Santander Banespa. (Convenience Translation into English from the Original Previously Issued in Portuguese)

Transcription

1 (Convenience Translation into English from the Original Previously Issued in Portuguese) Santander Banespa Financial Statements for the Year Ended December 31, 2004 and 2003 Independent Auditors Report Deloitte Touche Tohmatsu Auditores Independentes

2 (Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT AUDITORS REPORT To the Management of the Entities of Santander Banespa (see note 3 to the pro forma combined financial statements) São Paulo - SP 1. We have audited the accompanying pro forma combined balance sheets of Santander Banespa as of December 31, 2004 and 2003, and the related pro forma combined statements of income, changes in stockholders equity, and changes in financial position for the years then ended, all expressed in Brazilian reais and prepared under the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements. 2. Our audits were conducted in accordance with auditing standards in Brazil and comprised: (a) planning of the work, taking into consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the Entities, (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed, and (c) evaluating the significant accounting practices and estimates adopted by management, as well as the presentation of the financial statements taken as a whole. 3. In our opinion, the pro forma combined financial statements referred to in paragraph 1 present fairly, in all material respects, the financial positions of Santander Banespa as of December 31, 2004 and 2003, and the results of their operations, the changes in stockholders equity, and the changes in their financial positions for the years then ended in conformity with Brazilian accounting practices. 4. The pro forma combined financial statements referred to in paragraph 1 include the individual financial statements of the Santander Banespa entities that operate under a common management, as mentioned in notes 2 and 3 to the pro forma combined financial statements, and are presented for purposes of disclosing additional non-mandatory information on Santander Banespa. 5. The accompanying pro forma combined financial statements have been translated into English for the convenience of readers outside Brazil. São Paulo, February 14, 2005 DELOITTE TOUCHE TOHMATSU Auditores Independentes José Barbosa da Silva Júnior Engagement Partner

3 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) ASSETS CURRENT ASSETS Cash Interbank investments Money market investments Interbank deposits Securities and derivative financial instruments Own portfolio Subject to resale commitments Linked to Central Bank of Brazil Linked to guarantees Privatization certificates Derivative financial instruments Interbank accounts Payments and receipts pending settlement Restricted deposits: Central Bank of Brazil National Housing System Correspondents Interbranch accounts Third-party funds in transit 9 61 Internal transfers of funds Lending operations Public sector Private sector Allowance for loan losses ( ) ( ) Leasing operations Private sector Allowance for doubtful lease receivables (3.000) (8.865) Other receivables Foreign exchange portfolio Income receivable Trading account Receivables from insurance operations Other Allowance for other losses (17.056) (8.787) Other assets Other assets Allowance for valuation ( ) ( ) Prepaid expenses (Continues) 2

4 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) (Continuation) ASSETS LONG-TERM ASSETS Interbank investments Interbank deposits Allowance for losses (200) (200) Securities and derivative financial instruments Own portfolio Subject to resale commitments Linked to Central Bank of Brazil Linked to guarantees Privatization certificates Derivative financial instruments Interbank accounts Restricted deposits: National Housing System Lending operations Public sector Private sector Allowance for loan losses ( ) ( ) Leasing operations Private sector Allowance for doubtful lease receivables (818) (872) Other receivables Receivables for guarantees honored Foreign exchange portfolio Income receivable Trading account Other Allowance for other losses ( ) ( ) Other assets Temporary investments Allowance for losses (116) (116) Other assets Allowance for valuation (6.737) (4.222) Prepaid expenses PERMANENT ASSETS Investments Investments in subsidiaries and affiliates: Domestic Other investments Allowance for losses (25.240) (27.313) Property and equipment in use Real estate Other Accumulated depreciation ( ) ( ) Deferred charges Organization and expansion costs Accumulated amortization ( ) ( ) TOTAL ASSETS The accompanying notes are an integral part of these pro forma combined financial statements. 3

5 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Deposits Demand deposits Savings deposits Interbank deposits Time deposits Other deposits Money market funding Own portfolio Third parties Linked to trading portfolio operations Funds from acceptance and issuance of securities Securities issued abroad Interbank accounts Receipts and payments pending settlement Correspondents Interbranch accounts Third-party funds in transit Internal transfers of funds Borrowings Foreign borrowings Domestic onlendings - Official institutions National Treasury National Economic and Social Development Bank (BNDES) Federal Savings and Loan Bank (CEF) National Equipment Financing Authority (FINAME) Other institutions Derivative financial instruments Derivative financial instruments Other liabilities Collected taxes and other Foreign exchange portfolio Social and statutory Taxes and social security Trading account Technical reserves for insurance, pension plan and capitalization operations Supplementary pension plan Other (Continues) 4

