The global financial system crisis. Opportunities for Banco do Brasil

Transcription

1 The global financial system crisis Opportunities for Banco do Brasil 1

2 Disclaimer This presentation contains references and statements, planned synergies, increasing estimates, projections of results and future strategy for Banco do Brasil, it s Associated and Affiliated Companies and Subsidiaries. Although these references and statements reflect the management s belief, they also involve imprecision and high difficult risks to be foreseen, consequently, they may conduct to a different result than the one anticipated here. These expectations are highly dependent on market conditions, on Brazil s economic performance, as well as on the financial system and on the international market ones. Banco do Brasil is not responsible for bringing up to date any estimate in this presentation. 2

3 Agenda The financial crisis impacts on Brazil BB s Fundamentals Opportunities for Banco do Brasil 3

4 The financial crisis worsening restricted access to international funding to Brazilian banks and companies and trembled the Country s capital market and exchange rate % % Dec/07 Mar/08 Jun/08 Sep/08 Exchange Rate R$/US$ Ibovespa 4

5 Brazilian Government and Central Bank performed promptly to reduce the financial crisis impacts on the Brazilian financial system and economy Regulation Circular Circular Circular Resolution Oct 13th Circulars Description Reserve requirement decrease on interbank deposits from leasing companies. Interbank loan portfolios purchase with up to 40% deduction of time deposits reserve requirement. 3% reserve requirement decrease on time and demand deposits. Establishes procedures for loan and rediscount operations regulated by MP 442. Time, demand and interbank deposits compulsory and reserve requirements release. Amount R$ 13 billion R$ 23 billion R$ 23 billion Not established R$ 100 billion Brazil s reserve requirements and international reserves levels allow the Central Bank to keep providing liquidity to the country's economy as much in R$ as in US$. 300, , , , ,000 50,000 - Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Reserve Requirements - R$ million International Reserves - US$ million 5

6 Although Brazilian banks have no exposure to subprime-related assets, their market cap continued falling due to the global confidence crisis... Jan/08 Feb/08 Mar/08 Apr/08 May/08 Jun/08 Jul/08 Aug/08 Sep/08 Oct/08... and Banco do Brasil leads the market cap underperformance, even thought it has the best fundamentals The market lost its rationality with the crisis. Since Sep 30 th, BB market cap fell R$ 22 billion, which does not reflect the Bank s fundamentals. The P/B and P/E ratios are 1.3 and 5.3, close to 2003 levels. Sep-Oct/08 Lehman Brothers Bankruptcy Fed puts a rescue package for AIG A bail-out plan is announced by the US government Morgan Stanley and Goldman Sachs become commercial banks The US House of Representatives voted against the bail-out plan The US House of Representatives voted in favor of the bail-out plan, but it did not improved the markets confidence Iceland banks collapsed. Icesave accounts are declared in default Banco do Brasil Bradesco Itaú Unibanco Ibovespa 6

7 Agenda The financial crisis impacts on Brazil BB s Fundamentals Opportunities for Banco do Brasil 7

8 BB has increased its market share in consumer finance, loans to agribusiness, foreign trade, SME and large-sized companies... BB is the main Brazilian financer Market Share 16.5% 16.9% 15.3% 16.0% 16.7% 16.4% R$ billion Well diversified business loan portfolio, with maximum concentration of 11% in the oil sector (Aug/2008) 44.2% Others 11.0% Oil 10.9% Foodstuff of vegetable Origin 10.0% Metalworking and Steel 6.3% Services Jun/2008 Jul/2008 Aug/2008 Corporate SME Individuals Agribusiness - Individuals Agribusiness - Business Abroad Automotive 5.8% 6.0% Electricity 5.8% Telecommunications Agribusiness loan portfolio is diversified by purpose, customer size, region and financed items (Aug/08) Payroll loan has the largest share of individual loan portfolio Product R$ million Share Livestock 7, % Soybean 3, % Sugar Cane 3, % Corn 3, % Coffee 1, % Poultry 1, % Orange 1, % Machinery and Equipment 1, % Others 36, % T o t a l 59, % R$ billion Jun/2008 Aug/2008 Individuals Payroll Loan 8

9 ... maintaining the credit book quality along with delinquency better than the Brazilian Financial System one... BB s delinquency is 3.3%, lower than Brazilian Financial System 8.0% 6.1% 8.6% 6.4% 8.3% 6.4% 7.7% 5.6% 8.0% 6.1% 7.5% 5.3% 7.7% 5.6% 4.1% 4.7% 4.6% 4.3% 4.1% 4.0% 4.2% 3.3% 3.7% 3.7% 3.7% 3.3% 3.3% 3.3% Mar/07 Jun/07 Sep/07 Dec/07 Mar/08 Jun/08 Aug/08 Past Due Loans +15 Financial System Past Due Loan BB Past Due Loans +90 Financial System Past Due Loans BB 9

