Banco do Brasil Ordinary Shareholders Meeting 4/26/2012. Management Proposals and Other Documents for Information to Shareholders

Transcription

1 Banco do Brasil Ordinary Shareholders Meeting 4/26/2012 Management Proposals and Other Documents for Information to Shareholders Ordinary Shareholders Meeting - Comments from Management (CVM 481, Art. 9º, item III) Comments: the other documents on Art. 9 were filed with the CVM, via the IPE system, during the release of Banco do Brasil s results on 2/14/ Discussion of the allocation of net income for fiscal year 2010 and the distribution of dividends (CVM 481, Art. 9º 1º Item II Appendix 9 1 II) - Election of Members of the Fiscal Council (CVM 481, Art. 10). - Setting of compensation for members of the Fiscal Council. (CVM 481, Art 12, Items I and II) - Setting of annual total compensation for members of the executive bodies (CVM 481, Art 12, Items I and II) Extraordinary Shareholders Meeting - Bylaws amendment regarding to changes in the composition of Board of Directors and Audit Committee; - Bylaws amendment regarding to establishment the Remuneration Committee; - Amendment to Bylaws Article 32, which deals with the segregation of duties within the management areas; Rules - Bylaws amendment to adjust it to the BM&FBovespa Novo Mercado Listing

2 Ordinary Shareholders Meeting 2

3 COMMENTS FROM DIRECTORS Fiscal year ending 12/31/2010 In accordance with Art. 9, Section III of CVM Instruction 481/09 (Item 10 of the Reference Form) 3

4 10. COMMENTS FROM THE EXECUTIVE OFFICERS We, the members of the Executive Board of Banco do Brasil, pursuant to CVM Instruction 480/09, commented in this section 10 of the Reference Form the main aspects related to the Bank, retrospectively to 2009, 2010, and We declare that the information is true, complete and consistent. Initially, in item 10.1, we present our position about the financial conditions of the Bank, its capital structure, sources of loan and its indebtedness level. We further present the variations between the years 2011/2010 and 2010/2009 of each item of the Financial Statements (Balance Sheets - BP and Statement of Income - DRE). In item 10.2 we comment on the formation of the income of Banco do Brasil based on the vertical and horizontal analysis of Income Statement. We evidence the performance of the loan portfolios of Individual, Business and Agribusiness segments. Still in item 10.2, we comment on the Income from fees and comment on administrative (personnel, etc.) expenses. We also address the credit risk and the default of the Bank, comparing them with the Banking Industry (SFN). In compliance with item 10.3, we demonstrated the business conditions and the strategic rationale of the following events: acquisition of Banco Patagonia and of Eurobank, increase of interest in Visa Vale, in Brasilcap, partnership with Banco Bradesco S.A in the card sector, set-up of BB Securities Asia Pte. Ltd, and the new strategies with the Insurance businesses. Then, in item 10.4 we talk about material changes to the accounting practices adopted by the Bank and its effects on the Financial Statements. Besides, we commented the opinions of the Auditors on the Financial Statements related to the fiscal years ended on December 31, 2009, 2010 and In relation to the critical accounting policies, item 10.5, we highlight provision for loan operations, legal contingencies, revenue recognition, tax credits, long-lived assets, useful life of non-current assets, pension plans and the criteria for asset impairment tests. Referring to item 10.6, we commented on the internal controls intended to assure the correctness of the Financial Statements, which are based on the best market and corporate governance practices, besides the compliance with the legislation in force and the guidance from regulatory bodies. In item 10.7, we present how the funds arising from the securities public offering that ended in In response to items 10.8 and 10.9, we have listed the items not evidenced in the Financial Statements such as non-activated tax credits, contracts of derivative financial instruments, contracts of guarantees provided, unused facilities and letters of credit of imports and exports, discussing any impacts on the Financial Statements items, besides their natures and values. Finally, in item 10.10, addressing the business plan, we detail the Banco do Brasil's fixed investment plan, divided into: (i) Adequacy of the service network; (ii) Modernization of the set of automated teller machines; and (iii) Maintenance and preservation of physical facilities; Expansion of the processing and storage capacity in IT; Delivery of technological solutions; and Modernization of the security solutions. We believe that all the factors that significantly influenced the Banco do Brasil's operating performance were commented on in items 10.1 to and, accordingly, no additional comments were included in item

5 10.1 The executive officers should comment on: a. general financial conditions Banco do Brasil closed the year 2011 with R$ 981,230 million in total assets, consolidating its position of leading institution in Latin America, according to the ranking of consulting firm Economática. The growth in assets, of 21.0% in relation to 2010 and 38.5% in relation to 2009, occurred mainly on account of the strong growth of the loan portfolio, operations with securities and short-term interbank investments. In 2011, net income reached R$12,126 million, corresponding to a return on average equity of 22.4% The coverage ratio of administrative expenses that was 64.4% (Service revenues + Fee income/personnel expenses), compared to 62.1% in Service revenues and bank fee income reached R$ 18,242 million in 2011, an increase of 12.8% in relation to the previous year. The table below presents the main equity items, according to consolidated financial statements published by Banco do Brasil. The balances of assets and liabilities are presented with the current and noncurrent accounts grouped. We present below tables with more details of BB's asset status. Consolidated Financial Information R$ million, except for percentages 12/31/2009 Share % Total 12/31/2010 Share % Total Var. % 10/09 12/31/2011 Share % Total Var. % 11/10 Current and non-current assets Total Cash 7, , , Securities and interbank investments 292, , , Interbank accounts 26, , , Loan and lease operations 266, , , Other Receivables 95, , , Other Assets 2, , , Permanent assets 17, , , Total assets 708, , , Current and non-current assets Deposits 337, , , Money market borrowing 160, , , Borrowings and onlendings 37, , , Other liabilities 120, , , Other liabilities 15, , , Shareholders' equity 36, , , Total liabilities 708, , , Source: Financial Statements of Banco do Brasil. b. capital structure and possibility of redeeming shares or capital units At the end of 2011, Banco do Brasil presented a Referential Shareholders' Equity of R$ 80,482 million, a figure which exceeds that for 2010 by 20.3%. This increase is basically explained by the result attained in December 31 Variation (%) R$ million, except for percentages /09 11/10 Referential equity (PR) 53,704 66,928 80, Level I 41,087 52,397 60, Tier II 17,004 19,763 24,

