Download 6.5 Loan Portfolio

This report contains statements concerning expectations, planned synergies, growth estimates, forecasts
and future strategies related to Banco do Brasil and its subsidiaries, associated companies and affiliates.
Although these statements reflect management's current beliefs, they involve imprecisions and risks that
are difficult to predict, and actual results and events may differ from those anticipated and discussed
herein. These expectations depend materially on market conditions, Brazil’s economic performance and
developments in the banking industry and international markets. Banco do Brasil does not assume any
responsibility to update the estimates contained in this report.
This report contains tables and charts that present financial figures rounded to the nearest million of
Brazilian real. The rounding method used complies with Regulation 886/66 issued by Fundação IBGE: if
the last digit is equal to or greater than 5, the last remaining digit is increased by one unit; and if the last
digit is less than 5, it is discarded and the digit before it is maintained. Variations, in both nominal and
percentage terms, were calculated using numbers in units.
Summary
Summary ............................................................................................................................................. 2
Index of Tables .................................................................................................................................... 4
Index of Figures................................................................................................................................... 7
Presentation ........................................................................................................................................ 9
Summary of Results .......................................................................................................................... 10
1 - Economic Environment ............................................................................................................... 23
2 - BB Securities............................................................................................................................... 29
2.1 Shares...................................................................................................................................... 29
2.2 Warrants .................................................................................................................................. 34
2.3 Stock Performance .................................................................................................................. 35
3 - Corporate Governance ............................................................................................................... 39
4 - Key Statistics............................................................................................................................... 43
5 - Summarized Financial Statements ............................................................................................. 45
5.1 Summarized Balance Sheet .................................................................................................... 45
5.2 Summarized Income Statement – BR GAAP .......................................................................... 47
5.3 Income Statement with Reallocations ..................................................................................... 48
5.3.1 Details of Reallocations ....................................................................................................49
6 - Balance Sheet Analysis .............................................................................................................. 53
6.1 Breakdown ............................................................................................................................... 53
6.2 Analysis of Assets.................................................................................................................... 54
6.3 Securities Portfolio................................................................................................................... 55
6.4 Tax Credits .............................................................................................................................. 56
6.5 Loan Portfolio........................................................................................................................... 57
6.5.1 Individual Customer Loan Portfolio ...................................................................................59
6.5.2 Business Loan Portfolio ....................................................................................................61
6.5.3 Agribusiness Loan Portfolio ..............................................................................................64
6.6 Analysis of Liabilities................................................................................................................ 75
6.7 Liquidity Analysis ..................................................................................................................... 77
6.8 Deposits and Money Market Funding...................................................................................... 78
6.8.1 Foreign Borrowing ............................................................................................................79
7 - Analysis of Results...................................................................................................................... 80
7.1 Net Interest Income ................................................................................................................. 80
7.2 Analysis of Investments ........................................................................................................... 84
7.3 Analysis of Funding ................................................................................................................. 88
7.4 Analysis of Volume and Spread .............................................................................................. 90
7.5 Provision for Credit Risk .......................................................................................................... 92
7.5.1 Retail Loan Portfolio ..........................................................................................................96
7.5.2 SMEs Loan Portfolio .......................................................................................................100
7.5.3 Commercial Loan Portfolio ..............................................................................................101
7.5.4 Agribusiness Loan Portfolio ............................................................................................102
7.5.5 Foreign Trade Loan Portfolio ..........................................................................................106
7.5.6 Foreign Loan Portfolio and Others ..................................................................................107
7.6 Fee Income............................................................................................................................ 108
7.6.1 Revenues from Checking Account Fees .........................................................................109
7.6.2 Asset Management .........................................................................................................110
7.6.3 Cards...............................................................................................................................112
7.6.4 Collection ........................................................................................................................114
7.7 Administrative Expenses ...................................................................................................... .115
7.7.1 Personnel Expenses .......................................................................................................116
7.7.2 Other Administrative Expenses .......................................................................................117
7.7.3 Distribution Network ........................................................................................................118
7.7.4 Automated Channels.......................................................................................................121
7.7.5 Productivity – Coverage Ratios……………………………………………………………….123
7.7.6 Operating Income……………………………………………………………………………… 126
7.8 Net Value Added.................................................................................................................... 129
8 - Risk Management ..................................................................................................................... 130
8.1 Risk Management.................................................................................................................. 130
8.1.1 Market Risk .....................................................................................................................130
8.1.2 Liquidity Risk ...................................................................................................................140
8.1.3 Credit Risk .......................................................................................................................142
8.1.4 Operating Risk ................................................................................................................146
8.2 Capital Structure .................................................................................................................... 148
8.2.1 Shareholders’ Equity .......................................................................................................148
8.2.2 Regulatory Capital ...........................................................................................................149
8.2.3 Economic Capital ............................................................................................................154
9 - Social and Environmental Performance ................................................................................... 156
9.1 Employee Relations............................................................................................................... 157
9.2 Eco-efficiency ........................................................................................................................ 161
9.3 Social Environmental focused Business................................................................................ 164
9.4 Investor Market Recognition .................................................................................................. 168
10 - Strategic Investments ............................................................................................................... 169
10.1
Information ..................................................................................................................... 169
10.2
Income from Insurance, Pension and Savings Bonds ................................................... 170
10.3
Strategic Development................................................................................................... 178
10.3.1 Banco Votorantim ......................................................................................................178
10.3.2 Performance in the State of São Paulo .....................................................................184
10.3.3 Internationalization………………………………………………………………………....186
10.3.4 Business in Progress .................................................................................................188
11 - Financial Statements ................................................................................................................ 190
11.1
Summarized Balance Sheet .......................................................................................... 190
11.2
Summarized Income Statement..................................................................................... 192
11.3
Income Statement with Reallocations............................................................................ 193
Index of Tables
Table 1. Main Equity Items ........................................................................................................................11
Table 2. Loan portfolio (Conglomerate).....................................................................................................11
Table 3. Income statement with reallocations – Main lines.......................................................................13
Table 4. Main Indicators of Income/Expenses ..........................................................................................13
Table 5. NII by business line .....................................................................................................................14
Table 6. Net Interest Margin......................................................................................................................15
Table 7. Loan Portfolio Quality Indicators .................................................................................................16
Table 8. Expenses with Allowance for Loan Losses vs Portfolio ..............................................................16
Table 9. Insurance, Pension Plans and Savings Bonds Income...............................................................17
Table 10. Administrative expenses – Pro forma Comparison ...................................................................18
Table 11. One-off items .............................................................................................................................20
Table 12. Guidance 2010 ..........................................................................................................................22
Table 13. Main Macroeconomic Indicators................................................................................................28
Table 14. Shareholders quantity after and before the Public Offering .....................................................30
Table 15. Ownership Structure.................................................................................................................31
Table 16. Distribution of Dividends/Interest on Own Capital.....................................................................31
Table 17. Shareholders by Range of Shares Owned................................................................................32
Table 18. Breakdown of the Warrant Holders ...........................................................................................34
Table 19. Series "C" Warrants...................................................................................................................34
Table 20. Expected Dilution of Capital ......................................................................................................34
Table 21. Key Statistics .............................................................................................................................43
Table 22. Summarized Balance Sheet – Assets .......................................................................................45
Table 23. Summarized Balance Sheet – Liabilities ...................................................................................46
Table 24. Summarized Income Statement – BR GAAP............................................................................47
Table 25. Income Statement with Reallocations .......................................................................................48
Table 26. Reallocations - Other Operating Income/Expenses ..................................................................50
Table 27. Previ – adjustments ...................................................................................................................51
Table 28. Tax Effects and Statutory Profit Sharing on One-off Items .......................................................52
Table 29. Breakdown of Assets.................................................................................................................54
Table 30. Securities Portfolio by Category ................................................................................................55
Table 31. Securities Portfolio by Maturities – Market Value......................................................................55
Table 32. Breakdown of Tax Credits .........................................................................................................56
Table 33. Acquired Portfolios and Interbank Deposits with Credit Guarantee..........................................57
Table 34. Loan Portfolio ............................................................................................................................58
Table 35. Individuals’ Loan Portfolio .........................................................................................................60
Table 36. Business Loan Portfolio.............................................................................................................61
Table 37. Private Securities – Business....................................................................................................62
Table 38. ACC/ACE Average Volume per Contract..................................................................................62
Table 39. SME Credit Products.................................................................................................................63
Table 40. Exports ......................................................................................................................................65
Table 41. Brazil’s Participation in World Agribusiness ..............................................................................65
Table 42. Agribusiness Loan Portfolio by Region .....................................................................................66
Table 43. Agribusiness Loan Portfolio by Purpose ...................................................................................67
Table 44. Agribusiness Loan Portfolio by Product ....................................................................................68
Table 45. Agribusiness Loan Portfolio by Financed Item..........................................................................68
Table 46. Funds Released for the 09/10 Crop by Customer Size ............................................................68
Table 47. Agribusiness Portfolio by Size...................................................................................................69
Table 48. Equalizable Funds from Agribusiness Portfolio.........................................................................71
Table 49. 2009/2010 Crop Plan ................................................................................................................73
Table 50. Defrayal – Transaction Profile ...................................................................................................73
Table 51. Liabilities....................................................................................................................................75
Table 52. Sources and Uses .....................................................................................................................76
Table 53. Liquidity Balance .......................................................................................................................77
Table 54. Deposits and Money Market Funding .......................................................................................78
Table 55. Foreign Borrowing .....................................................................................................................79
Table 56. Overseas Issues........................................................................................................................79
Table 57. Net Interest Income ...................................................................................................................80
Table 58. Analysis of Volume (Earning Assets) and Quarterly Spread – 1Q10 and 2Q10.......................81
Table 59. Margin, Net of Interest and Profit Margin ..................................................................................83
Table 60. Revenues from Loans Net of Exchange Impact (Res. 2,770)...................................................84
Table 61. NIM ............................................................................................................................................85
Table 62. Securities Income......................................................................................................................86
Table 63. Avg Balance of the BS accounts and onfo. on interest rates – Earning assets (quarterly) ......87
Table 64. Avg Balance of the BS accounts and info. on interest rates – Earning Assets (half-yearly) ....87
Table 65. Avg. Balances of the BS accounts and info. on int. rates – Int. Bearing Liabilities (quarterly) .88
Table 66. Avg. Bal of the BS accounts and info. on int. rates – Int. Bearing Liabilities (half-yearly) ........89
Table 67. Int. increase and decrease (Inc. and Exp.) due to changes in Vol and Rates (quarterly).........90
Table 68. Int. increase and decrease (Inc. and Exp.) due to changes in Vol and Rates (half-yearly) ......91
Table 69. Net Financial Margin .................................................................................................................92
Table 70. Allowance for Loan Losses Expenses over Portfolio ................................................................92
Table 71. Loan Portfolio by Level of Risk..................................................................................................94
Table 72. Delinquency Ratio .....................................................................................................................94
Table 73. Average Portfolio Risk...............................................................................................................95
Table 74. Retail Loan Portfolio by Level of Risk .......................................................................................96
Table 75. Changes in the Allowance – Retail ...........................................................................................97
Table 76. Small and Micro Enterprise Loan Portfolio..............................................................................100
Table 77. Changes in the Allowance – SMEs .........................................................................................100
Table 78. Commercial Loan Portfolio by Level of Risk ...........................................................................101
Table 79. Changes in the Allowance - Commercial ................................................................................101
Table 80. Agribusiness Loan Portfolio by Level of Risk ..........................................................................102
Table 81. Changes in the Allowance – Agribusiness ..............................................................................102
Table 82. Portfolio with and without Roll Over – Agribusiness................................................................103
Table 83. Agribusiness Portfolio Rates ...................................................................................................104
Table 84. Foreign Trade Loan Portfolio by Level Risk ............................................................................106
Table 85. Changes in Allowance – Foreign Trade ..................................................................................106
Table 86. Foreign Loan Portfolio by Risk Level ......................................................................................107
Table 87. Other Transactions Portfolio – Banco Nossa Caixa and Banco Votorantim (50%) ................107
Table 88. Fee Income..............................................................................................................................108
Table 89. Investment Funds and Managed Portfolios by Customer .......................................................111
Table 90. Investment Funds and Managed Portfolios by Type...............................................................111
Table 91. Global Card Revenue..............................................................................................................113
Table 92. Commercial Income ................................................................................................................115
Table 93. Personnel Expenses ...............................................................................................................116
Table 94. Other Administrative Expenses ...............................................................................................117
Table 95. Distribution Network ................................................................................................................118
Table 96. Wholesale Pillar Branches ......................................................................................................119
Table 97. Distribution Network Abroad....................................................................................................120
Table 98. Coverage Ratios – without extraordinary items ......................................................................123
Table 99. Cost Income Ratio – without extraordinary items....................................................................124
Table 100. Operating Income..................................................................................................................126
Table 101. Accumulated Amortization.....................................................................................................127
Table 102. Intangible ...............................................................................................................................128
Table 103. Net Value Added ...................................................................................................................129
Table 104. Balance in Foreign Currency.................................................................................................132
Table 105. Consolidated BB VaR............................................................................................................135
Table 106. Foreign Network’s VaR .........................................................................................................136
Table 107. International Trading Portfolio’s VaR ....................................................................................137
Table 108. Domestic Trading Portfolio’s VaR .........................................................................................138
Table 109. Repricing Profile of Interest Rates – 06/30/2010 ..................................................................139
Table 110. Extended Loan Portfolio ........................................................................................................144
Table 111. Concentration of the Loan Portfolio of the 100 Largest Borrowers .......................................144
Table 112. Concentration of the Loan Portfolio of the 100 Largest Borrowers % in relation to RE ........145
Table 113. Concentration of the Loan Portfolio by Macrossector ...........................................................145
Table 114. Monitoring Operational Losses..............................................................................................147
Table 115. Shareholders’ Equity .............................................................................................................148
Table 116. BIS Ratio – Economic-Financial Conglomerate ....................................................................150
Table 117. Main accounts of the PEPR quota (Economic-Financial Conglomerate)..............................151
Table 118. RRE for Market Risk by Risk Factor .....................................................................................151
Table 119. Allocated Capital for Operational Risk by Line of Business ..................................................151
Table 120. Changes in Composition of BIS Ratio ...................................................................................152
Table 121. Fixed Asset Ratio ..................................................................................................................153
Table 122. Economic Capital ..................................................................................................................154
Table 123. Distribution of Economic Capital in the Loan Portfolio ..........................................................154
Table 124. VaR by Risk Factor ...............................................................................................................155
Table 125. Distribution of Economic Capital for Operating Risk, by Loss Event Category.....................155
Table 126. Scholarships Granted............................................................................................................158
Table 127. Employees Training – Annual Flow.......................................................................................159
Table 128. Quarterly Average Expenses per Employee (Income Statement with Reallocations) ..........160
Table 129. Expenses with Statutory Profit Sharing.................................................................................160
Table 130. Employee Turnover ...............................................................................................................160
Table 131. Use of Water..........................................................................................................................161
Table 132. Use of Paper..........................................................................................................................161
Table 133. Sustainable Regional Development (DRS) ...........................................................................164
Table 134. Microcredit Operations ..........................................................................................................165
Table 135. RSA Loans - Other Programs ...............................................................................................166
Table 136. Investment Funds with RSA criteria ......................................................................................166
Table 137. Complaints Registered in the Central Bank of Brazil ............................................................167
Table 138. Interests in the Capital of Companies ...................................................................................169
Table 139. Insurance, Pension Plans and Savings Bondsans................................................................171
Table 140. Insurance Income Statement by Line of Business ................................................................172
Table 141. Consolidated Insurance Ratio ...............................................................................................174
Table 142. Insurance Ratio by Segment .................................................................................................175
Table 143. Operating Highlights of the Insurance Group........................................................................177
Table 144. Banco Votorantim – Income Statement with Reallocations Highlights .................................179
Table 145. Banco Votorantim – Reallocations (Fee Income)..................................................................180
Table 146. Banco Votorantim – Reallocations (Mark-to-Market - MKT) .................................................180
Table 147. Banco Votorantim – Reallocations (Currencies Fluctuation) ................................................180
Table 148. Banco Votorantim – Equity Highlights ...................................................................................182
Table 149. Banco Votorantim – Loan Portfolio by Level of Risk .............................................................182
Table 150. Banco Votorantim – Delinquency Ratios...............................................................................183
Table 151. Banco Votorantim – Vehicle Loan Portfolio...........................................................................183
Table 152. Banco Votorantim – Operating and Structural Highlights .....................................................183
Table 153. Banco Votorantim – Ratios Highlights...................................................................................183
Table 154. Deposits in the State of São Paulo .......................................................................................184
Table 155. Loan Operations in the State of São Paulo...........................................................................185
Table 156. Banco Patagonia – Income of Statement Highlights.............................................................187
Table 157. Banco Patagonia – Equity Highlights ....................................................................................187
Table 158. Banco Patagonia – Operating and Structural Highlights.......................................................187
Table 159. Banco Patagonia – Returns, Capital and Loan Ratios..........................................................187
Table 160. Review of the Corporate Structure ........................................................................................189
Table 161. Balance Sheet – Assets ........................................................................................................190
Table 162. Balance Sheet – Liabilities ....................................................................................................191
Table 163. Summarized Corporate Law Income Statement ...................................................................192
Table 164. Income Statement with Reallocation .....................................................................................193
Index of Figures
Figure 1. Income (R$ million) and ROE (%)..............................................................................................10
Figure 2. BIS Ratio ....................................................................................................................................19
Figure 3. Dollar/Euro Ratio ........................................................................................................................23
Figure 4. Brazil Risk and Exchange Rate..................................................................................................24
Figure 5. Industrial Production Index.........................................................................................................24
Figure 6. Installed Capacity Usage Index – NUCI.....................................................................................25
Figure 7. Unemployment Rate (% of the Economically Active Population) ..............................................25
Figure 8. Brazilian Economy Volume of Credit Growth.............................................................................26
Figure 9. Price Index - IPCA......................................................................................................................27
Figure 10. Selic Evolution..........................................................................................................................27
Figure 11. Public Offering Breakdown.......................................................................................................29
Figure 12. Geographic localization of Institutional Investors.....................................................................30
Figure 13. Total Free Float Breakdown.....................................................................................................32
Figure 14. Equity Held by Foreign Investors .............................................................................................33
Figure 15. BB Shares vs. Ibovespa...........................................................................................................35
Figure 16. BBAS3 Stock in Ibovespa ........................................................................................................36
Figure 17. Average daily financial trading volume – BBAS3.....................................................................36
Figure 18. Average daily trading volume – BBAS3 ...................................................................................37
Figure 19. Market Ratios ...........................................................................................................................38
Figure 20. Committees, Subcommittees and Commissions - Strategic Level ..........................................40
Figure 21. Earning Assets vs. Interest Bearing Liabilities .........................................................................53
Figure 22. Breakdown of Assets ...............................................................................................................54
Figure 23. Agribusiness Participation in the GDP and in the Labor Market..............................................64
Figure 24. Trade Balance (FOB) ...............................................................................................................65
Figure 25. Production vs. Planted Area.....................................................................................................66
Figure 26. Agribusiness Loan Portfolio by Customer................................................................................69
Figure 27. Agribusiness Loan Portfolio by Funding Sources ....................................................................70
Figure 28. Equalization Revenues and Weighting Factor .........................................................................71
Figure 29. Agricultural Insurance and Proagro .........................................................................................72
Figure 30. Evolution of Operations Contracted with Risk Mitigators .........................................................73
Figure 31. Ratio Price/Cost of Soybean and Maize ..................................................................................74
Figure 32. Liquidity Balance ......................................................................................................................77
Figure 33. Market Share of BB Funding....................................................................................................78
Figure 34. NIM Evolution ...........................................................................................................................82
Figure 35. Securities Portfolio by Index (Multiple Bank) ...........................................................................86
Figure 36. Allowances Breakdown ............................................................................................................93
Figure 37. Overdue above 15 and 90 days ...............................................................................................95
Figure 38. Allowance/Past Due Loans + 90 days – BB x BI (%)...............................................................95
Figure 39. Quarterly Vintage .....................................................................................................................98
Figure 40. Annual Vintage .........................................................................................................................98
Figure 41. Annual Vintage – Vehicle Loan Portfolio – Arena I ..................................................................99
Figure 42. Annual Vintage – Vehicle Loan Portfolio – Arena II .................................................................99
Figure 43. Stratified Agribusiness Portfolio .............................................................................................105
Figure 44. Checking Account Base .........................................................................................................109
Figure 45. Asset Management ................................................................................................................110
Figure 46. Credit and Debit Cards...........................................................................................................112
Figure 47. Card Revenue ........................................................................................................................113
Figure 48. BB Billings Volume.................................................................................................................114
Figure 49. Business vs. Expenses ..........................................................................................................115
Figure 50. Changes in Workforce............................................................................................................116
Figure 51. Total Distribution Network ......................................................................................................119
Figure 52. Automated Teller Machines ...................................................................................................121
Figure 53. Customer Access Options – % ..............................................................................................122
Figure 54. Coverage Rations – whitout extraordinary items – % ............................................................123
Figure 55. Cost Income Ratio – without extraordinary items ..................................................................124
Figure 56. Other Productivity Ratios .......................................................................................................125
Figure 57. Changes in Foreign Exchange Exposure ..............................................................................133
Figure 58. Composition of Banco do Brasil’s assets and liabilities in the country. .................................133
Figure 59. Net Position ............................................................................................................................134
Figure 60. Consolidated BB VaR ............................................................................................................134
Figure 61. Consolidated of the Foreign Network’s VaR ..........................................................................135
Figure 62. VaR of the International Trading Portfolio..............................................................................137
Figure 63. VaR of the Domestic Trading Portfolio...................................................................................138
Figure 64. Reserve Liquidity – National Treasury ...................................................................................140
Figure 65. Reserve Liquidity – Foreign Currency....................................................................................141
Figure 66. DRL Index ..............................................................................................................................141
Figure 67. Measuring and management instruments..............................................................................142
Figure 68. BIS Ratio – Economic-Financial Conglomerate.....................................................................152
Figure 69. Employees Age ......................................................................................................................157
Figure 70. Employees by Length of Service............................................................................................157
Figure 71. Level of Education..................................................................................................................159
Figure 72. Transactions without Use of Paper ........................................................................................162
Figure 73. Toner Consumption – in units ................................................................................................163
Figure 74. PRONAF Portfolio/Proger Rural (R$ million) .........................................................................165
Figure 75. Share of BBAS3 in ISE, ITAG, and IGC ................................................................................168
Figure 76. Change of the Insurance Ratio ..............................................................................................174
Figure 77. Combined Ratio .....................................................................................................................176
Presentation
This Management Discussion and Analysis (MD&A) presents the economic and financial situation of
Banco do Brasil (BB). Geared towards market analysts, stockholders and investors, this quarterly report
addresses topics such as the economic environment and BB's stock performance, corporate
governance practices and risk management. The capital structure and results are analyzed separately.
Moreover, in conformity with the "Triple Bottom Line" concept, the report also presents the Social and
Environmental Performance indicators of Banco do Brasil (Chapter 9) in order to demonstrate the value
these initiatives generate for our shareholders and other stakeholders.
Readers will also find eight tables presenting the historical data series for the period from the
Summarized Balance Sheet, Summarized Corporate Law Income Statement, Income Statement with
Reallocations, Analytical Spread, and other information on profitability, productivity, loan portfolio quality,
capital structure, capital markets and structural data.
According to Paragraph 55 of CVM Resolution 371/2000, Banco do Brasil has decided to adopt, as of
year-end 2009 and on, in consistent and recurring basis, a faster recognition of the actuarial gains and
losses related to Previ Benefit Plan I (Plan I of Previ).
Henceforth, PREVI income will be regarded as recurring and the income arising from surpluses will be
recognized on a quarterly basis. In order to allow comparability of results in the first quarter of 2010 with
previous fiscal years, PREVI income will be segregated in a specific line of the Statement of Income with
Reallocations.
Considering the strategic transactions relevance announced as of the second half of 2008 (acquisitions,
mergers and partnerships), main information details related to the companies associated with business
in course and to transactions already executed is presented in this report, evidencing the transactions
impact on BB's results and producing a (pro forma) simulation of how the Bank's main indicators would
be like if all the companies were consolidated.
Note also that as of 1Q09, all financial statements and management analyses developed are based on
an "Economic Financial Consolidation" view, which provides for the consolidation of all the companies
belonging to the economic group. Prior to this period, the MD&A report featured the consolidation of
financial companies only. For comparability, we inform that the 2008 results presented were prepared
using the same method.
At the end of the report we present the Financial Statements and accompanying notes for the quarter
under analysis.
ON-LINE ACCESS
This Management Discussion and Analysis is also available on Banco do Brasil’s Investor Relations
website. More information about the Bank can also be accessed there, such as: corporate governance,
news, frequently asked questions, a download center with versions of this report for Adobe® Reader®
software. The website also makes available general information, balance sheet analyses, complete
financial statements, and historical data series in Excel, presentations to the market, the Social and
Environment Responsibility Report, the Social Balance Sheet and transcripts of the quarterly earnings
conference calls.
LINKS
Banco do Brasil S.A.
Investor Relations
9 - Banco do Brasil – MD&A 2Q10
bb.com.br
bb.com.br/ri
Summary of Results
Net Income surpasses R$ 5 billion in the first half
Banco do Brasil reported a net income of R$ 5,076 million in the first half, up 26.5% from the same
period of 2009. The result represents annualized return on average equity of 28.7%. Excluding one-off
items, recurring net income was R$ 4,383 million, up 34.9% from the amount recorded in 1H09, and
corresponding to a recurring return on equity of 24.6%.
Considering only the second quarter, the net income was R$ 2,725 million, presenting growth of 15.9%
from 1Q10 and 16.1% from the same prior-year period. The ROE of the quarter was 31.5%. On
recurring basis, net income of the period was R$ 2,327 million, a growth of 13.2% from the previous
quarter and 34.8% in relation to 2Q09. The annualized return on equity was 26.5%.
56.8
33.2
23.8
28.7
28.0
26.2
31.5
27.4
24.6
26.5
23.7
21.6
23.1
22.5
24.2
22.0
4,014 4,383
4,155
1,5231,665
1Q09
2,348
1,7641,979 1,819
1,727
2Q09
3Q09
Recurring Net Income
4Q09
Net Income
5,076
2,0562,351
1Q10
2,725 3,250
2,327
2Q10
ROAE - %
1H09
1H10
Recurring ROAE - %
Figure 1. Income (R$ million) and ROE (%)
Banco do Brasil kept its payout policy of paying 40% of its net income to shareholders. In the quarter,
BB allocated R$565 million to dividends and R$ 525 million to interest on own capital.
10 - Banco do Brasil – MD&A 2Q10
♦ BB consolidates leadership in the financial system with R$ 756 billion in
assets
Banco do Brasil reached R$ 755,706 million in total assets at the end of June, growth of 26.2% in
relation to June 2009 and 4.3% in relation to the previous quarter. The growth of loans and of the
securities portfolio deserves special emphasis in the quarter.
Table 1. Main Equity Items
Chg. %
R$ million
Jun/09
M ar /10
Jun/10
On Jun/09 On M ar /10
Total A ssets
598,839
724,881
755,706
26.2
Loan Portf olio
252,485
305,551
326,522
29.3
6.9
Securities
109,564
119,364
132,249
20.7
10.8
Short-term Interbank Operations
132,438
152,595
132,543
0.1
(13.1)
Deposits
310,846
342,624
343,961
10.7
0.4
Demand Deposits
49,075
54,973
59,025
20.3
7.4
Savings Deposits
69,011
78,719
81,541
18.2
3.6
Interbank Deposits
7,459
10,749
10,436
39.9
(2.9)
185,072
197,934
192,715
4.1
(2.6)
101,508
32,360
157,866
37,646
166,603
39,332
64.1
21.5
5.5
4.5
Time Deposits
Money Market Borrow ing
Shareholder’s Equity
4.3
♦ Loan Portfolio reaches R$ 350 billion
The loan portfolio, based on an amplified concept that includes the guarantees given and private
securities in the portfolio, attained R$ 349,761 million, growth of 6.8% in the quarter and 41.1% in the
year.
The classified loan portfolio (in accordance with CMN Resolution 2682) reached R$ 326,522 million,
recording growth of 29.3% in 12 months and 6.9% in the quarter. The domestic loan portfolio grew
28.2% in the year and 6.6% from 1Q10. Banco do Brasil’s share of the domestic market began to rise
again and reached 20.1%.
The growth in 12 months was benefited by the proportionate consolidation of Banco Votorantim loans,
since 3Q09. However, even using a pro forma comparison basis that simulates the consolidation of BV
as of June, the domestic loan portfolio would record growth of 18.8% in twelve months. All the portfolios
exhibit growth in line with the projections provided by BB to the market.
Table 2. Loan portfolio (Conglomerate)
Chg. %
R$ million
Loan Por tfolio
Br azil
Individuals
Payroll Loan
A uto Loans
Businesses
Jun/09
M ar /10
Jun/10
On Jun/09 On M ar /10
252,485
305,551
326,522
29.3
239,418
288,044
307,018
28.2
68,467
95,092
101,122
47.7
6.3
29,533
38,550
40,476
37.1
5.0
6.9
6.6
8,180
21,037
22,774
178.4
8.3
103,351
128,080
135,575
31.2
5.9
SME
39,493
45,215
47,382
20.0
4.8
Other
63,858
82,865
88,193
38.1
6.4
67,600
13,068
64,872
17,507
70,321
19,504
4.0
8.4
49.3
11.4
A gribusiness
Abroad
11 - Banco do Brasil – MD&A 2Q10
♦ Consumer credit surpasses R$ 100 billion
At the end of 2Q10, loans to individuals amounted to R$ 101,122 million, an increase of 47.7% in the
year and of 6.3% in the quarter. Among the most relevant lines of credit, special emphasis is placed on
the growth of payroll loans and of vehicle financing operations, which continue to exhibit expressive
expansion, both in the quarterly comparison and in twelve months. Consumer credit maintained its
relative share at 31% of the total portfolio.
The business portfolio, which represents 41.5% of BB's total portfolio, amounted to R$ 135,575 million in
June 2010, recording growth of 31.2% in the last twelve months and of 5.9% over the previous quarter.
Both in the quarterly comparison and in twelve months, growth was concentrated in operations with
medium and large companies (middle and corporate segments).
The greater growth among loan portfolios in the quarter was observed in the agribusiness and foreign
portfolios, which grew respectively 8.4% and 11.4%. The agribusiness loans performance was
leveraged mainly by the "Trading and Processing of Agricultural and Stockbreeding Products"
operations, which recorded growth of 44.5%, and "BNDES/Finame Rural", with expansion of 17.5%. In
twelve months, the agribusiness portfolio recorded a growth of 4%.
12 - Banco do Brasil – MD&A 2Q10
♦ Recurring income reflects improvement in the operating efficiency
Recurring income in 1H10 registered growth of 34.9% from the same period of 2009, with an emphasis
on the net interest income, which presented expansion of 21.6%.
In 2Q10 the recurring income presented growth of 13.2% from the previous quarter and of 34.8% in
relation to that observed in the same period of 2009. During the quarter, special emphasis is placed on
the growth of service fees and on the control of administrative expenses, which were accompanied by a
decrease in expenses with allowance for loan losses (reflecting an improvement in the quality of the
portfolio and reduction of delinquency rates). The net interest income continues growing, although at a
slower pace than that observed in the previous quarters.
The table below, extracted from the income statement with reallocations, presents the main highlights of
the period. The breakdown of reallocations can be seen in Section 5.3.1 of this Management Discussion
& Analysis.
Table 3. Income statement with reallocations – Main lines
Quarterly Flow
R$ million
Financial Interm ediation Incom e
Loan operations + Leasing
Securities
Financial Interm ediation Expenses
Net Interest Incom e
2Q09
1Q10
Chg. %
2Q10
Half-yearly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
16,037
18,562
19,512
21.7
5.1
31,297
38,075
21.7
10,281
12,721
13,195
28.3
3.7
19,370
25,916
33.8
5,644
5,195
(0.4)
(7.9)
10,945
10,839
(1.0)
(9,205) (10,052)
33.1
9.2 (15,825) (19,257)
21.7
21.6
5,215
(7,550)
8,487
9,357
9,461
11.5
1.1
15,472
18,817
(3,172)
(3,026)
(2,871)
(9.5)
(5.1)
(5,663)
(5,897)
4.1
5,316
6,331
6,590
24.0
4.1
9,809
12,920
31.7
3,436
Income f/ Insurance, Pension Plans and Savings Bonds 471
Contribution Margin
8,417
3,634
3,954
15.1
8.8
6,379
7,588
19.0
440
468
(0.6)
6.3
775
909
17.3
9,567
10,103
20.0
5.6
15,539
19,670
26.6
Allow ance for Loan Losses
Net Financial Margin
Fee income
Administrative expenses
(4,892)
(5,300)
(5,471)
11.8
3.2
(8,823) (10,771)
22.1
Personnel Expenses
(2,613)
(2,851)
(2,937)
12.4
3.0
(4,742)
(5,788)
22.0
Other Administrative Expenses
(2,279)
(2,449)
(2,534)
11.2
3.5
(4,080)
(4,983)
22.1
3,518
4,241
4,598
30.7
8.4
6,667
8,839
32.6
(152)
(238)
35
-
-
(247)
(203)
(18.0)
107
(212)
(274)
-
29.4
5
(485)
-
(740)
(379)
(491)
(33.6)
29.6
(1,294)
(870)
(32.8)
41.5
Com m ercial Incom e
Legal Claims
Labor Law suits
OtherOperating Income
Incom e Before Taxes
2,744
3,415
3,884
41.6
13.7
5,157
7,299
Income and Social Contribution Taxes
(771)
(1,053)
(1,194)
54.9
13.4
(1,459)
(2,247)
54.0
Corporate Profit Sharing
(220)
1,727
(307)
2,056
(363)
2,327
64.7
34.8
18.2
13.2
(423)
3,250
(670)
4,383
58.4
34.9
Recurring Net Incom e
Table 4. Main Indicators of Income/Expenses
Indicator s - %
2Q09
1Q10
2Q10
Global Spread¹
7.3
6.5
Ex pens es w ith A llow anc e f or Loan Los ses ov er Portf olio²
4.2
4.5
4.1
Ef f iciency Ratio³
42.3
44.3
42.7
Rec urring Return on Equity ¹
23.7
30.6
24.2
33.9
26.5
33.9
Ef f ectiv e Rate of Tax
6.5
(1) Annualized Indicators.
(2) Expenses with Allowance for Loan Losses in the last 12 months divided by the average portfolio in the same period.
(3) Extraordinary effects excluded.
13 - Banco do Brasil – MD&A 2Q10
♦ Net Interest Income continues expanding
The net interest income of Banco do Brasil reached R$ 18,817 million in the first half, which represents
an increase of 21.6% from 1H09. The performance reflects the growth of assets, especially of the loan
portfolio, in addition to Nossa Caixa (BNC) and Votorantim (BV) acquisition.
In 2Q10 the NII recorded growth of 1.1% over the previous quarter and of 11.5% over the same period
of 2009. The change over the previous quarter results from business expansion, especially the loan
portfolio. However, this growth was limited by the behavior of the net interest margin, as will be detailed
further on.
The table below presents the breakdown of the net interest income. The contribution of the loan portfolio
in its main lines is highlighted, and it also segregates the amounts corresponding to income from the
written-offs recovery and those related to remunerated compulsory deposits. The “Other” item,
comprised mainly of treasury income resulting from transactions with securities, derivatives and foreign
exchange, completes the composition of the NII.
The changes promoted by the Central Bank in the compulsory deposit rules produced two different
impacts on the financial statements of BB for 2Q10. On one hand there was decrease of liquidity, as a
result of the rise in rates, which reduces the resources available for more profitable investments. On the
other hand, there was a change in the form of collection, which implied migration of resources from the
securities portfolio to compulsory deposits. These movements explain the growth observed on the
"Remunerated Compulsory" line of the table below, and are better detailed in chapter 7.1 of the MD&A.
Table 5. NII by business line
Quarterly Flow
R$ million
2Q09
1Q10
Chg. %
2Q10
On 2Q09
On 1Q10
Half-yearly Flow
Chg. %
1H09
On 1H09
1H10
Net Interest Incom e
8,487
9,357
9,461
11.5
1.1
15,472
18,817
21.6
Loan Operations
5,826
6,924
6,904
18.5
(0.3)
10,744
13,829
28.7
Individuals
3,097
3,926
3,967
28.1
1.0
5,412
7,893
45.8
Businesses
1,827
2,052
1,927
5.5
(6.1)
3,514
3,979
13.2
902
946
1,010
12.1
6.8
1,818
1,957
7.6
2,662
2,432
2,556
(4.0)
5.1
4,728
4,989
5.5
213
274
917
330.5
234.7
389
1,192
206.6
531
1,918
631
1,528
757
882
42.7
(54.0)
20.1
(42.3)
887
3,452
1,388
2,410
56.4
(30.2)
Agribusiness
Other
Remunerated Compulsory
Recovery of Write-offs
Other
The net interest margin (NIM) was 6.4% in the first half, a 50 basis points decrease in relation to the
same period of previous year. In the quarter, the net interest margin was 6.5%, keeping the same level
observed in the previous quarter and a decrease of 80 basis points in relation to 2Q09.
The behavior of the NIM in 2Q10 is direct associated to the decrease in the spread on loans operations,
which was of 9.7%, recording decrease of 20 basis points in comparison with the 1Q10 and of 70 basis
points from the same period of 2009.
In the quarter, the 80 basis points downslide in spread on loans contracted by individuals and 50 basis
points in the business portfolio occurred due to mix changes, increasing the relative share of operations
with lower risk and therefore lower spread. In the individuals portfolio, there was an increased share of
payroll loans in the total portfolio. In the business portfolio, there was a faster growing in the operations
with medium and large companies. Furthermore, a larger share of loans for micro and small companies
have been contracted with the guarantee of the FGO.
The perception that the NIM oscillation is caused by mix changes in the portfolios, with greater shares of
lower risk transactions, is supported by the indicator " Risk Adjusted NIM ", calculated based on the ratio
of net financial margin and earning assets. Besides the net interest income, the risk-adjusted NIM
14 - Banco do Brasil – MD&A 2Q10
considers allowance for loan losses expenses. The indicator ended the 2Q10 in 4.5%, the same level
observed in 2Q09 and a 10 basis points increase over the previous quarter.
Table 6. Net Interest Margin
%
2Q09
L o an Op e r atio n s
Indiv iduals
1Q10
2Q10
1H09
1H10
10.4
9.9
9.7
10.0
9.7
21.2
18.2
17.4
20.4
17.4
Bus ines s es
7.5
6.7
6.2
7.3
6.4
A gribus ines s
5.5
5.6
6.0
5.6
5.8
Oth e r
Ne t In te r e s t M ar g in (NIM )
Ris k A d ju s te d NIM
15 - Banco do Brasil – MD&A 2Q10
4.4
3.3
3.4
3.0
3.3
7.3
4.5
6.5
4.4
6.5
4.5
6.9
4.4
6.4
4.4
♦ Loan default decrease sharply and approaches the pre-crisis level
Default intensified the downtrend during the quarter and approached the levels observed in 2008. All the
main delay ratios presented significant improvement. The ratio between operations past due 90 days
and the loan portfolio ended the quarter at 2.7%, down 40 basis points in the quarter and 60 basis points
in relation to June 2009. This is the lowest level of the historical series since December 2008.
Transactions past due 60 days represent 3.1% of the portfolio at the end of June. This percentage is 50
basis points lower than that recorded in March and 70 basis points below that verified in June 2009.
Table 7. Loan Portfolio Quality Indicators
%
Jun/09
M ar /10
Jun/10
A llow ance/Loan Portf olio
7.0
6.0
5.5
Past due loans + 60 days /Total Portf olio (% )
3.8
3.6
3.1
Past due loans + 90 days /Total Portf olio (% )
3.3
3.1
2.7
A llow ance/Pas t Due Loans + 60 day s
187.2
167.4
176.1
A llow ance/Pas t Due Loans + 90 day s
214.0
5.9
194.7
5.1
203.9
5.0
7.2
4.4
6.7
4.0
6.2
3.7
A verage Risk BB
A verage Risk – Banking Industry
Trans ac tions ov erdue + 90 day s/Total Portf olio – Banking Industry
In line with the improvement observed in the portfolio quality, there was a decrease in expenses with
allowance for loan losses. Expenses reached R$ 2,871 million in the quarter, which represents a
downslide of 5.1% in comparison to the previous quarter and of 9.5% against expenses observed in
2Q09. The indicator that measures the ratio between expenses with allowance for loan losses
cumulative in twelve months and the average loan portfolio of the same period ended 2Q10 at 4.1%,
against 4.5% in the previous quarter and 4.2% in 2Q09.
Table 8. Expenses with Allowance for Loan Losses vs Portfolio
R$ million
2Q09
1Q10
2Q10
(A ) A llow ance f or Loan Losses - Quarterly
(3,172)
(3,026)
(2,871)
(B) A llow ance f or Loan Losses - 12 Months
(9,241)
(12,164)
(11,864)
(C) Loan Portf olio
252,485
305,551
326,522
(E) A verage Portf olio – 3 Months
246,363
219,071
304,936
269,466
316,005
287,413
1.3
4.2
1.0
4.5
0.9
4.1
(E) A verage Portf olio – 12 Months
Expenses over Portf olio (A /D) - %
Expenses over Portf olio (B/E) - %
In spite of the improvement in the default ratios and the noticeable improvement in the economic and
business environment, Banco do Brasil kept its policy of prudence regarding the allowance for loan
losses and the percentage of portfolio coverage. The balance of allowance for loan losses ended the
quarter at R$ 18,088 million, which provides coverage of 204% of operations past due 90 days.
In the quarter, there was reduction of R$ 833 million in the balance of additional allowance for loan
losses. The change in the period is due to the following factors:
•
Reversion of nearly R$ 332 million in addition allowance for Rural operations. This accounting was
treated as an one-off item in the recurring net income for the quarter. Additional details can be seen
in chapter 7.5 of this MD&A.
16 - Banco do Brasil – MD&A 2Q10
•
The remaining changes are merely related to additional allowance balance reclassification to
required allowances and are not considered as reversion of provisioned amounts. For further details
see chapter 7.5.
♦ Fee Income presents robust growth
Fee income totaled R$ 7,588 million in 1H10, an increase of 19.0% from 1H09. Considering only 2Q10,
these revenues reached R$ 3,954 million, up 8.8% over the previous quarter and 15.1% versus the
same period of 2009.
Comparing with the 1H09, the performance was benefited from the consolidation of incomes of Banco
Votorantim (BV), which acquisition of interest was completed at the end of September 2009, and by the
incomes provided by Banco Nossa, which were accounted for 2009 results only since April. However,
even using a pro forma basis of comparison, which considers the consolidation of BV and BNC
throughout the 2009 year, the fee income of the conglomerate would have recorded expansion of 12.3%
comparing 2Q10 and 2Q09 and 10.8% comparing 1H10 and 1H09. The performance of the first half is
higher than the fee income Guidance growth provided by BB to the market (7% to 10%).
The loan and checking account fees grew respectively 34.3% and 12.6% over 1Q10. There was no
repricing or creation of new fees in the period. This good performance was possible due to business
expansion and adoption of measures with the purpose of improving the receivable fees management,
enhancing charging effectiveness.
Insurance, pension and savings bonds business were the highlight among fee income and recorded
growth of 79.2% in the quarter and 62.2% in comparison with 2Q09. Besides fee incomes, insurance
operations also generated net income of R$ 468 million in the quarter, 0.6% lower than in the same
quarter of 2009 but 6.3% higher than that recorded in 1Q10. In the first half, the net income from
insurance operations reached R$ 909 million, growth of 17.3% over that observed in the same prior-year
period.
Table 9. Insurance, Pension Plans and Savings Bonds Income
Quarterly Flow
R$ million
Fee Incom e
2Q09
1Q10
Chg. %
2Q10
On 2Q09
On 1Q10
Half-yearly Flow
Chg. %
1H09
On 1H09
1H10
3,436
3,634
3,954
15.1
8.8
6,379
7,588
19.0
Account Fees
863
875
985
14.1
12.6
1,587
1,861
17.2
Credit / Debit Cards
571
712
727
27.3
2.1
1,140
1,439
26.2
Investment Fund Management Fees
506
537
575
13.5
7.1
952
1,112
16.8
Loan Fees
344
307
413
19.8
34.3
654
720
10.0
Collections
284
288
302
6.5
4.9
541
591
9.2
Insurance, Pension Plans and Savings Bonds
117
106
190
62.2
79.2
187
296
58.3
Billings
120
143
141
18.0
(1.1)
230
284
23.2
Interbank
122
130
137
12.1
5.2
241
267
10.5
Capital Market Fees
138
106
98
(28.5)
(7.1)
180
204
13.8
371
Insurance, Pension Plans and Savings Bonds Incom
471
e
430
440
386
468
4.0
(0.6)
(10.4)
6.3
667
775
816
909
22.3
17.3
Other
17 - Banco do Brasil – MD&A 2Q10
♦ Expenses control surpasses estimates: administrative expenses below the
Guidance
Administrative Expenses, which include personnel expenses and other administrative expenses,
amounted to R$ 10,771 million in the 1H10, an increase of 22.1% over the same prior-year period. In
2Q10 administrative expenses reached R$ 5,471 million, 3.2% higher than that observed in the previous
quarter, with growth of 3.0% in personnel expenses and 3.5% in other administrative expenses.
As is the case of fee income, the comparison with 1H09 and 2Q09 is impaired by the consolidation of
Nossa Caixa (since 2Q09) and Votorantim (since 4Q09). The table below was prepared for this reason
and contains a pro forma basis of comparison for the periods of 2009, simulating the consolidation of the
banks acquired throughout the whole year. The table also segregates expenses incurred by BB + BNC,
from those incurred by the other associated and subsidiary companies, which present differentiated
growth dynamics.
In the pro forma comparison, also used for the 2010 Guidance monitoring, BB's expenses in 1H10
presented growth of 9.1% over the same period of 2009, percentage below the estimates range that
appears in projections provided to the market.
Considering only BB + BNC (Multiple Bank) expenses, administrative expenses of the first half are up
8.2% from 1H09. In the quarterly comparison the expenses expansion was 1.6% from 1Q10 and 6.2%
from 2Q09.
•
The performance, both in the quarterly and half-yearly comparison, resulted of an intense effort to
control expenses. This is proven by the Multiple Bank other administrative expenses performance
that grew only 6.1% in the comparison between 1H10 and 1H09. This percentage is low, given the
effect of inflation on service agreements and the organic growth of operations.
Once the other conglomerate companies operate in segments with a fast pace of growth, or in sectors in
which BB is structuring/restructuring its activities, they exhibited slightly stronger growth in their
expenses.
Table 10. Administrative expenses – Pro forma Comparison
Quar te r ly Flow
Chg. %
R$ million
2Q09
1Q10
2Q10
BB + BNC ¹
Personnel Ex pens es
(4,650)
(2,529)
(4,859)
(2,688)
(4,937)
(2,751)
Other A dministrative Expenses
(2,120)
(2,171)
(2,186)
(444)
(441)
(534)
Personnel Ex pens es
(159)
(163)
(186)
Other A dministrative Expenses
(285)
(278)
(348)
(5,094)
(2,688)
(2,405)
(5,300)
(2,851)
(2,449)
(5,471)
(2,937)
(2,534)
Othe r Affiliate d Com panie s ²
BB Cons olidate d
Personnel Ex pens es
Other A dministrative Expenses
(1)
(2)
Half-ye ar ly Flow
On 2Q09 On 1Q10
Chg. %
1H09
1H10
1.6
2.4
(9,051)
(4,944)
(9,796)
(5,439)
3.1
0.7
(4,107)
(4,357)
6.1
20.4
21.1
(826)
(976)
18.1
16.8
14.1
(295)
(349)
18.1
22.4
25.3
(531)
(627)
18.1
7.4
9.2
5.4
3.2
3.0
3.5
(9,877)
(5,239)
(4,638)
(10,771)
(5,788)
(4,983)
9.1
10.5
7.5
6.2
8.8
On 1H09
8.2
10.0
"BB + BNC" line includes branches in the country and abroad, BESC BI, BBDTVM, BB Leasing, Banco Popular and the foreign subsidiaries.
"Other Companies" line includes non-financial associated/subsidiary companies and Banco Votorantim.
18 - Banco do Brasil – MD&A 2Q10
♦ BIS ratio supports expansion of operations
Banco do Brasil's capital ratio (K) ended June 2010 at 12.8, a 90 basis points decrease over March
2010. The BIS ratio presented indicates an excess of reference equity of R$ 8,685 millions, allowing for
an increase of up to R$ 79 billion in credit assets, considering a 100% weighting.
The ratio decrease in the quarter is explained by the expansion of the loan portfolio, and mainly by the
exclusion of additional allowance for loan losses from the reference equity. The end of the prerogative of
inclusion of additional allowance for loan losses in the reference equity was already expected and
resulted in a decrease of approximately 60 basis points in the capital ratio.
The current BIS ratio does not yet contemplate the capital raise of R$ 7.05 billion that was performed in
July 2010. Pro forma simulations indicate that the admission of these resources would have brought the
June ratio up to approximately 14.3.
15.0
15.3
4.6
4.5
13.7
13.7
3.9
4.0
4.3
13.0
10.4
10.8
9.1
9.7
9.5
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Tier I
Figure 2. BIS Ratio
19 - Banco do Brasil – MD&A 2Q10
Tier II
12.8
4.1
8.8
Jun/10
♦ One-off items
The one-off items added R$ 310 million to BB's net income in the 2Q10 and R$ 694 million in the first
half. These impacts are already net of taxes and statutory profit sharing. Extraordinary items and their
amounts before taxes are detailed below.
2Q10
•
Reversal of additional allowance for loan losses amounting R$ 332 million due to improvements in
the risk profile of the agribusiness portfolio.
•
Expenses with civil claims regarding economic plans totaling R$ 140 million.
•
Capital gain of R$ 114 million, as a result of Brasilprev corporate restructuring. Banco do Brasil
increased its share in the total capital of that company from 50% to 75%.
•
Reversal of civil claim and labor lawsuit in the amount of R$ 250 million due to the completion of the
registration of proceedings from BESC in the systems and methodologies of BB. Further information
on this item is available in chapter 5.1 of the Management Discussion & Analysis.
1Q10
•
Expenses with civil claims regarding economic plans totaling R$ 85 million.
•
Reversal of provisions for labor lawsuits, in the amount of R$ 568 million. The amount involves
claims that were previously accounted at BNC and which were migrated to Banco do Brasil' systems
and methodologies.
•
Partial disposal of investments represented by shares held by the conglomerate corresponding to
0.156% of the capital of Visa Inc., generating an extraordinary gain of R$ 214 million in the quarter.
Banco do Brasil still holds, jointly with BB BI, shares representing 0.159% of the capital of Visa Inc.
In addition to one-off items, there was the recognition of gains and losses on employee benefit plans, in
the quarter. There was a gain resulted from the evaluation of actuarial assets and liabilities of PREVI,
amounting R$ 389.2 million, and losses due to actuarial assessment of the benefit plan with exclusive
responsibility of BB, amounting R$ 71.7 million, both before taxes. These bookings are part of the
recurring result of BB in the first half of 2010 and 50% of the amounts (as well as effects on taxes and
profit sharing) earned in 2Q10 were reallocated to compose the recurring income and the Income
Statement with reallocations of 1Q10. This adjustment is necessary for comparison purposes, besides
the fact that actuarial studies have evaluated the changes in assets and liabilities of the plan throughout
the first half.
Table 11. One-off items
R$ m illion
Re curr ing Ne t Incom e
1T10
2Q10
2,056
2,327
(+) Extr aordinar y Effe cts of the Pe riod
384
310
Sale of Interest in V ISA Internacional
214
-
Economic Plans
(85)
(140)
Contingent Liabilities (BESC)
-
250
A dditional A llow ance f or Loan Losses
-
332
Reversal of Labor Liabilities
Capital Gain - BB Seguros Participações
Tax Impacts and PLR on Extraordinary Items
PREV I A ctuarial A ssets - A djustments
Ne t Incom e
20 - Banco do Brasil – MD&A 2Q10
568
-
-
114
(313)
(246)
(88)
2,351
88
2,725
♦ Quarterly Performance in line with Guidance 2010
The performance of Banco do Brasil in the first half was in line with the estimates disclosed to the
market upon the announcement of the result of 4Q09.
The reasons for the figures that presented differences in the quarter from disclosed estimates and
actually achieved results are clarified below:
Recurring Return on Equity - The ratio slightly surpassed the guidance in the half-year monitoring.
However, the indicator is expected to end the year within estimates due to the expected increase of
shareholders' equity, which will be sensitized by the admission of funds from the public offering of
shares held by BB in June, and that was settled in July 2010.
Net Interest Margin - The performance of 2T10 was atypical due to changes in portfolio mix, which
led to a reduction in the spread of the loans operations. There was an increase in the relative share
of operations with lower risk and therefore lower NIM (such as payroll loans and loans to medium
and large companies). In the second half, it is expected that loans to individuals gain more
representation in the loan portfolio, allowing a net interest margin recovery.
Total deposits - The Bank expects a robust growth of the deposit base in the second half, helped by
an expansion of liquidity in the economy.
Corporate Loan Portfolio - Performance slightly above the upper range of the Guidance, influenced
by the pace of operations with medium and large companies. For the second half is expected a slow
down on this movement, which would bring the growth rate into the estimates range.
Fee Income - The improvements applied in the charges management should bring perennial
benefits to BB. However, the greatest impact occurred in the moment that these measures were
adopted, providing a better performance than that estimated, especially in 2Q10.
Administrative Expenses - Even with lower growth than the Guidance range, BB maintains
estimates for administrative expenses. BB consider that the second half brings seasonal events that
require larger volume of expenses (greater economic activity, wage agreement and marketing
actions to commemorative times).
In addition, we emphasize that the Guidance was prepared considering BB’s budget and expectations
for the entire year of 2010. Banco do Brasil Guidance is provided on a yearly basis, with quarterly
monitoring. Although the Bank expects that the figures close the year within the estimates, the evolution
of the numbers does not occur on a straight-line basis. The comparison with the same period in the
previous year is used for illustration only.
Estimates Changes
The guidance for expenses with allowance for loan losses was structured in parallel to the preparation of
the Bank budget. The information available at that time included uncertainties in relation to the pace of
the economic activity recovery and of the ratios that measure the default of the loan portfolio.
As an act of prudency, the range of estimates established considered the risks of a slower recovery in
the quality of the portfolio. As all the indicators mentioned reacted positively, the ratio between expenses
with allowance for loan losses and the average loan portfolio in twelve months remained below the
minimum point of the projected range. Banco do Brasil is reviewing its estimates in view of the new
scenario, projecting that the indicator will end the year between 4.0% and 4.4%.
21 - Banco do Brasil – MD&A 2Q10
Table 12. Guidance 2010
Ite m s
Pe rform ance 1H10
2010 Guidance - BB
Cons olidate d
Recurring Return on Equity¹
24.6%
21% - 24%
Net Interes t Margin ¹
6.4%
6,5% - 7,0%
Total Deposits²
6.6%
12% - 16%
Domes tic Loan Portf olio²
18.8%
18% - 23%
Individuals²
27.6%
27% - 32%
Bus ines ses²
21.5%
16% - 21%
4.0%
4% - 9%
A llow ance f or Loan Losses ³
A gribus ines s²
4.1%
4,0% - 4,4%
Fee Income²
10.8%
7% - 10%
A dministrative Expenses²
9.1%
10% - 12%
Tax Rate
33.9%
31% - 34%
(1) Annualized Indicator.
(2) BB's balance sheet items had not been affected by the consolidation of Banco Votorantim (BV) in 2Q09, and the income accounts had not been
affected by the consolidation either of BV or Nossa Caixa in that quarter. Therefore, for comparability purposes, a pro forma basis was established
for 2Q09, which simulates the consolidation of those banks into BB conglomerate.
(3) Cumulative expenses with Allowance for loan losses for the 12-month period divided by the average portfolio in the same period.
♦ Assumptions used to project 2010 Guidance
Assumptions influenced by management:
Increase in the profitability of customer base in order to leverage revenues;
Alignment of the cost structure to the business volume growth;
Contractual adjustments and collective bargaining agreement;
Sales force growth adequate to the strategy of increasing customer base profitability;
Current business model, without considering further purchases and/or strategic partnerships
that may be signed to act in specific segments;
Recognition of actuarial gains and losses for Previ's Benefit Plan I in accordance with Paragraph
55 of CVM Instruction 371/2000.
Assumptions beyond management's control
Gradual recovery in Brazilian and world economic growth in 2010;
Increased resistance but not immunity, of the Brazilian economy to external shocks;
Improvement in conditions for the additional financing of domestic credit;
A political environment without institutional rupture;
Maintenance of the current domestic macroeconomic policy structure: floating exchange rate,
inflation targets (nominal anchor) and fiscal discipline, entailing a gradual and consistent
reduction of the relationship between Public Sector Net Debt (PSND) and the Gross Domestic
Product (GDP);
An advancement of the regulatory mark / microeconomic agenda with stimulus to public and
private investment;
A gradual increase in the Brazilian economy's potential for growth (potential GDP);
Maintenance of the investment grade status awarded to Brazil;
2009/2010 Harvest Plan;
Regulatory stability, including tax rates on the Bank’s activities and labor and social security
laws;
Evolution of interest rates, inflation rate and GDP in line with market consensus.
22 - Banco do Brasil – MD&A 2Q10
1 - Economic Environment
In the second quarter of the year, the international economic environment was characterized by
uncertainties regarding the turn of events of the fiscal crisis in some European countries. Despite the
approval of the financial aid fund in the amount of € 750 billion for countries in difficulties in the Euro
Area, the uneasiness with the possibility of the potential impacts of a banking crisis on public finances of
countries in the region have grown. Consequently, there was a generalized increase in risk perception,
which in fact lead to a significant devaluation of the euro against the dollar.
1.80
1.70
1.60
US$/Euro
1.50
1.40
1.30
1.22
1.20
1.10
1.00
0.90
0.80
jun/00
jun/01
jun/02
jun/03
jun/04
jun/05
jun/06
jun/07
jun/08
jun/09
jun/10
Exchange rate (US$/Euro)
Source: Bloomberg
Figure 3. Dollar/Euro Ratio
Uncertainties regarding fiscal sustainability in some European economies and the slow pace of the
recovery on the expansion of economic activity in other advanced economies adversely affected
investor confidence in a faster retrieval of the global economic growth. The latest macroeconomic
indicators have been revealing that mature economies still present high rates of unemployment and
marginal advance in industrial production indicators, indicating that the recovery process should
continue moving at a moderate and non-homogeneous pace.
In turn, the main emerging economies continued recording greater dynamism. This, however, was not
sufficient to guarantee positive evolution in the prices of the main assets in the global financial market,
especially stock exchanges and commodities. In comparison with the closing figure of the previous
quarter, the Commodity Research Bureau (CRB) index presented a downslide of around 3.0%, dragged
down mainly by metals, with a downslide of 15%. The exception was food prices, which rose
approximately 1.5% in the period.
As of other countries, the Brazilian economy experienced a period of increased volatility of risk
indicators and foreign exchange rate. Nevertheless, Brazil's country risk premium (EMBI) remained far
below the mean values of emerging nations, and the volatility did not produce relevant impacts on
inflation prospects or the growth rates of the country.
23 - Banco do Brasil – MD&A 2Q10
400
1,95
375
1,90
1,85
325
1,80
300
1,75
275
1,70
250
1,65
225
1,60
200
1,55
175
150
set/09
Exchange rate (R$/US$)
EMBI + (Basis Points)
350
out/09
nov/09
dez/09
EMBI + Brazi
jan/10
fev/10
mar/10
EMBI + Emerging
abr/10
mai/10
1,50
jun/10
Exchange rate (R$/US$)
Sources: BCB and Bloomberg
Figure 4. Brazil Risk and Exchange Rate
Seasonally adjusted index
On the other hand, it is necessary to emphasize that, when announced, the GDP data for the second
quarter should have recorded important accommodation in the growth rate of the Brazilian economy in
comparison with the vigorous growth exhibited in the first quarter of the year. This perspective is
corroborated by the behavior of some production level indicators already known. Manufacturing activity,
for example, after the sharply increase observed in this first quarter (5.9%), it was registered a decrease
of 2.0% in the second quarter (seasonally adjusted data). This movement was already expected, due to
the reduction of fiscal stimuli (reversal of tax reliefs), as well as the start of the effects of a tighter
monetary policy.
jun/08 aug/08 oct/08 dec/08 feb/09 apr/09 jun/09 aug/09 oct/09 dec/09 feb/10 abr/10 jun/10
Source: IBGE
Industrial Production
Figure 5. Industrial Production Index
24 - Banco do Brasil – MD&A 2Q10
Average jul/08 to sep/08
The downturn of industrial activity is corroborated by the course of the usage level of the installed
capacity (NUCI). According to Industrial Indicators of Confederação Nacional da Indústria – CNI
(organization that represents the industry in Brazil), the NUCI of June reached 82.5%. Even if this
represents a slight increase in relation to that observed at the end of the previous quarter (82.1%), there
was a downslide of 0.5 p.p. in relation to the value of April.
Installed Capacity Usage Index - Seasonally Adjusted
Source: CNI
Figure 6. Installed Capacity Usage Index – NUCI
Agent Population
The accommodation of the industry did not impact the labor market indicators. The unemployment rate,
calculated by the Brazilian Institute of Geography and Statistics (IBGE) reached 7.0% of the PEA
(economically active population) in June. This percentage was below the rate recorded in March/10
(7.6%), and was the lowest level for 2010. Likewise, the CAGED (index of the Ministry of Labor which
represents a general register of employed and unemployed) data showed that the country accumulated
the historic milestone of 1.47 million new official jobs in the first half of the year. This value is already far
higher than the total amount of jobs created throughout the full year 2009 (995 thousand).
Unemployment rate
Annual average
Source: IBGE
Figure 7. Unemployment Rate (% of the Economically Active Population)
25 - Banco do Brasil – MD&A 2Q10
This labor market conditions evolution has been benefiting the credit market. According to data from
Brazilian Central Bank (BCB), the credit total volume of the financial system reached R$ 1,529 billion.
With this result, the economy total credit balance started to represent 45.7% of the GDP, as opposed to
44.6% in March of this year and 41.8% in Jun/09. Credit expansion continued to occur more intensely in
the segment of earmarked resources. In June, the total volume of these loans reached 15.3% of the
GDP, against 14.8% at the end of the first quarter and significantly above the 12.5% observed in Jun/09.
Loans / GDP (%)
Operations performed with free resources totaled R$ 1,017 billion in June or 66.5% of the total portfolio.
Among the lines that obtained more expressive growth, those that remained in the spotlight were
personal loans and vehicle financing, in the case of individuals, and funds intended for working capital,
in the case of businesses.
Total Loans / GDP
Free Resources / GDP
Earmarked resources / GDP
Source: BCB
Figure 8. Brazilian Economy Volume of Credit Growth
The good performance of the Brazilian economy has been increasing the demand for imported goods
and services, putting pressure on the trade balance. However, the exports growth in the second quarter
was sufficient to bring the trade balance up to the surplus of US$ 7.0 billion against only US$ 0.9 billion
accumulated in the first three months of the year.
The decrease in the dynamism of the domestic economic activity, which the strong recovery at the
beginning of the year had put excessive pressure on the price level of the economy, and the dissipation
of some seasonal pressures, contributed toward the prices slowdown in the second quarter. The
inflation rate measured by the IPCA, accumulated variation of 1.00% in the period, against 2.1%
recorded in the first quarter. Considering the last twelve months, the IPCA variation accumulated 4.84%
until June, and therefore, still above the central inflation target (4.50%).
26 - Banco do Brasil – MD&A 2Q10
20.0
4.0
18.0
3.5
16.0
In 12 months (%)
2.5
12.0
10.0
2.0
8.0
1.5
In the quarter ended at (%)
3.0
14.0
6.0
1.0
4.0
0.5
2.0
0.0
jun/00
0.0
jun/01
jun/02
jun/03
jun/04
jun/05
jun/06
IPCA in the quarter ended at (Right Axis)
jun/07
jun/08
jun/09
jun/10
IPCA in 12 months (Left Axis)
Source: IBGE.
Figure 9. Price Index - IPCA
In this context, the Central Bank of Brazil, aiming to redirect inflation to the path of targets and to anchor
the inflation expectations of the market, started an adjustment cycle of the basic interest rate, pushing
the Selic rate target up from 8.75% p.y. to 9.50% p.y., in May and 10.25% p.y., in June. In the Copom
Minutes (Brazilian Central Bank Monetary Policy Committee) and in the following Inflation Report, the
Monetary Authority expressed concern over the potential impacts on the economy price level resulting
from the combination between virtual depletion of the economy idle capacity and the mismatching
between the domestic absorption growth and the expansion capacity of the aggregate supply.
30
28
26
24
22
%p.a.
20
18
16
14
12
10,25
10
8
6
jun/01
jun/02
jun/03
jun/04
jun/05
jun/06
Selic rate
Source:BCB.
Figure 10. Selic Evolution
27 - Banco do Brasil – MD&A 2Q10
jun/07
jun/08
jun/09
jun/10
Table 13. Main Macroeconomic Indicators
2Q09
1Q10
2Q10
Economic Activity
GDP (% YTD in 12 months)
1.0
2.4
Family Consumption
4.4
6.0
-
Government Consumption
2.9
3.1
-
Gross Fixed Capital Formation
(2.4)
(1.5)
-
Exports
(7.6)
(4.2)
-
Imports
(0.9)
(0.4)
-
79.4
79.7
82.8
Agent Population (% YTD in 12 months)
0.7
1.8
2.5
Unemployment Rate (% YTD in 12 months)
8.1
7.8
7.5
Formal employment – net creation in the quarter (thousand jobs)
357.3
657.3
816.1
Formal employment – net creation (% YTD in 12 months)
(79.3)
103.6
455.7
(6.5)
(0.3)
6.5
(1.3)
(1.8)
(2.1)
7.3
5.6
6.5
International Reserves (US$ billion – year accumulated)
208.4
244.0
253.1
Sovereign Risk (base points – EOP)
281.0
183.0
251.0
Use of Installed Capacity (%)
Industrial Production (% YTD in 12 months)
External Sector
Current Transactions (% YTD in 12 months)
Direct Foreign Investment (US$ billion)
Trade Balance (US$ billion – year accumulated)
13.9
0.9
7.9
Exports (US$ billion – year accumulated)
70.0
39.2
89.2
Imports (US$ billion – year accumulated)
81.3
56.0
38.3
Ptax Dollar Sale (EOP)
1.95
1.78
1.80
Ptax Dollar Sale (% YTD in 12 months)
22.6
(22.5)
(7.7)
Monetary Ratios
IGP-DI FGV (% YTD in 12 months)
0.7
3.7
1.1
IGP-M FGV (% YTD in 12 months)
1.5
2.0
5.2
IPCA – IBGE (% YTD in 12 months)
4.8
5.2
4.8
Selic (EOP %)
9.3
8.8
10.3
Accumulated Selic (% YTD in 12 months)
12.4
9.4
8.8
Accumulated TR (exBTN) (% YTD in 12 months)
1.7
0.4
0.4
TJLP - IBGE (EOP %)
6.3
6.0
6.0
Libor (EOP %)
1.2
0.3
0.3
Public Finance
Primary Surplus (% GDP 12 months accumulated)
2.0
1.9
2.1
PSGD (% GDP)
60.9
59.9
60.1
PSND (% GDP) - Without Petrobras
41.2
42.0
41.4
43.9
45.0
45.7
4.3
4.0
3.7
8.6
7.0
6.6
Credit Ratios
Credit/GDP (% YTD in 12 months)
Total Default (% past due loans over 90 days)
Individuals
Businesses
3.4
3.6
3.6
36.6
34.2
34.6
Individuals
45.6
41.0
40.4
Businesses
27.4
26.3
27.3
27.2
24.1
23.5
Individuals
35.8
29.7
28.6
Businesses
18.2
17.1
16.9
15.9
8.9
17.5
9.6
17.6
12.7
Total Investment Rate (%)
Total Spread (%)
Average Term (%)
Individuals
Businesses
28 - Banco do Brasil – MD&A 2Q10
2 - BB Securities
2.1 Shares
At the end of the second quarter of 2010, Banco do Brasil’s capital was R$ R$ 26,027,932 thousand
composed of 2,569,869,551 common and dematerialized shares without par value. These figures still do
not consider the outcome of the public offering held in June 2010.
Public Offering
On 7.1.2010, the Central Bank ratified the capital increase in the amount of R$ 7.0 billion resulting from
a public offering for primary distribution of 286 million new common shares and from the secondary
distribution of 70.1 million shares. In addition, the over-allotment option, also known as green shoe,
comprised of 39.1 million shares was exercised, totaling 396 million shares and R$ 9.8 billion
negociated. With the end of the bookbuilding process on June 30,2010 BB stocks were priced at R$
24,65 by BB’s Board of Directors.
The funds raised with the offer will strengthen the Bank capital structure, enable its expansion strategy,
increase the liquidity of the shares in the secondary market and will allow the reach of the minimum 25%
of free float required by the Novo Mercado rules, anticipating the deadline established by BM&FBovespa
for June, 2011.
Institutional investors held 48.3% of the total offered and retail investors held 21.4%. The remaining
shares (30.3%) were allocated to the holders of preemptive rights.
30.3%
11.4%
21.4%
48.3%
2.5%
5.2%
2.4%
Institutional Investors
First Refusal
Customers
Employees
Investments Funds
Other funds
Figure 11. Public Offering Breakdown
29 - Banco do Brasil – MD&A 2Q10
Foreign investors, mainly consisting of institutional investors, participated with 39.0% of the total offered
(R$ 3,803 million). The following figure shows the result of the public offering, considering the
institutional investors segregated by country/continent.
2.8%
18.7%
42.9%
35.6%
US
Brazil
Europe
ROW
Figure 12. Geographic localization of Institutional Investors
With the offer, more than 78 thousand new shareholders were set up. The participation of companies in
the total shareholder basis of the Bank reached 4.0% after the offering against 3.1% prior to the offer, an
increase of 6,400 shareholders companies.
Table 14. Shareholders quantity after and before the Public Offering
Shareholders
06.31.10
A
07.31.10
B
A-B
A/B
Individuals
330,974
402,787
71,813
21.7%
Companies
10,466
1,076
16,870
1,289
6,404
213
61.2%
19.8%
Foreign Capital
The largest BB’ shareholder is the Brazilian Federal Government which after the public offer reduced its
share from 65.3% to 59.2% of the total capital. The second largest share is from the Caixa de
Previdência dos Funcionários do Banco do Brasil (Previ) which kept its 10.4% of participation on BB’s
total capital.
30 - Banco do Brasil – MD&A 2Q10
Table 15. Ownership Structure
%
Shareholders
Federal Governm ent
Jun/09
Mar/10
Jun/10
Jul/10 *
65.5
65.3
65.3
59.2
54.3
51.9
57.7
51.9
Fundo de Garantia a Exportação
8.9
8.9
5.4
4.9
Fundo Garantidor PPP
2.3
2.3
-
-
Fundo de Inv. Caixa FGHAB
-
0.1
0.1
-
Fundo de Garantia para Construção Naval
-
1.8
1.8
-
Fundo Garantidor para Investimentos
-
0.3
0.3
0.3
Fundo Fiscal de Inv e Estabilização
-
-
-
2.2
Caixa FI Garantia Construção Naval
-
-
-
-
10.2
10.4
10.4
10.4
BNDESPar
2.5
2.4
2.4
0.0
Treasury Shares
0.0
0.0
0.0
0.0
21.8
21.9
21.9
30.4
Individuals
5.6
5.3
5.0
6.3
Companies
5.1
4.8
3.9
7.6
11.1
-
11.7
0.1
13.0
-
16.5
-
100.0
100.0
100.0
100.0
Finance Ministry
Previ
Free Fl oat
Foreign Capital
Treasury Shares
Total
* Position at 07.30.10 after the Stock Public Offering.
The remuneration policy for shareholders defined by the Board of Directors for the year 2010
established payout of 40% of net income. The periodicity for payment of dividends and/or interest on
own capital is quarterly, according to Art. 43 of the Bank's By-laws.
Thus, in the second quarter of this year, the Bank distributed the amount of R$ 1,090 million to its
shareholders, with R$ 525 million as interest on own capital (R$ 0.20453 per share in the period) and R$
565 million as dividends (R$ 0.21987 per share).
Table 16. Distribution of Dividends/Interest on Own Capital
2Q09
National Treasury
R$ million
2Q10
1Q10
616.4
628.4
711.9
PREV I
95.4
99.9
113.1
BNDES
23.4
23.4
26.5
Individuals
52.5
51.0
54.7
Foreign Capital
47.3
104.1
46.2
112.9
42.5
141.5
Total*
939.2
962.3
1,090.2
Companies
* In 1Q10, includes R$ 0.6 million referring to the merger of shares of Banco Nossa Caixa.
BB's shareholder base is characterized by the great number of shareholders with a small share in the
capital. As can be seen from the table below, 321,854 shareholders (94.0%) account for 1.3% of the
capital, while 20,594 shareholders (6.0%) hold 98.7% of the total of the shares. These figures do not
consider the public offering results.
31 - Banco do Brasil – MD&A 2Q10
Table 17. Shareholders by Range of Shares Owned
Range of s har e s ow ne d
No. Shar e holde r s
% Shar e holde r s
Qty. Shar e s
% Qty. Shar e s
Fre e Float
342,445
100.0
562,444,707
21.9
1 to 10 shares
112,333
32.8
587,938
0.0
11 to 50 shares
90,258
26.4
2,293,379
0.1
51 to 100 shares
36,083
10.5
2,677,927
0.1
101 to 1,000 shares
83,180
24.3
28,715,359
1.1
Over 1,000 shares
20,591
3
6.0
0.0
528,170,104
2,007,415,406
20.6
78.1
342,448
100.0
2,569,869,551
100.0
s har e s )
Total
With regard to the total of the Bank’s shares that are available for trading in the normal course (30.4%),
that is, the free float, the predominance of foreign capital can be seen (54.2%), followed by Companies
(25.1%) and Individuals (20.7%), percentages on 07.30.2010, after the financial settlement of the Public
Offering. The following figures show the evolution of the free float between individuals, companies and
foreign capital.
Jun/09
Mar/10
23.2%
22.0%
53.7%
51.1%
25.7%
24.3%
Jul/10 *
Jun/10
59.3%
25.1%
17.8%
22.9%
54.2%
20.7%
Individuals
* Position of July 30, already considering the stock public offering.
Figure 13. Total Free Float Breakdown
32 - Banco do Brasil – MD&A 2Q10
Corporate
Foreign Capital
Equity Held by Foreign Investors
Since 2002, a noteworthy increase has been noted in the holdings of foreign investors in the Bank's
capital. With the Bank’s Public Offerings in 2006 and 2007 and the last performed on June/2010, in
addition to the "B" and "C" bonus subscription, the stake held by foreign shareholders’ in the Bank’s
capital increased significantly, from 0.9% in 2002 to 13.0% in June 2010. The public offering of shares
held in June 2010 further accentuated the foreign interest in the capital of BB, which reached 16.2% of
the total.
As disclosed on September 17, 2009, through a Material Fact, the limit for equity held by foreign
investors in the total capital of the Bank was increased from 12.5% to 20.0%. On that occasion, another
executive decree authorized the issue of American Depositary Receipts (ADR) backed by common
shares of BB. On December 2, 2009, Banco do Brasil launched its level 1 ADR program in New York,
the issue was also disclosed through Material Fact. On 07.30.2010, BB had 7.5 million of outstanding
ADRs.
16.5
13.0
11.3
11.8
9.9
7.2
2.8
0.9
2002
3.4
1.6
2003
2004
2005
2006
2007
2008
2009
* Position of July 30 for monitoring of the ownership structure considering the primary offering of shares.
Figure 14. Equity Held by Foreign Investors
33 - Banco do Brasil – MD&A 2Q10
Jun/10 Jul/10 *
2.2 Warrants
In 1996, on the occasion of a BB's capital increase, three series of warrants were issued: A, B, and C,
maturing in 2001, 2006, and 2011, respectively. The exercise price for these warrants was established
at R$ 8.50, with “adjusted pro rata temporis” by the IGP-DI price index.
In this quarter, with the execution of a new primary offering of shares, there was the exercising of
1,551,727 C bonuses (BBAS13), with 4,328,704 remained assets.
The distribution and some characteristics of the "C" Warrants are presented in the following tables:
Table 18. Breakdown of the Warrant Holders
Jun/09
%
Jun/10
Individuals
74.3
87.6
Companies
19.7
6.0
10.7
1.7
100.0
100.0
Foreign Capital
Total
Table 19. Series "C" Warrants
War r ant
Code
Exe r cis e Date
Series “C”
BBA S 13
03.31 to 06.30.2011
Num be r
Exe r cis e Pr ice R$
4,328,704
27.59
Quote in R$
47.01
In a simulation, considering a total of 2,569.9 million shares, the potential dilution in the Bank's capital is
0.5%, based on the assumption that until 2011 there will be no additional capital increases and that all
the C warrants will be exercised on maturity (March 31 to June 30, 2011).
Conversion:
1 Warrant = 3.131799 shares
Total Shares= 2,569,869,551
Table 20. Expected Dilution of Capital
War r ants
Se r ie s “C”
34 - Banco do Brasil – MD&A 2Q10
Qty. War r ants
4,328,704
Qty. Shar e s
13,556,631
Dilution of Capital - %
0.5
2.3 Stock Performance
Market
In the international financial environment, uncertainties regarding the turn of events of the crisis of the
public debt in Europe, and in general, in developed countries, remained. On the short term, besides
doubts regarding the resolution of the public indebtedness of some economies from the euro area, the
possibility of systemic banking crisis in that region increased. In spite of this, macroeconomic indicators
continue to indicate that the recovery process of the activity level remains consistent, but at a moderate
and non-homogeneous pace in the euro area.
In turn, the main emerging economies continued to record greater dynamism. This, however, was not
sufficient to guarantee a positive evolution in the prices of the main assets in the global financial market,
especially stock exchanges and commodities.
A slowdown of the inflationary environment was observed in the Brazilian domestic environment,
influenced particularly by the reduction of food prices. In minute published in June, the Central Bank
declared that "the set of information available evidences continuity in the deterioration of the inflationary
dynamics in the margin, although at a slower pace". However, the tighten monetary policy is still
expected to continue, yet the cycle of interest rate hikes may be shorter.
In relation to the GDP of the first quarter released by IBGE (Brazilian Institute of Geography and
Statistics), it was observed, along general lines, that the economy continues with robust growth.
Furthermore, the numbers showed a favorable composition for the future behavior of inflation, combining
de-acceleration of the consumption of families and expressive expansion of investments
BB shares
As a result of the factors described above, particularly in the international environment, the prices of the
main shares of the Brazilian financial market underwent adjustments. BBAS3 shares ended the
semester quoted at R$ 24.65, appreciation of 23.7% (adjusted by earnings) in twelve months, against
appreciation of 18.4% in the benchmark Bovespa index (Ibovespa).
23.7%
18.4%
jun/09
jul/09
ago/09
set/09
out/09
BB
Source: Economática
Figure 15. BB Shares vs. Ibovespa
35 - Banco do Brasil – MD&A 2Q10
nov/09 dez/09
jan/10
fev/10
Ibovespa
mar/10
abr/10
mai/10
jun/10
Share in Ibovespa
The Bovespa Index (Ibovespa) is an index adjusted every four months that represents the Brazilian
stock market, that is composed of the stocks traded in at least 80% of the trading sessions in the period.
A Liquidity Index is calculated based on the trading volume and financial volume of each stock which
determines the stock market share and the 80% with the highest Liquidity Index become components of
the Ibovespa index.
The evolution of the Bank's weighting in the Ibovespa portfolio is shown in the following chart. Banco do
th
Brasil ranks 13 in the Ibovespa portfolio valid for the next four months (May/10 to Aug/10). The Public
Offering carried out in 2006 and 2007 and the stock split in 2008, in the proportion of 1:3, boosted BB's
liquidity in the market, improving access by small investors to its stock. With the increase of 78 thousand
new investors and rise in the free float to 30.4% (position of 7.30.2010), as a result of the public offering
held in Jun/10, an improvement is also expected in the liquidity of BB's shares in the market.
12.479
12.162
11.613
11.307
11.992
11.831
10.710
2.379
2.443
May/08 Aug/08
Sep/08 Dec/08
2.404
2.337
Jan/09 Apr/09
May/09 Aug/09
1.893
Jan/08 Apr/08
BBAS3
2.124
Sep/09 Dec/09
10.554
2.328
2.177
Jan/10 Apr/10
May/10 Aug/10
Banking Industry
Source: Bovespa
Figure 16. BBAS3 Stock in Ibovespa
The average quantity of negotiations in 2Q10 (5,652) surpassed the levels observed in the same period
of 2009 (4,726), and the one observed in the the prior quarter (5,248). The average volume traded
reached R$ 100.7 billion in 2Q10 as compared with R$ 76.6 billion in 2Q09 and R$ 90.7 billion in 1Q10.
120
R$ million
100
80
60
40
20
3Q08
4Q08
1Q09
2Q09
3Q09
Source: Economática
Figure 17. Average daily financial trading volume – BBAS3
36 - Banco do Brasil – MD&A 2Q10
4Q09
1Q10
2Q10
6.0
5.0
thousand
4.0
3.0
2.0
1.0
0.0
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Source: Economática
Figure 18. Average daily trading volume – BBAS3
Market Ratios
The P/E ratio, which indicates a time estimate in years for investors to recover the capital invested in the
purchase of shares assuming the full distribution of company profits; stood at 5.65x last June, compared
with 6.16x in the same period of 2009.
The EPS reached R$ 1.06 in 2Q10, against R$ 0.91 in 2Q09. The P/B ratio of 1.61x in June 2010
denotes that the Bank's shares are traded more than the book value, that is, the Bank market price is
worth 161% of the Shareholders´ Equity.
Market capitalization reached R$ 63,319 million at the end of June 2010, against R$ 54,394 million in
the same period of the previous year, an increase of 16.4%. The free float capitalization recorded R$
13,864 million, higher than R$ 11,807 million recorded in June 2009.
In 2Q10, the Bank disbursed R$1,090 million to its shareholders, of which R$ 525 million was interest on
own capital (R$ 0.20453 per share in the period) and R$ 565 million was dividends (R$ 0.21987 per
share in the period). The Dividend Yield in the quarter, which is calculated by dividing the dividends
distributed in the period by the Bank’s market capitalization was 1.7%.
The following charts show the performance of Banco do Brasil's main key multiples in recent quarters.
37 - Banco do Brasil – MD&A 2Q10
Price / Earnings (LTM)
Earnings per Share (R$)
8.97
8.25
7.52
7.08
6.16
1.62
5.65
5.34
1.15
4.28
0.91
0.73
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
3Q08
0.65
4Q08
Price / Book Value
2.38
2.11
Sep/08
Dec/08
Jun/09
11.66
12.02
Sep/09
Dec/09
Mar/10
Jun/10
Sep/08
Dec/08
Mar/09
Market Capitalization (R$ million)
80,204
1Q10
12.60
13.11
Jun/09
Sep/09
14.06
14.66
76,291
Dec/09
Mar/10
17,420
76,676
15.31
Jun/10
16,658
16,789
13,864
12,550
54,394
11,807
43,325
9,404
37,701
Dec/08
2Q10
Free Float Capitalization (R$ million)
63,319
58,360
Sep/08
4Q09
1.61
1.40
Mar/09
3Q09
2.04
1.68
1.26
2Q09
1.06
Book Value per Share (R$)
10.87
2.09
1Q09
0.92
0.77
8,103
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Sep/08
Net Income (R$ million)
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Dividends and Interest on Own Capital (R$ million)
4,155
1,662
2,944
2,725
2,348
3Q08
2,351
1,178
1,090
1,979
1,867
939
1,665
4Q08
1Q09
747
2Q09
3Q09
4Q09
1Q10
2Q10
3Q08
666
4Q08
1Q09
Dividend Yield (%)
940
791
2Q09
3Q09
4Q09
1Q10
2Q10
Payout (%)
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3.1
2.2
1.5
1.3
1.7
1.7
1.2
1.0
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
Figure 19. Market Ratios
38 - Banco do Brasil – MD&A 2Q10
1Q10
2Q10
3 - Corporate Governance
Banco do Brasil has achieved a prominent position due to practices that guarantee the balance of rights
among shareholders and by the accountability to its investors and to the community, as well as the
business sustainability and ethics in the relationship with its stakeholders’. Proof of this is BB's
membership in Bovespa's Novo Mercado, which is a special listing segment that ghaters the institutions
with the most stringent Corporate Governance practices, and its shares listing in the ITAG and IGC
indexes, which respectively group companies with differentiated tag along, and those with the best
corporate governance practices.
In July 2010, Banco do Brasil accomplished the last of its commitments assumed with BM&FBOVESPA
for adhesion to the Novo Mercado. Listed in that important trading segment since 2006, BB had
negotiated a term with the Stock Exchange of up to June 2011 to attain the minimum percentage of 25%
of free-float. With the stock offering settlement in July, BB anticipated the negotiated deadline, and
began to fulfill all the conditions imposed by BM&FBOVESPA, which reflect the best corporate
governance practices observed in the Brazilian market.
BB's management has been based not only on assuring compliance with governing law, but also by
providing the market with as many details as possible on its activities, always focusing on the quality of
the information provided. In addition to the wide range of reports and information made available at the
Securities and Exchange Commission of Brazil (CVM) and on its investor relations website, as well as
through meetings organized by the Capital Market Professionals and Investors Association (Apimec)
and other events with shareholders, Banco do Brasil has been inviting the market to attend conferences
whenever management finds it necessary to clarify specific topics concerning the company. The attitude
adopted by BB in view of its new strategy to expand through acquisitions reinforces the Bank's
commitment to transparency: to reduce information asymmetry as much as possible, and, in the best
interests of its minority shareholders, BB disclosed to the market the valuation reports of the companies
involved in its acquisitions, mergers and strategic partnerships.
Management
BB's management bodies are the Board of Directors, which is advised by the Audit Committee, and the
Executive Board of Officers, which is formed by the officers (chief executive officer and nine vicepresidents) and by 27 statutory directors. The Bank also has a permanent Board of Auditors.
Decisions are taken collectively at all levels of the Bank. With the purpose of involving all executives in
the definition of strategies and approval of proposals for BB's different businesses, Management is
supported by committees, subcommittees and commissions at the strategic level, which guarantees
agility and security in the decision making process.
39 - Banco do Brasil – MD&A 2Q10
Board of Auditors
Management of Assets
& Liabilities
and Liquidity
Global Risk
Management Board
Market & Liquidity
Risk
Board of Directors
Credit Risk
Management of
Assets &
Liabilities
and Liquidity
Superior Inquiry
Operational Risk
Prevention of Financial
& Exchange Fraud
Information
Security
Credit Limit
Operations
Resources
Operations
Operational
Administrative
Information
Technology
Business and
Communication
Employee
Assignment
Channels
Working
Agreement
Committee
Subcommittee
Cost Management
and Operational
Efficiency
Commission
Figure 20. Committees, Subcommittees and Commissions - Strategic Level
The sophisticated governance structure developed by the Bank is reflected in the daily business
management, the assumptions of which include a rigid structure of levels of decision-making authority
and the segregation of duties. Loans, for example, are analyzed independently by the business areas,
which evaluate the characteristics and the attractiveness of each operation, and by the Loan Directorate,
which defines the maximum exposure by client, and sets individualized limits by business category. In
this regard, the development of new products is submitted to all the intervening Senior Managements
and Units, which analyze in a separate manner all the aspects involved in the deal, like its structure,
pricing and risks involved.
Highlights in period
Public Offering of Shares
Banco do Brasil held a public offering of 356.8 million common shares of its issue in June 2010. The
shares were traded at R$ 24.65 after the bookbuilding process concluded on 6.30.2010. The operation
consisted of:
Primary offering of 286 million shares, totaling R$ 7.05 billion, a sum that will be used to
reinforce the capital base of the institution, and to sustain its future growth;
Secondary offering of 70.8 million shares, previously belonging to BNDES and to the
Federal Government
In addition, the over-allotment option, also known as green shoe, comprised of 39.1 million shares was
exercised. These shares were held by BNDES and the Federal Union, besides treasury shares.
In addition to BB’s capital raise due to the primary offering and ratified by the Central Bank on 7.1.2010,
the stock offering will result in an increase of the percentage of free float shares to 30.4%, against a
percentage of 21.9% observed at the end of June 2010 (before the liquidation of the stock offering).
New Head of Investor Relations
On 7.7.2010, Banco do Brasil announced the nomination of Mr. Gilberto Lourenço Aparecida to fill the
position of Head of Investor Relations.
40 - Banco do Brasil – MD&A 2Q10
Gilberto Lourenço is 48 years old, a BB employee for 23 years and lately acted as Executive Manager of
Investor Relations. He has been working for more than 10 years in BB’s Investor Relations, acting
directly on the relationship with the market in Brazil and abroad. He coordinated a project dedicated to
the preparation of Banco do Brasil’s Public Offering during the first half of 2010. He holds a bachelor
degree in Accounting and a MBA in General Accounting at Universidade de São Paulo - USP, along
with postgraduate courses in Business Administration and Auditing.
Corporate Reorganization – Insurance
Continuing the process of the insurance corporate reorganization of Banco do Brasil Conglomerate, in
the second quarter of 2010 strategic moves were made involving the segment companies - Brasilsaúde,
Brasilprev and Brasilveículos - and their negotiating partners - Mapfre, Principal Financial Group and Sul
América. See additional information on Chapter 10.3.4 of this report.
Financial Holding Company
Banco do Brasil was given the status of "Financial Holding Company" by the Board of Governors of the
Federal Reserve System (“Fed”). The Bank was accorded this status after an accurate analysis of major
factors determined by U.S. banking law, which includes the Bank's capitalization level and the quality of
its management. This status will allow Banco do Brasil, whether in its interest, to perform banking
activities in the US territory, either by itself or through its subsidiaries, under the same conditions as U.S.
banks.
In the same line, the American regulatory agency FINRA - Financial Industry Regulatory Authority authorized Banco do Brasil Securities LLC, a Banco do Brasil S.A. subsidiary in the United States, to
pursue activities related to underwriting. This authorization will allow the full performance of the
subsidiary in the main activities related to the distribution of capital market offerings and to brokerage
services in the United States.
Partnership between Banco do Brasil, Bradesco and Caixa Econômica Federal in the card
sector
On April 27, 2010, Banco do Brasil S.A. and Banco Bradesco S.A. signed a Memorandum of
Understanding, with no binding effect, to create a new business model in order to integrate part their
card operations and, concomitantly, launch a Brazilian brand of credit, debit and pre-paid cards for
account holders and non-account holders. Subsequently, a new Memorandum of Understanding signed
on 08.09.2010, communicated to the market the intention of integrating Caixa Econômica Federal to the
initiative. If concluded the operation, the aforementioned companies intend to establish a holding
company which will integrate and manage the businesses.
Increase in equity interest - Cielo and CBSS
On April 23, 2010, Banco do Brasil, together with its fully-owned subsidiary BB Banco de Investimento
S.A. submitted proposals to Grupo Santander Espanha referring to the acquisition of a part of the shares
held by this group in Companhia Brasileira de Soluções e Serviços (“CBSS”), representing 4.655% of
the compay's capital; and in Cielo S.A. ("Cielo"), representing 5.11% of this company' social capital.
The operation, which had its conclusion announced to the market on 7.13.2010, resulted in the interest
increase of BB-BI in Cielo from 23.54% to 28.65% and in CBSS from 40.35% to 45.0%, reinforcing the
equity interest of the Banco do Brasil conglomerate in the capital of these companies that operate in the
market of cards.
Banco Patagonia
On 04.21.2010, Banco do Brasil and the controllers of Banco Patagonia S.A., entered into a Stock
Purchase Agreement for acquisition, by Banco do Brasil, of Banco Patagonia's shareholding control.
41 - Banco do Brasil – MD&A 2Q10
The transaction is dependent on the approval of the regulatory agencies in Brazil and Argentina, as well
as of the Shareholders' Meetings of Banco do Brasil. For additional information, please see chapter
10.3.3.
Merger of Banco Nossa Caixa
On 4.1.2010, the Central Bank of Brazil (Bacen) approved the takeover of Banco Nossa Caixa by Banco
do Brasil, through the transfer of all its equity and consequent extinction, with BB succeeding this
company in all rights and obligations.
42 - Banco do Brasil – MD&A 2Q10
4 - Key Statistics
Table 21. Key Statistics
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Balance Sheet Items – R$ billion
Assets
458.2
521.3
591.9
598.8
685.7
708.5
724.9
27.9
29.9
30.9
32.4
33.7
36.1
37.6
39.3
Credit Portfolio
202.2
224.8
241.9
252.5
285.5
300.8
305.6
326.5
Deposits
Shareholders’ Equity
755.7
229.8
270.8
305.0
310.8
327.0
337.6
342.6
344.0
Demand Deposits
43.0
51.9
47.3
49.1
50.1
56.5
55.0
59.0
Saving Deposits
52.7
55.0
70.6
69.0
72.2
75.7
78.7
81.5
127.6
149.6
178.5
185.1
194.7
193.5
197.9
192.7
1.06
Time Deposits
Profitability
Net Income per Share - R$ **
0.73
1.15
0.65
0.91
0.77
1.62
0.92
Recurring Income per Share – R$
0.79
0.63
0.59
0.67
0.69
0.71
0.80
0.91
ROE - Annual Basis %
30.5
47.4
23.8
33.2
26.2
56.8
28.0
31.5
Recurring ROE - Annual Basis %
33.6
24.5
21.6
23.7
23.1
22.5
24.2
26.5
ROE - Annual Basis %
26.1
30.4
28.9
30.1
29.0
30.7
31.6
31.3
ROA - Annual Basis %
1.7
2.4
1.2
1.6
1.2
2.4
1.3
1.5
NII / Earning Assets - Annual Basis
7.0
7.2
6.6
7.3
6.7
6.7
6.5
6.5
45.7
45.7
42.0
42.3
44.6
44.4
44.3
42.7
123.4
125.8
93.4
137.1
121.2
110.3
120.3
127.3
Productivity
Cost/Income ratio (ex nonrecurring items) - %
Fee Income / Personnel Expenses - %
Fee Income / Adm. Expenses - %
Personnel Expenses per Employee - R$
66.0
66.3
50.4
63.9
64.0
57.0
57.7
64.4
25,033
25,071
31,900
22,100
25,422
28,719
26,510
26,681
Employees / (Branches + PAA + PAB)
17.3
16.4
16.8
16.6
16.7
16.8
16.7
17.0
Checking Accounts per Collaborator
317.2
313.4
309.4
306.4
304.8
307.2
309.2
300.1
Assets per Employee – R$ thousand
4,834
5,377
5,990
5,281
5,992
6,221
6,362
6,494
13.1
14.1
14.1
14.7
15.4
16.8
16.9
17.9
Loan Portfolio / Points of Service – R$ million
Loan Portfolio Quality
Allowance / Loan Portfolio - %
Allowance / (E + F + G + H) - %
Portfolio Net of Allowance / Total Portfolio - %
5.5
6.1
6.4
7.0
6.7
6.2
6.0
5.5
105.4
107.5
106.0
114.2
114.0
114.5
114.9
114.1
94.5
93.9
93.6
93.0
93.3
93.8
94.0
94.5
Capital Structure
Leverage (times)
16.4
17.4
19.2
18.5
20.4
19.6
19.3
19.2
BIS Ratio - %
13.0
15.2
15.0
15.3
13.0
13.7
13.7
12.8
2,565.3
2,568.2
2,568.2
2,568.2
2,568.2
2,568.7
2,568.7
2,568.7
Price / Earnings 12 months **
8.25
4.28
5.34
6.16
8.98
7.52
7.08
5.65
Price / Book Value **
2.09
1.26
1.40
1.68
2.38
2.11
2.04
1.61
58,360
37,701
43,325
54,394
80,204
76,291
76,676
63,319
Total Quantity of Shares - thousand
Capital M arket
M arket Capitalization - R$ million
Book Value per Share - R$ **
10.87
11.66
12.02
12.60
13.11
14.06
14.66
15.31
Price of Share - R$ **
22.75
14.68
16.87
21.18
31.23
29.70
29.85
24.65
Structural Information
Total Service Points
15,438
15,964
16,207
17,210
17,234
17,929
18,030
18,284
Total Customers - thousand
47,492
48,022
53,890
53,530
54,236
52,695
53,535
53,349
Total Checking Accounts - thousand
Individuals - thousand
Businesses - thousand
Total Savings Accounts - thousand
Staff
Employees
Interns
43 - Banco do Brasil – MD&A 2Q10
30,117
30,378
30,574
34,747
34,875
34,988
35,234
34,920
28,173
28,494
28,701
32,555
32,657
32,781
32,910
32,695
1,944
1,884
1,874
2,192
2,218
2,207
2,324
2,225
18,002
18,459
19,432
19,389
19,429
23,371
23,655
23,970
94,935
96,938
98,825
113,401
114,432
113,888
113,942
116,370
85,392
88,972
89,534
103,458
104,139
103,971
103,923
106,241
9,543
7,966
9,291
9,943
10,293
9,917
10,019
10,129
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1T10
2Q10
Glo ba l R a t ings
Fitch Ratings
Individual
C/D
C/D
C/D
C/D
C/D
C/D
C/D
Sho rt-Term - Lo cal Currency
F3
F3
F3
F3
F3
F3
F3
C/D
F3
Long-Term - Local Currency
B BB -
B BB -
B BB -
BB B-
BB B-
BB B-
BB B-
B BB -
Sho rt-Term - Fo reign Currency
F3
F3
F3
F3
F3
F3
F3
F3
Long-Term - Fo reign Currency
B BB -
B BB -
B BB -
BB B-
BB B-
BB B-
BB B-
B BB -
M oo dy's
Financial Strength
Sho rt-Term - Lo cal Currency
Sho rt-Term - Fo reign Currency
Long-Term Deposits - Fo reign Currency
Long-Term Depo sits - Local Currency
C
C
C
C
C
C+
C+
C+
P -1
P-1
P-1
P-1
P-1
P-1
P -1
P -1
NP
NP
NP
NP
NP
NP
P -3
P -3
B aa3
B aa3
B aa3
B aa3
Baa2
Baa2
Baa2
Baa2
A1
A1
A1
A1
A1
A2
A2
A2
Ba2
Ba2
Ba2
B a2
Baa3
Baa3
Baa3
Baa3
Long-Term - Local Currency
B BB -
B BB -
B BB -
BB B-
BB B-
BB B-
BB B-
B BB -
Long-Term - Fo reign Currency
B BB -
B BB -
B BB -
BB B-
BB B-
BB B-
BB B-
B BB -
Long-Term Debt- Fo reign Currency
Standard & Po or's
N a tio na l R at ings
Fitch Ratings
Sho rt-Term
F1+(bra)
F1+(bra)
F1+(bra)
F1+(bra)
F1+(bra)
F1+(bra)
F1+(bra)
F1+(bra)
Long-Term
A A+(bra)
A A+(bra)
A A+(bra)
AA +(bra)
AA +(bra)
AA +(bra)
AA +(bra)
AA +(bra)
M oo dy's
Sho rt-Term
BR-1
B R-1
B R-1
B R-1
B R-1
BR-1
BR-1
BR-1
Long-Term
A aa.br
Aaa.br
Aaa.br
Aaa.br
Aaa.br
Aaa.br
A aa.br
A aa.br
45%
42%
42%
42%
42%
42%
42%
42%
8%
5%
5%
5%
5%
5%
8%
8%
25%
30%
30%
30%
30%
30%
30%
30%
C o mpulso ry/ R e se rve R e quire me nt s
Demand Depo sits
Rate
Additio nal (1)
Reserve Requirements*
Reserve Requirements (micro finance)
Unmarked
2%
2%
2%
2%
2%
2%
2%
2%
20%
21%
21%
21%
21%
21%
18%
18%
Savings Depo sits
Rate
20%
15%
15%
15%
15%
15%
15%
15%
Additio nal
10%
10%
10%
10%
10%
10%
10%
10%
Reserve Requirements*
65%
70%
70%
70%
70%
70%
70%
70%
5%
5%
5%
5%
5%
5%
5%
5%
15%
15%
15%
15%
15%
14%
14%
15%
8%
5%
5%
4%
4%
4%
8%
8%
77%
80%
80%
81%
81%
83%
79%
77%
Unmarked
Time Depo sits
Rate
Additio nal (2)
Unmarked
Judicial Deposits
Rate
Unmarked
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
*Reserve Requirements at BB are directed to Rural Credit.
The following subtitles refer to the rates due to 3Q09.
(1) 5% rate until the calculation period from 01/03/2010 to 05/03/2010. From this period on, the rate was changed to 8%.
(2) 4% rate until the calculation period from 01/03/2010 to 05/03/2010. From this period on, the rate was changed to 8%.
44 - Banco do Brasil – MD&A 2Q10
5 - Summarized Financial Statements
5.1 Summarized Balance Sheet
Table 22. Summarized Balance Sheet – Assets
R$ million
ASSETS
Cur re nt and Long-te r m As s e ts
A vailable Funds
Short-term Interbank Investments
Securities and Financial Derivatives
Securities A vailable f or Trading
Securities A vailable f or Sale
Securities Held to Maturity
Financial Derivatives
Interbank A ccounts
Deposits w ith the Central Bank
Compulsory Deposits on Demand Deposits and Float
Compulsory Deposits on Savings Deposits
Other
Intrabank A ccounts
Loans
Public Sector
Private Sector
( A llow ance f or Loan Losses)
Leasing
Leasing and Subleasing Receivables
(Unearned Lease Income)
(A llow ance f or Lease Losses)
Other Receivables
Receivable on Guarantees Honored
Foreign Exchange Portf olio
Income Receivable
Trading and Brokerage of Securities
Specif ic Credits
Specif ic Operations
Credits f rom Insurance, Pension and Capitalization Op.
Tax Credits
A ctuarial A ssets
Warrants Deposits Receivable
Other Credits
(Provision or Doubtf ul Receivables)
(With Loan Characteristics)
(Without Loan Characteristics)
Other A ssets
Interest in Companies
Other A ssets
(Provision f or Possible Losses)
Prepaid Expenses
Pe r m ane nt As s e ts
Investments
Property and Equipment
Leasing A ssets
Intangible
Def erred Charges
45 - Banco do Brasil – MD&A 2Q10
Jun/09
598,839
584,287
6,212
132,438
109,564
31,661
46,645
30,477
781
29,127
24,507
11,188
13,319
4,620
102
214,906
2,816
228,995
(16,904)
3,253
3,406
(153)
87,034
78
13,957
502
1,763
888
0
702
21,053
8,410
20,489
20,916
(1,725)
(702)
(1,023)
1,652
0
352
(187)
1,487
14,551
5,184
3,663
2
5,128
574
Balance
M ar /10
724,881
706,102
7,364
152,595
119,364
38,183
62,950
17,070
1,162
53,144
47,244
14,472
32,773
5,900
99
267,317
5,668
279,054
(17,405)
4,593
4,826
(233)
99,430
89
11,808
588
400
954
850
22,000
13,374
21,764
29,226
(1,625)
(678)
(947)
2,196
384
(176)
1,988
18,780
6,869
4,230
1
7,267
413
Chg. %
Jun/10
On Jun/09 On M ar /10
755,706
26.2
4.3
737,151
26.2
4.4
9,535
53.5
29.5
132,543
0.1
(13.1)
132,249
20.7
10.8
44,830
41.6
17.4
67,153
44.0
6.7
19,049
(37.5)
11.6
1,217
55.9
4.8
64,857
122.7
22.0
59,374
142.3
25.7
15,833
41.5
9.4
43,541
226.9
32.9
5,483
18.7
(7.1)
110
7.6
10.6
289,075
34.5
8.1
6,145
118.2
8.4
300,028
31.0
7.5
(17,097)
1.1
(1.8)
4,394
35.1
(4.3)
4,641
36.3
(3.8)
(246)
60.9
5.9
101,887
17.1
2.5
73
(5.7)
(17.9)
12,258
(12.2)
3.8
678
35.1
15.2
409
(76.8)
2.4
978
10.1
2.5
816
16.1
(4.1)
22,431
6.5
2.0
14,510
72.5
8.5
22,380
9.2
2.8
28,988
38.6
(0.8)
(1,633)
(5.3)
0.5
(744)
6.0
9.7
(890)
(13.1)
(6.1)
2,501
51.4
13.9
394
12.0
2.7
(171)
(8.4)
(2.9)
2,278
53.2
14.6
18,555
27.5
(1.2)
6,866
32.4
(0.0)
4,259
16.3
0.7
1
(62.2)
(17.1)
7,052
37.5
(3.0)
377
(34.3)
(8.6)
Table 23. Summarized Balance Sheet – Liabilities
R$ million
LIABILITIES AND SHAREHOLDER’S EQUITY
Cur re nt and Long-te r m Liabilitie s
Depos its
Demand Deposits
Savings Deposits
Interbank Deposits
Time Deposits
Inves tment Deposits
Money Market Borrow ing
Funds f rom A cceptances and Securities Placed
Foreign Securities
Interbank A c counts
Intrabank A c counts
Borrow ing
Foreign Borrow ing
Domestic Onlending – Of f icial Ins titutions
National Treasury
BNDES
CEF
Finame
Other Institutions
Foreign Onlending
Financial Derivativ es
Other A ccounts Payable
Collection of Taxes and Contributions
Foreign Ex change Portf olio
Shareholder and Statutory Distributions
Taxes and Social Security
Trading and Brokerage of Securities
Technical Prov. Insurance, Pension and Capitalization Op.
