156 - Banco do Brasil MDA 3Q07

Transcription

1 156 - Banco do Brasil MDA 3Q07

2 ÍNDICE I FINANCIAL STATEMENTS Balance Sheet Income Statements Statement of Changes in Stockholders' Equity Statement of Changes in Financial Position II NOTES DO THE FINANCIAL STATEMENTS NOTE 1 The Bank and its Operations 09 NOTE 2 Presentation of the Financial Statements 09 NOTE 3 Accounting Practices 10 NOTE 4 Interbank Investments 13 NOTE 5 Securities and Derivatives Financial Instruments 13 5 a) Securities 14 5 b) Derivatives Financial Instruments 16 5 c) Adjustment to Market Value Securities and Derivatives 19 NOTE 6 Loan and Lease Operations 20 6, a) Details of the loan portfolio and loan operations classified as Other Receivables 20 6, b) Details of the Loans Portfolio by sectors, including operations with loan characteristcs classifieded as Other Receivables 20 6, c) Details of the loan portfolio by risk level and maturity, including operations with loan characteristics classified as "Other receivables 21 6, d) Details of the allowance for loan losses by risk level, including operations with loan characteristics classified as "Other receivables" 22 6, e) Changes in the allowance for loan and lease losses and for operations with loan characteristics classified as "Other receivables" 22 6, f) Changes in the provision for loss on other receivables without loan characteristics: 23 6, g) Supplementary information 23 NOTE 7 Other Receivables 23 7, a) Foreign exchange portfolio 23 7, b) Specific credits 24 7, c) Sundry 24 NOTE 8 Other Assets NOTE 9 Property and Equipment and Leased Assets NOTE 10 Deposits NOTE 11 Borrowings - Foreign Borrowings NOTE 12 Domestic Onlending Official Institutions NOTE 13 Funds Obtained in Foreign Capital Markets (in R$/US$ million) NOTE 14 Other liabilities ,a) Foreign exchange portfolio ,b) Financial and development funds ,c) Fund for Worker Assistance (FAT) and Fund to Guarantee the Increase in Employment and Earnings (FUNPROGER) 28 14,d) Sundry... 30

3 14,e) Subordinated Debt NOTA 15 Desdobramentos das Contas de Resultado ,a) Banking services fees ,b) Personnel expenses ,c) Other administrative expenses ,d) Other Operating Income ,e) Other operating expenses ,f) Non-operating income NOTE 16 Stockholders' Equity NOTE 17 Income Tax and Social Contribution on Net Income NOTE 18 Tax Credits NOTE 19 Equity in the Earnings (Loss) of Subsidiary and Associated Companies NOTE 20 Related-party Transactions NOTE 21 Operational Limits Basel Accord ia NOTE 22 Balance Sheet by Currency and Foreign Exchange Exp NOTE 23 Retirement and Pension and Health Plans - Post-Employment Benefits NOTE 24 Compensation Paid to Employees and Management NOTE 25 Assignment of Employees to External Organizations NOTE 26 Commitments, Responsibilities and Contingencies NOTE 27 Financial Instruments NOTE 28 Other Information III ADDITIONAL INFORMATION TO THE FINANCIAL STATEMENTS Statement Of Added Value Cash Flow Statement IV EXECUTIVE BOARD...

4 Banco do Brasil S.A. Financial Statements In thousands of Reais Quarter ended at September 30, 2007 B A L A N C E S H E E T BB - Domestic and Foreign branches A S S E T S CURRENT ASSETS Available Funds Short-term interbank investments......(note 4) Money market Interbank deposits Securities and derivative financial instruments...(note 5) Own portfolio Subject to repurchase agreements Deposits with the Brazilian Central Bank Pledged in guarantee Securities subject to repurchase agreements (with free movement) Derivative financial instruments Interbank accounts Payments and receipts pending settlement Restricted deposits Brazilian Central Bank deposits National Treasury - rural credits receivable National Housing Financing System (SFH) Interbank onlendings Correspondent banks Interdepartmental accounts Internal transfers of funds Loan operations......(note 6) Loan operations Public sector Private sector (Allowance for loan losses)...(note 6d) ( ) ( ) ( ) ( ) Lease operations...(note 6) (14) (1.002) Lease and sublease receivables Public sector Private sector (Unearned income from lease operation)... (54.332) (55.629) ( ) ( ) (Allowance for lease losses)... (15) (274) (15.099) (20.359) Other receivables Receivables on guarantees honored Foreign exchange portfolio......(note 7a) Income receivable Negotiation and intermediation of securities Special operations Sundry......(Note 7c) (Provision for other losses)...(note 6e & 6f) ( ) ( ) ( ) ( ) Other assets Investments Other assets......(note 8) (Provision for devaluations)... ( ) ( ) ( ) ( ) Prepaid expenses

