Earnings Presentation 2 nd Quarter, 2014 Disclaimer: This presentation may include references and statements on expectations, planned synergies, growth estimates, projections of results, and future strategies for Banco Votorantim, it’s associated and affiliated companies, and subsidiaries. Although these references and statements reflect the management’s belief, they also involve imprecision and risks that are highly difficult to be foreseen. Consequently, they may conduct to different results from those anticipated and discussed here. These expectations are highly dependent on market conditions, on Brazil’s economic and banking system performances, as well as on international market conditions. Banco Votorantim is not responsible for bringing up to date any estimate in this presentation.
Executive summary Net income of R$ 140M in 2Q14 and R$ 292M in 1H14 In 2H14, BV will keep working to consolidate net profit Highlights of 2Q14 results Net income of R$ 140M in 2Q14 – third consecutive quarter of positive results, with net profit Profit of in each of the last nine months R$ 140M in 2Q14 In 1H14, net income totaled R$ 292M (R$-474M in 1H13) Consistent Net Interest Income increased 4.8% in 2Q14/1Q14 and 4.7% in 1H14/1H13, despite the reduction in the expanded credit portfolio, reflecting the focus on profitability (vs. growth) revenue Net Interest Margin¹ (NIM) of 5.4% p.y. – improvement of 0.5 p.p. vs. 1Q14 and 1.1 p.p. vs. 2Q13 generation BV has been originating auto finance with quality and scale for more than 30 months Maintained • Better quality vintages reached 81% of the managed auto finance loan portfolio (62% in June/13) asset quality Consumer Finance’s 90 -day NPL at 6.6%, stable compared to Mar/14 and 0.5 p.p. below June/13 ALL expenses² dropped by 26.7% in 2Q14/1Q14 and 33.1% (R$ 611M) in 1H14/1H13 Reduced credit • Expenses with credit provisions in 2Q14 (R$ 523M) were the lowest since 1Q11 provisions 90-day Coverage Ratio reached 118% in June/14 (June/13: 111%; Sept/11³: 78%) Personnel and Administrative expenses reduced 13.0% in 2Q14/1Q14 and 10.6% in 1H14/1H13 Reduction in • Administrative expenses dropped almost 25% (R$ 177M) in the 1H14/1H13 comparison the cost base Efficiency Ratio for the last 12 months reached 36.0% (Mar/14: 37.9%; June/13: 46.3%) 1. Ratio between Net Interest Income and Average Interest-Earning Assets; 2. Net of income from recovery of written-off loans; includes ALL expenses of the portfolios assigned with recourse; 3. Beginning of the restructuring process 2
Agenda Banco Votorantim – Overview 2Q14 Results Appendix 3
Banco Votorantim – Overview Banco Votorantim is one of the leading banks in Brazil “Top 10” in total assets, with strong shareholders and shared governance Banco Votorantim is one of the largest Ownership Structure privately-held Brazilian banks in total assets... Votorantim Group Banco do Brasil Total: 50.00% Total: 50.00% 10 largest banks in Mar/14¹ - Total Assets (R$B) Voting: 50.01% Voting: 49.99% Shareholder Non-voting: 49.99% Non-voting: 50.01% Banco do Brasil 1,281 50% Total Itaú 1,034 CEF 910 Bradesco 791 BNDES 765 Santander 503 HSBC 167 Público Safra 132 Estrangeiro BTG Pactual 125 Governance Structure Brasileiro e privado 10 th 105 Votorantim Equal Statutory representation ...and also in terms of loan portfolio of each Fiscal shareholder Board of Council 10 largest banks in Mar/14¹ – Loan Portfolio² (R$B) Directors Audit Finance Banco do Brasil 592 Committee Committee CEF 512 Itaú 353 Compensation Products & Bradesco 296 & HR Marketing BNDES 285 Committee Committee 194 Santander Executive Committee 54 HSBC Público 8 th Votorantim 54 Operating Committees & Estrangeiro 46 Safra Commissions Brasileiro e privado 26 Banrisul 1.June/14 Central Bank (“ Bacen ”) data unavailable by the preparation of this presentation; 2. On -balance portfolio according to Bacen’s Res. 2,682 4
