Banco do Brasil MD&A 1Q11 1

Transcription

1 MD&A 1Q11

2 This report contains statements concerning expectations, planned synergies, growth estimates, forecasts and future strategies related to Banco do Brasil and its subsidiaries, associated companies and affiliates. Although these statements reflect management's current beliefs, they involve imprecisions and risks that are difficult to predict, and actual results and events may differ from those anticipated and discussed herein. These expectations depend materially on market conditions, Brazil s economic performance and developments in the banking industry and international markets. Banco do Brasil does not assume any responsibility to update the estimates contained in this report. This report contains tables and charts that present financial figures rounded to the nearest million of Brazilian real. The rounding method used complies with Regulation 886/66 issued by Fundação IBGE: if the last digit is equal to or greater than 5, the last remaining digit is increased by one unit; and if the last digit is less than 5, it is discarded and the digit before it is maintained. Variations, in both nominal and percentage terms, were calculated using numbers in units. Banco do Brasil MD&A 1Q11 1

3 Summary Summary... 2 Index of Tables... 4 Index of Figures... 7 Presentation... 8 Highlights... 9 Summary of Results Income Shareholders Return Net Interest Income and Spread Assets Loan Portfolio Basel Fee Income Administrative Expenses Efficiency Insurance Guidance Key Statistics Summarized Financial Statements Summarized Balance Sheet Summarized Income Statement Income Statement with Reallocations Details of Reallocations Breakdown Breakdown of Income with Reallocations Credit Loan Portfolio Individual Loan Portfolio Business Loan Portfolio Agribusiness Loan Portfolio Credit Risk Total Portfolio Retail Portfolio SMEs Portfolio Commercial Portfolio Agribusiness Portfolio Foreign Trade Portfolio Foreign Loan Portfolio and Others Concentration Analysis of Assets Funding Sources and Uses...70 Asset Management Other Components of the Balance Sheet Deferred Taxes Actuarial Asset Intangible Assets Financial Results Analysis of Investments Analysis of Funding Analysis of Volume and Spread Spread Non-Financial Business Fee Income Banco do Brasil MD&A 1Q11 2

4 8.2 Cards Insurance Capital Market Administrative Expenses Human Resources Operating Structure Other Income Information Productivity Ratios Risk Management Risk Management Credit Risk Market Risks Liquidity Risk Operating Risk Capital Structure Strategic Investments Information Banco Votorantim Internationalization Financial Statements Summarized Balance Sheet Summarized Corporate Law Income Statement Income Statement with Reallocations Banco do Brasil MD&A 1Q11 3

5 Index of Tables Table 1. Statement of Income with Reallocations Main Lines...11 Table 2. Previ Recognized Actuarial in Half-Yearly Reassessment...11 Table 3. One-Off Items...12 Table 4. Main Indicators of Income/Expenses...12 Table 5. NII by Line of Business...13 Table 6. Annualized NIM...14 Table 7. Main Equity Items...15 Table 8. Extended Loan Portfolio¹...15 Table 9. Loan Portfolio...16 Table 10. Loan Portfolio Quality Indicators...17 Table 11. Expenses with Allowance for Loan Losses over Loan Portfolio...17 Table 12. Fee Income and Result from Insurance Operations...19 Table 13. Administrative Expenses...20 Table 14. Consolidated Insurance Ratio...21 Table 15. Guidance Table 16. Main Macroeconomic Indicators (1)...23 Table 17. Ownership Structure - %...24 Table 18. Distribution of Dividends/Interest on Own Capital...24 Table 19. Market Ratios...24 Table 20. Participation of BB s Shares in Brazilian Stock Market Indexes - %...24 Table 21. Key Statistics...25 Table 22. Ratings...26 Table 23. Compulsory/Reserve Requirement...26 Table 24. Summarized Balance Sheet - Assets...27 Table 25. Summarized Balance Sheet - Liabilities...28 Table 26. Summarized Corporate Law Income Statement...29 Table 27. Income Statement with Reallocations...30 Table 28. Statement of Recurring and Extraordinary Reallocations...32 Table 29. Tax Impacts and Statutory Profit Sharing on Extraordinary Items...34 Table 30. Breakdown Assets and Liabilities...35 Table 31. Breakdown of Income with Reallocations...36 Table 32. Loan Portfolio...37 Table 33. Credit in the Brazilian Banking Industry...37 Table 34. Individual Loan Portfolio...38 Table 35. Individual Loan Portfolio Market Share...38 Table 36. Payroll Loans Share...38 Table 37. Average Rates and Terms...38 Table 38. Portfolio Acquired...39 Table 39. Business Loan Portfolio...40 Table 40. Private Securities - Companies...40 Table 41. ACC/ACE Average Volume per Contract...40 Table 42. SME Credit Products...41 Table 43. Exports...43 Table 44. Brazil's Share in World Agribusiness...44 Table 45. Agribusiness Loan Portfolio by Region...44 Table 46. Agribusiness Loan Portfolio by Purpose...45 Table 47. Agribusiness Loan Portfolio by Type of Loans...46 Table 48. Agribusiness Loan Portfolio by Product...46 Table 49. Resources Contracted in the 10/11 Crop by Size of Customer...46 Table 50. Agribusiness Portfolio by Size...47 Table 51. Equalizable Funds of the Agribusiness Portfolio...49 Table 52. Agricultural Insurance and Proagro...49 Table /2011 Crop Plan...50 Table 54. Defrayal Contracting Profile...50 Table 55. Expenses with Allowance for Loan Losses over Portfolio...52 Banco do Brasil MD&A 1Q11 4

6 Table 56. Delinquency Ratio...53 Table 57. Average Portfolio Risk...53 Table 58. Total Loan Portfolio by Risk Level...54 Table 59. Retail Loan Portfolio by Risk Level...54 Table 60. Changes in the Allowance for Loan Losses - Retail...55 Table 61. Micro and Small Company Portfolio by Risk Level...58 Table 62. Changes in the Allowance for Loan Losses - SMEs...58 Table 63. Commercial Loan Portfolio by Risk Level...59 Table 64. Changes in the Allowance for Loan Losses - Commercial...59 Table 65. Agribusiness Loan Portfolio by Risk Level...60 Table 66. Changes in the Allowance - Agribusiness...60 Table 67. Extended and Unextended Agribusiness Operations...61 Table 68. Rates of the Agribusiness Portfolio...62 Table 69. Foreign Trade Loan Portfolio by Risk Level...63 Table 70. Changes in the Allowance for Loan Losses Foreign Trade...63 Table 71. Foreign Trade Loan Portfolio by Risk Level...64 Table 72. Banco Votorantim s Portfolio and Other...64 Table 73. Concentration in the Loan Portfolio of the 100th Largest Borrowers...65 Table 74. Concentration in the Loan Portfolio of the 100th Largest Borrowers - % of the RE...65 Table 75. Loan Portfolio Concentration by Macro-Sector...66 Table 76. Earning Assets¹ vs. Interest Bearing Liabilities²...67 Table 77. Breakdown of Assets...67 Table 78. Securities Portfolio by Category...68 Table 79. Securities Portfolio by Maturities Market Value...68 Table 80. Liquidity Balance...68 Table 81. Deposits and Market Funding...69 Table 82. Foreign Borrowing...70 Table 83. Overseas Issues...70 Table 84. Sources and Uses...71 Table 85. Cost of Funding vs. Selic Rate...71 Table 86. Segregation of Deposits by deadline Chargeability...71 Table 87. Fee Income from Asset Management...71 Table 88. Investment Funds and Managed Portfolios by Customer...72 Table 89. Investment Funds and Managed Portfolios by Type...72 Table 90. Breakdown of Tax Credit...73 Table 91. Opening of Deferred Tax Liability...73 Table 92. Effects of Half-Yearly Accounting...74 Table 93. Accumulated Amortization...75 Table 94. Intangible...75 Table 95. Estimate of Amortization of Intangible Assets...75 Table 96. Av. Bal. of the Bal. Sheet Accounts and Info. on Interest Rates Earning Assets (Quarterly) 76 Table 97. Spread by Portfolio...76 Table 98. Securities Income...77 Table 99. Av. Bal. of the Bal. Sheet and Info. on Interest Rates Interest Bearing Liab. (Quarterly)...78 Table 100. Int. Increase/Decrease (Inc./Exp.) due to Chg. in Quart. Vol. and Rates (Quarterly)...79 Table 101. Analysis of Volume (Earning Assets) and Quarterly Spread 4Q10 and 1Q Table 102. Margin, Net of Interest and Profit Margin...80 Table 103. Bank Fee Income...81 Table 104. Customer Base and Checking Accounts...81 Table 105. Cards...82 Table 106. Total Card Revenues...82 Table 107. Insurance, Pension Plan and Saving Bonds Companies...83 Table 108. Income Statement by Line of Business...84 Table 109. Operating Highlights of the Insurance Group...85 Table 110. Consolidated Insurance Ratio...88 Table 111. Consolidated Information on the FIPs/FMIEEs - Position 1Q Table 112. Personnel Expenses...90 Table 113. Other Administrative Expenses...91 Table 114. Distribution Network Total...91 Banco do Brasil MD&A 1Q11 5

7 Table 115. Network of Branches by Region...92 Table 116. Distribution Network Abroad...92 Table 117. Other Operating Income...94 Table 118. Other Operating Expenses...94 Table 119. Coverage Ratios Without One-Off Items...95 Table 120. Efficiency Ratios without One-Off Items...95 Table 121. Other productivity Ratios...96 Table 122. Balance in foreign currencies...98 Table 123. Repricing Profile of Interest Rates Table 124. Monitoring of Operational Loss Table 125. BIS Ratio Economic-Financial Conglomerate* Table 126. Main Accounts of the PEPR Quota (Economic-Financial Conglomerate) Table 127. RSE for Market Risk by Risk Factor Table 128. Allocated Capital for Operational Risk by Line of Business Table 129. Interest in the Capital of Companies Table 130. Banco Votorantim Summarized Corporate Law Income Statement Table 131. Banco Votorantim Income Statement with Reallocations Table 132. Banco Votorantim Reallocations (Service Rendering) Table 133. Banco Votorantim Reallocations (Mark-to-Market - MKT) Table 134. Banco Votorantim Reallocations (Currency Variation) Table 135. Banco Votorantim Main Indicators of Income/Expenses Table 136. Banco Votorantim Highlights of the Result Equity Table 137. Banco Votorantim Vehicle Portfolio Table 138. Banco Votorantim Operating and Structural Highlights Table 139. Banco Votorantim Margin, Net of Interest and Profit Margin - Quarterly Table 140. Banco Votorantim Loan Portfolio by Level of Risk Table 141. Banco Votorantim Delinquency Ratios Table 142. Main Financial Information of EuroBank Table 143. Banco Patagonia - Key Profit Figures Table 144. Banco Patagonia Equity Highlights Table 145. Banco Patagonia Operating and Structural Highlights Table 146. Banco Patagonia Indicators on Returns, Capital, and Credit Table 147. Balance Sheet Assets Quarterly Table 148. Balance Sheet Assets Annual Table 149. Balance Sheet Liabilities Quarterly Table 150. Balance Sheet Liabilities Annual Table 151. Summarized Corporate Law Income Statement - Quarterly Table 152. Summarized Corporate Law Income Statement - Annual Table 153. Income Statement with Reallocations Quarterly Table 154. Income Statement with Reallocations Annual Banco do Brasil MD&A 1Q11 6

8 Index of Figures Figure 1. Income (R$ million) e ROAE (%)...10 Figure 2. Net Income per Share...12 Figure 3. Dividends and Interest on Own Capital...13 Figure 4. BIS Ratio...18 Figure 5. Efficiency Ratios Without One-Off Items - %...20 Figure 6. Trade Balance (FOB)...43 Figure 7. Production vs. Planted Area...44 Figure 8. Agribusiness Loan Portfolio by Type of Client...47 Figure 9. Agribusiness Loan Portfolio by Funding Sources...47 Figure 10. Equalization Revenues and Weighting Factors...48 Figure 11. Percentage of Operation Contracted with Risk Mitigators...49 Figure 12. Ratio Price/ Cost of Soybean and Maize...51 Figure 13. Breakdown of Allowances...52 Figure 14. Quarterly Vintage...56 Figure 15. Annual Vintage...56 Figure 16. Annual Vintage Vehicle Financing Portfolio excluded Votorantim portfolio...57 Figure 17. Market Share of BB Funding...69 Figure 18. Asset Management...72 Figure 19. Securities Portfolio by Index (Multiple Bank)...77 Figure 20. Analysis of Spread...80 Figure 21. Combined Ratio...88 Figure 22. Charges in Workforce...90 Figure 23. Automated Teller Machines...93 Figure 24. Transactions by Customer Service Channel - %...93 Figure 25. Composition of Banco do Brasil's Assets and Liabilities in the Country Figure 26. Net Position of BB Consolidated...99 Figure 27. Liquidity Reserve in Local Currency Figure 28. Liquidity Reserve Foreign Currency Figure 29. DRL Indicator Banco do Brasil MD&A 1Q11 7

9 Presentation The Performance Analysis report presents the economic/financial situation of Banco do Brasil (BB). Geared toward market analysts, stockholders and investors, with quarterly periodicity, this report addresses topics such as the economic environment, BB's shares performance, corporate governance practices, and risk management. There are separate analyses of the capital structure and the results. The reader will also find tables with historical series, from up to 8 periods, of the Summarized Balance Sheet, the Summarized Corporate Law Income Statement, the Income Statement with Reallocations, the Analytic Spread besides information about profitability, productivity, quality of the loan portfolio, capital structure, capital market, and structural data. Based on paragraph 55 of CVM Deliberation 600/2009, Banco do Brasil has decided to adopt, as from the closing of the fiscal year ended 2009 and for the coming fiscal years, on a consistent recurring basis, a faster recognition of the actuarial gains and losses related to Benefit Plan I (Plan I of Previ). The result of PREVI was regarded as recurring and the revenues arising from the surplus will be recognized on a quarterly basis. Revaluations of assets and liabilities started to be recognized semi-annually, reducing volatility on the income of BB. In order to allow comparability of the result for each quarter with the previous quarters, the revenues of PREVI are segregated in an specific caption in the Statement of Income with reallocations. Exceptionally in 2Q10, the amounts regarding semi-annual revaluation were distributed between the first and second quarters of that year for comparative purposes; nevertheless, after market inquiries, it was decided that the amounts would be part of recurring income for the quarter of revaluation. As of 1Q11, aiming to facilitate the reading of the BB figures, the Performance Analysis Report was reformulated, without impairment quality of information disclosed. After inquiries to market analysts and users of the report, new chapters and contents were added, and the layout of information among chapter was review, aiming at concentrating the whole analysis of a subject under the same chapter, making the report more concise and objective. The Summary of the Results was also reformulated in order to address the items that contributed the most to BB's result. A summary with the main highlights of the result for the period was also added. Socio-environmental information will be available on the Internet, "Corporate Governance" link within three weeks after the disclosure of the Result, aligning them to the initiative of disclosing the Annual Report on electronic media. BB, in step with the Triple Bottom Line concept and believing that this data collaborates to a full view of corporate performance, will maintain its pioneer initiative among Brazilian banks of disclosing this data on a quarterly basis. At the end of the report we present the Financial Statements and Explanatory Notes for the quarter under analysis. ON-LINE ACCESS The Performance Analysis report can also be read through Banco do Brasil s Investor Relations website. Further information about the Bank is also available there, such as: Corporate Governance, news, frequently asked questions, a download center which contains versions of this report for the Adobe Reader software. General information, balance sheet analysis, and complete financial statements; the historical series in Excel: presentations to the market; Social and Environment Responsibility Report Social Balance Sheet: Teleconferences on Results and Other are also available on the website. Banco do Brasil S.A. Investor Relations bb.com.br bb.com.br/ri Banco do Brasil MD&A 1Q11 8

10 Highlights 1. The recurring net income increased 42,2% in twelve months and attained R$ 2,923 million in the 1 st quarter of This result corresponds to an annualized return on average shareholders' equity of 24,8%. The net income per share attained R$ 1.03 in the quarter, an amount 12.0% higher than the recorded in the first quarter of In the quarter, R$ million were paid out to the shareholders, R$ 449 million as dividends, and R$ 724 million as interest on own capital. For the year 2011, the percentage of net profits paid (payout,) will remain in 40% in Total assets reached R$ 867 billion at the end of first quarter of 2011, 19.6% higher than the one recorded in March 2010, and 6.8% higher than the previous quarter. This result corresponds to an annualized return on average assets of 1.4%, as opposed to 1.3% in March Loan portfolio, including provided guarantees and private securities, attained R$ 398 billion, an increase of 21.2% in twelve months. In March 2011, loan portfolio market share reached 19.5%, allowing BB to hold its leadership in the Brazilian Banking Industry (BI). 5. Loan portfolio grows with delinquency ratios under control. In March, the ratio that measures the percentage of operations past due over 90 days reached 2.1%, lower than that observed in March 2010 and the one recorded in the Brazilian Banking Industry, of 3.2%. 6. Total funding (deposits and money market borrowings) reached R$ 561 billion, growth of 8.1% in relation to the forth quarter of Assets managed by Banco do Brasil amounted to R$ 394 billion, representing a market share of 22.0%. Considering 50% of the volume of assets managed by Banco Votorantim (BV), corresponding to BB's interest in that bank, funds attained R$ 408 billion and market share reached 22.7%. 8. The Net Interest Income (NII) reached R$ 10,476 million in the first quarter of 2011, which represents an increase of 12.0% in relation to the the first quarter of 2010 and of 3.0% over the prior quarter. The revenues from loan operations boosted NII, which grew 19.5% in 12 months and 3.7% in the quarter. 9. Administrative expenses are under control and recorded good performance in the quarter, with a balance of R$ 5.7 billion. This result represents a 6.2% decline over the fourth quarter of 2010 and growth of 7.4% in 12 months, below the guidance proposed for Non-financial business increases Bank's income. Fee Income increased 10.9% in 12 months, while results from insurance, pension plan and saving bonds operations recorded growth of 16.3% on the same comparison basis. Together, these two lines reached R$ 4.6 billion in the first quarter of The efficiency ratio, the ratio between operating income and administrative expenses, improved significantly and went up from 44.3% in the first quarter of 2010 to 40.9% in the current quarter. 12. Corroborating the good results recorded by BB and its solid capital structure, Fitch Ratings upgraded the Bank's ratings on : The following evaluations of BB debts were reviewed and had their ratings improved: long-term - foreign currency BBB (previously BBB-); short-term - foreign currency F2 (previously F3); long-term - local currency BBB (previously BBB-), and, shortterm - local currency F2 (previously F3). Banco do Brasil MD&A 1Q11 9

11 Summary of Results Income BB's income attains R$ 2.9 billion in the quarter Banco do Brasil recorded net income of R$ 2,932 million in the first quarter of 2011, up 24.7% over the amount verified in the same period of This result corresponds to an annualized return on average shareholders' equity of 24.9%. The only one-off item for the quarter was the amount regarding Economic Plans, that added R$ 10 million to the result, net of taxes. Disregarding this effect, recurring income reached R$ million in the quarter, representing growth of 42.2% over the first quarter of The Return on Equity (ROE) was 24.8%. The decrease shown as compared to the previous quarter (fourth quarter of 2010) is the result of revaluation of assets and liabilities of Plan 1 of Previ, occurring semiannually ,704 4,002 2,056 2,351 2,923 2,932 1Q10 4Q10 1Q11 Recurring Net Income Net Income ROAE - % Recurring ROAE - % Figure 1. Income (R$ million) e ROAE (%) Recurring income is driven by the improvement in credit risk and control over expenses The growth verified in recurring income for the quarter in relation to the same period of previous year is chiefly due to the 21.2% increase in credit (loan portfolio, private securities, and provided guarantees), combined with the 13.1% drop in the allowance for loan losses expenses, reflecting the improvement observed in the loan portfolio risk. The control of administrative expenses, combined with synergy gains from the acquisition of BNC, allowed a growth of 7.4% in the comparison of the first quarter of 2011 to the first quarter of 2010, below the guidance proposed for BB's strategy to focus on non-banking business can already by perceived in the income figures for this quarter. Fee income grew 10.9% in the comparison with the first quarter of The result from insurance, pension and saving bonds also increased 16.3% on the same comparison basis. The ratio between commercial income (Net Interest Income, fee income and income from insurance operations) and average customer base generated R$ , growth of 8.7% over the first quarter of 2011, confirming the adoption of connect right strategies regarding the transformation of retail segment at Banco do Brasil. Banco do Brasil MD&A 1Q11 10

12 The following table, extracted from the statement of income with reallocations, presents the main highlights of the period. The breakdown of reallocations is in Section of the Management and Discussion Analysis report (MD&A). Table 1. Statement of Income with Reallocations Main Lines Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Financial Inte rm e diation Incom e 18,562 21,736 22, Loan operations + Leasing 12,721 14,526 15, Securities 5,644 6,137 6, (0.1) Financial Inte rm e diation Expe ns e s (9,205) (11,568) (12,355) Ne t Intere s t Incom e 9,357 10,169 10, Allow ance for Loan Losses (3,026) (2,139) (2,629) (13.1) 23.0 Ne t Financial M argin 6,331 8,030 7, (2.3) Fee income 3,703 4,306 4, (4.6) Income f/ Insur., Pension Plans and Sav. Bonds Contribution M argin 9,636 11,858 11, (3.1) Administrative expenses (5,300) (6,068) (5,692) 7.4 (6.2) Personnel Expenses (2,851) (3,270) (3,145) 10.3 (3.8) Other Administrative Expenses (2,449) (2,798) (2,547) 4.0 (9.0) Com m e rcial Incom e 4,310 5,772 5, (0.3) Legal Claims (238) 35 (98) (58.8) - Labor Law suits (212) 92 (79) (62.6) - OtherOperating Income (448) 289 (760) Incom e Be fore Taxe s 3,415 6,186 4, (21.8) Income and Social Contribution Taxes (1,053) (1,923) (1,474) 40.0 (23.4) Corporate Profit Sharing (307) (559) (442) 44.1 (20.9) Re curring Ne t Incom e 2,056 3,704 2, (21.1) Previ In the first quarter of 2011, R$ 624 million were recorded regarding recognition of actuarial gains of Previ's defined benefit plan (plan 1). This amount is determined by the expected restatement of plan's assets and liabilities and is calculated based on the use of the discount rate of actuarial assets on assets and liabilities (proportional to the BB's share of 50%), net of current service cost. The periodic revaluation of assets and liabilities of Previ occurs at the end of each semester, generating additional recording of R$ 1,369 million in the fourth quarter of Further explanations can be obtained in the Note regarding Benefits for employees and in chapter 6 of the MD&A. Table 2. Previ Recognized Actuarial in Half-Yearly Reassessment R$ million 1H10 2H10 Fair Value of the Plan's A ssets (a) 130, ,566 Present V alue of A ctuarial Liabilities (b) 83,005 90,805 Surplus / (Deficit) BB (c) = 50% of [(a) + (b)] 23,579 25,380 Corridor BB (d)* = 50% of max of 10% of A ssets or Liabilities (the highest) 6,508 7,078 Surplus / (Deficit) BB after Corridor 17,071 18,302 Recognized Actuarial Gains/(Losses) before the half -yearly Reassessment 14,120 8,526 Unrecognized A ctuarial Gains/(Losses) 2,950 9,777 Average Remaining Work Period (half-yearly) Amortization of Actuarial Gains/(Losses) 389 1,369 Net A ctuarial (Liabilities)/ Assets 14,510 9,895 Banco do Brasil MD&A 1Q11 11

13 One-Off Items The following table shows the one-off items, that added R$ 10 million to BB's net income in this quarter. These impacts are already net of taxes and statutory profit sharing. Table 3. One-Off Items R$ million 1Q10 4Q10 1Q11 Re curring Ne t Incom e 2,056 3,704 2,923 (+) Extraordinary Effe cts of the Period Sale of Interest in V ISA Internacional Economic Plans (85) (231) 17 Tax Efficiency Reversal of Labor Liabilities Tax Impacts and PLR on Extraordinary Items (313) 70 (8) PREV I Actuarial Assets - Adjustments (88) - - Ne t Incom e 2,351 4,002 2,932 Table 4. Main Indicators of Income/Expenses Indicators - % 1Q10 4Q10 1Q11 Net Interest Margin (NIM)¹ Expenses w ith A llow ance for Loan Losses over Portfolio² Eff iciency Ratio³ Recurring Return on Equity¹ Eff ective Rate of Tax (1) Annualized indicators. (2) Accumulated Allowance for Loan Losses expenses for the 12-month period divided by the average loan portfolio in the same period. (3) The extraordinary effects of the period were segregated in the calculation. Shareholders Return Net income per share of R$ 1.03 in the first quarter of 2011 In this quarter, the net income per share attained R$ 1.03, an amount 12.0% higher than that recorded in the same period of Q10 4Q10 1Q11 Figure 2. Net Income per Share Banco do Brasil MD&A 1Q11 12

14 40% net income distributed to the shareholders Banco do Brasil maintained the policy of paying out 40% of its net income to its shareholders (payout). In the quarter, BB allocated R$ 724 million as interest on own capital and R$ 449 million as dividends. 1, , Q10 4Q10 1Q11 Dividends (R$ million) Interest on Ow n Capital (R$ million) Figure 3. Dividends and Interest on Own Capital Net Interest Income and Spread The Net Interest Income (NII) reached R$ 10,476 million in the first quarter of 2011, which represents an increase of 12.0% in 12 months and of 3.0% in the quarter. It is expected that, throughout 2011, the gradual incorporation of the effects of credit product repricing and the growth of earning assets influence the NII positively, in line with the guidance forecasted interval. The table below presents the breakdown of Net Interest Income. Special emphasis is placed on the contribution of the loan portfolio in its main business lines and the amounts corresponding to revenues with recovery of loans written off as loss and relating to remunerated compulsory deposits are segregated. The item Other Income, comprised mainly of income from treasury, resulting from transactions with securities, derivatives and foreign exchange, completes the formation of the Financial Margin. Table 5. NII by Line of Business Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Ne t Inte re s t Incom e 9,357 10,169 10, Loan Ope rations 6,924 6,934 7, Individuals 3,926 3,964 4, Businesses 2,052 1,902 2, A gribusiness 946 1, (6.9) Othe r 2,432 3,235 3, Remunerated Compulsory 274 1,276 1, Recovery of Write-of fs (1.0) Other 1,528 1, (46.0) (24.7) Regarding compulsory deposits, changes made by the Central Bank of Brazil (Bacen) in 2Q10 and fourth quarter of 2010 explain the performance observed. These changes had two major impacts on the financial statements of BB. On one hand there was reduction of resources available for more profitable Banco do Brasil MD&A 1Q11 13

15 investments as result of the rise in rates. On the other hand there was a change in the form of payment, which implied migration of resources from the securities portfolio to compulsory deposits. The Net Interest Margin (NIM) of loan operations was 8.8% in the first quarter of 2011, an increase of 10 basis points over the previous quarter and a decrease of 110 basis points over the first quarter of In twelve months, the behavior of the spread is mainly associated with changes in the mix of the portfolios, with an increase in the share of lower risk operations, and, therefore, a lower spread; in the business portfolio, the transactions with medium and large companies are those that most significantly increased. In the quarter, the spread recovery was due to operations with businesses, which returned to the level observed up to the third quarter of On the other hand, performance of the agribusiness line results from the growth of the portfolio focusing agroindustrial credit that presents lower spreads. Please note that the new loan operations are contracted at higher rates, reflecting the macroprudential measures adopted by Central Bank. However, the impact of such repricing does not occur immediately. The perception that the fluctuation of the spread in a 12-month comparison results from changes in the mix of the portfolios, with greater statistical significance of operations of lower risk, is corroborated by the "Risk-Adjusted NIM ", indicator, determined with a basis on the ratio between the net interest margin and earning assets. Besides the net interest income, the risk-adjusted spread also takes into consideration expenses with allowance for possible loan losses. The indicator ended the first quarter of 2011 at 4.6%, 20 base points higher than that recorded in the first quarter of Table 6. Annualized NIM % 1Q10 4Q10 1Q11 Loan Ope rations Individuals Businesses A gribusiness Othe r Ne t Inte re s t M argin (NIM ) Ris k Adjus te d NIM Assets BB's assets attain R$ 867 billion Banco do Brasil attained R$ 866,636 million in total assets, an increase of 19.6% compared to March 2010 and 6.8% in the quarter. In the quarter, growth was influenced by the performance of short-term interbank investments. Banco do Brasil MD&A 1Q11 14

16 Table 7. Main Equity Items Chg. % R$ million M ar/10 De c/10 M ar/11 On M ar/10 On De c/10 Total A ssets 724, , , Loan Portf olio¹ 328, , , Securities 119, , , Short-term Interbank Operations 152, , ,458 (4.0) 36.1 Deposits 342, , , Demand Deposits 54,973 63,503 59, (6.2) Savings Deposits 78,719 89,288 90, Interbank Deposits 10,749 18,998 12, (36.5) Time Deposits 197, , , Money Market Borrow ing 157, , , Shareholder s Equity 37,646 50,441 52, (1) Includes provided guarantees and private securities. Loan Portfolio Loan portfolio surpasses R$ 397 billion The loan portfolio that includes provided guarantees and private securities in the portfolio attained R$ 397,516 million, growth of 2.4% in the quarter and 21.2% in the year. Banco do Brasil s share in the domestic loan portfolio was 19.5% in March 2011, maintaining the leadership in the Brazilian Banking Industry. Table 8. Extended Loan Portfolio¹ Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Brazil 309, , , Individuals 95, , , Business 148, , , A gribusiness 65, , , Foreign 18, , , Total¹ 328, , , (1) Includes provided guarantees and private securities Consumer credit leads the expansion of the portfolio Loans to individual clients continued to grow, influenced by vehicle financing and Consumer Loan backed by that grew 36.0% and 23.6%, respectively, in 12 months. In line with the Bank strategy of increasing portfolio interest with mortgage, a growth of 16.1% was observed in the quarter, attaining R$ 3,427 million. We noted amounts disbursed of R$ 1,140 million, a volume 252% higher than the one recorded in the same period of When the balance of mortgage for businesses is added (R$ 734 million), the real estate portfolio of BB reaches R$ 4,161 million, 22% higher than that verified in the fourth quarter of 2010 and 99% higher in the 12-month comparison. In this quarter, part of the demand for credit by companies was complied with via subscription of private fixed income securities. Banco do Brasil recorded growth of R$ 3,767 million in private securities, a fact that influenced business portfolio's performance. In analyzing the loan portfolio, in amplified concept that Banco do Brasil MD&A 1Q11 15

17 includes provided guarantees and private securities, there was a growth of 1.7% in the quarter for the business segment. Moreover, there was a robust growth in agroindustrial credit for companies involved in the agribusiness chain. The agribusiness loan portfolio grew 3.4% in the quarter and 19.3% in 12 months, as a result of the agroindustrial credit. Table 9. Loan Portfolio Balan ce C h g. % R$ million M ar /10 Share % De c/10 Share % M ar /11 Share %On M ar /10On De c/10 L o an Po r tfo lio (a) 305, , , Br az il 288, , , In d ivid u als 95, , , Pay roll Loan 38, , , Cons umer Loan Bac ked by Direc t Depos 11, , , A uto Loans 21, , , Mortgage 1, , , Credit Card 8, , , (5.8) Ov erdraf t A c c ounts 2, , , Other 10, , , (3.8) (1.0) Bus ine s s e s 128, , , (0.8) SME 45, , , (1.0) Middle and Large 82, , , (0.7) A g r ib u s in e s s 64, , , Indiv iduals 47, , , Bus ines s es 17, , , A b r o ad 17, , , Bo n d s Se cu r itie s (b ) 22,542 29,858 32, A m p lifie d L o an Po r tfo lio (a + b ) 328, , , Indiv iduals 95, , , Bus ines s es 148, , , A gribus ines s 65, , , A broad 18, , , Quality of the portfolio results in lower expenses with allowance for loan losses The average loan portfolio risk decreased 10 base points in the quarter, corroborating the improvement in the quality of BB's loan portfolio and continues above the Banking Industry indicator, that recorded average risk of 5.5%. Loan operations classified as AA to C risk represented 93.8% at the end of March 2011, as opposed to 93.7% in December 2010 and 91.9% in March In relation to the indicator that measures operations overdue for more than 90 days, BB's result is below the indicator observed in the Brazilian Banking Industry in March 2010, 2.1% at BB as opposed to 3.2% in the BI. Banco do Brasil MD&A 1Q11 16