10 ...lower delinquency ratios are seen in every BB loan segments. 3.9% 3.4% 2.4% 1.8% In the business book delinquency is in line with the Financial System 4.2% 3.7% 2.6% 2.0% 4.7% 4.2% 2.8% 2.3% 4.3% 3.9% 2.7% 2.5% 3.3% 3.3% 2.5% 2.3% 3.2% 2.9% 2.0% 2.0% 2.9% 2.6% 1.7% 1.7% 3.0% 2.6% 1.7% 1.6% Dec/04 Dec/05 Jun/06 Dec/06 Jun/07 Dec/07 Jun/08 Aug/ % 12.0% 9.1% Individual book delinquency shows falling trend and it is below market 13.1% 14.2% 12.9% 12.4% 7.9% 7.2% 13.8% Past Due Loans +15 Financial System Past Due Loan BB 13.5% 13.0% 13.4% 10.7% 9.9% 9.6% 9.7% 7.6% 7.1% 6.7% 6.7% 6.2% 6.0% 5.8% 7.0% 6.3% 13.7% 10.2% 7.0% 7.5% 5.8% 5.8% Dec/04 Dec/05 Jun/06 Dec/06 Jun/07 Dec/07 Jun/08 Aug/08 Past Due Loans +15 Financial System Past Due Loan BB Past Due Loans +90 Financial System Past Due Loans BB Past Due Loans +90 Financial System Past Due Loans BB Agribusiness delinquency is under control and presents improving average risk (*) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-12/04 12/05 12/06 12/07 01/08 02/08 03/08 04/08 05/08 06/08 07/08 08/08 09/08 Balance - R$ billion Average Risk Past Due Loans +90 (*) agri-industrial loan is not included 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 10

11 In the crisis momentum, BB s credit policies and risk management have been proving to be appropriated. Risk analysis prior to assuming customer credit risk; Credit risk exposure limitation per customer and macroeconomic sector; Market and liquidity risk management are guided by preestablished limits and levels of decision; Mismatches between financial indexes are protected. Additionally, BB has adopted preventive measures to monitor the crisis impact in its customer operations, with special monitoring of segments and companies. 11

12 BB s Global Risk Committee has always been conservative in its exposure to market risk, avoiding major impacts of foreign exchange and interest rates. Derivatives are used for protection, aiming at minimum variance between assets and liabilities; There is no speculation with derivatives; There is no relevant exposure to foreign currencies. Currently, BB s net foreign exchange exposure, included currency swaps contracted by BB s customers, is around US$ 100 million, below June 2008 level. BB s customers exposure to currency swap is intensively monitored. Until October 1 st, BB was expected to receive R$ million from its customers and to repay them R$ million, a net effect of R$ million. Term Option and Currency Swap Major Customers (R$ million) Client Notional Value B B C reditor A (64.8) B (56.5) C (31.6) D (30.1) E (28.9) Others¹ 3,616.8 (402.7) Total 4,600.6 (614.5) (1) It involves 152 contracts and average notional value of R$ 23.8 million Client Notional Value BB Debtor A B C D E Others² Total (2) It involves 38 contracts and average notional value of R$ 14.7 million 12

13 Loans to individuals still concentrated in payroll line, the lower risk one. 34.1% of the individual loan portfolio; Leadership 19.4% market share; Focused on the public servants (90% of the portfolio); Average term 34 months; Average ticket R$ 5.3 thousand. Car loan is the second largest line in the individual portfolio. 11.6% of the individual portfolio; Average term 42 months (account holders) and 44 months (non-account holders); Average ticket R$ 22.7 thousand; Past Due Loans +90 days 4.3%. 13

14 BB has kept its leadership in financing exporting companies, offering foreign trade credit lines, such as ACC/ACE, despite the lower availability of foreign funding. Preventive measures to serve the largest number of customers being taken since August (ACC/ACE): Term reduction; Financed amount reduction. 33% market share, with growth perspective ACC/ACE Contract ACC/ACE Average Balance Portfolio US$ billion 1,600 1,400 1,200 1, Jun/08 Jul/08 Aug/08 Sep/08 thousand , Mar/08 Jun/08 Jul/08 Aug/08 Sep/ Contracted Amount (US$ million) Quantity of Contracts 14

15 The agribusiness loan portfolio outlook remains favorable, despite the commodities volatility. The Brazilian crop is in the planting season, mainly; The sector inputs purchase decisions took into account the price rise that occurred in the 1H08; Estimated global stockpiles sign adjusted supplies; The lower volume of anticipated sales will mean lower use of fertilizers; Cropped area will keep unchanged, but with productivity reduction; Researches indicate that the rain will be adequate to the crop season. The commodities price drop down in American Dollars is being offset by the Real devaluation. CRB Food Index US$ 1 CRB Food Index R$ 2 FeB/02 Aug/02 Feb/03 Aug/03 Feb/04 Aug/04 Feb/05 Aug/05 Feb/06 Aug/06 Feb/07 Aug/07 Feb/08 Aug/08 Source: Bloomberg. (1) FX Exchange Rate from Feb 12nd 2002 to Oct 2nd 2008 (2) Original index converted by the FX Exchange Rate R$/US$ 15

