Banco Modal S.A. Update to credit analysis. Exhibit 1 Rating Scorecard - Key Financial Ratios. Capital: Tangible Common Equity/Risk-Weighted Assets

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1 CREDIT OPINION Banco Modal S.A. Update to credit analysis Update Summary RATINGS Banco Modal S.A. Domicile Rio de Janeiro, Rio de Janeiro, Brazil Long Term Debt Not Assigned Long Term Deposit B1 Type LT Bank Deposits - Fgn Curr Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Banco Modal S.A.'s (Modal) baseline credit assessment (BCA) of reflects its improved capital position, particularly after the capital injection, which enhanced the loss absorption capacity of its common equity. It also takes into consideration the reducing reliance on market funds given its efforts to increasingly obtain granular deposits through its own digital platform. Earnings consistency has been improving, but the BCA also incorporates the potential challenges to profitability given the still gradually recovering economy and business environment. Also, asset risk could be negatively pressured by the lagging effects from economic contraction in the last years, particularly considering the high borrower concentration of its loan portfolio. The bank's standalone assessment also factors the risks associated with the large exposure to merchant banking investments. The deposit and senior debt ratings of B1 derive from Modal's BCA of, and does not benefit from parental and government support uplift given Moody's assessment of low probability of support, based on the bank's modest market share in the domestic deposits. Exhibit 1 Rating Scorecard - Key Financial Ratios Banco Modal S.A. (BCA: ) Contacts Median -rated banks 12% 7% Alcir Freitas VP-Sr Credit Officer alcir.freitas@moodys.com 1% 6% Farooq Khan Analyst farooq.khan@moodys.com 4% Aaron Freedman Associate Managing Director aaron.freedman@moodys.com Rafael B Amaral Associate Analyst rafael.amaral@moodys.com CLIENT SERVICES Americas Asia Pacific Japan EMEA % 8% 4% 6% 2% 3% 2% 1.5% 9.8% % Asset Risk: Problem Loans/ Gross Loans Capital: Tangible Common Equity/Risk-Weighted Assets Solvency Factors (LHS) Source: Moody's Financial Metrics.4% Profitability: Net Income/ Tangible Assets 14.3% 59.6% Funding Structure: Market Funds/ Tangible Banking Assets Liquid Resources: Liquid Banking Assets/Tangible Banking Assets 1% % Liquidity Factors (RHS)