18 Table 10. Loan Portfolio Quality Indicators % M ar/10 De c/10 M ar/11 Past due loans + 15 days/total Portfolio (%) Past due loans + 60 days/total Portfolio (%) Past due loans + 90 days/total Portfolio (%) AA - C Loans / Total Portfolio (%) Allow ance/loan Portf olio Allow ance/past Due Loans + 60 days Allow ance/past Due Loans + 90 days Average Risk BB Average Risk Banking Industry Transactions overdue + 90 days/total Portfolio BI Expenses with allowance for loan losses showed a decrease of 13.1% in 12 months, in line with the improvement in the quality of the loan portfolio. In the quarter, the increase in such expenses is mainly due to the following factors: Result of the mobilization to recover agribusiness operations written-off as loss, that can be verified by the increase in operations rated at level H (provision of 100%) in a normal situation, as defined by CMN Resolution 2682/99. Larger volume of reversal of provisions related to loan operations assigned by Banco Votorantim in the fourth quarter of 2010, which led to a decrease in expenses with provisions in that quarter. The index that measures the ratio between expenses with allowance for loan losses accumulated in twelve months and the average loan portfolio of the same period ended the first quarter of 2011 in 3.0%, improvement of 30 base points compared to the immediately prior quarter. Table 11. Expenses with Allowance for Loan Losses over Loan Portfolio R$ million 1Q10 4Q10 1Q11 (A) A llow ance f or Loan Losses - Quarterly (3,026) (2,139) (2,629) (B) Allow ance for Loan Losses - 12 Months (12,164) (10,675) (10,278) (C) Loan Portfolio 305, , ,659 (E) A verage Portfolio 3 Months 304, , ,964 (E) A verage Portfolio 12 Months 269, , ,575 Expenses over Portfolio (A /D) - % Expenses over Portfolio (B/E) - % Notwithstanding the improvement in the quality of the portfolio, Banco do Brasil continues to be cautious in relation to the balance of credit risk provisions and the percentage of coverage of the portfolio. The balance of allowance for loan losses ended the quarter at R$ 17,016 million, which provides coverage of 221.8% of operations overdue for more than 90 days. Basel BIS ratio strengthened by the increase in capital Banco do Brasil capital ratio (K) ended March 2011 at 14.1%, the same level observed in the fourth quarter of 2010 and growing 40 base points in relation to that recorded in March The BIS Ratio Banco do Brasil MD&A 1Q11 17

19 presented indicates an excess of Referential Shareholders Equity of R$ 15.1 billion, which enables an expansion of up to R$ billion in credit assets, considering a weighting of 100%. The evolution of the ratio during the year is explained by the capital increase made by BB in June Under that transaction, BB raised R$ 7 billion through a public offering. In addition to strengthening the Bank's Tier I capital, the offering expands the limit for BB to reinforce its Tier 2 capital basis Mar/10 Dec/10 Mar/11 Tier II Tier I Figure 4. BIS Ratio Fee Income Fee Income and Result from Insurance Operations Fee income totaled R$ 4,108 million in the first quarter of 2011, 10.9% higher than that verified in the same period of 2010, and lower than 4.6% in the quarter. Quarterly performance is chiefly due to the year-end seasonal effect, in which the demand for banking services increases significantly. The highlights for the period are revenues related to business with cards that recorded growth of 23.1% in 12 months. Operations with agribusiness cards led to this result. With a 6.3% growth in the quarter and 16.0% over the first quarter of 2010, investment fund management fees reached R$ 622 million. It is emphasized that at the end of March 2011, BB reached R$ billion in Assets Management, with a market share of 22.0%. Considering the 50% share regarding the partnership with Banco Votorantim (BV), market share would reach 22.7%. The result of BB's strategy of increasing participation of its result with insurance operations can be observed in Income from insurance operations in the table below. The corporate restructuring of this segment initiated in 2010 influenced performance for the quarter, growth of 4.4%, and of 16.3% in 12 months. Banco do Brasil MD&A 1Q11 18

20 Table 12. Fee Income and Result from Insurance Operations Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Fe e Incom e 3,703 4,306 4, (4.6) Account Fees 875 1, (0.6) (16.0) Credit / Debit Cards (1.8) Investment Fund Management Fees Loan Fees (9.8) Collections (4.1) Insurance, Pension Plans and Savings Bonds Billings Interbank (0.0) Capital Market Fees (11.3) (16.4) Other (11.8) 0.2 Ins urance, Pe ns ion Plans and Savings Bonds In Administrative Expenses Control of expenditures influences the good behavior of administrative expenses Administrative expenses, which include personnel and other administrative expenses, totaled R$ 5,692 million in the first quarter of 2011, growth of 7.4% in 12 months, and decrease of 6.2% over the previous quarter. The growth of personnel expenses in 12 months is chiefly due to the average salary adjustment of 7.5% and hiring of employees. In relation to other administrative expenses, synergy gains due to the takeover of BNC, together with control of expenditures promoted by BB, explain the good result of this account. Banco do Brasil MD&A 1Q11 19

21 Table 13. Administrative Expenses Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Adm inis trative Expe ns e s (5,300) (6,068) (5,692) 7.4 (6.2) Personnel Expenses (2,851) (3,270) (3,145) 10.3 (3.8) Other Administrative Expenses (2,449) (2,798) (2,547) 4.0 (9.0) Efficiency Growth of operating income, combined with strict control of administrative expenses, contributed to improve the efficiency ratio that went from 44.3% in the first quarter of 2010 to 40.9% in this quarter. The decrease of 190 base points in relation to the fourth quarter of 2010 is influenced by the item "Other operating income", where the revenues derived from PREVI surplus are recorded, owing to the actuarial revaluation of the Benefit Plan 1 of Previ be performed semi-annually, in the 2 nd and 4 th quarters. This performance can also be observed in the efficiency ratio accumulated in 12 months, that presented an improvement of 210 base points in the comparison of the first quarter of 2011 with the first quarter of 2010 and of 80 base points over the fourth quarter of The indicator based in 12 months allows an efficiency analysis with less volatility, especially in comparison with 2 nd and 4 th quarters Q10 4Q10 1Q11 1Q10 4Q10 1Q11 Cost Income Ratio (last 12 months) Cost Income Ratio Figure 5. Efficiency Ratios Without One-Off Items - % Banco do Brasil MD&A 1Q11 20

22 Insurance Income from Insurance Insurance result reached a balance of R$ 369 million at the end of the quarter, 23.9% higher than the first quarter of In the quarterly comparison, the performance observed is due to the fact that in the fourth quarter of 2010 there was an extraordinary result regarding the reversal of PIS/COFINS provisions by the companies Aliança do Brasil and Brasilveículos. Table 14. Consolidated Insurance Ratio Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Ins urance Re sult (10.1) Brokerage Net Income Service Fee Net Income Equity in the Earnings (20.7) BB Recurring Income 2,056 3,704 2, (21.1) Insurance Ratio Guidance The justifications for deviations between the guidance and the result observed in the first quarter of 2011 are listed below. It is worth highlighting that the guidance is prepared for the year and quarterly monitoring can be impaired by seasonal or specific events of the period in question. Table 15. Guidance 2011 Ite m s Pe rform ance Guidance - BB Cons olidate d Recurring Return on Equity 24.8% 21% - 24% Net Interest Income* 12.0% 16% - 20% Total Deposits 11.3% 14% - 18% Domestic Loan Portfolio 18.9% 17% - 20% Individuals 22.5% 19% - 23% Businesses 16.1% 17% - 20% A gribusiness 19.3% 5% - 8% A llow ance for Loan Losses 3.0% 3,3% - 3,7% Fee Income 10.9% 12% - 17% A dministrative Expenses 7.4% 10% - 13% Tax Rate 33.5% 31% - 34% (*) Net Interest Margin indicator has been replaced by the growth of Net Interest Income Net Interest Income in spite of the performance below the estimates, the net interest income is expected to grow 16% to 20% based on the assumption of expansion of earning assets over 2011, and gradual incorporation of the effects of credit product repricing considering the macroeconomic scenario; Total deposits in spite of the result below the guidance, total deposits are expected to reach a growth of 14% to 18% throughout 2011; Business Loan Portfolio in the quarter, part of the demand for credit by large companies was met via subscription of private fixed income securities; Banco do Brasil MD&A 1Q11 21

23 Agribusiness Loan Portfolio the expansion of agroindustrial credit was the main factor to the growth above the guidance; Allowance for loan losses although the first quarter of 2011 did not show a deterioration in the risk profile of BB s loan portfolio, we kept the guidance to reflect a more conservative approach considering the current macroeconomic scenario; Fee Income in spite of the result below the guidance, fee income is expected to reach a growth of 12% to 17% throughout 2011; Administrative expenses - performance resulting from the higher efficiency in the control of administrative expenses combined with synergy gains arising from acquisitions, highlighting the integration process of Banco Nossa Caixa. A higher concentration of expenses is expected in the second quarter of 2011 due to the opening of new branches and hiring of personnel over the year. The estimated for 2011 were prepared with the consideration of the following assumptions: Assumptions influenced by management: Increase in profitability of the client portfolio as a way to leverage revenues; Alignment of the cost structure to business volume growth; Contractual adjustments and collective bargaining agreement, aligned with market practice; Sales force growth adequate to the strategy of increasing customer base profitability; Maintenance of the current business model, without considering new acquisitions and/or partnerships that might be entered into to exploit specific segments; Recognition of actuarial gains and losses in the Previ s Benefit Plan I, as established by the CVM Resolution 600/2009. Assumptions that are not under management control: Continued global economic growth in 2011; Greater resistance, but not immunity, of the Brazilian economy to foreign shocks; A political environment without institutional rupture; Maintenance of the current domestic macroeconomic policy structure: floating exchange rate, inflation targets (nominal anchor) and fiscal discipline, entailing a gradual and consistent reduction of the relationship between Public Sector Net Debt (PSND) and the Gross Domestic Product (GDP); An advancement of the regulatory mark / microeconomic agenda with stimulus to public and private investment; A gradual increase in the Brazilian economy's potential for growth (potential GDP); Maintenance of the investment grade status awarded to Brazil; 2011/2012 Crop Plan; Regulatory stability, also in what concerns the rates of taxes levied on the Bank's activities, labor legislation, and social security legislation; Evolution of interest rates, inflation rate and GDP according to the market s consensus. Banco do Brasil MD&A 1Q11 22

24 1 - Key Statistics Table 16. Main Macroeconomic Indicators (1) Econom ic Activity Q11 GDP (% YTD in 12 months) (0.6) Family Consumption Government Consumption Gross Fixed Capital Formation (10.3) Exports (10.2) Imports (11.5) Use of Installed Capacity (%) Agent Population (% YTD in 12 months) Unemployment Rate (% YTD in 12 months) Formal employment net creation in 12 m (thousand jobs) 1, , , ,005.3 Industrial Production (% YTD in 12 months) (7.4) External Sector Current Transactions (% YTD in 12 months) 0.1 (1.7) (1.5) (2.3) (2.3) Direct Foreign Investment (US$ billion) International Reserves (US$ billion year accumulated) Sovereign Risk (base points EOP) Trade Balance (US$ billion year accumulated) Exports (US$ billion year accumulated) Imports (US$ billion year accumulated) Ptax Dollar Sale (EOP) Ptax Dollar Sale (% YTD in 12 months) (17.2) 31.9 (25.5) (4.3) (1.8) M onetary Ratios IGP-DI FGV (% YTD in 12 months) (1.4) IGP-M FGV (% YTD in 12 months) (1.7) IPCA IBGE (% YTD in 12 months) Selic (EOP %) Accumulated Selic (% YTD in 12 months) Accumulated TR (exbtn) (% YTD in 12 months) TJLP - IBGE (EOP %) Libor (EOP %) Public Finance Primary Surplus (% GDP 12 months accumulated) PSGD (% GDP) PSND (% GDP) - Without Petrobras Credit Ratios Banking Industry Loan Portfolio (R$ billion) , , , ,752.5 Individuals (R$ billion) Companies (R$ billion) Credit/GDP (% YTD in 12 months) Household Debt (%) Total Default (% past due loans over 90 days) Individuals (2) Businesses (2) Total Investment Rate (%) (2) Individuals Businesses Total Spread (%) (2) Individuals Businesses A verage Term (%) (2) Individuals Businesses (1) All indicators were obtained from official sources such as Central Bank of Brazil, FGV (Getúlio Vargas Foundation), IBGE, etc. (2) Loans as reference for interest rate. Banco do Brasil MD&A 1Q11 23

25 Table 17. Ownership Structure - % Share holde rs M ar/10 Jun/10 Se p/10 De c/10 M ar/11 Federal Government Previ BNDESPar Treasury Shares BNC A cquisition Fre e Float Individuals Companies Foreign Capital Total Table 18. Distribution of Dividends/Interest on Own Capital 1Q10 2Q10 3Q10 4Q10 1Q11 Federal Government Previ BNDES Individuals Companies Foreign Capital Total , , , ,172.9 Table 19. Market Ratios % R$ million 1Q10 2Q10 3Q10 4Q10 1Q11 Earnings per Share - R$ Price / Earnings (12 months) Price / Book Value Market Capitalization - R$ million 76,676 63,319 91,915 89,884 84,535 Book V alue Price of Share - R$ Share Appreciation in the Period - % 0.51 (17.42) (2.21) (5.95) Table 20. Participation of BB s Shares in Brazilian Stock Market Indexes - % % Jan/10 - Apr/10 M ay/10 - Aug/10 Se p/10 - De c/10 Jan/11 - Apr/11 M ay/11 - Aug/11 Bovespa Index - Ibovespa Brazil Index - IBrX Brazil 50 Index - IBrX Carbon Ef ficient Index - ICO Financial Index - IFNC Corporate Governance Trade Index - IGCT Special Corporate Governance Stock Index - IGC Corporate Sustainability Index - ISE Special Tag Along Stock Index - ITAG Mid-Large Cap Index - MLCX Banco do Brasil MD&A 1Q11 24

26 Table 21. Key Statistics B a la nc e S he e t It e m s R $ billio n 1Q 10 2 Q 10 3 Q 10 4 Q 10 1Q 11 A ssets Shareho lders Equity Credit P o rtfo lio Depo sits Demand Depo sits Saving Depo sits Tim e Depo sits P ro f it a bilit y Net Inco m e per Share - R$ ** Recurring Inco m e per Share R$ ROE - A nnual B asis % Recurring ROE - A nnual B asis % ROE - A nnual B asis % ROA - A nnual B asis % NII / Earning A ssets - A nnual B asis P ro duc t iv it y Co st/inco m e Ratio (ex no nrecurring items) - % Co st/inco m e Ratio in the Year (ex no nrecurring items) - % Fee Inco me / P erso nnel Expenses - % Fee Inco me / A dm. Expenses - % P erso nnel Expenses per Em plo yee - R$ 26,510 26,681 29,056 29,039 27,085 Em plo yees / (B ranches + P A A + P A B ) Checking A cco unts per Co llabo rato r A ssets per Em plo yee R$ tho usand 6,362 6,494 6,727 6,824 7,174 Lo an P o rtfo lio / P o ints o f Service R$ millio n Lo a n P o rt f o lio Q ua lit y A llo wance / Lo an P o rtfo lio - % A llo wance / (E + F + G + H) - % P o rtfo lio Net o f A llo wance / To tal P o rtfo lio - % C a pit a l S t ruc t ure Leverage (times) B IS Ratio - % Tier I Tier II To tal Quantity o f Shares - tho usand 2,569 2,569 2,861 2,861 2,861 S t ruc t ura l Inf o rm a t io n B ranches 4,960 4,984 5,058 5,078 5,103 To tal Service P o ints 18,030 18,284 18,348 18,350 18,450 To tal Custo mers - tho usand 53,535 53,349 54,510 54,366 54,936 To tal Checking A cco unts - tho usand 35,234 34,920 35,682 35,934 35,304 Individuals - tho usand 32,910 32,695 33,469 33,758 33,128 B usinesses - tho usand 2,324 2,225 2,213 2,176 2,176 To tal Savings A cco unts - tho usand 23,655 23,970 23,215 23,601 23,536 Staff 113, , , , ,797 Em plo yees 103, , , , ,224 Interns 10,019 10,129 10,000 9,853 9,573 M a rk e t S ha re % A ssets ND Depo sits ND B NDES Onlending Lo an A gribusiness A sset M anagement Cards Revenues Impo rt Exchange Expo rt Exchange Banco do Brasil MD&A 1Q11 25

27 Table 22. Ratings Ratings Fitch Ratings 1Q10 2Q10 3Q10 4Q10 1Q11 Individual C / D C / D C / D C / D C / D Short-Term - Local Currency F3 F3 F3 F3 F2 Long-Term - Local Currency BBB- BBB- BBB- BBB- BBB Short-Term - Foreign Currency F3 F3 F3 F3 F2 Long-Term - Foreign Currency BBB- BBB- BBB- BBB- BBB National Ratings Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) Long-Term A A+(bra) AA +(bra) A A+(bra) AA +(bra) A AA (bra) M oody's Financial Strength C+ C+ C+ C+ C+ Short-Term - Local Currency P-1 P-1 P-1 P-1 P-1 Short-Term - Foreign Currency P-3 P-3 P-3 P-3 P-3 Long-Term Debt- Foreign Currency Baa2 Baa2 Baa2 Baa2 Baa2 Long-Term Deposits - Local Currency A 2 A2 A 2 A2 A2 Long-Term Deposits - Foreign Currency Baa3 Baa3 Baa3 Baa3 Baa3 National Ratings Short-Term BR-1 BR-1 BR-1 BR-1 BR-1 Long-Term Aaa.br A aa.br A aa.br Aaa.br A aa.br Standard & Poor's Long-Term - Local Currency BBB- BBB- BBB- BBB- BBB- Long-Term - Foreign Currency BBB- BBB- BBB- BBB- BBB- Table 23. Compulsory/Reserve Requirement Com puls ory/re s e rve Re quire m e nts Demand Deposits 1Q10 2Q10 3Q10 4Q10 1Q11 Rate 42% 42% 43% 43% 43% A dditional (1) 8% 8% 8% 12% 12% Reserve Requirements* 30% 30% 29% 29% 29% Direct Lending (micro f inance) 2% 2% 2% 2% 2% Unmarked 18% 18% 18% 14% 14% Savings Deposits Rate 15% 15% 16% 16% 16% A dditional 10% 10% 10% 10% 10% Reserve Requirements* 70% 70% 69% 69% 69% Unmarked 5% 5% 5% 5% 5% Time Deposits Rate 14% 15% 15% 20% 20% A dditional (2) 8% 8% 8% 12% 12% Unmarked 79% 77% 77% 68% 68% Judicial Deposits Rate 0% 0% 0% 0% 0% Unmarked 100% 100% 100% 100% 100% *Reserve Requirements at BB are directed to Rural Credit. The following subtitles refer to the rates due in the 1Q09 4Q10. (1) a) until : 5% rate. B) 8% rate until the calculation period from to ; c) since % rate. (2) a) until : 5% rate; b) until the calculation period from to % rate; c) Since % rate. Banco do Brasil MD&A 1Q11 26

28 2 - Summarized Financial Statements 2.1 Summarized Balance Sheet Table 24. Summarized Balance Sheet - Assets Balance Chg. % R$ million Mar/10 Dec/10 Mar/11 On Mar/10 On Dec/10 ASSETS 724, , , Current and Long-term Assets 706, , , Available Funds 7,364 9,745 12, Short-term Interbank Investments 152, , ,458 (4.0) 36.1 Securities and Financial Derivatives 119, , , Securities Available for Trading 38,183 50,445 51, Securities Available for Sale 62,950 75,142 76, Securities Held to Maturity 17,070 16,656 17,052 (0.1) 2.4 Financial Derivatives 1,162 1,624 1, (14.0) Interbank Accounts 53,144 89,526 94, Deposits w ith the Central Bank 47,244 87,035 87, Compulsory Deposits on Demand Deposits and Float 14,472 20,414 17, (13.3) Compulsory Deposits on Savings Deposits 32,773 66,621 69, Other 5,900 2,491 7, Intrabank Accounts (57.9) Loans 267, , , Public Sector 5,668 7,184 7, Private Sector 279, , , ( Allow ance for Loan Losses) (17,405) (16,433) (16,140) (7.3) (1.8) Leasing 4,593 3,857 3,499 (23.8) (9.3) Leasing and Subleasing Receivables 4,826 4,048 3,694 (23.4) (8.7) (Unearned Lease Income) (Allow ance for Lease Losses) (233) (191) (195) (16.3) 1.9 Other Receivables 99, , , (0.6) Receivable on Guarantees Honored (13.1) 2.8 Foreign Exchange Portfolio 11,808 11,878 15, Income Receivable Trading and Brokerage of Securities (28.5) (25.3) Specific Credits 954 1,030 1, Specific Operations Credits from Insurance, Pension and Capitalization Op ,109 1, (3.5) Tax Credits 22,000 21,970 22, Actuarial Assets 13,374 9,895 10,563 (21.0) 6.8 Warrants Deposits Receivable 21,764 23,388 24, Destination Superavit Fund - PREVI - 7,595 7, Other Credits 29,226 38,269 32, (15.6) (Provision or Doubtful Receivables) (1,625) (1,572) (1,565) (3.7) (0.5) (With Loan Characteristics) (678) (690) (681) 0.4 (1.4) (Without Loan Characteristics) (947) (882) (884) (6.6) 0.2 Other Assets 2,196 3,884 4, Interest in Companies Other Assets (Provision for Possible Losses) (176) (177) (181) Prepaid Expenses 1,988 3,673 3, Permanent Assets 18,780 19,770 19, (2.5) Investments 6,869 8,128 8, (0.0) Property and Equipment 4,230 4,904 4, (0.8) Leasing Assets Intangible 7,267 6,452 6,036 (16.9) (6.4) Deferred Charges (40.7) (14.4) Banco do Brasil MD&A 1Q11 27

29 Table 25. Summarized Balance Sheet - Liabilities Balance Chg. % R$ million M ar/10 De c/10 M ar/11 On M ar/10 On De c/10 LIABILITIES AND SHAREHOLDER S EQUITY 724, , , Curre nt and Long-te rm Liabilitie s 686, , , Deposits 342, , , Demand Deposits 54,973 63,503 59, (6.2) Savings Deposits 78,719 89,288 90, Interbank Deposits 10,749 18,998 12, (36.5) Time Deposits 197, , , Investment Deposits (100.0) (100.0) Money Market Borrow ing 157, , , Funds from A cceptances and Securities Placed 11,656 13,486 19, Foreign Securities 8,617 9,172 12, Interbank Accounts 2, ,292 (2.1) 12,555.4 Intrabank Accounts 2,503 3,688 1,968 (21.4) (46.6) Borrow ing 7,884 8,598 8, Foreign Borrow ing 7,884 8,598 8, Domestic Onlending Official Institutions 33,201 50,764 51, National Treasury 2,065 1,549 1,552 (24.8) 0.2 BNDES 20,264 26,978 27, CEF Finame 9,708 14,046 14, Other Institutions 1,025 8,043 7, (2.4) Foreign Onlending (11.8) (10.0) Financial Derivatives 4,085 5,297 4, (7.2) Other A ccounts Payable 124, , , Collection of Taxes and Contributions 3, ,263 (1.0) Foreign Exchange Portfolio 12,609 29,506 33, Shareholder and Statutory Distributions 1,355 1,992 1, (16.6) Taxes and Social Security 21,796 27,613 23, (13.3) Trading and Brokerage of Securities 1,071 1,676 1, (0.4) Technical Prov. Insurance, Pension and Capitalization Op. 18,356 32,369 34, Financial and Development Funds 3,685 3,568 3,499 (5.0) (1.9) Perpetual Securities 3,659 3,361 2,521 (31.1) (25.0) Special Operations Obligations for Lotto Operations FCO (Subordinated Debt) 20,792 23,412 24, A ctuarial Liabilities 6,525 6,907 6, Other Liabilities 31,597 28,757 27,250 (13.8) (5.2) Unearned Incom e (1.3) Share holde rs Equity 37,646 50,441 52, Capital 18,567 33,078 33, (Unpaid Capital) Capital Reserves Revaluation Reserves (6.5) (4.1) Reserve for Retained Earnings 16,857 16,889 16,442 (2.5) (2.7) Mark-to-Market Securities and Derivatives (4.9) (17.7) Retained Earnings (Accumulated losses) 4-0 (90.3) - (Treasury Shares) (31) (0) (0) (100.0) (99.8) Corporate Profit Sharing (58.7) 7.6 Income Accounts 1,833-2, Banco do Brasil MD&A 1Q11 28

30 2.2 Summarized Income Statement Table 26. Summarized Corporate Law Income Statement Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Financial Inte rm e diation Incom e 17,981 21,413 22, Loans 11,953 13,716 14, Leasing (37.1) 0.3 Securities 5,644 6,137 6, (0.1) Financial Derivatives (232) (571) (413) 77.9 (27.6) Foreign Exchange Portf olio (18) (54.7) Compulsory Investments 274 1,276 1, Financial Inc. from Insur., Pension & Capit. Operations Financial Inte rm e diation Expe ns e s (12,356) (13,679) (14,986) Money Market Funds (8,493) (10,727) (11,539) Borrow ing, A ssignments and Onlending (903) (841) (816) (9.7) (3.0) A llow ance for Loan Losses (2,959) (2,112) (2,631) (11.1) 24.6 Gros s Incom e from Financial Inte rm e diation 5,625 7,733 7, (6.4) Othe r Ope rating Incom e (Expe ns e s ) (1,896) (1,728) (2,386) Fee Income 2,666 3,158 2, (6.3) Banking Fees Income 1,038 1,147 1, Personnel Expenses (3,021) (3,452) (3,272) 8.3 (5.2) Other A dministrative Expenses (3,277) (3,502) (3,133) (4.4) (10.5) Taxes (864) (993) (1,019) Equity Interest in the Results of Subsidiaries, and A ffiliates 50 (36) (20) - (45.3) Income f/ Insurance, Pension & Capitalization Operations Other Operating Revenues 3,041 4,574 3, (32.6) Other Operating Expenses (1,969) (3,115) (2,646) 34.4 (15.1) Ope rating Incom e 3,730 6,005 4, (19.2) Non-operating Income 217 (2) 19 (91.3) - Incom e Be fore Taxe s 3,946 6,004 4, (18.8) Income and Social Contribution Taxes (1,242) (1,426) (1,497) Statutory Profit Sharing (353) (575) (443) 25.5 (22.9) Corporate Profit Sharing Ne t Incom e 2,351 4,002 2, (26.7) Banco do Brasil MD&A 1Q11 29

31 2.3 Income Statement with Reallocations Table 27. Income Statement with Reallocations Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Financial Inte rm e diation Incom e 18,562 21,736 22, Loan Operations (4) (14) 12,480 14,376 14, Lease Operations (37.1) 0.3 Securities 5,644 6,137 6, (0.1) Financial Derivatives (232) (571) (413) 77.9 (27.6) Foreign Exchange Portfolio (18) (54.7) Compulsory Investments 274 1,276 1, Financial Income from Insurance, Pension and Capitaliz. Opera FX Gain (Loss) on Foreign Investments (1) 18 (58) (29) - (50.1) Other Op. Inc. of a Fin. Intermed. Nature (2) 28 (224) Hedge Fiscal (5) 8 (54) (19) - (65.0) Financial Inte rm e diation Expe ns e s (9,205) (11,568) (12,355) Money Market Funds (3) (8,302) (10,727) (11,539) Borrow ing, Assignments and Onlending (903) (841) (816) (9.7) (3.0) Ne t Inte re s t Incom e 9,357 10,169 10, Allow ance for Loan Losses (6) (17) (3,026) (2,139) (2,629) (13.1) 23.0 Ne t Financial M argin 6,331 8,030 7, (2.3) Fee Income 3,703 4,306 4, (4.6) Services Income 2,666 3,158 2, (6.3) Banking Fee Income 1,038 1,147 1, Insurance, Pension Plan and Capitalization Income Taxes on Revenues (5) (7) (839) (968) (977) Contribution M argin 9,636 11,858 11, (3.1) Administrative Expenses (5,300) (6,068) (5,692) 7.4 (6.2) Personnel Expenses (8) (21) (2,851) (3,270) (3,145) 10.3 (3.8) Other Administrative Expenses (8) (9) (2,449) (2,798) (2,547) 4.0 (9.0) Other Tax Expenses (7) (26) (19) (40) Com m ercial Incom e 4,310 5,772 5, (0.3) Legal Risk (450) 127 (177) (60.6) - Legal Claims (8) (13) (16) (18) (238) 35 (98) (58.8) - Labor Law suits (8) (16) (18) (22) (212) 92 (79) (62.6) - Other Operating Income (448) 289 (760) Eq. Int. in Results of Subs. And Affil. (1) (71.4) (58.2) FX Other Operating Income / Expenses (480) 267 (769) Other Operating Income (2) (3) (4) (10) (22) 1,043 1,613 1, (1.6) PREVI (10) (11) 913 1, (31.7) (67.5) Other Operating Expenses (2) (6) (9) (13) (2,437) (3,267) (2,980) 22.3 (8.8) Ope rating Incom e 3,412 6,188 4, (22.1) Non-operating Income (12) (20) (23) 3 (2) Incom e Be fore Taxe s 3,415 6,186 4, (21.8) Income and Social Contrib. Taxes (5) (15) (19) (24) (1,053) (1,923) (1,474) 40.0 (23.4) Interest on Ow n Capital Tax Benefit Statutory Profit Sharing (24) (307) (559) (442) 44.1 (20.9) Corporate Profit Sharing Re curring Incom e 2,056 3,704 2, (21.1) Extraordinary Items (97.5) (96.8) Sale of Share in VISA Internacional (12) Economic Plans (13) (85) (231) Tax Efficiency (15) Reversal of Labor Liabilities (22) Tax FX and Statutory Profits over Extraord. Items (24) (313) 70 (8) (97.6) - Actuarial Assets -Adjustments (88) Ne t Incom e 2,351 4,002 2, (26.7) Banco do Brasil MD&A 1Q11 30

32 2.3.1 Details of Reallocations In this chapter the adjustments made to the Summarized Income Statement to obtain the Income Statement with Reallocations are detailed. These adjustments aim to: a) Separate the extraordinary items and show the recurring income for the period; b) Change the manner that income and expenses are shown, in order to provide a better understanding of the business and the company's performance; c) Allow the Net Interest Income (NII) recorded in the period to reflect, effectively, the gain from all the earning assets, seeking to inform the market what was the spread achieved from the division of this margin by average balance of earning assets. For this, it was necessary to: Include in NII the income recorded in Other Operating Income that had financial intermediation characteristics and which was derived from earning assets recorded in the Balance Sheet Under Other Receivables; Identify the foreign exchange gain/(loss) on financial assets and liabilities abroad in the period in a specific NII item (financial equity); To keep in NII, amounts related to negative foreign exchange adjustments that were recorded in Other operating income (expenses) to avoid inverting the balance of accounts of a financial intermediation nature; Detect and cancel the effects of Tax Hedge transactions entered into as of 4Q08, on the Effective Tax Rate and Financial Margin. We present below two tables with the origin, destination and the description of each reallocation performed, event of origin and destinations. We have divided the reallocations into two types: standard and on extraordinary items. Banco do Brasil MD&A 1Q11 31

