With us, today, we have Mr. Ivan de Souza Monteiro, CFO and Mr. Leonardo Loyola, Head of Investor Relations. Mr. Leonardo, you may now begin.

Transcription

1 Banco do Brasil Conference Call 08/15/14 OPERATOR: Good morning everyone and thank you for waiting. Welcome to Banco do Brasil 2Q2014 Earnings Conference Call. This event is being recorded and all participants will be in a listen only mode during the Company presentation. After this, there will be a Question and Answer session. At the time, further instructions will be given. Should any participant need assistance during this call, please press *0 (star zero) to reach the operator. This event is also being broadcast live via webcast into Banco do Brasil's website at where the presentation is also available. Participants may view the slides in the order they wish. Before proceeding, let me mention that this presentation may include references and statements, planned synergies, estimated 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 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. Ivan de Souza Monteiro, CFO and Mr. Leonardo Loyola, Head of Investor Relations. Mr. Leonardo, you may now begin. LEONARDO: Good morning everyone. And thank you for joining our 2Q2014 Conference call. I would like to start the presentation in slide 3, where we show some highlights of Banco do Brasil's performance in the period. We posted an adjusted net income of R$ 3.0 billion in 2Q2014. Net Interest Income grew 7.2% compared to 1H2013. Our loan portfolio in the broad concept grew 12.5% in 12 months,

2 reaching a total balance of R$ billion. Our delinquency ratio remains the best in the banking industry, closing the quarter at 1.99%. Movin on to slide 4, we present some earnings highlights. The Net Interest Income grew by 6.4% y.o.y and 7.2% compared to the 1H2013. Administrative expenses hit 8.3% compared to the 1H2013, converging to the guidance. Allowance for loan losses grew 2.9% compared to the 1H2014. In 12 months, this figure increased by 8.4% staying under the 19.4% growth of the average classified loan portfolio. We posted an adjusted net income of R$ 5.4 billion, in the 1H2014, corresponding to an adjusted return on equity of 15.3%. On slide 5, we show our sources and uses where we call your attention to the Agribusiness Letters of Credit and Real State Letters of Credit, that together grew 122.3% in 12 months, and also to corporate bonds repos which grew 106.5% in the same period. We highlight a 98.4% growth in that instrument elegible for capital, compared to the last quarter, reaching a balance of R$ 16.3 billion in June Part of this increase is due to the last perpetual bond issued in June, recently authorized to compose BB supplementary capital Tier 1 capital base. You can also, you can see that BB's loan portfolio represents 86.6% of the Bank's funding usage. Continuing to slide 6, we display BB net income performance. In the upper lefthand side graph, you can see our global spread behavior, reaching 4.1% in this quarter. On the right-hand side we show the credit spread by segment that show recovery in 3 segments. In 2Q2014, NII reached R$ 12.4 billion, 6.4% growth compared to 2Q2013. Comparing the 1H2013 and 14, NII grew by 7.2%, reaching R$ 24.2 billion. We highlight the 34.6% growth in treasury income, due to the average Selic rate increase compared to 1H13.

3 On the next slide, we have the evolution of the loan portfolio in the broad concept reaching R$ billion in June 2014, representing 12.5% growth in 12 months. In 12 months, individual's portfolio grew 7.2%, representing 24.1% of the total loan portfolio. The companies portfolio grew by 13.2%, representing 46.7% of the total loan portfolio, and the agribusiness portfolio grew 23.7%, representing 21.9% of Banco do Brasil's total loan portfolio. Considering the classified loan portfolio, BB's market share was 21.3% in June On slide 8, we have the organic portfolio with individuals. In this view, we excluded the proportional consolidation of Banco Votorantim, and the acquisition of portfolios of other banks. On this basis, the portfolio grew 13.2% in 12 months and 3.9% in the quarter. The four lower risk lines, payroll, salary loans, mortgage and auto loans, represent together 76.0% of this portfolio, against 75.3% in June On the upper graph on slide 9, we can see that the payroll loan portfolio reached R$ 63.4 billion, allowing BB to end the period with a 26.6% market share. If we consider the organic portfolio, 88.0% of this portfolio is composed by customers who are civil servants; 7,95% relates to INSS retirees; and 4.05% to private sector employees. We highlight that this portfolio posted a balance of R$ 32.0 billion by the end of June 2014, an increase of 84.5% in 12 months. For individuals, the growth was 71.1%, reaching R$ 23.5 billion. Finally, the botton right-hand side graph shows the autoloans portfolio credit offered exclusively to our customers within our branch network. In June 2014, more than 82.0% of auto loans were taken by customers with relationship over 5 years with Banco do Brasil.