5 LONG-TERM RECEIVABLES Interbank Investments......(Note 4) Money market Interbank deposits Securities and derivative financial instruments......(note 5) Own portfolio Subject to repurchase agreements Deposits with the Brazilian Central Bank Pledged in guarantee Securities subject to repurchase agreements (with free movement) Derivative financial instruments Interbank accounts National Treasury - rural credits receivable Loan operations......(note 6) Loan operations Public sector Private sector (Allowance for loan losses)...(note 6d) ( ) ( ) ( ) ( ) Lease operations...(note 6) (10) Lease and sublease receivables Public sector Private sector (Unearned income from lease operation)... (39.347) (41.997) ( ) ( ) (Allowance for lease losses)... (11) (207) (7.433) (8.430) Other receivables Receivables on guarantees honored Income receivable Specific credits......(note 7b) Sundry......(Note 7c) (Provision for other losses)..... (Notes 6e & 6f) ( ) ( ) ( ) ( ) Other assets Prepaid expenses PERMANENT ASSETS Investments Investments in subsidiary and associated companies...(note 20) Domestic Foreign Other investments (Provision for losses)... (50.708) (53.776) (64.501) (80.108) Land and buildings in use......(note 9) Land and buildings in use Other property and equipment in use (Accumulated depreciation)... ( ) ( ) ( ) ( ) Applications in fixed assets for leasing...(note 9) Leased assets (Accumulated depreciation)... (64.623) (32.657) ( ) ( ) Deferred charges Organization and expansion costs (Accumulated amortization)... ( ) ( ) ( ) ( ) Total

6 L I A B I L I T I E S / S T O C K H O L D E R S' E Q U I T Y CURRENT LIABILITIES Deposits... (Note 10) Demand deposits Savings deposits Interbank deposits Time deposits Sundry Deposits received under security repurchase agreements Own portfolio Third-party portfolio Unrestricted Portfolio Funds from acceptance and issue of securities Foreign securities Interbank accounts Receipts and payments pending settlement Correspondent banks Interdepartmental accounts Third-party funds in transit Internal transfers of funds Borrowings... (Note 11) Foreign borrowings Local onlendings - official institutions... (Note 12) National Treasury National Bank for Economic and Social Development (BND National Industrial Financing Authority (FINAME) Other institutions Foreign onlendings Foreign onlendings Derivative financial instruments (Note 5b) Derivative financial instruments Other liabilities Collection and payment of taxes and social contributions Foreign exchange portfolio (Note 14a) Social and statutory Taxes and social security contributions Negotiation and intermediation of securities Financial and development funds... (Note 14b) Subordinated debt (Note 14e) Sundry (Note 14d)

7 LONG-TERM LIABILITIES Deposits... (Note 10) Interbank deposits Time deposits Sundry Deposits received under security repurchase agreements Own portfolio Third-party portfolio Unrestricted Portfolio Funds from acceptance and issue of securities Foreign securities Borrowings (Note 11) Foreign borrowings Local onlendings - official institutions... (Note 12) National Bank for Economic and Social Development (BND National Industrial Financing Authority (FINAME) Foreign onlendings Foreign onlendings Derivative financial instruments (Note 5b) Derivative financial instruments Other liabilities Taxes and social security contributions Negotiation and intermediation of securities Financial and development funds (Note 14b) Special operations Subordinated debt (Note 14e) Hybrid capital and debt instruments Sundry (Note 14d) DEFERRED INCOME Deferred income STOCKHOLDERS' EQUITY (Note 16) Capital Local residents Foreign residents Capital reserves Revaluation reserves Revenue reserves Adjustment to market value - securities and derivative financial instrumen Retained earnings (accumulated losses) Total The accompanying notes are an integral part of these financial statements. 4

8 Banco do Brasil S.A Financial Statements In thousands of reais STATEMENT OF INCOME Quarter ended at September 30, 2007 BB-Domestic and Foreign Branches 3rd quarter/2007 3rd quarter/2006 3rd quarter/2007 3rd quarter/2006 INCOME FROM FINANCIAL INTERMEDIATION Loans Leases Securities Derivative financial instruments... ( ) ( ) ( ) ( ) Foreign exchange, net Compulsory deposits EXPENSES FROM FINANCIAL INTERMEDIATION... ( ) ( ) ( ) ( ) Deposits and funds obtained in the money market... ( ) ( ) ( ) ( ) Borrowings and onlendings... ( ) ( ) ( ) ( ) Leases... (13.120) (7.741) ( ) (94.428) Foreign exchange, net (64.460) -- (64.304) Allowance for loan losses....(note 6e & 6f) ( ) ( ) ( ) ( ) GROSS FINANCIAL INTERMEDIATION INCOME OTHER OPERATING INCOME/EXPENSES... ( ) ( ) ( ) ( ) Banking service fees (Note 15a) Personnel expenses... (Note 15b) ( ) ( ) ( ) ( ) Other administrative expenses... (Note 15c) ( ) ( ) ( ) ( ) Tax Expenses... ( ) ( ) ( ) ( ) Equity in the (earnings)/loss of subsidiary and associated companies..... (Note 19) Other operating income... (Note 15d) Other operating expenses... (Note 15e).. ( ) ( ) ( ) ( ) OPERATING INCOME NON-OPERATING INCOME... (Nota 15f) Income Expenses... (14.024) (15.243) (14.230) (15.388) PROFIT BEFORE TAXATION AND PROFIT SHARING INCOME TAX AND SOCIAL CONTRIBUTION ON NET INCOME... (Note 17) ( ) ( ) ( ) ( ) Income tax... ( ) ( ) ( ) ( ) Social contribution on net income... ( ) ( ) ( ) ( ) Deferred tax credits PROFIT SHARING... ( ) ( ) ( ) ( ) NET INCOME Number of shares Net income per share... 0,55 1,10 0,55 1,10 5