6 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) FINANCIAL INCOME Lending operations Leasing operations Securities transactions Income from insurance, pension plan and capitalization operations Derivative financial instruments Foreign exchange operations Compulsory investments FINANCIAL EXPENSES ( ) ( ) Funding operations ( ) ( ) Adjustment of interest on technical reserves for insurance, pension plan and capitalization operations ( ) ( ) Borrowings and onlendings ( ) ( ) Provision for loan losses ( ) ( ) GROSS PROFIT FROM FINANCIAL OPERATIONS OTHER OPERATING (EXPENSES) INCOME ( ) ( ) Income from services rendered Income from insurance, pension plan and capitalization operations Personnel expenses ( ) ( ) Other administrative expenses ( ) ( ) Tax expenses ( ) ( ) Equity in subsidiaries and affiliates Other operating income Other operating expenses ( ) ( ) INCOME FROM OPERATIONS NONOPERATING (EXPENSES) INCOME (37.766) INCOME BEFORE TAXES ON INCOME AND MINORITY INTEREST INCOME AND SOCIAL CONTRIBUTION TAXES (88.641) ( ) Provision for income tax (25.970) ( ) Provision for social contribution tax (14.603) (63.929) Deferred tax credits (48.068) (53.358) INCOME BEFORE MINORITY INTEREST MINORITY INTEREST (32.929) (35.122) NET INCOME The accompanying notes are an integral part of these pro forma combined financial statements. 6

7 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) (Continuation) LIABILITIES AND STOCKHOLDERS' EQUITY LONG-TERM LIABILITIES Deposits Interbank deposits Time deposits Money market funding Linked to trading portfolio operations Funds from acceptance and issuance of securities Securities issued abroad Borrowings Foreign borrowings Domestic onlendings - Official institutions National Economic and Social Development Bank (BNDES) Federal Savings and Loan Bank (CEF) National Equipment Financing Authority (FINAME) Other institutions Other liabilities Foreign exchange portfolio Taxes and social security Trading account Supplementary pension plan Other DEFERRED INCOME Deferred income MINORITY INTEREST STOCKHOLDERS' EQUITY Capital: Brazilian residents Foreign residents Capital reserves Revaluation reserves Profit reserves Adjustment to market value - securities and derivative financial instruments Retained earnings TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY The accompanying notes are an integral part of these pro forma combined financial statements. 5

8 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) Capital reserves Profit reserves Adjustment to Stock market value- Capital Tax Goodwill exchange Revaluation Legal Statutory securities and derivative Retained Capital increase incentives reserve memberships reserve reserve reserve financial instruments earnings Total BALANCES AS OF DECEMBER 31, ( ) Capital increase/(reduction) (20.292) (3.035) Corporate restructuring (46.511) - (2.312) - - (417) (16.813) Adjustment to market value - securities and derivative financial instruments Income tax incentives Updating of stock exchange memberships Monetary restatement Net income Dividends ( ) ( ) Legal reserve (85.954) - Statutory reserve (11.230) - BALANCES AS OF DECEMBER 31, Capital increase Unpaid capital - (20.955) (20.955) Corporate restructuring (516) Adjustment to market value - securities and derivative financial instruments Updating of stock exchange memberships Income tax incentives Net income Dividends paid ( ) ( ) Legal reserve (90.389) - Statutory reserve (45.050) - Proposed dividends ( ) ( ) Interest on capital (19.796) (19.796) BALANCES AS OF DECEMBER 31, The accompanying notes are an integral part of these pro forma combined financial statements. 7

9 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) SOURCES OF FUNDS Adjusted net income Net income Adjustments to net income: Equity in subsidiaries (20.067) (44.960) Depreciation and amortization Goodwill amortization Provision for (reversal of) losses on other assets (46.388) Exchange variation on foreign branches (190) 464 Capital increase Adjustment to market value - securities and derivative financial instruments Change in deferred income Minority interest Updating of stock exchange memberships Investment grants Monetary restatement Corporate restructuring (16.813) Funds from third parties: Increase in liabilities Deposits Money market funding Securities issued abroad Interbank and interbranch accounts Borrowings and onlendings Other liabilities Decrease in assets Leasing operations Other receivables Other assets Disposal of permanent assets Assets not in use Property in use Investments (Continues) 8

10 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA PRO FORMA COMBINED FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In thousands of Brazilian reais - R$) (Continuation) USES OF FUNDS Interest on capital and proposed dividends Additions Assets not in use Property in use Investments Deferred charges Increase in assets Interbank investments Securities and derivative financial instruments Interbank and interbranch accounts Lending operations Leasing operations Other assets Decrease in liabilities Deposits Securities issued abroad Interbank and interbranch accounts Borrowings and onlendings Derivative financial instruments Other liabilities INCREASE (DECREASE) IN CASH REPRESENTED BY: Cash Beginning of year End of year INCREASE (DECREASE) IN CASH The accompanying notes are an integral part of these pro forma combined financial statements. 9