6 December 31 Variation (%) R$ million, except for percentages /09 11/10 Deduction from the PR (4,387) (5,233) (5,011) 19.3 (4.2) Required Referential Equity (RRE) 42,749 52,297 63, Surplus/(insufficiency) of RE 10,955 14,630 17, K Coefficient % (0.7) Source: Financial Statements of Banco do Brasil. Redemption hypotheses There are no hypotheses of redemption of BB shares other than those provided for in the law. Formula for the calculation of redemption amount: Not applicable. c. payment ability in relation to the financial commitments assumed Banco do Brasil - BB Múltiplo has a good payment ability. The difference between Liquidity Assets and Liquidity Liabilities reached R$92,633 million at the end of In comparison to the year 2010, there was an increase driven mainly by the important growth of interbank investments (+54.8%). Similar growth is observed in BB-Consolidated. Financial Information on the Multiple Bank December 31 Variation (%) R$ million, except for percentages /09 11/10 Liquidity Assets (A) 277, , ,975 (20.6) 32.1 Total Cash 7,597 9,397 9, (1.8) Interbank Investments 174, , ,573 (34.1) 54.8 Securities (except linked to BACEN)¹ 95,929 96, , Liquidity Liabilities (B) 165, , ,342 (10.2) 33.8 Interbank deposits 15,556 22,023 18, (17.6) Money market borrowing 149, , ,202 (15.6) 42.7 Liquidity Balance (A - B) 112,616 72,093 92,633 (36.0) 28.5 (1) Bacen restricted securities are not considered liquidity assets as they do not represent free trading securities. Source: Financial Statements of Banco do Brasil. Financial Information on Consolidated BB R$ million, except for percentages December 31 Variation (%) /09 11/10 Liquidity Assets (A) 300, , ,015 (13.1%) 31.3 Total Cash 7,843 9,745 10, % 3.0 Interbank Investments 168, , ,288 (36.1%) 54.6 Securities (except linked to BACEN)¹ 124, , , % 15.9 Liquidity Liabilities (B) 172, , ,625 (6.5%) 30.1 Interbank deposits 11,619 18,998 14, % (23.9) Money market borrowing 160, , ,175 (11.6%) 37.3 Liquidity Balance (A - B) 128, , ,390 (21.9%) 33.4 (1) BACEN restricted securities are not considered liquid assets as they do not represent free trading securities. Source: Financial Statements of Banco do Brasil. 6

7 d. funding sources for working capital and investments in non-current assets utilized The Banco do Brasil's main funding sources for loan operations in Brazil, in Brazilian Reais, are demand deposits, savings deposits, Bank Deposit Certificates (CDBs) and Interbank Deposit Certificates (CDIs). In addition, in order to take advantage of opportunities arising from its position in government securities, Banco do Brasil can raise funds on the interbank market, pledging these assets as collateral. The significant volume of demand deposits and savings in relation to Total deposits (37.4%) reduces the weighted average cost of funding, and given their dispersion, allows stability in BB's cash flow. The table below presents the funding sources of the as of the dates stated: Financial Information on the Multiple Bank R$ million December 31 Variation (%) /10 Funds not arising from the Federal Government Demand deposits 56,212 63,296 60,371 (4.6) Savings deposits 75,742 89, , Interbank deposits 15,556 22,023 18,140 (17.6) Time deposits 182, , , Others Total deposits 330, , , Deposits received under the terms of security repurchase agreements 149, , , Total funds not arising from the government 479, , , Funds from the Federal Government Repass borrowings 28,895 47,285 47, Special operations Total funds from the Federal Government 29,100 47,285 47, Total funds 508, , , Source: Financial Statements of Banco do Brasil. Financial Information on Consolidated BB R$ million December 31 Variation (%) /10 Funds not arising from the Federal Government Demand deposits 56,459 63,503 62,016 (2.3) Savings deposits 75,741 89, , Interbank deposits 11,619 18,998 14,450 (23.9) Time deposits 193, , , Others Total deposits 337, , , Deposits received under the terms of security repurchase agreements 160, , , Total funds not arising from the government 498, , , Funds from the Federal Government Repass borrowings 31,390 50,764 50, Special operations 206-7

8 R$ million December 31 Variation (%) /10 Total funds from the Federal Government 31,596 50,764 50, Total funds 529, , , Source: Financial Statements of Banco do Brasil The table below presents loan operations by type of financial product as of the dates stated: Financial Information on the Multiple Bank R$ million December 31 Variation% /10 Loans and bills discounted 124, , , Financing (1) 67,024 85, , Rural and agribusiness financing 66,887 76,973 92, Housing loans 1,611 3,421 7, Financing of Infrastructure and development Total 259, , , (1) Banco do Brasil distinguishes between "Financing" and "Loans and Bills Discounted" in defining financing as loans intended for specific projects or programs and in classifying all the other loans for working capital or other purposes as "Loans". Source: Financial Statements of Banco do Brasil Financial Information on Consolidated BB R$ million December 31 Variation % /10 Loans and bills discounted 129, , , Financing (1) 80, , , Rural and agribusiness financing 67,167 77,639 93, Housing loans 1,611 3,476 7, Financing of Infrastructure and development , Total 279, , , (1) Banco do Brasil distinguishes between "Financing" and "Loans and Bills Discounted" in defining financing as loans intended for specific projects or programs and in classifying all the other loans for working capital or other purposes as "Loans". Source: Financial Statements of Banco do Brasil Funding Sources and Application of Funds The following indicators show the relationship between the funding sources and application of funds at Banco do Brasil - BB Múltiplo, evidencing that the loan portfolio is backed both by deposits, and by other forms of funding, such as BNDES onlending, resources of Financial and Development Funds and overseas funding, among others. Financial Information on the Multiple Bank R$ million December 31 Variation % /09 11/10 Total funding 373, , , Total deposits 330, , , Domestic onlending 28,895 47,285 47, Financial and development funds 4,135 3,568 4,002 (13.7) 12.2 Subordinated debt 16,388 19,961 27, Foreign borrowing 18,598 25,779 38, Compulsory deposits (24,167) (83,929) (90,736) Net loan portfolio 258, , , Loan portfolio 275, , ,