16 Agenda The financial crisis impacts on Brazil BB s Fundamentals Opportunities for Banco do Brasil 16

17 BB s funding has increased above the goal. Its the flight to quality phenomenon benefiting BB s funding expansion... R$ billion Jun/08 Jul/08 Aug/08 Time Deposits Savings Demand Deposits Interbank Deposits thousand CDB % 97.4% 97.5% 97.6% R$ billion Jun/08 Jul/08 Aug/08 Sep/08 Average Cost - % Selic CDB Balance BRL billion Jun/08 Jul/08 Aug/08 Sep/08 New Deposits Funding Volume Customers who made new deposits 17

18 ...allowing liquidity increase and vigorous credit growth... R$ billion Jan/08 Feb/08 Mar/08 Apr/08 May/08 Jun/08 Jul/08 Aug/08 Average Liquidity Minimum Reserve Domestic Loan Portfolio* * It does not include installment purchases made with credit card and financed by retailers. 18

19 ... besides placing the Loan/Deposits ratio in a better level, without affecting the BIS ratio. Loan / Deposits - % Q07 1Q08 2Q08 Jul/08 Aug/08 BIS Ratio - % Q07 1Q08 2Q08 Jul/08 Aug/08* (*) Estimated Ratio 19

20 The reserve requirements drop, approved by CMN, will increase BB s liquidity as well as the Financial System s... R$ billion Reserve Requirements R$ 160 billion reserve requirements are being added up to the economy Apr/08 May/08 Jun/08 Jul/08 Aug/08 BB Financial System BB gets extra R$ 11.4 billion due to the reserve requirements drop 20

21 ... allowing BB to leverage its individual loan portfolio with the purchase of other banks portfolios. Individual loan portfolio reached R$ 42.1 billion balance in Aug/08; In the last 18 months, BB acquired loan portfolios with joint risk of R$ 1.5 billion; The reserve requirements drop generates opportunities to loan portfolio purchase; R$ 3 billion loan portfolios with joint risk proposals are currently under analysis; The acquire decision considers good banking governance and the risk x return equation; The acquisition process is automated and centralized, minimizing operational risks. BB s Analysis Limit establishment Portfolio Analysis Operations Filter Valuation 21

22 The Brazilian international reserves, as an alternative funding source, will allow BB to keep its highlighted position in the foreign trade financing, even with the global liquidity restriction. Interbank Reduction of credit lines over 90 days; No liquidity; No parameters to valuate; Reduced number of partners. Repurchase Agreements Unlisted; No partners. Time Deposits Customers Return BB is seen as safe harbor. Issuing Unavailable; Closed market, awaiting for behavior clearness. BB s international diversified funding basis has cushioned the liquidity restrictions Alternative sources such as Proex and Proger Exportação collaborate to finance the foreign trade market. MP 442 / Resolution CMN 3622: It will bring liquidity to the market (ACC/ACE). US$ million 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Dec/07 Jan/08 Feb/08 Mar/08 Apr/08 May/08 Jun/08 Jul/08 Aug/08 Sep/08 Issuing Individuals Special Business Repurchase Agreements Interbank 22

23 In agribusiness, the 2008/09 crop is already planted at an American Dollar exchange rate of R$1.60. When the harvest season comes (2Q09), the margins will be lower than in the previous crop, but still profitable. To the 2008/2009 crop, BB was expecting to grant R$ 30.8 billion in loans, setting R$ 19.3 billion for cost finance (R$ 11.5 billion from July to December/2008 and R$ 7.8 billion from January to June/2009) To compensate the tradings lower share in agribusiness financing, R$ 5 billion from funds with equalization are being anticipated when previously expected to be disbursed in the 1H09. If by the end of the crop (Jun/09) that amount anticipated needs to be replaced or increased, the Federal Government can use its budget funds or other source to be defined. The 2007/2008 crop good performance improved the 2008 payment flow (until Sep) :...Each crop agribusiness sector is funded by farmers their own, tradings/suppliers and rural credit (banks), which has the following share in the 2008/09 crop: 51.3 Production Cost and Agribusiness Loan 2008 Estimative R$ billion 36% 33% 21% % % % % Paid Default To be paid Grains Coffee Sugar Cane Granted Loans Livestock Production Cost 23

24 Investor Relations Unit SCN Quadra 2 Bloco A - 6º andar Sala 602 Ed. Corporate Financial Center CEP Brasília DF Phone: (61) Fax: (61) bb.com.br ri@bb.com.br For further information access bb.com.br/ri 24