Performance Analysis. 1 st Quarter of Investor Relations Division

Transcription

1 1 Performance Analysis 1 st Quarter of 2001 Investor Relations Division

2 2 ECONOMIC ENVIRONMENT In the first quarter of 2001, the Brazilian economic scene was influenced by an unstable external conjuncture. Uncertainties as regards slow-down trends in the U.S. economy and a solution for the political and economic crisis in Argentina were the core of the disturbance that came from abroad. The poor performance of the Euro against the Dollar, the stagnation of the Japanese economy and the continued high and volatile levels of international oil prices also had repercussions in the internal environment. The behavioral pattern of the exchange rate from January to March reflected this instability in the foreign scenario. The U.S. currency appreciated by 10.5%, closing the period at R$2.16. The accumulated variance of the IPCA (Broad Consumer Price Index) was 1.42%, the equivalent of 35% of the total focal target of 4%. The IGP-DI (General Price Index Domestic Supply), on its side, showed a variance of 1.64% in the same period. In view of this environment and despite the 1.5% drop in the U.S. basic interest rate in the 1 st quarter of 2001, the Copom (Monetary Policy Committee) raised the SELIC (Securities Settlement and Custody Service) interest rate by 0.5% in March. At the end of the quarter the target was 15.75% p.a.. In short, although the Brazilian economy is showing more consistent bases than those that were evident during the Mexican, Asian and Russian crises, Brazil is feeling the effects of an unfavorable foreign environment, in a context of a significant need to absorb internal savings.

3 3 Financial Statements Balance Sheet (In Accordance with Brazilian Corporation Law in ) Assets Totals Variations Mar./00 Dec./00 Mar./01 Mar./00 Dec./00 Current and Long-Term Assets 122, , , Cash and Banks 1,692 2,906 2, (8.3) Interbank Investments 11,124 5,064 7,086 (36.3) 39.9 Securities 37,188 51,116 46, (9.5) Interbank Accounts 10,292 6,628 9,045 (12.1) 36.5 Interbranch Accounts , Credit Operations 29,649 35,917 38, Public sector 3,704 3,949 4, Private sector 26,959 34,645 37, Doubtful Credit Operations 9, (100.0) (Provision for doubtful credits) -10,055-2,677-2,831 (71.8) 5.8 Leasing Transactions (2.0) 2.1 Leasing and subleasing transactions (7.2) Doubtful leasing transactions (100.0) Unearned leasing income (4.2) 6.8 (Allowance for leasing transactions) (59.0) (5.9) Other Receivables 31,478 31,931 36, Guarantees honored Foreign exchange portfolio 8,556 7,299 11, Income receivable (1.7) Trading and Brokerage Agreements Specific Credits 3,630 4,093 4, Special Operations Sundry 18,710 20,245 20, (0.0) Doubtful receivables 1, (100.0) (Provision for doubtful credits) -1, (68.7) 3.0 Other Assets (28.5) (0.7) (Provisions for devaluations) (7.7) Prepaid expenses Permanent Assets 3,894 4,263 4, Investments 1,007 1,145 1, Premise in Use 1,838 2,186 2, Leased Property Deferred Assets (18.0) - Total 126, , ,

4 4 Financial Statements Balance Sheet (In Accordance with Brazilian Corporation Law in ) Liabilities Totals Variations Mar./00 Dec./00 Mar./01 Mar./00 Dec./00 Current and Long Term Liabilities 118, , , Deposits 66,998 65,688 69, Demand Deposits 11,526 16,110 14, (9.3) Savings Deposits 20,142 19,958 20, Interbank Deposits 2,982 3,296 3, Term Deposits 32,348 26,323 31,129 (3.8) 18.3 Open Market Funds 13,904 28,068 26, (6.0) Funds from Acceptances and Issuances , Acceptances outstanding Issuance of securities abroad , Debentures Interbank Accounts 2, , ,182.1 Interbranch Accounts (19.3) Borrowings 4,322 5,210 5, (2.4) Borrowings in Brazil Other Institutions Foreign borrowings 4,322 5,210 5, (2.4) Purchase of government securities On-lending Borrowings from Domestic Official Institutions 8,783 9,331 6,262 (28.7) (32.9) National Treasury BNDES (Federal Bank for Economic and Social Development) 1,170 1,525 1, CEF (Federal Savings Bank) Finame (Government Agency for Machinery and Equipment Financing) 2,278 2,268 2, Other Institutions 4,663 4,656 1,277 (72.6) (72.6) Foreign Currency On-Lendings (66.7) - Foreign on-lendings (66.7) - Other Liabilities 20,777 20,430 25, Tax and Similar Collections 1, (35.9) Foreign Exchange Portfolio 5,525 4,075 8, Social and Statutory (96.1) (97.9) Tax and Social Security Trading and Brokerage Agreements Financial and Development Funds 3,743 4,329 4, Special Operations (95.3) - Sundry 9,391 10,933 9, (11.0) Deferred Income Shareholders Equity 7,244 7,965 7, First Quarter Results Total 126, , ,