9 Banco do Brasil S.A. Financial Statements In thousands of Reais Quarter ended at September 30, 2007 Statement of Changes in Stockholders' Equity Revenue reserves Adjustment to market Revaluation value - marketable Paid-in Capital reserves Legal Statutory Expansion securities and derivatives Retained E V E N T S capital reserves in subsidiary reserve reserves reserves Bank Subs. & Assoc Earnings Total and associated Companies companies Balances at Capital increase by the exercise of subscription bonuses Adjustment to market value - securities and derivative financial instruments...(note 16f) Tax effect on adjustments - securities and derivative financial instruments...(note 16f) (19.470) (301) -- (19.771) Dividends and bonuses - Reversal of residual value Interest on own capital Realization of revaluation reserve in subsidiary and associated companies.(note 16d (40) Net income for the period Balances at Changes in the period (40) Balances at Adjustment to market value - securities and derivative financial instruments...(note 16f) ( ) ( ) Tax effect on adjustments - securities and derivative financial instruments...(note 16f) Donations Interest on own capital Revaluation reserves in subsidiary and associated companies...(nota 16d) Realization of revaluation reserve in subsidiary and associated companies...(note 16d) (80) Net income for the period Appropriations (Note 16e): Dividendos Propostos por conta da Reserva de Equalização de Dividendos ( ) ( ) Interest on own capital ( ) ( ) Balances at Changes in the period (76) -- ( ) -- (81.161) The accompanying notes are an integral part of these financial statements.

10 6

11 Banco do Brasil S.A. Financial Statements In thousands of Reais STATEMENT OF CHANGES IN FINANCIAL POSITION BB-Domestic and Foreign branches 3rd quarter 3rd quarter 3rd quarter 3rd quarter FINANCIAL RESOURCES WERE PROVIDED BY Net Income Adjustments to net income... ( ) ( ) Depreciation and amortization Depreciation of leased assets Equity in the earnings (loss) of subsidiary and associated companies... ( ) ( ) (50.162) ( ) (Profit)/loss on the sale of assets... (21.782) - (21.952) - Excess depreciation (13.096) (19.837) Changes in the currency exchange rate.... (77.416) (3.262) ( ) Provision/(reversal) for devaluation of other assets (Profit)/loss on the disposal of property... (14.009) - (14.009) - Other adjustments (40.004) (28.267) Changes in deferred income (5.259) Marked-to-Market Securities and Derivative Financial Instruments... (59.371) (59.371) Capital increase Third party funds: Increase in liabilities Deposits Deposits received under security repurchase agreements Funds from acceptance and issue securities Interbank and interdepartmental accounts Borrowings and onlendings Derivative financial instruments Other liabilities Decrease in current assets and long-term receivables Short-term interbank investments Lease operations Other receivables Disposal of assets and investments Non-operating assets Property and equipment in use Leased assets Investments Dividends received from subsidiary/associated companies Interest on own capital receivable FINANCIAL RESOURCES WERE USED FOR: Dividends and Bonuses Proposed Interest on own capital receivable Changes in deferred income Reversals in Assets and Investments Non-operating assets Property and equipment in use Leased assets Adjustment to market value of subsidiaries (79) - Investments

12 Banco do Brasil S.A. Financial Statements In thousands of Reais STATEMENT OF CHANGES IN FINANCIAL POSITION Deferred charges Increase in current assets and long-term receivables Short-term interbank investments Securities and derivative financial instruments Interbank and interdepartmental accounts Loan operations Lease operations Other receivables Other assets Decrease in liabilities Deposits received under security repurchase agreements Funds from acceptance and issue securities Interbank and interdepartmental accounts Derivative financial instruments Other liabilities Increase (decrease) in cash and cash equivalents... ( ) ( ) ( ) ( ) Change in cash and cash equivalents: At the beginning of the period At the end of the period Increase (decrease) in cash and cash equivalents... ( ) ( ) ( ) ( )

13 Banco do Brasil S.A. Financial Statements In thousands of Reais Quarter ended at September 30,2007 NOTES DO THE FINANCIAL STATEMENTS Note 1 The Bank and its Operations Note 2 Presentation of the Financial Statements Note 3 Significant Accounting Practices Note 4 Interbank Investments Note 5 Securities and Derivative Financial Instruments Note 6 Loan and Lease Operations Note 7 Other Receivables Note 8 Other Assets Note 9 Property and Equipment and Leased Assets Note 10 Deposits Note 11 Borrowings - Foreign Borrowings Note 12 Local Onlendings - Official Institutions Note 13 Funds Obtained in Foreign Capital Markets Note 14 Other liabilities Note 15 Analysis of Income Statement Items Note 16 Stockholders' Equity Note 17 Income Tax and Social Contribution on Net Income Note 18 Tax Credits Note 19 Equity in the Earnings (Loss) of Subsidiary and Associated Companies Note 20 Related-party Transactions Note 21 Operational Limits Basel Accord Note 22 Balance by Currency and Foreign Exchange Exposure Note 23 Retirement and Pension and Health Plans - Post-Employment Benefits Note 24 Compensation Paid to Employees and Management Note 25 Transfer of Employees to External Organizations Note 26 Commitments, Responsibilities and Contingencies Nota 27 Financial Instruments Nota 28 Other Information Additional Information to the Financial Statements - Statement of Added Value - Statement of Cash Flows

