Earnings Summary 1Q13

Transcription

1 1Q13 Earnings Summary BB s Adjusted Net Income reaches R$ 2.7 billion in the 1Q13 Banco do Brasil recorded adjusted net income, excluding one-off items, of R$ 2.7 billion in the 1Q13. This performance corresponds to adjusted ROAE of 17.4%. Net income reached R$ 2.6 billion in the quarter, equivalent to ROAE of 16.5%. The quarter earnings were driven mainly by expansion of businesses, improvement of the relationship with clients and cost control. The indicator that measures the delinquency of operations overdue by more than 90 days decreased and remained lower than that observed in the Banking Industry (BI). Net income, excluding Previ, reached R$ 2.4 billion in the 1Q13, with increase of 7.8% over 1Q12. In the 1Q13, adjusted net income, excluding Previ, was of R$ 2.6 billion, up 4.2% over 1Q Guidance The following table presents the 2013 Guidance. It is important to note that the forecast is prepared for the year and the quarterly monitoring can be adversely affected by seasonality or specific events of the period being considered. The balance sheet items were calculated from the amounts recorded in Mar/13, against observed in Mar/12. The income statement figures were calculated by dividing the amount accumulated in 2013 over the same period of the previous year. Table Guidance Items 2013 Performance - % 2013 Guidance - % Adjusted Return on Equity¹ Net Interest Income Commercial Funding² Domestic Loan Portfolio - Broad Concept³ Individuals Companies Agribusiness Allowance for Loan Losses ⁴ 3.0 3,0-3,4 Fee Income Administrative Expenses Adjusted ROAE estimated for 2013 uses estimated shareholders equity, according to current legislation on December 31, Includes total deposits, Agribusiness Letters of Credit - LCA, Mortgage Bonds - LCI and Repurchase Agreements Operations with Private Securities. 3 - Domestic Loan Portfolio, in Broad Concept, includes private securities and guarantees. 4 - Expenses with allowance for loan losses of the last twelve months/average classified loan portfolio of the same period. To calculate Adjusted ROAE, were not considered in the shareholders equity of BB effects of restatement of assets and actuarial liabilities arising from the resolution CVM/695. Thus, adjusted ROAE contained in Guidance for 2013, is calculated from adjusted shareholder s equity, as indicated in the following table: 1 - Banco do Brasil Earnings Summary 1Q13

2 Table 2. Adjusted Shareholders Equity R$ million Dec/12 Mar/13 Shareholders' Equity 61,499 62,121 Benefit Plan (4,571) (4,571) Corporate Prof it Sharing Adjusted Shareholders' Equity 65,496 66,112 Adjusted Shareholders' Equity - average - 65,804 In the 1Q13, the following indicators presented deviations in relation the 2013 Guidance: a) Adjusted ROAE: return higher than expected due to lower allowance for loan losses expenses, as a result of an improvement in the loan portfolio risk and administrative expenses; b) Net Interest Income: performance impacted mainly by the reduction of TMS - Average Selic Rate in the period (1Q13/1Q12) and growth of the loan portfolio in lines of lower spread and risk; c) Commercial Funding: performance arising from liquidity management strategy of the institution; d) Companies Loan Portfolio: growth in credit demand by medium/large companies, especially in the 4Q12; e) Agribusiness Loan Portfolio: high demand, mainly from medium/large farmers and agricultural cooperatives, as well as the contracting of the 2012/2013 harvest; f) Fee income: reflecting the strategy alignment of prices to priority services in the market; g) Administrative Expenses: reflects the strategy of improving operating efficiency, mainly through control of administrative expenses and the streamlining of business processes. The assumptions used in the preparation of the 2013 Guidance can be found at the end of Earnings Summary 4Q12. Return to Shareholders Remuneration to shareholders reaches R$ 1.03 billion in the 1Q13 BB s earnings per share reached R$ 0.91 in the 1Q13. Banco do Brasil maintained a 40% payout ratio for its shareholders with R$ 1.03 billion remuneration, comprised by R$ 279 million in dividends and R$ 754 million of interest on own capital. Figure 1. Earnings per Share, Dividends and Interest on Own Capital Q12 4Q12 1Q13 Dividends (R$ billion) Interest on Own Capital (R$ billion) Earnings per Share (R$) 2 - Banco do Brasil Earnings Summary 1Q13