Financial and Development Funds
Perpetual Sec urities
Special Operations
Obligations f or Lotto Operations
FCO (Subordinated Debt)
A ctuarial Liabilities
Other Liabilities
Une ar ne d Incom e
Cor por ate Profit Shar ing
Share holde r s ’ Equity
Capital
(Unpaid Capital)
Capital Reserves
Revaluation Reserves
Revenue Reserves
Mark-to-Market – Securities and Derivatives
Retained Earnings (A ccumulated los ses)
(Treasury Shares)
Corporate Prof it Sharing
Income A c counts
46 - Banco do Brasil – MD&A 2Q10
Jun/09
598,839
565,692
310,846
49,075
69,011
7,459
185,072
228
101,508
2,673
2,337
2,677
2,045
8,536
8,536
22,626
3,574
11,118
159
7,009
765
107
2,580
112,094
2,853
16,339
1,502
20,141
450
15,017
4,076
990
2,140
14,689
6,179
27,719
787
32,360
18,549
5
7
13,614
216
(31)
-
Balance
M ar /10
724,881
687,235
342,624
54,973
78,719
10,749
197,934
249
157,866
11,656
8,617
2,341
2,503
7,884
7,884
32,995
2,065
20,264
139
9,708
818
99
4,085
125,184
3,295
12,609
1,355
21,796
1,071
18,356
3,685
3,659
206
20,792
5,738
32,621
37,646
18,567
5
6
16,857
405
4
(31)
0
1,833
Chg. %
Jun/10
On Jun/09 On M ar /10
755,706
26.2
4.3
716,374
26.6
4.2
343,961
10.7
0.4
59,025
20.3
7.4
81,541
18.2
3.6
10,436
39.9
(2.9)
192,715
4.1
(2.6)
243
6.6
(2.4)
166,603
64.1
5.5
12,232
357.6
4.9
9,631
312.1
11.8
3,034
13.3
29.6
1,783
(12.8)
(28.7)
52.4
12,016
40.8
12,016
40.8
52.4
36,308
60.5
10.0
2,074
(42.0)
0.4
22,250
100.1
9.8
142
(11.0)
1.7
11,373
62.3
17.1
471
(38.4)
(42.4)
104
(3.0)
4.4
3,238
25.5
(20.7)
137,096
22.3
9.5
2,896
1.5
(12.1)
16,321
(0.1)
29.4
1,885
25.5
39.0
24,308
20.7
11.5
1,247
177.0
16.4
26,921
79.3
46.7
3,729
(8.5)
1.2
3,643
267.9
(0.4)
206
(90.4)
(0.0)
21,340
45.3
2.6
6,758
9.4
17.8
27,842
0.4
(14.6)
39,332
21.5
4.5
33,078
78.3
78.2
(7,050)
6
(8.3)
(0.4)
12,917
(5.1)
(23.4)
411
90.2
1.7
(31)
(0.0)
0
(65.6)
-
5.2 Summarized Income Statement – BR GAAP
Table 24. Summarized Income Statement – BR GAAP
R$ million
Financial Inte r m e diation Incom e
Loans
Leasing
Securities
Financial Derivativ es
Foreign Exchange Portf olio
Compulsory Inv estments
Financial Inc. f rom Insur., Pension & Capit. Operations
Financial Inte r m e diation Expe ns e s
Money Market Funds
Borrow ing, A s signments and Onlending
A llow ance f or Loan Losses
Gr os s Incom e fr om Financial Inte r m e diation
Othe r Ope r ating Incom e (Expe ns e s )
Fee Income
Banking Fees Inc ome
Personnel Ex pens es
Other A dministrative Expenses
Tax es
Equity Interest in the Res ults of Subsidiaries, and A f f iliates
Income f / Insurance, Pension & Capitalization Operations
Other Operating Revenues
Other Operating Expenses
Ope r ating Incom e
Non-operating Income
Incom e Be for e Taxe s
Income and Social Contribution Taxes
Statutory Prof it Sharing
Corporate Prof it Sharing
Ne t Incom e
47 - Banco do Brasil – MD&A 2Q10
Quar te r ly Flow
2Q09
1Q10
2Q10
15,365
9,963
148
5,215
(451)
131
213
146
(11,415)
(7,067)
(483)
(3,865)
3,950
(1,167)
2,557
879
(2,506)
(2,871)
(860)
(576)
471
4,957
(3,217)
2,782
1,426
4,208
(1,559)
(300)
(1)
2,348
17,981
11,953
240
5,644
(232)
(18)
274
120
(12,356)
(8,493)
(903)
(2,959)
5,625
(1,896)
2,747
887
(3,021)
(3,277)
(864)
50
440
3,110
(1,969)
3,730
217
3,946
(1,242)
(353)
2,351
18,848
12,364
204
5,195
(29)
71
917
125
(12,577)
(9,055)
(997)
(2,525)
6,271
(1,789)
2,853
1,101
(3,105)
(3,039)
(944)
29
468
3,020
(2,173)
4,483
129
4,612
(1,473)
(414)
2,725
Chg. %
On 2Q09 On 1Q10
22.7
24.1
38.2
(0.4)
(93.5)
(45.5)
330.5
(14.3)
10.2
28.1
106.5
(34.7)
58.8
53.2
11.6
25.3
23.9
5.8
9.7
(0.6)
(39.1)
(32.5)
61.1
(90.9)
9.6
(5.6)
38.0
16.1
4.8
3.4
(15.0)
(7.9)
(87.3)
234.7
4.3
1.8
6.6
10.3
(14.7)
11.5
(5.6)
3.8
24.2
2.8
(7.3)
9.3
(41.5)
6.3
(2.9)
10.3
20.2
(40.3)
16.9
18.6
17.1
15.9
Half-Ye ar ly Flow
1H09
1H10
29,854
18,465
286
10,945
(512)
15
389
267
(22,546)
(14,828)
(1,199)
(6,519)
7,308
(3,832)
4,811
1,568
(5,659)
(5,562)
(1,528)
(666)
775
7,018
(4,588)
3,477
1,442
4,919
(378)
(527)
(1)
4,014
36,829
24,317
445
10,839
(262)
53
1,192
245
(24,932)
(17,548)
(1,900)
(5,484)
11,896
(3,684)
5,600
1,988
(6,125)
(6,315)
(1,808)
79
909
6,130
(4,142)
8,212
346
8,558
(2,715)
(767)
5,076
Chg. %
On 1H09
23.4
31.7
55.5
(1.0)
(49.0)
257.7
206.6
(8.3)
10.6
18.3
58.5
(15.9)
62.8
(3.8)
16.4
26.8
8.2
13.5
18.3
17.3
(12.6)
(9.7)
136.2
(76.0)
74.0
618.5
45.6
26.5
5.3 Income Statement with Reallocations
Table 25. Income Statement with Reallocations
Quarte r ly Flow
Chg. %
R$ million
2Q09
1Q10
2Q10
On 2Q09 On 1Q10
Financial Inte r m e diation Incom e
16,037
18,562
19,512
21.7
5.1
Loan Operations (4) (14)
10,133
12,480
12,991
28.2
4.1
Lease Operations
148
240
204
38.2
(15.0)
Securities
5,215
5,644
5,195
(0.4)
(7.9)
Financial Deriv atives
(451)
(232)
(29)
(93.5)
(87.3)
Foreign Exchange Portf olio
131
(18)
71
(45.5)
Compulsory Investments
213
274
917
330.5
234.7
Financial Inc ome f rom Insurance, Pension and Capitaliz . Operatrions 146
120
125
(14.3)
4.3
FX Gain (Loss) on Foreign Investments (1)
(592)
18
(5)
(99.2)
Other Op. Inc. of a Fin. Intermed. Nature (2)
1,533
28
57
(96.3)
105.4
Hedge Fis cal (5)
(439)
8
(15)
(96.6)
Financial Inte r m e diation Expe ns e s
(7,550)
(9,205) (10,052)
33.1
9.2
Money Market Funds (3)
(7,067)
(8,302)
(9,055)
28.1
9.1
Borrow ing, A ssignments and Onlending
(483)
(903)
(997)
106.5
10.3
Ne t Inte r e s t Incom e
8,487
9,357
9,461
11.5
1.1
A llow ance f or Loan Los ses (6) (15)
(3,172)
(3,026)
(2,871)
(9.5)
(5.1)
Ne t Financial M argin
5,316
6,331
6,590
24.0
4.1
Fee Income
3,436
3,634
3,954
15.1
8.8
Serv ices Income
2,557
2,747
2,853
11.6
3.8
Banking Fee Income
879
887
1,101
25.3
24.2
Insurance, Pension Plan and Capitalization Income
471
440
468
(0.6)
6.3
Tax es on Revenues (5) (7)
(806)
(839)
(909)
12.8
8.4
Contribution M ar gin
8,417
9,567
10,103
20.0
5.6
A dministrativ e Expenses
(4,892)
(5,300)
(5,471)
11.8
3.2
Personnel Expenses (8)
(2,613)
(2,851)
(2,937)
12.4
3.0
Other A dministrativ e Expenses (8) (9)
(2,279)
(2,449)
(2,534)
11.2
3.5
Other Tax Expenses (7)
(7)
(26)
(34)
378.7
28.6
Com m e r cial Incom e
3,518
4,241
4,598
30.7
8.4
Legal Risk
(45)
(450)
(239)
427.8
(46.9)
Legal Claims (8) (13) (16) (20)
(152)
(238)
35
Labor Law s uits (8) (16) (19) (20)
107
(212)
(274)
29.4
Other Operating Income
(740)
(379)
(491)
(33.6)
29.6
Eq. Int. in Results of Subs. A nd A f f il. (1)
15
32
34
123.1
6.2
FX Other Operating Income / Expens es
(755)
(411)
(525)
(30.5)
27.7
Other Operating Income (2) (3) (4) (10) (11)
838
1,112
1,180
40.8
6.1
PREV I (10) (11)
298
913
913
206.2
0.0
Other Operating Expenses (2) (6) (9) (13)
(1,891)
(2,437)
(2,618)
38.4
7.4
Ope r ating Incom e
2,733
3,412
3,869
41.5
13.4
Non-operating Income (12) (21)
11
3
15
44.4
406.8
Incom e Be for e Taxe s
2,744
3,415
3,884
41.6
13.7
Income and Social Contrib. Taxes (5) (10) (17) (18)
(771)
(1,053)
(1,194)
54.9
13.4
Interest on Ow n Capital Tax Benef it
182
207
210
15.2
1.4
Statutory Prof it Sharing (10)
(220)
(307)
(363)
64.7
18.2
Corporate Prof it Sharing
(26)
Re cur ring Incom e
1,727
2,056
2,327
34.8
13.2
Extraordinary Items
455
384
310
(31.9)
(19.3)
Sale of Share in V ISA Internacional (12)
214
Ec onomic Plans (13)
(193)
(85)
(140)
(27.5)
65.3
Credit A s signment (14)
271
Contingent Liabilities – BESC (20)
250
A dditional Provision f or Loan Losses (15)
(676)
332
Provision f or Labor, Civil and Tax Claims (16)
Tax Credits – dif f erential of CSLL rate (17)
Disposal of Investments – V isanet Brasil (18)
1,415
Reversal of Labor Liabilities (19)
568
Capital Gain - BB Seguros Participaç ões (21)
114
Tax FX and Statutory Prof its over Extraord. Items (22)
(362)
(313)
(246)
(31.9)
(21.5)
166
(88)
88
(46.8)
A ctuarial A ssets - A djustments (10)
2,348
2,351
2,725
16.1
15.9
Ne t Incom e
48 - Banco do Brasil – MD&A 2Q10
Half-Ye ar ly Flow
Chg. %
1H09
1H10
On 1H09
31,297
38,075
21.7
19,084
25,471
33.5
286
445
55.5
10,945
10,839
(1.0)
(512)
(262)
(49.0)
15
53
257.7
389
1,192
206.6
267
245
(8.3)
(677)
13
2,003
85
(95.7)
(503)
(6)
(98.7)
(15,825) (19,257)
21.7
(14,626) (17,357)
18.7
(1,199)
(1,900)
58.5
15,472
18,817
21.6
(5,663)
(5,897)
4.1
9,809
12,920
31.7
6,379
7,588
19.0
4,811
5,600
16.4
1,568
1,988
26.8
775
909
17.3
(1,424)
(1,747)
22.7
15,539
19,670
26.6
(8,823) (10,771)
22.1
(4,742)
(5,788)
22.0
(4,080)
(4,983)
22.1
(50)
(60)
20.2
6,667
8,839
32.6
(242)
(688)
183.8
(247)
(203)
(18.0)
5
(485)
(1,294)
(870)
(32.8)
10
66
541.0
(1,304)
(936)
(28.3)
1,633
2,292
40.3
597
1,827
206.2
(3,534)
(5,055)
43.0
5,130
7,281
41.9
27
18
(32.2)
5,157
7,299
41.5
(1,459)
(2,247)
54.0
362
417
15.5
(423)
(670)
58.4
(26)
3,250
4,383
34.9
764
694
(9.2)
214
(288)
(225)
(21.8)
271
250
(676)
332
(1,367)
1,213
1,415
568
114
196
(560)
4,014
5,076
26.5
5.3.1 Details of Reallocations
In this chapter the adjustments made to the Summarized Income Statement to obtain the Income
Statement with Reallocations are detailed. These adjustments aim to:
a) Segregate the One-Off Items and present the recurring income in the period;
b) Change the way that income and expenses are reported, in order to provide a better understanding of
the business and the company's performance;
c) Allow the Net Interest Income (NII) recorded in the period to effectively reflect the income from all
earning assets, seeking to inform the market the spread achieved from the division of this margin by the
assets, excluding permanent assets. To achieve this, it was necessary to:
•
•
•
Include in NII the income recorded under Other Operating Income that had financial
intermediation characteristics and which was derived from earning assets recorded in the
Balance Sheet under Other Receivables;
Identify, in an specific item inside the NII, the FX Gain (Loss) over the Financial Assets and
Liabilities Abroad, in the period;
Maintain under NII the amounts related to Negative Foreign Exchange Adjustments that were
recorded under Other Operating Income and Expenses to avoid inverting the balance of
accounts of a financial intermediation nature;
d) Detect and cancel the effects of Tax Hedge transactions entered into as of 4Q08, on the Effective Tax
Rate and Financial Margin. Regarding these transactions, it should be noted that:
•
•
•
•
The exchange variation on foreign investments impacts Banco do Brasil's income through the
equity income account. To reduce the effects of exchange fluctuations on income, the Bank
seeks to align its foreign exchange positions with transactions in the financial market or through
commercial positions assumed with customers;
In accordance with tax law equity income from overseas investments does not affect the tax
calculation bases (IRPJ, CSLL, PIS/PASEP, and COFINS), in contrast to income from foreign
exchange hedge transactions which generated gains of R$ 183 million during the third quarter of
2008, and may create losses in subsequent periods if the Brazilian real begins to appreciate
consistently again;
In order to reduce fluctuations in its profit figures, the Bank decided to assume a foreign
currency short position, considering the amount required for effective protection, including tax
effects pursuant to article 4 in Circular 3389 dated June 25, 2008;
This short position is assumed by entering into a hedge transaction in excess of the assets
being protected, by means of a transaction known as a Tax Hedge, or overhedge. The Tax
Hedge's value is specified in such a way that the outcome of the hedge transactions, net of their
effects on taxes, will be equal to the impact of the exchange fluctuation on the income, which
enhances protection and reduces the income's volatility;
Reallocations under net interest income
(1) The FX Gain (Loss) on Foreign Investments is reallocated from equity income in the results of
subsidiaries and affiliates for inclusion under NII. This adjustment is required to maintain the balance
and coherence of the spread analysis, since assets and liabilities previously included in permanent
assets are included in other balance sheet items after consolidation. Without the reallocation, the spread
would be calculated incorrectly. The amounts of these reallocations were R$ 18 million in 1Q10 and (R$
5 million) in 2Q10.
49 - Banco do Brasil – MD&A 2Q10
(2)The reallocations from Other Operating Income/Expenses to Other Operating Income of a Financial
Intermediation Nature are detailed below:
Table 26. Reallocations - Other Operating Income/Expenses
Quar te rly Flow
R$ million
2Q09
1Q10
Chg. %
2Q10
Half-Ye arly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
Income f rom Special Operations
12
10
20
71.2
105.4
24
29
21.9
Income f rom specif ic credits
22
22
46
108.2
106.6
44
69
55.9
1,499
(4)
(9)
-
111.7
1,935
(13)
-
3,047
(1,548)
0
(4)
(9)
(99.4)
111.7
3,627
(1,692)
0
(13)
(100.0)
(99.3)
1,533
28
57
(96.3)
105.4
2,003
85
(95.7)
FX Readjustment
FX Readjustment Income
FX Readjustment Expense
Total
(3) Reallocation from Other Operating Income to Money Market Fundings. It refers to the reversal of
charges with the restatement of savings deposits recorded upon the closing of the semesters. In the
months after the closing of the Balance Sheets, this reallocation is necessary order to correctly state the
NII. This reallocation is only performed in the first and third quarters of the year. In 1Q09 the charges
were R$ 202 million and R$ 191 million in 1Q10.
(4) Reallocation from Other Operating Income to Loan Operations corresponding to the equalization
revenues of charges over loan operations. Since January 2008 these revenues are accounted for under
Other Operating Income, and had to be reallocated to the group of Loan Operations for purposes of
comparability. Equalization revenues amounted to R$ 527 million in 1Q10 and R$ 626 million in 2Q10.
(5) Reallocations were performed in order to cancel the effects from Tax Hedge transations. In the
second quarter of 2010, in view of the appreciation in the Brazilian real against the U.S. dollar, the Tax
Hedge adversely impacted the NII by R$ 14.8 million, an amount that we reallocated to replace the
negative impact on Taxes on Revenues (of R$ 1.6 million) and on Income and Social Contribution Taxes
(of R$ 13.2 million).
Reallocations under Net Financial Margin
(6) The expense with Allowance for Loan Losses includes credits without characteristics of financial
intermediation, therefore this part of the allowance is reallocated to Other Operating Expenses. In 1Q10,
this reallocation was of R$ 67 million and in 2Q10 was R$ 14 million.
Reallocations under Contribution Margin
(7) Considering the model used for Income Statement, tax expenses on revenues are reallocated and
included in the Contribution Margin. In 1Q10, this reallocation was of R$ 837 million and in 2Q10, R$
910 million.
Reallocations under operating income
(8) The expenses with Legal Claims and Labor Lawsuits were segregated on the Income Statement with
Reallocations, into a group called Legal Risk. In order to provide a better analysis of the Administrative
Expenses and greater transparency for this type of risk. Amounts reallocated in 1Q10 and 2Q10 were,
respectively:
- Labor claims: (R$ 212 million) and (R$ 274 million).
- Civil claims: (R$ 238 million) and R$ 35 million.
50 - Banco do Brasil – MD&A 2Q10
(9) As of 1Q09, in compliance with the resolution issued by the Central Bank of Brazil, part of the
premiums paid to customers began to be recorded under "Other Administrative Expenses". Aiming to
maintain the comparability and considering the nature of the amounts disbursed, we reallocated the
entire sum to "Other Operating Expenses", as recorded until December 2008. The amounts reallocated
to 1Q10 and 2Q10 were R$ 503 million and R$ 504 million, respectively.
(10) Regarding the recognition of revenues originating from the review of actuarial assets and liabilities
(PREVI and benefits of sole responsibility of Banco do Brasil, as can be seen in the notes to financial
statements), pursuant to CVM Resolution 371/00. Aiming to keep the comparability and evidence the
recurring income of each period, the gross amount of R$ 159 million (being R$ 195 million of income
regarding PREVI Plano 1, deducted from losses of R$ 36 million regarding the benefits of sole
responsibility) was reallocated from the 2Q10 to 1Q10, as well as the effects on taxes of (R$ 59 million)
and on statutory profit sharing of (R$ 11 million). As the actuarial analysis evaluated the movement of
assets and liabilities during the halfyear, 50% of the gains and losses were reallocated to the previous
quarter. The table below details the impact of the adjusts on each line of the 1Q10 income statement
with reallocations, where can be observed an increase in the recurring income of R$ 88 million. In order
to avoid changes in the net income registered in the corporate law income statement, the line “Actuarial
Assets – Adjustments” was also included after the recurring income, with the amount of (R$ 88 million)
in 1Q10 and R$ 88 million in 2Q10.
Table 27. Previ – adjustments
R$ million
Gain / Loss
Plan 1 - Previ (a)
Benefit plan w ith exclusive responsability of BB (b)
(a) + (b)
195
(36)
159
Profit
Incom e Tax Net Am ount
Sharing
(72)
(14)
108
13
3
(20)
(59)
(11)
88
nd
(11) Since the 2 quarter of 2009, the historical series for the Statement of Income with Reallocations
was restated in a manner that the revenues arising from the surplus of PREVI started to be evidenced in
a separate line of the statement. The amounts were reallocated from “Other Operating Income” to
“PREVI”. This reallocation does not interfere with the PREVI amounts recorded as extraordinary effects.
One-off Items
(12) Sale of part of the stake held by the BB group (Multiple Bank, CIELO and VisaVale) in Visa Inc.,
generating positive extraordinary income of R$ 214 million in 1Q10.
(13) Civil claims of Economic Plans generating extraordinary expenses in the amount of R$ 85 million in
1Q10 and R$ 140 million in 2Q10. On a semi-annual basis, the amounts were of R$ 288 million in 1H09
and R$ 225 million in 1H10.
(14) Assignment of credits written-off to Ativos S.A., generating extraordinary income in the amount of
R$ 271 million in 2Q09.
(15) Extraordinary expense incurred in 2Q09 for Additional Allowance for Loan Losses in the amount of
R$ 676 million. The Additional Allowance for Loan Losses was a result of adjustments to the Bank's
statistical models and also due to external macroeconomic scenario. In the 2Q10, there was a reversal
of $ 332 million of the Additional Allowance for Loan Losses due to the improvement in the risk profile of
the Agribusiness Loan Portfolio.
(16) In the 1Q09, as a result of the process of periodic reevaluations of the equity impacts originating
from the lawsuits in which Banco do Brasil figures as complainant, plaintiff or stakeholder, an expense of
R$ 1,367 million, before taxes, was realized that refers to the supplementation of provision to cover
labor, civil and fiscal claims.
(17) In the 1Q09, also on account of the reevaluation of the expected impacts of lawsuits, income of R$
1,213 million was realized relating to the recognition of tax credits originating from the alteration of the
51 - Banco do Brasil – MD&A 2Q10
rate of Social Contribution on Net Income – CSLL from 9% to 15%. The recognition of this tax credit
results from the reassesment of the prospect of success of the Direct Unconstitutionality Action (ADIN),
number 4101/DF, against the raise of the rate of CSLL of the financial sector.
(18) Disposal of 8.1% of the capital stock of CIELO (former VISANET – Companhia Brasileira de Meios
de Pagamento), an affiliate of BB Banco de Investimento S/A – BB-BI, a wholly-owned subsidiary of
Banco do Brasil, generating extraordinary positive income of R$ 1,415 million in 2Q09 and R$ 209
million in 3Q09 (due to greenshoe exercise, that was only accounted for in 3Q09). Banco do Brasil
remains as one of the main shareholders of this company, and currently holds 23.61% of its shares.
(19) Reversal of allowances for labor lawsuits, generating extraordinary income in the amount of R$ 568
million in 1Q10, since as from the 4Q09 the balance of allowances was calculated so as to cover the
average of the amounts effectively disbursed by BB in judicial lawsuits of the same nature (up to that
date the allowance was determined based on the amount claimed by the claimant). The amount
recorded as extraordinary in 1Q10 resulted from the migration of the base of labor claims recorded in
the controls of Banco Nossa Caixa to the methods and systems of Banco do Brasil.
(20) Extraordinary income, in the amount of R$ 250 million, due to the reversal of allowance for labor,
civil and tax lawsuits arising from Banco do Estado de Santa Catarina (BESC). In 3Q08, BB recorded an
expense of R$ 360 million because it was necessary to increase the allowances to cover the lawsuits of
that bank. Since the corporate merger, BB has been registering these lawsuits in order to the allowance
to be calculated in accordance with the systems and methodologies in force at BB. The registration of
the lawsuits was completed in 2Q10 and the amount calculated for the reserves was lower than that
accounted in 3Q08.
(21) Extraordinary income of R$ 114 million, in the second quarter of 2010, due to the increase in the
Bank's participation in the company Brasilprev. The participation increased from 50% to 75%.
(22) As of 4Q08 the Statement of Income with Reallocations started to segregate the effects of
extraordinary items of the period on the payment of Statutory Profit Sharing (PLR), and to unify the
effects of these items on Taxes (Income and Social Contribution Taxes). The table below shows the
effect of each extraordinary item on Taxes and on PLR.
Table 28. Tax Effects and Statutory Profit Sharing on One-off Items
Quar te rly Flow
R$ million
Sale of Shares in V ISA International
Economic Plans
Credit A ssignment
Contingent Liabilities (BESC)
A dditional Provision f or Loan Losses
Provision f or labor, civil and tax claims
Dispos al of Investments – V isanet Brasil
Reversal of Labor Liabilities
Capital Gain - BB Seguros Participações
Total
52 - Banco do Brasil – MD&A 2Q10
2Q09
1Q10
Chg. %
2Q10
Half-Ye arly Flow
On 2Q09 On 1Q10
1H09
Chg. %
1H10
On 1H09
-
(96)
-
-
-
-
(96.1)
-
86
38
62
(27.5)
62.7
121.7
100.2
(17.6)
(120)
-
-
-
-
(120.1)
-
-
-
-
(111)
-
-
-
(110.8)
-
299
-
(147)
-
-
299.3
(146.9)
-
-
-
-
-
-
521.1
-
-
(627)
-
-
-
-
(626.5)
-
-
-
(256)
-
(50)
-
-
-
(255.6)
(50.5)
-
(362)
(313)
(246)
(31.9)
(21.5)
196
(560)
-
6 - Balance Sheet Analysis
6.1 Breakdown
Banco do Brasil is the largest financial institution in Brazil, with total assets of R$ 755,706 million. The
assets recorded an expansion of 26.2% in 12 months and 4.3% in the quarter. These figures already
consider consolidation of all the interests in financial and non-financial companies, in addition to mergers
(Banco Nossa Caixa, BESC, and BEP), and a 50% interest in the capital of Banco Votorantim (BV).
The earning assets recorded a change of 4.5% in the quarter and 26.5% in 12 months. The figure below
shows that these assets accounted for 81.6% of total assets at the end of June, as compared with
81.0% in March 2010 and 81.4% in June 2009.
Analyzing the mix of liabilities, interest-bearing liabilities increased by 2.8% in the quarter and by 29.3%
in 12 months. Interest-bearing liabilities accounted for 71.2% of total liabilities at the end of June, a
reduction in comparison to the 71.9% of the previous quarter, but an increase as compared with the
threshold observed in the same quarter of the previous year (69.5%).
Earning Assets¹ vs. Interest Bearing Liabilities² (%)
19.6
29.5
31.3
17.4
18.6
19.4
19.6
31.8
80.4 68.7 80.6 70.5
80.4 68.2
17.3
28.1
30.5
81.4
69.5
82.6
82.7
71.9
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
18.4
19.0
28.0
28.1
81.0
72.0
Dec/09
Earning Assets
Other Assets
Interest Bearing Liabilities
Other Liabilities
28.8
81.6
71.9
Mar/10
71.2
Jun/10
Figure 21. Earning Assets vs. Interest Bearing Liabilities
1 Cash and cash equivalents in foreign currency, marketable securities, financial investments, loan operations Leasing, Remunerated Compulsory
Deposits and Other Earning Assets.
2 Savings Accounts, Interbank Deposits, Time Deposits, Money Market Borrowings, Foreign Borrowings, Onlendings, Financial and Development
Funds, Subordinated Debts, Hybrid Capital and Debt Instruments, and Foreign Securities Issued Abroad.
53 - Banco do Brasil – MD&A 2Q10
6.2 Analysis of Assets
In the analysis of the mix of assets, we highlight the increase in the share of the category "Loan and
Leasing operations", which reached 38.8% in June 2010, the highest threshold of the historical series
since September 2008. In March 2010 and June 2009, these transactions accounted for 37.5% and
36.4% of total assets, respectively.
Liquidity Assets excluding Securities, continued to present a reduction in its share of the Bank's Assets,
reaching 18.8% in June 2010, as compared with 22.1% in March 2010 and 23.2% in June 2009. On the
other hand, during the quarter, there was a growth in the percentage allocated to Marketable Securities
transactions and Other Assets.
The fluctuation in the line "Other Assets" basically arises from the balance of compulsory deposits
performance at the Central Bank of Brazil (BACEN). These deposits totaled R$ 59,374 million in June,
with a growth of 25.7% in the quarter and of 142.3% in twelve months.
22.1
3.3
38.8
19.1
18.6
17.0
16.9
3.2
3.4
3.5
3.2
3.1
37.2
35.2
36.4
36.6
37.6
16.7
18.7
18.3
18.9
24.0
23.5
23.2
24.2
19.0
17.5
Sep/08
Dec/08
Mar/09
Jun/09
Liquidity Assets except Securities
Loans and Leasing
Other Assets
24.9
Sep/09
Dec/09
Securities
Tax Credits
21.9
3.0
3.0
37.5
38.8
16.5
18.8
17.0
20.9
17.5
22.1
18.8
Mar/10
Jun/10
Figure 22. Breakdown of Assets
Table 29. Breakdown of Assets
R$ million
Total As s e ts
Se p/08
De c/08
M ar /09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
458,237
521,273
591,925
598,839
685,684
708,549
724,881
Liquidity A ssets except Securities
77,938
124,953
139,312
138,650
165,881
176,241
159,958
142,078
Securities
85,954
86,909
110,594
109,564
129,818
124,337
119,364
132,249
Loans and Leasing
177,866
193,849
208,622
218,159
250,853
266,484
271,910
293,470
Tax Credits
14,994
101,485
16,499
99,062
20,413
112,984
21,053
111,413
22,261
116,872
21,910
119,578
22,000
151,648
22,431
165,477
Other A ssets
54 - Banco do Brasil – MD&A 2Q10
755,706
6.3 Securities Portfolio
The securities portfolio showed an increase of 10.8% in relation to 1Q10 and of 20.7% in relation to the
final balance of June 2009.
Table 30. Securities Portfolio by Category
Balance
R$ million
Se p/08
Se curitie s
De c/08
Shar e %
M ar /09
Jun/09
Se p/09
De c/09
M ar/10
Jun/10
Jun/09
Jun/10
85,954
86,909
110,594
109,564
129,818
124,337
119,364
132,249
100.0
100.0
A vailable f or Trading
26,475
26,136
32,475
31,661
44,590
38,274
38,183
44,830
28.9
33.9
A vailable f or Sale
37,777
38,374
45,269
46,645
52,750
62,161
62,950
67,153
42.6
50.8
Held to Maturity
20,443
1,258
20,123
2,276
31,433
1,417
30,477
781
30,773
1,706
22,439
1,463
17,070
1,162
19,049
1,217
27.8
0.7
14.4
0.9
Financial Derivatives
As to the composition of the securities portfolio by maturity in the quarter showed a higher concentration
of securities with terms over 1 year. Securities with terms between 1 to 5 years accounted for 60.9% of
total portfolio, while securities with terms above 10 years represented 6.8%.
Table 31. Securities Portfolio by Maturities – Market Value
Up to 1 ye ar
R$ million
Balance
1 to 5 ye ar s
Shar e %
Balance
5 to 10 ye ars
Shar e %
Balance
Ove r 10 ye ar s
Share %
Balance
Share %
Total
Sep/08
27,206
32.1
40,609
47.9
11,594
13.7
5,286
6.2
Dec /08
27,232
32.2
39,465
46.6
12,543
14.8
5,373
6.3
84,612
Mar/09
35,555
32.5
55,949
51.1
12,295
11.2
5,631
5.1
109,430
Jun/09
31,277
28.7
64,016
58.7
7,301
6.7
6,445
5.9
109,040
Sep/09
35,354
27.6
72,607
56.6
14,683
11.4
5,653
4.4
128,298
Dec /09
29,640
24.2
70,531
57.5
15,720
12.8
6,823
5.6
122,715
Mar/10
28,025
31,311
23.7
23.9
68,319
79,737
57.9
60.9
14,581
10,925
12.4
8.3
7,132
8,929
6.0
6.8
118,057
130,902
Jun/10
55 - Banco do Brasil – MD&A 2Q10
84,695
6.4 Tax Credits
In 1998, BB filed a lawsuit claiming the full carry forward of accrued income tax losses and the negative
bases of social contribution tax. Since then, Banco do Brasil has offset these tax losses in full against
income tax and social contribution taxable income and has made judicial deposits of the taxes otherwise
due (on 70% of the amount offset).
In May 2007, the tax credits that had been written off since the beginning of the lawsuit were reactivated
in the sum amount of R$ 4,913.2 million, and allocated to a contra account for the rebuilding of provision
relating to the portion of 70% of Income Tax and Social Contribution, for which judicial deposits were
formed.
The Tax Credit balance, including BNC's and BV's consolidated figures, reached R$ 22,431 million in
June 2010, 2.0% higher than the balance in March 2010. In the comparison of 12-month periods the
stock of tax credits grew 6.5%.
Tax credits originating from temporary differences represent 80.6% of the stock. The time differences
tax credits result from the fact that the tax legislation does not allow the inclusion of certain expenses in
the calculation base of taxes at the time they occur (accrual basis accounting), but rather at the time
they are financially settled (cash basis accounting).
Table 32. Breakdown of Tax Credits
R$ million
M ar /09
Jun/09
Time Dif f erenc es
15,428
16,433
Soc ial c ontribution on net inc ome (18% acc ording to 3,579
MP 2158/2001)
3,363
Tax Los s / Negativ e Base
Ex c es s Deprec iation
Total Tax Cre dit
Inc ome Tax / Pre-tax Inc ome - %
Se p/09
De c/09
M ar/10
Jun/10
17,644
17,244
17,514
18,076
3,247
3,188
3,097
2,967
1,217
189
1,009
248
937
433
949
529
1,014
375
990
399
20,413
21,053
22,261
21,910
22,000
22,431
31.1
30.6
29.2
31.9
33.9
33.9
The table above presents a breakdown of the stock of tax credits by type. The ratio of income tax to pretax earnings ended the second quarter at 33.9%, in line with Mar/2010, and higher than the 30.6%
recorded at the end of Jun/09.
When commenting on tax aspects, it is important to emphasize that Tax Hedge operations began to be
contracted as of 4Q08. Banco do Brasil contracted hedge operations in an amount that exceeded the
amount of investments maintained abroad (over hedge) with the objective of canceling the effects of
exchange variation on net income, given the fiscal impacts of these operations. Further details on tax
hedging and the reasons that led Banco do Brasil to contract them can be found in Chapter 5.3.1
(Details on Reallocations).
During 1H10, Banco do Brasil realized tax credits amounting to R$ 3,273 million, corresponding to
90.9% of the projected use of tax credits in 2010 that was reported in the technical study dated
December 31, 2009 (R$ 3,599 million).
56 - Banco do Brasil – MD&A 2Q10
6.5 Loan Portfolio
Providing continuity to integration process of loan portfolios of Banco do Brasil and Banco Nossa Caixa,
the Business portfolio was incorporated in the BB systems in this quarter. However, the remaining
balance of the Individual portfolio is still presented in a segregated line in the tables of this chapter.
The loan portfolio of the National Banking Industry ended Jun/10 with a balance of R$ 1,529.0 billion,
considering free and specific funds, up 19.7% from June 2009 and 5.3% in relation to March 2010. The
Loan/GDP ratio estimated by the Central Bank of Brazil stood at 45.7% in this quarter, in line with the
figure observed in the previous quarter (45.2%) and higher than the one recorded in Jun/09 (41.8%).
Loans to companies increased by 20.3% in 12 months and by 6.0% in the quarterly comparison, while
for individuals it grew by 19.1% in 12 months and 4.5% from March 2010 with the respective balances of
R$ 836.4 billion and R$ 692.6 billion.
BB's domestic loan portfolio expanded by 6.6% in the quarter and by 28.2% in the 12 months. There is
still no impact in the portfolio results of the partnership with BV in June 2009.
In the latter half of 2008, the process of acquiring the loan portfolios of other financial institutions,
particularly payroll and auto loans, began to intensify at BB. The table below shows the balances of the
portfolios acquired and the interbank deposits guaranteed by the loan portfolios of other institutions,
which are recorded under Interbank Investments.
Table 33. Acquired Portfolios and Interbank Deposits with Credit Guarantee
R$ million
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Payroll loans
3,110
2,935
2,741
2,655
3,003
2,616
3,552
Vehicle financing
Interbank w ith Loan Guarantee
744
5,970
737
9,644
1,580
5,133
1,850
3,968
2,668
4,056
2,476
4,062
3,956
3,148
Total
9,825
13,317
9,454
8,473
9,728
9,155
10,656
Loans to Individuals reached R$ 101,122 million in June 2010, an increase of 6.3% in the quarter and of
47.7% in the 12-month period, higher than that recorded in the Banking Industry. The results include the
acquisitions (BNC) and partnerships (BV).
Meanwhile, loans to companies closed the first half with a balance of R$ 135,575 billion, up 31.2% from
the same period of 2009 and of 5.9% in relation to March 2010, also considering the balances of
acquisitions and partnerships. The growth recorded in the Companies Portfolio was also higher than that
recorded in the Banking Industry.
The Agribusiness Loan Portfolio decreased by 8.4% from the previous quarter and by 4.0% in 12
months, to end 2Q10 with a balance of R$ 70,321 million.
BB's foreign portfolio ended June 2010 with a balance of R$19,504 million, a growth of 49.3% in the 12
months and 11.4% in the quarterly comparison. Note that in these periods there was foreign exchange
devaluation (Ptax Dollar Sell) of 7.7% and appreciation of 1.2%, respectively.
57 - Banco do Brasil – MD&A 2Q10
Table 34. Loan Portfolio
Balance
R$ million
Br azil
Se p/08
De c/08
M ar/09
Jun/09
Chg. %
Se p/09
De c/09
M ar /10
Jun/10
On Jun/09 On M ar /10
189,301
209,693
227,201
239,418
270,748
283,560
288,044
307,018
28.2
6.6
. Individuals
43,435
48,811
61,138
68,467
85,717
91,791
95,092
101,122
47.7
6.3
. Businesses
85,343
97,192
101,776
103,351
116,994
125,336
128,080
135,575
31.2
5.9
32,027
34,900
37,403
39,493
41,159
44,920
45,215
47,382
20.0
4.8
- MSE
- Other
. A gribusiness
53,315
62,292
64,373
63,858
75,834
80,416
82,865
88,193
38.1
6.4
60,524
63,690
64,287
67,600
68,038
66,434
64,872
70,321
4.0
8.4
- Individual
42,630
45,202
46,252
47,381
47,574
47,265
47,663
47,839
1.0
0.4
- Companies
17,894
18,487
18,035
20,219
20,464
19,169
17,210
22,482
11.2
30.6
For e ign
Total
12,900
15,115
14,726
13,068
14,769
17,268
17,507
19,504
49.3
11.4
202,201
224,808
241,926
252,485
285,517
300,829
305,551
326,522
29.3
6.9
58 - Banco do Brasil – MD&A 2Q10
6.5.1 Individual Customer Loan Portfolio
The individuals’ loan portfolio reached R$ 101,122 billion, expansion of 47.7% in the 12 months and of
6.3% in relation to March 2010. During this quarter, the Individual loan portfolio was better evidenced. A
significant portion of the consumer finance loan balance was relocated to consumer loan backed by
direct position. Therefore, table 33 has been restated with the new segmentation. Series was redone
since Mar/09.
Payroll loans continued to be the most relevant product, with a balance of R$ 40,476 million in 2Q10,
40.0% of BB’s total individual loan portfolio. This amount represents 32.8% of all loans granted in
Brazil’s Banking Industry (R$ 123,438 million).
In 2Q10, there were 1,393.1 thousand payroll loans operations, with an average term of 44 months and
an average monthly interest rate of 2.18%. In the same period of 2009, 762.9 thousand payroll loans
were granted with an average term of 40 months and an average interest rate of 2.32%. Note that in
2Q10, BB acquired approximately R$ 1 billion in payroll loans, fact that explains the growth observed in
contracting of operations of 82.6% in twelve months, and of 86.2% in relation to the previous quarter.
Loans granted to civil servants still represent the highest share of BB's payroll loan portfolio, accounting
for 84.8% of all loans. The remaining portion of loans was granted retirees and pensioners (8.1%) in the
INSS social security system and to employees in the private sector (7.2%).
In the vehicle segment, the balance of loan operations reached R$ 10,050 million (not including the BV
balance), an increase of 22.9% in 12 months and 13.5% over March 2010. During the quarter, there was
an increase of R$ 1,480 million in the vehicle financing acquisition balance totalizing R$ 3,956 million, a
balance 59.8% higher than the one recorded in March 2010. Considering the BV balance, the total
amount reached R$ 22,774 million, a growth of 8.3% from the prior quarter. BB’s share of vehicle
acquisition operations in the banking industry (R$ 167,299 million) reached 13.6%.
In 2Q10, BB's vehicle financing operations presented an average term of 46.8 months, average value
per contract of R$ 22,082 and average monthly rate of 1.55%. Meanwhile, leasing transactions in the
same period registered an average term of around 49.8 months and an average value per agreement of
R$ 28,800 and a 1.6% average rate. Around 12.4% of BB's vehicle portfolio balance consists of leasing
operations. Note that this information does not consider the balances of BV.
Although incipient and in view of the growth promoted by the strategy adopted by BB, the balance of
Real Estate Financing operations amounted to R$ 1,197 million in 2Q10, up from R$ 350 million in the
prior-year period. The average term of these operations is 240 months, with an average ticket of R$ 135
thousand. Combined with the amount of R$ 908 million accounted at BNC, these transactions reached
R$ 2,105 million.
In view of the real estate financing using funds from the Government Severance Indemnity Fund for
Employees (FGTS) under the rules of the government housing program "My Home, My Life", the Bank
expects to grant financing to 44.5 thousand families to acquire low-income housing units. Note that BB
has adopted an innovative sales strategy in this segment that uses alternative sales channels, real
estate correspondents and companies specializing in the origination of real estate business to
individuals.
Also under the scope of the "My Home, My Life" program, but using funds allocated to finance
production in the real estate portfolio, Banco do Brasil prospected 40 operations with 3 operations
recorded so far.
The table below presents the main products in the loan portfolio aimed at the individual clients of BB,
BNC and BV. We point out that for Votorantim the amount presented refers to 50% of that portfolio and
part of BNC's portfolio has already been incorporated into BB’s products lines.
59 - Banco do Brasil – MD&A 2Q10
Table 35. Individuals’ Loan Portfolio
Balance
R$ million
Direc t Cons umer Credit (CDC)
M ar /09
Jun/09
Se p/09
Chg. %
De c/09
M ar /10
Jun/10 On Jun/09On M ar/10
28,138
31,809
34,609
37,153
47,468
51,196
60.9
7.9
18,411
20,000
21,612
23,516
31,164
33,921
69.6
8.8
Consumer Financ e¹
3,924
4,018
4,133
4,460
5,127
5,628
40.1
9.8
Consumer Loan Bac ked by Direct Deposits¹
6,744
7,791
8,865
9,177
11,177
11,647
49.5
4.2
167
350
471
676
1,029
1,197
242.3
16.3
V ehic les Loan¹²
7,005
8,180
8,638
9,425
8,857
10,050
22.9
13.5
Credit Card
7,493
7,830
8,007
9,336
8,889
9,327
19.1
4.9
Ov erdraf t A c counts
2,822
2,906
2,870
2,434
2,735
3,199
10.1
17.0
20.3
Pay roll Loan
Mortgage
Mic rocredits
548
519
549
674
870
1,046
101.5
Other
4,031
3,650
3,604
3,887
3,706
4,436
21.6
19.7
BNC³
9,991
13,224
14,524
15,080
6,926
5,569
(57.9)
(19.6)
(15.2)
Pay roll Loan
6,433
9,534
10,672
11,324
5,093
4,318
(54.7)
Consumer Financ e
1,835
1,845
1,933
1,905
49
-
-
-
Mortgage
771
789
819
854
884
908
15.1
2.7
Others
953
1,056
1,100
997
900
344
(67.5)
(61.8)
-
-
12,446
13,126
14,611
15,101
-
3.4
Pay roll Loan
-
-
1,689
1,674
2,293
2,237
-
(2.4)
V ehic les Loan
-
-
8,947
9,339
10,057
10,539
-
4.8
Leasing
-
-
1,671
139
1,974
139
2,123
138
2,184
140
-
2.9
1.4
61,138
68,467
85,717
91,791
95,092
101,122
47.7
6.3
BV *
Others
Total
(1) As of March 2010, owing to the partial integration of the BNC portfolio and the BB’ systems, this line contains the partial balance of this bank.
(2) The Jun/10 figures include the balances of Finame Pro-Caminhoneiro PF (R$ 167.1 million) and leasing operations (R$ 1,263.9 million)
(3) In Mar/10 due to the partial integration of the BNC portfolio and the BB’ systems, lines in this table already include partial balances.
(4) Amount equivalent to 50% of the BV's loan portfolio
60 - Banco do Brasil – MD&A 2Q10
6.5.2 Business Loan Portfolio
In the business segment, BB ended June 2010 with a balance of R$ 135,575 million, up 31.2%% in the
12 months and 5.9% in relation to the prior quarter. This figure represents 41.5% of BB's total portfolio.
Nossa Caixa portfolio was totally integrated to BB systems during this quarter
During this quarter an improvement was made in the evidencing of Business loan portfolio, so that, part
of the working capital balance was reclassified to receivable lines. The table below shows a series
recomposed since March 2009.
Regarding BV, the product with the highest share in the portfolio was Working Capital (33.0% of the
total) followed by the BNDES and FINAME investment lines (30.7%). Further information can be
obtained from the chapter 10 of this report.
Table 36. Business Loan Portfolio
Balance
R$ million
M ar/09
Jun/09
Se p/09
Chg. %
De c/09
M ar /10
Jun/10
On Jun/09 On M ar /10
Working Capital¹
45,699
47,614
51,847
56,947
60,772
67,499
41.8
Investment
19,415
19,934
20,671
22,704
23,834
26,146
31.2
9.7
Receivables¹
12,213
12,342
12,191
14,586
13,775
14,403
16.7
4.6
Pré-A pproved Credit
11.1
2,565
2,568
2,713
2,877
2,647
3,548
38.2
34.0
11,807
10,711
8,945
7,923
7,971
7,097
(33.7)
(11.0)
BNDES Exim
4,105
3,988
4,692
4,464
3,934
3,521
(11.7)
(10.5)
Credit Cards
902
1,196
1,639
2,024
2,187
2,603
117.6
19.0
Overdraf t A cc ount
155
177
161
141
154
253
42.7
64.7
Other
1,679
1,819
2,098
1,672
1,936
2,256
24.0
16.6
BNC²
3,038
3,001
3,984
3,904
2,842
-
-
-
-
-
8,052
8,096
8,028
8,249
-
2.8
Working Capital
-
-
2,383
2,654
2,501
2,722
-
8.8
BNDES/FINA ME
-
-
2,258
2,459
2,415
2,532
-
4.9
Ex port Letter of Credit
-
-
1,427
1,350
1,426
1,430
-
0.3
Joint Lending
-
-
681
1,304
618
1,016
585
1,100
509
1,055
-
(13.1)
(4.1)
101,776
103,351
116,994
125,336
128,080
135,575
31.2
5.9
A CC/A CE
BV *
Other
Total
(1) Series remade since Mar/09 for methodology improval. Part of the Working Capital balance moved to receivables.
(2) Since Mar/10, due to BNC portfolio integration to BB’s systems, part of the balances are already added to the other lines of this table.
* Amount equivalent to 50% of BV's loan portfolio
The working capital and investments lines continue presenting a good performance in this quarter,
leveraged by the domestic economy upturn. These lines grew 11.1% and 9.7%, respectively in the
quarterly comparison and 41.8% and 31.2% in 12 months. Together, these two credit lines represented
69.1% of the total business portfolio.
BB remained as the leading bank in overall onlending of the BNDES/Finame system, with
disbursements of R$ 8,489.1 million and 107,193 thousand operations in June 2010.
Private Securities – Banco do Brasil, operates in the capital markets, as an alternative to traditional
credit lines, thorough debentures issues, promissory notes and letter of credit. The balances of these
Certificates are presented in the following table:
61 - Banco do Brasil – MD&A 2Q10
Table 37. Private Securities – Business
Chg. %
R$ million
Jun/09
Corpor ate Se curitie s *
Banco do Brasil
BV
Se p/09
De c/09
M ar /10
Jun/10
On Jun/09
On M ar/10
2,436
4,936
8,688
9,695
11,274
362.9
16.3
2,436
-
4,936
-
5,782
2,906
6,620
3,075
8,568
2,706
251.7
-
29.4
(12.0)
* Securities issued in the country registered in compliance with Central Bank Circular 3068 as “available for sale”.
Foreign Trade Loans – The Pre-Shipment/Post-Shipment Export Financing (ACC/ACE) ended the
quarter at R$ 7,097 million, lower than the balance recorded in the previous quarter (R$ 7,971 million)
and that recorded in June 2009 (R$ 10,711 million). This credit facility is strongly influenced by the
behavior of the foreign exchange rate (US dollar) that, in the quarter, appreciated 1.2% in comparison
with mar/10, although a devaluation of 7.7% in twelve months.
The performance observed basically results from the strong base of comparison and credit migration
from ACC/ACE to other lines, especially prepayment operations. The contracted volume decreased
11.4% compared to the immediately prior quarter and 8.2% in 12 months.
Despite this performance, Banco do Brasil maintained its leadership of the export and import exchange
market in the 2Q10, with volumes of US$ 14.2 and US$ 10.4 billion, respectively. Market share in such
lines reached 31.9% for imports and 24,9% in export lines.
Table 38. ACC/ACE Average Volume per Contract
Chg. %
ACC/ACE
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
On 2Q09 On 1Q10
Contracted V olume (US$ million)
2,325
3,182
2,653
2,722
3,296
2,920
(8.2)
(11.4)
Quantity of Contracts
3,768
617
4,021
791
4,332
612
4,473
609
4,263
773
4,682
624
16.4
(21.2)
9.8
(19.3)
A verage V olume per Contract (US$ thousand)
Loans to SMEs - In the delivery of services to micro and small companies, Banco do Brasil continued to
act as the principal partner of the segment. At the end of the second quarter of 2010, BB had 2.2 million
checking accounts, with 1.97 million micro and small business clients. Around 587 thousand received
service rendered by specialized relationship managers.
BB has also been consolidating its share in the group credit segment, delivering products and services
tailored to the needs of this market. The products include the Compe/SPB Integration Service, whereby
credit cooperatives and its cooperative members have access to the System for the Clearing of Checks
and Other Instruments and to the Payment Settlement and Transfer System (SPB). This service allowed
banking products to be made available to around 369 thousand cooperative members, associated with
331 credit cooperatives, contributing with innovation in the supply of solutions in products and sale
formats, essential functions for the growth of BB's competitiveness and maintenance of partnerships.
In June 2010, BB supported 187 Local Productive Arrangements (APL), delivering services to 18.5
thousand ventures. A sum of R$ 1.7 billion was made available that contributed toward the sustainable
growth of the locations where the APLs are included, with R$ 1.05 billion in loans for working capital and
R$ 292.6 million to finance the investments, R$ 146.5 million in funds for foreign trade, with R$ 177
million earmarked for operations geared toward agribusiness.
The balance of transactions in favor of SMEs in June 2010 was of R$ 47.4 billion, a 20.0% increase as
compared to the same period in 2009.
Considering working capital and investment loans, R$ 11 billion was allocated to manufacturing
industries (23.4%), R$ 22.9 billion to trade (48.9%) and R$ 13 billion to service provision (27.7%).
62 - Banco do Brasil – MD&A 2Q10
Table 39. SME Credit Products
Balance
R$ million
Working Capital
M ar /09
Jun/09
Se p/09
Chg. %
De c/09
M ar /10
Jun/10
On Jun/09
On M ar /10
25,159
26,575
28,151
31,250
31,001
34,920
31.4
12.6
Investment
9,652
10,188
10,840
11,466
12,254
11,967
17.5
(2.3)
Foreign Trade*
BNC
1,143
1,450
1,310
1,420
667
1,501
596
1,608
481
1,479
495
-
(62.2)
-
2.9
-
Total
37,403
39,493
41,159
44,920
45,215
47,382
20.0
4.8
* Since 3Q09 the classification methodology was revaluated in this credit line.
In the end of June 2010, R$ 34,920 million were set aside to working capital, an increase of 31.4% in
relation to the same period in 2009. Among the working capital lines, the following should be highlighted:
a) BB Giro Rápido aims to satisfy the need for working capital of the segment of micro and small
businesses, without requiring tangible collateral. In 2Q10, this line of credit reached a balance of R$ 6.2
billion, representing 17.9% of the working capital block;
b) the "BB Giro Empresa Flex", whose purpose is supplying working capital and financing for acquisition
of goods and services. In this credit line, the customer can determine the form of loan repayment in
accordance with the company's cash flow. This credit line has reached the balance of R$9.1 billion,
which represents growth of 28.3% in relation to 2Q09.
Financing investments to micro and small businesses reached R$ 11.9 billion in the 2Q10, an increase
of 17.5% in relation to the same period of 2009. These also deserve highlighting:
a) at the end of June, the BNDES card, a product in which BB is a leader (in terms of amounts disbursed,
number of cards and transactions), reached R$ 3.6 billion of disbursements accumulated since the
beginning of its commercialization, representing an increase of R$ 2.3 billion in the last 12 months, with
67% of cards issued in the market.
b) the Proger Urbano Empresarial program, the key credit facility for investments by SMEs, which
showed a record balance of R$ 4.9 billion;
c) FINAME operations with micro and small businesses reached a balance of R$ 2.09 billion in June
2010.
The Operation Guarantor Fund (FGO) is a system which supplements, by up to 80%, the guarantees
required from legal entities for loans and financing, and expands credit supply to companies, particularly
micro and small-sized companies, with yet more competitive rates. In the end of the first half of this year,
212 thousand operations amounting to R$ 5.1 billion were with the FGO. The operations backed by this
Fund represent approximately 36.4% of the expenses observed in the lines that permit the link with this
collateral.
63 - Banco do Brasil – MD&A 2Q10
6.5.3 Agribusiness Loan Portfolio
Agribusiness is one of the main sectors of the Brazilian economy, of fundamental importance to the
growth of the Country. In its role as an agent of public policies, Banco do Brasil represents a link
between the government and the rural producer, acting as the largest financier of Brazilian agribusiness
in all its segments and in all stages of the productive chain, from the small farmer to the large
agroindustrial companies.
The figure below shows both the importance of the share of agribusiness in the Brazilian GDP and the
share of jobs generated by agribusiness in the Brazilian job market.
73.6%
26.4%
67.0%
28.9%
71.1%
% GDP - Other Activities
Cattle
%GDP - Agribusiness
Agriculture
Other Jobs
33.0%
Agriculture Jobs
Source: MAPA Strategic Plan (2008 data)
Figure 23. Agribusiness Participation in the GDP and in the Labor Market
Agribusiness surplus closed 1H10 with a balance of US$ 28,892 million, 7.2% higher than the one
shown in the same period of 2009. On the other hand, the Brazilian trade balance showed an opposed
performance in relation to agribusiness, having its surplus balance decreased by 43.6% in comparison
to 1H09, with a balance of US$ 7,899 million in 1H10. For 2010, the outlook for Brazilian agribusiness is
better than in 2009, due to the following assumptions: lower prices for inputs; availability of funding for
the coming harvest; a recovery in the price of grains, and; an improved market for meat (chicken, pork,
and beef).
64 - Banco do Brasil – MD&A 2Q10
The illustration below shows the increase of the Brazilian Trade Balance.
US$ billion
60.0
54.9
49.7
44.8
42.7
46.1
40.0
38.4
28.9
24.7
24.6
7.9
2005
2006
2007
2008
Agribusiness
2009
1H10
Brazil
Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento.
Figure 24. Trade Balance (FOB)
The tables below reflect the flow of exports broken down by key products and Brazil's share in
international agribusiness.
Table 40. Exports
US$ million
2006
2007
2008
2009
1H10
Soybeans and Related Products
9,308
11,381
17,980
17,240
Meat
8,641
11,295
14,545
11,787
6,467
Leather, Hides and Shoes
3,471
3,554
3,140
2,041
1,364
Sugar
7,772
6,578
7,873
9,716
5,201
Forest Products
7,881
8,819
9,326
7,223
4,532
Cof f ee, Mate and Spices
3,535
4,093
4,971
4,470
2,350
Fruit Juice
1,570
2,374
2,152
1,752
799
Tobacco
1,752
5,495
2,262
8,059
2,752
9,066
3,046
7,480
1,170
3,533
49,424
58,416
71,806
64,756
34,973
Other Products
Total
9,557
Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento.
Table 41. Brazil’s Participation in World Agribusiness
Pr oduction
Export
% World Tr ade
Cof f ee
1º
1º
35.0
Orange Juice
1º
1º
86.2
Cattle
2º
1º
25.1
Sugar Cane
1º
1º
53.0
Soy beans
2º
2º
33.0
Poultry
3º
1º
40.9
Corn
3º
3º
9.4
Cotton
5º
4º
4.0
Source: USDA – PSD online
65 - Banco do Brasil – MD&A 2Q10
The sector’s performance in the last few years is due to the permanent quest for new technologies and
for valuing the services provided by the professionals from this area, always aiming at improving
profitability and continuity in the enterprises. In the following chart, the increased productivity per planted
area, as a result of gains in productivity, can be visualized.
180
350
300
140
250
120
100
200
80
150
60
Yield (ton / ha)
Production / Area (million)
160
100
40
50
20
0
0
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10
Production (million ton.)
Area (million ha)
Yield (ton / ha)
Figure 25. Production vs. Planted Area
Agribusiness at BB
In relation to the distribution of agribusiness operations by region of the country, continuity was verified
in the distribution among Brazilian regions, with the South and Southeast regions appearing as most
relevant, while the North and Northeast continue being the least relevant regions.
Table 42. Agribusiness Loan Portfolio by Region
Re gion
North
Northeast
Share - %
2.6
5.9
Midw est
20.0
Southeast
38.7
32.7
South
Rural credit finances the costs of producing and marketing of agricultural products, stimulates rural
investments, including warehousing, processing and the industrial transformation of agricultural products.
Furthermore, it encourages the introduction of rational methods in the productive system.
Agricultural and cattle breeding activity follows the agricultural calendar, known as the harvest-year,
which begins in July of each year and ends in June of the following year. Hence, the current 2010/2011
harvest began in jul/2010 and will end in jun/11.
In the first quarter of the crop year, funds will required for planting (funding) the summer crop. Also
during this period there is a concentration of payments of the costing loans for the summer harvest in
the preceding harvest-year.
From October to December, the demand for costing funds continues, however, at a lower volume than in
the first quarter of the crop.
During the harvest's third quarter (January to March) demand begins for the winter harvest's costing
loans, and for the summer harvest in the northern and northeastern regions.
66 - Banco do Brasil – MD&A 2Q10
And demand grows during the harvest-year's last quarter for working capital to fund sales, as this is a
harvesting period.
The rural portfolio of Brazilian Banking Industry attained R$ 116,140 million in Jun/10, an increase of
8.9% in twelve months and of 0.8% in relation to Mar/10. At BB, the balance of the agribusiness portfolio
attained R$ 70,321 million, increase of 8.4% over Mar/10 and 4% in twelve months. The rural portfolio
represented 21.5% of BB's total portfolio as opposed to 26.8% in Jun/2009.
As to the quarterly comparison, commercialization lines showed a stronger growth (36.8%), own
seasonality of agribusiness operations explaining such performance.
The table below shows a breakdown of BB's agribusiness portfolio, divided into funding for costing,
investments, and sales.
Table 43. Agribusiness Loan Portfolio by Purpose
Balance
R$ million
M ar/09
Jun/09
Se p/09
Chg. %
De c/09
M ar /10
Jun/10
On Jun/09
On M ar /10
Costs
24,389
24,667
24,484
27,478
26,769
27,057
9.7
1.1
Investment
20,587
21,497
22,098
21,965
22,768
23,945
11.4
5.2
Marketing
Other*
16,629
2,682
18,738
2,699
18,802
2,655
14,403
2,589
12,704
2,632
17,376
1,943
(7.3)
(28.0)
36.8
(26.2)
Total
64,287
67,600
68,038
66,434
64,872
70,321
4.0
8.4
* Since Mar/09 BNC portfolio was included.
Proger Rural is a product that offers fixed loans for agricultural and cattle breeding funding, besides
financial support for fixed and semi-fixed investments. Another important credit line is the National
Family Agriculture Empowerment Program – Pronaf aimed at the financing of agricultural activity funding.
These two products added up to R$ 19,998 million in June 2010, growing 20.5% in relation to the same
period of the previous year and of 5.9% in relation to the previous quarter.
FCO Rural offers a financial supplement for working capital and costs for the rural producer of the
Midwest region of Brazil. The operations of this product fell 4.9% in 12 months, and practically stable
(0.1%) compared to Mar/10, totaling a balance of R$ 5,498 million in June/10.
The BNDES/Finame Rural products have the objective of financing investments in the modernization of
machines and equipment intended for rural production. Transactions with these products totaled R$
7,846 million, with positive variations of 78.4% in 12 months and 17.5% in relation to Mar/10. BNDES
Procer line financing working capital for agribusiness was responsible for such performance.
Financial support to agribusiness involved in selling and processing agricultural and livestock goods are
emphasized in Sales and Processing of Agricultural Goods, that ended Jun/10 with a balance of R$
15,684 million. In the 4Q09, part of the balance was reclassified to the BNDES line, which also changed
the line of BNDES/Finame Rural operations.
Balances of the remaining products are consolidated into the line Others that, during the period Mar/09Mar/10, includes the amount of BNC portfolio, and as of June/10 balances from BNC already compose
the segmentation shown in the following table.
67 - Banco do Brasil – MD&A 2Q10
Table 44. Agribusiness Loan Portfolio by Product
Balance
R$ million
M ar /09
Jun/09
Se p/09
Chg. %
De c/09
M ar /10
Jun/10
On Jun/09 On M ar /10
A gricultural and Livestock Costs
17,898
18,139
17,670
17,737
17,391
16,637
(8.3)
(4.3)
Loans to Companies
14,112
16,245
16,334
12,333
10,855
15,684
(3.5)
44.5
Pronaf / Proger Rural
15,545
16,597
17,645
18,279
18,880
19,998
20.5
5.9
FCO Rural
5,810
5,784
5,617
5,390
5,490
5,498
(4.9)
0.1
BNDES / Finame Rural¹
Other²
4,441
6,481
4,398
6,438
4,378
6,394
6,706
5,989
6,676
5,580
7,846
4,657
78.4
(27.7)
17.5
(16.5)
Total
64,287
67,600
68,038
66,434
64,872
70,321
4.0
8.4
(1) Includes amounts from the BB Investimento Agropecuário (Agricultural and Livestock Investment) line
(2) BNC portfolio was included as of Mar/09.
The following table shows the balance of the loan transactions intended for agribusiness by item
financed:
Table 45. Agribusiness Loan Portfolio by Financed Item
R$ million
Ite m Finance d
Chg. %
Jun/09
Shar e %
M ar /10
Share %
Jun/10
Shar e %
On Jun/09 On M ar /10
Livestock
9,708
14.4
10,932
16.9
11,790
16.8
21.4
7.9
Soybeans
4,906
7.3
5,863
9.0
4,835
6.9
(1.5)
(17.5)
Corn
3,434
5.1
2,871
4.4
2,676
3.8
(22.1)
(6.8)
Cof f ee
2,247
3.3
2,304
3.6
2,379
3.4
5.9
3.3
Sugar Cane
3,602
5.3
2,187
3.4
2,258
3.2
(37.3)
3.2
Machinery and Equipment
1,368
2.0
1,652
2.5
1,813
2.6
32.6
9.7
Poultry
1,564
2.3
1,523
2.3
1,523
2.2
(2.6)
-
Rice
1,636
2.4
1,455
2.2
1,717
2.4
4.9
18.0
Pork
630
0.9
735
1.1
716
1.0
13.7
(2.6)
Cotton
677
1.0
672
1.0
688
1.0
1.6
2.4
Manioc
531
0.8
521
0.8
525
0.7
(1.1)
0.9
Other*
270
37,026
0.4
54.8
248
33,910
0.4
52.3
231
39,170
0.3
55.7
(14.5)
5.8
(6.7)
15.5
Total
67,600
100.0
64,872
100.0
70,321
100.0
4.0
8.4
Fertilizers
* Since Set/09 BNC portfolio was included.
In its work of financing Brazilian agribusiness, Banco do Brasil reaches all the segments, from the small
producer to the large agro-industrial companies. The table below reveals this work, showing that while
financing mini and small producers accounts for 84.9% of the total of contracts (22.3% of the amount
contracted), the transactions with the other agents show a 77.7% share of the amount contracted. The
information in the following table includes sums loaned during the current harvest but not actually
disbursed, which information is explained in this chapter.
Table 46. Funds Released for the 09/10 Crop by Customer Size
R$ million
Qty. Contracts
Qty. Contr acts - %
Am ount Contr acte d
Am ount Contr acte d %
Mini
449,848
38.6
2,749,772,632
5.9
Small
541,005
46.4
7,565,981,511
16.3
Medium and Large Sized
175,336
667
15.0
0.1
33,276,777,165
2,701,395,516
71.9
5.8
1,166,856
100.0
46,293,926,824
100.0
Cooperatives
Total
68 - Banco do Brasil – MD&A 2Q10
The table below shows the view by size of customer in relation to the total balance of the agribusiness
loan portfolio.
Table 47. Agribusiness Portfolio by Size
Segment
M ar /09
Jun/09
Se p/09
De c/09
R$ million
Jun/10
M ar /10
Micro
11,008
11,351
11,083
11,262
11,329
12,008
Small
9,239
10,003
10,243
10,675
11,050
12,043
41,297
43,543
43,152
40,952
38,996
42,730
2,743
-
2,703
-
2,759
800
2,763
783
2,738
759
3,540
-
64,287
67,600
68,038
66,434
64,872
70,321
Medium and Large
Cooperatives
BNC
Total
In the figure below we present the distribution of the balance of the Agribusiness Loan Portfolio by type
of client.
R$ billion
20.5
19.2
17.2
46.2
47.4
47.6
47.3
47.7
47.8
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
18.1
42.6
45.2
Sep/08
Dec/08
17.9
22.5
20.2
18.5
Individuals
Figure 26. Agribusiness Loan Portfolio by Customer
69 - Banco do Brasil – MD&A 2Q10
Businesses
Next, the Agribusiness Loan Portfolio by Funding Sources is shown.
Demand Deposits
Jun/09
36.0
Sep/09
FCO
Dec/09
Mar/10
BNDES/Finame
5.9
4.1
4.4
5.7
5.4
5.8
5.7
5.8
3.6
3.6
7.7
7.6
7.6
FAT
7.4
7.6
5.3
5.8
7.2
5.6
30.8
31.8
30.6
Savings
6.7
10.9
9.6
12.9
12.4
11.8
31.7
R$ billion
Other
Jun/10
Figure 27. Agribusiness Loan Portfolio by Funding Sources
The main source of funds for the agribusiness portfolio continued to be savings which in Jun/10 reached
the sum of R$ 36.0 billion, as opposed to R$ 30.8 in the same period of 2009. These resources account
for 51.3% of the total. During this quarter, part of the agribusiness loan operations was contracted
through non-equalizable saving funds.
BB uses funding from Poupança Ouro (savings) and Demand Deposits, Fund for Worker Assistance FAT, the Federal Treasury, Fund for Worker Assistance - Funcafé, and Constitutional Fund for the
Financing of the Midwest - FCO, for low-rate agricultural loans. In order to make this intermediation
feasible, the National Treasury or Fundo Constitutional pays the Bank an equalization fee which is the
difference between the sum charged to the borrower and the funding costs, credit risk and administrative
costs and taxes.
Moreover, weighting factors are set for financing obtained with funds from demand and savings
deposits. The weighting factor is a multiplier that helps to fulfill liabilities and raise revenues upon the
release of funds in the Bank's cash for investments. The following figure shows a history of the revenues
received by way of interest rate equalization and weighting factor.
70 - Banco do Brasil – MD&A 2Q10
R$ million
626
527
494
488
449
441
395
296
60
3Q08
38
4Q08
32
1Q09
21
2Q09
Equalization Revenues
15
3Q09
10
11
4Q09
15
1Q10
2Q10
Weighting Factors
Figure 28. Equalization Revenues and Weighting Factor
In this quarter the balance of equalization revenues, including weighting factor, grew 19.1% in
comparison with the preceding quarter and 38.9% in 12 months, following increase of 9.0% (in the
quarter) and 23.9% (in 12 months) in the balance of equalizable resources in the same period. With
respect to non-equalizable funds, the agroindustrial credit again explains an 8.1% growth during the
quarter, since approximately 30% of such funds refers to agroindustrial operations having obtained a
good performance during the quarter.
The table below evidences the distribution of equalizable funds from BB's Agribusiness portfolio.
Table 48. Equalizable Funds from Agribusiness Portfolio
R$ million
Chg. %
M ar /09
Equalizable Resources
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
On Jun/09 On M ar /10
22,209
21,244
20,065
22,249
24,162
26,328
23.9
9.0
14,493
13,693
12,235
13,284
14,392
15,440
12.8
7.3
6,596
7,015
7,249
7,897
8,594
9,259
32.0
7.7
Non-Equalizationable Resources
1,120
42,078
535
46,356
582
47,972
1,068
44,185
1,177
40,710
1,629
43,992
204.3
(5.1)
38.4
8.1
Total Loan Por tfolio
64,287
67,600
68,038
66,434
64,872
70,321
4.0
8.4
Costs
Investments
Marketing
BB has mechanisms for mitigating risks from agriculture loan portfolio. The 2009/2010 harvest closed
with 60.7% of costing operations (R$ 9,028 million) having been contracted by using mitigators. Of this
amount, R$ 4,493 million were guaranteed by Proagro and R$ 4,535 million at the company Aliança do
Brasil and at the reinsurance companies indicated below.
71 - Banco do Brasil – MD&A 2Q10
The following chart shows the increase in percentage in the use of Agriculture Insurance and Proagro.
R$ 46,8 bi
R$ 14,9 bi
R$ 3,4 bi
26.1%
22.8%
0.9%
9.4%
31.8%
5.0%
77.2%
13.7%
84.7%
12.8%
15.6%
Corporate Agricultural Costs
Agricultural Costs = R$ 14.9 bi
Family Agricultural Costs
Working Capital = R$ 6 bi
With Proagro and PGPAF
With Proagro
With PGPAF
Without Mitigation
Investment = R$ 7.3 bi
Marketing = R$ 6.4 bi
Agroindustrial Credit = R$ 12.2 bi
R$ 11,5 bi
Re ins urance
14.8%
43.2%
42.0%
IRB
24.0
Partner RE
15.0
Sw iss RE
15.0
Scor RE
15.0
Münchener Rück do Bras il
10.0
Mapf re RE
4.0
Catlin RE
3.0
Hannover RE
3.0
Everest RE
With Insurance/Proagro
Companies Risk/Cooperatives
Without Insurance/Proagro
Amounts in R$ billion
Figure 29. Agricultural Insurance and Proagro
72 - Banco do Brasil – MD&A 2Q10
%
TOTAL
1.0
90.0
The figure below evidences the growth of agricultural funding transactions operations contracted with
risk mitigators since the harvest of 2007/08.
Crop 2007/2008
50%
Crop 2008/2009
Crop 2009/2010
39%
38%
50%
62%
Agricultural Costs w ith Mitigation
61%
Agricultural Costs w ithout Mitigation
Figure 30. Evolution of Operations Contracted with Risk Mitigators
The table below shows a comparison between 09/10 and 08/09 harvests, detailing the purpose of the
loan and destination thereof. We point out that there was a growth of 14.2% in total funds released in
09/10 harvest, in comparison to previous harvest.
Table 49. 2009/2010 Crop Plan
R$ million
Familiar
Costs
Investment
Corporate
Costs
Investment
Marketing
Crop 08/09 (A)
7.099
4.272
2.827
23.282
15.815
2.431
5.036
Crop 09/10 (B)
8.714
4.518
4.196
25.982
17.102
3.126
5.755
Chs. (%) (B/A)
22,7
5,8
48,4
11,6
8,1
28,6
14,3
30.381
34.696
14,2
Total
We detail below the four key crops subject to agricultural funding, with the percentage share of funding
for the 2009/2010 harvest and the concentration per state regarding each of these crops.
Table 50. Defrayal – Transaction Profile
Soybe ans
Cor n
Rice
19.7%
8.8%
4.5%
Cotton
0.9%
PR
29.91%
PR
20.46%
RS
78.23%
MT
38.37%
RS
18.99%
RS
19.60%
SC
12.10%
BA
20.90%
GO
15.93%
MG
18.19%
MS
1.65%
GO
14.65%
MS
9.63%
SC
17.62%
PR
1.61%
MS
12.24%
73 - Banco do Brasil – MD&A 2Q10
We show below a breakdown of price and cost of the corn and soybean crops for the 2009/2010
harvests. The margin is represented by the percentage of revenues net of the costs involved in each
crop, i.e., the part designed for the producer. The figures regarding the plantations' price and costs are
referenced based on the state of Paraná, with the key municipalities serving to find a proportional
average.
Evolution Price and Cost - Soybean
Margin - Soybean
80.0
60.0
%
51.9
47.1
40.0
32.8
R$/kg
65.0
50.0
30.0
0.76
0.74
70.0
35.8
0.49
0.54
0.50
0.43
0.40
0.33
0.28
34.8
0.35
0.26
0.24
20.0
10.0
0.0
04/05
05/06
06/07
07/08
Crops
08/09
04/05
09/10
05/06
07/08
08/09
09/10
Crops
Price
Cost
Evolution Price and Cost - Soybean
Margin - Corn
80
06/07
70
0.34
%
50
52.8
45.6
40
30
R$/kg
60
0.24
0.16
0.19
0.16
33.4
20
24.0
22.4
08/09
09/10
0.27
0.25
0.21
0.13
0.23
0.18
0.16
16.8
10
0
04/05
05/06
06/07
07/08
Crops
Figure 31. Ratio Price/Cost of Soybean and Maize
74 - Banco do Brasil – MD&A 2Q10
04/05
05/06
06/07
Crops
Price
07/08
08/09
Cost
09/10
6.6 Analysis of Liabilities
The volume of deposits taken by Banco do Brasil ended the quarter at R$ 343,961 million, growth of
0.4% in the quarter and of 10.7% in twelve months. The highlight was the funding through demand
deposits, which increased 7.4% in the quarter, amounting to R$ 59,025 million. Banco do Brasil is the
leader of funding through demand deposits, which contributes to the reduction of its funding cost in
comparison to the other financial institutions. Foreign borrowings and money market funding also
increased in the quarter, recording a growth of 24.1% and 5.5%, respectively.
In the twelve-month comparison, the mix of liabilities changed mainly as a result of money market
funding, which reached to account for 22.0% of total liabilities, as compared with 17% in June 2009, and
foreign borrowings increased from 1.9% to 3.2% of the total liabilities. On the other hand, there was a
decrease in the share of total deposits, which started to account for 45.5% of liabilities, as compared
with 51.9% in the same period of the previous year.
Table 51. Liabilities
R$ million
Deposits
Se p/08
De c/08
M ar/09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
229,810
270,841
305,002
310,846
326,958
337,564
342,624
343,961
Demand Deposits
42,955
51,949
47,276
49,075
50,107
56,459
54,973
59,025
Savings Deposits
52,693
54,965
70,567
69,011
72,233
75,742
78,719
81,541
Interbank Deposits
6,309
14,065
8,406
7,459
9,627
11,619
10,749
10,436
127,582
149,618
178,487
185,072
194,707
193,516
197,934
192,715
Time Deposits
Investment Deposits
270
243
266
228
284
229
249
243
Money Market Funding
85,339
91,130
106,452
101,508
153,603
160,821
157,866
166,603
Foreign Borrow ing
7,672
11,106
13,065
11,209
15,086
13,733
19,539
24,248
Domestic Onlending
19,640
22,436
22,220
22,626
26,761
31,390
32,995
36,308
Other Liabilities
87,887
27,889
95,822
29,937
114,327
30,859
120,290
32,360
129,615
33,661
128,922
36,119
134,212
37,646
145,254
39,332
458,237
521,273
591,925
598,839
685,684
708,549
724,881
755,706
Shareholders’ Equity
Total Liabilitie s
75 - Banco do Brasil – MD&A 2Q10
The indicators of the following table show the relationship between funding sources and investments in
Banco do Brasil.
Both in the quarterly and in the twelve-month comparison, we can note that the increase in the Net Loan
Portfolio outpaces that of total funding, which explains the reduction in cash and cash equivalents and
the increase in the ratio between loans and total funding. In addition, the recent amendments to the
rules for compulsory deposits by the Brazilian Central Bank had material impacts on funding both in
March and June 2010.
Even when we take into consideration the impacts mentioned in the previous paragraph, BB continues
to present cash and cash equivalents exceeding 17% of the total funding and the Net Loan Portfolio
continues to account for less than 83% of funding.
Table 52. Sources and Uses
Balance
R$ million
Jun/09
M ar/10
Chg. %
Jun/10
On Jun/09 On M ar/10
Funding Total
339,699
373,110
371,358
9.3
Total Funding
310,846
342,624
343,961
10.7
0.4
22,626
32,995
36,308
60.5
10.0
1.2
Domestic Onlending
Financial and Dev elopment Funds
(0.5)
4,076
3,685
3,729
(8.5)
FCO (Subordinated Debt)
14,689
20,792
21,340
45.3
2.6
Foreign Borrow ing*
11,970
20,259
25,394
112.1
25.3
(24,507)
(47,244)
(59,374)
142.3
25.7
233,703
286,289
307,545
31.6
7.4
Loan Portf olio
252,485
305,551
326,522
29.3
6.9
A llow ance f or Loan Los s es
(18,782)
(19,263)
(18,977)
1.0
(1.5)
105,996
86,822
63,813
(39.8)
(26.5)
Net Loan Portf olio / Total Deposits
75.2
83.6
89.4
Net Loan Portf olio / Total Funding
68.8
31.2
76.7
23.3
82.8
17.2
Compuls ory Depos its
Ne t Loan Por tfolio
Available Funds
Indicator s - %
A v ailable Funds / Total Funding
*Includes Foreign Borrowings, Obligations for Securities Abroad, Obligations for Foreign Onlendings and Hybrid Capital and Debt Instruments.
76 - Banco do Brasil – MD&A 2Q10
6.7 Liquidity Analysis
The liquidity of Banco do Brasil, determined by the difference between Liquidity Assets and Liabilities,
attained R$ 97,288 million at the end of June 2010, reduction of 12.1% in the quarter and 21.1% in
twelve months.
R$ million
132,469
119,662
123,254
128,138
110,708
97,288
92,660
61,914
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Figure 32. Liquidity Balance
In the quarter, the reduction in the liquidity balance is basically explained by the 13.1% decrease in the
balance of interbank investments. In the twelve-month comparison, the main reason for the decreased
liquidity was the 64.1% increase in the balance of money market funding.
It should be highlighted that BB's liquidity position presented a strong growth as from September 2008,
mainly as a result of the flow of deposits to lower-risk financial institutions due to the financial crisis
(flight to quality), in addition to the acquisition of Banco Nossa Caixa, which had a high volume of
deposits and low leverage. At the time, these funds were allocated to interbank investments and
Marketable Securities, as well as to the loan portfolio. As BB manages to allocate these funds to more
profitable investments, such as loan operations, the trend is that the liquidity balance begins to fall and
return to thresholds which are closer to the ones observed in the past. Furthermore, as already
mentioned, there is the effect of the increase in the payment of compulsory deposits as a result of the
amendment of the rules by the Brazilian Central Bank. Further information on the management of BB's
liquidity position can be obtained on chapter 8.1.
Table 53. Liquidity Balance
R$ million
Se p/08
Liquidity As s e ts (A)
De c/08
M ar /09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
153,563
197,855
234,520
232,221
295,699
300,578
279,323
6,847
5,545
7,516
6,212
8,340
7,843
7,364
9,535
Interbank Investments
71,092
119,408
131,796
132,438
157,541
168,398
152,595
132,543
Securities (ex cept linked to Bacen)
75,624
72,902
95,208
93,571
129,818
124,337
119,364
132,249
Liquidity Liabilitie s (B)
91,649
105,195
114,858
108,967
163,230
172,440
168,615
177,039
Interbank Depos its
Money Market Borrow ing
6,309
85,339
14,065
91,130
8,406
106,452
7,459
101,508
9,627
153,603
11,619
160,821
10,749
157,866
10,436
166,603
Liquidity Balance (A - B)
61,914
92,660
119,662
123,254
132,469
128,138
110,708
97,288
A v ailable Funds
77 - Banco do Brasil – MD&A 2Q10
274,327
6.8 Deposits and Money Market Funding
Banco do Brasil's Market Funding reached R$ 510,563 million at the end of March 2010, a growth of
2.0% in the quarter leveraged by the increase in the volume obtained in demand deposits and money
market borrowing.
In the twelve-month comparison, market funding increased by 23.8%, mainly as a result of the money
market borrowing, as well as of demand and interbank deposits.
Table 54. Deposits and Money Market Funding
R$ million
Se p/08
De c/08
M ar/09
Jun/09
Se p/09
De c/09
M ar/10
Jun/10
Demand Deposits
42,955
51,949
47,276
49,075
50,107
56,459
54,973
Sav ing Depos its
52,693
54,965
70,567
69,011
72,233
75,742
78,719
81,541
6,309
14,065
8,406
7,459
9,627
11,619
10,749
10,436
Money Market Borrow ing
127,852
85,339
149,862
91,130
178,753
106,452
185,300
101,508
194,991
153,603
193,745
160,821
198,183
157,866
192,958
166,603
TOTAL
315,149
361,971
411,455
412,353
480,561
498,385
500,490
510,563
Interbank Depos its
Time and Inv estment Depos its
59,025
We present below the market shares of Banco do Brasil in the deposits and money market funding of
the National Financial System*
R$ million
Time Deposits
81,541
75,742
26.2
25.7
23.9
21.7
Dec/08
Mar/09
Jun/09
Total Funding
Sep/09
510,563
Sep/08
Jun/10
500,490
Jun/10
Mar/10
498,385
Mar/10
Dec/09
24.0
Market Share - %
480,561
Dec/09
19.8
23.7
78,719
Sep/09
25.8
24.1
Market Share - %
24.1
72,233
69,011
Jun/09
412,353
Sep/09
Mar/09
26.3
361,971
Jun/09
25.8
24.8
315,149
Mar/09
Dec/08
Savings Deposits
192,715
Dec/08
185,072
149,618
127,582
Sep/08
178,487
19.6
18.0
Sep/08
Market Share - %
197,934
24.2
Jun/10
193,516
23.4
Mar/10
194,707
Demand Deposits
Dec/09
24.4
20.3
70,567
Sep/09
20.4
411,455
Jun/09
54,973
50,107
Mar/09
56,459
49,075
Dec/08
47,276
51,949
42,955
Sep/08
25.4
33.1
54,965
32.8
52,693
33.2
30.8
59,025
33.5
32.8
33.4
Dec/09
Mar/10
Jun/10
Market Share - %
*Information about participation in the Financial System comes from the top 50 banks of the Central Bank site. The latest available position at the
time of publishing this report was in Mar/2010.
Figure 33. Market Share of BB Funding
78 - Banco do Brasil – MD&A 2Q10
6.8.1 Foreign Borrowing
Funds taken abroad by Banco do Brasil amounted to US$ 23,637 million at the end of June, growth of
56.2% in relation to the balance observed at the end of 2Q09 and slight downslide of 1.9% in the
comparison with 1Q10. In the comparison with the same prior-year period, special emphasis is placed
on the interbank market fundings and for issues in the international capital market, which recorded
growth in the balance of 75.7% and 228.3%, and increased their relative share in the mix of foreign
fundings. Methodology adjustments were made in the quarter to optimize the survey of values, which
resulted in a review of the historical series.
Table 55. Foreign Borrowing
Pr odutos
Se p/08
De c/08
M ar /09
Jun/09
Se p/09
De c/09
US$ million
Jun/10
M ar /10
Interbanking
3,019
3,270
3,618
4,084
5,123
6,195
7,087
7,176
Repo
3,086
3,356
2,722
1,588
2,354
2,609
2,294
2,266
Bus ines ses
3,967
5,736
6,613
5,415
5,528
6,161
6,187
5,176
835
1,018
1
-
-
155
44
182
Is sues
2,053
2,056
2,024
2,227
1,943
2,097
1,939
2,103
1,966
2,500
1,976
4,592
1,931
6,545
1,932
6,905
TOTAL
15,016
17,631
16,994
15,129
17,471
21,688
24,088
23,637
Special
Individuals
In April 2010, BB issued securities under its "GMTN" program in the amount of US$ 450 million. Issued
with a 5-year term and coupon of 4.5% p.y., the securities were traded at 100.68% of their face value
and the spread on the American government bonds came to 180 basis points, the lowest among the
pending issues performed by BB. The conditions of the operation reflect the market's interest in
securities issued by Banco do Brasil and the solidity of its economic and financial grounds. The issue
cannot be qualified as subordinated debt for purposes of calculation of the BIS Ratio, and was made to
back up loan operations for foreign trade.
Table 56. Overseas Issues
Half-Yearly
Volume in
US$ million
07.10.2003
178
07.10.2003
Term in
years
Issue
price
Return for Premium
Investor
over
(%)
Treasury
Cupom
(%)
Interest
Interval
8
5,911
Quarterly
100.00
5.911
350
A-/A2
Visanet
45
8
4,777
Quarterly
95.00
5.565
350
A-/A2
Visanet
12.19.2003
250
10
6,550
Quarterly
100.00
6.550
292
A-/A2
09.20.2004
300
10
8,500
Half-Yearly
99.17
8.625
447
A2
Stand Alone
01.23.2006
500
-
7,95
Quarterly
100.00
7.950
0
Baa3
Stand Alone
07.18.2007
187
10
9,75
Half-Yearly
100.00
9.750
0
Baa3
GMTN **
03.06.2008
250
6
L3M+0,55
Quarterly
100.00
L3M+0,55
04.29.2008
150
10
5,25
Quarterly
100.00
5.250
Rating
0 AAA/Aa2
0 A-/A2
Program
MT 100
MT 100
MT 100
09.05.2008
200
7
L3M+1,2
Quarterly
100.00
L3M+1,2
0
A-/A2
07.02.2009
100
5
L6M+2,55
Half-Yearly
98.25
L6M+2,55
0
Baa3
GMTN
10.20.2009
1,500
-
8,500
Half-Yearly
100.00
8.500
0
Baa2
Stand Alone
01.22.2010
500
5
4,500
Half-Yearly
99.33
4.651
220
Baa2
GMTN
99.45
6.074
237.5
Baa2
GMTN
100.68
4.337
180
Baa2
GMTN
01.22.2010
500
10
6,000
Half-Yearly
04.29.2010
450
5
4,500
Half-Yearly
79 - Banco do Brasil – MD&A 2Q10
MT 100
7 - Analysis of Results
7.1 Net Interest Income
Table 57. Net Interest Income
Quar te rly Flow
Chg. %
R$ million
2Q09
1Q10
2Q10
Financial Inte r m e diation Incom e
16,037
18,562
19,512
21.7
10,133
12,480
12,991
28.2
148
240
204
Securities
5,215
5,644
Financial Derivatives
Loans
Leasing
Half-Ye ar ly Flow
On 2Q09 On 1Q10
Chg. %
1H09
1H10
On 1H09
5.1
31,297
38,075
21.7
4.1
19,084
25,471
33.5
38.2
(15.0)
286
445
55.5
5,195
(0.4)
(7.9)
10,945
10,839
(1.0)
(451)
(232)
(29)
(93.5)
(87.3)
(512)
(262)
(49.0)
Foreign Exchange Portf olio
131
(18)
71
(45.5)
-
15
53
257.7
Compulsory Investments
213
274
917
330.5
234.7
389
1,192
206.6
Financial Income f rom Insur., Pension and Savings Bonds Op.
146
120
125
(14.3)
4.3
267
245
(8.3)
FX Gain (Loss) on Foreign Investments
(592)
18
(5)
(99.2)
-
(677)
13
-
Other Op, Inc, of a Fin, Intermed, Nature
1,533
28
57
(96.3)
105.4
2,003
85
(95.7)
8
Over Hedge
Financial Inte r m e diation Expe ns e s
Money Market Borrow ing
Borrow ing, A ssignments and Onlending
Ne t Inte re s t Incom e
(15)
(96.6)
-
(503)
(6)
(98.7)
(7,550)
(439)
(9,205) (10,052)
33.1
9.2
(15,825)
(19,257)
21.7
(7,067)
(483)
(8,302)
(903)
(9,055)
(997)
28.1
106.5
9.1
10.3
(14,626)
(1,199)
(17,357)
(1,900)
18.7
58.5
8,487
9,357
9,461
11.5
1.1
15,472
18,817
21.6
Net Interest Income (NII) – which is the income from financial intermediation before provisions for credit
risk – totaled R$ 9,461 million in 2Q10, an increase of 1.1% from the previous quarter, and of 11.5%
from 2Q09. NII totaled R$ 18,817 million in the semester, 21.6% higher than the same period of 2009.
To enable a better understanding of the information, considering that 2009 was impacted by the
acquisitions of a controlling interest in Nossa Caixa and of 50.0% of the total capital of Banco Votorantim,
we present below a list of the impacts of these corporate transactions on BB's Financial Margin:
• Nossa Caixa (BNC) – BNC balance sheet items began to integrate Banco do Brasil's in March 2009,
but the income accounts only impacted BB's as from the 2Q09, period when all the accounts of BNC
started to compose the financial statements of BB and to integrate the ratios and calculations
determined in chapters 7.1 to 7.4 of the present report. There is no further distortion in the quarterly
comparisons, since BNC is already included in the comparison base. In order to avoid distortions in the
half-yearly NIM follow-up, the equity consolidation impact was segregated in March 2009, since income
started being consolidated only as of April.
• Banco Votorantim (BV) – BV's balance sheet items began to integrate Banco do Brasil’s in September
2009, while the income accounts recorded since 4Q09. In order to prevent distortions in the NIM
determination, the effect of the asset consolidation in September was segregated, since the
consolidation of results began only in October.
An item that merits special emphasis in the quarter is the revenues from loan operations, which
recorded an expansion of 4.1% in relation to the previous quarter and 28.2% in relation to the same
prior-year period of 2009. This behavior is aligned to the BB's loan portfolio expansion and interest rate
increase (which effect upon margin is gradual due to prefixed operations representativeness in loan
portfolio). Comparing with previous quarter, there was also a significant growth in income from
compulsory investments, which recorded a percentage variation of 234.7% and absolute variation of R$
643 million.
Although not having had an expressive oscillation in the U.S. dollar quotation (main currency among
those comprising BB's foreign currency assets and liabilities), a 6.9% yen oscillation in the quarter has
helped to bring volatility to the lines comprising NII. BB has a significant amount of funding in that
80 - Banco do Brasil – MD&A 2Q10
currency obtained from its branches in Japan. In spite of exchange variation having increased funding
expenses, it is worth to stress the limitantion of analyzing the lines that compose the margin in a
separate manner, because exchange rate fluctuations affect both financial intermediation income and
expenses, besides the existence of financial derivative instruments that minimize the effect on BB's
income and on NII determined in the Income Statement with Reallocations.
The following table presents the formation of Net Interest Income with change in spread and the growth
of earning assets volume.
Table 58. Analysis of Volume (Earning Assets) and Quarterly Spread – 1Q10 and 2Q10
R$ million
V olume: A ss ets – Earning A s sets¹
Net Interes t Inc ome
Spread - %²
1Q10
2Q10
Abs . Chg.
590,315
600,580
10,265
9,357
1.5851
9,461
1.5752
104
(0.0098)
Gain/(loss) w ith volume
9,520
163
Gain/(loss) w ith spread
9,299
(58)
(1)
Gain/(loss) w ith volume and spread
(1) Average Balances
(2) Net Interest Income / Earning Assets
Spread
Based on annualized rates, the NIM (Net Interest Income over average Earning Assets) ended 2Q10 at
6.5%, keeping the same level observed in the previous quarter and a decrease of 80 basis points as
opposed to 7.3% recorded in the same quarter of 2009. In the first half, the rate was 6.4%, against 6.9%
in the same prior-year period.
NIM oscillation in comparison between 2Q10 and 2Q09 is mainly explained by the following factors:
Positive
• Solid spread recovery of the agribusiness portfolio;
• Increase of the relative share of loans and leasing in earning assets. The average balance of these
operations represented 47.3% of average earning assets in 2Q09, increasing to 48.0% in 1Q10 and
reaching 49.2% in 2Q10.
Negative
• Slightly decrease in the contracted loans spread, mainly due to Individual and Business portfolio
behavior, as further detailed below;
• Decrease of 6.9% in the Average Selic Rate (TMS);
• Changes in the rules about compulsory deposits (BCB instructions 3485 and 3486, of 02.24.2010).
These changes had two different impacts in BB’s financial statements;
• Liquidity reduction, due to time deposits incidental rate that changed from 13.5% to 15.0%; raise of
the additional reserve requirements over time deposits from 4% to 8%, and over demand deposits
from 5% to 8%; in addition to collection deduction suppression that existed for institutions with
Referential Equity Tier I over than R$ 5 billion. Besides all additional collected balance being paid by
TMS, BB ceases to apply resources in more profitable operations;
• Changes in reserve requirements fulfillment, raising the compulsory deposits collected in cash and
reducing those fulfilled by linking part of the portfolio to the Brazilian Central Bank. This change did
not cause effects in BB profitability due to resources allocation in less profitable operations and
resulted some changes in the asset accounts, reducing the securities portfolio (share previously
linked to BCB) and raising the amounts allocated in “Interbank relations / Deposits in the Central
Bank” account.
• By the consolidation of Banco Votorantim (BV) accounting information, that has a NIM lower than
BB’s. BV acts on lending to specific segments, such as wholesale (middle market and corporate)
and payroll vehicle loans for individual customers. These segments show lower risk and, therefore,
lower NIM. Besides, besides BV does not have a low cost retail funding, it helped to the funding
average cost raise in the consolidated financial statements.
81 - Banco do Brasil – MD&A 2Q10
In the comparison between 2Q10 and 1Q10, there was a 1.1% growth in the net interest income,
basically explained by business expansion and, in lower grade, for the base interest rate raise. However,
the margin growth was limited to the spread behaviour, which did not register recoveries due to the
following factors:
•
•
•
20 basis point fall in loan operations spread, basically due to change in portfolios mix, as further
detailed below;
Securities income reduction, influenced, among other factors, for lower income from interbank
investments, due to resources migration to other compulsory deposits. The performance of these
lines is mainly explained for the change in the compulsory deposits form of collection, which stopped
being made in the form of titles and began being collected in cash, resulting in interbank
investments reduction. There was also a reduction in negotiations and mark-to-market results for the
accounting effect of interest rates (SELIC) increase over prefixed securities available for trading.
The negative impact of mark-to-market occurs immediately in case of securities available for trading,
but the positive effect of the interest rate raise over the securities linked to SELIC (postfixed) is
attenuated in long term;
Changes in rates and collecting forms of compulsory deposits, detailed in the comparison between
2Q10 and 2Q09.
One of the main reasons for the falling trend shown by Net Interest Margin – NIM follows from the credit
portfolio mix change, with greater representativeness of the lower risk operations. This perception is
confirmed by “Risk Adjusted NIM” indicator, calculated from the relation between the net interest income
after provisions and the earning assets. Besides the net interest income, the Risk Adjusted NIM takes in
consideration the allowance for loan losses provisions. The indicator ends 2Q10 in 4.5%, same baseline
observed in 2Q09 and raising 10 basis points against the previous quarter.
7.0
7.3
7.2
6.7
6.6
6.7
6.5
6.5
5.4
4.9
4.5
4.0
3Q08
4Q08
1Q09
2Q09
4.2
3Q09
4.5
4Q09
4.4
4.5
1Q10
2Q10
NII / (Earning Assets) - Annualized Spread
(Net Financial Margin) / (Earning Assets) - Annualized Spread
Figure 34. NIM Evolution
82 - Banco do Brasil – MD&A 2Q10
Table 59. Margin, Net of Interest and Profit Margin
R$ millio n
2Q09
1Q10
2Q10
1H09
1H10
A v erage Earning A ss ets (A EA )
478,047
590,315
600,580
455,814
595,448
A v erage Interest Bearing Liabilities (A IBL)
415,776
519,987
522,946
395,309
521,467
Net Interest Gain (1)
7,734
8,925
8,596
14,190
17,521
Interes t Income
15,204
18,038
18,555
29,860
36,594
Interes t Expense
(7,470)
(9,113)
(9,960)
(15,670)
(19,072)
Net Interest Income Other Items (2)
NII
753
431
865
1,282
1,296
8,487
9,357
9,461
15,472
18,817
A IBL / A EA – %
87.0
88.1
87.1
86.7
87.6
Interes t Rate on A EA (3) (7)- %
13.3
12.8
12.9
13.5
12.7
Interes t Rate on A IBL (4) (7)- %
7.4
7.2
7.8
8.1
7.4
Net Interest Rate (5) - %
6.0
5.6
5.1
5.4
5.2
A djusted NIM (6) (7) - %
6.6
7.3
6.2
6.5
5.8
6.5
6.3
6.9
6.0
6.4
NIM (7) – %
(1) Defined as interest income less interest expenses.
(2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign
exchange gain/loss abroad and other income of a financial intermediation nature
(3) Total interest income divided by the average balance of assets generating income.
(4) Total interest expenses divided by the average balance of liabilities generating expenses.
(5) Difference between the average rate of assets generating assets and the average rate of liabilities generating expenses.
(6) Income net of interest divided by the average balance of assets generating income.
(7) Rates are annualized
83 - Banco do Brasil – MD&A 2Q10
7.2 Analysis of Investments
Loan Operations
Loan and Lease Operation Revenues, excluding the recovery of write-offs, reached R$ 12,438 million in
2Q10, for growth of 2.9% in the quarter and 27.6% from 2Q09. Excluding the effects of exchange
variation on operations under the terms of CMN Resolution 2770, this income amounted to R$ 12,448
million, for growth of 3.3% over 1Q10 and of 23.7% over the same prior-year quarter.
Table 60. Revenues from Loans Net of Exchange Impact (Res. 2,770)
Quar te r ly Flow
R$ million
Loans and Le as ing Re ve nue s – Ave r age Balance *
Chg. %
2Q09
1Q10
2Q10
Half-Ye ar ly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
225,998
283,551
295,757
30.9
4.3
215,658
289,654
34.3
Loans and Leasing Revenues
9,751
12,090
12,438
27.6
2.9
18,483
24,528
32.7
FX Impact in Loan Portf olio (Res. 2,770)
(309)
43
(10)
(96.7)
-
(717)
33
-
10,060
19.0
12,047
18.1
12,448
17.9
23.7
-
3.3
-
19,200
18.6
24,495
17.6
27.6
-
Loans and Leasing Rev. bef ore FX Impact (Res. 2,770)
A nnualized Interest Rate
*It does not consider recovery of write-offs
Spread by Portfolio
The spread of loans reached 9.7% in 2Q10, down 20 basis points from the spread recorded in 1Q10 and
70 basis points decrease in relation to 2Q09. In the quarter it was recorded a 80 basis points decrease
at individuals credit portfolio spread and 50 basis points at businesses credit portfolio, mainly explained
for:
•
•
•
Raise in the relative share in payroll loan on Individuals portfolio average balance;
From the fact that the Businesses portfolio has presented a higher growth in the contracted
operations among middle and corporate segments;
From BB strategy on raising the FGO use as a guarantee instrument for the contracted operations
from small and medium companies. In the quarter the contracted volume in FGC guaranteed
operations were 23.5% higher than the previous quarter. The total contracted by BB reached R$ 7.3
billion, in 244 thousand operations.
The changes in the mix resulted in a slight spread reduction, but are important improvement vectors of
BB credit portfolio quality, helping the default and allowance for loan losses reduction.
Besides mix changes, it is important to highlight that the NIM presented in the table below is calculated
based on management information. The portfolios Net Interest Income is calculated from the financial
income, deducted from the financial expenses and opportunity costs. The NII is divided for the daily
average balance of the portfolios.
The fall of the Individuals and Businesses portfolio in the quarter is partially due to the fact that the major
opportunity cost of the lines be the average selic rate (TMS), which presented almost a 9.7% growth
comparing to the previous quarter. The costs increase represented by TMS expansion is gradually
passed by BB to credit lines rates. However, considering the representativeness of the credit portfolio
fixed share, until this portion is priced there is a fall in the NIM, due to the immediate increase in the
opportunity cost.
As detailed in section 8, BB has more active positions than passive in CDI/TMS and, thus benefits from
higher interest rates. However, the changes in the interest rates can bring slight distortions in calculating
the NIM, besides effects over securities fixed share, as further detailed.
About NIM on agribusiness operations, there was a 40 basis points raise over the previous quarter and
50 basis points over 2Q09. Both on quarterly bases as compared to the same period in the previous
year, the NIM advance is due to the representativeness raise of the portfolio share contracted with
equalized resources.
84 - Banco do Brasil – MD&A 2Q10
Table 61. NIM
%
2Q09
Loan Operations
1Q10
2Q10
1H09
1H10
10,4
9,9
9,7
10,0
9,7
Individuals
21,2
18,2
17,4
20,4
17,4
Businesses
7,5
6,7
6,2
7,3
6,4
Agribusiness
5,5
5,6
6,0
5,6
5,8
4,4
7,3
3,3
6,5
3,4
6,5
3,0
6,9
3,3
6,4
Other
Global Spread
85 - Banco do Brasil – MD&A 2Q10
Securities Income
Income from securities and interbank investments reached R$ 5,195 million in 2Q10, a 7.9% fall over
the last quarter and 0.4% over the same period of 2009. Comparing to the last quarter, the results
decrease is associated mainly to the interbank investments average balance reduction, due to the
migration of the resources to the compulsory deposits earning share. The changes in the compulsory
deposits rules are detailed at chapter 7.1, in the NIM section. There was also a result reduction from
negotiations and marking to market, in relation to the values observed in 1Q10.
Comparing with the same period of 2009, there was a slight reduction of 0.4% in securities revenues,
also influenced by a lower interbank investments revenues. Accordind to that period, there was a 6.9
decrease in average SELIC (TMS), which influenced directly this line performance.
It is worth to show that the figure below does not represent BB treasury results. It is disclosed only the
results of operations classified by the Central Bank as securities / interbank investments. The results are
disclosed for all the conglomerate (including non financial companies, BB Investment Bank, Banco
Votorantim, subsidiaries and foreign branches).
Table 62. Securities Income
Quar te r ly Flow
R$ m illion
2Q09
1Q10
Chg. %
2Q10
Half-Ye ar ly Flow
On 2Q09On 1Q10
1H09
1H10
Chg. %
On 1H09
Se cur itie s Incom e
5,215
5,644
5,195
(0.4)
(7.9)
10,945
10,839
(1.0)
Fixed Income Securities
5,208
5,598
5,144
(1.2)
(8.1)
10,931
10,742
(1.7)
Rev aluation – Curve
2,349
2,249
2,362
0.6
5.1
4,407
4,611
4.6
149
79
(12)
-
-
172
67
(61.2)
Inc ome/Loss f rom Negotiation
Mark to Market
(202)
12
(75)
(63.0)
-
60
(62)
-
Interbank A c counts
2,911
3,107
2,733
(6.1)
(12.0)
6,292
5,839
(7.2)
0
8
151
46
136
51
571.1
(9.9)
11.2
0
14
288
97
612.3
Foreign Income
Others
The figure below presents the classification of BB's portfolio of securities by type of index. The
classification below includes the portfolio of securities of Banco Nossa Caixa, but does not include the
information of Banco Votorantim.
16.4%
1.1%
82.4%
CDI / Average Selic Rate
Fixed
Figure 35. Securities Portfolio by Index (Multiple Bank)
86 - Banco do Brasil – MD&A 2Q10
TR
IPCA
Table 63. Avg Balance of the BS accounts and onfo. on interest rates – Earning assets (quarterly)
1Q10
R$ million
Ave r age
Balance
2Q10
Inte re s t
Annualize d
Rate (%)
Ave r age
Balance
Annualize d
Rate (%)
Inte r e s t
Ear ning As s e ts
A vailable Funds in Foreign Currenc y
476
30
27.8
1,142
5
Sec urities + Interbank Investments on Hedge
286,845
5,644
8.1
261,053
5,195
8.2
Loans + Leas ing
283,551
12,090
18.2
295,757
12,438
17.9
Remunerated Compulsory Depos its
Total
1.7
19,443
274
5.8
42,628
917
8.9
590,315
18,038
12.8
600,580
18,555
12.9
Non Ear ning As s e ts
Tax Credits
22,097
22,454
Other A s sets
84,884
91,912
Total
26,967
133,947
26,949
141,315
TOTAL ASSETS
724,263
741,895
Permanent A ss ets
Table 64. Avg Balance of the BS accounts and info. on interest rates – Earning Assets (half-yearly)
1H09
R$ million
Ave r age
Balance
1H10
Inte re s t
Annualize d
Rate (%)
Ave r age
Balance
Inte r e s t
Annualize d
Rate (%)
Ear ning As s e ts
A vailable Funds in Foreign Currenc y
523
43
17.2
809
35
Sec urities + Interbank Investments on Hedge
227,958
10,945
9.8
273,949
10,839
8.1
Loans + Leas ing
215,658
18,483
17.9
289,654
24,528
17.7
Remunerated Compulsory Depos its
Total
11,675
389
6.8
31,035
1,192
7.8
455,814
29,860
13.5
595,448
36,594
12.7
Non Ear ning As s e ts
Tax Credits
19,172
22,276
Other A s sets
73,917
88,398
Total
17,375
110,464
26,958
137,631
TOTAL ASSETS
566,278
733,079
Permanent A ss ets
87 - Banco do Brasil – MD&A 2Q10
8.8
7.3 Analysis of Funding
The Interest Bearing Liabilities average balance rose R$ 522,946 million in the 2Q10, growth of 0.6% in
relation to the previous quarter and 25.8% in 2Q09. Average funding costs totaled 7.8% in the quarter,
higher then the 7.2% recorded in 1Q10 and 7.4% in 2Q09. Increase in rate was a determinant factor for
a growth of 9.3% in interest expenses in the period.
For its turn, the average rate has been influenced by TMS behavior, showing a 9.7% increase upon
1Q10 and having an impact on the cost of time deposits and on money market borrowing. Besides,
foreign obligations (loans and securities) have also experienced an exchange impact because of
currency oscillation, such as it occurred with the yen. As already explained, despite of the exchange
effect having an influence on financial intermediation income and expenses, it does not bring relevant
variations to the NII.
Table 65. Avg. Balances of the BS accounts and info. on int. rates – Int. Bearing Liabilities (quarterly)
1Q10
R$ million
Ave r age
Balance
Inte re s t
2Q10
Annualize d
Rate (%)
Ave r age
Balance
Inte r e s t
Annualize d
Rate (%)
Inte r e s t Be ar ing Liabilitie s
Saving Deposits
78,009
(1,216)
6.4
80,535
(1,303)
6.6
Interbank Deposits
11,635
(130)
4.6
10,641
(119)
4.6
Time Deposits
197,373
(3,485)
7.3
193,115
(3,706)
7.9
Money Market Borrow ing
156,724
(3,173)
8.3
155,972
(3,566)
9.5
7,752
(191)
10.2
9,630
(311)
13.5
Onlending
32,898
(638)
8.0
34,719
(623)
7.4
Financial and Development Funds + Subordinated Debt
24,032
(155)
2.6
24,825
(128)
2.1
Foreign Securities Borrow ing
10,307
(108)
4.3
12,443
(161)
5.3
1,258
(18)
5.7
1,066
(43)
17.0
519,987
(9,113)
7.2
522,946
(9,960)
7.8
Foreign Borrow ing
Mortgage-backed Security
Total
Othe r Liabilitie s
Demand Deposits
53,302
56,290
Other Liabilities
113,799
123,878
Shareholder’s Equity
Total
37,175
204,275
38,781
218,949
TOTAL LIABILITIES
724,263
741,895
88 - Banco do Brasil – MD&A 2Q10
Table 66. Avg. Bal of the BS accounts and info. on int. rates – Int. Bearing Liabilities (half-yearly)
1H09
R$ million
Ave r age
Balance
Inte re s t
1H10
Annualize d
Rate (%)
Ave r age
Balance
Inte r e s t
Annualize d
Rate (%)
Inte r e s t Be ar ing Liabilitie s
Saving Deposits
64,013
(2,135)
6.8
79,272
(2,519)
6.5
Interbank Deposits
10,320
(445)
8.8
11,138
(250)
4.5
Time Deposits
168,805
(6,715)
8.1
195,244
(7,191)
7.5
Money Market Borrow ing
100,409
(5,129)
10.5
156,348
(6,739)
8.8
Foreign Borrow ing
5,068
(90)
3.6
8,691
(501)
11.9
Onlending
26,661
(822)
6.3
33,808
(1,261)
7.6
Financial and Development Funds + Subordinated Debt
16,871
(287)
3.4
24,429
(282)
2.3
2,874
(47)
3.3
11,375
(269)
4.8
289
(0)
0.0
1,162
(60)
10.6
395,309
(15,670)
8.1
521,467
(19,072)
7.4
Foreign Securities Borrow ing
Mortgage-backed Security
Total
Othe r Liabilitie s
Demand Deposits
45,601
54,796
Other Liabilities
94,193
118,839
Total
31,175
170,969
37,978
211,612
TOTAL LIABILITIES
566,278
733,079
Shareholder’s Equity
89 - Banco do Brasil – MD&A 2Q10
7.4 Analysis of Volume and Spread
The table below shows the appropriation of changes in interest income and expenses due to the change
in the average volume of earning assets and interest bearing liabilities and the change in the average
interest rate on such assets and liabilities, in the periods under analysis.
The changes in volume and interest rate were calculated based on changes in average balances in the
period and the changes in the average interest rates on earning assets and interest bearing liabilities.
The Average Rate variation was calculated by the variation in the interest rate in the period multiplied by
the average quantity of earning assets or average quantity of interest bearing liabilities in the first period.
The Net Variation is the difference between the interest income of the present period and that of the
previous period. The variation by Average Volume is the difference between the Net Variation and that
resulting from the Average Rate.
Comparing with the previous quarter, we observe that both points of view of profitable assets as well as
onerous liabilities, there was a growth in the average rate and volumes, contributing for increase in
financial intermediation revenues and expenses.
In the comparison with the same prior-year period, the analysis of the volume and rate allows a good
understanding BB’s global spread changes. Revenues from earning assets grow in a higher pace than
the expenses associated to onerous liabilities. Increase in financial revenues was a result of the
expansion of the average profitable asset volume, followed by reduction in the average rate incurring
upon them. From the interest bearing liabilities point of view, the expenses raise was due not only to
volume increase, but also to the behavior of the average rate on these liabilities.