9 R$ million December 31 Variation % /09 11/10 Provision for credit risk (17,612) (16,499) (17,236) (6.3) 4.5 Total Cash 115,617 71,141 85,656 (38.5) 20.4 Ratios (%) Net Loan Portfolio / Total Deposits Net Loan Portfolio / Total Funding Cash and cash equivalents/funding Total Source: Financial Statements of Banco do Brasil. The Net Loan Portfolio / Total Funding ratio ended in 2011 at 81.2%, as opposed to 81.4% in 2010 and 69.1% in The increase in the index is explained by the combined effect of the expansion of BB's loan portfolio and the rise in the payment of compulsory deposit. However, there is also a comfortable margin for growth of the loan portfolio without the need for other financing sources. Financial Information on Consolidated BB R$ million December 31 Variation % /09 11/10 Total funding 381, , , % 19.6 Total deposits 337, , , % 17.4 Domestic Onlending 31,390 50,764 50, % 0.4 Financial and development funds 4,135 3,568 4,002 (13.7%) 12.2 Subordinated debt 18,553 23,412 30, % 31.9 Overseas funding 14,582 21,228 30, % 42.2 Compulsory Deposits (24,280) (87,035) (93,660) 258.5% 7.6 Net Loan Portfolio 282, , , % 18.4 Loan portfolio 300, , , % 18.0 Provision for Credit Risk (18,617) (17,315) (19,015) (7.0%) 9.8 Total Cash 99,732 47,737 60,813 (52.1%) 27.4 Ratios (%) Net Loan Portfolio / Total Deposits 83.6% 90.5% 91.3% Net Loan Portfolio / Total Funding 73.9% 87.7% 86.9% Cash and cash equivalents/funding Total 26.1% 12.3% 13.1% Source: Financial Statements of Banco do Brasil. e. sources of financing for working capital and for investment in non-current assets that it intends to use for coverage of liquidity shortages Banco do Brasil does not have a liquidity shortage. Items 10.1.c e 10.1.d present payment ability and liquidity analyses, respectively. f. indebtedness levels and characteristics of such dents Indebtedness levels and characteristics of such debts, also describing: (i) relevant loan and financing agreements; (ii) other long-term relationships with financial institutions; (iii) degree of subordination among debts; and (iv) any restrictions imposed on the issuer, especially in relation to indebtedness limits and the contracting of new debts, to the distribution of dividends, to the divestiture of assets, to the issuance of new securities and to the sale of controlling interest. Banco do Brasil issues securities in the international and domestic capital market, using both subordinated debt and hybrid capital and debt instruments. The objective is to obtain funds for free use and to reinforce the Bank's Referential Equity with those resources qualifying as Capital. These 9

10 issues have institutional investors, financial institutions and private banking clients as a target audience. Furthermore, for purposes of composition of its Referential Equity, Banco do Brasil classifies as Subordinated Debt the resources from the Constitutional Financing Fund of the Midwest - FCO (Vote CMN No 067/2001 and Bacen - Diret Official Letter No. 1,602/2001), qualifying as Capital in keeping with the low enforceability and long term of stay of these funds at the Bank. In this manner, the amount of R$ 14,771 million determined on December 31, 2011, comprised the Level of Banco do Brasil (R$ 13,456 million, on December 31, 2010). The amount of R$2,719 million of Perpetual Bonuses was considered level I capital of the Referential Equity - PR on 12/31/2011 (R$2,415 million and R$816 million on 12/31/2010, respectively, level I and level II of the PR), in compliance with Resolution CMN no. 3,444/2007. I. Borrowings R$ million up to 1 year from 1 to3 years from 3 to5 years BB-Multiple Bank from 5 to15 years 12/31/ /31/2010 Abroad Borrowings from BB Group companies overseas , ,909 8,846 Borrowings by bankers abroad 7, ,399 5,291 Public sector repass borrowing (1) Imports Exports Total 8,368 14, ,485 15,389 Source: Financial Statements of Banco do Brasil. R$ million up to 1 year from 1 to 3 years from 3 to 5 years BB-Consolidated from 5 to 15 years 12/31/ /31/2010 Domestic Borrowing by non financial companies Others Abroad Borrowings by bankers abroad 8,809 2, ,879 7,180 Public sector repass borrowing (1) Exports Imports Total 9,506 2, ,257 8,598 (1) Maturity date as of April 2015 and rate of 6.92% p.a. Source: Financial Statements of Banco do Brasil. II. Foreign onlendings R$ thousand BB-Multiple Bank BB-Consolidated 12/31/ /31/ /31/ /31/2011 Free Resources - Resolution CMN 3844/ , ,931 96, ,876 Special fund for support to small and medium manufacturing companies - FAD Total 526, ,408 97, ,353 Source: Financial Statements of Banco do Brasil. III. Funds from acceptance and issue of securities R$ million 10

