Note 22 – Share-based payment
ITAÚ UNIBANCO HOLDING and its subsidiaries have share-based payment programs aimed at involving its management members and employees in the medium and long term corporate development process.
These payments are only made in years where there are sufficient profits to enable the distribution of mandatory dividends, in order to limit the maximum dilutive effect to which stockholders are subject, and at a quantity that does not exceed the limit of 0.5% of the total shares held by the controlling and minority stockholders at the balance sheet date.
These programs are settled through the delivery of ITUB4 treasury shares to stockholders.
From 01/01 to 12/31/2017, the accounting effect of the share-based payment in income was R$ (536) (R$ (591) from 01/01 to 12/31/2016 and R$ (734) from 01/01 to 12/31/2015).
I – Stock Option Plan (Simple Options)
ITAÚ UNIBANCO HOLDING has a Stock Option Plan (“Simple Options”) aimed at involving management members and employees in the medium and long term corporate development program of ITAÚ UNIBANCO HOLDING and its subsidiaries, offering them the opportunity benefit from the appreciation that their work and dedication bring to the shares.
In addition to the awards provided under the Plan, ITAÚ UNIBANCO HOLDING also maintains control over the rights and obligations in connection with the options granted under the plans approved at the Extraordinary Stockholders’ Meetings held on April 24, 2009 and April 19, 2013 related to the Unibanco – União de Bancos Brasileiros S.A. and to Unibanco Holdings S.A., and to Redecard S.A. (“Rede”) stock option plans, respectively. Accordingly, the exchange of shares for ITUB4 did not have a relevant financial impact.
Simple options have the following characteristics:
| a) | Exercise price: calculated based on the average prices of shares in the three months of the year prior to the grant date. The prices determined will be inflation-adjusted to the last business day of the month prior to the option exercise date based on IGP-M or, in its absence, on an index to be determined internally, and should be paid within the period in force for the settlement of operations on B3. |
| b) | Vesting period: determined upon issue, from one to seven years, counted from the grant date. The vesting period is normally determined at five years. |
| c) | Fair value and economic assumptions for cost recognition: the fair value of Simple Options is calculated on the grant date based on the Binominal model. Economic assumptions used are as follows: |
| (i) | Exercise price: exercise price previously agreed upon the option issue, adjusted by the IGP-M variation; |
| (ii) | Price of the underlying asset (ITUB4 shares): closing price on B3 on the calculation base date. |
| (iii) | Expected dividends: the average annual return rate for the last three years of dividends paid plus interest on capital of the ITUB4 share; |
| (iv) | Risk-free interest rate: IGP-M coupon rate at the expiration date of the Simple Option; |
| (v) | Expected volatility: calculated based on the standard deviation from the history of the last 84 monthly returns of the ITUB4 share closing prices, disclosed by B3, adjusted by the IGP-M variation. |
Summary of changes in the plan
| Simple options | ||||||||||||
| Quantity | Weighted average exercise price |
Weighted average market value |
||||||||||
|
Opening balance 12/31/2016 |
38,033,506 | 36.94 | ||||||||||
|
Options exercisable at the end of the period |
23,440,177 | 40.98 | ||||||||||
|
Options outstanding but not exercisable |
14,593,329 | 30.45 | ||||||||||
|
Options: |
||||||||||||
|
Granted |
— | — | ||||||||||
|
Canceled / Forfeited (*) |
(1,204,728 | ) | 41.11 | |||||||||
|
Exercised |
(20,485,872 | ) | 35.58 | 42.06 | ||||||||
|
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 | ||||||||||||
| Quantity | Weighted average exercise price |
Weighted average market value |
||||||||||
|
Opening balance 12/31/2015 |
