion, basically distributed among employees (32%), taxes (29%), reinvestment of net income (26%), and stockholders (11%). We supported several initiatives and projects throughout 2016. Our social investments totaled R$474.8 million, 67% of which through donations and sponsorships made by Itaú Unibanco and 33% through funds under law incentive. Such funds have been allocated to projects to foster education, health, culture, sports and mobility, which are areas that our organization has been prioritizing over the last year.

In 2016, we announced a series of changes in our Executive Committee. As disclosed more than two years ago, after 23 years serving as the Chief Executive Officer of Itaú Unibanco, I left the position in April 2017. Since the last General Shareholders Meeting, I have, in conjunction with Pedro Moreira Salles, served as Co-Chairman of the Board of Directors. The new Chief Executive Officer of the bank is Candido Bracher, who has more than 36 years’ experience in the financial market and, over the past 28 years, has served in several leading positions at BBA Creditanstalt, Itaú BBA and Itaú Unibanco, contributing to the evolution of these institutions.

Marco Bonomi ended his mandate as Retail General Manager and, at the last shareholders meeting, was nominated to be a member of our Board of Directors. With over four decades of experience in retail business, Marco will certainly make valuable contributions, considering his vast knowledge of banking activities.

After all changes already announced, the Executive Committee has now the following composition: Candido Bracher, Executive President & CEO, Marcio Schettini, General Retail Manager, Eduardo Vassimon, General Wholesale Manager, Caio David, Vice-President of Risks and Finance departments, André Sapoznik, Vice-President of Technology and Operations departments, and Claudia Politanski, Vice-President of Human Resources, Legal and Ombudsman, Corporate Communication and Institutional and Governmental Relations departments. We believe that this Executive Committee is ready to face with confidence the major challenges we have ahead.

In 2016, we invested over R$192 million in training our more than 94 thousand employees, focusing not only on their technical qualification but also on the dissemination of our Risk Culture, which is a critical factor in managing our organization.

Also, in 2016, our expansion occurred by means of acquisitions, with an emphasis on the consolidation of Itaú CorpBanca in Chile into our balance sheet, which represented an addition of R$71 billion to our loans and leases portfolio, the acquisition of Citibank’s retail business in Brazil, the acquisition of Recovery - a company specialized in debt collection - and the remaining 40% in Itaú BMG Consignado’s capital.

To ensure that we are able to meet our clients’ needs, we continue to expand our offerings of products and services through digital channels. If eight years ago, around 74% of our transactions were conducted from standard channels, in 2016, 73% are conducted from digital channels, which represented 10.9 billion in transactions.

We started this year expecting 2017 to be better for Brazil, with some growth for the economy and the bank´s results. We will work to continue our distinguished performance, focused on the challenges and opportunities that lie ahead.

Finally, I wish to thank for the continued trust and support I have received over the 23 years in which I led the bank. It feel privileged for having worked with so many qualified and dedicated employees, with whom I share the merits of the results reached in the period.

My warmest regards.

Roberto Setubal

Executive President & CEO

Building a bank that’s ever more digital

We always believed in the potential of technology to make people's lives easier and continue to enhance our relationship with our customers. Based on this, we have come this far and built our company over nearly a century.

In the 1960s, when no one ever imagined that technology could change the relationship between people and companies, we were already certain that it would be essential for us to keep up with the times in an ever changing world.

Our story is proof of that. In 1970, Itaú built one of the first four main data processing centers in Brazil. It was also during that decade that Unibanco became the first Brazilian bank to start using the IBM 360 processing system. In 1983, we were the first bank to introduce ATMs in Brazil. And we didn't stop there. Because we focus on our customers’ needs, in 2013 we created the digital branches, a new way of servicing our customers with online and after-hour services, keeping a close relationship with them. Also, in September 2016, we launched an app that allows customers to open bank accounts via their cell phones. Only four months after the launch, more than 60,000 bank accounts were opened via mobile.

Today we can see that technology and mobile devices are driving significant changes in society. It is not by chance that over 73% of our transactions take place on digital channels and over 50% of those are on mobile phones.