14 NOTE 1 The Bank and its Operations Banco do Brasil S.A. (the Bank ) is a publicly listed company established under private law, with both public and private stockholders, and subject to the requirements of Brazilian corporate legislation. Its corporate purpose is to carry out all assets, liabilities and accessory banking operations, to provide banking services, to intermediate and originate financial transactions and to perform any other activity permitted of institutions that form part of the National Finance System. It is also the main financial agent of the Brazilian Federal Government and is therefore required to carry out the functions attributed to it by law, specifically those of Art. 19 of Law 4595/1964. NOTE 2 Presentation of the Financial Statements 2.a) The Financial Statements have been prepared in accordance with the requirements of Law 6404/1976 and observing the rules and instructions issued by the Brazilian Central Bank (BACEN) and the Brazilian Securities Commission (CVM) include the operations of Banco do Brasil S.A. in Brazil and its branches and subsidiaries abroad (BB-Domestic and Foreign Branches), and the consolidated position of the branches and financial subsidiaries in Brazil and abroad and the foreign special purpose entities (BB- Consolidated), and the amounts are presented in thousand of Reais, except when indicated. The account balances of the Foreign branches and the Foreign branches and subsidiaries included in the financial statements of "BB - Domestic and Foreign Branches" and "BB - Consolidated", respectively, are as follows: Foreign Branches and Foreign branches Subsidiaries Current assets 28,423,540 31,917,184 27,312,263 32,071,404 Long-term receivables 11,417,646 12,078,401 12,135,930 11,957,847 Permanent assets 95, ,592 98, ,273 Total assets 39,936,193 44,107,177 39,546,853 44,161,524 Current liabilities 30,944,225 33,080,295 29,688,547 32,196,262 Long-term liabilities 6,413,648 7,632,593 6,529,048 7,777,739 Deferred income 4,641 5,949 4,641 5,949 Shareholder s equity 2,573,679 3,388,340 3,324,617 4,181,574 Total liabilities and stockholders' equity 39,936,193 44,107,177 39,546,853 44,161,524 Net income for the quarter 90, , , ,994 2.b) The consolidated financial statements (BB - Consolidated) comprise domestic companies and foreign branches and subsidiaries, as follows: Banco do Brasil - AG. Vienna (Austria), BB Leasing Company Ltd., Brasilian American Merchant Bank BAMB, BB Securities Ltd., BB Securities LLc. and the domestic subsidiaries: BB Administração de Ativos - Distribuidora de Títulos e Valores Mobiliários S.A., BB Banco de Investimento S.A., BB Leasing S.A. - Arrendamento Mercantil and BB Banco Popular do Brasil S.A. In order to comply with CVM Instruction No. 408, of August 18, 2004, the following Foreign Special Purpose Entities (SPE) has been included in the consolidation: Dollar Diversified Payment Rights Finance Company. The asset and liability and the income and expense accounts reflecting transactions between the foreign branches and subsidiaries and Banco do Brasil S.A. were eliminated in the consolidation. The translation into Reais of the financial statements prepared in a foreign currency is carried out using current exchange rates, in conformity with CVM Decision 28/1986.

15 BB Corretora de Seguros e Administradora de Bens S.A., BB Administradora de Cartões de Crédito S.A., BB Tur Viagens e Turismo Ltda., Cobra Tecnologia S.A., Ativos S.A. and BB Administradora de Consórcios S.A. were not included in the consolidation, in accordance with article 23 of CVM Instruction 247 as of , as they do not materially affect the consolidated financial statements, and Brasil Aconselhamento Financeiro S.A was also not included because it is in the process of liquidation. The investments in these companies were recorded using the equity method of accounting, and the information required by article 20 of CVM Instruction 247 of and CVM Deliberation 26 of is presented in Notes 19 and 20, respectively. 2.c) The Cash Flow Statement, prepared in accordance with Accounting Standards and Procedures - NPC 20, of , issued by the Brazilian Institute of Accountants - IBRACON, and the Statement of Added Value, prepared in accordance with Resolution CFC n.º 1,010, of , of the Federal Accounting Council, are being shown as supplementary information to the basic financial statements. NOTE 3 Significant Accounting practices 3.a) Income and expenses are recognized on the accrual basis. 3.b) Assets and liabilities with floating rates are recorded at their present values, on a pro rata basis, in accordance with variations in the contractual indices. Assets and liabilities with fixed rates are recorded at their future values, adjusted to reflect unearned income or prepaid expenses. Assets and liabilities denominated in or indexed to foreign currencies are adjusted in accordance with the exchange rates or official indices as of the balance sheet date and are presented at their realizable values. Transaction gains and losses are recorded in income for the period. For the subsidiaries located abroad, assets and liabilities are translated into Brazilian Reais at the closing exchange rate on the balance sheet date. 3.c) Interbank Investments Interbank funds applied are recorded at the investment value or purchase price, plus income accrued up to the balance sheet date. 3.d) Securities Securities purchased for the Bank's own portfolio are recorded at the amount paid, including brokerage charges and fees, and are classified based on the intention of management, in one of three different categories; as follows: 3.d.1) Trading securities: these are securities purchased in order to be actively and frequently traded. They are adjusted monthly to their market value, and increases and decreases in market value are recorded in income and expense accounts for the period; 3.d.2) Available-for-sale securities: these are securities which are not classified as either trading or heldto-maturity. They are adjusted monthly to their market value, and increases and decreases in market value are recorded, net of tax effects, in a separate stockholders' equity account; 3.d.3) Held to-maturity securities: these are securities that the Bank has both the intention and the financial capacity to hold to maturity. The financial capacity is supported by a cash flow projection that does not consider the possibility of selling these securities. They are not adjusted to their market value. The mark-to-market methodology used for securities was established following consistent and verifiable criteria, which considers the average trading price on the day of calculation or, if not available, pricing models that estimate the probable net realizable value. Income accrued on the securities, irrespective of the category in which they are classified, is accrued on a pro rata basis up to the date of maturity or final sale, using an exponential or straight-line method, based on the contractual remuneration and purchase price distributed over the investment period, and recorded directly in income for the period.

