Financial Statements BB Leasing

Transcription

1 Financial Statements BB Leasing Contadoria Gesub - Gerência de Subsidiárias/Subsi III

2 Management Report Dear shareholders, Below we present the financial statements of BB Leasing S.A. - Arrendamento Mercantil (BB Leasing) for the six-month period ended on June 30, This report complies with the statutory and legal provisions established by the Banco Central do Brasil (Bacen). THE COMPANY BB Leasing, wholly-owned subsidiary of Banco do Brasil S.A. (BB), with head office and jurisdiction in Brasília, located in Setor Bancário Sul Quadra 01, Lote 32, Bloco G, 24º Andar, CEP , is an autonomous company registered with the national Register of Legal Entities (CNPJ) under no / The Company is inserted in the context of BB s corporate strategic planning and is in line with BB Conglomerate s strategic objectives, in the financial perspective, in order to seek expansion of credit intended for investments in modernization and expansion of Brazilian companies, offering an attractive credit alternative. The Company is mainly engaged in operating chattel and real estate lease transactions, pursuant to applicable standards, as well as in performing sub-lease, granting and acquisition of lease contract transactions, granting and acquisition of credit rights deriving from lease contracts and all other transactions permitted to companies of this type. The Company s businesses are governed by Law No. 6,099/74, which provides on tax treatment for lease transactions, and by Conselho Monetário Nacional (CMN) Resolution no. 2,309/96, which disciplines and consolidates standards related to lease transactions. Subsidiary s operating strategy for domestic lease market is focused on business with legal entities, which may be verified in its portfolio, which, in June 2014, had 97.9% of businesses with this public. The main product offered by the Company is Leasing Financeiro Pessoa Jurídica (financial lease for legal entities), type of lease in which the lessee intends to acquire the asset at contract end by paying the Guaranteed Residual Value (VRG) in advance or diluted along the contract. BB Leasing also offers Leasing Finame, which onlends funds from the Banco Nacional de Desenvolvimento Econômico e Social (BNDES). CORPORATE GOVERNANCE As a privately-held company, it does not have a Board of Directors. The Executive Board is formed by a CEO, a Vice- President Director and a Managing Officer and has its own Supervisory Board to ensure inspection of management actions. The Company joined the single Audit Committee of BB Conglomerate. ISSUANCES OF DEBENTURES In 2013, 20 million debentures were issued, non-convertible into shares, in a single series, unsecured, for public distribution with restricted efforts for placement and term of ten years, in the total amount of R$ 20 billion. This transaction was repeated in the first half of 2014, under the same conditions, such as quantity, term and total value. LEASING MARKET According to information from the Associação Brasileira das Empresas de Leasing (ABEL), lease market is presenting fall both in number of contracts and present value amounts. Businesses with legal entities represent the biggest value of market portfolio, and the most expressive sector is services. Growth in machinery and equipment lease market share has been observed for some time and shows the potential leasing has to foster domestic industry s production. 1

3 Management Report PORTFOLIO On June 30, 2014, Corporate Lease portfolio concentrated 3,896 active transactions, representing a balance of R$ million. Individual Lease, on its turn, had 2,289 active transactions and balance of R$ 11.2 million. This portfolio s representativeness, per segment, was distributed as follows: 48.3% for services, 32.0% for the industry, 17.7% for commerce and 2.0% for individuals. Vehicles and similar items were a highlight with 47.3% and machinery and equipment presented 36.5%. POLICY FOR REINVESTMENT OF PROFIT AND PAYMENT OF DIVIDENDS In the first half of 2014, BB Leasing distributed 25% of available net income after assignment of legal reserves as dividends to shareholder. ECONOMIC-FINANCIAL PERFORMANCE In the first half of 2014, BB Leasing presented positive income of R$ 109,236 thousand. This performance is mainly due to Revenues from Financial Intermediation, with highlight to income from derivative financial instruments, in addition to financial income from lease transactions added to income from security transactions. INDEPENDENT AUDIT In the first half of 2014, KPMG Auditores Independentes did not provide other services to BB Leasing in addition to those related to external audit. STRATEGIC ACTIONS Seek optimization of BB Leasing S.A. income; Use Conglomerate s resources to evaluate best business opportunities, maintaining the Institution s quality and image standards; Seek growth of credit for investments in modernization and expansion of Brazilian companies. ACKNOWLEDGMENTS We thank the trust of shareholder, their clients and society. 2

4 Financial Statements BALANCE SHEET In thousands of Reais ASSETS CURRENT ASSETS 46,122,068 23,725,246 Cash and Cash Equivalents (Note 4) Short-term Interbank Investments (Note 5.a) 3,198,096 3,123,927 Open market investments 3,198,096 3,123,927 Securities and Derivative Financial Instruments (Note 6.b) 42,925,598 20,488,881 Derivative financial instruments 42,925,598 20,488,881 Leasing transactions (15,569) (26,440) Private sector (Note 7.a) 143, ,707 (Leasing transactions income) (Note 7.a) (141,727) (161,778) (Allowance for leasing transactions losses) (Note 7.f) (17,655) (29,369) Other Receivables (Note 8.a) 11, ,296 Sundry 12, ,216 (Allowance for other losses) (Note 8.b) (1,029) (920) Other Assets 1,591 1,339 Other assets (Note 9.a) (Allowance for impairment) (Note 9.a) (373) (373) Prepaid expenses (Note 9.b) 1, LONG-TERM RECEIVABLES 348, ,037 Leasing transactions (4,680) (7,517) Private sector (Note 7.a) 178, ,395 (Leasing transactions income) (Note 7.a) (178,960) (148,395) (Allowance for leasing transactions losses) (Note 7.f) (4,680) (7,517) Other Receivables (Note 8.a) 353, ,818 Sundry 353, ,818 Other Assets 370 1,736 Prepaid expenses (Note 9.b) 370 1,736 PERMANENT ASSETS 940,555 1,409,126 Investments Other investments (Accumulated impairment) (520) (520) Leased Assets (Note 10.a) 940,555 1,409,126 Leased assets 1,083,875 1,556,475 (Accumulated depreciation) (Note 10.c) (143,320) (147,349) TOTAL ASSETS 47,411,334 25,409,409 3