33 Table 28. Statement of Recurring and Extraordinary Reallocations R$ million Quarterly Flow ITEM FROM TO EVENT 1Q10 4Q10 1Q11 1 Eq. Int. in Results of Subs. And Affil FX Gain (Loss) on Foreign Investments FX Gain (Loss) on Foreign Investments 17.7 (57.9) (28.9) 2 Other Operating Income Other Op. Inc. of a Fin. Intermed. Nature Other Op. Inc. of a Fin. Intermediation Nature Other Operating Income Other Op. Inc. of a Fin. Intermed. Nature FX Readjustment Other Operating Expenses Other Op. Inc. of a Fin. Intermed. Nature FX Readjustment (4.0) (326.8) (172.6) 3 Other Operating Income Money Market Funds Reversal of Charges with the Restatement of Saving Deposi Other Operating Income Loan Operations Equalization Revenues of Charges over Loan Operations Tax on Revenues Tax Hedge Tax Hedge 0.9 (5.9) (2.1) 5 Income and Social Contribution Taxes Tax Hedge Tax Hedge 7.4 (48.4) (16.9) 6 Allowance for Loan Losses Other Operating Expenses Allowance for Loan Losses (Credits w/o Charact. of Fin. Int.) (1.1) 7 Other Tax Expenses Tax on Revenues Taxes on Revenues (837.7) (974.3) (979.0) 8 Other Administrative Expenses Legal Claims Expenses of Legal Claims (324.7) (198.8) (80.9) 9 Personnel Expenses Labor Lawsuits Provision for Labor Lawsuits (169.9) (182.0) (126.8) 10 Other Operating Income Legal Claims Reversal of Contingent Liabilities Other Operating Income Labor Lawsuits Reversal of Labor Liabilities Other Administrative Expenses Other Operating Expenses Premiuns Paid to Costumers (502.5) (505.4) (505.4) 13 Other Operating Revenues PREVI Revision in the Actuarial Assets and Liabilities of Previ , Other Operating Income PREVI (1Q10) Revision in the Actuarial Assets and Liabilities of Previ Other Operating Expenses (2Q10) Other Operating Expenses (1Q10) Revision in the Actuarial Assets and Liabilities of Previ (35.8) Income and Social Contribution Taxes (2Q10) Income and Social Contribution Taxes (1Q10) Revision in the Actuarial Assets and Liabilities of Previ Statutory Profit Sharing (2Q10) Statutory Profit Sharing (1Q10) Revision in the Actuarial Assets and Liabilities of Previ Actuarial Assets - Adjustments (2Q10) Actuarial Assets - Adjustments (1Q10) Actuarial Adjustments (88.5) Non-Operating Income Sale of Share in VISA International Sale of Share in VISA International Legal Claims Economic Plans Economic Plans (84.9) (230.8) Income and Social Contribution Taxes Tax Efficiency Tax Efficiency Labor Lawsuits Reversal of Labor Liabilities Reversal of Labor Liabilities Statutory Profit Sharing Tax FX and Statutory Profits over One-Off Items Tax Effects and Statutory Profits over One-Off Items (57.7) (16.2) (1.2) 24 Income and Social Contribution Taxes Tax FX and Statutory Profits over One-Off Items Tax Effects and Statutory Profits over One-Off Items (255.8) 85.7 (6.4) Banco do Brasil MD&A 1Q11 32

34 Glossary (1) Corresponds to the result of the variations of rights and obligations relating to foreign exchange variations incurred due to the periodic restatement of loans and financings payable in foreign currency. (2) Includes financial income and expenses from foreign exchange besides other operating income with characteristics of financial intermediation. (3) Refers to the reversal of charges with the restatement of savings deposits recorded upon the closing of the semesters. In the months after the closing of the Balance Sheets, this reallocation is necessary in order to correctly evidence the NII. As from 3Q10, this amount started to be directly recorded in financial intermediation expenses in the Statement of Income, and reallocations were no longer necessary. (4) Refers to the equalization revenues of charges on rural credit loans. The calculations for equalization of the interest rates are based on the administrative rulings of the Finance Ministry, which determine the calculation formulas, according to the source of funds. (5) Mechanism that reduces the effects of exchange variation on the result. (6) Expenses with the Allowance for Loan Losses for credits without characteristics of financial intermediation. (7) Tax expenses reallocated to form the Margin of Contribution. (8) Expenses originating from labor and civil lawsuits that in the corporate statement of income are accounted for in personnel expenses and in other administrative expenses, respectively. (11) Portion of the business relationship budget accounted for in other administrative expenses. Considering the nature of the amounts disbursed, we reallocated the entire sum to "Other Operating Expenses". (12) Revenues originating from the review of the Actuarial Assets and Liabilities of PREVI. (13) a (19) Items that make up the ramifications of income and expenses arising from the review of the actuarial assets and liabilities of PREVI at the end of each six-month period, in light of Resolution CVM 600/09. Reallocations were performed to equalize amounts between the 1 st and 2 nd quarters of In 2H10, it was decided that this income and expenses would only belong to the quarter of origin. (20) Partial sale of investments of the shares of the BB Group (Multiple Bank, CIELO and Visa Vale) in the company Visa Inc. (21) Expense with provision originating from lawsuits relating to the economic plans. (22) Tax efficiency generated by the Bank in a periodic review as to the treatment of the deductibility of tax expenses used until then. (23) Reversal of provisions for labor claims, generating extraordinary income in 1Q10. As of 4Q09, provision was determined so as to cover the average sum of amounts effectively outlaid by the Bank in legal proceedings of the same nature (provision was formerly defined with a basis on the amount requested by the applicant). The amount recorded as extraordinary in 1Q10 resulted from the migration of the base of labor claims recorded in the controls of Banco Nossa Caixa to the methods and systems of Banco do Brasil. (24) e (25) Segregation of effects of extraordinary items of the period on the payment of Statutory Profit Sharing (PLR), and unification of effects of these items on taxes (IR and CSLL). The table below shows separately the effect of each extraordinary item on taxes and on PLR. Banco do Brasil MD&A 1Q11 33

35 Table 29. Tax Impacts and Statutory Profit Sharing on Extraordinary Items Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Sale of Shares in VISA International (96) Economic Plans (8) - - Reversal of Labor Liabilities (256) Total (313) 70 (8) (97.6) - Banco do Brasil MD&A 1Q11 34

36 2.4 Breakdown Table 30. Breakdown Assets and Liabilities Balance R$ million M ar/10 Share % Dec/10 Share % M ar/11 Share % ASSETS 724, , , Curre nt and Long-te rm As s ets 706, , , Available Funds 7, , , Short-term Interbank Investments 152, , , Securities and Financial Derivatives 119, , , Interbank A ccounts 53, , , Deposits w ith the Central Bank 47, , , Compulsory Deposits on Demand Deposits and Float 14, , , Compulsory Deposits on Savings Deposits 32, , , Other 5, , , Intrabank A ccounts Loans 267, , , Leasing 4, , , Other Receivables 99, , , Foreign Exchange Portfolio 11, , , Tax Credits 22, , , Actuarial Assets 13, , , Destination Superavit Fund - PREV I - - 7, , Other 52, , , Other Assets 2, , , Pe rm ane nt As s ets 18, , , Investments 6, , , Intangible 7, , , Other 4, , , LIABILITIES AND SHAREHOLDER S EQUITY 724, , , Curre nt and Long-te rm Liabilitie s 686, , , Deposits 342, , , Demand Deposits 54, , , Savings Deposits 78, , , Interbank Deposits 10, , , Time Deposits 197, , , Investment Deposits Money Market Borrow ing 157, , , Funds from Acceptances and Securities Placed 11, , , Interbank A ccounts 2, , Intrabank A ccounts 2, , , Borrow ing 7, , , Domestic Onlending Official Institutions 33, , , Foreign Onlending Financial Derivatives 4, , , Other Accounts Payable 124, , , Foreign Exchange Portfolio 12, , , Taxes and Social Security 21, , , Technical Prov. Insurance, Pension and Capitalization Op. 18, , , FCO (Subordinated Debt) 20, , , Actuarial Liabilities 6, , , Other 44, , , Unearne d Incom e Share holde rs Equity 37, , , Banco do Brasil MD&A 1Q11 35

37 2.5 Breakdown of Income with Reallocations Table 31. Breakdown of Income with Reallocations Balance R$ million 1Q10 Share % 4Q10 Share % 1Q11 Share % Net Interest Income 9, , , Fee Income 3, , , Insurance, Pension Plan and Capitalization Income Eq. Int. in Results of Subs. And Affil FX Other Operating Income / Expenses (480) (3.7) (769) (5.4) Total Ope rating Incom e 13, , , Expanded Administrative Expenses (5,749) (44.0) (5,941) (38.9) (5,870) (40.9) Administrative Expenses (5,300) (40.6) (6,068) (39.8) (5,692) (39.7) Personnel Expenses (2,851) (21.8) (3,270) (21.4) (3,145) (21.9) Other Administrative Expenses (2,449) (18.8) (2,798) (18.3) (2,547) (17.8) Legal Risk (450) (3.4) (177) (1.2) Other Tax Expenses (26) (0.2) (19) (0.1) (40) (0.3) Taxes on Revenues (839) (6.4) (968) (6.3) (977) (6.8) Allow ance for Loan Losses (3,026) (23.2) (2,139) (14.0) (2,629) (18.3) Ope rating Incom e 3, , , Non-operating Income (2) (0.0) Incom e Be fore Taxe s 3, , , Income Taxes and Statutory Profit Sharing (1,360) (10.4) (2,482) (16.3) (1,916) (13.4) Re curring Incom e 2, , , One-off Items Actuarial Assets -Adjustments (88) (0.7) Ne t Incom e 2, , , Banco do Brasil MD&A 1Q11 36

38 3 - Credit 3.1 Loan Portfolio The following tables show the share of each loan portfolio area in the total portfolio, besides the table with Brazilian Banking Industry figures. Table 32. Loan Portfolio Balance Chg. % R$ million M ar/10 Share - % De c/10 Share - % M ar/11 Share - % On M ar/10 On De c/10 Loan Portfolio (a) 305, , , Brazil 288, , , Individuals 95, , , Payroll Loan 38, , , Cons. Loan Back. by Dir. Deposits 11, , , A uto Loans 21, , , Mortgage 1, , , Credit Card 8, , , (5.8) Overdraf t A ccounts 2, , , Other 10, , , (3.8) (1.0) Bus ine s s e s 128, , , (0.8) SME 45, , , (1.0) Middle and Large 82, , , (0.7) Agribus ine s s 64, , , Individuals 47, , , Businesses 17, , , Abroad 17, , , Bonds Se curitie s (b) 22,542 29,858 32, Am plifie d Loan Portfolio¹ (a + b) 328, , , Individuals 95, , , Businesses 148, , , A gribusiness 65, , , A broad 18, , , (1) Includes Securities and guarantees provided. Table 33. Credit in the Brazilian Banking Industry Balance Chg. % R$ million M ar/10 Jun/10 Se p/10 De c/10 M ar/11 On M ar/10 On De c/10 SFN 1,451,946 1,528,887 1,613,767 1,705,784 1,752, Individuals 663, , , , , Business 788, , , , , Banco do Brasil MD&A 1Q11 37

39 3.1.1 Individual Loan Portfolio Table 34. Individual Loan Portfolio Balance Chg. % R$ million M ar/10 Share - % De c/10 Share - % M ar/11 Share - % On M ar/10 On De c/10 Direct Consumer Credit (CDC) 54, , , Payroll Loan 38, , , Consumer Finance 5, , , (1.1) Consumer Loan Backed by D 11, , , Mortgage 1, , , Vehicles Loan 21, , , Credit Card 8, , , (5.8) Overdraft Accounts 2, , , Microcredits , , (2.4) Other 4, , , (19.4) (0.3) Total 95, , , Table 35. Individual Loan Portfolio Market Share M ar/10 De c/10 M ar/11 R$ million BB BI Share - % BB BI Share - % BB BI Share - % Payroll Loan 38, , , , , , Mortgage 1, , , , , , Vehicles Loan 21, , , , , , Table 36. Payroll Loans Share Balance Chg. % M ar/10 Share - % De c/10 Share - % M ar/11 Share - %On M ar/10 On De c/10 Civil Servants 32, , , INSS's Retirees and Pensioners 2, , , Employees f rom the Private Sector 2, , , (0.5) (2.8) Table 37. Average Rates and Terms Banco do Bras il CDC - V e hicle s M ar/10 De c/10 M ar/11 A verage rate - % p.m A verage term - months V ahicle s Le as ing A verage rate - % p.m A verage term - months M ortgage A verage Contracted A mount A verage term - months Payroll Loan A verage rate - % p.m A verage term - months BV - Ve hicle s Loan A verage rate - % p.m A verage term - months Banco do Brasil MD&A 1Q11 38

40 The following table evidences the balances of the portfolios acquired for payroll loans and vehicle financing. Please note that the change between June/10 and Sept/10 is a result chiefly of consolidation with the Banco Nossa Caixa figures. Table 38. Portfolio Acquired Balance Chg. % R$ million De c/09 M ar/10 Jun/10 Se p/10* De c/10 M ar/11 On M ar/10 On De c/10 Payroll loans 3,003 2,616 3,552 7,604 8,636 9, Vehicle financing 2,668 2,476 3,956 4,799 5,877 6, Total 5,672 5,093 7,508 12,403 14,514 16, * As of Sept/10 the information includes loan operations acquired by Banco Nossa Caixa. Banco do Brasil MD&A 1Q11 39

41 3.1.2 Business Loan Portfolio The following table displays key corporate credit lines. Table 39. Business Loan Portfolio Balance Chg. % R$ million M ar/10 Share - % De c/10 Share - % M ar/11 Share - % On M ar/10 On De c/10 Working Capital 65, , , (1.1) Investment 26, , , Receivables 13, , , (8.7) Pré-Approved Credit 3, , , (20.0) (9.3) ACC/ACE 8, , , (3.6) BNDES Exim 3, , , (1.0) Credit Cards 2, , , Overdraft Account (1.1) Other 4, , , (10.8) 3.8 Total 128, , , (0.8) BB disbursed R$ 2,174 million in BNDES onlendings operations in the first two months of 2011, which represented a share of 17.9% in the total amount of these operations. Private Securities Banco do Brasil, operates in the capital market, as an alternative to the traditional credit lines, by means of issues of debentures, promissory notes and bank credit bills. It is emphasized that the demand for credit is being satisfied by these subscriptions, a fact that explains the quarterly performance of the business loan portfolio. The balances of these Certificates are presented in the table below: Table 40. Private Securities - Companies Balance R$ million De c/09 M ar/10 Jun/10 Se p/10 De c/10 M ar/11 On M ar/10 On De c/10 Corporate Se curitie s * 8,688 9,695 11,274 12,798 14,249 18, Banco do Brasil 5,782 6,620 8,568 10,570 11,645 15, BV 2,906 3,075 2,706 2,228 2,604 2,980 (3.1) 14.5 *Securities issued in the country registered in compliance with Bacen Circular 3068 in Available for sale. Chg. % Foreign Trade Loans The Pre-Shipment/Post-Shipment Export Financing (ACC/ACE) ended the quarter with a higher balance observed in the first quarter of This credit line is strongly influenced by the behavior of the exchange rate of the R$/US$, which exhibited appreciation of 2.3% in the first quarter of 2011 in relation to the fourth quarter of 2010, and of 8.6 % over the first quarter of Table 41. ACC/ACE Average Volume per Contract Balance Chg. % ACC/ACE 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 On 1Q10 On 4Q10 Contracted A mount (US$ million) 2,722 3,296 2,920 2,640 3,784 3, (5.8) Quantity of Contracts 4,473 4,263 4,682 4,037 4,117 3,938 (7.6) (4.3) Average V olume per Contract (US$ thous (1.5) In the first quarter of 2011, Banco do Brasil maintained high onlendings in the foreign exchange market for imports and exports, with volumes of US$ 16.6 billion and US$ 11.0 billion, respectively, which represented market share of 31.8% and 23.9%, in the same order. BB's market share in the foreign exchange market for exports increased 270 bps in comparison with the figure observed in the first quarter of 2010, while in the exchange market for imports the market share decreased 70 bps. Banco do Brasil MD&A 1Q11 40

42 Loans to SMEs - In the delivery of services to SMEs, Banco do Brasil continued to act as principal partner of the segment. At the end of the first quarter of 2011, BB had 2.1 million checking accounts with 2.0 million micro and small business clients. Around 577 thousand received service rendered by specialized relationship managers. BB has also been consolidating its share of the cooperativist credit segment, delivering products and services tailored to the requirements of this market. The products include the Compe/SPB Integration Service, whereby credit cooperatives and its cooperative members have access to the System for the Clearing of Checks and Other Instruments and to the Payment Settlement and Transfer System (SPB). This service allowed bank products to be made available to 392 thousand cooperative members, associated with 336 credit cooperatives, contributing with innovation in the supply of solutions in products and sale formats, essential functions for the growth of BB's competitiveness and maintenance of partnerships. In March 2011, BB supported 197 Local Productive Arrangements (APL), delivering services to 20.2 thousand ventures. A sum of R$ 1.9 billion was made available that contributed toward the sustainable growth of the locations where the APLs are included, with R$ 1.6 billion in loans for working capital and finance investments, R$ million in funds for foreign trade, with R$ million for geared toward agribusiness. In February 2011, BB launched a new version of the Financial Manager (an Internet banking tool for companies) for the iphone or ipod Touch sets. The transactions utilized the most that represent 90% of operations performed by the channels, including inquirie and financial transactions, are available initially. The Financial Manager is the main self-service channel of BB's corporate clients, with versions for use via the web and on cell phones (via wap2). Over 100 thousand transactions performed in the new version were accounted for at the end of March Considering working capital and investment loans, R$ 11.6 billion was allocated to manufacturing industries (23.3%), R$ 23.5 billion to trade (47.1%), and R$ 14.8 billion to service provision (29.6%). Table 42. SME Credit Products Balance Chg. % R$ million M ar/10 Share - % De c/10 Share - % M ar/11 Share - % On M ar/10 On De c/10 Working Capital 31, , , (3.2) Investment 12, , , Foreign Trade* (6.4) (39.2) BNC 1, Total 45, , , (1.0) *The rating methodology of operations in such credit line was reviewed as of 3Q09. Among the working capital lines, the following should be highlighted: a) BB Giro Rápido - working capital without collateral requirements, which in the first quarter of 2011 reached a balance of R$ 6.1 billion, 16.9% of the working capital block; b) BB Giro Empresa Flex - working capital and financing for acquisition of goods and services and the customer can determine the form of loan repayment in accordance with the company's cash flow. Reached a balance of R$ 9.5 billion, representing 26.4% of the working capital block; c) BB Giro Décimo Terceiro Salário - a facility offered seasonally to finance the 13 th month salary of companies, including social charges levied, ended the contracts of the season of on with a record balance of R$ 449 million, representing growth of 12.2% over the prior year; d) BB Giro Recebíveis - working capital loan taken out in the form of revolving ceiling with secured receivables (post-dated checks and trade notes), which reached a balance of R$ 976 million at the end of the first quarter of 2011; Banco do Brasil MD&A 1Q11 41

43 e) BB Giro Empresa Flex Agro - launched in Feb/2011 and intended exclusively to satisfy the needs of agribusiness companies. The operations can be contracted with the backing of funds from BB itself and from Rural Savings, which makes it possible to work with extremely appealing interest rates. Among the loan lines for investments, the following should be highlighted: a) BNDES card - a product in which BB is a leader (in terms of amounts disbursed, number of cards and transactions), reached R$ 6.2 billion of disbursements accumulated since the beginning of its commercialization, representing an increase of R$ 3.3 billion in the last 12 months, with 65.6% of cards issued in the market; b) "Proger Urbano Empresarial" - the main credit line for investments had a R$ 4.3 billion balance; c) FINAME operations reached a balance of R$ 2.4 billion in March The Operation Guarantor Fund (FGO), is a system which supplements, by up to 80%, the guarantees required from legal entities for loans and financing, and expands credit supply to companies, particularly micro and small-sized companies, with yet more competitive rates. By the end of 1Q11, thousand operations had been carried out under the FGO, totaling the balance of R$ 7.2 billion. The operations backed by this Fund represent approximately 20.3% of the expenses observed in the lines that permit the link with this guarantee. Another important mechanism to enable the contracting of investment financing operations is the Fundo de Aval às Micro e Pequenas Empresas (Guarantee Fund for Micro and Small Enterprises (Fampe). It is formed with funds from Serviço Nacional de Apoio às Micro e Pequenas Empresas (Brazilian Service of Support to Micro and Small Enterprises) - Sebrae, Fampe supplements by up to 80% the of guarantees necessary for the performance of operations with micro and small enterprises with annual gross revenues of up to R$ 2.4 million. At the end of the first quarter of 2011, the debit balance of operations guaranteed by Fampe reached R$ 3.8 billion, whereas the secured debit balance was R$ 2.9 billion. Banco do Brasil MD&A 1Q11 42

44 3.1.3 Agribusiness Loan Portfolio Agribusiness is one of the main sectors of the Brazilian economy, of fundamental importance to the growth of the Country. In its role as an agent of public policies, Banco do Brasil represents a link between the government and the rural producer, acting as the largest financier of Brazilian agribusiness in all its segments and in all stages of the productive chain, from the small farmer to the large agroindustrial companies. Brazilian agriculture has been experiencing a special moment when occurs the completion of the 2010/11 crop. The prices of most products has been traded at high levels and the farmer s costs were lower than the previous crop. Although the La ninã phenomenon have influenced the development of the crop, when droughts commonly occur in the Southern Region, the weather was quite favorable in most producing regions, resulting in record productivity, especially in Parana and Mato Grosso States. The outlook for the 2011/12 grain harvest remain optimistic. The costs should show some upward adjustment, but margins remain positive because of the world demand pressure for corn, soybeans, wheat and other grains and because the insufficient production to replenish low inventories. US$ billion T Agribusiness Brazil Source: MAPA Ministério da Agricultura, Pecuária e Abastecimento. Figure 6. Trade Balance (FOB) The following tables reflect the flow of exports broken down by key products and Brazil's share in international agribusiness. Table 43. Exports US$ million Q11 Soybeans and Related Products 11,381 17,980 17,240 17,107 3,164 Meat 11,295 14,545 11,787 13,630 3,541 Leather, Hides and Shoes 3,554 3,140 2,041 2, Sugar 6,578 7,873 9,716 13,776 2,520 Forest Products 8,819 9,326 7,223 9,282 2,360 Coffee, Mate and Spices 4,093 4,971 4,470 5,962 1,999 Fruit Juice 2,374 2,152 1,752 1, Tobacco 2,262 2,752 3,046 2, Other Products 8,059 9,066 7,480 9,358 2,582 Total 58,416 71,806 64,756 76,441 17,858 Source: MAPA Ministério da Agricultura, Pecuária e Abastecimento. Banco do Brasil MD&A 1Q11 43

45 Table 44. Brazil's Share in World Agribusiness Production Export % World Trade Coff ee 1º 1º 30% Orange Juice 1º 1º 83% Cattle 2º 1º 21% Sugar Cane 1º 1º 52% Soybeans 2º 2º 33% Poultry 3º 1º 37% Corn 3º 3º 11% Cotton 5º 5º 6% Source: USDA PSD online The sector's performance in the last few years is due to the permanent quest for new technologies and for valuing the services provided by the professionals from this area, always aiming at improving profitability and continuity in the enterprises. In the following chart, the increased productivity per planted area, as a result of gains in productivity, can be visualized. Production / Area (million) ,500 2,500 1, ,500-2,500 Yield (ton / ha) 0 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 Production (million ton.) Area (million ha) Yield (ton / ha) -3,500 Figure 7. Production vs. Planted Area Agribusiness at BB The distribution of agribusiness operations by region of the country shows the South and Southeast regions appearing as most relevant, while the North and Northeast with the least relevant regions. Table 45. Agribusiness Loan Portfolio by Region Re gion Share - % North 2.5 Northeast 5.3 Midw est 18.5 Southeast 41.1 South 32.6 The rural credit finances the costs of producing and marketing of agricultural products stimulates rural investments, including warehousing, processing and the industrial transformation of agricultural products. Furthermore, it encourages the introduction of rational methods in the productive system. Banco do Brasil MD&A 1Q11 44

46 Agricultural and cattle breeding activity follows the agricultural calendar, known as the harvest-year, which begins in July of each year and ends in June of the following year. Hence, the current 2010/2011 harvest began in Jul/10 and will end in Jun/11. In the first quarter of the crop year, funds will required for planting (funding) the summer crop and there is a concentration of payments of the costing loans for the summer harvest in the preceding harvestyear. From October to December, the demand for costing funds continues, however, at a lower volume than in the first quarter of the crop. During the harvest's third quarter (January to March) demand begins for the winter harvest's costing loans, and for the summer harvest in the northern and northeastern regions. And demand grows during the harvest-year's last quarter for working capital to fund sales, as this is a harvesting period. The rural portfolio of Brazilian Banking Industry attained R$ 126,704 million in Mar/11, an increase of 10.0% in twelve months and of 2.2% in relation to Dec/10. The rural portfolio represented 21.2% of the total portfolio of BB in this quarter, a percentage equal to the observed in Mar/10. Due to the current portfolio, BB continues to act as principal partner of the Brazilian agribusiness with a market share of 61.1%. The following table shows a breakdown of BB's agribusiness portfolio, divided into funding for costing, investments, and sales. Table 46. Agribusiness Loan Portfolio by Purpose Balance Chg. % R$ million Mar/10 Share - % Dec/10 Share - % Mar/11 Share - % On Mar/10 On Dec/10 Working Capital for Input Purchase 27, , , (6.5) (11.3) Investment 23, , , Crop Trading 4, , , (18.6) (20.5) Agroindustry 8, , , Other 1, , ,865.3 Total 64, , , The table below details the agribusiness portfolio by lines of credit. These also deserve highlighting: a) Pronamp, a product that offers fixed loans for agricultural and cattle breeding funding, besides financial support for fixed and semi-fixed investments; and the National Family Agriculture Empowerment Program - Pronaf is aimed at the financing of agricultural activity funding; b) FCO Rural offers a financial supplement for working capital and costs for the rural producer of the Middle-west region of Brazil; c) The BNDES/Finame Rural products have the objective of financing investments in the modernization of machinery and equipment intended for rural production. BNDES Procer line financing working capital for agribusiness was responsible for such performance; d) The financial support for agribusinesses that trade, process or industrialize agricultural products has intensified and is highlighted on the line of Marketing and Processing of Agricultural Products. Banco do Brasil MD&A 1Q11 45

47 Table 47. Agribusiness Loan Portfolio by Type of Loans Balance Chg. % R$ million M ar/10 Share - % De c/10 Share - % M ar/11 Share - %On M ar/10 On De c/10 Agric. and Livestock Working Capital 17, , , (3.5) 0.5 Loans to Companies¹ 10, , , Pronaf / Pronamp 18, , , FCO Rural 5, , , BNDES / Finame Rural² 6, , , Other 5, , , (6.2) Total 64, , , (1) In the 4Q09, part of the balance was reclassified to the BNDES Procer line, which also changed the line of BNDES/Finame Rural operations. (2) Includes amounts from the BB Investimento Agropecuário (Agricultural and Livestock Investment) line The following table shows the balance of the loan transactions intended for agribusiness by item financed. Table 48. Agribusiness Loan Portfolio by Product R$ million Chg. % Ite m Finance d M ar/10 Share - % Dec/10 Share - % M ar/11 Share - %On M ar/10 On De c/10 Livestock 10, , , Soybeans 5, , , (2.7) Corn 2, , , (16.2) (3.3) Sugar Cane 2, , , (3.6) Machinery and Equipment 1, , , Coff ee 2, , , (14.3) (0.7) Rice 1, , , (5.4) Poultry 1, (44.7) (1.6) Cotton Pork (6.8) (3.4) Other 34, , , Total 64, , , In its work of financing Brazilian agribusiness, Banco do Brasil reaches all the segments, from the small producer to the large agro-industrial companies. The table below reveals this work, showing that while financing mini and small producers account for 80.9% of the total of contracts (23.6% of the amount contracted). The information in the following table includes sums loaned during the current harvest but not actually disbursed, which information is explained in the following table 2010/2011 Harvest Plan, in this chapter. Table 49. Resources Contracted in the 10/11 Crop by Size of Customer R$ million Qty. Contracts Qty. Contracts - % Am ount Contracte d Am ount Contracte d - % Mini 269, ,810,851, Small 356, ,794,102, Medium and Large Sized 144, ,005,648, Cooperatives 3, ,661,234, Total 774, ,271,837, The following table shows the view by size of customer in relation to the total balance of the agribusiness loan portfolio. Banco do Brasil MD&A 1Q11 46

48 Table 50. Agribusiness Portfolio by Size R$ million Segment De c/09 M ar/10 Jun/10 Se p/10 De c/10 M ar/11 Micro 11,262 11,329 12,008 11,488 5,338 5,247 Small 10,675 11,050 12,043 12,290 16,150 16,454 Medium and Large 40,952 38,996 42,730 46,635 50,337 52,224 Cooperatives 2,763 2,738 3,540 3,539 3,191 3,477 BNC Total 66,434 64,872 70,321 73,952 75,015 77,403 In the following figure we present the distribution of the balance of the Agribusiness Loan Portfolio by type of client. R$ billion Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Individuals Businesses Figure 8. Agribusiness Loan Portfolio by Type of Client Next, the Agribusiness Loan Portfolio by Funding Sources is shown. R$ billion Demand Deposits Savings FAT FCO BNDES/Finame Other Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Figure 9. Agribusiness Loan Portfolio by Funding Sources Banco do Brasil MD&A 1Q11 47

49 The main source of funds for the agribusiness portfolio continued to be savings which in March/11 reached the sum of R$ 45.7 billion, as the figure above. These funds accounted for 59.1% of the total this quarter. The Bank uses funding from Poupança Ouro (savings) and Demand Deposits, Fund for Worker Assistance - FAT, the Federal Treasury, Fund for Worker Assistance - Funcafé, and Constitutional Fund for the Financing of the Center-West - FCO, for low-rate agricultural loans. In order to make this intermediation feasible, the National Treasury or Fundo Constitucional pays the Bank an equalization fee which is the difference between the sum charged to the borrower and the funding costs, credit risk and administrative costs and taxes. Moreover, weighting factors are set for financing obtained with funds from demand and savings deposits. The following figure shows a history of the revenues received by way of interest rate equalization and weighting factor. R$ million Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Equalization Revenues Weighting Factors Figure 10. Equalization Revenues and Weighting Factors During this quarter the balance of equalization revenues, including the weighting factor, fell 1.7% over 4Q10 and rose 43.3% in 12 months. In comparison with last quarter, there was an increase of 53.9% in the amount of the weighting factor. The weighting factor is a multiplier applied to certain rural credit operations for compliance of banking liabilities. This instrument produces profits for Banco do Brasil through the release of funds to cash. Using the weighting factor, with every R$ 1.0 invested in rural credit operations subject to this mechanism, BB is authorized to apply the multiplier (variable according to the facility and stipulated in a resolution of CMN). The difference between the result of the application of this multiplier and the amount originally invested is released for use in the cash of BB. Banco do Brasil began using the weighting factor more intensively again for the crop of 2010/11 in view of the projections of funds of Demand Deposits and Savings Deposits. The following table below evidences the distribution of equalizable funds from BB's Agribusiness portfolio. Banco do Brasil MD&A 1Q11 48

50 Table 51. Equalizable Funds of the Agribusiness Portfolio R$ million Balance Chg. % De c/09 M ar/10 Jun/10 Se p/10 De c/10 M ar/11 On M ar/10 On De c/10 Equalizable Resources 22,249 24,162 26,328 25,648 27,130 28, Working Capital f or Input Purchase 13,284 14,392 15,440 14,508 15,350 15, Investments 7,897 8,594 9,259 9,663 10,157 10, Crop Trading 1,068 1,177 1,629 1,477 1,623 1, (2.4) Non-Equalizationable Resources 44,185 40,710 43,992 48,304 47,885 49, Total Loan Portfolio 66,434 64,872 70,321 73,952 75,015 77, The table below shows the use of risk mitigators instruments in the contracting of operations. Table 52. Agricultural Insurance and Proagro Balance Chg. % R$ million Crop 09/10¹ Crop 10/11¹ On M ar/10 Working Capital for Input Purchase 12,830 12,065 (6.0) Total of Insurance 8,081 7,044 (12.8) With Proagro 3,791 3,752 (1.0) With Insurance 4,290 2,588 (39.7) Hedge Price With Out Insurance 4,749 5, Working Capital - Cattle Raising 4,287 5, Investment 4,923 4,894 (0.6) Agroindustrial Credit / Procer 4,639 6, Crop Trading 4,495 4, Total 31,174 33, (1) position of March The figure below evidences the percentage of agricultural funding transactions operations contracted with risk mitigators since the 2010/11 crop. This quarter the contracting of operations occurs in crops that do not usually require insurance. The contracting of insured operations, particularly soybeans, corn and cotton, are concentrated in the second half of each year, which explains the reduction in the percentage mitigated in the current crop. Crop 2008/2009 Crop 2009/2010 Crop 2010/2011¹ 38% 62% 38% 62% 42% 58% (1) Position of March Working Capital for Input Purchase w ith Mitigation Working Capital for Input Purchase w ithout Mitigation Figure 11. Percentage of Operation Contracted with Risk Mitigators Banco do Brasil MD&A 1Q11 49

