Banco Votorantim S.A. Earnings Presentation. 3 rd Quarter, 2012

Transcription

1 Banco Votorantim S.A. Earnings Presentation 3 rd Quarter, 2012

2 Disclaimer Disclaimer Certain statements made in this presentation may not be based on historical information or facts. This presentation therefore contains, or may be deemed to contain, forward looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), including those relating to the general business plans and strategy, future financial condition and results and growth prospects of Banco Votorantim S.A. ( Banco Votorantim or the Company ), and future developments in its industry and its competitive and regulatory environment. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and are based on assumptions, data or methods which, although considered reasonable by the company at the time, may turn out to be incorrect or imprecise, or may not be possible to realize. Accordingly, actual results may differ materially from these forward looking statements due to a number of factors, including future changes or developments in the Company s business, its competitive environment, technology developments and political, economic, legal and social conditions in Brazil. Forward looking information is not merely based on historical fact but also reflects management s objectives and expectations. The Company can give no assurance that expectations disclosed in this presentation will be confirmed. The words estimate, believe, "anticipate", wish", "expect", foresee", intend", "plan, "predict", forecast", aim" and similar words, written and/or spoken, are intended to identify affirmations which, necessarily, involve known and unknown risks. Known risks include uncertainties which include, but are not limited to, interest rates, product competition, market acceptance of products, the actions of competitors, regulatory approval, currency type and fluctuations, monetary policy, among others. This presentation is based on events up to September 30 th, The Company or any of its affiliates take no responsibility or liability to update the contents of this presentation in the light of new information and/or future events. Banco Votorantim and/or any of its affiliates do not accept and take no responsibility, whatsoever, direct or indirect, for transactions or investment decisions made on the basis of information contained in this presentation. Banco Votorantim may alter, modify or otherwise change in any manner the contents of this presentation, without the obligation to notify any person of such revision or changes. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. Recipients of this presentation are not to construe the contents of this summary as legal, tax or investment advice and recipients should consult their own advisors in this regard. The market and competitive position data, including market forecasts, used throughout this presentation were obtained from internal surveys, market research, publicly available information and industry publications. Although the Company has no reason to believe that any of this information or these reports are inaccurate in any material respect, the Company has not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications and therefore does not make any representation as to the accuracy of such information. This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without the Company s prior written consent. 1

3 Executive summary Executive summary (I) results were impacted by the new economic-regulatory scenario and the adjustment process Since 2011, the financial industry has been impacted by economic and regulatory changes, such as the slowdown of economic activity, rising delinquency, macroprudential measures, Bacen s Resolution 3,533, and others For institutions focused on consumer finance, two changes were particularly striking: Systemic increase of delinquency : in the auto finance market, in which we have a strong presence through BV Financeira, delinquency doubled in 2011 (Dec.10: 2.5%; Dec.11: 5.0%) and reached 6.0% in Sept.12; and Taking effect of Bacen Resolution 3,533: defined new rules for the accounting method of credit assignments with recourse as of Jan.12, producing an impact on the securitization market and on the income/loss of the banks operating in it In view of this new economic-regulatory scenario, we started a prudential adjustment process in 4Q11, with broad support from the shareholders. In 2012, we continue advancing in the implementation of our Change Agenda After a period of strong growth, the current focus lies on increasing the medium-term return on capital As informed in the latest earnings disclosures, our consolidated results were once again impacted by four main factors all related to Consumer Finance: Delinquency: expenses with credit provisions¹ in Consumer Finance amounted to R$1,167M in (R$1,279M in ), still impacted by the delinquency of auto finance portfolios originated between Jul.10 and Sept.11 Resolution 3,533/Bacen: In view of this regulatory change, it was decided not to perform further credit assignments with recourse, impacting BV Financeira s revenues Reduction of production: reduction of approximately 50% in the volume originated by Consumer Finance in 9M12 compared to the same period of 2011, in order to guarantee the quality and profitability of the new financings; and Gradual rise in the Coverage Ratio: the coverage ratio of Consumer Finance s managed loan portfolio², which includes credit assignments with risk retention, was raised to 98% in Sept.12 (95% in Dec.11) Besides the abovementioned factors, in there was an increase in expenses with provisions for contingencies, reflecting the restructuring process commenced in 4Q11 1. Includes Expenses with credit provisions related to credit assignments with recourse, and Income from the recovery of write-offs to loss; 2. Includes credit assignments with recourse and credit assignments for FIDCs (of which Banco Votorantim owns 100% of the subordinated quotas) 2