5 5 Income Statement Income Statement for the first quarter 2000 Consolidated 1 st qr./00 1 st qr./01 Var.% Income from Financial Brokerage 4,153 3, Credit Operations 1,849 2, Leasing transactions Securities income 1, Foreign Exchange Portfolio Compulsory Investments Expenses with Financial Brokerage -2,666-3, Open Market Funds -1,948-2, Borrowings, Transfers and On-Lending Provision for NPL Gross Result from Financial Brokerage 1, Other Operating Income/Expenses -1, Service Fees Personnel Expenses -1,299-1, Other administrative expenses Tax expenses Equity Income from associated and subsidiary companies Other operating income Other operating expenses Operating Income Non-Operating Income Income before Tax and Participation Income Tax and Social Contribution Net Income Banco do Brasil recorded Net Income of R$137 million in the 1 st quarter of 2001, which was 90.3% higher than the same period of last year. The results in the quarter reflect continued expansion of the Bank s business, stressing the increment of credit operations, earnings from which increased by 32.2% as compared to the same period of last year. Another important fact was the 19.6% growth in revenues from service fees, driven by expansion of the client base and by growth of business related to asset management. Operating Income showed a decrease of 23.8%, affected by the need to reinforce credit risk provisions. An analysis of reallocations is shown below, providing more details on the composition of the Bank s results.

6 6 Income Statement With Reallocations (*) 1 st qr./00 1 st qr./01 Var.% A) Income from Financial Brokerage 4,399 4, Credit Operations (1) 1,679 2, Leasing transactions Securities Portfolio 1, Foreign Exchange Portfolio Compulsory Investments Other operating income (2) B) Expenses with Financial Brokerage -2,593-2, Open Market Funds -1,948-2, Borrowings, Transfers and On-Lending Hedging Effects on foreign exposure (7) C) Gross Financial Margin 1,806 1, Provision for NPL (3) e (4) ,040.7 D) Net Financial Margin 1,747 1, Service Fees Turnover Tax Expenses (5) E) Contribution Margin 2,363 2, F) Administrative Expenses -1,993-2, Personnel Expenses -1,299-1, Other Administrative Expenses Other Tax Expenses (5) G) Commercial Result H) Others Result Items Other Operating Income (2) e (6) Other Operating Expenses Equity Income from Associated and Subsidiary Companies Hedging expenses against foreign exchange exposure (7) I) Operating Income Non-Operating Income Statutory Profit Sharing 0 0 Income Tax and Social Contribution J) Net Income ,3

7 7 Analysis of Reallocated Results The reallocations applied in the Corporate Law Income Statement so as to arrive at the reallocated Income Statement are specified below. We clarify that these adjustments do not change the final results, as they have the sole purpose of arranging expense and revenue items in a more coherent manner, following the dynamics of the performance of a financial institution. Basically the adjustments have the aim of: Including in Income from Financial Brokerage the revenues booked under Other Operating Income which have brokerage characteristics; excluding from Credit Operations Income, from Other Operating Income and from Provision for NPL, the amounts deriving from the accruals for NPL before legal proceedings, which recording took place until August 2000; identifying in a specific item the hedging transactions carried out to offset the effect of foreign exchange variance on exposure that exceeds the limit established for assets and liabilities management. Income from Financial Brokerage (1) exclusion of accruals for NPL before legal proceedings in the amount of R$170 million, in the 1 st quarter of 2000 (the amounts were also excluded from the Provision for NPL); (2) reallocation of Other Operating Income with financial brokerage characteristics (1 st quarter of R$416 million; 1 st quarter of R$393 million) to the Other Operating Income item in the assessment of gross financial margin; Provision for NPL (3) R$170 million were excluded in the 1 st quarter of 2000 relative to Provision for NPL expenses booked so as to eliminate the effect on the results of accruals for NPL before legal proceedings;