Regardless of how much technology is available to a bank, true progress is only possible if the bank is connected to people, therefore it's more important than ever to put our customers at the center of everything we do.

We understand that this is a challenge in terms of both infrastructure and culture, and this is our task for the coming years: to build a digital bank that continues to be, in every way, personal.

Business strategy

Our Board of Directors is the body responsible for establishing the general guidelines of our business. Strategic decisions taken by our Board of Directors are supported by the Strategy Committee, which provides data and information about critical strategic matters. The Strategy Committee’s activities and responsibilities range from evaluating investment opportunities and budget guidelines to issuing opinions and recommendations in order to support the decisions of the Board of Directors. The Economic Scenarios Sub-Committee supplies macroeconomic data to the Strategy Committee, supporting its discussions. Please refer to section Our governance, item Management structure, Committees of the Board of Directors, Strategy Committee for further information.

Expand our operations in Brazil and abroad

Brazil

We continue to analyze potential business operations which would create additional value for our stockholders, in Brazil. Please refer to section Our profile, item 2016 highlights, Corporate events and partnerships for further information.

Abroad

In line with our Latin America expansion strategy, and consistent with our vision to create value and ensure sustainable performance, as from April 2016, we concluded the merger of Banco Itaú Chile with CorpBanca and now hold the control of the resulting entity – Itaú CorpBanca.

Please refer to section Our profile, item 2016 highlights, Corporate events and partnerships for further information.

Furthermore, in 2016, Moody’s assigned for the first time to Itau BBA International (based in the United Kingdom) an investment grade rating, including an A3 rating for purposes of an issuer and long term deposits rating. In its ratings release,

Moody’s recognized the strength of Itau BBA International’s balance sheet and business model.

Please refer to section Our profile, item Our business, Our international business, Itau BBA International for further details about Itau BBA International’s business.

Focus on non-interest income

We continued to focus on the offer of new products and services, which we believe add value to our customers and, at the same time, allow us to increase our fee-based income. This increase is mainly due to a higher volume of account service packages. New subscriptions to current account service packages and the adjustment of services provided to our higher-income Uniclass clients and by our Itaú Empresas business unit also contributed to this growth in fee-based income.

In addition, we continue to focus on our insurance services, which include our 30% stake in Porto Seguro, by operating under the bancassurance model, with a focus on the sale of massive personal and property insurance services, largely provided through our retail banking. As part of this strategy, in October 2014 we announced the sale of our large risks operations to the ACE group and the early termination of operating agreements between Via Varejo S.A. and our subsidiary Itaú Seguros S.A. for the offer of extended warranty insurance in “Ponto Frio” and “Casas Bahia” stores.

In September 2016, we entered into an agreement to sell our group life insurance operations with Prudential do Brasil. The transfer of shares and the financial settlement of the transaction will take place after compliance with certain conditions provided

for in the agreement, including obtaining required regulatory authorizations. This transaction reinforces our already-disclosed strategy of focusing on mass-market insurance products typically related to the Retail Banking segment.

Continue to improve efficiency

In 2010, we established an Efficiency Program aimed at identifying, implementing, and monitoring costs and revenues, in addition to promoting a strong culture of operational efficiency. In the years thereafter, we focused on increasing cost savings by reducing unnecessary costs, promoting the simplification and centralization of processes, promoting synergy gains and combining the management of certain business units.

In February 2015, we created the Technology and Operations executive area with the aim of optimizing our structure in order to sustain growth. This executive structure enabled us to organize our operations in a simpler and more efficient manner. We are committed to improve processes, to streamline operations and to be more efficient in everything we do with the clear purpose of client satisfaction.

Throughout 2015 and 2016, we increased the number of our digital branches in response to the profile of our customers, who express an increasing demand for services through digital channels. The clients of our digital branches can be in contact with their relationship managers from 7:00 am to midnight, from Monday to Friday through a variety of digital channels. This allows us to strengthen our relationship with clients and improve the efficiency and profitability of our operations.