11 (Convenience Translation into English from the Original Previously Issued in Portuguese) SANTANDER BANESPA NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (Amounts in thousands of Brazilian reais - R$, unless otherwise indicated) 1. OPERATIONS Santander Banespa, which has Banco Santander S.A. as the lead institution of the financial and non-financial group with the Central Bank of Brazil, controlled by Banco Santander Central Hispano, operates through its financial institutions. Its operations include commercial, foreign exchange, investment, credit and financing, mortgage loan and leasing portfolios. Through related entities it also operates in insurance, pension plan and capitalization markets. Transactions are conducted within the context of a group of financial institutions which operate on an integrated basis in the financial markets. 2. PRESENTATION OF FINANCIAL STATEMENTS The financial statements of the entities included in the combined financial statements Santander Banespa have been prepared in accordance with Brazilian corporate law, standards and instructions of the Central Bank of Brazil (BACEN), standards established by the CVM (Brazilian Securities Commission) and standards established by the SUSEP (Superintendence of Private Insurance), as applicable. In the preparation of these combined financial statements, not only the ownership control was considered, as established by Brazilian corporate law, but also the actual operating control characterized by common management in Brazil or operation of the Brazilian market under the same brand. In the preparation of the pro forma combined financial statements, equity in subsidiaries, significant balances of accounts receivable and payable, income and expenses arising from transactions among domestic branches, foreign branches and subsidiaries, and unrealized profits between these entities have been eliminated. Minority interest is recorded in a separate caption in shareholders equity and in the statement of income. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting periods. Since management s judgment involves making estimates concerning the likelihood of future events, actual results could differ from those estimates. 10

12 3. ENTITIES OF SANTANDER BANESPA INCLUDED IN THE PRO FORMA COMBINED FINANCIAL STATEMENTS Adjusted Net stockholders Total income Ownership Entities equity assets (loss) - % Financial sector Banco Santander S.A. 5,529,670 7,510,187 1,716,897 99,99 Banco Santander Brasil S.A. 1,548,740 35,670,867 88,394 96,03 Banco do Estado de São Paulo S.A. - BANESPA 5,692,201 35,227,022 1,750,171 98,18 Banco Santander Meridional S.A. 1,606,819 4,564,577 (41,109) 96,91 Santander Brasil S.A Corretora de Títulos e Valores Mobiliários 86, ,542 13, ,00 Banespa S.A. Corretora de Câmbio e Títulos 43, , ,736 99,99 Santander Distribuidora de Títulos e Valores Mobiliários Ltda. 9,931 15, ,99 Santander Brasil Arrendamento Mercantil S.A. 70, ,753 21,553 99,99 Santander Banespa Companhia de Arrendamento Mercantil 418, ,412 75,771 99,99 Insurance sector Santander Seguros S.A 248,334 2,652,224 62,666 98,98 Santander Capitalização S.A. 47, ,422 34,166 99,99 Banespa S.A. - Serviços Técnicos, Administrativos e de Corretagem de Seguros - BANESER 75, , ,820 99,99 Santander Banespa Seguros S.A. 8,264 24,594 1,396 99,98 Other sectors Santander Banespa Administradora de Consórcios Ltda. 3,201 3, ,99 Norchem Participações e Consultoria S.A. 27,891 97,453 3,629 49,99 Santander Asset Management Ltda. 68,542 97,325 22,855 99,99 Santander Brasil Investimentos e Serviços S.A. 78,969 97,126 5, ,00 Santander Brasil Participações e Empreendimentos S.A. 205, ,300 7, ,00 Santander Companhia Securitizadora de Créditos Financeiros 182, ,398 27,572 99,99 Universia Brasil S.A. 4,732 5,371 (5,940) 99,99 Bozano, Simonsen Latin American S.A (1) 100,00 Agropecuária Tapirapé S.A. 5,330 5, ,06 4. SIGNIFICANT ACCOUNTING PRACTICES a) Results of operations Determined on the accrual basis of accounting. For insurance companies, insurance premiums recorded upon issuance of the related policies/invoices are recognized as premiums written. The respective revenue is deferred on a daily pro rata basis over the insurance policy/invoice period, through the recording of an unearned premium reserve, calculated based on the net retention of premiums written. Commissions and other acquisition costs are also deferred over the policy/invoice period. Revenues from social security contributions and capitalization certificates are recorded in income upon receipt. b) Current and long-term assets and liabilities Stated at their realizable or settlement amounts, respectively, and include income, charges and monetary or exchange variations earned or incurred to the balance sheet date, determined on a daily pro rata basis. When applicable, allowances for valuation are recorded to reflect market or realizable values. The allowance for loan losses is based on analyses of outstanding lending operations (past due and current), past experience, future expectations, and specific portfolio risks, as well as on the risk assessment policy of the Bank s management for recognition of allowances, including requirements under BACEN standards and instructions. 11

13 Receivables and payables due within 12 months are recorded in current assets and liabilities, respectively, except for trading securities which are totally classified in current assets, in conformity with BACEN Circular No. 3,068/01. Securities Securities are presented in accordance with the following recognition and accounting valuation criteria: I. Trading securities. II. Securities available for sale. III. Held to maturity. The Trading securities category includes securities acquired for the purpose of being actively and frequently traded. The Securities available for sale category includes those which cannot be classified in categories I and III. The Held to maturity category includes those which the Bank intends to maintain in its portfolio to maturity. Securities classified in categories I and II are stated at cost plus income earned to the balance sheet date, calculated on a daily pro rata basis, and adjusted to market value, reflecting the increase or decrease arising from this adjustment in: (1) the related income or expense account, in income for the period, when related to securities classified in the Trading securities category, net of tax effects; (2) separate caption in stockholders equity when related to securities classified in the Securities available for sale category, net of tax effects. Securities classified in the Held to maturity category are stated at cost, plus income earned to the balance sheet date, calculated on a daily pro rata basis, and recorded in income for the period; provisions for losses are recognized whenever there are permanent losses on the realizable value of these securities. Derivative financial instruments Derivative instruments considered as hedge transactions may be classified as: I. Market risk hedge. II. Cash flow hedge. Derivative financial instruments for hedge transactions and the respective items subject to hedge are adjusted to market value, considering the following: (1) for those classified in category I, the increase or decrease is recorded in income or expense for the period, net of tax effects; (2) for those classified in category II, the increase or decrease is recorded in a separate caption in stockholders equity, net of tax effects. 12

