Consolidated Financial Statements. 3 rd quarter Financial Statements

Transcription

1 Financial Statements 0

2 INDEX Index...1 Financial Statements...3 BALANCE SHEET...3 STATEMENT OF INCOME...7 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY...8 STATEMENT OF CASH FLOWS...9 STATEMENT OF ADDED VALUE 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 DUE FROM BANKS INTERBANK INVESTMENTS SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS INTERBANK ACCOUNTS LOANS FOREIGN EXCHANGE PORTFOLIO OTHER RECEIVABLES OTHER ASSETS INVESTMENTS PROPERTY AND EQUIPMENT INTANGIBLE ASSETS DEPOSITS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS FUNDS FROM ISSUANCE OF SECURITIES BORROWINGS AND ONLENDINGS

3 20 - 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 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

4 BALANCE SHEET ASSETS Note Sep 30, 2017 Dec 31, 2016 Sep 30, 2016 CURRENT ASSETS 812,860, ,240, ,279,533 Cash and due from banks 6 14,267,230 12,805,771 12,928,959 Interbank investments 7.a 409,728, ,769, ,798,907 Securities purchased under resale agreement 384,528, ,537, ,773,794 Interbank deposits 25,200,026 33,232,252 34,025,113 Securities and derivative financial instruments 8 17,431,031 16,959,199 20,497,283 Own portfolio 13,394,070 13,937,394 16,789,817 Subject to repurchase agreements 2,475,932 1,499,048 1,174,435 Pledged in guarantee 285, , ,133 Derivative financial instruments 1,275,572 1,213,218 2,218,898 Interbank accounts 77,454,999 68,026,103 71,796,733 Payments and receipts pending settlement 9.a 3,161,384 3,513 3,759,990 Reserve requirement 9.b 72,209,073 66,063,844 66,355,457 Deposits with Banco Central do Brasil 69,441,849 63,451,094 63,636,925 National Treasury - rural credits resources 52,597 54,959 51,624 National Housing Finance System 2,714,627 2,557,791 2,666,908 Interbank onlendings ,951 Correspondent banks 2,084,542 1,958,746 1,679,335 Interdepartmental accounts 129, , ,944 Internal transfers of funds 129, , ,944 Loans ,806, ,149, ,910,778 Public sector 719, ,803 1,209,068 Private sector 188,233, ,111, ,040,551 Loans sold under assignment (Allowance for loan losses) (14,146,075) (12,612,164) (13,338,889) Leasing transactions , , ,149 Private sector 196, , ,938 (Allowance for leasing transactions losses) (21,292) (31,803) (46,789) Other receivables 118,362, ,462, ,397,357 Receivables from guarantees honored 604, , ,904 Foreign exchange portfolio 11.a 16,567,668 17,188,751 18,683,617 Accrued income 2,890,341 2,644,778 2,822,309 Securities trading 461, , ,238 Specific credits 12.a Sundry 12.b 99,816, ,887, ,777,596 (Allowance for other losses) (1,979,471) (1,973,001) (1,723,307) Other assets , , ,423 Assets not for own use and materials in stock 366, , ,374 (Allowance for impairment) (159,858) (137,564) (127,318) Prepaid expenses 298, , ,367 See the accompanying notes to the financial statements. 3