50,543,148 | 31.89 | ||||||||||
|
Options exercisable at the end of the period |
35,647,958 | 33.40 | ||||||||||
|
Options outstanding but not exercisable |
14,895,190 | 28.29 | ||||||||||
|
Options: |
||||||||||||
|
Granted |
— | — | ||||||||||
|
Canceled / Forfeited (*) |
(127,798 | ) | 35.91 | |||||||||
|
Exercised |
(12,381,844 | ) | 26.92 | 35.15 | ||||||||
|
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. |
| Quantity | Weighted average exercise price |
Weighted average market value |
||||||||||
|
Opening balance 12/31/2014 |
60,678,323 | 29.48 | ||||||||||
|
Options exercisable at the end of the period |
31,759,519 | 29.23 | ||||||||||
|
Options outstanding but not exercisable |
28,918,804 | 29.75 | ||||||||||
|
Options: |
||||||||||||
|
Granted |
— | — | ||||||||||
|
Canceled / Forfeited (*) |
(9,968,681 | ) | 36.44 | |||||||||
|
Exercised |
(166,494 | ) | 22.11 | 31.24 | ||||||||
|
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 | ||||||||||
|
Range of exercise prices |
||||||||||||
|
Granting 2008-2009 |
23.95 - 36.62 | |||||||||||
|
Granting 2010-2012 |
21.71 - 38.90 | |||||||||||
|
Weighted average of the remaining contractual life (in years) |
2.60 | |||||||||||
| (*) | Refers to non-exercise based on the beneficiary’s decision. |
ll – Partner Plan
The employees and management members of ITAÚ UNIBANCO HOLDING and its subsidiaries may be selected to participate in the program investing a percentage of their bonus to acquire ITUB4 shares and share-based instruments. Accordingly, the ownership of these shares should be held by the beneficiaries for a period from three to five years, counted from the initial investment, and are thus subject to market price variations. After complying with the suspensive conditions set forth in the program, beneficiaries will be entitled to receive ITUB4 as consideration, in accordance with the numbers of shares provided for in the program regulations.
The acquisition prices of own shares and Share-Based Instruments are established every six months and is equivalent to the average of the ITUB4 quotation in the 30 days prior to the determination of the acquisition price.
The fair value of the ITUB4 as consideration is the market price at the grant date, less expected dividends.
The weighted average of the fair value of the ITUB4 shares as consideration was estimated at R$ 32.33 per share at 12/31/2017 (R$ 19.45 per share at 12/31/2016 and R$ 26.56 per share at 12/31/2015).
Law No. 12,973/14, which adjusted the tax legislation to the international accounting standards and terminated the Transitional Tax Regime (RTT), set up a new legal framework for payments made in shares. We made changes to the Partner Plan, and adjusted its tax effects, with conform with this new legislation.
Changes in the Partner Program
| Quantity | ||||
|
Balance at 12/31/2016 |
35,462,379 | |||
|
New granted |
7,041,957 | |||
|
Cancelled |
(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 | |||
|
|
|
|||
| Quantity | ||||
|
Balance at 12/31/2014 |
29,407,871 | |||
|
New granted |
11,442,795 | |||
|
Cancelled |
(889,690 | ) | ||
|
Exercised |
(6,294,621 | ) | ||
|
|
|
|||
|
Balance at 12/31/2015 |
33,666,355 | |||
|
|
|
|||
|
Weighted average of remaining contractual life (years) |
2.02 | |||
|
|
|
|||
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 and R$ 28.40 per share at 12/31/2015).
| 2017 | ||||
|
Change in variable compensation in shares |
Quantity | |||
|
Opening balance 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 | |||
|
|
|
|||
| 2016 | ||||
|
Change in variable compensation in shares |
Quantity | |||
|
Opening balance 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 | |||
|
|
|
|||
| 2015 | ||||
|
Change in variable compensation in shares |
Quantity | |||
|
Opening balance 12/31/2014 |
17,492,005 | |||
|
New |
13,792,517 | |||
|
Delivered |
(8,306,134 | ) | ||
|
Cancelled |
(652,815 | ) | ||
|
|
|
|||
|
Balance at 12/31/2015 |
22,325,573 | |||
|
|
|
|||