2Q12 Earnings Release Report

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2Q12 Earnings Release Report

  1. 1. Results 2Q12 Aug. 07, 2012 Better credit quality raises share of AA and B rated loans to 79%, from 65% in 2Q11. Corporate segment now accounts for 47% of the Expanded Credit Portfolio. Highlights of the Period • Due to the more conservative approach on account of the macroeconomicIDVL4: R$6.53 per share scenario, the Expanded Loan Portfolio grew just 1.7% in 2Q12 and 33.1%Closing: August 07, 2012 in 12 months, totaling R$2.8 billion.Outstanding shares: 62,371,178 • In line with our strategy, the Corporate segment continues to expand,Market Cap: R$407.3 million accounting for 47% of the Expanded Loan Portfolio (45% of the Classic LoanPrice/Book Value: 0.70 Portfolio) at the end of June. • Continuous improvement in the quality of the expanded loan portfolio: the Conference Call / Webcasts share of credits rated between AA and B increased to 79%, from 65% in August 08, 2012 2Q11. Of the new loans granted in the quarter, 99% are rated between AA and B (97% in 1Q12). In English 10:00 (US EST) / 11:00 (Brasília) Connections • Reduction in operations overdue more than 90 days to 2.6%, from 6.3% in June 2011, with coverage by provisions of 175.7% (156.4% in March 2012 Brazil: +55 11 4688-6361 and 155.8% in June 2011). USA: +1 786 924-6977 Code: BI&P • Funding costs continue to decrease, especially due to the higher share of In Portuguese Agribusiness Letters of Credit (LCA) in total funding in Real. Total funding 9:00 (US EST) / 10:00 (Brasília) stood at R$2.8 billion, in line with the loan portfolio trends. Number: +55 11 4688-6361 Code: BI&P • Our Basel Ratio of 17.0% (Tier 1) and our liquidity enable business expansion in the second half of 2012. Website: www.bip.b.br/ir 2011 Annual Report available at: • Despite the 59% growth in Income from Financial Intermediation beforehttp://www.bip.b.br/eng/ri/downlo allowance for loan losses, compared with 2Q11 (from R$37.4 million in ads/ra/Indusval_ra_2011.pdf 2Q11 to R$59.6 million in the quarter), provisioning of loans granted before 2010 continue to affect Net Profit. • Our Ratings were reaffirmed by: - Standard & Poors (Aug.06,2012) BB/B (global) e brA+/brA-1 (local) - FitchRatings (July 11, 2012) BBB/F3 (local). 1/18
  2. 2. SummaryMessage from the Management ................................................................................................................ 3Macroeconomic Environment .................................................................................................................... 4Key Indicators.............................................................................................................................................. 5Operating Performance .............................................................................................................................. 6Credit Portfolio............................................................................................................................................ 9Funding ..................................................................................................................................................... 12Liquidity..................................................................................................................................................... 13Capital Adequacy ...................................................................................................................................... 13Risk Ratings ............................................................................................................................................... 14Capital Market .......................................................................................................................................... 14Balance Sheet............................................................................................................................................ 16Income Statement .................................................................................................................................... 18 2/18
  3. 3. Message from the ManagementThe macroeconomic scenario, with the Brazilian economy growing below its potential and the European crisis worsening,called for greater caution, especially in the second quarter. As a result, we reduced the growth pace of our loan portfolio.This scenario also had an adverse impact on our results, reflecting the loans granted before 2010.However, though we have temporarily slowed down our growth pace, we are maintaining our strategy of growing withquality, while seeking to develop our differentials in the market through expertise in products and services, as well asmore efficient processes that allow us to expand our client base with agility and higher profitability.Our loan portfolio, which includes agro bonds (Rural Product Certificates (CPR), Agribusiness Credit Rights Certificate(CDCA) and Agribusiness Deposit Certificates and Warrants (CDA/WA)), private credit bonds (debentures and promissorynotes) and guarantees issued (sureties, guarantees, letters of credit), grew 1.7% in the quarter and 33% in 12 months,totaling R$2.8 billion. The Corporate segment (companies with annual revenue of between R$400 million and R$2.0 billion)led the upturn in lending, increasing its share of our expanded loan portfolio to 47%, including the transference ofcustomers previously managed by the Middle