Rule 12g3 2(b)Exemption # Free English Translation 3Q17 Earnings Conference Call November 10 th, 2017

Transcription

1 Rule 12g3 2(b)Exemption # Free English Translation 3Q17 Earnings Conference Call November 10 th, 2017 OPERATOR - Good morning everyone and thank you for waiting. Welcome to Banco do Brasil s 3Q2017 earnings conference call. This event is being recorded and all participants will be in listen-only mode during the company s presentation. After this there will be a Q&A session, at the time further instructions will be given. Should any participant need assistance during this call, please dial *0 to reach the operator. This conference call is also being broadcasted live via webcast into Banco do Brasil s website at where the presentation is also available. The replay of this conference call will be available through the phone number , in English and Portuguese. To access the replay you must ask the operator to listen to BB s Conference Call. Your identification will be required. Participants may view the slides in any order they wish. Before proceeding let me mention that this presentation may include references and statements, planned synergies, estimates, projections and forward looking strategies concerning Banco do Brasil, its associated and affiliated companies and subsidiaries. These expectations are highly dependent on market conditions and on the performance of domestic and international markets, the Brazilian economy and banking system. Banco do Brasil is not responsible for updating any estimate in this presentation. With us today we have Mr. Alberto Monteiro de Queiroz Netto, CFO, and Mr. Bernardo Rothe, head of investor relations. Mr. Bernardo, you may now begin. BERNARDO ROTHE Good morning everyone. Thank you for participating in our conference call. I would like to start the presentation on page 4 where we have the strategic guidelines of Banco do Brasil and what has been driven us to improve the performance of the bank. For the main guidelines, the profitability including efficiency, control delinquency and 1

2 improve the capital level of the Bank, the customer experience and the digital transformation. The highlights for the comparison between 9M this year to 9M last year were fee income at 9.9% growth. Administrative expenses, a decline of 2.7%, under control. Cost to income ratio reaching 38.5% the best ever relation for Banco do Brasil in the period. In the next page we have the net income, a growth of 45.1% to reach million in 9M2017. The ROE was 9.1%, 9M last year, now 12.2%. In slide 6 we have the earnings breakdown where we show you how we build the adjusted net income and the accounting net income. Starting on the bottom with the adjusted net income, Net Interest Income at R$ 43.3 billion, provisions reaching R$ 19.6 billion, fee income R$ 19.2 billion, personnel expenses R$ 14.1 billion, total expenses of R$ 23.5 billion to reach adjusted net income of R$ 7.87 billion. Slide 7. We have the market ratios. Earnings per share had been improving every quarter, we expect that to keep improving moving forward. Dividend yield at 2.68, price earnings at and price book/value of Slide 8, commercial funding. We reached R$ billion, pretty much in line with the performance of the credit portfolio. Main highlights include savings deposits of 3.9% in a comparison with the 3Q2016. Slide 9, we have loan portfolio in expanded view. It decrease 7.9% in 12 months and 2.7% in the quarter. The mix of our credit portfolio and loan portfolio has been changing, where we see individuals and agribusiness gaining participation while companies lose participation in the total loan portfolio. Slide 10 we have the disbursements considering base 100 in the 1Q2016. We can see we have overall increase of 49.0% in disbursements in the 3Q2017 compared to 3Q2016. It s the second highest level 2