5 ASSETS Note Sep 30, 2017 Dec 31, 2016 Sep 30, 2016 NON-CURRENT ASSETS 587,030, ,136, ,932,362 LONG-TERM RECEIVABLES 556,136, ,008, ,276,586 Interbank investments 7.a 1,615, ,027 1,004,308 Securities purchased under resale agreement 495, , ,870 Interbank deposits 1,119, , ,438 Securities and derivative financial instruments 8 120,059, ,309, ,173,675 Own portfolio 88,134,141 65,273,440 79,721,478 Subject to repurchase agreements 29,649,699 35,791,728 21,972,564 Pledged in guarantee 2,100,590 2,844,970 2,713,261 Derivative financial instruments 175, , ,372 Interbank accounts 646, , ,808 Reserve requirement 9.b 225 1,909 9 National Treasury - rural credits resources 225 1,909 9 Interbank onlendings 646, , ,799 Correspondent banks Loans ,651, ,774, ,539,479 Public sector 72,105,086 73,401,682 73,482,277 Private sector 316,477, ,986, ,650,089 Loans sold under assignment 521, , ,693 (Allowance for loan losses) (22,452,375) (22,226,287) (23,232,580) Leasing transactions , , ,667 Private sector 253, , ,340 (Allowance for leasing transactions losses) (5,155) (9,570) (25,673) Other receivables 66,897,913 67,143,433 71,744,945 Foreign exchange portfolio 11.a , ,426 Accrued income 47,683 31,350 60,106 Securities trading 483, , ,465 Specific credits 12.a 408, , ,862 Sundry 12.b 66,757,629 66,337,503 71,024,944 (Allowance for other losses) (799,117) (773,780) (616,858) Other assets 13 17,613 16,809 16,704 Prepaid expenses 17,613 16,809 16,704 PERMANENT ASSETS 30,893,426 33,127,744 31,655,776 Investments 16,853,215 16,855,006 16,481,958 Associates and joint ventures 14.a 16,704,248 16,703,729 16,303,620 Domestic 16,651,975 16,631,072 16,189,792 Abroad 52,273 72, ,828 Other investments 14.c 168, , ,591 (Provision for losses) (19,132) (19,121) (54,253) Property and equipment 15 7,213,478 7,557,478 7,198,918 Land and buildings 7,531,520 7,722,456 6,774,064 Other property and equipment 10,076,499 9,953,340 9,402,872 (Accumulated depreciation) (10,394,541) (10,118,318) (8,978,018) Intangible 16 6,826,733 8,715,260 7,963,884 Intangible assets 20,037,113 19,602,197 17,589,115 (Accumulated amortization) (13,210,380) (10,886,937) (9,625,231) Deferred ,016 Organization and expansion costs 2,098 2,098 1,579,972 (Accumulated amortization) (2,098) (2,098) (1,568,956) TOTAL ASSETS 1,399,890,755 1,401,376,974 1,448,211,895 See the accompanying notes to the financial statements. 4

6 LIABILITIES/SHAREHOLDERS EQUITY Note Sep 30, 2017 Dec 31, 2016 Sep 30, 2016 CURRENT LIABILITIES 1,063,390,677 1,004,424,338 1,024,746,296 Deposits 17.a 389,195, ,668, ,117,728 Demand deposits 61,793,371 69,349,186 61,622,917 Savings deposits 154,516, ,763, ,681,412 Interbank deposits 16,774,296 17,827,013 20,184,165 Time deposits 155,987, ,675, ,597,326 Other deposits 123,691 53,111 31,908 Securities sold under repurchase agreements 17.c 404,980, ,409, ,184,277 Own portfolio 28,561,564 42,983,151 22,353,562 Third-party portfolio 376,418, ,426, ,830,715 Funds from issuance of securities 18 87,988,766 68,052,214 71,941,873 Bonds backed by real estate, mortgage and other credits 79,279,585 62,623,394 67,334,503 Foreign securities 8,608,077 5,428,820 4,607,370 Certificates of structured operations 101, Interbank accounts 2,524,476 1,075 3,254,585 Receipts and payments pending settlement 9.a 2,524,476 1,075 3,238,815 Correspondent banks ,770 Interdepartmental accounts 2,388,368 2,450,012 2,468,333 Third-party funds in transit 2,387,169 2,446,807 2,466,197 Internal transfers of funds 1,199 3,205 2,136 Borrowings 19.a 15,752,760 17,997,094 19,641,127 Foreign borrowing 15,752,760 17,997,094 19,641,127 Domestic onlending - official institutions 19.b 44,686,732 39,463,427 39,695,325 National Treasury BNDES 6,911,213 8,227,439 9,128,563 Caixa Econômica Federal 25,858,655 23,758,043 22,917,625 Finame 4,644,776 5,155,259 5,257,193 Other institutions 7,272,088 2,322,686 2,391,812 Foreign onlending 19.b Derivative financial instruments 8.d 1,483,927 1,089,344 1,744,897 Other liabilities 114,389, ,293, ,698,056 Billing and collection of taxes and contributions 4,902, ,463 4,088,460 Foreign exchange portfolio 11.a 7,740,131 17,879,212 17,423,634 Shareholders and statutory distributions 1,079,717 1,125,248 1,281,487 Taxes and social security 20.a 12,214,853 15,293,551 16,797,035 Securities trading 732, , ,297 Financial and development funds 20.b 8,907,025 9,055,620 8,750,670 Subordinated debts 20.c 10,228,204 4,158,742 2,647,425 Equity and debt hybrid securities 20.d 727, , ,367 Other liabilities 20.e 67,857,536 73,694,320 72,847,681 See the accompanying notes to the financial statements. 5