Market team. In addition to reflecting the new business model, this growthresults primarily from the increase in BNDES onlending (up 13% in 2Q12 and 83% in 12 months), guarantees issued (up 7%and 157%, respectively), agribusiness bonds (CPR, CDCA and CDA/WA) (up 16% and 622%, respectively) and clients’debentures (up 20% in 2Q12).In view of this scenario, we opted to maintain the quality of our loan portfolio, which resulted in an increase in the loanoperations rated in the best risk categories (AA – C) to 93% of the expanded loan portfolio, with loans rated between AAand B representing 79% of the total, versus 65% in June 2011. Of the loans granted in the second quarter, 99% is ratedbetween AA and B.Loan operations overdue more than 90 days, which stood at 2.6%, fell by approximately four percentage points from June2011, reflecting both the better quality of the portfolio generated in the past 12 months and the write-offs of R$17 millionin the quarter.Funding stood at approximately R$2.8 million, in line with the loan portfolio, growing by 24% in relation to June 2011.Deposits in real, which account for 74% of total funding, maintained the cost reduction trend with the continuous increasein Agribusiness Letters of Credit (LCA), which represented 16% of total deposits, decreasing the share of funding sourceswith higher costs, such as CDBs and DPGEs. Another source that accounts for 10% of total funding – onlending operations -reflects the growth in such operations using funds from the BNDES. Foreign borrowings, equivalent to 16% of total funding,increased by 8.4% compared to June 2011 and are mainly related to Trade Finance lines granted by correspondent banks.It is worth noting the development of products. In the quarter, the team to develop derivatives with customers wasreinforced by hiring additional resources and we continued to train our commercial team in order to guarantee excellencein the supply and delivery of products and services. These initiatives help expand our business pipeline and strengthen ourbrand.Our human resources remain the focus of our attention because we believe that hiring and grooming seasonedprofessionals, who are engaged in our strategy and aligned with our vision and values, is fundamental for the success ofour business. In the quarter, we continued to invest in training our professionals in both the business and operationssupport areas, and in revising and optimizing processes to achieve business excellence. 3/18
  4. 4. Macroeconomic EnvironmentEconomic growth remains below potential. Brazil, though, has shown a slight improvement since the third quarter of 2011.Nevertheless, GDP estimates fell significantly in the quarter, indicating annual growth of less than 2% until the end of theyear. Industry remains the hardest hit sector, being affected by the European crisis in an environment of increasing costsand strong competition from imported products. The government continues to adopt measures to stimulate economicactivity and a few sectors have already started reacting, as was the case of vehicle sales after the IPI tax cut. Another factorthat has affected consumption growth in recent months is the increase in the portion of household incomes committed tothe payment of interest and principal on the loans contracted in recent years. However, consumption is expected to pickup in the second half of the year. The fundamental requirement for this is a stabilization of the international financial crisis,given that heavy tax and fiscal incentives were granted in the past two quarters.In the foreign exchange scenario, the quarter was marked by a sharp appreciation of the dollar, due primarily to twofactors: the worsening of the European crisis and the Brazilian government measures to weaken the real, in particular theinterventions by the Brazilian Central Bank, which bought dollars in both the spot and derivatives markets.In relation to interest rates, the Central Bank’s Monetary Policy Committee continued its cycle, lowering the benchmarkSelic rate to 8.50% - the lowest since the creation of the Real Plan – resulting in the need for changes to the rules onremuneration for savings accounts.Credit in the national financial system grew 4.5% in the quarter, according to Central Bank data, and 18% in 12 months,while remaining flat from the first quarter. The credit/GDP ratio exceeded 50% for the first time. Household defaultscontinued to grow, reaching 7.8% and forcing banks to tighten consumer credit. However, data related to June point to aslight drop in this figure. Corporate loan defaults remained flat at around 4%. Macroeconomic Data 2Q12 1Q11 2Q11 2012e 2013e Real GBP Growth (Q/Previous Q) 0.70% 0.21% 0.47% 1.9% 4.5% Inflation (IPCA - IBGE) – quarterly change 1.20% 1.44% 1.94% 5.1% 5.8% Inflation (IPCA - IBGE) – annual change 4.92% 5.24% 6.71% 5.1% 5.8% FX (US$/R$) – quarterly change 10.93% -2.86% -4.15% 8.6% 5.5% Interest Rate (Selic) 8.50% 9.75% 12.25% 7.5% 9.5% 4/18