In 2016, we launched the “Abreconta” app, which enabled, in the period of four months, the opening of approximately 60,000 new bank accounts exclusively through mobile channels.

Maintain asset quality in our loan portfolio

We are constantly seeking to improve our models for credit risk management and our economic forecasts and scenario modeling. In the last four years, we focused on the improvement of our asset quality by increasing credit selectivity, changing our loan portfolio mix, and prioritizing the offer of less risky products, such as payroll and mortgage loans, reducing the origination of higher risk portfolios, such as vehicle loans.

On January 21, 2016, we announced that our subsidiary Itaú Unibanco S.A. entered into a non-binding memorandum of understanding (MoU) with Banco Bradesco S.A., Banco do Brasil S.A., Banco Santander (Brasil) S.A. and Caixa Econômica Federal in order to create a credit intelligence bureau, or CIB. The CIB will be structured as a Brazilian corporation (sociedade por ações) and the parties to the MoU will share its control, with each of them holding a 20% equity ownership. The CIB’s technical and analytical platform will be developed and implemented through a services agreement with LexisNexis® Risk Solutions FL Inc.

The creation of CIB reaffirms the banks’ confidence in the future of Brazil and of the credit market, and allows a stronger and more sustainable market. CIB’s incorporation is subject to the execution of definitive agreements, as well as the satisfaction of certain conditions precedent.

Maintain a solid capital base

We implement a prospective approach regarding capital management. Our approach is comprised of the following phases:

(i) identification and analysis of material risks, (ii) capital planning, (iii) stress test analysis focused on the impact of severe events on our capitalization level, (iv) maintenance of a contingency plan, (v) internal capital adequacy assessment and (vi) preparation of periodic management reports.

At the end of December 2016, our Basel Ratio was 19.1%, of which: 15.9% related to Tier I Capital, which is composed of the sum of Principal Capital and Complementary Capital and 3.2% related to Tier II Capital. These indicators provide evidence of our effective loss-absorbing capacity.

Furthermore, our average Liquidity Coverage Ratio (LCR) was 212.8%. The Central Bank minimum requirement for 2016 was 70%. This ratio identifies high liquidity assets to cover outflows (net) that the institution may be subject to under a strict standard stress scenario considering a 30-day period.

In 2016, we acquired 31.4 million of our non-voting shares ¹ of own issue at the average price of R$30.13 per share ² aiming at: (i) maximizing the 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 remuneration models and long-term incentive plans; and (iii) using the shares acquired if business opportunities arise in the future.

Furthermore, in June 2016, we cancelled 100 million of our non-voting treasury shares, with no capital stock change, as the acquisition of our shares with their subsequent cancellation increases the shareholder's interest percentage in the company’s capital stock and, should the net income and the distribution of earnings percentage be maintained, it enables a higher return on dividends and interest on capital per share.

1 Quantities adjusted by the October 2016 bonus of 10%.

2 Buyback amounts includes settlement and brokerage fees. Prices are also adjusted by the October 2016 bonus of 10%.

Develop strong relationships with our clients based on client segmentation

We will continue to work on our client segmentation strategy in order to identify our clients’ needs and enhance our relationship with our client base, as well as to increase market penetration. We believe that our client segmentation tools and strategies provide us with an important competitive advantage developed over the course of more than 25 years. We aim to fulfill clients’ financial needs through a wide product portfolio by cross-selling banking and insurance products and making sales through a variety of channels. We are focused on delivering “best-in-class” client service, in order to maintain and increase client satisfaction and increase portfolio profitability.

As part of our reorganization conducted in 2015, we merged our Commercial Bank – Retail segment with our Consumer Credit – Retail segment and created the Retail Banking segment. We also migrated our Private Banking, Asset Management and Latin America Activities to our Wholesale segment. Please refer to section Performance, item Complete Financial Statements (IFRS), Note 34 – Segment Information, for further details.

