Banco do Brasil S.A. - MD&A 2Q17

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2 Banco do Brasil S.A. - MD&A 2Q17 This report makes references and statements, planned synergies, growth estimates, earnings and strategies projections regarding Banco do Brasil s Conglomerate. Such statements are based on current expectations, estimates and projections of management about future events and financial trends that may affect the business of the Group. These forward looking statements are not guarantees of future performance and involve risks and uncertainties that could extrapolate the control of management, and thus can result in balances and values different from those anticipated and discussed in this report. The expectations and projections depend of the market conditions (technological changes, competitive pressures on products, prices, etc.), the macroeconomic performance of the country (interest and exchange rates, political and economic changes, inflation, changes in tax legislation, etc.) and international markets. Future expectations based in this report should consider the risks and uncertainties about the business of the Group. Banco do Brasil has no responsibility to update any estimate contained in reports published in previous periods. The tables and charts in this report show, in addition to the accounting balances and values, financial and managerial numbers. The changes of relative rates are calculated before rounding procedure in million of R$. Rounding used follows the rules established by Resolution 886/66 of IBGE s Foundation: if the decimal number is equal or greater than 0.5, it increases by one unit, if the decimal number is less than 0.5, there is no increase.

3 Banco do Brasil S.A. - MD&A 2Q17 Table of Contents Presentation... 8 Highlights... 8 On-line Access... 8 Glossary Guidance Earnings Summary Key Statistics Corporate Governance Financial Statements Summary Balance Sheet Summary Income Statement with Reallocations Reallocations Breakdown Glossary of Reallocations Tax Effect and Statutory Profit Sharing on One-Off Items Loan Banco do Brasil Lending Process Loan Portfolio Individuals Loan Portfolio Companies Loan Portfolio Agribusiness Loan Portfolio Concentration Credit Risk Individuals Loan Portfolio Loans to Companies Agribusiness Loan Portfolio Foreign Loan Portfolio Credit Collection, Regularization and Recovery Management of Past Due Credits Credit Collection and Regularization Process Credit Collection, Regularization and Recovery Operating Flow Process Efficiency Renegotiated Loan Portfolio Funding Financial Earnings Net Interest Income Financial Income from Loans Operations Funding Financial Expense Institutional Funding Financial Expenses Income from Written-off Credit Recovery Treasury Assets and Liabilities Analysis Assets Analysis Liabilities Analysis Volume and Rate Analysis Credit Spread by Portfolio Fee Income Checking Accounts Payment Methods Cards Base and Turnover Cards Service Income Asset Management Capital Market Insurance Consortium Productivity and Efficiency Indicators Personnel Expenses Other Administrative Expenses Service Network

4 Table of Contents Automated Service Channels Other Operating Income and Expenses Operating Losses Actuarial Assets and Liabilities Previ Plan Previ (Plan 1) Surplus Allocation Funds Cassi Effects on Shareholders Equity Risk Management Risk Management Capital Structure Strategic Investments Information on Subsidiaries and Affiliates Banco Votorantim International Businesses Banco Patagonia

5 Banco do Brasil S.A. - MD&A 2Q17 List of Tables Table Guidance Table 2. Loan Portfolio Table 3. NII and ALLL Expenses Table 4. Net Income R$ million Table 5. ROE Concepts R$ million Table 6. Market Indicators Table 7. Fee Income R$ million Table 8. Credits Renegotiated When Past Due R$ million Table 9. Main Macroeconomic Indicators¹ Table 10. Ownership Structure % Table 11. Distribution of Dividends and Interest on Own Capital¹ Table 12. Market Ratios (ex-treasury shares) Table 13. BB s Shares in Brazilian Stock Market Indexes % Table 14. BB s Shares in International Stock Market Index % Table 15. Banco do Brasil Key Statistics Table 16. Ratings Table 17. Compulsory/Reserve Requirement % Table 18. Balance Sheet Summary - Assets Table 19. Balance Sheet Summary - Liabilities Table 20. Income Statement with Reallocations Table 21. Reallocations and One-Off Items Breakdown Table 22. Tax Effect and Statutory Profit Sharing on One-Off Items Table 23. Loan Portfolio Classified and Broad Definition Table 24. Organic Domestic Loan Portfolio Broad Definition Table 25. Loans in the Brazilian Banking Industry Table 26. Individuals Loan Portfolio Table 27. Individuals Loan Portfolio Market Share Table 28. Account Time Customers with Credit Transactions Table 29. Average Rates and Maturity Table 30. BB s Organic Auto Loan Portfolio - Customers Characteristics Table 31. Companies Loan Portfolio Table 32. Companies Portfolio Breakdown Table 33. Foreign Exchange for Export and Import Operations Table 34. Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE) Table 35. Account Time - Percentage of the Very Small and Small Companies Portfolio Balance Table 36. Very Small and Small Companies Loans by Sector Table 37. Very Small and Small Companies Loan Products Table 38. Brazil s Share in World Agribusiness in Jun/ Table 39. Classified Agribusiness Loan Portfolio by Region Table 40. Agribusiness Loan Portfolio by Credit Line/Program Table 41. Agribusiness Loan Portfolio by Purpose Table 42. Agribusiness Loan Portfolio by Financed Item Table 43. Agribusiness Loan Portfolio by Customer Size Table 44. Agribusiness Loan Portfolio by Customer Type Table 45. Agribusiness Loan Portfolio Broad Definition by Funding Sources Table 46. Equalization Revenues and Weighting Factor Table 47. Equalization Revenues Flow Table 48. Equalizable resources in the Agribusiness Portfolio Table 49. Disbursements by Purpose Rural Credit Table 50. Insurance in the Working Capital for Input Purchase Table Largest Customers in Relation to the Classified Loan Portfolio Table Largest Customers in Relation to Reference Equity (R$ million) Table 53. Concentration of Companies and Agro Companies Loan Portfolio by Macro-Sector Table 54. Classified Loan Portfolio by Risk Level Table 55. ALLL Expenses over Classified Loan Portfolio Table 56. Classified Loan Portfolio Delinquency Indicators Table 57. Individuals Classified Loan Portfolio by Risk Level Table 58. Changes in Allowance for Loan Losses Individuals Classified Loan Portfolio

6 List of Tables Table 59. NPL +90d Individuals Portfolio - % by Credit Line Table 60. Classified Loans to Companies by Risk Level Table 61. Changes in Allowance for Loan Losses Classified Loans to Companies Table 62. NPL +90d Companies Portfolio - % by Credit Line Table 63. Classified Agribusiness Loan Portfolio by Risk Level Table 64. NPL +90d Agribusiness Portfolio - % by Credit Line Table 65. Classified Agribusiness Loan Portfolio by Risk Level Individuals Table 66. Changes in Allowance for Loan Losses Agribusiness Individuals Table 67. Classified Agribusiness Loan Portfolio by Risk Level Companies Table 68. Changes in the Allowance for Loan Losses Agribusiness Companies Table 69. Agribusiness Transactions with Rollover and without it Table 70. Classified Agribusiness Loan Portfolio Delinquency Indicators Table 71. Classified Abroad Loan Portfolio by Risk Level Table 72. Renegotiated Loan Portfolio Multiple Bank¹ Table 73. Renegotiated Portfolio by Risk Level Table 74. Commercial Funding Table 75. Institutional Funding Table 76. Funding Abroad Borrowing - Type Table 77. Funding Abroad Borrowing - Product Table 78. Sources and Uses Table 79. Current Debt Issues Abroad Table 80. Main Indices Table 81. Net Interest Income Breakdown Table 82. Revenue from Loans Table 83. Assets Synthetic Composition Table 84. Funding Result¹ Table 85. Funding vs. Selic Rate Table 86. Institutional Funding Expenses Table 87. Written-Off Credit Recovery Income Table 88. Treasury Results Table 89. Result from Securities Table 90. Securities Portfolio by Category Market Value Table 91. Securities Portfolio by Maturity Market Value Table 92. Liquidity Balance Table 93. Open Market Funding Expenses Table 94. Other Treasury Components Table 95. Average Balances and Interest Rate Earning Assets (Annual) Table 96. Average Balances and Interest Rate Earning Asset (Quarterly) Table 97. Average Balances and Interest Rates Earning Assets (Half - Yearly) Table 98. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual) Table 99. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly) Table 100. Average Balances and Interest Rates - Interest Bearing Liabilities (Half - Yearly) Table 101. Analysis of Volume (Profitable Assets) Quarterly Rate Table 102. Volume Analysis (Earning Assets) Yearly - Rate Table 103. NIM Table 104. Adjusted NIM and Net Interest Income Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly) Table 106. Change in Revenues and Expenses and Change Volume / Rate (Half - Yearly) Table 107. Managerial Margin Table 108. Spread by Portfolio Table 109. Fee Income Table 110. Customers and Checking Accounts Table 111. Cards Base Table 112. Number of Transactions Table 113. Cards Service Income and Expenses Quarterly Flow Table 114. Cards Service Income and Expenses Half - Yearly Flow Table 115. Investment Funds and Managed Portfolio by Customer Table 116. Investment Funds and Managed Portfolio by Type Table 117. Investment Funds with Socio-Environmental Characteristics Management Table 118. Private Equity Indirect Interest Table 119. BB Seguridade Performance Ratios Table 120. Consortium Current Quotas per Type Table 121. Consortium Average Ticket

7 Banco do Brasil S.A. - MD&A 2Q17 Table 122. Consortium¹ Average Term and Average Management Rate Table 123. Pre-Tax and Pre-Provision Earnings Table 124. Cost-to-Income and Coverage Ratios Adjusted¹ Table 125. Other Productivity and Efficiency Indicators Table 126. Personnel Expenses Table 127. BB s Staff Profile Table 128. Other Administrative Expenses Table 129. Service Network Table 130. Branch Network by Region Table 131. Other Operating Income/Expenses Table 132. Breakdown of Operational Loss (%) Table 133. Breakdown of Assets Table 134. Main Actuarial Assumptions Table 135. Effects of Previ (Plan 1) Accounting CVM Deliberation No. 695/ Table 136. Previ (Plan 1) Parity Fund Table 137. Previ (Plan 1) Surplus Fund Table 138. Effects of the Cassi Accounting CVM Deliberation No. 695/ Table 139. Effects on Shareholders Equity CVM Deliberation No. 695/ Table 140. Balance in Foreign Currencies Table 141. Interest Rate Repricing Profile Table 142. Basel Index Table 143. Factor F applied to the amount of Risk-Weighted Assets (RWA) Table 144. MRRE in relation to RWACPAD Table 145. MRRE in relation to RWAMPAD Table 146. MRRE in relation to RWAOPAD Table 147. RWACPAD Segregated by Risk Weighting Factor (RWF) Table 148. Interest in the Capital of Subsidiaries and Affiliates Table 149. Income Statement with Reallocations¹ - Quarterly Table 150. Income Statement with Reallocations¹ - Half-Yearly Table 151. Adjusted Net Interest Margin and Net Interest Rate Table 153. Managed Portfolio Delinquency Table 154. BIS Ratio Table 155. Foreign Service Network Table 156. Consolidated Abroad - Balance Sheet Table 157. Consolidated Abroad Statement of Income Items Table 158. Banco Patagonia Equity Highlights Table 159. Banco Patagonia Funding Table 160. Banco Patagonia Main Earnings Items Table 161. Banco Patagonia Profitability, Capital and Credit Indicators Table 162. Banco Patagonia Operating and Structural Highlights

8 List of Figures List of Figures Figure 1. Net Interest Income R$ million Figure 2. NIM and Loans Average Balance R$ billion Figure 3. Managerial Spread by Segment % Figure 4. Main Components of Fee Income 100 Base Figure 5. Administrative Expenses R$ million Figure 6. Basel % Figure 7. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) Figure 8. Loan Portfolio (Broad Definition) R$ billion Figure 9. Commercial Funding R$ billion Figure 10. Coverage¹ Ratios % Figure 11. Coverage¹ by Segment % Figure 12. ALL Expenses by Segment R$ million Figure 13. Average Risk % Figure 14. NPL +90 days % Figure 15. Senior Management Structure Figure 16. Strategic Committees Figure 17. Banco do Brasil Lending Process Figure 18. Classified Loan Portfolio BB by Contracted Period - % and R$ billion Figure 19. BB s Classified Loan Portfolio in Brazil by Maturity - % Figure 20. Organic Individuals Loan Portfolio Direct Consumer Credit and Auto Loan - % Figure 21. Organic Payroll Loan Breakdown - % Figure 22. Maturity of transactions contracted in the quarter Payroll Loan Figure 23. Maturity of Transactions Contracted in the quarter Auto Loan Figure 24. Loan to Value - Organic Auto Loan Portfolio - % Figure 25. Disbursements by Onlending Fund - % Figure 26. BB s Market Share in Brazilian Agribusiness % Figure 27. Working Capital for Input Purchase Breakdown Risks - % Figure 28. Classified Loan Portfolio Average Risk Figure 29. Classified Loan Portfolio Coverage Index Figure 30. ALLL Classified Loan Portfolio Figure 31. NPL +90d Percentage on the Classified Loan Portfolio Figure 32. NPL +90d per segment Percentage on the Domestic Classified Loan Portfolio Figure 33. New NPL and Write-Off Percentage on the Classified Loan Portfolio Figure 34. ALLL Expenses / New NPL (%) Figure 35. Individuals Loan Portfolio Annual Vintage Figure 36. New NPL Individuals Loan Portfolio Figure 37. New NPL Companies Loan Portfolio Figure 38. Very Small and Small Companies Loans Portfolio Annual Vintage Figure 39. New NPL Agribusiness Loan Portfolio Figure 40. Collection, Regularization and Recovery Network Figure 41. Credit Regularization Rate Over Collection Period - % Figure 42. Collection and Regularization before Write Off¹ - % Figure 43. Accumulated Recovery (R$ billions) and Cash Recovery Index - % Figure 44. Write-Off Percentage on the Classified Loan Portfolio Figure 45. New NPL and Write-Off Percentage on the Renegotiated Loan Portfolio Figure 46. Market Share of BB s Funding (R$ billion) Figure 47. Summary of Assets Figure 48. Securities Portfolio by Index (BB Multiple Bank) Figure 49. Revenues From Loans Breakdown Figure 50. Payment Methods Organizational Chart Main Companies¹ Figure 51. Total Turnover R$ billion Figure 52. Traditional and Specific Business Total Turnover R$ billion Figure 53. Fiduciary Management and Market Share R$ billion Figure 54. Domestic Custody Total Assets and Market Share R$ billion Figure 55. Fixed Income Securities Origination Domestic and International Markets Figure 56. Individuals Equity Secondary Market Figure 57. Gold Custody Balance and Revenues Figure 58. Consortium Fee Income and Current Quotas

9 Banco do Brasil S.A. - MD&A 2Q17 Figure 59. Bank Product and Branches (% of evolution) Figure 60. Evolution of Headcount Figure 61. Transactions by Service Channel (%) Figure 62. Number of Users (million) Internet and Mobile Banking Figure 63. Number of Transactions (million) Internet (Individuals) and Mobile Banking Figure 64. Automated Teller Machines Figure 65. Transactions - ATMs vs Teller (average %) Figure 66. Tecnology Investments Figure 67. Storage Capacity and Availability Indicator Figure 68. Operational Loss for Value Range (%) Figure 69. Evolution of the Foreign Exchange Exposure as a % of the Reference Equity (RE) Figure 70. Assets and Liabilities by Index (R$ billion) Figure 71. Net Result by Index (R$ billion) Figure 72. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) Figure 73. Banco Patagonia Net Income R$ million

10 Presentation Presentation The Management Discussion and Analysis Report presents Banco do Brasil s economic/financial situation. Addressed to market analysts, stockholders and investors, with quarterly periodicity, this report releases data on main economic indicators, BB's shares performance and risk management. The reader will also find tables with historical series of the Summarized Balance Sheet, the Income Statement with Reallocations, besides information about profitability, productivity, loan portfolio quality, capital structure, capital market, and structural data. At the end of this report, the Financial Statements and the Notes to the Financial Statements will be presented. Highlights In chapter 5, two new figures are presented, with the credit revenue and the earning assets distribution. On-line Access The Management Discussion and Analysis report can also be read through Banco do Brasil s Investor Relations website. Further information about BB is also available there, such as: Corporate Governance, news, frequently asked questions and a Download center. Banco do Brasil Investor Relations bb.com.br bb.com.br/ir 8

11 Banco do Brasil S.A. - MD&A 2Q17 Glossary Leverage: financial indicator that measures the ratio between the total assets and shareholders' equity of the company. Earnings Assets: reflects the sum of all assets that produce a financial return to the institution. The total return of these assets is included in the gross income from financial intermediation. Commercial Funding: Includes Total Deposits, Agribusiness Letters of Credit - LCA, Mortgage Bonds - LCI and repurchase agreements operations with private securities. Institutional Funding: Includes funding directed to institutional investors, with the use of instruments such Senior Debt, Letters Financial and Instrument Hybrid Capital and Debt (IHCD). Classified Loan Portfolio: sum of the credit operations, financing, leasing, other credit with loan characteristics and acquired loan portfolio. Loan Portfolio - Broad concept: it corresponds to the Classified Loan Portfolio added of the private securities and guarantees operations. Organic Domestic Loan Portfolio - Broad concept: it corresponds to the Loan Portfolio Broad concept added of the private securities and guarantees operations. Domestic Loan Portfolio - Broad concept: classified loan portfolio plus guarantees provided and private securities, disregarding acquired loan portfolio. Managed Loan Portfolio: concept adopted by Banco Votorantim, loan portfolio accounted as established by the CMN Resolution 2,862/99, added to private securities and guarantees, which includes assets assigned with recourse to other financial institutions and the assets assigned to Credit Receivables Investment Funds FIDCs. Managed Loan Portfolio - Broad Concept: concept adopted by Banco Votorantim, managed loan portfolio, plus private securities and guarantees. Organic Loan Portfolio: Loan Portfolio excluding the acquired portfolios. Overdue Renegotiated Loan Portfolio: It comprises the renegotiated loans for debts composition due to delay in payments by customers. Furthermore, it does not comprise the rollover operations of agribusiness loan portfolio. Correspondent Services: are companies, whether or not members of the National Financial System, made by financial institutions and other institutions authorized by the Central Bank of Brazil for the provision of service to customers and users of these institutions. Opportunity Cost: managerial assessment tool used to compare the effective result of active operations and the hypothetical result of use in a replacement alternative. The Average Selic Rate (TMS) is generally considered. Fairness opinion: economic, financial and corporate analysis that provides those who will decide on a certain merger and acquisition transaction or to provide the shareholders an independent and unbiased opinion stating that, under the market conditions to which the company was subjected at the time the aforementioned transaction was negotiated, its terms were fair to the company and all its shareholders. Guarantees: operations where the BB ensures the settlement of the contracts for import and export. Structural Hedge: hired operations to cancel the changes in foreign currency effects on assets abroad. Tax Hedge: hired operations to reduce the foreign exchange variation effects on the result, considering the impact on taxes. Coverage Ratio Adjusted: indicates the magnitude of the coverage of tariff revenues on expenses. Cost to Income Ratio: productivity indicator that measures the relation between administrative expenses and operating revenues. When the ratio is lower, more efficient is the company. Adjusted Net Income: net income excluding one-off items. ADB: Average Daily Balance Net Interest Income (NII): It is calculated as the difference between income and expenses from financial intermediation considering the reallocations. 9

12 Glossary Extraordinary Items: revenues or expenses incurred relevant identified in results for the period and which do not refer to the normal business of the Bank and/or refer to values recorded in previous years. Adjusted NIM: net interest margin divided by the average balance of earning assets. Net Interest Rate: difference between average rate of earning assets and average rate of interest bearing liabilities. Net Interest Management: calculated on the basis of the financial revenues received, less any opportunity costs, is defined according to each type of product. Net Interest Gain: defined as interest income from earning assets less interest expenses from interest bearing liabilities. Interest Bearing Liabilities: includes the sum of all liabilities that carry an expense for the institution. The total financial cost of these liabilities reflects the expense of financial intermediation. Reallocations: adjustments made in the Corporate Law Income Statement in order to provide a better understanding of the business and the company's performance. Annualized Return on Equity: ratio between the net income and the arithmetic average of shareholders equity of the reporting period on the previous period, excluding non-controlling interest. The value was annualized for capitalization. Managerial Spread: spread is the result of the managerial financial margin divided by the respective average balances. For managerial financial margin calculation, financial revenues classified by portfolio are calculated first. Subsequently, the opportunity costs defined for each of the portfolio lines are deducted. Considering the individuals and companies loan portfolios, with free resources, the opportunity cost is the average Selic rate. For the agribusiness portfolio and other directed resources, the opportunity cost is calculated according to the funding source and the necessity or not of compulsory investing part of this funding. Net Interest Margin: Applying the concept of spread to the banking industry, which is calculated by dividing net interest income by average earning assets. Private Securities: operations characterized by the acquisition of securities (commercial paper and debentures) mainly issued by private companies. 10

13 Banco do Brasil S.A. - MD&A 2Q Guidance In the following table it is presented the 2017 Guidance and their comparison with the performance in the quarter. The loan portfolio performance is measured by comparing 12-month balances. The Net Income and ALLL Expenses are followed by the amounts accumulated during the fiscal year. The performance of Fee Income and Administrative Expenses is measured in relation to the same period of the previous year. Estimates are prepared for the year and variations along quarters may reflect specific events of the relevant period. The assumptions used to prepare these projections were presented in the 4Q16 MD&A. Results depend on domestic and international market conditions and the Brazilian and international economic performance, which may affect the effective performance compared to that set forth in our estimates. In 1H17, the following indicators were different from the expected: a) Organic Domestic Loan Portfolio - Broad Definition: results were primarily affected by the performance of the companies portfolio; b) Individuals: results affected by the prioritization of growth in lower risk lines; c) Companies: results affected by repayments and priority given to disbursements in lines of credit with higher returns; d) Rural Loans: performance within the strategy adopted, with the prospect of ending the year in the guidance; e) Fee Income: performance affected by the strategy to increase service revenues, especially the performance of Asset Management and Consortium. The expectation is to return to the interval until the end of the year; f) Administrative Expenses: performance affected by the strict expenses control. Table Guidance 2017 Guidance 1H17 Performance Revised 2017 Guidance Adjusted Net Income - R$ billion 9.5 to Unchanged NII (Net of Recovery of Write-offs) - % 0 to to 0 Organic Domestic Loan Portfolio - Broad Definition - % 1 to 4 (6.6) -4 to -1 Individuals - % 4 to to 5 Companies - % -4 to -1 (14.5) -11 to -8 Rural Loans - % 6 to Unchanged ALLL Expenses net of Recovery of Write-offs - R$ billion to (11.0) Unchanged Fee Income - % 6 to Unchanged Administrative Expenses - % 1.5 to 4.5 (0.9) -2.5 to 0.5 The following tables set forth new indicators performance effective from Table 2. Loan Portfolio Balance Chg. % R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Organic Domestic Loan Portfolio - Broad Definition , , ,0 (6,6) 1,0 Individuals , , ,3 1,0 1,1 Companies , , ,0 (14,5) (0,5) Rural Loans , , ,7 3,7 3,9 Table 3. NII and ALLL Expenses Quarterly Flow Chg. % Half-Yearly Flow Chg. % R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 NII (Net of Recovery of Write-offs) (0,3) (2,3) ,3 ALLL Expenses net of Recovery of Write-offs (6.893) (5.757) (5.264) (23,6) (8,6) (15.177) (11.021) (27,4) ALLL Expenses (8.277) (6.713) (6.658) (19,6) (0,8) (17.422) (13.371) (23,2) Recovery of Write-offs ,8 45, ,7 11

14 Earnings Summary Earnings Summary Adjusted Net Income of R$5.2 billion Banco do Brasil had an adjusted net income of R$5.2 billion in 1H17, primarily due to the increase in fee income and the decrease in provision expenses, compared to the same period in the previous year. The pre-tax and pre-provision earnings increased 5.8% in the same period. Table 4. Net Income R$ million Chg. % Chg. % 2Q16 1Q17 2Q17 On 2Q16 On 1Q17 1H16 1H17 On 1H16 Total Operating Income (Banking Product) 23,939 23,730 24, ,061 47, Operating Income 23,686 23,601 23, ,488 47, Net Interest Income 14,633 14,476 14,606 (0.2) ,909 29, Fee Income 5,886 6,096 6, ,285 12, Eq. Interest of Subsidiaries and Affiliates 1, ,062 (2.7) ,089 2,015 (3.5) Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1) Previ - Plano de Benefícios 1 (54) (59) (59) 10.5 (0.0) (107) (119) 10.5 Previ - Fundo de Utilização Restatement (57.9) (31.5) (53.3) Total Operating Expenses (13,262) (12,849) (12,680) (4.4) (1.3) (26,074) (25,529) (2.1) Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9) Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6) Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8 Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6) Other Tax Expenses (92) (118) (128) (209) (245) 17.5 Taxes on Revenues (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8) Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1) Non-Operating Income (17.0) (3.4) Pre-Tax and Pre-Provision Earnings 10,749 10,926 11, ,095 22, Allowance for Loan Losses (8,277) (6,713) (6,658) (19.6) (0.8) (17,422) (13,371) (23.2) Other/Taxes (671) (1,699) (2,082) (587) (3,780) Adjusted Net Income 1,801 2,515 2, ,087 5, One-Off Items 664 (72) (30) 0.0 (57.7) 1,738 (102) 0.0 Net Income 2,465 2,443 2, ,824 5, The table below sets forth the following ROE concepts: a) ROE: calculated based on the statement of income; b) Market ROE: reflects the metric that the main market analysts use to project results; c) Adjusted ROE: ratio between adjusted net income and average adjusted shareholders equity. Adjusted ROE was included in the projections until 2016; and d) Shareholders ROE: return for BB s shareholders. The core capital eligible instrument is not taken into account in the calculation of the indicator because the payment of compensation is made with funds from accumulated earnings and profit reserves. 12

15 Banco do Brasil S.A. - MD&A 2Q17 Table 5. ROE Concepts R$ million 2Q16 1Q17 2Q17 1H16 1H17 ROE - (a)/(b) % a) Net Income 2,465 2,443 2,619 4,824 5,062 b) Shareholders' Equity - Average 83,803 88,507 90,302 82,493 88,989 Market ROE - (c)/(b-d) % c) Adjusted Net Income 1,801 2,515 2,649 3,087 5,164 d) Minority Interest - Average 3,208 3,395 3,429 3,115 3,247 Adjusted ROE - (c)/(b-d-e) % e) Benefit Plans - Average (15,375) (15,493) (15,735) (15,375) (15,735) Shareholders' ROE - (c)/(b-d-f) % f) Instruments Qualifying to CET1 Capital - Average 8,100 8,100 8,100 8,100 8,100 Market Indicators The increase in the adjusted earnings per share stands out, having increased from R$1.11 in 1H16 to R$1.85 in 1H17. Table 6. Market Indicators 1H16 1H E¹ Earnings per Share - R$ Adjusted Earnings per Share - R$ Dividend Yield² - % Price/Earnings 12 months Price/Book Value ¹ Bloomberg estimate, on August 8, 2017, based on the average projections of market analysts. BB takes no responsibility for this information. ² Dividends and Interest on Shareholders Equity (12 months) / Market Capitalization. Net Interest Income Increases by 0.6% In the 1H17/1H16 comparison the NII increased 0.6%. Further analysis can be found in the MD&A chapter 5. Figure 1. Net Interest Income R$ million 28,909 (4,992) 3, ,083,0,,,0,,,0,,,0,,,0,, Net Interest Income 1H16 Loan Operations income Funding Expenses Financial Expense for Institutional Funding Recovery of Write-offs Treasury Income Net Interest Income 1H17 The earning assets increased R$ 28,955 million in 2Q17, from 1Q17. The Loans and Leasing line decreased by R$3,334 million and was offset by an increase in securities + interbank invest. balance (R$ million), a fact that negatively influenced the NIM because the securities have lower spreads. 13

16 Earnings Summary Figure 2. NIM and Loans Average Balance R$ billion Q16 3Q16 4Q16 1Q17 2Q17 Loans¹ NIM - %² ¹ Average balances of loans operations, leasing and acquired loan portfolio. ² NIM - NII/Earning Assets average, annualized. The managerial financial spread is calculated as managerial financial margin divided by the relevant average balances of the loan portfolios, annualized. In the case of prefixed transactions, managerial accounting spread takes into account the cost of funding at the time the loan was signed, and it is not affected by the variation in the Selic rate. The 100 bps quarterly drop in spread for companies was affected by the decrease on the Small and Very Small portfolio, especially on the Working Capital line. Figure 3. Managerial Spread by Segment % Q16 3Q16 4Q16 1Q17 2Q17 Individuals Loan Operations Companies¹ Agribusiness 7.3 ¹ It does not include transactions with the Government. Fee Income Increases by 10.0% Supported by the evolution of BB s digital strategy, fee income increased by 10.0% compared to 1H16. The increase in asset management line stands out (26.5%) due to the increase in funds under management from R$668.1 billion in June/16 to R$816.4 billion in June/17. 14

17 11, 00 9,000 7,000 5,000 3,000 1,000 (1, 00) Banco do Brasil S.A. - MD&A 2Q17 Table 7. Fee Income R$ million Chg. % Chg. % 2Q16 1Q17 2Q17 On 2Q16 On 1Q17 1H16 1H17 On 1H16 Fee Income 5,886 6,096 6, ,285 12, Checking Account 1,534 1,597 1, ,969 3, Asset Management 1,077 1,295 1, ,080 2, Insurance, P. Plans and Premium Bonds (20.3) (12.9) 1,532 1,429 (6.8) Loan Fees Collections (11.7) (2.7) (10.1) Credit/Debit Cards Consortium Other 1,237 1,275 1, ,396 2, Figure 4. Main Components of Fee Income 100 Base Q16 3Q16 4Q16 1Q17 2Q17 Insurance, P. Plans and Premium Bonds Asset Management Checking Account Administrative Expenses Decrease by 0.9% The Bank consistently seeks to improve its operating efficiency and productivity, keeping a strict control of administrative expenses. Administrative Expenses were impacted by R$67 million in 1Q17 and R$77 million in 2Q17 due to the institutional reorganization. Figure 5. Administrative Expenses R$ million ,956 5,283 5,210 4,677 4,817 3,017 3,137 3,406 3,096 3,047 2Q16 3Q16 4Q16 1Q17 2Q17 Personnel Expenses Other Administrative Expenses Cost-to-Income Ratio 12m - % ¹ ¹ Cost-to-Income ratio: Administrative Expenses/Operating Revenues. Data from Income Statement with Reallocations. 15

18 Earnings Summary Tier 1 Capital Ratio was 9.2% Tier 1 capital ratio was 9.2%, an increase compared to the same period of the previous year due to an increase in Shareholders Equity and a decrease in Risk Weighted Asset (RWA). Figure 6. Basel % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Full application of Basel III rules Tier I Tier II CET1 The following figure simulates the full application of Basel III and its impacts on the Bank s CET1. It takes into account the capital base on June 30, 2017 and has three stages: a) First stage: the calculation of the regulatory adjustments takes into account the assumptions of (i) anticipation of the deductions schedule (phase-in) and (ii) use of goodwill and intangible assets that were not amortized by 2017; b) Second stage: the calculation takes into account the effects of the first stage combined with the anticipation of Factor F (from 9.25% to 8.0%) for operating and market risks; and c) Third stage: the calculation takes into account all the effects of the previous stages combined with the usage of tax credits from temporary differences of 24% and tax losses of 30%, both in accordance with the usage estimates disclosed by the Bank in the Notes to the Consolidated Financial Statements. Figure 7. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) 9.18 (0.63) (0.13) Common Equity Tier I (CET) Jun/17 Deductions Schedule Anticipation RWA Rules Anticipation Use of Tax Credits Simulated CET under Full Basel III Rules 16

19 1, , , , , Banco do Brasil S.A. - MD&A 2Q17 Loan Portfolio and Commercial Funding The loan portfolio (broad definition) decreased by 7.6% in 12 months. The companies loan portfolio decreased by 15.4% in the same period, due to the decrease in working capital transactions (14.6%) and in private securities and guarantees (18.2%). In line with the behavior of the loan portfolio, commercial funding decreased by 5.8% in 12 months. The decrease came mainly from agribusiness letters of credits (25.7%), repurchase agreements with private securities (18.1%) and interbank deposits (31.0%). Figure 8. Loan Portfolio (Broad Definition) R$ billion (1.2) (6.9) (11.3) (11.4) (7.6) Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Companies Individuals Agribusiness Abroad 12m Growth - % Figure 9. Commercial Funding R$ billion (2.3) (6.1) (8.3) (8.5) (5.8) Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Time Deposits¹ Agrib. Letters of Credit and Mortgage Bonds Saving Deposits Demand Deposits Other 12m Growth - % ¹ Includes Judicial Deposits. 17

20 Earnings Summary Quality of the Portfolio The coverage of Banco do Brasil decreased from 146.5% in March/17 to 143.3% in June/17. Excluding a specific case, total coverage was 159.5% and the coverage for Businesses was 149.3%. Figure 10. Coverage¹ Ratios % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 ALLL/NPL + 90d % - Ex-specific cases² ALLL/NPL + 90d % - BB Consolidated ALLL/NPL + 90d % - BI¹ ¹ Indicator prepared based on the Average Risk Index, available at the Time Series Management System (Sistema Gerenciador de Séries Temporais SGS) of the Central Bank of Brazil. ² Simulation excluding the effect of specific cases. Figure 11. Coverage¹ by Segment % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Individuals Companies Agribusiness Companies ex specific case ¹ Ratio between the total balance of the provision (required plus additional) and the balance of transactions due over 90 days. 18

21 Banco do Brasil S.A. - MD&A 2Q17 Figure 12. ALL Expenses by Segment R$ million 8,277 1,282 6,644 7,486 2,207 6,713 6,658 1,411 1,677 1,743 5,794 4,370 5,517 4,370 3, (336) 98 2Q16 3Q16 4Q16 1Q17 2Q Agribusiness Abroad Companies Individuals The average risk of the Bank (ratio between the required provision and the classified loan portfolio) remains below that of the Brazilian Banking Industry (BI). Figure 13. Average Risk % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Average Risk - BI Average Risk - BB The NPL +90d (ratio between the operations more than 90 days overdue and the classified loan portfolio balance) was 4.11% in June Excluding a specific case the NPL +90d would have been 3.70%. 19

22 Earnings Summary Figure 14. NPL +90 days % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 NPL +90d - BB NPL +90d - ex-specific cases NPL +90d - BI The following table shows the renegotiated loan portfolio. It does not include the renegotiated operations of the agribusiness portfolio. In 2Q17, 44.4% of new renegotiations included more than 90 days past due operations, and 10.3% included written off operations. In this quarter, two operations with more than 90 days past due were responsible for 20% of the total renegotiations. Highlight to the increase of amortizations net of interest accrued. Table 8. Credits Renegotiated When Past Due R$ million 2Q16 1Q17 2Q17 On 2Q16 On 1Q17 Credits Renegotiated When Past Due 25,050 26,618 27, Initial Balance 22,038 27,086 26, (1.7) New Transactions 5,026 2,332 3,622 (27.9) 55.3 Amortization Net of Interest¹ (979) (864) (1,211) Write-Off (1,036) (1,936) (1,986) ALLL / Loan Portfolio - % NPL + 90 days / Loan Portfolio - % ALLL Balance/NPL + 90 days - % Credits Renegotiated/Classified Portfolio - % ¹ Principal and interest payments net of interest accrued in period. Chg. % 20

23 Banco do Brasil S.A. - MD&A 2Q Key Statistics Table 9. Main Macroeconomic Indicators¹ Economic Activity Q17 Nominal GDP in 4 quarters (R$ billion) 5,779 6,001 6,267 NA GDP (% yoy) 0.5 (3.8) (3.6) NA Household Consumption 2.3 (3.9) (4.2) NA Government Consumption 0.8 (1.1) (0.6) NA Gross Fixed Capital Formation (4.2) (13.9) (10.2) NA Exports (1.1) NA Imports (1.9) (14.1) (10.3) NA Retail Sales ( % yoy) 0.9 (4.3) (6.3) NA Business Confidence Index (quarter average) Consumer Confidence Index (quarter average) Industrial Production (% yoy) (3.0) (8.2) (6.4) (1.9) Labor Market Total Wages (index - basis: mar 2012 = 100) Real Average Income (R$ thousand - last quarter prices) 2,118 2,062 2,090 2,104 Formal Employment (in thousands of people - 12 months net creation) (1,625.6) (1,371.4) (786.8) Occupied Population (in million of people - quarter average) Unemployment Rate (% labor force - quarter average) External Sector Balance of Payments Current Account (% GDP in 12 months) (4.3) (3.3) (1.3) (0.8) Foreign Direct Investiment (US$ billion - year accumulated) Trade Balance (US$ billion - year accumulated) (4.0) Exports (US$ billion - year accumulated) Basics Manufactured Semi-manufactured Special Operations Imports (US$ billion - year accumulated) Capital Goods Intermediate Goods Consumer Goods Fuel Other International Reserves (US$ billion - closing balance) EMBI (basis point - EOP) CDS 10Y (basis point - EOP) Exchange Rate (R$/US$ - EOP) Public Finance General Government Gross Debt (% GDP) Nominal Result (R$ billion - in 12 months) (343.9) (613.0) (562.8) (607.5) Nominal Result (% GDP - in 12 months) (6.0) (10.2) (9.0) (9.5) Monetary Indicators Selic (% p.y. - EOP) Selic (accumulated in 12 months) Inflation Index IPCA (% - accumulated in 12 months) All indicators were obtained from official sources such as Central Bank of Brazil, FGV (Getúlio Vargas Foundation), IBGE, etc. NA - Not Available. 21

24 Chapter 1 - key Statistics Table 10. Ownership Structure % Shareholders Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Federal Government Shares Ow ned by the Company Free Float Individuals Companies Previ Foreign Capital Total Number of Shares 2,865,417,020 2,865,417,020 2,865,417,020 2,865,417,020 2,865,417,020 Table 11. Distribution of Dividends and Interest on Own Capital¹ R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Federal Government Individuals Companies Previ Foreign Capital Total Values subject to income tax of 15%. Table 12. Market Ratios (ex-treasury shares) 2Q16 3Q16 4Q16 1Q17 2Q17 Earnings per Share - R$ Price / Earnings (12 months) Price / Book Value Market Capitalization - R$ million 47,843 63,493 78,224 94,046 74,638 Book Value - BBAS3 - R$ BBAS3 Closing Price - R$ BBAS3 - Change (%) (13.1) (20.6) Dividend Yield - %¹ Dividends and Interest on Capital 12 months / Market Capitalization. Table 13. BB s Shares in Brazilian Stock Market Indexes % May/16 - Aug/16 Sep/16 - Dec/16 Jan/17 - Apr/17 May/17 - Aug/17 Sep/17 - Dec/17 Bovespa Index - Ibovespa Brazil 50 Index - IBrX Carbon Efficient Index - ICO Financial Index - IFNC Corporate Governance Trade Index - IGCT Special Corporate Governance Index - IGCX Corporate Sustainability Index - ISE Special Tag Along Stock Index - ITAG Mid-Large Cap Index - MLCX Table 14. BB s Shares in International Stock Market Index % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 MSCI Brazil Index

25 Banco do Brasil S.A. - MD&A 2Q17 Table 15. Banco do Brasil Key Statistics 2Q16 3Q16 4Q16 1Q17 2Q17 Balance Sheet Items - R$ billion Assets 1, , , , ,445.6 Shareholders Equity Loan Portfolio Loan Portfolio - Broad Definition¹ Deposits Demand Deposits Saving Deposits Time Deposits Profitability Adjusted ROE - Annual Basis - % Accounting ROE - % Adjusted ROA - Annual Basis - Quarterly % Annualized NIM - % Productivity Cost-to-Income Ratio (12 months accumulated) - % Fee Income / Personnel Expenses - % Fee Income / Administrative Expenses - % Personnel Expenses per Employee - R$ thousand Employees in Branches / (Branches + Service Posts) Checking Accounts per Employee in Branches Assets per Employee - R$ thousand 13, , , , ,513.8 Loan Port. Broad Def. / Ow n Service Netw ork - R$ million Loan Portfolio Quality Allow ance for Loan Losses / Loan Portfolio - % Coverage Ratio + 90 days - % Loan Portfolio (Net of Allow ance) / Total Portfolio - % Capital Structure Leverage (times) BIS Ratio - % Tier I CET1 Ratio Total Shares - million 2, , , , ,865.4 Structural Data Branches 5,428 5,430 5,440 4,877 4,885 Ow n Service Netw ork 17,181 17,092 16,625 16,492 16,098 Total Customers - thousand 64,187 64,383 64,798 65,244 65,566 Total Checking Accounts - thousand 37,755 37,808 37,307 37,109 36,939 Individuals 35,353 35,177 34,902 34,741 34,587 Companies 2,402 2,631 2,405 2,368 2,353 Total Savings Accounts - thousand 39,310 39,211 39,255 39,124 38,112 Staff 114, , , , ,071 Employees 109, , ,622 99,964 99,603 Interns 4,725 3,592 2,328 1,420 1,468 Market Share Assets NA Deposits NA Loan Agribusiness Asset Management² Cards Revenues NA Insurance Premium Auto Life Housing Rural Collection Pension Plans (PGBL, VGBL and Traditional) Premium Bonds Import Exchange Export Exchange Includes private securities, guarantees provided and the individual portfolio acquired with recourse, under CMN Resolution 3,533/ Banco Votorantim s asset management is not included. NA - Not Available. 23

26 Chapter 1 - key Statistics Table 16. Ratings 2Q16 3Q16 4Q16 1Q17 2Q17 Global Ratings Fitch Ratings Availability bb- bb- bb- bb- bb- Short-Term - Local Currency B B B B B Long-Term - Local Currency BB BB BB BB BB Outlook - Local Currency Negative Negative Negative Negative Negative Short-Term - Foreign Currency B B B B B Long-Term - Foreign Currency BB+ BB BB BB BB Outlook - Foreign Currency Negative Negative Negative Negative Negative Moody's Short-Term - Local Currency NP NP NP NP NP Short-Term - Foreign Currency NP NP NP NP NP Long-Term Debt - Foreign Currency Ba2 Ba2 Ba2 Ba2 Ba2 Long-Term Deposits - Local Currency Ba2 Ba2 Ba2 Ba2 Ba2 Long-Term Deposits - Foreign Currency Ba3 Ba3 Ba3 Ba3 Ba3 Outlook Negative Negative Negative Stable Negative Standard & Poor's Long-Term - Local Currency BB BB BB BB BB Outlook - Local Currency Negative Negative Negative Negative Negative Short-Term - Foreign Currency B B B B B Long-Term - Foreign Currency BB BB BB BB BB Outlook - Foreign Currency Negative Negative Negative Negative Negative Domestic Ratings Fitch Ratings Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) Long-Term AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra) Outlook Negative Negative Negative Negative Negative Moody's Short-Term BR-1 BR-1 BR-1 BR-1 BR-1 Long-Term Aa2.br Aa1.br Aa1.br Aa1.br Aa1.br Outlook Negative Negative Negative Stable Negative Table 17. Compulsory/Reserve Requirement % 2Q16 3Q16 4Q16 1Q17 2Q17 Compulsory/Reserve Requirements (%) Demand Deposits Rate Reserve Requirements (rural loan) Reserve Requirements (micro finance) Unmarked Savings Deposits Rural Rate Additional Reserve Requirements Unmarked Mortgage Rate Additional Reserve Requirements Unmarked Time Deposits Rate Additional Unmarked

27 Banco do Brasil S.A. - MD&A 2Q17 Corporate Governance Corporate governance at Banco do Brasil (BB) defines a broad view of principles and practices that strengthen the management transparency and increase its institutional value. These guidelines are constantly updated as a result of legal or statutory changes. BB adopts corporate governance best practices, ensuring the balance of rights among shareholders, accountability to investors and society, ethics in dealing with stakeholders and business sustainability supported by monitoring tools, which aligns the behavior of its executives with their shareholders and general society interests. Since 2006, Banco do Brasil has been part of the B3's Novo Mercado, a listing segment that counts with companies subject to stricter corporate governance practices. In addition, BB is also listed in the Corporate Sustainability Index (ISE), Special Tag-Along Stock Index (ITAG), Special Corporate Governance Stock Index (IGCT) and, since 2012, in the Dow Jones Sustainability Index (DJSI). Banco do Brasil s corporate governance structure consists of the Board of Directors, composed of 8 members, assisted by the Audit Committee, Remuneration and Elegibility Committee, Risk and Capital Committee and Internal Audit, and the Executive Board, composed of Board of Directors (CEO and 9 Chief Officers) and 27 Statutory Officers. BB also maintains, on a permanent basis, a Fiscal Council composed of five incumbent members and five alternate members. BB has tools to evaluate the performance of the Board of Directors, Audit Committee and Executive Board, which enables the mapping and identification of opportunities to improve their respective activities. In addition to the Bylaws, the Code of Corporate Governance and the Code of Ethics support the best corporate governance practices at Banco do Brasil. BB's Bylaws establishes the segregation of duties among its Officers in order to avoid any conflicts of interest. The Bylaws also prevents that the members of the Board of Directors or Executive Board from making decisions on matters for which they may have a conflict of interest. At all levels of BB, decisions are collective in order to engage executives in strategies definition and approving proposals for BB s businesses. For this, the senior management uses strategic committees, which guarantee agility and security to the process of decision-making. BB s Bylaws also establishes, in its Article 24, section III, paragraph 2, that the Executive Board members must be career employees of Banco do Brasil. The following figures present the senior management structure and the strategic committees of Banco do Brasil. Figure 15. Senior Management Structure Audit Committee Advisory Audit Committee Remuneration and Eligibility Committee Shareholders General Meeting Board of Directors Fiscal Council Internal Audit Risk and Capital Committee Board of Officers Chief Executive Officer Executive Secretary Communication Advisory Vice-Presidency of Wholesale Vice-Presidency of Government Affairs Vice-Presidency of Agribusiness Vice-Presidency of Retail Services Vice-Presidency of Distribution and Human Resources Vice-Presidency of Services, Infrastructure and Operations Vice-Presidency of Technology Vice-Presidency of Financial Management and IR (CFO) Vice-Presidency of Internal Controls and Risk Management (CRO) Corporate Bank Government Affairs Agribusiness Individual Customers Distribution Supplies, Inf rastructure and Property Technology Finance Risk Management Strategy and Organization Business Solutions Micro and Small Companies Southeastern Distribution Operations Engineering and Construction I Controllership Credit IT and Process Governance Capital Market and Infrastructure Payment Methods Channels Engineering and Construction II Accounting Restructuring of Operational Assets Legal Private Bank Consumer Lending, Finance and Mortgage Human Resources Operating and Solutions in IT Related Companies Governance Internal Controls Institutional Security Funding and Investments Business Center Digital Business Investor Relations Marketing and Communication Retail Integration 25

28 Executives Officers Board of Directors Chapter 1 - key Statistics Figure 16. Strategic Committees Composition Risk, Asset and Liabilities Liquidity and Capital Management Superior Committee Customer Service and Experience Executive Committee Profitability and Performance Executive Committee Strategic Committees Investor Relations Executive Committee Strategic Portfolio Management Executive Committee Risk Management and Internal Controls Executive Committee Asset & Liabilities, Liquidity and Capital Management Executive Committee Ethics and Discipline Executive Committee Prevention of Financial, Foreign Exchange Ilicit and Information Security Executive Committee Products and Services Executive Committee Credit Transactions Executive Committes Human Resources Executive Committee Credit Limit Executive Committee Related Companies Governance Executive Committee Administrative and Operational Executive Committee Credit Transations Resources Committee Information Technology Committee 01 Superior Committee 14 Executive Committees 03 Committees More information about Banco do Brasil's corporate governance practices is available in section 12 of the Reference Form, available on BB's Investor Relations website at 26

29 Banco do Brasil S.A. - MD&A 2Q Financial Statements Summary 2.1. Balance Sheet Summary Table 18. Balance Sheet Summary - Assets Chg. (%) on R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 ASSETS 1,445,115 1,402,399 1,445, Current and Long-Term Assets 1,413,533 1,370,713 1,413, Cash and Cash Equivalents 14,052 15,314 14, (6.4) Short-Term Interbank Investments 414, , , Securities and Derivative Financial Instruments 120, , , Securities Available for Trading 6,225 7,889 8, Securities Available for Sale 110, , , Securities Held to Maturity 841 5,052 5, Derivative Financial Instruments 3,256 1,176 1,390 (57.3) 18.1 Interbank Accounts 73,981 69,849 73,543 (0.6) 5.3 Deposits w ith Central Bank of Brazil 65,404 61,619 64,659 (1.1) 4.9 Compulsory Deposits on Demand Dep. and Float 11,050 10,131 13, Compulsory Deposits on Savings Deposits 54,354 51,488 51,418 (5.4) (0.1) Other 8,576 8,230 8, Interdepartamental Accounts Loans 597, , ,756 (6.8) 0.6 (Allow ance for Loan Losses) (35,783) (35,212) (36,602) Leasing (23.6) (6.8) Other Receivables 191, , ,521 (3.1) 0.5 Receivable from Guarantees Honored (2.8) (20.6) Foreign Exchange Portfolio 19,801 16,879 17,288 (12.7) 2.4 Accrued Income 2,688 2,771 2, Securities Trading 1,027 1, (4.7) (6.5) Specific Credits Tax Credits 43,853 42,555 42,836 (2.3) 0.7 Actuarial Assets (Previ Plano 1) (4,910) (2,184) (2,596) (47.1) 18.8 Fundo Paridade (2.0) Fund of Surplus Allocation - Previ 9,377 9,488 9, (0.0) Sundry Debtors from Escrow Deposits 47,275 51,785 52, Sundry 73,911 63,687 63,347 (14.3) (0.5) (Allow ance for Other Credits) (2,698) (2,760) (2,793) (With Loan Characteristics) (1,179) (1,234) (1,312) (Without Loan Characteristics) (1,519) (1,526) (1,481) (2.5) (2.9) Other Assets (6.9) (8.2) Assets Not for Ow n Use and Materials in Stock (0.3) (Allow ance for Impairment) (125) (137) (149) Prepaid Expenses (12.0) (9.9) Permanent Assets 31,583 31,686 31, (0.1) Investments 16,505 16,285 16, Property and Equipment 7,141 7,415 7, Intangible 7,924 7,986 7,499 (5.4) (6.1) Deferred

30 Chapter 2 - Financial Statements Summary Table 19. Balance Sheet Summary - Liabilities Chg. (%) on R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 LIABILITIES AND SHAREHOLDER S EQUITY 1,445,115 1,402,399 1,445, Current and Long-Term Liabilities 1,361,227 1,312,130 1,354,399 (0.5) 3.2 Deposits 440, , , Demand Deposits 62,550 63,960 62,385 (0.3) (2.5) Savings Deposits 148, , , Interbank Deposits 27,473 18,265 18,962 (31.0) 3.8 Time Deposits 202, , , Securities Sold Under Repurshase Agreements 411, , , Repurchase Agreements w ith Private Securities 30,415 20,135 24,898 (18.1) 23.7 Funds from Acceptance and Securities Issuance 174, , ,822 (16.4) (7.2) Agribusiness Letters of Credit 135, , ,665 (25.7) (10.7) Mortgage Bonds 18,066 21,012 20, (4.2) Commercial Papers 2,393 2,812 3, Foreign Securities 18,631 20,540 21, Interbank Accounts 3,113 2,434 2,906 (6.6) 19.4 Interdepartamental Accounts 3,238 2,197 2,281 (29.6) 3.8 Borrow ings 22,763 17,769 19,741 (13.3) 11.1 Domestic Onlending 86,603 81,431 79,453 (8.3) (2.4) National Treasury (1.2) 1.4 BNDES 35,324 30,922 29,777 (15.7) (3.7) Caixa Econômica Federal 21,648 24,487 25, Finame 27,532 23,736 22,467 (18.4) (5.3) Other Institutions 1,933 2,124 2, (4.1) Derivative Financial Instruments 3,019 2,159 1,970 (34.7) (8.8) Other Liabilities 215, , ,594 (2.6) 0.5 Billing and Collection of Taxes and Contributions 3,913 4,970 4, (17.8) Foreign Exchange Portfolio 21,588 17,814 16,346 (24.3) (8.2) Shareholders and Statutory Distributions 1, , Taxes and Social Security 15,610 11,336 11,768 (24.6) 3.8 Securities Trading (24.0) 21.1 Financial and Development Funds 13,741 14,817 14, Subordinated Debt 81,615 84,228 85, Equity and Debt Hybrid Securities 5,397 5,759 5, (3.8) Subordinated Instruments 58,648 61,123 62, Debt Instruments Qualified as Capital 17,570 17,347 18, Actuarial Liabilities (Cassi) 7,519 8,020 8, Other Liabilities 68,532 65,825 65,624 (4.2) (0.3) Deferred Income (1.9) (4.0) Shareholders Equity 83,449 89,820 90, Capital 67,000 67,000 67, Instruments Qualifying to Common Equity Tier 1 Capital 8,100 8,100 8, Capital Reserves (19.8) (24.4) Revaluation Reserves (10.7) (8.9) Profit Reserves 25,402 27,675 31, Other Comprehensive Income (18,319) (16,325) (16,882) (7.8) 3.4 Benefit Plans (16,832) (15,493) (15,978) (5.1) 3.1 Retained Earnings (Accumulated Losses) - 1, (Shares Ow ned by the Company) (1,855) (1,852) (1,850) (0.3) (0.1) Non-Controlling Interests 3,102 3,577 3, (8.3) 28

31 Banco do Brasil S.A. - MD&A 2Q Income Statement with Reallocations Table 20. Income Statement with Reallocations Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Financial Intermediation Income 36,935 38,267 38, (0.6) 68,055 76, Loan Operations (1) 25,626 22,683 20,851 (18.6) (8.1) 45,592 43,534 (4.5) Sale or Transference of Financial Assets (1) (32.4) (18.9) 1, (24.7) Lease Operations (19.1) (7.4) (20.4) Securities (2) (9) 12,282 14,883 14, (1.6) 23,819 29, Financial Derivatives (1,310) (546) (1,613) (195) (87.9) Foreign Exchange Portfolio (81.2) (38.0) 1, (70.9) Compulsory Investments 1,447 1,255 1,070 (26.1) (14.8) 2,838 2,325 (18.1) FX Gain (Loss) on Foreign Equity (3) (1,081) (166) (2,349) Tax Hedge (4) (5) (981) (150) (1,854) Financial Intermediation Expenses (22,302) (23,790) (23,428) 5.0 (1.5) (39,146) (47,218) 20.6 Money Market Funds (6) (17) (28,926) (24,258) (18,119) (37.4) (25.3) (52,577) (42,377) (19.4) Borrow ing, Assignments and Onlending (3) (6) 6, (5,309) ,431 (4,842) - Net Interest Income 14,633 14,476 14,606 (0.2) ,909 29, Allow ance for Loan Losses (10) (21) (8,277) (6,713) (6,658) (19.6) (0.8) (17,422) (13,371) (23.2) Net Financial Margin 6,356 7,764 7, ,488 15, Fee Income 5,886 6,096 6, ,285 12, Service Fee Income 3,810 3,884 3, ,270 7, Banking Fee Income 2,076 2,212 2, ,015 4, Taxes on Revenues (4) (13) (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8) Contribution Margin 10,952 12,597 13, ,258 25, Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9) Personnel Expenses (16) (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6) Other Administrative Expenses (11) (12) (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8 Other Tax Expenses (13) (92) (118) (128) (209) (245) 17.5 Commercial Income 2,887 4,706 5, ,268 9, Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6) Civil Claims (14) (15) (18) (19) (185) (358) (112) (39.5) (68.7) (576) (470) (18.4) Labor Law suits (16) (20) (396) (393) (404) (795) (797) 0.2 Other Operating Income (31.5) (46.2) Eq. Int. in Results of Subsidiaries and Affiliates (22) 1, ,062 (2.7) ,089 2,015 (3.5) Other Operating Income/Expenses Result (997) (739) (916) (8.1) 23.9 (1,420) (1,655) 16.5 Other Operating Income (2) (8) 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1) Previ - Plano de Benefícios 1 (7) (54) (59) (59) 10.5 (0.0) (107) (119) 10.5 Previ - Fundo Utilização Restatement (8) (57.9) (31.5) (53.3) Other Operating Expenses (7) (9) (10) (11) (12) (14) (15) (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1) Operating Income 2,400 4,168 4, ,565 8, Non-Operating Income (17.0) (3.4) Income Before Taxes 2,472 4,214 4, ,674 8, Income and Social Contribution Taxes (5) (23) 12 (995) (1,334) (2,329) - Interest on Ow n Capital Tax Benefit Statutory Profit Sharing (24) (246) (307) (354) (431) (662) 53.5 Minority Interest Earnings (438) (396) (394) (10.1) (0.6) (827) (790) (4.5) Adjusted Net Income 1,801 2,515 2, ,087 5, One-Off Items 664 (72) (30) - (57.7) 1,738 (102) - Economic Plans (17) (18) (185) (227) (64) (65.3) (71.7) (567) (291) (48.8) Extraordinary Provision for Law suits (19) (20) (97.8) (93.6) (85.9) Additional Allow ance for Loan Losses (21) (22) 1, , Tax Eff. and Stat. Prof. on One-Off Items (23) (24) (618) (57.7) (1,617) #N/D #N/D 95 - Net Income 2,465 2,443 2, ,824 5, Each index presented in the table above corresponds to the event item in the table "Statement of Reallocations and One-Off Items". 29

32 Chapter 2 - Financial Statements Summary Reallocations Breakdown In this chapter, the adjustments made in the Corporate Law Income Statement to obtain the Income Statement with Reallocations are detailed. Adjustments aim to: a) Separate the one-off items and show the adjusted net income for the period; b) Change the way income and expenses are shown, in order to provide a better business and company's performance understanding; c) Allow the Net Interest Income (NII) recorded during the period to reflect, effectively, the gain from all the earning assets, to inform the market regarding the spread achieved from the ratio of this margin by average balance of earning assets. For this, it was necessary to: I - Include, in the NII, the income recorded in other operating income with financial intermediation characteristics and that was derived from earning assets recorded in the other receivables in the Balance Sheet; II - Identify the foreign exchange gain/(loss) on assets and liabilities abroad during the period in a specific NII item; III - Keep amounts related to negative foreign exchange adjustments and expenses reversal that were recorded in Other Operating Income and/or Other Expenses Income to avoid inverting the balance of accounts which have a financial intermediation nature; IV - Include, in the NII, all expenses related to Subordinated Debt and Perpetual Securities. The next table it shows the statement of the reallocations performed during the period: 30

33 Banco do Brasil S.A. - MD&A 2Q17 Table 21. Reallocations and One-Off Items Breakdown R$ million Quarterly Flow Half-Yearly Flow Item From To Event 2Q16 1Q17 2Q17 1H16 1H17 1 Sale or Transference of Financial Assets Loan Operations Sale or Transference of Financial Assets , Other Operating Income Securities Financial Investment Income Borrow ing, Assignments and Onlending FX Gain (Loss) on Foreign Equity FX Gain (Loss) on Foreign Equity (1,081.5) (165.9) (2,348.7) Taxes on Revenues Tax Hedge Tax Hedge (52.7) (8.1) 23.5 (99.7) Income and Social Contribution Taxes Tax Hedge Tax Hedge (928.0) (142.4) (1,754.3) Money Market Funds Borrow ing, Assignments and Onlending Restatement Expenses - Funds and Programs (117.5) (160.3) (106.9) (251.8) (267.2) 7 Other Operating Expenses Previ - Plano de Benefícios 1 Actuarial Assets and Liabilities Valuation Adjustements (53.7) (59.3) (59.3) (107.3) (118.6) 8 Other Operating Income Previ - Fundo Utilização Restatement Actuarial Assets and Liabilities Valuation Adjustements Securities Other Operating Expenses Operating Provisions Reversal Allow ance for Loan Losses Other Operating Expenses Allow ance for Loan Losses (Cred. w /o Char. of Fin. Int.) 7.1 (55.8) (10.4) 11 Other Administrative Expenses Other Operating Expenses Goodw ill Amorization (276.5) (310.6) (298.8) (553.8) (609.4) 12 Other Administrative Expenses Other Operating Expenses Premiums Paid to Costumers (505.4) (471.3) (468.3) (1,010.9) (939.6) 13 Other Tax Expenses Taxes on Revenues Taxes on Revenues (1,343.7) (1,270.4) (1,207.4) (2,613.7) (2,477.8) 14 Other Operating Expenses Civil Claims Expenses w ith Civil Claims (265.1) (373.9) (250.2) (577.5) (624.1) 15 Other Operating Expenses Civil Claims Reversal of Contingent Liabilities Personnel Expenses Labor Law suits Provision for Labor Law suits (380.4) (387.5) (403.0) (767.1) (790.5) 17 Money Market Funds Economic Plans Economic Plans (167.2) (127.9) (141.3) (326.5) (269.1) 18 Civil Claims Economic Plans Economic Plans (18.0) (98.7) 77.1 (241.0) (21.6) 19 Civil Claims Extraordinary Provision for Law suits Extraordinary Provision for Law suits Labor Law suits Extraordinary Provision for Law suits Extraordinary Provision for Law suits Allow ance for Loan Losses Additional Allow ance for Loan Losses Reversal of Additional Alow ance for Loan Losses 1, , Eq. Int. in Results of Subsidiaries and Affiliates Additional Allow ance for Loan Losses Reversal of Additional Alow ance for Loan Losses - BV Income and Social Contribution Taxes Tax Eff. and Stat. Prof. on One-Off Items Tax Eff. and Stat. Prof. on One-Off Items (543.6) (1,421.6) Statutory Profit Sharing Tax Eff. and Stat. Prof. on One-Off Items Tax Eff. and Stat. Prof. on One-Off Items (74.7) (195.5)

34 Chapter 2 - Financial Statements Summary Glossary of Reallocations (1) Revenues (expenses) generated in financial assets with co-obligation assignment. (2) Revenues from non-financial companies financial investments. (3) Corresponds to the results of exchange rate changes on investments in subsidiaries and branches abroad. (4) and (5) Taxes effects on investments abroad hedge. (6) Funding expenses on funds and programs. (7) Expenses arising from Previ's actuarial assets and liabilities review. (8) Financial income from restatement of Fundo Utilização da Previ. (9) Provision for losses on equity interests reversal. (10) Allowance for loan loss expenses for credits without characteristics of financial intermediation. (11) Expenses from amortization of goodwill on investments. (12) Payroll acquisition amortization. (13) Tax expenses reallocated to compose the contribution margin. (14) and (15) Reversal our expenses arising from civil claims. (16) Provision for expenses arising from labor lawsuits. (17) and (18) Expenses with provision arising from lawsuits relating to economic plans. (19) and (20) Extraordinary provisions for lawsuits. (21) Partial reversal of additional allowance for loan losses recognized in previous fiscal years. (22) Partial reversal of additional allowance for loan losses recognized in previous fiscal years of Banco Votorantim. (23) and (24) One-off items effects on the payment of statutory profit sharing and unification of these effects on income and social contribution taxes Tax Effect and Statutory Profit Sharing on One-Off Items The next table shows the effects of taxes and statutory profit sharing on each one-off item. Table 22. Tax Effect and Statutory Profit Sharing on One-Off Items Quarterly Flow Half-Yearly Flow R$ million 2Q16 1Q17 2Q17 1H16 1H17 Economic Plans Extraordinary Provision for Law suits (125) (42) (3) (321) (45) Additional Allow ance for Loan Losses (583) - - (1,570) - Total (618) (1,617) 95 32

35 Banco do Brasil S.A. - MD&A 2Q Loan Banco do Brasil Lending Process Advanced methodologies for credit risk calculation supports lending process in Banco do Brasil. BB develops these methodologies and follows the best risk management practices. Customer risk reflects the likelihood that a borrower will default in 1 year after the risk analysis. Banco do Brasil determines the amount of resources exposed to that borrower. To calculate the risk the Bank uses internal and external information, in addition to the history of the relationship with that customer, as follows. I. Customer File Information: analysis of client information obtained from internal and external sources, including restrictive client information; II. III. IV. Behavior within BB: indebtedness evaluation, use of credit products, timely payments and data on relationships with the Bank; Behavior within the Banking Industry: indebtedness analysis at other banks, use of competitors products and payment punctuality within the Banking Industry; Personalized Methodologies - evaluation of financial statements, customer s segment outlook and other market information. Risk is collectively calculated for individuals, very small companies, and farmers, and individually calculated for companies and government entities. The client s credit risk is automatically calculated in the collective risk analysis, generating immediate results for the intended transaction. Individual analyses are conducted by the technical staff of Banco do Brasil, using corporate systems calculations. Committees are responsible for approving these customers risk. Customer risk is an important input to establish credit limits, to define proper classification of loan risk, and to guide business with the customer. Figure 17. Banco do Brasil Lending Process 1 - SCR: Central Bank of Brazil Credit Information System Loan Portfolio For a better understanding of BB s loan operations, we present the following definitions related to the loan portfolio. The information presented in this chapter is divided into individuals, companies and agribusinesses segments. a) Classified Loan Portfolio: sum of the credit operations, financing, leasing, other credit with loan characteristics and acquired loan portfolio. b) Loan Portfolio Broad Definition: classified loan portfolio added of the private securities and guarantees operations, where: b.1) Private Securities: operations characterized by the acquisition of securities (commercial papers and debentures) mainly issued by private companies and underwritten by BB. b.2) Guarantees: operations where BB ensures the settlement of the contracts. 33

36 Chapter 3 - Loan Table 23. Loan Portfolio Classified and Broad Definition Balance Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio (a) 691, , , (7.1) 0.7 Brazil 647, , , (6.2) 0.7 Individuals 189, , , (2.0) 0.4 Payroll Loan 64, , , Mortgage 39, , , Credit Card 22, , , (0.6) Salary Loans 20, , , (3.1) 0.7 Auto Loans 23, , , (28.9) (7.5) Consumer Finance 7, , , (17.3) 4.6 Overdraft Account 2, , , (12.6) (6.0) Other 8, , , (0.4) Companies 274, , , (14.8) (2.0) Middle Market and Corporates 156, , , (11.7) (1.2) Very Small and Small Companies 81, , , (29.2) (6.5) Government 37, , , Agribusiness 183, , , Individuals 130, , , Companies 53, , , (7.8) 7.8 Abroad 44, , , (19.5) 0.7 Private Securities and Guarantees (b) 61,140 50,353 53,275 (12.9) 5.8 Loan Portfolio - Broad Definition (a + b) 752, , , (7.6) 1.1 Brazil 701, , , (7.2) 0.8 Individuals 189, , , (2.0) 0.4 Companies 327, , , (15.4) (1.3) Agribusiness 184, , , Abroad 51, , , (12.4) 5.0 For its guidance, Banco do Brasil considers the organic domestic loan portfolio broad definition, calculated by the sum of the domestic organic loan portfolio and private securities and guarantees, not considering acquired loan portfolio. The agroindustry loans are excluded from rural loan portfolio and summed to companies loan portfolio. Table 24. Organic Domestic Loan Portfolio Broad Definition Balance Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Organic Domestic Loan Portfolio - Broad Definition 684, , , (6.6) 1.0 Individuals 172, , , Companies 359, , , (14.5) (0.5) Rural 152, , , The table below shows BB s market share in the classified loan portfolio of the Brazilian Banking Industry (BI). Table 25. Loans in the Brazilian Banking Industry Balance R$ billion Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Jun/16 Mar/17 BI 3,130 3,110 3,106 3,079 3,078 (1.6) (0.0) Individuals 1,529 1,542 1,561 1,576 1, Companies 1,600 1,568 1,545 1,502 1,483 (7.3) (1.3) BB Market Share - % Chg. % on The following figure sets forth the domestic classified loan portfolio by the loans closing date. In certain cases, loan disbursement may continue to occur during quarters after the loan s closing, being then added to the original closing quarter. Considering the portfolio of Jun/17, 16.8% of assets were contracted in Assets contracted before 2015 corresponds to 45.8%. 34