2 Credit strengths» Improved capitalization following the conversion of Tier 2 debt into common equity» Recovering profitability, although the trend may be challenged by market conditions and merchant banking investments» Adequate liquidity management and lowering reliance on market funds Credit challenges» Profitability may be pressured by the still gradually recovering operating environment» Asset risk weighted by the single name concentration, market risk and non-banking investments Rating outlook The stable outlook on its ratings reflects our expectation that the potential negative pressures that could come from asset risk and profitability are appropriately counterbalanced by its capital position and adequate liquidity management. Factors that could lead to an upgrade» Modal s ratings could be upgraded if it is able to consistently improve its profitability and reduce earnings volatility, while decreasing its exposure to risky merchant investments and maintaining its capital position around current levels. Factors that could lead to a downgrade» The bank s ratings could face downward pressure if it is unable to sustain the capitalization and to post consistent earnings generation; and/or the bank encounters problems with its merchant investments. Key indicators Exhibit 2 Banco Modal S.A. (Consolidated Financials) [1] Total Assets (BRL billion) Total Assets (USD billion) Tangible Common Equity (BRL billion) Tangible Common Equity (USD billion) Problem Loans / Gross Loans (%) Tangible Common Equity / Risk Weighted Assets (%) Problem Loans / (Tangible Common Equity + Loan Loss Reserve) (%) Net Interest Margin (%) PPI / Average RWA (%) Net Income / Tangible Assets (%) Cost / Income Ratio (%) Market Funds / Tangible Banking Assets (%) Liquid Banking Assets / Tangible Banking Assets (%) Gross Loans / Due to Customers (%) CAGR/Avg [1] All figures and ratios are adjusted using Moody's standard adjustments [2] Basel III - fully-loaded or transitional phase-in; LOCAL GAAP [3] May include rounding differences due to scale of reported amounts [4] Compound Annual Growth Rate (%) based on time period presented for the latest accounting regime [5] Simple average of periods presented for the latest accounting regime. [6] Simple average of Basel III periods presented Source: Moody's Financial Metrics This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Detailed credit considerations The assessment takes into account Modal's Prudencial Conglomerate financial statements, which includes Banco Modal S.A. and its subsidiaries, as well as Modal Administradora de Recursos Ltda. Asset risk influenced by credit environment and non-lending risks The score for asset risk reflects the inherent borrower concentration in the bank's loan book and the relevant non-lending credit risk. Also, it is somewhat weighted by Modal's exposure to market risk that represents 25% of total capital requirement in June 217. Total credit risk exposure, including loans, private securities and guarantees, declined by 4% in the last twelve months ended June 217. The decline was mainly driven by lowering exposure to private securities (-57% year over year) and guarantees (-13%), which were partially counterbalanced by the 14% growth in gross loans. Modal's loan book and private securities remain focused primarily on commercial corporate transactions to support its investment banking activity. Also, it remains short term in nature, as about half matures in less than one year. Modal's problem loan ratio was equivalent to.4% in June 217, and experienced a volatility in the last years, which reflects the fact that its loan book is somewhat concentrated, and also, the negative pressures arising from economic environment. The loan loss reserves represented 477.8% of problem loans in June 217. Also, Modal recorded increasing volume of property foreclosures in the last 12 months, as part of the guarantees received in certain unpaid credit operations. In Jun/17 the outstanding volume of foreclosed assets was equivalent to BRL38.1 million, representing about 6.1% of gross loans and 11% of its tangible common equity. Modal holds a representative volume allocated to merchant banking investments, with an aggregate book value of about BRL185 million in June 217, net of minority interest, being equivalent to 52% of its tangible common equity. In the last years, the fair value assessment of these investments resulted in gains that are accounted directly in the bank s shareholders equity. Although the impairment analysis of these investments is carried out each six months to one year, the continued success and future valuation of these investments is difficult to forecast with any certainty, as they are mostly in non-financial private companies with limited transparency. Preservation of capital position will be associated with consistent internal earnings generation The capital score reflects Moody's capital measure, represented by the tangible common equity to risk-weighted assets (TCE/ RWA) of 9.8% in June 217, which meaningfully increased from the 7.6% in December 215, following the BRL 12 million Tier 2 debt conversion into capital. The capital injection coupled with earnings retention are somewhat offsetting the consumption arising from activity growth, evidenced by the 19% growth in risk-weighted assets in the twelve months ended in June 217. Modal also reports adequate regulatory capital, evidenced by the common equity Tier 1 (CET1) ratio of 13.9% in June 217, from 13.6% in June 216. Going forward, the trend of Modal s capital position will be directly linked to its ability to generate capital with internal results in order to support the ongoing activity growth. Profitability is improving but could be challenged by slow growth environment The b3 score captures the potential challenges arising from its ability to keep sustaining earnings at higher levels under a slow business environment. Also, it accounts for the revenue contribution from segments that are more subject to volatility including investment banking, sales and trading and merchant banking. Profitability sustained at higher levels in the last two semesters, with net income to tangible assets, net of minority stakes, rising to a reasonably healthy.8% in the first half of 217, and.5% in the second half of 216, supported by lower provisions for loan losses and foreign exchange gains related to the repatriation of financial assets that were invested abroad, as part of the Repatriation Law. The consistent results recorded in the last 12 months represents an improvement vis-à-vis the fluctuations in previous periods, with net income being close to zero in the first half of 216 and negative in the first half of 215. This is partially associated with the increasing revenue stream from divisions that have a higher recurrence, including asset management, retail brokerage and credit. Those segments more exposed to volatility still have an important contribution to its bottom-line results, although the relevance is diminishing and the revenue generation has been somewhat consistent in the last years. 3