4 Moving on to the next slide, we present the company's loan portfolio, totalling over R$ 335,0 billion, representing 13.2% growth in 12 months, highliting the increase of 136.5% in mortgage and 20.6% and credits for investments. By the end of 2014, the estimate of this disbursement for investiments will reach R$ 8.0 billion. By the end of 2015, we estimate disbursement of additional R$ 5.8 billion. On slide 11, we present the breakdown of loan portfolio with companies by size. SME, medium and large companies. The SME portfolio ended June 2014 with a balance of R$191.1 billion, up 7.6% y.o.y. And medium and large companies portfolio reached 15.7% growth for the same period. In the upper right hand side graph, R$ 19.7 billion of SME loan portfolio was covered by Operations Guarantee Fund, the FGO. This amount grew by 21.0% compared to June R$ 3.6 billion of this portfolio is covered by FAMP, an SME Guarantee Fund. In the bottom line graph, we display that 69.7% from the SME portfolio was contracted by clients with relationship of over 5 years with Banco do Brasil. On slide 12, we can see our agribusiness loan portfolio that grew 4.8% in the quarter and 23.7% compared to June 2013, remaining with the best delinquency ratio in Banco do Brasil's portfolio, with a 0.56% ratio. As we can see from the chart, on the right hand side, almost 64.0% of loans working capital for imput purchases on the crop are protected with insurance options offered to our customers. We ended crop with disbursement of R$ 76.3 billion, R$ 6.3 billion over the estimate for the period. The crop started in July 2014, has an estimate of R$ 81.5 billion disbursement through June 2015.

5 On the next slide, we detail BB's Assets quality which historically achieved the better delinquency ratio in the banking insdustry, as shown in the top graph. In June 2014, the NPL ratio was 1.99%, while the industry presented a 3.0% ratio. Our current provisional levels enable us to record a coverage ratio of 192.1%, a much better ratio compared to the industry, as posted on the bottom graph. On slide 14, we show the average risk of our loan portfolio, evolution with a downward trend remaining below the industry. We ended June 2014 with a ratio of 3.57%, while the industry posted 4.78%. On the bottom left hand side graph, we see the write off of BB in 12 months, compared to the average balance of the classified loan portfolio for the same period. We may see that BB presented a better performance compared to its main peers. The bottom right-hand side graph demonstrates the relation between the amount of credit recovered and the total amount of write-offs to losses, both accumulated in 12 months. Banco do Brasil has prioritized recovery in cash. We present to you on slide 15, Banco do Brasil's delinquency per segment breakdown. The portfolios have been stable compared to that observed in 2013, remaining at a level significant lower than those reported by the industry. In a quarterly comparison, we see an improvement in individuals and agribusiness segments, with a slight elevation in companies. On slide 16, we see the NPL formation index in line with the same period in Despite its increase in this quarter, it remains within the range in the last two years.