3 disbursement in the series. We ve been seen increasing disbursements in our operations. Most of it came from individuals, a growth of a 100.0% in comparison with the 3Q2016 while companies increased 25.0% and agribusiness increased 39.0%. Slide 11, individuals loan portfolio. We have the mortgages growing for individuals at 6.1%, market share of 7.8%, payroll grew 4.4%, market share of 21.6%. Also we need to point out that we ve been growing faster through retirees and pensioners and the other types of clients that can do payroll loans. Salary loans decreased by 2.0% and auto loans 25.1%. Slide 12, loans to companies in expanded view. Reduction of 15.5% in comparison with September 2016 and 3.4% compared to June Most of it came from very small and small companies, 30.9% in 12M comparison and 9.9%, almost 10.0% in a quarter comparison. This is the portfolio that we are seeing an increase in disbursements, disbursements are improving, but we expect inflection point, we are going to start see the portfolio stop going down and start going up in the 1Q next year. Slide 13, agribusiness. We had a growth of 5.0% in rural loans in a comparison to September We reached 6.1% market share and the main highlight is the increase in disbursement in the 3Qif you compare with the same quarter last year, meaning the 1Q of the new harvest, it s an increase of 24.1%. Slide 14 we have the delinquency ratio over 90 days. As we mentioned before the pick of the delinquency was in the 2Q, at 4.11%. Now we are at 3.94%. We expect stability in the delinquency ratio in the 2H, so we are believing in that and an improvement is really coming next year as the portfolio starts to grow. 3

4 Slide 15 delinquency ratio by segments. We had a decrease in companies, to 6.7% some increase in individuals to 3.49%, and also in agribusiness to 1.6%. Slide 16, provisions and coverage ratio. The total coverage ratio of the Bank reached 152%, provisions were quite stable in comparison with June 2017 and we had reinforced the supplementary provision for risks E, F and G in this quarter. Slide 17, coverage ratio by segments. Individuals at 171%, agribusiness 161% and companies 147%. Slide 18, average risk at 6.01% at the end of September and the concentration levels AA-C at the end of the quarter was 91.0%. Slide 19, we have the provision expenses flow divided by the loan portfolio, 0.99% that s the total, it has reduced a little bit. And the total provisions, total expenses and provisions reached R$ 6.2 billion in the quarter, a gradual reduction and this expected gradual reduction in expenses moving forward should continue to happen. Slide 20, NPL formation. We have a good performance in this quarter, reduction from 1.07% to 0.73%, the lowest nominal value in NPL formation since 1Q2015, at 4.58%. If we add the part of the renegotiation of the loan portfolio that was renegotiated over 90 days past due, this ratio would be 0.8% and the nominal value R$ 5.13 billion also the lowest nominal value since the 1Q2015. NPL formation by segments, in individuals is stable, also stable in agribusiness, with a small reduction. And in companies we had a big reduction going from 1.72% to 0.95%. Slide 22, we have the renegotiated overdue loan portfolio. Main highlight is the continued increase in the amortization net of interest, this is principal plus interest less interest capitalized in the period, at R$ 773 million. If you 4

5 consider the payment in cash, it was over R$ 1.2 billion in the quarter. The coverage of the total portfolio by provisions is 48%, we had an increase since 3Q The NPL reduced to 24.6%. NPL formation in this portfolio also is behaving pretty well decreasing every quarter. It reached 5.69% in this quarter. Slide 23, net interest income. Without recovery of write-off loans, it was 0.4% decrease in comparison with 2Q and 2.2% in 9M comparison. That against the average balance of credit portfolio being reduced by 6.0% in the period. Spreads by portfolio. Individuals increased a little bit to 16.32% also impacting the total loan operations with a small increase to 7.42%. We also saw an increase in companies spread and agribusiness reduced a little bit. Slide 25, net interest margin, at 4.56%, a reduction of 14 bps pretty much explained by the effect of the mix, where liquid assets increased participation in our total assets, in relation to the loan portfolio that represents a 4 bps decrease in the NIM in this quarter. Also, the level of recovered write-offs, meaning the seasonality that we have usually in the 1Q, 3Q we have lower recoveries than in the 2Q and 4Q, that a reduction relations to the 2Q, represents 10 bps in the NIM in this quarter. Moving to slide 26, fee income. We have the main highlights here are checking account fees, 11.3% growth. Also asset management fees with 26.6% growth. One item I would like to highlight as well is the performance of capital market, the increase of 13.0% in fees collected in the 9M2017 and the consortium still remains high percentage of growth, at 33.6%. Slide 27, administrative expenses and cost to income ratio. We had a reduction of 2.7%, mainly coming from personal expenses, we had in fact a small increase in administrative expenses in 9M. In the right side of the slide we have how behaved the number of employees and branches in 5

