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3Q12 Results Presentation

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3Q12 Results Presentation

  1. 1. 3rd Quarter 2012Results Presentation
  2. 2. Disclaimer This presentation may contain references and statements representing future expectations, plans of growth and future strategies of BI&P. These references and statements are based on the Bank’s assumptions and analysis and reflect the management’s beliefs, according to their experience, to the economic environment and to predictable market conditions. As there may be various factors out of the Bank’s control, there may be significant differences between the real results and the expectations and declarations herewith eventually anticipated. Those risks and uncertainties include, but are not limited to our ability to perceive the dimension of the Brazilian and global economic aspect, banking development, financial market conditions, competitive, government and technological aspects that may influence both the operations of BI&P as the market and its products. Therefore, we recommend the reading of the documents and financial statements available at the CVM website (www.cvm.gov.br) and at our Investor Relations page in the internet (www.bip.b.br/ir) and the making of your own appraisal.2
  3. 3. Highlights  Expanded Credit Portfolio came to R$3.0 billion in 3Q12 (+6.5% QoQ and +33% YoY), with R$687 million new loans granted in the period (38% above 3Q11).  Continuous improvement in the quality of the Credit Portfolio – the share of credits rated from AA to B increased to 81% of the Expanded Credit Portfolio in 3Q12; 99.7% of the new loans granted in the quarter are rated between AA and B (99.4% in 2Q12).  We have maintained the strategy of originating higher quality assets, with shorter tenors. And expect to resume origination of higher spread assets in a more favorable macro scenario.  Reduction in past due loans above 90 days to 1.8% (2.6% in June 2012 and 4.1% in September 2011), with coverage by provisions of 231.9% (175.7% in June 2012 and 199.3% in September 2011).  Total Funding of R$2.9 billion (+6.6% in 3Q12), in line with Loan Portfolio growth, keeping the spread over CDI. Funding through Agribusiness Letters of Credit (LCA) accounted for 11,2% of total funding (6.7% in September 2011).  Revenue from services climbed by 43% over 2Q12 and 40% in relation to 3Q11, contributing R$7.7 million to the results of the quarter.  Net Profit totaled R$3.1 million in 3Q12 (up 29% in the quarter).3
  4. 4. Expanded Credit PortfolioRestructuring of commercial area and its efforts, coupled with theimprovement in economic growth in 3Q12, supported portfolio increase... 2,807 2,991 2,759 2,534 2,248 R$ million 3Q11 4Q11 1Q12 2Q12 3Q12 Loans and Financing in Real Trade Finance Guarantees Issued (L/G and L/C) Agricultural Bonds (CPR, CDA/WA and CDCA) Private Credit Bonds (PN and Debentures)4
  5. 5. Expanded Credit Portfolio Development...with higher volume of new transactions… 2,807 2,991 (381) 687 (106) (16)R$ million 2Q12 Amortized Credit Write offs New 3Q12 Credits Exits Operations New Transactions 99.7% of new Portfolio growth would be transactions in 656 687 10.3% if we have not 646 3Q12 are classified 498 517 decided for credit exits. between AA and B.R$ million 3Q11 4Q11 1Q12 2Q12 3Q125
  6. 6. Multiproduct Offering...and better exploitation of the +50 product portfolio...6
  7. 7. Expanded Credit Portfolio...increasing the new products share in the portfolio... 3Q11 3Q12 Trade BNDES Guarantees Trade BNDES Guarantees Onlendings Issued Finance Onlendings Issued Agricultural Finance 5% Agricultural 10% Bonds 19% 8% 16% 6% Bonds 10% 2% Loans & Private Private Loans &Discounts in Credit Bonds Credit Bonds Discounts in Real 1% 1% 64% Real 56% Other Other 1% 1% Discount Receivables NCE CCE CCBI 1.0% NCE 1.9% 2.2% 1.8%Confirming 0.1% Discount 0.8% Receivables 0.2% Credit ConfirmingAssignment 0.6% 6,4% Credit Loans Assignment Loans 56.1% 16.5% 32.8% 7 NCE: Export Credit Notes; CCE: Export Credit Certificate; CCBI: Real State Credit Bank Note
  8. 8. Developing Franchise Value...in specific niches... Agricultural Bonds Large Corporates Ecosystem (*) 512 341 307 287 267R$ million 230 R$ million 162 129 75 52 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 CPR Warrant (CDA/WA) CDCA Receivables from Clients Receivables drawn on Clients Fixed Income Bonds 94 The expertise development in certain nichesR$ million 60 allows competitive advantages and 41 10 15 profitability increase through fees. 3Q11 4Q11 1Q12 2Q12 3Q12 PNs Debentures Real State Bank Notes (*) Acquisition and/or assignment of receivables originated by our customers and transactions with8 receivables of suppliers drawn on our clients (Confirming).