37 Banco do Brasil S.A. - MD&A 2Q17 Figure 18. Classified Loan Portfolio BB by Contracted Period - % and R$ billion % % % % % Up to % Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Other Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2T17 The following figure sets forth the BB s Classified Loan Portfolio in Brazil by maturity. Up to 79.9% of the portfolio has a maturity period over 360 days, in line with the investment, mortgage and payroll loans trend, while 6.9% of the portfolio has a maturity of less than 90 days, notably working capital operations with companies. Figure 19. BB s Classified Loan Portfolio in Brazil by Maturity - % Jun/ Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days 79.9 From 181 to 360 days Over 360 days Individuals Loan Portfolio The following tables show the main credit lines to individuals. BB s total acquired loan portfolio is composed of payroll and auto loan operations. The decrease on the annual basis was mainly due to the reorganization and consolidation of the sector, specially the payroll loan segment. The joint obligation loan portfolio are 99.5% of this total. 35

38 Chapter 3 - Loan Table 26. Individuals Loan Portfolio Balance R$ million Jun/16Share % Mar/17Share % Jun/17Share % Jun/16 Mar/17 Organic Classified Loan Portf. 172, , , Direct Consumer Credit 90, , , (0.7) 2.5 Payroll Loan 62, , , Salary Loan 20, , , (3.1) 0.7 Consumer Finance 7, , , (17.3) 4.6 Mortgage 39, , , Credit Card 22, , , (0.6) Renegotiated Loan 6, , , Auto Loan 7, , , (25.9) (5.9) Overdraft Account 2, , , (12.6) (6.0) Microcredit (23.2) (10.7) Other (36.9) (9.1) Acquired Loan Portfolio¹ 17, , , (32.7) (9.0) Payroll Loan 1, (58.5) (19.7) Auto Loan 15, , , (30.3) (8.3) Classified Loan Portfolio (a) 189, , , (2.0) 0.4 Private Securities and Guarantees (b) (26.4) (4.9) Broad Concept Loan Portfolio (a+b) 189, , , (2.0) Includes the balance of acquired joint obligation loan portfolio, in compliance with CMN Resolution No. 3,533/08. Chg. % on BB remains among the market leaders in loan operations with lower risk. The following table shows BB's participation in these segments. Table 27. Individuals Loan Portfolio Market Share Jun/16 Mar/17 Jun/17 R$ million BB¹ BI Share % BB¹ BI Share % BB¹ BI Share % Payroll Loan 64, , , , , , Auto Loan² 22, , , , , , Mortgage 39, , , , , , Includes the acquired joint obligation loan portfolio, in compliance with CMN Resolution 3,533/08. 2 Includes only free resources. Civil servants and pensioners contracted the majority of direct consumer credit and auto loans, which portfolio was R$95.6 billion in Jun/17. Figure 20. Organic Individuals Loan Portfolio Direct Consumer Credit and Auto Loan - % Jun/16 Mar/17 Jun/17 Civil Servants INSS Retirees and Pensioners Private Sector Employees BB s knowledge of its customers is one of the important components of credit methodology. Of those with credit transactions at BB, 89.9% have an account for at least five years. 36

39 Banco do Brasil S.A. - MD&A 2Q17 Table 28. Account Time Customers with Credit Transactions % Jun/16 Mar/17 Jun/17 Account Time Up to 1 year From 1 to 2 years From 2 to 5 years From 5 to 10 years Over 10 years The table below shows the average maturity and the rates of the operations with lower risk. The average maturity is calculated by weighting the remaining term with the closing balance. The average rate is calculated considering the portfolio. Table 29. Average Rates and Maturity Banco do Brasil Auto Financing Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Average Rate - % p.m Average Maturity - months Mortgage Average Contract Amount - R$ thousand Average Rate - % p.y Average Maturity - months LTV Payroll Loan Average Rate - % p.m Average Maturity - months Direct Consumer Credit Average Rate - % p.m Average Maturity - months Payroll Loan In the 2Q17, the disbursement was R$11.0 billion, best performance since The payroll loan portfolio was R$64.2 billion in Jun/17. It s mainly composed by operations with civil servants and INSS pensioners, who have lower risk. The table below shows the portfolio breakdown. Figure 21. Organic Payroll Loan Breakdown - % Jun/16 Mar/17 Jun/17 Civil Servants INSS s Retirees and Pensioners Private Sector Employees Most of the payroll loan granted by BB in this quarter has a maturity period over 60 months. The profile of this portfolio allows customers to lengthen the term and generates loyalty and an opportunity to offer other products during this time. 37

40 Chapter 3 - Loan Figure 22. Maturity of transactions contracted in the quarter Payroll Loan 0 to 12 months 1.7% 13 to 24 months 4.4% 25 to 36 months 5.5% 37 to 48 months 8.8% Auto Loan 85 to 96 months 46.3% 73 to 84 months 6.0% 61 to 72 months 17.3% 49 to 60 months 9.9% The balance of BB s organic auto loan portfolio was R$5.4 billion in Jun/17. Disbursement was R$651.2 million in 2Q17. The following table shows the main characteristics of the customers of BB s organic auto loan portfolio. Most customers have hold accounts for over 10 years and receive their salary through the Bank. Table 30. BB s Organic Auto Loan Portfolio - Customers Characteristics % Jun/16 Mar/17 Jun/17 Account Time Up to 5 years From 5 to 10 years Over 10 years Salary Paid through Banco do Brasil Paid through other banks The next figure shows maturity of auto loan transactions contracted at Banco do Brasil in 2Q17. Approximately 74.9% of the disbursement matures within 48 months. Figure 23. Maturity of Transactions Contracted in the quarter Auto Loan 0 to 12 months 4.2% 49 to 60 months 25.1% 13 to 24 months 18.4% 37 to 48 months 19.6% 25 to 36 months 32.8% The following figure sets forth the Loan-to-Value (LTV) ratio of financed assets. BB s customers committed, in average, 33.5% of the asset s value in 2Q17, which further reduces the probability of default. 38

41 Banco do Brasil S.A. - MD&A 2Q17 Figure 24. Loan to Value - Organic Auto Loan Portfolio - % Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 LTV Down Payment Mortgage In the last 12 months the balance increased R$ 3.3 billion confirming the upward trend as a percentage of the total portfolio, with the increase from 23.1% to 24.7% in organic portfolio. The increase was due the expansion of products offered to customers and process efficiency gain. BB had a 7.8% of market share in Jun/17, an increase of 10bps from the same period of the last year Companies Loan Portfolio The companies loan portfolio decrease in annual basis is a result, mainly, from the reduction of working capital operations. Table 31. Companies Loan Portfolio Balance Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio (a) 274, , , (14.8) (2.0) Working Capital 134, , , (14.6) (2.2) Investiments 62, , , (9.5) (2.4) Renegotiated Loan 18, , , ACC/ACE 18, , , (25.9) 6.3 Mortgage 11, , , (11.1) (4.3) Credit Card 12, , , (39.6) (14.3) Receivables 10, , , (31.4) 1.0 Pre-Aproved-Credit 2, , , (41.3) (14.8) BNDES Exim (23.5) (7.4) Overdraft Account (13.3) (5.9) Other 2, , , (11.7) 1.5 Private Sec. and Guarantees (b) 52, , , (18.2) 2.8 Loan Portfolio - Broad Definition (a+b) 327, , , (15.4) (1.3) The following table sets forth the distribution of the companies portfolio, considering the broad definition. Table 32. Companies Portfolio Breakdown R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio (a) 274, , , (14.8) (2.0) Middle Market and Corporates 156, , , (11.7) (1.2) Very Small and Small Companies 81, , , (29.2) (6.5) Government 37, , , Private Sec. and Guarantees (b) 52, , , (18.2) 2.8 Loan Portfolio - Broad Definition (a+b) 327, , , (15.4) (1.3) Foreign Trade Finance Balance Chg. % on BB is one of the main partners in Brazilian foreign trade, closing 2Q17 with a market share of 21.6% and 12.7% in foreign exchange for export and import operations, respectively. BB ended the quarter 39

42 Chapter 3 - Loan with a 24.2% market share in operations of Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE). Table 33. Foreign Exchange for Export and Import Operations Export Exchange 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 1Q17 Contracted Amount (US$ thousand) 11,198 8,433 8,061 8,120 11,079 (1.1) 36.4 Market Share - % Import Exchange Balance Contracted Amount (US$ thousand) 4,402 4,593 5,066 4,051 4,228 (3.9) 4.4 Market Share - % Chg. % on Table 34. Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE) 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 1Q17 Contracted Amount (US$ million) 2,276 1,354 1,496 1,252 1,852 (18.6) 47.9 Quantity of Contracts 3,128 2,554 2,410 2,255 2,971 (5.0) 31.8 Average Vol. per Contract (US$ thousand) (14.4) 12.2 Investment Loan Balance Chg. % on Banco do Brasil s disbursements for investment loan were R$6.4 billion in 2Q17. Pronaf/Pronamp/Proger/FCO products stand out, accounting for most of disbursements in period. The next chart shows the onlending funds share in disbursements. Figure 25. Disbursements by Onlending Fund - % Q BNDES/Finame Pronaf/Proger/Pronamp/FCO Agribusiness Investment Q Transport Infrastructure Finance Development Funds BNDES Card Other Loan to the Government Banco do Brasil supports the states, Federal District and the municipalities in their demands, financing investment programs that aims to improve quality and transparency of public administration, urban mobility, health, education and public safety, generating real benefits for the population and contributing to the develop of the country. In 2Q17 there were disbursed R$212 million to states and municipalities. Under Central Bank of Brazil Circular 3,644/2013, Article 37, a Risk Weighting Factor (FPR) of 0% must be applied to the portion of exposure covered by credit guarantees provided by the National Treasury transactions, without thereby compromising capital. Loan to Very Small and Small Companies At the end of 2Q17, BB had 2.2 million very small and small companies customers. Companies with annual revenues up to R$ 25 million are categorized as very small and small companies customers. The following table shows that 99.1% of this portfolio was concentrated by account holders who have accounts over two years. 40

43 Banco do Brasil S.A. - MD&A 2Q17 Table 35. Account Time - Percentage of the Very Small and Small Companies Portfolio Balance % Jun/16 Mar/17 Jun/17 Account Time Up to 1 year From 1 to 2 years From 2 to 5 years From 5 to 10 years Over 10 years The following tables show the main details of loan to very small and small companies. Table 36. Very Small and Small Companies Loans by Sector Balance Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Trade 34, , , (31.0) (5.6) Service Segment 25, , , (27.3) (7.2) Industry 21, , , (28.7) (6.9) Total 81, , , (29.2) (6.5) Table 37. Very Small and Small Companies Loan Products R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Working Capital 51, , , (28.6) (4.7) Investment 28, , , (30.5) (9.9) Foreign Trade 1, (27.8) (0.4) Total 81, , , (29.2) (6.5) Agribusiness Loan Portfolio Balance Chg. % on Agribusiness is one of the main sectors of the Brazilian economy, with fundamental importance to the country s growth and development. Brazil is one of the world s leading agribusiness exporters, especially in terms of production, export and trade of major agricultural supply chains. Table 38. Brazil s Share in World Agribusiness in Jun/17 Item Production Export % World Trade Orange Juice 1st 1st 76.1% Sugarcane 1st 1st 48.0% Soybean and Related Product 2nd 1st 43.2% Poultry 2nd 1st 38.3% Coffee 1st 1st 25.0% Cattle 2nd 2nd 18.7% Corn 3rd 3rd 22.0% Cotton 5th 4th 12.2% Source: USDA PSD online. The main role played by Brazilian agribusiness results from the competence of farmers, available natural resources, state-of-the-art technology, and offer of credit. These factors place Brazil in a privileged position in the world scenario. Agricultural and livestock activity follows the agricultural calendar, known as the crop-year, which begins in July of each year and ends in June of the following year. The data presented in this report includes information from fourth quarter of 2016/2017 crop. Agribusiness at BB Banco do Brasil is one of the main agents encouraging agribusiness development in Brazil, in line with the criteria established to maintain socio-environmental sustainability. 41

44 Chapter 3 - Loan Operating from the small producer to large agribusiness companies, BB finances the costs of producing and trading agricultural products, stimulates rural investment, including construction and enlargement of warehouses, purchase and modernization of agricultural machinery and farm implements, besides processing and industrialization of agricultural goods, as well as the rural properties adequacy to environmental legislation. Thus, BB supports the Brazilian agribusiness in all stages of the production chain. Historically, Banco do Brasil remains as the main agribusiness financial agent in the country, contributing significantly to supply the credit demand. According to Central Bank of Brazil s data, BB accounted for 59.8% of all financings granted to the agribusiness sector in in Jun/17. Figure 26. BB s Market Share in Brazilian Agribusiness % Jun/ Banco do Brasil Other Financial Institutions The distribution of agribusiness operations by Brazilian region shows the share of each in the loan portfolio. Table 39. Classified Agribusiness Loan Portfolio by Region Region Rural Credit - % Agroindustry - % Total - % Southeast South Midw est Northeast North The following table shows the breakdown of the agribusiness loan portfolio by credit line/program. The Brazilian Program for the Strengthening of Family Farming (Programa Nacional de Fortalecimento da Agricultura Familiar Pronaf) stands out, totaling R$43.0 billion in Jun/17, an increase of 6.1% on an annual basis. The Brazilian Program for Support to the Midsize Farmer (Programa Nacional de Apoio ao Médio Produtor Rural Pronamp) was R$25.2 billion in Jun/17, an increase of 1.2% in 12 months. Also important is the working capital for input purchase, with R$40.6 billion in Jun/17, an increase of 7.5% in 12 months. 42

45 Banco do Brasil S.A. - MD&A 2Q17 Table 40. Agribusiness Loan Portfolio by Credit Line/Program Balance Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 183, , , Rural Loans 151, , , Pronaf 40, , , Work. Capital for Input Purchase 37, , , Pronamp 24, , , FCO Rural 9, , , Agricultural Investment 9, , , Low Carbon Agriculture Program 9, , , (4.4) (1.5) BNDES/Finame Rural 9, , , (9.2) (1.9) Agricultural Selling 7, , , (8.5) 22.4 Other 3, , , (15.1) (3.6) Loans to Companies 31, , , (6.0) 7.5 Rural Product Bills and Guarantees (46.8) (22.2) Rural Loans - Broad Definition 152, , , Loan Portfolio - Broad Definition 184, , , The following table sets forth a breakdown of BB s agribusiness portfolio, divided into working capital for input purchase, investments, agroindustry, crop trading and others. Table 41. Agribusiness Loan Portfolio by Purpose Balance R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 183, , , Investment 82, , , Working Capital for Input Purchase 60, , , Agroindustry 31, , , (6.0) 7.5 Crop Trading 8, , , (12.2) 19.1 Other , , Rural Product Bills and Guarantees (46.8) (22.2) Loan Portfolio - Broad Definition 184, , , The following table shows the balance of agribusiness loan transactions by financed item. Table 42. Agribusiness Loan Portfolio by Financed Item Balance Chg. % on Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 183, , , Livestock 35, , , Meat 23, , , Milk 12, , , Machinery and Equipment 22, , , (0.1) Soybean 17, , , Corn 8, , , Coffee 4, , , Sugarcane 3, , , (3.7) 6.4 Aviculture 3, , , Sw ine Production 1, , , Rice 2, , , Cotton (1.6) 5.3 Other 52, , , (8.6) 2.2 Loans to Companies 31, , , (6.0) 7.5 Rural Product Bills and Guarantees (46.8) (22.2) Loan Portfolio - Broad Definition 184, , , The following table shows the balance of agribusiness loan portfolio and the breakdown for each customer type. 43

46 Chapter 3 - Loan Table 43. Agribusiness Loan Portfolio by Customer Size Balance R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 183, , , Medium and Large Sized 87, , , Small 42, , , Companies 42, , , (4.8) 8.9 Agroindustrial Cooperatives 10, , , (20.0) 2.8 Rural Product Bills and Guarantees (46.8) (22.2) Loan Portfolio - Broad Definition 184, , , The following table sets forth the breakdown of agribusiness loan portfolio by customer type. Table 44. Agribusiness Loan Portfolio by Customer Type Balance Chg. % on Chg. % on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 183, , , Individuals 130, , , Companies 53, , , (7.8) 7.8 Rural Product Bills and Guarantees (46.8) (22.2) Loan Portfolio - Broad Definition 184, , , BB uses 81.1% own funds in rural and agro industrial financing (mainly demand deposits, rural savings accounts and agribusiness letters of credit). In addition to those, BB also onlends funds from the BNDES (Brazilian development bank), FCO (constitutional fund for financing of the Midwest) and the Funcafé (coffee production economy defense fund). The following table sets forth the breakdown of agribusiness loan portfolio broad definition by funding sources. Table 45. Agribusiness Loan Portfolio Broad Definition by Funding Sources R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Agricultural Savings 92, , , Agribusiness Letters of Credit 38, , , Demand Deposits 19, , , FCO 13, , , BNDES/FINAME 11, , , Other¹ 9, , , Loan Portfolio - Broad Definition 184, , , National Treasury, Funcafé, Rural Product Bills and Guarantees. Balance To enable financing with lower interest rates, covering the funding costs, credit risks, tax and administrative costs and BB s profitability, National Treasury and Central Bank of Brazil may authorize following subsides: a) Equalization Revenues: amount paid by the National Treasury that represents revenues for the banks to cover the administrative and tax costs, besides the guarantee of a profitability rate on the applied resources; b) Weighting factor: multiplier adopted by the Federal Government to the use of resources from demand deposits and rural savings. Through this mechanism the banks are authorized to operate lower rates of rural credit. The released amount is invested in operations with market rates, in order to compensate the profitability difference from operations encouraged by the Federal Government. The mechanism of a weighting factor reduces the amount of assets subject to equalization, and allows banks to increase interest income proportionally. At BB, the released funds has TMS remuneration. The next table shows a history of equalization revenues and weighting factor. 44

47 Banco do Brasil S.A. - MD&A 2Q17 Table 46. Equalization Revenues and Weighting Factor Quarterly Flow R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Equalization Revenues 1,416 1,706 1,722 1,415 1,385 Weighting Factor Total 1,897 1,779 1,789 1,490 1,444 Table 47. Equalization Revenues Flow R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Initial Balance 1,357 2,767 1,700 3,418 1,401 Flow 1,410 (1,067) 1,718 (2,017) 1,382 Final Balance 2,767 1,700 3,418 1,401 2,783 1 Source: Notes to the Consolidated Financial Statements 12.b. Quarterly Flow The following table sets forth the distribution of BB s Agribusiness Portfolio equalization funds. Table 48. Equalizable resources in the Agribusiness Portfolio Balance R$ million Jun/16 Mar/17 Jun/17 Classified Loan Portfolio 183, , ,665 Equalizable Resources 95,500 92,578 96,358 Investments 50,970 49,449 49,779 Working Capital for Input Purchase 43,255 41,617 44,650 Crop Trading 1,275 1,512 1,929 Non-Equalizable Resources 88,054 86,853 91,306 Rural Product Bills and Guarantees Loan Portfolio - Broad Definition 184, , ,155 In the 2016/2017 crop, BB disbursed R$72.3 billion in agricultural loans. The Family Agriculture disbursement was R$13.4 billion, while the disbursement for Companies was R$46.9 billion. Operations through the National Program Support for Medium Farmers (Pronamp) were R$12.0 billion. The next table compares the disbursements of the 2016/2017 crop to the 2015/2016 one, detailing the credit purpose, destination and customer type. Table 49. Disbursements by Purpose Rural Credit R$ million Crop 15/16 Crop 16/17 Change (%) Family - Pronaf 13,494 13,431 (0.5) Working Capital for Input Purchase 7,276 7, Investment 6,218 5,851 (5.9) Medium - Pronamp 14,313 11,964 (16.4) Working Capital for Input Purchase 12,287 10,586 (13.8) Investment 2,026 1,378 (32.0) Companies 54,582 46,890 (14.1) Working Cap. for Input Purch./Crop Trading 48,176 39,929 (17.1) Investment 6,406 6, Total 82,389 72,285 (12.3) Risk Mitigators Banco do Brasil encourages the contracting of protection against bad weather (agricultural insurance or Proagro) in operations of working capital for input purchase. The strategy improves with each new crop, including the mass offering of options, such as seguro faturamento (price assurance). The risk mitigation strategy takes into account several types of information on the customers requested transactions, such as activity risk, type of crop to be financed and financing location. Those types of 45

48 Chapter 3 - Loan information allow the use of the protective devices (agricultural insurance/proagro or options) that best fit the risk profile of each transaction. The following table shows the recent historic use of risk mitigators in the working capital for input purchases. Table 50. Insurance in the Working Capital for Input Purchase Operation Contracted R$ million Crop 14/15 Share % Crop 15/16 Share % Crop 16/17 Share % Working Capital for Input Purchase 20, , , Total Insured 11, , , Proagro 6, , , Crop Insurance 4, , , Hedge Price , Without Insurance 9, , , The distribution of risks assumed as a result of agricultural insurance in the 2016/2017 crop is detailed below. Figure 27. Working Capital for Input Purchase Breakdown Risks - % Mapfre Re 20,0 BB Mapfre 20.0 IRB Re Concentration The following tables sets forth the concentration level of the portfolio with customers and business groups with which Banco do Brasil has relations. The first table sets forth the 100 largest borrowers over the classified loan portfolio and the second, over the Reference Equity (RE). Table Largest Customers in Relation to the Classified Loan Portfolio Period 1st. Customer (%) Balance 2nd. to 20th. (%) Balance 21st. to 100th (%) Balance Top 100 Largest (%) Balance Sep/ , , , ,446 Dec/ , , , ,567 Mar/ , , , ,699 Jun/ , , , ,403 Sep/ , , , ,701 Dec/ , , , ,529 Mar/ , , , ,284 Jun/ , , , ,876 46

49 Banco do Brasil S.A. - MD&A 2Q17 Table Largest Customers in Relation to Reference Equity (R$ million) Period 1st Customer (%) Balance 2nd to 20th (%) Balance 21st to 100th (%) Balance Top 100 Largest (%) Balance Sep/ , , , ,446 Dec/ , , , ,567 Mar/ , , , ,699 Jun/ , , , ,403 Sep/ , , , ,701 Dec/ , , , ,529 Mar/ , , , ,284 Jun/ , , , ,876 The next table shows the concentration of the companies and agro companies considering Multiple Bank, guarantees and securities and abroad loan portfolio. Each macrosector is divided into various economic sectors related with each other. The portfolio is in accordance with the main business of each customer. Table 53. Concentration of Companies and Agro Companies Loan Portfolio by Macro-Sector R$ million Balance Macrosector Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Public Administration 37, , , Oil and Gas 42, , , (9.2) 0.6 Metalw orking and Steel 38, , , (16.7) (4.9) Food products of Vegetable Origin 33, , , (10.1) 7.9 Electric Utilities 38, , , (23.1) (3.2) Transportation 27, , , (7.3) (0.7) Services 21, , , (3.7) (6.2) Housing 20, , , (15.1) (5.5) Automobiles and Components 23, , , (30.8) (2.8) Food products of Animal Origin 16, , , (5.4) 4.3 Financials 16, , , (25.9) 25.5 Retail Trade 17, , , (31.2) (3.6) Construction Materials 13, , , (19.0) (2.8) Agricultural Inputs 10, , , (21.1) 8.6 Telecommunication Services 5, , , Textiles 10, , , (28.4) (0.5) Electrical and Electronic Goods 8, , , (15.6) 2.5 Pulp and Paper 8, , , (31.0) (4.7) Chemicals 7, , , (20.9) (2.7) Heavy Construction 7, , , (31.2) (1.4) Wholesale Trade and Industries 6, , , (32.0) 0.5 Furniture and Forest Products 5, , , (16.8) (5.1) Leather and Shoes 2, , , (21.5) (2.6) Beverages 1, , , (20.0) 1.7 Other Activities (67.5) 22.2 Total 421, , , (14.9) 0.5 Domestic Loan Portfolio 328, , ,907 Abroad Loan Portfolio 33,881 24,022 23,937 Guarantees 17,770 13,945 14,150 Securities 41,717 34,822 37,685 Total 421, , ,679 Chg. % on 47

50 Chapter 3 - Loan 3.2. Credit Risk All risk segmentations of the loan portfolio in this section refer to the Classified Portfolio, in compliance with CMN Resolution 2,682/99, unless otherwise indicated. Banco do Brasil maintains a consistent process for risk credit evaluation and monitoring in loan transactions. The main loan portfolio s quality indicator is the Average Risk, which shows the ratio between the required provision and the classified loan portfolio. The figure below shows BB s classified loan portfolio average risk historical evolution and its comparison with the Brazilian Banking Industry (BI). This index at BB remains lower than BI. Figure 28. Classified Loan Portfolio Average Risk Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Average Risk - BB Average Risk - BI¹ Average Risk - Ex-specific cases² 1 - Ratio created through Average Risk Index available at SGS (Time Series Management System) of the Central Bank of Brazil. 2 - Simulation excluding specific cases effect. The following chart shows the coverage index (ALLL/NPL +90d), which states the ratio between the total provision (minimum, supplementary and additional) and the balance of transactions due over 90 days. It is worth mentioning that BB has sufficient provisions to support potential scenarios changes, such as higher delinquency. Figure 29. Classified Loan Portfolio Coverage Index Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 ALLL/NPL + 90d % - BB Consolidated ALLL/NPL + 90d % - Ex-specific cases² ALLL/NPL + 90d % - BI¹ 1 - Ratio created through Average Risk Index available at SGS (Time Series Management System) of the Central Bank of Brazil. 2 - Simulation excluding specific cases effect. The next figure shows the Allowance for Loan and Lease Losses ALLL, segregating the minimum, supplementary, required and additional provision. In BR GAAP accounting standards, Banco do Brasil records credit provision for its portfolio following the statistical model risk provision according to CMN Resolution 2,682/99. The additional provision is recorded from the management's experience by applying stress testing on the portfolio, considering the operations default history and aligned with the good banking practice. 48

51 Banco do Brasil S.A. - MD&A 2Q17 Figure 30. ALLL Classified Loan Portfolio 36,968 37,514 36,070 36,414 1,535 1,686 37,881 1,851 R$ million 36,968 37,514 34,535 34,728 36,030 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Provision Supplementary Provision Minimum Provision The delinquency ratio (NPL +90d) states the ratio between the operations more than 90 days overdue and the classified loan portfolio balance. Figure 31. NPL +90d Percentage on the Classified Loan Portfolio Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 NPL +90d - BB NPL +90d - BI 1 - Simulation excluding specific cases effect. The following graphic shows the NPL by BB s business segments. Excluding the portfolio decrease and specific case effects, NPL +90d of companies portfolio would be 6.08% in Jun/17. Figure 32. NPL +90d per segment Percentage on the Domestic Classified Loan Portfolio Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Companies Individuals Agribusiness 1 - Simulation excluding specific case effect. 49

52 Chapter 3 - Loan The following chart shows the New NPL/Loan Portfolio index, which indicates the future delinquency trend. The index is calculated by the ratio between: (i) the quarterly change of the transactions more than 90 days overdue balance, plus the quarterly write-off; and (ii) the previous quarter classified loan portfolio balance. The write-off process is strictly pursuant to CMN Resolution No. 2,682/99. Operations classified as risk H are accounted as write-off only after six months in delinquency at this risk level, never before that period. Figure 33. New NPL and Write-Off Percentage on the Classified Loan Portfolio Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 New NPL (R$ billion) New NPL(t)/Loan Portfolio(t-1) 1 - Simulation excluding specific cases effect. The next figure shows the index between Allowance for Loan Losses expenses and the New NPL index. Figure 34. ALLL Expenses / New NPL (%) ,55¹ ,93¹ Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 ALLL/New NPL (%) 1 - Simulation excluding specific cases effect. The results achieved with loan portfolio management risk, combined with a low delinquency ratio and historical high coverage ratio, have enabled the continuous improvement of BB s risk classification methodology. In 4Q16 and 1Q17, BB improved its rating assessment, establishing intermediate levels to those minimum required by Resolution CMN nº 2,682/99. The column Supplementary Provision from next table presents the balance of these interim levels. 50

53 Banco do Brasil S.A. - MD&A 2Q17 Table 54. Classified Loan Portfolio by Risk Level R$ million Balance Minimum Provision¹ Supplementary Provision Required Provision Share % Balance Minimum Supplementary Provision¹ Provision Required Provision Share % Jun/16 AA 343, , A 132, , B 120, , ,109 1, , C 39, , ,470 1,904 1,160 3, D 8, ,911 1, , E 15, , ,624 3,787-3, F 5, , ,943 2,971-2, G 4, , ,293 5,105-5, H 22, , ,283 19,283-19, Total 691, , ,846 36,030 1,851 37, AA-C 635, , ,793 3,693 1,699 5, D-H 56, , ,053 32, , Mar/17 AA 307, , A 92, , B 108,754 1, , ,109 1, , C 68,783 2,063 1,096 3, ,470 1,904 1,160 3, D 16,477 1, , ,911 1, , E 14,175 4,253-4, ,624 3,787-3, F 6,559 3,279-3, ,943 2,971-2, G 6,493 4,545-4, ,293 5,105-5, H 17,391 17,391-17, ,283 19,283-19, Total 638,336 34,728 1,686 36, ,846 36,030 1,851 37, AA-C 577,241 3,612 1,440 5, ,793 3,693 1,699 5, D-H 61,095 31, , ,053 32, , Minimum required provision by Resolution CMN nº 2,682/99. The next table presents the ALLL expenses over the Classified Loan Portfolio, as well the average Classified Loan Portfolio and the ALLL indexes. Table 55. ALLL Expenses over Classified Loan Portfolio Jun/17 Jun/17 R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 on 2Q16 on 1Q17 ALLL Expenses Balance Chg. % (A) BB - 12 months (30,248) (31,056) (31,552) (29,119) (27,501) (9.1) (5.6) (B) BB - 3 months (8,277) (6,644) (7,486) (6,713) (6,658) (19.6) (0.8) Average Loan Portfolio (C) BB - 12 months 704, , , , ,319 (6.6) (2.2) (D) BB - 3 months 698, , , , ,228 (8.6) (1.0) Recovery of Write-offs (E) 12 months 4,211 4,459 4,571 4,666 4, (F) Quarterly 1, , , ALLL Indexes - % (A/C) ALLL Expenses/Loan Porfolio 12M - BB (B/D) ALLL Expenses/Loan Porfolio 3M - BB The following table shows the key credit risk management indicators, some of them previously mentioned. 51

54 Chapter 3 - Loan Table 56. Classified Loan Portfolio Delinquency Indicators R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 Classified Loan Portfolio 691, , , , ,846 NPL + 15 days 33,896 39,921 37,032 44,088 38,848 NPL + 15 days/loan Portfolio - % NPL + 15 days/loan Portfolio - % - excluding specific cases NPL + 60 days 25,722 27,559 25,134 30,354 29,807 NPL + 60 days/loan Portfolio - % NPL + 60 days/loan Portfolio - % - excluding specific cases NPL days/loan Portfolio - % NPL + 90 days 22,559 23,535 21,504 24,853 26,435 NPL + 90 days/loan Portfolio - % NPL + 90 days/loan Portfolio - % - excluding specific cases NPL days/loan Portfolio - % NPL + 90 days/loan Portfolio - BI - % Write-off 5,434 6,143 9,000 6,405 5,253 Write-off - excluding specific cases 6,078 Recovery of Write-off (1,384) (968) (1,359) (956) (1,394) Recovery of Write-off/Write-off - % Net Loss 4,050 5,176 7,641 5,449 3,859 Net Loss/Loan Portfolio - % annualized Net Loss/Loan Portfolio - % annualized - excluding specific cases 2.92 Provision (Minimum + Supplementary + Additional) 36,968 37,514 36,070 36,414 37,881 ALLL/Loan Portfolio - % ALLL/NPL + 15 days - % ALLL/NPL + 60 days - % ALLL/NPL + 90 days - % Individuals Loan Portfolio The following table shows the individuals classified loan portfolio and the respective changes in the allowance for loan losses and the NPL over 90 days. 52

55 Banco do Brasil S.A. - MD&A 2Q17 Table 57. Individuals Classified Loan Portfolio by Risk Level R$ million Balance Jun/16 Minimum Provision¹ Supplementary Provision Required Provision Share % Balance Minimum Supplementary Provision¹ Provision Required Provision Share % AA 66, , A 49, , B 47, , , C 12, , , D 2, , E 2, , F 1, , G 1, ,437 1,006-1, H 5, , ,267 5,267-5, Total 189, , ,530 9,878 1,103 10, AA-C 176, , ,180 1,782 1,007 2, D-H 12, , ,350 8, , Mar/17 Jun/16 AA 56, , A 36, , B 45, , , C 27, , , , D 8, , , E 2, , F 1, , G 1, ,437 1,006-1, H 4,950 4,950-4, ,267 5,267-5, Total 184,752 9, , ,530 9,878 1,103 10, AA-C 166,029 1, , ,180 1,782 1,007 2, D-H 18,723 8, , ,350 8, , Minimum required provision by Resolution CMN nº 2,682/99. Jun/17 Jun/17 Jun/17 Table 58. Changes in Allowance for Loan Losses Individuals Classified Loan Portfolio R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 Classified Individuals Loan Portfolio 189, , , , ,530 Initial Allow ance 9,010 9,041 9,144 9,993 10, Risk Migration 1,132 1,409 1,908 1,406 1,355 a) Risk Deterioration 2,214 2,228 3,939 2,010 2,827 b) Risk Improvement (1,081) (818) (2,032) (604) (1,472) 2 - New Transactions Write-offs (1,251) (1,309) (1,357) (1,159) (1,274) Total (1+2+3) Other Impacts¹ (241) (169) (88) (26) (31) Allow ance Required (CMN Res. 2,682) 9,041 9,144 9,993 10,512 10,981 Provision Expenses - R$ million 1,282 1,411 2,207 1,677 1,743 Provision / Loan Portfolio - % Provision Flow / Loan Portfolio - % NPL + 15 days/loan Portfolio - % NPL + 90 days/loan Portfolio - % Amortization, settlement, release of installments and charge debt. The following table shows the NPL of the main lines regarding individuals credit portfolio and the share of each line in relation to the total loan portfolio. Thus, it is possible to analyze the delinquency of each product in relation to the relevance of this line in the portfolio. 53

56 Chapter 3 - Loan Table 59. NPL +90d Individuals Portfolio - % by Credit Line Jun/16 Mar/17 Jun/17 NPL Share % NPL Share % NPL Share % Individuals Payroll Loan Mortgage Credit Card Salary Loan Auto Loans Vintage The following graph shows the vintage of the individual s loan portfolio delinquency. This methodology affords greater detailing and is closer to the portfolio than traditional indicators, in order to evaluate how the delinquency of a set of operations contracted for in a particular period behaves over the time. Loans that have been nonperforming for more than 90 days are considered delinquent. Overdraft and credit card operations are not included in the individuals loan portfolio. The following graph shows the vintage by year, making it easier to interpret the data. Figure 35. Individuals Loan Portfolio Annual Vintage 54

57 Banco do Brasil S.A. - MD&A 2Q17 The next figure shows the individuals loan portfolio new NPL in the last 8 quarters. Figure 36. New NPL Individuals Loan Portfolio Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Individuals New NPL (R$ billion) Individuals New NPL(t)/Individuals Loan Portfolio(t-1) Loans to Companies The following tables show the classified loan portfolio for companies and the respective changes in allowance for loan losses. Table 60. Classified Loans to Companies by Risk Level Jun/16 Jun/17 R$ million Balance Minimum Supplementary Provision¹ Provision Required Provision Share % Balance Minimum Provision¹ Supplementary Provision Required Provision Share % Jun/16 AA 153, , A 37, , B 32, , C 18, , D 5, , E 10, , ,437 2,831-2, F 3, , ,929 1,964-1, G 2, , ,303 3,712-3, H 10, , ,145 11,145-11, Total 274, , ,078 21, , AA-C 242, , , , D-H 32, , ,070 20, , Mar/17 AA 131, , A 15, , B 27, , C 29, , , D 6, , E 10,786 3,236-3, ,437 2,831-2, F 4,143 2,071-2, ,929 1,964-1, G 4,639 3,248-3, ,303 3,712-3, H 9,861 9,861-9, ,145 11,145-11, Total 238,827 20, , ,078 21, , AA-C 202,976 1, , , , D-H 35,851 19, , ,070 20, , Minimum required provision by Resolution CMN nº 2,682/99. Jun/17 Jun/17 55

58 Chapter 3 - Loan Table 61. Changes in Allowance for Loan Losses Classified Loans to Companies R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 Classified Loan Portfolio to Companies 274, , , , ,078 Initial Allow ance 16,665 19,185 19,561 21,183 20, Risk Migration 5,407 4,743 5,185 4,379 3,869 a) Risk Deterioration 6,455 5,504 6,370 5,681 5,181 b) Risk Improvement (1,049) (760) (1,184) (1,302) (1,312) 2 - New Transactions Write-offs (3,274) (3,994) (3,896) (4,643) (3,201) Total (1+2+3) 2,601 1,086 1,722 (147) 863 Other Impacts¹ (81) (710) (101) (127) (85) Allow ance Required (CMN Res. 2,682) 19,185 19,561 21,183 20,910 21,688 Provision Expenses - R$ million 5,794 4,370 5,517 4,370 3,979 Provision / Loan Portfolio - % Provision Flow / Loan Portfolio - % NPL + 15 days/loan Portfolio - % NPL + 90 days/loan Portfolio - % NPL + 90 days/loan Portfolio - % - Ex-specific case Amortization, settlement, release of installments and charge debt. The following table sets forth the NPL of the main lines regarding companies credit portfolio and the share of each line in relation to the total loan portfolio. Thus it is possible to analyze the delinquency of each product in terms of the importance in the portfolio. Table 62. NPL +90d Companies Portfolio - % by Credit Line Jun/16 Mar/17 Jun/17 NPL Share % NPL Share % NPL Share % Companies Working Capital Investments FEC/ACE Receivables The next figure shows the companies loan portfolio new NPL in the last 8 quarters. Figure 37. New NPL Companies Loan Portfolio Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Corporates New NPL (R$ billion) Companies New NPL(t)/Companies Loan Portfolio(t-1) 1 - Simulation excluding specific case effect. The following chart shows Very Small and Small Companies credit on an annual basis, making it easier to interpret the data. 56

59 Banco do Brasil S.A. - MD&A 2Q17 Figure 38. Very Small and Small Companies Loans Portfolio Annual Vintage Agribusiness Loan Portfolio The Classified Agribusiness Loan Portfolio by risk level table is shown on the following table. Table 63. Classified Agribusiness Loan Portfolio by Risk Level R$ million Balance Jun/16 Minimum Supplementary Provision¹ Provision Required Provision Share % Balance Minimum Supplementary Provision¹ Provision Required Provision Share % AA 98, , A 36, , B 33, , C 8, , D , E 2, , F G H 2, , ,148 2,148-2, Total 183, , ,665 4, , AA-C 176, , , D-H 7, , ,787 3, , Mar/17 Jun/16 Jun/17 Jun/17 AA 99, , A 32, , B 30, , C 11, , D 1, , E 1, , F G H 1,954 1,954-1, ,148 2,148-2, Total 179,431 3, , ,665 4, , AA-C 173, , , D-H 5,679 3, , ,787 3, , Minimum required provision by Resolution CMN nº 2,682/99. Jun/17 The table below shows the NPL of the main lines regarding Agribusiness credit portfolio and the share of each line in relation to the total loan portfolio. Thus, it is possible to analyze the delinquency of each product in relation to the relevance of this line in the portfolio. 57

60 Chapter 3 - Loan Table 64. NPL +90d Agribusiness Portfolio - % by Credit Line Jun/16 Mar/17 Jun/17 NPL Share % NPL Share % NPL Share % Agribusiness Pronaf Working Capital for Input Purchase Pronamp BNDES/Finame Rural The following tables show the individuals agribusiness loan portfolio by risk level and the respective changes in the allowance for loan losses. Table 65. Classified Agribusiness Loan Portfolio by Risk Level Individuals R$ million Balance Jun/16 Minimum Supplementary Provision¹ Provision Required Provision Share % Balance Minimum Supplementary Provision¹ Provision Required Provision Share % AA 68, , A 19, , B 30, , C 3, , D , E 2, , F G H 2, , ,113 2,113-2, Total 130, , ,715 3, , AA-C 123, , D-H 6, , ,656 3, , Mar/17 Jun/16 AA 71, , A 20, , B 28, , C 7, , D 1, , E 1, , F G H 1,922 1,922-1, ,113 2,113-2, Total 134,010 3, , ,715 3, , AA-C 128, , D-H 5,531 3, , ,656 3, , Minimum required provision by Resolution CMN nº 2,682/99. Jun/17 Jun/17 Jun/17 Table 66. Changes in Allowance for Loan Losses Agribusiness Individuals R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 Classified Agrib. Loan Portfolio - Individuals 130, , , , ,715 Initial Allow ance 5,093 4,678 4,757 3,763 3, Risk Migration (283) a) Risk Deterioration 1,235 1,290 1,658 1,138 1,356 b) Risk Improvement (747) (478) (1,941) (563) (587) 2 - New Transactions Write-offs (717) (667) (648) (473) (533) Total (1+2+3) (139) 226 (772) Other Impacts¹ (276) (147) (223) (36) (119) Allow ance Required (CMN Res. 2,682) 4,678 4,757 3,763 3,891 4,098 Provision Expenses - R$ million (346) Provision / Loan Portfolio - % Provision Flow / Loan Portfolio - % (0.26) Amortization, settlement, release of installments and charge debt. The following tables show the agribusiness loan portfolio for companies by risk level and the respective changes in the allowance for loan losses. 58

61 Banco do Brasil S.A. - MD&A 2Q17 Table 67. Classified Agribusiness Loan Portfolio by Risk Level Companies R$ million Balance Jun/16 Minimum Provision¹ Jun/16 Supplementary Provision Required Provision Share % Balance Minimum Provision¹ Jun/17 Supplementary Provision Required Provision Share % AA 29, , A 16, , B 2, , C 4, , D E F G H Total 53, , AA-C 52, , D-H (0) Mar/17 AA 27, , A 12, , B 2, , C 3, , D E F G H Total 45, , AA-C 45, , D-H (0) Minimum required provision by Resolution CMN nº 2,682/99. Jun/17 Jun/17 Table 68. Changes in the Allowance for Loan Losses Agribusiness Companies R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 Classified Agrib. Loan Portfolio - Companies 53,078 50,326 48,327 45,421 48,949 Initial Allow ance Risk Migration a) Risk Deterioration b) Risk Improvement (30) (36) (29) (54) (19) 2 - New Transactions Write-offs (38) (66) (9) (31) (7) Total (1+2+3) 60 (24) 19 (25) 17 Other Impacts¹ (4) (58) (17) (1) (16) Allow ance Required (CMN Res. 2,682) Provision Flow - R$ million 94 (16) Provision / Loan Portfolio - % Provision Flow / Loan Portfolio - % 0.18 (0.03) Amortization, settlement, release of installments and charge debt. 59

62 Chapter 3 - Loan The next figure shows the agribusiness loan portfolio new NPL in the last 8 quarters. Figure 39. New NPL Agribusiness Loan Portfolio Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Agribusiness New NPL (R$ billion) Agribusiness New NPL(t)/Agribusiness Loan Portfolio(t-1) Portfolio with and without Rollover The average portfolio risk is affected by extended transactions, primarily between 2005 and 2007, totaling R$7,433 million in Jun/17. The CMN Resolution 2,682/99, which provides for the classification of risk and constitution of allowances for loan losses, requires the maintenance of risk of the renegotiated loans at the risk level locked at the time of renegotiation. Due to this regulation, renegotiated transactions increase the loan portfolio s average risk. In the following table, the classified agribusiness loan portfolio, in 2Q17, is segregated in operations with rollover and without it. Operations more than 90 days overdue (BB risk + third parties) accounted for 1.21% of the total portfolio without rollover in Jun/17, while the same indicator for the transactions with rollover was 4.86%. Table 69. Agribusiness Transactions with Rollover and without it R$ million Balance Portfolio w ithout Rollover¹ Required Provision Past Due 90 Balance Portfolio w ith Rollover¹ Required Provision Past Due 90 AA 103, A 33, (0) B 30, , C 9, , D E F G H 1,513 1,513 1, Total 180,231 3,152 2,181 7,433 1, AA-C 176, , D-H 3,585 2,215 2,018 2,201 1, Non-performing loans at level AA refers to credit with third party risk. The following table shows the balance, the NPL +90days and the average risk of the classified agribusiness loan portfolio segmented in the total portfolio, with rollover and without it. 60

63 Banco do Brasil S.A. - MD&A 2Q17 Table 70. Classified Agribusiness Loan Portfolio Delinquency Indicators R$ million Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Classified Loan Portfolio 183, , , , ,665 ALLL 5,054 5,051 4,058 4,160 4,368 NPL + 15 days 2,662 3,203 3,238 4,122 4,204 NPL + 15 days/loan Portfolio - % NPL + 90 days 1,743 1,709 1,773 2,290 2,616 NPL + 90 days/loan Portfolio¹ - % ALLL/Loan Portfolio - % Write-off Transactions w ithout Rollover - BB Risk + Third Parties 178, , , , ,231 ALLL 4,106 4,084 2,968 3,084 3,152 NPL + 90 days 1,468 1,466 1,511 1,964 2,181 NPL + 90 days/ Transactions w ithout Rollover - % ALLL / Transactions w ithout Rollover - % Write-off Transactions w ith Rollover - BB Risk + Third Parties 5,332 5,825 6,915 6,595 7,433 ALLL ,089 1,076 1,216 NPL + 90 days NPL + 90 days/ Transactions w ith Rollover - % ALLL / Transactions w ith Rollover - % Write-off Simulation: Trans. w /o Rollover ex-drag effect of Trans. w / Rollover a - BB Risk + Third Parties 177, , , , ,230 b - ALLL 1,434 1,430 1,477 1,964 2,181 Average Risk (b/a) - % The past due resulting from non-performing operations with third party risk was included in the calculation of the index Foreign Loan Portfolio The following table shows the Abroad Portfolio by risk level. Table 71. Classified Abroad Loan Portfolio by Risk Level R$ million Balance Jun/16 Mar/17 Jun/17 Required Provision Share % Balance Required Provision Share % Balance Required Provision Share % AA 25, , , A 8, , , B 6, , , C , D E F G H 3,545 3, Total 44,181 3, , , AA-C 40, , , D-H 3,617 3, Minimum required provision by Resolution CMN nº 2,682/99. 61

64 Chapter 3 - Loan 3.3. Credit Collection, Regularization and Recovery Management of Past Due Credits Banco do Brasil monitors credits presenting signs of default. The treatment of past due transactions is carried out in three stages: conduction, collection and regularization/recovery. I. Conduction seeks to avoid the default, in a preventive manner; II. Collection is to regularize past due operations in a short period of time; this reduces process costs and maintains the good relationship with the customer; III. Regularization and recovery is to minimize losses, regularizing and recovering the highest possible amount Credit Collection and Regularization Process Banco do Brasil uses its own quantitative models, which, together with automated collection and regularization platforms, track and manage non-performing customers behavior. These customers profiles are statistically identified based on previous behavior in relation to collection proceedings, which results in determining likelihood of the collection and regularization. I. Customers with a high probability of regularization; II. III. Customers with an intermediate probability of regularization; Customers with a low probability of regularization. Based on information and variables analysis, proceedings, service network, renegotiation and discount policies, as well as credit cession to other companies, are established actions that support BB s collection and regularization model. The conceptual model that supports the process is based on the following assumptions: I. Customer Profile: actions are defined based on customer s profile, taking into consideration variables such as segmentation, relationship level, products contracted, indebtedness with BB, among others; II. III. IV. Service Network: regularization and recovery process occurs in several frameworks on a sequential basis; Sequential Actions: credit collection actions are pre-determined according to each customer profile and their intensity increases along the time; Value Relations: variable approach that respects each customer relationship level with BB; V. Information Systems: advanced analytical and operating platforms, which automate credit collection process and improve business efficiency, are used. The credit collection historic performance actions determines the likelihood of credits in default to be regularized. The main consequence of statistical follow-up is the possibility of continuously improve the process with feedback from strategies with best results during the period. The possibility of segregating non-performing customers is an important aspect of the credit collection and regularization strategy, of discount policy and credit cession. Banco do Brasil uses credit cession as part of the recovery strategy, with the purpose of reducing losses and unpaid portfolio management costs, through transactions with autonomous companies Credit Collection, Regularization and Recovery Operating Flow Sequential use of credit collection and recovery channels is closely related to BB s strategy success. 62

65 Banco do Brasil S.A. - MD&A 2Q17 Figure 40. Collection, Regularization and Recovery Network Gecor Network: refers to a group of business units specialized in dealing with past due credits of customers with indebtedness higher than R$ 400 thousand Process Efficiency The following figures show results obtained in credit collection and regularization flow. From the volume of credit that entered to the collection process in the last 12 months, 93.5% were resolved within 360 days in the Jun/17. Figure 41. Credit Regularization Rate Over Collection Period - % Until to to to to to to to 360 Credit Regularization 1Q17 Credit Regularization 2Q17 BB prioritizes receiving past due operations as soon as possible, and even acting preventively to avoid worsening the risk and new write-offs. BB collected and regularized R$ 21.9 billion in the last twelve months. Past due loans classified at risk H represented 7.4% of this amount and 92.6% were at lower risk ranges. 63

66 Chapter 3 - Loan Figure 42. Collection and Regularization before Write Off¹ - % 2Q16 2Q Other Risks Risk H months accumulated The recovery strategy of written off credit is geared towards receiving the defaulting operations in cash, which does not generate new credit provisions (ALLL). In the last 12 months R$4.7 billion were recovered. From this volume, R$1.8 billion were received in cash. Figure 43. Accumulated Recovery (R$ billions) and Cash Recovery Index - % Q16 2Q16 3Q16 4Q16 1Q17 2Q17 In addition, the following chart demonstrates the behavior of write-offs accumulated in 12 months in relation to average balance of the classified credit portfolio during the same period. BB has better historic indexes than the main market peers. Figure 44. Write-Off Percentage on the Classified Loan Portfolio Q16 3Q16 4Q16 1Q17 2Q17 Banco do Brasil Peer Average¹ 1 Corresponds to the three Brazilian largest private banks. 64

67 Banco do Brasil S.A. - MD&A 2Q Renegotiated Loan Portfolio The following table shows the renegotiated loan portfolio. It does not include the renegotiated operations of the agribusiness portfolio, discussed in section of this MD&A. These are the main lines of the following table: a) Renegotiated Credits: loan operations renegotiated during the period, falling due or past due; a.1) Renegotiated When Past Due: loan operations renegotiated during the period due to payment delay by customers; a.2) Renewed: loan operations not past due renegotiated during the period to settle in whole or in part previous operations or any other kind of agreement that changes the maturity or payment terms originally agreed to. Up to 3Q16, it was just available for Individuals and from 4Q16 on, also for Companies. In 2Q17, 44.4% of new renegotiations included more than 90 days past due operations, and 10.3% included written off operations. In this quarter, two operations with more than 90 days past due were responsible for 20% of the total renegotiations. Highlight to the increase of amortizations net of interest accrued. Table 72. Renegotiated Loan Portfolio Multiple Bank¹ R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Credits Renegotiated 11,921 9,190 9,955 9,524 13,959 Renegotiated When Past Due 5,026 2,758 3,873 2,332 3,622 Renew ed - not Past Due 6,895 6,432 6,082 7,192 10,337 Credits Renegotiated When Past Due - Changes Initial Balance 22,038 25,050 25,694 27,086 26,618 New Transactions 5,026 2,758 3,873 2,332 3,622 Amortization Net of Interest² (979) (744) (1,113) (864) (1,211) Write-Off (1,036) (1,370) (1,368) (1,936) (1,986) Past due Renegotiated Loan Portfolio (A) 25,050 25,694 27,086 26,618 27,042 ALLL Balance (B) 10,369 10,784 11,925 12,314 12,924 NPL + 90 days (C) 5,642 6,370 7,375 7,410 7,094 Indicators - % ALLL / Loan Portfolio (B/A) NPL + 90 days / Loan Portfolio (C/A) ALLL Balance/NPL + 90 days (B/C) Credits Renegotiated/Classified Portfolio Accordingly to Financial Statements Note 10.k Individuals Statements 2 Principal and interest payments net of interest accrued in period. Figure 45. New NPL and Write-Off Percentage on the Renegotiated Loan Portfolio Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 New NPL (R$ billion) New NPL(t)/Credits Renegotiated (t - 1) In the next table, the renegotiated loan portfolio breakdown by risk level is shown: 65

68 Chapter 3 - Loan Table 73. Renegotiated Portfolio by Risk Level Jun/16 Mar/17 Jun/17 R$ million Balance Provision Share % Balance Provision Share % Balance Provision Share % AA A 1, B 3, , , C 3, , , D 1, , , E 4,988 1, ,269 1, ,709 1, F 2,369 1, ,739 1, ,392 1, G 1,897 1, ,124 2, ,289 2, H 6,094 6, ,132 7, ,680 7, Total 25,050 10, ,618 12, ,042 12, AA-C 8, , , D-H 16,649 10, ,250 12, ,996 12,

69 Banco do Brasil S.A. - MD&A 2Q Funding The amount of commercial funding increased 0.7% in the quarter. The positive variation of 23.7% in Rep. Agreement with Private Securities volume was compensated by other decreases in the period, mainly with Agribusiness Letters of Credits, lower by 10.7% compared to 1Q17. In the comparison with the same period of last year the commercial funding decrease was mainly due to the agribusiness letters of credit, interbank deposits and Rep. Agreement with Private Securities. Table 74. Commercial Funding Balance Chg. (%) on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17 Commercial Funding 624, , , (5.8) 0.7 Saving Deposits 148, , , Judicial Deposits 116, , , Agribusiness Letters of Credits 135, , , (25.7) (10.7) Time Deposits¹ 85, , , (6.8) 3.2 Demand Deposits 62, , , (0.3) (2.5) Rep. Agreement w ith Private Securities² 30, , , (18.1) 23.7 Mortgage Bonds³ 18, , , (4.2) Interbank Deposits 27, , , (31.0) Includes others deposits of Notes to the Consolidated Financial Statements. 2 - Includes part of the balances of the Repurchase Agreements Private Securities shown on Notes to the Consolidated Financial Statements. 3 - Includes the balance of CRI (Certificates of Real Estate Receivables). The following figure shows BB s market share in deposits and money market funding in the BI. Figure 46. Market Share of BB s Funding (R$ billion) Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Demand Deposits (%)Market Share¹ Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Savings Deposits (%)Market Share¹ Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Time Deposits² (%)Market Share¹ Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Money Market Borrowing³ (%)Market Share¹ 1 - Information about share in the BI from the Dados selecionados de Entidades Supervisionadas report of the Central Bank of Brazil website < Position: Mar/ Includes Judicial Deposits. 3 - Includes Total Deposits and Money Market Borrowing. 67

70 Chapter 4 - Funding The following table shows the institutional funding balance, consisting in the issuance of securities acquired by institutional investors. In comparison with Jun/16, the increase of 1.1% is explained mainly by the increase in Securities Issued Abroad. Table 75. Institutional Funding Balance Chg. (%) on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17 Institutional Funding 211, , , Borrow ing, Assignments and Onlending 124, , , (2.7) (1.1) Hybrid Capital Instruments 31, , , Financial Letters 27, , , Securities Issued Abroad 18, , , Subordinated Debt Overseas 9, , , The following tables shows BB s foreign funding balance (by type and by product), including Banco Patagonia and BB Americas. Table 76. Funding Abroad Borrowing - Type US$ million Balance Type Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17 Issues and Certificates of Deposit 14, , , Interbanking Deposits and Loans 14, , , (26.7) 2.3 Businesses 6, , , (0.2) 4.8 Individuals 3, , , Repo 1, , , Special Account (64.2) (59.4) TOTAL 41, , , (5.0) 4.0 In 2Q17, the foreign funding increase was mainly caused by Repo, 72.8% over the 1Q17. Chg. (%) on BB s commercial funding abroad is composed by demand deposits, time deposits and saving deposits. Table 77. Funding Abroad Borrowing - Product US$ million Balance Chg. (%) on Product Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17 Issues and Certificates of Deposit 14, , , Time Deposits 11, , , (20.9) 1.9 Loans 6, , , (16.1) 6.2 Demand Deposits 2, , , (2.3) (1.9) Saving Deposits 1, , , Pledge 1, , (23.1) (24.8) Repo 1, , , Call Account (7.6) 63.5 Over Special Account (64.2) (59.4) TOTAL 41, , , (5.0) 4.0 Sources and Uses The following table shows the relation between funding sources and investments at Banco do Brasil. BB aims to diversify its funding sources by offering attractive alternatives to customers and providing a reduction in the funding cost for the Bank. In 2Q17 the increase in Repurchase Agreements with Private Securities and Total Deposits volume, compared with 1Q17, has contributed significantly to achieving the funding strategy in period. The loan portfolio remains the main use of funding with a share of 82.9% of total uses. The following table shows the adjusted net loan portfolio indicator over commercial funding, which disregards the credit originated by domestic onlending. 68

71 Banco do Brasil S.A. - MD&A 2Q17 Table 78. Sources and Uses R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17 Sources 802, , , (4.5) 0.7 Commercial Funding 624, , , (5.8) 0.7 Total Deposits 440, , , Agrib. Letters of Credit and Mortgage Bonds 153, , , (21.3) (9.7) Repurch. Agreement w ith Private Securities¹ 30, , , (18.1) 23.7 Domestic Onlending 86, , , (8.3) (2.4) Subordinated Debt 58, , , Foreign Borrow ing² 50, , , Hybrid Capital Instuments 31, , , Financial and Development Funds 13, , , Commercial Paper³ 2, , , Compulsory Deposits (65,404) (8.1) (61,619) (8.1) (64,659) (8.4) (1.1) 4.9 Uses 802, , , (4.5) 0.7 Net Loan Portfolio (a) 696, , , (8.7) 0.7 Classified Loan Portfolio 691, , , (7.1) 0.7 Private Securities 41, , , (26.2) 3.9 Allow ance for Loan Losses (36,968) (4.6) (36,414) (4.8) (37,881) (4.9) Available Funds 106, , , Domestic Onlending Loans (b) 124, , , (2.7) (1.1) Adjusted Net Loan Portfolio (a) - (b) 572, , , (10.1) 1.1 Indicators - % Balance Net Loan Portfolio / Total Deposits Net Loan Portfolio / Commercial Funding Adjusted Net Loan Portfolio / Commercial Funding Net Loan Portfolio / Sources Chg. (%) on 1 - Includes part of the balance of Private Securities shown on Notes to the Consolidated Financial Statements. 2 - Includes Foreign Borrowings, Foreign Securities, foreign Onlending, Subordinated debt abroad and Hybrid Capital and Debit Instruments Abroad. 3 - Includes Letters of Credit and Debentures. The following table presents the fixed income securities issued by BB in the international capital market. Table 79. Current Debt Issues Abroad Issue Date Maturity Call Date Volume (US$ thousand) Cupon (%) ¹ Issue price Return for Investor (%) Spread over Treasury Currency Balance Jun/17 (US$ thousand) Rating S&P/Moody's/Fit ch 07/18/ /18/ , S BRL 105, SR / Ba2 / SR GMTN 04/29/ /15/ , Q USD 24, BBB *- / Ba1 / SR MT /20/2009 Perpetual 10/20/2020 1,500, S USD 1,498, SR / B2 / SR Stand Alone 01/22/ /22/ , S USD 500, BB *- / Ba2 / BB GMTN 10/05/ /15/ , S USD 660, SR / Ba3 / SR Stand Alone 05/26/ /26/2022 1,500, S USD 1,500, SR / Ba3 / SR Stand Alone 01/20/2012 Perpetual 04/15/2023 1,000, S USD 648, B- *- / SR / SR Stand Alone 03/05/2012 Perpetual 04/15/ , S USD 750, B- *- / SR / SR Stand Alone 06/19/ /19/ , S USD 750, B *- / Ba3 / SR Stand Alone 10/10/ /10/2022 1,925, S USD 1,809, BB *- / Ba2 / BB Stand Alone 01/31/2013 Perpetual 04/15/2024 2,000, S USD 1,988, B- *- / SR / SR Stand Alone 07/25/ /25/ , A EUR mid-sw ap EUR 820, BB *- / Ba2 / BB GMTN 12/20/ /20/ , A CHF mid-sw ap+190 CHF 286, BB *- / Ba2 / BB GMTN 03/26/ /25/ , A EUR mid-sw ap+230 EUR 320, BB *- / Ba2 / BB GMTN 06/18/2014 Perpetual 06/18/2024 2,500, S USD 2,169, B- *- / B2 / SR Stand Alone 1 - A: annual; S: semiannual; Q: quaterly. Banco do Brasil did not make any debt repurchase operations in 2Q17. Program 69

72 Chapter 5 - Financial Earnings 5 - Financial Earnings This chapter describes the main components of Banco do Brasil s financial results Net Interest Income Table 80. Main Indices % 2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 1H16 CDI (24.4) (16.1) (16.0) TMS (24.4) (16.1) (16.0) TJLP (6.5) (9.6) (1.5) TR (63.5) (49.3) (44.1) Exchange Rate (US$) The following table sets forth the NII s breakdown. Table 81. Net Interest Income Breakdown Rate Chg. (%) on 1 - It includes senior bonds, subordinated debt, and Hybrid Instruments in Brazil and abroad.; 2 - It includes the result from interest, tax hedging, derivatives, and other financial instruments that offset the effects of the exchange rate variation on result. 3 Series revised (Funding Expense for Institutional Funding to Treasury). Impact in all tables with those lines. Bellow, the NII and its components are analyzed: Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Net Interest Income 14,633 14,476 14,606 (0.2) ,909 29, Net Interest Income W/O Recovery 13,249 13,521 13,212 (0.3) (2.3) 26,665 26, Loan Operations 25,311 23,611 21,786 (13.9) (7.7) 50,390 45,398 (9.9) Funding Expenses (11,034) (9,755) (8,404) (23.8) (13.9) (21,965) (18,159) (17.3) Financial Expense for Institutional Funding¹ ³ (3,785) (3,470) (3,146) (16.9) (9.4) (7,518) (6,616) (12.0) Treasury² ³ 2,758 3,135 2, (5.1) 5,758 6, Recovery of Write-offs 1, , ,245 2, I. Financial income from loans decreased by R$1,825 million compared to the previous quarter, primarily (70.0%) due to the Companies Revenues. This line was affected by the the Small and Very Small companies, especially on the Working Capital line. For individuals, the reduction of R$321 million is primarily due to the decrease in income from credit card revolving credit, fact that had already impacted the 1Q17. II. III. Credit recovery increased by R$438 million compared to 1Q17, and R$10.8 million compared to 2Q16. Earning assets mix composition, with an increase in the securities + interbank invest. average balance in R$32,969 million (6.2%) and decrease in loans and leasing operations balance R$3,334 (-0.5%) in the quarter, affecting the revenue of the relevant line items Financial Income from Loans Operations Table 82. Revenue from Loans Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Revenue from Loans 25,311 23,611 21,786 (13.9) (7.7) 50,390 45,398 (9.9) Individuals 9,831 10,014 9,693 (1.4) (3.2) 19,242 19, Companies 9,226 7,561 6,283 (31.9) (16.9) 18,532 13,843 (25.3) Agribusiness 4,941 4,749 4,662 (5.6) (1.8) 9,690 9,411 (2.9) Equalization 1,416 1,415 1,385 (2.2) (2.1) 2,799 2, Abroad ,467 1,354 (7.7) Sale or Transference of Financial Assets (32.4) (18.9) 1, (24.7) Other (60.4) (54.3) (32.8) Leasing (19.1) (7.4) (20.4) The decrease in credit revenues with individuals compared to 1Q17 (R$321 million) is primarily due to the decrease in income from credit card revolving credit, whose rates decreased in 1Q17. In the comparison with 1H16, even with the Individuals portfolio decrease of 2.0%, and increase of R$465.5 million due to the repricing process started on

73 Banco do Brasil S.A. - MD&A 2Q17 Income from loans operations with companies was negatively affected by the decrease in average balances, notably on the working capital products with Small and Very Small companies affected all the comparisons period. The individuals revenues gained relevance of 565 bps and a fall of 761 bps in revenues from loans to companies. This movement is due to the reduction in the volume of the companies portfolio classified (14.8% in one year) as well as the repricing process in the individuals portfolio in recent periods. Figure 47. Summary of Assets Table 83. Assets Synthetic Composition Balance Chg. (%) on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Classified Loan Portfolio 691, , , (7.1) 0.7 Liquidity Assets 546, , , Other 207, , , (0.1) 1.9 Total Assets 1,445,115 1,402,399 1,445, Funding Financial Expense Funding financial expenses include transactions with clients, except repo. Funding financial expenses also include the result of compulsory investments and FGC expenses. Table 84. Funding Result¹ Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Funding Result (11,034) (9,755) (8,404) (23.8) (13.9) (21,965) (18,159) (17.3) Commercial Funding (7,905) (7,308) (6,579) (16.8) (10.0) (15,698) (13,888) (11.5) Judicial Deposits (2,996) (3,024) (2,806) (6.3) (7.2) (5,886) (5,830) (1.0) Savings Deposits (2,854) (2,668) (2,388) (16.3) (10.5) (5,698) (5,057) (11.3) Time Deposits (2,054) (1,616) (1,385) (32.6) (14.3) (4,114) (3,001) (27.1) Bonds (4,410) (3,545) (2,744) (37.8) (22.6) (8,766) (6,289) (28.3) Agribusiness Letters of Credit (3,934) (3,112) (2,347) (40.4) (24.6) (7,814) (5,459) (30.1) Mortgage Bonds (476) (432) (398) (16.4) (8.0) (951) (830) (12.8) Compulsory Deposits 1,447 1,255 1,070 (26.1) (14.8) 2,838 2,325 (18.1) FGC (167) (157) (149) (10.8) (5.2) (338) (307) (9.4) 1 It excludes expenses from repo. Quarterly Flow Chg. (%) on Half-Yearly Flow In 2Q17, funding expenses decreased compared to the last quarter (R$1,352 million). The most relevant decrease was in the Agribusiness Letters of Credit expenses (R$766 million) or 56.7% of the total decrease, due to lower average balances and lower rates (the CDI rate decreased by 16.1% in the quarter). In the half yearly flow, the decrease with that letter of credit represented 61.9% of the total decrease in the Funding Result line (R$3,806 million). The following table sets forth BB s funding costs and the average Selic rate in the period. 71