6 Banco do Brasil. And we have now the breakdown between the traditional ratio and the digital service. You can see traditional branches decreased by 13.1% in a 12M comparison while the digital service increased by 51.0% Slide 28. Capital ratio, 19.15%, very good capital ratio and the common equity Tier I reaching 10.04%, in comparison to our goal, 9.5% minimum, core equity Tier I ratio fully loaded on the beginning of January These improvements in capital ratios come from increase in profitability, retention of profits and managing the RWA growth. Slide 29, full application of Basel III rules. It will go from the total ratio of 19.1% after the total application of the rules and use of the tax credits to 18.6%. In the case of the core equity Tier I it goes from 10.0% to 9.5%. 9.5% already is our floor for Slide 30, we have the performance against the guidance. Adjusted net income at R$ 7.9 billion for a guidance of R$ 9.5 billion to R$ 12.5 billion. NII -2.2%, it s from -4.0%-0.0%. Provision expenses net of recovery at 16.2 million. Fee income 9.9%, a little bit higher than the guidance of 6%-9%. Then the administrative expenses, -2.7%, in comparison to the bottom of the guidance of -2.5%. We have missed here in the growth of the loan portfolio but we expect the guidance for loan portfolio growth and by segment as well, to be within the guidance until the end of the year, as we move to compare to the 4Q2016 that was a lower comparison. Finally, in the last slide, the invitation for participation in our meeting with investors and analysts, the APIMEC in December 6 th, at 2:30pm in Rennaissance Hotel in São Paulo. That will be broadcasted live in the IR website. So, you can follow it remotely as well. Now we can start the Q&A. Thank you. 6

7 OPERATOR - Ladies and gentlemen, we will now begin the Q&A session. If you have a question, please dial *1 on your touch tone phone now. We request for all participants to ask only one question at a time, in each round of questions. Our first question comes from Mr. Tito Labarta from Deutsche Bank. LABARTA Hi, good morning and thanks for the call. My question: looking at the net interest income, we re not seeing much growth this year which is expected but maybe, thinking in the next year do you think you can see any growth in NII? Will loan growth take up enough to offset further margin pressure? And can that be offset by lower provisions such as, you know, at the end the profitability will continue to increase into next year? Thank you. ROTHE - Thank you Tito. The Net Interest Income, we should see that being by the end of the year between what we have now and the lower end of the guidance. Next year we still don t have any guidance for NII but I can tell you that it is not the main driver of growth in profitability. We should see profitability still improving next year, not in the same level as this year, but that can be the double digit growth in profitability next year again butthe main drivers are not going to be the NII. Still, the main drivers of growth for Banco do Brasil will be the fee income, the control of expenses and the behavior of the provision expenses. LABARTA Ok. Bernardo. That s helpful. A follow up question in terms of your capital. Because you re already at 9.5% in the core Tier I which is your target for So, what do you think it will be by the end of next year and you have another some moving parts, talks in the press of hybrid capital and potentially having to pay that, you announced the sale of Neoenergia, still working on Patagonia. What do you think your capital could be at the end of next year now? 7

8 ROTHE Tito, 9.5% is a floor, not a target. So, we should keep growing the core equity Tier I of the Bank, maybe not in the beginning of 2019, of course, but overtime to be between 11% to 12.0%. That has to be decided by the Board of Directors. What we have is the decision of the floor of 9.5% by the beginning of As a floor, a level higher than that is pretty good and we want to be as higher as we can get, not too high of course, not to have excess capital but we are going to keep working to improve profitability of the Bank, keeping retaining profits and manage our RWA so we can grow our portfolio with a lower density that would be helpful for capital as well. LABARTA OK. Great. Thanks, Bernardo. OPERATOR - Our next question comes from Mr. Carlos Macedo from Goldman Sachs. MACEDO Thanks. Good morning, gentlemen. A couple of questions on your loan book to individuals. A little bit stronger showing in this quarter part of it driven by loan purchases on the auto side. Just trying to get understanding on what motivated this. Your organic auto loan book is still weaker sequentially. Is that just because the type or the location of the sales being the dealership rather than the branch, what has been driving that? And generally speaking, the outlook for loan growth in the individuals book which is 2% to 5% this year, how do you see that going forward in the next year? And the second question on the back of that, the NPL ratio on that specific loan book has gone up where your peers Itau, Bradesco, Santander, actually Santander has been a little flat, but the other two have been coming down, you can see from the general information for private sector banks are coming down as well. Could you give us an understanding why that is? Is that because of the mix of the book, you have longer duration loans and therefore to write them off takes more time? I just kinda get understanding when to expect an inflection in that specific NPL ratio. Thanks. 8