16 Losses from securities classified as available for-sale and held-to-maturity, if judged to be other than temporary, are recorded as an expense for the period, and a new cost basis for the asset is established. Upon their sale, the difference between the selling price and book value is recorded on the date of the transaction as either a gain or loss from securities. 3.e) Derivative financial instruments Derivative financial instruments are recorded at market value in each monthly balance sheet and yearly financial statements. Increases or decreases in market value are recorded in the income or expense accounts of the respective financial instruments. The mark-to-market methodology used for derivative financial instruments was established following consistent and verifiable criteria, which considers the average trading price on the date of calculation or, if not available, pricing models that estimate the probable net realizable value, according to the characteristics of the derivative. Derivative financial instruments used to offset, in whole or in part, risks arising from exposure to variations in the market values of financial assets or liabilities are considered hedging instruments and are classified and measured according to the nature of the hedge: 3.e.1) Market risk hedge - increases or decreases in value of the derivative financial instruments classified in this category, as well as of the item hedged, are recorded in income and expense accounts for the period; 3.e.2) Cash flow hedge - the effective portion of the increases or decreases in value of the derivative financial instruments classified in this category is recorded, net of tax effects, in a separate stockholders' equity account. The effective portion is that for which the variation of the item hedged, as relates to the corresponding risk, is offset by the variation in the derivative financial instrument used to execute the hedge, considering the accumulated gain or loss. Other variations in these instruments (i.e. the ineffective portion) are recorded directly in income or expense accounts for the period. 3.f) Loan and lease operations, advances on foreign exchange contracts, other receivables with characteristics of loans and the allowance for loan losses Loan and lease operations, advances on foreign exchange contracts, and other receivables with characteristics of loans are classified according to management's evaluation with respect to the risk level of the credit, taking into consideration the economic environment, past experience and specific risks in relation to the operation, the debtors and guarantors; and observing the parameters established by Bacen Resolution n.º 2,682/1999, which requires the periodic analysis of the portfolio and assignment of ratings in one of nine categories, ranging from AA (minimum risk) to H (maximum risk). Income from loans overdue for more than 60 days, regardless of their risk category, will only be recognized as income when effectively received (i.e. on the cash basis). Operations classified in level H continue in this rating for up to 6 months, at which time they are written off against the existing provision and controlled, for five years, in memorandum accounts, no longer being recognized in the balance sheet. Renegotiated operations are maintained, at a minimum, at the same level at which they were rated prior to the renegotiation. The renegotiation of loans that had already been written off against the provision are classified as H, and any gains from the renegotiation are only recognized as income when effectively received. The allowance for loan losses, considered sufficient by management, satisfies the minimum requirements established by the aforementioned Resolution n.º 2682/1999, as demonstrated in Note 6.d.

