4 th quarter 2018 EARNINGS RELEASE. COVE R

Transcription

1 4 th quarter 2018 EARNINGS RELEASE 1 COVE R

2 CONTENTS Executive Summary Key Information Corporate strategy Analysis of Managerial Result Net interest income Cost of credit Income from services and insurance Administrative and personnel expenses Other operating income and expenses Balance sheet analysis Balance sheet Loan portfolio Auto finance Loan portfolio quality Funding and Liquidity Capital Ratings Corporate Governance Accounting x Managerial Reconciliation Appendices 2 INDE X

3 EXECUTIVE SUMMARY Net income for 2018 totaled R$1,061 million equivalent to an annualized return on shareholders' equity (ROE) of 11.5% p.y., comparable to R$ 582 million in 2017, representing growth of 82.3% over the period. In the 4Q18, net income totaled R$ 282 million, with ROE of 12.5% p.y.. Total income (net interest income + income from services and insurance brokerage) grew 5.9% in 2018/2017 and 7.8% in relation to 3Q18. The NII by itself grew 5.5% over the last year, reflecting the higher profitability in all businesses and the greater share of Consumer Finance in the portfolio. Net Interest Margin (NIM) increased to 6.2% in 2018, as compared to 5.6% in Result of loan losses and impairments decreased 25.5% in the 2018/2017 comparison due to the improvement in the credit quality of the portfolio, mainly in the Wholesale segment. Coverage Ratio reached 171% in the end of Dec.18. In the 4Q18, the result of loan losses and impairments grew by 69.6%, mainly reflecting lower income from credit recovery. The 90-day NPL ratio of the loan portfolio ended Dec.18 at 4.2%, stable in the quarter, and 0.2 p.p. higher in the last 12 months, due to a specific Large Corporate s case which was already properly provisioned. The effective management of cost base and the consistent and diversified generation of revenues in 2018 contributed to the improvement in the Efficiency Ratio for the last 12 months, which decreased to 33.1% in Dec/18 (34.4% in Dec/17). Funding: funding sources totaled R$ 60.8 billion in Dec.18. Stable funding instruments accounted for 61% of total funding. Liquidity: cash reserve at a conservative and very comfortable level to fully cover funding sources with daily liquidity. Capital: Basel Ratio reached 15.7% in Dec.18, of which 13.6% composed of Tier I Capital, which consists of the sum of Equity Tier (11.6%) and Additional Capital (2.0%). The Bank made progress towards the strategy to produce business returns, increase operational efficiency, and diversify income sources, continuously investing in digital transformation aimed at improving client experience. Aiming to strengthen its diversification strategy, the Bank formalized two new partnerships by the end of the year. In September 2018, it was consolidated an exclusive agreement for BV to offer credit solutions to Yalo s clients, Dr. Consulta partner and the first Brazilian benefit platform of healthcare procedures and wellness in the Brazilian market. Moreover, on December 2018, the Bank started operating in the tourism segment, financing the purchase of travel packages for CVC clients. In line with its plan to continue advancing on initiatives that promote an innovation environment among companies that are changing the markets in which they operate, the Bank created an equity investment fund (FIP BV) with the purpose of investing directly in promising startups. In this sense, seeking to further increase the participation of fintechs in its ecosystem, we signed an agreement with Weel, a pioneering online platform that uses artificial intelligence to anticipate receivables focusing mainly on small and medium enterprises (SMEs). 3 Executive Summary 4Q18 Earnings Release EXECUTIVE SUMMARY

4 EXECUTIVE SUMMARY We show below Banco Votorantim managerial information and indicators aimed at enabling analyses on same comparison bases. RESULTS (R$ Million) 4Q17 3Q18 4Q Variation 4Q18/3Q /2017 Net Interest Income 1,332 1,326 1,428 5,081 5, % 5.5% Result of loan losses and impairments (487) (292) (495) (2,004) (1,492) 69.6% -25.5% Income from services and banking fees ,318 1, % 4.2% Personnel and admin. expenses (w/ profit sharing) (657) (674) (653) (2,403) (2,521) -3.1% 4.9% Operating Income ,027 1, % 93.7% Net Income , % 82.3% MANAGERIAL INDICATORS (%) Return on Average Equity¹ (ROAE) p.p. 4.7 p.p. Return on Average Assets² (ROAA) p.p. 0.5 p.p. Net Interest Margin³ (NIM) p.p. 0.6 p.p. Efficiency Ratio (ER) - accumulated of 12 months p.p p.p. Basel ratio p.p. 0.2 p.p. Tier I Capital Ratio p.p. 2.2 p.p. Common Equity Tier I p.p. 0.2 p.p. MACROECONOMIC INDICATORS 5 CDI - in the period (%) p.p p.p. Selic rate- end of the period (p.y.%) p.p p.p. IPCA - in the period (%) p.p. 0.8 p.p. Dolar exchange rate - end of the period (R$) % 17.1% BALANCE SHEET (R$ Million) Variation Dec18/Sept18 Dec18/Dec17 Total assets 93,519 97, , % 8.9% Expanded loan portfolio 59,021 59,417 60, % 2.0% Wholesale segment 23,029 22,031 21, % -6.1% Consumer Finance segment 35,992 37,387 38, % 7.2% Funding sources 61,203 61,606 60, % -0.6% Shareholders' equity 8,868 9,498 9, % 5.7% LOAN PORTFOLIO QUALITY INDICATORS (%) 90-day NPL p.p. 0.2 p.p. Coverage Ratio (90-day NPL) p.p p.p. OTHER INFORMATION Dec17 Sept18 Dec18 Employees 6 (quantity) 3,873 3,892 3, % -0.8% AuM 7 (R$ Million) 54,749 50,121 48, % -11.5% 1. Ratio between net income and the average shareholders equity of the period. Annualized exponentially; 2. Ratio between net income and average total assets for the period. Annualized exponentially; 3. Ratio between the net interest income and the average earning assets for the period. Annualized exponentially; 4.IE = personnel and administrative expenses / (net interest income + fee income + equity in income of subsidiaries and affiliates + other operating income + other operating expenses); 5. Source: Cetip; Bacen; IBGE; 6. Does not consider interns and statutory employees; 7.Includes onshore funds (ANBIMA criteria) and resources from private clients (fixed income, variable income and offshore funds). 4 Executive Summary 4Q18 Earnings Release Key Information