4 Executive summary Executive summary (II) Credit provisions presented further reduction, and expenses remained stable Even when faced with these factors, consolidated results exhibited a slight improvement in comparison to the previous quarter (R$-497M in ; R$-536M in ), mainly because of the R$112M reduction in expenses with credit provisions (R$1,286M in ; R$1,398M in ) It is worth emphasizing two additional points related to results: Wholesale Businesses (Corporate & Investment Banking, Middle Market, Asset Management, Private Bank and Treasury) maintained a good performance, with consistent generation of revenues Personnel and administrative expenses amounted to R$615M in, stable in relation to the R$616M recorded in. Personnel expenses decreased R$23M (or 9.4%) in the quarter, already reflecting efficiency gains associated with the integration of corporate areas of Wholesale and Consumer Finance and with the adaptation of the organizational structures to the new origination levels of Consumer Finance In this context of results, we continue to strengthen the quality of Banco Votorantim s credit risk profile: Liquidity: we kept free cash at a conservative level above the historical threshold. In addition, we have a credit facility of approximately R$7B with Banco do Brasil (BB), which was never used Funding: we reduced the maturity mismatch between assets and liabilities to very conservative and historically low levels. Moreover, the greater focus on return on capital (vs. growth) substantially reduced the need for additional funding. This favorable context has allowed us to focus on the reduction of our funding cost Coverage ratio for loans: we maintained the Wholesale coverage ratio at conservative levels (177% in Sept.12) and gradually raised the coverage ratio of Consumer Finance s managed loan portfolio in 2012 (Sept.12: 98%; Dec.11: 95%); and Capital: Basel Ratio ended Sept.12 at 15.2% (15.5% in Jun.12). BB and Votorantim Finanças are committed to keep the capitalization of Banco Votorantim at appropriate levels, as set out in the Shareholders Agreement 3

5 Executive summary Executive summary (III) Banco Votorantim keeps moving forward on its prudential adjustment process, started in 4Q11 To resume growth with profitability, we continue progressing in the implementation of the Change Agenda, which has three main fronts: Production quality: since Sept.11, the enhancement of the credit policies, processes and models, as well as the greater focus on return on capital (vs. growth), have resulted in the improvement of the risk level of recent vintages. The auto financings originated in 2012 present the lowest level of the indicator of 1st installment delinquency in the history of BV Financeira, contributing to keep the delinquency of vehicles at 8.7% stable in relation to Jun.12 Handling of the stock originated between Jul.10 and Sept.11: review and intensification of the credit collection processes, with a more segmented performance towards clients. In addition, we have promoted a gradual increase in the coverage ratio over 2012; and Efficiency and Governance: besides hiring experienced market professionals and adapting the organizational structures to the new production levels of Consumer Finance, we continue working on the refinement of internal controls and on the implementation of operational improvements in Consumer Finance The progress in the Change Agenda creates the conditions for Banco Votorantim to resume growth with profitability over the medium-term. However, as anticipated to the market, short-term results will continue impacted by four factors related to Consumer Finance: Delinquency above the historical average of the auto finance portfolios originated by BV Financeira between Jul.10 and Sept.11, still representing about half of the managed loan portfolio Resolution 3,533 reduction of revenues with credit assignments with recourse until the consolidation of the BV Financeira Originadora model along with BB Adequacy of the origination volumes to levels that ensure the quality of the new vintages; and Gradual increase of the coverage ratio of Consumer Finance loans Summarizing, the strategies and initiatives adopted, whose effects are evident both in maintaining the good performance of Wholesale, and in the generation of good and profitable new businesses in Consumer Finance, will allow us to resume our path of sustainable growth with profitability in the medium-term 4

6 Agenda Banco Votorantim and the implications of the economic-regulatory context Change Agenda developments Recent results Appendix Financial highlights 5