Table 67. Int. increase and decrease (Inc. and Exp.) due to changes in Vol and Rates (quarterly)
2Q10/1Q10
R$ million
Ave rage
V olum e
(1)
Ave r age
Rate
(2)
2Q10/2Q09
Ne t
Change
(3)
Ave r age
V olum e
(1)
Ave rage
Rate
(2)
Ne t
Change
(3)
Ear ning As s e ts
A vailable Funds in Foreign Currency
Securities + Interbank Investments on Hedge
Loans + Leasing
Remunerated Compulsory Deposits
Total
3
(513)
(28)
(25)
3
(23)
65
(449)
453
(473)
2,934
(246)
513
(165)
348
499
144
643
632
317
200
517
3,786
72
(434)
(20)
(20)
2,687
704
3,352
Inte r e s t Be aring Liabilitie s
Saving Deposits
(41)
(46)
(87)
(170)
(23)
Interbank Deposits
11
(0)
11
(12)
81
Time Deposits
82
(303)
(221)
(227)
Money Market Borrow ing
(171)
69
(398)
17
(411)
(394)
(1,237)
Foreign Borrow ing
(61)
(59)
(120)
(154)
(118)
(273)
Onlending
(33)
47
15
(145)
(162)
(307)
(4)
31
27
(33)
33
(28)
(25)
(52)
(126)
(23)
Financial and Development Funds + Subord. Debt
Foreign Securities Borrow ing
Mortgage-backed Security
Total
8
(56)
(1,197)
0
(150)
(33)
(25)
(30)
(12)
(43)
(791)
(847)
(2,041)
(448)
(2,489)
(1) Net Change - Average Rate
(2) (Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period)
(3) Current Interest - Interest for Previous Period
90 - Banco do Brasil – MD&A 2Q10
40
(193)
Table 68. Int. increase and decrease (Inc. and Exp.) due to changes in Vol and Rates (half-yearly)
1H10/1H09
R$ million
Ave rage
V olum e
(1)
Ave r age
Rate
(2)
Ne t
Change
(3)
Ear ning As s e ts
A vailable Funds in Foreign Currency
12
(21)
(8)
Securities + Interbank Inv estments on Hedge
1,820
(1,926)
(106)
Loans + Leasing
6,266
(221)
Remunerated Compulsory Deposits
Total
743
8,581
60
(1,848)
6,045
803
6,734
Inte r e s t Be ar ing Liabilitie s
Saving Depos its
Interbank Depos its
Time Depos its
Money Market Borrow ing
(485)
101
(384)
(18)
214
195
(974)
498
(476)
(2,411)
801
(1,610)
Foreign Borrow ing
(209)
(203)
(412)
Onlending
(267)
(173)
(439)
Financial and Dev elopment Funds + Subord. Debt
Foreign Sec urities Borrow ing
Mortgage-bac ked Security
Total
(87)
(201)
(45)
(4,614)
92
(21)
(15)
1,212
5
(222)
(60)
(3,402)
(1) Net Change - Average Rate
(2) (Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period)
(3) Current Interest - Interest for Previous Period
91 - Banco do Brasil – MD&A 2Q10
7.5 Provision for Credit Risk
The analysis of the provision for losses included in this chapter already takes into account the figures of
Banco Votorantim.
Table 69. Net Financial Margin
Quar te r ly Flow
R$ million
2Q09
Ne t Inte re s t Incom e
A llow ance f or Loan Losses
Ne t Financial M ar gin
1Q10
Chg. %
2Q10
Half-Ye ar ly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
8,487
9,357
9,461
11.5
1.1
15,472
18,817
21.6
(3,172)
5,316
(3,026)
6,331
(2,871)
6,590
(9.5)
24.0
(5.1)
4.1
(5,663)
9,809
(5,897)
12,920
4.1
31.7
The net financial margin is obtained by deducting expenses with allowances for loan losses from the net
interest income. In 2Q10, a 4.1% growth was observed in the net financial margin when compared to the
previous quarter and 24.0% when measured against the same period in 2009. Expenses related to the
allowance for loan losses had decreased R$ 155 million in relation to that recorded in 1Q10, a 5.1%
drop. BV contributed with R$ 233 million of the total amount of R$ 2,871 million in the 2Q10. In this half
of the year there was an increase of R$ 234 million in expenses related to the allowance for loan losses,
with its amount reached R$ 5,897 million, out of which R$ 435 million refers to Banco Votorantim. There
is no impact in the partnership with BV in 1H09.
The behavior of expenses related to the allowance for loan losses arises from the improvement in BB
default levels which showed the worse rates in 3Q09 and gradually improved since then. It should be
noted that although the loan portfolio had vigorous growths of 29.3% over 12 months and 6.9% over the
quarter, expenses related to the allowance for loan losses grew only 4.1% when 1H10 is compared to
1H09. It is important to highlight that in 2Q10 an additional allowance was reversed, a fact which is
explained below in this chapter.
The ratio between expenses of provisions and the average total portfolio – both accumulated in 12
months – went from 4.2% in 2Q09 to 4.1% in 2Q10, but with an increase of 10 basis points in the period.
There was an improvement of 40 basis points compared to the immediately prior quarter.
Table 70. Allowance for Loan Losses Expenses over Portfolio
R$ million
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
(A ) A llow anc e f or Loan Losses - Quarterly
(1,338)
(2,240)
(2,491)
(3,172)
(3,017)
(2,950)
(3,026)
(2,871)
(B) A llow anc e f or Loan Losses - 12 Months
(6,056)
(6,800)
(7,757)
(9,241)
(10,919)
(11,629)
(12,164)
(11,864)
(C) Loan Portf olio
202,201
224,808
228,101
252,485
265,019
300,829
305,551
326,522
(D) A verage Portf olio – 3 Months
195,431
174,161
218,626
189,144
225,528
203,591
246,363
219,071
257,948
234,430
282,405
250,888
304,936
269,466
316,005
287,413
0.7
3.5
1.0
3.6
1.1
3.8
1.3
4.2
1.2
4.7
1.0
4.6
1.0
4.5
0.9
4.1
(E) A verage Portf olio – 12 Months
Expenses ov er Portf olio (A /D) - %
Expenses ov er Portf olio (B/E) - %
92 - Banco do Brasil – MD&A 2Q10
2Q10
Considering that the agribusiness default indicators behavior improve, there was a reverse in the
additional provision from the rural operations for around R$ 332 million, treated as extraordinary item for
finding BB’s recurring result. Such additional provision was created in Jun/09 and supported by CMN
th
Resolution No. 3,499, of September 27 , 2007, when the risks of customers that have renegotiated
operations in agribusiness activity were reviewed, with normal credit limit and operations, being the
correspondent amount prudentially allocated as additional provision in order to keep up with the
performance evolution of this portfolio, that was so far reverted.
Provisions arising from methodology differences for risk rating between BB and BNC were prudentially
formed by applying the increased risk assigned to the common customers credit portfolio to both banks
(cross-drag), and recorded as additional allowance for loan losses at the beginning of BNC incorporation,
in order to provide resources for the necessary adjustments in the regulatory provision in accordance
rd
with Article 3 of Resolution no. 2,682. With the migration process evolution of the BNC’s portfolios to
BB systems over the second quarter, there was an adaption of such operations levels of risk, a fact that
encouraged the migration of additional provision (R$ 220 million) in order to regulate it.
Moreover, there was a R$ 280 million migration for additional regulatory allowance for loan losses. This
balance is basically due to customers transactions that have a indebtedness less than R$ 50 thousand.
st
CMN Resolution no. 2,682, of 21 December, 1999, allows the classification of this type of risk A
operations. However, for prudence, BB fit into the risk levels set by their credit scoring systems, which
leads to higher regulatory provisions. Until 1Q10 that difference was accounted for as additional
provision.
The figure below details the allowance for loan losses, segregating the minimum provisions required by
CMN Resolution No. 2,682/99 from the total booked. A 1.8% growth is noted in the total allowance as
compared to March 2010 and a 1.2% decrease over the 12-month period. The 9.4% growth in the
required allowance is in line with the loan portfolio performance and with the migrations made between
the allowance for loan losses required and the additional allowance.
R$ million
17,759
13,673
11,187
1,594
14,674
19,070
2,903
2,867
18,617
18,316
18,088
2,782
2,624
1,791
15,691
16,296
1,640
719
10,468
Sep/08
12,079
Dec/08
13,034
Mar/09
Required Provision
14,892
16,167
15,835
Jun/09
Sep/09
Dec/09
Additional Provision
Mar/10
Jun/10
Total Provision
Figure 36. Allowances Breakdown
The transactions rated at risk levels AA-C in this quarter (92.5%) showed improvement in relation to
Mar/10 (91.9%) and Jun/09 (90.6%). BB presented, in this same classification, improved levels
compared to the Banking Industry (91.8%).
93 - Banco do Brasil – MD&A 2Q10
Table 71. Loan Portfolio by Level of Risk
R$ million
Jun/09
M ar /10¹
Balance Pr ovis ion Shar e %
Jun/10¹
Balance Pr ovis ion Shar e %
Balance Pr ovis ion Shar e %
BI²
AA
61,760
-
24.5
78,451
-
25.7
86,326
-
26.4
21.0
A
71,638
358
28.4
91,647
458
30.0
68,141
341
20.9
41.7
19.4
B
69,629
696
27.6
81,058
811
26.5
109,308
1,093
33.5
C
25,651
770
10.2
29,732
892
9.7
38,280
1,148
11.7
9.6
D
8,263
826
3.3
8,722
872
2.9
8,610
861
2.6
2.5
E
2,664
799
1.1
2,883
865
0.9
2,462
739
0.8
1.0
F
1,696
848
0.7
1,651
826
0.5
1,600
800
0.5
0.8
G
1,970
9,216
1,379
9,216
0.8
3.6
1,463
9,944
1,024
9,944
0.5
3.3
1,598
10,196
1,118
10,196
0.5
3.1
0.6
3.3
Total
252,485
14,892
100.0
305,551
15,691
100.0
326,522
16,296
100.0
100.0
A A -C
228,678
23,808
1,824
13,068
90.6
9.4
280,888
24,663
2,161
13,531
91.9
8.1
302,056
24,466
2,582
13,714
92.5
7.5
91.8
8.2
H
D-H
(1) Includes Banco Nossa Caixa and Banco Votorantim
(2) Previous data of March/2010.
The average loan portfolio risk, considering only the required provisions, was of 5.0% in June 2010, 10
basis points below that witnessed in March 2010 (5.1%), and 90 basis points lower than that observed in
Jun/09 (5.9%).
The volume overdue above 15 days of the portfolio amounted to R$ 14,875 million, reaching 4.6% of the
loan portfolio in June 2010, which is about the same default level observed before the worsening of the
world economic crisis. The rate overdue above 60 days reached 3.1%, 50 basis points below that
observed in 1Q10. The rate overdue above 90 days reached 2.7%, below the 3.1% recorded in 1Q10; in
the Banking Industry that indicator closed June 2010 at 3.7%, a default level that was higher than that
observed in BB.
Table 72. Delinquency Ratio
R$ million
3Q08
4Q08
1Q09
2Q09
3Q09¹
4Q09³
1Q10
2Q10
Loan Portfolio
202,201
224,808
228,101
252,485
285,517
300,829
305,551
326,522
7,376
8,951
10,692
13,204
16,571
15,457
15,576
14,875
3.6
4.0
4.7
5.2
5.8
5.1
5.1
4.6
5,234
6,267
7,450
9,485
11,838
11,192
10,941
10,268
2.6
2.8
3.3
3.8
4.1
3.7
3.6
3.1
4,471
5,305
6,197
8,299
10,399
9,783
9,408
8,871
2.2
2.4
2.7
3.3
3.6
3.3
3.1
2.7
Write-of f
1,342
1,229
1,606
1,888
2,377
3,402
3,298
2,800
Recov ery of Write-of f s²
(400)
(467)
(357)
(802)
(686)
(847)
(631)
(757)
Ne t Los s
941
763
1,250
1,086
1,691
2,555
2,668
2,043
Net Loss/Loan Portf olio - % annualized
1.9
1.4
2.2
1.7
2.4
3.4
3.5
2.5
11,187
13,673
14,674
17,759
19,070
18,617
18,316
18,088
5.5
6.1
6.4
7.0
6.7
6.2
6.0
5.5
A llow ance/Past Due Loans + 15 days - %
151.7
152.8
137.2
134.5
115.1
120.4
117.6
121.6
A llow ance/Past Due Loans + 60 days - %
213.8
250.2
218.2
257.7
197.0
236.8
187.2
214.0
161.1
183.4
166.3
190.3
167.4
194.7
176.1
203.9
Pas t Due Loans + 15 days
Pas t Due Loans + 15 days/Loan Portf olio
Pas t Due Loans + 60 days
Pas t Due Loans + 60 days/Loan Portf olio
Pas t Due Loans + 90 days
Pas t Due Loans + 90 days/Loan Portf olio
Allow ance
A llow ance/Loan Portf olio-%
A llow ance/Past Due Loans + 90 days - %
(1) As of 2Q09, Banco Nossa Caixa was included
(2) Includes R$ 271 million in assigned loans in 2Q2, R$ 119 million in 3Q09, R$ 242 million in 4Q09 and R$ 9.3 million in 1Q10.
(3) As of 3Q09, Banco Votorantim was included
The following graph shows the monthly behavior of default rates in Banco do Brasil's domestic portfolio,
excluding BV's portfolio and the remaining balance of BNC, for loans in arrears from 15 to 90 days. The
behavior of those indexes is evidence of improvements in the economy's conditions. The graph shows
that the peak of default in 2009 occurred in August, presenting inflection of the trend as from that month.
94 - Banco do Brasil – MD&A 2Q10
NPL-15
4.6
3.2
3.1
2.9
n/
1
0
0
3.2
4.8
ju
3.4
5.0
m
ay
/1
3.5
5.1
r/1
0
n/
1
9
c/
0
5.4
0
3.5
de
no
v/
0
/0
9
9
3.6
ja
3.9
oc
t
/0
9
3.9
se
p
09
au
g/
l/0
9
3.6
ju
n/
0
9
9
ju
m
ay
/0
r/0
9
3.6
3.5
3.2
4.0
5.4
ap
5.5
/1
0
5.9
m
ar
5.9
5.1
ap
m
ar
/0
9
3.1
6.2
6.0
5.9
10
5.3
fe
b/
6.3
5.6
NPL-90
Figure 37. Overdue above 15 and 90 days
The graph below shows the ratio between the provision required to the provision for transactions
overdue above 90 days from BB and the Banking Industry. It can be observed that BB has a level of
required provision that is more than enough to cover transactions overdue above 90 days. Considering
the entire provision (required + additional), the provision's coverage rate on loans overdue over 90 days
at BB ended Jun/10 at 203.9%.
234.1
227.7
170.0
Sep/08
210.3
186.1 179.4
175.8
Dec/08
Mar/09
183.7
163.5 155.5 162.2 161.9 156.1 166.8 166.7
Jun/09
Sep/09
90 Days BB
Dec/09
Mar/10
169.1
Jun/10
90 Days Banking Industry
Figure 38. Allowance/Past Due Loans + 90 days – BB x BI (%)
With the improved cyclical indicators for the Brazilian economy, the decline tendency in average risk
was maintained. At BB the average risk decreased 10 basis points in the quarterly comparison and 90
basis points when comparing with June 2009; In the Banking Industry it was observed decreases of 50
and 100 basis points, respectively, as shown below:
Table 73. Average Portfolio Risk
Se p/08
A verage Risk BB
A verage Risk BI
De c/08
5.2
5.1
95 - Banco do Brasil – MD&A 2Q10
5.4
5.3
M ar /09
5.7
6.6
Jun/09
5.9
7.2
Se p/09
5.7
7.2
De c/09
5.3
6.9
M ar /10
5.1
6.7
Jun/10
5.0
6.2
7.5.1 Retail Loan Portfolio
Since 4Q09, the retail loan portfolio was reorganized. The small and medium entity portfolio (SMEs) was
spared from retail business and shown separately in a specific chapter (chap. 7.5.2). Hence, the retail
portfolio now consists essentially of individuals business, without taking into consideration the
transactions of the partnership with BV. Regarding BNC operations, some remaining balances still
remain in the loan portfolio, and they are being distributed in the "other" segments as described in
chapter 7.5.6 herein.
In June 2010, the Retail Loan Portfolio grew 48.5% in relation to the same prior-year period and 9.8 % in
relation to March 2010. The performance is influenced by the comparison basis effect, since the
migration from BNC portfolio to BB was made mostly in 1Q10. A volume of R$ 5.6 billion still remains to
be migrated to BB from loan operations originated in BNC.
Table 74. Retail Loan Portfolio by Level of Risk
Jun/09
R$ million
AA
Balance
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10*
Pr ovis ion
Shar e
Balance
Pr ovis ion
Shar e
100
-
0.2
192
-
0.3
249
-
0.3
A
20,689
103
38.5
26,909
135
37.0
10,885
54
13.6
B
17,916
179
33.3
25,335
253
34.8
39,111
391
49.0
C
10,121
304
18.8
14,652
440
20.2
23,648
709
29.6
D
1,488
149
2.8
1,839
184
2.5
2,069
207
2.6
E
444
133
0.8
479
144
0.7
424
127
0.5
F
464
232
0.9
387
194
0.5
469
234
0.6
G
415
2,121
290
2,121
0.8
3.9
339
2,577
237
2,577
0.5
3.5
389
2,587
272
2,587
0.5
3.2
Total
53,756
3,511
100.0
72,709
4,163
100.0
79,832
4,582
100.0
A A -C
48,825
4,931
586
2,925
90.8
9.2
67,088
5,621
827
3,335
92.3
7.7
73,894
5,938
1,155
3,428
92.6
7.4
H
D-H
* Includes Banco Nossa Caixa's operations migrated to BB. Excludes Banco Votorantim's operations.
The retail loan portfolio average risk remained steady in relation to March 2010 and closed June 2010 at
5.7%, a drop of 80 basis points in relation to June 2009 levels.
The following table shows the changes in the Retail Portfolio allowance for loan losses. The large
variation in the number of new contracts, in the Mar-June 2010 period, is due to BNC loan portfolio
migration to BB, of approximately R$650 million in March 2010. The flow of provision on the portfolio
totaled 1.5% in Jun/10.
96 - Banco do Brasil – MD&A 2Q10
The Allowance for Loan Losses movement of the retail portfolio is detailed in the table below:
Table 75. Changes in the Allowance – Retail
R$ million
Re tail Loan Por tfolio¹
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
49,864
53,756
57,737
62,700
72,709
79,832
3,733
3,885
3,511
3,544
3,732
4,163
751
1,109
394
485
312
438
a) Risk Deterioration
1,153
1,292
1,240
1,292
1,165
1,396
b) Risk Improv ement
(402)
(183)
(845)
(807)
(853)
(958)
2 – New Trans actions
561
(624)
533
(754)
245
(883)
259
(799)
793
(960)
380
(806)
Initial Allow ance
1 - Risk Migration
3 – Write-of f s
Total (1 + 2 + 3):
688
888
(244)
(55)
145
12
Other Impacts²
(536)
(1,262)
277
242
287
407
Final Allow ance
3,885
3,511
3,544
3,732
4,163
4,582
A llow ance Required by CMN Resolution 2,682
3,885
3,511
3,544
3,732
4,163
4,582
152
(374)
33
987
1,391
1,226
a) A dded Provision
-
-
-
-
-
-
b) Prov ision Expenses
-
-
-
987
1,391
1,226
Provision Flow - R$ million
Provision / Portf olio - %
7.8
6.5
6.1
6.0
5.7
5.7
Provision Flow / Portf olio - %
0.3
(0.7)
0.1
1.6
1.9
1.5
(1) As of the 1Q10, includes part of the operations of Banco Nossa Caixa which migrated to BB's systems. Excludes Banco Votorantim's portfolio.
(2) Amortization, settlement, release of installments and charge debt
Vintage
We present the vintage of the individual loan portfolio in the graphs below. This methodology, known
abroad as Vintage, affords greater detailing and closer to the portfolio than traditional indicators.
Vintage makes possible to monitor how the default of the set of operations contracted in a particular
period behaves over time. In the first graph, for example, the vintage is performed in the quarterly view.
The lines show how the default of operations contracted in each quarter behaved in the following
periods. The longer lines, therefore, refer to the oldest vintage period.
In the case of the graphs below, we consider operations overdue above 90 days at default, and for
determination of the Loan portfolio for individual customers, the overdraft accounts, credit card
operations and vehicle loans do not appear in these graphs.
The vintage shows how the operations contracted most recently present a more favorable default curve
than those contracted at the beginning of the vintage. This result reflects the constant optimization in the
credit analysis, concession and vintage models.
97 - Banco do Brasil – MD&A 2Q10
Figure 39. Quarterly Vintage
The second graph contains the vintage with annual periodicity, helping the viewing and interpretation of
data. The inflections presented in the previous figure curves refer to loan assignments.
Figure 40. Annual Vintage
In the graphs below, we added detailing of the vehicle loan portfolio, segmented by the operation
contracting origin: Arena I - operations contracted in BB’s branches; Arena II - operations contracted in
associated vehicle dealerships.
In the graph below we emphasize the vehicle financing portfolio contracted by the BB's branches:
98 - Banco do Brasil – MD&A 2Q10
Figure 41. Annual Vintage – Vehicle Loan Portfolio – Arena I
In this figure we emphasize the vehicle financing portfolio contracted by automobile dealing companies:
Figure 42. Annual Vintage – Vehicle Loan Portfolio – Arena II
99 - Banco do Brasil – MD&A 2Q10
7.5.2 SMEs Loan Portfolio
As of 4Q09, we prepared a loan portfolio for small and medium entities (SMEs). Until 3Q09, this portfolio
appeared within the Retail Portfolio. Foreign trade transactions by SMEs are not included in this portfolio.
SME loan portfolio rose 35.1% over the last 12 months and 10.9% compared to Mar /10. This increase
is mainly due to the working capital products performance: BB Giro Empresa Flex which amounted R$
9.1 billion, a 28.3% growth in relation to Jun/09. It is important to emphasize that in this quarter BNC
transactions with businesses were integrated into BB systems. At the end of June 2010, operations
classified at risk levels AA to C exhibited an improvement of 80 basis points compared to March 2010,
representing 91.2% of the total portfolio.
Table 76. Small and Micro Enterprise Loan Portfolio
Jun/09
R$ million
Balance
AA
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10
Pr ovis ion
Shar e
Balance
Pr ovis ion
Shar e
4,986
-
15.0
8,355
-
20.6
11,130
-
24.8
A
13,390
67
40.2
15,577
78
38.4
13,823
69
30.7
B
10,739
107
32.3
11,578
116
28.6
14,869
149
33.1
C
733
22
2.2
1,146
34
2.8
1,177
35
2.6
D
822
82
2.5
1,225
122
3.0
996
100
2.2
E
439
132
1.3
482
144
1.2
490
147
1.1
F
359
179
1.1
271
135
0.7
311
155
0.7
G
356
1,470
249
1,470
1.1
4.4
255
1,661
178
1,661
0.6
4.1
311
1,859
218
1,859
0.7
4.1
Total
33,294
2,309
100.0
40,548
2,470
100.0
44,966
2,732
100.0
A A -C
29,849
3,446
196
2,113
89.7
10.3
36,656
3,892
228
2,241
90.4
9.6
41,000
3,966
253
2,479
91.2
8.8
H
D-H
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
The following table details the changes in Allowance for Loan Losses for the Micro and small businesses
Portfolio:
Table 77. Changes in the Allowance – SMEs
R$ million
Re tail Loan Por tfolio
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
31,637
33,294
35,311
39,478
40,548
44,966
1,484
1,792
2,309
2,625
2,595
2,470
1 - Risk Migration
366
580
387
65
(2)
198
a) Risk Deterioration
765
1,017
951
899
907
977
b) Risk Improv ement
(399)
(437)
(565)
(833)
(909)
(778)
2 – New Trans actions
137
(394)
213
(412)
200
(531)
183
(815)
143
(895)
311
(694)
Initial Allow ance
3 – Write-of f s
Total (1 + 2 + 3):
109
381
56
(567)
(755)
(185)
Other Impacts*
198
137
260
537
629
448
Final Allow ance **
1,792
2,309
2,625
2,595
2,470
2,732
A llow ance Required by CMN Resolution 2,682
1,792
2,309
2,625
2,595
2,470
2,732
308
518
316
(30)
(126)
262
a) A dded Provision
-
-
-
-
-
-
b) Prov ision Expenses
-
-
-
-
-
-
Provision / Portf olio - %
5.7
6.9
7.4
6.6
6.1
6.1
Provision Flow / Portf olio - %
1.0
1.6
0.9
(0.1)
(0.3)
0.6
Provision Flow - R$ million
(1) Amortization, settlement, release of installments and charge debt
(2) Additional Provision allocated to the Commercial Loan Portfolio
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
100 - Banco do Brasil – MD&A 2Q10
7.5.3 Commercial Loan Portfolio
The commercial portfolio grew 31.9% in June 2010 as compared to June 2009, whereas allowances
grew 14.6% over the same comparison period. The commercial loan portfolio is strongly influenced by
the entering into and settlement of operations in material amounts with large customers. At the end of
June 2010 the transactions classified into risk level AA to C remained almost unchanged in relation to
those observed in March 2010, but improved 40 basis points when compared to June 2009.
Table 78. Commercial Loan Portfolio by Level of Risk
Jun/09
R$ million
Balance
AA
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10
Pr ovis ion
Shar e
Balance
Pr ovis ion
Shar e
25,970
-
52.1
35,198
-
58.9
37,578
-
57.1
A
9,359
47
18.8
8,819
44
14.7
11,538
58
17.5
B
11,152
112
22.4
11,834
118
19.8
13,303
133
20.2
C
1,869
56
3.7
2,258
68
3.8
1,617
48
2.5
D
691
69
1.4
871
87
1.5
943
94
1.4
E
262
79
0.5
252
76
0.4
178
53
0.3
F
106
53
0.2
92
46
0.2
108
54
0.2
G
190
290
133
290
0.4
0.6
47
429
33
429
0.1
0.7
71
470
50
470
0.1
0.7
Total
49,889
838
100.0
59,799
901
100.0
65,805
960
100.0
A A -C
48,350
1,539
214
623
96.9
3.1
58,108
1,691
230
671
97.2
2.8
64,035
1,769
239
721
97.3
2.7
H
D-H
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
The following table details the changes in Allowance for Loan Losses for the Commercial Portfolio.
Table 79. Changes in the Allowance - Commercial
R$ million
Com m e r cial Loan Por tfolio
Initial Allow ance
1 - Risk Migration
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
48,367
49,889
52,573
57,189
59,799
65,805
492
599
838
1,005
1,085
901
27
278
215
78
(142)
22
a) Risk Deterioration
225
330
348
373
193
299
b) Risk Improv ement
(198)
(53)
(133)
(295)
(335)
(277)
86
(60)
178
(74)
109
(75)
233
(180)
111
(259)
151
(163)
10
2 – New Trans actions
3 – Write-of f s
Total (1 + 2 + 3):
52
382
249
132
(290)
Other Impacts¹
54
(143)
(82)
(51)
106
49
599
838
1,005
1,085
901
960
Final Allow ance
A llow ance Required by CMN Resolution 2,682
599
838
1,005
1,085
901
960
Changes in the Prov ision - in R$ million
167
312
242
260
75
223
-
-
-
-
-
-
167
312
242
260
75
223
Provision / Portf olio - %
1.2
1.7
1.9
1.9
1.5
1.5
Changes in the Prov ision - % of Portf olio
0.3
0.6
0.5
0.5
0.1
0.3
a) A dditional Prov ision²
b) Provision Expense
(1) Amortization, settlement, release of installments and charge debt
(2) Additional Provision allocated to the Commercial Loan Portfolio
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
101 - Banco do Brasil – MD&A 2Q10
7.5.4 Agribusiness Loan Portfolio
In June 2010 the agribusiness portfolio grew 5.3% in twelve months and 9.7% over March 2010, mostly
due to the seasonality in the period, as detailed in chapter 6.5.3 herein. In June 2010 the loans classified
at risk levels AA-C accounted for 89.5% of the portfolio, 240 basis points higher than the number
presented in June 2009 and 190 basis points over Mar/10. The porfolio growth was influenced by lowrisk agroindustrial loan contracts.
The relationship between the provisions required (CMN Resolution 2,682/99) and the balance of
operations went from 7.6% in 2Q09 to 6.2% in 2Q10, improvement of 140 basis points in the period.
Table 80. Agribusiness Loan Portfolio by Level of Risk
Jun/09
R$ million
Balance
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10
Pr ovis ion
Shar e
Balance
Pr ovis ion
Shar e
AA
13,673
-
20.5
10,534
-
16.4
13,310
-
18.9
A
17,754
89
26.6
18,058
90
28.2
10,003
50
14.2
B
18,234
182
27.3
19,012
190
29.7
30,590
306
43.5
C
8,527
256
12.8
8,565
257
13.4
9,050
272
12.9
D
3,319
332
5.0
3,252
325
5.1
3,239
324
4.6
E
1,008
302
1.5
876
263
1.4
674
202
1.0
F
356
178
0.5
449
225
0.7
312
156
0.4
G
670
3,234
469
3,234
1.0
4.8
402
2,965
281
2,965
0.6
4.6
355
2,788
248
2,788
0.5
4.0
Total
66,775
5,042
100.0
64,113
4,597
100.0
70,321
4,346
100.0
A A -C
58,188
8,587
527
4,515
87.1
12.9
56,169
7,945
537
4,059
87.6
12.4
62,953
7,367
627
3,718
89.5
10.5
H
D-H
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
The following table details the changes in Allowance for Loan Losses for the Portfolio Agribusiness.
Table 81. Changes in the Allowance – Agribusiness
R$ million
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
63,492
66,775
67,237
65,651
64,113
70,321
4,784
5,087
5,042
4,950
4,611
4,597
1 - Risk Migration
647
144
(142)
(315)
(45)
(364)
a) Risk Deterioration
873
774
922
899
786
739
b) Risk Improv ement
(226)
(631)
(1,064)
(1,214)
(831)
(1,103)
2 – New Trans actions
3 – Write-of f s
974
(357)
1,301
(288)
865
(527)
564
(944)
379
(605)
560
(621)
Total (1 + 2 + 3):
1,264
1,156
196
(695)
(271)
(425)
Other Impacts¹
(961)
(1,201)
(288)
356
257
174
Final Allow ance
5,087
5,042
4,950
4,611
4,597
4,346
A llow ance Required by CMN Resolution 2,682
5,087
5,042
4,950
4,611
4,597
4,346
660
244
435
605
591
370
-
(332)
-
-
-
332
b) Prov ision Expense
660
576
435
605
591
38
Provision / Portf olio - %
8.0
7.6
7.4
7.0
7.2
6.2
Changes in the Prov ision - % of Portf olio
1.0
0.9
0.6
0.9
0.9
0.5
Agr ibus ine s s Loan Por tfolio
Initial Allow ance
Changes in the Prov ision - in R$ million
a) A dditional Provis ion²
(1)Amortization, settlement, release of installments and charge debt
(2) Additional Provision allocated to the agribusiness loan portfolio
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
102 - Banco do Brasil – MD&A 2Q10
The average risk of the portfolio is strongly influenced by the operations from 2005 to 2007 harvests
extended with total balance of R$ 10,308 million. In the following table, the Agribusiness Loan Portfolio
is divided in extended and unextended operations.
Table 82. Portfolio with and without Roll Over – Agribusiness
Por tfolio Without Rollove r
Balance
Ris k
Allow ance
for Loan
Los s e s
Pas t Due _90
437¹
Por tfolio w ith Rollove r
Pas t Due 90/
Ballance ²
Balance
Allow ance
for Loan
Los s e s
Pas t Due _90
28¹
Pas t Due 90/
Ballance ²
AA
12,331
-
-
979
-
A
9,582
48
(0)
-
421
2
(0)
-
B
28,102
281
-
-
2,488
25
-
-
C
6,646
199
14
-
2,404
72
1
-
D
1,761
176
39
-
1,477
148
4
-
E
221
66
49
-
453
136
27
-
F
141
71
44
-
171
85
32
-
G
206
144
70
-
149
105
45
-
H
1,023
1,023
445
Total
60,013
2,008
660
1.1%
1,765
1,765
403
10,308
2,338
512
5.0%
(1) Overdue operations at level AA refer to credit with third party risk
(2) The delay resulting from overdue operations with third party risk was not included in the calculation of the rate
According to the table above, transactions overdue above 90 days represent 1.1% of the unextended
total portfolio. If we compare this indicator to the extended operations, there is a gap of only 390 basis
points.
In the table below we present the balances, rate of default 90 days and average risk of the agribusiness
portfolio segmented in total portfolio, extended and not extended.
103 - Banco do Brasil – MD&A 2Q10
Table 83. Agribusiness Portfolio Rates
R$ million
2Q09
3Q09
4Q09
1Q10
2Q10
Lo a n P o rtfo lio
66,775
67,237
65,651
64,113
70,321
P ro v isio n
5,042
4,950
4,611
4,597
4,346
P a st D ue Lo a ns + 90 days
1,786
2,588
2,146
2,050
1,638
Past Due Loans + 90 days/Loan Po rtfolio - %
2.7
3.8
3.3
3.2
2.3
Allo wance/Lo an Po rtfolio - %
7.6
7.4
7.0
7.2
6.2
288
527
944
605
621
14,648
14,278
11,743
11,439
10,308
2,711
2,939
2,635
2,542
2,338
738
1,401
1,076
904
540
5.0
9.8
9.2
7.9
5.2
18.5
20.6
22.4
22.2
22.7
127
371
733
450
419
Write-Off
Ext ende d Ope ra tio ns – B B R isk + T hird P a rt ies
Pro visio n
Past Due Loans + 90 days
Transactions overdue + 90 days/To tal Po rtfolio (%)
Pro visio n/Extended Operations - %
Write-Off
Une xtended Ope ra tio ns – B B R isk + T hird P a rt ie s
52,127
52,959
53,908
52,674
60,013
Pro visio n
2,331
2,011
1,976
2,055
2,008
Past Due Loans + 90 days
1,047
1,187
1,070
1,146
1,098
Transactions overdue + 90 days/Unextended o perations - %
2.0
2.2
2.0
2.2
1.8
Pro visio n/Unextended Operations - %
4.5
3.8
3.7
3.9
3.3
162
156
211
154
202
13,431
13,077
10,951
10,691
9,599
2,711
2,939
2,635
2,542
2,337
738
1,401
1,076
872
512
5.5
10.7
9.8
8.2
5.3
20.2
22.5
24.1
23.8
24.4
127
371
733
450
419
Write-Off
Ext ende d Ope ra tio ns – B B R isk
Pro visio n
Past Due Loans + 90 days
Transactions overdue + 90 days/Unextended o perations - %
Pro visio n/Unextended Operations - %
Write-Off
Une xtended Ope ra tio ns – B B R isk
49,315
50,321
52,078
50,910
58,289
Pro visio n
2,331
2,011
1,976
2,055
2,008
Past Due Loans + 90 days
1,047
1,187
1,070
1,146
1,098
Transactions overdue + 90 days/Unextended o perations - %
2.1
2.4
2.1
2.3
1.9
Pro visio n/Unextended Operations - %
4.7
4.0
3.8
4.0
3.4
162
156
211
154
202
52,127
52,959
53,908
52,674
60,013
1,243
1,209
1,219
1,232
1,120
2.4
2.3
2.3
2.3
1.9
49,315
50,321
52,078
50,910
58,289
1,243
2.5
1,209
2.4
1,219
2.3
1,232
2.4
1,120
1.9
Write-Off
Simulat io n Operat io ns no t Exte nde d wit ho ut dra g e ff ec t o f Exte nde d Operatio ns
a- BB Risk + Third Parties
b- Pro visio n
Average Risk (b/a)
c- BB Risk
d- Pro visio n
Average Risk (d/c)
The delay resulting from overdue operations with third party risk was included in the calculation of the rate. Does not consider operations of Banco
Nossa Caixa and Banco Votorantim.
The average risk of BB Risk extended operations in 2Q10, presented a 60 basis points improvement in
relation to 1Q10 totaling 24.4% in the 2Q10.
CMN Resolution No. 2,682/99, which provides risk ratings and the creation of allowance for loan losses,
requires maintenance of risk with renegotiated loans at the risk level found at the time of renegotiation.
Owing to these rule, renegotiated transactions increase the loan portfolio's average risk.
A simulation performed with unextended BB risk transactions, after removing the drag effect caused by
extended loans, shows that there would be a 3.4% to 1.9% decline in average risk in 2Q10.
104 - Banco do Brasil – MD&A 2Q10
In the figure below the agribusiness portfolio is segregated in extended and non-extended operations, by
appropriation and respective shares.
2Q10*
14.1%
Costs
48.7%
Inves tment
33.8%
Ref inancing
17.6%
R$ 9.6 billion
Ave r age Ris k : 24.4%
Costs
65.8%
Inves tment
30.7%
R$ 58.3 billion
3.4%
Ave r age Ris k : 3.4%
Marketing
85.9%
Rollove r :
Without Roll Ove r :
-w /o Rollove r Effe ct: 1.9%
Portfolio w ithout rollover
Portfolio w ith rollover
* Agribusiness portfolio, excluding third-party risk operations
Figure 43. Stratified Agribusiness Portfolio
105 - Banco do Brasil – MD&A 2Q10
7.5.5 Foreign Trade Loan Portfolio
The foreign trade finance portfolio recorded a decrease of 26.0% (Jun/10 – Jun/09). Loans rated at
levels of risk AA to C ended Jun/10 with participation of 95.2% of total, and those rated as D-H, 4.8% in
Mar/10.
Table 84. Foreign Trade Loan Portfolio by Level Risk
Jun/09
R$ million
Balance
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10
Pr ovis ion
Shar e
Balance
Pr ovis ion
Shar e
AA
6,768
-
43.0
5,779
-
44.9
4,596
-
39.5
A
3,029
15
19.3
1,769
9
13.7
1,537
8
13.2
B
4,166
42
26.5
3,303
33
25.7
3,372
34
29.0
C
1,329
40
8.4
1,482
44
11.5
1,578
47
13.6
D
195
19
1.2
254
25
2.0
249
25
2.1
E
14
4
0.1
61
18
0.5
36
11
0.3
F
36
18
0.2
15
7
0.1
30
15
0.3
G
54
141
38
141
0.3
0.9
27
181
19
181
0.2
1.4
46
202
32
202
0.4
1.7
Total
15,732
317
100.0
12,871
338
100.0
11,645
374
100.0
A A -C
15,292
440
97
221
97.2
2.8
12,333
538
86
251
95.8
4.2
11,082
562
89
285
95.2
4.8
H
D-H
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
The table below shows the effects of the global risk of the Foreign Trade Loan Portfolio on provisions,
which provision vs. portfolio ratio of was pushed 60 basis points in relation to the 2Q10 and 120 basis
points against 2Q09. That behavior is explained by term extensions in export-related exchange
transactions as allowed by CMN Resolutions No. 3,675 and 3,826, which allow term extensions for
export-related exchange transactions contracted before January 29, 2009. The extensions' deadline is
th
December 30 , 2010. When extending a transaction, the provisions are stated as per the poorest risk
transaction.
Table 85. Changes in Allowance – Foreign Trade
R$ million
Fore ign Tr ade Loan Por tfolio
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
17,384
15,732
14,522
13,361
12,871
11,645
Initial Allow ance
153
294
317
335
357
338
1 - Risk Migration
15
71
6
(62)
(16)
24
a) Risk Deterioration
87
84
66
96
52
86
b) Risk Improvement
(72)
(13)
(60)
(157)
(68)
(63)
88
(2)
89
(54)
89
(30)
161
(70)
68
(36)
72
(31)
2 – New Transactions
3 – Write-of f s
Total (1 + 2 + 3):
101
106
65
29
16
65
40
(83)
(48)
(7)
(36)
(29)
Final Allow ance
294
317
335
357
338
374
A llow ance Required by CMN Resolution 2,682
294
317
335
357
338
374
Changes in the Provision - in R$ million
143
77
47
93
16
67
-
-
-
-
-
-
143
77
47
93
16
67
Provision / Portf olio - %
1.7
2.0
2.3
2.7
2.6
3.2
Changes in the Provision - % of Portf olio
0.8
0.5
0.3
0.7
0.1
0.6
Other Impacts¹
a) A dditional Provision²
b) Provision Expense
(1) Amortization, settlement, release of installments and charge debt
(2) Additional Provision allocated to the loan portfolio Foreign Trade
*As of 2Q10, it includes Banco Nossa Caixa's operations migrated to BB. Does not consider operations of Banco Votorantim.
106 - Banco do Brasil – MD&A 2Q10
7.5.6 Foreign Loan Portfolio and Others
The table below shows the risk profile of BB’s foreign loan portfolio. In June 2010 the loans ranked at
risk levels AA-C accounted for 97.7% of the total, an increase of 20 basis points in relation to Mar/10.
Table 86. Foreign Loan Portfolio by Risk Level
Jun/09
R$ million
Balance
M ar /10
Pr ovis ion
Shar e
Balance
Jun/10
Provis ion
Share
Balance
Provis ion
Share
AA
7,767
-
59.4
11,747
-
67.1
13,367
-
68.5
A
2,692
13
20.6
2,656
13
15.2
4,110
21
21.1
B
994
10
7.6
2,439
24
13.9
1,325
13
6.8
C
1,306
39
10.0
228
7
1.3
246
7
1.3
D
173
17
1.3
218
22
1.2
271
27
1.4
E
0
0
0.0
103
31
0.6
68
20
0.3
F
0
0
0.0
0
0
0.0
0
0
0.0
G
10
126
7
126
0.1
1.0
0
116
0
116
0.0
0.7
0
118
0
118
0.0
0.6
Total
13,068
213
100.0
17,507
214
100.0
19,504
206
100.0
A A -C
12,759
309
63
150
97.6
2.4
17,070
437
45
169
97.5
2.5
19,048
456
41
165
97.7
2.3
H
D-H
Does not consider operations of Banco Nossa Caixa and Banco Votorantim.
The table below exhibits the rating by risk of the other loans not classified in the Retail, SME,
Commercial, Agribusiness, Foreign Trade and Abroad portfolios, plus the loan portfolios of Banco Nossa
Caixa (remaining balance not migrated to BB's systems) and Banco Votorantim.
Table 87. Other Transactions Portfolio – Banco Nossa Caixa and Banco Votorantim (50%)
Jun/09
R$ million
Balance
M ar /10
Pr ovis ion
Share
Balance
Jun/10
Provis ion
Share
Balance
Pr ovis ion
Shar e
AA
2,496
-
12.5
6,647
-
17.5
6,096
-
17.7
A
4,725
24
23.7
17,859
89
47.0
16,245
81
47.2
B
6,428
64
32.2
7,558
76
19.9
6,739
67
19.6
C
1,766
53
8.8
1,401
42
3.7
964
29
2.8
D
1,575
158
7.9
1,064
106
2.8
844
84
2.5
E
497
149
2.5
631
189
1.7
593
178
1.7
F
375
188
1.9
437
218
1.1
371
185
1.1
G
275
1,833
193
1,833
1.4
9.2
393
2,014
275
2,014
1.0
5.3
425
2,172
298
2,172
1.2
6.3
Total
19,972
2,661
100.0
38,004
3,010
100.0
34,450
3,096
100.0
A A -C
15,416
4,556
141
2,520
77.2
22.8
33,465
4,538
207
2,803
88.1
11.9
30,044
4,407
178
2,918
87.2
12.8
H
D-H
107 - Banco do Brasil – MD&A 2Q10
7.6 Fee Income
Fee income (RPS), which include revenues from services provided and bank fee income (classification
defined by BCB in 2008), amounted R$ 3,954 million in 2Q10, an increase of 8.8% in the previous
quarter and of 15.1% in relation to 2Q09.
In the semester, Fee Income reached R$ 7,588 million, increase of 19.0% in relation to the same period
of previous year. It is worth reminding that 1H09 revenues had not yet consider Banco Votorantim (BV)'s
consolidation, having started considering Banco Nossa Caixa (BNC)'s acquisition only as of the second
quarter. In order to improve comparison, including for purposes of 2010 Guidance, a proforma base was
prepared for 1Q09, simulating BV and BNC revenue consolidation during the entire period. Even using
such proforma comparison base, fee income of Banco do Brasil conglomerate would show an increase
of 10.8% in 1H10. This performance is slightly above the range of growth estimates for the growth for
the Income from Services Provided disclosed in the 2010 Guidance, which estimates a growth from 7%
to 10%.
Bank fee income, characterized as such fees indicated by the Central Bank in Circular Letter 3371 and
detailed in the accompanying note Other operating income/expenses", totalized R$ 1,101 million,
showing an increase of 24.2% upon previous quarter and 25.3% in relation to the amount recorded in
2Q09. In the semester, these revenues reached R$ 1,988 million, a growth of 26.8% in relation to the
same period in 2009.
In relation to the details of fees income mentioned in the table below, it is worth mentioning that the
historical series has been revised during the quarter, due to improvement in determination of the "capital
market earnings" line which started considering including revenues earned by BB subsidiaries in Brazil
and abroad.
Table 88. Fee Income
Quar te r ly Flow
R$ million
Fe e Incom e
2Q09
1Q10
Chg. %
2Q10
Half-Ye arly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
3,436
3,634
3,954
15.1
8.8
6,379
7,588
19.0
A ccount Fees
863
875
985
14.1
12.6
1,587
1,861
17.2
Credit / Debit Cards
571
712
727
27.3
2.1
1,140
1,439
26.2
Investment Fund Management Fees
506
537
575
13.5
7.1
952
1,112
16.8
Loan Fees
344
307
413
19.8
34.3
654
720
10.0
Collections
284
288
302
6.5
4.9
541
591
9.2
Insurance, Pension and Savings Bonds
117
106
190
62.2
79.2
187
296
58.3
Billings
120
143
141
18.0
(1.1)
230
284
23.2
Interbank
122
130
137
12.1
5.2
241
267
10.5
Capital Market Fees
138
371
106
430
98
386
(28.5)
4.0
(7.1)
(10.4)
180
667
204
816
13.8
22.3
Other
108 - Banco do Brasil – MD&A 2Q10
7.6.1 Revenues from Checking Account Fees
Checking account fees amounted R$ 985 million in 2Q10, which represents a 12.6% growth over 1Q10
and 14.1% over 2Q09. In the semester these revenues reached R$ 1,861 million, a 17.2% expansion
over the same period in the previous year.
Good performance of checking account fees arises, besides business expansion, from adopting many
measures with the purpose of improving the intelligence of receivable fees management, enhancing
collection effectiveness. Such measures allow revenues to increase even without creating new fees or
increasing prices during the period.
BB's checking account base reached 34,920 thousand in June 2010, being 32,695 thousand related to
individual accounts, and 2,225 thousand to businesses. During this quarter, Banco Popular (BPB) has
been merged into BB, causing deactivation of accounts being operated in that institution. There has also
been a reduction in checking accounts due to shadowing arisen from the continuity of the BNC customer
base integration process. Thus, individual checking accounts have been reduced by 0.7% when
comparing June/10-Mar/10, but have increased by 0.4% in relation to June/10-June/09. Similar behavior
occurred in corporate accounts: reduction by 4.3% upon Mar/10 and increase by 1.5% in relation to
June/09.
From a broader perspective, which considers not only current accounts, but all the customers that have
some active business with the Banco do Brasil’s Conglomerate, such as INSS beneficiaries, savings
account holders and customers of other products (including those sold to non-account holders through
partnerships entered into with retail networks), the total base reaches about 53.3 million customers.
in thousand
28,173
28,494
32,555
32,657
32,781
32,910
32,695
28,701
1,944
1,884
1,874
2,192
2,218
2,207
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Individuals
Figure 44. Checking Account Base
109 - Banco do Brasil – MD&A 2Q10
Businesses
2,324
Mar/10
2,225
Jun/10
7.6.2 Asset Management
In 2Q10, Banco do Brasil recorded R$ 575 million in income from asset management fees, which
represents a 7.1% growth over the preceding quarter, and of 13.5% as compared to the same period in
2009. In the semester, these revenues reached R$ 1,112 million, a growth of 16.8% in relation to 1H09.
The sum of funds managed attained R$ 344.9 billion at the end of the quarter, an increase of 4.5% as
compared with the previous quarter and 17.3% over 2Q09. BB Administração de Ativos - Distribuidora
de Títulos e Valores Mobiliários (BB DTVM), a full-owned subsidiary of Banco do Brasil, ended 2Q10 as
leader in the balance of Assets under Management, according to the Anbima ranking. At the end of the
quarter, BB held a 22.3% market share in fund management against a 20.3% in June 2009.
It is important to highlight that these figures still do not include funds managed by Banco Votorantim,
that attained R$ 19.0 billion in June 2010. If 50.0% of the balance managed by BV were consolidated,
percentage equal to BB's interest in the latter's total equity capital, Banco do Brasil's market share would
rise to 23.5%.
R$ billion
22.3
21.7
20.7
20.9
21.1
20.3
21.7
19.8
241.5
246.3
Sep/08
Dec/08
293.9
302.6
306.7
Jun/09
Sep/09
Dec/09
330.1
344.9
259.3
Mar/09
Asset Management
Mar/10
Jun/10
Market Share - %
Figure 45. Asset Management
The classification of managed funds by segment of customers, as shown in the table below, includes
BNC's funds as from September 2009. With respect to previous quarter, the major absolute growth
occurred in funds destined to institutional investors, showing an expansion of R$ 6.8 billion, and the
major percentage variation occurred in funds destined to businesses, with an increase of 9.0%. In
comparison to June 2009, the highest percentage increases have been observed in funds destined to
governmental and foreign investor clients, thus contributing for the relative participation of funds
destined to institutional investors to show a reduction in twelve months from 39.9% to 37.4%.
110 - Banco do Brasil – MD&A 2Q10
Table 89. Investment Funds and Managed Portfolios by Customer
Chg. %
R$ million
Institutional Investors
Jun/09
Shar e %
M ar /10
Shar e %
Jun/10
Shar e %
On Jun/09
On M ar /10
105,602
39.9
122,236
37.0
129,075
37.4
22.2
5.6
Individuals
60,860
23.0
77,105
23.4
76,952
22.3
26.4
(0.2)
Government
62,293
23.5
84,773
25.7
89,183
25.9
43.2
5.2
Businesses
24,173
12,017
9.1
4.5
30,311
15,677
9.2
4.7
33,041
16,635
9.6
4.8
36.7
38.4
9.0
6.1
264,944
100.0
330,101
100.0
344,886
100.0
30.2
4.5
Foreign Investors
Total
In comparison to June 2009, an analysis of resource distribution by type of funds and portfolios shows a
growth in the relative participation of fixed income funds. This movement is consistent with the growth
observed in the funds managed for government clients, which are conservative in the management of
their funds. In comparison with previous quarter, there was not a significant alteration in distribution of
funds and portfolios by type, with emphasis only to the growth in the relative participation of fixed rate
managed portfolios.
Table 90. Investment Funds and Managed Portfolios by Type
Chg. %
R$ million
Inve s tm e nt Fund
Jun/09
Shar e %
M ar /10
Shar e %
Jun/10
Shar e %
On Jun/09 On M ar /10
252,555
95.3
317,723
96.3
329,924
95.7
30.6
3.8
132,442
50.0
178,870
54.2
186,545
54.1
40.9
4.3
V ariable
43,484
16.4
50,203
15.2
50,298
14.6
15.7
0.2
Multimarket
42,453
16.0
47,146
14.3
50,348
14.6
18.6
6.8
Others
34,177
12.9
41,505
12.6
42,733
12.4
25.0
3.0
12,389
4.7
12,378
3.7
14,962
4.3
20.8
20.9
8,144
4,245
3.1
1.6
10,376
2,002
3.1
0.6
14,171
791
4.1
0.2
74.0
(81.4)
36.6
(60.5)
264,944
100.0
330,101
100.0
344,886
100.0
30.2
4.5
Fixed
M anage d Por tfolios
Fixed
V ariable
TOTAL
111 - Banco do Brasil – MD&A 2Q10
7.6.3 Cards
Fee income in connection with the card business totaled R$ 727 million in the 2Q10, which is 27.3%
higher than the amount recorded in the same period of the prior year and 2.1% higher when compared
to the 1Q10. In the semester, these revenues reached R$ 1,439 million, a 26.2% growth in relation to
1H09.
The significant evolution compared to the 1H09 results from the significant increase of the card base
and billing (detailed below), as well as from the fact that Nossa Caixa's income started to be accounted
for in the 2Q09. Besides, the fact that fee income from Visa Vale (Companhia Brasileira de Soluções e
Serviços - CBSS) started to be included in the card income line as of 1Q10 also impairs the semestral
comparison. Formerly, such income was included in "other income from operations", and the purpose of
this change is to adjust the methodology to what had already been practiced for Cielo's income.
The total card base, including credit and debit cards and those issued through partnerships and for nonaccount holders, reached 86.2 million plastic cards, practically steady in relation to the previous quarter.
In 12 months, there was a 2.5% growth.
Credit Cards (million)
Debit Cards (million)
25.0
25.4
25.2
27.2
27.5
28.0
28.0
28.8
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
52.0
52.7
53.0
Sep/08
Dec/08
Mar/09
57.0
57.6
59.3
58.4
57.5
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Figure 46. Credit and Debit Cards
The billings by cards rose to R$ 25.5 billion in the quarter, a 19.9% expansion as compared to 2Q09 and
6.2% over 1Q10. BB's market share measured by Abecs based on sector billing (Associação Brasileira
das Empresas de Cartões de Crédito e Serviços), was 20.3% in 2Q10 compared to 20.4% in previous
quarter, and 20.2% in 2Q09.
112 - Banco do Brasil – MD&A 2Q10
R$ billion
25.8
25.5
24.0
23.7
21.2
19.4
18.0
17.0
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Figure 47. Card Revenue
The historical series of global card revenues was reviewed as of the disclosure of results for 1Q10,
aiming to highlight card revenues earned by Visanet and Visa Vale. For this reason, equivalence
revenues will no longer be shown as of 1Q10, exactly because the affiliates' income is already
consolidated in the Banco do Brasil conglomerate.
Global card revenue totaled R$ 1,348 million in the 2Q10, which is 0.3% higher than the amount
recorded in the previous quarter and 13.0% higher when compared to 2Q09. In the semester, these
revenues reached R$ 2,691 million, a 22.2% growth in relation to 1H09.
Table 91. Global Card Revenue
Quar te r ly Flow
R$ million
2Q09
1Q10
Chg. %
2Q10
Half-Ye ar ly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
Fee Income - Cards
604
712
727
20.3
2.1
1,050
1,439
37.0
Financing Income
540
574
552
2.1
(3.9)
1,052
1,126
7.0
9
39
58
69
77.7
19.1
10
90
127
41.1
1,192
1,344
1,348
13.0
0.3
2,202
2,691
22.2
Equity Income - V isanet
Other Income and Other Services
Total Re ve nue s *
*Since 4Q09 it is included BNC card revenue.
113 - Banco do Brasil – MD&A 2Q10
7.6.4 Collection
Revenues from collections reached R$ 302 million in 2Q10, an increase of 4.9% in relation to the
previous quarter and of 6.5% in relation to the same period of 2009. In the semester, these revenues
reached R$ 591 million, a growth of 9.2% in relation to 1H09.
A total of 145.9 million bank payment slips were issued in 2Q10, an amount 8.4% higher than 1Q10 and
14.4% above the same period of 2009. This variation is due mainly to the incorporation of bank payment
slips issued by BNC in this quarter. In relation to the volume obtained, it was also observed a growth of
6.0% compared to 1Q10 and 17.7% in twelve months.
3Q08
4Q08
1Q09
Figure 48. BB Billings Volume
114 - Banco do Brasil – MD&A 2Q10
2Q09
3Q09
4Q09
1Q10
155,953
147,095
152,645
145,513
132,457
125,562
140,065
134,621
R$ million
2Q10
7.7 Administrative Expenses
The Commercial Income, which expresses BB’s business earnings after deducting administrative and
tax expenses, reached R$ 4,598 million in 2Q10, an increase of 8.4% in relation to the previous quarter
and of 30.7% in relation to the same period of 2009. Commercial income totaled R$ 8,839 million in the
semester, 32.6% higher than that recorded in the same period of 2009.
Table 92. Commercial Income
Quar te rly Flow
R$ million
2Q09
Contribution M ar gin
1Q10
Chg. %
2Q10
Half-Ye ar ly Flow
On 2Q09 On 1Q10
1H09
1H10
Chg. %
On 1H09
8,417
9,567
10,103
20.0
5.6
15,539
19,670
26.6
(4,892)
(5,300)
(5,471)
11.8
3.2
(8,823) (10,771)
22.1
Personnel Expenses
(2,613)
(2,851)
(2,937)
12.4
3.0
(4,742)
(5,788)
22.0
Other A dministrative Expenses
(2,279)
(2,449)
(2,534)
11.2
3.5
(4,080)
(4,983)
22.1
(7)
3,518
(26)
4,241
(34)
4,598
378.7
30.7
28.6
8.4
(50)
6,667
(60)
8,839
20.2
32.6
A dministrative Expenses
Other Tax Expenses
Com m e r cial Incom e
Administrative expenses, which include personnel expenses and other administrative expenses,
amounted to R$ 5,471 billion in 2Q10, recording a growth of 3.2% over the previous quarter and 11.8%
in 2Q09. These expenses attained R$ 10,771 million in the semester, an amount 22.1% higher than that
recorded in 1H09.
It is worth emphasizing that the expenses for 1H10 already consider Banco Nossa Caixa (BNC) and
Votorantim (BV) acquisitions, making the comparison with 1H09 even more complex. BNC has
sensitized expenses as of 2Q09, and BV only as of 4Q09. In order to make such comparison easier, and
also for following the 2010 Guidance, BB has prepared a proforma base for 2Q09 and 1H09, simulating
how would expenses be in that period if the banks acquired were already a part of the conglomerate.
Using such proforma comparison base, administrative expenses would show a 7.4% growth comparing
2Q10 and 2Q09 and of 9.1% in comparing the first semester of each year. Variation in the semester is
lower than the range that Guidance 2010's estimates, which provides for a growth between 10% and
12% in the year.
The figure below shows the progress of the main items that comprise the commercial income.
Figure 49. Business vs. Expenses
33,060
24,515
20,807
19,185
18,107
13,448
13,020
9,902
8,888
15,358
11,811
18,817
13,511
10,771
7,588
2006
2007
Fee Income
115 - Banco do Brasil – MD&A 2Q10
2008
Net Interest Income
2009
1H10
Administrative Expenses
7.7.1 Personnel Expenses
Personnel expenses reached R$ 2,937 million in 2Q10, 3.0% growth comparing with the previous
quarter and 12.4% over the same period of 2009. Personnel expenses attained R$ 5,788 million in the
semester, an amount 22.0% higher than that recorded in 1H09.
Considering only BB Multiple Bank (that includes BNC, already merged), the personnel expenses
registered a slight growth of 2.4% over the previous quarter. The 3.0% growth shown in the consolidated
view is influenced by the colligated and controlled performances. These companies are in an
accelerated expansion rhythm and, therefore, show a higher growth both revenues as expenses.
Personnel expenses have been influenced, besides from the 2009 salary raise agreement (6.0%
average readjustment) and the increase in staff (detailed below), by BV and BNC acquisitions. Using the
same proforma comparison base presented in the prior chapter, personnel expenses for 2Q10 would
have shown a growth of 9.2% upon 2Q09. In the half-yearly view, the growth would have been of 10.5%.
Table 93. Personnel Expenses
Quar te r ly Flow
R$ million
2Q09
Pe r s onne l Expe ns e s
1Q10
Chg. %
2Q10
Half-Ye arly Flow Chg. %
On 2Q09 On 1Q10
1H09
1H10
On 1H09
(2,613)
(2,851)
(2,937)
12.4
3.0
(4,742)
(5,788)
22.0
Salaries
(1,409)
(1,306)
(1,587)
12.7
21.5
(2,442)
(2,893)
18.5
Benef its
(373)
(426)
(433)
16.1
1.8
(681)
(859)
26.1
Social Charges
(475)
(483)
(537)
13.0
11.2
(832)
(1,020)
22.6
Training
(16)
(13)
(19)
13.9
37.5
(26)
(32)
24.5
Pension Fund
(45)
(52)
(49)
8.8
(6.3)
(74)
(101)
36.2
(12)
(283)
(14)
(557)
(15)
(298)
18.7
5.3
7.1
(46.6)
(21)
(667)
(28)
(855)
31.2
28.1
Remuneration f or Counselors and Directors
A dministrative Personnel Provisions
The figure below shows the growth of the total staff at BB. At the end of June 2010, Banco do Brasil had
116,370 employees, which is 2.6% higher compared to the same month in 2009 and 2.1% higher in
relation to the prior quarter.
Sep/08
Dec/08
Total
Figure 50. Changes in Workforce
116 - Banco do Brasil – MD&A 2Q10
Jun/09
Sep/09
Employees
Dec/09
Mar/10
Interns
106,241
10,129
116,370
103,923
10,019
113,942
9,917
103,971
113,888
10,293
104,139
114,432
9,943
113,401
Mar/09
103,458
89,534
7,966
9,291
98,825
88,972
96,938
9,543
85,392
94,935
The staff shall keep on increasing in the next quarter as a result of project BB 2.0. This project aims at
improving relationship with clients, particularly in retail. Among the several measures is the adaptation of
service model to client's needs, with a better allocation of employees directly involved with service in the
branches, in order to allow new businesses.
Jun/10
7.7.2 Other Administrative Expenses
Other Administrative Expenses amounted to R$ 2,534 million in 2Q10, a 3.5% growth in relation to the
previous quarter and 11.2% in relation to the same period of 2009. Other administrative expenses
attained R$ 4,983 million in the semester, 22.1% higher than 1H09.
Comparing with the previous quarter, which is not prejudiced by societary issues (BNC and BV were
already in the consolidated financial demonstrations), the other administrative expenses from BB
Multiple Bank (that includes BNC, already merged) recorded only a 0.7% growth. The consolidated
numbers show a higher growth (3.5%) in order of the paid expenses for the colligated and controlled.
Increase in expenses is aligned to contractual readjustments made during 2009 and in first quarter
(basically inflation), as well as to the organic operations increase and, mainly, BV and BNC acquisitions
(when comparing with 2Q09 and 1H09). On the other hand, such factors have been partially
compensated by expense control actions being adopted by BB.
Using proforma comparison base shown in chapter 7.7, other administrative expenses of 2Q10 would
show an increase of 5.4% upon 2Q09. In the half-yearly view, the growth would have been of 7.5%.
Table 94. Other Administrative Expenses
Quar te r ly Flow
Chg. %
Half-Ye arly Flow Chg. %
R$ million
2Q09
1Q10
2Q10
1H09
1H10
Othe r Adm inis tr ative Expe ns e s
(2,279)
(2,449)
(2,534)
11.2
3.5
(4,080)
(4,983)
Telecommunications and Data Processing
(511)
(638)
(570)
11.6
(10.6)
(945)
(1,208)
27.9
A mortization and Depreciation
(258)
(273)
(306)
18.7
12.1
(476)
(580)
21.8
12.2
On 2Q09 On 1Q10
On 1H09
22.1
Security. Guard and Transport Services
(312)
(329)
(337)
8.1
2.5
(594)
(667)
Expenses w ith Premises and Equipment
(304)
(330)
(352)
15.8
6.7
(551)
(682)
23.6
Marketing and Public Relations
(107)
(129)
(155)
44.1
20.1
(221)
(284)
28.2
Expenses w ith Outsourced Services
(352)
(434)
(418)
(332)
(438)
(375)
24.4
(13.6)
4.8
13.1
(619)
(674)
(857)
(707)
38.4
4.8
Other A dministrative Expenses
The table above sets forth the major lines composing Other Administrative Expenses and its not based
on the pro-forma simulation described in the prior paragraph. Therefore, 2Q09 does not bring Banco
Votorantim consolidation and 1H09 does not bring BNC results consolidation in the three first months of
the year. Comparing 2Q10 and 1Q10, it is important to highlight the communication and data processing
expenses, registering a 10.6% downslide.
117 - Banco do Brasil – MD&A 2Q10
7.7.3 Distribution Network
With national coverage and present in 3,558 Brazilian municipalities (64% of the total), besides overseas
branches located in 23 countries, BB has the largest network of branches in Brazil. At the end of Jun/10,
BB’s own service network consisted of 18,286 points and in considering the shared network the total
comes to 36,223 points.
The background performance of the BB conglomerate's distribution network included BNC outlets since
June 2009 (in December Nossa Caixa added 1,542 points of service, 566 of which are branches). Until
September 2009 BNC received information from that Bank, and as of the takeover information was
processed in the BB corporate systems. The difference in concepts adopted in Banco do Brasil and in
Banco Nossa Caixa led to an increase in the SAA and PAE network, as found in the table below.
In addition to its own distribution network, BB also has partnerships for the sharing of automated tellermachines and to use the chain of lottery kiosks that performs withdrawals, deposits, payments and other
services. Besides reducing costs with new investments and with terminal maintenance, these
partnerships consolidate the dispersed and national customer service of Banco do Brasil.
Table 95. Distribution Network
Se p/08
De c/08
M ar /09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
Dis tr ibution Channe l
Branches
4,077
4,342
4,354
4,928
4,958
4,897
4,960
4,984
PA A
184
187
182
182
179
178
178
179
PA B
1,225
1,389
1,360
1,734
1,729
1,697
1,677
1,687
PA E
5,969
6,055
6,061
6,102
6,094
6,529
6,566
6,774
SA A
3,980
3,987
4,248
4,262
4,272
4,626
4,647
4,660
PA P
3
4
2
2
2
2
2
2
15,438
Shar e d Dis tr ibution Channe ls
15,964
16,207
17,210
17,234
17,929
18,030
18,286
Subtotal
CEF - lottery stores
10,091
10,182
9,723
9,723
9,838
9,838
10,887
10,579
Banco 24h
4,378
14,469
4,732
14,914
5,068
14,791
5,558
15,281
5,980
15,818
6,486
16,324
6,912
17,799
7,358
17,937
29,907
30,878
30,998
32,491
33,052
34,253
35,829
36,223
Subtotal
Total
The Bank's distribution network is divided into 5 types of points of service, besides the branches:
PAA – Advanced Service Post: is a point of service intended for towns lacking banking services. They
have a small staff and electronic services;
PAB – Banking Service Post: this type of unit is located inside the premises of companies or
government offices. This service structure requires one employee and electronic services;
PAE – Electronic Service Post: the structure of services is exclusively electronic;
SAA – Self-Service Room: exclusively electronic structure of services, installed in the main areas of the
branches; and
PAP – Payment and collection post: points of service comprised by employees and automated teller
machines located mainly in government offices (town halls);
118 - Banco do Brasil – MD&A 2Q10
North
Retail
249
Wholesale
2
Government
7
High Income 2
5.2%
21.4%
Northeast
Retail
1,018
Wholesale
7
Government 9
High Income 12
8.4%
Midwest
Retail
402
Wholesale
5
Government 5
High Income 10
43.9%
South
Retail
1,004
Wholesale
23
Government 3
High Income 10
Southeast
Retail
2,089
Wholesale
48
Government 6
High Income 73
21.1%
Figure 51. Total Distribution Network
To render an excellent service and improve the level of satisfaction of clients, Banco do Brasil segments
its customer base according to each profile and relationship, developing adequate strategies for each
segment.
The Retail distribution network, main element responsible for the relationship with Individual clients and
Small and Medium Enterprises (SMEs), ended the quarter with 4,762 branches, 44% of this total located
in the southeast region. Moreover, in the delivery of services to individuals, BB makes available its
network of bank correspondents that serve the clients of BB without using its infrastructure, freeing the
network of branches to concentrate its business focus. At the end of 2Q10, Banco do Brasil relied on a
total of 9,810 correspondents, including 3,347 correspondents from Banco Popular, incorporated
institution by BB this quarter.
In relation to the Wholesale market, the service network is comprised by 85 branches, segmented by
annual billings, and that served 42.3 thousand customers in this quarter, figure 3.5% higher than that
attended in the same quarter of 2009. Most of the network is located in the Southeast (56%) and South
(27%) regions of Brazil, regions with the largest concentration of large companies.
Table 96. Wholesale Pillar Branches
Indus tr y
Com m e r ce
Corporate
Ov er R$ 90 million
Over R$ 150 million
Se r vice s
Over R$ 150 million
Business
From R$ 10 to R$ 90 million
From R$ 15 to R$ 150 million
From R$ 15 to R$ 150 million
The Government, comprised by direct administration, federal entities, foundations and public
companies, was comprised by 30 agencies, whose business focus is the relationship with the Federal
Government and the State and Municipal spheres, encompassing the Executive, Legislative, and
Judicial Authorities. The strategy of working in this market has ensured appropriate solutions for the
specific aspects of each one of the niches of its segment, by means of an innovative approach,
materialized in the proposal of new products and services, such as the exclusive electronic bidding
service.
119 - Banco do Brasil – MD&A 2Q10
The overseas network is comprised by 45 facilities located in 23 countries (13 branches, 8 sub-branches,
11 representation offices, 7 subsidiaries, 4 associated subsidiaries, 1 shared service unit and 1 business
unit). In order to supplement this structure, Banco do Brasil has an agreement with other foreign
financial institutions to serve its clients: at the end of last December, there were 1,332 banks acting as
BB's correspondent banks in 146 countries.
Table 97. Distribution Network Abroad
Branche s
Sub-br anche s
Re pr e s e ntative Subs idiar ie s and Br anch
Office s
Office s
A ssuncion
Cidade do Leste
Caracas
Buenos A ires
Gif u
Mexico City
Frankf urt
Gunma
Dubai
Grand Cayman
Hamamatsu
Hong Kong
La Paz
Ibaraki
Lima
Banco do Brasil Securities
LLC
BB Leasing Company Ltd.
BA MB Brazilian A merican
Merchant Bank
BB Securities Ltd. Londres
London
Nagano
Luanda
BB USA Holding Company
Madrid
Nagóia
Montevideo
Miami
Santa Cruz de La Sierra Panama
Milan
Seoul
New Y ork
Washington
Paris
Shanghai
Santiago
Tokyo
120 - Banco do Brasil – MD&A 2Q10
Banco do Brasil A G
BB Money Transf ers, Inc.
Banco do Brasil A G Branch Of f ice in Portugal Cascais
Banco do Brasil A G Branch Of f ice in Portugal Marquês de Pombal
Banco do Brasil A G Branch Of f ice in Portugal Parque das Nações
Banco do Brasil A G Branch Of f ice in Portugal Porto
Shar e d Se r vice s
Units
BB USA Servicing
Center
Bus ine s s
Units
Rome
7.7.4 Automated Channels
Banco do Brasil’s self-service network represents a strategic differential, offering an extensive range of
services to BB client, besides supporting the cost control strategy of the institution. The graph below
contains an itemized description of BB's own machines network as well as the machines originating from
strategic partnerships, such as the external terminals of Caixa Economica Federal (CEF), Banco
Regional de Brasília (BRB) and the service network of Banco 24h.
In June 2010, BB had a network of 43,942 automated teller machines (ATMs). The terminals originating
from the acquisition of Nossa Caixa were very old and required renovation, and were thus deactivated,
which explains the decrease in the number of ATMs comparing Mar10 to Jun/10. The expressive
variation of machines in the period of Jun/09-Mar/09 is also a result of the acquisition of BNC, besides
the takeover of the BESC system. Moreover, there are 10,195 ATMs from partnerships (Banco 24h,
CEF and BRB).
7,300
8,379
45,817
Mar/09
1,816
7,863
45,442
Dec/08
6,764
1,419
43,772
Sep/08
6,239
1,297
43,976
4,850
40,543
1,277
5,679
39,714
864
5,306
39,918
862
1,297
Jun/09
Sep/09
Dec/09
Mar/10
Automated Teller Machines
ATM: Banco 24h
43,942
1,297
Jun/10
ATM: BRB + CEF
Figure 52. Automated Teller Machines
The ATM's are responsible for the processing of an expressive portion of the total banking operations
performed by Banco do Brasil. In 2Q10, 95.5% of the cash withdrawals, 79.1% of the checkbooks
delivered, 72.8% of the deposits and 67.5% of the receipts of bills and contractual payments passed
through the ATM network, these amounts do not include the transactions undertaken in the environment
of the partnerships with other institutions.
Besides the cashiers at the branches and the ATMs, Banco do Brasil offers several other options for
access to banking services, such as: The Internet, Financial Manager (and Internet banking tool for
businesses), POS equipment (credit and debit card machines at the commercial establishments),
telephone, fax, and mobile banking (WAP). At the end of June, BB had approximately 10.2 million clients
capable of using the internet banking services, responsible for 307.2 million transactions in the quarter,
and 693.7 thousand customers capable of using the mobile banking channel.
The figure below presents the percentage of transactions processed by each one of the main customer
service channels made available by Banco do Brasil. In 2Q10, the automated channels were
accountable for 91.9% of the total transactions.
121 - Banco do Brasil – MD&A 2Q10
91.9
91.1
92.2
92.0
91.4
6.3
8.9
9.1
5.9
8.8
8.9
6.4
11.2
8.0
6.0
9.4
8.6
19.3
19.1
18.6
5.9
8.8
7.8
18.6
19.3
19.4
5.8
10.0
8.1
17.1
14.9
14.3
16.6
19.1
21.1
15.4
18.0
20.1
40.6
40.6
40.0
38.7
37.8
39.6
38.7
38.9
90.1
91.1
90.9
5.8
8.7
9.9
6.1
10.9
8.9
20.2
3Q08
4Q08
1Q09
ATM
Cash
Automated Transactions
Figure 53. Customer Access Options – %
122 - Banco do Brasil – MD&A 2Q10
2Q09
3Q09
Internet Individuals
POS
4Q09
1Q10
2Q10
Internet Businesses
COBAN and Other
7.7.5 Productivity – Coverage Ratios
The productivity ratios usually adopted in the analysis of financial institutions are shown below. On
comparing with the preceding quarter, the favorable performance of banking service fees and control of
administrative expenses led to an improvement in the ratio that measures personnel expenses coverage
as well as that which measures administrative expenses coverage.
The efficiency rate rose to 42.7% in 2Q10, an expressive 220 basis points drop as compared to the
previous quarter and 40 basis points above that for 2Q09. The rate is close to the levels seen prior to
the acquisition of Banco Nossa Caixa, which at that time reflected on this indicator for not having a
revenues and expenses structure as favorable as that in BB.
Table 98. Coverage Ratios – without extraordinary items
R$ million
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Fee Income
2,933
3,058
2,943
3,436
3,526
3,606
3,634
3,954
A dministrative Expenses
3,972
2,178
4,571
2,430
4,128
2,231
4,937
2,506
5,153
2,909
5,469
2,894
5,749
3,062
5,710
3,211
134.6
73.8
125.8
66.9
131.9
71.3
137.1
69.6
121.2
68.4
124.6
65.9
118.7
63.2
123.2
69.2
Personnel Expenses
Fe e Incom e / Pe r s onne l Exp.¹
Fe e Incom e / Adm inis t. Exp.²
(1) In the calculation of this ratio Labor Claims are included,
(2) In the calculation of this ratio Legal Risk is included (Legal Claims and Labor Lawsuits).
Fee Income / Personnel Expenses
134.6
3Q08
125.8
4Q08
131.9
1Q09
137.1
2Q09
121.2
124.6
3Q09
4Q09
118.7
123.2
1Q10
2Q10
Fee Income / Administrative Expenses
73.8
3Q08
66.9
71.3
69.6
68.4
65.9
63.2
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Figure 54. Coverage Rations – whitout extraordinary items – %
123 - Banco do Brasil – MD&A 2Q10
69.2
2Q10
Table 99. Cost Income Ratio – without extraordinary items
R$ million
3Q08
Ope rating Incom e (A)
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
8,686
10,003
9,839
11,673
11,558
12,315
12,969
13,378
Gross Income f rom Financial Intermediation
3,667
1,932
3,294
3,240
4,460
5,829
5,634
6,256
A llow ance f or Loan Loss es
1,367
3,892
2,654
3,865
2,928
2,950
2,959
2,525
Fee Inc ome
2,933
3,058
2,943
3,436
3,526
3,606
3,634
3,954
496
Income f / Insurance, Pension & Sav ings Bonds Op.218
707
(90)
(576)
(275)
(49)
50
29
353
303
471
392
408
440
468
Equity Int. in the Results of Subs . and A f f il.
Other Operating Rev enues
1,401
1,764
2,359
4,659
3,162
2,298
2,759
2,786
Other Operating Expenses
(1,396)
(1,702)
(1,625)
(3,422)
(2,635)
(2,726)
(2,508)
(2,641)
Adm inis tr ative Expe ns e s (B)
Personnel Expenses
3,972
4,571
4,128
4,937
5,153
5,469
5,749
5,710
2,178
2,430
2,231
2,506
2,909
2,894
3,062
3,211
Other A dministrative Expenses
1,793
45.7
2,140
45.7
1,897
42.0
2,431
42.3
2,244
44.6
2,575
44.4
2,687
44.3
2,499
42.7
Cos t Incom e Ratio (B/A) - %
Cost Income Ratio - %
45.7
45.7
3Q08
4Q08
42.0
42.3
1Q09
2Q09
44.6
44.4
44.3
42.7
3Q09
4Q09
1Q10
2Q10
Figure 55. Cost Income Ratio – without extraordinary items
124 - Banco do Brasil – MD&A 2Q10
Business growth and the customer base led to a constant growth in the "assets per employee" ratio,
which retreated only at the time of acquisition of Banco Nossa Caixa. As for the ratios "bank accounts
per employee" and "employees per branch office", a decline is expected in the former and an increase in
the latter owing to the "BB 2.0" project, which provides for more staff members in the branch network,
reducing the number of customers handled by each manager (portfolio resizing) and increasing the
number of transactions pert customer.
Assets per Employee - R$ thousand
5,990
5,377
5,992
6,221
Checking Accounts per Employee
6,362
6,494
5,281
4,827
317
313
309
306
307
305
309
300
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Employees/(Branches+PAA+PAB)
17.3
16.8
16.6
17.0
16.8
16.7
Dec/09
Mar/10
16.7
16.4
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Jun/10
Fee Income/Points of Service
Credit Portfolio/Points of Service
17.9
16.8
13.1
14.1
14.1
14.7
190.0
17.9
17.2
15.4
16.0
16.9
15.4
18.0
191.5
Jun/09
Sep/09 Dec/09 Mar/10
Jun/10
Loan Portfolio / Points of Service - R$ million
Sep/08
Dec/08 Mar/09
Points of Service
Sep/08
Dec/08
25.3
25.9
27.4
27.4
27.6
23.8
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
Figure 56. Other Productivity Ratios
125 - Banco do Brasil – MD&A 2Q10
17.2
17.2
216.2
201.1
201.6
17.9
18.0
18.3
Jun/09
Sep/09 Dec/09 Mar/10
Jun/10
Fee Income/Points of Serv ice - R$ thousand
Checking Accounts/(Branches+PAA+PAB)
5,490
25.9
204.6
16.2
16.0
15.4
Personnel Expenses per Employee - R$ thousand
23.7
199.6
18.3
17.2
16.2
Sep/08 Dec/08 Mar/09
Points of Service
181.6
Sep/08
5,133
5,186
5,077
5,079
5,166
5,170
5,098
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Jun/10
7.7.6 Operating Income
Table 100. Operating Income
Quarterly Flow
R$ million
Com m ercial Incom e
Legal Risk
Legal Claims
Labor Law suits
Other Operating Income
Eq Int. in Results of Subs. and Af fil.
2Q09
1Q10
Chg. %
2Q10
On 2Q09
Half-Yearly Flow
On 1Q10
1H09
1H10
Chg. %
On 1H09
3,518
4,241
4,598
30.7
8.4
6,667
8,839
32.6
(45)
(450)
(239)
427.8
(46.9)
(242)
(688)
183.8
(18.0)
(152)
(238)
35
-
-
(247)
(203)
107
(212)
(274)
-
29.4
5
(485)
-
(740)
(379)
(491)
(33.6)
29.6
(1,294)
(870)
(32.8)
15
32
34
123.1
6.2
10
66
541.0
(755)
(411)
(525)
(30.5)
27.7
(1,304)
(936)
(28.3)
Other operating income
838
1,112
1,180
40.8
6.1
1,633
2,292
40.3
PREVI
298
913
913
206.2
0.0
597
1,827
206.2
(1,891)
2,733
(2,437)
3,412
(2,618)
3,869
38.4
41.5
7.4
13.4
(3,534)
5,130
(5,055)
7,281
43.0
41.9
Other Operating Income / Expenses
Other operating expenses
Operating Incom e
Banco do Brasil's Operating Income closed 2Q10 as R$ 3,869 million, an increase by 13.4% upon the
previous quarter and 41.5% upon the same period of 2009. Income for the semester rose to R$ 7,281
million, 41.9% increase over 1H09. The operating income is determined with a basis on the Commercial
Income, plus the results of two major lines: Legal Risk and Other Operating Income/Expenses.
Legal risk dropped by 46.9% over the previous quarter, yet rose by 427.8% over the same period in
2009. The performance of such line was impacted by a series of factors since 2Q09, which are detailed
below:
Banco Nossa Caixa (BNC) Acquisition. On one hand, led to a rise in monthly expenses incurred with
claims and economic plans, for having an ample customer base, and savings accounts and judicial
deposits. On the other, led to volatility in finding these expenses, as it reinforced and reversed
provisions inasmuch as its extensive lawsuit base was gradually recorded in the BB systems and
methodologies.
In 4Q09 there was a review of the methodology adopted by BB for calculation of provisions required
to face labor claims and civil claims. As from that quarter, BB obtained approval from Central Bank
and started to use a methodology near to those used by some of its pairs. Such systematic consists
in applying upon the number of shares the maximum percentage of success of plaintiffs (percentage
of shares that historically BB has lost in court) and the average value of disbursement in shares of
the same nature (also determined based on historical).
In 1Q10, there were two distinct impacts on provision. In one side, the BNC proceedings migration
to BB's system (fit for the new methodology) generated release of provisions in the amount of R$
568 million which, as acknowledged in the Income Statement with Reallocations, was considered as
an extraordinary item. On the other side, there was a refining of system's parameters, which was
among the factors that collaborated for a growth in expenses with provisions considered recurrent in
the period.
During 2Q10, the overall sum of expenses due to claims returned to the closest level recorded in the
past in the Income Statement with Reallocations (BB past history plus sums from banks acquired /
taken over). However, there was still volatility between the lines of civil and labor suits owing to the
refinements that were gradually implemented under the new lawsuit methodology, that were still
monitored under the previous model. Recording all of these suits under the new methodology has
not been concluded yet and may cause some volatility over the coming quarters.
The Other Operating Income/Expenses line is subdivided into Equity in the earnings/loss of subsidiary
and associated companies, and Income from Other Operating Revenues and Expenses. Equity in the
earnings of subsidiary and associated companies showed an increase both in comparison with previous
quarter and in relation to the same period of 2009. On the other side, the performance of Other
Operating Revenues and Expenses was basically influenced by the factors listed below:
126 - Banco do Brasil – MD&A 2Q10
•
•
Increase in accounting of recurring revenues derived from Previ surplus. Such revenues
summed up R$ 949 million (before income taxes and deduction of impact upon statutory profit
sharing) in relation to R$ 877 million in the previous quarter and R$ 298 million in the 2Q09.
These sums already consider the adjustment made at the Income Statement with Reallocations,
which carried to 1Q10 half of the income found from the reassessment during the semester of
actuarial assets and liabilities. The sum reallocated was of R$ 158.8 million, in addition to R$ 59
million in effects on taxes and R$ 11.3 million in effects on profit sharing. The gross sum refers
to 50% of the gains in the reassessment of Previ actuarial assets of R$ 389.2 million, and 50%
of the actuarial losses arising from the benefit plan under the BB’s sole responsibility, of R$ 71.7
million.
Comparing with 2Q09 and 1H09, there was a significant impact referring to the acquisition of
Banco Votorantim, having a considerable amount of other operating expenses (account
sensitized in the payment of commissions to credit vendor agents) and which income accounts
have only started being consolidated to those of BB as from 4Q09. The BNC income figures
also show a distortion as compared to 1H09, as they were not consolidated in 1Q09.
Goodwill amortization arising from the acquisition of equity holdings and from amortizing intangible
assets also influences other operating revenues and expenses, and is detailed in the tables below. The
remaining fluctuations in revenues and expenses will be found in the explanatory note "Other Operating
Revenues / Expenses."
Table 101. Accumulated Amortization
R$ million
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Banco Noss a Caixa
Balance
Accumulated amortization
3,540
3,659
4,957
4,961
4,961
4,961
-
(40)
(81)
(61)
(99)
(136)
3,540
3,619
4,876
4,900
4,862
4,825
-
(40)
(40)
21
(38)
(38)
Balance
-
-
444
444
436
426
Accumulated amortization
-
-
-
(4)
(9)
(19)
Balance w ithout amortization
Amortization expenses for the period
Banco Votorantim
Balance w ithout amortization
-
-
444
440
427
407
Amortization expenses for the period
-
-
-
(4)
(5)
(10)
Other expenses of the Conglom erate
Balance
557
510
487
487
487
487
Accumulated amortization
(24)
(71)
(95)
(95)
(95)
(95)
Balance w ithout amortization
533
-
439
(47)
392
(23)
392
-
392
-
392
-
Amortization expenses for the period
127 - Banco do Brasil – MD&A 2Q10
Table 102. Intangible
R$ million
2Q09
3Q09
4Q09
1Q10
2Q10
Rights due to payroll acquisition
Initial Balance
6,032
4,896
4,785
5,305
6,826
Amortization expenses for the period
(371)
(380)
(403)
(503)
(504)
Other (1)
(891)
9
(10)
-
(0)
125
260
933
2,024
251
4,896
4,785
5,305
6,826
6,574
155
(10)
232
(12)
297
(15)
372
(18)
441
(23)
Acquisitions
88
73
90
87
56
Other (1)
(1)
4
0
-
(0)
232
297
372
441
474
Acquisitions
Final Balance (a)
Acquisition/development of software
Initial Balance
Amortization expenses for the period
Final Balance (b)
Other Intangible Assets
Acquisitions
Final Balance (c)
Balance ( a+ b + c)
-
-
-
-
4
5,128
5,082
5,677
7,267
4
7,052
(1) Among other items, this account is composed basically of amounts derived by the consolidation of banks acquired, in proportion to the
participation of Banco do Brasil.
128 - Banco do Brasil – MD&A 2Q10
7.8 Net Value Added
The table Net Value Added shows how Banco do Brasil’s income is made up of the generation of value
from each of the Bank’s businesses, and then shows a breakdown of the distribution of these proceeds.
The point of view used is the gross financial margin, which includes financial intermediation income and
expenses, without allowance for loan losses.
Table 103. Net Value Added
Quar te r ly Flow
R$ million
2Q09
1Q10
Chg. %
2Q10
On 2Q09
Half-Ye ar ly Flow
On 1Q10
1H09
1H10
Chg. %
On 1H09
Net interest income
8,487
9,357
9,461
11.5
1.1
15,472
18,817
21.6
Income f rom Non-Financial Products
2,734
2,916
3,196
16.9
9.6
5,196
6,111
17.6
Fee Income
863
875
985
14.1
12.6
1,587
1,861
17.2
Investment Fund Management Fees
506
537
575
13.5
7.1
952
1,112
16.8
Loans
344
307
413
19.8
34.3
654
720
10.0
Billings
284
288
302
6.5
4.9
541
591
9.2
Collections
120
143
141
18.0
(1.1)
230
284
23.2
Credit Cards Fees
571
712
727
27.3
2.1
1,140
1,439
26.2
45
53
52
15.7
(2.0)
92
106
15.4
2,310
3,220
3,369
45.9
4.6
4,199
6,589
56.9
57
73
75
32.6
3.0
117
149
27.1
Insurance – Results
187
218
212
13.7
(2.4)
344
430
25.2
Others Fee Income
645
645
683
5.8
5.8
1,066
1,328
24.6
(198)
Res. f rom Insurance, Pension Plan and Savings Bonds Operations
471
(186)
(179)
(9.6)
(3.8)
(359)
(364)
1.4
440
468
(0.6)
6.3
775
909
17.3
Other Operational Revenues
1,136
1,112
1,180
3.8
6.1
2,230
2,292
2.8
-
913
913
-
0.0
-
1,827
-
11
3
15
44.4
406.8
27
18
(32.2)
Insurance
Others
Insurance – Brokerage
Equity Interest in Results of Subs.and A f f iliates
PREV I
Non Operation Income
V alue Adde d
13,531
15,492
16,025
18.4
3.4
24,867
31,517
26.7
(11,183)
(13,141)
(13,300)
18.9
1.2
(20,854)
(26,441)
26.8
(5,063)
(5,463)
(5,489)
8.4
0.5
(9,197)
(10,952)
19.1
A llow ance f or Loan Losses
(3,172)
(3,026)
(2,871)
(9.5)
(5.1)
(5,663)
(5,897)
4.1
Other Operational Income
(1,891)
(2,437)
(2,618)
38.4
7.4
(3,535)
(5,055)
43.0
(2,727)
(3,369)
(3,574)
31.1
6.1
(5,160)
(6,943)
34.5
(2,506)
(3,062)
(3,211)
28.1
4.8
(4,737)
(6,273)
32.4
(220)
(307)
(363)
64.7
18.2
(423)
(670)
58.4
A dministrative Expenses
(2,431)
(2,687)
(2,499)
2.8
(7.0)
(4,328)
(5,186)
19.8
Tax Expenses
(1,584)
(1,917)
(2,136)
34.9
11.4
(2,932)
(4,054)
38.3
(806)
(839)
(909)
12.8
8.4
(1,424)
(1,747)
22.7
(7)
(26)
(34)
378.7
28.6
(50)
(60)
20.2
(771)
(1,053)
(1,194)
54.9
13.4
(1,459)
(2,247)
54.0
455
166
384
(88)
310
88
(31.9)
(46.8)
(19.3)
-
764
-
694
-
(9.2)
-
Dis tr ibution of V alue Adde d (Exce pt Shar e holde r s )
Operational Revenues
Personnel Expenses
Personnel Expenses
Statutory Prof its Sharing
Tax es on Sale
Other Tax Expenses
Income and Social Contribution Taxes
Extraordinary Items
PREV I A ctuarial A ssets - A djustments
129 - Banco do Brasil – MD&A 2Q10
8 - Risk Management
8.1 Risk Management
The tables and graphs presented on this chapter are not impacted by the accounting figures of Banco
Votorantim (BV), unless stated otherwise. Accordingly, the term BB Consolidated is defined as Banco do
Brasil in Brazil and abroad, including Banco Nossa Caixa (BNC) and excluding BV.
8.1.1 Market Risk
Introduction
BB uses statistical and simulation methods to measure the market risks of its positions. The metrics
resulting from the use of these methods, include:
• Sensitivity;
• Value at Risk (VaR) and
• Stress.
By using sensitivity metrics, simulations are made of the effects in the exposure values arising from
changes in the market risk factor levels.
VaR is a measurement employed to estimate the maximum expected loss under routine market
conditions, that is expressed in monetary values on a daily basis and considering a certain confidence
interval and time horizon.
To measure VaR, Banco do Brasil adopts a Background Simulation system and the following
parameters:
•
•
•
99% of one-tailed confidence interval;
252 retrospective scenarios of daily shock factors and
10-day time horizon.
It is emphasized that, during the second quarter, BB started calculating VaR over 10-day time horizon
and there was improvements of the corporate curves models of fixed interest rates.
The risk factors employed to measure VaR for market exposure risks are rated in the following classes:
•
•
•
•
interest rates,
exchange rates,
share prices and
goods (commodity) prices.
The performance of VaR metrics is assessed every month by applying a backtesting procedure. This
assessment is separated from the VaR metric development and use procedures.
Lastly, BB uses the Stress metrics arising from simulations of its exposure subject to market risks under
extreme conditions, such as financial crises and economic upheavals. Stress Tests are intended to size
plausible impacts or events, but unlikely to occur, in the regulatory and economic capital requirements.
Stress Tests cover exposure simulations, retrospective and based on historical data series of shocks in
market risk factors, as well as those of a forward-looking nature, based on projections of economic and
financial scenarios.
130 - Banco do Brasil – MD&A 2Q10
Politics
Policy on Market and Liquidity Risk and the Policy on the Use of Derivative Financial Instruments,
approved by the Board of Directors, are part of the strategic documentation regarding the BB's market
and liquidity risk management.
These documents are intended to establish guidelines to be complied with in the Company's business
decisions. They involve market and liquidity risk assessment, dealing with quantitative aspects, such as
metrics used, and also qualitative aspects such as the hedging policy, scope of management, and
segregation of functions.
Structure
th
In accordance with CMN Resolution No. 3,464, of June 26 , 2007, financial institutions should
implement a structure for market risk management apart from the business units and from the unit
conducting the internal audit, and compatible with the nature of transactions, the complexity of products
and the degree of exposure to market risk of the institution.
The Bank has a market risk management structure represented by the Risk Management Directorate
(Diris), that is compatible with the nature of the Bank’s transactions, and completely segregated from the
business units and the Internal Audit unit.
One of the main responsibilities of Diris in market and liquidity risk management is: the proposition to
policies, guidelines, methodologies and limits of market risk, as well as the identification, assessment,
monitoring and control of the market and liquidity risk of the Financial Conglomerate.
Foreign Exchange Exposure
Banco do Brasil adopts a policy of managing its exchange risk so as to reduce its effects on the
consolidated economic and financial result.
Following, a statement of assets, liabilities and derivatives of BB Consolidated is presented, increased
by the exposure associated to the BB participation in the Banco Votorantim, referenced to foreign
currencies. The net exchange position on June 30, 2010 is a liability in the amount of US$ 1,111.80
million, which reflects the tax hedge strategy adopted by the Bank.
The purpose of tax hedging is to reduce the volatility of the result, after the tax effects, since exchange
gains on investments abroad are not subject to taxation and likewise losses do not generate deduction
in the tax basis.
131 - Banco do Brasil – MD&A 2Q10
Table 104. Balance in Foreign Currency
R$ million
06/30/2010
CURRENCY
BALANCE SHEET
ASSETS
U.S. Dollar
Euro
Pound Sterling
LIABILITIES
63,856
76,036
7,427
4,968
126
155
2,339
1,770
Sw iss Franc
76
18
Gold
12
-
Ohter
161
126
Total
73,997
83,074
Y en
Ne t Pos ition - Equity
(9,077)
CURRENCY
BALANCE SHEET
LONG
U.S. Dollar
Euro
Pound Sterling
Y en
Sw iss Franc
Gold
Total
Ne t Pos ition - De r ivative
SHORT
34,141
23,221
4,755
7,886
72
120
2,235
2,827
-
70
169
173
41,370
34,297
7,074
Total Ne t Pos ition
(2,003)
Total Ne t Pos ition - in U.S. Dollar
(1,112)
BB Consolidated foreign exchange exposure, plus the exposure associated to the BB participation in the
th
Banco Votorantim, was calculated according to Bacen Circular 3,389, of June 25 , 2008, was R$ 1,497
th
million at June 30 , 2010.
The following chart shows the quarterly behavior of BB Consolidated’s foreign exchange exposure in
relation to the Referential Equity (RE) since June/2008.
132 - Banco do Brasil – MD&A 2Q10
Changes in Foreign Exchange Exposure in % of PR
5.00%
4.00%
3.30%
3.00%
0.71%
0.08%
2.01%
0.22%
2.00%
0.28%
0.20%
2.00%
1.00%
0.09%
2.40%
0.14%
0.69%
0.11%
0.09%
Exposure % Other Currencies
Mar/10
Sep/09
Jun/09
Mar/09
Dec/08
Sep/08
Jun/08
Exposure % Currency Basket
0.47%
0.69%
Jun/10
0.77%
0.69%
0.00%
0.08%
1.06%
1.21%
Dec/09
1.77%
“G” Portion
Figure 57. Changes in Foreign Exchange Exposure
Balance Sheet by Index
We present below the composition of assets and liabilities, including derivatives, of BB Consolidated,
broken down by index:
R$ billion – 06.30.10
Assets
325.5
190.1
149.9
Fixed
CDI/TMS/FACP
IRP/TBF/TR
Liabilities
173.9
146.7
58.8
Price Index
TJLP
US$/Gold
W/O Index
19.0
Assets: Tax Credits; Permanent
Liabilities: PL; Adm. Prov.; Float.
102.6
6.4
25.2
25.4
104.0
13.8
24.9
41.5
80.1
Total R$ 743.9 bi
Figure 58. Composition of Banco do Brasil’s assets and liabilities in the country.
The chart below shows BB Consolidated’s net mismatches, by index, in BB Consolidated:
133 - Banco do Brasil – MD&A 2Q10
R$ billion – 06.30.10
18.20%
135.4
3.23%
1.69%
24.0
12.6
0.03%
0.1
-1.5
-0.18%
-27.7
-55.2
-3.72%
-87.9
-7.42%
Fixed
CDI/TMS/FACP
Price
Index
-11.82%
TJLP
US$/Gold
W/O Index
PL/others
IRP/TBF/TR
Figure 59. Net Position
Value at Risk
The illustration below uses a Box-Plot analysis of the BB Consolidated Value at Risk (VaR) since the
third quarter of 2008.
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
3Q 2008
4Q 2008
1Q 2009
Figure 60. Consolidated BB VaR
134 - Banco do Brasil – MD&A 2Q10
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
It is worth mentioning that the VaR metrics value of BB Consolidated, for the second quarter, add effects:
a) from the methodologies improve from corporate curves of fixed interest rates and
b) from time horizon change from 1 work day to 10 work days.
The following table describes the Banco do Brasil minimum, average, and maximum VaR observed on
the following periods:
Table 105. Consolidated BB VaR
R$ thous and
Pe r iod
M inim um
Ave r age
M axim um
Jul to Dec /2008
125,903
288,699
652,740
Jan to Dec /2009
389,597
451,129
647,895
628,155
1,301,299
734,288
Jan to Jun/2010
The figure below shows a Box-Plot analysis of the Consolidated Abroad Network's VaR since the third
quarter of 2008:
600,000
US$ thousand
500,000
400,000
300,000
200,000
100,000
0
3Q 2008
4Q 2008
1Q 2009
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
Figure 61. Consolidated of the Foreign Network’s VaR
It is worth mentioning that the VaR metrics value of BB Consolidated Foreign Network, for the second
quarter, incorporate effects from time horizon change from 1 work day to 10 work days.
135 - Banco do Brasil – MD&A 2Q10
The following table describes the Abroad Network's minimum, average, and maximum observed on the
following periods:
Table 106. Foreign Network’s VaR
US$ thous and
Pe r iod
M inim um
Ave r age
M axim um
Jul to Dec /2008
14,439
18,634
27,711
Jan to Dec /2009
9,049
48,339
59,429
188,953
101,679
481,797
Jan to Jun/2010
136 - Banco do Brasil – MD&A 2Q10
BB Grupo Trading
For management purposes, Banco do Brasil puts trading operations apart from the others, establishing
its own strategies and limits. The groups shown below, International and Domestic Trading, are
subdivisions of the Trading Portfolio (Bacen Circular 3,354).
The figure below shows a Box-Plot analysis of the International Trading portfolio's VaR since the third
quarter of 2008.
1,200
US$ thousand
1,000
800
600
400
200
0
3Q 2008
4Q 2008
1Q 2009
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
Figure 62. VaR of the International Trading Portfolio
It is worth mentioning that the VaR metrics value of BB Trading International Group, for the second
quarter, incorporate effects from time horizon change from 1 work day to 10 work days.
The table below sets out the average, minimum and maximum VaR of the international trading portfolio
observed in the periods shown:
Table 107. International Trading Portfolio’s VaR
US$ thous and
Pe r iod
M inim um
Ave r age
M axim um
Jul to Dec /2008
218
428
683
Jan to Dec /2009
220
112
338
442
495
1,136
Jan to Jun/2010
137 - Banco do Brasil – MD&A 2Q10
The figure below shows a Box-Plot analysis of the Domestic Trading Portfolio's VaR since the third
quarter of 2008.
6,000
R$ thousand
5,000
4,000
3,000
2,000
1,000
0
3Q 2008
4Q 2008
1Q 2009
2Q 2009
3Q 2009
4Q 2009
1Q 2010
2Q 2010
Figure 63. VaR of the Domestic Trading Portfolio
It is worth mentioning that the VaR metrics value of BB Consolidated, for the second quarter, add effects:
a) from the methodologies improve from corporate curves of fixed interest rates and
b) from time horizon change from 1 work day to 10 work days.
The following table describes the Domestic Trading minimum, average, and maximum VaR observed on
the following periods:
Table 108. Domestic Trading Portfolio’s VaR
R$ thousand
Pe r iod
M inim um
Jul to Dec/2008
Jan to Dec/2009
Jan to Jun/2010
138 - Banco do Brasil – MD&A 2Q10
Ave r age
M axim um
-
957
3,792
19
2,012
1,551
5,280
5,483
Statement of Repricing Profile of Interest Rates
We present below a table containing the inventory of operations sensitive to the variations in the interest
rates, allocated by risk factor and by interest rate indexation period, of BB Consolidated:
Table 109. Repricing Profile of Interest Rates – 06/30/2010
R$ million
< 1 Mo
1 > 3 Mo
Assets
Fixed
151.582
CDI/TMS
3 > 6 Mo
19.588
6 > 12 Mo
31.343
1 > 3 Yrs
> 3 Yrs
173.929
-
-
TR/TBF/IRP
-
58.792
-
-
-
-
58.792
Price Index
-
18.962
-
-
-
-
18.962
TJLP
64.140
-
33.155
-
0
25.684
-
325.492
173.929
2.053
23.347
-
-
-
-
25.400
10.836
30.543
15.293
8.583
10.661
26.561
102.477
338.400
151.232
46.636
34.267
74.801
59.716
705.052
Fixed
(109.865)
(18.623)
(9.966)
CDI/TMS
(149.894)
(10.648)
-
(26.669)
-
(14.368)
-
(149.894)
Foreign Currencies/Gold
Total - Earning Assets
Liabilities
-
-
(190.139)
TR/TBF/IRP
-
(146.711)
-
-
-
-
Price Index
-
(6.393)
-
-
-
-
(6.393)
(23.806)
-
-
-
-
(25.202)
TJLP
Foreign Currencies/Gold
Total - Interest Bearing Liabilities
(1.396)
(146.711)
(7.120)
(9.921)
(8.984)
(13.727)
(18.298)
(45.924)
(103.974)
(268.275)
(205.454)
(18.950)
(24.375)
(44.967)
(60.292)
(622.313)
Gap
70.125
(54.222)
27.686
9.892
29.834
Cum ulative Gap
Cum ulative Gap as % Assets
(Earning Assets)
70.125
15.903
43.589
53.481
83.315
20,7%
139 - Banco do Brasil – MD&A 2Q10
-35,9%
59,4%
28,9%
39,9%
(576)
82.739
82.739
-1,0%
11,7%
8.1.2 Liquidity Risk
Banco do Brasil maintains liquidity level that are adequate for the institution's commitments assumed in
Brazil and abroad, resulting from its broad and diversified depositor base and the quality of its assets,
the extensive reach of its network of overseas branches and of access to the international capital
markets. Stringent control over liquidity risk is based on the Market and Liquidity Risk Policy established
for the Conglomerate, fulfilling the requirements of national banking supervision and of the other
countries where BB operates.
The liquidity risk management of Banco do Brasil separates liquidity in Reais from liquidity in Foreign
Currencies. For this purpose, it uses the following tools:
•
•
•
•
•
•
Maps of Mismatching of Terms,
Short, Medium and Long-term Liquidity Projections,
Stress test,
Liquidity Risk Limits,
Liquidity Contingency Plan and
Test of Potential of Liquidity Contingency Measures.
Liquidity risk management tools are periodically monitored and reported to the Strategic Committees of
the institution.
The Maps of Mismatching of Terms demonstrate the expectation regarding payments and receipts
contracted, distributed in previously defined intervals of time, and presented both under the joint
perspective or detailed by index of the operations. The analysis of the Maps of Mismatching of Terms
aims to determine the contractual cash flow of the institution on a given date.
Short, Medium and Long-term Liquidity Forecasts permit the evaluation of the effect of mismatching
between funding and investments, with the objective of identifying situations that could compromise the
institution's liquidity, taking into consideration the budget planning of the institution, as well as market
conditions.
Stress Tests are performed periodically, when the Short-term Liquidity Projections are evaluated in
alternative and stress scenarios, aiming to verify the institution's liquidity recovery capacity under
adverse conditions and to list corrective measures, if necessary.
Regarding, liquidity risk limits, the Liquidity Reserve is used for the short term liquidity management,
ensuring that the minimum level of assets of high liquidity to be maintained by the Bank, compatible with
the exposure to risk resulting from the characteristic of its operations and from the market conditions.
The methodology of the Liquidity Reserve was approved by the Global Risk Committee (CRG), is used
as a parameter to identify a liquidity contingency and involvement of the Liquidity Contingency Plan, with
monitoring on a daily basis.
Jun/09
Jul/09
Aug/09
Sep/09
Oct/09
Nov/09
Average Liquidity
Figure 64. Reserve Liquidity – National Treasury
140 - Banco do Brasil – MD&A 2Q10
Dec/09
Jan/10
Feb/10
Mar/10
Apr/10
Liquidity Reserve
May/10
Jun/10
The figure below presents the monitoring of the Liquidity Reserve in Foreign Currency of the Bank,
which in April 2010, in conformity with the decision of the Subcommittee of Market and Liquidity Risk,
substituted the monitoring of the Liquidity Reserve of the Foreign Network.
Jun/09
Jul/09
Aug/09
Sep/09
Oct/09
Nov/09
Dec/09
Jan/10
Average Liquidity
Feb/10
Mar/10
Apr/10
May/10
Jun/10
Liquidity Reserve
Figure 65. Reserve Liquidity – Foreign Currency
Still regarding liquidity risk limits BB utilizes, in the planning and execution of its annual budget, the
indicator of Availability of Free Funds (DRL), which aims to guarantee a balance between funding and
application of resources from the commercial portfolio and to ensure the financing of liquidity with
structural resources.
A DRL limit is defined annually by the Global Risk Committee (CRG), and monitored on a monthly basis,
employed to guide the budget's planning in accordance with the targets for funding and commercial
loans.
Jun/09
Jul/09
Aug/09
Sep/09
Oct/09
Nov/09
Monthly DRL
Dec/09
Jan/10
Feb/10
Mar/10
Apr/10
May/10
Jun/10
Annual Limit
Figure 66. DRL Index
The favorable conditions in the Liquidity Reserve (operating liquidity) and the DRL (structural liquidity) in
Brazilian reais have allowed the Global Risk Committee to reduce the indicator's annual limit of the DRL
for 2010 and to maintain the company's strategic planning for its business.
The numbers for the second quarter of 2010, presented in figures 8 and 9, confirm the favorable
situation of the Bank's liquidity in Reais.
The Liquidity Contingency Plan, in turn, establishes a set of procedures and responsibilities to be
adopted in liquidity contingency situations. In case of liquidity contingency, one or more contingency
measures may be adopted with the intention of protecting the institution's payment capacity. The
liquidity contingency measures are measured with monthly periodicity.
Moreover, as an additional control mechanism, the liquidity generation capacity of the Liquidity
Contingency Measures, provided for in the Liquidity Contingency Plan, is tested monthly through the
Test of Potential of Contingency Measures, in light of the effects of different scenarios on the liquidity of
the Institution and its ability to generate net resources.
141 - Banco do Brasil – MD&A 2Q10
8.1.3 Credit Risk
Structure
In Banco do Brasil, the credit risk management structure is composed of a Risk Management Director, a
Credit Director, and an Operating Assets Restructuring Director, and the Risk Management Director, by
appointment of the Board of Directors, is in charge of the Bank's credit risk management. This structure
is in accordance with CMN Resolution 3721 dated April 30, 2009.
The investor relations pages in BB's website provides detailed information on the management structure
and the credit risk management process.
Credit Risk Management
To comply with the requirements of Basel II and aligned with best risk management practices, BB has
developed its own methodology for determining of risk components: Expected Default Frequency (FEI),
Loss Given Default (LGD), exposure to credit risk, which are inputs for the measurement of Economic
Capital (EC) and of Expected Loss (EL).
The internal model for measuring the VaR of credit has its theoretical groundings based on an actuarial
approach, used in the banking industry.
The VaR of the loan portfolio is associated with a distribution of added loss for a given level of
confidence. The mean value of this distribution is the Expected Loss, which represents how much the
Bank expects to lose on average in a given period of time, the protection of which is performed by
means of provision. Now the Economic Capital, which is associated with Unexpected Loss, is
determined by the difference between VaR and EL. For this portion the Bank protects itself through the
allocation of capital required for risk coverage.
Frequency %
Reliance
Level(%)
EL
Economic Capital
VaR
Figure 67. Measuring and management instruments
142 - Banco do Brasil – MD&A 2Q10
Losses - $
The distribution of aggregate loss is obtained using the following risk components as data input: FEI,
LGD and exposure subject to credit risk.
The measurement of the VaR of Credit supports the appraisal of risk and return of the Bank's loan
portfolio, and for the process establishing limits for the loan portfolio. Its evaluation has supported the
decision-making process of the Bank, bringing historical information and allowing permitting an analysis
of the risk behavior trend. Furthermore, its use has proved extremely valuable in the dissemination of
the credit risk management culture at the Bank.
With regard to the valuation of return, the values of EL and EC serve as inputs for calculating the RiskAdjusted Return on Capital (RAROC). The use of RAROC is intended to subsidize important decisionmaking processes at the Bank. Its tracking in the historical perspective for the portfolios analyzed has
allowed the assessment of risk and return to be present in the decisions of the Institution.
In addition to the use of techniques for identifying and measuring risks, BB monitors and controls the
credit risk concentration in terms of risk exposure and commitment of the Referential Equity (RE).
BB developed a credit risk concentration control method, that analyzes the interrelation among the
various economic sectors comprising the business loan portfolio. This model evaluates the credit risk
concentration of the borrowers.
BB also has other management tools of credit risk appraisal, with an emphasis on:
•
•
•
•
•
Macro-sector limits for the Business segment;
Portfolio Quality Index (PQI) – qualitative and quantitative indicator of the portfolio. The default
concept follows the precepts defined by CMN Resolution 2682/99;
Delinquency Rates of 15 and 90 days – correspond to the division of the balance overdue for
more than 15 and 90 days, respectively, by the balance of the portfolio;
Credit Risk Budget – consists of projections for allowance for loan losses used to form BB’s
annual budget;
Risk Management Reports - systematic monitoring and projections for the loan portfolio using
different viewpoints.