5 CORPORATE STRATEGY Banco Votorantim aims to consolidate its position among the main national privately-held banks, leveraging synergies with shareholders and bringing the client to the center of the business. For this purpose, the Bank has focused on the improvement of businesses profitability, increasing of operational efficiency and diversification of sources of revenues, continuously investing in the digital transformation aimed at improving the client s experience. The portfolio of the Bank is divided in three business units: Consumer Finance business Wholesale Bank (Corporate Bank) Wealth Management Consumer Finance Business The core business of Consumer Finance is Auto finance, in which the Bank operates through the subsidiary BV mainly in the used and light auto finance market (multi-brand dealers), in which it has history of leadership and recognized expertise. Its competitive differentials include: (i) expertise in pricing, credit concession and collection; (ii) high capillarity through extensive outsourced distribution chain; (iii) agility in decision-making; and (iv) relationship with dealers. Using the client base of auto finance, the Bank seeks to diversify its sources of revenues through credit cards and insurance brokerage, both products with well-defined strategies: Credit cards Seeks to increase the volume of active cards issued with the brands Elo, MasterCard and Visa, through the offer to the current client base of auto finance, as well as for the offer to clients of commercial partners. Insurance Brokerage Through Votorantim Corretora de Seguros, the aim is to increase revenues from insurance brokerage. Besides continuing to grow in products such as Auto and Credit Insurance, the Bank has also been diversifying its portfolio, which currently includes capitalization and life, residential, personal accident insurance among others. In addition, the Bank has specific strategies for other loans and financing products. Payroll loan Aims to maintain an important position in the market of payroll loans, focusing on Private categories (organic portfolio growth) and INSS National Institute of Social Security (refinancing of portfolio). Individual loans and other business Individual Loan: partnership with fintechs (ex.: Guia Bolso, Yalo and Neon Pagamentos) and leveraging BV s clients; Student loan: partnership with Kroton and PRAVALER; Real Estate Credit; Financing for acquisition of residential solar power panel - partnership with Portal Solar. In addition, the Bank has been seeking to increase income from commissions of Promotiva S.A., joint-venture with BB which is mainly engaged in the origination of payroll loan (Public and INSS) directly to the shareholder. 5 Corporate Strategy 4Q18 Earnings Release CORPORATE STRATEGY

6 Wholesale Bank (Corporate Bank) With a diversified portfolio of products and banking services, sectorial expertise and an agile and customized service, the Wholesale Bank serves clients with a profile of minimum annual billing of R$ 300 million, which are internally grouped in two sectors. Large Corporate Clients¹ (including financial institutions) with annual revenues above R$ 1.5 billion, whose main focus is to operate in the capital market, financial structuring, guarantees and treasury. Corporate Wide range of products Local Currency & Cash Management Foreign Currency & FX Corporate Finance Clients¹ with annual revenues of up to R$ 1.5 billion, whose focus is to operate selectively in cash management, financial structuring, guarantees, working capital, hedge, foreign exchange, capital markets and mergers and acquisitions. Derivatives Capital Markets & M&A Funding 1. Economic groups Wealth Management The Wealth Management business develops and provides sustainable wealth management solutions, with clearly set strategic goals for the two distinct markets in which operates: Asset Management It is recognized for its consistent performance and for developing solutions appropriate to the clients needs by means of its capacity for innovation and differentiated capacity for restructuring and managing products that have a high added value. Votorantim Asset Management (VAM) holds an important position within its peer group (Asset Managers without branch network structure) and has its partnership with BB for structuring, management, administration and distribution of investment funds. Private Bank It is among the best private banks in the market, expanding its performance in integrated patrimonial management through differentiated solutions. Private Bank adopts a macro approach, evaluating different scenarios to identify the best investment options, always supported by modern management tools, statistical models, and systems specially developed to interpret stress scenarios and monitor risks to prioritize the hedging of invested capital. 6 Corporate Strategy 4Q18 Earnings Release

7 ANALYSIS OF MANAGERIAL RESULT In this chapter the main components of Banco Votorantim financial and operational result will be discussed. The net income totaled R$ 1,061 million in 2018, with a growth of 82.3% in comparison to the same prior-year period. Such increase reflects the good performance of operating income, driven by (i) growth in NII and revenues from services and insurance brokerage, (ii) lower expenses with loan loss, and (iii) lower expenses with contingent liabilities. The return on shareholders' equity (ROE) reached 11.5% p.y. in 2018, against 6.8% p.y. in In the 4Q18, net income amounted to R$ 282 million, with growth of 5.0% in relation to the 3Q18. The main highlights of the last quarter were (i) the consistent and diversified generation of revenues, with growth in the NII and in the revenues from services and insurance brokerage, and (ii) reduction in personnel and administrative expenses, aligned with the strategy of increase the operational efficiency. On the other hand, in 4Q18 there was an increase in the result of loan losses and impairments, mainly due to lower revenues with credit recovery and an increase in provisions for losses, driven by a specific Wholesale s case. INCOME STATEMENT (R$ Million) 4Q17 3Q18 4Q18 Variation (%) Variation (%) Q18/3Q /2017 Net Interest Income - NII 1,332 1,326 1, ,081 5, Results of Loan Losses and impairments (487) (292) (495) 69.6 (2,004) (1,492) (25.5) Net financial margin 845 1, (9.8) 3,077 3, Other operating income/expenses (546) (491) (458) (6.6) (2,050) (1,878) (8.4) Fee income ,318 1, Personnel and administrative expenses (657) (674) (653) (3.1) (2,403) (2,521) 4.9 Tax expenses (112) (99) (98) (0.8) (398) (398) 0.1 Equity in income of subsidiaries Other operating income/(expenses) (234) (145) (182) 25.5 (853) (694) (18.7) Operating income (12.7) 1,027 1, Non-operating income (loss) (4) (2) (69) - 3 (76) - Income before taxes (25.1) 1,030 1, Income tax and social contribution (138) (273) (123) (54.7) (448) (853) 90.3 Net income , Return on Equity (ROE) 7.3% 11.9% 12.5% 6.8% 11.5% Net Interest Income (NII) NII grew 5.5% in relation to 2018/2017 and 7.7% in 4Q18/3Q18, due to the higher profitability of the businesses, particularly in the Consumer Finance operation, whose share in the portfolio has grown on consistent basis. There was an increase both in the financial margin with the market and with clients, the latter being driven by the portfolio growth and the greater representativeness of products with higher spreads. NIM¹ grew to 6.2% p.y. in 2018, due to the increase of the share of Auto Finance and Cards in the mix of portfolio. Net interest income (R$M) and NIM¹ (% p.y.) +5.5% 5,081 5, % 1,332 1,326 1,428 4Q17 3Q18 4Q NIM 1 6.3% 6.4% 6.7% 5.6% 6.2% 1. Net Interest Margin: Quotient between NII and Average Profitable Assets 7 Managerial result analysis 4Q18 Earnings Release ANALYSIS OF MANAGERIAL RESULT

