Earnings Release Report 2Q11

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Earnings Release Report 2Q11

  1. 1. 2Q11 Results New Estrategy Execution: New Products and Stronger management team Well-capitalized bank, structured for new growth cycleSão Paulo, August 8, 2011 – Banco Indusval S.A., financial institution focused on corporatelending, operating in the Brazilian market for over 40 years, listed at the Stock, Commodities andFutures Exchange - BM&FBOVESPA under tickers IDVL3 and IDVL4, announces its financial resultsfor the second quarter (2Q11) and half year (1H11) 2011. Highlights IDVL4: R$ 8.25 per share Closing: 08/08/2011 Capital increase of R$ 201 million, equivalent to 21,9 million subscription receipts admitted for negotiation at Total stock: 41,212,984 + Subscription receipts: 21,892,709 BM&FBOVESPA under tickers IDVL9 (ON) and IDVL10 - Treasury stock: (746,853) (PN), to be converted into shares upon the approval of the 62,358,840 capital increase by the Central Bank of Brazil. Market Cap: R$ 514.5 MM The new Executive Board, together with their teams, defined the goals and action plans, under the Bank’s new Conference Calls/ Webcasts: vision. The action plan aims at resuming growth with an 08/09/2011 improved credit quality and includes: - the strengthening of the commercial team – Middle In English market and Corporate – hiring and training – to meet 10h00 (US EST)/ 11h00 (Brasília) Connection USA:+1 786 924-6977 our customers needs with multiproduct offering; Connection Brazil:+55 11 4688-6361 Code: Banco Indusval - development of new more cost-efficient products to expand offer, generating recurring fee income; In Portuguese - Creating franchise value on certain productive chains; 9h00 (US EST)/ 10h00 (Brasília) - Funding sources diversification, including J.P.Morgan’s Phone: +55 11 4688-6361 Code: Banco Indusval credit line disbursement in May. During this 2nd quarter, while we were preparing the Website: www.indusval.com.br/ir structure, the loan portfolio growth 6%, equivalent to 26% on an annual basis. 1/18
  2. 2. SummaryMessage from the Management ........................................................................ 3Key Indicators................................................................................................ 5Operating Performance ................................................................................... 6Credit Portfolio ............................................................................................... 8Funding ....................................................................................................... 11Liquidity ...................................................................................................... 12Capital Adequacy.......................................................................................... 13Risk Ratings................................................................................................. 13Capital Market.............................................................................................. 13BALANCE SHEET .......................................................................................... 16INCOME STATEMENT .................................................................................... 18 2/18
  3. 3. Message from the ManagementThe first half of 2011 marks a new chapter in Indusval’s history. During the course of its 43-yearhistory, we passed through decisive moments in the evolution of our business: from Brokerage toBank in 1991; the merger with Multistock in 2003; the sale of the Consumer Credit operation in2004; the opening of the first branches in 2006; the IPO in 2007; the strategy review in 2010; andin March 2011, we signed investment agreements with Warburg Pincus, one of the world’s leadingprivate equity funds; with Sertrading, one of Brazil’s biggest foreign trade service companies; westrengthened our management team; acquired Serglobal Comércio de Cereais Ltda., a companywhich activities generate agricultural bonds; and signed a financing line and an agreement withJ.P.Morgan for possible future minority interest in the Bank. To mark this new phase, incorporatingthe new vision, new partnerships, new values, as well as the new strategy, we started operatingunder a new brand: BANCO INDUSVAL & PARTNERS.As a result of these developments announced at the end of the first quarter, we implemented aseries of initiatives in the second quarter focusing on the Company’s organizational restructuring toresume growth: we defined a new Vision - “To be an innovative bank with excellence in corporatecredit and deep understanding of our clients’ businesses and industries the operate, becoming alsoone of the leading players of the high-growth Brazilian corporate bond market”; we elected ourExecutive Board, compounded by one of the best management teams in the market; we set ourgoals and action plans, in a participative way, involving more than 150 people from all areas, aimingat a quality leap and the development of new products and services to serve as the basis for ourgrowth and profitability in the medium and long run; we started the franchise value creation processin certain productive chains, improving our understanding of selected industries, targeting atproducing a recurring income flow; and, we consolidated our values by incorporating to the Ethicsand Credibility legacy, new concepts like