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Banco do Brasil
Performance Analysis
1th Quarter 2006
Summary
Index of Tables ..........................................................................................................................................4
Index of Figures.........................................................................................................................................7
Presentation...............................................................................................................................................9
1 – Economic Environment ....................................................................................................................10
2 – BB Securities .....................................................................................................................................11
2.1 Shares .........................................................................................................................................11
2.1.1 Equity Held by Foreign Investors ....................................................................................13
2.2 Warrants .....................................................................................................................................14
2.3 Performance of the Shares .......................................................................................................16
3 – Corporate Governance......................................................................................................................19
4 – Other Information ..............................................................................................................................21
5 – Summarized Financial Statements ..................................................................................................23
5.1 Summarized Balance Sheet......................................................................................................23
5.2 Summarized Corporate Law Income Statement .....................................................................25
5.3 Income Statement with Reallocations .....................................................................................26
5.3.1 Details of the Reallocations..............................................................................................27
6 – Balance Sheet Analysis ....................................................................................................................29
6.1 Breakdown .................................................................................................................................29
6.2 Analysis of Assets.....................................................................................................................30
6.3 Liquidity Analysis ......................................................................................................................31
6.4 Securities Portfolio....................................................................................................................32
6.5 Loan Portfolio ............................................................................................................................34
6.5.1 Retail Loan Portfolio .........................................................................................................36
6.5.2 Commercial Loan Portfolio...............................................................................................40
6.5.3 Agribusiness Loan Portfolio ............................................................................................41
6.5.4 Foreign Trade Loan Portfolio ...........................................................................................47
6.5.5 Concentration of the Portfolio..........................................................................................48
6.6 Tax Credits .................................................................................................................................49
6.7 Analysis of Liabilities ................................................................................................................50
6.8 Deposits and Money Market Funding......................................................................................52
6.8.1 Foreign Borrowing ............................................................................................................54
6.9 Shareholders’ Equity.................................................................................................................55
6.10 BIS Ratio ...................................................................................................................................56
6.11 Fixed Asset Ratio.....................................................................................................................58
6.12 Risk Management ....................................................................................................................59
6.12.1 Market Risk Management ...............................................................................................59
6.12.2 Liquidity Risk Management ............................................................................................65
7 – Analysis of Results ...........................................................................................................................66
7.1 Gross Financial Margin .............................................................................................................66
7.1.1 Analysis of Uses ................................................................................................................68
7.1.2 Analysis of Funding ..........................................................................................................71
7.1.3 Analysis of Spread ............................................................................................................72
7.1.4 Analytical Spread...............................................................................................................73
7.1.5 Management Analysis of the Spread...............................................................................76
7.2 Net Financial Margin..................................................................................................................79
7.2.1 Retail Loan Portfolio .........................................................................................................83
7.2.2 Commercial Loan Portfolio...............................................................................................84
7.2.3 Agribusiness Loan Portfolio ............................................................................................85
7.2.4 Foreign Trade Loan Portfolio ...........................................................................................87
7.2.5 Foreign Loan Portfolio ......................................................................................................88
7.3 Contribution Margin ..................................................................................................................89
7.3.1 Revenues with Customer Relationship Fees..................................................................91
7.3.2 Asset Management ............................................................................................................92
7.3.3 Credit Cards .......................................................................................................................94
7.3.4 Collections .........................................................................................................................95
7.4 Commercial Income...................................................................................................................96
7.4.1 Personnel Expenses .........................................................................................................97
7.4.2 Other Administrative Expenses .......................................................................................99
7.4.3 Distribution Network .......................................................................................................100
7.4.4 Automated Channels.......................................................................................................103
7.4.5 Productivity – Coverage Ratios .....................................................................................105
7.5 Operating Income ....................................................................................................................107
7.6 Net Income................................................................................................................................109
7.7 Net Value Added ......................................................................................................................112
7.8 Gross Value Added..................................................................................................................113
7.9 Insurance, Pension Plans and Capitalization .......................................................................115
7.9.1 Income Statement by Line of Business ........................................................................115
7.9.2 Combined Ratio ...............................................................................................................116
7.9.3 Brasilseg...........................................................................................................................117
7.9.4 Brasilsaúde ......................................................................................................................117
7.9.5 Aliança do Brasil..............................................................................................................117
7.9.6 Brasilcap...........................................................................................................................118
7.9.7 Brasilprev .........................................................................................................................118
7.9.8 BB Previdência ................................................................................................................119
8 – Financial Statements.......................................................................................................................120
8.1 Summarized Balance Sheet....................................................................................................120
8.2 Summarized Corporate Law Income Statement ...................................................................122
8.3 Income Statement with Reallocations ...................................................................................123
8.4 Analytical Spread.....................................................................................................................124
Financial Statements.............................................................................................................................127
Index of Tables
Table 1. Main Macroeconomic Indicators..................................................................................................10
Table 2. Shareholding Breakdown ............................................................................................................11
Table 3. Shareholders by Range of Shares Owned..................................................................................11
Table 4. Free Float by Range of Shares Owned.......................................................................................11
Table 5. Tax Residence of the Investors...................................................................................................12
Table 6. Breakdown of the Warrant Holders .............................................................................................14
Table 7. B and C Series Warrants.............................................................................................................14
Table 8. Expected Dilution of Capital ........................................................................................................14
Table 9. Warrant Holders by Range of B Warrants Owned ......................................................................15
Table 10. Warrant Holders by Range of C Warrants Owned ....................................................................15
Table 11. Other Information.......................................................................................................................21
Table 12. Summarized Balance Sheet - Assets........................................................................................23
Table 13. Summarized Balance Sheet - Liabilities....................................................................................24
Table 14. Summarized Corporate Law Income Statement .......................................................................25
Table 15. Income Statement with Reallocations .......................................................................................26
Table 16. Reallocations – Other Operating Income / Expenses ...............................................................27
Table 17. Breakdown of Assets.................................................................................................................30
Table 18. Liquidity Balance .......................................................................................................................31
Table 19. Securities Portfolio by Category ................................................................................................32
Table 20. Securities Portfolio by Maturities ...............................................................................................32
Table 21. Loan Portfolio ............................................................................................................................34
Table 22. Individuals and Business Customers Loan Portfolio .................................................................34
Table 23. Loan Portfolio by Segment ........................................................................................................35
Table 24. Retail Loan Portfolio ..................................................................................................................36
Table 25. MSB Credit Products .................................................................................................................38
Table 26. BPB Highlights...........................................................................................................................39
Table 27. Commercial Loan Portfolio ........................................................................................................40
Table 28. Exports ......................................................................................................................................41
Table 29. Agribusiness Loan Portfolio by Region .....................................................................................42
Table 30. Agribusiness Loan Portfolio by Purpose ...................................................................................43
Table 31. Agribusiness Loan Portfolio by Product ....................................................................................43
Table 32. Agribusiness Loan Portfolio by Financed Items ........................................................................44
Table 33. Funds Released for the 05/06 Crop by Segment......................................................................45
Table 34. Variables Associates to Technical Risk System for Agribusiness – RTA .................................46
Table 35. Foreign Trade Loan Portfolio.....................................................................................................47
Table 36. ACC/ACE Average Volume per Contract..................................................................................47
Table 37. Concentrationof the Loan Portfolio Among the 100 Largest Borrowers ...................................48
Table 38. Concentration of the Loan Portfolio by Macro-sector................................................................48
Table 39. Liabilities....................................................................................................................................50
Table 40. Foreign Borrowing .....................................................................................................................54
Table 41. Shareholders’ Equity .................................................................................................................55
Table 42. BIS Ratio ...................................................................................................................................56
Table 43. Changes in Composition of BIS Ratio .......................................................................................57
Table 44. Fixed Asset Ratio ......................................................................................................................58
Table 45. Balance Sheet of Foreign Exchange Assets and Liabilities......................................................60
Table 46. Balance Sheet by Currencies - Assets......................................................................................61
Table 47. Balance Sheet by Currencies – Liabilities.................................................................................61
Table 48. Abroad Portfolio.........................................................................................................................63
Table 49. Average V@R, Minimum and Maximum ...................................................................................63
Table 50. Portfolios Indexed to Fixed Interest Rates ................................................................................63
Table 51. Domestic Trading Portfolio ........................................................................................................64
Table 52. International Trading Portfolio ...................................................................................................64
Table 53. Average V@R, Minimum and Maximum ...................................................................................64
Table 54. Gross Financial Margin .............................................................................................................66
Table 55. Analysis of Volume (Assets – Permanent) and Quartely Spread – 1Q05 and 1Q06................66
Table 56. Analysis of Volume (Remunerated Assets) and Annual Spread – 1Q05 e 1Q06.....................67
Table 57. Investment Rate ........................................................................................................................68
Table 58. Investment Rate on Available Funds in Foreign Currency........................................................68
Table 59. Investment Rate on Securities and Interbank Investments.......................................................68
Table 60. Securities Income......................................................................................................................68
Table 61. Investment Rate on Loans and Leasing....................................................................................69
Table 62. FX Gain (Loss) and Other FX Operations.................................................................................70
Table 63. Funding Cost .............................................................................................................................71
Table 64. Cost of Foreign Borrowing.........................................................................................................71
Table 65. Market Funding Cost .................................................................................................................71
Table 66. Investment Rates and Funding Costs .......................................................................................72
Table 67. Analytical Spread – Investment Rates ......................................................................................73
Table 68. Analytical Spread – Funding Costs ...........................................................................................74
Table 69. Reconciliation with the Gross Financial Margin ........................................................................75
Table 70. Main Components of the Spread...............................................................................................75
Table 71. Nominal Spread by Transaction ................................................................................................76
Table 72. Compositions of the Transactions .............................................................................................77
Table 73. Weighted Spread per Transaction.............................................................................................77
Table 74. Analysis of Volume and Management Spread Quarterly 1Q05 and 1Q06 (12 months) ...........77
Table 75. Net Financial Margin .................................................................................................................79
Table 76. Expenses with Allowance for Loan Losses over Portfolio.........................................................79
Table 77. Loan Portfolio by Level of Risk..................................................................................................80
Table 78. Delinquency Ratio .....................................................................................................................81
Table 79. Retail Loan Portfolio by Level Risk ...........................................................................................83
Table 80. Changes in provision levels for doubtful or non-performing loans - Retail................................83
Table 81. Commercial Loan Portfolio by Level Risk .................................................................................84
Table 82. Changes in provision levels for doubtful or non-performing loans - Commercial .....................84
Table 83. Agribusiness Loan Portfolio by Level Risk ................................................................................85
Table 84. Changes in provision levels for doubtful or non-performing loans - Agribusiness ....................86
Table 85. Foreign Trade Loan Portfolio by Risk Level ..............................................................................87
Table 86. Changes in the Allowance – Foreign Trade ..............................................................................87
Table 87. Loan Protfolio Abroad by Level of Risk .....................................................................................88
Table 88. Contribution Margin ...................................................................................................................89
Table 89. Sevices Revenues.....................................................................................................................89
Table 90. Investment Funds and Managed Portfolios by Customer .........................................................92
Table 91. Commercial Income ..................................................................................................................96
Table 92. Personnel Expenses .................................................................................................................97
Table 93. Other Administrative Expenses .................................................................................................99
Table 94. Distribution Network ................................................................................................................100
Table 95. Wholesale Pillar Branches ......................................................................................................101
Table 96. Distribution Network Abroad....................................................................................................102
Table 97. Coverage Ratios......................................................................................................................105
Table 98. Operating Income....................................................................................................................107
Table 99. Eficiency Ratio.........................................................................................................................107
Table 100. Efficiency Ratio Statement - Quarterly ..................................................................................108
Table 101. Net Income ............................................................................................................................109
Table 102. Return on Equity....................................................................................................................110
Table 103. ROE decomposition - Quarterly ............................................................................................111
Table 104. Net Value Added ...................................................................................................................112
Table 105. Gross Value Added ...............................................................................................................113
Table 106. Insurance, Pension Plans and Capitalization........................................................................115
Table 107. Income Statement by Line of Business.................................................................................115
Table 108. Brasilseg Data .......................................................................................................................117
Table 109. Brasilsaúde Data ...................................................................................................................117
Table 110. Aliança do Brasil Data ...........................................................................................................118
Table 111. Brasilcap Data .......................................................................................................................118
Table 112. Brasilprev Data ......................................................................................................................118
Table 113. BB Previdência Data .............................................................................................................119
Table 114. Balance Sheet – Assets ........................................................................................................120
Table 115. Balançe Sheet - Liabilities .....................................................................................................121
Table 116. Summarized Corporate Law Income Statement ...................................................................122
Table 117. Income Statement with Reallocations ...................................................................................123
Table 118. Analytical Spread...................................................................................................................124
Index of Figures
Figure 1. Total distribution of the Free Float .............................................................................................12
Figure 2. Free Float Distribution at the CBLC ...........................................................................................12
Figure 3. BB Shares vs. Ibovespa.............................................................................................................16
Figure 4. BB Shares in Bovespa ...............................................................................................................17
Figure 5. Finance Volume and Quantity Traded BBAS3...........................................................................17
Figure 6. Market Ratios .............................................................................................................................19
Figure 7. Earning Assets vs. Interst Bearing Liabilities .............................................................................29
Figure 8. Breakdown of Assets .................................................................................................................30
Figure 9. Liquidity Assets (-) Liquidity Liabilities .......................................................................................31
Figure 10. Securities Portfolio with Maturities between 0 and 5 years .....................................................33
Figure 11. Breakdown of the Loan Portfolio ..............................................................................................35
Figure 12. Main Retail Loan Portfolio Products.........................................................................................37
Figure 13. Main Products for Micro and Small Businesses.......................................................................38
Figure 14. Main Products for Wholesale Customers.................................................................................40
Figure 15. Trade Balancel (FOB) ..............................................................................................................41
Figure 16. Production vs. Planted Area.....................................................................................................42
Figure 17. Main Products of the Agribusiness Loan Portfolio ...................................................................44
Figure 18. Agribusiness Loan Portfolio by Funding Souces .....................................................................45
Figure 19. Equalizations Revenues...........................................................................................................45
Figure 20. Main Products of the Foreign Loan Portfolio............................................................................47
Figure 21. Breakdown of Tax Credit..........................................................................................................49
Figure 22. Changes in the Liabilities .........................................................................................................51
Figure 23. Deposits and Market Funding ..................................................................................................52
Figure 24. Market Share of BB Funding....................................................................................................53
Figure 25. Brazilian Sovereign Risk (points) vs. Marking to Market (R$ million) ......................................55
Figure 26. Bis Ratio - %.............................................................................................................................56
Figure 27. Changes in FX Exposure - %...................................................................................................60
Figure 28. Balance Sheet by Index ...........................................................................................................62
Figure 29. Mismatch Gaps by Index..........................................................................................................62
Figure 30. Availability of Free Funds – DRL % .........................................................................................65
Figure 31. Analysis of Volume (Assets – Permanent) Quarterly Spread – 1Q05 e 1Q06 ........................67
Figure 32. Securities Portfolio by Index.....................................................................................................69
Figure 33. FX Gain (Loss) and Other FX Operations................................................................................70
Figure 34. Anaysis of Spread - %..............................................................................................................72
Figure 35. Analysis of Volume and Spread of Uses and Funding Quarterly – 1Q05 and 1Q06...............78
Figure 36. Expenses with Allowance for Loan Losses over Portfolio .......................................................79
Figure 37. Breakdown of Allowances ........................................................................................................80
Figure 38. CLP/CT BB vs Banking Industry - %........................................................................................81
Figure 39. Delinquency Ratio -%...............................................................................................................82
Figure 40. Growth in Service Revenues....................................................................................................89
Figure 41. Breakdown and Performance os Services Revenues..............................................................90
Figure 42. Revenues from Relationship Fees and Customer Base..........................................................91
Figure 43. Costumer Base.........................................................................................................................91
Figure 44. Asset Management ..................................................................................................................92
Figure 45. Investment Funds and Managed Portfolios .............................................................................93
Figure 46. Investiment Funds ....................................................................................................................93
Figure 47. Managed Portfolios and Investment Clubs ..............................................................................93
Figure 48. Credit Cards .............................................................................................................................94
Figure 49. Credit Cards Sales by Brand....................................................................................................94
Figure 50. BB Collection Volume ..............................................................................................................95
Figure 51. Changes in Commercial Income ..............................................................................................96
Figure 52. Changes in Workforce..............................................................................................................97
Figure 53. Tenure ......................................................................................................................................98
Figure 54. Productivity Ratios ...................................................................................................................98
Figure 55. Total Distribution Network ......................................................................................................100
Figure 56. Distribution Network - Wholesale ...........................................................................................101
Figure 57. Distribuition Network - Government .......................................................................................101
Figure 58. Automated Teller Machines ...................................................................................................103
Figure 59. Share of Automated Transactions / Total Transactions - % ..................................................103
Figure 60. Costumer Access Options......................................................................................................104
Figure 61. Coverage Ratios.....................................................................................................................105
Figure 62. Productivity Ratios .................................................................................................................106
Figure 63. Business vs. Expenses ..........................................................................................................106
Figure 64. Efficiency Ratio - % ................................................................................................................108
Figure 65. Changes in Earnings before Taxes........................................................................................109
Figure 66. Change in Net Income ...........................................................................................................110
Figure 67. Change in ROE ......................................................................................................................110
Figure 68. Net Value Added ....................................................................................................................114
Figure 69. Gross Value Added ................................................................................................................114
Figure 70. Combined Ratio......................................................................................................................116
Presentation
The Performance Analysis is a report published quarterly and is intended for market analysts, investors
and others who need a deeper understanding of the economic and financial situation of Banco do Brasil
(BB). The report starts with an overview of the economic environment, which is followed by an analysis
of the performance of BB paper and of the main practices of corporate governance adopted by the
institution. Continuing the report, there are separate analyses of the capital structure and the results.
The reader will also find tables with historical series, from 8 periods, of the summarized balance sheet,
the summarized corporate income statement, the income statement with reallocations, the analytic
spread, and other information about profitability, productivity, quality of the loan portfolio, capital
structure, capital market, and structural data.
The Balance Sheet Analysis brings a more detailed study of the main components of the balance sheet
such as the securities portfolio, the loan portfolio, tax credits, market borrowings, and shareholders’
equity, amongst others.
The Analysis of Results shows, step by step, the items of the statement of income with reallocatons. The
cosporate income statement is submitted to these reallocations with the intention of favoring a better
understanding of the results, making the historical series more comparable and facilitating accurate
forecasts from this data.
Finally, the financial statements and the explanatory notes for the quarter under analysis are presented.
ON-LINE ACCESS
The Performance Analysis report can also be read through Banco do Brasil’s Investor Relations website.
Further information is also made available about the Bank, such as: corporate governance, interactive
balance sheets and fundamentalist indicators, news items, frequently asked questions, and the
Download Center, containing versions of this report for the Adobe® Reader® software, available in the
complete version or split into three: general information, balance sheet analysis, and complete financial
statements; the historical series in Excel, presentations to the market, Annual Report and Report on
Socioenvironmental Responsibility, the Financial Balance Sheet, audio of the teleconferences on
results, and others.
LINKS OF INTEREST
Banco do Brasil www.bb.com.br/
Investor Relations www.bb.com.br/appbb/portal/ri/index.jsp
Download Center (RI) www.bb.com.br/appbb/portal/ri/dce/MenuCenter.jsp
Shareholder’s Room (also attends to shareholders www.bb.com.br/appbb/portal/ri/sla/index.jsp
of other companies with custody in BB)
9 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
1 – Economic Environment
Throughout the first quarter of 2006, the economic environment was characterized by volatility in the
financial markets and in oil prices. However, the international marketable, aversion to risk and flow of
resources to emerging countries were not significantly affected.
The combination of strong foreign heated demand and prices of commodities on the rise continued
being important to set off the effects of Real appreciation upon the foreign trade balance, which
accumulated in twelve months, reached US$ 45.8 billion at the end of quarter, against US$ 44.8 billion
reached at the end of 2005, which result has also contributed to the fall in jectory of risk-country in the
period.
The evaluation the inflationary pressures at the beginning of year were punctual proved to be accurate,
as demonstrated by price indicators at the end of quarter. Besides, the foreign exchange behavior and
the good management of the monetary policy provided convergence of inflation expectations to a core
goal of 4.5% this year. In this context, the Central Bank of Brazil went ahead with gradual flexibilization
monetary policy with the Selic rate reaching 16.5% p.a last March against 18.5% p.a. in December of
last year.
Controlled inflation, the continuity of the decrease in real interest, together with credit expansion and real
growth in salaries, have been important drivers for the more accelerated growth of economy.
Table 1. Main Macroeconomic Indicators
1Q05 4Q05 1Q06 12 months
Ptax Dollar Sale 0.4 5.3 (7.2) (18.5)
Accumulated IGP-DI FGV 1.7 1.0 0.2 (0.3)
Accumulated IGP-M FGV 1.5 1.0 0.7 0.4
Acumulated IPCA –IBGE 1.8 1.3 1.4 5.3
Accumulated Selic 4.2 4.3 4.0 18.9
Accumulated TR (formerly BTN) 0.6 0.7 0.5 2.8
Ptax Dollar Sale * 2.6662 2.3407 2.1724 -
* Closing Rate
Source: Economática
The Selic rate was less in the 1Q06 in relation to 1Q05 and 4Q05. The behavior of the Selic rate is
reflected mainly in securities income and in the expenses with the remuneration of time deposits and
money market borrowing.
In 1Q06, appreciation of the currency is seen in relation to 1Q05 and 4Q05. The dollar ended the quarter
quoted at R$ 2.1724, against R$ 2.6662 in 1Q05 and R$ 2.3407 in 4Q05. In view of its risk
management policy of working with low foreign exchange exposure, the volatility of the foreign exchange
rate only brings about effects of a tax nature in the Bank’s results. The index that measure variation in
prices, IGP-DI, IGP-M and IPCA, showed less variation in 1Q06.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 10
2 – BB Securities
2.1 Shares
In March 2006, Banco do Brasil’s capital stock was R$ 10,797,336,780.83 made up of 810,617,415
ordinary shares, represented book entries and no nominal value. The largest shareholder is the National
Treasury, with 72.1% of the capital, followed by Caixa de Previdência dos Funcionários do Banco do
Brasil (Previ) with 13.9%, and BNDESPar – the equity investment company of National Bank for
Economic and Social Development – which has 5.7% of the capital. Without taking into consideration
the shares that are held in treasury, the other shares – 6.9% - are well dispersed in the market.
Table 2. Shareholding Breakdown
Shareholders %
National Treasury 72.1
Previ 13.9
BNDESPar 5.7
Free Float 6.9
Individuals 2.5
Companies 1.0
Foreign Capital 3.3
Subtotal 98.6
Shares in Treasury 1.4
Total 100.0
The BB shareholder base is characterized by the large number of shareholders with a small holding in
the capital. As can be seen from the table below, 262,734 shareholders (98.8%) account for 0.9% of the
capital, while 3,179 shareholders (1.2%) hold 99.1% of the total number of shares.
Table 3. Shareholders by Range of Shares Owned
Range of shares owned N. Shareholders % Shareholders Qty. Shares % Qty. Shares
1 to 10 shares 178,028 66.9 636,480 0.1
11 to 50 shares 58,211 21.9 1,317,155 0.2
51 to 100 shares 11,446 4.3 827,979 0.1
101 to 1,000 shares 15,049 5.7 4,382,627 0.5
Over 1,000 shares 3,179 1.2 803,453,174 99.1
Total 265,913 100.0 810,617,415 100.0
Table 4. Free Float by Range of Shares Owned
Range of shares owned N, Shareholders % Shareholders Qty, Shares % Qty. Shares
1 to 10 shares 178,028 67.0 636,480 1.1
11 to 50 shares 58,211 21.9 1,317,155 2.4
51 to 100 shares 11,446 4.3 827,979 1.5
101 to 1,000 shares 15,049 5.7 4,382,627 7.9
Over 1,000 shares 3,176 1.2 48,398,074 87.1
Total 265,910 100.0 55,562,315 100.0
With regard to the tax residence of the investors, it is to be noted that the quantity of shareholders
resident in Brazil is 265,727, and they hold 96.7% of the total shares, while the quantity of foreign
shareholders is 186, and they hold 3.3% of the shares.
11 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 5. Tax Residence of the Investors
N. Shareholders % Shareholders Qty. Shares % Qty. Shares
Brazil 265,727 99.9 783,934,866 96.7
Abroad 186 0.1 26,682,549 3.3
Total 265,913 100.0 810,617,415 100.0
Total distribution of the Free Float
Mar/05 Dec/05 Mar/06
36.9% 37.5% 36.7%
45.3% 48.0%
49.7%
17.7% 12.8% 15.3%
Private Individuals Corporate Bodies Foreign Capital
Figure 1. Total distribution of the Free Float
With regard to the total of the Bank’s shares that are well dispersed in the market (6.9%), that is, that is,
the free float, a predominance of foreign capital can be seen (48.0%), followed by Individuals (36.7%)
and Companies (15.3%).
The major part of the free float, 72.3% (40.2 million shares), is under custody of the Brazilian Clearing
and Depository Corporation (CBLC), distributed as shown in the following figure. It is to be noted that, of
the total shares available for trading at the CBLC, 66.4% is to be found in the possession of foreign
investors.
Free Float Distribution at the CBLC
Mar/05 Dec/05 Mar/06
17.6% 17.1%
26.2%
13.1% 16.5%
53.1%
69.3% 66.4%
20.7%
Private Individuals Corporate Bodies Foreign Capital
Figure 2. Free Float Distribution at the CBLC
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 12
2.1.1 Equity Held by Foreign Investors
The participation of foreigners in the Bank’s capital is limited to 5.6% at the most. This limitation derives
from a legal directive, expressed in Article 52 of the Transitory Constitutional Provisions Act, in the
Federal Constitution of the Federal Republic of Brazil, and represents the participation of these investors
at the time of the promulgation of the Constitution, in 1988.
According to the provisions of the article of the Constitution referred to, an increase in the percentage of
participating interests of Individuals or Companies, resident or domiciled abroad, in the capital of
financial institutions with their registered office in Brazil, is forbidden. Accordingly, any alteration will
depend on the publication of an instruction, on the initiative of the President of the Federal Republic of
Brazil.
On 04/19/2000, the National Monetary Council (CMN) approved, to be forwarded to the President of the
Republic, a proposal for increasing foreign interest in Banco do Brasil S.A’s capital stock, from the
present 5.6% up to 12.5%.
From 2002 onwards, a noteworthy increase has been noted in the participating interest of foreigners in
the Bank’s capital. BB closed 1Q06 with 3.3% of the free float in the possession of foreigners, which is
stable in relation to December 2005.
Equity Held by Foreign Investors
3.4% 3.3%
2.8%
1.6%
1.0% 0.9%
2001 2002 2003 2004 2005 1Q06
Figure 3. Equity Held by Foreign Investors
13 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
2.2 Warrants
In 1996, on the occasion of BB’s capital increase, three series of subscription warrants were issued: A,
B e C, to be due on 2001, 2006 and 2011, respectively. The exercise price of such warrants was
established at R$ 8.50, readjusted by IGP-DI. On 03.31.2006, the updated price was R$ 21.69. It is
worth pointing out that the period for exercising the “B” Warrants starts on March 31, 2006.
The breakdown of the warrant holders is shown in the following table:
Table 6. Breakdown of the Warrant Holders
%BNB %BNC
Private Individuals 25.1 38.1
Corporate Bodies 49.1 38.5
Foreign Capital 25.8 23.4
Total 100.0 100.0
The “B” and “C” warrants in circulation, showed the following characteristics in March 2006:
Table 7. B and C Series Warrants
Series Code Exercise Date Quantity Exercise Price R$ Quotation in R$
B Warrants BBAS 12 03.31 to 06.30.2006 15,993,142 21.68 31.01
C Warrants BBAS 13 03.31 to 06.30.2011 27,028,746 21.68 27.99
In a simulation, based on the assumption that there will be no additional capital increases before 2011
and that the total amount of "B" and "C" warrants will be exercised on maturity, the expected dilution of
BB’s capital, as per the table below, is 5.4%, of which 2.0% arises from the exercise of B warrants and
3.4% from the exercise of the C warrants.
Conversion:
1 Warrant = 1.043933 shares
Total of the Capital = 810,617,415
Table 8. Expected Dilution of Capital
Warrants Qty. Warrants Qty. Shares Dilution of Capital - %
B Series 15,993,142 16,695,769 2.0
C Series 27,028,746 28,216,200 3.4
Total 43,021,888 44,911,969 5.4
The basis of the Series "B" and "C" Subscription Warrants is characterized by the concentration of
warrant holders with little participation in the total of the warrants. As can be observed, in relation to the
"B" warrants, 159,493 warrant holders (99.7%) hold 13.4% of the warrants, and 485 (0.3%) warrant
holders hold 86.7% of the total. In relation to the "C" warrants, 208,910 warrant holders (99.6%) hold
12.6% of the warrants, and 893 warrant holders (0.4%) hold 87.4% of the total.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 14
Table 9. Warrant Holders by Range of B Warrants Owned
Range of B Warrants Owned N. Warrant % Warrant
Qty. B Warrants % Qty. B Warrants
Holders Holders
1 to 10 warrants 129,197 80.8 402,538 2.5
11 to 50 warrants 22,837 14.3 494,033 3.1
51 to 100 warrants 3,786 2.4 265,763 1.7
101 to 1,000 warrants 3,673 2.3 971,631 6.1
Over 1,000 warrants 485 0.3 13,859,177 86.7
Total 159,978 100.0 15,993,142 100.0
Table 10. Warrant Holders by Range of C Warrants Owned
N. Warrant % Warrant
Range of C Warrants Owned Qty. C Warrants % Qty. C Warrants
Holders Holders
1 to 10 warrants 161,224 76.8 515,352 1.9
11 to 50 warrants 35,537 16.9 778,055 2.9
51 to 100 warrants 5,938 2.8 424,338 1.6
101 to 1,000 warrants 6,211 3.0 1,678,584 6.2
Over 1,000 warrants 893 0.4 23,632,417 87.4
Total 209,803 100.0 27,028,746 100.0
15 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
2.3 Performance of the Shares
Market
In the 1Q06, the Brazilian stock market proved to be the financial investment that brought the best return
for its investors. In March, Ibovespa reached 37,951 points, higher than the 26,610 points in March
2005.
The behavior of the stock market over the quarter can be divided into two distinct periods. The months
of January and February were basically influenced by three factors: the optimism of investors regarding
the good economic foundations of the country, the expectation of a stronger reduction in the Selic
interest rate in the next few months, and ressumption of PIB growth 2006. Associated to this, the
American economy, in spite of the expectation of continuity of the cycle of increases in interest,
continues to show signs of strength, contributing to the maintenance of a global environment of low
aversion to risk.
After remaining positive during the two first months of the year, the stock market showed a volatile
behavior in March. The result of the month was mainly influenced by the increase in the foreign
exchange and the disclosure regarding the new increase in the interest rate of the United States of
America and other developed countries.
BB Shares
The Bank’s shares appreciation of 95.6%, while Ibovespa rose 42.6% in the last 12 months, as shown in
the following graph.
BB Shares vs. Ibovespa
95.6%
42.6%
Mar/05 Apr/05 Mai/05 Jun/05 Jul/05 Aug/05 Sep/05 Oct/05 Nov/05 Dec/05 Jan/06 Feb/06 Mar/06
Daily Volume BBAS3 BBAS3 Ibovespa
Source: Economática
Figure 3. BB Shares vs. Ibovespa
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 16
Participation in Ibovespa
The Bovespa Index (Ibovespa) is an index that represents the Brazilian stock market, made up of debt
securities that were traded in at least 80% of the trading sessions carried out. From this, the Tradability
Index is worked out, made up by the financial volume and by the quantity traded of each security
transacted, which determines the ranking of the security’s share in the market. Out of the total of
securities, the 80% with the highest Tradability index are determined, to represent the Ibovespa index.
Throughout 2004, a gradual reduction has been seen in the participation of shares from the banking
sector in the composition of Ibovespa’s theoretical portfolio. However, a recovery is to be seen of the
participation of the sector in 2005. Banco do Brasil’s share has followed the trend verified in the sector,
closing the year with 1.0% of Ibovespa. However, for the two first quarters of 2006, BB’s participation in
the index was slightly lower than the one showed at the end of 2005, as it can be seen in the following
graphic:
BB Shares in Bovespa - %
9,100 9,501
8,773
7,773 7,525 8,034
6,639 6,382
1.111
0.967 0.921 1.000 0.989 0.962
0.826 0.832
Jan/04 - May/04 - Sep/04 - Jan/05 - May/05 - Sep/05 - Jan/06 - May/06 -
Apr/04 Aug/04 Dec/04 Apr/05 Aug/05 Dec/05 Apr/06 Aug/06
BBAS3 Banking Industry
Source: Bovespa
Figure 4. BB Shares in Bovespa
The Bank’s share in Ibovespa for 2005 can be explained through the following graphs. The Bank’s
quantity of trades and the financial volume traded were higher in 1Q06 than the first period of the
previous year.
Finance Volume and Quantity Traded - BBAS3
Finance Volume Quantity Traded
22,000,000 650.0
17,000,000 550.0
450.0
12,000,000
350.0
7,000,000 250.0
2,000,000 150.0
mar/04 jun/04 sep/04 dec/04 mar/05 jun/05 sep/05 dec/05 mar/06 /04 dec/04 mar/05 jun/05 sep
mar/04 jun/04 sep /05 dec/05 mar/06
Source: Economática
Figure 5. Finance Volume and Quantity Traded BBAS3
17 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Market capitalization reached R$ 44,364 million at the end of March 2005, against R$ 23,661 million in
the same period of the previous year, an increase of 87.5%. The price/book value ratio reached at
2.31x, against 1.58x in 1Q05, and the net income per share reached R$ 2.93 in March 2006, against R$
1.21 in March 2005.
Market Ratios
Price / Ea rnings 12 mo nths Net Income per Share - R$
2.93
8.59 8.29 8.12 8.02
7.01 7.06
6.05 6.38
1.80
1.14 1.21 1.27
1.10 0.96 0.92
Jun/04 Sep /04 Dec/04 Mar/05 Jun/05 Sep /05 Dec/05 Mar/06 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06
Price / Book Valu e Book Value per S hare - R$
2.31 24.03
2.06 2.00 21.05 21.08
1.84 18.81 19.26
1.64 17.57 17.65 18.68
1.58
1.28 1.34
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep /04 Dec/04 Mar/05 Jun/05 Sep /05 Dec/05 Mar/06
Market Capitalization - R$ million Free Float Capitalization - R$ million
3,084
44,364
2,396 2,345
34,692 33,733
1,794 1,747
25,979 1,634
23,661 25,300 1,339
18,447 1,192
16,470
Jun/04 Sep /04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep /04 Dec/04 Mar/05 Jun/05 Sep /05 Dec/05 Mar/06
Net Pr ofit - R$ million Divid ends a nd Intere st on Equity - R$ million
2,343
1,498
1,438
870 954
965 1,014
805 833 771 737 628
450 504
2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 1H04 2H04 1H05 2H05 2004 200 5
Divid end Yield - % Payout Ratio - %
4.4
40.0
3.7 36.1
31.7 31.4 31.7 31.5
2.7 2.6
2.5
1.9
1H04 2H04 1H05 2H05 200 4 200 5 1H04 2H04 1H05 2H05 2004 200 5
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 18
Figure 6. Market Ratios
3 – Corporate Governance
Banco do Brasil constantly evaluates its Corporate Governance practices, with the intention of improving
the principles and mechanisms that ensure the Bank’s good government. Accordingly, various kinds of
work have been carried out in the Bank with a focus on analyzing the following points: structure of the
shareholder capital; shareholders’ rights and relations with stakeholders; transparency and audit;
management structure and effectiveness.
The Board of Directors (BD) is composed of seven members, having a one-year term of office, where
reelection is permitted until the limit of 8 (eight) consecutive years. The advisory member may return
after one year. Of the seven members, three are appointed by minority shareholders and the others by
the majority shareholder. The bank maintains a permanent statutory Audit Committee, composed of five
members, among which two are appointed by minority shareholders and the others by the controlling
shareholder. The current members of both Boards were elected by General Shareholders’ Meetings
dated April 28, 2006, the summarized decisions of which are as follows:
General Shareholders’ Meetings:
I – approve the capital budget of Banco do Brasil for the year 2006;
II – declare cognizance of the Directors’ Report and approve accounts, balance sheets, financial
statements, reports of the Audit Committee and independent auditors and report of the Audit Committee
related to the fiscal year of 2005;
III – approve the proposal for distribution for the net income of the fiscal year 2005 and dividend
distribution;
IV – elect the following members and respective deputies to compose the Audit Committee for the
2006/2007 term of office:
Member: Bruno Walter Coelho Saraiva
Deputy: Marcos Machado Guimarães
Member: José Luiz Gomes Rôlo
Deputy: Pedro Paulo Bernardes Lobato
Member: Otávio Ladeira de Medeiros
Deputy: Daniel Sigelmann
Member: Eduardo Grande Bittencourt
Deputy: Egon Handel
Member: Eustáquio Wagner Guimarães Gomes
Deputy: Alfredo Luiz Buso
V – set the remuneration of the Audit Committee members;
VI – elect the following members to compose the Board of Directors of Banco do Brasil, for the
2006/2007 term:
19 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
President: Bernard Appy
Vice-President: Rossano Maranhão Pinto
Members: Tarcísio José Massote de Godoy
José Carlos da Rocha Miranda
Carlos Augusto Vidotto
João Carlos Ferraz
Francisco Augusto da Costa e Silva
VII – set the full annual remuneration of the members of the management units
Extraordinary Shareholders’ Meetings:
I – approve the capitalization of the reserve balance portion for expansion and the amount recorded in
capital reserves, without the issuance of new shares, raising the corporate capital of Banco do Brasil to
R$ 11,608,512,813.37 (eleven billion, six hundred and eight million, five hundred and twelve thousand,
eight hundred and thirteen Reais and thirty-seven centavos);
II – approve amendments to articles 7, 14 and 18 of the Bylaws; and
III – approve the opening of a real estate loan portfolio.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 20
4 – Other Information
Table 11. Other Information
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Profitability
Net Income per Share - R$ 1.10 1.14 0.96 1.21 1.27 1.80 0.92 2.93
ROE – Annualized % 27.7 27.5 24.0 29.3 29.6 40.8 18.7 63.0
ROE – Accumulated and Annualized % 23.9 24.5 23.0 29.3 28.6 30.5 26.8 63.0
ROA - Annualized % 1.4 1.4 1.3 1.6 1.7 2.4 1.2 3.7
GFM / (Assets - Permanent) – Annualized 7.4 7.1 7.1 6.9 7.3 7.3 7.5 7.0
GFM / Remunerated Assets – Annualized 9.2 8.8 8.7 8.4 9.0 9.0 9.2 8.5
Produtividade
Efficiency1 - % 55.2 52.3 59.3 50.4 47.6 44.9 50.0 48.1
Efficiency2 - % 59.0 56.8 62.7 56.1 49.6 54.8 53.6 51.3
Service Revenues / Personnel Expenses - % 98.1 98.4 92.5 97.9 119.6 100.8 99.5 112.1
Service Revenues / Administrative Expenses1 - % 49.3 55.6 49.0 55.0 62.5 58.5 57.0 65.0
Service Revenues / Administrative Expenses2 - % 53.1 54.9 51.2 54.4 64.0 56.3 56.4 64.1
Personnel Expenses per Collaborator - R$ 17,314 17,780 18,554 17,892 18,034 18,054 19,143 18,969
Collaborators / (Branches + PAA + PAB) 17 17 17 17 17 17 18 17
Customers per Collaborator 224 229 234 232 234 236 243 248
Assets per Collaborator – R$ thousand 2,536 2,614 2,654 2,683 2,499 2,594 2,688 2,819
Loan Portfolio / Points of Service – R$ million 6.0 5.9 6.1 6.4 6.6 6.4 6.9 7.1
Quality of the Loan Portfolio
Allowance / Loan Portfolio - % 6.1 6.4 6.1 6.1 6.1 6.3 6.6 7.3
Allowance / (E + F + G + H) - % 128,9 127,8 119,1 119,0 122,6 109,5 109,2 108.3
Portfolio Net of Allowance / Total Portfolio - % 95.0 94.8 94.9 94.8 94.9 94.5 93.4 92.7
Capital Structure
Leverage (times) 17.7 17.1 16.9 16.5 15.2 14.6 15.0 13.8
BIS Ratio- % 14.5 15.7 15.2 15.6 15.9 17.4 17.1 18.3
Total Quantity of Shares – thousand 732,018 732,018 810,617 810,617 810,617 810,617 810,617 810,617
Quantity of Shares in Treasury – thousand 11,258 11,258 11,258 11,258 11,258 11,258 11,258 11,258
Capital Market
Price / Earnings 12 months 6.05 6.38 8.59 7.01 7.06 8.29 8.12 8.02
Price / Book Value 1.28 1.34 1.84 1.58 1.64 2.06 2.00 2.31
Market Capitalization - R$ million 16,470 18,447 25,979 23,661 25,300 34,692 33,733 44,364
Book Value per Share - R$ 17.57 18.81 17.65 18.68 19.26 21.05 21.08 24.03
Price of Share - R$ 22.50 25.20 32.50 29.60 31.65 43.40 42.20 55.50
Structural Information
Total of Points of Service 13,908 14,230 14,450 14,564 14,593 14,716 14,804 14,866
Branches 3,618 3,662 3,722 3,786 3,814 3,857 3,894 3,923
PAA 187 188 188 185 185 186 188 190
PAB 1,520 1,495 1,455 1,400 1,358 1,318 1,300 1,273
PAE 5,280 5,461 5,614 5,665 5,657 5,643 5,668 5,700
SAA 3,285 3,406 3,455 3,519 3,572 3,706 3,749 3,775
PAP 18 18 16 9 7 6 5 5
Total of Customers – thousand 20,055 20,607 21,089 21,219 21,910 22,329 22,907 23,259
Individuals – thousand 18,779 19,234 19,720 19,858 20,511 20,924 21,475 21,812
Businesses – thousand 1,274 1,373 1,369 1,361 1,398 1,405 1,432 1,447
Total of Savings Accounts – thousand 12,023 12,506 13,016 13,090 13,555 13,810 14,228 14,489
Individuals – thousand 11,914 12,392 12,896 12,980 13,442 13,701 14,113 14,374
Businesses – thousand 109 114 120 110 114 110 115 115
Collaborators 89,665 90,137 90,064 91,556 93,569 94,641 94,114 93,865
Employees 78,995 79,611 79,725 80,904 82,969 84,048 83,751 83,405
Interns 10,670 10,526 10,339 10,652 10,600 10,593 10,363 10,460
1 Law Income Statement
2 Statement with Reallocations
21 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Global Ratings
Fitch Ratings
Individual C/D C/D C/D C/D C/D C/D C/D C/D
Short-Term - Local Currency B B B B B B B B
Long-Term - Local Currency BB- BB- BB BB BB BB BB BB
Short-Term - Foreign Currency B B B B B B B B
Long-Term - Foreign Currency B+ B+ BB- BB- BB- BB- BB- BB-
Moody's
Financial Strength E+ E+ E+ E+ E+ E+ D D
Short-Term - Local Currency P-2 P-2 P-2 P-2 P-2 P-2 P-2 P-2
Short-Term - Foreign Currency NP NP NP NP NP NP NP NP
Long-Term Debt- Foreign Currency Ba3 Ba2 Ba2 Ba2 Ba2 Ba1 Ba1 Ba1
Long-Term Deposits - Local Currency A3 A3 A3 A3 A3 A3 A3 A3
Long-Term Deposits - Foreign Currency B3 B2 B2 B2 B2 B1 B1 B1
Standard & Poor's
Long-Term - Local Currency BB BB BB BB BB BB BB BB
Long-Term - Foreign Currency B+ B+ BB- BB- BB- BB- BB- BB-
National Ratings
Fitch Atlantic Ratings
Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra)
Long-Term AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra)
Moody's
Short-Term BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1
Long-Term Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br
Compulsory Investments
Demand Deposits
Rate(1) 45% 45% 45% 45% 45% 45% 45% 45%
Additional(2) 8% 8% 8% 8% 8% 8% 8% 8%
Compulsory Investments* 25% 25% 25% 25% 25% 25% 25% 25%
Compulsory Investments (micro finance) 0% 0% 2% 2% 2% 2% 2% 2%
Free 22% 22% 20% 20% 20% 20% 20% 20%
Savings Deposits
Rate(3) 20% 20% 20% 20% 20% 20% 20% 20%
Additional(2) 10% 10% 10% 10% 10% 10% 10% 10%
Compulsory Investments* 40% 50% 50% 50% 50% 55% 55% 55%
Free 30% 20% 20% 20% 20% 15% 20% 20%
Time Deposits
Rate(4) 15% 15% 15% 15% 15% 15% 15% 15%
Additional(2) 8% 8% 8% 8% 8% 8% 8% 8%
Free 77% 77% 77% 77% 77% 77% 77% 77%
Judicial Deposits
Rate 0% 0% 0% 0% 0% 0% 0% 0%
Free 100% 100% 100% 100% 100% 100% 100% 100%
* In BB, the compulsory investments are applied in Rural Credit.
(1) Paid over in cash without remuneration
(2) Paid over in cash at Selic rate.
(3) Paid over in cash at TR + interest of 6.17% p.a.
(4) Linked to securities
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 22
5 – Summarized Financial Statements
5.1 Summarized Balance Sheet
Table 12. Summarized Balance Sheet - Assets
R$ million
Balances Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
ASSETS 245,685 252,977 264,635 7.7 4.6
Current and Long-term Assets 240,739 247,397 259,111 7.6 4.7
Available Funds 14,408 5,828 4,056 (71.8) (30.4)
Short-term Interbank Investments 17,681 28,996 35,744 102.2 23.3
Securities 74,089 66,470 68,631 (7.4) 3.3
Securities Available for Trading 11,309 3,077 4,327 (61.7) 40.6
Securities Available for Sale 35,092 37,832 38,815 10.6 2.6
Securities Held to Maturity 27,039 25,275 25,069 (7.3) (0.8)
Financial Derivatives 649 287 421 (35.2) 46.8
Interbank Accounts 23,348 24,404 24,912 6.7 2.1
Deposits with the Central Bank 20,787 23,419 21,970 5.7 (6.2)
Compulsory Deposits on Demand Deposits and Float 7,866 9,494 7,934 0.9 (16.4)
Compulsory Deposits on Savings Deposits 12,921 13,925 14,036 8.6 0.8
Other 2,561 985 2,942 14.9 198.6
Intrabank Accounts 140 121 12 (91.2) (89.8)
Loans 77,896 85,942 88,306 13.4 2.8
Public Sector 4,528 3,730 3,442 (24.0) (7.7)
Private Sector 78,765 88,551 92,191 17.0 4.1
( Allowance for Loan Losses) (5,397) (6,339) (7,327) 35.7 15.6
Leasing 4 20 30 745.9 52.6
Leasing and Subleasing Receivables 580 752 822 41.7 9.2
(Unearned Lease Income) (547) (708) (768) 40.3 8.4
(Allowance for Lease Losses) (29) (24) (24) (17.1) (0.4)
Other Receivables 32,985 35,108 36,811 11.6 4.9
Receivable on Guarantees Honored 83 160 156 88.9 (2.0)
Foreign Exchange Portfolio 10,444 9,156 9,130 (12.6) (0.3)
Income Receivable 211 237 183 (13.4) (22.8)
Trading and Brokerage of Securities 62 46 66 7.6 43.3
Specific Credits 559 610 627 12.2 2.7
Specific Operations 1 1 1 (57.6) 0.0
Tax Credits 7,956 6,687 8,905 11.9 33.2
Atuarial Assets 2,709 3,869 3,865 42.7 (0.1)
Warrants Deposits Receivable 9,199 11,692 12,251 33.2 4.8
Other Credits 3,907 5,558 4,812 23.2 (13.4)
(Provision or Doubtful Receivables) (2,146) (2,908) (3,186) 48.5 9.6
(With Loan Characteristics) (229) (328) (380) 66.2 15.9
(Without Loan Characteristics) (1,917) (2,580) (2,806) 46.3 8.8
Other Assets 188 509 608 223.1 19.6
Interest in Companies - 0 0 - (9.7)
Other Assets 317 319 310 (2.3) (2.8)
(Provision for Possible Losses) (177) (185) (177) (0.3) (4.4)
Prepaid Expenses 48 374 475 886.3 26.9
Permanent Assets 4,946 5,580 5,524 11.7 (1.0)
Investments 896 1,045 1,030 14.9 (1.4)
Property and Equipment 2,886 3,119 3,015 4.5 (3.4)
Leasing Assets 619 812 895 44.5 10.2
Deferred Charges 544 604 584 7.3 (3.3)
23 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 13. Summarized Balance Sheet - Liabilities
R$ million
Balances Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
LIABILITIES AND SHAREHOLDER’S EQUITY 245,685 252,977 264,635 7.7 4.6
Current and Long-term Liabilities 230,624 236,003 245,295 6.4 3.9
Deposits 120,096 137,658 139,195 15.9 1.1
Demand Deposits 29,340 35,802 31,878 8.6 (11.0)
Savings Deposits 31,418 32,844 32,975 5.0 0.4
Interbank Deposits 6,489 5,383 5,262 (18.9) (2.2)
Time Deposits 52,769 63,495 68,948 30.7 8.6
Investment Deposits 81 134 131 62.1 (2.2)
Money Market Borrowing 43,086 30,508 42,758 (0.8) 40.2
Funds from Acceptances and Securities Placed 852 3,166 2,789 227.4 (11.9)
Foreign Securities 852 3,166 2,789 227.4 (11.9)
Interbank Accounts 1,521 980 1,477 (2.8) 50.7
Intrabank Accounts 1,385 1,973 1,273 (8.1) (35.5)
Borrowing 17,201 4,858 4,031 (76.6) (17.0)
Foreign Borrowing 17,201 4,858 4,031 (76.6) (17.0)
Domestic Onlending – Official Institutions 10,629 13,370 13,053 22.8 (2.4)
National Treasury 3,596 4,157 4,053 12.7 (2.5)
BNDES 3,663 3,908 3,960 8.1 1.3
Finame 2,927 4,750 4,720 61.3 (0.6)
Other Institutions 443 556 320 (27.8) (42.4)
Foreign Onlending 1 0 0 (54.4) -
Financial Derivatives 674 571 1,446 114.6 153.4
Other Accounts Payable 35,180 42,918 39,274 11.6 (8.5)
Collection of Taxes and Contributions 1,967 344 3,258 65.6 847.1
Foreign Exchange Portfolio 7,969 17,500 10,687 34.1 (38.9)
Shareholder and Statutory Distributions 84 1,169 229 171.5 (80.4)
Taxes and Social Security 954 1,599 1,503 57.7 (6.0)
Trading and Brokerage of Securities 3,343 58 127 (96.2) 120.0
Financial and Development Funds 1,954 1,932 1,981 1.4 2.5
Perpetual Securities 1,102 - -
Special Operations 2 2 2 0.0 (0.2)
FCO (Subordinated Debt) 7,093 7,840 8,095 14.1 3.2
Actuarial Liabilities 3,070 3,277 3,291 7.2 0.4
Other Liabilities 8,744 9,196 8,999 2.9 (2.1)
Unearned Income 128 125 131 2.1 5.1
Shareholders’ Equity 14,933 16,850 19,209 28.6 14.0
Capital 9,864 10,797 10,797 9.5 -
(Unpaid Capital) - - - - -
Capital Reserves 5 5 5 0.3 (0.0)
Revaluation Reserves 26 23 23 (9.3) (0.2)
Revenue Reserves 4,294 6,020 6,020 40.2 -
Mark-to-Market – Securities and Derivatives (95) 130 146 (253.8) 12.2
Retained Earnings (Accumulated losses) - - 1 - -
(Treasury Shares) (126) (126) (126) - -
Income Accounts 965 - 2,343 142.9 -
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 24
5.2 Summarized Corporate Law Income Statement
Table 14. Summarized Corporate Law Income Statement
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Financial Intermediation Income 8,046 8,104 9,394 16.7 15.9
Loans 4,546 5,036 5,095 12.1 1.2
Leasing 29 36 38 29.5 4.6
Securities 3,166 3,333 3,521 11.2 5.7
Financial Derivatives (31) (229) (139) 344.6 (39.4)
Foreign Exchange Portfolio (50) (501) 452 (1.002.9) (190.2)
Compulsory Investments 386 429 427 10.5 (0.5)
Financial Intermediation Expenses (5,361) (6,216) (6,556) 22.3 5.5
Money Market Funds (3,729) (3,976) (3,984) 6.8 0.2
Borrowing, Assignments and Onlending (371) (482) (502) 35.1 4.0
Allowance for Loan Losses (1,261) (1,757) (2,071) 64.2 17.8
Gross Income from Financial Intermediation 2,685 1,888 2,838 5.7 50.3
Other Operating Income (Expenses) (1,182) (569) (1,873) 58.5 229.0
Service Revenues 1,767 2,001 2,103 19.0 5.1
Personnel Expenses (1,804) (2,012) (1,876) 4.0 (6.8)
Other Administrative Expenses (1,407) (1,498) (1,362) (3.2) (9.1)
Taxes (395) (432) (454) 14.9 5.1
Equity Int, in the Results of Subs, and Affil, 114 307 (154) (235.6) (150.2)
Other Operating Revenues 1,046 605 1,464 39.9 141.8
Other Operating Expenses (503) 458 (1,595) 217.2 (448.0)
Operating Income 1,503 1,319 965 (35.8) (26.8)
Non-operating Income 98 28 26 (73.1) (6.1)
Income Before Taxes 1,601 1,347 991 (38.1) (26.4)
Income and Social Contribution Taxes (559) (447) 1,542 (375.9) (445.1)
Statutory Profit Sharing (78) (163) (190) 144.0 16.4
Net Income 965 737 2,343 142.9 217.9
25 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
5.3 Income Statement with Reallocations
Table 15. Income Statement with Reallocations
R$ million
Quarterly Flow Chg,%
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Financial Intermediation Income 8,191 8,856 8,892 8.6 0.4
Loans 4,546 5,036 5,095 12.1 1.2
Leasing 29 36 38 29.5 4.6
Securities 3,166 3,333 3,521 11.2 5.7
Financial Derivatives (31) (229) (139) 344.6 (39.4)
Foreign Exchange Portfolio (50) (501) 452 - (190.2)
Compulsory Investments 386 429 427 10.5 (0.5)
FX Gain (Loss) on Foreign Investments (40) 166 (266) 564.6 (260.4)
Other Op, Inc, of a Fin, Intermed, Nature 184 587 (237) (228.4) (140.3)
Financial Intermediation Expenses (4,100) (4,458) (4,486) 9.4 0.6
Money Market Funds (3,729) (3,976) (3,984) 6.8 0.2
Borrowing, Assignments and Onlending (371) (482) (502) 35.1 4.0
Gross Financial Margin 4,090 4,398 4,406 7.7 0.2
Allowance for Loan Losses (1,061) (1,498) (1,345) 26.7 (10.2)
Net Financial Margin 3,029 2,900 3,061 1.1 5.6
Service Revenues 1,767 2,001 2,103 19.0 5.1
Taxes on Revenues (351) (393) (409) 16.7 4.2
Contribution Margin 4,446 4,509 4,755 7.0 5.5
Administrative Expenses (2,992) (3,268) (3,156) 5.5 (3.4)
Personnel Expenses (1,638) (1,802) (1,781) 8.7 (1.2)
Other Administrative Expenses (1,315) (1,428) (1,331) 1.2 (6.8)
Other Tax Expenses (39) (39) (44) 14.3 14.0
Commercial Income 1,453 1,241 1,600 10.1 28.9
Legal Risk (258) (281) (126) (51.0) (55.1)
Legal Claims (92) (70) (31) (66.1) (55.7)
Labor Lawsuits (166) (211) (95) (42.7) (54.9)
Other Operating Income (Expenses) 84 359 (9) (110.5) (102.5)
Eq, Interest in Resul, Subs, and Affil, 144 134 106 (26.4) (21.3)
FX Other Operating Income/Expenses (60) 224 (115) 91.7 (151.2)
Other Operating Income 596 1,036 631 5.8 (39.1)
Other Operating Expenses (656) (812) (746) 13.6 (8.2)
Operating Income 1,280 1,319 1,465 14.4 11.1
Non-operating Income 98 28 26 (73.1) (6.1)
Income Before Taxes 1,378 1,347 1,491 8.2 10.7
Income and Social Contribution Taxes (483) (447) (363) (24.8) (18.8)
Interest on Own Capital Tax Benefit - 252 - - (100.0)
Statutory Profit Sharing (78) (163) (190) 144.0 16.4
Recurring Income 817 737 938 14.8 27.3
Non-Recurring Items 148 - 1,405 852.0 -
Extraordinary Provision for Credit Risks (6) - (500) - -
Recovery of Undue Taxes 229 - - - -
Provision for Non-recurring IR and CS (76) - - - -
Non-recurring Pasep/Cofins (6) - - - -
Tax credits recorded (7) - - 1,905 - -
Net Income 965 737 2,343 142.9 217.9
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 26
5.3.1 Details of the Reallocations
The adjustments made in the statement of income to arrive at the Reallocated Statement of Income are
detailed below. The adjustments do not change the final result, since they only intend to arrange
revenue and expense items more coherently, considering the performance dynamics of a financial
institution. Basically, these adjustments were intended to:
a) allow the financial margin recorded in the period to reflect, effectively, the gain from all the
remunerated assets, seeking to inform the market the spread obtained by the division of this margin by
the assets, except the permanent assets. For this, it was necessary to:
• include in the financial margin the income recorded in Other Operating Income that had financial
intermediation characteristics and which was derived from remunerated assets recorded in the
Balance Sheet Under Other Assets;
• Identify the foreign exchange gain/(loss) on financial assets and liabilities abroad in the quarter in a
specific financial margin item (financial equity);
• to keep in the financial margin, amounts related to negative foreign exchange adjustments that were
recorded in other operating income and expenses to avoid inverting the balance of accounts of a
financial intermediation nature.
b) segregate the impacts of extraordinary events in order to present recurring income of the Bank in the
period.