7 Banco Votorantim Overview Banco Votorantim is one of the leading players in Brazil... 3 rd largest privately-held Brazilian bank in total assets and loan portfolio Banco Votorantim is the 3 rd largest privatelyheld Brazilian bank in total assets......and is well-positioned to consolidate itself as one of the largest banks in Brazil Banco do Brasil Itaú Unibanco Bradesco CEF Santander HSBC Votorantim Safra BTG Pactual Citibank Largest Financial Institutions - Assets (R$B)¹ State-owned Foreign 998 National privately-held...and also in terms of loan portfolio... Shareholder 50% total Diversified business portfolio Wholesale Banking Top 5 in credit for large enterprises Consumer Finance Among the leaders in used auto finance 6 th largest player in payroll loans³ ~ 5.6 million customers Wealth Management 8 th largest asset manager by Anbima s managers ranking: R$45.6B in AuM Largest Financial Institutions Loan Portfolio (R$B)¹ Banco do Brasil Itaú Unibanco CEF Bradesco Santander Votorantim² HSBC Safra Banrisul Volkswagen State-owned Foreign 429 National privately-held Strategic partnership with Banco do Brasil, the largest financial institution in Latin America Strong and committed shareholder base Banco do Brasil and Votorantim Group Low fixed-cost business model Extensive third-party distribution network in Consumer Finance (vs. branches) + 1. Excluding BNDES (state-owned development bank); figures as of June/12, except for Banco Votorantim (); 2. Considers BV s own portfolio (excluding securitization); 3. Includes credit assignments with recourse, as of June/12 Source: Banco Votorantim; Bacen; Anbima 6

8 BV Corporate strategy...and has a diversified business portfolio, internally divided into Wholesale and Consumer Finance Expanded¹ loan portfolio R$79.5B R$79.5B Wholesale R$41.7B Cons. Finance² R$37.8B Corporate & IB (CIB) Middle Market Wealth Management Auto Finance Other businesses Pillars Position CIB as a relevant partner, by building agile and long-term relationships, as well as offering integrated financial solutions (IB, derivatives, structured products and distribution), suitable for each client Continue to grow with quality in this segment of mid-sized companies, gaining scale and efficiency Focus on relationships and operational agility Enhance product offering 8 th largest asset manager, with innovative products Private Bank focused on estate planning, offering customized solutions, with an open architecture Continuously expand synergies with BB Among the top players in the market, enhancing partnership with BB Focus on used auto finance (multi-brand dealers) Partner with BB in new auto finance (new car dealers) Increase profitability in individual loans, with focus on INSS payroll loans Continue to grow in credit cards Expand insurance brokerage revenues (e.g. Auto) Shareholders Banco do Brasil + Votorantim Group Banco Votorantim is focused on increasing the return on capital of all business lines in the medium-term 1. Includes guarantees provided and private securities; 2.Consumer Finance s own loan portfolio totaled R$37.8B in, besides R$13.4B in credit assignments (including R$10.5B with recourse and R$2.9B in FIDCs of which Banco Votorantim owns 100% of subordinated shares) Note: Middle Market segment refers to enterprises with annual sales between R$20M and R$400M 7

9 BV Auto finance expansion In the post-2008 crisis period, Banco Votorantim rapidly expanded its auto finance loan portfolio The auto finance managed loan portfolio more than doubled between 2008 and Banco Votorantim Auto finance managed loan portfolio¹ (R$B) expanding its share in BV s consolidated managed loan portfolio to ~60% Banco Votorantim managed loan portfolio¹ (excluding guarantees provided) (R$B) +33% Auto finance (securitization)¹ Auto finance (loan portfolio) (86%) Wholesale and payroll loans² Auto finance (securitization)¹ Auto finance (loan portfolio) 46% 41% 40% 52% 8% 14% 21% 7% 41% 47% 45% 39% Market share³ 12% 21% 1. Includes credit assignments with recourse and credit assignments for FIDCs; excludes guarantees provided; 2. Considers individual loans and credit cards; 3. Estimate based on BV s managed loan portfolio (excluding FIDCs) Source: Banco Votorantim; Bacen; Abel 8