11 Borrowings Banco Múltiplo Currency Issued value Remuneration p.a. Date no maturity 12/31/ /31/2011 Program Global Medium Term Notes 2,965 5,199 R$ thousand 350, % Jul/07 Jul/ USD Libor 100,000 thousand 6m+2.55%p.a Jul/09 Jul/ USD thousand 950, % Jan/10 Jan/15 1,617 1,820 USD thousand 500,000 6% Jan/10 Jan/ EUR thousand 750, % Jan/11 Jan/ ,880 Senior Notes USD thousand 500, % Nov/11 Jan/ Certificates of deposits - Long Term 2,286 1,796 USD thousand 4, % Nov/09 11/2012 (1) 7 -- USD thousand 1, % Dec/09 12/2012 (1) 2 -- USD thousand 99, % Jan/10 01/2013 (1) USD thousand 100, % Jan/10 01/2013 (1) USD thousand 2, % May/10 May/ USD thousand 200, % Aug/10 06/2012 (1) USD thousand 100, % Aug/10 07/2012 (1) USD thousand 5, % Aug/10 06/2012 (1) 8 -- USD thousand 100, % Aug/10 08/2012 (1) USD thousand 10, % Aug/10 08/2016 (1) USD thousand 200, % Aug/10 03/2013 (1) USD thousand 100, % Sep/10 08/2012 (1) USD thousand 4, % Sep/10 09/2012 (1) 8 -- USD thousand 30, % Sep/10 09/2013 (1) USD thousand 150, % Oct/10 10/2012 (1) USD thousand 100, % Nov/10 10/2012 (1) USD thousand 25, % Nov/10 11/2012 (1) USD thousand 150, % Dec/10 12/2013 (1) USD thousand 100, % Jan/11 Jan/ USD thousand 99, % Feb/11 Jan/ USD thousand 100, % Mar/11 Mar/ USD thousand 200, % Mar/11 Mar/ USD thousand 10,000 3% Aug/11 Aug/ USD thousand 30, % Sep/11 Sep/ USD thousand 233, % Oct/11 Feb/ USD thousand 25, % Nov/11 Feb/ USD thousand 2, % Dec/11 Jun/ USD thousand 150, % Nov/11 Dec/ USD thousand 2, % Dec/11 Apr/

12 Borrowings Currency Issued value Remuneration p.a. Date no maturity R$ million 12/31/ /31/2011 USD thousand 5, % Dec/11 Apr/ Certificates of deposits - Short-term (2) 1,290 4,129 Certificate of Credit EUR thousand 3,500 3 to 3.31% 8 -- Letters of Credit - Agribusiness 275 6,596 Short-Term R$ 275 1,095 Long-Term (3) R$ -- 5,501 Fund issuance costs R$ -- (0.4) Letters of Credit 208 3,487 Total BB-Multiple Bank 7,032 22,140 Banco Patagonia Bonds G PAT Series I ARS thousand Bonds G PAT Series II ARS thousand Bonds G PAT Series III ARS thousand Bonds G PAT Series IV ARS thousand Special purpose entities - EPE Abroad (4) , % Mar/11 Mar/ , % May/11 May/ , % Aug/11 Aug/ , % Nov/11 Nov/ Securitization of future flow of payment orders from abroad USD thousand 250, % Dec/03 Dec/ USD Libor 250,000 thousand 3m+0.55%p.a Mar/08 Mar/ USD Libor 200,000 thousand 3m+1.2%p.a Sep/08 Sep/ USD thousand 150, % Apr/08 Jun/ Total Special purpose entities - EPE Abroad 1,185 1,141 Banco Votorantim Debentures 1,507 1,566 With Exchange variation R$ PTAX+12.04% Dec/06 Dec/ Post-fixed R$ 0.35% DI Jun/06 Jul/ Post-fixed R$ DI Apr/11 Dec/ Real Estate Receivables Certificates 87 to 95.5% DI Feb/09 Jan/ Letters of Credit - Agribusiness Post-fixed 45 a 96.5% DI Aug/07 Mar/ Pre-fixed to 12.35% May/08 Apr/ Letters of Credit 1,303 3,572 Pre-fixed 10.9 to 14% Jul/10 Feb/ Post-fixed 100 to 112% DI Jul/10 Jul/17 1,297 3,447 Post-fixed 108 to 109% Selic Feb/11 Feb/ Post-fixed 4.5 a 7.81% + IPCA Jan/11 Sep/ Post-fixed 5.05 a 5.99% + IGPM Aug/11 Sep/ "Global medium-term notes" program 1,442 2,966 Short-term (5) Long-Term 963 2,893 R$ thousand 100, % Dec/05 Dec/ USD thousand 100, % Sep/06 Sep/ R$ thousand 100, % Apr/07 Apr/ USD thousand 250, % Feb/10 Feb/ USD thousand 37, % Apr/10 Feb/ CHF thousand 125, % Dec/10 Dec/

13 Borrowings Currency Issued value Remuneration p.a. Date no maturity R$ million 12/31/ /31/2011 USD thousand 2, % Feb/11 Feb/ USD thousand 625, % Feb/11 Feb/ ,189 USD thousand 37,500 3% Mar/11 Mar/ USD thousand 1, % Apr/11 Mar/ USD thousand % May/11 May/ R$ thousand 10, % May/11 Jan/ R$ thousand 309, % May/11 May/ USD thousand 29, % Jul/11 Jul/ Total Banco Votorantim 5,149 8,933 Non-Financial Corporations Cibrasec Real Estate Receivables Certificates (6) 7 6 Kepler Weber S.A. Debentures R$ TJLP+3.8% Sep/07 Sep/ Ativos S.A. Securitizadora de CrédItos Financeiros Debentures R$ DI + 1.5% Mar/10 Mar/ Total Non-Financial Corporations Eliminated amount on Consolidated (7) (3) (79) Total BB - Consolidated 13,486 32,323 (1) Operations settled in advance over the course of the year (2) Securities maturing in less than 360 days and interest rates of the certificate issued in U.S. dollars between 0.35% and 3.8% p.a. (3) Operations with maturity between 361 and 720 days. (4) The Special Purpose Entity - EPE "Dollar Diversified Payment Rights Finance Company" was organized under the laws of the Cayman Islands for the following purposes: (a) issue and sell securities in the international market; (b) use funds raised with the issue of securities to pay for the purchase from BB of BB's rights on payment orders issued by correspondent banks in the USA and by BB's New York branch, in US dollars, to any BB branch in Brazil (Remittance Rights); and (c) to make payments of principal and interest with regard to securities and other payments provided in the agreements covering the issue of such securities. The SPE declares that it has no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. Bank does not hold the control, is not a shareholder, the owner, or is a beneficiary of any of the results of operations of the SPE. The liabilities arising from the issued securities are paid by the SPC using the funds accumulated in its account. (5) Securities with a term below 360 days, whereas the interest rates in foreign and local currency between 3.98% and 30.59% per annum. (6) Reference Rate - TR, General Market Price Index - IGP-M and IPCA and average maturity of 110 months. (7) Refers to securities issued by BB Conglomerate, in possession of subsidiaries abroad. Source: Financial Statements of Banco do Brasil. IV - Other liabilities - Subordinated debts Borrowings BB-Multiple Bank Currency Issued value Remuneration p.a. 13 Date of funding R$ million Maturity 12/31/ /31/2011 FCO - Recursos do Fundo Constitucional do Centro-Oeste 13,456 14,771 funds applied (1) 11,751 13,811 Resources available (2) 1, Charges to capitalize Subordinated CDB issued in the country 3,808 4, , % of CDI Mar/09 Sep/14 1,083 1,227 1,335, % of CDI Mar/09 Mar/15 1,607 1,824 1,000, % of CDI Nov/09 Nov/15 1,118 1,254 Subordinated debt Abroad 1,614 4,684 USD thousand 300, % Sep/04 Sep/ USD thousand 660, % Oct/10 Jan/21 1,114 1,260 USD 1,500, % May/11 Jan/ ,847