In the regulatory sphere, special emphasis is placed on the publication of Resolution nº 3721 on
4/30/2009, which establishes guidelines for implementation of the credit risk management structure at
Financial Institutions and other institutions licensed to operate by Bacen and Release nº 18365, of
4/22/2009, which presents the preliminary criteria for use of the approaches based on internal models,
topics that already comprise the Bank's process of preparation for the new guidelines established in the
scope of Basel II.
143 - Banco do Brasil – MD&A 2Q10
Concentration
BB's extended Loan Portfolio, composed by foreign and domestic loan portfolio, guarantees granted and
Private Securities, besides the portfolios of BNC and BV, totaled R$ 349,761 million in June 2010, 6.8%
growth in the quarter and 41.1% in 12 months.
Table 110. Extended Loan Portfolio
R$ million
Pe r iod
Por tfolio
Colate r al
Se cur itie s
Total
Sep/08
202,201
7,132
4,284
213,617
Dec/08
224,808
8,220
4,175
237,203
Mar/09
228,101
7,899
4,662
240,662
Jun/09
235,400
8,600
3,900
247,900
Sep/09
245,712
10,155
5,748
261,615
Dec/09
300,829
9,875
9,992
320,696
Mar/10
305,551
326,522
10,550
11,168
11,252
12,071
327,353
349,761
Jun/10
In the extended concentration analysis for the loan portfolio, there was a 23.5% growth in exposure to
the 100 largest borrowers in March 2010 to 23.9% at the end of June 2010. It is worth to emphasize,
however that information on portfolio concentration does not include a part of BNC (still not integrated by
systems), and the BV portfolio.
Table 111. Concentration of the Loan Portfolio of the 100 Largest Borrowers
R$ million
Pe r iod
1s t
Cus tom e r
Balance
2nd to 20th
Balance
21s t to 100th
Balance
100th
lar ge s t
Balance
Sep/08
2.3
4,811
10.5
22,505
9.9
21,113
22.7
48,429
Dec/08
2.4
5,576
11.2
26,644
10.3
24,454
23.9
56,675
Mar/09
2.6
6,204
10.9
26,190
10.7
25,800
24.2
58,194
Jun/09
2.5
6,201
10.9
26,950
10.0
24,681
23.3
57,832
Sep/09
2.7
6,951
11.4
29,927
10.0
26,078
24.1
62,956
Dec/09
2.5
8,070
10.8
34,776
10.6
34,137
24.0
76,983
Mar/10
2.3
2.8
7,478
9,707
10.9
10.9
35,745
38,209
10.3
10.2
33,575
35,587
23.5
23.9
76,797
83,503
Jun/10
144 - Banco do Brasil – MD&A 2Q10
The exposure of the 100 largest borrowing customers as compared to the Referential Equity also
reflects a growth in the quarter, reaching 137.7% in June 2010 as opposed to 124.6% at the end of
March 2010. The ratio between the exposure of the largest borrower and the Referential Equity Amount
ended June 2010 in 16.0%, an increase of 390 bps in relation to the exposure recorded at the end of
March 2010.
Table 112. Concentration of the Loan Portfolio of the 100 Largest Borrowers % in relation to RE
R$ million
Pe r iod
1s t
Cus tom e r
(%)
2nd to 20th
(%)
Balance
Balance
21s t to 100th
(%)
Balance
100th
lar ge s t (%)
Balance
Sep/08
13.4
4,811
62.5
22,505
58.7
21,113
134.6
48,429
Dec/08
12.6
5,576
60.4
26,644
55.4
24,454
128.5
56,675
Mar/09
13.0
6,204
55.0
26,190
54.2
25,800
122.1
58,194
Jun/09
12.4
6,201
53.8
26,950
49.3
24,681
115.5
57,832
Sep/09
13.5
6,951
58.2
29,927
50.7
26,078
122.3
62,956
Dec/09
13.9
8,070
59.7
34,776
58.6
34,137
132.1
76,983
Mar/10
12.1
16.0
7,478
9,707
58.0
63.0
35,745
38,209
54.5
58.7
33,575
35,587
124.6
137.7
76,797
83,503
Jun/10
BB's amplified Business Loan Portfolio, disregarding loan portfolios of BNC and BV, totaled R$ 192,037
million in June 2010, 10.7% growth in the quarter and 32.0% in 12 months. The greatest concentration is
in transactions contracted with companies from the Oil macro sector that corresponds to 11.3% of the
amplified business portfolio, recording growth of 3.3% in June 2009 and 10.7% in March 2010.
Table 113. Concentration of the Loan Portfolio by Macrossector
R$ million
M acr o-s e ctor
Oli
Chg. %
Jun/09
Shar e %
M ar /10
Shar e %
Jun/10
Shar e % On Jun/09 On M ar /10
4,790
3.3
18,540
10.7
21,707
11.3
353.2
17.1
Metalw orking and Steel
14,577
10.0
15,967
9.2
20,767
10.8
42.5
30.1
Foodstuf f s of V egetable Origin
10,386
7.1
15,463
8.9
17,795
9.3
71.3
15.1
Building
1,087
0.7
12,198
7.0
14,730
7.7
1,255.1
20.8
Services
8,373
5.8
13,298
7.7
14,372
7.5
71.6
8.1
Electricity
4,016
2.8
10,113
5.8
11,348
5.9
182.6
12.2
A utomotive
2,568
1.8
9,821
5.7
11,120
5.8
333.0
13.2
Transport
5,943
4.1
10,008
5.8
10,629
5.5
78.8
6.2
Foodstuf f s of A nimal Origin
7,440
5.1
9,728
5.6
9,685
5.0
30.2
(0.4)
14.7
Retail Trade
7,524
5.2
7,479
4.3
8,580
4.5
14.0
15,052
10.3
6,251
3.6
6,815
3.5
(54.7)
9.0
Pulp and Paper
1,749
1.2
6,738
3.9
6,316
3.3
261.2
(6.3)
Electrical and Eletronic Goods
5,369
3.7
5,583
3.2
5,731
3.0
6.7
Telecommunications
5,125
3.5
6,714
3.9
5,256
2.7
2.6
Textile and Garments
A gricultural Consumables
2.6
(21.7)
14,764
10.2
4,995
2.9
5,198
2.7
(64.8)
4.1
Chemicals
3,819
2.6
4,396
2.5
4,468
2.3
17.0
1.6
Other A ctivities
2,912
2.0
4,192
2.4
4,214
2.2
44.7
0.5
11,178
7.7
3,841
2.2
4,084
2.1
(63.5)
6.3
Timber and Furniture
6,565
4.5
3,261
1.9
3,726
1.9
(43.2)
14.2
Wholesale Trade and Sundry Ind.
5,863
6,347
4.0
4.4
3,184
1,753
1.8
1.0
3,525
1,971
1.8
1.0
(39.9)
10.7
(68.9)
12.4
Total
145,447
100.0
173,524
100.0
192,037
100.0
32.0
10.7
Internal Loan Portf olio
120,576
134,137
149,336
A broad Loan Portf olio
13,198
17,585
19,462
8,335
3,339
10,550
11,252
11,168
12,071
145,447
173,524
192,037
Beverages
Leather and Shoes
Garantees
Securities
Total
Does not consider operations of Banco Nossa Caixa and Banco Votorantim.
145 - Banco do Brasil – MD&A 2Q10
8.1.4 Operating Risk
Introduction
The structure of Banco do Brasil's operating risk management is composed of a Risk Management
Directorate, Internal Controls Directorate and Security Management Directorate, pursuant to CMN
Resolution No. 3,380, which provides on the implementation of an operating risk management structure.
Information about the Management Structure and Operational Risk Management Process can be found
in more detail on BB's Internet page, Investor Relations Website.
In order to meet the Basel II implementation schedule, pursuant to Release 19,028 of the Central Bank
th
of Brazil (BACEN), of October 29 , 2009, which provides for the use of advanced models as from 2013,
as well as the guidance defined by the Central Bank of Brazil in Release 19,217, regarding
determination of Required Referential Equity (RRE), the Bank has been carrying out actions aimed at
the adoption of an internal operating risk model which enables more accurate management and fulfills
the requirements established by the Regulator.
In order to manage operational risk, Banco do Brasil, following the best market practices, monitors
operating risks through key risk indicators, operational loss exposure limits and a systematized internal
database. Special emphasis is placed on the implementation of specific limits for operating losses
related to "Labor Issues", "Business Failures", "Failures in Processes" and "Fraud and External Theft",
with the objective of enhancing agility in the proposition of mitigation actions.
Key Risk Indicators (KRI's)
ICR is a tool that supports operational risk management. It is comprised of one or more combined and
interrelated variables that are an integral part of an operating process, with expected behavior according
to predefined rules, and whose variation indicates greater or lesser exposure to the operational risk.
At BB they are used with the objective of identifying weak points associated with the critical operating
processes and to assist in the proposition of operating loss mitigation actions.
Operating Loss Exposure Limits
In order to ensure an effective management of operating risks, Banco do Brasil employs operating loss
exposure limits, which are intended to establish the acceptable limits to the Bank for operating losses,
which are remitted for verification every month by the Operating Risk Sub-Committee and Global Risk
Committee (GRC).
Regard this subject, BB created the Operating Loss Global Limit and Specific Limits in order to allow
operating loss management based on statistically pre-established tolerance levels, and to allow the
detection of weaknesses associated with processes likely to cause significant losses.
The following table present the progress of BB's operating losses, according to loss event classes and in
percentages. It can be noticed, however, that since the 2º quarter 2010, BB started to consider the
constitution/reversal of provisions in the total account of operational losses for the labor claims and
business failures.
146 - Banco do Brasil – MD&A 2Q10
Table 114. Monitoring Operational Losses
Los s Eve nt Cate gor y
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Labor Is sues
41.9%
45.2%
39.1%
39.5%
32.1%
42.0%
Busines s Failures
14.5%
16.3%
22.1%
35.1%
40.7%
20.9%
External Fraud and Thef t
18.2%
16.6%
18.0%
13.3%
16.0%
19.5%
Proces s Failures
19.8%
12.9%
11.8%
10.3%
9.2%
12.1%
Phy sic al A s sets Damage
4.6%
5.3%
4.1%
0.4%
0.7%
0.5%
Internal Frauds
0.9%
3.5%
4.8%
1.3%
1.0%
4.9%
System Failures
0.1%
0.0%
0.2%
0.0%
0.2%
0.0%
0.1%
0.0%
0.3%
0.0%
0.1%
0.0%
A c tiv ities Interruption
147 - Banco do Brasil – MD&A 2Q10
8.2 Capital Structure
8.2.1 Shareholders’ Equity
The Shareholders' Equity of Banco do Brasil attained R$ 39,332 million at the end of June 2010, a
growth of 4.5% in the quarter, corresponding to an equity value of R$15.31 per share, mainly due to the
incorporation of result in the period.
Table 115. Shareholders’ Equity
R$ million
Shar e holde r s ’ Equity
Se p/08
De c/08
M ar/09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
27,889
29,937
30,859
32,360
33,661
36,119
37,646
39,332
Capital
13,699
13,780
13,780
18,549
18,549
18,567
18,567
26,028
Reserves
12,762
15,990
15,771
13,626
13,311
17,313
16,869
12,924
(33)
199
124
216
324
270
405
411
(Shares in Treasury)
-
(31)
(31)
-
-
-
4
-
Retained earnings (accumulated losses)
-
-
-
(31)
(31)
(31)
(31)
(31)
Corporate Prof it Sharing
-
-
-
-
-
-
0
1,833
0
-
MTM – Securities and Derivatives
P&L A ccounts
148 - Banco do Brasil – MD&A 2Q10
8.2.2 Regulatory Capital
The implementation of Basel II rules in Brazil, especially in relation to the capital requirement, produced
several modifications in the method of measuring capital to bear the risks inherent to banking activities.
The implementation schedule of Basel II in Brazil was officialized by the Central Bank of Brazil - Bacen
by means of Communication 12,746, of 12.9.2004, and subsequently adjusted by Communication 6137,
of 9.27.2007. This agenda was built in phases, initially establishing, as regards capital requirement, the
use of a standardized approach (defined by Bacen), and at the end, the use of advanced models. On
TH
October 29 , 2009, Bacen, through Release 19.028, adjusted the schedules previously disclosed, with a
view to supplementing the measures and procedures required for proper implementation of Basel II in
Brazil.
To regulate the transition from Basel I to Basel II (standardized approach), Bacen published several
rules about capital requirement (Pillar I), process of supervision and transparency of information (Pillars
II and III).
Referential Equity Amount (RE)
On 2.28.2007, CMN approved changes in the rules for definition of the RE (Referential Equity Amount)
of financial institutions by means of Resolution no. 3,444, revoking CMN Resolution 2,837, of 5.30.2001.
On the same date, Bacen published Circular 3343/2007, which refers to the procedures to be adopted in
the request for categorization of borrowing instruments at Level I and Level II of RE.
1
2
The RE is formed by the sum of the Tier I portions and Level II , , being deducted the asset balances
represented by the following funding instruments issued by the financial institution: stock, hybrid capital
and debt instruments, subordinated debt instruments and other financial instruments described in Bacen
Resolution no. 3,444/2007, art. 12 and art. 13, § 3.
According to CMN Resolution no. 3,444/2007, for purposes of PR composition, the value of preferred
shares issued with a redemption clause having an original term of less than ten years, increased by the
value of subordinated debt instruments (DS), is limited to 50% of RE Tier I (art. 14, clause III). On the
other hand, the amount of hybrid capital and debt instruments (IHCD) is limited to the PR Tier I value,
being deducted the existing DS amount and its remaining issue margin (art. 14, clause I).
Required Referential Equity (RRE)
CMN Resolution 3,490, of 8.29.2007, established the Required Referential Equity (RRE) concept to
substitute the Required Shareholders' Equity (RSE) concept, revoking exhibit IV of CMN Resolution
2099/1994, and other rules concerning the topic. The RRE was henceforth comprised of the following
six portions:
RRE = PEPR + PCAM + PJUR + PCOM + PACS + POPR
Where:
PEPR - portion referring to the exposures weighted by the FPR assigned thereto;
PCAM - portion referring to the risk of exposures in gold, in foreign currency and in operations subject to
exchange variance;
PJUR - portion referring to the risk of operations subject to the variation of interest rates and classified in
the trading book, as provided for by Resolution 3,464, of 6.27.2007, where n = number of the different
1
Level I – it is determined by the sum of the values corresponding to the net equity, to the credit income
accounts balances and to a blocked account deposit to cure capital deficiency, excluded the items
mentioned in Bacen Resolution 3444/2007, art. 1, § 1, clause I to VI.
2
Level II – it comprises the sum of the values corresponding to revaluation reserves, contingency
reserves and special profit reserves related to non-distributed statutory dividends, increased by values
corresponding to hybrid capital and debt instruments, subordinated debt instruments and other items
described in Bacen Resolution 3.444/2007, art. 1, § 2, clauses I and II
149 - Banco do Brasil – MD&A 2Q10
portions relating to the risk of operations subject to the Variation of interest rates and classified in the
trading book;
PCOM - portion referring to the risk of operations subject to the variation of the price of commodities;
PACS - portion referring to the risk of operations subject to the Variation of the price of shares and
classified in the trading book, as provided for in Resolution 3,464, of 6.27.2007;
POPR - portion referring to the operational risk.
The reviews in the Referential Equity (RE) were incorporated by BB in July 2007. As regards the
Required Referential Shareholders' Equity (RRE), the rule started to be required as of 7.1.2008. The
following information is in compliance with the regulation in effect.
Performance
Banco do Brasil closed the second quarter of 2010 with referential shareholders’ equity 21.1% higher
than that seen in June 2009, reaching R$ 60,655 million.
Table 116. BIS Ratio – Economic-Financial Conglomerate
R$ million
Re fe r e nce Equity (RE)
Se p/08
De c/08
M ar /09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
35,271
43,391
47,644
50,087
51,456
58,264
61,654
60,655
23,954
31,201
32,915
35,218
36,121
41,068
42,489
41,476
13,699
13,780
13,780
18,549
18,549
18,567
18,567
26,028
Capital Increase
-
-
-
-
-
-
-
-
Retained earnings (losses)
0
-
-
-
-
-
-
-
Tie r I
Capital
Capital reserves
Revenue reserves
Reavaluation reserves
-
-
-
-
-
-
-
-
12,762
15,990
15,771
13,626
13,311
17,313
16,869
12,924
(7)
(7)
(15)
(14)
(7)
(7)
(6)
(6)
(33)
199
124
216
324
270
405
411
Treasury shares
-
(31)
(31)
-
-
-
4
-
A ccumulated Earnings or Losses
-
-
-
(31)
(31)
(31)
(31)
(31)
0
Mark-to-Market – Securit. A nd Derivatives
Corporate Prof it Sharing
-
(0)
834
787
21
0
-
1,461
-
1,215
-
1,509
-
1,833
-
(3,702)
(22)
(22)
(22)
(22)
(22)
(22)
(22)
(352)
(513)
(562)
(638)
(291)
(242)
(186)
(293)
126
(29)
(97)
(121)
(144)
(85)
(148)
(145)
A dditional Provision
-
1,835
1,918
2,867
2,903
2,782
2,624
-
Hybrid Capital and Debt Instruments - Tier I
-
-
-
-
-
2,524
2,581
2,611
11,317
12,190
14,729
14,869
15,335
17,196
19,165
19,178
11,209
11,729
14,342
14,653
15,230
17,078
18,970
19,376
938
1,145
1,134
956
871
853
872
882
Inst of Cap. Issued by IF w ith FPR of 100%
-
-
-
-
-
-
-
-
Revaluation reserves
7
7
15
14
7
7
6
6
Income accounts
Tax Credit excl. RE's Tier I – Res.3059
Def erred A ssets
Mark-to-market
Tie r II
Subordinated debt
Hybrid Capital and Debt Instruments
Mark-to-market
(126)
29
97
121
144
85
148
145
Financial Instruments Excluded f rom RE
(711)
(720)
(859)
(875)
(917)
(827)
(832)
(1,232)
RSE/RRE
29,813
31,500
34,879
35,957
43,647
46,758
49,377
51,970
Credit Risk(1)
29,310
30,980
33,554
34,574
40,487
43,557
45,350
48,248
Market risk(2)
102
119
170
228
631
674
775
470
401
5,458
401
11,891
1,155
12,765
1,155
14,131
2,528
7,809
2,528
11,506
3,252
12,277
3,252
8,685
13.0
15.2
15.0
15.3
13.0
13.7
13.7
12.8
Operating Risk(3)
Sur plus /(ins ufficie ncy) of RE
K Coe fficie nt %
(1) Referring to the PEPR portion pursuant to circular 3,360 of 9/12/2007.
(2) Referring to the PCAM, PJUR, PCOM and PACS portions, Circulars 3361 to 3364/2007, 3366/2007, 3368/2007 and 3389/2008.
(3)Referring to the POPR portion, pursuant to circular 3,383, of 4/30/2008.
150 - Banco do Brasil – MD&A 2Q10
BB's RRE reached R$ 51,970 million in June, increasing 44.5% in relation to June 2010 and 5.3% in
relation to March 2010. The main part of the requirement was caused by the credit risk portion (PEPR),
which reflects mainly the growth of loan operations. The following table presents the main changes in
the PEPR quota accounts in the second quarter of 2010, in relation to the same 2009 period,
considering the Economic-Financial Consolidated:
Table 117. Main accounts of the PEPR quota (Economic-Financial Conglomerate)
R$ million
Loan Operations
Jun/09
Jun/10
Chg %
38.6
19,256
26,689
5,098
6,774
32.9
Securities
844
2,720
222.3
Loans to releas e
713
1,494
109.5
961
7,702
1,903
8,668
98.0
12.5
34,574
48,248
39.5
Ohter Credits (gold, adv anc es to FGPC, other adv anc es
Guarantees giv en
Other
TOTAL
Regarding the market risk, we present in the following table the Required Referential Equity in June
2010, by risk factor.
Table 118. RRE for Market Risk by Risk Factor
R$ million
Jun/10
Ris k Factor s
PRE FX
-
PRE Interest Rate
456.5
PRE Commodities
3.4
10.1
PRE Shares
PRE M ark e t Ris k ¹
470.0
(1) Includes positions of BNC and BB's interest in BV's positions (R$ 425 million)
BB has chosen for the utilization of the Alternate Standardized Approach, which requires 100% of the
value determined, according to Circular no. 3,383. The total calculated of R$ 3,252 million (base date December 2009) considers the amounts of Banco Nossa Caixa and Banco Votorantim. The allocated
capital amount, by line of business, corresponds to:
Table 119. Allocated Capital for Operational Risk by Line of Business
Bus ine s s Line
A sset Management
Commercial
Am ount (R$ m illion)
94
794
Retail
386
Corporate Finance (1)
505
Trading and Sales
Payments and Settlements
Financial A gent Services
Retail Brokerage
TOTAL
1,002
400
67
4
3,252
(1) Amount includes R$ 316 million regarding Banco Votorantim;
Banco do Brasil's capital ratio (K) ended June 2010 at 12.8, level lower than that obtained in March
2010. The Basel ratio shown allows the Bank to expand its loan portfolio by R$ 78,953 million in credit
assets, considering a 100% weighting.
151 - Banco do Brasil – MD&A 2Q10
15.2
15.3
15.0
13.7
13.7
3.9
4.0
4.3
13.0
13.0
4.3
12.8
4.5
4.6
4.2
8.8
10.9
10.4
10.8
9.1
9.7
9.5
Sep/08
Dec/08
Mar/09
Jun/09
Sep/09
Dec/09
Mar/10
Tier I
4.1
8.8
Jun/10
Tier II
Figure 68. BIS Ratio – Economic-Financial Conglomerate
The reduction in the Basel ratio during the quarter is explained by the growth of the loan portfolio, and
basically due to the removal of additional credit risk provisions (PCLD) of Referential Equity. The end of
the prerrogative of including the additional PCLD in the reference assets was already expected and led
to a 0.6 percentage point decline in the ratio.
It should be recalled that the BIS ratio for June 2010 does not include the R$ 7.05 billion capital increase
in June 2010. Pro forma simulations reflect that these incoming funds would raise the June ratio to about
14.3%.
Table 120. Changes in Composition of BIS Ratio
R$ million
Net Income less Interest on Capital
Increase of Subordinated Debt
Other Changes in Ref erenc e Equity
Re quir e d
Re fe r e nce
Equity
Re fe r e nce
Equity
Effe ct on Bas e l
Ratio
Effe ct on
Le ve r age
1,635
-
0.3
406
-
0.1
14,866
3,691
(3,080)
-
(0.7)
(28,004)
Tax Credit excluding RE's Tier I – Res.3059
-
-
-
-
Hybrid Capital and Debt Instruments - Tier I
30
-
0.0
270
Hybrid Capital and Debt Instruments - Tier II
10
-
0.0
91
Increase of Market Risk Requirement
-
(305)
0.1
2,774
Increase of Credit Risk Requirement
-
2,898
0
(0.8)
(0.0)
(26,342)
(0)
(999)
2,593
(0.9)
(32,654)
61,654
60,655
49,377
51,970
13.7
12.8
111,607
78,953
(999)
2,593
(0.9)
(32,654)
Increase of Operational Risk Requirement
Change s in the Quar te r
Balance at Mar/10
Balance at Jun/10
Quar te r ly Ne t V ar iation
152 - Banco do Brasil – MD&A 2Q10
Fixed Asset Ratio
In the last quarter, the Fixed Asset Ratio went up from 14.2% to 15.8%. With the current fixed asset
level, BB was able to increase its fixed assets by R$ 20.7 billion, without leading to be out of the
maximum 50% limit of the Referential Equity.
Table 121. Fixed Asset Ratio
R$ million
Se p/08
De c/08
M ar /09
Jun/09
Se p/09
De c/09
M ar /10
Jun/10
Shareholders ' Equity
27,889
29,937
30,859
32,360
33,661
36,119
37,646
39,332
Subordinated debts eligible as Capital
11,209
11,729
14,342
14,653
15,230
17,078
18,970
19,376
938
1,145
1,134
956
871
853
872
882
(4,765)
580
1,308
2,118
1,693
4,214
4,166
1,064
35,270
43,391
47,643
50,087
51,455
58,264
61,654
60,655
8,217
13,606
19,421
19,779
23,729
25,178
27,112
26,864
V ariable Income Securities
38
28
26
31
204
308
398
668
Stock Exchange and Cetip Clearing
(1)
(0)
(0)
(0)
(1)
(0)
(0)
(0)
(2,877)
(4,078)
(4,836)
(5,221)
(7,759)
(8,166)
(8,301)
(8,280)
Hybrid Capital and Debt Instruments
Other
Adjus te d Re fe r e ntial Equity Am ount (A)
Permanent A ssets
Leased assets
Los ses w ith Leasing to be A mortized
Def erred A ssets (Resolution CMN 3,444)
V es ted Rights Payroll up to 06/30/09 (Res. 3642 Bacen)
Equity Int. in the Results of Subs and A f f il.
Total Fixe d As s e ts (B)
Fixe d As s e t Ratio (B/A) - %
M ar gin (Sur plus ) - %
153 - Banco do Brasil – MD&A 2Q10
(62)
(55)
(48)
(42)
(39)
(35)
(32)
(30)
(352)
(513)
(562)
(638)
(291)
(242)
(186)
(293)
-
(3,921)
(6,284)
(4,894)
(4,782)
(5,305)
(4,937)
(4,094)
-
-
-
(3,619)
(5,028)
(5,115)
(5,289)
(5,231)
4,964
5,067
7,716
5,396
6,035
6,623
8,764
9,604
14.1
12,671
11.7
16,628
16.2
16,105
10.8
19,648
11.7
19,693
11.4
22,509
14.2
22,063
15.8
20,724
8.2.3 Economic Capital
Banco do Brasil uses the concept of economic capital in its internal processes of risk management. The
tables below show the total capital calculation and by economy sector (disregarding BV).
Table 122. Economic Capital
Econom ic Capital
Credit Ris k Requirement (1)
Inte r nal M ode l
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
4,809
5,150
5,737
7,397
8,060
7,913
Market Ris k Requirement (2)
414
338
170
176
104
166
8,204
108
Operating Ris k Requirement
1,335
1,513
1,674
1,967
2,250
2,100
2,109
TOTAL
6,558
7,001
7,581
9,540
10,414
10,179
10,421
(1) For loan operations and collateral operations
(2) Capital Consumption for Trading Book (Bacen Circ. 3,354), Foreign Exchange, Commodities
We present below the economic capital calculation over the Credit Risk detailed by macro-sectors and
individuals/businesses, disregarding BNC's and BV's information.
Table 123. Distribution of Economic Capital in the Loan Portfolio
R$ million
Jun/09
Shar e
Jun/10
Shar e
INDIV IDUALS
3,619
63.1%
5,354
68.3%
COM PANIES
2,117
36.9%
2,481
31.7%
A gribusiness of A nimal Origin
261
4.6%
173
2.2%
A gribusiness of V egetable Origin
370
6.5%
361
4.6%
A utomotive
128
2.2%
120
1.5%
Beverages
13
0.2%
13
0.2%
Wholesale Trade and Sundry Ind.
52
0.9%
48
0.6%
Retail Trade
96
1.7%
120
1.5%
105
1.8%
163
2.1%
37
0.6%
46
0.6%
Building
Leather and Shoes
Electrical and Eletronic Goods
73
1.3%
89
1.1%
Electricity
50
0.9%
49
0.6%
A gric ultural Consumables
40
0.7%
50
0.6%
Timber and Furniture
51
0.9%
63
0.8%
106
1.8%
216
2.8%
86
1.5%
40
0.5%
Metalw orking and Steel
Pulp and Paper
Oil
86
1.5%
132
1.7%
Chemicals
54
0.9%
59
0.8%
Servic es
240
4.2%
357
4.6%
20
0.3%
13
0.2%
Telec omunications
Textiles and Garments
100
1.7%
121
1.5%
Transport
138
2.4%
200
2.6%
Other A ctivities
TOTAL
154 - Banco do Brasil – MD&A 2Q10
11
0.2%
46
0.6%
5,736
100.0%
7,835
100.0%
We show below the value at risk (VaR) measurement for market risk, per risk factor, for BB
Consolidated.
Table 124. VaR by Risk Factor
R$ million
Ris k Factors
Jun/10
Pre-Fixed Interest Rate
53.5
Foreign Currency Coupom
13.6
Price Index Coupon
2.6
Exchange V ariation
31.0
Commodities
5.1
A ções
2.2
PRE M ar k e t Ris k *
108.0
*Trading Book + Exchange Variation + Commodities
Please note that the BB Consolidated VaR for 2Q10 includes the effects of improved methodologies for
the corporate curves regarding pre-fixed interest rates, and changes in the time horizon from one to ten
business days.
Lastly, we show the economic capital for operating risks, according to class of operating loss events and
taking into account Banco Nossa Caixa values. This calculation includes data associated with the
severity of the loss events recorded in the internal database. Please note that this figure does not
include use of the External Database, Internal Control Scenario and Factors Analysis, and the Business
Environment.
Table 125. Distribution of Economic Capital for Operating Risk, by Loss Event Category
Los s Eve nt Cate gor ie s
Faults in Businesses
Damage to the Physical Property
Faults in Systems
R$ m illion
900
8
5
Faults in Processes
205
External Fraud and Thef t
293
Internal Fraud
65
Labor Issues
633
TOTAL
*Trading Book + Exchange Variation + Commodities
155 - Banco do Brasil – MD&A 2Q10
2,109
9 - Social and Environmental Performance
Since 4Q08, Banco do Brasil has maintained the pioneer initiative among Brazilian banks of disclosing
information about its socio-environmental performance together with the financial result of the company.
In this initiative, the Bank presents historical data and analyses that allow the reader to understand the
advances and efforts undertaken in the quest to make sustainability increasingly present in the
company's strategies and policies.
The decision about the quarterly disclosure of this information is based on the commitment to the
creation of social and environmental values, materialized in Agenda 21, and from the understanding that
this data is as important to the company's sustainability as the economic and financial information,
deserving a treatment similar to that is already given to it. In addition, the Bank seeks to stimulate the
investor market to consider socio-environmental aspects in its decision making more and more often,
contributing to the appreciation of companies committed to their social and environmental responsibility.
Social and Environmental Responsibility – RSA practices selected to form a part of the Performance
Analysis Report were picked out based on their relevance to the Company's business, on the tangible
return to shareholders, and on market research with pension funds and specialists on the subject. The
selection of which data justifies the quarterly monitoring of its development (the other indicators are
traditionally reported in the Annual Report) was also used as a criterion in the structuring of this report.
Like the rest of the report, this set of information is constantly reviewed and monitored with a view to
better adapting its reporting to the needs of analysts and shareholders, target audience of this
publication.
This chapter is divided into four major blocks, grouping the new RSA indicators and information that the
Bank had already been disclosing, per related topics: employee relations, Ecoefficiency, Business with
Socio-environmental Emphasis and Recognition of the Investor Market.
It is worth emphasizing that the numbers related to Banco Nossa Caixa's (BNC) takeover started being
included as of 4Q09. Tables and figures of this chapter show comparisons with the same period of prior
year (2Q09), that is, not including BNC yet.
156 - Banco do Brasil – MD&A 2Q10
9.1 Employee Relations
This section contains the main actions regarding business sustainability, in connection with investments
in staff by Banco do Brasil.
Characteristics of Workforce
Banco do Brasil invests in the creation and strengthening of bonds with its collaborators, so that its
professionals feel encouraged to build a career at the institution. People that join the staff tend to spend
most of their professional lives at the Bank, which contributes to the low turnover and causes the
stratification of the staff by age and length of service to evolve in a relatively linear manner, without
abrupt oscillations.
2Q10 presented few fluctuations in the stratification of the staff by age. There was an increase in the
percentage of employees between 26 and 35 years of age, besides a small reduction in the 36 to 45
year age range.
2Q09
1Q10
2Q10
7.4%
7.6%
8.3%
27.1%
29.5%
29.2%
35.2%
35.7%
35.1%
29.5%
27.9%
Up to 25 years old
from 26 to 35 years old
27.5%
from 36 to 45 years old
Over 45 years old
Figure 69. Employees Age
The service length breakdown at the Bank faced significant changes in the 4Q09 due to the joining of
BNC’s staff, which explains the change seen in the 2Q10, mainly in the “up to 5 years” range, in relation
to the same prior-year period. On the date Banco Nossa Caixa was incorporated by Banco do Brasil, all
of its employees became BB’s, and as of 4Q09 they were included in this analysis. In relation to the
previous quarter, except for the range related to employees with 11 to 15 years of service in the Bank,
which went from 2.2% to 5.9%, no significant change was noted in the quarter.
2Q09
1Q10
2Q10
14.6%
16.4%
41.2%
14.1%
11.3%
11.6%
46.8%
14.3%
3.9%
2.2%
3.3%
2.5%
20.8%
22.2%
46.5%
3.9%
2.3%
21.9%
Up to 5 years
From 6 to 10 years
From 11 to 15 years
From 16 to 20 years
From 21 to 25 years
Over 25 years
Figure 70. Employees by Length of Service
157 - Banco do Brasil – MD&A 2Q10
Education and Professional Development
Banco do Brasil develops countless education and professional development actions. These actions
include onsite courses, the establishment of partnerships to provide distance learning solutions and the
concession of scholarships (academic and of languages), besides the incentive to studies by means of
the internal career planning system.
The total number of scholarships granted in 2Q10 was 9,282, which corresponds to 8.7% of the staff.
This percentage is slightly lower than the 9.5% observed in 1Q10, yet higher than the 8.3% observed in
2Q09. The drop in the percentage is a result of the increase in the Bank's employee base, going from
103,923 in 1Q10 to 106,241 in the 2Q10. In comparison with the same prior-year period, there was an
increase in the absolute number of scholarships granted, which increased from 7,374 in 2Q09 to 9,282
in 2Q10.
Universidade Corporativa do Banco do Brasil (Corporate University of Banco do Brasil) began the
selective process for the granting of scholarships in the categories of Undergraduate Studies and NonDegree Specialization, estimating a total 1,000 scholarships for the first and 500 for the second
category. The Program, launched in 1997, has been successful in encouraging and enabling the
participation of employees in undergraduate and specialization courses. Since then, it has been offering
higher education and specialization opportunities to around 26 thousand employees.
Table 126. Scholarships Granted
2Q09
Undergraduate Scholars hips
1Q10
2Q10
6,529
4,417
3,759
MBA s, Masters ' and Doctors' Sc holarships
586
5,253
5,307
Language Scholarships
259
197
216
7,374
9,867
9,282
Total Sc holars hips Granted
Number of Employ ees in Period
89,194
103,923
106,241
Unde r gr aduate Scholar s hips pe r Em ploye e
7.3%
4.3%
3.5%
M BAs , M as te r s ' and Doctor s ' Scholar s hips pe r Em ploye e
0.7%
5.1%
5.0%
Language Scholar s hips pe r Em ploye e
0.3%
8.3%
0.2%
9.5%
0.2%
8.7%
Total Scholar s hips pe r Em ploye e
*As from the 4Q09 employees from BNC were included.
The composition of the staff by level of education remained stable in relation to the previous quarter,
with a slightly higher variation in comparison to 2Q09. Once again, this fact is due to the incorporation of
the employees of Banco Nossa Caixa, which added a greater percentage of employees with "Higher
Education" to the staff profile. Due to the countless incentives offered for the specialization of its staff,
the percentage of employees with higher education and specialization, masters and doctoral degrees
presented positive variation in relation to the previous quarter, surpassing 48.3% in the case of higher
education and 21.8% in the case of employees with specialization, masters and doctoral degrees,
against 48.9% and 21.6% in 1Q10.
158 - Banco do Brasil – MD&A 2Q10
2Q09
1Q10
30.5%
2Q10
29.3%
28.8%
48.9%
46.3%
0.5%
0.6%
Elementary School
0.6%
21.6%
22.6%
High School
48.3%
21.8%
Bachelor's Degree
Specialization, Master's or Doctorate
Figure 71. Level of Education
Besides the formal education of employees, Banco do Brasil invests in other types of training, providing
presence and distance learning courses to its staff. A significant number of these courses is developed
by the Corporate University of Banco do Brasil, which identifies knowledge and competences that the
employees need to obtain to perform their duties at the bank. Other courses also provided are those
related to the personal growth, social and environmental awareness, and incentives to voluntary work,
among other theme areas considered important to the personal and professional experience of its
collaborators.
The total hours of training exhibited growth in 2Q10 in relation to the previous quarter, but is still slightly
lower than the number presented in the same period of 2009. It is worth emphasizing the increase in the
average number of employees, which went from 96,769 in 1Q10 to 101,031 in the current quarter,
besides an increase in the average number of hours of training by employees. The increase in rates in
relation to the previous quarter is due to the gradual growth of the involvement of the employees of
Banco Nossa Caixa in the training programs and courses offered by the Bank.
Table 127. Employees Training – Annual Flow
2Q09
Hours of Training**²
12,447,694
1Q10
2Q10
10,736,733
11,482,480
Total employees *¹
87,545
96,769
101,031
Hours of training by employees**²
142.19
110.95
113.65
Employ ees w ith A nbid Certif ic ation – CPA 10
37,876
7,620
44,080
8,158
46,641
11,074
Employ ees w ith A nbid Certif ic ation – CPA 20
(1) As from the 4Q09 employees from BNC were included.
(2) Indicator calculated based on data accrued over 12 months.
Another highlight is the number of employees with Anbid certification, which exhibited growth in the two
categories: CPA 10 and CPA 20. Banco do Brasil is the institution with the highest quantity of
employees certified by ANBIMA. Since the start of the program, 57,715 employees have been certified,
of which 46,641 under the basic mode and 11,074 under the advanced mode.
Value Added to Employees
Personnel Expenses in their diverse aspects comprise an important index of value added by the Bank to
staff members. The table below shows the progress of these expenses in absolute terms and in average
sums per employee.
Not considering the consolidation of Banco Votorantim, personnel expenses rose to R$ 2,849 million in
2Q10. The average quarterly expense per employee increased 0.7% in relation to the 1Q10 and
increased 6.2% in relation to the 2Q09 (when BNC's employees started to comprise the BB's staff). The
159 - Banco do Brasil – MD&A 2Q10
growth of personnel expenses in relation to the 2Q09 is due, basically, to the salary adjustment upon the
collective bargaining and the increase in the number of employees of the Bank.
Table 128. Quarterly Average Expenses per Employee (Income Statement with Reallocations)
2Q09
Personnel expenses (reallocated) – R$
Number of employees in the period
Quarte rly Ave rage Expe ns e pe r Em ploye e – R$
1Q10
2Q10
2,612,943,274.52
103,458
2,768,501,282.16
103,923
2,849,054,211.25
106,241
25,256.08
26,639.93
26,816.90
*The number of employees does not include interns.
As of 1Q09, the number of employees of banks BESC and BEP was included. In the 2Q09, BNC's employees were included.
As a manner of providing improved financial returns to collaborators and at the same time strengthening
the commitment by everybody in the organization with the generation of consistent profits, Banco do
Brasil has made efforts to constantly enhance its Statutory Profit Sharing - PLR. During 2Q10 the
average sum provisioned for paying out to each employee reached R$ 3,275.67, decreasing 2.6% in
relation to 2Q09.
Table 129. Expenses with Statutory Profit Sharing
2Q09
Profit Distribution provisioned in the quarter – R$
Number of employees in the period
Average PLR per Em ployee – R$
1Q10
2Q10
299.823.039,70
89.194
307.567.037,30
103.923
348.010.517,34
106.241
3.361,47
2.959,57
3.275,67
(1) Accrued statutory profit sharing considered only for BB Multiple Bank
Turnover of Staff Members
The turnover rate, which measures the proportion of dismissals in relation to the mean headcount in the
period, presented a slight decrease in relation to the previous quarter, yet continues slightly high in
relation to the historical data. The rise of the rate is basically due to the corporate merger of Banco
Nossa Caixa in the 2nd quarter of 2009. Many employees adhered to the Voluntary Resignation Plan,
and these adhesions have been consummated in the last quarter, which contributed to the growth of the
number of dismissals and resignations, hiking the turnover rate.
With the finalization of the takeover process of Nossa Caixa, and consequent stabilization in the staff, it
is expected that the rate will present gradual reduction up to the year end.
Table 130. Employee Turnover
2Q09
Employee Turnover Rate¹
1Q10
2Q10
1.05
1.29
1.20
No. Employees in Prior Quarter³
89,534
103,971
103,923
No. Employees in Quarter³
89,194
942
103,923
1,342
106,241
1,258
Terminations in Period²
(1) Proportion of dismissals as compared to the average number of employees in the period
(2) The concept of dismissals includes discharges, retirements, early retirements, deaths and leaves at the request of the employee
(3) In 1Q09, the number of employees of the recent corporate merger of banks BESC and BEP and in 4Q09 of BNC.
160 - Banco do Brasil – MD&A 2Q10
9.2 Eco-efficiency
The purpose of eco-efficiency is to produce more with less, using fewer natural resources and less
energy in the productive process, reducing waste and operational costs. In publishing information on
eco-efficiency, Banco do Brasil demonstrates the effort undertaken in the increasingly efficient use of
natural resources and of energy, reflected not only in the environment, but also in the control of
administrative expenses and in risk mitigation.
To structure the indicators, we sought to relate the items that are being evidenced (i.e.: consumption of
water and paper) with denominators that influence in a more direct way its fluctuation. For example, the
use of water in Banco do Brasil's main buildings is intended mainly to meet the needs of its staff
members, and hence we relate its use to the average number of employees per period. Under the same
reasoning, the use of paper relates to the base of checking accounts.
Annual Use of Water in the Main Buildings
The ratio below refers to the use of water in Banco do Brasil's head office buildings. Head Office
Buildings I, II, and III located in Brasilia concentrate a major part of Banco do Brasil's executive officers,
in addition to support bodies.
Water consumption observed in the head office buildings presented a slight increase in relation to the
previous quarter. However, in relation to the same period of 2009, the figures presented were lower.
Water consumption by employee presented a significant reduction, reaching the value of 18.8m³ in
2Q10, as opposed to 23.6m³ in 2Q09. In spite of increase in the number of employees in the Head
Office Buildings, water consumption has been kept stable during the quarter.
Table 131. Use of Water
2Q09
Use of Water in the Main Building (m³)
Employees in Main Buildings I, II, and III (average)
Us e of Wate r (m ³) / Em ploye e s *
1Q10
2Q10
127,530
5,407
124,025
6,111
124,459
6,633
23.6
20.3
18.8
*Calculated based on data accrued over 12 months.
White Paper – Annual Use
Banco do Brasil has also implemented several measures to reduce the use of paper. Corporate systems
were adapted to print preferably double-sided, there were employee awareness campaigns, and
customers are encouraged more and more to make use of automated channels which do not involve the
use of paper.
Paper consumption exhibited a small increase in 2Q10 in relation to the previous quarter due to
seasonal factors and also the Public Offering process held by BB. However, in comparison with the
same period of 2009, the absolute consumption and the consumption by client are lower, showing an
advance of efficiency in the use of the resource.
Table 132. Use of Paper
2Q09
Paper Consumption (tons)
Checking A ccount Base (average)
Cons um ption pe r Cus tom e r (gr)¹
(1) Calculated base on data accrued over 12 months
Automated Transactions without the Use of Paper
161 - Banco do Brasil – MD&A 2Q10
1Q10
2Q10
3,380
30,594,788
3,276
31,653,435
3,328
31,767,855
110.5
103.5
104.8
As informed in the preceding item, Banco do Brasil has invested in new channels for processing
transactions and for doing business with its customers. There is growing trend to employ channels that
do not involve printing and, therefore, do not consume paper. Among such channels, we may point out
the Internet, Customer Assistance, and Mobile Banking. There was a slightly reduction in the use of
these channels in the quarter, attaining 41.8%, against 42.4% in 1Q10.
It is worth emphasizing the consolidation of the initiative DDA - Authorized Direct Debit, an option that
allows the client to register as an electronic payer, avoiding the need for issuance of paper bank
payment slips. BB is a leader in the DDA service, and reached this position because it started providing
this service for customers even before it was launched by the Brazilian Bank Federation (Febraban).
39.8%
3Q08
38.6%
4Q08
40.0%
1Q09
42.6%
2Q09
44.6%
40.1%
3Q09
4Q09
Automated Transactions w ithout use of paper
Figure 72. Transactions without Use of Paper
162 - Banco do Brasil – MD&A 2Q10
42.4%
1Q10
41.8%
2Q10
Use of Toner
The use of toner is another potential creator of residues related to printing documents. Banco do Brasil
already uses 100% of reconditioned cartridges, and has concentrated efforts to reduce the use of this
kind of material.
The consumption of toner exhibited an increase of 6.0% in comparison with the previous quarter. This
increase originates from seasonal factors, but also from the Public Offering process held by the Bank.
Due to the Offering, the distribution network had a greater volume of contracts to be printed for adhesion
by shareholders, contributing to the increase in the consumption of toner and of white paper. Another
specific factor, which tends to gradually impact toner consumption, is the corporate merger of the
distribution network of Banco Nossa Caixa. The effects have already begun to be felt in 2Q10, and may
cause an increase in consumption for the coming quarters.
Strategic measures to optimize the consumption of these resources have been gradually implemented.
Customers’ accession to DDA (Authorized Direct Charge) will gradually lead to a decline in the use of
paper and toner, as there will be an increased use of this service by customers and the printing of bank
collection vouchers will be reduced.
26,378
24,549
23,096
3Q08
22,398
4Q08
24,856
23,449
22,857
21,653
1Q09
2Q09
3Q09
Toner Consumption
Figure 73. Toner Consumption – in units
163 - Banco do Brasil – MD&A 2Q10
4Q09
1Q10
2Q10
9.3 Social Environmental focused Business
Banco do Brasil, with its concern for contributing to the improvement in the quality of life of the society
and preserve the environment, carries out businesses that support the sustainable development of the
country. Accordingly, the Bank offers environmentally and socially responsible products and services
and designs business approaches intended to foster the sustainable development of the Brazilian
regions in which BB operates.
Expanding business performance in activities and projects with positive socio-environmental impact,
including those that favor low carbon economy, is one of the corporate drivers of BB that guides its
strategic actions.
Reconciling business goals with concerns relating to environmental preservation, to respect for diversity
and the reduction of social inequalities, Banco do Brasil is striving to become a reference in sustainable
businesses.
Sustainable Regional Development - DRS
Sustainable Regional Development (DRS) is a business strategy through which Banco do Brasil seeks
to drive sustainable development, by mobilizing the agents of economic, social, and political activities in
order to support productive activities that are economically feasible, socially fair, and environmentally
correct.
In order to implement DRS, Banco do Brasil's traditional credit facilities are extended, such as microcredit loans, on-lending (such as Proger), or other facilities with unrestricted funds intended for
individuals and businesses. DRS creates returns for the Bank, from a social as well as an economic
viewpoint: it provides the opening of new checking accounts and the expansion of the loan portfolio,
besides allowing the loyalty enhancement of a customer base that tends to have growing business
potential.
The concept of "Beneficiaries - DRS" underwent a reformulation in 1Q10, substituting the previous term
"DRS - Covered Families". Accordingly, the result of 1Q10 underwent a reduction of around 9.7% in
relation to 4Q09. For 2Q10, it is possible to observe an increase of 6.2% in the number of beneficiaries
served, with maintenance of growth expected in the next few quarters. It is also worth emphasizing the
financial volume of business, which presented growth of 19.0% in relation to the prior quarter.
The innovative character in sustainable finance and the social-environmental extent of the initiative were
attested by the United Nations University, which stated the following in its report: "In our knowledge, the
Sustainable Regional Development strategy is the first initiative promoted by a financial institution that
includes sustainable development principles as the basis of its methodology and practice of
implementation, and follows them systematically." (...) BB proved that combining legitimate economic
profitability with a high level of social responsibility represents a new, solid and definitively necessary
method of doing business. (...) The Program deserves to be continued and reinforced, and in our
opinion, contains elements and acquired experience that could be applied successfully in other
countries".
Table 133. Sustainable Regional Development (DRS)
2Q09
1Q10
2Q10
DRS - Transactions Concluded (R$ millions)
5,858
7,049
8,388
DRS - Scheduled Loans (R$ million)
5,355
4,852
4,904
Business Plans in implementation
4,612
3,630
3,664
1,188,749
140,522
901,778
156,199
957,388
189,093
DRS Benef iciaries ¹
Bank A ccounts opened in DRS assisted communities ²
1 As from the 1Q10, the concept of “Covered Families” was replaced by “Beneficiaries – DRS”
2 Accrued Position. Monitoring begun as of 2008
164 - Banco do Brasil – MD&A 2Q10
Microcredit
Microcredit consists in low volume loan transactions, normally aimed at low-income groups that do not
have access to conventional credit facilities. Law 10,735/03 regulates the concession of loans to the low
income population and refers to the allocation of funds corresponding to 2% of the demand deposits
obtained by the financial institutions for microcredit operations, at a rate of up to 2% per month.
Banco do Brasil is one of the major players in the market agents in micro-finance. The distribution
channels of the loan lines are the branches of Banco do Brasil and the banking correspondents network
(of BB itself and those previously related to Banco Popular do Brasil). The micro-credit loan portfolio
ended 2Q10 with R$ 1.1 billion, an increase of 20.3% over the preceding quarter, and of 101.5% as
compared to the same period in 2009. This growth is explained by the review of BB operation model in
this segment, as well as the review of lendings and management methodologies.
Table 134. Microcredit Operations
2Q09
Microcredit - Portf olio (R$ thousands)
Loans in Period - (R$ thousand)
Number of A greements in Portf olio
1Q10
2Q10
519,335
870,155
1,046,420
153,059
1,166,198
363,504
1,212,670
350,689
1,274,796
Family Agriculture - Pronaf
Banco do Brasil is the country's largest lender to family-run Agriculture. Besides performing the social
role of supporting small producers and the generation of income in the rural zone, PRONAF enables the
Bank to prospect new customers, generate new income and seek new business based on the increase
in the loyalty of these customers. The PRONAF portfolio ended 2Q10 at R$ 19,998 million, reflecting a
growth of 5.9% in the quarter and of 20.5% as compared to the same period in the previous year.
19,998
18,880
18,279
17,645
16,597
15,088
15,545
13,955
Sep/08
Dec/08
Mar/09
Jun/09
Figure 74. PRONAF Portfolio/Proger Rural (R$ million)
165 - Banco do Brasil – MD&A 2Q10
Sep/09
Dec/09
Mar/10
Jun/10
RSA Loans – Other Programs
In addition to the programs already described, Banco do Brasil supports the organic foodstuffs activity
(BB Produção Orgânica) and forest production (BB Florestal). The total amount invested in these two
lines was R$ 605.9 million at the end of the quarter, representing an increase of 4.7% as compared to
the previous quarter and of 19.7% over 2Q09.
Table 135. RSA Loans - Other Programs
R$ million
BB Florestal
2Q09
1Q10
2Q10
BB Produção Orgânica
492.3
13.8
621.1
14.4
591.5
14.3
TOTAL
506.2
635.5
605.9
In the concession of loans to companies there is compliance with the criteria and rules defined by the
Bank and by the financial authorities, as well as the fulfillment of social and environmental requirements
such as those contained in the Equator Principles and in the Global Pact, rules to which the Bank
voluntarily adhered. BB also verifies whether the loan proponents are included in the list of the
Department of Labor and Employment which identifies companies that submit their employees to
degrading forms of labor or slave labor.
Other Business with Social and Environmental Attributes
Banco do Brasil offers its customers two alternatives of investment funds that adopt RSA criteria. The
BB Ações ISE portfolio is comprised of companies that form the theoretical portfolio of the Business
Sustainability Index - ISE. BB Referenciado DI Social 50 allocates 50% of its management fees, via
Fundação Banco do Brasil, to social programs. The equity of the two funds reached R$ 77.6 million in
the 2Q10, an increase of 1.7% in the quarter, and of 48.1% over 2Q10.
Table 136. Investment Funds with RSA criteria
R$ million
BB A ções ISE
2Q09
1Q10
2Q10
BB DI Social 50
20.5
31.9
27.0
49.3
23.0
54.6
Total
52.4
76.3
77.6
166 - Banco do Brasil – MD&A 2Q10
Long-Term Relationship – Quality in Customer Service
The table below shows the share of complaints registered by Banco do Brasil’s customers at the Central
Bank of Brazil - Bacen, as compared to total complaints in the Financial System. These data refer to
banks with over one million customers in their portfolios.
The ratio which measure valid complaints recorded by BB customers with the BACEN increased in the
quarter. This up trend can be explained by the absorption of the customers basis of Nossa Caixa and
the expansion of Banco do Brasil’s own base, which contains more than 50 million clients. Another point
that contributed to the increase in this ratio is the fact that the judgment of proceedings by BACEN does
not occur in an exactly linear manner, which means that in a few months time there is concentration of
the judgment of suits of a given Bank, as occurred in 2Q09.
Despite understanding that certain factors contribute to the fluctuation in indicators, Banco do Brasil
continues to work toward improving the quality of service, assessing the need for a revision of the
organizational and business model and taking one-off measures with respect to branches where there
have been sharp drops in the indexes that measure the service quality.
Furthermore, in the first half the Bank deployed the programs Atendimento de Excelência (Customers
Assistance of Excellence) and BB 2.0, increasing the number of employees per branch and improving
the profile of jobs and salaries for its employees. As a result, it is expected that the rate of claims at
BACEN will record reductions in the coming quarters.
Table 137. Complaints Registered in the Central Bank of Brazil
4Q08
Complaints of BB registered at Central Bank
Total complaints regis tered at Central Bank
Customer Base (million)¹
Complaints / Customer Bas e²
Complaints BB / Total Central Bank
1Q09
2Q09
3Q09
1Q10
2Q10
498
1,137
327
442
450
794
8,173
7,829
4,020
1,771
1,455
1,392
1,990
47.0
47.2
53.5
54.2
52.7
53.5
53.3
1.5
8.9%
1.1
6.4%
2.1
28.3%
0.6
18.5%
0.8
30.4%
0.8
32.3%
1.5
39.9%
(1) Since 1Q09 the table includes BESC and BEP customers. BNC customers were included in 2Q09
(2) ((Number of Complaints) / (Number of Customers)) x 100.000
167 - Banco do Brasil – MD&A 2Q10
4Q09
724
9.4 Investor Market Recognition
Besides having a representative share in the Ibovespa, BB participates in the following indexes in the
São Paulo Stock Exchange: Differentiated Tag Along Share Index - ITAG; Differentiated Corporate
Governance Share Index - IGC; and Corporate Sustainability Index - ISE.
The objective of ITAG is to measure the performance of the companies that offer better terms to minority
shareholders, in the case of sale of control. The portfolio is composed of shares that grant tag along
rights in excess of 80% to minority common shareholders. The Bank, as a participant of the Novo
Mercado (New Market) of BOVESPA, highest degree of Corporate Governance level of the exchange,
grants 100% of tag along to minority shareholders.
IGC's purpose is to measure the behavior of shares of companies with good levels of corporate
governance and those listed in the Novo Mercado or in Corporate Governance levels 1 and 2 in
BM&FBOVESPA.
ISE comprises the companies with best corporate governance and socio-environmental responsibility
practices of BM&FBOVESPA, which is renewed annually by the application of questionnaires and
evaluation of documents. Banco do Brasil has been part of the Index since its creation, in the year 2005.
In July 2010, Banco do Brasil was selected to compose the Emerging Markets Global Fund portfolio of
the British F&C asset management company. The fund is constituted by shares from companies which
contribute to sustainable development in emerging markets, demonstrate the adoption of good practices
and standards, corporate governance and manage impacts generated by their operations as regards
social and environmental aspects.
3.8
3.2
3.1
3.1
3.1
3.2
3.4
3.6
3.0
2.2
1.2
1
2
ISE
3
ITAG
IGC
For ITAG/IGC: 1 – Jan to Apr/09; 2 – May to Aug/09; 3 – Sep to Dec/09; 4 – Jan to Apr/10
For ISE: 1 – Dec06 to Nov07; 2 – Dec07 to Nov08; 3 – Dec08 to Nov09; 4 – Dec09 to Nov10
Source: Bovespa
Figure 75. Share of BBAS3 in ISE, ITAG, and IGC
168 - Banco do Brasil – MD&A 2Q10
4
3.2
10 - Strategic Investments
10.1 Information
Since 1Q08, the non-financial companies of the insurance, pension plan and savings bonds segment
and other activities began to be included in the consolidated statements of Banco do Brasil.
Table 138. Interests in the Capital of Companies
R$ thous and
Book
V alue
06.30.09
Book
V alue
06.30.10
Equivale nce
Re s ults
1H10
Activity
Share
06.30.10
A ss et Management
100%
130,143
129,829
217,955
Inv es tment Bank
100%
1,896,769
732,911
469,592
Financial Activity - Countr y
BB Gestão de Recursos - Dis trib de Tít. e V al. Mobiliários S.A .
BB Banc o de Investimento S.A .
BB Banc o Popular do Brasil S.A .
Banking
-
17,803
-
1,768
BB Leasing S.A . - A rrendamento Mercantil
Leasing
100%
30,087
35,861
10,019
BESC Distribuidora de Títulos e V alores Mobiliários S.A .
A ss et Management
99.62%
7,916
9,921
181
BESC Financ eira S.A . - Crédito, Financ iamento e Investimentos
Credit and Financ ing
99.58%
18,761
-
414
141
BESC Leas ing S.A . – A rrendamento Mercantil
Leasing
99%
Banco Noss a Caixa S.A .
Multiple Bank
-
Banco V otorantim S.A .
Multiple Bank
50%
19,367
-
5,557,589
-
-
-
4,318,866
181,206
Financial Activity – Abr oad
Banco do Brasil – A g. V iena
Banking
100%
240,938
199,224
BB Leasing Company Ltd.
Leasing
100%
82,773
78,080
(21,489)
3,299
BB Securities LLc .
A ss et Management
100%
10,534
21,701
4,473
BB Securities Ltd.
A ss et Management
100%
82,773
78,080
708
Bras ilian A meric an Merchant Bank – BA MB
Banking
100%
1,023,696
1,005,156
30,721
BB USA Holding Company, Inc
Holding
100%
3,834
2,757
Ins uranc e Company
100%
Ins ur ance , Pe ns ion and Savings Bonds
BB Seguros Participações S.A .
BB A lianç a Partic ipaç ões
Ins uranc e Company
100%
Seguradora Bras ileira de Crédito à Exportaç ão – SBCE
Ins uranc e Company
12.09%
Nos sa Caix a Capitalização S.A .
Ins uranc e Company
Mapf re Noss a Caixa V ida e Previdênc ia S.A .
(775)
-
-
-
-
603,735
184,670
-
1,051,146
225,138
2,222
2,430
221
100%
-
5,574
98
Ins uranc e Company
49%
-
76,164
32,285
-
-
-
A tiv os S.A .
Credit A c quis ition
100%
59,681
575,089
44,512
BB A dminis tradora de Cartões de Crédito S.A .
Serv ic e Rendering
4,610
Othe r Activitie s
100%
25,079
25,848
100%
-
10,615
251
100%
16,920
16,920
26,835
Brokerage
100%
78,526
91,197
57,649
IT
99.39%
2,840
8,283
(36,461)
Nos sa Caix a S.A . - A dministradora de Cartões de Crédito
BB A dminis tradora de Consórcios S.A .
BB Corretora de Seguros e A dministradora de Bens S.A .
Cobra Tec nologia S.A .
Cons ortiums
Cia. Brasileira de Soluç ões e Serviços CBSS – V is av ale
Serv ic e Rendering
40.35%
39,755
66,031
17,452
Cielo S.A
Serv ic e Rendering
23.61%
128,762
270,830
211,531
Kepler Weber S.A .
Indus try
17.57%
29,178
30,347
Neoenergia S.A .
Energy
11.99%
1,028,441
1,166,455
Cadam S.A .
(39)
71,467
Mining
21.64%
46,903
44,888
Sanitation
16.19%
2,077
2,159
Cia. Catarinense de A s sess oria e Serviços - CCA
Serv ic e Rendering
48.13%
227
228
Companhia Bras ileira de Sec uritização – Cibras ec
Credit A c quis ition
3.03%
-
2,158
Tec nologia Bancária S.A . – Tecban
Serv ic e Rendering
4.51%
-
7,614
448
Holding
50%
-
45,632
15,965
Serv ic e Rendering
100%
2,836
3,104
Cia. Hidromineral Piratuba
BV Participações S.A .
BB Money Transf ers, Inc
169 - Banco do Brasil – MD&A 2Q10
(1,443)
72
(19)
(400)
10.2 Income from Insurance, Pension and Savings Bonds
The insurance income statement is also disclosed in Explanatory Notes (NE) for this quarter, NE 21.
There a few differences between these figures and those shown in this chapter, as explained below.
The information contained in the mentioned NE was prepared in accordance to the guidance found in
CVM Resolution # 582/2009 (CPC 22), based on the requirement of individualized financial information.
The amounts were calculated considering the book balances of Aliança do Brasil; Brasilveículos;
Brasilprev; Brasilcap; Brasilsaúde; SBCE - Seguradora Brasileira de Crédito à Exportação; BB
Corretora; BB Seguros Participações; BB Aliança Participações and Nossa Caixa Capitalização.
The insurance ratio shown in this chapter includes the performance added by five companies in the
Conglomerate active in strategic retirement plan segments. Aliança do Brasil; Brasilveículos; Brasilprev;
Brasilcap and Brasilsaúde. The net profits of these companies (in proportion to BB's interests in the
capital of each) are added to the net brokerage revenues earned by BB Corretora and to the net fees
earned from insurance business of BB Banco Múltiplo.
The restructuring process for the insurance area, under implementation by Banco do Brasil, is focused
on re-designing the corporate structures of the companies in which the Bank has participation, by means
of its wholly-owned subsidiaries BB Seguros Participações and BB Aliança Participações. This process
is intended to strengthen Banco do Brasil's activities in the sector and to optimize the contribution of the
Insurance Income in the Conglomerate's Income Statement.
On April, BB Seguros and the Principal Financial Group of Brazil reviewed their strategic partnership in
developing and commercialization of private pension plans in Brazil. Due to this agreement, Principal
acquired a 4% shareholding participation in Brasilprev held by Serviço Brasileiro de Apoio às Micro e
Pequenas Empresas - SEBRAE. In addition, Brasilprev retained its exclusiveness to commercialize its
private pension services in the current BB distribution channels until October 2032. On the other hand,
BB Seguros will hold 74.995% of Brasilprev's total equity capital, in accordance with the following
breakdown of equity interests. Under this partnership, BB expects to consolidate an association between
BB Seguros, a wholly-owned subsidiary of BB that owns the country's largest number of points of
service, and Principal, the owner of a vast experience in the international market and with 18.9 million
customers by means of offices in Asia, Australia, Europe, Latin America, besides the United States.
In May of 2010, BB Seguros and Sul América signed a Purchase and Sale Agreement to acquire all the
shares of Sul América (60% of common registered shares) in Brasilveículos by BB Seguros. The price
stipulated for the business is R$ 340 million. The transaction is subject to analysis and approval of
respective regulatory, overseeing and inspecting agencies, in accordance with the applicable legislation.
Lastly, the Contract of Purchase and Sale for the sale of all the shares held by BB Seguros was
established (49.92% of the total capital) in Brasilsaúde Companhia de Seguros to Sul América Seguro
Saúde S.A. The transaction's final price on July 8, 2010 when the agreement was settled, was of R$
29.2 million.
The table below details the holdings in the total capital and business line of each of these companies as
of June 2010.
170 - Banco do Brasil – MD&A 2Q10
Table 139. Insurance, Pension Plans and Savings Bondsans
Com pany
Cia. De Seguros A liança do Brasil S.A .
Shar e %
Bus ine s s
100.00 Health and Other A ctivities
Par tne r s hip
-
Brasilprev
74.99 Pension
Principal Financial Group
BrasilV eículos Cia de Seguros
70.00 V ehicle
Sul A mérica Seguros
Brasilcap
49.99 Savings Bonds
Icatu Hartf ord, Sul A mérica e A liança da Bahia
Brasilsaúde
49.92 Health
Sul A mérica Seguros
Performance and Market
During the 1st quarter of 2010, the insurance market kept pace well with the Brazilian economy and
grew by 16.7% as compared to the same period in 2009, according to data from SUSEP. Total volume
of premiums raised to the R$ 40.9 billion. Another positive aspect was the decline in the average
incident rate from 53% to 51%, with retained claims adding up to R$ 11.2 billion.
In the private pension market, excluding the VGBL line, total contributions dropped by 14.8%. Total
provisions by companies in the business rose by 12.5% and totaled R$ 83.7 billion. The VGBL line is
stated by SUSEP in the insurance market data. The total number of participants in this industry rose to
17.2 million, including here the VGBL line. PGBL and VGBL plans currently account for roughly 50% of
participants. The remainder continues under the traditional plans.
Savings bonds on the other hand, accounted for R$ 5.7 billion in premiums, a 21.9% increase as
compared to 1H09. Provisions rose to R$ 16.0 billion, a 14.8% increase.
Consolidated
The consolidated income of the BB insurance companies totaled R$ 430.1 million, a 25.3% rise as
compared to the same period of last year. It may be seen in the following table that the insurance area
(Automobile, Health, Life and Casualty) accounted for 55% of the total, while Pension Plans contributed
with 32.1% and Savings bonds with 12.9%.
171 - Banco do Brasil – MD&A 2Q10
Table 140. Insurance Income Statement by Line of Business
1H10
R$ thousand
Ins ur ance
Auto
He alth
Re v. fr om Ins ur ance Pe ns ion Plans and Savings Bonds 779,970
Life and
Othe r
Pe ns ion
Plans
Total
Chg. %
Savings
Bonds
Cons olidate d
On 1H09
105,534
1,068,945
1,954,449
3,983,283
1,311,517
7,249,249
37.7
Retained Insurance Premiums
779,970
105,534
1,068,945
1,954,449
-
-
1,954,449
27.4
Revenues f rom Pension Plans
-
-
-
-
3,983,283
-
3,983,283
50.6
Revenues f rom Savings Bonds
-
-
-
-
-
1,311,517
1,311,517
20.9
(1,137,531)
(5,070,706)
42.9
Change s in Te chnical Pr ovis ions
Insurance
Pension Plans
(68,436)
(142)
(10,654)
(79,231)
(68,436)
(142)
(10,654)
(79,231)
-
-
-
-
Savings Bonds
-
-
-
-
Be ne fits and Re de m ption Expe ns e s
-
-
-
-
Capitalization Bonds Pr e s cr iption
Ear ne d Pr e m ium s
Re taine d Claim s
M ar k e ting Expe ns e s
Insurances
Pension Plans
Savings Bonds
Othe r Ope r ating Incom e (Expe ns e s )
(3,853,944)
(3,853,944)
(109,832)
-
(79,231)
30.6
-
(3,853,944)
52.2
(1,137,531)
-
(1,137,531)
19.1
(109,832)
17.9
-
-
-
-
-
1,319
1,319
711,534
105,391
1,058,292
1,875,217
-
-
1,875,217
(490,216)
(90,158)
-
-
(308,309)
(888,683)
(82,539)
(7,308)
(283,723)
(373,569)
(82,539)
(7,308)
(283,723)
(373,569)
-
-
-
-
-
-
-
-
(53,280)
(53,280)
(100,040)
-
-
(100,040)
(888,683)
29.0
27.3
23.6
(526,889)
20.3
(373,569)
16.8
(53,280)
38.4
(100,040)
25.6
(41,874)
(6,744)
(124,632)
(173,250)
216,531
(14,132)
29,149
96,906
1,181
341,627
439,714
182,759
61,133
683,607
31.9
Adm inis tr ative Expe ns e s
(87,959)
(8,305)
(51,901)
(148,165)
(104,560)
(29,129)
(281,854)
17.1
Tax Expe ns e s
(17,130)
(86)
13.5
Bus ine s s Re s ult
Financial Incom e
Financial Revenues
Financial Expenses
Ope r ating Incom e
(36,030)
(53,247)
(8,520)
(61,766)
36,252
3,062
43,011
82,325
154,735
68,566
305,627
(6.3)
43,340
3,498
100,924
147,763
1,139,432
213,092
1,500,286
(4.0)
(144,525)
(1,194,659)
(7,087)
28,070
(436)
(4,148)
(57,914)
(65,437)
(984,696)
296,707
320,628
232,935
Equity Account Adjus t
18
-
1,546
1,564
Non-ope r ating Incom e
(31)
-
73
42
Incom e be for e Taxe s
Income and Social Contribution Taxes
Prof it Sharing
Ne t Incom e (Los s )
Ave r age Shar e holde r 's Equity
ROE (Annual)
-
(44.2)
(55)
(3.4)
92,050
645,613
17.6
-
1,564
(21.5)
122
108
(93.3)
28,057
(4,148)
298,326
322,234
232,879
92,172
647,286
(10,779)
1,242
(72,148)
(81,685)
(91,295)
(36,667)
(209,647)
3.7
(2,510)
659
(2,208)
(4,059)
(3,469)
(7,527)
5.4
-
14,768
(2,247)
223,969
236,491
138,116
55,505
430,111
326,571
45,661
564,076
936,308
428,586
142,512
1,507,405
95.2
56.9
74.8
93.1
65.2
9.2
(9.6)
17.1
25.3
Company’s Performance
Except for specific terms, the present analysis refers to the performance in the second quarter of 2010
versus the first quarter of this year.
Aliança do Brasil
Aliança do Brasil ended the semester with 3.6 million insurance policies issued, a 53.4% increase and a
2 p.p. gain in market share. This increment is explained by the increased marketing of “Seguro
Prestamista” and “BB Seguro Vida”, the latter directed at the lower income public. This strategy has
allowed the company to rise to third place in the SUSEP ranking of policies issued.
Despite the delay in disbursing farming subsidies by the government, the company kept its leading
position in agricultural insurance with a 39.8% share. Moreover, the coming of the winter harvest has
increased the need for correlated insurance, boosting the sale of these services.
A conjunction of the above factors gave rise to a 25.2% growth in retained premiums. The low incident
rate in the Company's portfolio jointly with a good operating and financial management, gave rise to net
income of R$ 224.0 million, a 53.9% increase.
172 - Banco do Brasil – MD&A 2Q10
Brasilcap
Brasilcap was 15 years old in July and leads the SUSEP rankings, in billings as well as in provisions. It
currently has a portfolio with 11 kinds of plans, subdivided into seven with monthly payments (PM) and
four with one sole payment (PU).
The effort to keep ahead of the competition led the company to exceed its billing record on two
occasions: In March (R$ 237.4 million) and in May (R$ 239.0 million), rising to a total of R$ 1.3 billion, a
20.9% increase.
Technical reserves with an 18.0% increase, rose beyond R$ 3.8 billion or equal to 3 p.p. above the
market's growth.
Owing to this performance the Company made R$ 55.5 million in Net Income, or an 8.0% growth.
Brasilprev
In the wake of the performance of the VGBL line, Brasilprev's revenues rose to R$ 3.98 billion, a 50.6%
increase. This took the company to 2nd place in Fenaprevi's ranking of total revenues. The company's
strategy for retaining customers continues successful: the rate of redemptions retreated by 0.3 p.p. and
the company's is the lowest rate among the industry's large businesses.
The managed portfolio increased 32.3%, totaling R$ 30.8 billion. Brasilprev continues to hold 3rd place
in reserves. The expanded portfolio jointly with the company's financial management, led to a 7.7% rise
in financial income. The good operational and financial results have had direct impact on net income,
increasing by 19.5%.
According to agreement entered into with Principal Finance Group - PFG, on 04/30/2010, Brasilprev
increased its capital, which was fully paid-up by the members, in a proportion equivalent to their
interests, in the amount of R$ 118.0 million. At the beginning of July, 50.0% was fully paid-up, BB
Seguros having disbursed R$ 44.2 million, and PFG R$ 14.8 million. The remaining payment shall occur
no later than within 12 months.
Upon the company's corporate restructuring, Banco do Brasil's interest increased from 49.9892% to
74.995%, generating an additional gain in equity accounting of R$ 10.5 million (+15.2%).
Brasilsaúde
Supported by independent brokers in sales strategy, Brasilsaúde had an increase of 67.8% in the
number of customers of the odonthology portfolio. With respect to billing, the Company exceeded the
mark of R$ 105 million in retained premiums, representing a growth of 6.9%.
In view of the well succeeded vaccination campaign against H1N1 influenza, the influenza epidemic
scenario having occurred in 2009 winter has not repeated itself this winter. However, respiratory
diseases, typical of this season, have sensitized the company's causality, causing the company to
record a combined index of 100.4%. The good financial and administrative management was not
sufficient to revert the loss shown by Brasilsaúde, accounting for a negative income of R$ 2.2 million.
Brasilveículos
Brasilveículos ended the semester with a retained fleet of 1.1 million vehicles, a growth of 8.7%. The
performance of the auto portfolio caused the company to reach a retained premium of R$ 780.0 million
(+34.1%), placing the company among the five largest vehicle insurers of the country, according to
SUSEP ranking.
In the first six months of the year, the loss ratio impact of 5.8 percent higher resulted in a growth of
37.3% of retained claims, totalizing R$ 490.2 million. Therefore, the combined index increased to 95.3%,
causing net income of the company to decrease by 57.5%, to R$ 14.8 million.
173 - Banco do Brasil – MD&A 2Q10
Insurance Ratio
The Insurance ratio reflects the participation of insurance business in the result of Banco do Brasil,
insurance, social security and savings bonds companies, that is, how much these segments added to
the Conglomerate's final income.
Table 141. Consolidated Insurance Ratio
R$ million
1Q09
Insurance Result
2Q09
3Q09
4Q09
1Q10
2Q10
217.2
282.0
252.6
240.4
298.5
297.7
Brokerage Net Revenue
60.1
56.9
63.2
60.9
73.3
75.5
Service Fee Net Income
46.5
45.3
48.7
48.2
53.5
52.4
110.6
179.8
140.6
131.3
171.8
169.8
1,523.1
1,726.7
1,763.9
1,819.0
2,055.6
2,327.1
14.3
16.3
14.3
13.2
14.5
12.8
Equity In The Earnings (Loss)
BB Recurring Income
Insurance Ratio (%)
Insurance Ratio (%)
16.3
14.3
13.2
14.5
12.8
171.8
169.8
53.5
52.4
60.9
73.3
75.5
4Q09
1Q10
2Q10
179.8
140.6
131.3
45.3
48.7
48.2
56.9
63.2
2Q09
3Q09
Brokerage Net Revenue R$ million
Service Fee Net Income R$ million
Equity In The Earnings (Loss) R$ million
Insurance Ratio (%)
Figure 76. Change of the Insurance Ratio
174 - Banco do Brasil – MD&A 2Q10
Table 142. Insurance Ratio by Segment
R$ thousand
Life and P&C
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
120,043
163,163
140,730
151,977
182,292
181,297
Brokerage net rev enue
39,427
37,838
40,515
40,845
48,900
49,241
Serv ic e Fee net inc ome
21,709
19,298
21,242
21,341
21,794
18,516
Equity in the earnings (los s )
58,906
106,028
78,973
89,792
111,598
113,540
Social Se cur ity Re s ult
36,965
54,836
61,216
45,372
55,965
60,148
Brokerage net rev enue
2,632
2,570
5,289
2,648
3,825
3,824
Serv ic e Fee net inc ome
9,843
11,561
13,126
14,377
14,576
14,303
24,489
40,705
42,802
28,347
37,564
42,021
20,559
31,159
22,554
18,993
21,033
22,399
Brokerage net rev enue
13,905
12,810
13,995
14,446
16,032
17,168
Serv ic e Fee net inc ome
-
-
-
-
-
-
6,654
18,349
8,559
4,547
5,001
5,231
Equity in the earnings (los s )
Auto Re s ult
Equity in the earnings (los s )
He alth Re s ult
284
(698)
(322)
466
947
(1,054)
Brokerage net rev enue
465
422
398
356
420
625
Serv ic e Fee net inc ome
-
-
-
-
-
-
(181)
(1,120)
(719)
110
528
(1,679)
Savings Bonds Re s ult
39,366
33,589
28,382
23,564
38,301
34,875
Brokerage net rev enue
3,667
3,275
3,035
2,595
4,106
4,637
Serv ic e Fee net inc ome
14,933
14,432
14,370
12,478
17,108
19,600
Equity in the earnings (los s )
Equity in the earnings (los s )
20,767
15,881
10,977
8,490
17,088
10,638
Total Ins ur ance Re s ult (A)
217,217
1,523,105
282,049
1,726,689
252,561
1,763,909
240,371
1,819,008
298,538
2,055,631
297,665
2,327,118
14.3
16.3
14.3
13.2
14.5
12.8
BB Re cur r e nt Re s ult (B)
Total Ins ur ance Ratio % (A/B)
175 - Banco do Brasil – MD&A 2Q10
Combined Ratio
The combined ratio, which expresses the percentage of earned premiums that is consumed by
operating expenses in the insurance business (retained claims, marketing expenses, and administrative
expenses), closed the second quarter at 73.3%. In the following graphs, we can notice index evolution
during the quarters:
Consolidated
77.7
78.3
77.6
Health
75.2
73.3
105.6
106.0
97.3
92.1
265.6
232.5
248.4
256.5
266.8
382.6
388.6
759.4
806.0
845.0
2Q09
3Q09
4Q09
357.7
426.7
920.3
90.5
90.8
7.2
7.3
7.2
46.0
44.3
42.1
42.3
47.8
49.7
52.8
53.7
52.1
53.3
2Q09
3Q09
4Q09
1Q10
2Q10
61.1
60.6
171.4
164.2
149.0
159.3
426.7
931.9
1Q10
2Q10
93.8
96.7
Life and P&C
66.6
67.9
66.9
100.7
87.0
73.4
82.3
94.6
158.9
164.9
135.8
148.6
149.9
152.4
235.3
8.4
6.6
Vehicle
90.0
95.0
254.9
189.7
196.6
452.7
533.8
343.7
367.8
524.4
320.8
470.5
300.6
432.8
277.0
2Q09
3Q09
4Q09
1Q10
2Q10
2Q09
3Q09
4Q09
1Q10
2Q10
175.9
Earned Premiums
Administrative Expenses / Marketing
Figure 77. Combined Ratio
176 - Banco do Brasil – MD&A 2Q10
Claims
Combined Ratio
Table 143. Operating Highlights of the Insurance Group
Chg. %
Jun/09
Mar/10
Jun/10
On Jun/09
On Mar/10
Aliança do Brasil
Lives Insured – thousand
2,373
2,226
3,640
53.4
Volume of Managed Portfolio
1,270
1,488
1,464
15.3
(1.6)
Technical Reserves
1,009
1,122
1,108
9.8
49.9%
23.3%
39.8%
-10.1 p.p.
(1.2)
16.5 p.p.
1.7 p.p.
Market share - rural line - %
Market share - life line - %
9.1%
10.6%
10.8%
Rural line position
1º
1º
1º
Life line position
4º
3º
3º
63.5
0.2 p.p.
Brasilcap
Quantity of Bonds – thousand
3,009
3,168
3,267
8.6
3.1
Volume of Managed Portfolio
3,488
3,899
4,085
17.1
4.8
Quantity of Prize-w inning Bonds
Sum of Prizes Distributed
Technical Reserves - R$ million
7,543
6,191
5,644
(25.2)
(8.8)
14,482
24,708
20,135
39.0
(18.5)
3,296
3,729
3,888
18.0
Market share - collection - %
23.0%
22.5%
23.0%
0.0 p.p.
4.3
0.5 p.p.
Market share - reserves - %
23.4%
22.9%
24.2%
0.8 p.p.
1.3 p.p.
Brasilprev
Rate of Redemptions - %
7.3%
7.0%
7.0%
-0.3 p.p.
0.0 p.p.
Active agreements - thousands
2,886
3,406
3,524
22.1
3.5
Volume of the Managed Portfolio - R$ million
23,284
28,982
30,805
32.3
6.3
Technical Reserves - R$ million
22,838
28,618
30,427
33.2
Market share - collection - %
15.8%
20.6%
20.1%
4.3 p.p.
6.3
-0.5 p.p.
Market share - reserves - %
1.1 p.p.
0.10 p.p.
14.5%
15.5%
15.6%
Collection Ranking
3º
3º
2º
Reserves Ranking
3°
3°
Lives Insured
114,237
101,108
101,356
(11.3)
0.2
Help Insured
105,458
86,484
86,628
(17.9)
0.2
8,779
14,624
14,728
67.8
0.7
Volume of the Managed Portfolio - R$ million
57
58
55
(3.5)
(5.2)
Technical Reserves - R$ million
37
35
41
10.8
17.1
Fleet – thousand
971
1,021
1,055
8.7
3.3
Volume of the Managed Portfolio - R$ million
665
683
666
0.0
(2.6)
Technical Reserves - R$ million
961
1,032
1,071
11.5
3.8
-2.50 p.p.
0.4 p.p.
3°
Brasilsaúde
Dental Insured
Brasilveículos
Rate of Portfolio Retention - %
Market share - %
Ranking
177 - Banco do Brasil – MD&A 2Q10
80.3%
85.2%
82.7%
2.4 p.p.
7.5%
5º
7.7%
6º
8.1%
5º
0.6 p.p.
10.3 Strategic Development
This chapter presents Banco do Brasil’s transaction highlights as of the first quarter of 2010, as well as
those that are in progress, in conformity with public announcements to the market.
10.3.1 Banco Votorantim
The announced strategic partnership between Banco Votorantim (BV) and Banco do Brasil (BB) was
concluded on September 28, 2009, as per the public announcement to the market on the same date.
The operation involves the acquisition, by BB, of 33,356,791,198 common shares of BV for the price of
R$ 3 billion, paid directly to Votorantim Finanças, besides the subscription, also by BB, of new preferred
shares issued by Banco Votorantim in the amount of R$ 1.2 billion. Shares acquired by BB correspond
to 50% of the total capital and approximately 50% of the voting capital of Banco Votorantim.
The business model and the team of employees were maintained, and the board of directors is on the
same level, with the appointment of three members by every partner, and the chairmanship of the board
of directors alternated between the two partners. All strategic decisions are made jointly. For further
details on the payment terms, please refer to the Material Fact disclosed at the portal www.bb.com.br/ri
The consolidation of the financial statements, risk management and operating limits will be proportional
to BB's ownership interest in the total capital of BV. The Assets and Liabilities started to be consolidated
in the financial statements as of 3Q09 and the income statement accounts since the 4Q09.
The partnership presents strong strategic rationale, since it will allow Banco do Brasil to:
►
increase the asset origination capacity in the competitive consumption financing industry;
►
gain access to well developed alternative distribution channels – (BV Financeira dealerships,
partners and stores);
►
adopt the successful model for promoting sales nationwide in the vehicle financing market;
►
Strengthen BB’s activities in the capital markets (Votorantim Corretora) and in the Corporate
segment.
The tables below present the highlights of the BV operation.
Regarding the income statement, the reallocations carried out are detailed below and may differ from
those made in the financial statements of BB. Therefore, for a better understanding of BV's net income,
the income statement with reallocations was maintained, despite the fact that the net income of BV is
already consolidated in the financial statements of the BB conglomerate. Further information can be
obtained from the website of Banco Votorantim.
To improve the analysis, Banco Votorantim has made changes in reallocations, including rebuilding the
series of 2009 values. Among such changes, we highlight Credit Assignments, which are no longer
segregated under nonrecurring items. The decision to not allocate such events among nonrecurring
effects was due to the fact of such operations having been recurrent during the last quarters, although
not in a completely linear fashion.
178 - Banco do Brasil – MD&A 2Q10
Table 144. Banco Votorantim – Income Statement with Reallocations Highlights
Chg. %
Quar te r ly Flow
R$ million
Financial Inte r m e diation Incom e
Loan operations (1) (2) (5) (6) (7) (9) (10) (15)
Lease operations (1) (5) (6) (9) (15)
Securities Income (6) (7) (11)
Income f rom Financial Derivatives (3) (4) (6) (7) (8) (16)
Compulsory Investments
Incom e fr om Financial Inte r m e diation
Market Borrow ing (6) (7) (8)
Borrow ings, A ssignments and Onlendings (7)
Ne t Inte r e s t Incom e
A llow ance f or loan losses (2) (10)
Ne t Financial M ar gin
Bank f ee income
Fee income (5)
Bank Fee Income (5)
2Q09
1Q10
2Q10
On 2Q09
On 1Q10
2,843
2,969
3,165
11.4
6.6
1,996
1,920
2,249
12.7
17.1
(3.7)
83
165
159
91.3
989
947
985
(0.4)
(225)
(66)
(315)
39.7
375.3
-
2,201.3
-
4
87
4.1
(1,614)
(1,601)
(1,760)
9.1
9.9
(1,517)
(1,482)
(1,656)
9.2
11.7
7.3
(13.0)
(97)
1,229
(119)
1,368
(104)
1,405
(481)
14.4
2.7
(0.3)
17.9
(483)
(408)
746
960
924
23.9
(3.7)
46
89
103
124.5
14.8
46
68
57
24.9
0
22
46
31,256.7
110.9
(16.0)
15.7
Taxes on Revenues (2) (4)
(90)
(103)
(119)
32.8
Contr ibution M ar gin
702
946
908
29.3
(4.1)
(280)
(378)
(434)
54.6
14.6
A dministrative expenses
Personnel Expenses (13)
(130)
(164)
(176)
35.4
6.9
Other A dministrative Expenses (12) (13) (14) (15) (16)
(150)
(210)
(257)
71.1
22.4
(1)
97.0
(75.3)
Com m e r cial Incom e
Other Tax Expenses (14)
422
568
474
12.4
(16.5)
Legal Risk
(26)
(45)
(37)
40.4
(18.5)
Legal Claims (12)
(2)
(18)
(16)
562.3
(9.4)
Labor Law suits (13)
(6)
(7)
(2)
(67.4)
(72.1)
Fiscal Law suits (14)
(18)
(21)
(19)
Other Components of the Result
(1)
24
(4)
8
11
4.8
(51.5)
(8.9)
41.2
Other Operating Income (Expenses)
24
8
11
(51.5)
41.2
Other Operating Income (3) (9) (10) (14)
42
12
18
(57.4)
48.0
(6)
(64.9)
Other operating expenses (1) (2) (3) (9) (10) (12) (13) (14)
Ope r ating Re s ult
(18)
419
(4)
531
448
7.0
62.0
(15.5)
Non-operating Income (17)
(34)
(20)
(23)
(32.5)
13.2
Pr ofit be fore taxation and pr ofit s har ing
385
510
426
10.5
(16.6)
Income and Social Contribution Taxes (2) (4) (11)
(79)
(171)
(107)
34.8
(37.5)
Prof it Sharing (2)
(75)
(81)
(103)
37.5
28.4
Pr ofit be fore m inor ity inte r e s t
231
259
215
(6.6)
(16.9)
Minority interest
Non-Re cur r ing Ite m s
Extraordinary Items
FINOR (17)
Ne t Incom e
(1)
(0)
0
-
230
259
215
(6.3)
-
-
3
-
-
-
3
-
230
259
218
(5.0)
(16.9)
(15.7)
(1) Reallocation from Other Operating Expenses to Loan and Lease Operations corresponding to the
amount of expenses with discounts granted on loan operations, with the reallocation required for
comparability purposes. The expenses with discounts granted totaled (R$ 86.6 million) in 2Q09,
(R$ 47.4 million) in 1Q10 and (R$ 70.2 million) in 2Q10.
(2) The effects arising from the assignment of a loan portfolio to Credit Rights Investment Funds
(FIDCs) recorded under Tax Expenses, Other Operating Expenses and Income and Social
Contribution Taxes were reallocated to the result of Loan Operations, in the amount of (R$ 6.3
million) in 2Q09, (R$ 0.0 million) in 1Q10 (R$ 0 million) in 2Q10.
(3) The FX Gain (Loss) on Foreign Investments is reallocated from Other Operating Income/Expenses
to Income from Financial Derivatives for inclusion in the Net Interest Income. This adjustment is
necessary to maintain the balance and consistency of spread analysis. In 2Q09, this reallocation
was of (R$ 187.5 million), R$ 15.9 million in the 1Q10 and in 2Q10, R$ 8.2 million.
179 - Banco do Brasil – MD&A 2Q10
(4) Reallocations were performed in order to cancel the Tax Hedge's effects. In 2Q09, the amount
reallocated to the result of Derivative Financial Instruments arising from Tax Expenses on
Revenues was (R$ 13.9 million) and that from Income and Social Contribution Taxes (IR and
CSLL) was (R$ 113.9 million), in 2Q10, the amount reallocated from Tax Expenses on Revenues
was (R$ 0.9 million) and that from IR and CSLL was (R$ 7.2 million) and in 1Q10, the amount
reallocated from Tax Expenses on Revenues was (R$ 0.1 million) and that from IR and CSLL was
R$ (0.4 million).
(5) Fee Income arising from Loan Operations recorded under Revenues from Services Provided were
reallocated to the income statement from Loan Operations in the amount of R$ 124.7 million in
2Q09, R$ 180.6 million in the 1Q10 and R$ 188.1 million in the 2Q10.
Table 145. Banco Votorantim – Reallocations (Fee Income)
R$ million
2Q09
1Q10
Fee Income (TC /TLA / TAC) (5)
2Q10
(97.6)
(131.4)
(2.7)
(5.4)
(6.3)
Guarantees Income (5)
(24.4)
(43.8)
(37.5)
Allocation on Loan Operations + Leasing (5)
124.7
180.6
188.1
Credit Card Fees (5)
(144.3)
(6) All mark-to-market effects were reallocated as a result of the hedge on the result of derivative
financial instruments, as follows:
Table 146. Banco Votorantim – Reallocations (Mark-to-Market - MKT)
R$ million
MKT Loan Operations (BV Financeira) (6)
MKT Loans Operations (BV ) (6)
MKT Leasing (6)
MKT Securities (6)
MLT Funding (6)
A loc ation of MKT in Derivatives (6)
2Q09
1Q10
176.8
2Q10
(117.7)
21.9
64.6
36.9
(47.9)
1.8
(39.0)
10.9
64.9
(28.9)
104.3
5.1
12.9
(270.5)
135.8
1.5
(133.4)
(7) All the effects of fluctuations in foreign currencies, such as the US dollar, yen, Turkish lira, euro
etc., were reallocated as a result of the hedge on the result of derivative financial instruments, as
follows:
Table 147. Banco Votorantim – Reallocations (Currencies Fluctuation)
R$ million
2Q09
1Q10
2Q10
V CR Loans Operations (7)
737.2
(85.6)
V CR Sec urities (7)
364.9
(11.4)
(4.8)
V CR Fundings (7)
(534.0)
21.0
52.4
V CR Loans and On Lending (7)
(686.1)
12.2
18.8
118.0
63.8
(45.7)
A loc ation of V CR on Derivatives (7)
(20.7)
(8) Reallocation of the Options BOX, accounted in Derivative Financial Insturments, to Money Market
Funding was carried out in the amount (R$ 68.7 million) in 2Q09, (R$ 124.3 million) in 1Q10 and
(R$ 132.9 million) in 2Q10.
(9) The Operating Income and Expenses directly associated with the Loan Operations were
reallocated from Other Operating Income/Expenses to the Loan Operations in the amount of (R$
235.9 million) in 2Q09, (R$ 95.1 million) in 1Q10 and (R$ 203.9 million) in 2Q10.
180 - Banco do Brasil – MD&A 2Q10
(10) The Allowance for Loan Losses expenses arising from the Assignments made with Co-obligations
recorded under Other Operating Expenses and, as of 2010, under Loan Operations, were
reallocated to the Allowance for Loan Losses expenses caption in the amount of (R$ 32.5 million) in
2Q09, R$ (3.1 million) in 1Q10 and (R$ 15.7 million) in 2Q10.
(11) The effect of the tax benefit generated by the tax-free interest of securities issued abroad was
reallocated from the Income Tax and Social Contribution caption to Securities Income in the
amount of R$ 25.7 million in 2Q09, R$ 15.8 million in the 1Q10 and R$ 26.0 million in 2Q10.
The expenses with Labor, Civil and Tax Claims were separated into a group called Legal Risk, in
order to facilitate the analysis of the other operating expenses and to increase the transparency of
this type of risk. The reallocated amounts were as follows:
(12) Civil Claims: (R$ 2.4 million) in 2Q09, (R$ 17.8 million) in 1Q10 and (R$ 16.1 million) in 2Q10.
(13) Labor Lawsuits: (R$ 5.7 million) in 2Q09, (R$ 6.7 million) in 1Q10 and (R$ 1.9 million) in 2Q10.
(14) Tax Claims: (R$ 18.2 million) in 2Q09, (R$ 20.9 million) in 1Q10 and (R$ 19.1 million) in 2Q10.
(15) Other Administrative Expenses directly related to Loan Operations were reallocated from Other
Administrative Expenses to the Loan and Lease Operations line, totaling (R$ 80.2 million) for 2Q09,
(R$ 84.3 million) for 1Q10, and (R$ 124.8 million) for 2Q10.
(16) Other Administrative Expenses directly related to derivative transactions were reallocated from
Other Administrative Expenses to the Income from Financial Derivatives line, totaling (R$ 0 million)
for 2Q09, (R$ 4.8 million) for 1Q10, and (R$ 8.6 million) for 2Q10.
(17) The result obtained from operation and valuation of the Northeast Investment Fund (FINOR) in the
amount of R$ 0 million in 2Q09, R$ 0 million in 1Q10, and R$ 3 million in 2Q10 was reallocated
from line Non-Operating Income to the line Extraordinary Items.
181 - Banco do Brasil – MD&A 2Q10
Table 148. Banco Votorantim – Equity Highlights
Quar te r ly Flow
R$ million
Jun/09
M ar/10
Chg. %
Jun/10
On Jun/09
On M ar /10
As s e ts
88,845
94,773
99,416
11.9
4.9
Securities
20,099
29,339
28,188
40.2
(3.9)
Loan Portf olio
38,087
45,277
46,699
22.6
3.1
Individuals
21,549
29,221
30,201
40.2
3.4
Payroll Loan
V ehicles Loan
Leasing and Subleasing Receivables
Other
Businesses
2,358
4,585
4,474
89.8
(2.4)
16,403
20,114
21,078
28.5
4.8
2,518
4,246
4,369
73.5
2.9
271
276
280
3.3
1.4
16,538
16,055
16,497
(0.2)
2.8
Working Capital
5,110
5,002
5,445
6.5
8.8
BNDES/Finame
4,022
4,829
5,065
25.9
4.9
Export Letter of Credit
3,277
2,853
2,860
(12.7)
0.3
Other
4,128
3,371
3,127
(24.3)
(7.2)
18.6
Permanent A ssets
Deposits¹
Demand Deposits
Saving Deposits
Time Deposits
Judicial
Others
Money Market Borrow ing
Shar e holde r s ’ Equity
96
162
192
100.2
23,826
23,074
24,239
1.7
5.0
110
220
285
158.5
29.4
-
-
-
-
-
19,826
22,035
23,202
17.0
5.3
0
0
0
0.4
0.3
19,826
22,035
23,201
17.0
5.3
33,290
30,417
31,787
(4.5)
4.5
6,464
7,978
8,039
24.4
0.8
¹ Except other deposits
Table 149. Banco Votorantim – Loan Portfolio by Level of Risk
Jun/09
R$ million
AA
Balance
M ar/10
Pr ovis ion
Shar e
Balance
Jun/10
Pr ovis ion
Shar e
Balance
Pr ovis ion
Share
8,191
-
21.5
7,849
-
17.3
8,188
-
17.5
A
22,020
110
57.8
28,691
143
63.4
29,806
149
63.8
B
4,725
47
12.4
5,596
56
12.4
5,426
54
11.6
C
1,290
39
3.4
1,017
31
2.2
1,064
32
2.3
D
588
59
1.5
521
52
1.2
495
49
1.1
E
232
70
0.6
280
84
0.6
382
115
0.8
F
358
179
0.9
243
121
0.5
208
104
0.4
G
148
104
0.4
366
256
0.8
343
240
0.7
H
535
535
1.4
714
714
1.6
789
789
1.7
38,087
1,142
100.0
45,277
1,458
100.0
46,699
1,532
100.0
Total
A dd. A llow .
Total Allow .
A A -C
D-H
11
-
-
1,153
1,458
1,532
36,226
196
95.1
43,153
230
95.3
44,483
235
95.3
1,861
946
4.9
2,124
1,228
4.7
2,216
1,297
4.7
182 - Banco do Brasil – MD&A 2Q10
Table 150. Banco Votorantim – Delinquency Ratios
R$ million
Jun/09
M ar /10
Jun/10
Loan Por tfolio
38,087
45,277
46,699
Past Due Loans
4,345
5,033
4,747
Past Due Loans/Loan Portf olio
11.4%
11.1%
10.2%
Past Due Loans + 90 days
1,187
1,522
1,399
Past Due Loans + 90 days /Loan Portf olio
3.1%
3.4%
3.0%
391
Write-of f
191
309
Rec ov ery of Write-of f s
(45)
(30)
(41)
Net Loss
146
279
350
Saldo da Perda / Carteira de Crédito
1.5%
2.5%
3.0%
Pr ovis ion
1,153
A llow ance/Loan Portf olio
A llow ance/Past Due Loans + 90 days - %
1,458
1,532
3.0%
3.2%
3.3%
97.1%
95.8%
109.5%
3.0%
3.2%
3.3%
A llow ance Ex pens es / Loan Portf olio (12 months average)
Table 151. Banco Votorantim – Vehicle Loan Portfolio
Jun/09
A v erage rate per crop (p.m.)
M ar /10
Jun/10
1.82
1.67
A v erage term per crop
46
50
50
Duration
18
21
20
A v erage Portf olio Term (p.y.)
27.4
24.4
24.9
Used V ehicles / V ehic les Portf olio - %
83.5
77.1
77.2
6.1
5.9
5.8
69.3
73.7
73.8
A v erage V ehicle A ge (years )
Financed V alue / A s set V alue – average %
1.66
Table 152. Banco Votorantim – Operating and Structural Highlights
M ar/10
Customers
A ssets Under Management - R$ million
Employees*
Jun/10
4,169,395
4,429,234
24,095
25,322
6,583
7,269
316
318
Number of Branch Of f ices
*Employees and Interns are included.
Table 153. Banco Votorantim – Ratios Highlights
Indicator s - %
2Q09
1Q10
2Q10
Total Spread
6.2
6.6
Ex pens es w ith A llow anc e f or Loan Loss es over Portf olio
3.0
3.2
3.3
Cost Income Ratio¹
27.5
31.1
36.0
Recurring Return on Equity ²
14.9
25.6
14.4
39.7
11.4
33.1
Ef f ectiv e Rate of Tax
6.3
¹ Efficiency Ratio calculated by Banco Votorantim: (Sum of Personnel Expenses and Other Administrative Expenses) ÷ (Sum of Net income from
financial intermediation, of expenses with Allowance for Loan Losses (PCLD), Service Revenues and Result of Other Operating Income and
Expenses).
2
Recurring Net Income divided by Average Net Equity.
183 - Banco do Brasil – MD&A 2Q10
10.3.2 Performance in the State of São Paulo
With the purpose of expanding business in São Paulo, Banco do Brasil acquired Banco Nossa Caixa
shareholding control and create a statutory board for managing business strategies related to that state.
These two events point to a new stage in Banco do Brasil's activities in São Paulo. BB became the
leader in branch offices in the state, in addition to gaining expressive market shares in a number of lines
of business.
São Paulo Distribution Directorship is focused in Individuals, Legal Entities and Government segments,
attended by Retail Branches, High Income, and Government in São Paulo. This new structure aims to
integrate the management and operation of BB in the state, according to the specificity and relevance of
São Paulo’s market.
In the case of Nossa Caixa, Banco do Brasil is working to capture important synergies by integrating
operations. Customers from that institution will have access to a broader portfolio of services and to a
relationship model. The BB’s new assistance model in São Paulo includes, for example, hiring 1,150
new employees to work in the State. The number of managers in each branch rose from 1,244 in Nov/09
to 1,991 in past July. The number of cash attendants rose from 1,530 to 2,465 in the same period.
Furthermore, 748 employees from BNC migrated from internal departments to the branch network.
In the business area, it was allowed to BNC customers hiring loan operations, including payroll loans, in
alternative channels as ATM, Internet and Mobile Banking. The Small and Medium Enterprises (SME)
had only 8 kinds of loans operations before the corporate merger of BNC; nowadays them number rose
to 27.
Besides that, there was the replacement of the individuals cards for chip cards (Ourocard Nossa Caixa)
and deployment of syllabic code, reducing by 90% losses due to frauds, the total integration of systems
with regard to Investment Funds, Time and Court Deposits, Money Transfers, Foreign Exchange,
Payments and Loans and Financing, and migration of all the branches to the BB platform.
We show below BB's evolution in the state of São Paulo, regarding the businesses generated by the
São Paulo Distribution Directorship. It is worth mentioning that it does not include Banco Votorantim
credit portfolio.
Table 154. Deposits in the State of São Paulo
R$ million
Jun/09
M ar /10
Jun/10
Chg. %
On Jun/09
On M ar /10
De pos its
49,570
98,626
99,305
100.3
0.7
Demand
7,341
12,523
13,245
80.4
5.8
Savings
10,458
24,818
25,797
146.7
3.9
Time
23,579
32,578
30,732
30.3
(5.7)
7,965
228
28,366
341
29,218
314
266.8
38.1
3.0
(7.7)
Judic ial
Other
184 - Banco do Brasil – MD&A 2Q10
It’s not included the partnership with BV in the tables below.
Table 155. Loan Operations in the State of São Paulo
R$ million
Jun/09
Individuals
Payroll Loan
Consumer Finance
M ar /10
Chg. %
On Jun/09
On M ar /10
Jun/10
20,860
23,800
23,682
13.5
(0.5)
11,849
14,607
14,084
18.9
(3.6)
(0.2)
2,397
1,147
1,145
(52.2)
Consumer Loan Backed by Direct Deposits
634
1,480
1,619
155.5
9.4
Mortgage
877
1,107
1,220
39.2
10.3
(6.2)
V ehicles Loan¹
Credit Card
104
102
95
(8.2)
1,203
1,369
1,449
20.5
5.8
540
489
940
74.0
92.1
(10.6)
Overdraf t A ccounts
Other
3,257
3,499
3,129
(3.9)
37,465
41,297
41,649
11.2
0.9
14,132
18,125
18,940
34.0
4.5
Investment
5,171
6,135
6,310
22.0
2.9
Receivables
6,143
6,739
7,526
22.5
11.7
(19.3)
Bus ine s s e s
Working Capital
Pre-A pproved Credit
2,726
2,672
2,157
(20.9)
A CC/A CE
5,239
3,609
3,455
(34.1)
(4.3)
BNDES Exim
2,001
1,867
1,641
(18.0)
(12.1)
Credit Cards
323
583
682
110.9
17.1
45
1,685
42
1,524
138
800
208.1
(52.5)
225.7
(47.5)
Overdraf t A ccount
Other
R$ million
Jun/09
M ar /10
Jun/10
Chg. %
On Jun/09
On M ar /10
Agr ibus ine s s
13,979
14,169
17,437
24.7
23.1
Individuals
Companies
4,227
9,752
4,319
14,169
4,503
12,934
6.5
32.6
4.3
(8.7)
185 - Banco do Brasil – MD&A 2Q10
10.3.3 Internationalization
In November 2007, Banco do Brasil was licensed by the Central Bank of Brazil to open three new
companies in the United States: one for money transfers (BB Money Transfer), a retail bank (Banco do
Brasil Federal Savings Bank), and a holding company (BB USA Holding Company), intended to provide
basic financial services to Brazilians living in the US, such as: transfers, deposits, investments, credit
cards, among others.
2009 reflected an intensified trend to internationalize BB's business. On January 15, 2009 the first
international unit for administrative services was opened, the BB USA Servicing Center located in
Florida, USA, with the aim of centralizing and rationalizing back-office services in the units located in the
United States.
BB Money Transfers began operating in June of 2009 by providing money transfer services to Brazil,
focused on assisting Brazilian immigrants in that country. BB Money Transfers operates by means of
accredited agents and has currently 69 points of assistance in five US states.
In August 2009 the Bank inaugurated its representation office in Montevideo, Uruguay, one of the key
objectives being to provide service and financial intermediation solutions, to increase two-way trade
between Brazil and Uruguay, and to provide consultancy to Brazilian companies in Uruguay and to
Uruguayan companies that do business with Brazil.
On April 13, 2010 the North-American Central Bank - FED (“The Board of Governors of the Federal
Reserve System”) granted Banco do Brasil the status of "Financial Holding Company". The Bank was
accorded this status after a minute analysis of major factors determined by the US banking legislation,
among which is the Bank's savings bonds level and the quality of its management, besides considering
quality of bank supervision, performed in the Brazilian Central Bank. This qualification will make it
possible for Banco do Brasil, if it is in its interest, to perform banking activities in the US territory, either
by itself or through its subsidiaries, under the same conditions as US banks.
Strategy
BB's Board of Directors approved among other corporate directives that the Bank should increase its
international business and support Brazilian international companies.
In this regard, the Bank's strategic overseas positioning was aimed at wholesale and retail activities in
favor of Brazilian immigrant communities, in funding Brazilian companies with businesses involving
foreign trade and acting in the capital market. The conglomerate's actions are aimed at intensifying
relations with international financial institutions, economic agents, and government, in support of
implementing transnational and binational projects.
Simultaneously with strategic guidelines, the Bank has focused efforts in continuing to be Brazil's
overseas partner with capillarity to assist its customers everywhere, with the purpose of being the first
bank for Brazilians at home and overseas.
Banco Patagonia
On April 21, 2010 Banco do Brasil announced the Share Purchase and Sale Agreement (the
"Agreement") to acquire equity control of Banco Patagonia, whereby the current shareholders agree to
sell 51% of outstanding shares, with voting rights in that bank.
The transaction includes, among other provisions: (i) disposal of Banco Patagonia's equity control
represented by 366,825,016 shares in favor of Banco do Brasil; (ii) maintenance of a 10.58% equity
holding with voting rights in possession of the current shareholders (76,117,564 shares). (iii) Share
Acquisition Public Offering for Shares ("Mandatory PO") owned by other Banco Patagonia shareholders,
at the same price paid per share in the acquisition of control (100% tag along). The acquisition price for
the 366,825,016 shares was specified at US$ 479,660,391, and the payment terms are detailed in the
above-mentioned relevant event.
186 - Banco do Brasil – MD&A 2Q10
We list below a selection of economic and structural indicators for Banco Patagonia, and income figures.
Table 156. Banco Patagonia – Income of Statement Highlights
Chg. %
R$ million
2Q09
Net Interest Income
A llow ance f or Loan Losses
1Q10
2Q10
On 2Q09
On 1Q10
190
111
109
(42.5)
20
3
7
(66.1)
(1.8)
126.0
Fee income
43
45
46
7.4
1.8
A dministrative Expenses
92
87
94
3.1
8.5
Others
2
4
119
(2)
68
58
(51.6)
(15.1)
Taxes
57
23
19
(66.8)
(17.7)
Net Income
62
45
39
(37.7)
(13.9)
Income Bef ore Taxes
-
94.7
Table 157. Banco Patagonia – Equity Highlights
Chg. %
R$ million
Jun/09
M ar/10
Jun/10
On Jun/09
On M ar/10
A ssets
4,365
4,557
4,666
6.9
2.4
Loan Operations
1,924
2,030
2,366
22.9
16.5
(33.1)
Exposure to Public Sector
Deposits
Shareholders' Equity
6
50
33
491.3
2,818
3,068
3,330
18.2
8.6
817
896
831
1.6
(7.3)
Table 158. Banco Patagonia – Operating and Structural Highlights
Chg. %
Jun/09
Clients
Bank Branches
Branches in Buenos A ires
Service Points
Employees
M ar/10
Jun/10
On Jun/09
On M ar/10
751,623
777,947
782,119
4.1
137
138
138
0.7
0.5
-
-
75
75
-
-
154
159
159
3.2
-
2,690
2,718
2,811
4.5
3.4
Table 159. Banco Patagonia – Returns, Capital and Loan Ratios
Jun/09
M ar /10
Jun/10
Return on Equity
22.6%
20.8%
19.9%
Capital A dequacy Ratio (Basel)
34.0%
38.3%
31.2%
143.9%
132.1%
137.0%
2.5%
2.3%
1.9%
Prov isions / Pas t Due Loans (+90 days )
Pas t Due Loans (+90 days ) / Loan Portf olio
187 - Banco do Brasil – MD&A 2Q10
10.3.4 Business in Progress
The Mapfre Partnership
On May 5, 2010, by means of its wholly-owned subsidiary BB Seguros Participações S.A., Banco do
Brasil and the insurance group Mapfre entered into a partnership agreement to form a strategic alliance
in the field of personal insurance, casualties, and vehicles effective over 20 years.
Pursuant to this agreement, two privately owned holding companies will be organized, under the Mapfre
group's control of the voting shares and jointly managed. In order to equalize the intended shareholding
in both holding companies that will be organized, BB Seguros will pay in a sum of R$ 295 million.