Reallocations in the gross financial margin
(1) The foreign exchange gain (loss) on foreign financial equity is reallocated from equity interest in the
results of subsidiaries and affiliates for inclusion in the financial margin. This adjustment is required
to maintain the equilibrium and coherence of the analysis of the spread, since assets and liabilities
previously included in permanent assets are included in other balance sheet items after
consolidation. Without reallocation the spread would be improperly reduced.
(2) The reallocations of Other Operating Income/Expenses to Other Operating Income of a financial
intermediation nature are detailed below:
Table 16. Reallocations – Other Operating Income / Expenses
R$ million
Quarterly Flow Chg,%
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Income from Special Operations 22 20 15 (31) (22.9)
Income from Specific Credits 15 17 17 12 (3.5)
FX Readjustment 147 550 (269) - -
FX Readjustment Income 193 (461) 806 317 -
FX Readjustment Expense (46) 1,011 (1,075) 2,222 -
Total 184 587 (237) - -
27 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Reallocations in the net financial margin
(3) The expense with the Allowance for Loan Losses includes credits without characteristics of financial
intermediation, so this part of the allowance is reallocated to Other Operating Expenses.
Reallocations in the contribution margin
(4) Considering the model used for the income statement, tax expenses on revenues were reallocated
and included in the contribution margin.
Reallocations in the operational result
(5) The expenses with Legal Claims and Labor Lawsuits were separated in the Income Statement with
Reallocations, into a group called Legal Risk. It aims to provide a better analysis of the
administrative expenses and give greater transparency to this type of risk.
Itens Extraordinários
(6) In 1Q06, additional provision on the loan portfolio totaling R$ 500.0 million was recorded, in order to
support future volatility of the loan portfolio and its required provision. The study was based on an
analysis the behavior expenses related to the loan portfolio.
(7) Recording of R$ 1.9 billion in Tax Credit on Temporary Differences related to periods prior to 2006,
according to CMN Resolution 3.355, of 03/31/2006
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 28
6 – Balance Sheet Analysis
6.1 Breakdown
Banco do Brasil is the largest financial institution in Brazil, with total assets of R$ 264,635 million. In the
last 12 months, BB increased its assets by 7.7%.
The figure below shows a slight increase in the relative share of remunerated assets in the Bank’s total
assets, which rose from 81.3% to 81.5% (Mar/05 –Mar/06). This occurred due to an increase in Credit
Operations and Leasing and in Securities and Interbank Funds Applied, when compared to March 2005.
Profitable Assets had a growth of 8.0% in 12 months.
With regard to the liabilities, a reduction is seen in the relative share of interest-bearing liabilities from
69.5% to 68.0% (Mar/05 – Mar/06). This movement is explained by the decrease in money market
borrowing and foreign borrowing, due to the changes in the rules for booking foreign exchange
transactions, as commented in chapter 6.3.
Earning Assets vs. Interest Bearing Liabilities - %
21.2 20.2 19.0 18.7 19.9 19.1 20.1 18.5
32.0 31.7 30.2 30.5 35.8 32.0
34.9 35.4
78.8 79.8 81.0 81.3 80.1 80.9 79.9 81.5
68.0 68.3 69.8 69.5 65.1 68.0
64.2 64.6
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Earning Assets OtherAssets
R tá i
Interest Bearing Liabilities Other Liabilities
Figure 7. Earning Assets vs. Interst Bearing Liabilities
29 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.2 Analysis of Assets
Securities showed a decrease in the participation of total assets, going down from 30.2% to 25.9%
(Mar/05 – Mar/06). The total balance of securities closed the quarter with R$ 68,631 million, 7.4% lower
than that observed in 1Q05 and 3.3% higher than that observed in 4Q05. The growth of loans stands
out, with their balance net of allowances increasing 13.4%, reaching R$ 88,336 million. Accordingly,
those transactions went up from 31.7% to 33.4% (Mar/05 - Mar/06) of total assets.
The increase in the participation of maketable assets (except securities) from 13.1% to 15.0% (Mar/06 –
Mar/06) is due, mainly, to the increase of 102.2% in short-term financial investments, which accounted
for 7.2% of total assets in 1Q05, against 13.5% in 13.5% in 1Q06. In relation to the previous quarter, a
growth of 14.3% in marketable assets (except securities) was observed.
Tax credits reached R$ 8,905 million in March 2006, an increase of 11.9% in relation to March 2005 and
of 8.25 in relation to March 2005 and of 33.2% in relation to December 2005, due to recording of Tax
Credit , according to CMN Resolution 3.355, of 03/31/2006
Breakdown of Assets - %
13.3 15.0 13.3 13.1 8.9 14.1 13.8 15.0
30.2 29.5 26.3 25.9
30.7 30.2 30.7 27.9
30.5 29.7 31.3 31.7 34.5 32.5 34.0 33.4
3.9 3.6 3.5 3.2 3.2 2.8 2.6 3.4
21.5 21.6 21.1 21.8 23.8 22.7 23.3 22.3
Jun/04 Sep/04 Dec/04 Mac/05 Jun/05 Sep/05 Dec/05 Mar/06
Other Assets Tax Credits
Loans and Leasing Securities
Liquidity Assets except
S iti
Figure 8. Breakdown of Assets
Table 17. Breakdown of Assets
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Total Assets 227,374 235,599 239,014 245,685 233,793 245,511 252,977 264,635
Liquidity Assets except Securities 30,316 35,228 31,868 32,089 20,843 34,628 34,824 39,800
Securities 69,855 71,120 73,485 74,089 68,973 68,610 66,470 68,631
Loans and Leasing 69,247 69,961 74,844 77,899 80,734 79,798 85,961 88,336
Tax Credits 8,971 8,505 8,396 7,956 7,523 6,815 6,687 8,905
Other Assets 48,986 50,785 50,421 53,652 55,720 55,660 59,035 58,962
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 30
6.3 Liquidity Analysis
One way of measuring the liquidity of a financial institution consists of determining the difference
between marketable assets and marketable liabilities. An analysis of the graphic below reveals an
increase of 4.1% in this index when compared to March 2005 and a reduction of 8.9% in relation to
December 2005.
Liquidity Assets (-) Liquidity Liabilities
R$ million
62,145
58,772
55,765 56,641
52,963 53,177 54,419
45,490
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 9. Liquidity Assets (-) Liquidity Liabilities
The reduction in movement of the liquidity balance in relation to December 2005 is due to the reduction
in foreign exchange operations sold in advance, which has mitigated the growth in interbank operations,
provided by expansion of the committed operations with third the party portfolio.
In addition, it is worth pointing out the significant reduction in foreign currency cash, in relation to March
2005, due to changes in accounting rules for foreign exchange operations, given the unification of free
and floating rate markets, as estabilish in CMN Resolution CMN 3.265, of March 04, 2005.
Table 18. Liquidity Balance
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Liquidity Assets (A) 97,779 103,297 103,472 103,993 87,495 100,646 98,036 104,660
Available Funds 15,841 16,669 15,494 14,408 3,464 4,939 5,828 4,056
Interbank Investments 14,475 18,559 16,453 17,681 17,379 29,690 28,996 35,744
Securities (except linked to Bacen) 67,463 68,069 71,525 71,904 66,652 66,018 63,212 64,860
Liquidity Liabilities (B) 44,816 47,533 50,295 49,574 42,005 41,874 35,891 48,019
Interbank Deposits 7,684 5,530 5,768 6,489 5,837 5,885 5,383 5,262
Money Market Borrowing 37,132 42,003 44,527 43,086 36,168 35,989 30,508 42,758
Liquidity Balance (A - B) 52,963 55,765 53,177 54,419 45,490 58,772 62,145 56,641
31 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.4 Securities Portfolio
In March 2006, the securities portfolio released a reduction of 7.4% in relation to the 1Q05 due to the a
larger allocation of resources for loan operations. With respect to December 2005, the increase of 3.3%
is mainly due to the raise in repurchase operations.
It is worth pointing out the change in the profile of the portfolio, which comprised 6.3% of securities
available for trading and 56.6% of securities available for sale, against 15.3% and 47.4%, respectively,
in the same period of the previous year.
Table 19. Securities Portfolio by Category
R$ million
Balances Share %
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Mar/05 Dec/05
Securities 69,855 71,120 73,485 74,089 68,973 68,610 66,470 68,631 100.0 100.0
Available for Trading 11,998 12,690 13,163 11,309 6,087 2,722 3,077 4,327 15.3 6.3
Available for Sale 31,008 31,997 32,790 35,092 35,265 39,075 37,832 38,815 47.4 56.6
Held to Maturity 25,146 25,945 26,951 27,039 26,266 26,106 25,275 25,069 36.5 36.5
Financial Derivatives 1,702 488 581 649 1,355 707 287 421 0.9 0.6
In the following table, the concentration on securities with a maturity of between 0 and 5 years is
observed. As of March 2006, the concentration on securities totaled 89.3%, slightly below the 89.3%
and 89.7% share reported in March and December of 2005, respectively.
Table 20. Securities Portfolio by Maturities
R$ million
Up to 1 year 1 to 5 years 5 to 10 years Over 10 years
Total
Balance Share % Balance Share % Balance Share % Balance Share %
Jun/04 14,416 21.4 45,341 67.3 7,179 10.7 416 0.6 67,353
Sep/04 15,910 22.8 46,062 65.9 7,491 10.7 446 0.6 69,910
Dec/04 21,348 29.6 44,187 61.2 6,233 8.6 441 0.6 72,208
Mar/05 21,970 30.2 43,104 59.2 6,714 9.2 971 1.3 72,759
Jun/05 18,477 27.6 40,706 60.7 6,908 10.3 921 1.4 67,012
Sep/05 16,926 25.1 42,510 63.1 7,232 10.7 651 1.0 67,320
Dec/05 17,116 26.0 41,900 63.7 6,189 9.4 567 0.9 65,771
Mar/06 18,159 26.7 42,565 62.6 6,379 9.4 873 1.3 67,977
The following figure shows the share increase of securities with maturities of 5 and 10 years, during a
12-month period, notwithstanding securities with maturities from 0 to 1 year, indicating the mid-term
extension of the portfolio.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 32
Securities Portfolio with Maturities between 0 and 10 years
Consolidated Bank
Mar/05 Dec/05 Mar/06
9.4% 9.5% 9.5%
26.2% 27.0%
30.6%
60.0% 63.5%
64.3%
0 to 1 year 1 to 5 years 5 to 10 years
Figure 10. Securities Portfolio with Maturities between 0 and 5 years
33 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.5 Loan Portfolio
Banco do Brasil holds a top leadership position for loan assignment in Brazil, with a 15.5% share in the
1
financial system , an increase of 20 base points in relation to the previous position.
The evolution of loans in the Brazilian Banking Industry (SFN) was 19.6% (Mar/05 – Mar/06), while BB
grew 15.3% in the same period. In relation to the previous quarter, loans in the Brazilian Banking
Industry grew 2.8%, while BB grew 4.4%.
Agribusiness transactions were 20.4% higher than in March 2005 and 3.8% higher than in December
2005, due to the release of funds for the 2005/2006 harvest. Besides that, there was a contribution to
the increase in loans from the debt rescheduling arising from the problems brought by the drought in the
Center-South, the loss of income due to the fall in commodity prices in the international market, and the
appreciation of the Real against the Dollar.
Loans to individuals grew 15.9% (Mar/04-Mar/05), while loans to companies grew 10.7% (Mar/04-
Mar/05); in transactions with MPE, these rose by 10.4% and the other segments by 11.0%. As to
December of 2005, transactions involving individuals presented the highest growth, 7.6%, where payroll
loan transactions can be highlighted, growing by 23.2%. It should be stressed that the Foreign Network
Portfolio has presented a decrease due to exchange appreciation, which in 1T06 alone, came to 7.2%.
The portfolio’s growth in US$ amounted to 4.2% in the quarter.
Table 21. Loan Portfolio
R$ million
Chg.%
Mar/05 Dec/05 Mar/06 on Dec/05 on Mar/05
Brazil 83,805 92,612 96,655 4.4 15.3
, Individuals 17,069 18,386 19,779 7.6 15.9
, Businesses 35,962 38,518 39,822 3.4 10.7
- MSE 13,885 15,204 15,324 0.8 10.4
- Other 22,077 23,315 24,498 5.1 11.0
, Agribusiness 30,774 35,708 37,054 3.8 20.4
Foreign 9,457 9,177 8,872 (3.3) (6.2)
Total 93,263 101,789 105,527 3.7 13.2
Table 22. Individuals and Business Customers Loan Portfolio
R$ million
Retail Wholesale Agribusiness Other Total
Brazil 35,539 23,754 37,054 282 96,655
Individuals 19,698 - 31,247 56 51,026
Business Customers 15,841 23,754 5,808 226 45,629
Foreign - - - 8,872 8,872
Total 35,539 23,754 37,054 9,154 105,527
1
Source: Central Bank (Dec/05 estimate).
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 34
Of the total of loan transactions, 33.7% are loans to the retail segment, 22.5% to the wholesale
segment, and 35.1% to agribusiness. The portfolio abroad, represents 8.4% of the total.
With respect to total portfolio interest, we can highlight a growth of 20.4% in Agribusiness Portfolio,
12.4% in Retail Portfolio, and 13.9% in Commercial Portfolio, in a 12-month period. In relation to
December 2005, such portfolios had a growth of 3.8%, 4.6% and 7.5%, respectively. The Retail
Portfolio showed a composition of 30.7% in March 2006, a reduction of 20 base points in one-year
period, and an increase of 30 base points in relation to December 2005.
From this point onwards, BB’s total loan portfolio will be shown by segment.
Breakdown of the Loan Portfolio
Mar/05 Dec/05 Mar/06
2.1% 2.4% 2.4%
10.1% 9.0% 8.4%
30.9% 9.5% 30.4% 9.2% 30.7%
9.8%
14.0% 35.1% 13.6% 35.1% 14.1%
33.0%
Retail Commercial Agribusiness Foreign Trade Abroad Other
Figure 11. Breakdown of the Loan Portfolio
Table 23. Loan Portfolio by Segment
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Total Portfolio 83,131 84,148 88,554 93,263 96,129 94,685 101,789 105,527
Retail 25,345 26,586 27,501 28,835 30,046 30,699 30,987 32,415
Commercial 10,696 11,687 12,221 13,090 13,189 12,714 13,878 14,914
Agribusiness 25,573 25,666 30,036 30,774 32,171 31,247 35,709 37,054
Foreign Trade 8,810 8,507 7,992 9,179 9,489 8,713 9,623 9,695
Abroad 11,088 10,016 9,017 9,457 9,162 8,539 9,177 8,872
Other 1,619 1,686 1,786 1,928 2,072 2,773 2,415 2,578
35 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.5.1 Retail Loan Portfolio
The retail loan portfolio comprises the products intended, mainly, for individuals and micro and small
businesses (companies with annual sales of up to R$ 10 million). In March 2006, the portfolio reached a
balance of R$ 32,415 million, which represents an increase of 12.4% in relation to the same period of
the previous year and 4.6% in relation to December 2005.
Table 24. Retail Loan Portfolio
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Direct Consumer Credit (CDC) 9,251 9,590 9,688 10,153 10,879 11,920 11,981 12,839
CDC Crédito em Consignação 1,040 1,198 1,477 1,770 2,558 3,286 3,810 4,695
Receivables 6,012 6,145 6,755 6,720 6,887 6,842 6,922 6,657
BB Giro Rápido (WCL) 3,173 3,373 3,433 3,705 3,838 3,973 3,893 4,145
Overdraft accounts 2,740 2,813 2,347 2,709 2,638 2,666 2,227 2,625
Credit Cards 1,742 1,842 1,994 2,074 2,089 2,218 2,489 2,585
Others 2,428 2,823 3,285 3,474 3,715 3,080 3,474 3,564
Total 25,345 26,586 27,501 28,835 30,046 30,699 30,987 32,415
Loans to Individuals – Banco do Brasil meets the credit needs of individuals through mass distributed
products. BB’s credit scoring system calculates pre-approved limits for Direct Consumer Finance
(CDC), overdraft account, and credit cards, based on a series of customer information.
Direct Consumer Finance transactions showed a 26.5% growth in relation to March 2005, and 7.2% in
relation to December 2005, reaching R$ 12,839 million, with an average value per transaction of R$
1,753.23 at the end of March 2006.
The increase was basically due to the growth in payroll loans, which went up from R$ 1,770 million in
March 2005 to R$ 4,695 million in March 2006, growing 165.3% in the period. It is worth to highlight that
this type of loan represents 36.6% of the Bank’s CDC portfolio. The Consumer Finance (CDC) can be
contracted through the Internet, automated teller machines and in the branch network. Besides that, it
combines low operational costs with credit that is well spread out.
In March 2006, 59.8% of the individual customers had accounts with a credit limit. Transactions in
overdraft accounts ended March 2006 with a balance of R$ 2,625 million (an 8.1% share in retail
transactions).
The balance of credit card transactions showed an increase of 24.6% (Mar/06 – Mar/05), with a balance
of R$ 2,585 million at the end of March 2006, while the quantity of cards in use rose 30.5%, going up
from 7,173 thousand to 9,358 thousand.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 36
Main Retail Loan Portfolio Product
R$ million
CDC Credit Card
12,839 2,625
11,920 11,981 2,489
10,879 2,218
9,590 9,688 10,153 2,074 2,089
9,251 1,994
1,742 1,842
/04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06 /04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06
Figure 12. Main Retail Loan Portfolio Products
37 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Credit for micro and small businesses - In 1Q05, the Retail Portfolio incorporated about R$ 7.0 billion
in transactions based on receivables, in which about 75% are with micro and small businesses, and the
rest with medium and large businesses, formerly recorded in the Commercial Portfolio. The information
on these portfolios was processed retroactively in all the parts of this report, to ensure its comparability.
Transactions intended for micro and small businesses accounted for 44.6% of the retail portfolio in
March 2006, the same percentage registered in March 2005. In December 2005, these transactions
accounted for 46.3% of the retail portfolio. The balance of these transactions was R$ 14,457 million, a
12.3% increase in relation to March 2005 and 0.8% in relation to December 2005
Table 25. MSB Credit Products
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Receivables 6,012 6,145 6,755 6,720 6,887 6,842 6,922 6,657
BB Giro Rápido 3,173 3,373 3,433 3,705 3,838 3,973 3,893 4,145
Proger Urbano Emp, 1,201 1,426 1,649 1,821 1,998 2,172 2,327 2,442
Others 458 453 626 628 825 823 1,195 1,214
Total 10,844 11,396 12,462 12,874 13,548 13,810 14,338 14,457
Transactions based on receivables totaled R$ 6,657 million in March 2006, a 0.9% decrease in relation
to the same period of the previous year. The main products intended for this segment are receivables,
accounting for over 91.5% of the total.
BB Giro Rápido offers financing for working capital without red tape and without requiring tangible
collateral. The transaction is divided into a part with an overdraft account and another for working
capital, paid in installments over 12 months. At the end of March 2006, this line of credit reached a
balance of R$ 4,145 million, a 11.9% increase (Mar/05 – Mar/06) and a 6.5% increase over December
2005.
The Proger Urbano Empresarial transactions use funding from the Worker’s Support Fund (FAT) to
finance projects or investment with the respective working capital, which provides for the generation of
employment and income in urban areas. These transactions showed an increase of 34.1% (Mar/05 –
Mar/06) and of 4.9% in relation to December 2005, ending the period with a balance of R$ 2,442 million.
Main Products for Micro and Small Businesses
R$ million
Receivables BB Giro Rápido
6,755 6,720 6,887 6,842 6,922 6,657 3,973 3,893 4,145
3,705 3,838
6,012 6,145 3,433
3,173 3,373
/04 /05
Jun/04 Sep Dec/04 Mar/05 Jun/05 Sep Dec/05 Mar/06 Jun/04 Sep /05
/04 Dec/04 Mar/05 Jun/05 Sep Dec/05 Mar/06
Figure 13. Main Products for Micro and Small Businesses
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 38
Loans for the lower income population - With the Federal Government’s decision to expand the
financial services industry to the population with a lower income and to microentrepreneurs, Law
10.735/03 was passed, which makes provisions about the channeling of resources equivalent to 2% of
demand deposits taken by financial institutions towards microcredit transactions, at an interest rate of up
to 2% a month.
To maintain coherence with its corporate strategy, Banco do Brasil adopted an institutional solution
which involved the creation of a separate structure from the multiple bank, so as to guarantee the
transparency of the process, besides adapting the products, processes, credit policy and operational
costs.
Banco Popular do Brasil (BPB) was created as a wholly-owned subsidiary of Banco do Brasil through
Law 10.738/03, in the form of a multiple bank with commercial, credit, financing and investment
portfolios.
The network comprised by 5,092 service points, enabled clients to perform, during the quarter, more
than 6.2 million transactions in INSS benefit payments and titles and conventions receipt, totalizing R$
696 million in the period.
Table 26. BPB Highlights
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Assets - R$ thousand 125,974 129,713 147,850 155,851 151,197 158,715 136,958 146,158
Deposits - R$ thousand 123 1,377 22,568 47,569 54,690 85,151 85,337 95,075
Credit Portfolio* - R$ thousand 77,512 1,541 20,011 37,130 54,128 70,333 79,496 84,322
Points of Service 30 1,720 5,530 6,021 5,484 4,850 5,239 5,092
39 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.5.2 Commercial Loan Portfolio
The Commercial Loan Portfolio covers the products intended mainly for medium and large-sized
companies and corporate customers. Banco do Brasil has adopted a segmentation model that has the
objective of perfecting the management of this customer base, dividing them into Industry, Commerce,
and Services lines, and into the medium, large, and corporate segments. The model helps attain a
better knowledge of the specific needs of each company and seeks to develop, diversify and achieve a
return from the business. In March 2006, the portfolio reached a balance of R$ 14,914 million, an
increase of 13.9% (Mar/05 – Mar/06) and 7.5% in relation to December 2005.
Table 27. Commercial Loan Portfolio
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Working Capital – Others 3,292 3,684 3,589 4,638 4,486 4,606 4,399 5,500
Investment Finance 2,833 2,958 3,128 3,156 3,238 3,376 3,515 3,629
Receivables 2,347 2,884 3,386 2,976 2,779 2,811 3,398 3,183
Overdraft Accounts 1,919 1,805 1,721 1,863 2,170 1,847 1,878 1,825
Others 306 356 397 456 516 74 688 776
Total 10,696 11,687 12,221 13,090 13,189 12,714 13,878 14,914
The product that stands out most in this portfolio is Working Capital – Others, reaching a 36.9% of the
total portfolio, an increase of 18.6% (Mar/05 – Mar/06), closing the year with R$ 5,500 million.
Receivable operations closed the month of March 2006 with a balance of R$ 3,183 million, a 7.0%
increase in relation to the same period of previous year and a reduction of 6.3% in relation to December
2005. These are short term transactions and present a low credit risk for the Bank. For the companies,
they mean an excellent alternative for working capital financing and an opportunity for boosting their
sales, offering longer terms for their customers.
Main Products for Wholesale Customers
R$ million
Working Capital - Others Investiments
5,500
3,376 3,515 3,629
4,638 4,486 4,606 4,399 3,128 3,156 3,238
2,833 2,958
3,684 3,589
3,292
/04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06 /04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06
Figure 14. Main Products for Wholesale Customers
The investment transactions comprise, in the main, lines of credit intended for the expansion or
modernization of production, via the acquisition of machines and equipment, including freight vehicles.
The balance of these transactions grew 15.0% (Mar/05 – Mar/06) and 3.2% in relation December 2005,
to reach R$ 3,629 million in March 2006.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 40
6.5.3 Agribusiness Loan Portfolio
Agribusiness is one of the main sectors of the Brazilian economy, of fundamental importance to the
growth of the Country. In its role as an agent of public policies, Banco do Brasil represents a link
between the government and the rural producer, acting as the largest financier of Brazilian agribusiness
in all its segments and in all stages of the productive chain, from the small farmer to the large
agroindustrial companies.
The Brazilian Trade Balance has increased as a result of the positive contribution from agribusiness.
The trade balance of this sector generated a US$ 8.3 billion surplus in 1Q06, growing 9.3% in relation to
1Q05.
Trade Balance (FOB)
US$ billions
4 4 .8
3 4 .1 3 8 .4
3 3 .7
1 3 .1 2 5 .8 2 4 .8
1 9 .0 2 0 .3
1 4 .8 (0 .7 ) 2 .6 8 .3 9 .3
2000 2001 2002 2003 2004 2005 1Q06
Agribusiness Brazil
Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento
Figure 15. Trade Balancel (FOB)
The table below shows exports broken down into the main products
Table 28. Exports
US$ million
2002 2003 2004 2005 1Q06
Soybeans and Related Products 6,009 8,125 10,048 9,477 1,708
Meat 2,751 3,641 6,144 8,066 1,786
Sugar and Alcohol 2,263 2,298 3,138 4,684 1,130
Soybeans and Related Products 2,214 2,620 3,781 3,792 885
Pulp and Paper 2,056 2,831 2,909 3,405 957
Leather, Hides and Shoes 2,341 2,465 2,897 3,069 835
Coffee, Mate and Spices 1,331 1,424 1,892 2,669 671
Tobacco 1,008 1,090 1,426 1,707 151
Fruit Juice 1,134 1,292 1,194 1,245 336
Other Products 3,732 4,852 5,587 5,487 1,338
Total 24,839 30,639 39,016 43,601 9,797
Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento
The sector’s extremely positive performance in the last few years is due to the permanent quest for new
technologies and for valuing the services provided by the professionals from this area, always aiming at
improving profitability and continuity in the enterprises. In the following chart, the increased productivity
per planted area, as a result of gains in productivity, can be visualized.
41 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Production vs. Planted Area
180 300
160
250
Production (million of ton)
140
productivity (ton/ha)-%
120 200
100
150
80
60 100
40
50
20
0 0
91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06*
Production (million ton.) Area (million ha) Productivity (ton./ha) - %
* Prevision
Figure 16. Production vs. Planted Area
In 2005, adverse factors implied a sharp reduction in the income of rural producers. Amongst these were
the fall in productivity due to climatic problems in some regions, the low quotations for commodity prices,
and the appreciation of the Real against the Dollar, besides some phytosanitary problems.
The estimate for the 2005/2006 agricultural crop, according to CONAB, is for production to reach 123.8
million tons, 9.2% higher than that recorded in the previous crop.
Regarding the distribution of agribusiness transactions by region of the country in March 2006, it can be
seen that 90.4% is concentrated in the regions of the South, Southeast and Central-West.
Table 29. Agribusiness Loan Portfolio by Region
Region Share - %
North 3.3
Northeast 6.3
Midwest 27.8
Southeast 22.4
South 40.3
Rural credit finances the costs of producing and marketing of agricultural products, stimulates rural
investments, including warehousing, processing and the industrial processing of agricultural products.
Furthermore, it encourages the introduction of rational methods in the productive system.
BB’s agribusiness loan portfolio grew 20.4% (Mar/05 – Mar/06) and 3.8% in relation to December 2005,
ending the period with a balance of R$ 37,054 million. Part of the growth observed in the last 12 months
is due to the process of renegotiating loans with farmers affected by the drought in 2005.
Loans for financing costs and marketing, intended to finance the goods and services needed for the
production of crops and livestock production, account for 52.7% of the agribusiness portfolio. Loans for
investments, intended for the modernization of the productive activity, accounted for 43.3% of this
portfolio and have an average term of 4 years.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 42
Table 30. Agribusiness Loan Portfolio by Purpose
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Costs 11,827 11,674 14,734 14,979 15,036 13,658 16,133 15,891
Investment 12,016 12,389 13,231 13,807 14,233 14,619 15,463 16,051
Marketing 1,000 958 1,054 831 2,214 2,347 3,097 3,644
Other 730 644 1,017 1,157 687 623 1,016 1,466
Total 25,573 25,666 30,036 30,774 32,171 31,247 35,709 37,052
The funds made available by the Bank are obtained from savings deposits (MCR 6-4), demand deposits
(MCR 6-2), the Program for Generating Employment and Income in the Rural Area (Proger Rural), the
National Program for Strengthening Family Farming, of the Ministry of Agrarian Development (Pronaf),
the Constitutional Fund for Developing the Central-West (FCO) and the National Bank for Economic and
Social Development (BNDES), amongst others.
Table 31. Agribusiness Loan Portfolio by Product
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Agricultural and Livestock Costs 8,329 8,409 10,773 11,020 11,460 10,280 12,342 12,381
Pronaf/Proger Rural 6,099 5,937 7,079 7,351 7,776 7,746 8,905 9,317
BNDES/Finame Rural 2,774 3,064 3,362 3,618 3,702 3,878 3,967 4,028
FCO Rural 2,908 2,912 2,986 3,093 3,158 3,208 3,272 3,367
Others 5,463 5,345 5,836 5,692 6,075 6,136 7,223 7,959
Total 25,573 25,666 30,036 30,774 32,171 31,247 35,709 37,052
Proger Rural is a product that offers fixed credit for crop and livestock costs, as well as financial support
for fixed and semi-fixed investments, and the National Program for Strengthening Family Farming –
Pronaf aims at financing the costs of the farming business. These two products added up to R$ 9,317
million at the end of March 2006, growing 26.7% in relation to the same period of the previous year.
FCO Rural offers a financial supplement for working capital and costs for the rural producer of the
Central-West region of Brazil. Transactions in the product grew 8.9% in the past 12 months, and 2.9%
in relation to December 2005, totalling R$ 3,367 million in March 2006.
The BNDES/Finame Rural products have the objective of financing investments in the modernization of
machines and equipment intended for rural production. Transactions with these products totaled R$
4,028 million at the end of March 2006, growing 11.3% in relation to March 2005 and 1.5% in relation to
December 2005.
43 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Main Products of the Agribusiness Loan Portfolio
R$ million
Agriculture and Livestocks costs Pronaf/Proger Rural
8,905 9,317
12,342 12,381
11,460
10,773 11,020 10,280 7,351
7,776 7,746
7,079
8,329 8,409 6,099 5,937
/04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06 /04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06
Figure 17. Main Products of the Agribusiness Loan Portfolio
The following table shows the balance of the loan transactions intended for agribusiness by item
financed.
Table 32. Agribusiness Loan Portfolio by Financed Items
R$ million
Chg.%
Items Financed Sep/05 Part.% Dec/05 Part.% Mar/06 Part.% on Mar/05 on Dec/05
Soybeans 2,621 8.4 4,389 12.2 4,565 12.3 (8.9) 4.0
Bovinocultura 3,518 11.3 3,864 10.8 4,136 11.2 21.9 7.0
Corn 2,465 7.9 2,899 8.1 2,820 7.6 4.1 (2.7)
Machinery and Equipment 2,450 7.8 1,150 3.2 1,178 3.2 (60.3) 2.4
Rice 869 2.8 883 2.5 947 2.6 (11.9) 7.2
Cotton 857 2.7 859 2.4 787 2.1 (18.5) (8.4)
Fertilizers 638 2.0 672 1.9 688 1.9 (33.1) 2.3
Coffee 707 2.3 655 1.8 701 1.9 21.0 6.9
Wheat 576 1.8 525 1.5 367 1.0 (23.8) (30.0)
Sugar Cane 337 1.1 474 1.3 484 1.3 26.7 2.1
Manioc 379 1.2 440 1.2 392 1.1 2.5 (11.0)
Avicultura 412 1.3 402 1.1 430 1.2 100.0 6.9
Pork 221 0.7 314 0.9 359 1.0 - 14.3
Tabbaco 255 0.8 261 0.7 265 0.7 43.4 1.8
Others 14,943 47.8 18,117 50.5 18,934 51.1 66.0 4.5
Total 31,247 100.0 35,906 100.0 37,052 100.0 20.4 3.2
In its financing of Brazilian agribusiness, Banco do Brasil reaches all segments, from the small producer
to the large agro-industrial companies. The table below reveals this work, showing that while financing
mini and small producers account for 80.6% of the total contracts, the transactions with the other agents
show a 73.9% share of the amount financed.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 44
Table 33. Funds Released for the 05/06 Crop by Segment
R$ million
Qty. Contracts Qty. Contracts - % Amount Contracted Amount Contracted - %
Mini 421,617 38.4 1,421 8.3
Small 464,561 42.3 3,014 17.7
Medium and Large sized 212,017 19.3 11,522 67.7
Cooperatives 707 0.1 1,064 6.3
Total 1,098,902 100.0 17,021 100.0
Next, the Agribusiness Loan Portfolio by Funding Sources is shown.
Agribusiness Loan Portfolio by Funding Sources
R$ million
13,052
12,007
9,307
9,090
8,663
6,230
5,936
5,653
5,628
5,635
5,470
5,289
5,214
5,111
5,150
4,496
4,496
4,407
4,298
4,245
4,211
4,263
4,138
4,068
3,989
3,462
3,894
3,904
2,858
2,727
Demand Deposits Saving Deposits FAT FCO BNDES/Finame Others
Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 18. Agribusiness Loan Portfolio by Funding Souces
Investments in Savings Deposits, the main funding line of the portfolio, grew 40.2% in the last 12
months, reaching a balance of R$ 13,052 million in March 2006.
The Bank uses funds from Ouro savings accounts and the FAT (Worker’s Support Fund) in rural
financings at reduced interest rates. To make this kind of intermediation viable, the National Treasury
compensates the Bank, in the form of equalization, for the difference between the funding,
administrative and tax costs and the amount charged to the taker of the loans.
The following figure shows a history of the revenues received by way of interest rate equalization.
Equalization Revenues
R$ million
196
173
146
132
94
75
60 64
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Figure 19. Equalizations Revenues
45 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
We can observe an increase of R$ 19.0 million in the installments paid to the Bank by way of
compensation in 1Q06 in relation to 1Q05. The movement observed in the graph above is mainly due to
seasonal effect of investment operation, which are received in the second and fourth quarters of each
year.
Besides the mechanisms for risk management applicable to all the Bank’s loan portfolios, the Bank
applies, in the management of the agribusiness portfolio, specific methods for identifying risks and
minimizing losses.
To define the maximum level of exposure with each customer, the Bank has developed a credit limit
system specific for the rural producer - ANC Rural Producer – that takes into account behavioral data
and the technical risk of the business.
Table 34. Variables Associates to Technical Risk System for Agribusiness – RTA
Productivity Cost Price
Soil • •
Climate • • •
Roads • •
Warehouse •
Technology • •
Distance • •
Market •
For measuring the technical risk of the business of each customer, BB’s system is unique. It is made up
of a microregional database including the past history of product prices, productivities observed in the
crops, and modal production costs. There are one hundred thousand production spreadsheets that
represent the various kinds of productive systems that there are in the Country.
Besides improving the quality of the assets, this database makes automating the credit process viable. A
system like this, associated with the observance of the parameters of the Federal Government’s
Agricultural Zoning, has also created the conditions for implementing a new system for rural insurance,
the Farm Gold Insurance. Launched in September 2000, this instrument protects the farmer against
losses from climatic risks.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 46
6.5.4 Foreign Trade Loan Portfolio
The balance of Banco do Brasil’s foreign trade loan portfolio ended March 2006 with R$ 9,695 million,
an increase of 5.6% in relation to March 2005, and 0.7% in relation to December 2005. Banco do Brasil
offers several tools to support foreign trade, such as training, consultancies that accompany, step by
step, all the stages of an international transaction, the Foreign Trade Counter, a virtual environment for
trade between Brazilian companies and the global market, amongst others.
This portfolio’s main product is ACC/ACE, which accounts for 72.2% of the total. In March 2006, this
modality reached a balance of R$ 6,996 million, a decrease of 9.8% in relation to March 2005 and an
increase of 4.7% in relation to December 2005. In March 2006, the volume contracted through
ACC/ACE reached US$ 2,822 million.
Table 35. Foreign Trade Loan Portfolio
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
ACC/ACE 7,117 7,056 6,393 7,756 7,494 6,801 6,684 6,996
BNDES Exim 740 537 699 450 1,199 1,217 2,153 1,961
Import Finance 947 909 896 970 791 688 762 713
Others 6 6 5 3 5 7 23 26
Total 8,810 8,507 7,992 9,179 9,489 8,713 9,623 9,695
Main Products of the Foreign Loan Portfolio
R$ million
ACC/ACE BNDES Exim
2,153
1,961
7,756 7,494
7,117 7,056 6,801 6,684 6,996
6,393 1,217
1,199
740 699
537 450
/04 /05
Jun/04 Sep Dec/04 Mar/05 Jun/05 Sep Dec/05 Mar/06 /04 Dec/04 Mar/05 Jun/05 Sep
Jun/04 Sep /05 Dec/05 Mar/06
Figure 20. Main Products of the Foreign Loan Portfolio
The table below shows details of the ACC/ACE transactions:
Table 36. ACC/ACE Average Volume per Contract
ACC/ACE 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Volume Contractad (US$ million) 2,285 1,995 2,359 3,057 3,168 2,839 2,808 2,822
Quantity of Contracts 7,821 7,513 7,772 8,085 8,152 8,077 7,801 7,587
Average Volume per Contract (US$ thousandl) 292 266 303 378 388 351 359 372
Market share - % 33,1 30,8 34,1 39,5 37,2 36,3 35,3 31,5*
* Market share calculated in base of prelimirary information from Central Bank,
47 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.5.5 Concentration of the Portfolio
BB’s business loan portfolio in Brazil showed a concentration of 29.5% in the transactions with the 100
largest borrowers at March 2006, compared to 31.8% in March 2005.
Table 37. Concentrationof the Loan Portfolio Among the 100 Largest Borrowers
Period 1st Customer 2nd to 20th 21st to 100th 100th Largest
Jun/04 2.1 14.1 17.7 33.9
Sep/04 1.5 14.2 17.9 33.5
Dec/04 1.3 12.4 16.7 30.4
Mar/05 1.2 12.7 17.9 31.8
Jun/05 1.2 12.2 18.9 32.2
Sep/05 1.3 11.9 16.0 29.2
Dec/05 1.3 11.9 16.7 29.9
Mar/06 1.0 11.1 17.4 29.5
The table below shows the distribution of the business loan portfolio in Brazil by macro-sector of the
economy.
Table 38. Concentration of the Loan Portfolio by Macro-sector
R$ milllion
Chg. %
on on
Macro-sector Mar/05 Share % Dec/05 Share % Mar/06 Share %
Mar/05 Dec/05
Services 7,782 14.7 7,162 12.9 6,987 12.1 (10.2) (2.5)
Foodstuffs of Vegetable Origin 5,225 9.9 6,150 11.1 6,724 11.7 28.7 9.3
Metalworking and Steel 4,408 8.3 4,100 7.4 4,500 7.8 2.1 9.8
Automotive 3,936 7.4 4,387 7.9 4,341 7.5 10.3 (1.0)
Oil 3,427 6.5 3,666 6.6 3,877 6.7 13.1 5.7
Eletrical and Eletronic Goods 2,578 4.9 2,832 5.1 2,976 5.2 15.5 5.1
Foodstuffs of Animal Origin 2,572 4.9 2,717 4.9 2,693 4.7 4.7 (0.9)
Agricultural Consumables 2,579 4.9 2,384 4.3 2,468 4.3 (4.3) 3.5
Building 1,831 3.5 2,182 3.9 2,258 3.9 23.3 3.5
Textiles and Garments 2,029 3.8 2,251 4.1 2,255 3.9 11.2 0.2
Retail Trade 2,233 4.2 1,990 3.6 2,092 3.6 (6.3) 5.2
Pulp and Paper 1,926 3.6 2,242 4.0 2,091 3.6 8.6 (6.7)
Transport 1,117 2.1 1,770 3.2 1,924 3.3 72.3 8.7
Chemicals 1,696 3.2 1,869 3.4 1,895 3.3 11.7 1.4
Eletricity 1,324 2.5 1,389 2.5 1,772 3.1 33.9 27.6
Wholesale Trade / Sundry Industries 871 1.6 1,565 2.8 1,591 2.8 82.7 1.7
Timber and Furniture 1,203 2.3 1,354 2.4 1,395 2.4 16.0 3.1
Telecommunications 1,254 2.4 1,074 1.9 1,110 1.9 (11.5) 3.4
Leather and Shoes 876 1.7 918 1.7 878 1.5 0.2 (4.3)
Beverages 805 1.5 492 0.9 655 1.1 (18.7) 33.0
Other Activities 3,187 6.0 3,008 5.4 3,029 5.3 (5.0) 0.7
Total 52,859 100.0 55,502 100.0 57,513 100.0 8.8 3.6
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 48
6.6 Tax Credits
During 1Q06, Tax Credit stocks increased by R$ 2,218 million, representing a 33.2% increase compared
with 4T05. When compared to the same period of the previous year, tax credit increased by R$ 949
million or 11.9%. The movements observed were a result of changes in the criteria for tax credit
capitalization by means of CMN Resolution 3,355, dated 03/31/2006, which allows the capitalization of
Tax Credit, for which the estimate for consumption reaches 10 years, unlike the previous ruling, which
limited it to 5 years. Thus, BB was able to capitalize the amount of R$ 1,906 million in the 1Q05 balance
sheet.
It is worth pointing out that 77.7% of the tax credits are derived from temporary differences, arising from
the tax legislation not permitting the inclusion of given revenues and expenses in the basis for
calculation at the moment when they occur (accrual basis), but only at the moment they are settled
financially (cash basis). If we disregard these tax credits, the consumption in the period came to 41.2%,
in relation to March 2005, and 6.1% in relation to December 2005. The tax credits arising from tax
losses and negative bases reduced their share in the total, going down from 31.2% in 1Q05 to 20.2% in
1Q06.
Breakdown of Tax Credit
R$ million
37.7 38.6
31.7 32.4 33.2 33.2
20.2 17.3
9,116 8,905
8,505 8,396 7,956
58 65 49 7,523 140
43 57 6,815 6,687
81 72 1,801
2,765 2,638 2,601 2,484 2,357 46
2,101 2,001
1,577 1,231 1,172 851 527 51 42
6,919
4,571 4,571 4,574 4,578 4,581 4,581 4,572
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Non-temporal Dif ferences Fiscal Loss and Ne gative Base
Social Contribution to be Compensa ted Ma rk- to-Ma rke t and Tax Cr edit Abr oad
Total Tax Cre dit Income Tax / I ncome bef. Inc om e Tax - %
Figure 21. Breakdown of Tax Credit
According to the last technical study on the consumption of tax credits in the multiple bank, the timetable
of use for the coming periods forecasts consumption of R$ 1,759 million in 2006, R$ 1,735 million in
2007, R$ 2,057 million in 2008, R$ 1,894 million in 2009 and R$ 1,341 million in 2010.
49 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.7 Analysis of Liabilities
The funding obtained by the Bank through demand, savings and time deposits grew 17.9% over the
balance of March 2005. Demand deposits showed an increase of 8.7%, reaching R$ 31,878 million,
savings deposits grew 5.0%, totaling R$ 32,975 million, and time deposits showed an increase of
30.7%, reaching R$ 68,948 million in March 2006.
The increase in Open Market Funding in relation to December 2005 was derived from utilization as
funding for operations with interbank funds and Credit Operations. The reduction in 1Q06 in the item
other liabilities was mainly due to the fall in the items foreign exchange and trading and value
intermediation portfolios. The latter was for a large part reclassified as foreign securities obligations.
Table 39. Liabilities
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Deposits 115,795 115,079 115,532 120,096 117,952 122,672 137,658 139,195
Demand Deposits 29,425 30,191 28,991 29,340 27,923 27,694 35,802 31,878
Savings Deposits 28,939 29,915 31,069 31,418 31,607 32,093 32,844 32,975
Interbank Deposits 7,684 5,530 5,768 6,489 5,837 5,885 5,383 5,262
Time Deposits 49,747 49,444 49,665 52,769 52,520 56,907 63,495 68,948
Investment Deposits * - - 38 81 66 93 134 131
Money Market Funding 37,132 42,003 44,527 43,086 36,168 35,989 30,508 42,758
Foreign Borrowing 15,270 16,793 17,343 18,054 5,646 5,266 8,024 6,820
Domestic Onlending 8,448 8,778 10,611 10,629 11,823 12,147 13,370 13,053
Other Liabilities 37,866 39,175 36,895 38,888 46,812 52,610 46,567 43,601
Shareholders’ Equity 12,864 13,771 14,106 14,933 15,393 16,826 16,850 19,209
Total Liabilities 227,374 235,599 239,014 245,685 233,793 245,511 252,977 264,635
The following figure shows the changes in the percentage share of the main liabilities in such a way as
to facilitate an understanding of the composition of the sources of financing.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 50
Change in the Share of the Main Liabilities - %
12.9 12.8 12.1 11.9 11.9 11.3 14.2 12.0
Demand Deposits
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
12.7 12.7 13.0 12.8 13.5 13.1 13.0 12.5
Saving
Deposits
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
21.9 21.0 20.8 21.5 22.5 23.2 25.1 26.1
Time Deposits
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
16.3 17.8 18.6 17.5 15.5 14.7 12.1 16.2
Money Market
Funding
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
6.7 7.1 7.3 7.3
Foreign 2.4 3.2 2.6
2.1
Borrowing
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
4.4 4.3 5.1 4.9 5.3 4.9
Domestic 3.7 3.7
Onlending
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
20.0 19.0 17.9 18.5 22.5 23.9 20.6 18.5
Other
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
5.7 5.8 5.9 6.1 6.6 6.9 6.7 7.3
Shareholders
Equity
Jun/04 /04
Sep Dec/04 Mar/05 Jun/05 /05
Sep Dec/05 Mar/06
Figure 22. Changes in the Liabilities
51 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.8 Deposits and Money Market Funding
Banco do Brasil’s market funding reached R$ 182.0 million in March 2006, an increase of 11.5% in
relation to March 2005 and of 8.2% in relation to December 2005. Main funding are Open Market
Funding (R$ 42.8 billion) and Time Deposits (R$ 68.9 billion), corresponding to 61,0% of the total.
Deposits and Market Funding
R$ billion
182.0
163.3
168.2
35.8
31.4
29.3
32.8
33.0
31.9
69.1
63.6
52.8
43.1
42.8
6.5
30.5
5.4
5.3
Demand Deposits Saving Deposits Interbank Time Deposits Money Market Funding Total
Deposits
Mar/05 Dec/05 Mar/06
Figure 23. Deposits and Market Funding
BB’s position of leadership in market funding shows the trust that Brazilians have in the institution,
2
accounting for 19.1% of the total funding of the Brazilian banking industry. .
The Bank is also the leader in demand deposits, with a market share of 35.6%, and in time deposits,
with 19.0%, besides a prominent position in savings, with a 19.4% share.
2
Base: December/2005
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 52
Market Share3 of BB Funding
R$ million
36.3 36.5 33.1 35.6
32.6 32.6 32.7 19.4 19.7 19.5 19.7 19.8 19.8 19.4
35,802
32,975
32,844
32,093
31,878
31,607
31,069
31,418
30,191
29,915
29,425
29,340
28,939
28,991
27,923
27,694
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Demand Deposits Market Share - % Saving Deposits Market Share - %
20.4 20.2 21.1 20.9 20.9 20.5
18.9 18.2 19.0 19.2 18.3 18.1
17.7
16.4
68,948
63,495
181,952
168,032
56,907
163,182
158,661
52,769
52,520
157,082
154,120
152,927
160,059
49,444
49,665
49,747
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Time Deposits Market Share - % Total Funding Market Share - %
Figure 24. Market Share of BB Funding
3
Information about the market share within the banking industry if from Central Bank. The latest available position at the time of publishing this report
was in dec/05.
53 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.8.1 Foreign Borrowing
Its foreign borrowing demonstrates that Banco do Brasil’s credibility goes beyond the national frontiers,
making BB a very attractive investment option for international investors. The following table shows the
issues in circulation.
Table 40. Foreign Borrowing
Premium
Issue Volume in Term in Interest Issue Return for the
Cupom (%) over Rating Program
Date US$million years Interval price Investor (%)
Treasury
06.09.97 200 10 9.375 Half-year 99,2190 9.500 287 Ba3 GMTN
08.10.01 300 5 7.875 Quarter 99,6850 7.990 375 BBB Dekasseguis
12.27.01 450 7 7.890 Trimestral 100,0000 7.890 325 BBB/Baa1 MT100
07.03.02 300 7 L3M+0.60 Quarter 100,0000 5.013 *266 AAA/Aaa MT100
09.11.02 40 7 7.890 Quarter 100,0000 7.890 489 BBB/Baa1 MT100
03.17.03 120 7 7.260 Quarter 100,0000 7.260 450 BBB/Baa1 MT100
07.10.03 178 8 5.911 Quarter 100,0000 5.955 350 BBB+/Baa1 Visanet
07.10.03 45 8 4.777 Quarter 95,0000 5.955 350 BBB+/Baa1 Visanet
12.19.03 250 10 6.550 Quarter 100,0000 6.550 292 BBB/Baa1 MT100
09.20.04 300 10 8.500 Half-year 99,1740 8.625 447 Baa1 Dív, Subor,
12.17.04 **73 3 zero-cupom - 62,0385 17.250 ***180 - GMTN
Perpetual
01.23.06 500 Perpétuo 7.950 Quarter 100,0000 7.950 Ba1
Securities
* 492 basis points over Libor
** amount in US$ equivalent to R$ 200 million, PTAX 2,75080
*** preliminary calculation in Reais with swap into US$
At the end of the period, Banco do Brasil prepared its first issue abroad in the perpetual security market,
launched on January 2006. This issue totaled US$ 500 million, US$ 200 million higher than initially
forecast and confirmed the success of the issue whose demand was more than US$ 4.2 billion. The
issue attracted the Asiatic, European and American markets.
Perpetual Securities are borrowing instruments recognized by BIS rules and widespread in the
international banking industry in order to compound their capital base. With this issue, BB increased the
leverage capacity of its loan operations. This issued was classified as Ba1 by Moody’s agency.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 54
6.9 Shareholders’ Equity
Banco do Brasil closed March 2006 with R$ 19,209 million in shareholders’ equity, an amount 28.6%
higher than in the same period of the previous year and 14.0% higher in relation to December 2005. The
growth of shareholders’ equity in the year was mainly due to the incorporation of results.
An analysis of the graph below shows the inversely perfect correlation between yhe Brazilian country
risk and the impact of marking to market on shareholders’ equity, indicating that the discount on the
securities has been decreasing because of the greater confidence of the investors in the Brazilian
market.
Brazilian Sovereign Risk (points) vs. Marking to Market (R$ million)
646
466 456
383 411
343 306
234
130 146
(51) 43
(17) (22) (27)
(95)
Jun/04 Sep/04 Dec/04 Mar/04 Jun/05 Sep/05 Dec/05 Mar/06
Mark to Market
Brazilian Sovereign Risk
Figure 25. Brazilian Sovereign Risk (points) vs. Marking to Market (R$ million)
Table 41. Shareholders’ Equity
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Shareholders’ Equity 12,864 13,771 14,106 14,933 15,393 16,826 16,850 19,209
Capital 8,366 9,857 9,864 9,864 10,797 10,797 10,797 10,797
Reserves 4,674 3,226 4,325 4,325 4,743 4,743 6,048 6,048
MtM - Securities and Derivatives (51) (17) 43 (95) (22) (27) 130 146
(Treasury shares) (126) (126) (126) (126) (126) (126) (126) (126)
Income accounts - 833 - 965 - 1,438 - 2,343
55 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.10 BIS Ratio
Banco do Brasil closed March 2006 with referential shareholders’ equity 29.4% higher than that seen in
March 2005, and 10.6% higher than December 2005, reaching R$ 27,263 million.
Shareholders’ Equity increased by 28.6% in relation to March 2005, mainly due to incorporation of
results, which caused an increase in K Coefficient from 15.6% to 18.3% in the last 12 months. In the
quarter, the increase in K Coefficient was of 120 base points. This ratio is higher than the 11% required
by the Central Bank and allows BB leverage of R$ 98,713 million in loan assets.
Table 42. BIS Ratio
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
APR – Risk Weight Assets 119,966 121,391 127,179 129,986 131,205 132,194 139,598 145.339
Required Shareholders’ Equity 13,929 14,201 14,513 14,839 14,955 15,064 15,836 16.404
APR Requirement 13,196 13,353 13,990 14,298 14,433 14,541 15,356 15.987
Swap Requirement 152 223 196 190 173 259 223 219
FX Exposure Requirement - - - - - - - -
Interest Rate Exposure Requirement 581 625 326 351 349 264 258 198
Referential Shareholders’ Equity 18,299 20,272 20,050 21,070 21,566 23,872 24,639 27.263
Tier I 12,702 13,609 14,000 14,746 14,958 16,392 16,817 19.169
Capital 8,366 9,857 9,864 9,864 10,797 10,797 10,797 10.797
Retained Earnings (Accumulated Losses) - - - - - - - 1
Capital Reserves 5 5 5 5 5 5 5 5
Revenue Reserves 4,645 3,195 4,294 4,294 4,715 4,715 6,020 6.020
Mark-to-Market – Securities and Derivatives (51) (17) 43 (95) (22) (27) 130 146
Treasury Shares (126) (126) (126) (126) (126) (126) (126) (126)
Income Accounts - 833 - 965 1,438 - 2.343
60% Tax Credits Realized After 5 years (137) (137) (80) (161) (411) (411) (10) (16)
Tier II 5,597 6,663 6,051 6,324 6,608 7,481 7,822 8.093
Subordinated Debt 5,573 6,637 6,025 6,298 6,585 7,457 7,799 8.070
Revaluation Reserves 24 26 26 26 23 23 23 23
Shareholders’ Equity Surplus / Deficit 4,371 6,070 5,538 6,231 6,612 8,808 8,803 10.858
Leverage Surplus / Deficit 39,733 55,185 50,344 56,645 60,106 80,074 80,029 98.713
K Coefficient % 14.5 15.7 15.2 15.6 15.9 17.4 17.1 18.3
Bis Ratio - %
18.3
17.4 17.1
15.7 15.2 15.6 15.9
14.5
5.4
4.9 5.5 5.4
4.4 5.2 4.6 4.7
11%
11.0 12.0 11.7 12.9
10.1 10.5 10.6 10.9
Jun/04 Set/04 Dez/04 Mar/05 Jun/05 Set/05 Dez/05 Mar/06
Tier I Tier II
Figure 26. Bis Ratio - %
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 56
CMN Resolution 3059/02 determined, as from 01.01.2004, an additional allocation of capital for the
stock of tax credits that exceed a 5 year consumption period from the date of the balance sheet.