8 8 (4) R$55 million were added, in the 1 st quarter of 2000, relative to the reversal of Provision for NPL expenses on other accruals for NPL before legal proceedings. The amount was also added into Other Operating Income; Tax Expenses (5) R$118 million were reallocated to make up the contribution margin in the 1 st quarter of 2000, and R$113 million in the 1 st quarter of 2001, relative to taxes ( Pasep [Civil Servants Savings Program], Cofins [Contribution Tax for Social Security Financing], ISSQN [Service Tax]) levied directly upon the Bank s turnover; Other Operating Income (6) offset of the reversal of accruals for other NPL before legal proceedings in Other Operating Income item, in the amount of R$55 million, in the 1 st quarter of 2000 (the amount was also added into the Provision for NPL); Expenses with hedging against foreign exchange exposure (7) identification and segregation of amounts relative to the hedging transactions necessary to protect the Bank s results from the fluctuation of foreign currencies, as from the maximum limits established for assets and liabilities management for exchange exposure. These amounts are offset in the gross financial margin to protect the margin from the fluctuations caused by the hedging transactions. R$ million 1 st qr./00 1 st qr./01 Exchange gain/loss on investments abroad Hedging transactions Admitted foreign exchange effect

9 9 I. GROSS FINANCIAL MARGIN Gross Financial Margin showed an evolution of 10.2% over the 1 st quarter/2000, reaching 45.4% of Income from Financial Brokerage, compared to 41.1% in the same period last year. 1,806 1,990 1 st qr./00 1 st qr.//01 % 1 st QR./00 1 st QR./01 % Var. Average TR* TMS IGP-DI IGP-M** US$ * TR Referential Rate **IGP-M General Market Price Index In the quarter, the indexes related to the Bank s assets and liabilities from financial brokerage, except for the dollar and the IGP-DI, showed a reduction compared to the figures presented in the 1 st quarter of Despite this, there was no significant compression of the gross spread, which recorded 7.8% in the quarter, against 8.0% in the same period of last year. This performance is explained by BB s assets and liabilities management, which seeks to: a) manage the impacts deriving from market risks, enhancing earnings and minimizing losses resulting from mismatch of assets and liabilities rates; b) take advantage of the growth in cost-free funds, particularly demand deposits, with the aim of reducing funding costs;

10 10 c) increase the profitability of credit assets, by intensifying commercial and retail portfolio transactions. Composition of the Gross Spread 1 st qr./00 1 st qr./01 Abs. Var. % Var. A)Average Profitable Investments 92, ,888 11, B)Income from Financial Brokerage 4,399 4, C)Investment Rate % (C=B:A) D)Source of Funds (D=E+F) 92, ,888 11, E)Interest-bearing Average Sources 87,222 96,886 9, F) Non-interest Average Sources 5,677 8,002 2, G) Expenses with Financial Brokerage -2,593-2, H)Funding Rate % (H=G:D) I)Gross Financial Margin (I=B+G) 1,806 1, J)Annualized Gross Spread % (J=C-H) Credit growth In the light of these figures and with the refueling of the economy, BB prioritized funds for credit operations. The strategy proved to be correct, because even in a scenario of falling interest rates, the volume of revenue in the period was 45.6% higher than that shown in the 1 st quarter of 2000: 1 st qr./00 1 st qr./01 % Var. Credit Operations* 29,749 38, Credit Operations Income 1,679 2, *Net of provisions

11 11 The good performance for this item was not only due to unilateral 29.5% expansion of the credit portfolio but also resulted from an improved mix. The Bank sought to allocate funds to segments that could provide better earnings at lower operating costs, stressing mass automated and receivables-based credit transactions. The effects of this strategy can be noticed in the performance of products like Crédito Direto ao Consumidor - CDC (Direct Consumer Credit), BB Giro Rápido (a working capital providing program for small businesses), Receivables, the portfolios of which almost doubled in volume. Month-end Balance R$ billions Receivable CDC BB-Giro Rápido Mar./00 Mar./01 The sum of credit operations with individuals and with corporate increased from 32% to 44% of the total portfolio. This performance ratifies BB s position as the largest retail bank in Latin America. March/2000 March/2001 Others Retail 11% International 4% Retail 14% 13% Others 22% International 14% Commercial 18% Rural 43% Rural 39% Commercial 22%