8 ALL and income from services Result of loans losses and impairments R$ Million 4Q17 3Q18 4Q Variation (%) 4Q18/3Q /2017 Allowance for loan losses expenses (managerial) (1,039) (454) (526) (2,726) (1,907) 16.0 (30.0) Revenues from recovery of written-off loans (48.2) (15.5) Impairments 385 (60) (84) (70) (254) Result of loan losses and impairments (487) (292) (495) (2,004) (1,492) 69.6 (25.5) The result of loan losses and impairments in 2018 decreased by 25.5% in relation to 2017, mainly due to the lower expenses with credit losses in the Wholesale segment, reflecting the improvement in the portfolio quality. Such improvement reflects the efficiency of risk management and of the credit concession processes, as evidenced by the reduction in the relation of the consolidated net ALL expenses with the credit portfolio, which decreased from 4.0% in 2017 to 2.5% in Compared to the previous quarter, the result of loan losses and impairments recorded an increase of 69.6%, mainly influenced by (i) lower revenues with credit recovery and (ii) an increase in provisions for losses, driven by a specific Wholesale case. Result of loan losses and impairments (R$M) Provision for loan losses and impairments Revenues from recovery of loans written-offs -25.5% +69.6% 2, , , ,161 (167) (221) (114) (792) (669) 4Q17 3Q18 4Q % 1.9% 3.3% 4.0% 2.5% ALL expenses (net) / Credit portfolio (% p.y.) Income from services² and Insurance¹ The income from services and banking fees and insurance grew 7.2% in the 2018/2017 comparison, and 8.2% in the comparison with the 3Q18. In both periods, the revenue increase reflects the greater origination of Auto Finance mainly used cars, and the increase in the volume of the credit card portfolio. It is worth highlighting that insurance brokerage revenues grew by 16.6% compared to 2017, and 11.9% in relation to the previous quarter, in line with the strategy of expanding volume in higher margin operations (Life, Capitalization and Residential), in addition to further leveraging the potential of the automotive product, through the use of the customer base of the auto finance portfolio. Income from services² and Insurance¹ (R$M) Insurance (Commission)¹ Services and fees Q17 3Q % 4Q18 1, % 1, ,318 1, Auto Finance Origination (R$B) 1. Income from Votorantim Corretora de Seguros (VCS) insurance brokerage, which result is recognized under the equity method of accounting. For more details, see page 24. INCOME FROM SERVICES² (R$ Million) 2. Includes Banking Fees Income. 4Q17 3Q18 4Q Variation (%) 4Q18/3Q /2017 Master file registration and Appraisal of assets Credit cards Income from guarantees provided (12.3) (9.9) Management of investment funds Other (3.1) Total Income From Services ,318 1, Revenues from insurance brokerage Total Income From Services and Insurance ,727 1, Managerial result analysis 4Q18 Earnings Release

9 Administrative and Personnel Expenses General expenses of personnel and administrative, including profit sharing, totaled R$ 2,521 million in 2018, with increase of 4.9% in relation to 2017 mainly due to (i) higher administrative expenses reflecting a higher business volume, (ii) increased investments in technology linked to the digital transformation journey, and (iii) increased investments in marketing leveraged by the launch of the new BV brand. In the 3Q18 comparison, general expenses decreased by 3.1%, reflecting lower expenses with Labor Lawsuits in the 4Q18, thus offsetting the effects of the collective bargaining agreement that occurred in September Personnel expenses remained practically stable compared to 2017 down 0.2%. The decrease in the year reflects the lower number of employees (salaries, benefits and charges), partially neutralized by higher expenses with provision for variable compensation, reflecting the higher net income for the period. In comparison to the 3Q18, total personnel expenses reduced due to lower expenses on labor lawsuits. 243 Administrative and Personnel Expenses (R$M) Labor lawsuits (Personnel expenses) Personnel - Other¹ Administrative Q17 3Q18 2, % 231 4Q % 33.4% 33.1% Efficiency Ratio² (last 12 months) 1,028 1, % 2, ,025 1, Includes profit sharing expenses; 2. Excludes expenses with labor lawsuits and profit sharing expenses. The Bank ended 2018 with 3,842 employees (disregarding interns and statutory employees) Administrative expenses increased 10.5% in the 2018/2017 comparison, and 3.5% in the 4Q18/3Q18 comparison. In both periods, growth is explained by higher expenses in (i) data processing, reflecting the higher volume of businesses and greater technology investments, coupled with the Bank's digital transformation process, and (ii) marketing, due to the greater investment in advertisement of Consumer Finance brand, BV. The Efficiency Ratio for the last 12 months closed Dec.18 at 33.1%, better in relation to 34.4% in Dec.17, reflecting the consistent and diversified revenue generation, and the ongoing efforts of effective management of cost base accordingly with the strategy of Banco Votorantim to increase the operational efficiency. ADMINISTRATIVE AND PERSONNEL EXPENSES (R$ Million) 4Q17 3Q18 4Q Variation (%) 4Q18/3Q /2017 Personnel Expenses (338) (337) (304) (1,259) (1,257) (9.7) (0.2) Salaries, Benefits e Social Charges (215) (216) (222) (859) (847) 3.0 (1.4) Labor lawsuits (95) (68) (21) (231) (232) (68.9) 0.2 Profit sharing expense (27) (51) (58) (164) (171) Training (1) (2) (3) (4) (7) Administrative Expenses (319) (338) (349) (1,144) (1,265) Specialized technical services (111) (119) (110) (379) (420) (8.0) 10.8 Data processing (51) (61) (84) (204) (245) Services of the financial system (25) (25) (23) (97) (100) (8.6) 3.6 Judicial and Notary public fees (22) (23) (21) (94) (83) (7.6) (11.3) Marketing (13) (15) (21) (31) (59) Other (97) (95) (91) (339) (357) (3.9) 5.1 Total (657) (674) (653) (2,403) (2,521) (3.1) Managerial result analysis 4Q18 Earnings Release Administrative and Personnel Expense