9 ROTHE - Thank you Macedo for your question. In terms of growth, level of disbursement even in auto loan has been increasing in Banco do Brasil, this is the dynamics of the portfolio. We grow with demand, we don t force demand. But the demand is growing and we ve been seeing even growth, big growth, in terms of loans that are made through our mobile app, they are doing that inside the dealers. So, we have the perspective for this portfolio moving forward but it is part of the behavior of the portfolio, there s a lot of motivations and that portfolio will start going again for autoloans moving forward. So, there is no restrictions in what we do here and in terms of what we did organically is not part of our guidance, right? So, we guide only on the growth of the organic portfolios. But, anyway, we have a shareholder at Banco Votorantim and part of what we ve been doing in Votorantim is to buy portfolios from time to time. So, that happened this quarter, it s normal, [against what we have done in the past. So, for individuals, growth next year should be, let s say, individuals and agribusiness should grow more than the rest of our portfolio. That s what we want to do. So, we see growth in individuals next year to be higher than the average of our total portfolio. In terms of delinquency in individuals that is part of the process we are looking at higher risk-return in the portfolio so delinquency was expected to go up. But if you look at the vintage in the graph we have in the MD&A, we can see that the 2017 vintage is performing better than any other else before. So the quality of the growth that we are seeing in individuals portfolio is better than in the past. We still have some impact coming from rapid growth but we have renegotiated loans with individuals in the total portfolio, that impacted the delinquency of the overall portfolios. So that is going to stop growing that much looking forward and then you know, we are going to go down in delinquency potentially in the end of next year is going to be better than in the end of the year. 9

10 MACEDO - Ok. So, just going back to the first question. You were engaged in purchases from Banco Votorantim as required by the, you know, as for your prior arrangement where you did purchases ad hoc, depending on what the bank needed, correct? ROTHE You know, we don t have to, but we buy from time to time when we think that s a good opportunity for the Bank. We don t have to buy anything from Votorantim but we always bought portfolios from time to time when we think that s a good opportunity for Banco do Brasil, a good price, a delinquency very good, it s a decision that we make from time to time. It doesn t mean we are not going to buy any, and doesn t mean we are going to buy in the future. It depends. The future is made on case by case basis. MACEDO - Ok. Thanks, Bernardo. ROTHE And just to remember: it s not part of our guidance. Grupo Votorantim does not impact the guidance. MACEDO Of course. Thanks. OPERATOR - Our next question comes from Mr. Thiago Batista from Itaú BBA. BATISTA - Hi guys, Hi Bernardo. I have two questions. The first one about, I know you don t provide any formal guidance for earnings for next year but can you comment about the Bank expectations, how much the earnings should expand next year and the main drivers of this possible expansion. The second point about the hybrid instruments. We saw in the press, the beginning of this week, the discussion about R$ 8,1 billion in Hybrid instruments. Can you comment how those instruments impact the agribusiness loans, if this is part of the calculation of the equalization revenues? So, if there is any change in those instruments, how this should impact the agribusiness loans? Or the equalization revenues of agribusiness loans? 10

