4Q12 Earnings Release Report

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Information about 4Q12 Earnings Release Report
Investor Relations

Published on March 1, 2013

Author: indusval

Source: slideshare.net

Results 4Q12 Feb. 25, 2013 Growth of 2.6% in the Expanded Credit Portfolio in 4Q12 and 21.1% in 2012 Maintained quality of the credit portfolio: 99% of new loans rated between AA and BJoint venture with a company of Ceagro Agrícola Ltda group and Acquisition of Voga Empreendimentos e Participações Ltda are important steps towards the creation of competitive advantages Highlights  Expanded Credit Portfolio came to R$3.1 billion, 2.6% up in the quarter and 21.1% up in the year.  At the end of 2012, the Corporate segment accounted for 59.3% of the Expanded Credit Portfolio, in line with our strategy of focusing on higherIDVL4: R$7.85 per share quality with shorter term assets. In a more favorable scenario, expected forClosing: February 25, 2013 2013, we will refocus on the Middle Market segment in order to reach the 50% Corporate and 50% Middle Market strategic balance.Outstanding Shares: 62,371,178  The share of loans rated between AA and B in the Expanded CreditMarket Cap: R$489.6 million Portfolio remains high, increasing from 78.4% in September 2012 to 79.1%Price/Book Value: 0.83 in December 2012. Note that 99.2% of the loans granted in the quarter were rated between AA and B. Conference Calls / Webcasts  The percentage of operations overdue by more than 60 days was 1.5% at February 26, 2013 the end of 4Q12, with a significant reduction of 1.5 p.p. in the quarter and 3.5 p.p. in the year, with coverage by provisions of 3.7% in December 2012 In English (4.1% in September 2012 and 6.3% in December 2011). 9h00 (US EST) / 12h00 (Brasília) Connections  Revenue from Services, which includes structuring fees, climbed by 32.3% Brazil: +55 11 4688-6361 in 2012, totaling R$26.4 million. USA: +1 786 924-6977  Net Profit totaled R$3.6 million in 4Q12 (15.8% up on 3Q12) and R$14.2 Code: BI&P million in 2012. In Portuguese  Keeping focused on creating structures that generate competitive 8:00 (US EST) / 11:00 (Brasília) advantages, in December 2012 we entered into an association with Number: +55 11 4688-6361 Lifegrain Holding de Participações Ltda, a company of the Ceagro Agrícola Code: BI&P Ltda group, through the creation of the joint venture C&BI Agro Partners, aiming to boost the origination of agribusiness bonds. In February 2013, we signed a Purchase Commitment to acquire Voga Empreendimentos e Participações Ltda, a financial and strategic advisory company, in line with the strategy of increasing our revenue from fees and leveraging investment Website: www.bip.b.br/ir banking operations in our growing client base, especially mergers and acquisitions and fixed income securities. 1/18

SummaryMessage from the Management ................................................................................................................ 3Macroeconomic Environment .................................................................................................................... 4Key Indicators.............................................................................................................................................. 5Operating Performance .............................................................................................................................. 6Credit Portfolio............................................................................................................................................ 9Funding ..................................................................................................................................................... 12Free Cash ................................................................................................................................................... 13Capital Adequacy ...................................................................................................................................... 13Risk Ratings ............................................................................................................................................... 13Capital Markets ......................................................................................................................................... 14Balance Sheet ............................................................................................................................................ 16Income Statement .................................................................................................................................... 18 2/18