7 LIABILITIES/SHAREHOLDERS EQUITY Note Sep 30, 2017 Dec 31, 2016 Sep 30, 2016 NON-CURRENT LIABILITIES 242,935, ,758, ,741,460 LONG-TERM LIABILITIES 242,520, ,312, ,305,221 Deposits 17.a 47,927,416 51,312,376 55,584,795 Interbank deposits 2,874,617 2,837,788 3,734,439 Time deposits 45,052,799 48,474,588 51,850,356 Securities sold under repurchase agreements 17.c 12,889,830 16,224,713 31,285,762 Own portfolio 12,889,812 16,224,699 31,285,762 Third-party portfolio Funds from issuance of securities 18 49,143,458 97,114, ,624,966 Bonds backed by real estate, mortgage and other credits 37,444,068 82,047,387 85,831,208 Foreign securities 11,671,852 14,964,440 15,666,524 Certificates of structured operations 27, , ,234 Borrowings 19.a 2,615,598 2,412,254 3,170,978 Foreign borrowing 2,615,598 2,412,254 3,170,978 Domestic onlending - official institutions 19.b 37,986,931 43,619,266 45,382,677 National Treasury 158, , ,864 BNDES 21,092,151 23,859,417 24,452,529 Finame 16,486,379 19,610,601 20,762,284 Other institutions 249, Foreign onlending 19.b Derivative financial instruments 8.d 235, , ,098 Other liabilities 91,720,906 97,848,445 99,700,563 Foreign exchange portfolio 11.a 4,363,969 5,322,077 6,026,327 Shareholders and statutory distributions Taxes and social security 20.a 496, , ,295 Securities trading 350,146 24, ,099 Financial and development funds 20.b 5,934,842 5,734,905 5,869,076 Special operations 2,216 2,203 2,192 Subordinated debts 20.c 45,211,963 50,942,804 50,745,908 Equity and debt hybrid securities 20.d 5,080,977 5,246,031 5,762,377 Debt instruments eligible as capital 20.c and 20.d 24,848,035 24,714,492 24,402,877 Other liabilities 20.e 5,431,810 5,127,838 5,984,412 DEFERRED INCOME 415, , ,239 SHAREHOLDERS' EQUITY 23 93,564,197 87,193,752 85,724,139 Capital 67,000,000 67,000,000 67,000,000 Local residents 52,261,049 53,209,529 53,342,172 Domiciled abroad 14,738,951 13,790,471 13,657,828 Instruments qualifying as 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 2,389 2,660 2,678 Profit reserves 31,124,786 27,646,569 25,409,076 Accumulated other comprehensive income (16,481,629) (16,929,205) (17,873,976) Retained earnings/accumulated losses 1,977, ,566,220 (Treasury shares) (1,850,043) (1,854,749) (1,854,749) Non-controlling interests 3,679,249 3,212,968 3,359,381 TOTAL LIABILITIES 1,399,890,755 1,401,376,974 1,448,211,895 See the accompanying notes to the financial statements. 6