14 Borrowings Currency thousand Issued value Remuneration p.a. Date of funding R$ million Maturity 12/31/ /31/2011 Subordinated Letters of Credit 1,083 3,429 1,000, % of CDI Mar/10 Mar/16 1,083 1,220 1,006, % of CDI Mar/11 Mar/ , , % of CDI Apr/11 Apr/ , % of CDI May/11 May/ , % of CDI Sep/11 Oct/ Total Subordinated debt Banco do Brasil 19,961 27,189 Banco Votorantim Subordinated CDB issued in the country 1,631 1, ,500 CDI % Nov/07 Nov/ ,500 CDI % Dec/07 Dec/ ,000 (3) CDI % Dec/07 Dec/ ,500 IGPM % Dec/07 Dec/ ,500 IPCA % Mar/08 Mar/ ,500 IPCA % Aug/09 Aug/ ,250 IPCA % Aug/09 Aug/ ,500 IPCA % Aug/09 Aug/ ,500 IPCA % Aug/09 Aug/ ,000 CDI+1,670229% Aug/09 Aug/ ,000 CDI+1,635268% Dec/09 Dec/ ,000 CDI+1,674668% Dec/09 Dec/ Subordinated Note USD thousand 575, % Jan/10 Jan/ ,100 Subordinated Letters of Credit 152 1,055 1,000 IPCA % Nov/10 Nov/ ,000 IPCA+7.25% Nov/10 Nov/ ,000 IPCA+7.2% Nov/10 Nov/ ,000 IPCA+7.1% Nov/10 Nov/ ,950 CDI+1,3% Nov/10 Nov/ ,000 CDI+1,6% Dec/10 Dec/ ,900 CDI+1.94% May/11 May/ ,550 IGPM % May/11 May/ ,400 IPCA % May/11 May/ ,650 IPCA % May/11 May/ ,500 IPCA+7.95% May/11 May/ ,000 IPCA+7.95% Jul/11 Jul/ ,000 IGPM + 7.7% p.a. Jul/11 Jul/ ,922 IPCA+8.02% Jul/11 Jul/ ,000 IPCA+7.9% Aug/11 Aug/ ,000 IPCA+7.93% Aug/11 Aug/ ,000 IPCA+7.76% Aug/11 Aug/ ,000 IPCA+7.85% Aug/11 Aug/ ,050 IGPM + 7.7% p.a Aug/11 Aug/ , % of CDI Aug/11 Aug/ , % of CDI Sep/11 Sep/ ,000 IGPM % p.a Sep/11 Sep/ , % of CDI Oct/11 Oct/ IPCA+5.45% Oct/11 Oct/ ,000 IGPM % p.a Oct/11 Oct/ ,116 IPCA+7% Nov/11 Nov/ , % of CDI Nov/11 Dec/ ,349 IPCA+7.2% Nov/11 Nov/ Debentures 693,575 CDI+0,5% Apr/06 Apr/ Total Subordinated debt Banco Votorantim 3,452 3,699 14

15 Borrowings Currency Issued value Remuneration p.a. Subordinated debt issued by the BB-Multiple Bank, in the possession of subsidiary abroad, eliminated in the BB-Consolidated Date of funding R$ million Maturity 12/31/ /31/ Total subordinated debt - BB-Consolidated (4) 23,412 30,885 (1) Contracted charges are paid by borrowers with less the del credere financial institution, according to article 9 of Law 7827/1989. (2) Remunerated based on extra-rate announced by the Central Bank of Brazil (Bacen), pursuant to Article 9 of Law No. 7827/1989. (3) The amount of R$ 192,071 thousand from the amount issued was settled during the period from to (4) The amount of R$ 24,522,493 thousand (R$ 18,738,173 thousand in ) comprise the level II of the Referential Shareholders' Equity (PR), in conformity with CMN Resolution 3444/2007. As determined by the Bank, subordinated debts issued by Banco Votorantim ceased to compose the Referential Equity of the Bank (Note 29.f.). Source: Financial Statements of Banco do Brasil. V - Recorded in Other Liabilities - Capital and Debt Hybrid Instruments. Funding Issued amount (USD million) BB-Multiple Bank and BB-Consolidated Remuneration p.a. R$ million Date of funding 12/31/ /31/2011 Perpetual Bonuses % Jan/ , % Oct/09 2,460 2,848 Total BB-Multiple Bank 2,000 3,371 2,848 Values eliminated in the BB- Consolidated (10) (2) Total BB-Consolidated 3,361 2,846 The amount of R$ 2,718,895 thousand of the Perpetual Bonuses composes level I of the Referential Equity - PR (R$ 2,414,830 thousand and R$ 816,046 thousand on 12/31/2010, respectively, level I and level II of the PR), in compliance with Resolution CMN no. 3,444/2007 (Note 29.f). The Bank settled in January 2011, the bonus in the amount of USD 500,000, issued in January 2006, through the exercise of the option provided in the rescue operation. The transaction of USD 1,500,000, issued in October 2009, has the option of redemption at the initiative of the Bank from 2020 and on each monthly payment of interest thereafter, provided by prior authorization of the Central Bank of Brazil. If the Bank does not exercise the option to redeem in October 2020, the interest on the bonds will be fixed on this date for 7.782% over the trading price of Treasuries North American 10 years. Thereafter, every 10 years, the interest on the bonds will be corrected by taking into account the trading price of North American Treasuries of 10 years. The terms of Perpetual bonuses determine that the Bank has suspended payments of monthly interest and / or accessories on those securities issued (which shall not be paid or accrued) if: (i) the Bank is not framed or such charges do not allow the Bank is in accordance with the levels of capital adequacy, operational limits or its financial indicators are below the minimum level required by the rules applicable to Brazilian banks; (ii) the Central Bank of Brazil or the Regulatory Authorities determine the suspension of payments of the aforesaid charges; (iii) some insolvency or bankruptcy event occurs; (iv) some default occurs; or (v) )the Bank has not distributed dividend payments or interest on own capital to common shareholders for the period corresponding to the period of calculation of such interest and/or accessories. 15