74 Chapter 5 - Financial Earnings Table 85. Funding vs. Selic Rate R$ million Average Balance 2Q16 1Q17 2Q17 Cost as % of Selic Average Balance Cost as % of Selic Average Balance Cost as % of Selic Savings Deposits 149,297 (2,854) ,621 (2,668) ,634 (2,388) 62.7 Time Deposits - Judicial Deposits 116,075 (2,996) ,815 (3,024) ,020 (2,806) 86.8 Agribusiness Letters of Credits 135,540 (3,934) ,244 (3,112) ,499 (2,347) 88.3 Time Deposits 87,418 (2,054) ,366 (1,616) ,434 (1,385) 69.4 Demand Deposits 60, , , Mortgage Bonds 18,267 (476) ,742 (432) ,508 (398) 76.2 Interbank Deposits 31,671 (141) ,495 (183) ,906 (148) 32.5 Total Funding 599,095 (12,456) ,239 (11,035) ,195 (9,472) Institutional Funding Financial Expenses The following table sets forth the breakdown of institutional funding expenses. Table 86. Institutional Funding Expenses Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Institutional Funding (3,785) (3,470) (3,146) (16.9) (9.4) (7,518) (6,616) (12.0) Borrow ing, Assignments and Onlending (2,088) (1,740) (1,572) (24.7) (9.7) (3,879) (3,312) (14.6) Financial Letters (961) (940) (763) (20.6) (18.8) (1,973) (1,703) (13.7) Hybrid Capital Instruments (438) (453) (461) (973) (914) (6.1) Securities Issued Abroad (176) (200) (210) (418) (410) (1.9) Subordinated Debt Abroad (122) (137) (140) (274) (277) Income from Written-off Credit Recovery More information about the process and balances of credit recovery transactions is set forth in sections 3.2 and 3.3 of this report. Table 87. Written-Off Credit Recovery Income Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Recovery of Write-offs 1, , ,245 2, Treasury Treasury result includes the result from interest and exchange rate variation of treasury activities. It also includes the effects of structural hedge of the exchange rate variation on financial income from loans, funding expenses, and institutional funding expenses. Table 88. Treasury Results Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Treasury 2,758 3,135 2, (5.1) 5,758 6, Securities 14,473 15,536 13,884 (4.1) (10.6) 28,615 29, Open Market (11,664) (12,311) (11,030) (5.4) (10.4) (22,823) (23,341) 2.3 Financial Derivatives (172) (301) (113) (34.4) (62.5) (375) (414) 10.4 Other Treasury Components¹ It includes items not listed in the treasury result breakdown, including exchange rate variation. Below is an analysis of the components of treasury result: Quarterly Flow Chg. (%) on Half-Yearly Flow Result from Securities The following table sets forth the results from Securities transactions (only transactions classified by the Central Bank as securities/interbank liquidity investments). 72

75 Banco do Brasil S.A. - MD&A 2Q17 Table 89. Result from Securities Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Securities Income 14,473 15,536 13,884 (4.1) (10.6) 28,615 29, Fixed Income Securities 14,594 15,482 13,754 (5.8) (11.2) 28,595 29, Interbank Accounts 10,825 12,076 10,605 (2.0) (12.2) 21,147 22, Revaluation Curve 3,767 3,236 3,066 (18.6) (5.2) 7,307 6,302 (13.8) Income/Loss from Negotiation (7) (47.1) Mark to Market 9 10 (2) (75.2) Other (121) The following figure sets forth the breakdown of the securities portfolio of BB Multiple Bank by index. Figure 48. Securities Portfolio by Index (BB Multiple Bank) The following tables set forth the breakdown of the Securities portfolio. Table 90. Securities Portfolio by Category Market Value Balance Chg. (%) on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Securities 117, , , Available for Trading 6, , , Available for Sale 110, , , Held to Maturity , , (2.4) Financial Derivatives 3,256-1,176-1,390 - (57.3) 18.1 Table 91. Securities Portfolio by Maturity Market Value Up to 1 year 1 to 5 years 5 to 10 years Over 10 years R$ million Balance Share % Balance Share % Balance Share % Balance Share % Sep/15 19, % 56, % 29, % 3, % 108,543 Dec/15 19, % 55, % 32, % 6, % 113,684 Mar/16 20, % 71, % 22, % 4, % 117,791 Jun/16 12, % 74, % 23, % 6, % 117,205 Sep/16 12, % 79, % 22, % 8, % 122,339 Dec/16 11, % 74, % 24, % 8, % 119,005 Mar/17 12, % 76, % 28, % 5, % 123,233 Jun/17 16, % 74, % 35, % 5, % 132,320 The following table sets forth the Liquidity Balance, calculated as Liquidity Assets less Liquidity Liabilities. Total 73

76 Chapter 5 - Financial Earnings Table 92. Liquidity Balance Balance Chg. (%) on R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Liquidity Assets (A) 546, , , Interbank Investments 414, , , Securities (except linked to Bacen) 117, , , Available Funds 14, , , (6.4) Liquidity Liabilities (B) 439, , , Money Market Borrow ing 411, , , Interbank Deposits 27, , , (31.0) 3.8 Liquidity Balance (A - B) 106, , , (4.3) Open Market Funding Open market funding expenses primarily consist of expenses incurred with repo backed by the Bank s own portfolio and third parties securities. Table 93. Open Market Funding Expenses Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Open Market (11,664) (12,311) (11,030) (5.4) (10.4) (22,823) (23,341) 2.3 Third Party Portfolio (9,852) (10,678) (9,701) (1.5) (9.1) (18,924) (20,378) 7.7 Ow n Portfolio (1,659) (1,441) (1,169) (29.5) (18.9) (3,341) (2,610) (21.9) Interbank Deposits (141) (183) (148) 4.8 (18.9) (541) (331) (38.9) Other Open Market Op. (11) (10) (12) (17) (22) 27.1 Other Treasury Components Other treasury components include, in addition to the results from foreign exchange earnings/losses on shareholders equity abroad and tax hedging, the exchange rate variation on credit, funding, and institutional funding transactions, among others, recorded in others. Table 94. Other Treasury Components Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Other Treasury Components Gain (Loss) over Equity Abroad (1,081) (166) (2,349) Tax Hedge (981) (150) (1,854) Foreign Exchange Portfolio Other 2, (780) - - 4,388 (328) Assets and Liabilities Analysis Assets Analysis Table 95. Average Balances and Interest Rate Earning Assets (Annual) R$ million Average Balance¹ 2Q16 Revenues ³ Yearly Rate (%)² Average Balance¹ 2Q17 Revenues ³ Yearly Rate (%)² Earning Assets 1,218,676 41, ,252,360 36, Loans and Leasing⁴ 677,470 25, ,289 21, Secur. + Interbank Invest. w /o Hedge 479,125 14, ,449 13, Remunerated Compulsory Deposits 53,733 1, ,257 1, Other 8, , Non Earning Assets 176, ,422 Other Assets 102,113 99,945 Tax Credits 42,429 42,889 Permanent Assets 31,564 31,588 TOTAL ASSETS 1,394,783 1,426,782 1 Arithmetic average of the final balances in the months of the relevant periods. 74

77 Banco do Brasil S.A. - MD&A 2Q17 2 Annualized average (business days of the quarter divided by 252). 3 Calculated including the partial effect of the exchange rate variation. 4 It includes Credit Transactions, Leases, and Acquired Portfolios. Table 96. Average Balances and Interest Rate Earning Asset (Quarterly) R$ million Average Balance¹ 1Q17 Revenues ³ Yearly Rate (%)² Average Balance¹ 2Q17 Revenues ³ Yearly Rate (%)² Earning Assets 1,223,404 40, ,252,360 36, Loans and Leasing⁴ 627,622 23, ,289 21, Secur. + Interbank Invest. w /o Hedge 535,480 15, ,449 13, Remunerated Compulsory Deposits 51,998 1, ,257 1, Other 8, , Non Earning Assets 177, ,422 Other Assets 102,409 99,945 Tax Credits 42,524 42,889 Permanent Assets 32,146 31,588 TOTAL ASSETS 1,400,484 1,426,782 1 Arithmetic average of the final balances in months of the relevant periods. 2 Annualized average (business days of the quarter divided by 252). 3 Calculated including the partial effect of the exchange rate variation. 4 It includes Credit Transactions, Leases, and Acquired Portfolios. Table 97. Average Balances and Interest Rates Earning Assets (Half - Yearly) R$ million Average Balance¹ 1H16 Revenues ³ Yearly Rate (%)² Average Balance¹ 1H17 Revenues ³ Yearly Rate (%)² Earning Assets 1,220,103 82, ,237,882 77, Loans and Leasing⁴ 684,322 50, ,955 45, Secur. + Interbank Invest. w /o Hedge 473,776 28, ,964 29, Remunerated Compulsory Deposits 53,331 2, ,627 2, Other 8, , Non Earning Assets 176, ,750 Other Assets 103, ,177 Tax Credits 41,553 42,706 Permanent Assets 31,603 31,867 TOTAL ASSETS 1,396,285 1,413, Arithmetic average of the closing balances of months that comprise the period; 2 Annualized rate (business day by 252); 3 - Calculated partial effect of exchange rate change; 4 - Included:Loans Operations, Leasing and acquired loan portfolio. 75

78 Chapter 5 - Financial Earnings Liabilities Analysis Table 98. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual) R$ million Average Balance¹ Expenses⁴ Yearly Rate (%)² Average Balance¹ Expenses⁴ Yearly Rate (%)² Interest Bearing Liabilities 1,133,923 (28,301) ,164,459 (24,080) 8.8 2Q16 Money Market Borrow ing 354,980 (11,522) ,706 (10,882) 10.8 Time Deposits 203,493 (5,050) ,454 (4,191) 8.7 Saving Deposits 149,297 (2,854) ,634 (2,388) 6.8 Agribusiness Letters of Credit 135,540 (3,934) ,499 (2,347) 9.6 Borrow ing and Onlending 111,418 (2,088) ,624 (1,572) 6.8 Subordinated Debt 91,808 (1,521) ,059 (1,364) 6.2 Others Commercial Papers³ 20,498 (476) ,351 (398) 7.2 Foreign Securities Borrow ing 21,193 (176) ,475 (210) 3.9 Interbank Deposits 31,671 (141) ,906 (148) 3.5 Financial and Development Funds 14,026 (538) ,750 (580) 17.3 Other Liabilities 260, ,322 Other Liabilities 117, ,461 Shareholder s Equity 82,405 82,667 Demand Deposits 60,827 62,194 TOTAL LIABILITIES 1,394,783 1,426,782 1 Arithmetic average of the final balances in the months of the relevant periods. 2 Annualized average (business days of the quarter divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 Calculated including the partial effect of the exchange rate variation. 2Q17 Table 99. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly) R$ million Average Balance¹ Expenses⁴ Yearly Rate (%)² Average Balance¹ Expenses⁴ Yearly Rate (%)² Interest Bearing Liabilities 1,139,061 (27,229) 9.9 1,164,459 (24,080) 8.8 1Q17 Money Market Borrow ing 402,573 (12,129) ,706 (10,882) 10.8 Time Deposits 200,181 (4,640) ,454 (4,191) 8.7 Saving Deposits 149,621 (2,668) ,634 (2,388) 6.8 Agribusiness Letters of Credit 117,244 (3,112) ,499 (2,347) 9.6 Borrow ing and Onlending 100,900 (1,740) ,624 (1,572) 6.8 Subordinated Debt 92,629 (1,530) ,059 (1,364) 6.2 Others Commercial Papers³ 22,377 (432) ,351 (398) 7.2 Foreign Securities Borrow ing 20,266 (200) ,475 (210) 3.9 Interbank Deposits 18,495 (183) ,906 (148) 3.5 Financial and Development Funds 14,776 (595) ,750 (580) 17.3 Other Liabilities 261, ,322 Other Liabilities 116, ,461 Shareholder s Equity 81,605 82,667 Demand Deposits 62,955 62,194 TOTAL LIABILITIES 1,400,484 1,426,782 1 Arithmetic average of the final balances in the months of the relevant periods. 2 Annualized average (business days of the quarter divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 Calculated including the partial effect of the exchange rate variation. 2Q17 76

79 Banco do Brasil S.A. - MD&A 2Q17 Table 100. Average Balances and Interest Rates - Interest Bearing Liabilities (Half - Yearly) R$ million Average Balance¹ Expenses⁴ Yearly Rate (%)² Average Balance¹ Expenses⁴ Yearly Rate (%)² Interest Bearing Liabilities 1,139,110 (55,865) ,151,760 (51,309) 9.3 Money Market Borrow ing 345,700 (22,282) ,640 (23,010) 11.5 Time Deposits 203,395 (10,000) ,817 (8,831) 9.0 Saving Deposits 150,167 (5,698) ,628 (5,057) 7.0 Agribusiness Letters of Credit 135,701 (7,814) ,872 (5,459) 10.3 Subordinated Debt 94,438 (3,220) ,844 (2,893) 6.4 Borrow ing and Onlending 113,781 (3,879) ,762 (3,312) 6.9 Interbank Deposits 36,251 (541) ,201 (331) 3.7 Foreign Securities Borrow ing 24,369 (418) ,370 (410) 3.9 Others Commercial Papers³ 20,643 (951) ,864 (830) 7.5 Financial and Development Funds 14,666 (1,060) ,763 (1,175) H16 Other Liabilities 257, ,872 Other Liabilities 117, ,161 Shareholder s Equity 77,641 82,136 Demand Deposits 62,117 62,575 TOTAL LIABILITIES 1,396,285 1,413,633 1 Arithmetic average of the final balances in the months of the relevant periods. 2 Annualized average (business days of the semester divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 Calculated including the partial effect of the exchange rate variation. 1H Volume and Rate Analysis Table 101. Analysis of Volume (Profitable Assets) Quarterly Rate R$ million 1Q17 2Q17 Abs. Chg. Assets Earning Assets (a)¹ 1,223,404 1,252,360 28,955 Net Interest Income (b) 14,476 14, Spread - % (b/a) (0.017) Gain/(loss) w ith Volume² 343 Gain/(loss) w ith Spread³ (208) 1 - Arithmetic average of the closing balances of months that comprise the period. 2 - Gain/(Loss) resulting from multiplying the earning assets volume of the current period for the spread of the previous period net previous NII; 3 - Gain/(Loss) resulting from multiplying the earning assets volume of the previous period for the spread of the current period net previous NII; Table 102. Volume Analysis (Earning Assets) Yearly - Rate R$ million 1H16 1H17 Abs. Chg. Assets Earning Assets (a)¹ 1,220,103 1,237,882 17,779 Net Interest Income (b) 28,909 29, Spread - % (a/b) (0.020) Gain/(loss) w ith Volume² 421 Gain/(loss) w ith Spread³ (244) Gain/(loss) w ith Volume and Spread⁴ (4) 1 - Arithmetic average of the closing balances of months that comprise the period. 2 - Gain/(Loss) resulting from multiplying the earning assets volume of the current period for the spread of the previous period net previous NII; 3 - Gain/(Loss) resulting from multiplying the earning assets volume of the previous period for the spread of the current period net previous NII; 4 - Combined Gain/(Loss) of the effects above. Below is the Net Interest Margin evolution. The earning assets increased R$28,955 million in 2Q17, from 1Q17. The Loans and Leasing line decreased by R$3,334 million and was offset by an increase in securities + interbank invest balance (R$ million), a fact that negatively influenced the NIM since the securities have lower spreads. 77

80 Chapter 5 - Financial Earnings Figure 49. Revenues From Loans Breakdown 1 The change in the mix of earning assets, including the increase in securities transactions and the decrease in credit transactions in the quarter, resulted in a decrease in global spread, fact that had already occurred on the 1Q17.If the securities line did not increase (base effect), the new NIM would be 4.9%. The impact of the revolving credit revenue with individuals impacted the NIM in 10 bps. Table 103. NIM 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 NII / (Earning Assets) - Annualized ¹ NFM / (Earning Assets) - Annualized ² NII/Earning Assets average, annualized; 2 - Risk adjusted Net Interest Margin (NII less Provision for Loan Losses)/Earning Assets average, annualized. Table 104. Adjusted NIM and Net Interest Income R$ million 2Q16 1Q17 2Q17 1H16 1H17 Average Interest Earning Assets (AIEA) (a) 1,218,676 1,223,404 1,252,360 1,220,103 1,237,882 Average Interest Bearing Liabilities (AIBL) (b) 1,133,923 1,139,061 1,164,459 1,139,110 1,151,760 NII (c) 14,633 14,476 14,606 28,909 29,083 Net Interest Gain (d) 12,977 13,224 12,702 26,142 25,927 Interest Income (1.d) 41,279 40,454 36,782 82,007 77,236 Interest Expense(2.d) (28,301) (27,229) (24,080) (55,865) (51,309) Net Interest Income Other Items¹ (e) 1,655 1,252 1,904 2,767 3,156 AIBL / AIEA % (b/a) Yield Average Assets² ⁴ - % (1.d/a) Liabilities Average Cost ² ⁴ - % (2.d/b) Net Interest Rate² ³ - % Adjusted NIM² - % (d/a) NIM² % (c/a) Includes 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. 2 - Annualized Rates. 3 - Difference between average rate of earning assets and average rate of interest bearing liabilities. 4 - Calculated partial effect of exchange rate change. The following tables set forth the variations in interest income and expenses due to the variation in the average volume of interest earning assets and interest bearing liabilities and by the change in the average interest rate on these assets and liabilities, for the periods indicated. 1 For Retail, considers Individuals and Small and Very Small Companies. For wholesale, considers medium and large companies, added to government credit operations. 78

81 Banco do Brasil S.A. - MD&A 2Q17 Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly) 2Q17 / 1Q17 2Q17 / 2Q16 R$ million Average Volume¹ Average Rate ² Net Change³ Average Volume¹ Average Rate ² Net Change³ Earning Assets ⁴ 850 (4,522) (3,671) 989 (5,486) (4,497) Secur. + Interbank Invest. w /o Hedge 805 (2,458) (1,652) 2,182 (2,770) (589) Loans and Leasing (116) (1,709) (1,825) (1,856) (1,668) (3,524) Remunerated Compulsory Deposits (15) (170) (185) (52) (326) (378) Other 0 (9) (8) 0 (6) (6) Interest Bearing Liabilities ⁴ (525) 3,675 3,149 (631) 4,853 4,222 Saving Deposits (0) (5) Interbank Deposits (121) (7) Time Deposits (108) (40) Open Market Borrow ing (804) 2,051 1,247 (1,996) 2, Borrow ing and Onlending Financial and Development Funds (28) (14) (43) Subordinated Debt (6) (18) Foreign Securities Borrow ing (21) 11 (10) (12) (22) (34) Agribusiness Letters of Credit ,588 Others Commercial Papers⁵ (17) (49) Net variation Average Rate. 2 (Interest for the Current Period / Balance in the Current Period) x (Balance in the Previous Period) (Interest for the Previous Period). 3 Interest for the Current Period Interest for the Previous Period. 4 Calculation based on the same method presented in footnotes 1, 2, and Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. Table 106. Change in Revenues and Expenses and Change Volume / Rate (Half - Yearly) R$ million Average Volume¹ 1H17 / 1H16 Average Rate² Net Change³ Earning Assets ⁴ 1,109 (5,881) (4,771) Secur. + Interbank Invest. w /o Hedge 4,168 (3,362) 806 Loans and Leasing (4,233) (759) (4,992) Remunerated Compulsory Deposits (77) (436) (513) Other (4) (68) (72) Interest Bearing Liabilities ⁴ (564) 5,120 4,556 Saving Deposits Interbank Deposits 328 (117) 211 Time Deposits 25 1,144 1,169 Money Market Borrow ing (4,009) 3,281 (728) Domestic Borrow ing and Onlending Financial and Development Funds (8) (108) (115) Subordinated Debt Foreign Securities Borrow ing 58 (50) 8 Agribusiness Letters of Credit 1,223 1,133 2,355 Others Commercial Papers⁵ (81) Net variation Average Rate. 2 (Interest for the Current Period / Balance in the Current Period) x (Balance in the Previous Period) (Interest for the Previous Period). 3 Interest for the Current Period Interest for the Previous Period. 4 Calculation based on the same method presented in footnotes 1, 2, and Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 79

82 Chapter 5 - Financial Earnings 5.8. Credit Spread by Portfolio Determining the managerial financial margin begins as follows: a) accrued interest income, classified by type of portfolio; b) opportunity costs determined for each line item of the portfolios. In the case of fixed rate transactions, the managerial financial spread takes into account the funding cost at the time of the contracting, and it is not affected by the variation in the Selic rate. The opportunity cost for Loans allocated to Individuals and Businesses with free resources is the TMS and/or Term Structure of Estimated Interest Rates (Estrutura a Termo das Taxas de Juros Estimada ETTJ). The opportunity cost for the agribusiness portfolio and other directed resources is calculated based on the source of funds and the need to make any compulsory investment with a portion of the funds from the relevant source. Table 107. Managerial Margin Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Loan Operations 11,424 10,609 10,107 (11.5) (4.7) 22,586 20,716 (8.3) Individuals 5,534 5,416 5,457 (1.4) ,814 10, Companies 3,708 3,074 2,533 (31.7) (17.6) 7,544 5,607 (25.7) Agribusiness 2,182 2,119 2,117 (3.0) (0.1) 4,229 4, Spread Quarterly Flow Chg. (%) on Half-Yearly Flow The following table presents the managerial spread by portfolio. The rate results from the managerial financial margin divided by respective average balances. Table 108. Spread by Portfolio % 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Loan Operations Individuals Companies¹ Agribusiness It does not include transactions with the Government. The decrease in the Companies Spread (100 bps) was the main cause of the loans operation spread reduction (40 bps). Three effects were predominant in this decrease: the TMS reduction in the period, which impacted revenues with the wholesale segment, the decrease in the working capital portfolio, notably with Small and Very Small companies and the increase in judicial recoveries (chapter 11), and the increase in judicial recoveries (chapter 11), which reduced interest accrual on transactions past due over 60 days. 80

83 Banco do Brasil S.A. - MD&A 2Q Fee Income The assertive offer of customized products and services brings clients needs closer to the solutions offered by the Bank, according to a strategy that seeks to generate higher satisfaction levels, profitability, and, as a result, increase in fees income. In comparison of 2Q17/1Q17, the highlight was with Loan Fees that increased R$138 million, mainly due to the BB credit portfolio disbursement In 1H17/1H16, the checking account fees and asset management fees performance had great relevance. The checking account fees income was driven by the qualification of accounts through service package with the consequent improvement in the relationship with the customer, despite the reduction in the base. Table 109. Fee Income Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Fee Income 5,886 6,096 6, ,285 12, Checking Account Fees 1,534 1,597 1, ,969 3, Asset Management Fees 1,077 1,295 1, ,080 2, Insurance, Pension and Premium Bonds (20.3) (12.9) 1,532 1,429 (6.8) Loan Fees Collections (11.7) (2.7) (10.1) Credit / Debit Cards Billings (1.1) Capital Market (6.5) National Treasury and Manag. of Official Funds Consortium Interbank (14.7) (4.5) (9.5) Other (1.3) 1 Revised series in 1Q17. Quarterly Flow Chg. (%) on Half-Yearly Flow Below is a description of the main fee generator business in Banco do Brasil Checking Accounts The growth pace of BB s client base remained stable. BB s customers and checking accounts basis in the last 12 months are shown below. Table 110. Customers and Checking Accounts thousands Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Jun/16 Mar/17 Customers 64,187 64,383 64,798 65,244 65, Checking Accounts 37,755 37,808 37,307 37,109 36,939 (2.2) (0.5) Individuals 35,353 35,177 34,902 34,741 34,587 (2.2) (0.4) Companies 2,402 2,631 2,405 2,368 2,353 (2.1) (0.6) Series revised in Jun/17. Position Chg. (%) on 6.2. Payment Methods The chart below sets forth the main electronic payment businesses in which Banco do Brasil holds a direct or indirect equity interest. 81

84 Chapter 6 - fee Income Figure 50. Payment Methods Organizational Chart Main Companies¹ 1 As of June 30, Cards Base and Turnover The wide customer base, the quality and diversity of the services provided, make Banco do Brasil one of the main emitters of the Elo, Visa and Mastercard brand. At the end of Jun/17, BB s card base totaled 68.3 million, including credit, debit, and pre-paid cards. Elo cards totaled 11.6 million in the period. Table 111. Cards Base thousands Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Total of Cards¹ 78,644 69,238 68,321 (13.1) (1.3) Credit Cards 22,315 17,098 16,589 (25.7) (3.0) Elo 2,917 2,173 2,175 (25.4) 0.1 Debit Cards/Prepaid 56,329 52,140 51,732 (8.2) (0.8) Elo 8,357 8,675 9, Reviewed series in Jun/17. Chg. (%) on BB s base of recurring use cards i.e., with at least one purchase in the last thirty days, was 8.0 million for the credit function and 11.2 million for the debit function. The following table shows the number of transactions performed in the quarter and the growth observed in the period, which is in line with the growth in traditional business revenues. Table 112. Number of Transactions Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Number of Transactions ,216 1, Credit Cards Debit Cards/Prepaid

85 Banco do Brasil S.A. - MD&A 2Q17 The financial volume transacted through BB cards (total turnover), was R$ 67.6 billion in the 2Q17, increase of 1.8% in comparison the 1Q17. Considering only the traditional transactions, the growth was 7.6% in the quarter. Figure 51. Total Turnover R$ billion Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17 Debit/Prepaid Cards Credit Cards Figure 52. Traditional and Specific Business Total Turnover R$ billion Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17 Specific Business¹ Traditional Segment 1 It represents the volume of transactions with Ourocard Agronegócios, Ourocard Crediário, Cartão BNDES, payment of bank-issued invoices with card, Ourocard Pré-pago, Alelo, and B2B/corporate purchases with cards Cards Service Income The card services result card services derives from the issuance and use of cards in the credit, debit, and consumer credit functions by clients and from services of credentialing/acquiring, pre-paid cards/vouchers, and card flags provided by the Bank s affiliates. The result of services does not include financial income and expenses from minimum or partial payments of the invoice (revolving credit). Administrative and operating costs directly related to the card business were included, as identified as of the current period. The following table details the result of card services and the result after taxes. The performance in the quarter also reflects the seasonality that affected total invoicing. 83

86 Chapter 6 - fee Income Table 113. Cards Service Income and Expenses Quarterly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 Total Operating Income 2,244 2,163 2, Issuance Acquiring (1.8) Other Revenues (11.5) 42.7 Expenses (1,379) (1,213) (1,294) (6.2) 6.7 Issuance (650) (568) (640) (1.5) 12.7 Acquiring (581) (559) (592) Other Expenses (148) (86) (62) (58.1) (28.0) Cards Services Income , Tax Effect (313) (350) (404) Cards Services Income After Tax Table 114. Cards Service Income and Expenses Half - Yearly Flow R$ million 1H16 1H17 Chg. (%) on Total Operating Income 4,533 4,529 (0.1) Issuance 1,775 1, Acquiring 1,366 1, Other Revenues 1, (34.3) Expenses (2,726) (2,507) (8.0) Issuance (1,291) (1,208) (6.4) Acquiring (1,131) (1,151) 1.8 Other Expenses (304) (148) (51.3) Cards Services Income 1,807 2, Tax Effect (658) (754) 14.6 Cards Services Income After Tax 1,149 1, Asset Management The main activities of BB Gestão de Recursos DTVM S.A. are the administration, management, and distribution of funds and managed portfolios. The following chart sets forth asset management and the market share held by BB DTVM in the Global Fund Administration ranking of the Brazilian Association of Entities of the Financial and Capital Markets (Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais Anbima). Figure 53. Fiduciary Management and Market Share R$ billion ,269 3,533 2,222 2, , , ,778 1,868 2,002 2,200 2,538 2, H17 BB Market (ex-bb) Market Share - % Source: Anbima. In 1H17, the net funding of BB DTVM was positive in by R$ 43.2 billion, with highlights being Fixed Income and Pension Plans. 84

87 Banco do Brasil S.A. - MD&A 2Q17 According to Anbima s Global Fund Administration ranking, in Jun/17, BB DTVM remained the market leader in the following segments: Institutional Investor, Government, and Retail. The following tables set forth the breakdown of administered funds by segment and product, as of Jun/17. Table 115. Investment Funds and Managed Portfolio by Customer Balance R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Institutional Investors 311, , , Government 120, , , (0.8) Retail 84, , , High income 45, , , RPPS 44, , , Corporate¹ 13, , , (9.9) Private 25, , , Middle Market 14, , , Foreign Investors 7, , , Total 668, , , Source: Anbima. 1- In 4Q16 the BB DTVM started to administer the fund of an exclusive client, this same fund had negative net funding in 2Q17. Chg. (%) on The growth observed in the investment funds of the Retail and High Income segments is due to the sales mobilization strategy that occurred in the period Data about the breakdown by Anbima class is disclosed without discounting the units of own funds and third-party funds, which totaled R$3.959 million in Jun/17. Table 116. Investment Funds and Managed Portfolio by Type R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Investment Fund 656, , , Fixed 422, , , Equity 42, , , (19.8) (9.1) Multimarket 12, , , Others¹ 179, , , Managed Portfolios 14, , , (0.9) Fixed 14, , , (0.9) Equity (2.0) Fundos de Terceiros (3,168) (0.5) (10,373) (1.3) (3,959) (0.5) 25.0 (61.8) Total 668, , , Source: Anbima 1 - Includes Pension, Exchange, FIP, ETF, Real Estate and Off Shore funds. Custody Balance Chg. (%) on Banco do Brasil stands out as one of the main leaders in the following sectors: custody, controllership, accounting, and bookkeeping of assets. In Jun/17, the amount held in custody by BB totaled R$897 billion, representing a 19.4% increase compared to the same period in the previous year and a 1.8% increase compared to the last quarter. This increase in the volume held in custody is primarily due to advance of the fund industry. The following figure sets forth the custody evolution at Banco do Brasil. 85

88 Chapter 6 - fee Income Figure 54. Domestic Custody Total Assets and Market Share R$ billion Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Third-Party Own Resources Market Share - % Source: Anbima. Sustainability Currently, BB DTVM manages five investment funds with social and environmental characteristics. The following table sets forth the balance of funds managed in these five funds. Table 117. Investment Funds with Socio-Environmental Characteristics Management R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 BB Referenciado DI Social BB Multi Global Acqua LP Private FI BB Previdenciário Ações Governança BB Ações ISE Jovem FIC (3.5) BB Ações Carbono Sustent. FIA (13.0) (4.8) Total , Source: Brazilian Securities and Exchange Commission - CVM 6.4. Capital Market Balance Chg. (%) on Capital markets are one of the main sources of funds for production activities in economies in the whole world. Funding instruments not only enable companies to grow, but also contribute to generate and dilute the risk of new investments. Banco do Brasil is present in the Brazilian capital market through BB Banco de Investimento S.A. (BB- BI). The BB conglomerate operates in the international capital market through its wholly-owned subsidiaries: BB Securites Ltd. (London), Banco do Brasil Securities LLC. (New York), and BB Securities Asia Pte Ltd. (Singapore). The portfolio of BB includes market research, transaction structuring and distribution, settlement and custody of assets, products, and services for individuals and businesses. The main products and services are described below: I. Mergers and acquisitions: provides financial advisory services in sales transactions, corporate reorganizations (consolidations, spin-offs, and mergers), private placements, and tender offers. BB- BI also issues appraisal reports and fairness opinions for companies. II. Gold: offers sale and purchase services for gold in book entry form or ingots for its clients, in addition to custody of these assets. III. Private Equity: is a member of 15 funds and provides advisory services for seven of them, with 53 indirect investments in companies located in different Brazilian regions, in a number of segments (energy, infrastructure, logistics, consumption, education, ti, services agribusiness, etc.), in different 86

89 Banco do Brasil S.A. - MD&A 2Q17 development stages (consolidated and emerging companies and companies with innovative technologies). IV. Fixed Income: (i) Domestic Market: offers services of coordination, structuring, and distribution of debentures, promissory notes and financial bills; and (ii) International Market: BB Investimentos offers services of coordination, structuring, and distribution of securities issued by companies, banks, and governments through brokers located in London, New York, and Singapore, providing BB with global transactions in the capital market. V. Variable Income: offers advisory services in all stages of public offerings of shares, tender offers, and Cepacs offers (a funding instrument used to finance public works). BB-BI also operates in the structuring and distribution of Real Estate Investment Funds (Fundos de Investimento Imobiliários FII). The variable income portfolio includes services of purchase and sale of shares for individual investors and stock-share lease services for investors of the private segment. VI. Securitization: coordinates, structures, and distributes securitization transactions, according to which a relatively consistent group of assets is converted into negotiable securities, through the following products: Credit Rights Investment Funds (Fundos de Investimento em Direitos Creditórios FIDC), Real Estate Receivables Certificates (Certificados de Recebíveis Imobiliários CRI), and Agribusiness Receivables Certificates (Certificados de Recebíveis do Agribusiness CRA). Performance in the Capital Market In the first half of 2017, BB-BI operated in 7 issuances, with R$1.7 billion share in Long-Term Debentures, of which R$1.6 billion Long Term and R$108 million Short Term. This volume represents a market share of 6.6%, giving BB-BI the 5 th position in the Anbima Origination Ranking. In terms of securitization, according to Anbima Ranking published in Jun/17, BB-BI reached the 6 th position in the number of Emissions of Certificates of Receivables of the Agribusiness (CRA), with 4 operations accumulated in the Anbima Origination Ranking, making a total volume R$663 million. In 2Q17, 4 brazilian issuers (3 companies and 1 bank) accessed the international bond market, issuing a total of US$6.1 billion, and 2 companies hired BB to act as a lead-manager, issuing a total of US$4.4 billion. This represents a market share of 71.9% in the period. In the accumulated of the year, according to the Anbima External Emissions Ranking (position Jun/17), BB is 6 th place. Regarding foreign groups, BB acted as co-manager in another 3 transactions totaling US$7 billion in the period. The following chart sets forth BB s performance in the origination of fixed income securities in Brazil and abroad. Figure 55. Fixed Income Securities Origination Domestic and International Markets ,889 20, ,709 1,688 8,279 11,422 14,990 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Volume (R$ million) Revenues (R$ million) BB-BI offers share purchase and sale services to Retail investors through its network of branches, internet (home broker), and mobile banking. In 2Q17, shares purchase and sale services to Retail investors totaled R$7.5 billion, in the same in B3 counter R$154.6 billion. BB market share in the period was 4.8%. The following chart sets forth the quarterly evolution of retail variable income. 87

90 Chapter 6 - fee Income Figure 56. Individuals Equity Secondary Market ,057 5,883 7,399 8,705 10,316 10,069 9,239 7,528 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Volume (R$ million) Revenues (R$ million) BB-BI is a member of 15 funds in the private equity sector. Total capital invested by BB-BI in the private equity sector amounts to R$1.3 billion, as set forth in the table below. Table 118. Private Equity Indirect Interest R$ million Commited Capital of BB-BI Jun/16 Mar/17 Jun/17 Share in Committed Capital of the Fund (%) Commited Capital of BB-BI Share in Committed Capital of the Fund (%) Commited Capital of BB-BI Share in Committed Capital of the Fund (%) FIP Angra Infraestrutura FIP Logística Brasil FIP Brasil Energia FIP Infra Brasil FIP Coliseu FMIEE Rio Bravo Nordeste II FMIEE Jardim Botanico VC I FMIEE Fundotec II FIP Fundo Brasil de Governança Corporativa FIP Brasil Agronegócio FIP Brasil Sustentabilidade FIP Fundo Brasil de Internacionalização de Empresas FIP Brasil Portos e Ativos Logísticos FIP Brasil Óleo e Gás FIP Fundo Brasil de Internacionalização de Empresas II Total 1, , ,306.7 The figure below shows the balance and revenue arising from gold custody in BB-BI. Figure 57. Gold Custody Balance and Revenues Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Custody Value (R$ million) Revenues (R$ million) 88

91 Banco do Brasil S.A. - MD&A 2Q Insurance BB Seguridade is the insurance group of Banco do Brasil. Established in 2012, the company is the result of corporate reorganizations undertaken since Its activities include the offer of insurance products, open pension plans, capitalization products, and brokerage services. Other information about BB Seguridade and businesses of the insurance segment is included in the MD&A of BB Seguridade, available at The following table sets forth the main performance indicators of BB Seguridade. Table 119. BB Seguridade Performance Ratios R$ million 2Q16 1Q17 2Q17 on/ 2Q16 on/ 1Q17 Performance Ratios - % Insurance - Life, Mortgage and Rural Loss Ratio¹ (11.4) 11.3 Comission Ratio² (1.0) 1.9 Technical Margin (7.1) Combined Ratio³ (4.0) Expanded Combined Ratio⁴ (2.3) Adjusted ROAE⁵⁴ Insurance - Property and Casualty Loss Ratio¹ (0.6) (5.0) Comission Ratio² Technical Margin (9.9) 10.5 Combined Ratio³ (4.4) Expanded Combined Ratio⁴ (7.3) Adjusted ROAE 13.9 (0.4) 6.6 (52.7) - Pension Plans Comission Ratio² Adjusted ROAE Premium Bonds Comission Ratio⁵ Premium Bonds Margin (32.7) 0.2 Adjusted ROAE (48.3) (56.0) Brokerage Quarterly Flow Chg. (%) on Adjusted Operating Margin (0.2) (1.9) Adjusted Net Margin (0.5) (1.9) 1 Loss Ratio = Expenses with Claims / Earned Premiums. 2 Comission Ratio = Acquisition Costs / Earned Premiums. 3 Combined Ratio = (General Expenses + Administrative expenses + Acquisition Costs + Expenses with Claims + Revenue from Policy Issuance + Result with Reinsurance) / Earned Premiums. 4 Expanded Combined Ratio = (General Expenses + Administrative Expenses + Acquisition Costs + Expenses with Claims + Revenue fromf Policy Issuance + Revenue with Reinsurance) / (Earned Premiums + Net Investment Income). 5 Historical series reviewed in 1Q Consortium Banco do Brasil operates in the purchase consortium market through its subsidiary BB Administradora de Consórcios S.A. In April 2017, according to the most recent data available at the website of the Central Bank, BB Consórcios held a 9.6% market share. In June 2017, BB Marketed 44.7 thousand new consortiums shares quotas. 89

92 Chapter 6 - fee Income Table 120. Consortium Current Quotas per Type Balance Chg. (%) on units Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17 Auto 579, , , (4.5) Motorcycle 10, , , Mortgage 19, , , Tractor/Truck 7, , , Services 3, , , Electric and Electronic Devices 3, , , Total 623, , , (2.5) Figure 58. Consortium Fee Income and Current Quotas , , , , ,976 2Q16 3Q16 4Q16 1Q17 2Q17 Active Quotas (units) Management Fees - R$ million The following tables set forth a comparison between the average balance, average term, and average management fees of the membership units sold in the period. Table 121. Consortium Average Ticket Balance R$ 2Q16 3Q16 4Q16 1Q17 2Q17 Tractor/Truck 156, , , , ,634 Mortgage 187, , , , ,207 Auto 35,394 31,232 39,431 37,405 39,862 Motorcycle 9,881 10,907 11,833 12,986 14,657 Services 7,101 7,343 7,360 6,842 7,236 Electric and Electronic Devices 4,535 4,736 4,557 4,233 4,428 Table 122. Consortium¹ Average Term and Average Management Rate Average Term (months) Average Rate (%) Average Term (months) Average Rate (%) Average Term (months) Average Rate (%) Services Motorcycle Mortgage Electric and Electronic Devices Auto Tractor/Truck Contracted in the period 2Q16 1Q17 2Q17 90

93 Banco do Brasil S.A. - MD&A 2Q Productivity and Efficiency Banco do Brasil seeks to improve its operating efficiency and productivity by maintaining a strict control of its administrative, personnel and operating expenses Indicators This section presents the indicators normally used in the analysis of financial institutions. The following table present the Pre-Tax and Pre-Provision Earnings, that increased in the quarterly and semi-annual comparison, primarily consisting of the banking product and total operating expenses, showing the evolution of the Bank's businesses. Table 123. Pre-Tax and Pre-Provision Earnings Quarterly Flow Administrative Expenses were impacted by R$67 million in 1Q17 and R$77 million in 2Q17 due to the institutional reorganization. The following table sets forth the coverage ratio by fee income and operating income evoluation in the 1H17/1H16, due to the increase in fee income, in addition to the strict expenses control. Table 124. Cost-to-Income and Coverage Ratios Adjusted¹ % 2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17 Fee Income/Personnel Expenses - Quarterly Fee Income/Personnel Expenses - 12 months Fee Income/Administrative Expenses - Quarterly Fee Income/Administrative Expenses - 12 months Cost-to-Income Ratio - 12 months² Data refers to the Income Statement with Reallocations. 2 Operating Income, net of Other Operating Expenses. The following table sets forth other productivity and efficiency indicators. Table 125. Other Productivity and Efficiency Indicators Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Total Operating Income (Banking Product) 23,939 23,730 24, ,061 47, Operating Income 23,686 23,601 23, ,488 47, Net Interest Income 14,633 14,476 14,606 (0.2) ,909 29, Fee Income 5,886 6,096 6, ,285 12, Eq. Interest of Subsidiaries and Affiliates 1, ,062 (2.7) ,089 2,015 (3.5) Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1) Previ - Plano de Benefícios (54) (59) (59) 10.5 (0.0) (107) (119) 10.5 Previ - Fundo de Utilização Restatement (57.9) (31.5) (53.3) Total Operating Expenses (13,262) (12,849) (12,680) (4.4) (1.3) (26,074) (25,529) (2.1) Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9) Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6) Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8 Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6) Other Tax Expenses (92) (118) (128) (209) (245) 17.5 Taxes on Revenues (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8) Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1) Non-Operating Income (17.0) (3.4) Pre-Tax and Pre-Provision Earnings 10,749 10,926 11, ,095 22, Half-Yearly Flow Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Checking Accounts/Ow n Service Netw ork 2,197 2,212 2,244 2,250 2,295 Checking Accounts/Employees in Branches Fee Income/Ow n Service Netw ork - R$ thousand Credit Portf. (Broad Definition)/Ow n Service Netw ork - R$ million Commercial Funding/Employess in Branches - R$ million DTVM Funding/Employess in Branches - R$ milion Personnel Expenses per Employee - R$ thousand Employees in Branches/(Branches+Services Posts) The following figure sets forth the banking product (total operating revenues) and the number of branches evolution in the last five years. 91

94 Chapter 7 - Productivity and Efficiency Figure 59. Bank Product and Branches (% of evolution) 7.2. Personnel Expenses Personnel expenses increased by 3% in 2Q17/1Q17, impacted by the seasonality, mainly related to the vacation concentration. In 1H17/1H16 comparison, the personnel expenses presented a 2.6% decrease. The decrease in expenses was mainly due to the internal Bank reorganization. Table 126. Personnel Expenses Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6) Salaries (2,687) (2,201) (2,589) (3.6) 17.6 (4,938) (4,790) (3.0) Social Charges (825) (754) (797) (3.4) 5.6 (1,598) (1,551) (2.9) Administrative Personnel Provisions (554) (735) (440) (20.6) (40.1) (1,438) (1,175) (18.3) Benefits (669) (765) (762) 14.0 (0.3) (1,332) (1,527) 14.7 Pension Fund (192) (202) (204) (387) (406) 4.8 Training (17) (9) (14) (19.3) 61.9 (28) (22) (21.0) Remunerat. for Directors and Officers (13) (11) (11) (13.1) (0.4) (24) (22) (8.4) The following figure and table set forth the changes and the profile in BB s headcount (employees and interns). Figure 60. Evolution of Headcount 114, , , , , , , ,622 99,964 99,603 4,725 3,592 2,328 1,420 1,468 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Employees Interns 92

95 Banco do Brasil S.A. - MD&A 2Q17 Table 127. BB s Staff Profile Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Employees 109, , ,622 99,964 99,603 Female 45,542 45,408 41,549 41,321 41,194 Male 64,073 63,751 59,073 58,643 58,409 Educational Level High School 22,846 22,060 19,750 19,024 18,429 College 47,210 46,916 43,083 42,482 42,100 Specialization, Master's and Doctorate 39,250 39,875 37,575 38,249 38,868 Others Turnover - Quarterly Index (%) The 8.6% turnover rate in dec/16 reflects the Extraordinary Incentivized Retirement Program (PEAI) disclosed in the material fact on november 20, Other Administrative Expenses Other Administrative Expenses decreased by 1.6% compared to the previous quarter, especially the items below: I - Telecommunications and Data Processing: actions implementation aimed at reducing current expenses and revising contracts. II - Expenses with Outsourced Services: contracts renegotiation that impacted 1Q17. There was an 1.8% increase in the half-yearly comparison, in which Rent and Property Maintenance had great importance due to the leasing of São Paulo and Brasília new buildings and the property return indemnities as a result of the restructuring plan started in november/2016. Table 128. Other Administrative Expenses Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8 Rent and Property Maintenance¹ (625) (720) (708) 13.2 (1.8) (1,304) (1,428) 9.5 Security and Transport Services (567) (550) (562) (0.9) 2.3 (1,110) (1,112) 0.2 Telecommunications and Data Processing (510) (541) (444) (12.8) (17.9) (973) (985) 1.2 Expenses w ith Outsourced Services (445) (497) (476) 7.0 (4.2) (946) (973) 2.8 Amortization and Depreciation (338) (352) (355) (674) (707) 4.9 Advertising and Public Affairs (128) (84) (96) (24.9) 15.3 (247) (180) (27.0) Other Administrative Expenses (404) (353) (406) (782) (759) (2.9) 1- Includes expenses with Property Insurance. We present below data on the Bank s structure that is included in other administrative expenses Service Network Banco do Brasil ended jun/17 with 66.1 thousand points of service, including its own service network, shared network channels and agents in the country. It is present in 99.8% of the Brazilian municipalities. BB entered into partnerships to share automated teller machines (ATMs) and use the lottery network for withdrawals, deposits, payments, among others services, consolidating the nation-wide presence of Banco do Brasil s network. The following table sets forth the BB s service network breakdown. 93

96 Chapter 7 - Productivity and Efficiency Table 129. Service Network Quantity Chg. (%) on Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Ow n Service Netw ork 17,181 16,492 16,098 (6.3) (2.4) Branches 5,428 4,877 4,885 (10.0) 0.2 Service Posts 1,738 2,180 2, (2.9) Automated Service Posts 10,015 9,435 9,096 (9.2) (3.6) MaisBB Netw ork 14,110 13,622 13,486 (4.4) (1.0) Agents in the Country 7,962 7,501 7,350 (7.7) (2.0) Banco Postal 6,148 6,121 6,136 (0.2) 0.2 Shared Netw ork Channels 35,680 36,731 36, (0.7) Lottery Stores 13,146 13,038 13,021 (1.0) (0.1) Banco 24h 18,935 20,516 20, (0.9) ATM: Partner Banks 3,599 3,177 3,127 (13.1) (1.6) Total 66,971 66,845 66,072 (1.3) (1.2) Table 130. Branch Network by Region BB Banking Industry Share % Southeast 2,118 11, Northeast 1,057 3, South 948 4, Middle West 457 1, North 305 1, Total 4,885 22, Automated Service Channels Banco do Brasil s automated service channels offers a wide range of services and products to costumers, and contributs to cost control. In jun/17, these channels accounted for 96.9% of all completed transactions. Mobile and Internet Banking BB Mobile and Internet Banking seek to make the banking experience simpler, faster, safer and more convenient to costumers, offering a wide portfolio of products and services everywhere and at any time. The following figure sets forth the evolution of transactions by service channel. Figure 61. Transactions by Service Channel (%) Jun/14 Jun/15 Jun/16 Jun/17 Internet + Mobile POS + Agents in the Country Other Service Channels (ATM + CABB + Branch Cash) The following figures sets forth the registered users and transactions number evolution conducted in the mobile banking and internet banking channels, respectively

97 Banco do Brasil S.A. - MD&A 2Q17 Figure 62. Number of Users (million) Internet and Mobile Banking Jun/14 Jun/15 Jun/16 Jun/17 Internet Mobile Figure 63. Number of Transactions (million) Internet (Individuals) and Mobile Banking CAGR 46.1% 3, , , , , , , Q14 2Q15 2Q16 2Q17 Internet Mobile Automated Teller Machines Banco do Brasil has the largest network automated teller machines (ATMs) in Brazil. The following figure sets forth the number of BB s ATMs and partnerships with Banks and Banco 24h ATM network. Figure 64. Automated Teller Machines 64,785 64,860 63,706 61,651 3,599 3,452 61,179 3,296 3,177 3,127 18,935 19,456 19,868 20,516 20,340 42,251 41,952 40,542 37,958 37,712 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Automated Teller Machines ATM: Banco 24h ATM: Partner Banks The following figure sets forth that the ATMs, accounted for most of the basic banking transactions, including general consultations, withdrawals, deposits, and payments of bank-issued invoices and bills, compared to bank tellers and service stations. 95

98 Chapter 7 - Productivity and Efficiency Figure 65. Transactions - ATMs vs Teller (average %) Q14 2Q15 2Q16 2Q17 Check Withdrawals Deposits Payments Technology Investments Banco do Brasil consistently invests in technology to improve operational efficiency, reduce operating losses, expand businesses and improve client service. In the period between 2011 and jun/2017, investments totaled R$19.6 billion. The following figure sets forth investments in technology throughout 6 years. Figure 66. Tecnology Investments H17 Total Technology Investments (R$ billion) Investments in technology primarily leads to a significant increase in data storage capacity and in the availability indicator, as shown in the figure below. Figure 67. Storage Capacity and Availability Indicator , , ,643 78,476 60,190 36, Q17 Storage Capacity (Terabytes) Availbility Index (%) 96

99 Banco do Brasil S.A. - MD&A 2Q Other Operating Income and Expenses The following table sets forth the main line items of other operating income/expenses. The line item "Other" represents the sum of non-significant and pulverized sub-lines items amounts. Table 131. Other Operating Income/Expenses Quarterly Flow Chg. (%) on Half-Yearly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16 Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1) Income from Guarantee Deposits (12.4) (14.5) 1,437 1, Recovery of Charges and Expenses ,016 1,013 (0.3) Card Transactions Receivables Income (18.8) (19.1) (7.8) Income from non-financial Associated Companies (9.5) (21.1) Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1) Negotiation Relationship Allow ance (505) (471) (468) (7.4) (0.6) (1,011) (940) (7.1) Discounts Granted on Renegotiations (411) (313) (422) (641) (735) 14.7 Card Transactions (408) (326) (331) (18.7) 1.5 (733) (658) (10.2) Goodw ill Amotization (277) (311) (299) 8.1 (3.8) (554) (609) 10.0 Actuarial Liabilities (312) (292) (292) (6.4) - (623) (583) (6.4) Guarantee Deposits Expenses (318) (307) (267) (16.1) (13.1) (558) (573) 2.8 Negotiation Relationship Bonus (181) (230) (225) 24.6 (2.4) (260) (455) 74.8 Other Oper. Exp. from Non-Financ. Comp. (94) (98) (110) (207) (208) 0.4 Self-Service Terminals (91) (86) (96) (178) (182) 2.2 Operating losses (67) (79) (119) (164) (198) 20.5 Payment Bonus (78) (58) (52) (32.5) (9.8) (150) (110) (26.3) Remuneration for Transactions of Banco Postal (309) (55) (59) (80.9) 6.6 (607) (114) (81.2) INSS Agreement (27) (38) (40) (50) (78) 57.6 Life Insurance Premium - Consumer Credit (39) (34) (33) (15.4) (3.1) (78) (67) (14.5) Other (25.4) (52.8) 1- Revised series since 1Q17, due to the adjustment in the reallocation of Other Operating Expenses to Legal Risk - Civil Claims 7.5. Operating Losses Banco do Brasil classifies its operating losses according to categories of operating risk events set forth by CMN Resolution No. 4,557/2017. BB includes provisions constitutions/reversals (notably, contingent liabilities) in the total amount of operating losses regarding labor issues, business failures and process failures categories. BB records losses resulting from disagreements between employee and employer relating to agreements or laws, occupational health and safety, and discrimination in the work environment in Labor Issues, including losses derived from secondary liability relating to outsourced companies. External Fraud and Theft are those losses resulting from acts committed by third parties who intend to steal valuables and physical assets of the Bank or clients. The main losses resulting from External Fraud and Theft are operating losses resulting from electronic fraud and external theft. BB records operating losses related to reimbursements or indemnifications paid to account holders and non-account holders as a result of judicial and administrative proceedings in Business Failures, except those resulting from fraud and questionings related to client service practices, products sold, and services provided by the Bank and its business partners. Process Failures are those losses resulting from possible payments to other Banks; business partners; suppliers; and regulatory, inspection and control agencies, due to failures or inadequacies in the execution, handling, and management of activities associated with the relevant internal processes. The following table sets forth operating losses by category. 97

100 Chapter 7 - Productivity and Efficiency Table 132. Breakdown of Operational Loss (%) 2Q16 3Q16 4Q16 1Q17 2Q17 Labor Issues External Fraud and Theft Business Failures Internal Fraud Process Failures Physical Assets Damage System Failures Activities Interruption (2.2) Total BB s operational losses are concentrated (96%) in amounts below R$5,000.00, with 88% in amounts below R$1, Figure 68. Operational Loss for Value Range (%) Up to R$1, from R$1, to R$4, From R$5, to R$9, From R$10, to R$24, More than R$25,

101 Banco do Brasil S.A. - MD&A 2Q Actuarial Assets and Liabilities BB records in its balance sheet actuarial assets and liabilities derived from benefit plans granted to itsemployees. The most significant actuarial asset is Previ s Plan 1 and the most significant actuarial liability is the health plan administered by Cassi. Amounts are periodically assessed based on an actuarial valuation report and the availability of funds is subject to the fulfillment of the requirements set forth by law and regulatory authorities. Since 2Q16, information on other components of the balance sheet are available at the Investor Relations website ( in the historical series spreadsheet. 8.1 Previ Plan 1 Brief History The Benefit Plan 1 (Plan) was created in 1967 and structured as a defined benefit plan. Until December 2000, Banco do Brasil, as sponsor, made contributions representing 2/3 and members (retirees and pensioners) made contributions representing 1/3 of the total amount. New members were accepted until December 23, As of January 2001, in order to comply with Constitutional Amendment No. 20, sponsor and members implemented a parity contribution (50%). Accordingly, the Bank makes contributions to the Plan surplus corresponding to 50% of the present value of the actuarial assets and liabilities. In the period between January 2007 and December 2013, due to the Plan s surplus, contributions were no longer charged. At that time, the Bank entered into a Memorandum of Understanding with Previ providing for the allocation and use of a portion of the surplus amount, once the requirements set forth by law (Supplementary Law No. 109/2001 and CGPC Resolution No. 26/2008) were fulfilled. In view of the approval of the measures set forth in the memorandum, a portion of the surplus amount was allocated in 2010 as agreed, recognized as Allocation Fund (Fundo de Destinação), and subsequently segregated in Contribution (Fundo de Contribuição) and Surplus Funds (Fundo de Utilização). In the period between December 2010 and December 2013, contributions were covered by the Contribution Fund. In January 2014, as the accumulated surplus decreased, Previ informed that contributions were going to be charged again. BB s contributions to the Plan were thereafter made by the Surplus Fund. The Plan s actuarial balance is measured on a semiannual basis (June and December) and contemplates: (i) the plan s surplus/deficit amount at the end of current semester and (ii) the plan s estimated financial results at the end of subsequent semester, considering current service cost projections, contributions, liabilities interest costs and return on assets. BB makes an early monthly recognition based on the estimated financial result of the Plan for the end of the following month, corresponding to one-sixth (1/6) of the projected gains or losses throughout the semester to which it refers. Members Employees who were Previ members on December 24, 1997 and those dismissed or fired before then, but opted to remain in the plan are members of Plano 1. Three groups characterize these beneficiaries: I. Contrato 97: only the workforce employed before April 14, They were included due to a contract signed on December 24, 1997 between BB and Previ. The contract provides a sponsor commitment to bear the contributions for the unformed mathematical reserve period. Beginning in April 1967, the Contrato 97 mathematical reserves were paid-in to Plano 1; II. Employees admitted in the period between April 15, 1967 and December 23, 1997; and III. Special Group (Grupo Especial): members of Previ s Benefits Plan 1 who obtained additional retirement amounts as a result of administrative and/or judicial decisions. Analysis The assets of the Plan are measured at fair value based on their market value or according to the discounted cash flow method, as set forth in the following table. 99

102 Chapter 8 - Actuarial Assets and Liabilities Actuarial obligations correspond to the net present value of benefits payable to members. Actuarial obligations take into account the survival statistics set forth in the Soft AT 2000 actuarial life table (reduced by 10%) and the nominal rate of return, measured by the future interest rate curve applied to trading of government securities indexed to inflation. The rate used by the Bank is different from that used by Previ, which takes into account the assumptions set forth in CGPC Resolution No. 18/2006. Table 133. Breakdown of Assets % Jun/16 Mar/17 Jun/17 Variable Income Fixed Income Real Estate Investments Loans and Financing Others Amounts Listed in Fair Value of Plan Asset In the Entity's Ow n Financial Instruments In Properties or Other Assets Used by Entity Table 134. Main Actuarial Assumptions % 1H H17 Real Discount Rate (p.y.) Nominal Rate of Return on Investments (p.y.) The actuarial asset (liability) of Plan 1 corresponds to 50% (parity) of the positive or negative difference between the assets at fair value and liabilities at present value. Banco do Brasil recognizes in advance the variation projected for the following semester, reducing the actuarial assets volatility. Contributions set forth in item f (contribution from funds) in the table below are derived from the Surplus Fund, which is detailed in the Previ (Plan 1) Surplus Fund table in section 8.2. Table 135. Effects of Previ (Plan 1) Accounting CVM Deliberation No. 695/2012 R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 (a) Fair Value of the Plan's Assets 129, , , , ,597 (b) Present Value of Actuarial Liabilities (139,707) (139,707) (148,350) (148,350) (151,789) (c) Surplus/(Deficit) BB = [(a) + (b)] x 50% (4,910) (4,910) (2,202) (2,202) (2,596) (d) Actuarial Assets (Initial Period) (1,453) (4,910) (4,977) (2,202) (2,184) (e) Anticipated Financial Results (110) (199) (199) (115) (115) (f) Contributions of Funds (h) Semi-Annual Adjustmentment - Shareholders' Equity (3,482) - 2,797 - (433) (i) Actuarial Assets/(Liabilities) (End Period) = (d) + (e) + (f) + (g) (4,910) (4,977) (2,202) (2,184) (2,596) 8.2. Previ (Plan 1) Surplus Allocation Funds Banco do Brasil recognized in its assets the following amounts: I. Parity contributions among sponsor and members, recorded in May 2006, based on the balance of the remaining reserves, at an initial amount of R$2.2 billion; II. III IV Allocation Fund (Fundo de Destinação): established after an agreement on the allocation of Previ surplus in 2010 to cover the Contribution and Surplus Funds. The process ended in 2013; Contribution Fund (Fundo de Contribuição): established with funds transferred from the Allocation Fund to cover the interruption of contributions charged in the period between 2010 and The Contribution Fund was fully used; and Surplus Fund (Fundo de Utilização): established with funds transferred from the Allocation Fund and used by the Bank after 1Q14 to cover periodic contributions. Parity Fund (Fundo Paridade) The Parity Fund is adjusted monthly based on the actuarial target (INPC + 5% p.y.) and it has been used since January 2007 to offset obligations assumed under the 97 Agreement. 100

103 Banco do Brasil S.A. - MD&A 2Q17 Table 136. Previ (Plan 1) Parity Fund R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Initial Balance Contributions to Plano 1 - Contrato 97 (5) (4) Restatement Closing Balance Surplus Fund (Fundo de Utilização) In 2Q11, Surplus Fund was created through Allocation Fund resources transfers. It represents the amount subject to use by Banco do Brasil and reflects Previ s accounting surplus distribution. This reserve is adjusted annually by the actuarial target (INPC + 5% p.y.) and its use is subject to the confirmation of the full coverage of obligations under the plan (Article 25, CGPC Deliberation No. 26/2008). As of 1Q14, as periodic contributions resumed, the sponsor started making contributions through this fund. Table 137. Previ (Plan 1) Surplus Fund R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 Initial Balance 9,200 9,377 9,458 9,432 9,488 Restatement Contributions to Plano 1 (131) (131) (177) (132) (132) Closing Balance 9,377 9,458 9,432 9,488 9, Cassi The Bank sponsors a health plan administered by Cassi, whose main purpose is to assist members and their registered beneficiaries in the coverage of their health expenses. The members of the Plan are divided in: I. Members: BB s active and former employees (self-sponsored), retirees, and pensioners; II. Dependents: spouses, partners, children and stepchildren below 24 years of age; and III. Indirect Dependents: dependents who are directly related to members, of any degree of kinship, admitted until the amendment to the Articles of Association of In 1995, due to successive mismatches between income and expenses, sponsor and members agreed to share the amount needed to cover the operating deficit. In 1996, Cassi and the Bank remodeled the Articles of Association to ensure the financial equilibrium of the plan. The main amendments include restricted access of new indirect dependents and the increase in contributions paid by members and the sponsor. In 2007, the Bank entered into a new agreement with Cassi to amend its Articles of Association, which are currently in effect. The main amendments include: I. a sponsor s contribution corresponding to 4.5% of general salaries or of the total amount of the retirement or pension benefit, for all groups; II. a monthly contribution payable by members and pension beneficiaries corresponding to 3% of general salaries or of the total amount of the retirement or pension benefit; III. a contribution in the amount of R$315 million paid by BB to Cassi for investments in the improvement of the operations model regarding its own services; and IV. the assumption by the Bank of the deficit of Indirect Dependents until this group is terminated. The 2007 measures were complemented in 2016, when Banco do Brasil and representative entities entered into a Memorandum of Understanding, resulting in a proposal that was approved by members and ensures an additional monthly amount of R$40 million to the Plan, as follows: I. R$23 million extraordinary monthly compensation by the Bank in Cassi favor, until December 2019; II. additional 1% extraordinary monthly contribution from associates, until December 2019, on the same personal contribution calculation basis, in the estimated amount of R$17 million per month; and 101

104 Chapter 8 - Actuarial Assets and Liabilities III. hiring a specialized company to analyze, review and develop processes, projects and actions focused on the governance, management and operation model of Cassi. The following table sets forth the evolution of Cassi s actuarial liability, pursuant to CVM Deliberation No. 695/2012. Table 138. Effects of the Cassi Accounting CVM Deliberation No. 695/2012 R$ million 2Q16 3Q16 4Q16 1Q17 2Q17 (a) Fair Value of the Plan's Assets (b) Present Value of Actuarial Liabilities (7,519) (7,519) (7,948) (7,948) (8,284) (c) Deficit BB = [(a) + (b)] (7,519) (7,519) (7,948) (7,948) (8,284) (d) Actuarial Liabilities (Initial Period) (6,368) (7,519) (7,619) (7,948) (8,020) (e) Amounts recognized in statement of income (266) (248) (248) (253) (253) (f) BB - Amount paid (g) Semi-Annual Adjustment - Shareholders' Equity (1,062) - (236) - (175) (h) Actuarial Liabilities (Period End) = [(d) + (e) + (f) + (g)] (7,519) (7,619) (7,948) (8,020) (8,284) 8.4. Effects on Shareholders Equity The following table sets forth the effects of the Bank s actuarial assets and liabilities recognized in BB s Shareholders Equity pursuant to CVM Deliberation No. 695/2012. The effects on Shareholders Equity are recorded half-yearly, based on the actuarial studies. Table 139. Effects on Shareholders Equity CVM Deliberation No. 695/2012 R$ million Jun/16 Previ - Plano 1 Cassi Other Plans Valuation Adjustments (3,482) (1,062) (312) (4,857) Tax Effects 1, ,943 Effect on Shareholders' Equity (2,089) (637) (187) (2,914) Total Dec/16 Valuation Adjustments 2,797 (236) (329) 2,233 Tax Effects (1,119) (892) Effect on Shareholders' Equity 1,678 (141) (196) 1,341 Jun/17 Valuation Adjustments (433) (175) (205) (813) Tax Effects Effect on Shareholders' Equity (260) (105) (123) (488) 102

105 Banco do Brasil S.A. - MD&A 2Q Risk Management 9.1. Risk Management The risk management of the Financial Conglomerate of Banco do Brasil comprehensively includes credit, market, liquidity, and operating risks. Management activities are conducted by specialized structures, according to the objectives, policies, strategies, processes, procedures, and systems described for each of these risks. For more information about Banco do Brasil s risk management process, access the Risk Management Report Pillar III at bb.com.br/ir. Pursuant to its policy, Banco do Brasil manages its foreign exchange exposure to minimize its effects on the Consolidated Result. The following table sets forth BB s Consolidated statement of assets, liabilities, and derivatives in foreign currencies. At June 30, 2017, net foreign exchange exposure totaled an expense of US$1,396 million. Table 140. Balance in Foreign Currencies R$ million Currency Assets Liabities U.S. Dollar 151, ,332 Euro 10,722 10,424 Yen 1,827 1,645 Pound Sterling Sw iss Franc Canadian Dollar 8 7 Gold 9 - Other 15,332 14,477 Total 179, ,446 Net Position - Balance Sheet Items 14,483 R$ million Currency Long Short U.S. Dollar 34,083 24,156 Euro 3,909 4,525 Pound Sterling Sw iss Franc Yen Canadian Dollar - - Other Total 39,902 30,036 Net Position - Derivatives 9,866 Balance Sheet Derivatives Total of Derivatives and Balance Sheet 219, ,482 Total Net Position (4,617) Total Net Position in US$ million (1,396) BB s Consolidated regulatory foreign exchange exposure, calculated pursuant Central Bank Circular Letter No , dated March 4, 2013, including the tax hedging strategy, totals R$3,556 million at June 30, The purpose of tax hedging is to reduce the result s volatility, after tax effects, considering that the earnings with the exchange rate variation of investments abroad are not taxed, just as losses do not generate a deduction in the tax base. The following figure sets forth BB s Consolidated foreign exchange exposure, as a percentage of the Reference Equity, for the quarters indicated, since March