10 Other operating income and expenses Other operating income and expenses Other operating income and expenses totaled R$ 694 million in 2018, with reduction of 18.7% in relation to 2017, mainly because of lower expenses with provision for contingent liabilities related to civil lawsuits. In relation to the 3Q18, other operating income and expenses grew 25.5%, mainly impacted by higher expenses with provisions for provided guarantees. It is worth highlighting that in the 3Q18 there was a reversal of provision for guarantees provided, due to the balance decrease of a specific client. OTHER OPERATING INCOME/(EXPENSES) (R$ Million) 4Q17 3Q18 4Q Variation (%) 4Q18/3Q /2017 Costs associated with the production (166) (144) (145) (636) (587) 0.7 (7.6) Reversal (provision) for contingent liabilities (40) (29) (45) (220) (156) 55.9 (29.1) Reversal (provision) for unhonored guarantees (21) 27 (3) (43) Other (7) (39.8) Total Other Operating Income/(Expenses) (234) (145) (182) (853) (694) 25.5 (18.7) Managerial result analysis 4Q18 Earnings Release

11 EQUITY HIGHLIGHTS BALANCE SHEET HIGHLIGHTS Balance sheet Total assets reached R$ 101,821 million in the end of Dec.18, with an increase of 4.7% in three months and 8.9% in 12 months. Shareholders equity totaled R$ 9,374 million in the same period. BALANCE SHEET Assets (R$ Million) Dec17 Sept18 Dec18 Variation (%) Dec18/Sept18 Dec18/Dec17 CURRENT AND LONG-TERM ASSETS 92,503 95,729 99, Cash and cash equivalents (50.2) (31.9) Interbank funds applied 15,110 13,815 12,997 (5.9) (14.0) Securities and derivative financial instruments 21,083 20,341 26, Derivative financial instruments 2,036 4,536 4,309 (5.0) Interbank accounts or relations (19.2) - Loan Operations, Leases and Others receivables 47,200 48,065 48, Alowance for loan losses (3,674) (3,635) (3,631) (0.1) (1.2) Tax credit 7,215 6,997 6,837 (2.3) (5.2) Other Assets 3,224 4,559 3,792 (16.8) 17.6 NON-CURRENTS 1,016 1,527 2, Investments 742 1,196 1, Fixed (1.5) 2.2 Intangible and Diferred TOTAL ASSETS 93,519 97, , BALANCE SHEET Liabilities (R$ Million) Dec17 Sept18 Dec18 Variation (%) Dec18/Sept18 Dec18/Dec17 CURRENT AND LONG-TERM LIABILITIES 84,619 87,717 92, Deposits 8,503 10,971 12, Demand and interbank deposits 2,143 2,069 2, (1.0) Time deposits 6,360 8,902 9, Money market borrowings 25,737 20,767 24, (3.5) Acceptances and endorsements 24,085 28,452 30, Interbank accounts 1,213 1,281 1, Borrowings and onlendings 4,062 4,394 3,974 (9.6) (2.1) Derivative financial instruments 1,701 4,110 4,064 (1.1) Other obligations 19,318 17,741 15,784 (11.0) (18.3) Subordinated debts 5,818 6,461 6,334 (2.0) 8.9 Credit transactions subject to assignment 9,445 6,635 5,914 (10.9) (37.4) Other 4,055 4,645 3,537 (23.9) (12.8) DEFERRED INCOME (18.5) 3.9 SHAREHOLDERS EQUITY 8,868 9,498 9,374 (1.3) 5.7 TOTAL LIABILITIES 93,519 97, , Balance sheet highlights 4Q18 Earnings Release

12 Loan Portfolio In the end of Dec.18, the expanded credit portfolio (including guarantees provided and corporate security transactions) reached R$ 60.2 billion, with growth of 2.0% in the last 12 months and 1.4% in relation to Sept.18, with an increase in participation of Consumer Finance business. The expanded portfolio in Wholesale reached R$ 21.6 billion in Dec.18, with reduction of 6.1% in the past 12 months, mainly in the private securities balance. In the quarterly comparison, the reduction was 1.8%. In the Consumer Finance segment, the loan portfolio reached R$ 38.6 billion in Dec.18, 7.2% higher than in Dec.17 and 3.2% when compared to Sept.18, leveraged by growth in Auto Finance - used car financing, specially. It is worth mentioning the 20.4% growth in the credit card portfolio over the last 12 months, a result of the strategy on the diversification of revenues. The Bank has strengthened its card portfolio and making more sophisticate offering to current clients and business partners. CREDIT PORTFOLIO (R$ Million) Dec17 Sept18 Dec18 Variation (%) Dec18/Sept18 Dec18/Dec17 Wholesale segment (a) 12,687 12,383 11,887 (4.0) (6.3) Consumer Finance segment (b) 35,992 37,387 38, Auto finance 30,520 32,224 33, Loans and financing¹ 3,582 3,110 2,945 (5.3) (17.8) Credit Cards 1,890 2,053 2, On-balance loan portfolio (a+b) 48,679 49,770 50, Guarantees provided (c) 4,862 5,299 5, Private securities (d) 5,480 4,349 4,228 (2.8) (22.8) Expanded credit portfolio (a+b+c+d) 59,021 59,417 60, Wholesale segment (a+c+d) 23,029 22,031 21,634 (1.8) (6.1) Consumer Finance segment (b) 35,992 37,387 38, Payroll loans (INSS, private and government), individual loans (with and without guarantee), home equity, student credit and solar; For more details, see page 24. Wholesale mix of credit expanded portfolio (R$B) Consumer Finance mix of credit (R$B) Dec/17 39% 1% 12% 21% 24% % Dec/17 77% 8% % Dec/18 41% 2% 8% 26% 20% 21.6 Dec/18 79% 7% 6% 5% 38.6 Loan portfolio Guarantees Private securities Used Vehicles New Loans Export./Import. financing Payroll loan Cards Personal loans + Other BNDES Onlendings Other 12 Balance sheet highlights 4Q18 Earnings Release Loan Portfolio