16 VI - Other Liabilities - Securitization Funding Issued amount (USD million) BB-Multiple Bank and BB-Consolidated Compensation p.a. Date Funding Maturity R$ million 12/31/ /31/2011 Future flow of credit card invoice receivables % Jul/03 Jun/ % Jul/03 Jun/ Total Source: Financial Statements of Banco do Brasil. The Special Purpose Company - SPC "Brazilian Merchant Voucher Receivables" was created under the laws of the Cayman Islands with the following purposes: (i) issue and sell securities in the international market; (ii) to use funds raised with the issue of securities to pay for the purchase of current and future rights of Cielo S.A. against Visa International Service Association over the "receivables" arising from: (i.1) credit or charge purchases made in Brazilian territory, in any currency processed by Cielo, with Visa cards issued by financial institutions located outside of Brazil; ou (i.2) credit or charge purchases processed by Cielo in foreign currency and made with Visa cards issued by financial institutions located in Brazil; and (iii) to make payments of principal and interest with regard to securities and other payments provided in the agreements covering the issue of such securities. The Bank is the beneficiary of % of the funds, calculated based on the equity interest held in Cielo, on the issuing date, and the remaining funds made available to the other Brazilian financial institution which holds an interest in Cielo. The SPE declares that it has no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. Bank does not hold the control, is not a shareholder, the owner, or is a beneficiary of any of the results of operations of the SPE. The liabilities arising from the issued securities are paid by the SPC using the funds accumulated in its account. g. limits on the use of the financing obtained Banco do Brasil - BB Multiple Bank does not set limits on the use of financing, but is subject to the standards determined by the Monetary Authorities, in accordance with the Basel principles. h. significant changes in each item of the financial statements We present below analyses of income for the year 2010 in comparison with that of 2009, of the year 2011 in comparison with that of 2010, as well as equity analyses on 12/31/2010 in comparison with 12/31/2009, and of 12/31/2011 in comparison with 12/31/2010. Analysis of the fiscal year social ended on December 31, 2010, compared with the fiscal year ended on December 31, Balance Sheet Assets Balance Sheet Assets Consolidated financial information in December 31 R$ million, except for percentages Var. 10/09 Var.% 10/09 Total assets 708, , , Current assets 414, ,496 61,

17 Balance Sheet Assets Consolidated financial information in December 31 R$ million, except for percentages Var. 10/09 Var.% 10/09 Total Cash 7,843 9,745 1, Short-term interbank investments 166, ,616 (59,454) (35.8) Open market investments 144,174 85,060 (59,114) (41.0) Interbank deposits 21,896 21,556 (340) (1.6) Certificates Securities and derivative financial instruments 59,297 76,342 17, Own portfolio 47,295 46,402 (893) (1.9) Subject to repurchase agreements 5,956 26,466 20, Deposits with the Brazilian Central Bank 3,817 - (3,817) - Pledged in guarantee 1,147 2,217 1, Derivative financial instruments 1,082 1, Interbank accounts 26,574 89,443 62, Payments and receipts pending settlement (24) (15.7) Restricted deposits 26,063 88,903 62, Deposits with the Brazilian Central Bank 24,280 87,035 62, National Treasury - rural credits receivable (73) (49.3) National Housing Financing System (SFH) 1,635 1, Interbank onlendings Correspondent banks Interdepartmental accounts (37) (12.5) Internal transfers of funds (37) (12.5) Loan operations 110, ,099 18, Public sector 2, (1,915) (68.5) Private sector 115, ,728 19, (Provisions for Loan Losses) (7,952) (7,509) 443 (5.6) Lease operations 1,858 1,801 (57) (3.1) Public sector (5) (20.8) Private sector 1,951 1,817 (134) (6.9) (Allowance for Lease Losses) (117) (35) 82 (70.1) Other Receivables 40,891 61,658 20, Receivables from guarantees honored Foreign exchange portfolio 8,671 10,292 1, Income receivable Securities Clearing Accounts (53) (12.2) Insurance, social security and capitalization transaction credits 886 1, Sundry 31,168 49,880 18, (Provision for other losses) (842) (972) (130) 15.4 Others assets 1,530 1, Non-operating Assets and Materials in Stock (Provision for devaluations) (176) (177) (1) 0.6 Prepaid expenses 1,342 1,323 (19) 1.4 Non-current assets 293, ,676 41, Long-term receivables 276, ,906 38, Short-term interbank investments 2, (1,365) (58.6) Interbank deposits 2, (1,365) (58.6) Securities and derivative financial instruments 65,040 67,524 2, Own portfolio 27,638 39,316 11, Subject to repurchase agreements 20,930 24,860 3, Deposits with the Brazilian Central Bank 14,591 - (14,591) - Pledged in guarantee 1,500 2,982 1, Derivative financial instruments (16) (4.2) Interbank accounts Restricted deposits