Message from Management2012 was a challenging year for the Brazilian economy, in which GDP growth was less than 1%, much lower than theprojections. However, in 2013, the Brazilian economy is expected to gain momentum due to government incentives, andwe project growth of approximately 2.5-3%.Our Expanded Credit Portfolio grew to R$3.1 billion in 2012, led by operations in the Corporate segment (companies withannual revenue of between R$400 million and R$2.0 billion). Considering the uncertainties in the economy, we decided tomaintain our strategy of focusing on higher quality and shorter term assets, despite the lower spreads generated by thissegment. As a result, the portfolio was allocated as follows: 59.3% to the Corporate segment and 39.1% to the MiddleMarket segment. In a more favorable scenario, expected for 2013, we will refocus on the Middle Market segment inorder to reach the 50% Corporate and 50% Middle Market strategic balance.The main reflection of the improved quality of our portfolio was the decrease in default rates: operations overdue by morethan 60 days went down 1.5 p.p. in the quarter and 3.5 p.p. in relation to 2011 (3.0% in September 2012 and 5.0% inDecember 2011).In line with the growth of our Credit Portfolio, our ability to raise funds remains high. Funding stood at R$3.0 billion at theend of 2012, 2.1% up on September 2012 and 18.4% more than in December 2011.We had many achievements in 2012, which shows that we are committed to our long-term Vision. We remain focused oncreating value by expanding our client base, improving processes and internal controls, as well as by attracting and trainingprofessionals, which are our most valuable asset. Some important achievements were: Consolidation of the sales team after renewal, reinforcement of the derivative trading desk and increase in revenue from structured operations services. Migration to the Level 2 Corporate Governance listing segment; Affirmation of our risk rating by Standard & Poor’s and Fitch Ratings, despite the adverse scenario for small and medium banks. Note that Moody’s also affirmed our ratings in February 2013; Hiring of XP Investimentos Corretora de Câmbio, Títulos e Valores Mobiliários to act as market maker for the Company’s preferred shares; Creation of the joint venture C&BI Agro Partners, as a result of the association between BI&P and Lifegrain Holding de Participações LTDA, a company of the Ceagro Agrícola Ltda. group. This strategic association will allow us to increase our share in the Brazilian agricultural market by granting loans to farmers; Approval at an Extraordinary Shareholders’ Meeting of the Company’s conversion into a Multiple Bank, allowing us to operate an investment portfolio, after approval by the Central Bank of Brazil. As a result, we will be able to expand our activities and operate actively in the fixed income securities market; and In February 2013, we signed a Purchase Commitment to acquire 100% of Voga Empreendimentos e Participações Ltda, a financial and strategic advisory firm with vast experience in the area. Since the acquisition is subject to approval by the Brazilian Central Bank, we also signed an operational agreement to enable joint origination and execution as from that date. This acquisition will allow us to increase our focus on the provision of financial and strategic advisory services related to mergers and acquisitions, corporate restructurings, and long-term funding operations, as well as to expand our capacity for the origination, structuring and distribution of fixed income products, in line with our strategy of being one of the leaders in the growing market for corporate fixed income securities in Brazil.In 2013, we will continue our work to solidify our bases, aiming to reach our Vision: To be an innovative bank withexcellence in corporate credit and deep understanding of our clients’ businesses and industries they operate, becomingalso one of the leading players of the high-growth Brazilian corporate bond market. 3/18

Macroeconomic EnvironmentDespite all fiscal incentives offered by the government, at the end of 2012 economic growth unfortunately disappointedyet again. With lower-than-expected GDP growth in the third quarter, and the weak industrial output in the fourth, Brazil’seconomic growth is headed to levels below 1% in 2012. The good news is that, after a long period of rises, industrialinventory levels are now falling to close to the historical average. Furthermore, the unemployment rate remains at ahistorically low level and the default rates, although still high, show a downward trend. These factors should contribute toan economic growth closer to the potential in 2013. There are still doubts, however, over private investment plans in ascenario of international uncertainty, which could hamper more robust growth in the next year.On the foreign exchange market there was a considerable rise in volatility, and the Central Bank intervened again in foreignexchange derivatives, aiming to minimize the impact of a higher exchange rate on the economic agents planning. At thebeginning of December, the dollar reached R$2.14, but then fell to R$2.04 at the close of the quarter, a cleardemonstration on the part of the government that it will not tolerate a strong rise in the rate.The Central Bank’s Monetary Policy Committee continued the process of cutting interest rates, lowering the benchmarkinterest rate (Selic) to 7.25% in October, the lowest level since the creation of Plano Real. It also made clear that the ratewill be maintained at this level for a long period, although the inflation rate remains high, both according to current dataand 2013 projections.The credit in the national financial system, currently at R$2.4 trillion, rose 5.4% in the last quarter, according to the CentralBank, thus accumulating an increase of 16.2% in 2012 (below the 19% recorded in 2011). The credit/GDP ratio continuedrising, surpassing 53.4%. Household default stabilized at the high level of 7.9%, but operations overdue by between 15 and90 days fell substantially to 5.9%, after reaching 6.9% at the beginning of 2012, indicating an improvement in the officialdefault rate in the coming quarters. Default on corporate loans continued remained flat at around 4%. Macroeconomic Data 4Q12 3Q12 4Q11 2012e 2013e Real GBP Growth (Q/Previous Q) 0.8% 0.6% 0.1% 0.9% 3.0% Inflation (IPCA - IBGE) – quarterly change 1.77% 1.07% 1.43% 5.80% 5.97% Inflation (IPCA - IBGE) – annual change 5.80% 5.28% 6.50% 5.80% 5.97% FX (US$/R$) – quarterly change 0.64% 0.46% 1.15% 8.94% 5.50% Interest Rate (Selic) 7.25% 7.50% 11.00% 7.25% 8.50% e = expectation 4/18