14 c) Permanent assets Stated at cost and include: c1) Investments Adjustments to investments in subsidiaries are determined under the equity method of accounting and recorded as equity in subsidiaries. Other investments are stated at cost, reduced to market value, when applicable. c2) Property and equipment Depreciation of property and equipment is determined under the straight-line method at the following annual rates: buildings - 4%, installations, furniture, equipment in use, communication and security systems - 10%, and data processing systems and vehicles - 20%. c.3) Deferred charges Costs classified under deferred charges are amortized over a maximum period of 5 years when applicable to the acquisition and development of software, and 10 years for other costs, considering the benefit period of the expense and the terms of rental contracts. Goodwill on acquisition of investment is being amortized over a period of 10 years, based on the expectation of future income. d) Income and social contribution taxes Income tax is calculated at the rate of 15% plus a 10% surcharge; social contribution tax is calculated at the rate of 9%, after adjustments determined by tax legislation. Deferred tax assets and liabilities are computed basically on certain temporary differences between book and taxable income, on tax losses, and adjustments to market value of securities and derivative financial instruments. As provided for by BACEN Circular No. 3,171 of December 31, 2002, CVM Resolution No. 273, of August 20, 1998, and CVM Instruction No. 371, of June 27, 2002, the Bank s expected realization of tax credits, as shown in note 11, is based on the projection of future results and is supported by a technical study. e) Technical reserves related to insurance, pension plan and capitalization activities e1) Insurance I. Unearned premium reserve The unerned premium reserve is recorded as established by CNSP Resolution No. 89/2002, related to the risk coverage period, calculated on a daily pro rata basis over the individual unelapsed period of the policies or invoices, for all significant insurance lines in effect in the month of recording, or related to them, except for the lines excluded by SUSEP. 13

15 II. Mathematical reserves and benefits Represent the amount of the obligations assumed in the form of annuity and lump sum plans, determined by means of actuarial calculations based on the capitalization system. III. Reserve for unsettled claims The reserve for unsettled claims is calculated on an estimated basis, considering the notices of claims received according to the company s experience for each insurance line, net of recoveries of ceded coinsurance and reinsurance. IV. Reserve for claims incurred but not reported - IBNR reserve The reserve for claims incurred but not reported was calculated according to SUSEP (Superintence of Private Insurance) Circular No. 242/2004. The reserve for DPVAT (mandatory insurance) agreement, included in the balance of reserve for claims incurred but not reported, is recorded based on information provided by the management of the DPVAT agreement of the FENASEG (Brazilian Federation of Insurance and Capitalization Companies). e2) Capitalization The technical reserves for capitalization operations are determined by a percentage applied to the amounts received from underwriters, as established in the technical actuarial note of each product and in the general conditions of each proposal, adjusted monthly by the basic prime rate applied to savings deposits and capitalized at the rate of 0.5% per month, and may be redeemed under the conditions described in the respective capitalization certificate. Monetary restatement and interest on the technical reserves are recorded as monetary expenses. 5. INTERBANK INVESTMENTS Up to From 3 to Over 3 months 12 months 12 months Money market investments 4,748, ,748,177 5,139,907 Own portfolio 260, , ,787 Treasury bills 93, ,888 94,413 National Treasury notes ,800 Central Bank notes ,735 Securities issued abroad by the Brazilian government - Brady bonds 166, , ,838 Third-party portfolio 3,271, ,271,235 4,767,121 Treasury bills ,275,257 National Treasury bills 3,175, ,175,970 1,926,359 Central Bank notes 94, , ,505 Sold position 1,216, ,216,294 - National Treasury notes 1,216, ,216,294 - Interbank deposits 80, , , , ,987 Foreign-currency investments 2,115, ,115,599 72,657 Allowance for losses - - (200) (200) (200) Interbank investments 6,943, , ,683 7,384,368 6,052,351 14