3 1Q13 Income Statement with Reallocations Earnings driven by business growth The following table, extracted from the income statement with reallocations, presents the main highlights of the period. The NII, difference between the Financial Intermediation Income and the Financial Intermediation Expenses, closed 1Q13 at R$ 11.0 billion, up 1.7% from the same period of the previous year. The fee income details can be found in Section 6.1. of MD&A. The growth of administrative expenses of 6.6% in the comparison of 1Q13/1Q12 was influenced by the constant search for greater operational efficiency. The breakdown of statement of income with reallocations can be found in Section of the MD&A report. Table 3. Income Statement with Reallocations - Main Lines Quarterly Flow Chg. % R$ million 1Q12 4Q12 1Q13 On 1Q12 On 4Q12 Financial Intermediation Income 25,934 24,868 24,073 (7.2) (3.2) Loan Operations + Leasing 17,343 17,427 17,231 (0.6) (1.1) Securities 7,004 6,255 5,937 (15.2) (5.1) Financial Intermediation Expenses (15,100) (12,835) (13,053) (13.6) 1.7 Net Interest Income 10,834 12,033 11, (8.4) Allow ance for Loan Losses (3,576) (3,636) (3,278) (8.3) (9.8) Net Financial Margin 7,258 8,398 7, (7.8) Fee income 5,051 5,484 5, (1.8) Income f/ Insur., Pension P. and premium bonds Contribution Margin 11,811 13,422 12, (4.7) Administrative Expenses (6,626) (7,499) (7,061) 6.6 (5.8) Personnel Expenses (3,694) (4,211) (4,069) 10.1 (3.4) Other Administrative Expenses (2,932) (3,288) (2,992) 2.0 (9.0) Commercial Income 5,123 5,855 5, (3.6) Legal Claims (250) (23) (163) (34.7) Labor Law suits (238) (196) (252) Other Operating Income (516) (590) (990) Income Before Taxes 4,139 5,042 4, (15.7) Income and Social Contribution Taxes (967) (1,324) (1,138) 17.7 (14.1) Corporate Profit Sharing (433) (500) (390) (9.9) (22.0) Adjusted Net Income 2,704 3,180 2,685 (0.7) (15.6) The result of one-off items was negative in R$ 128 million in the 1Q13, net of tax and statutory profit sharing. Items considered as one-off in this year were: (i) expenses with provision originating from lawsuits relating to economic plans; (ii) Provision for Agreement Committee; and (iii) Lawsuits Reconciliation. 3 - Banco do Brasil Earnings Summary 1Q13

4 Table 4. One-off Items R$ million 1Q12 4Q12 1Q13 Adjusted Net Income (+) One-Off Items of the Period (201) 787 (128) Economic Plans (362) (167) (348) Additional Allow ance for Loan Losses Reversion Sale of Real Estate Provision for Agreement Committee - - (186) Law suits Reconciliation Tax Eff. and Stat. Profit Sharing on One-Off Items 160 (625) 102 Net Income The following table presents the main earnings indicators. Table 5. Main Earnings Indicators Indicators - % 1Q12 4Q12 1Q13 Net Interest Margin (NIM)¹ Expenses w ith Allow ance for Loan Losses / Portfolio Adjusted Cost-Income Ratio Adjusted Cost-Income Ratio - 12 Months Adjusted Return on Equity ¹ Effective Tax Rate Annualized Indicators. 2 Allowance for loan losses expenses of the last 12 month period divided by the average classified loan portfolio in the same period. Net Interest Income The breakdown of the net interest income is presented in the following table. In this disclosure, the revenues from loan operations and the funding expenses do not consider the exchange rate fluctuations. Financial expenses result mainly from time deposits and savings. As of 4Q12, expenses of funding held with institutional investors comprising senior debt, subordinated debt and Hybrid Capital Instrument and abroad were detached in specific items. The treasury comprises: (i) interest income; (ii) profitable compulsory deposits income; (iii) tax hedge, derivatives and other financial instruments that compensate the exchange variation effect in the result. Since 1Q13, provisioned resources in BB that were mandatorily driven to loans linked to official government programs, such as Finame, BNDES and FCO, that were previously presented in the line Other were relocated to Funding Expenses and / or Institutional Funding items, depending on the source of funding. In order to maintain comparability, the information for the 2012 year was reprocessed. Additional information about net interest income can be founded in chapter 5 of the MD&A. Table 6. NII Breakdown¹ Quarterly Flow Chg. % R$ million 1Q12 4Q12 1Q13 On 1Q12 On 4Q12 Net Interest Income 10,833 12,033 11, (8.4) Loan Operations income 16,338 16,323 16, Funding Expenses (8,167) (6,934) (7,093) (13.2) 2.3 Financial Expense for Institutional Funding (1,260) (1,258) (1,275) Recovery of Write-offs Loans 750 1, (7.4) (35.5) Treasury Income 3,046 2,638 2,139 (29.8) (18.9) Other (23.1) (48.2) 1 - Historical data reviewed since 1Q Banco do Brasil Earnings Summary 1Q13