  5. 5. Key IndicatorsThe financial and operating information presented in this report are based on consolidated financials prepared in millions of Real (localcurrency), according to Brazilian GAAP (BRGAAP), except were otherwise stated.Results 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 1H12 1H11 1H12/1H11Result from Financial Int. before ALL 59.6 50.8 17.2% 37.4 59.3% 110.4 76.2 44.8% 1ALL Expenses (22.6) (14.4) 56.9% (1.5) 1377.9% (37.0) (103.2) -64.1%Result from Financial Intermediation 37.0 36.4 1.5% 35.9 3.1% 73.4 (27.0) 372.2%Net Operating Expenses (30.7) (27.2) 12.9% (25.9) 18.4% (57.8) (50.6) 14.2%Recurring Operating Result 6.3 9.3 -32.0% 10.0 -36.7% 15.6 (77.6) 120.1%Non-Recurring Operating Expenses (0.3) 0.0 n.m. (1.2) -76.9% (0.3) (3.9) -93.0%Operating Result 6.0 9.3 -34.9% 8.8 -31.2% 15.3 (81.5) 118.8%Net Profit (Loss) 2.4 5.0 -52.1% 5.1 -52.1% 7.5 (49.4) 115.1%Assets & Liabilities 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Loan Portfolio 2,395.6 2,385.6 0.4% 2,003.2 19.6% 2 Expanded Loan Portfolio 2,807.1 2,759.1 1.7% 2,108.7 33.1%Cash & Short Term Investments 632.6 642.3 -1.5% 566.4 11.7%Securities and Derivatives 1,536.0 1,309.8 17.3% 1,764.3 -12.9% Securities excl. Agro Sec. & Private 3 1,300.3 1,100.1 18.2% 1,727.3 -24.7%Credit BondsTotal Assets 4,966.5 4,583.0 8.4% 4,432.8 12.0%Total Deposits 2,038.0 2,087.8 -2.4% 1,661.2 22.7%Open Market 1,219.6 1,058.4 15.2% 1,361.3 -10.4%Foreign Borrowings 449.2 407.8 10.2% 414.4 8.4%Domestic On-lending 267.8 240.2 11.5% 154.0 73.9%Shareholders’ Equity 582.4 590.5 -1.4% 566.5 2.8%Performance 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 1H12 1H11 1H12/1H11Free Cash 873.7 853.3 2.4% 923.3 -5.4%NPL 60 days / Loan Portfolio 2.8% 3.2% -0.3 p.p. 6.8% -4.0 p.p.NPL 90 days / Loan Portfolio 2.6% 2.7% -0.2 p.p. 6.3% -3.7 p.p. 4Basel Index 17.0% 17.5% -0.5 p.p. 21.3% -4.3 p.p.ROAE 1.7% 3.5% -1.8 p.p. 3.6% -2.0 p.p. 2.6% -18.9% 21.5 p.p.Adjusted Net Interest Margin (NIMa) 7.7% 6.6% 1.0 p.p. 5.2% 2.5 p.p. 7.1% 5.5% 1.6 p.p.Efficiency Ratio 62.3% 68.1% -5.7 p.p. 78.5% -16.2 p.p. 65.1% 78.6% -13.5 p.p.Other Information 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Number of Corporate Clients 820 775 5.8% 683 20.1%Number of Employees 438 426 2.8% 376 16.5%Details in the respective sessions of this report:1 Additional Allowance for Loan Losses (ALL) included.2 Including Guarantees issued, Private Credit Bonds (PNs and Debentures) and agro securities (CDCAs, CDA/WAs and CPRs).3 Excluding Agro Securities (CPRs and CDA/WA) and Private Credit Bonds (PNs and debentures).4 R$201 million capital increase in March 2011.BI&P - Banco Indusval & Partners is a commercial bank listed at Level 2 Corporate Governance of the BM&FBOVESPA, withover 40 years of experience in the financial market, focusing on local and foreign currency corporate loan products. BI&Prelies on a network of 11 branches strategically located in economically relevant Brazilian regions, including an offshorebranch in Cayman Islands, its brokerage firm operating at the São Paulo Stock, Commodities and Futures Exchange -BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds. 5/18
  6. 6. Operating Performance Financial Intermediation Result Net Profit before Allowance for Loan Losses 44.8% 115.1% -52.1% 110.4 59.3% 76.2 10.3 59.6 7.3 7.5 49.3 50.8 R$ million 5.1 R$ million 45.0 5.0 37.4 2.4 2Q11 3Q11 4Q11 1Q12 2Q12 1H11 1H12 2Q11 3Q11 4Q11 1Q12 2Q12 1H11 1H12 -49.4 Expanded Credit Portfolio Funding 33.1% 23.6% 1.7% 0.7% 2.8 2.8 2.7 2.8 2.5 2.4 2.5 2.1 2.2 2.2 R$ billion R$ billion 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 Loans & Financing in Reais Trade Finance Guarantees Issued Local Funding Foreign Funding Agro Bonds (CPR, CDA/WA e CDCA) Private Credit Bonds (PNs e Debentures)ProfitabilityFinancial Intermediation 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 1H12 1H11 1H12/1H11Financial Intermediation Revenues 222.8 161.8 37.7% 126.5 76.1% 384.6 243.2 58.2%Loan Operations 62.9 70.2 -10.5% 62.1 1.3% 133.1 126.4 5.3% Loans & Discounts Receivable 46.4 62.9 -26.2% 57.5 -19.3% 109.3 117.8 -7.2% Financing 7.6 6.4 19.1% 3.4 125.2% 13.9 7.0 99.9% Other 8.9 0.9 836.8% 1.2 614.5% 9.8 1.7 493.2%Securities 114.4 68.6 66.7% 64.6 77.1% 183.0 104.6 74.9%Derivative Financial Instruments 5.5 (3.7) 248.1% (7.8) 171.0% 1.8 (3.2) 157.2%FX Operations Result 40.0 26.7 49.8% 7.6 423.3% 66.8 15.3 336.0%Financial Intermediation Expenses 163.3 111.0 47.2% 89.1 83.2% 274.2 167.0 64.2%Money Market Funding 119.4 85.3 39.9% 85.0 40.5% 204.7 157.0 30.4% Time Deposits 40.8 45.2 -9.8% 48.5 -15.9% 86.0 92.5 -6.9% Repurchase Transactions 68.1 30.5 123.2% 30.4 123.9% 98.6 52.7 87.1% Interbank Deposits 3.4 3.1 9.7% 3.1 11.7% 6.6 6.4 2.8% Agro Notes (LCA) & Bank Notes (LF) 7.0 6.4 9.3% 3.0 136.0% 13.5 5.4 149.6%Loans, Assignments & Onlending 43.9 25.6 71.2% 4.2 957.5% 69.6 10.0 594.3% Foreign Borrowings 39.6 22.2 78.3% 2.2 1733.1% 61.7 5.8 966.5% Domestic Borrowings & Onlending 4.3 3.5 25.5% 2.0 118.1% 7.8 4.2 84.8%Gross Result Financial Interm.before ALL 59.6 50.8 17.2% 37.4 59.3% 110.4 76.2 44.8%Allowance for Loan Losses (ALL) (22.6) (14.4) 56.9% (1.5) 1377.9% (37.0) (103.2) -64.1%Gross Result from Financial Intermediation 37.0 36.4 1.5% 35.9 3.1% 73.4 (27.0) 372.2% 6/18