13 Auto finance The auto finance loan origination volume was R$ 4.6 billion in the quarter, being 89% for used cars. The combination of continuous improvements in the credit processes and models and the prudence in the granting of loans has maintained the quality in vehicle origination, whose volume grew 4.2% in relation to 4Q17. The Bank maintained conservative regarding the auto finance market, with an average down payment percentage of 40% and an average term of 45 months. Banco Votorantim is one of the leaders of the auto finance market. 4Q17 3Q18 4Q18 Variation (%) 4Q18/3Q18 4Q18/4Q17 Average rate (% p.y.) p.p. 0.6 p.p. Average term (months) Down payment (%) p.p p.p. Used cars/auto finance origination (%) p.p p.p. Total auto finance origination (R$ billion) % 4.2% Dec17 Sept18 Dec18 Variation (%) Dec18/Sept18 Dec18/Dec17 Average rate (% p.y.) p.p p.p. Maturity (months) Used cars/auto finance portfolio (%) p.p p.p. Average vehicle age (years) Auto Finance portfolio (R$ billion) % 9.3% Auto finance origination (R$B) +4.2% Q18 /4Q % 4.0 (90%) 3.8 (88%) 4.1 (89%) +2.6% 4Q17 3Q18 4Q18 Other Vehicles Used cars 13 Balance sheet highlights 4Q18 Earnings Release Auto finance

14 Loan Portfolio Quality All the segmentations of the credit portfolio risk in this section refer to the loan portfolio (Res. CMN No /99), unless otherwise indicated. The Bank maintains a consistent process of evaluation and monitoring of the credit risk on operations carried out with clients. LOAN PORTFOLIO QUALITY INDICATORS (R$ Million, except w here indicated) Dec17 Sept18 Dec18 90-Day NPL balance 1,925 2,095 2, Day NPL ratio 4.0% 4.2% 4.2% Write-off (a) (461) (436) (530) Credit recovery (b) Net Loss (a+b) (295) (215) (416) Net Loss / Loan portfolio - annualized 2.4% 1.7% 3.3% New NPL New NPL / Loan portfolio¹ - quarter 0.9% 1.1% 1.1% ALL balance² 3,688 3,645 3,640 ALL balance / Loan portfolio 7.6% 7.3% 7.2% ALL balance / 90-day NPL 192% 174% 171% AA-C balance 43,196 44,390 45,378 AA-C balance / Loan portfolio 88.7% 89.2% 89.9% 1. D NPL quarterly + write-offs of loss for the period) / Loan Portfolio for the immediately preceding quarter; 2. Includes, in Dec.18, R$ 9M of generic credit provision recognized as Liabilities in the "Other" line (Note # 18d of 4Q18 FS). Coverage ratio Reflecting the solid risk management model and the solidity of the balance sheet, the Coverage Ratio of 90-Day NPL remained at a comfortable level, reaching 171% in Dec.18 (Dec.17: 192%). Coverage ratio (90-days CR) 192% 191% 184% 90-days CR 174% 171% 3,688 3,551 3,630 3,645 3,640 1,924 1,861 1,969 2,095 2,128 Dec/17 Mar/18 Jun/18 Sept/18 Dec/18 ALL balance (R$M) 90-Day NPL balance (R$M) 14 Balance sheet highlights 4Q18 Earnings Release Loan portfolio quality

15 Loan Portfolio per Risk Level (%) The Bank s credit risk management aims at maintaining the loan portfolio quality at adequate levels for each market segment. D-H Loan Portfolio per Risk Level (%) 11.3% 10.8% 11.2% 10.8% 10.1% Loans classified between AA-C, according to Resolution 2,682 of the Brazilian Central Bank (BACEN) represented, at the end of Dec.18, 89.9% of the loan portfolio, against 88.7% in Dec.17, ratifying the quality of the portfolio. AA-C 88.7% 89.2% 88.8% 89.2% 89.9% Dec/17 Mar/18 Jun/18 Sept/18 Dec/18 Delinquency of loan portfolio - 90-day NPL ratio The quality indicators of the portfolio were kept under control, supported by the combination of improvements in the credit models and the prudence in the granting of loans. The consolidated ratio of delinquency over 90 days (NPL90) reached 4.2% in the end of Dec.18, stable in relation to Sept.18 and 0.2 p.p. higher than in Dec.17. As explained in the prior quarter, the increase in the indicator reflects an specific Wholesale s case that was properly provisioned. The NPL90 of Wholesale attained 2.2% in Dec.18, coming from 2.1% in Sept.18. Not considering this specific case mentioned, the consolidated ratio in Dec.18 would be 4.0%, and the Wholesale one would be 1.4%, aligned with the historical level. In Consumer Finance, the NPL90 ended at 4.8% in Dec.18, 0.1 p.p. lower than in Sept.18, and 0.1 p.p. higher over Dec.17. This stable behavior mainly reflects the quality of the Auto Finance portfolio, which NPL90 ended Dec.18 at 4.3%. 5.7% 5.5% Banco Votorantim 4.6% 4.4% 4.0% 4.0% 4.2% 4.2% 4.0% 4.0% Consumer Finance 5.7% 5.7% 5.3% 5.4% 5.5% 5.1% 5.2% 4.7% 4.7% 4.2% 4.9% Disregarding specific case of Wholesale 4.9% 4.8% 4.4% 4.4% 4.3% Consumer Finance Auto Finance 5.8% Wholesale 2.0% 5.6% 2.3% 1.8% 1.3% 2.1% 2.2% 1.3% 1.4% Dec/15 Jun/16 Dec/16 Jun/17 Dec/17 Jun/18 Sep/18 Dec/18 Disregarding specific case 15 Balance sheet highlights 4Q18 Earnings Release