16 6. SECURITIES Adjustment to Effect of adjustment to market value on: Book Book Categories Cost market value Income Equity value value Government Securities 20,591, ,406 5, ,543 21,068,522 17,057,823 National Treasury bonds 8,318 2,306-2,306 10,624 13,983 Brady bonds 85,399 (2,799) (2,799) - 82,600 39,508 Treasury certificates 1,587,629 32,721-32,721 1,620,350 1,784,178 Securitized credit 78,116 (8,996) - (8,996) 69, ,428 National Treasury bills 4,640,866 (3,847) 447 (4,294) 4,637,019 2,216,184 Treasury bills 961, ,455 1,362,817 Central Bank notes 3,358, ,166 9,505 98,661 3,467,079 4,189,699 National Treasury notes NTN A 175,543 10,862-10, ,405 - National Treasury notes NTN C 8,090, ,597 (3,318) 274,915 8,362,245 6,500,020 National Treasury notes NTN D 554,568 57,343 1,861 55, , ,106 National Treasury notes NTN F 1,030,029 9,420-9,420 1,039,449 - National Treasury notes NTN P 74 (31) - (31) Samurai bonds 19,176 (143) - (143) 19,033 18,651 Agricultural debt securities Private Securities 4,795, , , ,114 5,128,357 4,861,768 Shares 1,068, , , ,698 1,393,026 1,140,771 Rural product notes 297, ,545 - Bank deposit certificates 52, ,453 53,120 Investment fund quotas 635, ,500 1,536,484 Investment fund quotas for guarantee of PGBL benefit plans 1,300, ,300, ,099 Investment fund quotas for guarantee of PBGL benefit plans 741, , ,104 Debentures 260,752 5,755 (323) 6, , ,829 Eurobonds 258,199 1,959 1, , ,433 Real estate bonds 73, ,813 67,003 Mortgage notes 56, , ,851 Certificate of real estate receivables - CRI 51, ,136 - Other ,074 Total 25,386, , , ,657 26,196,879 21,919,591 Derivatives (Assets) 796,778 (59,335) (59,335) - 737, ,738 Call option premiums 19,258 (11,732) (11,732) - 7,526 58,774 Swap differential receivable 777,514 (47,603) (47,603) - 729, ,616 Forward purchases receivable ,348 Total 26,183, , , ,657 26,934,322 22,670,329 Derivatives (Liabilities) (196,501) 14,173 29,676 (15,503) (182,328) (279,553) Put option premiums (45,743) (2,372) (2,372) - (48,115) (73,284) Swap differential payable (148,743) 16,545 32,048 (15,503) (132,198) (197,133) Forward purchases payable (2,015) (2,015) (9,136) Without Up to From 3 to Over Composition by maturity maturity 3 months 12 months 12 months Total Government Securities - 1,647,217 6,829,397 12,591,908 21,068,522 National Treasury bonds - 1,531 1,467 7,626 10,624 Brady bonds ,600 82,600 Treasury certificates - 134, ,787 1,136,752 1,620,350 Securitized credit - - 2,636 66,484 69,120 National Treasury bills - 1,077,761 3,320, ,489 4,637,019 Treasury bills - 339, , , ,455 Central Bank notes - - 1,879,884 1,587,195 3,467,079 National Treasury notes NTN A , ,405 National Treasury notes NTN C ,329 7,479,916 8,362,245 National Treasury notes NTN D - 93, , ,911 National Treasury notes NTN F ,039,449 1,039,449 National Treasury notes NTN P Samurai bonds ,806 19,033 Agricultural debt securities

17 Without Up to From 3 to Over Composition by maturity maturity 3 months 12 months 12 months Total Private Securities 4,069, , , ,650 5,128,357 Shares 1,393, ,393,026 Rural product notes - 81, , ,545 Bank deposit certificates - 31,444-21,009 52,453 Investment fund quotas 635, ,500 Investment fund quotas for guarantee of PGBL benefit plans 1,300, ,300,259 Investment fund quotas for guarantee of PGBL benefit plans 741, ,200 Debentures , , ,507 Eurobonds , ,158 Real estate bonds ,474 48,339 73,813 Mortgage notes ,760 56,760 Certificate of real estate receivables - CRI ,136 51,136 Total 4,069,985 1,760,337 7,086,999 13,279,558 26,196,879 Adjustment to Effect of adjustment to market value on: Book Book Categories Cost market value Income Equity value value Trading securities 8,131, Securities available for sale Held to maturity Total Adjustment to market value Book Without Up to From 3 to Over Trading securities Cost Income value maturity 3 months 12 months 12 months Government Securities 4,877,668 5,863 4,883, ,796 3,557,260 1,036,475 Brady bonds 85,399 (2,799) 82, ,600 National Treasury bills 2,739, ,739,631-29,144 2,539, ,733 Treasury bills 740, , , ,596 88,324 Central Bank notes 697,775 9, , , ,636 National Treasury notes NTN C 585,838 (3,318) 582, , ,254 National Treasury notes NTN D 29,067 1,861 30, ,928 Private Securities 3,253, ,894 3,467,781 3,181, ,631 Shares 292, , , , Investment fund quotas 635, , , Investment fund quotas for guarantee of VGBL benefit plans 1,300,259-1,300,259 1,300, Investment fund quotas for guarantee of VGBL benefit plans 741, , , Debentures 26,423 (323) 26, ,100 Eurobonds 258,199 1, , ,531 Total 8,131, ,757 8,351,312 3,181, ,796 3,557,887 1,322,106 16