  7. 7. Result from Financial Intermediation before expenses with the allowance for loan losses reached R$59.6 million 2Q12, up17.2% in the quarter and 59.3% in 12 months.Revenue from Loan Operations in the quarter was impacted by the cut in the Selic rate and, especially, the effects of thecurrent economic scenario, with the slowdown in Brazilian economic growth affecting not only the generation of newloans, but also the performance of the loans granted before 2010. As a result, the share of the Corporate portfolio in thetotal Loan Portfolio increased to 45% (47% of the Expanded Loan Portfolio). The growth of our portfolio was driven by theExpanded Loan Portfolio operations, i.e. Sureties and Guarantees, whose commissions are booked under Revenue fromServices in the Other Operating Income account; and under Agro Bonds (CPRs and CDA/WA) and Private Credit Bonds(Debentures), whose revenues are booked under Income from Securities. Note that the increase in Revenue fromFinancing was primarily driven by the growth in BNDES onlending operations, of 12.9% in the quarter and 82.6% in 12months. Moreover, credit recovery amounted to a significant R$8.5 million in the quarter.Income from Securities, which includes the results from the treasury’s directional portfolio and CPR, CDA/WA andDebenture operations, is offset by funding expenses, and its increase in the quarter derives mainly from the purchase andsale of government bonds.The Result from Derivative Financial Instruments in 2Q12 was extraordinarily impacted by Management’s decision todiscontinue hedge accounting for booking hedges of cash flows indexed to the IPCA and IGPM, as well as foreignborrowings, with exposure to interest rate and foreign exchange variations, as detailed in notes 3(d) and 5(c).Management’s decision, in line with Central Bank’s Circular 3082/2002 and after hearing our auditors, derives from theinterpretation that hedge accounting treatment should be used in cases where the cash flow amount is fixed; in otherwords, variable flows should be hedged at a prefixed rate. The mark-to-market of the hedge operations for these cashflows is now booked in the income statement, instead of under Shareholders’ Equity.Revenue from Foreign Exchange Operations was strongly impacted by the depreciation of the Real in the quarter, whichalso impacted Expenses with Foreign Borrowings.Open Market Funding Expenses in the quarter mainly reflect Repo Operations, which are offset by the income fromsecurities mentioned above. Time deposit expenses fell 9.8% in the quarter, despite a 2.2% growth in the average balanceof CDBs and DPGEs in the period. Expenses with interbank deposits, Agribusiness Letters of Credit and Treasury Bills,though less significant, reflect the higher average funding balance in the period.Result from Financial Intermediation, after the expenses with allowance for loan losses of R$22.6 million in the quarter,amounted to R$37.0 million, up 1.5% over 1Q12 and down 3.1% in 12 months. The expenses with allowance for loan lossesalso reflect the vulnerability resulting from the legacy of the 2008 financial crisis and the caution required in light of theslowdown in the economy in the first half of the year, which led to an increase in the allowance for loans overdue morethan 90 days to 175.5% (from 156.4% in March 2012).Net Interest MarginAdjusted net interest margin rose 1.0 and 2.5 percentage points, respectively, in the quarter and in 12 months. 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 1H12 1H11 1H12/1H11A. Result from Financial Interm. before ALL 59.6 50.8 17.2% 37.4 59.3% 110.4 76.2 44.8%B. Average Interest bearing Assets 4,193.6 4,234.5 -1.0% 4,124.1 1.7% 4,214.0 3,799.2 10.9% Adjustment for non-remunerated avg. assets 1 (1,006.7) (1,096.9) -8.2% (1,199.2) -16.1% (1,051.8) (1,009.6) 4.2%B.a Adj. Average Interest bearing Assets 3,186.9 3,137.6 1.6% 2,924.9 9.0% 3,162.2 2,789.7 13.4%Net Interest Margin (NIM) (A/B) 5.8% 4.9% 0.9 p.p. 3.7% 2.1 p.p. 5.3% 4.1% 1.3 p.p.Adj. Net Interest Margin (NIMa) (A/Ba) 7.7% 6.6% 1.0 p.p. 5.2% 2.5 p.p. 7.1% 5.5% 1.6 p.p.1 Repos with equivalent volumes, tenors and rates both in assets and liabilities. 7/18
  8. 8. Efficiency RatioEfficiency Ratio 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 1H12 1H11 1H12/1H11Personal Expenses 21.9 22.7 -3.5% 16.4 33.6% 44.7 32.6 37.2%Contributions and Profit-sharing 2.3 2.1 5.2% 1.0 118.0% 4.4 3.1 39.6%Administrative Expenses 13.6 13.1 3.8% 12.2 12.1% 26.7 23.5 13.6%Taxes 2.3 3.7 -36.8% 2.9 -20.0% 6.0 6.5 -6.6%Other Operating Expenses 2.8 0.9 209.8% 1.9 47.6% 3.6 2.8 31.8%A- Total Operating Expenses 42.9 42.6 0.7% 34.4 24.7% 85.5 68.5 24.9%Gross Income Financial Interm. (w/o ALL) 59.6 50.8 17.2% 37.4 59.3% 110.4 76.2 44.8%Income from Services Rendered 5.4 6.6 -18.6% 4.1 30.5% 12.0 7.6 57.8%Income from Banking Tariffs 0.2 0.2 -22.1% 0.2 -35.4% 0.4 0.5 -25.8%Other Operating Income 3.7 5.0 -24.8% 2.1 82.4% 8.7 2.9 203.3%B- Total Operating Income 68.8 62.6 10.0% 43.8 57.2% 131.4 87.1 50.8%Efficiency Ratio (A/B) 62.3% 68.1% -5.7 p.p. 78.5% -16.2 p.p. 65.1% 78.6% -13.5 p.p.The Efficiency Ratio maintained the trend that began in 3Q11, in line with our objective of improving efficiency andprofitability. In the upcoming quarters, this trend should become more evident with the higher contribution of revenuefrom services generated by the products area.Net ProfitThe operating income of R$6.0 million in 2Q12, excluding (i) the non-operating income from the loss on the sale ofproperties and idle assets, (ii) taxes and contributions, and (iii) profit sharing, resulted in a net profit of R$2.4 million, down52.1%, mainly due to the increase in the allowance for loan losses (R$22.6 million). Net profit in the first six months of2012 amounted to R$7.5 million, versus a loss of R$49.4 million in the same period last year. 8/18