106 Chapter 9 - Risk Management Figure 69. Evolution of the Foreign Exchange Exposure as a % of the Reference Equity (RE) 0,19 0,78 0,95 0,87 4,56 1,05 1,13 0,87 1,00 3,02 2,72 3,09 0,88 0,95 1,83 0,81 0,79 1,71 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Other Currencies Currency Basket Balance Sheet by Index The following figure sets forth the breakdown of BB s Consolidated assets and liabilities, including derivatives, by index, at June 30, Figure 70. Assets and Liabilities by Index (R$ billion) Assets Liabilities Fixed 1, ,610.2 CDI / TMS / FACP IRP/TBF/TR Price Index TJLP US$ / Gold W/O Index The following figure sets forth net mismatches by index of BB s Consolidated Results.: 104

107 Banco do Brasil S.A. - MD&A 2Q17 Figure 71. Net Result by Index (R$ billion) (12.0) (7.4) (86.9) (140.9) (144.3) Fixed Price Index TJLP US$ / Gold W/O Index CDI / TMS IRP/TBF/TR Statement of the Interest Rate Repricing Profile The following table sets forth BB s Consolidated inventory of transactions sensitive to variations in interest rates, by risk factor and interest rate indexation term.: Table 141. Interest Rate Repricing Profile R$ million < 1 Mo 1 > 3 Mo 3 > 6 Mo 6 > 12 Mo 1 > 3 Yrs > 3 Yrs Total Assets 806,047 75, ,785 63, , ,519 1,530,614 Fixed 509,234 25,880 46,875 39,246 98, , ,318 CDI / TMS 244, ,742 TR/TBF/IRP , ,366 Price Index , ,909 TJLP 1,174 24, ,104 US$/ME 50,898 24,205 13,634 24,321 27, , ,173 Liabilities 764,191 60, ,298 39,558 67, ,780 1,443,667 Fixed¹ 326,292 7,424 15,430 17,074 33,886 45, ,326 CDI / TMS 385, ,652 TR/TBF/IRP , ,653 Price Index - - 4, ,411 TJLP 1,390 36, ,083 US$/ME 50,857 16,268 18,804 22,484 33, , ,542 Gap 41,856 14,630 (106,513) 24,009 58,225 54,739 86,947 Cumulative Gap 41,856 56,486 (50,027) (26,017) 32,208 86,947 - Cumul. Gap as % Assets (21.0) (40.9) Pre-fixed liabilities include all deposits in current accounts (R$44.3 billion) Capital Structure Considering the large number of technical terms used pursuant to capital regulations, we set forth below a glossary to assist in the interpretation of the information presented in this section: a) MRRE: Minimum Required Reference Equity; b) RWA: Risk-Weighted Asset; c) RWACPAD: refers to exposures to credit risk subject to the calculation of capital requirement through the standardized approach; 105

108 Chapter 9 - Risk Management d) RWAMPAD: refers to exposures to market risk subject to the calculation of capital requirement through the standardized approach; e) RWAOPAD: refers to capital requirement for operational risk exposures under the standardized approach. CMN Resolution No /2013, which provide for the calculation of the Reference Equity and the Minimum Required Reference Equity (MRER) in relation to the Risk Weighted Assets (RWA), respectively, considering Banco Votorantim by the Equity Method, as determined by the Central Bank. Performance The following table sets forth the calculation of the Reference Equity and RWA. Table 142. Basel Index R$ million Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Reference Equity (RE) 125, , , , ,048 Tier I 86,188 87,976 90,284 84,867 87,643 Common Equity Tier 1 Capital (CET1) 63,965 65,500 67,718 62,926 64,734 Shareholders Equity 73,099 75,039 76,703 79,032 80,200 Instruments Eligible to Capital 8,100 8,100 8,100 8,100 8,100 Prudential Adjustments (17,234) (17,639) (17,085) (24,205) (23,566) Sup. Investments, Tax credits of temporary differences dependent on profit generation (15% excess)¹ (4,589) (5,049) (4,637) (9,046) (9,149) Intangible Assets composed as of 10/01/2013 (3,246) (3,514) (4,258) (5,233) (5,105) Tax credits from temporary differences dependent on generation of profits (10% excess) (6,887) (6,877) (6,099) (4,803) (4,852) Superior investments (excess of 10%) (2,070) (1,758) Tax credits arising from tax losses and negative basis of Social Contribution (440) (336) (500) (1,195) (1,160) Goodw ill paid on acquisition of investment on the basis of expected future profitability (1,394) (1,233) (954) (966) (727) Non-controlling interest (511) (465) (493) (711) (637) Tax credits arising from tax loss of excess depreciation (81) (77) (76) (92) (84) Actuarial Assets related to Defined Benefit Pension Funds net of deferred tax liability associated (74) (77) (66) (90) (95) Deferred Assets (13) (11) Additional Tier I Capital 22,224 22,476 22,565 21,941 22,909 HCDI authorized by CMN n.º 4,192/2013 resolution 17,570 17,770 17,840 17,347 18,112 HCDI authorized by previous rules to the CMN n.º 4,192/2013 resolution² 4,653 4,706 4,725 4,594 4,797 Tier II 38,885 39,085 40,170 39,182 39,405 Eligible to Capital Subordinated Debts 38,905 39,096 40,182 39,194 39,426 Subordinated Debts authorized by CMN n.º 4,192/2013 resolution - Financial Letters 5,584 5,286 5,466 5,349 4,936 Subordinated Debts authorized by previous rules to the CMN n.º 4,192/2013 resolution 33,320 33,810 34,716 33,844 34,490 FCO Funding³ 23,842 24,332 25,237 25,945 26,591 Financial Letters and Certificates of Deposits⁴ 9,479 9,479 9,479 7,899 7,899 Tier II deductions (19) (12) (12) (11) (21) Funding instruments issued by financial institutions (19) (12) (12) (11) (21) Risk-Weighted Assets (RWA) 760, , , , ,412 Credit Risk (RWACPAD) 702, , , , ,781 Market Risk (RWAMPAD) 25,508 16,418 18,844 9,723 16,645 Operational Risk (RWAOPAD) 31,708 37,152 43,793 54,986 54,986 Minimum Required Referential Equity (MRRE)⁵ 75,060 71,341 69,703 63,238 65,251 MRRE Margin (RE-MRRE) 50,014 55,720 60,750 60,812 61,797 Tier I Capital Ratio (Tier I/RWA) - (%) CET1 Ratio (CET1/RWA) - (%) BIS Ratio (RE/RWA) - (%) On June 30, 2017, with regards to the investment in Financial Institutions (BV and Banco CBSS), R$2,353,039 thousand were fully deducted from the Reference Equity and R$2,106,257 thousand were weighted by 250% in the RWA. 2 On June 30, 2017, Banco do Brasil considered all Tier 1 eligible debt instruments authorized by the Central Bank to be included in the Reference Equity, pursuant to CMN Resolution No /2007, and that did not fulfill the requirement set forth in CMN Resolution No /2013, based on the instruction given by the Central Bank of Brazil regarding the limit established in Article 28, Items I to X, of CMN Resolution No / Pursuant to CMN Resolution No /2013, FCO balances are eligible to be included in the Reference Equity. 4 On June 30, 2017, the Bank included the balance of the Subordinated Debt instruments that were included in the Reference Equity on December 31, 2012, applying a 50% limit percentage, pursuant to CMN Resolution No / Pursuant to CMN Resolution No /2013, it corresponds to the application of Factor F to the amount of RWA. The scope of the consolidation used as a base to verify operating limits is the Prudential Conglomerate, defined in CMN Resolution No /2013, as of January 1, Pursuant to the Accounting Plan of Financial Institutions (Cosif), the Prudential Conglomerate encompasses not only financial institutions, but also purchase consortium administrators, payment institutions, companies that directly or indirectly purchase transactions or assume credit risk, and investment funds in which the conglomerate retains significant risks and benefits. 106

109 Banco do Brasil S.A. - MD&A 2Q17 CMN Resolution No /2013 set forth Factor F, representing the Basel index to be followed during the implementation process of the Basel III requirements. Table 143. Factor F applied to the amount of Risk-Weighted Assets (RWA) Period Factor "F" (%) 10/01/2013 to 12/31/ /01/2016 to 12/31/ /01/2017 to 12/31/ /01/2018 to 12/31/ From 01/01/2019 on 8.0 Reference Equity, which takes into account the requirements to assess Basel III regulatory capital, reached R$127,048 million and MRRE totaled R$65,251 million at June 30, Full Application of Basel III The following figure simulates the full application of Basel III and its impacts on the Bank s CET1. It takes into account the capital base on June 30, 2017 and has three stages: d) First stage: the calculation of the regulatory adjustments takes into account the assumptions of (i) anticipation of the deductions schedule (phase-in) and (ii) use of goodwill and intangible assets that were not amortized by 2017; e) Second stage: the calculation takes into account the effects of the first stage combined with the anticipation of Factor F (from 9.25% to 8.0%) for operating and market risks; and f) Third stage: the calculation takes into account all the effects of the previous stages combined with the usage of tax credits from temporary differences of 24% and tax losses of 30%, both in accordance with the usage estimates disclosed by the Bank in the Notes to the Consolidated Financial Statements. Figure 72. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) 9.18 (0.63) (0.13) CET 1 Ratio Jun/17 Deductions Schedule Anticipation RWA Rules Anticipation Tax Credits Realization Simulated CET 1 Ratio under complete Basel III Rules The following table sets forth the breakdown of RWACPAD, including the main exposures. Table 144. MRRE in relation to RWACPAD Jun/17 R$ million RWA CPAD MRRE (%) Loan Operations 403,097 37, Other Credits 56,710 5, Securities and Derivatives 28,817 2, Tax Credits 37,533 3, Permanent Assets 29,906 2, Loans to release 17,790 1, Guarantees Provided 4, Investments in Clearings Guaratee Funds Other 55,395 5, TOTAL 633,781 58,

110 Chapter 9 - Risk Management The table below sets forth MRRE in relation to the RWAMPAD market risk, at June 30, 2017, by risk factor: Table 145. MRRE in relation to RWAMPAD Jun/17 R$ million RWA MPAD MRRE (%) FX 12,105 1, Interest Rate 4, Commodities Shares TOTAL 16,645 1, Table 146. MRRE in relation to RWAOPAD Jun/17 R$ million RWA OPAD MRRE (%) Commercial 26,434 2, Retail 14,579 1, Trading and Sales 6, Payments and Settlements 3, Financial Agent Services 1, Asset Management 1, Corporate Finance Retail Brokerage TOTAL 54,986 5,

111 Banco do Brasil S.A. - MD&A 2Q17 Table 147. RWACPAD Segregated by Risk Weighting Factor (RWF) R$ million RWF (%) 1 RWA CPAD MRRE² Available Founds , , Short-term Interbank Investments ,887 1, ,091 1, Securities and Financial Derivatives , ,434 1,058 1,250 9, Investments in Clearings Guarantee Funds Interbank Accounts , ,340 1,234 Loans 50 3, ,052 15, ,814 9, ,581 10, Leasing ,057 1,023 Other Receivables 75 16,428 1, , ,707 2,285 Other Assets Permanent Assets ,136 1, ,770 1, Credit Commitment non-cancellable unconditionally and unilaterally by the Institution 75 8, , Loans to Concede , , Advance payment granted by the Institution 85 7, , Guarantees provided , , ,095 2,506 Tax Credits 250 9, Operations for settlement of purchase of foreign currency, gold or securities on the spot market Operations for settlement of sale of foreign currency, gold or securities on the spot market Derivatives adjustment due to variation of credit quality from counterparty Total 633,781 58,625 1 Sum of the exposures multiplied by the respective Risk Weighting Factors, adjusted by the Conversion Factor. 2 Exposure weighted by the Risk Factor multiplied by 9.25%. Jun/17 109

112 Chapter 10 - Strategic Investments 10 - Strategic Investments Information on Subsidiaries and Affiliates The following table presents Banco do Brasil S.A equity on its subsidiaries and affiliates. Table 148. Interest in the Capital of Subsidiaries and Affiliates Equity Interest Activity Share (%) Book Value Equity Income R$ thousand Jun/17 Jun/16 Jun/17 2Q17 Banco do Brasil - AG. Viena Banking (I) 100, (3.145) Banco Patagonia S.A. Multiple Bank (I) 58, Banco Votorantim S.A. Multiple Bank (II) 50, BB Adm. de Cartões de Crédito S.A. Service Rendering (I) 100, BB Administradora de Consórcios S.A. Consortiums (I) 100, BB Americas Multiple Bank (I) 100, BB Banco de Investimento S.A. Investment Bank (I) 100, Ativos S.A. Securitizadora de Créd. Financ. Credit Acquisition (I) 100, Cielo S.A. Service Rendering (II) 28, Companhia Brasileira de Securit. Cibrasec Credit Acquisition (II) 12, Kepler Weber S.A. Industry (II) 17, (869) Neoenergia S.A. Energy (II) 11, Seg. Brasileira de Créd. à Exportação SBCE Insurance Company (II) 12, (12) Tecnologia Bancária S.A. Tecban Service Rendering (II) 12, BB DTVM S.A. Asset Management (I) 100, BB Elo Cartões Participações S.A. Holding (I) 100, Elo Participações S.A. Holding (II) 49, CBSS - Alelo Service Rendering (II) 49, Elo Serviços Service Rendering (II) 33, Cateno Gestão de Contas de Pagamento S.A.¹ Service Rendering (II) 50, BB Leasing S.A. Arrendamento Mercantil Leasing (I) 100, BB Securities LLC. Brokerage (I) 100, BB Seguridade Participações S.A. Holding (I) 66, BB Corretora de Seg. e Adm. de Bens S.A.² Brokerage (I) 66, BB Seguros Participações S.A. Holding (I) 66, BB Mapfre SH1 Participações S.A. Holding (II) 49, Brasilcap Capitalização S.A. Capitalization (II) 44, Brasildental Operadora de Planos Odontológicos S.A. Service Rendering (II) 49, Brasilprev Seguros e Previdência S.A. Insurance / Pension (II) 49, IRB - Brasil Resseguros Reinsurance (II) 13, Mapfre BB SH2 Participações S.A. Holding (II) 33, BB Tecnologia e Serviços S.A. IT (I) 99, BB USA Holding Company, Inc. Holding (I) 100, (2) Besc DTVM S.A. Asset Management (I) 99, (71) Brasilian American Merchant Bank Banking (I) 100, (16.271) BB Securities Asia Pte. Ltd. Brokerage (I) 100, BB Securities Ltd. Brokerage (I) 100, (I) Subsidiaries fully included in the accounting consolidation. (II) Affiliate companies accounted for by equity method. 1 - The values shown (Book Value and Equity Income) of company Cateno Gestão de Contas de Pagamento S.A. are equivalent to 30% of direct participation by BB Multiple Bank. 2 On Dec/16 BB Cor. Participações S.A was incorporated by BB Corretora de Seg. e Adm. de Bens S.A. BB holds direct and indirect participations through BB Banco de Investimentos S.A. in the following companies: I. Ativos SA: 75.71% by BB-BI and 24.29% by Brazilian American Merchant Bank (BAMB); II. Cateno: 30.0% by BB Multiple Bank and 20.9% by BB-BI, totalling 50.9%; III. Tecban: 8.01% by BB-BI and 4.51% by BB Multiple Bank, totalling 12.52%; IV. Cibrasec: 7.32% by BB-BI and 4.8 by BB Multiple Bank, totalling 12.12%. 110

113 Banco do Brasil S.A. - MD&A 2Q Banco Votorantim The equity method is used to present BV s financial information in BB s financial statements. Banco do Brasil owns a 50.0% stake and jointly-controls BV. All data presented in this section reflects 100% of BV s balance sheet and statement of income balances. More detailed information about Banco Votorantim can be obtained from the 2Q17 Earnings Release available at Earnings Highlights BV s 2Q17 net income was R$145 million, ROE of 7.1% p.y. In 1H17 the net income was R$273 million, growth of 40.2% compared to 1H16, mainly due to (i) lower ALLL expenses, (ii) growth of fees and insurance income and (iii) personal and administrative expenses decrease. The NII s decrease compared to the previous quarter was mainly due to a higher securities impairment. In half-yearly comparison, besides impairments, the conservative stance on loan granting and companies portfolio retraction also affected the NII. This decrease was partially offset by the 23.6% growth of income from insurance and fees in the same period. In 1H17/1H16 comparison personnel expenses decreased, mainly due to decrease in labor claims expenses. In quarterly comparison, these expenses were affected by the sales agents wage bargaining. The last twelve months cost income ratio of was 38.4%. Table 149. Income Statement with Reallocations¹ - Quarterly 1Q17 Quarterly Flow Chg. (%) on R$ million Corp. Law Adjustm. Adjusted Corp. Law Adjustm. Adjusted 1Q17 Financial Intermediation Income 3,584 (161) 3,423 3,638 (233) 3,405 (0.5) Loans 1,711 (121) 1,590 2,104 (304) 1, Leasing 5-5 (1) - (1) - Securities 1,180-1, (16.2) Financial Derivatives 46 (40) 6 (44) Foreign Exchange Portfolio (2) - (2) Compulsory Investments (52.4) Sale or Transference of Financial Assets (15.9) Financial Intermediation Expenses (2,270) - (2,270) (2,363) 34 (2,328) 2.6 Money Market Funds (1,844) - (1,844) (1,856) - (1,856) 0.6 Borrow ing, Assignments and Onlending (15) - (15) (133) - (133) Sale or Transference of Financial Assets (411) - (411) (374) 34 (339) (17.5) Net Interest Income 1,314 (161) 1,153 1,275 (198) 1,077 (6.6) Allow ance for Loan Losses (477) 109 (368) (654) 269 (385) 4.7 Net Financial Margin 837 (51) (11.9) Other Operating Income (Expenses) (477) 10 (467) (443) (6) (449) (3.9) Fee Income Personnel Expenses (245) - (245) (279) - (279) 13.9 Other Administrative Expenses (256) - (256) (275) - (275) 7.3 Tax Expenses (92) 4 (88) (86) (6) (92) 4.5 Equity Interest in Subsidiaries and Affiliates Other Operating Revenues and Expenses (232) 6 (226) (195) 0 (195) (13.7) Operating Income 360 (42) (23.7) Non-operating Income (16) - (16) (1) - (1) (96.8) Income Before Taxes 344 (42) (19.8) Income and Social Contribution Taxes (177) 42 (135) 25 (65) (39) (70.9) Profit Sharing (39) - (39) (58) - (58) 47.9 Net Income 127 (0) Adjustments refer to: (i) income from written-off credits recovery and credit expenses referring to the portfolio granted with co-obligation, classified under line Loans, and reallocated to Allowance for Loan Losses and (ii) foreign investments exchange variations, which were accounted for under Other Operating Income (Expenses) and reallocated to Income from Derivative Financial Instruments, as well as these investments hedging strategy tax effects. 2Q17 111

114 Chapter 10 - Strategic Investments Table 150. Income Statement with Reallocations¹ - Half-Yearly Chg. (%) on R$ million Corp. Law Adjustm. Adjusted Corp. Law Adjustm. Adjusted 1H16 1H16 Half-Yearly Flow Financial Intermediation Income 6,968 (1) 6,966 7,221 (393) 6,828 (2.0) Loans 3,002 (281) 2,721 3,815 (425) 3, Leasing (77.4) Securities 2, ,543 2,170-2,170 (14.7) Financial Derivatives 374 (250) (72.9) Foreign Exchange Portfolio (319) - (319) Compulsory Investments (28.3) Sale or Transference of Financial Assets 1,863-1,863 1,171-1,171 (37.2) Financial Intermediation Expenses (4,486) - (4,486) (4,633) 34 (4,598) 2.5 Money Market Funds (3,708) - (3,708) (3,700) - (3,700) (0.2) Borrow ing, Assignments and Onlending (148) - (148) - Sale or Transference of Financial Assets (1,317) - (1,317) (785) 34 (751) (43.0) Net Financial Margin 2,482 (1) 2,481 2,589 (359) 2,230 (10.1) Allow ance for Loan Losses (691) (273) (965) (1,132) 378 (753) (21.9) Net Interest Margin 1,791 (275) 1,516 1, ,477 (2.6) Other Operating Income (Expenses) (1,108) 24 (1,084) (919) 4 (916) (15.5) Fee Income Personnel Expenses (596) - (596) (524) - (524) (12.1) Other Administrative Expenses (561) - (561) (532) - (532) (5.2) Tax Expenses (204) 27 (177) (178) (2) (180) 1.6 Equity Interest of Subsidiaries and Affiliates Other Operating Income and Expenses (356) (3) (359) (427) 6 (421) 17.2 Operating Income 683 (251) Non-operating Income 6-6 (17) - (17) - Income Before Taxes 688 (251) Income and Social Contribution Taxes (411) 251 (160) (152) (23) (175) 9.1 Profit Sharing (83) - (83) (97) - (97) 16.3 Net Income Adjustments refer to: (i) income from written-off credits recovery and credit expenses referring to the portfolio granted with co-obligation, classified under line Loans, and reallocated to Allowance for Loan Losses and (ii) foreign investments exchange variations, which were accounted for under Other Operating Income (Expenses) and reallocated to Income from Derivative Financial Instruments, as well as these investments hedging strategy tax effects. 1H17 Table 151. Adjusted Net Interest Margin and Net Interest Rate R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 Average Interest Earning Assets 95,988 92,769 92,056 (4.1) (0.8) Average Interest Bearing Liabilities 90,800 86,467 85,834 (5.5) (0.7) Net Interest Gain ¹ 1,212 1,151 1,003 (17.3) (12.9) Interest Income 3,334 3,419 3, (1.7) Interest Expense (2,122) (2,268) (2,359) Net Interest Income Other Items² (4) NII 1,208 1,153 1,077 (10.9) (6.6) AIBL/AEA % Yield Average Assets - % ³ Liabilities Average Cost - % ⁴ Net Interest Rate - % ⁵ Adjusted NIM - % ⁶ NIM % Chg. (%) on 1 - Defined as interest income less interest expenses. 2 - Includes derivatives, debt assumption contracts, foreign exchange portfolio, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income from financial intermediation nature. 3 - Total interest income divided by average interest earning assets. 4 - Total interest expenses divided by average interest bearing liabilities. 5 - Difference between average rate of earning assets and average rate of interest bearing liabilities. 6 - Net Interest Gain divided by average interest earning assets. Balance Sheet Highlights The Loan Portfolio - Broad Definition decreased in the quarter and in the last twelve months, reflecting the more conservative stance to grant loans and focus to ensure quality of new loans. In this context, 112

115 Banco do Brasil S.A. - MD&A 2Q17 the Bank has been improving its funding mix, increasing the share of more stable financial instruments in total funding, such as financial letters, which accounted for 32.3% of total funding in Jun/17. Table 152. Balance Sheet Main Items R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Total Assets¹ 108, , ,468 (5.1) (1.6) Broad Definition Loan Portfolio 59,417 59,980 57,305 (3.6) (4.5) Classified Loan Portfolio 46,875 46,931 46,828 (0.1) (0.2) Retail (Individuals) 33,140 33,998 34, Wholesale (Business Loans) 13,735 12,932 12,697 (7.6) (1.8) Guarantees Provided, Securities and Other 12,542 13,049 10,477 (16.5) (19.7) Securities and Financial Derivatives 31,689 31,223 29,726 (6.2) (4.8) Funding 67,520 64,073 63,352 (6.2) (1.1) Commercial Papers 17,775 22,043 23, Financial Letters 14,797 19,431 20, Agribusiness and Real Estate Letters of Credit 2,978 2,613 2,664 (10.6) 2.0 Debenture (Linked to Repurchase) 16,211 11,760 8,579 (47.1) (27.1) Assigned Assets Obligations 15,690 11,438 10,447 (33.4) (8.7) Other 17,844 18,832 21, Shareholders' Equity 8,282 8,358 8, It considers creditors adjustments on anticipation of residual amounts, in financial leasing operations. Chg. (%) on The NPL +90 days decreased in Jun/17, reflecting improvement in wholesale segment delinquency. The retail portfolio s NPL +90 days remained stable compared to Mar/17, and decreased 50bps compared to Jun/16, to 5.2%, reflecting the decrease in auto loans delinquency that, in the last twelve months, decreased 70bps. The delinquency decreased 25bps in the banking industry in this segment, in the same period. Table 153. Managed Portfolio Delinquency R$ million 2Q16 1Q17 2Q17 Managed Loan Portfolio¹ 46,925 46,931 46,828 NPL + 90 days 2,174 2,120 2,065 NPL + 90 days/managed Loan Portfolio - % 4.6% 4.5% 4.4% Write-off (639) (926) (646) Recovery of Write-offs Net Loss (500) (804) (343) Net Loss/Managed Loan Portfolio - annualized - % 4.3% 7.0% 3.0% New NPL New NPL/Managed Loan Portfolio² 1.2% 0.9% 1.3% Provision³ 3,221 3,245 3,257 Allow ance/npl + 90 days - % 148.2% 153.0% 157.8% Balance AA-C 42,309 41,850 41,632 Balance AA-C/Managed Loan Portfolio 90.2% 89.2% 88.9% 1 - It includes assets assigned with recourse previously to the CMN Resolution nº 3, (Difference from the NPL amount from the last quarter and this quarter + write-off)/ loan portfolio of the previous quarter. 3 - It includes ALLL of assets assingned with recourse. BIS Ratio BIS ratio and Reference Equity Tier I (RE Tier I) ratio remain above the minimum required. The index improved in comparison to Mar/17 reflecting mainly the (i) credit RWA decrease, affected by the wholesale loan portfolio decrease, and (ii) RE Tier I increase, due to the equity increase due to the period profits. 113

116 Chapter 10 - Strategic Investments Table 154. BIS Ratio R$ million Jun/16 Mar/17 Jun/17 RE - Reference Equity 9,675 8,051 8,178 RE Tier I 6,892 6,205 6,255 RE Tier II 2,782 1,846 1,923 RWA 64,839 61,058 60,445 Credit Risk 57,168 54,544 53,575 Market Risk 1,654 1,363 1,719 Operational 6,016 5,151 5,151 MRRE - Minimum Required Reference Equity 6,403 5,648 5,591 BIS Ratio 14.9% 13.2% 13.5% RE Tier I 10.6% 10.2% 10.3% RE Tier II 4.3% 3.0% 3.2% 114

117 Banco do Brasil S.A. - MD&A 2Q International Businesses BB's presence abroad aims to maintain its reference position for Brazilian companies and individuals in international markets. The Bank s foreign service network consists of 34 subsidiaries located in 23 countries. In addition to this structure, Banco do Brasil has an agreement with others financial institutions abroad to service its customers. At the end of 2Q17, there were 880 banks acting as BB correspondents in 105 countries. Table 155. Foreign Service Network Branches Sub-branches Subsidiaries and Branches Asunción - Paraguay Hamamatsu - Japan BB Americas / Miami - USA Buenos Aires - Argentina Nagoya - Japan Banco Patagonia / Buenos Aires - Argentina Frankfurt - Germany Santa Cruz de la Sierra - Bolivia BB AG (Aktiengesellschaft) / Vienna - Austria¹ Grand Cayman - Cayman Islands Representative Offices Shared Services Units La Paz - Bolivia Caracas - Venezuela BB USA Servicing Center / Orlando - USA London - England Mexico City - Mexico BB Europa Servicing Center / Lisbon - Portugal Miami - USA Dubai - United Arab Emirates Securities New York - USA Lima - Peru Banco do Brasil Securities LLC - U.S. Santiago - Chile Luanda - Angola BB Securities Ltd - England Tokyo - Japan Montevideo - Uruguay BB Securities Asia PTE - Singapore Shanghai - China Panama City - Panama 1 - BB AG Vienna also has branches located in the cities of Madrid, Paris, Milan, Lisbon and Porto. Table 156. Consolidated Abroad - Balance Sheet Quarterly Chg. (%) on Flow R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 ASSETS (6,3) 4,8 Short-term Interbank Investments (14,3) 19,1 Securities ,9 10,0 Securities Available for Trading ,4 38,4 Securities Available for Sale ,8 1,4 Securities Held to Maturity (60,6) Loans (19,5) 0,7 Public Sector (34,4) (24,0) Private Sector (19,2) 1,2 Other Assets ,7 (36,1) BB Group (1,7) 5,2 LIABILITIES (6,3) 4,8 Deposits (9,6) 8,2 Demand Deposits ,6 (2,2) Time Deposits ,2 17,7 Interbank Deposits (35,0) 2,3 Funds from Acceptances and Securities Issuance ,7 6,8 Borrow ings (12,3) 11,0 Subordinated Debt and Perpetual Bonuses ,0 3,3 Other Liabilities ,2 8,1 BB Group (41,7) (11,4) Shareholders Equity ,2 3,5 Controlling ,7 4,6 Non-Controlling Interest¹ (6,5) (10,2) 1 - It corresponds to non-controlling shareholders participation of Banco Patagonia. 115

118 Chapter 10 - Strategic Investments Table 157. Consolidated Abroad Statement of Income Items Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 Income after Taxes and Statutory Participations (30) (4,8) Non-Controlling Interest¹ ,4 17,7 Net Income It corresponds to non-controlling shareholders participation of Banco Patagonia Banco Patagonia All information presented in this section reflect 100% of Banco Patagonia s balances equity accounts and earnings. The following tables show the main equity, earnings and structural data highlights. In 2Q17 Banco Patagonia s Net Income was R$176.3 million, stable when compared with the same period of the previous year. Table 158. Banco Patagonia Equity Highlights Quarterly Flow Chg. (%) on R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Assets 13,504 15,454 18, Loans 7,313 8,009 8, Deposits 9,140 10,583 11, Shareholders' Equity 2,076 2,165 1,942 (6.5) (10.3) Table 159. Banco Patagonia Funding Quarterly Flow Chg. (%) on R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Interbanking Repo Companies 1,485 1,510 1, Individuals 1,252 1,551 1, Issues Total 3,008 3,344 4, Table 160. Banco Patagonia Main Earnings Items Quarterly Flow Chg. (%) on R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 Financial Intermediation Income Allow ance for Loan Losses 4 30 (23) - - Income from Financial Intermediation (2.7) Fee income Administrative Expenses (248) (288) (297) Other 38 5 (6) - - Income Before Taxes (3.3) Income and Social Contribuition Taxes (101) (169) (134) 32.9 (20.5) Net Income (0.1)

119 Banco do Brasil S.A. - MD&A 2Q17 Figure 73. Banco Patagonia Net Income R$ million H17 Table 161. Banco Patagonia Profitability, Capital and Credit Indicators % 2Q16 1Q17 2Q17 Return on Equity BIS Ratio Coverage Index (+90 days) NPL+90 days Adjusted series considering the rules established by Resolution #5,369 of the Central Bank of Argentina. Table 162. Banco Patagonia Operating and Structural Highlights Quarterly Flow Chg. (%) on Jun/16 Mar/17 Jun/17 Jun/16 Mar/17 Customers (thousand) 1,020 1,074 1, Branches Branches in Buenos Aires Service Points Employees 3,421 3,391 3,367 (1.6) (0.7) 117

120 Banco do Brasil S.A. - IR Vice Presidency of Financial Management and Investor Relations Chief Financial Officer Alberto Monteiro de Queiroz Netto Head of Investor Relations Bernardo de Azevedo Silva Rothe Executive Manager Rodrigo Felippe Afonso Divisional Managers Daniel Henrique de Sousa Diniz Heverton Masaru Ono Janaína Marques Storti Joaquim Camilo de Castro Analysts Adriano Gonçalves de Souza Bruno Santos Garcia Cleber Antonio Lima Rentroia Daniela Priscila da Silva Debora Stefani Diogo Simas Machado Eva Maria Gitirana de Oliveira Fabíola Lopes Ribeiro Felipe de Mello Pimentel Fernanda Vasconcelos de Meneses Filipe Cardoso Duda Gustavo Correia de Brito Itala Tonon Jefferson Guarnieri Aquino Joabel Martins de Oliveira Luiz Fernando de Almeida Peterson Luiz Barbosa Regina Knysak Vilmar Francisco Thewes Vitor Lopes Rodrigues Viviane de Sousa 118

121 Banco do Brasil S.A. Limited Assurance Report about Supplementary Accounting information included within the Performance Analysis Report June 30, 2017 (A free translation of the original report in Portuguese on the supplementary accounting information presented in the Performance Analysis Report) KPMG Auditores Independentes Agosto de 2017 KPDS

122 KPMG Auditores Independentes SBS - Qd Bl. Q - Lote 03 - Salas 708 a 711 Edifício João Carlos Saad Brasília/DF - Brasil Caixa Postal CEP Brasília/DF - Brasil Telefone 55 (61) , Fax 55 (61) Limited Assurance Report about supplementary accounting information included within the Performance Analysis Report To Board of Directors, the Shareholders and the Directors of Banco do Brasil S.A. Brasília DF Introduction We were hired by Banco do Brasil S.A. ( Bank ) to report on the supplementary accounting information of Banco do Brasil S.A. for the six month period then ended in June 30, 2017, in the form of a limited assurance conclusion if, based on our engagement performed, nothing has come to our attention that causes us to believe that the supplementary accounting information included within the Performance Analysis Report are not presented, in all material respects, in accordance to on the information referred to in the paragraph Criteria for preparing the supplementary accounting information. Responsibility of the Bank s Management The Bank s Management is responsible for preparing and adequately presenting the supplementary accounting information included within the Performance Analysis Report based on the criteria for the preparation of the supplementary accounting information described below, and the other information contained in such report, as well as for the design, implementation and maintenance of internal controls it deemed necessary to enable that such information are free from material misstatements, regardless of whether caused by fraud or error. Responsibility of the independent auditors Our responsibility is to review the supplementary accounting information included in the Performance Analysis Report prepared by the Bank and, based on that review, to issue a conclusion in the form of limited assurance. We conducted our works in conformity with the Brazilian Standard on Assurance Engagements NBC TO 3000 Assurance Engagements Other than Audits or Reviews (ISAE 3000). That standard requires compliance with ethical requirements, including independence requirements, planning and execution of procedures to obtain a level of limited assurance that we are not aware of any fact that would lead us to believe that the supplementary accounting KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 2

123 information presented in the Analysis Performance Report of the Bank are not presented, in all material respects, in accordance with the information referred to in the paragraph Criteria for preparing the supplementary accounting information. The procedures selected were based on our understanding of the supplementary accounting information included within the Performance Analysis Report, as well as other circumstances of our work and our consideration of other areas that may contain material misstatements. Procedures for collecting evidence for a limited assurance work are more limited than for a reasonable assurance work. Therefore, less assurance is obtained than in a reasonable assurance work. Consequently, we do not express an audit opinion or a reasonable assurance on the supplementary accounting information presented in Performance Analysis Report of the Bank. Our conclusion does not contemplate aspects related to any prospective information contained within the Performance Analysis Report, nor offers any guarantee if the assumptions used by Management to provide a reasonable basis for the projections presented. Therefore, our report does not offer any type of assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment. Criteria for preparation of supplementary accounting information The supplementary accounting information disclosed within the Performance Analysis Report for the six month period then ended as at June 30, 2017, were prepared by the Bank s management based on the accounting information contained in the June 30, 2017 consolidated financial statement and the criteria described in the Performance Analysis Report in order to allow additional analysis, without, however, being part of the consolidated financial statement disclosed on this date. Conclusion Our conclusion has been formed on the basis of, and is limited to the matters outlined in this report. Based on the limited assurance procedures performed, as summarized above, we are not aware of any facts that lead us to believe that the supplementary accounting information included within the Performance Analysis Report, are not presented, in all relevant aspects, in accordance with the information referred to in the paragraph Criteria for preparing the supplementary accounting information. Brasília, August 09, 2017 KPMG Auditores Independentes CRC SP /O-6 F-DF Original report in Portuguese signed by Marcelo Faria Pereira Accountant CRC RJ /O-2 3

124 Consolidated Financial Statements 1 st half 2017 Financial Statements 1 st half

125 Consolidated Financial Statements 1 st half 2017 INDEX Index... 1 Management Report Financial Statements BALANCE SHEET STATEMENT OF INCOME STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY STATEMENT OF CASH FLOWS STATEMENT OF VALUE ADDED Notes to the Consolidated Financial Statements THE BANK AND ITS OPERATIONS COMPANY RESTRUCTURING PRESENTATION OF FINANCIAL STATEMENTS DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES INFORMATION BY SEGMENT CASH AND CASH EQUIVALENTS INTERBANK INVESTMENTS SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS INTERBANK ACCOUNTS LOAN OPERATIONS FOREIGN EXCHANGE PORTFOLIO OTHER RECEIVABLES OTHER ASSETS INVESTMENTS PROPERTY AND EQUIPMENT INTANGIBLE ASSETS

126 Consolidated Financial Statements 1 st half DEPOSITS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES BORROWINGS AND ONLENDINGS OTHER LIABILITIES OTHER OPERATING INCOME/EXPENSES NON-OPERATING INCOME SHAREHOLDERS' EQUITY TAXES RELATED PARTY TRANSACTIONS EMPLOYEE BENEFITS PROVISIONS, CONTINGENT ASSETS AND LIABILITIES, LEGAL LIABILITIES TAXES AND SOCIAL SECURITY RISK AND CAPITAL MANAGEMENT STATEMENT OF COMPREHENSIVE INCOME OTHER INFORMATION Independent Auditor s Report Summary of the Audit Commitee Report Declaration of the Executive Board Members about the Financial Statements Declaration of the Executive Board Members about the Report of Independent Auditors Members of Management

127 Management Report 1 st half 2017 Dear Shareholders, We present Banco do Brasil s (BB) Management Report for 1H17, in accordance with the legal requirements and regulatory rules in force. We suggest reading this document along with the MD&A for the first and second quarters of The MD&A is a quarterly report for market analysts, shareholders and investors, provides economic and financial indicators, analyzes our performance. These reports are available on our Investor Relations website at bb.com.br/ir. 1. Macroeconomic Environment In the first semester, the domestic and international macroeconomic scenario was characterized by uncertainties that directly and indirectly affected the business environment for financial institutions. Although the domestic uncertainties level has declined during the first months of the year, non-economic events have again brought volatility to the markets. In the United States, the economy began the year with growth below expected, but ended the semester show consistent recovery. The unemployment rate reduction to below full employment and the inflation convergence to the target set by the Federal Reserve allowed the monetary conditions normalization process continuation. In Europe, economic activity responded to the monetary stimulus promoted by the European Central Bank, with GDP growth in its main economies. Add to this context there was uncertainties reduction due to the defeat of presidential candidates with nationalist profiles and who defended their countries exit from the European block. In emerging markets, after doubts about US trade protection policy possible negative impacts, economic activity in China kept accelerating as expected. The result was the slight commodity prices appreciation in the international market. In Brazil, after two years in recession, the first signs of economic activity recovery were observed. Driven by robust results in agriculture and livestock GDP increased 1.0% in the first quarter (compared to the last quarter of 2016, seasonally adjusted). In the semester the industry, commerce and services also presented positive figures. With the dissipation of inflation shocks observed in 2015 and 2016, retail prices slowed, with IPCA reaching 3.0% in 12 months to June (accumulated), below the target (4.5%), result, partially, of macroeconomic policy reorientation, implemented throughout There has been progress in approved reform agenda, such as establishment of a limit on public expenditure. Other reforms underway in Congress, such as pension system reform, also focus on structural issues for the country. As a result, Brazil s risk premium, as measured by 5-year CDS, declined by 23% compared to the end of 2016 (May, 2017 average over December/16 average), and the confidence indexes, whether entrepreneurs or consumers, continued the improvement trend, signaling positive prospects in relation to the possibility of a gradual and sustained economic growth recovery. Recently, non-economic events brougth increased uncertainties into the country. As a result, risk and exchange rate levels responded unfavorably, although there is no evidence on those event s repercussion over monetary policy conduction and moreover, on economic activity recovery. By the semester end, those events more intense effects on country risk and exchange rate were already reversing, suggesting market expectations in discussions continuity on the reform agenda. In this context, the monetary authority kept on the monetary distension process, reducing the interest rates to 9.25% p.y. Since the cycle beginning, in October/16, Selic rate has been reduced in 500 b.p. 3

128 Management Report 1 st half Corporate Strategy for the period Banco do Brasil s strategic procedure for the period is represented in challenges that guide us towards the vision of "Being the most reliable and relevant bank in the clients and employees lives and for brazilian development": a) Profitability, Risk and Capital Management; B) Customer Experience; C) Digital transformation; D) People Management; E) Knowledge Management. In Profitability, Risk and Capital Management, we will prioritize profitability growth, revenue increase with service rendering, operational efficiency improvement, capital sustainability and operational and credit losses reduction. Regarding the Customer Experience, the focus is in providing high value experiences, prioritizing actions that favor customer satisfaction improvement. For Digital Transformation, we have been upgrading processes, products and channels, making them simpler, agile, innovative, integrated and Customer Experience oriented. The company s evolution is based on employees s development. Therefore, in People Management, we will continue to invest in professional skills improvement for leadership and digital transformation. Also, we will improve succession and talent recognition programs. Finally, in Knowledge Management, the priority is to strengthen the strategic knowledge acquisition and certification. Besides the banking business, we have presence in other sectors. In insurance, we operate through BB Seguridade S.A., commercialization insurance products, open pension plans, premium bonds and dental care plans. In payment market, we operate through BB Administradora de Cartões, BB Elo Cartões holding company, which concentrate Alelo, Stelo, Livelo and Cateno businesses and the stake in Cielo S.A., via BB-Banco de Investimento S.A., our subsidiary. Working in these markets is part of our customer loyalty strategy, offering complementary services to credit and diversifying revenues, with a focus on increasing profitability. More information about these businesses can be found in BB Seguridade (bbseguridaderi.com.br) and Cielo (cielo.riweb.com.br/) investor relations website and in these companies Management Reports and also in BB s MD&A (available at Following next, awards received and other highlights events: I. we launched in March, at CMEP (Congress of Electronic Payment Means), the Pulseira Ourocard, BB's first wearable bracelet, through which customers will make payments, by approximation, in debit and credit functions without needing the physical card; II. III. with 38 cases, we won 21 categories in the efinance Award for several innovations, among them the possibility of points 2 purchase in real stores with Ourocard app, Open Banking solution with the Developer Portal launch, digital culture dissemination by LABBS in Silicon Valley development and the Conta Fácil 3 (Digital Account), first step for the checking account opening with a cell phone; for the 9 th consecutive year, we were considered the preferred credit card, according to the Credit Cards National Survey, organized by CardMonitor; 1 The efinance Award identifies and highlights the most important projects in IT and Communication in finance in Brazil. 2 Regards Ponto pra Você loyalty program. 3 Payment account for those who do not have a account in BB yet and can be opened with a mobile phone. 4

129 Management Report 1 st half 2017 IV. we won the Prêmio Atendimento Ouro prize, from Associação das Relações Empresa Cliente (Costumercompany relationship association), as the best receptive call center service; V. BBDTVM s (Asset management) fund was considered the best in the share fund category in FGV s Melhor Banco para Investir ; VI. VII. we launched in may, in BB s Portal, Fale Conosco, another tool that enables the costumer to get in touch with the Bank. The innovation benefits non-checking account holders or those clients who do not have an internet password, and previously did not have the option to register requests in BB Portal; we conquered the Top Básico category in the Broadcast Projections Award. The event, promoted by Agência Estado, rewarded institutions whose projections for the country's main economic indicators more closely approximated those observed during In the same event, four out of ten awarded in the Broadcast Analysts Award analysts worked for BB-Banco de Investimentos. The award evaluates the stock recommendations that obtained the best profitability in Financial Performance Following our main results in the year: Table 1. Financial Performance 1 Refers to the sum of Personnel Expenses and Other Administrative Expenses. Banco do Brasil Financial Statements Consolidated Financial Statements 1H16 1H17 1H16 1H17 Earnings (R$ million) Net Income 4,752 5,018 4,824 5,062 Gross Income from Financial Intermediation 17,461 13,252 16,248 15,158 Fee Income 8,223 8,962 11,285 12,411 Administrative Expenses¹ (17,427) (17,239) (18,113) (17,977) Jun/16 Jun/17 Jun/16 Jun/17 Equity (R$ million) Assets 1,551,539 1,503,116 1,445,115 1,445,614 Classified Loan Portfolio 675, , , ,846 Total Deposits 435, , , ,812 Shareholders Equity 72,586 79,742 83,449 90,783 BIS Ratio (%) Capital Banco do Brasil, aligned with regulatory guidelines and best market practices, has a capital plan with a three-year prospective view, incorporating the effects defined in Basel III and considering (a) the Declaration of Appetite and Risk Tolerance, (b) the Corporate Strategy and (c) the Corporate Budget. 5

130 Management Report 1 st half 2017 The Basel ratio was 18.0% in June, The Tier I capital ratio was 12.4%, with 9.2% in core capital. The reference equity reached R$ billion. Our focus is on organic capital generation and credit growth on more attractive lines under the return versus risk criteria and strategic holdings for the Bank's core business. 4. Business and Client Relationship Present context The customers habits and behavior have changed and the financial industry is more competitive, which requires evolution in the banks' relationship models. Therefore, we continue to advance in innovations to improve service through specialization and provide an integrated experience between face-to-face and digital channels. The structural reorganization started in November, 2016 was set to make the Bank even more dynamic, agile, competitive and strengthening the sustainability of our business. The goal is to continuously improve the customer experience, generate efficiency in the processes and, consequently, reach profitability indexes compatible with our market peers. In 1H17, we reduced in R$ 863 million personnel expenses, as this process result. It is important to emphasize that the branch closing and the transformation of others into service stations is part of service digitization strategy and was carried out in a way that does not hinder the customers, who continue to be served by other branches or migrated to digital service. 4.1 Individuals Service Our more than 63.0 million customers count on 16 thousand service points, present in 99.8% of Brazilian municipalities. To better serve them, we rely on relationship segments according to the each audience s characteristics and necessity. Currently our segments are: Private, Estilo, Exclusivo, Personalizado, Varejo e Mercado Emergente. Furthermore, we have specialized service to college students and rural producers. Private banking clients can be served in seven exclusive offices, 68 service points in the country and one abroad. Considering client s specific needs, we offer financial consulting in investments and asset management by specialized managers, of which 80% hold a CFP (financial planning certification). In high income retail (Estilo, Exclusivo and Personalizado), we served in the first semester, more than 1.8 million customers in 250 branches and 42 offices. For customers in Varejo and Emergente segments, there was an incentive to use the self-service channels, cash flow centralization at BB and credit responsible use, with priority for the supply of lines with lower risk. In the target audience, the clients that receive their salary with us and INSS beneficiaries stand out. We also invest in tools to listen and understand the customer. Our SAC (Costumer Service) received, on average, 433 thousand monthly calls between information, complaints and sugestions, of which 94% were resolved in the first contact. In social media (Facebook and Twitter), approximately 15,5 thousand monthly demands were solved in the period. Digital Experience As for June, 2017, transactions in mobile and internet channels accounted for 48.8% and 22.8% of the total automated channel service, respectively. Nearly 12 million clients (19.4% of the total) used our mobile solutions and, monthly, we registered 450 thousand new app BB users. 6

131 Management Report 1 st half 2017 By the semester end, 50% of Private customers used the mobile service and 66% used the internet. We served more than 65% of private customers with "Fale com o seu gerente" solution, already available since the 1H15 to Estilo and Exclusivo clients and offered since November of 2016 to Private customers. The application allows the direct contact between the client and BB through the exchange of instant messages, in a secure way, with BB app or Internet banking. We ended the semester with three Escritórios Estilo, two of which were opened this semester. The evolution in Estilo also occurred in the Exclusivo customer, with 643 thousand customers served in the digital model in 39 offices. The relationship model evolution, combined with other innovations in product offerings, is aimed at raising customer satisfaction levels. That is why we intend to expand this performance and open 25 more Escritório Estilo and 207 Escritórios Exclusivo by the end of Since 2016, our customers can finance auto and to contract tax income in advance in a totally digital way, using a smartphone. In 1H17, auto loan via mobile already represented 31.3% in the total disbursed in this line, being 57.3% of the operations performed outside business hours. In addition to offering convenience to the customer, the operation carried out by mobile phone has operational cost 65% lower than those made at the branch. With chat investments advice, available in the BB app and Internet, we had R$861.3 million in investments. In addition, we offer, in BB app, a financial advisory solution called Minhas Finanças, which in the semester had 2.3 million accesses, and was used by 19% of customers that use mobile. Business Inovation We have expanded the products that can be contracted by BB app in 1H17. Our clients can renew their car insurance, purchase premium bonds and consortium, contract, simulate and cancel the BB Seguro Residencial via mobile. Such as the auto loan and tax anticipation, we were the first bank to make the purchase of mobile home insurance available. For investor clients, we provide a new environment for trading capital market products, with a modern look and a focus on the customer experience. The platform allows greater user interaction, stock trading, gold and public securities, as well as the possibility of personalization. In 1H17, there were 1.5 million accesses, with R$16.7 billion in negotiations. After Conta Fácil launch, in November, 2016, we started, in May, a pilot project to open a full checking account through BB app. From documents upload to password registration, everything is done by the clients in a mobile device. This innovation is expected to reduce the demand for account opening at branches and allow more time to conduct business. Fifteen thousand people were invited to participate in the project. The implementation is expected to be completed at the beginning of the second semester. In real estate loan, we have implemented measures to optimize the granting process, such as expert advice to clients and the possibility of client monitoring the process progress through a smartphone and internet. These improvements resulted in an 11% reduction in contracting time in the second quarter. We also launched Balcão dos Imóveis website, a platform that offers exclusive conditions for the purchase of properties built by construction companies that are Banco do Brasil s clients. Since the year beginning, there were more than 10,000 monthly accesses to the portal. Credit Payroll loans remain the main line in the portfolio for individuals, with 34.9% of the total classified portfolio, with loans to civil servants the most representative (87.8%). Real estate credit was R$43.0 billion, an increase of 8.4% over June,

132 Management Report 1 st half Companies and Government Service Our 2.4 million business customers are served in the following segments: Very Small and Small Companies, Empresa, Middle, Upper Middle, Corporate and Large Corporate. In order to better serve Very Small and Small Companies, we inaugurated 55 Agências Empresa in the semester, specialized and exclusive, in which we serve more than 129 thousand customers. Currently, we have 93 branches and new units will be implemented by the end of To improve those clients experience, employees involved in service were trained in actions such as the Internship for New Managers. Customized trainings have been developed for the managers who work in Agências Empresa. The expectation is that by the year end, 395 managers will be trained in this training. Yet, as part of the improvement and specialization effort, all branches general managers will receive training in credit, in Digital Experience By the semester end, we had 32 Escritórios de Negócio focused on Very Small and Small Companies, 12 of which were implemented in this semester. In these offices, we serve 86.0 thousand clients, who have digital relationship channels and extended service hours. Since May, our clients have the possibility to contract export and import exchange operations 100% by the Gerenciador Financeiro (Financial management system). The solution centralizes international business operations on a single platform and brings agility and efficiency to the company s management. In the first semester, US$27.5 million was traded in foreign exchange operations, with 62.7% of the export operations and 38.9% of imports being carried out over the Internet. Business Inovation We launched, in April, the electronic procuration, which allows clients to establish procuration directly in the Gerenciador Financeiro. The solution eliminates physical documents use, it offers agility to the customer, security and notary and transport cost reduction. In addition, it generates operational efficiency at the service centers that process these documents. On average, this innovation generated a 68% reduction in the analysis and registration time. In 1H17, more than three thousand procurations were issued, representing 15% of the total registered in the period. We have also invested in new Cash Management solutions development, focused on providing payment and receiving solutions to customers, including specialized consultants advice. Government We have developed a personalized credit card for the judiciary branch. The solution was created to offer the client agility, control, security and modernity in public resources use. The product, which provides cost reduction and transparency in the accountability process, will replace checks use. Credit Companies loan portfolio was R$234.0 billion in 1H17, a 14.9% fall to 1H16. In export and import exchange oprations, we had 19.5% and 12.6% market share, respectively, in june, 2017, consolidating our position as the main Brazilian foreign trade partners. 8

133 Management Report 1 st half 2017 Capital Markets We operate in domestic capital markets through BB - Banco de Investimento S.A. (BB-BI) and abroad with our brokers BB Securities Ltd (London), Banco do Brasil Securities LLC (New York) and BB Securities Asia Pte. Ltd. (Singapore), focusing in retail and institutional clients. We have global coverage and work in fixed and variable income operations, M&A and Project Finance advisory, offering the clients different finance alternatives and access to investors in Brazil and abroad. 4.3 Rural e Agribusiness Service We expanded to 13 agribusiness specialized branches. A total of 10,6 thousand clients were served in this relationship model, in which they are assisted by a team trained in rural credit, have support from investment specialists, agronomists, and extended service hours. Digital Experience As part of our effort to provide even more convenience, our customers access credit for working capital for input purchase and investment with a smartphone. In 1H17, R$334 million were disbursed for working capital and R$4.2 million in investment operations. The GeoMapa Rural app, a solution for rural properties delimitation via area to be financed geodetic coordinates and part of Agro Digital project, has already surpassed 300 thousand areas captured. Business Inovation We have launched rural properties automatic valuation, which allows the remote evaluation of rural properties. It generated efficiency with R$35.8 million in cost reduction and more than 127 thousand properties evaluated. This initiative, in addition to others, such as rural financing simulation and the statement consultation through digital channels, reinforces our role as a modern and innovative financial agent, which provides its clients with solutions that ensure more transparency and convenience in operations follow-up. Credit We have been, historically, the main agribusiness financial agent in the country, contributing significantly to the credit demand supply in the segment. We ended the first semester with R$187,7 billion Agribusiness credit portfolio, with emphasis on the Working Capital for Input Purchase line. According to data from BACEN, we held, in June, 2017, 59.8% market share. In rural credit operations we use risk mitigation mechanisms (weather and prices). In the 2016/2017 crop, 62.3% of the agricultural working capital operations were covered by production insurance (Seguro Agrícola or Proagro), price insurance (option contracts) or both (Billing Insurance). 5. Asset Management With BB DTVM, we kept on as the market leader in asset management, with 23.1% market share and R$816.4 billion in assets under management. To maintain this leadership, it is critical to improve the customer experience. With this in mind, we have implemented, as of May, the possibility to Banco do Brasil s quota holders to vote electronically, through the internet or mobile, in the funds assemblies. The new voting format, carried out in a totally digital way, besides being more practical for the client, makes the internal process more efficient, since, previously, the voting was done through a branch. 9

134 Management Report 1 st half 2017 Initially, the possibility is available to individuals and funds exclusively to Private segment. Throughout 2017, other segments will have access to virtual voting. The focus in 2017 is to expand our operations in electronic means and improve our customer experience with innovative solutions. 6. Social Businesses and Sustainable Development Our social businessess have as a priority the economically profitable initiatives development, using market mechanisms, to resolving socioeconomic inequalities in a sustainable manner, guaranteeing income, productive inclusion and access to public services. As we believe in the feasibility of conciliate our shareholders' interests with socially and environmentally sustainable businesses development, we have the Integrated Sustainable Development Model (DS). This system allows programs, projects and actions mapping, as well as identifying opportunities in an integrated way, driving initiatives in Sustainable Development Action Plans (PADS). Table 2. Main Social Businessess Balance R$ million 1H16 1H17 MPO Fies 24, ,197.2 Crédito Acessibilidade Shareholders Banco do Brasil's shares (BBAS3) remained in all B3 trading sessions and represented 3.7% of Ibovespa index for the four-month period from may to august, Banco do Brasil also has a level 1 ADR program (BDORY), traded on the over-the-counter market in the United States. We release reports and information to CVM, and on the Investor Relations website. We also invite market analysts to conferences whenever management considers it necessary to elucidate specific topics concerning Banco do Brasil. To institutional investor, we had 340 meetings, including 14 conferences in Brazil and other six abroad, besides promoting two earnings teleconferences. To retail investors, we had meeting along with Private offices in Porto Alegre, Rio de Janeiro and São Paulo. We keep an exclusive analyst and investors relationship team which had, to June, 600 contacts, including meeting and phone calls. Table 3. Market Index Indexes 1H16 1H17 BBAS3 - Book Value BBAS3 - Book Value - Consolidated BBAS3 - Closing Price Earnings per Share (R$) Return on Assets (%) Return on Assets (%) - Consolidated Return on Equity (%) Return on Equity (%) - Consolidated Interest on Ow n Capital (R$ million) 1,411 1,489 ADR Price (US$)

135 Management Report 1 st half 2017 Dividend Distribution According to Material Fact dated , the Board of Directors (BoD) decided, in the exercise of its attributions established in art. 21, item II in BB s Bylaws, set at 25% the net income percentage for the year to be distributed to shareholders as dividends and/or interest on shareholders' equity. In june, 2017, the Board of Directors approved the Stockholder Remuneration Specific Policy creation. Further clarifications on Banco do Brasil dividend policy may be found in the Reference Form, section 3 or in Article 46 of the Banco do Brasil s Bylaws, available on bb.com.br/ir. 8. Corporate Governance Banco do Brasil s corporate governance is structured by the BoD and the Executive Board (EB). The BoD is composed by eight members and advised by the Audit, Compensation and Eligibility, Risks and Capital (recently created) and Internal Audit Team. EB is composed of the Managing Board (CEO and nine Vice-Presidents) and 27 Statutory Directors. We also have a permanent Fiscal Council composed by five sitting members and five alternate members. As a good corporate governance practice, we evaluate the Board of Directors, Audit Committee and Executive Board performance. The Bylaws, the Corporate Governance and Ethics codes also support our best governance practices. Furthermore, our shares are listed in B3 Novo Mercado, the highest segment in governance requirements. Decisions are taken collectively at all Bank levels to conduct the adequate debate over strategic themes and business proposals. For such, management uses committees, subcommittees and commissions at a strategic level, which ensure the agility and security for the decision making. In May, as provided for Law No. 13,303/2016 (State owned companies law), we released the Annual Chart of Public Policies and Corporate Governance, a document written in clear, direct language to the general public and investors and subscribed by the Board of Directors. We are also preparing to join the B3 Programa Destaque em Governança de Estatais (State owned companies governance program). Internal Controls Aligned with our corporate strategy, the Internal Control System continues with cohesive and coordinated action in risk management and controls. The model preserves the Internal Controls Directorship authority and independence, provided responsible for consolidated assessment of the Internal Control System. For further information on BB internal controls, see Reference Form 2016 available in Institutional Security We support and actively contribute to the actions taken within the Sistema Nacional de Prevenção e Combate à Lavagem de Dinheiro e à Corrupção (National System for Prevention and Combat Against Money Laundering and Corruption) through its participation in meetings to prepare and implement the Enncla (National Strategy for the Combat Against Corruption and Money Laundering), and technical cooperation agreements formalization with institutions such as Ministério da Justiça (Ministry of Justice), Coaf (Council for Financial Activities Control). During the period, 33,503 employees participated in corruption and 9,343 in money laudering prevention training. 9. People For us, the policies development and practices on people management is guided by meritocracy, competencies development for work and organizational climate. They are the foundation that allows the strategic objectives achievement. 11

136 Management Report 1 st half 2017 Following, our employees profile: Table 4. Employee Profile 1H16 1H17 Employee Profile Employees 109,615 99,603 Female 45,542 41,194 Male 64,073 58,409 Education's Level High School 22,846 18,429 College 47,210 42,100 Specialization, Master's and Doctorate 39,250 38,868 Others Geographic distribution North 5,902 4,509 Northeast 17,642 16,635 Mid West 17,586 16,615 Southeast 49,141 44,142 South 19,301 17,665 Abroad Turnover (%) In 1H17, we invested R$34.8 million in corporate education through UniBB (Banco do Brasil Corporate University). This investment made possible the offering of 4.8 thousand undergraduation, 4.3 thousand graduation and 2.3 thousand foreign language scholarships. As the investments s result, we won the award for best corporate university in the world in the Innovation category at the Global CCU Awards. Aligned with the Digital Transformation strategic move, UniBB has been offering the most innovative technologies and educational methodologies. As a state owned company, we selected our employees through a public test, with a minimum schooling requirement, no maximum age limit and 5% quota for people with disabilities and 20% for black and brown people. There are no wage differences between women and men holding the same position. In addition, the professional ascension process is based on meritocracy, taking into account training, experience and results obtained. Aligned with our national and global commitments to value diversity and to provide equal opportunities for men and women, we launched, on March 8, 2017, measures to accelerate the organic ascention and increase women representation at all levels, including leadership roles. Among those measures are: I. the adherence of all executives to United Nations Women HeForShe movement, in which they commit to do their part for a world without violence and discrimination against women. HeForShe reinforced the perception of men's fundamental role in making gender equity a reality; II. gender affirmative action in all professional promotion corporate programs; III. extension to transgender, of women exclusive Ombudsman. 12

137 Management Report 1 st half 2017 Table 5. Compensation and Benefits Banco do Brasil Financial Statements Consolidated Financial Statements R$ million 1H16 1H17 1H16 1H17 Payroll¹ 8, , , ,043.3 Supplementary Pension² Health Care Plans² Statutory Profit Sharing³ Training⁴ Expenses with salaries, benefits, social charges and personnel provisions, as note 21 b) Personnel Expenses; 2 - Funding of supplementary pension and health care plans, pursuant to Note Benefit Plan; 3 - Amount set aside for Profit and Gain Sharing, as Statement of Income; 4 As note 21 b) Personnel Expenses. 10. Legal Information In accordance with criteria defined by the Very Small and Small Companies Brazilian Statute, 94.8% of our companies clients are very small and small companies. The funds used by small and very small companies were R$34.7 billion in June, The working capital operations balance contracted by very small companies was R$1.4 billion, and of small companies was R$20.2 billion. Investment operations aimed at very small companies was R$1.0 billion; for small companies, investments was R$12.0 billion. In the engagement of services non related to external audits, we adopt procedures based on the applicable legislation and on internationally accepted principles that preserve the auditor independence. These principles consist on: (i) the auditor should not audit his own work and (ii) the auditor should not act managerially before his client nor promote the clients interests. During the period, Banco do Brasil s Conglomerate companies contracted KPMG Auditores Independentes to provide other services not related to the Bank's and its subsidiaries' external audit R$650.3 thousand, representing 1.7% of the fees related to the external audit service. The contracted services were: Table 6. Hiring of KPMG Audit Hiring Company Hiring Date End of Contract Description Amount - In R$ Thousands BB AG 03/06/ /06/2017 Training Fit&Proper 15.4 Banco Patagonia - Ur 04/01/ /01/2017 Consulting 23.2 Banco Patagonia 04/01/ /01/2017 System 49.2 Banco Patagonia 04/01/ /01/2017 Consulting - Regulation 12.0 BB Securities Londres 04/10/ Consulting - ICAAP Banco Votorantim 04/06/ /30/2017 Training 16.0 Banco Votorantim 05/10/ /31/2017 Consulting 95.0 Banco Votorantim 06/24/ /31/2017 Consulting - Taxes BB Londres 06/01/ /31/2017 Consulting 52.4 Neoenergia 06/30/ /30/2017 Consulting BB AG 06/09/ /09/2017 Training

138 Management Report 1 st half 2017 In compliance with CVM Instruction 381, we report that in 1H17, the Independent Auditors KPMG did not provide services that could affect its independence, ratified by the adherence of its professionals to relevant ethical standards and independence that meet or exceed the standards promulgated by IFAC, PCAOB, SEC, AICPA, CFC, CVM, Central Bank, SUSEP PREVIC and by other regulatory agencies. These policies and procedures covering areas such as: personal independence, post-employment relationships, rotating professionals as well as the approval of audit and other services, are subject to constant monitoring. In Banco do Brasil, the contracting of services related to external audit should be preceded by the Audit Committee s opinion. Securities In accordance with art. 8 of Bacen Circular 3,068/2001, we state that we have the intention and the financial capacity to hold, up to maturity, securities classified as held-to-maturity securities. Financial capacity is supported by cash flow projection that does not consider the possibility of selling these securities. The securities breakdown by category and the reclassification of securities can be found in Note 8 - Securities and Derivative Financial Instruments. The amounts related to unrealized gains and losses relating to securities are disclosed in Note 28 - Risk and Capital Management. Affiliates and Subsidiaries Pursuant to article 243, Law 6,404/76, we hereby announce that the Company's investments in affiliates and subsidiaries are listed in Notes 3 - Presentation of Financial Statements and 14 - Investments. Additional Information I. In the semester, fixed investments amounted to R$666 million, emphasizing the investment in new service points and in branches ambience improvement (R$208 million) as well as the investment made in information technology (R$428 million). II. We have R$1.4 billion non-active tax credits arising from requirements defined by CMN Resolutions 3,059, december 20, 2002 and 3,355, march 31, 2006, and presented in Banco do Brasil Financial Statements and Consolidated Financial Statements note for 1H17. III. IV. Records in a memorandum account, according to rules provided for in Cosif (Financial Institutions Accounting Plan), R$7.7 billion deriving from Co-obligations and Risks in Guarantees Provided to BB s clients and companies. In 2012 was entered Interbank Revolving Credit contract Line to release with Banco Votorantim, by the limit equivalent to R$ 6.8 billion. The operation was accounted for in memorandum accounts, according to rules provided for in Cosif and was issued in the Related Parties Note in Banco do Brasil Financial Statements and Consolidated Financial Statements related to the first semester. V. During this period, there haven t been any corporate reorganizations. Banco do Brasil, its Shareholders, Officers, and the Fiscal Council members undertake to resolve all and any dispute or controversy related with Novo Mercado Listing Regulation by means of B3 Market Arbitration Chamber, in conformity with a commitment clause contained in Banco do Brasil By-laws. Acknowledgements We thank our employees and collaborators dedication and diligence, as well as the trust of shareholders, clients and company. For more information, visit Investor Relations Website: 14

139 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated BALANCE SHEET ASSETS Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 CURRENT ASSETS 850,692, ,240, ,957,263 Cash and cash equivalents 6 14,330,233 12,805,771 14,052,402 Interbank investments 7.a 447,193, ,769, ,436,276 Open market investments 416,126, ,537, ,966,585 Interbank deposits 31,067,034 33,232,252 38,469,691 Securities and derivative financial instruments 8 23,333,147 16,959,199 19,781,675 Own portfolio 16,284,968 13,937,394 16,278,894 Subject to repurchase agreements 5,505,909 1,499, ,242 Pledged in guarantee 264, ,539 97,065 Derivative financial instruments 1,277,847 1,213,218 2,419,474 Interbank accounts 72,964,327 68,026,103 73,565,770 Payments and receipts pending settlement 9.a 3,468,477 3,513 3,818,464 Restricted deposits 9.b 67,363,327 66,063,844 68,059,575 Deposits with Banco Central do Brasil 64,659,229 63,451,094 65,404,128 National Treasury - rural credits resources 51,408 54,959 64,192 National Housing Finance System 2,652,690 2,557,791 2,591,255 Interbank onlendings ,495 Correspondent banks 2,132,523 1,958,746 1,686,236 Interdepartmental accounts 153, , ,293 Internal transfers of funds 153, , ,293 Loan operations ,843, ,149, ,585,686 Public sector 735, ,803 1,184,584 Private sector 186,791, ,111, ,217,383 Loan operations linked to assignment (Allowance for loan losses) (13,684,382) (12,612,164) (12,816,930) Leasing transactions , , ,805 Private sector 218, , ,129 (Allowance for leasing transactions losses) (24,212) (31,803) (43,324) Other receivables 118,221, ,462, ,612,282 Receivables from guarantees honored 589, , ,165 Foreign exchange portfolio 11.a 17,001,540 17,188,751 18,854,747 Accrued income 2,871,681 2,644,778 2,641,688 Securities trading 375, , ,176 Specific credits 12.a Sundry 12.b 99,374, ,887, ,215,592 (Allowance for other losses) (1,991,668) (1,973,001) (2,035,086) Other assets , , ,074 Assets not for own use and materials in stock 354, , ,465 (Allowance for impairment) (148,531) (137,564) (124,846) Prepaid expenses 253, , ,455 See the accompanying notes to the financial statements. 15