Partnership, Excellence, Inovation and Team work, beingconstantly Result oriented.From June we started the execution and follow-up on the plans and established goals. Our effortsbegin to produce results, although we are construing an organization that aims to achievetransformational and consistent results in the medium and long term. In this last quarter, wereached a 6% loan portfolio growth, equivalent to 26% annualized, led by clients with annualrevenues of over R$400 million, from now called “Corporate” clients in our bank. These operationsnow represent 15% of the expanded credit portfolio, which, considering sureties, guarantees andletters of credit issued amounting to R$68.5 million and agricultural bonds (CPR) amounting toR$37.0 million, came in at R$2.1 billion. Though agricultural bonds represent exposure toagribusiness credit, they are classified as Marketable Securities in accordance with Brazilian CentralBank regulations due to their negotiability.As expected, and reflecting, in great extent, loans granted in previous years, that were highlyprovisioned for last march, we accounted for operations overdue more than 60 days totallingR$137.0 million which are covered by allowance for loan losses amounting to R$196.6 million,signifying a coverage ratio of 143.5%.Thanks to the high liquidity maintained over the past few years, funding volume remained stable atR$2.2 billion. Our funding cost droped some basis points during second quarter, inspite of marketdeterioration, due to (i) the capital increase and the entrance of new partners and (ii) the reductionin the volume of higher cost sources such as Time Deposits with Special Guarantee (DPGE) andgiving way to lower cost alternatives like Agribusiness Letters of Credit (LCA). LCAs are backed byRural Product Bills (CPR) generated from the takeover of Serglobal Cereais’ operations. Despite thechallenging scenario, the international area increased funding through correspondent banks to meetthe 15% growth of the Trade Finance portfolio in dollar terms. Our total funding also includes theline of credit granted by J.P. Morgan in May. The diversification of sources and investors aims atlowering the total funding costs.Liquidity remains high, with free cash of R$923.3 million, which enables us to grow without thepressure for funding and use the leverage cushion provided by a comfortable capital adequacy ratio 3/18
  4. 4. of 21.6%, in order to return to profitability in a healthy and sustainable manner in the medium andlong terms.It is worth mentioning that although new members of the Executive Board and other professionalswere hired, recurring personnel expenses were not significantly increased. They went from R$ 16,0million in the 1Q11 to R$ 16,7 million in 2Q11 as, to a greater extent, there were mainlyadjustments to key positions to meet the new guidelines of the Bank, without a relevant increase inthe number of employees for the management’s constant concern not to inflate the Company’sexpenses.The Bank’s bottom line and return on equity remained low in the second quarter as a result from themanagement’s conservative liquidity and provisioning strategies. Additionally, the impact of the newstrategy and management team is not yet reflected in the figures disclosed. Higher level returnsshall be achieved during the next quarters as the expansion of the asset base reflects in increasedincome, with improved credit quality and fee income generated in the product area. 4/18
  5. 5. Key IndicatorsThe financial and operating information presented in this report are based on consolidated financials prepared in millions ofReais (local currency), according to Brazilian GAAP (BRGAAP).Results 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 1H2011 1H2010 1HS11/1H10Financial Intermediation Income 127.0 118.1 110.4 7.5% 15.1% 245.1 224.7 9.1%Financial Interm. Expenses bef. ALL (89.1) (77.8) (64.6) 14.5% 37.9% (167.0) (132.4) 26.2%Result from Financial Int. before ALL 37.9 40.3 45.7 -6.0% -17.2% 78.2 92.4 -15.4% 1ALL Expenses (1.5) (101.6) (12.7) -98.5% -87.9% (103.2) (24.1) 327.9%Result from Financial Intermediation 36.3 (61.4) 33.1 59.2% 9.9% (25.0) 68.3 -136.6%Recurring Operating Result 10.0 (87.5) 12.1 111.4% -17.8% (81.5) 22.9 -455.5%Non-Recurring Operating Expenses (1.2) (2.7) - -56.3% n.m. (3.9) (0.4) n.m.Operating Result 8.8 (90.3) 12.1 109.7% -27.6% (81.5) 22.9 -455.5%Net Profit (Loss) 5.1 (54.5) 8.3 109.3% -38.8% (49.4) 15.6 -416.6%Assets & Liabilities 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10Loan Portfolio 2,003.2 1,890.2 1,686.6 6.0% 18.8% 2 Expanded Loan Portfolio 2,108.7 1,994.3 1,762.6 5.7% 19.6%Cash & Short Term Investments 566.4 567.1 353.2 -0.1% 60.4%Securities and Derivatives 1,764.3 1,825.9 937.8 -3.4% 88.1% Sec.