  9. 9. Credit PortfolioExpanded Credit PortfolioThe Expanded Credit Portfolio totaled R$2.8 billion on June 30, 2012, up 1.7% in the quarter and 33.1% in 12 months. Thisportfolio includes loan and financing operations in Real and Trade Finance operations, detailed in note 6(a) to the financialstatements, as well as: (i) sureties, guarantees and letters of credit issued; (ii) agribusiness bonds generated from theabsorption of the operations of Serglobal Cereais (CPR and CDA/WA), which were booked under Securities as per theCentral Bank regulations; and (iii) Private Credit Bonds (promissory notes and debentures).Expanded Credit Portfolio by Product 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Loans & Financing in Real 1,844.4 1,861.3 -0.9% 1,560.5 18.2%Trade Finance (ACC/ACE/IMPFIN) 449.4 442.8 1.5% 425.4 5.7%Guarantees Issued (LGs & L/Cs) 175.8 163.8 7.3% 68.5 156.6%Agro Bonds (Securities: CPRs, CDA/WAs; Credit: CDCAs) 267.0 229.7 16.2% 37.0 622.4%Private Credit Bonds (Securities: PNs & Debentures) 30.7 25.5 20.2% 0.0 n.m.Other 39.8 35.9 10.9% 17.4 129.1%TOTAL 2,807.1 2,759.1 1.7% 2,108.7 33.1%Loans and financing operations in Real, which include loans, discounted bills, acquisition of client receivables and BNDESonlendings, represented 67.1% of the Expanded Loan Portfolio. Notable were the increase of 12.9% in the quarter and82.6% in 12 months in BNDES onlending operations, which totaled R$260.8 million in the end of June 2012.Trade Finance operations, which accounted for 16.0% of the portfolio, include import financing (R$130.4 million) andexport financing (ACC/ACE in the amount of R$319.0 million).The guarantees issued – sureties, guarantees and import letters of credit – represented 6.3% of the Expanded LoanPortfolio, up 7.3% in the quarter and 156.6% in 12 months.Though agribusiness bonds and private credit bonds represent credit exposure, they are classified under MarketableSecurities in the balance sheet, in accordance with Brazilian Central Bank regulations on account of their negotiability.These bonds jointly represented 8.4% of the Expanded Loan Portfolio, up 12.4% in the quarter and 537.88% in 12 months.Our Expanded Loan Portfolio breakdown is as follows: By Economic Activity By Region By Customer Segment Financial Institution South Other 6% 18% 2% Midwest Other 16% Services Industry 22% Northeast Corporate Middle 45% 3% 47% Market Individuals Southeast 51% 4% 63% Commerce 23% 9/18
  10. 10. By Economic Sector By Product Agribusiness 19.0% Food & Beverage 15.5% Guarantees Construction 11.9% Issued Trade Transportation & Logistics 5.2% 6% Agro Bonds Chemical & Pharmaceutical 5.0% Finance 10% Financial Services 4.6% 16% Debentures Pulp & Paper 4.3% Automotive 4.2% 1% BNDES Oil & Biofuel 3.7% 9% Other Metal Industry 3,7% 1% Textile, Apparel & Leather 2.8% Acquired Education 2.5% Receivables Power Generation & Distribution 2.4% 3% Financial Institutions 2.3% Loans & Commerce - Retail & Wholesale 1.8% Discounts Electronics 1.3% 54% Other Industries (%lower than 1%) 9.7%As shown in the table below, agribusiness bonds activities, which began in the first quarter of 2011, continue to expandtheir share of the Expanded Loan Portfolio.Agro Bonds Portfolio 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Booked under Securities 205.0 184.1 11.3% 37.0 454.8% Warrants - CDA/WA 7.5 7.2 3.8% 0.0 n.m. Agro Product Certificate - CPR 197.5 176.9 11.6% 37.0 434.4%Booked under Credit Portfolio - Loans & Financing 62.0 45.6 36.0% 0.0 n.m. Agro Credit Rights Certificate - CDCA 62.0 45.6 36.0% 0.0 n.m.TOTAL AGRO BONDS 267.0 229.7 16.2% 37.0 622.4%Credit PortfolioThe “classic” credit portfolio, which excludes off-balance sheet items (guarantees issued) and credits classified undermarketable securities, totaled R$2.4 billion, virtually stable in the quarter, of which operations in Real totaled R$1.9 billionand Trade Finance operations, R$449.4 million.The significant changes in the outstanding balances of the credit portfolio by segment in 2Q12 derive from the migration ofsome customers that were previously managed by the Middle Market team to the Corporate platform, amounting to circaR$200 million. For comparison purposes if the current customer classification was applied to the portfolio in the 1Q12, theCorporate segment would increase by 4.6% and the Middle Market would decline by 2.6% in 2Q12.Credit Portfolio by Client Segment 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Middle Market 1,266.7 1,500.8 -15.6% 1,604.4 -21.0%Local Currency - Real 1,019.4 1,211.3 -15.8% 1,278.4 -20.3% Loans and Discounted Receivables 854.0 1,051.7 -18.8% 1,144.0 -25.3% Financing 0.0 0.0 n.m. 0.5 n.m. BNDES / FINAME 165.4 159.6 3.7% 134.0 23.5%Foreign Currency 247.3 289.6 -14.6% 326.0 -24.1%Corporate 1,078.0 830.6 29.8% 322.2 234.5%Local Currency - Real 875.8 677.3 29.3% 222.9 293.0% Loans and Discounted Receivables 699.7 518.8 34.9% 129.9 438.7% BNDES / FINAME 95.4 71.5 33.5% 8.9 977.2% Acquired Receivables 80.7 87.1 -7.3% 84.1 -4.0%Foreign Currency 202.1 153.3 31.9% 99.4 103.4%Other 51.0 54.2 -6.0% 76.6 -33.5% Consumer Credit – used vehicles 2.0 3.0 -34.7% 8.5 -76.9% Acquired Loans and Financing 11.2 18.3 -39.1% 59.2 -81.2% Non-Operating Asset Sales Financing 37.8 32.9 15.1% 8.8 328.0%CREDIT PORTFOLIO 2,395.6 2,385.6 0.4% 2,003.2 19.6% 10/18