10 Individuals credit market Delinquency Since 2011, economic-regulatory shifts have impacted the banking industry Examples of economic-regulatory shifts Systemic increase in auto finance delinquency levels Taking effect of Bacen s Res. 3,533² impacted the model of credit assignment with recourse Bacen adopts macro-prudential measures Market delinquency¹ (%) Bacen BV starts adjustment process Res. 3,533² comes into effect Historical record Total Individuals Vehicles Balance of BV s credit assignments with recourse (R$B) With Res. 3,533, BV decided not to execute new credit assignments with recourse % 2.2 J 10 S 10 D 10 M 11 J 11 S 11 D 11 M 12 J 12 S 12 D 08 D 09 D 10 D 11 S 12 In Sept/11, Banco Votorantim initiated a process of prudential adjustment with broad support from the shareholders 1. Past due by over 90 days, informed by Bacen; 2. Changed rules for recording credit assignments with recourse, impacting the securitization market and the results of banks that operated in it Source: Banco Votorantim; Bacen 9

11 Diagnosis Change Agenda In Sept/11, Banco Votorantim initiated a process of prudential adjustment, guided by a Change Agenda Change Agenda Strategic initiatives that will further strengthen Banco Votorantim s position as one of Brazil s leading banks Wholesale Banking Intensification of delivery of integrated financial solutions for Credit, Structured products, and Investment banking services Focus on increasing Banco Votorantim s relevance for its customers Consumer Finance Progress in the development of BV Financeira s new asset origination model, enhancing partnership with Banco do Brasil More conservative approach to credit concession, focusing on profitability Intensification of credit collection processes Gradual increase in the Coverage Ratio Corporate Initiatives examples Pursuit of greater efficiency in cost management and rationalization of capital use Redefinition of the organizational structure, in order to operate in a more efficient and integrated way Maintenance of BV s Basel Ratio at adequate levels The adjustment process, has continued in 2012 and will allow Banco Votorantim to resume growth with profitability in the medium-term 10

12 Agenda Banco Votorantim and the implications of the economic-regulatory context Change Agenda developments Recent results Appendix Financial highlights 11

13 Change Agenda Consumer Finance Developments in Consumer Finance s Change Agenda Three main fronts: Production Quality, Handling of the Stock, and Efficiency and Governance Change Agenda Production Quality Handling of the Stock Efficiency and Governance Developments in Consumer Finance s Change Agenda Profitability: Focus on clients with better risk profiles, as well as adequacy of origination volumes Reduction in the commissions paid to correspondent banks Maintenance of the good profitability of recent vintages, despite the drop in market rates Credit: improvement of policies, processes and credit models Refinement of credit models (e.g.: incorporation of BB s internal ratings) Increase in the % of automated credit decisions Operating model: Origination to BV: intensified focus on multi-brand dealers (used vehicles) Origination to BB: progress in the structuring of the model of origination directly to BB ( BV Originadora ) Credit collection: revision of collection processes, acting in a more segmented way towards customers Revision of the negotiation policy (e.g.: greater incentive to the full payment of past due installments) Implementation of a settlement policy based on the restated value of the asset vs. amount of debt Coverage ratio: gradual increase in the balance of provisions over the past due loan portfolio Structure: adaptation of organizational structures to the new origination levels Compensation: revision of the internal compensation model and of incentives to distribution channels Talents: aggregation of 20+ senior professionals in credit, modeling and collection Processes and control: new improvements in internal controls and processes (e.g.: downgrading initial ratings for auto finance and refining manual drag rules) 12

14 Change Agenda Consumer Finance Initiatives resulted in consistent improvement of the risk level of auto finance operations originated since Sept/11 Production Light vehicles 1 Origination by channel (R$B) and first installment delinquency 2 (%) New car dealers (R$B) Multi-brand dealers (R$B) 1st installment delinquency ("Inad 30") Vintages indicating lower quality Inad 30 returned to its historical quality levels since 4Q Multi-brand dealers/ light vehicle prod. Mar/09 Sept/09 Mar/10 Sept/10 Mar/11 Sept/11 90% 64% 77% 83% Quality of origination has been addressed since 4Q11, but vintages originated until Sept/11 should keep impacting results Focus on multi-brand dealers 1. Includes CDC vehicles and vans (excludes leasing); 2. % of each month s production with first installments past due by over 30 days 13