8 STATEMENT OF INCOME Note 3rd quarter/2017 3rd quarter/2016 Jan 1 to Sep 30, 2017 Jan 1 to Sep 30, 2016 INCOME FROM FINANCIAL INTERMEDIATION 32,145,400 46,705, ,965, ,092,842 Loans 10.b 18,953,291 26,989,034 61,624,738 71,435,453 Leasing transactions 10.i 61,990 83, , ,526 Securities 8.b 12,312,201 17,245,102 41,851,581 41,063,317 Derivative financial instruments 8.e (659,509) (134,397) (854,783) (1,747,644) Foreign exchange results 11.b 138, , ,569 1,963,034 Reserve requirement 9.c 958,804 1,534,718 3,283,310 4,372,367 Operations of sale and transfer of financial assets 380, ,830 1,272,265 1,744,789 EXPENSES FROM FINANCIAL INTERMEDIATION (24,043,745) (38,375,052) (84,705,294) (94,514,482) Deposits and securities sold under repurchase agreements 17.d (18,604,042) (29,386,182) (61,516,862) (82,541,397) Borrowings and onlendings 19.c 955,921 (2,371,314) (3,303,689) 8,962,907 Leasing transactions 10.i (36,698) (46,681) (114,703) (149,636) Operations of sale and transfer of financial assets (44,706) (30,419) (74,257) (58,463) Allowance for loan losses 10.f and 10.g (6,314,220) (6,540,456) (19,695,783) (20,727,893) INCOME FROM FINANCIAL INTERMEDIATION 8,101,655 8,329,968 23,260,087 24,578,360 OTHER OPERATING INCOME/EXPENSES (3,784,440) (4,526,871) (10,570,593) (12,101,083) Service fee income and bank fee income 21.a 6,562,093 5,972,149 19,206,871 17,475,885 Service fee income 4,116,058 3,808,780 12,187,042 11,297,732 Bank fee income 2,446,035 2,163,369 7,019,829 6,178,153 Personnel expenses 21.b (5,137,760) (5,560,152) (15,422,344) (16,072,382) Other administrative expenses 21.c (4,002,427) (3,898,886) (11,695,050) (11,499,670) Tax expenses 24.c (1,402,514) (1,390,036) (4,125,561) (4,212,559) Equity in earnings (losses) in associates and joint ventures 14 1,004,652 1,064,456 3,019,446 3,179,664 Other operating income 21.d 1,884,534 2,375,941 6,004,435 7,043,546 Other operating expenses 21.e (2,693,018) (3,090,343) (7,558,390) (8,015,567) OPERATING INCOME 4,317,215 3,803,097 12,689,494 12,477,277 NON-OPERATING INCOME ,876 55, , ,350 Incomes 527,808 70, , ,622 Expenses (137,932) (15,742) (184,225) (60,272) PROFIT BEFORE TAXATION AND PROFIT SHARING 4,707,091 3,858,167 13,183,960 12,640,627 INCOME TAX AND SOCIAL CONTRIBUTION 24.a (1,036,591) (912,022) (3,011,775) (3,416,528) Income tax and social contribution current (838,035) (1,950,831) (2,829,487) (7,269,290) Income tax and social contribution deferred (198,556) 1,038,809 (182,288) 3,852,762 EMPLOYEE AND DIRECTORS PROFIT SHARING (368,108) (292,716) (1,018,469) (919,485) NON-CONTROLLING INTERESTS (461,508) (407,252) (1,251,129) (1,234,338) NET INCOME 2,840,884 2,246,177 7,902,587 7,070,276 EARNINGS PER SHARE 23.f Weighted average number of shares - basic and diluted 2,784,953,544 2,784,757,945 2,784,888,989 2,788,498,467 Basic and diluted earnings per share (R$) See the accompanying notes to the financial statements. 7

9 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Note Capital Instruments qualifying as common equity tier 1 Capital Capital reserves Revaluation reserves Legal reserve Profit reserves Statutory reserves Accumulated other comprehensive income Banco do Brasil Associates and subsidiaries Treasury shares Retained earnings/ accumulated 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 Capital increase - capitalization of reserves 7,000, (7,000,000) Accumulated other comprehensive income of securities and derivative financial instruments, net of taxes ,723, , ,082,690 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 , ,173 Realization of revaluation reserve in associates and subsidiaries 23.d (52) Change in noncontrolling interest , ,303 Net income 23.h ,070, ,070,276 Interest on instruments elegible to common equity (66,420) -- (66,420) Unrealized gains , (32,700) Allocation - Reserves 23.g ,595 3,107, (3,345,286) Interest on own capital 23.g (2,069,875) -- (2,069,875) Balances at Sep 30, ,000,000 8,100,000 15,509 2,678 6,411,237 18,997,839 (17,869,528) (4,448) (1,854,749) 1,566,220 3,359,381 85,724,139 Changes in the period 7,000, ,183 (52) 237,595 (3,859,609) (1,190,959) 359,654 (157,369) 1,566, ,303 4,187,966 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 ,035,864 43, ,079,806 Accumulated other comprehensive income - benefit plans, net of taxes (487,658) (487,658) Foreign exchange variation and hedge of investments abroad 23.i (144,572) (144,572) Share-based payment transactions (3,073) , ,633 Expired dividend/interest on own capital , ,100 Realization of revaluation reserve in associates and subsidiaries 23.d (271) Change in noncontrolling interest , ,281 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 ,902, ,902,587 Interest on instruments elegible to common equity (70,200) -- (70,200) Unrealized gains , (3,514) Allocation - Reserves 23.g ,190 3,226, (3,474,703) Interest on own capital 23.g (2,323,257) -- (2,323,257) Balances at Sep 30, ,000,000 8,100,000 12,436 2,389 6,818,337 24,306,449 (16,396,624) (85,005) (1,850,043) 1,977,009 3,679,249 93,564,197 Changes in the period (3,073) (271) 248,190 3,230, ,206 (100,630) 4,706 1,977, ,281 6,370,445 See the accompanying notes to the financial statements. Noncontrolling interest Total 8