  11. 11. By Collateral By Customer Concentration By Maturity Pledge / 91 to 180 61 - 180 Lien days 181 to 360 25% Receivables 9% 20% days 32% Property 15% 8% Monitored Pledge 5% 11 - 60 Other 32% 25% Vehicles Up to 90 Above 360 3% days days Securities 37% 28% 1% 10 largest Aval PN 42% 18%Quality of Credit Portfolio Rating AA A B C D E F G H Prov / Comp. TOTAL Required Provision % 0% 0.5% 1% 3% 10% 30% 50% 70% 100% Cred % O/S Loans 137.5 880.7 807.6 379.6 36.1 88.4 17.8 10.3 37.6 - 2,395.62Q12 4.5% Allowance for Loan Losses 0.0 4.4 8.1 11.4 3.6 26.5 8.9 7.2 37.6 0.0 107.7 O/S Loans 94.9 921.4 776.9 397.8 38.8 97.8 19.9 11.7 26.4 - 2,385.61Q12 4.3% Allowance for Loan Losses 0.0 4.6 7.8 11.9 3.9 29.4 10.0 8.2 26.4 0.0 102.0 O/S Loans 84.1 630.5 564.5 442.3 78.3 87.7 23.6 4.5 87.8 - 2,003.22Q11 9.8% Allowance for Loan Losses 0.0 3.2 5.6 13.3 7.8 26.3 11.8 3.2 87.8 37.7 196.6Operations rated in the top risk bands (AA and C) increased to 92.1% of the total credit operations in the quarter (85.9% inJune 2011), of which 76.2% are rated between AA and B. As a result of the commercial strategy established in thebeginning of 2011, 99% of the loans granted in 2Q12 were rated between AA and B. The chart below shows the evolutionof the portfolio quality: 92.1% 2Q12 6% 37% 34% 16% 8% 91.8% 1Q12 4% 39% 33% 17% 8% 85.9% 2Q11 4% 31% 28% 22% 14% AA A B C D- HOperations rated between D and H, amounting to R$190.2 million (R$194.6 million in 1Q12), include R$122.9 million thatare not overdue, representing 64.6% of such operations. The remaining 35.4%, shown below, is made up of delinquentoperations: > 60 days > 90 daysDefault by Segment 2Q12 1Q12 2Q12 1Q12 2Q12 1Q12 Credit Portfolio NPL %T NPL %T NPL %T NPL %TMiddle Market 1,347.4 1,500.8 56.6 4.2% 72.2 4.8% 50.7 3.8% 64.1 4.3%Corporate 997.2 830.6 9.7 1.0% 1.8 0.2% 9.7 1.0% - -Other 51.0 54.2 1.0 2.0% 1.2 2.2% 1.0 1.9% 1.1 2.1%TOTAL 2,395.6 2,385.6 67.3 2.8% 75.2 3.2% 61.3 2.6% 65.2 2.7%Allowance Loan Losses (ALL) 107.7 102.0ALL/ NPL - 160.1% 135.8% 175.7% 156.4%ALL/ Loan Portfolio 4.5% 4.3% - - - - 11/18
  12. 12. The default rates on loans overdue by more than 60 days (NPL 60 days) and more than 90 days (NPL 90 days) fell by 0.4 and0.1 p.p., respectively, from March 2012, to close the quarter at 2.8% and 2.6%. The improvement in these ratios is theresult of the strategy adopted last year of expanding the loan portfolio through better quality loans but also the write-offsof fully loans provisioned in the amount of R$17.1 million in the quarter.The allowance for loan losses, amounting to R$107.7 million, provides coverage to 160.1% of the loans overdue more than60 days and 175.7% of the loans overdue more than 90 days.FundingFunding totaled R$2.8 billion, up 0.7% in the quarter and 23.6% in 12 months. Of this total, 74.0% came from deposits.Funding from Agribusiness Letters of Credit represented 11.8% of total funding and 15.9% of funding in Real, up 12.2% inthe quarter and 150.8% in 12 months. Funding through Bank Notes grew to R$30.6 million, up 305.2% on the quarterlyclosing balance, and 316.2% in 12 months, though it represented just 1.1% of total funding on June 30, 2012.Funding in foreign currency is specially allocated to Trade Finance operations and its balance is impacted by foreignexchange variations.Total Funding 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11Total Deposits 2,038.0 2,087.8 -2.4% 1,661.2 22.7% Time Deposits 744.9 816.2 -8.7% 665.4 11.9% Insured Time Deposits (DPGE) 771.9 799.7 -3.5% 717.1 7.6% Agro Notes (LCA) 324.2 288.9 12.2% 129.3 150.8% Bank Notes (LF) 30.6 7.6 305.2% 7.4 316.2% Interbank Deposits 137.0 127.4 7.5% 77.6 76.6% Demand Deposits and Other 29.5 48.0 -38.4% 64.5 -54.2%Domestic Onlending 267.8 240.2 11.5% 154.0 73.9%Foreign Borrowings 449.2 407.8 10.2% 414.4 8.4% Trade Finance 398.6 362.3 10.0% 357.4 11.5% Other Foreign Borrowings 50.5 45.4 11.1% 57.0 -11.4%TOTAL 2,755.0 2,735.7 0.7% 2,229.6 23.6% By Type By Investor By Maturity Insured Time Dep. Brokers Other (DPGE) Corporates 3% 90 to 180 3% Up to 90 28% 7% BNDES 17% days Demand Time Individuals 10% 30% 1% Deposit 9% Interbank 27% Foreign 5% National Banks 180 to 360 Banks 16% 16% Foreign 9% Demand Loans 1% 2% Agro Bonds Trade 12% Institutional Finance Onlendings Bank Notes + 360 days 10% 1% Investors 14% 36% 43% 12/18
  13. 13. The average term of deposits stood at 780 days from issuance (623 days in 1Q12) and 408 days from maturity (404 days in1Q12). Average Term in days 1 Type of Deposit from issuance to maturity Time Deposits 532 298 Interbank 213 91 Time Deposits Special Guarantee (DPGE) 1.369 702 Agro Notes (LCA) 150 62 Bank Notes (LF) 731 545 2 Portfolio of Deposits 780 408 1 From June 30, 2012. 2 Volume weighted average.Liquidity 923 853 874On June 30, 2012, cash and short term interbank investments andsecurities totaled R$2.1 billion, excluding money market funding of R$1.2 R$ Millionbillion, resulted R$873.7 million, equivalent to 42.9% of total depositsand 1.5 times Company’s shareholders’ Equity. 2Q11 1Q12 2Q12Capital AdequacyThe Basel Accord requires banks to maintain a minimum percentage of the capital weighted by the risk in their operations. Inthis context, the Central Bank of Brazil has stipulated that banks operating in the country should maintain a minimumpercentage of 11%, calculated according to the Basel II Accord regulations, which provides greater security to Brazil’s financialsystem against oscillations in economic conditions.The following table shows BI&P’s position in relation to the Central Bank’s minimum capital requirements: Basel Index 2Q12 1Q12 2Q12/1Q12 2Q11 2Q12/2Q11 Total Capital 580.0 588.1 -1.4% 566.5 2.4% Tier I 581.1 576.6 0.8% 566.4 2.6% Tier II 1.4 14.0 -90.2% 0.2 716.8% Deductions (2.4) (2.4) 0.0% (2.39) 0.0% Required Capital 374.5 369.1 1.5% 291.3 28.6% Credit Risk Allocation 337.1 326.8 3.2% 261.3 29.0% Market Risk Allocation 17.1 22.1 -22.5% 14.8 15.8% Operating Risk Allocation* 20.2 20.2 0.0% 15.2 33.1% Excess over Required Capital 205.6 219.0 -6.1% 272.9 -24.7% Basel Index 17.0% 17.5% -0.5 p.p. 21.3% -4.3 p.p. * An adjustment to the operating risk calculation was made retroactively to 1Q12, increasing operating risk allocation on 1Q12 from R$8.2 million to R$20.2 million, reducing the Basel Index in that quarter from 18.1% to 17.5%. 13/18