& Derivatives excl. Agro Sec. 1,727.3 1,798.2 937.8 -3.9% 84.2%Total Assets 4,432.8 4,346.8 3,043.8 2.0% 45.6%Total Deposits 1,661.2 1,759.0 1,373.3 -5.6% 21.0%Open Market 1,361.3 1,312.8 561.5 3.7% 142.5%Foreign Borrowings 414.4 350.7 414.2 18.2% 0.1%Domestic On-lending 154.0 137.0 93.1 12.4% 65.5%Shareholders’ Equity 566.5 563.7 429.7 0.5% 31.9%Performance 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 1H2011 1H2010 1HS11/1H10Free Cash 923.3 1,027.0 695.5 -10.1% 32.8%NPL 60 days/ Loan portfolio 6.8% 6.1% 2.6% 0.7 p.p. 4.2 p.p.NPL 90 days/ Loan portfolio 6.3% 4.6% 2.2% 1.7 p.p. 4.1 p.p.Basel Index 3 21.6% 23.7% 20.3% -2.0 p.p. 1.3 p.p.ROAE 3.6% -37.3% 7.9% 40.9 p.p. -4.3 p.p. 0.0% 0.0% 0.0 p.p.Net Interest Margin (NIM) 3.8% 4.6% 6.8% -0.8 p.p. -3.0 p.p. 4.1% 6.9% -2.7 p.p.Adjusted Net Interest Margin (NIMa) 5.2% 5.9% 8.5% -0.7 p.p. -3.3 p.p. 5.5% 8.4% -2.9 p.p. 4Efficiency Ratio 79.6% 80.9% 55.2% -1.3 p.p. 24.4 p.p. 80.2% 58.1% 22.2 p.p.Recurring Efficiency Ratio 75.9% 72.3% 57.5% 3.6 p.p. 18.4 p.p. 74.1% 58.8% 15.2 p.p.Other Information 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10Number of Corporate Clients 1,194 707 694 68.9% 72.0%Number of Employees 376 357 349 5.3% 7.7%Details in the respective sessions of this report1 additional Loan loss Allowances included2 guarantees issued and agro securities included3 capitalization of March 2011 under reserves4 non-recurring expenses includedBanco Indusval & Partners (BI&P) is a commercial bank listed at Level 1 Corporate Governance of the BM&FBOVESPA,with 43 years of experience in the financial markets, focusing on local and foreign currency corporate loan products.The Bank relies on a network of 11 branches strategically located in economically relevant Brazilian regions, includingan offshore branch, its brokerage firm operating at the São Paulo Stock, Commodities and Futures Exchange -BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which generates agricultural bonds. 5/18
  6. 6. Operating PerformanceProfitabilty Financial Intermediation 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 1H2011 1H2010 1HS11/1H10 Financial Intermediation Revenues 127.0 118.1 110.4 7.5% 15.1% 245.1 224.7 9.1% Loan Operations 62.1 64.3 65.6 -3.5% -5.4% 126.4 126.8 -0.3% Loans & Discounts Receivables 57.5 60.3 59.9 -4.7% -4.0% 117.8 111.9 5.2% Financing 3.4 3.6 4.3 -6.7% -22.3% 7.0 10.9 -35.8% Other 1.2 0.4 1.4 200.2% -11.3% 1.7 4.0 -58.2% Securities 63.7 40.7 18.9 56.4% 236.9% 104.4 43.2 141.8% Derivative Financial Instruments (6.4) 5.4 6.8 -218.0% -195.0% (1.0) 8.4 -111.6% FX Operations Result 7.6 7.7 19.1 -0.2% -59.9% 15.3 46.4 -67.0% Financial Intermediation Expenses 90.7 179.5 77.3 -49.5% 17.3% 270.1 156.5 72.7% Money Market Funding 85.0 72.0 46.0 18.1% 84.9% 157.0 84.8 85.2% Time Deposits 51.5 46.4 34.2 11.0% 50.6% 97.9 63.7 53.6% Repurchase Transactions 30.4 22.3 10.6 36.5% 187.2% 52.7 18.9 178.9% Interbank Deposits 3.1 3.3 1.2 -7.1% 161.5% 6.4 2.2 196.3% Loans, Assign. & Onlending 4.2 5.9 18.7 -29.2% -77.8% 10.0 47.6 -79.0% Foreign Borrowings 2.2 3.6 16.8 -40.6% -87.2% 5.8 43.1 -86.6% Dom. Borrowings+Onlending 2.0 2.2 1.9 -10.8% 6.5% 4.2 4.5 -6.7% Allowance for Loan Losses 1.5 101.6 12.7 -98.5% -87.9% 103.2 24.1 327.9% Financial Intermediation Result 36.3 (61.4) 33.1 159.2% 9.9% (25.0) 68.3 -136.6%Result from Financial Intermediation, detailed in notes 15.a and 15.b to the quarterly financialstatements, increased to R$36.3 million at the end of the quarter, thanks to the growth of financialintermediation revenue, reflecting the higher income from securities that, net of results fromfinancial derivative instruments, represented 45% of total financial intermediation revenue. Thisrevenue was offset by funding expenses, which were up due to the growth in the average fundingbalance, from R$1,147.5 million in 2Q10 and R$1,581.4 million in 1Q11 to R$1,635.4 million in2Q11, as well as the rise in the SELIC interest rate. Moreover, despite the slight decrease in thequarter, the high cash level partly explains the higher revenue from securities operations, especiallythose involving government bonds, as explained in note 5.b to the financial statements.The improved result from financial intermediation in the quarter also reflects the lower allowance forloan losses, given that the bank had already constituted additional provisions of R$67 million in theprevious quarter to safeguard the profitability of its future operations, which was partially usedduring the quarter, as expected.The result from the half year ended June 30, 2011 was a negative R$25 million, already offsetting asubstantial part of the provision expenses of R$103 million generated in 1Q11, of which R$67 millionwere provisioned in excess of requirement, to be used during the course of the year with the agingof the previous portfolio.Net Interest MarginNet Interest Margin 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 1H2011 1H2010 1HS11/1H10A. Result from Financial Int. before ALL 37.9 40.3 45.7 -6.0% -17.2% 78.2 92.4 -15.4% 1A1 Adjustment FX fluctuation (0.5) (1.5) 1.2 -66.6% -141.2% (1.9) 1.2 -264.8%A.a Adj. Financial Interm Result before ALL 37.4 38.8 46.9 -3.7% -20.3% 76.2 93.6 -18.5%B. Average Interest bearing Assets 4,084.3 3,583.1 2,754.3 14.0% 48.3% 3,833.7 2,737.2 40.1% 2Adjustment for non-remunerated average assets (1,161.4) (913.7) (489.9) 27.1% 137.1% (1,037.5) (487.2) 112.9%B.a Adj Average Interest bearing Assets 2,923.0 2,669.4 2,264.5 9.5% 29.1% 2,796.2 2,250.0 24.3%Net Interest Margin (NIM) (A/B) 3.8% 4.6% 6.8% -0.8 p.p. -3.0 p.p. 4.1% 6.9% -2.7 p.p.Adj.Net Interest Margin (NIMa) (Aa/Ba) 5.2% 5.9% 8.5% -0.7 p.p. -3.3 p.p. 5.5% 8.5% -3.0 p.p.1 FX fluctuations accounted under other operating income (expenses)2 Repos with volumes, tenors and rates equivalent in assets and liabilities 6/18