51 The table below displays a comparative funding of the current crop (10/11) with the previous year (09/10), describing the purpose of the loans. Table /2011 Crop Plan R$ million Crop 09/10 (A)¹ Crop 10/11 (B)¹ Chs. (%) (B/A) Fam iliar 6,445 6, Working Capital for Input Purchase 3,750 3, Investment 2,695 2, Corporate 18,911 21, Working Capital for Input Purchase 12,233 14, Investment 2,201 2, Crop Trading 4,477 4,253 (5.0) Total 25,356 27, (1) position of March We detail below the four key crops subject to agricultural funding, with the percentage share of funding for the 2010/2011 crop and the concentration per state regarding each of these crops. Table 54. Defrayal Contracting Profile Soybe ans Corn Rice Cotton 33.6% 19.9% 8.0% 2.2% PR 32.4% PR 28.0% RS 76.7% MT 32.4% RS 20.1% RS 16.3% SC 14.0% BA 17.8% GO 13.0% SC 15.0% PR 1.7% GO 17.7% MS 10.1% MG 14.4% MA 1.4% MS 13.0% Banco do Brasil MD&A 1Q11 50

52 We show below a breakdown of price and cost of the corn and soybean crops for the 2010/2011 crops. The margin is represented by the percentage of revenues net of the costs involved in each crop, i.e., the part designed for the producer. The figures regarding the plantations' price and costs are referenced based on the state of Paraná, with the key municipalities serving to find a proportional average. % % Margin - Soybean /06 06/07 07/08 08/09 09/10 10/11 Crops Margin - Corn /06 06/07 07/08 08/09 09/10 10/11 Crops R$/kg R$/kg Evolution Price and Cost - Soybean /06 06/07 07/08 08/09 09/10 10/11 Crops Price Cost Evolution Price and Cost - Corn /06 06/07 07/08 08/09 09/10 10/11 Price Crops Cost Figure 12. Ratio Price/ Cost of Soybean and Maize Banco do Brasil MD&A 1Q11 51

53 3.2 Credit Risk Expenses with the provisioning of credit risks ended the first quarter of 2011 with a balance of R$ 2,629 million, an amount lower than the observed in the first quarter of 2010 (R$ 3,026 million) and higher than the recorded in the fourth quarter of 2010 (R$ 2,139 million). In the quarter, the increase in such expenses is mainly due to the following factors: Result of the mobilization to recover agribusiness operations written-off as loss, that can be verified by the increase in operations rated at level H (provision of 100%) in a normal situation, as defined by CMN Resolution 2682/99. Larger volume of reversal of provisions related to loan operations assigned by Banco Votorantim in the fourth quarter of 2010, which led to a decrease in expenses with provisions in that quarter. The ratio between expenses of provisions and the average total portfolio - both accumulated in 12 months was 3.0% in the 1Q11, showing an improvement of 150 basis points in relation to the same period in 2010 and 30 basis points compared to the immediately prior quarter. Table 55. Expenses with Allowance for Loan Losses over Portfolio R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 (A) A llow ance f or Loan Losses - Quarterly (2,950) (3,026) (2,871) (2,639) (2,139) (2,629) (B) Allow ance for Loan Losses - 12 Months (11,629) (12,164) (11,864) (11,486) (10,675) (10,278) (C) Loan Portfolio 300, , , , , ,659 (D) Average Portfolio 3 Months 282, , , , , ,964 (E) A verage Portf olio 12 Months 250, , , , , ,575 Expenses over Portf olio (A/D) - % Expenses over Portf olio (B/E) - % The figure below details the allowance for loan losses, segregating the minimum provisions required by CMN Resolution 2,682/99 from the total booked. In Mar/11, the entire provision presented a reduction of 1.7% in relation to the observed in Dec/10 and 7.1% in twelve months. This trend is in line with the improved risk in the credit portfolio, which has presented a growth in the AA-C risk levels. R$ million 17,759 2,867 19,070 18,617 18,316 18,088 18,140 17,315 17,016 2,903 2,782 2,624 1,791 1,754 1,766 1,766 14,892 16,167 15,835 15,691 16,296 16,386 15,549 15,250 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Required Provision Additional Provision Total Provision Figure 13. Breakdown of Allowances Banco do Brasil MD&A 1Q11 52

54 The volume overdue above 15 days of the portfolio amounted to R$ 14,704 million, reaching 4.0% of the total portfolio in Mar/11, 110 basis points lower than that observed in 1Q10. The delinquency ratios overdue above 60 and 90 days also maintained their downward trend, reaching 2.5% and 2.1%, respectively. Table 56. Delinquency Ratio R$ milhões 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Loan Portfolio 300, , , , , ,659 Loans ove rdue 15,457 15,576 14,875 15,099 13,437 14,704 Past Due Loans/Loan Portfolio Pas t Due Loans + 15 days 15,457 15,576 14,875 15,099 13,437 14,704 Past Due Loans + 15 days/loan Portf olio Pas t Due Loans + 60 days 11,192 10,941 10,268 10,588 9,505 9,186 Past Due Loans + 60 days/loan Portf olio Pas t Due Loans + 90 days 9,783 9,408 8,871 9,025 8,164 7,673 Past Due Loans + 90 days/loan Portf olio Past Due Loans + 90 days/loan Portf olio - BI Write-of f 3,402 3,298 2,800 2,577 2,962 2,921 Recovery of Write-offs (847) (631) (757) (1,052) (863) (855) Ne t Los s 2,555 2,668 2,043 1,525 2,099 2,066 Net Loss/Loan Portf olio - % annualized Allow ance 18,617 18,316 18,088 18,140 17,315 17,016 Allow ance/loan Portf olio - % Allow ance/past Due Loans + 15 days - % Allow ance/past Due Loans + 60 days - % Allow ance/past Due Loans + 90 days - % (1) Include assigned loans of R$ 242 million of 4Q09 and R$ 9.3 million in the 1Q10. In March 2011, the decline in average risk tendency for the average risk was maintained as in BB or BI. At BB, the reduction was 10 basis points in comparison with the previous quarter, and 90 basis points in the comparison over twelve months, according to the table below: Table 57. Average Portfolio Risk De c/09 M ar/10 Jun/10 Se p/10 De c/10 M ar/11 Average Risk BB - % Average Risk BI - % Banco do Brasil MD&A 1Q11 53

55 3.2.1 Total Portfolio The transactions rated at risk levels AA-C in this quarter (93.8%) showed improvement in relation to Dec/10 (93.7%) and Mar/10 (91.9%). BB presented, in this same classification, improved levels compared to the Banking Industry. Table 58. Total Loan Portfolio by Risk Level R$ million M ar/10 De c/10 M ar/11 BI¹ Balance Provis ion Share % Balance Provis ion Share % Balance Provis ion Share % AA 78, , , A 91, , , B 81, ,647 1, ,760 1, C 29, ,350 1, ,314 1, D 8, , , E 2, , , F 1, , , G 1,463 1, , , H 9,944 9, ,779 9, ,292 9, Total 305,551 15, ,366 15, ,659 15, AA -C 280,888 2, ,725 2, ,872 2, D-H 24,663 13, ,641 12, ,786 12, * As of Sept/10, it includes 100% of Banco Nossa Caixa's operations Retail Portfolio The retail loan portfolio consists, essentially, of individuals operations, without taking into consideration the transactions of the partnership with BV. Twelve-month performance is influenced by the comparison base effect, as the migration from the BNC to the BB portfolio occurred largely in 1Q10. Operations classified as risk level AA-C reached 93.5% in the first quarter of 2011, indicating an improvement compared to the percentage of 92.3% observed in March In relation to the prior quarter, this indicator showed stability. Table 59. Retail Loan Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA , A 26, , , B 25, , , C 14, , , D 1, , , E F G H 2,577 2, ,674 2, ,516 2, Total 72,709 4, ,060 4, ,389 4, AA -C 67, ,863 1, ,905 1, D-H 5,621 3, ,197 3, ,485 3, * As of September 2010, it includes 100% of Banco Nossa Caixa's operations. It excludes Banco Votorantim's operations. The following table shows the changes in the retail loan portfolio allowance for loan losses. Banco do Brasil MD&A 1Q11 54

56 Table 60. Changes in the Allowance for Loan Losses - Retail R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Re tail Loan Portfolio¹ 62,700 72,709 79,832 89,683 96,060 99,389 Initial Allow ance 3,544 3,732 4,163 4,582 4,855 4, Risk Migration a) Risk Deterioration 1,292 1,165 1,396 1,416 1,319 1,263 b) Risk Improvement (807) (853) (958) (995) (1,038) (890) 2 New Transactions Write-offs (799) (960) (806) (917) (887) (956) Total ( ): (55) (263) (298) Other Impacts² Final Allow ance 3,732 4,163 4,582 4,855 4,818 4,742 Allow ance Required by CMN Resolution 2 3,732 4,163 4,582 4,855 4,818 4,742 Provision Flow - R$ million 987 1,391 1,226 1, a) A dded Provision b) Provision Expenses 987 1,391 1,226 1, Provision / Portfolio - % Provision Flow / Portfolio - % (1) As of the 3Q10, includes all operations of BNC. It excludes Banco Votorantim's portfolio. (2) Amortization, settlement, release of installments and charge debt Vintage We present the vintage of the individual loan portfolio in the graphs below. This methodology, known abroad as Vintage, affords greater detailing and closer monitoring of the portfolio than traditional ndicators. Vintage makes possible to monitor how the default of the set of operations contracted in a particular period behaves over time. In the first graph, for example, the vintage is performed in the quarterly view. The lines show how the default of operations contracted in each quarter behaved in the subsequent periods. The longer lines, therefore, refer to the oldest vintage period. In the case of the graphs below, we consider loans overdue above 90 days at default, and for determination of the Loan portfolio for individual customers, the overdraft accounts and credit card operations do not appear in these chart. The vintage shows how the operations contracted most recently present a more favorable default curve than those contracted at the beginning of the monitoring. This result reflects the constant optimization in the credit analysis, concession and vintage models. Banco do Brasil MD&A 1Q11 55

57 Delinquency 90 days Months Vintage Figure 14. Quarterly Vintage The second graph contains the vintage with annual periodicity, helping the viewing and interpretation of data.. Delinquency 90 days.... Months Figure 15. Annual Vintage Vintage Banco do Brasil MD&A 1Q11 56

58 In the graphs below, we present detailing of the vehicle loan portfolio, segmented by the loans production contracting origin: Arena I operations contracted in BB's branches. In line with BB strategy when partnering with BV, the transactions entered into Arena II (loans granted in vehicle dealers) were assumed by that institution. Delinquency 90 days Vintage Months Figure 16. Annual Vintage Vehicle Financing Portfolio excluded Votorantim portfolio Banco do Brasil MD&A 1Q11 57

59 3.2.3 SMEs Portfolio Foreign loans granted to SMEs are not included in this portfolio The allowance for loan losses decreased in 12 months reflecting the improvement of portfolio risk level. The share of operations rated in the AA-C risk levels showed an improvement and rose from 90.4% of the total portfolio in March 2010 to 93.1% in March Table 61. Micro and Small Company Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 8, , , A 15, , , B 11, , , C 1, D 1, E F G H 1,661 1, ,529 1, ,405 1, Total 40,548 2, ,037 2, ,592 2, AA -C 36, , , D-H 3,892 2, ,244 2, ,141 1, As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. It does not consider operations of Banco Votorantim. The following table details the changes in Allowance for Loan Losses for the Micro and small businesses Portfolio: Table 62. Changes in the Allowance for Loan Losses - SMEs R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 SM E's Loan Portfolio¹ 39,478 40,548 44,966 44,423 47,037 45,592 Initial Allow ance 2,625 2,595 2,470 2,732 2,590 2, Risk Migration 65 (2) (154) (3) a) Risk Deterioration b) Risk Improvement (833) (909) (778) (833) (953) (752) 2 New Transactions Write-offs (815) (895) (694) (783) (859) (725) Total ( ): (567) (755) (185) (611) (892) (650) Other Impacts² Final Allow ance 2,595 2,470 2,732 2,590 2,268 2,112 Allow ance Required by CMN Resolution 2 2,595 2,470 2,732 2,590 2,268 2,112 Provision Flow - R$ million (30) (126) 262 (142) (323) (155) a) A dded Provision b) Provision Expenses (30) (126) 262 (142) (323) (155) Provision / Portfolio - % Provision Flow / Portfolio - % (0.1) (0.3) 0.6 (0.3) (0.7) (0.3) (1) As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. It does not consider operations of Banco Votorantim. (2) Amortization, settlement, release of installments and charge debt Banco do Brasil MD&A 1Q11 58

60 3.2.4 Commercial Portfolio The commercial portfolio allowance for loan losses decreased 27.0 in 12 months. The operations rated in the AA-C risk levels showed an improvement and rose from 97.2% of the total portfolio in March 2010 to 98.1% in March Table 63. Commercial Loan Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 35, , , A 8, , , B 11, , , C 2, , , D E F G H Total 59, , , AA -C 58, , , D-H 1, , , The following table details the changes in allowance for loan losses for the Commercial Portfolio. Table 64. Changes in the Allowance for Loan Losses - Commercial R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Com m e rcial Loan Portfolio 57,189 59,799 65,805 67,460 70,030 69,518 Initial Allow ance 1,005 1, Risk Migration 78 (142) 22 (4) (121) (10) a) Risk Deterioration b) Risk Improvement (295) (335) (277) (251) (306) (154) 2 New Transactions Write-offs (180) (259) (163) (102) (105) (123) Total ( ): 132 (290) (61) (110) Other Impacts¹ (51) (48) (137) 32 Final Allow ance 1, Allow ance Required by CMN Resolution 2 1, Changes in the Provision - in R$ million (93) 45 a) Additional Provision b) Provision Expense (93) 45 Provision / Portfolio - % Changes in the Provision - % of Portf olio (0.1) 0.1 Banco do Brasil MD&A 1Q11 59

61 3.2.5 Agribusiness Portfolio Agribusiness credit transactions, besides adding to portfolio expansion, have a low risk and improve the breakdown of portfolio. The loans ranked at risk levels AA-C represented 92.2% of the portfolio in March 2011, 460 basis points higher than the number presented in March 2010 and 80 basis points over December The relation between the provisions required (CMN Resolution 2,682/99) and the balance of operations dropped to 4.6% in the 1Q11, with an improvement of 260 basis points in relation to the same period of previous year. Table 65. Agribusiness Loan Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 10, , , A 18, , , B 19, , , C 8, , , D 3, , , E F G H 2,965 2, ,412 2, ,158 2, Total 64,113 4, ,015 3, ,403 3, AA -C 56, , , D-H 7,945 4, ,420 3, ,023 2, * As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. It does not consider operations of Banco Votorantim. The following table details the changes in Allowance for Loan Losses for the Agribusiness Portfolio. Table 66. Changes in the Allowance - Agribusiness R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Agribus ine s s Loan Portfolio 65,651 64,113 70,321 73,952 75,015 77,403 Initial Allow ance 4,950 4,611 4,597 4,346 4,109 3, Risk Migration (315) (45) (364) (47) 23 (172) a) Risk Deterioration b) Risk Improvement (1,214) (831) (1,103) (844) (831) (785) 2 New Transactions Write-of fs (944) (605) (621) (364) (566) (589) Total ( ): (695) (271) (425) 169 (178) (572) Other Impacts (405) (90) 288 Final Allow ance 4,611 4,597 4,346 4,109 3,841 3,557 Allow ance Required by CMN Resolution 2,68 4,611 4,597 4,346 4,109 3,841 3,557 Changes in the Provision - in R$ million a) Additional Provision b) Provision Expense Provision / Portfolio - % Changes in the Provision - % of Portfolio (1) Amortization, settlement, release of installments and charge debt * As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. It does not consider operations of Banco Votorantim. Banco do Brasil MD&A 1Q11 60

62 The average risk of the portfolio is strongly influenced by the operations of the 2005 to 2007 vintages rolled over with total balance of R$ 7,340 million. In the following table, the Agribusiness Loan Portfolio is divided in rolled over and non rolled over loans. According to the table below, transactions overdue above 90 days represent 0.8% of the total non rolled over portfolio. If we compare this indicator to the rolled over operations, there is a gap of only 610 basis points. Table 67. Extended and Unextended Agribusiness Operations Ris k Balance Portfolio Without Rollove r Allow ance for Loan Los s e s Pas t Due _90 Pas t Due 90/ Ballance ² Balance Portfolio w ith Rollove r Allow ance for Loan Los s e s Pas t Due _90 Pas t Due 90/ Ballance ² AA 16, A 13, B 31, , C 5, , D 1, , E F G H ,258 1, Total 70,063 1, % 7,340 1, % (1) Overdue operations at level AA refer to credit with third party risk (2) The delay resulting from overdue operations with third party risk was not included in the calculation of the rate In the following table we present the balances, delinquency over 90 days and average risk of the agribusiness portfolio segmented in total portfolio, extended and not extended. Banco do Brasil MD&A 1Q11 61

63 Table 68. Rates of the Agribusiness Portfolio R$ million Dec/09 M ar/10 Jun/10 Se p/10 De c/10 M ar/11 Loan Portfolio 65,651 64,113 70,321 73,952 75,015 77,403 Provis ion 4,611 4,597 4,346 4,109 3,841 3,557 Pas t Due Loans + 90 days 2,146 2,050 1,638 1,885 1,846 1,422 Past Due Loans + 90 days/loan Portf olio - % Allow ance/loan Portf olio - % Write-Of f Exte nde d Ope rations BB Ris k + Third Parties 11,743 11,439 10,308 9,437 8,727 7,340 Provision 2,635 2,542 2,338 2,210 2,001 1,738 Past Due Loans + 90 days 1, Transactions overdue + 90 days/total Portfolio (%) Provision/Extended Operations - % Write-Of f Unexte nde d Ope rations BB Ris k + Third Partie s 53,908 52,674 60,013 64,515 66,288 70,063 Provision 1,976 2,055 2,008 1,899 1,840 1,819 Past Due Loans + 90 days 1,070 1,146 1,098 1, Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Of f Exte nde d Ope rations BB Ris k 10,951 10,691 9,599 8,783 8,557 7,186 Provision 2,635 2,542 2,337 2,210 2,001 1,738 Past Due Loans + 90 days 1, Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Of f Unexte nde d Ope rations BB Ris k 52,078 50,910 58,289 62,885 65,209 69,088 Provision 1,976 2,055 2,008 1,899 1,839 1,819 Past Due Loans + 90 days 1,070 1,146 1,098 1, Transactions overdue + 90 days/unextended operations - % Provision/Unextended Operations - % Write-Of f Sim ulation Ope rations not Extende d w ithout drag e ffe ct of Extende d Ope rations a- BB Risk + Third Parties 53,908 52,674 60,013 64,515 66,288 70,063 b- Provision 1,219 1,232 1,120 1, ,008 Average Risk (b/a) c- BB Risk 52,078 50,910 58,289 62,885 65,209 69,088 d- Provision 1,219 1,232 1,120 1, ,008 Average Risk (d/c) The delay resulting from overdue operations with third party risk was included in the calculation of the rate. It does not consider operations of Banco Votorantim. CMN Resolution 2,682/99, which provides for risk ratings and the creation of allowance for loan losses, requires maintenance of risk with renegotiated loans at the risk level found at the time of renegotiation. Owing to these rule, renegotiated transactions increase the loan portfolio's average risk. A simulation performed with unextended BB risk transactions, after removing the drag effect caused by extended loans, shows that there would be a 2.6% to 1.46% decline in average risk in 1Q11. Banco do Brasil MD&A 1Q11 62

64 3.2.6 Foreign Trade Portfolio Loans rated at levels of risk AA-C ended Mar/11 with participation of 97.3% of total, 150 basis points higher than that observed in Mar/10 and 40 basis points below the observed in Mar/10. Table 69. Foreign Trade Loan Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 5, , , A 1, , , B 3, , , C 1, , , D E F G H Total 12, , , AA -C 12, , , D-H The table below shows the changes in the allowance for loan losses of the foreign trade portfolio. Table 70. Changes in the Allowance for Loan Losses Foreign Trade R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Fore ign Trade Loan Portfolio 13,361 12,871 11,645 13,955 15,006 14,666 Initial Allow ance Risk Migration (62) (16) 24 (30) (40) 29 a) Risk Deterioration b) Risk Improvement (157) (68) (63) (82) (81) (40) 2 New Transactions Write-of fs (70) (36) (31) (41) (15) (28) Total ( ): (5) Other Impacts¹ (7) (36) (29) (26) (72) (31) Final Allow ance Allow ance Required by CMN Resolution 2, Changes in the Provision - in R$ million (38) 77 a) Additional Provision b) Provision Expense (38) 77 Provision / Portfolio - % Changes in the Provision - % of Portfolio (0.3) 0.5 Banco do Brasil MD&A 1Q11 63

65 3.2.7 Foreign Loan Portfolio and Others The tables below show the Portfolios by level of risk for the Foreign Portfolio and Others. Table 71. Foreign Trade Loan Portfolio by Risk Level M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 11, , , A 2, , , B 2, , , C D E F G H Total 17, , , AA -C 17, , , D-H Table 72. Banco Votorantim s Portfolio and Other M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provision Share Balance Provis ion Share AA 6, , , A 17, , , B 7, , , C 1, , D 1, E F G H 2,014 2, ,668 2, ,825 2, Total 38,004 3, ,773 3, ,998 3, AA -C 33, , , D-H 4,538 2, ,533 3, ,130 3, Banco do Brasil MD&A 1Q11 64

66 3.3 Concentration In the concentration analysis for the extended loan portfolio, we noted a increase in exposure to the 100 largest borrowers, from 23.5% in Mar/10 to 24.9% by the end of Mar/11. It is worth emphasizing, however, that for information on the concentration of credit the portfolio of BV is not considered. Table 73. Concentration in the Loan Portfolio of the 100th Largest Borrowers R$ million Pe riod 1s t Cus tom e r Balance 2nd to 20th Balance 21s t to 100th Balance 100th large s t Balance Jun/ , , , ,818 Sep/ , , , ,535 Dec/ , , , ,983 Mar/ , , , ,797 Jun/ , , , ,503 Sep/ , , , ,627 Dec/ , , , ,540 Mar/ , , , ,152 Exposure by the 100 largest borrowing customers as compared to the Referential Equity increased to 190.2% in Mar/11, compared to 133.9% at the end of Dec/10 and 124.6% in Mar/10. The ratio between the exposure of the largest borrower and the Referential Equity Amount ended Mar/11 in 20.6%, an increase of 850 basis points in relation to the exposure recorded at the end of Mar/10. Table 74. Concentration in the Loan Portfolio of the 100th Largest Borrowers - % of the RE Pe riod 1s t Cus tom e r (%) Balance 2nd to 20th (%) Balance 21s t to 100th (%) Balance 100th large s t (%) R$ million Balance Jun/ , , , ,818 Sep/ , , , ,535 Dec/ , , , ,983 Mar/ , , , ,797 Jun/ , , , ,503 Sep/ , , , ,627 Dec/ , , , ,540 Mar/ , , , ,152 The table below shows the Loan Portfolio concentration by macrossetor. Banco do Brasil MD&A 1Q11 65

67 Table 75. Loan Portfolio Concentration by Macro-Sector R$ million Chg. % M acro-s e ctor M ar/10 Share - % De c/10 Share - % M ar/11 Share - % On M ar/10 On Dec/10 Oil and Gas 18, , , Foodstuffs of Vegetable Origin 15, , , Metalw orking and Steel 15, , , Services 13, , , Foodstuffs of Animal Origin 9, , , Automotive 9, , , Building 12, , , Electricity 10, , , Transport 10, , , Telecommunications 6, , , (11.7) 0.1 Retail Trade 7, , , Textile and Garments 6, , , (0.6) Pulp and Paper 6, , , (21.2) (11.7) Electrical and Eletronic Goods 5, , , (9.2) Other Activities 4, , , (42.0) Agricultural Consumables 4, , , (0.4) Chemicals 4, , , Timber and Furniture 3, , , Wholesale Trade and Sundry Ind. 3, , , Beverages 3, , , Leather and Shoes 1, , , (2.4) Total 173, , , Internal Loan Portfolio 134, , ,297 Abroad Loan Portfolio 17,585 20,453 22,121 Garantees 10,550 13,286 12,353 Securities 11,252 15,886 19,653 Total 173, , ,425 It does not consider operations of Banco Nossa Caixa and Banco Votorantim. Banco do Brasil MD&A 1Q11 66

68 4 - Analysis of Assets Earning assets recorded improvement, with special emphasis on the growth of the balance of liquidity assets except Securities. The growth of interest-bearing liabilities was caused mainly by the increase in funds obtained in the money market borrowing and time deposits. Table 76. Earning Assets¹ vs. Interest Bearing Liabilities² Balance Chg. % M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Earning Assets 590, , , Other Assets 134, , , Total 724, , , Interest Bearing Liabilitie 523, , , Other Liabilities 201, , , Total 724, , , Cash and cash equivalents in foreign currency, marketable securities, financial investments, loan operations Leasing, Remunerated Compulsory Deposit and Other Earning Assets. 2 Savings Accounts, Interbank Deposits, Time Deposits, Money Market Borrowings, Foreign Borrowings, Onlendings, Financial and Development Funds, Subordinated Debts, Hybrid Capital and Debt Instruments, and Foreign Securities Issued Abroad. In relation to total assets, a change can be observed in the mix as a result of the increase in the share of liquidity assets to the detriment of securities and loan operations. The expansion of the Other Assets group stems from the expansion of compulsory deposits, which had their rate increased over 2010 by the Central Bank of Brazil (Bacen). Table 77. Breakdown of Assets Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10on De c/10 Total As s e ts 724, , , Liquidity A ssets except Securities 159, , , (0.6) 35.6 Securities 119, , , Loans and Leasing 271, , , Tax Credits 22, , , Other Assets 151, , , The securities portfolio exhibited growth in the quarter in all categories, except for derivative financial instruments, as presented in the following table. The portfolio mix remained in line with that observed in the fourth quarter of In comparison with March 2010, portfolio growth was enhanced by the resources from the capital increase performed by BB in June These funds entered into BB's cash position in July/10 when the transaction was settled, and they remained in treasury for short-term market investments until their allocation to other business such as loan operations. Banco do Brasil MD&A 1Q11 67

69 Table 78. Securities Portfolio by Category Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Se curities 119, , , A vailable for Trading 38, , , A vailable for Sale 62, , , Held to Maturity 17, , , (0.1) 2.4 Financial Derivatives 1, , , (14.0) Table 79. Securities Portfolio by Maturities Market Value Up to 1 ye ar 1 to 5 ye ars 5 to 10 years Ove r 10 ye ars R$ million Balance Share % Balance Share % Balance Share % Balance Share % Jun/09 31, , , , ,040 Sep/09 35, , , , ,298 Dec/09 29, , , , ,715 Mar/10 28, , , , ,057 Jun/10 31, , , , ,902 Sep/10 37, , , , ,124 Dec/10 40, , , , ,083 Mar/11 35, , , , ,938 Total The table below presents the liquidity balance, difference between liquidity assets and liabilities. Table 80. Liquidity Balance Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10on De c/10 Liquidity Ass e ts (A) 279, , , Available Funds 7, , , Interbank Investments 152, , , (4.0) 36.1 Securities (except linked to Bacen 119, , , Liquidity Liabilitie s (B) 168, , , Interbank Deposits 10, , , (36.5) Money Market Borrow ing 157, , , Liquidity Balance (A - B) 110, , , Banco do Brasil MD&A 1Q11 68

70 5 - Funding Banco do Brasil's funding in the domestic market were mainly driven in the quarter by the expansion of the volume funded in time and investment deposits and by money market borrowing. Table 81. Deposits and Market Funding Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Demand Deposits 54, , , (6.2) Saving Deposits 78, , , Interbank Deposits 10, , , (36.5) Time and Investment Deposits 198, , , Money Market Borrow ing 157, , , TOTAL 500, , , We present below the market shares of Banco do Brasil in the deposits and money market funding of the Brazilian Banking Industry* R$ million 33,4 33,2 32,8 33,1 33,2 32,5 33,0 24,4 24,1 23,7 24,0 23,9 23,7 23, Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Demand Deposits Market Share - % Savings Deposits Market Share - % 24,2 24,8 25,8 26,3 25,4 24,6 25,0 23,9 25,8 26,2 25,7 25,0 24,2 23, Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Time Deposits Market Share - % Total Funding Market Share - % *Information about participation in the Brazilian Banking Industry comes from the top 50 banks of the Central Bank of Brazil site. The latest available position at the time of publishing this report was in Dec/10. Figure 17. Market Share of BB Funding The sum obtained by Banco do Brasil abroad presented a growth, led by issues. In the comparison with the same prior-year period, special emphasis is placed on the issues in the international capital market, which recorded the largest absolute and percentage growths for the groups with greatest significance. Banco do Brasil MD&A 1Q11 69

71 Table 82. Foreign Borrowing US$ million Balance Chg. % Produtos M ar/10 Share % Dec/10 Share % M ar/11 Share % On M ar/10 On De c/10 Interbanking 7, , , (10.3) Repo 2, , , (5.1) 19.4 Companies 6, , , (17.5) 4.2 Special Individuals 1, , , (1.4) Issues 6, , , TOTAL 24, , , The table below shows the borrowings of Banco do Brasil in the international capital market. During the period BB issued securities under its "GMTN" program in the amount of U$ 1 billion, confirming a more active stance of the Bank in the foreign market over the last few years, with relatively low financial costs, factors that demonstrate the market's interest in securities issued by BB. The debt issue in the period was the first of BB held in Euro. With this transaction the Bank raised EUR 750 million, converted at rate of US$/EUR. Table 83. Overseas Issues Half- Ye arly V olum e in US$ m illion Te rm in years Cupom (%) Inte re s t Inte rval Is s ue price Re turn for Inve s tor (%) Pre m ium ove r Tre as ury Rating Program Quarterly A-/A 2 V isanet Quarterly A-/A 2 V isanet Quarterly A-/A 2 MT Half-Y early A2 Stand A lone Quarterly Baa3 Stand A lone Half-Y early Baa3 GMTN ** L3M+0.55 Quarterly L3M+0,55 0 AA A/Aa2 MT Quarterly A-/A 2 MT L3M+1.2 Quarterly L3M+1,2 0 A-/A 2 MT L6M+2.55 Half-Y early L6M+2,55 0 Baa3 GMTN , Half-Y early Baa2 Stand A lone Half-Y early Baa2 GMTN Half-Y early Baa2 GMTN Half-Y early Baa2 GMTN A nnual Baa2 Stand A lone , A nnual midsw ap+200 Baa2 GMTN Sources and Uses The indicators of the following table show the relationship between funding sources and investments in Banco do Brasil. In general, we observe that the percentage of use of funds has presented a continuous improvement. In the 12-month comparison it can be noted that the growth of the net loan portfolio occurs at a faster pace than the total funding, which explains the reduction of cash and cash equivalents and the increase of the ratio between credit and total funding. The Net Loan Portfolio / Total Deposits' ratio closed March 2011 at 91,0%, an increase of 70 bps in relation to the end of 2010 and of 640 bps in the 12 monthcomparison. Banco do Brasil MD&A 1Q11 70

72 Table 84. Sources and Uses Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Funding Total 373, , , Total Funding 342, , , Domestic Onlending 32, , , Financial and Development Funds 3, , , (5.0) (1.9) FCO (Subordinated Debt) 20, , , Foreign Borrow ing* 20, , , Compulsory Deposits (47,244) (12.7) (87,035) (22.4) (87,053) (21.9) Ne t Loan Portfolio 286, , , Loan Portfolio 305, , , Allow ance for Loan Losses (19,263) (6.7) (18,197) (5.3) (17,900) (5.2) (7.1) (1.6) Available Funds 86, , , (41.0) 5.4 Indicators - % Net Loan Portf olio / Total Deposits Net Loan Portf olio / Total Funding Available Funds / Total Funding *Includes Foreign Borrowings, Obligations for Securities Abroad, Obligations for Foreign Onlendings and Hybrid Capital and Debt Instruments. Table 85. Cost of Funding vs. Selic Rate Balance Chg. % Annualize d Intere s t Rate 1Q10 as % of as % of as % of 4Q10 1Q11 Se lic Se lic Se lic On 1Q10 On 4Q10 Saving Deposits Interbank Deposits (10.6) Time Deposits Money Market Borrow ing (1.9) Annualize d Se lic Table 86. Segregation of Deposits by deadline Chargeability R$ million No e xpiration Up to 3 m onths 3 to 12 m onths 1 to 3 ye ars 3 to 5 ye ars Ove r 5 years Total Total Time Deposits (1) 79,129 12,413 36,966 42,282 48, , ,934 Saving Deposits 90, ,516 78,719 Demand Deposits 59, ,533 54,973 Interbank Deposits 689 4,202 5,042 1, ,069 10,749 Investment Deposits Total 229,867 16,615 42,008 44,178 48, , ,624 (1) Includes the amount of R$ 93,106,817 thousand, on , (R$ 70,553,948 thousand on ) relating to time deposits with early repurchase clause (liquidity commitment), considering the original maturity dates established in the fundraisings. Asset Management Table 87. Fee Income from Asset Management Balance Chg. % R$ million 1Q10 2Q10 3Q10 4Q10 1Q11 On 1Q10 On 4Q10 Asset Management Banco do Brasil MD&A 1Q11 71