12 12 Liquidity Preserved Liquidity Assets (*) /Total Assets 33.9% 35.3% Mar./00 Mar./01 (*)Liquidity Assets = Cash and Banks + Interbank Investments + Securities Securities deposited with the Central Bank - Privatization Currencies The Bank aimed at maintaining a balance between the expansion of the credit portfolio and an adequate level of liquidity. BB s assets and liabilities management policy allowed for this expansion while maintaining liquid assets at 35.3% of total assets. Liquidity Assets Liquidity Liabilities (*) 25,806 21,401 Mar./00 Mar./01 (*) Liquidity Liabilities = Interbank Accounts + Open Market Funds The difference between Liquid Assets and Liabilities ended the quarter at R$21.4 billion. There was a reduction of R$4.4 billion in this position from the 1 st quarter of 2000 to the 1 st quarter of This fact is explained by the expansion of funding through the open market, due to major clients preference for this type of investment. Despite this, liquid assets have maintained their share of the Bank s total assets, as mentioned previously, without hindering the expansion of the credit portfolio to 26.6%, against 23.6% of total assets in the 1 st quarter of R$ billions Mar./00 Mar./01 Balance % Share Balance % Share Liquidity Assets 42, , Credit Operations 29, , Other Assets 53, , Total Assets 126, ,

13 13 Earnings from Securities accumulated R$926 million in the quarter, 47.3% less than the same period of last year. Two factors contributed to the decrease in these revenues in the 1 st quarter of Security earnings in the previous period included revenue deriving from the restatement of privatization currencies, which up until June 2000 were recorded in this item. As from the 2 nd half of 2000, they started to be booked in Other Operating income, as required by Bacen. As a result, the 1 st quarter of 2000 is higher than the quarter under examination by R$384 million, in respect of such revenues. Another factor that caused the reduction in Earnings from Securities was the increase in expenses with derivatives allocated to make up annulment of the impact of exchange exposure on the Bank s equity. Thus, the adjustments deriving from hedging carried out in the period amounted to expenses of R$209 million, recorded under Earnings from Securities, against R$60 million in revenues booked in the 1 st quarter of st qr./00 1 st qr./01 % Var. Earnings from Securities 1, Revenues from Restatement of Privatization Currencies Effect of Hedging on Earnings from Securities Adjusted Earnings from Securities 1,313 1, Excluding the events shown in the table above, Security earnings fell 13.6% in relation to the 1 st quarter of 2000, due to a lower variance of the economic indexes applicable to the securities portfolio. Retail funding In the 1 st quarter of 2001, the Bank continued to direct its network towards an increment in total funding, with the purpose of backing the growth of short-term investments and maintaining an adequate level of liquidity. Demand deposits ended the quarter at R$14.6 billion, an increase of 26.7% in relation to the same period of last year. Total funding, including investment open market funds, amounted to R$145.5 billion, a growth of 24.5%.

14 14 Total Funding R$ Billions Mar./00 Mar./ Totals Savings Term Deposits Demand Depisits Interfinancial Open Market Investment Funds The reduction in term deposits and the substantial increase in Open market Funds are partly explained by BB s initiative of offering committed transactions as an investment alternative for major clients, as commented previously. Expenses with Funding in the Market amounted to R$2,050 million in the 1 st quarter of 2001, compared to R$1,948 million in the same period of last year, a slight increase of 5.2%, even taking into account the 17.1% growth in the volume of burdened funds (savings, term deposits, interbank and open market funding).

15 15 II NET FINANCIAL MARGIN Net Financial Margin showed a reduction of 24.6% in the 1 st quarter of 2001, compared to the same period of last year. Provisions for market risks are deducted from the Gross Financial Margin, which was R$673 million in the period, well above the R$59 million recorded in the 1 st 1,747 1,317 Mar./00 Mar./01 quarter of The process of adjustment of the credit portfolio to the requirements of CMN (National Monetary Council) Resolution 2682/99 was commenced in this quarter. The Bank had already accrued an additional provision in 1999, in anticipation of the need to adjust the level of provisions to the new requirements. This procedure mitigated the initial impact in that quarter, as to the requirement of more substantial provisions. On the other hand, in the 1 st quarter of 2000, changes were implemented in the system for monitoring and appropriating charges for transactions deriving from Securitization and the Special Program of Enhancement of Assets (Law 9138/95), which required additional reinforcement of credit risk provisions.