  7. 7. Net Interest Margin (NIM), after deducting the average balance of assets offset by a balancing itemof equal amount, rate and tenor in repo operations under liabilities and hence with no remuneration,stood at 5.2% in 2Q11 and 5.5% in 1H11, reflecting the substantial free cash and the decrease inrevenue from loan operations due to defaults being over 60 days. This margin will increase duringthe second half of the year with the growth of the credit portfolio in terms of both volume andrevenue. This growth also has a positive impact on the use of surplus cash.Efficiency RatioEfficiency Ratio 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 1H2011 1H2010 1HS11/1H10Personnel Expenses 15.7 13.9 14.3 13.0% 9.7% 29.7 26.8 10.8%Contributions and Profit-sharing 1.0 2.1 1.9 -51.1% -44.8% 3.1 4.4 -27.8%Administrative Expenses 11.7 10.9 8.9 7.1% 30.2% 22.5 17.9 26.2%Taxes 2.9 3.5 2.6 -17.5% 13.4% 6.5 5.8 12.3%Other Operating Expenses 4.0 6.1 0.5 -34.0% 694.9% 10.1 4.0 152.6%A1- Recurring Operating Expenses 35.4 36.6 28.2 -3.3% 25.2% 71.9 58.7 22.5% 1A1 Adjustment FX fluctuation (0.5) (1.5) 1.2 -66.6% -141.2% (1.9) 1.2 -264.8%A1- Adj. Recurring Operating Exp. 34.9 35.1 29.4 -0.6% 18.6% 70.0 59.9 16.8% 2Personnel Expenses 0.7 2.2 - -69.0% n.m. 2.9 - n.m. 3Administrative Expenses 0.5 0.5 - -0.8% n.m. 1.0 0.4 136.5%A2- Total Adjusted Op. Expenses 1.2 2.7 - -56.3% n.m. 3.9 0.4 820.4%A- Operating Expenses Total 36.1 37.8 29.4 -4.6% 22.6% 73.9 60.3 22.5%Gross Income Fin. Interm. (w/o ALL) 37.9 40.3 45.7 -6.0% -17.2% 78.2 92.4 -15.4%Income from Services Rendered 4.1 3.5 2.6 18.6% 55.3% 7.6 5.5 38.3%Income from Banking Tariffs 0.2 0.2 0.3 1.3% -4.0% 0.5 0.4 7.2%Other Operating Income 3.7 4.6 2.5 -18.4% 46.3% 8.3 3.5 134.5%B- Operating Income Total 46.0 48.6 51.2 -5.4% -10.2% 94.5 101.9 -7.2%Recurring Efficiency Ratio (A1/B) 75.9% 72.3% 57.5% 3.6 p.p. 18.4 p.p. 74.1% 58.8% 15.2 p.p.Efficiency Ratio (A/B) 78.5% 77.9% 57.5% 0.6 p.p. 21.0 p.p. 78.2% 59.2% 18.9 p.p.1 FX fluctuations accounted under other operating expenses2 layoff and hiring expenses and events with employees3 strategic consultancy, law and auditting firmsThe Efficiency Ratio in 2Q11 was also impacted by non-recurring expenses in the amount of R$1.2million (R$2.7 million in 1Q11) related to amounts and charges provisioned and/or paid asseverance pay to employees terminated and other expenses resulting from the corporate andorganizational restructuring, which totaled R$3.9 million in 1H11. The efficiency ratio, adjusted fornon-recurring expenses and exchange variation, stood at 75.9% in 2Q11 and 74.1% in 1H11,considered high by Management, and should be normalized with the gradual increase in assets andreduction in cash levels.Net ProfitThe net profit of R$5.1 million still reflects the non-recurring expenses related to the corporaterestructuring and the continuation of high liquidity, with lower impact from the allowance for loanlosses due to the provisions constituted in the previous quarter.Net result in 1H11 was a R$49.4 million loss, partially offsetting the expenses with the allowance forloan losses in the amount of R$103.2 million in the period. 7/18
  8. 8. Credit PortfolioThe Expanded Credit Portfolio, which stood at R$2.1 billion on June 30, 2011, includes sureties,guarantees and letters of credit issued by the Bank, in addition to agricultural bonds generated fromthe takeover of Serglobal Cereais’ operations. These operations resulted in a 6% growth of thecredit portfolio in the quarter and 20% in comparison with the same period last year. Credit Portfolio by Product 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 Loan Operations 1,622.9 1,527.2 1,365.3 6.3% 18.9% Loans & Discounted Receivables 1,410.3 1,348.0 1,204.4 4.6% 17.1% BNDES/ Finame 142.9 124.6 72.7 14.6% 96.5% Direct Consumer Credit – used vehicles 3.6 4.8 9.9 -25.3% -63.5% Financing in Foreign Currency 53.8 32.0 33.1 68.1% 62.6% Other Financing 7.3 10.2 19.7 -28.6% -62.8% Assignment with Co-obligation 4.9 7.5 25.5 -34.1% -80.8% Advances on Foreign Exchange Contracts 371.5 353.8 314.1 5.0% 18.3% Other Loans 8.8 9.2 7.2 -4.2% 23.6% CREDIT OPERATIONS 2,003.2 1,890.2 1,686.6 6.0% 18.8% Guarantees Issued (L/Gs and L/Cs) 68.5 76.4 76.0 -10.3% -9.8% Agricultural Securities (CPRs) 37.0 27.7 - 33.5% n.m. EXPANDED CREDIT PORTFOLIO 2,108.7 1,994.3 1,762.6 5.7% 19.6% Allowance for Loan Losses (196.6) (212.6) (107.8) -7.5% 82.3%Loan operations represented 77% of the expanded portfolio, led by loans and discount ofreceivables, which accounted for 67%. Trade finance operations, which include foreign currencyloans (R$53.8 million) and advances on foreign exchange contracts (R$371.5 million), totaledR$425.4 million, equivalent to 20% of the credit portfolio, up 10% in the quarter and 22% in 12months, despite the 4.15% and 6.31% appreciation of the Brazilian Real in the respectivecomparison periods. In U.S. dollar terms, the trade finance portfolio stood at R$272 million, up 15%in the quarter and 41% in 12 months, from US$237 million on March 31, 2011 and US$193 millionon June 30, 2010.The portfolio also includes BNDES/FINAME onlendings, which increased 15% and 97%, respectively,in the comparison periods; the run-off balance from the Direct Consumer Credit – Used Vehiclesportfolio discontinued in October 2008; and, the portion of car financing assigned to other financialinstitutions under our credit risk coverage (co-obligation), which together represent only R$8.5million, or less than 0.5% of the Expanded Credit Portfolio.The guarantees issued – sureties, guarantees and import letters of credit – totaled R$68.5 millionand represent 3.2% of the expanded credit portfolio, while agricultural bonds, represented by CPRsand recorded under ‘Marketable Securities’ in accordance with Brazilian Central Bank regulations dueto their negotiability, represented 1.8% of the portfolio. Currently, the agricultural bonds portfoliomainly consists of coffee certificates and will grow with the diversification to other agriculturalcommodities.As shown below, the middle market segment (annual revenue of between R$40 million and R$400million) represents 76% of the expanded credit portfolio, up 3% in the quarter and stable incomparison with June 2010. The Corporate segment (annual revenue of over R$400 million),created in July 2010, accounts for 15% of the portfolio, up 21% in the quarter. 8/18