11 ROTHE OK, thank you, Thiago. You know, we see expansion in earnings per share next year. As I mentioned that can be double digits, should be more than single digit, not what we are seeing this year, very high in terms of earnings per share, but still a good growth. And something that I mentioned in the previous call I d say we can expect that the low of the guidance for net income next year should be close to the total performance of the Bank of this year. That means a good growth in terms of earnings per share given that 2018 is still a very difficult year. Main drivers are going to be fee income growing above inflation, expenses growing below inflation, and cost of risk reducing throughout 2018, so provision expenses are going to still reduce in relation to So that are the main drivers, not the NII, a year with low interest rates, credit is going to grow but it s going to grow throughout the year, so potentially could impact by the end of the year. So, main drivers of growth: fees, expenses/administrative expenses and provisions and, again, without giving a guidance we still don t have that floor of the guidance, the lower level of the guidance should be close to what we already are going to deliver this year. And this year, of course, if you look at our performance we are close to the mid of the guidance until the end of the year. About the hybrids, right? OK, this discussion that appeared in the newspapers, what the accounting office is analyzing, so far we are not the object of the analysis, not even an interest party, so one day, if they decide to analyze Banco do Brasil they ll have to start something and then we are going to have a chance to show the differences or the characteristics of what we have and how the funding is used to and so on. This hybrid is a funding for agribusiness so part of the cost that you have to consider is the equalization for each harvest period. So we have several sources of funding, as savings account, the main deposits account, LCAs, the hybrids and so on so forth. So we have to put all costs together, cost of funding plus the cost of doing business, the cost of risk and the expected the risk- 11

12 adjusted return that the bank want to have in the portfolio. All of that gives us how much it is going to cost to finance agribusiness in Brazil. And the government then set how much is it going to be paid by producers and how much the government is going to pay for equalization. So, if there is a change in cost of the hybrid, that will impact the overall cost of doing or financing agribusiness. That can mean increasing costs for the producers or increasing in expenses of equalization by the government. Part of the formula is how we calculate the equalization every year. By the way, it s public through the information that the minister of finance issues every beginning of the harvest period. So, that s how it works. BATISTA - Ok. Thanks a lot for the clarification, Bernardo. OPERATOR - Our next question comes from Mr. Jorge Kuri from Morgan Stanley. Kuri Hi, good morning everyone. Two questions if I may. The first one is on your third quarter numbers and operating profits were down 8.0%, q.o.q, your net income grew because you have very low tax rate. I m just trying to understand how should we think about this 8.0% contraction in operating profits over the next 2-3 quarters. What was extraordinary this quarter that will allow you to grow your operating profits going forward, what is that you are expecting to reverse that we saw this quarter. And my second question is on your effective tax rate. What should be the expectations for effective tax rate going forward? Thank you. ROTHE - Thank you Kurifor your question. This quarter we had an increase in provisions for legal items, mostly labor that we booked in this quarter, that went higher than that we had in the 2Q and that end up impacting the earnings before tax. That is pretty much what happened. Moving forward, provisions overtime should be decreasing even for labor. We don t see that happening next year, should be lower than what we are seeing now. This increase is natural after 10,000 layoffs of the bank and 12

13 we are doing some provisions now to cover that but 4Q may be higher, high level, still a high level, not exactly higher than the 3Q but still a high level and throughout 2018 that should be more normalized again. So, pretty much the type of expense that we are anticipating future expenses in provisions now and taking care of some potential problems instead letting that happen in the future. So, it s under control, is part of the process of restructuring the bank. In relation to the tax rate. By the way, we expect that the increase in net income, quarter after quarter, gradually as we ve been doing that this year. So next quarter the net income should be a little bit better than this quarter and moving through 2018 that gradual improvement should come as well. In terms of tax rate. We had two interesting things happening in this year right? The tax rate in the previous quarter was higher than the soft guidance that we ve been delivering to you. And that this quarter was lower. But if you look at the tax rate for the full 9M we are pretty much aligned with our soft guidance. Just to remember, the soft guidance is earnings before taxes less the equityincome, that is tax free, so if you take that out of the earnings before taxes the effective tax rate should be between 30%-35.0% and we are inside this soft guidance if you look at the 9M perspective. We are higher than the 35.0% in the previous quarter, we are lower than 30.0% in this quarter, 9M we are inside the soft guidance and looking forward for the full year we should be between %. Kuri Thank you. That s clear. OPERATOR - Our next question comes from Mr. Jorg Friedemann from Citibank. FRIEDEMANN - Thank you very much for the opportunity. I also have two questions. The first one with regards the stabilization of cost of risk, I would like to understand when you think that you are going to be able to stabilize the levels of cost of risk that should be normalized level that you had years ago, for instance by , provisions per average assets, 13