Key IndicatorsThe financial and operating information presented in this report are based on consolidated financials prepared in millions of Real (localcurrency), according to Brazilian GAAP (BRGAAP), except were otherwise stated.Results 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 2012 2011 2012/2011Result from Financial Int. before ALL 48.5 48.4 0.2% 49.3 -1.6% 207.4 170.6 21.6% 1ALL Expenses (7.9) (11.9) -33.9% (1.1) 584.2% (56.7) (118.1) -52.0%Result from Financial Intermediation 40.7 36.5 11.4% 48.2 -15.6% 150.6 52.5 187.0%Net Operating Expenses (33.8) (27.0) 25.1% (30.1) 12.6% (118.7) (107.4) 10.5%Recurring Operating Result 6.9 9.5 -27.8% 18.1 -62.2% 31.9 (55.0) 158.1%Non-Recurring Operating Expenses 0.0 0.0 n.m. (0.2) -100.0% (0.3) (4.1) -93.4%Operating Result 6.9 9.5 -27.8% 17.9 -61.7% 31.7 (59.1) 153.6%Net Profit (Loss) 3.6 3.1 15.8% 10.3 -64.9% 14.2 (31.7) 144.8%Assets & Liabilities 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Loan Portfolio 2,624.3 2,548.4 3.0% 2,269.6 15.6% 2Expanded Loan Portfolio 3,067.9 2,990.9 2.6% 2,534.4 21.1% 3Cash & Short Term Investments 447.8 955.1 -53.1% 351.3 27.5%Securities and Derivatives 731.3 613.1 19.3% 1,443.1 -49.3% 4Securities excl. Agro Sec. & Private Credit Bonds 445.9 338.1 31.9% 1,318.2 -66.2%Total Assets 4,022.0 4,337.1 -7.3% 4,278.3 -6.0%Total Deposits 2,274.6 2,194.5 3.7% 1,851.2 22.9%Open Market 241.9 597.2 -59.5% 867.9 -72.1%Foreign Borrowings 388.6 432.0 -10.0% 463.8 -16.2%Domestic On-lending 335.5 309.3 8.5% 218.2 53.7%Shareholders’ Equity 587.2 587.6 -0.1% 577.1 1.7%Performance 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 2012 2011 2012/2011Free Cash 571.1 621.8 -8.2% 762.3 -25.1%NPL 60 days/ Loan portfolio 1.5% 3.0% -1.5 p.p. 5.0% -3.5 p.p.NPL 90 days/ Loan portfolio 1.2% 1.8% -0.6 p.p. 4.7% -3.5 p.p. 4Basel Index 14.9% 15.8% -0.9 p.p. 18.2% -3.3 p.p.ROAE 2.5% 2.2% 0.3 p.p. 7.3% -4.9 p.p. 2.4% -6.3% 8.8 p.p.Adjusted Net Interest Margin (NIMa) 5.9% 6.1% -0.3 p.p. 6.7% -0.8 p.p. 6.4% 5.9% 0.4 p.p.Efficiency Ratio 78.4% 69.7% 8.7 p.p. 74.2% 4.2 p.p. 68.7% 74.4% -5.7 p.p.Other Information 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Number of Corporate Clients 851 774 9,9% 734 15,9%Number of Employees 436 423 3,1% 421 3,6%Details in the respective sessions of this report:.1 Additional Allowance for Loan Losses (ALL) included.2 Including Guarantees issued, Private Credit Bonds (PNs and Debentures) and agro securities (CDCAs, CDA/WAs and CPRs).3 Reduction impacted by the decrease of repos. More details on the section Profitability of this report.4 Excluding Agro Securities (CPRs and CDA/WA) and Private Credit Bonds (PNs and debentures).BI&P - Banco Indusval & Partners is a commercial bank listed at Level 2 Corporate Governance of the BM&FBOVESPA, with45 years of experience in the financial market, focusing on local and foreign currency corporate loan products. BI&P relieson a network of 11 branches strategically located in economically relevant Brazilian regions, including an offshore branch inCayman Islands, its brokerage firm operating at the São Paulo Stock, Commodities and Futures Exchange - BM&FBOVESPAand Serglobal Cereais, acquired in April 2011, which originates agricultural bonds. 5/18