The group Mapfre is the largest insurance group in Spain and operates in 43 countries, mainly in the
insurance, reinsurance and assistance markets of Latin America, where it ranks first in equity insurance.
The Mapfre group has 122 own branches and over 10 thousand active brokers, 18 territorial senior
managements, and 15 million customers throughout the world. In 2009 it profited R$ 364,4 million, and
had R$ 4.4 billion in revenues in Brazil.
Ownership interest in IRB-Brasil Re
When an insurance company enters into an insurance agreement in excess of its financial capacity, it
has to transfer this risk, or a portion of it, to a reinsurance company. Reinsurance is a common practice
all over the world as a means to mitigate risk, safeguarding the stability of insurance companies and
ensuring the payment of the claim to the insured party. IRB-Brasil Re (IRB) is the largest reinsurance
group in Latin America, with assets of R$ 10.4 billion, issued premiums of R$ 2.9 billion and retained
premiums of R$ 1.6 million as of 2009. The Federal Government holds 100% of the common shares of
IRB and 50% of total capital.
In order to supplement the operations of its insurance companies and to proceed with the restructuring
of the sector, BB proposed to start negotiations with no binding effect, which was accepted by the
Federal Government through the Ministry of Finance, for the acquisition of an ownership interest, in
compliance with the regulations in effect and the terms and conditions inherent to transactions of this
nature, namely the obtaining of all the previous authorizations required.
On May 20, 2010 Banco do Brasil published in the Diário Oficial da União call notice to hire specialized
technical services for economic and financial evaluation and conducting due diligence of the IRB. The
period for receipt of proposals is closed and, at the time, BB is in final review of proposals received.
Strategic Alliance with the Icatu Group
In order to form a strategic alliance to develop and sell savings bonds businesses in the Brazilian market,
a Memorandum of Understanding was signed between BB and the Icatu Group on January 6, 2010.
The businesses between the two institutions will be integrated in order to eliminate competition between
the partners. Accordingly, the corporate structure will be revised, as shown in the table below:
188 - Banco do Brasil – MD&A 2Q10
Table 160. Review of the Corporate Structure
Cur r e nt
Futur e
% - Com m on
% - Com m on
% - Total Capital
% - Pr e fe r r e d
BB Seguros
49.99
49.99
100.00
74.995
Icatu
SulA mérica
16.67
50.01
-
25.005
16.67
-
-
A lianç a da Bahia
15.80
-
-
0.87
-
-
Minoritários
The Icatu Group is a leader among the companies not related to retail banks in the savings bonds
market and serves over 3.2 million people in various business lines.
The information on the security businesses were addressed in Material Event Notices disclosed to the
market on October 6, 15 and 27, 2009 and January 6, 2010.
Partnership between BB, Bradesco and CEF - Cards
Aiming at developing a new business model in the Brazilian credit/debit cards’ market, on April 27, 2010,
Banco do Brasil and Banco Bradesco started negotiations on building up a partnership. On August 9,
2010, the intention of integrating the Caixa Econômica Federal - CEF and Caixa Participações S.A. was
added to the memorandum of understanding.
The Banks also inform their intention to consider the possibility of expanding the shareholding of Caixa
Econômica Federal in Cielo S.A. and continuing negotiations about the joining of Caixa Econômica in
the ATM sharing project.
The partnership goal is to integrate some of the banks cards operations and to initiate a Brazilian credit,
debit and prepaid cards brand to be directed to account holders and non-account holders, and to
develop new business for private label cards (the offering of cards to non-account holders via retail
partners).
A new holding company will be created, which will be called Elo and will integrate and manage the
partnership businesses. Therefore, three drivers are predicted: (i) the creation of the Elo Banco, which
will hold the banking responsibilities (credit and debit cards) and future agreements with retail partners
to issue private label cards; (ii) the Elo Vale and Elo Promotora formation, which will be responsible for
prepaid cards business and brand promotion, respectively; (iii) and third pillar which the consolidation of
is the banks’ holdings in Cielo.
Strategic Partnership with Bradesco and BES
Banco do Brasil S.A., Banco Bradesco S.A. and Banco Espírito Santo S.A. (BES) (“Banks”) started
negotiations to establish a strategic partnership aiming at operating in the African continent. Banco
Espírito Santo S.A., headquartered in Lisboa, is the second largest Portuguese commercial bank and is
present in 18 countries and 4 continents. The Banks intention is to take part in a financial holding
company which would consolidate, in Africa, current operations of BES. Besides that, the holding would
coordinate future investments involving the acquisition of shareholdings in other banks as well as
establishing its own operations in the African continent. The three financial institutions consider that the
partnership is important to support the internationalization of Brazilian and Portuguese companies and to
assist the growing foreign trade with that continent. The closing of the deal is subject to technical, legal
and financials studies, satisfactory negotiation of definitive documents, and the compliance with
applicable regulatory and legal procedures in both countries. Any decision will be timely released to the
market according to the evolution of the negotiations.
189 - Banco do Brasil – MD&A 2Q10
11 - Financial Statements
11.1 Summarized Balance Sheet
Table 161. Balance Sheet – Assets
R$ million
ASSETS
Current and long-term assets
Available funds
Short-term interbank investments
Open market investments
Interbank deposits
Marketable securities
Securities for trading
Securities available for sale
Securities held to maturity
Financial derivatives
Interbank accounts
Central Bank deposits
Compuls. dep, on demand, Dep & float
Compulsory dep, on savings dep,
Others
Interdepartmental accounts
Loans
Public sector
Private sector
(Allow ance for loan losses)
Leasing
Leasing and sub-leasing receivables
Public sector
Private sector
(Unearned lease income)
(Allow ance for lease losses)
Other receivables
Receivable on guarantees honored
Foreign exchange portfolio
Income receivable
Trading and brokerage of securities
Specific credits
Special operations
Credits from Insurance, Pension and Savings Bonds
Tax credits
Atuarial Assets
Warrants Deposits Receivable
Other credits
(Provision for doubtful receivables)
(With loan characteristics)
(Without loan characteristics)
Other assets
Statutory profit sharing
Others
(Provision for possible losses)
Prepaid expenses
Perm anent assets
Investments
Investm, in assoc. and subsidiary co,
Other investments
(Provision for losses)
Property and equipment
Land and buildings in use
Land and buildings in use reavaliation
Other property and equipment in use
(Accumulated depreciation)
Leased assets
Leases assets
(Accumulated depreciation)
Intangible
Intangible Assets
(Accumulated amortization)
Deferred charges
Organization and expansion costs
(Accumulated amortization)
190 - Banco do Brasil – MD&A 2Q10
Sep/08
458,237
449,235
6,847
71,092
61,637
9,454
85,954
26,475
37,777
20,443
1,258
38,238
35,564
12,220
23,344
2,675
138
175,599
3,038
183,345
(10,783)
2,267
2,310
48
2,262
(44)
68,375
51
17,053
402
287
821
0
396
14,994
2,003
17,481
16,008
(1,121)
(360)
(760)
726
0
304
(165)
586
9,002
1,589
763
893
(66)
3,082
2,692
5,278
(4,887)
5
10
(5)
3,674
3,674
652
1,835
(1,183)
Dec/08
521,273
511,761
5,545
119,408
95,160
24,249
86,909
26,136
38,374
20,123
2,276
21,287
20,882
12,439
8,443
405
228
190,882
4,040
200,020
(13,179)
2,968
3,039
55
2,984
(71)
83,279
71
20,914
413
347
846
0
441
16,499
7,794
18,007
19,325
(1,377)
(579)
(798)
1,256
0
308
(170)
1,118
9,512
1,524
721
871
(68)
3,339
2,668
5,610
(4,940)
4
8
(4)
4,041
4,043
(2)
604
1,846
(1,241)
Mar/09
591,925
577,351
7,516
131,796
103,356
28,440
110,594
32,475
45,269
31,433
1,417
30,925
25,543
12,381
13,162
5,382
99
205,376
3,767
216,684
(15,075)
3,246
3,352
53
3,299
(106)
86,156
81
19,041
513
150
868
0
586
20,413
7,794
20,024
18,363
(1,676)
(649)
(1,027)
1,642
0
356
(183)
1,469
14,574
961
188
869
(96)
3,588
2,825
152
6,018
(5,407)
3
429
(426)
9,391
10,544
(1,154)
632
2,226
(1,594)
Jun/09
598,839
584,287
6,212
132,438
111,171
21,267
109,564
31,661
46,645
30,477
781
29,127
24,507
11,188
13,319
4,620
102
214,906
2,816
228,995
(16,904)
3,253
3,406
60
3,346
(153)
87,034
78
13,957
502
1,763
888
0
702
21,053
8,410
20,489
20,916
(1,725)
(702)
(1,023)
1,652
0
352
(187)
1,487
14,551
5,184
4,369
901
(87)
3,663
2,970
150
6,021
(5,478)
2
6
(4)
5,128
6,657
(1,529)
574
2,195
(1,621)
Sep/09
685,684
669,719
8,340
157,541
134,045
23,495
129,818
44,590
52,750
30,773
1,706
31,252
26,468
12,398
14,069
4,784
161
246,217
4,975
259,359
(18,118)
4,636
4,861
60
4,801
(225)
89,641
76
12,066
542
522
910
0
815
22,261
8,709
20,888
24,523
(1,671)
(728)
(943)
2,114
385
(191)
1,920
15,965
6,625
5,698
1,007
(80)
3,741
3,061
150
6,184
(5,654)
2
4
(2)
5,082
6,998
(1,916)
515
2,237
(1,722)
Dec/09
708,549
691,539
7,843
168,398
144,174
24,224
124,337
38,274
62,161
22,439
1,463
26,592
24,280
11,919
12,361
2,312
295
261,783
6,388
273,080
(17,685)
4,701
4,932
63
4,869
(231)
95,233
91
8,671
563
436
932
0
908
21,910
12,655
21,209
29,539
(1,682)
(702)
(980)
2,358
364
(176)
2,170
17,010
6,645
5,776
947
(78)
4,214
3,336
6,632
(5,753)
1
4
(2)
5,677
7,659
(1,982)
472
2,247
(1,775)
Mar/10
724,881
706,102
7,364
152,595
125,683
26,911
119,364
38,183
62,950
17,070
1,162
53,144
47,244
14,472
32,773
5,900
99
267,317
5,668
279,054
(17,405)
4,593
4,826
59
4,767
(233)
99,430
89
11,808
588
400
954
850
22,000
13,374
21,764
29,226
(1,625)
(678)
(947)
2,196
384
(176)
1,988
18,780
6,869
5,964
986
(82)
4,230
3,256
6,759
(5,785)
1
2
(1)
7,267
9,670
(2,403)
413
2,201
(1,788)
Jun/10
755,706
737,151
9,535
132,543
107,838
24,704
132,249
44,830
67,153
19,049
1,217
64,857
59,374
15,833
43,541
5,483
110
289,075
6,145
300,028
(17,097)
4,394
4,641
53
4,588
(246)
101,887
73
12,258
678
409
978
816
22,431
14,510
22,380
28,988
(1,633)
(744)
(890)
2,501
394
(171)
2,278
18,555
6,866
5,910
1,023
(68)
4,259
3,392
6,969
(6,102)
1
2
(1)
7,052
9,872
(2,820)
377
2,041
(1,664)
Table 162. Balance Sheet – Liabilities
R$ million
LIABILITIES AND SHAREHOLDERS' EQUITY
Cur r e nt and long-te r m as s e ts
Deposits
Demand deposits
Sav ings deposits
Interbank deposits
Time deposits
Investment depos its
Money market borrow ing
Ow n portf olio
Third-party portf olio
Others
Funds f rom acceptances and securities placed
Foreign securities
Interbank acc ounts
Rec eipts and payments pending s ettlement
Correspondent banks
Interdepartmental acc ounts
Third-party f unds in transit
Internal trans f ers of f unds
Borrow ing
Foreign borrow ing
Domes tic onlending – of f icial institutions
Federal Treasury
National Development Bank (BNDES)
Caixa Econômic a Federal (CEF)
Fed. Prog. f or Cap. Equip. Finan. (FINA ME)
Other ins titutions
Foreign onlending
Financial deriv ativ es
Other ac counts pay able
Collec tion of taxes and c ontributions
Foreign ex change portf olio
Stoc kholders and s tatutory distributions
Taxes and social security
Trading and brokerage of securities
Technical Prov . Insuranc e, Pension & Capitaliz ation. Op.
Financ ial and Dev elopment Funds
Perpetual Securities
Special operations
Obligations f or Lotto Operations
Subordinated Debt (FCO)
A ctuarial liabilities
Other liabilities
Def erred inc ome
Corporate Prof it Sharing
Shar e holde r s ’ e quity
Capital
(Unpaid Capital)
Capital res erves
Rev aluation res erves
Rev enue reserv es
Mark-to-market – s ec urities and derivatives
Retained earnings (acc umulated loss es )
(Treas ury shares )
Corporate Prof it Sharing
Income ac counts
191 - Banco do Brasil – MD&A 2Q10
Se p/08
458,237
430,348
229,810
42,955
52,693
6,309
127,582
270
85,339
28,632
56,707
2,664
2,465
2,438
2,423
14
1,315
1,268
46
5,008
5,008
19,640
3,276
9,380
6,085
898
0
1,367
82,767
2,770
15,761
1,549
14,540
382
12,075
2,277
971
2
11,232
4,285
16,924
27,889
13,699
5
7
12,750
(33)
1,461
De c/08
521,273
491,336
270,841
51,949
54,965
14,065
149,618
243
91,130
21,927
69,203
3,479
3,210
21
1
20
2,496
2,495
0
7,627
7,627
22,436
3,485
11,168
6,585
1,199
98
3,895
89,312
252
15,964
1,838
17,570
401
12,675
2,458
1,185
2
11,772
5,662
19,531
(0)
29,937
13,780
5
7
15,977
199
(31)
-
M ar /09
591,925
560,232
305,002
47,276
70,567
8,406
178,487
266
106,452
31,133
75,319
3,074
2,762
1,940
1,924
16
1,862
1,808
53
9,991
9,991
22,220
3,532
10,753
165
6,826
945
104
3,164
106,422
3,156
15,380
985
17,686
145
13,771
3,741
1,174
2,136
9
14,371
5,738
28,130
834
30,859
13,780
5
7
15,759
124
(31)
1,215
Jun/09
598,839
565,692
310,846
49,075
69,011
7,459
185,072
228
101,508
28,755
72,553
200
2,673
2,337
2,677
2,657
20
2,045
2,007
37
8,536
8,536
22,626
3,574
11,118
159
7,009
765
107
2,580
112,094
2,853
16,339
1,502
20,141
450
15,017
4,076
990
2,140
14,689
6,179
27,719
787
32,360
18,549
5
7
13,614
216
(31)
-
Se p/09
685,684
652,002
326,958
50,107
72,233
9,627
194,707
284
153,603
45,543
106,568
1,491
6,231
3,383
2,792
2,769
23
1,859
1,840
19
8,855
8,855
26,761
2,826
14,968
153
7,780
1,034
104
6,098
118,742
2,629
15,466
1,608
22,224
378
16,081
4,052
901
2,346
16,409
5,871
30,775
21
33,661
18,549
5
7
13,299
324
(31)
1,509
De c/09
708,549
672,429
337,564
56,459
75,742
11,619
193,516
229
160,821
31,902
128,745
174
7,362
4,597
21
1
21
3,229
3,215
14
6,370
6,370
31,390
2,101
19,630
146
8,381
1,133
99
4,724
120,848
377
12,174
2,625
24,297
528
17,339
4,135
3,516
206
18,553
6,374
30,725
0
36,119
18,567
5
7
17,301
270
(31)
-
M ar /10
724,881
687,235
342,624
54,973
78,719
10,749
197,934
249
157,866
45,011
112,281
574
11,656
8,617
2,341
2,320
21
2,503
2,414
88
7,884
7,884
32,995
2,065
20,264
139
9,708
818
99
4,085
125,184
3,295
12,609
1,355
21,796
1,071
18,356
3,685
3,659
206
20,792
5,738
32,621
37,646
18,567
5
6
16,857
405
4
(31)
0
1,833
Jun/10
755,706
716,374
343,961
59,025
81,541
10,436
192,715
243
166,603
63,630
102,923
50
12,232
9,631
3,034
3,023
11
1,783
1,768
15
12,016
12,016
36,308
2,074
22,250
142
11,373
471
104
3,238
137,096
2,896
16,321
1,885
24,308
1,247
26,921
3,729
3,643
206
21,340
6,758
27,842
39,332
33,078
(7,050)
6
12,917
411
(31)
0
-
11.2 Summarized Income Statement
Table 163. Summarized Corporate Law Income Statement
R$ million
3Q08
Financial Inte r m e diation Incom e
15,076
Loans
8,697
Leas ing
58
Sec urities
5,771
Financ ial Derivatives
(85)
Foreign Ex c hange Portf olio
(50)
Compulsory Investments
590
Financ ial Inc. f rom Ins ur., Pension & Sav ings Bonds
94
Financial Inte r m e diation Expe ns e s
(11,409)
Money Market Funds
(7,068)
Borrow ing. A ss ignments and Onlending
(2,973)
A llow ance f or Loan Los ses
(1,367)
Gr os s Incom e fr om Financial Inte r m e diation
3,667
Othe r Ope r ating Incom e (Expe ns e s )
(1,449)
Fee Inc ome
2,259
Banking Fees Revenues
673
Personnel Expenses
(2,377)
Other A dminis trativ e Ex pens es
(2,069)
Taxes
(577)
Equity Int. in the Res ults of Subs. and A f f il.
496
Income f / Ins ur., Pens ion & Sav ings Bonds
218
Other Operating Revenues
1,322
Other Operating Ex pens es
(1,396)
Ope r ating Incom e
2,219
Non-operating Income
105
Incom e Be for e Taxe s
2,324
Income and Soc ial Contribution Taxes
(216)
Statutory Prof it Sharing
(241)
Corporate Prof it Sharing
1,867
Ne t Incom e
192 - Banco do Brasil – MD&A 2Q10
4Q08
18,824
10,613
147
8,097
(1,053)
503
424
93
(17,226)
(8,432)
(4,903)
(3,892)
1,597
2,744
2,338
720
(2,430)
(2,185)
(887)
707
353
7,090
(2,962)
4,342
5
4,347
(1,022)
(380)
2,944
1Q09
14,489
8,502
138
5,730
(62)
(116)
176
121
(11,131)
(7,761)
(716)
(2,654)
3,359
(2,664)
2,255
688
(3,152)
(2,691)
(667)
(90)
303
2,061
(1,371)
694
16
711
1,182
(227)
0
1,665
2Q09
15,365
9,963
148
5,215
(451)
131
213
146
(11,415)
(7,067)
(483)
(3,865)
3,950
(1,167)
2,557
879
(2,506)
(2,871)
(860)
(576)
471
4,957
(3,217)
2,782
1,426
4,208
(1,559)
(300)
(1)
2,348
3Q09
15,637
10,333
147
5,083
(664)
406
213
117
(10,841)
(7,320)
(593)
(2,928)
4,795
(1,875)
2,647
879
(2,909)
(2,596)
(807)
(275)
392
3,162
(2,367)
2,921
379
3,300
(1,062)
(258)
(1)
1,979
4Q09
17,794
11,717
213
5,321
(47)
265
214
109
(11,665)
(7,997)
(718)
(2,950)
6,129
1,065
2,714
892
(3,271)
(3,054)
(998)
(49)
408
6,794
(2,371)
7,194
22
7,217
(2,463)
(599)
1
4,155
1Q10
17,981
11,953
240
5,644
(232)
(18)
274
120
(12,356)
(8,493)
(903)
(2,959)
5,625
(1,896)
2,747
887
(3,021)
(3,277)
(864)
50
440
3,110
(1,969)
3,730
217
3,946
(1,242)
(353)
2,351
2Q10
18,848
12,364
204
5,195
(29)
71
917
125
(12,577)
(9,055)
(997)
(2,525)
6,271
(1,789)
2,853
1,101
(3,105)
(3,039)
(944)
29
468
3,020
(2,173)
4,483
129
4,612
(1,473)
(414)
2,725
11.3 Income Statement with Reallocations
Table 164. Income Statement with Reallocation
R$ million
3Q08
Financial Interm ediation Incom e
15,894
Loans
8,993
Leasing
58
Securities
5,771
Financial Derivatives
(85)
Foreign Exchange Portf olio
(50)
Compulsory Investments
590
Financial Income from Insur., Pension & Capitalization Op.
94
FX Gain (Loss) on Foreign Investments
496
Other Op. Inc. of a Fin. Intermed. Nature
27
Tax Hedge
Financial Interm ediation Expenses
(9,862)
Money Market Funds
(6,889)
Borrow ing .Assignments and Onlending
(2,973)
Net Interest Incom e
6,032
Allow ance f or Loan Losses
(1,338)
Net Financial Margin
4,694
Fee Income
2,933
Fee Income
2,259
Banking Fee Income
673
Res. From Insurance, Pension Plan and Savings Bonds
218
Taxes on Revenues
(541)
Contribution Margin
7,303
Administrative Expenses
(3,817)
Personnel Expenses
(2,020)
Other Administrative Expenses
(1,797)
Other Tax Expenses
(35)
Com m ercial Incom e
3,451
Legal Risk
(155)
Legal Claims
4
Labor Law suits
(159)
Other Operating Income (Expenses)
(525)
Eq.Interest in Resul. Subs. and Af fil.
0
Other Operating Income/Expenses
(526)
Other Operating Income
889
PREVI
Other Operating Expenses
(1,415)
Operating Incom e
2,771
Non-Operating Income
105
Income Before Taxes
2,876
Income and Social Contribution Taxes
(598)
Interest on Ow n Capital Tax Benef it
138
Interest on Ow n Capital Tax Benefit
(241)
Statutory Prof it Sharing
Recurring Incom e
2,037
Extraordinary Items
(170)
Sale of Interest in VISA Internacional
Economic Plans
(192)
Credit Assignment
Contingent Liabilities (BESC)
(360)
Tax Credit (BESC)
194
Previ – Unrecognized Actuarial Gains
Cassi – Unrecognized Actuarial Losses
Additional Provision f or Loan Losses
Provision f or labor, civil and tax claims
Tax credits – diff irential of CSLL rate
Disposal of Investments (Visanet Brasil)
Voluntary Resignation Program - BNC
Reversal of Labor Liabilities
Capital Gain - BB Seguros Participações
Tax Ef f ects and Statutory Prof it Sharing on Nonrecurring Items 188
PREVI Actuarial Assets - Adjustments
1,867
Net Incom e
193 - Banco do Brasil – MD&A 2Q10
4Q08
20,412
11,106
147
8,097
(1,053)
503
424
93
711
50
334
(13,335)
(8,432)
(4,903)
7,077
(2,240)
4,837
3,058
2,338
720
353
(715)
7,534
(4,344)
(2,301)
(2,043)
(45)
3,144
(226)
(97)
(129)
(542)
(3)
(539)
1,230
(1,769)
2,375
5
2,380
(557)
140
(198)
1,626
1,318
(44)
5,326
(1,259)
(1,594)
(1,110)
-
1Q09
15,259
8,951
138
5,730
(62)
(116)
176
121
(85)
470
(64)
(8,275)
(7,558)
(716)
6,985
(2,491)
4,493
2,943
2,255
688
303
(618)
7,122
(3,931)
(2,129)
(1,801)
(43)
3,148
(197)
(95)
(102)
(554)
(5)
(549)
795
298
(1,643)
2,397
16
2,413
(688)
179
(203)
0
1,523
309
(95)
(1,367)
1,213
557
(166)
2Q09
16,037
10,133
148
5,215
(451)
131
213
146
(592)
1,533
(439)
(7,550)
(7,067)
(483)
8,487
(3,172)
5,316
3,436
2,557
879
471
(806)
8,417
(4,892)
(2,613)
(2,279)
(7)
3,518
(45)
(152)
107
(740)
15
(755)
838
298
(1,891)
2,733
11
2,744
(771)
182
(220)
(26)
1,727
455
(193)
271
(676)
1,415
(362)
166
3Q09
16,048
10,609
147
5,083
(664)
406
213
117
(292)
643
(216)
(7,729)
(7,136)
(593)
8,320
(3,017)
5,303
3,526
2,647
879
392
(760)
8,461
(4,897)
(2,693)
(2,203)
(23)
3,540
(256)
(40)
(216)
(590)
17
(607)
1,015
298
(1,920)
2,694
29
2,723
(727)
190
(230)
(1)
1,764
215
141
(84)
119
209
(171)
-
4Q09
17,984
11,963
213
5,321
(47)
265
214
109
(74)
75
(58)
(8,715)
(7,997)
(718)
9,268
(2,946)
6,322
3,606
2,714
892
408
(965)
9,371
(5,465)
(2,844)
(2,621)
(27)
3,880
(4)
46
(49)
(964)
24
(989)
1,165
298
(2,452)
2,912
22
2,934
(853)
191
(262)
1
1,819
2,336
530
242
3,030
(215)
644
(1,895)
-
1Q10
18,562
12,480
240
5,644
(232)
(18)
274
120
18
28
8
(9,205)
(8,302)
(903)
9,357
(3,026)
6,331
3,634
2,747
887
440
(839)
9,567
(5,300)
(2,851)
(2,449)
(26)
4,241
(450)
(238)
(212)
(379)
32
(411)
1,112
913
(2,437)
3,412
3
3,415
(1,053)
207
(307)
2,056
384
214
(85)
568
(313)
(88)
2Q10
19,512
12,991
204
5,195
(29)
71
917
125
(5)
57
(15)
(10,052)
(9,055)
(997)
9,461
(2,871)
6,590
3,954
2,853
1,101
468
(909)
10,103
(5,471)
(2,937)
(2,534)
(34)
4,598
(239)
35
(274)
(491)
34
(525)
1,180
913
(2,618)
3,869
15
3,884
(1,194)
210
(363)
2,327
310
(140)
250
332
114
(246)
88
2,944
1,665
2,348
1,979
4,155
2,351
2,725
Vice-Presidency of Finance, Capital Markets and Investor Relations
Vice-President
Ivan de Souza Monteiro
Investor Relations Manager
Gilberto Lourenço da Aparecida
Executive Manager
Gisele Campana Rodrigues
Divisional Managers
Joaquim Camilo de Castro
Eduardo Amaral Pilenghi
Analysts
Bruno Santos Garcia
Daniel Henrique Sousa Diniz
Domingos Pereira dos Santos Neto
Glauco Ribeiro Barbirato Tavares
Hilzenar Souza Alves da Cunha
Janaína Marques Storti
Joabel Martins de Oliveira
Leonardo Resende Nader
Marcelo de Campos e Silva
Marcone Edson de Vasconcelos Formiga Filho
Mariana Reschke da Cunha
Rafael Augusto Sperendio
194 - Banco do Brasil – MD&A 2Q10
FINANCIAL
STATEMENTS
2Q10 RESULTS
Todo
seu
Management Report 1H10
Dear Shareholders,
We present the Management Report and the Financial Statements of Banco do Brasil for the first half
of 2010, in conformity with the requirements of the Brazilian Corporate Law, the National Monetary
Council (CMN), the Brazilian Central Bank, the Brazilian Securities Commission (CVM) and Banco do
Brasil's Bylaws.
Macroeconomic Environment
In the international environment, the first half of 2010 was marked by uncertainties regarding fiscal
sustainability of some European countries, especially Portugal, Ireland, Italy, Greece and Spain. Those
concerns led the European Union and the International Monetary Fund to jointly announce a package
of financial aid to the countries in difficulty for the total amount of € 860 billion, of which € 110 billion
were for Greece alone.
Facing the difficulties of implementing the required adjustments in public accounts, and the questions
regarding the potential impacts of those measures on European economic activity during this and the
forthcoming years, the strength of the euro against the US dollar was put in test. Between the end of
December 2009 and June 2010, the euro recorded a devaluation of about 16% against the US dollar,
and reached its lowest daily quotation since the first quarter of 2006.
In spite of the potential impacts of the adverse external environment, the Brazilian economy hardly
resented the fiscal crisis in Europe. Some volatility was felt in the foreign exchange and in the stock
market, but no damage was caused to the growth prospects of the domestic economic activity. In
fact, a marked expansion of domestic activity was observed, anchored in the significant dynamism of
the labor market, industrial production (led by the capital goods and durable consumer goods
sectors), retail sales and credit market, which reached a level that exceeds 45% of the Gross
Domestic Product (GDP).
The GDP for the first quarter recorded a 9% growth compared to the same period in 2009 and 2.7%
compared to the preceding quarter (seasonally adjusted). The quarterly GDP expansion was
equivalent to annualized growth of 11%. This growth was led by internal demand, with private
consumption and investment growing in annualized rates between 6% and 33%, respectively,
comparing with 2009 last quarter.
In the first half of the year, the Expanded Consumer Price Index (IPCA), for instance, showed its
highest variation observed in the same period since 2003, compromising about 68% of the core
inflation target (4.5%) for this year. In view of that scenario, in April 2010 the Central Bank of Brazil
started a new cycle of increases for the basic interest rate, which was raised from 8.75% p.y. to
9.50% p.y., and reached 10.25% p.y. in June 2010.
Highlights of the period
As the Latin America's largest bank in assets, with R$ 755.7 billion, Banco do Brasil recorded a net
income of R$ 5.1 billion in the first half of 2010. From this total, R$ 2.1 million were distributed to its
shareholders. The achieved performance is the result of the adopted negotiation strategies, including
the recent acquisitions and established strategic partnerships.
The loan portfolio ended the first half of the year 2010 with a R$ 326.5 billion balance, up 29.3% from
1H09. The loan portfolio expansion is due to the strong growth credit loans to individuals, specially
payroll loans and vehicle finance, and to companies highlighted to investments and working capital
operations. With this performance, BB keeps its leadership in the Banking Industry, with a 20.1%
market share, without comprising the credit risk (overdue 90 days), which decreased from 3.6% in
1H09 to 2.7% at the end of the first half of 2010.
Specifically this first half of the year, Banco do Brasil disclosed to the market an agreement for the
acquisition of the stake control of Banco Patagonia. The closing of the deal will still depend on the
approval by Brazilian and Argentine governmental bodies. Also concerning the recent mergers, BB's
deal with Bescleasing and Bescredi was approved on April 13, 2010 by BB's Extraordinary General
Meeting.
Providing continuity to the restructuring process in the insurance, pension and savings bonds segment,
the Bank disclosed: (i) review of the partnership with the Principal Financial Group in BrasilPrev; (ii) an
agreement to form a strategic alliance with the Mapfre group; and (iii) corporate restructuring in
BrasilVeículos and BrasilSaúde. For that, BB faced the need for approval and statement by the
regulators / supervisors, whose authorization was given only in the first movement, Brasilprev, where
1
Management Report 1H10
the participation of BB Seguros happened on 4/30/2010, from 49.9892 % to 74.995%, generating an
increase in 2Q10, 11% in the equity in income of related compared with 1T10.
In the card business, the Bank increased its interest in Cielo and Companhia Brasileira de Soluções e
Serviços – CBSS companies by acquiring the ownership interest held by Santander bank in both
companies. In that segment, BB also signed a memorandum of understanding with Bradesco bank,
aiming: (i) to integrate a part of their card operations; (ii) launching the Brazilian ELO card brand; (iii)
formatting new businesses for private label cards; (iv) creating a company for card sales to noncustomers; and (v) creating a company formed by ownership interest in CBSS S.A. held by both
institutions or by their subsidiaries.
In 1H10, BB's investments amounted to R$ 514.8 million, up 27.9% from 1H09. It is worth to highlight
the investments of R$ 191.7 million in properties (constructions and reforms), equipment (R$ 22.2
million), and information technology (R$ 300.8 million).
In addition, in the first half of 2010 a primary and secondary public offering of BB shares was made, in
order to strength its capital base, meet its organic and inorganic expansion strategy, increase the
liquidity of its shares in the secondary market. Additionally, this offer reached a 30.4% free float, which
exceeds the mandatory minimum of 25% required by Novo Mercado Regulation of BM&FBovespa,
where BB is listed since 2006. BB’s stockes were priced at R$ 24.65 at the end of the bookbuilding
process.
Outlook
Committed to remaining among the leading financial groups from Latin America, Banco do Brasil
outlined the following as strategies and goals for 2010-2014:
•
become a reference in performance and sustainable business;
•
expand loans market share;
•
increase share in the capital market;
•
expand product and service distribution capacity;
•
refine the customers management and service delivery channels;
•
strengthen its activity in value chains, cooperativism and associativism;
•
increase the international activities and the use of strategic, business and operational
strategies in the country and abroad;
•
develop and refine the management of knowledge and of competencies of employees;
•
participate in the Dow Jones Sustainability Index;
•
broaden and strengthen its activities of insurance, pension plan, savings bonds, purchasing
pools and cards;
•
become a reference in risk management, security and control;
•
expanding and strengthening its negotiation performance as a development agent in Brazil.
ECONOMIC-FINANCIAL PERFORMANCE
Banco do Brasil recorded net income of R$ 5.1 billion in the first half of 2010, 26.5% higher than the
same period in 2009, with an annualized return on equity of 28.7%. Net income per share was R$
1.98 in the last six months.
Assets totaled R$ 755.7 billion, up 26.2% in 12 months, with a return on assets of 1.4% in 1H10,
same in 1H09, a performance that confirms the Bank's leadership in assets in the Banking Industry –
SFN. Shareholders' equity reached R$ 39.3 billion, an increase of 21.5% in 12 months.
2
Management Report 1H10
R$ million
Highlights
Results
1H10¹
Net Income
5,076
Income (without extraordinary impacts)
4,383
Net income from financial intermediation
11,896
Revenue from loans
24,317
Fee Income
7,588
Insurance Income
596.2
Administrative expenses²
(12,411)
Net Income per Share
1.98
Return on Assets
1.4
Return on Equity
28.7%
Equity
Jun/10
Assets
755.7
Loan portfolio
326.5
Funding
510.6
Assets under Management
344.9
¹ Items based on Consolidated Statements.
² Refers to the addition of Personnel Expenses and Other Administrative Expenses.
1H09
4,014
3,250
7,308
18,465
6,379
499.3
(11,221)
1.56
1.4
27.4%
Jun/09
598.8
252.5
412.4
264.9
∆ 1H09 (%)
26.5
34.9
62.8
31.7
19.0
19.4
10.9
26.9
1.3 p.p.
∆ Jun/09 (%)
26.2
29.3
23.8
30.2
The administrative expenses, which comprise personnel expenses and other administrative
expenses, totaled R$ 12.4 billion, growth of 10.9% in 12 months, reflected in the productivity ratios
shown in the table below:
Productivity Ratios
1H10
1H09
Service Revenues/Personnel Expenses
123.9
112.7
Service Revenues/Administrative Expenses
61.0
56.9
Cost/Income Ratio - %
44.5
49.3
Income fees and financial margin growth in addition to the control of administrative expenditure
helped to improve the cost/income ratio of the period.
See further information about the economic-financial performance of BB in the Management
Discussion and Analysis at BB's Website (www.bb.com.br/ri).
SHARE PERFORMANCE
Banco do Brasil's shares (BBAS3) closed the first half of 2010 priced at R$ 24.65, up 23.7% from the
last 12 months, against appreciation of 18.4% of Ibovespa.
BBAS3 was traded in all BM&FBovespa's sessions, in the daily average amount of R$ 94.9 million in
the first half of 2010, as opposed to R$ 66.4 million in the same half of the previous year, and
continued to be listed in the theoretical portfolios of the major Stock Exchange indexes: Ibovespa,
Ibrx50, IGC, ISE and Itag.
Banco do Brasil's stocks have also been traded in the US market by means of American Depositary
nd
th
Receipts - ADR since December 2 , 2009. On June 30 , 2010, there were 5.6 million outstanding
ADRs.
Banco do Brasil has a 40% payout policy, which is taken in the form of dividends and interest on own
capital, at quarterly intervals. The amount of R$ 2.1 billion was allocated to shareholders in the first
half of the year, being R$ 1 billion as dividends and R$ 1.1 billion as interest on own capital. The
remaining 60% of the profit was allocated to legal and statutory reserves and to business expansion
(a policy of reinvesting the profits and paying dividends).
With its stack public offering, Banco do Brasil achieved a free float of 30.4%, raising the number of
shareholders from 355.5 thousand in the first half of 2009 to 417.9 thousand in the same period of
2010.
3
Management Report 1H10
BUSINESS PERFORMANCE
BB closed the first half of 2010 with a base of 53.3 million customers and 34.9 million checking
accounts (32.7 million individual checking accounts and 2.2 million business checking accounts), a
growth 0.5% growth in 12 months.
BB has a segmented model to meet the needs of its non-corporate customers. For Private Banking
business, some platforms were installed in the cities of Campo Grande, Manaus, Santo André,
Maceió and Natal. That expansion allowed a 16.6% increase in the customer based served by BB
Private, a 24.2% increase in the volume of assets under management and a 37.2% higher
contribution margin for the segment.
BB makes available to its customers an access for making business by physical networks (branches,
service centers and correspondents) and virtual networks (call center, internet and mobile).
In its physical network, BB has Brazil's largest branch network, with 4,984 units, and has 9.8
thousand correspondent banks, over 18.2 thousand service centers, and Latin America's largest
ATM set, with 43.9 own machines. In 1H10 the migration process for Nossa Caixa service centers to
the BB model was completed.
In ATM, about 38.9% of all BB banking transactions are performed. In order to provide more comfort
and convenience, in 1H10 the bank started an equipment modernization involving a migration to the
Linux operating system, which will provide a faster service and new functionalities. In addition, the
use of terminals contributes to develop the potential of more distant regions, such as the country's
borders.
BB also has terminals that are shared with Caixa Econômica Federal and Banco de Brasília and its
own network abroad, comprised of 45 service centers in 23 countries, in addition to 1,332 foreign
correspondent banks.
By means of its virtual network, BB provides additional channels for access to banking services,
such as the Call Center, the internet access (both for individuals and corporations), the mobile
banking and SMS. BB's internet self-service closed the first half of the year with the historical mark of
over 93.2 million effective transactions per month and over 10.2 million customers using that
channel, that attends to 37.2% of the total transactions.
The Short Message Service – SMS has over 829.8 thousand enrolled customers, and 58 million
messages had been transmitted by end of the first half of 2010. In that period, BB launched the
"Saque Sem" service, a transaction mode that allows withdrawals in ATM without using a card. That
is a new and innovating service, providing both convenience and security.
Fundings
In the first half of 2010, Banco do Brasil recorded R$ 510.6 billion in funding, a 23.8% growth over the
same period of 2009, which reflects the customers reliance in BB, even in adverse environment.
1
Demand deposits, that grew 20.3%, deserve special emphasis, allowing BB to reach a 25.7% market
share in 1H10.
Regarding foreign fundings, it is important to highlight the funding accomplished in January 2010, when
stocks were issued under the Global Medium Term Notes - GMTN program, in the amount of US$ 1
billion, comprising two series of US$ 500 million, one for a 5-year term and the other for a 10-year term.
At the end of the half, the balance of foreign funding recorded US$ 23.6 billion, change of US$ 8.5
billion or 56.2% in relation to the same prior-year period.
Funding management and government programs
In the 1H10, BB loaned R$ 1.7 billion in 29.6 thousand transactions with resources from Fundo
Constitucional do Centro-Oeste (FCO). The performance is equivalent to 65.1% of the budget program
for the period, being 50.6% of that amount have benefited micro, mini and small-sized borrowers. Such
financings created / maintained 75.8 thousand direct and 125.8 thousand indirect jobs. Funds invested
grew 4.8% in relation to the same period of previous year and the balance of the portfolio attained R$
11.5 billion.
1
BB’s total funding, as for June 2010, were compared with the Banking Industry provided by the Central Bank of Brazil, position March 2010.
4
Management Report 1H10
In working capital lending to micro and small-sized companies, Banco do Brasil made full use of the
Transaction Guarantee Fund – FGO to mitigate credit risk in the transactions and expand portfolio
volume. In 1H10, contracted operations amounted to R$ 4.4 billion, of which R$ 3.4 billion were
guaranteed by FGO.
Out of 5 projects analyzed by BB, all were authorized to support the construction capacity increase by
shipbuilding industry, expand port infrastructure through Fundo de Marinha Mercante – FMM, totaling
R$ 92.8 million in outlays. Thereby, the FMM portfolio reached the mark of R$ 795 million in June
2010, a 23.9% evolution from the same period in the previous year.
Services
BB Consórcios ended the first half of 2010 with 161.8 thousand active shares, a 33.3% increase in
12 months. 122.8 thousand consortium members in this total refer to vehicles and 9.6 thousand to
housing segment.
In tax collection, BB accounts for 23% of the market at federal level and 40% at state level,
corresponding to R$ 93.3 billion and R$ 56.8 billion collected, respectively. R$ 7.4 billion were
collected in the municipal level.
By means of the bank charge services, deposit forms and standing orders, Banco do Brasil provides
services for more than 590 thousand companies that brought in R$ 334 billion in the 1H10. These
services added R$ 901 million in revenue, growth of 15% comparing to 1H09.
The new electronic payment charge solution, called Authorized Direct Debit, had 1.2 million
electronic drawees and 29.2% market share, and over 38.5 million bank payment forms were
electronically processed. That new service avoids payment form printing, a measure that contributes
to reduce paper use, and thus benefits the environment.
In the half of 2010, 49.1 thousand payrolls were processed, considering business clients and public
sector in the half. Overall, BB provided these services to a total of 18.4 million people, involving civil
servants and employees from private enterprises.
In addition, services were provided to 48 Social Security programs, such as advisory services in the
financial, accounting and actuarial areas, benefit analysis and technical support, in addition to
processing of retiree and pensioner payrolls, involving 210 thousand insureds.
Asset Management
In the first half of 2010, BB Gestão de Recursos (BB DTVM), Brazil's largest asset manager,
reached R$ 344.9 billion in managed assets, comprising its investment funds and managed
portfolios, and achieved the historical mark of 22.3% of market share. This volume represented an
increase of 12.5% in the period, according to Associação Brasileira das Entidades dos Mercados
Financeiros e de Capitais – Anbima.
Considering fund management, BB DTVM is responsible for R$ 330 billion, which represents 22.7%
market share, consolidating its position as also Brazil's largest assets monitor, according to Anbima.
BB DTVM expanded its international performance by creating BB Asset Management Ireland, in
Dublin, to meet the needs of foreign investors, especially those in Europe and Asia.
Capital Market and Treasury
Banco do Brasil operates in the domestic capital market through BB Banco de Investimento S.A. – BBBI. In 1H10, 20 issues of fixed-income securities were made, adding up to R$ 5.5 billion, placing the
Bank on position number 1 in Anbima ranking, with 20.8% of market share. In the securitization
segment, the Bank issued two receivables-backed investment funds (FIDC) and mortgage-backed
securities (CRI) funds and one real state fund, amounting to R$ 397 million.
In the market of variable-income issuance, BB-BI coordinated share offerings adding up to R$ 327
mllion, which placed it in position number 10 in Anbima ranking, with 2.4% of market share.
5
Management Report 1H10
In the custody of assets in the domestic market, BB occupies the position number 2 in Anbima ranking,
with R$ 487 billion under its custody, representing 25.8% of market share.
In the private equity industry, BB-BI has been operating since 2004 as a shareholder in eight FIPs
(Investment Participation Fund) / FMIEEs, and more recently, has been providing economic and
financial advisory services to four FIPs, being three of them in the investment period and one in the
stage of obtaining funding from institutional investors, with a total capital commitment of R$ 1.85 billion.
In the international capital market, through its external brokers BB Securities Ltd (London) and Banco
do Brasil Securities LLC (New York), the Bank had a participation in 15 of 32 Brazilian issuances of
fixed-income securities in the first half of the year, being 9 as lead-manager and 6 as co-manager, of
which Braskem, CSN, Magnesita, Marfrig, Minerva, Banco Votorantim, BNDES, Fibria, Votorantim
BESI and STN, besides BB, totaling over US$ 9 billion from the total of around US$ 15 billion issued
in the period.
BB's ownership interest in affiliated companies and subsidiaries contributed to the Bank R$ 1.4
million in equity in subsidiaries, an increase of 39.7% in relation to the same period in the previous
year. The Bank participates as a shareholder in companies that have affinity with its businesses, and
adopts the best corporate governance practices in the market.
Loan portfolio
BB's loan portflio reached R$ 326.5 billion, an increase of 29.3% compared to the first half of 2009.
In the amplified portfolio criteria, where guarantees granted and private securities are included, BB's
loan portfolion attained R$ 349.8 billion. This progress was driven by the growth of individuals
transactions, that represented 31% of the total portfolio, as against 27.1% in the end of June 2009.
Also worth highlighting is the 315% increase in the volume of transactions contracted by states and
municipalities, compared to the same period in 2009.
R$ million
Loan portfolio
1H10
1H09
∆ (%)
Country
307,018
239,418
28.2
Individuals
101,122
68,467
47.7
Businesses
135,575
103,351
31.2
- SMEs
47,382
39,493
20.0
- Other
88,193
63,858
38.1
Agribusiness
70,321
67,600
4.0
Abroad
19,504
13,068
49.3
Total
326,522
252,485
29.3
Regarding the foreign loan portfolio, a 49.3% change was noted in relation to the same period in the
previous year, achieving a total balance of R$ 19,5 billion at the end of 1H10, with a special highlight
for pre-payment transactions, whose balance improved 60% when compared to 1H09.
One of the reflexes in the financial crisis that began in 2008 was the rise in default in the Banking
Industry – SFN. In BB, the delay index for receivables past due 90 days reached 3.7% at end of the
first half of 2010, compared to 4.4% recorded in the same period of the previous year, and remained
below market levels throughout the period. The transactions rated at risk levels AA, A, B and C
accounted for 92.5% of portfolio, against the 91.8% verified in the SFN.
Another positive factor was the volume of recovered credits. In the first half of 2010, R$ 1.4 billion of
credits written off as losses were recovered, an amount 56.4% higher as compared to the first half of
2009.
In the 1H10, Banco do Brasil also consolidated its leading position in the transfer of BNDES funds, with
21.1% of market share and a total of R$ 8.5 billion intended for investments in the wholesale market.
6
Management Report 1H10
BB was also the leader in terms of number of transactions contracted under the BNDES System, with
107.2 thousand transactions accumulated during the first half of the year. Among micro, small and
middle-size undertakings, one out of three transactions was carried out by BB, which shows the wider
and more dispersed access to investment credit.
Cards
The card business added R$ 1.4 billion to the Bank, among revenues from financing and services,
with an expansion of 37% in relation to the same prior-year period.
With a base of 86.2 million cards issued, BB obtained R$ 49.5 billion revenues in 1H10, growth of
26.2% in relation to 1H09. This performance enabled BB to advance in its market share from 20.2%
to 20.3%, keeping the billing leadership in the debit and Visa cards in Brazilian market.
Insurance, Private Pension Fund, and Savings Bonds
The insurance, private pension fund and savings bonds business added, in the first half of 2010, R$
596.2 million to the Bank's income, considering earning/loss equity fee income, which represented
an increase of 19.4% compared to 1H09. This result may be expressed by the insurance ratio, which
represents the insurance share Banco do Brasil's recurring net income, reaching 13.6% in the 1H10.
Also in this semester, Banco do Brasil, through its whole-owned subsidiary BB Seguros, signed a
Purchase and Sale Agreement with Sul América Seguros for the acquisition of the total shares of
Brasilveículos in the amount of R$ 340 million and the sale of the total shares of Brasilsaúde in the
total amount of R$ 28.4 million, thus proceeding with the restructuring in the insurance area.
Foreign Trade
In the foreign trade, the Bank maintained its leadership of the export and import exchange market,
with volumes of US$ 25.6 billion and US$ 19.5 billion, respectively, and market shares of 30.6% and
24.8%, respectively. As regards foreign trade financing, noteworthy are the Pre-Shipment/PostShipment Export Financing operations, which reimbursements reached US$ 6.2 billion and regarding
the Export Financing Program (Proex), which leveraged exports of approximately US$ 1.2 billion.
Exchange and foreign trade online services continue to post records: 65.5% of such export
exchange contracts and 42.8% of import contracts were agreed on through the Internet, and 47.7%
used digital signatures. Currently, 92.3% of the dossiers of operations carried out at the Bank are
scanned and 71% of clients forward documents to BB also by digital means.
CORPORATE GOVERNANCE
Banco do Brasil's corporate governance structure is comprised by: the Board of Directors, advised
by the Audit Committee and Internal Audit, and the Executive Board, made up of the Management
Board (president and nine vice-presidents) and by 27 statutory directors. The Bank also has a
permanent Board of Auditors.
Decisions are taken collectively at all levels of the Bank. With the purpose of involving the executives
in the definition of strategies and approval of proposals for BB's different businesses, the
management uses committees, subcommittees and commissions at a strategic level, which ensure
the agility and security for the decision making. Among the instruments used to assure good
governance, it is also worth highlighting the Corporate Governance Code and the Code of Ethics.
As a good initiative of corporate governance, the Bank has introduced tools to evaluate the
performance of the Board of Directors, Audit Committee and Executive Board, in order to support the
preparation of internal diagnoses and the identification of measures to improve performance.
Banco do Brasil is signatory of the Anbima Code of Regulation and Best Practices for the Private
Banking Activity in the Domestic Market, ensuring high ethical standards, maximum transparency,
qualification of professionals and commitment in the quality of the recommendation of products and
services.
7
Management Report 1H10
Moreover, Banco do Brasil, its Shareholders, the Officers, and the members of the Audit Committee
undertake to resolve all and any dispute or controversy related with the New Market Listing
Regulation by means of the Arbitration Chamber of the Bovespa Market, in conformity with a
commitment clause contained in the By-laws of Banco do Brasil.
In relation to investee companies, BB has searched to improve the governance of these companies.
For example, improvements have been implemented in the governance of Banco Votorantim:
restructuring of the Board of Auditors, the Audit Committee, and Board of Directors, in addition to the
implementation of three assistance committees to the Board of Directors (Finance, Human
Resources and Products and Marketing).
Market relations
In the first half of the current year, BB took part in 34 meetings with domestic investors and analysts,
5 conferences and promoted 4 teleconferences with analysts and investors, and more that 300
telephone assistances. In view of the public offer of the Bank's shares, road shows in Asia, Europe
and South and North Americas were intensified.
BB provides up-to-date information to the market at the Investor Relations site (bb.com.br/ri).
Highlights of the period
Jan
- Announcement of strategic partnership between BB Seguros and Grupo Icatu, focused on
savings bonds businesses;
Feb
- Registering the Memorandum of Understanding between Banco do Brasil and Caixa
Econômica Federal and Caixa Participações, with the purpose of carrying out studies on the
operating or corporate feasibility in Cobra Tecnologia S.A.
Mar
The table below highlights several events that occurred in BB's business over the course in the first
half of 2010:
- Filing, with the Brazilian Exchange Securities Commission (CVM), of notice calls for Annual
and Extraordinary Shareholders' Meetings for the merger, by Banco do Brasil, of Bescleasing
and Bescredi.
- Granting of the "Financial Holding Company" status by the US Central Bank;
- Granting of a license for BB USA Servicing to carry out activities and provide fully supporting
services to all Bank units in the USA;
Apr
- Executing a purchase and sale agreement for acquisition of the ownership control of Banco
Patagonia by Banco do Brasil;
- Registering a partnership between Banco do Brasil and Banco Bradesco for launching the
Brazilian brand ELO and integrating part of its card operations;
- Announcing the renewal of the strategic partnership between BB Seguros and Principal
Financial Group – PFG do Brasil Ltda., aimed at private pension plan and savings bonds
business;
- Announcing the acquisition of part of the shares held by the Santander S.A. Group in Cielo
S.A. and in CBSS, through its wholly-owned subsidiary BB Banco do Investimento S.A.
8
Management Report 1H10
May
- Announce of the strategic partnership between BB Seguros and the Mapfre insurance group,
aimed at the individual life, real estate, agriculture, vehicle and all insurance risks lines;
- Approval, at the Banco do Brasil's Meeting, the corporate merger of wholly-owned subsidiary
Banco Popular do Brasil;
- Filling of the Protocol with the Brazilian Association of Financial and Capital Market Entities
(Anbima) – request for previous analysis of the registering of the Public Offer of Primary and
Secondary Distribution of Common Shares;
Jun
- Authorization granted to BB Securities by Financial Industry Regulatory Authority – FINRA to
operate with underwriting, registered offerings and dealings.
- Approval, at the Banco do Brasil's Meeting, the acquisition of the ownership control of Banco
Patagonia, still pending homologation by the regulatory bodies of Brazil and Argentina.
Legal Information
In compliance with CVM Instruction No. 381, Banco do Brasil reports that KPMG Auditores
Independentes has not provided, to BB and subsidiaries, any services that could affect its
independence in relation to audit work in the first half of 2010.
In the engagement of services not related to external audits, Banco do Brasil adopts procedures
based on the applicable legislation and on internationally accepted principles that preserve the
independence of the auditor. These principles consist of: (i) the auditor should not audit his own work
and (ii) the auditor should not act managerially before his client nor promote the interests of his
client.
In compliance with article 8 of BACEN Circular 3068/01, Banco do Brasil confirms that it has the
intention and financial capacity to hold until maturity the securities classified in the "Securities Held to
Maturity" category. The financial capacity is backed by a cash flow forecast that does not take into
consideration the possibility of selling these securities.
In compliance with CVM Instruction no. 319/99, art. 14, BB informs that by the end of the first half of
2010, the process of integrating the agencies' BB-BNC Network was completed, which now serve
customers within the applications and systems of the Banco do Brasil. Banco Nossa Caixa
incorporation was part of the process of expanding the business of BB in the state of São Paulo,
along with the creation of a statutory board to manage the negotiation strategies relating to that
state.
In compliance with Article 243 of Law 6404/76, BB reports that investments in subsidiary and
associated companies totaled R$ 13 billion as of June 30, 2010.
In accordance with criteria defined by the Brazilian Statute of Micro and Small Businesses (General
Law of Micro and Small Businesses), 93.4% of BB's business clients are classified as micro and
small businesses. The volume of funds used by SMEs reached R$ 47.4 billion in the 1H10,
representing a 24.5% increase as compared to the previous half. The balance of working capital
operations contracted by micro companies totaled R$ 4.3 billion, and for small companies totaled R$
20.5 billion. Investment operations aimed at very small companies reached R$ 2.2 billion; for small
companies, investments reached R$ 6.8 billion.
See further information about BB strategic investiments in the Performance Analysis Report at BB's
Website (www.bb.com.br/ri).
INTERNAL PROCEDURES
Risk Management
In the first half of 2010, in spite of the uncertainties of the global economic scenario, specially
regarding the tax sustainability of some countries in the Euro Zone, BB reaffirmed its management
strategy, based on a solid risk governance.
9
Management Report 1H10
At Banco do Brasil, risk management is carried out on a joint and segregated basis from its business
units. Risk and concentration policies are specified by the Bank's Board of Directors. These policies
are expressed by global risk exposure limits, which are defined by the Global Risk Committee
(CRG), which is a forum composed of its president and vice-presidents. The measures for
implementing and monitoring the guidelines issued by the CRG are carried out by the Credit Risk,
Marked and Liquidity and Operating Subcommittees.
With the purpose of improving the risk governance, the Board of Directors approved a set of
quantitative indicators to monitor the Banco do Brasil's risk appetite and tolerance.
Under the scope of the market risk, there was a review on the global and specific limit structure and
the Program of Stress Testing on the Required Capital for Market Risks, both in conformity with the
provisions set forth by the Central Bank of Brazil (BACEN) Circular No. 3,478, which addresses
internal market risks models. In connection with liquidity risks, the Bank's exposure is minimum as it
is the owner of an expressive position in highly liquid public federal bonds.
In relation to credit risk, Banco do Brasil adopts its own methodologies to rate customer credit risks.
Developed concurrently with best market practices and the concepts introduced by the Basel Accord,
these statistical models consider customer past performance (credit score), their credit performance
(behavior score) with the Bank and the market, and the use of bank products.
The credit methodologies developed and implemented in the Bank include customer risk analysis in
every corporate and individual customer segment, in addition to financial institutions and countries.
These methodologies have permitted the improvement of the credit process, by virtue of a more
precise assessment of customer risk profile and contributes to the increase of credit, at levels above
the competitors, with quality and security, even in adverse scenarios.
The default on loans at Banco do Brasil, in the last 24 months, has remained at lower levels than that
of the Banking Industry. The provisioning level is in line with its key competitors, while the coverage
ratio, the relation between provision and late payments, is above that of other banks.
In order to manage operational risk, Banco do Brasil, following the best market practices, monitors
operational loss through a systemized internal database, exposure limits and key risk indicators,
besides risk matrices to assess relevant outsourced services.
Aiming at the ongoing improvement of the operating risk management, in the first half of 2010 BB
implemented specific limits to operating losses related to "Labor Issues", "Faults in Businesses",
"Faults in Processes" and "External Fraud and Theft", with the purpose of providing more
expeditious proposals for mitigating measures. Noteworthy are the work for adequacy to the
guidelines issued by BACEN at its Communication No. 19,217, of December 24, 2009, involving the
use of four basic elements in the internal model for measuring operating risk: Internal Data Base,
External Database, Scenario Analysis and Internal Control Factors and Business Environment.
Finally, is recorded that BB continued with the consolidation of the simplified standardized approach
of Basel II, and with the preparation process for adoption of advanced models.
To find out more on Banco do Brasil's risk management policies, visit bb.com.br/ri.
Internal Controls
Since the first half of 2010, new practices to evaluate the efficiency of BB Internal Controls were
incorporated, based on material relevance criteria, both in terms of impact on the financial
statements and in relation to the operating risk items.
With the purpose of strengthening the processes that fed the information disclosure to the market
and the information generation for preparing the financial statements, in conformity with the
provisions set forth in CVM Instruction No. 480, of December 7, 2009, some mechanisms were
developed to ensure control efficiency.
Taking into account the possible proposal of own models, either advanced or internal, of Market and
Liquidity Risk, BB has also made strong efforts towards the segregated validation procedures of said
models.
10
Management Report 1H10
Preventing and Combating Money Laundering
For Banco do Brasil, preventing and fighting against money laundering is a legal obligation and a
commitment to the Country. In its internet website, the Bank discloses the policies adopted to
prevent and avoid money laundering, and provides suggestions to customers on how to avoid being
used by criminals in money-laundering schemes.
Moreover, the Bank permanently invests in the education of its employees. On-site training and
internal certification in the Bank's Prevention and Avoidance of Money Laundering are certified with
Seal by Enccla - National Strategy for the Avoidance of Corruption and Money Laundering. The
Enccla seal is granted by the Ministry of Justice to courses which should meet the requisites as
defined in Programa Nacional de Capacitação e Treinamento para o Combate à Lavagem de
Dinheiro – PNLD (National Program of Education and Training for the Avoidance of Money
Laundering).
Additionally, from 2009 on, BB has addressed this issue in its external hiring selections.
HUMAN RESOURCES
BB ended the first half of 2010 with 106,241 employees, in view of 89,194 in 1H09. Inside this staff,
there are 1,955 new employees hired as a result of the increase in funds, thus reinforcing the Bank's
commitment with its employees (improved organizational climate), with its customers (improved
customer service) and the country's development (generation of jobs). In 1H10, BB had 9,066
scholarship employees, as graduation and post-gradution students. Regarding training in general,
BB recorded 2,078 thousand training hours in the first half of 2010.
The remuneration and the benefits granted to the employees were distributed according to the table
below:
R$ million
1H10
1H09
∆ (%)
Payroll¹
5,627
4,621
21.8
Supplementary Pension Plans – Previ²
100.6
73.8
36.2
Health Care Plans – Cassi²
439.8
422.1
4.2
Profit-Sharing Plan³
767.2
526.9
45.6
50
43
16.2
Training
¹ Expenses with salaries, benefits, social charges and personnel provisions.
² Funding of supplementary pension and health care plans, pursuant to Explanatory Note 28.
³ Amount set aside for Profit and Gain Sharing, as Statement of income for the first half of the year.
In its structure, the Bank has a Quality of Life Area - Vitae, which develops and manages a number
of programs intended to improve its employees' quality of life, such as PCMSO (Program for
Occupational Health Medical Control), Sesmt (Specialized Services in BB's Safety Engineering and
Occupational Medicine), TABAS (Tobacco Control Program), and PAVAS (Assistance Program for
Victims of Hold-Ups and Kidnappings).
By means of the Traveling Ombudsman Project, in 1H10, Banco do Brasil's Internal Ombudsman
held training and awareness events for employees. In its relations with trade unions, BB has adopted
a system of permanent discussions.
Moreover, a "Collective Bargaining" website was made available in the quest for improving the
internal communications process, in order to consolidate and cultivate the practice of dialogue with
union officials.
SUSTAINABILITY
In a world scenario in which the concern with the Earth sustainability is outstanding, Banco do Brasil
has publicly embraced the cause for water. As an initiative towards the defense of this precious
natural resource, BB signed a Protocol of Intentions for developing the Água Brasil (Water Brazil)
11
Management Report 1H10
Program, with the National Water Agency – ANA, WWF Brazil and Fundação Banco do Brasil – FBB,
on March 22, 2010, the World Water Day.
BB and FBB will invest, in a five-year period, approximately R$ 60 million in social and environmental
projects for improvement of water quality and offer and improvement of the forest coverage in 14
major micro basins located in the Brazilian biomass: Cerrado/Pantanal, Atlantic Rainforest, Amazon,
Caatinga and Pampa regions.
Another purpose of the Program is to promote changes in behavior and values concerning the
production, destination and treatment of urban solid waste, by implementing major projects in five
cities.
The Program will be coordinated by BB. FBB will follow up and evaluate the social and
environmental projects, in addition to working out social players and partners, together with ANA and
WWF Brazil, which will be responsible for the strategic assistance, preparation and carrying out of
projects.
Regarding the portfolio of sustainability actions, noteworthy is the business strategy of the Regional
Sustainable Development (DRS), which operates to support urban and rural production activities, by
aligning economic return, social justice and environment preservation, and respecting the local
culture of the communities involved.
The DRS methodology enables the catalization of a number of actions with local, regional and
institutional partners in order to change the reality surrounding the supported activities, acting as a
significant sustainable development tool in the several regions of the country, as a result of the
widespread diversification of Banco do Brasil branches and its vocation for fostering actions.
DRS serves approximately one million beneficiaries deployed in 3,827 municipalities, with 3,664
business plans and over R$ 5 billion in credits with BB.
Additionally, Fundação Banco do Brasil social investments reached R$ 30.7 million in terms of
initiatives, programs and structured actions in education, generation of jobs and income, and
application of social technologies, with priority to communities of family farmers, agriculture workers,
settlers, inhabitants of "quilombos" (encampment communities founded by escaped or freed African
slaves), indigenous people and collectors of recycled materials all around the country, particularly in
regions with low human development indices, and communities with high risk of suffering social
exclusion.
Also worth mentioning in the first half of 2010 were the awards granted to Banco do Brasil in three,
out of six, categories of the GRI Readers´Choice Awards, at the Global Amsterdam Conference on
Sustainability and Transparence. BB's 2008 Annual Report has been awarded in the Engagement,
Investor Prize and General Winner categories.
These awards achieved by BB provide international value to the brand and place the practice of
sustainability and transparence reporting in the public relations as a benchmark for the market.
This award was the result of the joint work from several areas of the Bank, which have made efforts
to provide accurate, transparent and timely information, on a bold and innovative manner, aimed at
strengthening relations with its investors and other interested publics.
For further information, see the 2009 Annual Report at bb.com.br/ri and the Fundação Banco do
Brasil website: www.fbb.org.br.
MAIN AWARDS RECEIVED IN THE PERIOD
•
GRI Readers´Choice Awards winner in three categories – Engage Award, Investor Award and
GRI Readers’ Choice Award: Best Overall
•
Deutsche Bank’s Straight Through Processing (STB) Excellence Award
•
35 cases awarded in 12 categories of the E-finance Award: Storage, Corporative Architecture,
Technical Architecture, ATMs, Collaboration, Asset Management, Professional Inclusion,
Telecommunications Infrastructure, Technology Integration, New Technologies, Image
Processing and Virtualization.
12
Management Report 1H10
•
BB won the Impar Award 2010 (Preferred Brands and Regional Affinity) from Ibope and RIC
Recorde (Santa Catarina)
ACKNOWLEDGMENTS
We thank the dedication and diligence of our employees and collaborators, who are Banco do
Brasil's greatest treasury, as well as the trust of shareholders and clients, which are the reason for
our existence.
Further information: Investor Relations Website (bb.com.br/ri).
13
INDEX
MANAGEMENT REPORT
FINANCIAL STATEMENTS
Balance Sheet
Income Statement
Statement of Changes in Stockholder’s Equity
Cash Flow Statement
Added Value Statement
EXPLANATORY NOTES
NOTE 1 – The Bank and its Operations
NOTE 2 – Company Restructuring
NOTE 3 – Presentation of the Financial Statements
NOTE 4 – Summary of main accounting practices
NOTE 5 – Information by segment
NOTE 6 – Cash and cash equivalents
NOTE 7 – Interbank Investments
NOTE 8 – Securities and Derivative Financial Instruments
NOTE 9 – Interbank
NOTE 10 – Loans
NOTE 11 – Other Receivables
NOTE 12 – Foreign Exchange Portfolio
NOTE 13 – Other Assets
NOTE 14 – Investments
NOTE 15 – Premises and equipment and leased assets
NOTE 16 – Intangible
NOTE 17 – Deposits and Money Market Borrowing
NOTE 18 – Borrowings
NOTE 19 – Resources from securities issues
NOTE 20 – Other liabilities
NOTE 21 – Insurance, pension and capitalization operations
NOTE 22 – Other Income / Expenses
NOTE 23 – Non operating income
NOTE 24 – Stockholder’s Equity
NOTE 25 – Income and Social Contribution Taxes
NOTE 26 – Tax credits
NOTE 27 – Related-party Transactions
NOTE 28 – Employee Benefits
NOTE 29 – Commitments, Responsibilities and Contingencies
NOTE 30 – Risk Management and Regulatory Capital
NOTE 31 – Subsequent Events
NOTE 32 – Other Information
INDEPENDENT AUDITORS REPORT
SUMMARY OF THE AUDIT COMMITTEE REPORT
Management
Report
st
1 Half 2010
Todo
seu
Investor Relations Unit
Banco do Brasil S.A.
Financial Statements
In thousands of reais
BALANCE
Semester ended 06.30.2010
SHEET
Banco do Brasil
12.31.2009 06.30.2009
06.30.2010
Current Assets
399.702.520 380.900.268 312.455.431 443.264.254 414.966.454
Available Funds
(Note 6)
Short-term interbank investments
Money market
Interbank deposits
(Note 7a)
Securities and derivative financial instruments
Internal portfolio
Repurchase agreements
Deposits with the Brazilian Central Bank
Pledged in guarantee
Subject to repurchase agreements within free movement
Derivative financial instruments
(Note 8)
Interbank Accounts
Payments and receipts pending settlement
Restricted deposits
Brazilian Central Bank deposits
National Treasury - rural credits receivable
National Housing Financing System (SFH)
Interbank onlendings
Correspondent banks
(Note 9)
(Note 9)
Interdepartmental accounts
Third-party funds in transit
Internal transfers of funds
Loan operations
Public sector
Private sector
(Allowance for loan losses)
(Note 10)
Lease operations
Public sector
Private sector
(Allowance for lease losses)
(Note 10)
Other receivables
Receivables on guarantees honored
Foreign exchange portfolio
Income receivable
Negotiation and intermediation of securities
Special operations
Insurance, pension plan and capitalization
Sundry
(Provision for other losses)
Other assets
Other assets
(Provision for devaluations)
Prepaid expenses
(Note 12a)
(Note 21a)
(Note 11b)
(Note 13)
9.240.098
7.596.546
5.648.842
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
ASSETS
9.535.060
346.512.326
7.842.770
6.212.045
137.902.326 166.919.021 131.712.334 131.212.743 166.070.192
101.867.415 134.937.621 104.178.979 107.838.360 144.173.860
36.034.911 31.981.400 27.533.355 23.374.383 21.896.332
124.924.973
111.171.285
13.753.688
37.282.901
10.638.385
23.062.864
16
3.263.578
-318.058
39.370.590
29.778.301
5.239.743
3.713.112
19.300
-620.134
30.432.092
20.181.482
5.892.859
3.094.191
366.454
200.002
697.104
69.296.901
36.236.785
26.472.598
16
5.519.814
-1.067.688
59.297.166
47.295.209
5.956.127
3.817.049
1.147.243
-1.081.538
53.631.234
37.724.309
11.550.028
3.094.191
366.454
200.002
696.250
62.670.068
3.343.306
59.018.578
57.243.465
104.641
1.670.472
1.211
306.973
26.421.167
153.232
25.950.674
24.167.099
148.158
1.635.417
1.254
316.007
23.391.793
2.570.046
20.690.380
20.605.544
24.636
60.200
1.287
130.080
64.830.856
3.343.625
61.148.827
59.373.714
104.641
1.670.472
27.860
310.544
26.574.438
153.258
26.063.340
24.279.765
148.158
1.635.417
7.746
350.094
29.121.620
2.722.492
26.125.223
24.507.300
24.636
1.593.287
1.287
272.618
109.576
13
109.563
293.950
330
293.620
99.283
-99.283
109.576
13
109.563
295.152
330
294.822
101.835
43
101.792
84.815.312 119.710.412 110.606.691
1.149.858
2.554.574
2.794.701
90.793.972 124.777.622 115.763.862
(7.128.518) (7.621.784) (7.951.872)
91.861.442
1.381.556
97.922.401
(7.442.515)
110.748.552 102.016.228
2.335.290
2.432.592
115.571.236 107.102.607
(7.157.974) (7.518.971)
51.359
51.359
---
23.195
23.195
---
55.940
55.940
---
1.771.865
19.132
1.882.592
(129.859)
1.858.258
23.883
1.951.468
(117.093)
1.424.725
31.270
1.464.237
(70.782)
40.356.253
73.125
11.271.514
1.322.145
77.607
--28.344.083
(732.221)
36.984.668
36.938
8.480.791
1.464.119
16.017
28
-27.747.561
(760.786)
35.581.053
28.716
13.861.743
1.857.099
44.211
28
-20.594.037
(804.781)
45.406.025
73.125
12.257.825
648.367
406.482
-794.598
32.026.002
(800.374)
40.891.329
39.588
8.671.052
533.393
435.578
28
885.945
31.167.511
(841.766)
38.223.056
28.716
13.957.465
471.047
1.697.288
28
681.429
22.234.250
(847.167)
1.341.387
304.066
(163.096)
1.200.417
1.274.903
290.210
(166.105)
1.150.798
718.782
272.260
(152.513)
599.035
1.390.816
394.205
(171.142)
1.167.753
1.530.458
363.989
(175.968)
1.342.437
1.011.396
352.002
(186.923)
846.317
1
Banco do Brasil
12.31.2009 06.30.2009
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
ASSETS
06.30.2010
NON CURRENT ASSETS
292.885.246 279.708.708 219.245.281 312.441.375 293.582.389
252.326.261
LONG-TERM RECEIVABLES
268.468.924 257.489.129 202.842.288 293.886.554 276.572.786
237.775.040
Interbank Investments
Interbank deposits
(Note 7a)
4.336.471
4.336.471
7.248.277
7.248.277
6.998.165
6.998.165
1.329.922
1.329.922
2.327.768
2.327.768
7.512.928
7.512.928
Securities and derivative financial instruments
Internal portfolio
Subject to repurchase agreements
Deposits with the Brazilian Central Bank
Pledged in guarantee
Derivative financial instruments
(Note 8)
52.512.401
23.304.824
18.358.670
58
10.726.247
122.602
57.501.256
21.131.525
20.584.267
14.527.621
1.110.340
147.503
38.081.592
7.322.693
16.682.912
12.385.809
1.604.153
86.025
62.952.551
31.835.646
19.689.260
58
11.278.208
149.379
65.039.715
27.638.367
20.929.518
14.590.558
1.499.726
381.546
55.932.343
22.900.041
18.427.334
12.897.964
1.622.670
84.334
25.892
25.892
17.071
17.071
5.517
5.517
25.892
25.892
17.071
17.071
5.517
5.517
157.376.724 140.826.236 113.473.058 169.364.706 151.176.406
3.661.142
3.801.538
1.625.281
3.590.270
3.593.364
162.837.614 146.444.106 120.303.877 175.250.068 157.315.829
(9.122.032) (9.419.408) (8.456.100) (9.475.632) (9.732.787)
123.044.807
1.428.371
131.077.999
(9.461.563)
Interbank transactions
Interbank transfers
Loan operations
Public sector
Private sector
(Allowance for loan losses)
(Note 10)
Lease operations
Public sector
Private sector
(Unearned income from lease operation)
(Allowance for lease losses)
(Note 10)
Other receivables
Receivables on guarantees honored
Income receivable
Negotiation and intermediation of securities
Specific credits
Insurance, pension plan and capitalization
Sundry
(Provision for other losses)
Other assets
Prepaid expenses
(Note 11a)
(Note 21a)
(Note 11b)
(Note 13)
PERMANENT ASSETS
Investments
Investments in subsidiary and associated companies
Domestic
Foreign
Other investments
(Provision for losses)
(Note 14a)
(Note 14b)
Land and buildings in use
Land and buildings in use
Other property and equipment in use
(Accumulated depreciation)
(Note 15)
Applications in fixed assets for leasing
Leased assets
(Accumulated depreciation)
(Note 15)
Intangible
Intangible Assets
(Accumulated amortization)
(Note 16)
Deferred charges
Organization and expansion costs
(Accumulated amortization)
Total
------
37.580
37.580
----
2.920
2.920
----
2.622.540
34.012
2.705.104
-(116.576)
2.842.305
38.967
2.917.455
-(114.117)
1.828.108
28.865
1.881.618
-(82.375)
53.321.792
-30.634
-978.009
-53.136.975
(823.826)
51.223.436
51.384
31.069
-931.845
-51.031.510
(822.372)
43.918.489
48.797
31.503
-888.137
-43.753.000
(802.948)
56.481.058
-29.182
2.958
978.009
21.120
56.282.761
(832.972)
54.341.849
51.384
30.051
427
931.845
22.265
54.145.893
(840.016)
48.810.609
48.797
30.484
65.676
888.137
20.973
48.634.343
(877.801)
895.644
895.644
635.273
635.273
362.547
362.547
1.109.885
1.109.885
827.672
827.672
640.728
640.728
24.416.322
22.219.579
16.402.993
18.554.821
17.009.603
14.551.221
13.085.225
13.049.309
12.044.153
1.005.156
87.233
(51.317)
12.182.867
12.143.602
11.177.506
966.096
109.093
(69.828)
8.901.673
8.871.162
7.847.466
1.023.696
82.986
(52.475)
6.865.521
5.909.879
5.909.879
-1.023.321
(67.679)
6.645.339
5.775.953
5.775.953
-947.225
(77.839)
5.183.844
4.368.888
4.368.888
-901.475
(86.519)
4.040.260
3.375.105
6.505.246
(5.840.091)
4.006.745
3.167.766
6.232.263
(5.393.284)
3.248.276
2.715.179
5.296.674
(4.763.577)
4.259.386
3.392.468
6.969.318
(6.102.400)
4.214.484
3.335.698
6.631.918
(5.753.132)
3.663.320
3.120.630
6.020.842
(5.478.152)
895
1.689
-794
1.223
3.640
(2.417)
2.371
5.996
(3.625)
----
----
----
6.965.830
9.757.675
(2.791.845)
5.625.845
7.607.239
(1.981.394)
3.808.425
4.335.280
(526.855)
7.051.600
9.871.520
(2.819.920)
5.676.879
7.659.321
(1.982.442)
5.127.647
6.656.968
(1.529.321)
325.007
1.928.080
(1.603.073)
404.122
2.083.036
(1.678.914)
444.619
1.652.816
(1.208.197)
377.419
2.041.268
(1.663.849)
471.678
2.246.822
(1.775.144)
574.039
2.195.299
(1.621.260)
692.587.766 660.608.976 531.700.712 755.705.629 708.548.843
598.838.587
2
Banco do Brasil
12.31.2009 06.30.2009
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
L I A B I L I T I E S / S T O C K H O L D E R S' E Q U I T Y
06.30.2010
CURRENT LIABILITIES
494.284.796 478.981.403 393.784.039 518.782.738 503.739.681
440.186.213
250.628.839
49.074.636
69.011.330
708.579
131.606.412
227.882
Deposits
Demand deposits
Savings deposits
Interbank deposits
Time deposits
Sundry
(Note 17a)
254.863.139 252.490.505 220.497.064 261.485.318 258.676.108
58.796.157 56.211.678 45.395.707 59.025.332 56.458.787
81.540.814 75.741.590 57.601.744 81.540.812 75.741.590
11.603.876 13.543.548
8.358.269
8.820.484 10.437.440
102.680.757 106.765.221 108.916.751 111.855.739 115.808.988
241.535
228.468
224.593
242.951
229.303
Deposits received under security repurchase agreements
Internal portfolio
Third-party portfolio
Subject to repurchase agreements within free movement
(Note 17c)
145.494.688 142.412.717
50.309.560 24.462.905
95.185.128 117.949.812
---
Funds from acceptance and issue of securities
Mortgage Notes
Foreign securities
(Note 19)
Interbank accounts
Receipts and payments pending settlement
Correspondent banks
(Note 9a)
Interdepartmental accounts
Third-party funds in transit
Internal transfers of funds
84.832.507 157.393.100 153.699.462
21.180.401 59.178.358 30.819.656
63.460.106 98.213.637 122.719.587
192.000
1.105
160.219
96.864.212
27.641.894
69.030.318
192.000
1.722.859
30.222
1.692.637
758.810
-758.810
86.562
-86.562
2.031.371
352.338
1.679.033
1.406.912
407.929
998.983
445.948
314.816
131.132
3.029.471
3.018.839
10.632
21.332
602
20.730
2.403.937
2.386.514
17.423
3.033.762
3.023.130
10.632
21.350
615
20.735
2.677.099
2.656.863
20.236
1.757.030
1.742.171
14.859
3.209.295
3.197.791
11.504
1.814.307
1.777.713
36.594
1.783.214
1.768.333
14.881
3.229.088
3.214.643
14.445
2.044.600
2.007.108
37.492
Borrowings
Domestic borrowings - Official institutions
Domestic borrowings - Other institutions
Foreign borrowings
(Note 18a)
13.816.700
--13.816.700
6.274.611
--6.274.611
10.111.206
3.832.296
-6.278.910
9.826.474
-127.781
9.698.693
4.810.915
70.976
86.221
4.653.718
7.170.898
3.832.296
104.073
3.234.529
Local onlendings - official institutions
National Treasury
National Bank for Economic and Social Development (BNDES)
Federal Bank (CEF)
National Industrial Financing Authority (FINAME)
Other institutions
(Note 18b)
11.377.281
2.073.619
5.568.650
29.516
3.234.424
471.072
11.472.080
2.100.693
6.078.474
21.935
2.138.406
1.132.572
13.682.710
3.574.417
6.429.351
-2.914.050
764.892
12.167.790
2.073.619
6.034.523
29.516
3.559.060
471.072
12.405.660
2.100.693
6.731.990
21.935
2.418.470
1.132.572
13.750.611
3.574.417
6.437.826
25.308
2.947.967
765.093
317.009
317.009
868
868
2.099
2.099
12.787
12.787
576
576
95
95
1.049.096
1.049.096
1.996.875
1.996.875
2.048.898
2.048.898
2.384.698
2.384.698
2.617.011
2.617.011
2.046.430
2.046.430
60.857.523
2.846.543
15.342.817
1.760.573
15.527.514
18.391
-1.441.501
204.007
-23.716.177
60.344.310
335.641
12.106.915
2.470.489
16.568.631
95.006
-2.050.776
204.007
13.260
26.499.585
58.304.749
2.596.602
16.249.954
1.485.485
14.474.786
128.342
-829.726
2.137.443
14.863
20.387.548
68.664.224
2.895.613
16.321.036
1.884.735
17.288.548
1.167.653
4.379.174
1.441.501
204.007
-23.081.957
66.872.599
376.523
12.173.988
2.625.183
18.315.213
526.029
4.123.164
2.050.776
204.007
13.260
26.464.456
64.557.481
2.853.288
16.338.591
1.502.172
16.030.541
450.187
3.567.359
829.726
2.137.443
14.863
20.833.311
Foreign onlendings
Foreign onlendings
Derivative financial instruments
Derivative financial instruments
Other liabilities
Collection and payment of taxes and social contributions
Foreign exchange portfolio
Social and statutory
Taxes and social security contributions
Negotiation and intermediation of securities
Technical provisions - insurance, pension plan and capitalization
Financial and development funds
Special operations
Hybrid capital and debt instruments
Sundry
(Note 8d)
(Note 12a)
(Note 20b)
(Note 21b)
(Note 20a)
(Note 20c)
(Note 20e)
(Note 20f)
3
Banco do Brasil
12.31.2009 06.30.2009
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
L I A B I L I T I E S / S T O C K H O L D E R S' E Q U I T Y
06.30.2010
NON CURRENT LIABILITIES
158.916.059 145.508.308 105.556.508 197.591.009 168.689.756
125.505.608
LONG-TERM LIABILITIES
158.706.119 145.259.396 105.359.236 197.591.009 168.689.756
125.505.608
Deposits
Interbank deposits
Time deposits
(Note 17a)
81.042.233
2.500.207
78.542.026
77.614.251
2.012.595
75.601.656
54.637.261
1.171.328
53.465.933
82.475.508
1.615.779
80.859.729
78.887.719
1.181.133
77.706.586
60.216.746
6.750.813
53.465.933
Deposits received under security repurchase agreements
Internal portfolio
Third-party portfolio
Subject to repurchase agreements within free movement
(Note 17c)
6.864.228
2.155.092
4.709.136
--
7.108.094
1.082.487
6.025.607
--
4.643.807
1.113.202
3.522.605
8.000
9.209.469
4.451.894
4.709.136
48.439
7.121.725
1.082.045
6.025.607
14.073
4.643.382
1.112.777
3.522.605
8.000
Funds from acceptance and issue of securities
Features letters Real estate, mortgage, credit and similar
Debentures
Foreign Securities
(Note 19)
5.285.026
--5.285.026
1.812.687
--1.812.687
694.308
--694.308
10.200.792
581.603
1.666.979
7.952.210
5.955.407
860.822
1.496.353
3.598.232
2.227.066
210
21.067
2.205.789
Borrowings
Domestic borrowings - Official institutions
Foreign borrowings
(Note 18a)
3.830.983
-3.830.983
4.776.034
-4.776.034
4.893.444
-4.893.444
2.189.337
9.282
2.180.055
1.559.348
93.859
1.465.489
1.365.529
141
1.365.388
Local onlendings - official institutions
National Bank for Economic and Social Development (BNDES)
Federal Bank (CEF)
National Industrial Financing Authority (FINAME)
(Note 18b)
22.367.301
15.055.980
112.119
7.199.202
17.422.445
11.799.391
124.297
5.498.757
8.679.901
4.655.737
-4.024.164
24.140.611
16.214.993
112.119
7.813.499
18.984.508
12.897.512
124.297
5.962.699
8.875.306
4.680.122
133.880
4.061.304
437.304
437.304
1.457.949
1.457.949
1.905.222
1.905.222
90.754
90.754
98.555
98.555
106.681
106.681
148.804
148.804
187.908
187.908
533.952
533.952
853.205
853.205
2.107.025
2.107.025
533.952
533.952
38.730.240
4.904.665
1.410.211
-2.287.315
2.258
18.411.878
3.643.393
8.070.520
34.880.028
4.123.099
1.320.070
-2.083.838
2.278
16.387.569
3.503.525
7.459.649
29.371.341
2.571.225
1.448.118
-2.119.045
2.314
14.689.140
975.400
7.566.099
68.431.333
7.019.531
79.511
22.541.624
2.287.315
2.258
21.339.629
3.643.049
11.518.416
53.975.469
5.981.486
2.197
13.216.012
2.083.838
2.278
18.553.240
3.502.544
10.633.874
47.536.946
4.110.284
-11.449.367
3.245.782
2.314
14.689.140
975.400
13.064.659
209.940
248.912
197.272
39.386.911
36.119.265
32.360.165
39.331.882
36.119.406
33.146.766
26.028.096
27.427.230
5.650.766
-7.049.900
18.566.919
17.236.823
1.330.096
--
18.548.611
17.227.447
1.321.164
--
26.027.932
27.427.066
5.650.766
-7.049.900
18.566.919
17.236.823
1.330.096
--
18.548.611
17.227.447
1.321.164
--
5.188
5.188
5.188
5.188
6.372
6.746
6.948
6.372
6.746
6.948
12.972.258
17.301.439
13.614.362
12.917.350
17.301.439
13.614.362
411.376
270.164
216.247
411.376
270.164
216.247
-31.191
-31.191
-31.191
-31.191
-31.191
-31.191
43
141
786.601
692.587.766 660.608.976 531.700.712 755.705.629 708.548.843
598.838.587
Foreign onlendings
Foreign onlendings
Derivative financial instruments
Derivative financial instruments
Other liabilities
Taxes and social security
Negotiation and intermediation of securities
Technical provisions - insurance, pension plan and capitalization
Financial and development funds
Special operations
Subordinated debt
Hybrid capital and debt instruments
Sundry
(Note 8d)
(Note 20b)
(Note 21b)
(Note 20a)
(Note 20c)
(Note 20d)
(Note 20e)
(Note 20f)
DEFERRED INCOME
STOCKHOLDERS' EQUITY
(Note 24)
Capital
Domestic
Foreign
(Capital to be held)
Capital reserves
--
Revaluation Reserves
Profits Reserves
Assets Valuation Adjustments
(Treasury Shares)
MINORITY INTEREST IN SUBSIDIARIES
Total
(Note 8f)
--
--
--
--
--
--
--
The accompanying notes are an integral part of these financial statements
4
Banco do Brasil S.A
Financial Statements
In thousands of reais
Semester ended 06.30.2010
Statement of Income
Banco do Brasil
1S2010
INCOME FROM FINANCIAL INTERMEDIATION
Loans
Leases
Securities
Derivative financial instruments
Net foreign exchange
Compulsory deposits
Insurance, pension plans and capitalization
EXPENSES FROM FINANCIAL INTERMEDIATION
Deposits and funds obtained in the money market
Borrowings and onlendings
Leases
Resultado de operações de câmbio
Insurance, pension plans and capitalization
Allowance for loan losses
BB-Consolidated
1S2009
1S2010
1S2009
33.774.129
27.603.148
38.565.365
31.014.073
(Note 10.b)
22.295.406
17.247.157
24.316.980
18.465.063
(Note 10.i)
21.877
25.521
1.591.280
988.396
(Note 8.b)
10.185.396
10.497.869
10.839.056
10.944.973
(Note 8.e)
125.575
-510.238
-261.540
-512.499
18.653
53.242
(Note 12.b)
(Note 9.c)
(Note 21.e)
-1.145.875
--
324.186
--
14.884
1.191.565
388.666
834.782
724.590
-22.937.377
-21.420.395
-26.668.888
-23.705.625
(Note 17.d)
-16.029.568
-14.065.383
-17.548.179
-14.828.169
(Note 18.c)
-1.911.907
-1.168.241
-1.900.093
-1.198.852
(Note 10.i)
-18.937
-22.327
-1.146.529
-702.292
(Note 12.b)
-2.179
(Note 21.e)
(Notes 10.f and 10.g)
--
---
--
--
-589.881
-457.393
-4.974.786
-6.164.444
-5.484.206
-6.518.919
GROSS FINANCIAL INTERMEDIATION INCOME
10.836.752
6.182.753
11.896.477
7.308.448
OTHER OPERATING INCOME/EXPENSES
Banking service fees
(Note 22.a)
Banking Fees
(Note 22.b)
Personnel expenses
(Note 22.c)
Other administrative expenses
(Note 22.d)
Tax Expenses
(Note 22.e)
Equity in the (earnings)/loss of subsidiary and associated companies (Note 14)
Insurance, pension plan and capitalization
(Note 21.e)
Other operating income
(Note 22.f)
Other operating expenses
(Note 22.g)
-3.152.652
-2.372.481
-3.684.312
-3.831.756
3.996.415
3.481.882
5.599.996
4.811.322
1.816.009
1.403.898
1.988.158
1.567.833
-5.727.624
-5.071.104
-6.125.473
-5.658.641
-5.644.767
-4.758.583
-6.315.076
-5.562.265
-1.403.541
-1.192.645
-1.807.732
-1.527.899
1.422.095
1.018.234
78.709
-664.956
OPERATING INCOME
NON-OPERATING INCOME
Income
Expenses
(Note 23)
PROFIT BEFORE TAXATION AND PROFIT SHARING
INCOME TAX AND SOCIAL CONTRIBUTION ON NET INCOME
Income tax
Social contribution on net income
Deferred tax credits
(Note 25)
PROFIT SHARING
NET INCOME
Profit attributable to parent
MINORITY INTEREST
Number of shares
(Treasury Shares)
Total shares used in calculation of earnings per share
Net income per share
(Note 24.f)
--
--
908.865
774.558
5.288.189
6.626.205
6.130.278
7.016.551
-2.899.428
-3.880.368
-4.142.037
-4.588.259
7.684.100
3.810.272
8.212.165
3.476.692
172.609
28.106
346.024
1.442.244
214.943
63.756
426.300
1.489.264
-42.334
-35.650
-80.276
-47.020
7.856.709
3.838.378
8.558.189
4.918.936
-2.069.947
687.858
-2.714.779
-377.844
-1.824.934
-1.731.353
-2.546.511
-2.618.517
-1.091.701
-1.049.619
-1.406.265
-1.483.386
846.688
3.468.830
1.237.997
3.724.059
-655.578
-512.673
-767.154
-526.916
5.131.184
4.013.563
5.076.256
4.014.176
5.131.184
4.013.563
5.076.276
4.013.563
-20
613
2.568.186.485
--
--
2.569.869.551
2.568.186.485
2.569.869.551
-1.159.815
-1.150.336
-1.159.815
-1.150.336
2.568.709.736
2.567.036.149
2.568.709.736
2.567.036.149
2,00
1,56
1,98
1,56
The accompanying notes are an integral part of these financial statements
14
Banco do Brasil S.A
Financial Statements
In thousands of Reais
Semester ended 06.30.2010
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Capital
Reserves
Banco do Brasil
Capital Realized
EVENTS
Tax Incentives
Balances at 12.31.2008
Capital increase - the capitalization of reserves
Assets Valuation Adjustments
(Note 8.f)
Net Income
Appropriantions:
- Reserves
Revenue Reserves
Revaluation
Reserves in
Subsidiary and
Associated
Companies
Assets Valuation Adjustments
Legal Reserves
13.779.905
5.188
7.286
4.768.706
1.788.916
Statutory
Reserves
Expansion
Reserves
Retained earnings
(31.191)
--
--
--
--
--
--
--
--
--
--
--
--
--
48.482
(30.964)
--
--
--
--
--
--
--
--
--
--
--
4.013.563
--
--
--
--
--
--
--
(2.624.209)
(4.768.706)
Total
29.937.250
-17.518
4.013.563
--
- Dividends
(Note 24.e)
--
--
--
--
--
--
--
--
(483.097)
(701.571)
- Interest on own capital
(Note 24.e)
--
--
--
--
--
--
--
--
--
(903.854)
(903.854)
--
--
--
--
--
--
--
--
--
(2.741)
(2.741)
--
--
(338)
--
--
--
--
--
--
--
17.060
199.187
(31.191)
--
32.360.165
48.482
(30.964)
--
--
2.422.915
--
(36.885)
307.049
(31.191)
--
36.119.265
--
--
--
--
--
Prior year adjustments in associated companies - adequacy Law 11.638/2007
Realization of revaluation reserves in subsidiary and associated companies
(Note 24.c)
Balances at 06.30.2009
18.548.611
5.188
Changes in the period
4.768.706
--
18.566.919
5.188
6.746
--
--
--
Balances at 12.31.2009
6.948
(338)
(218.474)
(31.422)
Treasury shares
--
2.423.651
4.768.706
Subsidiary and
associated
companies
230.151
--
200.558
9.419.711
Bank
1.989.474
11.624.888
200.558
2.205.177
2.296.291
15.005.148
--
Capital increase - incorporation of subsidiaries and affiliates
(Note 24.b)
274
Capital increase - the capitalization of reserves
(Note 24.b)
7.418.087
(5.188)
--
--
--
--
--
--
--
--
Capital increase - subscription bonus of "C"
(Note 24.b)
42.816
--
--
--
--
--
--
--
--
--
42.816
--
--
--
--
--
--
18.910
--
--
--
--
--
--
--
Assets Valuation Adjustments
(Note 8.f)
Net Income
Appropriantions:
- Reserves
--
--
--
(Note 24.e)
--
--
--
--
- Interest on own capital
(Note 24.e)
--
--
--
--
--
--
--
--
Realization of revaluation reserves in subsidiary and associated companies
(Note 24.c)
Others
(Note 24.e)
Realization of revaluation reserves in subsidiary and associated companies
(Note 24.c)
Acquisition of subsidiary
(1.043.527)
--
--
--
--
--
--
--
--
371
--
--
--
--
10.419.407
--
(17.975)
429.351
(31.191)
--
39.386.911
(4.585.741)
--
18.910
122.302
--
--
3.267.646
Retained earnings
Minority interest in
Subsidiaries
6.372
(374)
2.552.851
256.560
Legal Reserves
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
1.788.916
-200.558
--
9.419.711
-2.423.651
(218.474)
Total
4.768.706
(31.422)
(31.191)
--
--
(4.768.706)
--
--
--
--
--
--
48.482
(30.964)
--
--
--
17.518
--
230.151
613
29.937.250
--
--
--
--
4.013.563
--
--
--
--
(2.624.209)
--
4.014.176
--
--
--
--
(483.097)
--
(701.571)
--
--
--
--
--
--
--
--
--
--
(903.854)
--
(903.854)
--
--
--
--
--
--
--
--
--
(2.741)
--
(2.741)
--
--
(338)
--
--
--
--
--
--
338
--
--
--
--
--
--
--
--
--
--
6.948
5.188
--
Balances at 12.31.2009
18.566.919
5.188
Capital increase - incorporation of subsidiaries and affiliates
(Note 24.b)
274
Capital increase - the capitalization of reserves
(Note 24.b)
7.418.087
Capital increase - subscription bonus of "C"
(Note 24.b)
(338)
6.746
1.989.474
11.624.888
200.558
2.205.177
2.296.291
15.005.148
--
-(4.768.706)
--
--
786.601
--
--
786.601
3.209.516
(36.885)
307.049
(31.191)
--
141
36.119.406
--
---
42.816
--
--
--
--
--
--
--
--
--
--
--
--
18.910
--
--
--
--
--
--
274
--
--
--
--
--
--
--
--
--
--
--
42.816
--
--
--
141.212
122.302
Net Income
--
--
--
--
--
--
--
--
--
5.076.276
--
--
--
--
(54.908)
--
--
--
--
54.908
Appropriantions:
--
--
--
--
--
--
--
(3.527.879)
(20)
5.076.256
--
--
--
--
- Dividends
(Note 24.e)
--
--
--
--
--
--
--
--
(564.785)
--
(1.008.946)
- Interest on own capital
(Note 24.e)
--
--
--
--
--
--
--
--
--
(1.043.527)
--
(1.043.527)
--
--
--
--
--
--
--
--
--
4.636
--
(Note 24.c)
--
--
(371)
--
--
--
--
--
--
371
--
--
(164)
--
--
--
--
--
--
--
--
--
--
(164)
Prescribed interest on own capital and dividends
Realization of revaluation reserves in subsidiaries / affiliates
--
--
Balances at 06.30.2010
26.027.932
--
Changes in the period
7.461.013
(5.188)
(3)
6.372
(374)
-2.552.851
256.560
(444.161)
33.146.766
(31.191)
(30.964)
--
3.271.319
785.988
199.187
--
256.560
--
785.988
17.060
(5.188)
(7.412.899)
--
48.482
Results not achieved
Others
(3)
Subsidiary and
associated
companies
Bank
4.768.706
--
Treasury shares
Expansion
Reserves
7.286
4.768.706
Participation in subsidiaries
--
Assets Valuation Adjustments
Statutory
Reserves
5.188
18.548.611
- Reserves
4.636
Revenue Reserves
Revaluation
Reserves in
Subsidiary and
Associated
Companies
13.779.905
--
4.636
--
--
Balances at 06.30.2009
(Note 8.f)
(1.008.946)
(1.043.527)
--
Changes in the period
Assets Valuation Adjustments
(564.785)
--
--
Tax Incentives
- Interest on own capital
--
--
--
EVENTS
Prior year adjustments in associated companies - adequacy Law 11.638/2007
--
--
--
--
Capital Realized
(Note 24.e)
--
--
--
(3)
Capital
Reserves
- Dividends
--
--
--
BB-Consolidated
- Reserves
--
(371)
(5.188)
Net Income
(3.527.879)
141.212
5.131.184
--
7.461.177
(Note 8.f)
-5.131.184
--
Changes in the period
Assets Valuation Adjustments
---
--
--
Capital increase - the capitalization of reserves
(444.161)
--
-26.028.096
Balances at 12.31.2008
3.271.319
122.302
274
--
Balances at 06.30.2010
Appropriantions:
(7.412.899)
- Dividends
Prescribed interest on own capital and dividends
256.560
--
(4.768.706)
338
--
--
4.636
--
--
--
--
(78)
10.364.499
--
(17.975)
429.351
(31.191)
--
43
39.331.882
(81)
(4.640.649)
--
18.910
122.302
--
--
(98)
3.212.476
6
The accompanying notes are an integral part of these financial statements
6
Banco do Brasil S.A.
Financial Statements
In thousands of Reais
Semester ended 06.30.2010
STATEMENT OF CASH FLOW
Banco do Brasil
1S2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income before taxes
Adjustments to Net Income:
Provision for credit, leasing operations and other receivables
Depreciation and amortization
Result of the assessment of the recoverable value of assets
BB-Consolidated
1S2009
1S2010
1S2009
7.856.709
3.693.835
4.974.786
1.558.880
338
(1.422.095)
(32.170)
3.568
(2.599)
1.669
90.413
97.389
-(1.581.252)
4.908
3.838.378
6.807.877
6.164.444
946.886
703
(1.018.234)
(8.338)
2.684
(496.281)
(452)
87.553
1.718.160
-(586.507)
(2.741)
8.558.189
9.254.232
5.484.206
1.585.731
1.395
(78.709)
(3.083)
(94.559)
(4.802)
1.718
90.413
236.092
3.612.338
(1.581.252)
4.744
4.918.936
11.232.241
6.518.919
1.100.686
703
664.956
(11.401)
2.136
(676.520)
(520)
87.553
2.020.662
2.119.282
(586.507)
(7.708)
22.509.201
498.615
(34.488.379)
(29.825.396)
9.416
(3.354.012)
(296.073)
(2.916.635)
5.829.408
2.838.105
4.436.388
10.742.591
1.405.264
(38.972)
-11.099.935
425.567
836.398
(360.269)
(14.460.843)
2.418
6.138.072
(18.408)
(2.780.972)
(1.308.075)
(2.603.341)
(419.657)
(1.090.759)
3.956.087
(24.250)
-1.061.777
32.785.008
(7.795.630)
(36.513.124)
(32.253.375)
205.192
(7.510.915)
(141.206)
(3.952.776)
6.396.999
5.781.382
4.869.844
10.568.191
12.403.700
-2.655.711
(12.842.082)
(1.120.854)
312.182
(17.524.861)
(374.546)
1.979.685
(135.187)
(4.101.903)
3.339.510
2.175.564
(808.983)
806.851
6.158.661
--5.984.786
486.839
5.232.593
1.161.284
(461.315)
(419.230)
(2.388.924)
1.114.510
398.720
834.207
(386.169)
(63.749)
(317.348)
(4.851.464)
3.389.603
-(486.827)
(135.160)
(2.425.336)
(2.040.236)
1.800.013
-(403.347)
445.016
(327.517)
-3.611.247
(1.258.491)
321.680
--4.509.184
4.267.966
3.741.895
CASH FLOWS FROM FINANCING ACTIVITIES
Change in minority interest
Subordinated debt
Hybrid capital instruments and debt
Capital increase - Exercise of bonuses subscription
Dividends and Interest on own capital paid
CASH PROVIDED/(USED IN) FINANCING ACTIVITIES
-2.024.309
126.608
42.815
(2.480.792)
-287.060
-2.916.963
(195.894)
-(1.843.925)
877.144
(182)
2.786.389
127.246
42.815
(2.480.792)
475.476
785.988
2.916.963
(195.016)
-(1.843.925)
1.664.010
Net Cash Variation
At the beginning of the period
At the end of the period
-7.775.748
49.702.511
41.926.763
137.047
67.739.366
67.876.413
-1.377.997
37.874.982
36.496.985
-578.881
68.012.137
67.433.256
-7.775.748
137.047
-1.377.997
-578.881
Result of participation in affiliates and subsidiaries
(Profit)/ loss on the sale of assets
(Gain)/Loss on Capital
Changes in foreign exchange
Provision/(reversal) for devaluation of other assets
Amortization of goodwill on investments
Provision with civil, labor and tax provisions
Changes in provision for Insurance, Pension Plans and Capitalization
Actuarial Assets/Liabilities
Other adjustments
Changes
Short-term interbank investments
Securities and derivative financial instruments
Interbank and interdepartmental accounts
Loan operations
Lease operations
Other claims net of deferred tax
Other assets
Income tax and social contribution
Deposits
Money Market
Repurchase agreements
Borrowing and onlendings
Other liabilities
Change Deferred Income
CASH PROVIDED/(USED IN) OPERATIONS
CASH FLOWS INVESTING ACTIVITIES
Securities and Derivatives availlable for sale
Securities and Derivatives held to maturity
Dividends receivable from subsidiary/associated companies
(Acquisition) / disposal of fixed assets in use
(Acquisition) / Disposal of investment
(Acquisition) of intangible
Cash and Cash Equivalents Assets and Liabilities
arising from the merger of Banco Nossa Caixa (Note 5.a.)
CASH PROVIDED/(USED IN) INVESTING ACTIVITIES
Increase (decrease) in cash and cash equivalents
The accompanying notes are an integral part of these financial statements
8
Banco do Brasil S.A.
Financial Statement
In Thousand of Reais
Semester ended 06.30.2010
STATEMENT OF ADDED VALUE
Banco do Brasil
1S2010
Balance
Income
BB Consolidated
1S2009
%
Balance
1S2010
%
Balance
1S2009
%
Balance
36.669.005
28.079.046
43.302.963
34.434.073
Financial Intermediation Income
Banking and service fees
Allowance for loans losses
Other income/expenses
Financial Intermediation Expense
33.774.129
5.812.424
(4.974.786)
2.057.238
-17.962.591
27.603.148
4.885.780
(6.164.444)
1.754.562
-15.255.951
38.565.365
7.588.154
(5.484.206)
2.633.650
-21.184.682
31.014.073
6.379.155
(6.518.919)
3.559.764
-17.186.706
Third party materials and services
-3.321.565
-2.604.743
-3.809.859
-3.147.723
Materials, energy and other
Services provided
Others
(224.827)
(515.399)
-2.581.339
(194.761)
(364.639)
-2.045.343
(232.142)
(589.258)
-2.988.459
(206.118)
(452.700)
-2.488.905
Communications
Data processing
Transportation
Security and surveillance services
Services of the financial system
Advertising and publicity
Other
Added Value
(598.527)
(534.730)
(321.058)
(325.961)
(266.887)
(132.176)
(402.000)
15.384.849
(481.672)
(353.931)
(274.102)
(285.179)
(213.762)
(96.393)
(340.304)
10.218.352
(642.942)
(565.466)
(338.668)
(327.947)
(304.847)
(188.310)
(620.279)
18.308.422
(520.055)
(424.537)
(288.280)
(305.718)
(337.923)
(139.923)
(472.469)
14.099.644
Amortization / depreciation
Net Value Added Produced by Entity
(1.558.880)
13.825.969
(946.886)
9.271.466
(1.585.731)
16.722.691
(1.100.686)
12.998.958
1.422.095
1.018.234
78.709
-664.956
Added Value Received in the Transfer
Equity in the (earning)/loss of subsidiary and associated
companies
Added Value to distribute
1.422.095
15.248.064
Distributed of Added Value
15.248.064
100,00
5.642.143
Personnel
Salaries and fees
Profit sharing
Benefits and training
FGTS
Others
Income Taxes and Social Contribution
3.594.905
655.578
831.224
224.136
336.300
4.214.563
Federal
State
Municipal
Remuneration of Third Party Capital
3.945.016
556
268.991
260.174
Rentals
Remuneration of Equity
Interest on capital of the Union
Interest on equity to other stockholders
Dividends - main shareholder
Dividends - other shareholder
Retained earnings
Minority interests in retained earnings
260.174
5.131.184
681.423
362.104
658.841
350.105
3.078.711
--
100,00
1.018.234
10.289.700
100,00
10.289.700
100,00
37,00
5.022.201
27,64
3.267.780
512.673
620.520
183.120
438.108
1.066.745
1,71
835.614
474
230.657
187.191
33,65
187.191
4.013.563
592.928
310.926
460.231
241.340
2.408.138
--
78.709
16.801.400
100,00
16.801.400
100,00
48,80
6.091.571
10,37
3.843.837
767.154
890.784
246.478
343.318
5.323.583
1,82
4.962.918
567
360.098
309.990
39,01
309.990
5.076.256
681.423
362.104
658.841
350.105
3.023.803
(20)
(664.956)
12.334.002
%
100,00
12.334.002
100,00
36,26
5.543.434
44,94
31,68
3.635.860
526.916
706.530
210.613
463.515
2.548.246
20,66
1,85
2.233.011
491
314.744
228.146
1,85
30,21
228.146
4.014.176
32,55
592.928
310.926
460.231
241.340
2.408.138
613
The accompanying notes are an integral part of these financial statements
9
Notes to Financial Statements
Notes to Financial Statements
1 – The Bank and its Operations
2 – Company Restructuring
3 – Presentation of the Financial Statements
4 – Summary of main accounting practices
5 – Information by segment
6 – Cash and cash equivalents
7 – Interbank Investments
8 – Securities and Derivative Financial Instruments
9 – Interbank
10 – Loans
11 – Other Receivables
12 – Foreign exchange portfolio
13 – Other Assets
14 – Investments
15 – Premises and equipment and leased assets
16 – Intangible
17 – Deposits and Money Market Borrowing
18 – Borrowings
19 – Resources from securities issues
20 – Other liabilities
21 – Insurance, pension and capitalization operations
22 – Other Income / Expenses
23 – Non operating income
24 – Stockholder’s Equity
25 – Income and Social Contribution Taxes
26 – Tax credits
27 – Related-party Transactions
28 – Employee Benefits
29 – Commitments, Responsibilities and Contingencies
30 – Risk Management and Regulatory Capital
31 - Subsequent Events
32 – Other Information
1
Notes to Financial Statements
1 – The Bank and its Operations
Banco do Brasil S.A. is a publicly listed company established under private law with both public and private
stockholders. It is subject to the requirements of Brazilian corporate legislation. Its purpose is to carry out all
asset, liability and accessory banking operations, to provide banking services, to intermediate and originate
financial transactions in various forms, including foreign exchange transactions and supplementary activities,
with an emphasis on insurance, private pension, capitalization, securities brokerage, administration of
credit/debit cards, consortiums, investment funds and management portfolios, and to practice any activities
permitted for the institutions that are part of the National Finance System. It is also the main financial agent
of the Brazilian Federal Government and is therefore required to carry out the functions attributed to it by law,
specifically those of Article 19 of Law 4595/1964.
2 – Company Restructuring
a) Mergers
Besc S.A. Arrendamento Mercantil e Besc Financeira S.A. – Crédito, Financiamento e Investimento
On April 13, 2010, as approved by the Extraordinary General Meeting held on the same date, Banco do
Brasil S.A. merged the subsidiaries Besc S.A. Arrendamento Mercantil (Bescleasing) and Besc Financeira
S.A. - Crédito, Financiamento e Investimento (Bescredi). The justifications for the mergers are principally
based on cost reduction by capturing operating synergies and consolidating the competitive advantages to
be achieved due to the magnitude of Bank's network of branches.
The required valuations were performed; that of the Bank by the quotation of its shares in the
securities
market and those of Bescleasing and Bescredi by their book values. Based on those valuations, the Bank's
capital, was increased by R$ 274 thousand, due to the issue of 9,039 registered common shares without par
value, arising from the transfer of 1% of the assets of Bescleasing and 0.41639% of the assets of Bescredi
approved by the Bank at 05.28.2010.
Of that share issue, 6,452 shares were assigned to Besc Distribuidora de Títulos e Valores Mobiliários S.A. Bescval, controlled by Banco do Brazil and minority shareholder of Bescleasing, resulting in a reciprocal
shareholding expected to be eliminated within 1 year.
Banco do Brasil took on the capacity of successor of Bescleasing and Bescredi, as regards all their assets,
rights and obligations. As a natural outcome, both merged companies had their separate legal identities
terminated.
Banco Popular do Brasil S.A.