16 16 Credit risk The credit portfolio in the quarter totaled R$50 billion, following the criterion established by CMN Resolution 2682/99 (credit operations, leasing and other credits subject to risk assessment). Credits deemed as being of good quality, classified under AA, A and B, represented 83% of the volume at the end of the quarter. The volume of credit with H risk remained at 4.1% of the portfolio, as shown at the end of FY The balance of Provision for NPL amounted to R$3.2 billion in March This amount covers 99.5% of the credit operations in risk levels E, F, G and H. Banco do Brasil SFN* Risk Credit Volume Required % % Provision AA 17, A 17, B 6, C 2, D 2, E F G H 2,067 2, Total 50,395 3, Source: Bacen Note to press 4/23/2001 on the Credit Portfolio of the National Financial System.

17 17 III CONTRIBUTION MARGIN 2,363 2,082 1 st qr./00 1 st qr./01 1,040.7% higher in March/2001. The Contribution Margin is assessed by adding to the Financial Margin Service fees and Tax Expenses (Pasep, Cofins and ISSQN) that are levied directly on the Bank s turnover. In the 1 st quarter of 2001, the Margin was 11.9% lower than in the same period of last year. This drop is a result of the decrease in Net Financial Margin, which was affected by the reinforcement of Provision for NPL, which were Segregating the effect of the Provision, one arrives at the Gross Contribution Margin, which increased by 13.7% in the quarter, a reflection of the higher gains from financial brokerage and of the pattern of Service fees, which showed an increase of 19.5%. 1 st qr./00 1 st qr./01 % Var. Net Contribution Margin from Provision for NPL 2,363 2, Provision for NPL ,040.7 Gross Contribution Margin 2,422 2, Diversifying sources of income The 19.6% expansion in the volume Service fees RPS illustrates well the Bank s efforts to diversify its business and take advantage of opportunities obtained from the consistent growth of its individual and corporate clients base.

18 18 1 st qr./00 1 st qr./01 Abs. Var. % Var. Service fees Fees from Client Relationship Credit operations Fees Investment Fund Management Collections Other income Expansion of client base Fees charged on current accounts, recorded under Fees from Client relationship, reached a volume of R$238 million, an increase of 11.2% over the 1 st quarter of This growth is related to the expansion of the client base in both the individual and company segments. The Bank closed the quarter with 13.0 million clients, which Individual Clients millions represented an increase of 16.3% compared to the client base in March Mar./00 Mar./01 Of the total of 12.1 million Individual clients, 6.4 million are special overdraft accounts, a figure that is 15.3% higher than in March This growth derives from the Company s commitment with modernization of its services and the launch of new products with the differential of the Banco do Brasil trademark. The highlight in the period was the launch of Conta Especial Eletrônica (Electronic Overdraft Account). Corporate Clients thousands Mar./00 Mar./01 The company client base closed the quarter with 893 thousand accountholders, an increase of 16.4% over the same period of last year. In the company segment, Banco do Brasil has an aggressive approach and operates in a range that goes from microcompanies (equivalent to Sub-Chapter 5) to large business conglomerates.

19 19 BB s Corporate portfolio is made up of 580 business groups, which together represent 1,412 companies. There was an increase of 23% in the number of clients. Leadership in Asset Management Earnings from Asset Management accounted for 18.1% of total Service fees in the 1 st quarter of 2001, against 16.5% in the same period last year. The figures for the month of March 2001 confirm the leadership of BB DTVM (BB Asset Management) in the investment funds market. BBDTVM ended the period with R$54.6 billion in managed funds, a growth of 32.5% compared to the 1 st quarter of 2001, with a 15.6% market share in the sector, as reported by the National Association of Investment Banks ANBID. Asset Management R$ billions 41.2 Mar./ Mar./01 Service Fees / Personnel Expenses 56.5% 67.8% mar/00 mar/01 Another feature is the improvement of the Coverage Index of Service fees on Personnel Expenses, which totaled 67.8% in the 1 st quarter of 2001, against 56.5% in March 2000, a growth of 19.9%. This indicator mainly reflects the 19.6% increase in Service fees. On the other side, Personnel Expenses showed a decrease of 0.4% in the quarter.