  14. 14. Risk Ratings Last Financial Agency Classification Observation Report Data BB/ Stable /B Global Scale Standard & Poor’s Aug. 6, 2012 Mar. 31, 2012 brA+/ Stable /brA-1 Local Scale - Brazil Ba3/ Stable /Not Prime Global Scale Moodys Nov. 28, 2011 Sept. 30, 2011 A2.br/ Stable /BR-2 Local Scale - Brazil FitchRatings BBB/ Stable /F3 Local Scale - Brazil Jul. 11, 2012 Mar. 31, 2012 10.43 Riskbank Index RiskBank Jul. 17, 2012 Mar. 31, 2012 Ranking: 41 Low Risk Short TermCapital MarketTotal Shares and Free Float Number of shares as of June 30, 2012 Corporate Controlling Type Management Treasury Free Float % Capital Group Common 36,945,649 20,743,333 277,307 - 15,925,009 43.1% Preferred 26,160,044 609,226 60,125 734,515 24,756,178 94.6% TOTAL 63,105,693 21,352,559 337,432 734,515 40,681,187 64.5%Share Buyback ProgramOn October 19, 2011, the Board of Directors approved the 5th Share Buyback Program, effective until October 18, 2012, forthe acquisition of up to 1,720,734 preferred shares. Until June 30, 2012, no share had been repurchased under theprogram, in which Indusval S.A. CTVM acts as the intermediary.Stock Option PlanThe following Stock Options Plans, approved to be extended to the Company’s executive officers and managers, as well asindividuals who provide services to the Company or its subsidiaries, present, as of June 30, 2012 the following balances: QuantityStock Option Date of Grace Term for Granted Exercised Extinct Not Exercised Plan Approval Period Exercise I 03.26.2008 Three years Five years 2,039,944 37,938 207,437 1,794,569 II 04.29.2011 Three years Five years 1,703,854 - 262,941 1,440,913 III 04.29.2011 Five years Seven years 1,850,786 - - 1,850,786 IV 04.24.2012 Five years Five years - - - - 5,594,584 37,938 470,378 5,086,268The aforementioned Stock Options Plans are filed with the Brazilian Securities Commission (CVM) and are also available inthe Company’s IR website. 14/18
  15. 15. Remuneration to ShareholderDuring the first semester of 2012, there was no provisioning or anticipated payment of interest on equity on account of theminimum annual dividend for fiscal year 2012. The Board of Directors will, during the 2nd semester, analyze theopportunity for such anticipated payments considering the company’s results in the current year and the tax efficiency ofsuch payment.Share PerformanceBI&P’s preferred shares (IDVL4), listed under Level 2 Corporate Governance at BM&FBOVESPA, closed 2Q12 at R$6.69, formarket cap of R$417.3 million, considering existing shares as of June 30, 2012 and excluding treasury stock. The price ofIDVL4 shares dropped 22.2% in 2Q12 and 26.7% (23.7% adjusted for earnings) in the 12-month period ended in June. TheBovespa index (Ibovespa) declined by 15.7% in 2Q12 and 12.9% when compared to 2Q11. At the end of the quarter, theprice/book value (P/BV) was 0.72. Share Price Evolution in the last 12 months 140 130 120 110 100 90 80 70 IBOVESPA IDVL4 IDVL4 ajusted for earnings 60Liquidity and Trading VolumeBI&P’s preferred shares (IDVL4) were traded in 95.2% of the sessions in 2Q12 and in 94.0% of the 250 sessions from July2011 until June 2012. In 2Q12, a total of 923.7 thousand IDVL4 shares were traded in 835 transactions on the spot market,for total volume of R$7.0 million. In the 12 months ended June 2012, the financial volume traded on the spot market stoodat R$30.4 million, totaling around 4.1 million preferred shares in 3,247 trades.Shareholder Base Position as of June 30, 2012 Qtt TYPE OF SHAREHOLDER IDVL3 % IDVL4 % TOTAL % 5 Controlling Group 20,743,333 56.1% 609,226 2.3% 21,352,559 33.8% 6 Management 277,307 0.8% 60,125 0.2% 337,432 0.5% - Treasury - 0.0% 734,515 2.8% 734,515 1.2% 48 National Investors 1,201,090 3.3% 8,116,379 31.0% 9,317,469 14.8% 15 Foreign Investors 4,891,304 13.2% 13,852,644 53.0% 18,743,948 29.7% 8 Corporate - 0.0% 21,110 0.1% 21,110 0.0% 349 Individuals 9,832,615 26.6% 2,766,045 10.6% 12,598,660 20.0% 431 TOTAL 36,945,649 100.0% 26,160,044 100.0% 63,105,693 100.0% 15/18
  16. 16. Balance Sheet Consolidated R$ Thousand Assets 06/30/2011 03/31/2012 06/30/2012 Current 3,748,509 3,811,194 4,112,797 Cash 38,482 25,215 25,754 Short-term interbank investments 527,902 617,066 606,824 Open market investments 464,743 559,764 569,256 Interbank deposits 63,159 57,302 37,568 Securities and derivative financial instruments 1,756,439 1,281,882 1,483,027 Own portfolio 329,087 615,536 550,099 Subject to repurchase agreements 975,515 524,128 724,713 Linked to guarantees 205,552 129,701 170,547 Subject to the Central Bank 208,038 - - Derivative financial instruments 38,247 12,517 37,668 Interbank accounts 2,864 3,337 3,195 Loans 929,773 1,294,343 1,263,526 Loans - private sector 968,410 1,316,621 1,281,970 Loans - public sector - - - (-) Allowance for loan losses (38,637) (22,278) (18,444) Other receivables 442,316 538,250 692,144 Foreign exchange portfolio 395,888 408,036 564,427 Income receivables 32 1,136 14 Negotiation and intermediation of securities 54,569 34,381 37,365 Sundry 5,001 100,282 94,854 (-) Allowance for loan losses (13,174) (5,585) (4,516) Other assets 50,733 51,101 38,327 Other assets 52,637 52,183 39,960 (-) Provision for losses (3,011) (2,780) (2,745) Prepaid expenses 1,107 1,698 1,112 Long term 631,882 719,321 801,308 Marketable securities and derivative financial instruments 7,827 27,918 