73 Please note that these figures still do not include funds managed by Banco Votorantim, that attained R$ 27.3 billion in March If 50.0% of the balance managed by BV were to be consolidated, a percentage equal to BB's stake in it s total equity capital, Banco do Brasil's market share would rise to 22.7%. R$ billion Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Asset Management Market Share - % Figure 18. Asset Management In the classification of the funds managed by type of customer, it must be highlighted, in the quarter, that the funds aimed at businesses and government, which presented the highest percentage increases in relation to December Table 88. Investment Funds and Managed Portfolios by Customer Balance Chg. % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Institutional Investors 122, , , Individuals 77, , , Government 84, , , Businesses 30, , , Foreign Investors 15, , , (10.5) (9.2) Total 330, , , As regards the classification per type, highlight to Investment funds that recorded a significant increase in relation to the previous quarter. Table 89. Investment Funds and Managed Portfolios by Type Balance Share % R$ million M ar/10 Share % De c/10 Share % M ar/11 Share % On M ar/10 On De c/10 Inve s tm e nt Fund 317, , , Fixed 178, , , Equity 50, , , (3.6) Multimarket 47, , , (39.9) (47.4) Others 41, , , M anage d Portfolios 12, , , Fixed 10, , , Equity 2, (92.6) 5.8 TOTAL 330, , , Banco do Brasil MD&A 1Q11 72

74 6 - Other Components of the Balance Sheet 6.1 Deferred Taxes Tax Credits Tax credits originating from temporary differences represent 83.5% of the stock. Temporary differences result from the fact that the tax legislation does not allow the inclusion of certain expenses in the calculation basis of taxes at the time they occur (accrual basis), but rather at the time they are financially settled (cash basis). Table 90. Breakdown of Tax Credit Balance Chg. % R$ million M ar/10share % De c/10share % M ar/11share % n M ar/10on De c/10 Time Differences 17, , , Social contribution on net income (18% acc 3, , , (13.7) (4.8) Tax Loss / Negative Base 1, (77.7) (63.4) Excess Depreciation Total Tax Cre dit 22, , , Income Tax / Pre-tax Income - % Also in relation to the tax aspects, it is important to emphasize the contracting of a Tax Hedge operation as from 4Q08. Banco do Brasil contracted hedge operations in a higher sum than that of investments maintained abroad (over hedge), with the objective of annulling the effect of exchange variation on the result, considering the fiscal impacts of these operations. In the quarter of 2011, it was observed the realization of tax credits at Banco do Brasil in the amount of R$ million. This amount corresponds to 42.6% of the projections of utilization of tax credits in 2011, which appeared in the technical study carried out in (R$ 3,532 million). Deferred Tax Liability Deferred tax liability represents the amount of income tax payable in a future period related to taxable temporary differences. The table below shows the opening of deferred tax liabilities: Table 91. Opening of Deferred Tax Liability Balance Chg. % R$ million M ar/10share % De c/10share % M ar/11share % n M ar/10 n De c/10 Acturial Gains 4, , , (2.6) 6.6 Restatement of Judicial Deposits Market-to-market Other , , Total De fe rred Tax Liabilitie s 5, , , Income Tax / Pre-tax Income - % Banco do Brasil MD&A 1Q11 73

75 6.2 Actuarial Asset The actuarial asset of Banco do Brasil is influenced by the recognition of the surplus of Previ Plan I, and is realized, in a recurring manner, by means of a method known as corridor, which implies the execution of two types of accounting. The first of the accountings arises from the recognition of price-level restatement expected for the surplus. An actuarial fee is applied to the surplus (in BB's case half of the surplus, as it is a joint fund) and the cost of current services, which are expenses related to the plan participants that are still on active duty, is deducted from the amount determined. At Banco do Brasil this recognition is performed monthly, whereas for the months of 1Q11 the amount was approximately R$ 208 million per month, which will not be altered until the next valuation of assets and liabilities that will be detailed in the following paragraph. As mentioned in the foregoing paragraph, in addition to the monthly recognition of expected returns on assets and liabilities, there is a second accounting that refers to the revaluation of assets and liabilities of the plan. The present fair of the plan assets and liabilities is calculated (actuarial assumptions are contained in note 27) and a surplus determined. The corridor method Implies the deduction of 10% of the assets and/or liabilities (whichever is higher) from the actuarial surplus or deficit, to avoid volatility in the recognition. After the deduction of this corridor, the remaining surplus is divided by 2, as it is a joint plan (50% of the rights and obligations belong to the participants and the same percentage belongs to the sponsor). The amount determined is the surplus that can be recognized in this methodology. To determine how much of this amount will influence the result of the six-month period in question, this recognizable amount is compared with the sum of actuarial assets that is already in the company's assets. Whenever the unrecognized amount is higher than the sum already recognized, part of the difference should be recorded in net income for the month in which the actuarial revaluation is being executed. The exact amount to be recognized, in the case of BB, results from the multiplication of this difference by the expected average time in six-month periods (since the revaluations always take place at the end of each six-month period) for all the employees from the Defined Benefit Plan to retire and for the plan to thus become inactive. The table below shows the step-by-step process of the accounting performed semiannually. Table 92. Effects of Half-Yearly Accounting R$ million 1H10 2H10 Fair Value of the Plan's Assets (a) 130, ,566 Present V alue of Actuarial Liabilities (b) 83,005 90,805 Surplus / (Deficit) BB (c) = 50% of [(a) + (b)] 23,579 25,380 Corridor BB (d)* = 50% of max of 10% of Assets or Liabilities (the highest) 6,508 7,078 Surplus / (Deficit) BB after Corridor 17,071 18,302 Recognized A ctuarial Gains/(Losses) before the half-yearly Reassessment 14,120 8,526 Unrecognized A ctuarial Gains/(Losses) 2,950 9,777 Average Remaining Work Period (half-yearly) Amortization of A ctuarial Gains/(Losses) 389 1,369 Net A ctuarial (Liabilities)/ A ssets 14,510 9,895 Banco do Brasil MD&A 1Q11 74

76 6.3 Intangible Assets Table 93. Accumulated Amortization R$ million 1Q10 2Q10 3Q10 4Q10 1Q11 Banco Nos s a Caixa Balance 4,961 4,961 4,961 4,961 4,961 A ccumulated amortization (99) (136) (174) (212) (270) Balance w ithout amortization 4,862 4,825 4,787 4,749 4,691 A mortization expenses for the period (38) (38) (38) (38) (58) Banco V otorantim Balance A ccumulated amortization (9) (19) (29) (40) (51) Balance w ithout amortization A mortization expenses for the period (5) (10) (10) (10) (11) Othe r e xpe ns e s of the Conglom e rate Balance - - 1,002 1,002 1,002 A ccumulated amortization - - (18) (36) (57) Balance w ithout amortization A mortization expenses for the period - - (18) (18) (21) Othe r e xpe ns e s of the Conglom e rate Quarte rly Flow Balance A ccumulated amortization (95) (95) (96) (97) (154) Balance w ithout amortization A mortization expenses for the period - - (1) (1) (57) Table 94. Intangible R$ million 1Q10 2Q10 3Q10 4Q10 1Q11 Rights due to payroll acquis ition Initial Balance 5,305 6,826 6,574 6,141 6,122 A mortization expenses for the period (503) (504) (503) (505) (505) Other (1) - (0) (15) 0 (0) A cquisitions 2, Final Balance (a) 6,826 6,574 6,141 6,122 5,624 Acquis ition/de ve lopm e nt of s oftw are Initial Balance A mortization expenses for the period (18) (23) (27) (30) (36) A cquisitions Other (1) - (0) (0) (0) (0) Final Balance (b) Othe r Intangible As s e ts Initial Balance A cquisitions Final Balance (c) Balance ( a+ b + c) 7,267 7,052 6,673 6,801 6,401 (1) This line comprises, among other items, the intangibles related to acquired banks, proportionally to the stake held by Banco do Brasil. Table 95. Estimate of Amortization of Intangible Assets R$ million Total A mounts to be A mortized 2,128 1,638 1, ,036 Banco do Brasil MD&A 1Q11 75

77 7 - Financial Results This chapter presents the Banco do Brasil s equity analysis (investments and funding) and the result analysis. The main equity items show the earning assets composition and interest-bearing liabilities, as well as the spread management of credit operations. In sections of the result shows the volume and rate with variations in the allocation of revenue and expense for the change in the average volume of items and property for the change in average interest rate. 7.1 Analysis of Investments Table 96. Av. Bal. of the Bal. Sheet Accounts and Info. on Interest Rates Earning Assets (Quarterly) R$ million Earning As s e ts Ave rage Balance Inte re s t Annualize d Rate (%) Ave rage Balance Inte re s t Annualize d Rate (%) Available Funds in Foreign Currency Securities + Interbank Investments on Hed 275,907 6, ,499 6, Loans + Leasing 328,775 13, ,572 14, Remunerated Compulsory Deposits 57,617 1, ,957 1, Total 663,039 21, ,771 21, Non Earning As s e ts Tax Credits 22,264 22,312 Other Assets 107, ,078 Permanent A ssets 27,394 26,954 Total 157, ,344 TOTAL ASSETS 820, ,114 Spread by Portfolio 4Q10 The following table shows the spread management by operations segmented. The spread is the result of managerial financial margin divided by their average balances. When assessing the managerial financial margin is initially received financial revenues, classified by portfolio type. After subtracting the expenses, which are added the opportunity cost for each set of lines in our portfolio. In the case of Individual and Business portfolios, the opportunity cost is the average selic rate on most lines. In the case of portfolio and other agricultural resources allocated, the opportunity cost is calculated according to the source of funding and the need or not compulsory application part of this funding. 1Q11 Table 97. Spread by Portfolio % 1Q10 4Q10 1Q11 Loan Ope rations Individuals Businesses Agribusiness Othe r Global Spre ad Banco do Brasil MD&A 1Q11 76

78 Securities Income Practically stable in relation to the fourth quarter of 2010, the income with securities ended the first quarter of 2011 with a balance of R$ 6,133 million. We emphasize the fewer working days in the first quarter of 2011 in comparison to the fourth quarter of 2010 (3 days), which recorded the highest recovery of this line. The continued up trend in the Selic rate has a negative influence on the income with securities on the short term as it impacts the prices of securities immediately, but with recovery over time due to the higher remuneration of this portfolio. It is important to note that the table below does not represent the result of Banco do Brasil's treasury department. The results from the operations of the entire Conglomerate (including non-financial companies, BB Banco de Investimento, Banco Votorantim, subsidiaries and branches based abroad) are only evidenced in the operations classified by the Brazilian Central Bank as Securities/Short-term Interbank Investments. Table 98. Securities Income Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Se curitie s Incom e 5,644 6,137 6, (0.1) Fixed Income Securities 5,598 6,032 5, (0.7) Revaluation Curve 2,249 2,771 2, (3.0) Income/Loss from Negotiation 79 8 (51) - - Mark to Market 12 (37) (30) - - Interbank Accounts 3,107 3,289 3, Foreign Income (99.8) (82.2) Others The figure below presents the classification of BB's portfolio of securities by type of index. The classification below does not include the portfolio of BV. 23% 75% 02% CDI / Average Selic Rate Fixed Other Figure 19. Securities Portfolio by Index (Multiple Bank) Banco do Brasil MD&A 1Q11 77

79 7.2 Analysis of Funding Table 99. Av. Bal. of the Bal. Sheet and Info. on Interest Rates Interest Bearing Liab. (Quarterly) R$ million Intere s t Be aring Liabilitie s Ave rage Balance Inte re s t Annualized Rate (%) Ave rage Balance Inte re s t Annualize d Rate (%) Saving Deposits 87,738 (1,557) ,385 (1,606) 7.3 Interbank Deposits 19,514 (359) ,766 (243) 6.8 Time Deposits 200,077 (4,294) ,313 (4,728) 9.1 Money Market Borrow ing 157,531 (4,213) ,850 (4,563) 10.9 Foreign Borrow ing 9,129 (34) 1.5 9,016 (30) 1.3 Onlending 50,123 (740) ,316 (709) 5.6 Financial and Development Funds + Subordi 26,721 (110) ,456 (126) 1.8 Foreign Securities Borrow ing 12,132 (76) ,198 (106) 2.8 Mortgage-backed Security 2,451 (90) ,368 (141) 13.6 Total 565,416 (11,472) ,666 (12,251) 8.4 Othe r Liabilitie s 4Q10 Demand Deposits 60,851 60,522 Other Liabilities 143, ,228 Shareholder s Equity 50,169 51,698 Total 255, ,448 TOTAL LIABILITIES 820, ,114 1Q11 Banco do Brasil MD&A 1Q11 78

80 7.3 Analysis of Volume and Spread The table below shows the appropriation of changes in interest income and expenses due to the change in the average volume of earning assets and interest bearing liabilities and the change in the average interest rate on such assets and liabilities, in the periods under analysis. The changes in volume and interest rate were calculated based on changes in average balances in the period and the changes in the average interest rates on assets generating income and liabilities generating expenses. The Average Rate variation was calculated by the variation in the interest rate in the period multiplied by the average quantity of assets generating income or by the average quantity of liabilities generating expenses in the first period. The Net Variation is the difference between the interest income of the present period and that of the previous period. The variation by Average Volume is the difference between the Net Variation and that resulting from the Average Rate. In the quarterly comparison, the increase in the average volume of earning assets offset the negative rate effect and contributed to the growth of net income from intermediation with R$ 81 million, net of expenses. Compared to the same prior-year period, the contribution to revenues was produced both by the volume increase and by the effect of the average rates that led to an increase of R$ 780 million in the result of income and expenses. Table 100. Int. Increase/Decrease (Inc./Exp.) due to Chg. in Quart. Vol. and Rates (Quarterly) R$ million Earning As s ets Average Volum e (1) 1Q11/4Q10 Ave rage Rate (2) Ne t Change (3) Average Volum e (1) 1Q11/1Q10 Ave rage Rate (2) Ne t Change (3) A vailable Funds in Foreign Currency 0 (5) (5) 6 (20) (14) Securities + Interbank Investments on Hedge 268 (271) (3) Loans + Leasing ,309 (189) 2,121 Remunerated Compulsory Deposits , ,322 Total 942 (81) 860 3, ,919 Intere s t Be aring Liabilitie s Saving Deposits (47) (2) (49) (220) (171) (391) Interbank Deposits (52) (61) (113) Time Deposits (314) (120) (434) (374) (869) (1,243) Money Market Borrow ing (428) 78 (350) (449) (940) (1,390) Foreign Borrow ing (4) Onlending (16) (254) 183 (71) Financial and Development Funds + Subord. Debt (3) (12) (16) (16) Foreign Securities Borrow ing (21) (8) (30) (34) 37 3 Mortgage-backed Security (62) 11 (51) (101) (23) (124) Total (814) 35 (779) (1,503) (1,635) (3,139) (1) Net variation Average rate (2) (Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period) (3) Current Interest - Interest for Previous Period Banco do Brasil MD&A 1Q11 79

81 7.4 Spread Table 101. Analysis of Volume (Earning Assets) and Quarterly Spread 4Q10 and 1Q11 R$ million 4Q10 1Q11 Abs. Chg. Volume: A ssets Earning Assets¹ 663, ,771 33,731 Net Interest Income 10,169 10, Spread - %² (0.0301) Gain/(loss) w ith volume 10, Gain/(loss) w ith spread 9,969 (200) Gain/(loss) w ith volume and spread (10) (1) Average balances (2) Gross financial margin / (Earning assets) Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 NII / (Earning Assets) - Annualized NFM / (Earning Assets) - Annualized Figure 20. Analysis of Spread Table 102. Margin, Net of Interest and Profit Margin R$ million 1Q10 4Q10 1Q11 Average Earning Assets (A EA ) 590, , ,771 Average Interest Bearing Liabilities (A IBL) 519, , ,666 Net Interest Gain (1) 8,925 9,625 9,706 Interest Income 18,038 21,097 21,957 Interest Expense (9,113) (11,472) (12,251) Net Interest Income Other Items (2) NII 9,357 10,169 10,476 A IBL / A EA % Interest Rate on AEA (3) (7)- % Interest Rate on AIBL (4) (7)- % Net Interest Rate (5) - % A djusted NIM (6) (7) - % NIM (7) % (1) Defined as interest income less interest expenses. (2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature. (3) Total interest income divided by the average balance of assets generating income. (4) Total interest expenses divided by the average balance of liabilities generating expenses. (5) Difference between the average rate of assets generating assets and the average rate of liabilities generating expenses. (6) Income net of interest divided by the average balance of assets generating income. (7) Rates are annualized Banco do Brasil MD&A 1Q11 80

82 8 - Non-Financial Business 8.1 Fee Income We emphasize revenues from cards, which exhibited growth both comparing quarter and in 12 months. These revenues were driven mainly by agribusiness transactions, payment of bills and corporate credit lines. Table 103. Bank Fee Income Quarterly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Fee Income 3,703 4,306 4, (4.6) Account Fees 875 1, (0.6) (16.0) Credit / Debit Cards (1.8) Asset Manegement Fees Loan Fees (9.8) Collections (4.1) Insurance, Pension and Savings Bonds Billings Interbank (0.0) Capital Market Fees (11.3) (16.4) Other (11.8) 0.2 Table 104. Customer Base and Checking Accounts Quarterly Flow Chg. % thousand 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 On 1Q10 On 4Q10 Customers 52,695 53,535 53,349 54,510 54,366 54, Checking Accounts 34,988 35,234 34,920 35,682 35,934 35, (1.8) Individuals 32,781 32,910 32,695 33,469 33,758 33, (1.9) Business 2,207 2,324 2,225 2,213 2,176 2,176 (6.4) (0.0) Despite the decrease in the quantity of checking accounts, caused by the base review process, the number of clients recorded growth in the quarter. Banco do Brasil MD&A 1Q11 81

83 8.2 Cards The reduction in the volume of cards was due to the maintenance of the expense rationalization process through the write-off of unused cards. For seasonal reasons, in the first quarters of each year the performance is poorer than in other quarters, mainly due to the lower number of business days and due to the strong basis of comparison represented by the last quarter of each year, in which the year-end shopping season increases billing and the number of transactions. Table 105. Cards Quarterly Flow Chg. % 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 On 1Q10 On 4Q10 Issue Cards - million (2.6) (4.7) Credit Cards (5.9) (3.5) Debit Cards (1.0) (5.2) Revenues - R$ billion (9.8) Table 106. Total Card Revenues Quarterly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Fee Income - Cards (1.8) Financing Income (2.3) Other Income and Other Services (11.4) (11.4) Total Revenues* 1,394 1,678 1, (2.3) Banco do Brasil MD&A 1Q11 82

84 8.3 Insurance The statement of income of insurance is also disclosed in explanatory note (EN) 21, which refers to Insurance, Pension and Saving Bonds Operations. There are differences between the result presented in the aforesaid note and the information detailed in this chapter, described below. The information contained in the above note was prepared according to the guidelines of Resolution CVM 582/2009 (CPC 22), having the mandatory nature of individualized financial information as one of its assumptions. The amounts were calculated considering the book balances of Aliança do Brasil; Brasilveículos; Brasilprev; Brasilcap; Brasilsaúde; SBCE - Seguradora Brasileira de Crédito à Exportação; BB Corretora; BB Seguros Participações; BB Aliança Participações and Nossa Caixa Capitalização. The insurance ratio shown in this chapter includes the performance added by five companies in the Conglomerate active in strategic insurance plan segments. Aliança do Brasil; Brasilveículos; Brasilprev; Brasilcap and Brasilsaúde. The net profits of these companies (in proportion to BB's interests in the capital of each one of them) are added to the net brokerage revenues earned by BB Corretora and to the net fees earned from insurance business of BB Multiple Bank. Continuing the restructuring in the Saving Bonds segment started in 2010, the year 2011 began with BB Seguros signing a contract of purchase and sale for the acquisition of all the shares held by Sul América in Brasilcap Capitalização S.A. For this year, the intention is to conclude the other restructuring processes and to increase the share of the Financial Group in the insurance market. The table below shows the holdings in total capital and the line of business of each one of these companies as of December Table 107. Insurance, Pension Plan and Saving Bonds Companies Company Share % Business Partnership Cia. De Seguros Aliança do Brasil S.A Health and Other Activ - Brasilprev Pension Principal Financial Group BrasilVeículos Cia de Seguros Savings Bonds Sul América Seguros Brasilcap Health Icatu Hartford, Sul América e Aliança da Bahia Performance and Market According to data from the Superintendence of Private Insurance - SUSEP, in the first two months of 2011, the premiums issued by the Brazilian insurance market amounted to R$16.0 billion, growth of 22.9% when compared with the same period of last year. People insurance premiums amounted to R$5.4 billion, down 26.0% over the 1 st two-month period of Consequently the segment corresponded to 33.4% of the total market. In the Auto group there was growth of 6.4% in premium revenues, which totaled R$ 3.7 billion. The share of this line came to 23.2%. The premiums issued by the Patrimonial group reached R$1.5 billion, up 23.8%. The share of the segment was 9.6%. The other insurance lines recorded expansion of 439.4%, with a volume of premiums of R$5.4 billion. They corresponded to 33.8% of the total. The Pension market (except for VGBL type products) presented a total inflow of R$1.5 billion, growth of 10.9%. PGBL plans grossed R$ 1.0 billion, against R$ million of Traditional plans. The VGBL Banco do Brasil MD&A 1Q11 83

85 segment, which is included in the insurance market, raked in R$4.2 billion. The quantity of participants amounted to 18.3 million and that of beneficiaries to thousand. Provisions for pension plans amounted to R$92.0 billion, expansion of 13.9%. The revenues of the Saving Bonds companies reached R$1.9 billion, up 20.3%. Provisions reached R$17.5 billion compared to R$15.3 billion from Consolidated As verified in the table below, in relation to the 1st quarter of 2011, the consolidated net income of insurance companies was R$ million, growth of 14.7% over the 1 st quarter of The Insurance (Auto, Life and Property/Casualty) contributed with 44.1%, while Private Pension participated with 39.0% and Saving Bonds 16.9%. These results mirror the success of the corporate restructuring, started in 2009 with the acquisition of all the shares of Aliança do Brasil, and in 2010, with the percentages of 25% of Brasilprev and 30% of Brasilveículos. In analyzing the segments separately in terms of Net Results, we can observe growth of 115.0% in Auto insurance, 28,3% in Pension, and Saving Bonds with growth of 22.7%, which were sufficient to overshadow the reduction of 5.6 % in the segments of Life and Property/Casualty. Table 108. Income Statement by Line of Business R$ mil 1Q11 A ut o Insurance Lif e and Ot her C g h. % o n 1Q10 Rev. from Ins., Pens. Plans and Sav. Bonds 371, ,451 1,041,491 3,258, ,046 5,000, Retained Insurance Premiums 371, ,451 1,041, ,041, Revenues from Pension Plans ,258,541-3,258, Revenues from Savings Bonds , , Changes in Technical Provisions 17,231 (51,256) (34,025) (3,181,364) (603,596) (3,818,986) 54.0 Insurance 17,231 (51,256) (34,025) - - (34,025) Pension Plans (3,181,364) - (3,181,364) 63.8 Savings Bonds (603,596) (603,596) 14.2 Benefits and Redemption Expenses (58,644) - (58,644) 11.4 Capitalization Bonds Prescription Earned Premiums 388, ,194 1,007, ,007, Retained Claims (275,905) (207,829) (483,734) - - (483,734) 25.9 M arketing Expenses (49,358) (165,340) (214,698) (35,347) (46,161) (296,207) 16.9 Insurances (49,358) (165,340) (214,698) - - (214,698) 17.9 Pension Plans (35,347) - (35,347) 33.7 Savings Bonds (46,161) (46,161) 2.7 Other Operating Income (Expenses) (12,897) (95,324) (108,222) 141,085 (4,184) 28, Business Result 50, , , ,271 46, , Administrative Expenses (37,136) (28,343) (65,479) (60,146) (15,296) (140,921) 7.9 Tax Expenses (8,675) (23,152) (31,826) - (4,829) (36,655) 12.8 Financial Income 22,962 45,985 68,947 99,800 43, , Financial Revenues 27,383 68,360 95, , ,178 1,087, Financial Expenses (4,421) (22,375) (26,796) (764,380) (83,893) (875,068) 21.4 Operating Income 27, , , ,925 69, , Equity Account Adjust 9 2,538 2, ,546 - Non-operating Income (74.3) Income before Taxes 27, , , ,931 69, , Inc and Soc Contrib Taxes (10,537) (52,261) (62,798) (64,298) (28,075) (155,171) 25.0 Profit Sharing (1,236) (1,449) (2,684) (2,824) 303 (5,205) 31.1 Net Income (Loss) 15, , , , , , Average Shareholder's Equity 416, ,783 1,375, , ,489 2,144, ROE (Annual) *The Contract of Purchase and Sale for the sale of all the shares held by BB Seguros was established (49.9% of the total capital) in Brasilsaúde to Sul América. The transaction's final price on 08/07/2010 when the agreement was settled, was of R$ 29.2 million. T o t al Pensio n Plans Saving s B o nd s Consolidat ed Banco do Brasil MD&A 1Q11 84

86 Table 109. Operating Highlights of the Insurance Group Balance Var. % Mar/10 Dec/10 Mar/11¹ On Mar/10 On Dec/10 Aliança do Brasil Revenues - R$ million Lives Insured thousand 2,226 3,200 3, Volume of Managed Portfolio 1,464 1,739 2, Technical Reserves 1,169 1,278 1, Market share - rural line - % 23.3% 44.1% 35.3% Market share - life line - % 10.6% 11.5% 11.4% Rural line position 1º 1º 1º Life line position 3º 4º 4º Brasilcap Revenues - R$ million Quantity of Bonds thousand 3,244 3,449 3, Volume of Managed Portfolio 3,899 4,390 4, Quantity of Prize-w inning Bonds 6,191 13,551 4,840 (21.8) (64.3) Sum of Prizes Distributed 24,708 31,767 22,658 (8.3) (28.7) Technical Reserves - R$ million 3,729 4,194 4, Market share - collection - % 22.7% 23.2% 23.6% Market share - reserves - % 24.1% 24.3% 24.2% Brasilprev Revenues - R$ million 2,004 3,316 3, (1.7) Rate of Redemptions - % 7.9% 7.5% 8.0% Active agreements - thousands 3,406 3,949 2,048 (39.9) (48.1) Volume of the Managed Portfolio - R$ million 28,982 37,199 40, Technical Reserves - R$ million 28,620 36,759 40, Market share - collection - % 19.9% 21.1% 27.4% Market share - reserves - % 15.5% 17.0% 17.6% Collection Ranking 2º 2º 2º Reserves Ranking 3º 3º 3 Brasilveículos Revenues - R$ million (8.0) Fleet thousand 1,021 1,028 1, Volume of the Managed Portfolio - R$ million Technical Reserves - R$ million 1,032 1,126 1, Rate of Portfolio Retention - % 85.2% 80.7% 81.2% Market share - % 7.7% 7.8% 7.3% Ranking 6º 6º 6º (1) Data related to Feb/11. Performance per Company We emphasize below the main variations over the first quarter of 2011, over the preceding quarter and over the first quarter of the prior year. Aliança do Brasil In the first quarter of 2011, Aliança do Brasil presented a scenario of growth in its production. This performance is even more pronounced because of the spin-off that occurred in its operations between the lines of Life/People and Property/Casualty, a result of the restructuring organized by the Banco do Banco do Brasil MD&A 1Q11 85

87 Brasil financial group in its area of insurance. The proportion between the lines before the spin-off was approximately 85% and 15% of the turnover, respectively. The Retained Premiums of the insurance company grew 11% in the first quarter of 2011 in comparison with the same prior-year period, reaching R$ 569,077 thousand of accumulated earnings. It is emphasized that the comparative basis presented the figures before the spin-off, further reinforcing the company's good performance. With the spin-off, the company initially needed to increase its expenditures with the restructuring and internal reorganization, slightly affecting its efficiency and therefore its operating results. Despite the increase in its turnover, its net income with insurance operations was 17.4% lower, totaling R$ 97,678 thousand in the period. As a means of offsetting this decrease, the company sought to optimize its financial results, which grew by 36.5%, rising to R$ 38,816 thousand. Accordingly, its general operating income had a less accentuated downslide of 7%, amounting to R$ 136,494 thousand. Such actions caused its net income in the first quarter of 2011 to be only slightly lower than that obtained in the same prior-year period. Retained earnings of the quarter were R$ 88,804 thousand, down 9%, which represented average monthly profitability of 3.5% (5.8% in 2010). Brasilcap In the 1 st quarter, Brasilcap's revenues from premiums presented growth of 15.2% over the same prioryear period, totaling R$ million. We emphasize the turnover of the Single Payment (PU) plans, which reached R$ million, up 25.8%. The new sales (First Installment) of the Monthly Payment (PM) recorded a downslide of 17.2%, reaching R$ 24.8 million, while revenues from other parts totaled R$ million (+12.7%). With this result, the company's turnover mix, in the first quarter of 2011, was 32.9% for the PU plans against 67.2% for the PM products. Last year, the distribution was 30.1% for the Single Payment products and 69.9% for those of Monthly Payment. This increase trend of share in the Single Payment products compared to total revenues of the company favors the accumulation of reserves. Brasilcap's investment portfolio reached R$4.4 billion, expansion of 13.8%. However, the financial market volatility, fueled by uncertainty regarding the course of the interest rate, meant that the company recorded a downslide in its financial results of 6.3% in relation to the 1st quarter of Marketing expenses had a small increase of 2.6%, far below the increase in the company's turnover. Administrative expenses rose 6.7%, impacted mainly by the growth in personnel expenses due to the annual collective bargaining, which ranged from 6.5% to 7.5%. Even with the reduction of the financial result, Brasilcap presented net income of R$ 42.1 million, expansion of 22.5%. Brasilcap maintained its leadership in Susep's accumulated earnings ranking up to February/11. The company achieved a market share of 23.6%, against 22.7% for the 1 st two-month period of In the ranking of reserves, the company achieved 0.1% of market share, reaching 24.2% and maintaining the 1 st position. Brasilprev Brasilprev's takings reached R$ 3.3billion in the 1 st quarter, up 62.6% over the same prior-year period. The higher sales were once again sustained by products of the VGBL type, which attained a turnover of R$ 2.7 billion, a result 77.1% higher than that verified in the first quarter of With this performance, the VGBL category began to represent 84.2% of the total volume obtained, against 77.3% in the first quarter of Income from contributions of pension products (PGBL and Traditional) totaled R$ million, an increase of 13.1%. Banco do Brasil MD&A 1Q11 86