140 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated ASSETS Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 NON-CURRENT ASSETS 594,921, ,136, ,158,234 LONG-TERM RECEIVABLES 563,266, ,008, ,575,565 Interbank investments 7.a 1,223, ,027 1,034,690 Open market investments 335, , ,919 Interbank deposits 888, , ,771 Securities and derivative financial instruments 8 110,933, ,309, ,968,583 Own portfolio 78,648,526 65,273,440 76,783,299 Subject to repurchase agreements 30,395,180 35,791,728 20,367,464 Pledged in guarantee 1,778,204 2,844,970 2,981,022 Derivative financial instruments 111, , ,798 Interbank accounts 579, , ,825 Restricted deposits 9.b 2,957 1,909 12,513 National Treasury - rural credits resources 2,957 1,909 12,513 Interbank onlendings 576, , ,312 Correspondent banks Loan operations ,912, ,774, ,992,475 Public sector 73,594,750 73,401,682 72,563,235 Private sector 331,686, ,986, ,732,315 Loan operations linked to assignment 549, , ,397 (Allowance for loan losses) (22,917,925) (22,226,287) (22,966,472) Leasing transactions , , ,420 Private sector 295, , ,558 (Allowance for leasing transactions losses) (6,255) (9,570) (28,138) Other receivables 67,300,266 67,143,433 69,798,783 Foreign exchange portfolio 11.a 286, , ,955 Accrued income 33,751 31,350 45,846 Securities trading 603, , ,994 Specific credits 12.a 398, , ,509 Sundry 12.b 66,779,138 66,337,503 68,416,115 (Allowance for other losses) (801,292) (773,780) (662,636) Other assets 13 28,199 16,809 11,789 Prepaid expenses 28,199 16,809 11,789 PERMANENT ASSETS 31,654,866 33,127,744 31,582,669 Investments 16,737,539 16,855,006 16,504,684 Associates and joint ventures 14.a 16,585,040 16,703,729 16,350,824 Domestic 16,523,486 16,631,072 16,230,179 Abroad 61,554 72, ,645 Other investments 14.c 171, , ,112 (Provision for losses) (19,136) (19,121) (54,252) Property and equipment 15 7,418,223 7,557,478 7,140,829 Land and buildings 7,705,323 7,722,456 6,769,791 Other property and equipment 10,263,092 9,953,340 9,580,790 (Accumulated depreciation) (10,550,192) (10,118,318) (9,209,752) Intangible 16 7,499,104 8,715,260 7,924,452 Intangible assets 19,952,308 19,602,197 17,590,378 (Accumulated amortization) (12,453,204) (10,886,937) (9,665,926) Deferred ,704 Organization and expansion costs 2,098 2,098 1,584,154 (Accumulated amortization) (2,098) (2,098) (1,571,450) TOTAL ASSETS 1,445,613,792 1,401,376,974 1,445,115,497 See the accompanying notes to the financial statements. 16

141 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated LIABILITIES/SHAREHOLDERS EQUITY Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 CURRENT LIABILITIES 1,104,357,067 1,004,424,338 1,011,489,183 Deposits 17.a 393,217, ,668, ,520,384 Demand deposits 62,384,828 69,349,186 62,549,870 Savings deposits 150,982, ,763, ,367,610 Interbank deposits 15,687,145 17,827,013 24,111,806 Time deposits 164,060, ,675, ,461,136 Other deposits 103,565 53,111 29,962 Securities sold under repurchase agreements 17.c 437,069, ,409, ,837,556 Own portfolio 33,888,906 42,983,151 18,677,267 Third-party portfolio 403,180, ,426, ,160,289 Funds from acceptance and issuance of securities 18 96,826,343 68,052,214 60,873,824 Bonds backed by real estate, mortgage and other credits 90,423,395 62,623,394 57,765,731 Foreign securities 6,278,234 5,428,820 3,108,093 Certificates of structured operations 124, Interbank accounts 2,905,777 1,075 3,112,659 Receipts and payments pending settlement 9.a 2,905,777 1,075 3,100,027 Correspondent banks ,632 Interdepartmental accounts 2,280,882 2,450,012 3,238,264 Third-party funds in transit 2,279,328 2,446,807 3,236,114 Internal transfers of funds 1,554 3,205 2,150 Borrowings 19.a 15,977,925 17,997,094 18,577,980 Foreign borrowing 15,977,925 17,997,094 18,577,980 Domestic onlending - official institutions 19.b 39,332,945 39,463,427 38,264,763 BNDES 7,348,876 8,227,439 9,220,341 Caixa Econômica Federal 25,009,178 23,758,043 21,648,278 Finame 4,938,360 5,155,259 5,463,023 Other institutions 2,036,531 2,322,686 1,933,121 Foreign onlending 19.b Derivative financial instruments 8.d 1,477,150 1,089,344 2,085,982 Other liabilities 115,268, ,293, ,977,676 Billing and collection of taxes and contributions 4,085, ,463 3,913,418 Foreign exchange portfolio 11.a 10,332,885 17,879,212 18,160,037 Shareholders and statutory distributions 1,934,819 1,125,248 1,622,869 Taxes and social security 20.a 11,188,234 15,293,551 14,877,176 Securities trading 722, , ,317 Financial and development funds 20.b 8,946,766 9,055,620 8,606,530 Subordinated debts 20.c 8,331,154 4,158,742 2,448,477 Equity and debt hybrid securities 20.d 86, ,308 74,600 Other liabilities 20.e 69,640,329 73,694,320 71,594,252 See the accompanying notes to the financial statements. 17

142 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated LIABILITIES/SHAREHOLDERS EQUITY Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 NON-CURRENT LIABILITIES 250,473, ,758, ,176,976 LONG-TERM LIABILITIES 250,042, ,312, ,737,563 Deposits 17.a 49,594,114 51,312,376 57,358,148 Interbank deposits 3,274,579 2,837,788 3,360,699 Time deposits 46,319,535 48,474,588 53,997,449 Securities sold under repurchase agreements 17.c 12,752,115 16,224,713 32,131,079 Own portfolio 12,752,099 16,224,699 32,131,079 Third-party portfolio Funds from acceptance and issuance of securities 18 48,995,197 97,114, ,634,901 Bonds backed by real estate, mortgage and other credits 33,259,362 82,047,387 97,975,349 Foreign securities 15,659,050 14,964,440 15,522,755 Certificates of structured operations 76, , ,797 Borrowings 19.a 3,762,720 2,412,254 4,185,001 Foreign borrowing 3,762,720 2,412,254 4,185,001 Domestic onlending - official institutions 19.b 40,119,676 43,619,266 48,337,873 National Treasury 163, , ,578 BNDES 22,427,841 23,859,417 26,103,172 Finame 17,528,283 19,610,601 22,069,123 Foreign onlending 19.b Derivative financial instruments 8.d 492, , ,918 Other liabilities 94,325,147 97,848,445 93,157,261 Foreign exchange portfolio 11.a 6,013,322 5,322,077 3,428,033 Shareholders and statutory distributions Taxes and social security 20.a 579, , ,130 Securities trading 32,612 24, ,520 Financial and development funds 20.b 5,890,500 5,734,905 5,134,590 Special operations 2,213 2,203 2,205 Subordinated debts 20.c 46,659,043 50,942,804 49,816,340 Equity and debt hybrid securities 20.d 5,453,826 5,246,031 5,322,793 Debt instruments eligible as capital 20.c and 20.d 25,427,786 24,714,492 23,953,240 Other liabilities 20.e 4,265,474 5,127,838 4,454,410 DEFERRED INCOME 431, , ,413 SHAREHOLDERS' EQUITY 23 90,783,362 87,193,752 83,449,338 Capital 67,000,000 67,000,000 67,000,000 Local residents 52,709,419 53,209,529 53,699,220 Domiciled abroad 14,290,581 13,790,471 13,300,780 Instruments qualifying to common equity tier 1 capital 23.c 8,100,000 8,100,000 8,100,000 Capital reserves 12,436 15,509 15,509 Revaluation reserves 2,407 2,660 2,695 Profit reserves 31,120,094 27,646,569 25,402,333 Accumulated other comprehensive income (16,881,666) (16,929,205) (18,318,685) (Treasury shares) (1,850,043) (1,854,749) (1,854,749) Non-controlling interests 3,280,134 3,212,968 3,102,235 TOTAL LIABILITIES 1,445,613,792 1,401,376,974 1,445,115,497 See the accompanying notes to the financial statements. 18

143 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated STATEMENT OF INCOME Note 2nd quarter/2017 2nd quarter/2016 1st half/2017 1st half/2016 INCOME FROM FINANCIAL INTERMEDIATION 37,181,137 38,042,616 75,819,981 72,387,822 Loan operations 10.b 20,464,550 24,034,104 42,671,447 44,446,419 Leasing transactions 10.i 64,172 83, , ,925 Securities 8.b 14,659,395 12,281,551 29,539,380 23,818,215 Derivative financial instruments 8.e 351,200 (1,310,452) (195,274) (1,613,247) Foreign exchange results 11.b 172, , ,025 1,546,902 Compulsory investments 9.c 1,069,509 1,447,472 2,324,506 2,837,649 Operations of sale and transfer of financial assets 400, , ,186 1,173,959 EXPENSES FROM FINANCIAL INTERMEDIATION (29,750,364) (29,656,907) (60,661,549) (56,139,430) Deposits and securities sold under repurchase agreements 17.d (18,366,893) (29,211,134) (42,912,820) (53,155,215) Borrowings and onlendings 19.c (4,721,296) 6,681,422 (4,259,610) 11,334,221 Leasing transactions 10.i (35,470) (47,580) (78,005) (102,955) Operations of sale and transfer of financial assets (13,839) (19,207) (29,551) (28,044) Allowance for loan losses 10.f and 10.g (6,612,866) (7,060,408) (13,381,563) (14,187,437) INCOME FROM FINANCIAL INTERMEDIATION 7,430,773 8,385,709 15,158,432 16,248,392 OTHER OPERATING INCOME/EXPENSES (3,230,848) (3,774,622) (6,786,153) (7,574,212) Service fee income and bank fee income 21.a 6,315,660 5,886,369 12,411,408 11,284,628 Service fee income 3,953,727 3,810,243 7,837,614 7,269,844 Bank fee income 2,361,933 2,076,126 4,573,794 4,014,784 Personnel expenses 21.b (5,219,709) (5,336,562) (10,284,584) (10,512,230) Other administrative expenses 21.c (3,814,373) (3,798,862) (7,692,623) (7,600,784) Tax expenses 24.c (1,335,108) (1,435,358) (2,723,047) (2,822,523) Equity in associates and joint ventures 14 1,062,074 1,091,144 2,014,794 2,115,208 Other operating income 21.d 2,085,710 2,382,473 4,353,271 4,886,713 Other operating expenses 21.e (2,325,102) (2,563,826) (4,865,372) (4,925,224) OPERATING INCOME 4,199,925 4,611,087 8,372,279 8,674,180 NON-OPERATING INCOME 22 59,475 71, , ,280 Incomes 84,643 84, , ,810 Expenses (25,168) (13,093) (46,293) (44,530) PROFIT BEFORE TAXATION AND PROFIT SHARING 4,259,400 4,682,775 8,476,869 8,782,460 INCOME TAX AND SOCIAL CONTRIBUTION 24.a (896,043) (1,459,665) (1,975,184) (2,504,506) EMPLOYEE AND DIRECTORS PROFIT SHARING (351,064) (320,452) (650,361) (626,769) NON-CONTROLLING INTERESTS (393,611) (437,610) (789,621) (827,086) NET INCOME 2,618,682 2,465,048 5,061,703 4,824,099 EARNINGS PER SHARE 23.f Weighted average number of shares - basic and diluted 2,784,950,759 2,788,217,354 2,784,856,177 2,790,389,280 Basic and diluted earnings per share (R$) See the accompanying notes to the financial statements. 19

144 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY BB Consolidated Note Capital Instruments qualifying to common equity tier 1 Capital Capital reserves Revaluation reserves Profit reserves Accumulated other comprehensive income Treasury shares Retained earnings/acc umulated losses Balances at Dec 31, ,000,000 8,100,000 14,326 2,730 6,173,642 22,857,448 (16,678,569) (364,102) (1,697,380) -- 3,128,078 81,536,173 Legal reserve Statutory reserves Banco do Brasil Associates and subsidiaries Capital increase - capitalization of reserves 7,000, (7,000,000) Accumulated other comprehensive income of securities and derivative financial instruments, net of taxes Noncontrolling interest ,332, , ,637,981 Accumulated other comprehensive income - benefit plans, net of taxes (2,913,995) (2,913,995) Share-based payment transactions , , ,340 Operation due to performance secured by the FGCN - Fundo Garantidor da Construção Naval (163,526) (163,526) Expired dividend/interest on own capital , ,554 Realization of revaluation reserve in associates and subsidiaries 23.d (35) Change in noncontrolling interest (25,843) (25,843) Net income 23.h ,824, ,824,099 Interest on instruments elegible to common equity (46,227) -- (46,227) Unrealized gains , (25,957) Allocation - Reserves 23.g ,595 3,107, (3,345,286) Interest on own capital 23.g (1,411,218) -- (1,411,218) Balances at Jun 30, ,000,000 8,100,000 15,509 2,695 6,411,237 18,991,096 (18,259,672) (59,013) (1,854,749) -- 3,102,235 83,449,338 Changes in the period 7,000, ,183 (35) 237,595 (3,866,352) (1,581,103) 305,089 (157,369) -- (25,843) 1,913,165 Balances at Dec 31, ,000,000 8,100,000 15,509 2,660 6,570,147 21,076,422 (16,944,830) 15,625 (1,854,749) -- 3,212,968 87,193,752 Accumulated other comprehensive income of securities and derivative financial instruments, net of taxes ,433 (1,942) ,491 Accumulated other comprehensive income - benefit plans, net of taxes (487,658) (487,658) Foreign exchange variation and hedge of investments abroad 23.i (31,294) (31,294) Share-based payment transactions (3,073) , ,633 Expired dividend/interest on own capital , ,098 Realization of revaluation reserve in associates and subsidiaries 23.d (253) Change in noncontrolling interest ,166 67,166 Initial adoption of the CMN Resolution No. 4,512/2016 in Banco Votorantim S.A. 14.a (58,275) -- (58,275) Net income 23.h ,061, ,061,703 Interest on instruments elegible to common equity (45,172) -- (45,172) Unrealized gains (1,178) , Allocation - Reserves 23.g ,190 3,226, (3,474,703) Interest on own capital 23.g (1,489,082) -- (1,489,082) Balances at Jun 30, ,000,000 8,100,000 12,436 2,407 6,818,337 24,301,757 (16,864,055) (17,611) (1,850,043) -- 3,280,134 90,783,362 Changes in the period (3,073) (253) 248,190 3,225,335 80,775 (33,236) 4, ,166 3,589,610 See the accompanying notes to the financial statements. Total 20

145 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated STATEMENT OF CASH FLOWS Note 1st half/2017 1st half/2016 Cash flows from operating activities Income before taxation and profit sharing 8,476,869 8,782,460 Adjustments to income before taxation and profit sharing 12,893,611 23,664,885 Provision for credits, leasing and other credits 10.f and 10.g 13,381,563 14,187,437 Depreciation and amortization 21.c 2,150,383 2,134,991 Exchange fluctuation in changes of intangible assets 16 (2,362) 17,406 Equity in subsidiaries and associates 14.a (2,014,794) (2,115,208) Gain on the disposal of assets 22 (8,264) (12,488) Gain on the disposal of investments 22 (311) -- Capital gain 22 (92,186) (71,810) Provision for devaluation of other assets 22 11,816 6,091 Amortization of goodwill 14.d 105, ,748 Expenses with civil, labor and tax provisions 27 1,069,221 1,409,317 Adjustment of actuarial assets/liabilities and surplus allocation funds 26 53,196 (259,572) Commissions income deferred (339,840) (342,383) Effect of changes in foreign exchange rates in cash and cash equivalents (493,908) 9,489,726 Non-controlling interests (789,621) (827,086) Other adjustments (136,958) (55,284) Income adjusted before taxation and profit sharing 21,370,480 32,447,345 Equity variations (59,155,965) (48,118,921) Increase in short-term interbank investments (90,232,512) (94,929,936) (Increase) decrease in trading securities and derivative financial instruments (1,856,609) 1,470,932 Increase in interbank and interdepartmental accounts (853,288) (2,632,071) Increase in compulsory deposits with Banco Central do Brasil (1,208,135) (4,593,210) (Increase) decrease in loan operations (4,970,485) 16,546,482 Decrease in leasing transactions 69, ,181 (Increase) decrease in other receivables net of deferred taxes 7,268,199 (2,930,265) Increase in other assets (19,830) (20,839) Income tax and social contribution paid (2,394,295) (4,039,627) Decrease in deposits (3,168,667) (23,541,186) Increase in securities sold under repurchase agreements 75,187,718 78,446,987 Decrease in funds from acceptance and issuance of securities (19,344,813) (14,052,767) Decrease in borrowings and onlendings (4,298,775) (10,364,972) (Decrease) increase in other liabilities (13,319,267) 12,392,165 Decrease in deferred income (15,059) (19,795) CASH USED IN OPERATING ACTIVITIES (37,785,485) (15,671,576) Cash flows from investing activities Increase in securities available for sale (38,212,834) (23,202,854) Decrease in securities available for sale 27,291,946 16,620,658 Increase in securities held to maturity (804,450) (2,471,171) Decrease in securities held to maturity 1,249,080 5,495,175 Dividends received from associated and subsidiaries companies 4,681,924 1,173,185 Acquisition of property, plant and equipment in use (440,143) (417,960) Disposal of property, plant and equipment in use 4,326 38,172 Acquisition of investments (1,884,200) (54,265) Acquisition of intangible assets (357,906) (200,115) Disposal of intangible assets/deferred assets 1, CASH USED IN INVESTING ACTIVITIES (8,471,143) (3,019,175) Cash flows from financing activities Change in non-controlling interests 67,166 (25,843) (Decrease) increase in subordinated debts 329,837 (1,287,877) (Decrease) increase in equity and debt hybrid securities 287,103 (6,274,240) (Acquisition) disposal of treasury shares 4,706 (157,369) Interest on own capital paid (929,124) (1,276,973) CASH USED IN FINANCING ACTIVITIES (240,312) (9,022,302) Net variation of cash and cash equivalents (46,496,940) (27,713,053) At the beginning of the period 103,123, ,707,171 Effect of changes in foreign exchange rates in cash and cash equivalents 493,908 (9,489,726) At the end of the period 57,120,638 65,504,392 Decrease in cash and cash equivalents (46,496,940) (27,713,053) See the accompanying notes to the financial statements. 21

146 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated STATEMENT OF VALUE ADDED Note 1st half/2017 1st half/2016 Income 74,133,842 69,265,926 Income from financial intermediation 75,819,981 72,387,822 Income from service and bank fees ,284,628 Allowance for loan losses (13,381,563) (14,187,437) Capital gains , ,243 Other income/(expenses) ( ) (325,330) Expenses from financial intermediation (47,279,986) (41,951,993) Inputs purchased from third parties (4,324,619) (4,392,957) Materials, water, electric power and gas 21.c (315,165) (354,655) Expenses with outsourced services 21.c (707,065) (750,845) Communications 21.c (576,845) (579,417) Data processing 21.c (407,848) (394,052) Transportation 21.c (502,093) (547,500) Security services 21.c (610,339) (562,162) Financial system services 21.c (359,031) (393,649) Advertising and marketing 21.c (122,999) (125,973) Other (723,234) (684,704) Gross added value 22,529,237 22,920,976 Depreciation and amortization 21.c (2,256,059) (2,238,739) Value added produced by entity 20,273,178 20,682,237 Value added received through transfer 2,014,794 2,115,208 Equity in associates and joint ventures 2,014,794 2,115,208 Added value to distribute 22,287, % 22,797, % Value added distributed 22,287, % 22,797, % Personnel 9,708, % 9,928, % Salaries and fees 6,326,069 6,505,872 Employee and directors profit sharing 650, ,769 Benefits and staff training 1,581,269 1,404,704 FGTS (Government severance indemnity fund for employees) 380, ,130 Other charges 770,663 1,005,673 Taxes, rates and contributions 5,924, % 6,537, % Federal 5,161,188 5,859,273 State Municipal 762, ,192 Interest on third parties' capital 803, % 680, % Rent 21.c 803, ,231 Interest on own capital 23.g 5,851, % 5,651, % Federal government's interest on own capital 803, ,567 Other shareholders interest on own capital 685, ,651 Interest on the instrument eligible to the federal government's common equity tier 1 capital 45,172 46,227 Retained earnings 3,527,449 3,366,654 Non-controlling interest in retained earnings 789, ,086 See the accompanying notes to the financial statements. 22

147 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - THE BANK AND ITS OPERATIONS Banco do Brasil S.A. (Banco do Brasil or the Bank) is a publicly-traded company established under private law, with both public and private shareholders, subject to the rules of Brazilian Corporate Law. Its headquarters are located at Setor de Autarquias Norte, Quadra 5, Lote B, Edifício Banco do Brasil, Brasília, Distrito Federal, Brazil. The Bank's business activities include the following: all manner of asset, liability and advisory services; banking and financial services, including foreign exchange transactions and other services such as insurance, pension plans, capitalization bonds, securities brokerage, credit/debit card management, consortium management, investment funds and managed portfolios; and all other types of transactions available to banks within Brazil s National Financial System. As an agent for execution of the Brazilian Federal Government's credit and financial policies, Brazilian Law requires the Bank to perform functions specifically those under article 19 of Law 4,595/ COMPANY RESTRUCTURING Corporate reorganization in the area of insurance Incorporation of BB Cor Participações S.A. by BB Corretora de Seguros e Administradora de Bens S.A. On December 27, 2016, the BB Cor Participações S.A. (BB Cor) was merged into BB Corretora de seguros e Administradora de Bens S.A. (BB Corretora) in accordance with the terms of Protocol and Justification of Incorporation. The incorporated net assets were evaluated at book value of R$ 26,976 thousand on the base date of the transaction, December 27, The incorporation is justified by the unnecessary maintenance of BB Cor verified in the process of reviewing the business model in the segment of distribution of security products, as well as due to the lack of prospects that the company would develop operational activities. Thereby a natural consequence, BB Corretora became the successor of BB Cor in a universal representation regarding of all its assets, rights and obligations, entirely taking over its assets. Considering that BB Seguridade is the single shareholder of the merged entity on the date of the incorporation, there was no exchange between the shares of non-controlling shareholders of the merged company for shares of the absorbing company, therefore, there was no change in the share capital of BB Seguridade. - PRESENTATION OF FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with the accounting guidelines derived from Brazilian corporation law, the rules and instructions issued by the National Monetary Council (Conselho Monetário Nacional - CMN), the Central Bank of Brazil (Banco Central do Brasil - Bacen) and the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários - CVM), as applicable. In the consolidated financial statements, there was a reclassification of the Instrument qualifying as CET1 - hybrid capital and debt instrument to Shareholder's equity. This adjustment is also performed in the prudential financial statements and to IFRS to improve the quality and transparency of these consolidated financial statements. 23

148 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated The preparation of financial statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management uses judgment in the determination and recording of accounting estimates, when applicable. Significant assets and liabilities subject to these estimates and assumptions include: the residual value of fixed assets, the allowance for loan losses, deferred tax assets, provision for labor, civil and tax demands, valuation of financial instruments, assets and liabilities relating to post-employment benefits and other provisions. The final amounts of transactions involving these estimates are only known upon their settlement. The consolidated financial statements include the operations of the Bank performed by their domestic agencies and abroad and also include the operations of the Bank s controlled entities, as well as of the special purpose entities (Dollar Diversified Payment Rights Finance Company and Loans Finance Company Limited) and of the investment financial funds (Fênix Fundo de Investimento em Direitos Creditórios do Varejo, Fundo de Investimento em Direitos Creditórios da Companhia Pernambucana de Saneamento Compesa, BB Fund Class A and BB Fund Class D) of which the companies of Banco do Brasil s Conglomerate are the main beneficiaries or detain the main obligations. The consolidated financial statements reflect the assets, liabilities, income and expenses of Banco do Brasil and its controlled entities, in accordance with CPC 36 (R3) Consolidated financial statements. In the preparation of the consolidated financial statements, amounts resulting from transactions between consolidated companies, including the equity interest held by one in another, balances of balance sheet accounts, revenues, expenses and unrealized profits, net of tax effects, were eliminated. Non-controlling interest in net equity and in income of the controlled entities were separately disclosed in the financial statements. Leasing transactions were considered based on the financial method, and the amounts were reclassified from the Leased assets line to the Leasing transactions line, after deduction of residual amounts received in advance. The profit and loss with foreign exchange from branches operations are presented in the groupings of income in which the charges and income on these transactions are recognized. The foreign exchange profit and loss on overseas investments are presented in the grouping of Borrowings and onlendings, in order to eliminate the effect of protection for the exchange rate fluctuations of these investments. The Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - CPC) is responsible for issuing accounting pronouncements and interpretations, based on international accounting standards, approved by the CVM. Bacen adopted the following pronouncements of the CPC, applied by the Bank, as applicable: CPC 00 (R1) - Conceptual framework, CPC 01 - Decrease in recoverable amount of assets, CPC 03 - Statement of cash flows (DFC), CPC 05 - Related party disclosures, CPC 10 (R1) - Share-based payment, CPC 23 - Accounting policies, changes in accounting estimates and errors, CPC 24 - Events after the reporting period, CPC 25 - Provisions, contingent liabilities and contingent assets and CPC 33 (R1) - Employee benefits. Additionally, Bacen issued CMN Resolution No. 3,533/2008, which became effective in January 2012 and established procedures for classification, accounting and disclosure of sale and transfer transactions related to financial assets. This Resolution establishes the criteria for the derecognition of financial assets as specified in the CPC 38 Financial instruments: recognition and measurement. The Bank has also applied the following pronouncements which do not conflict with the Bacen rules, as established by article 22, paragraph 2 of Law 6,385/1976: CPC 09 - Value added statement, CPC 12 - Adjustment at present value, CPC 22 - Information by segment, CPC 36 (R3) - Consolidated financial statements and CPC 41 - Earnings per share. The application of other standards, which depend on Bacen s regulations, results primarily in immaterial adjustments or in changes in disclosure, except the following pronouncements, that may result in significant impacts on the financial statements: CPC 04 (R1) - Intangible assets and CPC 15 (R1) - Business combinations - a) reclassification of intangible assets identified in the acquisition of the equity interest in Banco Votorantim, in 2009, as well as in acquisition of controlling interest of Banco Patagonia, in 2011, and of BB Americas, in 2012, from the investment account to the account of Intangible assets, in the group of Non-current assets - permanent; b) derecognition of goodwill amortization expenses from acquisitions; and c) recognition of amortization expenses of intangible assets with definite useful lives, identified in the acquisitions. 24

149 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated CPC 18 (R2) - Investments in associates and joint ventures - a) recording at fair value of the equity interests received in the partnership of the formation of the joint ventures BB Mapfre SH1 and SH2, on June 30, 2011; b) write-off of the book value of the assets contributed by the Bank including any goodwill; and, c) recognition of the result of the transaction in the new constituted companies by the proportion of the equity interest. CPC 38 - Financial instruments: recognition and measurement - adjustment in the allowance for loan losses, due to the adoption of the incurred loss criteria instead of the expected loss criteria. These financial statements were approved by the Executive Board of Directors on August 08, a) Equity interest included in the consolidated financial statements, segregated by business segments: Banking segment Activity Functional currency Jun 30, 2017 Dec 31, 2016 % of Total Share Jun 30, 2016 Banco do Brasil AG Banking Real % % % BB Leasing Company Ltd. (1) Leasing Real % BB Leasing S.A. - Arrendamento Mercantil Leasing Real % % % BB Securities Asia Pte. Ltd. Broker Real % % % Banco do Brasil Securities LLC. Broker Real % % % BB Securities Ltd. Broker Real % % % BB USA Holding Company, Inc. Holding Real % % % Brasilian American Merchant Bank Banking Real % % % Banco do Brasil Americas Banking American Dollar % % % Banco Patagonia S.A. Investment segment Banking Argentinian Peso 58.97% 58.97% 58.97% BB Banco de Investimento S.A. Investment bank Real % % % Segment of fund management BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A. Asset management Real % % % Besc Distribuidora de Títulos e Valores Mobiliários S.A. Asset management Real 99.62% 99.62% 99.62% Segment of insurance. private pension fund and capitalization BB Seguridade Participações S.A. (2) Holding Real 66.36% 66.36% 66.36% BB Cor Participações S.A. (2) (3) Holding Real % BB Corretora de Seguros e Administradora de Bens S.A. (2) Broker Real 66.36% 66.36% 66.36% BB Seguros Participações S.A. (2) Holding Real 66.36% 66.36% 66.36% Segment of payment methods BB Administradora de Cartões de Crédito S.A. Service rendering Real % % % BB Elo Cartões Participações S.A. Holding Real % % % Other segments Ativos S.A. Securitizadora de Créditos Financeiros Credits acquisition Real % % % Ativos S.A. Gestão de Cobrança e Recuperação de Crédito Credits acquisition Real % % % BB Administradora de Consórcios S.A. Consortium Real % % % BB Tur Viagens e Turismo Ltda. (4) Tourism Real % % % BB Asset Management Ireland Limited Credits acquisition Real % % % BB Tecnologia e Serviços (2) IT Real 99.99% 99.99% 99.97% (1) The last General Assembly of the company was on January 28, 2016, when the balances of all balance sheet accounts were zero. The company was formally discontinued on April 29, (2) Refers to the percentage of the equity interest, considering the acquisition of shares by the invested entity held in treasury. (3) On December 27, 2016, the company was merged into BB Corretora de Seguros e Administradora de Bens S.A. (Note 2). (4) The financial statements refers to May/

150 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated b) Information for comparability purposes For comparability purposes in order to better show the nature of operations the following reclassifications were made: Restated statement of income Reimbursement of borrowings and onlendings expenses, of the grouping Other operating income to Borrowings and onlendings. Reimbursement of Interbank operating costs of the grouping Service fee income to Recovery of charges and expenses of the grouping Other operating income. 2nd quarter/2016 Original report Adjustments Restated balances EXPENSES FROM FINANCIAL INTERMEDIATION (29,972,356) 315,449 (29,656,907) Borrowings and onlendings 6,365, ,449 6,681,422 INCOME FROM FINANCIAL INTERMEDIATION 8,070, ,449 8,385,709 OTHER OPERATING INCOME/EXPENSES (3,459,173) (315,449) (3,774,622) Service fee income 3,986,862 (176,619) 3,810,243 Other operating income 2,521,303 (138,830) 2,382,473 1st half/2016 Original report Adjustments Restated balances EXPENSES FROM FINANCIAL INTERMEDIATION (56,875,960) 736,530 (56,139,430) Borrowings and onlendings 10,597, ,530 11,334,221 INCOME FROM FINANCIAL INTERMEDIATION 15,511, ,530 16,248,392 OTHER OPERATING INCOME/EXPENSES (6,837,682) (736,530) (7,574,212) Service fee income 7,605,977 (336,133) 7,269,844 Other operating income 5,287,110 (400,397) 4,886,713 26

151 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted by Banco do Brasil are applied consistently in all periods presented in these financial statements and applied to all the entities of the Conglomerate. a) Statement of income In accrual basis accounting, revenues and expenses are reported in the closing process of the period in which they are incurred, regardless of receipt or payment. The operations with floating rates are adjusted pro rata die, based on the variation of the indexes agreed, and operations with fixed rates are recorded at future redemption value, adjusted for the unearned income or prepaid expenses for future periods. The operations indexed to foreign currencies are converted at the reporting date using current rates. b) Present value measurement Financial assets and liabilities are presented at present value due to the application of the accrual basis in the recognition of their interest income and expenses. Non-contractual liabilities are primarily represented by provisions for lawsuit and legal obligations, for which the disbursement date is uncertain and is not under the Bank's control. They are measured at present value because they are initially recognized at estimated disbursement value on the valuation date and are updated monthly. c) Cash and cash equivalents Cash and cash equivalents comprise available funds in local currency, foreign currency, investments in gold, securities purchased under resale agreements guaranteed by securities not repledged/re-sold, interbank deposits and investments in foreign currencies, with high liquidity and insignificant risk of change in fair value, with maturity at time of acquisition not exceeding 90 days. d) Interbank investments Interbank investments are recorded at their investment or acquisition amount, plus income accrued up to the balance sheet date and adjustments for allowance for losses. e) Securities The securities purchased for the Bank's portfolio are recorded at the actual amount paid, including brokerage charges and fees, and are classified based on management s intention, in one of three categories, according to Bacen Circular 3,068/2001: Trading Securities: these are securities purchased to be actively and frequently traded. They are adjusted monthly to market value. The increases and decreases in value are recorded in income and expense accounts for the period; Securities available for sale: these are securities that may be traded at any time, but are not acquired to be actively and frequently traded. They are adjusted monthly to market value and their increases and decreases in value are recorded, net of tax effects, in Accumulated other comprehensive income in Shareholders' equity; and Securities held to maturity: these are securities that the Bank owns and has the financial capacity and intent to hold to maturity. These securities are not adjusted to market value. The Bank's financial capacity to hold to maturity is supported by a cash flow projection that does not consider the possibility of sale of these securities. The marking-to-market methodology of derivative financial instruments was established on the basis of consistent and verifiable criteria that take into account the closing price, or adjustment, when applicable, on the day of calculation or, failing that, by means of Pricing models that reflect the net realizable value, or the price of a similar financial instrument, taking into account at least the payment and maturity dates, the credit risk and the currency or indexer. 27

152 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Income accrued on the securities, irrespective of the category in which they are classified, is appropriated on a pro rata die basis on an accrual basis until the date of maturity or final sale, using the cumulative or straight-line method, based on the contractual remuneration and purchase price, and recorded directly in the statement of income for the period. Impairment of securities classified as available for sale and held to maturity, if considered not to be temporary, are recorded directly in expense for the period and a new cost basis for the asset is determined. Upon sale, the difference between the sale amount and the cost of purchase plus accrued income is considered as a result of the transaction and is recorded on the date of the transaction as a gain or loss on securities. f) Derivative financial instruments Derivative financial instruments are adjusted to market value at each monthly trial balance and balance sheet date. Increases or decreases in value are recorded in the appropriate income or expense accounts. The mark-to-market methodology used for derivative financial instruments was established following consistent and verifiable criteria, which consider the average price of trading on the date of calculation or, if not available, pricing models that estimate the expected net realizable value, or the price of a similar financial instrument, considering at least, the payment or maturity date, the credit risk and currency or index. Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in the market value or asset cash flow or financial liabilities, commitment or future transaction, are considered hedge instruments and are classified according to their nature: Market Risk Hedge: increases or decreases in value of the financial instruments, as well as of the hedged item, are recorded in income/expense accounts for the period; and Cash Flow Hedge: the effective portion of the increases or decreases in value of the derivative financial instruments classified in this category are recorded, net of tax effects, in Accumulated other comprehensive income in Shareholders' equity. The effective amount is that in which the variation of the hedged item, directly related to the corresponding risk, is offset by the variation in the financial instrument used for the hedge, considering the accumulated effect of the transaction. Other variations in these instruments are recorded directly in the statement of income for the period. g) Loan and leasing operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowance for loan losses Loans, leases, advances on foreign exchange contracts and other receivables with loan characteristics are classified according to Management's judgment with respect to the level of risk, taking into consideration market conditions, past experience and specific risks in relation to the operation, to borrowers and guarantors, observing the parameters established by CMN Resolution 2,682/1999, which requires periodic analyses of the portfolio and its classification into nine levels, ranging from AA (minimum risk) to H (maximum risk), as well as the classification of operations more than 15 days overdue as non-performing. For atypical transactions with a term of more than 36 months, there is a double counting on the days-past-due intervals defined for the nine levels of risk, as permitted by CMN Resolution 2,682/1999. Income from loans overdue for more than 60 days, regardless of their risk level, will only be recognized as income when effectively received. Operations classified at level H, which remain in this classification for 180 days, are written off against the existing allowance. Renegotiated operations are maintained, at a minimum, at the same level at which they were rated on the date of renegotiation. The renegotiations of loans already written off against the allowance are rated as H level and any gains from renegotiation are recognized as income when effectively received. Reclassification to a lower risk category is allowed when there is significant amortization of the operation or when new material facts justify a change in risk level, according to CMN Resolution 2,682/

153 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Allowance for loan losses, considered sufficient by management, satisfies the minimum requirement established by the aforementioned CMN Resolution 2,682/1999 (Note 10.e). h) Taxes Taxes are calculated based on the rates shown in the table below: Taxes Income tax ( additional 10.00%) 25.00% Social Contribution on Net Income (CSLL) (1) 20.00% Social Integration Program/Public servant fund program (PIS/Pasep) (2) 0.65% Contribution to Social Security Financing - (Cofins) (2) 4.00% Tax on services of any kind - (ISSQN) Up to 5.00% (1) Rate applied to financial companies and to non-financial companies in the areas of private insurance and capitalization, since September 01, 2015 (the rate was 15% until August 31, 2015). In January 2019, the rate will return to 15%. For others non-financial companies, the CSLL rate is 9%. (2) For non-financial companies that have opted for the non-cumulative regime of calculation, the PIS/PASEP rate is 1.65% and the Cofins rate is 7.6%. Rate Deferred tax assets (tax credits) and deferred tax liabilities are recorded by applying the current rates of taxes on their respective bases. For the recording, maintaining and writing-off of deferred tax assets, the Bank follows the established criteria by CMN Resolution 3,059/2002, amended by Resolutions CMN No. 3,355/2006, CMN 4,192/2013 and CMN 4,441/2015 and they are supported by a study of their realizability. Tax credits resulting from the increase of the social contribution rate from 15% to 20% are being recognized in an amount sufficient for consumption by the end of the term of the new rate (December 31, 2018), according to Law 13,169/2015. i) Prepaid expenses These expenses refer to the application of payments made in advance, for which the benefits or the services will occur in subsequent periods. Prepaid expenses are recorded at cost and amortized as incurred. j) Permanent assets Investments: investments in subsidiaries and associates in which the Bank has significant influence or an ownership interest of 20% or more of the voting shares, and in other companies which are part of a group or are under common control are accounted for by the equity method based on the Shareholders equity of the subsidiary or associates. In the consolidated financial statements, the subsidiaries are fully consolidated and the associates and joint ventures are presented under the equity method. Goodwill, the premium paid over the book value of the investment acquired due to expectations of future profitability, is based on a financial-economic assessment which substantiate the purchase price of the business and is amortized based on annual income projections as per the assessment. Goodwill is tested for impairment annually. The financial statements of branches and subsidiaries abroad follow the accounting criteria in force in Brazil and are converted into the Real currency by the current rate criterion, as provided for in Bacen Circular No. 2,397 / 1993 and CMN Resolution No. 4,524 / Their effects are recognized in the income statement, under the equity method for those who record the functional currency equal to the national currency, and in Shareholders' Equity, for those who record the functional currency different from the national currency. Other permanent investments are valued at acquisition cost, less allowance for impairment losses, as applicable. Property and equipment: property and equipment are stated at acquisition cost less the impairment losses and depreciation, calculated using the straight-line method by the useful life of the asset (Note 15). 29

154 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Deferred: deferred assets are recorded at cost of acquisition or formation, net of accrued amortization. They are composed mainly of restructuring costs, and the expenditures, up to September 30, 2008, with: third party properties, as a result of opening branches, which are amortized according to rates based on rental terms, limited to 10 years; and with the acquisition and development of information systems, which are amortized at 10% per annum (p.a.). New values are not recorded in deferred assets, in accordance with Resolution CMN 4,534/2016. In 2016, the balances recorded in excluded accounting securities were reclassified to the appropriate asset accounts, according to the nature of the transaction, in conformity with Bacen Circular 3,791/2016. Intangible: intangible assets consist of rights over intangible assets used in the running of the Bank, including acquired goodwill. An asset meets the criteria for identification as an intangible asset, when it is separable, i.e, it can be separated from the entity and sold, transferred or licensed, rented or exchanged, individually or jointly with a contract, related assets or liabilities, regardless of the intention for use by the entity; or results from contractual rights or other legal rights, regardless of whether these rights are transferable or separable from the entity or other rights and obligations. Intangible assets with finite useful lives compromise: disbursements for the acquisition of rights to provide banking services (rights to managing payrolls), amortized over the terms of contracts; goodwill paid on the acquisition of merged company (Banco Nossa Caixa), amortized based on projections of annual results set in the economic-financial study; software, amortized on a straight-line basis by the useful life from the date it is available for use. Intangible assets are adjusted by allowance for impairment losses, if applicable (Note 16). The amortization of intangible assets is recorded in the Other administrative expenses account. k) Impairment of non-financial assets At each reporting date, the Bank determines if there is any indication that a non-financial asset may be impaired. This evaluation is based on internal and external sources of information. If there are indications of impairment, the Bank estimates the asset s recoverable amount, which is the higher of its fair value less selling costs or its value in use. Regardless of whether there are indications of impairment, the Bank performs an annual impairment test for intangible assets with indefinite useful lives (including goodwill acquired in business combinations and intangible assets not yet available for use). The Bank performs these tests at the same time every year. If the recoverable amount of the asset is less than its carrying amount, the asset's carrying amount is reduced to its recoverable amount through a provision for impairment, which is recognized in the Income statement. Methodologies in assessing the recoverable amount of the main non-financial assets: Property and equipment in use Land and buildings the Bank relies on technical evaluations prepared in accordance with the standards of the Brazilian Association of Technical Standards - ABNT to determine the recoverable amount of land and buildings. The ABNT establishes general concepts, methods and procedures for the valuation of urban properties. Data processing equipment when available, the Bank uses market values to determine the recoverable amount of data processing equipment. When market values are not readily available, the Bank considers the amount recoverable by using the asset in its operations. Recoverable amount is calculated based on cash flow projections for the asset over its useful life, discounted to present value using the interbank deposit certificate - CDI rate. Other items of property and equipment these items are individually insignificant. Although subject to evaluation of impairment indicators, the Bank does not determine their recoverable amount on an individual basis due to cost benefit considerations. The Bank conducts annual inventory counts and writes off assets that are lost or showing signs of deterioration. 30

155 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Investments and goodwill on acquisition of investments The recoverable amount of goodwill arising from business combinations is calculated using a discounted cash flow model based on the investments expected results. Assumptions used in estimating the results consist of: the company s operating projections, results and investment plans; macroeconomic scenarios developed by the Bank; and internal methodologies to determine cost of capital under CAPM. Intangible Rights due to the acquisition of payrolls the recoverability of acquired payroll contracts is determined based on the contribution margin of the client relationships generated under each contract. The objective is to determine if the projections that justified the initial acquisition correspond to actual performance. An impairment loss is recognized on underperforming contracts. Software the Bank continuously invests in the modernization and adequacy of its internally developed software to accompany new technologies and meet the demands of the business. Since there is no similar software in the market, and because of the significant cost associated with developing models to calculate value in use, the Bank evaluates the ongoing utility of its software to test for impairment. Any software not being used is written off. Goodwill on acquisition of merged company - the recoverable amount of goodwill arising from business combinations is calculated using a discounted cash flow model based on the investments expected results. Assumptions used in estimating the results consist of: the company s operating projections, results and investment plans; macroeconomic scenarios developed by the Bank; and internal methodologies to determine cost of capital under CAPM. This methodology, particularly with respect to goodwill on the Bank s acquisition of Banco Nossa Caixa in November 2009, involves comparing the portion of the purchase price attributable to goodwill to the Bank s projected results in the state of São Paulo, less net assets with finite useful lives. These projections are based on Banco do Brasil s historic results adjusted for current assumptions about earnings growth. The discount rate reflects the Bank s cost of capital. The losses recorded in the Statement of Income to adjust the recoverable value of these assets, if any, are stated in the respective notes. l) Employee benefits Employee benefits related to short-term benefits for current employees are recognized on the accrual basis as the services are provided. Post-employment benefits, comprising supplementary retirement benefits and medical assistance for which the Bank is responsible, are assessed in accordance with criteria established by CPC 33 (R1) -Employee benefits, approved by CVM Resolution 695/2012 (Note 26) and by the Resolution CMN 4,424/2015. The evaluations are performed semiannually. In defined-contribution plans, the actuarial risk and the investment risk are borne by the plan participants. Accordingly, cost accounting is based on each period's contribution amount representing the Bank's obligation. Consequently, no actuarial calculation is required when measuring the obligation or expense, and there are neither actuarial gains nor losses. In defined benefit plans, the actuarial risk and the investment risk value of plan assets fall either partially or fully on the sponsoring entity. Accordingly, cost accounting requires the measurement of plan obligations and expenses, with a possibility of actuarial gains and losses, leading to the register of a liability when the amount of the actuarial obligation exceeds the value of plan assets, or an asset when the amount of assets exceeds the value of plan obligations. In the latter instance, the asset should be recorded only when there is evidence that it can effectively reduce the contributions from the sponsor or will be refundable in the future. 31

156 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated The Bank recognizes the components of defined benefit cost in the period in which the actuarial valuation was performed, in accordance with criteria established by CPC 33 (R1) - Employee benefits, as follows: the current service cost and the net interest on the net defined benefit liability (asset) are recognized in profit or loss; and the remeasurements of the net defined benefit liability (asset) are recognized in other comprehensive income, in the Bank s equity, net of tax effects. Contributions to be paid by the Bank to medical assistance plans in some cases will continue after the employee s retirement. Therefore, the Banks obligations are evaluated by the present actuarial value of the contributions to be paid over the expected period in which the plan participants and beneficiaries will be covered by the plan. Such obligations are evaluated and recognized under the same criteria used for defined benefit plans. m) Deposits and securities sold under repurchase agreements Deposits and securities sold under repurchase agreements are recorded at the amount of the liabilities and include, when applicable, related charges up to the balance sheet date, on a daily pro rata die basis. n) Provisions, contingent assets and liabilities and legal obligations The recognition, measurement and disclosure of provisions, contingent assets and liabilities and legal obligations are made in accordance with the criteria defined by CPC 25 Provisions, Contingent Assets and Contingent Liabilities, approved by CMN Resolution 3,823/2009 (Note 27). Contingent assets are not recognized in the financial statements however when there is evidence assuring their realization, usually represented by the final judgment of the lawsuit and by the confirmation of the capacity for its recovery by receipt or offsetting by another receivable, are recognized as assets. Contingent liabilities are recognized in the financial statements when, based on the opinion of legal advisor and Management, the risk of loss of legal or administrative proceedings is considered probable, with a probable outflow of financial resource for the settlement of the obligation and when the amounts involved are measurable with sufficient assurance, being quantified when judicial noticed and revised monthly as follows: Aggregated Method: cases that are similar and recurring in nature and whose values are not considered relevant. Provisions are based on statistical data. It covers civil, tax or labor judicial proceedings (except labor claims filed by trade unions and all proceedings classified as strategic) with probable value of award, estimated by legal advisors, up to R$ 1 million. Individual Method: cases considered unusual or whose value is considered relevant by our legal counsel. Provisions are based on: the amount claimed; probability of an unfavorable decision; evidence presented; evaluation of legal precedents; other facts raised during the process; judicial decisions made during the course of the case; and the classification and the risk of loss of legal actions. Contingent liabilities considered as possible losses are not recognized in the financial statements, they are disclosed in notes, while those classified as remote do not require provisioning or disclosure. Legal obligations (fiscal and social security) are derived from tax obligations provided in the legislation, regardless of the probability of success of lawsuits in progress, and have their amounts recognized in full in the financial statements. o) Debt instrument issue expense Expenses related to transactions involving the issue of debt instruments are capitalized and presented as a reduction of the corresponding liability. The expenses are recognized in the income statement over the term of the transaction. 32

157 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated p) Other assets and liabilities Other assets are stated at their realizable amounts, including, when applicable, related income and monetary and exchange variations on a pro rata die basis, and allowance for losses, when deemed appropriate. Other liabilities are stated at their known and measurable amounts, plus, when applicable, related charges and monetary and exchange variations on a pro rata die basis. q) Earnings per share Earnings per share is disclosed in accordance with CPC 41 Earnings per Share, approved by Resolution CVM 636/2010. The Bank's basic and diluted earnings per share were calculated by dividing the net profit attributable to shareholders by the weighted average number of total common shares, excluding treasury shares (Note 23.f). The Bank has no outstanding options, bonus of subscription nor its equivalents which provide their holders the right to acquire shares. Thus, the basic and diluted earnings per share are equal. r) Functional and presentation currency These consolidated financial statements are presented in Brazilian Reais, which is the Bank's functional and presentation currency. The functional currency is the currency of the main economic environment in which an entity operates. For most of the Conglomerate entities, the functional currency is the Real. - INFORMATION BY SEGMENT The segment information was prepared based on internal reports used by the Bank s Chief Operating Decision Maker to assess performance, and make decision about the allocation of fund for investment and other purposes. The framework also takes into account the regulatory environment and the similarities between goods and services. The information was prepared based on internal management reports (Management Information), reviewed regularly by Management. The accounting policies adopted in the Management Information are different from those presented in the description of significant accounting policies of BB Consolidated (Note 4.j), because of proportionally consolidating the investments in joint ventures. The Bank's operations were mainly in Brazil, divided into five segments: banking, investments, fund management, insurance (insurance, pension and capitalization) and payment methods. The Bank also engages in other activities, including consortium business and other services aggregated in "Other Segments". The measurement of managerial income and of managerial assets and liabilities by segment takes into account all income and expenses as well as all assets and liabilities recorded by the controlled companies (Note 3) and joint ventures (Note 14). There were no common income or expenses nor common assets or liabilities allocated between the segments, for any distribution criteria. Transactions between segments were eliminated in the column Intersegment transactions. They were conducted at the same terms and conditions as those practiced with unrelated parties for similar transactions. These transactions do not involve any unusual payment risks. None of the Bank s customers individually account for more than 10% of the Bank s income. a) Banking segment The results were mainly from operations in Brazil. It includes a wide array of products and services, including deposits, loans and services provided to customers through different distribution channels, located in the country and abroad. The operations of the banking segment include business with the retail, wholesale and public sector, which were carried out by the Bank s network and customer service teams. It also engages in business with micro-entrepreneurs and lowincome population, undertaken through banking correspondents. 33

158 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated b) Investments segment This segment was responsible for operations in the domestic capital markets, being active in the intermediation and distribution of debts in the primary and secondary markets, as well as being responsible for equity investments and the rendering of some financial services. The income from financial intermediation of this segment were the accrued interest on investments in securities less the interest expenses from third party funding costs. The principal equity investments were those in the associates and subsidiary companies. Financial service fee income were from economic/financial advisory services and the underwriting of fixed and variable income. c) Fund management segment The segment was involved in the purchase, sale and custody of securities, portfolio management, and management of investment funds and clubs. Income consists mainly of commissions and management fees for services charged to investors. d) Insurance, pension, and capitalization segment In this segment, the products and services offered relate to life, property and automobile insurance, private pension and capitalization plans. Income were mainly from revenues from insurance premiums issued, contributions to private pension plans, capitalization bonds and investments in securities. The amounts offset by selling cost, technical insurance provision and expenses related to benefits and redemptions. e) Payment methods segment This segment was responsible for the funding, transmission, processing and settlement of operations via electronic means. Revenues were mainly from commissions and management fees charged to businesses and financial institutions for the services rendered, as well as income from rent, installation and maintenance of electronic terminals. f) Other segments Other segments comprise the consortium management and other services segments, which have been aggregated as they were not individually significant. Their revenues were originated mainly from rendering services not covered in previous segments, such as: credit recovery; consortium management; development, manufacturing, sale, lease and integration of digital electronic systems and equipment, peripherals, programs, inputs and computing supplies; and intermediation of air tickets, lodging and organization of events. 34

159 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated g) Breakdown of managerial information by segment and accounting reconciliation Banking Investments Fund Management Managerial Information by Segment Insurance, pension and capitalization Payment methods 1st half/2017 Other segments Intersegment transactions Managerial to Accouting Reconciliation Management information Consolidation Adjustments BB Consolidated Income from financial intermediation 78,948, ,831 41,633 2,240, , ,420 (251,521) 81,332,630 (5,512,649) 75,819,981 Income from loans and leases 45,543, ,571 (33,980) 45,563,084 (2,753,926) 42,809,158 Securities 30,338, ,874 41,633 62, ,125 47,436 (256,633) 30,525,350 (985,970) 29,539,380 Derivative financial instruments (261,254) (39,043) (300,297) 105,023 (195,274) Income from exchange operations and compulsory deposits 2,811, (587) 654 2,811,257 (36,726) 2,774,531 Operations of sale and transfer of financial assets 516, , , ,186 Financial results from insurance, pension and capitalization operations ,177, ,438 2,216,395 (2,216,395) -- Expenses from financial intermediation (63,377,187) (197,981) -- (1,525,408) -- (64,680) 409,083 (64,756,173) 4,094,624 (60,661,549) Deposits and securities sold under repurchase agreements (44,897,229) (197,981) (64,680) 378,953 (44,780,937) 1,868,117 (42,912,820) Borrowings, assignments, onlending and leases (4,485,562) ,130 (4,455,432) 117,817 (4,337,615) Allowance/reversal for loan losses (13,947,718) (13,947,718) 566,155 (13,381,563) Operations of sale and transfer of financial assets (46,678) (46,678) 17,127 (29,551) Financial expenses from technical provisions of insurance, pension plans and capitalization (1,525,408) (1,525,408) 1,525, Other income 14,183, ,593 1,033,915 3,722,234 2,917,228 1,256,180 (1,077,376) 22,554,106 (3,623,750) 18,930,356 Income from service and banking fees 9,740, ,880 1,024,748 1,290,902 2,426, ,753 (755,297) 14,992,455 (2,581,047) 12,411,408 Equity in associates and joint ventures 76,198 12, (11,476) (42,590) ,244 1,980,550 2,014,794 Results from insurance, pension plan and capitalization operations ,240, ,154 2,342,863 (2,342,863) -- Other 4,366, ,601 9, , , ,427 (424,233) 5,184,544 (680,390) 4,504,154 Other expenses (26,085,495) (184,368) (160,867) (1,415,657) (1,743,290) (755,924) 919,814 (29,425,787) 3,813,868 (25,611,919) Personnel expenses (10,280,705) (29,331) (43,246) (268,421) (112,577) (187,730) 4,416 (10,917,594) 633,010 (10,284,584) Other administrative expenses (6,021,232) (31,919) (28,618) (342,533) (245,769) (172,113) 753,905 (6,088,279) 651,715 (5,436,564) Amortization (1,618,584) (61,759) -- (57,649) (26,782) (2,026) -- (1,766,800) 85,813 (1,680,987) Depreciation (574,678) (8,057) (57,785) (7,013) -- (647,533) 72,461 (575,072) Tax expenses (2,389,757) (36,544) (70,713) (369,015) (269,208) (130,019) -- (3,265,256) 542,209 (2,723,047) Other (5,200,539) (24,815) (18,290) (369,982) (1,031,169) (257,023) 161,493 (6,740,325) 1,828,660 (4,911,665) Profit before taxation and profit sharing 3,669, , ,681 3,021,652 1,323, , ,704,776 (1,227,907) 8,476,869 Income tax and social contribution (895,154) (106,849) (411,254) (1,131,240) (461,898) (123,169) -- (3,129,564) 1,154,380 (1,975,184) Employee and directors profit sharing (699,741) -- (545) (20,703) (1,087) (1,812) -- (723,888) 73,527 (650,361) Non-controlling interests (134,753) (654,866) -- (2) -- (789,621) -- (789,621) Net income 1,939, , ,882 1,214, , , ,061, ,061,703 Balance sheet Interbank investments 460,432,465 6, ,593 2,504,203 1,005, ,646 (8,074,319) 457,239,120 (8,822,430) 448,416,690 Securities and derivative financial instruments 144,040,920 1,022,503 7, ,281,880 6,416,057 1,051,760 (1,415,863) 328,404,326 (194,137,575) 134,266,751 Loan and leasing, net of allowance for losses 577,539, ,725,418 (2,818,946) 577,445,942 (20,206,578) 557,239,364 Investments 14,562,796 5,418,018 26, , , (17,872,360) 3,464,013 13,273,526 16,737,539 Other assets 288,690, , ,347 12,911,626 19,412,785 2,282,655 (3,609,372) 321,021,395 (32,067,947) 288,953,448 TOTAL ASSETS 1,485,266,181 7,408,979 1,302, ,269,727 27,591,287 6,526,506 (33,790,860) 1,687,574,796 (241,961,004) 1,445,613,792 Liabilities 1,396,345,235 4,394,603 1,164, ,887,029 19,256,264 3,626,905 (13,882,770) 1,596,791,434 (241,961,004) 1,354,830,430 Deposits 447,768,935 3,410, (3,528,517) 447,650,726 (4,838,705) 442,812,021 Securities sold under repurchase agreements 472,132, (7,302,673) 464,829,713 (15,007,963) 449,821,750 Funds from acceptance and issuance of securities 155,043, ,075 2,805, ,297,689 (12,476,149) 145,821,540 Onlendings 81,066, ,066,703 (1,613,605) 79,453,098 Technical provisions for insurance, pension plans and capitalization ,083, (5,250) 178,078,604 (178,078,604) -- Other liabilities 240,333, ,295 1,164,168 7,803,175 18,807, ,905 (3,046,330) 266,867,999 (29,945,978) 236,922,021 Shareholders' equity 88,920,946 3,014, ,808 7,382,698 8,335,023 2,899,601 (19,908,090) 90,783, ,783,362 TOTAL LIABILITIES AND EQUITY 1,485,266,181 7,408,979 1,302, ,269,727 27,591,287 6,526,506 (33,790,860) 1,687,574,796 (241,961,004) 1,445,613,792 35

160 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Banking Investments Fund Management Managerial Information by Segment Insurance, pension and capitalization Payment methods 1st half/2016 Other segments Intersegment transactions Managerial to Accouting Reconciliation Management information Consolidation Adjustments BB Consolidated Income from financial intermediation 75,764,537 (49,087) 39,936 3,249, ,150 73,229 (334,952) 78,919,191 (6,531,369) 72,387,822 Income from loans and leases 47,880, (96,390) 47,784,194 (3,159,850) 44,624,344 Securities 24,675,779 (28,686) 39,936 68, ,150 73,071 (282,034) 24,723,207 (904,992) 23,818,215 Derivative financial instruments (1,613,697) (20,401) (1,634,098) 20,851 (1,613,247) Income from exchange operations and compulsory deposits 4,298, (22) 4,298,172 86,379 4,384,551 Operations of sale and transfer of financial assets 523, , ,124 1,173,959 Financial results from insurance, pension and capitalization operations ,180, ,494 3,223,881 (3,223,881) -- Expenses from financial intermediation (58,799,309) (220,138) (9) (2,193,512) (56) (58,164) 413,922 (60,857,266) 4,717,836 (56,139,430) Deposits and securities sold under repurchase agreements (55,256,241) (212,846) (58,512) 368,455 (55,159,144) 2,003,929 (53,155,215) Borrowings, assignments, onlending and leases 11,079, ,467 11,124, ,470 11,231,266 Allowance/reversal for loan losses (14,594,353) (7,292) (9) -- (56) (14,601,362) 413,925 (14,187,437) Operations of sale and transfer of financial assets (28,044) (28,044) -- (28,044) Financial expenses from technical provisions of insurance, pension plans and capitalization (2,193,512) (2,193,512) 2,193, Other income 14,256, , ,796 3,705,419 3,017,277 1,227,605 (1,095,654) 22,514,934 (4,075,575) 18,439,359 Income from service and banking fees 8,862, , ,583 1,119,196 2,561, ,738 (783,755) 13,668,972 (2,384,344) 11,284,628 Equity in associates and joint ventures 4,085 (10,788) (62,835) (69,278) 2,184,486 2,115,208 Results from insurance, pension plan and capitalization operations ,377, ,192 2,507,405 (2,507,405) -- Other 5,390, ,107 7, , , ,720 (442,091) 6,407,835 (1,368,312) 5,039,523 Other expenses (26,915,437) (268,037) (147,956) (1,314,287) (1,820,754) (784,762) 1,016,684 (30,234,549) 4,329,258 (25,905,291) Personnel expenses (10,571,310) (37,623) (42,650) (272,287) (155,476) (180,577) 4,318 (11,255,605) 743,375 (10,512,230) Other administrative expenses (5,943,207) (35,330) (26,336) (356,793) (304,830) (155,235) 738,419 (6,083,312) 721,267 (5,362,045) Amortization (1,626,451) (54,630) -- (55,196) (74,476) (1,071) -- (1,811,824) 135,078 (1,676,746) Depreciation (566,901) (1,556) -- (9,357) (59,803) (5,136) -- (642,753) 80,760 (561,993) Tax expenses (2,563,488) (25,014) (55,936) (377,546) (295,076) (113,631) 3,999 (3,426,692) 604,169 (2,822,523) Other (5,644,080) (113,884) (23,034) (243,108) (931,093) (329,112) 269,948 (7,014,363) 2,044,609 (4,969,754) Profit before taxation and profit sharing 4,306,386 54, ,767 3,446,998 1,372, , ,342,310 (1,559,850) 8,782,460 Income tax and social contribution (1,730,917) (15,597) (316,248) (1,346,300) (476,051) (115,412) -- (4,000,525) 1,496,019 (2,504,506) Employee and directors profit sharing (671,043) -- (421) (17,950) (83) (1,103) -- (690,600) 63,831 (626,769) Non-controlling interests (139,967) (687,118) -- (1) -- (827,086) -- (827,086) Net income 1,764,459 39, ,098 1,395, , , ,824, ,824,099 Balance sheet Interbank investments 425,578,110 7, ,293 2,087,527 1,083, ,345 (6,717,661) 423,112,368 (8,641,402) 414,470,966 Securities and derivative financial instruments 132,008,032 1,422,116 7, ,798,715 3,118,771 1,096,622 (2,070,689) 282,381,003 (161,630,745) 120,750,258 Loan and leasing, net of allowance for losses 619,004, ,642,116 (2,747,819) 618,898,374 (20,686,988) 598,211,386 Investments 13,474,358 4,922,860 23, , , ,455 (16,159,707) 3,314,550 13,190,134 16,504,684 Other assets 292,220, , ,485 14,924,453 7,641,217 2,720,800 (3,302,766) 315,486,794 (20,308,591) 295,178,203 TOTAL ASSETS 1,482,285,423 7,319,491 1,056, ,956,162 12,469,422 7,104,338 (30,998,642) 1,643,193,089 (198,077,592) 1,445,115,497 Liabilities 1,400,688,849 4,368, , ,196,029 5,492,523 3,487,540 (12,414,537) 1,559,743,751 (198,077,592) 1,361,666,159 Deposits 442,562,176 3,322, (3,492,500) 442,392,415 (1,513,883) 440,878,532 Securities sold under repurchase agreements 434,528, (5,572,127) 428,956,582 (16,987,947) 411,968,635 Funds from acceptance and issuance of securities 181,341, ,942 2,796, ,043,366 (10,534,641) 174,508,725 Onlendings 88,256, ,256,084 (1,652,971) 86,603,113 Technical provisions for insurance, pension plans and capitalization ,412, (11,461) 148,400,901 (148,400,901) -- Other liabilities 253,999,972 1,045, ,270 8,783,265 4,587, ,024 (3,338,449) 266,694,403 (18,987,249) 247,707,154 Shareholders' equity 81,596,574 2,951, ,625 6,760,133 6,976,899 3,616,798 (18,584,105) 83,449, ,449,338 TOTAL LIABILITIES AND EQUITY 1,482,285,423 7,319,491 1,056, ,956,162 12,469,422 7,104,338 (30,998,642) 1,643,193,089 (198,077,592) 1,445,115,497 36

161 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - CASH AND CASH EQUIVALENTS Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Cash and cash equivalents 14,330,233 12,805,771 14,052,402 Local currency 9,863,562 7,824,081 9,270,852 Foreign currency 4,457,648 4,974,123 4,773,276 Investments in gold 9,023 7,567 8,274 Interbank investments (1) 42,790,405 90,317,899 51,451,992 Securities purchased under resale agreements guaranteed by securities not repledged / re-sold 12,616,995 58,269,836 13,530,909 Interbank deposits 29,918,361 32,037,173 37,921,083 Foreign currency 255,049 10, Total 57,120, ,123,670 65,504,394 (1) Investments whose original maturity is less than or equal to 90 days and with insignificant risk of change in fair value. - INTERBANK INVESTMENTS a) Breakdown Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Securities purchased under resale agreement 416,461, ,682, ,115,504 Reverse repos - own resources 12,648,042 58,281,504 13,530,909 Treasury financial bills 5,280,479 58,180, National Treasury bills ,692 National Treasury notes 5,174, ,643,646 Other securities 2,193, , ,571 Reverse repos - financed position 403,813, ,401, ,584,595 Treasury financial bills 302,191, ,292, ,934,313 National Treasury bills 57,672,842 45,437, ,941,666 National Treasury notes 43,629,951 48,526,197 84,559,697 Other securities 319, , ,919 Interbank deposits 31,955,284 34,028,987 39,355,462 Total 448,416, ,711, ,470,966 Current assets 447,193, ,769, ,436,276 Non-current assets 1,223, ,027 1,034,690 b) Income from interbank investments 1st half/2017 1st half/2016 Income from open market investments 22,255,054 20,660,456 Own resources 1,490,557 1,451,086 Financed position 20,764,497 19,209,370 Income from investments in interbank deposits 197, ,279 Total 22,452,687 20,880,735 37