17 3.g) Permanent assets 3.g.1) Equity investments, when material, are recorded using the equity method based on the shareholder s equity information provided by the subsidiaries or the associated, in accordance with BACEN and CVM instructions and rules. Investments are recorded in the Permanent Assets account. The financial information of the foreign branches and subsidiaries is adapted to conform to the accounting practices adopted in Brazil and translated to Reais, with the impacts recorded in income for the period. Other permanent investments are stated at cost, price level-restated up to December 31, 1995, and are adjusted to market value through the formation of provision, in accordance with regulatory rules; 3.g.2) Property and equipment is stated at cost, less depreciation, calculated on the straight-line method at the following annual rates: buildings and leasehold improvements - 4%; vehicles, installations and equipment - 20%; others - 10%. 3.g.3) Deferred Charges are recorded at the acquisition cost, net of amortization, and are composed mainly by: leasehold improvements in properties owned by third parties for the installation of facilities, amortized at rates based on the rental terms; and the cost of purchase and development of systems, amortized at an annual rate of 20%. 3.h) Employee benefits Short-term benefits for existing employees are recognized on the accrual basis as the services which result in these benefits are provided. Post-employment benefits, comprising supplementary retirement benefits, medical assistance and other benefits for which the Bank is responsible, were calculated at December 31, 2006 in accordance with the criteria established by CVM Deliberation 371 of i) Income and Social Contribution Taxes 3.i.1) Corporate income tax is calculated at the basic rate of 15% plus a surcharge of 10% on taxable income, and the Social Contribution on net income is calculated at the basic rate of 9% on taxable income (Note 17.a). 3.i.2) The tax credits were recorded at the current rates calculated on their respective bases, and the recording, maintenance and reversal/use of the credits, is in accordance with Resolution 3059, of December 20, 2002, of the National Monetary Council (changed to Resolution CMN 3355, of March 31, 2006), and are supported by a technical study of future realization prepared by Bank management. 3.i.3) The Bank has recorded IRPJ, CSLL, Pasep and Cofins tax credits on the negative mark-to-market adjustments of securities and derivative financial instruments recorded in a separate account in Stockholders' equity. 3.i.4) IRPJ, CSLL, Pasep and Cofins deferred tax liabilities have been recorded by taking into consideration the positive mark-to-market adjustments of securities and derivative financial instruments recorded in income and the separate account in Stockholders' equity. 3.j) Contingent assets, liabilities and legal obligations The recognition, measurement and disclosure of contingent assets and liabilities, and legal obligations is performed in accordance with the criteria defined in CVM Deliberation n.º 489/2005. Contingent assets are only recognized in the financial statements when there is existing evidence demonstrating that realization of the asset is a certainty. Contingent liabilities are recognized in the financial statements when, based on the opinion of legal counsel and Management, the risk of loss of a lawsuit or administrative proceeding is considered probable, with a likely outflow of financial resources being required to settle the obligations, and when the amounts involved can be measured with sufficient reliability.

18 The provisions for claims are recorded taking into consideration the possibility of success by the plaintiff in the lawsuit against the Bank and or the subsidiaries. The provisions for labor claims are recorded considering, also, the jurisprudence applicable to each claim. The contingencies classified as probable are not recorded, and are required to be disclosed in the financial statements notes, and the the contingencies classified as remote do not require any provision or disclosure (see Note 26.a). Legal obligations - fiscal and social security - derived from tax obligations provided for in the applicable legislation, regardless of the probability of success of any lawsuits in progress, and which are recognized in full in the financial statements. 3.k) Use of estimates and judgments The preparation of financial statements in accordance with accounting practices adopted in Brazil requires Management to make judgments and assumptions, when applicable, in determining accounting estimates. Significant assets and liabilities subject to these judgments and assumptions include the residual value of property, plant and equipment, the allowance for loan losses deferred income tax assets, the provision for contingencies, valuation of derivative financial instruments, and the assets and liabilities relating to employee benefit plans. The actual amounts involved in these transactions will only be known upon their effective settlements. NOTE 4 Interbank Investments BB - Domestic and Foreign branches BB- Consolidated / Repurchase agreements 43,004,385 12,897,490 42,938,209 12,814,383 Sales pending settlement Own operations 2,282,325 1,870,282 2,290,130 1,870,282 Sales pending settlement Financed operations 38,022,060 11,027,208 37,948,079 10,944,101 Sales pending settlement Clearing and settlement houses 2,700, ,700, Interbank deposits 18,864,250 25,313,882 8,480,867 16,677,625 Foreign currency deposits 2,758,663 1,632, Total 64,627,298 39,843,428 51,419,078 29,492,008 NOTE 5 Securities and Derivative Financial Instruments The criteria used for the calculation of market values of marketable securities and derivative financial instruments are as follows: - the average of the representative trading price on the day of the calculation and the daily adjustments of futures market transactions reported by ANDIMA, BM&F, BOVESPA and the Brazilian Central Bank; or - the net probable realizable value obtained through extrapolating interest rates, foreign exchange rates, price and currency indices, consistent with prices observed during the quarter.