Operating Performance Financial Intermediation Result Net Profit before Allowance for Loan Losses 21.6% -1.6% -64.9% 207,4 170,6 14,2 10,3 15.8% 0,2% R$ million R$ million 5,0 49,3 50,8 59,6 2,4 3,1 3,6 48,4 48,5 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012 -31.7 Expanded Credit Portfolio Funding 21.1% 18.4% 2.6% 2.1% 3,0 3,1 2,9 3,0 2,8 2,8 2,7 2,8 2,5 2,5 R$ billion R$ billion 4Q11 1Q12 2Q12 3Q12 4Q12 4Q11 1Q12 2Q12 3Q12 4Q12 Loans & Financing in Reais Time Deposits Insured Time Deposits Trade Finance Agro Bonds Bank and Real State Notes Guarantees Issued Agro Bonds (CPR, CDA/WA and CDCA) Interbank & Demand Deposits Domestic Onlending Private Credit Bonds (PNs and Debentures) Trade Finance and Foreign BorrowingsProfitabilityFinancial Intermediation 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 2012 2011 2012/2011Financial Intermediation Revenues 123.7 131.7 -6.0% 175.8 -29.6% 640.0 631.7 1.3%Loan Operations 62.3 62.9 -0.9% 80.7 -22.7% 258.3 283.5 -8.9% Loans & Discounts Receivables 46.9 49.1 -4.6% 63.6 -26.4% 205.3 247.5 -17.1% Financing 7.5 7.9 -4.2% 7.9 -5.3% 29.3 23.8 23.0% Other 8.0 5.9 34.8% 9.1 -12.6% 23.7 12.1 95.5%Securities 28.6 53.4 -46.4% 57.7 -50.4% 265.1 258.2 2.7%Derivative Financial Instruments 15.6 4.7 228.8% (6.3) 346.5% 22.1 (38.2) 157.7%FX Operations Result 17.2 10.6 61.9% 43.7 -60.6% 94.6 128.3 -26.2%Financial Intermediation Expenses 75.2 83.3 -9.7% 126.5 -40.6% 432.7 461.1 -6.2%Money Market Funding 56.4 69.2 -18.5% 79.2 -28.7% 330.3 324.1 1.9% Time Deposits 40.0 37.3 7.3% 41.7 -4.2% 163.3 180.7 -9.6% Repurchase Transactions 8.4 22.7 -63.1% 30.2 -72.2% 129.7 117.3 10.6% Interbank Deposits 1.6 2.4 -33.2% 2.1 -25.6% 10.5 11.0 -4.2% Agro (LCA), Real State (LCI) & Bank Notes (LF) 6.5 6.9 -5.2% 5.1 26.7% 26.8 15.1 77.6%Loans, Assignments & Onlending 18.8 14.0 33.6% 47.3 -60.4% 102.4 137.0 -25.3% Foreign Borrowings 14.5 8.5 70.2% 44.2 -67.2% 84.7 126.9 -33.2% Domestic Borrowings & Onlending 4.3 5.5 -22.8% 3.2 35.6% 17.6 10.1 73.6%Gross Result from Financial Interm. before ALL 48.5 48.4 0.2% 49.3 -1.6% 207.4 170.6 21.6%Allowance for Loan Losses (ALL) (7.9) (11.9) -33.9% (1.1) 584.2% (56.7) (118.1) -52.0%Gross Result from Financial Intermediation 40.7 36.5 11.4% 48.2 -15.6% 150.6 52.5 187.0% 6/18

In 4Q12, the Result from Financial Intermediation before Expenses with the Allowance for Loan Losses totaled R$48.5million, remaining virtually stable quarter on quarter and decreasing by 21.6% over 4Q11. In 2012, this figure moved up by21.6%.Revenue from Loan Operations remained flat in relation to 3Q12, despite the cuts in the Selic rate and the effects of theforeign and domestic scenario on the Brazilian economy. The growth in the credit portfolio, both in the quarter-on-quarterand year-on-year comparison, was substantial in the Corporate segment, where credits usually have higher quality.However, the lower spreads negatively impacting revenue. It is important to point out that there was an increase of 38.5%in the quarter and 99.6% in the year in revenues from credit recovery, totaling R$7.9 million and R$22.8 million,respectively.Income from Securities, which includes the results from the treasury’s directional portfolio and CPR, CDA/WA anddebenture operations, is offset by funding expenses. This result was impacted not only by the period reduction in thebenchmark interest rate (Selic), but also by the lower balance of securities subject to repurchase agreements, whichdropped from R$220.2 million in 3Q12 to R$37.2 million in 4Q12, and from R$733.4 million in 2011 to R$407.9 million in2012. This decline also led to a reduction in open market funding expenses, from R$874.3 million in 3Q12 to R$505.2million in 4Q12, and from R$1,029.2 million in 2011 to R$850.6 million in 2012. The combination of lower volume and thecut in the interest rate resulted in a 63.1% decline in expenses with repo operations.The Result from Derivative Financial Instruments includes results from operations involving swaps, forwards, futures andoptions used to hedge against exchange and interest rate exposure for funding operations indexed to the IPCA and IGPM,as well as foreign borrowings (non-trade related), to hedge coffee prices resulting from CPR operations and indexers offederal government bonds held in the securities portfolio, in addition to the directional portfolio. Thus, the result fromderivative financial instruments has offsets in both revenue and expenses from financial intermediation resulting fromoperations in local and foreign currency, commodities and indexes.The Result from Foreign Exchange Operations, as well as Expenses with Foreign Borrowings, was impacted by thedevaluation of the real against the U.S. dollar, in both the quarterly and annual comparisons.The 7.3% increase in Expenses with Time Deposits reflects the 7.4% upturn in the average balance of bank depositcertificates (CDBs) and time deposits with special guarantees (DPGEs) in the period. In 2012, these expenses fell by 9.6%,despite the 13.2% increase in the average volume of time deposits in the period, as there was a reduction in deposits costs,due to the cut in the benchmark interest rate in the period and the increased share of agribusiness letters of credit (LCAs)and real estate letters of credit (LCIs) in the funding mix.As a reflection of the better quality of our credit portfolio, expenses with allowance for loan losses decreased by 33.9% in4Q12 (R$7.9 million in December 2012 and R$11.9 million in September 2012), and 52.0% in 2012 (R$56.7 million in 2012and R$118.1 million in 2011). This reduction had a direct impact on the Result from Financial Intermediation, which cameto R$40.7 million in the quarter, 11.4% up on 3Q12, and R$150.6 million in the year, a 187.0% increase over 2011.Net Interest MarginAdjusted net interest margin stood at 5.9% in 4Q12, 0.3 p.p. down quarter on quarter, and widened by 0.5 p.p. between2011 and 2012, from 5.9% to 6.4%.Net Interest Margin 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 2012 2011 2012/2011A. Result from Financial Interm. before ALL 48.5 48.4 0.2% 49.3 -1.6% 207.4 170.6 21.6%B. Average Interest bearing Assets 3,891.0 4,106.5 -5.2% 4,192.4 -7.2% 4,106.4 3,958.4 3.7% 1 Adjustment for non-remunerated avg assets (505.2) (874.3) -42.2% (1,155.8) -56.3% (851.5) (1,078.4) -21.0%B.a Adj. Average Interest bearing Assets 3,385.8 3,232.2 4.8% 3,036.6 11.5% 3,254.9 2,879.9 13.0%Net Interest Margin (NIM) (A/B) 5.1% 4.8% 0.3 p.p. 4.8% 0.3 p.p. 5.0% 4.3% 0.7 p.p.Adj. Net Interest Margin (NIMa) (Aa/Ba) 5.9% 6.1% -0.3 p.p. 6.7% -0.8 p.p. 6.4% 5.9% 0.4 p.p.1. Repos with equivalent volumes, tenors and rates both in assets and liabilities. 7/18