5 Financial Statements BALANCE SHEET In thousands of Reais LIABILITIES / STOCKHOLDERS' EQUITY CURRENT LIABILITIES 154, ,635 Domestic Onlending - Official Institutions Finame (Note 12.a) Derivative Financial Instruments Derivative financial instruments (Note 6.b) Other Liabilities 153, ,695 Stockholders and statutory distributions (Note 13.a) 25,943 11,656 Taxes and social security (Note 13.b) 117, ,568 Other liabilities (Note 13.c) 10,209 7,471 LONG-TERM LIABILITIES 43,457,676 21,582,679 Funds from Acceptance and Issuance of Securities 42,921,103 20,488,475 Funds from debentures (Note 11.a) 42,921,103 20,488,475 Domestic Onlending - Official Institutions 1,150 1,587 Finame (Note 12.a) 1,150 1,587 Other Liabilities 535,423 1,092,617 Taxes and social security (Note13.b) 142, ,202 Other liabilities (Note 13.c) 393, ,415 STOCKHOLDERS' EQUITY 3,799,487 3,588,095 Capital 3,261,860 3,261,860 Local residents (Note 16.a) 3,261,860 3,261,860 Profit Reserves (Note 16.b) 537, ,235 TOTAL LIABILITIES 47,411,334 25,409,409 See the accompanying notes to the financial statements. 4

6 Financial Statements STATEMENT OF INCOME 1st half/2014 In thousands of Reais 1st half/2013 INCOME FROM FINANCIAL INTERMEDIATION 1,764, ,974 Loan operations (Note 7.g) 3,092 7,314 Lease transactions (Note 7.b) 250, ,751 Securities (Note 5.b) 154, ,395 Derivative financial instruments (Note 6.c) 1,356, ,514 EXPENSES FROM FINANCIAL INTERMEDIATION (1,570,852) (723,363) Deposits and securities sold under repurchase agreements (Note 11.b) (1,353,043) (386,384) Borrowings and onlendings (Note 12.b) (26) (100) Lease transactions (Note 7.b) (209,924) (331,556) Allowance for leasing transactions / Other receivables (7,859) (5,323) INCOME FROM FINANCIAL INTERMEDIATION 194, ,611 OTHER OPERATING INCOME / EXPENSES (21,013) (21,316) Personnel expenses (Note 14.a) (1,188) (484) Other administrative expenses (Note 14.b) (2,843) (2,055) Tax expenses (Note 17.c) (10,838) (14,915) Other operating income (Note 14.c) 5,299 2,748 Other operating expenses (Note 14.d) (11,443) (6,610) OPERATING INCOME 173, ,295 NON-OPERATING INCOME (2) 7 Incomes Expenses (2) (7) PROFIT BEFORE TAXATION AND PROFIT SHARING 173, ,302 INCOME TAX AND SOCIAL CONTRIBUTION (Note 17.a) (63,805) (87,226) NET INCOME 109,236 49,076 Number of shares 3,000,000 3,000,000 Earning per share (R$) See the accompanying notes to the financial statements. 5

7 Financial Statements STATEMENT OF CAHS FLOWS - INDIRECT METHOD 1st half/2014 In thousands of Reais 1st half/2013 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax and social contribution 173, ,302 Adjustments to income (loss) before tax and social contribution 206, ,947 Provision (Reversal) allowance for leasing transactions 7,789 5,263 Provision (Reversal) allowance for other credits Depreciation and amortization 104, ,399 Amortization of losses 14,074 13,658 Excess depreciation 75, ,891 Expenses with civil and tax provisions 4, Equity Variations (21,772,321) (20,936,358) (Increase) Decrease in Leasing transactions 1,209 2,340 (Increase) Decrease in Derivative financial Instruments (21,520,294) (20,490,257) (Increase) Decrease in other receivables net of deferred taxes 14,678 (61,366) (Increase) Decrease in Prepaid expenses (138) 2,275 Increase (Decrease) in Income tax and social contribution paid (56,798) (141,691) Increase (Decrease) in Other liabilities (210,978) (247,659) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (21,392,754) (20,481,109) CASH FLOWS FROM INVESTMENTS Acquisition of property, plant and equipment in use (180,782) (83,165) Disposal of property, plant and equipment in use 117, ,926 CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (63,359) 144,761 CASH FLOWS FROM FINANCING ACTIVITIES Increase (Decrease) in Debentures issued liabilities 21,516,480 20,488,475 Increase (Decrease) in Borrowings and domestic onlendings - Official Institutions (320) (1,518) Dividends paid (25,943) (11,387) CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 21,490,217 20,475,570 Net variation of cash and cash equivalents 34, ,222 At the beginning of the period 3,164,489 2,984,948 At the end of the period 3,198,593 3,124,170 Increase (Decrease) in cash and cash equivalents 34, ,222 See the accompanying notes to the financial statements 6