According to the instruction, 40% of the remaining balance will be deducted from Tier I capital in 2005,
60% in 2006, and so on, until it arrives at 100% in 2008.
In accordance with technical studies of tax credit consumption, the surplus in the subsidiaries was about
R$ 24 million. Accordingly, the effect on Tier I capital was a reduction of R$ 16 million. In 2006, there will
be no allocation of capital in the multiple bank because of the absence of an excess after 5 years, as
described in explanatory note 18 to the Financial Statements.
Table 43. Changes in Composition of BIS Ratio
R$ million
Referential Required
Effect in Basel Effect in
Shareholders’ Shareholders’
Ratio Leaverage
Equity Equity
Net Income deducted of Interest on Own Capital 4,276 - 2.9 38,874
Increase of Subordinated Debt 1,772 - 1.2 16,107
Other Changes in Referential Shareholders’ Equity - - - -
60% Tax Credit after 5 years 145 - 0.1 1,314
Increase of Refer, Shareholders’ Eq, Requir, on Int, Rate Exp, - (153) 0.2 1,391
Increase of Refer, Shareholders’ Equity Requir, on Swap - 29 (0.1) (265)
Increase of Refer, Shareholders’ Eq, Requir,on Risk Weight
- 1,689 (1.6) (15,353)
Assets
Annual Changes 6,192 1,565 2.7 42,067
Balance at Mar/05 21,070 14,839 15.6 56,645
Balance at Mar/06 27,263 16,404 18.3 98,713
Net Annual Changes 6,192 1,565 2.7 42,067
In the table above, it is possible to see the determinant factors for the increase of 270 points basis in the
K-Coefficient, which grew surplus leverage by R$ 42,067 million. The main effects on leverage in last 12
months were from the income of the period, which generated a leverage surplus of R$ 38,874 million
and the increase in the Bank’s subordinated debt, which generated a surplus of R$ 16,107 million.
These factors were more than sufficient to support the increase of R$ 1,689 million in the referential
shareholders’ equity requirement on risk weighted assets and the allocation of capital for the Swap risk.
In the same period, a reduction of R$ 145 million is to be seen in the capital allocated for tax credits after
5 years, and a fall of R$ 153 million in the capital allocated for interest rate risk.
57 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
6.11 Fixed Asset Ratio
In the last 12 months, there was a reduction in the Fixed Asset Ratio of 350 base points through profit
incorporation and increase in the Subordinated Debt. With the present fixed asset level, BB may
increase its Fixed Assets by R$ 9,005 million, thus satisfying the maximum 50% limit of the Referential
Shareholders’ Equity.
Table 44. Fixed Asset Ratio
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Shareholder’s Equity 12,864 13,771 14,106 14,933 15,393 16,826 16,850 19.209
Subordinated Debt Qualifying as Capital 5,573 6,637 6,025 6,298 6,585 7,457 7,799 8.070
60% Tax Credits Realized After 5 years (137) (137) (80) (161) (411) (411) (10) (16)
Referential Shareholders’ Equity (A) 18,299 20,272 20,050 21,070 21,566 23,872 24,639 27.263
Permanent Assets 4,517 4,585 5,059 4,946 5,016 5,008 5,580 5.524
Stock Exchange and Cetip Clearing (2) (2) (2) (2) (2) (2) (2) (2)
Leasing Assets (456) (507) (537) (598) (658) (705) (788) (869)
Losses with Leasing to be Amortized (10) (12) (15) (9) (22) (23) (24) (26)
Total Fixed Assets (B) 4,049 4,063 4,504 4,324 4,334 4,278 4,766 4.626
Fixed Asset Ratio (B/A) - % 22.1 20.0 22.5 20.5 20.1 17.9 19.3 17,0
Margin (Surplus) - % 5.101 6.072 5.521 6.211 6.449 7.658 7.554 9.005
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 58
6.12 Risk Management
With the integration of the structure for managing the conglomerate’s market, liquidity, operational and
credit risks, the Risk Management became responsible for the overall management of risks. This
integration is bringing about, amongst other aspects, greater precision in the measurement of risks and
a better allocation of capital, observing the New Basel Accord, by generating an increase in the synergy
of processes and of the degree of specialization.
The Global Risk Committee (CGR) is responsible for the integrated management of the Bank’s risk,
defining exposure limits, contingency plans and risk measurement models.
Management of liquidity and market risks in Banco do Brasil is oriented by scenario analysis,
considering stress situations.
For market risk management, BB separates commercial and treasury operations from trading
operations, with their own limits and strategies.
6.12.1 Market Risk Management
BB uses statistical and simulation methodologies to measure the market and liquidity risks of its
positions. Amongst them, mention should be made of:
• Value at Risk (V@R);
• Sensitivity (parallel shift and curvature of risk factors);
• Stress Analysis.
The Value at Risk (V@R) is a measure of maximum expected loss in monetary values, under normal
market conditions, in a determined line period, with a chosen level of probability. At BB, the V@R is
measured by the historical simulation methodology, with probability of 95%, for a period of 1 (one) day.
The methodology for historical simulation uses the changes observed in interest rates, market indices,
foreign exchange rates, shares and commodities. For the Brazilian market, this model for measuring the
risk of instruments and portfolios is the most appropriate. This methodology passes through a process of
backtesting, which consists of comparing the distribution of the values calculated with the financial
results actually occurred.
With a view to determining the sensitivity of the Bank’s capital to the impacts of extreme market
movements, stress scenario tests are carried out. These scenarios are constructed from strong shocks
in the market, and are based on significant historical moments or forecast economic-and financial
scenarios.
Building the scenarios is the responsibility of the Scenarios Commission, under the coordination of the
Bank’s economics department.
Banco do Brasil adopts the policy of managing its foreign currency exposure so as not to a capital
requirement for its coverage, respecting the exposure limit of 5% in relation to the Referential
Shareholders’ Equity, as defined in CMN Resolution CMN 2891, of 09/26/2001. It is worth emphasizing
that for strategic reasons, on 03/09/2006, the Board of Directors authorized, , on Global Risk Committee
to set the maximum limit of capital consumption for foreign exchange exposure, which allows exposition
of until R$ 2 billion.
The Central Bank made optional the use of a methodology that takes into consideration exposures in
Euros, Dollars, Swiss Francs, Yens, Pounds Sterling and Gold as a single currency, incorporating the
59 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
diversification effect in the calculation of foreign exchange exposure. With the objective of improving the
management of foreign exchange risk, Banco do Brasil has adopted this methodology.
Below, we present an information balance sheet of foreign currency assets and liabilities referenced to
the American dollar, for the position at March 2006, exposing liability of US$ 693 million:
Table 45. Balance Sheet of Foreign Exchange Assets and Liabilities
Multiple Bank - US$ million
03.30.06
ASSETS LIABILITIES
Trade Bills 168 Currency Swap 72
DDI 26 U,S, Dollar Spot 135
Term Market operations 268
Futures 61
Foreign Investiment 1,486 Res, 2770 2,420
Debt Assumption 205
Other Currency Assets 130
Total 2,139 Total 2,832
FX Exposure 693
The graph bellow shows the behavior of Banco do Brasil’s foreign exchange exposure since February
2005, in relation to the referential shareholders’ equity:
Changes in FX Exposure - %
4.91
0.22
3.46 3.58
3.18 3.12 2.91 0.23 3.20
2.81 2.67 0.30 0.24 0.26
0.34 0.30 2.60 2.56 2.44
0.33 0.31 0.25 0.26 0.27 4.69
3.16 3.35 2.94
2.84 2.48 2.82 2.67
2.36 2.35 2.30 2.17
Apr/05 May/05 Jun/05 Jul/05 Aug/05 Sep/05 Oct/05 Nov/05 Dec/05 Jan/06 Feb/06 Mar/06
Exposure % - Currency Basket Exposure % - Other Currencies Exposurse % - Total
Figure 27. Changes in FX Exposure - %
The following table shows the balance sheet of Banco do Brasil, as of March 30, 2006, setting forth the
amounts in Reais and in foreign currencies in internal and external, accounting position:
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 60
Table 46. Balance Sheet by Currencies - Assets
R$ million
03.30.2006
Foreign Currency
Balance Sheet Local Currency Brazil Abroad
ASSETS 264,635 226,507 10,612 27,516
Current Assets and Long-Term Receivables 259,111 221,159 10,590 27,362
Cash and cash equivalents 4,056 2,558 159 1,339
'Short-term interbank investments 35,744 21,435 - 14,309
Securities and derivative financial instruments 68,631 65,369 368 2,894
Interbank accounts 24,912 24,911 - 1
Interdepartmental accounts 12 12 - -
Loan and lease operations 88,336 77,778 1,895 8,664
Other receivables and assets 37,420 29,097 8,168 154
Permanent Assets 5,524 5,348 21 154
Investments 1,030 985 21 24
Property and equipment 3,015 2,890 - 124
Leased assets 895 895 - -
Deferred charges 584 577 - 7
Table 47. Balance Sheet by Currencies – Liabilities
R$ million
03.30.2006
Foreign Currency
Balance Sheet Local Currency Brazil Abroad
Liabilities and Shareholder’s Equity 264,635 226,783 14,036 23,816
Current and Long-term Liabilities 245,295 207,448 14,036 23,811
Deposits 139,195 123,564 3,258 12,373
Demand Deposits 31,878 27,658 3,258 961
Savings Deposits 32,975 32,975 - -
Interbank Deposits 5,393 961 - 4,433
Time Deposits 68,948 61,969 0 6,979
Money Market Borrowing 42,758 40,995 - 1,763
Funds from Acceptances and Securities Placed 2,789 - - 2,789
Interbank Accounts 1,477 1,470 - 8
Intrabank Accounts 1,273 196 1,076 -
Onlending 17,084 13,053 348 3,683
Financial Derivatives 1,446 1,446 - -
Other Liabilities 39,274 26,724 9,354 3,196
Unearned Income 131 126 - 5
Shareholders’s Equity 19,209 19,209 - -
Banco do Brasil manages its exposures on a consolidated basis, analyzing the impacts of several
scenarios and stress tests. The following graph shows Banco do Brasil’s the composition of assets and
liabilities in Brazil, detailed by indexer:
61 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Balance Sheet by Index4
R$ billion – 03.30.06
Assets Liabilities
49.0 Fixed
Fixed
76.2
64.9 CDI/TMS/FACP
CDI/TMS/FACP 89.2
56.9 IRP/TBF/TR
IRP/TBF/TR
34.8
0.1 IGP
IGP 5.6 12.7 TJLP
TJLP 12.9
32.2 US$/Gold
US$/ Gold 29.6 w/o Index
21.0
w/o Index Shareholders’
13.3
36.6 Equity; Adm.
Tax Credit; Pro.;Float
Permanent 11.8
Figure 28. Balance Sheet by Index
The chart below shows Banco do Brasil’s net mismatches, by index in Brazil.
Mismatch Gaps by Index5
R$ billion – 03.30.06
27.2
24.3
5.5 0.2
(2.6)
(7.7)
(22.1)
(24.8)
CDI/TMS/FAC Fixed IGP TJLP US$/ w/o Index IRP/TBF/TR Other
P
Figure 29. Mismatch Gaps by Index
4
Visão Banco Múltiplo
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 62
Abroad Portfolio
The consolidated portfolio of the Foreign Network is made up of the positions of assets and liabilities,
comprising commercial, financial, derivative and securities transactions, recorded in the balance sheets
of Banco do Brasil’s units located abroad.
The following table shows the net position of the present value (MtM) and the value at risk (V@R) of the
consolidated figures of the Foreign Network at the end of the 4th quarter of 2005, calculated according
to the methodology already detailed, applying the treatment provided for in Central Bank of Brazil
circulars 3.068 and 3.082 for transactions with derivatives and with securities.
Table 48. Abroad Portfolio
US$ thousand
MtM Amount V@R
Abroad Portfolio 609,842 12,569
The following table details the average, minimum and maximum V@R of the Foreign Network portfolio
observed between January and March 2006:
Table 49. Average V@R, Minimum and Maximum
thousand
Abroad Network Minimum Average Maximum
Abroad Network in US$ 7,521 10,880 12,569
Fixed Interest Rate Portfolio
The risk management strategy for the set of Real-denominated operations and remunerated at pre-fixed
interest rates establishes the VaR limit definition for corrected cost portfolio, which is composed of
products recorded in the accounting by the corrected cost value. The products recorded at market value
are managed by means of Domestic Treasury specific-portfolio limits.
The V@R methodology used in managing and accompanying the limits of these portfolios is the same
as defined by the Brazilian Central Bank, through Circular 2.972 of 3.23.2000, that is, a 99% confidence
level for the period of 10 days and the allocation of the marked-to-market values by standard vertices.
Table 50. Portfolios Indexed to Fixed Interest Rates
R$ thousand
Fixed Interest Rate Σ VP Vertices V@R
Cost Adjusted Portfolio 24,297,855 108,856
Trading Portfolio
For the purposes of management, Banco do Brasil segregates the trading transactions from the others,
establishing specific strategies and limits. The diversification effect shows the risk reduction of the
portfolio arising from the correlations between the assets that it comprises.
63 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
The table below shows the V@R for the domestic trading portfolio by risk factor:
Table 51. Domestic Trading Portfolio
R$ thousand
Domestic Trading
Risk Factor MtM Amount V@R
Fixed Rate 14,753 43
Floating Rate - -
Diversification effect - -
Total 14,753 43
The table below shows the V@R for the international trading portfolio by risk factor:
Table 52. International Trading Portfolio
US$ thousand
International Trading
Risk Factor MtM Amount V@R
US Dollar 45,782 181
Euro (1,206) 17
Sterling Pound 268 2
Other Currencies 250 3
Diversification effect - (85)
Total 45,094 118
The table below sets out the average, minimum and maximum V@R of the international trading portfolio
observed between January and March 2006.
Table 53. Average V@R, Minimum and Maximum
thousand
Trading Minimun Average Maximum
Domestic (R$) - 347 639
Internaiional (US$) 41 102 191
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 64
6.12.2 Liquidity Risk Management
Banco do Brasil maintains adequate levels of liquidity, as a result of its broad and diversified depositor
base and the quality of its assets, and of the strong control over liquidity risk, in accordance with the
Market and Liquidity Risk Policy established for the group.
The liquidity risk management instruments adopted are:
• Short, Medium and Long Term Liquidity Forecasts.
• Risk limits.
• Liquidity Contingency Plan.
The main risk limits are the minimum liquidity reserve and the availability of free funds (DRL) indicator,
established by the Global Risk Committee.
The DRL is an indicator of liquidity that aims to ensure the equilibrium between the funding and
application of funds in the commercial portfolio and to guarantee the generation of structural resources
for financing liquidity, used in planning and carrying out the Bank’s budget. The new DRL limits guided
the preparation of the 2006 budget according to funding and commercial investment goals and the
Liquidity management established by the Board of Directors.
The minimum liquidity reserve is the minimum level of cash to be held by the Bank, compatible with the
degree of exposure to risk arising from the characteristics of its assets and liabilities and from the market
conditions, used as a parameter for identifying a liquidity crisis and activating the liquidity contingency
plan and, if necessary, adopting liquidity contingency measures.
In the liquidity contingency plan the actions and measures to be adopted in a liquidity crisis are defined.
A liquidity crisis, which is characterized when the short term liquidity forecast indicates levels lower than
the limit of the minimum liquidity reserve defined.
In this first quarter, there was no departure from the risk limits, thus ensuring the proper management of
the Bank's liquidity risk, as shown in the following graph.
Availability of Free Funds – DRL %
20%
Fev/05 Mar/05 Abr/05 Mai/05 Jun/05 Jul/05 Ago/05 Set/05 Out/05 Nov/05 Dez/05 Mar/06
Figure 30. Availability of Free Funds – DRL %
65 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7 – Analysis of Results
7.1 Gross Financial Margin
Table 54. Gross Financial Margin
R$ million
Quarterly Flow Chg.%
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Financial Intermediation Income 8,191 8,856 8,892 8,6 0,4
Loans 4,546 5,036 5,095 12,1 1,2
Leasing 29 36 38 29,5 4,6
Securities 3,166 3,333 3,521 11,2 5,7
Financial Derivatives (31) (229) (139) 344,6 (39,4)
Foreign Exchange Portfolio (50) (501) 452 - (190,2)
Compulsory Investments 386 429 427 10,5 (0,5)
FX Gain (Loss) on Foreign Investments (40) 166 (266) 564,6 (260,4)
Other Op, Inc, of a Fin, Intermed, Nature 184 587 (237) (228,4) (140,3)
Financial Intermediation Expenses (4,100) (4,458) (4,486) 9,4 0,6
Money Market Funds (3,729) (3,976) (3,984) 6,8 0,2
Borrowing, Assignments and Onlending (371) (482) (502) 35,1 4,0
Gross Financial Margin 4,090 4,398 4,406 7,7 0,2
The gross financial margin represents the result from financial intermediation business before provisions
for credit risks. In 1Q06, the margin was R$ 4,406 million, growing 7.7% in relation to 1Q5 and 0.2% in
relation to 4Q05.
In 1Q06, the Gross Financial Margin grew R$ 316 million in relation to 1Q05. The spread went up from
1.6938% in 1Q05 to 1.7007 in 1Q06. The growth of the margin was driven both by the rise in the
interest rates and of volume, which went up from R$ 241,493 million to R$ 259,070 million in 1Q06. We
highlight the fact that the spread between Selic and the TR was larger in this period than in 1Q05, a fact
that, combined with the index mismatch profile, increased the margin (please see figure 28). It is worth
to remind that, although exchange rate variation has impacted several items of the GFM, its effect on the
formation of the margin was small, because of BB’s low foreign exchange exposure.
The table below demonstrates the formation of the Gross Financial Margin from the changes in the
spread and from the growth in the volume of investments (Assets – Permanent Assets):
Table 55. Analysis of Volume (Assets – Permanent) and Quartely Spread – 1Q05 and 1Q06
R$ million
1Q05 1Q06 Abs. Chg.
Volume: Assets – Permanent Assets * 241,493 259,070 17,577
Gross Financial Margin 4,090 4,406 316
Spread - % ** 1.6938 1.7007 0.0069
Gain/(loss) with volume 4,388 298
Gain/(loss) with spread 4,107 17
Gain/(loss) with volume and spread 1
* Average Balances
** Gross Financial Margin / (Assets – Permanent Assets)
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 66
Analysis of Volume (Assets – Permanent) and Quarterly Spread – 1Q05 and 1Q06
Spread - %
1Q06 – 1.7007
17 1
1Q05 – 1.6938
4,090 298
Volume - R$ million
1Q06 – 259,070
1Q05 – 241,493
Gain/(Loss) in Volume
Gain/(Loss) in Spread
Gain/(Loss) in Volume and Spread
Figure 31. Analysis of Volume (Assets – Permanent) Quarterly Spread – 1Q05 e 1Q06
Considering the volume based on Remunerated Assets, spread went up from 2.0456% in 1Q05 to
2.0631% in 1Q06. The volume of Remunerated Assets was R$ 213,563 billion, compared with R$
199,964 million in 1Q05.
The table below demonstrates the formation of the Gross Financial Margin from the changes in the
spread and from the growth in the volume of investments (Remunerated Assets):
Table 56. Analysis of Volume (Remunerated Assets) and Annual Spread – 1Q05 e 1Q06
R$ million
1Q05 1Q06 Abs. Chg.
Volume: Assets – Permanent Assets * 199,964 213,563 13,598
Gross Financial Margin 4,090 4,406 316
Spread - % ** 2.0456 2.0631 0.0175
Gain/(loss) with volume 4,369 278
Gain/(loss) with spread 4,126 35
Gain/(loss) with volume and spread 2
* Average Balances
** Gross Financial Margin / (Assets – Permanent Assets)
67 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.1.1 Analysis of Uses
The annualized investment rate of Financial Intermediation Income over Remunerated Assets increased
from 17.4% to 17.7% (Mar/05 - Mar/06). This increase is mainly due to the higher income from loan
operations and securities.
Table 57. Investment Rate
Average Balances in R$ million
1Q05 4Q05 1Q06
Remunerated Assets 199,964 197,940 213,563
Fin, Interm, Income (Reallocated Income Statement) 8,191 8,856 8,892
Fin, Interm, Income, / (Remunerated Assets) 4.1 4.5 4.2
Fin, Interm, Income, / (Remunerated Assets)- Ann. 17.4 19.1 17.7
The average balance of available funds in foreign currency showed a significant reduction due to
changes in the accounting rules for foreign exchange transactions, which allow certain asset and liability
accounts to be balanced out. The investment rate in this item in the period showed great volatility,
because of the behavior of the dollar.
Table 58. Investment Rate on Available Funds in Foreign Currency
Average Balances in R$ million
1Q05 4Q05 1Q06
Available Funds in Foreign Currency 11,664 403 245
Income from Available Funds in Foreign Currency 6 14 5
Annualized Rate - % 0.22 14.41 8.14
Securities income in 1Q06 totaled R$ 3,521 million, an amount 11.2% higher than that recorded in 1Q05
and 5.7% in relation to 4Q05. The annualized investment rate decreased 20 basis points in relation to
1Q05, reflecting the fall in Selic rate.
Table 59. Investment Rate on Securities and Interbank Investments
Average Balances in R$ million
1Q05 4Q05 1Q06
Securities + Interbank Investments 92,440 94,116 104,485
Securities Income excluding Hedges 3,166 3,333 3,521
Annualized Rate - % 14.4 14.9 14.2
The following table shows the origin of the revenues of the securities portfolio. In 1Q06, the accrual of
revenues from the portfolio showed a decrease of 11.5% in relation to 1Q05, basically because of the
decrease in the average Selic rate. The result of marking-to-market (MTM) showed a negative effect of
R$ 2.0 million in 1Q06, against a negative effect of R$ 6.0 million in 1Q05.
Table 60. Securities Income
R$ million
Quarterly Flow Chg.%
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Securities Income 3,166 3,333 3,521 11.2 5.7
Fixed Income Securities 2,866 2,746 2,569 (10.4) (6.4)
Revaluation – Curve 2,873 2,727 2,543 (11.5) (6.8)
Income/Loss from Negotiation (1) 19 28 - 49.8
Mark to Market (6) (0) (2) (69.4) 672.1
Others 300 587 952 217.6 62.2
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 68
The figure below shows the main indices in BB’s securities portfolio.
Securities Portfolio by Index
Multiple Bank– 03.30.2006
3.6% 0.6%
0.6%
3.9%
9.1%
82.2%
CDI/TMS Fixed TR and Others Dollar IGP-M IPCA
Figure 32. Securities Portfolio by Index
In 1Q06, Revenues from Loans and Leasing reached R$ 4,837 million, an increase of 11.9% in relation
to 1Q05. The search for less onerous sources of financing by the borrowers contributed towards the
reduction in profitability in the period. Annualized investment rate went down from 22.8% in 1Q05 to
22.2% in 1Q06.
Table 61. Investment Rate on Loans and Leasing
Average Balances in R$ million
1Q05 4Q05 1Q06
Loans + Leasing 82,095 89,416 94,036
Loans + Leasing Income 4,322 4,814 4,837
Annualized Rate - % 22.8 23.3 22.2
*Income from recoveries of loans written off as losses are not included.
69 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
The behavior of the dollar explains the changes in the items below. The relationship of these accounts
with exchange rate variation is shown in the following figure.
Table 62. FX Gain (Loss) and Other FX Operations
R$ million
1Q05 4Q05 1Q06
FX Gain (Loss) on Foreign Investments (40) 166 (266)
Other FX Operations (56) (515) 447
FX Gain (Loss) and Other FX Operations
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
FX Gain (Loss) on Foreign Investments
Other FX Operations
Dollar Variation - %
Figure 33. FX Gain (Loss) and Other FX Operations
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 70
7.1.2 Analysis of Funding
The annualized Financial Intermediation Expenses over Remunerated Assets increased 20 basis points
in relation to 1Q05. This is mainly due to the rise in Time Deposits, which balance grew from R$ 52,769
million in March, 2005 to R$68,948 million in March 2006. When compared to 4Q05, the 60 basis points
reduction in the annualized funding rate was due to to an increase in Open Market Funding, where
funding rates are lower than the Time Deposit remuneration rates. In 1Q06, the total annualized cost of
borrowing came to 8.7%.
Table 63. Funding Cost
Average Balances in R$ million
1Q05 4Q05 1Q06
Remunerated Assets 199,964 197,940 213,563
Financial Intermediation Expenses (4,100) (4,458) (4,486)
Finan, Interm, Expenses, / (Remunerated Assets) 2.1 2.3 2.1
Finan, Interm, Expenses, / (Remunerated Assets)- Ann, 8.5 9.3 8.7
Foreign borrowing was significantly reduced in the year, because of the change in the rules for recording
foreign exchange transactions, as previously commented, as due the depreciation of Dolar.
Table 64. Cost of Foreign Borrowing
Average Balances in R$ million
1Q05 4Q05 1Q06
Foreign Borrowing 16,877 4,532 4,173
Expenses with Borrowing, Onlending, and Foreign Banks (66) (66) (56)
Annualized Rate - % 1.6 6.0 5.5
A growth can be seen in the expenses with Deposits and Money Market Borrowing, whose rate fell from
9.5% in 1Q05 and 10.01% in 4Q05 to 9.0% in 1Q06. This movement is explained by the behavior of
interest rates in the last 12 months.
Table 65. Market Funding Cost
Average Balances in R$ million
1Q05 4Q05 1Q06
Money Market Borrowing 162,228 163,891 178,988
Expenses withd Money Market Borrowing 5 (3,729) (3,976) (3,901)
Annualized Rate - % 9.5 10.1 9.0
Savings Deposits 31,458 32,313 33,121
Expenses with Savings Deposits (665) (705) (669)
Annualized Rate - % 8.7 9.0 8.3
Interbank Deposits 6,621 5,442 5,056
Expenses with Interbank Deposits (101) (127) (202)
Annualized Rate - % 6.3 9.6 17.0
Time Deposits 51,596 61,725 67,378
Expenses with Time Deposits (1,269) (1,927) (1,588)
Annualized Rate - % 10.2 12.1 9.8
Money Market Borrowing 43,787 32,715 41,962
Expenses with Money Market Borrowing (1,694) (1,217) (1,442)
Annualized Rate - % 15.9 15.7 14.5
Demand Deposits 28,764 31,694 31,472
5
Expenses with Deposits and Money Market Borrowing except Expenses with Foreign Securities, Expenses with FGC on Demand Deposits, and
Expenses with Debt Assumption Contracts.
71 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.1.3 Analysis of Spread
The overall annualized quarterly spread from financial intermediation has shown a decrease in relation
to the periods under analysis. This is basically due to an increase in operations committed before TVM,
in which Total Assets is increased, and to a growth in Financial Intermediation Expenses.
Analysis of Spread - %
9.2 9.0 9.0 9.2
8.8 8.7
8.4 8.5
7.4 7.3 7.3 7.5
7.1 7.1 6.9 7.0
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
GFM / (Assets - Permanent) - Annualized
GFM / (Remunerated Assets) - Annualized
Figure 34. Anaysis of Spread - %
Table 66. Investment Rates and Funding Costs
1Q05 4Q05 1Q06
Finan, Interm, Income / (Assets – Permanent Assets) 3.4 3.7 3.4
Finan, Interm, Income / (Assets – Permanent Assets) – Ann, 14.3 15.5 14.5
Finan, Interm, Expenses / (Assets – Permanent Assets) 1.7 1.8 1.7
Finan, Interm,, Expenses / (Assets – Permanent Assets) – Ann, 7.0 7.6 7.1
GFM / (Assets – Permanent Assets) 1.7 1.8 1.7
GFM / (Assets – Permanent Assets) – Annualized 6.9 7.5 7.0
Finan, Interm, Income / (Remunerated Assets) 4.1 4.5 4.2
Finan, Interm, Income / (Remunerated Assets) – Annualized 17.4 19.1 17.7
Finan, Interm, Expenses / (Remunerated Assets) 2.1 2.3 2.1
Finan, Interm, Expenses / (Remunerated Assets) – Annualized 8.5 9.3 8.7
GFM / (Remunerated Assets) 2.0 2.2 2.1
GFM / (Remunerated Assets) – Annualized 8.4 9.2 8.5
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 72
7.1.4 Analytical Spread
Table 67. Analytical Spread – Investment Rates
Average Balances in R$ million
1Q05 4Q05 1Q06
Remunerated Assets 199,964 197,940 213,563
Available Funds in Foreign Currency 11,664 403 245
Income from Available Funds in Foreign Currency 6 14 5
Annualized Rate - % 0.2 14.4 8.1
Securities + Interbank Investments 92,440 94,116 104,485
Securities Income excluding Hedges 3,166 3,333 3,521
Annualized Rate - % 14.4 14.9 14.2
Loans + Leasing 82,095 89,416 94,036
Loans + Leasing Income 4,322 4,814 4,837
Annualized Rate - % 22.8 23.3 22.2
Remunerated Compulsory Deposit 13,129 13,255 14,017
Income from Compulsory Deposits 386 429 427
Annualized Rate - % 12.3 13.6 12.7
Other Remunerated Assets 637 750 780
Other Income with Financial Intermediation Characteristics 37 37 32
Annualized Rate - % 25.6 21.5 17.5
Tax Credits 8,127 6,720 7,352
Other Assets 33,401 37,668 38,155
Permanent Assets 4,945 5,392 5,496
TOTAL ASSETS 246,437 247,720 264,566
73 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 68. Analytical Spread – Funding Costs
Average Balances in R$ million
1Q05 4Q05 1Q06
Interest Bearing Liabilities 169,839 160,413 176,204
Savings Deposits 31,458 32,313 33,121
Expenses with Savings Deposits (665) (705) (669)
Annualized Rate - % 8.7 9.0 8.3
Interbank Deposits 6,621 5,442 5,056
Expenses with Interbank Deposits (101) (127) (202)
Annualized Rate - % 6.3 9.6 17.0
Time Deposits 51,596 61,725 67,378
Expenses with Time Deposits (1,269) (1,790) (1,588)
Annualized Rate - % 10.2 12.1 9.8
Money Market Borrowing 43,787 32,715 41,962
Expenses with Money Market Borrowing (1,645) (1,217) (1,442)
Annualized Rate - % 15.9 15.7 14.5
Foreign Borrowing 16,877 4,532 4,173
Expenses with Foreign Borrowing, Onlending and Banks (66) (66) (56)
Annualized Rate - % 1.58 5.98 5.46
Onlending 10,544 12,681 13,310
Expenses with Onlending (175) (287) (291)
Annualized Rate - % 6.80 9.37 9.04
Financial and Development Funds + Subordinated Debt 8,123 9,571 9,900
Expenses with Financial and Development Funds (130) (129) (155)
Annualized Rate - % 6.57 5.50 6.41
Foreign Securities 832 1,432 1,304
Expenses with Foreign Securities (21) (114) (58)
Annualized Rate - % 10.65 35.67 19.18
Other Liabilities 62,038 70,256 70,517
Demand Deposits 28,764 31,694 31,472
Other Liabilities 33,273 38,561 39,046
Shareholders’ Equity + Income Accounts 14,561 17,052 17,845
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 246,437 247,720 264,566
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 74
Table 69. Reconciliation with the Gross Financial Margin
R$ million
1Q05 4Q05 1Q06
Financial Intermediation Income 8,191 8,856 8,892
Income from Remunerated Assets 7,918 8,627 8,821
Income from Financial Derivatives (31) (229) (139)
FX Gain (Loss) on Foreign Investments (40) 166 (266)
Other FX Operations (56) (515) 447
Other Operating Income 147 550 (269)
Recovery of Write-offs 253 258 297
Financial Intermediation Expenses (4,100) (4,458) (4,486)
Expenses with Remunerated Liabilities (4,073) (4,435) (4,462)
Expenses with FGC on Demand Deposits (15) (15) (16)
Expenses with Debt Assumption Contracts (12) (8) (8)
Table 70. Main Components of the Spread
Average Balances in R$ million
1Q05 4Q05 1Q06
Gross Financial Margin 4,090 4,398 4,406
Assets – Permanent Assets 241,493 241,188 259,070
Remunerated Assets 199,964 197,940 213,563
75 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.1.5 Management Analysis of the Spread
We carried out a management assessment of the financial intermediation spread, by reconciling the
management information on the loan portfolio, deposits and money market borrowing with the
accounting information.
The spread was assessed by comparing the gross financial margin of each funding product and loan
with their respective volume. The gross financial margin is determined by taking into consideration the
opportunity cost of each product. In the case of loan product, for example, the gross financial margin is
made up of the financial revenues from the product after deduction of the opportunity costs. In the case
of an investment or funding product, the margin is determined by comparing the financial expenses with
the respective opportunity revenue.
The opportunity costs and revenues of each product are determined in accordance with their
characteristics. As a general rule, the average Selic rate (TMS) is adopted as a reference point for the
opportunity cost for the greater part of the products of financial intermediation. There are, however,
exceptions such as, for example, funding from savings, where the opportunity revenue is hybrid, that is,
it is remunerated by the TMS on the free portion, by the rural CDI in the case of the portion invested in
rural credit, and by TR+6% a year, in the case of the portion intended for the compulsory deposit.
Accordingly, the gross spread of each product is determined by assessing its actual contribution to the
make-up of the result.
The table below shows the composition of the average quarterly spread, while it should be observed that
the spread on transactions with individuals – where the risk vs. return ratio is better – has been showing
a systematic reduction, because of the downturn in the interest rates. A rise in the profitability of
funding costs is to be seen, as the growth in interest rates increases the financial margin of fundings.
Table 71. Nominal Spread by Transaction
%
1Q05 4Q05 1Q06
Nominal Spread 1.69 1.82 1.70
Loans 3.00 2.79 2.68
Individuals 8.23 7.23 7.12
Businesses 2.08 2.15 2.04
Agribusiness 1.67 1.47 1.44
Other Transactions 0.38 (0.19) (0.22)
Funding 1.04 0.99 0.94
Other 0.95 2.07 1.67
The increase in the difference between TR and TMS has kept the weighted spread on funding more
stable. This movement is natural at times of increasing interest rates. The same occurs when there is a
fall in the basic interest rate of the economy, as the TR does not usually accompany this movement.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 76
Table 72. Compositions of the Transactions
%
1Q05 4Q05 1Q06
Composition (mix)
Loans 34.43 37.47 36.76
Individuals 18.32 19.14 18.61
Businesses 40.30 39.40 39.29
Agribusiness 38.15 38.63 39.41
Other Transactions 3.23 2.83 2.69
Funding 41.90 47.96 46.98
Other 23.66 14.57 16.26
Table 73. Weighted Spread per Transaction
%
1Q05 4Q05 1Q06
Weighted Spread 1.69 1.82 1.70
Loans 1.03 1.05 0.99
Individuals 0.52 0.52 0.49
Businesses 0.29 0.32 0.29
Agribusiness 0.22 0.21 0.21
Other Transactions 0.00 0.00 0.00
Funding 0.44 0.48 0.44
Other 0.23 0.30 0.27
A slight downward tendency for the weighted spread on loan transactions can be seen in the quarter.
That movement was led by loans to individuals.
Table 74. Analysis of Volume and Management Spread Quarterly 1Q05 and 1Q06 (12 months)
Gain/(Loss)
Total
Volume Spread Volume and Spread
Investments (64) 295 (6) 226
Funding 214 (103) (21) 90
Total 150 192 (27) 316
77 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Analysis of Volume and Spread of Uses and Funding Quarterly 1Q05 and 1Q06
Uses Funding
Spread- % Spread- %
1Q06 – 2.6843 295 (6) 1Q05 – 1.0425 (103) (21)
1Q05 – 2.9961 1Q06 – 0.9407
(64)
2,491 1,145 214
Volume - R$ million Volume - R$ million
4Q05 – 95,245 4Q05 – 121,704
4Q04 – 83,157 4Q04 – 101,188
Gain/(Loss) in Volume
Gain/(Loss) in Spread
Gain/(Loss) in Volume and Spread
Figure 35. Analysis of Volume and Spread of Uses and Funding Quarterly – 1Q05 and 1Q06
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 78
7.2 Net Financial Margin
Table 75. Net Financial Margin
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Gross Financial Margin 4,090 4,398 4,406 7.7 0.2
Allowance for Loan Losses (1,061) (1,498) (1,345) 26.7 (10.2)
Net Financial Margin 3,029 2,900 3,061 1.1 5.6
The net financial margin is obtained by deducting expenses with allowances for loan losses from the
gross financial margin. In 1Q06, the expenses with the allowances for loan losses grew 26.7% in relation
to 1Q05, mainly due to the worsening of risk in agribusiness loan portfolio. In relation to the 4Q05, there
was a reduction of 10.2 in allowances for loan losses.
The overall risk of the portfolio, measured by the ratio between the stock of provisions required
(Resolution 2682) against the total portfolio, went up from 5.2% in 1Q05 to 6.6% in 1Q05. The expenses
with allowances for loan losses were R$ 1,345 million in 1Q06, against R$1,061 million in 1Q05 and
R$1,498 million in 4Q05.
Table 76. Expenses with Allowance for Loan Losses over Portfolio
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
(A) Allowance for Loan Losses - Quarterly (903) (856) (868) (1,061) (1,002) (966) (1,498) (1,345)
(B) Allowance for Loan Losses - 12 Months (3,378) (3,487) (3,528) (3,688) (3,786) (3,896) (4,527) (4,810)
(C) Loan Potfolio 83,131 84,148 88,554 93,312 96,129 94,685 101,789 105,502
(D) Average Portfolio – 3 Months 82,283 82,942 86,839 91,731 95,434 95,097 98,833 103,636
(E) Average Portfolio – 12 Months 77,035 80,149 82,722 85,949 89,237 92,275 95,459 97,872
Expenses over Portfolio (A/D) - % 1.1 1.0 1.0 1.2 1.0 1.0 1.5 1.3
Expenses over Portfolio (B/E) - % 4.4 4.4 4.3 4.3 4.2 4.2 4.7 4.9
Expenses with Allowance for Loan Losses over Portfolio
4.4 4.4 4.3 4.3 4.2 4.2 4.7 4.9
1.1 1.0 1.0 1.2 1.0 1.0 1.5 1.3
1,498
1,345
1,061
1,002
966
903
868
856
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
(A) Allowance for Loan Losses - Quarterly
Expenses over Portfolio (A/D) - %
Expenses over Portfolio (B/E) - %
Figure 36. Expenses with Allowance for Loan Losses over Portfolio
The graph below details the allowance for loan losses, segregating the minimum provisions required by
CMN Resolution 2682 from the total booked.
79 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Breakdown of Allowances
R$ million
7,731
6,692
5,655 5,893 5,955 749
5,374 5,365 790
5,102
812 956 782
999 819
973
5,901 6,982
4,843 4,937 5,173
4,128 4,375 4,546
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Provision Required Additional Provision Total Provision
Figure 37. Breakdown of Allowances
The deterioration in credit risk in the agribusiness portfolio helped to reduce the percentage of loans
classified as risk AA-C, which fell from 91.9% in March 2005 to 89.5% in March 2006, a level that is in
line with the 89.6% observed in the loans of the Brazilian banking industry in 1Q06. In relation to
December, operations recorded in AA-C did not present a good performance, due to punctual problems
in Brazilian agribusiness. It is worth highlighting the increase in the concentration of the loans classified
in G-H, which require a larger volume of provisions. In March 2006, these transactions accounted for
4.9% of the total amount of the portfolio, against 3.7% in March 2005.
Table 77. Loan Portfolio by Level of Risk
R$ million
Mar/05 Dec/05 Mar/06
BI*
Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. %
AA 17,771 - 19.1 18,400 - 18.1 17,815 - 16.9 24.5
A 25,660 128 27.5 29,174 146 28.7 28,324 142 26.8 37.9
B 30,446 304 32.6 31,364 314 30.8 32,139 321 30.5 17.0
C 11,844 355 12.7 13,302 399 13.1 16,127 484 15.3 10.2
D 2,788 279 3.0 3,413 341 3.4 3,986 399 3.8 3.4
E 834 250 0.9 1,175 352 1.2 1,296 389 1.2 1.4
F 532 266 0.6 727 364 0.7 681 341 0.6 1.1
G 425 297 0.5 804 563 0.8 838 587 0.8 0.9
H 2,963 2,963 3.2 3,422 3,422 3.4 4,320 4,320 4.1 3.6
Total 93,263 4,843 100.0 101,781 5,901 100.0 105,527 6,982 100.0 100.0
AA-C 85,721 788 91.9 92,240 859 90.6 94,381 947 89.5 89.6
D-H 7,541 4,055 8.1 9,542 5,043 9.4 11,121 6,035 10.5 10.4
* Information of dec/2005
The ratio of Portfolio Net of Allowances (CLP) over the Total Portfolio (CT) expresses the overall
evaluation of the weighted portfolio, in accordance with CMN Resolution 2,682. The following chart
shows that Banco do Brasil has maintained better quality in its loan portfolio than the Brazilian banking
industry.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 80
CLP/CT BB vs. Banking Industry - %
95.0 94.8 94.9 94.9 94.5 94.5
94.2 94.3 94.4 94.8 94.5 94.3 94.2 94.4
93.5 93.9
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
BB Banking Industry
Figure 38. CLP/CT BB vs Banking Industry - %
In March 2006, past due loans and the allowance for loan losses accounted for 6.1% and 7.3% of the
portfolio, respectively. Taking into consideration only the loans past due over 60 days, the allowance for
loan losses would cover 170.4% of these transactions, compared to 193.1% in March 2005 and 165.7%
in December 2005.
Table 78. Delinquency Ratio
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Loan Portfolio 83,131 84,148 88,554 93,312 96,129 94,685 101,789 105,527
Past Due Loans 4,256 4,703 4,296 4,792 4,885 5,924 5,724 6,434
Past Due Loans/Loan Portfolio - % 5.1 5.6 4.9 5.1 5.1 6.3 5.6 6.1
Past Due Loans + 15 days 4,128 4,585 4,178 4,731 4,451 5,580 5,666 6,383
Past Due Loans + 15 days/Loan Portfolio - % 5.0 5.4 4.7 5.1 4.6 5.9 5.6 6.0
Past Due Loans + 60 days 2,639 2,726 2,885 2,929 2,964 3,695 4,039 4,537
Past Due Loans + 60 days/Loan Portfolio - % 3.2 3.2 3.3 3.1 3.1 3.9 4.0 4.3
Write-off 660 641 672 771 730 890 762 788
Recovery of Write-offs (315) (278) (206) (253) (260) (245) (258) (297)
Net Loss 345 364 467 517 470 645 504 492
Net Loss/Loan Portfolio - % annualized 1.7 1.7 2.1 2.2 2.0 2.8 2.0 1.9
Allowance 5,102 5,374 5,365 5,655 5,893 5,955 6,692 7,731
Allowance/Loan Portfolio - % 6.1 6.4 6.1 6.1 6.1 6.3 6.6 7.3
Allowance/Past Due Loans + 15 days - % 123.6 117.2 128.4 119.5 132.4 106.7 118.1 121.1
Allowance/Past Due Loans + 60 days - % 193.3 197.1 186.0 193.1 198.8 161.2 165.7 170.4
81 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
The following graph shows an increase in the non-performing loans when compared to March 2005,
due, mainly, to agribusiness operations. It is worth pointing out that CMN Resolution 3,314/05, of
9.08.2005, which regulated the rescheduling of financing of agricultural costs, brought about
renegotiations of part of these transactions.
Delinquency Ratio - %
6.3 6.1
5.6 5.6
5.1 4.9 5.1 5.1
5.9 6.0
5.4 5.6
5.0 5.1
4.7 4.6 4.3
3.9 4.0
3.2 3.2 3.3 3.1 3.1
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Allowance/Loan Portfolio
Allowance/Past Due Loans + 15 days
Allowance/Past Due Loans + 60 days
Figure 39. Delinquency Ratio -%
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 82
7.2.1 Retail Loan Portfolio
The retail loan portfolio, which grew 12.4% in relation to March2005 and 4.6% in relation to December
2005, has shown an improvement in risk in relation to the same period of the previous year and in
relation to December 2005. Part of the improvement in the risk of the portfolio in relation to December
can be attributed to the growth of Payroll Loans, which have the lowest level of risk, as well as the
starting up of vehicle financing operations.
Besides that, since 2005, Banco do Brasil took a series of coordinated measures to reduce the
delinquency in its loan operations. The process for collecting and recovering loans was improved, to
optimize the return of borrowed capital and maintain the customer base. Amongst the measures taken
are: automatic renegotiation of the credit through the automatic teller machines and internet; the
training of employees for credit recovert; and the changes in the focus on collecting, from “product” to
“customer”, with strategies directed to each customer profile and its historical relationship with BB.
Table 79. Retail Loan Portfolio by Level Risk
R$ million
Mar/05 Dec/05 Mar/06
Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. %
AA 2,573 - 8.9 3,057 - 9.9 2,713 - 8.4
A 4,126 21 14.3 5,257 26 17.0 5,087 25 15.7
B 12,635 126 43.8 13,108 131 42.3 14,213 142 43.8
C 5,745 172 19.9 5,970 179 19.3 6,768 203 20.9
D 977 98 3.4 944 94 3.0 1,085 109 3.3
E 465 140 1.6 521 156 1.7 481 144 1.5
F 316 158 1.1 316 158 1.0 285 143 0.9
G 279 195 1.0 272 190 0.9 266 186 0.8
H 1,719 1,719 6.0 1,544 1,544 5.0 1,515 1,515 4.7
Total 28,835 2,629 100.0 30,987 2,479 100.0 32,415 2,467 100.0
AA-C 25,079 319 87.0 27,392 336 88.4 28,782 371 88.8
D-H 3,756 2,310 13.0 3,595 2,142 11.6 3,633 2,097 11.2
The following table details the movement in allowances for loan losses in the retail portfolio, slightly
lower than in the previous period.
Table 80. Changes in provision levels for doubtful or non-performing loans - Retail
R$ million
1Q05** 2Q05 3Q05 4Q05 1Q06
Retail Loan Portfolio 28,835 30,046 30,699 30,987 32,415
Initial Allowance 2,319 2,629 2,634 2,558 2,479
1 - Risk Migration 520 397 430 181 165
a) Risk Deterioration 878 812 804 861 801
b) Risk Improvement (358) (415) (374) (680) (636)
2 – New Transactions 274 304 213 217 220
3 – Write-offs (593) (569) (618) (555) (596)
Total (1 + 2 + 3): 201 132 25 (157) (211)
Other Impacts* 109 (127) (101) 78 199
Final Allowance 2,629 2,634 2,558 2,479 2,467
Allowance Required by CMN Resolution 2682 2,629 2,634 2,558 2,479 2,467
*Amortization, settlement, instllments, and charges.
83 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.2.2 Commercial Loan Portfolio
The 13.9% growth of the commercial portfolio was accompanied by a relative improvement in risk
(Mar/05 – Mar/06). At the end of March 2006, the levels of risk AA to C now comprised 95.1% of the
total of the portfolio, compared to 94.8% at the end of March 2005. Credits rated D to H decreased from
5.2% to 4.9% in the same period. In relation to September 2005, a slight improvement in risk is
observed.
Table 81. Commercial Loan Portfolio by Level Risk
R$ million
Mar/05 Dec/05 Mar/06
Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. %
AA 2,741 - 20.9 3,876 - 27.9 3,803 - 25.5
A 4,874 24 37.2 4,814 24 34.7 5,238 26 35.1
B 4,137 41 31.6 3,943 39 28.4 4,300 43 28.8
C 661 20 5.1 564 17 4.1 836 25 5.6
D 484 48 3.7 409 41 2.9 459 46 3.1
E 67 20 0.5 90 27 0.6 108 32 0.7
F 55 28 0.4 68 34 0.5 48 24 0.3
G 8 6 0.1 27 19 0.2 17 12 0.1
H 62 62 0.5 89 89 0.6 105 105 0.7
Total 13,090 250 100.0 13,878 290 100.0 14,914 313 100.0
AA-C 12,413 86 94.8 13,196 80 95.1 14,177 94 95.1
D-H 677 164 5.2 682 209 4.9 737 219 4.9
The table of changes in the allowance for loan losses shows higher provisions, when compared to the
previous period.
Table 82. Changes in provision levels for doubtful or non-performing loans - Commercial
R$ million
1Q05** 2Q05 3Q05 4Q05 1Q06
Commercial Loan Portfolio 13,090 13,189 12,714 13,878 14,914
Initial Allowance 505 250 253 229 290
1 - Risk Migration (10) (28) 41 42 28
a) Risk Deterioration 56 73 78 97 82
b) Risk Improvement (66) (101) (37) (55) (54)
2 – New Transactions 54 60 44 49 77
3 – Write-offs (62) (14) (21) (24) (18)
Total (1 + 2 + 3): (17) 19 65 67 87
Other Impacts* (239) (16) (89) (6) (63)
Final Allowance 250 253 229 290 313
Allowance Required by CMN Resolution 2682 250 253 229 290 313
*Amortization, settlement, instllments, and charges.
**In 1Q05, some operations were transfered from Commercial to Retail.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 84
7.2.3 Agribusiness Loan Portfolio
The agribusiness portfolio grew 20.4% (Mar/05-Mar/06) and 3.8% (Dec/05-Mar/06). In March 2006 the
loans ranked at risk levels AA-C accounted for 88.8% of the portfolio, against 95.6% in March 2005 and
90.7% in December 2005.
The ratio between the allowances required (Resolution 2682) and the stock of loans grew from 2.6% in
1Q05 to 5.4% in 4Q05 and 6.8% in 1Q06. The rise in the risk of the portfolio in the period still reflects the
effects of the drought in the states in the South region and Mato Grosso do Sul and some municipalities
in the states of São Paulo, Minas Gerais, Goiás and Mato Grosso, as well as the farmers’ marketing
problems because of the behavior of the exchange rates and the commodity prices in the international
market.
Delinquency in the agribusiness portfolio increased between July and September 2005, when CMN
Resolution 3,314/05, of 9.08.2005 was published, authorizing the rescheduling of the financings of
agricultural costs of the 2004/2005 crop. The rule covers the whole of Brazil and benefits the producers
of cotton, rice, corn, soybeans, sorghum and wheat, who will be able to reschedule their debts to March
and April 2006. The period for the farmers to sign up ended on 10.15.2005. The loans, even after being
rescheduled, continued to be counted in the requirement for rural credit. Likewise, the transactions that
were contracted in this way continue to receive equalization from the National Treasury.
Considering that there was a deterioration in risk of the outstanding transactions, from the moment they
went into arrears until the formalization of the reschedulings, the new transactions (2005/2006 crop),
suffering the effect of being dragged down, will be contracted at higher risk levels, in accordance with
the rules of Resolution 2,682/99. Accordingly, an increase in expenses with allowances for loan losses
is observed in March 2006 and it is expected that the provision level for this portfolio will remain high
until the total renegotiated loans are regularized.
Table 83. Agribusiness Loan Portfolio by Level Risk
R$ million
Mar/05 Dec/05 Mar/06
Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. %
AA 5,267 - 17.1 5,114 - 14.3 5,203 - 14.0
A 10,251 51 33.3 10,306 52 28.9 9,694 48 26.2
B 10,264 103 33.4 11,516 115 32.2 11,163 112 30.1
C 3,642 109 11.8 5,462 164 15.3 6,826 205 18.4
D 737 74 2.4 1,379 138 3.9 1,758 176 4.7
E 111 33 0.4 284 85 0.8 371 111 1.0
F 93 46 0.3 248 124 0.7 239 119 0.6
G 101 71 0.3 442 309 1.2 226 158 0.6
H 308 308 1.0 958 958 2.7 1,573 1,573 4.2
Total 30,774 795 100.0 35,709 1,945 100.0 37,052 2,502 100.0
AA-C 29,425 263 95.6 32,398 331 90.7 32,886 365 88.8
D-H 1,350 532 4.4 3,311 1,614 9.3 4,166 2,137 11.2
An analysis of the following table shows that the increase in the risk of the portfolio, combined with the
renegotiation of some lines of credit, led to a greater reinforcement of provisions, both in the quarter and
when compared with the same period of the previous year
85 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 84. Changes in provision levels for doubtful or non-performing loans - Agribusiness
R$ million
1Q05 2Q05 3Q05 4Q05 1Q06
Agribusiness Loan Portfolio 30,774 32,171 31,247 35,709 37,052
Initial Allowance 691 795 918 1,310 1,945
1 - Risk Migration 74 54 267 521 359
a) Risk Deterioration 278 334 600 879 561
b) Risk Improvement (204) (281) (334) (358) (202)
2 – New Transactions 84 161 466 644 306
3 – Write-offs (53) (71) (71) (113) (98)
Total (1 + 2 + 3): 104 144 662 1,052 567
Other Impacts* 0 (21) (270) (417) (9)
Final Allowance 795 918 1,310 1,945 2,502
Allowance Required by CMN Resolution 2682 795 918 1,310 1,945 2,502
*Amortization, settlement, installments, and charges
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 86
7.2.4 Foreign Trade Loan Portfolio
The foreign trade finance portfolio recorded an increase of 5.6% (Mar/05 – Mar/06). Loans rated at
levels of risk AA to C came to 98.1 and those rated as D-H to 1.9% in the period.
Table 85. Foreign Trade Loan Portfolio by Risk Level
R$ million
Mar/05 Dec/05 Mar/06
Balance Allowance Comp.% Balance Allowance Comp. % Balance Allwoance Comp. %
AA 1,621 - 17.7 1,312 - 13.6 1,884 - 19.4
A 3,460 17 37.7 5,060 25 52.6 4,567 23 47.1
B 2,464 25 26.8 2,139 21 22.2 1,847 18 19.1
C 1,383 41 15.1 906 27 9.4 1,214 36 12.5
D 186 19 2.0 132 13 1.4 100 10 1.0
E 10 3 0.1 7 2 0.1 7 2 0.1
F 31 15 0.3 8 4 0.1 6 3 0.1
G 1 0 0.0 10 7 0.1 5 3 0.0
H 22 22 0.2 48 48 0.5 64 64 0.7
Total 9,179 143 100.0 9,623 149 100.0 9,695 160 100.0
AA-C 8,928 83 97.3 9,417 74 97.9 9,512 78 98.1
D-H 250 59 2.7 206 75 2.1 183 82 1.9
The table below shows the effects of the reduction of the overall volume of the Foreign Trade Loan
Portfolio on the allowances. The strong appreciation of the local currency and lower volume of new
transactions contracted brought a growth in the provisions of the portfolio in the quarter.
Table 86. Changes in the Allowance – Foreign Trade
R$ million
1Q05 2Q05 3Q05 4Q05 1Q06
Foreign Trade Loan Portfolio 9,179 9,489 8,713 9,623 9,695
Initial Allowance 125 143 130 123 149
1 - Risk Migration (40) (79) (28) 17 11
a) Risk Deterioration 21 20 26 44 31
b) Risk Improvement (61) (99) (54) (27) (20)
2 – New Transactions 75 83 55 81 56
3 – Write-offs (7) (4) (4) (14) (6)
Total (1 + 2 + 3): 28 1 23 84 61
Other Impacts* (10) (14) (30) (58) (50)
Final Allowance 143 130 123 149 160
Allowance Required by CMN Resolution 2682 143 130 123 149 160
*Amortization, settlement , installments, and charges
87 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.2.5 Foreign Loan Portfolio
The table below shows the risk profile of BB’s foreign loan portfolio. In March 2005, loans ranked at
levels of risk between AA and C had a 97.7% share of the total, while in March 2006, these levels of risk
showed an even greater concentration, amounting to 98.2% of this portfolio.