  9. 9. Credit Portfolio By Cliente Segment 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 Middle Market 1,604.4 1,554.5 1,602.3 3.2% 0.1% Local Currency - Real 1,278.4 1,241.3 1,255.1 3.0% 1.9% Loans & Discounted Receivables 1,144.0 1,118.6 1,181.8 2.3% -3.2% Financing 0.5 10.2 0.6 -95.5% -19.9% BNDES / FINAME 134.0 112.4 72.7 19.2% 84.3% Foreign Currency 326.0 313.1 347.2 4.1% -6.1% Corporate 322.2 267.2 - 20.6% n.m. Local Currency - Real 222.9 194.5 - 14.6% n.m. Loans & Discounted Receivables 214.0 182.3 - 17.4% n.m. BNDES / FINAME 8.9 12.2 - -27.2% n.m. Foreign Currency 99.4 72.7 - 36.6% n.m. Other 76.6 68.6 84.3 11.7% -9.1% Consumer Credit – used vehicles 8.5 11.7 23.3 -26.9% -63.4% Acquired Loans & Financing 59.2 47.7 53.8 24.2% 10.0% Other Loans 8.8 9.2 7.2 -4.2% 23.6% CREDIT PORTFOLIO 2,003.2 1,890.2 1,686.6 6.0% 18.8% Guarantees Issued 68.5 76.4 76.0 -10.3% -9.8% Agricultural Securities 37.0 27.7 0.0 33.5% n.m. EXPANDED CREDIT PORTFOLIO 2,108.7 1,994.3 1,762.6 5.7% 19.6% Allowance for Loan Losses (196.6) (212.6) (107.8) -7.5% 82.3%Credit Portfolio according to note 6 to the financial statementsThe credit portfolio, which includes loans and financing operations in Brazilian Real and trade financeoperations, totaled R$2.0 billion, as detailed in note 6 to the financial statements, broken down asfollows: Industry % Food & Beverage 18.2% Agribusiness 16.0% Construction 11.5% Financial Institutions 7.2% Civil Construction 5.4% Transportation & Logistics 4.1% Textile, Apparel and Leather 4.1% Education 3.2% Metal Industry 3.0% Power Generation & Distribution 2.9% Chemical & Pharmaceutical 2.9% Oil and Biofuel 2.8% Individuals 2.2% Pulp & Paper 2.2% Financial Services 2.0% Retail & Wholesale 1.7% Wood & Furniture 1.7% Other Industries (*) 9.2% TOTAL 100.0% (*) Other Industries: less than 1.3% individual share in the portfolio 9/18
  10. 10. By Economic Activity By Segment Other Retail & Services Individuals Other 22% 7% 4% Financial Corporate Cos 16% 5% Commerce Middle 10% Market Industry 80% 56% By product By Client Concentration BNDES Onlendings Other 10 Largest 7% 24% 20% Loans & Trade Discounts Finance 69% 20% Guarantees 61 - 160 11 - 60 Other Issued 23% 33% 1% 3% By Maturity By Guarantee Pledge 91 to 180 Monitored 21% 181 to 360 7% 13% Pledge /Lien 20% Real State Above 3% Rec eivables Up to 90 360 days Vehicles 69% days 30% 1% 36% Loan Portfolio Quality Rating AA A B C D E F G H Prov / Comp. TOTAL Cred Required Provision % 0% 0.5% 1% 3% 10% 30% 50% 70% 100% % O/S Loans 84.1 630.5 564.5 442.3 78.3 87.7 23.6 4.5 87.8 - 2,003.2 2Q11 9.8% Allowance for Loan Losses 0.0 3.2 5.6 13.3 7.8 26.3 11.8 3.2 87.8 37.7 196.6 O/S Loans 35.4 666.1 476.4 430.8 87.5 91.7 22.2 10.1 69.9 - 1,890.2 1T11 11.2% Allowance for Loan Losses 0.0 3.3 4.8 12.9 8.8 27.5 11.1 7.1 69.9 67.2 212.6 O/S Loans 0.0 548.2 466.9 459.4 95.4 55.1 20.0 8.9 32.8 - 1,686.6 2Q10 6.4% Allowance for Loan Losses 0.0 2.7 4.7 13.8 9.5 16.5 10.0 6.2 32.8 11.6 107.8Loan and financing operations in Brazilian Real and trade finance operations totaled R$2.0 billion, ofwhich 86% carried risk classifications of between AA and C. Operations classified between D and Htotaled R$281.8 million, equivalent to 14% of this portfolio and included loans renegotiated withclients in the amount of R$247.3 million, mostly classified between D and H even when not overdue.The balance of loans overdue more than 60 days totaled R$137.0 million, equivalent to 6.8% of thecredit portfolio, while the balance of loans overdue more than 90 days stood at R$126.2 million,equivalent to 6.3% of the credit portfolio (Non-Performing Loans over 90 days). 10/18
  11. 11. > 60 days > 90 days Default by segment 2Q11 1Q11 2Q11 1Q11 2Q11 1Q11 Total Credit Portifolio NPL %T NPL %T NPL %T NPL %T Middle Market 1,604.4 1,554.5 134.1 8.4% 112.1 7.2% 123.7 7.7% 84.2 5.4% Large Companies 322.2 - - - - 267.2 - - - - Other 76.6 68.6 2.9 3.7% 3.8 5.5% 2.5 3.2% 3.4 4.9% TOTAL 2,003.2 1,890.2 137.0 6.8% 115.9 6.1% 126.2 6.3% 87.6 4.6% Allowance Loan Losses (ALL) 196.6 212.6 ALL / NPL - 143.5% 183.4% 155.80% 242.8% ALL/ Loan Portfolio 9.8% 11.2% - - - -The table above shows that the balance of allowance for loan losses, amounting to R$196.6 million,corresponds to 9.8% of the credit portfolio, providing coverage of 143% of loans overdue more than60 days and 156% of loans overdue more than 90 days.FundingFunding remained practically stable in relation to the previous quarter, for a total of R$ 2.2 million,81.4% of which in Real and 18.6% in foreign currency. Total Funding 2Q11 1T11 2Q10 2Q11/1Q11 2Q11/2Q10 Total Deposits 1,661.2 1,759.0 1,373.3 -5.6% 21.0% Time Deposits 665.4 680.5 749.2 -2.2% -11.2% Insured Time Deposits (DPGE)* 717.1 830.0 525.4 -13.6% 36.5% Agribusiness & Bank Notes 136.6 95.9 16.2 42.5% 743.8% Interbank Deposits 77.6 113.5 45.7 -31.7% 69.6% Demand Deposits and Other 64.5 39.1 36.8 64.9% 75.4% Domestic Onlending 154.0 137.0 93.1 12.4% 65.5% Foreign Borrowings 414.4 350.7 414.2 18.2% 0.1% Trade Finance 357.4 331.9 304.4 7.7% 17.4% Other Foreign Borrowings 57.0 18.8 109.8 202.9% -48.1% TOTAL 2,229.6 2,246.7 1,880.6 -0.8% 18.6%Funding in Real chiefly consists of deposits (74%), mainly through the issue of Bank DepositCertificates (CDB) (30%) and Time Deposits with Special Guarantee (DPGE) (32%). At the end ofthe quarter, Agribusiness Letters of Credit (LCA) represented 6% of total funding, versus 4% in1Q11 and less than 1% in 2Q10. The increase in the share of LCAs is tied to the increase in theagricultural bond positions held consequent to the acquisition of Serglobal, which serve as collateralfor cheaper funding sources than CDBs and, especially, DPGEs, besides enabling greaterdiversification in local currency funding. The Bank has voluntarily reduced the volume of DPGEs inorder to further reduce its funding costs, given the funding alternatives available at the moment.The average term of deposits increased to 845 days from issue (+39 days) and 571 days from theclose (+39 days), as follows: Avg term from Avg term Type of Deposit issuance to maturity1 Time Deposits 602 361 Interbank 244 157 Time Deposits Special Guarantee (DPGE) 1,245 891 Agribusiness & Bank Notes 199 87 Portfolio of Deposits 2 845 571 1 from June 30, 2011 2 average weighted by volume 11/18
  12. 12. Deposits By Type By Investor By maturity de 1 a 81 Empresas 360 dias Time Demand 23% Inst . Finan. 13% Deposit 4% 8% 40% Interbk Pessoa de 91a 1 dias 80 > de 360 5% Fí sica 14% 17% dias ALC+B 49% Time N Out ros Deposit Inv. Inst it . 8% 6% (DPGE) 49% < 90 dias 43% 21%Foreign borrowings are mainly related to the Trade Finance Portfolio and are financed through linesgranted by foreign correspondent banks, which totaled R$357.4 million on June 30, 2011, the loanfrom J.P. Morgan in May, totaling R$38.7 million, and the balance of IFC’s A loan, amounting toR$18.4 million, maturing in September. Exposure to interest rates and foreign currency iscompletely hedged against currency and interest rate fluctuations since the loan disbursement. Free CashLiquidity 1,027 923On June 30, 2011, cash totaled R$2,284.6 million and, 707excluding money market funding (R$1,361.3 million), s n o i lresulted in free cash of R$923.3 million, equivalent to l i M55.6% of total deposits. $ R 2Q10 1Q11 2Q11Capital AdequacyThe Basel Accord requires banks to maintain a minimum percentage of the capital weighted by the riskin their operations. In this context, the Central Bank of Brazil has stipulated that banks operating inthe country should maintain a minimum percentage of 11.0%, calculated according to the BaselAccord regulations, which provides greater security to Brazil’s financial system against oscillations ineconomic conditions.The following table shows Banco Indusval S.A.’s position in relation to the Central Bank’s minimumcapital requirements: Basel Index 2Q11 1Q11 2Q10 2Q11/1Q11 2Q11/2Q10 Total Capital 566.5 563.7 429.7 0.5% 31.9% Required Capital 288.0 261.8 232.5 10.0% 23.9% Credit Risk allocation 261.6 240.0 213.3 9.0% 22.6% Market Risk Allocation 11.3 6.6 3.2 70.8% 255.0% Operating Risk Allocation 15.2 15.2 16.1 0.0% -5.6% Excess over Required Capital 278.5 301.9 197.1 -7.8% 41.3% Basel Index 21.6% 23.7% 20.3% -2.0 p.p. 1.3 p.p.The reference equity includes the capital subscription of R$201 million in March 2011, held in the"capital increase" account until its conversion into stock after approval from the Brazilian Central Bank. 12/18
  13. 13. Risk Ratings Agency Classification Observation Last Report Financial Data B+/Positive/B Global Scale Standard & Poors Dec. 28, 2010 Sept. 30, 2010 brBBB+/Positive/brA-3 Local Scale - Brazil Financial Strength: D- Stable Moodys Ba3/Stable/Not Prime Global Scale Nov. 25, 2010 Sept. 30, 2010 A2.br/Stable/BR-2 Local Scale - Brazil FitchRatings BBB/Stable/F3 Local Scale - Brazil Aug. 3, 2011 March 31, 2011 10,57 Riskbank Index RiskBank Jul. 15, 2011 March 31, 2011 Ranking: 32 Low Risk Short TermCapital MarketTotal sharesOn June 30, 2011, Banco Indusval S.A. had a total of 41,212,984 shares, of which 27,000,000 werecommon shares (IDVL3) and 14,212,984 were preferred shares (IDVL4), with 746,853 held intreasury. In addition, there are 21,892,709 subscription receipts relating to the capital increase ofR$ 201 million in March 2011, of which 9,945,649 pertain to common shares (IDVL9) and11,947,060 pertain to preferred shares (IDVL10). The subscription receipts, available for trading onthe Bovespa, will be converted to shares immediately after approval from the Brazilian Central Bank,increasing the total number of shares to 63,105,693.Share Buyback ProgramThe 4th Share Buyback Program for the acquisition of up to 1,301,536 preferred shares, approvedby the Board of Directors on August 10, 2010, is effective until August 9, 2011. Indusval S.A. CTVMis the intermediary for this program. As of June 30, 2011, a total of 772,453 preferred shares(IDVL4) had been acquired under the program.Free Float Number of shares as of 06.30.2011 Corporate Controling Type Management* Treasury Free Float % Capital Group Common 27.000.000 17.215.278 2.395.619 0 7.389.103 27,4% Preferred 14.212.984 497.578 116.448 746.853 12.852.105 90,4% TOTAL 41.212.984 17.712.856 2.512.067 746.853 20.241.208 49,1%* This position includes members of the board of directors and of the executive board in Office and the ones elected in the AGM held on April 29 and BDM of May 6 to take office afeter the Central Bank approval. Number of subscription receipts as of 06.30.2011 Total of Controling Type Management* Others Recipts Group Common 9.945.649 2.282.607 961.956 6.701.086 Preferred 11.947.060 27.811 211.937 11.707.312 TOTAL 21.892.709 2.310.418 1.173.893 18.408.398Stock Option PlanThe following Stock Option Plans were approved for the Company’s executive officers and managers,as well as individuals who provide services to the Company or its subsidiaries: 13/18