8 Financial Statements STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY Events Realized capital Legal reserve Profit reserves Statutory reserve Retained earnings (loss) In thousands of Reais Balances at Net income for the period Allocation: Reserves (Nota 16.c) (37.420) -- Dividends (R$ 3, every thousand shares) (Nota 16.c) (11.656) (11.656) Balances at Changes in the period Balances at Net income for the period Allocation: Reserves (Nota 16.c) (83.293) -- Dividends (R$ 8, every thousand shares) (Nota 16.c) (25.943) (25.943) Balances at Changes in the period See the accompanying to the financial statements Total 7

9 1 BB LEASING AND ITS OPERATIONS BB Leasing S.A. Arrendamento Mercantil (BB Leasing) is a company controlled by Banco do Brasil S.A. (wholly owned subsidiary), formed in 1987, aiming to provide property and equipment leasing operations. It is located at Setor Bancário Sul, Quadra 01, Lote 31, Bloco G, 24th floor, Sede III Building Brasília, Distrito Federal, Brazil. 2 PRESENTATION OF FINANCIAL STATEMENT The Financial Statements have been prepared in accordance with the accounting guidelines derived from Brazilian corporation law, the rules and instructions issued by the Conselho Monetário Nacional (CMN) and Banco Central do Brasil (Bacen). The preparation of financial statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management use judgment in the determination and recording of accounting estimates, when applicable. Significant assets and liabilities subject to these estimates and assumptions include: the allowance for loan losses, deferred tax assets, provision for civil and tax demands, appreciation of financial instruments and other provisions. The final amounts of transactions involving these estimates are only known upon their settlement. The Comitê de Pronunciamentos Contábeis (CPC) is responsible for issuing accounting standards and interpretations, based on international accounting standards, approved by the Comissão de Valores Mobiliários (CVM). Bacen adopted the following pronouncements of the CPC, applied by BB Leasing, as applicable: CPC 00 - Conceptual Framework, CPC 01 Decrease in Recoverable Amount of Assets, CPC 03 Statement of Cash Flows (DFC), CPC 05 Related Party Disclosures, CPC 10 Share-Based Payment, CPC 23 Accounting Policies, Changes in Accounting Estimates and Errors, CPC 24 Events After the Reporting Period and CPC 25 - Provisions, Contingent Liabilities and Contingent Assets. These financial statements were approved by the Executive Board of Directors on Information for comparability purposes For comparison purposes and in order to better highlight the essence of the operations, the reverse/provision to write-off account was reclassified from Other operating expenses to Other operating income : Statement of Income OTHER OPERATING INCOME/EXPENSES 1st half/2013 Original Report Reclassification Adjusted Balances Other operating income 1, ,748 Other operating expenses (5,704) (906) (6,610) 3 DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted by BB Leasing are applied consistently in all periods presented in these financial statements. a) Statement of income In accrual basis accounting, revenues and expenses are reported in the period in which they are incurred, regardless of receipt or payment. The operations with floating financial charges are adjusted on a pro rata basis, based on the variation of the applicable indexes. Operations with fixed financial charges are recorded at redemption value, adjusted for unearned income or prepaid expenses for future periods. 8

10 b) Cash and cash equivalents Cash and cash equivalents comprise available funds in local currency and, investments in repurchase agreements of own resources and interbank deposits, that are characterized by high liquidity, insignificant risk of change in fair value, and maturity not exceeding 90 days, to meet short-term funding needs (Note 4). c) Short-term interbank investments Short-term interbank investments are recorded at their investment or acquisition amount, plus income accrued to the balance sheet date and are adjusted for allowance for losses (Note 5). d) 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 income or expense accounts of the respective financial instruments (Note 6.b). 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. Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in financial asset or liability market values 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/expenses 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 Stockholders' 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/expenses for the period. e) Lease operations and Other Receivables with loan characteristics, and Allowance for credit losses Lease receivables they are leasing contract installments, accrued according to the contract terms, and presented as current or long term assets. Unearned lease receivables they are the monthly accrual of payables for the period, required by Portaria do Ministério da Fazenda (MF) 140/1984. Income from operations overdue for more than 60 days, regardless their risk level, is recognized as revenue only when it is received. Allowance for loan losses they are lease 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. 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. The renegotiations already written off against the allowance are rated ats the H level and any gains from renegotiation are recognized as income when effectively received. Allowance for loan losses, considered sufficient by management, satisfies the minimum requirement established by the aforementioned CMN Resolution 2,682/1999 (Note 7.e). 9