Strategy Diversified business portfolio Focus on expanding business profitability, operating efficiency and synergies with BB Off-balance portfolio¹ R$ 2.8B Assigned to BB R$ 0.4B Assigned to FIDCs R$ 68.2B Wholesale R$ 32.3B Consumer Finance Wealth Mgmt. R$ 35.9B Corporate & Auto Other Wealth IB (CIB) Finance Businesses Mgmt. & BVEP Asset: 10 th largest in the To be the best wholesale To originate portfolios with In Payroll loans, focus on bank to our target clients, quality, scale and market, with innovative INSS (retirees and focused on: profitability products pensioners) and refinancing • Long-term relationships To focus on used auto R$ 40.6B AuM Pillars To expand synergic finance (multi-brand dealers) • Capturing synergies in the businesses (credit cards, Increase synergies with BB To advance in new auto origination and structuring of insurance sales) Private: focus on estate finance origination in integrated financial solutions To explore new opportunities management through partnership with BB (new • Efficient management of together with BB (e.g. custom-made solutions car dealers) capital allocation and syndicated loans, real BVEP: investment in real expenses estate, “ Mais BB” ) estate projects R$ 29.6B R$ 6.3B + Banco do Brasil Votorantim Group Shareholders Expanded credit portfolio² 1. Securitization with substantial risk retention before entry in force of Bacen’s Res. 3,533; 2. Includes guarantees provided and private securities 5
Wholesale Businesses Wholesale: continued focus on return on capital and on strengthening the product portfolio Wholesale Businesses Corporate & Investment Bank (CIB) Highlights Expanded credit portfolio¹ (R$B) Disciplined approach to capital usage • Credit selectivity • Focus on products with low capital consumption (FX, IB) ∆June14 • Active management of the credit portfolio /Mar14 37.0 • Reduced exposure to the “lower middle market” -1.2% 32.7 32.3 Medium – Portfolio in June/14: R$ 1.3B (Mar/14: R$ 1.8B) 8.8 companies 6.9 6.6 -4.3% Increased relevance of BV to its target clients • Strengthening of the product portfolio • Enhancing international distribution (NY and London) Large Focus on capturing synergies in the origination and 28.2 25.8 -0.4% companies 25.7 structuring of Credit, Capital Markets, Derivatives and FX operations • 2 nd place in the 2Q14 Local Fixed Income Distribution ranking² (3 rd place in the 1H14) June/13 Mar/14 June/14 Thorough monitoring of key credit operations in “financial distress”, focused on debt restructuring Guarantees 12.1 9.9 10.1 provided 18.6 17.3 17.2 Loans 1. Includes on- balance portfolio (loans), guarantees provided (sureties and endorsements) and private securities; 2. “Ranking Anbima de Distribuição – Renda Fixa Consolidado ” (June/14) 6
Consumer Finance Businesses Consumer Finance: intensified focus on used auto finance and INSS payroll loans (retirees and pensioners) Consumer Finance Businesses Auto Finance Payroll Loans Managed Loan Portfolio (R$B) Managed Loan Portfolio (R$B) ∆June14 ∆June14 /Mar14 /Mar14 35.7 8.8 -3.3% 33.0 32.0 Off- Off- -6.4% 6.0 7.1 1.8 3.1 2.4 -22.8% balance 6.6 balance 1.1 0.9 -18.8% On- On- 29.7 30.0 29.6 -1.3% 7.0 balance 6.0 -4.2% balance 5.8 June/13 Mar/14 June/14 June/13 Mar/14 June/14 Used/ INSS/ 72% 78% 59% 63% Total¹ Total¹ 7 th largest³ player in the payroll loan market Among market leaders in auto financing Operates as an extension of Banco do Brasil in auto Focus on INSS (retirees and pensioners) financing outside of the branch network Focus on refinancing (vs. growth) Continuous improvement of credit processes Selective operation in private and public agreements • 72%² automated credit decisions in June/14 Res. 4,292 (May/14): Credit portability (Dec/13: 65%; Jan/12: 28%) Res. 4,294 (Jan/15): Deferred Cobans 4 payment 1. Only on-balance portfolio; 2. Refers to light vehicles; 3. Banco Votorantim estimate; 4. Banking correspondents 7
Consumer Finance Businesses – Auto Finance Auto finance: origination amounted to R$ 6.6B in 1H14 Increased focus on used light vehicles and maintained conservative credit concession Auto finance: financing of used light vehicles, BV maintained the focus on quality and BV’s focus, increased 9.0% on 1H13 profitability of originated new vintages Auto finance origination (R$B) Down payment (%) and average term (months) 52 +0.2% ∆1H14/ Average term 45 44 44 1H13 6.6 6.6 Down 39% 39% 38% Other -24.2% 1.3 26% 1.8 payment vehicles¹ 4Q10 4Q13 1Q14 2Q14 Auto finance interest rate x Selic² rate (% p.y.) 5.3 26.8 Used light 4.9 +9.0% 26.3 25.5 24.6 (80%) BV Financeira vehicles (74%) (vehicles) 10.75 10.75 11.0 10.0 Selic Dec/10 Dec/13 Mar/14 June/14 1H13 1H14 Banco Votorantim is one of the leading players in the auto financing market 1. New light vehicles, trucks and motorcycles; 2. Market’s benchmark interest rate ( Bacen) 8
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