18 Balance Sheet Assets Consolidated financial information in December 31 R$ million, except for percentages Var. 10/09 Var.% 10/09 National Treasury - rural credits receivable Interbank onlendings Loan operations 151, ,627 37, Public sector 3,593 6,381 2, Private sector 157, ,171 33, (Allowance for loan losses) (9,733) (8,925) 808 (8.3) Lease operations 2,842 2,056 (786) (27.7) Public sector (12) (30.8) Private sector 2,917 2,185 (732) (25.1) (Allowance for Lease Losses) (114) (156) (42) 36.8 Other Receivables 54,342 53,303 (1,039) (1.9) Receivables from guarantees honored 51 - (51) - Foreign exchange portfolio 1,586 1,586 - Income receivable Specific credits 932 1, Credit Insurance, social security and capitalization transaction credits Sundry 54,146 51,235 (2,911) (5.4) (Provision for other losses) (840) (600) 240 (28.6) Others assets 828 2,349 1, Prepaid expenses 828 2,349 1, Permanent assets 17,010 19,770 2, Investment 6,645 8,128 1, Investments in Subsidiary and Associated Companies 5,776 7,116 1, Brazil 5,776 7,116 1, Other investments 947 1, (Accumulated impairment) (78) (85) (7) 9.0 Property and equipment in use 4,214 4, Land and buildings in use 3,336 3, Other property and equipment in use 6,632 7, (Accumulated depreciation) (5,753) (6,198) (445) 7.7 Leased assets 1 - (1) - Leases assets 4 - (4) - (Accumulated depreciation) (2) Intangible assets 5,677 6, Intangible assets 7,659 10,259 2, (Accumulated amortization) (1,982) (3,807) (1,825) 92.1 Deferred (186) (39.4) Organization and expansion costs 2,247 2,154 (93) (4.1) (Accumulated amortization) (1,775) (1,868) (93) 5.2 Source: Financial Statements of Banco do Brasil. We present below the Summarized Balance Sheet - Assets that only presents the sum total of the balance of accounts classified in current and non-current that have the same characteristics. In the understanding of the Bank's Management, this sum total facilitates the analysis of the Balance Sheet since in aggregating the values, the user of the accounting information visualizes the total balance of aforesaid asset or liability, whether it is classified or in non-current. This presentation differs from that required by accounting practices adopted in Brazil, which require the classification of assets in current and non-current. Summarized Balance Sheet - Assets Consolidated financial information in December 31 R$ million, except for percentages 2009 % Total 2010 % Total Var. 10/09 Var.% 10/09 Asset 708, , ,

19 Summarized Balance Sheet - Assets Consolidated financial information in December 31 R$ million, except for percentages 2009 % Total 2010 % Total Var. 10/09 Var.% 10/09 Current Assets and Long-Term Receivables 691, , , Total Cash 7, , , Short-term interbank investments 168, , (60,819) (36.1) Open market investments 144, , (59,114) (41.0) Interbank deposits 24, , (1,705) (7.0) Securities and derivative financial instruments 124, , , Own Portfolio 74, , , Subject to repurchase agreements 26, , , Deposits with the Brazilian Central Bank 18, (18,408) (100.0) Pledged in guarantee 2, , , Derivative financial instruments 1, , Interbank accounts 26, , , Central Bank deposits 24, , , Other 2, , Interdepartmental accounts (37) (12.5) Loan Operations 261, , , Public sector 6, , Private sector 273, , , (Allowance for loan losses) (17,685) (2.5) (16,434) (2.0) 1,251 (7.1) Lease operations 4, , (843) (17.9) Lease and sublease receivables 4, , (883) (17.9) Public sector (17) (27.0) Private sector 4, , (866) (17.8) (Allowance for lease losses) (231) - (191) - 40 (17.3) Other Receivables 95, , , Receivables from guarantees honored (16) (17.6) Foreign exchange portfolio 8, , , Income receivable Negotiation and intermediation of securities (53) (12.2) Specific credits , Insurance, social security and capitalization transaction credits , Sundry 85, , , (Provision for other losses) (1,682) (0.2) (1,572) (0.2) 110 (6.5) Others assets 2, , , Others assets (Provision for possible losses) (176) - (177) - (1) 0.6 Prepaid expenses 2, , , Permanent Assets 17, , , Investment 6, , , Property and equipment in use 4, , Leased assets (1) (100.0) Intangible assets 5, , Deferred charges (186) (39.4) Source: Financial Statements of Banco do Brasil. We present below the reconciliation between the Published Balance Sheet - Assets and the Summarized Balance Sheet. 19

20 R$ million, except for percentages Current Consolidated financial information in December 31, Real. Long term Summarized Balance Sheet Current Real. Long term Summarized Balance Sheet Assets 414, , , , , ,402 Cash and cash equivalents 7,843-7,843 9,745-9,745 Short-term interbank investments 166,070 2, , , ,579 Open market investments 144, ,174 85,060-85,060 Interbank deposits 21,896 2,328 24,224 21, ,519 Securities and derivative financial instruments 59,297 65, ,337 76,342 67, ,866 Own portfolio 47,295 27,638 74,934 46,402 39,316 85,718 Subject to repurchase agreements 5,956 20,930 26,886 26,466 24,860 51,326 Deposits with the Brazilian Central Bank 3,817 14,591 18, Pledged in guarantee 1,147 1,500 2,647 2,217 2,982 5,199 Derivative financial instruments 1, ,463 1, ,623 Interbank accounts 26, ,592 89, ,527 Deposits with the Brazilian Central Bank 24,280-24,280 87,035-87,035 Other 2, ,312 2, ,492 Interdepartmental accounts Loan operations 110, , , , , ,726 Public sector 2,795 3,593 6, ,381 7,261 Private sector 115, , , , , ,899 (Allowance for loan losses) (7,952) (9,733) (17,685) (7,509) (8,925) (16,434) Lease operations 1,858 2,842 4,700 1,801 2,056 3,857 Lease and sublease receivables 1,975 2,956 4,931 1,836 2,212 4,048 Public sector Private sector 1,951 2,917 4,868 1,817 2,185 4,002 (Allowance for lease losses) (117) (114) (231) (35) (156) (191) Other Receivables 40,891 54,342 95,233 61,658 53, ,961 Receivables from guarantees honored Foreign exchange portfolio 8,671-8,671 10,292 1,586 11,878 Income receivable Securities Clearing Accounts Specific credits ,030 1,030 Insurance, social security and capitalization transaction credits , ,109 Sundry 31,168 54,146 85,313 49,880 51, ,115 (Provision for other losses) (842) (840) (1,682) (972) (600) (1,572) Others assets 1, ,358 1,534 2,349 3,883 Others assets (Provision for devaluations) (176) - (176) (177) - (177) Prepaid expenses 1, ,170 1,323 2,349 3,672 Permanent Assets , ,770 Investment - - 6, ,128 Investments in Subsidiary and Associated Companies - - 5, ,116 Other investments ,097 (Allowance for losses) - - (78) - - (85) 20