6 On slide 17, we can observe our credit provision expenses considering the avarage classified loan portfolio. On the first graph, on the upper left-hand side, we have the ratio between provision expenses and the loan portfolio on a 12 months view. By the end of June 2014, we reached 2.76%. On the second graph on the right-hand side, we see stability on a quarterly view. In the bottom graph, we see that the 12.9% growth of the loan portfolio between June 2013 and June 2014 has been concentrated in the best risks, mainly between AA and C levels. On slide 18, we present Banco Votorantim net income in this quarter, confirming the progress in its restructuring process. Net income in June 2014 reached a total of R$ 140,0 billion, the third consecutive quarter of positive results. On the bottom graph, we have the information regarding the origination figures for light vehicles for Banco Votorantim where we can observe a decrease of 0.3% on NPL90 days in line compared to June On slide 19, we address the asset quality of loans originated by Banco Votorantim. The top graph shows the provisions expenses where we can see a decrease of 26.7% compared to the last quarter. The new vintage, contracted after September 2011 already occupies 77.0% of Banco Votorantim's managerial auto loans portfolio. On slide 20, we show our performance in fees. In 1H2014, fee income reached R$ 11.9 billion, growing 5.3% compared to the same period in Y.o.y., we highlight the 15.4% growth in card operations, 11.7% in insurance, pension and premium operations in and 14.0% in services. On the other hand, we've seen a weaker activity in capital market, which negatively affected fee generation in this segment.

7 On slide 21, we display the organizational product in the main cores business in which Banco do Brasil holds, direct or indirectly equity interest. In June 2014 we have added Stelo and Nivelo, Stelo introduced an international payment solution and Nivelo was created to offer strong loyalty program to our clients, bringing more efficiency to the business. On slide 22, we show information about the cards business. In the top graph, we see an increase in Elo cards issued by Banco do Brasil, that grew from R$ 5.6 million in June 2013 to R$ 7.2 million in June 2014 and a turnover that increase 78.7% y.o.y., reaching a balance of R$ 6.1 billion. On the bottom lefthand side graph, we show the bottomline of BB's card business. This business has been showing a strong growth year after year. The cards services income after tax reached R$ million in the 1H2014, 31.7% growth y.o.y. In the bottom righ-hand side graph, we display the total cards turnover which grew by 19.2% in 12 months. On slide 23, we can see the performance of our administrative expenses. These expenses amounted to R$ 7.8 billion in the 1H2014, corresponding to 8.3% increase y.o.y. I would like to draw your attention to the personal expenses, Q.o.Q that dropped 0.2%. Banco do Brasil continues to work hard on this line to hit the guidance estimate. On slide 24, we can observe stability on our cost-income ratio throughout the presented quarters. On slide 25, we show the BIS ratio of Banco do Brasil that ended June 2014 at 14.19%, with a 10.13% Tier I ratio. This metrics already considers the Basel

8 III rules and if we consider this fully implemented, measured over June 2014, the estimated BIS ratio would reach 12.91% and the Tier I of 8.77%. Finally, on slide 26, we closed this presentation with our guidance. Considering the results observed through 1H2014, some estimates were reviewed. We beat the guidance regarding the adjusted return on equity, reaching 15.3%, as well as net interest income, that grew 7.2%. The annual estimate for the lines was reviewed. Adjusted ROE between 14.0% and 17.0%, and net interest income between 5.0% and 9.0%. Fee income was also reviwed growing by 5.3% in 2Q2014. In regards our credit portfolio, we observe the same behavior, it means that the agro portfolio was growing faster than the others while individuals portfolio was growing slower. Companies portfolio performed slightly below the guidance range. Allowance for loan losses closed June at 2.8% ratio and administrative expenses are converging to the guidance range. Thank you for your attention and let's now open the Q&A session. OPERATOR : Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press *1 on your touchtone phone now. OPERATOR: Our first question comes from Saul Martinez, of JPMorgan. MARTINEZ: Thank you very much. Congratulations on the results. So, 2 questions. First, on your NIM evolution, in loans spread specifically. They have increased now for the last 2 quarters and it was specially pronounced on consumer side this quarter, 60 b.p. How much more room do you see this