88 The company's strong sales were reflected in the 39.8% growth of its investment portfolio, which reached the milestone of R$ 40.5 billion. This increase in assets managed by the company helped to boost the increase of 36.2% of its revenues from management fees. The growth of the portfolio and the good management of resources also supported the expansion of the financial results by 10.3%. Selling expenses and expenses with benefits and redemptions rose 33.7% and 11.4%, respectively. These figures weighted by the expansion in revenue show that Brasilprev continue to present good business efficiency and client retention rates. The increase of 22.9% in administrative expenses is explained by the Company's need to adjust to the growth of the plan portfolio under its management. The good operating and financial performance led Brasilprev to reach a net income of R$96.8 million, surpassing 28.3% the profit accumulated in the first quarter of With data accumulated up to February 2011, Brasilprev continued in 2 nd position in the total collection ranking of the Brazilian Federation of Private Pension Plans and Life Insurance (FENAPREVI). However, the company increased its market share by 8.7 percentage points (from 18.7% to 27.4%), reducing by 15.3% its difference in relation to Bradesco, whose market share decreased from 35.1% to 28.6%. In the PGBL ranking, the Company's market share decreased by 2.7% of the total collected (24.2% of the market), whereas Bradesco's market share of this segment increased by 0.3% (22.8%). Among the VGBL plans, the Company surpassed Bradesco, reaching a market share of 28.9%, against a market share of 28.8% of its competitor. In 2010, Brasilprev had a market share of only 17.9%, followed only by Itaú Unibanco (18.1%) and Bradesco (37.4%). This good performance in sales of VGBL products supported the Company's rise in the ranking of total revenues. Bradesco only remains as the leader of the overall ranking thanks to its 37.2% share of the total amount collected in the Traditional segment. In this segment, the Company's share of the total amount collected is 16.5%. In the portfolio race, the distance to Bradesco (1 st ) and Itaú Unibanco (2 nd ) is still considerable. In February, Brasilprev had a portfolio of R$39.2 billion, against R$79.4 billion of the leader and R$53.3billion of the first runner-up. Brasilveículos In the 1 st quarter of 2011 the Retained Premiums of Brasilveículos increased by 2%, totaling R$ 371,040 thousand. This poor performance is explained by the substantial increase in the cancellation of premiums, which increased 29%, to R$ thousand, from one year to another, starting to represent 18.4% of net revenues (14.5% in 2010). Offsetting this trend, the Company, in view of the recovery of the quality of the portfolio and improved managerial control, reversed provisions previously established, particularly that for Risks in Force but not Issued (RVNE), which corresponds to an estimate of the Provision for Unearned Premiums (PPNG) of risks that already started in a certain month, but whose issues will take place in subsequent months, and, therefore, were not included in the calculation of the PPNG established for the current month. Such reversal was also necessary for covering the increase in claims. In the year-to-date, the total claims were 70.1% (60.3% in the first quarter of the prior period). The increase in the commercial expenses of the insurance business, particularly commissions on premiums issued (increase of 16%, to R$ 48,060 thousand) was fully offset by the increase in service revenues, mainly the gains on insurance policy costs, which amounted to R$ 27,362 thousand (+63.6%). In relation to administrative expenses, the latter decreased by 4% in comparison to the total expenses, amounting to R$ 45,810 thousand, and the highlights were the maintenance of personnel expenses at the same thresholds and the lower advertising costs, which decreased by 62.1% (R$ 1,996 thousand in 2011 against R$ 5,276 thousand in 2010). Taking advantage of the high interest rates, Brasilveículos sought to increase its financial gains. Finance income increased by 26% in the period, totaling R$ 22,962 thousand. Banco do Brasil MD&A 1Q11 87

89 With these actions, net income increased 115% at the end of the first quarter in comparison to the first quarter of the previous year, totaling R$ 15,502 thousand, with a net margin of 4.2% and a return on equity of 3.7% (2.0% and 2.2% in 2010, respectively). Insurance Ratio The Insurance Ratio reflects the participation of the insurance business in the Conglomerate's Result, that is, how much the Insurance, Open Pension Plan and Saving Bonds lines added to Banco do Brasil's final result. Table 110. Consolidated Insurance Ratio Quarterly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Insurance Result (9.8) Brokerage Net Revenue Service Fee Net Income Equity In The Earnings (Loss) (20.7) BB Recurring Income 2, , , (21.1) Insurance Ratio (%) (12.6) 14.3 Combined Ratio The combined ratio, which expresses the percentage of earned premiums that is consumed by Operating expenses in the insurance business (Retained claims, Marketing expenses, Administrative expenses and Other operating income expenses). It is important to mention the increase in the caption "Other operating income (expenses) in the calculation of the ratio which changed the historical series. In the following graph, we can notice index evolution during the quarters Consolidated Vehicle , Q10 2Q10 3Q10 4Q10 1Q11 1Q10 2Q10 3Q10 4Q10 1Q11 Life and P&C Figure 21. Combined Ratio 1Q10 2Q10 3Q10 4Q10 1Q11 Administrative Expenses / Marketing Claims Earned Premiums Combined Ratio Banco do Brasil MD&A 1Q11 88

90 8.4 Capital Market Domestic Market Banco do Brasil operates in the domestic capital market through BB Banco de Investimento S.A. - BB-BI, with a focus on Retail investors, taking advantage of its wide distribution network, as well as on institutional investors. In the first quarter of 2011, BB-BI participated in 11 issues of fixed-income securities, among promissory notes and debentures, which totaled R$ 4,614 billion. In the securitization segment, BB coordinated the 01 issue of Receivables Investment Funds - FIDCs (the only issue carried out in the first quarter of 2011, in accordance with Anbima's ranking) and 02 Certificates of Real Estate Receivables (CRIs), totaling R$ million. In the Anbima ranking (accumulated in 12 months), the BB-BI is leader of both the fixed income market (14 operations) and variable income (8 operations), with market-share of 29.2% (origination) and 60.4% (distribution), respectively. In the private equity sector, BB-BI has been operating as an investor since 2004 and currently owns units of 12 funds. Since 2007, it has been rendering economic and financial advisory services for Equity Funds, operating as an advisor to 4 invested funds. The total capital allocated by BB-BI to the private equity sector is R$ million Table 111. Consolidated Information on the FIPs/FMIEEs - Position 1Q11 R$ million Commited Capital BB-BI Share (%) AG Angra Infra Estrutura Logística Brasil FIP FIP Brasil Energia InfraBrasil FIP FIP COLISEU Rio Bravo Nordeste II FMIEE Jardim Botânico VC I - FMIEE Fundotec II FMIEE Brasil Agronegócio FIP Brasil Sustentabilidade FIP Fundo Brasil de Governança Corporativa - FIP Fundo Brasil de Internacionalização de Empresas - FIP International Market In the international capital market, BB, through its overseas brokers BB Securities Ltd (London) and Banco do Brasil Securities LLC (New York), took part in 3 of the 17 foreign funding operations carried out by companies, banks and the Brazilian government, of which 2 had lead manager condition and 1 co-manager status. Of the total sum of approximately US$ 12.2 billion issued in the quarter, BB participated in around US$ 2.3 billion. In addition, BB Securities Ltd has acted as a co-manager in the issue of US$ 2 billion of Banco BNP Paribas. Banco do Brasil MD&A 1Q11 89

91 9 - Administrative Expenses 9.1 Human Resources In the twelve-month comparison, the growth of the line of Personnel Expenses was mainly due to the average salary adjustment of 7.5% of 2010, and to the increase of around 7,400 employees in the period. Table 112. Personnel Expenses Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Pe rs onne l Expe ns e s (2,851) (3,270) (3,145) 10.3 (3.8) Salaries (1,306) (1,847) (1,469) 12.5 (20.5) Benefits (426) (464) (445) 4.5 (4.1) Social Charges (483) (634) (536) 11.0 (15.4) Training (13) (33) (11) (19.3) (66.7) Pension Fund (52) (80) (68) 30.5 (15.2) Remuneration for Counselors and Directors (14) (13) (14) (0.1) 2.2 Administrative Personnel Provisions (557) (199) (602) The following figure shows the growth of BB's staff. The opening of new branches and the re-adaptation of the customer service model, with better allocation of employees directly involved in customer care at the branches, in order to monetize the customer base, explain the growth observed. 10,019 10,129 10,000 9,853 9, , , , , , , , , , ,224 Mar/10 Jun/10 Set/10 Dez/10 Mar/11 Total Employees Interns Figure 22. Charges in Workforce Banco do Brasil MD&A 1Q11 90

92 9.2 Operating Structure The strict control of BB's expenses combined with the synergies obtained in the integration of BNC, drove the good behavior of expenses. The Outsourced Services line was impacted in the fourth quarter of 2010, due to the launch of the new Real notes. This action required an increased transportation of paper currency to a number of locations. These expenses went back to normal in this quarter, which caused a downslide of 14.7% in the period. On the Marketing & Public Relations line, the basis of comparison also explains the performance observed, since there were restrictions on government-controlled companies until Oct/10 as it was election time. The reduction in expenses with Communication and Data Processing results from the synergy gains related to integration of BNC. Table 113. Other Administrative Expenses Quarterly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Othe r Adm inistrative Expe ns e s (2,449) (2,798) (2,547) 4.0 (9.0) Telecommunications and Data Processing (638) (586) (538) (15.7) (8.2) Amortization and Depreciation (273) (301) (317) Security. Guard and Transport Services (329) (388) (373) 13.3 (4.0) Expenses w ith Premises and Equipment (330) (357) (368) Marketing and Public Relations (129) (188) (127) (1.4) (32.5) Expenses w ith Outsourced Services (418) (520) (443) 6.0 (14.7) Other Administrative Expenses (332) (457) (382) 15.1 (16.5) Service Network With national coverage and present in 4,383 Brazilian municipalities, besides overseas branches located in 23 countries, BB has the largest network of branches in Brazil. In addition to its own distribution network, BB also has partnerships for the sharing of self-service terminals and to use the chain of lottery kiosks that performs withdrawals, deposits, payments and other services. Besides reducing costs with new investments and with terminal maintenance, these partnerships consolidate the dispersed and national customer service of Banco do Brasil. The tables below present BB's distribution network and its distribution by region of the country. Table 114. Distribution Network Total Quarte rly Flow Chg. % M ar/10 De c/10 M ar/11 On M ar/10 On De c/10 Dis tribution Channe l Branches 4,960 5,087 5, SA A 4,647 4,815 4, Services Posts 8,423 8,457 8, Subtotal 18,030 18,359 18, Bank ing Age nte s 5,727 10,145 10, Share d Dis tribution Channe ls CEF - lottery stores 10,887 10,748 10,622 (2.4) (1.2) Banco 24h 7,863 10,294 10, Subtotal 18,750 21,042 21, Total 42,507 49,546 50, Banco do Brasil MD&A 1Q11 91

93 Table 115. Network of Branches by Region BB BI Share % North Northeast 1,061 2, Middle West 431 1, Southeast 2,296 10, South 1,046 3, Total 5,103 19, The overseas network is comprised by 47 facilities located in 23 countries (13 branches, 8 sub-branches, 11 representation offices, 7 subsidiaries, 5 associated subsidiaries, 2 shared service units and 1 business units). In order to supplement this structure, Banco do Brasil has an agreement with other foreign financial institutions to serve its clients: at the end of last March, there were 1,066 banks acting as BB's correspondent banks in 133 countries. Table 116. Distribution Network Abroad Branche s Sub-branche s Re pre s e ntative Office s Subs idiarie s and affiliate s Share d Se rvice s Units Bus ine s s Units A ssuncion Cidade do Leste Caracas Banco do Brasil A G BB USA Servicing Center Rome Buenos Aires Gifu Mexico City Banco do Brasil Securities LLC BB Europa Servicing Center Frankfurt Gunma Dubai BB Leasing Company Ltd. Grand Cayman Hamamatsu Hong Kong BA MB Brazilian American Merchant Bank La Paz Ibaraki Lima BB Securities Ltd. Londres London Nagano Luanda BB USA Holding Company Madrid Nagóia Montevideo BB Money Transfers, Inc. Miami Santa Cruz de La Sierra Panama Banco do Brasil A G - Branch Office in Portugal - Cascais Milan Seoul Banco do Brasil A G - Branch Office in Portugal - Marquês de Pombal New York Washington Banco do Brasil A G - Branch Office in Portugal - Parque das Nações Paris Shanghai Banco do Brasil A G - Branch Office in Portugal - Porto Santiago Banco do Brasil A G - Branch Office in Portugal - Costa da Caparica Tokyo Banco do Brasil MD&A 1Q11 92

94 Automated Channels Banco do Brasil s self-service network represents a strategic differential, offering an extensive range of services to clients, besides supporting the cost control strategy of the institution. The graph below contains an itemized description of the terminals from BB's own network as well as the machines originating from strategic partnerships, such as the external terminals of Caixa Economica Federal (CEF), Banco Regional de Brasilia (BRB) and the service network of Banco 24h. 1,419 1,816 1,816 1,804 1,804 7,863 8,379 9,248 10,294 10,894 45,817 43,942 44,180 44,954 44,340 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Figure 23. Automated Teller Machines ATM: BRB + CEF ATM: Banco 24h Automated Teller Machines The ATM's are responsible for the processing of an expressive portion of the total banking operations performed by Banco do Brasil. The figure below shows that 92.9% of transactions are carried out through alternative channels at the end of the first quarter of 2011.The changes in COBAN and others line was due to the inclusion of Automatic Debts agreements, that will be informed from this quarter on Q10 2Q10 3Q10 4Q10 1Q11 COBAN e Outros POS Caixa Internet PJ Internet PF TAA Trans. Automatizadas Figure 24. Transactions by Customer Service Channel - % Banco do Brasil MD&A 1Q11 93

95 9.3 Other Income Information The remaining variations in other operating income and expenses may be found in the tables below. Table 117. Other Operating Income Quarte rly Flow Chg. % R$ milhões 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Othe r Ope rating Incom e 1,043 1,692 1, (6.2) Recovery of charges and expenses (48.2) (37.0) Income from guarantee deposits Update on Allocation of Surplus Funds - Previ Other (15.8) Table 118. Other Operating Expenses Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Othe r Ope rating Expe ns es (2,437) (3,267) (2,980) 22.3 (8.8) A ctuarial Liabilities (289) (303) (220) (23.9) (27.5) Other Operating Expenses f rom Non-Financial Assoc (319) (333) (362) Business Partners (234) (300) (190) (18.9) (36.8) Credit Card Transactions (227) (217) (258) Premiums Paid to Clients - Loyalty Program (125) (356) (325) (8.6) Restatement of Guarantee Deposits (115) (147) (100) (13.4) (31.9) Premium over Payroll Loans A cquired (88) (254) (270) Hybrid Capital and Debt Instruments (81) (69) (56) (30.9) (18.4) Discounts Granted on Renegotiations (59) (89) (62) 4.8 (30.6) Update of Obligations due to Investment Acquired - (66) (47) - (27.8) Goodw ill Amotization (43) (67) (148) Failures/Frauds and Other Losses (59) (78) (82) Other (797) (988) (860) 8.0 (13.0) Banco do Brasil MD&A 1Q11 94

96 9.4 Productivity Ratios In this section the productivity ratios usually adopted in the analysis of financial institutions are shown below. In comparison with the previous quarter, the impact of the recognition of revaluation of actuarial assets and liabilities of the defined benefit plan of Previ (R$ 1.3 billion) explains the result. In twelve months, the favorable performance of banking service fees and control of administrative expenses led to an improvement in the ratio that measures personnel expenses coverage as well as that which measures administrative expenses coverage. The efficiency indicators base on cumulative 12 month permits analysis with lower volatility, especially in comparison with peers quarters (2Q and 4Q). In this view, there is an improvement of 210 basis points compared 1Q11-1Q10 and 80 basis points about 4Q10. Table 119. Coverage Ratios Without One-Off Items Quarte rly Flow R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Fee Income 3,606 3,703 4,026 4,138 4,306 4,108 Administrative Expenses 5,469 5,749 5,710 6,242 5,941 5,870 Personnel Expenses 2,894 3,062 3,211 3,442 3,178 3,224 Fe e Incom e / Pe rs onne l Exp.¹ Fe e Incom e / Adm inis t. Exp.² (1) In the calculation of this ratio Labor Claims are included. (2) In the calculation of this ratio Legal Risk is included (Legal Claims and Labor Lawsuits). Table 120. Efficiency Ratios without One-Off Items Quarte rly Flow R$ million 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Ope rating Incom e (A) 12,315 12,986 13,378 13,861 15,227 14,337 Gross Income from Financial Intermediation 5,829 5,634 6,256 6,619 7,679 7,221 A llow ance for Loan Losses 2,950 2,959 2,525 2,648 2,112 2,631 Fee Income 3,606 3,703 4,026 4,138 4,306 4,108 Equity Int. in the Results of Subs. and Af fil. (49) (89) (36) (20) Income f/ Insurance, Pension & Savings Bond Other Operating Revenues 2,298 2,707 2,714 3,220 4,297 3,037 Other Operating Expenses (2,726) (2,508) (2,641) (3,163) (3,621) (3,151) Adm inis trative Expe ns e s (B) 5,469 5,749 5,710 6,242 5,941 5,870 Personnel Expenses 2,894 3,062 3,211 3,442 3,178 3,224 Other A dministrative Expenses 2,575 2,687 2,499 2,800 2,762 2,645 Cos t Incom e Ratio (B/A) - % Cos t Incom e Ratio (B/A) 12 m onths - % Banco do Brasil MD&A 1Q11 95

97 The table below presents other outcome indicators used. Table 121. Other productivity Ratios Quarte rly Flow 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Assets per Employee - 6,221 6,362 6,494 6,727 6,824 7,174 Checking Accounts per Employee Employees/(Branches+PAA +PA B) Credit Portfolio/Points of Service - R$ million Fee Income/Points of Service Personnel Expenses per Employee Checking Accounts/(Branches+PAA +PAB) 5,166 5,170 5,098 5,168 5,189 5,102 Banco do Brasil MD&A 1Q11 96

98 10 - Risk Management 10.1 Risk Management The risk management Risk management in the Financial Group of Banco do Brasil covers in a comprehensive manner: credit, market and liquidity and operational risks. Management activities are performed by specific and specialized structures, according to objectives, policies, strategies, processes and systems described in each one of these risks. Although activities are focused on credit, market, liquidity and operational risks, the Bank adopts mechanisms to ensure the sufficiency of capital to cover other risks incurred. Collegiate risk management is performed completely apart from the business units. Risk and concentration policies are specified by the Bank's Board of Directors and by the Global Risk Committee (CRG), a discussion group composed by the President and by vice-presidents. Actions for implementing and monitoring guidelines issued by the CRG are directed at specific sub-committees (Credit, Market, and Operations), which are groups formed by Directors. To find out more about the risk management process at Banco do Brasil, access the website bb.com.br/ri. The tables and graphs contained in this chapter do not consider the financial information of Banco Votorantim (BV), unless there is explicit reference to the contrary. Accordingly, the term BB Consolidated is defined as Banco do Brasil in Brazil and abroad, excluding BV Credit Risk Credit Risk is defined as the possibility of losses associated with non-performance by the borrower or counterparty of their respective financial obligations under the agreed terms, with loan agreement devaluation arising from the deterioration in the borrower's risk rating, with reduced earnings or remuneration, with benefits granted in the renegotiation and with recovery costs. The definition of credit risk involves, among others: the credit risk of the counterparty, is the possibility of non-performance, by a particular counterparty, of obligations relating to the settlement of transactions involving the trading of financial assets, including those relating to the settlement of derivative financial instruments; the country risk, is the possibility of losses associated with the non-performance of financial obligations under the terms agreed by a borrower or counterparty located outside the country, as a result of actions taken by the government of the country where the borrower or counterparty is located, and the transfer risk, understood as the possibility of obstacles in the currency conversion of amounts received; the possibility of outlays to honor sureties, guarantees, co-obligations, loan commitments or other operations of a similar nature; and the possibility of losses associated with the non-performance of financial obligations under the terms agreed by the intermediary or contracting party of loan operations. In Banco do Brasil, the credit risk management structure is composed of a Risk Management Director, a Credit Director, and an Operating Assets Restructuring Director, and the Risk Management Director, by appointment of the Board of Directors, is in charge of the Bank's credit risk management. This structure is in accordance with CMN Resolution 3721 dated April 30, Banco do Brasil MD&A 1Q11 97

99 Market Risks Market Risk reflects the possibility of losses resulting from fluctuations in the market s of positions held by a financial institution. It includes the risks of operations subject to foreign exchange variation, of interest rates, of stock prices and of commodity prices. The Risk Management Directorate (Diris), as provided for in Resolution 3464, of , is responsible for managing market and liquidity risk at Banco do Brasil, with a structure for managing market and liquidity risks consistent with the nature of operations, the complexity of products and the dimension of the institution's risk exposure, segregated from the trading units and from the unit executing the internal audit activity. BB uses statistical methodologies to measure the market risks of its positions. Among the metrics resulting from the use of these methodologies, it is worth highlighting: Sensitivity, Value at Risk (VaR) and Stress. Banco do Brasil adopts the policy of managing its exchange risk so as to reduce its effects on the consolidated economic and financial result. Following, we present the statement of assets, liabilities and derivatives of BB Consolidated, referenced to foreign currencies. Net foreign exchange exposure, for is negative in the amount of US$ million, reflecting the fiscal hedging strategy adopted by the Bank. The purpose of tax hedge is to reduce the volatility of the result, after the tax effects, since exchange gains on investments abroad are not subject to taxation and likewise losses do not generate deduction in the tax basis. Table 122. Balance in foreign currencies R$ million BALANCE SHEET CURRENCY ASSETS LIABILITIES U.S. Dollar 61,724 69,409 Euro 9,170 9,454 Pound Sterling Yen 1,467 1,282 Sw iss Franc Gold 13 - Ohter Total 72,822 80,442 Net Position - Equity (7,620) DERIVATIVES CURRENCY LONG SHORT U.S. Dollar 16,709 9,607 Euro 1,710 1,857 Pound Sterling Yen 2,087 2,195 Sw iss Franc 2 91 Other Total 20,882 14,156 Net Position - Derivative 6,726 TOTAL OF DERIVATIVES AND BALANCE SHEET 93,704 94,598 Total Net Position (894) Total Net Position - in U.S. Dollar (550) Banco do Brasil MD&A 1Q11 98

100 Balance Sheet by Index We present below the composition of assets and liabilities, including derivatives, of BB Consolidated, detailed by index: Assets Liabilities Fixed CDI/TMS/FACP IRP/TBF/TR Price Index TJLP US$/Gold W/O Index Equity/Others Total R$ bi Figure 25. Composition of Banco do Brasil's Assets and Liabilities in the Country. The chart below shows BB Consolidated s net mismatches, by index in Brazil BB Consolidated: 15.15% R$ billion % % % % -0.12% % % Fixed W/O Index CDI/TMS/FACP Price Index TJLP US$/Gold Equity/Others IRP/TBF/TR Figure 26. Net Position of BB Consolidated Banco do Brasil MD&A 1Q11 99

101 Statement of Repricing Profile of Interest Rates We present below a table containing the inventory of operations sensitive to the variations in the interest rates, allocated by risk factor and by interest rate indexation period, of BB Consolidated: Table 123. Repricing Profile of Interest Rates R$ million Assets Liabilities Ativos < 1 M o 1 > 3 M o 3 > 6 M o 6 > 12 M o 1 > 3 Yrs > 3 Yrs 0 Fixed 184,681 21,624 36,187 33,367 41,913 63, ,560 CDI/TMS 191, ,535 TR/TBF/IRP - 60, ,886 Price Index - 10, ,560 TJLP 2,753 23, ,987 Foreign Currencies/Gold 22,888 17,231 12,489 9,998 12,697 28, ,556 Total - As s e ts 401, ,535 48,676 43,365 54,610 92, ,085 Pas s ivos Fixed 123,048 22,575 14,696 14,885 21,088 58, ,279 CDI/TMS 181, ,974 TR/TBF/IRP - 161, ,417 Price Index - 6, ,638 TJLP 1,527 24, ,003 Foreign Currencies/Gold 17,627 8,933 9,182 13,510 16,050 39, ,545 Total - Liabilitie s 324, ,039 23,878 28,395 37,138 98, ,858 Gap 77,681 (90,504) 24,798 14,970 17,472 (6,189) 38,227 Cum ulative Gap 77,681 (12,823) 11,975 26,945 44,417 38,228 Cum ulative Gap as % As s e ts (Earning As s e ts ) 19.3% -67.8% 50.9% 34.5% 32.0% -6.7% 4.9% Liquidity Risk Liquidity risk is the occurrence of imbalances between marketable assets and enforceable liabilities - "mismatching" between payments and receipts - that may affect the payment capacity of the institution, taking into account the different currencies and settlement terms of their rights and obligations. Banco do Brasil maintains levels of liquidity that are adequate for the institution's commitments assumed in Brazil and abroad, resulting from its broad and diversified depositor base and the quality of its assets, the capillarity of its network of overseas branches and of access to the international capital market. Stringent control over liquidity risk is in accordance with the Market and Liquidity Risk Policy established for the Conglomerate, fulfilling the requirements of national banking supervision and of the other countries where the Bank operates. The liquidity risk management of Banco do Brasil separates liquidity in Reais from liquidity in Foreign Currencies. For this purpose, it uses the following tools: Maps of mismatching of terms; Short, medium and long term liquidity forecasts; Stress test; Liquidity risk limits; Liquidity contingency plan; and, Banco do Brasil MD&A 1Q11 100

102 Test of Potential of Liquidity Contingency Measures Liquidity risk management tools are periodically monitored and reported to the Strategic Committees of the institution. The figure below presents the monitoring of the Liquidity Reserve in Local Currency of the Bank. Figure 27. Liquidity Reserve in Local Currency The figure below presents the monitoring of the Liquidity Reserve in Foreign Currency of the Bank Figure 28. Liquidity Reserve Foreign currency Banco do Brasil MD&A 1Q11 101

103 The indicator of the Availability of Free Funds (DRL), another liquidity risk limit used by BB, aims to guarantee a balance between funding and investment of resources from the commercial portfolio of the internal area and to ensure the financing of liquidity in local currency with commercial and structural resources. The limit of DRL, defined annually by the Global Risk Committee (CRG) according to the funding and commercial investment goals, is the parameter used in the planning and in the execution of the institution's budget and its monitoring is performed on a monthly basis. Figure 29. DRL Indicator The favorable conditions of the Liquidity in Reais, monitored by the Liquidity Reserve and by the DRL Indicator, as presented in the figures above, made it possible for the execution of the strategic planning of the company's business to occur at comfortable levels of liquidity risk exposure. Banco do Brasil MD&A 1Q11 102

104 Operating Risk Operating risk represents the possibility of loss resulting from faults, deficiencies, or the inadequacy of internal processes, personnel and systems, or derived from external events. This definition includes the legal risk associated with inadequacy or deficiency in contracts executed by the institution, with compensation for damages to third parties arising from activities of the institution and with compensation paid on account of differences of opinion in labor relations. The operational risk management structure at Banco do Brasil is composed of the Directorates of Risk Management, Internal Controls and Security Management. Information about the Management Structure and Operational Risk Management Process can be found in more detail on BB's Internet page, Investor Relations Website. In conformity with the schedule established in BACEN Notification 19028, of , BB has been implementing actions aimed at the adoption of advanced models for operational risk. Special emphasis is placed on the preparation of a candidature plan designed to qualify the Bank, in compliance with the guidelines published in Notification 19217, of , involving the use of four essential elements: Internal Data Base, External Database, Scenario Analysis and Internal Control Factors and Business Environment. Emphasis is also placed on the conclusion of the process of affiliation to the Operational Riskdata Exchange Association - ORX, a consortium for the exchange of external data on operating losses and the process of monitoring and analysis of scenarios for operational risk. The table below presents the monitoring of BB's operational loss, by loss event categories, in percentages, disregarding those from Banco Votorantim. It is emphasized that BB, as of the 2nd quarter of 2010, started considering recordings/reversals of provisions in the total operational loss determined for the "Labor Issues" and "Business Failures" categories. Table 124. Monitoring of Operational Loss Los s Eve nt Cate gory 1Q10 2Q10 3Q10 4Q10 1Q11 Labor Issues 32.1% 42.0% 37.6% -18.7% 19.2% Business Failures 40.8% 20.9% 43.8% 70.0% 54.1% External Fraud and Theft 16.0% 19.5% 11.1% 15.8% 17.5% Process Failures 9.2% 12.1% 5.7% 31.5% 6.7% Physical A ssets Damage 0.7% 0.5% 0.2% 0.2% 0.7% Internal Frauds 1.0% 4.9% 1.6% 1.2% 1.7% System Failures 0.3% 0.1% 0.0% 0.0% 0.1% Activities Interruption 0.0% 0.0% 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% Banco do Brasil MD&A 1Q11 103

105 10.2 Capital Structure The BIS ratio was determined according to the criteria established by CMN Resolutions 3,490/2007 and 3,490/2007, which address the calculation of Referential Equity Amount (RE) and of Required Referential Equity Amount (RSE), respectively. In this disclosure the information relating to Banco Votorantim (BV) was consolidated by the Equity Method (MEP). Performance Banco do Brasil closed the 1Q11 with referential shareholders equity 22.1% higher than that seen in March 2010, and 2.3% in relation to December 2010, reaching R$ 68,467 million. Table 125. BIS Ratio Economic-Financial Conglomerate* R$ million M ar/10 Jun/10 Se p/10 De c/10 M ar/11 Reference Equity (RE) Tie r I Capital Reserve for retained earnings Reavaluation reserves (6) (6) (6) (6) (6) Mark-to-Market Securit. And Derivatives Treasury shares (0) Accumulated Earnings or Losses (31) (31) (0) (0) 0 Corporate Profit Sharing Income accounts Tax Credit excl. RE's Tier I Res.3059 (22) (22) (22) (22) (14) Deferred Assets (186) (293) (265) (227) (214) Mark-to-market (148) (145) (283) (203) (188) Additional Provision Hybrid Capital and Debt Instruments - Tier I Tie r II Subordinated debt Hybrid Capital and Debt Instruments Revaluation reserves Mark-to-market Financial Instruments Excluded from RE (832) (1.232) (1.293) (5.233) (5.228) RSE/RRE Credit Risk(1) Market risk(2) Operating Risk(3) Surplus/(insufficiency) of RE K Coeff icient % 13,73 12,84 14,21 14,08 14,13 * The information and book balances of BV were not included in the statements of limits of risk management in the calculation basis of the Bank's Basel Ratio, retroactive to (1) Referring to the PEPR portion pursuant to circular 3,360 of 9/12/2007. (2) Referring to the PCAM, PJUR, PCOM and PACS portions, Circulars 3361 to 3364/2007, 3366/2007, 3368/2007 and 3389/2008. (3) It refers to the POPR portion, pursuant to circular 3,383, of 4/30/2008. Banco do Brasil MD&A 1Q11 104

106 BB's RSE reached the sum of R$ 53,315 million in March, an increase of 18,8% over March 2010 and 1.9% over December The main part of the requirement was caused by the credit risk portion (PEPR), which reflects mainly the growth of loan operations. The following table presents the main variations in the PEPR quota accounts in the first quarter of 2011, in relation to the same 2010 period, considering the Economic-Financial Consolidated: Table 126. Main Accounts of the PEPR Quota (Economic-Financial Conglomerate) Chg. % R$ million M ar/10 De c/10 M ar/11 On M ar/10 On Dec/10 Loan Operations 24,457 27,201 27, Ohter Credits (gold, advances to FGPC, other advances 6,730 7,625 7, (3.4) Securities and Derivatives 2,354 3,027 3, Loans to release 1,471 1,627 1, Permanent 2,069 2,601 2, (2.0) Other 8,268 6,820 6,778 (18.0) (0.6) TOTAL 45,350 48,901 49, With respect to market risk, we present in the following table the Required Referential Equity in March 2011, by risk factor. Table 127. RSE for Market Risk by Risk Factor R$ million Risk Factors Mar/10 Dec/10 Mar/11 On Mar/10 On Dec/10 RSE FX RSE Interest Rate (97,25) (16,67) RSE Commodities RSE Shares (93,01) (26,47) RSE Market Risk¹ (97,03) (27,67) (1) Includes positions of BNC and BB's interest in BV's positions Chg. % For the operational risk, BB has opted for the utilization of the Alternate Standardized Approach, according to Bacen Circular No The total amount calculated, R$ 3,342 million, includes sums from Banco Nossa Caixa and Banco Votorantim, with the inclusion, as of this period, of the non-financial companies. The allocated capital amount, by line of business, corresponds to: Table 128. Allocated Capital for Operational Risk by Line of Business Bus ine s s Line Am ount (R$ m illion) Share % Asset Management Subsidiaries and Aff iliates in the Country and Abroad Commercial Retail Brokerage Corporate Finance Trading and Sales Payments and Settlements Financial A gent Services Retail TOTAL 3, Banco do Brasil MD&A 1Q11 105

107 11 - Strategic Investments 11.1 Information In October 2010, there was a market capitalization of BB Leasing S.A of R $ 3.2 billion. On the carrying of the company was $ 3.4 billion, against R$ 29.8 million at In the insurance segment occurred two changes in investments in the BB from 1Q11. The stake in Mapfre Nossa Caixa was transferred to BB Aliança Participações and in February was the capitalization of BB Seguros Participações by transfer of the contribution of BB Aliança to BB Seguros. These two events account for the observed variation in book in the table below. Banco do Brasil MD&A 1Q11 106