53,002 Own portfolio - 52 15,370 Subject to repurchase agreements - - - Linked to guarantees 62 - - Derivative financial instruments 7,765 27,866 37,632 Interbank Accounts 6,669 4,784 4,347 Loans 504,965 556,306 596,483 Loans - private sector 649,548 625,260 675,150 Loans - public sector - - - (-) Allowance for loan losses (144,583) (68,954) (78,667) Other receivables 111,350 129,823 147,066 Trading and Intermediation of Securities 481 536 468 Sundry 111,053 134,501 152,674 (-) Allowance for loan losses (184) (5,214) (6,076) Other rights 1,071 490 410 Permanent Assets 52,409 52,498 52,392 Investments 26,201 24,578 24,738 Subsidiaries and Affiliates 24,515 22,892 23,052 Other investments 1,842 1,842 1,842 (-) Loss Allowances (156) (156) (156) Property and equipment 11,045 13,739 13,801 Property and equipment in use 2,192 1,210 1,210 Revaluation of property in use 3,538 2,634 2,634 Other property and equipment 13,452 18,440 18,811 (-) Accumulated depreciation (8,137) (8,545) (8,854) Intangible 15,163 14,181 13,853 Goodwill 2,391 2,391 2,391 Other intangible assets 13,100 13,100 13,100 (-) Accumulated amortization (328) (1,310) (1,638) TOTAL ASSETS 4,432,800 4,583,013 4,966,497 16/18
  17. 17. Consolidated R$ ThousandLiabilities 6/30/2011 3/31/2012 6/30/2012Current 2,838,089 2,984,718 3,383,145 Deposits 658,502 982,842 893,007 Cash deposits 64,539 47,964 29,527 Interbank deposits 71,395 126,365 136,482 Time deposits 522,568 808,513 726,998 Other - - - Funds obtained in the open market 1,361,341 1,058,390 1,219,647 Own portfolio 963,490 520,776 720,294 Third party portfolio 110,383 175,021 130,011 Unrestricted Portfolio 287,468 362,593 369,342 Funds from securities issued or accepted 129,271 296,488 331,483 Agribusiness Letters of Credit & Bank Notes 129,271 296,488 331,483 Interbank accounts 1,391 327 202 Receipts and payment pending settlement 1,391 327 202 Interdepartamental accounts 8,369 19,724 10,218 Third party funds in transit 8,369 19,724 10,218 Borrowings 368,123 362,521 449,157 Foreign borrowings 368,123 362,521 449,157 Onlendings 48,564 95,761 103,582 BNDES 19,123 58,487 62,750 FINAME 29,441 37,274 40,832 Other liabilities 262,528 168,665 375,849 Collection and payment of taxes and similar charges 643 835 449 Foreign exchange portfolio 50,488 72,021 212,693 Taxes and social security contributions 7,812 3,563 3,186 Social and statutory liabilities 7,528 1,750 4,000 Negotiation and intermediation securities 150,505 63,956 114,389 Derivative financial instruments 37,724 18,050 29,580 Sundry 7,828 8,490 11,552Long Term 1,027,567 1,006,412 999,899 Deposits 866,043 808,429 790,227 Interbank Deposits 6,159 1,080 494 Time deposits 859,884 807,349 789,733 Funds from securities issued or accepted 7,362 - 23,323 Agribusiness Letters of Credit & Bank Notes 7,362 - 23,323 Loan obligations 46,306 45,230 - Foreign loans 46,306 45,230 - Onlending operations - Governmental Bureaus 105,410 144,477 164,180 Federal Treasure 12,081 9,980 9,184 BNDES 35,662 61,639 68,282 FINAME 56,247 71,873 86,063 Other Institutions 1,420 985 651 Other liabilities 2,446 8,276 22,169 Taxes and social security contributions 1,207 6,297 18,872 Derivative financial instrument 58 213 1,049 Sundry 1,181 1,766 2,248Future results 605 1,378 1,013Shareholders Equity 566,539 590,505 582,440 Capital 572,396 572,396 572,396 Capital Reserve 3,039 8,248 10,343 Revaluation reserve 1,894 1,377 1,364 Profit reserve 55,812 - 4,196 (-) Treasury stock (5,958) (5,859) (5,859) Asset valuation Adjustment (1,727) 12,578 - Accumulated Profit / (Loss) (58,917) 1,765 - TOTAL LIABILITIES 4,432,800 4,583,013 4,966,497 17/18
  18. 18. Income StatementConsolidated R$ Thousand 2Q11 1Q12 2Q12 1H11 1H12Income from Financial Intermediation 126,519 161,778 222,829 243,186 384,607 Loan operations 62,078 70,197 62,860 126,390 133,057 Income from securities 64,603 68,606 114,389 104,636 182,995 Income from derivative financial instruments (7,811) (3,746) 5,549 (3,150) 1,803 Income from foreign exchange transactions 7,649 26,721 40,031 15,310 66,752Expenses from Financial Intermediaton 90,659 125,348 185,865 270,146 311,213 Money market funding 84,978 85,303 119,361 156,950 204,664 Loans, assignments and onlendings 4,152 25,647 43,907 10,018 69,554 Allowance for loan losses 1,529 14,398 22,597 103,178 36,995Gross Profit from Financial Instruments 35,860 36,430 36,964 (26,960) 73,394Other Operating Income (Expense) (27,080) (27,151) (30,926) (54,524) (58,077) Income from services rendered 4,109 6,590 5,364 7,575 11,954 Income from tariffs 240 199 155 477 354 Personnel expenses (16,419) (22,738) (21,939) (32,558) (44,677) Other administrative expenses (12,151) (13,123) (13,622) (23,534) (26,745) Taxes (2,927) (3,705) (2,342) (6,476) (6,047) Result from affiliated companies (116) 1,544 473 (116) 2,017 Other operating income 2,050 4,971 3,739 2,872 8,710 Other operating expense (1,866) (889) (2,754) (2,764) (3,643)Operating Profit 8,780 9,279 6,038 (81,484) 15,317Non-Operating Profit (1,314) 2,884 (1,153) (1,797) 1,731Earnings before taxes ad profit-sharing 7,466 12,163 4,885 (83,281) 17,048Income tax and social contribution (1,381) (4,979) (217) 37,013 (5,196)Income tax 614 579 (6,687) 153 (6,108)Social contribution 371 415 (4,027) 94 (3,612)Deferred fiscal assets (2,366) (5,973) 10,497 36,766 4,524Statutory Contributions & Profit Sharing (1,032) (2,139) (2,250) (3,143) (4,389)Net Profit for the Period 5,053 5,045 2,418 (49,411) 7,463 18/18

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