EficiênciaEfficiency Ratio 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 2012 2011 2012/2011Personnel Expenses 23.7 21.4 10.5% 21.4 10.9% 89.8 71.7 25.3%Contributions and Profit-sharing 1.8 3.0 -38.4% 3.6 -49.6% 9.2 8.5 8.1%Administrative Expenses 13.3 13.0 2.2% 14.2 -6.0% 53.1 50.4 5.4%Taxes 4.3 2.3 92.1% 3.1 40.7% 12.6 13.2 -4.3%A- Total Operating Expenses 43.2 39.7 8.8% 42.3 2.2% 164.8 143.8 14.6%Gross Income Fin. Interm. (w/o ALL) 48.5 48.4 0.2% 49.3 -1.6% 207.4 170.6 21.6%Income from Services Rendered 6.7 7.7 -11.9% 6.9 -2.1% 26.4 19.9 32.3%Income from Banking Tariffs 0.2 0.2 4.3% 0.2 9.0% 0.7 0.9 -14.0%Other Net Operating Income (*) (0.4) 0.7 -157.6% 0.6 -172.8% 5.4 1.9 176.8%B- Total Operating Income 55.1 57.0 -3.3% 57.0 -3.3% 239.8 193.3 24.1%Efficiency Ratio (A/B) 78.4% 69.7% 8.7 p.p. 74.2% 4.2 p.p. 68.7% 74.4% -5.7 p.p.(*) Net of other Operating Expenses to offset the cost of acquisition and income on sale of commodities in the activity of Serglobal Cereais.In 2012, the efficiency ratio stood at 68.7% in 2012, a significant improvement of 5.7 p.p. In 4Q12, the efficiency ratioclimbed by 8.7 p.p., closing the quarter at 78.4%, due to the substantial increase in operating expenses, especially (i)personnel expenses, in view of the 7.5% pay rise following the collective bargaining agreement effective as of September2012, and (ii) tax expenses, which increased mainly because of taxes levied on the conversion of operations performed bythe arbitration board in the quarter.We believe there is still room for improvement in our efficiency ratio, especially with the expansion of our credit portfolio,increased share of revenue from fees, and optimization of operating expenses, which reflect our focus on the continuousreview of processes and pursuit of excellence in all areas.Net ProfitThe operating income of R$6.9 million in 4Q12, after (i) the non-operating loss from the sale of properties and idle assets,(ii) taxes and contributions, and (iii) profit sharing, resulted in a net profit of R$3.6 million, 15.8% up in the quarter, mainlydue to the substantial decrease in the allowance for loan losses. Net profit amounted to R$14.2 million in 2012, versus aloss of R$31.7 million in 2011. 8/18