Table 87. Loan Protfolio Abroad by Level of Risk
R$ million
Mar/05 Dec/05 Mar/06
Balance Allowance Comp.% Balance Allowance Comp. % Balance Allwoance Comp. %
AA 5,522 - 58.4 4,937 - 53.8 4,700 - 53.0
A 2,772 14 29.3 3,576 18 39.0 3,610 18 40.7
B 718 7 7.6 410 4 4.5 304 3 3.4
C 230 7 2.4 83 2 0.9 98 3 1.1
D 38 4 0.4 17 2 0.2 16 2 0.2
E 2 1 0.0 2 1 0.0 2 1 0.0
F 0 0 0.0 0 0 0.0 - - 0.0
G 5 3 0.1 - - 0.0 0 0 0.0
H 171 171 1.8 152 152 1.7 142 142 1.6
Total 9,457 207 100.0 9,177 179 100.0 8,872 168 100.0
AA-C 9,241 28 97.7 9,006 24 98.1 8,712 24 98.2
D-H 216 179 2.3 171 154 1.9 160 144 1.8
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 88
7.3 Contribution Margin
Table 88. Contribution Margin
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Net Financial Margin 3,029 2,900 3,061 1.1 5.6
Service Revenues 1,767 2,001 2,103 19.0 5.1
Taxes on Revenues (351) (393) (409) 16.7 4.2
Contribution Margin 4,446 4,509 4,755 7.0 5.5
Starting from the net financial margin, which expresses the Bank’s financial performance, adding the
service revenues and deducting the taxes on revenues (Pasep, Cofins and ISSQN), we obtain the
Contribution Margin.
The contribution margin totaled R$ 4,755 in 1Q06, growth of 7.0% in relation to 1Q05 and 5.5% to 4Q05.
The graph below shows the percentage growth of service revenues of one quarter in relation to those
recorded in the same period of the previous year.
Growth in Service Revenues - Xt/Xt-4 %
22.3 21.5
19.0
17.4 17.6
13.8 13.7
12.7
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Figure 40. Growth in Service Revenues
Service Revenues totaled R$ 2,103 million. The table below shows a breakdown of service revenues. A
growth of 19.0% is shown in relation to 1T05 and 5.1% in relation to 4Q05. The largest revenues in this
group are the customer relationship fees and those from asset management, which account for 49.2% of
the total of service revenues in the year. Furthermore, these revenues, together with those from credit
cards, were those that showed higher growth in the period.
Table 89. Sevices Revenues
R$ million
Quaterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Services Revenues 1,767 2,001 2,103 19.0 5.1
Customer Relantioship Fees 589 648 679 15.3 4.8
Investment Fund Management Fees 283 310 356 25.8 14.7
Credit Cards 163 199 201 23.4 0.8
Collections 168 190 189 12.7 (0.3)
Loan Fees 149 162 135 (9.8) (17.0)
Fund Transfers 118 131 218 85.7 66.3
Others 297 360 324 9.4 (9.8)
89 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Breakdown and Performance of Services Revenues - %
31.0 30.0 31.6 33.4 33.1 32.6 32.4 32.3
Costumer
Relationship Fees
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Investment Fund 14.7 15.7 16.0 15.8 16.5 15.5 16.9
14.6
In Management
Fees
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Credit Cards 8.6 8.0 9.2 9.2 8.6 9.5 10.0 9.6
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
9.6 10.2 9.5 9.5 9.5 9.5
9.2 9.0
Collections
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
9.8 9.4 9.0 8.5 9.1 8.4 8.1
Loan Fees 6.4
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
10.4
Funds Transfer 6.3 6.5 6.8 6.7 6.4 7.0 6.6
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
19.9 21.2 18.6 16.8 17.6 16.5 18.0 15.4
Others
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Figure 41. Breakdown and Performance os Services Revenues
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 90
7.3.1 Revenues with Customer Relationship Fees
In 1Q06, revenues from customer relationship fees totaled R$ 679 million, an expansion of 15.3% in
relation to 1Q05 and 4.8% in relation to 4Q05. The share of revenues from customer relationship fees in
the Service Revenues reached 32.3% in the quarter . The graph below shows that the revenues from
customer relationship fees have shown greater growth than the customer base, revealing that the Bank
has managed to tighten its business links with its customers.
Revenues from Relantioship Fees and Costumer Base
Base: 2Q04
33.2%
16.0%
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Revenues from Relantionship Fees Costumer Base
Figure 42. Revenues from Relationship Fees and Customer Base
BB’s had 23.3 million current account holders in March 2006, a number that is 9.6% higher than in the
same period of the previous year.
Costumer Base
in thousand
20,924 21,475 21,812
19,858 20,511
18,779 19,234 19,720
1,274 1,373 1,369 1,361 1,398 1,405 1,432 1,447
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Individuals Companies
Figure 43. Costumer Base
91 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.3.2 Asset Management
In March 2006, the Bank reached R$ 356 million in Asset Management fees, a 25.8% growth in relation
to 1Q05 and 14.7% in relation to 4Q05. The share of these fees in the total of Service Revenues
reached 16.9% in the first quarter.
BB Administração de Ativos – Distribuidora de Títulos e Valores Mobiliários (BB DTVM), a wholly-owned
subsidiary of Banco do Brasil, showed growth of 22.4% in the volume of assets under management in
the last 12 months, which totaled R$ 169.2 billion. This volume confirms BB’s leadership as the largest
asset manager in the country, with a 20.1% market share, according to Anbid’s ranking.
Asset Management
R$ billion
20.8 21.3 20.9
20.0 20.2 20.1
19.9 19.7
169.2
150.4 153.5
138.2 144.8
116.9 122.5 124.0
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Asset Management Market Share - %
Figure 44. Asset Management
BB DTVM has funds for different kinds of customers. According to the table below, investment funds
and managed portfolios aimed at institutional investors have the largest share in the total registered in
March 2006, with 38.1%, followed by individuals and government, with 30.0% and 16.8% respectively.
We highlight the growth of Investment Funds and Managed Portfolios addressed to Government, from
R$ 19,072 million to R$ 28,500 million (Mar05 – Mar06), a 49.4% increase in the period.
Table 90. Investment Funds and Managed Portfolios by Customer
R$ million
Chg. %
Mar/05 Part. % Dec/05 Part. % Mar/06 Part.% on Mar/05 on Dec/05
Institutional Investors 57,447 41.6 62,952 41.0 64,366 38.1 12.0 2.2
Individuals 38,607 27.9 47,916 31.2 50,672 30.0 31.3 5.8
Government 19,072 13.8 20,905 13.6 28,500 16.8 49.4 36.3
Businesses 13,665 9.9 13,638 8.9 19,328 11.4 41.4 41.7
Foreign Investors 8,545 6.2 8,056 5.2 6,192 3.7 (27.5) (23.1)
Others 861 0.6 41 0.0 92 0.1 (89.3) 123.9
Total 138,197 100.0 153,508 100.0 169,150 100.0 22.4 10.2
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 92
Investment Funds and Managed Portfolios
R$ billion
169.2
150.4 153.5
144.8
138.2
122.5 124.0
116.9 113.1
106.3
98.4 101.2
93.0 96.3
90.2
86.8 112.4
98.8 104.2
92.7 92.9
80.9 83.8 86.2
42.3 48.1
35.0 37.4 40.4
30.2 31.8 32.3
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
BB Bradesco Itaú CEF
Figure 45. Investment Funds and Managed Portfolios
Investiment Funds
R$ billion
160.5
145.1 148.4
139.0
132.8
117.4 119.1
111.9
104.8
93.5 98.2
90.8
88.9
78.1 80.9 84.7
104.5
91.6 97.2
77.1 85.1 86.1 46.1
74.1 80.5 37.8 39.6
29.7 30.0 32.7 34.9
28.3
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
BB Bradesco Itaú CEF
Figure 46. Investiment Funds
Managed Portfolios and Investment Clubs
8.8 9.3 8.6 R$ billion
8.2 7.6 8.0 8.3
7.6 7.7
7.4
6.8 7.9
6.7
7.2 7.0 7.8
5.8 6.9 7.3
6.6
6.1
5.1 5.4 5.4 5.7
5.4 5.8 5.2
5.0 5.1 5.3
4.9
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
BB Bradesco Itaú Unibanco
Figure 47. Managed Portfolios and Investment Clubs
93 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.3.3 Credit Cards
The revenues from credit cards in the total of service revenues was R$ 201 million in 1Q06, a growth of
23.4% in relation to 1Q05.05. The participation of these revenues in total service revenues reached
9.6% in the quarter, in relation to 9.2% in the same period of the previous year.
Banco do Brasil has expanded its credit card base by 30.6% in the last 12 months, closing the year with
9.4 million cards, as we can see in the following figure. Revenues from credit cards in 1Q06 reached
R$4,877 million, a 28.4% increase in relation to 1Q05 and a 4.7% increase in relation to 4Q05.
Credit Cards
in million
9.3 9.4
8.0
7.5
6.9 7.2
6.6
6.1
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 48. Credit Cards
Credit Cards Sales by Brand
R$ million
3,838 3,967
3,419
3,126 3,147 3,233
2,916
2,697
818 910
594 646 651 653 690
541
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Visa Mastercard
Figure 49. Credit Cards Sales by Brand
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 94
7.3.4 Collections
Revenues from collections increased 12.7% in 1Q06, in relation to the same period of the previous year,
reaching R$ 189 million at the end of the period. The total volume collected grew 8.3% in the 12-month
period. In March 2006, BB reached 410 thousand active collection agreements, against 365 thousand in
March 2005.
BB Collection Volume
R$ million
84,167
83,862
82,019
80,644
80,136
77,745
76,526
71,949
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Figure 50. BB Collection Volume
95 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.4 Commercial Income
Table 91. Commercial Income
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Contribution Margin 4,446 4,509 4,755 7.0 5.5
Administrative Expenses (2,992) (3,268) (3,156) 5.5 (3.4)
Personnel Expenses (1,638) (1,802) (1,781) 8.7 (1.2)
Other Administrative Expenses (1,315) (1,428) (1,331) 1.2 (6.8)
Other Tax Expenses (39) (39) (44) 14.3 14.0
Commercial Income 1,453 1,241 1,600 10.1 28.9
Commercial income represents the Bank’s business earnings after the deduction of the expenses
necessary for carrying on the business. As from the 2Q05 edition, the expenses with labor and civil
lawsuits, previously recorded in personnel expenses and other administrative expenses respectively,
have been separeted. These expenses have been recorded in a new group called legal risk, which
comes right after commercial income. This change aims to bring greater stability and to facilitate an
analysis of the administrative expenses, besides demonstrating the behavior of legal risk in the Bank
better.
In March 2006, the Bank recorded R$ 1,600 million in Commercial Income, against R$ 1,453 million in
March 2005, an increase of 10.1%. On the other hand, in relation to the last quarter of 2005, there was
an increase of 28.9%, mainly due to the effects derived from the decrease in administrative expenses in
the 1Q06.
Changes in Commercial Income
9.5%
6.0%
1.3%
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Net Financial Margin Contribution Margin Commercial Income
Figure 51. Changes in Commercial Income
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 96
7.4.1 Personnel Expenses
Personnel expenses went up from R$ 1,638 million in 1Q05 to R$ 1,781 million in 1Q06, a growth of
8.7%. In relation to 4Q05, there was a 1.2% decrease.
Table 92. Personnel Expenses
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Personnel Expenses (1.638) (1.802) (1.781) 8,7 (1,2)
Salaries (759) (1.003) (792) 4,3 (21,1)
Benefits (205) (219) (218) 6,2 (0,8)
Social Charges (300) (385) (400) 33,5 4,0
Training (6) (23) (8) 38,6 (62,9)
Remuneration for Counselors and Directors (3) (3) (3) 2,7 1,4
Administrative Personnel Provisions (365) (169) (359) (1,6) 113,3
Starting in the previous edition, the number of employees who are on leave, leave of absence and
seconded to other companies has been deducted from the workforce, in such as way as to demonstrate
the Bank’s real workforce, that is to say, the employees that are effectively contributing towards
generating results.
Banco do Brasil closed the 1Q06 with 93,865 collaborators, a workforce 0.3% lower than that recorded
in December 2005 and 2.5% higher than recorded in March 2005.
Changes in Workforce
94,641
94,114
93,569
93,865
91,556
90,137
90,064
89,665
84,048
83,751
82,969
83,405
80,904
79,725
79,611
78,995
10,670
10,526
10,339
10,652
10,600
10,593
10,363
10,460
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Total Employees Interns
Figure 52. Changes in Workforce
The natural renewal of the Bank’s workforce has allowed a relative stability in expenses with personnel,
even with the salary increases awarded: 12.6% in 2003, 8.5% in 2004 and 6% in 2005. It is worth to
highlight that the participation of employees up to 10 years grew from 42,5% to 47,7% of total in the last
12 months, as shown in the figure below.
97 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Tenure
1Q05 4Q05 1Q06
35.2% 32.0% 32.4%
39.4% 38.5%
44.0%
3.1% 20.6% 3.4% 19.8% 9.2%
22.2%
Up to 5years 6 to 10 years 11 to 20 years Over to 20 years
Figure 53. Tenure
Some BB productivity ratios are shown below.
Productivity Ratios
Assets per Employee - R$ thousand Costumers per Employee
248
2,819 243
2,654 2,683 2,688
2,614 2,594
2,536 2,499 236
234 234
232
229
224
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Employees / (Branches + PAA + PAB)
17,7
17,5 17,5 17,4
17,0
16,8 16,9 16,8
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 54. Productivity Ratios
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 98
7.4.2 Other Administrative Expenses
Other Administrative Expenses reached R$ 1,331 million in 1Q06, a 1.2% increase in relation to the
same period of previous year. Analyzing the first quarter, a reduction of 6.8% is seen in this item, in
relation to 4Q05. This performance is due to the Bank strong control and improvement in management
of costs that impacted the efficiency ratios positively.
Table 93. Other Administrative Expenses
R$ million
Quarterly Flow Chg.%
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Other Administrative Expenses (1,315) (1,428) (1,331) 1.2 (6.8)
Telecommunications and Data Processing (341) (350) (373) 9.5 6.7
Amortization and Depreciation (174) (169) (170) (2.3) 0.4
Security, Guard and Transport Services (187) (197) (185) (0.8) (6.0)
Expenses with Premises and Equipment (175) (182) (191) 9.0 5.0
Marketing and Public Relations (84) (132) (71) (14.8) (46.2)
Expenses with Outsourced Services (138) (144) (129) (6.4) (10.3)
Other Administrative Expenses (217) (253) (211) (2.7) (16.7)
The items most directly related to the running of the business (telecommunications and data processing,
surveillance, security and transport services, property and equipment) added up to R$ 749 million in
1Q06, showing growth of 6.5% in relation to the same period of last year, explained, mainly, by the
following factors:
- 2.1% expansion in the service network – opening new points of service has a direct implication for
an increase in the greater part of the items making up administrative expenses;
- 9.6% increase in the customer base – the increase in the quantity of customers, besides the
increase in the points of service, has an influence on the quantity of correspondence sent, data
processing, use of the self-service channels, etc; and
- Contractual readjustments relating to data processing.
In 1Q06, expenses with marketing and public relations decreased 14.8% in relation to 1Q05 and 46.2%
in relation to 4Q05, to total R$ 71 million. The behavior of these expenses was due mainly to the
reduction in spending on advertising, events and sponsorships, as a result of a review of contracts with
agencies and suppliers, besides the restructuring of the area.
99 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.4.3 Distribution Network
Banco do Brasil is present in 3,080 municipalities all over Brazil. At the end of March 2006, the Bank's
distribution network comprised 14,866 points of service (growing 2.1% in relation to March 2005). The
distribution network is classified as follows:
Table 94. Distribution Network
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec05 Mar/06
Branches 3,618 3,662 3,722 3,786 3,814 3,857 3,894 3,923
PAA 187 188 188 185 185 186 188 190
PAB 1,520 1,495 1,455 1,400 1,358 1,318 1,300 1,273
PAE 5,280 5,461 5,614 5,665 5,657 5,643 5,668 5,700
SAA 3,285 3,406 3,455 3,519 3,572 3,706 3,749 3,775
PAP 18 18 16 9 7 6 5 5
Total 13,908 14,230 14,450 14,564 14,593 14,716 14,804 14,866
The Bank’s distribution network is divided into 5 types of points of service, besides the branches:
PAA – Advanced Service Post: these are points of service intended for towns lacking banking services.
They have a small staff and electronic services;
PAB – Banking Service Post: this type of unit is located inside the premises of companies or
government offices. This service structure requires one employee and electronic services;
PAE – Electronic Service Post: the structure of services is exclusively electronic; and
SAA – Self-Service Room: exclusively electronic structure of services, installed in the main areas of the
branches; and
PAP – Payment and collection post: located mainly in government offices (town halls) for carrying out
receipts and payments. Employees and automated teller machines provide the service:
Total Distribution Network
BB 7.5%
North Northeast
BB 25.8%
Branches 236 Branches 987
Others 864 Others 2,814
Total 1,100 Total 3,801
BB 11.4%
Midwest BB 36.9%
Branches 389 Southeast
Others 1,293
Branches 1,505
Total 1,682
Others 3,921
BB 19.4% Total 5,426
South
Branches 806
Others 2,051
Total 2,857
Figure 55. Total Distribution Network
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 100
To provide its service to the wholesale segment, Banco do Brasil has a specific distribution network.
The staff of this network undergoes highly specialized training and works in harmony with the various
needs of this market.
The locations of the Wholesale pillar include 17 Corporate branches and 68 Business branches, which
are intended to serve companies with annual sales in accordance with the following table:
Table 95. Wholesale Pillar Branches
Industry Commerce Services
Corporate Over R$ 90 million Over R$ 150 million Over R$ 150 million
Business From R$ 10 to R$ 90 million From R$ 10 to R$ 150 million From R$ 10 to R$ 150 million
Distribution Network - Wholesale
North Northeast
Business 2 Business 7
Corporate 0 Corporate 1
Total 2 Total 8
Midwest
Business 4 Southeast
Corporate 1
Business 37
Total 5 Corporate 11
South Total 48
Business 18
Corporate 4
Total 22
Figure 56. Distribution Network - Wholesale
The Government market keeps its business focus trained on the relationship with the federal, state and
municipal government, in the spheres of the executive, legislative and judiciary branches. The
Government market’s strategy of work has ensured appropriate solutions for the specific aspects of
each one of the niches of its segment, acting to generate value through solutions with new products and
freeing processes from red tape.
The locations of the Government pillar include 36 branches, distributed as shown in the following figure:
Distribuição Network - Government
North Northeast
Branches 7 Branches 11
Others 2 Others 7
Total 9 Total 18
Midwest
Branches 5 Southeast
Others 4 Branches 8
Total 9 Others 8
South Total 16
Branches 5
Others 5
Total 10
Figure 57. Distribuition Network - Government
101 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Besides its own network, BB has bank correspondents (Aqui tem BB), which at the end of March 2006
totalized 1,762 points of service and 14,980 ATMs for receipt of payment booklets, taxes and bank titles.
Banco do Brasil’s network abroad comprises 40 points of service (17 branches, 8 sub-branches, 10
business units and offices and 5 subsidiaries) in 23 countries. To supplement its own network abroad, at
the end of 4Q05 BB maintained a relationship with 1,472 financial institutions, present in 147 countries.
This network is of great importance for complementing BB 's own network of branches abroad and for
making it possible to carry out transactions and business, for itself and for customers.
Table 96. Distribution Network Abroad
Branches Sub-Branches Business Units Subsidiaries
Amsterdam Cascais Caracas Banco do Brasil AG
Assunção Gifu Cidade do México Banco do Brasil Securities LLC
Buenos Aires Gunma* Hong Kong BB Leasing Company Ltd,
Cidade do Leste Hamamatsu* Lima BB Securities Ltd,
Frankfurt Ibaraki Luanda BAMB Brasilian American Merchant Bank
Grand Cayman Nagano Roma
La Paz Nagóia* Xangai
Lisboa Santa Cruz de La Sierra Washington
Londres Seul**
Madri Dubai**
Miami
Milão
Nova Iorque
Panamá
Paris
Santiago
Tóquio
* Sub-Branche being transformed in Branch,
** Unit in process of instalation
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 102
7.4.4 Automated Channels
Banco do Brasil’s self-service network represents a strategic differential. BB’s customers have at their
disposal the largest network of automated teller machines (ATMs) in Latin America, with terminals in
Brazil and abroad. At the end of December, BB customers had at their disposal 40,957 ATMs, compared
to 39,180 in March 2005, growth of 4.5%.
Automated Teller Machines
40,957
40,191
39,856
39,324
39,015
39,180
38,153
38,242
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 58. Automated Teller Machines
This technological infrastructure has provided support for BB in its strategy for controlling costs. In
December 2005, over 523 million transactions were carried out over the ATM network, an increase of
4.8%, compared to the same period of the previous year.
The importance of this channel in BB’s transactions can be seen from the figures below, which show the
percentage of banking transactions carried out through the ATMs:
- 94.7% of the cash withdrawals;
- 83.0% of the check books delivered;
- 69.4% of the deposits; and
- 58.8% of the receipts of bills and contractual payments.
The share of automated transactions in the total of transactions carried out by BB’s customers
amounted to 88.6% in March 2006, against 87.9% in the same period of the previous year.
Share of Automated Transactions / Total Transactions - %
89,6 89,2
88,4 87,9 88,1 88,4 88,6
86,9
Jun/04 Set/04 Dez/04 Mar/05 Jun/05 Set/05 Dez/05 Mar/06
Figure 59. Share of Automated Transactions / Total Transactions - %
103 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Besides the cashiers at the branches and the ATMs, Banco do Brasil offers several other options for
access to banking services, such as: the Internet, its Financial Manager (an Internet banking tool for
businesses), POS equipment (credit and debit card machines at the commercial establishments),
telephone, fax, and WAP.
The chart below shows that the other service channels have been gaining ground in the customers’
preference:
Costumer Access Options - %
2.3 1.9 2.2 2.0 4.2 4.1 3.9 3.9
5.2 5.3 6.9 6.0 6.1
5.9 7.7 6.4
13.1 10.4 11.6 12.1 11.9 11.6 10.8 11.4
16.8 16.8
16.6 16.7 15.9 14.8 16.6 17.2
11.9 15.0 11.9 13.0 12.8 13.8 12.7 14.1
51.2 50.6 50.7 50.1 49.3 49.6 48.3 47.0
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
ATM Internet Internet Cashier POS COBAN and Others
Individuals Corporate
Figure 60. Costumer Access Options
Banco do Brasil continues to be the leader on the Internet. At the end of March 2006, the number of
customers reached 8.1 million, growing 14.1% in relation to the same period of the previous year. The
above chart shows that the share of transactions carried out via the Internet has grown, gaining ground
from such important channels as cashiers and ATMs.
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 104
7.4.5 Productivity – Coverage Ratios
The coverage ratios show the capacity for covering fixed costs using only service revenues.
As the following graph shows, coverage ratio of service revenues over personnel expenses went up
from 97.9% in 1Q05 to 112.1% in 1Q06. The growth of this ratio is explained by the growth of service
revenues and the control over personnel expenses.
Broadening the concept to the capacity for coverage of all the administrative expenses, a similar
movement can be seen, with an increase from 54.4% in 1Q05 to 64.1% in 1Q06.
Coverage Ratios - %
Services Revenues/Personnel Expenses
119.6
112.1
98.1 98.4 97.9 100.8 99.5
92.5
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Services Revenues/ Administratives Expenses
64.0 64.1
57.9 56.4
53.1 54.9 54.4
51.2
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Figure 61. Coverage Ratios
Table 97. Coverage Ratios
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Service Revenues 1,643 1,717 1,702 1,767 1,929 1,952 2,001 2,103
Administrative Expenses (2,832) (2,908) (3,065) (2,992) (3,035) (3,106) (3,268) (3,156)
Personnel Expenses (1,552) (1,603) (1,671) (1,638) (1,687) (1,709) (1,802) (1,781)
Legal Risk (261) (221) (258) (258) 22 (268) (281) (126)
Legal Claims (139) (79) (89) (92) (52) (40) (70) (31)
Labor Lawsuits (122) (141) (169) (166) 74 (228) (211) (95)
Service Revenues/Personnel Exp.* 98.1 98.4 92.5 97.9 119.6 100.8 99.5 112.1
Service Revenues/Administ, Exp.** 53.1 54.9 51.2 54.4 64.0 57.9 56.4 64.1
* In the calculation of this ratio Labor Lawsuts are included.
** In the calculation of this ratio Legal Risk is included (Legal Claims and Labor Lawsuts).
105 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Despite the expansion of the service network, which is necessary to meet the constant increase in the
customer base, BB has kept its cost structure compatible with its generation of business, as seen in the
graphs below:
Productivity Ratios
Loan Portfolio / Points of Service Services Revenues / Points of Service
135.2 141.5
132.2 132.7
118.1 120.6 117.8 121.3
6.9 7.1
6.1 6.4 6.6 6.4
6.0 5.9
14.6 14.7 14.8 14.9
14.5 14.6
14.2
13.9
14.6 14.6 14.7 14.8 14.9
14.2 14.5
13.9
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06 Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Points of Service
Loan Portfolio / Points of Service - R$ thousand Points of Service Service Revenues / Points of Service
Costumers / (Branches + PAA + PAB)
4,165 4,256 4,318
4,090
3,855 3,931 3,951
3,766
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
Figure 62. Productivity Ratios
R$ million
CAGR
17,624 17.5%
16,709
15,327 15,464 11.8 %
13,575
12,398 12,623 6.6%
11,298 11,524
10,109 9,645
9,161
8,412
7,648
6,607
5,491
4,454
3,760
2001 2002 2003 2004 2005 1Q06*
Services Revenues Gross Financial Margin Administratives Expenses
* Annualized,
Figure 63. Business vs. Expenses
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 106
7.5 Operating Income
Table 98. Operating Income
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Commercial Income 1,453 1,241 1,600 10.1 28.9
Legal Risk (258) (281) (126) (51.0) (55.1)
Legal Claims (92) (70) (31) (66.1) (55.7)
Labor Lawsuits (166) (211) (95) (42.7) (54.9)
Other Operating Income (Expenses) 84 359 (9) (110.5) (102.5)
Equity Interest in Results of Subs, and Affil, 144 134 106 (26.4) (21.3)
FX Other Operating Income/Expenses (60) 224 (115) 91.7 (151.2)
Other Operating Income 596 1,036 631 5.8 (39.1)
Other Operating Expenses (656) (812) (746) 13.6 (8.2)
Operating Income 1,280 1,319 1,465 14.4 11.1
As commented in chapter 7.4 Commercial Income, civil and labor lawsuits have been separated into a
group called legal risk, with a view to demonstrating these expenses better and facilitating an analysis of
administrative expenses.
A significant decrease can be observed in the expense group called legal risk. Regarding such matter,
the sum of Civil and Labor Lawsuits showed a reduction of 51.0% in relation to the same period of last
year, and of 55.1% compared with the last quarter of 2005.
The item Equity Interest in Subsidiaries and Affiliated Company showed a decrease of 26.4% in relation
to 1Q05, partly caused by the exchange appreciation effects on non-financial Shareholder’s Equity
abroad.
The 5.8% increase in the item operational income was greatly influenced by an increase in revenues
derived from secured deposits compared to the same period in 2005. With respect to operational
expenses, part of the 13.6% increase was due to interest on equity updating in the last 12 months.
The table and the graph below show the efficiency attained by Banco do Brasil. The ratio of
administrative expenses plus legal risk to operating revenues reached 51.3% in 1Q06, a 480 basis
points reduction in relation to the same period of the previous year. The improvement shown in the
efficiency ratio in 1Q06 was caused mainly by the increases in the gross financial margin, service
revenues and other operating income.
Table 99. Eficiency Ratio
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
A) Administrative Expenses (2,832) (2,908) (3,065) (2,992) (3,035) (3,106) (3,268) (3,156)
Personnel Expenses (1,552) (1,603) (1,671) (1,638) (1,687) (1,709) (1,802) (1,781)
Other Administrative Expenses (1,242) (1,265) (1,358) (1,315) (1,314) (1,362) (1,428) (1,331)
Other Tax Expenses (37) (41) (36) (39) (34) (36) (39) (44)
B) Legal Risk (261) (221) (444) (258) 22 (268) (281) (126)
Legal Claims (139) (79) (275) (92) (52) (40) (70) (31)
Labor Lawsuits (122) (141) (169) (166) 74 (228) (211) (95)
C) Operating Income 5,244 5,505 5,597 5,797 6,070 6,155 6,623 6,394
Gross Financial Margin 3,925 3,919 4,086 4,090 4,146 4,199 4,398 4,406
Service Revenues 1,643 1,717 1,702 1,767 1,929 1,952 2,001 2,103
Other Operating Income 383 457 621 596 632 692 1,036 631
Other Operating Expenses (707) (588) (812) (656) (637) (689) (812) (746)
Efficiency Ratio ((A+B) / C) - % 59.0 56.8 62.7 56.1 49.6 54.8 53.6 51.3
107 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 100. Efficiency Ratio Statement - Quarterly
Effect in the
1Q05 1Q06 Abs. Chg Chg. %
Ratio
Administrative Expenses (3,250) (3,282) (32) 1.0 0,6
Personnel Expenses (1,638) (1,781) (142) 8.7 2,5
Other Administrative Expenses (1,315) (1,331) (15) 1.2 0,3
Other Tax Expenses (39) (44) (6) 14.3 0,1
Legal Risk (258) (126) 131 (51.0) (2,3)
Operating Income 5,797 6,394 597 10.3 (5,2)
Gross Financial Margin 4,090 4,406 316 7.7 (2,9)
Service Revenues 1,767 2,103 336 19.0 (3,1)
Other Operating Income 596 631 35 5.8 (0,3)
Other Operating Expenses (656) (746) (89) 13.6 0,9
Adm, Exp, and Oper, Inc, (consolidated effect) (0,1)
Efficiency Ratio % 56.1 51.3 (4.7)
Efficiency Ratio - %
58.6
58.2 57.7 57.6
56.8 56.6 57.2
56.3
59.0 62.7
56.8 56.1 54.8 53.6
49.6 51.3
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Efficiency Ratio Eficiency Ratio - Average 12 Months
Figure 64. Efficiency Ratio - %
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 108
7.6 Net Income
Table 101. Net Income
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Operating Income 1,280 1,319 1,465 14.4 11.1
Non-operating Income 98 28 26 (73.1) (6.1)
Income Before Taxes 1,378 1,347 1,491 8.2 10.7
Income and Social Contribution Taxes (483) (447) (363) (24.8) (18.8)
Interest on Own Capital Tax Benefit - 252 - - (100.0)
Statutory Profit Sharing (78) (163) (190) 144.0 16.4
Recurring Income 817 737 938 14.8 27.3
Non-Recurring Items 148 - 1,405 852.0 -
Extraordinary Provision for Credit Risks (7) - (500) - -
Recovery of Undue Taxes (9) 229 - - (100) -
Provision for Non-recurring IR and CS (10) (76) - - (100) -
Non-recurring Pasep/Cofins (11) (6) - - (100) -
Tax credits recorded - - 1,905 - -
Net Income 965 737 2,343 142.9 217.9
In 1Q06, the Bank’s net income was R$ 2,343 million, against R$ 965 million in 1Q05, an increase of
142.9%. In relation to 4Q05, net income in 1Q06 was 217.9% higher. This result was caused by a
change in tax credit treatment criteria, according to CMN Resolution 3.355, of 03/31/2006. This allowed
the recording of R$ 1.9 billion of tax credit related to previous periods, an amount considered non
recurring.
The annualized Return on Equity (ROE) was 63.0% in the 1Q06, compared with 29.3% in the 1Q05
The recurring expenses with Income tax (IR) and Social Contribution (CS) in 1Q06 were lower in relation
to the same period of last year, recording 24.3%. Among other factors, the recording of tax credit on
temporary differences in the quarter, due to the publication of CMN Resolution 3.355, of 31.03.2006,
which permits the recording of tax credits whose period for realization is up to 10 years, differently from
the previous regulation, which established a period of up to 5 years.
Changes in Earnings before Taxes
R$ million
37.7 34.9 32.4 38.6 33.2
20.2 24.3
17.3
2,533
1,601 1,760
1,445 1,347 1,491
1,184 1,083
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
EBT IR/LAIR - %
Figure 65. Changes in Earnings before Taxes
109 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Recurring Income
The recurring income for the period amounted to R$ 938 million, 14.8% higher than that recorded in the
same period of the previous year and 27.3% higher than observed in 4Q05. The recurring ROE was
22.2% p.a., against 24.5% p.a. in 1Q05 and 18.7% p.a. in 4Q05.
Extraordinary Items
The extraordinary items relating to 1Q06 are detailed in item 5.3.1 – Details of the Reallocations.
Regarding 1Q06, the Bank recorded revenues, net of taxes, of R$ 1,405 million, of which R$ 500 million
were related to reinforcement of provisions and R$ 1.905 to recording of tax credit for periods prior to
2005
The graphs that follow show the changes both in net income and recurring income, and in the
corresponding returns on shareholders’ equity.
Change in Net Income
R$ million
2,343
1,438
965 1,014
805 724 771 737
1,014 873 938
703 833 586 817 737
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Recurring Income Net Income
Figure 66. Change in Net Income
Change in ROE - %
63.0
40.8
27.7 24.0 29.3 29.6
23.6 18.7
27.5 24.5 29.6
23.9 17.9 23.5 18.7 22.5
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Recurring ROE ROE
Figure 67. Change in ROE
Table 102. Return on Equity
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Recurring Income 703 724 586 817 1,014 873 737 938
Net Income 805 833 771 965 1,014 1,438 737 2,343
Average Shareholders’ Equity 12,775 13,318 13,939 14,519 15,163 16,109 16,838 18,029
Recurring ROE - % 23.9 23.6 17.9 24.5 29.6 23.5 18.7 22.5
ROE - % 27.7 27.5 24.0 29.3 29.6 40.8 18.7 63.0
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 110
Table 103. ROE decomposition - Quarterly
1Q05 4Q05 1Q06
NI RI NI RI NI RI
Gross Financial Margin 124.4 122.6 111.5 111.5 118.5 105.7
Allowance for Loan Losses (32.3) (31.8) (38.0) (38.0) (36.2) (32.2)
Service Revenues 53.7 52.9 50.8 50.8 56.6 50.4
Taxes on Revenues (25.3) (25.0) (21.3) (21.3) (20.8) (18.5)
Administrative Expenses (91.0) (89.7) (82.9) (82.9) (84.9) (75.7)
Other Components of Result*** (4.7) (4.6) (1.5) (1.5) (8.0) (7.2)
Recurring Income ** 24.5 18.7 22.5
Non-recurring Items 4.5 - 37.8
Net Income* 29.3 18.7 63.0
* Legal Risk, Other Operating Income (expenses), non-operating income, Statutory Profit Sharing
The Analytical ROE has the aim of showing the behavior of the items that make up the Bank’s results.
According to the table above, the gross financial margin (GFM) the service revenues and the
extraordinary items were those that most contributed to the making up of the result. On the expenses
side, we can observe a larger share of administrative expenses, which has been falling systematically
throughout the years, and allowances for loan losses. Comparing 1Q06 to 1Q05, both from the point of
view of net income and of recurring income, it can be seen that the lower contribution of the GFM to
making up the ROE has been offset by the reduction in administrative expenses.
111 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
7.7 Net Value Added
The table Net Value Added shows how Banco do Brasil’s income is made up of the of the generation of
value from each of the Bank’s businesses, and then shows a breakdown of the distribution of these
proceeds. The point of view used is the gross financial margin, which includes financial intermediation
revenues and expenses, without allowances for loan losses.
Table 104. Net Value Added
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Gross Financial Margin 4,090 4,398 4,406 7.7 0.2
Income from Non-Financial Products 1,484 1,656 17 (98.8) (98.9)
Customer Relationship Fees 589 648 - (100.0) (100.0)
Investment Fund Management Fees 283 310 - (100.0) (100.0)
Loans 149 162 - (100.0) (100.0)
Collections 168 190 - (100.0) (100.0)
Services Provided to Related Companies 118 131 - (100.0) (100.0)
Credit Cards 163 199 - (100.0) (100.0)
Insurance 14 16 17 28.5 11.0
Others 1,121 1,543 2,849 154.1 84.6
Insurance – Brokerage 81 98 99 22.3 0.6
Insurance – Results 48 70 84 76.3 19.4
Others Service Revenues 202 247 1,987 882.8 705.8
Equity Interest in Results of Subs,and Affil, 96 64 22 - -
Other Operational Revenues 596 1,036 631 5.8 (39.1)
Non Operation Income 98 28 26 - -
Value Added 6,695 7,598 7,272 8.6 (4.3)
Distribution of Value Added* (5,731) (6,860) (4,929) (14.0) (28.1)
Operational Revenues (1,717) (2,310) (2,090) 21.7 (9.5)
Provision for Credit Risk (1,061) (1,498) (1,345) 26.7 (10.2)
Other Operational Income (656) (812) (746) 13.6 (8.2)
Personnel Expenses (1,882) (2,175) (2,065) 9.8 (5.0)
Personnel Expenses (1,804) (2,012) (1,876) 4.0 (6.8)
Statutory Profits Sharing (78) (163) (190) 144.0 16.6
Administrative Expenses (1,407) (1,498) (1,362) (3.2) (9.1)
Tax Expenses (872) (878) (817) (6.4) (7.0)
Taxes on Sale (351) (393) (409) 16.7 4.2
Other Tax Expenses (39) (39) (44) 14.3 14.0
Income and Social Contribution Taxes (483) (447) (363) (24.8) (18.7)
Extraordinary Items 148 - 1,405 - -
Value Added to Shareholders 965 737 2,343 142.9 217.7
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 112
7.8 Gross Value Added
Another way of analyzing the distribution of the value added among the Bank’s various stakeholders is
shown in the table below. Financial intermediation revenues are included in the value added, while
intermediation expenses are included in the distribution of the value added to the Bank’s different
creditors.
Table 105. Gross Value Added
R$ million
Quarterly Flow Chg. %
1Q05 4Q05 1Q06 on 1Q05 on 4Q05
Gross Financial Margin 8,191 8,856 8,892 8.6 0.4
Income from Non-Financial Products 1,484 1,656 17 (98.8) (98.9)
Customer Relationship Fees 589 648 - (100.0) (100.0)
Investment Fund Management Fees 283 310 - (100.0) (100.0)
Loan Fees 149 162 - (100.0) (100.0)
Collections 168 190 - (100.0) (100.0)
Services Provided to Related Companies 118 131 - (100.0) (100.0)
Credit Cards 163 199 - (100.0) (100.0)
Insurance 14 16 17 - 11.0
Other 1,121 1,543 2,849 154.1 84.6
Insurance - Brokerage 81 98 99 22.3 0.6
Insurance – Results 48 70 84 76.3 19.4
Other Service Revenues 202 247 1,987 882.8 705.8
Equity Interest in Results of Subs, and Affil 96 64 22 - -
Other Operational Revenues 596 1,036 631 5.8 (39.1)
Non Operation Income 98 28 26 - (6.1)
Value added 10,795 12,056 11,758 8.9 (2.5)
Distribution of Value Added* (9,831) (11,319) (9,415) (4.2) (16.8)
Financial Intermediation Expenses (4,100) (4,458) (4,486) 9.4 0.6
Operational Expenses (1,717) (2,310) (2,090) 21.7 (9.5)
Provision for Credit Risk (1,061) (1,498) (1,345) 26.7 (10.2)
Other Operational Expenses (656) (812) (746) 13.6 (8.2)
Personnel Expenses (1,882) (2,175) (2,065) 9.8 (5.0)
Personnel Expenses (1,804) (2,012) (1,876) 4.0 (6.8)
Statutory Profits Sharing (78) (163) (190) 144.0 16.6
Administrative Expenses (1,407) (1,498) (1,362) (3.2) (9.1)
Tax Expenses (872) (878) (817) (6.4) (7.0)
Taxes on Sale (351) (393) (409) 16.7 4.2
Other Tax expenses (39) (39) (44) 14.3 14.0
Income and Social Contribution Taxes (483) (447) (363) (24.8) (18.7)
Extraordinary Items 148 - 1,405 - -
Value Added for the Shareholders 965 737 2,343 142.9 217.7
113 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Net Value Added
16.7 14.6 9.4 Others
Others 23.4 Others Others
Value Added to
Income from Non 24.8 32.2 Shareholders
Income from Non 22.2 14.4 Value Added to Produtos Products
Financial
Financial Products Shareholders
13.0 11.2
Tax Expenses Tax Expenses
21.0 Administrative Expenses 18.7 Administrative Expenses
Gross Financial 61.1 21.0 Gross Financial 60.6
Margin Margin
28.1 Personnel Expenses 28.4 Personnel Expenses
28.1
1Q05 1Q06
Figure 68. Net Value Added
Gross Value Added
Value Added to Value Added to
Others 10.3 8.9 Others 9.1 9.4
Shareholders Shareholders
Income from Non 13.8 8.1 Tax Expenses Income from Non 15.3 6.9 Tax Expenses
Financial Products Financial Products 11.6
13.0 Administrative Expenses Administrative Expenses
Personnel Expenses 17.6 Personnel Expenses
17.4
Financial Financial
Intermediation Intermediation 75.6
75.9 Financial Financial
Income Income
Intermediation Intermediation
38.0 38.2
Income Income
1Q05 1Q06
Figure 69. Gross Value Added
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 114
7.9 Insurance, Pension Plans and Capitalization
Banco do Brasil, through BB Banco de Investimentos, a wholly-owned subsidiary, has a shareholding
interest in several companies in the areas of insurance, pension plans and capitalization, offering a
broad range of non-banking products. The table below details BB’s holdings in these companies,
together with the line of business in which they work:
Table 106. Insurance, Pension Plans and Capitalization
Company Share % Business Partnership
Brasilseg Participações S,A, 70.00 Auto Insurance Sul América Seguros
Cia, De Seguros Aliança do Brasil S,A, 70.00 Life Insurance and Others Aliança da Bahia
Brasilprev 49.99 Pension Plans Principal Financial Group e Sebrae
Brasilcap 49.99 Capitalization Icatu Hartford, Sul América e Aliança da Bahia
Brasilsaúde 49.92 Health Insurance Sul América Seguros
The income statement by line of business for 1Q06 is shown below to help to understand the process
and to show greater transparency in the insurance, pension plan and capitalization business.
7.9.1 Income Statement by Line of Business
Table 107. Income Statement by Line of Business
R$ thousand
1Q06 Insurance
Pension
Life and Capitalization Consolidated
Auto Health Total Plans
Other
Rev, from Insuran,, Pension Plans and Capit, 208,714 34,842 306,045 549,601 558,623 409,696 1,517,920
Retained Insurance Premiums 208,714 34,842 306,045 549,601 - - 549,601
Revenues from Pension Plans - - - - 558,623 - 558,623
Revenues from Capitalization - - - - - 409,696 409,696
Changes in Technical Provisions (23,100) 195 (14,451) (37,356) (260,273) (360,664) (658,293)
Insurance (23,100) 195 (14,451) (37,356) - - (37,356)
Pension Plans - - - - (260,273) - (260,273)
Capitalization - - - - - (360,664) (360,664)
Benefits and Redemption Expenses - - - - (289,640) - (289,640)
Earned Premiums 185,614 35,037 291,594 512,245 - - 512,245
Gross Inc, from Pension Plans and Capitaliz, - - - - 8,710 49,032 57,741
Retained Claims (121,150) (21,929) (84,556) (227,635) - - (227,635)
Marketing Expenses (23,749) (1,649) (61,306) (86,704) (12,130) (28,027) (126,860)
Insurances (23,749) (1,649) (61,306) (86,704) - - (86,704)
Pension Plans - - - - (12,130) - (12,130)
Capitalization - - - - - (28,027) (28,027)
Administrative Expenses (23,151) (3,867) (38,903) (65,921) (37,419) (12,454) (115,794)
Commercial Income 17,565 7,593 106,828 131,986 (40,839) 8,552 99,698
Other Operating Income (Expenses) (14,130) (1,873) (68,905) (84,908) 21,360 (3,537) (67,085)
Financial Income 17,328 2,058 30,677 50,063 72,829 63,446 186,339
Financial Revenues 19,715 2,432 43,953 66,100 372,513 129,884 568,497
Financial Expenses (2,387) (373) (13,276) (16,037) (299,684) (66,437) (382,158)
Operating Income 20,763 7,778 68,600 97,141 53,350 68,461 218,952
Non-operating Income 237 - 513 750 31 4 785
Income before Taxes 21,000 7,778 69,113 97,891 53,382 68,465 219,737
Income and Social Contribution Taxes (7,943) (2,419) (20,797) (31,159) (16,723) (21,984) (69,866)
Profit Sharing (2,645) (1,117) (3,516) (7,278) (1,100) (2,405) (10,782)
Net Income/ (Loss) 10,412 4,242 44,800 59,454 35,559 44,076 139,089
Interests of Other Shareholders (3,124) (2,124) (13,440) (18,688) (17,783) (22,042) (58,513)
Other Investment Changes - - 1,436 1,436
115 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
1Q06 Insurance
Pension
Life and Capitalization Consolidated
Auto Health Total Plans
Other
Equity Income Result 7,289 2,117 31,360 40,766 17,776 23,470 82,011
Service Revenues – Commission 24,514 1,714 64,602 90,831 3,298 4,864 98,992
Service Revenues – BB Fees - - 3,428 3,428 8,247 19,580 31,255
Service Revenues – Assets Management 813 123 1,803 2,739 12,289 7,434 22,462
Insurance Value Added 32,616 3,954 101,193 137,763 41,610 55,348 234,720
7.9.2 Combined Ratio
The combined ratio shows the percentage of earned premiums used by operating expenses in the
insurance business (retained claims, expenses with marketing and administrative expenses). The
consolidated combined ratio rose from 87.5% in 1Q05 to 87.7% in 1Q06.
Combined Ratio - %
Consolidated Auto
99,6 104,1
92,8 94,7 93,2 90,5 90,5
88,4 91,6 87,5 90,4 91,1 87,7 87,2 90,6
86,0 21,2
12,3 14,8 13,3 12,6 12,5
11,5 11,6 10,6 8,1 11,1 12,9 12,5 9,4 4,4
11,2 12,8 11,9 12,9
14,3 12,3 13,1 12,8
27,9 28,4 11,5
26,7 28,2 30,0
28,8 28,2 30,4
70,1 66,3 69,3 69,3 70,0 64,8 65,3
53,8 51,8 54,5 56,4 62,9
48,1 48,7 50,0 44,4
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Health Life and Others
101,3 97,3
94,7 93,7 9,6
89,8 88,8 84,6 78,3 98,3
12,6 10,6 9,5 93,8 92,1 92,3 87,0
11,8 5,6 10,9 91,5 85,5
5,2 5,6 10,2 83,7 11,4
5,2 5,4 5,8 11,0 11,0 10,3 13,3
6,2 11,7 10,9 11,5 10,1
4,7
37,9 41,3 40,7 41,2 43,5
40,3 41,4 44,7
86,1 82,2
77,0 72,8 77,7 72,1 68,2 62,6 41,9 41,5 41,3 45,7
34,4 30,9 38,5 29,0
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Administratives Expenses / Earned Premiuns - %
Expenses for Marketing / Earned Premiuns - %
Retained Claims / Earned Premiuns - %
Figure 70. Combined Ratio
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 116
7.9.3 Brasilseg
Criated in March 1997, BB Seguros/Brasilveículos is result of a partnership between Banco do Brasil
and Sul América Seguros, a company contracted in purpose to manage services related to claims and
24 hours assistence. The maily product, BB Seguro Auto, is traded throughout BB Corretora de Seguros
e Administradora de Bens S.A, the whole branches of Banco do Brasil, thelephone and Internet. The
company is currently ranked third in the auto market.
In relation to 1Q05, the insured fleet increased 7.6%, dropped 585 thousand of vehicles to 630 thousand
in March 2006. The combined ratio was slight better due the decrease of retained claims, which came
from 90.6% to 90.5% (1Q05 – 1Q06)
Table 108. Brasilseg Data
R$ thousand
Chg. %
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Fleet – thousand 585 625 630 7.6 0.72
Volume of the Managed Portfolio 256,059 318,511 328,877 28.4 3.25
7.9.4 Brasilsaúde
Created in December 1995, BrasilSaúde Companhia de seguros is the result of a partnership between
Banco do Brasil and Sul America Seguros.
BrasilSaúde uses BB branches and brokers to market health insurance in the following segments:
company, professional, individual, and dental.
The number of lives insured decreased 20.6% in relation to March 2005. Therefore, a less volume of
expenses administratives and retained claims set to an improvment of the combined ratio, which
dropped from 101.3% to 78.3% (1Q05 – 1Q06).
Table 109. Brasilsaúde Data
R$ thousand
Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Lives Insured – thousand 102 84 81 (20.6) (3.6)
Volume of the Managed Portfolio 44,583 49,664 46,686 4.7 (6.0)
7.9.5 Aliança do Brasil
Founded in June 1997, Companhia de Seguros Aliança do Brasil resulted from the association between
Banco do Brasil and Aliança da Bahia. The company is the leader in the Life branch, as well as in ROE
and combined ratio , an indicator that measures the company’s operational efficiency. Aliança do Brasil
operates throughout Brazil, offering its products through Banco do Brasil branches and brokers.
The company has a diversified portfolio of products, made up of 20 types of insurance from the life and
basic lines, and offers solutions that meet the needs of individuals and businesses.
The number of policies increased 22.3% in relation to March 2005. The increase in retained claims
decreased the combined ratio, which came from 83.7% to 87.0%.
117 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Table 110. Aliança do Brasil Data
R$ thousand
Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Life Insurance Policies – thousand 1,373 1,417 1,679 22.3 18.5
Volume of the Managed Portfolio 685,264 717,094 720,132 5.1 0.4
7.9.6 Brasilcap
Brasilcap was formed in 1995, following a partnership between Banco do Brasil and Icatu Hartford, Sul
América and Aliança da Bahia. The company’s main product is Ourocap, which can only be acquired by
BB current account holders. This product is based on two forms of payment: a single installment, or in
monthly installments, with the customer competing for several prizes.
In 12 months, there was a 2.7% increase in the quantity of bonds and an increase of 22.0% in the
volume of the managed portfolio, which amounted to R$ 2,854 million in March 2005.
Table 111. Brasilcap Data
R$ thousand
Chg, %
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Quantity of Bonds – thousand 2,824 2,949 2,899 2.7 (1.7)
Volume of the Managed Portfolio 2,339,324 2,875,839 2,854,379 22.0 (0.7)
7.9.7 Brasilprev
Brasilprev is a supplementary pension plan company of Banco do Brasil, in association with the
Principal Financial Group and Sebrae. Founded in 1993, it actually started marketing its products in
1995. These include the Traditional, PGBL and VGBL plans, and the company is currently ranked third
in the pension plan market.
The number of active participants increased 14.4% in relation to March 2005 and 2.4% in relation to
December 2005. Regarding the volume of managed portfolio, there was an increase of 25.1% and 5.5%
in relation to March and December 2005, respectively.
Table 112. Brasilprev Data
R$ thousand
Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Active participants – thousand 1,410 1,576 1,613 14.4 2.4
Volume of the Managed Portfolio 8,149,813 9,659,217 10,193,075 25.1 5.5
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 118
7.9.8 BB Previdência
BB Previdência is a multisponsored pension fund created in 1994, with the objective of instituting and
managing private pension plans (annuity or income) offering benefits to public and private sector
companies, trade associations, other associations and trade unions operating in Brazil.
Its main competitive advantages are:
- lower management fees, as the institution has its own workforce which is shared with various plans;
and
- better investment rates for the assets under management, given the volumes that are invested.