9 additional spread increases and what does that mean for your net interest income going forward, not only this year, I know you moved up your guidance but there is some upside, thinking in terms of NII for the rest of the year and for NIM in Secondly, can you comment at all or would it be shared on the news yesterday about the STJ ruling on the overall plan making into national intergo. Is there anything that you could share with us on that beyond what you rolled in the release? LEONARDO: Thank you for your questions. Basically, let me start from the second one. There's not much thing to add to what we released in our information to market yesterday. Basically, all the information we would like to provide to the market is there. There is no immediate impact and the bank will wait until the minutes from the court just to take action, to appeal, either to STJ or to STF. Secondly, going to NIM, basically, as we saw in the past, we saw that while the SELIC rate was increasing, we were taking the heat on the funding side so now we have a more stable SELIC rate and on the other hand we have been repricing those assets and so we started seeing spread and NIM going up and we believe it is a trend that will continue throughout the year. MARTINEZ: Will you expect your NIM and spread to continue rising at least for another couple of quarters? LEONARDO: yes, you have to consider that now SELIC rate is stable and we are, you have to consider the mix effect as we have mortgage portfolio and agro portfolio growing faster than the others which compensates, on the other hand, an increase in spread. That's why, so, we believe that it will depend on how fast mortgage and agro will grow overtime.

10 MARTINEZ: Ok. Thanks a lot. IVAN: you need to take into consideration that we are renewing the portfolio, the loan portfolio, and we get a benefit from the new practices. We need to combine this with the different mix, special came from the mortgage portfolio and from the agro portfolio. MARTINEZ: it seems like this quarter for other banks including yourselves the impact in repricing has been very powerful and my question is more aligned with how much you will balance the mix on the one hand, and repricing on the other hand. Does the repricing have a bigger impact and does that mean there is actually room for NIM to expand more than what we were expecting in the coming quarters? IVAN: The best we can provide to you is the change that we did on the guidance. That's the best information right now, OK? MARTINEZ: OK, fair enough. Thank you. OPERATOR: Our next question comes from Carlos Macedo, of Goldman Sachs. MACEDO: hi, good morning gentlemen, I have a couple of questions. The first question is on your capital. We did see the common equity one level declining 40 b.p. q.o.q, on the Previ markdown, you announced yesterday you are going to negociate with the Central Bank to get part of that, part of the hybrid capital to be converted in the common equity I. Can you give us a little bit more colour on that? What exactly how much is being considered, what's the timing, what

11 will be the impact on your capital level. The second, the asset quality on the corporate side, we can a bit in the quarter, offsetting improvement in the consumer, individual side, could you comment on that? Is that more driven by SME portfolio, I know you have guarantees, but could you comment a little bit on the trends and assets quality in each one of those portfolios,it would be great? Thank you. LEONARDO: OK, the trend for the portfolio as a whole is a stable trend, because, you know, we built this portfolio based on credit lines that will be better in terms of risk, that's why we are very comfortable, and the Brazilian portfolio even thou if you have a lot of volatility in the macroeconomic scenario in the future. The first one is about the capital. We are in discussion, tougher discussions with the federal government about, we need to adopt, or to be compliance with the new regulation. We issued the hybrid instrument in 2012 and we have now the new rule, the final rules are Basel III that's why we are trying to change a little bit just to be compliance with the new regulation. We didn't provide, there's no number related to that, but we believe it could be positive for us because we are moving from level I, II, to core capital, that will be very positive for us and it will improve the quality of our capital. MACEDO: Do you have, can you disclose the amount of what you are negotiating with the Central Bank, in terms of that move on Tier I core capital? LEONARDO: Yes, the amount is R$ 8.1 billion and we will wait, probably in the next days we will conclude this process with the federal government. MACEDO: ok, how confident are you that you're gonna be able to get this done? I mean, CEF has been able to convert a significant amount of this