10 STATEMENT OF CASH FLOWS Note Jan 1 to Sep 30, 2017 Jan 1 to Sep 30, 2016 Cash flows from operating activities Income before taxation and profit sharing 13,183,960 12,640,627 Adjustments to income before taxation and profit sharing 20,774,512 32,889,314 Provision for credits, leasing and other credits 10.f and 10.g 19,695,783 20,727,893 Depreciation and amortization 21.c 3,224,856 3,191,771 Exchange fluctuation in changes of intangible assets 16 4,230 34,551 Equity in earning in associates and joint ventures 14.a (3,019,446) (3,179,664) Gain on the disposal of assets 22 (6,771) (15,958) Gain on the disposal of investments 22 (311) -- Capital gain 22 (485,076) (113,982) Impairment of other assets 22 23,129 8,367 Amortization of goodwill 14.d 158, ,603 Expenses with civil, labor and tax provisions 27 1,993,764 2,162,047 Adjustment of actuarial assets/liabilities and surplus allocation funds 26 76,034 (177,174) Commissions income deferred (518,655) (523,980) Effect of changes in foreign exchange rates in cash and cash equivalents 1,161,198 9,023,303 Non-controlling interests (1,251,129) (1,234,338) Other adjustments (281,127) 2,831,875 Income adjusted before taxation and profit sharing 33,958,472 45,529,941 Changes in assets and liabilities (77,007,232) (42,161,369) Increase in short-term interbank investments (63,504,384) (90,312,238) (Increase) decrease in trading securities and derivative financial instruments (750,630) 527,015 Increase in interbank and interdepartmental accounts (878,333) (3,384,876) Increase in compulsory deposits with Banco Central do Brasil (5,990,755) (2,826,007) Decrease in loan operations 4,039,500 25,075,674 Decrease in leasing transactions 126, ,466 (Increase) decrease in other receivables net of deferred taxes 7,435,491 (4,351,084) (Increase) decrease in other assets (67,571) 12,091 Income tax and social contribution paid (2,776,094) (5,694,157) Decrease in deposits (8,857,699) (26,717,195) Increase in securities sold under repurchase agreements 43,236,252 76,948,391 Decrease in funds from issuance of securities (28,034,129) (14,994,653) Decrease in borrowings and onlendings (2,450,020) (11,840,482) (Decrease) increase in other liabilities (18,504,766) 15,246,655 Decrease in deferred income (30,601) (22,969) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (43,048,760) 3,368,572 Cash flows from investing activities Acquisition of securities available for sale (58,177,357) (25,059,570) Proceeds from sale of securities available for sale 43,349,363 16,353,510 Acquisition of securities held to maturity (958,496) -- Proceeds from sale of securities held to maturity 1,249, ,980 Dividends received from associates and joint ventures 2,810,777 2,141,929 Acquisition of property, plant and equipment in use ( ) (759,235) Disposal of property, plant and equipment in use ,182 Disposal of investments 1,068,961 55,480 Acquisition of intangible assets (478,675) (1,512,690) Disposal of intangible assets/deferred assets 1, ,082 CASH USED IN INVESTING ACTIVITIES (11,654,230) (7,359,332) Cash flows from financing activities Change in non-controlling interests 466, ,303 Increase in subordinated debts 967,651 90,986 Decrease in equity and debt hybrid securities (212,741) (5,516,598) (Acquisition) disposal of treasury shares 4,706 (157,369) Interest on own capital paid (1,772,050) (2,010,532) CASH USED IN FINANCING ACTIVITIES (546,153) (7,362,210) Net variation of cash and cash equivalents (55,249,143) (11,352,970) At the beginning of the period 103,123, ,707,171 Effect of changes in foreign exchange rates in cash and cash equivalents (1,161,198) (9,023,303) At the end of the period 46,713,329 82,330,898 Decrease in cash and cash equivalents (55,249,143) (11,352,970) See the accompanying notes to the financial statements. 9