The institution showed a 28.9% increse in the number of active participants in relation to March 2005
and 18.8% in relation to December 2005, to a total of 45 thousand participants at the end of March
2006. The volume of the managed portfolio amounted to R$ 919 million.
Table 113. BB Previdência Data
R$ thousand
Chg.%
Mar/05 Dec/05 Mar/06 on Mar/05 on Dec/05
Active Participants - thousands 35 38 45 28.9 18.8
Sponsors 54 62 67 24.1 8.1
Volume of the Managed Portfolio 658,727 856,816 919,467 39.6 7.3
119 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
8 – Financial Statements
8.1 Summarized Balance Sheet
Table 114. Balance Sheet – Assets
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
ASSETS 227,374 235,599 239,014 245,685 233,793 245,511 252,977 264,635
Current and long-term assets 222,858 231,014 233,955 240,739 228,776 240,503 247,397 259,111
Available funds 15,841 16,669 15,494 14,408 3,464 4,939 5,828 4,056
Short-term interbank investments 14,475 18,559 16,453 17,681 17,379 29,690 28,996 35,744
Open market investments 4,662 6,160 2,732 3,953 2,118 5,419 8,050 21,839
Interbank deposits 9,813 12,400 13,722 13,729 15,261 24,271 20,946 13,905
Marketable securities 69,855 71,120 73,485 74,089 68,973 68,610 66,470 68,631
Securities for trading 11,998 12,690 13,163 11,309 6,087 2,722 3,077 4,327
Securities available for sale 31,008 31,997 32,790 35,092 35,265 39,075 37,832 38,815
Securities held to maturity 25,146 25,945 26,951 27,039 26,266 26,106 25,275 25,069
Financial derivatives 1,702 488 581 649 1,355 707 287 421
Interbank accounts 20,959 21,152 22,106 23,348 22,166 23,561 24,404 24,912
Central Bank deposits 18,781 18,919 21,931 20,787 19,710 21,066 23,419 21,970
Compulsory dep, on demand, Dep & float 7,118 6,527 9,087 7,866 6,759 7,856 9,494 7,934
Compulsórios dep, on savings dep, 11,662 12,392 12,844 12,921 12,951 13,210 13,925 14,036
Others 2,178 2,232 175 2,561 2,456 2,495 985 2,942
Interdepartmental accounts 13 108 147 140 487 45 121 12
Loans 69,241 69,954 74,823 77,896 80,725 79,781 85,942 88,306
Public sector 4,647 4,552 4,161 4,528 3,717 3,677 3,730 3,442
Private sector 69,472 70,520 75,773 78,765 82,598 81,778 88,551 92,191
(Allowance for loan losses) (4,877) (5,118) (5,110) (5,397) (5,590) (5,675) (6,339) (7,327)
Leasing 6 6 20 4 9 17 20 30
Leasing and sub-leasing receivables 411 472 532 580 633 677 752 822
Public sector 20 40 54 60 62 76 99 106
Private sector 390 432 479 520 572 601 653 716
(Unearned lease income) (385) (443) (483) (547) (595) (625) (708) (768)
(Allowance for lease losses) (20) (22) (29) (29) (30) (35) (24) (24)
Other receivables 32,196 33,194 31,198 32,985 35,399 33,677 35,108 36,811
Receivable on guarantees honored 29 41 71 83 132 143 160 156
Foreign exchange portfolio 11,508 11,455 8,530 10,444 11,667 9,270 9,156 9,130
Income receivable 309 354 180 211 207 221 237 183
Trading and brokerage of securities 45 41 235 62 287 167 46 66
Specific credits 516 530 544 559 576 593 610 627
Special operations 1 1 1 1 1 1 1 1
Tax credits 8,971 8,505 8,396 7,956 7,523 6,815 6,687 8,905
Atuarial Assets 909 1,450 2,128 2,709 2,720 3,422 3,869 3,865
Warrants Deposits Receivable 7,750 8,127 8,789 9,199 10,138 10,874 11,692 12,251
Other credits 3,746 4,437 4,268 3,907 4,541 4,739 5,558 8,678
(Provision or doubtful receivables) (1,587) (1,749) (1,944) (2,146) (2,394) (2,567) (2,908) (3,186)
(With loan characteristics) (205) (234) (226) (229) (272) (245) (328) (380)
(Without loan characteristics) (1,383) (1,515) (1,718) (1,917) (2,122) (2,322) (2,580) (2,806)
Other assets 272 252 228 188 175 184 509 608
Statutory profit sharing - - - - - 0 0 0
Others 398 391 335 317 319 319 319 310
(Provision for possible losses) (201) (201) (186) (177) (185) (191) (185) (177)
Prepaid expenses 76 62 79 48 41 56 374 475
Permanent assets 4,517 4,585 5,059 4,946 5,016 5,008 5,580 5,524
Investments 823 843 900 896 960 966 1,045 1,030
Investm, in associated and subsidiary co, 803 819 880 851 920 918 999 982
Other investments 234 231 229 230 225 230 231 229
(Provision for losses) (215) (208) (210) (185) (185) (182) (184) (181)
Property and equipment 2,730 2,723 3,052 2,886 2,827 2,767 3,119 3,015
Land and buildings in use 2,275 2,270 2,284 2,195 2,164 2,179 2,235 2,246
Other property and equipment in use 3,446 3,534 3,936 3,873 3,922 3,914 4,326 4,310
(Accumulated depreciation) (2,991) (3,082) (3,168) (3,182) (3,259) (3,326) (3,442) (3,542)
Leased assets 466 519 553 619 680 727 812 895
Leases assets 579 636 676 749 824 890 992 1,103
(Accumulated depreciation) (114) (117) (123) (129) (144) (163) (180) (208)
Deferred charges 498 500 554 544 549 548 604 584
Organization and expansion costs 882 907 970 991 1,022 1,054 1,149 1,159
(Accumulated amortization) (384) (407) (415) (447) (473) (506) (545) (575)
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 120
Table 115. Balançe Sheet - Liabilities
R$ million
Jun/04 Sep/04 Dec/04 Mar/05 Jun/05 Sep/05 Dec/05 Mar/06
LIABILITIES AND SHAREHOLDERS' EQUITY 227,374 235,599 239,014 245,685 233,793 245,511 252,977 264,635
Current and long-term assets 214,373 221,689 224,775 230,624 218,282 228,573 236,003 245,295
Deposits 115,795 115,079 115,532 120,096 117,952 122,672 137,658 139,195
Demand deposits 29,425 30,191 28,991 29,340 27,923 27,694 35,802 31,878
Savings deposits 28,939 29,915 31,069 31,418 31,607 32,093 32,844 32,975
Interbank deposits 7,684 5,530 5,768 6,489 5,837 5,885 5,383 5,262
Time deposits 49,747 49,444 49,665 52,769 52,520 56,907 63,495 68,948
Investment deposits - - 38 81 66 93 134 131
Money market borrowing 37,132 42,003 44,527 43,086 36,168 35,989 30,508 42,758
Own portfolio 32,371 36,679 41,600 39,603 33,637 31,308 23,122 31,249
Third-party portfolio 4,761 5,324 2,927 3,483 2,532 4,681 7,386 11,509
Funds from acceptances and securities placed 1,397 768 776 852 569 558 3,166 2,789
Foreign securities 1,397 768 776 852 569 558 3,166 2,789
Interbank accounts 1,945 2,034 6 1,521 1,902 2,059 980 1,477
Receipts and payments pending settlement 1,945 2,034 6 1,520 1,902 2,059 979 1,476
Correspondent banks - - - - - - 1 1
Interdepartmental accounts 1,189 1,852 1,725 1,385 1,404 1,604 1,973 1,273
Thrid-party funds in transit 1,063 1,743 1,725 1,332 1,384 1,585 1,883 1,183
Internal transfers of funds 126 109 - 53 19 19 89 89
Borrowing 13,872 16,017 16,565 17,201 5,076 4,707 4,858 4,031
Foreign borrowing 13,872 16,017 16,565 17,201 5,076 4,707 4,858 4,031
Domestic onlending – official institutions 8,448 8,778 10,611 10,629 11,823 12,147 13,370 13,053
Federal Treasury 1,940 2,059 3,361 3,596 3,979 3,991 4,157 4,053
National Development Bank (BNDES) 3,322 3,484 3,559 3,663 3,674 3,779 3,908 3,960
Fed,l Program for Capital Equip, Finan, (FINAME) 2,720 2,662 3,026 2,927 3,675 3,817 4,750 4,720
Other institutions 466 574 665 443 495 560 556 320
Foreign onlending 1 9 2 1 1 1 0 0
Financial derivatives 1,996 370 523 674 1,473 664 571 1,446
Other accounts payable 32,599 34,780 34,508 35,180 41,915 48,171 42,918 39,274
Collection of taxes and contributions 2,168 2,328 255 1,967 1,852 2,614 344 3,258
Foreign exchange portfolio 5,480 7,509 7,870 7,969 13,845 20,011 17,500 10,687
Stockholders and statutory distributions 644 262 423 84 887 386 1,169 229
Taxes and social security 984 1,013 980 954 1,064 1,362 1,599 1,503
Trading and brokerage of securities 4,217 3,759 3,627 3,343 2,867 2,633 58 127
Financial and development funds 1,825 1,814 1,867 1,954 2,029 1,919 1,932 1,981
Special operations 2 2 2 2 2 2 2 1,102
Perpetual Securities - - - - - - - 2
Subordineted Debt 5,573 6,637 6,833 7,093 7,301 7,482 7,840 8,095
Actuarial liabilities 2,894 2,885 3,051 3,070 3,075 3,087 3,277 3.291
Other liabilities 8,812 8,571 9,600 8,744 8,993 8,673 9,196 8.999
Deferred income 138 139 134 128 118 112 125 131
Shareholders’ equity 12,864 13,771 14,106 14,933 15,393 16,826 16,850 19,209
Capital 8,366 10,302 9,864 9,864 10,797 10,797 10,797 10,797
(Unpaid Capital) - (445) - - - - - -
Capital reserves 5 5 5 5 5 5 5 5
Revaluation reserves 24 26 26 26 23 23 23 23
Revenue reserves 4,645 3,195 4,294 4,294 4,715 4,715 6,020 6,020
Mark-to-market – securities and derivatives (51) (17) 43 (95) (22) (27) 130 146
Retained earnings (accumulated losses) - - - - - 1 - 1
(Treasury shares) (126) (126) (126) (126) (126) (126) (126) (126)
Income accounts - 833 - 965 - 1,438 - 2,343
121 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
8.2 Summarized Corporate Law Income Statement
Table 116. Summarized Corporate Law Income Statement
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Financial Intermediation Income 8,159 6,941 8,003 8,046 7,936 8,993 8,104 9,394
Loans 4,361 4,120 4,461 4,546 4,706 4,918 5,036 5,095
Leasing 21 23 26 29 31 35 36 38
Securities 2,930 2,660 2,922 3,166 2,849 3,076 3,333 3,521
Financial Derivatives (194) 22 (89) (31) (38) (85) (229) (139)
Foreign Exchange Portfolio 729 (224) 329 (50) (35) 597 (501) 452
Compulsory Investments 312 340 353 386 423 451 429 427
Financial Intermediation Expenses (5,739) (4,607) (4,657) (5,361) (5,166) (5,418) (6,216) (6,556)
Money Market Funds (3,070) (3,222) (3,412) (3,729) (3,606) (3,840) (3,976) (3,984)
Borrowing, Assignments and Onlending (1,467) (315) (357) (371) (337) (412) (482) (502)
Allowance for Loan Losses (1,201) (1,071) (887) (1,261) (1,222) (1,166) (1,757) (2,071)
Gross Income from Financial Intermediation 2,421 2,334 3,346 2,685 2,770 3,574 1,888 2,838
Other Operating Income (Expenses) (1,276) (969) (2,259) (1,182) (1,030) (1,104) (569) (1,873)
Service Revenues 1,643 1,717 1,702 1,767 1,929 1,952 2,001 2,103
Personnel Expenses (1,952) (1,744) (1,840) (1,804) (1,722) (1,937) (2,012) (1,876)
Other Administrative Expenses (1,381) (1,344) (1,633) (1,407) (1,366) (1,401) (1,498) (1,362)
Taxes (360) (385) (406) (395) (440) (455) (432) (454)
Equity Int, in the Results of Subs, and Affil, 347 (275) (149) 114 (442) (49) 307 (154)
Other Operating Revenues 983 2,637 1,700 1,046 3,690 2,285 605 1,464
Other Operating Expenses (555) (1,576) (1,633) (503) (2,681) (1,500) 458 (1,595)
Operating Income 1,144 1,365 1,087 1,503 1,740 2,470 1,319 965
Non-operating Income 39 80 (4) 98 21 64 28 26
Income Before Taxes 1,184 1,445 1,083 1,601 1,760 2,533 1,347 991
Income and Social Contribution Taxes (239) (545) (187) (559) (570) (979) (447) 1,542
Statutory Profit Sharing (140) (67) (125) (78) (176) (116) (163) (190)
Net Income 805 833 771 965 1,014 1,438 737 2,343
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 122
8.3 Income Statement with Reallocations
Table 117. Income Statement with Reallocations
R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Financial Intermediation Income 8,462 7,456 7,855 8,191 8,089 8,452 8,856 8,892
Loans 4,361 4,120 4,461 4,546 4,706 4,918 5,036 5,095
Leasing 21 23 26 29 31 35 36 38
Securities 2,930 2,660 2,922 3,166 2,849 3,076 3,333 3,521
Financial Derivatives (194) 22 (89) (31) (38) (85) (229) (139)
Foreign Exchange Portfolio 729 (224) 329 (50) (35) 597 (501) 452
Compulsory Investments 312 340 353 386 423 451 429 427
FX Gain (Loss) on Foreign Investments 268 (354) (202) (40) (533) (202) 166 (266)
Other Op, Inc, of a Fin, Intermed, Nature 35 869 54 184 686 (339) 587 (237)
Financial Intermediation Expenses (4,537) (3,536) (3,769) (4,100) (3,943) (4,252) (4,458) (4,486)
Money Market Funds (3,070) (3,222) (3,412) (3,729) (3,606) (3,840) (3,976) (3,984)
Borrowing, Assignments and Onlending (1,467) (315) (357) (371) (337) (412) (482) (502)
Gross Financial Margin 3,925 3,919 4,086 4,090 4,146 4,199 4,398 4,406
Allowance for Loan Losses (903) (856) (868) (1,061) (1,002) (966) (1,498) (1,345)
Net Financial Margin 3,022 3,063 3,218 3,029 3,144 3,234 2,900 3,061
Service Revenues 1,643 1,717 1,702 1,767 1,929 1,952 2,001 2,103
Taxes on Revenues (323) (345) (369) (351) (406) (376) (393) (409)
Contribution Margin 4,341 4,435 4,551 4,446 4,667 4,810 4,509 4,755
Administrative Expenses (2,832) (2,908) (3,252) (2,992) (3,035) (3,106) (3,268) (3,156)
Personnel Expenses (1,552) (1,603) (1,671) (1,638) (1,687) (1,709) (1,802) (1,781)
Other Administrative Expenses (1,242) (1,265) (1,544) (1,315) (1,314) (1,362) (1,428) (1,331)
Other Tax Expenses (37) (41) (36) (39) (34) (36) (39) (44)
Commercial Income 1,510 1,528 1,299 1,453 1,631 1,704 1,241 1,600
Legal Risk (261) (221) (258) (258) 22 (268) (281) (126)
Legal Claims (139) (79) (89) (92) (52) (40) (70) (31)
Labor Lawsuits (122) (141) (169) (166) 74 (228) (211) (95)
Other Operating Income (Expenses) (245) (51) (139) 84 86 156 359 (9)
Eq, Interest in Resul, Subs, and Affil, 79 79 53 144 91 153 134 106
FX Other Operating Income/Expenses (324) (131) (191) (60) (5) 3 224 (115)
Other Operating Income 383 457 621 596 632 692 1,036 631
Other Operating Expenses (707) (588) (812) (656) (637) (689) (812) (746)
Operating Income 1,003 1,256 903 1,280 1,739 1,592 1,319 1,465
Non-operating Income 39 80 (4) 98 21 64 28 26
Income Before Taxes 1,043 1,336 899 1,378 1,760 1,655 1,347 1,491
Income and Social Contribution Taxes (47) (545) (187) (483) (570) (666) (447) (363)
Interest on Own Capital Tax Benefit 153 - 171 - 214 - 252 -
Statutory Profit Sharing (140) (67) (125) (78) (176) (116) (163) (190)
Recurring Income 856 724 586 817 1,014 873 737 938
Extraordinary Items (51) 109 184 148 - 565 - 1,405
Non Recurring Prov, for Credit Risks - - 184 - - - -
Non Recurring Rever, Prov, for Credit Risks (146) (80) - - - - - (500)
Recovery of Undue Taxes 565 - - 229 - 921 - -
Prov, for Retirement Incentive Plan (277) 189 - - - - - -
Provision for Non-recurring IR and CS (192) - - (76) - (313) - -
Non Recurring Pasep/Cofins - - - (6) - (43) - -
Tax Credit Recorded - 1,905
Net Income 805 833 771 965 1,014 1,438 737 2,343
123 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
8.4 Analytical Spread
Table 118. Analytical Spread
Average Balances in R$ million
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Remunerated Assets 176,216 183,393 193,649 199,964 189,646 192,275 197,940 213,563
Available Funds in Foreign Currency 7,813 9,266 10,648 11,664 7,290 536 403 245
Income from Avail, Funds in Foreign Currency 430 18 13 6 (1) 3 14 5
Annualized Rate - % 23.9 0.8 0.5 0.2 (0.1) 2.5 14.4 8.1
Securities + Interbank Investments 83,162 87,637 91,346 92,440 83,983 93,515 94,116 104,485
Securities Income excluding Hedges 2,930 2,660 2,922 3,166 2,849 3,076 3,333 3,521
Annualized Rate - % 14.9 12.7 13.4 14.4 14.3 13.8 14.9 14.2
Loans + Leasing 73,086 73,984 78,293 82,095 85,443 85,427 89,416 94,036
Loans + Leasing Income 4,067 3,865 4,282 4,322 4,474 4,708 4,814 4,837
Annualized Rate - % 24.2 22.6 23.7 22.8 22.6 23.9 23.3 22.2
Remunerated Compulsory Deposit 11,614 11,946 12,760 13,129 12,237 12,065 13,255 14,017
Income from Compulsory Deposits 312 340 353 386 423 451 429 427
Annualized Rate - % 11.2 11.9 11.5 12.3 14.6 15.8 13.6 12.7
Other Remunerated Assets 542 561 601 637 693 733 750 780
Other Income with Fin, Intermed, Charact, 37 40 37 37 37 35 37 32
Annualized Rate - % 30.3 31.9 26.9 25.6 22.8 20.4 21.5 17.5
Tax Credits 8,913 8,651 8,333 8,127 7,535 6,926 6,720 7,352
Other Assets 34,189 35,055 32,820 33,401 35,807 36,388 37,668 38,155
Permanent Assets 4,471 4,538 4,776 4,945 5,008 5,008 5,392 5,496
TOTAL ASSETS 223,789 231,636 239,577 246,437 237,996 240,596 247,720 264,566
Remunerated Liabilities 151,362 157,351 164,690 169,839 160,184 155,609 160,413 176,204
Savings Deposits 28,392 29,718 30,452 31,458 31,447 32,077 32,313 33,121
Expenses with Savings Deposits (561) (707) (622) (665) (713) (758) (705) (669)
Annualized Rate - % 8.1 9.9 8.4 8.7 9.4 9.8 9.0 8.3
Interbank Deposits 7,580 6,279 5,502 6,621 6,060 5,992 5,442 5,056
Expenses with Interbank Deposits (52) (69) (80) (101) (93) (179) (127) (202)
Annualized Rate - % 2.8 4.4 6.0 6.3 6.3 12.5 9.6 17.0
Time Deposits 48,928 49,164 50,078 51,596 52,809 55,201 61,725 67,378
Expenses with Time Deposits (1,124) (1,059) (1,113) (1,269) (1,285) (1,489) (1,790) (1,588)
Annualized Rate - % 9.5 8.9 9.2 10.2 10.1 11.2 12.1 9.8
Money Market Borrowing 36,973 39,855 43,694 43,787 37,283 35,526 32,715 41,962
Expenses with Money Market Borrowing (1,235) (1,351) (1,551) (1,645) (1,484) (1,376) (1,217) (1,442)
Annualized Rate - % 14.0 14.3 15.0 15.9 16.9 16.4 15.7 14.5
Foreign Borrowing 12,531 14,963 16,100 16,877 12,070 5,030 4,532 4,173
Exp, with Foreign Borr,, Onlending and Banks (1,200) (60) (71) (66) (53) (57) (66) (56)
Annualized Rate - % 44.16 1.61 1.78 1.58 1.77 4.57 5.98 5.46
Onlending 8,266 8,731 9,762 10,544 11,424 12,067 12,681 13,310
Expenses with Onlending (159) (139) (151) (175) (140) (208) (287) (291)
Annualized Rate - % 7.91 6.52 6.35 6.80 4.99 7.07 9.37 9.04
Fin, and Develop, Funds + Subord,Debt 7,306 7,845 8,343 8,123 8,492 9,149 9,571 9,900
Expenses with Fin, and Develop, Funds (108) (116) (134) (130) (144) (148) (129) (155)
Annualized Rate - % 6.07 6.03 6.60 6.57 6.98 6.62 5.50 6.41
Foreign Securities 1,388 795 759 832 598 567 1,432 1,304
Expenses with Foreign Securities (24) (16) (15) (21) (15) (16) (114) (58)
Annualized Rate - % 7.15 8.55 7.88 10.65 10.27 11.70 35.67 19.18
Other Liabilities 59,376 60,744 60,795 62,038 63,292 69,585 70,256 70,517
Demand Deposits 30,037 29,938 29,319 28,764 27,361 27,370 31,694 31,472
Other Liabilities 29,339 30,806 31,476 33,273 35,931 42,214 38,561 39,046
Shareholders’ Equity + Income Accounts 13,050 13,541 14,093 14,561 14,520 15,402 17,052 17,845
TOTAL LIAB, AND SHAREHOLDERS’ EQ, 223,789 231,636 239,577 246,437 237,996 240,596 247,720 264,566
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 124
Average Balances in R$ milion
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Financial Intermediation Income 8,462 7,456 7,855 8,191 8,089 8,451 8,856 8,892
Income from Remunerated Assets 7,776 6,924 7,607 7,918 7,782 8,273 8,627 8,821
Income from Financial Derivatives (194) 22 (89) (31) (38) (85) (229) (139)
FX Gain (Loss) on Foreign Investments 268 (354) (202) (40) (533) (202) 166 (266)
Other FX Operations 300 (242) 317 (56) (34) 594 (515) 447
Other Operating Income (2) 828 17 147 650 (374) 550 (269)
Recovery of Write-offs 315 278 206 253 262 245 258 297
Financial Intermediation Expenses (4,537) (3,536) (3,769) (4,100) (3,943) (4,252) (4,458) (4,486)
Expenses with Remunerated Liabilities (4,463) (3,517) (3,737) (4,073) (3,927) (4,230) (4,435) (4,462)
Expenses with FGC on Demand Deposits (17) (17) (17) (15) (13) (13) (15) (16)
Expenses with Debt Assumption Contracts (58) (2) (15) (12) (3) (7) (8) (8)
Gross Financial Margin 3,925 3,919 4,086 4,090 4,146 4,199 4,398 4,406
Assets – Permanent Assets 219,318 227,099 234,802 241,493 232,988 235,588 241,188 259,070
Remunerated Assets 176,216 183,393 193,649 199,964 189,646 192,275 197,940 213,563
Finan, Interm, Inc, / (Assets – Perman, Assets) 3.9 3.3 3.3 3.4 3.5 3.6 3.7 3.4
Finan, Inter, Inc, / (Assets – Perm, Assets) – Ann, 16.4 13.8 14.1 14.3 14.6 15.1 15.5 14.5
Finan, Inter, Exp, / (Assets – Permanent Assets) 2.1 1.6 1.6 1.7 1.7 1.8 1.8 1.7
Finan, Inter, Exp,/(Assets – Perm, Assets) – Ann, 8.5 6.4 6.6 7.0 6.9 7.4 7.6 7.1
GFM / (Assets – Permanent Assets) 1.8 1.7 1.7 1.7 1.8 1.8 1.8 1.7
GFM / (Assets – Permanent Assets) – Ann, 7.4 7.1 7.1 6.9 7.3 7.3 7.5 7.0
Finan, Intermed, Income / (Remunerated Assets) 4.8 4.1 4.1 4.1 4.3 4.4 4.5 4.2
Finan, Intermed, Inc, / (Remun, Assets) – Ann, 20.6 17.3 17.2 17.4 18.2 18.8 19.1 17.7
Finan, Intermed, Expenses / (Remun, Assets) 2.6 1.9 1.9 2.1 2.1 2.2 2.3 2.1
Finan, Interm, Expen,s / (Remun, Assets) – Ann, 10.7 7.9 8.0 8.5 8.6 9.1 9.3 8.7
GFM / (Remunerated Assets) 2.2 2.1 2.1 2.0 2.2 2.2 2.2 2.1
GFM / (Remunerated Assets) – Ann, 9.2 8.8 8.7 8.4 9.0 9.0 9.2 8.5
125 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Vice-Presidency of Finance, Capital Markets and Investor Relations
Vice-President
Aldo Luiz Mendes
Investor Relations Manager
Marco Geovanne Tobias da Silva
Divisional Managers
Gilberto Lourenço da Aparecida
Luís Gustavo do Lago Quinteiro
Analysts
Ananias Pereira da Silva Neto
Bruno Santos Garcia
Carla Sarkis Teixeira
Eduardo Amaral Pilenghi
Glauco Risperi Wermelinger
Luciana Elias Rezende Ramos
Mariana Reschke da Cunha
Raquel Castelo de Carvalho
Ricardo Borges de Araújo Rosa
Banco do Brasil - Análise do Desempenho 1º Trimestre/2006 - 126
Financial Statements
th
1 Quarter 2006
127 - Banco do Brasil - Análise do Desempenho 1º Trimestre/2006
Banco do Brasil S.A.
Financial statements
In thousands of reais Quarter ended at 03.31.2006
BALANCE SHEET
BB-Domestic and Foreign
Branches BB-Consolidated
ASSETS 03.31.2006 03.31.2005 03.31.2006 03.31.2005
147.422.771 134.535.509
CURRENT ASSETS ............................................................................................................................. 138.893.009 129.480.306
4.051.245 14.404.154
Cash and cash equivalents ......................................................................................................................4.055.796 14.407.563
Interbank investments ..................................(Note 4) 40.140.414 20.561.969 31.089.280 15.157.633
21.883.686
Money market ....................................................................................................... 3.952.762 21.838.978 3.898.310
18.256.728 16.609.207
Interbank deposits ...................................................................................................................... 9.250.302 11.259.323
Securities and derivative financial
instruments .......................................................................(Note 5) 17.601.535 21.547.099 17.965.158 22.023.390
11.616.414 12.533.271
Own portfolio .............................................................................................................................. 11.977.415 13.125.443
4.948.416 7.793.892 4.951.345
Subject to repurchase agreements .......................................................................................................................... 7.797.487
524.079 524.402 524.079
Deposits with the Brazilian Central Bank ............................................................................................................................. 524.402
Pledged in guarantee ......................................................................... 79.972 -- 79.972 --
Securities subject to repurchase agreements (with free movement) 191.219 -- 191.219 --
Derivative financial instruments ...................................................................... 241.435 695.534 241.128 576.058
24.894.933 23.332.461
Interbank accounts ............................................................................................................................... 24.912.043 23.347.967
2.838.972 2.442.369 2.839.044 2.442.455
Payments and receipts pending settlement ..............................................................................................................................
Restricted deposits
21.965.253 20.786.644 21.969.637 20.787.070
Brazilian Central Bank deposits ............................................................................................................................
9.935 8.409 9.935
National Treasury - rural credits receivable ............................................................................................................................8.409
1.473 2.633 1.473
National Housing Financing System (SFH) ............................................................................................................................2.633
46 5.031
Interbank onlendings ............................................................................................................................... 46 5.031
79.254 87.375
Correspondent banks .............................................................................................................................. 91.908 102.369
12.409 140.229
Interdepartmental accounts ........................................................................................................................... 12.409 140.229
12.409 140.229
Internal transfers of funds ............................................................................................................................. 12.409 140.229
Loan operations .............................................. (Note 6) 45.932.062 39.566.100 45.998.026 39.367.587
Loan operations
829.311 1.117.791
Public sector......................................................................................................................................... 831.981 1.125.732
48.920.677 41.302.073 49.159.949 41.279.354
Private sector .............................................................................................................................................
(3.817.926)
(Allowance for loan losses) .....................................................................................................(2.853.764) (3.993.904) (3.037.499)
Lease operations ........................................... (Note 6) 11.725 3.340 8.548 (3.624)
Lease and sublease receivables
54.009 22.864
Public sector ........................................................................................................................... 54.009 22.864
4.307 2.100
Private sector ............................................................................................................................. 327.321 247.314
(46.337) (21.512)
(Unearned income from lease operations) ....................................................................................................... (356.880) (250.747)
(Allowance for lease losses)........................................................................ (254) (112) (15.902) (23.055)
14.174.822 14.796.490
Other receivables ....................................................................................................................... 14.243.310 14.851.237
121.369 82.809 121.369
Receivables on guarantees honored ........................................................................................................................... 82.809
Foreign exchange portfolio ........................... (Note 8a) 9.129.823 10.444.104 9.129.823 10.444.104
128.561 110.156
Income receivable .............................................................................................................................. 142.894 167.535
9.050 1.969 66.326 61.629
Negotiation and intermediation of securities ...............................................................................................................................
Specific credits ..................................... (Note 8b) -- 279.411 -- 279.411
575 1.355
Special operations ................................................................................................................................ 575 1.355
Sundry ........................................................... (Note 8c) 6.026.582 5.885.642 6.027.278 5.827.474
(Provision for other losses) ................................... (Notes 6e & 6f) (1.241.138) (2.008.956) (1.244.955) (2.013.080)
603.626 183.667
Other assets ........................................................................................................................... 608.439 188.324
Investments............................................................................................. 3 4 3 4
Other assets .................................................. (Note 9) 303.415 309.588 310.118 317.417
(170.457) (170.473)
(Provision for losses) ............................................................................................................................ (176.797) (177.267)
470.665 44.548
Prepaid expenses ............................................................................................................................ 475.115 48.170
118.690.364 109.413.716 120.218.262 111.258.995
LONG-TERM RECEIVABLES .............................................................................................................................
Interbank investments ........................................................... (Note 4) 4.510.485 2.374.067 4.654.854 2.589.225
Money market ...................................................................................................... -- 54.452 -- 54.452
4.510.485
Interbank deposits............................................................................................ 2.319.615 4.654.854 2.534.773
Securities and derivative financial
instruments............................................................................. (Note 5) 49.852.630 51.535.476 50.666.114 52.065.979
18.595.754 15.606.513
Own portfolio ..................................................................................................................... 19.282.582 16.038.125
27.467.746 33.832.296 27.566.288 33.930.249
Subject to repurchase agreements ..........................................................................................................................
3.218.990 1.660.608 3.247.104 1.660.608
Deposits with the Brazilian Central Bank .............................................................................................................................
390.539 364.014
Pledged in guarantee ............................................................................................................................. 390.539 364.014
179.601 72.045
Derivative financial instruments.................................................................................................................... 179.601 72.983
Loan operations .................................................................... (Note 6) 41.845.581 37.524.564 42.308.136 38.527.960
Loan operations
2.585.374 3.385.163 2.610.284 3.402.131
Public sector .....................................................................................................................................................................................
42.592.676 36.499.040 43.030.559 37.485.486
Private sector ........................................................................................................................................................................
(3.332.469)
(Allowance for loan losses) .................................................................................. (2.359.639) (3.332.707) (2.359.657)
Lease operations ................................................................... (Note 6) 11.265 5.454 21.226 7.144
Lease and sublease receivable
51.891 37.305
Public sector ............................................................................................................................ 51.891 37.305
4.138 2.873
Private sector ............................................................................................................................. 388.393 272.542
(44.520) (34.546)
(Unearned income from lease operations) ....................................................................................................... (410.646) (296.426)
(Allowance for lease losses) ................................................................. (244) (178) (8.412) (6.277)
22.470.403 17.974.155
Other receivables .......................................................................................................................... 22.567.932 18.068.687
35.062 -- 35.062
Receivables on guarantees honored ........................................................................................................................... --
40.216 43.835
Income receivable ............................................................................................................................. 40.216 43.944
Specific credits ............................................................... (Note 8b) 626.859 279.411 626.859 279.411
Sundry .............................................................................. (Note 8c) 23.702.958 17.776.137 23.807.120 17.878.496
(Provision for other losses....................................... (Notes 6e & 6f) (1.934.692) (125.228) (1.941.325) (133.164)
7.487.331 7.680.026
PERMANENT ASSETS ............................................................................................................................ 5.523.655 4.946.060
3.808.094 4.202.520
Investments ........................................................................................................................... 1.030.281 896.352
Investments in subsidiary and associated companies................. (Note 19)
2.274.647 2.570.001
Domestic .................................................................................................................................... 982.423 851.172
1.494.182 1.591.512
Foreign ............................................................................................................................... -- --
193.401 194.883
Other investments .......................................................................................................................... 229.101 229.713
(154.136) (153.876)
(Provision for losses) ......................................................................................................................... (181.243) (184.533)
3.013.666 2.884.767 3.014.610
Property and equipment ................................................................................................................................ 2.886.026
2.246.370 2.195.240 2.246.370
Land and buildings in use ............................................................................................................................... 2.195.240
4.303.394 3.864.781 4.309.910
Other property and equipment in use ............................................................................................................................. 3.872.778
(3.536.098) (3.175.254)
(Depreciações acumuladas) ..........................................................................................................................(3.541.670) (3.181.992)
88.920
Leased assets ........................................................................................................................55.356 894.927 619.437
106.161 58.057
Leased assets ............................................................................................................................... 1.102.895 748.923
(17.241) (2.701)
(Accumulated depreciation) ..........................................................................................................................(207.968) (129.486)
576.651 537.383
Deferred charges ....................................................................................................................................... 583.837 544.245
1.139.462 974.103 1.158.765
Organization and expansion costs .............................................................................................................................. 991.443
(562.811) (436.720) (574.928)
(Accumulated amortization) ..................................................................................................................................... (447.198)
273.600.466 251.629.251
Total ................................................................................................................................................ 264.634.926 245.685.361
2
Banco do Brasil S.A.
Financial statements
In thousands of reais
BB-Domestic and Foreign
BB-Consolidated
Branches
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y 03.31.2006 03.31.2005 03.31.2006 03.31.2005
200.393.671 200.121.472
CURRENT LIABILITIES ................................................................................................. 189.896.258 193.144.802
Deposits ................................................................ (Note 10) 123.189.872 120.827.880 114.729.140 116.555.464
31.815.890 29.296.550
Demand deposits ...................................................................................................... 31.877.536 29.340.311
Savings deposits ....................................................................................... 32.975.353 31.417.670 32.975.353 31.417.670
Interbank deposits ................................................................................. 8.986.260 7.969.037 402.251 3.571.051
Time deposits ............................................................................................. 49.280.981 52.063.561 49.342.612 52.145.370
Sundry ............................................................................................. 131.388 81.062 131.388 81.062
Money market ........................................................................... 36.397.768 39.151.967 35.921.212 38.287.279
Own portfolio........................................................................................................... 26.812.931 36.250.222 26.346.375 35.430.133
Third-party portfolio ....................................................................................................9.389.839 2.901.745 9.379.839 2.857.146
Within free movement portfolio 194.998 -- 194.998 --
402.859
Funds from acceptance and issue of securities ......................................................... 136.460 363.786 103.831
Foreign securities................................................................... 402.859 136.460 363.786 103.831
Interbank accounts .................................................................................. 1.471.850 1.517.538 1.477.313 1.520.579
Receipts and payments pending settlement .................................................................. 1.470.751 1.517.346 1.476.214 1.520.387
Correspondent banks .................................................................................................. 1.099 192 1.099 192
Interdepartmental accounts ................................................................................. 1.272.575 1.385.209 1.272.575 1.385.209
Third-party funds in transit ............................................................................ 1.183.232 1.331.791 1.183.232 1.331.791
Internal transfers of funds .................................................................... 89.343 53.418 89.343 53.418
Borrowings............................................................ (Note 11) 2.836.617 15.124.124 1.647.800 13.614.328
Foreign borrowings .................................................................................... 2.836.617 15.124.124 1.647.800 13.614.328
Local onlendings - official institutions
institutions .............................................................(Note 12) 8.955.981 3.314.108 8.960.896 3.318.155
National Treasury ................................................................................................ 4.053.193 3.312.941 4.053.193 3.312.941
3.405.306 -- 3.405.306
National Bank for Economic and Social Development (BNDES) .................................................................................................................... --
1.177.674 -- 1.182.446
National Industrial Financing Authority (FINAME)........................................................................................................... 3.924
Other institutions ........................................................................................................ 319.808 1.167 319.951 1.290
Foreign onlendings ............................................................... 219.783 546.962 95 209
Foreign onlendings................................................................................................. 219.783 546.962 95 209
Derivative financial instruments............................ (Note 5b) 1.271.956 646.303 1.270.517 570.613
Derivative financial instruments................................................................. 1.271.956 646.303 1.270.517 570.613
Other liabilities ............................................................................................ 24.374.410 17.470.921 24.252.924 17.789.135
Collection and payment of taxes and social contributions .......................................... 3.257.303 1.966.211 3.257.686 1.966.723
Foreign exchange portfolio ............................................... (Note 14a) 10.686.527 7.969.384 10.686.527 7.969.384
Social and statutory ............................................................................................... 228.473 84.392 229.104 84.392
1.254.824
Taxes and social security contributions ....................................................................................... 771.663 1.446.993 923.702
Negotiation and intermediation of securities ................................................................. 70.091 6 5.668 127.165 71.639
Financial and development funds ............................ (Note 14b) 105.284 165.524 105.284 165.524
Special operations.............................................................................. 2.382 2.382
Subordinated debt................................................. (Note 14e) -- 237 -- 237
Hibrid instruments and capital debts ..................................... 1.102.105 -- 1.102.105 --
Sundry ................................................................ (Note 14d) 7.069.803 6.505.460 7.298.060 6.605.152
LONG-TERM LIABILITIES .............................................................................. 53.866.870 36.446.640 55.398.743 37.479.420
Deposits ................................................................ (Note 10) 20.016.455 1.391.089 24.465.423 3.541.029
Interbank deposits ..................................................................................... 410.680 767.601 4.859.649 2.917.541
Time deposits ...................................................................................................... 19.605.775 623.488 19.605.774 623.488
6.836.369 4.798.557
Deposits received under security repurchase agreements................................................................................. 6.836.369 4.798.557
Own portfolio........................................................................................................... 4.707.266 4.173.151 4.707.266 4.173.151
2.129.103
Third-party portfolio .................................................................................................... 625.406 2.129.103 625.406
200.000
Funds from acceptance and issue of securities .............................................................. 747.934 2.424.828 4.017.314
Foreign securities............................................ 200.000 747.934 2.424.828 4.017.314
Borrowings ......................................................... (Note 11) 5.383.702 4.786.239 2.382.910 3.586.683
Foreign Borrowings ............................................................................................... 5.383.702 4.786.239 2.382.910 3.586.683
Local onlendings - official
institutions ...........................................................................(Note 12) 4.087.373 7.306.127 4.091.871 7.310.466
National Treasury ........................................................................................................ -- 282.995 -- 282.995
554.352 3.662.796 554.352
National Economic Development Bank (BNDES) ......................................................................................................................... 3.662.796
3.533.021 2.918.381 3.537.519
National Industrial Financing Authority (FINAME) ........................................................................................................................ 2.922.720
Other institutions ......................................................................................................... -- 441.955 -- 441.955
Foreign onlendings ............................................................................ 849.397 235.957 382 837
849.397
Foreign onlendings ......................................................................................................... 235.957 382 837
Derivative financial instruments........................... (Note 5b) 175.730 103.212 175.730 103.212
1
Derivative financial instruments..................................................................................... 75.730 103.212 175.730 103.212
Other liabilities ................................................................................................ 16.317.844 17.077.525 15.021.230 14.121.322
--
Taxes and social security contributions ..................................................................................... -- 56.451 29.904
Negotiation and intermediation of securities ............................................................... 1.613.142 3.268.485 -- 1.847
Financial and development funds ............................ (Note 14b) 1.876.037 1.788.178 1.876.037 1.788.178
Special operations.............................................................................. 2.382 2.382
Subordinated debt................................................. (Note 14e) 8.094.798 7.092.958 8.094.798 7.092.958
Sundry ................................................................ (Note 14d) 4.731.485 4.927.904 4.991.562 5.208.435
DEFERRED INCOME ............................................................. 130.873 128.240 130.873 128.240
Deferred income ........................................................................ 130.873 128.240 130.873 128.240
STOCKHOLDERS' EQUITY .................................... (Note 16) 19.209.052 14.932.899 19.209.052 14.932.899
Capital ................................................................................................................. 10.797.337 9.864.153 10.797.337 9.864.153
Local residents ........................................................................................... 10.751.490 9.841.636 10.751.490 9.841.636
Foreign residents ..................................................................................... 45.847 22.517 45.847 22.517
Capital reserves ................................................................................................ 4.778 4.763 4.778 4.763
Revaluation reserves ..................................................................................... 23.310 25.701 23.310 25.701
Revenue reserves .............................................................................................. 6.020.150 4.294.251 6.020.150 4.294.251
Adj. to mkt value - securities & derivative fin. instr..(Note 16i) 145.800 (94.799) 145.800 (94.799)
Retained earnings (accumulated losses) ........................................ 2.343.456 964.609 2.343.456 964.609
(Treasury stock) .................................................................................. (125.779) (125.779) (125.779) (125.779)
Total .................................................................................................................. 273.600.466 251.629.251 264.634.926 245.685.361
The accompanying notes are an integral part of these financial statements.
4
Banco do Brasil S.A.
Financial Statements
Business corporation act (in thousands of reais) Period ended at 03.31.2006
STATEMENT OF INCOME
BB-Domestic and Foreign
Branches BB-Consolidated
1st Quarter/2006 1st Quarter/2005 1st Quarter/2006 1st Quarter/2005
INCOME FROM FINANCIAL INTERMEDIATION.....................................................................................................................9.357.132 8.052.707 9.471.401 8.154.760
5.051.107
Loans ................................................................................................................................................................................. 4.508.028 5.095.441 4.546.158
11.500
Leases................................................................................................................................................................. 6.321 115.065 87.514
Securities .......................................................................................................................................... 3.555.448 3.179.783 3.521.208 3.166.117
Derivative financial instruments................................................................................................ (137.830) (27.591) (138.685) (31.195)
450.319
Foreign exchange, net ......................................................................................................................................... -- 451.784 --
426.588
Compulsory deposits .............................................................................................................................................. 386.166 426.588 386.166
(6.555.428) (5.472.658)
EXPENSES FROM FINANCIAL INTERMEDIATION........................................................................................................................................ (6.633.571) (5.529.626)
(3.990.057) (3.787.954)
Deposits and funds obtained in the money market ......................................................................................................................................... (3.983.672) (3.789.079)
(501.672)
Borrowings and onlendings ........................................................................................................................................... (371.163) (501.868) (371.397)
Leases.................................................................................................................................................. (7.215) (2.788) (77.211) (58.288)
Foreign exchange, net ................................................................................................................... -- (49.195) -- (50.039)
Allowance for loan losses ..............................................................................(Note 6e & 6f) (2.056.484) (1.261.558) (2.070.820) (1.260.823)
NET FINANCIAL INTERMEDIATION INCOME............................................... 2.801.704 2.580.049 2.837.830 2.625.134
(1.894.729) (1.116.410)
OTHER OPERATING INCOME (EXPENSES)................................................................................................................................................... (1.873.303) (1.121.812)
Banking service fees ............................................................................................... (Note 15a) 1.934.485 1.631.835 2.102.901 1.766.749
Personnel expenses................................................................................................ (Note 15b) (1.855.942) (1.785.970) (1.875.557) (1.803.866)
Other administrative expenses .......................................................................... (Note 15c) (1.344.745) (1.384.325) (1.361.883) (1.407.119)
Taxes ................................................................................................................................................ (433.962) (365.964) (453.574) (394.922)
(37.594) 221.157 (154.290)
Equity in the earnings (loss) of subsidiary and associated companies.. (Note 19) ................................................................................................................................... 113.545
Other operating income .......................................................................................... (Note 15d) 1.459.121 1.050.218 1.463.761 1.046.357
Other operating expenses ..................................................................................... (Note 15e) (1.616.092) (483.361) (1.594.661) (442.556)
906.975
NET OPERATING INCOME ................................................................................................................................... 1.463.639 964.527 1.503.322
NON-OPERATING INCOME ................................................(Note 15f) 25.019 96.430 26.303 97.819
Income................................................................................................................................................ 53.537 111.767 55.071 114.103
Expenses............................................................................................................................................ (28.518) (15.337) (28.768) (16.284)
931.994
PROFIT BEFORE TAXATION AND PROFIT SHARING ......................................................................................... 1.560.069 990.830 1.601.141
INCOME TAX AND SOCIAL CONTRIBUTION ON NET INCOME (Note 17) ..................................................................... 1.599.658 (517.814) 1.541.550 (558.802)
Income tax ............................................................................................................................................(588.959) (377.545) (635.025) (413.511)
Social contribution on net income ........................................................................................... (221.179) (137.217) (236.675) (149.958)
Deferred tax credits ........................................................................................................................ 2.409.796 (3.052) 2.413.250 4.667
PROFIT SHARING ............................................................................................... (188.983) (77.675) (189.711) (77.759)
2.342.669 964.580 2.342.669
NET INCOME ............................................................................................................................................................................................................................... 964.580
Number of shares .......................................................................................................................................................810.617.415 810.617.415 810.617.415 810.617.415
Treasury stock ................................................................................................................................... (11.257.677) (11.257.677) (11.257.677) (11.257.677)
Total shares used in calculation of net income per share ............................................................. 799.359.738 799.359.738 799.359.738 799.359.738
Net income per share ......................................................................................................................... 2,93 1,21 2,93 1,21
Banco do Brasil S.A. Quarter ended at 03.31.2006
Financial Statements
Business corporation act (in thousands of reais)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Revenue reserves Adjustment to Market
Reavalution Value - Marketeable
Capital Capital Reserves in Expansion Securities and Derivatives
EVENT S Reserves subsidiary Legal Statutory Reserves Banco Subsidiary Retained Treasury Total
and associated Múltiplo and associated Earning Stock
companies companies
Balances at 12.31.2004 ......................................................... 9.864.153 4.769 25.717 585.997 347.291 3.360.963 46.796 (4.211) -- (125.779) 14.105.696
Capital increase........................................................................................... -- (6) -- -- -- -- -- -- -- -- (6)
Adjustment to revaluation reserve -- -- 13 -- -- -- -- -- -- -- 13
Realization of revaluation reserve in subsidiary and associated companies ...(Note 16e)............................................ -- -- (29) -- -- -- -- -- 29,00 -- 0
Adjustment to market value - securities and derivative financial instruments ........ --
.....(Nota 16f)................................... -- -- -- -- (37.932) (133.813) -- -- (171.745)
--
Tax effect on adjustments - securities and derivative financial instruments.......(Note 16f)...................................................................... -- -- -- -- -- 14.040 20.321 -- -- 34.361
Net income for the period .......................................................................................... -- -- -- -- -- -- -- -- 964.580 -- 964.580
Balances at 31.03.2005 ...................................................................................... 9.864.153 4.763 25.701 585.997 347.291 3.360.963 22.904 (117.703) 964.609 (125.779) 14.932.899
Changes in the period................................................................................... -- (6) (16) -- -- -- (23.892) (113.492) 964.609 -- 827.203
Balances at 12.31.2005 ............................................................................ 10.797.337 4.778 23.351 793.677 471.899 4.754.574 36.847 93.080 -- (125.779) 16.849.764
Revaluations in subsidiary and associated companies..(Note 16e)................................................................. -- -- (41) -- -- -- -- -- 41 -- --
Adjustment to market value - securities and derivative financial instruments .(Note 16f)................................... -- -- -- -- -- -- 14.864 6.673 -- -- 21.537
Tax effect on adjustments - securities and derivative financial instruments....(Note 16f)......................................................................
-- -- -- -- -- -- (5.527) (137) -- -- (5.664)
Prescribed dividends............................................................................. -- -- -- -- -- -- -- -- 746 -- 746
Net income for the period ............................................................................. -- -- -- -- -- -- -- -- 2.342.669 -- 2.342.669
Balances at 03.31.2006 ..................................................................................... 10.797.337 4.778 23.310 793.677 471.899 4.754.574 46.184 99.616 2.343.456 (125.779) 19.209.052
Changes in the period................................................................................... -- -- (41) -- -- -- 9.337 6.536 2.343.456 -- 2.359.288
The accompanying notes are an integral part of these financial statements.
6
13/5/200618:13
Banco do Brasil S.A.
Financial Statements
In thousands of reais Quarter ended at 03.31.2006
STATEMENT OF CHANGES IN FINANCIAL POSITION
BB-Domestic and Foreign Branches BB-Consolidated
1st quater/2006 1st quarter/2005 1st quater/2006 1st quarter/2005
FINANCIAL RESOURCES WERE PROVIDED BY ............................................................................................
16.974.437 8.119.908 17.333.940 8.484.306
Net income .................................................................................................................
2.342.669 964.580 2.342.669 964.580
Adjustments to net income ............................................................................................
48.365 (55.596) 111.263 105.327
Depreciation and amortization ..................................................................... 169.351 173.335 169.467 173.738
Depreciation of leased assets ............................................................................................
7.215 -- 70.519 46.262
Amortization of losses ..........................................................................................................
-- -- 2.945 2.041
Equity in the earnings (loss) of subsidiary and associated companies.........................................................................
37.594 (221.157) 154.290 (113.545)
Excess depreciation ................................................................................................... -- -- (15.209) (3.230)
Changes in the currency exchange rate ............................................................................
(155.443) (41.471) (263.498) (34.131)
Provision for loss on investments ............................................................ -- 11.979 (1.248) 11.454
Disposals of fixed assets .........................................................................................................................
(4.491) 17.935 (4.491) 17.935
Other adjustments ............................................................................................................................... 3.783
(5.861) (1.512) 4.803
Changes in deferred income.................................................................. 6.310 (5.340) 6.310 (5.340)
Adj. to market value - Securities & derivative financial instr............ 15.873 (94.094) 15.873 (137.384)
Third party funds:
Increase in liabilities................................................................................ 14.537.467 7.195.987 14.661.051 7.290.379
Deposits ..................................................................................................................................
999.478 4.695.709 1.536.304 4.564.650
Deposits received under security repurchase agreements....................................................................................................
12.051.845 -- 12.249.321 --
Funds from acceptance and issue securities ........................................................ -- 25.219 -- 75.993
Interbank and interdepartmental accounts ............................................................... -- 1.172.197 -- 1.175.234
Borrowings and onlendings .......................................................................... 609.235 337.498 -- 651.974
Derivative financial instruments ......................................................................................876.909 226.632 875.426 150.645
Other liabilities ..................................................................................................................
-- 738.732 -- 671.883
Decrease in current assets and long-term receivables ..................................................................................
-- 35.929 -- 39.463
Lease operations.............................................................................. -- 12.338 -- 16.824
Other receivables .................................................................................................................
-- 23.591 -- 22.639
Disposal of assets and investments ..................................................................................
23.067 77.947 37.734 87.290
Non-operating assets ........................................................................................................
-- 22.580 62 22.672
Property and equipment in use ..................................................................................................................
23.067 55.367 23.067 55.367
Leased assets ............................................................................................... -- -- 14.605 9.251
Revaluation reserve recognized by the equity method of accounting ..............................................................
41 (16) 41 (16)
Dividends received from subsidiary/associated companies ............................................................... 511
645 153.319 130.238
Interest on own capital receivable .............................................................................. -
- -- 5.680 9.769
FINANCIAL RESOURCES WERE USED FOR: .....................................................................................................
18.751.131 9.192.277 19.105.807 9.570.565
Investments ...........................................................................................................
59.401 75.404 207.887 179.487
Non-operating assets............................................................................................................
-- 7.057 292 7.145
Property and equipment in use ........................................................................................................................
51.914 50.727 51.914 50.727
Leased assets ...................................................................................................... 7.487 17.620 155.681 121.115
Investments ......................................................................................................................................
-- -- -- 500
Deferred charges ..................................................................................................................
61.696 23.738 61.665 23.570
Increase in current assets and long-term receivables ................................................................................................ 13.486.511
14.428.371 7.609.453 7.926.483
Interbank investments......................................................................................... 8.084.476 1.122.190 6.748.212 1.227.986
Securities and derivative financial instruments.............................................. 2.139.338 831.884 2.161.156 604.009
Interbank and interdepartmental accounts.......................................................................... 400.722 1.227.733 399.226 1.234.859
Loan operations...................................................................................................................
2.422.170 3.026.595 2.364.531 3.072.380
Lease operations .................................................................................... 6.342 -- 10.265 --
Other assets ................................................................................................................................ 1.401.051
1.277.188 1.703.245 1.787.249
Other receivables.....................................................................................................................
98.135 -- 99.876 --
Decrease in liabilities ......................................................................................... 4.201.663 1.483.682 5.349.744 1.441.025
Deposits received under security repurchase agreements......................................................................................................
-- 1.483.682 -- 1.441.025
Funds from acceptance and issue of securities ................................................................. 17.217 -- 377.037 --
Interbank and interdepartmental accounts......................................................................... 208.565 -- 203.111 --
Borrowings and onlendings .................................................................................... -- -- 1.144.791 --
Other liabilities..............................................................................................................................
3.975.881 -- 3.624.805 --
Increase (decrease) in cash and cash equivalents.................................... (1.776.694) (1.072.369) (1.771.867) (1.086.259)
Change in cash and cash equivalents:
At the beginning of the period ...........................................................................................................................
5.827.939 15.476.523 5.827.663 15.493.822
At the end of the period ............................................................................................................................
4.051.245 14.404.154 4.055.796 14.407.563
.
(1.776.694)
Increase/(Decrease) in cash and cash equivalents ......................................................................... (1.072.369) (1.771.867) (1.086.259)
The accompanying notes are an integral part of these financial statements.
- - -
- - -
Banco do Brasil S.A.
Notes to the Financial Statements
In thousands of reais Quarter ended at 03.31.2006
NOTES DO THE FINANCIAL STATEMENTS
Note 1 – The Bank and its Operations
Note 2 – Presentation of the Financial Statements
Note 3 – Accounting Practices
Note 4 – Interbank Investments
Note 5 – Securities and Derivative Financial Instruments
Note 6 – Loan and Lease Operations
Note 7 – Provisions for Vacation Pay, Paid Leave and Litigation
Note 8 – Other Receivables
Note 9 – Other Assets
Note 10 – Deposits
Note 11 – Borrowings - Foreign Borrowings
Note 12 – Local Onlendings - Official Institutions
Note 13 – Funds Obtained in Foreign Capital Markets
Note 14 – Other liabilities
Note 15 – Analysis of Income Statement Items
Note 16 – Stockholders' Equity
Note 17 – Income Tax and Social Contribution on Net Income
Note 18 – Tax Credits
Note 19 – Equity in the Earnings (Loss) of Subsidiary and Associated Companies
Note 20 – Related-party Transactions
Note 21 – Operating Limits - Basel Agreement
Note 22 – Balance Sheet by Currency and Foreign Exchange Exposure
Note 23 – Retirement and Pension and Health Plans - Post-Employment Benefits
Note 24 – Compensation Paid to Employees and Management
Note 25 – Assignment of Employees to External Organizations
Note 26 – Commitments, Responsibilities and Contingencies
Note 27 – Reclassifications for Comparative Purposes
NOTE 1 - The Bank and its Operations
Banco do Brasil S.A. is a publicly listed company established under private law, with both public and private
stockholders, and subject to the requirements of Brazilian corporate legislation. Its corporate purpose is to carry
out all the asset, liability and accessory banking operations, to provide banking services, intermediate and
originate financial transactions in various forms and perform any activity permitted to the institutions that are
part of the National Finance System. It is also the main financial agent of the Brazilian Federal Government and
is therefore required to carry out the functions attributed to it by law, specifically those of Art. 19 of Law
4595/1964.
NOTE 2 – Presentation of the Financial Statements
2.a) The financial statements of Banco do Brasil S.A. have been prepared in accordance with the requirements
of Law 6404/1976 and the rules and instructions issued by the Brazilian Central Bank (BACEN) and the
Brazilian Securities Commission (CVM). The financial statements labeled "BB - Domestic and Overseas
branches" include the Bank's operations in Brazil and its branches abroad. The consolidated amounts ("BB -
Consolidated") also include the financial subsidiaries and the foreign special purpose entities. The balances of
foreign branches and subsidiaries included in the financial statements of "BB - Domestic and Overseas
branches" and "BB - Consolidated", respectively, are as follows:
9
Foreign branches and
Foreign branches subsidiaries
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Current assets 28,753,882 30,531,297 28,924,461 30,244,351
Long-term receivables 11,302,177 10,114,213 11,637,779 10,539,935
Permanent assets 133,828 181,969 154,335 210,368
Total assets 40,189,887 40,827,479 40,716,575 40,994,654
Current liabilities 31,042,196 27,280,165 30,034,956 25,892,768
Long-term liabilities 6,697,603 10,881,009 6,737,349 10,844,069
Deferred income 4,679 2,669 4,679 2,669
Long-term liabilities 2,445,409 2,663,636 3,939,591 4,255,148
Total liabilities and stockholders' 40,189,887 40,827,479 40,716,575 40,994,654
equity
Net income for the quarter 46,582 57,397 71,736 99,333
2.b) The consolidated financial statements (BB - Consolidated) comprise the domestic and foreign branches
and the foreign subsidiaries: Banco do Brasil - A.G. Vienna - Austria, BB - Leasing Company Ltd., Brazilian
American Merchant Bank - BAMB and the domestic subsidiaries: BB - Administração de Ativos - Distribuidora
de Títulos e Valores Mobiliários S.A., BB - Banco de Investimento S.A., BB - Leasing S.A. - Arrendamento
Mercantil and BB - Banco Popular do Brasil S.A. In order to comply with CVM Instruction No. 408, of August
18, 2004, the following Foreign Special Purpose Entities (EPE) have been included in the consolidation: Dollar
Diversified Payment Rights Finance Company and Nikkei Remittance Rights Finance Company. The asset and
liability and the income and expense accounts recording transactions between the foreign branches and
subsidiaries and Banco do Brasil S.A. were eliminated on consolidation. The translation into Brazilian reais of
the financial statements prepared in a foreign currency is carried out using current exchange rates, in
conformity with CVM Decision 28/1986. BB - Corretora de Seguros e Administradora de Bens S.A., BB -
Administradora de Cartões de Crédito S.A., BBTUR Viagens e Turismo Ltda., Cobra Tecnologia S.A., Ativos
S.A. and BB - Administradora de Consórcios S.A. were not included in the consolidation, in accordance with
article 23 of CVM Instruction 247/03.27.1996, as they do not materially affect the consolidated financial
statements, and Brasil Aconselhamento Financeiro S.A was also not included because it is in liquidation. The
investments in these companies were recorded on the equity method of accounting and the information
required by article 20 of CVM Instruction 247/02.051996 and CVM Deliberation 26/02.05.1986 is presented in
Notes 19 and 20, respectively.
NOTE 3 – Accounting practices
3.a) Net income is determined on the accrual basis of accounting.
3.b) The assets and liabilities in foreign currencies and those subject to indexation are adjusted in accordance
with the exchange rates or official indices as of the balance sheet date and are presented at realizable values.
The assets and liabilities with floating financial charges are recorded at present value, calculated pro rata
based on the variations in the contractual indices. Those with fixed financial charges are recorded at future
value, adjusted to reflect unearned income or unexpired expenses.
3.c) The allowance for loan losses is recorded based on the parameters of CMN Resolution 2682/1999, for
domestic branches and subsidiaries, as well as those abroad, taking into consideration the risks of the
transactions based on consistent and verifiable criteria, supported by internal and external information, and
covering all aspects established in the resolution..
3.d) Securities:
The securities purchased for the Bank's portfolio are recorded at the actual amount paid, including brokerage
charges and fees, and are classified based on the intention of management, in three different categories:
10
3.d.1) Trading securities: these are securities purchased to be actively and frequently traded. They are
adjusted to market value on a monthly basis and increases and decreases in value are recorded in income
and expense accounts for the period;
3.d.2) Securities available for sale: these are securities which, although not actively and frequently traded,
can be traded at any time. They are adjusted to market value on a monthly basis and increases and
decreases in value are recorded, net of tax effects, in a separate stockholders' equity account;
3.d.3) Securities held to maturity: these are securities that the Bank intends and has the financial capacity to
hold to maturity. The financial capacity is supported by a cash flow projection that does not consider the
possibility of sale of these securities. They are not adjusted to market value.