15 Change Agenda Consumer Finance Better quality of origination derives from improvements and greater conservatism towards credit concession Production NPL 90 days by vintage, 4 months after concession Auto finance (%) Auto production average interest rate (%p.y.) Higher than the SFN²: 20.9% in D 09 M 10 J S D 10 M 11 J S D 11 J 12 Auto production tenor and down payment F M 12 A M J Month of concession Sept/11 Dec/11 June/12 Auto finance origination by payment plan Down payment % Average tenor (months) 60 months, no down payment Other plans % 16% 34% 38% 41% 41% 44% 76% 84% 100% 100% 100% 3Q11 4Q11 1Q12¹ 3Q11 4Q11 1Q12 1. From 1Q12 the criteria for calculating the down payment % was revised; 2. National Financial System ( Sistema Financeiro Nacional ) Source: Banco Votorantim; Bacen 14

16 Change Agenda Consumer Finance Progress in the definition of the model of auto finance origination directly to BB BVO Production New operating model for joint action in auto finance current view Responsibilities Multi-brand dealers Non-BB clients New car dealers BB clients Sales force Commercial Web portal for entry of proposals Credit policies and analysis Funding and pricing Operational Initial accounting record Post-sale and credit collection BVO model will join Banco Votorantim s asset origination capacity to Banco do Brasil s broad funding base BVO model (BV Originadora) 15

17 Change Agenda Consumer Finance Vintages of better quality already represent 32% of the loan portfolio, helping stabilize the auto finance delinquency Stock Vintages of better quality already represent 32% of the light vehicle loan porfolio Managed loan portfolio delinquency Light vehicles loan porfolio¹ by vintage (%) Non-performing loans² 90 days (%) After Sept/11 10% 17% 25% 32% 100% 7.8% 8.7% 8.7% Vehicles July/10- Sept/11 67% 62% 56% 53% 12.1% June/12 Non-performing loans² 15 to 90 days (%) 9.4% 8.9% Vehicles Until June/10 23% 20% 19% 15% Dec/11 June/12 June/12 1. Considers own loan portfolio and credit assignments with recourse, excludes credit assignments for FIDCs; 2. Past due by over 90 days, according to Bacen s Res. 2,682 criteria 16

18 Change Agenda Efficiency initiatives start showing results Personnel expenses reduced 9.4% in the QoQ Efficiency Several initiatives were implemented in order to improve operational efficiency...with tangible results already reached, specially regarding personnel expenses Unification of the corporate areas that serve both Wholesale and Consumer Finance businesses E.g.: Finance, Legal, Marketing, HR, etc. Adjustment of staff to the new origination levels in Consumer Finance Personnel Administrative and personnel expenses (R$M) -5.2% / -9.4% Creation of a specific committee (CAAD) for analysis and approval of expenses Revision of expenses with advisory, telephony, media, events, travel and sponsorships Admin %¹ Rationalization of rent expenses, e.g.: Clearance of floors on Rochaverá, Berrini and Paulista locations 3Q11 4Q11 1Q12 Note: expenses above include the ones related to the restructuring process (e.g.: labor provisions) 1. QoQ expansion explained mainly by timely expenses in the period, such as the remittance of the annual debt settlement letter to clients, as well as the intensification of credit collection processes in Consumer Finance 17

19 Agenda Banco Votorantim and the implications of the economic-regulatory context Change Agenda developments Recent results Appendix Financial highlights 18

20 Consolidated results Consolidated results still impacted by credit provisions However, ALL expenses registered a new reduction in the (-8% QoQ) Total revenues (Gross Financial Margin, Fee Income and Other Revenues) R$ million Allowance for loan losses expenses ALL 1,709 1,152 1,365 1,354 1,403 Wholesale Consumer Finance , ,147 1, ,332 1, ,279-8% 1, ,167 / - -9% 3Q11 4Q11 1Q12 3Q11 4Q11 1Q12 Non-interest expenses (Personnel, Administrative, Operating and Other Tax¹) Net income Others Contingencies² Personnel Administrative Q11 4Q11 1Q12 3Q11 4Q11 1Q12 Note: from, income from the recovery of write-offs to loss started being allocated as part of ALL expenses, therefore both ALL and Total revenues previous figures were adjusted 1. Federal, state and local taxes (excludes ISS, PIS and Cofins); 2. Expenses with provisions for civil and labor contingencies 19