Credit PortfolioExpanded Credit PortfolioAt the end of December 2012, the Expanded Credit Portfolio totaled R$3.1 billion, 2.6% up on the end of the previousquarter and 21.1% more than in December 2011. The Expanded Credit Portfolio includes loan and financing operations inReal and trade finance operations, detailed in note 6(a) to the financial statements, as well as: (i) guarantees issued(sureties, guarantees and letters of credit), (ii) agribusiness bonds originated from the absorption of the operations ofSerglobal Cereais (CPR and CDA/WA); and (iii) private credit bonds (promissory notes and debentures). Both (ii) and (ii)were booked under Securities as per the Central Bank regulations.Expanded Credit Portfolio by Product Group 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Loans & Financing in Real 2,080.6 1,974.4 5.4% 1,776.5 17.1%Trade Finance (ACC/ACE/IMPFIN) 426.0 463.0 -8.0% 457.6 -6.9%Guarantees Issued (LGs & L/Cs) 158.2 167.5 -5.6% 139.8 13.1%Agro Bonds (Securities: CPRs & CDA/WA; Credit: CDCAs) 327.1 306.7 6.6% 129.4 152.9%Private Credit Bonds (Securities: PNs & Debentures) 40.1 41.1 -2.6% 10.4 283.8%Other 35.9 38.1 -5.9% 20.6 74.2%TOTAL 3,067.9 2,990.9 2.6% 2,534.4 21.1%Loans and financing operations in Real, which include loans, discounted bills, acquisition of client receivables and BNDESonlendings, represented 67.8% of the Expanded Credit Portfolio. This group was led by loans and BNDES onlendings, whichclimbed by 7.6% and 11.4%, respectively, in the quarter and 11.2% and 62.0% in 12 months.Trade finance operations, which accounted for 13.9% of the Expanded Credit Portfolio, include import financing (R$111.9million) and export financing (ACC/ACE in the amount of R$314.1 million).The guarantees issued (sureties, guarantees and import letters of credit) represented 5.2% of the Expanded CreditPortfolio, 5.6% down in the quarter and 13.1% up in the year.Though agribusiness bonds and private credit bonds represent credit exposure, they are classified under marketablesecurities in the balance sheet, in accordance with Brazilian Central Bank regulations due to their tradability. These bondsjointly represented 9.3% of the Expanded Credit Portfolio, a 3.8% increase in the quarter and 128.4% up in 12 months.Our Expanded Credit Portfolio breakdown is as follows: By Economic Activity By Region By Customer Segment Financial Institution South Others 1% 18% 2% Other Midwest Services 20% Middle Industry 21% Market 47% Northeast 39% 5% Individuals Corporate 6% North Southeast 1% 59% 56% Commerce 25% 9/18

By Economic Sector By Product Agribusiness 22,1% Food & Beverage 14,0% Construction 12,6% Trade Automotive 6,5% Finance Agro Bonds Guarantees Transportation & Logistics 4,1% 14% 11% Issued Electronics 4,0% Metal Industry 3,9% 5% Chemical & Pharmaceutical 3,9% Debentures Textile, apparel & Leather 3,2% Pulp & Paper 3,2% BNDES 1% Commerce - Retail & Wholesale 2,5% 11% Other Education 2,4% 1% Oil & Biofuel 2,1% Power Generation & Distribution 1,7% Loans & Machinery and Equipments 1,6% Financial Institutions 1,5% Discounts Advertising & Publishing 1,2% 57% Mining 1,1% Financial institutions 1,1% Other Industries (%lower than 1%) 7,2%As shown in the table below, agribusiness bonds activities, which began in the first quarter of 2011, continue to expandtheir share of the Expanded Credit Portfolio:Agro Bonds Portfolio 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Booked under Securities 245.3 233.9 4.9% 114.5 114.2%Warrants - CDA/WA 8.0 7.7 2.9% 0.0 n.m.Agro Product Certificate - CPR 237.4 226.1 5.0% 114.5 107.3%Booked under Credit Portfolio - Loans & Financing 81.8 72.9 12.2% 14.9 450.5%Agro Credit Rights Certificate - CDCA 81.8 72.9 12.2% 14.9 450.5%TOTAL AGRO BONDS 327.1 306.7 6.6% 129.4 152.9%Credit PortfolioThe “classic” credit portfolio, which excludes off-balance sheet items (guarantees issued) and credits classified undermarketable securities, totaled R$2.6 billion, 3.0% up in the quarter and a 15.6% upturn in 12 months, R$2.2 billion of whichin operations in Real and R$426.0 million in trade finance operations.As the previous quarters indicated, our Corporate portfolio continued to follow its upward trend, in view of our strategy offocusing our growth on higher quality and shorter term assets. At the end of December 2012, the Corporate segmentrepresented 56.4% of the portfolio (53.9% in September 2012) and the middle market segment, 42.0% (44.3% inSeptember 2012). The remaining 1.6% (1.8% in September 2012) classified as Others includes the remaining balance of thedirect consumer credit - used vehicles (CDC) portfolio, portfolios acquired from other banks and financing of non-operating assets.Credit Portfolio By Client Segment 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Middle Market 1,101.9 1,127.7 -2.3% 1,571.8 -29.9%Local Currency - Real 882.0 880.2 0.2% 1,292.5 -31.8% Loans & Discounted Receivables 737.4 743.7 -0.8% 1,136.9 -35.1% Financing 0.0 0.0 n.m. 0.4 n.m. BNDES / FINAME 144.7 136.6 5.9% 155.2 -6.8%Foreign Currency 219.9 247.5 -11.2% 279.3 -21.3%Corporate 1,479.8 1,373.6 7.7% 641.3 130.8%Local Currency – Real 1,273.7 1,158.2 10.0% 463.0 175.1% Loans & Discounted Receivables 1,083.0 942.2 14.9% 411.2 163.4% BNDES / FINAME 190.7 164.5 16.0% 51.8 268.4% Acquired Receivables 0.0 51.6 n.m. 0.0 n.m.Foreign Currency 206.1 215.5 -4.3% 178.3 15.6%Other 42.6 47.0 -9.3% 56.5 -24.6%Consumer Credit – used vehicles 0.6 1.1 -48.1% 4.3 -86.9%Acquired Loans & Financing 6.7 8.9 -24.1% 35.9 -81.3%Non-Operating Asset Sales Financing 35.3 37.0 -4.6% 16.3 117.0%CREDIT PORTFOLIO 2,624.3 2,548.4 3.0% 2,269.6 15.6% 10/18