The mark-to-market methodology used for securities was established following consistent and verifiable
criteria, which consider the average price of trading on the day of calculation or, if not available, pricing
models that estimate the probable net realizable value.
Income accrued on the securities, irrespective of the category in which they are classified, is appropriated on
a pro rata basis on the accrual basis of accounting up to the date of maturity or of final sale, on an
exponential or straight-line method, based on the contractual remuneration and purchase price, and
recorded directly in income for the period.
Losses with securities classified as available for sale and held to maturity, if judged not to be temporary, are
recorded directly in expense for the period and a new cost basis for the asset is determined.
Upon sale, the difference between the sale amount and the cost of purchase plus accrued income is
considered as a result of the transaction and is recorded on the date of the transaction as a gain or loss on
securities.
3.e) Derivative financial instruments:
Derivative financial instruments are recorded at market value at each monthly trial balance and balance
sheet date. Increases or decreases in value are recorded in income or expense accounts of the respective
financial instruments.
The mark-to-market methodology used for derivative financial instruments was established following
consistent and verifiable criteria, which consider the average price of trading on the date of calculation or, if
not available, pricing models that estimate the probable net realizable value, according to the characteristics
of the derivative.
Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to
variations in financial asset or liability market values are considered hedge instruments and are classified
according to their nature:
3.e.1) Market risk hedge - increases or decreases in value of the financial instruments classified in this
category, as well as of the item hedged, are recorded in income and expense accounts for the period;
3.e.2) Cash flow hedge - the effective amount of the increases or decreases in value of the financial
instruments classified in this category is recorded, net of tax effects, in a separate stockholders' equity
account. The effective amount is that in which the variation of the item hedged, directly related to the
corresponding risk, is offset by the variation in the financial instrument used for hedge, considering the
accumulated effect of the transaction. Other variations in these instruments are recorded directly in income
or expense accounts for the period.
3.f) Permanent assets:
3.f.1) Investments are stated at cost and, when material, are recorded on the equity method of accounting;
3.f.2) Property and equipment is stated at cost less depreciation calculated on the straight-line method at the
following annual rates: buildings and improvements - 4%; vehicles, installations and equipment - 20%; others
- 10%;
11
3.f.3) Organization and expansion expenses recorded in deferred charges relate to: leasehold improvements
in properties owned by third parties for the installation of facilities, amortized at rates based on the rental
terms; cost of purchase and development of systems, amortized at the annual rate of 20%.
3.g) Vacations, paid leave and thirteenth month salaries are accrued monthly, in accordance with the period of
acquisition of the right.
3.h) Current benefits for existing employees are recognized on the accrual basis as the services are
provided. Post-employment benefits, comprising supplementary retirement benefits, medical assistance and
other benefits for which the Bank is responsible, were calculated at December 31, 2005 in accordance with
criteria established by CVM Deliberation 371/2000, considering a 6.3% annual interest rate, and are being
allocated monthly in accordance with this calculation, as shown in Note 23.
3.i) Corporate income tax is calculated at the basic rate of 15% plus a surcharge of 10% on taxable income
above a specific limit, and the social contribution on net income is calculated at the basic rate of 9% on
taxable income (Note 17(a)). Income tax and social contribution on net income tax credits are recorded in
accordance with the criteria mentioned in Note 18 and are supported by a study of future realization
prepared by management.
NOTE 4 – Interbank Investments
Current and long-term
BB - Domestic
and foreign branches BB - Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Repurchase agreements 21,883,686 4,007,214 21,838,978 3,952,762
Sales pending settlement - own operations 11,956,623 1,499,865 11,956,623 1,499,864
Sales pending settlement - financed operations 9,927,063 2,507,349 9,882,355 2,452,898
Interbank deposits 20,445,728 18,757,788 13,905,156 13,623,062
Foreign currency deposits 2,321,485 171,034 -- 171,034
Total 44,650,899 22,936,036 35,744,134 17,746,858
NOTE 5 – Securities and Derivative Financial Instruments
Securities are classified in three categories: trading securities, securities available for sale and securities
held to maturity, and derivative financial instruments in derivates for trading and derivatives for hedging
purposes. Trading securities are adjusted to market value and the adjustments recorded as income or
expense for the period while similar adjustments for securities available for sale are recorded in a separate
stockholders' equity account. Securities held to maturity are stated at cost plus income accrued in the period.
The derivative financial instruments for trading, used at the request of clients or for own account, do not
comply with hedging criteria and are recorded at market value and the adjustments recorded as income or
expense. Derivatives for hedging purposes are used to protect exposures to risk or to modify the
characteristics of financial assets and liabilities. They are directly related to a specific transaction and are
also adjusted to market value with contra-entry to income or expense as they are considered a market risk
hedge.
The parameters for the calculation of market values of marketable securities and derivative financial
instruments are:
- the average of the representative trading price on the day of the calculation and the daily adjustment of
future market transactions reported by ANDIMA, BM&F, BOVESPA and the Brazilian Central Bank; or
- the net probable realizable value obtained through the use of curves of future interest rates, foreign exchange
rates, price and currency indices, all consistent with prices in effect during the year.
5.a) Securities
12
The cost (plus accrued income) and market value of the securities at March 31, 2006 are as follows
BB - domestic and foreign branches
03.31.2006 03.31.2005
Market value Total Total
With no Market Unrealized gain Market Unrealized gain
maturity 0-30 31-180 181-360 Over 360 Cost value (loss) Cost Value (loss)
Maturity in days
1 - Trading securities -- -- 804,810 941,287 2,495,535 4,213,443 4,241,632 -- 11,241,512 11,210,735 --
Domestic -- -- -- 941,287 2,495,535 4,213,443 4,241,632 -- 11,241,512 11,210,735 --
Financial Treasury Bills -- -- 1,821 -- 394,469 396,137 396,290 -- 8,444,072 8,443,223 --
Federal Treasury Bills -- -- 802,989 941,287 2,038,206 3,753,952 3,782,482 -- 2,652,306 2,627,263 --
Federal Treasury Notes -- -- -- -- 62,860 63,354 62,860 -- 142,671 137,652 --
Shares in listed companies -- -- -- -- -- -- -- -- 2,463 2,597 --
2 - Securities available for sale 25,083 856,542 5,064,308 6,336,118 25,444,028 37,481,935 37,726,079 153,310 34,085,620 34,067,809 (20,322)
Domestic 17,576 853,479 4,864,119 6,124,890 24,090,018 35,785,456 35,950,082 73,793 31,895,794 31,934,735 36,430
Financial Treasury Bills -- 517,242 3,532,718 5,148,531 19,131,853 28,161,687 28,330,344 168,655 21,502,995 21,513,478 10,483
Brazilian Central Bank Notes -- -- -- -- 33,597 33,616 33,597 (19) -- -- --
Federal Treasury Notes -- -- -- 169,560 -- 172,656 169,560 (3,096) 477,393 475,801 (4,102)
Federal Government securities – other -- -- 190,987 -- 3,721,462 3,962,336 3,912,449 (49,887) 4,944,300 4,977,049 32,749
Debentures -- -- -- 440,815 1,157,814 1,587,847 1,598,629 10,782 3,992,003 4,005,727 13,724
Agricultural debt securities -- -- -- -- 31,803 33,034 31,803 (1,231) 27,283 27,623 339
Shares in investment funds -- 778 1,087 4,259 8,243 16,769 14,367 (2,402) 21,208 18,126 (3,083)
Shares in social development funds 12,334 -- -- -- -- 12,334 12,334 -- 129,401 129,401 --
Shares in listed companies 481 -- -- -- -- 1,545 481 (1,064) 1,545 1,461 (84)
Rural Product Bills (Commodities) 4,761 -- -- -- -- 7,364 4,761 (2,603) 7,365 10,146 2,781
-- 335,459 1,139,327 361,725 5,246 1,887,100 1,841,757 (45,343) 792,301 775,923 (16,377)
Foreign 7,507 3,063 200,189 211,228 1,354,010 1,696,479 1,775,997 79,517 2,189,826 2,133,074 (56,752)
Eurobonds -- -- 15,302 4,300 -- 19,765 19,602 (163) 73,601 73,178 (423)
Brazilian foreign debt securities -- 966 16,327 163,957 1,352,701 1,454,659 1,533,951 79,291 1,830,818 1,774,563 (56,255)
Foreign debt securities – other countries -- 2,097 168,560 42,971 1,309 215,483 214,937 (546) 276,745 275,706 (1,039)
Shares in equity funds 7,506 -- -- -- -- 6,572 7,506 934 8,662 9,626 964
Shares in listed companies 1 -- -- -- -- -- 1 1 -- 1 1
3 - Securities held to maturity -- 32,490 1,411,972 1,823,343 21,563,802 25,065,418 24,831,607 -- 27,036,452 26,355,036 --
Domestic -- 1,875 1,401,080 1,823,111 20,829,558 24,348,964 24,055,624 -- 25,779,909 24,996,563 --
Debentures -- -- -- -- -- -- -- -- 50,982 47,984 --
Financial Treasury Bills -- -- 1,398,239 1,398,338 18,037,432 20,848,215 20,834,009 -- 19,885,342 19,637,864 --
Federal Treasury Notes -- -- -- -- 2,196,897 2,475,611 2,196,897 -- 2,271,842 1,801,768 --
Federal Government securities – other -- -- -- 422,838 590,646 1,013,466 1,013,484 -- 1,989,090 1,970,547 --
Commodities -- 1,875 2,841 1,935 4,583 11,672 11,234 -- 1,574,981 1,531,221 --
Other -- -- -- -- -- -- -- -- 7,672 7,179 --
Foreign -- 30,615 10,892 232 734,244 716,454 775,983 -- 1,256,543 1,358,473 --
Eurobonds -- -- -- -- 13,218 13,224 13,218 -- -- -- --
Brazilian foreign debt securities -- 20,727 -- -- 720,828 682,035 741,555 -- 1,247,984 1,349,897 --
Certificates of deposit -- -- -- -- -- -- -- -- 6,929 6,929 --
Foreign debt securities – other countries -- 196 -- 232 198 611 626 -- 1,630 1,647 --
Other -- 9,692 10,892 -- -- 20,584 20,584 -- -- -- --
Total 25,083 889,032 7,281,090 9,100,748 49,503,365 66,851,629 66,799,318 153,310 72,363,584 71,633,580 (20,322)
03.31.2006 03.31.2005
Market value Total Total
With no Market Unrealized gain Market Unrealized gain
maturity 0-30 31-180 181-360 Over 360 Cost Value (loss) Cost Value (loss)
Maturity in days
Total by portfolio 25,083 889,032 7,281,090 9,100,748 49,503,365 66,851,629 66,799,318 153,310 72,363,584 71,633,580 (20,322)
a) Own portfolio 25,083 889,032 5,969,392 4,821,217 18,286,944 30,138,835 29,991,670 48,944 28,165,996 27,690,155 1,808
b) Subject to repurchase agreements -- -- 1,155,500 3,814,684 27,623,571 32,499,800 32,593,755 103,780 41,648,603 41,402,233 (22,169)
c) Deposits with the Brazilian Central Bank -- -- 75,863 464,847 3,202,633 3,742,572 3,743,343 497 2,185,010 2,179,261 --
d) Pledged in guarantee -- -- 80,334 -- 390,217 470,422 470,550 89 363,975 361,931 39
03,31.2006 03.31.2005
Market value Total Total
With no Due in up Due from Due from Due after Market Cost Market
maturity to one year 1 to 5 years 5 to 10 years 10 years Cost Value Value
Maturity in years
Total by category 25,083 17,270,870 42,387,251 6,341,267 774,847 66,851,629 66,799,319 72,363,584 71,633,580
1 - Trading securities -- 1,746,097 2,495,535 -- -- 4,213,443 4,241,631 11,241,512 11,210,735
2 - Securities available for sale 25,083 12,256,968 24,368,979 300,201 774,847 37,572,768 37,726,078 34,085,620 34,067,810
3 - Securities held to maturity -- 3,267,805 15,522,737 6,041,066 -- 25,065,418 24,831,608 27,036,452 26,355,035
13
The portfolio after marking-to-market is as follows:
03.31.2006 03.31.2005
% of the % of the
total total
portfolio portfolio %
Total by category 67,033,129 100% 72,314,996 100%
1 – Trading securities 4,241,632 6% 11,210,735 16%
2 – Securities available for sale 37,726,079 56% 34,067,809 47%
3 – Securities held to maturity 25,065,418 37% 27,036,452 37%
BB – Consolidated
03.31.2006 03.31.2005
Market value Total Total
With no Cost Market Unrealized gain Cost Market Unrealized gain
maturity 0-30 31-180 181-360 Over 360 Value (loss) Value (loss)
Maturity in days
1 - Trading securities 607 1,961 807,080 1,021,744 2,495,535 4,299,778 4,326,928 -- 11,341,162 11,308,834 --
Domestic 607 -- 804,810 941,287 2,495,535 4,214,063 4,242,240 -- 11,252,763 11,221,990 --
Financial Treasury Bills -- -- 1,821 -- 394,468 396,137 396,289 -- 8,455,323 8,454,478 --
Federal Treasury Bills -- -- 802,989 941,287 2,038,207 3,753,952 3,782,483 -- 2,652,306 2,627,263 --
Federal Treasury Notes -- -- -- -- 62,860 63,354 62,860 -- 142,671 137,652 --
Shares in listed companies 607 -- -- -- -- 620 607 -- 2,463 2,597 --
Foreign -- 1,961 2,270 80,457 -- 85,715 84,688 -- 88,399 86,844 --
Eurobonds -- 833 2,270 54,850 -- 58,538 57,953 -- 57,022 55,883 --
Brazilian foreign debt securities -- 1,128 -- 25,607 -- 27,177 26,735 -- 24,739 24,452 --
Foreign debt securities – other countries -- -- -- -- -- -- -- -- 6,638 6,509 --
2 - Securities available for sale 761,365 857,343 5,101,613 6,336,118 25,758,655 38,587,180 38,815,096 227,913 35,131,526 35,092,138 (41,897)
Domestic 718,584 854,280 4,898,116 6,124,890 24,266,677 36,749.199 36,862,547 113,347 32,786,673 32,807,577 18,395
Financial Treasury Bills -- 517,242 3,532,718 5,148,531 19,168,102 28,197,940 28,366,593 168,654 21,522,788 21,533,278 10,491
Federal Treasury Bills -- -- -- -- 33,598 33,616 33,598 (19) -- -- --
Brazilian Central Bank Notes -- -- -- 169,560 -- 172,656 169,560 (3,096) 477,393 475,801 (4,103)
Federal Treasury Notes -- -- 190,987 -- 3,721,462 3,962,336 3,912,449 (49,887) 4,944,300 4,977,049 32,751
Federal Government securities – other -- -- -- 440,815 1,157,814 1,587,847 1,598,629 10,782 3,992,003 4,005,727 13,724
Debentures -- -- 33,739 -- 160,875 194,313 194,614 301 105,837 105,998 161
Agricultural debt securities -- 778 1,087 4,259 8,243 16,769 14,367 (2,402) 21,208 18,126 (3,083)
Shares in investment funds 14,987 -- -- -- 8,157 22,712 23,144 432 129,406 129,406 --
Shares in social development funds 481 -- -- -- -- 10,321 481 (9,840) 10,321 1,461 (8,861)
Shares in listed companies 512,144 -- -- -- -- 469,472 512,144 42,672 403,724 420,601 16,877
Shares in privately-held companies 2,986 -- -- -- -- 2,749 2,986 237 -- -- --
Shares in equity funds 187,986 -- -- -- 3,180 189,502 191,166 1,664 192,077 169,307 (22,770)
Rural Product Bills (Commodities) -- 335,760 1,139,440 361,725 5,246 1,887,513 1,842,171 (45,343) 974,288 958,311 (15,976)
Securities in special status company -- -- -- -- -- 808 -- (808) 808 -- (808)
Other -- 500 145 -- -- 645 645 -- 12,520 12,512 (8)
Foreign 42,781 3,063 203,497 211,228 1,491,978 1,837,981 1,952,547 114,566 2,344,853 2,284,561 (60,292)
Eurobonds -- -- 15,302 4,300 0 19,765 19,602 (163) 73,601 73,178 (423)
Brazilian foreign debt securities -- 966 19,255 163,957 1,451,243 1,530,417 1,635,421 105,004 1,923,618 1,876,111 (47,507)
Foreign debt securities - other countries -- 2,097 168,560 42,971 1,309 215,483 214,937 (546) 276,745 275,706 (1,039)
Shares in equity funds 39,885 -- -- -- -- 32,210 39,885 7,675 40,129 45,384 5,255
Shares in listed companies 2,896 -- -- -- -- 977 2,896 1,919 1,199 1,593 394
Other -- -- 380 -- 39,426 39,129 39,806 677 29,561 12,589 (16,972)
3 - Securities held to maturity -- 32,493 1,412,021 1,826,313 21,563,888 25,068,518 24,834,714 -- 27,039,356 26,357,952 --
Domestic -- 1,875 1,401,080 1,823,111 20,829,558 24,348,963 24,055,623 -- 25,779,909 24,996,563 --
Debentures -- -- -- -- -- -- -- -- 50,982 47,984 --
Financial Treasury Bills -- -- 1,398,239 1,398,338 18,037,432 20,848,215 20,834,008 -- 19,885,342 19,637,864 --
Federal Treasury Notes -- -- -- -- 2,196,897 2,475,611 2,196,897 -- 2,271,842 1,801,768 --
Federal Government securities – other -- -- -- 422,838 590,646 1,013,465 1,013,484 -- 1,989,090 1,970,547 --
Commodities -- 1,875 2,841 1,935 4,583 11,672 11,234 -- 1,574,981 1,531,221 --
Other -- -- -- -- -- -- -- -- 7,672 7,179 --
Foreign -- 30,618 10,941 3,202 734,330 719,555 779,091 -- 1,259,447 1,361,389 --
Brazilian foreign debt securities -- -- -- -- 13,218 13,224 13,218 -- -- -- --
Certificates of deposit -- 20,727 -- 2,954 720,828 684,989 744,509 -- 1,250,694 1,352,608 --
Foreign debt securities - other countries -- -- -- -- -- -- -- -- 6,929 6,929 --
Other -- 198 49 232 198 661 677 -- 1,696 1,716 --
Brazilian foreign debt securities -- 9,693 10,892 16 86 20,681 20,687 -- 128 136 --
Total 761,972 891,797 7,320,714 9,184,175 49,818,079 67,955,476 67,976,738 227,913 73,512,044 72,758,924 (41,897)
03,31.2006 03.31.2005
Market value Total Total
With no Market Unrealized gain Market Unrealized gain
maturity 0-30 31-180 181-360 Over 360 Cost Value (loss) Cost Value (loss)
Maturity in days
Total by portfolio 761,972 891,797 7,320,714 9,184,175 49,818,079 67,955,476 67,976,738 222,913 73,512,044 72,758,924 (41,897)
a) Own portfolio 761,972 891,797 6,006,088 4,904,645 18,475,005 31,138,808 31,039,509 97,833 29,143,082 28,632,011 (28,514)
b) Subject to repurchase agreements -- -- 1,158,429 3,814,684 27,722,113 32,575,559 32,695,225 129,494 41,819,977 41,585,721 (13,422)
c) Deposits with the Brazilian Central Bank -- -- 75,862 464,847 3,230,744 3,770,687 3,771,453 497 2,185,010 2,179,261 --
14
d) Pledged in guarantee -- -- 80,334 -- 390,217 470,422 470,551 89 363,975 361,931 39
03.31.2006 03.31.2005
Market value Total Total
With no Due in up Due from Due from Due after Market Cost Market
maturity to one year 1 to 5 years 5 to 10 years 10 years Cost Value Value
Maturity in years
Total by category 761,972 17,396,686 42,565,362 6,379,327 873,389 67,955,476 67,976,738 73,512,044 72,758,924
1 - Trading securities 607 1,830,785 2,495,534 -- -- 4,299,778 4,326,928 11,341,162 11,308,834
2 - Securities available for sale 761,365 12,295,074 24,547,091 338,175 873,389 38,587,180 38,815,096 35,131,527 35,092,139
3 - Securities held to maturity -- 3,270,827 15,522,737 6,041,152 -- 25,068,518 24,834,714 27,039,355 26,357,951
The portfolio after marking-to-market is as follows:
03.31.2006 03.31.2005
% total % total
portfolio portfolio
Total by portfolio 68,210,542 100% 73,440,328 100%
1 – Trading securities 4,326,928 6% 11,308,834 15%
2 – Securities available for sale 38,815,096 57% 35,092,138 48%
3 – Securities held to maturity 25,068,518 37% 27,039,356 37%
No reclassifications of marketable securities were made between the above categories during the period.
5.b) Derivative financial instruments
The Bank uses derivative financial instruments to manage, in a consolidated manner, its positions and to
meet clients' needs, classifying own positions into Hedging (market risk) and Trading, both with limits of
approval. This information is made available to the areas of pricing, trading, controls and calculation of
results, which are segregated within the Bank.
The models used to manage risks with derivatives are reviewed periodically and the decisions made follow
the best risk/return relationship, estimating possible losses based on the analysis of macroeconomic
scenarios.
The Bank uses appropriate tools and systems to manage the derivatives. Trading in new derivatives,
standardized or not, is subject to a previous risk analysis o.
The hedge strategy of the equity positions is in line with the macroeconomic analyses and is approved by
management.
Risk analysis of the subsidiaries is individual and its control consolidated.
The Bank uses statistical methods and simulations to measure the risks of its positions, including derivatives,
using models of values at risk sensibility and stress analysis.
Risks
The main risks inherent to derivative financial instruments resulting from the Bank's and its subsidiaries'
business are credit, market and operating risks, all similar to those related to other types of financial
instruments.
Market risk is the exposure created by a potential fluctuation in interest rates, exchange rates, quotations of
goods, prices quoted on stock markets and other values, and is a function of the type of product, the volume
of operations, the term and conditions of the contract and the underlying volatility.
Credit risk is the exposure to loss in the event of default by a counterparty to a transaction. The credit
exposure in futures contracts is minimized due to daily settlement in cash. Swap contracts registered at
CETIP and at BM&F are subject to credit risk if the counterparty is unable or unwilling to comply with his
contractual liabilities. Total credit exposure in swaps at March 31, 2006 is R$ 1,095,638 (R$ 949,642 at
March 31, 2005). The credit risk associated with options contracts is limited to the premiums paid on
purchased options.
Operating risk is the probability of financial losses resulting from failures or inadequacy of people, processes
and systems, or factors such as catastrophes or criminal activities.
15
The tables below show the notional amounts, as cost or market value, and the respective net exposures in
the balance sheet at March 31, 2006 for the derivative financial instruments classified in conformity with their
classification as Trading or Hedge instruments.
BB - Domestic and Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
By index Counte Notional Cost Market Notional Market Market Notional Cost Market Notional Cost Market
rparty Amount value amount value Value Amount Value Amount Value
Exchange trading
Futures contracts
Purchase commitments 658,917 (52,435) (52,482) 1,380,977 (25,479) (25,453) 641,544 (52,435) (52,472) 1,380,977 (25,479) (25,453)
DI B -- 2,082 2,082 -- 731 731 -- 2,082 2,082 -- 731 731
U,S, dollar B -- (24,428) (24,428) 38,485 1,764 1,764 -- (24,428) (24,428) 38,485 1,764 1,764
Índex B -- (49) (49) -- 127 127 -- (49) (49) -- 127 127
Foreign exchange B 343,041 (36,757) (36,757) 740,112 (28,101) (28,101) 343,041 (36,757) (36,757) 740,112 (28,101) (28,101)
coupon
Libor (IF) 232,361 (1) (48) 602,380 -- 26 214,988 (1) (38) 602,380 -- 26
SCC B 83,515 6,718 6,718 -- -- -- 83,515 6,718 6,718 -- -- --
Sales commitments 5,360,905 (1,781) 614 2,607,631 14,236 16,074 5,360,905 (1,781) 614 2,607,631 14,236 16,074
DI B 3,184,589 (24,755) (24,755) 668,607 7,166 7,166 3,184,589 (24,755) (24,755) 668,607 7,166 7,166
U,S, dollar B 301,585 1,544 1,544 20,130 622 622 301,585 1,544 1,544 20,130 622 622
Índex B -- (58) (58) -- 416 416 -- (58) (58) -- 416 416
Foreign exchange B 202,599 21,488 21,488 290,086 15,259 15,259 202,599 21,488 21,488 290,086 15,259 15,259
coupon
SCC B -- -- -- 298,773 (9,227) (9,227) -- -- -- 298,773 (9,227) (9,227)
Commodities B -- (1) (1) -- -- -- -- (1) (1) --
Libor (IF) 1,672,132 -- 2,395 1,330,035 -- 1,838 1,672,132 -- 2,395 1,330,035 -- 1,838
Fixed-term options
Asset position 678,749 60,468 68,027 410,451 228,702 222,463 678,749 60,468 68,027 410,451 228,702 222,463
Securities B 51,825 51,825 51,825 209,513 209,513 209,513 51,825 51,825 51,825 209,513 209,513 209,513
Currencies B 626,924 8,643 16,202 200,938 19,189 12,950 626,924 8,643 16,202 200,938 19,189 12,950
Liability position 646,524 (97,852) (83,411) (473,012) (229,094) (213,549) 646,524 (97,852) (83,411) (473,012) (229,094) (213,549)
Securities B (51,825) (51,825) (51,825) (209,513) (209,513) (209,513) (51,825) (51,825) (51,825) (209,513) (209,513) (209,513)
Currencies B 698,349 (46,027) (31,586) (263,499) (19,581) (4,036) 698,349 (46,027) (31,586) (263,499) (19,581) (4,036)
Options market
Purchase options 8,696 87 87 200 65 31 10,439 152 147 5,842 315 76
Shares B -- -- -- 200 65 31 -- -- -- 200 65 31
Financial assets &
derivatives 8,696 87 87 -- -- -- 10,439 152 147 5,642 250 45
Short Position (370,787) (816,028) (823,012) (200) (44) (19) (369,044) (816,093) (823,073) 5,442 (294) (64)
Shares B (379,483) (815,941) (822,925) (200) (44) (19) (379,483) (815,941) (822,925) (200) (44) (19)
Financial assets &
derivatives 8,696 (87) (87) -- -- -- 10,439 (152) (148) 5,642 (250) (45)
Over-the-counter
trading
Swap contracts”
Asset position 2,072,495 292,044 336,574 5,876,479 504,927 523,506 2,001,703 292,156 336,207 5,615,171 402,921 404,923
DI C 1,523,306 266,899 289,593 2,294,266 374,304 390,515 1,523,305 266,899 289,593 2,294,266 374,304 390,515
IF -- -- -- 291,038 58,851 61,029 -- -- -- 271,448 50,890 51,916
Foreign currency C 36,071 701 177 20,050 262 116 36,071 701 177 20,050 262 116
IF 77,548 20,194 40,955 1,857,749 56,645 63,402 77,548 20,194 40,955 1,704,725 (36,642) (45,358)
Prefixed C 435,570 4,250 5,849 334,646 9,368 3,803 364,779 4,362 5,482 245,953 8,610 3,121
IGPM C -- -- -- 24,564 1,249 393 -- -- -- 24,564 1,249 393
Other -- -- -- -- 1,054,166 4,248 4,248 -- -- -- 1,054,165 4,248 4,220
Liability position 15,742,292 (528,524) (529,800) 12,091,531 (512,106) (535,356) 15,742,292 (528,524) (529,800) 11,943,517 (437,732) (459,621)
DI C 12,031,117 (379,043) (379,375) 9,751,619 (316,180) (316,629) 12,031,117 (379,043) (379,375) 9,604,970 (316,054) (316,054)
IF 605,856 (46,669) (53,841) 250,595 (76,349) (76,817) 605,856 (46,669) (53,841) 250,595 (76,349) (76,817)
Foreign currency C 546,212 (14,475) (7,394) 120,924 (793) (399) 546,212 (14,475) (7,394) 120,924 (793) (399)
IF 1,710 (1,140) (1,140) 687,615 (24,102) (46,671) 1,710 (1,140) (1,140) 686,250 50,146 27,541
Prefixed C 77,422 (999) (1,852) 14,571 (235) (393) 77,422 (999) (1,852) 14,571 (235) (394)
TMS C 2,151,074 (77,058) (77,058) 585,394 (60,820) (60,820) 2,151,074 (77,058) (77,058) 585,394 (60,820) (60,820)
Referential rate (TR) C 328,901 (9,140) (9,140) 680,813 (33,627) (33,627) 328,901 (9,140) (9,140) 680,813 (33,627) (32,678)
Forwards contracts”
Asset position 1,874,052 2,427 16,348 -- -- -- 1,874,025 2,427 16,348 -- -- --
Foreign currency IF 920,720 1,521 15,442 -- -- -- 920,693 1,521 15,442 -- -- --
Other -- 953,332 906 906 -- -- -- 953,332 906 906 -- -- --
Liability position 1,220,797 (5,847) (10,967) -- -- -- 1,128,198 (3,848) (9,467) -- -- --
Foreign currency IF 786,477 (5,843) (10,963) -- -- -- 693,878 (3,844) (9,463) -- -- --
Other -- 434,320 (4) (4) -- -- -- 434,320 (4) (4) -- -- --
BB- Domestic and Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
By maturity Notional Cost Market Notional Cost Market Notional Cost Market Notional Cost Market
Amount value Amount value Amount value Amount value
Forwards contracts
Sales commitments 658,917 -- -- 1,380,977 -- -- 641,544 -- -- 1,380,977
Up to 30 days 6,513 -- -- 135,881 -- -- 6,513 -- -- 135,881 -- --
31 to 60 days 21,568 -- -- 38,485 -- -- 21,568 -- -- 38,485 -- --
61 to 90 days 82,520 -- -- 181,247 -- -- 82,520 -- -- 181,247 -- --
91 to 180 days 69,491 -- -- 229,933 -- -- 69,491 -- -- 229,933 -- --
181 to 360 days 91,757 -- -- 236,361 -- -- 91,757 -- -- 236,361 -- --
1 to 5 years 369,695 -- -- 559,070 -- -- 369,695 -- -- 559,070 -- --
16
Over 5 years 17,373 -- -- -- -- -- -- -- --
Sales commitments 5,360,905 -- -- 2,607,631 -- -- 5,360,905 -- -- 2,607,631 -- --
Up to 30 days -- -- -- 50,109 -- -- -- - - 50,109 -- --
31 to 60 days 301,585 -- -- 13,706 -- -- 301,585 -- -- 13,706 -- --
61 to 90 days 173,729 -- -- 175,916 -- -- 173,729 -- -- 175,916 -- --
91 to 180 days 907,190 -- -- 634,063 -- -- 907,190 -- -- 634,063 -- --
181 to 360 days 1,120,506 -- -- 794,337 -- -- 1,120,506 -- -- 794,337 -- --
1 to 5 years 2,705,883 -- -- 811,561 -- -- 2,705,883 -- -- 811,561 -- --
Over 5 years 152,012 -- -- 127,939 -- -- 152,012 -- -- 127,939 -- --
Fixed-term options
Security maturity
Asset position 51,825 51,825 51,825 209,513 209,513 209,513 51,825 51,825 51,825 209,513 209,513 209,513
Up to 30 days 51,825 51,825 51,825 209,513 209,513 209,513 51,825 51,825 51,825 209,513 209,513 209,513
Liability position (51,825) (51,825) (51,825) (209,513) (209,513) (209,513) (51,825) (51,825) (51,825) (209,513) (209,513) (209,513)
Up to 30 days (51,825) (51,825) (51,825) (209,513) (209,513) (209,513) (51,825) (51,825) (51,825) (209,513) (209,513) (209,513)
Currency maturity
Asset position 626,924 8,643 16,202 200,938 19,189 12,950 626,924 8,643 16,202 200,938 19,189 12,950
Up to 30 days 340,933 2,278 2,677 32,727 1,535 1,570 340,933 2,278 2,677 32,727 1,535 1,570
31 to 60 days 41,229 735 773 70,646 1,614 1,901 41,229 735 773 70,646 1,614 1,901
61 to 90 days 11,465 322 367 16,263 2,249 1,853 11,465 322 367 16,263 2,249 1,853
91 to 180 days 50,920 8,527 7,917 44,823 6,958 4,662 50,920 8,527 7,917 44,823 6,958 4,662
181 to 360 days 163,480 (2,827) 3,782 22,014 2,988 1,162 163,480 (2,827) 3,782 22,014 2,988 1,162
1 to 5 years 18,897 (392) 686 14,465 3,845 1,802 18,897 (392) 686 14,465 3,845 1,802
Liability position 698,349 (46,027) (31,586) (263,499) (19,581) (4,036) 698,349 (46,027) (31,586) (263,499) (19,581) (4,036)
Up to 30 days 177,631 (6,355) (5,774) (22,240) (352) (380) 177,631 (6,355) (5,774) (22,240) (352) (380)
31 to 60 days 68,625 (3,362) (3,419) (17,470) (419) (246) 68,625 (3,362) (3,419) (17,470) (419) (246)
61 to 90 days 73,391 (4,797) (4,212) (23,437) (646) (123) 73,391 (4,797) (4,212) (23,437) (646) (123)
91 to 180 days 199,472 (13,253) (9,530) (89,267) (6,638) (2,615) 199,472 (13,253) (9,530) (89,267) (6,638) (2,615)
181 to 360 days 163,500 (15,717) (6,959) (107,082) (10,513) (721) 163,500 (15,717) (6,959) (107,082) (10,513) (721)
1 to 5 years 15,730 (2,543) (1,692) (4,003) (1,013) 49 15,730 (2,543) (1,692) (4,003) (1,013) 49
Options market
Purchase options
Shares 8,696 87 87 200 65 31 10,439 152 147 5,842 315 76
Up to 30 days 8,696 87 87 200 65 31 9,650 132 120 2,366 195 39
61 to 90 days -- -- -- -- -- -- -- -- -- 983 77 14
91 to 180 days -- -- -- -- -- -- 203 17 11 2,109 28 12
181 to 360 days -- -- -- -- -- -- 586 3 16 384 15 11
Sales options
Shares (370,787) (816,028) (823,012) (200) (44) (19) (369,044) (816,093) (823,073) 5,442 (294) (64)
Up to 30 days (84,627) (203,148) (205,393) (200) (44) (19) (83,673) (203,193) (205,426) 1,966 (174) (27)
31 to 60 days (48,740) (107,975) (109,114) -- -- -- (48,740) (107,975) (109,114) -- -- --
61 to 90 days -- -- -- -- -- -- -- -- -- 983 (77) (14)
91 to 180 days (235,100) (499,905) (503,488) -- -- -- (234,897) (499,922) (503,499) 2,109 (28) (12)
181 to 360 days (2,320) (5,000) (5,017) -- -- -- (1,734) (5,003) (5,034) 384 (15) (11)
Swap contracts
Asset 2,072,495 292,044 336,574 5,876,479 504,927 523,506 2,001,703 292,156 336,207 5,615,171 402,921 404,923
Up to 30 days 556,134 50,015 59,490 2,163,452 207,705 198,173 556,134 50,015 59,490 2,136,341 192,436 182,913
31 to 60 days 268,029 3,502 5,533 504,849 39,040 41,464 268,029 3,502 5,533 453,102 24,395 26,865
61 to 90 days 121,698 12,310 13,931 513,861 17,802 17,184 121,698 12,310 13,931 503,991 12,777 12,132
91 to 180 days 77,085 6,280 7,460 772,388 66,899 71,547 77,085 6,280 7,460 772,215 61,873 66,532
181 to 360 days 448,852 27,711 30,328 1,308,062 116,849 133,781 378,060 27,823 29,961 1,136,022 64,804 65,157
1 to 5 years 600,697 192,226 219,832 613,867 56,632 61,357 600,697 192,226 219,832 613,500 46,636 51,324
Liability 15,742,292 (528,524) (529,800) 12,091,531 (512,106) (535,356) 15,742,292 (528,524) (529,800) 11,943,517 (437,732) (459,621)
Up to 30 days 657,525 (31,869) (34,089) 440,715 (69,772) (71,933) 657,525 (31,869) (34,089) 398,714 (49,309) (51,392)
31 to 60 days 400,395 (17,672) (16,718) 161,488 (8,181) (9,308) 400,395 (17,672) (16,718) 130,009 (8,186) (9,243)
61 to 90 days 391,241 (39,782) (40,223) 570,878 (74,752) (75,548) 391,241 (39,782) (40,223) 541,107 (65,752) (66,469)
91 to 180 days 7,235,137 (253,704) (251,556) 4,888,346 (199,010) (200,481) 7,235,137 (253,704) (251,556) 4,844,781 (189,166) (190,411)
181 to 360 days 2,461,259 (76,887) (77,866) 1,975,035 (71,640) (89,422) 2,461,259 (76,887) (77,866) 1,975,035 (46,640) (64,415)
1 to 5 years 4,596,735 (108,610) (109,348) 4,055,069 (88,751) (88,664) 4,596,735 (108,610) (109,348) 4,053,871 (78,679) (77,691)
Forward contracts
Asset 1,874,052 2,427 16,348 -- -- -- 1,874,025 2,427 16,348 -- -- --
Up to 30 days 535,162 1,608 3,839 -- -- -- 535,162 1,608 3,839 -- -- --
31 to 60 days 202,905 2,080 3,968 -- -- -- 202,885 2,080 3,968 -- -- --
61 to 90 days 370,279 794 2,791 -- -- -- 370,272 794 2,791 -- -- --
91 to 180 days 472,251 157 4,163 -- -- -- 472,251 157 4,163 -- -- --
181 to 360 days 291,705 (2,192) 1,567 -- -- -- 291,705 (2,192) 1,567 -- -- --
1 to 5 years 1,750 (20) 20 -- -- -- 1,750 (20) 20 -- -- --
Liability 1,220,797 (5,847) (10,967) -- -- -- 1,128,198 (3,848) (9,467) -- -- --
Up to 30 days 888,015 66 (2,582) -- -- -- 802,476 873 (2,088) -- -- --
31 to 60 days 113,933 (1,033) (1,564) -- -- -- 113,902 (1,033) (1,564) -- -- --
61 to 90 days 14,478 (351) (1,194) -- -- -- 14,461 (351) (1,194) -- -- --
91 to 180 days 47,678 (803) (1,401) -- -- -- 47,589 (801) (1,401) -- -- --
181 to 360 days 124,947 (91) (812) -- -- -- 124,766 (83) (811) -- -- --
1 to 5 years 27,837 (2,785) (2,438) -- -- -- 25,004 (2,453) (2,409) -- -- --
5 to 10 years 3,909 (850) (976) -- -- -- -- -- --
5b,2) Hedge derivatives:
BB - Domestic and Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
By index Counte Notional Cost Market Notional Market Market Notional Cost Market Notional Cost Market
rparty Amount value amount value Value Amount Value Amount Value
Over-the-counter
trading
Swap contracts
Asset position -- -- -- 125,450 21,184 21,579 -- -- -- 125,450 21,184 21,579
DI C -- -- -- 66,647 6,653 6,957 -- -- -- 66,647 6,653 6,957
17
IF -- -- -- 58,803 14,531 14,622 -- -- -- 58,803 14,531 14,622
-- --
Liability position -- -- -- (33,039) (417) (305) -- -- -- (33,039) (417) (305)
Foreign currency C -- -- -- (33,039) (417) (305) -- -- -- (33,039) (417) (305)
BB - Domestic and Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
By maturity Notional Cost Market Notional Market Market Notional Cost Market Notional Cost Market
Amount value amount value Value Amount Value Amount Value
Swap contracts
Asset -- -- -- 125,450 21,184 21,579 -- -- -- 125,450 21,184 21,579
Up to 30 days -- -- -- 23,587 3,735 3,825 -- -- -- 23,587 3,735 3,825
31 to 60 days -- -- -- 26,009 1,106 1,214 -- -- -- 26,009 1,106 1,214
61 to 90 days -- -- -- 14,600 1,631 1,709 -- -- -- 14,600 1,631 1,709
91 to 180 days -- -- -- 1,350 33 43 -- -- -- 1,350 33 43
181 to 360 days -- -- -- 59,904 14,679 14,788 -- -- -- 59,904 14,679 14,788
Liability -- -- -- (33,039) (417) (305) -- -- -- (33,039) (417) (305)
Up to 30 days -- -- -- (14,653) (278) (226) -- -- -- (14,653) (278) (226)
31 to 60 days -- -- -- (7,972) (50) (45) -- -- -- (7,972) (50) (45)
61 to 90 days -- -- -- (7,810) (68) (32) -- -- -- (7,810) (68) (32)
91 to 180 days -- -- -- (2,604) (21) (2) -- -- -- (2,604) (21) (2)
The margin given as guarantee for transactions with derivative financial instruments is comprised of
Financial Treasury Bills (LFT) amounting to R$ 470,551 (R$ 361,931 at March 31, 2005),
The following tables show the derivative financial instruments portfolio for market risk hedges and the
respective hedged items, which terminated on October 13, 2005 because of the maturity of the
securities comprising the hedged item.
BB-Consolidated
- Hedged item”:
Market Value
Asset 03.31.2006 03.31.2005
Foreign exchange securities -- 58,592
NBC-E -- 58,592
- Derivatives for market risk hedge: BB-Consolidated
:
Notional amount
Liability 03.31.2006 03.31.2005
Derivative financial instruments -- 151,615
Swap contracts -- 151,615
5.c) Adjustment to market value - securities and derivatives
The mark-to-market accounting requirement established by Circulars Letters 3068 and 3082 and later
regulations resulted in the following income and expense being recognized in the period:
BB-Consolidated
st st
1 quarter/2006 1 quarter/2005
Securities 8,697 (4,359)
Derivatives 21,931 24,262
Total 30,628 19,903
18
NOTE 6 – Loan and Lease Operations
6.a) Details of the loan portfolio and loan operations classified as "Other receivables":
BB- Domestic and
Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Loan operations 87,777,643 77,090,664 88,306,162 77,895,547
Loans and bills discounted 36,884,364 36,181,640 37,142,233 36,677,234
Financing 21,144,453 15,039,290 21,591,725 15,532,699
Rural and agribusiness financing 36,898,815 31,082,770 36,898,815 31,082,770
Financing of securities 406 367 -- --
(Allowance for loan losses) (7,150,395) (5,213,403) (7,326,611) (5,397,156)
Other receivables with loan
Loan characteristics 8,811,590 9,243,675 9,459,757 9,708,155
Receivables from guarantees honored 156,430 82,809 156,430 82,809
Advances on foreign exchange contracts 6,834,853 7,742,951 6,834,853 7,742,951
Sundry 2,200,245 1,645,254 2,848,788 2,111,195
(Provision for other losses) (379,938) (227,339) (380,314) (228,800)
Lease operations 22,990 8,794 29,774 3,520
Lease operations 23,488 9,084 54,088 32,852
(Allowance for lease losses) (498) (290) (24,314) (29,332)
Total 96,612,223 86,343,133 97,795,693 87,607,223
6.b) Details of the loan portfolio by sector, including operations with loan characteristics classified as
"Other receivables":
BB- Domestic and Foreign branches BB-Consolidated
03.31.2006 % 03.31.2005 % 03.31.2006 % 03.31.2005 %
PUBLIC SECTOR 3,448,764 3.5 4,554,078 5.0 3,476,346 3.5 4,578,988 5.0
Domestic 446,462 0.5 559,509 0.6 446,462 0.5 559,509 0.6
Government 206,009 0.2 411,561 0.4 206,009 0.2 411,561 0.4
Direct administration 185,795 0.2 220,165 0.2 185,795 0.2 220,165 0.2
Indirect administration 20,214 -- 191,396 0.2 20,214 -- 191,396 0.2
Business entities 240,453 0.3 147,948 0.2 240,453 0.3 147,948 0.2
Industry 152,932 0.2 49,885 0.1 152,932 0.2 49,885 0.1
Commerce -- -- 110 -- -- -- 110 --
Financial services 68,765 0.1 68,376 0.1 68,765 0.1 68,376 0.1
Other services 18,756 -- 29,577 -- 18,756 -- 29,577 --
Foreign 3,002,302 3.0 3,994,569 4.4 3,029,884 3.0 4,019,479 4.4
Business entities 3,002,302 3.0 3,994,569 4.4 3,029,884 3.0 4,019,479 4.4
Industry 165,541 0.2 -- -- 354,453 0.3 -- --
Other services 2,836,761 2.8 3,994,569 4.4 2,675,431 2.7 4,019,479 4.4
PRIVATE SECTOR 100,694,289 96.5 87,230,087 95.0 102,050,586 96.5 88,683,523 95.0
Domestic 95,539,926 91.7 82,801,839 90.2 96,208,471 91.2 83,245,636 89.2
Rural 34,242,246 32.9 29,398,415 32.0 34,242,246 32.5 29,398,415 31.5
Industry 22,580,067 21.7 19,267,596 21.0 22,819,684 21.6 19,413,264 20.8
Commerce 11,311,333 10.9 9,856,408 10.7 11,486,876 10.9 9,988,406 10.7
Financial services 194 -- 361 -- 194 -- 361 --
Other services 9,666,926 9.3 8,846,754 9.7 9,794,843 9.3 9,020,381 9.7
Individuals 17,739,159 16.9 15,432,305 16.8 17,864,628 16.9 15,424,809 16.5
Foreign 5,154,363 4.8 4,428,248 4.8 5,842,115 5.3 5,437,887 5.8
BB Group 38,300 -- 7,038 -- 12,321 -- 23,600 --
19
Commerce 595,271 0.5 325,593 0.4 667,782 0.6 333,033 0.4
Industry 3,762,037 3.5 3,316,395 3.6 4,243,438 3.8 3,947,806 4.2
Other companies 70,986 0.1 157,607 0.2 70,986 0.1 331,456 0.4
Other banks 503,402 0.5 -- -- 504,343 0.5 408,622 0.4
Individuals 8,237 -- 13,515 -- 8,326 -- 13,836 --
Other services 176,130 0.2 608,100 0.6 334,919 0.3 379,534 0.4
Total 104,143,054 100.0 91,784,165 100.0 105,526,932 100.0 93,262,511 100.0
6.c) Details of the loan portfolio by risk level and maturity, including operations with loan
characteristics classified as "Other receivables":
BB- Domestic and Foreign branches
Loans falling due
Risk Over 360 Total Total
Level 0-15 16-30 31-60 61-90 91-180 181-360 portfolio % portfolio %
03.31.2006 03.31.2005
AA 963,493 613,729 1,076,300 1,341,384 2,580,897 2,564,990 8,554,416 17,695,209 18 17,555,238 20
A 1,004,709 911,124 1,496,835 1,711,802 4,315,412 7,860,051 10,435,593 27,735,526 29 25,181,037 29
B 919,177 583,307 872,001 1,345,882 2,693,911 10,811,527 14,192,659 31,418,464 33 29,571,444 34
C 448,197 268,611 465,069 584,921 1,267,294 4,060,377 8,052,188 15,146,657 15 11,023,764 13
D 86,477 38,628 82,341 127,508 168,860 645,265 2,101,665 3,250,744 3 2,243,416 3
E 23,061 9,205 10,697 8,857 27,216 97,656 539,426 716,118 1 361,318 --
F 5,011 2,086 5,096 3,677 11,259 35,044 193,998 256,171 -- 201,909 --
G 3,750 830 2,013 3,542 7,733 15,812 368,038 401,718 -- 120,494 --
H 15,580 4,744 9,859 13,779 30,266 69,534 992,667 1,136,429 1 761,015 1
Total 3,469,455 2,432,264 4,020,211 5,141,352 11,102,848 26,160,256 45,430,650 97,757,036 100 87,019,635 100
BB- Domestic and Foreign branches
Loans overdue
Risk Over 360 Total Total
Level 0-15 16-30 31-60 61-90 91-180 181-360 portfolio % portfolio %
03.31.2006 03.31.2005
B 21,266 339,099 30,024 9,204 1,275 128 66 401,062 6 425,708 9
C 16,837 339,927 439,848 38,344 45,215 1,655 14 881,840 14 728,655 15
D 5,248 140,156 151,382 251,277 96,852 26,075 528 671,518 11 496,180 10
E 1,686 52,794 61,229 83,787 308,715 51,000 -- 559,211 9 464,052 10
F 601 21,889 23,329 30,142 284,792 55,603 3,260 419,616 7 326,783 7
G 639 15,735 16,540 17,520 291,522 79,379 10,862 432,197 7 300,971 6
H 3,953 96,513 104,645 90,475 460,274 1,979,450 285,264 3,020,574 46 2,022,181 43
Total 50,230 1,006,113 826,997 520,749 1,488,645 2,193,290 299,994 6,386,018 100 4,764,530 100
BB-Consolidated
Loans falling due
Risk Over Total Total
Level 0-15 16-30 31-60 61-90 91-180 181-360 360 portfolio % portfolio %
03.31.2006 03.31.2005
AA 974,410 615,711 1,082,002 1,345,515 2,592,709 2,552,454 8,652,120 17,814,921 18 17,771,016 20
A 1,015,214 914,846 1,504,391 1,719,197 4,346,967 8,081,790 10,741,745 28,324,150 29 25,660,192 29
B 925,791 590,294 886,399 1,359,301 2,730,420 10,884,287 14,361,347 31,737,839 32 30,020,210 34
C 450,641 270,394 473,358 591,697 1,292,562 4,087,476 8,073,863 15,239,991 16 11,109,280 13
D 88,335 39,791 84,873 129,984 177,429 663,090 2,123,364 3,306,866 3 2,288,744 3
E 23,292 10,071 11,707 9,142 30,020 102,713 544,936 731,881 1 366,171 --
F 5,100 2,120 5,183 3,755 11,466 35,369 194,450 257,443 -- 203,444 --
G 3,812 856 2,067 3,594 7,882 16,044 368,264 402,519 -- 121,514 --
H 23,111 4,931 10,251 14,136 31,231 70,993 1,122,340 1,276,993 1 930,258 1
Total 3,509,706 2,449,014 4,060,231 5,176,321 11,220,686 26,494,216 46,182,429 99,092,603 100 88,470,829 100
20
BB-Consolidated
Loans overdue
Risk Over 360 Total Total
Level 0-15 16-30 31-60 61-90 91-180 181-360 portfolio % portfolio %
03.31.2006 03.31.2005
B 21,714 339,176 29,582 9,204 1,284 128 66 401,154 6 425,809 9
C 17,109 345,051 440,078 38,344 45,215 1,655 14 887,466 14 734,637 15
D 5,265 140,640 157,988 251,338 96,852 26,244 528 678,855 11 499,412 11
E 1,687 52,883 61,735 87,715 308,751 51,000 -- 563,771 9 467,621 10
F 605 21,932 23,473 30,565 288,437 55,603 3,260 423,875 7 328,180 7
G 639 15,769 16,594 17,609 295,090 79,379 10,861 435,941 7 303,103 6
H 3,958 96,732 105,020 90,791 464,879 1,996,514 285,373 3,043,267 46 2,032,920 42
Total 50,977 1,012,183 834,470 525,566 1,500,508 2,210,523 300,102 6,434,329 100 4,791,682 100
6.d) Details of the allowance for loan losses by risk level, including operations with loan
characteristics classified as "Other receivables":
BB- Domestic and Foreign branches
Risk %
Level Allowance Balance Allowance Balance Allowance
03.31.2006 03.31.2006 03.31.2005 03.31.2005
AA 0 17,695,209 -- 17,555,238 --
A 0.5 27,735,526 138,678 25,181,037 125,905
B 1 31,819,526 318,195 29,997,152 299,972
C 3 16,028,497 480,855 11,752,419 352,573
D 10 3,922,262 392,226 2,739,596 273,960
E 30 1,275,329 382,599 825,370 247,611
F 50 675,787 337,893 528,692 264,345
G 70 833,915 583,740 421,465 295,025
H 100 4,157,003 4,157,003 2,783,196 2,783,196
Subtotal 104,143,054 6,791,189 91,784,165 4,642,587
Additional allowance foreign * -- 29,729 -- 46,221
Additional allowance domestic ** -- 709,912 -- 752,224
Total 104,143,054 7,530,830 91,784,165 5,441,032
BB-Consolidated
Risk %
Level Allowance Balance Allowance Balance Allowance
03.31.2006 03.31.2006 03.31.2005 03.31.2005
AA 0 17,814,921 -- 17,771,016 --
A 0.5 28,324,150 141,621 25,660,192 128,301
B 1 32,138,993 321,390 30,446,019 304,460
C 3 16,127,457 483,824 11,843,917 355,318
D 10 3,985,721 398,572 2,788,156 278,816
E 30 1,295,652 388,695 833,792 250,138
F 50 681,318 340,659 531,624 265,812
G 70 838,460 586,922 424,617 297,232
H 100 4,320,260 4,320,260 2,963,178 2,963,178
Subtotal 105,526,932 6,981,943 93,262,511 4,843,255
Additional allowance foreign * -- 39,234 -- 59,616
Additional allowance domestic -- 710,062 -- 752,417
**
Total 105,526,932 7,731,239 93,262,511 5,655,288
21
* Additional allowance required by local legislation.
** In the first quarter of 2006, the Bank concluded a specific appraisal of its credit portfolio based on
historical data. The work identified expressive variations in the delay flow of operations, resulting in a
consequent impact upon provision. Cash volatilities almost always cannot be identified upon a previous risk
and scenario analysis. Along the time, the Bank is implementing betterments in its systems, methodologies
and processes with the purpose of improving credit risk management. Besides betterments implemented, it
was identified a need to establish a provision besides the minimum provided for by CMN Resolution 2682/99,
in order to prudently reflect the risks existent in the Portfolio. Thus, Banco do Brasil, based on the prudence
principle, establishes in the trial balance as of March /2006, a provision exceeding the minimum required by
CMN Resolution 2.682/99, in the value of R$ 500 million, with the purpose of adjusting the Bank to the
expectations of credit portfolio realization. It also contemplates an installment of R$ 184,380 thousand
related to charges upon operations included in Proagro, pending reimbursement by the Central Bank.
6.e) Changes in the allowance for loan and lease losses and for operations with loan characteristics
classified as "Other receivables":
BB- Domestic and Foreign
branches BB-Consolidated
1st quarter/2006 1st quarter/2005 1st quarter/2006 1st quarter/2005
Opening balance 6,484,244 5,147,493 6,691,651 5,365,196
Additional allowances 1,830,297 1,061,817 1,844,594 1,061,071
Exchange variation on allowances - foreign (5,544) (395) (16,534) (193)
Loans written off (778,167) (767,883) (788,472) (770,786)
Closing balance 7,530,830 5,441,032 7,731,239 5,655,288
6.f) Changes in the provision for loss on other receivables without loan characteristics:
BB- Domestic and Foreign
branches BB-Consolidated
1st quarter/2006 1st quarter/2005 1st quarter/2006 1st quarter/2005
Opening balance 2,569,412 1,706,591 2,579,850 1,717,785
Additional allowances 226,187 199,759 226,225 199,752
Exchange variation on allowances - foreign 384 495 384 495
Loans written off (91) -- (493) (588)
Closing balance 2,795,892 1,906,845 2,805,966 1,917,444
6.g) Supplementary information:
BB- Domestic and Foreign
branches BB-Consolidated
1st quarter/2006 1st quarter/2005 1st quarter/2006 1st quarter/2005
Renegotiated loans 1,363,739 682,947 1,363,739 682,947
Recoveries of loans
written off* 296,181 251,768 296,632 253,316
* Recorded in the statement of income in the account “Income from loan operations”, as permitted by CMN
Resolution 2836/05.30.2001, where R$ 4,346 thousand (R$ 1,878 thousand in 03.31.2005) refer to loans to
individuals and corporate entities.