5 1Q13 Spread by Portfolio The table below presents the managerial spread by transactions. Spread is the result of the managerial financial margin divided by the respective average balances. For managerial financial margin calculation, financial revenues classified by portfolio are calculated first. Subsequently, the opportunity costs defined for each of the portfolio lines are deducted. Considering the individuals and companies loan portfolios, with free resources, the opportunity cost is the average Selic rate. For the agricultural portfolio and other directed resources, the opportunity cost is calculated according to the funding source and the need of reserve requirements to this funding. Net Interest Margin, in turn, is the application of the concept of spread to the banking industry, which is calculated by dividing net interest income by average earning assets. "Risk-Adjusted NIM" is calculated based on ratio between net financial margin and earnings assets, that is, it considers expenses with allowance for loan losses. The following table presents the performance of the BB' spreads. The following table presents the performance of BB s spreads. Table 7. Annualized NIM % 1Q12 4Q12 1Q13 Loan Operations Individuals Companies Agribusiness Net Interest Margin (NIM) Risk Adjusted NIM Assets and Main Balance Sheet Items Total assets surpass R$ 1.18 trillion The total assets of Banco do Brasil reached R$ 1.18 trillion in Mar/13, which represented a growth of 16.8% over observed in Mar/12. The main lines of assets are loan operations and leasing, securities and short-term interbank investments that accounted for 76.3% of BB's total assets in Mar/13. Regarding liabilities, highlight to commercial funding, representing 43.8% of total liabilities, as well as the increase in the share of Agribusiness Letters of Credit. The following table presents the main items of the Balance Sheet. 5 - Banco do Brasil Earnings Summary 1Q13

6 Table 8. Main Balance Sheet Items Chg. % R$ million Mar/12 Dec/12 Mar/13 On Mar/12 On Dec/12 Total Assets 1,009,410 1,149,308 1,179, Loan Portfolio - Broad Concept¹ 471, , , Domestic Loan Portfolio - Broad Concept¹ 435, , , Securities 155, , , (1.0) Short-Term Interbank Operations 183, , , Commercial Funding² 463, , , Total Deposits 446, , , (0.8) Demand Deposits 60,659 74,760 68, (8.1) Savings Deposits 101, , , Interbank Deposits 14,272 16,569 17, Time Deposits 270, , ,047 (4.1) (1.5) Judicial Deposits 80,470 86,346 89, Agribusiness Letters of Credit + Mortgage Bonds 9,297 34,075 39, Repurchase Agreements Oper. w ith Private Secu 7,663 9,554 9, (4.0) Money Market Borrow ing 199, , , Shareholder s Equity 61,186 61,499 62, Includes private securities and guarantees provided. 2 Includes Total Deposits, Agribusiness Letters of Credit - LCA, Mortgage Bonds - LCI and repurchase agreements operations with private securities. Solid structure of funding sources ensures business expansion Banco do Brasil s structure of funding presents greater diversification, with reduction of the share of deposits and increase of Agribusiness Letters of Credit and Other Commercial Papers, as shown in the table below. It is also worth emphasizing Foreign Borrowing. Regarding the uses, the loan portfolio remains as the main destiny of funding, representing 88.0% of the sources total as of Mar/13, as the following table shows: Table 9. Sources and Uses Balance Chg. % R$ million Mar/12 Share % Dec/12 Share % Mar/13 Share % On Mar/12 On Dec/12 Sources 501, , , Commercial Funding² 463, , , Total Deposits 446, , , (0.8) Agribusiness Letters of Credit + Mortgage Bonds 9, , , Repurchase Agreem. Oper. w ith Priv. Securities 7, , , (4.0) Domestic Onlending 51, , , Financial and Development Funds 4, , , Subordinated Debt 25, , , Others Commercial Papers¹ 9, , , (3.1) Domestic Hybrid Debt Capital Instruments - - 8, , Foreign Borrow ing² 40, , , Compulsory Deposits (94,146) (18.8) (80,098) (13.1) (77,273) (12.3) (17.9) (3.5) Uses 501, , , Available Funds 66, , , Net Loan Portfolio (a) + (b) - (c) 434, , , Loan Portfolio (a) 430, , , Private Securities (b) 23, , , Allow ance for Loan Losses (c) (19,573) (3.9) (21,210) (3.5) (21,414) (3.4) Indicators - % Net Loan Portfolio / Total Deposits Net Loan Portfolio / Funding Net Loan Portfolio / Total Deposits Includes Letters of Credit and Debentures (Explanatory Note 19). 2 - Includes Foreign Borrowings, Foreign Securities Obligations, Subordinated Debt Abroad and Hybrid Capital Instruments. The balance of foreign borrowings reached US$ 47.5 billion in Mar/13, an amount 27.1% higher than that observed in Mar/ Banco do Brasil Earnings Summary 1Q13