21 R$ million, except for percentages Current Consolidated financial information in December 31, Real. Long term Summarized Balance Sheet Current Real. Long term Summarized Balance Sheet Property and equipment in use - - 4, ,904 Land and buildings in use - - 3, ,708 Other property and equipment in use - - 6, ,394 (Accumulated depreciation) - - (5,753) - - (6,198) Leased assets Leases assets (Accumulated depreciation) - - (2) Intangible assets - - 5, ,452 Intangible assets - - 7, ,259 (Accumulated amortization) - - (1,982) - - (3,807) Deferred Organization and expansion costs - - 2, ,154 (Accumulated amortization) - - (1,775) - - (1,868) Source: Financial Statements of Banco do Brasil. Total Cash Cash and cash equivalents amounted to R$9,745 million on December 31, 2010, an increase of R$1,902 million (24.3%), compared to December 31, This accretion results mainly from the increase of R$1,882 million in the Cash account. 'Short-term interbank investments Short-term interbank investments accounted for R$107,579 million on December 31, 2010, a decrease of R$60,819 million (36.1%) in relation to December 31, This reduction is due mainly to the downslide of R$59,114 million in market investments, with special emphasis on R$43,419 million in repurchase agreements backed by the financed position and R$16,800 million in own operations. Securities and derivative financial instruments Securities and Derivative Financial Instruments totaled R$143,866 million on December 31, 2010, an increase of R$19,529 million (15.7%) compared to December 31, This increase is the result of: (i) increase of R$ 10,784 million in the own portfolio; (ii) accretion of R$24,440 million in operations restricted to repurchase commitments; (iii) accretion of R$2,552 million in operations restricted to provision of guarantee; (iv) decrease of R$18,408 million in Central Bank restricted operations. Interbank accounts The item Interbank accounts totaled R$ R$89,527 million as of December 31, 2010, an increase of R$62,935 million (236.7%) compared to December 31, This increase occurs mainly in restricted deposits, highlighting: (i) increase of R$ 29,283 million especially due to amendment in compliance with the requirement for additional in-kind due to additional federal government securities, according to Bacen Circular 3,486/2010; 21

22 (ii) accretion of R$15,178 million in liabilities on time deposits, due mainly to the change of rate, deduction and performance method, according to new regulations; (iii) accretion of R$7,195 million due to the transfer of resources by Bacen, according to Resolution CMN no. 3,745/2009, for investment in rural credit; (iv) accretion of R$5,430 million in the compulsory cash reserves at the Central Bank; (v) accretion of R$2,819 million due to the increase in the funding bases of the savings product. Loan Operations loan operations totaled R$317,726 million on 12/31/2010, higher by R$55,943 million(21.4%) than on 12/31/2009. This accretion originates from: (i) accretion of R$23,148 million in Financing operations, with special emphasis on the categories of BB Capital de Giro à Exportação (BB Working Capital for Exports) (R$6,596 million), Finame (R$4,909 million), BNDES (R$ 2,420 million), CDC (R$2,342 million) and Credit Card (R$1,705 million). The financing operations of Banco Votorantim increased by R$5,026 million; (ii) accretion of R$19,208 in loans and bills discounted, with special emphasis on the categories of CDC (R$7,050 million), BB Giro Empresa Flex (R$3,293 million), BNDES (R$1,571 million) and BB Giro Recebíveis (R$1,413 million). The loan operations of overseas branches increased R$2,621 million while those of Banco Votorantim increased R$1,485 million; (iii) accretion of R$10,473 million in rural and agribusiness financing operations, with special emphasis on the categories of Poupança Ouro (R$8,107 million) and Pronaf (R$2,124 million); (iv) the R$1,866 million growth in transactions income Real estate financing. Allowance for loan losses Provisions for loan operations totaled R$16,434 million on December 31, 2010, a balance 7.1% below that observed in Other Receivables The operation of other credits amounted to R$114,961 million on December 31, 2010, an increase of R$19,728 million (20.7%), compared to December 31, This increase is due to: (i) accretion of R$4,781 million in receivables related to debit and credit card operations; (ii) accretion of R$3,207 million in the foreign exchange portfolio due mainly to the higher volume of operations contracted in foreign currencies; (iii) accretion of R$2,861 million in taxes and contributions recoverable; (iv) accretion of R$1,677 million of equalization of rates and agricultural harvests; (v) the balance of Actuarial Assets reached R$9,895 million on 12/31/2010, down 21.8% in comparison to the R$12,655 million recorded in This reduction results from the reclassification of R$7,519 million to the group of Other Receivables - Accounts Receivable, arising from the Previ surplus distribution agreement, offset by the accretion of R$4,299 million arising from the recognition of actuarial gains - benefit plan 1 - Previ. The table below shows the position of the plan assets and respective obligations: Equity effect (reconciliation of assets and liabilities): (R$ million, except for percentages) 12/31/ /31/2010 Var. 10/09 Var. % 10/09 22