22
NOTE 7 – Provision for Vacation Pay, Paid Leave and Litigation
The changes in the provisions are as follows:
Banco Múltiplo
(Multiple Bank)
1st quarter/2006 1st quarter/2005
7.a) Vacation pay (other liabilities - sundry)
Opening balance 722,468 667,739
Provision/(reversal) 142,920 152,160
Provision used (250,127) (237,587)
Closing balance 615,261 582,312
7.b) Paid leave (other liabilities - sundry)
Opening balance 585,917 585,864
Provision/(reversal) 49,390 50,279
Provision used (69,609) (73,455)
Closing balance 565,698 562,688
7.c) Labor claims (other liabilities - sundry)
Opening balance 2,126,608 2,000,685
Provision/(reversal) 31,727 102,413
Closing balance 2,158,335 2,103,098
7.d) Tax claims (other liabilities - taxes and social security charges)
Opening balance 27,730 127,345
Provision/(reversal) 1,626 3,144
Provision used (2) --
Closing balance 29,354 130,489
7.e) Other legal claims (other liabilities - sundry)
Opening balance 857,922 741,051
Provision/(reversal) 32,242 68,138
Provision used (15,132) (47,564)
Closing balance 875,032 761,625
NOTE 8 – Other Receivables
8.a) Foreign exchange portfolio
Current and long-term
BB- Domestic and Foreign branches
and BB-Consolidated
03.31.2006 03.31.2005
Forward foreign exchange purchases pending settlement 7,970,887 9,010,139
Bills of exchange and time drafts in foreign currency 87,995 113,232
Receivables from sales of foreign exchange 9,553,210 6,673,973
Advances received (8,588,013) (5,443,447)
Foreign currency receivables 14,123 14,221
Income receivable on advances granted 91,612 75,978
Income receivable on financed imports 9 8
Total 9,129,823 10,444,104
23
8.b) Specific credits
These are credits from the Federal Treasury of R$ 626,859 for the extension of terms of rural
financing (R$ 558,822 at 03.31.2005), as determined by Law 9138/1995.
8.c) Sundry
Current and long-term
BB- Domestic and
Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Salary and other advances 229,600 180,200 229,656 180,212
Accounts receivable - Federal Treasury 344,577 391,867 344,577 391,867
Accounts receivable - credit card operations 1,494,393 1,073,068 1,494,393 1,073,068
Accounts receivable - other 404,870 288,596 413,516 298,319
Tax credits (Note 18) 8,808,858 7,833,086 8,905,447 7,955,833
Sundry debtors - foreign 19,560 39,905 19,667 40,426
Sundry debtors – domestic * 4,723,427 3,361,250 4,696,981 3,363,484
Receivables from guarantee deposits ** 12,193,775 9,183,041 12,251,207 9,199,093
Income tax and social contribution on net income to offset 816,466 279,153 831,170 296,366
Receivables from sale of assets and rights 459,419 514,312 460,722 530,502
Other 234,595 517,301 187,062 376,800
Total 29,729,540 23,661,779 29,834,398 23,705,970
* Includes the net amount of R$ 3,865,470 thousand equivalent to the total of the Actuarial Asset CVM No.
371 and of the Actuarial Asset relating to the 1997 Contract (R$ 2,709,399 at 03.31.2005, relating to the sum
of Actuarial Asset CVM No. 371 anf of the PREVI actuarial liability relating to the 1997 contract), as shown in
Note 23.e.
** Includes R$10,184,935 (R$ 7,528,483 at 03.31.2005) relating to filing appeals of tax claims (Note 17.d),
R$ 1,404,727 (R$ 1,282,786 at 03.31.2005) relating to filing appeals of labor claims and R$ 596,638 (R$
357,686 at 03.31.2005) relating to other appeals, in the Multiple Bank.
NOTE 9 - Other Assets
Current and long-term
BB- Domestic and Foreign
branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Non-operating assets 275,333 289,011 282,036 296,840
Supply materials 28,082 20,577 28,082 20,577
Total 303,415 309,588 310,118 317,417
NOTE 10 – Deposits
Current and long-term
BB- Domestic and Foreign
branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Demand deposits 31,815,890 29,296,550 31,877,536 29,340,311
Related companies 864,026 1,605,946 864,026 1,605,947
Individuals 10,144,762 9,810,039 10,151,305 9,815,974
Corporate entities 10,930,343 10,025,944 10,983,656 10,063,521
Financial institutions 146,908 180,606 147,839 180,001
24
Government 2,002,947 2,368,052 2,002,947 2,368,052
Federal Treasury 275,689 204,295 275,689 204,295
Domiciled abroad 11,386 31,867 11,298 31,804
Restricted 4,168,585 3,864,926 4,169,532 3,865,842
In foreign currency 3,257,036 1,187,848 3,257,036 1,187,848
Other 14,208 17,027 14,208 17,027
Savings deposits 32,975,353 31,417,670 32,975,353 31,417,670
Individuals 30,979,695 29,835,702 30,979,695 29,835,702
Corporate entities 1,617,920 1,209,365 1,617,920 1,209,365
Related companies 375,351 370,253 375,351 370,253
Financial institutions 2,387 2,350 2,387 2,350
Interbank deposits 9,396,940 8,736,638 5,261,900 6,488,592
Time deposits 68,886,756 52,687,049 68,948,386 52,768,858
Time deposits 33,609,130 25,025,282 33,670,760 25,107,091
Time deposits in foreign currency 46 851 46 851
Time deposits with automatic renewal 182,735 187,333 182,735 187,333
Remunerated judicial deposits 21,699,675 17,581,458 21,699,675 17,581,458
Special deposits relating to funds
and programs (Note 14(c)) 13,395,170 9,892,125 13,395,170 9,892,125
Deposits for investments 131,388 81,062 131,388 81,062
Total 143,206,327 122,218,969 139,194,563 120,096,493
NOTE 11 - Borrowings - Foreign Borrowings
BB- Domestic and Foreign branches
Up to From 91 to From 1 to From 3 to From 5 to Total Total
90 days 360 days 3 years 5 years 15 years 03.31.2006 03.31.2005
Exports 89,787 140,262 -- -- -- 230,049 153,968
Imports 107,863 86,224 77,793 9,364 2,112 283,356 403,227
Bankers* 181,826 -- -- -- -- 181,826 11,900,051
Onlend to the public sector 273,633 190,128 611,431 88,951 1,637,863 2,802,006 3,500,555
Borrowings from BB Group companies 874,703 -- 2,956,188 -- -- 3,830,891 2,429,724
overseas
Borrowings by BB Group companies 277,679 614,512 -- -- -- 892,191 1,522,838
overseas
Total 1,805,491 1,031,126 3,645,412 98,315 1,639,975 8,220,319 19,910,363
BB-Consolidated
Up to From 91 to From 1 to From 3 to From 5 to Total Total
90 days 360 days 3 years 5 years 15 years 03.31.2006 03.31.2005
Exports -- -- -- -- -- -- 3,530
Imports 85,337 35,535 33,189 9,364 2,112 165,537 284,166
Bankers* 181,826 -- -- -- -- 181,826 11,900,051
Onlend to the public sector
273,633 190,128 611,431 88,951 1,637,863 2,802,006 3,500,556
Borrowings by BB Group companies 266,828 614,513 -- -- -- 881,341 1,512,708
overseas
Total 807,624 840,176 644,620 98,315 1,639,975 4,030,710 17,201,011
* The reduction in 2005 resulted from the implementation of Bacen Resolution No. 3.265, of March
4, 2005, which unified the floating exchange rate and free exchange rate markets.
Banco do Brasil S.A. policy in respect of its foreign borrowings is to seek the lowest possible cost for the
maturity, type of instrument, and its balance sheet profile. The Bank uses the Libor and US Treasury rates,
25
respectively, as references for its financial and capital transactions, constantly monitoring rates in the various
markets
NOTE 12 - Local Onlendings - Official Institution
BB- Domestic and
Programs Financial charges Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Federal treasury 4,053,193 3,595,936 4,053,193 3,595,936
Rural credit 4,053,193 3,595,936 4,053,193 3,595,936
Farming/livestock breeding TR or 9% p,a, 38,698 37,616 38,698 37,616
Cocoa TJLP + 0,6% p,a, or 6,35% 41,393 37,744 41,393 37,744
p,a,
Pronaf TMS (available) or 1,0% p,a, to 3,717,720 3,237,581 3,717,720 3,237,581
7,25% p,a,(Invested)
Recoop 55,75% to 7,25% p,a, 255,382 282,995 255,382 282,995
BNDES * 3,959,658 3,662,796 3,959,658 3,662,796
Finame ** 4,710,695 2,918,381 4,719,965 2,926,644
Other institutions -- 319,808 443,122 319,951 443,245
Prohemp funds -- 992 1,177 992 1,177
FBB - Fundec II -- 10,065 12,729 10,065 12,729
Funcafé TR or TMS (available) or TJLP +
3% p,a, or 4% p,a, or 5% p,a, 308,588 429,039 308,588 429,039
(Invested)
Other -- 163 177 306 300
Total 13,043,354 10,620,235 13,052,767 10,628,621
* BNDES
- Programs with fixed interest rates: interest paid to the BNDES varies from 3% p.a. to 7.75% p.a..
- Programs with Long-Term Interest Rate (TJLP) or foreign exchange variation: interest paid to the BNDES
varies from 0.5% p.a. to 5.5% p.a.
** Finame
- Programs with fixed interest rates: interest paid to BNDES/FINAME varies from 3.75% p.a. to 11% p.a.
- Programs with TJLP or foreign exchange variation: interest paid to BNDES/FINAME and BNDES/EXIM
varies from 1% p.a. to 11.47% p.a.
NOTE 13 – Funds Obtained in Foreign Capital Markets (in millions)
Date of
Transactions Coupon Amount funding Maturity
a) DIRECT FUND RAISING
"Global medium-term notes" program (a.1) 9.375% p.a. US$ 200 Jun/97 Jun/07
"Global medium-term notes" program (a.1) Zero-cupom R$ 200 Dec/04 Dec/07
Subordinated debt 8.5% p. a. US$ 300 Set/04 Sep/14
Perpetual bonus (a.2) 7.95% p.a. US$ 500 Jan/06 perpetual
b) FUND RAISING THROUGH SPC
Securitization of the flow of remittance of funds -dekasseguis (b.1) 7.875% p.a. US$ 300 Ago/01 Aug/06
Securitization of the flow of electronic remittances (MT - 100) (b.2) 7.890% p.a. US$ 450 Dec/01 Dec/08
Securitization of the flow of electronic remittances (MT - 100) (b.2) Libor 3m+0.60% p.a. US$ 300 Jul/02 Jun/09
Securitization of the flow of electronic remittances (MT - 100) (b.2) 7.890% p.a. US$ 40 Sep/02 Sep/09
Securitization of the flow of electronic remittances (MT - 100) (b.2) 7.26% p.a. US$ 120 Mar/03 Mar/10
Securitization of the flow of electronic remittances (MT - 100) (b.2) 6.55% p.a. US$ 250 Dec/03 Dec/13
Securitization of credit card receivables - Visanet (b.3) 5.911% p.a. US$ 178 Jul/03 Jun/11
Securitization of credit card receivables - Visanet (b.3) 4.777% p.a. US$ 45 Jul/03 Jun/11
26
Total issued per program:
Foreign currency Reais*
"Global medium-term notes" program -- 200
"Global medium-term notes" program – GMTN US$ 200 434
Securitization of the flow of electronic remittances (MT - 100) US$ 1,160 2,519
Securitization of credit card receivables – Visanet US$ 223 484
Securitization of the flow of remittance of funds – dekasseguis US$ 300 651
Subordinated debt US$ 300 651
Perpetual bonus US$ 500 1,086
Total 6,025
* Converted at R$ 2.1716 per US$ 1.00.
a.1) Recorded under Other Obligations – Value Negotiation and Intermediation.
a.2) On January 23, 2006, Banco do Brasil S.A concluded a foreign funding in the amount of US$
500,000,000.00 through launching of perpetual securities. The operation has a redemption option by
th
initiative of the issuer ("call") as from the 5 year, and, quarterly, each interest payment date thereafter.
The issue price was of 100% and coupon, quarterly, of 7.95% p.a. was the lower price ever paid by a
Brazilian issuer until that date.
b.1) Recorded under Foreign marketable securities. The transaction was carried out through the Special-
Purpose Company (SPC) “Nikkei Remittance Rights Finance Company”, incorporated under the laws of the
Cayman Islands, on July 16, 2001. The Head Office of this SPC is located at BNP Paribas Private Bank &
Trust Cayman Limited, P.O. Box 10632 APO 3rd floor, Royal Bank House, Shedden Road, George Town,
Grand Cayman, Cayman Islands, British West Indies. The capital of the SPC is US$1,000.00, divided into
1,000 shares of US$1.00 each. Banco do Brasil S.A. (“BB”) does not hold the control, is not a shareholder,
the owner, or is a beneficiary of any of the results of operations of the SPC. On August 2, 2001, this SPC
entered into an Administration Services Agreement with BNP Paribas Private Bank & Trust Cayman Limited.
The SPC has declared that it does not have any subsidiaries, employees or debt, except for the securities
described below.
The SPC was incorporated for the sole purpose of carrying out the following transactions: (a) issue and sell
securities in the international market; (b) use funds raised with the issue of securities to pay for the purchase
of the remittance rights from BB, arising from the foreign currency payment orders made by people in Japan
(“dekasseguis”) at BB’s branches in Japan whose beneficiaries are individuals in Brazil; (c) pay the principal
and interest on the securities and make other payments established in the related security issue agreements.
According to the agreements signed, EPE does not have any significant asset other than the resources
arising from its equity issued, the remittance rights and the liabilities arising from the issuance contracts. The
EPE liability is composed of the issuance of marketable securities, as described in the table below (“Series
2001-1“), with the following characteristics:
Term Coupon Return to Current
Serie Issue date Maturity Amount (US$) (year (%) Issue the rating
date s) price investor
2001-1 10/08/01 05/08/06 300,000,000 5 7.875 99,6850 7.99% BBB
Total 300,000,000
The Series 2001-1 pay to the international investors, every quarter, interest during the first year and, interest
and principal as from the second year. The liabilities are paid by the SPC using funds accumulated in its
account and generated by the Remittance Rights. When the amount corresponding to the next interest
and/or amortization installment is reached in the SPC’s account, the entire excess amount is automatically
released to BB.
This structure resulted in the reduction of the Brazil risk and helped obtain an investment grade rating for the
transaction which, in the final analysis, reduced BB’s fund raising cost. For the beneficiaries of the
dekasseguis’ remittances in Brazil, nothing changed because even after the sale of the Remittance Rights to
the SPC, BB regularly and punctually fulfills all payment orders within the same deadlines as previously.
Under this structure, after five years, the SPC will have repaid all interest and principal of the transaction thus
returning the full ownership of the flow of remittances to BB. Based on its analysis of the transaction, BB is
not exposed to any potential loss.
27
b.2) Recorded under Foreign marketable securities. The transaction was carried out through the Special
Purpose Company (SPC) “Dollar Diversified Payment Rights Finance Company”, incorporated under the
laws of the Cayman Islands on November 6, 2001. The Head Office of the SPC is at BNP Paribas Private
Bank & Trust Cayman Limited, P.O. Box 10632 APO 3rd floor Royal Bank House, Shedeen Road, George
Town, Grand Cayman, Cayman Islands, British West Indies. The capital of the SPC is US$1,000.00, divided
into 1,000 shares of US$1.00 each. Banco do Brasil S.A. (“BB”) does not hold the control, is not a
shareholder, the owner, or is a beneficiary of any of the results of operations of the SPC. On August 2, 2001,
this SPC entered into an Administration Services Agreement with BNP Paribas Private Bank & Trust
Cayman Limited. The SPC has declared it does not have any subsidiaries, employees or debt, except for the
securities described below.
The SPC was incorporated for the sole purpose of carrying out the following transactions: (a) issue and sell
securities in the international market; (b) use funds raised with the issue of securities to pay for the purchase
from BB of BB’s rights on payment orders issued by correspondent banks in the USA and by BB’s New York
branch, in US dollars, to any BB branch in Brazil. (Remittance Rights); (c) pay the principal and interest on
the securities and make other payments established in the related security issue agreements
The SPC has no material assets other than the funds obtained from the issue of its capital, the Remittance
Rights, and the duties arising from the issue agreements. The SPC’s liabilities consist of the five issues of
securities made in the international capital market, as follows:
Term Coupon Return to Current
Serie Issue date Maturity date Amount (US$) (years) (%) Issue price the investor rating
2001-1 12/27/01 12/15/08 450,000,000 7 7.890 100,0000 7.89% BBB/Baa1
2002-1 07/03/02 06/15/09 300,000,000 7 L3M+0.60 100,0000 L3M+0.60 AAA/Aaa
2002-2 09/11/02 09/15/09 40,000,000 7 7.890 100,0000 7.89% BBB/Baa1
2003-1 03/17/03 03/15/10 120,000,000 7 7.260 100,0000 7.26% BBB/Baa1
2003-2 12/19/03 12/16/13 250,000,000 10 6.550 100,0000 6.55% BBB/Baa1
Total 1,160,000,000
The liabilities arising from the securities are paid by the SPC using the funds accumulated in its account.
When the amount corresponding to the next interest and/or amortization installment is reached in SPC’s
account, the entire excess amount is automatically released to BB.
This structure resulted in the reduction of the Brazil risk and helped obtain an investment grade rating for the
transaction which, in the final analysis, reduced BB’s fund raising cost. For the beneficiaries of the dekasseguis’
remittances in Brazil, nothing changed because even after the sale of the Remittance Rights to the SPC, BB
regularly and punctually fulfills all payment orders within the same deadlines as previously.
Under this structure, after the final maturity of each transaction, the SPC will have repaid all interest and
principal of the transaction thus returning the full ownership of the flow of remittances to BB. Based on its
analysis of the transaction, BB is not exposed to any potential loss.
b.3) Recorded in Other liabilities – Contracts for assumption of liabilities – Foreign transactions. The
transaction was carried out through the Special Purpose Company (SPC) “Brazilian Merchant Voucher
Receivables”, incorporated under the laws of the Cayman Islands on May 16, 2003. The Head Office of the
SPC is at Walkers SPV limited, P.O. Box 908 GT, Mary Street, George Town, Grand Cayman, Cayman
Islands.
The capital of the SPC is US$1,000.00, divided into 1,000 shares of US$1.00 each. Banco do Brasil S.A. (“BB”)
does not hold the control, is not a shareholder, the owner, or is a beneficiary of any of the results of operations
of the SPC. On July, 10, 2003, the SPC entered into an Administration Services Agreement with Walkers SPV
Limited.
The SPC was incorporated for the sole purpose of carrying out the following transactions: (a) issue and sell
securities in the international market; (b) use funds raised with the issue of securities to pay for the purchase of
the current and future rights of Companhia Brasileira de Meios de Pagamento (“Visanet”) against Visa
International Service Association on receivables (“Receivables”) arising from (i) credit or debit purchases made
in Brazil, in any currency processed by Visanet, using Visa cards issued by financial institutions located outside
Brazil, or (ii) credit or debit purchases, processed by Visanet in foreign currency, made using Visa cards issued
by financial institutions located in Brazil; (c) pay the principal and interest on securities and make other
payments established in the related security issue agreements
28
The SPC stated that it does not have any significant assets other than the funds from the issue of its capital
and from the Receivables. It also stated that it does not have significant liabilities other than the obligations
arising from the contracts for issue of securities.
The SPC’s liabilities consist of two issues of securities carried out in the international capital market, as
follows:
Term Coupon Return to Current rating
Serie Issue date Maturity date Amount (US$) (years) (%) Issue the investor
price
2003-1 07/10/03 06/15/11 400,000,000* 8 5.911 100,0000 5.955% BBB+/Baa1
2003-2 07/10/03 06/15/11 100,000,000** 8 4.777 95,0000 5.955% BBB+/Baa1
Total 500,000,000
* Pursuant to the Series 2003 Visanet Support Agreement, BB received the amount of US$ 178,473,952, as described in
the text below.
** Pursuant to the Series 2003 Visanet Support Agreement, BB received the amount of US$ 44,618,488, as described in
the text below.
The liabilities arising from the securities are paid by the SPC using the funds accumulated in its account.
When the amount corresponding to the next interest and/or amortization installment is reached in the SPC’s
account, the entire excess amount is automatically released to Visanet..
Under the structure, which included, among other agreements, the agreement called Series 2003 Visanet
Support Agreement, entered into on July 10, 2003 by Visanet, BB and Bradesco, Visanet agreed to transfer to
BB the funds arising from the sale of the Receivables, at the ratio of 44.618488%, calculated based on the
shareholding interest of BB in Visanet on the transaction closing date, resulting in US$ 223,092,440.00 of funds
being raised by BB..
Also under the same agreement, BB agreed to periodically transfer to Visanet amounts equivalent to the
Receivables held by Visanet for the account of the SPC, pursuant to the Receivables purchase and sale
agreement, at the ratio of 44.618488%.
This structure resulted in the reduction of the Brazil risk and helped obtain an investment grade rating for the
transaction which, in the final analysis, reduced BB’s fund raising cost.
Under this structure, after the final maturity of each transaction, the SPC will have repaid all interest and
principal of the transaction thus returning the full ownership of the Receivables to Visanet. Based on its
analysis of the transaction, BB is not exposed to any potential loss.
NOTE 14 - Other Liabilities
14.a) Foreign exchange portfolio
Current and long-term
BB- Domestic and Foreign branches
and BB-Consolidated
03.31.2006 03.31.2005
Forward foreign exchange sales pending settlement 9,381,551 6,501,015
Advances in foreign currencies (32,574) (6,664)
Import financing (9,375) (3,011)
Foreign exchange purchase liabilities 8,160,981 9,184,861
Advances on foreign exchange contracts (6,834,853) (7,742,951)
Foreign currency payables 17,029 32,005
Unearned income on advances granted 3,768 4,129
Total 10,686,527 7,969,384
14.b) Financial and development funds
Current and long-term
29
BB- Domestic and Foreign branches
and BB-Consolidated
03.31.2006 03.31.2005
PIS/PASEP 1,477,600 1,395,414
Merchant Navy 8,352 15,655
Land and Agrarian Reform - BB Banco da Terra 94,542 60,916
Special Lending Program for Agrarian Reform – Procera 376,139 320,592
Consolidation of Family Farming (CAF) -- 80,245
Fight against Poverty/Our First Land (CPR/NPT) -- 60,242
Other 24,688 20,638
Total 1,981,321 1,953,702
14.c) Fund for Worker Assistance (FAT) and Fund to Guarantee the Increase in Employment and
Earnings (FUNPROGER)
FAT is a special accounting and financial fund, established by Law 7998/90, enacted on 01/11/90, attached to
the Ministry of Labor and Employment (MTE) and managed by the Executive Council of the Worker Assistance
Fund (CODEFAT). CODEFAT is a collective, tripartite and equal level organization, composed of
representatives of workers, employers and government, which acts as the manager of FAT.
The main sources of funding of FAT are contributions payable to the Social Integration Program (PIS) and to
the Public Service Employees Savings Program (PIS/PASEP).
FAT's objective is to fund the Unemployment Insurance Program (with specific responsibilities for payment of
unemployment insurance benefits, professional qualification and requalification, and orientation and
intermediation of employment), the Salary Bonus (paragraph 3 of article 239 of the Federal Constitution), and
finance programs for economic development as well as to promote employment.
The main actions to promote employment using FAT funds are centralized in the Programs for the Increase in
Earnings (PROGER), whose resources are allocated by special deposits, established by Law 8352/91, in
official federal financial institutions (including, among others, PROGER in the Urban – Investment and Working
Capital– and Rural, the National Program for Strengthening of Family Farming – PRONAF, the program that
allocates resources for the purchase of construction materials – FAT Housing, in addition to the special lines
such as FAT Rural and Urban Integration and FAT Digital Inclusion).
Banco do Brasil has a partnership with FAT in the conduct of the employment and income generation
programs, through special deposits to be applied in Proger, Urban and Rural, in Pronaf, in FAT Housing and in
the special lines mentioned above; for this purpose, the Bank offers credit lines directed to mini and small
companies, cooperatives, informal economy and rural workers.
The FAT special deposits, allocated with Banco do Brasil, while available, incur interest on a daily “pro rata”
basis using the TMS (Average Selic Rate). As they are applied in loans, the interest rate is changed to the
TJLP (Long-term Interest Rate) during the effective period of the loans.
The income on the Bank’s funds is paid to FAT on a monthly basis, as established in CODEFAT Resolution No.
439, of June 2, 2005.
The Guarantee Fund for Generation of Employment and Earnings (Funproger) is a special accounting fund
established on November 23, 1999 by Law 9872, amended by Law 10360, of 12.27.2001, and by Law 11110,
of 04.25.2005 and regulated by Codefat Resolution 409/04, and is managed by Banco do Brasil under the
supervision of Codefat/MTE, whose balance at March 31, 2006 is R$ 238,931 thousand (R$ 202,104 thousand
at March 31, 2005).
The objective of FUNPROGER is provide guarantees to entrepreneurs who do not have the necessary
guarantees of their own to contract PROGER Urbano financing, through the payment of a commission.
The net assets of FUNPROGER are accumulated through funds arising from the difference between the
average SELIC Rate and the Long-Term Interest Rate (TJLP) in respect of the remuneration of the special
deposit balances available in the FAT. Other sources of funds are the earnings from its operations and the
income on its cash resources paid to Banco do Brasil, the Fund manager.
30
Resolution/ TMS TJLP Return of FAT funds
Program TADE Available (1) Invested (2) Total
PROGER (Rural) and PRONAF 1.006.768 5.257.409 6.264.177 Type (*) Initial date Final date
Pronaf Custeio 04/2005 445,088 1,935,507 2,380,595 RA(**) 11/2005 --
Pronaf Investimento 05/2005 116,861 1,928,507 2,045,368 RA(**) 11/2005 --
Giro Rural 03/2005 415,203 598,968 1,014,171 SD(***) 09/2006 07/2008
Rural Custeio 02/2006 844 20,620 21,464 RA(**) 11/2005 --
Rural Investimento 13/2005 28,772 773,807 802,579 RA(**) 11/2005 --
Proger Urbano 369,807 5,033,398 5,403,205
Urbano Investimento 18/2005 164,759 2,694,647 2,859,406 RA(**) 11/2005 --
Urbano Capital de Giro 15/2005 196,068 2,168,439 2,364,507 RA(**) 11/2005 --
Empreendedor Popular 01/2006 8,980 170,312 179,292 RA(**) 11/2005 --
Other 194,950 992,398 1,187,348
Electric appliances 360/2003 25 432 457 RA(**) 11/2005 --
Exports 027/2005 2,518 1,981 4,499 RA(**) 11/2005 --
Rural Area Integration 026/2005 20,994 281,767 302,761 RA(**) 11/2005 --
Urban Area Integration 025/2005 114,350 103,756 218,106 RA(**) 11/2005 --
Housing - Construction
material 04/2006 33,372 602,883 636,255 RA(**) 11/2005 --
Digital Inclusion 09/2005 23,691 1,579 25,270 RA(**) 11/2005 --
Total 1,571,525 11,283,205 12,854,730
(1) Funds remunerated by the TMS: average SELIC rate
(2) Funds remunerated by the TJLP: long-term Interest rate
(*) Type: PU (single payment at the end of the period), PAS (annual and successive installments) and PSS
(semiannual and successive installments).
(**) Automatic return (Monthly, 1% over total balance)
(***) Available balance
14.d) Sundry
Current and long-term
BB- Domestic and
Foreign branches BB-Consolidated
03.31.2006 03.31.2005 03.31.2006 03.31.2005
Provisions for payments (*) 5,282,149 4,934,307 5,284,648 4,944,217
Creditors by residual value advances 370 -- 142,912 105,490
Contracts of assumption of liabilities 869,059 1,160,339 430,404 592,124
Provisions for contingent liabilities (Note 7) 3,041,241 2,876,397 3,070,243 2,911,126
Accounts payable for payment services provided 409,474 386,307 409,474 386,307
Sundry creditors – overseas 37,667 67,788 38,669 50,068
Sundry creditors – domestic 1,154,646 532,614 1,164,011 536,659
Credit card operations 688,865 1,016,271 688,865 1,016,271
Liabilities for official agreements 68,868 73,840 68,868 73,840
Liabilities for purchase of goods and rights 163,679 220,210 163,679 220,210
Funds restricted to credit operations 79,644 156,950 822,334 965,204
Other 5,626 8,341 5,515 12,071
Total 11,801,288 11,433,364 12,289,622 11,813,587
* Includes R$ 3.290.966 thousand(R$ 3,069,836 thousand at March 31, 2005) relating to "PREVI Actuarial
Liability of the Informal Plan" (exclusive responsibility of the Bank) and the "Cassi Actuarial Liability" at March
31, 2006 (Note 23.e).
31
14.e) Subordinated debt
Current and long-term
BB- Domestic and Foreign branches
and BB-Consolidated
03.31.2006 03.31.2005
Subordinated debt – FCO * 8,070,083 6,298,368
Other subordinated debt ** 24,715 794,827
Total 8,094,798 7,093,195
* As from June 30, 2001, as determined by CMN Vote No. 67 of June 28, 2001 and Bacen-Diret Official
Letter 2001/1602 of June 29, 2001, Banco do Brasil has considered the funds from the Central-Western
Constitutional Fund (FCO) as subordinated debt and as Level II Reference Equity, because of their low level
of obligation and length of term in the Bank.
On September 13, 2004, Banco do Brasil carried out its first international issue in the subordinated debt
market. The funding amounts to US$ 300 million (R$ 850,921 thousand) with a ten-year maturity. As
authorized by the Central Bank of Brazil, the Bank started to consider the amount of this funding, net of the
value of free repurchase, as Level II Reference Equity.
** Free repurchase amount.
NOTE 15 – Analysis of Income Statement Items
15.a) Banking services fees
BB- Domestic and
Foreign branches BB-Consolidated
1st quarter/06 1st quarter/05 1st quarter/06 1st quarter/05
Investment funds * 224,489 -- 355,872 282,957
Collections 189,275 167,875 189,439 168,120
Collection services 6,793 7,879 8,108 9,266
Services rendered to related companies 46,085 206,792 60,135 49,497
Fund transfers 31,805 32,482 31,881 32,545
Guarantees granted 12,251 22,193 12,272 22,198
Settlement and transfer of funds systems 173,429 136,633 173,429 136,633
Examination of requests for exclusion from CCF 19,892 18,604 19,892 18,604
PASEP administration 6,536 6,813 6,536 6,813
Loans contracted 188,832 141,205 188,832 141,205
Deposit account fees 61,220 48,310 61,220 48,310
Checking account fees 35,230 22,669 35,230 22,669
Fees for issuing documents 28,284 29,101 28,284 29,101
Fees on register information 28,125 24,281 28,125 32,600
Ouro plan 393,350 367,936 393,350 367,936
Fees for official services 85,645 59,905 85,645 59,905
International trade services 5,853 3,820 5,853 3,820
Third party collection services 53,464 48,851 53,464 48,851
Commissions for administration of public sector debt 11,922 11,929 11,922 11,929
Payments on account of third parties 34,719 31,294 34,719 31,294
Credit cards – annual fees 78,304 70,831 78,304 70,831
Credit cards –fees on withdrawals and purchases 4,049 2,270 4,049 2,270
Credit cards – commissions of issuing bank 82,535 63,959 82,535 63,959
Other services 132,398 106,203 153,803 105,436
Total 1,934,485 1,631,835 2,102,899 1,766,749
* According to a service agreement signed between the Bank and the funds, as from July 1, 2005 the Bank
has been receiving the fees for the distribution and record of investment fund quotas, which were previously
paid to DTVM, directly from the funds.
32
15.b) Personnel expenses
BB- Domestic and Foreign
branches BB-Consolidated
1st quarter/06 1st quarter/05 1st quarter/06 1st quarter/05
Salaries (778,339) (747,101) (791,625) (759,041)
Benefits (216,330) (203,742) (217,613) (204,874)
Social charges (395,681) (295,586) (400,284) (299,860)
Training (8,374) (6,045) (8,446) (6,094)
Directors’ fees (2,771) (2,557) (3,142) (3,058)
Personnel provisions (359,428) (365,191) (359,428) (365,191)
Provisions for labor claims (31,727) (102,413) (31,727) (102,413)
Labor claim losses (63,292) (63,335) (63,292) (63,335)
Total (1,855,942) (1,785,970) (1,875,557) (1,803,866)
15.c) Other administrative expenses
BB- Domestic and
Foreign branches BB-Consolidated
1st quarter/06 1st quarter/05 1st quarter/06 1st quarter/05
Water, electricity and gas (69,316) (58,619) (69,367) (58,633)
Rent (67,891) (63,331) (69,169) (64,653)
Leasing costs (18,307) (36,597) (18,307) (36,597)
Communications (221,326) (206,295) (224,173) (208,762)
Maintenance and upkeep (50,763) (49,543) (51,021) (49,734)
Materials (31,686) (37,516) (31,784) (38,119)
Data processing (146,536) (129,272) (149,283) (132,256)
Promotion and public relations (31,212) (45,927) (32,040) (47,888)
Advertising and publicity (39,166) (35,444) (39,180) (35,665)
Financial system services (87,762) (77,495) (85,859) (76,143)
Third party services (112,188) (107,160) (116,831) (114,074)
Security services (106,450) (96,021) (106,486) (96,118)
Specialized technical services (11,402) (21,660) (11,977) (23,585)
Transportation (78,767) (90,478) (78,994) (90,914)
Domestic travel (15,268) (22,393) (15,737) (22,981)
Amortization (43,343) (33,582) (43,582) (33,887)
Depreciation (126,008) (139,754) (126,091) (139,850)
Expenses with tax and civil lawsuits (31,114) (91,845) (31,114) (91,845)
Other (56,240) (41,393) (60,888) (45,415)
Total (1,344,745) (1,384,325) (1,361,883) (1,407,119)
15.d) Other operating income
BB- Domestic and
Foreign branches BB-Consolidated
1st quarter/06 1st quarter/05 1st quarter/06 1st quarter/05
Recovery of charges and expenses 85,037 149,100 85,073 149,492
Income from special operations 15,455 22,343 15,455 22,343
Income from specific credits 16,708 14,980 16,708 14,980
Income from other credit operations 225 7,916 225 7,916
Income from payments of INSS benefits 71,296 58,348 71,296 58,348
Income from guarantee deposits 323,169 261,895 323,169 261,895
Income from securities and credits receivable from the 37,431 24,350 37,431 24,350
Federal Treasury
Dividends received 15,665 14,276 15,665 14,276
Equalization of rates – Law 8427 3,020 2,141 3,020 2,141
PREVI – Benefit Plan 1 14,468 8,668 14,468 8,668
Exchange adjustments of credit card transactions 2,477 1,676 2,477 1,676
33
Overdue advances on exchange contracts 5,462 20,932 5,462 20,932
Reversal of provisions 2,205 4,644 2,205 4,644
Foreign exchange gains 806,314 193,352 806,314 193,352
Taxes paid in error (Note 27.b) 13,655 229,127 13,655 229,127
Other 46,534 36,470 51,138 32,217
Total 1,459,121 1,050,218 1,469,442 1,046,357
15.e) Other operating expenses
BB- Domestic and
Foreign branches BB-Consolidated
1st quarter/06 1st quarter/05 1st quarter/06 1st quarter/05
Fees for the use of Sisbacen (3,946) (2,027) (3,946) (2,027)
Expenses on Pasep funds (40) (130) (40) (130)
Collection of contributions and federal taxes
(15) (9) (15) (9)
Exchange loss on profits from overseas branches at the
disposal of the Head Office (388) (112) (388) (112)
Discounts granted on renegotiations - credit operations (19,096) (19,903) (19,096) (19,903)
Expenses from discounts granted on renegotiations – other
credits (151) (19) (157) (19)
Updating of the pension liability (36,477) (45,835) (36,477) (45,835)
Interest on funds allocated for payment of benefits (70,903) (61,770) (70,903) (61,770)
CASSI – Interest on actuarial liabilities (Adjustments arising (94,967) (94,187) (94,967) (94,187)
from CVM Resolution 371)
Losses with holdups and burglaries (73,384) (37) (73,384) (37)
Errors and fraud (1,580) (44) (1,580) (44)
Expenses with BB premium savings account (15,802) (11,855) (15,802) (11,855)
Expenses with restatement – interest on own capital -- (2,154) -- (2,154)
BB Personal Banking expenses -- (2,380) -- (2,380)
Expenses with credit card operations (21,572) (5,895) (21,572) (5,895)
Expenses with Proagro funds (13,313) (26,053) (13,313) (26,053)
Provision for devaluation of securitized credits (52,300) (42,898) (52,300) (42,898)
Provision for guarantees provided (1,243) (1,161) (1,243) (1,161)
Foreign exchange losses (8) -- (1,751) (3,685)
Law 9138/95 - Restatement of funds to be returned to the (8,215) (1,216) (8,215) (1,216)
Federal Treasury
Securitization dekasseguis – liabilities with the SPC (1,075,242) (46,307) (1,075,242) (46,307)
Securitization SWIFT MT100 – liabilities with the SPC (11,931) (12,400) (11,931) (12,400)
Other (2,212) (6,900) -- --
Fees for the use of Sisbacen (40,243) (53,267) -- --
Expenses on Pasep funds (73,064) (46,803) (92,339) (62,479)
Total (1,616,092) (483,361) (1,594,661) (442,556)
* These obligations are classified as “Foreign marketable securities” in the consolidated statements because of the
consolidation of the foreign special purpose entities.
15.f) Non-operating income
BB- Domestic and Foreign
branches BB-Consolidated
1º trim/2006 1º trim/2005 1º trim/2006 1º trim/2005
Non-operating income 53,537 111,767 55,071 114,104
Profit on the sale of assets 14,058 76,760 14,058 76,985
Capital gains 1,854 825 1,854 825
Rental income 2,345 2,252 2,345 2,252
Valuation of other assets 20,419 12,111 20,446 12,113
34
Gains with shares and quotas 668 1.664 2.006 2.962
Profit on the sale of other assets 11.255 16.947 11.255 16.947
Other non-operating income 2.938 1.208 3.107 2.020
Non-operating expenses (28.518) (15.337) (28.768) (16.285)
Loss on sale of investments (6) (7) (6) (7)
Loss on sale of assets (888) (1.812) (888) (1.812)
Capital losses (11.666) (3.723) (11.666) (3.767)
Loss in value of other assets (14.946) (8.663) (15.106) (8.680)
Losses with shares and quotas -- -- (90) (774)
Other non-operating expenses (1.012) (1.132) (1.012) (1.245)
Total 25.019 96.430 26.303 97.819
NOTE 16 – Stockholders' Equity
16.a) Stockholders' equity of R$ 19,209,052 thousand (R$ 14,932,899 thousand at March 31, 2005),
equivalent to a net book value of R$ 24.03 per share (R$ 18.68 per share at March 31, 2005) considering the
total of 799,359,738 common shares (disregarding treasury stock). The market value of the common share at
March 31, 2006 was R$ 55,50 (R$ 29,60 at March 31, 2005).
16.b) Of the subscription bonuses issued by the Bank, the remaining balance of 15,993,142 “B” Bonus and
27,028,746 “C” Bonus can be exercised up to the original terms – 03.31.2006 to 06.30.2006 and 03.31.2011
to 06.30.2011, respectively.
16.c) Capital
Capital is R$ 10,797,337 thousand and comprises 810,617,415 common shares with no par value. The
Federal Treasury is the controlling stockholder.
16.d) Treasury stock
The Bank purchased 10,234,252,464 preferred shares, equivalent to 1.44% of the total capital, as
reimbursement to dissident stockholders not in agreement with the conversion of preferred shares into
common shares, approved at the Special Preferred Stockholders' Meeting held on June 7, 2002. These
shares were converted into 11,257,677 common shares and remain in treasury in accordance with article 45
of Law 6404/76.
16.e) Revaluation reserves
These refer to a revaluation of assets carried out by the associated companies Kepler Weber and by the
subsidiary Cobra Tecnologia S.A. The realizations of the reserves in the period, totaling R$ 41 thousand (R$ 29
thousand at March 31, 2005), were transferred to the "Retained earnings" account.
16.f) Mark-to-Market – Securities and Derivatives
In accordance with BACEN Circular Letters 3068/01 and 3082/02, this account records the mark-to-
market adjustment of securities available for sale, totaling R$ 145,800 thousand (R$ 94,799
thousand at March 31, 2005), net of tax effects, as per changes in the stockholders' equity account
“Mark-to-Market – Securities and Derivatives”:
12.31.2005 Net changes 03.31.2006
Securities available for sale Balance in the quarter Balance
Multiple Bank 58,929 14,864 73,793
Subsidiaries and affiliates 109,046 6,673 115,719
Tax effects (38,048) (5,664) (43,712)
Total 129,927 15,873 145,800
12.31.2004 Net changes 03.31.2005
Securities available for sale Balance in the quarter Balance
Multiple Bank 74,362 (37,932) 36,430
Subsidiaries and affiliates 11,118 (133,813) (122,695)
35
Tax effects (42,895) 34,361 (8,534)
Total 42,585 (137,384) (94,799)
16.g) Shareholding positions
As prescribed in paragraphs IV, V, VI and VII of Article 40 of the Bank's by-laws, the shareholding positions
are as follows:
Paragraph IV: shareholdings of all those who hold, directly or indirectly, more than 5% of capital:
Stockholders Total shares % Total
Federal Treasury 584,778,036 72.1
Banco do Brasil Employees Retirement Fund (PREVI) 112,415,335 13.9
BNDES Participações S.A. – BNDESPAR 46,604,052 5.7
Paragraph V: number and characteristics of the securities issued by the Bank and directly or indirectly held
by the controlling stockholder, management and members of the Fiscal Council; and
Paragraph VI: changes in ownership of the parties referred to in the previous paragraph of these securities
during the preceding twelve months:
Controlling stockholder - Federal Treasury 2006 2005
Common shares (ON) 584.778.036 584.778.036
Board of Directors Position Common Shares B Bonds C Bonds
03.31.06 03.31.05 03.31.06 03.31.05 03.31.06 03.31.05
Bernard Appy President 01 01 -- -- -- --
Rossano Maranhão Pinto Vice-President 01 01 -- -- -- --
Carlos Augusto Vidotto Counselor 02 02 -- -- -- --
Francisco Augusto da Costa e Silva Counselor 02 02 -- -- -- --
João Carlos Ferraz Counselor 02 02 -- -- -- --
José Carlos Rocha Miranda Counselor 01 01 -- -- -- --
Tarcísio José Massote de Godoy Counselor 01 01 -- -- -- --
Fiscal Council Position Common Shares B Bonds C Bonds
03.31.06 03.31.05 03.31.06 03.31.05 03.31.06 03.31.05
Rodrigo Pirajá Wienskoski President -- -- -- -- -- --
Alon Feuerwerker Membrer -- -- -- -- -- --
Artemio Bertholini Membrer -- -- -- -- -- --
Otavio Ladeira de Medeiros Member -- -- -- -- -- --
Vicente de Paulo Barros Pegoraro Member 01 01 -- -- -- --
Amaury Patrick Gremaud Deputy -- -- -- -- -- --
Ernesto Rubens Gelbcke Deputy -- -- -- -- -- --
Henrique Jager Deputy
Marcus Pereira Aucélio Deputy -- -- -- -- -- --
Pedro Paulo Bernardes Lobato Deputy -- -- -- -- -- --
Executive Board of Directors Position Common Shares B Bonds C Bonds
03.31.06 03.31.05 03.31.06 03.31.05 03.31.06 03.31.05
Rossano Maranhão Pinto President 01 01 -- -- -- --
Adézio de Almeida Lima Vice-President 02 02 -- -- 01 01
Aldo Luiz Mendes Vice-President -- -- -- -- -- --
Antônio Francisco de Lima Neto Vice-President -- -- -- -- -- --
José Luiz de Cerqueira César Vice-President -- -- -- -- -- --
José Maria Rabelo Vice-President 20 20 6 6 10 10
Luiz Oswaldo Sant’Iago Moreira de Souza Vice-President 02 02 -- -- 01 01
Ricardo Alves da Conceição Vice-President 371 371 111 111 185 185
Directors Position Common Shares B Bonds C Bonds
36
03.31.06 03.31.05 03.31.06 03.31.05 03.31.06 03.31.05
Augusto Braúna Pinheiro Director -- -- -- -- -- --
Clara da Cunha Lopes Director -- -- -- -- -- --
(Temporary)
Derci Alcântara Director 33 33 9 9 16 16
Expedito Afonso Veloso Director -- -- -- -- -- --
Francisco Cláudio Duda Director 2 -- 2 -- 1 --
Glauco Cavalcante Lima Director 22 22 6 6 11 11
Izabela Campos Alcântara Lemos Director -- -- -- -- -- --
José Carlos Soares Director 219 219 6 6 10 10
Juraci Masiero Director -- -- -- -- -- --
Luiz Gustavo Braz Lage Director -- -- -- -- -- --
Maria da Glória Guimarães dos Santos Director -- -- -- -- -- --
Manoel Gimenes Ruy Director 14 14 4 4 6 6
Marco Antônio Ascoli Mastroeni Director -- -- -- -- -- --
Maria da Graça França Director -- -- -- -- -- --
Maurício Doft Sotta Director 2 2 -- -- -- --
Milton Luciano dos Santos Director -- -- -- -- -- --
Nilo José Panazzolo Director -- -- -- -- -- --
Paulo Euclides Bonzanini Director -- -- -- -- -- --
Paulo Rogério Caffarelli Director -- -- -- -- -- --
Ricardo José da Costa Flores Director 19 19 5 5 9 9
Sandro Kohler Marcondes Director 1 -- -- -- -- --
Sérgio Ricardo Miranda Nazaré Director -- -- -- -- -- --
William Bezerra Cavalcanti Filho Director -- -- -- -- -- --
Statutory Auditor
José Luis Prola Salinas General Auditor -- -- -- -- -- --
Paragraph VII - number of shares in the market and percentage in relation to the total issued:
BB shares Number %
Market 799,359,738 98.6
Total issued 810,617,415 100
NOTE 17 – Income Tax and Social Contribution on Net Income
17.a) Details of calculation basis
BB-Consolidated
st st
1 quarter 2006 1 quarter 2005
Income Social Income Social
Tax Contribution Tax Contribution
a) Profit before taxation and after employee
profit sharing: 1,193,504 1,193,504 1,782,464 1,782,464
- Profit before taxation 990,831 990,831 1,601,141 1,601,141
- Net income of foreign entities (81,770) (81,770) (110,119) (110,119)
- Intercompany eliminations 284,529 284,529 291,525 291,525
- Employee profit sharing (86) (86) (83) (83)
b) Permanent additions/(deductions): (151,098) (146,754) (448,183) (441,541)
- Equity in the (earnings)/loss of subsidiary and (125,648) (125,648) (391,654) (391,654)
associated companies
- Non-deductible expenses and provisions 129,523 129,523 63,672 66,787
- Other additions/(deductions) (154,973) (150,628) (120,201) (116,674)
c) Temporary additions/(deductions): 2,003,862 2,116,593 738,546 742,127
- Allowance for loan losses 2,066,403 2,089,080 1,263,668 1,263,668
- Provision for loss on securities and investments 133 133 6,829 6,829
- Provision for pension liabilities (29,971) (29,971) (469,026) (469,026)
- Provision for labor claims, tax
contingencies and contingent liabilities 30,242 30,242 102,948 102,948
- Amortization of goodwill on investments 398 -- 398 --
- Other additions/(deductions) (63,343) 27,109 (166,271) (162,292)
d) Other additions/(deductions) (770,723) (771,707) (666,276) (667,325)
- Foreign profits -- -- -- --
- Adjustment - BACEN Resolution 2682/99
and Law 9430/99 (771,363) (771,363) (664,652) (664,652)
37
- Other 640 (344) (1,624) (2,673)
e) Taxable income 2,275,545 2,391,636 1,406,551 1,415,725
f) Income tax/social contribution: 564,339 215,708 346,069 128,127
- Rate of 15% / 9% 343,499 215,708 212,168 128,127
- Additional 10% 228,981 -- 141,421 --
- Tax incentives (8,141) -- (7,520) --
- Income tax on profits of foreign entities -- -- -- --
17.b) Details of income tax and social contribution expense
BB-Consolidated
st st
1 quarter 2006 1 quarter 2005
Income Social Income Social
Tax Contribution Tax Contribution
a) Present values (572,875) (215,708) (353,272) (128,127)
- Domestic income tax and social contribution (564,339) (215,708) (346,069) (128,127)
- Foreign income tax (8,536) -- (7,203) --
b) Deferred tax liabilities (62,150) (20,967) (60,239) (21,831)
- Provision)/reversal of deferred income tax on the
adjustment of the portfolio and depreciation (leasing
operations) (2,841) -- (1,366) --
- (Provision)/reversal of provision for deferred taxes -
positive MTM (10,063) (3,218) (13,390) (4,525)
- (Provision)/reversal of the provision for deferred income
tax - sale of investments in installments (BB - BI) 160 57 160 58
- (Provision)/reversal of provision for deferred taxes -
restatement of judicial deposits (46,575) (16,767) (34,683) (12,486)
- (Provision)/reversal of provision for deferred taxes –
foreign profits (8,190) (3,852) (10,960) (4,878)
- (Provision)/reversal of provision for deferred income tax
on transactions carried out in the
futures market 5,359 2,813 -- --
c) Provision (a+b) (635,025) (236,675) (413,511) (149,958)
d) Deferred tax credits 1,612,249 801,001 2,932 1,735
- Recording/(reversal) of tax credits on temporary
Differences 3,169 -- 2,917 1,022
- Recording/(reversal) of tax credits
on income tax and social
contribution losses 1,563,403 784,123 2,772 711
- Recording/(reversal) of tax credits
- negative MTM 1,918 826 (2,757) 2
- Recording/(reversal) of tax credits on
transactions carried out in the futures market 43,759 16,052
e) Total income tax and social contribution expense (c+d) 977,224 564,326 (410,579) (148,223)
17.c) Reconciliation of income tax and social contribution expense
BB-Consolidated
st st
1 Quarter 2006 1 Quarter 2005
a) Income tax
Profit before taxation and profit sharing 990,831 1,601,141
- Total income tax charge (rate of 25%) (247,708) (400,285)
- Effects of non-taxable income 174,909 305,804
- Effects of non-deductible expenses (674,465) (440,933)
- Effects of foreign profits (10,034) (10,786)
- Employee profit sharing 22 21
- Deferred charges on mark-to-market adjustments (175) (523)
- Other 1,726,534 128,603
- Fiscal incentives (workers meal program, culture and others) 8,141 7,520
Income tax expense 977,224 (410,579)
38
b) Social contribution
Profit before taxation and profit sharing 990,831 1,601,141
- Total social contribution charge (rate of 9%) (89,175) (144,103)
- Effects of non-taxable income 60,866 109,940
- Effects of non-deductible expenses (242,807) (158,730)
- Employee profit sharing 8 7
- Deferred charges on mark-to-market adjustments (63) (187)
- Other 835,497 44,850
Social contribution expense 564,326 (148,223)
17.d) Litigation: income tax and social contribution on net income social
In February 1998, the Bank filed a legal request for full offset of prior year income tax and social contribution
on net income losses against taxable income. Since then, the Bank has offset these tax losses in full against
income tax and social contribution taxable income and has made judicial deposits of the taxes otherwise due
(on 70% of the amount offset). These deposits prompted the Federal District 16th Court to issue a dispatch
recognizing the suspension of payment of these taxes until final judgment of the Bank's request, based on
article 151, II, of the Tax Code.
The amounts relating to this matter are as follows:
03.31.2006 03.31.2005
a) Judicial deposits 7,723,039 5,609,243
- Original amounts 5,392,040 4,175,403
- Restatement 2,330,999 1,433,840
b) 70% thereof 5,309,444 4,198,619
- Income tax losses incurred up to December 31, 1994 739,067 739,067
- Income tax losses incurred after December 31, 1994 2,262,966 1,626,674
- Social contribution losses incurred up to December 31, 1994 356,007 356,007
- Social contribution losses incurred after December 31, 1994 560,880 560,880
- Social contribution to offset (temporary differences up to 1998) 1,390,524 915,991
c) The offset of income tax and social contribution losses results in the reduction of the deferred tax credits.
d) The provision relating to the judicial deposit, recorded in Provision for losses on assets without loan
characteristics, amounts to R$ 2,330,999 thousand. Management considers this provision sufficient based
on the status of the lawsuit at March 31, 2006.
e) In the event of an unfavorable decision to the extraordinary appeal which was accepted by the President
of the Federal Regional Court - First Region on November 26, 2001 and submitted to the Federal Supreme
Court for judgment, the deposits equivalent to the amount of taxes determined to be payable will be
transferred to the Federal Revenue Secretariat; the amount of these deposits, net of the provision recorded,
will be expensed. The recording of the related tax credits as income will depend on an analysis of their future
realization in up to 10 years, as defined by CMN Resolution 3355/2006.
f) In September 2005, the Bank offset the balance of the tax losses and related tax credits recorded
as assets. From October 2005, the income tax has been fully paid through the Document for
Receipt of Collection of Federal Income (DARF).
39
NOTE 18 – Tax credits
18.a) Tax credits recorded as assets
BB-Consolidated
03.31.2006 03.31.2005
Income Social Income Social
Nature and origin: Tax Contribution Tax Contribution
a) Income tax and social contribution losses 172,839 25,947 3,386,403 45,985
a.1) Rate (%) 25 9 25 9
a.2) Tax credit recorded 43,210 2,335 846,601 4,139
b) Timing differences 20,395,555 20,226,262 14,161,231 11,526,428
b.1) Rate (%) 25 9 25 9
b.2) Tax credit recorded 5,098,889 1,820,364 3,540,308 1,037,379
c) Negative mark-to-market adjustments 164,932 158,081 88,705 79,221
c.1) Rate (%) 25 9 25 9
c.2) Tax credit recorded 41,233 14,227 22,176 7,130
d) Social contribution to offset -- 1,801,072 -- 2,483,994
e) Negative futures market adjustments 175,035 178,354
e.1) Rate (%) 25 9 -- --
e.2) Tax credit recorded 43,759 16,052 -- --
f) Tax credits abroad 7,609 -- 8,182 --
g) Total income tax and social contribution tax recorded
(a.2 + b.2 + c.2 + d + e.2 + f) 5,234,700 3,654,050 4,417,267 3,532,642
Pasep Cofins Pasep Cofins
h) Negative mark-to-market adjustments 172,055 172,055 128,124 127,268
h.1) Rate (%) 0,65 4 0,65 4
h.2) Tax credit recorded 1,118 6,881 833 5,091
i) Negative futures market
adjustments 187,052 187,052 -- --
i.1) Rate (%) 0,65 4 -- --
i.2) Tax credit recorded 1,216 7,482 -- --
j) Total PASEP and COFINS credits recorded
(h.2 + i.2) 2,334 14,363 833 5,091
k) Total tax credits recorded (g + j) 5,237,034 3,668,413 4,418,100 3,537,733
18.b) Tax credits not recorded as assets
BB-Consolidated
03.31.2006 03.31.2005
Income Social Income Social
Nature and origin: Tax Contribution Tax Contribution
a) Income tax and social contribution losses 124,834 84,180 638,940 35,623
a.1) Rate (%) 25 9 25 9
a.2) Tax credits not recorded 31,208 7,576 159,735 3,206
b) Timing differences 95,967 85,836 2,785,085 5,165,455
b.1) Rate (%) 25 9 25 9
b.2) Tax credits not recorded 23,992 7,725 696,271 464,891
c) Negative mark-to-market adjustments 457 457 36,894 36,894
c.1) Rate (%) 25 9 25 9
c.2) Tax credits not recorded 114 41 9,223 3,320
d) Accounting losses of foreign entities in countries with
favorable taxation 377,636 377,636 508,680 508,680
d.1) Rate (%) 25 9 25 9
40
d.2) Tax credits not recorded 94,409 33,987 127,170 45,781
e) Tax credits abroad 74,588 -- 96,695 --
f) Total income tax and social contribution credits not
recorded (a.2 + b.2 + c.2 + d.2 + e) 224,311 49,329 1,089,094 517,198
Pasep Cofins Pasep Cofins
g) Negative mark to market adjustments 479 479 -- 856
g.1) Rate (%) 0,65 4 0,65 4
g.2) Tax credits not recorded 3 19 -- 34
h) Total PASEP and COFINS tax credits
not recorded (g.2) 3 19 -- 34
i) Total tax credits not recorded (f + h) 224,314 49,348 1,089,094 517,232
18.c) Changes during the period
Tax credits recorded during the period BB-Consolidated
03.31.2006 03.31.2005
Income Social Income Social
Tax Contribution Tax Contribution
a) On income tax and social contribution losses 3,169 -- 2,772 711
b) On timing differences 1,563,404 784,123 2,917 1,022
c) On negative mark-to-market adjustments 306 123 207 82
d) Tax credits abroad 3,493 -- -- --
e) Negative futures
market adjustments 43,759 16,052 -- --
f) Total income tax and social contribution tax
recorded (a + b + c + d + e) 1,614,131 800,298 5,896 1,815
Pasep Cofins Pasep Cofins
g) Relating to negative mark-to-market adjustments -- 3 7 12
h) Relating to negative futures
market adjustments 646 3,974 -- --
i) Total tax credits recorded (f + h) 1,614,777 804,275 5,903 1,827
Tax credits reversed during the period BB-Consolidated
03.31.2006 03.31.2005
Income Social Income Social
Tax Contribution Tax Contribution
a) Relating to income tax & social contribution losses -- -- 325,098 --
b) Relating to timing differences -- -- -- --
c) Relating to social contribution to offset (MP 1.858/99) -- 200,154 -- 117,301
d) Relating to negative mark-to-market adjustments 359 189 1,508 547
e) Tax credits abroad -- -- 2,521 --
f) Arising from futures market
transactions -- -- -- --
g) Total reversals of income tax and
social contribution tax credits ( a + b + c + d + e + f) 359 200,343 329,127 117,848
Pasep Cofins Pasep Cofins
h) Relating to negative mark-to-market adjustments 39 242 128 789
i) Total tax credits reversed (g + h) 398 200,585 329,255 118,637
41
18.d) Deferred tax liabilities
BB-Consolidated
03.31.2006 03.31.2005
Income Social Income Social
Tax Contribution Tax Contribution
a) Arising from sale of investments 111 40 816 294
b) Arising from mark-to-market adjustments 84,743 30,500 43,985 15,880
c) Arising from leasing portfolio adjustment 38,715 -- 30,949 --
d) Arising from tax incentive depreciation 2 -- 2 --
e Entities abroad 2,550 -- 2,034 --
f) Arising from restatement of judicial deposits 346,554 124,759 159,037 57,253
g) Arising from foreign profits 8,190 3,852 10,959 4,878
h) Arising from futures market
transactions -- -- -- --
i) Total deferred income tax and social
contribution liabilities (a + b + c + d + e + f + g + h) 480,865 159,151 247,782 78,305
Pasep Cofins Pasep Cofins
j) Arising from mark-to-market adjustments 2,310 14,217 1,199 7,381
k) Arising from restatement of judicial deposits 9,450 58,153 4,337 26,687
l) Arising from futures market
transactions -- -- -- --
m) Total deferred tax liabilities (i + j + k + l) 492,625 231,521 253,318 112,373
18.e) Estimates of the realization of tax credits recorded (tax losses, timing differences, negative mark-to-market
adjustments on derivatives and social contribution available for offset)
Banco Múltiplo (Multiple Bank)
03.31.2006
Nominal Present
Value Value
In 2006 1,759,000 1,672,000
In 2007 1,735,000 1,644,000
In 2008 2,057,000 1,922,000
In 2009 1,894,000 1,863,000
In 2010 1,341,000 817,000
Total tax credits 8,786,000 7,918,000
In the 1st quarter of 2006, it was observed the realization of tax credits in the Multiple Bank in the amount of
R$ 200,154 thousand, corresponding to 9.75% of the forecast (R$ 2,053,000 thousand).