20 20 IV - COMMERCIAL RESULTS Commercial results, calculated by taking Contribution Margin, less Administrative Expenses, was a negative R$156 million in the first quarter of 2001, still reflecting the increase in credit risk provisions. Taking Gross Contribution Margin, excluding the effect of the provisions, one observes a growth of 20.5% in Commercial results for the 1 st quarter of 2001, which would enable comfortable absorption of the 12.3% increase in administrative costs st qr./00 1 st qr./ st qr./00 1 st qr./01 % Var. Gross Contribution Margin 2,422 2, Administrative Expenses -1,993-2, Adjusted Commercial results Administrative Expenses reflect a more substantial increase in Advertising and Publicity Expenses, as a result of advertising campaigns conducted, which have contributed to increased and improved profitability of the client base. 1 st qr./00 1 st qr./01 % Var. Administrative Expenses 1,993 2, Personnel Expenses 1,299 1, Other Administrative Expenses Communications Data Processing Advertising & Publicity Other Administrative Expenses Tax Expenses

21 21 Among these actions the most important is the nationwide campaign to popularize the use of the Internet, launched in 2000, which enabled an increase in the number of users of the Portal BB (BB Gateway). The results of this campaign were felt during the 1 st quarter, through the growth of business via the Portal BB. Of the total of ACC/ACE granted, for example, 308 transactions were contracted under the ACC-Automático category, via the Internet, showing an effectiveness of 84% in relation to the total of transactions quoted through this channel. The total contracted on the worldwide web was more than US$2.6 million. Investing in the future In order to maintain leadership in the markets in which it operates, BB continues to invest in the development of the Portal bb.com.br. Currently, the Gateway enables effecting more than 100 types of different transactions, offers banking services and information and sites that are specialized in investments, agribusiness, sports and culture. With the [e-pronto] advertising campaign launched in 2000, the Bank was able to attain important figures on the Internet. The initiative increased the number of banking transactions to 13.5 million per month and increased the number of clients with access to Auto-Atendimento BB (Personal Banking) on the worldwide web to 2.9 million, corresponding to approximately 22% of the base. In the 1 st quarter of 2001, a total of 566,600 transactions were carried out via Portal BB, with an activity volume of R$3.0 billion in investments. 2.9 million clients with access to Portal BB June/00 Sept/00 Dec./00 Mar./01

22 million transactions per month on the Internet 0,4 3,5 8,3 12,5 13,5 This aggressive approach showed significant results in the quarter: AGRONEGÓCIOS-e BANCO DO BRASIL Volume of new offers: R$1.8 billion Volume of new business: R$30.9 million 1,907 new users on record R$68.0 million in business, since the site was launched

23 23 Another item that affected the pattern of Administrative Expenses was the continuity of the process of improvement of the geographical deployment of the services network. In the first quarter of 2001, a total of 57 new branches were opened and 41 were broken down into 43 new downsized branches, with an average allocation of 25 employees. In the opening and breakdown process, 67 branches were deployed in the South and Southeast Regions. BB is present in 2,607 cities throughout Brazil, with 7,795 points-of-service. There are 3,008 branches, 1,473 banking service stations, 2,906 ATMs and 408 other stations, 9.1% more than in March The ratio between Commercial results, excluding credit risk provisions, and the number of BB points-of-service, showed an increase of 10.1% over the 1 st quarter of Adjusted Commercial Earnings / Points-of-Service (R$) 59, ,365.1 Mar./00 Mar./01

24 24 V OPERATING INCOME Operating income showed a drop of 23.8% as compared to the 1 st quarter of This result was affected by the impact of the reduction in the Net Financial Margin, as a result of increased credit risk provisions st qr./00 1 st qr./01 In Operating income, we stress the increase in Earnings from Equity Participation in Affiliates and Controlled Subsidiaries, from a negative R$123 million in 2000 to a positive R$851 million in the 1 st quarter of The 10.5% exchange variance recorded in 2001, against the 2.3% in the 1 st quarter of 2000, was one of the factors that contributed to the improvement in these results. 1 st qr./00 1 st qr./01 % Var. Other Earnings Components Other Operating income Other Operating Expenses Earnings from Equity Participation in Affiliates and Controlled Subsidiaries Expenses with Hedging Against Exchange Exposure Operating income