21 Consumer Finance results Consumer Finance results were impacted by four factors Auto finance delinquency, higher coverage ratio, Res. 3,533 and lower origination volumes Delinquency - Auto finance¹ Cov. Ratio² - Cons. Finance Bacen Resolution 3,533 Auto finance origination 4.7% Sept % Dec % Mar % June % Sept 12 95% Dec 11 98% Sept 12 Effective since Jan/12 Changed the rules for recording credit assignments with recourse Revenues cannot be recognized by the time of the assignment BV decided not to execute any credit assignment with recourse Expenses with early settlements of credit assignments kept on being recognized (: R$93M; : R$80M) (R$B) 6.2 Focus on quality Q11 4Q11 1Q Allowance for Loan Losses expenses - Consumer Finance Gross results from credit assignments³ Fee income 4 - Cons. Finance (R$M) 820 3Q11 1,148 4Q11 1,332 1Q12 1,279-9% 1,167 Reduced ALL expenses in the because of: Lower impact of vintages originated between July/10 and Sept/11 Improved quality of the vintages originated since Sept/11 Intensified credit collection processes (R$M) 615 3Q Q11 0 Assignments for FIDC and BB Q12 (R$M) 228 3Q Q Q Considers managed loan portfolio (with credit assignments); past due by over 90 days (Bacen Res. 2,682 criteria); 2. Ratio between ALL balance and balance of operations past due by over 90 days; 3. Impact of Gross financial margin before early settlements expenses and credit provisions; 4. Includes banking fees 20

22 Wholesale results Still, Wholesale businesses maintained their good performance in, with consistent income generation Wholesale kept the good standard of its net margin, and registered R$294M in......with consistent fee income generation Wholesale Gross financial margin (R$M) Wholesale Fee income² (R$M) ALL expenses¹ Net margin Q12 1Q12 Wholesale shall keep reporting good results in all its businesses (CIB, Middle Market, AM e PB) in Net of credit recovery; 2. Includes banking fee income 21

23 Wholesale CIB and Middle Market recent developments CIB and Middle Market have increased their focus on profitability, and kept the conservatism in credit provisions Wholesale: expanded¹ loan portfolio reached R$41.7B in Corporate & IB (CIB) recent developments Middle Market Corporate (CIB) Wholesale expanded¹ loan portfolio (R$B) Sept.12/ Sept.11 3% 8% 1% More disciplined capital allocation (focus on profitability) Assessment of operations via Business Committee (weekly) Specific business plans for each client Improved relevance to customers, through strengthening of the product platform. 9M12 highlights: Derivatives (hedge): Top 10 in CETIP s ranking Investment Bank: 50 Fixed Income ; 2 Equities operations, besides the announcement of 5 M& A operations Project Finance: R$2.3B in concluded operations One-stop-shop Project Structuring factory Financing and advisory throughout the project cycle Middle Market recent developments Focus on profitability (vs. growth) Sept/11 Coverage ratio² 190% 177% Cautious loan portfolio expansion Delinquency³ levels below market average (3.3% in ) Scale and efficiency gains Focus on exploring opportunities related to infrastructure investments and the growth of capital markets 1. Includes guarantees provided and private securities; 2. Ratio between ALL balance and balance of operations past due by over 90 days (Bacen Resolution 2,682 criteria); 3. Past due by over 90 days (Bacen s Res. 2,682 criteria) 22

24 Wholesale Wealth Management developments VWM&S reached R$45.6B in assets under management Wealth Management (VWM&S) expands 18% in 12 months and VAM is now the 8 th largest Asset¹ VWM&S assets under management²(r$b) Asset Management developments Enhanced synergies with BB: assets from funds structured in partnership reach R$3.7B³ % Highlighted in major rankings Star Ranking by Valor Investe, Guide of Personal Investments by Exame magazine and Excellent Funds Edition of the Investidor Institucional magazine Commitment to a consistent performance Sept/11 Anbima¹ ranking 13 th 9 th 8 th Private Bank developments 12% growth in assets under management (AuM) in the last 12 months ISO 9001:2008 Certificate for the scope of Relationship, Wealth Management and Advisory regarding Brazilian clients, by Bureau Veritas Focus on estate planning via customized solutions, with an open architecture concept VWM&S aims at being one of the best in structuring and managing high value-added products 1 Votorantim Asset Management s(vam) position in Anbima s managers ranking ; 2. Includes Treasury, Brokerage and offshore products; 3. Total assets by the end of Source: Banco Votorantim; Anbima 23