11 Excess / (insufficiency) of Depreciation - the present value of future cash flows of finance lease transactions, recorded in the accounts "excess / insufficiency of Depreciation" presented as Permanent Assets, was calculated based on the internal rate of return of each contract, according to Circular 1,429/1989 of Bacen and recorded as income or expense. The operating leases do not require adjustment to present value and their values are not incorporated in the loan portfolio for not having the characteristics of granting loan. Call option result on sale: Profit profit is recognized upon exercise of the call option. Loss loss is recorded in the Leased fixed assets and recognized as expense over the remaining term of life of the leased assets under Circular 1,429/1989, of Bacen. f) Taxes Taxes are calculated based on the rates shown in the table below: Taxes Income Tax (15% + additional 10%) 25% Social Contribution on Net Income (CSLL) 15% Social Integration Program/Public servant fund program (PIS/Pasep) 0.65% Contribution to Social Security Financing (Cofins) 4% Tax on services of any kind (ISSQN) Up to 5% Deferred tax assets (tax credits - Note 17.e) and deferred tax liabilities (Note 17.d) are recorded by applying the current rates of taxes on their respective bases. For recording, maintaining, and writing off tax credits follows the established criteria by CMN Resolution 3,059/2002, and amended by CMN Resolution 3,355/2006 and 4,192/2013, and they are supported by a study of their realizability. g) Prepaid expenses These expenses refer to the application of payments made in advance, for which the benefits or the services to BB Leasing will occur in subsequent periods (Note 9.b). Prepaid expenses are recorded at cost and amortized as incurred. h) Permanent Asset Leased permanent assets are valued at acquisition cost, less accumulated depreciation, whose amount is calculated by the straight-line method at the rates provided in the Normative Instruction SRF n o 162 of : aircraft - 10%, facilities - 10%, vessels - 5% to 20%, and related vehicles - 10% to 25%, machinery and equipment - 10% to 33.3%, properties - 4%, furniture - 4% to 10%, and 30% accelerated when applicable (Note 10). The amounts recorded in the "unamortized losses on leases" account, are calculated using the expiration of lease contracts and are amortized over the remaining useful life of the leased assets. i) Impairment of non-financial assets BB Leasing assesses whether there is any indication that a nonfinancial asset may be impaired based on internal and external sources of information. If there is an indication that an asset may be impaired, BB Leasing estimates the recoverable amount of the asset. The recoverable amount of the asset is the higher of: i) its fair value less costs to sell it; and ii) its value in use. At least annually, to perform the impairment test, BB Leasing prepares a study to check if there is any indication of impairment of assets covered by CPC 01, according to technical criteria defined by the Management. 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. Rate 10

12 j) Contingent Liabilities and Legal Obligations The recognition, measurement and disclosure of 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. Contingent assets are only recognized in the financial statements upon the existence of 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. 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 (Note 20.a), 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. 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 that are considered as possible losses are not recognized in the balance sheet and are only disclosed in the notes to the financial statements (Note 20.b), while those considered as remote do not require provisioning or disclosure. Legal obligations (fiscal and social security) are tax obligations provided by legislation. Regardless of the probability of success of lawsuits in progress, these legal obligations have their amounts recognized in full in the financial statements. k) Functional Currency The functional and presentation currency of the financial statements of BB Leasing is Real (R$). l) Risk Management BB Leasing adopts a conservative risk management policy. Cash equivalent and investments are held with its controller, which minimizes the credit risk of the Company and provides alignment to the risk management policies adopted by the conglomerate Banco do Brasil S.A. 4 CASH AND CASH EQUIVALENTS Cash and cash equivalents Interbank investments (1) 3,198,096 3,123,927 Total 3,198,593 3,124,170 (1) Investments whose maturity is less than or equal to 90 days and with insignificant risk of change in fair value. 11

13 5 SHORT-TERM INTERBANK INVESTMENTS a) Breakdown Open Market Investments sales pending settlement own resources 3,198,096 3,123,927 Total 3,198,096 3,123,927 Current assets 3,198,096 3,123,927 b) Income from Short-term Interbank Investment 1st half/2014 1st half/2013 Income from Open Market Investment own resources 154, ,395 Income from interbank deposits 5 -- Total 154, ,395 6 SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS a) Securities On there were no investments on securities. b) Derivative Financial Instruments BB Leasing uses derivative financial instrument to reduce market risk. The options contracts refer to investments of the amount received from debentures issued (Note 11.a) and they have the characteristic of a fixed income investment. The swap operations, represented by the exchange of CDI / pre rates, are contracted as an instrument of protection from market risk. Derivatives market values are estimated according to internal pricing model, in compliance with rates disclosed for operations with maturity and indexed on the last trading day of the month. The valuation model adopted uses prices quoted in active markets for identical financial instruments. A financial instrument is considered as quoted in an active market if the prices are promptly and regularly available and if those prices represent real market transactions and occur on basis where there is no relation between the parties. 12

14 Notional value Cost Market value Notional value Cost Market value Asset position 128,770,560 42,923,520 42,925,598 40,725,614 20,483,049 20,488,881 Options Call 42,923,520 42,308,611 42,175,257 20,362,807 20,121,886 19,851,906 Options Put 42,923, , ,985 20,362, , ,975 Swap 42,923, Current Assets ,925, ,488,881 Liability position ,483,049 3, Swap ,483,049 3, Current Liability Investments whose maturity is between 31 to 60 days. c) Income from Derivative Financial Instruments 1st half/2014 1st half/2013 Options Call/Put 1,358, ,546 Swap (1,272) (23,032) Total 1,356, ,514 7 LEASING OPERATIONS AND OTHER RECEIVABLES WITH LOAN CHARACTERISTICS a) Leasing Operations Receivable Lease and sublease 322, ,102 Finance lease 322, ,102 Current Assets 143, ,707 Long-term Receivables 178, ,395 Leasing unearned income (320,687) (310,173) Finance lease (320,687) (310,173) Current Assets (141,727) (161,778) Long-term Receivables (178,960) (148,395) 13

15 b) Financial Results from Leasing Operations 1st half/2014 1st half/2013 Leasing income 250, ,751 Finance lease 250, ,751 Leasing expenses (209,924) (331,556) Finance lease (209,866) (331,498) Operational lease (58) (58) Total 40,890 51,195 c) Portfolio by Sector % % Private Sector - Domestic 549, ,0 565, Services 265,182 48,3 234,973 41,5 Industry 175,938 32,0 172,091 30,4 Commerce 97,005 17,7 73,603 13,0 Individuals 11,223 2,0 85,126 15,1 In accordance with Bacen rules, finance leases and other receivables with loan characteristics are presented on several accounts, as follows: Finance lease receivable 322, ,102 Financial unearned leasing income (320,687) (310,173) Property, plant and equipment by finance lease (Note 10.a) 940,545 1,409,000 Creditors for residual value in advance (393,283) (846,136) Present value of leasing and other credit operations 549, ,793 14