108 Table 129. Interest in the Capital of Companies S har e B o o k V alue B o o k V alue E q uivalence R esult s R$ t housand A ct ivit y Q 11 F i nancial A ct i vit y - C o unt r y B B Gest ão de Recursos - Dist rib de Tí t. e V al. M obiliários S.A. A sset M anagement 100,00% B B B anco de Invest imento S.A. Invest ment B ank 100,00% B B B anco Popular do B rasil S.A. B anking B B Leasing S.A. - A rrendament o M ercant il Leasing 100,00% B ESC Dist ribuidora de Tí t ulos e V alores M obiliários S.A. A sset M anagement 99,62% B ESC Financeira S.A. - Crédito, Financiament o e Investiment os Credit and Financing B ESC Leasing S.A. A rrendamento M ercantil Leasing B anco Nossa Caixa S.A. M ult iple B ank B anco V otorantim S.A. M ult iple B ank 50,00% F i nancial A ct i vit y A b r o ad Banco do Brasil Ag. Viena Banking 100,00% (713) B B Leasing Company Lt d. Leasing 100,00% B B Securit ies LLc. A sset M anagement 100,00% B B Securit ies Ltd. A sset M anagement 100,00% B rasilian A merican M erchant B ank B A M B B anking 100,00% BB USA Holding Company, Inc Holding 100,00% (107) Insurance, Pensio n and Saving s B o nd s B B Seguros Part icipações S.A. Insurance Company 100,00% B B A liança Part icipações Insurance Company 100,00% Seguradora Brasileira de Crédito à Exportação SBCE Insurance Company 12,09% (253) Nossa Caixa Capit alização S.A. Insurance Company 100,00% M apfre Nossa Caixa V ida e Previdência S.A. Insurance Company 49,00% O t her A ct i vit i es A t ivos S.A. Credit A cquisit ion 100,00% B B A dminist radora de Cart ões de Crédit o S.A. Service Rendering 100,00% Nossa Caixa S.A. - A dminist radora de Cartões de Crédito 100,00% B B A dminist radora de Consórcios S.A. Consort iums 100,00% B B Corretora de Seguros e A dminist radora de B ens S.A. B rokerage 100,00% Cobra Tecnologia S.A. IT 100,00% (15.308) Cia. B rasileira de Soluções e Serviços CB SS V isavale Service Rendering 49,99% Cielo S.A Service Rendering 28,65% Kepler W eber S.A. Indust ry 17,54% Neoenergia S.A. Energy 11,99% Cadam S.A. M ining 21,64% (445) Cia. Hidromineral Piratuba Sanitat ion 16,19% Cia. Cat arinense de A ssessoria e Serviços - CCA Service Rendering 48,13% Companhia B rasileira de Securit ização Cibrasec Credit A cquisit ion 12,12% Tecnologia B ancária S.A. Tecban Service Rendering 13,53% B V Part icipações S.A. Holding 50,00% BB M oney Transfers, Inc Service Rendering 100,00% (67) Banco do Brasil MD&A 1Q11 107

109 11.2 Banco Votorantim The consolidation of the financial statements is proportional to BB's ownership interest in the total capital of BV. The assets and liabilities started to be consolidated in the financial statements since 3Q09 and the income statement accounts since the 4Q09. The statements of risk management and operating limits, at the decision of the Brazilian Central Bank (BACEN), have been prepared under the equity method since November The tables below illustrate the main highlights of the operation of BV. In order to provide for a better understanding of its businesses and their impact on BB's result, as from 3Q10, the Corporate Income Statement of this bank has been included, together with a section containing comments on the result presented in the Income Statement with Reallocations. The Corporate Income Statement was included to make it possible for the analyst to make a follow-up of the effects of the acquisition on the Income Statement of the BB Conglomerate, as the reallocations of BV are not reproduced in the Income Statement with Reallocations of BB (whose reallocations are mainly based in BB Multiple Bank). As to the Income Statement with Reallocations, the explanatory text detailing the reclassifications made continues to be presented. We emphasize that the reclassifications conducted by BV are considered as the most adequate for monitoring the business peculiarities at hand, even if they are not those adopted in the statement of income with BB reclassifications. Further information can be obtained from the website of Banco Votorantim. Table 130. Banco Votorantim Summarized Corporate Law Income Statement Quarte rly Flow Chg. % R$ milhões 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Financial Inte rm e diation Incom e ,9 21,5 Loans ,1 39,5 Leasing (31,7) 72,6 Securities ,0 (12,0) Financial Derivatives (455) (318) (428) (5,8) 34,8 Foreign Exchange Portf olio 43 (41) 9 (79,3) - Compulsory Investments ,4 22,1 Financial Inc. from Insur., Pension & Capit. Operations Financial Inte rm e diation Expe nse s (1.953) (1.853) (2.212) 13,2 19,4 Money Market Funds (1.417) (1.811) (1.758) 24,1 (3,0) Borrow ing, A ssignments and Onlending (132) (46) (28) (78,9) (39,7) A llow ance for Loan Losses (405) 5 (427) 5,4 - Gros s Incom e from Financial Inte rm e diation ,3 25,1 Othe r Ope rating Incom e (Expe ns e s ) (464) (511) (628) 35,5 23,0 Fee Income ,7 (16,2) Banking Fees Income ,8 (23,1) Personnel Expenses (164) (224) (205) 24,8 (8,4) Other Administrative Expenses (300) (440) (343) 14,5 (22,0) Taxes (107) (113) (161) 50,7 42,8 Equity Interest in the Results of Subsidiaries, and Af filiate - - (0) - - Income f/ Insurance, Pension & Capitalization Operations Other Operating Revenues (96,2) (98,0) Other Operating Expenses (543) (811) (233) (57,1) (71,2) Ope rating Incom e ,3 27,2 Non-operating Income (20) (17) Incom e Be fore Taxes ,7 33,4 Income and Social Contribution Taxes (148) (144) (182) 23,1 25,8 Profit Sharing (81) (90) (109) 35,8 21,0 Corporate Profit Sharing (0) (0) Ne t Incom e ,6 41,5 Banco do Brasil MD&A 1Q11 108

110 Table 131. Banco Votorantim Income Statement with Reallocations Quarte rly Flow Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Financial Inte rm ediation Incom e ,1 9,5 Loan operations (1) (4) (5) (6) (8) (9) (14) (17) (19) ,4 5,5 Lease operations (1) (4) (5) (8) (14) (11,0) 8,9 Securities Income (5) (6) (10) ,7 (11,3) Income from Financial Derivatives (2) (3) (5) (6) (7) (15) (66) (341) (49) (26,3) (85,7) Compulsory Investments ,4 22,1 Incom e from Financial Inte rm e diation (1.601) (2.237) (2.187) 36,5 (2,3) Market Borrow ing (5) (6) (7) (18) (1.482) (2.108) (2.065) 39,3 (2,0) Borrow ings, Assignments and Onlendings (6) (119) (130) (122) 1,9 (6,0) Ne t Inte re s t Incom e ,7 29,7 A llow ance f or loan losses (9) (19) (408) (356) (534) 30,8 50,0 Ne t Financial M argin ,9 22,0 Bank fee income ,8 (32,2) Fee income (4) (12,5) (42,0) Bank Fee Income (4) ,7 278,4 Taxes on Revenues (3) (103) (109) (123) 18,8 12,0 Contribution M argin ,7 17,1 Administrative expenses (325) (435) (366) 12,6 (15,8) Personnel Expenses (12) (164) (224) (204) 23,9 (9,0) Other A dministrative Expenses (11) (12) (13) (14) (15) (17) (18) (157) (210) (160) 2,4 (23,6) Other Tax Expenses (13) (4) (2) (2) (46,5) 52,1 Com m e rcial Incom e ,0 45,3 Legal Risk (45) (13) (60) 32,8 382,5 Legal Claims (11) (18) 14 (23) 29,9 - Labor Law suits (12) (7) (8) (11) 64,9 46,5 Fiscal Law suits (13) (21) (19) (26) 24,8 36,1 Other Components of the Result 8 48 (4) - - Other Operating Income (Expenses) 8 48 (4) - - Other Operating Income (2) (8) (13) (53,1) (89,9) Other operating expenses (1) (2) (8) (11) (12) (13) (20) (4) (8) (10) 153,3 24,6 Ope rating Re s ult ,9 23,9 Non-operating Income (16) (20) (17) Profit be fore taxation and profit s haring ,3 29,3 Income and Social Contribution Taxes (3) (10) (20) (171) (164) (188) 10,1 14,6 Profit Sharing (81) (90) (110) 36,6 21,7 Profit be fore m inority inte re s t ,6 40,6 Minority interest (0) (0) Non-Re curring Ite m s ,6 40,6 Extraordinary Items FINOR (16) Ne t Incom e ,6 41,5 Banco do Brasil MD&A 1Q11 109

111 Details of the Reallocations (1) Reclassification of Other Operating Expenses to Loan and lease operations corresponding to the amount of expenses with discounts granted on loan operations, being necessary its reallocation for comparability purposes. Expenses with discounts granted totaled (R$ 47.4 million) in 1Q10, (R$ 49.1 million) in the 4Q10 and (R$ 13.3 million) in 1Q11. (2) The foreign exchange gain (loss) on foreign financial equity is reallocated from Other Operating Income/Expenses to Income from Financial Derivatives for inclusion in the financial margin. This adjustment is necessary to maintain the balance and consistency of spread analyses. In the first quarter of 2010 this reallocation was R$ 15.9 million, in the 4Q10 it was (R$ 11.4 million) and in the 1Q11 it came to (R$ 16.6 million). (3) Reallocations were performed in order to cancel the Tax Hedge's effects. In the first quarter of 2010, the amount that were allocated to the result of Derivative Financial Instruments arising from Tax Expenses on Gross Sales was R$ 0.9 million, while that from IR and CSLL (Income Tax and Social Contribution of Net Income)was R$ 7.2 million. In the fourth quarter of 2010, the amount of Tax Expenses on Gross Sales that we allocated was (R$ 1.7 million) while that of IR and CSLL was (R$ 13.8), and in the first quarter of 2011, the amount that we reallocated of Tax Expenses on Gross Sales was (R$ 1,8 million) and that of IR and CSLL (R$ 15,1 million). (4) Fee revenues arising from loan operations recorded under Revenues from Services Provided were reallocated to the income statement from Loan Operations in the amount of R$ million in 1Q10, R$ million in the 4Q10 and R$ million in the 1Q11. Table 132. Banco Votorantim Reallocations (Service Rendering) R$ million 1Q10 4Q10 1Q11 Fee Income (TC /TLA / TA C) (4) (131) (181) (126) Credit Card Fees (4) (5) (9) (10) Guarantees Income (4) (44) (31) (34) Valuation of A ssets Fee (4) (19) (51) (46) Fee Income - Loan Operations (4) - (12) Allocation on Loan Ope rations + Le as ing (4) Total (5) All mark-to-market effects were reallocated as a result of the hedge on the result of derivative financial instruments, as follows: Table 133. Banco Votorantim Reallocations (Mark-to-Market - MKT) R$ million 1Q10 4Q10 1Q11 MKT Loan Operations (BV Financeira) (5) (118) MKT Loans Operations (BV) (5) (27) MKT Leasing (5) (39) 50 - MKT Securities (5) (29) (86) (41) MKT Funding (5) 13 (82) (67) Alocation of MKT in Derivatives (5) 136 (194) 135 Total (6) All the effects of fluctuations in foreign currencies, such as the US dollar, Yen, Turkish Lira, Euro etc., were reallocated as a result of the hedge on the result of derivative financial instruments, as follows: Banco do Brasil MD&A 1Q11 110

112 Table 134. Banco Votorantim Reallocations (Currency Variation) R$ million 1Q10 4Q10 1Q11 VCR Loans Operations (6) (86) 9 45 VCR Securities (6) (11) VCR Fundings (6) 21 (67) (141) VCR Loans and On Lending (6) 12 (55) (94) Alocation of V CR on Derivatives (6) Total (7) There was a reallocation from the BOX of options accounted for in Derivative Financial Instruments to funds obtained in the market in the amount of (R$ million) in the 1Q10, of (R$113.2 million) in the 4Q10 and (R$ 95.3 million) in the 1Q11. (8) The Operating Income and Expenses directly associated with the loan operations were reallocated from Other Operating Income/Expenses to the Loan Operations caption in the amount of (R$ 95.1 million) in the 1Q10, (R$ 83.5 million) in the 4Q10 and (R$ million) in 1Q11. (9) Expenses with PDD (allowance for doubtful accounts) resulting from assignments performed with co-obligation and that are recorded in loan operations were reallocated to the line of PDD expenses in the amount of (R$ 3.1 million) in 1Q10, (R$ 30.3 million) in the 4Q10 and (R$ 35.9 million) in the 1Q11. (10) The effect of the tax benefit generated by the tax-free interest of securities issued abroad was reallocated from the Income Tax and Social Contribution caption to the result of Securities in the amount of R$ 15.8 million in the 1Q10, R$ 28.1 million in 4Q10 and R$ 21.4 million in 1Q11. The expenses with Labor, Civil and Tax Claims were separated into a group called Legal Risk, in order to facilitate the analysis of the Other Income and Operating Expenses, Other Administrative Expenses and Personnel Expenses and to increase the transparency of this type of risk. The reallocated amounts were as follows: (11) Civil Claims: (R$ 17.8 million) in the 1Q10, R$ 14.3 million in 4Q10 and (R$ 23.1 million) in 1Q11. (12) Labor Claims: (R$ 6.7 million) in 1Q10, (R$ 7.6 million) in 1Q10 and (R$ 11.1 million) in 1Q11. (13) Tax claims: (R$ 20.9 million) in 1Q10, (R$ 19.2 million) in 4Q10 and (R$ 26.2 million) in 1Q11. (14) Other Administrative Expenses directly related to loan operations were reallocated from Other Administrative Expenses to the Loan and lease operations line, totaling (R$ 137,5 million) for 1Q10, (R$ million) for 4Q10, and (R$ million) for 1Q11. (15) Other Administrative Expenses directly related to derivative transactions were reallocated from Other Administrative Expenses to the Income from Financial Derivatives line, totaling (R$ 4.8 million) for 1Q10, (R$ 8.2 million) for 4Q10, and (R$ 6.7 million) for 1Q11. (16) The results obtained with the activation and appreciation of shares of Fundo de Investimento do Nordeste (FINOR - northeast investment fund) in the amount of R$ 0 million in the first quarter of 2010 and fourth quarter of 2010 and of R$ 2.6 million in the first quarter of 2011 was reallocated from the line of Non-Operating Income/Expenses to the line of Extraordinary Items. (17) The Other administrative expenses referring to Guarantees were reclassified from Other administrative expenses to Loan operations in the amount of R$ 0 million in 1Q10, R$ 4.2 million in 4Q10 and R$ 5.7 million in 1Q11. (18) The Other administrative expenses referring to expenses to Money market funding operations in the amount of R$ 0 million in 1Q10, R$ 4.9 million in 4Q10 and R$ 3.0 million in 1Q11. Banco do Brasil MD&A 1Q11 111

113 (19) For purposes of better comparability, in the fourth quarter of 2010 we reallocated the PDD of the assignment of the loan portfolio composed of delinquent non-performing assets (FDIC NP) to the line of loan operations in the amount of (R$ million) and (R$ 71.0 million) in the first quarter of (20) The sum of R$ 0 million in the first quarters of 2010 and 2011 and (R$ 5.3 million) in the fourth quarter of 2010 was reallocated from Other Operating Expenses Overseas Withholding Tax (IRF) to Income Tax. Summary Highlights of the result (DRE with reallocations) Net Income grows 48.6% in twelve months and reaches R$ 385 million in the first quarter of 2011 Banco Votorantim recorded net income of R$ 385 million in the first quarter of 2011, up 41.5% over the amount verified in the fourth quarter of 2010 and 48.6% higher than that calculated in the same period of The annualized return on shareholders' equity (RSPL) was 19.2%, 550 base points above that verified in the fourth quarter of R$ 2.6 million worth of extraordinary items obtained with the activation and appreciation of shares of Fundo de Investimento do Nordeste (FINOR) were subtracted in the period. Table 135. Banco Votorantim Main Indicators of Income/Expenses Indicators - % 1Q10 4Q10 1Q11 Total Spread 6,4 5,1 6,7 Expenses w ith Allow ance for Loan Losses over Averag 3,9 2,4 2,3 Cost Income Ratio¹ 31,1 51,8 30,7 Recurring Return on Equity² 14,4 13,7 19,2 Eff ective Rate of Tax 39,7 37,6 33,0 (1) Efficiency Ratio calculated by Banco Votorantim: (Sum of Personnel Expenses and Other Administrative Expenses) (Sum of Net income from financial intermediation, of expenses with Allowance for Loan Losses (PCLD), Service Revenues and Result of Other Operating Income and Expenses). (2) Recurring Net Income divided by Average Net Equity. Total Assets Surpass R$ billion Banco Votorantim reached R$ billion in total assets at the end of the first quarter of 2011, growth of 18.7% in comparison with the same period of The loan portfolio was once again the key item of growth, with expansion of 29.3%, and special emphasis on the portfolio of loans to individual clients, which recorded growth of 32.1% over March Banco do Brasil MD&A 1Q11 112

114 Table 136. Banco Votorantim Highlights of the Result Equity Quarte rly Flow Chg. % R$ million M ar/10 De c/10 M ar/11 On M ar/10 On De c/10 As s e ts ,7 4,4 Securities (12,7) 1,8 Loan Portfolio ,3 3,0 Individuals ,1 3,7 Payroll Loan ,1 4,8 Vehicles Loan ,4 5,0 Leasing and Subleasing Receivables (3,9) (5,7) Other ,4 3,5 Businesses ,1 1,6 Working Capital ,1 (1,1) BNDES/Finame ,5 1,4 Export Letter of Credit (17,1) 2,0 Other ,5 7,6 Permanent A ssets ,5 7,5 Deposits¹ ,1 5,7 Demand Deposits ,2 18,3 Saving Deposits Time Deposits ,4 3,9 Judicial ,9 0,3 Others ,4 3,9 Money Market Borrow ing ,7 (2,1) Share holde rs Equity ,8 3,5 ¹ Except other deposits Table 137. Banco Votorantim Vehicle Portfolio 1Q10 4Q10 1Q11 Average rate per crop (p.m.) 1,7 1,8 2,2 Average term per crop 50,0 50,8 48,4 Duration 21,0 22,1 19,3 Average Portfolio Term (p.y.) 24,4 22,5 21,8 Used V ehicles / Vehicles Portfolio - % 78,3 70,1 69,6 Average V ehicle A ge (years) 6,7 7,5 7,2 Financed Value / Asset Value average % 65,6 67,8 67,9 Table 138. Banco Votorantim Operating and Structural Highlights 1Q10 4Q10 1Q11 Customers Assets Under Management - R$ million Employees* Number of Branch Of fices *Includes employees and interns. Banco do Brasil MD&A 1Q11 113

115 Financial Margin The gross financial income (MFB) closed at R$ million at the end of the first quarter of 2011, recording expansion of 29.7% over the previous quarter and 26.7% over the first quarter of The total gross spread of the first quarter of 2011 was 6.7%, showing expansion of 160 basis points over the previous quarter, and 30 basis points over the same period of The significant increase observed in the spread in comparison with the previous quarter already mirrors the first impacts of the macro prudential measures adopted by Bacen in the last month of December. However, much of this growth is mainly due to treasury gains, commercial area and lower cost of early settlement recorded in the period. Table 139. Banco Votorantim Margin, Net of Interest and Profit Margin - Quarterly R$ m illion 1Q10 4Q10 1Q11 Average Earning A ssets (AEA) Average Interest Bearing Liabilities (AIBL) Net Interest Gain (1) Interest Income Interest Expense (1.594) (2.229) (2.179) Net Interest Income Other Items (2) (44) (268) 3 NII A IBL / A EA % 89,6 89,7 88,9 Interest Rate on AEA (3)- % 14,7 15,5 15,9 Interest Rate on AIBL (4) - % 8,6 9,9 9,9 Net Interest Rate (5) - % 6,1 5,5 6,0 A djusted NIM (6) - % 6,6 6,2 6,7 NIM % 6,4 5,1 6,7 (1) Defined as interest income less interest expenses. (2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature. (3) Total interest income divided by the average balance of assets generating income. (4) Total interest expenses divided by the average balance of liabilities generating expenses. (5) Difference between the average rate of assets generating assets and the average rate of liabilities generating expenses. (6) Income net of interest divided by the average balance of assets generating income. (7) Rates are annualized Default on the Downslide Expenses of allowance for credit risk increased 23.4% over the previous quarter and a decrease of 2.4% over the same period of The indicator that measures the ratio between the allowance for loan losses over a 12-month period and the average loan portfolio in the same period showed an 10-point decrease over the previous quarter and 160 base points over the one observed in the 1Q10. At the end of the first quarter, operations with risk ranging from AA to C represented 96.1% of the portfolio, against 97.2% in the previous quarter and 95.3% in March Past due loans were 11.1% of the portfolio, compared to 8.4% in the previous quarter and 11.1% in March The rate of past due loans over 90 days was 2.3%, an increase of 70 base points in relation to the previous quarter, and a reduction of 110 base points when compared to the same period in the previous year. Banco do Brasil MD&A 1Q11 114

116 Table 140. Banco Votorantim Loan Portfolio by Level of Risk M ar/10 De c/10 M ar/11 R$ million Balance Provis ion Share Balance Provis ion Share Balance Provis ion Share AA , , ,5 A , , ,2 B , , ,3 C , , ,1 D , , ,2 E , , ,6 F , , ,7 G , , ,4 H , , ,0 Total , , ,0 Add. A llow Total Allow AA -C , , ,1 D-H , , ,9 The bulk of the reversal of provisions related to loans provided by Banco Votorantim 4Q10 caused the reduction of expenses with provisions of that quarter and explaining the quarterly performance of past due loans over 90 days and for low loss. Table 141. Banco Votorantim Delinquency Ratios R$ million 1Q10 4Q10 1Q11 Loan Portfolio Past Due Loans Past Due Loans/Loan Portfolio 11,1 8,4 11,1 Past Due Loans + 90 days Past Due Loans + 90 days/loan Portfolio 3,4 1,6 2,3 Write-of f (309) (384) (157) Recovery of Write-offs Net Loss Saldo da Perda / Carteira de Crédito 2,5% 2,1% 0,7% Provis ion Allow ance/loan Portfolio 3,2% 2,0% 2,4% Allow ance/past Due Loans + 90 days - % 95,8% 130,4% 105,2% Allow ance Expenses / Loan Portfolio (12 months averag 3,9% 2,4% 2,3% Banco do Brasil MD&A 1Q11 115

117 Commercial Income Commercial income, which, in addition to gross financial margin and provision expenses, includes income from fees, administrative expenses and tax expenses, recorded a 45.3% increase over the previous quarter and 30.0% over 1Q10. The income from fees included in the Income Statement with Reallocations (not comprising fees somehow related to loan operations, which are reclassified to gross financial margin) showed a 32.2% slide over 4Q10. In comparison with the first quarter of 2010 there was slight expansion of 0.8%. As regards administrative expenses, there was a decrease of 15.8% over the previous quarter and an increase of 12.6% over the first quarter of In the comparison with the previous quarter, personnel expenses decreased by 9.0% and other administrative expenses by 23.6%. In relation to the first quarter of 2010, there was an increase of personnel expenses of 23.9%, and 2.4% in other administrative expenses. A significant portion of the increase in expenses of Banco Votorantim in the last twelve months is explained by the investment in the maturation of recent business initiatives, which involves, for example, hiring staff and specialized consulting firms for strategic projects and systems development. The consolidation of BV's business in the middle market segment exemplifies this situation. In addition, BV has also been going through a stage of intense growth in its operations, which by itself entails higher expenses for personnel, rental, communications and data processing. The hiring of personnel to increase retail loan requests, expand the commercial area, and adjust internal areas to a new governance standard generates an immediate increase in administrative expenses, but it is mandatory to sustain the bank's future growth and resulting creation. We also emphasize BV's expressive growth in loan requests, especially after the strategic partnership with BB. The total loan portfolio, even after discounting the portfolio transfers made to Banco do Brasil, and the impacts of Circular Letter Bacen 3,515 as of December 2010, recorded expansion of 3.0% over the previous quarter. In comparison with the first quarter of 2010, the growth was 29.3%. Banco do Brasil MD&A 1Q11 116

118 11.3 Internationalization In November 2007, Banco do Brasil was licensed by Banco Central do Brasil to open three new companies in the United States: One for money transfers (BB MoneyTransfer), a retail bank (Banco do Brasil Federal Savings Bank), and a holding company (BB USA Holding Company), intended to provide basic financial services to Brazilians living in the US, such as: Transfers, deposits, investments, credit cards, among others reflected an intensified trend to internationalize Bank's business. On the first international unit for administrative services was opened, the BB USA Servicing Center located in Florida, USA, with the aim of centralizing and rationalizing back-office services in the units located in the United States. BB Money Transfers began operating in June by providing money transfer services to Brazil, focused on assisting Brazilian immigrants in that country. BB Money Transfers operates by means of accredited agents and has currently 69 points of assistance in 5 US states. In August 2009 the Bank inaugurated its representation office in Montevideo, Uruguay, one of the key objectives being to provide service and financial intermediation solutions, to increase two-way trade between Brazil and Uruguay, and to provide consultancy to Brazilian companies in Uruguay and to Uruguayan companies that do business with Brazil. On April 13, 2010, the North-American Central Bank - FED ( The Board of Governors of the Federal Reserve System ) granted Banco do Brasil the status of "Financial Holding Company". The Bank was accorded this status after a minute analysis of major factors determined by the US banking legislation, among which is the Bank's capitalization level and the quality of its management, besides considering quality of bank supervision, performed in the Brazilian Central Bank. This qualification will make it possible for Banco do Brasil, if it is in its interest, to perform banking activities in the US territory, either by itself or through its subsidiaries, under the same conditions as US banks. Strategy BB's Board of Directors approved among other corporate directives that the Bank should increase its international business and support Brazilian international companies. In this regard, the Bank's strategic overseas positioning was aimed at wholesale and retail activities in favor of Brazilian immigrant communities, in funding Brazilian companies with businesses involving foreign trade and acting in the capital market. The conglomerate's actions are aimed at intensifying relations with international financial institutions, economic agents, and governments, in support of implementing transnational and binational projects. Simultaneously with strategic guidelines, the Bank has focused efforts in continuing to be Brazil's overseas partner with capillarity to assist its customers everywhere, with the purpose of being the first bank for Brazilians at home and overseas. EuroBank On 04/25/2011 Banco do Brasil formalized the purchase of 100% of the capital stock of the North American bank EuroBank, for the price of US$ 6.0 million. EuroBank, a privately held company headquartered in Florida (USA), currently has a network of three branches located in the regions of Coral Gables, Pompano Beach and Boca Raton and serves American, Portuguese and Hispanic clients as well as a small group of Brazilians. Banco do Brasil MD&A 1Q11 117

119 The acquisition is part of BB's business expansion strategy in the U.S. and will allow the bank to operate in the North American retail market, focusing on serving the Brazilian and Hispanic communities living in that country. Table 142. Main Financial Information of EuroBank US$ million Dec/10 Assets 102,1 Loan Portfolio 74,8 Deposits 91,4 Shareholder's Equity 5,5 Banco Patagonia On 11/03/2010 Banco do Brasil announced the approval, by the Central Bank, of the acquisition of 51% of the capital of Banco Patagonia. The transaction was approved by the Central Bank of the Argentine Republic on 02/03/2011 and finally, by the Comissión Nacional de Defensa de la Competencia da Argentina on 04/05/2011, thus completing the legal procedure. In addition, the Central Bank of Brazil authorized BB to increase its stake in the capital of that bank to up to 75% of its total capital, due to the performance of a Public Share Offering (IPO). Accordingly, on Banco do Brasil S.A. filed a request at the Comisión Nacional de Valores da Argentina, the capital market regulatory agency of that country, for authorization to hold, in Argentina, a Mandatory Takeover Bid for the acquisition of shares of Banco Patagonia. On 04/12/2011 there was the closing of the operation for acquisition of the controlling interest of Banco Patagonia S.A., an Argentine financial institution, consisting of the conclusion of the payment of the price to the sellers and the transfer to Banco do Brasil of 366,825,016 class "B" book-entry common shares, which correspond to 51% of the total capital and voting capital of Banco Patagonia. We list below a selection of economic and structural indicators for Banco Patagonia, and income figures. Table 143. Banco Patagonia - Key Profit Figures Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Net Interest Income (17.3) Allow ance for Loan Losses (17.7) Fee income Administrative Expenses Others Income Before Taxes (21.6) Taxes (13.2) Net Income (26.0) Banco do Brasil MD&A 1Q11 118

120 Table 144. Banco Patagonia Equity Highlights Chg. % R$ million 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Assets 4,666 6,144 6, Loan Operations 2,030 3,137 3, Exposure to Public Sector (27.8) (5.3) Deposits 3,176 4,401 4, Shareholders' Equity (0.1) 1.3 Table 145. Banco Patagonia Operating and Structural Highlights Chg. % 1Q10 4Q10 1Q11 On 1Q10 On 4Q10 Clients 777, , , Bank Branches Branches in Buenos Aires Service Points Employees 2,718 2,929 2, Table 146. Banco Patagonia Indicators on Returns, Capital, and Credit M ar/10 De c/10 M ar/11 Return on Equity 20.8% 24.6% 22.1% Capital A dequacy Ratio (Basel) 38.4% 26.0% 25.4% Provisions / Past Due Loans (+90 days) 132.1% 169.1% 168.5% Past Due Loans (+90 days) / Loan Portfolio 2.3% 1.2% 1.0% Banco do Brasil MD&A 1Q11 119

121 12 - Financial Statements 12.1 Summarized Balance Sheet Table 147. Balance Sheet Assets Quarterly R$ millio n J un/ 0 9 S e p / 0 9 D e c / 0 9 M a r / 10 J un/ 10 S e p / 10 D e c / 10 M a r / 11 A S S E T S 5 9 8, , , , , , , , C ur r e nt a nd l o ng - t e r m as s e t s 5 8 4, , , , , , , ,3 6 1 A vailab le f unds 6,2 12 8,34 0 7, ,3 64 9,53 5 9,54 5 9, ,575 Sho rt -term int erb ank invest ment s 13 2, , , , , , , ,4 58 Op en market invest ment s 111, , , , , , , ,8 2 3 Int erb ank depo sits 2 1, , , , , , , ,6 3 5 M arketable securities 10 9, , , , , , , ,50 0 Securit ies fo r t rading 3 1, , , , , ,850 50, ,74 2 Securit ies availab le f o r sale 4 6, , , , , , ,142 76,3 10 Securit ies held t o maturit y 3 0, , , , , , , ,0 52 Financial d erivat ives ,70 6 1, ,162 1,2 17 1, ,6 24 1,3 9 6 Int erb ank acco unt s 2 9, , , , ,857 75, ,526 94,2 3 2 Cent ral B ank d ep o sit s 2 4, , , , , , , ,0 53 Co mp uls. dep, on d emand, Dep & f lo at 11, , , , , , , ,70 1 Co mp ulso ry d ep, o n savings d ep, 13, , , , , , , ,3 52 Ot hers 4, ,78 4 2,3 12 5,9 00 5, ,4 10 2,4 91 7,179 Int erd ep art ment al acco unt s Lo ans 214, , , , , , , ,6 8 2 Pub lic sect o r 2,8 16 4,975 6, ,6 68 6,14 5 7,0 71 7,184 7,70 2 Privat e sect or 2 2 8, , , , , , , ,12 0 (A llo wance fo r lo an losses) (16,9 0 4 ) (18,118 ) (17,6 8 5) (17,40 5) (17,0 9 7) (17,13 7) (16,4 3 3) (16,14 0 ) Leasing 3,253 4,63 6 4,70 1 4,593 4, ,14 9 3,8 57 3,4 9 9 Leasing and sub -leasing receivab les 3, ,86 1 4, ,8 26 4,64 1 4,3 77 4,0 48 3,6 9 4 Pub lic secto r Privat e sect o r 3, ,80 1 4, ,76 7 4,58 8 4, ,0 02 3,6 52 (Unearned lease inco me) (A llo wance fo r lease lo sses) (153 ) (2 2 5) (23 1) (2 3 3 ) (2 46 ) (2 2 8 ) (19 1) (19 5) Ot her receivab les 8 7, , , , , , , ,2 3 8 Receivable o n g uarantees ho no red Fo reign exchang e p o rtf o lio 13, ,06 6 8, , , , , ,0 8 2 Income receivab le Trad ing and b ro kerag e o f securities 1, Sp ecif ic credit s , ,0 30 1,0 57 Sp ecial op erat io ns Cred it s f rom Insurance, Pensio n and Savings B o ,109 1,0 70 Tax credit s 2 1, , , , , , , ,3 2 5 A t uarial A sset s 8,4 10 8, , , ,510 15, , ,56 3 W arrants Dep o sit s Receivab le 2 0, , , , , , , ,2 0 3 Destinat ion Sup eravit Fund - PREV I ,59 5 7,8 54 Ot her cred it s 2 0, , , , , , , ,3 15 (Provision f or doubt ful receivables) (1,725) (1,671) (1,682) (1,625) (1,633 ) (1,679 ) (1,572) (1,565) (W ith lo an charact erist ics) (70 2 ) (728 ) (70 2 ) (678 ) (744 ) (775) (6 9 0) (6 81) (W ithout loan charact erist ics) (1,0 2 3 ) (9 43 ) (98 0 ) (94 7) (8 90 ) (9 0 4 ) (8 8 2) (88 4 ) Ot her asset s 1,652 2,114 2,3 58 2,196 2,50 1 3, ,8 84 4,0 6 9 Statuto ry p rof it sharing Ot hers (Provision f or possible losses) (187) (191) (176 ) (176 ) (171) (174 ) (177) (181) Prep aid exp enses 1,48 7 1,92 0 2,170 1,9 88 2,2 78 3, ,6 73 3,8 4 6 P e r ma nent a s s et s 14, , , , , , , ,2 75 Invest ments 5,18 4 6, ,6 45 6,8 69 6, , ,128 8,12 6 Invest m, in asso c. and sub sid iary co, 4, ,69 8 5,776 5,9 64 5,910 6, ,116 7,0 52 Other investment s , , , , ,159 (Provisio n f o r losses) (87) (80 ) (78 ) (8 2 ) (68 ) (8 2 ) (8 4) (8 4 ) Pro p ert y and eq uip ment 3, ,74 1 4,2 14 4,2 30 4,2 59 4, ,9 04 4,8 6 7 Land and b uild ing s in use 2,970 3,06 1 3, ,2 56 3, , ,557 3,6 4 5 Land and b uild ing s in use reavaliatio n Other pro p erty and eq uipment in use 6, ,18 4 6, ,759 6, , ,3 94 7,4 52 (Accumulated depreciation) (5,478 ) (5,654 ) (5,753 ) (5,785) (6,102 ) (6,124) (6,198) (6,381) Leased asset s Leases asset s (Accumulated depreciation) (4 ) (2 ) (2 ) (1) (1) (1) - (1) Int angib le 5,12 8 5,08 2 5,6 77 7, ,0 52 6,673 6,4 52 6,0 3 6 Intang ib le A sset s 6,6 57 6,99 8 7,6 59 9,6 70 9, , , ,3 8 1 (Accumulated amortization) (1,529) (1,916 ) (1,982) (2,403) (2,820 ) (3,345) (3,808) (4,345) Deferred charg es Org anizat io n and exp ansio n co st s 2,19 5 2, ,2 47 2, ,04 1 2,16 2 2,155 2,0 8 6 (Accumulated amortization) (1,621) (1,722 ) (1,775) (1,788) (1,664 ) (1,830) (1,868) (1,841) Banco do Brasil MD&A 1Q11 120