Transform client experience through technology

Digital trends evolve on an exponential basis. Every day, new ways of doing business and using and exploring content emerge. At the same time, people are increasingly more open to experience the world in other ways by means of technology. We recognize that the needs of our clients are changing increasingly faster and we are attentive to technologies that have great potential to transform the three levels of clients’ relationship with the bank: experience (with new channels like mobile and internet banking), processing (big data and artificial intelligence) and infrastructure (the use of new platforms such as blockchain).We have been very active in the discussions on blockchain - the technology underlying digital and encrypted currencies – in the Latin American financial segment. We are convinced that this technology may provide solutions that bring more efficiency to our business and better experiences to our clients. In April 2016, we were the first Latin American company to enter into a partnership agreement with R3, the international innovation startup that brings together more than 70 of the largest financial institutions in the world to contribute to the international effort for the development and implementation of innovative solutions for the market based on shared ledger technologies, which are based on blockchain. We have been studying blockchain and analyzing how this technology can change the financial industry and its business models.

The manipulation, management and analysis of large volumes and varieties of data (Big Data) has been a reality for Itaú Unibanco for some time already. The bank has been improving its data processing and deepening its Data Lake, a massive repository of data capable of storing, processing and distributing with high performance, various types of information. We believe that the development of solutions that provide for integrated views of clients allows us to identify what they are going through in their lives and, for this reason, these solutions are essential for us to predict their needs and segment them in a more precise manner.

We also have new talented professionals among our employees. Data scientists, specialists in digital security and digital antifraud, people dedicated to studying and developing the client’s experience in digital channels have, in a collaborative way, joined our design, customer relationship management, technology and business teams to continue to transform the bank. The work of this team, in addition to improving the analysis of credit, risk, offer and fraud models, aims to provide mechanisms for the automation of processes and algorithms of our systems, products and channels. Therefore, the bank expects each time more to understand clients’ needs and offer them the right product at the right time.

Accordingly, Cubo Coworking Itaú has been an important ally because it allows us to be close and learn from the latest technologies and working models. In September 2016, Cubo completed one year of operation as an important technological entrepreneurship center in Brazil during this year, it promoted connections that were essential to leverage businesses, ideas and initiatives of a new generation of entrepreneurs and digital startups.

Context of this report

This consolidated annual report unifies the content of our major annually released reports, such as the consolidated annual report on Form 20-F, the consolidated annual report, and the Offering Memorandum for the Medium-Term Note Program, or MTN Program. The consolidated annual report on Form 20-F, filed with the U.S. Securities and Exchange Commission, or SEC, has served as the basis for the content of this report.

The consolidated annual report describes our strategy, structure, activities and operations, using plain and straightforward language to be clear to all audiences who may consult this consolidated annual report.

The information presented is aligned with Pronouncement 13 of the Market Information Disclosure Steering Committee ( Comitê de Orientação para Divulgação de Informações ao Mercado , or CODIM), a Brazilian joint initiative of entities representing the capital markets, and focused on improving transparency and information reporting in the Brazilian capital markets.

This consolidated annual report contains data from January 1, 2016 to December 31, 2016, presenting our corporate and business structure, governance and financial performance, among other matters. It also includes information on all entities subject to the significant influence or control of Itaú Unibanco Holding. Any potential changes or impacts on the data collected as a result of certain transactions, the acquisition or sale of assets, or any important change for the business are indicated throughout this report. The consolidated annual report is divided into the following sections: (i) Context, (ii) Our profile, (iii) Our governance, (iv) Our risk management, (v) Performance, and (vi) Attachments.

The audit of our financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), has been conducted by PricewaterhouseCoopers Auditores Independentes, or PwC.

Documents on display

We are subject to informational requirements under the U.S. Securities Exchange Act of 1934, as amended, for foreign private issuers. Accordingly, we are required to file reports and other information with the SEC, including consolidated annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information filed with the SEC at the public reference facilities maintained by the SEC at 100 F Street, N.W., Washington D.C. 20549. Copies of the materials may be obtained by mail from the Public Reference Room of the SEC at 100 F Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at www.sec.gov , from which you can electronically access those materials, including this consolidated annual report and the accompanying exhibits. We also file financial statements and other periodic reports with the CVM located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20050-901, Brazil. The CVM maintains an Internet website at www.cvm.gov.br.