16 d) Portfolio by Risk Level and Maturity Normal operations AA A B C D E F G H Total Total Normal operations Installments falling due 01 to 30 15,004 2,624 6, ,905 34, to 60 15,323 2,558 6, ,196 33, to 90 15,056 2,554 5, ,446 31, to ,207 14,629 2, ,121 81, to ,354 13,255 23,465 3, , , ,368 More than ,974 37,108 51,100 6, , , ,205 Installments overdue Up to 14 days ,337 Subtotal 327,720 65, ,746 14, ,515 1, , , ,433 Abnormal operations AA A B C D E F G H Total Total Installments falling due 01 to ,263 2, to ,167 1, to ,098 1, to ,227 2,680 4, to , ,764 4,017 5,949 More than , ,303 7,641 8,954 Installments overdue 01 to to , to ,245 1, to ,051 1, to ,312 1,666 2, to ,464 1,512 2,894 More than ,274 1,274 1,989 Subtotal ,427 1,816 6,124 1,497 1,461 12,905 25,961 38,360 Total 327,720 65, ,477 16,012 2,398 10,639 2,503 1,775 14, , ,793 15

17 e) Allowance for loan losses by risk level Level of % Risk Provision Value of operations Allowance Provision Value of operations Allowance Provision AA , , A , , B 1 108,476 1, ,868 2,969 C 3 16, , D 10 2, ,473 1,847 E 30 10,639 3,192 7,412 2,224 F 50 2,503 1,251 4,728 2,364 G 70 1,774 1,242 3,124 2,187 H ,519 14,519 24,124 24,124 Total 549,348 22, ,793 36,886 f) Changes of allowance for loan losses 1st half/2014 1st half/2013 Opening balance 24,591 52,990 Provision/(reversal) 7,789 5,263 Write-Off (10,045) (21,367) Closing balance 22,335 36,886 Current Asset 17,655 29,369 Long-term Receivables 4,680 7,517 g) Supplementary information 1st half/2014 1st half/2013 Amount of credit operations renegotiated 449 1,908 Recoveries of credits previously written off (1) 3,092 7,314 (1) Recorded as income, according to Resolution CMN 2,836/

18 8 OTHER RECEIVABLES a) Breakdown Sundry Tax Credits (Note 17.e) 288, ,155 Tax and contributions to offset 48,816 50,108 Sundry debtors from escrow deposits (Note 20.c) 25,941 23,313 Other 2,537 2,458 Subtotal 365, ,034 (Allowance for other receivables without loan characteristics) (1) (1,029) (920) Total 364, ,114 Current assets 11, ,296 Long-term Receivables 353, ,818 (1) It is a provision for receiving precatory titles of the State of São Paulo of R$ 978 thousand (R$ 869 thousand on ) and tax incentives provision, on the amount of R$ 51 thousand (R$ 51 thousand on ). b) Changes of allowance for other credit losses 1st half/2014 1st half/2013 Opening balance Provision/(reversal) Closing balance (1) 1, Current assets 1, (1) Corresponds to allowance for operations without loan characteristics. 9 OTHER ASSETS a) Non-operating Assets Machinery and equipment Vehicles and related Assets in special regime Subtotal (Impairment) (1) (373) (373) Total Current assets (1) It is a provision for assets reintegrated by the company. 17

19 b) Prepaid Expenses Commissions arising from credit intermediation (1) 74 2,066 Commissions for placement of debentures Expenses arising from insurance commercialization (2) Total 1,431 2,541 Current Asset 1, Long-term Receivables 370 1,736 (1) Refers to commissions paid to retailers - vehicle leasing. These expenses are recorded in accordance with the contracts giving rise to the credit. (2) Refers to insurance expenses of leased assets, taken over according to the contracts term. Such payments are made in advance in accordance with the regulations for leasing contracts and tenant's option to include the insurance on the contract. 10 LEASED ASSETS a) Leased Assets Finance lease Leased assets 1,080,769 1,549,030 Vehicles and related 476, ,875 Machinery and equipment 470, ,151 Planes 33,554 44,810 Furniture 17,222 22,817 Facilities 14,500 14,889 Property 7,862 7,862 Boats 6,712 6,005 Other 54,012 62,621 Unamortized loss on leases (1) 108, ,975 Other goods 1,950 2,498 Accumulated amortization (1) (56,187) (43,852) Excess depreciation 384, ,778 Accumulated Depreciation (527,838) (1,008,127) Deferred 3,096 7,319 Unamortized loss on leases 24,531 33,972 Accumulated amortization (21,435) (26,653) Subtotal 940,545 1,409,000 (1) Adjustment to CMN Resolution n o. 3,617/2008, by the accumulated values from until