  9. 9. Credit Portfolio …relevant exposure in agribusiness maintained... 3Q12 Other * 14% Agribusiness 20% Education 2% Commerce 3% Textile, App. & Leather 3% Chemical & Pharma. 3% Financial Instit. 3% Food & Beverage 15% Oil & Biofuel 4% Transport. & Log. 4% 3Q11 Pulp & Paper 4% Metal Industry 5% Construction 12% Other * 14% Agribusiness 18% Automotive 8% Financial Services 2% Pulp & Paper 3% Metal Industry 3% Oil & Biofuel 3% Education 3% Food & Beverage 16%Power Gen. & Distr. 3% Chemical & Pharma. 3% * Other industries with less than 2% of share.Textile, App. & Leather 4% Transport. & Log. 4% Construction 14% Financial Inst.. 5% Automotive 5% 9
  10. 10. Credit Portfolio...lower customer concentration and short term maturity profile maintained. 3Q11 3Q12 Client Concentration Client Concentration 11 - 60 11 - 60 largest largest Top 10 32% Top 10 31% 19% 15% 61 - 160 Other largest 22% 61 - 160 Other 27% 27% largest 27% Maturity Maturity 91 to 180 days up to 90 91 to 180 up to 90 22% days days days 40% 16% 35% 181 to 360 days 181 to 360 15% days 16% +360 days +360 days 28% 28%10
  11. 11. Client SegmentationHigher share of the Corporate segment Other  Credit exits in the Middle Market segment (~R$320mn in 9M12); 2% Middle  Migration of clients from Middle Market to Corporate team, Market adjusting the segmentation by company size; 42%  Tactical decision of focusing on short-term higher credit quality Corporate transactions in the 2H12, for future relocation into more 56% favorable spreads if macroeconomic scenario improves (expected for 2013). Middle Market Corporate Annual revenues from R$40mn to R$400mn Annual revenues between R$400mn and R$2bn 1,593 1,572 1,501 1,374 1,267 1,128 1,078 831 R$ million R$ million 641 436 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 Migration of clients from Middle to Corporate = ~ R$200mn as of June 30, 2012 and ~ R$260mn as of Sept.30, 2012 Note: In addition to the Middle Market and Corporate operations above, the Credit Portfolio also includes Other11 Credits of R$47mn in 3Q12 (Consumer Credit Vehicles, Acquired Loans and Non-Operating Asset Sales Financing). The Expanded Credit Portfolio also includes Agricultural Bonds, Private Credit Bonds and Guarantees Issued.
  12. 12. Credit Portfolio Quality 99.7% of loan volumes granted in the quarter were rated from AA to B Rating 92.1%3Q12 6% 37% 35% 14% 8%  Credits rated between D and H totaled R$200.4 92.1% million as of September 30, 2012:2Q12 6% 37% 34% 16% 8% − R$122.8 million (5% of Credit Portfolio) in normal payment course 86.9% − Only R$77.6 million overdue more than 60 days3Q11 3% 33% 30% 21% 13% AA A B C D-H NPL / Credit Portfolio  Credits overdue more than 60 days are derived from: 6.3% − Clients acquired up to March 2011: 2.9%; 5.0% − Clients acquired from April 2011: 0.1%. 3.2% 2.8% 3.0%  Installments overdue from 15 days to 60 days over 4.7% 4.1% credit portfolio dropped to 1.6%, with reduction in 2.7% 2.6% potential default: 1.8% − of 0.4 p.p. compared to the 2.0% in 2Q12, and − of 2.2 p.p. compared to the 3.8% in 3Q11 3Q11 4Q11 1Q12 2Q12 3Q12 NPL 60 days NPL 90 days 12
  13. 13. FundingProduct mix helps to overcome volume and cost challenge 3Q11 Insured Time Time Deposits deposits (DPGE) (CDB) 31% 28% LCA Foreign 7% 2,936 Borrowings 2,736 2,755 20% LF and LCI 2,420 2,533 Onlendings Interbank 0% 8% & Demand Deposits 6% 3Q12R$ million Insured Time Time deposits Deposits (CDB) (DPGE) 3Q11 4Q11 1Q12 2Q12 3Q12 35% 23% in Local Currency in Foreign Currency LCA Foreign Borrowings 11% 15% Interbank LF and LCI Onlendings & Demand 1% 10% Deposits 5% LCA: Agribusiness Letters of Credit; LF: Bank Notes; LCI: Real State Letters of Credit13