Copies of our consolidated annual report on Form 20-F will be available for inspection upon request to the Investor Relations department at our office at Praça Alfredo Egydio de Souza Aranha 100, Torre Conceição, 9º andar – São Paulo – SP – 04344-902 – Brazil.

Investors may receive a hard copy of this consolidated annual report, including our complete audited financial statements for the last fiscal year, free of charge, by requesting a copy from our Investor Relations department, by e-mail, at investor.relations@itau-unibanco.com.br , indicating their contact information and their complete mailing address. Comments and suggestions regarding this report may be sent to the same e-mail.

Reading this report

In this report, the terms:

Additionally, acronyms used repeatedly, technical terms and specific market expressions in this consolidated annual report are explained or detailed in the section Attachments, item Glossary, as are the full names of our main subsidiaries and other entities referenced in this consolidated annual report.

The reference date for the quantitative information for balances found in this consolidated annual report is as of December 31, 2016 and the reference date for results is the year ended December 31, 2016, except where otherwise stated.

Our fiscal year ends on December 31 and, in this consolidated annual report, any reference to any specific fiscal year is to the 12-month period ended on December 31 of that year.

The information found in this consolidated annual report is accurate only as of the date of such information or as of the date of this consolidated annual report, as applicable. Our activities, the situation of our finances and assets, the results of transactions and our prospects may have changed since that date.

This document contains information, including statistical data, about certain markets and our competitive position. Except as otherwise indicated, this information is taken or derived from external sources. We indicate the name of the external source in each case where industry data are presented in this consolidated annual report. We cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as the estimates we present in this report.

Information contained in or accessible through the websites mentioned in this consolidated annual report does not form part of this report unless we specifically state that it is incorporated by reference and forms part of this report. All references in this report to websites are inactive textual references and are for information only.

Forward-looking information

This consolidated annual report contains statements that are or may constitute forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions including, among other risks:

The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this consolidated annual report might not occur. Our actual results and performance could differ substantially from those anticipated in such forward-looking statements.

About our financial information

Our consolidated financial statements, included elsewhere in this consolidated annual report, are prepared in accordance with the International Financial Reporting Standards, or IFRS, as issued by the IASB. All consolidated financial information related to the years 2016, 2015, 2014, 2013 and 2012 included in this report were prepared in accordance with IFRS.

We use accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (“Brazilian GAAP”) for our reports to Brazilian stockholders, filings with the CVM, and calculation of payments of dividends and tax liabilities.

The CMN establishes that financial institutions meeting certain criteria, such as Itaú Unibanco Holding, are required to present complete financial statements in accordance with IFRS as issued by IASB, in addition to financial statements under Brazilian GAAP.

Please refer to section Performance, item Complete Financial Statements in IFRS, Note 34 – Segment Information for further details about the main differences between our management reporting systems and the complete financial statements prepared according to IFRS.

Our consolidated financial statements as of December 31, 2016 and 2015 and for the three years ended December 31, 2016, 2015 and 2014 were audited by PricewaterhouseCoopers Auditores Independentes, an independent auditors, as stated in its report in section Performance, item Financial Performance in this report.

Please refer to section Performance, item Complete Financial Statements in IFRS, Note 2 – Significant Accounting Policies for further details about the significant accounting policies applied in the preparation of our complete financial statements according to IFRS.

O ur profile

In numbers

Selected Financial Data – IFRS

The following selected financial data must be read in conjunction with the section Performance item Results and Complete Financial Statements in IFRS included in this consolidated annual report.

The data presented in the tables below have been derived from our complete financial statements for the years presented, which have been prepared in accordance with IFRS as issued by IASB, unless otherwise indicated.

(1) The average balances are calculated on a monthly basis. Please refer to section Attachments – Selected Statistical Information, item Average Balance Sheet for further details.

(1) The average balances are calculated on a monthly basis. Please refer to section Attachments – Selected Statistical Information, item Average Balance Sheet for further details.