12 hybrid instrument, into common equity Tier I. Is it a similar process or is it something different? LEONARDO: it's a little different. But we are comfident that we can build this solution between us and the federal government. MACEDO: OK, thank you. OPERATOR: Our next question comes from Mr. Tito Labarta, of Deutsche Bank. LABARTA: hi, good morning, thanks for the call. A couple of questions. Looking in terms of your loan growth that has slowed down, quite a bit on the last years, so I just want to get a sense, you are still growing above the private sector banks. How do you see your loan growth evolving particularly, it can continue growing in lower risk segment and just a follow up in terms of asset quality. Your asset quality has been pretty stable over year, just given the economy and your growth, what point do you think the asset quality begin deteriorate and maybe you start to see some deterioration there? Thank you. LEONARDO: there is an important difference between our portfolio and the portfolio from private peers that is agriculture, the first one, and the second is mortgage. If you get the loan growth, if you get the growth in this portfolio, its above the average of our portfolio as a whole. We are pretty confident about the stable trend for the delinquency ratio in BB because of the contribution specially the individual portfolio, because this portfolio is based on what we call the best credit lines for us and in terms of delinquency ratio: payroll business, salary loans, autoloans and mortgage. We are pretty comfident this

13 quality. And the trend is a stable trend. LABARTA: Ok, and just in terms of your growth, you have the guidance for the year thinking maybe looking into 2015, how comfortable growth you think you can continue to look on your loans? LEONARDO: the outlook for GDP growth is better if you compare with the outlook for we are linked with the real economy in Brazil. If you get a better results from the economy as a whole, probably the bank will be able to capture this benefit on the loan portfolio. But we need to wait until we have, there is a lot of volatility right now in the world, because of the problems, geopolitical problems, but we are pretty comfident that this portfolio is very resilient, even if you have this huge volatility in the macroeconomic conditions. LABARTA: All right. Thank you very much. OPERATOR: Our next question comes from Marcelo Telles, of Credit Suisse. TELLES: Hello, good afternoon, gentlemen. Thanks for your time. I have two questions. The first one is a more specific question regarding the hybrid instruments, sorry for asking this questions, I know there has been many, but do you plan, or do you see you're not able to capitalize the interest of this instrument, instead of, given that it's gonna be part of common equity Tier I that interest passes, you might not able to let them flow through the PNL, you can just book that in your equity directly. This is the first question. The second question, if you think about your capital plan going forward, do you see room for sale of loan portfolio down the road, what prevents you from pursuing that route in terms of trying to see volatility non dilutable ways, to boost your capital

14 base. Of course, these R$ 8.0 billion is very positive on the hybrid side but maybe selling portfolio could also help to boost the capital base on the Basel III scenario, looking 3 years from now. IVAN: Marcelo, there is also common in Brazil to have the secondary market for loans. You know that. But there is no restrictions from the banks to do that, if we have a strong and robust secondary market for that. But I belive we need to wait until this market getting more and more, how can I say that, with special prices. Its very difficult to price a loan like this. It's very common in the USA and Europe, as you know, and a little different in Brasil, but it's a risk ratio to do that in my opinion, it could be helpful for the financial system as a whole to do this type of business with the market, specially with the assets on the management company, the insurance companies, like that. Leo will talk about the hybrid. LEONARDO: Marcelo, as we are under negotiation still with a ministry of finance, we prefer not to comment as we don't have a final structure. But we will communicate to the market at a right time, the right structure going forware IVAN: but, Marcelo, there's a positive trend for that. TELLES: ok, good to hear. Thank you. OPERATOR: our next question comes from Mr. Boris Molina of Santander. MOLINA: I have a question regarding your additional Tier I, you already have an existing stock of your own, how much is that, R$ 22.0 bilion? And there are two types of hybrids right? On different plans, right? this existing structure,