122 Table 148. Balance Sheet Assets Annual R$ million C A GR - % A SSET S 2 9 6, , , , , C urrent and lo ng - t erm asset s 2 9 0, , , , , Available funds 4,749 4,352 5,545 7,843 9, Short-term interbank investments 29,088 51, , , , Open market investments 17,490 43,391 95, ,174 85, Interbank deposits 11,598 7,733 24,249 24,224 22, M arketable securities 73,108 75,201 86, , , Securities for trading 7,494 19,112 26,136 38,274 50, Securities available for sale 40,641 38,109 38,374 62,161 75, Securities held to maturity 24,409 16,830 20,123 22,439 16,656 (9.1) Financial derivatives 564 1,150 2,276 1,463 1, Interbank accounts 28,180 33,445 21,287 26,592 89, Central Bank deposits 26,967 32,278 20,882 24,280 87, Compuls. dep, on demand, Dep & float 11,209 10,768 12,439 11,919 20, Compulsory dep, on savings dep, 15,758 21,510 8,443 12,361 66, Others 1,213 1, ,312 2, Interdepartmental accounts Loans 113, , , , , Public sector 4,384 2,472 4,040 6,388 7, Private sector 117, , , , , (Allowance for loan losses) (8,366) (9,980) (13,179) (17,685) (16,433) 18.4 Leasing ,968 4,701 3, Leasing and sub-leasing receivables 1,018 1,109 3,039 4,932 4, Public sector (18.8) Private sector 913 1,028 2,984 4,869 4, (Unearned lease income) (979) (1,054) (Allowance for lease losses) (28) (23) (71) (231) (191) 61.5 Other receivables 40,482 54,883 83,279 95, , Receivable on guarantees honored Foreign exchange portfolio 9,456 9,023 20,914 8,671 11, Income receivable Trading and brokerage of securities Specific credits , Special operations Credits from Insurance, Pension and Savings Bonds ,109 - Tax credits 8,604 13,826 16,499 21,910 21, Atuarial Assets 2,652 2,268 7,794 12,655 9, Warrants Deposits Receivable 13,699 15,409 18,007 21,209 23, Destination Surplus Fund - PREVI ,595 - Other credits 8,657 13,816 19,325 29,539 38, (Provision for doubtful receivables) (3,713) (896) (1,377) (1,682) (1,572) (19.3) (With loan characteristics) (240) (311) (579) (702) (690) 30.2 (Without loan characteristics) (3,472) (585) (798) (980) (882) (29.0) Other assets 951 2,865 1,256 2,358 3, Statutory profit sharing Others (Provision for possible losses) (162) (152) (170) (176) (177) 2.2 Prepaid expenses 819 2,755 1,118 2,170 3, Permanent asset s 5,79 4 6, ,512 17, , Investments 1,109 1,368 1,524 6,645 8, Investm, in assoc. and subsidiary co, 1,057 1, ,776 7, Other investments , (Provision for losses) (77) (64) (68) (78) (84) 2.4 Property and equipment 2,862 2,844 3,339 4,214 4, Land and buildings in use 2,286 2,349 2,668 3,336 3, Land and buildings in use reavaliation Other property and equipment in use 4,253 4,594 5,610 6,632 7, (Accumulated depreciation) (3,677) (4,100) (4,940) (5,753) (6,198) 13.9 Leased assets 1,228 1, Leases assets 1,541 1, (Accumulated depreciation) (313) (430) (4) (2) - - Intangible - - 4,041 5,677 6,452 - Intangible Assets - - 4,043 7,659 10,259 - (Accumulated amortization) - - (2) (1,982) (3,808) - Deferred charges (16.7) Organization and expansion costs 1,302 1,490 1,846 2,247 2, (Accumulated amortization) (708) (904) (1,241) (1,775) (1,868) 27.5 Banco do Brasil MD&A 1Q11 121

123 Table 149. Balance Sheet Liabilities Quarterly R$ million Jun/ 0 9 Sep / 0 9 D ec/ 0 9 M ar / 10 Jun/ 10 Sep / 10 D ec/ 10 M ar / 11 LIA B I LIT IE S A N D S HA R E HO LD E R S ' E Q 59 8, , , , , , , , C ur r ent and l o ng - t er m asset s 56 5, , , , , , , ,2 2 1 Deposit s 310, , , , , , , ,170 Demand deposit s 49,075 50,107 56,459 54,973 59,025 59,018 63,503 59,553 Savings deposit s 69,011 72,233 75,742 78,719 81,541 85,703 89,288 90,516 Int erbank deposits 7,459 9,627 11,619 10,749 10,436 11,216 18,998 12,069 Time deposits 185, , , , , , , ,031 Invest ment deposit s M oney market borrowing 101, , , , , , , ,112 Own port f olio 28,755 45,543 31,902 45,011 63,630 60,188 56,795 55,939 Third-part y port f olio 72, , , , , ,595 84, ,433 Ot hers 200 1, , Funds f rom A ccept and Securit ies Placed 2,673 6,231 7,362 11,656 12,232 12,812 13,486 19,550 Foreign securities 2,337 3,383 4,597 8,617 9,631 8,945 9,172 12,725 Int erbank account s 2,677 2, ,341 3,034 2, ,292 Receipt s and Paym. Pending Set tlement 2,657 2, ,320 3,023 2, ,280 Correspondent banks Int erdepart ment al A ccount s 2,045 1,859 3,229 2,503 1,783 1,805 3,688 1,968 Third-part y f unds in t ransit 2,007 1,840 3,215 2,414 1,768 1,652 3,683 1,946 Int ernal Transf ers of Funds B orrowing 8,536 8,855 6,370 7,884 12,016 9,443 8,598 8,939 Foreign B orrowing 8,536 8,855 6,370 7,884 12,016 9,443 8,598 8,939 Domestic Onlending Of ficial Inst itutions 22,626 29,105 31,390 33,201 36,308 48,849 50,764 51,626 Federal Treasury 3,574 2,826 2,101 2,065 2,074 2,086 1,549 1,552 National Development B ank (B NDES) 11,118 14,968 19,630 20,264 22,250 26,013 26,978 27,163 Caixa Econômica Federal (CEF) Fed. Prog. f or Cap. Equip. Finan. (FINA M E) 7,009 7,780 8,381 9,708 11,373 12,812 14,046 14,897 Ot her Inst itutions 765 3,378 1,133 1, ,925 8,043 7,847 Foreign Onlending Financial Derivat ives 2,580 6,098 4,724 4,085 3,238 5,195 5,297 4,916 Ot her A ccount s Payable 112, , , , , , , ,562 Collect ion of Taxes and Cont ributions 2,853 2, ,295 2,896 3, ,263 Foreign Exchange port f olio 16,339 15,466 12,174 12,609 16,321 27,947 29,506 33,361 Stockholders and St at ut ory Dist ribut ions 1,502 1,608 2,625 1,355 1,885 2,157 1,992 1,662 Taxes and Social Securit y 20,141 22,224 24,297 21,796 24,308 26,404 27,613 23,952 Trading and B rokerage of Securities ,071 1,247 1,385 1,676 1,670 Technical Prov. Ins., Pension & Cap.Op. 15,017 16,081 17,339 18,356 26,921 29,131 32,369 34,999 Financial and Development Funds 4,076 4,052 4,135 3,685 3,729 3,506 3,568 3,499 Perpetual Securities ,516 3,659 3,643 3,474 3,361 2,521 Special operat ions 2, Obligat ions for Lot to Operations Subordinated Debt (FCO) 14,689 16,409 18,553 20,792 21,340 22,090 23,412 24,464 A ctuarial liabilities 6,179 5,871 6,374 6,525 6,758 6,803 6,907 6,921 Ot her liabilit ies 27,719 30,775 30,725 31,597 27,842 27,352 28,757 27,250 Def erred income S har eho l d er s eq ui t y 3 3, , , , , , , ,12 0 Capital 18,549 18,549 18,567 18,567 33,078 33,078 33,078 33,078 (Unpaid Capit al) (7,050) Capital reserves Revaluation reserves Reserve f or Ret ained earnings 13,614 13,299 17,301 16,857 12,917 12,539 16,889 16,442 M ark-t o-market Securities and Derivatives Retained earnings (accumulated losses) (Treasury shares) (31) (31) (31) (31) (31) (0) (0) (0) Corporat e Profit Sharing Income account s - 1,509-1,833-1,951-2,208 Banco do Brasil MD&A 1Q11 122

124 Table 150. Balance Sheet Liabilities Annual R$ million C A G R - % LIA B I LIT IE S A N D S HA R E HO LD E R S ' E Q U I T Y 2 9 6, , , , , C ur r ent and Lo ng - T er m A sset s 2 75, , , , , Deposit s 158, , , , , Demand deposits 40,059 51,311 51,949 56,459 63, Savings deposit s 36,714 45,839 54,965 75,742 89, Int erbank deposit s 4,878 5,144 14,065 11,619 18, Time deposit s 76,900 85, , , , Invest ment deposits M oney market borrowing 49,283 72,270 91, , , Own port f olio 31,916 28,126 21,927 31,902 56, Third-part y portf olio 16,867 44,144 69, ,745 84, Ot hers , Funds f rom accept ances and securit ies placed 2,304 1,297 3,479 7,362 13, Foreign securities 2,304 1,297 3,210 4,597 9, Interbank accounts 1, (64.7) Receipts and payments pending settlement 1, (85.7) Correspondent banks Int erdepartment al accounts 2,397 2,428 2,496 3,229 3, Third-part y f unds in t ransit 2,281 2,311 2,495 3,215 3, Internal transfers of funds (56.0) B orrowing 3,737 2,833 7,627 6,370 8, Foreign borrowing 3,737 2,833 7,627 6,370 8, Domest ic onlending of f icial inst it ut ions 14,335 17,487 22,436 31,390 50, Federal Treasury 2,989 3,185 3,485 2,101 1,549 (15.1) National Development B ank (B NDES) 4,658 8,713 11,168 19,630 26, Caixa Econômica Federal (CEF) Fed. Prog. for Cap. Equip. Finan. (FINA M E) 6,004 4,866 6,585 8,381 14, Ot her inst it ut ions ,199 1,133 8, Foreign onlending Financial derivatives 3,511 1,947 3,895 4,724 5, Ot her account s payable 39,895 56,268 89, , , Collect ion of taxes and cont ribut ions Foreign exchange port folio 10,013 6,609 15,964 12,174 29, Stockholders and st at ut ory distribut ions 1, ,838 2,625 1, Taxes and social securit y 2,672 12,725 17,570 24,297 27, Trading and brokerage of securit ies , Technical Prov. Insurance, Pension & Capit alization. Op ,675 17,339 32,369 - Financial and Development Funds 1,902 2,117 2,458 4,135 3, Perpet ual Securities 1, ,185 3,516 3, Special operations Obligations f or Lot t o Operat ions Subordinat ed Debt (FCO) 8,995 10,012 11,772 18,553 23, A ctuarial liabilit ies 3,485 4,051 5,662 6,374 6, Ot her liabilit ies 10,255 18,533 19,531 30,725 28, Def erred income S har eho l d er s eq ui t y 2 0, , , ,119 50, Capital 11,913 13,212 13,780 18,567 33, (Unpaid Capit al) Capital reserves Revaluation reserves (1.4) Reserve f or Ret ained earnings 8,101 10,695 15,977 17,301 16, M ark-t o-market securities and derivat ives Retained earnings (accumulat ed losses) (Treasury shares) - - (31) (31) (0) - Corporat e Prof it Sharing - - (0) Income account s Banco do Brasil MD&A 1Q11 123

125 12.2 Summarized Corporate Law Income Statement Table 151. Summarized Corporate Law Income Statement - Quarterly R$ millio n 2 Q Q Q 0 9 1Q 10 2 Q 10 3 Q 10 4 Q 10 1Q 11 F i nanc i al Int e r me d i a t i o n Inc o me 15, , , , , , , ,2 2 6 Loans 9, , ,717 11, , ,700 13,716 14,3 3 6 Leasing Securities 5,2 15 5,0 83 5,3 21 5, ,195 6,2 62 6,13 7 6,13 3 Financial Derivatives (451) (664) (47) (232 ) (29) (1,407) (571) (413 ) Fo reig n Exchang e Po rt f olio (18 ) Comp ulso ry Invest ment s ,119 1,2 76 1,59 7 Financial Inc. f ro m Insur., Pensio n & Saving s B onds F i nanc i al Int e r me d i a t i o n E x p e nse s ( 11,4 15 ) ( 10, 8 4 1) ( 11, ) ( 12,3 5 6 ) ( 12,577) ( 13, 8 6 1) ( 13, ) ( 14, ) M o ney M arket Fund s (7,0 6 7) (7,3 2 0 ) (7,99 7) (8,4 93 ) (9,055) (10,4 8 1) (10,72 7) (11,539 ) B orrowing. A ssignments and Onlending (483) (593) (718) (903 ) (997) (732) (841) (816 ) A llo wance f or Loan Lo sses (3,8 6 5) (2,9 2 8 ) (2,950) (2,9 59 ) (2,52 5) (2,6 4 8 ) (2,112) (2,6 31) G r o s s I nc o me f r o m F i nanc i al Int e r me d i a t i o n 3, , , , , , , ,2 4 0 O t her O p er at ing I nco me ( E xp e ns e s ) ( 1,16 7 ) ( 1, 8 7 5) 1, ( 1, ) ( 1,78 9 ) ( 2, 5 12 ) ( 1, ) ( 2, ) Fee Inco me 2,557 2, ,714 2, , , ,158 2,9 59 B anking Fees Revenues , ,10 1 1, ,14 7 1,14 9 Personnel Expenses (2,506) (2,909) (3,271) (3,021) (3,105) (3,442) (3,452) (3,272 ) Other A dministrat ive Expenses (2,871) (2,596) (3,054) (3,277) (3,039) (3,223) (3,502) (3,133 ) Taxes (8 6 0 ) (8 07) (9 9 8) (8 64 ) (9 4 4 ) (9 4 9 ) (9 9 3) (1,0 19 ) Eq uit y Int. in t he Result s o f Sub s. and A f fil. (576 ) (2 75) (4 9) (8 9 ) (3 6) (20 ) Inco me f / Insur., Pensio n & Saving s B o nd s Other Op erating Revenues 4,9 57 3,162 6,79 4 3,04 1 2, , ,574 3,0 8 5 Other Operating Expenses (3,217) (2,367) (2,371) (1,969 ) (2,173 ) (2,660) (3,115) (2,646 ) O p e r a t i ng I nc o me 2,78 2 2, , , , , , , No n-o perat ing Inco me 1, (2) 19 Inc o me B ef o r e T a x es 4, , , , , , , , Income and Social Contribution Taxes (1,559 ) (1,062) (2,463) (1,242 ) (1,473 ) (1,180) (1,426) (1,497) Statutory Profit Sharing (300) (258 ) (599) (353 ) (414 ) (414 ) (575) (443 ) Corp o rate Pro f it Sharing (1) (1) 1 0 (0 ) N et I nc o me 2, ,9 79 4, , , , , ,9 3 2 Banco do Brasil MD&A 1Q11 124

126 Table 152. Summarized Corporate Law Income Statement - Annual R$ millio n C A G R - % F i nanc i al Int e r me d i a t i o n Inc o me 3 6, , , , , Loans 2 1, , , ,515 51, Leasing Securities 13, , , , , Financial Derivatives (6 3 5) 175 (1,2 8 3) (1,22 3 ) (2,2 3 9 ) Fo reig n Exchang e Po rt f o lio , Comp ulso ry Invest ment s 1,612 1,6 16 1, , Financial Inc. fro m Insur., Pension & Saving s B ond s F i nanc i al Int e r me d i a t i o n E x p e ns es ( 2 5, ) ( 2 5, 119 ) ( 4 2,8 2 2 ) ( 4 5,0 52 ) ( 5 2, ) M o ney M arket Fund s (16,9 89 ) (17,797) (2 5,53 2) (3 0,14 6 ) (38,756 ) B orro wing. A ssig nment s and Onlending (1,8 50 ) (1,6 45) (8,68 5) (2,510 ) (3,4 73 ) 17.1 A llo wance f o r Loan Lo sses (7,140 ) (5,6 77) (8,6 0 6) (12,39 6 ) (10,2 4 4 ) 9.4 G r o s s I nc o me f r o m F i nanc i al Int er me d iat i o n 10, , , , , O t her O p er at ing I nco me ( E xp e ns e s ) ( 4, 6 12 ) ( 7, 8 8 1) ( 1, 15 0 ) ( 4, 6 4 1) ( 7,9 2 4 ) 14.5 Fee Inco me 8, , ,771 10,172 11, B anking Fees Revenues - - 2,04 0 3, , Perso nnel Exp enses (7,8 71) (9,16 1) (8,870) (11,83 8 ) (13,0 2 0 ) 13.4 Other A d ministrat ive Exp enses (5,8 73 ) (6,735) (7,917) (11,212 ) (13,0 4 0 ) Taxes (1,8 2 5) (2,0 6 4 ) (2,63 5) (3,33 3 ) (3,750 ) 19.7 Eq uit y Int. in t he Result s o f Sub s. and A f fil ,39 2 (99 1) (50 ) - Inco me f / Insur., Pensio n & Saving s B o nd s ,574 1, Other Op erat ing Revenues 5,13 8 5, , , , Other Op erat ing Exp enses (3,3 56 ) (5,0 0 0 ) (7,60 5) (9,3 2 7) (9,9 17) 31.1 O p e r a t i ng Inc o me 6, , , , , No n-o perat ing Inco me , Inc o me B ef o r e T a x es 6,3 16 7, , , , Inco me and Social Co nt rib ut io n Taxes (504 ) (1,8 47) (2,14 5) (3,90 3 ) (5,3 2 1) St at ut ory Pro fit Sharing - - (1,13 4) (1,3 8 5) (1,756 ) - Corporate Prof it Sharing (777) (649) 0 (1) (0 ) (92.9 ) N et I nc o me 6, , , , , Banco do Brasil MD&A 1Q11 125

127 12.3 Income Statement with Reallocations Table 153. Income Statement with Reallocations Quarterly R$ million 2 Q0 9 3 Q0 9 4 Q0 9 1Q10 2 Q10 3 Q10 4 Q10 1Q11 F inancial Int er med iat io n Inco me 16, , , , , , , ,8 3 1 Loans 10,133 10,609 11,963 12,480 12,991 14,332 14,376 14,915 Leasing Securities 5,215 5,083 5,321 5,644 5,195 6,262 6,137 6,133 Financial Derivatives (451) (664) (47) (232) (29) (1,407) (571) (413) Foreign Exchange Portfolio (18) Compulsory Investments ,119 1,276 1,597 Financial Income from Insur., Pension & Cap. Op FX Gain (Loss) on Foreign Investments (592) (292) (74) 18 (5) (104) (58) (29) Other Op. Inc. of a Fin. Intermed. Nature 1, (224) 75 Tax Hedge (439) (216) (58) 8 (15) (86) (54) (19) F inancial Int er med iat io n Exp enses ( 7,550 ) ( 7,72 9 ) ( 8,715) ( 9,2 0 5) ( 10,0 52 ) ( 11,2 13 ) ( 11,56 8 ) ( 12,3 55) M oney M arket Funds (7,067) (7,136) (7,997) (8,302) (9,055) (10,481) (10,727) (11,539) Borrowing.Assignments and Onlending (483) (593) (718) (903) (997) (732) (841) (816) N et Int erest Inco me 8, , , ,3 57 9, , , ,4 76 Allowance for Loan Losses (3,172) (3,017) (2,946) (3,026) (2,871) (2,639) (2,139) (2,629) N et F inancial M arg in 5,3 16 5, , , ,59 0 7,54 6 8, ,8 4 7 Fee Income 3,436 3,526 3,606 3,703 4,026 4,138 4,306 4,108 Fee Income 2,557 2,647 2,714 2,666 2,924 3,047 3,158 2,959 Banking Fee Income ,038 1,101 1,091 1,147 1,149 Res. from Ins., Pension Plan and Savings Bonds Taxes on Revenues (806) (760) (965) (839) (909) (911) (968) (977) C o nt rib ut io n M arg in 8,4 17 8, ,3 71 9, ,175 11, , ,4 9 0 Administrative Expenses (4,892) (4,897) (5,465) (5,300) (5,471) (5,726) (6,068) (5,692) Personnel Expenses (2,613) (2,693) (2,844) (2,851) (2,937) (3,186) (3,270) (3,145) Other Administrative Expenses (2,279) (2,203) (2,621) (2,449) (2,534) (2,541) (2,798) (2,547) Other Tax Expenses (7) (23) (27) (26) (34) (29) (19) (40) C o mmercial Inco me 3,518 3,54 0 3, ,3 10 4,6 70 5,50 6 5,772 5,757 Legal Risk (45) (256) (4) (450) (239) (515) 127 (177) Legal Claims (152) (40) 46 (238) 35 (259) 35 (98) Labor Lawsuits 107 (216) (49) (212) (274) (256) 92 (79) Other Operating Income (Expenses) (740) (590) (964) (448) (563) (959) 289 (760) Eq.Interest in Resul. Subs. and Affil Other Operating Income/Expenses (755) (607) (989) (480) (596) (974) 267 (769) Other Operating Income 838 1,015 1,165 1,043 1,108 1,235 1,613 1,587 PREVI , Other Operating Expenses (1,891) (1,920) (2,452) (2,437) (2,618) (2,760) (3,267) (2,980) Op erat ing Inco me 2,73 3 2, ,9 12 3,4 12 3, , ,18 8 4,8 2 0 Non-Operating Income (2) 19 Income Before Taxes 2,74 4 2,72 3 2, ,4 15 3, ,0 57 6,18 6 4,8 3 9 Income and Social Contribution Taxes (771) (727) (853) (1,053) (1,194) (1,072) (1,923) (1,474) Interest on Own Capital Tax Benefit Interest on Own Capital Tax Benefit (220) (230) (262) (307) (363) (408) (559) (442) Statutory Profit Sharing (26) (1) 1 0 (0) R ecurr ing Inco me 1,72 7 1,76 4 1,8 19 2,0 56 2, ,578 3,70 4 2,9 2 3 Extraordinary Items , Sale of Interest in VISA Internacional Economic Plans (193) (84) 530 (85) (140) 84 (231) 17 Credit Assignment Tax Efficiency Contingent Liabilities (BESC) Previ Unrecognized Actuarial Gains - - 3, Additional Provision for Loan Losses (676) Provision for labor, civil and tax claims Tax credits diffirential of CSLL rate Disposal of Investments (Visanet Brasil) 1, Voluntary Resignation Program - BNC - - (215) Reversal of Labor Liabilities Capital Gain - BB Seguros Participações Tax Effects and Statutory Profit Sharing on One-Off Ite (362) (171) (1,895) (313) (246) (37) 70 (8) PREVI Actuarial Assets - Adjustments (88) N et Inco me 2, ,9 79 4,155 2,3 51 2,72 5 2, , ,9 3 2 Banco do Brasil MD&A 1Q11 126

128 Table 154. Income Statement with Reallocations Annual R$ millio n C A G R - % F i na nc i a l I nt e r me d i a t i o n Inc o me 3 6, , , , , Lo ans 2 1, , , , , Leasing Securit ies 13, , , , , Financial Derivat ives (6 36 ) 175 (1,28 3 ) (1,2 2 3) (2,2 3 9 ) Fo reig n Exchange Po rt f olio , Co mp ulsory Investment s 1,612 1,6 16 1, , Financial Inco me f ro m Insur., Pensio n & Cap it alization Op FX Gain (Lo ss) o n Fo reig n Investment s (2 4 5) (574 ) (1,0 4 2) (14 9 ) (11.7) Ot her Op. Inc. o f a Fin. Int ermed. Nat ure , Tax Hed g e (776 ) (147) - F i na nc i a l I nt e r me d i a t i o n E x p e ns e s ( 18, 57 7 ) ( 19,16 8 ) ( 3 3,8 8 5 ) ( 3 2, ) ( 4 2,0 3 8 ) M o ney M arket Fund s (16,726 ) (17,52 3 ) (2 5,20 0 ) (2 9,759 ) (38,565) B o rro wing.a ssig nment s and Onlend ing (1,8 51) (1,6 45) (8,6 8 5) (2,510 ) (3,4 73 ) 17.0 N e t Int e r e s t I nco me 18, , , , , A llo wance fo r Lo an Lo sses (5,743 ) (5,3 78 ) (6,79 9 ) (11,6 29 ) (10,6 75) 16.8 N e t F i na nc i a l M a r g in 12, , , , , Fee Inco me 8,88 8 9, , ,511 16, Fee Income 8,88 8 9, ,771 10,172 11, B anking Fee Inco me - - 2, ,33 9 4, Res. Fro m Insurance, Pension Plan and Saving s B o nds ,574 1, Taxes o n Revenues (1,6 83 ) (1,9 11) (2,36 2 ) (3,14 9) (3,6 27) C o nt r i b ut io n M a r g i n 19, , , , , A d minist rat ive Exp enses (13,0 20 ) (13,4 4 8 ) (15,3 58 ) (19,18 5) (22,565) 14.7 Perso nnel Expenses (7,2 70 ) (7,0 77) (8,112 ) (10,2 80 ) (12,2 4 4 ) 13.9 Ot her A d minist rat ive Expenses (5,6 08 ) (6,2 19 ) (7,24 6 ) (8,9 0 5) (10,3 2 2 ) 16.5 Other Tax Expenses (142 ) (153 ) (140) (100 ) (107) (6.8 ) C o mme r c i a l I nc o me 6, , , , , Leg al Risk (798 ) (9 9 3 ) (72 2 ) (50 2) (1,0 76 ) 7.8 Leg al Claims (19 7) (3 17) (16 1) (2 42 ) (4 27) Lab o r Lawsuit s (6 0 1) (6 76 ) (56 0 ) (2 60 ) (6 4 9 ) 2.0 Ot her Operating Inco me (Exp enses) (530 ) (9 8 ) (2,19 8 ) 18 5 (1,6 8 1) Eq.Interest in Resul. Sub s. and A f f il (9 7) (3 3.0 ) Ot her Op erat ing Inco me/exp enses (1,0 3 7) (8 25) (2,10 2 ) 13 4 (1,78 3 ) 14.5 Ot her Op erating Income 2,518 2,74 4 3, ,84 3 4, PREV I ,19 3 4, Ot her Op erating Exp enses (3,555) (3,56 9 ) (5,79 9 ) (7,9 02 ) (11,0 8 2 ) O p e r a t i ng I nco me 5, , , , , Non-Operating Income (22.8 ) Inc o me B e f o r e T a xe s 5,34 1 9, , , , Inco me and So cial Co nt rib ut io n Taxes (8 99 ) (2,4 8 4 ) (2,416 ) (4,155) (5,2 4 2 ) 55.4 Int erest o n Own Cap it al Tax B enef it Int erest o n Own Cap it al Tax B enef it (777) (6 4 9 ) (9 51) (1,157) (1,6 37) St at ut o ry Pro f it Sharing (2 6) (0 ) - R e cur r ing I nc o me 3, , , , , Extraordinary Items 2,379 (821) 2,118 1,642 1,039 (18.7) Previ - Parity 1, Tax Cred it s Reco rd ed 1, Reco very o f Und ue Taxes A d ditio nal Provisio n fo r Lo an Lo sses (500 ) - (1,59 4 ) (6 76) Cassi - A ssist ence Plan - (4 9 3 ) PA A - Early Ret irement Plan - (9 15) Permanent Exclusio ns Tax B enef it Disp o sal o f Investment s , Economic Plans - (19 9 ) (3 72 ) 157 (3 71) - Revaluat io n o f Co nso lid at ed Shares Change o f Cred it Card B asis - - (54 ) Previ Unreco g nized A ct uarial Gains - - 5, Tax Eff iciency - - (1,2 59 ) Sale o f Int erest in V ISA Int ernacio nal Cred it A ssig nment Tax Eff iciency Co nt ing ent Liab ilit ies (B ESC) - - (36 0 ) Tax cred it s diff irent ial o f CSLL rat e Pro vision f or labo r, civil and t ax claims (1,3 6 7) - - Tax Cred it s - Diff erential o f CSLL rate , V o lunt ary Resig nat io n Pro g ram - B NC (215) - - Reversal o f Lab o r Liabilities Cap it al Gain - B B Seg uro s Part icipaçõ es Tax Eff ects and St at ut ory Prof it Sharing on Nonrecurrin (502 ) 496 (986) (513) (527) 1.2 N e t Inc o me 6, , , , , Banco do Brasil MD&A 1Q11 127

129 Vice-Presidency of Finance, Capital Markets and Investor Relations Vice-Presidency Ivan de Souza Monteiro Investor Manager Director Gilberto Lourenço da Aparecida Executive Manager Gisele Campana Rodrigues Divisional Managers Joaquim Camilo de Castro Eduardo Amaral Pilenghi Carla Sarkis Teixeira Analysts Alfredo Tertuliano de Carvalho Bruno Pio de Abreu Travassos Bruno Santos Garcia Carlos Vieira do Nascimento Daniel Henrique Sousa Diniz Danilo de Melo Farias Domingos Pereira dos Santos Neto Elias Santos Lima Eva Maria Gitirana de Oliveira Fabíola Lopes Ribeiro Glauco Ribeiro Barbirato Tavares Hilzenar Souza Alves da Cunha Janaína Marques Storti Joabel Martins de Oliveira Leonardo Resende Nader Marcelo de Campos e Silva Marcone Edson de Vasconcelos Formiga Filho Mariana Reschke da Cunha Rafael Augusto Sperendio Rafael de Freitas Peixoto Raquel Castelo de Carvalho Ferrari Toni Rudi Schmitz Banco do Brasil MD&A 1Q11 128

130 Financial Statements First Quarter 2011