16 Consumer Finance New NPL Ratio The New NPL, that considers the volume of loans that became default above 90 days in the quarter, was R$ 564 million in 4Q18. Due to this, the New NPL in relation to portfolio was 1.13% in Dec % 1.27% 0.86% 0.92% 0.92% 0.97% 1.38% 1.14% 1.13% Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 New NPL¹ Ratio New NPL (R$B) 1. D NPL quarterly + write-offs of loss for the period) / Credit Portfolio for the immediately previous quarter. Renegotiated Loan In the chart below are segregated the operations renegotiated by segment, considering all renegotiation types, whether not past due, past due, and those arising from the credit recovery written-off to loss. The balance of renegotiated loans amounted to R$ 4,886 million in Dec.18, a reduction of 13.8% in 12 months and 5.7% in the quarter. The reduction was observed in both Wholesale and Consumer Finance. It is worth mentioning that most of the balance of the renegotiated Consumer Finance portfolio is composed of renewed operations without delay (refinancing), mainly of Payroll loans product. Renegotiated loan portfolio (R$M) 5,671 1,061 5,184 4,886 1,254 1,292 2,320 1,759 1,566 2,290 2,171 2,029 Dec/17 Sept/18 Dec/18 Wholesale Payroll loan Other 16 Balance sheet highlights 4Q18 Earnings Release

17 Funding and Liquidity The total amount of funding sources reached R$ 60.8 billion in Dec.18, down 0.6% in 12 months and 1.3% in 4Q18. The funding from Financing Bills continue to post growth in the quarter, and together with the assignments with co-obligation and subordinated debt more stable funding instruments, accounted for 61% of total funding sources in Dec.18. The Bank remains with a diversified portfolio and keeps providing terms and conditions appropriate to the profile of its assets. It is worth mentioning the decrease in the balance of repos backed by BV Leasing debentures, reflecting the regulatory change introduced by Resolution 4,527, which made it impossible new repos with debentures of lease subsidiaries as of As a substitute for this instrument, the Bank increased the volume of funding with bank deposit certificates (CDB) and Commercial Leasing Bills (LAM). FUNDING SOURCES (R$ Billion) Dec17 Sept18 Dec18 Variation (%) Dec18/Sept18 Dec18/Dec17 Debentures (repos) (51.2) (75.3) Deposits Time deposits Deposits on demand and interbank (1.0) Subordinated debts (2.0) 8.9 Subordianted Financing bills Others subordinated debts (3.9) 8.7 Borrowings and onlendings (9.6) (2.1) Bills Financing bills Agribusiness credit bills ("LCA") and real estate credit bills ("LCI") (9.2) (21.8) Financial lease bills ("LAM") Securitization with recourses (10.9) (37.4) Securities abroad (21.6) (12.4) Other Total funding (1.3) (0.6) In relation to liquidity, the Bank has maintained its cash reserve at a very conservative and very comfortable level to cover our funding sources with daily liquidity. Additionally, it is important to emphasize that the Bank has a credit facility at BB since 2009, which represents a significant liquidity reserve and that has never been tapped. The table below demonstrates the LCR calculation, which objective is to measure short-term liquidity of banks in stress scenario. Liquidity Coverage Ratio (LCR) 3Q18 4Q18 High Quality Liquidity Assets (HQLA)¹ 12,361 11,722 Total cash inflows 7,937 7,193 LCR 156% 163% 1. Mainly federal public securities and bank reserves; Further details about the LCR may be found in the Report on Management of Risks and Capital at the website of IR: 17 Balance sheet highlights 4Q18 Earnings Release

18 Capital Capital Basel Ratio reached 15.7% in Dec.18, with increase of 0.2 p.p. in relation to Dec.17, mainly due to the Tier I Additional Capital increment arising from the issue of perpetual bonds abroad in Nov.17. The capital index Tier I reached 13.6%, of which 11.6% composed of CET1. The Basel ratio was determined pursuant to Basel III method for calculating minimum Reference Equity, Tier I capital and principal capital requirements. In 2018, the minimum capital requirement was 10.50%, where 7.88% was the minimum for Tier I Capital, and 6.38% for Equity Tier (CET1). BASEL RATIO (R$ Million) Dec17 Sept18 Dec18 Total Capital 9,233 9,731 9,358 Tier I Capital 6,759 7,801 8,058 Common Equity Tier I 6,759 6,570 6,895 Additional Tier I - 1,230 1,163 Tier II Capital 2,475 1,930 1,300 Risk Weighted Assets (RWA) 59,410 59,364 59,457 Credit risk 52,083 51,842 52,207 Market risk 1,937 1,926 1,654 Operational risk 5,390 5,597 5,597 Minimum Capital Requirement 5,495 5,120 5,128 Basel Ratio (Capital/RWA) 15.5% 16.4% 15.7% Tier I Capital Ratio 11.4% 13.1% 13.6% Common Equity Tier I Ratio 11.4% 11.1% 11.6% Additional Tier I Ratio - 2.1% 2.0% Tier II Capital Ratio 4.2% 3.3% 2.2% In relation to Sept.18, the Basel Ratio decreased 0.7 p.p., affected (1) by the provision of R$ 194 million for payment of dividends, and (2) by the decay in subordinated debt that comprise Tier II Capital. 16.4% Change in Basel ratio for 4Q18 0.3% 1.1% 0.2% 0.5% % This decrease was partially offset (3) by the generation of net income of R$ 282 million in the 4Q18, and (4) by the effects of Resolution 4,680/18¹. Basel Sept/18 Dividends Tier II Net income 4Q18 Effects of Res Basel Dec/18 1. Deduction of only 50% of tax credits arising from tax losses related to the hedge of investments abroad. 18 Balance sheet highlights 4Q18 Earnings Release