7 1Q13 Figure 2. Foreign Borrowing (US$ billion) Repo Individuals 7.7 Companies Bond Issues Interbanking Mar/12 Dec/12 Mar/13 BIS Ratio BIS Ratio higher than the minimum required The BIS ratio of Banco do Brasil closed Mar/13 at 16.29%, higher than the minimum of 11% required by BCB, indicating a surplus in Referential Equity (RE) of R$ 36.5 billion. The improvement of 1.46 basis points observed between 4Q12 and 1Q13 can be explained by the growth of the RE level 2 (subordinated debt and IHCD) and the change in the index weighting promoted by Central Bank Circular No. 3644, of March 4, 2013, mainly in relation to exposures related to payroll loans and credit to large companies. Figure 3. BIS Ratio Mar/12 Dec/12 Mar/13 Tier I Tier II 7 - Banco do Brasil Earnings Summary 1Q13

8 Loan portfolio Loan Portfolio grows with quality The loan portfolio in the broad concept reached R$ billion in Mar/13, with expansion of 25.6% in twelve months and 2.1% in relation to that observed in Dec/12, as shown in the table below. Banco do Brasil share in the domestic credit market was 20.4% in Mar/13, indicating an increase in relation to the share observed in Mar/12 (19.1%) and Dec/12 (20.3%). Table 10. Loan Portfolio Classified and Broad Concepts Balance Chg. % R$ million Mar/12 Share % Dec/12 Share % Mar/13 Share % On Mar/12On Dec/12 Loan Portfolio (a) 430, , , Brazil 397, , , Individuals 131, , , Payroll Loan 51, , , Salary Loans 16, , , Consumer Finance 5, , , Auto Loans 30, , , Mortgage 6, , , Credit Card 13, , , (2.2) Overdraft Accounts 3, , , (10.1) 12.7 Other 4, , , Companies 173, , , SME 70, , , Government 3, , , Middle and Large 100, , , Agribusiness 91, , , Individuals 59, , , Companies 32, , , Abroad 33, , , (5.1) Private Securities and Guarantees (b) 40,977 55,127 55, Loan Portfolio - Broad concept (a + b) 471, , , Brazil 435, , , Individuals 131, , , Companies 211, , , Agribusiness 92, , , Abroad 36, , , (3.1) Individuals Loan Portfolio backed by lower-risk lines The individual loan portfolio in the broad concept closed March at R$ billion, an increase of 18.7% in twelve months and of 2.8% over Dec/12, accounting for 26.4% of the Bank s loan portfolio in the broad concept. Considering only BB organic loan portfolio, i.e., excluding the acquired portfolios and 50% of the operations of Banco Votorantim, the individual portfolio grew 26.3% in twelve months and 3.4% over the previous quarter. This performance was favored by the development of the BOMPRATODOS strategy. In the auto loans portfolio, organic portfolio reached R$ 11.7 billion in Mar/13, with growth of 153.2% over Mar/12 and 6.1% against Dec/12, while the profile of these new operations is within the strict credit analysis adopted by BB. Payroll loans totaled R$ 60.6 billion in Mar/13, with expansion of 16.9% over the same period of 2012 and 3.4% against the previous quarter. BB s market share in this group was 30.4% in Mar/13. In Mar/13, the balance of the mortgage loan portfolio (Individuals and Corporate) reached R$ 14.3 billion, an increase of 66.3% in twelve months and 11.6% over Dec/12. In the Individual portfolio, the balance of the mortgage portfolio totaled R$ 11.4 billion in Mar/13 (up 66.4% on Mar/12 and 11.4% 8 - Banco do Brasil Earnings Summary 1Q13