20 Operating Leases Deferred Unamortized loss on leases Accumulated amortization (808) (692) Subtotal Total 940,555 1,409,126 b) Portfolio adjustment The Finance Leases portfolio adjustment (excess / insufficiency depreciation) was calculated as provided in Note 3.e, presenting the following position: Present values 942,631 1,411,929 Creditors for anticipating residual value 393, ,136 Present value of leasing 549, ,793 ( ) Book value of transactions 558, ,151 Lease receivables - internal resources 322, ,102 Unearned finance lease receivables (320,687) (310,173) Residual values to perform 336, ,108 Residual values to balance (336,714) (349,108) Leased Assets 1,080,769 1,549,030 Accumulated depreciation of finance lease (527,838) (1,008,127) Unamortized loss on leases 24,531 33,972 Accumulated amortization (21,435) (26,653) (=) Increase in Fixed Assets (excess of Depreciation) 384, ,778 c) Accumulated Depreciation Accumulated depreciation of finance leases (527,838) (1,008,127) ( ) Depreciation excess 384, ,778 (=) Accumulated depreciation (143,320) (147,349) d) Other Information The insurance of the leased assets is contracted by their tenants, as provided in contractual clause. 19

21 11 FUNDS FROM ISSUANCE OF DEBENTURES a) Funds from Debentures The debentures issued in March/2013 (2nd issue) and May/2014 (3rd issue) are simple, non-convertible into share types, in a single series, unsecured, nominal and registered with CVM, for public distribution with restricted placement efforts, pursuant to CVM Instruction n o. 476/09, and were acquired in its entirety by the Banco do Brasil S.A. Principal and interest will be paid at maturity date. Book Value Issuance Principal Maturity Interest rate March/ ,000, % CDI 22,468,362 20,488,475 May/ ,000, % CDI 20,452,741 Total 42,921,103 20,488,475 b) Funding Expenses 1 st half/ st half/2013 Interest (1) (1,353,029) (386,376) Securities (14) (8) Total (1,353,043) (386,384) (1) Remuneration is exponentially and cumulatively calculated on a pro rata basis by business days elapsed, applied to the face value of the debentures, or the nominal value of the debentures from the issue date until the date until the date of actual payment, which must occur on the maturity date. 12 BORROWINGS AND ONLENDINGS a) Onlendings Official Institutions Breakdown for term liabilities Programs BNDES/Finame Interest rates 1.50% to 8.3% p.a. or TJLP + 2.3% to 5.5% p.a. up to 90 days from 91 to 360 days from 1 to 3 years from 3 to 5 years from 5 to 15 years Total Total ,638 2,430 Current liabilities Long-term liabilities 1,150 1,587 The collateral consists of operations in a pledge, to BNDES/Finame of receivables represented by the lease agreements as Circular BNDES nº. 196 item 9. b) Borrowings and Onlendings 1 st half/ st half/2013 Onlendings BNDES/Finame (26) (100) Total (26) (100) 20

22 13 OTHER LIABILITIES a) Social and Statutory Dividends paid (Note 16.c) 25,943 11,656 Total 25,943 11,656 Current liabilities 25,943 11,656 b) Financial and Development Funds Provision for deferred taxes (Note 17.d) 154, ,514 Provision for taxes and contributions on net income 87, ,513 Provision for tax risk (Note 20.a) 16,695 10,594 Taxes and contributions payable 2,031 1,149 Total 259, ,770 Current liabilities 117, ,568 Long-term liabilities 142, ,202 c) Sundry Creditors for prepayment of residual value (1) 393, ,136 Provision by civil lawsuits (Note 20.a) 4,989 3,789 Sundry creditors domestic (2) 3,562 1,565 Amounts payable to related companies (3) 1,411 1,396 Total 403, ,886 Current liabilities 10,209 7,471 Long-term liabilities 393, ,415 (1) Guaranteed residual value received from tenants. (2) Includes R$ 2,576 thousand (R$ 725 thousand on ) related to funds to be released to suppliers of leased assets. (3) Includes R$ 1,130 thousand (R$ 1,163 thousand on ) related to the amount payable to Banco do Brasil S.A. for advances to suppliers. 21

23 14 OTHER OPERATING INCOME/EXPENSE a) Personnel Expenses 1st half/2014 1st half/2013 Salaries Social charges Fiscal council fees Benefits Total 1, b) Other administrative expenses 1st half/2014 1st half/2013 Financial system services (2,211) (1,172) Compensation for agency and brokerage (229) (344) Insurance (120) (177) Sindical contribution (81) (78) Legal and notary fees (55) (145) Other (147) (139) Total (2,843) (2,055) c) Other operating income 1st half/2014 1st half/2013 Reversal of provision by contingent liabilities and tax risk 4,336 1,973 Sundry debtors from escrow deposits Other Total 5,299 2,748 d) Other operating expenses 1st half/2014 1st half/2013 Provision by contingent liabilities and tax risk (9,118) (2,649) Dividend interest expense (884) (173) Sales commissions financing of vehicles (602) (2,351) BB - operational support (347) (207) Other (492) (1,230) Total (11,443) (6,610) 22

24 15 NON-OPERATING INCOME 1st half/2014 1st half/2013 Non-Operating Income Net income from the disposal ol other assets Reversal of provision not operating -- 2 Non-Operating Expenses (2) (7) Loss in transactions in assets -- (2) Impairment of other assets (2) (5) Total (2) 7 16 STOCKHOLDERS EQUITY a) Capital The capital, entirely subscribed and paid-in, in the amount of R$ 3,261,860 thousand in June 30, 2014 and June 30, 2013 is divided into 3,000,000 book-entry common shares without par value. The Stockholders' Equity of R$ 3,799,487 thousand (R$ 3,588,095 thousand as of June 30, 2013) corresponds to a book value of R$ 1, per share (R$ 1, per share on ). b) Profit reserves Legal reserve 35,254 21,392 Statutory reserves 502, ,843 Operating margin 502, ,843 Total 537, ,235 Statutory reserve for operating margin is designed to guarantee operating margin consistent with the development of the Bank s operations, may be consists of up to 100% of net income, after the legal destinations, including dividends, limited to 100% of the capital. c) Dividends and Distribution of Net Income 1st half/2014 1st half/2013 Calculation basis: 103,774 46,623 - Net profit 109,236 49,076 - Legal reserve in the period (5,462) (2,453) Minimum mandatory dividend - 25% 25,943 11,656 Total allocated to stockholders 25,943 11,656 Statutory reserves 77,831 34,967 Adjusted net profit after appropriations The dividends will be adjusted based on the variation of the Selic rate between, the balance sheet date and the date of actual payment. 23