162 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS a) Securities a.1) Breakdown of the consolidated portfolio by category, type of bonds and maturity Maturity in days 1 - Trading securities Federal government bonds Treasury financial bills National Treasury bills National Treasury notes Brazilian foreign debt securities Foreign Government bonds Without maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market value Total Total Total 0 to to to 360 More than 360 Cost value Market value 1,383, ,842 2,948, ,510 2,776,599 7,952,157 8,253, ,262 5,520,274 6,074, ,946 5,999,358 6,224, ,539 Mark to market 5, ,414 2,939, ,631 2,730,958 6,621,212 6,817, ,863 4,417,848 4,918, ,485 4,744,700 4,948, , ,550 18, , , ,283 2, , ,506 1,648 1,140,647 1,140,167 (480) ,722 60,992 87,150 1,940,373 2,207,730 2,220,237 12, , ,413 7,290 1,104,549 1,106,229 1, , , ,686 2, , ,810 3, , ,479 2, ,534 26,816 26,534 (282) 57,873 55,805 (2,068) 20,531 19,423 (1,108) 5, ,692 2,744, , ,653 3,681,530 3,854, ,451 2,445,109 2,926, ,065 2,233,928 2,434, ,676 Other , , , ,354 5, , ,625 9,246 60,308 60,307 (1) Corporate bonds 1,378,266 1,428 9,130 1,879 45,641 1,330,945 1,436, ,399 1,102,426 1,155,887 53,461 1,254,658 1,276,688 22,030 Debentures ,311 20,101 20, ,100 36,999 (101) 63,661 63,217 (444) Shares in investment funds 1,353, ,248,362 1,353, ,262 1,006,172 1,075,290 69,118 1,031,071 1,062,888 31,817 Shares Certificate of deposit Eurobonds -- 1,343 2,537 1,879 20,916 37,212 26,675 (10,537) 44,308 33,785 (10,523) 71,717 61,150 (10,567) Other 24, , ,414 25,251 35,708 10,457 14,828 9,783 (5,045) 88,190 89,400 1,210 Cost value Market value Mark to market Cost value Market value Mark to market 38

163 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Maturity in days 2 - Available for sale securities Federal government bonds Treasury financial bills National Treasury bills National Treasury notes Agricultural debt securities Brazilian foreign debt securities Foreign Government bonds Without maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market value Total Total Total 0 to to to 360 More than 360 Cost value Market value Mark to market Cost value 1,172,948 1,187,541 3,633,679 7,239, ,239, ,445, ,472,810 (973,051) 109,958, ,986,288 (1,972,710) 113,802, ,428,527 (3,373,768) 1, , ,047 5,945,161 80,386,094 86,755,064 87,669, ,322 72,588,429 72,890, ,763 67,441,566 67,567, , ,274 2,506,802 56,092,942 58,933,955 58,930,018 (3,937) 49,913,679 49,847,895 (65,784) 43,716,189 43,679,271 (36,918) , ,397,376 5,154,469 7,735,234 8,151, ,379 8,201,990 8,505, ,450 8,310,486 8,478, , ,856 12,839,304 12,900,841 13,422, ,319 7,591,708 7,837, ,771 9,445,348 9,480,623 35, ,487 3,613 3, ,031 4,003 (28) 4,758 4,658 (100) ,460 2,700,613 2,656,745 2,705,073 48,328 2,747,485 2,679,586 (67,899) 2,575,637 2,615,511 39, ,409 17, ,488 2,771,080 3,595,034 3,534,491 (60,543) 3,229,155 3,141,857 (87,298) 2,001,536 2,018,153 16,617 Other 1, ,647 1, , , ,417 (7,225) 900, ,932 (26,449) 1,387,612 1,290,975 (96,637) Corporate bonds 1,171, ,316 3,191,632 1,293,890 25,853,497 33,690,797 31,803,424 (1,887,373) 37,370,569 35,096,096 (2,274,473) 46,360,729 42,860,996 (3,499,733) Debentures -- 43,897 2,433, ,693 23,438,660 28,001,485 26,822,278 (1,179,207) 30,902,601 29,512,403 (1,390,198) 38,406,034 37,591,269 (814,765) Promissory notes -- 64, , , , , , , ,025 6,366 Credit notes ,638 45,627 42,638 (2,989) 47,794 44,990 (2,804) 49,368 46,185 (3,183) Shares in investment funds 18, , , , , , ,862 67, , , ,658 2,312,457 1,012,762 (1,299,695) Shares 255, , , , , ,167 94, , ,735 25,509 Rural product bills - commodities Certificate of deposit -- 72, ,086 98,992 2, , ,550 2, , ,952 1, , ,012 5, , ,520 (133) 80,234 80,208 (26) Financial bills ,195 22,094 (101) Real estate receivables certificates , , , ,252 (135,015) 413, ,056 (68,505) 408, ,284 (7,939) Other 896,370 3, ,894 34,043 1,957,616 3,843,029 3,050,274 (792,755) 3,879,001 2,841,130 (1,037,871) 3,325,186 1,913,422 (1,411,764) Market value Mark to market Cost value Market value Mark to market 39

164 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Maturity in days 3 - Held to maturity securities Federal government bonds Foreign Government bonds Without maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market value Total Total Total 0 to to to 360 More than 360 Cost value Market value 455, , ,025,000 5,150,981 4,593,662 (557,319) 5,595,611 4,944,850 (650,761) 840, ,530 (289,032) Mark to market ,024 50,024 50, ,024 50,024 50, Corporate bonds 455, , ,974,976 5,100,957 4,543,638 (557,319) 5,595,611 4,944,850 (650,761) 840, ,530 (289,032) Debentures , ,808,106 4,227,724 3,921,556 (306,168) 4,760,259 4,360,652 (399,607) 450, ,490 (3,105) Real estate receivables certificates , , ,827 (251,151) 398, ,533 (251,154) 382,547 96,620 (285,927) Financial letters 455, , , , , Other ,043 7,043 7, ,657 6, ,420 7, Cost value Market value Mark to market Cost value Market value Mark to market Total 3,011,658 2,055,383 6,696,099 7,515, ,041, ,548, ,319,891 (1,229,108) 121,074, ,005,358 (2,069,525) 120,642, ,204,954 (3,437,261) a.2) Breakdown of the consolidated portfolio by financial statement classification and maturity date Maturity in days Without maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market value Total Total Total 0 to to to 360 More than 360 Cost value Total by portfolio 3,011,658 2,055,383 6,696,099 7,515, ,041, ,548, ,319,891 (1,229,108) 121,074, ,005,358 (2,069,525) 120,642, ,204,954 (3,437,261) Market value Mark to market Cost value Market value Mark to market Cost value Market value Own portfolio 3,011,658 2,055,383 3,575,289 4,866,406 80,863,875 95,394,455 94,372,611 (1,021,844) 80,504,897 78,440,696 (2,064,201) 91,837,231 90,502,488 (1,334,743) Subject to repurchase agreements ,120,791 2,384,751 30,399,111 36,110,811 35,904,653 (206,158) 37,412,855 37,410,153 (2,702) 25,725,431 23,624,379 (2,101,052) Pledged in guarantee ,404 1,778,204 2,043,733 2,042,627 (1,106) 3,157,131 3,154,509 (2,622) 3,079,553 3,078,087 (1,466) Mark to market 40

165 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated a.3) Breakdown of the consolidated portfolio by category and maturity in years Maturity in years Without maturity Due in up to one year Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market value Total Total Total Due from 1 to 5 years Due from 5 to 10 years Due after 10 years Cost value Market value Cost value Market value Cost value Market value Total by category 3,011,658 16,267,043 74,993,320 35,316,388 2,731, ,548, ,319, ,074, ,005, ,642, ,204, Trading securities 1,383,498 4,093,322 2,228, ,193 18,135 7,952,157 8,253,419 5,520,274 6,074,220 5,999,358 6,224, Available for sale securities 1,172,948 12,060,271 70,790,757 33,560,629 1,888, ,445, ,472, ,958, ,986, ,802, ,428, Held to maturity securities 455, ,450 1,974,292 1,225, ,142 5,150,981 4,593,662 5,595,611 4,944, , ,530 a.4) Summary of the consolidated portfolio by financial statement classification Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Book value Book value Book value Current Non-current Total Current Non-current Total Current Non-current Total Total by portfolio 22,055, ,821, ,877,210 15,745, ,910, ,656,119 17,362, ,131, ,493,986 Own portfolio 16,284,968 78,648,526 94,933,494 13,937,394 65,273,440 79,210,834 16,278,894 76,783,299 93,062,193 Subject to repurchase agreements 5,505,909 30,395,180 35,901,089 1,499,048 35,791,728 37,290, ,242 20,367,464 21,353,706 Pledged in guarantee 264,423 1,778,204 2,042, ,539 2,844,970 3,154,509 97,065 2,981,022 3,078,087 a.5) Summary of the consolidated portfolio by category Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Total by category 1 - Trading securities 8,253,419 6% 6,074,220 5% 6,224,897 5% 2 - Available for sale securities 119,472,810 90% 107,986,288 90% 110,428,527 94% 3 - Held to maturity securities 5,150,981 4% 5,595,611 5% 840,562 1% Portfolio book value 132,877, % 119,656, % 117,493, % Mark to market - held to maturity (557,319) -- (650,761) -- (289,032) -- Portfolio market value 132,319, ,005, ,204,

166 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated b) Income from operations with securities 1st half/2017 1st half/2016 Short-term interbank investments (Note 7.b) 22,452,687 20,880,735 Fixed-income securities 6,882,099 7,875,966 Variable-income securities 204,594 (4,938,486) Total 29,539,380 23,818,215 c) Reclassification of securities There was no reclassification of securities in the June 30, There was the following reclassification in the period from January 1 to December 31, 2016: On April 27, 2016, Cielo's Board of Directors approved the partial repurchase of debentures issued by Cielo up to R$ thousand, causing early maturity of the debentures, although the BB Conglomerate had the intention and financial capacity to hold Cielo's debentures to maturity (December 2023). Due to this fact, on June 30, 2016, BB Conglomerate reclassified all the securities in the category "held to maturity" to the category "available for sale", resulting in a negative mark to market impact in Shareholders' Equity in the amount of R$ 39,326 thousand, net of tax effects. Market value 3,446,831 Book value before reclassification 3,506,416 Mark to market (59,585) Tax effects 20,259 Shareholders Equity impact (39,326) Impact d) Derivative financial instruments The Bank uses derivative financial instruments to manage, at the consolidated level, its positions and to meet clients' needs, classifying its own positions as hedge (market risk and cash flow risk) and trading, both within limits approved by committees of the Bank. The hedge strategy of the equity positions is in line with macroeconomic analyses and is approved by the Executive Board of Directors. In the options market, active or long positions have the Bank as holder, while passive or short positions have the Bank as writer. The main risks inherent to derivative financial instruments resulting from the business of the Bank and its subsidiaries are credit, market, liquidity and operational, and the management process presented in note 28. The models used to manage risks with derivatives are reviewed periodically and the decisions made follow the best risk/return relationship, estimating possible losses based on the analysis of macroeconomic scenarios. The Bank uses tools and systems to manage the derivatives. Trading in new derivatives, standardized or not, is subject to a prior risk analysis. Risk analysis of the subsidiaries is undertaken on an individual basis and its risk management is done on a consolidated basis. The Bank uses statistical methods and simulations to measure the risks of its positions, including derivatives, using models of values at risk sensibility and stress analysis. 42

167 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Total credit exposure from swaps is R$ 196,393 thousand on Jun 30, 2017 (R$ 221,735 thousand on Dec 31, 2016 and R$ 325,571 thousand on Jun 30, 2016). d.1) Breakdown of the portfolio of derivatives for trading by index By Index Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Notional value Cost value Market value Notional value Cost value Market value Notional value Cost value Market value Future contracts Purchase commitments 7,270, ,675, ,742, Interbank deposits 3,973, ,767, ,004, Currencies 3,277, ,899, ,409, Libor , Commodities 19, , , Sales commitments 3,795, ,109, ,743, Interbank deposits 1,218, ,103, ,147, Currencies 741, , ,590, Bovespa Index On-shore USD rates 31, Libor 33, , Commodities 1,613, , , SCS 157, Forward operations Asset position 4,274, , ,623 4,472, , ,699 6,269, , ,241 Term securities 507, , , ,023 36,023 36,023 Term currencies 3,729,400 73,818 90,835 4,436, , ,787 6,197, , ,784 Term commodities 37,456 4,227 6,331 35,699 3,083 10,912 35,202 1,501 9,434 Liability position 8,801,982 (1,108,566) (948,609) 10,058,932 (968,637) (582,138) 13,490,707 (2,026,068) (1,528,419) Term securities 507,457 (507,457) (507,457) ,023 (36,023) (36,023) Term currencies 8,259,144 (596,797) (434,950) 10,053,226 (967,623) (581,870) 13,432,210 (1,985,996) (1,483,687) Term commodities 35,381 (4,312) (6,202) 5,706 (1,014) (268) 22,474 (4,049) (8,709) Option market Purchase commitments - long position 30,151 1, Shares 30,151 1, Commodities Sale commitments - long position 153, , , , , , , , ,783 Foreign currency , Shares 153, , , , , , , , ,610 Commodities Purchase commitments - short position 360,756 (23,105) (28,619) 228,388 (19,787) (30,500) 330,949 (15,683) (14,841) Foreign currency 146,484 (3,645) (3,177) 67,646 (2,518) (134) 269,422 (8,524) (924) Interbank deposit 1,979 (9) (3) 160,486 (17,244) (30,366) 57,141 (7,032) (13,770) Bovespa index 39,847 (1,915) (1,127) IPCA 171,497 (17,525) (24,312) Shares ,084 (79) (111) Commodities 949 (11) (25) Other ,302 (48) (36) Sale commitments - short position 220,288 (1,678) (1,025) 16,979 (306) (156) 82,140 (1,591) (614) Foreign currency 1,212 (28) (1) 7,285 (161) (42) 2,502 (55) (65) Interbank deposit 209,543 (1,345) (799) Bovespa index 1,710 (65) (43) Shares 580 (14) Commodities 7,243 (226) (182) 9,694 (145) (114) 79,638 (1,536) (549) Swaps contracts Asset position 7,145, , ,727 8,501,031 1,131,352 1,128,122 13,648,406 2,192,062 2,198,991 Interbank deposits 1,547, , ,969 4,328, , ,366 7,467,078 1,258,280 1,314,564 Foreign currency 5,368, , ,492 3,933, , ,439 5,705, , ,018 Pre-fixed 229,762 13,036 15, ,509 6,417 8, ,721 70,105 74,771 IPCA ,397 1, Liability position 8,873,569 (910,625) (905,418) 10,748,833 (1,078,089) (1,190,214) 9,683,116 (1,405,235) (1,435,345) Interbank deposits 2,374,874 (180,351) (165,188) 2,565,720 (157,851) (152,659) 2,626,621 (560,702) (567,284) Foreign currency 6,147,408 (727,022) (726,172) 7,831,015 (915,496) (1,026,088) 6,823,029 (833,820) (853,286) Pre-fixed 351,287 (3,252) (14,058) 352,098 (4,742) (11,467) 34,575 (7,230) (7,593) IPCA ,891 (3,483) (7,182) Other derivatives (1) Asset position Foreign currency 855,510 22,721 21,787 3,258,027 42,868 37,328 2,573, ,671 88,257 Liability position Foreign currency 3,556,892 (80,084) (86,288) 2,735,958 (83,191) (67,383) 1,146,261 (99,003) (39,681) (1) Related, essentially, to Non Deliverable Forwards (NDF) which are traded in the over-the-counter (OTC) market and have as their object an exchange rate of a specific currency. 43

168 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d.2) Breakdown of the derivatives portfolio by maturity (notional value) Maturity in days 0 to to to 360 More than 360 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Futures 3,559,679 6,031, , ,320 11,066,279 14,785,249 13,485,994 Forwards 4,837,364 5,850,467 1,348,584 1,039,880 13,076,295 14,531,295 19,759,862 Options 111, ,339 25, , , , ,800 Swaps 1,999,056 3,539,634 4,508,410 5,971,967 16,019,067 19,249,864 23,331,522 Other 2,180,495 2,009,400 18, ,953 4,412,402 5,993,985 3,719,868 d.3) Breakdown of the derivative portfolio by trading market and counterparty (notional value on Jun 30, 2017) Futures Forwards Option market Swaps Other BM&FBovespa 11,033, , Over-the-counter Financial institutions 33,002 1,919, ,323,230 4,412,402 Client -- 11,156, ,271 2,695, d.4) Breakdown of margin given as guarantee for transactions with derivative financial instruments Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Treasury financial bills 1,282,328 1,587,775 1,520,645 Total 1,282,328 1,587,775 1,520,645 d.5) Portfolio of derivatives designated as hedge accounting Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Market risk hedge Hedging instruments Assets 518, , ,677 Swaps 365, , ,067 Options 153, , ,610 Hedged items Assets 255, , ,252 Securities 255, , ,252 Liabilities (365,461) (361,623) (355,080) Other liabilities (365,461) (361,623) (355,080) In order to hedge against possible fluctuations in the interest and exchange rates on its securities and foreign investments, the Bank uses swaps (cross currency interest rate swaps) to hedge a foreign funding and use option contracts to offset the risks arising from market variations some actions. Cited hedges were assessed as effective, in accordance with the provisions of Central Bank Circular No. 3,082/2002, which require evidence of hedge effectiveness is the range of 80 % to 125 %: d.6) Income gains and losses with hedging instruments and hedged items 1st half/2017 1st half/2016 Hedge items gains 59, ,015 Hedging instruments losses (65,582) (102,837) Net effect (6,432)

169 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d.7) Derivative financial instruments segregated by current and non-current Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Current Non-current Current Non-current Current Non-current Assets Forwards 600,343 4, ,887 20, ,336 7,905 Options 153, , ,610 Swaps 507, , , ,126 1,708, ,223 Other derivatives 17,089 4,698 32,921 4,407 84,197 4,060 Total 1,277, ,694 1,213, ,345 2,419, ,798 Liabilities Forwards (879,434) (69,175) (482,991) (99,147) (1,527,870) (549) Options (4,351) (25,293) (1,498) (29,158) (3,193) (12,262) Swaps (512,383) (393,035) (540,564) (649,650) (517,982) (917,363) Other derivatives (80,982) (5,306) (64,291) (3,092) (36,937) (2,744) Total (1,477,150) (492,809) (1,089,344) (781,047) (2,085,982) (932,918) e) Income from derivative financial instruments 1st half/2017 1st half/2016 Swaps 142,277 1,076,002 Forwards (156,924) (1,683,634) Options (31,257) (17,651) Futures (86,312) (906,160) Other derivatives (63,058) (81,804) Total (195,274) (1,613,247) - INTERBANK ACCOUNTS a) Payments and receipts pending settlement Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Assets Rights against other participants of settlement systems (1) Bank checks and other instruments 1,764,608 3,513 1,852,665 Documents sent by other participants 1,703, ,965,799 Total 3,468,477 3,513 3,818,464 Current assets 3,468,477 3,513 3,818,464 Liabilities Obligations to other participants of settlement systems (1) Remitted receipts 2,125, ,182,958 Bank checks and other instruments 775, ,121 Other receipts 5,477 1,075 8,948 Total 2,905,777 1,075 3,100,027 Current liabilities 2,905,777 1,075 3,100,027 (1) There was no operation of the service of clearing checks and other securities on Dec 31,

170 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated b) Restricted deposits Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Compulsory deposits with Banco Central do Brasil 64,659,229 63,451,094 65,404,128 Additional reserve requirements on deposits 8,257,226 13,958,774 14,754,847 Savings deposit requirements 23,953,922 23,919,390 23,714,737 Demand deposit requirements 13,241,642 11,443,864 11,050,143 Time deposit requirements 16,968,324 11,974,996 13,912,434 Resources for microfinance 318, , ,288 Resources for rural credit (1) 1,874,492 1,874,492 1,643,753 Other 45,210 17,834 8,926 Housing Finance System 2,652,690 2,557,791 2,591,255 Compensation of wage changes fund 3,031,421 2,925,091 2,757,928 Provision for losses (391,835) (380,953) (175,871) Other 13,104 13,653 9,198 National Treasury - rural credit 54,365 56,868 76,705 Rural credit - Proagro 253, , ,688 Provision for losses (199,412) (190,690) (173,983) Total 67,366,284 66,065,753 68,072,089 Current assets 67,363,327 66,063,844 68,059,575 Non-current assets 2,957 1,909 12,513 (1) Refers to funds deposited with the Banco Central do Brasil, because they were not lent on to rural credits, according to Resolution CMN No. 3,745/2009. The special supply funds were provided by Banco Central do Brasil and recorded in borrowings and onlendings (Note 19.b). c) Compulsory investments 1st half/2017 1st half/2016 Deposits linked to the Banco Central do Brasil 2,226,958 2,741,222 Additional reserve requirements on deposits 671, ,050 Savings deposit requirements 821, ,466 Time deposit requirements 733, ,706 Deposits linked to real estate 93,380 94,693 Deposits linked to National Treasury - rural credit 23,883 22,320 Losses on restricted deposits (19,715) (20,586) Total 2,324,506 2,837,649 46

171 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - LOAN OPERATIONS a) Portfolio by modality Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Loan operations 593,357, ,761, ,361,563 Loans and discounted credit rights 206,295, ,073, ,834,866 Financing 139,201, ,770, ,634,154 Rural and agribusiness financing 193,034, ,067, ,424,384 Real estate financing 54,277,152 54,237,642 51,720,740 Financing of infrastructure and development ,373 Loan operations sold under assignment (1) 549, , ,046 Other receivables with loan characteristics 48,973,668 53,225,445 57,765,275 Credit card operations 22,829,591 23,510,421 21,526,694 Advances on exchange contracts (2) 13,499,886 13,714,072 18,207,494 Other receivables purchase under assignment (3) 11,459,443 14,983,588 16,969,731 Guarantees honored 589, , ,165 Other 595, , ,191 Leasing transactions 514, , ,687 Total loan portfolio 642,845, ,591, ,831,525 (Allowance)/reversal for loan losses (37,881,410) (36,070,120) (36,967,684) (Allowance for loan losses - loan operations) (36,602,307) (34,838,451) (35,783,402) (Allowance for other losses - other receivables) (4) (1,248,636) (1,190,296) (1,112,820) (Allowance for lease losses - leasing transactions) (30,467) (41,373) (71,462) Total loan portfolio net of provisions 604,964, ,521, ,863,841 (1) Loan operations assigned with retention of the risks and benefits of the financial assets. (2) Advances on exchange contracts are classified as a deduction to other liabilities. (3) Loan operations acquired with retention of the risks and benefits by the assignor of the financial assets. On June 30, 2016, the premiuns on Credits linked to operations acquired in assignment were reclassified in the group Other receivables with loan characteristics, in the amount of R$ 1,764,623 thousand. (4) Includes the amount of R$ 11,173 thousand as of June 30, 2017 (R$ 8,725 thousand as of June 30, 2016) related to allowance for interbank onlendings losses. b) Loan operations and leasing transactions income 1st half/2017 1st half/2016 Loan operations income 42,671,447 44,446,419 Loans and discounted credit rights 21,165,111 28,996,693 Rural and agribusiness financing 6,875,068 7,194,939 Financing (1) 4,286,033 (2,222,033) Real estate financing 3,364,942 2,476,376 Equalization of rates - agricultural crop- Law 8,427/1992 2,800,547 2,799,073 Recovery of loans previously written-off as loss (2) 2,350,271 2,244,654 Export financing 1,704,017 2,322,775 Guarantees honored 62,116 75,608 Income from foreign currency financing 20, ,199 Other 42,397 53,135 Leasing transactions income (Note 10.i) 137, ,925 Total 42,809,158 44,624,344 (1) The debit balances presented arise from the negative exchange variation of the period (the appreciation of the Real against the Dollar) (2) The amount of R$ 51,353 thousand in the 1st half/2017 (with impact on the income of R$ 26,931 thousand) and R$ 78,842 thousand in the 1st half/2016 (with impact on the income of R$ 41,347 thousand) was received from assignments without recourse of written off credits to entities outside the financial system, in accordance with CMN Resolution 2,836/2001.The book value of these transactions were R$ 95,231 thousand and R$ 71,075 thousand, respectively. 47

172 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Breakdown of the loan portfolio by sector Jun 30, 2017 % Dec 31, 2016 % Jun 30, 2016 % Public sector 74,639, ,322, ,009, Public administration 38,816, ,405, ,587, Oil sector 24,783, ,103, ,354, Electricity 8,931, ,621, ,700, Services 970, ,018, , Other activities 1,137, ,173, ,064, Private sector (1) 568,206, ,268, ,821, Individuals 329,390, ,781, ,551, Companies 238,816, ,487, ,270, Agribusiness of plant origin 29,120, ,655, ,111, Mining and metallurgy 28,946, ,000, ,796, Services 18,986, ,610, ,081, Transportation 18,536, ,229, ,255, Real estate agents 16,178, ,187, ,088, Agribusiness of animal origin 15,403, ,365, ,793, Automotive sector 15,029, ,596, ,428, Fuel 11,410, ,514, ,236, Electricity 11,157, ,781, ,835, Retail commerce 10,308, ,853, ,616, Specific activities of construction 8,342, ,178, ,789, Agricultural inputs 7,225, ,499, ,106, Textile and clothing 6,902, ,699, ,505, Electronics 5,972, ,587, ,056, Chemical 5,550, ,805, ,771, Wholesale and various industries 5,271, ,899, ,304, Pulp and paper 4,652, ,674, ,050, Woodworking and furniture market 4,556, ,134, ,429, Financial services 4,426, ,690, ,584, Telecommunications 3,832, ,878, ,866, Heavy construction 3,568, ,158, ,465, Other activities 3,437, ,484, ,095, Total 642,845, ,591, ,831, (1) The amounts disclosed under individuals include loans to the sectors of agribusiness, housing and other sectors of economic activity carried out with individuals. To the highlighted economic sectors, operations are exclusive to companies. 48

173 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d) Loan portfolio by risk level and maturity Current operations Installments falling due AA A B C D E F G H Jun 30, 2017 Dec 31, 2016 Jun 30, to 30 11,232,349 7,218,282 13,363,026 7,048, , ,548 83, , ,440 40,150,022 40,579,377 49,226, to 60 8,196,092 4,691,996 5,569,789 2,410, , , ,873 37, ,032 21,663,837 21,437,583 25,704, to 90 9,188,220 3,634,351 4,766,400 1,946, ,467 88, ,232 55,451 82,391 20,713,866 17,217,798 24,052, to ,999,427 9,825,574 10,676,213 4,855, , , , , ,596 54,228,137 52,889,238 65,491, to ,582,111 9,067,895 18,240,118 8,261,291 1,135,104 1,471, , , ,814 76,562,405 89,815,855 87,186,345 More than ,821,216 56,996,573 78,653,372 35,415,641 5,323,265 6,794,382 2,164,497 2,145,298 4,584, ,898, ,073, ,546,119 Installments overdue Up to 14 days 244, , , ,307 91,574 20,360 17,561 8,727 23, ,246 2,954,178 1,311,045 Other (1) 397, , , ,207 Subtotal 297,660,994 91,552, ,419,685 60,094,960 8,924,733 9,351,280 2,813,181 2,861,609 5,767, ,445, ,368, ,911,031 Operations past due Installments falling due 01 to , ,481 98,327 97, , , ,822 1,187,103 1,234,254 1,272, to ,719 81,883 66,771 57,422 53,482 62, , , , , to ,819 72,924 88,826 55,086 58, , , , , , to , , , , , , ,542 1,589,558 1,603,229 1,635, to , , , , , , ,362 2,664,096 2,980,962 2,794,316 More than ,158,780 1,864,027 1,591,581 1,839,876 1,718,413 2,429,395 6,096,559 16,698,631 13,592,170 11,663,704 Installments overdue 01 to ,514 30,412 27,983 40,282 23,480 38,700 92, , , , to , ,826 57,625 74,137 44,447 41, , ,742 1,016, , to , , , ,450 89,289 74, ,288 1,143,723 1,439,130 1,122, to , , ,679 95,802 82, , ,654 1,352,492 1,102, to ,589 53, , , ,178 1,013,346 2,249,565 2,909,284 2,965, to , ,402 62, , ,604 2,605,203 3,089,219 3,158,831 3,006,390 More than ,787 9, ,982 46, , , , ,682 3,129,644 Subtotal ,689,419 3,375,444 2,986,212 3,272,631 3,129,554 4,431,014 13,516,032 32,400,306 31,222,997 30,920,494 Total 297,660,994 91,552, ,109,104 63,470,404 11,910,945 12,623,911 5,942,735 7,292,623 19,283, ,845, ,591, ,831,525 (1) Operations with third party risk linked to government funds and programs, primarily Pronaf, Procera, FAT, BNDES and FCO. They include 13,369 thousand of overdue installments, which comply with rules defined in each program for reimbursement by the program managers and, therefore, do not represent a credit risk for the Bank. 49

174 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated e) Allowance for loan losses by risk level Level of risk % Minimum provision Value of loans Minimum required allowance Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Supplementary allowance (1) Total Value of loans Minimum required allowance Supplementary allowance (1) Total Value of loans Minimum required allowance AA 297,660, ,706, ,701, A ,552, ,760 46, , ,838, ,190 25, , ,191, , ,959 B 1 133,109,104 1,331, ,901 1,823, ,671,959 1,186, ,585 1,443, ,081,955 1,200,820 1,200,820 C 3 63,470,404 1,904,112 1,160,053 3,064,165 67,284,778 2,018,543 1,039,438 3,057,981 39,567,405 1,187,022 1,187,022 D 10 11,910,945 1,191, ,601 1,342,696 14,981,314 1,498, ,709 1,711,840 8,465, , ,505 E 30 12,623,911 3,787, ,787,314 16,064,403 4,819, ,819,467 15,442,695 4,632,809 4,632,809 F 50 5,942,735 2,971, ,971,368 5,822,600 2,911, ,911,300 5,160,751 2,580,376 2,580,376 G 70 7,292,623 5,104, ,104,836 5,483,533 3,838, ,838,473 4,536,621 3,175,635 3,175,635 H ,283,051 19,283, ,283,051 17,738,400 17,738, ,738,400 22,683,558 22,683,558 22,683,558 Total 642,845,806 36,030,486 1,850,924 37,881, ,591,432 34,535,078 1,535,042 36,070, ,831,525 36,967,684 36,967,684 (1) Refers to the supplementary allowance over and above the minimum requered by CMN Resolution 2,682/1999. This provision is established based on the internal scale of risk level. Total 50

175 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated f) Changes in allowance for loan losses Includes loans, leases and other receivables with characteristics of credit. 1st half/2017 1st half/2016 Opening balance 36,070,120 33,577,000 Adittion/(reversal) 13,371,203 14,191,667 Minimum required allowance 13,055,321 17,420,165 Additional allowance (1) -- (3,228,498) Supplementary allowance (2) 315, Exchange fluctuation - foreign allowances 98,034 (191,558) Write off (11,657,947) (10,609,425) Closing balance 37,881,410 36,967,684 (1) Refers to the additional allowance over and above the minimum required by CMN Resolution 2,682/1999. This provision is established based on the experience of Management, by making projections for the loan portfolio, based on the history of default of operations. (2) Refers to the supplementary allowance over and above the minimum requered by CMN Resolution 2,682/1999. This provision is established based on the internal scale of risk level. g) Changes in allowance for other loan losses Includes provisions for other receivables without characteristics of credit. 1st half/2017 1st half/2016 Opening balance 1,566,638 1,287,621 Adittion/(reversal) 10,360 (4,230) Exchange fluctuation - foreign allowances (2,113) (1,759) Write-off/other adjustments (19,388) 311,995 Closing balance 1,555,497 1,593,627 h) Leasing portfolio by maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Up to 1 year (1) 218, , ,129 More than 1 year and up to 5 years 295, , ,038 Over 5 years ,520 Total present value 514, , ,687 (1) Includes amounts related to overdue installments. i) Income from leasing transactions 1st half/2017 1st half/2016 Lease revenue 137, ,925 Leasing 137, ,925 Lease expenses (78,005) (102,955) Leasing (77,942) (102,830) Loss on disposal of leased assets (63) (125) Total 59,706 74,970 51

176 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated j) Concentration of loans Jun 30, 2017 % of credit portfolio Dec 31, 2016 % of credit portfolio Jun 30, 2016 % of credit portfolio Largest debtor 25,467, ,759, ,902, largest debtors 80,922, ,224, ,799, largest debtors 106,612, ,099, ,021, largest debtors 142,113, ,075, ,854, largest debtors 165,875, ,529, ,403, k) Renegotiated credits 1st half/2017 1st half/2016 Credits renegotiated during the period (1) 23,484,515 21,735,942 Renegotiated when past due (2) 5,953,550 8,637,612 Renovated (3) 17,530,965 13,098,330 Changes on credits renegotiated when past due Opening balance 27,086,224 19,652,990 Contracts (2) 5,953,550 8,637,612 Interest (received) and appropriated (2,072,533) (1,427,214) Write off (3,924,763) (1,813,648) Closing balance (4) 27,042,478 25,049,740 Allowance for loan losses of the portfolio renegotiated when past due 12,923,937 10,369,188 (%) Allowance for loan losses on the portfolio 47.8% 41.4% 90 days default of the portfolio renegotiated when past due 7,093,996 5,641,907 (%) Portfolio default 26.2% 22.5% (1) Represents the balance of all installments (past due and future) of loans renegotiated during the period using the internet, automated teller machines (ATM) or branch network. (2) Renegotiated credit under debt composition as a result of payment delay by the clients. (3) Renegotiated current credits (i.e. not past due) in the form of the extension or renewal of the credit or the granting of new loans for partial or full settlement of previous contracts or any other type of agreement that changes the maturity or the payment terms, originally agreed. (4) Includes the amount of R$ 81,239 thousand (R$ 101,408 thousand as of June 30, 2016) related to renegotiated rural credits. The amount of R$ 7,433,175 thousand (R$ 5,332,452 thousand as of June 30, 2016), related to deferred credits from rural portfolio governed by specific legislation, is not included. l) Supplementary information Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Undrawn credit lines 119,686, ,745, ,317,122 Guarantees provided (1) 4,731,448 6,445,216 7,045,332 Confirmed export credit 249, , ,830 Contracted credit opened for import 508, , ,725 Linked resources 3,247,789 4,523,775 4,058,376 (1) For these operations, the Bank maintains an allowance recorded in Other liabilities - sundry, (Note 20,e) totaling R$ 366,209 thousand (R$ 442,300 thousand as of December 31, 2016 and R$ 525,327 thousand as of June 30, 2016 ) calculated in accordance with Resolution CMN 2,682/

177 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated m) Loan Operations by line of credit from Fund for Workers Assistance (Fundo de Amparo ao Trabalhador FAT) Lines of FAT TADE (1) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Loans and discounted securities 1,036, ,150 16,532 Proger Urbano Capital de Giro 15/2005 and 01/2016 1,029, ,601 6 FAT Turismo - Capital de Giro 02/2012 6,588 7,549 16,526 Financing 2,506,171 2,800,917 3,014,334 Proger Urbano Investimento 18/2005 2,067,892 2,302,862 2,498,499 FAT Taxista 02/ , , ,850 FAT Turismo - Investimento 01/ , , ,630 Proger Exportação 27/ ,676 44,292 47,355 Proger Urbano Empreendedor Popular 01/ Rural and agribusiness financing 55,023 66,570 91,826 Pronaf Investimento 05/ ,278 55,267 72,939 Proger Rural Investimento 13/2005 7,288 8,490 11,683 Pronaf Custeio 04/2005 1,949 2,298 2,511 Proger Rural Custeio 02/ Giro Rural - Aquisição de Títulos 03/ ,051 Total 3,597,656 3,637,637 3,122,692 (1) TADE - Allocation Term of Special Deposits. 53

178 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated 11 - FOREIGN EXCHANGE PORTFOLIO a) Breakdown Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Other receivables Exchange purchases pending settlement 16,017,373 16,896,594 18,774,008 Bills of exchange and time drafts in foreign currency 40,838 40,232 40,098 Receivables from sales of foreign exchange 13,499,847 20,428,130 19,933,758 (Advances received in national/foreign currency) (12,523,009) (20,178,005) (19,198,715) Foreign currency receivables ,334 Income receivable on advances granted and on financed imports 252, , ,219 Total 17,287,754 17,471,545 19,800,702 Current assets 17,001,540 17,188,751 18,854,747 Non-current assets 286, , ,955 Other liabilities Exchange sales pending settlement 13,465,426 18,739,249 18,376,250 (Financed imports) (904) (4,561) (17,465) Exchange purchase liabilities 15,743,441 17,513,179 20,759,788 (Advances on exchange contracts) (12,924,888) (13,115,132) (17,597,845) Foreign currency payables 52,859 54,017 55,872 Unearned income on advances granted 10,273 14,537 11,470 Total 16,346,207 23,201,289 21,588,070 Current liabilities 10,332,885 17,879,212 18,160,037 Non-current liabilities 6,013,322 5,322,077 3,428,033 Net foreign exchange portfolio 941,547 (5,729,744) (1,787,368) Memorandum accounts Credit opened for imports 561, ,106 1,025,129 Confirmed export credit 249, , ,830 b) Foreign exchange results 1st half/2017 1st half/2016 Exchange income 3,722,102 10,198,797 Exchange expenses (3,272,077) (8,651,895) Foreign exchange result 450,025 1,546,902 54

179 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - OTHER RECEIVABLES a) Specific credits Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Extension of rural credits - National Treasury 398, , ,793 Other Total 399, , ,509 b) Sundry Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Deferred tax asset - tax credit (Note 24.e) 42,835,892 42,883,504 43,853,106 Sundry debtors from escrow deposits - contingencies (Note 27.g.1) 34,058,669 33,121,209 30,309,783 Credit card operations (Note 10.a) 22,829,591 23,510,421 21,526,694 Sundry debtors from escrow deposits - lawsuit (Note 27.h.1) 17,868,745 17,431,080 16,911,249 Credit linked to acquired operations (Note 10.a) (1) 11,459,443 14,983,588 16,969,731 Fund of allocation of surplus - Previ (Note 26.f) 9,615,869 9,562,010 9,501,682 Income tax and social contribution to offset 9,581,064 12,813,584 11,137,929 Receivables - other 6,129,091 6,268,085 5,283,961 Sundry debtors - domestic 2,574,957 2,779,446 2,426,088 National Treasury - interest rate equalization - agricultural crop - Law 8,427/1992 2,783,417 3,418,200 2,767,454 Receivables - non-financial companies 999,865 1,482,045 1,195,844 Sundry debtors - foreign 334, , ,077 Receivables - National Treasury (2) 1,017, , ,173 Receivables ECT Banco Postal 752, , ,869 Rights for acquisition of royalties and government credits 577, , ,654 Advances to cards transactions processing s companies 588,956 22, ,834 Receivables acquisition 409, ,678 3,244,115 Salary advances and other advances 205,616 1,732, ,840 Actuarial assets (Note 26.e) 159, , ,398 Sundry debtors from escrow deposits - other 1,023,054 74,103 54,365 Sundry debtors for purchasing assets 7,204 12,674 24,898 Other 340, , ,963 Total 166,153, ,225, ,631,707 Current assets 99,374, ,887, ,215,592 Non-current assets 66,779,138 66,337,503 68,416,115 (1) Refers to the portfolios of payroll loans and vehicle financing granted to individuals, acquired by the Bank through assignments with full recourse to the transferor, accounted for in accordance with CMN Resolution 3,533/2008. (2) Refers mainly to amounts from subsidies in operations with MCR 6-2 resources, MCR 6-4 (Rural credit manual) and they are supported by specific legislation, like the CMN resolutions, the Program of Bahia's Cocoa Farming Recovery (CMN Resolution No. 2,960/2002) and the regional funds (FDNE, FDA and FDCO). 55

180 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - OTHER ASSETS Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Assets not for own use 297, , ,107 Assets in special regime 176, , ,726 Real estate 52,875 41,849 43,466 Residential properties 48,080 40,125 23,072 Machinery and equipment 2,923 3,138 3,630 Vehicles Other 16,561 19,681 28,704 Materials in stock 57,373 61,885 61,358 Subtotal 354, , ,465 (Impairment) (1) (148,531) (137,564) (124,846) Prepaid expenses 281, , ,244 Personnel expenses and other administrative expenses 139, , ,940 Entities abroad 86,528 74,787 77,260 Tax expenses 38, ,363 Unearned insurance premiums 10,011 14,323 18,291 Rent 5,734 5,718 5,764 Promotion and public relations ,397 Premiums for purchased payroll credits (2) ,864 Other 1,089 1,115 1,365 Total 487, , ,863 Current assets 459, , ,074 Non-current assets 28,199 16,809 11,789 (1) The Bank recognized, in the 1st half/2017, allowance expenses for impairment losses of assets not in use in the amount of R$ (11,816) thousand (allowance expenses in the amount of R$ (6,091) thousand in the 1st half/2016). (2) The amounts are amortized over the maturity of the installments of loans acquired from other financial institutions. 56

181 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - INVESTMENTS a) Changes in associates and joint ventures Share capital Adjusted shareholders equity Net income/(loss) - 1st half/2017 Number of shares (in thousands) Ownership interest in share Book value Changes - 1st half/2017 Book value Equity income Common Preferred capital % Dec 31, 2016 Dividends Other events (1) Equity income Jun 30, 2017 Jun 30, st half/2016 Domestic 16,631,072 (1,758,295) (364,254) 2,014,963 16,523,486 16,230,179 2,115,208 Banco Votorantim S.A. (2) 8,130,372 8,508, ,565 43,114,693 9,581, % 4,212, (95,141) 136,086 4,253,915 4,139, ,089 Cateno Gestão de Contas de Pagamento S.A. (3) 414,000 12,176, ,011 2,397,200 1,198, % 3,654,804 (90,955) -- 89,104 3,652,953 3,630,487 77,092 Cielo S.A. (4) 4,700,000 10,714,790 1,982, , % 2,604,974 (84,023) (94,382) 555,422 2,981,991 2,211, ,982 Brasilprev Seguros e Previdência S.A. (4)(5) 1,193,539 2,588, , , % 1,775,368 (215,657) (23,720) 382,548 1,918,539 1,924, ,493 BB Mapfre SH1 Participações S.A. (4)(5) 2,050,198 2,204, ,292 1,039,908 2,079, % 2,138,636 (1,095,976) (5,303) 616,037 1,653,394 2,087, ,617 Mapfre BB SH2 Participações S.A. (4)(5) 1,968,380 3,507,578 57, , , % 1,786,095 (51,485) (109,039) (48,336) 1,577,235 1,744,987 80,618 Brasilcap Capitalização S.A. (4)(5) 231, , , , , % 300,698 (110,671) -- 98, , , ,443 Other investments 2,887,992 (109,528) 2, ,248 2,966,196 2,833, ,874 Goodwill/(bargain) purchase on acquisition of investments 530, (96,621) , , Unrealized results (6) (3,260,687) -- 57, (3,203,219) (3,319,780) -- Overseas 72, (10,934) (169) 61, , Other equity abroad (169) Goodwill on acquisition of investments abroad 72, (11,103) -- 61, , Total investments in subsidiaries and associates 16,703,729 (1,758,295) (375,188) 2,014,794 16,585,040 16,350,824 2,115,208 (Provision for losses) (11,213) (11,213) (9,018) -- (1) These basically refer to the and prior fiscal year adjustments and equity valuation adjustments of available-for-sale securities and the foreign exchange variation on investments abroad. Includes the initial adoption of Resolution CMN 4,512/16, in the amount of R$ 58,275 thousand, in the Banco Votorantim S.A. (2) Excluded unrealized result arising from transactions with the Banco do Brasil. (3) Indirect interest of the Bank in Cateno, through its subsidiary BB Elo Cartões Participações S.A. The total share of the Bank is 50.08% (Cielo S.A. holds 70% of direct interest in Cateno). (4) Refers to the percentage of the equity interest, considering the acquisition of shares by the invested entity held in treasury. (5) Equity interest held by BB Seguros Participações S.A. It includes harmonization adjustments in accounting practices. (6) Unrealized profit arising from a new strategic partnership between BB Elo Cartões Participações S.A. and Cielo S.A., forming Cateno Gestão de Contas de Pagamento S.A. 57

182 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated b) Summarized financial information of associates and joint ventures, not adjusted for the equity interest percentage held by the Bank Balance sheet Brasilprev Seguros e Previdência S.A. Banco Votorantim S.A. Cateno Gestão de Contas de Pagamento S.A. BB Mapfre SH1 Participações S.A. Jun 30, 2017 Mapfre BB SH2 Participações S.A. Cielo S.A. (1) Other Total Total assets 219,240, ,473,731 12,875,783 13,134,469 13,677,631 74,077,379 40,751, ,230,768 Cash and cash equivalents 5, , , ,171 13, , ,237 Short-term interbank investments -- 17,941, , ,806 6,124,102 25,408,711 Securities and derivative financial instruments 217,009,053 29,726, ,738 6,118,045 4,592,734 9,091,524 10,356, ,564,203 Loan operations -- 40,975, ,460 41,022,062 Other credits and other assets 2,013,038 12,752, ,122 6,579,904 8,618,208 54,017,329 10,411,527 94,953,518 Permanent assets 213, ,794 10,673, , ,518 10,583,266 13,619,612 36,815,037 Total liabilities 216,652,158 93,965, ,301 10,929,826 10,170,050 63,362,590 25,411, ,921,861 Deposits, securities, loans, derivative financial intruments and outhers onlendings -- 72,801, ,922,573 1,486,352 81,210,145 Other liabilities 216,652,158 21,164, ,301 10,929,826 10,170,050 56,440,017 23,925, ,711,716 Technical provisions for insurance, pension plans and capitalization 208,478, ,333,098 7,609, ,355, ,775,881 Subordinated debts and equity and debt hybrid securities -- 4,868, ,868,605 Other 8,173,787 16,295, ,301 2,596,728 2,560,909 56,440,017 5,569,755 92,067,230 Shareholders' equity 2,588,086 8,508,173 12,445,482 2,204,643 3,507,581 10,714,789 15,340,153 55,308,907 % of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 28.69% Shareholders' equity (proportional to the equity interest) 1,940,935 4,254,087 3,733,645 1,653,262 1,753,791 3,075,369 3,390,100 19,801,189 Goodwill/(bargain) purchase on acquisition of investments (1,563) 30, ,005 38, ,601 Other amounts (2) (22,394) (172) (80,692) 132 (176,556) (93,378) (3,276,690) (3,649,750) Balance of the investment 1,916,978 4,284,482 3,652,953 1,653,394 1,577,235 3,347, ,002 16,585,040 (1) Increase in assets and liabilities arising from changes in the accounting disclosure of Cielo S.A., after adherence to the Chart of Accounts for Financial Institutions - Cosif, after operating license issued by Bacen on April 27, (2) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif. 58

183 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Statements of income Brasilprev Seguros e Previdência S.A. Banco Votorantim S.A. Cateno Gestão de Contas de Pagamento S.A. BB Mapfre SH1 Participações S.A. 1st half/2017 Mapfre BB SH2 Participações S.A. Cielo S.A. Other Total Income from financial intermediation 200,931 1,560, , , ,279,189 3,575,542 Service fee income 1,146, ,287 1,366, ,786 3,719, ,628 6,986,650 Other administrative expenses (119,680) (564,180) (461,265) (117,502) (252,155) (434,717) (407,778) (2,357,277) Other operating income/expenses (323,487) (722,075) (455,061) 1,106, ,349 (573,383) 113,303 (752,564) Non-operating income (2,200) (16,932) (3,736) 15,384 (6,571) Result before tax 902, , ,088 1,289,081 88,714 2,707,948 1,479,726 7,445,780 Tax about profit and profit sharing (393,739) (255,343) (153,093) (467,589) (31,125) (725,678) (348,137) (2,374,704) Net income 508, , , ,492 57,589 1,982,270 1,131,589 5,071,076 % of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 28.69% Net income (proportional to the equity interest) 381, ,282 89, ,037 28, , ,117 2,159,486 Other amounts (1) 1,142 (196) 6 -- (77,131) (13,329) (55,184) (144,692) Result in the equity method investments 382, ,086 89, ,037 (48,336) 555, ,933 2,014,794 (1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif. 59

184 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Balance sheet Brasilprev Seguros e Previdência S.A. Banco Votorantim S.A. Cateno Gestão de Contas de Pagamento S.A. BB Mapfre SH1 Participações S.A. Jun 30, 2016 Mapfre BB SH2 Participações S.A. Neoenergia S.A. Cielo S.A. Other Total Total assets 175,665, ,091,839 12,510,093 14,188,884 14,191,416 11,893,420 21,512,344 30,911, ,964,928 Cash and cash equivalents 3, , , , , , ,228 Interbank investments -- 19,855, , , ,682 21,369,802 Securities and derivative financial instruments 173,801,541 31,689, ,380,130 4,728, ,413 71,005 17,549, ,414,815 Loan operations -- 41,394, ,394,671 Other credits and other assets 1,661,678 14,392, ,795 7,319,390 8,859, ,292 11,164,834 10,022,197 54,572,058 Permanent assets 198, ,700 11,058, , ,220 11,083,579 10,266,048 2,543,907 36,586,354 Total liabilities 173,065,410 99,809, ,708 11,405,348 10,700,534 1,959,729 13,810,164 24,163, ,324,194 Deposits, securities, loans, derivative financial intruments and outhers onlendings -- 41,777, ,777,991 Other liabilities 173,065,410 58,031, ,708 11,405,348 10,700,534 1,959,729 13,810,164 24,163, ,546,203 Technical provisions for insurance, pension plans and capitalization Subordinated debts and equity and debt hybrid securities 171,816, ,486,569 7,963, ,689, ,955, ,451, ,451,069 Other 1,249,405 52,580, ,708 2,918,779 2,736,927 1,959,729 13,810,164 4,474,729 80,139,802 Shareholders' equity 2,600,153 8,282,418 12,100,385 2,783,536 3,490,882 9,933,691 7,702,180 6,747,489 53,640,734 % of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 11.99% 28.72% Shareholders' equity (proportional to the equity interest) Goodwill/(bargain) purchase on acquisition of investments 1,949,985 4,141,209 3,630,116 2,087,374 1,745,441 1,190,761 2,211,858 2,079,282 19,036,026 (1,561) 91, , , ,511 Other amounts (1) (25,821) (1,898) (454) (15,372) -- (3,381,670) (3,424,713) Balance of the investment 1,922,603 4,230,675 3,630,487 2,087,505 1,744,987 1,175,389 2,693,456 (1,134,278) 16,350,824 (1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif. 60

185 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Statements of income Brasilprev Seguros e Previdência S.A. Banco Votorantim S.A. Cateno Gestão de Contas de Pagamento S.A. BB Mapfre SH1 Participações S.A. 1st half/2016 Mapfre BB SH2 Participações S.A. Neoenergia S.A. Cielo S.A. Other Total Income from financial intermediation 281,259 1,614, , , ,189 3,464,608 Service fee income 904, ,271 1,349, , ,032,324 68,312 6,595,412 Other administrative expenses (103,575) (576,624) (501,651) (119,939) (241,561) (7,919) (431,115) (172,293) (2,154,677) Other operating income/expenses (234,938) (583,288) (458,711) 1,065, , ,307 (781,347) 595,251 90,529 Non-operating income 85 5, , ,024 (19,627) 16,882 9,706 Result before tax 847, , ,337 1,350, , ,412 2,800,235 1,295,341 8,005,578 Tax about profit and profit sharing (382,655) (501,901) (132,363) (541,870) (138,562) (420) (876,590) (383,230) (2,957,591) Net income 464, , , , , ,992 1,923, ,111 5,047,987 % of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 11.99% 28.72% Net income (proportional to the equity interest) 348,493 97,205 77, ,617 80,618 39, , ,294 2,157,815 Other amounts (1) -- 6, (9,385) 1,563 (41,669) (42,607) Result in the equity method investments 348, ,089 77, ,617 80,618 29, , ,625 2,115,208 (1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif. 61

186 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Other investments Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Tax incentive investments 38,462 38,462 35,189 Equity securities Stocks and shares 49,414 48,930 88,486 Other investments 4,092 4,038 7,868 Other equity abroad 79,610 78,911 76,512 Total (1) 171, , ,112 (Provision for losses) (7,923) (7,908) (45,234) (1) Includes, in Banco do Brasil, the amount of R$ 5,536 thousand as of June 30, 2016 and, in BB Consolidated, R$ 4,797 thousand of June 30, 2017 and R$ 9,090 thousand as of June 30, 2016 related of accumulated impairment. d) Goodwill arising on acquisition of investments Changes of goodwill 1st half/2017 1st half/2016 Opening balance 604, ,903 Amortizations (1) (105,676) (103,748) Foreign exchange fluctuation (2) (2,046) (45,083) Closing balance 496, ,072 (1) Recorded in other administrative expenses. (2) Levied on the goodwill from Banco do Brasil Americas e do Banco Patagonia. e) Expected goodwill amortization 2nd half/ After 2019 Total Banco do Brasil 39,518 18,237 18,601 15,765 92,121 Banco Votorantim 30, ,567 Banco Patagonia 8,951 18,237 18,601 15,765 61,554 Tax effects (1) (17,783) (8,207) (8,370) (7,094) (41,454) Net total 21,735 10,030 10,231 8,671 50,667 Other investments BB-BI 61, , , ,005 Cielo 61, , , ,005 BB Seguros 12,268 11,040 10,028 5,256 38,592 Brasilcap 4,297 8,780 7, ,736 IRB-Brasil Resseguros S.A. 7,971 2,260 2,369 5,256 17,856 BB Consolidated 113, , ,179 21, ,718 Tax effects (1) (49,745) (75,724) (84,927) (8,881) (219,277) Net total 63,800 95, ,252 12, ,441 (1) 25% of income tax and 20% of social contribution for financial companies and for non-financial companies of insurance, private pension plan and capitalization, and 25% of income tax and 9% of social contribution for other non-financial companies. The expected amortization of goodwill arising on the acquisition of investments is based on the projections of results made at the time of the purchase, prepared by specialized firms or technical departments within the Bank, and considers the timing of the estimates and discount rates used in calculating the net present value of expected cash flows. 62

187 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated f) Goodwill impairment test The recoverable amount of goodwill arising on acquisition of investments is determined by the value in use, which is the discounted value of the cash flow projections of the invested entity (cash-generating unit). For the evaluation of the banks, the free cash flow for shareholders discounted by the cost of equity capital calculated for each institution was used. Assumptions used to project these cash flows are based on public information, budgets and / or business plans of the purchased entities. These assumptions consider current and past performance, as well as expected market and macroeconomic growth. The cash flow of the entities below were actively projected for ten years and considered perpetual from the eleventh year with fixed growth rates. For the periods that exceed the terms of the budget or business plan, the growth estimates are in line with those adopted by the entities. The nominal discount rate is determined annually based on the CAPM (Capital Asset Pricing Model) adjusted for the market and the currency of each country. Entity (cash-generating unit) Growth rate p.a. (1) Discount rate p.a. (2) Banco Votorantim 4.2% 14.2% Banco do Brasil Americas 2.0% 8.6% Banco Patagonia 19.0% 27.7% (1) Nominal growth in perpetuity. (2) Geometric average used in economic evaluations. According to the sensitivity analysis performed, there is no indication that changes in the assumptions would cause the book value of the cash-generating units to exceed the recoverable amount, except for Banco do Brasil Americas. The recoverable amount of the goodwill arising on the acquisition of Cielo, as well as of the goodwill recognized in the BB Seguros/BB Seguridade, is determined by the net realizable value through sale, based on the share price of the companies on BM&FBovespa. Entity (cash-generating unit) Share price (1) BB Seguridade (BBSE3) R$ Cielo (CIEL3) R$ (1) Share price quoted at September 30, In the first half 2017 and in the first half 2016, there was no impairment loss on goodwill arising on the acquisition of investments. 63

188 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated 15- PROPERTY AND EQUIPMENT Dec 31, st half/2017 Jun 30, 2017 Jun 30, 2016 Book value Changes Depreciation Cost value Accumulated Depreciation Accumulated impairment Book value Book value Buildings 3,511,189 1,463 (177,683) 7,525,139 (4,172,835) (17,335) 3,334,969 3,675,748 Furniture and equipment in use 1,635,334 65,696 (142,868) 3,660,254 (2,101,967) (125) 1,558,162 1,426,655 Data processing systems 1,108, ,834 (211,464) 4,064,464 (2,992,670) -- 1,071,794 1,082,059 Facilities 174,558 1,536 (16,209) 987,073 (827,188) , ,650 Land 198,906 (1,388) , , ,348 Security systems 165,617 4,353 (15,112) 418,932 (264,074) , ,064 Constructions in progress 641, , , , ,945 Communication systems 113,195 19,200 (10,845) 304,985 (183,435) , ,472 Transport systems 7, (891) 14,844 (8,023) -- 6,821 8,170 Furniture and equipment in stock 1,718 (53) -- 1, ,665 1,718 Total 7,557, ,817 (575,072) 17,985,875 (10,550,192) (17,460) 7,418,223 7,140,829 - INTANGIBLE ASSETS a) Changes and breakdown Dec 31, st half/2017 Jun 30, 2017 Jun 30, 2016 Book value Acquisitions Exchange fluctuation Write offs Amortization Cost value Accumulated amortization Accumulated impairment Book value Book value Rights to manage payroll (1) 5,596, (885,514) 10,569,150 (5,808,345) (49,740) 4,711,065 4,400,620 Goodwill on acquisition of (2) 1,007, (503,729) 4,961,028 (4,457,298) ,730 1,457,537 absorbed company Softwares 1,839, ,944 2,362 (1,114) (127,188) 3,911,827 (1,845,609) -- 2,066,218 1,737,130 Other intangible assets 272, (54,057) 560,043 (341,952) , ,165 Total 8,715, ,084 2,362 (1,114) (1,570,488) 20,002,048 (12,453,204) (49,740) 7,499,104 7,924,452 (1) The values of acquisitions and write-offs include contracts renegotiated in the period, in which the new contract value is recorded and the past contract value is written-off without impact on Statement of Income. (2) Refers to the goodwill from the merger of Banco Nossa Caixa on November b) Estimate for amortization 2nd half/ After 2021 Total Amounts to be amortized 1,520,190 1,891,190 1,363, , ,758 1,157,865 7,499,104 c) Impairment test The impairment test of goodwill on the acquisition of Banco Nossa Caixa, which was merged into Banco do Brasil, considers the value in use of Banco do Brasil s operations in the state of São Paulo (cash-generating unit). Cash flows are based on cash-generating unit results in 2016, and in the 2017 budgets and internal projections of results from 2018 to The assumptions adopted for the calculation are based on Banco do Brasil's Corporate Strategy and macroeconomic scenario. They consider the current and past performance and expected growth in the market segment. Cash flows were discounted by the Bank s cost of own capital. The nominal discount rate is measured annually based on the Capital Asset Pricing Model CAPM adapted for the Brazilian market and referenced in Reais (R$). Entity (cash-generating unit) Growth rate p.a Discount rate p.a. Banco do Brasil - state of São Paulo - goodwill Banco Nossa Caixa (1)(2) 2.7% 14.6% (1) Nominal growth in perpetuity. (2) Geometric average of five years of projections. According to the sensitivity analysis performed, there is no indication that changes in the assumptions would cause the book value of the cash-generating unit to exceed its recoverable amount. 64

189 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated In the first half 2017 and first half 2016, there was no impairment loss on goodwill on merged company. - DEPOSITS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS a) Deposits Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Demand deposits 62,384,828 69,349,186 62,549,870 Individuals 32,251,148 33,991,206 29,142,429 Corporations 18,297,375 22,205,568 20,065,846 Restricted 8,236,303 7,546,026 9,471,591 Government 1,664,449 2,622,497 1,488,770 Financial system institutions 503, , ,904 Foreign currency 344, , ,597 Related companies 526, , ,568 National Treasury Special 335, , ,398 Domiciled abroad 111,576 70,856 86,528 Other 114, , ,239 Saving deposits 150,982, ,763, ,367,610 Individuals 143,115, ,469, ,228,546 Corporations 7,504,813 7,964,554 8,754,939 Related companies 347, , ,514 Financial system institutions 14,285 15,618 16,611 Interbank deposits 18,961,724 20,664,801 27,472,505 Time deposits 210,379, ,150, ,458,585 Judicial 130,513, ,969, ,654,650 National currency 50,069,291 52,691,661 60,079,689 Foreign currency 23,709,204 22,475,927 20,385,582 Fundo de Amparo ao Trabalhador - FAT (Note 17.e) 4,050,535 5,187,817 3,741,432 Funproger (Note 17.f) 345, , ,697 Other 1,691,008 1,501,693 1,294,535 Other deposits 103,565 53,111 29,962 Total 442,812, ,980, ,878,532 Current liabilities 393,217, ,668, ,520,384 Non-current liabilities 49,594,114 51,312,376 57,358,148 b) Deposits by liability date Without maturity Up to 3 months 3 to 12 months 1 to 3 years Over 3 years Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Time deposits (1) 136,683,643 19,949,371 7,427,002 18,903,381 27,416, ,379, ,150, ,458,585 Saving deposits 150,982, ,982, ,763, ,367,610 Demand deposits 62,384, ,384,828 69,349,186 62,549,870 Interbank deposits -- 6,967,988 8,719, ,901 2,330,678 18,961,724 20,664,801 27,472,505 Other deposits 103, ,565 53,111 29,962 Total 350,154,389 26,917,359 16,146,159 19,847,282 29,746, ,812, ,980, ,878,532 (1) Includes the amount of R$ 48,326 thousand (R$ 51,068 thousand as of Dec 31, 2016 and R$ 57,911 thousand as of Jun 30, 2016), of time deposits with early repurchase clause (liquidity commitment), classified based on the contractual maturity dates. 65

190 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Securities sold under repurchase agreements Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Own portfolio 46,641,005 59,207,850 50,808,346 Corporate bonds 24,897,641 25,591,345 30,415,000 Treasury financial bills 18,516,660 32,718,983 19,241,233 Securities abroad 3,226, ,522 1,152,113 Third-party portfolio 403,180, ,426, ,160,289 National Treasury bills 57,667,980 45,709, ,623,309 Treasury financial bills 302,182, ,552, ,924,351 National Treasury notes 43,330,629 50,163,996 84,612,628 Securities abroad Total 449,821, ,634, ,968,635 Current liabilities 437,069, ,409, ,837,556 Non-current liabilities 12,752,115 16,224,713 32,131,079 d) Deposits and securities sold under repurchase agreements expenses 1st half/2017 1st half/2016 Deposits (9,755,955) (17,942,769) Saving deposits (5,311,341) (6,000,428) Judicial deposits (5,830,354) (5,886,330) Time deposits (3,278,086) (4,231,748) Interbank deposits 4,663,826 (1,824,263) Securities sold under repurchase agreements (22,989,168) (22,264,217) Third-party portfolio (20,378,350) (18,923,692) Own portfolio (2,610,818) (3,340,525) Funds from acceptance and issuance of securities (1) (8,640,408) (11,323,454) Agribusiness letters of credit (5,459,177) (7,814,270) Financial bills (1,702,952) (1,972,745) Securities issued abroad (648,566) (585,117) Letters of credit real estate (829,713) (951,322) Subordinated debt abroad (2) (271,880) (274,345) Equity and debt hybrid securities (3) (918,649) (973,305) Other (336,760) (377,125) Total (42,912,820) (53,155,215) (1) Funds from acceptance and issuance of securities are disclosed in Note 18. (2) Subordinated debt abroad are disclosed in Note 20.c. (3) Equity and debt hybrid securities are disclosed in Note 20.d. 66

191 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated e) Fund for worker's assistance (Fundo de Amparo ao Trabalhador FAT) Repayment of FAT Funds Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Program Resolution/TADE (1) Type (2) Available Invested Initial date TMS (3) TJLP (4) Total Available Invested TMS (3) TJLP (4) Total Available Invested TMS (3) TJLP (4) Proger Rural and Pronaf 10,834 47,500 58,334 13,409 57,761 71,170 18,503 78,120 96,623 Pronaf Custeio 04/2005 RA 11/ ,170 1, ,440 1, ,705 1,796 Pronaf Investimento 05/2005 RA 11/2005 9,834 41,965 51,799 12,187 51,238 63,425 17,054 69,457 86,511 Rural Custeio 02/2006 RA 11/ Rural Investimento 13/2005 RA 11/ ,145 4,907 1,038 4,837 5,875 1,274 6,589 7,863 Proger Urbano 548,435 2,943,843 3,492,278 1,531,783 2,914,158 4,445, ,719 2,341,018 3,008,737 Urbano Investimento 18/2005 RA 11/ ,560 1,921,297 2,199, ,056 2,150,447 2,631, ,799 2,341,018 2,657,817 Urbano Capital de Giro 01/2016 RA 06/ ,875 1,022,546 1,292,421 1,050, ,711 1,814, , ,920 Other 75, , , , , , , , ,072 Exports 27/2005 RA 11/ ,309 23,069 37,378 15,768 41,379 57,147 13,973 45,324 59,297 FAT Taxista 02/2009 RA 09/ , , , , , ,754 62, , ,205 FAT Turismo Investimento 01/2012 RA 08/ ,281 80,750 93,031 15,777 97, ,767 13, , ,788 FAT Turismo Capital de Giro 02/2012 RA 08/ , ,038 25,499 11,283 36,782 Total 634,560 3,415,975 4,050,535 1,727,332 3,460,485 5,187, ,561 2,939,871 3,741,432 (1) TADE - Allocation Term of Special Deposits. (2) RA - Automatic Return (monthly, 2% of the total balance). (3) Funds remunerated by the Taxa Média Selic (average selic rate - TMS). (4) Funds remunerated by Taxa de Juros de Longo Prazo (long-term interest rate - TJLP). Total 67

192 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated FAT is a special accounting and financial fund, established by Law 7,998/1990, associated with the Ministério do Trabalho e Emprego (Ministry of Labor and Employment) and managed by the Executive Council of the Fundo de Amparo ao Trabalhador (Fund for Workers Assistance) - Codefat. Codefat is a collective, tripartite, equal level organization, composed of representatives of workers, employers and government. The main actions to promote employment using FAT funds are structured around the Employment and Earnings Generating Program (Proger), which resources are invested through special deposits, established by Law 8,352/1991, in official federal financial institutions. These programs include, among others, the urban Proger program (Investment and Working Capital) and the rural Proger program and the National Program for Strengthening Family Farming - Pronaf, in addition to the special lines such as FAT Integrar Rural e Urbano, FAT Giro Setorial Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Setorial Veículos Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial Veículos Médias e Grandes Empresas (medium and large-sized companies), FAT Fomentar Micro e Pequenas Empresas (micro and smallsized companies), FAT Fomentar Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Agropecuário, FAT Inclusão Digital (digital inclusion), FAT Taxista (taxi), FAT Turismo Investimento and FAT Turismo Capital de Giro. The FAT special deposits invested in Banco do Brasil are daily accrued the Average Selic Rate (TMS), when not lent out. When disbursed as loans, the interest rate is swapped to the Long-term Interest Rate (TJLP) until maturity. The accruals are paid to FAT on a monthly basis, as established in Codefat Resolutions 439/2005 and 489/2006. f) Endorsement fund for the generation of employment and income (Funproger) The Endorsement fund for the generation of employment and income (Funproger) is a special accounting fund established on November 23, 1999 by Law 9,872/1999, amended by Law 10,360/2001 and by Law 11,110/2005 and regulated by Codefat Resolution 409/2004, and its amendments. It is managed by Banco do Brasil under the supervision of Codefat/MTE and the balance at June 30, 2017 is R$ 345,805 thousand (R$ 324,120 thousand as of December 31, 2016 and R$ 302,697 thousand as of June 30, 2016). The objective of Funproger is to provide endorsement to entrepreneurs who do not have the necessary guarantees to contract financing by Proger Urbano and Programa Nacional de Microcrédito Produtivo Orientado, through the payment of a commission. The Funproger equity where incorporated from the spread between TMS and TJLP accrued over FAT special deposits. Other sources of funds are the operations accruals and the income paid by Banco do Brasil, the fund manager. 68