9 1Q13 over Dec/12). The market share of the mortgage to individuals reached 4.1% in Mar/13, compared to 3.3% in Mar/12. The total volume contracted in the mortgage loans was R$ 3.6 billion in 1Q13, with an increase of 167.9% over 1Q12, R$ 1.9 billion to individuals and R$ 1.7 billion with corporate. Loans to Companies growth driven by company s credit demand The loans to Companies in the broad concept reached R$ billion, with growth of 32.7% e 2.4% in relation with Mar/12 and Dec/12, respectively. This portfolio represents 47.3% of the total loan portfolio. In Mar/13, credit to investments reached R$ 46.2 billion for companies and R$ 45.5 billion for agribusiness, with increase in twelve months of 20.9% and 33.6%, respectively. Disbursement of credit for investment reached R$ 10.3 billion in 1Q13 (growth of 3.7% in relation to 1Q12), with emphasis to resources onlending from BNDES, Pronaf, Investimento Agropecuário, FCO and PROGER. In BNDES onlending, since 2008, BB is the leading financial agent operating in the global onlending, with market share of 25.1% in 1Q13. The credit operations for small and medium-sized enterprises (SME) reached R$ 89.3 billion in Mar/13 (up 27.1% in twelve months). This performance was especially favored by the BOMPRATODOS program. Moreover, BB has been using the Fundo de Garantia de Operações FGO (Operations Guarantee Fund) and the Fundo de Aval às Micro e Pequenas Empresas Fampe (Endorsement for Micro and Small Enterprises Fund) to allow greater access to the credit for SME and to reduce the operating cost for the final borrower. The working capital lines for SME totaled R$ 60.1 billion in Mar/13, an increase of 24.8% in twelve months. The investment credit lines to SME closed Mar/13 at R$ 27.0 billion, a growth of 33.9% in twelve months. BB s Foreign Loan Portfolio in the broad concept reached R$ 45.4 billion in Mar/13, a balance 25.2% higher than that the one verified in Mar/12. The balance of ACC/ACE (advance against exchange and advance against draft presentation) operations reached R$ 11.2 billion in Mar/13, ensuring BB a market share of 29.3% in the period. Agribusiness Loan Portfolio in the broad concept surpasses R$ 110 billion Banco do Brasil is the absolute leader in agribusiness loans, with a 63.3% market share. The agribusiness portfolio in the broad concept, including agricultural loan and agro-industrial operations, represented 18.6% of the total loan portfolio in Mar/13, reaching R$ billion, an expansion of 19.5% in twelve months. The individual agribusiness loan portfolio reached R$ 76.7 billion in Mar/13, growing 29.0% against observed in Mar/12. The companies agribusiness loan portfolio reached R$ 33.0 billion (up 6.1%). The use of insurance to support the 2012/2013 harvest working capital for input purchase reached 51.1% of the operations on Mar/13. The delinquency of the agribusiness portfolio remains low levels, with the NPL+90 days ratio of 0.65%, against 0.62% in Mar/12. Delinquency Ratios fall and remain below Banking Industry The ratio that measures non-performing loans for more than 90 days ended Mar/13 at 2.00% (1.74%, excluding the operations of BV), lower than that recorded by Brazilian Banking Industry, which reached 3.6% in the same period. BB also presents a better credit structure than the Industry. Operations classified at risk levels AA-C closed Mar/13 at 94.3% of the total portfolio, against 92.3% observed in the Industry. 9 - Banco do Brasil Earnings Summary 1Q13

10 Figure 4. Delinquency Ratios Percentage on the Classified Loan Portfolio Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 BI Average Risk BB Average Risk Total Provision The following table presents quality indexes of loan portfolio. Table 11. Classified Loan Portfolio Quality Indicators % Mar/12 Dec/12 Mar/13 NPL + 15 days/total Portfolio (%) NPL days/total Portfolio (%) NPL + 60 days/total Portfolio (%) NPL days/total Portfolio (%) NPL + 90 days/total Portfolio (%) AA - C Loans / Total Portfolio (%) Allow ance/loan Portfolio Individuals Allow ance/loan Portfolio Companies Allow ance/loan Portfolio Allow ance/npl + 60 days Allow ance/npl + 90 days Average Risk BB Average Risk Banking Industry NPL + 90 days/total Portfolio BI Allowance for loan losses decreased 9.8% in relation to 4Q12, variation consistent with the reduction in the average risk of the portfolio in the period. Table 12. Allowance for Loan Losses Expenses over Classified Loan Portfolio Chg. % R$ million 1Q12 4Q12 1Q13 On 1Q12 On 4Q12 (A) Allow ance for Loan Losses - Quarterly (3,576) (3,636) (3,278) (8.3) (9.8) (B) Allow ance for Loan Losses - 12 Months (12,773) (14,651) (14,354) 12.4 (2.0) (C) Classified Loan Portfolio 430, , , (D) Average Classified Portfolio 3 Months 424, , , (E) Average Classified Portfolio 12 Months 398, , , Expenses over Portfolio (A/D) - % Expenses over Portfolio (B/E) - % The balance of provisions ended the quarter at R$ 21.4 billion, which provides coverage of 199.7% of non-performing loans overdue for more than 90 days, higher percentage than that verified in Banking Industry that reached 146.2% in Mar/ Banco do Brasil Earnings Summary 1Q13