The above estimates of realization of tax credits were based on a technical study carried out as of December
31, 2005
18.f) Other information
18.f.1) The tax credits were recorded at the current rates calculated on their respective bases and the
recording, maintenance and reversal/use of the credits are being followed according to Resolution 3059, of
December 20, 2002 of the National Monetary Council, changed to Resolution CMN 3355, of March 31, 2006.
18.f.2) The tax credits recorded include Social Contribution to Offset relating to tax credits calculated at the
rate of 18% on tax losses and temporary differences existing on December 31, 1998. Provisional Measure
(MP) 1.858/99 (current MP 2158-35/2001) reduced the rate of social contribution from 18% to 8% and
42
authorized the maintenance of this credit classified in Other Receivables - Sundry. At March 31, 2006, the
balance of this account amounted to R$ 1,801,072 thousand.
Since January 1, 2003, the rate for social contribution on net income is 9%, in conformity with Law
10637/2002
18.f.3) The projections of offset of tax credits recorded as assets in the Multiple Bank are classified in two
groups. The first arises from tax losses (income tax and social contribution on net income losses) and Social
Contribution on Net Income (CSLL) to offset, whose projection for offset is linked to the ability to generate
IRPJ and CSLL taxable income in future years. The second group arises from temporary differences, whose
ability for offset arises from changes in the provisions (estimates of realization, of reversals, write-offs and
use).
18.f.4) In September 2005, the Multiple Bank offset the balance of the IRPJ tax credits arising from tax losses.
The realization of the nominal amounts of the other tax credits recorded as assets, based on a technical study
prepared by the Multiple Bank (as of March 31, 2005), is estimated in five years, in the following proportions:
CSLL to offset Temporary differences
In 2006 33% 17%
In 2007 28% 18%
In 2008 33% 21%
In 2009 6% 25%
In 2010 -- 19%
This study also shows the tax credits recorded as assets at present values based on the average funding
rate of the Multiple Bank.
18.f.5) The Bank has recorded IRPJ, CSLL, Pasep and Cofins tax credits on the negative
mark-to-market adjustments of securities and derivative financial instruments recorded in a separate account in
Stockholders' equity. The Bank has only recognized Pasep and Cofins tax credits on negative mark-to-market
adjustments recorded in income for the period, in compliance with the rules included in CMN Resolution
3059/2002 and BACEN Circular 3171/2002 (Note 3, items "d" and "e").
IRPJ, CSLL, Pasep and Cofins deferred tax liabilities have been recorded on the positive mark-to-market
adjustments of securities and derivative financial instruments recorded in income and in a separate account in
Stockholders' equity (Note 3, items "d" and "e").
18.f.6) The Bank has recorded IRPJ, CSLL, PASEP and COFINS tax credits on the net negative adjustment
of operations to be recorded in future markets in the period of 01.01.2005 to 02.28.2006 (effective term of
taxation by the cash basis accounting). Assets will vary in the extent that operations generating said
adjustment shall be liquidated.
NOTE 19 – Equity in the Earnings (Loss) of Subsidiary and Associated Companies
Significant investments in Brazil and abroad are stated on the equity method of accounting, in
conformity with BACEN and CVM instructions, and are classified in an investment account in
permanent assets.
The equity accounting adjustments were recorded in the account "Equity in the earnings (loss) of
subsidiary and associated companies" as follows:
43
19.a) BB - Domestic and Foreign branches
Paid in Adjusted Our owner- Dividend Equity in the Book value Book value
capital l stockholder’s ship s/ earnings (loss)
equity Interest
on own
capital
DESCRIPTION %- Foreign 03.31.2006 03.31.2005
Operational exchange
variations
SUBSIDIARIES
BAMB-Brasilian American Merchant Bank 922,930 1,341,442 100.00 -- 23,002 (99,469) 1,341,442 1,408,768
Banco do Brasil AG. Viena (Áustria) 49,507 78,636 100.00 -- 1,193 (3,998) 78,636 98,258
BB – Leasing Company Ltd. -- 74,104 100.00 -- 959 (5,669) 74,104 84,486
BB – Administradora de Cartões de Crédito S.A. 9,300 26,263 100.00 -- 1,497 -- 26,263 26,675
BB – Administradora de Consórcios S.A. 14,100 19,442 100.00 -- 4,995 -- 19,442 10,283
BB – Corretora de Seguros e Administradora de Bens S.A. 26,918 49,213 100.00 -- 15,919 -- 49,213 47,292
BB –Administração de Ativos - Distribuidora de
Títulos e Valores Mobiliários S.A. 99,628 197,417 100.00 -- 79,111 -- 197,417 177,988
BB – Banco de Investimento S.A. 1,589,399 1,867,220 100.00 -- 147,411 -- 1,867,220 2,118,804
BB – Leasing S.A. - Arrendamento Mercantil 61,860 26,116 100.00 -- 1,093 -- 26,116 23,142
Banco Popular do Brasil S.A. 144,529 42,001 100.00 -- (14,822) -- 14,021 83,199
Cobra Tecnologia S.A.(1) 17,183 -- 99,35 645 (18,969) -- -- --
ASSOCIATED COMPANIES
Cadam S.A. 183,904 346,372 21,64 -- (2,270) -- 74,955 82,618
SUBTOTAL -- -- -- 645 239,119 (109,136) 3,768,829 4,161,513
Abroad
Foreign exchange gain/losses in branches -- -- -- -- -- (164,297) -- --
Increase/decrease in stockholders’
equity arising from other changes -- -- -- -- (3,280) -- -- --
TOTAL -- -- -- 645 235,839 (273,433) 3,768,829 4,161,513
19.b) BB – Consolidated
Paid in Adjusted Our Divi-dends/ Equity in the Book value Book value
capital stockholde ownersh Interest on earnings (loss)
DESCRIPTION r’s equity ip% own Operational Foreign (Goodwill/
capital exchange Negative
variations goodwill)
(A)) 03.31.2006 03.31.2005
1) Interest - BB-Multiple Bank
SUBSIDIARIES
BB – Administradora de Cartões de Crédito S.A. 9,300 26,263 100.00 -- 1,497 -- -- 26,263 26,675
BB – Administradora de Consórcios S.A. 14,100 19,442 100.00 -- 4,995 -- -- 19,442 10,283
BB – Corretora de Seguros e Admin. de Bens S.A. 26,918 49,213 100.00 -- 15,919 -- -- 49,213 47,292
Cobra Tecnologia S.A. (1) 17,183 -- 99.35 645 (18,969) -- -- -- --
ASSOCIATED COMPANIES
Cadam S.A. 183,904 346,372 21.64 -- (2,270) -- -- 74,955 82,618
SUBTOTAL (1) -- -- 645 1,172 -- -- 169,873 166,868
2) BB-BI Banco de Investimento
ASSOCIATED COMPANIES
Brasilseg Participações S.A. (3) 84,290 208,202 70.00 10,500 7,288 -- -- 145,741 133,371
Cia. De Seguros Aliança do Brasil S.A. (3) 129,861 264,856 70.00 36,306 31,359 -- -- 185,399 178,797
Brasilprev (3)(B) 77,687 219,922 49.99 32,017 17,776 -- (2,701) 112,640 88,766
Brasilcap (3) 79,054 169,213 49.99 42,179 23,470 -- -- 84,590 72,512
Brasilsaúde (3)(C) 39,726 43,234 49.92 4,248 2,118 -- 111 21,471 19,688
Cia. Brasileira de Meios de Pagamento (3) 74,534 468,600 32.00 -- 29,287 -- -- 150,091 61,423
Seguradora Brasileira de Crédito à Exportação (3) 9,165 14,591 12.088 290 32 -- -- 1,764 1,806
Cibrasec (3) -- -- -- -- -- -- -- -- 5,313
Itapebi (3) 150,000 199,684 19.00 10,078 2,825 -- -- 37,940 33,693
Kepler Weber (3) 86,230 67,721 24.38 -- (2,589) -- -- 16,510 28,669
Cia. Brasileira de Soluções e Serviços(1) 8,720 26,019 40.345 1,370 2,353 -- -- 7,405 10
Ativos S.A. (3) 4,577 14,276 74.50 14,213 5,357 -- -- 10,809 16,223
BAF S.A. (2) 203,498 4,369 100.00 -- -- -- -- 4,369 4,150
SUBTOTAL (2) -- -- -- 151,201 119,276 -- (2,590) 778,729 644,421
3) BAMB - Brasilian American Merchant Bank
SUBSIDIARIES
BBTUR – Viagens e Turismo Ltda. (3) 9,633 9,632 99.00 -- (302) 733 -- 9,536 13,456
Ativos S.A. (3) 4,577 14,276 24.286 -- 1,479 61 -- 3,467 5,553
Other -- -- -- -- -- -- -- -- 16
SUBTOTAL (3) -- -- -- -- 1,177 794 -- 13,003 19,025
4) BB - Leasing Company Ltd.
ASSOCIATED COMPANIES
BBTUR – Viagens e Turismo Ltda. 9,633 9,632 1,.00 -- 4 -- -- 96 136
SUBTOTAL (4) -- -- -- -- 4 -- -- 96 136
5) Participação da BB-Administração de Ativos - Distribuidora de Títulos e Valores Mobiliários S.A
ASSOCIATED COMPANIES- (not valued
on the equity method)
Pronor -- -- 12,02 -- -- -- -- 20,722 20,722
44
SUBTOTAL (5) -- -- -- -- -- -- -- 20,722 20,722
Abroad
Foreign exchange gain/losses in branches -- -- -- -- -- (164,297) -- -- --
Foreign exchange gain/losses in subsidiaries -- -- -- -- -- (109,136) -- -- --
Increase/decrease in stockholders’ equity arising from
other movements (3,280)
TOTAL -- -- -- 151,846 118,349 (272,639) (2,590) 982,423 851,172
(A) The agreements for dissolution of the partnership in Maxblue Américas Holdings S.A. were signed on December 19, 2003, through which BB BI assigned its
49.90% interest in the Company in exchange for a 100% interest in Maxblue DTVM S.A. The Extraordinary General Meeting of shareholders held on December 5,
2004 changed the name of Maxblue DTVM S.A. to ¨Brasil Aconselhamento Financeiro e DTVM S.A. As from the 2nd half of 2005, the Company has not been
recorded on the equity method of accounting. A provision for loss of R$ 3,920 thousand was recorded. .
(1) Information regarding balance sheet at Dec/2005
(2) Information regarding balance sheet at May/2005.
(3) Information regarding balance sheet at Feb/2006.
Obs.: The goodwill recorded on the acquisition of investments was based on the estimate of future profitability and the negative goodwill was based on other economic reasons
NOTE 20 – Related-party Transactions
The transactions carried out between companies of the group are:
March 31, 2006 March 31, 2005
Assets Income Assets Income
(liabilities) (expenses) (liabilities) (expenses)
Cash and cash equivalents 407 -- 620 --
Foreign subsidiaries 407 -- 620 --
Short-term interbank deposits 2,918,242 101,498 449,014 57,850
Foreign subsidiaries 2,321,485 79,961 -- 44,427
BB-Leasing S.A. – Arrendamento Mercantil 506,636 21,537 297,920 13,423
BB-Banco Popular do Brasil S.A. 90,044 -- 40,000 --
Dollar Diversified Payment Rights Finance Company 77 -- 111,094 --
Securities 164,871 412 9,794 347
Foreign subsidiaries -- 525 -- 740
BB-Leasing S.A. – Arrendamento Mercantil 367 -- 9,794 --
BB-Administração de Ativos - DTVM S.A. -- (25) -- (16)
BB-Administradora de Cartões de Crédito S.A. -- (88) -- (165)
Brasil Aconselhamento Financeiro S.A. -- -- -- (151)
BB-Administradora de Consórcios S.A. -- -- -- (61)
Dollar Diversified Payment Rights Finance Company 164,504 -- -- --
Loan operations 69,171 3,600 93,166 173,662
Subsidiárias no exterior -- 509 -- 371
BB-Leasing S.A. – Arrendamento Mercantil 68,765 3,046 68,376 4,069
BB-Administração de Ativos - DTVM S.A. 406 45 367 169,222
Cobra Tecnologia S.A. -- -- 24,423 --
Other receivables 119,266 -- 207,100 --
BB-Banco de Investimento S.A. 942 -- 3,027 --
BB-Leasing S.A. – Arrendamento Mercantil 3,858 -- 4,512 --
BB-Administração de Ativos - DTVM S.A. 2,761 -- 66,853 --
BB-Administradora de Cartões de Crédito S.A. 213 -- 10,336 --
BB-Corretora de Seguros e Administradora de Bens S.A. 22,697 -- 22,109 --
Cobra Tecnologia S.A. 609 -- 675 --
BB-Banco Popular do Brasil S.A. 4,201 -- 15,405 --
BB-Administradora de Consórcios S.A. 521 -- 1,377 --
Brasil Aconselhamento Financeiro S.A. -- -- 159 --
BB-Tur Viagens e Turismo Ltda. 14,139 -- 7,532 --
Ativos S.A. 19,392 -- 9,596 --
Dollar Diversified Payment Rights Finance Company 2 -- 3 --
Nikkei Remittance Rights Finance Company 49,931 -- 65,516 --
Demand deposits (21,815) -- (26,666) --
Foreign subsidiaries (89) -- (63) --
BB-Banco de Investimento S.A. (132) -- (83) --
BB-Leasing S.A. – Arrendamento Mercantil (33) -- (96) --
BB-Administração de Ativos – DTVM S.A. (60) -- (425) --
45
BB-Banco Popular do Brasil S.A. (4) -- --
BB-Administradora de Cartões de Crédito S.A. (47) -- (101) --
BB-Corretora de Seguros e Administradora de Bens S.A. (603) -- (485) --
BB-Tur Viagens e Turismo Ltda. (6,065) -- (1,734) --
Cobra Tecnologia S.A. (14,765) -- (23,601) --
Brasil Aconselhamento Financeiro S.A. -- -- (17) --
Ativos S.A. (11) -- (57) --
BB-Administradora de Consórcios S.A. (6) -- (4) --
Interbank deposits (10,342,126) -- (7,328,666) --
Foreign subsidiaries (10,342,126) -- (7,328,666) --
Deposits received under security repurchase (782,283) (37,522) (1,232,271) (44,847)
agreements
Foreign subsidiaries (44,708) -- (54,452) --
BB-Banco de Investimento S.A. (188,340) (12,247) (549,837) (22,808)
BB-Leasing S.A. – Arrendamento Mercantil (513) (68) -- (60)
BB-Administração de Ativos – DTVM S.A. (271,088) (15,643) (266,278) (13,182)
BB-Administradora de Cartões de Crédito S.A. (112,011) (1,323) (183,313) (1,201)
BB-Corretora de Seguros e Administradora de Bens S.A. (126,845) (5,954) (117,100) (5,289)
Cobra Tecnologia S.A. -- -- (650) --
BB-Banco Popular do Brasil S.A. (16,615) (803) (48,573) (1,948)
BB-Administradora de Consórcios S.A. (20,032) (869) (6,747) (295)
Brasil Aconselhamento Financeiro S.A. -- -- (5,321) --
BB-Tur Viagens e Turismo Ltda. (2,131) (615) -- (64)
Funds from acceptance and issue of securities (39,073) -- (32,629) --
Foreign subsidiaries (39,073) -- (32,629) --
Foreign borrowings (4,222,645) -- (2,749,725) (6,066)
Foreign subsidiaries (4,222,645) -- (2,749,725) (6,066)
Foreign onlendings (1,068,703) -- (781,873) --
Foreign subsidiaries (1,068,703) -- (781,873) --
Derivative financial instruments (1,829) 391 (110,536) (924)
Foreign subsidiaries (1,500) -- (108,790) --
BB-Banco de Investimento S.A. -- -- (1,494) (1,341)
BB-Leasing S.A. – Arrendamento Mercantil -- 391 -- 417
BB-Administradora de Cartões de Crédito S.A. (17) -- (192) --
BB-Administradora de Consórcios S.A. (312) -- (60) --
Other liabilities (2,757,686) -- (4,031,213) --
Foreign subsidiaries (438,681) -- (586,865) --
BB-Leasing S.A. – Arrendamento Mercantil (23) -- (46) --
BB-Administradora de Cartões de Crédito S.A. (47,724) -- (11,721) --
BB-Administração de Ativos – DTVM S.A. (7,741) -- (7,146) --
Cobra Tecnologia S.A. (34,621) -- (150,705) --
BB-Tur Viagens e Turismo Ltda. (2,162) -- (3,367) --
BB-Banco Popular do Brasil S.A. (1,906) -- (1,983) --
Dollar Diversified Payment Rights Finance Company (2,130,858) -- (2,935,900) --
Nikkei Remittance Rights Finance Company (93,970) -- (333,480) --
Other operating income -- 19,785 -- 16,001
Foreign subsidiaries -- 25 -- 51
BB-Banco de Investimento S.A. -- 8,419 -- 6,054
BB-Administração de Ativos – DTVM S.A. -- 4,708 -- 3,572
BB-Administradora de Cartões de Crédito S.A. -- 531 -- 401
BB-Corretora de Seguros e Administradora de Bens S.A. -- 1,894 -- 1,357
BB-Tur Viagens e Turismo Ltda. -- 7 -- 1
BB-Administradora de Consórcios S.A. -- 1,823 -- 4,329
Ativos S.A. -- 973 -- 236
Dollar Diversified Payment Rights Finance Company -- 1,405 -- --
Other administrative/operating expenses -- (91,045) -- (125,056)
BB-Administração de Ativos – DTVM S.A. -- (2,326) -- (2,398)
Brasil Aconselhamento Financeiro S.A. -- (3,980) -- (3,980)
46
BB-Banco Popular do Brasil S.A. -- (2,619) -- (1,949)
Cobra Tecnologia S.A. -- (39,665) -- (56,562)
Dollar Diversified Payment Rights Finance Company -- (40,243) -- (53,267)
Nikkei Remittance Rights Finance Company -- (2,212) -- (6,900)
Other receivables include accounts receivable from related parties, dividends and interest on own capital
receivable.
Transactions carried out between the companies included in the consolidation are eliminated on
consolidation (Note 2.b).
Nota 21 – Operating Limits – Basle Agreement
At March 31, 2006, the referential stockholders' equity exceeded the minimum required by the Brazilian Central
Bank by R$ 10,858,431 and the coefficient of capital adequacy was 18.28% (15.62% as of March 31, 2005),
while the minimum required is 11%.
The risk-weighted assets are as follows:
March 31, 2006 03.31.2005
Cash and cash equivalents 2,686,152 2,443,035
Credits and securities issued or guaranteed by the 85,658,835 73,133,091
Brazilian Government
Deposits with the Brazilian Central Bank 21,969,637 20,787,070
Receivables from related companies 6,712 5,970
Specific credits - rescheduling of rural credits 626,859 558,821
Foreign exchange portfolio 630,952 788,419
Other 1,306,807 1,038,285
Total subject to zero-risk 112,885,955 98,751,691
Foreign currency funds 44,276 11,376,696
Clearing services for checks and other papers 2,839,043 2,442,455
Foreign exchange portfolio 896,582 1,156,957
Deposits with other banks 1,321,108 585,023
Investments in gold 4,260 3,038
Total subject to 20% risk 5,105,269 15,564,169
Weighted amount 1,021,054 3,112,833
Funds applied in interbank deposits 13,848,516 13,551,578
Foreign exchange portfolio 7,355,972 8,198,843
Foreign securities 215,598 283,911
Other 266,832 710,975
Total subject to 50% risk 21,686,918 22,745,307
Weighted amount 10,843,459 11,372,653
Loan operations 88,166,732 77,750,911
Property and equipment in use 3,014,610 2,886,027
Leased assets 868,729 598,313
Investments 1,019,298 885,369
Securities 3,993,423 4,069,246
Foreign exchange portfolio 246,317 299,885
Memorandum accounts (9,077,023) (8,866,709)
Other 18,574,989 14,492,713
Total subject to 100% risk 106,807,075 92,115,755
47
Weighted amount 106,807,075 92,115,755
Deferred tax credits - income tax and social contribution 8,889,176 7,794,993
on net income
Total subject to 300% risk 8,889,176 7,794,933
Weighted amount 26,667,528 23,384,979
Total assets subject to risk weighting 255,374,393 236,974,915
Total weighted amount 145,339,116 129,986,220
The calculations of the required stockholders' equity and the adequacy coefficient are as follows:
March 31, 2006 03.31.2005
A) Assets subject to risk weighting 255,374,392 236,974,915
B) AWR (assets weighted by risk) 145,339,115 129,986,220
C) SWAP credit risk 1,095,638 949,642
D) Requirement of stockholders' equity on AWR (11% of b) 15,987,303 14,298,484
E) Requirement of stockholders' equity on SWAP (20% of c) 219,128 189,928
F) Requirement of stockholders' equity on interest rate exposure 198,002 351,012
G) Required stockholders' equity (RSE): d + e + f 16,404,432 14,839,425
H) Referential equity amount (RE) 27,262,863 21,070,426
Level I 19,169,470 14,746,358
Capital 10,797,337 9,864,153
Capital reserves 4,778 4,763
Revenue reserves 6,020,150 4,294,251
Adjustment to market value - securities and derivatives 145,800 (94,798)
Retained earnings (accumulated losses) 787 29
Credit Income Accounts 16,074,046 13,990,066
Debit Income Accounts (13,731,377) (13,025,487)
Treasury stock (125,779) (125,779)
Tax credits excluded from Level I of RE (16,272) (160,840)
Level II 8,093,393 6,324,068
Subordinated debts eligible as capital 8,070,083 6,298,367
- Funds obtained from the FCO 7,445,700 6,298,367
- Funds obtained abroad 624,383 --
Revaluation reserves 23,310 25,701
I) Ratio between Referential equity amount to required
stockholders' equity: RE and RSE (h/g) 1,66 1,42
J) Surplus/(insufficiency) of stockholders' equity: RE - RSE (h-g) 10,858,431 6,231,001
L) Margin/(surplus) of leverage: (j x 100)/11 (“J” x 100)/11 98,713,011 56,645,464
M) Basel Ratio: RE x 100/(RSE/0,11) 18,28 15,62
48
NOTE 22 – Balance Sheet by Currency and Foreign Exchange Exposure
The purpose of this balance sheet is to show the assets and liabilities in foreign currency in Brazil
and abroad.
BB – Consolidated
March 31, 2006 March 31, 2006
Balance Local Foreign currency Foreign currency
Sheet currency Brazil Abroad Brazil Abroad
ASSETS 264,634,926 226,507,104 10,611,555 27,516,267 245,685,361 27,588,226
Current Assets and Long-Term Receivables 259,111,271 221,159,214 10,590,124 27,361,932 240,739,301 27,388,531
Cash and cash equivalents 4,055,796 2,557,662 158,643 1,339,491 14,407,563 606,118
Short-term interbank investments 35,744,134 21,434,859 -- 14,309,275 17,746,858 13,655,841
Securities and derivative financial instruments 68,631,273 65,368,530 368,389 2,894,354 74,089,369 3,753,033
Interbank accounts 24,912,043 24,910,739 -- 1,304 23,347,967 2,796
Interdepartmental accounts 12,409 12,409 -- -- 140,229 --
Loan and lease operations 88,335,936 77,777,580 1,894,791 8,663,565 77,899,067 9,189,395
Other receivables and assets 37,419,680 29,097,435 8,168,302 153,943 33,108,248 181,348
Permanent Assets 5,523,655 5,347,890 21,431 154,334 4,946,060 199,695
Investments 1,030,281 985,304 21,431 23,546 896,352 32,060
Property and equipment 3,014,610 2,890,326 -- 124,284 2,886,026 167,635
Leased assets 894,927 894,927 -- -- 619,437 --
Deferred charges 583,837 577,333 -- 6,504 544,245 --
LIABILITIES 264,634,926 226,782,890 14,035,880 23,816,155 245,685,361 28,716,766
Current and Long-Term Liabilities 245,295,001 207,447,645 14,035,880 23,811,475 230,624,222 28,716,766
Deposits 139,194,563 123,563,703 3,258,012 12,372,848 120,096,492 15,849,163
Demand deposits 31,877,536 27,658,429 3,257,966 961,141 29,340,311 1,080,302
Savings deposits 32,975,353 32,975,353 -- -- 31,417,670 --
Interbank deposits 5,393,288 960,634 -- 4,432,654 6,569,654 5,775,251
Time deposits 68,948,386 61,969,287 46 6,979,053 52,768,858 8,993,610
Deposits received under security repurchase 42,757,581 40,994,785 -- 1,762,796 43,085,836 1,201,428
agreements
Funds from acceptance and issue of securities 2,788,614 -- -- 2,788,614 4,121,145 4,121,145
Interbank accounts 1,477,313 1,469,723 -- 7,590 1,520,579 8,913
Interdepartmental accounts 1,272,575 196,383 1,076,192 -- 1,385,209 --
Borrowing and onlendings 17,083,954 13,052,768 347,841 3,683,345 27,830,678 5,013,263
Derivative financial instruments 1,446,247 1,446,247 -- -- 673,825 --
Other liabilities 39,274,154 26,724,036 9,353,835 3,196,283 31,910,457 2,522,855
DEFERRED INCOME 130,873 126,193 -- 4,680 128,240 --
STOCKHOLDERS' EQUITY 19,209,052 19,209,052 -- -- 14,932,899 --
Banco do Brasil does not follow the policy of incurring exposure in foreign currency which requires
capital for its coverage, and stays within the 5% exposure limit in relation to the Reference Equity,
as prescribed by CMN Resolution No. 2.891, of September 26, 2001. The foreign exchange
exposure at March 31, 2006 was R$ 1,339,036 thousand (R$ 745,014 thousand at March 31,
2005).
The Brazilian Central Bank authorized the use of a methodology which considers the exposure in
Euro, U.S. dollar, Swiss franc, Yen, Pound sterling and Gold as one currency, incorporating the
diversification effect in the calculation of the foreign exchange exposure. In order to improve
foreign exchange risk management, Banco do Brasil adopted this methodology.
NOTE 23 – Retirement and Pension and Health Plans - Post-Employment Benefits
23.a) Caixa de Previdência dos Funcionários do Banco do Brasil – Previ
Banco do Brasil is the sponsor of Caixa de Previdência dos Funcionários do Banco do Brasil (PREVI) which
provides participants and their dependents with benefits which are complementary or similar to those of the
Basic Government Retirement Plan. The plans offered through PREVI are of defined contribution (Plano
49
Previ Futuro) or defined benefit (Plan 1), the latter having adopted the capitalization method for actuarial
calculations. At March 31, 2006, the number of participants was 135,885, of which 46,088 are active (Plano
1), 33,457 actives 885 participants: 46,088 ativos do Plano de Benefícios n.º 1, 33,457 actives (Plano Previ
Futuro) and 56,340 retired employees.
23.a.1) The funding of the vested and unvested benefits is summarized as follows:
a) Participants employed before April 14, 1967, who were not retired and who were not in a position on that
date to request their retirement, contemplated in the contract signed on December 24, 1997 between the
Bank and PREVI (Plan 1): The sponsor assumes the commitment for the payment of pensions for this group;
the mathematical reserves which guarantee the benefits are not fully funded. The pension rights of this group
of participants are characterized as a defined benefit.
b) Participants employed between April 15, 1967 and December 23, 1997 (Plan 1): active participants
contribute 3% of their contribution salary plus 2% of the amount of such salary that exceeds six months of
the PREVI contribution (R$ 2,200.06 at March 31, 2006), plus 8% of the amount of such salary that exceeds
the PREVI contribution. Participants receiving benefits contribute 8% of the amount of the pension complement
and the sponsor an amount equal to the contributions of the participants. The retirement benefit of this group
is characterized as a defined benefit.
c) Participants employed as from December 24, 1997 (Plano Previ Futuro): active participants contribute to
PREVI an amount between 7% and 17% of their contribution salary, varying based on length of service and
the amount of the contribution salary. There is no contribution for retired participants. The sponsor
contributes an amount equal to the contributions of the participants, limited to 14% of the total contribution
payroll of these participants. The retirement benefit of this group is characterized as a defined contribution.
23.a.2) Effects of Benefit Plan 1, based on actuarial valuations as of December 31, 2004 and 2005 carried out
by an independent actuary, and of the Plano Previ Futuro as required by December 13, 2000 CVM Resolution
371/00:
a) Equity effect (reconciliation of assets and liabilities):
March March
Specification 31,2006 31,2006
Plan 1 Plan 1
1) Present value of actuarial liabilities with coverage 58,033,630 52,354,343
2) Present value of actuarial liabilities not covered -- --
3) Present value of actuarial liabilities (1 + 2) 58,033,630 52,354,343
4) Fair value of the plan assets (81,439,183) (68,880,031)
5) Present value of liabilities in excess of (less than) the fair value of the
(23,405,553) (16,525,688)
assets (3 + 4)
6) Actuarial (gains) or losses not recognized (20,217,605) (13,877,071)
7) Net actuarial liability (asset) to be recorded (5 - 6) (3,187,948) (2,648,617)
The Previ Futuro Plan, being a defined contribution plan, is not required to record actuarial assets or liabilities.
b) Amounts paid to PREVI:
March 31, 2006 03.31.2005
Specification Plano Plano
Plan 1 Previ Total Plan 1 Previ Total
Futuro Futuro
Sponsor contributions 113,415 17,249 130,664 107,893 12,905 120,798
50
Amounts paid to PREVI referring to the
-- -- -- 511,191 -- 511,191
1997 Contract
Total paid to PREVI 113,415 17,249 130,664 619,084 12,905 631,989
c) Effect on net income:
March 31, 2006 03.31.2005
Specification Plano Plano
Plan 1 Previ Total Plan 1 Previ Total
Futuro Futuro
1) Cost of current service (with interest) (67,603) (33,614) (101,217) (70,468) (25,178) (95,646)
2) Interest on actuarial liabilities (1,400,921) -- (1,400,921) (1,337,838) -- (1,337,838)
3) Expected earnings on the plan assets 1,995,561 -- 1,995,561 1,786,102 -- 1,786,102
4) Deferment of the net earnings from assets
and liabilities as from June/2003 (2+3) 594,640 -- 594,640 448,264 -- 448,264
5) Total gross (expense)/income (1 - 2 - 3 + 4) (67,603) (33,614) (101,217) (70,468) (25,178) (95,646)
6) Expected contributions from participants 49,306 17,227 66,533 46,493 12,918 59,411
7) Previ Liabilities/Assets (expense)/income
(3,663) -- (3,663) (8,408) -- (8,408)
(1997 Agreement)
8) Subtotal net (expense) /income (5 + 6 + 7) (21,960) (16,387) (38,347) (32,383) (12,260) (44,643)
9) Previ management fee (5% of the
employers’ union dues) (5,671) (862) (6,533) (5,395) (645) (6,040)
10) Effect of the net
(expense)/income (8 + 9) (27,631) (17,249) (44,880) (37,778) (12,905) (50,683)
23.a.3) The principal economic assumptions adopted for the actuarial calculations were the following:
March 31, March 31,
Specification
2006 2005
- Real interest rate used for discounting actuarial liabilities to present value 6.3% a.a. 6.7% a.a.
- Real expected yield on plan assets 6.3% a.a. 6.7% a.a.
- Estimated salary increases:
- Plan 1 1.3154% a.a. 1.4712% a.a.
- Plano Previ Futuro 3.3914% a.a. 3.5320% a.a.
23.b) Benefits of sole responsibility of the Bank
Banco do Brasil is also responsible for assistance and pension benefits for employees employed
before April 14, 1967, not covered by the PREVI Benefits Plan, with characteristics of a defined
benefit plan, and the regime adopted for the actuarial calculations is that of capitalization. There
were 8,656 retired employees and surviving spouses on March 31, 2005.
The main benefits are: (a) retirement pensions to founder participants and pension payments to
survivors of participants deceased prior to April 14, 1967; (b) payment of retirement supplements to
51
the other participants employed by Banco do Brasil who retired up to April 14, 1967 or who, on that
date, would have the right through length of service to retire and who had at least 20 years of effective
service with the Bank; and (c) increase in retirement benefits and pension payments in excess of
those provided by the PREVI Benefit Plans, as a result of judicial and administrative decisions due to
the restructuring of job and salary plans and incentives created by the Bank.
23.b.1) The cost of these benefits is totally funded by Banco do Brasil.
23.b.2) Effects on the financial statements based on actuarial valuations as of December 31, 2004 and 2005
carried out by an independent actuary, as required by CVM Resolution 371:
a) Equity effect (reconciliation of assets and liabilities):
March 31, March 31,
Specification
2006 2005
1) Present value of actuarial liabilities with coverage -- --
2) Present value of actuarial liabilities not covered
1,588,703 1,532,148
(Plans without financial assets)
3) Present value of actuarial liabilities (1 + 2) 1,588,703 1,532,148
4) Fair value of the plan assets -- --
5) Present value of liabilities in excess of the
1,588,703 1,532,148
fair value of the assets (3 + 4)
6) Actuarial (gains) or losses not recognized 188,887 180,239
7) Net actuarial liability/(asset) to be recorded (5 - 6) 1,399,816 1,351,909
b) Amounts paid to PREVI:
March 31, March 31,
Specification
2006 2005
Total benefits paid to Previ 66,448 64,451
c) Effect on net income::
March 31, March 31,
Specification
2006 2005
1) ) Cost of current service -- --
2) Expected contributions from participants -- --
3) Interest on actuarial liabilities (36,431) (37,427)
4) Actuarial gains or (losses) -- --
5) Expected earnings on assets -- --
6) Effect of the expense recorded (1 - 2 + 3 + 4 - 5) (36,431) (37,427)
23.b.3) The economic assumptions adopted for the actuarial calculations are the same as those adopted for
the PREVI Plan 1 (item 24 (a.3)).
23.c) Cassi - Caixa de Assistência dos Funcionários do Banco do Brasil
The Bank is the sponsor of a Health Plan managed by CASSI - Caixa de Assistência dos Funcionários do
Banco do Brasil. The main objective is to provide coverage for expenses with the promotion, protection,
52
recovery and rehabilitation of a member's health and of his/her inscribed beneficiaries. At March 31, 2006,
there were 158,721 participants, of which 86,813 active and 71,908 retired participants and pensioners.
The Bank contributes monthly an amount equivalent to 150% of the total contributions from
members (active and retired) and from pension beneficiaries of employees employed before
December 23, 1997 and 100% of the total contributions from participants employed after that date.
Monthly contributions from members and pension beneficiaries amount to 3% of the total payroll or
the total retirement or pension plan benefits.
23.c.1) Effects of the CASSI Plan on the financial statements, based on actuarial appraisals as of December
31, 2004 and 2005 carried out by an independent actuary, as required by CVM Resolution 371/12.13.2000:
:
a) Equity effect (reconciliation of assets and liabilities):
March 31, March 31,
Specification
2006 2005
1) Present value of actuarial liabilities with coverage -- --
2) Present value of actuarial liabilities not covered
3,232,214 3,078,155
(Plans without financial assets)
3) Present value of actuarial liabilities (1 + 2) 3,232,214 3,078,155
4) Fair value of the plan assets -- --
5) Present value of liabilities in excess of the fair value of the assets (3 + 4) 3,232,214 3,078,155
6) Actuarial (gains) or losses not recognized 1,341,064 1,360,228
7) Net actuarial liability (asset) to be recorded (5 - 6) 1,891,150 1,717,927
b) Amounts paid to Cassi:
Specification March 31, March 31,
2006 2005
Sponsor contributions 99,313 92,389
The amounts of R$ 99,313 thousand and R$ 92.389 thousand comprise Employer Contributions for
Active employees and Pensioners, as follows: at March 31, 2006– Active employees R$ 39,378
thousand and Pensioners R$ 59.935, and March 31, 2005 – Active employees R$ 36,600 thousand
and Pensioners R$ 55,789 thousand.
c) Effect on net income:
Specification March 31, March 31,
2006 2005
1) Cost of current service (with interest) (9,271) (7,808)
2) Expected contributions from participants -- --
3) Interest on actuarial liabilities (77,835) (78,670)
4) Actuarial (gains) or losses (17,132) (15,517)
5) Expenses with current employees (39,378) (36,600)
6) Expected earnings on assets -- --
53
7) Effect of the expense recorded (1 - 2 + 3 - 4 – 5 - 6) (143,616) (138,595)
23.c.2) The economic assumptions adopted for the actuarial calculations were the same as those applied to the
PREVI Plan 1 (item 23.a.3).
23.d) Policy for the recognition of actuarial gains and losses
In accordance with CVM Deliberation 371, the actuarial gains or losses to be recognized as income
or expense in a defined benefit plan are the amount of unrecognized gains and losses that exceed,
in each period, the higher of the following limits:
. 10% of the present value of the total actuarial liability of the defined benefit; and
. 10% of the fair value of plan assets.
23.d.1) Benefits of Sole Responsibility of the Bank (Plan 1): Actuarial losses relating to these benefits are
being recorded in the same year the actuarial calculation is made because the persons involved are all former
employees, and thus there is no remaining length of service to amortize.
23.d.2) Benefit Plan 1: Previ Plan 1 has assets at fair value in excess of the liabilities, thus permitting the
recording of actuarial gains. Face (i) the remaining pension commitments of the plan; (ii) the fluctuations that
can affect the fair value of plan assets and (iii) the possibility to realize actuarial gains, the Bank,
conservatively, is not recording in the quarter the actuarial gains.
23.d.3) Cassi Actuarial Liability: the actuarial losses relating to this liability are recognized over the average
remaining work period estimated for the employees participating in the plan (15.5 years).
23.e) Summary of the Provisions for the PREVI and CASSI Liabilities
1º Trimestre 2006
(Expense) Transfer
income between Unrecogni
Net actuarial zed Net actuarial
recorded in unamortized Sponsor
liability/ actuarial liability
the income reserves and contribu-
Specification (asset) (losses)/ga (asset)
statement advanced tions made
on January ins on March 31,
considering amortization in the year
1, 2006 2006
actuarial
adjustments
F=
A B C D E
(A-B+C+D+E)
Actuarial asset CVM No. 371 (3,187,948) -- -- -- -- (3,187,948)
Actuarial asset 1997 contract (681,185) (3,663) -- -- -- (677,522)
- Advanced amortization (1997 contract) (9,996,980) 234,073 287,917 -- -- (9,943,136)
- Unamortized reserves (1997 contract) 10,116,917 (237,736) (287,917) 13,330 -- 10,080,066
- Unrecognized actuarial losses (1997
contract)
(801,122) -- -- (13,330) -- (814,452)
PREVI actuarial liability in respect of the
Informal Plan (sole responsibility of the 1,429,833 (36,431) -- -- (66,448) 1,399,816
Bank)
CASSI actuarial liability 1,846,847 (104,238) -- -- (59,935) 1,891,150
54
1st quarter 2005
(Expense) income
Net actuarial Net actuarial
recorded in Sponsor contribut-
liability/ (asset) liability (asset)
Specification on January
the income statement ions made in the
on March 31,
considering actuarial year
1, 2005 2005
adjustments
A B C D=(A-B+C)
Actuarial asset CVM No. 371 (2,570,095) (23,975) (102,497) (2,648,617)
PREVI actuarial liability in respect of the 1997
contract
442,001 (8,408) (511,191) (60,782)
- Advanced amortization (1997 Agreement) (9,044,502) (295,981) (236,741) (9,577,224)
- Unamortized reserves (1997 Agreement) 9,486,503 304,389 (274,450) 9,516,442
PREVI actuarial liability in respect of the
Informal Plan (sole responsibility of the Bank)
1,378,933 (37,427) (64,451) 1,351,909
CASSI actuarial liability 1,671,721 (101,995) (55,789) 1,717,927
23.f) PREVI contributions parity
On December 16, 2000 parity between the Bank contributions and those of the participants was
instituted in compliance with that established in the Brazilian Federal Constitution,
On April 12, 2001, the Honorable Federal Judge of the 13th Federal District Court of the Justice
Department of the Federal District partially granted the motion for a collective writ of mandamus
lodged by the São Paulo Banking Establishments Workers´ Union – SEEB against the Supplemental
Social Security Secretary and the Tax Director, appointed by that Secretary to the Caixa de
Previdência dos Funcionários do Banco do Brasil - Previ.
The writ suspends the decision issued by the Tax Director appointed by that Secretary to the Caixa de
Previdência dos Funcionários do Banco do Brasil - Previ, on April 6, 2001, which authorized the use
of R$ 2.2 billion derived from the portion attributable to the Banco do Brasil in the reserve balance
remaining in Previ, after implementation of parity for amortization of the social security liability liable by
the Bank to that Entity, retroactive to December 15, 2000.
According to that disclosed in the Relevant Fact issued on May 3, 2006, an agreement was signed,
with the consent of the Caixa de Previdência dos Funcionários do Banco do Brasil - Previ, with the
Banking Establishment Workers’ Union of Brasília, São Paulo and Rio de Janeiro, for the purpose of
overcoming litigation, by using the amount in question to fulfill the purpose of improving the Benefits
Plan and amortize the social security liability or reduce/offset future Bank contributions.
Therefore there will be a positive impact on the Bank results in the amount of roughly R$ 880 million
net of taxes owed to the agreement after approval of the amendments to the First Benefits Plan by the
Supplemental Social Security Secretary (SPC) protocol withdrawing the writs of mandamus filed in the
courts, which took place on May 4, 2006 and May 5, 2006 respectively.
NOTE 24 – Compensation Paid to Employees and Management
The monthly compensation of employees and management of the Bank in Brazil is presented below (in
reais) in the format required by item 4, Section C of Ministry of Finance Statement of Justification 139/88:
55
Lowest salary 1st quarter/2006 1st quarter/2005
Standard amount 827,40 780,30
Semiannual bonus 206,85 195,07
Fixed amount – Trade Union Agreement 2004 31,80 30,00
Total 1,066,05 1,005,37
Highest salary
Standard amount 1,144,50 1,079,68
Amount per individual/supplement for length of service - I 395,51 374,81
Amount per individual - standard amount 1,213,06 1,144,36
Variable temporary supplement – commissioned position 11,054,14 10,426,63
Additional per function 2,753,40 2,597,40
Additional for temporary work updated 1,709,10 1,612,20
Semiannual bonus 1,803,89 1,702,12
Total 20,073,60 18,937,20
Average salary 3,219,03 3,069,88
Management
President 26,160,00 24,679,20
Vice-President 23,570,10 22,235,70
Director 20,073,60 18,937,20
NOTE 25 – Assignment of Employees to External Organizations
25.a) With costs for the Bank
a) Federal government
Assignments are regulated by article 93 of Law 8112/90 (amended by Law 9257/97), by
Decree 925/93, and by PGFN/CJN Note 088/96 issued by the General Counsel of the Federal
Treasury.
1st quarter/2006 1st quarter/2005
Number of employees assigned 15 12
Cost for the period R$ 639 thousand R$ 503 thousandl
b Labor unions
Assignments occur in cases prescribed in the Collective Labor Agreement or by commitments
assumed as a result of salary negotiations:
:
1st quarter/2006 1st quarter/2005
Number of employees assigned 131 124
Cost for the period R$ 2,578 thousand R$ 2,235 thousand
c) Other organizations/entities
Assignments occur as a result of agreements of strategic business interest of the Bank:
1st quarter/2006 1st quarter/2005
Number of employees assigned 3 3
Cost for the period R$ 233 thousand R$ 210 thousand
25.b) Without cost to the Bank
1st quarter/2006 1st quarter/2005
56
a) Federal, state and municipal governments 360 319
b) External organizations 671 564
c) Employee entities 33 30
d) Subsidiary and associated companies 321 314
Total employees assigned 1.534 1.366
NOTE 26 – Commitments, Responsibilities and Contingencies
26.a) Contingent liabilities
The Bank and its subsidiaries are parties in lawsuits involving labor, civil, tax and social security
contingencies.
The Bank classifies contingencies as remote, possible and probable, based on the possibilities of loss
determined after a legal update of each claim.
This procedure complies with Statement XXII - Contingencies issued by the Institute of Independent
Auditors of Brazil - IBRACON, which requires a provision for the total amount of the contingencies
classified as probable, and does not require a provision to be recorded for those classified as
possible and remote.
The provisions for claims are recorded taking into consideration the possibility of success by the
plaintiff in the lawsuit against the Bank/subsidiary.
The provisions for labor claims are recorded considering, also, the jurisprudence applicable to each
claim.
The consolidated position of the contingent liabilities at March 31, 2006, segregated by nature of
claim and classification of loss, as well as the provisions recorded, whose changes in the Bank are
shown in Note 7, are the following:
BB - domestic and foreign branches BB – Consolidated
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
Amount Provision Amount Provision Amount Provision Amount Provision
1 – Labor claims 2,441,103 2,499,472 2,160,649 2,105,501 2,441,103 2,499,472 2,160,649 2,105,501
Probable loss 2,160,649 2,105,501 2,160,649 2,105,501 2,160,649 2,105,501 2,160,649 2,105,501
Possible loss 280,454 393,971 -- -- 280,454 393,971 -- --
2 – Tax claims 233,153 626,475 29,934 130,489 302,432 672,172 73,319 167,183
Probable loss 29,934 130,489 29,934 130,489 73,319 167,183 73,319 167,183
Possible loss 203,219 495,986 -- -- 229,113 504,989 -- --
3 – Civil claims 2,170,945 2,056,736 880,592 770,888 2,215,204 2,105,158 909,594 805,471
Probable loss 880,592 770,888 880,592 770,888 909,594 805,471 909,594 805,471
Possible loss 1,290,353 1,285,848 -- -- 1,305,610 1,299,687 -- --
4 – Social security claims 478 484 -- 8 478 631 -- 155
Probable loss -- 8 -- 8 -- 155 -- 155
Possible loss 478 476 -- -- 478 476 -- --
26.b) Contingent tax assets
57
26.b.1) The Bank has filed lawsuits for reimbursement of taxes paid in error, the most important being:
- Unconstitutionality of Income Tax on Net Income paid in 1989 and in the 1st six months of 1992, in the
amount of R$ 11,296 thousand;
- Tax on Financial Transactions (IOF) - Law 8033/90 (Price-level restatement), in the amount of R$ 176,027
thousand;
26.c) Other commitments
26.c.1) The Bank is the sponsor of Fundação Banco do Brasil whose purpose is the promotion, support,
advancement and sponsorship of educational, cultural, social, philanthropic, and recreational/sporting activities,
as well as the promotion of research activities of a technological and scientific nature, and rural and urban
st
community assistance services. During the 1 quarter 2006, the Bank contributed with R$ 10,000 thousand to
the Fundação Banco do Brasil.
26.c.2) Guarantees to third parties, for a fee and with counter-guarantees from the beneficiaries - guarantees,
sureties and bonds - amounted to R$ 2,457, 286 thousand at March 31, 2006 (R$ 3,645,287 thousand at
December 31, 2004). A provision of R$ 17,757 thousand, recorded in "Other Liabilities", is considered sufficient
to cover any potential loss arising on these guarantees.
26.c.3) Available credit lines for loan and lease operations amount to R$ 24,748,028 thousand at March 31,
2006 (R$ 22,802,078 thousand at March 31, 2005).
26.c.4) The confirmed import and export letters of credit total R$ 872,421 thousand at March 31, 2006 (R$
884,745 thousand at March 31, 2005).
26.c.5) The Bank is the operator of the Fund for Sectorial Investments (FISET), with net assets, at March 31,
2006, of R$ 2,276 thousand (R$ 2,280 thousand at March 31, 2005), and is the manager of the Public Service
Employee Savings Program (PASEP), with net assets of R$ 1,477,600 thousand at March 31, 2006
(R$ 1,395,414 thousand at March 31, 2005). The Bank guarantees the latter a minimum remuneration
equivalent to the Long-Term Interest Rate (TJLP).
26.c.6) Despite the reduced level of risk to which its assets are subject, the Bank contracts insurance cover for
its assets in amounts considered sufficient to cover any losses.
NOTE 27 – Reclassifications for Comparative Purposes
Due to the consolidation of the special purpose entities, Dollar Diversified Payment Rights
Finance Company and Nikkei Remittance Rights Finance Company, in conformity with CVM
Instruction No. 408 of August 18, 2004, the following reclassifications were made in the March 31,
2005 balances for comparative purposes:
Previous Reclassified
Balance Sheet disclosure Reclassifications balances
Short-term interbank investments
Interbank deposits 13,728,582 65,514 13,794,096
Other receivables
Sundry 23,771,483 (65,514) 23,705,970
Funds from acceptance and issue of securities
Foreign securities 851,765 3,269,380 4,121,145
Other liabilities
Negotiation and intermediation of securities 3,342,866 (3,269,380) 73,486
58
Statement of Income
Income from Financial Intermediation
Securities (3,728,912) (60,167) (3,789,079)
Other operating income (expenses)
Securities (see original) 1,056,126 2,178 1,058,303
Other operating expenses (502,723) 57,990 (444,734)
Statement of Added Value
BB-Domestic and Foreign Branches BB-Consolidated
1st quarter/2006 1st quarter/2005 1st quarter/2006 1st quarter/2005
BALANCE % BALANCE % BALANCE % BALANCE %
Added value calculation
Net income from financial
intermediation 2,801,704 2,580,049 2,837,830 2,625,134
Banking service fees 1,934,485 1,631,835 2,102,901 1,766,749
Other operating income (expenses),
net (1,332,365) (644,132) (1,323,110) (629,581)
Non-operating income, net 25,019 96,430 26,303 97,819
Added value 3,428,843 3,664,182 3,643,924 3,860,121
Equity in the earnings (loss) of
subsidiary and associated (37,594) 221,157 (154,290) 113,545
companies
Gross added value 3,391,249 3,885,339 3,489,634 3,973,666
Depreciation
and amortization (169,351) (173,336) (169,673) (173,737)
Distribution of added value 3,221,898 100.00 3,712,003 100.00 3,319,961 100.00 3,799,929 100.00
Employees 1,836,067 56,99 1,661,785 44,77 1,854,398 55,86 1,677,958 44,16
Salaries and fees 1,154,497 1,165,379 1,168,154 1,177,821
Benefits, social charges and
training 492,587 418,731 496,533 422,378
Employee profit sharing 188,983 77,675 189,711 77,759
Governments (956,838) (29,70) 1,085,638 29,25 (877,106) (26,42) 1,157,391 30,46
Brazil (967,389) (30,03) 1,073,129 28,91 (888,352) (26,76) 1,144,909 30,13
Social security contributions (INSS) 208,858 201,860 210,870 203,667
on salaries
Tax expenses (except income tax
and social contribution on net 432,803 364,307 452,361 393,225
income))
Income tax/social contribution on net
income (1,609,050) 506,962 (1,551,583) 548,017
Foreign 10,551 0,33 12,509 0,34 11,246 0,34 12,482 0,33
59
Tax expenses (except income tax
and social contribution on net 1,159 1,657 1,213 1,697
income)
Income tax/social contribution on net
income 9,392 10,852 10,033 10,785
Stockholders 2,342,669 72,71 964,580 25,98 2,342,669 70,56 964,580 25,38
Retained earnings 2,342,669 964,580 2,342,669 964,580
Added value distributed 3,221,898 100.00 3,712,003 100.00 3,319,961 100.00 3,799,929 100.00
60
EXECUTIVE BOARD
CEO
Rossano Maranhão Pinto
VICE-PRESIDENTS
Adézio de Almeida Lima
Aldo Luiz Mendes
Antônio Francisco de Lima Neto
José Luiz de Cerqueira César
José Maria Rabelo
Luiz Oswaldo Sant’Iago Moreira de Souza
Ricardo Alves da Conceição
BOARD OF OFFICERS
Augusto Braúna Pinheiro
Clara da Cunha Lopes (Interim)
Derci Alcântara
Expedito Afonso Veloso
Francisco Cláudio Duda
Glauco Cavalcante Lima
Izabela Campos Alcântara Lemos
José Carlos Soares
Juraci Masiero
Luiz Gustavo Braz Lage
Manoel Gimenes Ruy
Marco Antônio Ascoli Mastroeni (Substitute)
Maria da Graça França
Miguel Oscar Viana Peixoto
Milton Luciano dos Santos
Nilo José Panazzolo
Paulo Euclides Bonzanini
Paulo Rogério Caffarelli
Ricardo José da Costa Flores
Sandro Kohler Marcondes
Sérgio Ricardo Miranda Nazaré
William Bezerra Cavalcanti Filho
BOARD OF DIRECTORS
Bernard Appy (Presidente)
Rossano Maranhão Pinto (Vice-Presidente)
Carlos Augusto Vidotto
Francisco Augusto da Costa e Silva
João Carlos Ferraz
José Carlos Rocha Miranda
Tarcísio José Massote de Godoy
BOARD OF AUDITORS
Rodrigo Pirajá Wienskoski (Presidente)
Artemio Bertholini
Otavio Ladeira de Medeiros
Vicente de Paulo Barros Pegoraro
Amaury Patrick Gremaud (suplente)
ACCOUNTING
Gil Aurélio Garcia
Contador Geral
Contador CRC-DF 5.027/O-6
CPF 047.999.766-72
190