25 25 Operating efficiency Operating performance is a reflection of BB s strategy of expanding business by offering financial solutions to its clients, coupled with an improvement in operating efficiency. The increase in operating income enabled Administrative Expenses / Operating income * 82.8% 78.6% absorption of a greater proportion of administrative expenses than in the 1 st quarter of 2000, improving the efficiency index from 82.8% to 78.6% in March Mar./00 Mar./01 *Gross Financial Margin + Service Fees + Other Operating income + Other Operating Expenses It should be stressed, however, that Operating income take into account the expenses with restatement of Social Security Liabilities. This concerns an expense item that, in general, BB s direct competitors do not carry, which renders meaningless any direct comparison with such banks. If in the calculation of the efficiency index this expense were disregarded, BB would have ended the quarter with a 73.7% ratio of Administrative Expenses on Operating income. R$ thousands 1 st qr./00 1 st qr./01 Expenses with updating of Pension Plan Liabilities 151, ,260 Efficiency Ratio excluding Pension Plan Liabilities

26 26 VI NET INCOME st qr./00 1 st qr./01 BB recorded Net Income of R$137 million in the 1 st quarter of This result is 90.3% higher than that obtained in the 1 st quarter of 2000, and is equivalent to an annualized return on Stockholders Equity of 6.9%, against 4.0% in Taxable results Basle Index % The quest for taxable earnings has the main purpose of enabling consumption of 10,4 11,9 10,2 8,0 tax credits and enhancing the profitability 9,6 of equity capital in order to improve the Bank s Capital Adjustment Index. Among the measures taken for adjustment to the Basle Index, which ended the quarter at 8.0%, we highlight the transformation of Mar./97 Mar./98 Mar./99 Mar/2000 Mar./2001 BB into a Multiple Bank, as approved by the Board of Directors in a meeting held on April 2, With this transformation the Company aims at reducing administrative costs with the elimination of bureaucratic structures and processes related to the management of the subsidiary, as well as enhancement of fiscal/tax management of the Conglomerate.

27 27 Major Indicators Equity Items 1 st qr./00 1 st qr./01 Var.% Assets 126, , Earning Assets 91, , Operating Assets 29,749 38, Credit Operations Net of Provision for NPL 29,749 38, Credit Operations 39,843 41, Provision for NPL on Credit Operations -10,094-2, Other Operating Credits 10,373 8, Liquidity Assets 42,692 51, Cash and Banks 1,692 2, Interbank Investments 11,124 7, Securities 29,876 41, Others Earning Assets 18,559 16, Other Assets 35,009 38, Liabilities 126, , Interest-Bearing Liabilities 86,955 98, Operating Liabilities 70,069 68, Savings Deposits 20,142 20, Term Deposits 32,348 31, Acceptance and Debentures 726 1, Borrowings and On-Lending 13,110 11, Financial and Development Funds 3,743 4, Liquidity Liabilities 16,886 29, Open Market Funds 13,904 26, Interbank Deposits 2,982 3, Other Liabilities 31,738 38, Demand Deposits 11,526 14, Others 20,212 24, Stockholders Equity 7,244 7, Indicators (%) 1 st qr./00 1 st qr./01 Var.% Basle Accord ROE ROA Efficiency Leverage (times) Contribution Margin/Total Income (Gross Fin. Margin + Service Fees)* % Service Fees / Administrative Expenses* Contribution Margin / Average Clients Base* (R$) Administrative Expenses/ Average Clients Base * (R$) % Spread annualized 8.0 7,8-2.5 * P&L items in the Reallocated Income Statements for the Fiscal Year

28 28 Other Information 1 st qr.00 1 st qr./01 Ratings* Atlantic Rating Brazil AAA AAA Fitch Individual D/E D/E Shareholding Structure National Treasury Previ BNDESPar Foreign Capital Other Individuals Other Companies Others Pension Funds Distribution Network Brazil Branches 2,846 3,008 Others Points-of-Service 4,299 4,787 Total 7,145 7,795 Distribution Network - Abroad Branches Other (Offices + Sub-branches + Subsidiaries) Total Human Resources Employees 73,730 77,299 Interns 12,064 12,324 Total 85,794 89,623 Technology Office Banking (Companies) 86, ,856 Self-Service Terminals 25,690 30,149 Number of Accounts in thousands Individuals 10,434 12,030 Companies Total 11,201 12,923 Number of Cards (in millions) Credit Cards Debit Cards *Atlantic Rating s last valuation, in December/1999 and 2000; and Fitch, in December/1999 and June/2000.