15 what are the conversion or the way that they absorb losses is a growing concern, if its conversion to equity or if it's some break down on some principal. Would you foresee the conversion of this to convert in Tier I would be through write-down so share conversions. Could you clarify a little bit how we should think about the potential. We are interested in trying to find out what is the fully diluted earnings of the bank, assuming comercial [32:51]. IVAN: As far as I understood you are talking about the hybrid we have right now, so they are not convertible into shares basically the way it is redempture, if something goes wrong we have to write down not the conversion. In terms of the new hybrid what we have is an instrument that if we come to a final agreement with the ministry of finance, so we would have an instrument that will add, will be added in core equity Tier I, now this instrument is of R$ 8.1 billion, that may be added, and you have to consider as well that 20.0% of this instrument has already been paid out, so it's been reduced by having an agreement with the government so we will add another 20,0% into the additional Tier I capital. MOLINA: My second question is are you working on some sort of plan to reduce the volatility on your capital from the fund marked to market? Is there a plan to either increase the diversification of the portfolio or is there a way you can take this asset off your balance sheet, because is pretty much volatile and it's going to continue to hurt your capital ratios going forward. IVAN: sorry, Boris, the quality of the line here is not that good, if you don't mind to repeat your question it would help. MOLINA: My question is regarding the Previ market risk that hurts your capital

16 ratios. Are you seeing any measures to either increase the level of diversification in your Previ portfolio or to put this off your balance sheet in order to avoid this volatility overtime? LEONARDO: unfortunatelly, it's very difficult to protect from the high volatility you mentioned market in Brazil, because Previ you have a big exposure on the equity side, specially concentrating on very good names, companys in Brazil but we are suffering this type of volatility. We have important recovery specially in the last 45 days. If you do the same calculation right know it could be much different. Once again, there is no way at this moment to protect from this type of volatility in our balance sheet, unfortunatelly. MOLINA: Thank you. OPERATOR: Our next question comes from Mr. Mariel Santiago, of Santander. CARLOS: Hi, this is Carlos, from HSBC. Sorry to come back to the hybrid capital, so to understand: you have 3 series of perpetual bonds, we understand that 2 or 3 of them are already in your capital I, and this is a third one you are trying to make it, compliant. Two questions. Number one is why do you have to conversation with him, the ministry of finance, at least regulator you can include it or not, is that [36:35] or additional features in those bonds, in another words, that would make the minister of finance the one deciding it? Second, so you want to include it in core equity tier I, now, obvious that it is not equity, so should we understand that for Brazilian regulatory purposes this both continue in equity, But if you compare notes with international bonds this would be part of your tier I nor your CP-I? Thank you.

17 IVAN: Thank you for your question. Basically it's not, it's a good starting point just to understand this instrument as, there are 16 requirements under the Resolution 492 and one of them, just to be considered as equity Tier I it matches exactly international standards not something regarding the Brazilian regulation. First thing. The second think is, as we are still under negotiations with the STN, the national treasury, we preffer not to comment nor going into details about this instrument as we may change, but we estimate between 16 to 19 days we will have more details and we are going to come to the market with more details. But, one thing, a good starting point maybe take a look on the Resolution 4192 just to see all the 16 points that the instrument has to agree with just to be in compliance with this resolution. CARLOS: Ok, and I understand as part of your core equity, in accordance to Brazilian resolution. IVAN: Not Brazilian, but internacional standards. Again, I mean as we come to the end of this process by having a final agreement with national treasury, so, we will add R$ 8.1 billion, which is the total amount of this instrument to core equity Tier I. Bear in mind that we have already reduced this instrument in 20,0%, will add another 20,0% of this instrument to the capital. CARLOS: ok. So, the loss of [39:30] is quicker depending on your level of core equity tier I, and therefore add in it, it would be going away from that minimun, I believe is 25.0% for core equity Tier I before the loss of [39:42]. Is that correct? so this put up to that? IVAN: Yes, so the trigger is a 5 and 1.8 as a trigger for the instrument under the new regime of Basel III.