18 Adjustment to market value Book Without Up to From 3 to Over Securities available for sale Cost equity value maturity 3 months 12 months 12 months Government Securities 10,214, ,543 10,685,742 1,352,463 3,113,275 6,220,004 National Treasury bonds 8,318 2,306 10,624-1,531 1,467 7,626 Treasury certificates (3) 764,622 32, , , , ,565 Securitized credit 78,116 (8,996) 69, ,636 66,484 National Treasury bills 1,901,682 (4,294) 1,897,388-1,048, ,015 67,756 Treasury bills 221, ,883-78,768 1, ,198 Central Bank notes 2,661,138 98,661 2,759, ,686,240 1,073,559 National Treasury notes NTN A 175,543 10, , ,405 National Treasury notes NTN C 2,828, ,915 3,103, ,063 2,653,420 National Treasury notes NTN D 525,501 55, ,983-93, ,516 National Treasury notes NTN F 1,030,029 9,420 1,039, ,039,449 National Treasury notes NTN P 74 (31) Samurai Bonds 19,176 (143) 19, ,806 Agricultural debt securities Private Securities 1,489, ,114 1,608, ,462 81, , ,010 Shares (2) 775, , , , Rural product notes 297, ,545-81, ,868 - Debentures 234,329 6, , , ,775 Real estate bonds 73,813-73, ,474 48,339 Mortgage notes 56,760-56, ,760 Certificate of real estate receivables - CRI 51,136-51, ,136 Total 11,703, ,657 12,293, ,462 1,434,140 3,370,249 6,601,014 Up to From 3 to Over Held to maturity (1) Cost 3 months 12 months 12 months Government Securities 5,499,249 4, ,862 5,335,429 Treasury certificates 823,007 4, , ,187 National Treasury notes NTN C (4) 4,676, ,676,242 Private Securities 52,453 31,444-21,009 Bank deposit certificates 52,453 31,444-21,009 Total 5,551,702 36, ,862 5,356,438 (1) The market value of Held to Maturity securities as of December 31, 2004 is R$6,560,474. Due to a new evaluation as to the classification of securities, the amount of R$1,424,142 (cost) referring to National Treasury notes - NTN C was transferred from the category "Held to Maturity" to the category "Available for Sale", and unrealized gains in the amount of R$281,522 were recognized in a separate caption of stockholders equity. In accordance with BACEN Circular No. 3,068, article 8, of November 8, 2001, Santander Banespa declares to have financial capacity and intention to hold to maturity the securities classified in the held to maturity category. 17

19 (2) Refers principally to shares of CESP - Cia. Energética de São Paulo - R$223,044 ( R$253,779) and AES Tietê S.A. - R$657,622 ( R$265,592). (3) The treasury certificates are held in custody of the Clearinghouse for the Custody and Financial Settlement of Securities (CETIP) and are restated based on the domestic general price index (IGP-DI) plus interest of 12% per year. (4) Restated based on the general market price index (IGP-M) plus interest of 12% per year, paid semiannually, maturing to January 1, The market value of securities is computed based on the average quotation on organized markets and their estimated cash flows, discounted to present value using the applicable interest rate curves which are considered representative of the market conditions at the balance sheet date. The principal interest rate curves are obtained from futures and swap contracts traded on the Commodities and Futures Exchange (BM&F). Adjustments to these curves are made whenever certain points are considered illiquid or when due to unusual reasons they do not fairly represent market conditions. 7. INTERBANK ACCOUNTS Composed of Payments and receipts pending settlement, represented basically by checks and other documents sent to clearinghouses (assets and liabilities) and by restricted deposits with BACEN to cover compulsory obligations for demand deposits, savings deposits, time deposits and foreign exchange transactions. 8. CREDIT PORTFOLIO AND ALLOWANCE FOR LOSSES a) Composition of credit portfolio 21,592,727 16,601,730 Lending operations 18,713,268 14,026,309 Loans and discounted receivables 8,768,469 6,480,880 Financing 7,041,009 5,168,586 Rural, agricultural and industrial financing 2,017,666 1,586,177 Real estate financing 841, ,281 Securities financing 5,991 19,856 Infrastructure and development financing 38,410 45,529 Leasing operations 443, ,479 Advances on foreign exchange contracts (1) 1,438,028 1,322,032 Other receivables (2) 997, ,910 (1) Classified as a reduction of Other liabilities ; (2) Include receivables for guarantees honored, debtors for purchase of assets, notes and credits receivable, and income receivable from advances on foreign exchange contracts. 18

20 b) Composition by business sector 21,592,727 16,601,730 Private sector 21,405,005 16,337,406 Industrial 5,976,701 3,989,545 Commercial 2,718,700 1,671,089 Financial institutions 6, ,364 Services and other 3,102,782 3,072,787 Individuals 6,732,071 4,963,525 Housing 842, ,695 Rural 2,025,093 1,559,401 Public sector 187, ,324 Federal 58,495 72,127 State - 1 Municipal 129, ,196 c) Changes in allowance for loan losses Balances as of January 1 1,008,769 1,036,536 Allowances recognized 475, ,296 Transfer due to merger - (25,376) Write-offs (567,008) (640,967) Exchange variations/other changes (993) 280 Balances as of December ,908 1,008,769 Recoveries (1) 312, ,296 (1) Recoveries are recorded in Income from Lending and Leasing Operations. d) Classification of credit portfolio by risk level and respective allowance for loan losses (CMN Resolution No. 2682/99) Minimum Balance Allowance required allowance Risk level required -% Current Past due Total Total AA - 10,205,228-10,205,228 7,615, A 0,5% 9,105,328-9,105,328 6,693,792 45,526 33,469 B 1% 466, , , ,027 7,132 6,380 C 3% 98, , , ,567 8,052 8,357 D 10% 191, , , ,961 35,001 30,996 E 30% 26,778 70,689 97, ,517 29,240 34,955 F 50% 13,006 71,710 84,716 67,757 42,358 33,879 G 70% 39,970 43,928 83,898 74,399 58,728 52,079 H 100% 191, , , , , ,999 Total 20,338,823 1,253,904 21,592,727 16,601, ,474 1,007,114 Additional allowance 5,434 1,655 Allowance 915,908 1,008,769 19