4 We also note that Modal historically records meaningful volumes of unrealized gains that were equivalent to.4% of tangible assets in June 217 and.7% in the same period of 216. The current unrealized gains are mainly related to the positive evaluation on merchant banking investments and securities. The unrealized gains and losses are just incorporated into our profitability assessment when they become effectively realized. Therefore, the bank's stock of unrealized gains may benefit its future results if they are realized at current levels. Declining reliance on market funds and maintenance of large volumes of liquid resources The combined liquidity score of ba1 captures the bank's lowering reliance on market funds as well as the large volume of liquid assets. Modal reduced significantly its reliance on market funds and large confidence-sensitive investors, by obtaining increasing volumes of granular deposits through third-party brokers as well as via its proprietary brokerage platform. The meaningful reliance on third-party brokers to obtain deposits exposes the bank to the commercial strategy of these intermediaries. In this sense, Modal started the operations of its digital brokerage platform in late 215 with the purpose of building its own access to a granular deposit base. Following the rapid growth of this business, the platform already contributed to 15% of the bank s time deposits in Jun/17, from almost zero in December 215, helping to reduce the reliance on third-party brokers and market funds. In this context, Modal s time deposits and deposit-like instruments (including LCIs and LCAs) have jointly increased by 29% in the last 12 months ended in June 217, to BRL1.9 billion, and represented the majority of its funding base. At the same time, the bank reduced its dependence on the more expensive DPGE funding, which shrank by 9% in the same period, to BRL 39 million. Modal holds a large amount liquid resources even after deducting the illiquid investments from its securities portfolio, mainly including the merchant banking investments, and also, other instruments with lower liquidity, such as debentures. The bank also maintains a favorable tenor gap in the maturity of its assets and liabilities. Modal's rating is supported by the Moderate - Macro Profile on Brazil Brazil's Moderate - macro profile reflects the country's large and diversified economy, strong international reserves, and the improved effectiveness of monetary policy. However, the country's economic performance remains weak following two years of recession. Following an aggressive expansion in lending, particularly at the public sector banks, which led to concerns of a possible credit bubble, lending has been contracting steadily since midyear 216 and asset risks have remained relatively contained despite the depth and length of the country's recession. The slowdown in lending has also limited banks' needs for market funding. Although governmentowned banks' account for a 56% share of the loan market, their growth rate has been consistently declining, which will help reduce pricing distortion created by their previous loose lending policies. Notching Considerations Government Support We believe there is a low likelihood of government support for Modal's rated deposits given its modest market share of deposits in Brazil. Counterparty Risk Assessment CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails and are distinct from debt and deposit ratings in that they (1) consider only the risk of default rather than both the likelihood of default and the expected financial loss suffered in the event of default and (2) apply to counterparty obligations and contractual commitments rather than debt or deposit instruments. The CR assessment is an opinion if the counterparty risk related to a bank s covered bonds, contractual performance obligations (servicing), derivatives (e.e., swaps), letters of credit, guarantees and liquidity facilities. Modal's CR Assessment is positioned at Ba3(cr)/Not Prime(cr) The CR Assessment is one-notch above the bank's adjusted BCA of, and, therefore, above the deposit rating of the bank, reflecting Moody's view that its probability of default is lower at the operating obligations than of deposits. Modal's CR Assessment does not benefit from government support, as the government support is not incorporated in the bank's deposit ratings. 4

5 About Moody's Bank Scorecard Our Scorecard is designed to capture, express and explain in summary form our Rating Committee s judgment. When read in conjunction with our research, a fulsome presentation of our judgment is expressed. As a result, the output of our Scorecard may materially differ from that suggested by raw data alone (though it has been calibrated to avoid the frequent need for strong divergence). The Scorecard output and the individual scores are discussed in rating committees and may be adjusted up or down to reflect conditions specific to each rated entity. 5

6 Rating methodology and scorecard factors Exhibit 3 Banco Modal S.A. Macro Factors Weighted Macro Profile Moderate - Factor 1% Historic Macro Ratio Adjusted Score Credit Trend Assigned Score Key driver #1 Key driver #2 Non lending credit risk Solvency Asset Risk Problem Loans / Gross Loans 1.5% baa3 Single name concentration Capital TCE / RWA 9.8% Risk-weighted capitalisation Profitability Net Income / Tangible Assets.4% b3 Expected trend Combined Solvency Score Liquidity Funding Structure Market Funds / Tangible Banking Assets ba2 14.3% baa3 ba2 Market funding quality Liquid Resources Liquid Banking Assets / Tangible Banking Assets 59.6% baa1 baa2 Quality of liquid assets Combined Liquidity Score Financial Profile Business Diversification Opacity and Complexity Corporate Behavior Total Qualitative Adjustments Sovereign or Affiliate constraint: Scorecard Calculated BCA range Assigned BCA Affiliate Support notching Adjusted BCA Instrument class Counterparty Risk Assessment Deposits baa2 Loss Given Failure notching 1 ba1 ba Ba2 ba3-b2 Additional Preliminary Rating Notching Assessment ba3 (cr) Government Support notching Local Currency Rating Ba3 (cr) B1 Foreign Currency Rating -B1 Source: Moody's Financial Metrics 6

7 Ratings Exhibit 4 Category BANCO MODAL S.A. Outlook Bank Deposits NSR Bank Deposits Baseline Credit Assessment Adjusted Baseline Credit Assessment Counterparty Risk Assessment Moody's Rating Stable B1/NP Baa2.br/BR-3 Ba3(cr)/NP(cr) Source: Moody's Investors Service 7

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9 CLIENT SERVICES 9 Americas Asia Pacific Japan EMEA