  14. 14. Operating Performance & ProfitabilityStill impacted by scale and the legacy of customers acquired before 2010... Net Interest Margin Efficiency Ratio* 7.7% 6.3% 6.6% 6.6% 6.1% 6.7% 74.2% 74.5% 5.7% 68.9% 69.7% 67.6% 65.8% 60.8% 5.8% 5.1% 4.6% 4.8% 4.9% 4.8% 4.2% 3Q11 4Q11 1Q12 2Q12 3Q12 9M11 9M12 3Q11 4Q11 1Q12 2Q12 3Q12 9M11 9M12 NIM NIM(a) * Net Profit Return on Average Equity (ROAE) % 10.3 10.6 7.3 7.3R$ million 5.0 5.2 3.1 3.5 2.4 2.4 1.7 2.2 3Q11 4Q11 1Q12 2Q12 3Q12 9M11 9M12 3Q11 4Q11 1Q12 2Q12 3Q12 9M11 9M12 -42.1 -11.0 * Details about the calculation are available in the 3Q12 Earnings Release at www.bip.b.br/ir14
  15. 15. Capital Structure & Ratings Shareholders’ Equity Leverage Expanded Credit Portfolio / Equity 577.5 577.1 590.5 582.4 587.6 5.1x 4.4x 4.6x 4.8x 3.9x R$ million 3Q11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 Last Basel Index (Tier I) Agency Rating Report 21.1% Standard Global: BB/Stable/ B Aug/12 18.2% 17.5% 17.0% & Poor’s National: brA+/Stable/brA-1 15.8% Global: Ba3/Stable/Not Prime Moody’s Nov/11 National: A2.br/Stable/BR-2 FitchRatings National: BBB/Stable/F3 Jul/12 Index: 10.36 3Q11 4Q11 1Q12 2Q12 3Q12 RiskBank Oct/12 Low Risk Short Term15
  16. 16. Major Strategic InitiativesThe changing cycle started April 2011 is completed...  Repositioning of the Bank’s Client Profile & Product Line  Credit Portfolio Segmentation  Franchise Value Developments  Funding Diversification & Cost Reduction  New Human Resources Policies  Control Improvements16
  17. 17. ...however, to improve profitability we need...  Larger scale through Credit Portfolio growth and Fee Revenues  Shifting part of short term Corporate Credit Portfolio by higher spread Middle Market transactions  Development of IB activities: Fixed Income17
  18. 18. ...and, in the medium & long run, focus on four pillars… VISION To be an innovative bank with excellence in corporate credit and deep understanding of our clients’ businesses and industries they operate, becoming also one of the leading players of the high-growth Brazilian corporate bond market. SERVICES & FRANCHISE VALUE PROCESSES & PEOPLE PRODUCTS TECHNOLOGY To develop credit and Development To build up Technology as risk analysis expertise Investment Banking in identified niches differential Attraction and Fixed Income To create structures to Continuous process Motivation Incentive X-selling promote competitive review in search for advantages excellence in all Alignment departments Ethics & Credibility Ethics & Credibility TeamworkExcellence Client Focus Innovation Excellence Ownership Attitude Teamwork Ownership Attitude Client Focus Innovation Commitment to Resultsto Results Commitment18
  19. 19. In a Nutshell...  Focus on developing Middle and Corporate customer base maintained.  As a response to the 2Q12 macroeconomic scene, we decided to temporarily focus even further in credit quality, booking short term deals, consequently with lower spreads and increased share of the Corporate segment in the Credit Portfolio.  We seek creating franchise value: Specializing in certain niche business ensures the ability to detect opportunities, evaluate risks and develop structures and products creating competitive advantages.  The increase of cross selling and investment activities will increase fee income, improving our profitability and efficiency.  Continuous processes, systems and controls review aiming at reducing costs and inefficiencies and increasing our speed and safety.  Consolidation of meritocracy to adequately compensate and motivate people, who are fundamental for the success of our strategy.  Finally, we constantly monitor the volatile scenario and market movements and we are alert to business opportunities aligned to our Vision and Values.19

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