21 9. FOREIGN EXCHANGE PORTFOLIO Assets 2,565,161 3,297,116 Exchange purchased pending settlement 1,828,890 2,278,325 Rights to foreign exchange sold 792,855 1,027,313 Advances in local currency (80,728) (37,861) Term bills in foreign currency 7,179 2,886 Income receivable from advances 16,965 26,091 Income receivable from import financing Liabilities 1,271,235 1,984,640 Exchange sold pending settlement 768,298 1,026,523 Foreign exchange purchased 1,937,545 2,289,863 Import financing (229) - Liabilities for sales made 1,353 1,329 Advances on foreign exchange contracts (1,438,028) (1,336,472) Payables in foreign currencies 2,237 3,397 Income receivable from advances 59 - Memorandum accounts Open import credits 159, ,001 Confirmed export credits 1,243 35, TRADING ACCOUNT Assets 486, ,107 Stock exchanges - escrow deposits 223, ,825 Clearinghouse transactions 20,129 6,504 Debtors pending settlement (1) 76,606 54,864 Transactions pending settlement 165, ,429 Other Liabilities 439, ,838 Clearinghouse transactions 24,087 13,552 Commissions and brokerage fees payable 3,198 2,486 Creditors pending settlement (1) 64,947 51,185 Transactions pending settlement 155, ,267 Creditors for loan of shares 192, ,244 Other (1) Receivables/payables arising from the sale/purchase of financial assets 20

22 11. OTHER RECEIVABLES Other Receivables - Other 6,605,399 6,068,423 Tax credits (1) 3,381,127 3,263,512 Recoverable income and social contribution taxes 237, ,933 Salary advances/other 21,973 21,871 Sundry advances/other 7,871 26,111 Receivables from export contracts 69,577 62,921 Debtors for purchase of assets 147, ,491 Escrow deposits for: 1,682,049 1,377,638 Tax appeals 804, ,059 Labor claim appeals 719, ,720 Other 158, ,859 Tax incentive options 78,046 33,168 Reimbursable payments 134,785 35,870 Notes and credits receivable 775, ,289 Other foreign debtors 11,475 7,776 Other local debtors 58,264 85,843 Detailed information on tax credits: I. Nature and origin of recorded tax credits Balance Balance as of as of Nature and origin of deferred tax credits Recognition Realization Allowance for loan losses 649,664 74,077 (138,554) 585,187 Reserve for civil contingencies 177,398 20,530 (47,299) 150,629 Reserve for tax contingencies 385,696 53,376 (31,979) 407,093 Reserve for labor contingencies 525,513 5,770 (55,741) 475,542 Reserve for maintenance of stockholders equity 1,756,803 - (514,211) 1,242,592 Adjustment to market value of trading securities and derivative financial instruments 132, (78,476) 54,494 Accrual for supplementary pension plan 859,465 48, ,245 Other temporary differences 247,561 59,059 (69,432) 237,188 Total tax credits on temporary differences 4,735, ,627 (935,692) 4,060,970 Tax loss carryforwards 256, ,456 (968) 363,112 Social contribution tax - Executive Act No, (08/24/2001) 796,216 - (12,916) 783,300 Subtotal tax credits 5,787, ,083 (949,576) 5,207,382 Insufficient depreciation of leased assets Adjustment to market value of securities available for sale and derivative financial instruments classified as hedge 163,817 19, ,207 Total tax credits 5,951, ,599 (949,576) 5,390,715 Deferred tax credits not recorded (2,688,180) (38,236) 716,828 (2,009,588) Tax credits, net 3,263, ,363 (232,748) 3,381,127 Tax credits are recorded in accordance with standards of the Central Bank of Brazil and adjusted according to their expected realization and present value, as follows: 21