18 CARLOS: OK, thanks. OPERATOR: our next question comes from Mrs. Natalia Corfield, of JP Morgan. NATALIA: hi, good morning, thank you for the question. Sorry to touch on the hybrid capital again. Just a follow up here. You are saying that you are going to continue the negotiations with the federal government in days, but I understand that you also have to have an approval from the Central Bank so, if that is correct, how long more would that take? LEONARDO: Basically, Natalia, thank you for your question. But when we say days we are considering the whole process. NATALIA: So, that would be much shorter than Caixa, then? Caixa took almost 6 months. LEONARDO: I don't know how long Caixa took to have a final agreement with them, but based on the instrument we are negotiating with them this is the best estimate we can provide right now. NATALIA: all right. Thank you. OPERADORA: our next question comes from Mr. Gustavo Lobo, of BTG Pactual LOBO: hi, I have a question on LCA and LCI, this has being one of the fastest growing sources of funding for the bank. There is an article on Valor

19 newspaper today mentioning that these instruments might lose the tax exemption that they have. My question is how likely do you believe that is and what would be the potential impact for Banco do Brasil if that actually materializes? IVAN: We don't have any additional information to this but it seems that it's not going to happen, but it's something that we don't like to say much because it's an article in an newspaper. It might be right or wrong but the thing is we have to have more information overtime just to make a better assumption on this item. LOBO: OK, but do you see any potential impact if the tax exemptions don't exist anymore? IVAN: I wouldn't take that assumption, really, you know? We have, again, it's an article on a newspaper, so we wouldn't like to comment and to make assumptions based on a newspaper article. LOBO: OK, Thank you. OPERATOR: Our next question comes from Mrs. Nada, from Nanometer. NADA: Hi, good morning. This is not an from [43:00]. Thank you very much for the presentation and congratulations on the good results. I have a couple of questions, if I may. The first one is related to the capitalization and the C-Tier I, if you could please provide some color on the impact of the new macroprudential rule reducing the risk assets on payroll and consumer loan, as well as the inclusion of the hybrid under Basel III and the combined impact

20 of this or any other impact and your best estimate for the equity Tier I ratio, once we take this to impact into the account. My second question is related to the recent transaction with Banco Votorantim on payroll loans and if you could please provide some color on the rationale for such transactions and how you see the impact on those Banco do Brasil and Banco Votorantim. IVAN: Thank you very much. I'll start from your second question. We see as very positive for us, and for Banco Votorantim because we will work together to specialise our team, special talking about the correspondent banks. Correspondent banks are very important for the business, specially for the payroll business, outside the branches of the bank. That's why we are combining the knowledge we have here at Banco do Brasil and inside Banco Votorantim, just to be more competitive in this type of market. Leo will respond your fist question. LEONARDO: Basically, in terms of capital, what we have, the measures from the microsector prudential measures, they are positive to the bank. It's very hard to say right now, in terms of figures, how much it will increase our capital, but the thing is, it is no doubt that we are talking about good measures that will help to boost our capital base. IVAN: the same for the hybrid and we expect to finalize this process, and we expect to finalize it in the next days, between days, but if at the end of this process we are able to conclude this it will be positive for the C-Tier I. NADA: What is your best estimate for C-Tier I, if hypotetically those measures are, include the, hybrids are included? Right now, the C-Tier 1 is at 0.5, so,

21 where do you see C-Tier I if those hybrid aren't into it? IVAN: Basically, I mean, it's positive, but, at a right time, again, we are still under negotiation, we preffer not to come out with the figure, we will wait and see we will come to the market with more information, overtime. NADA: Thank you. OPERATOR: our next question comes from Mr. Mario Pierre, of Merryll Lynch. PIERRE: good morning everybody. Thank you for taking my questions. Let me ask two questions. The first one is related to the growth in your individual loan book. Clearly, you have disappointed and you reduced your guidance, I want to understand here if the reason for this disappointment is because of weaker market conditions or because of more aggressive pricing value, which led to a slowdown in lending, and then, staying within the individual loan books, you have shown that mortgages have been growing at about 70,0% pace, now represents 17.0% of your loan book. How much bigger can this portfolio get, and what makes you so comfortable in growing so fast in this segment. Also, in the individual loans, if you could comment as well why was there a decline in your loans with sallaries, or your sallary loans, on a y.o.y. basis if this is a segment you want to continue growing. And then I'll ask a second question as well. LEONARDO: Mario, let me just start from the first one. Just giving you a figure. You see in our MD&A, you can see in regards of the total acquired portfolio, you'll see that basically the amount on the table 37, taking the figure of total acquired portfolio back in June 2013, it was R$ 20.4 billion. Going