19 RATINGS Banco Votorantim is rated by international rating agencies and the ratings assigned reflect its operating performance, financial soundness and the quality of its management, in addition to other factors related to the financial sector and economic environment in which the company is operating. It should be stressed that the longterm rating in foreign currency is limited to Brazil s sovereign rating. The table below presents the ratings assigned by the main agencies: RATING AGENCIES International National Local Foreign Local Brazil Sovereign rating Moody s Long-term Ba2 Ba3 Aa3.br Short-term NP NP BR-1 Ba2 Standard & Poor s Long-term BB- braaa Short-term B bra-1+ BB- In Oct.18, Moody's rating agency reaffirmed the Bank s rates, maintaining them as Ba2 (domestic currency) and Ba3 (foreign currency), both with negative outlook. 19 Ratings 4Q18 Earnings Release RATIN

20 CORPORATE GOVERNANCE The Votorantim Financial Conglomerate adopts the best governance practices, guaranteeing transparency and equity in the information, in order to contribute to the decision-making process. Corporate Structure Votorantim S.A. Total: 50.00% Com. shares: 50.01% Pref. shares: 49.99% Banco do Brasil Total: 50.00% Com. shares: 49.99% Pref. shares: 50.01% The Bank's management is shared between the shareholders Votorantim Finanças and Banco do Brasil, with an equal participation of both in the Board of Directors, which is composed of six members. The Board of Directors meetings are held at least monthly to deliberate on strategic issues and track the business and advise on the Conglomerate s businesses. With respect to decision-making process, the Board of Directors decisions are made by absolute majority with no casting vote. Each member holds office for a two-year term, and the positions of CEO and Vice-President are annually alternated between both shareholders. Also included in the governing bodies are the Fiscal Council and the BD advisory forums, as well as the Executive Board, Executive Committee and internal governance technical committees. It is worth emphasizing that the Risk and Capital Committee was implemented in the beginning of 2018, with reporting to the Board and whose principal attribution is the assessment of the operation of the structures of Management of Risks and Capital of the Bank. Corporate Governance Bodies Members of the Board of Directors Name Position Shareholder Paulo Rogério Caffarelli Chairman Banco do Brasil José Luiz Majolo Vice-Chairman Votorantim Finanças Antonio Mauricio Maurano Director Banco do Brasil Celso Scaramuzza Director Votorantim Finanças Marcelo Augusto Dutra Labuto Director Banco do Brasil Jairo Sampaio Saddi Director Votorantim Finanças Fiscal Council Audit Committee Compensation & HR Committee General Shareholders' Meeting Board of Directors Management Executive Board Advisory Committee Risk and Capital Committee 20 Corporate Governance 4Q18 Earnings Release CORPORATE GOVERNANCE

21 RECONCILIATION BETWEEN ACCOUNTING AND MANAGERIAL INCOME STATEMENT In order to enable a better understanding, comparison and analysis of the Bank s results and the performance of its businesses, the explanations contained in this report are based on the Managerial Statement of Income, which considers certain managerial reallocations made in the audited Statement of Income, with no impact in net income. These reallocations refer to: Income from credit recovery written-off to loss, recorded in Revenues from loans and reallocated to Allowance for Loan Losses ; Expenses with allowance for loan losses characteristics recorded in Other Operating Income (Expenses), which were reallocated to Allowance for Loan Losses ; and Impairment of Wholesale segment s private securities, classified as Net Interest Income, which were reclassified to Allowance for loan losses. Fiscal and tax effects of the hedge in relation to changes in exchange rates for overseas investments, which are recorded in Tax Expenses (PIS and Cofins) and Income Tax and Social Contribution, and that were also reallocated to Derivative Financial Instruments. The management strategy of the foreign exchange risk of resources invested abroad is intended to avoid effects resulting from exchange-rate change on income, and for this purpose, foreign exchange risk is neutralized using derivative financial instruments. Reconciliation of Audited and Managerial Net Income 4Q17, 3Q18 and 4Q18 INCOME STATEMENT (R$ Million) 4Q17 Audited Adjust ments 4Q17 Managerial 3Q18 Audited Adjust ments 3Q18 Managerial 4Q18 Audited Adjust ments 4Q18 Managerial Income from financial intermediation 3,556 (481) 3,075 3,053 (94) 2,959 2,600 (86) 2,515 Loans¹ 2,474 (167) 2,307 2,471 (221) 2,249 2,326 (114) 2,212 Leases Securities 1,185 (385) Derivative financial instruments (170) 70 (99) (114) 68 (46) (407) (55) (462) Foreign exchange operations (24) - (24) Compulsory deposits Expenses from financial intermediation (1,847) 104 (1,743) (1,634) - (1,634) (1,087) - (1,087) Money market borrow ings (1,325) - (1,325) (1,321) - (1,321) (969) - (969) Borrow ings and onlendings (113) - (113) (115) - (115) Sale or transfer from financial assets (409) 104 (305) (198) - (198) (159) - (159) Net interest income - NII 1,709 (377) 1,332 1,419 (94) 1,326 1,513 (86) 1,428 Result of loan losses and impairments (939) 452 (487) (449) 157 (292) (526) 31 (495) Net financial margin , (55) 932 Other operating income/expenses (509) (11) (520) (444) 4 (440) (398) (3) (401) Fee income Personnel and administrative expenses (631) - (631) (624) - (624) (596) - (596) Tax expenses (105) (6) (112) (98) (1) (99) (95) (3) (98) Equity in income of subsidiaries Other operating income/expenses (230) (5) (234) (150) 5 (145) (182) 0 (182) Operating income (loss) (58) 532 Non-operating income (loss) (4) - (4) (2) - (2) (69) - (69) Income (loss) before taxes and contributions (58) 463 Provision for income tax and social contribution (74) (64) (138) (206) (67) (273) (181) 58 (123) Profit sharing (27) - (27) (51) - (51) (58) - (58) Net income (loss) Includes revenues from credit portfolios assigned with recourse under Resolution Reconciliation of accounting vs. managerial income statement 4Q18 Earnings Release INCOME STATEMENT