By Collateral By Customer Concentration By Customer Concentration Pledge / 91 to 180 181 to 360 Lien 11 - 60 Receivables days days 10% 31% 25% Property 10 largest 16% 17% 8% 14% Monitored Pledge 6% Vehicles Up 90 days +360 days 3% Other Aval PN Securities 61 - 180 38% 29% 27% 47% 1% 28%Quality of Credit Portfolio Rating AA A B C D E F G H ALL/ Comp. TOTAL Loan Required Provision % 0% 0.5% 1% 3% 10% 30% 50% 70% 100% Port. % O/S Loans 53.4 1.103.2 919.8 344.7 65.0 82.2 27.1 8.5 20.4 - 2,624.34Q12 3.7% Allowance for Loan Losses 0.0 5.5 9.2 10.3 6.5 24.7 13.6 6.0 20.4 0.0 96.1 O/S Loans 158.2 948.3 892.4 349.2 45.8 103.5 12.4 3.9 34.8 - 2,548.43Q12 4.1% Allowance for Loan Losses 0.0 4.7 8.9 10.5 4.6 31.1 6.2 2.7 34.8 0.0 103.5 O/S Loans 48.3 901.5 636.5 450.1 54.1 77.9 14.7 14.0 72.4 - 2,269.64Q11 6.3% Allowance for Loan Losses 0.0 4.5 6.4 13.5 5.4 23.4 7.4 9.8 72.4 0.0 142.8Operations rated in the top risk bands (AA to B) climbed to 79.1% of the total credit operations in the quarter (78.4% inSeptember 2012 and 69.9% in December 2011). It is important to note that the percentage of loans rated between AA andB granted in 4Q12 remained high at 99.2%, thus consolidating the improvement in portfolio quality, as shown in the chartbelow:Operations rated between D and H, which amounted to R$203.2 million (R$200.4 million in September 2012 and R$233.2million in December 2011), include R$163.5 million that are not overdue, equivalent to 80% of such operations (61% inSeptember 2012 and 51% in December 2011). The remaining 20%, shown below, are made up of delinquent operations: > 60 days > 90 days Default by segment 4Q12 3Q12 4Q12 3Q12 4Q12 3Q12 Credit Portfolio NPL %T NPL %T NPL %T NPL %T Middle Market 1,448.9 1,127.7 37.9 2.6% 76.6 6.8% 30.9 2.1% 44.0 3.9% Corporate 1,132.9 1,373.6 1.5 0.1% - 0.0% - 0.0% - 0.0% Other 42.6 47.0 0.3 0.6% 1.0 2.2% 0.3 0.6% 0.6 1.3% TOTAL 2,624.3 2,548.4 39.7 1.5% 77.6 3.0% 31.1 1.2% 44.6 1.8% Allowance Loan Losses (ALL) 96.1 103.5 ALL / NPL - 242.3% 133.3% 308.6% 231.9% ALL / Loan Portfolio 3.7% 4.1% - - - -The default rates on loans overdue by more than 60 days (NPL 60 days) recorded a significant reduction of 1.5 p.p. quarteron quarter and 3.5 p.p. in 12 months, reflecting the better quality of our credit portfolio. The default rates on loans 11/18