25 17 TAXES a) Breakdown of income tax and social contribution expenses 1st half/2014 1st half/2013 Present values (113,035) (123,706) Income tax and Social contribution (113,035) (123,706) Deferred values 49,230 36,480 Deferred tax liabilities 39,871 (25,646) Leasing operations - portfolio adjustment 41,910 80,718 Mark to market (MTM) (2,039) (106,364) Deferred tax assets 9,359 62,126 Tax losses/social contribution negative bases -- (40,845) Mark to market (MTM) ,971 Total (63,805) (87,226) b) Reconciliation of income tax and social contribution expense 1st half/2014 1st half/2013 Earnings before taxation and profit sharing 173, ,302 Total charges of IR (25%) and CSLL (15%) (69,216) (54,521) Deferred tax assets and liabilities not recorded 4,542 (27,953) Other amounts 869 (4,752) Income tax and social contribution expense (63,805) (87,226) c) Tax Expenses 1st half/2014 1st half/2013 Cofins (7,999) (10,855) ISSQN (1,539) (2,296) Pis/Pasep (1,300) (1,764) Total (10,838) (14,915) d) Deferred tax liabilities Arising from leasing portfolio adjustments 96, ,182 Arising from mark-to-market 57, ,332 Total 154, ,514 Income tax 128, ,660 Social contribution 19,370 39,886 Cofins 5,417 11,155 PIS/Pasep 881 1,813 24

26 e) Deferred tax assets (Tax Credit) Recorded 1st half/ Constitution Write-off Temporary differences 69,433 56,529 46,029 79,933 Allowance for loan losses 16,842 4,826 7,223 14,445 Passive reserves 5,879 12,036 9,639 8,276 Mark to market (MTM) 46,563 39,667 29,167 57,063 Other provisions Excess depreciation 234, , ,678 Total 304,024 56,529 71, ,611 Income tax 274,824 33,439 53, ,761 Social contribution 24,140 18,780 15,270 27,650 Cofins 4,353 3,708 2,727 5,334 Pis/Pasep Not Recorded Temporary differences 82, ,277 Tax losses/negative bases -- 40,854 Total 82, ,131 Income tax 51, ,522 Social contribution 31,059 43,609 f) Realization Expectative The expected realization of deferred assets (tax credits) is based on a technical study, prepared in , and the present value is determined based on the average rate of funding for the period. Par value Present value In ,787 18,719 In ,522 28,471 In ,369 27,878 In ,324 21,437 In ,714 16,716 From ,895 80,123 Total 288, ,344 In the first half of 2014, it was observed the realization of tax credits at BB Leasing in the amount of R$ 71,942 thousand, corresponding to 246.9% of the respective projection of use for The technical study prepared at end of 2013 estimated R$ 29,139 thousand for the entire 2014 year. 25

27 18 RELATED-PARTY TRANSACTIONS The costs of benefits granted to Fiscal Council of BB Leasing were R$ 81 thousand in first half of 2014 (R$ 85 thousand in first half of 2013). BB Leasing does not make loans to key management personnel, in accordance with the prohibition to any financial institution established by the Banco Central do Brasil (Bacen). BB Leasing has banking transactions with its Controller, Banco do Brasil S.A., such as non-interest bearing current accounts and short-term investments. There are also service agreements, guarantee agreements and refunds of direct and indirect costs. These transactions are conducted under normal market conditions, mainly under the terms and conditions for comparable transactions, including interest rates and collateral. These transactions do not involve unusual payment risks. Summary of related-party transactions The assets and liabilities of BB Leasing with the Controller on June 30, 2014 and June 30, 2013 and the respective income: Assets Cash and cash equivalents (Note 4) Open market investments - Sales pending settlement - held position (Note 5.a) 3,198,096 3,123,927 Derivative financial instruments (Note 6.b) 42,925,598 20,488,881 Amounts receivable from related companies Liabilities Derivative financial instruments (Note 6.b) Funds of debentures (Note 11.a) 42,921,103 20,488,475 Dividends and bonus to be paid (Note 13.a) 25,943 11,656 Obligations with related parties (Note 13.c) 1,411 1,396 Statement of income 1st half/2014 1st half/2013 Income from short-term interbank investment (Note 5.b) 154, ,395 Income from financial instruments (Note 6.c) 1,356, ,514 Debentures expenses remuneration (Note 11.b) (1,353,029) (386,384) Personnel expenses (Note 14.a) (1,188) (484) Income from brokerage contracts (Note 14.b) (229) (344) Court fees (Note 14.b) (55) (145) Price level correction of dividends (Note 14.d) (884) (173) BB - operational support (Note 14.d) (347) (207) Other expenses (80) (95) 19 EMPLOYEE BENEFITS BB Leasing does not have its own staff, or remunerates its managers, since its activities are conducted directly by the administrative structure of Banco do Brasil S.A. BB Leasing refunds Banco for expenses (Note 18). 26