14 were running below 3.0%, they achieved more than 4.0% last year running more or less at 4.0% this year so, how long do you think it will take for you to come back to these levels in light of what you have already a feasibility, since the NPL creation points toward the fact the worst is behind? And whether you think this will allow already next year to see NIM adjusted by risk expanding? This is the first question. My second question: you mentioned several times about the optimization of RWA and the efforts that you are doing to improve your capital levels. Of course, in addition to that as already asked in this call, you have opportunity to do some assets divestitures and I would also add that on top of those points you could have maybe some contribution coming from Previ which actually, according to my forecasts, could be adding a bit of capital as well in the upcoming quarters. So, altogether, my point is: at what level of capital would the bank become comfortable enough to think even about not working anymore with the minimun dividend requirements. What is the level of core Tier I that beyond the 9.5% target would make management comfortable not only for resuming growth but even about of being more flexible about payouts? Thank you. ROTHE - Thank you Jorg for your question. We are looking ahead in terms of capital, managing our capital position as profits are going to grow so we are going to retain more profits, generating more capital. We have credit growth to happen next year but through lines of credit that are net generating ofcapital so they are positives for capital overtime. We should keep growing the capital base and overtime we can get the problems that we have excess capital and gradually we should decide how to deploy capital. That decision has to be made when the problem comes. Too soon to talk about how to deploy. Several ways of deploying capital, one of them is to increase pay out again. But that is a decision the board has to take when that type of problem comes. Right now we are in a capital conservation mode so we are going to keep this increase in capital 14

15 overtime. The decision that we have at this current time is to have a floor of 9.5 by beginning of We don t have a decision of the board on any other level, but I d say, in my point of view, that to be between % makes sense. Makes sense but the board has to decide and when the decision is made we can share with you guys. In terms of cost of risks, we see the cost of risk normalizing overtime. It is going to take 1 to 2 years to do that, I d say by the end of 2019, we should have a cost of risk that is more in line with what we had in the past. But you have to consider the change in mix that we are going through so as we ve been saying that we don t want to grow, or we don t want to compete with capital market in the large companies exposure, that means that for capital is good but for cost of risk usually large companies carry a lower cost of risk than the rest of the portfolio, so the mix should change overall and resulting in the cost of risk of the Bank but that s not a negative, that s a positive in terms of profitability and positive in terms of capital. But we should see, yet, the normalization by, at least, by the end of FRIEDEMANN OK. That s very clear. Thank you Bernardo. Just a follow up on the capital question. On top of all of this potential improvement that you mentioned we heard that there is a discussion, a debate I think, maybe in the level of the Central Bank, I m not sure if Febraban is leading this debate, but the RWA of agribusiness loans in Brazil are running according to my understanding of reading the circular 3644 of the Central Bank between %, given the level of collateral that you have in the Pronaf segment as well as SME, seems too high, specially compared with also other countries, like France etc., are you taking part of this debate? Do you think that at some point this could also change and maybe take into consideration this mitigating factors of the agribusiness book to lower RWA in the segment? Thank you. ROTHE - I ve a point of view, I have shared that already, agribusiness in Brazil is very particular, it s different from things that happen in other 15