19 5.a) Securities The cost (plus accrued income) and market value of securities at September 30, 2007 is as follows: Maturity in days BB - Domestic and foreign branches Market Value Total Total With no Maturity over 360 Cost Market Value Unrealized gain (loss) Cost Market Value Unrealized gain (loss) 1 - Trading securities 2,235 1,490, ,783 4,866,743 6,497,708 13,658,299 13,662, ,102,153 5,130, Domestic 2,235 1,490, ,783 4,866,743 6,497,708 13,658,299 13,662, ,102,153 5,130, Financial Treasury Bills ,190 48,036 2,293,083 2,476,213 2,476, ,647,953 2,648, Federal Treasury Bills -- 1,490, ,435 4,818,707 2,503,270 9,479,505 9,481, ,388,309 2,415, Federal Treasury Notes ,696,667 1,695,676 1,696, ,891 66, Shares in listed companies 2, ,214 2, Debentures ,688 4,691 4, Available-for-sale securities 23,667 2,168,048 3,011,477 7,535,352 24,284,640 36,715,301 37,023, ,883 40,456,884 40,651, ,600 Domestic 23,666 2,168,048 2,913,312 7,533,116 22,670,906 35,157,497 35,309, ,551 39,166,973 39,252,454 85,481 Financial Treasury Bills ,138 2,533,059 3,277,318 14,906,782 21,138,530 21,194,297 55,767 31,626,284 31,747, ,156 Federal Treasury Bills -- 1,159,513 55,513 1,532,597 2,756,609 5,483,751 5,504,232 20,481 1,052,274 1,059,757 7,483 Brazilian Central Bank Notes , ,364 (883) Federal Treasury Notes ,337,141 3,832,250 6,107,456 6,169,391 61,935 3,542,185 3,520,084 (22,101) Federal Government securities other , ,639 1,415,678 1,418,790 3,112 1,706,640 1,714,359 7,719 Debentures , , ,387 (1,380) 62,961 60,781 (2,180) Agricultural debt securities ,485 9,474 8,262 (1,212) 8,488 6,715 (1,773) Shares in investment funds 4, ,149 4, ,500 6, Shares in social development funds , (678) 1, (953) Shares in listed companies 18, ,364 18,650 11,286 7,364 4,859 (2,505) Rural Product Bills (Commodities) -- 79, , ,040 3, , ,426 1, , ,003 (20,482) Other ,879 31, , , Abroad ,165 2,236 1,613,734 1,557,804 1,714, ,332 1,289,911 1,399, ,119 Brazilian foreign debt securities , ,575,717 1,515,145 1,671, ,176 1,229,213 1,337, ,177 Foreign debt securities - other countries ,497 1,300 38,017 42,659 42, ,399 49,284 (115) Shares in equity funds ,904 7,976 1,072 Shares in listed companies Other ,395 4,379 (16) 3 Held-to-maturity securities -- 13,583 4,430,053 1,935,802 13,647,695 20,025,756 20,027, ,930,620 24,808, Domestic ,425,479 1,685,870 13,497,250 19,628,952 19,608, ,211,350 24,044, Financial Treasury Bills ,685,734 1,685,848 13,482,018 16,852,726 16,853, ,859,207 20,859, Federal Treasury Notes ,739, ,232 2,775,828 2,754, ,575,341 2,407, Federal Government securities other , , Commodities ,614 6, Abroad -- 13,542 4, , , , , , , EUROBONDS , ,219 13, ,869 13, Brazilian foreign debt securities , , , , , , Foreign debt securities - other countries -- 13,542 4, ,008 18, Other ,203 18, Total 25,902 3,672,366 8,246,313 14,337,897 44,430,043 70,399,356 70,712, ,883 70,489,657 70,591, ,600 Maturity in days Market Value Total Total With no Maturity over 360 Cost Market Value Unrealized gain (loss) Cost Market Value Unrealized gain (loss) Total by portfolio 25,902 3,672,366 8,246,313 14,337,897 44,430,043 70,399,356 70,712, ,883 70,489,657 70,591, ,600 a) Own portfolio 25,902 3,420,651 5,519,534 9,036,627 15,510,212 33,404,184 33,512, ,931 34,171,078 34,137,447 83,987 b) Subject to repurchase agreements ,154,890 4,613,221 25,328,955 31,895,842 32,097, ,755 31,942,399 32,075, ,039 c) Deposits with the Brazilian Central , , ,866 3,254,216 4,441,965 4,442, ,779,149 3,779, Bank d) Pledged in guarantee , , , ,979 2, , , Maturity in years With no Maturity Due in up to one year Market Value Total Total Due from 1 to 5 years Due from 5 to 10 years Due after 10 years Total by category 25,902 26,256,576 37,627,847 5,449,864 1,352,332 70,399,356 70,712,521 70,489,657 70,591, Trading securities 2,235 7,162,261 6,334, , ,658,299 13,662,204 5,102,153 5,130, Available-for-sale securities 23,667 12,714,877 22,481, ,325 1,352,332 36,715,301 37,023,184 40,456,884 40,651, Held-to-maturity securities -- 6,379,438 8,811,801 4,835, ,025,756 20,027,133 24,930,620 24,808,994 Cost Market Value Cost Market Value The securities portfolio at market value is as follows: By category 1 Trading securities 13,662,204 19% 5,130,637 8% 2 Available for sale securities 37,023,184 53% 40,651,484 57% 3 Held to maturity securities 20,025,756 28% 24,930,620 35% Book value 70,711, % 70,712, % Marked-to market effects on Held-to-maturity securities 1,377 (121,626) Portfolio at marked to marked value 70,712,521 70,591,115