overdue by more than 90 days (NPL 90 days) fell by 0.6 p.p. in the quarter and 3.5 p.p. in 12 months. The potential defaultrate (ratio of installments overdue by between 15 and 60 days to the total credit portfolio) stood at 0.8% in December2012, 0.5 p.p. up in the quarter and 0.2 p.p. down on December 2011.In 2012, the default rates improved substantially mainly as a result of (i) the strategy adopted in 2011 of enhancing ourcredit portfolio with better quality operations and (ii) the strategic decision, in view of the uncertainties in themacroeconomic scenario, of increasing the share of the Corporate segment in our credit portfolio.During the quarter, R$15.5 million (R$103.5 million in 2012) in loan operations, already fully provisioned in previousquarters, were written off as losses. The allowance for loan losses, amounting to R$96.1 million, provides coverage to242.3% of the loans overdue by more than 60 days and 308.6% of the loans overdue by more than 90 days.FundingFunding totaled R$3.0 billion, 2.1% up in the quarter and an 18.4% increase in 12 months. In 2012, the highlight wasfunding through agribusiness letters of credit (LCA), which recorded a 10.9% upturn in the quarter and 72.8% growth in theyear, and real estate letters of credit (LCI), which began in the last quarter, as they contributed to more balanced fundingcosts, and allowed greater diversification in products made available to our clients. However, time deposits via the issue ofBank Deposit Certificates (CDB) and Time Deposits with Special Guarantee (DPGE I) still account for the bulk of the fundingoperations, with 23.6% (22.6% in September 2012 and 29.3% in December 2011) and 33.6% (34.7% in September 2012 and29.5% in December 2011), respectively.Funding in foreign currency is specially allocated to trade finance operations and its balance is impacted by foreignexchange variations.Total Funding 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11Total Deposits 2,274.6 2,194.5 3.7% 1,851.2 22.9% Time Deposits 707.0 664.6 6.4% 743.0 -4.8% Insured Time Deposits (DPGE) 1,007.4 1,019.0 -1.1% 748.1 34.7% Agro Notes (LCA) 364.4 328.8 10.9% 210.9 72.8% Bank Notes (LF) 29.5 36.4 -19.0% 7.4 301.4% Real State Notes (LCI) 12.1 5.3 130.3% 0.0 n.m. Interbank Deposits 98.0 92.1 6.4% 88.5 10.7% Demand Deposits and Other 56.1 48.3 16.2% 53.4 5.1%Domestic Onlending 335.5 309.3 8.5% 218.2 53.7%Foreign Borrowings 388.6 432.0 -10.0% 463.8 -16.2% Trade Finance 337.4 381.1 -11.5% 417.1 -19.1% Other Foreign Borrowings 51.2 50.8 0.8% 46.7 9.6%TOTAL 2,998.7 2,935.8 2.1% 2,533.2 18.4% By Type By Investor By Maturity Insured Time Dep. Brokers Other 90 to 180 (DPGE) Corporates days 3% 4% 34% 11% 18% BNDES up 90 days Demand Individuals 11% 29% 2% 7% Time Interbank Foreign 180 to 360 3% Deposit National Banks days Foreign 24% Banks 13% 9% Loans Demand 7% 2% 2% Trade Agro Bonds Finance Bank and 12% Institutional Investors +360 days 11% Onlendings Real State 44% 42% 11% Notes 1% 12/18

The average term of deposits stood at 800 days from issuance (849 days in September 2012) and 430 days from maturity(476 days in September 2012). Average Term in days 1 Type of Deposit from issuance to maturity Time Deposits 487 294 Interbank 179 77 Time Deposits Special Guarantee (DPGE) 1.315 683 Agro Notes (LCA) 129 69 Bank Notes (LF) 795 567 Real State Letters of Credit (LCI) 165 108 2 Portfolio of Deposits 800 430 1 From December 31, 2012. 2 Volume weighted average.Free CashOn December 31, 2012, the free cash position totaled R$571.1 million, equivalent to 762 622 57125.1% of total deposits and 1.0x shareholders’ equity. The calculation considers cash, R$ millionshort-term interbank investments and securities less funds raised in the open marketand debt securities classified under marketable securities, comprising rural productcertificates (CPRs), agribusiness deposit certificates and warrants (CDAs/WAs), 4Q11 3Q12 4Q12debentures and promissory notes (NPs).Capital AdequacyThe Basel Accord requires banks to maintain a minimum percentage of the capital weighted by the risk in their operations. Inthis context, the Central Bank of Brazil has stipulated that banks operating in the country should maintain a minimumpercentage of 11%, calculated according to the Basel II Accord regulations, which provides greater security to Brazil’s financialsystem against oscillations in economic conditions.The following table shows BI&P’s position in relation to the Central Bank’s minimum capital requirements: Basel Index 4Q12 3Q12 4Q12/3Q12 4Q11 4Q12/4Q11 Total Capital 583.3 585.2 -0.3% 574.7 1.5% Tier I 584.3 586.2 -0.3% 569.1 2.7% Tier II 1.3 1.4 -0.9% 8.0 -83.3% Deductions (2.3) (2.4) -4.8% (2.4) -4.8% Required Capital 430.3 407.0 5.7% 347.5 23.8% Credit Risk allocation 372.9 350.7 6.3% 303.9 22.7% Market Risk Allocation 38.2 36.6 4.4% 34.3 11.5% Operating Risk Allocation 19.7 19.7 0.0% 9.3 112.1% Excess over Required Capital 153.1 178.2 -14.1% 227.3 -32.7% Basel Index 14.9% 15.8% -0.9 p.p. 18.2% -3.3 p.p.Classificação de Risco – Ratings Last Financial Agency Classification Observation Report Data BB/ Stable /B Global Scale Standard & Poor’s Aug. 06, 2012 Mar. 31, 2012 brA+/ Stable /brA-1 Local Scale - Brazil Ba3/ Stable /Not Prime Global Scale Moodys Feb. 07, 2013 Sept. 30, 2012 A2.br/ Stable /BR-2 Local Scale - Brazil F

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