193 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES Funding Currency Issued value Remuneration p.a. Issue date Maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Banco do Brasil 142,698, ,208, ,588,774 Global Medium - Term Notes Program 6,917,582 6,421,430 6,566,303 R$ 350, % , , ,080 USD 500, % ,695,270 1,669,293 1,643,530 EUR 1,000, % 2013/ ,908,568 3,496,582 3,667,774 CHF 275, % , , ,919 "Senior Notes" 5,998,866 7,561,835 7,442,474 USD 500, % ,656,809 1,630,511 USD 1,809,700 (1) 3.88% ,998,866 5,905,026 5,811,963 Structured notes 69,217 63,632 64,857 EUR 18, % to 3.55% ,217 63,632 64,857 Certificates of deposits (2) 5,828,391 3,388,669 1,637,263 Short term 0.85% to 4.60% 5,636,234 3,169,956 1,508,173 Long term 2.57% to 4.60% , , ,090 Certificates of structured operations 201, , ,797 Short term 124, Long term , , ,797 Letters of credit - real estate 20,131,501 17,073,622 18,066,485 Short term 135,098 39,344 9,235,106 Long term ,996,403 17,034,278 8,831,379 Letters of credit agribusiness 100,665, ,965, ,418,026 Short term 90,288,297 62,584,051 48,530,625 Long term ,376,845 62,381,283 86,887,401 Financial letters 2,886,114 2,631,826 2,256,569 Long term 98.50% to % DI IPCA % p.a Fixed 9.54% p.a. to 14.00% p.a ,886,114 2,631,826 2,256,569 Banco Patagonia (3) 385, , ,625 Short term ARS 203, , ,600 Long term ARS ,414 77, ,025 Special Purpose Entities SPE abroad (4) 2,805,000 2,801,840 2,796,517 Securitization of future flow of payment orders from abroad (4) USD 24,000(1) 5.25% , , ,401 USD 500,000 Libor 6m+2.50% 2014/ ,664,755 1,639,455 1,613,402 USD 320,000 Libor 6m+3.25% ,060,663 1,044,805 1,028,714 Eliminated amount on consolidation (5) (67,167) (169,700) (161,191) Total 145,821, ,166, ,508,725 Current liabilities 96,826,343 68,052,214 60,873,824 Non-current liabilities 48,995,197 97,114, ,634,901 (1) Refers to the outstanding value since partial repurchases ocurred. (2) Securities issued abroad in USD, AUD and EUR. (3) Securities issued with rates from 22.50% p.a. to 24.00% p.a. and from Badlar+325 pts. to Badlar+425 pts. (4) The Special Purpose Entities (SPE) "Dollar Diversified Payment Rights Finance Company" and "Loans Finance Company Limited" were organized under the laws of the Cayman Islands. The liabilities arising from securities issued by these entities are paid using the funds accumulated in their accounts. The SPE declare that have no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. The Bank is not a shareholder, the owner, or a beneficiary of any of the results of operations of the SPE. The Dollar Diversified Payment Rights Finance Company was organized for the following purposes: a) fund raising by issuance of securities in the international market; (b) use of resources obtained by issuing securities to pay for the purchase, with the Bank, of the rights to payment orders issued by banking correspondents located in the U.S. and by the agency of BB New York, in U.S. dollars, for any agency in Brazil (Rights on Consignment); and (c) making payments of principal and interest on securities issued and other payments defined in the contract of issuance of these securities. The Loans Finance Company Limited was organized for the following purposes: a) fund raising by issuance of securities in the international market; (b) closing and booking repurchase agreements with the Bank; (c) purchasing of protection against credit risk of the Bank through a credit derivative, which is actionable only in case of Bank's default in any of the obligations assumed in repurchase agreements; and (d) making payments of principal and interest on securities issued and other payments defined in the contract of issuance of these securities. (5) Refers to securities issued by Banco do Brasil Conglomerate, which are in possession of overseas subsidiaries/entities. 69

194 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - BORROWINGS AND ONLENDINGS a) Borrowings up to 90 days from 91 to 360 days from 1 to 3 years from 3 to 5 years Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Overseas 5,572,589 10,405,336 3,478, ,660 19,740,645 20,409,348 22,762,981 Borrowings from bankers abroad 5,544,248 10,335,191 3,445, ,437 19,607,777 20,345,736 22,586,697 Imports 26,794 54,709 32,159 2, ,885 63, ,951 Exports 1,547 15, , ,333 Total 5,572,589 10,405,336 3,478, ,660 19,740,645 20,409,348 22,762,981 Current liabilities 15,977,925 17,997,094 18,577,980 Non-current liabilities 3,762,720 2,412,254 4,185,001 b) Onlendings Domestic - official institutions Programs Finance charges Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 National Treasury - rural credit 163, , ,578 Pronaf Cacau (cocoa) Recoop TMS (if available) Fixed 0.50% p.a. to 5.50% p.a. (if applied) IGP-M % p.a. or TJLP % p.a. or 6.35% p.a. Fixed 5.75% p.a. to 8.25% p.a. or IGP-DI % p.a. or IGP-DI % p.a. 42,830 30,766 36,674 98,917 98,243 96,737 13,134 16,096 19,877 Other 8,671 4,143 12,290 BNDES Fixed 0.00% p.a. to 9.50% p.a. TJLP % p.a. to 5.40% p.a. IPCA % p.a. to 9.41% p.a. Selic % p.a. to 2.50% p.a. FX Variation % p.a. to 3.00% p.a. 29,776,717 32,086,856 35,323,513 Caixa Econômica Federal Fixed 5.24% p.a. (average) 25,009,178 23,758,043 21,648,278 Finame Fixed 0.00% p.a. to 11.00% p.a. TJLP % p.a. to 5.50% p.a. FX Variation % p.a. to 3.00% p.a. Selic % p.a. to 2.33% p.a. 22,466,643 24,765,860 27,532,146 Other official institutions 2,036,531 2,322,686 1,933,121 Special supply - deposits (Note 9.b) 1,874,492 1,874,492 1,643,753 Funcafé TMS (if available) Fixed 8.75% p.a. to 11.25% p.a. (if applied) 162, , ,341 Other Total 79,452,621 83,082,693 86,602,636 Current liabilities 39,332,945 39,463,427 38,264,763 Non-current liabilities 40,119,676 43,619,266 48,337,873 Overseas Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Special Fund for Support to Small and Medium Manufacturing Companies Total Current liabilities Non-current liabilities

195 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Expense on borrowings and onlendings 1st half/2017 1st half/2016 Borrowings expenses (1) (1,151,864) 6,604,983 Onlendings expenses (1) (2,752,060) 2,972,447 Foreign (1) (569,693) 5,395,127 BNDES (1,120,160) (1,298,342) Caixa Econômica Federal (732,994) (726,023) Finame (239,754) (291,557) National Treasury (37,507) (49,722) Other (51,952) (57,036) Expenses for obligations with bankers abroad (1) (46,485) 3,490,657 Expenses for financial and development funds liabilities (1) (584,904) 806,363 Foreign exchange profit/(loss) on overseas investments 275,703 (2,540,229) Total (4,259,610) 11,334,221 (1) The credit balances presented arise from the negative exchange variation of the period (the appreciation of the Real against the Dollar). - OTHER LIABILITIES a) Taxes and social security Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Legal liabilities (Note 27.h1) (1) 6,571,673 6,571,673 6,571,673 Deferred tax liabilities (Note 24.d) 1,993,464 2,088,502 2,348,411 Provision for taxes and contributions on net income 1,592, ,286 4,909,677 Taxes and contributions payable 1,214,662 1,412,098 1,355,457 Taxes and contributions on net income payable 396,360 5,472, ,088 Total 11,768,168 16,026,047 15,610,306 Current liabilities 11,188,234 15,293,551 14,877,176 Non-current liabilities 579, , ,130 (1) The provision for restatement of judicial deposit classified under "Other liabilities - Taxes and social security - Legal liabilities" was reclassified to "Other liabilities - Sundry - Legal liabilities Provision for tax risks ", according to Bacen Circular Letter No /2016. b) Financial and development funds Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Marinha Mercante 8,053,441 8,190,785 7,667,223 Pasep (1) 2,632,693 2,632,348 2,661,846 Fundo de Desenvolvimento do Nordeste - FDNE 2,077,529 2,070,560 2,123,251 Fundo de Desenvolvimento do Centro Oeste - FDCO 1,078, , ,598 Funds from Governo do Estado de São Paulo 776, , ,582 Fundo Nacional de Aviação Civil - FNAC 63,998 64,926 77,652 Other 154, , ,968 Total 14,837,266 14,790,525 13,741,120 Current liabilities 8,946,766 9,055,620 8,606,530 Non-current liabilities 5,890,500 5,734,905 5,134,590 (1) The Bank is administrator of the Public Servant Heritage Formation Program (Pasep), guaranteeing a minimum return equal to the Long-Term Interest Rate - TJLP. 71

196 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Subordinated debts Banco do Brasil Funding Issued value Remuneration p.a. Issue date Maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 FCO Resources from Fundo Constitucional do Centro-Oeste 26,591,388 25,237,153 23,841,572 Funds applied (1) 23,457,135 22,219,924 21,599,707 Resources available (2) 3,134,253 3,017,229 2,241,865 Subordinated debt abroad 9,821,086 9,668,175 9,516,527 USD 660, % ,231,534 2,197,183 2,163,114 USD 1,500, % ,056,889 4,977,616 4,899,001 USD 750, % ,532,663 2,493,376 2,454,412 Subordinated letters of credit 25,924,064 27,100,626 25,296, , % of CDI ,358,765 3,918,702 3,641,211 Total subordinated debt from Banco do Brasil % of CDI 1.06% to 1.11% + CDI 4,844, ,548,842 8,120,026 7,663, % to 5.56% + IPCA Fixed 10.51% 215, % of CDI , , ,133 4,680, % of CDI ,036,260 7,561,372 7,025, , % of CDI , , , % + IPCA 377, % to % of CDI , , , , % to % of CDI , , ,972 1,594, % to % of CDI ,352,260 2,208,470 2,046,731 2,273, % to % of CDI ,523,598 3,309,117 3,067, , % + IPCA , , ,010 62,336,538 62,005,954 58,654,822 Eliminated amount on consolidation (30,950) (30,203) (7,135) Total subordinated debt consolidated (3)(4) 62,305,588 61,975,751 58,647,687 Current liabilities 8,331,154 4,158,742 2,448,477 Non-current liabilities 53,974,434 57,817,009 56,199,210 (1) Remunerated at the rates on the loans funded with these amounts less the del credere of the financial institution, according to article 9 of Law 7,827/1989. (2) Remunerated based on extra-market rate announced by the Banco Central do Brasil (Bacen), according to article 9 of Law 7,827/1989. (3) R$ 39,425,703 thousand (40,181,808 thousand as of Dec 31, 2016 and 38,904,584 thousand as of Jun 30, 2016) of the total balance is considered tier II of the Referential Equity (RE). (4) Includes the amount of R$ 7,315,391 thousand, relating to subordinated debt recorded in the line Debt Instruments eligible as capital. d) Equity and debt hybrid securities Funding (1) Issued value p.a. Remuneration Issue date Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Perpetual bonds USD 1,498, % 10/2009 5,031,761 4,954,884 4,878,634 USD 1,398, % 01 and 03/2012 4,802,446 4,731,512 4,661,142 USD 1,988, % 01/2013 6,640,695 6,539,293 6,438,716 R$ 8,100, % (2) 09/2012 8,145,172 8,175,552 8,146,227 USD 2,169, % 06/2014 7,175,246 7,065,637 6,956,920 Total Banco do Brasil 31,795,320 31,466,878 31,081,639 Eliminated amount on consolidation (42,591) (1,252) (13,876) Total reclassified to shareholders' equity (Note 23.c) (8,100,000) (8,100,000) (8,100,000) Total BB Consolidated 23,652,729 23,365,626 22,967,763 Current liabilities 86, ,308 74,600 Non-current liabilities 23,566,221 23,086,318 22,893,163 (1) Refers in funding in US dollars, the outstanding value, as occurred partial repurchases of these instruments. (2) Since August.28, 2014, the remuneration is fully variable (Note 23.c). 72

197 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated R$ 22,909,285 thousand of the Perpetual Bonds is included in the Referential Equity (R$ 22,565,112 thousand as of December 31, 2016, and R$ 22,223,710 thousand as of June 30, 2016). Of this amount, R$ 18,112,395 thousand are recorded in debt instruments eligible as capital (Note 28.b). The bonds of USD 1,500,000 thousand (outstanding value USD 1,498,500 thousand), issued in October 2009, have the option of redemption at the discretion of the Bank from 2020 or on each subsequent, semi-annual interest payment date, as long as it has been previously authorized by Banco Central do Brasil (Bacen). In case the Bank does not exercise the option to redeem on October 2020, the interest on the bonds will be adjusted on this date to 7.782% plus the traded rate on 10 year North American Treasury bonds. Thereafter, every 10 years, the interest on the bonds will be adjusted by taking into account the traded rate of the 10 year North American Treasury bonds. The bonds issued in January 2012 and March 2012 (reopening), of USD 1,000,000 thousand (outstanding value USD 650,000 thousand) and USD 750,000 thousand (outstanding value USD 748,727 thousand) respectively, and the bonds issued in January 2013 of USD 2,000,000 thousand (outstanding value USD 1,988,000 thousand), had their terms and conditions modified on September 27, 2013, in order to adjust them to the rules of Bacen through Resolution No. 4,192 of March 1, 2013, which regulates the implementation of Basel III in Brazil. The changes were effective from October 1, 2013, when the instruments were submitted to Bacen to obtain authorization to be included in the Supplementary Capital (Tier I) of the Bank. The authorization was granted on October 30, The bonds issued in June 2014 of USD 2,500,000 thousand (outstanding value USD 2,169,700 thousand), have the option of redemption at the discretion of the Bank from June 18, 2024 or on each subsequent, semi-annual interest payment date, as long as it has been previously authorized by the Central Bank of Brazil. If the Bank did not exercise the option to redeem in June 2024, the interest on the bonds will be adjusted to 6.362% plus the traded rate on 10 year North American Treasury bonds. If the Bank does not exercise the redemption option in April 2023 for the bonds issued in 2012, in April 2024 for the bonds issued in 2013, and in June 2024 for the bonds issued in 2014, the rate of bond interest is adjusted on that date and every 10 years according to the 10 year North American Treasury bondsat the time plus the initial credit spread. The bonds have the following options of redemption, subject to prior authorization of Bacen: (i) (ii) the Bank may, at its option, redeem the bonds in whole but not in part in April 2023 for the bonds issued in 2012, in April 2024 for the bonds issued in 2013, and in June 2024 for the bonds issued in 2014, and on each subsequent, semi-annual interest payment date, at the base redemption price; the Bank may, at its option, redeem the bonds in whole, but not in part, after five years from the date of issue, as long as it is before April 2023, for the bonds issued in 2012, before April 2024 for the bonds issued in 2013, and before April 2024 for the bonds issued in 2014, as a result of a tax event, at the base redemption price; (iii) the Bank may, at its option, redeem the bonds in whole but not in part, after five years from the date of issue, as long as it is before April 2023, for the bonds issued in 2012, and in April 2024 for the bonds issued in 2013, on the occurrence of a regulatory event, at the higher value between the base redemption price and the Makewhole amount; (iv) the Bank may, at its option, redeem the bonds in whole but not in part, after five years from the date of issue as long as it is before June 2024 for the bonds issued in 2014, on the occurrence of a regulatory event at the base redemption price. The bonds issued in October 2009 determine that the Bank suspends the semi-annual payments of interest and / or accessories on those securities issued (which will not be due or accrued) if: (i) the Bank does not comply or the payment of such charges does not allow the bank to comply with the levels of capital adequacy, operating limits, or its financial indicators are under the minimum level required by Brazilian regulations applicable to banks; (ii) Bacen or the regulatory authorities determine the suspension of payment of such charges; (iii) any event of insolvency or bankruptcy occurs; (iv) a default occurs; or (v) the Bank has not distributed dividends or interest on equity to common shareholders for the period of calculation of such interest and / or accessories. The bonds issued in January and March 2012, in January 2013 and in June 2014 determine that the Bank suspend the semi-annual payments of interest and/or accessories on those securities issued (which will not be due or accrued) if: (i) distributable income for the period are not sufficient for making the payment (discretionary condition of the Bank); 73

198 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated (ii) the Bank does not comply or the payment of such charges does not allow the Bank to comply with the levels of capital adequacy, operating limits, or its financial indicators are under the minimum level required by Brazilian regulations applicable to banks; (iii) Bacen or the regulatory authorities determine the suspension of payment of such charges; (iv) any event of insolvency or bankruptcy occurs; or (v) a default occurs. According to Basel III rules, the bonds issued in January 2012, March 2012, in January 2013 and in June 2014 have mechanisms of loss absorption. Moreover, if the item (i) occurs, the payment of dividends by Bank to its shareholders will be limited to the minimum required determined by applicable law until the semi-annual interest payments and / or accessories on those titles have been resumed in full. Finally, these bonds will expire permanently and at the minimum value corresponding to the balance recorded in the Tier I capital of the Bank if: (i) (ii) the main capital of the Bank is less than 5.125% of the amount of risk-weighted assets (RWA); the decision to make a capital injection from the public sector or an equivalent capital contribution to the Bank is taken, in order to maintain the bank s viability; (iii) the Bank, on a discretionary assessment regulated by the CMN, sets out, in writing, the expiration of the bonds to enable the continuity of the Bank. e) Sundry Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Credit/debit card operations 19,844,445 21,471,614 19,170,677 Actuarial liabilities (Note 26.e) 13,452,483 12,527,486 14,546,091 Legal liabilities Provision for tax risks (Note 27.h1) (1) 9,443,223 8,869,908 8,062,268 Provisions for civil claims (Note 27.e1) 6,666,100 6,897,180 6,811,150 Sundry creditors - domestic 6,068,414 8,196,248 7,250,687 Provisions for pending payments 4,463,837 6,181,130 5,374,592 Funds linked to loan operations 3,247,789 4,523,775 4,058,376 Provision for labor claims (Note 27.e1) 2,559,471 2,508,268 2,598,301 Liabilities for rendering payment services 2,177,467 1,815,374 2,087,537 Liabilities for official agreements 1,285,684 1,217,719 1,218,125 Sundry creditors - abroad 991, , ,678 Liabilities for premiums granted under customer loyalty schemes 569, , ,490 Liabilities for operations linked to assignments 550, , ,086 Liabilities for assets acquisition 537, , ,882 Creditors of resources to be disbursed 495, , ,989 Provisions for guarantees provided (Note 20.f) 366, , ,327 Provision for tax litigation (Note 27.e1) (2) 273, , ,932 Provision for losses with the Fundo de Compensação de Variação Salarial - FCVS 165, , ,913 Liabilities for shares in investment funds 108,165 97, ,391 Guarantees on credits assigment Other 638, , ,304 Total 73,905,803 78,822,158 76,048,662 Current liabilities 69,640,329 73,694,320 71,594,252 Non-current liabilities 4,265,474 5,127,838 4,454,410 (1) Refers to the provision for restatement of judicial deposit, according to Bacen Circular Letter No /2016. (2) According to Bacen Circular Letter No. 3,782/2016, Provision for tax litigation were reclassified from Other liabilities - Taxes and social security to Other liabilities - Sundry". 74

199 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated f) Financial Guarantees Jun 30, 2017 Guaranteed values Allowance (1) Guarantees related to bidding, auctions, service rendering or execution of works 1,448, ,346 Sureties or guarantees in lawsuits and in tax-based administrative proceedings 998,581 42,985 Linked to the distribution of TVM by public offering 86, Guarantees related to the supply of goods 17, Other financial guarantees provided (2) 1,555, ,286 Other bank guarantees 623,513 2,157 Other guarantees 1, Total 4,731, ,209 (1) Calculated in accordance with Resolution CMN 2,682/1999. (2) Refers mainly to guarantees provided in foreign currency. - OTHER OPERATING INCOME/EXPENSES a) Service fee income and bank fee income 1st half/2017 1st half/2016 Account fee 3,309,202 2,969,100 Fund management 2,631,499 2,079,633 Insurance, pension plans and capitalization commissions 1,428,744 1,532,275 Loans and guarantees provided 962, ,267 Billing 754, ,200 Card income 740, ,194 Collection 542, ,380 Capital market income 349, ,906 National Treasury and official funds management 338, ,807 Consortium management fees 335, ,002 Interbank 80,653 89,150 Other 937, ,714 Total 12,411,408 11,284,628 b) Personnel expenses 1st half/2017 1st half/2016 Wages and salaries (4,790,057) (4,937,729) Social charges (1,551,444) (1,598,049) Benefits (1,527,057) (1,331,643) Personnel administrative provisions (1,174,764) (1,437,535) Labor lawsuits (790,330) (767,079) Pension plans (406,227) (387,484) Training (22,387) (28,345) Director's and officer's remuneration (22,318) (24,366) Total (10,284,584) (10,512,230) 75

200 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated c) Other administrative expenses 1st half/2017 1st half/2016 Amortization (1,680,987) (1,676,746) Rent (803,471) (680,231) Expenses with outsourced services (707,065) (750,845) Security services (610,339) (562,162) Communications (576,845) (579,417) Depreciation (575,072) (561,993) Transport (502,093) (547,500) Data processing (407,848) (394,052) Financial system services (359,031) (393,649) Maintenance and upkeep (352,152) (328,407) Specialized technical services (265,516) (195,517) Water, electricity and gas (256,307) (295,657) Advertising and marketing (122,999) (125,973) Materials (58,858) (58,998) Promotion and public relations (56,889) (120,592) Domestic travel (48,677) (40,188) Other (308,474) (288,857) Total (7,692,623) (7,600,784) d) Other operating income 1st half/2017 1st half/2016 Update of deposits in guarantee 1,466,183 1,437,288 Recovery of charges and expenses 1,013,052 1,016,171 Cards transactions 442, ,830 Income on receivables 414, ,468 Surplus allocation update - Previ Plan 1 (Note 26.f) 322, ,502 From non-financial subsidiaries 164, ,513 Reversal of provisions - administrative and personnel expenses 103,215 79,042 Adjustment of tax recoverable 87,797 68,461 Income from specific credits and special operations - National Treasury 21,842 46,099 Dividends received 9, Subsidy of the National Treasury - MPO 3,140 3,233 Royalties and special participation -- 39,102 Other 303, ,004 Total 4,353,271 4,886,713 76

201 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated e) Other operating expenses 1st half/2017 1st half/2016 Discounts granted on renegotiations (735,360) (641,217) Actuarial liabilities update (702,077) (730,656) Cards transactions (657,932) (732,787) Adjustment of the provision for deposit in court (Note 27.h) (573,315) (557,871) Business relationship bonus (455,311) (260,453) Civil and tax claims (404,654) (179,390) From non-financial subsidiaries (207,990) (207,252) Failures/frauds and other losses (197,758) (164,050) ATM Network (182,135) (178,280) Compensation for transactions of Banco Postal (114,236) (607,459) Compliance bonus (110,383) (149,787) INSS - Social Security (78,271) (49,678) Life insurance premium - consumer credit (66,523) (77,761) Other expenses - provisions of non-financial subsidiaries (21,672) (18,105) Proagro Expenses (10,121) (11,155) Update of interest on own capital/dividends (7,896) (9,575) Fees for the use of Sisbacen - Banco Central do Brasil System (1,647) (6,294) Other (338,091) (343,454) Total (4,865,372) (4,925,224) - NON-OPERATING INCOME 1st half/2017 1st half/2016 Non-operating income 150, ,810 Capital gains 112, ,243 Profit on disposal of assets 15,740 13,308 Rental income 4,960 4,283 Reversal of provision for devaluation of other assets 5,369 2,410 Profit on disposal of investments/equity interest Interest and inflation adjustment of debtors from disposal of property 631 1,499 Other non-operating income 11,295 25,067 Non-operating expenses (46,293) (44,530) Devaluation of other assets (17,185) (8,501) Loss on disposal of assets (7,476) (820) Capital losses (20,391) (34,433) Other non-operating expenses (1,241) (776) Total 104, ,280 77

202 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - SHAREHOLDERS' EQUITY a) Book value and market value per common share Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Shareholders' equity - Banco do Brasil 79,741,790 76,218,169 72,586,421 Book value per share (R$) (1) Market value per share (R$) Shareholders' equity - consolidated (2) 90,783,362 87,193,752 83,449,338 (1) Calculated based on the equity of Banco do Brasil. (2) Conciled with the equity of Banco do Brasil (Note 23.h). b) Capital Banco do Brasil s share capital of R$ 67,000,000 thousand (R$ 67,000,000 thousand on December 31, 2016 and on June 30, 2016) is fully subscribed and paid-in and consists of 2,865,417,020 book-entry common shares with no par value. The Federal Government is the largest shareholder and holds a majority of the Bank s voting shares. The Bank may, even without amending its by-laws, if approved by the Meeting of Shareholders, and in the conditions established therein, increase its capital up to the limit of R$ 120,000,000 thousand by issuing common shares, for which shareholders should be granted preference in the subscription in proportion to the number of shares held. c) Instruments Qualifying to Common Equity Tier 1 Capital The Bank signed a loan agreement with the federal government on September 26, 2012, with R$ 8,100,000 thousand in funds available. There is no maturity date, a fixed interest rate and semi-annual interest payments. The funding was used to finance agribusiness. Up to August 27, 2014, Bacen had authorized the instrument to be included in Tier I referential equity (additional Tier I capital) subject to the limitations set forth in Article 28 of CMN Resolution 4,192 of March 01, 2013 (Note 28.b). The Bank signed an amendment to the contract on August 28, 2014, under the terms of Law 12,793 of April 02, The purpose of the amendment was to allow the instrument to qualify as common equity in Tier I capital, under Article 16 of CMN Resolution 4,192/2013. As a result of the amendment, the interest rate was changed to a variable rate, and the interest period was changed to match the Bank s fiscal year (January 1 to December 31). Each years interest is paid in a single annual installment, adjusted by the Selic rate up to the effective payment date. Payment must be made within 30 calendar days after the dividend payment for the fiscal year. The interest payment must be made from profits or profit reserves available for distribution at the end of the fiscal year preceding the calculation date. Payment is at Management s discretion. Unpaid interest does not accumulate. If the payment or dividend distribution is not made (including in the form of interest on own capital) prior to the end of the subsequent fiscal year, the accrued interest is no longer owed. If the Bank s retained earnings, profit reserves (including the legal reserve) and capital reserve cannot fully absorb losses calculated at the end of a fiscal year, no interest will be paid on the loan. The Bank will apply the accrued interest and principal balance, in this order, to offset any remaining losses. This will be considered a pay-down of the instrument. The instrument does not have a maturity date. It is only payable if the Bank is dissolved or Bacen authorizes the repurchase of the instrument. If the Bank is dissolved, the payment of principal and interest is subordinated to payment of the Bank s other liabilities. There will be no preferred interest on the loan under any circumstances, including in relation to other equity instruments included in Reference Equity. 78

203 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Bacen formally approved the instrument as common equity in Tier I capital on September 22, 2014, under CMN Resolution 4,192/2013 of August 28, So the instrument mentioned was reclassified to the Shareholders` Equity for purposes of disclosure. d) Revaluation reserves The revaluation reserves, totaling R$ 2,407 thousand (R$ 2,660 thousand as of December 31, 2016 and 2,695 thousand as of June 30, 2016), refer to revaluations of assets made by the associates/subsidiaries. In the first half of 2017, there was a reserve realization of R$ 253 thousand (R$ 35 thousand as of June 30, 2016), due to depreciation, transferred to Retained Earnings (Accumulated Losses), net of taxes. In accordance with CMN Resolution 3,565/2008, the remaining amount will be maintained until the date of its effective realization. e) Capital and profit reserves Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Capital reserves 12,436 15,509 15,509 Profit reserves 31,120,094 27,646,569 25,402,333 Legal reserve 6,818,337 6,570,147 6,411,237 Statutory reserves 24,301,757 21,076,422 18,991,096 Operating margin 20,626,041 17,567,395 15,591,154 Equalization of dividends 3,675,716 3,509,027 3,399,942 The legal reserve ensures the adequacy of the Bank s capital structure and can only be used to offset losses or increase capital. Five percent of net income, before any other allocations, is transferred to the legal reserve. The amount of the reserve cannot exceed 20% of the share capital. The operating margin statutory reserve ensures the adequacy of the Bank s operating margins in accordance with its business activities. The reserve consists of up to 100% of net income after allocation to legal reserve (including dividends) and is limited to 80% of the share capital. The dividend equalization statutory reserve provides funds for the payment of dividends. The reserve consists of up to 50% of net income after allocation to legal reserve (including dividends) and is limited to 20% of the share capital. f) Earnings per share 1st half/2017 1st half/2016 Net income (R$ thousand) 5,017,709 4,751,915 Weighted average number of shares (basic and diluted) 2,784,856,177 2,790,389,280 Earnings per share (basic and diluted) (R$)

204 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated g) Interest on own capital/dividends and destination of the income Calculation base of dividends are shown below, as well as destination of the income of the period: 1st half/2017 1st half/2016 1) Net income - Banco do Brasil 5,017,709 4,751,915 Brazil 4,528,772 5,476,783 Abroad 488,937 (724,868) 2) Interest on instrument elegible to common equity tier 1 45,172 46,227 3) Calculation base of dividends (item 1 + item 2) 5,062,881 4,798,142 Dividends - payout 1,489,082 1,411,218 Minimum required dividend 1,178,899 1,129,727 Additional dividend 310, ,491 4) Allocation: Net income 5,017,709 4,751,915 Retained earnings/(losses) (53,923) 4,589 Distributed income 4,963,784 4,756,504 Legal reserve 248, ,595 Dividends and interest on own capital 1,489,082 1,411,218 Statutory reserves 3,226,513 3,107,691 Introducing payment schedule of interest on own capital and dividends: Amount Amount per share (R$) Base date of payment Payment date 1st quarter/2017 Interest on own capital paid (1) 200, Mar 13, 2017 Mar 31, 2017 Complementary Interest on own capital paid (1) 509, May 22, 2017 May31, nd quarter/2017 Interest on own capital paid (1) 218, Jun 12, 2017 Jun 30, 2017 Complementary Interest on own capital payable (1) 559, Ago 21, 2016 Ago 31, 2017 Total destined to shareholders 1,489, (1) Amounts subject to the rate of 15% Income Tax Withholding. 1st quarter/2016 Amount Amount per share (R$) Base date of payment Payment date Interest on own capital paid (1) 274, Mar 11, 2016 Mar 31, 2016 Complementary Interest on own capital paid (1) 372, May 23, 2016 May 31, nd quarter/2016 Interest on own capital paid (1) 383, Jun 13, 2016 Jun 30, 2016 Complementary Interest on own capital paid (1) 380, Ago 22, 2016 Ago 31, 2016 Total destined to shareholders 1,411, (1) Amounts subject to the rate of 15% Income Tax Withholding. In accordance with Laws 9,249/1995 and 9,430/1996 and the Bank's Bylaws, Management decided on the payment of Interest on own capital to its shareholders. The interest on own capital is calculated based on adjusted net equity value and is limited on a pro rata die basis to the variation of long-term interest rate, as long as there is profit (before the deduction of interest on own capital) or reserves for retained earnings and profit reserves of at least twice its value. 80

205 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated To comply with the Income Tax legislation, the amount of interest on own capital was recorded as "Financial expenses" and, for purposes of disclosure in these financial statements, reclassified to "Retained earnings". The total interest on own capital in the first quarter of 2017, provided an expense reduction on tax charges totaling R$ 670,087 thousand (R$ 635,048 thousand in the first half of 2016). h) Reconciliation of net income and shareholders' equity Net income Shareholders equity 1st half/2017 1st half/2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Banco do Brasil 5,017,709 4,751,915 79,741,790 76,218,169 72,586,421 Instruments qualifying to common equity tier 1 capital (1) 45,172 46,227 8,100,000 8,100,000 8,100,000 Unrealized gains (2) (1,178) 25,957 (338,562) (337,385) (339,318) Non-controlling interests ,280,134 3,212,968 3,102,235 BB Consolidated 5,061,703 4,824,099 90,783,362 87,193,752 83,449,338 (1) The instrument qualifying as CET1 was registered in the liabilities in the Individual Financial Statements and its interest recognized as expenses with securities sold under repurchase agreements. This Instrument was reclassified to Shareholder s Equity in the consolidated financial statements, aiming to improve the quality and transparency of these financial statements (Notes 3 and 23.c). (2) Refers to the realization of unrealized results arising from the assignment of credits from the Bank to Ativos S.A. i) Accumulated Other Comprehensive Income 1st half/2017 1st half/2016 Opening balance Net change Tax effects Closing balance Opening balance Net change Tax effects Closing balance Securities available for sale Banco do Brasil (1,453,578) 913,222 (344,789) (885,145) (2,760,383) 1,696,514 (363,622) (1,427,491) Subsidiary abroad 29,480 13,748 (353) 42,875 (12,780) 52,021 (976) 38,265 Associates and subsidiaries (5,555) (46,428) 31,562 (20,421) (351,322) 382,453 (122,864) (91,733) Cash flow hedge Associates and subsidiaries (8,300) (2,839) 2,368 (8,771) -- (10,082) 4,537 (5,545) Investment Hedge Abroad Associates and subsidiaries -- (368) -- (368) Foreign Exchange Variation in Investments Abroad Subsidiary abroad -- (30,926) -- (30,926) Actuarial gains/(losses) on pension plans (15,491,252) (812,840) 325,182 (15,978,910) (13,918,186) (4,856,506) 1,942,511 (16,832,181) Total (16,929,205) 33,569 13,970 (16,881,666) (17,042,671) (2,735,600) 1,459,586 (18,318,685) j) Noncontrolling interests Shareholders equity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Banco Patagonia S.A. 796, , ,794 Besc Distribuidora de Títulos e Valores Mobiliários S.A BB Tecnologia e Serviços BB Seguridade S.A. 2,483,347 2,390,744 2,250,357 Non-controlling interest 3,280,134 3,212,968 3,102,235 81

206 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated k) Shareholdings (number of shares) Number of shares issued by the Bank to shareholders which, directly or indirectly, hold more than 5% of the shares: Sharedholders Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Shares % Total Shares % Total Shares % Total Federal government 1,545,811, ,558,511, ,558,511, Tesouro Nacional 1,453,487, ,453,487, ,453,487, Fundo Fiscal de Investimento e Estabilização 92,324, ,024, ,024, Caixa de Previdência dos Funcionários do Banco do Brasil - Previ 264,297, ,209, ,025, Treasury shares (1) 80,463, ,668, ,666, Other shareholders 974,844, ,029, ,213, Total 2,865,417, ,865,417, ,865,417, Resident shareholders 2,254,245, ,275,634, ,297,735, Non resident shareholders 611,171, ,782, ,681, (1) Includes, in the first half of 2017, 40,900 shares of the Bank held by BB DTVM (50,100 on December 31, 2016 and in the first half of 2016). Number of shares issued by the Bank, held by the Board of Directors, the Executive Board and the Audit Committee: Commom shares (ON) (1) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Board of Directors (except for Bank s CEO, listed in the Bank s Executive Committee) Executive Committee 158, , ,685 Audit Committee 10,075 10,075 10,075 (1) The shareholding interest of the Board of Directors, Executive Committee, Fiscal Council and Audit Committee represents approximately 0.006% of the Bank's capital stock. l) Movement of shares outstanding/free float Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Total % Total % Total % Free float at the period date 1,226,072, ,139,037, ,139,037, Disposal of shares by Caixa F1 Garantia Construção Naval -- 87,368,167 87,368,167 Disposal of shares by FGO - shares investments -- 7,500,000 7,500,000 Disposal of shares by FFIE - Fundo Fiscal de Investmento e Estabilização Shares received in order to comply with operations secured by the FGCN Fundo Garantidor da Construção Naval 12,700, (8,075,350) (8,075,350) Other changes (1) 284, , ,602 Free float at the period end date (2) 1,239,057, ,226,072, ,225,999, Outstanding shares 2,865,417, ,865,417, ,417, (1) Refers mainly to changes coming from Technical and Advisory Bodies. (2) According to the Law 6,404/1976 and the regulation of BM&FBovespa's New Market. The shares held by the Board of Directors and Executive Committee are not included. The shares held by the Caixa de Previdência dos Funcionários do Banco do Brasil - Previ compose the free float shares. m) Treasury shares The Board of Directors approved a repurchase program for up to 50 million shares on July 13, 2012, within 180 days from that date, with the objective of acquiring shares to be held in treasury for subsequent sale or withdrawal without further capital reduction, aiming to generate value for shareholders. This program was concluded on January 8, 2013, with the acquisition of 20,200,000 shares in the amount of R$ 461,247 thousand. The minimum, average and maximum price per share under the program was R$ 18.28, R$ e R$ respectively. 82

207 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated The Board of Directors approved a repurchase program for up to 50 million shares on June 13, The conditions were the same as the previous program however, valid for up to 365 days from that date. The program concluded on June 6, 2014, with the acquisition of 43,126,700 shares in the amount of R$ 1,014,504 thousand. The minimum, average and maximum price per share under the program was R$ 18.84, R$ and R$ respectively. A total of 353,756 shares acquired under the program were used for the Bank s variable compensation program. The Board of Directors approved a repurchase program for up to 50 million shares on June 06, The conditions were the same as the previous program related to The program concluded on May 18, 2015, with the acquisition of 6,021,900 shares in the amount of R$ 155,481 thousand. The minimum, average and maximum price per share under the program was R$ 22.66, R$ and R$ 29.27, respectively. A total of 318,633 shares acquired under the program were used for the Bank s variable compensation program. The Board of Directors approved a repurchase program of up to 50 million shares on May 18, 2015, under the same conditions as the previous program. Up to December 31, 2015, the Bank had acquired 3,623,700 shares in the amount of R$ 67,902 thousand. The minimum, average and maximum price per share under the program was R$ 17.90, R$ and R$ 21.10, respectively. None of the shares acquired in this program were used for variable compensation programs. The Bank had 80,463,476 shares in treasury on June 30, 2017, representing R$ 1,850,043 thousand of which 71,861,516 of the shares were acquired in repurchase programs, 8,075,350 shares received in order to comply with operations secured by the FGCN - Fundo Garantidor da Construção Naval, 526,547 related to share-based payment and 63 shares were from mergers. n) Share-based payment The program of variable remuneration was based on the CMN Resolution 3,921 of November 25, 2010, which governs compensation policies for executives of financial institutions. The resolution establishes that at least 50% of variable compensation should be paid in shares or share-based instruments, of which at least 40% should be deferred for future payment over a period of at least three years, defined according to the risks and activities overseen by the executive. BB DTVM, as a result of this resolution, also adopted variable remuneration policy for its directors, directly acquiring treasury shares of the Banco do Brasil. All shares acquired are BBAS3 and its fair value is the quoted market price on the date of grant. 83

208 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated We present the statement of acquired shares, its distribution and its transfer schedule: 2013 Program Total Program Shares Average Cost Shares Distributed (1) Shares to Distribute Estimated Schedule Transfers Banco do Brasil 353, ,674 71,488 Mar 2018 Total shares to be distributed 71,488 BB DTVM 24, ,639 4,907 Apr 2017 Total shares to be distributed 4, Program Banco do Brasil 318, ,755 64,030 Feb ,029 Feb 2019 Total shares to be distributed 128,059 BB DTVM 27, ,239 5,412 Apr 2018 Total shares to be distributed 10,824 5,412 Apr Program Banco do Brasil 342, ,634 68,705 Mar ,703 Mar ,703 Mar 2020 Total shares to be distributed 206,111 BB DTVM 26, ,449 5,220 Mar ,220 Mar ,220 Mar 2020 Total shares to be distributed 15, Program Banco do Brasil 99, ,902 19,863 Mar ,861 Mar ,861 Mar ,861 Mar 2021 Total shares to be distributed 79,446 BB DTVM 10, ,085 2,078 Mar 2018 Total shares to be distributed 8,312 2,078 Mar ,078 Mar ,078 Mar 2021 (1) Due to the negative variation in the profit of Banco do Brasil between 2012 and 2016, the totality of the shares related to these periods were not distributed to the Directors, of which 1,197 were related to BB DTVM and 91,333 shares referring to the Bank. 84

209 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - TAXES a) Breakdown of income tax (IR) and social contribution expenses (CSLL) 1st half/2017 1st half/2016 Current values (1,991,452) (5,318,459) Domestic income tax and social contribution (1,725,478) (5,092,385) Foreign income tax (265,974) (226,074) Deferred values 16,268 2,813,953 Deferred tax liabilities 11,872 62,424 Leasing transactions - portfolio adjustment and accelerated depreciation 12,113 (3,836) Mark to Market (MTM) 255, ,985 Actuarial gains ,855 Interest and inflation adjustment of fiscal judicial deposits (187,791) (219,692) Foreign profits (50,714) (201,953) Transactions carried out on the futures market (122) 37,981 Recovered term credits (16,814) (84,916) Deferred tax assets 4,396 2,751,529 Temporary differences 371,184 2,037,485 Tax losses/csll negative bases (4,987) (121,588) Mark to Market (MTM) (355,812) 835,632 Transactions carried out on the futures market (5,989) -- Total (1,975,184) (2,504,506) b) Reconciliation of income tax and social contribution charges 1st half/2017 1st half/2016 Profit before taxation and profit sharing 8,476,869 8,782,460 Total charges of IR (25%) and CSLL (20%) (3,814,591) (3,952,107) Charges upon interest on own capital 670, ,048 Equity in subsidiaries and joint ventures 906, ,844 Employee profit sharing 286, ,996 Other amounts (23,897) (415,287) Income tax and social contribution (1,975,184) (2,504,506) c) Tax expenses 1st half/2017 1st half/2016 Cofins (1,677,492) (1,837,638) ISSQN (518,257) (470,259) PIS/Pasep (282,004) (305,845) Other (245,294) (208,781) Total (2,723,047) (2,822,523) 85

210 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d) Deferred tax liabilities Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Arising from mark-to-market 797, ,782 1,118,573 Arising from interest and inflation adjustment of fiscal judicial deposits 566, , ,221 Arising from recovered term credits 367, , ,310 Overseas entities 71,124 67,052 59,587 Arising from leasing portfolio adjustment 67,317 79,430 86,868 Related to foreign profit 50, ,953 Arising from positive adjustments of benefits plans 41,434 42,146 62,493 Arising from futures market transactions ,374 Other 31,220 3,861 2,032 Total deferred tax liabilities 1,993,464 2,088,502 2,348,411 Income tax 844, ,441 1,067,602 Social contribution 587, , ,029 Cofins 483, , ,509 PIS/Pasep 78,502 78,638 77,271 e) Deferred tax assets (Tax credit) Dec 31, st half/2017 Jun 30, 2017 Jun 30, 2016 Balance Constitution Write off Balance Balance Temporary differences 42,004,953 8,580,982 (9,328,794) 41,257,141 42,951,184 Allowance for loan losses 24,419,134 6,575,033 (5,961,058) 25,033,109 24,132,994 Provisions 9,650,754 1,391,188 (1,594,158) 9,447,784 9,466,154 Negative adjustments of benefits plans 3,721, ,471 (120,875) 3,925,392 4,886,263 Mark to Market (MTM) 1,643, ,608 (657,118) 1,156,094 1,676,105 Other provisions 2,569, ,682 (995,585) 1,694,762 2,789,668 CSLL written to 18% (MP 2,158/2001) 694, (64,192) 630, ,108 Tax losses/excess depreciation 127, (21,908) 105, ,625 Tax losses/negative bases 56, ,007 (83,707) 843,163 62,189 Total deferred tax assets 42,883,504 9,450,989 (9,498,601) 42,835,892 43,853,106 Income tax 24,529,862 5,334,630 (4,777,603) 25,086,889 24,704,928 Social contribution 18,202,275 4,099,009 (4,659,129) 17,642,155 18,998,902 Cofins 130,209 14,925 (53,221) 91, ,409 PIS/Pasep 21,158 2,425 (8,648) 14,935 20,867 f) Deferred tax assets (Tax credit - not recorded) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Overseas tax credits 1,436,157 1,067,634 1,069,620 Portion of tax losses/negative bases 6,810 4,581 1,492 Temporary differences Total tax credits 1,443,082 1,072,375 1,071,201 Income tax 902, , ,675 Social contribution 540, , ,526 86

211 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Realization expectative The expectation of realization of the deferred tax assets (tax credits) is based on a technical study, prepared in June 30, 2017, and the present value is determined based on the average rate of funding of Banco do Brasil. Future value Present value In ,935,938 4,606,743 In ,908,318 8,968,635 In ,808,087 8,611,318 In ,963,875 8,466,907 In ,647,701 6,289,639 In , ,173 In ,262 89,533 In ,561 77,430 In ,932 46,926 In ,233 22,942 In ,229 34,881 Total tax credits on Jun 30, ,835,892 37,318,127 In the first half 2017 it was possible to observe the realization of tax credits at Banco do Brasil, in the amount of R$ 9,256,338 thousand corresponding to 92.66% of the projection of use for the period of 2017 contained in the technical study prepared on December 31, The realization of the nominal value of tax credits registered, considering the recovery of those written-off during the lawsuits (Note 27.h), based on a technical study conducted by Banco do Brasil on June 30, 2017, is projected for 10 years in the following proportions: Tax losses/csll recoverable (1) Diferences intertemporary (2) In % 11% In % 23% In % 23% In % 23% In % 18% From % (1) Projected consumption linked to the capacity to generate IR and CSLL taxable amounts in subsequent periods. (2) The consumption capacity results from the movements of provisions (expectation of reversals, write offs and uses). 87

212 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - RELATED PARTY TRANSACTIONS a) Bank s key management personnel Salaries and other benefits paid the Bank s key management personnel (Executive Board, Audit Committee, Board of Directors and Fiscal Council) are as follows: 1st half/2017 1st half/2016 Short-term benefits 26,510 27,751 Fees and social charges 18,049 18,842 Executive Board 16,273 17,027 Audit Committee 1,380 1,345 Board of Directors Fiscal council Variable remuneration (cash) and social charges 7,162 7,444 Other (1) 1,299 1,465 Benefits motivated by cessation of tenure Share-based payment benefits 12,140 7,260 Total 39,059 35,501 (1) Includes contributions to pension plan and complementary healthy plan, housing and relocation benefits, group insurance, among others. The Bank's variable compensation policy (developed in accordance with CMN Resolution 3,921/2010) requires variable compensation for the Executive Directors to be paid partially in shares (Note 23.n). The Bank does not offer post-employment benefits to its key management personnel, except for those who are part of the staff of the Bank. Bacen prohibits all financial institutions from granting loans to key management personnel. b) Details of related party transactions The Bank's policy of related party transactions was approved by the Board of Directors and disclosed to the market. The policy aims to establish rules to assure that all decisions, especially those involving related party and other situations potentially conflicted, are made observing the interests of the Bank and its shareholders. It is applicable to all stakeholders and directors of the company. The policy forbids to conduct related party transactions under conditions other than those applicable to the market or that may adversely affect the Bank's interest. Therefore, the transactions are conducted under normal market conditions. The terms and conditions reflect comparable transactions with unrelated parties (including interest rates and collateral requirements). These transactions do not involve unusual payment risks. The transactions between the consolidated companies are eliminated in the consolidated financial statements. Intercompany transactions with these related parties consist of interest bearing and non-interest bearing deposits loans, sale and repurchase transactions, acquisitions of loan portfolios, provision of services and guarantees. The most important transactions involving the National Treasury include rural loans granted by the Bank under CMN Resolution 2,238/1996 and receivables from the National Treasury for interest rate equalization under Federal Government programs (Law 8,427/1992). Interest rate equalization represents an economic subsidy for rural credit, which provides borrowers with discounted interest rates compared to the Bank s normal funding costs (including administrative and tax expenses). The equalization payment is updated by the Selic rate in accordance with the National Treasury s budgeting process (as defined by law) and is designed to preserve the Bank s earnings. Some transactions are disclosure in other notes: the resources applied in federal government securities are listed in Note 8; and additional information about the Bank s contributions and other transactions with sponsored entities are listed in Note

213 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Fundação Banco do Brasil (FBB) promotes, encourages and sponsors actions in the areas of education, culture, health, social welfare, recreation and sports, science, technology and community development. In the 1st half/2017, the Bank s contributions to FBB totaled R$ 26,813 thousand (R$ 24,644 thousand in the 1st half /2016). c) Acquisition of portfolio of loans transferred by Banco Votorantim 1st half/2017 1st half/2016 Assignment with substantial retention of risks and rewards (with co-obligation) 1,171,140 4,922,158 Unrealized result, net of tax effects (balance) 172 1,898 d) Summary of related party transactions Jun 30, 2017 Controller (1) Joint ventures and associates (2) Key management personnel (3) Other related parties (4) Total Assets Interbank deposits , ,148 Securities -- 3,476, ,169 4,216,202 Loan operations (5) -- 13,940, ,820,178 45,760,308 Receivables from related companies , ,112 Other assets (6) 4,995,112 1,160, ,455 6,587,136 Guarantees received -- 2,415, ,601,060 7,016,677 Liabilities Demand deposits 339,878 86,301 1, ,780 1,087,247 Saving deposits , , ,504 Remunerated time deposits -- 20, ,030,945 10,051,583 Securities sold under repurchase agreements , ,307,517 4,004,980 Borrowings and onlendings 2,200, ,251,931 79,452,013 Other liabilities 348,646 1,350, ,985 2,472,745 Guarantees given and other coobligations (7) -- 6,812, ,859 7,532,666 1st half/2017 Income from interest, services and other income 2,889,413 3,470, ,220,739 8,580,533 Expenses from raising funds (37,507) (290,234) (74) (2,585,580) (2,913,395) (1) National Treasury. (2) Mainly refer to Banco Votorantim, Cielo, BB Mapfre SH1, Mapfre BB SH2, Brasilprev, Brasilcap, Alelo, Cateno and Tecban. (3) Board of Directors, Executive Board, Audit Committee and Fiscal Council. (4) Includes the most significant transactions with state-owned companies and private companies controlled by the Federal Government, such as: Petrobras, CEF, BNDES, Eletrobras, Fundo de Amparo ao Trabalhador FAT, Fundo de Aval para Geração de Emprego e Renda Funproger. In addition, entities linked to employees and sponsored entities: Cassi, Previ and others. (5) The Bank constituted the amount of R$ 97,413 thousand as allowance for losses on loans on transactions with other related parties. The expense for allowance for losses was R$ 34,953 thousand in the 1st half/2017. (6) The transactions with the Controller refer mainly to Extension of rural credits National Treasury transactions (Note 12.a), interest rate equalization agricultural crop and receivables National Treasury (Note 12.b). (7) Includes Contract of Opening of a Revolving Interbank Credit Line with Banco Votorantim. 89

214 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Jun 30, 2016 Controller (1) Joint ventures and associates (2) Key management personnel (3) Other related parties (4) Total Assets Interbank deposits , ,493 Securities -- 3,539, ,463 4,027,341 Loan operations -- 16,271, ,232,158 47,503,678 Receivables from related companies , , ,656 Other assets (5) 4,550,183 1,331, ,625 6,090,732 Liabilities Demand deposits 310,263 27,639 1,079 2,002,029 2,341,010 Saving deposits , ,761 Remunerated time deposits -- 3, ,936,597 10,940,959 Securities sold under repurchase agreements -- 3,863, ,946,497 6,810,122 Borrowings and onlendings 2,098, ,504,325 86,603,024 Other liabilities 254,766 1,226, ,187 2,157,592 Guarantees and other coobligations (6) -- 6,800, ,121 7,464,121 Income from interest, services and other income 1st half ,879,694 3,977, ,327,547 9,184,412 Expenses from raising funds (49,722) (201,203) (152) (2,863,464) (3,114,541) (1) National Treasury. (2) Mainly refer to Banco Votorantim, Cielo, BB Mapfre SH1, Mapfre BB SH2, Brasilprev, Brasilcap, Alelo, Cateno and Tecban. (3) Board of Directors, Executive Board, Audit Committee and Fiscal Council. (4) Includes the most significant transactions with state-owned companies and private companies controlled by the Federal Government, such as: Petrobras, CEF, BNDES, Eletrobras, Fundo de Amparo ao Trabalhador FAT, Fundo de Aval para Geração de Emprego e Renda Funproger. In addition, entities linked to employees and sponsored entities: Cassi, Previ and others. (5) The transactions with the Controller refer mainly to Extension of rural credits National Treasury transactions (Note 12.a), interest rate equalization agricultural crop and receivables National Treasury (Note 12.b). (6) Includes Contract of Opening of a Revolving Interbank Credit Line with Banco Votorantim. 90

215 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - EMPLOYEE BENEFITS Banco do Brasil sponsors the following pension and health insurance plans for its employees: Previ - Caixa de Previdência dos Funcionários do Banco do Brasil Cassi - Caixa de Assistência dos Funcionários do Banco do Brasil Economus Instituto de Seguridade Social Fusesc - Fundação Codesc de Seguridade Social SIM - Caixa de Assistência dos Empregados dos Sistemas Besc e Codesc, do Badesc e da Fusesc Plans Benefits Classification Previ Futuro Retirement and Pension Defined contribution Plano de Benefícios 1 Retirement and Pension Defined benefit Plano Informal Retirement and Pension Defined benefit Plano de Associados Health Care Defined benefit Prevmais Retirement and Pension Variable contribution Regulamento Geral Retirement and Pension Defined benefit Regulamento Complementar 1 Retirement and Pension Defined benefit Grupo B Retirement and Pension Defined benefit Plano Unificado de Saúde - PLUS Health Care Defined benefit Plano Unificado de Saúde - PLUS II Health Care Defined benefit Plano de Assistência Médica Complementar - PAMC Health Care Defined benefit Multifuturo I Retirement and Pension Variable contribution Plano de Benefícios I Retirement and Pension Defined benefit Plano de Saúde Health Care Defined contribution Prevbep - Caixa de Previdência Social Plano BEP Retirement and Pension Defined benefit Number of participants covered by benefit plans sponsored by the Bank Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Number of participants Number of participants Number of participants Active Retired/users Total Active Retired/users Total Active Retired/users Total Retirement and pension plans 102, , , , , , , , ,410 Plano de Benefícios 1 - Previ 10,817 99, ,873 11,268 99, ,305 18,388 92, ,793 Plano Previ Futuro 78,123 1,448 79,571 78,886 1,084 79,970 79,224 1,017 80,241 Plano Informal -- 3,173 3, ,267 3, ,385 3,385 Other plans 13,576 15,101 28,677 15,956 13,044 29,000 15,953 13,038 28,991 Health care plans 103, , , , , , ,393 99, ,964 Cassi 92,731 98, ,691 93,283 99, , ,019 92, ,369 Other plans 10,921 7,162 18,083 12,081 7,184 19,265 12,374 7,221 19,595 Bank s contributions to benefit plans 1st half/2017 1st half/2016 Retirement and pension plans 713, ,933 Plano de Benefícios 1 - Previ (1) 268, ,741 Plano Previ Futuro 285, ,895 Plano Informal 86,369 88,597 Other plans 72,723 63,700 Health care plans 607, ,466 Cassi 533, ,365 Other plans 74,410 71,101 Total 1,321,044 1,269,399 (1) Refers to the contributions relating to participants subject to Agreement 97 and Plan 1, whereby these contributions occur by the realization of Fundo Paridade and Fundo de Utilização (Note 26.f). Agreement 97 aims to regulate the funding required to constitute a portion equivalent to 53.7% of guaranteed amount relating to the supplementary pension due to the participants who joined the Bank up to April 14, 1967 and who have retired or will retire after the aforementioned date, except for those participants who are part of the Plano Informal. The Bank estimates that contributions to benefit plans (post-employment) in the first half of 2017 will be approximately R$ 788,943 thousand. 91

216 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Values recognized in income 1st half/2017 1st half/2016 Retirement and pension plans (668,160) (631,532) Plano de Benefícios 1 - Previ (230,220) (219,711) Plano Previ Futuro (285,376) (256,895) Plano Informal (66,025) (86,646) Other plans (86,539) (68,280) Health care plans (759,939) (800,056) Cassi (694,345) (729,915) Other plans (65,594) (70,141) Total (1,428,099) (1,431,588) a) Retirement and pension plans Previ Futuro (Previ) Participants in this plan include Bank employees hired after December 24, Depending on time of service and salary, active participants may contribute between 7% and 17% of their salary (retired participants do not contribute). The plan sponsor matches participants contributions up to 14% of their salaries. Plano de Benefícios 1 (Previ) Participants in this plan include Bank employees hired prior to December 23, Active and retired participants may contribute between 1.8% and 7.8% of their salary or pension. Prior to December 15, 2000, the Bank contributed 2/3 of the total amount to this plan. As from December 16, 2000, considering the Federal Constitutional Amendment nº 20, the Bank and the participants started to make equal contributions. As a result of this contributive parity, the Parity Fund was set-up in December 2000, and its funds are being used to offset the Bank s contributions (Note 26.f). Plano Informal (Previ) Banco do Brasil is fully responsible for this plan. The Bank s contractual obligations include to: (i) providing retirement benefits to the initial group of participants and pension payments to the beneficiaries of participants who died prior to April 14, 1967; (ii) paying additional retirement benefits to plan participants who retired prior to April 14, 1967, or had the right to retire based on time of service and at least 20 years of service with the Bank; and (iii) increasing retirement and pension benefits due to judicial and administrative decisions related to changes in the Bank s career, salary and incentive plans (in excess of the plan s original benefits). The Bank and Previ formalized an agreement on December 31, Under the agreement, Banco do Brasil paid 100% of the mathematical reserves for the so-called Grupo Especial (for which it was fully liable) using funds from the Fundo Paridade. As a result, this group migrated from the Plano Informal to Plano de Benefícios 1. The Grupo Especial included participants from Plano de Benefícios 1 (Previ) listed in the paragraph of first clause of the contract signed on December 24, These participants received additional retirement benefits due to administrative and/or judicial decisions (Note 26.f). 92

217 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Prevmais (Economus) Participants in this plan include employees of Banco Nossa Caixa (a bank acquired by Banco do Brasil on November 30, 2009) who enrolled after August 01, 2006, or were part of the Regulamento Geral benefit plan and opted to receive their vested account balances. The sponsor and participants make equal contributions, which may not exceed 8% of participants salaries. The plan provides additional risk coverage, including supplemental health, work-related accident, disability and death benefits. Regulamento Geral (Economus) Participants in this plan include employees of Banco Nossa Caixa who enrolled prior to July 31, This plan is closed to new members. The sponsor and participants contribute equally. Regulamento Complementar 1 (Economus) Participants in this plan include employees of Banco Nossa Caixa. This plan offers supplemental health benefits and annuities upon death or disability. The sponsor, participants and retired/other beneficiaries fund the plan. Grupo B' (Economus) Participants in this plan include employees of Banco Nossa Caixa admitted between January 22, 1974, and May 13, 1974, and their beneficiaries. This plan is closed to new members. Benefit levels are based on the fulfillment of certain conditions outlined in the plan regulation. Multifuturo I (Fusesc) Participants in this plan include employees of the State Bank of Santa Catarina Besc (acquired by Banco do Brasil on September 30, 2008) who enrolled after January 12, 2003, or were part of the Plano de Benefícios I (Fusesc) and chose to participate in this plan. Participants may contribute from 2.33% to 7% of their salaries. The plan sponsor matches these contributions. Plano de Benefícios I (Fusesc) Participants in this plan include employees of Besc who enrolled prior to January 11, This plan is closed to new members. The sponsor and participants contribute equally. Plano BEP (Prevbep) Participants in this plan include employees of the State Bank of Piauí BEP (acquired by Banco do Brasil on November 30, 2008). The sponsor and participants contribute equally. b) Health Care Plans Plano de Associados (Cassi) The Bank sponsors a health care plan managed by Cassi. The plan covers health care services related to prevention, protection, recovery and rehabilitation for participants and their beneficiaries. Each month, the Bank contributes 4.5% of participants salaries or pension benefits. Monthly contributions by participants and pensioners total 3% of their salary or pension, in addition to copayments for certain hospital procedures. Moreover, as a result of the amendment to the Cassi Statute in November 2016, it was approved the extraordinary monthly contribution of 1% for the participants until December

218 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Plano Unificado de Saúde - PLUS (Economus) Participants in this plan include employees from Banco Nossa Caixa. Participation in this plan requires a direct payroll deduction of 1.5%, providing coverage for employees and certain preferred dependents. An additional 10% copayment is required for each medical visit and low-cost exam performed by employees and their dependents (both preferred and non-preferred). Plano Unificado de Saúde - PLUS II (Economus) Participants in this plan include employees from Banco Nossa Caixa. Participation in this plan requires a direct payroll deduction of 1.5%, providing coverage for employees and certain preferred dependents. An additional 10% copayment is required for each medical visit and low-cost exam performed by employees and their dependents and adult children. This plan does not cover non-preferred dependents. Plano de Assistência Médica Complementar - PAMC (Economus) Participants in this plan include employees of Banco Nossa Caixa located in the state of São Paulo. The plan serves disabled employees under the Complementar and Regulamento Geral and their dependents. Participant costs vary based on usage and in accordance with a progressive salary table. Plano de Saúde (SIM) Participants in this plan include employees of Besc and other sponsors of the plan (including Badesc, Codesc, Bescor, Fusesc and SIM). For active members, monthly contributions total 3.44% of salary, including their 13th salary. For inactive members, monthly contributions total 8.86% of salary, while the plan sponsors contribute 5.42%. Beneficiaries also contribute 0.75% per dependent. The plan requires a copayment for ambulatory care procedures. c) Risk factors The Bank may need to make unplanned contributions to Previ, Economus, Fusesc and Prevbep, which could negatively affect operating income. Determination of the Bank s obligations to these entities is based on long-term actuarial and financial estimates and the application and interpretation of current regulatory standards. Inaccuracies inherent to the estimation process could result in differences between recorded amounts and the actual obligations in the future. This could have a negative impact on the Bank s operating results. 94

219 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d) Actuarial valuations Actuarial evaluations are performed every six months. The information contained in the below tables refers to the calculations at June 30, 2017, December 31, 2016 and June 30,

220 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d.1) Changes in present value of defined benefit actuarial obligations Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans 1st half/ st half/2016 1st half/ st half/2016 1st half/ st half/2016 1st half/ st half/2016 Opening balance (148,349,574) (121,329,915) (121,329,915) (965,470) (909,280) (909,280) (7,948,422) (6,248,098) (6,248,098) (7,609,949) (6,301,921) (6,301,921) Interest cost (8,139,876) (17,069,298) (9,095,589) (50,994) (121,736) (66,578) (455,851) (941,398) (491,828) (415,213) (860,756) (470,692) Current service cost (223,265) (455,492) (224,731) (50,215) (85,735) (39,524) (12,776) (26,616) (14,451) Past service cost (15,031) (38,228) (20,068) Benefits paid net of retirees contributions 6,375,224 10,350,474 5,178,484 86, ,002 88, , , , , , ,619 Remeasurements of actuarial gain/(losses) (1,451,633) (19,845,343) (14,235,442) 10,271 (80,228) (79,526) (175,279) (1,297,805) (1,062,240) (156,240) (1,006,081) (328,670) Experience adjustment 778,709 (1,749,063) (1,566,291) 24,510 (8,380) (24,296) (61,041) (293,184) (379,749) (6,966) 259, ,886 Changes to biometric assumptions (31,019) (78,102) (64,339) Changes to financial assumptions (2,230,342) (18,096,280) (12,669,151) (14,239) (71,848) (55,230) (114,238) (1,004,621) (682,491) (118,255) (1,187,001) (771,217) Closing balance (151,789,124) (148,349,574) (139,707,193) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (7,889,384) (7,609,949) (6,852,115) Present value of actuarial liabilities with surplus (146,597,375) (143,946,397) (129,888,116) (5,720,000) (5,731,092) (5,595,762) Present value of actuarial liabilities without surplus (5,191,749) (4,403,177) (9,819,077) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (2,169,384) (1,878,857) (1,256,353) d.2) Changes in fair value of plan assets Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans (1) 1st half/ st half/2016 1st half/ st half/2016 1st half/ st half/2016 1st half/ st half/2016 Opening balance 143,946, ,378, ,378, ,731,092 5,394,014 5,394,014 Interest income 7,902,703 16,291,315 8,880, , , ,153 Contributions received 268, , ,742 86, ,002 88, , , , , ,830 79,768 Benefits paid net of retirees contributions (6,375,224) (10,350,474) (5,178,484) (86,369) (184,002) (88,597) (345,276) (624,614) (322,802) (304,794) (585,425) (263,619) Actuarial gain/(loss) on plan assets 854,889 19,051,240 7,539, (122,151) 19,659 (19,554) Closing balance 146,597, ,946, ,888, ,720,000 5,731,092 5,595,762 (1) Refers to the following plans: Regulamento Geral (Economus), Prevmais (Economus), Regulamento Complementar 1 (Economus), Multifuturo I (Fusesc), Plano I (Fusesc) and Plano BEP (Prevbep). d.3) Amounts recognized in the balance sheet Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, ) Fair value of the plan assets 146,597, ,946, ,888, ,720,000 5,731,092 5,595,762 2) Present value of actuarial liabilities (151,789,124) (148,349,574) (139,707,193) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (7,889,384) (7,609,949) (6,852,115) 3) Surplus/(deficit) (1+2) (5,191,749) (4,403,177) (9,819,077) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (2,169,384) (1,878,857) (1,256,353) 4) Net actuarial (liability)/asset (1) (2,595,875) (2,201,588) (4,909,538) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (1,477,476) (1,260,178) (944,412) (1) Refers to the portion of the surplus/(deficit) due from the sponsor. 96

221 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d.4) Maturity profile of defined benefit actuarial obligations Duration (1) Expected benefit payments (2) Up to 1 year 1 to 2 years 2 to 3 years Over 3 years Total Plano 1 (Previ) ,344,410 13,219,075 13,061, ,144, ,769,481 Plano Informal (Previ) , , , ,435 1,345,101 Plano de Associados (Cassi) , , ,067 15,356,803 17,577,523 Regulamento Geral (Economus) , , ,497 10,574,767 11,925,543 Regulamento Complementar 1 (Economus) ,457 2,575 2, , ,220 Plus I e II (Economus) ,764 68,701 63, , ,648 Grupo B' (Economus) ,208 16,122 15, , ,363 Prevmais (Economus) ,680 19,814 19, , ,913 Multifuturo I (Fusesc) ,132 6,095 6, , ,106 Plano I (Fusesc) ,141 41,949 41, , ,796 Plano BEP (Prevbep) ,863 4,181 4, , ,665 (1) Weighted average duration, in years, of the defined benefit actuarial obligation. (2) Amounts considered without discounting at present value. d.5) Breakdown of the amounts recognized in statement of income relating to defined benefit plans Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans 1st half/2017 1st half/2016 1st half/2017 1st half/2016 1st half/2017 1st half/2016 1st half/2017 1st half/2016 Current service cost (111,633) (112,365) (50,215) (39,524) (6,388) (7,242) Interest cost (4,069,938) (4,547,794) (50,994) (66,578) (455,850) (491,828) (224,546) (253,932) Expected yield on plan assets 3,951,351 4,440, , ,201 Unrecognized past service cost (15,031) (20,068) Expense with active employees (188,280) (198,563) (81,004) (82,895) Other adjustments/reversals ,238 3,447 (Expense)/income recognized in the Statement of income (230,220) (219,711) (66,025) (86,646) (694,345) (729,915) (152,133) (138,421) 97