20 Maturity in days Valor de Mercado Total Total With no Maturity over 360 Cost Market Value Unrealized gain (loss) Cost Market Value Unrealized gain (loss) 1 - Trading securities 5,273 1,763, ,522 4,969,015 6,497,708 14,044,146 14,045, ,176,773 5,204, Domestic 5,273 1,762, ,783 4,866,743 6,497,708 13,933,611 13,937, ,107,685 5,136, Financial Treasury Bills ,190 48,036 2,293,083 2,476,213 2,476, ,647,953 2,648, Federal Treasury Bills -- 1,490, ,435 4,818,707 2,503,270 9,479,505 9,481, ,388,309 2,415, Federal Treasury Notes ,696,667 1,695,676 1,696, ,891 66, Debentures -- 51, ,688 56,145 55, Promissory Notes , , , Shares in listed companies 3, ,458 3, ,836 1, Shares in investment funds 1, ,830 1, ,696 3, Abroad , , , , ,088 68, EUROBONDS ,529 61, ,167 62, ,411 44, Brazilian foreign debt securities ,221 40, ,813 42, ,677 23, Foreign debt securities - other countries , ,555 3, Available-for-sale securities 869,028 2,168,048 3,169,207 7,556,788 24,703,106 37,967,728 38,466, ,449 42,872,778 43,180, ,312 Domestic 832,815 2,168,048 2,913,312 7,554,552 22,995,121 36,165,428 36,463, ,420 41,300,443 41,460, ,281 Financial Treasury Bills ,138 2,533,059 3,298,754 14,924,017 21,177,206 21,232,968 55,762 31,654,088 31,775, ,146 Federal Treasury Bills -- 1,159,513 55,513 1,532,597 2,756,609 5,483,751 5,504,232 20,481 1,052,274 1,059,757 7,484 Brazilian Central Bank Notes , ,364 (883) Federal Treasury Notes ,337,141 3,832,250 6,107,456 6,169,391 61,935 3,542,185 3,520,084 (22,101) Federal Government securities other , ,639 1,415,678 1,418,790 3,112 1,706,640 1,714,359 7,718 Debentures , , ,780 (670) 243, ,817 (1,285) Promissory Notes ,245,965 1,245,745 (220) Agricultural debt securities ,485 9,474 8,262 (1,212) 8,488 6,715 (1,773) Shares in investment funds FDIC ,203 5,040 5, Shares in equity funds other ,384 32,807 32,384 (423) Shares in investment funds other 4, ,149 4, ,376 14, Shares in social development funds , (9,454) 10, (9,728) Shares in listed companies 592, , , , , ,243 65,782 Shares in privately-held companies ,749 3, Shares in equity funds , ,107 14,999 Rural Product Bills (Commodities) -- 79, , ,040 3, , ,426 1, , ,003 (20,482) Securities in special status company (808) (808) Other 18, ,879 31, , ,252 (3,414) Abroad 36, ,895 2,236 1,707,985 1,802,300 2,002, ,029 1,572,335 1,719, ,031 EUROBONDS , ,669,968 1,579,460 1,765, ,112 1,305,110 1,442, ,295 Brazilian foreign debt securities ,227 1,300 38, , , , ,231 (115) Foreign debt securities - other countries 32, ,700 32,689 10,989 32,563 40,978 8,415 Shares in equity funds 3, ,524 2, ,414 1,437 Shares in listed companies ,339 17,338 (1) 3 - Held-to-maturity securities -- 13,583 4,433,363 1,935,802 13,647,695 20,029,066 20,030, ,933,798 24,812, Domestic ,425,479 1,685,870 13,497,250 19,628,952 19,608, ,211,350 24,044, Financial Treasury Bills ,685,734 1,685,848 13,482,018 16,852,726 16,853, ,859,207 20,859, Federal Treasury Notes ,739, ,232 2,775,828 2,754, ,575,341 2,407, Federal Government securities other , , Commodities ,614 6, Abroad -- 13,542 7, , , , , , , EUROBONDS , ,219 13, ,869 13, Brazilian foreign debt securities , , , , , , , Foreign debt securities - other countries -- 13,542 4, ,008 18, Other ,309 18, Total 874,301 3,944,884 8,413,092 14,461,605 44,848,509 72,040,940 72,542, ,449 72,983,349 73,196, ,312 Maturity in days Valor de Mercado Total Total With no Maturity Over 360 Cost Market Value Unrealized gain (loss) Cost Market Value Unrealized gain (loss) Total by portfolio 874,301 3,944,884 8,413,092 14,461,605 44,848,509 72,040,940 72,542, ,449 72,983,349 73,196, ,312 a) Own portfolio 874,301 3,693,169 5,686,314 9,160,335 15,834,427 34,981,453 35,248, ,562 36,588,873 36,638, ,579 b) Subject to repurchase agreements ,154,889 4,613,221 25,423,205 31,960,157 32,191, ,690 32,018,296 32,180, ,159 c) Deposits with the Brazilian Central Bank , , ,866 3,254,217 4,441,965 4,442, ,779,149 3,779, d) Pledged in guarantee , , , ,979 2, , , Maturity in years With no maturity Due in up to one year Market Value Total Total Due from 1 to 5 years Due from 5 to 10 years Due after 10 years Cost Market Value Cost Market Value Total by category 874,301 26,819,581 37,919,447 5,473,188 1,455,874 72,040,940 72,542,391 72,983,349 73,196, Trading securities 5,273 7,542,790 6,334, , ,044,146 14,045,771 5,176,773 5,204, Available-for sale securities 869,028 12,894,043 22,773, ,649 1,455,874 37,967,728 38,466,177 42,872,778 43,180, Held-to maturity securities -- 6,382,748 8,811,801 4,835, ,029,066 20,030,443 24,933,798 24,812,175 The securities portfolio at market value is as follows: By category 1 - Trading securities 14,045,771 19% 5,204,575 7% 2 - Available for sale securities 38,466,177 53% 43,180,090 59% 3 - Held to maturity securities 20,029,066 18% 24,933,798 34% Book value 72,541, % 73,318, % Marked-to-market effects on Held-to-maturity securities 1,377 (121,623) Portfolio at marked to marked value 72,542,391 73,196,840