On May 31, 2010, as approved by the Extraordinary General Meeting held on the same date, Banco do
Brasil merged its wholly-owned subsidiary Banco Popular do Brasil S.A. under the terms of the Agreement
and Plan of Merger, by transferring the net equity of the subsidiary into the parent company. The merger is
justified as the most adequate and efficient to integrate the activities and simplify the operating structure, with
the resulting reduction in operating costs, in addition to allowing the expansion of the offer of products and
services to the customers and the public connected to Banco Popular do Brasil.
The net equity of Banco Popular do Brasil was valuated based on the book value as of December 31, 2009,
with the addition of the equity variations between the date of the determination of book value and the merger
date, as authorized by the Brazilian Securities Commission (CVM). As a natural outcome, Banco Popular
do Brasil was extinguished pleno jure as a legal entity, and Banco do Brasil became the universal successor
of Banco do Brasil's rights and obligations.
2
Notes to Financial Statements
Shown below are the asset and liability balances of Banco Popular do Brasil S.A., Besc S.A. Arrendamento
Mercantil, and Besc Financeira S.A. - Crédito, Financiamento e Investimento, merged into Banco do Brasil:
R$ Thousand
Saldos incorporados:
- Assets
- Liabilities
- Equity
Net income to date of incorporation
Banco Popular
Bescleasing
Bescredi
194,820
171,265
23,555
20,500
780
19,720
21,107
1,860
19,247
1,768
142
373
Banco Nossa Caixa
On April 1, 2010, the Central Bank of Brazil (BACEN) approved the merger of Banco Nossa Caixa and
cancelled the operating permit. The book balances were absorbed by Banco do Brasil on November 30, 2009.
In connection with the Justification and Incorporation Protocol published on 10.29.2009, the shares of Banco
Nossa Caixa have been converted in shares of Banco do Brasil on 04.09.2010.
b) Acquisitions
Banco Patagonia S.A.
On 04.21.2010, Banco do Brasil and the controllers of Banco Patagonia S.A., entered into a Stock Purchase
and Sale Agreement for acquisition, by Banco do Brasil, of Banco Patagonia's shareholding control.
The price stipulated for the acquisition of the 366,825,016 shares (51% of the share capital and voting capital)
is of US$ 479,660 thousand, resulting in a value of US$ 1.3076 per share.
The transaction was approved by the Extraordinary General Meeting of Shareholders on 06.16.2010, in the
terms of article 256, of the Corporation Law, and is subject to approval of the regulatory bodies in Brazil and
Argentina.
Cielo e Visavale - Increase of the participation
On April 23, 2010, Banco do Brasil, together with its fully-owned subsidiary com sua subsidiária integral BB
Banco de Investimento S.A. submitted proposals to Grupo Santander Espanha referring to the acquisition of a
portion of the shares held by this group in Companhia Brasileira de Soluções e Serviços – CBSS (Visa Vale)
and in Cielo S.A. ("Cielo").
On 07.13.2010, the negotiation was completed and submitted to the competent authorities. The new
involvement of BB Banco de Investimentos in the companies is shown in the table below:
Participation
Value of Acquisition
Cielo S.A.
Companhia Brasileira de Soluções e Serviços - Visa Vale
1,058,988
61,916
--
Previous
Current
23.61%
28.65%
40.35%
45%
3
Notes to Financial Statements
c) Corporate Reorganizations in the area of Insurance, Pension, Capitalization and Reinsurance
IRB - Instituto de Resseguros do Brasil - Negotiations for Acquisition of Equity Interest
On 10.15.2009, the Bank communicated the start of negotiations without binding effect, aiming at the
acquisition of equity interest in IRB–Brasil Re S.A., in compliance with the current regulations and the terms
inherent to operations of this nature, notably the obtainment of the necessary prior authorizations.
Brasilcap Capitalizações S.A.
On January 6, 2010, the Bank announced that its wholly-owned subsidiary BB Seguros Participações S.A. (BB
Seguros) and Grupo Icatu (Icatu), entered into a Memorandum of Understanding with a view to forming a
strategic alliance in the Brazilian market to develop and sell capitalization products.
Brasilprev Seguros e Previdência S.A.
On 04.30.2010, the Bank announced that BB Seguros Participações S.A. (“BB Seguros”) and PFG do Brasil
Ltda., member of the Principal Financial Group (“Principal”), reviewed their strategic partnership in developing
and marketing open-ended private pension plans in Brazil.
Principal acquired a 4% shareholding in Brasilprev Seguros e Previdência S.A. (“Brasilprev”) held by Serviço
Brasileiro de Apoio às Micro e Pequenas Empresas - SEBRAE.
The BB Seguros holds 74.995% of Brasilprev's total equity capital, in accordance with the following breakdown
of equity interests:
Ações Ordinárias
Principal
BB Seguros
Total
Ações Preferenciais
Total
%
N.º de Ações
%
N.º de Ações
%
N.º de Ações
50.01
49.99
100.00
572,634
572,406
1,145,040
-100.00
100.00
-1,145,040
1,145,040
25.005
74.995
100.00
572,634
1,717,446
2,290,080
The Mapfre Partnership
On 05.05.2010, Banco do Brasil announced that BB Seguros and the insurance group Mapfre (“Grupo Mapfre”)
entered into a partnership agreement (“Agreement”) to form a strategic alliance in the field of personal
insurance, casualties, and vehicles effective for 20 years.
Pursuant to this Agreement, two privately owned holding companies will be organized, under the Mapfre
group's control of the voting shares and jointly managed. In order to equalize the intended shareholding in both
holding companies that will be organized, BB Seguros will pay in a sum of R$ 295 million.
Brasilveículos Companhia de Seguros
On 05.05.2010, the BB Seguros and Sul América Companhia Nacional de Seguros (Sul América) entered into
a Purchase and Sale Agreement to acquire all the shares of Sul América (60% of common registered shares)
in Brasilveículos by BB Seguros. The price set for this operation was R$ 340 million.
That transaction is subject to analysis and approval of respective regulatory, overseeing and inspecting
agencies, in accordance with the applicable legislation.
4
Notes to Financial Statements
Hence, Brasilveículos will have the following shareholders:
Atual
BB Seguros
Sul América
Futura
Ações ON
Ações PN
Ações ON
Ações PN
40%
60%
100%
--
100%
--
100%
--
Capital Total
100%
--
Brasilsaúde Companhia de Seguros
On 05.20.2010, BB Seguros and Sul América Seguro Saúde SA (SAS Saúde) signed an Agreement of
Purchase and Sale for the acquisition by SAS Saúde of all shares held by BB Seguros (49.92% of total capital)
in Brasilsaúde Companhia de Seguros. The sale price set is R$28.4 million.
That transaction is subject to analysis and approval of respective regulatory, overseeing and inspecting
agencies, in accordance with the applicable legislation.
d) Other Partners
Partnership of Banco do Brasil and Bradesco in the card segment
On 27.04.2010, the Bank of Brazil SA and Banco Bradesco SA signed a memorandum of understanding,
without binding effect, for the preparation of a business model to integrate a portion of their card operations
and, concomitantly, launch a Brazilian flag Elo of credit, debit and prepaid cards for account holders and
non-account holders. If the operation is concluded, the above mentioned companies intend to create a new
"holding" which will integrate and manage the businesses.
Memorandum of understanding Bradesco CEF
On 08.09.2010, the Banco do Brasil, Banco Bradesco SA and Caixa Economica Federal signed a
memorandum of understanding, without binding effect for development of business model in order (I) to
integrate the CEF for the release of all of the Brazilian flag Elo credit cards, debit and prepaid to customers
account holders and non-account holders of their banks and (ii) to evaluate the possibility to develop jointly,
new business for prepaid cards through creation of enterprise payment methods or incorporation of existing
businesses and aligned to this type of business.
The consummation of the transaction is subject to technical studies, legal, financial, to a satisfactory negotiation
of definitive documents and completion of legal formalities and regulatory requirements.
Strategic Partnership with Bradesco and BES
On 08.09.2010, the Banco do Brasil has signed with Banco Bradesco SA and Banco Espirito Santo SA (BES),
memorandum of understandings, without binding effect, in order to initiate dealings to establish strategic
partnership (financial holding) in order to performance in Africa.
If successful, the partnership would consolidate current operations in Africa BES. The Holding also coordinates
future investments involving the acquisition of shareholdings in other banks as well as establishing its own
operations on the African continent. The three financial institutions consider the potential partnership an
important means to support the movement towards the internationalization of Brazilian and Portuguese
companies and to assist the growing trade with that continent.
The consummation of the transaction is subject to completion of technical studies, legal, financial, to
satisfactory negotiation of definitive documents and completion of legal formalities and regulatory requirements
in each country.
5
Notes to Financial Statements
3 – Presentation of the Financial Statements
The Financial Statements have been prepared in accordance with the accounting guidelines derived from
Brazilian corporation law, the rules and instructions issued by the Conselho Monetário Nacional (CMN),
Brazilian Central Bank (BACEN), the Brazilian Securities Commission (CVM), the National Council of Private
Insurance (CNSP), the Superintendence of Private Insurance (SUSEP), and the National Health Agency
(ANS).
According to Brazilian practices some estimates require that Management use its judgment in determining and
recording accounting estimates, when applicable. Significant assets and liabilities subject to these estimates
and assumptions include the residual value of property, plant and equipment, the allowance for doubtful loans
and deferred income tax recorded in assets, some contingencies and issues discussed at judicial level were
booked, the appreciation of derivative financial instruments, and the assets and liabilities relating to benefits for
employees. The final amounts for transactions involving these estimates are only known upon their settlement.
They include operations of Banco do Brasil S.A. in Brazil and abroad (Banco do Brasil), and financial and nonfinancial subsidiaries in Brazil and abroad, special purpose entities, including the Investment Funds in which
the Bank controls directly or indirectly, and investments in subsidiaries and associated companies, in
accordance with Central Bank requirements (BB-Consolidated).
In the preparation of those financial statements, amounts resulting from transactions between consolidated
companies, including the ownership interest held by one in another, balances of balance sheet accounts,
revenues, expenses, reciprocal shareholding, and unrealized profits, net of tax effects, were eliminated.
Minority interest in net equity and income was separately disclosed in the financial statements. The balances
of balance sheet and income accounts of ownership interest where control is shared with other shareholders
were consolidated proportionally to the ownership held in the investee's capital. Leasing operations were
considered from the funding method's standpoint, and the amounts were reclassified from the heading of
leased assets to the heading of leasing operations, after deduction of residual amounts received in advance.
Since 2008, the Accounting Pronouncements Committee (CPC), issued accounting standards and
interpretations aligned to the international accounting standards approved by the Securities Commission.
Currently, the Bank has applied the pronouncements heretofore listed:
CPC n.º
Subject
01
03
05
25
Reduction to the recoverable value of assets
Cash Flow Statement
Related party disclosure
Provisions, Contingent Liabilities and Contingent Assets
CVM Deliberation n.º
CMN Resolution n.º
Exercise for
First-time adoption
527/2007
547/2008
560/2008
594/2009
3,566/2008
3,604/2008
3,750/2009
3,823/2009
2008
2008
2009
2010
The application and impact of other accounting rules issued by the Bank are being evaluated in the context of
the preparation of consolidated financial statements in accordance with international accounting standards
(IFRS) from fiscal year 2010, as determined by CMN Resolution No. 3.786/2009 and Central Bank Circular No.
3.472/2009.The Bank will complete this process within the statutory deadlines set.
For purposes of comparison of the financial statements, the following reclassification was made to the NonCurrent Liabilities - Minority Interests in Subsidiaries to Shareholders' Equity - Minority Interests in Controlled
Companies, on 06.30.2009 and 12.31.2009, in the value of R$ 786,601 thousand and R$ 141 thousand,
respectively.
The authorization for conclusion of such financial statements was given by the Executive Board of Directors, on
08.10.2010.
6
Notes to Financial Statements
We have listed the shareholding interest included in the consolidated financial statements, segregated by
business segments, according to exhibit in Note 5 - Information by Segment:
Total Share
06.30.2010
Banking Segment
BB Leasing S.A. – Arrendamento Mercantil
Besc Distribuidora de Títulos e Valores Mobiliários S.A.
BB Banco Popular do Brasil S.A.
Besc Financeira S.A. – Crédito, Financiamento e Investimentos
Besc Leasing S.A. – Arrendamento Mercantil
Banco Nossa Caixa S.A.
Banco Votorantim S.A.
Banco do Brasil – AG. Viena
BB Leasing Company Ltd.
BB Securities LLC.
BB Securities Ltd.
Brazilian American Merchant Bank – BAMB
BB USA Holding Company, Inc
Investment Segment
BB Banco de Investimento S.A.
Kepler Weber S.A.
Neoenergia S.A.
Companhia Brasileira de Securitização – Cibrasec
Segment of Fund management
BB Gestão de Recursos–Distribuidora de Títulos e Valores
Mobiliários S.A.
Segment of Insurance, Private Pension Fund, and
Capitalization
BB Seguros Participações S.A.
(1)
(1)
(2)
(2)
(2)
(2)
(3)
(1)
(1)
(1)
(1)
(1)
(1)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
Activity
Leasing
Asset Management
Banking
Loans and Financing
Leasing
Banking
Banking
Banking
Leasing
Broker
Broker
Banking
Holding
(1)
(6)
(6)
(5)
(8)
(9)
(8)
(9)
Investment Bank
Industry
Energy
Credit Acquisition
(1)
(8)
Asset Management
(8)
(8)
12.31.2009
06.30.2009
100%
99.62%
----50%
100%
100%
100%
100%
100%
100%
100%
99.62%
100%
99.58%
99%
-50%
100%
100%
100%
100%
100%
100%
100%
99.62%
100%
99.58%
99%
71.25%
-100%
100%
100%
100%
100%
100%
100%
17.57%
11.99%
12.12%
100%
17.65%
11.99%
9.09%
100%
17.67%
11.99%
9.09%
100%
100%
100%
--
(4)
(8)
Holding
100%
100%
BB Aliança Participações S.A.
(4)
(8)
Holding
100%
100%
--
BB Corretora de Seguros e Administradora de Bens S.A.
Cia. de Seguros Aliança do Brasil
Nossa Caixa Capitalização S.A.
Brasilveículos Companhia de Seguros
Brasilcap Capitalizações S.A.
Brasilprev Seguros e Previdência S.A.
Brasilsaúde Companhia de Seguros
Seguradora Brasileira de Crédito à Exportação – SBCE
Segment of payment methods
BB Administradora de Cartões de Crédito S.A.
Nossa Caixa S.A. – Administradora de Cartões de Crédito
Cia. Brasileira de Soluções e Serviços CBSS – Visavale
Cielo S.A.
Tecnologia Bancária S.A. – Tecban
Other segments
Ativos S.A.
BB Administradora de Consórcios S.A.
BB Tur Viagens e Turismo Ltda.
BB Money Transfers, Inc
Cobra Tecnologia S.A.
BV Participações S.A.
(4)
(4)
(4)
(5)
(5)
(5)
(5)
(5)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
Broker
Insurance company
Capitalization
Insurance company
Capitalization
Insurance
Company/Pension
Insurance
Company/Health
Insurance company
100%
100%
100%
70%
49.99%
75%
49.92%
12.09%
100%
100%
100%
70%
49.99%
49.99%
49.92%
12.09%
100%
100%
71.25%
70%
49.99%
49.99%
49.92%
12.09%
(4)
(4)
(5)
(6)
(5)
(8)
(8)
(9)
(8)
(8)
Service Rendering
Service Rendering
Service Rendering
Service Rendering
Service Rendering
100%
100%
40.35%
23.61%
13.53%
100%
100%
40.35%
23.60%
9.02%
100%
71.25%
40.35%
24.58%
8.96%
(4)
(4)
(4)
(4)
(4)
(7)
(8)
(8)
(9)
(8)
(9)
(8)
Credit Acquisition
Consortiums
Tourism
Service Rendering
IT
Holding
100%
100%
100%
100%
99.94%
50%
100%
100%
100%
100%
99.94%
50%
100%
100%
100%
100%
99.39%
--
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Financial subsidiary companies.
Financial institutions incorporated (Note 2a).
Financial company, with joint control with Votorantim Finanças S.A., included proportionately in the consolidation.
Non-financial subsidiary companies.
Non financial associated companies, included on pro rata basis in consolidation, as recommended by Bacen, according to the provisions of paragraph 2, Article 22 of
Law 5,385/1975, amended by Law 9,447/1997, with working of Decree 3,995/2001.
Non financial companies, jointly controlled, included on pro rata basis in consolidation, as recommended by Bacen, according to the provisions of 2nd paragraph of the
Article 22, of Law 5,385/1975, amended by Law 9,447/1997, with working of Decree 3,995/2001.
Non financial company , with joint control with Votorantim Finanças S.A., included proportionately in the consolidation.
Financial Statements for consolidation in June/2010.
Financial Statements for consolidation in May/2010.
The following investment funds were also consolidated: BV Financeira FIDC I, BV Financeira FIDC II, BV
Financeira FIDC III and Votorantim G&K Fundo de Investimento em Participações, as well as specific-purpose
entity located abroad Dollar Diversifield Payment Rights Finance Company, entities that are directly or indirectly
controlled by the Bank.
7
Notes to Financial Statements
4 – Summary of main accounting practices
a) Statements of income
Revenue and expenses are recorded under the accrual basis. Operations formalized post-fixed financial
charges are recorded at present value by the criterion pro rata die, based on changes in their indexers
agreed, and operations with fixed financial charges are recorded at redemption value, rectified on account of
unearned income or expenses to be recognized relating to future periods. Operations indexed to foreign
currencies are adjusted through the balance sheet date at the discretion of the current rates.
b) Cash and cash equivalents
Cash and cash equivalents are represented by available funds in local currency, foreign currency,
investments in gold, short-term investments with high liquidity and insignificant risk of change in value and
limits, with maturity equal to or less than 90 days and do not include short-term interbank investments –
financed position (Note 6).
c) Short-term interbank investments
Short-term interbank investments are recorded at their investment or acquisition amount, plus income
accrued up to the balance sheet date and adjustment to allowance for losses when applied.
d) Securities
The securities purchased for the Bank's portfolio are recorded at the actual amount paid, including brokerage
charges and fees, and are classified in three separate categories according to management’s intentions,
According to Bacen 3.068/2001:
Trading Securities: these are securities purchased to be actively and frequently traded. They are adjusted
monthly to market value. The increases and decreases in their value are recorded, respectively, in income
and expense accounts for the period;
Securities available for sale: these are securities that may be traded at any time, but are not acquired to be
actively and frequently traded. They are adjusted monthly to market value and their increases and decreases
in their value are recorded, net of tax effects, in a separate stockholders' equity account.
Securities held to maturity: these are securities that the Bank intends and has the financial ability to hold to
maturity. These securities are not adjusted to market value but are held at cost plus accumulated interest.
The financial capacity is supported by a cash flow projection that does not consider the possibility of sale of
these securities.
The mark-to-market methodology used for securities was established following consistent, verifiable criteria,
which consider the average price of trading on the day of calculation or, if not available, the daily adjustment
of future market transactions reported by Anbima, BM&FBovespa or the net expected realizable value
obtained through the use of future interest rate curves, foreign exchange rates, and price and currency index
charged in the settlement.
Income accrued on the securities, irrespective of the category in which they are classified, is appropriated on
a daily pro-rata basis on the accrual basis of accounting until the date of maturity or final sale, according to
the exponential or straight-line method, based on the contractual remuneration and purchase price, and
recorded directly in the statement of income for the period.
8
Notes to Financial Statements
Losses with securities classified as available for sale and held to maturity, if considered not to be temporary,
are recorded directly in expenses for the period and a new cost basis for the asset is determined.
Upon sale, the difference between the sale amount and the cost of acquisition plus accrued income is
recorded as a gain or loss on securities on the date of the transaction.
e) Derivative Financial Instruments
Derivative financial instruments are recorded at market value at each monthly trial balance and balance
sheet date. Increases or decreases in value are recorded in income or expense accounts of the respective
financial instruments.
The mark-to-market methodology used for derivative financial instruments was established following
consistent, verifiable criteria, which consider the average price of trading on the date of calculation or, if not
available, pricing models that estimate the expected net realizable value, according to the characteristics of
the derivatives.
Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to
variations in market values of financial assets or liabilities or future cash flows are considered hedge
instruments and are classified according to their nature:
Market Risk Hedge - the increases or decreases in the value of the derivative financial instruments, as well
as of the hedged item, are recorded in income accounts in the statement of income for the period;
Cash Flow Hedge - the effective portion of the increases or decreases in the value of the derivative financial
instruments classified in this category are recorded, net of tax effects, in a separate Stockholders' Equity
account. The effective portion is that where the variation in the hedged item, directly related to the
corresponding risk, is offset by the variation in the derivative financial instrument used as the hedge,
considering the accumulated effect of the transaction. Other variations in these instruments are recorded
directly in income for the period.
f) Loans, lease operations, advances on foreign exchange contracts, other receivables with loan
characteristics and allowance for loan losses
Loans, leases, advances on foreign exchange contracts and other receivables with loan characteristics are
classified according to Management's judgment with respect to the level of risk, taking into consideration
market conditions, past experience and specific risks in relation to the operation, to borrowers and guarantors,
observing the parameters established by CMN Resolution 2682/1999, which requires periodic analyses of the
portfolio and its classification into nine levels, ranging from AA (minimum risk) to H (maximum risk), as well as
the classification of operations more than 15 days overdue as non-performing.
Income from loans overdue for more than 60 days, regardless of their risk level, will only be recognized as
income when effectively received.
Operations classified at level H, which remain in this classification for 180 days, are written off against the
existing provision and monitored for five years in memorandum accounts, but do not appear in the balance
sheet.
Renegotiated operations are maintained, at a minimum, at the same level at which they were rated.
The renegotiations of loans already written off against the allowance are rated as H and any gains from
renegotiation are recognized as income when effectively received.
9
Notes to Financial Statements
The allowance for loan losses is considered sufficient by management which satisfies the minimum
requirements established by CMN Resolution 2682/1999 (Note 10.f).
g) Income and Social Contribution Taxes
Income tax is calculated at the basic rate of 15% plus a surcharge of 10%. As of May 1, 2008, Social
Contribution is being calculated at the rate of 15% for financial and insurance companies and 9% for other
companies.
Tax credits are recorded by applying the current tax rates to the difference between their respective fiscal
and accounting bases. The Bank follows the criteria for recording, maintaining, and writing off the tax credits
as established by CMN Resolution 3059/2002, and amended by CMN Resolution 3355/2006, and they are
supported by a study of their capacity for realization.
The deferred tax liabilities are made by applying the current rates of taxes on their respective bases.
h) Prepaid Expenses
Refer to the application of funds in payments made in advance, and the benefits will be felt or the services
will be rendered in subsequent periods.
i) Permanent assets
Investments – The investments in subsidiaries and associated companies with significant influence or with
participation of 20% or more voting shares in other companies and which are part of a group or are under
common control are evaluated by the equity method based on the value of the equity related or controlled in
accordance with the instructions and rules of the Central Bank and the CVM.
The statements of the branches and subsidiaries abroad are adapted to the prevailing accounting criteria in
Brazil and translated into Brazilian Reais using current exchange rates, in conformity with BACEN Circulars
2397/93 and 2571/95, and their impacts are recorded in the statement of income for the period.
Other permanent investments are stated at cost, restated for inflation up to December 31, 1995, and, if
necessary, are adjusted to market value through the formation of a provision, according to the current rules.
Property and equipment – Property and equipment are stated at cost less depreciation, calculated using the
straight-line method at the following annual rates: buildings and improvements - 4%; vehicles - 20%; data
processing system – 20% to 50% and others - 10% (Note 15).
Deferred – Deferred assets are recorded at cost of acquisition or formation, net of accrued amortizations.
They are composed mainly of expenditures with restructuring and leasehold improvements as a result of
opening branches, which are amortized according to rates based on rental terms, as well as expenditures on
the acquisition and development of information systems, which are amortized at 20% p.a.
Intangible – Intangible Assets consist of rights that have as their object intangible assets intended for the
maintenance of the company or that are exercised for that purpose, including goodwill acquired.
An asset meets the criteria for identification as an intangible asset, in accordance with CMN Resolution
3642/2008, when it is inseparable, i.e. it can be separated from the entity and sold, transferred or licensed,
rented or exchanged, individually or jointly with a contract, related assets or liabilities, regardless of the
intention for use by the entity; or results from contractual rights or other legal rights, regardless of whether
these rights are transferable or separable from the entity or other rights and obligations.
10
Notes to Financial Statements
Intangible assets have a defined useful life and refer to disbursements for acquisition of the right to provide
bank services (payroll acquisitions), and are amortized over contracted periods, and acquisition/development
of software, amortized on the straight-line basis at the rate of 20% per year starting from the date of
availability for use, and adjusted by reducing them to their recoverable amounts (impairment), when
applicable (Note 16). The amortization of intangible assets is recorded in "Other Administrative Expenses".
j) Decrease in the recoverable value of non-financial assets – impairment
A loss through impairment is recognized if the carrying value of an asset or its cash-generating unit exceeds
its recoverable value. A cash-generating unit is the smallest identifiable group of assets that generates cash
entries, which are largely independent of the cash entries from other assets or groups of assets. Losses
through impairment are recognized in income for the period.
From 2008, the values of non-financial assets, excluding tax credits and other assets are reviewed at least
annually to determine whether there is any indication of loss through impairment.
Taking into account the materiality and relevance of the involved amounts, the main assets that have their
recoverable amounts tested are: Buildings, Data processing systems (property, plant and equipment) and
Rights due to payroll acquisition (intangible assets) and Goodwill for expected future earnings generated in
the purchasing entities
The calculation of the recoverable amounts of the tested items employs the following assumptions: (1) for the
calculation of the recoverable amounts of buildings, appraisal reports (for properties of significant value) and
estimates (for the other properties) are. (2) For information technology equipment (mainframes and
automatic teller machines), both the market value and the amount recoverable over time by use in the
entity's transactions were considered. The methods applied consider the cash flow projections of the
economic benefits arising from the use of each asset over its useful life, discounted to present value. (3) The
model for evaluating losses arising from the devaluation of the Negotiation Relationship Allowance (for rights
resulting from payroll acquisition) is based on monitoring contract performance. That model was prepared
starting from the contribution margins of relationships with individuals linked to each contract.
k) Benefits for employees
Short-term benefits for current employees are recognized on the accrual basis as the services are provided.
Post-employment benefits, comprising supplementary retirement benefits, medical assistance and other
benefits for which the Bank is responsible, were accounted at June 30, 2010 in accordance with criteria
established by CVM Resolution 371/2000 and succeeded by CVM Resolution n.° 600/2009 (Note 28). As of
06.30.2010, periodicity of the evaluations became biannual, annual and no longer as occurred until
12.31.2009.
The actuarial asset recognized in the balance sheet (Note 28) refers to the Actuarial gains and its
implementation must occur by the end of the plan. There may be partial completion of actuarial, conditioned
upon satisfying the requirements of the Supplementary Law No 109/2001 and Resolution CGPC No
26/2008.
11
Notes to Financial Statements
l) Operations related to insurance, pension and capitalization activities
Statement of income
Insurance premiums and selling expenses are recorded upon the issuing of policies or upon billing and are
recognized in the statement of income, according to the elapsed period of coverage. Revenues from premiums
and the corresponding selling expenses, related to present risks without the issuing of respective policies are
recognized in the statement of income at the beginning of the coverage, based on estimates.
Income from insurance premiums covering future risks is deferred over the period of validity of the insurance
policies, through the recording of provision for unearned premiums, based on the net withholding of earned
premiums issued.
Accepted coinsurance, retrocession and DPVAT (Personal injuries caused by motor vehicles) convention
operations are recorded based on information received from similar companies, IRB Brasil Resseguros S.A.
and the Seguradora Lider - DPVAT, respectively.
The revenue from pension plans, life insurance plans with living benefits and capitalization plans are
recognized in the statement of income when effectively received, as a contra-entry to the recognition of
technical provisions, except the revenue to cover risks in cases of combined pension plans, which must be
recognized by the duration of the risk, regardless of your receipt. The selling costs are deferred on the
issuing of the contract or policy and allocated to results on a straight-line basis, over the average estimated
period for their recovery, except the ones related to capitalization.
Other income and expenses are determined according to the accrual basis of accounting.
Technical Provisions
Rules and procedures for the formation of technical provisions are regulated by Resolutions 162/2006,
181/2007, 195/2008 and 204/2009 of the National Council of Private Insurance (CNSP) and Regulatory
Resolution 75/2004 and 160/2007of the National Health Agency (ANS), and calculated in accordance with
the specific actuarial technical notes approved by the Superintendence of Private Insurance (SUSEP) and
the National Health Agency (ANS).
Insurance
The Provision for Unearned Premiums represents the portions of premiums that will be allocated to income
over the course of the insurance policies, as calculated on a daily pro rata basis.
The Provision for Unearned Premiums for Present Risks But Not Yet Issued represents the adjustment for
the Provision for Unearned Premiums given the existence of risks assumed by the insurance company
where the policy covering the risk has not yet been formally issued, except for health plan insurance.
The Provision for Premium Deficiency represents the need for coverage of possible deficiencies of the
Provision for Unearned Premiums due to the expectations of payment and re-assessment of claims incurred.
The Provision for Unsettled Loss Claims represents the forecast of probable indemnifications, judicial or
otherwise, net of recoveries, determined based on notices received up to the balance sheet date, adjusted
by the estimate for Claims Incurred But Not Enough Reported (IBNER).
The Provision for Claims Incurred but not Reported [IBNR - Incurred But Not Reported and Provision for
Events Occurred but not Reported - PEONA (of the health insurance segment)] represents the amount
expected of claims incurred but not reported until the base date of the financial statements.
The Premium Complementary Provision (PCP), recorded in "Other Provisions", has as object to maintain the
company protected in monthly transactions, keeping the amount of the technical premium provisions (PPNG
and PPNG-RVNE) higher or equal to the daily average of the month of calculation.
12
Notes to Financial Statements
Pension plan
The mathematical reserves related to pension plans represent the current value of the liabilities in the form of
a living income, pension and savings, determined through actuarial calculations and assumptions in the
financial regimes of capitalization, allocation of hedge capital and simple allocation, respectively. Particularly
for the pension and insurance plans of the PGBL and VGBL type, the Mathematical Provision for Future
Benefit Payments represents the sum of the premiums and contributions transferred by the participants, net
of the loading rate, plus the financial income earned from the investments of the resources. This provision
refers to participants whose perception of the benefits has not yet started and Mathematics Provision of
Benefits refers to those already in enjoyment of benefits.
The Provisions for a Deficiency in Contributions and in Premiums are formed to meet the possible adverse
changes in the technical risks made in the mathematical provisions of benefits to be granted, resulting from
the trend for a higher survival rate of participants and the calculation is made using the Mitigated AT 2000
Male/Female mortality table and related assumptions, considering all the plans sold.
The Provision for Financial Fluctuation is formed to account for the potential impacts of unfavorable
variations in future rates of funds earmarked for the payment of benefits and redemptions to participants,
considering the minimum remuneration guaranteed in existing contracts.
Capitalization
The Mathematical Reserve for Redemption is calculated on the face value of the notes, restated based on
actuarial technical notes approved by Susep.
The Provisions for Redemption of Overdue and Prepaid Notes are recorded at the values of the notes with
finalized and rescinded capitalization periods, restated in the period between the date of the right to
redemption and effective settlement.
The amounts earmarked for the formation of the Provision for Unrealized Draws for Prizes are calculated on
the face value of the notes, based on actuarial technical notes approved by Susep, and the write-off of the
provision for unrealized draws for prizes is recorded at the amount equivalent to the lapsed risk, i.e., the
balance of the provision for unrealized draws for prizes represents the deferred amounts of draws for prizes
not yet made.
The Provision for Draws for Prizes Payable is formed at the amounts of the notes payable from draws for
prizes, restated for the period between the date of the draw and the effective payment.
m) Contingent Assets and Liabilities and Legal Obligations
The recognition and disclosure of contingent assets and liabilities and legal obligations are made in
accordance with the criteria defined in CVM Resolution 3823/2009 (Note 29).
Contingent assets are only recognized in the financial statements upon the existence of evidence
guaranteeing their realization usually represented by the final judgment of the lawsuit and by the
confirmation of the capacity for its recovery by receipt or offsetting by another receivable.
Contingent liabilities are recognized in the financial statements when, based on the opinion of legal advisor
and Management, the risk of loss of legal or administrative proceedings is considered probable, with a
probable outflow of financial resource for the settlement of obligation and when the amounts involved are
measurable with sufficient assurance, and judicial figures when reporting monthly and revised as follows:
Aggregated – cases that are similar and recurring in nature and whose values are not considered relevant.
Provisions are based on statistical data for groups of cases, type of judicial body (Special Civil Court or
Common Court) and plaintiff. For labor claims and civil claims related to economic plans, provisions are
13
Notes to Financial Statements
based on the average payments for cases closed in the last 24 and 12 months respectively, for calculating
the value of the obligations; and
Individual – cases considered unusual or whose value is considered relevant by our legal counsel.
Provisions are based on: the amount claimed; probability of an unfavorable decision; evidence presented;
evaluation of legal precedents; other facts raised during the process; judicial decisions made during the
course of the case; and the classification and the risk of loss of legal actions.
Contingent liabilities considered as possible losses are not recognized in the balance sheet and only need to
be disclosed in the notes to the financial statements, while those classified as remote do not require
provisioning or disclosure.
Legal obligations (tax and social security) originate from tax obligations established in the legislation, and,
regardless of the probability of success of lawsuits in progress, the amounts are recognized in full in the
financial statements.
5 – Information by segment
The information by segment was compiled with a basis on the reports used by Management in the appraisal
of the segment's performance, decision making regarding the allocation of funds for investment and other
purposes, considering the regulatory environment and the similarities between goods and services.
The operations of Banco do Brasil are basically divided into five segments: banking, investments, fund
management, insurance (insurance, pension and capitalization) and payment methods. In addition, the
Banco do Brasil participates in other economic activities, such as leasing and Operating Support, that were
aggregated in "Other".
Intersegment transactions are conducted under normal market conditions, substantially under the terms and
conditions for comparable transactions, including interest rates and collateral. These transactions do not
involve abnormal payment risks.
a) Banking Segment
Responsible for the most significant portion of the Bank, preponderantly obtained in Brazil, involves a large
diversity of products and services, such as deposits, loans and services that are made available to clients by
means of a wide variety of distribution channels, located in the country and abroad.
The operations of the banking segment include business with the retail, wholesale and government markets,
carried out by Banco do Brasil by means of a network and customer service teams, and business with microentrepreneurs and the informal sector, performed through banking correspondents.
b) Investment Segment
Deals are performed in this segment in the domestic capital market, with activity in the intermediation and
distribution of debts in the primary and secondary markets, besides equity interest and the rendering of
financial services.
The operations income of the segment is obtained by means of revenues accrued in investments in securities
minus expenses with funding to third parties. The existing equity interests are concentrated at our associated
and subsidiary companies. Financial service fee income results from economic/financial advisory services,
underwriting, fixed and variable income, and the rendering of services to associated companies.
14
Notes to Financial Statements
c) Segment of Fund management
Responsible for operations inherent to the purchase, sale and custody of securities, portfolio management,
institution, organization and management of investment funds and clubs being their revenues mainly derived
from commissions and management fees charged to investors for services rendered.
d) Segment of Insurance, Private Pension Fund, and Capitalization
In said segment a products and services are offered, related to life, health, property and automobile insurance,
complementary private pension plans and capitalization plans.
Income comes mainly from revenues from insurance premiums issued, contributions for private pension plans,
capitalization bonds and investments in securities, being deducted commercialization expenses, technical
provisions and expenses related to benefits and redemptions.
e) Segment of payment methods
Such segment is mainly responsible for funding, transmission, processing services and financial settlement
of operations in electronic means (credit and debit cards), among others.
Revenues thereof are originated mainly from commissions and management fees charged to commercial
and banking establishments for the services rendered described in previous paragraph, besides income from
rent, installation and maintenance of electronic terminals.
f) Other segments
They comprise the operational support and consortium segments, which have not been aggregated by not
being individually representative.
Their revenues are originated mainly from provision of services not covered in previous segments, such as:
credit recovery, consortium administration, development, manufacture, commercialization, rent and
integration of digital electronic systems and equipment, peripherals, programs, inputs and computing
supplies, besides intermediation of air tickets, lodging and organization of events.
15
Notes to Financial Statements
R$ Thousand
1S2010
BB-Consolidated
Banking
Fund
Investments Management
Insurance
and Related
Payment
Methods
Other
Segments
Intersegment
transactions
Total
Income
50,539,220
774,662
451,985
2,086,150
709,309
555,325
(1,418,980)
53,697,671
Income from loans and leases (1)
Income from operations with securities
and derivative financial instruments
Income
from
foreign
exchange
operations and Compulsory
Financial
results
from
insurance
operations, pension and capitalization
26,004,236
--
--
--
--
--
(95,976)
25,908,260
10,577,392
41,272
21,966
13,303
51,262
6,554
(134,233)
10,577,516
1,244,801
--
--
--
(5)
--
11
1,244,807
--
--
--
810,772
--
--
24,010
834,782
Income from service fees
4,135,020
207,464
429,776
220,172
496,426
368,477
(257,339)
5,599,996
Income from Banking Fees
1,988,158
--
--
--
--
--
--
1,988,158
542,758
307,376
(2,075)
--
--
--
(769,350)
78,709
--
--
--
908,865
--
--
--
908,865
6,046,855
218,550
2,318
133,038
161,626
180,294
(186,103)
6,556,578
Expenses
(43,215,281)
(222,914)
(83,815)
(1,388,021)
(348,794)
(434,311)
553,654 (45,139,482)
Market funding
(17,556,412)
(90,714)
--
--
--
(22,622)
121,569 (17,548,179)
(3,046,543)
--
--
--
(28)
(51)
--
(3,046,622)
(5,484,895)
(12)
(76)
--
--
777
--
(5,484,206)
--
--
--
(589,881)
--
--
--
(589,881)
Personnel expenses
(5,911,281)
(15,260)
(23,734)
(88,489)
(28,612)
(60,570)
2,473
(6,125,473)
Other administrative expenses
(4,449,784)
(27,823)
(10,292)
(382,143)
(70,865)
(103,941)
315,503
(4,729,345)
(431,551)
(144)
--
(2,383)
(3,686)
(3,563)
--
(441,327)
(88,878)
--
--
(6,550)
(1,000)
(1,457)
--
(97,885)
Amortization of intangible assets
(1,046,419)
--
--
(49)
--
(51)
--
(1,046,519)
Other expenses
(5,199,518)
(88,961)
(49,713)
(318,526)
(244,603)
(242,833)
114,109
(6,030,045)
7,323,939
551,748
368,170
698,129
360,515
121,014
(865,326)
8,558,189
(2,714,779)
Equity in subsidiaries
Income from insurance
pension and capitalization
operations,
Others Income
Loans,
leases
assignments,
transfers
and
Allowance for loan losses
Restatement and interest on technical
provisions
Depreciation
Amortization of deferred
Profit before tax and participations
Income and social contribution on net
income (2)
(2,132,762)
(82,059)
(149,974)
(223,306)
(124,708)
(43,038)
41,068
Profit sharing
(747,539)
(97)
(241)
(6,323)
--
(12,954)
--
(767,154)
Net Income (3)
4,443,638
469,592
217,955
468,500
235,807
65,022
(824,258)
5,076,256
--
--
--
--
--
(20)
--
(20)
721,817,858
4,929,528
804,966
32,239,898
1,716,612
4,440,865
7,414,210
2,193,020
20,826
1,820,310
--
--
683,293,813
2,979,504
675,138
28,972,167
1,308,471
2,574,212
Minority interests
Balance Sheets
Assets
Investment in subsidiaries
Liabilities
(10,244,098) 755,705,629
(5,538,487)
5,909,879
(3,429,558) 716,373,747
(1) Includes intersegment transactions in the amount of R$ 95,976 thousand on the disposal of unrealized results on BB-Consolidated, arising from the
assignment of the Banco do Brasil to Ativos SA.
(2) Were activated in a BB-Consolidated amount of R$ 41,068 thousand (outstanding on intersegment transactions) relating to tax credits applied to the result is
not achieved (previous item).
(3) Includes intersegment transactions in the amount of R$ 54,908 thousand, relating to income not paid, net of tax (Note 24.f).
16
Notes to Financial Statements
R$ Thousand
1S2009
BB-Consolidated
Banking
Income
Fund
Investments Management
Insurance
and Related
Payment
Methods
Other
Segments
Intersegment
transactions
Total
41,615,417
2,321,195
390,829
1,632,861
723,328
330,107
(1,005,092)
46,008,645
19,454,080
--
--
--
--
79
(700)
19,453,459
10,413,222
47,325
25,377
9,284
52,906
6,090
(121,730)
10,432,474
403,427
--
--
--
92
--
31
403,550
--
--
--
703,845
--
--
20,745
724,590
Income from service fees
3,638,746
205,217
364,239
103,796
495,047
253,146
(248,869)
4,811,322
Income from Banking Fees
1,567,833
--
--
--
--
--
--
1,567,833
Equity in subsidiaries
(608,429)
533,502
(672)
--
--
--
(589,357)
(664,956)
(1)
Income from loans and leases
Income from operations with securities
and derivative financial instruments
Income
from
foreign
exchange
operations and Compulsory
Financial
results
from
insurance
operations, pension and capitalization
Income from insurance
pension and capitalization
operations,
--
--
--
774,558
--
--
--
774,558
6,746,538
1,535,151
1,885
41,378
175,283
70,792
(65,212)
8,505,815
Expenses
(39,348,520)
(318,145)
(77,951)
(1,106,018)
(370,460)
(284,350)
415,735 (41,089,709)
Market funding
(14,834,688)
(74,354)
--
--
--
--
80,873 (14,828,169)
(1,901,099)
(10)
(40)
--
(27)
--
32
(1,901,144)
(6,519,387)
(8)
(57)
--
(23)
556
--
(6,518,919)
Others Income
Loans,
leases
assignments,
transfers
and
Allowance for loan losses
Restatement and interest on technical
provisions
--
--
--
(457,393)
--
--
--
(457,393)
Personnel expenses
(5,482,366)
(13,112)
(22,329)
(75,616)
(29,345)
(36,791)
918
(5,658,641)
Other administrative expenses
(4,085,233)
(108,098)
(9,255)
(335,173)
(66,301)
(83,047)
225,528
(4,461,579)
Depreciation
(323,499)
(107)
--
(3,512)
(2,357)
(2,744)
--
(332,219)
Amortization of deferred
(122,623)
--
--
(4,470)
(507)
(589)
--
(128,189)
Amortization of intangible assets
(640,278)
--
--
--
--
--
--
(640,278)
(5,439,347)
(122,456)
(46,270)
(229,854)
(271,900)
(161,735)
108,384
(6,163,178)
2,266,897
2,003,050
312,878
526,843
352,868
45,757
(589,357)
4,918,936
642,276
(568,073)
(126,125)
(183,376)
(122,598)
(19,948)
--
(377,844)
Other expenses
Profit before tax and participations
Income and social contribution on net
income (2)
Profit sharing
(512,673)
--
(4,030)
(10,161)
--
(52)
--
(526,916)
Net Income (3)
2,396,500
1,434,977
182,723
333,306
230,270
25,757
(589,357)
4,014,176
638
--
--
--
--
(25)
--
613
575,011,253
7,171,001
701,119
17,671,154
1,271,978
808,896
3,873,447
2,965,587
19,390
11,385
12,031
--
545,435,281
2,849,198
391,610
16,536,509
1,014,265
770,226
Minority interests
Balance Sheets
Assets
Investment in subsidiaries
Liabilities
(3,796,814) 598,838,587
(2,512,952)
4,368,888
(1,305,268) 565,691,821
17
Notes to Financial Statements
6 – Cash and cash equivalents
R$ Thousand
Banco do Brasil
Total Cash
Local currency
Foreign currency
Investments in Gold
Interbank investments (1)
Subject to repurchase agreements
Interbank deposits
Investments in foreign currency
Total cash and cash equivalents
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
9,240,098
7,596,546
5,648,842
9,535,060
7,842,770
6,212,045
7,038,718
6,676,414
5,346,503
7,295,099
6,799,390
5,894,250
2,201,380
920,132
302,339
2,227,792
1,033,480
308,773
--
--
--
12,169
9,900
9,022
32,686,665
42,105,965
62,227,571
26,961,925
30,032,212
61,221,211
4,588,167
14,362,844
39,638,779
7,275,120
18,186,491
41,060,915
27,995,264
24,039,500
19,318,498
19,554,359
8,053,192
16,873,612
103,234
3,703,621
3,270,294
132,446
3,792,529
3,286,684
41,926,763
49,702,511
67,876,413
36,496,985
37,874,982
67,433,256
(1) Refer to investments whose maturity is less than or equal to 90 days.
18
Notes to Financial Statements
7 – Interbank Investments
a) Breakdown
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
Money market
Sales pending settlement - held position
Financial Treasury Bills
National Treasury Bills
National Treasury Notes
Others securities - Foreign
Sales pending settlement - financed position
Financial Treasury Bills
National Treasury Bills
National Treasury Notes
Others securities – Foreign
Sales pending settlement - sold position
Federal securities – Treasury
Interbank deposits
Investments in local currency
Investments in foreign currency
Total
101,867,415
4,588,167
--4,368,750
219,417
97,279,248
88,405,746
4,806,805
3,934,436
132,261
--40,371,382
39,604,702
766,680
142,238,797
134,937,621
14,362,844
1,772,231
804,732
11,785,881
-120,574,777
111,804,532
8,303,407
466,608
230
--39,229,677
33,845,063
5,384,614
174,167,298
104,178,979
39,638,779
37,985,635
1,653,144
--64,540,200
52,485,723
2,303,914
9,750,563
---34,531,520
31,109,603
3,421,917
138,710,499
107,838,360
7,112,106
552,603
418,411
5,797,888
343,204
100,726,254
88,405,746
7,694,073
4,494,174
132,261
--24,704,305
23,908,415
795,890
132,542,665
144,173,860
18,220,295
1,878,624
2,189,355
14,118,511
33,805
125,793,918
112,554,529
9,851,852
3,387,307
230
159,647
159,647
24,224,100
18,750,578
5,473,522
168,397,960
111,171,285
41,060,915
38,089,548
2,083,144
888,223
-70,110,370
54,494,120
2,303,914
13,312,336
---21,266,616
17,828,309
3,438,307
132,437,901
Current Assets
Non Current Assets
137,902,326
4,336,471
166,919,021
7,248,277
131,712,334
6,998,165
131,212,743
1,329,922
166,070,192
2,327,768
124,924,973
7,512,928
b) Income from short-term interbank deposits
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
Q
1S2009
5,337,080
599,177
5,758,178
1,877,510
5,601,177
646,300
5,861,962
1,961,847
Income from interbank deposits(1)
4,737,903
-593,356
3,880,668
-791,128
4,942,953
11,924
249,885
3,900,115
-429,728
Total
5,930,436
6,549,306
5,851,062
6,291,690
Income from Money Market
Held position
Financed position
Sold position
(1) Refers to income on interbank deposits in local currency. Rents on interbank deposits in foreign currency totaled R$ 313,028 thousand in 1S2010 (R$ 42,367
thousand in the 1st half of 2009) which are recorded under Income from Operations Securities.
19
Notes to Financial Statements
8 – Securities and Derivative Financial Instruments
a) Securities
R$ Thousand
Banco do Brasil
06.30.2010
12.31.2009
Market Value
Maturity in days
With
no maturity
0-30
31-180
Total
181-360
over 360
Cost Value
06.30.2009
Total
Market
Market to Market
Value
Cost Value
Total
Market
Value
Market to
Market
Cost Value
Market
Market to Market
Value
1 – Trading securities
--
924,904
2,398,049
803,577
14,370,571
18,500,483
18,497,101
(3,382)
19,606,486
19,655,622
49,136
16,138,841
16,429,463
290,622
Government bonds
--
924,904
2,398,049
782,927
14,256,097
18,364,377
18,361,977
(2,400)
19,466,189
19,511,891
45,702
16,006,874
16,299,496
292,622
Financial Treasury Bills
--
--
1,084,081
307,890
9,786,499
11,178,532
11,178,470
(62)
12,710,659
12,710,711
52
6,552,908
6,552,143
(765)
National Treasury Bills
--
669,184
1,313,968
298,004
2,888,339
5,191,052
5,169,495
(21,557)
4,052,388
4,052,631
243
5,109,357
5,175,116
65,759
National Treasury Notes
--
255,720
--
177,033
1,581,259
1,994,793
2,014,012
19,219
2,703,142
2,748,549
45,407
4,344,609
4,572,237
227,628
--
--
--
20,650
114,474
136,106
135,124
(982)
140,297
143,731
3,434
131,967
129,967
(2,000)
Debentures
--
--
--
20,650
114,474
136,106
135,124
(982)
135,918
134,043
(1,875)
82,114
80,134
(1,980)
Promissory notes
--
--
--
--
--
--
--
--
--
--
--
46,853
46,833
(20)
Shares
--
--
--
--
--
--
--
--
4,379
9,688
5,309
2,000
2,000
--
Others
--
--
--
--
--
--
--
--
--
--
--
1,000
1,000
--
Corporate bonds
2 - Securities available for sale
Government bonds
62,812
891,955
3,116,429
11,174,929
42,484,775
57,444,996
57,730,900
285,904
57,880,134
58,089,353
209,219
35,579,829
35,793,125
213,296
--
843,612
1,664,539
10,223,933
33,114,485
45,553,230
45,846,569
293,339
48,280,005
48,597,974
317,969
32,549,891
32,759,332
209,441
(2,480)
Financial Treasury Bills
--
1,055
579,480
8,151,949
27,200,612
35,937,091
35,933,096
(3,995)
35,459,266
35,457,957
(1,309)
23,341,605
23,339,125
National Treasury Bills
--
311,915
1,070,640
999,409
953,671
3,343,983
3,335,635
(8,348)
4,502,914
4,544,639
41,725
3,258,509
3,261,489
2,980
National Treasury Notes
--
530,523
12,235
1,072,099
2,089,077
3,711,553
3,703,934
(7,619)
5,017,154
5,070,229
53,075
2,937,795
2,981,516
43,721
Agricultural debt securities
--
119
1,250
476
8,811
12,170
10,656
(1,514)
11,572
10,912
(660)
12,211
10,735
(1,476)
Brazilian foreign debt securities
--
--
--
--
2,823,521
2,511,445
2,823,521
312,076
2,484,527
2,730,340
245,813
2,174,184
2,355,030
180,846
Foreign government bonds
--
--
934
--
--
945
934
(11)
592,647
593,549
902
738,030
736,169
(1,861)
Others
--
--
--
--
38,793
36,043
38,793
2,750
211,925
190,348
(21,577)
87,557
75,268
(12,289)
62,812
48,343
1,451,890
950,996
9,370,290
11,891,766
11,884,331
(7,435)
9,600,129
9,491,379
(108,750)
3,029,938
3,033,793
3,855
--
--
16,176
864,796
8,842,544
9,736,721
9,723,516
(13,205)
7,424,945
7,302,808
(122,137)
1,739,521
1,734,618
(4,903)
--
--
1,015,500
--
--
1,015,541
1,015,500
(41)
1,339,479
1,342,153
2,674
752,526
755,581
3,055
--
--
--
--
24,682
25,354
24,682
(672)
30,385
29,674
(711)
30,426
29,829
(597)
25,575
--
2,181
--
220,593
244,058
248,349
4,291
48,969
42,450
(6,519)
2,491
1,138
(1,353)
Corporate bonds
Debentures
Promissory notes
Credit Notes
Quotas in investment funds
Shares
37,237
--
--
--
--
9,182
37,237
28,055
33,122
56,504
23,382
8,732
15,614
6,882
Rural Product Bills -Commodities
--
47,625
324,775
86,200
463
462,413
459,063
(3,350)
508,429
510,370
1,941
494,259
494,203
(56)
Certificate of Deposits
--
--
89,536
--
--
89,269
89,536
267
83,419
83,722
303
--
--
--
--
718
3,722
--
282,008
309,228
286,448
(22,780)
131,381
123,698
(7,683)
1,983
2,810
827
Others
20
Notes to Financial Statements
R$ Thousand
Banco do Brasil
06.30.2010
Market Value
Maturity in days
With
no maturity
0-30
31-180
Total
181-360
over 360
Market
Market to Market
Value
Cost Value
Cost Value
12.31.2009
06.30.2009
Total
Total
Market
Market to Market
Value
Market
Market to Market
Value
Cost Value
3 - Securities held to maturity
--
1,942
3,219,145
526
9,735,008
13,126,641
12,956,621
(170,020)
18,359,234
18,184,196
(175,038)
15,507,967
15,523,322
15,355
Government bonds
--
1,942
3,219,145
526
9,643,490
12,855,030
12,865,103
10,073
18,081,948
18,098,851
16,903
15,507,967
15,523,322
15,355
Financial Treasury Bills
--
1,942
3,219,145
526
9,481,140
12,702,737
12,702,753
16
12,331,114
12,331,193
79
15,343,706
15,344,409
703
National Treasury Notes
--
--
--
--
20,172
22,729
20,172
(2,557)
829,207
826,400
(2,807)
21,352
17,829
(3,523)
National Treasury Bills
--
--
--
--
--
--
--
--
4,795,191
4,795,871
680
--
--
--
Brazilian foreign debt securities
--
--
--
--
142,178
129,564
142,178
12,614
126,436
145,387
18,951
142,909
161,084
18,175
Foreign government bonds
--
--
--
--
--
--
--
--
--
--
--
--
--
--
Corporate bonds
--
--
--
--
91,518
271,611
91,518
(180,093)
277,286
85,345
(191,941)
--
--
--
Others
--
--
--
--
91,518
271,611
91,518
(180,093)
277,286
85,345
(191,941)
--
--
--
62,812
1,818,801
8,733,623
11,979,032
66,590,354
89,072,120
89,184,622
112,502
95,845,854
95,929,171
83,317
67,226,637
67,745,910
519,273
Total
R$ Thousand
06.30.2010
12.31.2009
Market Value
Maturity in days
With
no maturity
0-30
31-180
Total
181-360
over 360
Total
Market
Market to Market
Value
Cost Value
06.30.2009
Cost Value
Total
Market
Value
Market to
Market
Market
Market to Market
Value
Cost Value
Total by portfolio
62,812
1,818,801
8,733,623
11,979,032
66,590,354
89,072,120
89,184,622
112,502
95,845,854
95,929,171
83,317
67,226,637
67,745,910
519,273
Own portfolio
62,812
1,816,858
1,554,492
3,438,220
27,944,675
34,893,612
34,817,057
(76,555)
50,796,768
50,732,531
(64,237)
27,029,323
27,515,821
486,498
Subject to repurchase agreements
--
--
7,175,079
8,511,337
37,115,277
52,611,924
52,801,693
189,769
25,678,841
25,826,500
147,659
22,541,419
22,578,318
36,899
Deposits with the Brazilian Central Bank
--
--
16
--
43,019
43,087
43,035
(52)
18,239,914
18,240,500
586
15,484,976
15,481,162
(3,814)
Pledged in guarantee
--
1,943
4,036
29,475
1,487,383
1,523,497
1,522,837
(660)
1,130,331
1,129,640
(691)
1,971,112
1,970,607
(505)
Titles object operations with free movement
--
--
--
--
--
--
--
--
--
--
--
199,807
200,002
195
R$ Thousand
06.30.2010
12.31.2009
Market Value
Maturity in years
Total by portfolio
1 - Trading securities
2 - Securities available for sale
3 - Securities held to maturity
With
no maturity
Due in up
to one year
Due from
1 to 5 years
Total
Due from
5 to 10 years
Due after
10 years
Cost Value
06.30.2009
Total
Market to
Market
Cost Value
Total
Market to
Market
Cost Value
Market to Market
62,812
22,531,456
57,359,954
6,722,284
2,508,116
89,072,120
89,184,622
95,845,854
95,929,171
67,226,637
67,745,910
--
4,126,530
12,183,196
2,109,174
78,201
18,500,483
18,497,101
19,606,486
19,655,622
16,138,841
16,429,463
62,812
15,183,313
35,533,268
4,594,617
2,356,890
57,444,996
57,730,900
57,880,134
58,089,353
35,579,829
35,793,125
--
3,221,613
9,643,490
18,493
73,025
13,126,641
12,956,621
18,359,234
18,184,196
15,507,967
15,523,322
21
Notes to Financial Statements
R$ Thousand
Current
06.30.2010
12.31.2009
06.30.2009
Book Value
Book Value
Book Value
Non Current
Total
Total by portfolio
36,964,843
52,389,799
89,354,642
38,750,456
57,353,753
96,104,209
29,734,988
Own portfolio
10,638,385
23,304,824
33,943,209
29,778,301
21,131,525
50,909,826
20,181,482
7,322,693
27,504,175
Subject to repurchase agreements
23,062,864
18,358,670
41,421,534
5,239,743
20,584,267
25,824,010
5,892,859
16,682,912
22,575,771
Deposits with the Brazilian Central Bank
Pledged in guarantee
Titles object operations with free movement
Non Current
Total
Current
Current
Non Current
Total
37,995,567
67,730,555
16
58
74
3,713,112
14,527,621
18,240,733
3,094,191
12,385,809
15,480,000
3,263,578
10,726,247
13,989,825
19,300
1,110,340
1,129,640
366,454
1,604,153
1,970,607
--
--
--
--
--
--
200,002
--
200,002
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
Total by category
Trading Securities
18,497,101
21%
19,655,622
21%
16,429,463
24%
Securities available for sale
57,730,900
64%
58,089,353
60%
35,793,125
53%
Securities held to maturity
13,126,641
15%
18,359,234
19%
15,507,967
23%
Carrying value of portfolio
89,354,642
100%
96,104,209
100%
67,730,555
100%
Mark-to-market - Category 3
Market value of portfolio
(170,020)
(175,038)
15,355
89,184,622
95,929,171
67,745,910
22
Notes to Financial Statements
R$ Thousand
BB–Consolidated
06.30.2010
12.31.2009
Market Value
Maturity in days
1 - Trading securities
With
no maturity
0-30
31-180
Total
181-360
over 360
06.30.2009
Total
Cost Value Market Value Market to Market
Total
Cost Value Market Value Market to Market
Cost Value
Market Value Market to Market
2,019,293
2,816,614
3,590,174
3,039,346
33,364,287
44,852,491
44,829,714
(22,777)
38,110,829
38,274,200
163,371
31,254,705
31,661,006
406,301
15,743
2,542,311
3,270,494
2,760,920
27,333,430
35,817,066
35,922,898
105,832
32,516,057
32,682,427
166,370
27,921,288
28,342,182
420,894
10,785
19,713
1,095,791
382,227
14,381,432
15,891,861
15,889,948
(1,913)
16,132,667
16,131,253
(1,414)
13,386,992
13,384,537
(2,455)
National Treasury Bills
--
739,279
1,712,995
1,537,296
3,846,167
7,867,031
7,835,737
(31,294)
7,085,711
7,093,374
7,663
6,411,480
6,503,172
91,692
National Treasury Notes
--
565,313
32,380
603,791
8,174,786
9,242,572
9,376,270
133,698
7,533,019
7,663,677
130,658
7,550,179
7,882,635
332,456
Agricultural debt securities
--
307
6,711
9,849
18,578
33,181
35,445
2,264
47,492
50,374
2,882
--
--
--
Federal Government securities
--
--
--
--
--
--
--
--
--
--
--
518,323
518,323
--
Brazilian foreign debt securities
--
130,824
15,322
7,234
69,633
219,862
223,013
3,151
211,419
214,513
3,094
51,963
51,165
(798)
Foreign government bonds
--
126,620
404,857
220,495
711,427
1,463,008
1,463,399
391
626,320
624,925
(1,395)
2,351
2,350
(1)
4,958
960,255
2,438
28
131,407
1,099,551
1,099,086
(465)
879,429
904,311
24,882
--
--
--
2,003,550
274,303
319,680
278,426
6,030,857
9,035,425
8,906,816
(128,609)
5,594,772
5,591,773
(2,999)
3,333,417
3,318,824
(14,593)
6,342
27,450
55,312
80,080
2,435,123
2,590,898
2,604,307
13,409
1,369,764
1,376,790
7,026
831,651
813,100
(18,551)
--
--
143,095
--
--
142,356
143,095
739
319,116
320,106
990
93,863
93,843
(20)
1,145,128
--
--
33,384
107,230
1,307,428
1,285,742
(21,686)
582,190
696,545
114,355
347,054
358,976
11,922
--
Government bonds
Financial Treasury Bills
Others
Corporate bonds
Debentures
Promissory Notes
Shares
Quotas in investment funds
741,781
9,487
--
--
54,137
805,372
805,405
33
550,141
550,141
--
375,316
375,316
Rural Product Bills - Commodities
87,293
14,868
11,716
10,640
54,385
177,981
178,902
921
192,056
193,094
1,038
--
--
--
Certificate of deposit
22,328
206,695
15,905
128,820
2,732,829
3,106,503
3,106,577
74
1,788,467
1,783,862
(4,605)
1,471,597
1,463,285
(8,312)
Eurobonds
Others
--
--
1,654
1,984
15,368
18,867
19,006
139
13,317
13,424
107
15,959
16,242
283
678
15,803
91,998
23,518
631,785
886,020
763,782
(122,238)
779,721
657,811
(121,910)
197,977
198,062
85
23
Notes to Financial Statements
R$ Thousand
BB–Consolidated
06.30.2010
12.31.2009
Market Value
Maturity in days
With
no maturity
Total
Cost Value
Market Value
Cost Value
Total
Market Value
Market to
Market
Cost Value
Market Value Market to Market
0-30
31-180
908,615
3,188,397
11,290,112
51,080,203
66,827,610
67,153,469
325,858
62,035,094
62,160,792
125,698
46,395,725
46,645,476
249,751
41,114
860,311
1,677,743
10,230,365
39,322,852
51,787,164
52,132,385
345,221
49,758,712
50,087,641
328,929
42,349,532
42,634,986
285,454
Financial Treasury Bills
--
3,769
586,807
8,158,381
27,541,773
36,294,794
36,290,730
(4,064)
35,858,772
35,857,280
(1,492)
31,885,529
31,883,349
(2,180)
National Treasury Bills
--
311,915
1,070,640
999,409
4,811,310
7,213,732
7,193,274
(20,458)
4,528,295
4,569,977
41,682
3,266,603
3,269,584
2,981
National Treasury Notes
--
544,508
16,233
1,072,099
3,761,526
5,394,256
5,394,366
110
5,987,334
6,002,387
15,053
4,066,726
4,162,190
95,464
Agricultural debt securities
--
119
1,250
476
8,811
12,170
10,656
(1,514)
11,572
10,912
(660)
12,211
10,735
(1,476)
Brazilian foreign debt securities
--
--
1,879
--
2,918,558
2,575,026
2,920,437
345,411
2,545,937
2,822,402
276,465
2,293,609
2,502,722
209,113
Government bonds
Foreign government bonds
Others
Corporate bonds
over 360
Total
Market to
Market
686,142
2 - Securities available for sale
181-360
06.30.2009
--
--
934
--
669
1,620
1,603
(17)
593,433
594,363
930
738,873
737,038
(1,835)
41,114
--
--
--
280,205
295,566
321,319
25,753
233,369
230,320
(3,049)
85,981
69,368
(16,613)
645,028
48,304
1,510,654
1,059,747
11,757,351
15,040,446
15,021,084
(19,363)
12,276,382
12,073,151
(203,231)
4,046,193
4,010,490
(35,703)
Debentures
--
--
26,274
910,232
9,920,823
10,883,119
10,857,329
(25,790)
8,674,870
8,534,065
(140,805)
2,347,431
2,321,258
(26,173)
Promissory Notes
--
--
1,015,500
--
--
1,015,541
1,015,500
(41)
1,364,005
1,366,850
2,845
752,526
755,581
3,055
Credit Notes
--
--
--
--
24,682
25,354
24,682
(672)
30,385
29,674
(711)
30,426
29,829
(597)
38,697
--
2,826
5,369
961,805
998,316
1,008,697
10,380
381,049
376,254
(4,795)
177,012
168,729
(8,283)
8,431
Quotes of investment funds
Shares
603,767
--
--
--
--
598,230
603,767
5,537
206,924
212,718
5,794
14,562
22,993
Rural Product Bills - Commodities
--
47,625
324,775
86,200
463
462,413
459,063
(3,350)
508,429
510,370
1,941
494,259
494,203
(56)
Certificate of deposit
--
985
129,197
7,236
53,706
190,878
191,124
246
127,827
124,936
(2,891)
87,230
87,012
(218)
Eurobonds
--
--
--
--
--
--
--
--
38,955
38,955
--
--
--
--
2,564
(306)
12,082
50,710
795,872
866,595
860,922
(5,673)
943,938
879,329
(64,609)
142,747
130,885
(11,862)
3 - Held to Maturity
--
85,491
3,382,957
303,993
15,146,523
19,049,202
18,918,964
(130,238)
22,438,805
22,279,681
(159,124)
30,476,511
30,733,021
256,510
Government bonds
--
85,491
3,382,957
303,993
15,055,005
18,777,591
18,827,446
49,855
22,161,519
22,194,336
32,817
29,719,106
29,968,651
249,545
Financial Treasury Bills
--
1,942
3,219,200
1,708
9,481,326
12,704,160
12,704,176
16
12,361,163
12,361,239
76
15,411,728
15,412,465
737
National Treasury Notes
--
23,584
124,813
254,964
5,324,282
5,725,368
5,727,643
2,275
4,670,990
4,682,819
11,829
6,471,370
6,532,607
61,237
169,879
Others
National Treasury Bills
--
59,965
38,932
47,321
107,193
218,461
253,411
34,950
5,002,907
5,004,868
1,961
7,592,147
7,762,026
Agricultural debt securities
--
--
12
--
26
38
38
--
23
23
--
--
--
--
Brazilian foreign debt securities
--
--
--
--
142,178
129,564
142,178
12,614
126,436
145,387
18,951
142,909
161,084
18,175
Others
--
--
--
--
--
--
--
--
--
--
--
100,952
100,469
(483)
--
--
--
--
91,518
271,611
91,518
(180,093)
277,286
85,345
(191,941)
757,405
764,370
6,965
Debentures
--
--
--
--
--
--
--
--
--
--
--
190,402
197,656
7,254
Certificate of deposit
--
--
--
--
--
--
--
--
--
--
--
119,682
119,682
--
Others
--
--
--
--
91,518
271,611
91,518
(180,093)
277,286
85,345
(191,941)
447,321
447,032
(289)
2,705,435
3,810,720
10,161,528
14,633,451
99,591,013
130,729,303
130,902,147
172,843
122,584,728
122,714,673
129,945
108,126,941
109,039,503
912,562
Corporate bonds
Total
24
Notes to Financial Statements
R$ Thousand
06.30.2010
12.31.2009
Market Value
Maturity in days
With
no maturity
Total
Cost Value
0-30
31-180
181-360
over 360
06.30.2009
Total
Market
Value
Market to Market
Cost Value
Total
Market
Value
Market to
Market
Cost Value
Market
Value
Market to Market
Total by portfolio
2,705,435
3,810,720
10,161,528
14,633,451
99,591,013
130,729,303
130,902,147
172,843
122,584,728
122,714,673
129,945
108,126,941
109,039,503
912,562
Own portfolio
2,699,093
3,677,433
2,582,614
5,656,508
54,370,413
69,023,207
68,986,061
(37,146)
74,768,787
74,772,199
3,412
59,993,023
60,872,632
879,609
6,342
131,344
7,180,707
8,722,977
41,500,647
57,330,804
57,542,017
211,212
26,734,553
26,888,135
153,582
29,932,795
29,969,844
37,049
--
--
16
--
43,019
43,087
43,035
(52)
18,413,608
18,407,373
(6,235)
15,997,118
15,993,318
(3,800)
Pledged in guarantee
--
1,943
398,191
253,966
3,676,934
4,332,205
4,331,034
(1,171)
2,667,780
2,646,966
(20,814)
2,004,198
2,003,707
(491)
Titles object operations with free movement
--
--
--
--
--
--
--
--
--
--
--
199,807
200,002
195
Subject to repurchase agreements
Deposits with the Brazilian Central Bank
R$ Thousand
06.30.2010
12.31.2009
Market Value
Maturity in years
With
no maturity
Due in up
to one year
Due from
1 to 5 years
Total
Due from
5 to 10 years
Due after
10 years
Cost Value
06.30.2009
Total
Market
Value
Cost Value
Total
Market
Value
Cost Value
Market
Value
Total by category
2,705,435
28,605,699
79,737,361
10,924,745
8,928,907
130,729,303
130,902,147
122,584,728
122,714,673
108,126,941
109,039,503
1 - Trading securities
2,019,293
9,446,134
27,861,073
3,836,713
1,666,501
44,852,491
44,829,714
38,110,829
38,274,200
31,254,705
31,661,006
686,142
15,387,123
41,360,882
6,764,799
2,954,523
66,827,610
67,153,469
62,035,094
62,160,792
46,395,725
46,645,476
--
3,772,442
10,515,406
323,233
4,307,883
19,049,202
18,918,964
22,438,805
22,279,681
30,476,511
30,733,021
2 - Securities available for sale
3 - Securities held to maturity
25
Notes to Financial Statements
R$ Thousand
Current
06.30.2010
12.31.2009
06.30.2009
Book value
Book value
Book value
Total
Current
By Portfolio
68,229,213
62,803,172
131,032,385
58,215,628
64,658,169
122,873,797
52,934,984
55,848,009
108,782,993
Own portfolio
36,236,785
31,835,646
68,072,431
47,295,209
27,638,367
74,933,576
37,724,309
22,900,041
60,624,350
Subject to repurchase agreements
26,472,598
19,689,260
46,161,858
5,956,127
20,929,518
26,885,645
11,550,028
18,427,334
29,977,362
16
58
74
3,817,049
14,590,558
18,407,607
3,094,191
12,897,964
15,992,155
5,519,814
11,278,208
16,798,022
1,147,243
1,499,726
2,646,969
366,454
1,622,670
1,989,124
--
--
--
--
--
--
200,002
--
200,002
Deposits with the Brazilian Central Bank
Pledged in guarantee
Non Current
Titles object operations with free movement
Non Current
Total
Current
Non Current
Total
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
Total by category
Trading Securities
44,829,714
34%
38,274,200
31%
31,661,006
29%
Securities available for sale
67,153,469
51%
62,160,792
51%
46,645,476
43%
Securities held to maturity
19,049,202
15%
22,438,805
18%
30,476,511
28%
Carrying value of portfolio
131,032,385
100%
122,873,797
100%
108,782,993
100%
Mark-to-market - Category 3
Market value of portfolio
(130,238)
(159,124)
256,510
130,902,147
122,714,673
109,039,503
b) Results from securities
R$ Thousand
Banco do Brasil
Applications of Interbank Liquidity (note 7b)
Fixed income securities
Variable income securities
Total
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
5,930,436
6,549,306
5,851,062
6,291,690
3,976,125
3,948,676
4,692,637
4,653,925
278,835
(113)
295,357
(642)
10,185,396
10,497,869
10,839,056
10,944,973
c) Reclassification of Securities
In the first half of 2010, there has been no reclassification to marketable securities.
d) Derivative financial instruments
The Bank uses derivative financial instruments to manage, at the consolidated level, its positions and to
meet clients' needs, classifying its own positions as both Hedge (market risk and risk of cash flow) and
trading, with both limits and heave at the Bank. The hedging strategy of equity positions is in line with the
macroeconomic analysis and is approved by the Board.
In the options market, asset or long positions have the Bank as holder, while liability or short positions have
the Bank as writer.
The models used to manage risks with derivatives are reviewed periodically and decisions are made in
accordance with the best risk/return ratio, estimating possible losses based on the analysis of
macroeconomic scenarios.
The Bank uses appropriate tools and systems to manage the derivatives. Trading in new derivatives,
whether standardized or not, is subject to a formal risk analysis prior to any transaction.
26
Notes to Financial Statements
Risk analysis of the subsidiaries is undertaken on an individual basis and its management is undertaken at
the consolidated level.
The Bank uses statistical methods and simulations to measure the risks of its positions, including derivatives,
using value at risk, sensitivity and stress analysis models.
Risks
The main risks inherent to derivative financial instruments resulting from the business dealings of the bank
and its subsidiaries are credit, market and operating risks.
Credit risk is reflected by the exposure to losses in the event of default by a counterparty to fulfill its part in
the operation. Exposure to credit risk in futures contracts is minimized due to daily settlement in cash. The
swap contracts, recorded in Cetip are subject to credit risk if the counterparty is not able or willing to perform
its contractual obligations, while the swap contracts registered in the BM&FBovespa are not subject to the
same risk, given that the Bank operations in Brazil that have the same stock market as guarantor.
Total credit exposure in swaps is R$ 973,844 thousand at June 30, 2010 (R$ 1,664,115 thousand at
December 31, 2009 and R$ 1,020,724 at June 30, 2009).
Market risk is the possibility of losses caused by changes in the behavior of interest rates and exchange
rates, stock prices and commodities.
Market liquidity risk is the possibility of loss resulting from the inability to perform a transaction within a
reasonable time and without significant loss of value due to the size of the transaction in the volume usually
negotiated.
The operating risk is the probability of financial losses resulting from failures or inadequacy of people,
processes and / or systems, or factors such as catastrophes or criminal activities.
27
Notes to Financial Statements
Breakdown of the Portfolio of Derivatives for Trading by Index
R$ Thousand
Banco do Brasil
By Index
06.30.2010
Counter party
Notional
value
BB-Consolidated
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
06.30.2010
Cost Value Market Value
Notional
value
Cost Value
12.31.2009
Market Value
Notional
value
Cost Value
06.30.2009
Market
Value
Notional
Cost Value
value
Market
Value
Exchange trading
Futures contracts
Purchase commitments
Interbank deposit
12,645,950
932,021
932,021
9,455,522
(361,209)
(361,209)
4,717,430
(9,266)
(9,266)
17,861,752
932,021
932,021
14,730,585
(361,209)
(361,209)
4,717,430
(9,266)
(9,266)
B
2,264,745
10,268
10,268
266,247
(5,548)
(5,548)
671,151
135,760
135,760
6,860,689
10,268
10,268
2,180,381
(5,548)
(5,548)
671,151
135,760
135,760
(221,341)
Currencies
B
2,175,890
916,722
916,722
3,050,767
(363,111)
(363,111)
3,435,152
(221,341)
(221,341)
2,722,321
916,722
916,722
4,206,988
(363,111)
(363,111)
3,435,152
(221,341)
T-Note
B
--
--
--
--
--
--
--
--
--
221
--
--
197,354
--
--
--
--
--
Index
B
1,846
85
85
--
(314)
(314)
--
(126)
(126)
75,051
85
85
18,832
(314)
(314)
--
(126)
(126)
Foreign exchange coupon
B
102,948
2,684
2,684
167,933
(35,537)
(35,537)
--
(2,442)
(2,442)
102,948
2,684
2,684
1,299,024
(35,537)
(35,537)
--
(2,442)
(2,442)
Libor
IF
8,098,363
2,124
2,124
5,858,885
--
--
610,942
15,745
15,745
8,098,364
2,124
2,124
5,858,885
--
--
610,942
15,745
15,745
Commodities
B
2,158
1,045
1,045
--
(238)
(238)
185
(163)
(163)
2,158
1,045
1,045
--
(238)
(238)
185
(163)
(163)
B
--
(907)
(907)
111,690
43,539
43,539
--
63,301
63,301
--
(907)
(907)
969,121
43,539
43,539
--
63,301
63,301
SCC
(1 )
Sales commitments
12,849,590
(865,194)
(865,194)
9,787,449
10,748
10,748
8,462,659
(451,363)
(451,363)
34,008,764
(865,194)
(865,194)
33,571,644
--
--
8,462,659
(451,363)
(451,363)
Interbank deposit
B
3,628,398
(26,522)
(26,522)
2,271,052
8,518
8,518
6,787,506
(342,966)
(342,966)
24,137,376
(26,522)
(26,522)
20,956,312
--
--
6,787,506
(342,966)
(342,966)
Currencies
B
511,809
(804,900)
(804,900)
231,663
(37,847)
(37,847)
80,689
(59,761)
(59,761)
1,110,368
(804,900)
(804,900)
938,605
--
--
80,689
(59,761)
(59,761)
BGI
B
--
--
--
--
--
--
--
--
--
70
--
--
37
--
--
--
--
--
Index
B
--
(202)
(202)
--
(142)
(142)
--
(320)
(320)
--
(202)
(202)
--
--
--
--
(320)
(320)
Foreign exchange coupon
B
522,179
(4,675)
(4,675)
709,139
69,039
69,039
610,124
122,576
122,576
522,179
(4,675)
(4,675)
3,892,713
--
--
610,124
122,576
122,576
Libor
IF
8,160,855
(28,344)
(28,344)
6,571,602
--
--
983,236
(5,390)
(5,390)
8,205,957
(28,344)
(28,344)
6,571,602
--
--
983,236
(5,390)
(5,390)
Commodities
B
26,349
(1,103)
(1,103)
3,993
448
448
1,104
(97)
(97)
32,814
(1,103)
(1,103)
344,699
--
--
1,104
(97)
(97)
SCC
B
--
552
552
--
(29,268)
(29,268)
--
(165,405)
(165,405)
--
552
552
867,676
--
--
--
(165,405)
(165,405)
129,786
Forward operations
Asset position
2,451,598
86,809
65,689
3,288,699
185,408
130,195
1,734,859
140,964
129,786
2,485,280
86,985
65,865
3,340,965
185,805
130,591
1,734,859
140,964
Term bonds
B
--
--
--
37,760
37,760
37,760
--
--
--
--
--
--
37,760
37,760
37,760
--
--
--
Currencies
C
2,451,598
86,809
65,689
3,250,939
147,648
92,435
1,734,859
140,964
129,786
2,451,598
86,809
65,689
3,250,939
147,648
92,434
1,734,859
140,964
129,786
Currencies
IF
--
--
--
--
--
--
--
--
--
33,682
176
176
52,266
397
397
--
--
--
(169,270)
Liability position
4,128,635
(279,092)
(110,503)
3,454,614
(365,811)
(237,453)
2,776,473
(321,938)
(169,270)
4,162,317
(283,843)
(115,254)
3,506,880
(366,030)
(237,673)
2,776,473
(321,938)
Term bonds
B
--
--
--
(37,762)
(37,762)
(37,762)
--
--
--
--
--
--
(37,762)
(37,762)
(37,762)
--
--
--
Term bonds
C
--
--
--
--
--
--
2,776,473
(321,938)
(169,270)
--
--
--
--
--
--
2,776,473
(321,938)
(169,270)
Currencies
C
4,128,635
(279,092)
(110,503)
3,492,376
(328,049)
(199,691)
--
--
--
4,128,635
(279,092)
(110,503)
3,492,376
(328,049)
(199,692)
--
--
--
Currencies
IF
--
--
--
--
--
--
--
--
--
33,682
(4,751)
(4,751)
52,266
(219)
(219)
--
--
--
28
Notes to Financial Statements
R$ Thousand
Banco do Brasil
By Index
06.30.2010
Counter party
Notional
value
BB-Consolidated
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
06.30.2010
Cost Value Market Value
Notional
value
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
Cost Value Market Value
Options market
Long position
3,260
72
4
348
4
5
3,335
317
427
157,456,731
364,025
342,237
8,471,551
222,805
194,375
4,564
398
Flexible Currency Options
B
--
--
--
--
--
--
--
--
--
8,153,107
289,856
276,802
5,197,702
157,327
126,083
--
--
--
Flexible Currency Options
C
--
--
--
348
4
5
3,335
317
427
--
--
--
348
4
5
3,335
317
427
Index
B
--
--
--
--
--
--
--
--
--
149,138,408
58,210
51,466
2,998,750
33,415
34,156
--
--
--
Commodities
B
--
--
--
--
--
--
--
--
--
128,553
9,877
7,897
238,589
21,096
24,442
Other financial assets
B
3,260
72
4
--
--
--
--
--
--
36,663
6,082
6,072
36,162
10,963
9,689
--
--
--
Other financial assets
C
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
1,229
81
145
652,442
(459,861)
(498,683)
(1,346,844)
(1,287,324)
(1,357,383)
(1,448,557)
(1,426,790)
(1,456,797)
195,952,490
(1,889,674)
(1,900,548)
14,612,454
(3,077,020)
(3,118,028)
1,449,786
(1,426,871)
(1,456,942)
Flexible Currency Options
B
182,863
(3,052)
(991)
(39,246)
(1,056)
(695)
(20,912)
(368)
(231)
10,179,122
(141,740)
(85,670)
6,897,303
(114,192)
(81,892)
20,912
(368)
(231)
Flexible Currency Options
C
469,579
(456,809)
(497,692)
(1,307,598)
(1,286,268)
(1,356,688)
(1,427,645)
(1,426,422)
(1,456,566)
469,579
(456,809)
(497,692)
2,152,406
(589,620)
(660,039)
1,427,645
(1,426,422)
(1,456,566)
Índices
B
--
--
--
--
--
--
--
--
--
183,951,258
(60,155)
(56,095)
3,073,527
(36,781)
(39,670)
--
--
--
Prefixed
B
--
--
--
--
--
--
--
--
--
1,352,531
(1,230,970)
(1,261,091)
2,489,218
(2,336,427)
(2,336,427)
--
--
--
Other financial assets
IF
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
1,229
(81)
(145)
547,132
Sales options
572
Over-the-counter trading
Swap contracts
Asset position
9,033,169
186,896
234,190
5,789,647
495,928
493,185
5,733,231
544,367
549,692
15,007,353
581,161
584,822
10,490,970
776,937
880,677
5,395,532
542,978
Interbank deposit
C
4,384,155
53,381
92,198
1,966,082
105,134
104,885
1,542,148
127,090
124,761
4,600,974
159,725
203,276
2,481,497
182,948
178,016
1,542,148
127,090
124,761
Interbank deposit
IF
1,557,928
111,757
113,882
2,276,302
360,965
351,317
1,421,803
259,214
224,213
2,562,698
174,413
50,682
3,026,790
415,493
401,377
1,421,803
259,214
224,213
Foreign currency
C
171,495
207
2,174
131,561
3,007
4,072
496,255
30,760
44,217
325,694
4,949
15,086
286,634
2,274
7,639
496,255
30,760
44,217
Foreign currency
IF
1,582,496
14,450
16,918
759,687
22,960
27,356
1,608,820
124,560
148,624
3,507,647
14,310
55,856
862,666
25,303
30,210
1,608,820
124,560
148,624
Prefixed
C
414,013
4,494
1,977
639,565
2,804
3,350
646,438
1,966
6,398
1,156,786
58,020
68,667
2,342,053
18,305
75,888
326,506
1,354
5,317
Prefixed
IF
902,000
730
4,154
--
--
--
--
--
--
1,323,550
5,381
18,745
698,947
55,338
87,041
--
--
--
IPCA
C
21,082
1,877
2,887
16,450
1,058
2,205
17,767
777
1,479
9,535
809
1,758
9,842
347
1,375
--
--
--
IPCA
IF
--
--
--
--
--
--
--
--
--
867,933
87,077
83,746
501,862
10,150
20,556
--
--
--
IGPM
C
--
--
--
--
--
--
--
--
--
12,437
22,517
26,875
17,004
26,847
31,350
--
--
--
IGPM
IF
--
--
--
--
--
--
--
--
--
626,497
50,047
56,218
240,104
30,070
37,363
--
--
--
Commodities
C
--
--
--
--
--
--
--
--
--
13,602
3,913
3,913
23,571
9,862
9,862
--
--
--
29
Notes to Financial Statements
R$ Thousand
Banco do Brasil
By Index
06.30.2010
Counter party
Liability position
Notional
value
BB-Consolidated
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
06.30.2010
Cost Value Market Value
Notional
value
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
Cost Value Market Value
10,112,535
(238,862)
(308,841)
8,422,593
(486,871)
(501,249)
12,555,964
(784,833)
(767,299)
17,443,465
(869,771)
(941,393)
14,218,331
(1,031,067)
(1,108,800)
12,555,964
(783,017)
(765,483)
Interbank deposit
C
471,743
(8,990)
(9,486)
1,729,248
(70,099)
(69,776)
2,683,845
(153,992)
(150,791)
487,183
(12,160)
(12,253)
1,699,597
(12,705)
(12,803)
2,683,845
(153,993)
(150,792)
Interbank deposit
IF
3,252,263
(111,699)
(123,178)
2,738,406
(297,057)
(292,126)
2,530,159
(350,242)
(319,087)
6,103,063
(258,847)
(167,042)
4,423,418
(378,626)
(420,064)
2,530,159
(350,242)
(319,087)
Foreign currency
C
467,426
(19,213)
(17,957)
543,643
(33,544)
(33,722)
1,328,091
(148,545)
(149,662)
738,685
(27,111)
(24,769)
734,496
(59,626)
(60,036)
1,328,091
(148,545)
(149,662)
Foreign currency
IF
1,572,088
34,748
(28,626)
1,184,106
9,070
(21,787)
1,355,587
(45,486)
(61,664)
4,712,418
(435,744)
(600,314)
2,908,508
(457,795)
(488,041)
1,355,587
(45,486)
(61,664)
Prefixed
C
3,828,850
(124,658)
(119,550)
1,411,272
(78,305)
(65,734)
185,300
(7,835)
(5,566)
4,508,278
(124,190)
(122,332)
2,189,594
(84,298)
(74,850)
185,300
(7,835)
(5,566)
Prefixed
IF
--
--
--
--
--
--
--
--
--
71,227
132
(40)
410,370
(4,340)
(24,466)
--
--
--
TMS
C
286,971
(1,328)
(2,322)
390,462
(5,253)
(6,421)
3,793,450
(67,189)
(68,985)
286,971
(1,328)
(2,322)
390,462
(5,253)
(6,421)
3,793,450
(67,189)
(68,985)
(9,727)
Referential rate
C
233,194
(7,722)
(7,722)
425,456
(11,683)
(11,683)
679,532
(11,544)
(11,544)
233,194
(7,722)
(7,722)
425,456
(11,683)
(11,683)
679,532
(9,727)
IGPM
IF
--
--
--
--
--
--
--
--
--
--
--
--
566,200
(15,738)
(7,707)
--
--
--
IGPM
C
--
--
--
--
--
--
--
--
--
268,000
(982)
(2,491)
--
--
--
--
--
--
IPCA
IF
--
--
--
--
--
--
--
--
--
25,000
185
(77)
462,500
1,121
(516)
--
--
--
C
--
--
--
--
--
--
--
--
--
9,446
(2,004)
(2,031)
7,730
(2,124)
(2,213)
--
--
--
Commodities
Others Securities
Asset position
6,376,549
136,849
140,777
8,089,892
150,715
144,252
1,999,233
95,891
103,224
7,124,652
136,165
224,143
9,053,091
245,071
238,952
1,908,574
1,304,849
103,094
Foreign currency
IF
6,376,549
136,849
140,777
8,089,892
150,715
144,252
1,999,233
95,891
103,224
6,260,489
136,165
139,962
7,909,507
149,892
143,773
1,908,574
1,304,849
103,094
Foreign currency
C
--
--
--
--
--
--
--
--
--
864,163
--
84,181
1,143,584
95,179
95,179
--
--
--
Liability position
10,525,315
(219,466)
(223,723)
7,297,615
(47,316)
(47,921)
3,748,219
(118,849)
(130,208)
10,663,191
(219,414)
(224,558)
8,496,336
(105,199)
(105,832)
3,734,393
(118,035)
(129,410)
Foreign currency
IF
10,525,315
(219,466)
(223,723)
7,210,342
(47,016)
(47,621)
3,748,219
(118,849)
(130,208)
10,521,704
(219,414)
(224,558)
7,215,124
(48,237)
(48,869)
3,734,393
(118,035)
(129,410)
Foreign currency
C
--
--
--
--
--
--
--
--
--
141,487
--
--
1,193,939
(56,662)
(56,663)
--
--
--
Others
IF
--
--
--
87,273
(300)
(300)
--
--
--
--
--
--
87,273
(300)
(300)
--
--
--
Counterpart: (B) Stock Exchange, (IF) Financial Institution, (C) Client.
30
Notes to Financial Statements
Breakdown of the portfolio of derivative by maturity
R$ Thousand
BB-Banco Múltiplo
By Maturity
06.30.2010
Notional
value
BB-Consolidated
12.31.2009
Cost
value
Market
value
Notional
value
Cost
value
06.30.2009
Market
value
Notional
value
Cost
value
06.30.2010
Market
value
Notional
value
Cost
value
12.31.2009
Market
value
Notional
value
Cost
value
06.30.2009
Market
value
Notional
value
Cost
value
Market
value
Futures contracts
Purchase commitments
12,645,950
2,124
2,124
9,455,522
--
--
4,717,430
15,745
15,745
17,861,752
2,124
2,124
9,455,522
--
--
4,717,430
15,745
15,745
Up to 30 days
102,131
--
--
99,062
--
--
653,944
--
--
2,216,414
--
--
99,062
--
--
653,944
--
--
31 to 60 days
1,946,181
--
--
2,825,276
--
--
3,010,267
--
--
2,394,725
--
--
2,825,276
--
--
3,010,267
--
--
61 to 90 days
3,583,650
(698)
(698)
2,333,681
--
--
91,039
377
377
3,619,518
(698)
(698)
2,333,681
--
--
91,039
377
377
91 to 180 days
1,934,547
(669)
(669)
2,370,039
--
--
95,018
166
166
3,438,595
(669)
(669)
2,370,039
--
--
95,018
166
166
181 to 360 days
2,604,172
(144)
(144)
889,013
--
--
49,922
1,603
1,603
3,103,686
(144)
(144)
889,013
--
--
49,922
1,603
1,603
1 to 5 years
2,475,269
3,635
3,635
938,451
--
--
511,769
5,726
5,726
2,185,735
3,635
3,635
938,451
--
--
511,769
5,726
5,726
--
--
--
--
--
--
305,471
7,873
7,873
903,079
--
--
--
--
--
305,471
7,873
7,873
(5,390)
More than 5 years
12,849,590
(28,344)
(28,344)
9,787,449
--
--
8,462,659
(5,390)
(5,390)
34,008,764
(28,344)
(28,344)
33,571,644
--
--
8,462,659
(5,390)
Up to 30 days
Sales commitments
426,667
--
--
1,192,776
--
--
61,286
--
--
1,760,851
--
--
2,549,090
--
--
61,286
--
--
31 to 60 days
--
--
--
--
--
--
183,486
--
--
857,696
--
--
1,973,867
--
--
183,486
--
--
61 to 90 days
1,398,902
(2,135)
(2,135)
778,310
--
--
125,539
15
15
4,138,899
(2,135)
(2,135)
1,885,364
--
--
125,539
15
15
91 to 180 days
2,050,292
(1,151)
(1,151)
782,712
--
--
1,698,769
719
719
6,307,107
(1,151)
(1,151)
2,818,236
--
--
1,698,769
719
719
181 to 360 days
2,704,632
(9,494)
(9,494)
1,693,423
--
--
2,633,009
(896)
(896)
7,790,301
(9,494)
(9,494)
5,556,727
--
--
2,633,009
(896)
(896)
1 to 5 years
6,044,381
18
18
5,248,320
--
--
3,741,831
(5,938)
(5,938)
11,928,558
18
18
17,863,013
--
--
3,741,831
(5,938)
(5,938)
224,716
(15,582)
(15,582)
91,908
--
--
18,739
710
710
1,225,352
(15,582)
(15,582)
925,347
--
--
18,739
710
710
Asset position
--
--
--
37,760
37,760
37,760
--
--
--
--
--
--
90,026
38,158
38,158
--
--
--
Up to 30 days
--
--
--
37,760
37,760
37,760
--
--
--
--
--
--
37,760
37,760
37,760
--
--
--
31 to 60 days
--
--
--
--
--
--
--
--
--
--
--
--
52,266
397
397
--
--
--
Liability position
--
--
--
(37,762)
(37,762)
(37,762)
--
--
--
--
--
--
14,504
(37,981)
(37,981)
--
--
--
Up to 30 days
--
--
--
(37,762)
(37,762)
(37,762)
--
--
--
--
--
--
(37,762)
(37,762)
(37,762)
--
--
--
31 to 60 days
--
--
--
--
--
--
--
--
--
--
--
--
52,266
(219)
(219)
--
--
--
More than 5 years
Operations Term
Term bonds
31
Notes to Financial Statements
R$ Thousand
Banco do Brasil
By Maturity
06.30.2010
Counter party
Notional
value
BB-Consolidated
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
06.30.2010
Cost Value Market Value
Notional
value
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
Cost Value Market Value
Currency futures
Asset position
2,451,598
86,809
65,689
3,250,939
147,648
92,435
1,734,859
140,964
129,786
2,485,280
86,985
65,865
3,250,939
147,647
92,433
1,734,859
140,964
129,786
Up to 30 days
1,214,491
27,414
29,118
563,903
49,089
46,656
470,292
24,586
20,429
1,214,491
27,414
29,118
563,903
49,088
46,654
470,292
24,586
20,429
31 to 60 days
436,759
12,478
11,604
416,544
25,073
18,425
265,099
19,260
17,726
436,759
12,478
11,604
416,544
25,073
18,425
265,099
19,260
17,726
61 to 90 days
243,606
8,499
7,029
390,667
11,020
4,469
387,354
38,874
31,250
243,606
8,499
7,029
390,667
11,020
4,469
387,354
38,874
31,250
91 to 180 days
289,785
15,415
9,237
697,857
29,848
13,879
472,561
35,849
30,370
289,785
15,415
9,237
697,857
29,848
13,879
472,561
35,849
30,370
181 to 360 days
223,653
15,798
4,701
592,319
25,943
8,493
138,663
22,073
21,464
232,485
15,844
4,747
592,319
25,943
8,493
138,663
22,073
21,464
43,304
7,205
4,000
589,649
6,675
513
890
322
8,547
68,154
7,335
4,130
589,649
6,675
513
890
322
8,547
Liability position
4,128,635
(279,092)
(110,503)
3,492,376
(328,049)
(199,691)
2,776,473
(321,938)
(169,270)
4,162,317
(283,843)
(115,254)
3,492,376
(328,049)
(199,692)
2,776,473
(321,938)
(169,270)
Up to 30 days
1,146,050
(24,063)
(24,465)
1,035,288
(39,904)
(38,867)
320,367
(29,698)
(26,969)
1,146,050
(24,063)
(24,465)
1,035,288
(39,904)
(38,868)
320,367
(29,698)
(26,969)
31 to 60 days
337,335
(10,648)
(9,747)
792,696
(37,568)
(34,437)
355,116
(22,714)
(19,352)
337,335
(10,648)
(9,747)
792,696
(37,568)
(34,437)
355,116
(22,714)
(19,352)
61 to 90 days
361,905
(13,993)
(11,259)
449,921
(25,577)
(19,608)
366,869
(22,733)
(15,830)
363,398
(14,207)
(11,473)
449,921
(25,577)
(19,608)
366,869
(22,733)
(15,830)
91 to 180 days
710,291
(46,751)
(30,406)
789,453
(65,491)
(50,478)
596,594
(47,080)
(38,541)
710,291
(46,751)
(30,406)
789,453
(65,491)
(50,478)
596,594
(47,080)
(38,541)
181 to 360 days
834,987
(61,602)
(18,939)
356,863
(67,160)
(36,365)
537,219
(54,511)
(30,793)
864,561
(65,774)
(23,111)
356,863
(67,160)
(36,365)
537,219
(54,511)
(30,793)
1 to 5 years
738,067
(122,035)
(15,687)
68,155
(92,349)
(19,936)
600,308
(145,202)
(37,785)
740,682
(122,400)
(16,052)
68,155
(92,349)
(19,936)
600,308
(145,202)
(37,785)
1 to 5 years
Options market
Sold position
3,260
72
4
348
4
5
3,335
317
427
157,456,731
364,025
342,237
8,471,551
222,805
194,375
4,564
398
572
Up to 30 days
3,260
72
4
174
2
2
--
211
165
17,516,499
223,561
215,562
2,959,069
47,923
19,453
--
211
164
31 to 60 days
--
--
--
174
2
3
1,634
47
167
799,746
15,699
11,213
418,816
12,736
5,770
2,863
128
313
61 to 90 days
--
--
--
--
--
--
--
--
--
563,185
9,677
7,054
38,717
2,649
1,862
--
--
--
91 to 180 days
--
--
--
--
--
--
1,701
59
95
82,015,672
32,383
26,753
922,601
31,566
25,479
1,701
59
95
181 to 360 days
--
--
--
--
--
--
--
--
--
56,398,375
78,698
77,433
992,784
88,973
90,283
--
--
--
1 to 5 years
--
--
--
--
--
--
--
--
--
163,254
4,007
4,222
3,139,564
38,958
51,528
--
--
--
(1,456,942)
652,442
(459,861)
(498,683)
1,346,844
(1,287,324)
(1,357,383)
1,448,557
(1,426,790)
(1,456,797)
192,556,542
(1,889,674)
(1,900,548)
14,612,454
(3,077,020)
(3,118,028)
1,447,328
(1,426,871)
Up to 30 days
For sale position
42,498
(31,105)
(31,190)
187,614
(169,306)
(176,673)
364,289
(364,628)
(370,429)
24,005,635
(267,826)
(241,824)
3,974,802
(209,574)
(190,403)
364,289
(364,628)
(370,428)
31 to 60 days
174,883
(121,912)
(131,592)
202,190
(200,699)
(209,968)
286,569
(274,695)
(280,635)
868,092
(135,881)
(139,906)
693,525
(205,018)
(212,523)
285,340
(274,776)
(280,781)
61 to 90 days
365,362
(246,925)
(272,055)
395,547
(370,200)
(390,442)
79,463
(72,129)
(72,241)
261,880
(253,340)
(276,124)
465,958
(370,976)
(390,884)
79,463
(72,129)
(72,241)
91 to 180 days
58,327
(52,750)
(54,524)
185,246
(173,850)
(185,940)
1,082
(67)
(18)
103,692,839
(92,202)
(86,382)
1,719,300
(475,673)
(486,597)
1,082
(67)
(18)
181 to 360 days
11,372
(7,169)
(9,322)
368,828
(366,226)
(385,434)
465,797
(463,914)
(476,950)
62,196,778
(839,091)
(869,279)
1,541,899
(452,624)
(463,897)
465,797
(463,914)
(476,950)
--
--
--
7,419
(7,043)
(8,926)
251,357
(251,357)
(256,524)
1,531,318
(301,334)
(287,033)
6,216,970
(1,363,155)
(1,373,724)
251,357
(251,357)
(256,524)
1 to 5 years
32
Notes to Financial Statements
R$ Thousand
Banco do Brasil
By Maturity
06.30.2010
Notional
value
BB-Consolidated
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
06.30.2010
Cost Value Market Value
Notional
value
12.31.2009
Cost Value Market Value
Notional
value
06.30.2009
Cost Value Market Value
Notional
value
Cost Value Market Value
Swap contracts
Assets
9,033,169
186,896
234,190
5,789,647
495,928
493,185
5,733,231
544,367
549,692
15,007,353
581,161
584,822
10,490,970
776,937
880,677
5,395,532
542,978
547,132
Up to 30 days
602,081
15,094
16,357
816,923
214,905
214,444
1,433,307
165,475
176,605
1,239,651
55,287
56,636
964,466
244,138
243,669
1,152,307
165,456
176,555
31 to 60 days
506,490
8,279
9,495
215,593
7,779
7,516
162,924
21,871
19,716
1,654,837
51,487
58,965
464,018
19,492
25,478
130,607
21,281
18,915
61 to 90 days
362,407
14,183
15,543
558,971
27,267
27,584
263,943
10,104
12,228
481,078
17,488
18,967
646,323
29,286
30,674
263,943
10,104
12,228
1,057,677
27,100
28,353
663,783
78,798
78,396
902,774
75,261
76,040
2,132,406
156,011
192,559
1,191,456
125,483
141,899
902,774
75,261
76,040
91 to 180 days
181 to 360 days
1,299,789
46,644
49,765
1,245,192
27,944
26,921
1,496,452
213,387
199,476
1,515,319
113,478
120,593
2,918,254
125,691
181,151
1,495,985
213,362
199,458
1 to 5 years
5,182,725
75,596
113,980
2,071,635
137,884
132,812
1,229,981
53,926
57,732
7,816,738
170,862
126,187
3,666,093
206,277
226,939
1,206,066
53,171
56,041
22,000
--
697
217,550
1,351
5,512
243,850
4,343
7,895
167,324
16,548
10,915
640,360
26,570
30,867
243,850
4,343
7,895
10,112,535
(238,862)
(308,841)
8,422,593
(486,871)
(501,249)
12,555,964
(784,833)
(767,299)
17,443,465
(869,771)
(941,393)
14,218,331
(1,031,067)
(1,108,800)
12,555,964
(783,017)
(765,483)
1,620,228
(77,948)
(79,287)
1,440,843
(203,263)
(203,127)
1,336,518
(154,196)
(147,813)
2,422,709
(106,074)
(107,610)
1,657,482
(167,572)
(174,522)
1,336,518
(152,380)
(145,997)
(123,287)
5 to 10 years
Liabilities
Up to 30 days
31 to 60 days
1,102,345
(31,983)
(35,223)
573,491
(42,821)
(41,817)
1,001,769
(131,209)
(123,287)
1,863,083
(78,440)
(80,822)
942,997
(55,939)
(56,458)
1,001,769
(131,209)
61 to 90 days
1,210,482
(24,750)
(27,752)
343,006
(15,017)
(13,925)
1,303,571
(70,728)
(67,300)
1,332,717
(29,026)
(32,287)
662,929
(19,996)
(19,477)
1,303,571
(70,728)
(67,300)
91 to 180 days
2,297,387
(54,679)
(63,012)
1,282,452
(54,090)
(50,605)
3,720,219
(143,486)
(141,868)
2,898,612
(190,630)
(199,333)
1,619,461
(93,790)
(90,800)
3,720,219
(143,486)
(141,868)
181 to 360 days
1,535,061
(48,885)
(41,577)
2,649,000
(82,720)
(82,039)
1,971,503
(121,154)
(118,016)
2,922,681
(22,571)
(42,349)
3,748,092
(181,053)
(185,531)
1,971,503
(121,154)
(118,016)
1 to 5 years
2,256,997
(61)
(60,739)
2,003,271
(89,325)
(105,868)
3,076,074
(162,990)
(162,589)
5,719,539
(435,347)
(466,849)
5,233,890
(506,755)
(556,297)
3,076,074
(162,990)
(162,589)
90,035
(556)
(1,251)
130,530
365
(3,868)
146,310
(1,070)
(6,426)
284,124
(7,683)
(12,143)
353,480
(5,962)
(25,715)
146,310
(1,070)
(6,426)
5 to 10 years
Others Securities
Assets
6,376,549
136,849
140,777
8,089,892
150,715
144,252
1,999,233
95,891
103,224
7,124,652
136,165
224,143
9,053,091
245,071
238,952
1,908,574
1,304,849
103,094
Up to 30 days
2,713,573
60,058
62,155
2,258,411
28,867
25,878
385,168
11,136
11,389
2,601,188
59,410
61,403
2,483,818
37,581
34,936
296,676
296,452
11,300
31 to 60 days
1,115,540
27,506
29,339
951,439
25,822
24,574
182,083
17,915
18,202
1,976,028
27,470
70,875
1,410,188
56,634
55,386
179,916
179,857
18,161
61 to 90 days
405,537
4,853
4,934
3,309,171
54,985
53,900
265,259
15,616
17,288
405,537
4,853
47,516
3,316,649
55,792
54,707
265,259
265,259
17,288
1,060,632
32,509
32,746
570,194
29,634
28,650
605,250
19,837
22,029
1,060,632
32,509
32,746
655,529
31,990
31,006
605,250
19,837
22,029
983,240
7,998
7,678
390,176
2,741
2,584
475,136
19,536
22,465
983,240
7,998
7,678
451,178
4,466
4,309
475,136
475,136
22,465
1 to 5 years
85,551
3,907
3,907
540,683
8,387
8,387
67,598
11,141
11,141
85,551
3,907
3,907
665,911
58,329
58,329
67,598
67,598
11,141
5 to 10 years
12,476
18
18
69,818
279
279
18,739
710
710
12,476
18
18
69,818
279
279
18,739
710
710
91 to 180 days
181 to 360 days
Liabilities
10,525,315
(219,466)
(223,723)
7,297,615
(47,316)
(47,921)
3,748,219
(118,849)
(130,208)
10,663,191
(219,414)
(224,558)
8,496,336
(105,199)
(105,832)
3,734,393
(118,035)
(129,410)
Up to 30 days
1,698,228
(21,972)
(21,597)
951,444
(4,142)
(4,258)
450,681
(9,779)
(14,071)
1,697,688
(21,970)
(22,497)
1,515,405
(11,490)
(11,632)
450,681
(9,779)
(14,086)
31 to 60 days
287,595
(23,915)
(24,257)
49,361
(1,878)
(1,802)
936,053
(51,030)
(51,707)
426,011
(23,865)
(24,191)
134,164
(3,888)
(3,812)
936,053
(51,030)
(51,707)
61 to 90 days
3,597,600
(52,587)
(54,201)
842,354
(5,341)
(5,235)
1,060,706
(16,317)
(18,151)
3,597,600
(52,587)
(54,201)
1,030,640
(24,986)
(24,880)
1,060,706
(16,317)
(18,151)
91 to 180 days
2,269,812
(97,707)
(99,818)
1,534,281
(8,189)
(8,202)
639,817
(27,619)
(29,802)
2,269,812
(97,707)
(99,818)
1,651,684
(17,047)
(17,061)
639,233
(27,600)
(29,783)
181 to 360 days
1 to 5 years
553,501
(8,387)
(8,873)
1,281,570
(19,334)
(19,891)
291,733
(2,752)
(5,125)
553,501
(8,387)
(8,873)
1,457,563
(34,732)
(35,290)
278,491
(1,957)
(4,331)
2,118,579
(14,898)
(14,977)
2,638,605
(8,432)
(8,533)
369,229
(11,352)
(11,352)
2,118,579
(14,898)
(14,978)
2,706,880
(13,056)
(13,157)
369,229
(11,352)
(11,352)
33
Notes to Financial Statements
The portfolio of credit derivatives is composed exclusively of purchases and sales carried out by Banco Votorantim. Currently consists of customers
whose risk is rated as investment grade and, as a counterpart, contains the main leaders of international market for this product. For the sale of protection
is approved credit limit, for both the client and for the counterparty risk, according to the heave of the committees and forums of credit. Allocates to limit
credit risk to the client by the reference value (notional) of derivatives, considering the amounts deposited as collateral. To purchase protection, operates
in portfolio trading with client sovereign risk, especially Brazil. In this case, we consider the potential future exposure to allocate out of the counterparty.
On 06.30.2010, the portfolio of credit derivatives reflected in the increase of R$ 79,850 thousand in PEPR - Portion related exposures weighted by risk
factor for calculating the Basel index. During the period, there was no occurrence of credit event relating to taxable events under the contract.
Breakdown of the credit derivatives portfolio
R$ Thousand
Banco do Brasil
06.30.2010
Notional
value
BB-Consolidated
12.31.2009
Market value
Notional
value
06.30.2009
Notional
value
Market value
06.30.2010
Market value
Notional
value
12.31.2009
Market value
Notional
value
06.30.2009
Market value
Notional
value
Market value
Asset position - Transferred risk
--
--
--
--
--
--
1,582,618
21,290
4,460,954
18,489
--
--
Credit swaps - Derivatives with Banks
--
--
--
--
--
--
1,582,618
21,290
4,460,954
18,489
--
--
Liability position - Received risk
--
--
--
--
--
--
4,229,514
(7,308)
4,775,870
(112,926)
--
--
Credit swaps - Derivatives with Banks
--
--
--
--
--
--
4,229,514
(7,308)
4,775,870
(112,926)
--
--
Breakdown of margin given as guarantee for transactions with derivative financial instruments
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
896,344
589,281
1,296,063
----
----
----
-896,344
-589,281
-1,296,063
06.30.2010
12.31.2009
06.30.2009
940,777
594,669
1,296,063
704,478
413,796
1,180,416
755,078
203,261
544,018
----
465,074
3,704,541
4,410
2,101,436
-1,296,063
Government bonds
LFT
NTN
LTN
Foreign Government bonds
Others
Total
34
Notes to Financial Statements
The Bank, in order to hedge against possible fluctuations in interest and exchange rates issued securities on the international capitals market in the
amount R$ 350 million, contracted derivative operations in the form off currency and interest rate swaps (Cross Currency Interest Rate Swaps), with the
same volume, term and interest rates. The hedge was assessed as effective, in accordance with the provisions of Central Bank Circular 3082/2002, which
require evidence of hedge effectiveness between 80% and 125%:
Breakdown of the portfolio of derivatives designated as market risk hedge
R$ Thousand
Banco do Brasil
By Index
06.30.2010
Counterparty
Notional
value
Cost
value
BB-Consolidated
12.31.2009
06.30.2009
Market
value
Notional
value
Cost
value
Market
value
Notional
value
06.30.2010
Cost
value
Market
value
Notional
value
Cost
value
12.31.2009
06.30.2009
Market
value
Notional
value
Cost
value
Market
value
Notional
value
Cost
value
Market
value
Over-the-counter trading
Swap contracts
Liability position
Foreign currency and interest
IF
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
Counterparty: (IF) Financial Institution.