222 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated d.6) Composition of the plan assets Plano 1 - Previ Other plans Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Fixed income 65,558,346 58,053,582 55,618,091 4,824,522 4,831,482 4,692,337 Floating income (1) 64,854,679 70,648,892 59,683, , , ,664 Real estate investments 9,866,003 9,126,202 8,728, , , ,968 Loans and financing 5,468,082 5,254,043 5,117, , ,183 97,135 Other 850, , , , , ,658 Total 146,597, ,946, ,888,116 5,720,000 5,731,092 5,595,762 Amounts listed in fair value of plan assets In the entity s own financial instruments 10,972,344 11,631,219 8,516,001 29,579 23,926 23,270 In properties or other assets used by the entity 156, , ,823 7,746 7,848 8,996 (1) Includes, in Plano de Benefícios 1 from Previ, the amount of R$ 32,966,823 thousand (R$ 30,265,763 thousand on December 31, 2016 and R$ 23,151,174 thousand on June 30, 2016), related to the assets that are not quoted in active markets. d.7) Main actuarial assumptions adopted Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans (1) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Inflation rate (p.a.) 4.87% 5.41% 5.44% 4.74% 5.29% 5.54% 4.88% 5.43% 5.43% 4.87% 5.40% 5.44% Real discount rate (p.a.) 5.60% 5.77% 6.20% 5.55% 5.84% 6.18% 5.61% 5.75% 6.20% 5.60% 5.77% 6.20% Nominal rate of return on investments (p.a.) Real rate of expected salary growth (p.a.) 10.74% 11.49% 11.98% % 11.48% 11.98% 1.04% 1.04% 1.01% % 0.92% 0.95% Actuarial life table Soft AT-2000 (reduced by 10%) Soft AT-2000 (reduced by 10%) Soft AT-2000 (reduced by 10%) AT-2000 / AT-83 AT-2000 Capitalization method Projected credit unit Projected credit unit Projected credit unit Projected credit unit (1) As of June 2017 Regulamento Complementar 1 and Grupo B' started to use actuarial life table AT

223 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated In order to determine the values for the defined benefit plans, the Bank uses methods and assumptions different from those submitted by the entities sponsored. CPC 33 (R1) prescribes the accounting, as well as the effects that occurred or that will occur in the entities that sponsor employee benefits plans. However, the sponsored entities themselves must comply with the rules issued by the Ministério da Previdência Social, through the Conselho Nacional de Previdência Complementar (CNPC) and the Superintendência Nacional de Previdência Complementar (Previc). The most significant differences are in the definition of the assumptions used in Plano 1 Previ. d.8) Differences in assumptions of the Plano 1 - Previ Bank Previ Real discount rate (p.a.) 5.60% 5.00% Evaluation of assets - exclusive funds Market Value or Discounted Cash Flow Discounted Cash Flow Capitalization method Projected credit unit Aggregate method d.9) Reconciliation of amounts calculated in Plan 1 - Previ/Bank Plan assets Actuarial liabilities Effect in surplus/(deficit) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Value determined - Previ 130,022, ,196, ,456,775 (145,664,160) (144,371,339) (142,474,276) (15,642,104) (14,174,874) (18,017,501) Incorporation of values from agreement 97 Incorporation of values from Grupo Especial 13,877,279 14,251,784 14,531,967 (13,877,279) (14,251,784) (14,531,967) ,125,311 1,145,314 1,162,458 (1,125,311) (1,145,314) (1,162,458) Adjustment in the value of plan assets (1) 1,572,729 (1,647,166) (10,263,084) ,572,729 (1,647,166) (10,263,084) Adjustment in the liabilities - discount rate/capitalization method ,877,626 11,418,863 18,461,508 8,877,626 11,418,863 18,461,508 Value determined - Bank 146,597, ,946, ,888,116 (151,789,124) (148,349,574) (139,707,193) (5,191,749) (4,403,177) (9,819,077) (1) Refers mainly to adjustments made by the Bank in determining the fair value of the investments in Litel, Neoenergia and in securities held to maturity. d.10) Sensitivity analysis The sensitivity analysis is performed for changes in a single assumption while maintaining all others constant. This is unlikely in reality, since some of the assumptions are correlated. The same methodology was used to perform the sensitivity analysis in each of the periods presented. However, the discount rate was updated to reflect market conditions. 99

224 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Plano 1 (Previ) Plano Informal (Previ) Plano de Associados (Cassi) Regulamento Geral (Economus) Regulamento Complementar 1 (Economus) Plus I e II (Economus) Grupo B' (Economus) Prevmais (Economus) Multifuturo I (Fusesc) Plano I (Fusesc) Plano BEP (Prevbep) Jun 30, 2017 Present value of defined benefit actuarial obligations Life table Salary increase Interest rate +1 age -1 age +0.25% -0.25% +0.25% -0.25% 151,789, ,382, ,157, ,837, ,741, ,459, ,257,747 Surplus/(deficit) in the plan (5,191,749) (1,785,103) (8,560,095) (5,239,714) (5,143,784) (1,862,146) (8,660,372) Present value of defined benefit actuarial obligations 934, , , , ,411 Surplus/(deficit) in the plan (934,855) (900,820) (969,648) (922,652) (947,411) Present value of defined benefit actuarial obligations 8,284,491 8,096,030 8,470,384 8,287,060 8,281,922 8,091,049 8,486,742 Surplus/(deficit) in the plan (8,284,491) (8,096,030) (8,470,384) (8,287,060) (8,281,922) (8,091,049) (8,486,742) Present value of defined benefit actuarial obligations 6,112,260 6,002,660 6,218, ,967,253 6,263,441 Surplus/(deficit) in the plan (1,808,750) (1,699,150) (1,915,125) (1,663,743) (1,959,931) Present value of defined benefit actuarial obligations 43,815 45,447 42, ,291 45,418 Surplus/(deficit) in the plan (1,204) (2,836) (2,806) Present value of defined benefit actuarial obligations 473, , , , ,461 Surplus/(deficit) in the plan (473,326) (455,341) (491,505) (466,123) (480,461) Present value of defined benefit actuarial obligations 205, , , , ,549 Surplus/(deficit) in the plan (205,676) (201,757) (209,469) (200,996) (210,549) Present value of defined benefit actuarial obligations 301, , , , , , ,984 Surplus/(deficit) in the plan 86,010 86,994 84,974 83,488 88,489 94,648 76,905 Present value of defined benefit actuarial obligations 78,494 77,547 79, ,603 80,471 Surplus/(deficit) in the plan 123, , , , ,177 Present value of defined benefit actuarial obligations 606, , , , ,332 Surplus/(deficit) in the plan 64,860 74,625 55, ,382 53,926 Present value of defined benefit actuarial obligations 67,534 66,545 68,489 67,697 67,373 65,710 69,445 Surplus/(deficit) in the plan 45,548 46,537 44,593 45,385 45,709 47,372 43,637 e) Overview of actuarial asset/(liability) recorded by the Bank Actuarial assets Actuarial liabilities Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Plano 1 (Previ) (2,595,875) (2,201,588) (4,909,538) Plano Informal (Previ) (934,855) (965,470) (986,855) Plano de Associados (Cassi) (8,284,491) (7,948,422) (7,518,888) Regulamento Geral (Economus) (957,833) (829,730) (561,393) Regulamento Complementar 1 (Economus) (427) (2,659) (2,656) Plus I e II (Economus) (473,326) (409,315) (399,431) Grupo B' (Economus) (205,676) (170,302) (167,330) Prevmais (Economus) 43,005 36,846 41, Multifuturo I (Fusesc) 61,577 57,514 52, Plano I (Fusesc) 32,430 33,586 68, Plano BEP (Prevbep) 22,774 23,882 23, Total 159, , ,398 (13,452,483) (12,527,486) (14,546,091) 100

225 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated f) Allocations of the Surplus - Plano 1 1st half/ st half/2016 Fundo Paridade Opening balance 129, , ,378 Restatement 4,665 14,065 9,163 Contributions to Plano 1 - Agreement 97 (4,472) (4,543) (4,543) Closing balance 130, , ,998 Fundo de Utilização Opening balance 9,432,110 8,959,543 8,959,543 Contributions to Plano 1 (264,138) (571,026) (263,198) Restatement 317,804 1,043, ,339 Closing balance 9,485,776 9,432,110 9,376,684 Total funds allocated surplus 9,615,869 9,562,010 9,501,682 f.1) Fundo Paridade In 2000, the cost of switching to equal contributions was based on the Plano de Benefícios 1 s surplus at the time. The agreement (between Banco do Brasil and participants) allowed the Bank to recognize an asset of R$ 2,227,254 thousand in Allocation funds surplus. The asset is recalculated each month based on the actuarial goal: INPC (the National Consumer Price Index published by the Brazilian Institute of Geography and Statistics IBGE) + 5% p.a.. Since January 2007, the asset has been used to offset financial liabilities related to the agreement signed with Previ in This agreement granted additional benefits to participants in Plano 1 (Previ) who joined the plan prior to April 14, 1967, and had not yet retired. f.2) Fundo de Utilização This fund contains resources transferred from the Allocation Fund (because of the plan s surplus), which the Bank can use for repayments or to reduce future contributions (after first meeting all applicable legal requirements). The Fundo de Utilização is recalculated based on the actuarial target (INPC + 5% p.a.). 101

226 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES, LEGAL LIABILITIES TAXES AND SOCIAL SECURITY a) Contingent assets Contingent assets are not recognized in the financial statements according to CPC 25 Provisions, Contingent Liabilities and Contingent Assets. b) Labor lawsuits The Bank is a party to labor claims involving mainly former employees and banking industry unions. The provision for probable losses covers a variety of different types of claims, including compensation, overtime, incorrect working hours, and additional functions, among others. c) Tax lawsuits The Bank, in spite of its conservative profile, may receive tax inquiries during inspections by the tax authorities, which could lead to the issuance of tax notices. These notices relate to the calculation base for income/social contribution taxes (mainly regarding deductibility) and matters involving payment of other taxes (based upon the occurrence of certain events). Most claims arising from the notices relate to service tax (ISSQN), income tax, social contribution (CSLL), the Social Integration Program (PIS), Contribution to Social Security Financing (Cofins), Tax on Financial Transactions (IOF), and Employer Social Security Contributions (INSS). As a guarantee in some of these cases, the Bank has pledged collateral in the form of cash, bonds, real estate or judicial deposits when necessary, preventing the Bank to be included in restrictive registration, as well as not to obstruct the semiannual renewal of its tax regularity certificate. d) Civil lawsuits Civil lawsuits relate mainly to claims from customers and users of the Bank s network. In most cases, they are requesting indemnification for material or moral damages arising from banking products or services and Economic Plans (Bresser Plan, Verão Plans and Collor Plans I and II). Indemnifications for material and moral damages are based on consumer protection laws and generally settled in specific civil courts. The awards are limited to forty times the minimum wage. The Bank is a defendant in claims seeking the payment and refunding the overpayment of the difference between the actual inflation rate and the inflation rate used for the adjustment of financial investments and rural credit when Economic Plans were implemented in the late 1980 s and early 1990 s. Although it complied with prevailing laws and regulations at the time, the Bank set-up provisions for these lawsuits. The provisions consider claims brought against the Bank in which the risk of loss is considered probable. Loss probabilities are determined after an analysis of each claim considering the most recent decisions in the Superior Courts of Justice (STJ). With respect to cases involving the financial investments related to Economic Plans, the Federal Supreme Court (STF) suspended prosecution of all cases after the discovery phase. This will be the case until the court issues a definitive ruling. e) Provisions for labor, tax and civil claims probable loss The Bank recorded a provision for labor, tax and civil demands with risk of loss probable, quantified using individual or aggregated methodology (includes processes with the author's probability of success equal to remote, possible or probable), according to the nature and / or process value. The estimates of outcome and financial effect are determined by the nature of the claims, the management's judgment, by the opinion of legal counsel on the basis of process elements, complemented by the complexity and the experience of similar demands. 102

227 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated The Management considers to be sufficient the provision for losses of labor, tax and civil claims. e.1) Changes in the provisions for civil, tax and labor claims classified as probable 1st half/2017 1st half/2016 Labor lawsuits Opening balance 2,508,268 2,169,106 Addition 587, ,790 Reversal of the provision (133,793) (23,703) Write off (525,923) (515,150) Inflation correction and exchange rate changes 123, ,258 Closing balance 2,559,471 2,598,301 Tax lawsuits Opening balance 276, ,695 Addition 30,602 96,955 Reversal of the provision (27,555) (74,390) Write off (18,513) (7,993) Inflation correction and exchange rate changes 12,556 7,665 Closing balance 273, ,932 Civil lawsuits Opening balance 6,897,180 7,150,581 Addition 763,107 1,758,017 Reversal of the provision (432,728) (1,515,478) Write off (707,572) (774,173) Inflation correction and exchange rate changes 146, ,203 Closing balance 6,666,100 6,811,150 Total labor, tax and civil 9,498,676 9,677,383 e.2) Expected outflows of economic benefits Labor Tax Civil Up to 5 years 2,494, ,399 5,432,750 From 5 to 10 years 64,940 97,978 1,204,644 Over 10 years 88 29,728 28,706 Total 2,559, ,105 6,666,100 The scenario of unpredictability of the duration of proceedings, and the possibility of changes in the case law of the courts, make values and the expected outflows of economic benefits uncertain. f) Contingent liabilities possible loss The labor, tax and civil lawsuits for which the risk of loss is considered possible do not require provisions when the final outcome of the process is unclear and when the probability of losing is less than more-likely-than-not and higher than the remote. 103

228 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated f.1) The balances of contingent liabilities classified as possible loss Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Labor lawsuits 191, , ,858 Tax lawsuits (1) 11,912,158 10,702,278 9,767,803 Civil lawsuits 2,138,382 1,975,843 2,385,644 Total 14,241,889 12,849,543 12,350,305 (1) The main contingencies originate from (i) notices of labor infraction form the National Social Security Institute (INSS) aiming at the payment of contributions applicable on year-end bonuses paid under the collective agreements in the period from 1995 to 2006, in the amount of R$ 3,476,644 thousand, public transport pay and use of private car by employees of Banco do Brasil, in the amount of R$ 300,891 thousand and employee profit sharing corresponding to the period from April 2001 to October 2003, in the amount of R$ 912,135 thousand; and (ii) notices of tax assessment drawn by the Treasuries of the Municipalities, which amounts R$ 1,694,639 thousand. g) Deposits in guarantee g.1) Deposits given in guarantee of contingencies Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Labor lawsuits 5,281,600 5,126,635 4,842,040 Tax lawsuits 7,968,553 7,720,456 7,138,443 Civil lawsuits 21,775,451 20,274,118 18,329,300 Total 35,025,604 33,121,209 30,309,783 h) Legal liabilities The Bank has a record in Legal liabilities tax and social security and Other liabilities sundry the amount of R$ 16,014,896 thousand (R$ 15,441,581 thousand on December 31, 2016 and R$ 14,633,941 thousand on June 30, 2016) relating to the following action: In 1998, the Bank requested full compensation of the accumulated tax losses of income tax and the negative calculation bases of social contribution. Since then, the Bank has fully offset tax losses and negative bases with the due amount of income tax and social contribution, making a full deposit of the amount due (70% of the amount offset), which led to the court order, determining the Suspension of the enforceability of said taxes. Currently, the Bank is awaiting the judgment of an extraordinary appeal (RE SP) in which there was recognition of the general repercussion of the matter by the STF. As a result, RE DF, floated by the Bank, will be overwritten in the TRF 1ª Region, until judgment of the general repercussion. The offsetting of tax loss carry forward and recoverable social contribution has resulted in the write-off of deferred tax assets, observing the limitation of 30%. Deferred taxes including corporate income tax and social contribution on the interest / inflation restatements of judicial deposits are being offset with the tax credits resulting from the provision related to that judicial deposit, in accordance with article 1, item II, paragraph 2 of CMN Resolution 3,059/2002, with no impact on income. Based on the hypothesis of a successful outcome to this lawsuit, in September 2005 and January 2009, the Bank would have consumed the entire stock of tax loss carry forward and recoverable social contribution. Therefore, since October 2005 and February 2009, the amounts of income tax and social contribution are being paid in full. Moreover, there would be a reclassification of resources from the account used to record judicial deposits to that of cash and cash equivalents. Tax assets related to judicial deposits (main value) would be written-off against the liabilities of income tax and social contribution and would be reversed against income, the provision for tax risks related to the restatement of the deposits amounts to R$ 9,443,223 thousand. 104

229 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated In the other hand, based on the hypethesis of an unsuccessful in its lawsuit (situation in which the amounts deposited judicially would be converted into income in favor of the Fazenda Nacional (Federal Tax Authority)), the portions of income tax, tax assests on tax losses and social contribution to offset would be reclassified to the representative asset account income tax recoverable and social contribution recoverable, that could be used since the accrual period starting October 2005 and February 2009, observing the limitation of 30%. The taxes recoverable, which would result from the adjustments to prior year Statements of economic-fiscal information of businesses, corresponds to R$ 6,016,371 thousand as of June 30, 2017 and updating by the Selic rate results in a further recoverable amount of R$ 3,902,295 thousand. This sum adjusts the provision for tax risks with respect to the updating of court deposits so that it will be sufficient to fully cancel the risk of a loss. h.1) The amounts related to this matter Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Judicial deposits 17,868,745 17,431,080 16,911,249 Amount realized (70%) 7,817,011 7,817,011 7,817,011 Inflation corrections 10,051,734 9,614,069 9,094,238 Legal obligations provision for lawsuit 16,014,896 15,441,581 14,633,941 Tax losses of income tax 3,002,033 3,002,033 3,002,033 Social contribution negative bases/social contribution recoverable 3,569,640 3,569,640 3,569,640 Provision for tax risks (restatement of deposit) 9,443,223 8,869,908 8,062,268 - RISK AND CAPITAL MANAGEMENT a) Risk management process For Banco do Brasil, risk management is one of the most important elements of the decision-making process. The Institution has a process of identification of risks that will be part of the Institution's risks inventory, performed by analysing the business segments that are explored, direct and indirectly, considering the Entities Related to Banco do Brasil. Once the risk inventory and its respective concepts are defined, the relevance of the risks is determined based on quantitative and qualitative criteria specified in the Corporate Manual. The risks below are part of Banco do Brasil's Financial Conglomerate Relevant Risks Corporate Range: a) Credit Risk; b) Counterparty Credit Risk; c) Concentration Risk; d) Liquidity Risk; e) Operational Risk; f) Market Risk; g) Banking Book Interest Rate Risk; h) Strategic Risk; i) Reputational Risk; j) Environmental Risk; k) Legal Risk; l) Contagion Risk; m) Complementary Pension Fund Entities and Private Health Insurance Plan Operators for Employees Risk; n) Model Risk; and o) Compliance Risk. In the Bank, the collegiate risk management is performed segregated from the business units. Risk management policies are approved by the Board of Directors. The Global Risk Superior Committee (CSRG), a forum composed of Vice- Presidents, is responsible for implementation and monitoring of these policies. The guidelines issued by the CSRG are conducted by specific executive committees (credit, market, liquidity and operational), which are groups formed by Directors. 105

230 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated To learn more about the risk management process in Banco do Brasil, visit the information available in the Risk Management Report at the website bb.com.br/ri. 106

231 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Financial instruments - fair value Financial instruments recorded in balance sheet accounts, compared to fair value: Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Unrealized gain/loss, net of tax effects On income On shareholders equity Book value Fair value Book value Fair value Book value Fair value Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Assets Short-term interbank investments 448,416, ,179, ,711, ,651, ,470, ,494,598 (1,236,993) (60,176) 23,632 (1,236,993) (60,176) 23,632 Securities 132,877, ,319, ,656, ,005, ,493, ,204,954 (1,530,370) (2,623,471) (3,662,800) (557,319) (650,761) (289,032) Adjustment of securities available for sale (Note 8.a) (973,051) (1,972,710) (3,373,768) Adjustment of securities held to maturity (Note 8.a) (557,319) (650,761) (289,032) (557,319) (650,761) (289,032) Derivative financial instruments 1,389,541 1,389,541 1,612,563 1,612,563 3,256,272 3,256, Loan operations 556,755, ,954, ,923, ,716, ,578, ,642,639 (41,800,964) (14,206,370) (10,935,522) (41,800,964) (14,206,370) (10,935,522) Liabilities Interbank deposits 18,961,724 19,166,318 20,664,801 21,238,847 27,472,505 28,005,024 (204,594) (574,046) (532,519) (204,594) (574,046) (532,519) Time deposits 210,379, ,342, ,150, ,053, ,458, ,259,403 37,295 96, ,182 37,295 96, ,182 Liabilities related to repurchase agreement 449,821, ,613, ,634, ,070, ,968, ,326,239 1,207,973 1,563,948 1,642,396 1,207,973 1,563,948 1,642,396 Borrowings and onlendings 99,193,742 99,528, ,492, ,735, ,366, ,667,224 (335,022) (242,546) (301,130) (335,022) (242,546) (301,130) Derivative financial instruments 1,969,959 1,969,959 1,870,391 1,870,391 3,018,900 3,018, Other liabilities 209,593, ,606, ,141, ,036, ,134, ,788,300 (1,012,759) 105,821 (653,363) (1,012,759) 105,821 (653,363) Unrealized gain/(loss), net of tax effects (44,875,434) (15,940,021) (14,220,124) (43,902,383) (13,967,311) (10,846,356) 107

232 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Determination of fair value of financial instruments Short-term interbank investments: The fair value was obtained by discounting future cash flows, using interest rates traded by the market in similar operations on the balance sheet date. Securities: Securities are accounted for by market value, as allowed for in Bacen Circular No. 3,068/2001, except for securities held to maturity. The fair value of the securities, including those held to maturity, is obtained from rates practised in the market. Loan operations: The fair value of fixed rate operations has been estimated through the future cash flow discount method, considering the interest rates utilized by the Bank when originating similar operations at the balance sheet date. For operations that are remunerated by floating rates, the fair value was equivalent to the book value itself. Interbank deposits: The fair value has been calculated by the discount of the future cash flows using rates currently applicable in the market for fixed rate deposits. In case of floating operations the maturities of which are less than 30 days, the book value was deemed approximately equivalent to the fair value. Time deposits: The same criteria adopted for interbank deposits are utilized in the determination of the fair value. Liabilities related to repurchase agreement: For operations at fixed rates, the fair value was determined calculating the discount of the estimated cash flows adopting a discount rate equivalent to the rates applied in contracting similar operations on the last trading day. For floating operations, book values have been deemed approximately equivalent to market value. Borrowing and onlendings: Such operations are exclusive to the Bank with no similar operations in the market. Given their specific characteristics, the exclusive rates for each fund, the inexistence of an active market or similar traded instruments, the fair values of such operations are considered equivalent to the book value. Other liabilities: Fair values have been determined by the discounted cash flow method, which takes into account interest rates offered in the market for obligations with similar maturities, risks and terms. Derivatives financial instruments: According to Bacen Circular No. 3,082/2002, derivatives are recorded at market value. The market value of derivatives was estimated in accordance with internal pricing models, with the use of the rates disclosed for transactions with similar terms and indices on the last business day of the period. Other financial instruments: Included or not in the balance sheet, fair value is approximately equivalent to the corresponding book value. Source of information regarding assets and liabilities measured at fair value in the balance sheet The Bank s fair value measurements consider the following input levels: Level 1 Price quotations are derived from active markets for identical financial instruments. Financial instruments are considered to be quoted in an active market if prices are readily available and are based on regularly occurring arm s length transactions. Level 2 Requires the use of information obtained from the market that is not Level 1. This includes prices quoted in non-active markets for similar assets and liabilities and information that can be corroborated in the market. Level 3 Requires the use of information not obtained from the market to measure fair value. When there is not an active market for an instrument, the Bank uses valuation techniques that incorporate internal data. The Bank s methodologies are consistent with commonly used techniques for pricing financial instruments. 108

233 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Assets and liabilities measured at fair value in the balance sheet Balance at Jun 30, 2017 Level 1 Level 2 Level 3 Assets 129,115,770 93,903,920 35,211, Trading securities, measured by market value 8,253,419 6,680,419 1,573, Derivative financial instruments 1,389, ,389, Available-for-sale securities, measured by market value 119,472,810 87,223,501 32,249, Liabilities (2,335,420) -- (2,335,420) -- Hedge funding (365,461) -- (365,461) -- Derivative financial instruments (1,969,959) -- (1,969,959) -- Balance at Dec 31, 2016 Level 1 Level 2 Level 3 Assets 115,673,071 77,497,818 38,175, Trading securities, measured by market value 6,074,220 4,798,108 1,276, Derivative financial instruments 1,612, ,612, Available-for-sale securities, measured by market value 107,986,288 72,699,710 35,286, Liabilities (2,232,014) -- (2,232,014) -- Hedge funding (361,623) -- (361,623) -- Derivative financial instruments (1,870,391) -- (1,870,391) -- Balance at Jun 30, 2016 Level 1 Level 2 Level 3 Assets 119,909,696 72,134,443 47,775, Trading securities, measured by market value 6,224,897 4,949,084 1,275, Derivative financial instruments 3,256, ,256, Available-for-sale securities, measured by market value 110,428,527 67,185,359 43,243, Liabilities (3,373,980) -- (3,373,980) -- Hedge funding (355,080) -- (355,080) -- Derivative financial instruments (3,018,900) -- (3,018,900) -- Sensitivity analysis (CVM Instruction No. 475/2008) Banco do Brasil manages its risks in a dynamic process, identifying, assessing, monitoring, and controlling market risk exposure arising on its positions. In this context, the Bank takes into account the risk limits defined by the Strategic Committees and possible scenarios, to act in a timely manner to reverse any adverse results. In accordance with CMN Resolution No. 3,464/2007 and with Bacen Circular No. 3,354/2007, to manage more efficiently its transactions exposed to market risks, Banco do Brasil separates its transactions, including derivative financial instruments, as follows: 1) Trading Book: consisting of own positions held for trading or as a hedge for its trading portfolio, for which there is an intention of trading prior to their contractual expiry, subject to normal market conditions and that do not have a nontrading clause. 2) Banking Book: consisting of transactions not classified in the Trading Book whose feature is held to maturity. The sensitivity analysis for all the operations with assets and liabilities of the Balance Sheet, in compliance with CVM Instruction No. 475/2008 does not adequately reflect the market risk management process or the accounting practices adopted by the Bank. In order to determine the sensitivity of the Bank's capital to the impacts of market volatility, simulations were performed with three likely scenarios, two of which assume adverse movements for the Bank. The scenarios used are set out below: 109

234 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Scenario I: Likely situation, which reflects the perception of the Bank s senior management, the scenario most likely to occur for a 3-month horizon, considering macroeconomic factors and market information (BM&FBovespa, Anbima, etc.). Assumptions: exchange rate real/dollar of R$ 3.33 and reduction the Selic rate to 8.75% per annum based on market conditions observed on June 30, Scenario II: Possible situation. Assumptions adopted: parallel shock of 25.00% in the risk variables, based on market conditions observed on June 30, 2017 considering the worst losses by risk factor and, therefore, ignoring the dynamics of correlation between macroeconomic factors. Scenario III: Possible situation. Assumptions adopted: parallel shock of 50.00% in the risk variables, based on market conditions observed on June 30, 2017 considering the worst losses by risk factor and thus ignoring the dynamics of correlation between macroeconomic factors. The tables below summarize the results for the Trading Portfolio (Trading), composed of public and private securities, derivative financial instruments and funds obtained through repurchase agreements: Risk factor Prefixed rate TMS and CDI indices IPCA index Exchange rates variation Concept Risk of variation of prefixed interest rates Risk of variation of interest rate indices Risk of variation of inflation indices Risk of variation of foreign exchange rates Variation of rates Scenario I Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/ (expense) Variation of rates Income/ (expense) Variation of rates Income/ (expense) Increase 89,219 Decrease (18,120) Maintenance -- Maintenance -- Increase 1 Maintenance -- Increase 6,935 Decrease 11,344 Maintenance -- Increase 2,842 Increase 5,883 Increase 2,657 Risk factor Prefixed rate IPCA index Exchange rates variation Concept Risk of variation of prefixed interest rates Risk of variation of inflation indices Risk of variation of foreign exchange rates Variation of rates Scenario II Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/ (expense) Variation of rates Income/ (expense) Variation of rates Income/ (expense) Decrease (130,708) Decrease (36,332) Decrease (7,529) Decrease (5,838) Increase (8,876) Increase (837) Decrease (116,085) Decrease (100,430) Decrease (81,115) Risk factor Prefixed rate IPCA index Exchange rates variation Concept Risk of variation of prefixed interest rates Risk of variation of inflation indices Risk of variation of foreign exchange rates Variation of rates Scenario III Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/ (expense) Variation of rates Income/ (expense) Variation of rates Income/ (expense) Decrease (245,388) Decrease (86,516) Decrease (17,978) Decrease (11,317) Increase (16,402) Increase (1,642) Decrease (232,171) Decrease (200,859) Decrease (162,231) 110

235 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated For transactions classified in the Banking Book, appreciations or depreciations resulting from changes in interest rates practiced in the market do not imply in a significant financial or accounting impact on the Bank's income as a result of the portfolio composition which is principally: loan operations (consumer credit, agribusiness, working capital, etc.); retail funding (demand, time, and savings deposits), and securities, which are recorded in the books using the contracted interest rates. In addition, it should be pointed out that these portfolios, except the securities available for sale, have as their principal characteristic the intention to hold the respective operations to maturity and, hence they are not subject to the effects of fluctuating interest rates, or the fact that such transactions are naturally related to other instruments (natural hedge), hence minimizing the impacts of a stress scenario. The tables below show a summary of the Trading Portfolio (Trading) and Non Trading (Banking) for the financial and non-financial entities controlled by the bank: Prefixed rate TR Risk factor Concept Risk of variation of prefixed interest rates Variation of rates Scenario I Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/ (expense) Variation of rates Income/ (expense) Variation of rates Income/ (expense) Decrease 7,338,043 Decrease 6,022,914 Maintenance -- Decrease (3,230,518) Decrease (4,647,926) Decrease (170,950) TBF Risk of variation Increase 803 Decrease (13,544) Decrease (851) of interest rate TJLP indices Decrease (28,652) Decrease 28,296 Maintenance -- TMS and CDI Increase 7,999 Increase 68,490 Increase 9,152 IGP-M Decrease (267,755) Decrease (151,412) Maintenance -- IGP-DI Risk of variation Maintenance -- Decrease 203 Maintenance -- of inflation INPC indices Decrease 219,520 Decrease 207,437 Maintenance -- IPCA Decrease 1,339,119 Decrease 1,199,604 Maintenance -- Foreign currency rates Exchange rate Risk of variation of foreign currency indices Risk of variation of foreign exchange rates Increase 884,188 Increase 886,493 Increase 712,241 Increase 11,333 Increase 42,445 Increase 26,237 Prefixed rate TR Risk factor Concept Risk of variation of prefixed interest rates Variation of rates Scenario II Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/ (expense) Variation of rates Income/ (expense) Variation of rates Income/ (expense) Increase (10,902,206) Increase (10,146,913) Increase (11,111,628) Decrease (6,058,990) Decrease (6,064,945) Decrease (6,853,809) TBF Risk of variation Decrease (2,259) Decrease (2,522) Decrease (2,809) of interest rate TJLP indices Increase (19,752) Increase (43,223) Decrease (11,212) TMS and CDI Decrease (10,368) Decrease (5,060) Increase (3,463) IGP-M Increase (462,500) Decrease (147,832) Increase (4,760) IGP-DI Risk of variation Maintenance -- Increase (231) Increase (150) of inflation INPC indices Increase (198,039) Increase (210,708) Increase (190,502) IPCA index Increase (1,093,161) Increase (1,024,907) Increase (1,152,899) Foreign currency rates Exchange rate Risk of variation of foreign currency indices Risk of variation of foreign exchange rates Decrease (989,398) Decrease (1,070,351) Decrease (856,285) Decrease (462,869) Decrease (724,627) Decrease (801,123) 111

236 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Prefixed rate TR Risk factor Concept Risk of variation of prefixed interest rates Variation of rates Scenario III Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Income/(expen se) Variation of rates Income/(expen se) Variation of rates Income/(expen se) Increase (20,845,236) Increase (19,332,178) Increase (21,091,958) Decrease (12,211,999) Decrease (12,265,979) Decrease (14,004,507) TBF Risk of variation Decrease (4,536) Decrease (5,066) Decrease (5,644) of interest rate TJLP indices Increase (41,752) Increase (87,006) Decrease (23,628) TMS and CDI Decrease (20,736) Decrease (10,119) Increase (6,924) IGP-M Increase (1,010,335) Decrease (364,349) Increase (28,291) IGP-DI Risk of variation Maintenance -- Increase (461) Increase (299) of inflation INPC indices Increase (388,541) Increase (412,498) Increase (373,327) IPCA index Increase (2,059,087) Increase (1,926,332) Increase (2,173,384) Foreign currency rates Exchange rate Risk of variation of foreign currency indices Risk of variation of foreign exchange rates Decrease (2,040,811) Decrease (2,210,173) Decrease (1,768,895) Decrease (925,739) Decrease (1,449,254) Decrease (1,602,247) The scenarios used for preparing the framework for sensitivity analysis must use situations of deterioration of at least 25% and 50% of the variable risks, on an individualized basis, as determined by CVM Instruction No. 475/2008. Thus, the combined analysis of the results does not reflect real expectations, for example, simultaneous shocks of increase in the prefixed interest rate and reduction of the TR rate are not consistent from the macroeconomic perspective. The derivative transactions classified in the Banking Book, do not represent a relevant market risk to Banco do Brasil, as these positions are usually originated with the following objectives: Swapping the index of funding and lending transactions performed to meet customer needs; Hedging market risk, the purpose and effectiveness of which are described in Note 8.d. Also in this transaction, the interest and exchange rate variations have no effects on the Bank's income. On June 30, 2017, the Banco do Brasil did not enter into any transaction classified as an exotic derivative, as described in CVM Instruction No. 475/ Attachment II. b) Capital management On June 30, 2011, Bacen issued a resolution requiring financial institutions to implement a capital management structure in accordance with Pillar II of Basel. In the Bank, such structure includes the Accounting, Risk Management, Controllership and Finance areas. In addition, the Board of Directors indicated the Controller as having overall responsibility for capital management. The Bank s organizational structure allows it to identify and evaluate significant risks incurred, including Pillar I risks not covered by MRER. The Bank s policies, strategies and capital plan enable it to maintain capital at a level that is consistent with the risks it faces. Stress tests are performed on a monthly basis, with the impacts evaluated from a capital perspective. The corporate units and strategic committees receive capital adequacy management reports. These reports support the decision-making process of the Bank s senior management team. The above mentioned resolution also required implementation of an Internal Capital Adequacy Assessment Process (ICAAP), which was formally established by the Bank on June 30, The Risk Management area is responsible for coordinating ICAAP, and the Internal Controls unit, which is independent from capital management, is responsible for validating ICAAP. Finally, Internal Audit is responsible for performing an annual evaluation of the overall capital management process. To learn more about the capital management at Banco do Brasil, visit the website bb.com.br/ri. 112

237 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Capital adequacy ratio The Bank calculated the Capital Adequacy Ratio in accordance with criteria established by Bacen. This criteria requires the calculation of Referential Equity (RE) and MRER as a percentage of Risk Weighted Assets (RWA). Basel III became effective on October 01, 2013 in Brazil. Recommend by the Basel Committee on Banking Supervision, Basel III represents a new set of regulations governing the capital structure of financial institutions. The new rules establish the following: a new methodology for calculating regulatory capital, which continues to be divided into Tier I and Tier II. Tier I consists of Common Equity Tier I Capital CET1 (net of regulatory adjustments) and Additional Tier I Capital; a new methodology for calculating capital requirements, establishing minimum requirements for Referential Equity, Tier I and CET1, and introducing the Additional CET1. From January 1, 2017, the percentage of deduction of prudential adjustments listed below increased to 80%: goodwill; intangible assets recognized after October 01, 2013; actuarial assets related to defined benefit pension plans, net of deferred tax liabilities; non-controlling interests; direct or indirect investments of greater than 10% in non-consolidated entities similar to financial institutions, insurance companies, reinsurance companies, capitalization companies and open-ended pension funds; deferred tax assets on temporary differences that rely on the generation of future taxable profits or income to be realized; deferred tax assets resulting from tax losses on excess depreciation; and deferred tax assets resulting from tax losses and negative social contribution base on net income. In accordance with CMN Resolution No. 4,192/2013, these deductions will be implemented gradually between 2014 and 2018 at the rate of 20% per year. However, deferred tax assets on debt issued by financial institutions are an exception, since they have been fully deducted since October On August 28, 2014, Bacen authorized the R$ 8,100,000 thousand perpetual bond included in Additional Tier I Capital to be considered Common Equity Tier I Capital. According to Bacen Resolution No. 4,192/2013 and No. 4,193/2013, from January 2015, the calculation of the Regulatory Equity (RE) and the amount of Risk-Weighted Assets (RWA) should be elaborated based on Prudential Conglomerate. 113

238 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 RE - Referential equity 127,047, ,453, ,073,657 Tier I 87,643,046 90,283,551 86,188,277 Common Equity Tier 1 Capital (CET1) 64,733,761 67,718,439 63,964,567 Shareholders' equity 80,199,982 76,702,977 73,098,924 Instrument qualifying as CET1 8,100,000 8,100,000 8,100,000 Regulatory adjustments (23,566,221) (17,084,538) (17,234,357) Additional Tier 1 Capital (AT1) 22,909,285 22,565,112 22,223,710 Hybrid instruments authorized in accordance with CMN Resolution No. 4,192/2013 Hybrid instruments authorized in accordance with regulations preceding the CMN Resolution No. 4,192/2013 (1) 18,112,395 17,840,287 17,570,370 4,796,890 4,724,825 4,653,340 Tier II 39,404,571 40,169,657 38,885,380 Subordinated debt qualifying as capital 39,425,703 40,181,808 38,904,584 Subordinated debt authorized in accordance with CMN Resolution No. 4,192/ Financial bills Subordinated Debt authorized in accordance with regulations preceding the CMN Resolution No. 4,192/2013 4,935,513 5,466,093 5,584,450 34,490,190 34,715,715 33,320,134 Funds obtained from the FCO (2) 26,591,388 25,237,153 23,841,572 Funds raised in financial bills and CD (3) 7,898,802 9,478,562 9,478,562 Deduction from tier II (21,132) (12,151) (19,204) Funding instruments issued by financial institution (21,132) (12,151) (19,204) Risk Weighted Assets (RWA) 705,412, ,851, ,102,037 Credit risk (RWACPAD) 633,781, ,214, ,885,694 Market risk (RWAMPAD) 16,644,771 18,844,349 25,507,869 Operational risk (RWAOPAD) 54,986,312 43,792,910 31,708,474 Minimum referential equity requirements (4) 65,250,653 69,702,814 75,060,076 Margin on the minimum referential equity required 61,796,964 60,750,394 50,013,581 Tier I Ratio (Tier I/RWA) 12.42% 12.79% 11.34% Common Equity Tier 1 Capital Ratio (CET1/RWA) 9.18% 9.59% 8.42% Capital Adequacy Ratio (RE/RWA) 18.01% 18.48% 16.45% (1) On June 30, 2017, based on the orientation of Bacen, it was considered the balance of the hybrid capital and debt instrument authorized by Bacen to compose the Tier 1 Capital of the Referential Equity according CMN Resolution 3,444/2007 and do not meet the relevant entry criteria, also related with the orientation established on article 28, sections I to X of CMN Resolution 4,192/2013. (2) According to CMN Resolution No. 4,192/2013, balances of the FCO are eligible to compose the RE. (3) On June 30, 2017, it was considered the balance of subordinated debt instruments that composed the RE in December 31, 2012, applying on it the limit of 50%, as determined by CMN Resolution No. 4,192/2013. (4) According to CMN Resolution No. 4,193/2013, corresponds to the application of the "F" factor to the amount of RWA, where "F" equals: 11%, from October 1, 2013 to December 31, 2015; 9.875% from January 1, 2016 to December 31, 2016; 9.25%, from January 1, 2017 to December 31, 2017; 8.625% from January 1, 2018 to December 31, 2018 and 8%, from January 1,

239 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated Regulatory adjustments deducted from CET1: Significant investments and tax credits resulting from temporary differences that rely on the generation of future taxable profits or revenues for their (1) (2) realization (amount exceeding the 15% threshold) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 (9,148,813) (4,636,849) (4,588,770) Intangible assets constituted after October 2013 (1) (5,104,774) (4,258,360) (3,245,920) Tax credits resulting from temporary differences that rely on the generation of future taxable profits or revenues for its realization (amount above 10% threshold) (1) (4,852,491) (6,099,094) (6,886,540) Superior investments (excess of 10%) (1) (1,757,550) Tax credits resulting from tax losses and negative base for social contribution on net income (1) (1,159,676) (500,439) (440,004) Goodwill (1) (3) (726,506) (954,281) (1,393,609) Non-controlling interests (1) (637,403) (493,315) (511,093) Tax credits resulting from tax loss of excess depreciation (1) (84,327) (76,391) (81,375) Actuarial assets related to defined benefit pension funds net of deferred tax liabilities (1) (94,681) (65,809) (74,342) Deferred assets (12,704) Total (23,566,221) (17,084,538) (17,234,357) (1) Regulatory Adjustments subject to phase-in, according to the CMN Resolution No. 4,192/2013. (2) On June 30, 2017, related to the investment Financial Institutions (Banco Votorantim and CBSS Bank), R$ 2,353,039 thousand were integrally deductec from the Referential Equity and R$ 2,106,257 thousand were risk-weighted at 250%. (3) The base value for calculating the goodwill is composed of: R$ 404,403 thousand in the investment line and R$ 503,729 thousand in the intangible assets line. The value in Intangible assets refers to the goodwill paid for the acquisition of Banco Nossa Caixa, merged in November/2009. c) Fixed asset ratio On June 30, 2017, the Fixed Asset Ratio for the Prudential Conglomerate, totalized 16.56% (15.52% on December 31, 2016 and 15.59% on June 30, 2017), and it was calculated in compliance with CMN Resolutions No. 4,192/2013 and No. 2,669/ STATEMENT OF COMPREHENSIVE INCOME 1st half/2017 1st half/2016 Net income presented in the statement of income 5,061,703 4,824,099 Other comprehensive income Accumulated other comprehensive income (Note 23.i) 33,569 (2,735,600) Banco do Brasil 100,382 (3,159,992) Subsidiaries abroad (17,178) 52,021 Associates and subsidiaries (49,635) 372,371 Income and social contribution taxes related to unrealized (gains)/losses (Note 23.i) 13,970 1,459,586 Other comprehensive income, net of income and social contribution taxes 47,539 (1,276,014) Comprehensive income 5,109,242 3,548,085 Comprehensive income - non-controlling interests 789, ,

240 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated - OTHER INFORMATION a) Distribution of dividends and interest on own capital During a meeting held on November 28, 2016, the Board of Directors approved the maintenance of the payout rate equivalent to the minimum of 25% of net income for the year 2017, fulfilling the policy for payment of dividends yield and/or interest on own capital on a quarterly basis, pursuant to article 45 of the Bank's By-Laws. b) Investiment funds management Funds managed by BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.: Numbers of funds/portfolios (in Units) Balance Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Managed funds ,440, ,923, ,474,425 Investment funds ,548, ,704, ,055,633 Managed portfolios ,892,492 15,218,538 14,418,792 c) Details in relation to overseas branches, subsidiaries and associates Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Assets BB Group 73,764,567 72,334,393 75,063,782 Third parties 87,455,931 89,816,739 97,036,060 TOTAL ASSETS 161,220, ,151, ,099,842 Liabilities BB Group 15,157,741 18,929,408 25,992,326 Third parties 134,103, ,980, ,155,458 Shareholders' equity 11,959,580 11,241,003 9,952,058 Attributable to parent company 11,162,853 10,418,838 9,100,264 Non-controlling interests 796, , ,794 TOTAL LIABILITIES 161,220, ,151, ,099,842 1st half/ st half/2016 Net income 290,746 (213,834) (585,029) Attributable to parent company 218,432 (500,841) (724,996) Non-controlling interest 72, , ,967 d) Consortium funds Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Monthly forecast of Purchase Pool Members receivable funds 242, , ,944 Obligations of the groups due to contributions 11,669,315 10,633,440 8,534,729 Purchase pool members - assets to be delivered 10,576,634 9,601,023 7,568,252 (In units) Quantity of groups managed Quantity of active purchase pool members 650, , ,503 Quantity of assets deliverable to members (drawn or winning offer) 55,353 60,858 59,204 1st half/2017 1st half/2016 Quantity of assets (in units) delivered in the period 57,635 52,

241 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated e) Assignment of employees to outside agencies Federal government assignments are regulated by Law 10,470/2002 and Decree No. 4,050/2001. With costs for the Bank 1st half/2017 1st half/2016 Quantiy of employees Ceded (1) Cost in the period Quantiy of employees Ceded (1) Cost in the period Labor unions , ,629 Other organizations/entities Subsidiaries and associates Without cost to the Bank Federal, state and municipal governments External organizations (Cassi, Previ, Economus, Fusesc and PrevBep) Employee entities Subsidiaries and associates Total 1,606 19,474 1,743 19,702 (1) Balance on the last day of the period. f) Remuneration of employees and managers Monthly wages paid to employees and Directors of the Banco do Brasil (in Reais): Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Lowest salary 2, , , Highest salary 44, , , Average salary 7, , , Management President 68, , , Vice-president 61, , , Director 52, , , Council members Fiscal council 5, , , Board of Directors 5, , , Audit Committee - member 46, , , g) Insurance policy of assets Despite the reduced level of risk to which its assets are subject, the Bank contracts insurance cover for its assets in amounts considered to be sufficient to cover any losses. Insurance contracted by the Bank in force on June 30, 2017 Covered risks Amounts covered Value of the premium Property insurance for the relevant fixed assets 1,154,938 6,198 Life insurance and collective personal accident insurance for the Executive Board (1) 15, Other 2,700 4,212 Total 1,172,718 10,487 (1) Refers to individual coverage for members of the Executive Board. 117

242 Consolidated Financial Statements 1 st half 2017 In thousands of Reais, unless otherwise stated h) Extraordinary Retirement Incentive Plan PEAI In accordance with the 4 th paragraph of article 157 from Law 6,404/1976, the Extraordinary Retirement Incentive Plan - PEAI was released in November 2016 for employees with the necessary conditions to retire. The plan was closed on December 09, 2016 and it had 9,409 members. Expenses with incentive payments totaled R$ 1,400,800 thousand in

243 KPMG Auditores Independentes SBS - Qd Bl. Q - Lote 03 - Salas 708 a 711 Edifício João Carlos Saad Brasília/DF - Brasil Caixa Postal CEP Brasília/DF - Brasil Telefone +55 (61) , Fax +55 (61) Independent auditor s reports on the consolidated financial statements To The Board of Directors, Shareholders, and Directors of Banco do Brasil S.A. Brasília-DF Opinion We have audited the consolidated financial statements of Banco do Brasil S.A. ( Bank ), comprising the balance sheet as of June 30, 2017 and the respective statements of income, comprehensive income, changes in shareholders equity and cash flows, for the six month period then ended, and notes, comprising the summary of the significant accounting practices. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Banco do Brasil S.A. as of June 30, 2017, the consolidated performance of its operations and its consolidated cash flows, for the six month period then ended, in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil. Basis for opinion We conducted our audit in accordance with Brazilian and international standards on auditing. Our responsibilities, under those standards, are further described in the Auditor's responsibilities for the audit of the consolidated financial statements. We are independent of the Bank, in accordance with the ethical requirements established in the Accountant s Professional Ethics Code and the professional standards issued by the Federal Accounting Council (CFC), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those that, in our professional judgment, were the most significant in our current six month period audit. These matters were addressed in the context of our audit of consolidated financial statements as a whole, and in forming our opinion on these consolidated financial statements and, therefore, we did not express a separate opinion on these matters. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 1

244 Allowance for loan losses As disclosed in notes 4g and 10 of the consolidated financial statements, for purpose of measuring the allowance for loan losses, the Bank classifies its credit, lease, and advances on foreign exchange contracts and other other receivables with credit characteristics into nine risk levels, taking into consideration factors and assumptions such as late payments, financial-economic situation, indebtedness level, sector of economic activity, characteristics of guarantees and other factors and assumptions provided for in CMN (National Monetary Council) Resolution no /1999, being AA minimum risk and H maximum risk. Initially, the Bank applies loss percentages determined by the Resolution to each risk level for purpose of calculating the allowance for loan losses and, when necessary, supplements its estimates based on internal assessment studies. Classification of credit transactions into risk levels involves the Bank s assumptions and judgments based on its internal methodologies for risk classification, and the allowance for loan losses represents the Banks s best estimate of portfolio losses. Due to the relevance of credit operations, leases, advances on foreign exchange contracts, other receivables with credit characteristics and to the degree of judgment related to the estimate of allowance for loan losses, we consider this as a key audit matter. How our audit conducted this matter We reviewed the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists we evaluate the general controls of information technology and automated key controls related to the processes of classification, approval, recognition and adjustment processes that support internal ratings evaluation methodologies for credit transaction, lease, advance for foreign exchange contracts and other receivables with credit characteristics, as well as main assumptions used to calculate the allowance for loan losses. We also evaluated, based on samples, if the Bank complied with minimum requirements established by CMN Resolution No /1999 referring to determination of allowance for loan losses. We also analyzed if disclosures of consolidated financial statements, described in notes 4g and 10, are in accordance with applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate, the level of provisioning and disclosures in the context of the consolidated financial statements taken as a whole. Market value of financial instruments The Bank has relevant balances of derivative financial instruments andsecurities classified as available for sale and trading, recorded at market value, in accordance with Brazilian Central Bank Circular Letters 3,068/2001 and 3,082/2002 and information disclosed in notes 4e, 4f and 8 of consolidated financial statements. For financial instruments that are not actively traded and for which market prices and parameters are not available, determination of market value is subject to a significant judgment of the Bank to estimate those amounts. The use of specific valuation techniques and assumptions may result in significantly different market value estimates. Therefore, we consider measurement of these financial instruments market value as a key audit matter. How our audit conducted this matter KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 2

245 We evaluated the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists, we evaluate the general controls of information technology and automated key controls conducted by the Bank to mitigate the risk of misstatements in the consolidated financial statements deriving from judgment in measurement financial instruments market value, mainly those that depend on the Bank s internal models. In addition, we analyzed the Bank s process to approve the assumptions used for mark-to-market, and calculations made for measurement of amounts. For a sample, with the technical support of our specialists in financial instruments, we evaluated the models developed by the Bank to determine market values and the reasonableness of data, parameters and information included in used pricing models, and we recalculated the amounts of the operations. We also analyzed if the disclosures of consolidated financial statements, described in notes 4e, 4f and 8, are in accordance with applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate, the market value measurement of the financial instruments in the context of the consolidated financial statements taken as a whole. Provisions and contingent liabilities - labor, civil and tax As disclosed in notes 4n and 27 of the consolidated financial statements, the Bank recorded a provision for labor, civil and tax lawsuits deriving from past events, when it is probable that a financial disbursement will be required and the amount may be reliably estimated. Estimates of outcome and financial effect are determined according to the nature of the lawsuit and the Bank s judgment, with the aid of internal and external legal advisors, based on lawsuit elements supplemented by experience with similar claims. As this evaluation carried out by the Bank involves complex estimates that are relevant for measurement of provisions and determination of disclosures for contingent liabilities, we consider this as a key audit matter. How our audit conducted this matter We evaluated the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists, we evaluate the general controls of information technology and automated key controls related to the processes of registration, evaluation of proceedings risk, calculation of massified provision, and conduction of closing processes and stages. In this area, our procedures included analysis, based on samples, of adequacy of measurement and recognition of provision and contingent liabilities regarding recognition, reversals, proceedings risk of lawsuits referring to relevant matters and values, sufficiency of provision, as well as historic data and information. We analyzed changes in estimates comparing to prior periods. We analyzed lawsuits conducted by external lawyers contracted by the Bank based on external confirmation procedures. We also evaluated if the disclosures in consolidated financial statements, described in note 4n and 27, are in accordance with applicable rules and provide information on the nature, exposure and amounts provisioned or disclosed related to the main lawsuits to which the Bank is involved. Based on the evidence obtained from the procedures described above, we consider adequate, the level of provisioning and disclosures in the context of the consolidated financial statements taken as a whole. Employee benefits As disclosed in notes 4l and 26 of consolidated financial statements, the Bank sponsors complementary pension fund entities and supplementary health plans that ensure KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 3

246 supplementation of retirement and health care benefits to its employees. A relevant portion of these entities pension plans is classified as defined benefit plans, and the amounts deriving from the Bank s sponsor to these plans are recorded in accordance with CVM Resolution no. 695/2012. These plans obligations are calculated based on several actuarial assumptions, including discount rate, inflation and mortality rate. Due to the complexity and judgment involved in treatment and measurement of these assumptions, and to the material impact that possible changes would have on financial statements, we consider this is a key audit matter. How our audit conducted this matter We evaluated the design and implementation of the Bank s internal controls regarding determination of assumptions used for measurement of actuarial obligations, as well as the Bank s evaluation of adherence to such assumptions. With the assistance of our actuaries, we analyzed reasonableness and sensitivity of main assumptions used and informed in actuarial reports of relevant benefit plans, as well as adequacy of actuarial liability amounts and database used in calculations performed by external actuaries. We analyzed recording of transactions involving pension plans and adequacy of disclosures in the consolidated financial statements, specifically in relation to sensitivity analysis of net defined benefit liability amount in relation to actuarial assumptions used and other applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate the measurement of actuarial obligations in the context of the consolidated financial statements taken as a whole. Projection of future profitability for realization of assets Consolidated financial statements include assets related to tax credits (notes 4h, 24 and 24f) and goodwill derived from acquisition of merged organization (notes 4k and 16c), whose realization is supported by estimated future profitability based on the business plan and budget prepared by the Bank. To prepare projections of future earnings, the Bank adopts assumptions based on its corporate strategies and on macroeconomic scenario, considering current and past performances and expected growth in operation market. Due to relevance of estimates of future profitability and of impact that possible changes in these estimates assumptions could have on consolidated financial statements, we consider this area a key audit matter. How our audit conducted this matter We evaluated the design and implementation of internal controls related to the Bank s process for determination and approval of assumptions used for projection of profitability, used for realization of assets. We analyzed, with technical support from our valuation specialists, the adequacy of income projections, financial-economic evaluations that backed business purchase price, evaluation of Cash Generating Units (CGU) income present value calculation and earnings growth assumptions. We evaluated reasonableness of assumptions used by the Bank and whether they were consistent with evaluation methodologies normally used in the market. We evaluated the determination bases to which prevailing tax rates are applied and deferred tax assets (tax credits) realization capacity. We also evaluated if disclosures in consolidated financial statements, are in accordance with applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate the measure the recoverable amounts of the assets specified above in the context of the consolidated financial statements taken as a whole. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 4

247 Ownership interest As disclosed in notes 3a, 5 and 14 of the consolidated financial statements, the Bank has shareholding interest in several entities and business segments, with specific investment structures that are controlled through Corporate Governance structures. Considering that these investees are subject to different structures and their own regulatory requirements, existence of related-party transactions, the necessity of harmonizing different accounting practices, interpretations and judgments involved in each investment model, we consider this as a key audit matter. How our audit conducted this matter Our audit procedures included understanding internal controls defined by the Bank and intended mainly for the management of the Bank s shareholding interests process, and harmonization of accounting practices in consolidation. We also included planning and communication of scope of the work, discussion of material misstatement risks and sending of instructions to relevant investees auditor, holding meetings with auditor responsible for relevant investees, and evaluation and review of work done. We evaluated the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists we evaluate the general controls of information technology and automated key controls related to the processes of consolidation, as well as, we tested identification, disclosure and elimination of related-party transactions, and determination of equity income of investees. We also evaluated if disclosures in consolidated financial statements are in accordance with applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate, the accounting treatment of shareholdings and disclosures in the context of the consolidated financial statements taken as a whole. Other matters - Statement of value added The consolidated statements of value added (DVA) for the six month period ended June 30, 2017, prepared under the responsibility of the Bank's management, and presented as supplementary information for purposes of accounting practices adopted in Brazil, applicable to financial institutions authorized to operate by the Central Bank of Brazil, were subject to audit procedures performed in conjunction with the auditing of the Bank's financial statements. For the purpose of forming our opinion, we assess whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria set forth in Technical Pronouncement CPC 09 - Statement of Value Added. In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria set forth in this Technical Pronouncement and are consistent with the consolidated financial statements taken as a whole. Individual financial statements The Bank prepared a complete set of individual financial statements of Banco do Brasil S.A. for the six month period ended June 30, 2017 in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil that were presented separately, over which we issued a separate independent audit report, without any modification, dated August 9, Other information that accompany consolidated financial statements and the auditor report KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 5

248 The Bank s management is responsible for other information included in Management s Report. Our opinion on consolidated financial statements does not cover Management s Report and we did not issue any assurance conclusion on such report. In connection with audit of consolidated financial statements, our responsibility is to read Management s Report and, in doing so, consider if such report is inconsistent with consolidated financial statements or with knowledge obtained during audit, or otherwise seems to be significantly misstated. If, based on work carried out, we conclude that Management s Report is materially misstated, we must communicate this fact. We have nothing to report in this regard. Responsibilities of management and those in charge with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Central Bank of Brazil, and the internal controls as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Bank s ability to continue as going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless management either intends to liquidate the Banks and its subsidiaries or to cease operations, or there has no realistic alternative but to do so. Those charged with governance are those responsible for overseeing the Bank and the subsidiaries financial reporting process. Auditor's responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism during the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting material misstatement resulting from fraud is higher than for the one resulting from error, as fraud may involve collusion, forgery, intentional omission or misrepresentations, or the override of internal controls. KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 6

249 Obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank and its subsidiaries internal control. Evaluate the appropriateness of the accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting, and based on the audit evidence obtained, whether material uncertainty exists related to events or conditions that may cast significant doubt on the Bank ability to continue as going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements, or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidences obtained up to the date of our auditor s report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provided those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be though to bear our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the consolidated financial statements of the current period, and are therefore the key audit matters. We describe these matters in our auditor s report, unless law or regulation precludes public disclosure about the matters, or when, in extremely rare circumstances, we determine a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication. Brasília, August 09, 2017 KPMG Auditores Independentes CRC SP /O-6 F-DF Original report in Portuguese signed by Marcelo Faria Pereira Accountant CRC RJ /O-2 KPMG Auditores Independentes, uma sociedade simples brasileira e firmamembro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 7

250 Consolidated Financial Statements 1 st half 2017 SUMMARY OF THE AUDIT COMMITTEE REPORT Introduction The Audit Committee of Banco do Brasil is a statutory advisory body of the Board of Directors, and has its assignments defined by Law /2016, decree 8.945/2016 and CMN Resolution 3.198/2004, besides other attributions designated by the Board of Directors. The Committee s activities cover the Banco do Brasil and the following subsidiaries: BB DTVM Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A., BB Banco de Investimento S.A., BB Leasing S.A. Arrendamento Mercantil, BB Administradora de Consórcios S.A., BB Administradora de Cartões de Crédito S.A. and Besc Distribuidora de Títulos e Valores Mobiliários S.A. Officers of Banco do Brasil and its subsidiaries are responsible for preparing and assuring the integrity of the financial statements, managing risks, maintaining effective internal control systems and for ensuring compliance with applicable legal and regulatory requirements. Internal Audit is responsible for periodic works, focusing on the main risks to which the Conglomerate is exposed, evaluating, with independence, the actions of management of these risks and the adequacy of internal controls and governance, through the verification of its quality, sufficiency, compliance and effectiveness. KPMG Auditores Independentes is responsible for auditing the financial statements of the Banco do Brasil and of the subsidiaries covered by the Audit Committee, in addition to other companies that integrate Banco do Brasil Conglomerate. The independent auditors also evaluate, in the context of the audit services on the financial statements, the quality and adequacy of the internal control systems and compliance with the legal and regulatory requirements. Internal regulations of the Audit Committee and a channel of communication for receiving information about violation of internal regulations, codes, legal and regulatory devices applicable to the institution are available at the website Main Activities The Audit Committee realized 105 meetings, in compliance with its work plan, with the Board of Directors, Supervisory Board, Banco Central do Brasil, representatives of the Board of Officers and executives of the main business, besides the internal activities. At these meetings, the attention was focused on subjects related to the internal control systems, accounting issues, loan portfolio, provisions, operational losses, risk and capital management processes, combatting money laundering and terrorist financing, actuarial result, related parties, business ethics ombudsman, branches abroad, related entities, and recommendations issued by the internal audit, independent auditors and by external inspection bodies. Where suggestions for improvement were observed, recommendations were made. The Committee maintained a dialogue with the internal audit and independent audit teams, verifying the accomplishment of their planning, got acquainted about the results of their main works and examined their conclusions and recommendations. The Committee revised the management report, financial statements and notes to the financial statements and discussed with independent auditor his report dated August 09, 2017, with a non-qualified opinion.

251 Consolidated Financial Statements 1 st half 2017 Conclusions Based on the activities developed in the period and considering the duties and limitations inherent to the scope of its activities, the Audit Committee concluded that: a. The internal control system is appropriate to the size and complexity of the Conglomerate s business and it is subject to permanent attention from the management; b. Internal Audit is effective and performs its functions with independence, objectivity and quality; c. Independent audit is effective and there was no occurrences that could compromise its independence; d. The financial statements, ended on June 30, 2017 were prepared in compliance to legal requirements and accounting practices adopted in Brazil, applicable to the institutions authorized to operate by the Brazilian Central Bank, and reflect, in all material aspects, the patrimonial and financial situation in that period.. Brasília-DF, August 09, Egidio Otmar Ames Antônio Carlos Correia Elvio Lima Gaspar Luiz Serafim Spinola Santos

252 Consolidated Financial Statements 1 st half 2017 DECLARATION OF THE EXECUTIVE BOARD MEMBERS ABOUT THE FINANCIAL STATEMENTS According to the article 25, item VI, of CVM Instruction No. 480 of December 07, 2009, we declare that the Financial Statements of the Banco do Brasil S.A. related to the period ended June 30, 2017 were reviewed and, based on subsequent discussions, we agree that such statement fairly reflects, in all material facts, the financial position for the periods presented. Brasília (DF), August 08, Paulo Rogério Caffarelli President Alberto Monteiro de Queiroz Netto Vice-president of Financial Management and Investors Relations Antonio Mauricio Maurano Vice-president of Whosale Carlos Hamilton Vasconcelos Araújo Vice-president of Services, Infrastructure and Operations Antonio Gustavo Matos do Vale Vice-president of Technology José Eduardo Pereira Filho Vice-president of Government Affairs Marcelo Augusto Dutra Labuto Vice-president of Retail Services Márcio Hamilton Ferreira Vice-president of Internal Controls and Risk Tarcísio Hübner Vice-president of Agribusiness Walter Malieni Junior Vice-president of Retail, Distribution and Human Resources

253 Consolidated Financial Statements 1 st half 2017 DECLARATION OF THE EXECUTIVE BOARD MEMBERS ABOUT THE REPORT OF INDEPENDENT AUDITORS According to article 25, item V, of CVM Instruction No. 480 of December 07, 2009, we affirm based on our knowledge, on auditor s plan and on discussions about the audit results, that we agree, with no dissent, to the opinions expressed in the Report of Independent Auditors for Financial Statements of August 09, Brasília (DF), August 09, Paulo Rogério Caffarelli President Alberto Monteiro de Queiroz Netto Vice-president of Financial Management and Investors Relations Antonio Mauricio Maurano Vice-president of Whosale Carlos Hamilton Vasconcelos Araújo Vice-president of Services, Infrastructure and Operations Antonio Gustavo Matos do Vale Vice-president of Technology José Eduardo Pereira Filho Vice-president of Government Affairs Marcelo Augusto Dutra Labuto Vice-president of Retail Services Márcio Hamilton Ferreira Vice-president of Internal Controls and Risk Tarcísio Hübner Vice-president of Agribusiness Walter Malieni Junior Vice-president of Retail, Distribution and Human Resources

254 Consolidated Financial Statements 1 st half 2017 MEMBERS OF MANAGEMENT PRESIDENT Paulo Rogério Caffarelli VICE-PRESIDENTS Alberto Monteiro de Queiroz Netto Antonio Gustavo Matos do Vale Antonio Mauricio Maurano Carlos Hamilton Vasconcelos Araújo José Eduardo Pereira Filho Marcelo Augusto Dutra Labuto Márcio Hamilton Ferreira Tarcísio Hübner Walter Malieni Junior DIRECTORS Adriano Meira Ricci Alexandre Alves de Souza Carlos Alberto Araujo Netto Carlos Renato Bonetti Cícero Przendsiuk Edmar José Casalatina Edson Pascoal Cardozo Edson Rogério da Costa Eduardo Cesar Pasa Fabiano Macanhan Fontes Fernando Florêncio Campos Gustavo de Souza Fosse João Pinto Rabelo Júnior José Caetano de Andrade Minchillo José Eduardo Moreira Bergo Leonardo Silva de Loyola Reis Lucinéia Possar Márcio Luiz Moral Marco Antonio Ascoli Mastroeni Marco Túlio de Oliveira Mendonça Marco Túlio Moraes da Costa Márvio Melo Freitas Nilson Martiniano Moreira Reinaldo Kazufumi Yokoyama Rogério Magno Panca Simão Luiz Kovalski Wilsa Figueiredo BOARD OF DIRECTORS Beny Parnes Fabrício da Soller Daniel Sigelmann Fabiano Felix do Nascimento Júlio César Costa Pinto Luiz Serafim Spinola Santos Paulo Rogério Caffarelli FISCAL COUNCIL Aldo César Martins Braido Christianne Dias Ferreira Felipe Palmeira Bardella Giorgio Bampi Mauricio Graccho de Severiano Cardoso AUDIT COMMITTEE Antonio Carlos Correia Egidio Otmar Ames Elvio Lima Gaspar Luiz Serafim Spinola Santos ACCOUNTING DEPT. Eduardo Cesar Pasa General Accountant Contador CRC-DF /O-5 CPF Daniel André Stieler Accountant CRC-DF /O-2 CPF

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