  14. 14. • Stock Option Plan I approved at the Extraordinary Shareholders’ Meeting held on March 26, 2008. • Stock Option Plan II approved at the Extraordinary Shareholders’ Meeting held on April 29, 2011. • Stock Option Plan III approved at the Extraordinary Shareholders’ Meeting held on April 29, 2011.The aforementioned Stock Option Plans are filed in CVM’s IPE System and are also available in theCompany’s IR website.The following table shows the options granted by Banco Indusval S.A. until June 30, 2011, underStock Option Plan I: Quantity Date Term for Exercise Grace period Granted Exercised Extinct Not Exercised Granted exercise Price R$ 07/22/08 3 years 5 years 10.07 161,896 - - 161,896 02/10/09 3 years 5 years 5.06 229,067 25,600 10 203,457 02/22/10 3 years 5 years 8.56 525,585 - 15,263 510,322 08/06/10 3 years 5 years 7.72 261,960 - 2,524 259,436 02/09/11 3 years 5 years 8.01 243,241 - - 243,241 1,421,749 25,600 17,797 1,378,352No option was granted till date under the Stock Option Plans II and III.Shareholder RemunerationOn July 8, 2011, the Bank paid Interest on Equity in the amount of R$5.3 million for 2Q11, asadvance payment of the minimum mandatory dividend for fiscal year 2011, corresponding toR$0.13097 per share. Total Interest on Equity paid in 1H11 was R$9.5 million, corresponding toR$0.23574 per share.Share PerformanceBanco Indusval’s preferred shares (IDVL4) closed 2Q11 at R$ 9.13, for market cap of R$369.5million, considering the shares as of June 30, 2011 and excluding treasury stock. The price of IDVL4shares appreciated 0.55% in 2Q11 and 21.9% in 12 months, while the Ibovespa index dropped9.9% and 1.9%, respectively. Share Price Evolution in the last 12 months 130 120 110 100 90 IBOVESPA IDVL4 80 14/18
  15. 15. Liquidity and Trading VolumeThe preferred shares of BI&P (IDVL4) were traded in 96.8% of the sessions in 2Q11 and 97.2% inthe past 12 months. In 2Q11, a total of 3.1 million IDVL4 shares were traded in over 789transactions on the spot market, for total volume of R$ 28.1 million. In 12 months, the financialvolume traded on the spot market stood at R$108.7 million, totaling around 13 million preferredshares in 3,957 trades.Shareholder BaseFollowing is the breakdown of the Company’s capital before and after the private subscription of thesubscription rights in March 2011, held in subscription receipts (IDVL9 and IDVL10) until the capitalincrease is approved by the Brazilian Central Bank: Subscription Shares Position Receipts IDVL3 IDVL4 Type of Shareholder IDVL3 IDVL4 IDVL9 IDVL10 % % TOTAL % +IDVL9 +IDVL10 CONTROLING GROUP 17.215.278 497.578 2.282.607 27.811 19.497.885 53% 525.389 2% 20.023.274 32% MANAGEMENT** 2.395.619 116.448 961.956 211.937 3.357.575 9% 328.385 1% 3.685.960 6% FISCAL COUNCIL - - - - - 0% - 0% - 0% TREASURY - 746.853 - - - 0% 746.853 3% 746.853 1% FAMILIES 7.389.013 702.148 - - 7.389.013 20% 702.148 3% 8.091.161 13% NATIONAL INVESTORS - 7.726.467 1.201.090 211.955 1.201.090 3% 7.938.422 30% 9.139.512 14% FOREIGN INVESTORS - 2.423.451 4.891.304 11.413.043 4.891.304 13% 13.836.494 53% 18.727.798 30% CORPORATES - 310.410 608.692 65.219 608.692 2% 375.629 1% 984.321 2% INDIVIDUALS 90 1.689.629 - 17.095 90 0% 1.706.724 7% 1.706.814 3% TOTAL 27.000.000 14.212.984 9.945.649 11.947.060 36.945.649 100% 26.160.044 100% 63.105.693 100%* This position includes members of the board of directors and of the executive board in Office and the ones elected inthe AGM held on April 29 and BDM of May 6 to take office afeter the Central Bank approval. 15/18
  16. 16. BALANCE SHEET Consolidated R$ 000 Assets 6/30/2010 3/31/2011 6/30/2011 Current 2,531,006 3,818,699 3,748,509 Cash 6,151 3,897 38,482 Short-term interbank investments 347,061 563,227 527,902 Open market investments 287,002 540,959 464,743 Interbank deposits 60,059 22,268 63,159 Securities and derivative financial instruments 934,809 1,819,265 1,756,439 Own portfolio 491,500 658,024 329,087 Subject to repurchase agreements 300,412 781,924 975,515 Linked to guarantees 111,767 134,012 205,552 Subject to the Central Bank - 198,683 208,038 Derivative financial instruments 31,130 46,622 38,247 Interbank accounts 3,415 2,106 2,864 Loans 828,346 842,536 929,773 Loans - private sector 840,325 890,506 968,410 Loans - public sector 17,828 4,247 - (-) Allowance for loan losses (29,807) (52,217) (38,637) Other receivables 372,762 539,599 442,316 Foreign exchange portfolio 370,408 397,698 395,888 Income receivables 77 13 32 Negotiation and intermediation of securities 5,493 63,055 54,569 Sundry 4,710 97,269 5,001 (-) Allowance for loan losses (7,926) (18,436) (13,174) Other assets 38,462 48,069 50,733 Other assets 39,686 49,447 52,637 (-) Provision for losses (2,006) (2,505) (3,011) Prepaid expenses 782 1,127 1,107 Long term 499,939 515,696 631,882 Marketable securities and derivative financial instruments 3,019 6,614 7,827 Linked to guarantees 37 31 62 Derivative financial instruments 2,982 6,583 7,765 Interbank Accounts 9,647 7,140 6,669 Loans 411,581 484,806 504,965 Loans - private sector 481,641 624,937 649,548 (-) Allowance for loan losses (70,060) (140,131) (144,583) Other receivables 74,456 16,469 111,350 Trading and Intermediation of Securities 84 243 481 Sundry 74,404 17,994 111,053 (-) Allowance for loan losses (32) (1,768) (184) Other rights 1,236 667 1,071 Permanent Assets 12,849 12,410 52,409 Investments 1,686 1,686 26,201 Subsidiaries and Affiliates - - 24,515 Other investments 1,686 1,686 1,842 (-) Loss Allowances - - (156) Property and equipment 11,163 10,724 11,045 Property and equipment in use 2,179 2,192 2,192 Revaluation of property in use 3,538 3,538 3,538 Other property and equipment 12,014 12,511 13,452 (-) Accumulated depreciation 6,568 (7,517) (8,137) Property and equipment - - 15,163 Goodwill - - 15,491 (-) Accumulated amortization - - (328) TOTAL ASSETS 3,043,794 4,346,805 4,432,800 16/18
  17. 17. Consolidated R$ 000Liabilities 6/30/2010 3/31/2011 6/30/2011Current 1,897,737 2,780,139 2,838,089 Deposits 723,279 761,590 658,502 Cash deposits 36,248 38,240 64,539 Interbank deposits 45,737 105,087 71,395 Time deposits 640,755 617,356 522,568 Other 539 907 - Funds obtained in the open market 561,458 1,312,773 1,361,341 Own portfolio 299,456 776,286 963,490 Third party portfolio 262,002 462,999 110,383 Unrestricted Portfolio - 73,488 287,468 Funds from securities issued or accepted 16,193 88,319 129,271 Agribusiness Letters of Credit & Bank Notes 16,193 88,319 129,271 Interbank accounts 683 475 1,391 Receipts and payment pending settlement 683 475 1,391 Interdepartamental accounts 12,066 9,004 8,369 Third party funds in transit 12,066 9,004 8,369 Borrowings 395,215 350,689 368,123 Foreign borrowings 395,215 350,689 368,123 Onlendings 36,270 44,025 48,564 BNDES 13,973 16,131 19,123 FINAME 22,297 27,894 29,441 Other liabilities 152,573 213,264 262,528 Collection and payment of taxes and similar charges 357 650 643 Foreign exchange portfolio 56,141 62,996 50,488 Taxes and social security contributions 3,489 9,590 7,812 Social and statutory liabilities 4,199 5,534 7,528 Negotiation and intermediation securities 32,644 77,938 150,505 Derivative financial instruments 48,876 45,398 37,724 Sundry 6,867 11,158 7,828Long Term 715,878 1,002,235 1,027,567 Deposits 633,872 901,534 866,043 Interbank Deposits - 8,392 6,159 Time deposits 633,872 893,142 859,884 Funds from securities issued or accepted - 7,571 7,362 Agribusiness Letters of Credit & Bank Notes - 7,571 7,362 Loan obligations 18,972 - 46,306 Foreign loans 18,972 - 46,306 Onlending operations - Governmental Bureaus 56,791 92,984 105,410 Federal Treasure 17,485 12,694 12,081 BNDES 1,639 30,445 35,662 FINAME 34,316 47,852 56,247 Other Institutions 3,351 1,993 1,420 Other liabilities 6,243 146 2,446 Taxes and social security contributions 5,917 117 1,207 Derivative financial instrument 144 29 58 Sundry 182 - 1,181Future results 501 701 605Shareholders Equity 429,678 563,730 566,539 Capital 370,983 568,665 572,396 Capital Reserve 1,375 2,540 3,039 Revaluation reserve 1,961 1,911 1,894 Profit reserve 65,313 55,812 55,812 (-) Treasury stock (9,010) (5,958) (5,958) Asset valuation Adjustment (944) (553) (1,727) Accumulated Profit / (Loss) - (58,687) (58,917) TOTAL LIABILITIES 3,043,794 4,346,805 4,432,800 17/18
  18. 18. INCOME STATEMENT R$ 000Consolidated 2T10 1T11 2T11 1S10 1S11Income from Financial Intermediation 110,359 118,123 127,005 224,745 245,128 Loan operations 65,630 64,312 62,078 126,783 126,390 Income from securities 18,905 40,713 63,692 43,177 104,405 Income from derivative financial instruments 6,750 5,437 (6,414) 8,388 (977) Income from foreign exchange transactions 19,074 7,661 7,649 46,397 15,310Expenses from Financial Intermediaton 77,300 179,487 90,659 156,467 270,146 Money market funding 45,959 71,972 84,978 84,751 156,950 Loans, assignments and onlendings 18,679 5,866 4,152 47,602 10,018 Allowance for loan losses 12,662 101,649 1,529 24,114 103,178Gross Profit from Financial Instruments 33,059 (61,364) 36,346 68,278 (25,018)Other Operating Income (Expense) (20,925) (28,900) (27,566) (45,354) (56,466) Income from services rendered 2,646 3,466 4,109 5,477 7,575 Income from tariffs 250 237 240 445 477 Personnel expenses (14,333) (16,139) (16,419) (26,755) (32,558) Other administrative expenses (8,949) (11,383) (12,151) (18,280) (23,534) Taxes (2,580) (3,549) (2,927) (5,768) (6,476) Result from affiliated companies - - (116) - (116) Other operating income 2,548 4,570 3,728 3,538 8,298 Other operating expense (507) (6,102) (4,030) (4,011) (10,132)Operating Profit 12,134 (90,264) 8,780 22,924 (81,484)Non-Operating Profit (815) (483) (1,314) (831) (1,797)Earnings before taxes ad profit-sharing 11,319 (90,747) 7,466 22,093 (83,281)Income tax and social contribution (1,185) 38,394 (1,381) (2,132) 37,013Income tax (75) (461) 614 87 153Social contribution (45) (277) 371 52 94Deferred fiscal assets (1,065) 39,132 (2,366) (2,271) 36,766Statutory Contributions & Profit Sharing (1,871) (2,111) (1,032) (4,353) (3,143)Net Profit for the Period 8,263 (54,464) 5,053 15,608 (49,411) 18/18

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