11 STATEMENT OF ADDED VALUE Note Jan 1 to Sep 30, 2017 Jan 1 to Sep 30, 2016 Income 105,903, ,570,946 Income from financial intermediation 107,965, ,092,842 Income from service and bank fees 19,206,871 17,142,925 Allowance for loan losses (19,695,783) (20,727,893) Capital gains , ,398 Other income/(expenses) (2,190,758) (1,094,326) Expenses from financial intermediation (65,009,511) (73,786,589) Inputs purchased from third parties (6,605,080) (6,635,856) Materials, water, electric power and gas 21.c (451,425) (501,983) Expenses with outsourced services 21.c (1,100,812) (1,101,213) Communications 21.c (839,178) (847,011) Data processing 21.c (608,857) (507,791) Transportation 21.c (806,814) (856,467) Security services 21.c (913,051) (879,994) Financial system services 21.c (551,804) (591,768) Advertising and marketing 21.c (232,186) (207,896) Other (1,100,953) (1,141,733) Gross added value 34,289,126 34,148,501 Depreciation and amortization 21.c (3,382,889) (3,346,374) Value added produced by entity 30,906,237 30,802,127 Value added received through transfer 3,019,446 3,179,664 Equity in associates and joint ventures 3,019,446 3,179,664 Added value to distribute 33,925, % 33,981, % Value added distributed 33,925, % 33,981, % Personnel 14,603, % 15,165, % Salaries and fees 9,485,786 10,132,729 Employee and directors profit sharing 1,018, ,485 Benefits and staff training 2,356,888 2,121,466 FGTS (Government severance indemnity fund for employees) 555, ,217 Other charges 1,186,780 1,435,340 Taxes, rates and contributions 8,974, % 9,455, % Federal 7,815,842 8,408,913 State 1, Municipal 1,157,169 1,046,025 Interest on third parties' capital 1,193, % 1,056, % Rent 21.c 1,193,817 1,056,222 Interest on own capital 23.g 9,153, % 8,304, % Federal government's interest on own capital 1,253,331 1,125,813 Other shareholders interest on own capital 1,069, ,063 Interest on the instrument eligible to the federal government's common equity tier 1 capital 70,200 66,420 Retained earnings 5,509,130 4,933,980 Non-controlling interest in retained earnings 1,251,129 1,234,338 See the accompanying notes to the financial statements. 10

12 1 - 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 active, passive and ancillary banking operations; 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, subsidiary of the Bank, 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. 11

13 3 - 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. 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: 12

14 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. 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 November 07, a) Equity interest included in the consolidated financial statements, segregated by business segments: Activity Functional currency Sep 30, 2017 Dec 31, 2016 % of Total Share Banking segment 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. Banking Argentinian Peso 58.97% 58.97% 58.97% Investment segment 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% 99.99% Sep 30, 2016 (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 August/

15 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. Income from services payments from the grouping Other Operating Income to Service fee income. 3rd quarter/2016 Original report Adjustments Restated balances EXPENSES FROM FINANCIAL INTERMEDIATION (38,688,920) 313,868 (38,375,052) Borrowings and onlendings (2,685,182) 313,868 (2,371,314) INCOME FROM FINANCIAL INTERMEDIATION 8,016, ,868 8,329,968 OTHER OPERATING INCOME/EXPENSES (4,213,003) (313,868) (4,526,871) Service fee income 3,858,813 (50,033 3,808,780 Other operating income 2,639,776 (263,835) 2,375,941 Jan 1 to Sep 30, 2016 Original report Adjustments Restated balances EXPENSES FROM FINANCIAL INTERMEDIATION (95,564,880) 1,050,398 (94,514,482) Borrowings and onlendings 7,912,509 1,050,398 8,962,907 INCOME FROM FINANCIAL INTERMEDIATION 23,527,962 1,050,398 24,578,360 OTHER OPERATING INCOME/EXPENSES (11,050,685) (1,050,398) (12,101,083) Service fee income 11,464,790 (167,058) 11,297,732 Other operating income 7,926,886 (883,340) 7,043,546 14

16 4 - 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 mark-to-market methodology used for securities was established following consistent, verifiable criteria, which consider the average price of trading on the day of calculation or, if not available, the indicative price reported by Anbima, or relationship between the unit price and the latest business value in the last 30 day, or the net expected realizable value obtained through pricing models, using credit risk curves, future values of interest rates, foreign exchange rates, price and currency indices, and similar financial instruments. 15

17 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 transactions, 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 transaction, 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 transactions 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 transactions 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 transaction or when new material facts justify a change in risk level, according to CMN Resolution 2,682/

18 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: Tributos Alíquota Income tax (15.00% + 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%. Deferred tax assets (DTA) 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. DTA 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 associates and joint ventures 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 associates and joint ventures. 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. 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). 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/

19 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 at a rate of 10% per year 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. 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. 18