R$ Thousand
Banco do Brasil
By Index
06.30.2010
Counterparty
Notional
value
Cost
value
BB-Consolidated
12.31.2009
Market
value
Notional
value
Cost
value
06.30.2009
Market
value
Notional
value
06.30.2010
Cost
value
Market
value
Notional
value
Cost
value
12.31.2009
06.30.2009
Market
value
Notional
value
Cost
value
Market
value
Notional
value
Cost
value
Market
value
Swap contracts
Liabilities
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
5 to 10 years
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
350,000
16,593
(56,150)
350,000
28,441
(40,777)
350,000
(12,249)
(59,276)
35
Notes to Financial Statements
Derivative financial instruments divided into current and long-term
R$ Thousand
Banco do Brasil
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
06.30.2010
Current
Non-Current
Current
Non-Current
Current
Non-Current
Current
12.31.2009
Non-Current
Current
06.30.2009
Non-Current
Current
Non-Current
8,547
ASSETS
Forward operations
61,689
4,000
129,682
513
121,239
8,547
61,735
4,130
130,078
513
121,239
Options market
4
--
5
--
427
--
338,015
4,222
142,847
51,528
572
--
Swap contracts
119,513
114,677
354,861
138,324
484,065
65,627
447,720
137,102
622,871
257,806
483,196
63,936
Others
136,852
3,925
135,586
8,666
91,373
11,851
220,218
3,925
180,344
58,608
91,243
11,851
--
--
--
--
--
--
--
--
5,398
13,091
--
--
318,058
122,602
620,134
147,503
697,104
86,025
1,067,688
149,379
1,081,538
381,546
696,250
84,334
Credit swaps
Total
LIABILITIES
Forward operations
(94,816)
(15,687)
(217,517)
(19,936)
(131,485)
(37,785)
(99,202)
(16,052)
(217,737)
(19,936)
(131,485)
(37,785)
Options market
(498,683)
--
(1,348,457)
(8,926)
(1,200,273)
(256,524)
(1,613,515)
(287,033)
(1,744,304)
(1,373,724)
(1,200,418)
(256,524)
Swap contracts
(246,851)
(61,990)
(391,513)
(109,736)
(598,284)
(169,015)
(462,401)
(478,992)
(526,788)
(582,012)
(596,469)
(169,015)
Others
(208,746)
(14,977)
(39,388)
(8,533)
(118,856)
(11,352)
(209,580)
(14,978)
(92,675)
(13,157)
(118,058)
(11,352)
Credit swaps
--
--
--
--
--
--
--
--
(35,507)
(77,419)
--
--
Hedge Derivatives
--
(56,150)
--
(40,777)
--
(59,276)
--
(56,150)
--
(40,777)
--
(59,276)
(1,049,096)
(148,804)
(1,996,875)
(187,908)
(2,048,898)
(533,952)
(2,384,698)
(853,205)
(2,617,011)
(2,107,025)
(2,046,430)
(533,952)
Total
36
Notes to Financial Statements
e) Results from Derivatives
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
Swap
Forward
Options
1S2009
1S2010
1S2009
466,359
78,346
468,688
32,130
(975)
(404)
(7,356)
(404)
(32,357)
(76,834)
(19,223)
(76,834)
135,803
(449,979)
Future
Derivatives
Others
(449,979)
(119,065)
--
--
8,370
--
(55,242)
(451,709)
(156,396)
(451,641)
Total
125,575
(510,238)
(261,540)
(512,499)
f) Equity Valuation Adjustment – Securities and Derivatives recognized in the Stockholders’ equity
R$ Thousand
1S2010
12.31.2009
Balance
Net change in
the quarter
1S2009
06.30.2010
Balance
12.31.2008
Balance
Net change in
the quarter
06.30.2009
Balance
Securities available for sale
Bank
(57,901)
27,317
(30,584)
(49,854)
81,234
31,380
Affiliates and subsidiaries
Tax effects
Total
306,258
164,856
471,114
217,466
(36,937)
180,529
21,807
(50,961)
(29,154)
31,117
(26,779)
4,338
270,164
141,212
411,376
198,729
17,518
216,247
37
Notes to Financial Statements
9 – Interbank
a) Payments and Receipts Settlement
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010 12.31.2009 06.30.2009 06.30.2010 12.31.2009 06.30.2009
Assets
Rights with participants of securities settlement systems
Checks and other papers
Documents submitted by other
Total
1,130,086
2,213,220
153,227
5
1,122,226
1,447,820
1,130,110
2,213,515
153,227
31
1,223,076
1,499,416
3,343,306
153,232
2,570,046
3,343,625
153,258
2,722,492
Current assets
3,343,306
153,232
2,570,046
3,343,625
153,258
2,722,492
Checks and other papers
Receipts remitted
Other receipts
Total
1,194,115
1,816,857
7,867
63
132
407
1,076,380
1,306,469
3,665
1,194,146
1,821,117
7,867
63
144
408
1,228,298
1,424,580
3,985
3,018,839
602
2,386,514
3,023,130
615
2,656,863
Current liabilities
3,018,839
602
2,386,514
3,023,130
615
2,656,863
Liabilities
Obligations with participants of securities settlement systems
b) Credit Linked
R$ Thousand
Banco do Brasil
BB-Consolidated
30.06.2010
31.12.2009
30.06.2009
30.06.2010
31.12.2009
30.06.2009
57,243,465
24,167,099
20,605,544
59,373,714
24,279,765
24,507,300
20,130,663
--
--
20,130,663
--
--
Demand deposits
13,702,568
11,878,269
9,644,890
15,832,817
11,919,021
11,152,657
Savings deposits
12,881,379
11,941,111
8,712,011
12,881,379
11,941,111
11,000,662
(2)
10,136,543
--
--
10,136,543
--
--
Resources on rural credit
208,902
204,008
2,137,443
208,902
204,008
2,147,268
Resources on microfinance
183,410
143,711
111,200
183,410
215,625
171,316
--
--
--
--
--
35,397
1,670,472
1,635,417
60,200
1,670,472
1,635,417
1,593,287
1,798,209
1,757,711
72,744
1,798,209
1,757,711
1,710,249
11,955
17,083
2,011
11,955
17,083
22,575
(139,692)
(139,377)
(14,555)
(139,692)
(139,377)
(139,537)
Compulsory Deposits at the Central Bank of Brazil
Additional - Central Bank Circular No. 3.144/2002
Term deposits
Other
Housing Finance System
Fund for compensation of wage changes
Other
Provision for losses on loans tied
National Treasury - Rural Credit
(1)
104,641
148,158
24,636
104,641
148,158
24,636
Total
59,018,578
25,950,674
20,690,380
61,148,827
26,063,340
26,125,223
Current assets
59,018,578
25,950,674
20,690,380
61,148,827
26,063,340
26,125,223
(1) As Bacen Circular 3486/2010, was amended in order to comply with the requirement for additional in-kind due to additional federal government
securities.
(2) According to Central Bank Circular No. 3.485/2010, has changed the form of performance requirements over the long term deposits.
38
Notes to Financial Statements
c) Income on Compulsory Deposits
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
362,046
1,083,175
322,826
1,128,865
Additional requirement Circular Letter No. 3144/2002
491,767
--
512,134
--
Savings Bank Circular No. 3093/2002
402,801
298,278
402,801
337,498
Resource requirements over the long term
188,607
--
213,930
--
--
24,548
--
24,548
25,285
Income Credit Linked to Central Bank
Additional requirement CMN Resolution No. 3607/2008
Income Credit Linked to SFH
50,373
25
50,373
Income Credit Linked to Rural Credit
12,327
1,335
12,327
1,335
1,145,875
324,186
1,191,565
388,666
Total
10 – Loans
Comprises the Loan Portfolio, Leasing and Loans Classified as "Other Receivables".
a) Portfolio by modality
R$ Thousand
Bando do Brasil
BB-Consolidated
06.30.2010 12.31.2009 06.30.2009 06.30.2010 12.31.2009 06.30.2009
Loans
Loans and bills discounted
284,405,282 259,780,843 213,872,988
306,172,534 279,467,756 231,810,327
131,988,352 124,255,540
138,460,097 129,828,585 106,446,214
91,008,396
Financing
78,679,717
67,023,572
55,626,560
93,646,288
80,858,134
56,497,258
Rural and agribusiness financing
71,374,708
66,887,223
66,842,918
71,703,644
67,166,529
67,668,044
2,361,215
1,610,578
395,114
2,361,215
1,610,578
1,192,098
Financing of Infrastructure and development
1,290
3,930
--
1,290
3,930
6,713
Other receivables with loan characteristics
15,325,015
16,051,948
17,167,127
15,708,807
16,429,275
17,269,164
Advances on foreign exchange contracts
7,168,030
7,967,810
10,750,691
7,381,114
8,192,660
10,834,835
Credit card operations
7,838,306
7,747,968
6,039,170
7,838,306
7,747,968
6,039,170
73,125
88,322
77,513
73,125
90,972
77,513
245,554
247,848
299,753
416,262
397,675
317,646
51,359
60,775
58,860
4,640,840
4,931,773
3,405,990
Real estate financing
Guarantees honored
Sundry
Lease operations
Total Loan Portfolio
299,781,656 275,893,566 231,098,975
326,522,181 300,828,804 252,485,481
Provision for Loan Losses
(17,005,165) (17,611,907) (16,252,779)
(18,087,552) (18,617,380) (17,759,015)
(Allowance for loan losses)
(16,280,006) (16,938,379) (15,584,618)
(17,097,416) (17,684,659) (16,904,078)
(Provision for other losses)
(Allowance for lease losses)
Total Loan Portfolio Net of Provisions
(725,159)
(673,528)
(668,161)
(743,701)
(701,511)
(701,780)
--
--
--
(246,435)
(231,210)
(153,157)
282,776,491 258,281,659 214,846,196
308,434,629 282,211,424 234,726,466
39
Notes to Financial Statements
b) Loan operations income
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
Loan operations income
22,295,406
17,247,157
24,316,980
18,465,063
Loans and bills discounted
14,111,638
10,226,276
14,676,983
11,360,793
Financing
3,838,155
3,094,922
5,214,533
3,099,687
Rural and agribusiness financing
2,364,185
2,284,684
2,376,454
2,298,465
Recovery of loans and lowered injury (Note 10.k)
1,443,410
1,132,859
1,387,616
1,158,486
138,777
176,200
257,749
176,200
4,919
4,691
4,934
4,691
394,322
327,525
398,711
366,741
Advances on foreign exchange contracts
Guarantees honored
Other
Lease Operations Income (Note 10.i)
Total
21,877
25,521
1,591,280
988,396
22,317,283
17,272,678
25,908,260
19,453,459
c) Breakdown of the Loan Portfolio by Sector
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
%
12.31.2009
%
06.30.2009
%
06.30.2010
%
12.31.2009
%
06.30.2009
%
PUBLIC SECTOR
5,996,432
2.0
6,234,130
2.3
2,775,139
1.2
6,144,844
1.8
6,388,065
2.1
2,809,927
1.1
Government
2,586,293
0.9
2,716,210
1.0
2,230,416
0.9
2,586,293
0.8
2,716,210
0.9
2,238,706
0.9
Direct administration
2,332,426
0.8
2,556,027
0.9
2,174,163
0.9
2,332,426
0.6
2,556,027
0.8
2,182,431
0.9
253,867
0.1
160,183
0.1
56,253
--
253,867
0.1
160,183
0.1
56,275
--
3,410,139
1.1
3,517,920
1.3
544,723
0.3
3,558,551
1.0
3,671,855
1.2
571,221
0.2
Indirect administration
Business entities
BB Group
Industry
Commerce
Financial services
Other services
Housing Companies
PRIVATE SECTOR
3,184
--
4,405
--
6,015
--
--
--
--
--
--
--
1,838,697
0.6
2,046,213
0.7
367,153
0.2
1,919,394
0.5
2,126,049
0.6
458,951
0.2
1,483
--
185
--
7,482
--
1,483
--
185
--
7,482
--
113,791
--
151,226
0.1
159,984
0.1
113,944
--
151,288
0.1
100,694
--
1,451,694
0.5
1,313,488
0.5
4,089
--
1,522,440
0.5
1,391,930
0.5
4,094
--
1,290
--
2,403
--
--
--
1,290
--
2,403
--
--
--
293,785,224
98.0 269,659,436
97.7 228,323,836
98.8 320,377,337
98.2 294,440,739
97.9 249,675,554
98.9
Rural
55,073,039
18.4
54,489,403
19.8
53,252,653
23.0
55,401,976
17.1
54,768,700
18.3
54,077,779
21.3
Industry
90,264,274
30.1
79,466,709
28.8
71,561,590
31.0
95,610,954
29.3
84,798,895
28.2
73,567,760
29.1
Commerce
35,523,931
11.9
30,881,818
11.2
25,886,717
11.2
37,096,572
11.4
32,175,132
10.7
27,412,706
10.9
Financial services
1,405,056
0.5
1,044,364
0.4
385,177
0.2
1,416,186
0.4
1,010,506
0.3
393,383
0.2
Private Individuals
72,938,830
24.2
66,367,114
24.0
46,050,779
19.9
89,248,734
27.3
81,295,241
27.0
60,295,188
23.9
Housing
Other services
Total
2,083,340
0.7
1,456,778
0.5
395,114
0.2
2,083,340
0.6
1,456,778
0.5
1,184,174
0.5
36,496,754
12.2
35,953,250
13.0
30,791,806
13.3
39,519,575
12.1
38,935,487
12.9
32,744,564
13.0
299,781,656 100.0 275,893,566 100.0 231,098,975 100.0 326,522,181 100.0 300,828,804 100.0 252,485,481 100.0
40
Notes to Financial Statements
d) Loan portfolio by risk level and maturity
R$ Thousand
Banco do Brasil
Performing loans
06.30.2010 12.31.2009 06.30.2009
AA
A
B
C
D
E
F
G
H
Total
portfolio
Total
portfolio
Total
portfolio
Installments falling due
01 to 30
5,233,288
6,156,701
7,183,846
2,618,222
685,293
83,348
27,899
24,803
173,793
22,187,193
22,146,248
20,223,977
31 to 60
5,449,798
4,845,693
4,623,781
1,729,754
329,402
62,681
21,103
15,021
122,380
17,199,613
16,170,441
13,146,276
61 to 90
3,878,900
2,924,604
4,687,723
1,696,933
328,682
41,772
16,840
15,307
105,271
13,696,032
13,319,159
12,604,445
91 to 180
7,770,935
6,518,380
12,271,454
4,515,746
724,557
111,037
53,328
40,106
356,236
32,361,779
32,052,930
28,872,599
181 to 360
13,579,775
7,610,666
18,767,864
6,501,911
932,130
261,072
72,522
43,051
302,704
48,071,695
46,627,198
43,694,745
Over 360
43,029,198
24,694,891
56,531,657
18,913,497
3,884,702
738,978
391,022
276,812
2,489,334
150,950,091 129,267,314
95,291,744
87,163
44,674
107,191
65,577
35,615
15,242
8,969
8,311
32,920
405,662
577,848
647,621
2,673,326
--
--
--
--
--
--
--
--
2,673,326
2,643,182
3,946,557
81,702,383
52,795,609
104,173,516
36,041,640
6,920,381
1,314,130
591,683
423,411
3,582,638
Installments overdue
Up to 14 days
Others
(1)
Subtotal
287,545,391 262,804,320 218,427,964
R$ Thousand
Non-performing loans
AA
A
B
C
D
E
F
G
H
06.30.2010
12.31.2009 06.30.2009
Total
portfolio
Total
portfolio
Total
portfolio
Installments falling due
01 to 30
--
--
120,991
224,944
179,022
123,504
138,168
128,980
780,350
1,695,959
1,770,496
1,910,536
31 to 60
--
--
40,878
51,400
32,262
24,567
21,765
23,772
187,065
381,709
351,919
391,921
61 to 90
--
--
31,833
49,279
34,606
25,550
26,056
25,347
137,543
330,214
290,999
328,291
91 to 180
--
--
71,818
128,989
92,632
75,444
74,308
69,125
389,861
902,177
871,115
848,927
181 to 360
--
--
132,228
243,377
181,660
125,974
119,966
118,989
662,840
1,585,034
1,662,274
1,520,522
Over 360
--
--
293,698
599,464
451,471
310,474
275,104
275,144
1,429,366
3,634,721
3,752,986
3,775,121
01 to 14
--
--
11,081
17,188
14,639
11,478
9,292
16,978
54,703
135,359
115,147
128,080
15 to 30
--
--
85,841
66,226
59,086
26,512
22,609
27,302
147,617
435,193
422,474
465,536
31 to 60
--
--
4,945
94,264
62,134
39,296
30,596
42,554
169,557
443,346
536,958
761,552
61 to 90
--
--
6
5,484
87,253
42,673
40,531
50,857
203,326
430,130
465,093
434,782
91 to 180
--
--
72
3,246
14,229
71,046
112,382
194,867
649,901
1,045,743
1,245,803
1,126,156
181 to 360
--
--
45
107
--
8,177
12,633
13,847
1,082,756
1,117,565
1,588,510
958,528
Over 360
--
--
43
2
--
--
--
--
99,070
99,115
15,472
21,059
Subtotal
--
--
793,479
1,483,970
1,208,994
884,695
883,410
987,762
5,993,955
12,236,265
13,089,246
12,671,011
81,702,383
52,795,609
104,966,995
37,525,610
8,129,375
2,198,825 1,475,093
1,411,173
9,576,593
299,781,656
Installments overdue
Total
275,893,566 231,098,975
41
Notes to Financial Statements
R$ Thousand
BB-Consolidated
Performing loans
AA
A
B
C
D
01 to 30
5,423,111
6,999,675
7,459,975
2,643,703
702,449
31 to 60
5,732,287
5,376,836
4,813,798
1,752,935
337,644
61 to 90
3,994,189
3,450,636
4,881,549
1,709,298
91 to 180
8,082,475
8,176,207
12,832,768
181 to 360
14,189,764
10,307,024
Over 360
46,144,077
E
06.30.2010 12.31.2009
06.30.2009
Total
portfolio
Total
portfolio
Total
portfolio
F
G
H
86,680
28,318
40,651
175,387
23,559,949
23,486,901
21,671,689
65,105
21,504
16,913
123,822
18,240,844
17,225,210
14,061,977
336,581
44,100
17,247
15,586
106,708
14,555,894
14,184,551
13,448,982
4,552,160
745,725
118,672
54,465
41,176
360,252
34,963,900
34,364,270
31,204,494
19,483,418
6,605,616
985,987
275,897
74,487
46,014
310,151
52,278,358
50,595,870
46,302,682
33,771,471
58,295,435
19,037,363
4,019,584
836,280
395,967
321,856
2,610,372
165,432,405
142,504,044
107,041,836
87,170
59,154
110,478
65,816
36,035
15,307
9,013
8,334
33,083
424,390
587,182
762,602
Other (¹)
2,673,326
--
--
--
--
--
--
--
--
2,673,326
2,643,182
3,946,557
Subtotal
86,326,399
68,141,003
107,877,421
36,366,891
7,164,005
1,442,041
601,001
490,530
3,719,775
312,129,066
285,591,210
238,440,819
Installments falling due
Installments overdue
Up to 14 days
(1) Operations with third party risk tied to Government Funds and Programs, mainly Pronaf, Procera, FAT, BNDES and FCO. They include the amount of
overdue installments in the total amount of R$ 153 million, which comply with rules defined in each program for reimbursement with the managers and do
not imply a credit risk for the Bank.
R$ Thousand
Non-performing loans
06.30.2010 12.31.2009 06.30.2009
AA
A
B
C
D
E
F
G
H
Total
portfolio
Total
portfolio
Total
portfolio
Installments falling due
01 to 30
--
--
149,410
243,429
188,090
128,368
142,098
132,260
795,550
1,779,205
1,889,122
1,954,257
31 to 60
--
--
68,060
68,114
40,601
28,906
25,464
26,688
201,005
458,838
434,455
420,876
61 to 90
--
--
58,076
65,427
42,630
29,818
29,559
28,209
150,985
404,704
364,029
355,994
91 to 180
--
--
145,717
175,235
115,728
87,656
84,234
77,228
427,621
1,113,419
1,082,286
926,129
181 to 360
--
--
258,361
322,802
221,041
147,119
137,327
132,825
726,734
1,946,209
2,014,513
1,639,411
Over 360
--
--
609,695
804,034
565,761
372,581
326,232
312,271
1,575,549
4,566,123
4,632,154
4,119,433
01 to 14
--
--
14,800
25,929
18,709
13,407
10,794
18,206
60,770
162,615
140,088
130,666
15 to 30
--
--
112,657
75,312
63,665
29,132
24,903
33,633
156,410
495,712
489,028
572,887
31 to 60
--
--
13,574
116,743
71,092
43,872
34,438
45,765
184,313
509,797
609,217
843,980
61 to 90
--
--
12
11,130
97,980
47,835
44,561
54,172
218,809
474,499
513,310
511,871
91 to 180
--
--
72
5,278
21,165
80,154
122,524
214,701
701,599
1,145,493
1,336,198
1,324,077
181 to 360
--
--
45
107
--
11,238
16,988
26,378
1,169,803
1,224,559
1,703,448
1,215,098
Over 360
--
--
43
2
--
--
--
4,739
107,158
111,942
29,746
29,983
Subtotal
--
--
1,430,522
1,913,542
1,446,462
1,020,086
999,122
1,107,075
6,476,306
14,393,115
15,237,594
14,044,662
86,326,399
68,141,003
109,307,943
38,280,433
8,610,467
2,462,127
1,600,123
1,597,605
10,196,081
326,522,181
300,828,804
252,485,481
Installments overdue
Total
42
Notes to Financial Statements
e) Allowance for loan losses by risk level
R$ Thousand
Banco do Brasil
06.30.2010
Level of
Risk
%
Provision
Value of
loans
Value of
allowance
12.31.2009
Additional Existent
allowance(1) Allowance
Value of
loans
06.30.2009
Value of
allowance
Value of
loans
Value of
allowance
AA
0
81,702,383
--
--
--
71,237,973
--
58,309,481
--
A
0,5
52,795,609
263,978
3,177
267,155
80,417,215
402,086
65,873,104
329,366
B
1
104,966,995
1,049,670
24,326
1,073,996
76,040,439
760,404
61,721,098
617,211
C
3
37,525,610
1,125,768
153,048
1,278,816
24,434,854
733,046
24,141,532
724,246
D
10
8,129,375
812,938
250,916
1,063,854
8,578,979
857,898
6,918,922
691,892
E
30
2,198,825
659,648
798,303
1,457,951
2,735,148
820,544
2,434,335
730,301
F
50
1,475,093
737,547
450,855
1,188,402
1,597,386
798,693
1,504,151
752,075
G
70
1,411,173
987,820
110,578
1,098,398
1,295,454
906,818
1,806,731
1,264,712
H
100
Subtotal
Additional allowance
Total
9,576,593
9,576,593
--
9,576,593
9,556,118
9,556,118
8,389,621
8,389,621
299,781,656
15,213,962
1,791,203
17,005,165
275,893,566
14,835,607
231,098,975
13,499,424
--
--
--
--
--
2,776,300
--
2,753,355
299,781,656
15,213,962
1,791,203
17,005,165
275,893,566
17,611,907
231,098,975
16,252,779
R$ Thousand
BB-Consolidated
06.30.2010
Level of
Risk
%
Provision
Value of
allowance
12.31.2009
Additional
allowance(1)
Existent
Allowance
Value of
loans
06.30.2009
Value of
allowance
Value of
loans
Value of
allowance
AA
0
86,326,399
--
--
--
75,507,847
--
61,760,344
--
A
0,5
68,141,003
340,705
3,177
343,882
95,114,890
475,574
71,638,022
358,190
B
1
109,307,943
1,093,079
24,326
1,117,405
79,428,413
794,284
69,628,835
696,288
C
3
38,280,433
1,148,413
153,048
1,301,461
25,448,587
763,458
25,650,521
769,516
D
10
8,610,467
861,047
250,916
1,111,963
9,072,785
907,279
8,262,920
826,292
E
30
2,462,127
738,638
798,303
1,536,941
2,943,151
882,945
2,663,742
799,123
F
50
1,600,123
800,062
450,855
1,250,917
1,714,522
857,261
1,695,961
847,981
G
70
1,597,605
1,118,324
110,578
1,228,902
1,480,320
1,036,225
1,969,512
1,378,659
H
100
10,196,081
10,196,081
--
10,196,081
10,118,289
10,118,289
9,215,624
9,215,624
326,522,181
16,296,349
1,791,203
18,087,552
300,828,804
15,835,315
252,485,481
14,891,673
Subtotal
Additional allowance
Total
Value of
loans
--
--
--
--
--
2,782,065
--
2,867,342
326,522,181
16,296,349
1,791,203
18,087,552
300,828,804
18,617,380
252,485,481
17,759,015
(1) Refers to the additional provision to the minimum required by CMN Resolution No. 2682/1999, up from the experience of management, by simulation on
the loan portfolio, considering the history of default of operations in accordance with the good banking practice.
43
Notes to Financial Statements
f) Changes in allowance for doubtful accounts
Includes the loans, leases and other receivables with characteristics of credit.
R$ Thousand
Banco do Brasil
1S2010
1S2009
Amount
Allowance
Additional
Provision
Existent
Allowance
Amount
Allowance
Additional
Provision
Existent
Allowance
Opening balance
14,835,607
2,776,300
17,611,907
11,879,197
1,736,618
13,615,815
Provision/(reversal)
6,040,773
(985,097)
5,055,676
4,975,330
1,016,737
5,992,067
2,325
--
2,325
(18,165)
--
(18,165)
Compensation as losses
(5,664,743)
--
(5,664,743)
(3,336,938)
--
(3,336,938)
Closing balance
15,213,962
1,791,203
17,005,165
13,499,424
2,753,355
16,252,779
Exchange variation on allowances - foreign
R$ Thousand
BB-Consolidated
1S2010
1S2009
Amount
Allowance
Additional
Provision
Existent
Allowance
Amount
Allowance
Additional
Provision
Existent
Allowance
Opening balance
15,835,315
2,782,065
18,617,380
12,082,262
1,746,797
13,829,059
Provision/(reversal)
6,556,129
(990,862)
5,565,267
5,331,487
1,012,906
6,344,393
3,299
--
3,299
(38,100)
--
(38,100)
(6,098,394)
--
(6,098,394)
(3,494,205)
--
(3,494,205)
--
--
--
1,010,229
107,639
1,117,868
16,296,349
1,791,203
18,087,552
14,891,673
2,867,342
17,759,015
Exchange variation on allowances - foreign
Compensation as losses
Added Values (1)
Closing balance
(1) Refers to balances arising from the acquisition of Banco Nossa Caixa acquired in March 2009 and incorporated in November 2009.
g) Changes in allowance for other doubtful accounts
Includes provisions for other receivables without characteristics of credit.
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
Opening balance
909,630
Provision/(reversal)
(80,890)
Exchange variation on allowances - foreign
Compensation as losses / Other settings
(1)
Added values
Closing balance
1S2010
1S2009
769,197
980,272
797,869
172,377
(81,061)
174,526
(150)
(805)
(150)
(806)
2,298
(1,201)
(9,416)
(11,232)
--
--
--
62,831
830,888
939,568
889,645
1,023,188
(1) Refers to balances arising from the acquisition of Banco Nossa Caixa acquired in March 2009 and incorporated in November 2009.
44
Notes to Financial Statements
h) Leasing portfolio by maturity
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
(1)
51,359
23,195
55,940
1,901,724
1,975,351
1,495,507
1 to 5 Years
--
37,580
2,920
2,726,201
2,939,741
1,891,177
Over 5 years
--
--
--
12,915
16,681
19,306
51,359
60,775
58,860
4,640,840
4,931,773
3,405,990
Up 1 year
Total Present Value
(1) Includes amounts related to installments overdue.
i) Income from Leasing Operations
R$ Thousand
Banco do Brasil
Lease revenue
Leasing
Operating leases
Lease expenses
Leasing
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
21,877
25,521
1,591,280
988,396
21,877
25,521
1,591,136
987,338
--
--
144
1,058
(18,937)
(22,327)
(1,146,529)
(702,292)
(692,794)
(18,937)
(22,327)
(1,143,416)
Operating leases
--
--
(57)
(609)
Loss on disposal of leased assets
--
--
(2,741)
(8,577)
Other costs of leases
Total
--
--
(315)
(312)
2,940
3,194
444,751
286,104
j) Concentration of credit
R$ Thousand
Banco do Brasil
06.30.2010
%
12.31.2009
%
06.30.2009
%
10 largest debtors
27,297,746
9.1
25,658,711
9.3
22,758,026
9.8
60 largest debtors
57,129,832
19.1
51,769,632
18.8
45,587,100
19.7
160 largest debtors
76,355,006
25.5
69,560,136
25.2
59,781,095
25.9
k) Supplementary information
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
11,947,151
9,395,005
13,801,428
9,417,226
1,443,410
1,132,859
1,387,616
1,158,486
--
--
1,251,357
--
Book value
--
--
1,131,506
--
Gain before taxes
--
--
119,851
--
06.30.2010
06.30.2009
06.30.2010
06.30.2009
85,254,240
40,018,198
82,827,590
45,273,500
7,584,142
7,172,372
12,122,866
7,042,218
Confirmed export credits
625,047
110,666
655,511
110,666
Credit opened for import
722,032
431,048
737,700
445,840
Renegotiated loans
Recovery of loans written off as loss
Amount of credits assigned to other financial institutions
Credits contracted to release
Guarantees given
Revenue from the recovery of loans written off are recorded in income from loans (Note 10.b), according to
CMN Resolution No. 2836/2001. Of that amount, in the 1st half of 2010, R$ 13,607 thousand (book value R$
15,405 thousand) refer to the assignment of receivables written off. In the 1st half of 2009, these amounts
totaled R$ 26,113 thousand (book value R$10,229 thousand).
45
Notes to Financial Statements
11 – Other Receivables
a) Specific credits
These are credits from the Federal Treasury of R$ 978,009 thousand (R$ 931,845 thousand at 12.31.2009
and R$ 888,137 thousand at 06.30.2009), for the extension of terms of rural financing as determined by Law
9138/1995.
b) Sundry
R$ Thousand
Banco do Brasil
06.30.2010
12.31.2009
BB-Consolidated
06.30.2009
06.30.2010
12.31.2009
06.30.2009
Tax credit (note 26.a)
20,364,000
20,206,935
18,665,193
22,431,474
21,909,801
Actuarial Assets (Note 28.d)
14,509,718
12,655,346
8,410,423
14,509,718
12,655,346
8,410,423
Sundry debtors from escrow deposits – lawsuit (Note 25.c)
12,082,682
11,752,804
11,409,884
12,082,682
11,752,804
11,409,884
Sundry debtors from escrow deposits – contingencies (Note 29.d)
9,024,454
8,266,094
6,227,163
10,141,040
9,392,161
8,913,088
Notes and credits receivable - other
5,251,856
4,413,235
2,697,832
7,863,862
7,084,658
3,832,696
Income tax and social contribution on net income to offset
5,038,692
6,802,424
4,755,813
5,607,772
7,407,346
5,106,635
Notes and credits receivable - credit card operations
Installments for purchases with credit cards, divided by the
shopkeepers
5,454,133
4,513,110
3,479,319
5,454,133
4,513,110
3,479,319
3,263,580
3,398,166
2,651,583
3,263,580
3,398,166
2,651,583
Sundry debtors - Brazil
2,073,812
2,342,653
1,393,919
2,399,988
2,722,568
1,172,866
Parity Fund Assets (Note 28a)
1,860,574
1,778,366
2,299,864
1,860,574
1,778,366
2,299,864
Notes and credits receivable Federal Treasury
875,779
793,727
430,859
875,779
793,727
430,859
Advances to Credit Guarantee or Fund (FGC)
833,689
955,693
954,929
833,689
955,693
1,077,696
Sundry debtors from escrow deposits Others
21,053,094
53,589
58,084
165,660
155,815
64,375
165,674
Purchase of assets receivable
202,869
223,576
263,917
202,869
223,577
271,537
Advances on and prepayment of salaries
175,188
222,970
177,390
188,583
229,878
185,230
34,265
30,938
40,026
34,982
32,383
41,462
Other
382,178
364,950
323,263
402,223
399,445
366,683
Total
81,481,058
78,779,071
64,347,037
88,308,763
85,313,404
70,868,593
Current Assets
28,344,083
27,747,561
20,594,037
32,026,002
31,167,511
22,234,250
Non Current Assets
53,136,975
51,031,510
43,753,000
56,282,761
54,145,893
48,634,343
Sundry debtors foreign
46
Notes to Financial Statements
12 – Foreign exchange portfolio
a) Breakdown
R$ Thousand
Banco do Brasil
06.30.2010
BB-Consolidated
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
13,957,465
Assets
Other Receivables
11,271,514
8,480,791
13,861,743
12,257,825
8,671,052
Receivables from sales of foreign exchange
13,030,336
12,353,989
14,345,396
13,557,336
12,379,924
14,362,661
(11,572,262)
(12,034,235)
(13,226,583) (11,708,801)
(12,046,972)
(13,243,851)
9,596,006
7,911,582
12,406,026
10,181,756
8,077,670
12,497,868
138,814
164,068
242,987
148,914
175,043
246,870
73,464
79,758
87,763
73,464
79,758
87,763
5,156
5,629
6,154
5,156
5,629
6,154
11,271,514
8,480,791
13,861,743
12,257,825
8,671,052
13,957,465
Other liabilities
15,342,817
12,106,915
16,249,954
16,321,036
12,173,988
16,338,591
Forward foreign exchange sales pending settlement
12,970,205
11,372,666
13,564,223
13,495,981
11,398,606
13,579,544
(15,556)
(11,026)
(24,362)
(15,556)
(23,585)
(24,362)
9,626,919
8,465,559
13,077,430
10,221,084
8,658,303
13,161,578
(7,253,490)
(7,737,233)
(10,382,341)
(7,456,474)
(7,938,549)
(10,466,485)
10,880
11,025
12,081
72,142
73,289
85,393
3,859
5,924
2,923
3,859
5,924
2,923
Current Liabilities
15,342,817
12,106,915
16,249,954
16,321,036
12,173,988
16,338,591
Foreign exchange portfolio, net
(4,071,303)
(3,626,124)
(2,388,211)
(4,063,211)
(3,502,936)
(2,381,126)
1,317,268
1,513,521
582,858
1,338,391
1,524,184
597,650
625,047
351,645
110,666
655,511
353,947
110,666
(Advances received in local currency)
Forward foreign exchange purchases pending settlement
Income receivable on advances granted
imports
and financed
Bills of exchange and time drafts in foreign currency
Foreign currency receivables
Current Assets
Liabilities
Financed imports - contracted exchange
Foreign exchange purchase liabilities
(Advances on foreign exchange contracts)
Foreign currency payables
Unearned income on advances granted
Memorandum accounts
Credit opened for imports
Confirmed export credit
b) Foreign exchange results
R$ Thousand
Banco do Brasil
Foreign exchange income
Foreign exchange expenses
Foreign exchange results
BB-Consolidated
1S2010
3,031,502
(3,033,681)
1S2009
4,719,567
(4,700,914)
1S2010
3,529,650
(3,476,408)
1S2009
4,737,730
(4,722,846)
(2,179)
18,653
53,242
14,884
47
Notes to Financial Statements
13 – Other Assets
R$ Thousand
Banco do Brasil
Assets not for own use
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
288,725
270,993
249,041
360,868
323,284
298,985
159,002
160,705
156,410
159,088
160,998
165,850
Buildings
79,464
80,073
76,474
81,026
80,507
80,026
Vehicles
516
612
651
70,131
51,281
18,516
Machinery and Equipment
28,416
7,400
11,632
29,186
8,174
13,226
Property
18,787
18,787
472
18,787
18,787
17,833
2,540
3,416
3,402
2,650
3,537
3,534
15,341
19,217
23,219
33,337
40,705
53,017
304,066
290,210
272,260
394,205
363,989
352,002
(Provision for devaluations)
(163,096)
(166,105)
(152,513)
(171,142)
(175,968)
(186,923)
Prepaid Expenses
2,096,061
1,786,071
961,582
2,277,638
2,170,109
1,487,045
Premiums for purchased credits payroll (1)
1,119,555
794,091
453,183
863,921
658,283
453,183
801,298
707,743
338,433
801,297
750,879
542,194
--
--
--
241,040
307,048
207,407
Commissions for credit intermediation financing of vehicles
39,755
52,893
42,175
149,152
175,296
42,175
Personnel expenses - Workers’ Meal Program
74,054
72,911
82,781
74,054
72,911
82,781
Others
61,399
158,433
45,010
148,174
205,692
159,305
Total Other Assets
2,237,031
1,910,176
1,081,329
2,500,701
2,358,130
1,652,124
Current Assets
1,341,387
1,274,903
718,782
1,390,816
1,530,458
1,011,396
895,644
635,273
362,547
1,109,885
827,672
640,728
Assets in special regime
Others
Material in stock
Subtotal Other Assets
Contracts for providing banking services
Insurance selling expenses
Non Current Assets
(1) Were eliminated in the BB-Consolidated premiums paid for the acquisition of Banco Votorantim's claims, because it is unrealized, R$ 255,634 thousand
(R$ 135,808 thousand on 12.31.2009).
48
Notes to Financial Statements
14 – Investments
a) Changes in subsidiaries
R$ thousand
Banco do Brasil
Book Value
Movements
Investments
06.30.2009
12.31.2009
Others
Events (1)
Dividends
BB - Consolidated
Income of
Equity
Book Value
Income of
Equity
1S2010
06.30.2010
1S2009
Book Value
06.30.2009
Income of
Equity
Movements
12.31.2009
Others
Events (1)
Dividends
1S2010
Book
Value
06.30.2010
Income of
Equity
1S2009
Brazil
7.847.466
11.177.506
(866.508)
341.781
1.391.374
12.044.153
1.644.642
4.368.888
5.775.953
(2.636)
79.099
83.539
5.909.879
11.607
Banco Nossa Caixa S.A .(2)
5.557.589
4.900.236
--
(75.632)
--
4.824.604
1.573
3.619.148
4.900.236
--
(75.632)
--
4.824.604
--
BB Administradora de Cartões de Crédito S.A.
25.079
21.325
--
(87)
4.610
25.848
3.653
--
--
--
--
--
--
--
BB Administradora de Consórcios S.A.
16.920
16.920
(26.835)
--
26.835
16.920
20.434
--
--
--
--
--
--
--
78.526
33.578
--
(30)
57.649
91.197
44.948
--
--
--
--
--
--
--
126.602
130.143
(218.293)
24
217.955
129.829
182.723
--
--
--
--
--
--
--
1.896.769
396.509
(142.746)
9.556
469.592
732.911
1.434.977
--
--
--
--
--
--
--
30.087
25.842
--
--
10.019
35.861
(13.202)
--
--
--
--
--
--
--
(4)
17.803
18.519
--
(20.287)
1.768
--
(13.150)
--
--
--
--
--
--
--
BESC Financeira S.A.- Bescredi (4)
18.761
18.795
--
(19.209)
414
--
379
--
--
--
--
--
--
--
7.916
9.810
(172)
102
181
9.921
85
--
--
--
--
--
--
--
19.367
19.382
--
(19.523)
141
--
132
--
--
--
--
--
--
--
--
5.476
--
--
98
5.574
--
--
--
--
--
--
--
--
--
10.364
--
--
251
10.615
--
--
--
--
--
--
--
--
2.840
44.744
--
--
(36.461)
8.283
(12.370)
--
--
--
--
--
--
--
BB Seguros Participações S.A.
--
594.604
(175.436)
(103)
184.670
603.735
--
--
--
--
--
--
--
--
BB Aliança Participações S.A.
--
1.031.928
(205.454)
(466)
225.138
1.051.146
--
--
--
--
--
--
--
--
--
3.774.777
(95.210)
458.093
181.206
4.318.866
--
--
214.571
--
152.414
39.685
406.670
--
--
32.029
(2.362)
--
15.965
45.632
--
--
(8.127)
--
--
--
(8.127)
--
46.903
46.331
--
--
(1.443)
44.888
(6.279)
46.903
46.331
--
--
(1.443)
44.888
(6.279)
2.077
2.087
--
--
72
2.159
102
2.077
2.087
--
--
72
2.159
102
227
228
--
--
--
228
--
227
228
--
--
--
228
--
--
43.879
--
--
32.285
76.164
--
45.008
43.879
--
--
32.285
76.164
10.342
Companhia Brasileira de Securitização – Cibrasec
--
--
--
2.177
(19)
2.158
--
--
--
--
--
--
--
--
Tecnologia Bancária S.A. – Tecban
--
--
--
7.166
448
7.614
--
--
--
--
--
--
--
--
--
--
--
--
--
--
508.634
485.095
--
(2.722)
--
482.373
--
--
--
--
--
--
--
--
52.640
54.621
--
(8.752)
12.415
58.284
9.671
Estruturadora Brasileira de Projetos - EBP
--
--
--
--
--
--
--
1.240
1.784
--
753
(687)
1.850
(275)
Pronor (5)
--
--
--
--
--
--
--
19.353
25.498
(2.636)
--
(2.076)
20.786
(671)
--
--
--
--
--
--
637
73.658
9.750
--
13.038
3.288
--
(1.283)
BB Corretora de Seguros e Administradora de
Bens S.A.
BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.
BB Banco de Investimento S.A.
(3)
BB Leasing S.A. - Arrendamento Mercantil
BB Banco Popular do Brasil S.A.
BESC Distribuidora de Títulos e Valores
Mobiliários S.A. - Bescval
BESC S.A. Arrendamento Mercantil - Besc Leasing (4)
Nossa Caixa Capitalização S.A.
Nossa Caixa S.A. - Administradora de Cartões
de Crédito
Cobra Tecnologia S.A . (5)
Banco Votorantim S.A.
(6)
BV Participações S.A. (7)
Cadam S.A. (5)
Cia. Hidromineral Piratuba
Cia. Catarinense de Assessoria e Serviços - CCA (8)
Mapfre Nossa Caixa Vida e Previdência S.A.
(5)
Goodwill / negative goodwill on acquisition of investments
Itapebi
(5)
Other Participations
(10)
(9)
49
Notes to Financial Statements
R$ thousand
Banco do Brasil
Book Value
Income of
Equity
Movements
Investments
06.30.2009
Abroad
12.31.2009
Others
Events (1)
Dividends
BB - Consolidated
1S2010
Book Value
06.30.2010
Income of
Equity
1S2009
Book Value
06.30.2009
Movements
12.31.2009
Others
Events (1)
Dividends
Income of
Equity
Book Value
Income of
Equity
1S2010
06.30.2010
1S2009
1.023.696
966.096
--
5.713
33.348
1.005.156
(130.122)
--
--
--
--
--
--
--
BAMB-Brasilian American Merchant Bank
689.451
656.043
--
3.043
47.065
706.151
(90.838)
--
--
--
--
--
--
--
Banco do Brasil AG. Viena (Áustria)
240.938
218.620
--
2.093
(21.489)
199.224
(31.983)
--
--
--
--
--
--
--
BB Leasing Company Ltd.
82.773
74.781
--
--
3.299
78.080
(15.230)
--
--
--
--
--
--
--
BB Securities LLC
10.534
16.652
--
577
4.473
21.701
7.929
--
--
--
--
--
--
--
Profit / (loss) in the agencies
--
--
--
--
(2.599)
--
(496.281)
--
--
--
--
(2.599)
--
(496.281)
Profit / (loss) of subsidiaries
--
--
--
--
--
--
--
--
--
--
--
(2.203)
--
(180.239)
Increase / decrease in equity resulting from handling
--
--
--
--
(28)
--
(5)
--
--
--
--
(28)
--
(43)
8.871.162
12.143.602
1.422.095
13.049.309
1.018.234
4.368.888
5.775.953
78.709
5.909.879
(664.956)
Total Investments in Subsidiaries and Affiliates
(1) This refers primarily to amortization of goodwill and adjustments of securities available for sale of subsidiaries and affiliates. At Banco Votorantim also derives from the capital increase R$ 450,000 thousand.
(2) Goodwill on acquisition of Banco Nossa Caixa, built on 11.30.2009.
(3) On 09.30.2009, the capital of BB Investment Bank has been reduced from R$ 1,542,944 thousand, due to spin off its holdings in Alliance in Brazil, Brasilcap Brasilprev, and Brasilveículos Brasilsaúde to BB and Insurance
BB Alliance.
(4) Companies incorporated by the Bank of Brazil in 1st half/2010 (Note 2a).
(5) The information relates to the period of December/2009 to May/2010.
(6) Includes in the book value of 06.30.2010, the amount of R$ 406,670 thousand (R$ 214,571 thousand at 12.31.2009) relating to goodwill in the acquisition of Banco Votorantim. It includes, as a result of equivalence of the
1st half/2010, the amount of R$ 39,685 thousand, relating to the recognition of unrealized income in prior periods
(7) Includes, in the book value, R$ 8,127 thousand, relating to negative goodwill on the acquisition.
(8) Company in liquidation court, not assessed by MEP.
(9) It is the goodwill for the acquisition of the Alliance of Brazil, R$ 486,767 thousand and discount on investments in Brasilprev, R$ 1,561thousand and Brasilsaúde, R$ 111 thousand.
(10) Refer to the holdings of non-financial related companies.
50
Notes to Financial Statements
R$ Thousand
Capital Held
Net Income
(Loss) for the
period
Net Equity
Numbers of Shares
(in thousands)
Common
Participation
%
Preferred
No País
BB Administradora de Cartões de Crédito S.A.
9,300
25,848
4,610
398,158
--
100.00
BB Administradora de Consórcios S.A.
14,100
16,920
26,835
14
--
100.00
BB Corretora de Seguros e Administradora de Bens S.A.
26,918
91,197
57,649
1,000
--
100.00
BB Gestão de Recursos - Distribuidora de Títulos e
Valores Mobiliários S.A.
103,142
129,829
217,955
100,000
--
100.00
BB Banco de Investimento S.A.
361,153
732,911
469,592
3,249
--
100.00
61,860
35,861
10,019
3,000
--
100.00
BESC Distribuidora de Títulos e Valores Mobiliários S.A. Bescval
5,857
9,959
182
10,168,625
--
99.62
Nossa Caixa Capitalização S.A.
5,400
5,574
98
5,400
--
100.00
100.00
BB Leasing S.A. – Arrendamento Mercantil
Nossa Caixa S.A. - Administradora de Cartões de Crédito
10,000
10,615
251
10,000
--
Cobra Tecnologia S.A .
107,267
8,786
(37,239)
22,654
22,680
99.94
BB Seguros Participações S.A.
592,251
603,735
184,670
53,221
--
100.00
100.00
BB Aliança Participações S.A.
964,493
1,051,146
225,138
102,513
--
3,994,920
8,151,807
477,512
33,356,791
7,412,620
50.00
60,423
107,518
31,931
15,105
15,106
50.00
183,904
207,431
(17,351)
--
4,762
21.64
2,047
13,335
334
63,931
--
16.19
780
474
--
260
520
48.13
Mapfre Nossa Caixa Vida e Previdência S.A.
50,000
155,437
65,888
20,000
--
49.00
Companhia Brasileira de Securitização – Cibrasec
68,475
71,240
(613)
2
--
3.03
158,378
168,822
9,919
169,395
--
4.51
105,000
306,759
53,108
19,950
--
19.00
Banco Votorantim S.A.
BV Participações S.A.
Cadam S.A.
Cia. Hidromineral Piratuba
Cia. Catarinense de Assessoria e Serviços - CCA
Tecnologia Bancária S.A. – Tecban
Itapebi
(1)
Estruturadora Brasileira de Projetos - EBP (1)
Pronor (2)
27,750
16,648
(6,185)
2,330
--
11.11
154,686
185,332
(5,216)
5,542
--
12.02
434,010
706,151
26,036
241,023
--
100.00
41,456
199,224
4,334
188
--
100.00
--
78,080
708
1,000
--
100.00
9,004
21,701
4,473
5,000
--
100.00
Abroad
BAMB-Brasilian American Merchant Bank
Banco do Brasil AG. Viena (Áustria)
BB Leasing Company Ltd.
BB Securities LLC
(1) Participations of BB Banco de Investimento S.A.
(2) Participations of BB Gestão de Recursos – Distribuidora de Títulos e Valores Mobiliários S. A
b) Others Investments
R$ Thousand
Banco do Brasil
06.30.2010
12.31.2009
BB-Consolidated
06.30.2009
06.30.2010
12.31.2009 06.30.2009
Investment tax incentives
Equity securities
Stocks and shares
18,810
58
52,434
18,742
58
57,962
17,800
58
51,552
68,007
146
55,948
59,081
146
61,868
32,371
58
61,720
Other investments (1)
Other investments abroad
3,281
12,650
87,233
21,895
10,436
109,093
3,048
10,528
82,986
885,769
13,451
1,023,321
814,893
11,237
947,225
795,997
11,329
901,475
Total
(1) Refers to BB-Consolidated, mainly to other investments related Neoenergia, R$ 816,201 thousand (R$ 732,687 thousand on 12.31.2009 and R$
763,309 thousand on 06.30.2009).
51
Notes to Financial Statements
c) Expected Goodwill Amortization
The expected amortization of goodwill generated by acquisitions of equity backs on projections of results that
supported the business, prepared by specialized firms contemplating the timing of the estimates and discount
rates used in calculating the net present value of expected cash flows .
The amounts written off in 1st half of 2010 totaled R$ 75,632 thousand and R$ 14,781 thousand relating to
goodwill for the acquisitions of Banco Nossa Caixa and Banco Votorantim, respectively.
R$ Thousand
Banco do Brasil
BB-Consolidated
Banco Nossa
Caixa
Banco
Votorantim
Total Gross
Total net
of tax
effects (1)
Aliança do
Brasil (2)
Total Gross
Total net
of tax
effects (1)
2nd half/2010
In 2011
In 2012
75,579
232,491
473,923
20,726
45,883
49,191
96,305
278,374
523,114
57,783
167,024
313,868
142,068
184,247
160,452
238,373
462,621
683,566
151,548
288,627
419,767
In 2013
In 2014
In 2015
617,846
709,394
807,756
54,570
56,722
57,981
672,416
766,116
865,737
403,450
459,670
519,442
-
672,416
766,116
865,737
403,450
459,670
519,442
In 2016
In 2017
Total
900,156
1,007,459
4,824,604
60,466
61,131
406,670
960,622
1,068,590
5,231,274
576,373
641,154
3,138,764
486,767
960,622
1,068,590
5,718,041
576,373
641,154
3,460,031
(1) Amount of depreciation to be held in the period, net of tax (25% of income tax and social contribution of 15%).
(2) The premium for the acquisition of the Alliance of Brazil is registered with controlled non-financial BB-Alliance Holdings SA.
15 – Premises and equipment and leased assets
a) Changes and Breakdown of Fixed Assets
R$ Thousand
Bando do Brasil
12.31.2009
1S2010
06.30.2010
Book
Value
Movements
Depreciation
Impairment
Cost
Value
Premises and equipment
4,006,745
461,315
Buildings
1,433,714
218,713
(427,800)
--
(92,872)
--
Data processing systems
1,245,543
345,147
(234,211)
444,028
87,325
(47,191)
Land
231,970
(19,188)
Facilities
189,907
11,435
Furniture and equipment in stock
151,004
(134,051)
--
--
Communication systems
109,626
8,579
(22,072)
--
Fixed assets under construction
102,706
(53,919)
--
--
98,118
(2,726)
(12,023)
--
129
--
(44)
--
4,006,745
461,315
(427,800)
--
Furniture and equipment for use
Security systems
Transport systems
Total
06.30.2009
Accumulated
Depreciation
Accumulated
impairment
9,884,849
(5,840,091)
(4,498)
4,040,260
3,248,276
3,165,427
(1,602,768)
(3,104)
1,559,555
1,256,659
--
3,719,602
(2,361,729)
(1,394)
1,356,479
990,907
--
1,302,432
(818,270)
--
484,162
395,561
--
--
212,782
--
--
212,782
160,847
(19,387)
--
905,682
(723,727)
--
181,955
177,066
16,953
--
--
16,953
14,673
259,707
(163,574)
--
96,133
91,961
48,787
--
--
48,787
73,688
251,634
(168,265)
--
83,369
86,727
1,843
(1,758)
--
85
187
9,884,849
(5,840,091)
(4,498)
4,040,260
3,248,276
(1)
Book
Value
52
Book Value
Notes to Financial Statements
R$ Thousand
BB-Consolidated
12.31.2009
1S2010
06.30.2010
Book
Value
Movements
Depreciation
Premises and equipment
4,214,484
487,154
(441,327)
Buildings
1,474,422
187,018
(93,102)
Data processing systems
1,303,799
376,444
Impairment
06.30.2009
Cost Value
Accumulated
Depreciation
Accumulated
impairment
(925)
10,367,882
(6,102,400)
(6,096)
4,259,386
3,663,320
--
3,179,578
(1,608,136)
(3,104)
1,568,338
1,330,666
(238,208)
--
3,873,019
(2,429,590)
(1,394)
1,442,035
1,123,705
484,546
(1)
Book
Value
Book
Value
Furniture and equipment for use
533,309
98,328
(55,553)
(925)
1,572,208
(995,451)
(1,598)
575,159
Land
235,120
(19,125)
--
--
215,995
--
--
215,995
240,226
Facilities
194,464
17,787
(19,753)
--
922,235
(729,737)
--
192,498
186,800
Furniture and equipment in stock
151,004
(134,051)
--
--
16,953
--
--
16,953
15,377
Communication systems
113,971
9,113
(22,462)
--
267,335
(166,713)
--
100,622
96,899
Fixed assets under construction
107,096
(46,779)
--
--
60,317
--
--
60,317
85,768
98,678
(2,346)
(12,079)
--
253,085
(168,832)
--
84,253
97,783
Transport systems
2,621
765
(170)
--
7,157
(3,941)
--
3,216
1,550
Leased fixed assets
1,223
--
(328)
--
1,689
(794)
--
895
2,371
4,215,707
487,154
(441,655)
(925)
10,369,571
(6,103,194)
(6,096)
4,260,281
3,665,691
Security systems
Total
(1) Recorded in Other Expenses.
16 – Intangible
a) Changes and Breakdown of Intangible Assets
R$ Thousand
Banco do Brasil
12.31.2009
Rights due to payroll acquisition
Acquisition/development of
software
Total
1S2010
06.30.2010
Impairment
Accumulated
Depreciation
Accumulated
impairment
Book Value
Acquisition
Amortization
5,305,198
2,275,070
(1,006,197)
(338)
9,323,175
(2,707,255)
320,647
110,870
(39,420)
--
476,687
5,625,845
2,385,940
(1,045,617)
(338)
9,799,862
(1)
06.30.2009
Cost
Value
Book Value
Book Value
(42,187)
6,573,733
3,621,740
(84,590)
--
392,097
186,685
(2,791,845)
(42,187)
6,965,830
3,808,425
R$ Thousand
BB-Consolidated
12.31.2009
Rights due to payroll
acquisition
Acquisition/development of
software
Other Intangible assets
Total
1S2010
06.30.2010
Book Value
Acquisition
Amortizati
on
5,305,198
2,275,070
(1,006,197)
371,681
142,688
--
3,952
5,676,879
2,421,710
Impairment
06.30.2009
Book Value
Book
Value
(42,187)
6,573,733
4,895,556
(112,665)
(132)
473,915
232,091
--
--
3,952
--
(2,819,920)
(42,139)
7,051,600
5,127,647
Cost Value
Accumulated
Depreciation
Accumulated
impairment
(338)
9,323,175
(2,707,255)
(40,322)
(132)
586,712
--
--
3,952
(1,046,519)
(470)
9,913,839
(1)
(1) Recorded in Other Expenses.
53
Notes to Financial Statements
b) Estimate for Amortization of Intangible Assets
R$ Thousand
Banco do Brasil
For the year ending:
Amounts to be amortized
2010
2011
2012
2013
2014
2015
Total
925,082
1,836,548
1,778,538
1,491,206
836,282
98,174
6,965,830
R$ Thousand
BB-Consolidated
For the year ending:
Amounts to be amortized
2010
2011
2012
2013
2014
2015
Total
933,659
1,853,702
1,795,692
1,508,361
853,436
106,750
7,051,600
17 – Deposits and Money Market Borrowing
a) Deposits
R$ Thousand
Banco do Brasil
Demand deposits
Individuals
Corporate entities
Restricted
Government
In foreign currencies
Special from Federal Treasury
Related companies
Institutions of the financial system
Domiciled abroad
Others
Savings deposits
Individuals
Corporate entities
Related companies
Institutions of the financial system
Interbank deposits
Time deposits
Local currency
Remunerated deposits in court
Funds and programs – FAT (Note 17e)
Obligations for special– Poupex/Funprogrer
Foreign currency
Others
Deposits for investments
Total
Current Liabilities
Non Current Liabilities
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
58,796,157
56,211,678
45,395,707
59,025,332
56,458,787
49,074,636
23,701,296
22,455,365
17,369,548
23,733,899
22,499,124
19,324,576
20,974,474
22,351,731
17,130,066
21,183,500
22,563,646
18,276,684
7,281,814
5,213,954
5,850,927
7,281,814
5,214,026
5,939,906
3,258,674
3,858,059
2,773,098
3,258,674
3,858,059
3,367,637
1,932,088
442,299
557,419
1,932,088
442,299
559,717
696,831
567,598
568,784
696,831
567,598
568,784
466,025
505,424
562,205
466,985
505,424
562,775
346,285
378,812
453,130
332,969
370,394
344,224
15,047
19,811
18,424
14,949
19,591
18,227
123,623
418,625
112,106
123,623
418,626
112,106
81,540,814
75,741,590
57,601,744
81,540,812
75,741,590
69,011,330
76,219,779
71,159,163
53,225,819
76,219,778
71,159,163
64,405,504
5,044,999
4,318,971
4,074,836
5,044,998
4,318,971
4,268,339
265,941
255,963
295,487
265,941
255,963
330,672
10,095
7,493
5,602
10,095
7,493
6,815
14,104,083
15,556,143
9,529,597
10,436,263
11,618,573
7,459,392
181,222,783
182,366,877
162,382,684
192,715,468
193,515,574
185,072,345
108,368,338
111,039,706
110,326,494
119,860,780
122,188,161
114,191,893
60,253,643
57,479,585
36,991,078
60,253,886
57,479,827
55,801,677
11,383,299
12,667,714
13,917,369
11,383,299
12,667,714
13,917,369
593,479
510,834
602,393
593,479
510,834
602,393
550,490
594,890
475,093
550,490
594,890
475,093
73,534
74,148
70,257
73,534
74,148
83,920
241,535
228,468
224,593
242,951
229,303
227,882
335,905,372
330,104,756
275,134,325
343,960,826
337,563,827
310,845,585
254,863,139
252,490,505
220,497,064
261,485,318
258,676,108
250,628,839
81,042,233
77,614,251
54,637,261
82,475,508
78,887,719
60,216,746
54
Notes to Financial Statements
b) Segregation of Deposits by deadline Chargeability
R$ Thousand
Banco do Brasil
(1)
Time deposits
Savings deposits
Demand deposits
Interbank deposits
Investment deposits
Total
No expiration
Up to 3
months
3 to 12
1 to 3 years 3 to 5 years
months
Over 5
years
Total
06.30.2010
Total
12.31.2009
Total
06.30.2009
74,337,521
13,764,633
14,578,603
25,679,960
52,859,693
81,540,814
--
--
--
--
--
81,540,814
75,741,590
57,601,744
58,796,157
--
--
--
--
--
58,796,157
56,211,678
45,395,707
--
8,138,480
3,465,396
2,420,665
70,951
8,591
14,104,083
15,556,143
9,529,597
241,535
--
--
--
--
--
241,535
228,468
224,593
214,916,027
21,903,113
18,043,999
28,100,625
52,930,644
2,373 181,222,783 182,366,877 162,382,684
10,964 335,905,372 330,104,756 275,134,325
R$ Thousand
BB-Consolidated
(1)
Time deposits
Savings deposits
Demand deposits
Interbank deposits
Investment deposits
Total
No expiration
Up to 3
months
3 to 12
1 to 3 years 3 to 5 years
months
Over 5
years
Total
06.30.2010
Total
12.31.2009
Total
06.30.2009
74,337,521
17,728,700
19,789,518
27,949,285
52,902,084
81,540,812
--
--
--
--
--
81,540,812
75,741,590
69,011,330
59,025,332
--
--
--
--
--
59,025,332
56,458,787
49,074,636
--
5,258,379
3,562,105
1,526,060
80,193
9,526
10,436,263
11,618,573
7,459,392
242,951
--
--
--
--
--
242,951
229,303
227,882
215,146,616
22,987,079
23,351,623
29,475,345
52,982,277
8,360 192,715,468 193,515,574 185,072,345
17,886 343,960,826 337,563,827 310,845,585
(1) It includes the amount of R$ 71,153,586 thousand (R$ 46,002,413 thousand on June 30, 2009 and R$ 41,102,468 thousand on December 31, 2009) at
Banco do Brasil and R$ 77,178,586 thousand (R$ 49,913,785 thousand on June 30, 2009 and R$ 51,946,695 thousand on December 31, 2009) at BB
Consolidated, related to term deposits with clause of anticipated repurchase (liquidity commitment), considering the terms established in funding.
c) Money market repurchases commitments
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
Own Portfolio
52,464,652
25,545,392
22,293,603
63,630,252
31,901,701
28,754,671
Financial Treasury Bills
44,768,586
23,503,150
21,426,176
43,726,705
22,467,046
27,887,244
--
858,162
--
8,345,014
7,946,156
--
National Treasury Bills
5,664,902
--
--
7,908,841
22,897
--
Securities abroad
1,381,562
1,184,080
678,555
1,590,571
1,304,041
678,555
649,602
--
188,872
1,492,771
147,744
188,872
--
--
--
566,350
13,817
--
Third-party portfolio
99,894,264
123,975,419
66,982,711
102,922,773
128,745,194
72,552,923
Financial Treasury Bills
88,405,801
111,805,277
52,486,545
88,405,801
112,555,277
54,494,983
National Treasury Bills
4,809,403
8,305,309
2,302,821
7,328,724
9,469,372
2,302,821
National Treasury Notes
3,932,631
466,563
9,738,465
4,441,819
3,322,275
13,300,239
Securities abroad
2,746,429
3,398,270
2,454,880
2,746,429
3,398,270
2,454,880
--
--
200,000
49,544
174,292
200,000
Total
152,358,916
149,520,811
89,476,314
166,602,569
160,821,187
101,507,594
Current Liabilities
145,494,688
142,412,717
84,832,507
157,393,100
153,699,462
96,864,212
6,864,228
7,108,094
4,643,807
9,209,469
7,121,725
4,643,382
Private equity
National Treasury Notes
Other
Free movement Portfolio
Non Current Liabilities
55
Notes to Financial Statements
d) Expenses with money market repurchase commitments
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
Expenses borrowings with deposits
(9,909,772)
(9,094,422)
(10,809,132)
(9,699,025)
Time deposits
(4,783,764)
(5,099,028)
(5,339,813)
(5,190,705)
Savings deposits
(2,709,778)
(2,150,745)
(2,709,778)
(2,337,564)
Demand deposits
(1,851,293)
(1,233,935)
(1,851,293)
(1,524,256)
Interbank deposits
(244,264)
(442,402)
(249,618)
(445,065)
Others
(320,673)
(168,312)
(658,630)
(201,435)
Expenses with money market repurchase commitments
(6,119,796)
(4,970,961)
(6,739,047)
(5,129,144)
Third-party portfolio
(4,783,382)
(3,947,236)
(4,986,462)
(3,966,672)
Own portfolio
(1,333,787)
(1,007,590)
(1,733,489)
(1,146,337)
(2,627)
(16,135)
(19,096)
(16,135)
(16,029,568)
(14,065,383)
(17,548,179)
(14,828,169)
Subject to repurchase agreements with free movement
Expenses with money market
56
Notes to Financial Statements
e) Fund for Workers’ Assistance (FAT) and Guarantee Fund for Generation of Employment and Earnings (FUNPROGER)
Shown below are the deposits of the Fund for workers assistance (FAT) in Banco do Brasil:
R$ Thousand
Return of FAT funds
Resolution
/ TADE
Program
06.30.2010
Type Opening Closing
Date
Date
(1)
12.31.2009
06.30.2009
Available
TMS (2)
Invested
TJLP (3)
Total
Available
TMS (2)
Invested
TJLP (3)
Total
Available
TMS (2)
Invested
TJLP (3)
Total
6.934.034
100.996
4.993.546
5.094.542
254.282
5.603.916
5.858.198
124.233
6.809.801
Pronaf Custeio
04/2005
RA
11/2005
---
20.586
136.570
157.156
148.895
186.654
335.549
91.022
471.412
562.434
Pronaf Investimento
05/2005
RA
11/2005
---
--
2.923.451
2.923.451
--
3.205.371
3.205.371
--
3.512.971
3.512.971
Giro Rural – Aquisição de Títulos
03/2005
SD
01/2008
01/2014
--
1.196.665
1.196.665
--
1.241.887
1.241.887
--
1.572.218
1.572.218
Giro Rural Fornecedores
14/2006
RA
08/2006
---
33.401
433.515
466.916
35.856
520.301
556.157
--
609.666
609.666
Rural Custeio
02/2006
RA
11/2005
---
7.661
19.169
26.830
21.387
43.317
64.704
7.291
158.621
165.912
Rural Investimento
13/2005
RA
11/2005
---
39.348
284.176
323.524
48.144
406.386
454.530
25.920
484.913
510.833
169.103
5.633.479
5.802.582
82.925
6.120.472
6.203.397
9.812
6.218.558
6.228.370
Proger Rural e Pronaf
Proger Urbano
Urbano Investimento
18/2005
RA
11/2005
---
160.000
5.020.812
5.180.812
74.258
5.434.647
5.508.905
--
5.452.739
5.452.739
Urbano Capital de Giro
15/2005
RA
11/2005
---
--
575.101
575.101
--
630.527
630.527
--
691.039
691.039
Empreendedor Popular
01/2006
RA
11/2005
---
9.103
37.566
46.669
8.667
55.298
63.965
9.812
74.780
84.592
191.192
294.983
486.175
282.976
323.143
606.119
222.622
532.343
754.965
3.501
Others
Exportação
27/2005
RA
11/2005
---
479
1.877
2.356
89
2.647
2.736
819
2.682
Integrar Área Rural
26/2005
RA
11/2005
---
9
32
41
40
38
78
1.309
48
1.357
Integrar Área Urbana
25/2005
RA
11/2005
---
81
9.329
9.410
20
10.299
10.319
2
11.309
11.311
Inclusão Digital
09/2005
RA
11/2005
---
--
11
11
15
23
38
114
136
250
FAT Giro Setorial Micro e Pequenas
Empresas
08/2006
RA
09/2007
---
797
650
1.447
14.755
6.959
21.714
34.480
77.121
111.601
FAT Giro Setorial Médias e Grandes
Empresas
09/2006
RA
09/2007
---
--
--
--
30.654
5.627
36.281
65.054
146.081
211.135
FAT Giro Setorial Veículos MGE
09/2006
RA
02/2009
---
1.605
8.611
10.216
--
11.217
11.217
70.068
10.000
80.068
FAT Giro Setorial Veículos MPE
08/2006
RA
02/2009
---
18.725
89.523
108.248
80.358
97.160
177.518
46.072
74.500
120.572
FAT Giro Cooperativo Agropecuário
10/2006
RA
07/2006
---
--
--
--
11
73
84
621
154
775
FAT Fomentar
Empresas
Micro
11/2006
RA
08/2006
---
1.521
14.570
16.091
1.114
16.632
17.746
739
18.748
19.487
FAT Fomentar
Empresas
Médias
12/2006
RA
07/2006
---
--
103.218
103.218
--
113.165
113.165
--
124.025
124.025
02/2009
RA
09/2009
---
164.831
14.891
179.722
150.000
--
150.000
--
--
--
---
---
---
3.144
52.271
55.415
5.920
59.303
65.223
3.344
67.539
70.883
461.291
10.922.008
11.383.299
620.183
12.047.531
12.667.714
356.667
13.560.702
13.917.369
FAT Taxista
FAT Encargos a capitalizar
e
Pequenas
e
Grandes
---
Total
(1) RA - Auto Return (monthly, 2% on the balance) and SD - Available Balance.
(2) Funds remunerated by the Average Selic Rate (TMS).
(3) Funds remunerated by the long-term interest rate (TJLP).
57
Notes to Financial Statements
FAT is a special accounting and financial fund, established by Law 7998/1990, attached to the Ministry of Labor
and Employment (MTE) and managed by the Executive Council of the Workers’ Assistance Fund (Codefat),
CODEFAT is a collective, tripartite, equal level organization, composed of representatives of workers,
employers and government, which acts as the manager of FAT.
The main actions to promote employment using FAT funds are structured around the Programs for the
Generating Employment and Earnings (PROGER), whose resources are allocated through special deposits,
established by Law 8352/1991, in official federal financial institutions (including, among others, PROGER in
the urban program- Investment and Working Capital - and rural program, the National Program for
Strengthening Family Farming - Pronaf, the program that allocates resources for the purchase of
construction materials - FAT Housing, in addition to the special lines such as FAT Rural and Urban
Integration, FAT Giro Setorial - Micro and Small-Sized Companies, FAT Giro Setorial - Medium and LargeSized Companies, FAT Fomentar - Micro and Small-Sized Companies, FAT Fomentar - Medium and LargeSized Companies, FAT Giro Agropecuário, FAT Digital Inclusion and FAT Taxi).
The FAT special deposits, allocated with Banco do Brasil, while available, incur interest on a daily pro rata
basis using the Average Selic Rate (TMS), As they are applied on loans, the interest rate is changed to the
Long-term Interest Rate (TJLP) during the effective period of the loans, The earnings on the Bank’s funds
are paid to FAT on a monthly basis, as established in CODEFAT Resolutions 439/2005 and 489/2006.
The Guarantee Fund for Generation of Employment and Earnings (Funproger) is a special accounting fund
established on November 23, 1999 by Law 9872/1999, amended by Law 10360/2001 and by Law
11110/2005 and regulated by Codefat Resolution 409/2004, It is managed by Banco do Brasil under the
supervision of Codefat/MTE, and the balance is R$ 143,979 thousand (R$ 335,131 thousand on June 30,
2009 and R$ 225,565 thousand on December 31, 2009).
The purpose of FUNPROGER is provide guarantees to entrepreneurs who do not have the necessary
guarantees of their own to contract PROGER Urbano and PNMPO financing, through payment of a fee, The
net assets of FUNPROGER are accumulated through funds arising from the difference between the average
SELIC Rate (TMS) and the Long-Term Interest Rate (TJLP) in respect of the remuneration of the special
deposit balances available in FAT. Other sources of funds are the earnings from its operations and the
income on its cash resources paid to Banco do Brasil, the Fund manager.
58
Notes to Financial Statements
18 – Borrowings
a) Borrowings
R$ Thousand
Banco do Brasil
up to
90 days
from 91 to
360 days
from 1 to
3 years
from 3 to
5 years
Total
from 5 to
15 years 06.30.2010
Total
12.31.2009
Total
06.30.2009
In Brazil
Exports
--
--
--
--
--
--
--
3,832,295
Borrowings by bankers abroad
3,853,857
Borrowings from BB Group abroad
1,494,266
4,107,845
310,366
7,204
--
8,279,272
3,660,559
2,851,370
3,915,410
2,442,040
--
--
7,851,716
5,783,779
6,407,951
--
232,310
433,014
433,014
--
1,098,338
1,176,000
1,445,949
Imports
107,078
66,890
114,864
67,561
22,920
379,313
402,961
442,489
Exports
18,027
21,017
--
--
--
39,044
27,346
24,596
5,473,228
8,343,472
3,300,284
507,779
22,920
17,647,683
11,050,645
15,004,650
13,816,700
6,274,611
10,111,206
3,830,983
4,776,034
4,893,444
Abroad
Public sector repass borrowing
Total
Current Liabilities
Non Current Liabilities
R$ Thousand
BB-Consolidated
up to
90 days
In Brazil
Borrowing by non financial companies
from 91 to
360 days
from 1 to
3 years
from 3 to
5 years
Total
from 5 to
15 years 06.30.2010
Total
12.31.2009
Total
06.30.2009
116,063
--
3,633
--
--
119,696
157,761
104,215
--
--
--
--
--
--
70,976
3,832,295
6,069
5,649
5,649
--
--
17,367
22,319
--
Borrowings by bankers abroad
4,138,388
5,016,885
1,184,034
10,176
--
10,349,483
4,507,182
2,851,479
Public sector repass borrowing
--
232,310
433,014
433,014
--
1,098,338
1,176,000
1,445,949
Imports
90,310
49,434
65,275
41,675
12,867
259,561
248,659
285,055
Exports
61,858
109,508
--
--
--
171,366
187,366
17,434
4,412,688
5,413,786
1,691,605
484,865
12,867
12,015,811
6,370,263
8,536,427
Current Liabilities
9,826,474
4,810,915
7,170,898
Non Current Liabilities
2,189,337
1,559,348
1,365,529
Exports
Others
Abroad
Total
59
Notes to Financial Statements
b) Repass Borrowings from official institutions – In Brazil
R$ Thousand
Banco do Brasil
Programs
BB-Consolidated
Financial Charges
06.30.2010 12.31.2009
National Treasury - Rural credit
06.30.2009 06.30.2010 12.31.2009 06.30.2009
2,073,619
2,100,693
3,574,417
2,073,619
2,100,693
3,574,417
Pronaf
TMS (Available) or
0,5% p,a, a 5,5% p,a, (Allocated)
1,835,010
1,840,672
3,304,992
1,835,010
1,840,672
3,304,992
Recoop
5,75% p,a, to 7,25% p,a,
128,149
150,041
160,580
128,149
150,041
160,580
TJLP + 0,6% p,a, or 6,35% p,a,
68,053
67,668
66,613
68,053
67,668
66,613
Farming/livestock breeding
TR or 3% p,a,
41,052
40,957
40,877
41,052
40,957
40,877
Others
--
1,355
1,355
1,355
1,355
1,355
1,355
20,624,630
17,877,865
11,085,088
22,249,516
19,629,502
11,117,948
20,624,630
17,877,865
11,085,088
20,624,630
17,877,865
11,117,948
Cocoa
BNDES
Banco do Brasil
Banco Votorantim
0,6305%p,a, to 15,35%p,a, or
TJLP/fx, variation+0,50%p,a to 8,55%p,a,
1,50%p,a, to 16,60%p,a or
TJLP/ fx, variation +1,30%p,a, to 11,50%p,a,
CEF
--
FINAME
Banco do Brasil
Banco Votorantim
1,00%p,a to 11,00%p,a or
TJLP/fx, variation +0,5%p,a to 5,50%p,a,
--
--
--
1,624,886
1,751,637
--
141,635
146,232
--
141,635
146,232
159,188
10,433,626
7,637,163
6,938,214
11,372,559
8,381,169
7,009,271
10,433,626
7,637,163
6,938,214
10,449,626
7,656,392
7,009,271
0,30%a,a to 11,00%a,a or
TJLP/ fx, variation +6,50%p,a to 11,50%p,a,
--
--
--
922,933
724,777
--
--
471,072
1,132,572
764,892
471,072
1,132,572
765,093
TMS (available) or 6,75%p,a,
470,934
1,132,409
764,576
470,934
1,132,409
764,576
138
163
316
138
163
517
Total
33,744,582
28,894,525
22,362,611
36,308,401
31,390,168
22,625,917
Current Liabilities
11,377,281
11,472,080
13,682,710
12,167,790
12,405,660
13,750,611
Non Current Liabilities
22,367,301
17,422,445
8,679,901
24,140,611
18,984,508
8,875,306
Other
Funcafé
Other
--
c) Expense of Borrowings and Transfers (official institutions)
R$ Thousand
Banco do Brasil
1S2010
Cost of Borrowings
Expenses Onlendings
BB-Consolidated
1S2009
1S2010
1S2009
(380,471)
(90,146)
(269,198)
(89,313)
(1,123,824)
(817,910)
(1,210,364)
(821,739)
BNDES
(652,864)
(447,598)
(717,353)
(447,949)
Finame
(277,558)
(244,451)
(302,394)
(246,250)
Foreign
(99,355)
--
(96,570)
--
Treasury
(65,709)
(90,902)
(65,709)
(90,902)
CEF
(2,478)
(10)
(2,478)
(1,681)
(25,860)
(34,949)
(25,860)
(34,957)
Expenses for Financial and Development liabilities
(282,242)
(260,185)
(282,242)
(287,210)
Expenditure obligations with foreign banks
(125,370)
--
(138,289)
(590)
(1,911,907)
(1,168,241)
(1,900,093)
(1,198,852)
Others
Total
60
Notes to Financial Statements
19 – Resources from securities issues
R$ Thousand
Amount
Issued
Resources
Remuneration
(p.a.)
Data
Capture
Maturity
06.30.2010
12.31.2009
06.30.2009
Banco do Brasil
Global Medium - Term Note Program
R$
350,000
9,75%
07/2007
07/2017
332,008
316,244
319,375
US$
100,000
Libor 6m+2,55%
07/2009
07/2014
167,844
171,160
--
US$
950,000
4,50%
01/2010
01/2015
1,749,665
--
--
US$
500,000
6,0%
01/2010
01/2020
924,030
--
--
2,138,881
1,324,360
389,943
US$
199,889
3,88%
06/2009
06/2012
359,940
347,886
389,943
US$
98,105
3,08%
07/2009
07/2012
176,658
170,742
--
US$
4,908
2,92%
07/2009
06/2012
8,838
8,542
--
US$
98,101
3,00%
08/2009
08/2012
176,650
170,734
--
US$
9,920
3,46%
08/2009
08/2016
17,863
17,265
--
US$
98,127
2,85%
09/2009
08/2012
176,697
170,780
--
US$
99,941
3,36%
10/2009
10/2012
179,965
173,938
--
US$
146,961
2,53%
10/2009
10/2012
264,631
255,771
--
US$
4,000
3,80%
11/2009
12/2012
7,203
6,962
--
US$
1,000
3,67%
12/2009
12/2012
1,801
1,740
--
US$
99,000
3,03%
01/2010
01/2013
178,269
--
--
US$
100,000
2,88%
01/2010
01/2013
180,070
--
--
US$
195,854
2,12%
03/2010
03/2013
352,674
--
--
US$
2,000
3,19%
05/2010
05/2013
3,601
--
--
US$
30,000
1,82%
05/2010
05/2011
54,021
--
--
759,733
71,552
R$
--
--
--
--
--
--
1,945
US$
--
--
--
--
1,665,235
754,754
58,749
EUR
--
--
--
--
--
4,979
10,858
R$
--
--
--
--
30,222
--
--
7,007,885
2,571,497
780,870
Certificates of deposits - Long Term
Certificates of deposits - Short Term (1)
Resources Letters of Credit - Agribusiness
(2)
Total Banco do Brasil
Special purpose entities - EPE Abroad
(3)
Securitization of future flow of payment orders from abroad
US$
300,000
Libor 3m+0,60%
07/2002
06/2009
--
--
--
US$
40,000
7,890%
09/2002
09/2009
--
--
3,807
US$
120,000
7,26%
03/2003
03/2010
--
12,362
40,843
US$
250,000
6,55%
12/2003
12/2013
251,299
273,289
338,334
US$
250,000
Libor 3m+0,55%
03/2008
03/2014
448,780
435,265
488,468
US$
200,000
Libor 3m+1,20%
09/2008
09/2015
360,418
348,319
391,254
US$
150,000
5,25%
04/2008
06/2018
270,735
261,707
293,345
1,331,232
1,330,942
1,556,051
Total Special purpose entities - EPE Abroad
Banco Votorantim
Debentures
1,535,787
1,475,559
--
Foreign Exchange
R$
--
PTAX+12,0436%
12/2006
12/2011
849,778
818,833
--
Pós-fixFloating rated
R$
--
DI + 0,35%
07/2007
07/2012
686,009
656,726
--
R$
--
--
02/2009
01/2012
13,185
53,156
--
R$
--
--
07/2007
03/2020
883,799
909,132
--
1,327,213
694,931
--
US$
--
--
--
--
297,581
219,177
--
R$
111,000
16,2%
11/2005
11/2010
40,502
37,548
--
R$
200,000
9,25%
12/2005
12/2012
84,090
79,806
--
R$
200,000
10,625%
04/2007
04/2014
103,534
89,888
--
US$
100,000
Libor 3m+2,0%
08/2005
08/2010
76,527
75,767
--
US$
200,000
6,875%
10/2005
10/2015
112,716
1,858
--
US$
200,000
6,75%
09/2006
09/2016
86,687
84,007
--
US$
500,000
4,25%
02/2010
02/2013
457,766
--
--
Resources letters of credit real estate
(4)
Resources letters of credit agribusiness
(4)
Liabilities for securities abroad - Program Global Medium - Term Notes
Short Term
Long Term
(5)
61
Notes to Financial Statements
Amount
Issued
Resources
Remuneration
(p.a.)
Data
Capture
Maturity
06.30.2010
12.31.2009
06.30.2009
USD
75,000
4,25%
04/2010
02/2013
67,810
--
--
US$
23,070
4,184%
02/2008
01/2010
--
1,338
--
US$
9,990
4,0%
07/2008
07/2010(6)
--
379
--
US$
4,000
3,98%
07/2009
04/2012(6)
--
21
--
US$
15,500
3,9088%
07/2009
04/2012(6)
--
76
--
US$
1,500
4,0538%
07/2009
05/2012(6)
--
9
--
US$
5,000
8,9%
07/2009
07/2014(6)
--
134
--
US$
120,000
5,1%
06/2008
06/2015(6)
--
104,679
--
EUR
250
1,0%
08/2009
12/2011(6)
--
135
--
05/2007
03/2012
(6)
--
5
--
05/2012
(6)
--
55
--
05/2012
(6)
--
49
--
3,759,984
3,132,778
--
EUR
EUR
EUR
1,000
10,000
9,000
5,2648%
4,0538%
4,0538%
07/2009
07/2009
Total Banco Votorantim
Non-Financial Corporations
Real Estate Receivables Certificates
Debentures
R$
--
--
--
--
6,734
306,463
315,026
R$
--
TJLP+3,8%
09/2007
09/2020
131,193
20,794
21,067
137,927
327,257
336,093
(4,865)
(155)
--
Total - BB Consolidated
12,232,163
7,362,319
2,673,014
Current Liabilities
Non Current Liabilities
2,031,371
1,406,912
445,948
10,200,792
5,955,407
2,227,066
(7)
Total Non-Financial Corporations
Eliminated amount on consolidation (8)
(1) Securities maturing in less than 360 days and interest rates of the certificate issued in U.S. dollars (US$ 906,128 thousand) between 0.23% and 2.30%
p.a.
(2) Title of agribusiness credit, with maturity of less than 360 days, with a refresh rate equal to 90% of DI p.a. pro rata to maturity.
(3) 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) the issuance and sale of securities in the international market, (b) use of resources obtained by issuing securities to pay for the
purchase, with the BB, the rights to payment orders issued by banking correspondents located in the U.S. and by the agency of BB New York in U.S.
dollars, for an agency for BB Brazil ( "Rights on Consignment") and (c) making payments of principal and interest on securities and other payments payable
on the issuance of these securities. EPE did not claim to have no assets or liabilities other than the relevant rights and obligations from the contracts issue
of securities. The BB has no control, is not a shareholder, it owns and participates in either the results of EPE. The obligations of the securities issued by
EPE are paid with funds accumulated in your account.
(4) Refresh rates are substantially to 90% of DI.
(5) Securities with a maturity of less than 360 days and interest rates between 0.85% and 1.30% p.a.
(6) Transactions settled in advance during the 1st half/2010.
(7) Debt with the average maturity of 128 months, average effective rate of 9.7% p.a., with the indices Reference Rate - TR General Price Index-Market IGP-M Index and Consumer Price Index - IPCA.
(8) Refers to securities issued by Banco do Brasil S.A., in possession of controlled company abroad.
62
Notes to Financial Statements
20 – Other liabilities
a) Financial and development funds
R$ Thousand
Banco do Brasil
PIS/Pasep
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
2,107,678
1,916,461
1,903,778
2,107,678
1,916,461
1,903,778
Merchant Navy
855,733
750,151
648,310
855,733
750,151
648,310
Funds from the State Government of Sao Paulo
485,826
475,925
--
485,826
475,925
470,840
Special Lending Program for Agrarian Reform - Procera
177,717
181,594
204,365
177,717
181,594
204,365
47,417
4,049
263
47,417
4,049
263
Combating Rural Poverty/Our First Plot of Land (CPR/NPT)
6,617
1,674
9,230
6,617
1,674
9,230
Land and Agrarian Reform - BB Banco da Terra
2,316
2,218
3,244
2,316
2,218
3,244
--
755,281
--
--
755,281
655,818
Consolidation of Family Farming (CAF)
Judicial Deposit Reserve Fund
(1)
Other
45,512
47,261
179,581
45,512
47,261
179,660
Total
3,728,816
4,134,614
2,948,771
3,728,816
4,134,614
4,075,508
Current Liabilities
1,441,501
2,050,776
829,726
1,441,501
2,050,776
829,726
Non Current Liabilities
2,287,315
2,083,838
2,119,045
2,287,315
2,083,838
3,245,782
(1) It refers to funds specific for guarantee of judicial deposits transferred to the State Treasury of São Paulo and to the City Councils of such State.
b) Taxes and social security
R$ Thousand
Banco do Brasil
Provision for legal litigation (Note 29.e)
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
11,502,534
11,245,230
10,981,334
11,502,534
11,245,230
10,981,334
Provision for deferred taxes and contributions (Note 26.c)
5,357,346
4,576,390
3,000,592
6,443,413
5,429,405
3,466,981
Provision for taxes and contributions on profits
2,054,256
64,335
2,348,065
2,828,331
653,257
3,362,327
Taxes payable
1,016,991
661,898
518,573
1,258,712
1,500,829
784,438
198,895
174,696
188,098
1,221,967
1,138,706
1,424,844
120,901
Provision for tax litigation (Note 29.b)
Taxes and contributions on net income payable
5,942
3,677,933
9,349
153,232
4,038,001
296,215
291,248
--
899,890
291,271
--
Total
20,432,179
20,691,730
17,046,011
24,308,079
24,296,699
20,140,825
Current Liabilities
15,527,514
16,568,631
14,474,786
17,288,548
18,315,213
16,030,541
4,904,665
4,123,099
2,571,225
7,019,531
5,981,486
4,110,284
Others
Non Current Liabilities
c) Special Operations
R$ Thousand
Banco do Brasil
BB-Consolidated
03.31.2010
12.31.2009
03.31.2009
03.31.2010
12.31.2009
03.31.2009
204,007
204,007
2,137,443
204,007
204,007
2,137,443
2,113
2,138
2,174
2,113
2,138
2,174
145
140
140
145
140
140
Total
206,265
206,285
2,139,757
206,265
206,285
2,139,757
Current liabilities
204,007
204,007
2,137,443
204,007
204,007
2,137,443
2,258
2,278
2,314
2,258
2,278
2,314
Government, Special procurement
Investment fund sector
Other special operations
Long Term Liabilities
(1)
(1) Refers to the transfer of funds, according to Resolution No. 3.607/2008 Bank, for use in rural credit.
63
Notes to Financial Statements
d) Subordinated debt
R$ Thousand
Resources
Amount
Issued
Remuneration
p.a.
Date
Capture
Maturity
06.30.2010
12.31.2009
06.30.2009
Banco do Brasil
FCO - Recursos do Fundo Constitucional do Centro-Oeste
--
--
--
--
13,239,454 12,422,046 11,788,116
Funds applied (1)
R$
--
--
--
--
11,360,015 10,755,066 10,919,721
Resources available (2)
R$
--
--
--
--
1,630,023
1,446,763
627,238
Charges to capitalize
R$
--
--
--
--
249,416
220,217
241,157
3,596,792
3,432,246
2,304,076
R$
900,000
113,8% do CDI
03/2009
09/2014
1,021,732
974,137
928,380
R$
1,335,000
115% do CDI
03/2009
03/2015
1,515,558
1,444,230
1,375,696
R$
1,000,000
105% do CDI
11/2009
11/2015
1,059,502
1,013,879
--
300,000
8,5%
09/2004
09/2014
551,208
533,277
596,948
1,000,000
108,5% do CDI
03/2010
03/2016
1,024,424
--
--
Subordinated CDB issued in the country
Subordinated debt Abroad
US$
Subordinate Financing Bills
R$
Total Subordinated debt Banco do Brasil
18,411,878 16,387,569 14,689,140
Banco Votorantim
Subordinated CDB issued in the country
1,539,508
1,463,908
--
R$
312,500
CDI+ 0,491417%
11/2007
11/2012
411,584
393,716
--
R$
8,500
CDI+ 0,491417%
12/2007
12/2012
11,175
10,690
--
R$
200,000
CDI+0,540556%
12/2007
12/2012
263,285
251,792
--
R$
32,500
IGPM+7,219701%
12/2007
12/2012
45,212
41,352
--
R$
57,500
IPCA+7,934241%
03/2008
03/2013
77,392
72,052
--
R$
7,500
IPCA+7,855736%
08/2009
08/2014
8,389
7,814
--
R$
5,250
IPCA+7,924428%
08/2009
08/2014
5,876
5,471
--
R$
19,500
IPCA+8,002932%
08/2009
08/2014
21,838
20,326
--
R$
2,500
IPCA+7,953867%
08/2009
08/2014
2,798
2,605
--
R$
260,000
CDI+1,670229%
08/2009
08/2014
284,529
270,586
--
R$
250,000
CDI+1,635268%
12/2009
12/2014
264,593
251,670
--
R$
135,000
CDI+1,674668%
12/2009
12/2014
142,837
135,834
--
Subordinated Note
US$
375,000
Pré+7,38%
01/2010
01/2020
700,558
--
--
Debentures
R$
693,575
CDI+0,5% a, a,
04/2006
04/2016
687,685
703,621
--
2,927,751
2,167,529
--
--
(1,858)
--
Total Subordinated debt Banco Votorantim
Subordinated debt issued by the Banco do Brasil, in the possession of controlled Abroad, eliminated in the BB-Consolidated
Total Subordinated debt BB Consolidated (3)
21,339,629 18,553,240 14,689,140
(1) Contracted charges are paid by borrowers with less the del credere financial institution, according to article 9 of Law No. 7.827/1989.
(2) Remunerated based on extra-rate announced by the Central Bank of Brazil, pursuant to Article 9 of Law No. 7.827/1989.
(3) The amount of R$ 19,376,109 thousand (R$ 17,078,207 thousand on 12.31.2009 and R$ 14,653,089 thousand on 06.30.2009) make up the Capital (PR),
level II, in accordance with Resolution CMN n º 3.444 / 2007, 02.28.2007 (Note 30f).
64
Notes to Financial Statements
e) Hybrid
capital and debt instruments
R$/US$ Thousand
Banco do Brasil e BB-Consolidated
Funding
Issued value
Remuneration
(p.a.)
Date of funding
06.30.2010
R$ thous
12.31.2009
R$ thous
06.30.2009
R$ thous
US$
500,000
7.95%
01/2006
US$
1,500,000
8.50%
10/2009
985,628
883,194
990,263
2,657,765
2,633,591
3,643,393
--
3,516,785
990,263
Perpetual Bonuses
Total BB-Banco do Brasil
Values eliminated in the BB-Consolidated
Total BB-Consolidated
Current Liabilities
Long term Liabilities
2,000,000
(344)
(981)
--
3,643,049
3,515,804
990,263
--
13,260
14,863
3,643,049
3,502,544
975,400
The amount of R$ 2,611,015 thousand of the perpetual bonuses comprise the Referential Shareholders'
Equity (PR), level II, in conformity with CMN Resolution 3444/2007 (Note 30f).
The amount of R$ 882,343 thousand of the perpetual bonuses comprise the Referential Shareholders' Equity
(PR), level II, in conformity with CMN Resolution 3444/2007(Note 30f).
The operation of US$ 500,000 thousand, issued in January 2006, has a redemption option by initiative of the
Bank as from 2011 or in each subsequent quarterly payment of interest, providing it is authorized beforehand
by the Central Banco do Brasil. The terms of these Perpetual Bonuses allow the Bank to suspend quarterly
payments of interest and/or accessory payments on the aforesaid securities issued (which will neither be due
or accumulated) if: (i) the Bank determines that it is incapable or the payment of these charges does not
allow the Bank to be in conformity with the capital adequacy levels then required by the Central Banco do
Brasil or its financial indicators are below the minimum level required by the regulations applicable to
Brazilian banks; (ii) the Central Banco do Brasil 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 decides to suspend these payments for any other reason. If the Bank decides to
suspend the payment of interest and accessories due to the Perpetual Bonuses on account of the contents
of item (v) above, the terms of the Perpetual Bonuses provide that, until such payments have been resumed
for a period equivalent to 12 months, the Bank (a) cannot recommend to its stockholders and, and as
established by the applicable legislation, will act in order to avoid the statement, payment or distribution of
dividends or interest on own capital on its common stock and (b) will suffer restrictions on its capacity to
redeem or otherwise acquire its common stock.
The transaction of US$ 1,500,000 thousand, 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 that prior
authorization by the Banco Central do Brasil. If the Bank does not exercise the option to redeem in October
2020, interest on the bonds will be corrected by this date and every 10 years, taking into account the trading
price of the Treasury of the U.S. 10 years. The terms of Perpetual 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 Banco Central do Brasil or the Regulatory Authorities to determine the
suspension of payments of these costs, (iii) any event of insolvency occurs, (iv) any default occurs, or (v) the
Bank has not distributed dividend payments or interest on equity to common shareholders for the period
corresponding to the period of calculation of such interest and / or accessories.
65
Notes to Financial Statements
f) Sundry
R$ Thousand
BB-Consolidated
Banco do Brasil
06.30.2010 12.31.2009 06.30.2009 06.30.2010 12.31.2009 06.30.2009
Credit card operations
(1)
7,770,628
7,982,813
5,546,077
7,770,628
7,982,813
5,546,077
Actuarial Liability (Note 28.c).
6,758,094
6,373,767
5,796,001
6,758,094
6,373,767
6,179,027
Provisions for payments
3,001,009
3,028,675
3,152,207
3,482,382
3,452,755
3,707,718
Sundry creditors - Brazil
2,036,985
1,878,724
410,089
3,437,127
3,093,899
1,799,420
Provisions for civil claims (Note 29.b)
3,204,045
3,036,381
2,472,361
3,353,840
3,131,472
3,806,430
Provisions for labor grievances (Note 29.b)
2,736,323
3,242,208
3,054,039
2,804,314
3,300,748
4,079,426
Obligations for premiums granted by the customer loyalty
2,231,921
1,170,060
674,333
2,231,921
1,170,060
674,333
708,044
627,782
608,290
1,150,086
1,056,660
1,077,954
Obligations for the acquisition of Banco Nossa Caixa
957,302
3,674,324
4,457,724
957,302
3,674,324
4,457,724
Accounts payable for payment services provided
757,342
280,874
574,529
757,342
280,874
576,877
Liabilities for official agreements
696,483
1,191,354
789,222
696,483
1,191,354
994,559
Provision for losses with FCVS
279,357
269,309
--
279,357
269,309
277,649
Liabilities for purchase of goods and rights
243,056
855,655
144,614
244,986
855,987
144,614
Provisions for guarantees provided
75,600
70,191
63,773
78,927
70,204
63,793
Assumption of obligations - Securitization (Note 20.g)
76,455
109,288
161,055
76,455
109,288
161,055
58,327
61,661
40,785
64,257
70,098
46,880
195,726
106,168
8,548
456,872
1,014,718
304,434
Funds subject to loans
Sundry creditors - abroad
Other
Total
31,786,697 33,959,234 27,953,647 34,600,373 37,098,330 33,897,970
Current Liabilities
23,716,177 26,499,585 20,387,548 23,081,957 26,464,456 20,833,311
Long term Liabilities
8,070,520
7,459,649
7,566,099 11,518,416 10,633,874 13,064,659
(1) Includes the value of the installments of shopping with credit cards by retailers installments in the amount of R$ 3,263,580 thousand (R$ 3,398,166 thousand
at 12.31.2009 and R$ 2,651,583 thousand on 06.30.2009).
g) Securitization
R$/US$ Thousand
Banco do Brasil e BB-Consolidated
Funding
Issued
value
Remuneration
(p.a.)
Date of
funding
Maturity
06.30.2010
R$ thous
12.31.2009
R$ thous
06.30.2009
R$ thous
US$
178,474
5.911%
07/2003
06/2011
61,394
88,418
129,178
US$
44,618
4.777%
07/2003
06/2011
15,061
20,870
31,877
76,455
109,288
161,055
Future flow of credit card invoice receivables
Total
223,092
The Special Purpose Company - SPC "Brazilian Merchant Voucher Receivables" was created under the laws of the
Cayman Islands with the following purposes: (a) issue and sell securities in the international market; (b) to use funds
raised with the issue of securities to pay for the purchase of current and future rights of Cielo S.A. (Visanet) against Visa
International Service Association over the Receivables arising from: (i) credit or charge purchases made in Brazilian
territory, in any currency processed by Visanet, with Visa cards issued by financial institutions located outside of Brazil,
or (ii) credit or charge purchases processed by Cielo in foreign currency and made with Visa cards issued by financial
institutions located in Brazil; 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. BB is the beneficiary of 44.618488% 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. BB 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.
66
Notes to Financial Statements
21 – Insurance, pension and capitalization operations
a) Claims Operations
R$ Thousand
BB-Consolidated
06.30.2010
12.31.2009
06.30.2009
Direct insurance premiums receivable
Credit insurance business with insurers
Credit insurance transactions with reinsurers
Total
658,122
7,426
150,170
815,718
612,282
9,447
286,481
908,210
458,890
7,078
236,434
702,402
Current assets
Non current assets
794,598
21,120
885,945
22,265
681,429
20,973
67
Notes to Financial Statements
b) Technical Provisions
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
BB–Consolidated
Mathematical provision for future benefits
Mathematical provision for vested benefits
Mathematical provision for redemptions
Mathematical
premiums
provision
for
unearned
Insurance
Pension
Capitalization
Total
4.932
21.228.842
--
232
578.057
--
578.289
222
358.872
--
36.762
1.865.673
1.902.435
--
14.862
21.233.774
Insurance
Pension Capitalization
8.984 12.271.198
--
Total
Insurance
Pension Capitalization
--
Total
12.280.182
4.809
10.459.169
10.463.978
--
359.094
241
335.793
--
336.034
1.743.419
1.758.281
--
1.884
1.587.691
1.589.575
957.443
--
--
957.443
1.041.045
--
--
1.041.045
811.352
--
--
811.352
Provision for unsettled claims
852.464
--
--
852.464
858.902
--
--
858.902
850.350
--
--
850.350
Provision for financial surplus
--
391.842
--
391.842
--
255.445
--
255.445
--
283.127
--
283.127
Provision for insufficiency of contributions
--
248.815
--
248.815
--
154.005
--
154.005
--
148.330
--
148.330
Provision for financial fluctuation
--
241.609
--
241.609
--
151.937
--
151.937
--
142.440
--
142.440
Provision for IBNR
187.274
5.770
--
193.044
232.495
3.441
--
235.936
183.577
2.509
--
186.086
Provision for premiums deficiency
Provision for draws for prizes
redemptions
Other provisions
115.149
50.068
--
165.217
92.689
26.777
--
119.466
76.248
20.536
--
96.784
--
--
60.559
60.559
--
--
56.430
56.430
--
--
54.879
54.879
41.734
36.600
16.973
95.307
33.913
24.669
9.871
68.453
26.057
22.740
4.994
53.791
Total
2.159.228
22.818.365
1.943.205
26.920.798
2.268.250 13.261.206
1.809.720
17.339.176
1.952.634
11.416.528
1.647.564
15.016.726
Current
1.828.134
607.835
1.943.205
4.379.174
1.940.475
372.969
1.809.720
4.123.164
1.576.059
343.736
1.647.564
3.567.359
331.094
22.210.530
--
22.541.624
327.775 12.888.237
--
13.216.012
376.575
11.072.792
--
11.449.367
Non-Current
and
68
Notes to Financial Statements
c) Technical Provisions by product
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
BB–Consolidated
Insurance
Pension
Capitalization
Automotive
707.921
--
--
707.921
654.000
--
--
654.000
548.243
--
--
548.243
Life
795.641
--
--
795.641
755.536
--
--
755.536
694.458
--
--
694.458
Property/casualty
541.374
--
--
541.374
781.925
--
--
781.925
632.734
--
--
632.734
Dpvat
93.963
--
--
93.963
59.879
--
--
59.879
58.908
--
--
58.908
Health
20.329
--
--
20.329
16.910
--
--
16.910
18.291
--
--
18.291
Capitalization
--
--
1.943.205
1.943.205
--
--
1.809.720
1.809.720
--
--
1.647.564
1.647.564
PGBL Free benefit generating plan
--
8.771.577
--
8.771.577
--
5.391.560
--
5.391.560
--
4.494.488
--
4.494.488
VGBL Living benefits life insurance
--
9.698.318
--
9.698.318
--
5.091.497
--
5.091.497
--
3.896.748
--
3.896.748
Traditional plans
--
4.348.470
--
4.348.470
--
2.778.149
--
2.778.149
--
3.025.292
--
3.025.292
2.159.228
22.818.365
1.943.205
26.920.798
2.268.250 13.261.206
1.809.720
17.339.176
1.952.634
11.416.528
1.647.564
15.016.726
Total
Total
Insurance
Pension Capitalization
Total
Insurance
Pension Capitalization
Total
d) Guarantee of Technical Provisions
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
BB–Consolidated
Insurance
Pension
Capitalization
Shares in Investment Funds (VGBL and
PGBL)
--
18.206.105
--
18.206.105
--
10.331.995
--
10.331.995
--
8.274.343
--
8.274.343
Shares in Investment Funds (except VGBL
and PGBL)
852.105
3.144.448
1.253.336
5.249.889
886.671
2.021.878
1.250.781
4.159.330
907.507
2.194.729
1.095.336
4.197.572
Government bonds
726.743
1.710.783
326.151
2.763.677
665.987
1.087.281
241.904
1.995.172
628.714
1.140.976
316.779
2.086.469
Corporate bonds
196.459
41.081
462.845
700.385
197.670
33.337
410.494
641.501
150.382
29.857
331.678
511.917
Credit rights
420.144
--
--
420.144
364.346
--
--
364.346
280.323
--
--
280.323
1.266
--
--
1.266
1.338
--
--
1.338
1.409
--
--
1.409
Real estate properties
Deposits held at IRB and deposits in court
Total
Total
Insurance
Pension Capitalization
Total
Insurance
Pension Capitalization
Total
432
--
--
432
416
--
--
416
513
--
--
513
2.197.149
23.102.417
2.042.332
27.341.898
2.116.428
13.474.491
1.903.179
17.494.098
1.968.848
11.639.905
1.743.793
15.352.546
69
Notes to Financial Statements
e) Results of Insurance, Pension Plan and Capitalization Operations
R$ Thousand
1S2010
BB–Consolidated
Insurance
Pension
113,279
Financial results
1S2009
Capitalization
Total
615,176
106,327
834,782
Insurance
129,685
Pension
Capitalization
Total
458,869
136,036
724,590
Financial income
133,076
854,516
106,741
1,094,333
169,629
698,590
137,726
1,005,945
Financial expenses
(19,797)
(239,340)
(414)
(259,551)
(39,944)
(239,721)
(1,690)
(281,355)
Restatement and interest on technical reserves
(33,593)
(498,961)
(57,327)
(589,881)
(15,872)
(377,256)
(64,265)
(457,393)
Operating results
873,838
(10,175)
45,202
908,865
752,662
(5,336)
27,232
774,558
1,677,113
2,987,263
655,627
5,320,003
1,540,197
1,595,018
634,514
3,769,729
Retained premiums and contribution (Note 21.f)
(58,075)
(2,954,081)
(10,301)
(3,022,457)
(78,414)
(1,577,593)
(5,882)
(1,661,889)
Retained claims
(700,492)
--
--
(700,492)
(646,780)
--
--
(646,780)
Selling expenses
(44,708)
(24,804)
(41,773)
(111,285)
(62,341)
(15,750)
(47,427)
(125,518)
Expenses with draws for prize & redemptions of
capitalization certificates
--
--
(558,351)
(558,351)
--
--
(553,973)
(553,973)
Expenses with
redemptions
--
(18,553)
--
(18,553)
--
(7,011)
--
(7,011)
953,524
106,040
94,202
1,153,766
866,475
76,277
99,003
1,041,755
Change in technical provisions
pension
plans
benefits
and
Total
f) Retained insurance premiums, pension plan contributions and capitalization certificates
R$ Thousand
1S2010
BB–Consolidated
Insurance
Premiums issued (VGBL retirement)
Supplementary pension
VGBL risk portion)
contributions
(includes
Pension
1S2009
Insurance
Pension
1,766,295
2,305,727
Capitalization
--
4,072,022
Total
1,702,012
1,019,244
Capitalization
--
2,721,256
Total
--
698,249
--
698,249
--
582,910
--
582,910
--
--
655,627
655,627
--
--
634,514
634,514
Coinsurance premiums ceded
(8,018)
--
--
(8,018)
(10,223)
--
--
(10,223)
Reimbursed premiums (return of VGBL contribution)
(4,754)
(16,713)
--
(21,467)
(10,122)
(7,136)
--
(17,258)
1,753,523
2,987,263
655,627
5,396,413
1,681,667
1,595,018
634,514
3,911,199
(76,410)
--
--
(76,410)
(141,470)
--
--
(141,470)
1,677,113
2,987,263
655,627
5,320,003
1,540,197
1,595,018
634,514
3,769,729
Revenues from capitalization certificates
Premiums issued net (premium issued - premium
reimbursed)
Reinsurance premiums ceded, consortiums and
funds
Retained insurance premiums, pension plans
and capitalization
70
Notes to Financial Statements
22 – Other Income / Expenses
a) Service fees income
R$ Thousand
Banco do Brasil
Income from cards
(1)
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
988,861
760,785
1,438,761
1,139,688
673,198
588,761
411,123
565,287
528,528
369,451
1,111,745
590,805
412,058
951,926
540,783
370,340
--
--
338,909
256,401
Insurance, pension and capitalization
Collection
Interbank
130,522
283,806
266,692
90,647
230,336
241,250
295,611
283,806
266,692
186,778
230,336
241,250
Brokerage and custody
Loans and guarantees provided
National Treasury and Management of official Funds
9,259
139,406
112,138
9,428
302,968
145,828
204,387
180,086
112,138
179,606
303,240
145,828
Provided to the related
Consortium administration fees
Other services
Total
189,890
-202,759
142,023
-95,351
83,655
50,046
231,297
40,595
38,290
186,261
3,996,415
3,481,882
5,599,996
4,811,322
Fund Management
Collections
Current Account
Services provided by non-financial associated companies
(1) Includes in the BB-Consolidated, the revenue service of Cielo SA for R$ 356,367 thousand in the 1st half of 2010 (R$ 378,903 thousand in the 1st half
of 2009) and Visavale, the value of R$ 93,533 thousand on the first half/2010, proportional to the participation of BB Banco de Investimento.
b) Bank fees income
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
Service package
Loans and registration file
1,211,354
404,441
926,874
316,821
1,247,872
539,712
1,045,235
351,076
Deposit account
Transfer of funds
131,768
68,446
1,816,009
106,841
53,362
1,403,898
131,935
68,639
1,988,158
114,112
57,410
1,567,833
Total
c) Personnel expenses
R$ Thousand
Banco do Brasil
Salaries
Payroll charges
Benefits
Personnel administrative provisions
Provision for labor grievances (1)
Supplementary welfare
Training
Directors’ and officers’ honoraries
Total
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
(2,662,356)
(933,648)
(2,161,683)
(715,060)
(2,893,146)
(1,019,968)
(2,441,577)
(831,715)
(802,959)
(854,881)
(337,912)
(598,988)
(634,310)
(872,720)
(858,747)
(854,881)
(337,912)
(680,796)
(667,255)
(916,236)
(97,546)
(28,265)
(10,057)
(57,050)
(21,532)
(9,761)
(100,583)
(32,037)
(28,199)
(73,841)
(25,734)
(21,487)
(5,727,624)
(5,071,104)
(6,125,473)
(5,658,641)
71
Notes to Financial Statements
d) Other Administrative Expenses
R$ Thousand
Banco do Brasil
Amortization
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
(1,131,080)
(637,695)
(1,144,404)
(768,467)
Communications
Third party services
Data processing
(598,527)
(515,399)
(534,730)
(481,672)
(364,639)
(353,931)
(642,942)
(589,257)
(565,466)
(520,055)
(452,700)
(424,537)
Depreciation
Transport
Security services
(427,800)
(321,058)
(325,961)
(309,191)
(274,102)
(285,179)
(441,327)
(338,668)
(327,947)
(332,219)
(288,280)
(305,718)
Litigation
Rent
Financial system services
(325,396)
(260,174)
(266,887)
(857,141)
(187,191)
(213,762)
(325,396)
(309,990)
(304,847)
(857,141)
(228,146)
(337,923)
Specialized technical services
Advertising and publicity
Maintenance and upkeep
(88,879)
(132,176)
(171,624)
(68,277)
(96,393)
(146,453)
(267,271)
(188,310)
(182,179)
(166,016)
(139,923)
(165,515)
Water, electricity and gas
Advertising and public relations
Domestic travel
(168,063)
(79,138)
(62,378)
(145,169)
(72,468)
(53,487)
(172,009)
(95,536)
(75,310)
(152,401)
(81,516)
(59,805)
(56,763)
(178,734)
(5,644,767)
(49,592)
(162,241)
(4,758,583)
(60,133)
(284,084)
(6,315,076)
(53,717)
(228,186)
(5,562,265)
Materials
Other
Total
e) Tax Expenses
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
(975,479)
(827,109)
(1,240,642)
(1,039,687)
ISSQN
(233,304)
(202,798)
(301,026)
(265,602)
PIS/Pasep
(158,515)
(134,405)
(206,032)
(172,506)
Other
(36,243)
(28,333)
(60,032)
(50,104)
Total
(1,403,541)
(1,192,645)
(1,807,732)
(1,527,899)
Cofins
72
Notes to Financial Statements
f)
Other Operating Income
R$ Thousand
Banco do Brasil
Previ – Adjustment
Equalization of rates - Law 8427/1992
Recovery of charges and expenses
Labor, civil and tax claims - Reversal of provisions
Income from guarantee deposits
Previ – Parity agreement contributions
Credit card transactions
Administrative expenses - Reversal of provisions
Dividends received
Personnel expenses - Reversal of provisions
Foreign exchange gains
(1)
Revenue Receive Credit - Securitization (Ativos S.A.)