25 Banco Votorantim credit risk quality In, Banco Votorantim kept on strengthening its credit risk quality Strengthening of Banco Votorantim s credit risk quality examples Liquidity Free cash continue at conservative levels above historic levels Additionally, BV has a stand-by credit facility of ~R$7B from Banco do Brasil, which has never been tapped Funding After successfully extending the average funding tenor, with reduction of the maturity mismatch between assets and liabilities, moderation in the loan portfolio s growth rate substantially reduced the need for additional funding Favorable context allows greater focus on the reduction of funding costs Coverage Ratio¹ Wholesale: Coverage Ratio maintained at higher levels (: 177%) Consumer Finance: gradual Coverage Ratio increase in 2012 (: 98%; Dec/11: 95%) Capital Basel Ratio of 15.2% in (15.5% in June/12), with a 9.9% Tier I ratio Maintenance of Banco Votorantim s capital structure at adequate levels, as set out in the Shareholders Agreement 1. Ratio between ALL balance and balance of operations past due by over 90 days (Bacen s Res. 2,682 criteria) 24

26 Agenda Banco Votorantim and the implications of the economic-regulatory context Change Agenda developments Recent results Appendix Financial highlights 25

27 Financial highlights Financial highlights Total revenues (Gross Financial Margin, Fee Income and Other Operating Income) Allowance for loan losses expenses R$ million 1,709 1,152 1,365 1,354 1,403 Wholesale Consumer Finance , ,147 1, ,332 1, ,279-8% 1, ,167 / - -9% 3Q11 4Q11 1Q12 3Q11 4Q11 1Q12 Non-interest expenses (Personnel, Administrative, Operating and Other Tax¹) Net income Others Contingencies² Personnel Administrative Q11 4Q11 1Q12 3Q11 4Q11 1Q12 Note: from, the income from the recovery of write-offs to loss started to be allocated as part of ALL Expenses, adjusting both ALL and Total Revenues previous figures 1. Federal, state and local taxes (excludes ISS, PIS and Cofins); 2. Expenses with provisions for civil and labor contingencies 26

28 Financial highlights Financial highlights Net Interest Margin NIM (% p.y.) Efficiency Ratio¹ (%) last 12 months ER impacted by the reduction in Income from credit assignments Q11 4Q11 1Q12 Sept/11 Dec/11 June/12 1.Ratio between (a) the sum of Personnel and Other administrative expenses and (b) the sum of Gross income from financial intermediation before Allowance for Loan Losses (ALL), Fee income, Other operating income/expenses, and Fiscal hedge adjustment 27

29 Financial highlights Financial highlights R$ billion Total assets Assets under management Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 Loan portfolio Expanded¹ managed² loan portfolio Securitization Expanded loan portfolio¹ Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 1. Includes guarantees provided and private securities, 2. Includes credit assignments with recourse and credit assignments for FIDCs (of which Banco Votorantim owns 100% of the subordinated quotas) 28

30 Financial highlights Expanded managed loan portfolio by segment R$ billion Expanded loan portfolio (Includes guarantees provided and private securities) Expanded managed loan portfolio (Expanded loan portfolio, plus credit assignments and FIDCs) Others¹ % Sept12 /June12 2.0% % Sept12 /June12-2.8% Auto finance % ,1% Middle market % % Corporate % % Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 Credit assignments with recourse (R$B) Credit assignments for FIDCs² (R$B) Payroll loans, CDC, credit cards and individual loans; 2. Refers to off-balance resources 29