23 II. Expected realization of recorded tax credits Temporary Temporary differences differences Tax loss Year IRPJ CSLL carryforwards CSLL 18% Total Recorded , ,345 42,500 20,545 1,045, , , ,486 30,673 7, , , , ,102 29,161 43, , , , ,627 25,448 23, , , ,122 45,654 42,467 40, , , to ,707 30, , , , , to , , , , to ,256 15,981 1, , , , to ,171 10, , , ,917 After ,279 79, , ,186 Total 3,171, , , ,300 5,207,382 3,197,794 IRPJ - Corporate income tax CSLL - Social contribution tax Due to differences between accounting, tax and corporate criteria, expected realization of tax credits should not be taken as indicative of future net income. The expected realization does not consider the tax credit of the adjustment to market value of securities available for sale and insufficient depreciation of leased assets. III. Present value of deferred tax credits The present value of total tax credits is R$3,545,077 ( R$3,925,505) and the present value of recorded tax credits is R$1,941,241 ( R$1,877,172). The present value was calculated taking into account the expected realization of temporary differences, tax loss carryforwards, and social contribution tax at the rate of 18% (Executive Act No. 2,158/01) and the average funding rate projected for the corresponding periods. IV. Nature and origin of deferred tax liabilities Balance Balance as of as of Recognition Realization Adjustment to market value of trading securities and derivative financial instruments 149,651 65,016 (93,518) 121,149 Adjustment to market value of securities available for sale and derivative financial instruments classified as hedge 141, ,783 (59,085) 398,703 Deferred income and social contribution taxes 17,245 - (17,245) - Excess depreciation of leased assets 14,817 - (12,349) 2,468 Total 322, ,799 (182,197) 522,320 22

24 12. OTHER ASSETS Refers principally to assets not in use, composed of real estate and vehicles received in settlement of liabilities in the amount of R$70,747 ( R$80,452), net of allowance for valuation, and prepaid expenses in the amount of R$145,086 ( R$162,885) Temporary investments refers to the equity investment in Bozano, Simonsen Centros Comerciais S.A. carried at cost, in the amount of R$274,748 ( R$274,748), transferred from permanent assets - investments, due to a contractual commitment for realization at cost. 13. DEFERRED CHARGES Cost Amortization Net Net Goodwill 505,434 (288,666) 216, ,291 Leasehold improvements 335,928 (102,531) 233, ,318 Acquisition and development of software 1,170,302 (344,546) 825, ,565 Other deferred charges 70,760 (16,022) 54,738 46,639 Total 2,082,424 (751,765) 1,330,659 1,143,813 For Banco Santander Brasil S.A., the goodwill on investment acquisition, net of amortization, totaled R$162,975 ( R$252,043), and the amount of R$89,068 related to amortization ( R$60,011) was recorded as expenses. For Banco Santander Meridional S.A. and Banco do Estado de São Paulo S.A., the goodwill related to the merger and the reserve for maintenance of the merging company s stockholders equity amounted to R$558,505 and R$3,096,179 ( R$643,960 and R$4,523,109), respectively, and the amounts of R$85,455 and R$1,426,930 ( R$85,445 and R$895,943), respectively, were recorded in the income of Banco Santander Meridional S.A. and Banco do Estado de São Paulo S.A. 14. FUNDING AND BORROWINGS AND ONLENDINGS Without Up to From 3 to Over maturity 3 months 12 months 12 months Total Total Deposits 9,619,529 4,917,250 4,749,252 3,383,874 22,669,905 18,049,265 Money market funding - 10,733,377 1, ,085 10,949,511 7,724,370 Securities issued abroad ,465, ,946 1,735,536 2,376,648 Borrowings and onlendings - 1,440,303 2,581,315 3,925,054 7,946,672 7,996,478 Total 9,619,529 17,090,942 8,797,194 7,793,959 43,301,624 36,146,761 23

25 Without Up to From 3 to Over maturity 3 months 12 months 12 months Total Total a) Deposits Demand deposits 3,973, ,973,168 3,675,794 Savings deposits 4,630, ,630,594 4,194,538 Interbank deposits - 89, ,002 10,561 Time deposits 992,585 4,828,055 4,748,445 3,383,874 13,952,959 10,168,372 Other deposits 23, ,182 - Total 9,619,529 4,917,250 4,749,252 3,383,874 22,669,905 18,049,265 Up to From 3 to Over 3 months 12 months 12 months Total Total b) Money market funding Own portfolio 6,450,497 1,049-6,451,546 2,402,815 Third parties 3,278, ,278,084 5,321,555 Linked to trading portfolio operations 1,004, ,085 1,219,881 - Total 10,733,377 1, ,085 10,949,511 7,724,370 c) Securities issued abroad Represented by funds obtained from the placement of securities (Eurobonds) abroad, for local investment in the amount of R$1,721,144 ( R$2,191,946), with maturities through 2006 and subject to financial charges ranging from 2.67% to 9.12% per year ( maturities through 2005 and financial charges from 5.25 % to 10.73% per year), and certificates of deposits, for local investment, in the amount of R$14,392 ( R$184,702) with maturities through October 2005 and subject to financial charges of 2.67% per year ( maturities through 2004 and financial charges from 1.63% to 7.25% per year). Up to From 3 to Over 3 months 12 months 12 months Total Total d) Borrowings and onlendings Foreign borrowings 1,055,900 1,754,000 2,686,716 5,496,616 6,373,837 Domestic onlendings 384, ,315 1,238,338 2,450,056 1,622,641 Total 1,440,303 2,581,315 3,925,054 7,946,672 7,996,478 Foreign borrowings 5,496,616 6,373,837 Export 1,225,124 1,190,690 Import 1,102,992 1,543,184 Other credit lines 156, ,934 Other liabilities - floating rates 65, ,393 Foreign loans 2,946,530 3,367,636 24