22 Reconciliation of Audited Net Income and Managerial Net Income 2017 and 2018 INCOME STATEMENT (R$ Million) 2017 Audited Adjustments 2017 Managerial 2018 Audited Adjustments 2018 Managerial Income from financial intermediation 13,881 (697) 13,184 11,786 (256) 11,529 Loans¹ 9,810 (792) 9,018 9,724 (781) 8,943 Leases Securities 4, ,203 2, ,714 Derivative financial instruments (217) 26 (192) (659) 271 (388) Foreign exchange operations Compulsory deposits Expenses from financial intermediation (8,248) 145 (8,103) (6,170) - (6,170) Money market borrow ings (6,463) - (6,463) (5,000) - (5,000) Borrow ings and onlendings (253) - (253) (370) - (370) Sale or transfer from financial assets (1,533) 145 (1,388) (801) - (801) Net interest income - NII 5,632 (551) 5,081 5,616 (256) 5,359 Result of loan losses and impairments (2,585) 581 (2,004) (2,014) 522 (1,492) Net financial margin 3, ,077 3, ,867 Other operating income/expenses (1,880) (6) (1,886) (1,697) (9) (1,707) Fee income 1,318-1,318 1,374-1,374 Personnel and administrative expenses (2,239) - (2,239) (2,350) - (2,350) Tax expenses (395) (2) (398) (384) (14) (398) Equity in income of subsidiaries Other operating income/expenses (849) (4) (853) (699) 5 (694) Operating income (loss) 1, ,191 1, ,161 Non-operating income (loss) 3-3 (76) - (76) Income (loss) before taxes and contributions 1, ,194 1, ,085 Provision for income tax and social contribution (425) (23) (448) (596) (256) (853) Profit sharing (164) - (164) (171) - (171) Net income (loss) 582 (0) 582 1, , Reconciliation of accounting vs. managerial income statement 4Q18 Earnings Release

23 APPENDI APPENDICES Overview Banco Votorantim s Position Banco Votorantim is one of the largest Brazilian privately-held banks in total assets and loan portfolio. 10 Largest Banks in Assets - Sept/18 (R$B) 10 Largest Banks in Loan Portfolio - Sept/18 (R$B) BB 1,469 CEF 683 Itaú 1,448 BB 624 CEF 1,283 Itaú 549 Bradesco 1,119 Bradesco 449 BNDES 790 BNDES 299 Santander 757 Santander 297 BTG Pactual 184 Safra 68 Safra th 9 th Votorantim 97 Votorantim Banrisul Citibank 82 Rabobank 20 Public Foreign Brazilian and private Public Foreign Brazilian and private Strategy Vision by business CONSUMER FINANCE R$ 60.2B WHOLESALE To focus on used auto finance (multibrand dealers), where BV has a history of leadership and expertise To originate portfolios with quality, scale and profitability Innovation and digital transformation Auto Finance Corporate Bank R$ 33.4B R$ 21.6B Corporate (R$300M to R$ 1.5B): Focus on growing cash management, financial structure, guarantees, floating capital, hedge, FX, capital markets and M&A Large Corporate (>R$ 1.5B): Focus on increase profitability capital markets, financial structure, guarantees and treasury Agility and flexibility to serve Capital discipline (Risk-Adjusted Return) Credit Cards and Insurance: revenue diversification cross-selling to auto customer base Loans: revenue diversification Payroll loans Personal loans Home equity Student loans Solar energy Promotiva: dedicated payroll loans origination to BB Other Businesses R$ 5.2B Wealth Management Asset: 13 th largest in the market, with innovative products and relevant synergies with BB R$ 48.4B in AuM Private: focus on asset management through tailor-made solutions Banco do Brasil Shareholders Votorantim S.A. R$ B Expanded credit portfolio (includes guarantees provided by the Bank and private securities) 23 Appendices 4Q18 Earnings Release

24 Consumer Finance - Other businesses Payroll loan Focus on the refinancing of the payroll loan portfolio INSS (retirees and pensioners) Growth in the payroll loan portfolio Private Selective operation in public/government agreements Continuous improvement in management tools (pricing, credit, collection, etc.) Public Private INSS Payroll loans - Loan Portfolio (R$B) (9%) Dec/ (9%) Sept/ (8%) Dec/18 Credit cards Issue of credit cards with Visa, Mastercard and Elo brands Focus on exploring the current client base of auto finance loans Growth organically by entering into new business partnerships (e.g.: Netpoints) Investment in new technologies (digital wallet, artificial intelligence, virtual credit card) Active cards (Million) and Portfolio (R$B) Loan portfolio Dec/17 Sept/ Dec/18 Active Cards Insurance Brokerage Insurance premiums (R$M) Focus on increase brokerage revenues, leveraging the Consumer Finance customer base Wide portfolio of insurance and assistance, with more than 15 products: Life Dental Residential Personal accidents etc Other Auto Credit Insurance Q Q Q18 24 Appendices 4Q18 Earnings Release

25 Quality of the Loan Portfolio - Wholesale Sectoral Concentration Wholesale Wholesale Sectorial concentration Dec/17 Dec/18 R$M Part.(%) R$M Part.(%) Financial Institutions 1, % 1, % Telecom 1, % 1, % Sugar and Ethanol 1, % 1, % Retail 1, % 1, % Automotive/Auto parts/car Dealers % % Mining 1, % % Oil & Gas % % Railways % % Food and beverages industry % % Industry % % Trading Agro % % Slaughterhouses % % Government % % Services % % Car Rental % % Steel industry % % Residencial Construction % % Petrochemical % % Agribusiness % % Cooperatives % % Other 3, % 2, % Total¹ 15, % 15, % 1. Numbers exclude private securities and are net of credit provisions. Credit Concentration 10 Major debtors¹ 100 Major debtors¹ Only 6.7% of credit risk is concentrated in the 10 largest debtors. 7.5% 7.0% 6.7% 20.7% 19.2% 18.0% Dec/17 Sept/18 Dec/18 Dec/17 Sept/18 Dec/18 1. In relation to consolidated loan portfolio. 25 Appendices 4Q18 Earnings Release