28 20 CONTINGENT LIABILITIES AND LEGAL OBLIGATIONS a) Contingent Liabilities - Probable Tax Lawsuits Tax lawsuits derive from assessments of municipal tax and refer to Service Tax (ISSQN) on income from leasing operations. Civil lawsuits Civil lawsuits classified as probable refers mainly to lawsuit for review and refund of tax overpayment. The balances of contingent liabilities classified as probable Tax Lawsuits 1st half/2014 1st half/2013 Initial balance 12,239 10,028 Provision 8, Reversal of the provision (3,752) (430) Written off due payment Balance at end of period 16,695 10,594 Civil lawsuits Initial balance 4,663 3,679 Provision 910 1,653 Reversal of the provision (584) (1,543) Written off due payment Balance at end of period 4,989 3,789 Total 21,684 14,383 b) Contingent Liabilities Possible Tax Lawsuits The lawsuits classified as possible are exempted from any provisions, basically, derive from assessments of municipal tax and refer to Service Tax (ISSQN) on income from leasing operations. Civil lawsuits Civil lawsuits classified as possible refers mainly to lawsuit for review and refund of tax overpayment. The balances of contingent liabilities classified as possible Civil lawsuits 587, ,792 Tax lawsuits 55,204 45,009 Total 643, ,801 27

29 c) Collateral deposits The balances of escrow deposits made for contingencies Civil lawsuits 20,807 18,493 Tax lawsuits 5,134 4,820 Total 25,941 23, OTHER INFORMATION Law n o. 12,973 (Conversion MP n o. 627/2013) The Law n o. 12,973, of (Law 12,973/2014), resulting from conversion of Provisional Measure n o. 627/2013, changes the federal tax legislation about Income Tax (IRPJ), Social Contribution on Net Income (CSLL), Social Integration Program/Public Servant Fund Program(PIS/Pasep) and Contribution to Social Security Financing (Cofins), aiming to: - Repeal the transition tax system (RTT); - Change the rules about tax in income abroad; and - Regulate the tax aspects relating to the accounting criteria and procedures prescribed in the laws 11,638/2007 and 11,941/2009, which dealt with the alignment of Brazilian accounting standards with international standards. For the accomplishment of a more conclusive analysis BB Leasing will wait for the regulation disclosure by the Receita Federal do Brasil, as provided by Law 12,973/2014. However, according to preliminary studies and the current text of MP 627/2013, no significant impacts are expected in the financial statements of the BB Leasing. 28

30 Report of Independent Auditors for Financial Statements To The Board of Directors and Shareholder BB Leasing S.A. Arrendamento Mercantil S.A. Brasília - DF We have audited the accompanying,financial statements of BB Leasing S.A. Arrendamento Mercantil (BB Leasing), which comprise the balance sheet as of June 30, 2014 and the related statements of income, of changes in stockholders' equity and of cash flows for the semester then ended, as well as the summary of significant accounting policies and other notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these individual financial statements in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Central Bank of Brazil, as well for designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the preparation and fair presentation of the financial statements of BB Leasing in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of BB Leasing. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Basis for qualified opinion on the financial statements BB Leasing records its operations and prepares its financial statements observing the accounting guidelines established by the Central Bank of Brazil, which require adjustment to present value of the leasing portfolio as a provision for excess or shortfall of depreciation, recognized in permanent assets, as described in note to the financial statements n o 10.b. These guidelines do not require the reclassification of the operations, which continue to be recognized in accordance with the provisions of Law 6.099/74, to current and non-current assets, and to leasing income and expenses, but result in the presentation of the results for semester and the shareholders equity as of June 30, 2014 in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil.

31 Report of Independent Auditors for Financial Statements Qualified Opinion In our opinion, except for the effects of the matter described in paragraph Basis for qualified opinion on the financial statements, the financial statements referred to above adequately present, in all material respects, the financial position of BB Leasing on June 30, 2014 the performance of its operations and its cash flows for the semester ended in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil. Brasília, August 15, KPMG Auditores Independentes CRC SP /O-6 F-DF Original report in Portuguese signed by Carlos Massao Takauthi Accountant CRC 1SP206103/O-4

32 Financial Statements SUMMARY OF THE AUDIT COMMITTEE REPORT In order to meet the CMN Resolution n /2004, the Banco do Brasil decided on the constitution of a single Audit Committee for the Multiple Bank and its wholly-owned subsidiaries. The single Summary of the Audit Committee Report was disclosed with the consolidated financial statements of Banco do Brasil S.A. Brasília-DF, August 13, Egidio Otmar Ames (Coordinator) Antônio Carlos Correia Elvio Lima Gaspar Henrique Jäger

33 Financial Statements BB LEASING S.A. - ARRENDAMENTO MERCANTIL MEMBERS OF THE MANAGEMENT BODIES DIRECTORS DIRECTOR-PRESIDENT Antonio Mauricio Maurano DIRECTOR-VICE-PRESIDENT Ivan de Souza Monteiro DIRETOR-MANAGER Sandro José Franco FISCAL COUNCIL Ricardo Botelho (President) Claudia da Costa Martinelli Wehbe Rodrigo Estrela de Carvalho AUDIT COMMITTEE Egidio Otmar Ames (Coordinator) Antônio Carlos Correia Elvio Lima Gaspar Henrique Jäger ACCOUNTING DEPT. Eduardo Cesar Pasa General Accountant Accountant CRC-DF /O-5 CPF