31 Financial highlights Credit indicators Credit indicators Non-performing loans - 90 days¹ (%) Non-performing loans - 15 to 90 days¹ (%) Total Wholesale 7.1% Cons. Finance 8.0% 8.1% 7.6% 8.1% 8.7% 8.1% 7.8% 4.4% 3.6% 1.3% 5.5% 4.5% 1.7% 5.8% 2.0% 6.3% 2.1% 6.5% 2.5% 5.9% 1.1% 6.2% 0.8% 6.7% 1.2% 6.0% 0.7% 5.8% 0.9% Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 Allowance for loan losses balance Coverage Ratio¹ (%) ALL balance (R$M) ALL balance/managed loan portfolio¹ 5.9% 6.9% 6.9% 103.9% 103.9% 102.0% 108.1% 106.3% 3.7% 4.6% 2,992 3,675 4,536 5,091 4,914 Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 Note: the methodology for calculation of the Coverage ratio was revised from 1. Considers credit assignments with recourse and credit assignments for FIDCs ; past due loans according to Bacen s Res. 2,682 criteria 30

32 Financial highlights Funding sources Funding sources Funding evolution (R$B) Loans and others 1 Onlendings Subordinated debt % Sept12 /June12-6.1% -7.3% 2.8% Issuance of securities² % Repos³ % Deposits % Sept/11 Dec/11 June/12 Financing Bills 4 (R$B) Additionally, Banco Votorantim has a stand-by credit facility of ~R$7B from BB, which has never been tapped 1. Includes Option Box and NCE repo; 2. Includes Eurobonds, Debentures, Financing bills and LCA; 3. Private securities (excludes government securities); 4.Includes subordinates financing bills Note: International funding is 100% swapped for BRL; the above graph does not consider sources from credit assignments 31

33 Financial highlights Capital and liquidity Basel Ratio and Shareholders Equity Basel Ratio Shareholders Equity (R$M) R$2B capital increase in June/12 Tier II 12.7% 4.2% 14.1% 4.7% 13.0% 4.4% 15.5% 5.3% 15.2% 5.3% 8,718 8,041 7,566 9,304 8,829 Tier I 8.5% 9.5% 8.7% 10.2% 9.9% Sept/11 Dec/11 June/12 Sept/11 Dec/11 June/12 32

34 Ratings Banco Votorantim s main ratings RATING AGENCIES International National Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Fitch Ratings Local Currency Foreign Currency Nacional BBB- F3 BBB- F3 AA+(bra) F1+(bra) Moody s Local Currency Deposits Foreign Currency Deposits Nacional Baa2 P-2 Baa2 P-2 Aaa.Br BR-1 Standard & Poor's Local Currency Foreign Currency Nacional BBB- A-3 BBB- A-3 braaa bra-1 Banco Votorantim is an Investment Grade bank by Fitch, Moody s and S&P 33

35 Managerial x Accounting results Conciliation between Managerial and Accounting Results INCOME STATEMENT SUMMARY (R$ Million) Accounting Hedge¹ ALL Credit Assignm ents² Managerial Incom e from Financial Interm ediation 3,214 (1) (46) 3,167 Loans 2,232 - (46) 2,186 Derivative Financial Instruments (264) (1) - (265) Expenses from Financial Interm ediation (2,046) - - (2,046) Gross Financial Margin 1,168 (1) (46) 1,120 Allow ance for Loan Losses (1,332) - 46 (1,286) Net Incom e from Financial Interm ediation (164) (1) - (166) Other Operating Incom e/expenses (626) (2) - (628) Tax Expenses (127) 0 - (126) Equity in income of associated companies and subsidiaries Other Operating Income/Expenses (158) (3) - (161) Operating Incom e (790) (4) - (794) Non-operating Incom e (43) - - (43) Incom e before Taxation and Profit Sharing (834) (4) - (838) Provision for Income Tax and Social Contribution Net Income (Loss) (497) - - (497) 1. Foreign exhange variation of overseas investments, accounted in Other Operating Income (Expenses), as w ell as fiscal and tax effects from the foreign investments hedge strategy, accounted in Tax Espenses (PIS/Cofins) and IT/SC, w ere relocated to Income from Derivative Financial Instruments; 2. Expenses w ith credit provisions related to credit assignments w ith recourse, and Income from the recovery of w rite-offs to loss, both accounted in Income from Loans and relocated to Allow ance for Loan Losses. 34