16 places. There are crop collateralized, we have insurance, we have part of the remuneration that is paid through the equalization that comes from the government. We have several things that would allow a different treatment for the Brazilian agribusiness than what s done from other parts of the world. But that s a discussion that is pretty much made through Febraban, Central Bank, it s very hard to see coming any change or to make too much comment on that. If there is any change of course is going to be positive for Banco do Brasil. We let Febraban take the leading of these discussions with the Central Bank, OK? FRIEDEMANN Ok, thank you very much. OPERATOR Our next question comes from Mr. Domingos Falavina, from JPMorgan. FALAVINA Thank you Alberto and Bernardo. I actually have two questions. The first one is more a follow up on the Thiago Batista s call as well as on the Portuguese call. In that call you mentioned that you are expecting something in the lower half, or in the lower end to be precise of the earnings for this year and you also mentioned in that call low doubledigit earnings growth. In this call even you also said maybe high single digit. If you look at your guidance the lower half would be something between R$ billion given the half is R$ 11 billion and if we apply this in the low teens to high single-digit earnings growth we probably get something between 5-7.0%, a good billion below the consensus estimates. Have noticed the share prices are down 3.0% underperforming the peers. My question here is: are you basically implying that earnings guidance, or should I say the consensus for earnings next year should decrease, is that the message you are trying to convey? And my question number two is - or are you just being conservative or cautious in your guidance? My second question is exactly on the same line but on fees. You re running at 9.9%, you are also setting the mid of the guidance for fee growth? The mid of the guidance would be 7.5% and to get to that we basically have to see zero 16

17 growth of fees in the 4Q y.o.y. Also, or you re just trying to be cautious, because I ve seen this happen before on the costs, where you offered a guidance and eventually on the last quarter you lowered the guidance or you re really basically trying to send a more negative message to the market? Thank you. ROTHE Thank you for your question. What we re saying is, if you look at what we ve delivered and if we re are going to increase net profit every quarter moving forward we are not going to be below R$ 10.5 billion, right? So, it s higher than R$ 10.5 billion. Potentially lower than R$ 11 billion. What I had said is: given the performance we should be below the mid of the guidance. Consensus is R$ 10.7 billion, right? That s the consensus right now. Just do the math. If I was going to, at least, repeat the performance of the 3Q. Where we are going to get? R$ 10.6 billion, right? What we are saying is as we are improving, so, it should be higher than R$ 10.5 billion, not going to be higher than R$ 11 billion. That s what I said. FALAVINA It makes a lot of sense. But the y.o.y. I think it s a number that strike to be a little bit negative. ROTHE Look to what I said: the low of the guidance for next year should be close to our performance for the full year. So, let s say we deliver the consensus, low of the guidance next year should be close to R$ 10.7 billion, if we deliver the consensus. FALAVINA You said that in this call but in the previous one, you said low single-digit, which would mean the base of guidance ROTHE I said we are not going to be in the same growth as this year but it should be double digit. Low double digit. OK? FALAVINA Perfect. Super clear. It s better, because I just got a couple of questions in here and it sound a bit alright. It makes more sense. Thank you. 17

18 ROTHE In fact, it s not that far from consensus for next year what I m saying. FALAVINA OK, so there is no message that the consensus is high. It helps a lot. Thank you. ROTHE Just to be clear in terms of fees revenues as well: What I said is: the 4Q last year had a very good performance so, when we put the 4Q in the math we are going to be inside the guidance. Over the mid of the guidance for fees but below the top of the guidance. So, we re not being above the top. But tend to be close to the top and the mid. FALAVINA Yes. It makes more sense now. Super clear. Thank you. ROTHE Thank you for the question, so I could clarify that to everyone. If someone didn t get the right message, we are in a good track to deliver a good growth in earnings per share next year. Thank you. OPERATOR - This concludes today s Q&A session. I would like to invite Mr. Bernardo Rothe to proceed with his closing statements. Please go ahead, sir. BERNARDO ROTHE - I just would like to thank everyone for participating in the conference call and please, let us know if there is anything else we can help, details, any information to add. My team and myself are at your disposal. You can call us. We are going to be here to help you. Thank you very much. OPERATOR - That does conclude Banco do Brasil conference call for today. As a reminder, the material used in this conference call is available on Banco do Brasil investor relation s website. Thank you very much for your participation and have a nice day. You may now disconnect. 18