Equipment Rental - POS (Cielo)
Commission income (Visavale)
Others
Total
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
1,826,515
1,153,880
604,568
568,609
547,358
109,954
109,275
83,008
31,407
5,728
----247,887
5,288,189
596,572
890,322
515,822
30,600
559,227
124,168
75,345
78,763
21,053
2,435
3,608,141
---123,757
6,626,205
1,826,515
1,153,880
879,644
568,609
547,358
109,954
109,275
83,008
31,407
5,728
-150,706
140,867
-523,327
6,130,278
596,572
890,322
428,503
30,600
559,227
124,168
75,345
78,763
21,053
2,435
3,608,141
64,026
149,789
46,570
341,037
7,016,551
(1) Refers to the revenue obtained with the liabilities in foreign currencies, due to the appreciation of the Real in the period, which offset the costs generated
by assets in foreign currencies, mainly, the group highlighted in other operating expenses – Negative foreign exchange adjustment (Note 22.g) and
exchange variation on investments abroad (Note 14.a).
g) Other operating expenses
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
(658,056)
(398,935)
(658,056)
(398,935)
--
--
(570,670)
(451,513)
(16,120)
(24,110)
(561,689)
(24,110)
(441,119)
(332,851)
(441,119)
(332,851)
Premiums paid to clients - Loyalty Program
(267,430)
(199,831)
(267,430)
(199,831)
Restatement of guarantee deposits
(257,304)
(288,738)
(257,304)
(288,738)
Payroll guaranteed loans acquired
(172,574)
(104,455)
(172,574)
(104,455)
Hybrid capital and debt instruments
(157,481)
(39,325)
(157,481)
(39,325)
Discounts granted on renegotiations
(84,659)
(49,319)
(143,416)
(51,285)
(115,093)
(125,922)
(115,093)
(125,922)
Actuarial liabilities
Other operating expenses from non-financial associated companies
Business partners
Credit card transactions
Failures / frauds and other losses
Amortization of goodwill
(90,413)
(40,256)
(90,413)
(40,256)
Updating the acquisition of investment
(66,676)
(141,380)
(66,676)
(141,380)
Autoatendimento
(62,612)
(36,691)
(62,612)
(36,691)
Update interest own capital / Dividends
(25,361)
(23,694)
(25,361)
(23,694)
Law 9138/95 - Restatement of funds to be returned to the Federal Treasury
(19,575)
(22,820)
(19,575)
(22,820)
Previ - Adjustment
(16,225)
(22,169)
(16,225)
(22,169)
Readjustment negative exchange / Reclassification of balances
(12,551)
(1,690,126)
(12,551)
(1,690,126)
INSS
(12,491)
(13,567)
(12,491)
(13,567)
(7,783)
(7,094)
(7,783)
(7,094)
(22,622)
(36,121)
--
--
(393,283)
(282,964)
(483,518)
(573,497)
(2,899,428)
(3,880,368)
(4,142,037)
(4,588,259)
Fees for the use of Sisbacen – Banco Central do Brasil System
Securitization SWIFT MT100 - liabilities with the SPE (1)
Others
Total
(1) In BB-Consolidated, these expenses are classified as "Cost of Liabilities for securities abroad" because of the consolidation of Special Purpose Entity
Abroad (EPE).
73
Notes to Financial Statements
23 – Non operating income
R$ Thousand
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
Non-operating income
214,943
63,756
426,300
1,489,264
Profit on the sale of investments
116,350
--
213,716
1,415,122
116,350
--
213,716
--
--
--
--
1,415,122
Visa Inc.
Cielo (Visanet)
Capital gains
7,469
6,445
106,323
7,225
Profit on the sale of assets
34,390
9,568
36,473
13,563
Reversal of provision for devaluation of other assets
25,537
22,861
25,665
23,196
Sale of real estate
16,936
12,632
16,936
12,632
6,010
7,550
6,135
7,976
--
2,692
--
2,693
8,251
2,008
21,052
6,857
(42,334)
(35,650)
(80,276)
(47,020)
Rental income
Provision for/(reversal of) loss with shares and quotas
Other non-operating income
Non-operating expenses
Devaluation of other assets
(2,220)
(1,230)
(33,390)
(2,162)
Loss on sale of assets
(27,206)
(22,409)
(27,383)
(22,676)
Capital losses
(11,037)
(9,129)
(11,764)
(9,361)
(1,871)
(2,882)
(7,739)
(12,821)
172,609
28,106
346,024
1,442,244
Other non-operating expenses
Total
24 – Stockholder’s Equity
a) Book value and market value per common share
06.30.2010
12.31.2009
06.30.2009
Equity Bando do Brasil (R$ thousand)
Book value per share (R$)
Market value per common share (R$)
39,386,911
15,33
24,65
36,119,265
14,05
29,70
32,360,165
12,60
21,18
Equity BB-Consolidated (R$ thousand)
39,331,882
36,119,406
33,146,766
Book value per share is calculated based on the equity of Banco do Brasil. The reconciliation with the equity of
BB-Consolidated is shown in Note 24.f.
b) Capital
The capital of R$ 26,028,096 thousand (R$ 18,566,919 thousand on 12.31.2009 and R$ 18,548,611
thousand at 06.30.2009) of Banco do Brasil is divided into 2,569,869,551 common shares represented in
book entry form no par value. The Federal Government is the largest shareholder, holding the control.
The capital increase in the first half of 2010, in the amount of R$ 7,461,177 thousand, was due to the
capitalization of Revenue Reserves (Statutory Reserve Operating Margin) of R$ 7,412,899 thousand and
Capital valued at R$ 5,188 thousand, the subscription of 4,859,696 common shares from the exercise of
subscription bonuses "C" of R$ 42,816 thousand, and the issuance of 9,039 shares, no par value, from the
incorporation of companies Besc Leasing SA - Leasing and Finance SA Besc - Credit, Financing and
Investment of R$ 274 thousand (Note 2.a).
74
Notes to Financial Statements
The Bank may, even without amending its by-laws, if approved by a General Meeting, and in the conditions
established therein, increase its capital up to the limit of R$ 50 billion Brazilian reais, by issuing common
shares, granting shareholders preference for subscribing the capital increase proportionally to the number of
held shares, while maintaining the rights of subscription bonus holders.
c) Revaluation reserves
The revaluation reserves, totaling R$ 6,372 thousand (R$ 6,746 thousand in 12.31.2009 and R$ 6,948
thousand in 06.30.2009), refer to revaluations of assets made by the companies Kepler Weber S.A., Pronor,
and Cobra Tecnologia S.A. The realizations of the reserves in the period, totaling R$ 371 thousand (R$ 338
thousand in the first half of 2009), were transferred to "Retained earnings (accumulated losses)". The
remaining balance will be held until to the date of its effective realization, in conformity with CMN Resolution
3565/2008.
d) Capital and profit reserves
R$ Thousand
06.30.2010
Capital reserves
Profit reserves
Legal Reserve
Statutory Reserves
Operating margin
Equalization of dividends
12.31.2009
06.30.2009
--
5,188
5,188
12,972,258
2,552,851
10,419,407
17,301,439
2,296,291
15,005,148
13,614,362
1,989,474
11,624,888
7,512,570
2,906,837
12,308,413
2,696,735
9,351,819
2,273,069
The capital reserve arising from the tax incentive related recording of a balance from a non-financial affiliated
company was capitalized on April, 2010, as decided by the Bank's Extraordinary General Meeting held on
April 13, 2010.
The capital reserve Operating Margin has the purpose is to guarantee an operating margin compatible with
the development of the company's transactions. It is formed by up to 100% of the balance of net income after
legal distributions, including dividends, up to the limit of 80% of the capital.
The capital reserve Equalization of dividends Guarantees financial resources for the payment of dividends
and is formed by up to 50% of the balance of net income after legal distributions, including dividends, up to
the limit of 20% of the capital.
e) Interest on own capital / Dividends
Value
(R$ Thous)
Value per share
Data Base
Date of payment
Payment
444,161
518,155
0.173
0.202
05.21.2010
03.24.2010
05.31.2010
05.31.2010
Dividends
Interest on own capital
Total allocated to stockholders (item 1 + item 2)
564,785
525,372
2,052,473
0.220
0.205
0.800
08.16.2010
05.24.2010
08.26.2010
08.26.2010
1- Dividends
2- Interest on own capital
Net income for the period
1,008,946
1,043,527
5,131,184
0.393
0.407
--
----
----
1st quarter/2010
Dividends
Interest on own capital
2nd quarter/2010
75
Notes to Financial Statements
Value (R$
Thous)
Value per share
Data Base
Date of payment
Payment
Dividends
218,474
0.085
05.14.2009
05.27.2009
Interest on own capital
2nd quarter/2009
447,717
0.174
03.23.2009
05.27.2009
Dividends
483,097
0.188
08.13.2009
08.27.2009
0.178
0.625
0.273
06.22.2009
08.27.2009
1- Dividends
456,137
1,605,425
701,571
--
--
2- Interest on own capital (1)
Net income for the period
903,854
4,013,563
0.352
--
---
---
1st quarter/2009
Interest on own capital
Total allocated to stockholders (item 1 + item 2)
(1) Amounts subject to the rate of 15% Income Tax Withholding.
In accordance with Laws 9249/1995 and 9430/1996 and the Bank's Bylaws, Management decided on the
payment of Interest on Own Capital to its stockholders, imputed to the value of the dividends, plus additional
dividends, equivalent to 40% of net income.
Interest on capital is calculated based on adjusted net equity accounts and is limited on a pro rata basis to the
variation of long-term interest rate, as long as there is profit computed before its deduction or retained earnings
and profit reserves at least twice its amount.
To comply with the Income Tax legislation, the amount of interest on capital was recorded as corresponding
entries against "Financial expenses" and, for purposes of disclosure of the financial statements, reclassified
to "Retained earnings". The total interest on capital during the semester provided a reduction in spending on
tax charges totaling R$ 417,411 thousand.
f) Reconciliation of Net Income and Shareholders' Equity
Net Income
Banco do Brasil
Results not achieved
Reciprocal participation in subsidiaries
Minority interests in subsidiaries
BB-Consolidated
Shareholders' Equity
1S2010
1S2009
06.30.2010
06.30.2009
5,131,184
(54,908)
4,013,563
--
32,360,165
-786,601
33,146,766
--
--
39,386,911
(54,908)
(164)
(20)
5,076,256
613
4,014,176
43
39,331,882
--
76
Notes to Financial Statements
g) Stockholdings (Number of shares)
Evolution of the quantity of shares issued by the Bank's shareholders hold, directly or indirectly, of more than
5% of the shares and the directors and members of the Fiscal Council and Audit Committee:
06.30.2010
Stockholders
12.31.2009
06.30.2009
Shares
%
Total
Shares
%
Total
Shares
%
Total
Federal Government
1,677,309,063
65.3
1,677,309,058
65.3
1,684,809,058
65.6
Ministério da Fazenda
1,483,734,063
57.7
1,378,734,058
53.7
1,393,734,058
54.3
139,400,000
5.4
229,400,000
8.9
229,400,000
8.9
--
--
60,000,000
2.3
60,000,000
2.3
Fundo Garantidor de Habitação Popular – FGHab
1,675,000
0.1
1,675,000
0,1
1,675,000
0.1
Fundo Garantidor para Investimentos
7,500,000
0.3
7,500,000
0,3
--
--
45,000,000
1.8
--
--
--
--
266,546,187
10.4
266,446,187
10.4
260,779,183
10.2
62,409,779
2.4
62,409,779
2.4
64,005,679
2.5
Fundo de Garantia a Exportação
Fundo Garantidor de Parcerias Público-Privadas – FGP
(1)
Fundo Garantidor para Construção Naval
Banco do Brasil Employees Retirement Fund (PREVI)
BNDES Participações S.A. – BNDESPar (2)
Treasury Stock
Other shareholders
Total
1,159,815
0.00
1,150,369
0.0
1,150,336
0.0
562,444,707
21.9
562,545,119
21.9
557,442,229
21.7
2,569,869,551
100.0
2,569,860,512
100.0
2,568,186,485
100.0
(1) Shares transferred by the Union to pay up the capital of FGP, as authorized by Ordinance No. 413/2005 of the Ministry of Finance.
(2) Connected to the Controller.
Shares ON (1)
06.30.2010
Board of Directors(Except for the shares of the President that are included in the Board of Directors)
12.31.2009
06.30.2009
15
14
28
Steering committee
8,372
7,665
7,668
Executive Committee
9,689
9,686
21,650
--
--
150
823
823
1,729
Fiscal Council
Audit Committee
(1) The shareholding interest of the Board of Directors, Steering Committee, Executive Committee, Fiscal Council and Audit Committee represents
approximately 0.001% of the Bank's capital stock.
h) Number of Shares being Traded on the Market / Free Float
06.30.2010
12.31.2009
06.30.2009
BB Shares
Quantity
Being traded
Total issued
(1)
%
Quantity
%
Quantity
%
562,426,631
21.9
562,527,754
21.9
557,412,883
21.7
2,569,869,551
100.0
2,569,860,512
100.0
2,568,186,485
100.0
(1) As Law No. 6.404/1976 and regulation of Bovespa's New Market. Does the shares held by the Board of Directors, Board and Executive Board.
If the capital increase on the public offering of common shares had occurred on 06.30.2010, the percentage
of shares outstanding would increase from 21.9% to 30.4% (Note 31).
77
Notes to Financial Statements
i) “C” subscription bonuses
The Extraordinary General Meeting of 05.19.2010, which approved the capital increase of the Bank,
provided the anticipation of the exercise of the subscription of shares arising from bonus "C" during the
period 06.21.2010 to 06.23.2010. Were exercised 1,551,727 bonuses "C" and the remaining balance,
4,328,704 bonuses "C", assures the holder of the document the right to subscribe for shares in the capital
until the deadlines originally – 03.31.2011 to 06.30.2011. The market value of these warrants was R$ 47.01
on 06.30.2010 (R$ 58.50 on 12.31.2009 and 06.30.2009 in R$ 28.57).
25 – Income and Social Contribution Taxes
a) Breakdown of income tax and social contribution expenses
R$ Thousand
Banco do Brasil
1S2010
BB-Consolidated
1S2009
1S2010
1S2009
Present values
(2,071,689)
(2,382,834)
(2,899,248)
(3,550,656)
Income and social contribution taxes in Brazil
(2,053,571)
(2,374,696)
(2,877,576)
(3,540,743)
(18,118)
(8,138)
(21,672)
(9,913)
(844,946)
(398,138)
(1,053,528)
(551,247)
(807)
--
(82,549)
(135,286)
Income tax abroad
Deferred tax liabilities
Leasing Operations – Portfolio adjustment and accelerated
depreciation
13,970
(35,019)
(131,644)
(48,980)
Actuarial gains
(696,633)
(227,533)
(696,633)
(227,533)
Restatement of litigation deposits
(134,781)
(122,322)
(134,781)
(122,322)
(26,706)
(13,195)
(26,706)
(13,195)
11
(69)
11
(3,931)
--
--
18,774
--
(2,916,635)
(2,780,972)
(3,952,776)
(4,101,903)
Income tax
(1,824,934)
(1,731,353)
(2,546,511)
(2,618,517)
Social Contribution
(1,091,701)
(1,049,619)
(1,406,265)
(1,483,386)
Deferred tax credits
846,688
3,468,830
1,237,997
3,724,059
878,769
3,358,561
1,208,576
3,502,017
41,364
--
103,656
112,919
MTM losses
(44,378)
125,814
(45,168)
124,669
Transactions Carried out on the Futures Market
(29,067)
(15,545)
(29,067)
(15,546)
(2,069,947)
687,858
(2,714,779)
(377,844)
MTM gains
Income abroad
Transactions carried out on the futures market
Time investments disposal
Provision
Temporary differences
Income tax and social contribution losses
Total Income Tax and Social Contribution
78
Notes to Financial Statements
b) Reconciliation of income tax and social contribution expense
R$ Thousand
Banco do Brasil
1S2010
Earnings before taxation and profit sharing
BB-Consolidated
1S2009
1S2010
1S2009
7,856,709
3,838,378
8,558,189
4,918,936
(1,967,574)
(3,142,684)
(1,535,351)
(3,423,276)
Interest on Own Capital
417,411
361,542
417,411
361,542
Equity in subsidiaries and associated
568,838
407,294
29,986
(266,519)
Profit sharing
262,231
205,069
306,862
--
1,213,177
(175,743)
36,127
(45,762)
70,764
(2,069,947)
687,858
(2,714,779)
(377,844)
Total charges of IR (25%) and CSLL (15%)
Activation of Tax Credits (CSLL previous years)
Other amounts
Social contribution expense
210,766
1,213,177
c) Lawsuit: Interest on Own Capital Tax Benefit
c.1) In February 1998, the Bank filed a request for full offsetting of accumulated income tax loss carry forwards
and negative basis of social contribution against taxable income. Since then, the Bank has been fully offsetting
tax loss carry forwards and negative basis of social contribution against income tax and social contribution and
has made judicial deposits in the full amount due (70% of the amount offset). These deposits prompted the
Federal District 16th Court to issue an order recognizing the suspension of chargeability of these taxes until
final judgment of the Bank's request, based on article 151, item II, of the Tax Code. Since 10.1.2002, the
proceedings have been awaiting hearing of an extraordinary appeal by the Federal Supreme Court.
c.2) The offsetting of tax loss carry forward and recoverable CSLL has resulted in the write-off of deferred tax
credits, observing the limitation of 30%.
c.3) In compliance with the prohibition contained in CMN Resolution 3535/2008, succeeded by Resolution
CMN n.º 3.823/2009, judicial deposits of the amount of R$ 12,082,682 thousand (principal plus interest) were
not deducted from the corresponding provisions, with a negative impact on the Basel Index.
c.4) Deferred taxes (including corporate income tax (IRPJ) and social contribution on net income (CSLL)) on
the restatement of judicial deposits are being offset with the tax credits resulting from the provision related to
that judicial deposit, in conformity with paragraph 1, item II, article 1 of CMN Resolution 3059/2002, with no
impact on income.
c.5) The hypothesis of a successful outcome to its lawsuit, we verified that in September 2005 and January
2009 the Bank would have consumed the entire stock of tax loss carry forward and recoverable social
contribution, respectively, Therefore, since the accrual period of October 2005 and February 2009, the
amount of Income Tax and Social Contribution are being paid in full. Additionally, there would be the transfer
of funds from the account used to record judicial deposits to cash and cash equivalents, The tax credits
related to judicial deposits (principal) would be written off against the provision for IRPJ and CSLL and the
provision for tax risks related to the restatement of deposits, in the amount of R$ 3,671,306 thousand.
c.6) If the Bank were unsuccessful in its lawsuit the amounts deposited judicially would be converted into
income in favor of the National Treasury. The portions of IRPJ tax credits on tax loss carry forward that could
be used since the accrual period of October 2005 and February 2009, observing the limitation of 30%, would
be reclassified to the account representing "recoverable IRPJ" and “recoverable CSLL” assets. The
recoverable IRPJ and CSLL that would result from the adjustments to the Economic-Tax Information
Returns for Corporate Entities, corresponds to R$ 3,283,247 thousand as of June 2010 and its restatement
using the Selic rate corresponds to R$ 416,257 thousand. This sum adjusts the provision for tax risks with
respect to the updating of court deposits so that it will be sufficient to fully cancel the risk of a likely loss.
79
Notes to Financial Statements
c.7) The amounts related to this matter are as follows:
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
12,082,682
11,752,804
11,409,884
7,817,011
7,817,011
6,557,456
4,265,671
3,935,793
4,852,428
6,585,045
6,585,045
6,585,045
3,002,033
3,002,033
3,002,033
3,583,012
3,583,012
3,583,012
Judicial Deposits
Amount realized
Restatement
70% thereof
Income tax losses
Negative basis of CSLL / Recoverable CSLL
d) Judicial Proceeding: PIS/PASEP and COFINS
Banco do Brasil and BB Corretora (wholly-owned subsidiary) filed a writ of mandamus in order to guarantee
the right to collect the PIS/PASEP and COFINS according to the calculation basis provided for in
Complementary Laws no. 7, of September 07, 1970, and no. 70, of December 30, 1991. The application
thereof, as from March 2010, resulted in a reduction of disbursement of such taxes in the amount of R$
515,533 thousand, being such amount provided for according to CVM Resolution no. 489, of October 03,
2005, item 10, and use of tax credits in order to cancel the tax effects upon corporate income.
26 – Tax credits
a) Tax credits recorded as assets
R$ Thousand
Banco do Brasil
12.31.2009
1S2010
Balance
Temporary differences
Entries
06.30.2010
Write-offs
Balance
06.30.2009
Book Value
16,246,460
1,428,405
(801,827)
16,873,038
14,315,722
Provision for doubtful accounts
7,357,817
268,733
(541,053)
7,085,497
6,842,911
Passive reserves
6,192,259
549,938
(118,860)
6,623,337
5,615,741
209,519
13,715
(140,225)
83,009
162,498
2,486,865
596,019
(1,689)
3,081,195
1,694,572
3,188,190
--
(221,146)
2,967,044
3,362,660
772,285
80,821
(329,188)
523,918
986,810
--
--
--
--
--
20,206,935
1,509,226
(1,352,161)
20,364,000
18,665,192
10,886,269
923,527
(821,533)
10,988,263
9,931,428
9,298,545
584,106
(515,775)
9,366,876
8,716,859
Pasep
3,092
223
(2,076)
1,239
2,363
Cofins
19,029
1,370
(12,777)
7,622
14,542
Mark-to-market
Other provisions
CSLL Escriturada a 18% (MP 2.158/2001)
Fiscal losses/ negative bases
Excess Depreciation
Total tax credits recorded
Income Tax
Social Contribution
80
Notes to Financial Statements
R$ Thousand
BB-Consolidated
12.31.2009
1S2010
Balance
Temporary differences
06.30.2010
Entries
06.30.2009
Write-offs
Balance
Book Value
17,244,001
1,660,803
(828,698)
18,076,106
16,433,201
Provision for doubtful accounts
7,812,377
382,763
(554,782)
7,640,358
7,512,029
Passive reserves
6,341,708
561,815
(119,724)
6,783,799
6,901,674
254,607
14,105
(152,494)
116,218
185,961
2,835,309
702,120
(1,698)
3,535,731
1,833,537
Mark-to-market
Other provisions
CSLL Escriturada a 18% (MP 2.158/2001)
3,188,190
--
(221,146)
2,967,044
3,362,660
Fiscal losses/ negative bases
948,834
373,947
(333,131)
989,650
1,009,288
Excess Depreciation
528,776
55,711
(185,813)
398,674
247,945
21,909,801
2,090,461
(1,568,788)
22,431,474
21,053,094
12,127,634
1,278,742
(954,192)
12,452,184
11,562,112
9,755,169
810,075
(598,444)
9,966,800
9,471,370
Pasep
3,475
230
(1,959)
1,746
2,742
Cofins
23,523
1,414
(14,193)
10,744
16,870
Total tax credits recorded
Income Tax
Social Contribution
Considering that some financial institutions have been going to court with individual lawsuits challenging the
increase of the rate of CSLL and that the National Confederation of the Financial System - Consif filed a
Direct Unconstitutionality Lawsuit - ADIN, the Banco do Brasil has been recognizing tax credits in a sum
sufficient to annul, exclusively, the impact on income resulting from the increase of the rate (6%) on the
CSLL tax liabilities (current and deferred).Banco do Brasil performed an assessment of the arguments
employed by ADIN, concluding on the remote likelihood of success by Consif, for which reason the Bank
posted an additional sum of CSLL tax credits in order to complete the increased 15% tax rate, totaling R$
1,213,177 thousand.
b) Tax credits not recorded
R$ Thousand
Banco do Brasil
06.30.2010
Tax credit abroad
BB-Consolidated
12.31.2009 06.30.2009
06.30.2010
12.31.2009
06.30.2009
216,598
108,345
120,272
216,598
108,345
120,272
Temporary differences
--
--
--
48,629
19,782
32,209
Fiscal losses/ negative bases
--
--
--
--
60,302
64,305
Mark-to-market losses
--
--
--
--
--
99
216,598
108,345
120,272
265,227
188,429
216,885
135,374
67,716
75,170
165,767
117,768
135,547
81,224
40,629
45,102
99,460
70,661
81,328
Pasep
--
--
--
--
--
1
Cofins
--
--
--
--
--
9
Total tax credits and the Pasep Cofins not Activated
Income Tax
Social Contribution
81
Notes to Financial Statements
c) Deferred tax liabilities
R$ Thousand
Banco do Brasil
06.30.2010
Arising from unrecognized actuarial gains
(1)
BB-Consolidated
12.31.2009 06.30.2009
06.30.2010
12.31.2009
06.30.2009
4,904,664
4,123,099
2,571,226
4,904,664
4,123,099
2,571,225
808
--
--
826,196
635,040
305,727
Arising from restatement of judicial deposits
295,574
156,508
167,946
295,574
156,508
240,821
Arising from mark-to-market adjustments
126,034
179,243
242,081
144,394
191,916
260,965
26,706
--
13,195
26,706
--
13,195
3,530
3,827
6,053
4,243
3,834
13,256
30
113,702
91
30
113,950
628
--
11
--
241,606
205,058
61,164
Arising from leasing portfolio adjustments
Arising from foreign profits
Foreign branches
Arising from futures market transactions
Others
Total deferred tax liabilities
5,357,346
4,576,390
3,000,592
6,443,413
5,429,405
3,466,981
Income Tax
2,872,197
2,497,476
1,579,488
3,534,005
2,972,537
1,981,199
Social Contribution
1,729,917
1,428,023
947,413
2,127,001
1,783,521
999,510
Pasep
105,570
90,985
66,215
109,369
94,124
67,973
Cofins
649,662
559,906
407,476
673,038
579,223
418,299
(1) The realization of deferred tax liabilities on actuarial gains is related to the achievement of the values of actuarial (Note 28).
d) Estimates for the realization of tax credits recorded
The value indicated below on the expectation of implementation of tax credits is based on technical study
was prepared in 06.30.2010, and the present value determined based on the average rate of funding of
Banco do Brasil.
R$ Thousand
In 2010
In 2011
In 2012
In 2013
In 2014
From 2015
Total tax credits
Banco do Brasil
Face Value
Present Value
2,977,000
2,854,000
5,010,000
4,625,000
5,115,000
4,499,000
2,413,000
2,034,000
1,163,000
939,000
3,686,000
2,761,000
20,364,000
17,712,000
BB-Consolidated
Face Value
Present Value
3,227,243
3,093,856
5,369,316
4,955,892
5,591,117
4,914,557
2,618,530
2,202,319
1,266,007
1,017,658
4,359,261
3,260,443
22,431,474
19,444,725
During the first half of 2010, the realization of tax credits in Banco do Brasil was observed in the amount of
R$ 3,272,701 thousand, corresponding to 90.93% of the forecast for use in 2010, reported in a technical
study prepared as of 12.31.2009 (R$ 3,599,072 thousand).
82
Notes to Financial Statements
e) Realization of Face Values of Credits
The realization of face values of recorded tax credits, considering the re-composition of those written off over
the course of the lawsuit (70%), based on a technical study carried out by the Banco do Brasil (as of
12.31.2009), is projected for 5,5 years, in the following proportions:
R$ Thousand
Banco do Brasil
Tax loss /CSLL
Intertemporal
recoverable (1)
Differences (2)
In 2010
In 2011
In 2012
In 2013
In 2014
From 2015
23%
19%
22%
24%
12%
--
13%
26%
26%
9%
5%
21%
BB-Consolidated
Tax loss /CSLL
Intertemporal
recoverable (1)
Differences (2)
23%
19%
22%
24%
12%
--
13%
26%
26%
9%
5%
21%
(1) Projection of consumption associated with the capacity to generate taxable bases of IRPJ and CSLL in subsequent periods.
(2) The consumption capacity results from the changes in the provisions (expectation of reversals, write-offs and uses).
27 – Related-party Transactions
The costs of salaries and other benefits granted to key management personnel of the Banco do Brasil Group
(Board of Directors, Executive Directors, Audit Committee and Fiscal Council) are listed as follows:
R$ Thousand
Short-term benefits
Fees
Executive Board
Audit Committee
Board of Directors
Council Tax
Profit sharing
Other
Benefits for termination of employment
Total
1S2010
13,783
8,473
1S2009
11,106
7,581
7,542
700
126
6,842
528
115
105
3,718
1,592
96
3,280
245
-13,783
5,549
16,655
Banco do Brasil has no variable remuneration based on shares and other long-term benefits and does not offer
post-employment benefits to its key management personnel except those that are part of the staff of the Bank,
participating in the Pension Plan for Employees of the Banco do Brasil - Previ. Since January 2007, due to
the accumulated surplus in the Plan of those officials, the Bank does not provide this benefit expenses (Note
28).
The Bank does not grant loans to its officers or members of its Board of Directors, Audit Committee and Fiscal
Council, because this practice is prohibited in all the financial institutions regulated by Banco Central do Brasil.
The balances referring to transactions between the consolidated companies of Banco do Brasil are eliminated
in the Consolidated Financial Statements. With respect to the majority shareholder, transactions with the
National Treasury and with the agencies of the direct administration of the Federal government that maintain
banking operations with the Bank, are included.
83
Notes to Financial Statements
The Bank has only normal banking transactions with these related parties, such as interest bearing and noninterest bearing deposits, loans, and sale and repurchases transactions. There are also service provision and
guarantee agreements. These transactions are conducted under normal market conditions, mainly under the
terms and conditions for comparable transactions with unrelated parties, including interest rates and collateral.
These transactions do not involve payment risks.
The funds invested in government securities and federal funds for transfers and programs from the Official
Institutions are listed as notes 8 and 18 respectively.
The Bank sponsors the Bando do Brasil Foundation whose goals are the promotion, support, encouragement
and sponsorship of actions at the educational, cultural, social, philanthropic, recreational / sports and promote
research activities - scientific and technological assistance to urban communities - rural areas. In the 1st half of
2010, the Bank has made contributions to the Banco do Brasil Foundation in the amount of R$ 15,840
thousand (R$ 27,885 thousand in 1st half 2009).
The information related to onlending and other transactions with other entities assisted are disclosed in Note
28.
In the 1st half of 2010, the Bank of Brazil acquired portfolios of credit operations of Banco Votorantim,
transferred joint obligations, totaling R$ 3,045,401 thousand. On 06.30.2010, the results were not made of
transactions from R$ 194,470 thousand, net of tax effects.
Summary of transactions with related parties
The balances of the assets and liabilities of Banco do Brasil from transactions with related on 06.30.2010 and
06.30.2009 and their results in the first half of 2010 and 1st half of 2009 are as follows:
R$ Thousand
06.30.2010
Controller (1)
Subsidiaries
(2)
Jointly
controlled
subsidiaries (3)
--
16,953,980
152,717
--
--
78,917
17,185,614
-1,138,644
--1,138,644
5,599
52,982
23,027
575,236
17,610,824
72,328
66,717
-84,303
376,065
41,166
--16,964
58,130
------
-363,435
--442,352
119,093
1,621,778
23,027
676,503
19,626,015
722,460
---
21,044
-4,183,748
2,402
-721,491
25,614
-112,829
778
1,019
5,152
767,939
-3,891,826
1,540,237
1,019
8,915,046
--
885,027
1,291,999
51,288
--
236,665
2,464,979
--
--
--
--
--
20,624,630
20,624,630
--
--
--
--
--
10,433,626
10,433,626
Borrowings
2,073,619
8,679,242
--
--
--
612,707
11,365,568
Other Liabilities
Total
2,796,079
1,346,459
15,115,520
46,553
2,062,445
-189,731
-6,949
18,039
36,585,432
1,411,051
56,756,156
86,227
1,519,107
Affiliates (4)
Key management
Personnel (5)
Other Related
Parties (6)
Total
Assets
Interbank deposits
Securities
Loans
Receivables
Other Assets
Total
Liabilities
Demand deposits
Saving deposits
Remunerated time deposits
Obligations related to Committed
Operations
Borrowings and transfers - BNDES
Borrowings and transfers FINAME
STATEMENT OF INCOME
Income from interest and services
Expenses from raising funds
Total Net
49,629
798,582
488,953
95,716
--
(65,709)
(16,080)
(275,383)
523,199
(147,342)
341,611
(4,310)
91,406
(641)
(641)
(1,060,373) (1,553,758)
(974,146)
(34,651)
84
Notes to Financial Statements
R$ Thousand
06.30.2009
Controller (1)
Subsidiaries
(2)
Jointly
controlled
subsidiaries (3)
--
14,661,153
--
--
--
7
14,661,160
-1,498,539
--1,498,539
2,697
123,801
22,105
2,155,178
16,964,934
---86,857
86,857
---61,049
61,049
------
-254,706
--254,713
2,697
1,877,046
22,105
2,207,788
18,770,796
572,699
--
134,863
--
676
--
9,509
--
1,171
1,575
1,103,926
--
1,818,172
1,575
--
2,417,841
78,485
209,530
5,221
4,599,567
7,126,704
--
903,328
--
--
--
4,606,173
5,509,501
--
--
--
--
--
11,085,088
11,085,088
--
--
--
--
--
6,938,214
6,938,214
3,574,418
-4,147,117
8,388,128
1,599,259
13,443,419
--79,161
--219,039
--7,967
764,892
19,248
29,117,108
12,727,438
1,618,507
46,825,199
64,768
664,053
135,426
73,885
--
102,423
882,657
(90,902)
(26,134)
(135,521)
528,532
(8,384)
127,042
(11,186)
62,699
(728)
(728)
(1,033,982)
(931,559)
(1,267,637)
(384,980)
Affiliates (4)
Key management
(5)
Personnel
Other Related
(6)
Parties
Total
Assets
Interbank deposits
Securities
Loans
Receivables
Other Assets
Total
Liabilities
Demand deposits
Saving deposits
Remunerated time deposits
Obligations related to
Committed Operations
Borrowings and transfers BNDES
Borrowings and transfers FINAME
Borrowings
Other Liabilities
Total
STATEMENT OF INCOME
Income from interest and
services
Expenses from raising funds
Total Net
(1) National Treasury and agencies of the direct administration of the Federal Government.
(2) They include related companies Note 3 as identified in item (1) ,(2) and (4).
(3) They include related companies Note 3 as identified in item (3), (6) and (7).
(4) They include related companies Note 3 as identified in item (5).
(5) Key Personnel Administration - Audit Committee, Audit Committee, Board of Directors, Executive Directors and Auditor General.
(6) They include private and public companies controlled by the Federal Government, entities linked to employees (Caixa de Previdência dos Funcionários do
Banco do Brasil - Previ, Fundação Codesc de Seguridade Social - Fusesc, Caixa de Assistência dos Funcionários do Banco do Brasil) and Fundação Banco do
Brasil - FBB.
85
Notes to Financial Statements
28 – Employee Benefits
Banco do Brasil sponsors the following private pension and complementary health plan entities that provide
for complementation of retirement and healthcare benefits for its employees:
Sponsored entities
Plans
Benefits
Previ Futuro
PREVI - Caixa de Previdência dos Funcionários do Banco do Brasil
CASSI - Caixa de Assistência dos Funcionários do Banco do Brasil
ECONOMUS – Instituto de Seguridade Social
Retirement and Pension
Benefit Plan 1
Retirement and Pension
Informal Plan
Retirement and Pension
Plan of Members
Health Care
Prevmais
Retirement and Pension
General Regulation
Retirement and Pension
Supplementary Regulations 1
Retirement and Pension
Unified Health Plan – PLUS
Health Care
Unified Health Plan – PLUS II
Health Care
Supplementary Health Care Plan Health Care
PAMC
FUSESC - Fundação Codesc de Seguridade Social
Multifuturo I
Retirement and Pension
Benefit Plan 1
Retirement and Pension
SIM - A fund for assistance for BESC, Codesc, Badesc and Fusesc
Health Care Plan
employees
Health Care
PREVBEP – Caixa de Previdência Social
Retirement and Pension
Plano BEP
We demonstrate below the number of participants covered by benefit plans sponsored by the Bank:
06.30.2010
Plans
12.31.2009
Number of Participants
06.30.2009
Number of Participants
Number of Participants
Actives
Retirees
Total
Actives
Retirees
Total
Actives
Retirees
Total
Retirement and Pension Plans
101,667
103,382
205,049
100,447
100,508
200,955
98,424
100,738
199,162
Plan participants Plano 1
33,182
82,281
115,463
33,814
82,536
116,350
34,320
82,774
117,094
Plan participants Previ Futuro
55,563
325
55,888
51,923
73
51,996
49,519
--
49,519
Other Plans
12,922
20,776
33,698
14,710
17,899
32,609
14,585
17,964
32,549
Medical Plans
103,782
81,731
185,513
98,262
81,359
179,621
97,157
81,253
178,410
Cassi Plani
94,867
81,731
176,598
91,364
81,359
172,723
90,273
81,253
171,526
Other Plans
8,915
--
8,915
6,898
--
6,898
6,884
--
6,884
The bank's contributions to benefit plans during the period were as follows:
Sponsors’ contributions
Retirement and Pension Plans
Plan participants 1
Plan participants Previ Futuro
Other Plans
Plano Informal
Medical Plans
Cassi Plani
Other Plans
Total
1S2010
1S2009
252,130
--
240,841
--
78,144
141,556
32,430
63,351
141,202
36,288
355,627
339,015
16,612
330,829
318,112
12,717
607,757
571,670
86
Notes to Financial Statements
The Bank's contributions to benefit plans during the second half of 2010 are estimated at R$ 576,216
thousand.
The values recognized in earnings during the period were as follows:
R$ Thousand
Specification
1S2010
1S2009
1,365,801
1,826,515
(69,405)
371,718
596,572
(56,906)
Plano Informal
Other Plans
Medical Plans
(350,763)
(40,546)
(456,421)
(127,951)
(39,997)
(466,847)
Plan Cassi
Other Plans
Total
(439,809)
(16,612)
909,380
(422,143)
(44,704)
(95,129)
Retirement and Pension Plans
Benefit Plan 1 (PREVI)
Previ Future Plan
a) Supplementary retirement and pension plans
Previ Futuro (Previ) - defined contribution plan. Participate in this plan the Bank's employees hired as from
December 24, 1997. The active participants contribute to PREVI an amount between 7% and 17% of their
contribution salary, which varies based on time of service and the amount of the contribution salary. There is
no contribution for retired participants. The sponsor contributes an amount equal to the contributions of the
participants, limited to 14% of the total contribution payroll of these participants. The retirement benefit for
this group is characterized as a defined contribution.
Previ Benefit Plan "I" – defined benefit plan. The participants of that plan are the Bank employees who
enrolled in it up to December 23, 1997. Plan closed for new applicants. Due to the establishment of parity
between Bank's and participants' contributions, in December 2000, a parity fund was set up, and its
resources are being used for the purpose of offsetting contributions to the plan. The Bank had, recorded in
Assets, the amount of R$ 1,860,574 thousand on June 30, 2010 (R$ 1,778,366 thousand on December 31,
2009 and R$ 2,299,864 thousand on June 30, 2009) related to that fund. Besides, due to the accumulated
surplus, the contributions of participants, beneficiaries (retirees and pensioners) and of the sponsor (Banco
do Brasil) were suspended, retroactive to January 2007. This measure will be evaluated every twelve
months, with its maintenance bound to the existence of the Special Reserve of Benefit Plan. The suspension
will continue maintained up to December 2010.
Informal Plan (Previ) - defined benefit plan. The sole responsibility of the Bank of Brazil whose contractual
obligations include (a) retirement pensions to founder participants and pension payments to survivors of
participants deceased up to April 14, 1967; (b) payment of retirement supplements to the other participants
employed by Banco do Brasil who retired up to April 14, 1967 or who, on that date, would have the right
through length of service to retire and who had at least 20 years of effective service with the Bank; and (c)
increase in the amount of retirement benefits and of pensions in addition to that provided for in the Benefit
Plan of Previ, resulting from judicial decisions and from administrative decisions on account of restructuring
of the job and salary plan and of incentives created by the Bank.
Prevmais (Economus) – defined contribution plan. The participants of that plan are the employees from
Banco Nossa Caixa (merged into Banco do Brasil on November 30, 2009) enrolled after August 1, 2006, and
the participants previously linked to the General Regulation Benefit Plan who opted for the distribution of
their vested account balances. The funding for income benefits is equally provided by employees and
employer, not exceeding 8% of the participants' salary. The plan also provides risk benefits, such as
complementation of sickness aid, workers' compensation, disability benefits and death pension.
General Regulation (Economus) – defined benefit plan. The participants of that plan are the employees from
Banco Nossa Caixa enrolled in it up to July 31, 2006. Plan closed for new applicants. Employees and the
sponsor contribute equally, in average, with 12.11% of participation salary.
87
Notes to Financial Statements
Supplementary Regulation 1 (Economus) - also for officials coming from Banco Nossa Caixa. Offers the
benefits of supplemental sickness benefit and annuity for death and disability. The cost of the plan is the
responsibility of the sponsor, participants and assisted. The sponsor's contribution focuses on real salary to
participate in equal numbers with participants.
Multifuturo I (Fusesc) – defined contribution plan. The participants of that plan are the employees from Banco
do Estado de Santa Catarina - BESC (merged into Banco do Brasil on September 9, 2008) enrolled after
January 12, 2003 and the employees previously linked to Fusesc's Benefit Plan 1 who opted for this benefit
plan. Employees and sponsor equally contribute from 2.33% to 7% of participation salary to that plan, as
determined by each participant.
Benefit Plan 1 (Fusesc) – defined benefit plan. The participants of that plan are the employees from BESC
enrolled up to January 11, 2003. Plan closed for new applicants. Employees and the sponsor contribute
equally, in average, with 9.89% of participation salary.
Plano BEP (Prevbep) – defined benefit plan. Other participants of that plan are the employees from Banco
do Estado de Piauí - BEP (merged in to Banco do Brasil on November 30, 2008). Employees and the
sponsor contribute equally, with 3.58% in average of participation salary.
In defined-contribution plans, the actuarial risk and the investment risk are borne by the plan participants.
Accordingly, cost accounting is based on each period's contribution amount representing the sponsor's
obligation. Consequently, no actuarial calculation is required when measuring the obligation or expense, and
there are neither actuarial gains nor losses.
In defined benefit plans, the actuarial risk and the investment risk the actuarial risk and the investment risk
fall either partially or fully on the sponsoring entity. Accordingly, cost accounting requires the measurement of
plan obligations and expenses, with a possibility of actuarial gains and losses.
b) Medical Assistance Plans
Plan Associates (Cassi) - the Bank is the sponsor of a Health Plan managed by CASSI that the main
objective is to provide coverage for expenses related to the promotion, protection, recovery and rehabilitation
of a member's health and of his/her enrolled beneficiaries. Each month the Bank contributed a sum
equivalent to 4.5p.p. of the total payroll or of the total retirement or pension plan benefit. Monthly
contributions from members and pension beneficiaries amount to 3% of the total payroll or the total
retirement or pension plan benefits.
Plano Unificado de Saúde - PLUS (Economus) - the participants of this plan are the employees from Banco
Nossa Caixa. Participation in this plan takes place by means of a 1.5% (one and one-half percent)
contribution of gross salary, without limitation, covering the owner and his/her preferred dependants,
deducted from the owner's payroll and 10% (ten percent) as a co-participation in the price of each medical
visit and low-cost exams, made by the owner and his/her dependants (preferred and non-preferred).
Plano Unificado de Saúde - PLUS II (Economus) - also for employees from Banco Nossa Caixa.
Participation in this plan takes place by means of a 1.5% (one and one-half percent) contribution of gross
salary, without limitation, covering the owner and his/her preferred dependants, deducted from the owner's
payroll and 10% (ten percent) as a co-participation in the price of each medical visit and low-cost exams,
made by the owner and his/her preferred dependants and children of age. The plan does not provide for
non-preferred dependants.
Supplementary Health Care Plan – PAMC (Economus): for employees from Banco Nossa Caixa stationed in
the State of São Paulo. Plan owners are those employees retired due to disability in Groups "B" and "C", and
their dependants, who participate in costs inasmuch as they use it, and according to the salary range
progressive table.
88
Notes to Financial Statements
SIM Health Plan - the participants of this plan are the employees from Banco do Estado de Santa Catarina.
Monthly contributions from members amount to 3% of the total payroll.
Since the contributions to be paid by the Bank in some cases will endure after the employee's retirement, the
Bank's obligations related to retired employees are evaluated by the present actuarial value of the
contributions to be paid over the expected period when plan participants and beneficiaries will be linked to
the plan. In addition, the Bank is also responsible for maintaining the financial balance of the plan for certain
groups of participants. Said obligations are evaluated and recognized under the same criteria used for
defined benefit plans.
c) Policy for the recognition of actuarial gains and losses
The actuarial gains or losses recognized balance sheet of the as income or expenses in a defined benefit
plan are the amount of unrecognized gains and losses that exceed, in each period, the higher of the
following limits:
(1) 10% of the present value of the total actuarial liability of the defined benefit; or
(2) 10% of the fair value of the plan’s assets.
Each plan's actuarial gains and losses are recognized over the average remaining working time estimated
for participating employees.
The Bank, as permitted by CVM No. 371/2000, subsequently succeeded by CVM No. 600/2009, adopted the
a fastest procedure of recognizing the gains / actuarial losses in the very year in which the actuarial valuation
was carried out . By recognizing actuarial gains, the bank checks for unrecognized actuarial losses, up the
aisle, in other post-employment plans. There are no such losses, the amount to be amortized in the outcome
of the Bank shall be the greater of a) the amount of unrecognized actuarial losses above the corridor to the
value of actuarial gain recognized on another plane and b) the actuarial loss in accordance with established
described in previous sections.
d) Actuarial evaluation
Shown below are the reconciliations of opening and closing balances of defined benefit obligations and fair
value of the corresponding assets of retirement and healthcare plans, based on actuarial valuations
conducted on June 30, 2010, December 31, 2009 and December 31, 2008, as well as the effect of actuarial
assets and liabilities on the balance sheets and other relevant information. From 06.30.2010, the periodicity
of the evaluations became semiannual, and no longer annual as occurred until 12.31.2009.
89
Notes to Financial Statements
Changes in present value of defined benefit obligations are as follows:
R$ Thousand
Plan Associates
(Cassi)
Plan 1 (Previ)
Present value of actuarial liabilities
Others Plans
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
(80,270,786)
(76,109,636)
(70,572,791)
(4,943,220)
(4,677,766)
(4,547,868)
(6,139,359)
(5,140,992)
(5,342,840)
(4,123,612)
(8,076,071)
(7,420,834)
(275,676)
(541,968)
(482,259)
(319,531)
(592,164)
(575,483)
Current service cost
(222,587)
(409,344)
(335,702)
(33,269)
(61,463)
(37,667)
(20,334)
(36,321)
(84,418)
Benefits paid net contributions retirees
3,159,981
7,166,391
7,561,454
167,780
351,951
334,413
313,958
576,550
485,530
--
35,831
33,221
--
--
--
--
--
--
(1,548,440)
(2,877,957)
(5,374,984)
34,900
(13,974)
55,615
(408,731)
(956,165)
258,210
Closing Balance
(83,005,444)
(80,270,786)
(76,109,636)
(5,049,485)
(4,943,220)
(4,677,766)
(6,573,997)
(6,149,092)
(5,259,001)
Present value of actuarial liabilities to cover
(83,005,444)
(80,270,786)
(76,109,636)
--
--
--
(4,058,870)
(3,866,688)
(3,717,835)
--
--
--
(5,049,485)
(4,943,220)
(4,677,766)
(2,515,127)
(2,282,404)
(1,541,166)
Opening Balance
Interest cost
Administrative Expenses paid by plan
Actuarial gain / (loss) on actuarial obligation
Present value of actuarial liabilities
The changes in fair value of plan assets are as follows:
R$ Thousand
Plan Associates
(Cassi)
Plan 1 (Previ)
Fair value of the plan’s assets
Opening Balance
Estimated yield on plan assets
Contributions received
Benefits paid net contributions retirees
Administrative Expenses paid by plan
Others Plans
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
137,814,150
104,778,828
128,884,712
--
--
--
3,852,533
3,619,708
3,486,025
7,220,769
10,871,704
13,841,349
--
--
--
285,277
529,979
569,163
27,857
638,380
(269,749)
339,015
351,951
334,413
174,433
364,384
408,626
(3,159,981)
(7,166,392)
(7,561,453)
(339,015)
(351,951)
(334,413)
(294,487)
(533,162)
(487,307)
--
(35,831)
(33,222)
--
--
--
--
--
--
Gain / (loss) on actuarial plan assets
(11,739,294)
28,727,461
(30,082,809)
--
--
--
41,114
(114,221)
(258,672)
Closing Balance
130,163,501
137,814,150
104,778,828
--
--
--
4,058,870
3,866,688
3,717,835
90
Notes to Financial Statements
The amounts recognized in the balance sheet are as follows:
R$ Thousand
Plan Associates
(Cassi)
Plan 1 (Previ)
Amounts recognized in the Balance Sheet
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
Others Plans
06.30.2009
06.30.2010
12.31.2009
06.30.2009
1) Fair value of the plan’s assets
130,163,501
137,814,150
104,778,828
--
--
--
4,058,870
3,866,688
3,717,835
2) Present value of actuarial liabilities
(83,005,444)
(80,270,786)
(76,109,636)
(5,049,485)
(4,943,220)
(4,677,766)
(6,573,997)
(6,149,092)
(5,259,001)
47,158,057
57,543,364
28,669,192
(5,049,485)
(4,943,220)
(4,677,766)
(2,515,127)
(2,282,404)
(1,541,166)
9,069,311
16,116,336
5,924,173
(545,909)
(481,750)
(330,307)
(247,253)
(196,063)
72,766
--
--
--
--
(104,015)
(104,015)
--
--
--
6) Amount not recognized as assets / (liabilities)
23,579,028
28,771,682
14,334,596
--
--
--
(13,357)
(70,029)
321,652
7) Net actuarial (liability) / asset (3-4-5-6)
14,509,718
12,655,346
8,410,423
(4,503,576)
(4,357,455)
(4,243,444)
(2,254,518)
(2,016,312)
(1,935,583)
3) Surplus / (deficit) (1+2)
4) Unrecognized actuarial gains or (losses)
5) Service cost not recognized
The actuarial assets recorded in other receivables (Note 11.b) must be realized before the end of the plan. The end of the plan is understood as the date
in which the last commitment will be paid. Partial realizations of that actuarial asset may occur, as long as compliant with the requirements in
Complementary Law 109/2001 and Resolution 26/2008 issued by the Complementary Pension Management Council (CGPC).
The amounts recognized in income are as follows:
R$ Thousand
Plan Associates
(Cassi)
Plan 1 (Previ)
Effects on the results for the period
Others Plans
1S2010
1S2009
1S2010
1S2009
1S2010
1S2009
(111,293)
(102,336)
(33,269)
(30,732)
(9,793)
(15,262)
--
--
--
--
15,462
12,834
(2,061,806)
(2,019,018)
(275,676)
(270,984)
(220,899)
(288,274)
3,610,384
2,717,926
--
--
108,226
242,503
389,230
--
--
--
(306,175)
(31,497)
6) Unrecognized past service cost
--
--
(4,956)
(4,956)
(863)
--
7) Expense with active employees
--
--
--
(100,107)
--
--
8) Expenses with extraordinary contribution
--
--
--
(27,520)
--
--
9) Effect of passive asset not recognized
10) (Expense)/income recognized in
Income
--
--
--
--
(15,460)
(95,255)
1,826,515
596,572
(313,901)
(434,299)
(429,502)
(174,951)
1) Cost of current service
2) Contributions from participants
3) Interest cost
4) Expected earnings on the plan’s assets
5) Amortization of gains or (losses) actuarial
Statement
of
91
Notes to Financial Statements
Provided below is the composition of the plans' assets, shown as a percentage of the total:
Plan Associates
(Cassi)
Plan 1 (Previ)
Breakdown of Assets
Others Plans
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
06.30.2009
Fixed Rate
32.8%
30.7%
37.0%
--
--
--
91.6%
83.0%
87.8%
Floating Rate
61.2%
63.8%
57.4%
--
--
--
4.6%
10.0%
5.2%
Real estate investments
3.2%
2.8%
2.8%
--
--
--
1.2%
1.7%
1.7%
Loans and financing
2.8%
2.6%
2.7%
--
--
--
1.3%
2.1%
2.3%
--
0.1%
0.1%
--
--
--
1.3%
3.2%
3.0%
In their own financial instruments of the entity
5.4%
6.8%
6.8%
--
--
--
--
--
--
In properties or other assets used by the entity
0.1%
0.1%
0.1%
--
--
--
0.1%
0.1%
0.1%
Other
Amounts listed in fair value of plan assets
Provided below is a comparative table showing expected and actual return from plan assets:
Plan Associates
(Cassi)
Plan 1 (Previ)
Specification
06.30.2010
Real expected yield on plan assets
Real expected yield on assets for the year
Effective yield
12.31.2009
06.30.2009
06.30.2010
12.31.2009
Others Plans
06.30.2009
06.30.2010
12.31.2009
06.30.2009
5.2%
10.8%
11.2%
-
-
-
7.1%
14.6%
16.3%
7,220,769
10,871,704
13,841,349
--
--
--
278,305
523,007
562,182
(4,518,525)
39,599,165
(16,241,461)
--
--
--
315,321
394,377
267,396
The main actuarial assumptions in the final period of the report:
Plan Associates
(Cassi)
Plan 1 (Previ)
Actuarial assumptions
06.30.2010
12.31.2009
06.30.2009
06.30.2010
12.31.2009
Others Plans
06.30.2009
06.30.2010
12.31.2009
06.30.2009
Inflation rate
4.20%
4.20%
4.59%
4.20%
4.20%
4.59%
4.88%
4.90%
5.76%
Discount rate
10.76%
10.76%
11.18%
10.76%
10.76%
11.18%
12.92%
13.08%
13.21%
Return rate of investments
10.76%
10.76%
11.18%
10.76%
10.76%
11.18%
7.49%
14.63%
16.35%
Rate of future salary growth
1.26%
1.26%
1.26%
1.26%
1.26%
1.26%
2.74%
2.75%
3.44%
3.79
4.04
5.85
12.42
14.14
14.22
2.70
3.16
3.20
Average remaining work period (years)
Survival table
Capitalization regime
AT-83
AT-83
Crédito Unitário Projetado
Crédito Unitário Projetado
(2)
AT-83
Crédito Unitário Projetado
(1) Grouped actuarial assumptions are expressed as weighted averages.
92
Notes to Financial Statements
(2) To the actuarial calculations of the Informal Plan at 12.31.2009 and 12.31.2008 a transitory table between GAM-71 modified and GAM-83 is used for the Informal Plan. The plans managed by FUSESC PREVBEP
use the AT-2000 table in actuarial valuations.
93
Notes to Financial Statements
The Bank, to define the values for the defined benefit plans, uses methods and assumptions different from
those submitted by entities sponsored. The most significant differences are concentrated on the definition of
the figures relating to plans administered by Previ, as follows:
Assumptions / method
PREVI
Bank
Discount rate
5.5% p.a.
6.3% p.a.
Lists of survival
AT-2000
AT-83
Discounted cash flow
conservative scenario
Aggregate Method
Market value or discounted cash flow - the
base scenario
Projected credit unit
Evaluation of Assets - Funds exclusive
Capitalization Regime
The actuarial values for the current period and previous four periods are as follows:
R$ Thousand
Specification
2010
Plan 1 (Previ) - Surplus (deficit)
2009
2008
2007
2006
49,393,498
57,543,364
28,669,191
64,229,505
37,481,696
Defined benefit obligation
(84,315,887)
(80,270,786)
(76,109,637)
(70,572,791)
(65,870,816)
Plan assets
103,352,512
133,709,385
137,814,150
104,778,828
134,802,296
Adjustment of experience on the plan liabilities
(1.9%)
(3.6%)
(7.1%)
(3.2%)
(9.7%)
Adjustment experience on plan assets
(9.0%)
20.8%
(28.7%)
(18.7%)
(17.3%)
Plan Associates (Cassi) - Surplus (deficit)
Defined benefit obligation
(5,190,326)
(4,943,220)
(4,677,766)
(4,547,868)
(3,562,867)
(5,190,326)
(4,943,220)
(4,677,766)
(4,547,868)
(3,562,867)
--
--
--
--
--
0.7%
(0.3%)
0.1%
8.8%
0.0%
Plan assets
Adjustment of experience on the plan liabilities
Adjustment experience on plan assets
Other Plans - Surplus (deficit)
Defined benefit obligation
Plan assets
Adjustment of experience on the plan liabilities
Adjustment experience on plan assets
--
--
--
--
--
(2,601,037)
(2,286,826)
(1,683,141)
(1,666,065)
(1,633,840)
(6,994,220)
(6,349,717)
(2,127,402)
(1,666,065)
(1,633,840)
4,393,183
4,062,891
444,261
--
--
(5.5%)
(14.0%)
(9.3%)
(9.6%)
(12.1%)
4.0%
(2.4%)
--
--
--
Overview of asset / liability actuarial recorded in the Bank:
R$ Thousand
Actuarial Assets
Actuarial Liability
Specification
06.30.2010
12.31.2009
06.30.2009
Plan 1 (Previ)
14,509,718
12,655,346
8,410,423
--
--
--
--
--
--
(1,778,254)
(1,569,047)
(1,552,557)
Plan Associates (Cassi)
--
--
--
(4,503,576)
(4,357,455)
(4,243,444)
Supplementary Regulation 1 (Economus)
--
--
--
(218,691)
(204,320)
(185,240)
PLUS I and II (Economus)
--
--
--
(257,573)
(242,945)
(197,786)
14,509,718
12,655,346
8,410,423
(6,758,094)
(6,373,767)
(6,179,027)
Informal Plan (Previ)
Total
06.30.2010
12.31.2009
06.30.2009
e) Contributive Proportion - sponsors' right - CGPC Resolution no. 26/2008
Resolution CVM 600/2009, determines the recording of a liability when the sum of obligations exceeds the
amount of assets from the benefit plan, and of an asset, when the sum of assets exceeds the amount of
obligations of the plan. In the latter circumstance, the asset should only be recorded when there is evidence
that it may effectively reduce the sponsor's contributions or that it will be reimbursable in the future, as
established in aforesaid Resolution.
Resolution CGPC 26/2008 served to throw light on issues related to the interpretation of the right of
sponsors and of participants to the surplus resources originating from the contributions (and their yields) of
both parties. According to that Resolution, the surplus should be assigned to the sponsors and participants in
proportion to the contributions made.
94
Notes to Financial Statements
Certain trade associations and other associations filed lawsuits challenging the legality of CGCP Resolution
26/2008, Bank management, based on the opinion of its legal advisors, understands that CGCP Resolution
26/2008 is of a legitimate nature, and that the Judiciary will conciliate the understanding with respect to the
right and form of division of the surplus as defined in the abovementioned resolution.
In view of the various lawsuits filed in relation to CGPC Resolution 26/2008, Banco do Brasil understands
that although this norm has thrown light on some issues previously under discussion, especially as regards
the amounts to be assigned to the sponsors and participants in the event of existence of a surplus in the
supplementary pension entities, this Resolution does not change the definitions existing in the current
regulations and, therefore, does not have effects on the need for records of the actuarial assets and liabilities
required by public institutions.
As regards the actuarial losses of the Health Care Plan, these are part of the sum that the Bank is required
to record in its liabilities, corresponding to the future contributions of all the employees according to the stage
of their retirement. The accrual basis requires that these expenses are recorded while the employees are still
active, even if the payments are made monthly, in the future. The Bank has already been appropriating these
losses since 2001, according to the CVM No. 371/2000, subsequently succeeded by Resolution No
600/2009. Since the aforementioned Resolution enables quicker recognition of these losses, the Bank opted
to do it in this manner.
29 – Commitments, Responsibilities and Contingencies
a) Contingent tax assets
The Bank is an active part in proceedings to restore indebts tax and prevent the launch of tax credits by tax
authorities, recognized in the financial statements only on the assumption favorable to the Bank (not
counted), according Resolution CVM 3823/2009, It is the actions of most relevance:
- Unconstitutionality of Income Tax on Net Income paid in 1989 and in the 1st semester of 1992,
in the amount of R$ 13,274 thousand (R$ 13,101 thousand on 12.31.2009 and R$ 12,816 thousand on
06.30.2009);
- Tax on Financial Transactions (IOF) - Law 8033/1990 (Price-level restatement), in the amount of R$
206,101 thousand (R$ 203,470 thousand on 12.31.2009 and R$ 199,131 thousand on 06.30.2009).
b) Contingent liabilities
Labor Lawsuits
The Bank is a party to labor lawsuits mainly filed by former employees or trade unions of the banking
industry. The provisions for probable losses account for various applications demanded as compensation,
overtime, mischaracterization of the working day, additional function and representation and others.
Tax Lawsuits
The Bank is subject to a number of challenges by the tax authorities with respect to taxes, which can give rise
to assessments regarding the jurisdiction where taxes are incurred or the sum of taxable income or deductible
expenses, Most of the lawsuits originating from tax assessment notices are related to ISSQN (service tax),
CPMF, CSLL, IRPJ and IOF, and, some are guaranteed by cash or real estate properties.
Civil Lawsuits
The most significant lawsuits classified as probable losses are those aimed at the collection of the difference
between the actual rates of inflation suffered and the rate used for inflation correction of financial
investments during the period of the various economic Plans (Collor Plan, Bresser Plan and Summer Plan).
95
Notes to Financial Statements
With the proximity of the prescriptive periods for bringing actions seeking the recovery of values based on
inflation rates away by these economic plans, there was an increase in the volume of lawsuits filed. Actions
whose success by adverse parties are considered probable are properly provisioned. The indices are
expected questioned by law that regulated the time the Federal Government's economic policy. With the
prescription that occurred, there is potential liability to be considered representative.
In this regard, there is action pending trial in the Supreme Court (STF) - ADPF/165: complaint of breach of
fundamental precept - authored by the National Confederation of Financial System (Consif), with the aim of
declaring the constitutionality of legislation that established the economic plans.
The changes in the provision for civil, tax and labor claims classified as probable were as follows:
Banco do Brasil
BB-Consolidated
1S2010
1S2009
1S2010
1S2009
Labor claims
Opening balance
Formation
Reversal of the provision
Monetary restatement
Write off due payment
(1)
Amount added / embedded
Closing balance
3,242,208
412,657
(739,824)
94,208
(273,314)
388
2,736,323
2,456,461
1,085,663
(342,965)
105,536
(250,656)
-3,054,039
3,300,748
424,404
(742,089)
94,568
(273,317)
-2,804,314
2,475,231
1,151,644
(363,696)
105,558
(262,898)
973,587
4,079,426
Tax demands
Opening balance
Formation
Reversal of the provision
Monetary restatement
Written off due payment
(1)
Amount added / embedded
Closing balance
174,696
27,935
(9,076)
5,784
(444)
-198,895
122,456
76,281
(9,339)
(1,187)
(113)
-188,098
--
1,138,706
71,868
(9,571)
22,863
(1,899)
-1,221,967
1,004,031
163,641
(36,302)
9,259
(285)
284,500
1,424,844
--
3,036,381
571,088
(387,356)
121,973
(139,840)
1,799
3,204,045
1,719,947
853,098
(28,322)
(20,605)
(51,757)
-2,472,361
3,131,472
660,600
(410,884)
124,333
(151,681)
-3,353,840
1,760,175
1,083,309
(76,033)
(16,718)
(80,375)
1,136,072
3,806,430
6,139,263
5,714,498
7,380,121
9,310,700
Civil claims
Opening balance
Formation
Reversal of the provision
Monetary restatement
Write off due payment
Amount added / embedded
Closing balance
(1)
Total Labor Demand, Taxation and Civil
(1) Refers to the balance of the Banco Popular do Brasil , Bescleasing and Bescredi, incorporated in 2010, and Banco Nossa Caixa, acquired in
March 2009 and incorporated in November 2009.
c) Contingent liabilities – Possible
Labor Lawsuits
The lawsuits risk classified "possible" are exempted from any provisions on the Resolution CVM No.
3823/2009, representing various applications demanded as compensation for overtime, distortion of the
working day , Additional Function and Representation, and others.
96
Notes to Financial Statements
Tax Lawsuits
The tax lawsuits considered as possible risk are exempt from the formation of provisions and represent a
number of claims made such as: ISSQN (service tax), collection and other tax obligations originating from
the Federal Revenue Department and Institute of Social Security. The main contingencies originate from:
- Notices of labor infraction drawn by the National Institute of Social Security (INSS), aiming at the payment
of contributions applicable on year-end bonuses paid in the collective agreements in the period from 1995 to
2006, in the amount of R$ 1,069,992 thousand, public transport pay and use of private car by employees of
Banco do Brasil, in the amount of R$ 147,358 thousand, conversions into cash, for the period from January
1993 to April 2001, in the amount of R$ 110,481 thousand and employee profit sharing corresponding to the
period from April 2001 to October 2003, in the amount of R$ 24,526 thousand.
- Notices of tax assessment drawn by the Treasuries of the Municipalities, aiming at the collection of ISSQN,
which amounts R$ 192,789 thousand.
Civil Lawsuits
In civil lawsuits there are actions that seek to recover the difference between inflation and the index used to
restate financial investments during the period of economic plans (Collor Plan, Bresser Plan and Summer
Plan).
The balances of contingent liabilities classified as possible were as follows:
R$ Thousand
Banco do Brasil
06.30.2010
BB-Consolidated
06.30.2009
06.30.2010
06.30.2009
73,295
243,324
75,632
324,053
Tax Claims
2,022,057
2,082,196
2,631,124
2,188,368
Civil Claim
Total
2,452,110
3,377,509
2,504,772
3,493,841
4,547,462
5,703,029
5,211,528
6,006,262
Labor claims
d) Deposits in Guarantee of Funds
The balances of deposits in guarantee recorded for probable, possible and / or remote contingencies are as
follows:
R$ Thousand
Banco do Brasil
BB-Consolidated
06.30.2010
06.30.2009
06.30.2010
06.30.2009
Labor claims
2,406,001
1,711,929
2,423,641
2,213,792
Tax Claims
4,081,010
3,164,686
5,135,663
4,470,459
Civil Claim
Total
2,537,443
1,350,548
2,581,736
2,228,837
9,024,454
6,227,163
10,141,040
8,913,088
e) Legal Obligations
The Bank has recorded in Other Liabilities - Tax and Social Security, the following provisions:
- Provision for legal proceedings to full compensation of tax losses and income tax bases of negative social
contribution (Note 25.c), whose liability for the tax credit is suspended by the court deposits since the
beginning of action, in the amount of R$ 11,502,534 thousand (R$ 11,245,230 thousand on 12.31. 2009 and
R$ 10,981,334 thousand at 06.30.2009).
- Provision for legal proceedings arising from an injunction by which it is intended to recognize the right of the
Bando do Brasil and BB Seguros collect the PIS / PASEP COFINS and according to the bases of calculation
97
Notes to Financial Statements
provided in Complementary Law No. 7 of September 7, 1970 and No. 70 dated December 30, 1991 (Note
25.d), amounting to R$ 515,533 thousand.
30 – Risk Management and Regulatory Capital
a) Risk Management Process
Banco do Brasil considers the management of risks and of capital the main vectors for the decision-making
process.
In the Banco do Brasil, collegiate risk management is performed completely apart from the business units.
Risk and concentration policies are specified by the Bank's Board of Directors and by the Global Risk
Committee (CRG), which is a discussion group composed by the President and by Vice-Presidents. Actions
for implementing and monitoring guidelines issued by the CRG are directed at specific sub-committees
(Credit, Market, and Operations), which are groups formed by Directors.
To find out more about the risk management process at Banco do Brasil, access the website bb.com.br/ri.
b) Credit Risk
Credit Risk is associated with the possibility of loss resulting from uncertainty regarding the receipt of
amounts agreed on with borrowers, counterparts of contracts or issues of securities.
For alignment with the best practices of credit risk management and to increase efficiency in the management
of its economic capital, Banco do Brasil uses risk and return metrics as instruments for dissemination of the
culture at the Institution, present throughout its loan process.
c) Market Risk
Market Risk reflects the possibility of loss that can be caused by changes in the behavior of interest and
exchange rates and of prices of shares and commodities.
98
Notes to Financial Statements
Financial Instruments – Market Value
The table below presents the financial instruments recorded in assets, compared to fair value:
R$ Thousand
BB-Consolidated
06.30.2010
Book
value
12.31.2009
Book
value
Fair Value
06.30.2009
Book
value
Fair Value
Unrealized gain/loss, net of tax effects
On Income
On Stockholders´ Equity
Fair Value
06.30.2010 12.31.2009 06.30.2009
06.30.2010 12.31.2009 06.30.2009
ASSETS
Short-term interbank deposits
132,542,665
132,686,485
168,397,960
168,377,532
132,437,901
132,392,752
143,820
(20,428)
(45,149)
143,820
(20,428)
(45,149)
Securities
131,032,385
130,902,147
122,873,797
122,714,673
108,782,993
109,039,503
195,620
(33,426)
506,261
(130,238)
(159,124)
256,510
Adjustment of securities available for sale (Note 8.a)
--
--
--
--
--
--
325,858
125,698
249,751
--
--
--
Adjustment of securities held to maturity (Note 8.a)
--
--
--
--
--
--
(130,238)
(159,124)
256,510
(130,238)
(159,124)
256,510
Derivative financial instruments
Loan operations
1,217,067
1,217,067
1,463,084
1,463,084
780,584
780,584
--
--
--
--
--
--
289,075,118
289,042,251
261,783,097
262,062,450
214,906,249
214,902,802
(32,867)
279,353
(3,447)
(32,867)
279,353
(3,447)
LIABILITIES
Interbank deposits
10,436,263
10,520,311
11,618,573
11,631,606
7,459,392
7,459,914
(84,048)
(13,033)
(522)
(84,048)
(13,033)
(522)
Time deposits
192,715,468
192,757,526
193,515,574
193,575,751
185,072,345
185,112,170
(42,058)
(60,177)
(39,825)
(42,058)
(60,177)
(39,825)
Obligations related to Committed Operations
166,602,569
166,506,148
160,821,187
160,648,661
101,507,594
101,510,228
96,421
172,526
(2,634)
96,421
172,526
(2,634)
48,427,753
48,470,009
37,859,562
37,925,250
31,269,120
31,285,514
(42,256)
(65,688)
(16,394)
(42,256)
(65,688)
(16,394)
Borrowings and onlendings
Derivative financial instruments
Other liabilities
Unrealized gain/loss, net of tax effects
3,237,903
3,237,903
4,724,036
4,724,036
2,580,382
2,580,382
--
--
--
--
--
--
137,095,557
137,055,598
120,848,069
120,655,895
112,094,427
112,131,278
39,959
192,174
(36,851)
39,959
192,174
(36,851)
274,591
451,301
361,439
(51,267)
325,603
111,688
99
Notes to Financial Statements
Determination of Fair Value of Financial Instruments
Short-term interbank investments: The market value was obtained by future cash flows discount, adopting
interest rates exercised by the market in similar operations in the balance sheet date.
Securities: Securities and derivative financial instruments are accounted for by the market value, as provided
for in BACEN Circular 3068 of 11.08.2001, excluding from such criterion, securities held to maturity.
Determination of securities' market value, including those held to maturity, is obtained according to rates
collected at the market.
Loan operations: Operations remunerated at fixed rates have been estimated through future cash flow
discount, adopting for such, interest rates utilized by the Bank for contracting of similar operations in the
balance sheet date. For operations of such group remunerated at variable rates, it was considered as market
value the book value itself due to equivalence among them.
Interbank deposits: The market value has been calculated through discount of the difference between future
cash flows and rates currently applicable in the fixed operations market. In case of variable operations which
maturities did not exceed 30 days, the book value was deemed to be approximately equivalent to the market
value.
Time deposits: The same criteria adopted for interbank deposits are utilized in the determination of the
market value.
Deposits received under security repurchase agreements: For operations at fixed rates, the market value
was determined calculating the discount of the estimated cash flows adopting a discount rate equivalent to
the rates applicable in contracting of similar operations in the last market day. For variable operations, book
values have been deemed approximately equivalent to market value.
Borrowing and onlendings: Said operations are exclusive to the Bank, without similarity in the market. In face
of their specific characteristics, exclusive rates for each fund entered, inexistence of an active market and
similar instrument, the market values of such operations are equivalent to the book value.
Other liabilities: Market values have been determined by means of the discounted cash flow, which takes into
account interest rates offered in the market for obligations which maturities, risks and terms are similar.
Other financial instruments: Included or not in the balance sheet, book values are approximately equivalent
to their correspondent market value.
Derivatives: According to BACEN Circular 3082, of 1.30.2002, derivatives are recorded at market value.
Determination of derivatives' market value is estimated in accordance with an internal pricing model, with the
use of the rates disclosed for transactions with similar terms and indices on the fiscal years' last business
day.
Sensitivity Analysis (CVM Instruction no. 475/2008)
In line with best market practices, Banco do Brasil manages its risks in a dynamic manner, seeking to detect,
assess, monitor, and control market risk exposures in its own positions. To this end, the Bank takes into
account the risk limits defined by the Strategic Committees and likely scenarios, to act in a timely manner in
reversing any occasional adverse results.
In accordance with CMN Resolution no 3464/2007 and with Bacen Circular no. 3354/2007, in an effort to
manage more efficiently its transactions exposed to market risks, Banco do Brasil separates its transactions
as follows:
100
Notes to Financial Statements
1) Trading Book: consisting in all the transactions in its own position undertaken as business deals or
intended as a hedge for its trading portfolio, for which there is an intention of trading prior to their contractual
expiry, subject to normal market conditions and that do not have a non-trading clause.
2) Banking Book: consisting in transactions not classified in the Trading Book and the key feature of which is
the intention of keeping these transactions until expiry.
The sensitivity analysis for all the operations with assets and liabilities of the balance sheet, in compliance with
CVM Instruction n.º 475/2008, of 12.17.2008, does not adequately reflect the management of market risks
adopted by the Institution, and does not represent the Bank’s accounting practices.
In order to determine the sensitivity of the Bank's capital to the reflexes of market trends, simulations were
performed with three likely scenarios, two of which with an ensuing adverse outcome for the Bank. The
scenarios employed are seen as follows:
Scenario I: Likely situation, which reflects the perception of senior management of the Bank, the scenario most
likely to occur for a 3-month horizon, considering macroeconomic factors and market information (BM & F
Bovespa, Andima, etc.). Assumptions used: real exchange rate / dollar rate of R$ 1.80 and raising the Selic
rate to 11.50% per annum based on market conditions observed on 06.30.2010.
Scenario II: Situation possible. Assumptions used: parallel shock of 25% in the risk variables, based on market
conditions observed on 06.30.20010 and is considered the worst losses by risk factor and, therefore, neglecting
the dynamics of macroeconomic factors.
Scenario III: Situation possible. Assumptions used: parallel shock of 50% in the risk variables, based on
market conditions observed on 06.30.2010 and is considered the worst losses by risk factor and, therefore,
neglecting the dynamics of macroeconomic factors..
In the table below may be seen a summary of the Trading Portfolio profit figures (Trading), which included
public and private securities, derivatives financial instrument and funding based on transactions subject to
repurchase agreements showing the values observed in 06.30.2010 and 06.30.2009:
R$ Thousand
Scenario I
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
TR/TBF
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of variation of TR and TBF coupon
Rate
Variation
Increase
Increase
Decrease
Increase
--
06.30.2009
Income
Rate
Variation
Income
(4,946)
-(59)
(1,378)
--
Decrease
Increase
Increase
Increase
Decrease
21,337
(274)
648
9,179
2,037
101
Notes to Financial Statements
R$ Thousand
Scenario II
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
TR/TBF
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of variation of TR and TBF coupon
06.30.2009
Rate
Variation
Income
Rate
Variation
Income
Increase
Decrease
Decrease
Increase
--
(10,541)
-(17,603)
(1,790)
--
Increase
Increase
Decrease
Increase
Increase
(83,762)
(35)
(31,567)
(25,693)
(5,163)
R$ Thousand
Scenario III
06.30.2010
Risk Factor
Concept
Rate
Variation
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
TR/TBF
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of variation of TR and TBF coupon
Increase
Decrease
Decrease
Increase
--
06.30.2009
Income
Rate
Variation
Income
(22,818)
-(35,206)
(3,482)
--
Increase
Increase
Decrease
Increase
Increase
(160,405)
(69)
(63,134)
(49,806)
(19,208)
In the case of transactions classified in the Banking Book, appreciations or depreciations resulting from
changes in interest rates practiced in the market do not imply in a significant financial and bookkeeping impact
on the Bank's income. This is so because this portfolio is composed chiefly of loan operations (consumer credit,
agribusiness, working capital, etc.); retail funding (demand, time, and savings deposits), and securities, which
are recorded in the books according to the agreed on rates when contracting these operations. In addition, it
should be pointed out that these portfolios have as their key feature the intention of helding the respective
positions to maturity, and hence they are not subject to the effects of fluctuating interest rates, or the fact that
such transactions are naturally related to other transactions (natural hedge), hence minimizing the reflexes of a
stress scenario.
In the tables below may be seen a summary of the Trading Portfolio (Trading) and Non Trading (Banking),
except from Banco Votorantim, with values observed in 06.30.2010 and 06.30.2009:
R$ Thousand
Scenario I
06.30.2010
Risk Factor
Concept
Rate
Variation
Prefixed rate
Foreign currency coupons
Exchange variation(1)
TJLP
TR/TBF
Price Indexes
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of long-term interest rate (TJLP) coupon
Risk of variation of TR and TBF coupon
Risk of variation of price index coupons
Increase
Increase
Decrease
Increase
Increase
Increase
06.30.2009
Income
Rate
Variation
Income
(2,392,340)
(36,115)
(405)
127,596
1,655,303
(405,550)
Decrease
Increase
Increase
Decrease
Decrease
Increase
442,323
(13,784)
3,740
(34,833)
(53,805)
(162,457)
(1) Net tax purpose.
102
Notes to Financial Statements
R$ Thousand
Scenario II
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
(1)
Exchange variation
TJLP
TR/TBF
Price Indexes
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of long-term interest rate (TJLP) coupon
Risk of variation of TR and TBF coupon
Risk of variation of price index coupons
06.30.2009
Rate
Variation
Income
Rate
Variation
Income
Increase
Increase
Decrease
Decrease
Decrease
Increase
(5,294,655)
(83,175)
(121,516)
(272,593)
(3,948,404)
(466,875)
Increase
Increase
Decrease
Decrease
Decrease
Increase
(2,130,701)
(19,447)
(182,305)
(283,868)
(1,545,076)
(774,410)
(1) Net tax purpose.
R$ Thousand
Scenario III
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation(1)
TJLP
TR/TBF
Price Indexes
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of long-term interest rate (TJLP) coupon
Risk of variation of TR and TBF coupon
Risk of variation of price index coupons
Rate
Variation
Increase
Increase
Decrease
Decrease
Decrease
Increase
06.30.2009
Income
(10,150,330
(164,797))
(243,032)
(311,629)
(8,168,385)
(910,149)
Rate
Variation
Income
Increase
Increase
Decrease
Decrease
Decrease
Increase
(4,121,028)
(38,612)
(364,610)
(586,031)
(3,204,134)
(1,465,474)
(1) Net tax purpose.
The scenarios used for preparing the framework of sensitivity analysis must necessarily use situations of
deterioration of at least 25% and 50% for variable risk for isolation, as determined by CVM Instruction No.
475/2008. Therefore, the analysis of the results is impaired. For example, simultaneous shocks of increase in
the rate of advance and reduction in interest coupon of TR are not consistent from a macroeconomic.
The derivative transactions found in the Banking Book, in particular, not represent a relevant market risk to
Banco do Brasil, as these positions originated mainly to fulfill the following situations:
- Change of the indexation of funding and lending transactions performed to meet customer needs;
- Market risk hedge with purpose and efficacy as described in Note 8.d. Also in this transaction, the interest and
exchange rate variations have no effects on the Bank's income.
The Banco do Brasil did not enter into any transaction likely to be classified as an exotic derivative, as
described in CVM Instruction no. 475 - Attachment II.
Participation in Banco Votorantim
In order to determine the sensitivity of the Bank's participation in Banco Votorantim, simulations were
performed with three likely scenarios, two of which with an ensuing adverse outcome. The scenarios employed
are seen as follows:
Scenario I: Situation likely, which reflects the perception of top management of Banco Votorantim in the
scenario most likely to occur. Assumptions used: real exchange rate / dollar from R$ 1.80 and the Selic rate
of interest 11.75% per year, to the end of 2010.
103
Notes to Financial Statements
Scenario II: Assumptions used: parallel shock of 25.0% in the risk variables, based on market conditions
observed on 06.30.2010 and is considered the worst losses by risk factor and thus ignoring the dynamics of
macroeconomic factors.
Scenario III: Assumptions used: parallel shock of 50.0% in the risk variables, based on market conditions
observed on 06.30.2010 and is considered the worst losses by risk factor and, therefore, neglecting the
dynamics of macroeconomic factors.
In the tables below are the results for the positions of the Bank for its participation in Banco Votorantim, with
values from 06.30.2010 and 12.31.2009:
R$ Thousand
Scenario I
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
Interest Rates
Others
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of change coupon interest rate
Risk of variation of others coupons
Rate
Variation
Increase
Increase
Decrease
Decrease
Increase
Increase
12.31.2009
Income
Rate
Variation
Income
(69,082)
-6,752
17,286
(530)
(33,067)
Increase
Increase
Increase
Increase
Increase
Increase
(142,478)
-(65,497)
(46,908)
(9,781)
3,136
R$ Thousand
Scenario II
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
Interest Rates
Others
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of change coupon interest rate
Risk of variation of others coupons
Rate
Variation
Increase
Increase
Increase
Increase
Increase
Decrease
12.31.2009
Income
Rate
Variation
Income
(81.359)
-(122.315)
(20.004)
(659)
--
Increase
Increase
Increase
Increase
Increase
Decrease
(324,976)
-(236,751)
(96,030)
(15,820)
(1,809)
R$ Thousand
Scenario III
06.30.2010
Risk Factor
Prefixed rate
Foreign currency coupons
Exchange variation
Price Indexes
Interest Rates
Others
Concept
Risk of variation of prefixed interest rates
Risk of variation of foreign exchange coupon
Risk of variation of exchange rates
Risk of variation of price index coupons
Risk of change coupon interest rate
Risk of variation of others coupons
Rate
Variation
Increase
Increase
Increase
Increase
Increase
Decrease
12.31.2009
Income
Rate
Variation
Income
(94,275)
-(322,441)
(23,808)
(785)
(48,073)
Increase
Increase
Increase
Increase
Increase
Decrease
(479,181)
-(398,723)
(139,799)
(21,165)
(9,299)
d) Liquidity Risk - this type of risk takes two forms: market liquidity risk and cash flow liquidity risk (funding).
The first is the possibility of loss resulting from the incapacity to perform a transaction in a reasonable period of
time and without significant loss of value. The second is associated with the possibility of a shortage of funds to
honor commitments assumed on account of the mismatching between assets and liabilities.
104
Notes to Financial Statements
e) Operating Risk - reflects the possibility of loss resulting from faults, deficiencies, or the inadequacy of
internal processes, personnel and systems, or external events. This concept includes legal risks.
f) Regulatory Capital - The BIS ratio of 03.31.2009 was determined according to the criteria established by
CMN Resolutions 3444/2007 and 3490/2007, which address the calculation of Referential Equity Amount (RE)
and of Required Referential Equity Amount (RRE), respectively. We present below the calculation of the BIS
ratio, pursuant to regulations in force and applicability as of July/2008:
R$ Thousand
06.30.2010
EconomicFinancial
RE - REFERENTIAL EQUITY AMOUNT
Level I
Shareholders' equity
12.31.2009
Financial
Financial
58,264,435
59,092,639
50,087,419
50,839,770
41,068,472
41,068,446
35,218,091
35,217,621
39,386,785
36,119,407
36,119,381
33,146,766
33,142,649
(6,373)
(6,373)
(6,746)
(6,746)
(13,905)
(13,888)
Deferred Assets
(292,619)
(292,619)
(242,296)
(242,296)
(638,323)
(634,693)
Mark-to-market
(145,060)
(145,060)
(85,061)
(85,061)
(121,312)
(121,312)
(22,477)
(22,477)
(22,477)
(22,477)
(22,477)
(22,477)
2,867,342
Tax credits excluded from Level I of RE
Additional provision to the minimum required by
resolution CMN 2682/1999
Hybrid Capital and Debt Instruments - Level I
Level II
Mark-to-market
60,654,717
61,939,495
41,476,368
41,531,271
39,331,882
06.30.2009
EconomicFinancial
Revaluation reserves
Financial
EconomicFinancial
--
--
2,782,065
2,782,065
2,867,342
2,611,015
2,611,015
2,523,580
2,523,580
--
--
20,409,885
20,409,885
18,022,810
18,025,986
15,744,198
15,744,181
145,060
145,060
85,061
85,061
121,312
121,312
Subordinated Debt Qualifying as Capital
19,376,109
19,376,109
17,078,207
17,081,383
14,653,089
14,653,089
Funds obtained from the FCO
13,239,454
13,239,454
12,422,046
12,422,046
11,788,115
11,788,115
414,193
414,193
400,323
400,323
560,898
560,898
Funds obtained from the CDB
3,997,481
3,997,481
4,115,114
4,115,114
2,304,076
Funds raised in Financial Letters
Funds obtained abroad
1,024,423
1,024,423
--
--
--
2,304,076
--
Funds raised in Subordinated Notes
700,558
700,558
--
--
--
--
Funds obtained from the debentures
--
--
140,724
143,900
--
--
882,343
882,343
852,796
852,796
955,892
955,892
Hybrid Capital and Debt Instruments – Level II
Revaluation reserves
6,373
6,373
6,746
6,746
13,905
13,888
Deduction from the PR
(1,231,536)
(1,661)
(826,847)
(1,793)
(874,870)
(122,032)
Financial instruments excluded from the PR
(1,231,536)
(1,661)
(826,847)
(1,793)
(874,870)
(122,032)
RRE - Required Referential Equity Amount
51,969,919
51,281,125
46,758,968
46,288,519
35,956,789
35,597,599
Credit Risk
48,247,880
47,559,086
43,556,535
43,086,086
34,574,149
34,214,959
469,692
469,692
673,909
673,909
227,759
227,759
Operating Risk
3,252,347
3,252,347
2,528,524
2,528,524
1,154,881
1,154,881
Surplus of stockholders' equity: RE – RRE
8,684,798
10,658,370
11,505,467
12,804,120
14,130,630
15,242,171
12.84
13.29
13.71
14.04
15.32
15.71
Market Risk
BIS Ratio: (RE x 100)/ (RRE / 0.11)
(1) Resolution CMN 3.825/2009 revoked with effect from 04/01/2010, the CMN Resolution No. 3.674/2008 allowing Level I add the value of additional
provision to the minimum percentage required by CMN Resolution No. 2682/1999.
If the capital increase (Note 31) had occurred on 06.30.2010, the equity of the bank would spend from R$
39,331,882 thousand to R$ 46,381,782 thousand, positively impacting the Basel Index of EconomicFinancial Consolidated at 1.49 pp (from 12.84% to 14.33%).
In the event of successful legal action for compensation in full of accumulated tax losses of income tax and
negative basis of social contribution (Note 25.c), there would be a positive effect on the BIS ratio Financial
1.07 percentage points (from 13.29% to 14.36%) and from the economic financial consolidated from 1.04
p.p. (from 12.84% to 13.88%).
105
Notes to Financial Statements
g) Fixed asset index
The fixed asset index in relation to RE - Referential Equity is 18.58% (14.55% on 12.31.2009 and 13.54 on
06.30.2009) to the Consolidated Financial and 15.83% (11.37% on 12.31.2009 and 10.77% on 06.30.2009) to
the Economic-Financial Consolidated pursuant to CMN Resolution No. 2669/1999. The difference between the
Fixed Assets of Consolidated Financial and Economic-Financial results from the inclusion of subsidiaries /
affiliates have no financial, high liquidity and low level of restraint, with consequent reduction in Fixed Assets
index of Consolidated Financial and Economic.
31 - Subsequent Events
Public Offering of Shares
In the process of primary and secondary public issue of shares of Banco do Brasil, 396 million registered
common shares without par value were traded, at R$ 24.65 per share, a price established after the
bookbuilding process completed on June 30, 2010. The operation consisted of:
•
•
•
Primary offering of 286 million shares, totaling R$ 7,049,900 thousand, a sum that will be used to
reinforce the capital base of the institution, and to sustain its future growth;
Secondary offering of 70.8 million shares, previously belonging to BNDES and to the Federal
Government;
A secondary offering of a supplementary lot of 39.2 million shares owned by the Brazilian Development
Bank (BNDES) and the Federal Government, in addition to treasury shares.
On July 1, 2010, the Brazilian Securities Commission (CVM) granted public distribution registrations for the
primary and secondary public offering of Banco do Brasil shares. On the same date, the Central Bank of
Brazil approved the capital increase arising from the primary public offering.
On August 5, 2010, the Extraordinary General Meeting approved the Bank's capital increase of R$ 42,815
thousand, corresponding to 4,859,696 subscription receipts, including the fractions, arising from the advance
exercising of 1,551,727 series "C" bonds. In the same EGM the shareholders also approved the capital
change to R$ 33,077,996 thousand (R$ 26,028,096 thousand on June 30, 2010), represented by
2,860,729,247 common book shares without par value (2,569,869,551 registered common shares on June 30,
2010), thus completing the capital increase process. On 06.08.2010, the Central Bank of Brazil approved the
capital increase.
Thus, the public offering resulted in an increase in the percentage of free float shares to 30.4%, compared to
21.9% observed at end of June 2010 (before the share offering was carried out). Due to this, Banco do Brasil
honors the commitment undertaken in the adhesion to the New Market of BM&FBOVESPA of attaining a free
float of 25% by 2011.
Multiple Bank
Ownership Structure
Free-float shares
Common Shares (BBAS3)
06.30.2010
Quantity
Public Offering
%
Primary
08.05.2010
Quantity
%
562,426,631
21.9
--
870,926,522
30.4
2,569,869,551
100.0
290,859,696
2,860,729,247
100.0
If the capital increase had occurred on June 30, 2010, Banco do Brasil's shareholders' equity would have been
increased from R$ 39,331,882 thousand to R$ 46,381,782, positively impacting the BIS Ration of EconomicFinancial Consolidated (Note 30.f) by 1.49 p.p. (from 12.84% to 14.33%).
106
Notes to Financial Statements
32 – Other Information
a) New Market
At 5.31.2006, Banco do Brasil signed a contract with the São Paulo Stock Exchange for adhesion to the New
Market segment of Bovespa, which assembles a group of companies with the best corporate governance
practices in Brazil.
Moreover, Banco do Brasil, its Shareholders, the Officers, and the members of the Audit Committee
undertake to resolve all and any dispute or controversy related to the New Market Listing Regulations
through the Arbitration Chamber of the BM&FBovespa Market, in conformity with an arbitration clause
included in the By-laws of Banco do Brasil.
b) Distribution of Dividends and/or Interest on Own Capital
During a meeting held on 2.24.2010, the Board of Directors approved the setting, for the year 2010, of the
payout rate equivalent to the minimum percentage of 40% of net income, fulfilling the policy for payment of
dividends and/or interest on own capital on a quarterly basis, pursuant to article 43 of the Bank's By-Laws.
c) Financial Holding Company
On 04.13.2010, the North-American Central Bank - FED (Federal Reserve System) granted Banco do Brasil
the status of "Financial Holding Company". The Bank was accorded this status after a minute analysis of major
factors determined by the US banking legislation, among which is the Bank's capitalization level and the quality
of its management.
This qualification will make it possible for Banco do Brasil, if it is in its interest, to perform banking activities in
the US territory, either by itself or through its subsidiaries, under the same conditions as US banks.
d) Investment Funds Administration
At June 30, 2010, BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A - wholly owned
subsidiary of the Banco do Brasil, exhibited a managed portfolio of R$ 344.9 billion, of which R$ 331.7 billion in
investment funds (456 funds investments) and $ 13.2 billion in managed portfolios (19 portfolios managed).At
December 31, 2009, managed portfolio was R$ 306.7 billion, distributed among 444 funds and 20 managed
portfolios. At June 30, 2009, managed portfolio was R$ 264.9 billion, distributed among 400 investment funds
and 18 portfolios managed.
e) Funds and Programs
The Bank is the operator of the Investment Fund Sector (Fiset), with assets of R$ 2,113 thousand (R$ 2,138
thousand on 12.31.2009 and R$ 2,174 thousand on 06.30.2009) and administrator of the Training
Programme Heritage Server Public - Pasep with assets of R$ 2,107,678 thousand (R$ 1,916,461 thousand
on 12.31.2009 and R$ 1,903,778 thousand at 06.30.2009), guaranteeing the latter a minimum return
equivalent to TJLP.
107
Notes to Financial Statements
f)
Details of Branches and Subsidiaries Abroad
R$ Thousand
Branches Abroad
BB-Consolidated Abroad
06.30.2010
12.31.2009 (1)
06.30.2009
06.30.2010 12.31.2009 (1)
Assets
- BB Group
- Third parties
Total Assets
19,188,451
42,389,390
61,577,841
18,229,330
32,507,723
50,737,053
15,778,695
26,047,066
41,825,761
15,768,597
43,600,059
59,368,656
13,975,507
33,751,943
47,727,450
14,307,620
27,359,584
41,667,204
Liabilities
- BB Group
- Third parties
Stockholders’ Equity
Total Liabilities
15,464,286
43,497,754
2,615,801
61,577,841
9,112,535
39,066,043
2,558,475
50,737,053
7,542,586
31,449,439
2,833,736
41,825,761
11,361,964
44,407,437
3,599,255
59,368,656
4,146,629
40,072,902
3,507,919
47,727,450
5,261,854
32,558,452
3,846,898
41,667,204
(7,219)
(76,678)
(17,980)
23,859
(53,432)
24,246
Income (Loss) for the period
06.30.2009
(1) Result of the 2nd semester.
g) Consortium funds
R$ Thousand
06.30.2010
Forecast of funds receivable from consortium members
12.31.2009
06.30.2009
56,109
45,856
39,440
Obligations of the group for contributions
Consortium - goods to granted
3,352,521
3,115,953
2,383,273
2,177,640
1,731,004
1,572,667
(In Units)
Number of groups managed
Number of active consortium members
239
161,801
316
140,860
336
121,366
16,722
22,123
21,450
31,164
19,839
16,905
Number of goods delivered to consortium winners
Number of goods in the period
h) Overseas Funding
In the 1st half of 2010, the Banco do Brasil raised US$ 1,450 million through securities issued abroad, with
US$ 950 million in securities maturing within five years and coupons of 4.5% per year and another US$ 500
million in securities maturing in ten years and coupons of 6.0% pa The Bando do Brasil has earmarked
resources for lending, priority given to finance foreign trade operations.
108
Notes to Financial Statements
i)
Assignment of Employees to Outside Agencies
Federal government assignments are regulated by Law No. 10.470/2002 and Decree No. 4.050/2001.
1S2010
Employees
assigned (1)
1S2009
Cost for the
period(thousand)
Employees
assigned (2)
Cost for the
period(thousand)
With costs for the Bank
Federal Government
Labor unions
Other agencies/entities:
10
229
1,258
11,477
12
160
1,290
7,364
4
770
3
584
Without cost to the Bank
Federal, state and municipal governments
Outside agencies (Cassi, FBB, Previ)
Employee entities
Subsidiaries and associated companies
310
756
76
----
292
718
58
----
311
--
312
--
1,696
13,505
1,555
9,238
Total
(1)
Balance at 06.30.2010.
j)
Remuneration of Employees and Management
The values of monthly wages paid to employees and Directors of the Bank of Brazil, are presented below:
R$ Thousand
06.30.2010
12.31.2009
06.30.2009
Lowest salary
Highest salary
Average salary
1,416,00
25,247,10
4,121,45
1,416,00
25,247,10
4,567,70
1,296,75
23,817,90
4,675,41
Management
President
Vice-President
44,505,00
40,197,00
41,592,00
37,566,00
41,592,00
37,566,00
34,380,00
32,130,00
32,130,00
3,606,85
3,370,80
3,370,80
3,606,85
30,942,00
27,847,80
3,370,80
28,917,00
26,025,30
3,370,80
25,704,00
15,422,40
Director
Directors
Council Tax
Board of Directors
Audit Committee - Proprietor
Audit Committee - Alternate
109
Notes to Financial Statements
k) Insurance Policy of Assets
Despite the low degree of risk to which their assets are subject, the bank hires for its values and assets,
insurance considered adequate to cover potential claims.
Insurance contracted by the Bank in force on 06.30.2010 have value coverage R$ 6,622,235 thousand and
mainly cover the following risks:
R$ Thousand
Risks Covered
Property insurance for the assets themselves relevant
Life insurance and personal accident for the collective Board
Property risks to the corporate network which owns and Cielo SA
Others
Covered Securities
Value Award
6,488,429
700
2,810
191
116,680
16,426
836
216
110
KPMG Auditores Independentes
Financial Services
R. Dr. Renato Paes de Barros, 33
04530-904 - São Paulo, SP - Brasil
Caixa Postal 2467
01060-970 - São Paulo, SP - Brasil
Central Tel
Fax Nacional
Internacional
Internet
55 (11) 2183-3000
55 (11) 2183-3001
55 (11) 2183-3034
www.kpmg.com.br
Independent auditors’ opinion
To
The Board of Directors, Stockholders and Management
Banco do Brasil S.A.
Brasília - DF
1. We have examined the balance sheets of Banco do Brasil S.A. (Banco do Brasil) and the
consolidated balance sheets of Banco do Brasil S.A. and its subsidiaries (BB - Consolidated)
as of June 30, 2010 and 2009 and the related statements of income, changes in stockholders’
equity, and changes in cash flows and in added value for the semesters then ended, which are
the responsibility of its management. Our responsibility is to express an opinion on these
financial statements. The financial statements of the indirect investments, Brasilcap
Capitalização S.A., Brasilsaúde Companhia de Seguros, Brasilveículos Companhia de
Seguros, Brasilprev Seguros e Previdência S.A., Cielo S.A., Neoenergia S.A. and Itapebi
Geração de Energia S.A. (Notes 3 and 14), were examined or reviewed by other independent
auditors. Thus, our opinion on the balances of the investments aforementioned and of the
respective income arising from the application of the equity pick-up method, which totaled
R$2,193 million (R$1,800 million as of June 30, 2009) and R$539 in the first semester of
2010 (R$437 million in the first semester of 2009), respectively, are based, exclusively, on
the reports issued by those independent auditors. Additionally, the net assets used in the
calculation of the surplus on Retirement and Pension Plan (Note 28), were examined by other
independent auditors and our evaluation, with respect to these net assets, is based on the
report issued by those independent auditors.
2. Our examination was conducted in accordance with auditing standards generally accepted in
Brazil and included: (a) planning of the audit work, considering the materiality of the
balances, the volume of transactions and the accounting systems and internal accounting
controls of the Bank and its subsidiaries; (b) verification, on a test basis, of the evidence and
records which support the amounts and accounting information disclosed; and (c) evaluation
of the most significant accounting policies and estimates adopted by Management of the
Bank and its subsidiaries, as well as the presentation of the financial statements taken as a
whole.
3. In our opinion, based on our examination and on the reports of other independent auditors,
pursuant to the aforementioned in paragraph one, the financial statements aforementioned
represent fairly, in all material respects, the financial position of Banco do Brasil S.A. (Banco
do Brasil) and Banco do Brasil S.A. and its subsidiaries (BB-Consolidated) as of June 30,
2010 and 2009, and the results of their operations, changes in stockholders’ equity and
changes in cash flows and the added value in their operations for the semester then ended, in
conformity with accounting practices adopted in Brazil, applicable to institutions authorized
to operate by the Brazilian Central Bank.
KPMG Auditores Independentes, uma sociedade simples brasileira e
firma-membro da rede KPMG de firmas-membro independentes e
afiliadas à KPMG International Cooperative (“KPMG International”),
uma entidade suíça.
KPMG Auditores Independentes, a Brazilian entity and a member
firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG International”), a
Swiss entity.
ABCD
4. The Bank has recorded in its assets, as of June 30, 2010, the amount of R$14,510 million
(R$8,410 million as of June 30, 2009) corresponding to the surplus of PREVI – Employee
Benefits (Note 28), which was determined based on criteria established by the Bank’s
Management, which we considered adequate in the circumstance. These criteria incorporate
long-term estimates and assumptions of actuarial and financial nature, as well as the
fulfillment of the requirements established in the regulations in force. Therefore, the
inaccuracies inherent to the process of using estimates and assumptions may result in
differences between the amount recorded and the amount effectively realized.
5. The balance sheets, individual and consolidated, as of December 31, 2009, jointly presented
with the financial statements mentioned in paragraph One, were examined by us, as part of
the financial statements for the year ended December 31, 2009, on which we issued an
unqualified opinion dated February 24, 2010, including emphasis paragraph on the same
matter described herein in paragraph Four.
Brasília, 13 August 2010
KPMG Auditores Independentes
CRC SP-014428/O-6 F-DF
The original version in Portuguese was signed by
Francesco Luigi Celso
Accountant CRC SP-175348/O-5 S-DF
José Claudio Costa
Accountant CRC SP-167720/O-1 S-DF
SUMMARY OF THE AUDIT COMMITTEE REPORT
Introduction
The audit committee of the Bank of Brazil (BB) is the statutory body advising the Board of Directors whose mains
functions are: evaluate the effectiveness of the system of internal controls and internal and external audits, and
review prior to publication, all the statements. The activities of the BB Audit Committee are governed by the
Bank’s bylaws and these are available at www.bb.com.br in the Investor Relations section of the Bank’s web
page.
The action universe of the Committee comprises BB Multiple Bank and the following fully owned subsidiaries: BB
Banco de Investimento S.A., BB Leasing S.A. – Arrendamento Mercantil, BB DTVM Gestão de Recursos –
Distribuidora de Títulos e Valores Mobiliários S.A., BB Administradora de Cartões S.a. e BB Administradora de
Consórcios S.A. Banco Popular do Brasil S.A. is not part of the Audit Committee, in order to have been
incorporated by Banco do Brasil on May 31st, 2010.
BB management and its subsidiaries’ management are responsible for preparing and assuring the integrity of the
financial statements, for managing risks, for maintaining an effective, consistent internal control system and for
monitoring compliance with applicable legal and regulatory standards.
The Internal Audit is responsible for periodically and independently performing its activities including internal
controls reviews in order to evaluate whether they are adequate and effective, as well as to evaluate whether risk
management procedures are adequately performed.
KPMG Auditors Independents is responsible for auditing the Bank’s financial statements and for issuing an
opinion on whether the financial position is presented fairly, in all material respects, and on whether its internal
controls are in conformity with accounting practices adopted in Brazil. Evaluates, also, the quality and adequacy
of internal controls system, including the system of electronic data processing and risk management, and
compliance with legal and regulatory provisions.
Activities
In compliance with its tasks and in line with the Bank’s Annual Work Plan, approved by the Board on at a meeting
held on December 14th, 2010, the Audit Committee has held, among other activities, a total number of 90
meetings with the board of directors, the internal and independent auditors, the Central Bank of Brazil auditors,
and those ones responsible for the business, internal controls, legal, technology, risk management and security
strategic areas in the semester ended June 30th, 2010.
During these meetings, it was approached, particularly, issues related to enhancements of the internal controls
mechanisms, compliance with laws and standards, risk management, new capital agreement (Basel II),
procedures for preventing and combating money laundering, security information, technology solutions, employee
benefits (health and pension), ombudsman, legal contingencies and internal and external audits and external
bodies bodies/agencies of supervision and control recommendations.
At the meetings with the internal and independent audits, we assessed their plans, verified the work performed for
the period and the main findings and recommendations.
It noticed the ongoing actions for adopting the new accounting practices for preparation of financial statements in
IFRS.
It also monitored the process used for preparing the financial statements, examined the accounting practices
adopted, the criteria used to establish provisions, the most significant variations in account balances and the
extraordinary events that occurred during the period.
In the situations in which suggestions for improvement were given, the Committee suggested improvements to
the Executive Board of Directors and other areas of the Institution.
Conclusions
Based on the activities undertaken during the period, observation on the system and internal controlenvironment,
interviews with Management, assessment of activities performed by internal control and risk/security
management, the internal and external audit reports and their conclusions, and taking into consideration the
responsibilities of the Committee and the limitations inherent to the scope of its activities, the Committee
concluded that:
a) the internal control system has been the object of permanent attention by senior management and it is
considered adequate for the size and complexity of the business. Moreover, it has been constantly improved;
b) the Group adopts a conservative posture in the assumption of risks and has appropriate instruments In place
for risk management and mitigation of risks;
c) the internal auditors’ duties have been assessed as effective and independent, as well as adequately reported
at the Committee’s request;
d) the external auditors work has been carried out effectively and nothing was noted that would indicate noncompliance with applicable independence rules and regulations; and
e) the financial statements for the semester ended June 30th, 2010 were prepared in compliance with legal
standards and accounting practices adopted in Brazil, and present fairly, in all material respects, the financial
situation of the Group for the period then ended.
Brasília-DF, August 13th, 2010.
José Danúbio Rozo
(Coordinator)
Celene Carvalho de Jesus
José Gilberto Jaloretto
EXECUTIVE BOARD
CEO
Aldemir Bendine
BOARD OF OFFICERS
Alexandre Corrêa Abreu
Allan Simões Toledo
Danilo Angst
Geraldo Afonso Dezena da Silva
Ivan de Souza Monteiro
Luís Carlos Guedes Pinto
Paulo Rogério Caffarelli
Ricardo Antônio de Oliveira
Robson Rocha
MANAGING DIRECTORS
Adilson do Nascimento Anísio
Admilson Monteiro Garcia
Amauri Sebastião Niehues
Armando Medeiros de Faria
Ary Joel de Abreu Lanzarin
Carlos Eduardo Leal Neri
Clenio Severino Teribele
Dan Antônio Marinho Conrado
Denilson Gonçalves Molina
Edson de Araújo Lôbo
Gueitiro Matsuo Genso
Janio Carlos Endo Macedo
José Carlos Vaz
José Mauricio Pereira Coelho
Luiz Henrique Guimarães de Freitas
Márcio Hamilton Ferreira
Marco Antonio Ascoli Mastroeni
Marco Antônio da Silva Barros
Nilo José Panazzolo
Nilson Martiniano Moreira
Orival Grahl
Paulo Roberto Evangelista de Lima
Renato Donatello Ribeiro
Sandro José Franco
Sandro Kohler Marcondes
Sérgio Ricardo Miranda Nazaré
Walter Malieni Júnior
ACCOUNTING
Eduardo Cesar Pasa
Contador Geral
Contador CRC-DF 017601/O-5
CPF 541.035.920-87
Daniel André Stieler
Contador CRC-DF 013931/O-2
CPF 391.145.110-53
BOARD OF DIRECTORS
Nelson Henrique Barbosa Filho (Presidente)
Aldemir Bendine (Vice-Presidente)
Henrique Jäger
Sérgio Eduardo Arbulu Mendonça
Bernardo Gouthier Macedo
Adriana Queiroz de Carvalho
Francisco Gaetani
BOARD OF AUDITORS
Daniel Sigelmann (Presidente)
Ênio Alexandre Gomes Bezerra da Silva
Clóvis Ailton Madeira
Marcos Machado Guimarães
Pedro Carvalho de Mello
AUDIT COMMITTEE
José Danúbio Rozo (Coordenador)
Celene Carvalho de Jesus
José Gilberto Jaloretto