22 forward to June 2014, this figure was R$ 17.6 billion. Ivan, when we were presenting during the press conference yesterday, there was a very good slide that it was showing that this is a balance figure. But, just taking the flow, you can see that we bought, in the same period roughly 48.0% less portfolio than in the past period of time. Basically, what is going on? We have a consolidation in the market, we have less available portfolios to be acquired by Banco do Brasil, this is the main source of this downward trend that we see, just taking in the organic individual portfolio as measure. It grew, if I'm not mistaken, 13.3%, which is a good measure just to take out this acquisition effect from the portfolio as a whole. If you don't mind to ask your second question agai? PIERRE: it was in the topic, when we look at your mortgage, it has grown 70% and now represents 17.0% of your individual loan book. Why are you so comfortable growing so aggressively in mortgages what are you seeing in the market and how much bigger do you think this portfolio can get and also if you could discuss why are your sallary loans they actually declined on a y.o.y. basis and I think this is one of the segments you want to continue growing more aggressivelly. IVAN: Basically, I mean, just the sallary loans is much more related to seasonalities, just just going to mortgages market, you have to consider that we were the latest entering in this market, so we are, as later entrants, so we are still wrapping up the portfolio and this is the portfolio point of view. Macroeconomically speaking, you have to consider that we have a very low mortgage to GDP levels in Brazil, that's why, economically speaking it tends to keep growing, not only us, but the system as a whole. This is a kind of portfolio that tends to grow overtime more rapidly than the others.

23 PIEERE: ok, let me ask you a second question, related to your fees. Fee income has also disappointed. And primarily, when we look at the slide you provided, it's clearly because of 2 lines, the account fees as well as loan fees. If you could give us any idea if there is room for you to be increasing your terrace which could help your fee income growth in the future. IVAN: the first message wasn't so good for the capital market. And the strategy for the fees as a whole is to diversify the source of the fees, that's why we provide a lot of information about the insurance business of the Bank, the card business of the bank, the [52:03] the first time we provided the information. We are pretty comfident for the trend and unfortunatelly we had to reduce the guidance for 2014, but for 2015 we are pretty comfident about a good trend for the fee income inside the bank and expanding the consumer base of the bank, not to charge the same customer base. We have a positive trend, specially talking about the agreement with the Post Office. That's why we are pretty comfident about the performance for but, unfortunatelly, it's not time to provide the guidance for 2015, it's only a trend. But it is a positive trend. PIERRE: OK, Ivan, if you could discuss a little bit about the Post Office agreement, how sucessful has that being so far, how is it coming along with regards to your expectations? IVAN: we are in discussions with the Post Office building the business plan, now we are able to provide all the products and services, through all the Post Office points, spread all over Brazil, it's new points we are adding to the branch network of Banco Do Brasil. That's why it's pretty good to have this alternative, it's pretty good to have more channels to distribute products and

24 services, but we are still in the process to build this business plan, between us and the Post Office. But we are pretty optimistic about this partnership. PIERRE: Thank you. OPERATOR: this concludes today's questions and answers session. I would like to invite Mr. Leonardo Loyola to proceed with his closing statements. Please, go ahead, sir. LEONARDO: Thank you everybody for participating in the conference call of Banco do Brasil. Have a nice day. OPERATOR: That does conclude BB's conference call for today. As a reminder, the material used in this conference call is available in BB investor relations website. Thank you very much for your participation and have a nice day. You may now disconnect.