11 1Q13 Fee Income Business growth diversifies Fee Income The expansion of the credit supply, the Bank s strong performance in the retail segment, focused on customer service and the retention and expansion of customer relationships, and the BOMPRATODOS program have been favorable for the expansion of business volume, contributing to the diversification of fee revenues. These revenues increased 6.7% in twelve months and decreased 1.8% in the 1Q13/4Q12 comparison. Table 13. Fee Income Quarterly Flow Chg. % R$ million 1Q12 4Q12 1Q13 On 1Q12 On 4Q12 Fee Income 5,051 5,484 5, (1.8) Credit / Debit Cards 1,075 1,279 1, (0.8) Account Fees 1,101 1,073 1,012 (8.1) (5.6) Asset Management Loans Operations (18.1) Collections (1.9) Insurance, P. Plans and Premium Bonds Billings (2.2) Interbank (4.9) Capital Market Income Other Credit Card revenues reached R$ 26.8 billion in 1Q13, an increase of 22.8% over the same period of 2012, driven by more intensive use of cards as a payment method, the increase in the average expenditure and the use of innovative solutions such as access to credit. Highlights to the revenues from business cards that grew 54.5% over the same period of Banco do Brasil, through BB Gestão de Recursos - BB DTVM, is the leader in assets under management in Brazil since At the end of Mar/13, BB reached the total of R$ billion in assets under management and a market share of 20.8%. BB s market share would reach 21.4% if we consider 50.0% of the balance of assets under management by BV, with Votorantim Asset Management VAM (R$ 28.0 billion on 1Q13). In April, 2013 Banco do Brasil held a Public Offering of its insurance, pension plan and premium bonds company (BB Seguridade). After the closing of the offering, the new stake of Banco do Brasil at BB Seguridade will be defined. However, at the end of 1Q13, BB's share was 100%. Additional information about fee income, cards, insurance, asset management and performance in the capital market can be founded in chapter 7 of the MD&A. Administrative Expenses The administrative expenses grew 6.6% in the comparison of 1Q13/1Q12. The Personnel Expenses increased 10.1% over 1Q12, mainly driven by (i) signing of the Collective Bargaining Agreement 2012/2013 (adjustment of 8.5% of benefits, 7.5% of salaries and allowances administrative personnel) and (ii) growth in the structure of commissioned officers. This growth was partially offset by lower growth in Other Administrative Expenses with change of 2% in the period Banco do Brasil Earnings Summary 1Q13

12 Table 14. Adjusted Administrative Expenses Quarterly Flow Chg. % R$ million 1Q12 4Q12 1Q13 On 1Q12 On 4Q12 Administrative Expenses (6,626) (7,499) (7,061) 6.6 (5.8) Personnel Expenses (3,694) (4,211) (4,069) 10.1 (3.4) Other Administrative Expenses (2,932) (3,288) (2,992) 2.0 (9.0) Cost to Income Ratio Relevant variations in other operating income and expenses are presented in item 6.3 of the 1Q13 of MD&A report. In the twelve month comparison, the performance of fee income and control of administrative expenses led to an improvement in the ratio that measures the coverage of the administrative expenses. Coverage ratio reduction in relation to the 4Q12 behavior was driven by the increase in personnel expenses and contract adjustments that are typical of that quarter. Cost to Income ratio, a ratio between administrative expenses and operating revenues, in twelve months, closed 1Q13 at 43.6%. This performance is explained by the reduction in the amount recorded referring to the recognition of actuarial gains and losses of Previ Benefits Plan I and by the factors that impacted administrative expenses as mentioned in the Administrative Expenses item. Figure 5. Cost to Income Ratio Adjusted - % Q12 4Q12 1Q13 Cost to Income Ratio (12 months accumulated) - % Cost to Income Ratio - % 12 - Banco do Brasil Earnings Summary 1Q13